We Had 5 Minutes To Help These Strangers With Money

Huge shout out to JC Rodriquez for collaborating with us on this episode! You can check out his content here: https://www.youtube.com/channel/UCYGNye47yLUpBAcveC8gyww Can financial advisors help solve real money problems in just 5 minutes? With the help of JC, we asked strangers about their biggest financial struggles, then challenged Brian and Bo to give each person practical financial advice. From paying off $70,000 in student loans and catching up on retirement savings to buying a first home, investing in rental properties, and escaping credit card debt, these are real financial decisions facing everyday Americans. Watch as Brian and Bo break down debt payoff strategies, retirement investing, 401(k) matches, home buying, and the Financial Order of Operations to show how they'd approach each situation. ⁠⁠⁠⁠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.

• 0:00Speaker 00

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• 0:57Brian Preston?

  Can you give someone a financial plan in five minutes? Guess what? We're about to find out.

• 1:02Speaker 02

  Brian, I am so excited because we're about to do something that we have never done before. Complete strangers out on the street are opening up and revealing their money goals. And you and I are going to help them out.

• 1:14Brian Preston?

  So I'm Brian, he's Bo, and this is The Money Guy Show, where two financial advisors go beyond the basics to show you a better way to do money. And with that, let's dive right in.

• 1:29Speaker 02

  All right, Brian, before we jump in, quick PSA for you guys. If you're not subscribed to the channel right now, make sure you do that. We are on a push to get to 1 million subscribers. So we need you right now. If you're not subscribed, subscribe. So Brian, this is so exciting. We have our good friend, J.C. Rodriguez. He went out on the streets to ask people about their financial goals, where they are, what questions they have. And we have not seen these clips. And what we're going to try to do is, based on the information that they give to us, we're going to try to write some quick little five-minute financial plans for each one of these strangers on the street.

• 2:05Brian Preston?

  Oh, man. Strap in, this ought to be good.

• 2:08Speaker 03

  What's your name and age?

• 2:09Speaker 04

  I'm Mike, 32.

• 2:11Speaker 03

  All right, Mike, what's your current career?

• 2:12Speaker 04

  I work as a sales rep at a Bitcoin financial services company called Unchained, based out of Austin, Texas.

• 2:19Speaker 03

  What is one financial goal you have in the next five years, let's say?

• 2:22Speaker 04

  I'd say one, pay off all my debt, whether that be student loans or old credit cards, stuff like that.

• 2:28Speaker 03

  What type of debt do you have?

• 2:29Speaker 04

  Mostly student loans for a degree that I don't even use.

• 2:33Speaker 03

  What was the degree?

• 2:34Speaker 04

  Building science. I went from building science to construction management. Turns out I didn't really like that to commercial real estate sales and then fell down the Bitcoin rabbit hole. So working sales at a Bitcoin company.

• 2:45Speaker 03

  Do you know what type of student loans you have? Federal, private?

• 2:48Speaker 04

  Federal, yeah.

• 2:49Speaker 03

  Okay. What is the interest rate on those loans, if you know?

• 2:51Speaker 04

  I think it's relatively low, around 4%.

• 2:53Speaker 03

  And what's the balance on the student loans?

• 2:55Speaker 04

  It's north of 70,000.

• 2:57Speaker 03

  What was your thought process when you got a student loan?

• 2:59Speaker 04

  I just, I always wanted to go to Auburn and they wanted to make it happen. And I was like, I'll figure it out later.

• 3:04Speaker 03

  Do you have savings?

• 3:06Speaker 04

  Bitcoin, so that's all, I mean, that's all I invest in, not financial advice. But I look at Bitcoin as, it's still an adopting asset. It's only, I guess, north of 17 years old. And it's, you're slowly seeing it be, you know, become an adopted asset. That's, it's very volatile day to day. But if you kind of look at where it's going, I think it's worth at least putting a little bit.

• 3:28Speaker 03

  So all your savings are in Bitcoin right now?

• 3:31Speaker 04

  That's correct.

• 3:32Speaker 03

  Do you have any money set aside for emergencies?

• 3:35Speaker 04

  A small amount, yeah. Which I think is, you know, in the event you're laid off or anything, it's important to have. And Bitcoin also is a very liquid asset. So, you know, you could buy or sell at any point in time.

• 3:46Brian Preston?

  Very volatile.

• 3:47Speaker 03

  Are you renting around here?

• 3:49Speaker 04

  Yeah, I rent.

• 3:49Speaker 03

  Is that eating up a chunk of your income?

• 3:51Speaker 04

  I mean, it's 1,800 or so. But for me, it's, I don't, I don't own a car. I'm remote, so I don't have to work, be driving to an office.

• 4:00Speaker 03

  So as far as payments, you have a student loan payment, you have no car payments, your rent's around 1,800. Do you have any other debt obligations?

• 4:07Speaker 04

  I have some credit card debt that I'm attacking, probably $600 or so for a month.

• 4:13Speaker 03

  And your income right now, is it irregular or is it consistent?

• 4:16Speaker 04

  No, it's consistent, salary plus commission.

• 4:18Speaker 03

  Solid, okay. So you have the salary. What is an average paycheck for you looking like?

• 4:22Speaker 04

  2,600 for every two weeks.

• 4:24Speaker 03

  You got a shovel there to help.

• 4:25Speaker 04

  Yeah. And then, you know, sales rep for three years, hopefully be promoted to a sales director and then having an increase on that. And then, well, obviously still a lot of student debt, but kind of attack that more and then just build towards overall savings. And, you know, over, you know, hopefully one day retiring soon.

• 4:40Speaker 03

  Yeah. Are you making the minimum payments on the student loan?

• 4:43Speaker 04

  A little bit, more than that.

• 4:45Speaker 03

  More than that?

