Pod Insights Money Guy Show How to Build Wealth With A Negative Net Worth | Making a Millionaire About this episode Carl and Laurel are crushing it with nearly $200,000 in household income and have already paid off over $100,000 in student loans. But like many young couples in their late 20s and early 30s, they're facing a critical question: should they continue aggressively paying down their remaining $110,000 in student debt, save for a house purchase, or shift focus to building wealth for retirement?
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:56 Speaker 02 Every financial decision you make has an opportunity cost associated with it. If I pursue this goal, it's likely at the expense of this goal to some extent. We've got these two goals I still want to satisfy. I want to be saving and investing, but I do still have a bunch of student loans that are 5%. We're going to stop talking for a second. What would you guys do?
1:17 Speaker 03 Well, whenever we started dating is right before I went to PA school. And so it's kind of like this expectation like, hey, I'm got to go to school and this is going to come with some debt. And so, you know, kind of like a debt crusader for the longest, I would say. And so we kind of carried that into our first couple of years. And so now today, our main goal is just to try to figure out, like, I know there's a more efficient way to do that, to kind of make the most out of our like prime earning and investing years. So we, from the very, from the get-go though, like we understood, like we didn't want any unnecessary debt. Credit cards, car payments, stuff like that. And the student loans were just next.
1:47 Speaker 02 Got it. And you said, are you a PA now? Is that what you're a professor? Awesome. Laura, what do you do professionally?
1:51 Speaker 04 I'm a teacher.
1:51 Speaker 02 Teacher?
1:52 Speaker 04 Yes.
1:52 Speaker 02 Awesome. What do you teach?
1:53 Speaker 04 5th grade English.
1:54 Speaker 02 5th grade. English, that's awesome. My wife was an English teacher. All right, so you guys got married, already talked about finances, already kind of on the same page. You're two years into this thing. You guys were kind enough to share with us a net worth statement. And right now, you guys, not unlike a lot of young newlywed couples. Uh, here you are, even though things look great, you've got thirty-four, almost thirty-five thousand dollars in cash. You have about twenty-three thousand dollars in investments, but then you do have the other side of the column. You have the liability column, the debts. You've got student loans, a total of a hundred and ten thousand. Uh, for you, Carl and Laurel, yours are about twenty-eight thousand five hundred. So when you look at that, your total net worth right now.
2:37 Speaker 03 Yep.
2:38 Speaker 02 Is negative eighty-one thousand.
2:40 Speaker 03 Yep.
2:40 Speaker 02 Negative eighty-one thousand. Let me just pause there. How's that feel? You're like, oh, this is awful, or like, ah, it just kinda is what it is.
2:46 Speaker 03 I would say that when we started, it was around like two twenty-eight, two thirty-two as far as student loans.
2:51 Speaker 04 Yeah.
2:51 Speaker 03 So it does feel good knowing that we've at least got that number way down.
2:54 Brian Preston? Wow, so you really have been.
2:56 Speaker 04 Yeah.
2:56 Brian Preston? You've been crusading way out there.
2:59 Speaker 03 So I know that we've got a lot of work to do.
3:00 Brian Preston? Let me ask you this, because obviously you've knocked down a lot. Were the other student loan rates that you paid off, were they much higher than what you currently? Or were they much in line with the current student loans that you have left?
3:10 Speaker 03 It was really just the snowball more than anything, so I really just looked at the balance first. Yeah, that's where I started.
3:15 Brian Preston? Give us a flare, were they all higher though, or do you know?
3:18 Speaker 03 Five, about, between five, point zero five, yeah.
3:21 Brian Preston? Okay.
3:21 Speaker 03 The one I have is like six percent, that's the highest one.
3:24 Speaker 02 Student loans is obviously, you said, it's been a goal, and it is a goal.
3:28 Brian Preston? It's been the main goal, it seems like.
3:29 Speaker 02 Is it the, is it the main goal? Like, do y'all have other financial goals? Like, when you guys sit down and talk about what you want your money to do for you. You make almost two hundred thousand dollars as a household, so that's, you got a really, really big shovel. What are you hoping to do with that shovel?
3:41 Speaker 04 We're wanting to buy the house that we're in.
3:45 Speaker 02 Mm-hmm.
3:45 Speaker 04 And so we're wanting to pay off the student loans, buy the house, and just start investing in what will be the most beneficial long-term for us.
3:56 Brian Preston? So it's kind of interesting, y'all actually already live in the house you think you want to buy. I know in the, the notes I had to review, that there's like a family connection or something with it as well. Give us the lay of the land on, on this house.
4:07 Speaker 03 So it's my great aunt's house, and so it's like a house I went up, it's up on the river. Went, spent a lot of summers up there growing up. Couple of years ago, I was graduating PA school, and then she went into assisted living, just because it's like thirty minutes outside of Cleveland, and so we were having to go back and forth a lot to where like, if she wouldn't answer the phone, we were.
