The Real Reason Americans Are Broke

Use code MONEYGUY at Monarch.com to get your first year half off at just $50: https://bit.ly/monarch-moneyguy Americans aren't broke because of inflation, housing prices, or interest rates. The real reasons go deeper than that, and the good news is they're all within your control. Financial Advisors, Brian Preston and Bo Hanson, break down the three core reasons most Americans struggle financially, from the money knowledge most of us were never taught to the costly habits we keep repeating, and share what you can do to stay in control of your financial journey! ⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Brian Preston?

  Americans are broke for three reasons and none of them are inflation, housing prices, or interest rates. They're actually things you have much more control over.

• 0:08Speaker 01

  Brian, I am so excited because today, we're not just going to show you the three main reasons Americans are broke, but we're also showing you how to make sure you don't end up on the wrong side of the statistics.

• 0:19Brian Preston?

  I'm Brian, he's Bo, and we're financial advisors here to show America there's a better way to do money. And with that, let's dive right in.

• 0:32Speaker 01

  Yeah, Brian, right now, it's really easy to put all the blame on our finances, on factors that are working against us right now. We can think about high inflation, low housing affordability, all the other things going on. And while those do have an impact on our finances, we think that there's something deeper going on that's likely impacting the finances of most Americans.

• 0:56Brian Preston?

  We're financial advisors. We've been doing this for decades, so we know that there's more than just the economic stuff that's the problem.

• 1:03Speaker 01

  Yeah, we really think there are sort of three main reasons why a lot of Americans are broke. Number one, we don't do what we should do. Number two, we do do what we shouldn't do. And number three, we don't know what we don't know.

• 1:17Brian Preston?

  I think it's important. Let's go ahead, let's do that backwards. Let's start with, "We don't know what we don't know." What do we mean by that?

• 1:25Speaker 01

  Yeah, this is a huge one. There's some stuff, some basic financial principles that we think are necessary for you to understand in order to make wise financial decisions. But at the end of the day, most Americans, or a vast majority of Americans, just don't understand or have never been taught those basic financial principles.

• 1:43Brian Preston?

  What's crazy to me is that we've actually been tracking how much Americans understand basic core finances. And for the last nine years, it's stayed at the exact same level, right there at the 49 to 50% of people who answer this have low financial literacy among Americans. So this isn't improving.

• 2:06Speaker 01

  And it's no surprise that Americans struggle with financial literacy. Financial decisions when they've never actually been taught they've they've not been educated on how to make this but there are some signs of improvement there are some things that are changing I think right now there are thirty different states that require personal financial literacy in order to graduate I don't think that was the case when I was coming through high school

• 2:31Brian Preston?

  Well and also even if you're taught it we don't know the caliber of that and where is the actual instruction coming from and then I even think about what happens in the in the home front

• 2:40Speaker 01

  Yeah

• 2:40Brian Preston?

  I mean I think about my own childhood look I had great parents lots of love really supportive but their thoughts on what created wealth or what had start people who were wealthy had over the people who did not it was completely wrong it wasn't until I actually learned how money worked that I kinda could see through the noise that they had created

• 3:00Speaker 01

  And what's so sad is your parents had the hardest part figured out you said that they were great savers diligent on living on lesson they made but not understanding that they could take that and do something with it and actually turn it into true wealth

• 3:10Brian Preston?

  Exactly right that's why their idea of investing was CDs it wasn't until I started getting out there learning how money worked that I learned you know no there's something much better like investing in markets and then there's economy there's lots of opportunities

• 3:23Speaker 01

  So there's obviously foundational principles that we don't know but we also are not taught and don't really understand the true dangers of debt and debt can take many forms I think the one especially right now that's getting a lot of headlines are student loans a lot of seventeen eighteen nineteen year olds are being empowered to make gigantic life decisions at a very very very young age

• 3:48Brian Preston?

  Yeah this one breaks my heart because you know education I have such a warm fuzzies for it because I really do believe education is the ladder that gets held for you to climb and become the better version of yourself but then imagine because we see how much student loan debt is getting and cost of education is going up up up and then you find out that fifty-two point three percent of borrowers borrowers currently in schools that they knew nothing or very little about loans when they started college realize a lot of these people are getting very dangerously close to six figures and that means they signed up without even knowing What they're getting into.

