How To Actually Make Money Sports Betting (Here’s the Math)

⁠⁠⁠⁠Sports betting has exploded in America—but can you actually make money betting on sports, or is it quietly hurting your ability to build wealth? We look at the rise of online sports gambling, why Gen Z and young investors are increasingly drawn to betting, how sportsbooks make money, and what the numbers reveal about long-term sports betting profits. Then we compare gambling with investing, retirement savings, Roth IRAs, 401(k)s, index funds, and the opportunity cost of losing money while you’re young. If sports betting is part of your entertainment budget, here’s how to think about it without sacrificing your financial future. 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

• 0:01Speaker 00

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• 0:26Speaker 01

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• 0:52Speaker 02

  How you can actually make money sports betting. Yes, you heard us right. We're going to break it down. Everything you need to know.

• 0:59Speaker 03

  All right, I am so excited about this because there is something going on in this country right now. That's a problem. I alluded to a little bit last week and I've thought about it over the last week. We even thought about it in show prep. And it's a problem and it's a bad problem. And in my opinion, it's only going to get worse and it's only going to get more severe. And I think that the headlines of the future are going to specifically call this thing that we are in right now, an epidemic that is robbing from our youth.

• 1:27Speaker 02

  There are a lot of headlines surrounding sports betting. In the past couple of years, you've probably seen them too. We reacted to one last week in the live stream, like Bo said. And why is that the case? It's because in 2018, the United States Supreme Court overturned a federal law that prevented states from legalizing sports betting. So since then, online markets have grown rapidly. 2018, in the grand scheme of things, not that long ago.

• 1:54Speaker 03

  Not that long ago at all.

• 1:55Speaker 02

  Now we are kind of living with the consequences or the aftermath of that decision. And we're seeing it more widespread than ever.

• 2:02Speaker 03

  Yeah, and if you look, some form of sports betting is now allowed in 39 states. And 30 states currently allow online. So like on your computer betting as well as retail sports gambling, like at a casino or through a sports book. So since that ruling in 2018, it's gotten bigger and bigger and bigger and bigger. And I think one of the most, I'm not going to use the curse word. I think one of the most, what's a better word than that curse word?

• 2:29Speaker 02

  What are you thinking of?

• 2:30Speaker 03

  I think one of the most haunting things, one of the most devastating truths and realities is, listen to this. Americans now spend more on sports bets than movies, arts, museums, and music combined.

• 2:47Speaker 02

  That was the thing last week that I was very surprised about. Like I'm used to hearing more people are doing it, but I was like, more than going to see a movie or going to a museum or like, and any of these other actually fun fulfilling things. That was really surprising to me.

• 3:02Speaker 03

  In the year 2025, Americans placed roughly $166 billion in bets on sporting events. In 2018, it was just 6.6 billion. So that is a 25 time increase from 2018 until 2025. It's not good. And so one of the questions, and we're trying to be unbiased here. We're trying to have a discerning mind in how we approach this. So when you see something increasing that much, when you see something going from a $6.6 billion market to $166 billion market, you want to ask the questions. Okay, is there something going on here? Do people actually make money on sports betting? Is this a way that people are able to generate wealth and add to their coffers?

• 3:46Speaker 03

  And not surprisingly, the numbers told the truth.

• 3:49Speaker 02

  So let's put it this way. If you bet on sports, on sporting events over an extended period of time and you just break even, just break even, then you are doing better than the vast majority of sports bettors. That is just the reality. So you might've clicked this video looking for ways to make money betting on sports. And we will show you the better approach. We are going to talk all about the money guy.

• 4:13Speaker 03

  I like how you worded that. The better approach to doing it.

• 4:16Speaker 02

  And a genuine approach, because we see that a lot of people are doing this. We're going to talk more about that, why you're doing it, all of these things. We are going to talk about that, but we do want to be upfront about some of the math behind that. And one of the first things is that in a study done from the University of California, San Diego, they found that 96% of sports gamblers lost money over a five-year period. So that is only four in 100 people who bet at all on sports. Only four of them made any money.

• 4:48Speaker 03

  It doesn't say how much. It doesn't say they're like, they won big, hit a jackpot, or millions. It just says that after that five-year period, they were net positive on sports betting. Because I have buddies and friends all the time telling me, oh, yeah, you know, I'm actually pretty good at it. I know what I'm doing. I'd be curious, if I looked at your track record across all the dollars that you spend on sports betting, how does that play out? Because statistically, only 4% of those people will have been positive over that five-year period. And what's even crazier is for every $100 that you bet on sports, for every $100 that you place, the average expected loss in 2025 was $10.40. And just, I'm trying to, I want you to wrap your head around this, Reg. What if I were to say, hey, you should put money into Roth IRA?

• 5:30Speaker 03

  And when you put money into your Roth IRA, you put $100 in there, from jump, from the onset, you need to just go and plan on the reality and the fact that you're going to lose $10 of that. Would you do it?

• 5:41Speaker 02

  I would not be doing that.

• 5:42Speaker 03

  No, of course, of course you wouldn't. And yet, that's what people do. They go into this thinking, oh, I'm gonna make money, or I'm gonna beat the system, or I've got this thing figured out. And so the real question in my mind is not so much, how do you make money sports betting? The real question I think everyone should answer before you even wade into those waters, is why are you doing it? Because this is going to be a little bit of a hot take and something that you may not expect to hear from the money guy. But we are going to advocate that if you're betting on sporting events or you're doing sports betting because it's something that's fun, it's something that you derive utility from, it's something that makes watching sporting events more enjoyable or allows you to be more engaged, I'm going to call that, okay.

