Triple-Leverage Cowboy Is Playing With FIRE | Making a Millionaire

Phil told us he treats money like a game. But looking at his money, it seems like his favorite game is RISK. He has a high net worth, but is he too much of a high roller? 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

  Phil told us he treats money like a game.

• 0:02Speaker 01

  I used to play Monopoly all the time.

• 0:03Speaker 00

  Okay.

• 0:04Speaker 01

  No joke, four, five, six, seven hours a day.

• 0:06Speaker 00

  Oh, wow.

• 0:07Speaker 01

  I love the game.

• 0:08Speaker 00

  Looking at his money, it seems like his favorite game is Risk. That is a daunting effort. And that's, you know, he

• 0:13Brian Preston?

  It's a lot of work for not much benefit.

• 0:15Speaker 00

  I'm gonna take a puff. Margin loan, I'm gonna take a puff. Credit cards, I'm gonna take a puff. You're 34 years old, worth almost a million dollars. Why? He has a high net worth, but is he too much of a high roller? Yeah, you were hitting these quick hits and it's working and you've not gotten burned on it yet. Might you be at the stage of your financial journey where it's time to?

• 0:36Speaker 01

  Calm down.

• 0:36Speaker 00

  I'm gonna say, well, I'm gonna say grow up.

• 0:43Brian Preston?

  Welcome to Making a Millionaire. This is where we help financial mutants to make small decisions to build their great, big, beautiful tomorrow.

• 0:52Speaker 00

  Brian, I am so excited because on this show, we get to talk to millionaires and millionaires in the making. And today is no different. I'm so excited we get to sit down with Phil today. Phil, thanks so much for being with us.

• 1:02Speaker 01

  Thanks for having me, guys.

• 1:03Speaker 00

  So, so the audience doesn't know you, they haven't met you yet. Give us, who are you? Where are you from? What do you do? Give us the quick, like, high level biography.

• 1:11Speaker 01

  I'm a registered nurse out in Columbus, Ohio. I'm 34 years old. I like to play sports. I'm a big soccer guy. I'm a big Buckeye fan. Baseball, basketball, you name it. I O, baby.

• 1:22Speaker 00

  I O. They have to do it every time.

• 1:24Speaker 01

  We'll see you Bulldogs in the playoffs.

• 1:26Speaker 00

  We got a bunch of Buckeyes here in the studio.

• 1:28Brian Preston?

  We got a lot of, um, the Ohio States.

• 1:31Speaker 00

  The Ohio State Buckeyes.

• 1:32Speaker 01

  I'm also a realtor. Kind of got that license about 12 months ago. Haven't done so much with it yet, but potentially that could be a side gig and/or a tool for me to use in building my wealth through rental real estate. I currently have a condo and a duplex. I live in the one side and rent out the other.

• 1:51Brian Preston?

  Little house hacking.

• 1:52Speaker 00

  Love it.

• 1:52Speaker 01

  Yep.

• 1:53Speaker 00

  Obviously, you watch The Money Guy Show. You're into personal financial content. How did you, like, have you always liked personal finance? It's a new thing.

• 1:59Speaker 01

  Sure.

• 2:00Speaker 00

  What's your money story in terms of where you started and where you are today?

• 2:04Speaker 01

  Yeah, so I think the story actually starts when I was a little kid. I used to play Monopoly all the time.

• 2:09Speaker 00

  Okay.

• 2:10Speaker 01

  Sega Genesis Monopoly.

• 2:12Speaker 00

  Yeah.

• 2:12Speaker 01

  And I used to play like, no joke, four, five, six, seven hours a day.

• 2:16Speaker 00

  Oh, wow.

• 2:16Speaker 01

  I love the game. Right, and every birthday, my grandma would give me 20 bucks or whatever, right? So I'd put that in the bank, and then me and my dad, we'd come home, and I'd see the statement, and I had earned a whopping 49 cents on quarterly.

• 2:29Speaker 00

  But that was money that wasn't there before, right?

• 2:31Speaker 01

  Exactly, exactly. So I'm like, wait a minute, what is, what's this, right? So that kinda got me super excited. And then in the sixth grade, in Mrs. Spencer's math class, kinda like your Mr. Moro moment.

• 2:42Speaker 00

  Shout out to Mrs. Spencer.

• 2:43Speaker 01

  Yeah, at Chapman Elementary. She told me about how, when she was a young girl, instead, or she would get dolls and, you know, things like that as a kid. However, there was this boy named Tommy Fitzgerald, or whatever his name was, who instead of getting basketballs, or race cars, or anything like that, he got stocks.

• 3:02Speaker 00

  Oh, wow.

• 3:02Speaker 01

  And she then said, "He's probably laughing all the way to the bank right now, because I'm sure he's a mega, mega millionaire." And that immediately kind of triggered the initial, "Okay, so if you own stocks, you become a millionaire."

• 3:14Speaker 00

  Love it, it's a connection, that's great.

• 3:15Speaker 01

  Right. Fast forward a little bit farther. I thoroughly enjoyed the stock market and stuff like that, but I didn't really understand how it worked. So when the iPhone had come out, I'm like, "Holy crap, this thing is really cool, and this thing's gonna change the world." And then when the next iPhone came out, I believe the iPhone 3, my older brother, who's a huge Apple nerd, he had bought it, and I played with it, and it was just such an upgrade from the first phone to the second phone, that I was just like, "All right, this thing, this thing's gonna change the world." So I took every penny that I had, I was approximately a sophomore in college.

• 3:51Speaker 00

  So that makes you what, like, uh...

• 3:53Speaker 01

  Sophomore in college.

• 3:54Speaker 00

  19, 20 years old.

• 3:55Speaker 01

  I was about to say 20. Yeah. And I took every penny that I had, and I put it, 2/3 of it in Apple, and 1/3 in Verizon.

• 4:03Speaker 00

  Oh, wow.

• 4:03Speaker 01

  Because at that time...

• 4:04Speaker 00

  Because of that, because of the phone, just the phone experience.

• 4:06Speaker 01

  Right, and you had to have singular wireless, now AT&T, to get the iPhone. So I thought it was only a matter of time before the best cellphone merged with the best cellphone provider. And I thought, alright, well, if I can kind of get ahead of that, then that would be great.

• 4:21Speaker 00

  That's unbelievably insightful for a 19-year-old to have that sort of field vision.

• 4:25Speaker 01

  Well, and shout out to all the young people out there. I think that trends can, like, young people have an insight in trends sooner than perhaps us older folk. So, yeah, I mean, I got lucky. It also was in, you know, 2010, so I had the tailwinds of the market recovery supporting me.

• 4:43Speaker 00

  Yep.

• 4:44Speaker 01

  But this was certainly back in the day where $10 per trade to get in and out. So, yeah, I just dropped everything I had into Apple and Verizon. And fortunately for me, I think I had like a 30, 40% return in that first year. And, well, that just got me hooked.

• 5:00Speaker 00

  So, give me some context. You said 19, 20, you'd put every, every penny you had. Like, what's every penny you have? Like, literally, like, I emptied out everything.

• 5:07Speaker 01

  To be fair, I did keep $500 on the side.

• 5:09Speaker 00

  Okay, well, you got, you know, you got to have a walk.

• 5:11Brian Preston?

  Two grand, three grand?

• 5:12Speaker 01

  Five. I had 55. So, in high school, my parents, and I'm happy that they did this, but I had to work throughout high school to build up funds for college.

• 5:25Speaker 00

  Okay.

• 5:25Speaker 01

  So, I had to pay for the first semester of college.

• 5:27Brian Preston?

  And where did you work in high school?

• 5:29Speaker 01

  A combination of golf courses, restaurants, Abercrombie & Fitch, just kind of anywhere.

• 5:39Speaker 00

  First millennials, that's such a flex to say, "I worked at Abercrombie & Fitch." Right, that's such a flex.

• 5:43Brian Preston?

  Also, I want to know, what was your childhood? Did you grow up, would you consider your parents having money or not having money, square in the middle class? What was childhood like?

• 5:53Speaker 01

  Sure. So, I probably grew up in a average, an above-average, but I guess a B-plus neighborhood, if you will. And my dad worked, my mom was a stay-at-home mom, to kind of give a little bit of... Background information on them. My mom was born and raised in Copenhagen. Uh, my dad was on a post, uh, my dad's an attorney. Okay. So he was on a post-law school trip to Europe. Okay. And my mom was a bartender and that's how they met. Wow, what a story. And then three months later, um, you know, he proposed over the phone. She flew over and, and got married. Wow. Yeah. So that's how Phil kinda came along.

• 6:36Speaker 00

  All right. So at 19 or 20, uh, you said, I'm gonna put all this stuff, uh, into Apple and it turns out really, really well for you.

• 6:41Speaker 01

  Yes.

• 6:41Speaker 00

  Right? So you, you learned at an early age, hey, I can work and I can go, I gotta put myself through college. Okay. Fast forward, we're gonna look at your net worth statement in a second to see kinda like where you are today.

• 6:51Speaker 01

  Mm-hmm.

• 6:51Speaker 00

  But walk us through that decision that you made at 19 to 20 to invest everything. And then now that you've gotten into the working world, you've been working for over a decade now. How have you approached making financial decisions? Like how, what's, what's your financial wherewithal? Like how do you decide what to do with your money and where to put your money? And, and ultimately, what are you working towards? Like now that you are in the working world, what are the goals that you're actually trying to move towards?

• 7:14Speaker 01

  Sure. I would say initially, when I first threw everything in, I just thought, holy crap, this, this product is going to revolutionize the world.

• 7:21Speaker 00

  Sure.

• 7:22Speaker 01

  Right? I was, I was lucky, um, but I was also right.

• 7:24Speaker 00

  Yeah.

• 7:25Speaker 01

  And then from that point on, I was just kind of addicted to investing. Um, so I continued working in college. Um, I was both a chemistry lab assistant and to help kind of bolster my academic career. And I also worked at Hyde Park. Um, it's a steakhouse. It's kind of the creme de la creme restaurants in Columbus. And that paid really well. So I was constantly trying to see, well, what can I, what job title can I get? That's going to increase the size of my shovel.

• 7:56Speaker 00

  Sure.

• 7:57Speaker 01

  Right? So that way I had more money I can dump in, dump in.

• 8:00Speaker 00

  For what, for what purpose? More money to dump in? Why? For what reason?

• 8:03Speaker 01

  I was just so enamored with how all of this works, read all the blogs, learned about the rule of 72. And so with that, roughly speaking, with the S and P averaging 10 to 11% a year. Inflation is roughly 3% a year. Roughly speaking, the purchasing power of your dollar doubles every 10 years, roughly speaking.

• 8:23Speaker 00

  Sure.

• 8:23Speaker 01

  And so when I was 20, 21, I just did the math real quick. I said, okay, well, eventually I'm gonna be, ideally, I'm gonna live to 100.

• 8:29Speaker 00

  Okay.

• 8:30Speaker 01

  And so somebody's gotta take care of that 90-year-old Phil.

• 8:33Speaker 00

  Right.

• 8:33Speaker 01

  Why not be me? Uh, because let's be real here. Everybody I know alive today will not be alive. By the time I'm ninety, right? So I gotta take care of myself. And so I recognized that using the rule of seventy-two, every dollar I could invest today would have the purchasing power of a hundred and twenty-eight, if my memory is correct. And so I was just like, holy crap. If I can work one day today, that's kind of like working a hundred and twenty-eight days as a ninety-year-old.

• 9:01Speaker 00

  I love that.

• 9:02Speaker 01

  And if I can save a hundred dollars today, that's a hundred and twenty-eight times a hundred. What is that, twelve thousand?

• 9:09Speaker 00

  Twelve thousand, eight hundred, yeah.