4:24 Speaker 02 Going to check on her.
4:25 Speaker 03 Yeah, just going to check on her and stuff. And so she ended up going to assist living in Cleveland and then no one was in the house. And so we kind of just had an understanding like, hey, I'm getting here to graduate. We're about to get married. Why don't we stay there? And now we've been there now about two years.
4:37 Speaker 04 We've really been able to go towards our loans. It's been such a huge blessing and we love the house. We're very thankful. So that's helped us a lot to just pay off a lot of our student debt.
4:49 Speaker 02 Is the house paid for? Like what is it? So it's paid for house right now.
4:53 Speaker 03 Yeah.
4:53 Speaker 02 But you guys are going to buy it from her. Have you talked about what that transaction is going to look like and how that's going to play out?
5:00 Speaker 03 Like as far as price wise, I would say average around 450 and probably going the traditional mortgage route. I'd imagine, you know, you look online, there's all kinds of like buying from a family member. You could have an attorney draw up X, Y, Z, and it can get pretty complicated. So I think we were just looking to go probably the traditional mortgage route whenever we do decide to buy it.
5:16 Speaker 02 Now, is 450 like a sweetheart deal? What's the house probably worth?
5:19 Speaker 03 There's another house in the neighborhood going for like nine thirty.
5:24 Speaker 02 Oh, wow. Okay.
5:24 Speaker 03 Yeah.
5:25 Speaker 02 So this is a really good deal that you're getting on this house.
5:28 Brian Preston? And truthfully, if y'all have been living in it for the last few years, I know, because houses, they don't work well unless somebody's living in them. So it's actually, it probably has been a win-win for the family members as well as for you guys, because you don't, you know, freezing pipes, all kinds of things could happen.
5:44 Speaker 03 We've had all of it in just two years. It's, it seems like, but you know, it's been great for everybody because on the weekends or holidays, specifically the 4th of July, bring her up to the house. We have like a whole family thing up there. So it's like everybody kind of.
5:55 Brian Preston? And I'm sure, because it sounds like your great aunt bought it in the nineties. There's probably some, if you did take ownership, you probably need to do some renovations and some other things to get it up to where it's that 900,000 as well.
6:05 Speaker 03 Yeah. And you know, there's a few cosmetic thing, you know, like wood paneling, put up drought, just stuff like that. But like functionally, it's in great shape. We're in no urgency to try to fix anything anytime soon.
6:15 Speaker 02 You could buy it and live in it just like it is, just like you're living in it right now. All right. So you have these three goals. You said, we want to buy this house. We want to pay off the student loans and we want to like save for the future. You mentioned Roth IRA and that sort of thing. When you guys think about like how you're going to attack these goals, do you already have a strategy in place? I mean, it sounds like student loans has been the number one, like plowing every. But you have some investments. So you've been doing some of the other stuff too, right?
6:42 Speaker 03 Yes.
6:43 Brian Preston? No, go back to that net worth.
6:44 Speaker 02 Okay. They got, look, they got like $23,000, Brian. That's, they've only paid off $100,000 of the student loans and they got $23,000 in.
6:54 Brian Preston? Answer this for me, both of you. Are those just the minimum so you get the match?
6:58 Speaker 03 So her 401K is kinda just, yeah, it's, she contributes to, I think they contribute like for. The 401A is like the employer one, one I don't contribute to.
7:08 Brian Preston? They just put the money in there, non-elective.
7:10 Speaker 03 Like last week, even I submitted it earlier, I thought I submitted enough to get the match, like 4% to get the 2%. So it hasn't even like had any deposits in it yet.
7:19 Speaker 02 When we actually look at your savings plan, there is money going in. You already mentioned 401A has about $300 a month going in there. Your 403B, you said you wanna get, you're gonna get the match on that. That's gonna be about $400. You're gonna get a $200 match on that. Laurel, you have money going into pension system right now, the teacher retirement system, about 5% of your pay. And then your 401K, you're doing about a hundred bucks. So all in, you know, based on your income, you can still include the employer match for the moment. You guys are quickly getting that, that realm where you won't be able to. But when we factor all that in, you guys have about $1,200, $1,300 a month going into like future financial independence, right? So see, they're saving.
7:59 Brian Preston? But most of that's employer.
8:00 Speaker 02 They're, okay, Brian. I'm trying to, I'm trying to help here.
8:05 Brian Preston? Big shovel, big shovel.
8:06 Speaker 03 Right, yeah.
