The Hidden Wealth Tool No One's Talking About

A new retirement savings tool is here - and most people don’t even know about it. We explain how auto-IRA programs are helping workers build wealth automatically, and what you can do to get ahead - even if your state isn’t on board yet. After the breakdown, we take live questions from listeners on everything from student loans to emergency funds to investing in private company stock. ⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Speaker 00

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• 0:27Speaker 01

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• 1:03Brian Preston?

  Here's something that's cool. We love sharing new things we figure out. How about a wealth building tool we've never talked about?

• 1:08Speaker 03

  Brent, I am so excited to talk about this because obviously this is something we've never talked about before. But even though everyone out there listening, even though this might not hit them perfectly, what we're going to talk about is something that every single member of our audience can take away and can implement themselves. And I think it's pretty exciting.

• 1:27Brian Preston?

  Well, you think about it. You see a trend out there is that we've realized that behavior and creating consistent habits is one of the most powerful wealth building tools.

• 1:37Speaker 03

  Yep.

• 1:37Brian Preston?

  And people who have 401Ks, you've probably heard of a quokka. I always liked the sound of that. That's where, you know, the government has incentivized, and that's the, by the way, that's not it.

• 1:45Speaker 03

  That's not it. That's not the thing.

• 1:47Brian Preston?

  It's kind of like a sibling of behaviorally of what we're going to be talking about. But it still encourages the behavior of auto-enrolling people to start saving a little bit of today for their great, big, beautiful tomorrow. So Beau, without, I mean, give a little more detail since we're not talking about the quokkas, but it's somewhat similar. What is this tool that we have never talked about before?

• 2:09Speaker 03

  So there Is some legislation that has been passed in certain states and there are more states that are adopting it now that for small employers who may not offer a retirement plan at work, or if you happen to work for one of these employers, the state, the governing body, might be willing to, and in some states are already doing this, open up an automatic IRA distribution for you. So if you're getting a paycheck coming in, they automatically enroll you an IRA contribution. So an IRA gets opened up in your name and out of every paycheck, funds start flowing into that to begin building. And as it stands right now, I think that there are, yeah, 13 US states currently have this in place or some sort of equivalent, and

• 2:51Speaker 03

  seven US states are set to implement similar programs in the coming years. So this is something that has been around, I think, since 2017.

• 2:58Brian Preston?

  2017 is what we talked about in the content meeting.

• 3:01Speaker 03

  And it's slowly getting some more steam. So maybe folks who have not been taking the initiative on their own are now going to have automatic contributions set up on their behalf so that they can start building wealth as well.

• 3:13Brian Preston?

  Yeah, and like you just saw in that stat, well, when we said 2017, I believe it was one state at that point. So this is slowly picking up steam. That's why I think we might be the first people that you hear about this, but you can quickly see how we got 13 states, we're adding seven this year. One of our writers was sharing that this likely, there's 49 states that have actually taken up the mantle of that they will do move forward with this auto IRA. I think it's a positive trend. Is anything that can break people through the barrier of just doing something. And we actually put together a case study to show you how important it is. Remember, I got, this whole empire is built upon a high school teacher telling me if I would just save a hundred dollars a month, I could be a millionaire.

• 3:56Brian Preston?

  So it's kind of, I think it's great if we could pay it forward and everybody could kind of see the power of just small decisions.

• 4:03Speaker 03

  Yeah, you may be thinking, well, this seems, guys, this seems insignificant. Surely this wouldn't add up to a substantial sum of money. But it's amazing when you make small decisions and you let those small decisions compound over a long period of time, how significant the impact can be. So let's look at how powerful automated Let's see that, let's assume that you are a $40,000 a year worker. Your starting wage is $40,000 a year. And let's assume that you have a 2% annual wage increase. And you are participating or living in one of these municipalities that has the auto IRA feature. So you're auto enrolled at 5%. And then every year, your auto enrollment contribution increases by 1% until you reach 10%. This is what's currently happening in Oregon right now.

• 4:47Speaker 03

  So that's how we base that. So you're going to start at 5% and then every year it's going to increase by 1%. So we're going to assume that you are 30 years old and that we're going to assume since you are 30, you can have a higher risk tolerance. So you're going to have a compound rate of return of 9%. So again, you're auto enrolled, $40,000 a year, 5% increasing every year until it reaches 10%. Would you believe that just that beginning 5% contribution, just that auto enrollment feature? If this is applied over your entire working career, this could lead to almost $1.2 million in just 35 years. Without, in this case, without this person purposefully making that decision,

• 5:31Speaker 03

  just having this happen and go on to the background.

• 5:33Brian Preston?

  Well, it's the whole thing is that the, the pebble rolling down the hill turns into the big snowball that actually the avalanche of your full financial independence. And nobody ever understands until you get 20 years in the future and you go, what was the small decision that actually changed my financial life? So I live this financial decisions and all the things. And it usually is some little thing here. So if anything that the government can do to incentivize people just to start the process, I think it's a positive thing. But here's the good news. You don't have to wait for the government to do this.

• 6:05Speaker 03

  I love.

• 6:06Brian Preston?

  This is an education thing. Everybody in the audience, just small decisions can have a huge impact.

• 6:11Speaker 03

  One of the comments in the chat said auto enrollment is not for financial mutants. And I kind of love it. You don't have to wait to be auto enrolled. You can go do this yourself. You can go open up your IRA. You can participate in your 401k. You can open a brokerage account. You can control your behavior. And what's great is if you are young and you are. Just starting out, it does not take a lot, even a little bit can have a huge impact.

• 6:35Brian Preston?

  Well, and remember, all these plans do allow an opt out, so they're very noble in the fact that they're encouraging. But there's, there's going to be some provisions where people can get out. The best thing, and I've always said this, that you can do for somebody is to educate them on the power of their army of dollars. So pay it forward, let people know about you can do this. And that's why we even have a great illustration. If you go to moneyguy.com/resources, what can 1% more do for you? It's amazing, and that's why I would encourage you, if you haven't gone and looked at these resources that we're doing to try to motivate you as well as make you the best version of your financial self, you're missing out. So don't wait for the states to come in and save you. Tell your friends and family, if you have, you know, we're in graduation season right now.

• 7:19Brian Preston?

  If you have any young person in your life that you're like, man, I wish I'd have known this. I wish I'd have found Brian and Bo back when I was 22 years of age. This is your opportunity to pay it forward.

• 7:30Speaker 03

  You know what else you can do for that young person? A great thing you can do for new graduates, Brian, you have this book that came out. When did that book come out, a year ago?

• 7:37Brian Preston?

  Oh man, we're close to a year, May 28th.

• 7:39Speaker 03

  May 28th, one year anniversary, Millionaire Mission. If you have not read this, or if you have a graduate who you just want to start on the right foot, on the right financial foundational path, you should think about gifting the Millionaire Mission as a graduation present because it is a fantastic book, no matter where you are in your financial journey. You know, you said a second ago, Brian, we really want to help you do money better. We want to help you make decisions that can have a huge impact. We believe that so much that you guys have been telling us, hey, we love what you do and we love what you do. We want more, we want more, we want more. And so we made a decision, we actually have more content coming your way. As you know, every other Monday, we've been releasing a brand new Making a Millionaire.

• 8:24Speaker 03

  We just had one that released yesterday. If you've not checked that out, go check it out. I feel like the comments, Ruby, people are loving the comments on this week's.

• 8:33Speaker 04

  Making a Millionaire, it's so good. The couple is, oh man, the guests we had on, you just can't help but not love them and relate to their story. And you'll love it.