• 9:09Speaker 01

  Uh, for that. If I can save a thousand dollars and so forth and so forth. So then I recognized if I can save a year's worth of income, um, that's a hundred and twenty-eight years. So like that, that compounding exponential growth really was just like enlightening and exciting. Uh, so initially it was not a goal other than-

• 9:30Speaker 00

  I've recognized this thing that works, this thing that happens.

• 9:33Speaker 01

  Yes. And so if I can save one month today, you know, there's twelve months in a year, ten years in a decade, quick math, uh, that's a hundred and twenty months, right? So if I can work one, if I can work and save one month's worth of income as a twenty-year-old, that is literally going to pay for an entire decade of my nineties.

• 9:53Speaker 00

  I love it.

• 9:54Brian Preston?

  Do you see what you just did? I love this because we, we talk about the wealth multiplier all the time. And anybody in the audience should go to moneyguy.com slash resources. And you can play around with our tool, you can download it. I love, you said something that I think just brings it back to what we talk about all the time. I make the statement, and Bo even has the koozie, a dollar invested for that twenty-one-year-old, twenty to twenty-one-year-old, um, to make that thing legal, um, is, is going to have the opportunity to turn into eighty-eight dollars. I love what you just said there, though. If you, if you change this, and this, I want everybody to listen, one month, or just say one week's worth of work.

• 10:32Speaker 00

  Mm-hmm.

• 10:33Brian Preston?

  If it's invested, it could provide for a 20 to 21 year old, 88 weeks of time. You start thinking about that, that it's literally to your point, that's years.

• 10:43Speaker 01

  Yeah.

• 10:44Brian Preston?

  And that's a pretty remarkable thing that at a young age, you kind of caught that concept. I mean, that really is an amazing thing. And but I still, I want to pull you back on what was the money why? Cause right now I just hear in what your explanation is, is why not make more? But it feels like it's all over the place. It started off with this pure message that, you know, a little bit of time would get me lots of time in the future. But I don't know that we stayed on point with that. So can you kind of bring in what was the why?

• 11:15Speaker 01

  It was if I could get more, I could buy my time back is essentially what it was in a nutshell.

• 11:21Speaker 00

  So are you like a fire proponent? Is that, is that the thing?

• 11:23Speaker 01

  I would say I'm a recovering fire enthusiast.

• 11:26Speaker 00

  Recovering fire enthusiast? I like that.

• 11:29Speaker 01

  Uh, and so, and the reason why recovering and not still like, you know, balls to the wall, you know, full speed ahead is one day I would like to have kids and I think one of the important things of, of having children is, you know, setting an example and it's going to be really hard to set an example, the importance of work and contribution to society and helping others if I'm just kicking back, sipping Mai Tais all the time.

• 11:53Speaker 00

  Sure, yeah.

• 11:54Speaker 01

  You know, so part of me has recognized that I should probably be doing some form of work when I have children around because somebody has to set that example, right? Uh, that being said, the, because of all my previous hard work, discipline, saving, investing, it's kind of bought me options today. Um, whether it's taking time off today to come down and speak with you fine gentlemen. Uh, or, you know, investing in perhaps more aggressive investment options. Um, or stepping down from a full-time nurse position to what we call in the industry PRN, um, which is basically as needed.

• 12:35Speaker 00

  Okay.

• 12:35Speaker 01

  So during the pandemic, obviously it wasn't the funnest time to be working in the healthcare industry. Extremely long story short, the industry as a whole, a lot of people left. So labor shortages were created. And so the institution that I work at created this policy where if you worked above your contracted hours, you'd get over triple time.

• 12:56Speaker 00

  Oh, wow.

• 12:57Speaker 01

  And so.

• 12:57Speaker 00

  Not time and a half, triple time.

• 12:59Speaker 01

  Correct, 300. Yeah.

• 13:03Speaker 01

  So I kind of viewed this as an opportunity because I had, you know, a decent stash of cash underneath my belt. And I felt comfortable because I understood how insurance works and things of that nature. I was just like, all right, well, instead of working full time, I demand to be demoted. So now I'm only required to work 16 hours a month.

• 13:22Speaker 00

  Oh, wow.

• 13:22Speaker 01

  And then everything above is no longer triple time. It's now like 2.1.

• 13:27Speaker 00

  Okay.

• 13:28Speaker 01

  But still.

• 13:28Speaker 00

  But still amazing.

• 13:29Speaker 01

  Right.

• 13:29Speaker 00

  So you're required to work 16 hours a month on average.

• 13:32Speaker 01

  Correct.

• 13:32Speaker 00

  How many months, how many hours a month do you work on average?

• 13:35Speaker 01

  Well, I've become a little spoiled. And so to be honest, I probably am doing closer to 24 hours a week.

• 13:44Speaker 00

  Oh, wow.

• 13:45Speaker 01

  So, you know, typical full time work is 40.

• 13:47Speaker 00

  Yeah.

• 13:48Speaker 01

  However, at the same time, even though I'm only doing 24 hours a week on average, roughly speaking, as a nurse, I have taken the time to build up my real estate license. And I'm in the process of building that business up a little bit. And my thought process was I have this exclusive access to literally a thousand nurses and doctors. I'm in what's called the float pool, so I bop around different units throughout the hospital. I kind of recognized, wait a minute, I have this opportunity where I have exclusive rights from a real estate agent's perspective. I have access to a thousand nurses and doctors who trust me, who have been in the COVID trenches with me. And so I've kind of been building that up a little bit. So I have gotten a little spoiled. I have taken my foot off the gas a little bit.

• 14:34Speaker 01

  And yeah.

• 14:35Speaker 00

  So you said something interesting, said, hey, I've got, I've made a lot of, I've done a lot of hard work leading up to this point, and now at the age of 34, I've got some flexibility and options. So if you're okay with it, let's look at your, your net worth statement. You kind of sent that to us and said, hey, let's dive in. And I think it's interesting because that way we can give our audience an idea of sort of where you're at on your financial journey. And what we can see is right now, your total net worth is just under about $800,000. At 34 years old, that is wild, right? Like, that's unbelievable. And then when we just look at the liquid wealth that you have, it's about $550,000, which again, for a 34-year-old is insane. So by all metrics, on, on the top level, you're absolutely crushing it. But when we got this, there was something that we noticed, and I think you must have forgotten to send us some statements.

• 15:20Brian Preston?

  Well, I have a question.

• 15:21Speaker 01

  Sure.

• 15:22Brian Preston?

  Phil, do you like to skinny dip?

• 15:26Speaker 01

  I do, actually.

• 15:28Brian Preston?

  Because when I saw this, I don't know if you know the saying is that, you know, we have a favorite investor, Uncle Warren. Yeah, Uncle Warren, he talks about when the tide rolls out, you can see who's swimming naked.

• 15:40Speaker 01

  Yeah.

• 15:41Brian Preston?

  Your cash, now, and you can tell us what each of these accounts, but it's not going to take us long to go through it. Your cash is at $2,615, and for some reason, you need three accounts for $2,615. Your lowest account, that checking account with $8 in it, what is the purpose of that account?

• 15:59Speaker 01

  Um, so I have a HELOC, and I have my primary checking account. The HELOC is with a different bank account. So it's literally just a middle account for me to transfer funds from my HELOC to the middle account.

• 16:12Speaker 00

  Just a conduit for money to pass.

• 16:14Speaker 01

  Correct.

• 16:14Speaker 00

  Great.

• 16:14Brian Preston?

  But, but why is cash so low?

• 16:17Speaker 01

  Um, I'm a maximalist optimizer, just like efficiency. Um, and as far as assessing my employment risk, um, to be honest,

• 16:32Speaker 01

  There's a labor shortage right now and at any time, I kind of view my job as an asset. And with that, I feel that I can pivot if, if for whatever reason, I'm having difficulty getting hours at the hospital that I work at, there's other hospitals in the area that I can pick up work at, it would, it's almost like I can shift whenever I want. I understand there's the, also the risk of disability and injury and things of that nature, which I do have risk exposed to.

• 16:59Speaker 00

  Because surely, like obviously if disability, you've got tons of disability insurance, right?

• 17:04Speaker 01

  I don't.

• 17:05Speaker 00

  Oh, so you have no cash reserves, I just don't understand, you have no cash reserves, also no disability insurance. So you just said that if, if your job and the flexibility of that is maybe your most valuable asset because it flexibly exists, you have not done anything to like insure against what happens if that goes away.

• 17:21Brian Preston?

  But I want to make sure everybody has context. This might be a false sense of security, even on your career side, is because when you were in, I know the team, when they were kind of talking to you off camera about things, you have what you call dry spells and then you have wet spells or whatever with access. These traveling nurses have kind of slowed down. Sometimes you have periods where you have trouble getting hours during that period.

• 17:46Speaker 01

  Yeah.

• 17:47Brian Preston?

  I worry because, you know, hospitals are highly competitive and there's the CFOs for hospitals are, you know, looking for angles and edges. And if some by chance, they watch Making a Millionaire and they realize, holy cow, we're paying three times for anybody who had over hours. There's an opportunity to squeeze the inefficiency out of their pay structure. I'm worried, do you have any fears that that, or is that just you move or go? What do you do?

• 18:14Speaker 01

  I think, I believe in my work ethic. I believe in my competencies. I believe in my, I believe in myself.

• 18:20Speaker 00

  Sure.

• 18:21Speaker 01

  And so if, even if I can't get a job for whatever reason in a nursing role, which I don't think is the case, but even if that is the case, I do have my real estate agent license that I can kind of rev up that engine.

• 18:33Brian Preston?

  I want to make sure we bring this back because this is something. Bad things happen to good people.

• 18:40Speaker 01

  Sure.

• 18:40Brian Preston?

  And you will find you might even be in a situation that you have zero control over. And it doesn't matter how hard you work, how good your network is, is, and you said one, which could be a car accident, a disability. It's, that's why in step one of the financial order of operations, highest deductible covered, is because we're trying to insure away the catastrophic things that could derail you to make desperate decisions. Then we go to step four, after we get through two and three, we'll come back to that. But step four is the three to six months, and that's to get you out of, out of the catastrophic, and then have just extended periods of time. And I'm just worried because in a minute, we're going to talk about you love to dance with leverage.

• 19:23Brian Preston?

  And I, I don't know if you've, you know, because Uncle Warren used to love sitting next to another great investor, Charlie Munger. And Munger talked about the three L's that will ruin a person.

• 19:34Speaker 01

  Ladies, liquor, and leverage.

• 19:36Brian Preston?

  Exactly. So you know all this stuff. You're a student of the game, but yet you, you see the shiny object and you couldn't avoid. And look, I have no problem with leverage. I mean, the building we're in.

• 19:47Speaker 01

  Which is beautiful, by the way.

• 19:48Brian Preston?

  Has a mortgage on it, you know, I've always used mortgages on my house, you know, I'm, I'm not an anti-debt person. But I do worry, when chaos occurs, you got to assume the worst. Access to cash is not the same as having cash. And when you hit catastrophic, when it rains, it pours, and you lose your job, your real estate's down 50%, like mom was back in the great recession, and then your financial assets are down 40%, you quickly realize what you took for granted, which is your hard work, your access to cash, you start drowning. And that's, that's the part that scares me. Now, you're, you're kind of, I feel like you've structured this as boom or bust, is

• 20:30Brian Preston?

  that you're making great money, but if the, if bad things happen, instead of, if you think about if you're on a sinking ship, and when economies go bad, we're all on that sinking ship. A person with cash gets to climb up a few decks and not be the first ones underwater.

• 20:45Speaker 01

  Sure.

• 20:46Brian Preston?

  You're going to be, you're in steerage.

• 20:48Speaker 01

  I'm in steerage, yeah.

• 20:48Brian Preston?

  You're in steerage, for sure. You're down there, you're down there, it goes underwater and you drown in bigger pockets, get to come in, get the best deal, the lifeboats come and save them.

