Pod Insights Money Guy Show Are You Richer Than Your Friends? About this episode Understanding where you fall on the financial spectrum - whether you're behind the curve, ahead of the curve, or right on the curve - can be an invaluable tool to help you develop a financial plan of action that's tailored to your unique life circumstances and needs.
But, it can be hard to find the information necessary to make that determination. So, in this video, we'll explore how Americans stack up in some key financial areas.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Brian Preston? Here's a question, don't know if it's healthy, unhealthy, are you richer than your friends?
0:10 Speaker 01 Brian, I am so excited that we get to talk about this because oftentimes, understanding where we line up with our peers can be helpful, it can be a valuable exercise, but on the flip side, it also could be negative and it could be detrimental.
0:26 Brian Preston? Well, I want people to always take an active role in your personal finances. I think you've gotta, you've only gotta figure out what gives you purpose, what's the why, what brings you tremendous happiness, so you can lean into that, but you also need to kinda know, and hold yourself accountable, are you ahead of the curve, are you behind the curve, are you right where you're supposed to be? And also, I want to dispel something I see out there in social media, especially in the personal finance circles, one of the housing hack things that are out there is it says, "Go buy the cheapest house on a nice street of homes."
0:59 Speaker 01 Because it'll go up in value more.
1:01 Brian Preston? Because it's gonna make a lot more money over the long term, you know, you'll be in this nice neighborhood and you got in cheaper than everybody else, your house will likely appreciate more than others. However, there is something that is left unspoken about that, is that if you are the poorest person on your street and you surround yourself, you have set yourself up, there's a reason, there's a saying, "Stop trying to keep up with the Joneses." If you're trying to keep up with the Joneses, you will literally drive yourself crazy. And there was actually a research study done by Yale School of Law, said being poorer than your peers can actually take a toll on both your health and your happiness. So if we're telling you, "Look, comparison is the thief of joy, and you don't
1:44 Brian Preston? want to always be the poor friend that can't keep up, can't go out to eat, can't go on the trips," you still need to kinda know, take an inventory of where you are, so you can actually be on the healthy side of this.
1:55 Speaker 01 Well, I'll take it a step further, I don't think there's anything wrong with looking at other successful people that have made good decisions, and you figure out, "How do I take some of the decisions they've made and apply it to my situation?" So it's more about making it a learning exercise than... Then comparison exercise. I don't want you looking at someone else saying, oh, man, I should have what they have or live in that house or drive that car. But rather say, oh, if someone's had some level of financial success, what are the behaviors and things that that person is doing? That maybe I should begin instituting in my life so that I can have a similar outcome? And I think one of the best things you can do if you really want to like level up your financial success is make sure you subscribe and ring that notification bell so you can stay up to date on all
2:40 Speaker 01 of the content that we put out there for you every single week.
2:45 Brian Preston? Let's jump in both. So well, first of all, there's already this misconception. What's the difference between wealth and what's the difference between being rich? And a lot of people, they get those two confused. Just because you have a good income, you might be rich, but it doesn't necessarily mean you're wealthy. So let's first just jump into for all those people who want to measure off of income. Where do people fall?
3:07 Speaker 01 Well, I think this is maybe even an unfair metric because where your income falls is very much dependent on what part of the country you live in. I mean, a lot of times when we do our net worth studies or income studies, we'll get people in the comments saying, yeah, yeah, but I live on this part of the country or I live here. And there is some truth in that. So we thought about in terms of comparing or thinking about where our income measures up. We know that the median household income in the United States is about $81,000 right now this year, according to the Census Bureau in 2024. But if we look at high cost of living areas like Hawaii or Massachusetts, California, New York and New Jersey, you can see that those median incomes
3:51 Speaker 01 are significantly higher than the national average. They're at 96,000, 106,000, 95,000. So if you are above the median income, but you live in one of those areas, odds are you're probably not feeling super wonderful about how your income stacks up.
4:07 Brian Preston? This is why you have to be careful with stats because I even look at New York and you see it's very close to the actual median, but we all know like New York City is completely different than other parts of the state of New York. So. But this is probably if you're living in one of those high cost of living areas, we know you're heard. We want you to feel that way, but it's still, it puts a lot of pressure on you that you still, even though you might be in a high cost of living area, the good news is a lot of times these places also are where some of the higher incomes earned also reside.