• 4:45Speaker 04

  Yeah, a little bit more.

• 4:46Speaker 03

  I guess, how much is your student debt?

• 4:48Speaker 04

  It's 277 a month.

• 4:50Speaker 03

  Okay.

• 4:51Speaker 04

  Probably making about 350 a month.

• 4:52Speaker 03

  How much do you invest into Bitcoin each month?

• 4:54Speaker 04

  Well, it's, it's small amounts, like $5 a day. It's relatively small amount.

• 4:59Speaker 03

  Do you do any other investing right now?

• 5:01Speaker 04

  No, just Bitcoin.

• 5:02Speaker 03

  All right, so yeah, there's a great resource. It's called the Financial Order of Operations, made popular by The Money Guy Show. And there are like a couple of really smart financial advisors. And I'm going to turn it over to Bo and Brian. They're going to give some real, real talk on how you can tackle the student loan debt.

• 5:17Speaker 02

  All right, so Brian, this is interesting. I'm going to do a quick little summary here. This is, so Mike, he works for a Bitcoin company, has tons of student loan debt, has some credit card debt. He says that he has an emergency fund, but it's really in Bitcoin. A bunch of stuff here that I think we're like, nope, nope, nope. Let's change, let's change, let's improve, improve, improve.

• 5:35Brian Preston?

  I wish we'd also heard if they had a 401K or something like that. And then, like, I don't know how long you worked for this Bitcoin company. But I mean, I think we have to take this all the way back to step number one. Because deductibles covered, you know, because where exactly is, Mike, in the Financial Order of Operations? Bitcoin, it's too volatile to be considered an emergency reserve. So that's the first thing that I would take him back to step one of the Financial Order of Operations.

• 6:03Speaker 02

  He said that Bitcoin is incredibly liquid. And when he says liquid, he means that, oh, I can buy and sell it. That's what he means with liquid. But when it comes to cash savings, emergency reserves, it doesn't, not only does it be liquid, you need to be liquid without the risk of loss of principal. That's why we like for it to be cash or cash equivalents. Your Bitcoin, your $100, $1,000 of Bitcoin today may look very different in terms of what that's worth one week from now. If you have wild undulations, that's not an emergency fund. So the very first thing I think that I would have him think about is, I need to reframe the way that I view cash and the way I view Bitcoin. But even, Brian, I'm going to argue, before it even gets to, to saving up that emergency fund, he's got this credit card debt. And it was unclear, he said, how much do you have? And he said, 600 a month.

• 6:46Speaker 02

  I think what that means is he's paying 600 bucks a month on some credit card debt that's sitting out there. I think, outside of getting that deductible covered, we don't know if he has an employer match, he's got to knock out the credit card debts. He just racking that up at his age is not worth it.

• 6:59Brian Preston?

  Well, that's why we don't have enough information to know. Because step one is just the highest insurance deductible. So we'd need to know more information on that. Step two is if we knew about his employer plan, then you're spot on. High interest debt, credit card debt. And that's why we always say, we're perfectly fine with people using credit cards. Credit card use is A-OK, but credit card debt is no way. So make sure you're not running afoul of that. Now, I think the big thing, if, because Mike's watched this, he's going to be like, okay, that's, that is Captain Obvious stuff that I need to pay off the credit card. I want to know about my student loans. This is what's going to be interesting for Mike to hear us talk about is that student loans, we would classify because it's not the same as the credit cards. It's because he said that this was the federal student loan

• 7:43Brian Preston?

  that also has an interest rate of around 4%. Mike is 32 years of age. So I would consider he, this isn't high interest debt. This is actually very usable debt. Now, I want him to get this paid off, but there's some other goals, like emergency reserves, Roth IRAs, and other things that need to be in order before we can start attacking that student loan debt.

• 8:06Speaker 02

  Yeah, I think that he should not be doing the $5 a month, or $5 a day in the Bitcoin. I don't think he should be paying any extra on the student loans. I think he should have every bit of excess capital he has going to knock out that credit card debt. Once that credit card debt gets gone, then I think he needs to move to that emergency fund. For him, he says 32, single years old. I'm thinking he probably needs three months of living expenses in liquid cash available. He said his paychecks are 2,600 every two weeks. So let's call that 5,000 a month. So maybe his living expenses, let's say, are 50% of that. So maybe he should have an emergency fund somewhere around 7,500 to $10,000, somewhere in that ballpark of cash readily available.

• 8:49Speaker 02

  Then, once he does that, then he can get into the good stuff. Because once he starts building and once he starts saving, for a 32-year-old, Brian, you would happen to know what the wealth multiplier is?

• 8:58Brian Preston?

  Oh, yeah, I've got it right here. 32-year-old, a wealth multiplier is $18.

• 9:02Speaker 02

  So every dollar that Mike deploys, puts to work for himself, whether it be in a 401K or his Roth IRA, if he invests it, and I'm going to say in something besides Bitcoin, in like a low-cost index fund, S and P 500, it has the ability to turn into $18 by the time he retires. And that wealth multiplier is only going to continue to decrease the longer and longer he waits to get his dollars working.

• 9:25Brian Preston?

  Yeah, I'd close it out with, with Mike, as understanding, look, nothing wrong with Bitcoin, but that's more of a step eight of the Financial Order of Operations. Let's get your financial foundation. And also, if your employer is exclusively doing cryptos and Bitcoin, you already have career risk tied into this cryptocurrency marketplace. Why not build some independence outside of that market by using traditional investments?

• 9:49Speaker 02

  I would encourage you, Mike, if this is all brand-new information, to go to moneyguide.com/FOO, F-O-O. That's our Financial Order of Operations Ultimate Guide. It will tell you everything you need to know to get started on your journey. Thanks so much for letting us be a part of your financial journey.