• 20:57Speaker 01

  So, one of the reasons why I came to talk to you guys is, I agree. And that fire enthusiast mentality is also part of the shift. When I was younger, you know, you think you're invincible.

• 21:09Brian Preston?

  Yeah.

• 21:10Speaker 01

  And all that other stuff. And even though I don't have kids yet, or anything along those lines, I can already sense my risk tolerance. Kind of coming down a little bit.

• 21:21Brian Preston?

  Great. Happens with age, that's a good thing.

• 21:23Speaker 01

  I think so. So, this isn't the only time I've used leverage to kind of help get to where I'm at. As an example, before, so my initial degree is biology with a minor of economics. Graduated circa 2013. I knew at some point I was going to, actually, let me take a step back, this might be interesting. So, 2013, I graduated. I got my first job as a chemical, inside chemical sales rep. I absolutely hated that job. Big mistake was staying in that job for a year because I thought, well, you know, you're supposed to stay in your first job for a year. I was super unhappy, the pay was not great, I, in my opinion, got somewhat taken advantage of, but neither here nor there. So with all of my extra time, I recognized, wait a minute, I can bust my butt at work

• 22:07Speaker 01

  and maybe make an extra hundred dollars. Or, with my free time at work, I can study taxes and study tax credits and things of that nature. If you're not gonna pay me well, I might as well use my time to better understand how to maximize.

• 22:22Brian Preston?

  How to pay less tax.

• 22:23Speaker 01

  Right.

• 22:23Brian Preston?

  Sure.

• 22:23Speaker 01

  How to maximize.

• 22:24Brian Preston?

  That's great.

• 22:25Speaker 01

  Right? Full disclosure, I did get fired from that job.

• 22:30Speaker 01

  But I don't regret, I don't regret how it all went down. I already had another job lined up by the time I got fired. At that point, three months into that job, I recognized, wait a minute, this, this life that I've currently built is not for me, so I'm gonna go to grad school at some point. So I started saving and investing, saving and investing, saving and investing, and I recognized, wait a minute, not only do you have personal exemptions and standard deductions, back when those were two things. But you'd also get tuition tax credits. And so I recognized, wait a minute, if I had traditional assets, I did an accelerated nursing program, so you get an entire bachelor's in one year. It was brutal. Like I said, my work ethic.

• 23:14Speaker 01

  So you get an entire bachelor's degree in 13 months. And I recognized, all right, there's no way I'm going to actually be able to earn an income during that time period. So instead, what I did was I loaded up traditional assets leading up to nursing school. So then in nursing school, during that 12-month period where I wasn't really making any income, I converted, I can't remember the exact figure, somewhere between $30,000 and $40,000 of traditional assets.

• 23:37Speaker 00

  Into Roth?

• 23:37Speaker 01

  Into Roth.

• 23:38Speaker 00

  Okay, great.

• 23:39Speaker 01

  With the idea that, all right, between the tax credits, personal exemptions, standard deductions.

• 23:44Speaker 00

  Still a low tax bracket.

• 23:45Speaker 01

  Exactly. It was zero. But with that, instead of paying for my nursing degree, I took out student loans. So I recognized, wait a minute, there's potential arbitrage here, where it's like, all right, not only am I going to save money in the tax conversion, you could also make an argument that I was, in a way, leveraging, in a way, leveraging student loans to be further invested into the market. So that was, I would say, like, the first time that I used leverage to kind of amplify investing. The second time, I would say, is during the pandemic, right? Once again, obviously, I'm pretty certain I've got a good employment security going into a health crisis, right?

• 24:25Speaker 01

  So when the stock market initially crashed in March, April, I had opened up credit cards and the 0% APR. And, right, right.

• 24:36Speaker 00

  Where is this going?

• 24:38Speaker 01

  And so, at that time, I had just closed on my duplex about three or four months prior, it needed some renovations. I had the cash, but rather than use the cash to pay for the renovations, I opened up the 0% APR credit cards for 18 months, and I maxed those out, and 18 months later I-

• 24:57Speaker 00

  Like cash advance? Like, use that for the renovations?

• 25:02Speaker 01

  Correct, correct. Yeah. That way I could further maximize my investment. Fortunately, once again, I did get lucky in the sense that the stock market recovered healthily, and so after that 18-month period, I sold the assets, took out money from the brokerage account, and then paid off the credit cards. So that's probably the second time.

• 25:21Brian Preston?

  Can I ask you a question?

• 25:22Speaker 01

  Go ahead.

• 25:23Brian Preston?

  Are you a gambler personality? Do you actually get?

• 25:25Speaker 01

  I hate gambling.

• 25:26Brian Preston?

  You're gamifier. I mean, you definitely gamify systems, the way you do your wages, the way you've done looking for these arbitrage situations. But I'm just trying to figure out if this is strategy or if this is an emotional high too.

• 25:38Speaker 01

  I hate gambling.

• 25:39Brian Preston?

  It's not a dopamine hit.

• 25:40Speaker 01

  I hate gambling.

• 25:41Brian Preston?

  Okay.

• 25:41Speaker 01

  For me, it's a game that I'm gonna lose.

• 25:43Brian Preston?

  Okay.

• 25:44Speaker 01

  With strategizing investing, I don't feel that way.

• 25:48Brian Preston?

  Okay.

• 25:49Speaker 01

  But with gambling, the house always wins, right?

• 25:51Brian Preston?

  But is it? But answer this, because you understand the statistical side that the house always wins. But is there some dopamine side of this that you're doing it?

• 26:00Speaker 01

  Probably a little bit.

• 26:01Brian Preston?

  Because?

• 26:01Speaker 01

  Maybe a little bit.

• 26:02Brian Preston?

  Because you know, you've said it several times, you knew you were taking a risk, but you won.

• 26:07Speaker 01

  Mm-hmm.

• 26:07Brian Preston?

  And I'm just, I'm just trying to get to the root cause here, and we'll get back to foo in a minute. But it's, you see where I'm building.

• 26:14Speaker 00

  Well, it's just interesting to me. You said something earlier. You said, when you come to the app, you said, hey, I was, I was lucky. Da, da, da. But I was right.

• 26:24Speaker 01

  Right.

• 26:25Speaker 00

  But I was right.

• 26:25Brian Preston?

  Yeah.

• 26:26Speaker 00

  And it's just interesting. These are all like very aggressive strategies that you've done. I took out a HELOC, I maxed out these credit cards. You're familiar with like the concept of Russian roulette? Not actually planning to give you the concept of it.

• 26:37Speaker 01

  Yeah.

• 26:38Speaker 00

  No one ever gets through five rounds of Russian roulette and says, holy cow, I won five times. Let me try for the six. Let's let me try for the seven. And that's what, it's so interesting. We've already said, you have a net worth of almost $800,000 at 34. You have $550,000 of liquid. It's gonna be hard for you to screw your financial situation up. And yet, it seems like you keep putting yourself out there to where screw up could be possible. And so the question I would have for you, okay, you said, I'm a maximalist and I want to max. You're at a stage of your financial journey where it might not just be about how much money do I make? Or how much do I compound? Or how much do I stack? But how much do I actually get to keep over the long term?

• 27:18Speaker 01

  Mm-hmm.

• 27:18Speaker 00

  You, I cannot disagree with a lot of the things you've done have worked out incredibly well for you thus far. So you had this huge head start. You've essentially rounded third. All you gotta do is get from third to home. But you gotta be careful taking too many risks between third and home, or else you sacrifice the whole thing.

• 27:36Brian Preston?

  Sure.

• 27:37Speaker 00

  You put at risk this entire beautiful thing that you've built, and the question I would have for you is, why?

• 27:42Brian Preston?

  Well, I want to bring it. He talked about his fascination and love of Rule of 72. That is the most pure, basic thing of letting your money work. You even gave the reference of the S&P 500. You work for an employer. Now, this blows my mind, is that you put in 10%. They force you to put in 10% in the 401A.

• 28:05Speaker 00

  Yeah.

• 28:06Brian Preston?

  They put in 11%.

• 28:07Speaker 00

  Yep.

• 28:08Brian Preston?

  And you don't even have to pay social security, because they're opted out of social security.

• 28:12Speaker 00

  Correct.

• 28:13Brian Preston?

  Because of their structure. So, that's an amazing thing, and that's why, when I look at the tax-deferred side, you can see why that number is big.

• 28:20Speaker 00

  Right.

• 28:21Brian Preston?

  I mean, close to 200,000.

• 28:22Speaker 00

  Right, unfortunate.

• 28:23Brian Preston?

  And then I look at, and we'll get to it in a minute, your real estate. You house hacked, which is one of the most basic things. You buy something, let somebody pay half your rent. That's a de-risked type of way of doing it. Those things are your biggest wins on this net worth statement, and they didn't require you to do all the individual stocks. We'll get into options contracts. I mean, it's like a who's who of what the hot dot is at the moment. But yet, the original part, and this gets back to Bo's question, was Rule of 72, S&P 500, but you never did that stuff. You've gone, you see this, and then you go here. Give us, go back to what Bo was asking.

• 29:05Speaker 00

  If you can remind me... So, my question is, is you've had all of this success thus far. And you say, hey, my risk tolerance is changing, and I think maybe I want to have a family one day, and I recognize, I am, for 34 years old, far ahead of the game. Yeah. Some of the stuff that we're gonna say is, okay, hey, you're a max, but you've only got, you know, $2,600 of cash. Sure. Perhaps that, even though you do have job security, even though you have, what is the opportunity cost that actually exists for you to have? Okay, I'll even concede. You're a nurse, so you're highly employable, and you're gonna be incredibly fluid in terms of where you can plug in. Even just keeping three months of liquid expenses, of living expenses in cash, plus, you do have, we haven't talked about real estate, we'll talk about that in a second, you do have some additional exposure through real estate.

• 29:50Speaker 00

  Sure. Which would substantiate probably having some cash there. And you've already said, hey, I think I might want to do more real estate. Well, if you're gonna do that... You are not currently positioned in the place as someone who would say, hey, yeah, going into more real estate would be without having that cash there. And so my ultimate question for you is, why not?

• 30:09Speaker 01

  Yeah.

• 30:09Speaker 00

  I get maximizing.

• 30:10Speaker 01

  I honestly think it is, it comes down to maximizing, right? The idea of FIRE, the, kind of the purpose is to kind of get to the finish line as fast as possible. And initially, part of the initial conversation was a recovering financial enthusiast, right? And so I think I've recognized that with that goal of hitting the financial independence as fast as possible, it is exposing me to extra risk. And I certainly, even though we've talked about some home runs that I've, financial home runs that I've had. I've certainly struck out a couple of times, too.

• 30:43Speaker 00

  Yeah, sure.

• 30:44Speaker 01

  So I think ultimately, this mindset of just, you know, grind, grind, grind, sprint, sprint, sprint, has kind of gotten me to a level of, alright, well, there's risk. And obviously, a substantial amount of assets are at risk. So for me, it was, the reason why I don't have cash reserves is because I do have some brokerage accounts that I could tap into. I, I know, I read the book.

• 31:09Brian Preston?

  Access to cash.

• 31:11Speaker 01

  Right, right, right. And I get that, and I get that. And that's why, even as somebody who I would consider myself a financial mutant, I hope that I would get that title bestowed.

• 31:19Speaker 00

  We're trying to figure it out. We're trying to figure out what variation you are.

• 31:22Brian Preston?

  We see that, we're like in the, in the man, and we see something that glimmers. But it seems to be covered up with something that I didn't.

• 31:30Speaker 01

  The not getting the clear picture.

• 31:31Brian Preston?