4:37 Speaker 01 And then if you are someone who lives in one of these lower cost of income areas and perhaps your income is below the median, but you live in a low cost of living area, you might be actually feeling pretty good. So assessing where you are and where you live matters when you're going to think about, okay, how should I be feeling? But we know that you guys don't consider yourselves to be the median. You're the financial mutants. And so maybe one of the questions you have is how do we stack up to other financial mutants out there? How do, how do I look when it's compared to the other folks who tune into financial content and make wise financial decisions?
5:17 Speaker 01 And we thought that this information, this data was fascinating. We looked at gross household income by age.
5:24 Brian Preston? Yeah, this one, this one kind of blew my mind is because I gave you guys a lot of credit, my financial mutants. I knew you're already a special type of person that you tune into a financial show to figure out how you can do things better with your personal financial decisions. Little did I know, you guys are smart, you're successful, and you're overachievers when it comes to the income category. Cause check this out, we broke it out, we stratified it to those that, and let's focus on primarily those that make over a hundred thousand dollars. I can remember when I was in my twenties, I aspired to break six figures by the time I reached age 30. And it seems like a lot of you guys not only aspired to that, but you blew the doors off of it.
6:07 Brian Preston? Because check, this one really blew my mind. For 20 to 29 year olds, 54% of our financial mutants make over six figures.
6:15 Speaker 01 It's wild.
6:16 Brian Preston? I didn't, I didn't reach that status. 30 to 39 years of age, 83% of you financial mutants that did our survey make over a hundred thousand dollars. For 40 to 49 years of age, 87%. For those 50 to 50 986% and for even those 60 and beyond, a lot of these people even potentially retired, 72%. That's amazing.
6:37 Speaker 01 It's unbelievable. And so you may be sitting there asking this question, okay, well, what do I learn from this? Obviously, the median for financial mutants is very different than the median national average. So what are some of the key takeaways? Well, if you look at this and you recognize that you are below the median, what are some things you can do? Well, the very first thing is avoid lifestyle creep. Just because someone else lives in the nicer home, or drives a nicer car, takes the more extravagant vacation, does not mean that that needs to be part of what you're doing. If you find yourself continuing to chase that lifestyle, what you're going to end up doing is squeezing out your ability, certainly at a lower income, to be able to build the financial future that you actually want to build.
7:21 Brian Preston? Well, when I saw that cost of living area, there's two things that hit me is that we often hear, you know, you only have really two levers to pull. You can either make more income, or you can lower your expenses. If you live in a low cost of living area, when you see the data we just shared, maybe you need to cut your expenses even more to figure out if some of that can turn into additional savings and investments. However, if you live in a high cost of living area, as I've already shared, this is the answer here, is that for a lot of people who live in high cost of living areas, there's also a lot of income opportunities.
7:53 Speaker 01 That's right.
7:54 Brian Preston? Meaning you can make more money in those high cost of living areas than people who live in, you know, the sticks or rural areas of America. So go ahead and see if there's some additional opportunities for you to level up your income.
8:06 Speaker 01 And if you're someone who is above the median income, maybe you're one of those financial mutants who are doing even better, one, celebrate your hard work. That's incredible. Now, you have a large shovel. You have something that you can use to begin to build towards financial independence, but don't be complacent. Don't, just because you make a high income, just because you're able to comfortably make ends meet, that does not mean that you don't have to take your finances seriously. You don't have to make wise financial decisions because we all know, it's less about how much money you make. And it's more about what you do with that money, how you effectively use your shovel.
8:46 Speaker 01 And if only there were some system or some method or some mechanism that could walk us through as we're making income, what we should be doing with our next dollar.
8:56 Brian Preston? It's almost like there needed to be an instruction manual, an order of operations, if you will, on what to do with your next dollar. And that's actually what we've created with the Money Guy Show. Even went a step further with Millionaire Mission, the book that came out this year. And you guys, by the way, thank you for all the support on that. But if you want to just get a free copy of this resource, just go to moneyguy.com/resources. We'll go ahead and share it with you on what you should do with your next dollar. So you don't fall into the traps of the typical American. We want you to fall into the financial mutant category where you're a maximizer of every dollar that comes your way.