• 6:27Speaker 03

  I'm going to say that is a hobby, that's an okay hobby to pursue with like a bunch of caveats. And we're going to talk about those caveats here in a moment. But if you're going into it, if you're saying, I'm going to be sports betting, I'm going to go play, this is the way that I'm going to make money. This is the way that I'm going to build wealth, then in reality, you've already lost the plot. You're already approaching it the wrong way. If you were to walk into a casino right now and say, you know what? This is my ticket. I'm going to walk into the casino, I'm going to make money, this is going to pay for my trip. I'm going to walk out and I'm going to be more wealthy because of it. Going, logging into FanDuel or logging into DraftKings and approaching it that same way, I think is the exact same thing.

• 7:12Speaker 03

  So you're going into it right away with the wrong presupposition. If this is your wealth building strategy, you're likely doing it wrong. So let's assume for a moment, that's not the case. Let's assume that you're not someone trying to build wealth that way. If that's the case, how should I approach it? How should I think about it?

• 7:30Speaker 02

  I'm going to echo something we shared before and we've been really transparent. We have financial mutants in this building.

• 7:36Speaker 03

  Yep.

• 7:37Speaker 02

  That do it with that first reason and that first why. It's recreational. They love sports. They have a budget for it. Honestly, they do it the way we're about to lay out. And I don't fault them for it because they are financial mutants through and through. They are very good with their money. They know themselves, they know their personality. And it's, I don't fault them for it. Like you said, it's more of a hobby.

• 7:57Speaker 03

  If I were sitting in your shoes though, I'd want to know, the people, the financial mutants we're alluding to, not hosts of this show. So I'm just throwing it out there. There's other folks that are, you know, out in the wings that perhaps are doing that. Not us, but they do it as a hobby and that's okay. I'm not going to fault you on your hobby. So if you are going to do it, if you're going to think about sports betting, if you're going to like wade into those waters, how should you approach it? And the first thing, we're hitting this home over and over and over again. Sports betting is not a replacement for investing. These are not synonymous terms. One is not, one is a wealth building strategy, a future financial dependent strategy. The other absolutely is not.

• 8:39Speaker 02

  In this next stat, I'm just looking at it, and this is why we keep bringing this home. This is kind of why we're even doing this show today. Over half of Gen Z investors redirected money for investing towards sports betting just in the past year. That is kind of staggering. Like that's what really makes me sad about this change and this rise of online sports betting. Because this is not a replacement for investing. And if the younger generation is kind of falling into this trap, then they are setting themselves up for some disappointment, some failures, a harder path along the way.

• 9:15Speaker 03

  Yeah, I think what's wild is, and it doesn't say that some people are doing it, some people are. It doesn't say some people are doing it. Some people are trying to do this as a hobby. Some people are trying to figure out what it's like. It says they're actually redirecting funds that should be going into their Roth, that should be going into their 401K, that should be going into wealth building. And instead, they're sports betting. So if you're a Gen Z, if you're a young person out there doing that, you are doing it wrong. I don't mind being that prescriptive because that's not the way that you build wealth. Rather, we want to see you saving for the future. We want to see you saving 25% of your gross income. And we want it going into accounts like your employer sponsored retirement plan, your 401Ks, 403Bs, 457s, your IRAs, your ESOPs or ESPPs,

• 10:00Speaker 03

  if you could participate in those, your taxable brokerage account, your health savings account. We want to see you putting money in those, not in the sports book. And if you're just doing the sports book and not doing those things, you're missing the boat.

• 10:12Speaker 02

  If you're deploying money that should be helping you follow the foo and get through those first few steps and lay that groundwork, then that's where you're kind of playing a dangerous game. And we would advise you not to do that.

• 10:23Speaker 03

  So the second thing then, okay, you're not doing that. If you are going to do it, treat it like fun money. Don't take it so seriously to where it has to win, has to work out, has to be the thing. Treat it like any other hobby. Now, if you're someone who likes to take the weekends and you like to go play four or five hours of golf and you want to spend a hundred bucks on a golf round or 200 bucks on a golf round or whatever, that's okay. That's a hobby. You can go pursue that. If you're someone who wants to go be an avid mountain biker and you're going to spend money on buying the bike and doing the thing and all that, fine, treat sports betting like a hobby. As our buddy Charles would say, this is money that should be vacation money. This is not grocery money. And if you start spending grocery money on this, again, you're doing it the wrong way.

• 11:03Speaker 02

  Absolutely. The third thing, or do we have anything else there? No, that's it. Yeah. The third thing is if you're going to sports bet, avoid what we would call quote unquote sucker bets and do your research. So here's where we're going to get into a little bit of nitty gritty. You may be surprised, but there are some things that if this is your hobby, you should know, like for example, stay away from parlays.

• 11:25Speaker 03

  Parlays, you know where the word parlay comes from? You don't know?

• 11:29Speaker 02

  Do you know where it comes from?

• 11:30Speaker 03

  No, I have no idea. It's interesting though, you hear a lot of sports betters talk about this. So, and we did the research that, okay, if you're going to be a sports bet, if you're going to do this, what are the things that you ought to do? And it says parlays are this idea where multiple things have to happen in order for you to win. And so a lot of gamblers love them because if these, you know, seemingly not low probability, but very low probability, we stack them up, things happen, there's a really big payoff.

• 11:56Speaker 02

  Right, which sounds cool.

• 11:57Speaker 03

  It sounds great.

• 11:57Speaker 02

  It makes it exciting. I get it.