• 8:41Speaker 03

  But a lot of you said, hey, guys, I love having the fresh content on Mondays. I wish I had more. So what we've decided is we also are going to be doing more react videos. You've told us you love those. You want to see more of them. So every Monday, we're going to have a new piece of content coming out. One Monday, it'll be a react video. The next Monday, it will be making a millionaire so that we can continue to help you do money better.

• 9:02Brian Preston?

  So man, if you're looking for your fix, the money guy fix, we're loading you up. This is kind of, but I think about it. I have a gym I go to that, and I need motivation. I have to be around people because I don't, unlike you, you could work out every day and you actually get enjoyment. I have to have people surrounding me to kind of make me feel motivated to do this. And when I first started working out, they didn't offer classes, but once or twice a week for that time slot. But then as they added most classes to more days, I remember thinking, eureka, this is the moment. Just like for you guys, if you've wondered, how do I keep my money guy motivation? We're adding more days to the week so that you can be like, oh, good. They got more content coming my way. We'll keep loading up the financial mutants.

• 9:43Speaker 03

  But the only way you're going to know about it is if you subscribe right now. So if you're not subscribed to the channel, make sure that you click on that subscribe button so that you can get notified every time we put out a brand new piece of content. Cause we love doing it. We love helping you do money better. We love it so much that every single Tuesday at 10 a.m. We show up here and answer your questions. We want to know, what are the things you're curious about that we can speak to that would be valuable for you? And so right now, we have the team out in the wings, collecting your questions. So if you have a question you want us to answer, make sure you get it in the chat. So with that, Creative Director Rebi, I'm going to throw it over to you.

• 10:20Speaker 04

  Oh yeah, I've got some great questions queued up. We're going to start with Josh's question. He says, hey, money guys, my wife and I are on step eight and have a six month emergency fund in a high yield savings account. What are your thoughts on having three months in cash and three months in a low risk investment portfolio?

• 10:41Speaker 03

  If you have three months in cash and three months in a low risk portfolio, I would argue that you have a three-month emergency fund. That's what you have. Now, one of the things that I would encourage you, Josh, to think about is when you and your spouse sit down, have you assessed, okay, when it comes to our emergency fund, do we need three months of living expenses in emergency cash? Or do we need six months? One of the things, you know, are you two incomes? Is there a large income disparity? Are there a lot of fixed costs inside your household? Do you work in unique vocations? It would be hard for you to find another job if something were to change in the job front. The answer to those questions will dictate whether you hold six months or whether you hold three months.

• 11:24Speaker 03

  But I'm going to argue, whatever decision you make on that, it needs to be in true, liquid, available, stable cash. You can still put it in like a high-yield fund that's earning, I think, right now, still over 4%. So it can be growing, but you can't put it in risk on assets. You can't put it in something that has a risk of loss of principal, or else it's not really an emergency fund.

• 11:47Brian Preston?

  By the way, Josh, I don't know if you know the history. I mean, I talk about it so much is that I am, this is one of those places where I am probably more of on the teetotaler side of emergency reserves or emergency reserves. And the reason I am so just hardcore about this is that I've fallen in this trap. And I see financial mutants do this constantly. And I fell into this trap too, is that we see cash, you know, like, but yeah, cash is good. At least right now, it's making 3% to 4%, but it could be better. So everybody is like, you know, if I can, I need to get more of this money working for me because that could be the spread that makes my financial independence happen that much sooner. But guys, it is a trap because I'm just telling you, what will happen is that that access to cash trap,

• 12:33Brian Preston?

  when things get ugly, it's going to, it's going to happen to that what you perceive as safe investment. Let me, let me put some history context in this. 2008, everybody was telling you that yes, you didn't have to have cash. There was these cool mortgage-backed securities that were almost like cash. You know, where you could work with banks and you could, you know, it'd be very easy to get access to this money. But they get, the difference was they had a huge yield because we were in a low interest rate of market environment. And all of a sudden, what happened when the mortgage market went bad, the stock market went bad. All of a sudden, these, these super safe investments that were people were treating like they were cash equivalent. They weren't, by the way. Um, if you read the disclosures, you'd see that they weren't.

• 13:17Brian Preston?

  And then fast forward, we get to the newest, what's considered safe investments. Think about stable coins. All these people who were telling us, oh my gosh, this is the way, you know, it's just as good as cash, but it has a much higher yield because you're putting this money to work and it's got all these cryptos backing it. And we saw that that also disintegrated as soon as we had the first sign of trouble. And even if I fell into the trap of using a home equity line, I've seen other people thinking just buying the S and P 500 is probably going to be their, their backup access, access to cash. All of those are traps. Do not disrespect steps one and four of the financial order of operations. That needs to be liquid cash and like a high yield money market or an FDIC insured, you know,

• 14:02Brian Preston?

  account at your bank, but you know, maximize it, get as much yield as you can get, but make sure that that thing is stable and it will be there if we have any type of volatility out there in the marketplace.

• 14:13Speaker 03

  And I think you should check yourself, check yourself before you wreck yourself.

• 14:18Brian Preston?

  That's right.

• 14:19Speaker 03

  Uh, because you said, hey, I'm on step eight. Well, if you're on step eight, that lets me know immediately, hey, you're saving more than 25% of your gross income. You have moved on in the financial order of operations. That three months of cash likely at this stage is not going to change your financial circumstance. So why risk it? Remember pigs get fat, hogs get slaughtered. Don't be a hog when it comes to your cash.

• 14:43Brian Preston?

  You're such a wannabe Gen Xer, by the way.

• 14:45Speaker 03

  Well, that's messed up.

• 14:47Brian Preston?

  Check yourself before you wreck yourself.

• 14:50Speaker 04

  That's an interesting, a compliment, a dig, I don't know.

• 14:52Speaker 03

  Uh, what happens is I hang out with Brian so much that like some of his traits and qualities, they like rub off. Like I'm not a CPA. I want to be very clear. I've never, I'm not, I'm not qualified to do that. But I know my way around a tax return just by proximity. I feel like that's the way it is with Gen X type stuff.

• 15:12Brian Preston?

  As long as you don't say that you were in your childhood wearing Adidas suits, we'll know that you're not officially a Gen Xer.

• 15:19Speaker 03

  Like Adidas, like the tracksuit?

• 15:20Brian Preston?

  Well, I think about, you know, because I think about early rap and things because everybody, every kid I knew in my block, when Run DMC came on the scene, we all were running around in Adidas because that was just what young America was doing back then.

• 15:34Speaker 03

  You should bring that back.

• 15:36Brian Preston?

  No, I don't think I can pull off most things. I mean, I am, I am the lamest middle-aged person when you get to that type of stuff.

• 15:44Speaker 03

  Agree to disagree.

• 15:45Speaker 04

  What? I don't know about that.

• 15:47Speaker 03

  Uh, how many comments do we get on the members only jacket? And then, the Tie Fighter, the Tie Fighter polo, have you seen, if you haven't seen the Tie Fighter polo mini show?

• 15:57Brian Preston?

  Oh, those are strong, those are strong fashion choices, no doubt.

• 15:59Speaker 03

  Oh, buddy, we got some.

• 16:01Brian Preston?

  That means, that means that you've, you know, it's no different than the guy who wears the sandals with the black socks on the beach.

• 16:06Speaker 03

  No, that's different.

• 16:07Brian Preston?

  And you're like, this guy has reached the age of life.

• 16:10Speaker 04

  The Tie Fighter polo is pretty cool.

• 16:12Brian Preston?

  That he just doesn't care. It's not quite billionaire success, like you see, you know, Jay-Z and those guys who just don't care as they make more and more money, but it's, it's getting there.

• 16:22Speaker 03

  He just equated sandals with socks and a members only jacket. Those two are not in the same stratosphere.