9:32 Speaker 01 And so when we think about how we stack up and how we compare with our friends or our peers or other folks in our financial situation, we have to think about, especially in the context of the Financial Order of Operations, where does it begin? Where does it start? And for most folks, one of the early places that we begin to see some differences between financial mutants and non-financial mutants is in cash reserves. How are you or how are your peers managing that thing that's going to effectively keep your financial life out of the ditch?
10:04 Brian Preston? Well, unfortunately, the typical American does not do this well. Now, I want to give one of our writers credit here because I think he'd be sad if I didn't use this analogy. I don't know how good it's going to hit, but I feel like I have to use it anyway. Just like when there's an emergency, what does our federal government do? They send in the National Guard.
10:23 Speaker 01 Oh, that they got to protect the home.
10:25 Brian Preston? So our writer, Nick, wanted everybody to realize, look, just like when you have an emergency, you need to have something in your army of dollars that you can send in. So he came up with the Cashinal Guard.
10:40 Brian Preston? Oh God, it hit worse than I thought.
10:41 Speaker 01 No, no, no, people out there in the audience are laughing. So in your army of dollar bills, just like we need a National Guard, you need a cash National Guard. And why is that the case? Because most folks don't do it. We know that right now, 56% of Americans could not come up with a thousand dollars for an emergency without going into debt. That is a problem and that is a sad reality that exists right now in this country.
11:09 Brian Preston? Yeah, and this one scares me because that's when you make those desperate decisions. Life is going to throw some chaos at you, no doubt. You never know what's coming your way. And if you just don't have a thousand dollars, how are you going to cover your health insurance deductible? How are you going to cover if you got in a car accident? That's why step one, highest deductible covered of the financial order of operations is your first level. So you're not making those desperate decisions.
11:33 Speaker 01 And we know that right now, if you look, the average healthcare deductible in the United States is about $2,500. So if you have accumulated $2,500 and you have passed step one of the financial order of operations, you're already, in the context of this show, richer than 56% of Americans that could not come up with that thousand dollars. So make sure that you're making the decisions that will prevent your financial life from falling off the rails.
12:03 Brian Preston? And this is more of doubling down on the bad decision making. We already knew Americans couldn't come up, 56% can't come up with a thousand. Well, you're not going to be surprised to learn that 72% of Americans don't have a fully funded emergency fund of three to six months. I wasn't completely shocked by this. If you have 56 that can't even reach a thousand, why would we expect three to six months to be even better? Of course, it's going to be a worse number.
12:26 Speaker 01 So again, thinking through the context here, if you are in step five and you're funding a Roth IRA or funding an HSA, that means that you have already built a fully established emergency fund in step four. If you've done that, you're doing better than 72% of your peers out there. So then the question becomes, okay, if these folks, even where the median income and you know... If they have this money coming in and they're not building it up in cash reserves and they can't even come up with a thousand dollars for emergency, where's the money going? What is happening to it?
13:00 Brian Preston? Yeah, well, that leads to consumption decisions, unfortunately. And look, there is an entire industry out there to trying to get you to easily part from the money you earn and they just want you to spend it, not save it, not give it away, they just want you to spend it on their consumable goods. And a lot of times that's done through high interest credit card debt.
13:20 Speaker 01 Yeah, it's this idea that I can afford anything in the world, one month at a time, a couple hundred bucks at a time. If I can swipe it, I can afford it. And far too many Americans are falling into the trap of not living, not living below their means, which what you're supposed to do, and not even living at their means, but actually living beyond their means. And they are literally robbing their future self of financial independence by accelerating those consumption decisions into today. If you are someone who finds yourself in that place, I think that you're doing it wrong. You're not stacking up enough.
13:54 Brian Preston? Well, that's why this is, once again, giving back to the financial order of operations. This is why this is step three, the high interest debt, you've got to get that under control. There's no way you'll ever get ahead if you're expecting to make somewhere between eight to 11% out of the financial markets while you're paying somebody else twice that with credit card debts being over 20% these days. So that's why we wanted to give you some guardrails or some ways you ought to think about this so you just don't fall in those same traps.