• 4:20Speaker 01

  It's wild to think about. It's harder to borrow money to go buy a home, to go make a huge asset purchase than it is to go take on student loan. At least if you want to go buy a home, you have to show income verification, or you have to show that you have a job, you have to show you have assets. When you're a student, when you're going to get student loans, oftentimes that's not required, and you can rack up tens of thousands, if not hundreds of thousands of debt. And when I, when I was coming through school, Brian, I remember you could go get a free t-shirt if you signed up, if you could go get, these things exist to take advantage of young people without them really understanding what it is they're getting into.

• 5:00Brian Preston?

  I think you make a key point. It is harder to get underwriting on our appreciating assets than it is just to go sign up for a student loan. And then I'll take you even a step further. Look at what's going on with consumption into credit cards. It's obvious Americans have a problem with credit cards is that we're not paying it off. Nearly half of college students, that's 44%, aren't taught about credit cards before they even sign up to get that first.

• 5:26Speaker 01

  Yeah, you show up on campus, there's a booth set up, there's a table there, it says, hey, come sign up, come get this, come this, without understanding how dangerous that can be, how swiping and living off of one swipe at a time and pushing that consumption into the future can be devastating because it gets worse and worse and worse, and the hole gets deeper and deeper and deeper and deeper.

• 5:45Brian Preston?

  Well, and then we, here's how the system's kind of stacked against you a little bit is that because of our lack of education, we know that credit scores are important. They impact your property and casualty insurance, they, they impact your house purchase, you know, the cars you drive and so forth. And then this is how bad the education is. 38% of Americans falsely, I want to repeat, falsely believe that you have to keep a balance month to month to build better credit score.

• 6:12Speaker 01

  That is not true.

• 6:13Brian Preston?

  You want to pay off the credit card every month. Do not make the banks, banks rich.

• 6:18Speaker 01

  A second study by Credit Karma found that two thirds of people in credit card debt are still trying to maximize credit card rewards. Yeah, no, no, I've got this debt. I know what's going on. I've got this going in the background, but I'm getting the points and I'm racking up. If you are doing that, if you're trying to maximize rewards and you are carrying a balance month over month and paying. Predatory interest rates? You are doing it wrong. You do not understand just how dangerous credit card debt can be.

• 6:47Brian Preston?

  Yeah, well, this is the part where I just don't think we understand how investing works. And let me, let me give a little color to this. Is that here we are running up debt and we're not even taking advantage of getting our free money from our employer. You know, this is one of the reasons when, when we came up with the financial order of operations, beyond just having the basics to get your highest insurance deductible covered for the catastrophic stuff, the next thing we put on here is get that free money, get your employer match. And yet we find out that 34% of employees don't contribute enough to get their 401K to even get the free money. That's a huge mistake.

• 7:25Speaker 01

  I want to say that again. One out of three, so 34% of folks say, hey, I don't want free money. I'm going to choose to walk away from it and not take advantage of it. If you're doing that, you are leaving hundreds, if not thousands, if not tens of thousands of dollars on the table by not going out to get there. But not only that, not only are they not getting as much money into their 401Ks as possible, 401Ks are actually leaky. We know that right now for every $1 contributed to a 401K, every $1 that goes in, 40 cents of that comes out as a premature withdrawal on average. So not only are we not getting enough money into these accounts and growing these accounts

• 8:08Speaker 01

  to build for our future financial self, we're actually treating them like a piggy bank, where we are pulling those soldiers in our army of dollar bills off of the field early, not letting them actually work for us.

• 8:18Brian Preston?

  And it could be distributions, it could be loans. It's just these things are way too leaky. The other thing I don't like is that people are actually putting money into these retirement plans, whether it's your 401K, your IRAs, and they're doing the hard part of actually living less than you make and putting the money into the accounts, but they're not actually investing it. They're just letting it sit in cash or stable reserves to the detriment of their army of dollars actually compounding and growing upon itself and becoming the best version of itself.

• 8:47Speaker 01

  Yeah, the numbers actually substantiate this. Vanguard found that 55% of direct contribution investors stayed in cash for at least 12 months. I mean, they chose to defer the money out of their paycheck into their retirement account, but they did not get it invested. If you're doing that, you're not actually allowing your dollars to work as hard as they could be. So what do you do? How do you improve this? How do you do it better? Well, the first thing we think is you need to educate yourself.

• 9:15Brian Preston?

