The Truth About Making $65,000 Per Year at 27

This episode brought to you by Abound Wealth. Take the relationship to the next level and become a client: https://moneyguy.com/become-a-client/ At 27 years old, Melissa has already built a $61,000 net worth on a $65,000 salary—proving you don't need a six-figure income to build wealth. Brian and Bo break down her investing strategy, Roth IRA contributions, 401(k), HSA, emergency fund, car loan, and savings rate while showing how small financial decisions compound into long-term financial independence. They also discuss the Financial Order of Operations (FOO), whether to prioritize investing or paying off debt, and how someone earning a moderate income can still become a millionaire through consistent investing and smart money habits. If you're building wealth in your 20s or 30s, this episode offers practical personal finance lessons you can apply today. 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.

• 0:01Speaker 00

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• 0:26Speaker 01

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• 0:45Speaker 02

  Total net worth right now at about $61,000. So you already have a net worth roughly equal to your income. That automatically puts you different than a number of your peers.

• 0:55Brian Preston?

  I will tell you, the inflection of your voice doesn't have the confidence it should have for all the good decisions.

• 0:59Speaker 02

  Is your kind of a baller?

• 1:00Speaker 04

  Maybe don't get too excited. This is like where I've made a bit, some mistakes in my past. I didn't know what investing was, but I knew what a CD was. So I just put it in a CD.

• 1:09Brian Preston?

  Oh, wow.

• 1:15Brian Preston?

  Where are you living most? Cause you've been all over the place based upon your financial statements.

• 1:19Speaker 04

  Yeah. So I grew up in Louisiana, like outside of Shreveport, then moved to Mississippi for college. After college, I got a job in Philadelphia with a company who, I'm still with the company, hitting five years on Sunday. And after about a year there, they offered to move me to London. And at the time I was 23 and I was like, no one gets this opportunity. I have to say yes.

• 1:46Speaker 02

  What's the job? What is the thing?

• 1:48Speaker 04

  I work in travel security. So if you.

• 1:52Brian Preston?

  Is that like packing heat?

• 1:53Speaker 04

  No.

• 1:54Brian Preston?

  Okay.

• 1:55Speaker 04

  But sometimes I hire people.

• 1:56Speaker 02

  Jason Bourne is what he's asking. That's what he wants to know.

• 1:59Speaker 04

  No, it's, um, if you work for sometimes usually bigger corporations, study abroad, and then NGOs are our main clientele. And we do their health and security abroad. So on my side, I work in security assistance. So if you're going somewhere, maybe more high risk, what areas of town you should avoid, where you should stay.

• 2:16Brian Preston?

  Is it education or like y'all are evacuation too?

• 2:19Speaker 04

  All the way, so it's all the way up to then if something happens while you're there. So on the health side, if you break a leg, they'll do all the coordination for getting you help. On the security side, it can be sometimes more logistical. If your passport was stolen, you don't have, or your wallet and you don't have credit cards and cash anymore. We can do like cash advance. And then all the way up to emergency evacuation. So in times of war started in like Israel or Ukraine.

• 2:46Speaker 02

  And natural disasters too.

• 2:47Speaker 04

  Yes, natural disasters. Sometimes that's a bit more like supply drops. And then sometimes like the answer is just to stand fast and wait it out and not an evacuation.

• 2:56Brian Preston?

  How do you get into that?

• 2:57Speaker 04

  I studied international studies in university and also studied abroad in Chile, South America, like learned Spanish. I don't really speak Spanish anymore, but, uh, and then I minored in intelligence and security studies. I just thought it sounded interesting.

• 3:14Speaker 02

  You're a spy.

• 3:15Speaker 04

  No.

• 3:15Speaker 02

  She's a spy. I don't want to say it out loud, but that's what I'm here.

• 3:18Speaker 04

  People usually say they're like, are you TSA?

• 3:20Speaker 02

  That's what, I did ask that question.

• 3:22Brian Preston?

  That question might've been asked, may or may not have been asked.

• 3:25Speaker 04

  I know. It's a very like niche industry that I somehow found and I really love it. Like I get to help people, like have good travel experiences, like especially study abroad students. Like imagine this is your first time leaving the country.

• 3:36Speaker 02

  Like young children, not children, but like young adults.

• 3:39Speaker 04

  And if I'm able to have like a, you know, 20, 30 minute conversation with them to help them have like a good study abroad experience, that might lead them to have travel more in the future, get more out of it.

• 3:50Speaker 02

  So 23 years old and you go to London. How long you're in London and then what happens after that?

• 3:54Speaker 04

  So I was in London for three years. Did a lot of gallivanting and less like financial focus, I would say. And then I also got my master's degree while I was there. So I was kind of paid for most of that in cash. So again, like a bit less like long-term financial, I guess would say. Was there for three years and then I was just kind of, felt like it was time to go back to the US.

• 4:16Speaker 02

  So, all right, you're in London for three years. You get your master's degree. You come out of the States, same company?

• 4:21Speaker 04

  Yes.

• 4:21Speaker 02

  Same company this whole time?

• 4:22Speaker 04

  Yeah.

• 4:23Speaker 02

  You just tell them, hey, I want to transition back to the States. And like, cool, come on. Do you go back to Philly?

• 4:27Speaker 04

  Yes, I'm back in Philadelphia, back to the team I was on. First go around, kind of did a boomerang.

• 4:33Brian Preston?

  I love it. Also, I can't help. Now, look, we're, I don't think we sound southern, but everybody says we sound southern. But I don't, I don't pick up a huge southern accent on you. But you said your whole family, you're from.

• 4:44Speaker 04

  Yeah.

• 4:45Brian Preston?

  So what happened to your accent?

• 4:46Speaker 04

  For the first, I guess 12 years, my dad was in the military. So we didn't live in Louisiana till then. And then moving to Philadelphia, I feel like it was, every time I said something in the office, people would just then like mimic it. Mimic me. And then I think also living in London, I've now just developed a very like standard.

• 5:05Speaker 02

  Like non-accent accent.

• 5:06Speaker 04

  Yeah, standard American.

• 5:07Brian Preston?

  It's a skill set. Well, you said you could speak Spanish earlier. So do you just linguistically? Do you pick up on stuff pretty easily?

• 5:15Speaker 04

  Hmm, I don't know. I'm in French classes now and it's not going well.

• 5:18Brian Preston?

  Okay.

• 5:19Speaker 02

  French class, are you planning on going to, moving to France?

• 5:22Speaker 04

  No, it's more just like to be able to ask for a table at a restaurant.

• 5:26Brian Preston?

  Ashante.

• 5:27Speaker 04

  See, I don't, I don't even know that.

• 5:30Speaker 02

  That's what he told me. He told me he was in France. That's the one thing he got and he just took that. He held on to it, held on to it hard.

• 5:36Brian Preston?

  We can keep going. I'm sorry, I will start getting on board with doing this right here any, anytime now.

• 5:40Speaker 02

  So, okay, so you've had like a very different first couple of years out of school than most young folks have. You were kind enough to share a net worth statement with us. And as we look at this right now, how old did you say you were?

• 5:53Speaker 04

  27.

• 5:53Speaker 02

  27 years old. Total net worth right now at about $61,000.