14:19 Speaker 01 Yeah, no, don't, don't mishear us. We are not anti-debt zealots. That's why we even talk about low interest debt and it's okay if you have low interest debt and you can even push that all the way back to the end of the financial order of operations, back to step nine. But if you have high interest debt, things that are often tied to consumption, well, that's something that has to be prioritized before you start saving and investing, before you start building and likely even before you build up a full emergency fund. So one of the questions we get asked all the time, Brian, is how do I know what counts as high interest debt? And if I have high interest debt, does it change and how do I quantify where that? Falls in my financial order of operations.
15:01 Brian Preston? Yeah, so we figure we go ahead and you know, cut the corner off, give you a head start on some of the things we've realized over our time. So we've even stratified this by age. Obviously, you're different when you're in your twenties versus the journey you are when you're in your forties. So let's go to change things. Student loans, for instance. We know, look, that's a noble thing that you're bettering yourself through education, but there is too much of a good thing and a lot of people have fallen into a lot of student loan debt. And that's why we always remind people, there's some key things, but let's give you the overview first of all these categories. Student loans, looking at risk premiums, your age, the opportunity cost of what that money could do. For student loans, it's 6%. For those in their twenties, 6% or greater.
15:42 Speaker 01 If it's over 6%, you may want to prioritize paying it off. That counts as high interest debt.
15:46 Brian Preston? Thirties, it's going to be greater than 5%. Forties, greater than 4%. Now, that's completely different than like car loans.
15:53 Speaker 01 Sure.
15:53 Brian Preston? Because car loans, look, I get it, these are higher percentages, but we also know that the difference between student loans and car loans is, car loans are going, especially when you follow our 238, they're going to be extinguished and gone within three years. We're not going to let these things hang around and just punish you and punish you over and over again. We're going to get them extinguished as fast as possible. So that creates a little bit more grace in how long, you know, what the interest rates can be before you can focus on other goals. So if you're in your twenties, it's greater than 10%. Thirties is greater than 9%. In your forties, it's greater than 8%.
16:26 Speaker 01 And then obviously, credit cards are a zero-sum game. If you have a credit card debt, we want you to get it paid off. We have a little saying around here, Brian, how's it go?
16:38 Brian Preston? It goes, "Credit card use is A-OK, but credit card debt, no way." And look, I get it. A lot of you financial mutants think you're just getting away with something incredible with these 0% credit card introductory offers and playing the transfer game. Don't do it. These things are traps. They literally are traps that they're trying to get you to fall into because instead of you addressing the behaviors that keep digging the hole deeper and deeper and deeper, you're just moving the shells around the table and not actually extinguishing. ...the debt, so don't fall into that trap because also what people don't realize about these things is a lot of times they accrue in the background, they have fees like even
17:18 Brian Preston? transfer fees of 3% to 5% of the balance, there's all kind of little caveats or asterisks or small fine print that you can fall into a trap and you're like, uh oh, I didn't realize that, I thought I was so smart. No, the banks have fleets of people that are smarter or working on this stuff, hoping that you fall into the trap and you're always going to be under their thumb.
17:39 Speaker 01 So what we've done is we've devised some rules to help try to keep you inside some guardrails when it comes to the times and areas where you might use debt. For student loans, we have a first year financing rule. We do not want the total amount of student loan debt that you accumulate to be greater than your first year's salary. So if you're going to come out in the vocation that you're studying for and make $50,000 a year, you want to make sure you keep your student loan balances below $50,000. When it comes to buying cars, you already alluded to this, Brian, we have our 238 rule. We want you to put 20% down, we don't want you to finance for any more than three years, and you cannot let your car payments exceed 8% of your monthly gross income. Luxury cars
18:22 Speaker 01 do not apply. If you buy a luxury car, it has to be paid off within one year, same as cash, and under no circumstance should the amount that you have monthly going towards your auto payments be more than the amount you have going towards your investments. If you can do that, if you can stay inside of those lines, inside of those guardrails, you're going to allow yourself to get through this debt, get it paid off, and then get to this phase of life where you can start actually building for a great, big, beautiful financial future.