  Yeah, I mean, on that part that you just brought, there's two parts to this. There's the funding and then there's the investment. Make sure you're not skipping out on that. But I definitely love the education yourself. This is, this is what the whole money guy was built off of. Is that we saw there was a need in the marketplace. People just didn't understand personal finance. So we wanted to bring education to everyone.

• 9:36Speaker 01

  And then we also think you should recognize, even though you educate yourself, there are going to be things that you don't know, things that you're not familiar with. So know when to ask for help. Don't assume that you have to go out there and figure out the entire financial world on your own. There are blogs, podcasts, YouTube channels, articles, where you can educate yourself, but you can also reach out to professionals, reach out to providers, reach out to content creators and say, hey, what does this mean? How do I do this? What do I need to know about how this works? Rather than assuming you know how it works and ending up in a horrible financial situation.

• 10:12Brian Preston?

  And then, you know, we kind of, this sounds like an echo of what we were just discussing. I want you to be scared of debt. If you're not chainsaw scared of debt, I think you're using debt wrong is because every time you have to go use this financial tool, and it is a tool. I don't want to just say like getting a mortgage, more than likely you're going to have to do that. And there's a chance even for paying for college, you might have to touch upon student loans. And like for me, with my first car, I had to go get a car loan because I didn't have any money and I needed reliable transportation. But you should be scared when you go through that process.

• 10:46Speaker 01

  Hey, Bo, it's almost summer and people are wondering how they go pay for their vacations. Yeah, but have you seen all these comments about a Monarch ad?

• 10:54Brian Preston?

  Yeah, people got some strong feelings.

• 10:56Speaker 01

  They do, Brian, and I gotta say, I think they're right. Monarch and Money Guy really is a fantastic partnership.

• 11:03Brian Preston?

  You're absolutely right, Bo. I mean, it's really a no brainer. We love Monarch and we've been recommending it to our clients for years. And did you know, even Rebi uses it.

• 11:12Speaker 01

  That's right, Brian. And for those of you who missed it, Monarch is the personal finance app that tracks everything. Accounts, investments, saving goals, and spending. Get your first year of Monarch Core for half off, just $50 with promo code MONEYGUY.

• 11:25Brian Preston?

  We love how you guys give us real time feedback and let us know how we're doing. Kind of like how Monarch gives you a clear visual picture of your finances.

• 11:32Speaker 01

  And I love that you can ask Monarch's AI assistant anything about your finances. Like, how much did I spend on travel last year? Or, should I monetize an ad on YouTube so that I can pay for this year's vacation?

• 11:46Brian Preston?

  And you can actually relax on vacation when you know you can afford it. Look, Monarch really can help you make smarter decisions with your money. And it's a great tool for handling your finances.

• 11:56Speaker 01

  And we have a special discount for financial mutants just like you. Use code MONEYGUY at monarch.com to get your first year of Monarch Core half off at just $50.

• 12:06Brian Preston?

  That's 50% off your first year at monarch.com with code MONEYGUY.

• 12:10Speaker 01

  All right, so we're talking about mistakes that are keeping Americans broke. We said the first is, we don't know what we don't know. We just have this lack of information. The second one is a little bit different. We do the very financial things that we shouldn't do. There are things that we should completely avoid or try to avoid. And yet we go headlong into them. The first one, I think we see this all the time in the society in which we live. We spend way too much money on automobiles.

• 12:41Brian Preston?

  Yeah, this is, this is, this is the ego. I mean, let's face it, how often do we sit around and think, people around us care what car we drive? I mean, and I think this starts, because maybe there is an ounce of truth. And this is why it catches on. In high school, the kids with the cool cars,

• 12:58Speaker 01

  It mattered.

• 12:58Brian Preston?

  A lot of times they get a little credit and it gives them a little more social credit while we're walking around campus. But I gotta tell you, in adulthood, I just don't know that I think that cars give you... You that bazzaz that we give it the credit. Meanwhile, here we are, the average car payment in the United States right now on new cars, $772 a month.

• 13:19Speaker 01

  That's only telling part of the story. It's $772 a month, but do you recognize? The average loan term for a new car purchase right now is 69 months.

• 13:29Brian Preston?

  That's incredible.

• 13:30Speaker 01

  69 months.

• 13:31Brian Preston?

  It was six years.

• 13:32Speaker 01

  The average interest rate on a new car loan is 7%. So think about paying a 7% loan over 69 months on a depreciable asset. If you're doing that, you are doing something that you should not be doing. And oftentimes, though, it doesn't just stop with cars, stop with automobiles. Another thing that we're doing that we should not do is we're buying way more housing than we can afford.