  So I'm trying to figure out how we, because I will tell you, let me, let me give you the good news before we bring this back to the Russian roulette, because Bo was spot on with that example. I think for somebody, you answered something that I thought was pretty interesting a few seconds ago. I asked you if you were a gambler, and you said no. You, you actually, you look at yourself as a maximizer of this, and it's not a dopamine or an emotional thing that you're trying to get. I think that people, and I talked about this in the book. Is that anybody who understands risk and risk tolerance, but also understands how you build up a nice balance of cash. That is like a superpower because you're in boom or bust is just part of our system with real estate, with a lot of these speculative investments.

• 32:15Brian Preston?

  You will see moments where things go up, where things go down. The smart play, and think about Warren Buffett. Why whenever we get into economic downturns? Do people start looking at the private jet landing? You know, the airplane numbers that they come to different places is because they're seeing is Uncle Warren go bail out the next company that's about to go broke. There is a superpower to be a maximizer, to have resources when everybody else is dying. And right now you're on the front end of drowning underwater because you have no liquidity. I would think a person who's a maximizer, especially when you think about how often do bear markets happen every decade?

• 32:54Speaker 01

  Uh, two out of eight or two out of 10 years.

• 32:57Brian Preston?

  So, and you've had a good run. It's back to the Russian roulette period is that you, you, you pull the hammer and then somehow it's just not, you're not, you're not paying the price. And you're like, let's keep going, even though you know the stats. Do you think that means that there's a lot of opportunity for real estate in the next three to five years? Or do you think it's going to take a little time for that huge spike in price appreciation?

• 33:20Speaker 01

  A reversion to the mean.

• 33:21Brian Preston?

  Yeah.

• 33:22Speaker 01

  Right.

• 33:22Brian Preston?

  But even good markets like Ohio can, are still potential opportunities if you have assets.

• 33:29Speaker 01

  Sure.

• 33:30Brian Preston?

  If you're naked, it potentially could pull you under.

• 33:34Speaker 01

  Yeah. And that's, and so the, the last, uh, just to kind of fill the audience in, the last time I went, uh, kind of crazy with leverage is, um, during like September of 22 to January of 23, I used my HELOC and I pulled out approximately a hundred grand.

• 33:52Brian Preston?

  And I pulled the chamber.

• 33:54Speaker 01

  Um, and I, and I DCA'd, um, over a four month span, 25 grand in each month. Uh, at, at worst.

• 34:02Brian Preston?

  I love the DCA.

• 34:04Speaker 00

  Hey, I smoke cigarettes. I have filters on them. You know what I mean? So it's healthier. It's a better way of doing it. Oh, Phil.

• 34:10Speaker 01

  At work, that hundred went down to eighty-nine, but I, to use some YouTube stock, you know, I diamond-handed. I hoddled. I held on. And, you know, that, those investments have done really well.

• 34:23Speaker 00

  Sure.

• 34:23Speaker 01

  And so now I'm kind of in a position where I have, you know, approximately a hundred and twenty-five grand of gains.

• 34:30Speaker 00

  Mm-hmm.

• 34:31Speaker 01

  I agree that I'm taking too much risk and that I need to kind of tone it down. But it's one of those things where how do I unwind that in the most tax-efficient way?

• 34:41Speaker 00

  Sure. We are going to get there.

• 34:42Speaker 01

  Okay.

• 34:43Speaker 00

  And what's interesting is you're talking about something that's like four steps down the road and we're still...

• 34:50Speaker 01

  Fair enough, fair enough.

• 34:50Speaker 00

  We're still trying to get to the very first step down there because you said something a second ago. He said, "Oh, well, look, I don't have a ton of liquidity, but I got this brokerage account and I can tap into this brokerage account." But when we look at your net worth table, I see another thing on there that says margin loan.

• 35:05Speaker 01

  Yes, sir.

• 35:06Speaker 00

  So you have a brokerage account. You have liquid assets, but it sounds like perhaps those liquid assets are also encumbered, right?

• 35:13Speaker 01

  Yeah.

• 35:14Speaker 00

  So, okay, so let's walk down this thing, right? And just throw out some of the names that exist in your brokerage account, some of the stocks that you hold.

• 35:21Speaker 01

  Predominantly Tesla, Nvidia, Enphase, Apple, Microsoft, Google. I know there's concentration risk, right?

• 35:27Speaker 00

  So these are all companies that are not subject to like wild volatility, right? These are companies that are pretty standard. They don't have these huge swings. So in the event that Brian's talking about, this like great recession type thing, maybe there's real estate softness, maybe there's job market softness, but there could be technology softness. And we see this. Do you know the way like margin loans operate, right?

• 35:45Speaker 01

  Colloquial.

• 35:46Speaker 00

  Right? Like if it goes, so in the time when you might very well need liquidity the most, when the world is, we're not even talking about like opportunistic liquidity, just like uh-oh liquidity, at the time when you might need it the very most, might be the time when what you thought was there in this brokerage account that totals two-hundred and forty-thousand dollars across all three of them.

• 36:09Speaker 01

  Yes.

• 36:09Speaker 00

  What you thought was there, because you have this loan outstanding on it, could very well not even be there, not be available and accessible to you.

• 36:16Speaker 01

  Right.

• 36:17Speaker 00

  So in that event, even the thing that you said, okay, it's not really a margin loan, but it's kind of a margin loan, that disappears too.

• 36:22Speaker 01

  Sure.

• 36:22Speaker 00

  And again, the question I come back to is... You're 34 years old, worth almost a million dollars. Why?

• 36:29Brian Preston?

  Yeah.

• 36:29Speaker 00

  Like you won, you've not won, but you're like on your way to winning.

• 36:35Brian Preston?

  Yeah.

• 36:36Speaker 00

  And so when I think about being a maximizer and having opportunities, you're, you're, uh, it's, it's so funny. Warren, man, we're giving Warren, Warren, if you're listening, shout out to you for getting it. You know, he used to have this idea that what I'm going to do is I'm looking for opportunities where I can just go pick up butts off the ground. I'm gonna take one quick puff, one quick puff, one quick puff. And he recognized that, man, that is a, that is a daunting effort. And that's, you know, he, he, I'm gonna take a puff. Margin loan, I'm gonna take a puff. Credit cards, I'm gonna take a puff. And then Charlie came along and Charlie said, hey, instead of finding them, why don't you find opportunities that you can sit around and smoke for a while? That you can savor over the long term. You were just setting yourself up right now that, yeah, you were hitting these quick hits and it's working and you're not gotten burned on it yet.

• 37:21Speaker 00

  But you've done that and you've got here. Does it make sense to continue doing that? Or might you be at the stage of your financial journey where it's time to?

• 37:30Brian Preston?

  Calm down.

• 37:30Speaker 00

  I'm gonna say, well, I'm gonna say grow up, grow up from the games.

• 37:33Brian Preston?

  Or get more focused. I mean, I think about when I think of wealthy people that we work with, and you've heard this before, this will not be new. A lot of secret to wealth is find something you're good at or that you, and you can replicate that most of the public can't do. And do it as much as you can. And a lot, and when I look at your, I, I was, when I was trying to prepare, I'm, I'm, if you want to know our dynamics, Bo is game time ready. Allen Iverson. And then I am like, oh my God, lose sleep, over studied. And I, and I got tired when I was looking at your statements. I was like, I can't figure out what the heck Phil is doing here. Cause there's individual stocks here, there's options contracts. I didn't, I mean, it was just all over the place.

• 38:14Brian Preston?

  And that was, that made me really tired and I didn't see a dynamic thread where I knew what you were doing. And that's why when we wrote, when I, when I started putting together the financial order of operations as we did that. It was to go through so you can build your foundation and know what you're doing financially. And, and I don't even mind sharing, like step two. You know, an interesting thing, you said you're currently working around 24 hours, but you even conceded, hey, 40 hours is the normal work week.

• 38:43Speaker 01

  Sure.

• 38:44Brian Preston?

  So, step two is maximize, you know, your employer match. You're leaving 40% of your work capacity kind of on the table. Now, I know you're gamifying this in a way, but what is that opportunity cost worth? Because we already see that's one of your biggest assets that you already have.

• 39:01Speaker 01

  Sure.

• 39:01Brian Preston?

  With a very small savings rate.

• 39:03Speaker 00

  Again, what I'm trying to figure out now is the why. Because like, we can look at your situation and we can triage the situation. We can say, hey, here's some things that we would change. Here's, okay, you've got this margin loan, here's how I think about that. Okay, you've got this home equity line outstanding, here's how I thought about that. We haven't even talked about the hard money loan. We haven't talked about all the different things. And we can triage that, but before we can start talking about, hey, here's what we would do to change, we do need to understand the why.

• 39:28Speaker 01

  Yeah.

• 39:28Speaker 00

  And it sounds like what I'm hearing you say is, I want to be able to be in a position in the future where I can have a family, provide for my family, potentially might have to even provide assistance to other family members in my life. What's interesting is if your financial life is just a house of cards that's built, that is working and it's still standing, but it's unstable, does that really put you in the best position to be able to accomplish all those things? Or is your why, I just want to see how aggressive I can be? Do you know what I mean? That's what I'm really trying to dive into.

• 39:59Brian Preston?

  That's a great question.

• 40:00Speaker 01

  So, I feel like initially it was how aggressive I could be. It was one of those situations where, when I was probably younger, I was just so excited about the rule of 72. So, if I can get the highest rate of return, understandably that with risk comes reward, or with reward comes risk, that I would kind of just go all in. I spent a lot of time and energy into becoming a nurse, right? And I really do, there's definitely parts of the job that I really do enjoy. Part of me is definitely thinking of a transition at some point in the future, whether it's sooner or later. So, one of the reasons why I wanted to kind of amass a high level of wealth is so I can change positions. Do I like what I do? Yes. Am I burning out? Yes.

• 40:39Speaker 00

  Sure.

• 40:40Speaker 01

  So, that's one potential reason why I'm hyper-aggressive, is to kind of get out.

• 40:44Speaker 00

  You you said your goal was to amass a high level of wealth. In your mind, what's a high level of wealth?

• 40:48Speaker 01

  Um, originally it was a million dollars and the reason for that.

• 40:50Speaker 00

  Hey, you know, you're real close. You're real, you know what I mean? You're real close.

• 40:54Speaker 01

  Um, and the reason for that, why a million? Well, first, it's obviously a nice round number.

• 40:58Speaker 00

  Sure, it's cool.

• 40:59Speaker 01

  And as you make mention in your book, there's studies that suggest that seventy thousand, seventy-five thousand is the necessary income to to.

• 41:09Speaker 00

  Baseline living expenses.

• 41:10Speaker 01

  Correct. Uh, so I thought, all right, well, going back to the S and P providing roughly ten to eleven percent. Inflation roughly doing three percent. Seventy to seventy-five thousand dollars, you would need about a million invested, right? Um, so that's how I.

• 41:25Speaker 00

  Market makes ten percent every year, you got a seven percent withdrawal rate, that math holds?

• 41:28Speaker 01

  Correct, correct.

• 41:29Speaker 00

  I don't know whether it works, but okay, cool, cool, cool, cool.

• 41:31Speaker 01

  So, so there is, there's obviously the ups and downs and all that stuff, but that's why I was aiming for a million.

• 41:37Speaker 00

  Sure.

• 41:37Speaker 01

  Nice round number, seventy to seventy-five thousand. That was not to suggest that I was going to necessarily retire.

• 41:43Speaker 00

  It's just the goal you're trying to hit. Got it. Yep. You just said, I've had this goal to amass a high level of wealth, high level of. What I can't figure out is your goal, your number was a million and you were rapidly on your way there. Why has the goal not shifted to be, man, I've almost hit that thing that I was gonna do. My goal now is to not lose a massive level of wealth, because that's where you are. I I I'm not gonna fault you on all the things that you've done leading up here, although I would not recommend you do them. They've worked out and that's amazing and that's wonderful and that's awesome. It's no different than someone who works for Tesla before Tesla becomes Tesla. That's an awesome opportunity you've been given. What I can't figure out is when you look at your situation, how are you not? Because when I looked at it.