• 16:28Speaker 04

  Agree to disagree.

• 16:29Speaker 03

  Agree to disagree.

• 16:29Speaker 04

  But Josh, great question. Thank you for asking it. Lucky for you, it is Tumblr day. So if you would like a Money Guy Tumblr, we'd love to send you one. Just email [email protected] and we'll send one out to you.

• 16:42Speaker 04

  Okay, next question is?

• 16:43Speaker 03

  I was doing a studio tour. So, you know, sometimes people will come to Nashville and they'll come like pop around and they'll come do a studio tour. And I had the Tumblr like sitting on the desk when I was showing it to him. And as soon as the guy saw the Tumblr, he did.

• 16:54Brian Preston?

  He did the sound?

• 16:55Speaker 03

  Yeah, I was like, oh, Brian would be, he would be so happy that you did that in his honor.

• 17:01Speaker 04

  Love to see it or hear it.

• 17:02Brian Preston?

  Well, anybody my age also remembers those cartoons that was still iconic whenever they had the metallic changing sound.

• 17:09Speaker 04

  All right. Well, let's give away some more of those tumblers. JB is up next. He says, how do you know when landing is assured for retirement? I'm 30 and based on projections, I don't need any more in a retirement account beyond my employer match. Does this mean I am in step eight? Is it time for real estate? What do you think?

• 17:31Speaker 03

  No.

• 17:32Speaker 04

  Ooh.

• 17:33Speaker 03

  No, that is not what that means.

• 17:35Speaker 04

  The end. No, care to expound?

• 17:37Speaker 03

  You asked two questions. I'm gonna answer the first one and then I'm gonna give a quick analogy for the second. And the first one is how do you know when landing is assured in retirement? Well, one of the things that we do, and we have a client who is working with us and they're like, hey, I've been saving and I've got this much money built up and I'm thinking about retiring in the next, you know, three, five, seven years. One of the ways that we know the landing is ready for them is we've stress tested their plan. We said, okay, well, what do you want your retirement lifestyle to look like? What are your living expenses gonna be? How often are you gonna replace your automobiles? What are you gonna do for health insurance? What one-off goals like weddings or vacation homes or travel do you have? Uh, what other sources of income are you gonna have? What are your social security benefits gonna look like? What's your pension gonna look like?

• 18:20Speaker 03

  And we, we collect all this data about very precisely what their retirement life is going to look like. And then we stress test that. We run that through a number of different Monte Carlo simulations to figure out, okay, what is the probability of success based on, you know, certain assumptions that we'll put into the system around you being able to make it all the way to the end of your plan without having to change your behavior, without having to cut your lifestyle drastically. And we can assign a probability of success to that. And so the way that you know that you've landed, the way that you know you're at that place is you've worked through that exercise. And that exercise normally happens around five, seven, three to seven years away from retirement. Now, JB's different.

• 19:05Speaker 03

  JB is 30.

• 19:08Brian Preston?

  Yeah, this is, this is one, I got this question. I was like, oh, good, this is gonna be one about landing the airplane. And then I saw 30 and I was like, okay, we need to make sure there's, there's some dividing lines here. If you are 20 plus years from, 10 plus years from retirement and you're really running projections. That's not a full retirement stress plan. It's basically a back of the napkin. If you're just, you know, using four, four percent withdrawal rules and growing out assets through your compound calculator, that's running a projection. Um, and for a 30-year-old, this is something, because we have this question all the time. And I want to first give some kudos to my financial mutants. I love, because you go, I just put out content like the first hundred thousand dollars. We use the Charlie Munger quote and we say a hundred thousand is the most important thing.

• 19:53Brian Preston?

  Just because you're starting to get some success and some wind in your sails. But sometimes my young, you know, people who are following our content. They'll see that they reach a hundred thousand, maybe even get 150, 200,000. And they're like, well, that's it. I got enough because if I go run this through your wealth multiplier. I'm gonna have millions upon millions of dollars. So I just need to shut this down. The problem is, is that you are too close to the starting line. So it's a projection for the future. And there's also the other thing that I put in here as a note is that you're also, you have too much life ahead of you. If you as a 30 year old can tell me what your life, because I'm going to assume you're not trying to retire at 35. I'm going to assume you're talking about 50, 55, somewhere in there likely.

• 20:35Brian Preston?

  If you can tell me what your life is going to look like in 20 to 25 years. I would love to know it because you don't know how many kids you're going to have. You're not going to know what life curve balls has been throwing your way. Where are you gonna live? Well, you don't know where you're going. There's just so many moving variables. It's hard to lock down a stress test or a full retirement plan. When you're not only decades away from the actual landing strip. But you're also, you just have so many moving variables in your life. But that's why it's important. I love that. That's why we do the 25%. We do other rules that you can actually still take a measure of where you're headed and going. So you can quickly figure out are you ahead of the curve, behind the curve, or right where you're supposed to be. And that's the metric you can use at this point. Still spot check it. But you're not at the point that you're actually running.

• 21:20Brian Preston?

  And you don't even need to probably run Monte Carlo simulations when you're 30 years of age. That's something that we talk about all the time is because it's back to that point. You just don't know all the variables that are coming to your life. But I think you should be commended for great, you know, behaviors that have obviously put you way ahead of the curve. But you're not assured that you're going to be there. Remember, there's make wealth, there's maintain wealth. And you're still, even at age 30, probably in the make wealth phase. You're on, you've got a great head start. You're doing, making good decisions. But if you don't keep doing those good behaviors, you won't necessarily be in the maintain wealth phase. You're just too close to the beginning. I hope that that doesn't sound. Too restrictive?

• 22:03Speaker 03

  No.

• 22:03Brian Preston?

  But it's just, I want to make sure that people don't have three to five years of success and say, well, man, based upon the wealth multiplier, I don't need to do anything else. Because, look, I did this with my wife, and you guys, some of you put it on our fire show, is that I did tell her when we reached in our 40s, if we would save as aggressively as we did in our late 20s and early 30s, we could come off the accelerator of our savings rate, and it was true. I mean, it worked out. But that was, I didn't really even pull off. I mean, I still haven't pulled off, because what's happened is, is I've had more success. It seems crazy not from a tax perspective to try to maximize opportunities out there,

• 22:47Brian Preston?

  but I've at least at 45, taken, when I got beyond 45, a measure of where we were from a risk adjusted and how close we were. But at 30 years of age, I think you're too far from that.

• 22:57Speaker 03

  Yeah, you said, you said a line that made me, that made me think of an analogy we use. You said, you're just too close to the starting line. We have some, some team members here who just ran their first half. Well, it was one of their first halves, but some of the rest of them have done a couple of them, right? And they've been training. This is like new, and I am not a long distance runner, so I'm speaking out.

• 23:17Brian Preston?

  Or a swimmer.

• 23:18Speaker 03

  Or, I'm not a short distance swimmer. But I, here's what you don't do. If you're going to set out for a 13 mile race, or for a 26 mile race, what you can't do is, you can't fire out of the blocks and say, you know what, I'm on pace for a five minute mile. And in that first 800 meters, that first 1600 meters, whatever, you say, oh, man, I'm going to smoke this marathon. Because that's not the way that it works. You are too early in. Just because you have a fast pace does not mean you are going to be able to maintain that and make it all the way to the end of the race. Saving for financial independence, saving for retirement, is a marathon, it is not a sprint. And I would argue, just because from where you started at age 30, you've been able to sprint pretty

• 24:00Speaker 03

  fast, does not mean that you're going to be able to maintain that. And so you want to get further into the race before you begin arriving at this conclusion. That's what you did in your 40s.