• 10:07Speaker 03

  What is your name and age? My name is Hayden.

• 10:09Speaker 05

  I am thirty six.

• 10:11Speaker 03

  Son, what's one money goal that you have for yourself?

• 10:13Speaker 05

  I think it's building up the investment piece of it.

• 10:16Speaker 03

  When it comes to investing, are you trying to retire by a certain age?

• 10:20Speaker 05

  Yes.

• 10:21Speaker 03

  Become work optional?

• 10:22Speaker 05

  Yes, I want to become more optional, um, not kind of fighting the uphill battle.

• 10:26Speaker 03

  Do you feel a little behind with investing for retirement?

• 10:29Speaker 05

  I'll be the first one to say yes, you know, when you're twenty, you know, you're starting to work, you're starting to grind, you're having fun. Um, you know, traveling maybe, and then all of a sudden in your thirties hit and it's like, okay, shoot.

• 10:41Speaker 03

  Yeah.

• 10:42Speaker 05

  I need to start kind of prioritizing those kind of things.

• 10:44Speaker 03

  How much are you investing per year?

• 10:46Speaker 05

  I'm doing like twenty, thirty.

• 10:47Speaker 03

  Current value of your retirement accounts at the moment?

• 10:50Speaker 05

  Maybe like eighty to a hundred.

• 10:51Speaker 03

  What do you do for work currently?

• 10:53Speaker 05

  I work in I T sales, keeps me very busy. I also, uh, started an A I investing company. Uh, like a consulting firm. So again, that's like a part of the, um, growing the investment piece.

• 11:05Speaker 03

  Oh, yeah.

• 11:05Speaker 05

  You know, side cash, extra money coming in, not going out.

• 11:08Speaker 03

  No, that's great. I mean, that's a genius fintech idea right now. Those are popping off.

• 11:12Speaker 05

  Yep.

• 11:12Speaker 03

  For you, what investing accounts do you have open, like Roth IRA?

• 11:16Speaker 05

  Yeah, currently, um, dumping into Roth IRA pretty hard. I do have a little bit of stock. Uh, it's not managed by anybody.

• 11:23Speaker 03

  Um, just in a brokerage account?

• 11:25Speaker 05

  Yeah, it's just, you know, four one K, obviously.

• 11:27Speaker 03

  Are you maxing out your Roth IRA right now?

• 11:29Speaker 05

  Trying to. I, I haven't for the last couple of years. So I think, again, one of those priorities is. If you don't have seventy five hundred dollars throughout the year, um, and you make under a certain threshold, um, it's a very good option. Obviously, if you make more money, um, that's becomes like unavailable. So I think it's really important to just kind of know where you're at, what you can, you know, what's offered to you.

• 11:49Speaker 03

  And with, from your best estimates, what percentage of your income or paycheck goes towards your investing?

• 11:54Speaker 05

  Uh, I would say at least six to ten percent.

• 11:57Speaker 03

  Is anything automated when it comes to investments or are you manually?

• 12:00Speaker 05

  Um, a little bit of both. I, I think it's more automated, but, um, there is a, a fun aspect of managing it yourself.

• 12:08Speaker 03

  Do you have any other debt obligations that you have to take care of before you can go all in with investing?

• 12:13Speaker 05

  I mean, minus a rent payment every month. I don't really consider that debt.

• 12:15Speaker 03

  That's in expense.

• 12:16Speaker 05

  I was fortunate not to have any college debt coming out of, so I kind of, um, took the, the untraditional route. So I didn't come out of college with just an immense amount of debt.

• 12:26Speaker 03

  No student loans?

• 12:28Speaker 05

  No student loans.

• 12:28Speaker 03

  You got a car payment?

• 12:29Speaker 05

  No.

• 12:29Speaker 03

  Heck, yeah. All right. So you're debt free.

• 12:31Speaker 05

  Yep.

• 12:31Speaker 03

  You have some savings?

• 12:32Speaker 05

  I do.

• 12:33Speaker 03

  You're on top of it, bro. And the last thing, we have financial planners gonna watch this and give you some like free game.

• 12:40Speaker 05

  Hundred percent.

• 12:40Speaker 03

  On how you can retire early, become work optional. Um, what question would you ask a certified financial planner if they were watching right now?

• 12:46Speaker 05

  Oh, man, that's a really loaded question. I would say the biggest question is like, at what age is it like almost too late? I like to work backwards. So I know that's kind of a weird question, but at what age do you really start to really feel the heat? Whether it's at thirty, is that, is that forty? Is there a, a number, specific amount that you need to have? Let's say come age forty five, what's it look like at fifty? What's it look like at sixty? Then those are the numbers that I kind of like to work backwards from. And that's probably the biggest question that I have.

• 13:14Brian Preston?

  Man, this one's, this one's gonna be good.

• 13:16Speaker 02

  I want, I want to give, I want to lay down some prerequisites here, Brian, because he, he gave some conflicting information. So I want to make sure that we're responding and answering in the same, same place. So he's thirty six year old, no, no, no debt. He asked him, hey, how much are you saving and investing a year? He said twenty to thirty. So generally when people give you a range of how much they're saving, it's actually the lower number, most often. So let's say it's twenty thousand dollars. And then he said, well, what percentage of your income do you think you're saving? He said, I think I'm saving probably somewhere from six to ten percent. So let's say he's saving eight percent currently and eight percent represents. Uh, twenty thousand dollar annual savings. That puts his income at two fifty, which checks, I think that he makes more money than he could to be able to do direct Roth contributions.

• 13:52Brian Preston?

  He made a reference that he, if you make too much money, you can't do a Roth. I, I picked up on the exact same thing. I was like, this, this, this cat makes some decent money.