8:06 Brian Preston? So I'm just trying to, and when you think about this, cause in a minute I'll talk about, we all have opportunity costs with every decision you make and y'all are also at this crucial age. I mean, it gets me so excited about how, big shovel, big ingredients, cause that's ingredients of wealth. You have what it takes. You are, you have good income coming in. So you obviously have discipline because you've been in college, you know, in education for all these years. You've got a big income, so that creates the second ingredient, which is the, the cash or the margin. And then y'all are young enough that you got time. So it's like a, a perfect carrot cake recipe. You got it. It's just that we actually put it all together and give it enough time to bake in the oven.
8:50 Speaker 03 Yeah.
8:51 Brian Preston? And I'm worried that you got something in whispering in your ear over here going,
8:56 Speaker 03 Yep, pretty much. Yeah. We'll set them on the shoulder.
8:58 Brian Preston? Then you're like, okay, we'll leave those ingredients up on that recipe, you know, up in the shelf in the cupboard just a little bit longer. And that's fun. We're gonna talk about that. But we're gonna build this cake one ingredient at a time.
9:09 Speaker 03 I like it.
9:09 Speaker 02 So it sounds like your strategy right now, if I am discerning correctly, is, all right, we're gonna attack the student loans, and we're gonna knock that out as quickly as we can. And then we want to do the house. And then, once we've knocked out those two things, then we're gonna start saving and investing for retirement.
9:24 Speaker 03 Yeah, that was the original plan. And then, kind of what's been changing over the last, like, six, eight months, was realizing that, you know, we've paid off the higher interest of the loans. We still have one that's like 6%, but I kind of wanted to focus more on the house right now. So that's why I've been just like putting money in the fair winds and just seeing like, okay, after we get a plan together.
9:43 Speaker 02 But fair winds is your savings account.
9:44 Speaker 03 Yeah.
9:44 Speaker 02 Just loading up money in cash to figure out what to do with.
9:47 Brian Preston? When you say it's changed, is this kind of like bonus? He's going, like, when I know I'm going to the doctor, I fast for like, the week before.
9:55 Speaker 03 Right.
9:56 Brian Preston? I quit eating.
9:57 Speaker 02 No sugar.
9:58 Brian Preston? No sugar, everything else.
9:59 Speaker 03 Yeah.
10:00 Brian Preston? So when you say that this is all pivoted recently, is this like you're coming to see your, your financial PAs?
10:06 Speaker 03 Yeah.
10:07 Brian Preston? And you really, because I mean, everything I've seen on that worst statement is you've been crusading. I mean, you practically got the plated, you know, you even put your chain mill on. I mean, you are, you are debt crusading all up and down. So is this, has your change been because you knew you were coming on this show to a degree too?
10:23 Speaker 03 I would say, like, the last year, it's been, you know, hammering out the loans, hammering out the loans. And then, like we said, about six months, I started like discovering other YouTube channels, seeing like there's probably a more efficient way to do this. So, you know, I'm perfectly comfortable if we buy the house and we still have loans, like, that's okay with me. Because I know that we will get rid of them eventually. I just don't want to miss an opportunity with the house.
10:44 Speaker 02 We do believe that there is a better way to do money. And one of the ways that we kind of like try to navigate that is through the system we've put together called the Financial Order of Operations. Maybe you guys have heard of this, right? It's this idea of, what should I be doing with my next dollar? And how should I be navigating the financial decisions I'm making inside this context? Well, it's really easy when you have things like student loans, right? Like, okay, well, where do student loans, where does that debt payoff fall in the Financial Order of Operations? It becomes a little bit harder when you have things like buying a house. Because buying a house is not specifically in here. So what we want to lay out for you is a framework of how we think that you guys might want to think about these three goals and three priorities, right? And how you can attack them in the most efficient manner. Because Brian already alluded to the fact that one of the greatest resources you have at your disposal
11:29 Speaker 02 right now is time, but time can be awfully cruel. And he'll show you the mathematics on that, that the older you get, the less powerful your time can be. So if you wait till you get through this one goal and then wait till you get to this other goal, you may have missed out on some real opportunity based on that resource that you have available to you. So we did some analysis on your student loans and you've kind of already alluded to this. When we break down all of your student loans, you can see, most of them are right around that like 5% threshold. There is one student loan that's up above 6% and you owe about $18,700 on that, right? So when we think about the financial order of operations, we think about step three high interest debt. We would argue that Carl, that loan for you qualifies as high interest debt, something we should probably think about prioritizing and knocking out.
12:12 Speaker 02 All of those other debts around that 5%, we're kind of teetering on the edge. Is it step three high interest or is it step nine low interest? And so we're going to get to talk about how we would think about that. And I think one of the things you're going to be surprised to see is that we didn't arrive at an all or nothing type solution. And we'll kind of walk you through that. But there is one unique thing as it relates to your loans that we want to like bring into the picture. I think specifically Laurel with your loans, there's a unique thing. Can you tell us a little bit about what that is and how that might play out?
12:44 Speaker 04 If I work at a Title I school for five years, they should pay $17,000.