• 5:59Brian Preston?

  Nice.

• 5:59Speaker 02

  Income presently at $65,000. So you already have a net worth roughly equal to your income. That's worth pausing for a moment for someone in their mid twenties. That automatically puts you different than a number of your peers. Like, do you recognize that? Or do you realize like how different that is from other folks in their mid twenties right now at this point in time?

• 6:18Speaker 04

  I think so. I also, I have a bit like my income is fluctuates a lot with doing like overtime and I get like incentive pay. And I feel like still a lot of my like, some people around me make a lot more than 65. So I mean, still working on like growing my income.

• 6:36Brian Preston?

  But, but tell me this, are the people around you that make more, they older?

• 6:39Speaker 04

  No. So like around my age, like my, my friends now.

• 6:42Brian Preston?

  Okay. So you feel like among your peer group, you don't make what they make.

• 6:46Speaker 04

  I think maybe not that I don't make what they make. So when I started out my company, I started by making 52. But that year with overtime and bonus made 60. And then salaries in the UK are lower than the US. Some of that like kind of balances out where you're not paying for health insurance. But there I was making, started making 32,000 pounds, which I think is around 45 or something. Ended making probably around like 50 or 60 USD.

• 7:26Speaker 04

  So I think I've not had a lot of income, as much income or salary increase. Five years, yeah, into. I think part of that is just being at the same company, not having made a big jump to get a pay raise.

• 7:40Brian Preston?

  But what is that, what are you missing out on in life? What do you feel like, because you're not making what some of your peers make? What do you feel like you're missing out on?

• 7:47Speaker 04

  I think I'm able to like have saved what I've saved because I've done some, I don't know. I like didn't turn the heat on for two years. Me and my roommate to save money, we just like didn't turn the heat on for two years.

• 7:58Speaker 02

  Sleeping in hoodies and sweatpants.

• 7:59Speaker 04

  We, it didn't get that cold. Like the place was pretty insulated, but like stuff like that. Like I have a bit frugal, like maybe not great ways.

• 8:06Speaker 02

  Not, I don't know you that well, but I'd say so, no heat.

• 8:08Brian Preston?

  But that sounds like, that's a choice.

• 8:09Speaker 04

  Yeah.

• 8:09Brian Preston?

  That's not something you, that was fun for you.

• 8:11Speaker 04

  Also like I try to, yeah, I try to keep my like base cost of living low. So I don't have a lot of subscriptions. I don't have a gym membership. Like I don't, I try to keep things like pretty low on the like monthly where I, if I made more, I would definitely lifestyle increase.

• 8:28Brian Preston?

  But what do you feel like you're missing out on?

• 8:30Speaker 02

  Well, she just said gym membership, subscriptions.

• 8:32Brian Preston?

  Do you want a gym membership?

• 8:33Speaker 04

  Yeah.

• 8:33Brian Preston?

  I mean, I know this guy wants one, but.

• 8:35Speaker 04

  But just some of that, like the nicer things like there's sometimes I, if I don't have anything planned that day where maybe I would go out by myself and sit somewhere and read or get a coffee. I'm like, well, that'd be spending money. So I might as well just like, yeah.

• 8:48Speaker 02

  So as we look through this, it looks like you're in a really great spot. So you've got about $12,000 in liquid cash, $10,000 on the emergency fund. What's your monthly burn around per month?

• 9:01Speaker 04

  So it's, I count my like needs rounded up at like 2,500.

• 9:07Speaker 02

  Okay.

• 9:07Speaker 04

  Uh, I think I make things a bit complicated, but it works for me. So like every paycheck, it's like $900 to my bills account, 500 to spending. And that's for like anything variable, like groceries, gas.

• 9:23Speaker 02

  Got it.

• 9:24Speaker 04

  Discretionary spending.

• 9:25Speaker 02

  So 2,500 for needs, but then like when we add discretionary stuff, maybe.

• 9:28Speaker 04

  So like 3,000 is around.

• 9:30Speaker 02

  Love that.

• 9:31Speaker 04

  Like accurate.

• 9:31Speaker 02

  So when I think about, you know, an emergency fund, right? You hear us say this all the time on the show that we want you to have somewhere between three months to six months of living expenses for a single individual, no one else depending on your income besides you. Uh, three months, I think, work. So like $9,000. So emergency fund, like you got that. What's the, you have a sinking fund in there of like $800? What's that for?

• 9:52Speaker 04

  It's a mix of travel. I'm in a wedding this year. It's like bridesmaid.

• 9:59Speaker 02

  Isn't it the worst?

• 10:00Speaker 04

  I had like three weddings this year.

• 10:01Speaker 02

  No, no, no, no. We're gonna have this conversation. I had the same conver- do you watch Aaron Talks Money? We had the same conversation around like, it's so ridiculous that, that you get invited to all these weddings and they're wonderfully doing all this stuff, but it's like, it's like.

• 10:13Brian Preston?

  Do you have to buy a dress?

• 10:15Speaker 04

  Yeah. So I'm definitely in the wedding season of friends. So like this year it was two friends and a cousin are getting married. And since I'm a bridesmaid and one, it is like.

• 10:25Speaker 02

  It just gets expensive, right? But you know, this is the thing we do for the people we love. This is the thing we do for our friends.

• 10:30Brian Preston?

  Where was this guy? I was in your wed- I was in Bo's wedding.

• 10:33Speaker 02

  Mine was so awful.

• 10:33Brian Preston?

  I had to buy these gaudy shoes that were so narrow that not for my wide feet. And I didn't, this guy who's all concerned about you having to buy dresses and stuff, didn't seem to have that concern for his wedding.

• 10:45Speaker 02

  They were $40 vans.

• 10:46Brian Preston?

  We had to buy a suit.

• 10:47Speaker 04

  Vans?

• 10:47Brian Preston?

  Most, most weddings, most weddings, you have to rent a suit, you know? So what does that cost? A few hundred bucks to rent? Bo had us buy suits.

• 10:55Speaker 02

  There were less. It was less to buy that. It was, it was the most frugally thought out, uh.

• 11:00Brian Preston?

  You didn't ask for this, Melissa, but I just, I want to call out hypocrisy whenever Bo is, is being a little opaque with.

• 11:07Speaker 02

  What I'm saying is.

• 11:08Brian Preston?

  He doesn't, he didn't practice what he's saying.

• 11:10Speaker 02

  A hundred percent I did. He's wrong on this, but I get what you're saying. You get invited to stuff and it's expenses that we have to incur. But I love that. How, how did you learn how to, not learn, but like, have you always been good with money where like, hey, I've got this thing coming up.

• 11:22Speaker 04

  No. Um, so when I like started my career, I just had, my company lets you split the paycheck, which is really helpful of like, some can go into checking, some can go into savings. So I had some amount like automatically going into savings, but then I just.

• 11:37Speaker 02

  I do that, like just like.

• 11:39Brian Preston?

  I think you're being modest here. I think you are naturally good with money.

• 11:42Speaker 04

  Uh, my parents did like growing up with allowance and they had like, here's your short term, medium term, long term.

• 11:48Speaker 02

  Okay.