• 24:09Brian Preston?

  That's a dynamite analogy. Well done.

• 24:12Speaker 03

  Look at that.

• 24:12Speaker 04

  Well done. Well, JB, thank you again for the question. If you would like a Money Guy Tumblr, if you don't have one already, just email [email protected] and we'd love to send you one.

• 24:22Speaker 03

  Have you ever run a, have you ever run a long race?

• 24:25Brian Preston?

  No, I signed up for a 10K once and then chickened out.

• 24:28Speaker 04

  Oh.

• 24:28Brian Preston?

  I even bought a book. Bought a book.

• 24:30Speaker 04

  Signed up.

• 24:31Brian Preston?

  Read the first chapter, read the first chapter and then like

• 24:34Speaker 04

  You were like, hmm.

• 24:35Brian Preston?

  Three weeks before I sold my number. Cause I was like, what am I doing?

• 24:39Speaker 03

  Oh, this is one you like had to get a number and pay for it every day.

• 24:41Brian Preston?

  Yeah, it was a Peachtree Road race.

• 24:42Speaker 04

  Oh, look.

• 24:42Brian Preston?

  Yeah, it was, um, you know, but I, the longest race I've ever run is a 5K for charity.

• 24:47Speaker 03

  I love it though.

• 24:48Brian Preston?

  I could, I could still do a 5K.

• 24:49Speaker 03

  Yeah, for sure.

• 24:51Brian Preston?

  Just not on a Disney island that has no running, um, air, blowing air in them. Cause I've done that where I've done, you know, if you do a Disney cruise, they have their 5K, 5K. And for some reason, they don't run you across the shoreline. They run you straight into the middle of their island where there is no moving air whatsoever.

• 25:08Speaker 04

  It's just humidity.

• 25:09Brian Preston?

  So you get to feel the full weight of the humidity and how out of shape and how old you're, you're getting.

• 25:14Speaker 03

  That sounds absolutely awful.

• 25:16Brian Preston?

  But I got, I gotta, if you go into my office, I've got the, the 5K that I walked with Disney.

• 25:21Speaker 04

  All right. I learned something new today.

• 25:23Speaker 03

  Have you ever run a long, a long race?

• 25:25Speaker 04

  I am not a runner.

• 25:26Brian Preston?

  5K is not a long race.

• 25:27Speaker 04

  I just fully admit, I never even bought a book.

• 25:28Speaker 03

  No, no, I'm asking like half, I consider, I think half, like once you get to half, that's what I consider a long race. Right? That, for my actual runners, is that considered a long race? No, they're scoffing at me saying, oh, no, only, oh, yeah. We got some good, we have some very good runners on our team.

• 25:43Speaker 04

  Props to them, you know? I, I admire it. I mean, I was like, y'all ran that race? Like, I am in awe. Cause I do not do that.

• 25:50Brian Preston?

  They all, the entire team did great, by the way.

• 25:52Speaker 04

  Yes.

• 25:52Brian Preston?

  I mean, really fast paced, but we do have one on the team that I think he could have gone and eaten breakfast.

• 25:57Speaker 03

  He could have run backwards.

• 25:59Brian Preston?

  Ran in college.

• 26:02Speaker 04

  Well, on that note, ready for the next question?

• 26:05Speaker 03

  Yes, ma'am.

• 26:07Speaker 04

  Shani says, we, a 28 and 30 year old, have about $4,000 left at 4.94% left on a car. We've had a goal of paying off this year. This would free up $500 per month. Should we use our emergency fund to pay it off? And use that to cash flow to replenish? Or the other way around? We have about three months saved, so this would take us down to two months temporarily. How should they think about it? I can like, I can tell they can like taste the debt freeness, right? Like, it's so exciting to be there.

• 26:44Brian Preston?

  And Bo, I'd love to get your take on this, but when I first, because look, when I see that you have three months, that's the, remember, never get astray of steps one and four. The financial order of operations, we reason that cash has two steps is because we don't make you, we don't want you making desperate decisions. No matter how well intentioned that might feel to you. And when I see somebody who has three months of cash reserves and it would take them down to two, that's getting outside of step four of the financial order of operations. So what I would encourage, if you only owe four, because that's what I love, is that you only owe 4,000, your monthly payment's a little over 500. You are at the point where you're like, I can practically see this thing paid off.

• 27:24Brian Preston?

  Use that as motivation from a behavioral standpoint to figure out, is there something in your life right now? You can squeeze a little bit harder to just over cash flow? Pay it off over the next three months, four months? Don't take it out of emergency reserves, because what happens if the music stops with the economy? Or you have some life thing happening, you need the emergency reserves? I'd rather this be gravy and the fact that you through discipline found a few hundred dollars here and there. You know, through a pantry audit or going and selling stuff on a marketplace. There's, there's other ways that you can go fill that $4,000 void without getting into those emergency reserves.

• 28:03Speaker 03

  Yeah, I think when it comes to making financial decisions, we're often emotional. And sometimes it's really hard to remove the emotion from the decision making. And so when I find myself in times like that. I try to ask myself the question, okay, well, does the mathematics help with the emotion? And in this case, I think it kind of does. You said that your car rate is 4,000 at 4.94%. And like in your mind, you're probably thinking, gosh, that's 5% that I could go be getting. But if you truly have your emergency fund and it's three months or four months and it's sitting in a high yield account right now, there's a really good chance that your high yield account is making over 4%. So when you think about what's the auto loan really costing you? It's probably less than 1%.

• 28:44Speaker 03

  And so what I would say is, okay, well, is the risk of me taking my emergency fund down to the bone and then some unknown, unknown happening, is it worth saving that 1% over just a couple of months between now and the end of the year? Probably not. Uh, in this one, I understand the temptation and even if the interest rate was higher, I would say, don't do it. But at this level, you can give yourself some peace saying, okay, it's not all that costly. It's not, it's not really costing me that much just to keep paying the 500 on this, get it knocked out. And I love what you said. See if there's some other levers you can pull. What are some ways that you can really tighten up? And maybe instead of paying 500 a month on it, you pay 700 a month on it and you knock

• 29:27Speaker 03

  it out that much quicker without putting yourself in a risky situation and, uh, and, uh, and putting yourself in a position where you're swimming naked.

• 29:38Brian Preston?

  Well, it's, it's one of those things where an emergency happens. It's not like you hear a knock on the door and it, and they're like, hey, this is life. Um, it's come, I'm coming, um, because it's, you're going to lose your job or the market's going to lose 30% or, you know, it's not like, oh, you can go up to the door and be like, oh, sorry, land shark, we don't want you here. You can go away.

• 29:58Speaker 03

  I just paid the car off.

• 29:59Brian Preston?

  No, you have to answer when that door knocks with life and all the crazy things that happen, you want to know that you can sleep comfortably and you have respected the financial order of operations because if you're just doing foolish, it's definitely foolish.

• 30:14Speaker 04

  Love it. Very good answer.

• 30:15Speaker 03

  That's gonna be the first T-shirt, isn't it?

• 30:17Brian Preston?

  No, I mean, I didn't. By the way, one of our audience members gave us that in one of the comments, one of these live streams. That's the power of these live streams. We basically have a marketing arm out there coming up with cool.

• 30:27Speaker 03

  It's, it's, that came from the Financial Mutant.

• 30:29Brian Preston?

  Financial Mutant came from a, I still, was it Nightcrawler? What was his name? He was a trucker.

• 30:35Speaker 03

  Yeah.

• 30:35Brian Preston?

  Who, who was asking where he could park his semi truck so he could come see the studio. This is years upon years ago. This is back when we first moved to downtown Franklin, probably 2017-ish.