12:51 Brian Preston? Potentially.
12:52 Speaker 04 Yes.
12:53 Brian Preston? Depending upon how you're made, you know, what your specialty is and the students you work with.
12:57 Speaker 04 Yes.
12:58 Brian Preston? Yeah, for sure. We've helped people work through that and you are currently at a Title I school.
13:03 Speaker 04 I am and I have friends who have done that, so.
13:06 Speaker 02 So if you are someone who's going to take advantage of teacher loan forgiveness, it probably would not make a ton of sense to rapidly pay off that debt if there's a potential that you could actually earn it off through some of the loan forgiveness programs. Is that a safe assessment?
13:19 Speaker 04 Yes.
13:20 Speaker 02 Awesome. Talk a little bit about cash flow for us. What do you guys have coming in every month and then what's your monthly burn rate?
13:26 Speaker 03 I believe with my most recent 403B contribution, I want to say around 11.3 coming in. And then our burn rate is. About forty one hundred.
13:36 Speaker 02 Public math is not my strong suit. I'm in around eleven, three to eleven thousand dollars coming in. And I'm around four, forty one hundred to four thousand going out. So that means we have, what, seven thousand dollars? With which to fund these goals. One of the first things we want to assess, again, working through the financial order of operations. And we did just determine that you do have a single loan that would qualify as high interest. Well, so we want to go back to our net worth statement and say, okay, is the cash that we have on hand appropriate? For what we're trying to accomplish? Because you said your strategy right now is you've been dumping cash in there, dumping cash, dumping cash, dumping cash in your savings account, right? If your monthly burn rate is four thousand dollars, and we were to say that, you know, we wanted you to have a
14:21 Speaker 02 six month, fully funded emergency fund, that would be six months times four, check my math on that, twenty four thousand dollars, right? So right now at thirty four, you have about ten thousand dollars of excess inside of your cash. Safe assessment? Uh, how much did we owe on that, uh, on the student loan that was at six percent?
14:42 Brian Preston? Eighteen, seven.
14:43 Speaker 02 Eighteen, seven.
14:44 Brian Preston? I, I do have a question for you, Carl, though. Was some of the, because you, you've paid off like over a hundred thousand dollars, right, already? Some of those loans under six percent?
14:54 Speaker 03 Yes.
14:55 Speaker 02 He told you, he did the snowball.
14:56 Brian Preston? I know, I'm trying to.
14:57 Speaker 02 Well, you're just, you're twisting, man, you're twisting.
15:00 Brian Preston? Well, no, education, sometimes it's better if you're going to be a good educator, you have to come back to the point. Because have you ever struggled with discipline?
15:07 Speaker 03 Yeah, in the past, I mean.
15:09 Brian Preston? Where? Tell me in your life, because you, you, and I want to hear from you in a minute if you think that Carl struggles with discipline.
15:15 Speaker 03 Well, I would say like before we met, like when I was in twenty, twenty four range, I did have some credit card debt. And so that's kind of what started the whole Dave Ramsey thing, and then kind of the, the snowball from there. And I was just, came pretty scared of.
15:27 Brian Preston? So, now, look, I want to give Dave some credit. So you, were you so reckless with your credit card debt? That you ran up a large balance or paying like twenty percent a month on, or a year, I should say, annualized?
15:39 Speaker 03 Yeah, I think the max at one point, it was around ten, ten thousand max, yeah.
15:42 Brian Preston? So you loaded it up?
15:43 Speaker 03 Yeah.
15:44 Brian Preston? Well, good, that, look. I gotta give Dave some credit because this is the thing that I think, you know, sometimes when people show that they can't be disciplined with credit card debt, you're just not a credit card debt type of person. You do have to T total it. So if that's the case, I stand corrected. Have you evolved or matured enough to where you still struggle? Or is this, so now you think, can we go back to the well with debt? Or do we need to stay on this path of knocking it out?
16:09 Speaker 03 No, we have a credit card that we use. I mean, only if I'm buying something.
16:12 Brian Preston? How long have you been paying it off every month? Like years?
16:15 Speaker 03 Since our honeymoon, so.
16:17 Brian Preston? So for the last two years, there's no problem y'all pay this thing off every month?
16:20 Speaker 03 It's just like, we don't use it for like daily expenses. Like if we were, we were gonna buy a couch and it was like 1,200 bucks. It was like, if there's not a 3% charge to use a credit card, I would just use that because some points and I would just pay it off.
16:31 Brian Preston? What happened during your early twenties? Was it just young and just crazy?
16:35 Speaker 03 Yeah, just, I didn't really go on any like insane trips or do anything like that. I think it was just a whole lot of small purchases here and there.
16:42 Speaker 04 Was it through school? Is that when it started or was it just a credit card?
16:46 Speaker 03 Yeah, it was while I was in like undergrad.