18:52 Brian Preston? Well, what's amazing is I already went and talked about how consumption decisions trap a lot of people, and if you need more proof, just realize that we're right at the halfway point, basically a fork in the road, that half of Americans are carrying a credit card balance every month.
19:08 Speaker 01 What was the saying again, Brian?
19:10 Brian Preston? Credit card use is A-OK, but credit card debt? No way.
19:15 Speaker 01 So you're saying that 50% of Americans, one out of two, is not getting that second part. They're actually carrying the balance from month to month, letting compound interest actually work against them.
19:25 Brian Preston? Yeah, and realize a lot of these credit cards are charging greater than 20%. Matter of fact, there's even potential that, I mean, in the whole political season, one of the most bipartisan things that I saw coming out of the presidential election was multiple people were saying, "Hey, wouldn't it be great if banks were capped at like 10% on credit card debt?" Because it is crazy that we let the banks charge twice what you can even hope to get out of the financial market, so don't fall into that trap. This is a choose-your-own-adventure. You just get to choose if you're going to fall into this consumption trap that the banks have set up for you.
19:58 Speaker 01 And if you want to know how bad it is, like how steep the chasm is, look at this. The average American credit card balance, not that they're using, but that they are carrying over month to month, is a little over $7,000. That, those are dollars that are accruing interest every single month. Now, we're talking about how do you stack up to your peers and how do other financial mutants and how does the average American work? Well, the average American, one out of two of them carries a balance month to month, and that balance, on average, is about $7,000. And yet, when we did our financial mutant survey of tens of thousands of you out there and said, "How do you use credit cards?
20:40 Speaker 01 What is your method?", we found that 88% of you have no credit card debt. That's not that you don't use credit cards. You fall into the credit card use OK part, but you recognize that it can be absolutely detrimental to your financial wealth building, and you said, "I am going to carry $0 over month to month and have absolutely no credit card debt."
21:05 Brian Preston? So go ahead and fall into the comfort of the behavior that nine out of 10 financial mutants, they're paying their credit cards off every month.
21:12 Speaker 01 That's right.
21:13 Brian Preston? Nine out of 10 financial mutants are doing this. You should do it too, because I've shared it many times. All of- Our seven-figure, eight-figure clients, I don't have a single one of them that came to us as prospects and they say, "Do you know what I need you guys to help me tackle? Paying off this credit card debt." It's just not the behavior that you see successful people struggle with. So if you are in one of those struggles right now and you're trying to extinguish that debt, let's make sure that you go ahead and just cut it up, be done with it, and let's get on the right side of this.
21:43 Speaker 01 All right, Brian, so we've talked about the foundational stuff. We talked about cash reserves and consumption decisions. Now let's talk about the exciting stuff. Let's talk about what do the actual wealth-building behaviors of folks that are making sound financial decisions look like? And how does that stack up to the average American? And how does that stack up to the financial mutant? Because we know that when it comes to the financial order of operations, the early steps are all about building the foundations. Steps one, two, three, four foundational. But then, once we get into steps five through seven, now we're talking about building wealth. Now we're talking about doing something pretty exciting.
22:20 Brian Preston? Well, but we first, I mean, there's a reason it's step number two in the financial order of operations is we have to get that free money from your employer.
22:26 Speaker 01 Oh, that's right, the employer match.
22:28 Brian Preston? I want you to think about this. If somebody came to you, we've done so many 401Ks, but it's been a while since we've made this analogy, is that if every one of you guys who's watching right now, if somehow in some creepy way, I knew where your home address was, and I like Ed McMahon could just show up at your house, and I said, "Hey," I sent you a text, I said, "Hey, by the way, go check your front door, because it wasn't Amazon that set off your Ring doorbell cam. It was me, and I set up outside your door, I set up $500, just sitting there waiting for you in an envelope." Every one of you guys would immediately go to your front door and check and say, "Holy cow, he really did leave me $500." You would just be so excited about it.
23:08 Brian Preston? And that's why that 50%, 100% guaranteed rate of return that your employer's offering you, if you will just contribute to your retirement plan, is so powerful that it made it to step two.
23:21 Speaker 01 Yep.