• 42:27Speaker 01

  I got scared.

• 42:28Speaker 00

  I and I and we're both super aggressive. When we look at this, we're like, oh, my goodness. Man, he's done so well, why is he still so at risk, especially hearing that you wanna move into the stage of life where you have a family and have kids? And and like you said, man, my job is like, I consider one of my greatest assets. Hey, but you know what? I kinda wanna leave this job. I kinda wanna leave this thing that's my greatest asset. You have so much risk inherent in everything that you're doing. What I can't figure out is why the mindset has not shifted.

• 42:57Speaker 01

  I think it's in the process of shifting, which is one of the reasons why I wanted to talk with you.

• 43:00Brian Preston?

  I see paper gains, not wealth.

• 43:03Speaker 01

  Sure.

• 43:03Brian Preston?

  And the difference is, paper gains can go away tomorrow. You're just one bad economic downturn away from a lot of this net worth just disappearing.

• 43:12Speaker 01

  Yeah.

• 43:13Brian Preston?

  Versus wealth, you get to keep. And that's, and that's what it just bothers me. And I think I'm echoing really where Beau is. And I gotta get you from the extremes, because right now, everything you do seems to be on extremes. Like, you work 80 hours a week, or you pretty much don't work at all. That's an extreme there. Or you go tremendous risk, or you don't really, well, I don't know that you don't have an off button on the risk so far. But you're constantly hanging out in the extremes on everything. And I think you're gonna find, you can do this while you're in warrior mode. And I think that, you know, a lot of us.

• 43:47Speaker 00

  Man, 34 is rapidly approaching the end of warrior mode.

• 43:50Brian Preston?

  When you take risk young, and you win, you know, you keep repeating that. Entrepreneurs do this as well. I don't know how you're gonna get yourself out of it if you don't take some really hard steps.

• 44:00Speaker 01

  Yeah. And, and so, that's one of the big reasons why I wanted to talk with you guys, was I understand, well, maybe not fully, because clearly, my mind is a little crazy. But I recognize that I'm, I'm definitely taking more risk than I probably should. And so, with building a real estate side business, if you will, and I follow the stock market quite routinely, quite aggressively, and stuff like that.

• 44:27Brian Preston?

  So do you think you can beat the market right now?

• 44:29Speaker 01

  No. I have, but no.

• 44:32Speaker 00

  Well, he just keeps giving me the disclaimers. I mean, no, kinda, you know what I mean?

• 44:37Speaker 01

  No, I think, I think, you know, a broke clock is right twice, right?

• 44:41Speaker 00

  Yeah, that's right.

• 44:41Speaker 01

  Potentially, the twice just happened to fall into my lap, right? So.

• 44:45Speaker 00

  Let's come back down. Let's talk about your shovel, right? When it comes to resources that you have to work with, when we look at your funding, obviously, we've looked at the balance sheet. Balance sheet crushing it, killing it. On a normal month, you know, 80s to zeros and you, I want to hear more about this real estate business that you're doing, understand what's going on there.

• 45:02Speaker 01

  Sure.

• 45:02Speaker 00

  What, what is your monthly income that you have that you can use in terms of like funding goals and doing the things that you want to do?

• 45:09Speaker 01

  I average about 110, 105 grand a year, um, and that is gross. So 10% of that, I'm forced to contribute to a 401A.

• 45:20Speaker 00

  So that's what, like 8,500, I'm doing that math in my head, that come out about right? Somewhere around there, 8,500 a month, okay?

• 45:26Speaker 01

  As far as real estate, um, the rents, my mom was actually living in the condo. So we just moved her out of the condo. She's still in the process of moving. Um, so as soon as that is, she was paying the mortgage, um, but kind of like not even the entire mortgage, I was helping her with about 150, 200 bucks a month.

• 45:46Speaker 00

  Okay.

• 45:49Speaker 01

  As far as the duplex that I'm living in.

• 45:52Speaker 00

  So the condo is not currently generating income for you, but it will be.

• 45:56Speaker 01

  Correct. My mom is still paying the mortgage. Um, so extremely long story short, I was looking over my mom's finances and her spending, to be honest, was kind of high. Um, and I looked at her assets and stuff and I basically ran the calculations and I explained to her, hey, this is, you're gonna, this is gonna lead to a dead end sooner rather than later, we need to adjust. And to be fair to my mom, she definitely cut back her spending. One of the ways she cut back her spending was reducing her housing income. She was living in Chicago, paying $1,200 a month, just in HOA fees.

• 46:27Speaker 00

  Oh, wow.

• 46:28Speaker 01

  Right.

• 46:28Speaker 00

  Oh, wow.

• 46:30Speaker 01

  Doormen, they're expensive.

• 46:31Speaker 00

  Yeah.

• 46:32Speaker 01

  So we moved her from Chicago to Columbus, Ohio. The problem is, is she couldn't qualify for a mortgage.

• 46:39Speaker 00

  Okay.

• 46:40Speaker 01

  So we put the mortgage in my name. However, during that transaction, she was diagnosed with cancer and we thought it was pancreatic cancer. So it's like, being a nurse, I know what that means, right? So I said, realistically, you got three to six months left. Um, I still think we should move you to Ohio because the health insurance she had in Chicago was garbage. Ohio State has one of the best, shameless plug for OSU, has one of the best cancer centers in the country, uh, let alone. The state and by her moving, it allowed for her to cherry pick the insurance company so that way we could get her the best medical care.

• 47:12Speaker 00

  Great.

• 47:12Speaker 01

  So at that point, it's like, well, you only have three or six, three to six months left. So does it really make sense for us to put the title indeed in your name? No, it didn't. Because why deal with litigation that is unnecessary? So we put the mortgage title indeed exclusively in my name.

• 47:29Speaker 00

  So it's your condo?

• 47:30Speaker 01

  Technically speaking, yes. It was her money used as the down payment. I have since given her that money back.

• 47:37Speaker 00

  Okay. So now it literally is your condo?

• 47:39Speaker 01

  Correct.

• 47:39Speaker 00

  Okay.

• 47:40Speaker 01

  Now, obviously some appreciation and debt paid down is thanks to her, right? And so I very much feel obligated in helping her, which is why right now, roughly speaking, I help her with 200 bucks a month. In the future, roughly speaking, she's got about 10 years' worth of spending money left before she runs out of money. Going back to what's a why, perhaps I feel like there's a.

• 48:06Speaker 00

  Some responsibility there that you might have to bear in the future.

• 48:10Speaker 01

  Correct.

• 48:11Speaker 00

  Which is all the more reason why you need a really stable.

• 48:15Speaker 01

  Right.

• 48:15Speaker 00

  Healthy foundational footing.

• 48:18Brian Preston?

  You essentially have a dependent.

• 48:19Speaker 01

  Yes.

• 48:19Brian Preston?

  In the long term.

• 48:20Speaker 01

  Yes.

• 48:20Brian Preston?

  Maybe not right now in the short term, but in the long term, there's a dependent on the horizon for you.

• 48:25Speaker 01

  And I would encourage everybody listening to have those conversations with your parents because had I not had that conversation with my parent.

• 48:31Speaker 00

  You would have known.

• 48:33Speaker 01

  The train, right, I wouldn't have known, the train probably would have derailed much sooner and there was a real possibility that right around today would have been the moment where she had run out of money.

• 48:43Speaker 00

  So as it relates to the condo, is that going to be rental income for you or?

• 48:48Speaker 01

  Yeah, so the way we're structuring that is roughly speaking, the mortgage is 1131 a month and HOAs are roughly 425. So like 1550 ish. I was going to rent it out for approximately two grand and then all that extra cash flow, I was just going to shovel off to my mom as a way of supporting her now, but also realistically, I wouldn't have this asset if it wasn't for her. So I can benefit from. The tax benefits, the write offs, or the tax benefits, the appreciation and the mortgage pay down.

• 49:23Speaker 00

  But just not the cash flow?

• 49:24Speaker 01

  Just not the cash flow.

• 49:25Speaker 00

  Okay.

• 49:25Speaker 01

  So I figured it was kind of a way for her to benefit in this situation.

• 49:31Brian Preston?

  You, you mentioned earlier she had a cancer scare.

• 49:33Speaker 01

  Mm-hmm.

• 49:34Brian Preston?

  Obviously, she made it well past the three to six months of, of the, so was it a bad diagnosis? Is she healthy? What, give us, give us the health update.

• 49:42Speaker 01

  Yeah, so originally it was pancreatic cancer was the original diagnosis.

• 49:47Brian Preston?

  Okay.

• 49:48Speaker 01

  We got her into Ohio State and they diagnosed her with what's called peri pancreatic cancer. I could go medical if you guys want.

• 49:55Brian Preston?

  Oh, no, no, no. But is her prognosis?

• 49:57Speaker 01

  Yes, yes, she's alive and well. It's now six, over six years since the surgery.

• 50:03Brian Preston?

  That's great.

• 50:04Speaker 01

  So she's alive and well, so.

• 50:05Brian Preston?

  Why, why did y'all move her out of the condo, though?

• 50:07Speaker 01

  The HOA and mortgage for the condo is 1,500. There is a low to moderate income housing program in Columbus that she was able to buy a house, which was appraised for 330, for 149.

• 50:22Speaker 00

  Oh, wow.

• 50:23Speaker 01

  It's reducing her monthly housing expenditure by $500, just like that.

• 50:27Speaker 00

  Okay.

• 50:28Speaker 01

  Then with me giving her that extra $500, now her housing expenses are going from 1,500 down to 500. So that was one of the biggest reasons why we moved her. On top of the fact that she was given grant money and stuff like that to help purchase the property, so longer term, all right, sweet, we just got 25, $30,000 of free money down the road.

• 50:50Speaker 00

  Sure.

• 50:51Speaker 01

  And then thirdly, to be quite honest, that debt was weighing me down from a debt to income ratio, because eventually, one day, I would like to buy more rental real estate. And so by having my mom live in the apartment, or in the condo, We weren't treating that money as rental income, but rather a gift from my mother. So that income was not being taxed because it was a gift. But that debt, from a debt to income ratio, was weighing me down. So I had no income to offset the debt. So for those three reasons, that was kind of the reason why we moved her. I mean, first and foremost, it was, we were gonna reduce her housing expenses by a thousand dollars a month.

• 51:31Speaker 00

  Sure.

• 51:32Speaker 01

  Had we not done that, she'd probably run out of money in about four years. But because of that, it's now ten. And when I say that, it's whenever she retires.

• 51:40Speaker 00

  Got it.

• 51:41Speaker 01

  So that was first and foremost why we moved her out of the condo.

• 51:44Speaker 00

  Okay.

• 51:44Speaker 01

  Moving forward, we're gonna rent it out for two thousand. I'm going to give her the five hundred dollars. So outside of maintenance and stuff like that, that's essentially gonna be a wash.

• 51:53Speaker 00

  No additional cash flow to you.

• 51:54Speaker 01

  Correct. And then with the duplex, right now I collect roughly twenty-two fifty. And the mortgage is eighteen fifteen for the entire duplex.

• 52:05Speaker 00

  That's what, four hundred bucks a month coming in of free cash flow?

• 52:07Speaker 01

  Correct.

• 52:08Speaker 00

  What about maintenance and that kind of stuff?

• 52:10Speaker 01

  Roughly, I would say about six hundred maintenance per, or excuse me, three hundred per side. So about six hundred to account for that. So if you, the mortgage is eighteen fifteen, if my memory is correct, plus we'll call it six hundred. So twenty-four fifteen is everything as far as the duplex is concerned. And the rents collected is roughly twenty-two fifty. But also keep in mind that I, this is where I live. So like, essentially, my housing expenses is a hundred and fifty bucks or whatever that matters.

• 52:41Speaker 00

  But it's not creating free cash flow for you right now?

• 52:43Speaker 01

  Correct.