• 11:48Speaker 04

  But I still was just like, living my life. I didn't even, I don't even think I had like how much my bills were each month that like tracking any of that.

• 11:55Speaker 02

  So long as the checks didn't bounce.

• 11:56Speaker 04

  I was just like, this isn't my checking account. And same when I got to London again, I didn't really think through the financial, like whatever. It was just, they sent me the offer. I converted it to USD. I was like, okay. So I feel like I could, I could make it work. And then when I was in London, I think like a year and a half in or so, I was paying for, uh, my parents helped pay for some of my masters, but I was covering the majority of it. And so I had to pay a class or like a class bill. I was having to renew my visa, which I have to pay, I had to pay upfront and then my company reimbursed me. So it was like 6,000 pounds that I just had to like have sitting around.

• 12:35Speaker 04

  And I was traveling back to the US for a wedding, all at the same time. And I was like, wait, I need to like figure out if I could actually do this, like, and that's when I started budgeting.

• 12:44Speaker 02

  I love it. Awesome.

• 12:45Brian Preston?

  So during that season that you were going ham on spending, what were you doing there that you're not doing now?

• 12:50Speaker 04

  It was a lot of traveling.

• 12:52Brian Preston?

  So it's travel. Okay. Now you get to do that. Do you get to do that with work naturally?

• 12:56Speaker 04

  Yes. So work has sent me to four countries, which I mean, again, is like a great opportunity.

• 13:01Brian Preston?

  But are they disconnected from what you, where you would travel for fun?

• 13:04Speaker 04

  Yes, those were. It was to Israel, Palestine, Moldova and Romania.

• 13:10Speaker 02

  I think I was, I think I looked at a list of the top 10 travel destinations and I think those were on there.

• 13:15Brian Preston?

  None of those sound like they're in the Caribbean.

• 13:16Speaker 04

  Like Moldova is the least, like least visited country in Europe. It was not on my travel list.

• 13:21Brian Preston?

  So where do you, when you, if you're choosing where you're gonna travel, where do you want to travel to?

• 13:25Speaker 04

  So that's the thing is I've kind of like, I've done gallivanting for now. I've really got a lot of it out of my system. And I think a lot of this was, you know, staying in hostels, like cheaper travel for sure. And I feel like I've gotten to the point where a lot of the places I want to go are better to go when you have money and can do a bit more. Um, I want to do like travel to the Middle East more. I went to Turkey, um, and then Israel, Palestine, but I want to go to like Jordan.

• 13:51Speaker 02

  Yeah. So you said you got your gallivanting out early on. As you think about planning forward, what is it you're planning for? Like when you think about, hey, this is what I would love for the next five years, 10 years, 15 years. Obviously you're a little bit of a planner, whether you mean to be or not. What's that look like? What are the financial goals that you're working towards?

• 14:10Speaker 04

  Uh, I don't know. I think at this time I'm like doing a lot, but maybe with a lack of direction in some aspect, uh, I don't, like some of the conventional things, like I don't really want to buy a house anytime soon. I think more just like focusing on like long-term savings and investments to like have more flexibility.

• 14:27Speaker 02

  You want to have like long-term saves. What have you been doing from a saving and building standpoint now? Like you talked us a little bit about how you, how you budget and how you think about that. What about how you invest? Cause I mean, as you said here, you've got $43,000 in investment assets. How have you been able to build that up over the last five years?

• 14:44Speaker 04

  So the UK pension and 401K, both done through work. And then the rollover IRA, this is like where I've made a bit, some mistakes in my past. I didn't know what investing was, but I knew what a CD was. So I just put it in a CD.

• 14:58Speaker 02

  Rollover IRA in a CD?

• 15:00Speaker 04

  Yes.

• 15:00Brian Preston?

  Is it still in a CD?

• 15:01Speaker 04

  Yes, I can.

• 15:01Brian Preston?

  It still is in a CD?

• 15:03Speaker 04

  They're like gonna charge me to get out of it.

• 15:06Brian Preston?

  Making on that CD?

• 15:07Speaker 04

  Nothing.

• 15:07Brian Preston?

  Is it less than 3%?

• 15:09Speaker 04

  Uh, maybe around there, but then it has some service charge. I've kind of just like counted it as a wash until I can get out of it next year.

• 15:16Speaker 02

  When you say they're gonna charge you to get out of that CD, is what you mean, they're gonna make you forfeit some of the?

• 15:20Speaker 04

  Yeah, all the interest. Yeah.

• 15:23Brian Preston?

  Do you know when the window out is?

• 15:24Speaker 04

  Yeah, next year, I think in March.

• 15:28Speaker 02

  But so in theory, I'm, I'm gonna use, I'm making up numbers here. Uh, let's say that it's a CD paying you 3%. And you're halfway through it. And so if you were to exit it early, it would cost you one and a half percent, right? Like I'm just making up a number.

• 15:40Speaker 04

  No, I think it's been in there for four years now.

• 15:42Brian Preston?

  But you would.

• 15:43Speaker 02

  But follow me, follow me on this, on this, on this like thought exercise.

• 15:46Speaker 04

  Yeah.

• 15:46Speaker 02

  Let's say it cost you half of whatever the interest you've made in it was. And let's say that it, you know, made 3%, it's gonna cost you one and a half percent. Do you think that over the next year, if you were to deploy those dollars differently, you would make more than the one and a half to 3% the CD is making? Or make less than the one and a half to 3%?

• 16:03Speaker 04

  I don't know.

• 16:04Brian Preston?

  Well, and can you answer this? Were they, when you bought the original CD, was it like a 12 month CD?

• 16:09Speaker 04

  No, it was like, I said the longest possible.

• 16:11Brian Preston?

  Oh, wow. So you was like, not only do I want a CD, but please lock this thing up as much as possible.

• 16:16Speaker 04

  I knew what a CD was and I didn't know, I literally did not know what investing was at all. So I just clicked the longest.

• 16:22Speaker 02

  But you know what? I'm, I'm, it's, we're, we're laughing at this, but good on you for not spending it and not cashing it out.

• 16:27Speaker 04

  So I knew it was just sitting there and it needed to be doing something, but I just didn't know.

• 16:31Speaker 02

  You didn't know what thing to have in you.

• 16:33Brian Preston?

  Would you put some homework over there on, do a little research on that, on that CD?

• 16:37Speaker 04

  Yeah.

• 16:38Brian Preston?

  More than likely you're gonna want to cash it, but because you went with as long as possible, we do need to know what you're foregoing since we are within 12.

• 16:46Speaker 04

  They also, they wouldn't let me take it out online and I had a call. And this was when I was living in the UK where I couldn't really make phone calls to the US that easy. So I was just kind of like not dealing with it.

• 16:55Brian Preston?

  Okay, keep going. What else you got on there?

• 16:58Speaker 04

  Um, so then the Roth IRA, I started, I guess, end of 2024. And so most of the stuff I'm doing now, as far as the 401K and the HSA is pre-tax. But I do have the option when available to make overtime. And so I kind of, at this point, am funding my Roth IRA contributions from my overtime.

• 17:21Speaker 02

  How much are you putting in your 401K right now? Do you know? Like percentage wise?