• 30:44Speaker 03

  Mm-hmm. Yep.

• 30:45Brian Preston?

  Um, so yeah, you guys are the gift that keeps on giving.

• 30:48Speaker 03

  I am curious. I mentioned Tisha. Would you do, can we do a quick poll? I would just be curious to our people. If we had a merch store, would you be interested in that? Like, yeah, merch store, no, not merch.

• 30:57Brian Preston?

  You were gonna stir the pot.

• 30:58Speaker 03

  Well, no, no, I, no, you just said, I'm looking for it though. Let's stir it. I'm asking. I just, I wanna know about the people. I'm just asking the people.

• 31:08Speaker 04

  Just asking the people.

• 31:10Speaker 03

  I'm just asking the people, Brian.

• 31:11Speaker 04

  You know, I think you call the Financial Order of Operations FOO because of, of Financial Mutant as well.

• 31:18Speaker 03

  Like, did, yeah, we might not have.

• 31:19Speaker 04

  Somebody like shortened it and I was like, oh, look, somebody called it FOO. And then it just kind of like took on a life of its own and now it's the FOO.

• 31:26Speaker 03

  Because we were like PIMDOS-ing pretty hard. And I think somebody dug it.

• 31:29Brian Preston?

  Well, I mean, well, PIMDOS is the acronym. We, we were, we tried to come up with our own PIMDOS for FOO. This is a disaster. You guys tried to help too. Nobody could, nobody could make it work perfectly.

• 31:39Speaker 04

  I'm happy we landed on the FOO in retrospect.

• 31:40Speaker 03

  I think FOO is a much better place.

• 31:41Speaker 04

  It works out great. Alright, well, Shani, if you would like a Tumblr, we'd love to send you one since we answered your question. Just email [email protected]. Alright, we have a question that I'm interested to see you answer.

• 31:54Brian Preston?

  Mm-mm.

• 31:55Speaker 04

  From our friend Vinyl1EarthLink, who we see in the chat a lot. So, hi Vinyl. I don't think we've asked one of your questions in a while. It says, "I have company stock in a 401K and I'm looking at an NUA distribution. The IRS rules are complex. Is this worthwhile with a high income?"

• 32:15Speaker 04

  I see IRMA and NII penalties. Have you ever had a client who managed an NUA distribution without falling into another tax hole? So that's the question. I think you should define a couple of these terms as well.

• 32:28Speaker 03

  Yeah, so this is, this is a unique, very specific planning opportunity. When he keeps saying the acronym NUA, that stands for net unrealized appreciation. And what often happens is if I participate in a 401k plan and the company for whom I work has publicly traded stock, I might get some stock inside that 401k plan. I might be, it might be my company match goes into that or might be buying into it. And what can happen is if I do that over a long period of time, I can have company stock inside of my 401k that has a large embedded gain if I did this for 10, 20, 30 years. Well, one of the unique things that you can do is you can opt to have that stock treated

• 33:12Speaker 03

  with NUA treatment, net unrealized appreciation treatment. Where essentially what you can do is you can do a distribution of that stock out of your 401k. And what's going to happen is you're going to pay ordinary income taxes on the basis what you paid for the stocks. Let me give a number here, right? I got $100,000 of company stock, I bought 100,000, now it's worth 300,000. I can do a $300,000 distribution out of my 401k. I pay $100,000 of ordinary income. And so long as I hold that stock outside of the 401k in a brokerage account for a greater than one year, now all of that gain is subject to long-term capital gain.

• 33:54Speaker 03

  Essentially, I was able to move $200,000 of appreciation out of the 401k into a taxable account, move it from ordinary income into capital income. So the question is, okay, does this make sense? It depends. And you already noticed some of these. I've got IRMA, I have net investment income tax, I have other things in my situation. We have done this for clients before and it can be a viable strategy, but it gets hairy. I mean, like most things in the tax world, when it gets this complicated, you want to be very careful navigating it if you haven't at least been trained on what to look for and what to look out for because it's really easy to make a mistake when it comes to implementing these kinds of strategies.

• 34:39Brian Preston?

  Well, it reminds me of, I tell you is that we can give you all the free information in the world because we are trying to help you go towards that goal of simplifying your financial life. But if you do this well enough and you're successful, there's going to be complexities that just naturally club you over the head. And this is one of those decisions. Is that, and by the way, this is, this is just an NUA analysis. We do this all the time when we're trying to figure out Roth conversion strategies. We're trying to figure out, you mentioned IRMA, so you can't help talk about Medicare planning and all, there's so much of this stuff, even if you try to keep your nose as clean as possible of doing, you know, doing things to keep your life complex, you're going to see success just

• 35:22Brian Preston?

  naturally is going to create these things. And that's why we leave the porch light on. And these are the type of things that we help you figure it out because every one of you, you're probably, this is the first time you're probably hearing NUA, or this is the first time as Vinyl's finding out that he's having to go through and say, I know the rules. I've read, there's enough blogs out there on the internet. I can get the, you know, the Cliff Notes or the executive summary. But I've only done this, this is going to be my first time. I don't want to be the charter member and screw something up. Go with somebody who's actually done this a bunch of times so that you kind of know what you're getting into and know all the unintended consequences that might be lurking around the corner.

• 35:58Speaker 03

  And this is where personal finance is so personal. And this is what makes it kind of hard. NUA is a specific example. There have been clients with whom we have worked where it made a lot of sense to do it. And we said, yes, we're going to implement this. There have been other times where clients had the opportunity to do it and we said, no, it doesn't make sense for whatever reason. So just because you can do something does not mean that you should do something, especially when it comes to these more advanced strategies. This is a great time where it might make sense to think about getting together with a professional to help you navigate all of the what ifs to determine if it does make the most sense for you.

• 36:37Speaker 00

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• 37:05Speaker 05

  Bonjour, compadre. It's the

• 37:09Speaker 05

  How do I negotiate so many great travel deals? My greatest gadget, the Priceline app. It's got hotel deals, flight deals, rental car deals, all of those deals in a bundle. Deals, game day deals, concert trip deals. No one deals more deals than Priceline. Hold your horses, there's more. The app lets you filter hotels by neighborhood, vibe, star level and amenities like pools and spas and beachfronts. Wait, I'm not done. Stop cutting me off.

• 37:35Speaker 04

  Awesome. Well, Vinyl, one EarthLink. A question. That was

• 37:38Brian Preston?

  I know, that's the

• 37:39Speaker 04

  I know. I was like, let's see if they can flex a little bit here.

• 37:42Brian Preston?

  That probably made it through the gatekeepers because of your name. I don't know. I don't know. I mean, if we were looking for a barn burner of how do we get as many people as possible to have a question that impacts their life? Probably wouldn't have chosen anywhere. So we're going to give a lot of respect to that. That was probably a vinyl.

• 37:59Speaker 04

  Well, Vinyl, if you I think he was trying to stump us. Do not, maybe he was trying to stump you. But if you do not have a Money Guy timewarp, we would love to send you one. Just winner at moneyguy.com, let us know. All right. Next question is from Coco Foro Toro.

• 38:15Speaker 04

  It's, that's what it says, Brian.

• 38:18Speaker 04

  It says, how is it possible to put down less than 20% for a home? Income is 205K and average homes here are about 500K. So he's talking about his situation. I can't see myself putting down any less than 100K. Thank you in advance.

• 38:36Brian Preston?

  That sounds like a personal preference.

• 38:38Speaker 03

  Well, yeah, so, but let me, let me speak to what Coco, Coco, because here's what I think Coco is saying. There are certain parts of the country and there are areas where the cost of housing is so expensive.

• 38:52Brian Preston?