• 13:55Brian Preston?

  Yeah, I mean, I think people are making this decision. Look, housing already is complicated. And we've seen post pandemic, it ran up in prices. We're not minimizing that. We're just saying, we want to make sure that you're not house rich, life poor. We want to leave some margin in your life so that you can actually afford to not only live a life, but also to save and invest in your life as well.

• 14:21Speaker 01

  We know right now, and again, do not mishear, so we're not minimizing what housing affordability looks like. But we do know that right now, the average American is putting 33.4% of their income towards their mortgage. That's a third of their income going towards a mortgage. Well, if you have that much of your income going towards housing, it is really crowding out the other things in your life that you likely would should be doing, like saving for the future, building towards financial independence, creating memories and getting to enjoy life today. So when it comes to buying a home, we're not anti-home ownership, we're not anti-buying. But if you're going to do it, we want to make sure that you do it the right way.

• 15:00Brian Preston?

  Yeah, and the other thing we're doing that we shouldn't be doing is we're way too comfortable carrying on high interest debt.

• 15:06Speaker 01

  That's right.

• 15:07Brian Preston?

  And this is one of those things where I think it's, um, just because everybody else around you or the society, the consumption society we live in, makes it feel like this is normal, it doesn't mean that this. This is the way success is found. And look at this stat, this freaks me out a little bit. It's 35% of Americans say they're carrying close to or at highest levels of debt ever. That's a problem.

• 15:30Speaker 01

  And I think, you know, we came out of the pandemic and we saw debt levels decrease and we saw savings rates increase. We thought, okay, man, we're turning a corner. Things are getting better, things are improving. But now, post pandemic, we have slingshotted right to the other side of the equation. Where now people are racking up more debt than they've ever had, a heavier financial burden they've ever had. If you are doing that, if that's true of your financial situation, I believe that you are moving in the wrong direction, not towards financial independence, but actually further and further away from financial independence.

• 16:02Brian Preston?

  Well, and also, look, it's easy to fall in this because the entire system in a lot of ways is encouraging you to fall into these traps. You realize the global marketing like industry is now over a trillion dollars. So it is, there is literally a trillion dollar empire that's out there trying to get you to spend more, live beyond your means, do the exact opposite of the discipline that's going to create wealth. You just need to be aware of that so you don't let that change or shape your behavior.

• 16:32Speaker 01

  And what's super frightening is that for those that are in personal debt right now, those that report having personal debt on their balance sheet, they're saying that they're spending 30% of their income on debt payments. So I want you to think about the mathematics. We said that the average homeowner is spending 33% on their mortgage. And then you think about all the other debt and that represents 30%. You can see that rapidly we are eating up an entire paycheck. Not only are we not saving for the future, not building for the future, we're actually oftentimes living beyond our means, borrowing from our future self to pay for today. And we want you to see the contrast because if you could just take half of that amount, instead of 30% going towards debt payments, if you could just save 15% over a working career,

• 17:17Speaker 01

  and you just take the median household income in this country. So someone making $83,000, $84,000 as a household, saving 15% over a 30-year working career.

• 17:29Speaker 01

  Just doing that could turn that 15% payment into over a million and a half dollars. By the time that you retire, by the time that you get to financial independence. If all that 15% is doing is going towards debt payments, you're paying for past financial decisions, not future financial decisions.

• 17:47Brian Preston?

  I think it's a stark contrast in the fact that we cut in half. We took the 30 and made it 15 and it was still an over one and a half million dollars. So if you, if you just stood that up and thought about what you just shared, that means the typical person, it's like three million dollars is going to make the banks richer, instead of for yourself. Guys, that's why we say little actions can create big results. So Bo, how should people think about this to do it better?

• 18:15Speaker 01

  Yeah, we actually have some rules to keep you inside the guardrails. When it comes to these huge purchases like cars and like homes, we believe there's a better way to do money. When it comes to cars, we want you to follow 238. We want you to put 20% down as a down payment. We want you to finance a car for no longer than three years or 36 months. And we want you to make sure that all of your car payments, not just one car payment, but all of your car payments do not exceed 8% of your monthly gross income. If you can do that, if you can stay inside that framework, you're going to prevent yourself from buying more car than you can afford.

• 18:51Brian Preston?