• 14:00Speaker 02

  So let's assume he's a thirty six year old with two hundred and fifty thousand dollar income who currently has eighty to ninety thousand dollars invested. Let's start there. What would you begin telling?

• 14:09Brian Preston?

  Oh, Hayden, man, I, I, I need you to get motivated because I, I want to show you some net worth targets. I mean, we, we tell you, you already passed this first one. We always want people to have one time their gross income by the time they're thirty. By the time you reach forty, you're not quite there. We want you to have three times your income. So I want you, now look, use this to motivate you because I have another thing I'm about to share with you.

• 14:31Speaker 02

  I mean, that put him way behind. He should be at seven fifty and he's at ninety to a hundred.

• 14:36Brian Preston?

  Three years, three, three to four years to get to seven hundred and fifty thousand dollars. And he's sitting at somewhere between eighty to a hundred thousand dollars. So. Way behind with a huge shovel. And that's why, look, we did a show recently that, that just went off. And it's, we call this the wealth window is that between ages thirty two to forty eight, you cannot screw this up. I get it. Life starts getting busy because for a lot of people, we call this the messy middle. Hayden is right there. I mean, he's closer to the beginning of this window than he is to the end of it because he was asking, when is it too late? Hayden, it's not too late for you, but you've got to get really serious. I, I, you know, in the show I share. You got to get to your first hundred thousand dollars like your life depends upon it.

• 15:19Brian Preston?

  And he's getting, I would tell you, you got to get to your first half a million. Because if you're making this much money and you only have less than a hundred thousand dollars to show for it. That wealth window is going to close on you. And the problem is, is you're not taking an active role in your life. Make something happen now.

• 15:37Speaker 02

  Yeah, your, your last question is, at what age is it too late? And I'm going to argue that's not the right question to be asking because you are not at the age where it's too late to make up time. But every year that you wait, it becomes more and more difficult. So at what age? Does the pain of the decisions I have to make become so great that I'd be unwilling to make those? Because that's really where you are. A two hundred and fifty thousand dollar income is huge. Your goal should be, I want to save. Twenty five percent of my gross income every single year for the future. So twenty five percent. Savings on a two hundred and fifty thousand dollar income is gonna be, what's that, sixty thousand dollars a year? Did I do good math on that? Is that right? Sixty thousand dollars a year ought to be what you're saving.

• 16:20Speaker 02

  At least to begin to get yourself back on track. Now then the question goes, okay, well, where do I save that? That's why we have the financial order of operations. Brian, will you save that thing for me? So obviously, if you have, and it's, you said you have a four one K, we want you to get your employer matched. You don't have any debt. We are assuming you have an emergency fund in place. Even if you can't do the Roth directly, we want you to do a backdoor Roth. Once you've done a backdoor Roth, assuming your account structure fits. Then we want you to go back to your four one K, begin maxing that out. Now remember, your target savings goal is sixty thousand. So you've got seventy five hundred into a Roth, you've got twenty four five going in your four one K. You can even now still go to step seven, begin building in an after tax brokerage account, buying low cost index funds.

• 16:58Speaker 02

  If you can get yourself on that twenty five percent savings rate, you're gonna start putting yourself on financial footing to actually have. A bright financial future.

• 17:08Brian Preston?

  Well, I, look, I'm gonna put Hayden, I, I didn't see a ring on his finger. I think he's enjoyed life because he was talking about traveling. He got a smooth voice. He's got a lot of things going for him, but I, I'm worried for Hayden. If you don't get serious, the easy button's about to go away. That's why we talk about this wealth window so much. So Hayden, here's the challenge for you. I want you to go to moneyguy dot com slash resources and take advantage of our brand new free calculator called Know Your Number. This is gonna tell you ahead of the curve, behind the curve, or right where you're supposed to be. You're behind the curve. Use this to actually find out how far behind and what you got to do to catch up. So you can actually use all this good stuff. You got a lot of great things going on in your life.

• 17:50Brian Preston?

  Let's actually turn it into a positive for you so you don't have regrets when you get into your forties. Because you alluded to it in the beginning. You're like, man, it just goes so fast. You're in your twenties, having a good time, traveling, and then one day you wake up and you're my age. When am I really behind? That, you ought to feel like that timer is ticking and the buzzer is gonna go off anytime now. Make something happen today. So when you're young and starting out, a bad money decision might cost you a hundred bucks. Which is not really a huge deal and you just course correct and move on.

• 18:21Speaker 02

  That's right, but as your net worth grows, that hundred dollar mistake can turn into a hundred thousand dollar mistake. It could be a poorly timed Roth conversion or a gap in your estate plan, or even something as simple as insurance. You didn't know you needed.

• 18:37Brian Preston?

  When the stakes get high, that's usually when people want a second set of eyes and that's where we can help.

• 18:43Speaker 02

  That's right. Here at Abound Wealth, we are fee only fiduciary advisors, legally required to work in your best interest.

• 18:50Brian Preston?

  We can help you stress test those big decisions before you make mistakes. So the hundred thousand dollar mistake never even happens in the first place.

• 18:59Speaker 02

  If the gravity of your decisions is bigger than you feel comfortable navigating alone, check us out at aboundwealth dot com or click the link below. We would love to connect and be a part of your financial journey.

• 19:10Brian Preston?

  Bonjour, compadre. It's the.

• 19:14Speaker 06

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• 19:40Speaker 00

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• 20:08Speaker 03

  What are your names?

• 20:09Speaker 00

  Shannon.

• 20:09Speaker 03

  And Dave. How old are you?

• 20:11Speaker 00

  Thirty-nine.

• 20:12Speaker 03

  Thirty-nine. Thirty-nine, thirty-nine, okay. At this point, what is one financial goal you want to achieve?

• 20:18Speaker 00

  We want to build properties, rent them out, and just make money so we can send our kids to college and then not have to worry about, you know, loans and stuff like that, like we did.