• 52:43Speaker 00

  Got it. Okay. So your only income so far that we've gotten to is about eighty-five hundred dollars. Gross from nursing, you take out the ten percent, maybe we're like seventy-five hundred-ish.

• 52:54Speaker 01

  Right.

• 52:54Speaker 00

  Well, that's not accounting taxes either. Then that doesn't count. Yeah. So we're like, that's the only income we're at so far?

• 52:59Speaker 01

  Yeah.

• 52:59Speaker 00

  Okay, keep going.

• 53:00Speaker 01

  As far as real estate agency, to be honest, the only deal I've done right now is my mom's.

• 53:05Speaker 00

  So I'm gonna, your only income, I mean, we're just getting down to brass tacks, your only income is nursing.

• 53:09Speaker 01

  Correct.

• 53:09Speaker 00

  Right now, that's where the income's coming, okay.

• 53:11Speaker 01

  Excluding the rents, but.

• 53:13Speaker 00

  But the rents are paying for the mortgage, they're all netting out, money's flowing to mom, so even though the rents are coming in, they're flowing out.

• 53:17Speaker 01

  Right.

• 53:18Speaker 00

  In terms of like cash flow to you, it's just the nursing income. Okay, what's it, what's your monthly burn rate? Like, how much is it, take, take out the mortgages for the, for the duplex and the condo, because we've already accounted for those.

• 53:28Speaker 01

  Sure.

• 53:29Speaker 00

  In terms of you to live the life that you want to live, doing the stuff that you do, going where you want to go, what is your monthly burn rate?

• 53:36Speaker 01

  Roughly speaking, including the HELOC debt and the margin debt, roughly speaking, it's about four grand a month.

• 53:41Speaker 00

  Okay.

• 53:42Brian Preston?

  But what about with mortgages?

• 53:44Speaker 01

  Um, add another three grand.

• 53:46Brian Preston?

  So seven grand a month?

• 53:47Speaker 01

  Correct, but.

• 53:50Brian Preston?

  Does that math work?

• 53:51Speaker 00

  Well, remember, he, he, we accounted for the income from the mortgages, so it netted out the mortgages. He's got income coming in there to zero those out, so from a true expense standpoint, he's at 7,000. But if you're gonna add that to the expense, then you'd also have to add those to the income, the 75, so I was just trying to figure out, because we're, like, I'm trying to figure out your baseline living expense.

• 54:09Speaker 01

  Yeah.

• 54:09Speaker 00

  Right? So if that's four grand, uh, man, you're just, I don't wanna say, I don't wanna say lean, but you know, you've, after taxes, you've got, what, 65? I mean, you got maybe two grand a month of, for free cash flow after taxes, somewhere in that ballpark?

• 54:26Speaker 01

  Two to 2,500, yeah. Um, also keep in mind that if I were to deleverage and de-risk the HELOC play, I'm paying about a thousand dollars a month between HELOC and margin and interest.

• 54:37Speaker 00

  Oh, I know, we are very aware, because what's the HELOC rate?

• 54:40Speaker 01

  Uh, 8.3.

• 54:42Speaker 00

  I don't know if you know this, that's a high interest rate, that's not, what's the margin rate?

• 54:45Speaker 01

  Uh, right now, 6.75.

• 54:47Speaker 00

  I don't know if you know that, that's a pretty high interest, right, that's, so that's what we're trying to figure out, like, it's, you know, it'd be different, not, you were, again, I cannot give you enough compliments of how wonderful your financial situation is, but you're playing some like,

• 54:59Speaker 01

  Yeah.

• 55:00Speaker 00

  You're playing some dangerous games, and sometimes when you win, play dangerous games, you win dangerous prizes. And the, the thing that normally covers people, the thing that normally, for people who like, want to be aggressive and do crazy- Crazy wild stuff is they have this like huge shelf like, oh, if I screws up, I've got a big income. Right now, your income is not significantly large relative to the wealth that you've built up so far. So.

• 55:22Speaker 01

  Or expenses.

• 55:23Speaker 00

  If something went wrong with your wealth, it's not like your income can make up the difference can make. Which again, to me suggests, hey, you've won the game. You're at this fantastic point. How do we start deleveraging? How do we start de-risking? Cause frankly, I hate seeing that you have a margin loan. I just can't figure out why you got that. Home equity line, I hate that you have that too, but you know, obviously there was a, you had, you did a thing. There's a reason behind that and there's resources that could satisfy that, even though there's a tax impact to doing that. So I'll begin to think through, how do we like knock out some of that stuff to get you in a more shored up financial position? Opportunistically, what are some strategies that we could employ? When we look at your brokerage account, can we look at the brokerage account real quick?

• 56:07Speaker 00

  Cause a lot of the positions have done incredibly well. You've got a bunch of really big gains on there. So anything that if you were to sell it to try to satisfy some of this, there's a bunch of like gains that you're going to take. So one of the things I immediately want to figure out is, are there any positions that you hold right now? Or if we were to look at your tax return on Schedule D, do you have carry forward losses or embedded losses that we could potentially liquidate right now? Loss match that with gains to figure out how much capital we could, we could free up to apply to these other things. So first question, do you have outside of this brokerage account that we're looking at? Do you have any other holdings that have like large embedded losses?

• 56:45Speaker 01

  Yes.

• 56:45Speaker 00

  Okay. Tell me about that one.

• 56:46Speaker 01

  So that is in a different brokerage account. As it currently sits, I want to say it's roughly about minus 30K.

• 56:54Speaker 00

  Okay. So it's like, yeah, $30,000 of losses that you can use.

• 56:58Speaker 01

  Right.

• 56:59Speaker 00

  And the total market value of that position is about $45,000.

• 57:03Speaker 01

  Correct.

• 57:03Speaker 00

  Right? Is this a position that you love and are in love with and is amazing and all this?

• 57:08Speaker 01

  You're gonna hate me for this one. So I, what had happened, the reason why-

• 57:13Speaker 00

  What? You're about to say what had happened was-

• 57:16Speaker 01

  What had happened was- All good stories, start with that. So, um, what had happened was, I, I completely emptied, like, I moved a hundred grand to the one brokerage account, right? I then used margin to then pay off the HELOC. So at one point, I had zero HELOC and zero, or excuse me, and everything, all the debt related to this investment play was in the margin only, right? But then I did get greedy, uh, and I, I redeployed some of the capital from the HELOC. And what I was thinking of doing, which did backfire, was I would take the cash and I was selling puts.

• 58:00Speaker 01

  I believe. Uh, I have to, I, I didn't quite think about this before coming on the show, so I'd have to rethink it. But yeah, something like selling puts-

• 58:07Speaker 00

  You were employing some sort of option strategy against the position.

• 58:09Speaker 01

  Correct, correct. While paying interest of what? Correct.

• 58:13Speaker 00

  Eight point three percent.

• 58:14Speaker 01

  Eight point three percent for the privilege. Well, the, the rate of return I was getting was like 25%. So I viewed it as this arbitrage ability where the selling of the options annualized was like 25%. So I was paying 8.3% and so I get to capture that margin, uh, or that, that spread.

• 58:34Speaker 00

  The arbitrage.

• 58:35Speaker 01

  The problem is, is the underlying stock did fall pretty hard as exhibit A. So that's, that's how I got in this. Would you say that was like a cigar butt that you picked up off the ground? Yes, but in reverse. Took a smoke off of it and then of the ash.

• 58:50Speaker 00

  He took it off on the other side of it.

• 58:52Speaker 01

  Yeah, yeah.

• 58:52Speaker 00

  Alright, so, uh, in theory, we could, and by the way, this is not specific investment advice. This is just some stuff that we're saying I noticed inside your financial situation. If I were looking at this, here's some stuff that I might think through.

• 59:01Speaker 01

  Yep.

• 59:02Speaker 00

  I could probably sell this position right now and it would free up for me $45,000 of capital. I didn't have $31,000 of losses I can use.

• 59:10Speaker 01

  Correct.

• 59:10Speaker 00

  Uh, do you know on your tax return, do you have carry forward losses from, like, were you loss harvesting in 22?

• 59:15Speaker 01

  I was, yes.

• 59:16Speaker 00

  Okay, great. Do we have any carry forward losses that are also available?

• 59:18Speaker 01

  We do, but I don't know the number off the top of my head.

• 59:19Speaker 00

  Is it about 11,000? Do you think that's what they're talking about? It's about 11,000. So you have $11,000 of carry forward losses that you can also use. So now we're at 14, we're at $42,000 of losses that we can use. Have you triggered any, have you done any selling, trading this year where you've triggered gains?

• 59:37Speaker 01

  Yeah, so the way I started to unwind the HELOC play was I recognized, wait a minute, I'm probably a little too far out on the risk spectrum here. Markets are at all time highs, not that I'm trying to time the market, you're gonna kill me for that. I feel like I'm too, I feel like I'm over my skis a little bit, right? I basically made a spreadsheet and I did an analysis, I guess what positions had the lowest gains, right?

• 1:00:01Speaker 00

  To free up the most capital at the lowest tax cost.

• 1:00:03Speaker 01

  Correct.

• 1:00:03Speaker 00

  That's great. That's a great way to think about it.

• 1:00:05Speaker 01

  And I took that cash and threw it at

• 1:00:08Speaker 00

  The HELOC.

• 1:00:09Speaker 01

  The HELOC in margin.

• 1:00:10Speaker 00

  Awesome. So we're gonna call this $31,000 of gains. I'm just doing some rough math here

• 1:00:14Speaker 01

  Sure.

• 1:00:15Speaker 00

  to get us there. I'm gonna call it 32 because I do the math in my head better. So you got $42,000 of losses that you're able to use and now you've already triggered $32,000 of gains this year. So that's gonna give us a net $10,000 of losses that you have left to use to capitalize on, right?

• 1:00:32Brian Preston?

  And have the balances changed on your net worth from what we had or is those pretty close to where they are?

• 1:00:37Speaker 01

  You mean from when I sent this in today?

• 1:00:40Brian Preston?

  Yeah, because you triggered some losses, I mean you triggered some gains already because that's where the, all the money, did it change the balance or is these most recent?

• 1:00:46Speaker 00

  I think it's the small, the zero balance ones are the ones that triggered the gains.

• 1:00:49Brian Preston?

  But I'm just saying is the liability, the margin loan and the home equity, are those the actual balances still?

• 1:00:54Speaker 01

  More or less, yes. I

• 1:00:57Brian Preston?

  Post-window dressing from this so far.

• 1:00:59Speaker 01

  Right, right. So I took, I took margin, I took margin, oh, are you saying, did I like go crazy?

• 1:01:04Brian Preston?

  Yeah, I'm saying was this money

• 1:01:05Speaker 00

  Like he said, did you use some of that capital to pay down the debts?

• 1:01:08Speaker 01

  Yes, yes. So what we

• 1:01:10Brian Preston?

  It's kind of like me. When I go to the doctor, I fast a lot longer than he tells me to because I'm hoping it's gonna make my cholesterol and all my data.

• 1:01:17Speaker 01

  As a nurse, don't do that.

• 1:01:19Brian Preston?

  I'm wondering if these numbers are window dressed in their best version because you cleaned it up a little bit.

• 1:01:26Speaker 01

  So, I mean, as we sit today, the HELOC is 29.9 or something like that.

• 1:01:34Speaker 00

  Okay.

• 1:01:35Speaker 01

  The margin is 105.5.

• 1:01:39Brian Preston?

  Okay, so it's gone up a little bit.

• 1:01:41Speaker 01

  And once again, I was, I was rotating money from the margin to the HELOC. And I would say that I spend probably too much time Listening to like following the stock market and things of that nature. So one thing that I'm definitely interested in doing is kind of scaling back the amount of attention I'm giving the stock market. Because with that attention, I can then work more as a nurse, right? And the stress of me being crazy is less stress for me, so that way I can absorb more stress from work.