16:48 Brian Preston? Laurel, how about you? Did you have any debt issues or any struggles?
16:51 Speaker 04 No, I.
16:53 Speaker 02 My dad was in finance.
16:54 Brian Preston? I know, but I wanna hear it from her.
16:56 Speaker 04 I am very much, I would say a saver. I think because of how my dad taught me and I saw my family do that when I got my masters. That's when I had the student debt.
17:07 Brian Preston? Laurel said that it was modeled in her house to be disciplined, not run up debt and other things. Well, your background, did you, did you have somebody, did you need to have just some time to live life to get that education? Or did you have it modeled in your house?
17:20 Speaker 03 Not really modeled in the household. It's more something that I kinda just came across. Like I just had that credit card debt. I just realized there's gotta be a more efficient way to do this. So that's where I kinda went online, found all this stuff, ran from there. But as far as like the household, money wasn't really talked about or enforced really.
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18:32 Speaker 02 Right now, you have an extra $10,000 or so in cash that you've been stocking up above and beyond your emergency fund that we could potentially deploy for like a step three type endeavor. Mm-hmm. Well, and you said you have like $7,000 of free cash flow coming in. So we think about $10,000 you have available right now and $7,000 of free cash flow, realistically you could knock out that 6% loan pretty quickly, right? Like you can make that 6% loan go away pretty fast.
18:59 Brian Preston? Like in the next month or two.
19:00 Speaker 02 So if we're gonna like think about prioritizing goals, high interest student loan debt, okay, we can kind of check that one off. We feel really good about that one. Well, now, let's move to the second goal you guys mentioned, which was buying the house. Because obviously, if we're thinking through where we're going, we always say you can't buy a house, or you shouldn't buy a house unless you're at least in step four of the financial order of operations. Meaning if you don't have your deductibles covered, you can't buy a house. And if you're not getting free money, you probably shouldn't buy a house. And if you have a bunch of credit card debt, you're probably not ready for homeownership. And if you have no cash, then you're also probably not ready. But once you're at that point, is where it kind of begins to start making sense. So we said, okay, let's look at the fundamentals of what a home purchase could look like for you guys, based on the information you shared with us.
19:43 Speaker 02 So you're gonna buy this house for like $450,000, right? We said, or you told us that the timeline for which you'd want to be able to make, have this transaction somewhere between a year to a year and a half. Fair assumption? Well, we said, okay, if we're gonna do a 5% down payment. Now, I don't know what you've worked out with your great aunt and the conversation. Have you talked about, you said you want some traditional financing that you're gonna do with a bank, right?
20:08 Speaker 03 Yeah, yes. I mean, pretty much that's the path we decided to go down, is just like do the traditional mortgage route. And the one, one and a half years just came from, you know, just making sure that, you know, this is kind of her last asset that she has that can... Blaster through everything. So it's like, we kind of, one, one and a half years seems pretty reasonable to get in on the books.
20:28 Speaker 02 So one of the things that's not entirely clear to us is when you approach the financial institution to go buy this house, and it ha- if it has, let's just say, eight hundred thousand, if it has an eight hundred thousand dollar market value, and you're asking them to loan you four hundred and fifty thousand dollars, there's already a lot of embedded equity in there. So it's unclear to us whether or not you'll have to come up with a down payment or not. But we said, for illustrative purposes, to show you how we would think about this if that is a requirement, if we wanted you to come up with five percent down payment, plus about three percent for closing costs, we said, okay, how much would we need to save if we're going to shoot for having that cash available either a year from now or a year and a half from now? So we know, over the next few months, we're going to pay off
21:10 Speaker 02 this six percent student loan. Well, then, if we want to save up that amount of cash in one year, we need to save about thirty-five, sixty per month. If we want to save it in one and a half, one and a half years, we need to save about twenty, two hundred dollars per month. So we said, all right, we're going to kind of, we're building a plan here. Let's go right in the middle and say that for the house, we're going to commit to saving three thousand dollars per month. That means that at some point in the next year to year and a half, we will have enough cash built up to be able to satisfy the down payment. So we've checked the box on the student loan. We paid that off in a few months. We know that we're going to have three thousand dollars a month going towards the house. We also, again, just because we want to make sure we do the math on this, whenever you buy a house, we want to make sure you can answer three things. Did I put at least three to
21:55 Speaker 02 five percent down? That, we've already satisfied that. Can I be in the house for five to seven years? You guys have already said that's the case. And does the total monthly expense fall below twenty-five percent of my gross income? So we did the math on what that mortgage would be, even doing the traditional financing route, and it's around three thousand dollars. So it's just kind of nice that the math worked out nice and even.
22:14 Speaker 00 Yeah.