• 17:24Speaker 04

  5%.

• 17:25Speaker 02

  5%. Is there a match or anything like that? Employer contribution?

• 17:27Speaker 04

  No, then I'm putting in 6%. They're doing 3%. No, sorry. Scratch all that. I'm doing 7%. They're doing 3%. I knew it added up to 10 somehow. Yeah.

• 17:36Brian Preston?

  And you said you're doing pre-tax though?

• 17:38Speaker 04

  Yes. So the tax is high in Philadelphia. So I was just kind of like.

• 17:43Brian Preston?

  Well, when you say the tax is high, what is your state, what is the state income tax in Philadelphia?

• 17:47Speaker 04

  Um, I also have a city tax of 3%.

• 17:49Brian Preston?

  Okay. So what was the total if you had those two together?

• 17:51Speaker 04

  Not sure.

• 17:52Brian Preston?

  Okay.

• 17:52Speaker 02

  We can do some work on that. We can do a little research on that.

• 17:55Speaker 04

  Roth, I've contributed at least like 450 every month this year, sometimes more, but.

• 18:01Speaker 02

  Automated or are you just doing that manually?

• 18:02Speaker 04

  I'm doing it manually because it is like, the overtime is not promised. It's just as available. Also I get incentive pay when I work weekends. So any of that extra money, I then have like paced out for the Roth contributions.

• 18:16Brian Preston?

  Have you, do you know last year, like, did you max out your Roth?

• 18:19Speaker 04

  I maxed it out in January this year.

• 18:21Brian Preston?

  Okay.

• 18:22Speaker 04

  I think, January, February.

• 18:23Brian Preston?

  Yeah, that's great.

• 18:24Speaker 02

  With the IRA, you're like, I didn't, I didn't know what, I didn't know what to do, so I just put in a CD. How'd you know about Roth? Like, how were you aware of and knew what a Roth IRA was and open that?

• 18:34Speaker 04

  My friends told me. Um, she's like very on it with this kind of stuff. And I think I first heard about it from her. And then, you know, it'd been percolating in the back of my mind for a while. And then I eventually was like, I gotta do it.

• 18:44Brian Preston?

  What, what are you investing in, in that Roth?

• 18:46Speaker 04

  Index. No, it's a target date index fund.

• 18:48Speaker 02

  Okay. Love that. Look, see, you buried the lead. You know what you're doing. Awesome.

• 18:54Brian Preston?

  And you even said a index target retirement fund.

• 18:56Speaker 04

  I think.

• 18:58Brian Preston?

  So we have a, the content team is, is very, they're, they're, you know, as you can tell, they're quick. They said that the, the flat income tax is 3% and then there's a city tax of 3.7. So it's about 6.7%?

• 19:11Speaker 04

  Sure.

• 19:11Speaker 02

  Yeah. I think that sounds right. Well, we can do some work on that. Where we're going is we want to determine at, at your age, starting out, is pre-tax really the most advantageous or might it be more advantageous for you to do Roth 401K contributions? That's one of the things we can help figure out for you.

• 19:26Brian Preston?

  It's gonna be a Roth contribution.

• 19:28Speaker 02

  Let's not be presumptuous.

• 19:29Brian Preston?

  It's gonna be a Roth contribution.

• 19:31Speaker 02

  Okay. Um, all right. What about the, you also have an HSA and a brokerage account. Talk us about those.

• 19:35Speaker 04

  So the HSA like started, uh, which I know about from watching shows.

• 19:39Brian Preston?

  Hey, triple tax advantage.

• 19:42Speaker 04

  So it started when I moved back, um, to the US, my company offered. And my company does do some match for it.

• 19:50Speaker 02

  You know how much money the company is putting in your HSA?

• 19:52Speaker 04

  Maybe $50 a month.

• 19:53Speaker 02

  Okay.

• 19:53Speaker 04

  If I'm doing 125 a page, yeah, comes out to like 350 a month.

• 19:58Speaker 02

  Awesome.

• 19:58Speaker 04

  And then the brokerage is I had some money from my parents in bonds.

• 20:05Brian Preston?

  You know what I think about when I'm a 20 something? Let's get some bonds.

• 20:08Speaker 02

  You know what though?

• 20:10Speaker 04

  And at some point, I did know about interest rates.

• 20:14Brian Preston?

  We need to talk to your parents too, because I have to think, because look, I grew up in a household where CDs is what my parents invested in. And it wasn't until I got out and wondered, figured out how the wonderful world of personal finance worked that I was like, what in the world are we doing? So are your parents super conservative with how they invest their money? Because you just said CDs and then you say bonds. This is not normal behavior for a 20 something.

• 20:36Speaker 04

  But also like my dad has buys individual stocks and stuff for his gambling.

• 20:42Brian Preston?

  But that's not gambling if it's the right stocks.

• 20:44Speaker 04

  And then he has like, they're, they're pretty set as far as like long-term for retirement.

• 20:49Speaker 02

  Got it.

• 20:49Brian Preston?

  But why did you choose bonds?

• 20:51Speaker 04

  No, they, this was like they bought when I was, when I was like born.

• 20:55Brian Preston?

  Is this like savings bonds, like government savings bonds?

• 20:58Speaker 04

  Yes, on like US.

• 20:59Brian Preston?

  For your education that they, you just didn't use?

• 21:01Speaker 04

  No, it's like us treasury.gov or whatever.

• 21:05Brian Preston?

  Are they I-bonds? You know, a few years ago, there was this crazy scheme where you could make.

• 21:09Speaker 04

  They were I-bonds and something else too.

• 21:11Brian Preston?

  Okay, okay. You know what? That's much better.

• 21:15Speaker 04

  I'm thankful, I'm thankful for the, so it was, I had about, I think it was like 2,000 or so. And some of them, when I moved, uh, so the last like year when I was in the UK or nine months when I was in the UK, I was done with my, done paying for my masters. So then I was just saving up for moving because I knew it was going to be pretty costly moving back to the States, also buying a car, um, and.

• 21:40Speaker 00

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• 22:34Speaker 04

  Finding a place to rent, deposit, moving, all those. So some of it, I then just put in a brokerage.

• 22:40Speaker 02

  With the HSA, are you using those dollars in there like for medical stuff? Or are they invested in growing?

• 22:45Speaker 04

  No, so for that and like in my sinking funds, I have some like car maintenance. I'm if like for my oil change, if I'm able to like cash flow it, I do. And same for health costs. Luckily I don't have too many, so I just, yeah.

• 22:58Brian Preston?

  Are they invested though? Or is it just sitting in cash?

• 23:00Speaker 04

  It's a minimum of a thousand in cash and then the rest is invested.

• 23:04Speaker 02

  So when I, when I count this up, you got 7% that you're saving to your 401K. You get a 3% employer match. You're doing about $450 a month into your Roth IRA.

• 23:13Speaker 04

  But so this is the question, I guess, but that's like, I think I do hit close to 25 on my base income, but it's not, I make more than that with the overtime incentive pay. So I'm kind of like fudging the numbers on the percentage.

• 23:25Speaker 02

  But that's, that's okay. What, okay, if you're, if we have your income at your 65, what's a realistic income for you annually?