• 1:02:15Brian Preston?

  Go back to that brokerage account. I saw, now here's the thing, you hit, you hit a homerun, but you hit a homerun when you were playing seven and eight league baseball. Because you, you, you, you put, where was it?

• 1:02:28Speaker 00

  3,300 grand.

• 1:02:29Brian Preston?

  Yeah, I'm trying to find the, yeah, you put $2,900 into Nvidia.

• 1:02:33Speaker 01

  I will say that.

• 1:02:33Brian Preston?

  And it's worth 32,000. So you hit a homerun, but you were in seven and eight league baseball, because it doesn't really change your financial position. But the problem is, is that you get emotionally connected with those stocks.

• 1:02:45Speaker 01

  Sure, yes.

• 1:02:45Brian Preston?

  To the point that it draws so much of your horsepower of your brain, that it hurts.

• 1:02:50Speaker 01

  And I will also say, to talk crap about myself for a second, I felt like a genius.

• 1:02:55Speaker 00

  Of course, we always do when we're right.

• 1:02:57Speaker 01

  And, and what I will say is, I was, I still am a little bit, which is why you guys need to kick my butt in shape a little bit, reluctant to sell some of these positions, because dang, dang, I look good.

• 1:03:08Speaker 00

  Yeah.

• 1:03:09Speaker 01

  Right? And so by, by selling these positions, to some extent, it's kind of me letting go of, that was really, I don't know, wise is perhaps the best word, but that was a good investment.

• 1:03:21Speaker 00

  Let me, but, yes, agree. If I wrote you a check for $1,000 right now, and I'm like, hey Phil, thanks for me, here's a check for $1,000, which one of those stocks would you go buy today?

• 1:03:31Speaker 01

  So you're saying if I have $1,000?

• 1:03:33Speaker 00

  I'm gonna give you $1,000 in cash, which one are you gonna go buy?

• 1:03:35Speaker 01

  Uh, QQQ.

• 1:03:37Speaker 00

  Okay, cuz you, so not Tesla, not Nvidia.

• 1:03:40Brian Preston?

  That's a version of indexing.

• 1:03:42Speaker 00

  But what I'm saying is, you're making the point that, oh, well, if I sell this, it's like I'm saying that like I'm giving up on that great decision. You've already capitalized on making that great decision. Continuing to hold it today is making the affirmative assertion that at today's price, I would buy it. If you wouldn't take $1,000 and go buy Nvidia today, the question I'd ask you is, okay, why are you holding Nvidia? Now, there might be a reason for tax implications or other things, but it's not about, just cuz you bought it low and you've rented it up here, does not mean that continuing to hold it here. Reinforces your decision to buy low. You've already done that. You've already made that. So that is a flaw that stock investors have is, oh, I can't sell that one because I got it so right.

• 1:04:24Speaker 00

  If you got it so right, great. If you wouldn't rebuy it today, does it make sense to continue to hold it? Because what I see when I look at your situation is I got to figure out how I get two things done, in my opinion. How do I get rid of some of this gross debt that's hanging out at 8.3 and 6.75? And how do I build up the coffers so I have at least some semblance of an emergency fund, right? Now, I'm going to give you so much leeway for you to be lean. If your burn rate is $4,000 a month in living expenses, then we know that we have debt on the two real estate properties of another 4,000 roughly. I would love to see you have an emergency fund of $25,000, right? So that'd give you about three months at $8,000 burn. That's even way leaner than I want it to be, but $25,000.

• 1:05:06Brian Preston?

  That's not buying more real estate.

• 1:05:07Speaker 00

  That's just like tomorrow, when I'm thinking about top pros, how do I get $25,000 there? And then how do I knock out these other debts? The way that you attack the HELOC in margin, 8.3, 6.75, you can do debt snowball. You can do debt avalanche. You can go either way. But I just, in my opinion, you got to get rid of them. They're just not doing anything for you.

• 1:05:28Brian Preston?

  I agree.

• 1:05:28Speaker 00

  And they are unnecessarily risky. And you're literally just, arbitrage or not, you are setting money on fire with the interest that you're paying on those.

• 1:05:36Brian Preston?

  What I'd like to do is, because I love how we give homework, because I won't feel to be able to leave here with actual actionable items. And that's what, when you bring up the financial order of operations, we were doing this. Is that, you know, we talked about the cash is going to be both high deductible emergency reserves. Employer match, you said it, you're leaving 40% of your work capacity on the table right now. That is going to go up automatically. Beau just laid out in step three, high interest debt, we're paying 8 point whatever and 6.8. I mean, these are, these are high interest rates. I like the fact that we're first going to triage your situation, I'll use a medical term.

• 1:06:14Brian Preston?

  We're going to triage it by trying to use and exploit that loss that you have and see how much can we pull off to pay it down just through the loss carry forward. But so you don't trigger a bunch of. Taxes all at once and make this a worse situation. I love what Bo is doing. He's creating what is your cash flow spread to pay off the, the, the high interest rate. But then while you're also at that point, he is telling you, cause it really kind of one and four are somewhat related is your highest deductible covered. And him giving you that streamline or really thinned out three month because he went super low on what the amount is. That's the $25,000. Those are the two big homework things that stood out to me. I was like, it feels really serious about de-risking this.

• 1:06:59Brian Preston?

  Let's pay down this debt. Let's, let's also try to get up cash reserves a little bit. And I think that you'll feel better and that's just the first step. This is, this is like I said, triaging you. To make sure you get to go on that healthy wing where you're currently working and not going to ICU just when we get the first downturn in the market. Cause that's, that's really what you're facing. You're on paper. We're trying to turn this to wealth.

• 1:07:22Speaker 00

  And look, you're going to be more aggressive naturally, like when, when someone, uh huh. Gosh, this is a horrible medical analogy. When someone like gives up smoking, most people can't do it cold turkey. They gotta do the gum or they gotta do a patch. If all you do is you go back like, hey, you know what? I'm gonna get, cause have you been maxing out your Roths every year?

• 1:07:42Speaker 01

  Yes, up until like the last, like last year, I don't think I did.

• 1:07:45Speaker 00

  You just hate tax free money?

• 1:07:47Speaker 01

  Well, for me, to be honest, it was part of that fire enthusiast, right?

• 1:07:49Brian Preston?

  I like that you said, I don't think I did. We know you didn't.

• 1:07:52Speaker 01

  Okay, there we go. There we go. Uh, so, um, did I did in 22 as well?

• 1:07:57Speaker 00

  Uh, I'm not sure if you did in 22 or not, but it was clear that you have not, it's not been a top priority for you to knock it out.

• 1:08:02Speaker 01

  I will say that, um, the HSA, um, I just became eligible for that.

• 1:08:07Speaker 00

  Awesome.

• 1:08:07Speaker 01

  So now I, uh, last year I have contributed the max amount. This year I will contribute the max amount. Um, and I'm going to continue to build up that HSA and have it invested, of course. Um, so. But with my buckets and with a tilt for wanting to get into more real estate in the future, I've been focusing because 20%, well, 22% of my income, nursing income, is forced into

• 1:08:35Speaker 00

  Going to your 401A.

• 1:08:35Speaker 01

  Correct.

• 1:08:36Speaker 00

  Great, I'm not gonna fight you on that.

• 1:08:37Speaker 01

  So I don't feel like I need to build up the traditional asset bucket any more than that is already being

• 1:08:44Speaker 00

  Well, I thought you were the guy that loved not paying taxes.

• 1:08:47Speaker 01

  I do, I do.

• 1:08:48Speaker 00

  I thought that was the thing that you said.

• 1:08:50Brian Preston?

  We're skipping steps, though, because if you go back, if you go back to the foo, if step five is the HSA and Roth IRA.

• 1:08:58Speaker 01

  Correct.

• 1:08:58Brian Preston?

  You just said, I didn't do it. We know we didn't do it in 2023.

• 1:09:02Speaker 01

  Okay.

• 1:09:02Brian Preston?

  I want to pick on you on one other thing, because you're a maximizer by your own words. But when I looked at your Roth statement, I did see this. For a person who is running, was it three grand, less than three grand of cash?

• 1:09:14Speaker 01

  Uh huh.

• 1:09:14Brian Preston?

  I imagine my surprise when I see your Roth IRA has $43,000 of cash in it.

• 1:09:20Speaker 01

  Yes, yes.

• 1:09:21Brian Preston?

  So I was like, wait a minute, what are we doing here?

• 1:09:25Speaker 01

  So, so, so what happened with that was, I also

• 1:09:28Brian Preston?

  How's that story start?

• 1:09:29Speaker 01

  I hit another home run. Those, that cash came from an Nvidia position I bought in 2016.

• 1:09:38Brian Preston?

  Okay.

• 1:09:38Speaker 01

  So at that point, I don't know, 60 days ago, I had something like 175 grand or 150 grand of Nvidia. And I was just like, even for me, that level of

• 1:09:50Speaker 00

  It was heavy.

• 1:09:51Speaker 01

  It was heavy. So I offloaded some of that, that 43 grand of Roth cash came from that.

• 1:10:00Brian Preston?

  So you've had a behavior of doing individual stocks, stock options, and you're saying you're on this reform path.

• 1:10:08Speaker 01

  I will say the stock options is only for like the last year or two.

• 1:10:11Brian Preston?

  Look, don't mishear me. I'm not, I'm not picking. I am just trying to show a behavioral side is I want to take you back to the rule of 72, that you said that's what brought you the passion, the love. Why not take that 43,000? Because you said even yourself, you got a little nervous having that concentrated position generates so much. What's wrong with like dollar cost averaging? Or even, you don't even have to dollar cost average with that sum of money on there. You could have lump summed into an S and P 500 index, a total market index. Why just sit in cash for a few months?

• 1:10:42Speaker 01

  Well

• 1:10:43Brian Preston?

  It's because you're looking for the next opportunity.

• 1:10:45Speaker 01

  It was. And, and so

• 1:10:48Brian Preston?

  You're looking for that next cigar butt?

• 1:10:50Speaker 01

  Yeah, you know, you need some dry powder to uh...

• 1:10:53Speaker 00

  I'm not inside a Roth IRA.

• 1:10:56Speaker 01

  So, so since that statement that I had sent you, um, that money has been deployed...

• 1:11:02Brian Preston?

  Into what?

• 1:11:03Speaker 01

  Index funds.

• 1:11:03Speaker 00

  Awesome.

• 1:11:04Speaker 01

  Oh, man. Right, so you're not trying here, guys. Work with me, work with me, alright? Um, so yeah, uh, I wanna say it was mostly VOO.

• 1:11:12Speaker 00

  Okay, great.

• 1:11:13Speaker 01

  And V I S T A X or something along those lines.

• 1:11:16Speaker 00

  That's true.

• 1:11:17Speaker 01

  But yes, index funds is where I deployed all that.

• 1:11:19Speaker 00

  Love it.

• 1:11:19Speaker 01

  Um, see, I'm trying to eat my own cooking too.

• 1:11:21Speaker 00

  Cause see, I think, uh, there are so many other, um, creative and interesting endeavors, and your mind is obviously like just a wonderful thing, that I think that you can pursue. Like, I, like, I don't even hate the idea of you doing real estate. I think real estate is something you're passionate about and potentially you wanna shift your vocation in there. But if that's really something that's meaningful to you, in a direction you really wanna go, then you gotta like, cut out all of this other fluff. You gotta shore up your financial situation. And frankly, what I think is, you're in a prime position, I don't have to think about the stock market. That's where I was going with my nicotine patch thing. Okay, maybe you don't go buy S and P 500, you buy QQQ. Okay, whatever, if you're gonna be more aggressive, that's fine. But set it and forget it, always be buying. Have your money going into your 401A and let it rock and roll.