• 11:59Speaker 03

  But sports betting companies love them because they often rarely happen. This is why experienced gamblers or experienced betters would call this a sucker's bet. And one study found that when, once gambling was legalized, parlays, that specific type of a bet accounted for just over 27% of the money that was wagered on sports betting. So about one in four bets were done on a parlay. However, 56% of the revenue, over half of the revenue from betting companies came directly from these parlays. So again, if you're trying to set yourself up for success, if you want to go with the higher probability, not high probability, but higher probability, don't try to make bets, a bunch of bets

• 12:43Speaker 03

  with very limited information. Rather, figure out, how can I make fewer bets with much better information? Am I looking at the lines? Am I looking at injury reports? Am I looking at weather forecasts? If that applies. And I'm going to try to get as informed as I can around the thing. Is this a team that I know about? Is this a team that I follow? Is this a sport that I know? Is this something I'm very familiar with? And I'm going to place much fewer bets on much more well-informed things rather than these like random happenstance things happening that might have a big payoff. Now, remember, that does not mean that you're going to win. It does not mean that you're going to come out ahead. 96 out of 100 folks over a five-year period have less money sports betting

• 13:28Speaker 03

  than they did when they started. So it's already odds stacked against you. But if you're going to do it and you're going to pursue it as a hobby, you might as well try to do it in the most financial mutant way that you can.

• 13:39Speaker 02

  Yeah, so those are real things, like avoid parlay, increase your odds, be informed, all of these things. Those are actual strategies to help you. But keep in mind, at the end of the day, you're still the underdog. Even if you do everything right, you're still going to be losing money, probably in the long run, just statistically speaking. Remember, only four of 100 people are actually making money when you actually study this. So just, that's the cold water. Please do remember that. Last but not least, this is where if Brian were here, he would say know thyself, probably. The last point is to be mindful of the psychological effects of sports gambling. I think this is something that gets a lot of headlines. This is where a lot of the conversation focuses on. Because if there's any part of you or anything that you're seeing

• 14:24Speaker 02

  in your personality that tips into addiction, like that's a real thing that people can struggle with, you do need to like pay close attention to that. Because if that's you, then this is not your hobby.

• 14:36Speaker 03

  No.

• 14:36Speaker 02

  It's kind of similar to me, maybe on a smaller scale, but just like how we talk about how like credit card debt, like credit cards are okay.

• 14:45Speaker 03

  Credit card use is totally okay.

• 14:46Speaker 02

  We use credit cards, there's some really big benefits to them. It's, it's fine if that works for you. But if you carry credit card debt, that's no way. Never carry credit card debt. And if you're really struggling with that, then maybe credit cards aren't for you in this season, you know? And that's okay. And so I think it's the same thing, like even if you like the idea of sports betting, but you're seeing yourself continuing to lose money or step outside of the financial order of operations framework, or seeing yourself fall into the psychological problem, problematic side of this, then maybe this is not for you. And so you really do need to know yourself and just not be sucked in if that's you. Like that is, that is so okay. And I just want to be that voice that says that.

• 15:25Speaker 03

  And I think before you go into it, you have to set boundaries. Cause most of the times with addiction, it's something that happens very gradually until it's not gradual anymore.

• 15:35Speaker 02

  Right.

• 15:36Speaker 03

  It's no different than if you were someone who likes having a drink or likes having a cocktail, there's not anything inherently wrong with doing that. But all of a sudden, when one drink turns into three drinks and when one night a week turns into every night of the week, you have to be mindful that this is getting into a dangerous territory. This is getting into somewhere that's unhealthy. This is now impacting other areas of my life. And sports betting is no different. If you're going to do it and you're going to pick it up as a hobby, you ought to set some, some very realistic parameters and boundaries about it. Hey, I'm only going to bet on football games. Hey, I'm only going to bet a max of a hundred dollars. I'm only going to, and you put these rules in place and don't deviate from those rules. And the first time that you deviate from those rules, oh, well, no,

• 16:21Speaker 03

  this, this is a big one and my boy's got this one. I'm going to bet 250 on, you ought to check yourself and say, uh-oh, is this getting to the place to where it's moving into that unhealthy realm? Am I allowing myself to slide down that slippery slope? And I think for far too many people, and the statistics would say 52% of Gen Zers, they are starting on that slippery slope.

• 16:42Speaker 02

  Right.

• 16:42Speaker 03

  Whereas if you're someone who's been investing and you've been saving and you're putting money in your employer plan and you're funding your Roth IRA and you're funding your HSA and you're doing all of those things. And then you want to say, okay, I'm going to try sports betting. Not try it, I just want to participate. It's gonna, I love the Georgia Bulldogs. I want to bet on my boys to win. And that's going to be an okay thing to do so long as it doesn't tip into that dangerous place. And when it tips in that dangerous place, you have to be mindful. And so one of the things I'd encourage, if you are going to do this, I love, I do love that our financial mutants here, there's a group of them, they're all buddies, they all hang out, they talk about it. They have conversations around it. Oh, I bet 14 cents on this, this, and that, that's okay. If you can have some accountability in there and you can have someone

• 17:26Speaker 03

  who's keeping you true to yourself, I think that's going to be a benefit. Cause I think that, I do think that now that it's so easy and it's so prevalent and it's so rampant, five, 10 years from now, we are going to see headlines of Gen Z's, Gen, what's after Z's?

• 17:41Speaker 02

  Alpha, I believe, yeah.