  And here's why it's important, because this one covered cars. We're about to cover houses. The reason of having a framework or a system, it takes out the emotions.

• 19:00Speaker 01

  That's right.

• 19:00Brian Preston?

  Because everything we're about to discuss, the, the system already is trying to encourage more consumption. It's trying to get you to live the best and biggest life on paper, but they never tell you about what you're really trading off. Like I said, you're making the banks wealthy instead of for yourself. So follow these rules. 238 will let you keep yourself going to your job in a reliable way. It doesn't let your ego start pushing you into bigger and bigger consumption decisions. Same thing can be said about housing. 3525 is going to be your path forward because we look, we've been doing this for years and decades, actually decades, over two decades, where instead of telling Everybody you had to put down 20% on houses.

• 19:41Brian Preston?

  We're honest with you. We have a very transparent, non Hippo, you know hypocrisy, you know, the way we communicate. We said, look, for our own first houses, we'll put down three to 5%. So you too should only have to put down three to 5% on your first house. Now, when you upgrade, yes, you likely should use those proceeds and put down 20%, but 3% to get in the first house, A, okay. You also be honest with yourself. If you can't be in this house for at least five years, you're probably not going to have a long-term enough horizon to absorb the, you know, the friction cost of the closing, the real estate people and everybody else. So you don't need to be doing this unless you can stay in the house for five to seven years. And then we want you to keep your monthly payment below 25%.

• 20:26Brian Preston?

  Because like I said, we don't want you to be house-rich, life-poor. We want you to have margin in your life to live your best life.

• 20:33Speaker 01

  So when it comes to these big decisions, we have rules for you. We have guidelines or guardrails you can follow. But then when it comes to all the other debt in your life, whether it be consumer debt, whether it be student loan debt, whether it be any other kind of debt you might incur, we want you to treat it like a chainsaw. We want you to recognize that debt can be useful and it can be valuable. It can be very helpful in certain situations, but if used carelessly, if used recklessly, it can be unbelievably dangerous. It's why, Brown, will you hold up the thing for me? It's why in step three of the Financial Order of Operations, after you have your doctor's bills covered, after you've gotten that free employer money, we want all of your effort going towards knocking out that high-interest debt.

• 21:16Speaker 01

  Because we want compounding interest working for you, not working against you.

• 21:20Brian Preston?

  And a lot of you are saying, well, what is high-interest debt? So we actually have a great deliverable. If you go to moneyguy.com/resources, you can download this. But here, let me go over it for you. We have some columns here and then you can cross-reference this with your age. But for like student loans, look, we want you to remember, our guidelines on student loans is try not to run up more student loan debt than you're going to making your first year right out of school. But then if you're in your twenties, we don't want you to exceed 6%. We don't want you to, for car loans, we Ideally, we want you paying cash for cars. But maybe you're broke as a joke like I was when I graduated college and I needed just reliable transportation. We've tried to give you grace with understanding that since cars are going to be paid off within three years and you need to have reliable transportation, it's okay if you're in your

• 22:05Brian Preston?

  twenties that that car loan's 10% or in your thirties, 9% or forties, 8% because we know you need to use your time to start building wealth by going to that job. And then credit cards, 0%. I don't care if the bank is trying to make you feel like, hey, you can play some crazy reindeer games, build your wealth through their 0% offers. No, we want you paying off credit cards month to month, carry zero interest. If you're not paying your credit cards off monthly, you might not be a credit card type person.

• 22:36Speaker 01

  So how do you prevent yourself from getting into this situation? Well, it's not all that complicated. If you have an emergency fund in place, if you have three to six months of living expenses in your savings account to cover you, then when the unknown unknown comes your way, you might not have to go rack up credit card debt. Or when it comes time to buy an automobile, you can go follow 238. The emergency fund is that thing to keep in place that can keep your life out of the ditch when those unknown unknowns come your way.

• 23:07Brian Preston?

  And then also, look, we just told you, housing could be 25%. Your cars could be 8%. And then we got student loans. A lot of people will say, well, wait a minute, these are a lot of debts. What's the total? We'd like you to keep your total debt load below 35% because then that allows you to pay your taxes, pay your debts, but also make sure you have margin to live your life and actually save some money to start building your great big beautiful tomorrow.