  Right.

• 38:53Speaker 03

  That if you put down, like, so if you, if you haven't done this, go to moneyguy.com/resources. We have a whole home buying hub where you can check out, you know, questions to ask yourself before you buy a home, home affordability calculator. And one of the things that we say is, yeah, you don't have to put down 20% on your first home. You can put down 3% or 5% when you're buying this first home. Well, I think a lot of people in these high cost of living areas say, okay, if I only put down 3% and I borrow 97% based on the value of homes in my area and based on where interest rates are, when I calculate my mortgage payment, I am now running afoul of the 25% gross income threshold. Because it wants your housing cost to be more than 25% of your gross income.

• 39:38Speaker 03

  So he's saying, hey, in this situation, I make 200, house is 500, I can't put down, you know, less than 20%. What do I do? I, I do think you, you hit the nail on the head. It's very much a personal.

• 39:50Brian Preston?

  Well, I mean, we could go, there's so many different ways to talk about this because high cost of living areas. I saw a blog post I was got caught up in over the weekend reading was there, there's a lot of parts of the country, these high cost of living where the rent for a house might be 4,000 to 4,500. But if you tried to pay the mortgage on that same house with current interest rates, it might be $11,000 a month.

• 40:12Speaker 03

  That's right.

• 40:12Brian Preston?

  And so people, there's a bigger question here. And I think some of this stuff, hopefully the market is going to correct and wages and all the other things that over the long term will turn this weird dynamic we have going on into something much more manageable, especially for all of our young people who are trying to get into that first house. But I think that's the first metric you have to probably go check is, do I need to buy a house right now? Or is this a marketplace that I ought to be renting until I kind of figure out how this impacts? And now. Coco Fortoro, very interesting name. What I think is interesting, you have a high income. I mean, somebody who makes over $200,000 a year. A lot of that, that's what I see is people who live in these high cost of living areas.

• 40:55Brian Preston?

  Part of the reason it's so high cost of living is that there's so many people in one concentrated area that are great incomes. It drives up the marketplace in a lot of ways. You might get to a point in your financial journey where it's now the life requires, or you've made the decision that this is such a priority for my family because I want to set roots, I want to raise family here, that after I've made it to like a step eight, you know, and I've done all these things where I look at that difference between I could rent this for $5,000 versus pay mortgage of $11,000. If you're in step eight or something like that where like I'm so ahead of the curve on this, it's a life decision for me. But I think reason we said three to 5% is for a lot of people in a lot of other parts

• 41:37Brian Preston?

  of the country, this is a reality so that your house down payment's not running from you as housing markets appreciate. And there's a lot of people who don't live in high cost of living areas. We've had them on Making a Millionaire where you can still buy a reasonable house for much lower prices. And that's why this is the personal impersonal finances that, and that's one of the things hard about being a content creator in the finance space is that we try to give you rules that you can navigate in an all-terrain type way, whether it's all weather, whether it's all different things that you're trying to navigate. But still, at the end of the day, sometimes you're going to run into walls in high cost of living areas. I've been, if you read the way I wrote Millionaire Mission, when I talk about that down payment,

• 42:21Brian Preston?

  I even give you guys some grace in the fact that sometimes when you live in these areas, these metropolitan areas, you don't have to buy a car. So you can push beyond 25 slightly.

• 42:31Speaker 03

  If you have to.

• 42:32Brian Preston?

  Because you don't have any transportation decisions. So that's the personal impersonal finances. I've tried to give you all the nuance and so you have the mindset to know how to navigate this, but it does get much more complex because of all the different variation geographically, cost of living, prices in areas, you know, that are unique. This is all unique stuff we have to navigate through.

• 42:55Speaker 03

  You want a hot take?

• 42:56Brian Preston?

  Yeah.

• 42:57Speaker 03

  This is a hot take and it's a unique hot take that we have. Renting is okay. I think so many people out there say you have to buy home, you have to buy home, homeownership, homeownership. And yeah, it's wonderful and there are benefits, but there are some people that renting just makes sense for maybe the station or season of life that you're in, or maybe for the area in which you live, where it is economically more advantageous for you to rent than for you to buy. I mean, I was talking with someone the other day, Brian, who actually owns a home, but the home they own creates like a 45 plus minute commute every day to get to their job. And the conversation we had was, okay, well, what solutions are there? And they said, well, it might make sense for

• 43:39Speaker 03

  us to sell our house and just rent closer. So that way, we can focus on the things that we want to focus on and we can reassess and regroup. And that's okay. I think there's so much pressure out there that people feel like, oh, I gotta buy, gotta buy, gotta do the next thing, gotta do the next thing. That may not be true for you. And if renting is what makes the most sense for you right now in this station, in this season, it's okay. Take a deep breath, give yourself a break, and still continue working towards what those ultimate long-term financial goals are.

• 44:12Speaker 04

  Really good answer. Thank you so much for that question, Coco Foro Toro. If you would like a Money Guy tummy, or just email [email protected], we would love to send you one. Ready for the next question? Julie Y. says, I have RSUs in a private company. My employer and earn more each year as my annual bonus. How should I think about selling all or some at IPO if the RSUs may be worth more than my current portfolio?

• 44:45Speaker 03

  What are you doing to us? All right, here we go. So what's Julie have going on? She works for a company that is not publicly traded, meaning assessing the value is not an easy, like publicly traded companies, you can just go out and top, type in a stock stick, stop sticker. Okay.

• 45:04Speaker 03

  A stock ticker and you can see what the value of those shares are trading at. With private companies, that's not the case. You have to wait till there's an annual valuation done or until they post what the value is to determine the value. Well, even more than that, oftentimes, there's not opportunity to turn that into liquid capital. Meaning even if I wanted to sell my privately held restricted stock units, I don't have a means or a mechanism to do that. But then she kind of like continued on in this very complex question and said, "Okay, well, what about when the company goes IPO and those private shares become public?" Okay, now we have a more generalized question. And here's the way I'll pose the question to you, Brian. If I have, if I work for a company and a lot of my exposure is in that company's stock,

• 45:47Speaker 03

  how do I think about diversifying away from that? Or do I even need to? Is it okay if the majority of my wealth is tied up in the company with whom I work?

• 45:56Brian Preston?

  I first want to focus on the mindset, is I think anybody who works, because we work with a number of people, we work with clients all over the country and it's not uncommon that we work with, whether it's the biotech industry, whether it's technology industry, whether it's pharmaceutical, you know, there's all kind of startups in the medical field, there's startups in technology that they, there's this whole game that's played, is that they will approach you and they say, "Hey, we can't pay you what the big people in our industry pay, but if you come work for us as a startup, there's this carrot that we're going to be giving you a portion of your compensation, since we can't pay you market. We're going to give you these RSUs, we're going to give you these stock options that potentially are your bag of beans that could be turned into the beanstalk

• 46:41Brian Preston?

  that takes you to all the riches in the heavens." And by the way, this works. Sometimes, I mean, we've had clients that, you know, that's where it's not uncommon that you find, if I find people who have millions of dollars in their 30s, typically, they worked for a startup of some type and they got options, they got RSUs, we've got clients all, you know, here that have made choices and elected because they were working for these startups. That's the dream. Now... If you get to that situation, as you laid out Julie, and you get to IPO and this portfolio is now worth more than the investments you've been selling, that's kind of like kudos. That's the way it worked is because you were sacrificing or trading what your value on

• 47:25Brian Preston?