• 23:31Speaker 04

  The first six months of the year, I made 35.

• 23:35Speaker 02

  Okay, 35 times two, that's 70.

• 23:37Speaker 04

  Yeah, with overtime and stuff.

• 23:38Speaker 02

  Okay. So if you're at 70 and our goal is for you to save 25%, that'd be about 17.5 would be the goal that we would say like ideally for you to shoot for. We already know that 10% is covered through your 401K. You get 450 a month going into your Roth. And I want to get this right. You said you're doing 125 per paycheck into your HSA?

• 23:57Speaker 04

  Yes, that's what it comes out to. And then they, it comes out to about 350 a month.

• 24:01Speaker 02

  350 a month.

• 24:02Speaker 04

  Including the match.

• 24:03Speaker 02

  Brian, this is literally it. What we're doing right now is literally one of my favorite things that we get to do sitting across from other real people talking about their finance.

• 24:12Brian Preston?

  Yeah, you guys get to see this on Making a Millionaire, but we also do this for our clients every day at Abound Wealth.

• 24:18Speaker 02

  We get to dig in where they're at, figure out where the gaps are and find where we can optimize and build a plan that works specifically for them and for their financial goals.

• 24:28Brian Preston?

  If you've been watching this and thinking to yourself, hey, I want that. I want a professional with decades of experience in my corner, looking at my specific situation. We're here to help.

• 24:37Speaker 02

  Yeah, here at Abound Wealth, we are fee-only fiduciary advisors. That means that we are legally required to work in your best interest. And we love helping our clients optimize our army of dollar bills so that they can live their best lives.

• 24:51Brian Preston?

  If you've reached a point where you're ready for some help, go check us out at aboundwealth.com or click on the link right below. We'd love to connect and see if we're a good fit for you.

• 25:01Speaker 02

  That's right. Head to aboundwealth.com and let's see if we can do this for you too. Now, you mentioned you bought a car because when I look at, when we look at your net worth statement, you've got a really healthy side on the assets. Talk to us about the car because it is, it's not like the most attractive interest rate ever. What, what was the decision there?

• 25:18Speaker 04

  Honestly, buying a car when I moved back was so hard. I was like.

• 25:21Speaker 02

  What was hard about it?

• 25:22Speaker 04

  Well, I had no transportation. So like getting places to like look at cars was like difficult to begin with. And then I was having to like rent a car to be able to get to work because I hadn't bought a car yet. And then it's like, well, then I'm having to like Uber these car dealerships. Then I like went to one and they're like, you don't have an in-state driver's license yet. We can't sell to you. I was like, what?

• 25:43Speaker 02

  Is Philly not like a public transportation city?

• 25:45Speaker 04

  It is, but all the car dealerships are in the suburbs. You know? And so I think the loan was like a little over $9,000.

• 25:52Brian Preston?

  How much was the car? The purchase, the total purchase price?

• 25:55Speaker 04

  Uh, 19,000 or so. I don't know. I think that's including taxes. A Nissan Kicks.

• 26:03Speaker 02

  A Kicks?

• 26:04Brian Preston?

  I don't even know what that is.

• 26:05Speaker 04

  I don't think they ran for very long. Yeah, like a crossover.

• 26:08Brian Preston?

  So 19,000. How much did you finance out of that 19,000?

• 26:11Speaker 04

  Nine. I put 10 down.

• 26:13Speaker 02

  Wow, so you had $10,000 to put down on the car?

• 26:15Speaker 04

  This was like all last year, I was like just saving, saving, saving, um, for moving. So I think the total amount that I had saved up to move was 25,000.

• 26:24Speaker 02

  Okay.

• 26:24Speaker 04

  When I left, I sold my car to this family member and I just again, put that money into savings account.

• 26:31Speaker 02

  You're a little squirrel. That's awesome. Like these are, like this is.

• 26:34Speaker 04

  So it was kind of like the money I had from selling my car was still there.

• 26:38Speaker 02

  So $10,000 down, uh, how long did you finance it for?

• 26:42Speaker 04

  It was five years. So the minimum is 207. I've been paying 300.

• 26:49Brian Preston?

  Look at you.

• 26:50Speaker 04

  To like pay it off in three years, but then you're.

• 26:53Speaker 02

  You know all the things.

• 26:54Speaker 04

  Maybe don't get too excited. But then on top of that, I've like paid an extra $1,000 this year of just like what I've had.

• 27:00Brian Preston?

  How did you know to pay it off in three years?

• 27:01Speaker 04

  You guys.

• 27:02Brian Preston?

  Yeah, look at that. Some dividends. I'm so proud.

• 27:07Speaker 02

  You're doing so many things right. Like you're, like, I keep thinking, oh, this is going to be the one.

• 27:11Brian Preston?

  I will tell you, the inflection of your voice doesn't have the confidence it should have for all the good decisions you're making.

• 27:16Speaker 02

  You're kind of a baller. Like you are crushing this.

• 27:18Brian Preston?

  You're making great decisions. This is really good. Yeah, 8.99 stinks, but you've probably heard us when we talk about what's high interest, cars, because you, you just, you made the case for why 238 exists is because sometimes the most important thing you can have in your wealth building journey is reliable transportation. And you're out in the burbs for when you first got moved back, have no car, have no friends, no support. You need transportation. So yeah, in your twenties, somebody stuck you with a bad interest rate. But if we knock this thing out quick, the, the, the actual incremental cost to your long-term future is going to be very small. Because I guarantee you, the next time we go through a car transaction with your squirrel

• 28:03Brian Preston?

  type behaviors, it's going to be a completely different structure. So it's going to be A-OK.

• 28:07Speaker 04

  So sometimes when I, if I'm hitting the like 450 on Roth, I do make extra to my car, you know, if I get like, I got, ended up getting a tax return from the UK. So I've put some, put some of that towards the car because I am like, I think if I try hard enough, I could pay it off this year.

• 28:24Brian Preston?

  Hit pause on that before you do that, because the thing I want to make sure, you did it in January for last year on your Roth. There is.

• 28:33Speaker 04

  Yeah.

• 28:33Brian Preston?

  You've, you've heard us talk about this.

• 28:34Speaker 04

  Yes.

• 28:35Brian Preston?

  The financial order of operations. I just want to make sure that we're not leaving anything on the table of step five before you knock, because it is questionable whether or not we think that car loan is high versus low interest rate because of your age and the opportunity that you might have investing in a Roth IRA at your, at your age and income potential.

• 28:55Speaker 04

  So I think the car payment just, uh, does take up a lot of my disposable income, I guess. So like my needs now with the car payment are closer to 60%. But if I pay off the car, it drops to like 52. So that's where I'm like, if I pay off the car, then I think I could like more automate the Roth contributions and it would maybe like free up more.

• 29:17Speaker 02

  I did the math on it. I've got you at a 24% savings rate. So like we are, like you are right there. Like you're doing the stuff.

• 29:24Speaker 04

  And the good thing is, is like when I do make overtime, like it does automatically like then increase versus in the UK, all my overtime was, did not go into my pension. Like they would just do the base salary.

• 29:37Speaker 02

  Only off base, not off of the.