23:22 Brian Preston? Now, I set that up with you, where we've already figured out we're all going to just dash as fast as we can to see if Brian actually gave you $500. Meanwhile, when I go pull the staff... That's for what the typical American is doing. One in four Americans are not getting their full employer match.
23:37 Speaker 01 It's devastating.
23:38 Brian Preston? What are we doing?
23:39 Speaker 01 One in four Americans don't like free money. That, that, that's what I'm hearing. One in four Americans just would not go to their front door to see if Brian was out there with a $500 envelope. And what that means is one in four Americans, to me, don't recognize just how powerful their dollars can be. If you, if you think about this, when you think about small incremental decisions, it's the small decisions over a long time period that can have a huge impact. We've talked about this in the past. We talked about, okay, if I could just save 1% more, and I'm 25 years old, what does that practically mean for me? Well, that means that by the time I get to retirement, me saving 1% more today could replace 6.5% of my income when I get to retirement.
24:23 Speaker 01 At 35, if I can save 1%, it will replace almost 3.5% of my income in retirement. At 45, 1% still can turn into 1.5%. But that's only part of the story because if you're one of those one in four Americans that is not getting your full employer match, if it's a dollar for dollar deal, that means that for a 25-year-old, that actual 1% additional savings you do could replace 13% of your needed income in retirement. For a 35-year-old, it can be almost a 7% difference. For a 45-year-old, it can be a 3% difference, leaving that money on the table.
25:02 Speaker 01 What seems like such a small insignificant decision can have huge impacts on you later in your financial life.
25:09 Brian Preston? Well, and I think that this also catches, we just came through that post-inflationary period, and young people especially, you're getting squeezed. And you feel really frustrated because you're like, I barely afford to pay my rent. I can barely afford to buy food for my family, and you're struggling, and I get it. But that's why it's important for us to share with you these type of stats on what 1%, because you don't have to think, don't think like you have to eat this elephant all in one bite, in one sitting. You can actually be, the most powerful thing you have is your time. ...of time, but that's why you also can't sleep on letting a decade go by where you lose it. So that's why I would encourage you, go to moneyguy.com/resources. And you need to see, we have a download and a resource of what 1% more can do for you.
25:54 Brian Preston? Go see by your age, your specific age, not just some case study that Bo just read through. You can actually see what it is for you specifically and get motivated today so that you don't sleep on that. Cause that one little, small decision can have huge results for your future selves.
26:10 Speaker 01 All right. So now speaking in the same vein of small decisions, right? We said that saving 1% is a big part of it, but that's, that's only part of it. Because it's not just about saving the additional 1% that can make the huge impact on your financial life. You actually have to invest it. And unfortunately, we've talked about this and we've seen this. There are a lot of people that miss that very crucial step.
26:37 Brian Preston? I was shocked and then I've been amazed. We even have a little short right now that's going pretty viral. It's well into the seven figures. And, um, and really what it's showing is, is that not only do you save money, but then you have to eventually, it's a two-part transaction. Like when you fund your Roth IRA, you put, make the contribution into your Roth. But then the second component of that is you have to actually invest the money. Put it to work, let your army of dollar bills work. You've done the hard part, by the way. The discipline, the deferred gratification, actually take a little bit today for the future and save the money is actually the hard work. The easy part is the second part, which is actually just go invest. Go buy some index fund to let it do the hard work for you sadly.
27:20 Brian Preston? And this is why I need to repeat this stat, because in the comments of this viral video we have, all kinds of people like, I did that, I did that in my Roth. Oh, I did that in my old 401K. Don't fall in this trap. When Vanguard is out there ringing and sharing that 28% of 401K rollovers remained in cash for over a year, it breaks my heart. It really breaks my heart.
27:44 Speaker 01 It's even worse than that, because you know what the study found? The study found that if the cash, if the dollars remained in cash for one year. There was a high likelihood that that money was going to remain in cash for at least seven.
27:59 Brian Preston? Oh, my gosh.
28:00 Speaker 01 If, if we think about the average return of the S and P 500, it's somewhere over like 10%. Do you recognize, just using the rule of 72, that money that you put in there could have doubled over that seven year period. But if you're one of these 28% of folks who just leave your money sitting in cash and not actually invest it, you are literally costing yourself tons of money. I mean, literally, you have half as much as you could have had otherwise, just by forgetting to that very simple marginal decision of actually putting the money to work.