• 20:27Speaker 03

  How many kids do you have? We have two. Two, oh, what ages?

• 20:31Speaker 00

  Uh, yeah, eight and four.

• 20:32Speaker 03

  Eight and four, okay, okay. So you're trying to go the real estate investor route. What are some things that you need to do to prepare for that?

• 20:39Speaker 00

  Work, work.

• 20:41Speaker 03

  Save, work?

• 20:41Speaker 00

  Yeah.

• 20:42Speaker 03

  Do you have any debts to pay off? No. Debt-free? For the most part, yeah. Okay, heck yeah.

• 20:46Speaker 00

  Besides our mortgage.

• 20:47Speaker 03

  Our mortgage. Side mortgage, no consumer debts? Yeah, no consumer debt, no credit cards, and no student loans. Love it. And do you have an emergency fund? Yeah.

• 20:56Speaker 00

  Yes.

• 20:56Speaker 03

  And you have your own primary residence?

• 20:58Speaker 00

  Yes.

• 20:59Speaker 03

  And now you're just trying to diversify and get into your own real estate?

• 21:02Speaker 00

  Yeah, we have a motorhome that we travel around in. And then when we're in different cities, we feel like, oh, we could buy a house here, you know, rent it out. So that's our next step, hopefully next year, is to get our first rental property.

• 21:13Speaker 03

  Sweet, what are your careers in?

• 21:14Speaker 00

  Uh, we both work in healthcare.

• 21:16Speaker 03

  Both in health?

• 21:16Speaker 00

  Yeah.

• 21:17Speaker 03

  Nurses?

• 21:17Speaker 00

  No, I'm a surgical tech.

• 21:19Speaker 03

  And I'm a nurse anesthetist. Oh, heck yeah, that's a lot of school. It's good income. And that's so little school, but such a good return?

• 21:25Speaker 00

  Yeah.

• 21:26Speaker 03

  On that, oh, man. At this point, what are you doing to save up for the home? Like, where are you putting the money to save up for this next property? Uh, right now, just in the savings account, by interest, um, by yield, the savings account. Are you currently investing for retirement?

• 21:38Speaker 00

  I mean, 401Ks, yeah.

• 21:40Speaker 03

  Just do the job? Are you getting the match? Yes.

• 21:42Speaker 00

  Oh, God, we're maxed, yeah. We, I, we maxed out and our companies maxed out. They give us, um, half of what we put in, so.

• 21:50Speaker 03

  Okay, nice.

• 21:51Speaker 00

  Yeah.

• 21:51Speaker 03

  Do you have a Roth IRA? I do not. So, well, that's another, just another vehicle to invest for retirement as well, too. Right. But it sounds like you do have a big goal of trying to, you know, get that next property. Again, it's a real estate investing. Have you had experience with that before, being a landlord? No, no, still learning. Hey, there's a lot of good podcasts out there. Right now, are there any, are there any financial pain points you have?

• 22:13Speaker 00

  Just kids being so little right now. We're trying to take care of them first.

• 22:17Speaker 02

  So Shannon, Dave, not, it sounds like they got a lot of really good stuff going on. First of all, they're messy metal, thirty-nine, two kids. Uh, they, they said, hey, we want to be able to, my words, not theirs, create some sort of financial, uh, system, sustainability, so that we can provide for our kids. They started with it, we wanted, we all didn't have student loans the way we did, and they ended with it, hey, we take care of our kids first. And there's nothing inherently wrong with that. That's noble, we want to make sure you're doing things at the right time, in the right order. Because, did you, Brian, perceive it when they said, oh, yeah, we're maxing those out? You think they're both doing twenty-four, five into their 401Ks? And then they're also getting the fifty percent matches on top of that? Is that what you think by maxing it out?

• 22:56Brian Preston?

  I mean, I, I, I don't think so.

• 22:58Speaker 02

  You think it's less than that?

• 22:59Brian Preston?

  I think that they're probably getting the employer match. You know, if the employer match is like six to seven percent. Now, maybe these employers are even more generous, because we have seen those cases where, you know, you can, people can put in twelve, thirteen, fourteen percent, and the employer match fills up the other side of the bucket. But either way, if their income is over two hundred thousand dollars, which I, I, I'm starting to think it is based upon both of their career fields, is that I, you don't need to count the employer match, because I think they get a false sense of where they are from a savings rate. I would really encourage them to try to get to twenty, twenty-five percent of their gross income into the Roth IRAs, into the 401Ks, and building up those after-tax investment accounts,

• 23:42Brian Preston?

  especially since they want to get in real estate. Real estate, we love, we know a good bit about real estate. We're in real estate investors as well. Is you've got to have a good financial base underneath you before you jump into real estate. Real estate is a step number eight of the financial order of operations. And I just don't want Shannon and Dave to run afoul of that, because that's when, um, big pockets take from little pockets whenever we hit those downturns in the real estate marketplace.

• 24:10Speaker 02

  And so let's assume, again, we don't know where your portfolio is, we don't know exactly what your savings is, but let's assume that you have the foundation established. And now you really are in step seven, and you're wanting to move into this area where you're being a real estate investor. There are some things that you ought to know about real estate investing, because I think so often, we see the brochure, oh, it's this beautiful thing, where I'm going to go buy this property, I'm going to put someone in, they're going to pay the mortgage, I'm going to get all the appreciation, and I'm going to get income from it. And oftentimes, that's not exactly the way that it works out with real estate. So we thought it'd be helpful to kind of walk Shannon and Dave just a few do's and don'ts when it comes to real estate investing. So the very first thing, do, when you buy real estate, you want to make sure you have some skin in the game. There's nothing wrong with using leverage.