22:15 Speaker 02 So if you have seven thousand dollars of free cash flow, that means you've got three thousand dollars going towards the house, you've got four thousand dollars to do other stuff with. Now, we know that inevitably, there are other things that come up that might fall outside of that four thousand dollar monthly expense number. So we just put in a five hundred dollar little, we call it a life buffer, right? So maybe we don't really have four thousand to work with. We really have thirty-five hundred dollars to work with. The question then becomes, all right, I've got thirty-five hundred dollars, and I've got these two goals I still want to satisfy.
22:45 Speaker 00 Mm-hmm.
22:46 Speaker 02 I want to be saving and investing, but I do still have a bunch of student loans that are five percent. We're gonna stop talking for a second. What would you guys do? Right now, as it stands, how would you approach that if you had $3,500 to work with?
22:59 Speaker 03 Get our investing percentage up.
23:01 Speaker 02 He's baiting the teacher. He's baiting, that's how we say it. When they walk in, they're like, "I'm gonna pay off those student loans."
23:06 Brian Preston? And look, I wanna, because we're gonna show you what this becomes, but everything we've done is to try to be as conservative as possible. I bet y'all pay off that 6% loan even faster. Because we've tried, and I bet this house decision, like I said, once you start talking to financial institutions, you start talking to your family members, you'll figure out the path. You might be able to do that faster. We just wanted to, but we laid this out in a very measured way so that it would kind of lay out what's the next step after those two points are made. If you had to, out of 100%, how would you, you know, we gotta squeeze the balloon. What are we doing to debt? What are we doing towards investing?
23:43 Speaker 03 Of the 3,500?
23:44 Brian Preston? Yeah, just curious.
23:46 Speaker 03 I don't know, that's, that's tough. Maybe like 70, 30, 70 invest, 30 loans. I still wanna do more than the minimum on those. I kinda wanna keep chipping away.
23:56 Brian Preston? God, I feel like a mentalist. I really do. You ever watch those shows and you're like, "Man, I wonder what they'll say."
24:02 Speaker 02 How they know what my second grade teacher's name was?
24:05 Brian Preston? There's some pretty good videos out there. The reason I feel like a mentalist is because we're gonna show you in a minute, we did exactly what, and by the way, just so the audience knows, we didn't know what you, matter of fact, even in some of the draft forms, there were some different percentages that were floated around to us. And I was like, "Look," and our number is arbitrary too. Because you guys, once you, this is, this is the unique situation you're in. You have options right now, and I think everybody, with personal finance, there's so many paths to success. But it is kind of funny because we did exactly what you just said, without knowing as we did 70, 30.
24:39 Speaker 02 And we want you to understand that every financial decision you make has an opportunity cost associated with it. If I pursue this goal, it's likely at the expense of this goal to some extent. And you guys are gonna have to decide, this is where personal finance is personal, which ones are we willing to accept? Which costs are okay? And which goals do we wanna pursue? So we wanna show you what the implications of those decisions are. Well, if all you did for your loans was pay the minimum payment, it would take you about 14 years to pay off those loans. Let me pause there for a moment. Would you guys like to have student loans 14 years from now? No. Is there any chance that you guys will have student loans 14 years from now?
25:15 Speaker 03 We're definitely not taking out more, so I mean...
25:18 Speaker 02 But it seems unlikely there's a scenario where you're just gonna pay the minimum payments. And you're gonna let these things go all the way out.
25:23 Speaker 03 Right, right, right.
25:24 Brian Preston? And this is where I think we get a bad rap sometimes, because we talk about how we can use debt as a tool. But you'll notice, we don't like debt either. We're just trying to figure out how you balance that, because there's a... Because everybody, you always hear when you talk about debt crusading, they always say, "Well, this is safer. This takes the risk out." Well, I always remind people, there's a risk you won't have as much in your army of dollar bills to pay for you when you're not working. And it's where I talk, you're gonna have a growing family. You're gonna want an army of dollar bills behind you, so you own your time that much sooner and have more flexibility. That's a risk, too.
26:00 Speaker 03 And that's been what's kind of been gnawing at me the last year. It's like, yeah, the paying off the debt and everything's great, but I know there's a more efficient way to do this, as far as in the future. Because it's easy to be like, "Oh, in a year and a half, we'll have these loans done, then we can start investing." But it's like, that's a year that we weren't invested in.
26:14 Speaker 02 It's a year of lost time.
26:15 Brian Preston? And I want to go, Beau, I want to give you some power in this, is when should I talk to him about the diminishing power of the wealth multiplier?
26:22 Speaker 02 I think right now, Brian. I think it's a great time to talk to him about it.
26:25 Brian Preston? Laurel, you are 28 years of age currently.
26:28 Speaker 02 Yes.
26:29 Brian Preston? Your wealth multiplier, meaning every dollar that comes into your possession right now, if you put it to work, or if you didn't put it to work and spend it, you've... You know, that's an opportunity lost. Every dollar could potentially become $29.70 at retirement, from every dollar.