28:35 Brian Preston? Well, good news, though. A lot of you guys, if you, if you find yourself in a situation where maybe even have an old 401k and you're trying to figure out what's the decision matrix on what to do. Once again, we got you covered. There's a reason people go to moneyguy.com/resources. We go load you up with all kinds of free information. We actually have that exact thing. We created it for you so you know exactly what to do with your old 401ks. Remember, it's a two-part transaction. Figure out what to do with the old 401k, but then make sure that money is fully invested and let that army of dollar bills do all the heavy lifting for you.
29:08 Speaker 01 Now, we said that Vanguard found that 28% of folks who rolled over their 401ks did not actually invest. And so it makes it seem like the investing part is the problem. And while there is a problem that exists there, Brian, I don't think that that's the most significant problem. I think that the most significant problem the average American has is not on actually investing the dollars. It's just making the choice to actually save the dollars, to defer the dollars, to live on less than they made. Because we know that right now, the average savings rate, according to the Federal Reserve Bank in America, is 4.6%. That is a far cry from what we recommend.
29:50 Brian Preston? Yeah, I mean, we're telling everybody we need to be saving and investing 25% for the future. And by the way, there's, there's some math to this. We'll share it with you in a second so you can know that we just didn't pull this number. Out of space, but it just shows that like I said, a lot of people are focusing on the consumption or they're just letting life happen to them. That's not going to be enough to get the job done.
30:10 Speaker 01 So if you want to know how you stack up to the average American, the average American saves 4.6%. But if you want to know how you stack up to a financial mutant, again, we asked all of you guys, what does your savings behavior look like? How are you building your wealth? It was amazing to see that over one-third of our financial mutants save more than 25% of their gross income. And it's not just for the high-income earners. It's not just for the folks who make a hundred thousand, 200, 300,000 dollars. We found this across most income strata. A third of the respondents from folks who make even 25 to 50,000, all the way to folks who make
30:50 Speaker 01 200,000 to 500,000, it is incredibly consistent that financial mutants understand how powerful saving can be and they get their savings rates up around that 25% level.
31:02 Brian Preston? Well, and I think if we had strat, we did stratify this by age and it was, it was across the board. It didn't matter how old you were, but if we would have expanded this to people who just did beyond 15%.
31:13 Speaker 01 Oh, it's gonna be even more compelling.
31:15 Brian Preston? It'd be 50, 60, in some age groups that have been even 70%.
31:19 Speaker 01 Yep.
31:19 Brian Preston? Um, we're, we're blowing the doors off that. So I just want you guys to know, look, it's okay when you're young. It's somewhat aspirational, but as you get in your 30s, without a doubt, you have to be saving and investing 20 to 25% for the future. If you want to know specifically why we say those numbers, once again, I'm going to give you another free resource. I want you to go out to moneyguy.com/resources and look at our resources titled, "How Much Should You Save?" But what I always like to say, "What 25% Can Do For You", is because, look at this thing. You will quickly see, we have, this thing is in a graphical format where it's going to show you, if you're in your twenties and you have discovered us, congratulations. Probably 10, 15% is going to make your day. You're going to be in a great place.
32:02 Brian Preston? But if you're in your 30s, you're right in that sweet spot that 20 to 25% is going to do it. If you're finding us in your 40s, guess what? Might mean a little bit more falls on your shoulders and your savings and investment rate's going to have to actually increase as a result of putting off that investment component for a few decades.
32:21 Speaker 01 So, we're talking about, Brian, how do we stack up to our peers and how do the decisions that we make compare to the decisions that our peers make? And ultimately, when we think about adding up all those small decisions, what we're really arriving at is the culmination of the decisions we make in our financial life ultimately impact our net worth. We actually look at the list of what do we own minus what do we owe? How is that changing through time and how is that improving? And so, we said, okay, how does the average American stack up? And this is from data from Empower. The average American, the median net worth for someone in their twenties, right now in America, $7,500.
33:05 Speaker 01 For someone in their thirties, $35,000. For someone in their forties, $124,000 net worth. Someone in their fifties, about $287,000. By the way, this is total net worth. And for someone in their sixties, median net worth, about $355,000.