• 17:42Speaker 03

  Alphas, even millennials, perhaps Gen Xers, that holy cow, I wasted five years, eight years, 10 years of my life doing this thing and I didn't even know I was doing it. Don't let that be you. Don't let yourself fall in that, that statistic. If you are going to do it, have guardrails, have boundaries and make sure that when you're making your financial decisions, you're not making them in a vacuum. If you're following, Reba, can you throw the thing up for me? Somebody got real upset you didn't shake it last week. There you go. Professional. If you're not following the financial order of operations, you're likely getting your financial life out of whack. If you want your free copy, you can go to moneyguy.com/resources to understand the nine steps of what you should do with your dollars.

• 18:27Speaker 03

  A lot of people are asking in the, in the chat that I can see this time. Well, where does this fall in the financial order of operations? Let me tell you where it's not at. It's not in step one. If you don't have your dollars covered, don't be sports betting. It's not in step two. We just showed you that only four out of 100 people over a five-year period ended up in a better position from sports betting than their peers. Do you know, Reba, this is a statistics question? For people that are going out and getting their employer match, what percentage of people have more money after getting an employer match than don't? And while you're thinking about that, it's a trick question, 100%.

• 19:13Speaker 03

  If you go get your employer match, you are 100% in a better position than had you not. So it ain't in step two. If you've got a bunch of high interest debt, you've got credit cards, you've got, you've got high car loans, you've got consumer debt, you've got that kind of stuff. It's not there. If you don't have your emergency fund fully funded, it's not there either. And I'm going to argue, if you're not at least putting enough, let me say this again, because I want you to have hobbies. I don't think hobbies have to wait until step seven, eight or nine.

• 19:42Speaker 02

  This is where you maybe start to get into some gray.

• 19:44Speaker 03

  But if you're putting more money into sports betting, into gambling, into speculation, into this risky stuff, than you are into your financial independence portfolio, you're doing it wrong. So if you're not saving a hundred bucks a month, do not be betting a hundred bucks a month. If you're not saving a thousand bucks a month, do not be betting a thousand bucks a month. And if you can get yourself in that place, you're likely going to set yourself up for much better financial success.

• 20:09Speaker 02

  The financial order of operations is the wealth building framework, right? This is where your money should be going first and then it's, it's extra hobby money being deployed to hobbies. Like if it happens to be DraftKings, okay, there's going to be a portion that goes towards that. But it shouldn't be holding you back from getting the financial order of operations on solid ground. And I think personal finance is personal. So we kind of started to say, okay, once you get into step five, six, seven, like we said, we know that you're going to have some amount of money towards hobbies. Like we want money to be a tool to help you focus on what matters and to enjoy your life, all of those things.

• 20:47Speaker 02

  So you have to be really honest with yourself if you're genuinely investing in the foo and your financial future or not, right?

• 20:55Speaker 03

  I alluded this last week and I know we've got to answer questions and we're going to. But it just bothers me so much. And I was, I was literally, I was at the lake this weekend with, with another family. It was an awesome time and we were just talking. I was like, it's such a travesty that someone starts out with this like noble idea that, hey, I'm going to go, there's, you know, hey, there's this app that advertises and it's for young people. Great. I'm going to download it and I can start investing and it's all this. And I log in, I can see my Roth IRA and my taxable brokerage account, maybe my 401k. And then right there on the margin, on the other side, hey, place a sports bet or hey, look at, look at a prediction market. And I just think that that is so, so, so dangerous that we're allowing it to just creep in right there.

• 21:38Speaker 02

  That's a huge disappointment.

• 21:39Speaker 03

  It really, really bothers me. It really, really worries me. And I hope, I hope that we can get in front of this so that we don't have an entire generation of young folks that are like, man, I blew it.

• 21:52Speaker 02

  Yeah. I would love to hear more from you guys, either in the chat here, in the comments, in the money verse Discord server. Just what your peers are doing, what you guys have seen happening with sports betting? And whether or not this is like showing up in your life practically, I would love to hear that because there's a lot. Obviously we shared it today. There's a lot of data and we are pretty passionate about it. We just, we don't want the next generation to fall prey to the wrong ideas and lose out on building wealth. But with that, let us know what you think. But for now, we are going to dive into your questions. Are you ready?

• 22:26Speaker 03

  I love, I love that we get to sit here every Tuesday at 10 a.m. and load you guys up. We get to answer the questions that you have and you care about. So if you have a question, make sure you get it in the chat right now. So we can do that. One of the questions I see keep coming through is, oh, Bo was at the lake. I wonder if he was swimming. Yeah, I was. I was crushed. I was swimming all over the lake, guys. I was, I was treading water. I don't know if you know this, I can tread water for a really long time. I'm a really good swimmer. No, no, it's a really long time and, and it was a great time. And I'd encourage you, if you're not out there in the money verse, if you're not out there on socials, you should be, because we've got a lot of fun, interesting, cool stuff coming your way.

• 23:06Speaker 03

  But the only way you're going to know about it is if you are subscribed, if you're in the money verse, if you follow us on socials, that's the way that we're going to make sure the fun stuff stays in front of you. But yeah, I was, you know, I'm super proud of my wife. We were, we were wake, wake surfing this. She got up. First time she's gotten up, she rode some, rode the way for a while. It was, it was awesome.

• 23:28Speaker 02

  That's fun.

• 23:28Speaker 03

  Super fun.

• 23:29Speaker 02

  I love it. All right. We're going to start off with a question from Calm Cat 9032.

• 23:38Speaker 02

  Is it okay to put your emergency fund in a cash equivalent bond ETF like SGOV? It feels like a waste to have it sitting in a savings account, even if it's a high yield savings account. I live in a state that doesn't tax it. What would you say to Calm Cat?