26:46 Speaker 02 $1 turn into $30, that's pretty awesome. That's 30x.
26:49 Brian Preston? Look over here at your husband. He's 32. So there's not much, you know, so you're like, okay, so if you're at close to 30, what happens to Carl? Well, he's 32, so every dollar has the potential to become $18. Do you see how
27:03 Speaker 02 You hear that response? Oh.
27:05 Brian Preston? Here's what's wild. For a 20 year, by the way, we've done surveys on our financial mutants who watched the show and then we have our our bound wealth clients and we see their crazy numbers. This is what separates the general public from a financial mutant. A lot of them found out about personal finance in their twenties. So they started actually saving and investing in twenty. For a 20 year old, every dollar has potential to become eighty eight dollars. Now, y'all are older than 20, but y'all have a growing family potentially coming in the next few years. I want you to pay attention to that because for a, as soon as your newborn baby comes on the planet, every dollar has the opportunity to become six hundred and forty seven dollars. Time is cruel. It's powerful, but it's also very unfair. Now, if you waited
27:51 Brian Preston? three years, because you said you were debt crusading, if we wait until you're thirty five years of age, every dollar only has a chance to become twelve point six nine. So it's down to thirteen. And here's where I did some math. You realize the difference between you and Laurel is almost, it's a little less, a forty percent diminished on what your wealth multiplier is.
28:13 Speaker 02 Yours is forty percent less valuable than hers.
28:16 Brian Preston? Because like I said, she currently is twenty nine point seven, yours is eighteen point oh five. Yeah, I get it. You got to pay a five percent on your student loans, but we've also, we got a clock in the background that is ticking and every dollar that doesn't go into your army of dollar bills is just lost. It just doesn't get a chance to catch back up because you just, you run out of time on compounding interest, the eighth wonder of the world. I want people to feel the equal weight of the pressure. Yes, the risk of the debt, but you also need to feel the risk that time can be your most valuable resource, but it can quickly turn into your enemy if you neglect the wealth building process too long. What happens when somebody has, you know, you look at some of these, the
28:59 Brian Preston? end of life decisions people have to make because of diabetes, heart disease and other things. At some point, you turn into palliative care because they just don't, you can't go tell them to go, hey, start walking every day.
29:11 Speaker 02 Yeah.
29:12 Brian Preston? Do anything for you because you've let too much of life build up that it doesn't. You're young enough now that my corrective action on you guys will seem like a walk in the park. Go get more sunshine. Hey, maybe you only get to have dessert twice a week instead of, you know. These are the, y'all are still in that young enough stage that we don't have to make hard decisions. It breaks my heart, though, when people come to me in their 50s and 60s. And then I'm like, I have to be the bad guy and be like, yeah, you know, you just don't get to have the easy decisions. That's somebody who's in their 20s, somebody's in their 30s, even 40s. But y'all are young enough, you get to make easy decisions. And that's why we want to kind of make sure we scare you a little bit.
29:51 Brian Preston? Because debt crusaders need a little scaring to know that there's, there's, there's, there's two different battles that you're, you're working through when you're building wealth.
29:59 Speaker 03 Yes.
30:00 Speaker 02 And the wealth multiplier is a conceptualized number. We want to show you guys actual numbers for you. So if you were to pay this off more quickly, you're going to put a thousand fifty dollars on the loan. You would see that now, instead of having student loans for 14 years and two months, you have it paid off in five years and two months. Let me pause there, give me some feedback.
30:18 Speaker 03 Yeah.
30:19 Speaker 02 You like that? That's way better. This is not even prioritizing the loans. This is doing the 30% of the loans, right?
30:25 Speaker 03 Right.
30:26 Speaker 02 Huge, drastic change.
30:28 Speaker 03 Yeah.
30:28 Speaker 02 Yeah. Well, with that other 70% that you're now putting to work, having it invest for you, look at what that money is able to do. Let's say that on average, you can earn about 8.8% over the remainder of your working career. That $23,000 you have right now has the ability to turn into almost $7 million by the time you get to age 60. Give me some feedback on that.
30:51 Speaker 03 Huge difference.
30:52 Speaker 02 Oh, yeah.
30:52 Brian Preston? Well, I can even go deeper because I, I want to take you not only through the behavior of the saving and investing, but knowing what that $7 million can do for you. That is, if we brought it back into today's dollars and said, hey, what could this provide income wise? All through my retirement, that $7 million at age 60 is about $121,000 a year.
31:13 Speaker 03 Yeah, and the, the five-year payoff is fine with me if we're
31:17 Speaker 02 Yeah, oh, yeah.
31:17 Speaker 03 adequately contributing to retirement. Because that's, like I said, been like the itch in the back of my mind in the last six months. I know that there was a better way.