  the market was, you took, you said, I'll take less for this promise of the magic beans that potentially could lay out for me, but it makes the point of what Bo was now leading to is if your magic, your bag of beanstalk beans, you're taking this risk, if it actually comes home and turns into a windfall moment, it really benefits you to start diversifying that out as fast as you can, but you have to go ahead and get your mindset is because look, if you do this on these startups, as you said, you get more every year. So while you're working there, get your mindset right that you're going to start diversifying that because you don't want your human capital, your working capital also tied up to where

• 48:07Brian Preston?

  all of your financial capital is because if this bag of beans falls in and turns into, it doesn't go anywhere and never even sprouts, you can see what a failure, or what's worse is this thing sprouts and gets a hundred, a few hundred feet up in the air, but never makes it to the clouds where all the treasures are. You have really got yourself in a pickle, even though on paper you might've looked like you were in a really good place because this thing was taking off. That's why it really benefits you. Use this moment, start diversifying every year, have a cycle, do it in a tax smart way. We do this whether it's RSUs, whether it's options. We'll try to pinpoint and figure out what's the best way from a tax perspective to create the respect for the diversification of capital,

• 48:49Brian Preston?

  but also how we minimize taxes as much as possible. But I look at it as a win and things worked out for you. Kudos, because it's not always. We also deal with clients all the time that They're hoping, or they worked for a big company and then they got lured away to this startup because they're like, this is going to be my thing. I've been around people who've gotten multiple seven figures from a startup and they go and jump over and it just never turns into what they want. There's risk. There's a risk component here that's, that's, that's part of what you're experiencing, Julie.

• 49:19Speaker 03

  And I do think, one thing I love is since the company has not gone IPO yet, I love the fact that you're thinking about this and having the conversation now because in my experience, when I see clients deal with this, this is one of the hardest times to be unemotional. I have seen clients, literally the tale of two clients. One client who had options in a company that went up to like major seven-figure wealth, like $5 million plus, and within 12 months, company went out of business before they exercised the options. So that money evaporated. That is a real story. Another client had tons of RSUs and we put together this idea to begin slowly divesting them over time. And this company that you have heard of has had like

• 50:01Speaker 03

  thousand percent rates of returns over the past couple of years. And both of these clients are, it's painful and it's emotional when those things happen. So that way if you can remove the emotion and say, okay, how can I put together a systematic, non-emotional way, oftentimes through like dollar cost divesting. So selling a certain portion, taking into account the taxes every month or every quarter, every period, so that if the stock continues going up, great, I'm riding that exposure. But if it goes down, I've taken some of my chips off the table. I've taken some of my wins. I think if you can do that, you're going to have a higher probability of not letting yourself fall into the emotional trap of ending at one of these two extremes.

• 50:46Speaker 04

  See, you guys did great. Great answer. Julie Y, thank you for the question. If you would like a Money Guy Tumblr, just email [email protected].

• 50:54Brian Preston?

  I'm waiting for a reverse mortgage question.

• 50:56Speaker 03

  Seriously, no kidding, right?

• 50:59Speaker 04

  I think this one's more straightforward, but we'll see. Maybe there's an element that you're gonna be like, it depends. Erin Kay says, I forgot about a retirement fund from a previous employer. I believe in IRA that now has 30K in it. Should I leave it where it's at? Or should I try and shift it to my current retirement account? And I think that as you're changing jobs, like I think this kind of happens to a lot of people.

• 51:25Brian Preston?

  We see this happen all the time.

• 51:28Speaker 04

  So how should we think about it?

• 51:29Brian Preston?

  We even had a guest on Making a Millionaire that they, but as they were preparing to come on our show, that made it on their net worth statement and it was kind of fun just talking with them. And they're like, yeah, we found out she had this account that was just sitting out there. And what's funny is we're doing some other show content today.

• 51:46Brian Preston?

  That we're going to be recording and I thought it was so interesting that Fidelity shares that some of their best performing assets are accounts that people forget about.

• 51:54Speaker 03

  Just abandoned accounts.

• 51:55Brian Preston?

  Because they, it's because it protects everybody from making all the horrible decisions we typically see that, you know, most investors make with emotions, over trading, doing everything else. So Erin, this is a blessing that you have $30,000 that you kind of had forgotten about. I think, but it just because it's worked out in the good to this point, doesn't mean that you get out of doing the homework. Bo, what's the homework? Because you really only, Bo, we always say that there's multiple options. The one of cashing it out, I'll just take that off the table. Because we always say you need this money for retirement in the future. Your 50, 60 year old self will be really disappointed if you don't maximize this moment.

• 52:34Brian Preston?

  But what's the decision matrix or the homework that somebody needs to kind of consider when they get into this type of newfound money situation?

• 52:41Speaker 03

  Yeah, I'm going to talk really slowly to give our production team time to see if they can pull up a deliverable we have at moneyguy.com/resources about what to do with an old 401k. Now you, you told me Erin, that you think this might be an old IRA. So it might've been an old SEP IRA. Oh my goodness, do you see how good these guys are?

• 53:01Speaker 04

  These guys are good.

• 53:02Speaker 03

  So it might be like an old SEP IRA or an old simple IRA. That's, that works the same. Logic applies as if you had an old 401k and Brian, we used to sit in prospect meetings. It'd be so funny. You would always say this early on in my career, you'd always be, oh, I feel like I'm looking at a patchwork quilt of the life that you used to live. Cause I can see the last three employers you had, and I can see what was going on then. But when you have an old, an old retirement account, you really have four options to choose from. We've already said that we're going to take away the fourth, we're not going to cash it out. Cause if you do that, not only are you going to pay ordinary income tax, but if you're below 59 and a half, you're going to pay a penalty on that as well. So you can either leave it where it is and do nothing. You can roll it into your new employer sponsored retirement plan, or you could roll it into an IRA,

• 53:47Speaker 03

  whether it be Roth or traditional, depending on what type of asset it is, to determine what makes the most sense. Now, how, how do you decide? Well, that's exactly what that deliverable is for. Moneyguide.com/resources, because there's some things you want to think through. How good is my old plan? How good is my new plan? What are the cost differences? What are the fund availability differences? And then the next question I want to ask is, okay, if I do this, is it going to affect other strategies that I'm implementing? Meaning if I want to roll over an old retirement plan into an IRA rollover, but I'm somebody who's taking advantage of backdoor Roth IRA contributions. I don't want to do that. It might make more sense for me to roll it from my old retirement plan to my new retirement plan so that I can continue to work that.

• 54:32Speaker 03

  So it's kind of like a flow chart that you have to work through for your specific situation. Good news for you, we've already done the work for you. Moneyguide.com/resources, what to do with an old 401k to help you decide, how do I know what to do with this old account? Well done, production team.

• 54:50Speaker 04

  Well done, production team.

• 54:51Speaker 03

  I thought there was no chance they're going to, because we don't call that one out a lot.

• 54:53Brian Preston?

  Yeah, we don't use that one. It's kind of a little more obscure. So now maybe instead of saying, I'm going to talk slowly, but I'm going to talk as fast as possible and really test you guys.

• 55:00Speaker 04

  Really challenge them.

• 55:01Speaker 03

  I've thought about one time, I've not done it yet.

• 55:04Brian Preston?

  Just start yelling out, kind of like a training session. You ever seen like if you're watching a Formula One driver, they keep dropping these balls and they catch them to show their reaction time? We could do that. Just start yelling out resources and see how fast the team can get them up.

• 55:15Speaker 03

  Well, I thought about, I was going to, I was going to make one up on the fly and call for it, just to like kind of watch them scramble to try to do it.

• 55:22Brian Preston?

  No, you've lost the plot.

• 55:22Speaker 04

  I'll be honest, I wasn't sure if we had that one, like an easy place. So I was like starting to go into our archives so I could like send it to them. And I was like, oh, we're good. Okay. We made it. That was some insider baseball there.