• 23:54Speaker 03

  So we get this question all the time. Hey, what? I know I've got to have cash. I know I've got to have conservative investments, but man, I just, I don't want to hold cash. What if I did something just a little bit more, just a little bit more? Well, for those of you don't know, bonds, conceptually, what is a bond? A bond is where you let some entity borrow money. I'm either going to let the federal government borrow money or I'm going to let a corporation borrow money. I'm going to let municipality borrow money. And this is the way that it works. I'm going to let you borrow $10,000 from me. In exchange for that, you're going to pay me some stated rate of interest on some sort of cycle, most often times twice a year. And then at the end of maturity, I'm going to get back my $10,000 that I borrowed you.

• 24:38Speaker 03

  Conceptually, that's the way that bonds work. Well, one of the problems is, is that between the time that you buy the bond and the time that the bond matures, the actual value of that bond will change. And most often, depending on the type of the bond, it changes with interest rates. And the way it works is when interest rates go, it's like a seesaw. If you guys can see this, when interest rates go up, the value of bonds that you have go down. When interest rates go down, the value of bonds that you hold go up. Well, the problem is if you're holding bonds or you're holding cash, because you want it there when the you know what hits the fan, you want to make sure that it's there when you need it the most. The problem is if you start getting really cute with your emergency fund, you start investing in things

• 25:21Speaker 03

  that have the ability or potential or propensity to lose value, you're kind of losing the plot. So I am not a fan, I'm not a proponent for holding bonds inside of my emergency fund or holding anything that can lose principal. What I want to hold is I want to hold cash and cash equivalents. Meaning I know that money's going to be there for me, whether interest rates go up, interest go down, whether we're in a bull market, bear market, whether we go into recession, no matter what, when the worst of the worst happens. And oftentimes these bad things happen all at once. It's not like they happen in isolation. I want to know that my emergency fund is there because the last thing that I want to have happen is,

• 26:01Speaker 03

  oh man, something went real squirrely with the economy, market tanks, interest rates shoot up, value of bonds goes down. And all of a sudden that cash that I needed, because I was holding it there, trying to get some extra yield, trying to get some extra growth, has now lost value and the cash that I needed the most, I now have to sell at a depressed value. I don't think that's the place there you want to be. And in reality, the juice just isn't worth the squeeze. I don't have SGOV in front of me, but I don't know how much that yield is. But I know right now that like high yield savings accounts or even money market mutual funds are paying like three and a half percent. That's pretty decent on like safe money. Am I trying to go out there and put my money at risk to go from three and a half to maybe four?

• 26:44Speaker 03

  Is that really worth it? I would argue not so much. Get to step four, build up your emergency fund, let it sit there and let all the other money you have working for you grow. I personally do not get cute with my emergency cash.

• 26:56Speaker 02

  Yeah. Well said. I think this is such a classic financial mutant question because you're thinking about money differently in a good way. But it is one place it's easy to get tripped up. And I think everybody working on the show gets it. Like everybody wants to have that good return and we get why cash is kind of unsexy some, sometimes, or can feel that way. But it's actually one of the most important pieces to your financial plan. So well said, Bo. And thank you to Calm Cat 9032 for the question. If you would like a Tumblr.

• 27:24Speaker 03

  Oh, today's Tumblr day. Look at this.

• 27:26Speaker 02

  It's a Tumblr day. Just email [email protected], Calm Cat 9032.

• 27:31Speaker 03

  I see, I see some people asking about, you know, about Brian being here. Have we, did we put on? Well, it was in the newsletter. Did we put anywhere?

• 27:41Speaker 03

  Have we, did we post on social that he was out traveling, gallivanting and stuff?

• 27:45Speaker 02

  Just on the newsletter, email newsletter.

• 27:47Speaker 03

  So if you're under, if you're not under newsletter, you should be, because there were some crazy pictures, some awesome stuff. There was a picture of a, what'd you say? It was a bald eagle holding a money guy. That's hilarious. Oh, there it is. There it is.

• 28:00Speaker 02

  And we had a Tumblr in the wild.

• 28:02Speaker 03

  We had a Tumblr.

• 28:02Speaker 02

  A broad picture.

• 28:04Speaker 03

  So if you're not, if you're not on our email list, make sure you are. But Brian, he is actually traveling home today. He was trying to get it where he could be home for the live stream. He'll be home later today. He'll be back in the saddle. We have missed him. It's not the same without him here.

• 28:16Speaker 02

  It's not the same without him.

• 28:17Speaker 03

  But rest assured, he's not gone anywhere. He's just been out traveling, seeing the world.

• 28:21Speaker 02

  Living his life.

• 28:22Speaker 03

  Yeah. Getting held by bald eagles.

• 28:23Speaker 02

  Living that step nine life.

• 28:25Speaker 03

  Step nine life.

• 28:26Speaker 02

  A really foo completion life.

• 28:27Speaker 03

  That's right.

• 28:27Speaker 02

  He's a foo success story. We love it. We love to see it. All right.

• 28:33Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies. 18 plus.

• 29:00Speaker 01

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• 29:27Speaker 02

  Jay till swag says, is it okay to be miserly for three years prior to having a baby? We are trying to hit 35% savings rate prior to a baby in hopefully three years, because we know our savings rate will be sub 20% afterwards.

• 29:43Speaker 03

  It depends.

• 29:44Speaker 02

  This is an interesting question.