• 1:12:05Speaker 00

  And then have your money go into your HSA and let it rock and roll. And have your money go into your Roth and let it rock and roll. If you're just doing those three things, the 22% into your 401A, and then you do the 7,000 Roth, and then you do the, uh, individual max for the HSA. Okay, check that box. Well then, with your shovel, then you can start building up your cash and pursuing your next real estate opportunity. Because you've got that piece taken care of. And then, you are legitimately at step seven, step eight of the financial order of operations. Cause you're saving 25% of your gross. You've covered your risk management, and you're still able to do all the things that you wanna do, without having to like, rob Peter to pay Paul, and move it from the margin into the HELOC, and go do the options.

• 1:12:47Speaker 00

  It's just needless spinning your wheels when you've already gotten to a fantastic financial situation. If pursuing real estate is what you wanna do, or shifting careers is what you wanna do, that should be where your focus is, not on... All this other stuff because frankly, this other stuff is easy. It will take care of itself if you just let the money work.

• 1:13:05Brian Preston?

  We've given you the kind of the instructions here is that in the short term, it's steps three and four. It's paying off these debts first cleaning up, you know, through that loss carry forward that you have, then get the emergency reserves up to 25%. Then make sure you're doing the Roth IRA and then, but once you get that that debt paid off, I think you're going to do it quicker because you're going to go pick up more hours and get that more income with that shovel coming through. I think you clean this up probably within a year. I mean, I really think you could do it. I was hoping to do it even faster than that. I know, and I think you will. I think you're wired that way. But that's when you're going to get to the point of step six, where we're going to say, okay, let's be honest about this 25% savings rate. Because that's really what step six is all about is getting you to 25%.

• 1:13:50Brian Preston?

  And the only thing I do worry about you is that I always tell people, if your income, household income is less than $200,000, you get to count the employer match. So you're currently technically, you're a part of that. But do you know the why on why I get to tell people that? Lifestyle creep. Well, it's you're also close to the social safety net. You know, for people who don't make a ton of money, you know, you're going to get social security at some point in the future. So you know Medicare and all those things have some income driven derivative to it. You personally don't have the social safety net. So you should feel some pressure that you you need to go above a little bit because you don't have social security. You don't, you're not getting the quarter hours and building that up over the time.

• 1:14:32Brian Preston?

  So I would love for this to be pushed towards, and it's going to happen naturally with the Roth. And then maybe you even go say, let's, let's hit a little bit more to the employer side of things. But that gets you to step seven, which is the hyper accumulation. How am I actually going to use this money? Everything that we were kind of alluding to, and you've already said, once you're at 25%, you'd love to get into real estate. I want you to do it where you're not faking it. You've been very, and by the way, House hacking is not faking it. I think that is completely noble, good. We even have to carve out when we do real estate shows and say, "Look, I'm not picking on my house hackers because you are just exploiting a beautiful thing that happens in real estate." But with all these other, if you want to get into real estate, you know, buying residential

• 1:15:15Brian Preston?

  rental or doing other things, you really do need to be at step eight of the financial order of operations. And if I'd have asked you when you came in here today, what step you're on, what would you have told me?

• 1:15:25Speaker 01

  I know, I know you guys are gonna already drill me on this one. I put eight, I believe.

• 1:15:29Brian Preston?

  Yeah.

• 1:15:30Speaker 00

  Nope.

• 1:15:31Brian Preston?

  When I was looking at your stuff originally, I was like, "Phil hadn't left step one." I mean, talking about skipping some steps. I mean, because that cash blew me away.

• 1:15:41Speaker 01

  Sure.

• 1:15:42Brian Preston?

  And, um, and that's the thing. You have so much potential, so much opportunity, but I just feel like somehow this was not, for a maximizer, you're grossly inefficient with your risk analysis.

• 1:15:55Speaker 01

  Yeah, and I would, I agree. Um, and that's why I'm here, is to get slapped around a little bit as well.

• 1:16:03Speaker 00

  Well, I don't know about that. We're not slapping around. What questions did we not answer? What are some things that you wanted to get our take on that we didn't speak to? Because I've got a, a long list of homework items that we can give to you. I mean, we didn't even talk about, you said that one of your greatest assets is your job, is the fact that you have that. And yet, if you were to leave here and drive back to the Ohio State University.

• 1:16:25Speaker 01

  Go Buckeyes.

• 1:16:26Speaker 00

  And get in a car wreck and not be able to work. You said you don't have any disability insurance?

• 1:16:29Speaker 01

  Correct.

• 1:16:30Speaker 00

  What happens in that scenario?

• 1:16:31Speaker 01

  Well, actually, this is a question perhaps for you, perhaps for an insurance agent. Given that I'm only contracted to 16 hours a month, I don't know how they would insure my income, if it would be based off of previous tax, like, I've been in this role where I've, um, kind of, I've been in this role for two years. So I don't know if they would only insure up to what my contracted amount would be, or what my historical incomes would be. But that is definitely one thing that I understand. I, even before coming in here, I think I had mentioned in some of the documents I had sent over, that I understand disability insurance is, is something I should pay attention to, and umbrella insurance just to help mitigate.

• 1:17:15Speaker 01

  Those are two things that I would like to...

• 1:17:17Speaker 00

  So let me speak to the first one. Disability insurance is something I would say that you absolutely have a need for based on the fact that if something were to happen to you and you could not create income, that creates a lot of problems. Your entire financial situation implodes upon itself if that happens. As to what income they would use, I would imagine, now again, you'll want to talk to a real estate agent, I would, not a real, insurance agent, don't talk to a real estate agent. I would imagine that you'd be able to use your earnings history, say, hey, this is the earnings that I have and I can confirm for you that I've been earning this for at least 24 months and they'll be able to insure you up to that level. I would also check with both the institution that you work for as well as any nursing associations you may belong to because a lot of times, big groups will have group disability plans that you can become a part of, whether it be subsidized, or not

• 1:18:00Speaker 00

  subsidized, but you'll get more favorable rates on that. It is not incredibly expensive and it's an easy risk to insure against and it's something that frankly is probably even, even in your psyche. I mean, we think we know what your biggest risks are, but even you would acknowledge that's a big risk and that's just an easy one to check the box on. You make enough money, you can pay for it. So I would investigate what's available through the company, through the entity that I work for, and then what's available through any organization that I may belong to. And then umbrella insurance, you, you own a lot of assets, right? And obviously you have a lot of stuff that if you were to become liable in some situation, someone could very easily look at your life and say, hey, this is something I want to go attack. So it makes sense to protect those assets and it's

• 1:18:40Speaker 00

  incredibly inexpensive. We generally recommend about your net worth equal, about your net worth's worth of umbrella coverage. So you go look at a million dollar policy and it's going to be maybe a hundred bucks a year. I mean, it is incredibly inexpensive. It sits as an umbrella on top of your homeowner duplex insurance, on top of your auto insurance. And again, it's just one of those things that at your stage of wealth building, there's no reason not to have it. That's as easy as a phone call to your insurance agent, get it in place, knock that out. So that was just not a difficult one at all.

• 1:19:11Brian Preston?

  And I don't want people to think we ignored some of your other debts out there. Is it because you did have, you know, you got the mortgage on the condo, you have a student loan debt, but when we were going through it, those were still somewhat, well, we consider low interest debt.

• 1:19:24Speaker 00

  Sure.

• 1:19:24Brian Preston?

  I mean, because you, you

• 1:19:26Speaker 00

  When you're on fire, you don't worry about Chapped lips. You know what I mean?

• 1:19:28Brian Preston?

  But that's why, but that, but I did want to make sure that everybody know we covered all that because that's more of a step nine and you had a lot of other things we needed to cover before we, we hit that.

• 1:19:38Speaker 00

  Mm hmm. All right, let me, let me rattle off for you, your homework.

• 1:19:41Brian Preston?

  Okay.

• 1:19:42Speaker 00

  We went through a lot and by the way, we cannot tell you enough, you're in a great spot. It just, you, all right, you've, you've, you've won, you've won some scratch offs. Let's not roll it back in, let's, let's keep it rolling.

• 1:19:52Brian Preston?

  My ninth grade basketball coach, Coach Corley, used to say, if I'm not yelling at you, I've given up on you. So I just want you to know that.

• 1:19:59Speaker 00

  Uh, so we need to look at some disability insurance. That's one thing you definitely need to look at. You need to go look at umbrella insurance. We recommend roughly your net worth, uh, value of umbrella insurance. I would love to see your emergency fund get to $25,000. That roughly covers three months of living expenses, plus some of the carry cost for the real estate properties that you own. I think you should really think about prioritizing paying off that home equity line. How do I get out of that? Prioritize paying off the more margin loan. How do I pay off that? And then once you do that, don't ever use them again. You don't need them anymore.

• 1:20:30Speaker 01

  Do you think I should, uh, just sell the assets from the brokerage to pay off the HELOC and margin?

• 1:20:33Speaker 00

  I think you had to play the tax game.

• 1:20:35Speaker 01

  Yeah.

• 1:20:35Speaker 00

  Uh, I do think you have some that are having very big and bad losses. We're close enough to the end of the year where you could even spread this over two tax years if you needed to.

• 1:20:41Speaker 01

  Okay.

• 1:20:42Speaker 00

  So you could sell a little bit this year, maximize all those losses. And then when you get into January, sell some more and think about doing that. That's the way that I would consider approaching it if it was me. Uh, I think it's crazy if you don't max out your Roth every year following the financial order of operations. I think you should max out your HSA as well, invest those dollars. And then once you've done those things, then you can actually graduate to step six. I'm going to argue you're doing, if you'd max out Roth, max out HSA and you got 22% going in. I'm going to say you're 25%. I think go to step seven and then you can start looking at some real estate. How do I build up cash to be able to do my next real estate endeavor?

• 1:21:16Brian Preston?

  You've got to go back to cash at some point because don't get into real estate unless you can go beyond six months. So remember, we gave you three months in this triage situation. So you will need to double back on step one and four and get cash up because don't want to be little pockets. Little pockets get taken from big pockets and downturns.

• 1:21:33Speaker 01

  And as a mistake, I will admit, when I bought the duplex and part of that hard money loan that we haven't quite mentioned yet.

• 1:21:39Speaker 00

  Haven't we talked about it?

• 1:21:40Speaker 01

  No, sir. Um, was, um, renovation as a realtor, even though I'm still a baby realtor.

• 1:21:48Speaker 01

  The, I put too much down and I didn't, I didn't leave myself enough liquidity. So,

• 1:21:53Speaker 00

  When you are, when you're worth $5 million one day, do you know how much that 50,000 in cash you ought to have is not going to have mattered?

• 1:22:01Speaker 01

  Sure.

• 1:22:02Speaker 00

  But you know what I mean? That's, that's the trajectory that you're on. You need to think of it through that lens. Okay. Do I want to get to 5 million? It's okay if I carry this 50,000 in cash or do I want to not carry the cash and risk never actually getting to where I truly could go? That's the position that you're at. The future's bright. You just got to figure out, do you believe that? And are you going to start moving in the course that a big, that a big boy millionaire would start moving in?

• 1:22:27Speaker 01

  Sure.

• 1:22:28Brian Preston?

  Phil, thank you so much for coming on Making a Millionaire. We've actually had an absolute blast.

• 1:22:33Speaker 00

  Uh, if you would like to be on Making a Millionaire, you can go to moneyguy.com/apply. And if you want to know more about some of the stuff we talked about today, you can go to moneyguy.com/resources and check out all of our free sources, free resources out on the website. Phil, thanks so much for hanging out with us today.

• 1:22:49Speaker 01

  Thanks guys. I really do appreciate it.

• 1:22:50Brian Preston?

  Guys, remember, there is an absolute better way to do money. Keep tuning in and we'll keep sharing the information. I'm your host, Brian Preston, joined by Mr. Bo Hanson. Money Guy team, out.

• 1:23:03Speaker 00

  Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management.