• 29:38Speaker 04

  Not off like increase. And I do get bonus in October. So then I feel like that would maybe push it towards 25 with the.

• 29:48Speaker 02

  What, tell me, what questions do you have? Because we've asked a ton of questions for, of you, like, hey, and man, every time I just keep thinking you're going to say something bad. You say something good, which is awesome. What can we answer for you? Why did you say, I want to come in here, I want to talk to these guys? What is it you're looking for?

• 30:02Speaker 04

  Are you like, you shouldn't be paying off this car early?

• 30:04Brian Preston?

  I'm not, no, once you get over 25% savings rate, I'm going to be A-OK with you because you're only, you're down to $6,000. It's not going to break my heart to have, 8.99 is not in our terms for a 20 something, a super high interest rate, but it's also not something that gets me like, wow, that's a low interest. No, it's a pretty high interest rate. So I'd be okay with you knocking that off.

• 30:25Speaker 02

  Okay, I'll take the other side. I have no issue with you paying it off more aggressively. Would I do that if I was already inside the confines of paying that 300 a month, getting it inside a 20 rate? I might think about taking that extra capital and either getting my Roth IRA maxed out sooner or bulking up my after-tax account, or maybe increasing my 401K contribution. Because I believe if you, if you go to moneyguy.com/resources, you look at what the wealth multiplier is for a 27-year-old, it's big. And so even though 8.99% is a higher interest rate, you're going to have that knocked out so quickly.

• 30:59Brian Preston?

  I will put it in a, what do you consider a reasonable interest rate? Because 8.99 is pretty high. What do you think if you were doing a car loan that wasn't high, what would that rate be?

• 31:09Speaker 04

  I mean, not high would be like one or 2%.

• 31:12Brian Preston?

  But do you want to use 3%?

• 31:14Speaker 04

  Sure.

• 31:15Brian Preston?

  Okay, so we're paying a 5.99% premium right now, right?

• 31:20Brian Preston?

  Times 6,000 bucks, because I bet you've already paid it down to 6,000. We're, it's costing you 350 bucks a year premium. But it seems a lot less when you hear it like that, isn't it? 8.99 looks like a high interest rate, but when you see what is the actual cost? Because you only owe $6,000 on the car, you're not getting penalized as much as you think you are. So there might be some value in actually making sure you're still prioritizing based upon the financial order of operations.

• 31:50Speaker 02

  So question one, should we pay off the car? Well, I think you could go either way on that. Ryan says, yeah, maybe. I say, yeah, maybe not. But it's, I think if you're saving.

• 31:58Brian Preston?

  Neither one are gonna hurt you because the same reason that $6,000 has made it to where it's just not a material needle mover.

• 32:06Speaker 04

  Okay, that's what I mean, good to hear. I thought it was like a lot more, I guess.

• 32:12Brian Preston?

  Well, because 8.99, now if you had a $28,000 car note on a $35,000 car and you're paying 8.99, you're getting crushed by that. But because you kept the debt, and that's the other part about 238 is that you kept all of it so minimal that it just doesn't hurt you as much.

• 32:32Speaker 04

  Okay.

• 32:33Speaker 02

  Where would you like to see yourself at 30? That's only three years from now, so it's not that crazy to think about. And then what would you like to see different at 40? Like, I'm just thinking through like, because it seems like you already have like this long.

• 32:44Brian Preston?

  And it doesn't have to be financial goals. Tell us about life, what you want in life, because there's usually an intersection, but it's also how you're living. And then the finances come into play to support that.

• 32:53Speaker 04

  My goal, I guess, by 30 is to have 100K invested. Is like my reach goal, I would say. And then.

• 33:02Speaker 02

  What's anything significant about 100K?

• 33:03Speaker 04

  Just a goal, like something to aim for. Like if I, I'm very like goal oriented. I think if it was just like, just invest, I wouldn't.

• 33:11Speaker 02

  You want some milestone to hit.

• 33:13Speaker 04

  Yeah.

• 33:13Speaker 02

  I love that.

• 33:13Speaker 04

  Um, life, I pretty like, I love my apartment. I like where I live, like I'm happy to just like, as I said, like Doug Galavanting. I'm like, want to stay in one place for a while, like put roots there. Again, like I'm not really like looking to like travel much anytime soon. More like domestic trips in the US to like see friends and family is like more of a priority. I think at this point, after, you know, taking kind of a three years for a side quest. Um, so I'm like, pretty okay with how things are going and want to stick to that. But then, you know, again, like, as I said, like have the investments where if I want to make different decisions later on, I am able to.

• 33:52Speaker 02

  Anything significantly different by age 40 than by age 30? Because $100,000 invested by 30 is a great goal. I love that.

• 33:59Speaker 04

  I don't know, I'm like, really not like attracted to like buy a house at this point. I don't think home maintenance is my journey in life. Um, and I, I think more like as far as my dream life, more surrounding like work. I would rather like not own a car, live in more center city, like, you know, a nice high-rise apartment or something.

• 34:18Speaker 02

  Like where?

• 34:18Speaker 04

  And still in Philadelphia.

• 34:19Speaker 02

  Oh, still in Philadelphia.

• 34:20Speaker 04

  But like, I'm a bit like, um, outside of center. So that would be like my dream life would be like not owning a car at all. Had been like, you know, having a job that either is in center city and I can like walk to or remote.

• 34:32Speaker 02

  Is your current job a, um, like a career job or is it like a right now job?

• 34:37Speaker 04

  No, I really like, I got my masters then in global security. I really like the field and I really like what I do. Um, whether I stay with like my current company forever, I probably don't.

• 34:49Speaker 02

  Still trying to figure that out. Because you had mentioned something earlier, you said, hey, I haven't really like changed jobs a bunch. And because.

• 34:56Speaker 04

  Or changed, yeah, yeah.

• 34:56Speaker 02

  In order to do that, in order to increase my income, that's what would be required. In your industry, is that true? Like if you want to move vertically, you probably need to change companies that you work for as opposed to being able to work up at your current?

• 35:08Speaker 04

  Like my company has, um, a policy where you can't ever get more than a 10% raise.

• 35:14Brian Preston?

  Hmm, that's a policy?

• 35:15Speaker 04

  It's like a standard policy and it basically has to be approved by the CEO. If you like, if it's more than that, so even if I get promoted.

• 35:22Speaker 02

  We haven't done that.

• 35:24Brian Preston?

  Guys, new policy, nobody gets pay raises over 10%, 10%.

• 35:28Speaker 04

  So and then.

• 35:29Brian Preston?

  I don't know how I feel about that.

• 35:30Speaker 04

  My income is still like, you know, 10% is just like, that's like marginal increases. And then even the annual increases usually like last year was like 2%.

• 35:39Brian Preston?

  Does the market allow for that? Because you know, market always controls everything.

• 35:42Speaker 04

  Everyone's, like retention's kind of low.

• 35:44Brian Preston?

  Yeah. Because that's, that's, there's an equalizer in that.

• 35:47Speaker 04

  But I. Yes, so because I pay for my moving costs, if I leave the company, I have to pay it back. If I leave before like end of September. So I've kind of like tried to put blinders on if I'm trying to make it till then.