33:25 Brian Preston? Now, here's what's sad, and we know this because we see the Fred data, we see, we keep up with the data pretty closely because we're that nerdy. This is going to include home equity.
33:35 Speaker 01 That's exactly right.
33:36 Brian Preston? Because net worth does include not only investable assets, but it also includes the equity you have in your primary residence. If we strip away home equity, these numbers are going to look even more anemic.
33:47 Speaker 01 That's right.
33:48 Brian Preston? And it's really a sad thing. Now, here's the good news. If you've just discovered us and you're in great company, because we don't want you just to be average or the median of the general public, because like we said, there's a lot of bad information out there. There's a lot of, the bar is not set at the right place and it's not going to protect you and help you build your financial independence. We want you to compare yourself to our fellow financial mutants. And that's why it was really a superpower that we've actually done this survey with so many thousands upon thousands of you who've actually completed this, because we've Got up here on the screen, this is the average American, but Bo, I'll let you give the big reveal of when we lay side by side, the average American to now what is the financial mutant, look at these differences.
34:32 Speaker 01 Again, we're talking about total net worth. For those in their twenties, the average American, 7,500. Our financial mutants have a net worth somewhere between 100,000 and 400,000 dollars. For folks in their thirties, the average American has a net worth of 35,000 dollars. Our financial mutants have a net worth somewhere between 400,000 and 750,000 dollars. For those in their forties, the average American, 125,000 dollar net worth. Our financial mutants are now in seven-figure land, 750,000 to 1.25 million dollars in net worth. For those in their fifties, average American, about 287,000 net worth. Financial mutants, somewhere between 1.2 and 2.5 million.
35:15 Speaker 01 And then for those in their sixties, the average American has a net worth of about 355,000. But when you look at our financial mutants, when we look at you guys, your average net worth by the time you get into your sixties is somewhere between 1 and 1/4 to 2 and 1/2 million dollars, very, very, very different than the average American.
35:36 Brian Preston? I think a lot of you are, by the way, congratulations, you discovered this content and this show at the perfect time is because you're seeing this and you're probably going, net worth, man, that's a huge spread. I see what Americans do and these guys keep telling me these financial mutants, how do I stack up? And you might be saying, I've never done a net worth. What is that? So here's what I want to tell you. This is why it's better to be lucky than good sometimes because you have found this content and I want to encourage you once again, go out to moneyguy.com/resources. We have a free, a completely free net worth tool template that you can use. And if you use this and you like it and you like the ability to actually see, hey, I'm paying down my debt each year this much, or I like seeing my investable assets, meaning
36:21 Brian Preston? I'm going to be able to retire and use these assets, that going to be my army of dollar bills is growing and you want a bigger and better dashboard to really beef up your navigation. I actually have a great tool that we've created called the Net Worth Tool. You can go to learn.moneyguy.com. And this is actually what Bo and I use. Every year. It is really fun. It's really nerdy to kind of have all those metrics. So you can see how your different account structures will work between your after-tax, your Roth assets, your tax-deferred, to see how you're paying down the debt, to see how efficient you're being with the income and your savings rate. All these things are built into the tool and it's a pretty exciting thing. This is why it's kind of like our Super Bowl or awards ceremony of the year is we actually
37:05 Brian Preston? get to take a measure to see how we're doing and hold ourselves accountable. And that's what I hope all financial mutants, I hope all Americans will discover this and kind of move it forward. So moneyguy.com/resources, that's all the free stuff. And then learn.moneyguy.com if you really want to dive in and accelerate your journey through some of the courses, some of the tools we've created. Here's what I want people to hear though. When you hear content like this and you hear about all of our financial mutants doing so well, a lot of you might be just like me and Bo where we don't come from money. We come from pretty humble beginnings and that's the majority of you seven-figure millionaires. You also come from humble beginnings. Eighty percent plus typically don't come from money.
37:48 Brian Preston? So I want you to know how your journey started does not have to define how it ends. Just be deliberate with every second of time and start making those good decisions today. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy Team, out.
38:04 Speaker 02 The Money Guy Show is hosted by Brian Preston. 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 and does not constitute financial, tax, investment, or legal advice.
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