• 23:33Speaker 01

  All right, Brian, this is why Americans are staying broke. We don't know what we don't know. We do the things that we shouldn't do. And then the third reason why we think Americans are broke right now is that we don't do the things that we should do. When we think about some of the things that we don't do that we ought to be doing, most people have no idea where their money is going. They get a paycheck in, they spend the money. They hope it gets them to the next paycheck, not actually understanding where their dollars are.

• 24:03Brian Preston?

  I actually, I'm glad we closed with this because I think it's actually, we, we saved the best for the last. Doing what we, you know, we don't do what we should be doing. These are the things that are actually going to create change agents in your life. And the fact is, I, I think to, to even know where you're going, you have to know where you are right now. So you have to track your spending. If you haven't, look, nobody likes to budget. I'll just go and tell you, it's not fun, but if you're not doing those type of behaviors, I think you're just putting yourself out there to the, the, the industries that are pushing consumption. And that's why nobody's doing this well, but it's an important transaction. If you want to know how badly, even the people who do budgeting, 84% of them say that they exceed their budget regularly.

• 24:44Speaker 01

  You, you have to actually do the exercise. There's like, hey, you know what? I wrote workouts this whole week long. But if you don't actually show up and do the workout, it was not valuable. So if you set a budget, I'm only going to spend this much in this category and you blow through it, you're not budgeting. That's not what you're doing. You actually need to build a budget and build something you can actually stick to.

• 25:06Brian Preston?

  Well, but I, even the people, I know 84% are exceeding their budget, but at least they're doing the hard work.

• 25:10Speaker 01

  They're doing something.

• 25:11Brian Preston?

  They're doing the work. And you know how you get better is by doing something and it gets better. Practice makes you better at the exercise. So just be part of that solution. And then another thing that's going to keep you safe. It's, it's why it's so important in the financial order of operations that cash reserves doesn't get one step. It actually gets two steps in the financial order of operations with highest insurance deductible covered. And then three to six months in your emergency reserves. Don't sleep on this because this is going to be the margin in your life that keeps you from making desperate decisions.

• 25:42Speaker 01

  Again, why do we say that most Americans aren't doing this, even though they should be? We know that right now 40%, 46%, almost one in two Americans report having three months of expenses saved for emergencies. And I would argue that for most families, most single income households, most folks with young children, three months of living expenses is probably not enough. I'm happy that that's there, but that means that there are 50% of people who have either no. No emergency fund or an underfunded emergency fund. It's the thing that you need to have in place to prevent your financial life from going off the rails.

• 26:19Brian Preston?

  And then here's another thing, we, we don't do what we should be doing. Cause we just don't save and invest enough. You know, you think about building your army of dollar bills. So you don't have to work so much. With your time, cause what you want to do is have enough money that you can start buying your time back. Unfortunately, most Americans are just not good at saving. If you look at just the typical savings rate of Americans. It's a little under 5%. You know, I know, look, we can hopefully with employer matches and other things, we can push this thing up over 10%. But needless to say, I think when you look at the stats that the typical American, those between the ages of 55 to 64. Are ending up with a hundred and eighty five thousand dollars. If you just use a safe withdrawal rate of 4%, that's only seventy four hundred dollars a year.

• 27:04Speaker 01

  Not a month.

• 27:05Brian Preston?

  That's a year.

• 27:06Speaker 01

  A year.

• 27:07Brian Preston?

  So you can quickly see, we're just not, you know, understanding this concept of deferred gratification and discipline. And discovering this early enough. I think most people unfortunately, figure this out way too late. That's why we want you to start early and do it often. So you can live your better life.

• 27:24Speaker 01

  So how do you do this better? Well, number one, make a plan and follow through with it. Success financially is not an accident. It is a very intentional endeavor, but the earlier you figure it out and the more consistent you can be, the more intentional you can be. The easier the path is going to be, the longer you wait, or the less consistent you are. The harder the path is going to be. So if you do the hard work today of putting a plan together. But getting to follow through with it, it's going to make life tomorrow easier, no matter where you're at.

• 27:58Brian Preston?

  And the other thing, look, we've tried to make this as easy as possible and you notice. Things are different for a 20 something versus a 40 something and we recognize that's why we do so much by age content. And if you're looking for a great starting place, we actually had a recent show come out, how to build a financial plan by age. So if you're 40 something and you don't have any money invested, we got you covered. If you're young and you've got the world by its tail because you're in your twenties, we've got you covered. Please go out and check out this content because that's what we're trying to do is give and love on you so you can live your best life and not fall into the trap of consumption like most Americans.