• 29:45Speaker 03

  Is it okay, a hot take, and Brian's not here to fight me on this. Yeah, is it okay to be miserly in seasons? Sure.

• 29:53Speaker 02

  Yeah.

• 29:54Speaker 03

  But you also want to like think through, okay, what am I sacrificing? What am I giving up? You know, what, what decisions am I making that are going to have downstream consequences? I'll give you a great example.

• 30:06Speaker 03

  When I was a younger, single man, I didn't like buying groceries. I didn't want to spend a ton of money. It wasn't something I got a lot of utility out of. And Publix, if you've been with us for any point in time, you know this story. Publix would have buy one, get one cereals. And so what I would do is to save money, I'd go get 14 boxes of cereal on Sunday, buy one, get one. So I'd pay for seven, I'd have 14 total. And I just eat that every meal. I'd eat it for breakfast, I'd eat it for lunch, and I'd eat it for dinner. And that was a great way to save money. I did not spend a ton, but look, cereal's not super healthy food. I mean, no offense out there to the cereal companies that are huge fans, but it's not like high quality food. It's not whole food. It's not, you know, rich in protein.

• 30:50Speaker 02

  Let me put it this way. We did a social video of you with some cereal. And somebody said, I can't believe Bo got so jacked by eating cereal. And I'm like, you didn't.

• 31:00Speaker 03

  I didn't. I didn't.

• 31:02Speaker 02

  Just to be frank, like there is a, there could be a downstream consequence.

• 31:06Speaker 03

  Yeah, like that was not a healthy, that was not a healthy way to live. That was not a healthy decision that I was making. But for that season, allow me to max out my Roth IRA and save. And so that's okay. So if you're planning for a baby, which is amazing, congratulations, you want to do that. And you and your spouse are on the same page. Hey, we're willing to sacrifice. We're willing to not travel, willing to not do this, we're not do that. So that we can enter into this season and phase of life feeling more comfortable? That's totally okay. And by the way, it's totally okay also if your savings rate drops after you have a kid. We call that the messy middle. It's a reality for a lot of folks. So long as you keep doing something, you keep that ball moving forward on your financial life.

• 31:47Speaker 03

  Yeah, I think it's okay. But what's great about being miserly is there are still amazing ways that you can bedazzle your basic life. Because what I don't want you to do is, I don't know how old you are, let's say that you're 24 to 27 is this next three years. You're only going to be 24 to 27 one time ever in your whole entire life. And I don't necessarily want you to miss out on those things. So are there ways you can still do things that you love and still create memories and still enjoy that season, even if you're being miserly? You know, when we were there and I was doing cereal and my girlfriend at the time, who became my fiance is now my wife, when she would come, I'd take her out for a nice Olive Garden dinner.

• 32:30Speaker 03

  I saved all that money, you know, on, on the cereal. So then we could go to Olive Garden. That was our date night. And it was great. And that was okay. So find ways where you can do that. Find ways where you can still bedazzle your basic life and not totally sacrifice, because you don't want to look back and have regrets. You don't look back and say, man, I wish I had not done that thing. Or I wish I had not given up that thing just for some future thing. Because none of us are guaranteed tomorrow. So it's a balance between how do I enjoy the present and have the things that I want now while also saving for and building for the future?

• 33:04Speaker 02

  Well, and do you think, this may be, you know, Brian on my shoulder as well, but the word miserly is an interesting one.

• 33:12Speaker 03

  Yeah.

• 33:13Speaker 02

  Because I'm wondering if miserly has a negative connotation to it.

• 33:17Speaker 03

  Yep.

• 33:17Speaker 02

  I think, to me, it means you are sacrificing something important potentially.

• 33:24Speaker 03

  Yep.

• 33:25Speaker 02

  Right? Like maybe you and your spouse aren't actually aligned. And one of you feels like you are missing out on valuable time, just the two of you, things like that. Like I think you have to be really aligned with your spouse on that. And I think you have to be really clear on what matters. Because I think being frugal or cutting way back or going through seasons or kind of challenging yourself to spend less, that is all a natural and very positive and very common part of the financial journey for everybody who makes, who follows the food, right? When you're trying to hit a goal. But I think that if, I think that being frugal or challenging yourself to a season of low spending, I think those are two different things. Those are two different things than being miserly.

• 34:07Speaker 02

  That's what I would maybe argue here. Like I would make sure you're reframing that and are truly on the same page and are truly still focusing on what matters. Not just a hypothetical savings rate and a hypothetical timeline. Because it is true too, that like, you're giving us all these timelines and you just don't, you don't really know how things will change over three years or how things will turn up too. So I just, I think everything Bo said was right on. But that, the word difference, I felt like was worth noting. That was what I thought. Even just from my own personal experience. But, great question.

• 34:41Speaker 03

  I did not know how much, how many comments, the Olive Garden comment was going to get. Yes, unlimited salad and breadsticks used to be the jam.

• 34:49Speaker 02

  Honestly, that's true. I remember that as well. It was the jam at one time, for sure. All right, Jay till swag. One thing we can do that will be free to you is send you a Tumblr.

• 35:01Speaker 03

  Look at that. That's how you bedazzle. You show up for a livestream, you get free stuff.

• 35:06Speaker 02

  You can just email [email protected] if you'd like to cash in on that. All right.

• 35:14Speaker 02

  One thing I do need to say is we will be doing rapid fire today, even though Brian's not here.

• 35:18Speaker 03

  Are you answering or just me?

• 35:19Speaker 02

  I think just you.

• 35:20Speaker 03

  How long do I have?

• 35:21Speaker 02

  Same amount of time.