• 24:54Speaker 02

  There's nothing wrong with having some sort of mortgage on that property, but I would be careful using too much leverage. I want to make sure that we are reasonable in terms of how much equity we have in these properties in case the worst-case scenario plays out.

• 25:07Brian Preston?

  And then analyze the cash flow. I mean, look, we're, we're in a marketplace right now where interest rates are high, but also property values are high. So if you're not looking at that cash flow to see how this is going to flow, you could be setting yourself up for a bomb. Because if you have to use other people's money to make it, and you don't have big cash reserves or other things, the leverage might eat you alive.

• 25:28Speaker 02

  Yeah, that's, that's the exact next point. You know, J C asked, hey, do you have a fully funded emergency fund? They said, yes, we do. I would argue, if you're going to be a real estate investor, you need your emergency fund plus some more, because you want to make sure that you have reserves on the real estate so that you can pay for repairs and pay for maintenance and cover vacancies and those sorts of things. Because there are all kinds of things that come with real estate that is not on the brochure. The toilet goes out, that's on you. HVAC goes out, that's on you. You don't put tenants in there for two or three months, that is on you. So you want to make sure that you're prepared for that. So those are the things that you do. Now, let's talk about, on the real estate side, Brian, some of the things that you don't do.

• 26:06Brian Preston?

  Yeah, and we've alluded to a few of these, like, don't buy before you have a solid foundation. I want to make sure your pockets are deep enough to weather not having a tenant in there for a few months, or you, you know, having to make a much bigger repair than you anticipated, or having to put a roof on the, on the house. All these things need to be taken on. Don't just count on that things are going to work out and have too much debt. You know, nothing wrong with starting with just one house.

• 26:30Speaker 02

  That's right.

• 26:30Brian Preston?

  It's amazing how many people try to stack these things to get as big as possible. And sometimes they take on too much debt too quick. And then, I have to share this, and Bo, we have so many stories. Real estate to do it right is not a passive activity. And a lot of what I felt like Shannon was talking about is that we want to kind of set some of these things up so we can live our best life, you know, make sure our kids don't have student loan debts like we did. Still go into it knowing this is an active investment, that you're going to be hands-on if you want to do it right.

• 27:00Speaker 02

  And then one question I want to ask you, again, I'd love to see your current net worth statement, your current balance sheet, because you said, hey, we already have our primary residence, we already have a mortgage on that. So I'd argue you already have real estate exposure when we think about your total enterprise portfolio. If you go buy a rental property or multiple rental properties, how much of your total wealth is going to be wrapped up in real estate? And then are those real estates, uh, real estate investments similar? Meaning, are they in the same geographies? Are they all single-family homes? Are they all in, structured in such a way that if something went bad, either in the market, in the area, or in your financial circumstance, that it could cause the entire house to come crumbling down? If that's the case, I would argue you're perhaps too concentrated.

• 27:43Speaker 02

  You should reconsider that, or at least wait until you have a stronger financial foundation built around you.

• 27:47Brian Preston?

  By the way, if you're getting into real estate, and now, look, we were primarily talking about for primary residence, but I think a lot of the same things, real estate is location, and a lot of things of understanding what you're getting into. We did a great show on the uncomfortable truth about real estate investing. I would encourage Shannon and Dave to check this out, because there's just a lot of things that you can fall into as a brand-new real estate investor, and we want to protect you from that. So learn from our experience, learn from the stories we share, so you can come out on the other side that much better.

• 28:17Speaker 03

  What is your name?

• 28:18Speaker 00

  My name is Nicole.

• 28:19Speaker 03

  What's one major money goal you have?

• 28:20Speaker 00

  To buy a house. It's a little hard right now, obviously, but yeah.

• 28:24Speaker 03

  How are you, how are you saving for that goal currently?

• 28:26Speaker 00

  Currently, I was just doing a savings account, but I paid off most of my debt, so it's just mostly savings account.

• 28:33Speaker 03

  So was that a priority for you, to pay off debt first before buying a home?

• 28:35Speaker 00

  Yes, and then I bought a car used in cash, so that was another thing to do.

• 28:40Speaker 03

  Oh, you bought a car cash?

• 28:41Speaker 00

  Yeah.

• 28:42Speaker 03

  Heck, yeah, okay. Why was paying off debt a priority for you before buying a house?

• 28:46Speaker 00

  I wanted to obviously get my credit score higher. I thought it was going to get me easy approval, so.

• 28:50Speaker 03

  What down payment do you want to put on this home?

• 28:52Speaker 00

  So because of the current economy, I think between thirty and forty thousand. But they are, I know there's assistance out there for certain programs to help you, but.

• 29:00Speaker 03

  Is this gonna be a first time home?

• 29:01Speaker 00

  Yes.

• 29:02Speaker 03

  Okay, for sure. There's gonna be definitely benefits for you. And what is your home budget?

• 29:06Speaker 00

  Cause I'm a single woman. I was thinking between, ideally, I would like to go 275 and no more than four.

• 29:11Speaker 03

  Is there an area you're looking at?

• 29:12Speaker 00

  Montgomery County, Pennsylvania.

• 29:14Speaker 03

  Pennsylvania, okay. Well, look that up. To see how realistic that is too, and like what you can afford out there. What do you do for work?

• 29:21Speaker 00

  I work for a hospital in the insurance field. So.

• 29:24Speaker 03

  Yeah, okay.

• 29:25Speaker 00

  Very nice. And luckily, they helped me pay down my student loans too, so.

• 29:29Speaker 03

  Yeah, reap all the benefits that you can. And at the moment, how much of your paycheck goes towards saving for the home?

• 29:35Speaker 00

  Probably only about 20%.

• 29:38Speaker 03

  20% savings rate?

• 29:39Speaker 00

  Mm-hmm.

• 29:40Speaker 03

  That's good.