• 28:36Speaker 01

  But don't make it more complicated than it has to do. Think about the goals that you have, break them down into small achievable steps and then get started because it's not about hitting all the big goals or achieving all the big steps. It's about taking the next step and the next step. Maybe your goal this month is just to track your spending. Okay, that's great. Okay, next month I'm going to build a budget. Okay, great. Next month, I'm going to make sure that I stick within my budget in these categories. It's not about doing everything right today. It's about doing a few things better today than I did them yesterday.

• 29:12Brian Preston?

  And you know, people learn through repetition and that's why it's worth for me to repeat, emergency reserves are so important in your financial success. So you don't have to make desperate decisions. We actually gave it two steps in the financial order of operations. Guys, if you don't have enough money to cover your highest insurance deductible, get to work on that. But if you get to the point that you've got that covered and you get your interest, your high interest debt paid off, you got your free money from your employer, let's get you three to six months of margin. So once again, if you lost your job or something bad happens, you're not stuck making desperate decisions.

• 29:47Speaker 01

  When it comes to personal finance, we know that 20% of personal finance is mathematical. It's mathematics, it's knowledge, it's education based. But 80% of personal finance is behavioral. So if you can do things to prevent yourself from making bad behaviors and encourage yourself to make good behaviors, you're going to set yourself up for success. That's why another thing that you can do is if you can Automate your saving and automate your investing via auto contributions to your 401k, auto contributions to your Roth IRA, auto transfers monthly from your checking account to your savings account. If you can do it automatically, pay yourself first, have that money, leave your checking account before you have a chance to see it,

• 30:31Speaker 01

  you're going to have a much higher likelihood of sticking to your plan over the long term.

• 30:36Brian Preston?

  What I like about the automation part of this is that it makes the good habits that much easier. Saving for the future and paying yourself first is definitely going to be something that your future self will get super excited. I always talk about that sloppy tears coming down your face bear hug that your future self will give yourself if you can make the good habit that much easier. The other thing about automation is it makes the bad habits. If you don't have discipline, it seems like if you have money in your pocket, you spend it. If you can set up an automated savings and investment plan, it's going to make the bad habits that much harder.

• 31:10Speaker 01

  And so you may be asked, okay, well, I guess I want to do this. I'm in. How much should I save? Well, we actually have a great deliverable for you. Go out to moneyguy.com/resources. This is new and improved. How much did you save? And all you do is you pick your age that you are today and you pick the age that you want to retire or build financial independence. And we will show you what you would need to save of your income today to be able to replace 80% of your income in retirement. I know retirement spending is based on expenses, but if you're a 25 year old or a 30 year old right now, you might not know what your expenses are going to be when you're 65. Let this be your guide. Perhaps you are not as far behind as you thought you were.

• 31:53Speaker 01

  Or perhaps you're not quite as far ahead as you thought you were. Go out, download the deliverable and let this be your motivation to start building towards the future that you ultimately want to live.

• 32:04Brian Preston?

  Hey, be honest with yourself. I want you to right now, put yourself in two camps. If you, if you learned something today and you're like, I could do better. I want to encourage you to go to moneyguy.com/resources. We just shared how much you should be saving is one of the resources there. Guys, there are literally just.

• 32:23Brian Preston?

  Tons of free resources to help you become better with money. So you don't have to have been raised with it. You don't have to come from money. There's definitely a better way to do money. But maybe you're one of these people, you're watching this and go, this is great. I knew a lot of this, but I am so successful. I've already figured this out. But what I'm struggling with is everything these guys is talking about is the early part of the journey when it was simple. But I'm now in this place where it seems like things are just so much more complicated. And it's more of that first category. I just don't know what I don't know anymore. Guys, we're gonna leave the porch light on for you too, because that's one of the things this channel started as a platform for education. I wanted people to live their best life and understand how money worked. And I quickly realized, you know what, even

• 33:06Brian Preston?

  though I can do that very well, you're going to find out you need personalized advice. That your situation is going to be different because either you're so successful, you don't have the time to do this, or you don't know where your blind spots are, or you want to make sure your spouse, who's the non-financial person, has a backup plan. If you weren't here to speak for what happens to the money, we're gonna leave that porch light on. I'd encourage you, come become a client. We work with clients all across the country, and we really do believe there's a better way to do money, and it's sitting out there waiting for you. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 33:41Speaker 02

  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.