• 35:22Speaker 03

  15 seconds?

• 35:23Speaker 02

  So I expect impeccable answers in these 30 seconds.

• 35:26Speaker 03

  So I get 30 seconds?

• 35:27Speaker 02

  You get 30 seconds.

• 35:28Speaker 03

  That's easy.

• 35:28Speaker 02

  Maybe I'll add in.

• 35:29Speaker 03

  It's not even really a challenge. Y'all should ask some hard questions, because 30 seconds, I've got that.

• 35:33Speaker 02

  So no, I expect full impeccable answers. But if you want to be part of the rapid fire segment for Mr. Bo Hanson, just put your questions in the livestream chat right now, if you're watching live, and make sure you put RF at the beginning, so we know it's for the rapid fire segment. So get on that. The team will be in the wings gathering that up for that segment soon. But in the meantime, gruberT23 has a question. It says, hi, Money Guy team. When do you know if Roth conversions are right for you? My goal is to retire in the next 10 years by age 45. Concern about getting bridge accounts high enough to make it to 59 and a half.

• 36:14Speaker 03

  So, man, okay, so when do you know if Roth conversions are right for you? One of the questions I'd want to know is if you're going to have to count on your Roth. So one of the strategies for being able to retire early is doing these Roth conversion ladders, where I convert, you know, I got to make sure that the Roth dollars are there for at least five years. But I create this cycle where I convert to begin building basis in my Roth. And then when I get there, I can pull the base, basis out, the money that I've put in or the money that I've converted, tax-free, penalty-free. I can't access the earnings yet, but I can do that. Well, one of the questions I want to know is if you're going to retire at 45,

• 36:54Speaker 03

  and you got to bridge the gap from 45 to 59 and a half, not knowing what your living expenses are, how much money will you have in a bridge account in your Roth? Because if you're saying the bridge account isn't going to be enough to get me there, I'm going to have to start doing these Roth conversions. By the way, when you convert to Roth, you're going to start burning the bridge account a little bit to pay the taxes unless you can cash flow it. So I'm going to be Roth converting, burning my bridge account down. I'm going to deplete my bridge account, and then I'm going to start depleting the Roth. Well, then, once you get to 59 and a half, my question is, well, how big is your pre-tax account? And how big is your Roth account? Because just because you have enough to get you from 45 to 59 and a half does not suggest and substantiate that you have enough to get you from 59 and a half

• 37:36Speaker 03

  all the way till the end of life. Are you going to be able to actually be a true financial independence? This was a problem we saw with Danielle on Making a Millionaire. She had this idea that she was going to coast fire and, all right, I want to get to this number. And you're not talking about coast fire, but I think the same thing applies. I want to get to this number, and if I get to this number here, it's going to get me to here, then I'll be good. And her math was right in that scenario. But she did not have a big enough pot to last her from the final checkpoint for her all the way to the end of her life. She had not saved enough. She, she had not done the math correctly, in our opinion. So I'd want to know, do you actually have a big enough pot that's going to allow you to retire at 45?

• 38:19Speaker 03

  Most of the folks that we see, and this is not like gospel, this isn't set in stone, but most of the folks that we see are able to use that taxable account to build a bridge. Very few folks that we interact in real life only have the ability to do the Roth conversion ladder to live off the assets from 45 or from whatever age they retire to, 59 and a half. So I would go revisit my assumptions, retest my strategy and see, is this really going to last for, you know, from, from 45 when I retire all the way out to 85 or 95, whenever I want to assume my life expectancy is? Because we did a show, me and you did a show last week about, hey, what happens if the 30-year retirement actually turns into a 40-year, actually turns into a 50-year?

• 39:04Speaker 03

  So how do you know if Roth conversions are right for you? Well, there's a ton of, you look at your, you look at your tax rate, you figure out is the cost of converting not going to be cumbersome to my ability to build wealth? But I don't even think it's a like, is Roth converting right for me? I don't even think that's the first question. I think the first question is, is retiring early right for me? Am I in this situation? Is my income high enough? Is my savings rate high enough? Is my pot big enough that I actually can retire early? And do I have enough, enough juice in my system to get me from 45 all the way to 59 and a half?

• 39:38Speaker 02

  Yeah, one thing you could play with is our Know Your Number Calculator over at moneyguy.com/resources. Granted, this is a kind of back of the napkin math tool, but it'll give you a good starting point, a good idea of how close you can get to some of these goals, how some of the variables will change your outcome. And then honestly, what Bo was just describing was a lot more complex, a lot more personal, a lot more advanced than I think we can fully dig into on the show because it's so customized. And that's exactly what they do for clients every day at Abound Wealth. So if that sounds like you, if you have enough of these problems and a big enough nest egg to where these. These decisions matter a lot. Like, that's exactly what we specialize in and just we are

• 40:23Speaker 02

  there. If you ever want to start the conversation or just explore it, go to moneyguy.com and click on the become a client button.

• 40:28Speaker 03

  Love that.

• 40:29Speaker 02

  All right, we're gonna do another question and then probably start digging into rapid fire if the team is ready. But let's go to Jesse's question. For someone in step nine of the foo and on track for retirement, what are your favorite ways to bedazzle your basic life? We recently hired a house cleaner.

• 40:48Speaker 03

  Love it.

• 40:48Speaker 02

  Oh, that's one of Bo's favorites. Any other suggestions?

• 40:51Speaker 03

  I'm gonna throw this, I'm gonna throw this out there. If you're on step nine, there's a chance you may not have to bedazzle basic anymore.