• 29:40Speaker 00

  Is it?

• 29:41Speaker 03

  Yeah, most people save nothing.

• 29:43Speaker 00

  Oh, okay.

• 29:44Speaker 03

  Most people's 20% going towards their car payment.

• 29:46Speaker 00

  Also, I do have to add, I do have a part-time job too.

• 29:49Speaker 03

  Okay, so you're hustling. What's the part-time job?

• 29:52Speaker 00

  I'm at a retail pharmacy.

• 29:53Speaker 03

  Yeah, okay. So you're doing all you can to bump up your income as much as possible. Doubts about where to put that money?

• 30:00Speaker 00

  Yeah.

• 30:00Speaker 03

  Optimized for this home. What is your timeline for buying a house?

• 30:03Speaker 00

  Um, hopefully within the next two years.

• 30:05Speaker 03

  And how much do you have saved currently?

• 30:07Speaker 00

  Only 20,000.

• 30:09Speaker 03

  Say only like that a little bit, right?

• 30:10Speaker 00

  Everything goes fast in the market though, when buying a house. So I wanna be, see if I could like, not get overbid and stuff like that, so.

• 30:17Speaker 03

  Well, yeah, I don't wanna speculate on how the market's gonna be the next two years, but you're doing what you can do and your control. And at the current moment, is there anything else that would hold you back from reaching your home purchase goal?

• 30:28Speaker 00

  No, besides me doordashing, eating out all the time, if I could just calm that down and traveling, which we're doing now, oh.

• 30:35Speaker 03

  That's it.

• 30:35Speaker 00

  That's it.

• 30:36Speaker 03

  Do you have anything invested for retirement?

• 30:38Speaker 00

  I don't, besides a 401K.

• 30:40Speaker 03

  Okay, so you have the 401K, and that's automatic?

• 30:43Speaker 00

  Yeah. And they do match.

• 30:45Speaker 03

  You're getting the company match?

• 30:46Speaker 00

  Yeah.

• 30:46Speaker 03

  And do you invest more outside of that? How much do you currently have invested for retirement?

• 30:51Speaker 00

  401K is probably around 50,000.

• 30:55Speaker 03

  Okay.

• 30:55Brian Preston?

  Here's the cool thing about Nicole. She will listen to us. She doesn't have to change how much she's saving.

• 31:03Speaker 02

  That's right.

• 31:03Brian Preston?

  It's more of how she allocates. Cause I think about the house I grew up in. My parents were great at being disciplined and saving money. They just didn't allocate the resource well. So it never turned into wealth. Nicole has everything, every ingredient she needs to be successful. She just needs somebody to tell her how to spread that money out.

• 31:26Speaker 02

  A lot of folks, because interest rates are so high, because home prices have increased so much. They see this idea of, I gotta save 20% down, I gotta do, I gotta do. And they begin thinking, oh, I can never afford this house. But what I think is really interesting, Nicole, for first time home buyers, we actually wanna give you a little bit of a reprieve. We believe that when you buy your first home, you should follow the three, five, 25 rule. And what that means is rather than having to put down a 20% down payment, we think you can put down as little as 3% to 5%. So long as you believe that you're gonna be in that house for at least five years. And your total housing payment does not exceed 25% of your monthly gross income.

• 32:03Speaker 02

  So if you've already got $20,000 saved, and you say that you're looking for a house between 275,000 to 400,000. There's a good chance that you may actually already have enough for your down payment, depending on the price of the house that you actually find.

• 32:21Brian Preston?

  Yeah, and that's, that's getting into what I was kind of alluding to, is that Nicole probably can go ahead and start taking action on this dream. But then, now that 20% that she's saving every month can fit quite nicely.

• 32:33Speaker 02

  That's right.

• 32:33Brian Preston?

  Into the financial order of operations. Look, I'm not even gonna pick on her for jumping immediately to pay off the student loans, or to pay off. Cause she's, you can tell, she's just very disciplined. We're looking, we're not looking backwards anymore. We're looking forward. And I think she has the potential, after she tops off the buying the house, the emergency reserves. We get into the exciting stuff of loading up on that Roth IRA, maxing out that employer 401K. Nicole is going to be a success story. She just needs to know how to allocate this money that much better.

• 33:04Speaker 02

  Yeah, Nicole, we actually have a great episode that we did titled, "Is It Too Late? Or How Should I Build Wealth If I Already Feel Like I'm Behind?" What's great is at 42, you're still young. You still have a lot of working years. You still have a lot of power in your army of dollar bills. But just like Brian said, you have to begin allocating it correctly. Am I actually putting my dollars in the place where they can be the most impactful and most valuable for me? I think you can save for a house and be on the homeownership side of things. And also build towards financial independence without having to change a whole lot of your behavior.

• 33:38Brian Preston?

  And if you don't know how to work one of these nerdy financial calculators, don't worry, we got your coverage. If you just go to moneyguy.com/resources, we actually have a home buying calculator for you. Nicole, you can go in, put your personal numbers in, make that house happen.

• 33:52Speaker 03

  What's your name and age?

• 33:54Speaker 05

  Uh, Jay, I'm 38.

• 33:55Speaker 03

  What's one thing you're trying to do financially?

• 33:57Speaker 05

  Man, right now, we are, are in the middle of getting out of debt.

• 34:00Speaker 03

  What is your debt made of right now?

• 34:02Speaker 05

  Uh, mainly credit cards, like most people.

• 34:04Speaker 03

  How many credit cards are you trying to pay off?

• 34:06Speaker 05

  Oh really? It's just one. One left. One left, yeah.

• 34:08Speaker 03

  Congrats. Okay, so you've been at this for a while.

• 34:10Speaker 05

  We've been at it, we've been at it, yeah.