• 55:35Speaker 04

  All right.

• 55:36Speaker 03

  That was Aaron.

• 55:38Speaker 04

  Aaron Kay, thank you for the question. Um, we can send you a Tumblr if you would like, since we answered it. Winner at moneyguy.com, just email that and we'll send it out to you. All right, Dan's question is next. He says, my girlfriend just graduated college and has a 125K in student loans. I'm planning on supporting us financially so that she can put 100% of her income into getting debt free. Is this the right path?

• 56:08Speaker 03

  I mean, I mean.

• 56:10Speaker 04

  You keep giving me the worst looks. You're like, you're too hard.

• 56:12Speaker 03

  Well, I mean, this is.

• 56:14Speaker 04

  I know, I know.

• 56:15Speaker 03

  Nuance here that just, ah, there's one small nuance here. Um.

• 56:21Brian Preston?

  This is like saying, hey, should we do a prenup?

• 56:23Speaker 03

  Yeah, like, right, like, hey.

• 56:25Brian Preston?

  I don't know, we don't know anything about Dan and his girlfriend. We don't know the dynamic of the relationship. We don't know what baggage or what assets they're all bringing in.

• 56:34Speaker 03

  Let's assume for a moment, I'm gonna, we're gonna play fairy tale here. Let's assume for a moment, uh, that Dan and his girlfriend are watching this together and he does not want to let the cat out of the bag, that this thing is serious and they are about to be engaged and they have made the decision, they're gonna be together for a long period of time moving forward, right? So let's operate in that assumption. This, this couple is gonna, they're, they are gonna be together for a long period of time. So how should we approach this? Well, I think one of the things that you ought to do, and any couple that's trying to navigate this, say, okay, now, if we're gonna have a plan where we're both jointly moving forward together, it probably doesn't need to be like my plan and your plan moving in different directions. Probably figure out, how do we get one plan together, moving in the same direction towards a common goal?

• 57:20Speaker 03

  We need to define what those goals are. Hey, we wanna save for financial independence, then we wanna have a family, and we wanna buy a house, and we wanna move, and wanna, you know, do all of these things. But once you have now prioritized the goals that you guys have as a couple, then you can, then you can begin deciding, okay, what are the appropriate steps for us to attack those goals in time? So that's the way that I would navigate that. So does it make sense for us to get really, really aggressive and live off of one income and have another income, paying off the student loan debt? Well. Maybe if the interest rates substantiate that and it aligns with your goals. But I think before you can have any of those conversations, you have to have that conversation about very long-term goal planning,

• 58:05Speaker 03

  not short-term goal planning, very long-term goal planning.

• 58:08Brian Preston?

  Well, I think we have some extremes here. I mean, Dan's extreme is almost in the same as you just go to Vegas, get married, now all of a sudden you can turn two into one. That's one extreme. And then you got the other extreme because I think about my childhood, growing up. My parents, I don't know how accurate this was, but supposedly my mom gave my dad trouble because he had financed some furniture or something. And, you know, and they didn't want to get married until he paid off some of that debt. So, I mean, that's the other extreme is you just basically say, you know what? The carrot is, is that I'm all yours. When you pay off that, you know, some form of this 120. So, those are the extremes. Go ahead and just go to Vegas. You take on half of this.

• 58:51Brian Preston?

  The other extreme is you just say, you know, stinks to be in your situation. I'm waiting here for you when you, when you get it over the tax, I mean, the loan-free threshold. The answer lies in between somewhere in there. And that's the thing that, because Bo, I don't mean to put you on the spot, but I know that after y'all got married, your, your wife had some student loans and y'all did turn it into a priority, but it was part of a more balanced approach. I mean, you were even talking about shampoo on the honeymoon and budgets. So, there's a lot of steps in between this.

• 59:21Speaker 03

  Your language was so great right there. And I want to be very clear, when we got married, my wife did not have student loans.

• 59:30Brian Preston?

  Yeah, we had.

• 59:31Speaker 03

  We had student loans. And that's the thing, Dan, I think that you and your girlfriend have to talk because you use some like, you said, hey, my girlfriend has this loan and I'm going to support her so that she can pay off her student loans. I think you guys should reframe the conversation and figure, okay, what's the we here? Are we going to live off of one income? And are we going to attack these student loans because of it's I and me and mine and you and yours? I worry about, okay, maybe there, there's a bigger conversation that needs to take place. So, it wasn't even a question for us. When my wife and I got married, she brought in those. Student loans, I was like, bring them on. These are ours now. How are we going to attack these? What are we going to do? How are we going to knock them out? And we were able to do that collectively as a unit, get through those and then move on to more fun, wealth building things.

• 1:00:15Brian Preston?

  I, I do think it is, it's a bigger question though of in relationships, you should talk about, just like you should talk about, hey, religion, kids, money. Because you know, we just did a stat on a recent show that 40% of divorces are, are driven by financial stress and, and bad things like that. So if you're avoiding these conversations, I think the, the starting line on this is instead of you being the solution and saying, hey, uh, cause that might be, be careful just to, I'm thinking about how I think about if you, I don't know how deep into this, if they just started dating last week and he's just like, man, I am marrying this girl and I found out that she's got a hundred and 20,000 dollars of student loan and, and man,

• 1:00:57Brian Preston?

  wouldn't she be impressed if she finds out I'm, I'm successful enough that I could go ahead and, and boost this? That, that would be premature. It would just wouldn't be, so that's why there's a time and a place, and I think we giving you the breadcrumbs is that you figure out how you, you do this in a balanced way. But yeah, by the time, if y'all been dating for, you know, a period of time and everything's lining up and this is going to be your spouse for life, then you know, at some point this will become y'all's debt that you have to navigate. I just want to make sure that you've actually done the work and not run into some situation where you know, the, the motivation or the why doesn't intersect with what's going on in life.

• 1:01:35Speaker 04

  I think that was a good answer. And listen, I know there's a lot of different stories and opinions, but there were some, one person in the chat said, I think girlfriend is the key word in this question. Cause you're right. It depends. Like how serious is this? We were like, I think that you did a great job answering it.

• 1:01:51Brian Preston?

  This is a very, you know, normal situation, but Bill Belichick, all the stuff that's out there on, you know, and that.

• 1:01:58Speaker 04

  Here we are, right? We jumped to that.

• 1:02:00Brian Preston?

  It's a little weird.

• 1:02:01Speaker 03

  Yeah.

• 1:02:04Brian Preston?

  Yep.

• 1:02:05Speaker 04

  Oh, man. All right. Well, Dan, thank you for that question. I really do hope that gives you some good food for thought as you think about finances together. If you would like a Money Guy Tumblr, just email [email protected] and we would love to send one for you. As always, we may be turning off the cameras and not coming back till, well, I guess we release content every day. We won't be live until Tuesday at 10 a.m. Central again, but moneyguy.com is always there for you. It has our full archive of videos, plus tons of free resources at moneyguy.com/resources to continue the conversations and go a little deeper into your personal financial situation. So be sure to go check that out. We made it for you.

• 1:02:50Brian Preston?

  I can, you know, I think about the fact that this is graduation season right now. And Bo, you gave a very nice plug to Millionaire Mission. This is the book I wrote, really, when I was, if you say, what's your dream person that you envision reading this book in the library, it really is a young person that's just starting out on that journey. And that's why we've had several questions today, and I think it all brings it full circle, is that wasting time can be more expensive than even wasting money if you're not careful. So be very deliberate with how you're spending all of your resources, whether we're talking about time, we're talking about money, but really start flexing that financial mutant muscle as fast as possible. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team.

• 1:03:34Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

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