31:24 Speaker 04 Yeah, that's been the missing piece. I feel like that's kind of how we found you guys. And then, once we started watching your show, we were like, oh, there's definitely something else we could be doing that we should be doing.
31:36 Speaker 03 Yep.
31:36 Speaker 04 And then, that's what really sparked all of this. So, just needing to know where to look and how to move forward is huge. So, we appreciate it.
31:46 Speaker 02 There's one more thing that we'd like to equip you with, because obviously, we've kind of walked you through your financial order of operations. How should we think about prioritizing our next dollar? We kind of gave you an example of what you could do to satisfy those three goals that you have. We also want to share with you sort of an investment order of operations, because when, if you do decide, hey, we're going to deploy more of these, you have a couple of different pieces and parts to choose from. So, we just wanted to show you your investment order of operations, how we would think about dollars flowing, putting them to work. So, obviously, we're going to get the employer money. That's going to happen right off the gate. Your 401A, Carl, and then your pension, you have an employee and employer mount going into TRS. Well, then, we for sure want you getting the match. That's step two of the financial order of operations. We want you to maximize the match in the
32:30 Speaker 02 403B, which you're already doing. Once you do that, and I think one of the things we saw in the notes, hey, I opened a Roth IRA just because I want to see what that looked like. I want to see what that was all about. We're just not putting anything in there yet.
32:40 Speaker 03 Right.
32:41 Speaker 02 Those get really, really excited. So, for some of the very first dollars you're going to put to work for yourself that you're not putting to work right now, we'd love to see you max out a Roth for each one of you. We'd love to see you open up an HSA if you have a high deductible health plan, and start getting those tax-free dollars growing. And then, once you've done those things, you can double back to the retirement accounts, double back to the 403B, double back to the 401K. Does that make sense?
33:05 Speaker 03 Yeah.
33:05 Speaker 02 Is this aligned with the plan that you already had in place?
33:08 Speaker 03 Yeah. I knew we would be contributing to the Roth to an extent. So, that's, and we'll open one up for her as well.
33:15 Speaker 02 At $2,450, if you take our numbers per month. Max those things out, which is pretty awesome. I know a guy early in his career didn't quite max them out all the way. Still regrets it this day, well into his 50s.
33:28 Brian Preston? It's in the book.
33:29 Speaker 04 Yeah.
33:29 Brian Preston? I'm telling you, you can make a lot of mistakes, but I'm telling you, you will look back and go, even though I've come out this well, could have done a little bit better. And that's your Roth, there's like I said, if the government restricts how much you can put in and who can put in, because if you make too much, you're like, no, no, not for you. Yeah. You gotta get in there. I mean, because that's, that's powerful. At your age, I mean, thinking about tax-free millionaire status on some of these assets gets me, it's tingly. It cracks me up that you opened a Roth account, but we haven't really started funding this. Once again, that is like
33:58 Speaker 02 That's the first step. That's the first step.
34:00 Brian Preston? That's like me fasting before the physical. It really is. I think you're not, you've got to get you actually doing the actions to actually create the wealth. Absolutely. No, we're excited to do that.
34:09 Speaker 02 Here's your homework. First thing, reevaluate your emergency fund. Determine if some of that money you have sitting in a fair winds should be applied to that high interest 6% loan that you have. Then, based on free cash flow, consider paying off that loan before the end of the year. You're going to have enough free cash flow to do that. Once you've done that, I would have a conversation with a bank. I'd go ahead and reach out to whoever you're thinking about doing traditional financing with the house for, to figure out what they're going to require in terms of capital down at closing.
34:38 Brian Preston? Yeah.
34:38 Speaker 02 If you're getting a $800,000 house for 450, you might not have to come up with any, and it might accelerate your timeline.
34:43 Brian Preston? Okay.
34:43 Speaker 02 If you do have to save for a down payment, we think that 5% is a great target to shoot for. That would involve saving about $3,000 per month towards housing over the next year to year and a half to build up that down payment. Once you've done that, figure out your split with a free cash flow. Do we want to go 70/30? Do we want to go 80/20? Do we want to go 64? And whatever the rest of that is, all the way up to 100? You figure out what makes sense and what works for you guys, and then check the numbers, rent, repeat, reevaluate, and start building your great, big, beautiful tomorrow.
35:17 Brian Preston? I really appreciate it. Beau, if somebody else wants to apply to come on Making a Millionaire, where should they go?
35:22 Speaker 02 Yeah, if you'd like to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of our resources or free tools, you can go to moneyguy.com/resources.
35:32 Brian Preston? Carl, Laurel, it's been an absolute pleasure. Thanks for coming on. This has been an absolute blast. Guys, I'm your host, Brian, Mr. Beau, Money Guy team, out.
35:43 Speaker 02 Making a Millionaire is hosted by Brian Preston and Beau Hanson. Brian and Beau 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.
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