• 34:11Speaker 03

  At its highest point, what was that credit card debt balance?

• 34:14Speaker 05

  Probably around like 30.

• 34:15Speaker 03

  And what's it at now?

• 34:17Speaker 05

  Uh, at about 15.

• 34:18Speaker 03

  What's this last big credit card?

• 34:19Speaker 05

  So is Amex.

• 34:20Speaker 03

  It's hard to reap the benefits when you're still like, have this huge balance building up, right?

• 34:25Speaker 05

  Yeah, yeah. You know what though? I don't, I'm kinda getting away, we're trying to get away from it. Like, we just wanna hold it just for like, you know, you get the, um, the lounge. We do like the lounge where we travel. Other than that, we don't really try to use it.

• 34:36Speaker 03

  How much are you putting towards your credit card debt each month?

• 34:39Speaker 05

  Since we're tacking it, about four grand. We're trying to get, trying to get rid of it like ASAP, so we're going hardcore.

• 34:45Speaker 03

  What do you do for work?

• 34:46Speaker 05

  I'm a dog trainer. Fly trainer, self-employed.

• 34:49Speaker 03

  How much of your income then is going towards your debt payment, like a percentage?

• 34:53Speaker 05

  So we're a two-income household. So right now, about 40 to 50% of our income is going towards debt right now.

• 34:59Speaker 03

  Yeah. Are you investing currently?

• 35:00Speaker 05

  Doing my wife's job, she is. Um, currently, no. We're embracing that, they step to fully.

• 35:05Speaker 03

  Just for the young people watching, what investing accounts do you have opened up?

• 35:09Speaker 05

  Roth IRA, through Charles Swab, uh, and then the fidelity is, uh, 401K through a job.

• 35:14Speaker 03

  So you, you paused investing right now?

• 35:16Speaker 05

  Yeah, paused investing right now. It's a payout debt.

• 35:18Speaker 03

  Do you have a goal age for when you wanna retire?

• 35:20Speaker 05

  I think around 50 or so.

• 35:21Speaker 03

  50 or so?

• 35:22Speaker 05

  Yeah, I would love around 50 to not have to, but I enjoy work. I love what I do, so.

• 35:25Speaker 02

  There is no doubt here that they have discipline. Jay and it sounds like his spouse, they are committed to changing their financial circumstance. Kudos to them.

• 35:35Brian Preston?

  Yeah, now look, here's the cool thing, just doing basic math here. If they're saving four grand a month and they have $15,000 a credit card, this thing will be extinguished in the next four months. But I do have a quick pickup for them. Look, baby steps does get you out of debt, but I'm trying to think beyond this four months that they're going to be in debt. And a lot of people will be like, well, it's only four months, what does it matter? No. I'm telling you, free money from your employer, your 401K is likely a 50 to 100% guaranteed rate of return. Make sure that your wife is doing the minimum on the match, because it's just not gonna be that much money to disrupt your savings or debt payment plan. And I just wanna make sure you do that pickup to start building that wealth, but let's extinguish the debt.

• 36:18Brian Preston?

  And then, let's go, let's graduate beyond the baby steps, cause there is a better way to do money and consider doing the financial order of operations.

• 36:26Speaker 02

  Now, I think at 38 years old, you guys are still young. You still have a lot of opportunity, but you do have to take it seriously. And so what I would love to see is in this few months, when you get this debt paid off, rather than deploying that $4,000 a month, the lifestyle and the other stuff. If you could just shift it and move it directly into saving and investing, funding those Roth IRAs, funding that 401K, putting money into your after-tax brokerage account, you can begin building up your army of dollar bills. Retiring at age 50, you're being work optional at age 50, it's gonna be a difficult charge. But if you can shift that four grand a month and start doing that as soon as that debt is paid off, you're gonna give yourself the highest likelihood, highest probability of actually being able to do that.

• 37:08Brian Preston?

  And that's the key part is, because I mean, doing it the, the baby steps method, he's gonna need more than 15%. Our savings rate is 25%, and it's of gross income, not net. And I just tell you that, cause you're already doing 50% towards paying off this debt. So it's already gonna feel like an automatic pay raise once this debt is extinguished. I would just love you to keep it going. And then I would also encourage you, go to our website, moneyguy.com/resources. We will have how much you should save based upon when you wanna retire, because if you think you're coming out of the workforce at 50, it might even require a savings rate beyond 25%.

• 37:43Speaker 02

  And look, if you love the baby steps, you're going to love the financial order of operations. Go check out a recent video we did, the wealth building plan that could change your life, and I think that you will be amazed.

• 37:55Brian Preston?

  Jay, you've got, you know, the last two cases definitely had all the components of behavior of like discipline and so forth. It's just a matter of how you allocating these resources. And I think you can see from just doing this type of content, for a lot of people, it's the basics. And that's why we love on you and we give everybody, go to moneyguy.com/resources, take advantage of all the free stuff. You do the free stuff right, you start building wealth. Guess what happens 10, 15, 20 years in the future? Your simple life, that you just got all this free information, all of a sudden, it's gonna start feeling really complicated. Especially as you're getting closer and closer to crossing seven figures, that's when we're gonna leave the porch light on for you.

• 38:34Brian Preston?

  We work with clients all across the country. We love giving away free advice to our listeners, so you can become the best version of yourself. And we just hope you'll remember who planted those seeds of knowledge, once they're starting to bear fruit. That was an absolute blast. Thank you, thank you, thank you, Jay C, for spreading the financial order of operations. And all the love is so cool, being content creators that are paying it forward. I'm your host, Brian, joined by Mr. Bo, Money Guy team, out.

• 39:02Speaker 00

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. As wish lists grow, you know where to go. Head to Ulta Beauty. We have gifts they'll love from brands like Tato One and Rare Beauty by Selena Gomez.

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