• 36:00Speaker 02

  Sure.

• 36:00Speaker 04

  Um, but still like when good opportunities show up on LinkedIn, I do apply.

• 36:05Speaker 02

  For the field in which you work, is it going to be easy to like change to another company and still stay in Philadelphia? Or will you likely have to move if you move to another company?

• 36:12Speaker 04

  That's the thing is I don't want to move, which I think makes it like a bit harder. We're like not as many options. I think if I was willing to move, I could get a new job fairly quickly. My resume is like pretty competitive for the, you know, having lived abroad, master's degree.

• 36:28Speaker 02

  Speaks Spanish and French now?

• 36:30Speaker 04

  No, absolutely not. So I like trying internally to like make some things happen, so hopefully.

• 36:38Brian Preston?

  How about Creole? You speak Creole?

• 36:40Speaker 04

  No, I can do like laissez-le, monte en relais.

• 36:44Speaker 02

  More than I got. It's more than I got.

• 36:46Brian Preston?

  You'll have to ask your friend.

• 36:47Speaker 02

  I will, they'll tell me. Uh, okay, um, so you, from an income standpoint, right? Obviously you would like to make more income. I think you've kind of expressed that. Do you have an income goal? And inside your industry, is there a, is there a way to get to that? Like, are there steps you could be taking to move towards that goal? Is it really? No, I just got to figure out if, yeah, if I want to move, then I can do that. But if I stay here, this is pretty much the lot that I'm going to be in.

• 37:11Speaker 04

  My short-term goal is to get to closer to like 75 or 80. Because even with the car payment, that puts my needs closer to 50%. And then I could do more like automated Roth and not depending on overtime and bonuses to like max it out. So that's like my short-term goal is to try and get there like by the end of the year. Um, I think that also is like my rent and like cost of living is pretty low. So I think that's like fine for now, but of course, if someone offers me more, I'm not going to say no.

• 37:39Brian Preston?

  No, because it sounds like you love the city you live in. You kind of like your job too, it sounds like. Is there any ways you can go advocate for yourself? Because I mean, I hear that policy.

• 37:47Speaker 02

  They have a policy.

• 37:48Speaker 04

  No, I'm trying.

• 37:49Brian Preston?

  They have a policy, but come on.

• 37:51Speaker 04

  No, I, I've like, I've made arguments. I've been like going to HR being like, well, this is what I've already made with overtime. Like I'm not going to take a position that's just, you know, like the increase would be to like 70,000. Where I'm like, that's not even a pay rise for me. So I'm like talking to people and.

• 38:06Brian Preston?

  Because you sound like you're always, I mean, because like, it sounds like if they need somebody to work on the weekend or they need overtime, Melissa's like, I'm here, I'm here. You know, so you sound like you're definitely the person that's dependable and somebody that they lean on for that type of stuff. So it makes you probably valuable to the enterprise, I would think.

• 38:25Speaker 04

  Yes, hopefully.

• 38:27Speaker 02

  Well, here's what I'm excited about. I think we're going to be able to put together a pretty interesting plan. There's a lot of variables you're going to change in your life.

• 38:32Brian Preston?

  Can I ask one more question?

• 38:33Speaker 02

  Nope, no, no, no, no. Yeah, you can ask a question.

• 38:36Brian Preston?

  When do you want to retire? Because you talked about kind of short-term goals up to 30. What's your long-term goals?

• 38:41Speaker 04

  Depends what happens when I'm there, but I, I think at the rate I'm going, like retirement before 65 is possible. Again, like I get more like flexibility, I guess, nearing that.

• 38:52Brian Preston?

  The only reason I ask is when I was your age, I used to think I wanted to retire somewhere around 50. Now, I will tell you, I don't like giving my age, but I am over 50 now. Um, but I am, and I don't ever plan to retire now. I've kind of gone the backwards, I'm the reverse. But I always loved the decisions I made in my twenties because it's just, I've been able to do things more on my terms. And I think that that's the part of owning your time that much sooner is about, and you just already have the natural skill set. That's why I just didn't know if you had a long-term goal. It can be very flexible and can change over time. Because even if you overshoot the goal of like early retirement, it can serve you well with flexibility in the future.

• 39:35Speaker 04

  I do think I don't make enough to do like full fire of like, I want to retire as soon as possible. And that's the same thing I think about buying a house is for me to save up a down payment now, when I have like $400 into savings every month, would just, it's like, it would take a while.

• 39:53Brian Preston?

  Your wife doesn't really push for you to have a house right now either?

• 39:55Speaker 04

  No.

• 39:56Brian Preston?

  Because I don't even think you've figured out the variables of life that would make those roots necessary.

• 40:02Speaker 04

  And I think even, you know, the house that I would want is not anywhere near what I've, you know.

• 40:09Brian Preston?

  You, everybody always underestimates what they can do in a decade, but they overestimate in a year. So you might be surprised that you, you probably are closer with what you're building right now. It's just, but you don't, you don't need to fill in that, that vision yet.

• 40:25Speaker 04

  Well, if I was making like, you know, closer to like 80 or 90, I would have a lot more money than if I wanted to like save up for a down payment, I would just have a lot more income to be able to get there.

• 40:34Speaker 02

  Well, what I'm excited about is I think we're going to put together a plan that is going to hopefully optimize some of the stuff you're doing, like some decisions you've made. Maybe we can like make them slightly better, tweak them a little bit, but also show if nothing changed, if all you did is say in your current, current place, current income, current trajectory, but continue to execute the good behaviors you've been doing. I think that you're going to have, just like Brian said, more freedom, more flexibility, much earlier than you realize because you've made so many good decisions so early. For a 27 year old, you're just, you've got a great mind for this and you're doing like really, really good things. I'm excited to put together the plan to see what it actually looks like when we stretch that out.

• 41:11Brian Preston?

  Yeah. I mean, it's, it's pretty amazing. I'll pick on you for the CDs. I pick on you for the bonds, but your natural instincts are incredible. And it's, you know, the hardest thing I always share with people is the discipline to, to live on the last thing you make and save. That's the hard part. Choosing how to invest in the better way, that's easy. That's, most people don't, most people never make it to this because they don't have this part that you have in spades. So you're, you're going to be great. We can tweak and improve these things, but you, you're going, you've got what is the secret sauce to creating success in the long term.

• 41:46Speaker 02

  Brian, what an awesome conversation with Melissa.

• 41:49Brian Preston?

  Yeah. I loved Melissa, but I gotta tell you, I felt like I went on a little side quest because when I found out her job was travel security, I just, I was fascinated. It reminded me, I don't know if I thought it was like Jason Bourne or what, but it was, it was definitely something that would create an interesting conversation. But bringing it back to what we talk about, she has specialized in being a travel security, but she, I think she wants to pivot now and focus on financial security.

• 42:14Speaker 02

  Yeah. I thought it was great. She was doing a really fantastic job, but not like a super high income. Sometimes we'll sit down with young people that have $100,000, $150,000. She has a very reasonable income, $65,000. And yet she was doing a lot of things really right. I think behaviorally she's figured a lot of stuff out, but there were some areas that I think we could optimize, I think we can improve upon.

• 42:35Brian Preston?

  Yeah. Let's jump on this. I mean, the first thing, CDs in retirement accounts?

• 42:40Speaker 02

  Yeah.

• 42:41Brian Preston?

  Not exactly what I consider the sexy sizzle of where I would start off with my retirement savings.

• 42:46Speaker 02

  Well, this is why we always say we want to measure twice, cut once. Cause initially when we talked to her, like, hey, okay, get rid of that CD, surrender it. We actually did a little bit of follow-up. We found out the CD is not paying 3%. It's actually paying 4%. And we also found-

• 42:59Brian Preston?

  Woo, 4%.

• 43:00Speaker 02

  But, but hear me out here, hear me out here. We also found that it matures in June of next year. So we're about a year out from this. If she were to just forfeit that CD right now, she's going to give up about $200 of interest on the CD and with that particular CD, there's a $30 penalty. So if she were to just forfeit it right now, she'd actually net about $3,089. So you're thinking, okay, not crazy. If she holds it until maturity, it's going to be worth 3.4, $3,420. So when you think about the imputed rate of return because of that $30 penalty, if she chooses not to hold it to maturity, it's going to

• 43:41Speaker 02

  be a 12% haircut. So we would argue, even though it's not ideal right now, I probably would recommend holding it to maturity and not taking that 12% pay cut.

• 43:49Brian Preston?

  Yeah. This is why personal finance is definitely personal is that I wouldn't recommend putting CDs into your retirement accounts, especially for 20 somethings. But for her situation specifically, when we actually did the math, that 12% moves the needle.

• 44:03Speaker 02

  It's significant.

• 44:04Brian Preston?

  Because, so, but like I said, don't want everybody saying, thinking this means we're endorsing CDs in retirement accounts. It does mean for Melissa, let's be patient, redeploy that money in next, next June of 2027.

• 44:17Speaker 02

  The other thing that we had a conversation around is she thought that she was getting hammered on taxes. And we actually, again-

• 44:23Brian Preston?

  That's why she's not doing Roth.

• 44:24Speaker 02

  Yeah. We did some due diligence. We found out that her effective tax rate, when you look at the marginal federal, marginal state rate is somewhere around 18%. And I'm going to argue that at an 18% tax rate, well, sure, it's not the lowest it could be. It's not super high. I think for someone her age with tons of time to grow, I think she might consider switching her contributions to Roth contributions, letting that money grow tax-free, even though she's going to pay more in tax today. I think likely that could be the right solution for her long-term.

• 44:56Brian Preston?

  Well, historically still 18.8% is pretty low. Now I think this is probably a good example of you get out there in the real world and you realize, hey, taxes is legitimate. To the point that she was like, man, I'm paying a lot in taxes and it feels really high. That's why you actually have to do the exercise. Let's see what the actual, your marginal rates are and don't skip out on doing your federal, your state. But when we did the math, 18.8% and at her age in her twenties, the compounding growth is going to be more powerful to definitely take advantage of doing the Roth and the tax-free growth.

• 45:29Speaker 02

  And then the, the other thing that we had talked about is, you know, she has this car loan right now. It's a 9% rate, which is not super exciting. And I think you and I had sort of two different views on how to handle that. What do you think she ought to do?

• 45:41Brian Preston?

  Yeah. I mean, when I, when I hear close to 9%, I'd kind of like to pay that off pretty quick. Now you took more of an aggressive stance because you think that not, even though it's 8.99, we'll round it up to 9%. Because of her age, the opportunity cost is just too much.

• 45:57Speaker 02

  Well, she already said she's paying extra to get it inside the 238 confines. She had this five-year loan, but she's going to pay it off in three years. Once she's done that, I'm okay with that. I recognize that her wealth multiplier at her age is still 34 times. So every dollar she invests can turn into $34 by the time that she retires. So my stance is pay off the car inside 238, even though 9% is higher interest for someone in their twenties, I'm going to argue those dollars could be better deployed out to her. But at the end of the day, I don't think that's something that either one of us are willing to die on the hill over. She'll have to decide which decision she thinks makes the most sense for her.

• 46:34Brian Preston?

  Well, the good news is either way, she's not just making the minimum payment. She's actually trying to honor 238. So I think she's going to be okay. And it's also, let's not forget, she's got a pretty healthy savings rate. So this money is going to grow because she had a pretty important goal. She says she wanted to have $100,000 by the time she was 30. Is she on track?

• 46:53Speaker 02

  Yeah. So we actually looked at her savings rate. Right now she's putting 7% into her 401k and she's getting a 3% match. On top of that, she's putting $450 a month into her Roth IRA and she's doing $350 a month into her HSA between her contributions and employer contributions. So she has about a 25% savings rate, almost $16,000 a year going in. Well, when we look at where she's at right now with her current portfolio, she had about $43,000. So if she just saves at that 24.8% clip and we don't assume any pay raises, any bonuses, any additional income coming her way, and we just assume a 9.3% annualized rate of return based on her age, by the time she gets to 30, we're projecting,

• 47:38Speaker 02

  she's actually going to have $112,000 saved up. So she's going to hit the six-figure goal, but it doesn't stop there.

• 47:44Brian Preston?

  Yeah. What I think is amazing, we have that, the good indicator that you're doing things right. By the time you're age 30, we want you to be one times your income. And as you've already disclosed, now yes, with bonuses and stuff, she goes a little over 70,000, but still she's going to have $112,000.

• 48:00Speaker 02

  It's huge.

• 48:01Brian Preston?

  That's pretty powerful. What happens if we give that wonderful, valuable concept of time and compounding growth? What happens by the time she's 40?

• 48:09Speaker 02

  Yeah. It's great. If, if she, so she gets to 112 by 30. If she just continues that same behavior, no more pay raises, no more increases, no more big adjustments, just keep doing the same things that she's doing. By the time that she gets to 40, she will have over half a million dollars. She had almost $550,000 of investable assets.

• 48:27Brian Preston?

  Now, think about that in terms of, because a good indicator when you're 40 is have three times your income. Now, without a doubt, Melissa's going to get pay raises. There's no telling, because she already said she had some other opportunities, but just taking a conservative stance that we did when we did this analysis, she's going to have over $500,000 on a $65,000 salary. We're getting to a, close to a 10 time factor.

• 48:48Speaker 02

  That's right.

• 48:49Brian Preston?

  That's way ahead of schedule.

• 48:50Speaker 02

  I think a lot of young people are going to see this and be like, holy cow, it, it's possible for me to build wealth. I don't have to have a huge income. Why don't I have some amazing miraculous thing happen? Just making small, consistent, sound financial decisions can lead, can really can lead to a great, big, beautiful tomorrow.

• 49:07Brian Preston?

  Yeah. Stack up those small decisions early and often for the win. But if others want to come on Making a Millionaire, how can they apply?

• 49:15Speaker 02

  Yeah. If you'd like to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of our free tools, resources or calculators, go to moneyguy.com/resources.

• 49:25Brian Preston?

  I'm still not convinced that Melissa is not Jason Bourne, but without a doubt, she's in a great financial situation. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 49:34Speaker 05

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. 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. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth

• 50:19Speaker 05

  Management.

• 50:20Speaker 06

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