• 40:58Speaker 02

  That's what I was thinking too. I was like, fun question.

• 41:00Speaker 03

  If you're doing those things, uh, in, in, when I was bedazzling my basic life, it was kind of early on.

• 41:06Speaker 02

  Yeah.

• 41:06Speaker 03

  When I was trying to get to the 25, when I was trying to get to the savings rate that made sense for me. But then, once we were able to get there and kind of build up a foundation and build up a base and move into sort of a different place, it wasn't so much about bedazzling our basic life. It was like, hey, is it okay for us to allow our lifestyle to improve and increase? Because all the time, lifestyle creep gets such a bad rap. In reality, most of us want lifestyle creep. Most of us want our 40s to look better than our 30s, and our 30s to look better than our 20s, and so on and so forth. And so there's nothing wrong with your standard of living increasing through time. So there are things that make a ton of sense that when you get to that point, uh, you can start

• 41:50Speaker 03

  increasing your lifestyle, and that's okay. And I'd argue that doesn't have to be the bedazzle. Now, you can still bedazzle. There's a lot of people that are, um, you know, there are some things that no matter how wealthy you are, or how successful you get, my, my opinion is, there's always those things that are gonna just stick in your craw. Like, here's mine. I don't, I don't buy drinks at restaurant, uh, cocktails is fine, right? But like, like a, like a sweet tea, or a Pepsi, or a Coke, or like whatever. I don't buy that at restaurant. I can't, I just can't get over the fact.

• 42:20Speaker 02

  Not Mr. Bo Hanson.

• 42:21Speaker 03

  Two thirty-five. For, one, it's bad for you, but two, I just, and so my kids are like, yeah, can we get a drink? And I'm like, no, you can't get a drink. We drink water. It's what we do. It's what, it's what a Hanson does. And so, uh, I just, I don't think I'll ever get past that. And, and that's okay. It's okay to hold on to those kinds of things. But there are things that I have let go of. Uh, hiring a house cleaner is a great one, right? Like, if, if that's, um, my, my wife and I, we made the decision a number of years ago for her to stay home and for me to, um, me to not stay home.

• 42:54Speaker 02

  To do this.

• 42:54Speaker 03

  To do this, right? And, um, for, for me, if you, if you were like to compare the two of us, I'm the one who probably is a little bit more, you know, um, uh, things being orderly and neat matter a little bit more to me. That's just kind of like my nature or whatever. And so we got to this point where like, I would come home and I'd be like, babe? And she'd be like, babe? And I'd be like, babe? And she'd be like, mm-mm. I got all these kids. I'm doing, and I'm like, all right, I get it. And so like, hey, it really, I'd love, I'd love for that to be put together. And like, I don't want to spend our time on the weekends doing that kind of stuff, like scrubbing toilets and that kind of stuff. That just wasn't something that we wanted to be, wanted to do when we were in the financial situation we're in. So we outsourced that. It removed a lot of friction from our marriage.

• 43:38Speaker 03

  Me being upset at something not being the way that I wanted, and her being like, are you kidding me? I've got, I'm literally moming all day lawn. That's my number one thing, and these kids are wild. Uh, that's okay. Uh, lawn maintenance. I'm like, I didn't, I would, when I was a little kid, I wasn't like allergic to stuff. That wasn't a thing. I, you know, I just like ran around barefoot. But now, if I go like, start trimming my hedges, I break out in hives and I can't breathe and I start coughing, I have someone else like do, do my, do my lawn and that kind of stuff. I think those are great things to outsource, especially if you're like, hey, if I'm working all week and I want to be home on weekends, I want to be able to play, and I want to be able to swim, and I want to be able to do soccer, all that kind of stuff. I don't want to spend three hours cutting the grass and edging. Now, some people love that. And if you love it and it's your passion, don't

• 44:23Speaker 03

  outsource the things that you love. But if it's things you don't love, and you have the ability to outsource, I mean, it allows you to open up to do something else, that's great. I got a buddy, man, he's super successful here in town, really close friend of mine, changes oil every time. And one time he was doing it, and like, as he was changing it, a big wind gust started blowing, and he just dumped oil all over his beautiful driveway. And I was like, see, that's why I don't do it. And he's like, ah, it'll be fine. I'll clean it up. And I'm like, I'm just, I'm not gonna do that. But for him, he gets utility out of it, doesn't outsource it, he does it. For me, I, I would rather not do those kinds of things. So you have to ask yourself, what are the things that you value? What are the things that it makes sense for you to spend money on? And Ezra Mead would say, spend lavishly on those things, but don't waste your money on the things that don't matter.

• 45:08Speaker 03

  Don't think just because someone else does something, it means that you need to do that something. Just because some other family goes to Disney, if Disney's not your thing, don't feel like you have to go to Disney. You go do something else, somewhere else, that's totally okay. Figure out what it is that you want to do with your money and use it to do those things. Because money's nothing more than a tool that allows us to accomplish our goals, not that allows us to accomplish other people's goals.

• 45:34Speaker 02

  Bedazzling your basic life, this isn't so much a bone to pick with you and Brian, because you're right.

• 45:40Speaker 03

  Uh-oh.

• 45:40Speaker 02

  But just to, I don't know.

• 45:41Speaker 03

  Hot take disagreement, let's go.

• 45:43Speaker 02

  A little bit of a hot take. It's not actually that hot of a take. Maybe it is. I don't know. You're about to know. I think sometimes, I like that you talked about outsourcing right there, because sometimes we talk about bedazzle your basic life, and we automatically start to talk about travel and vacation and trips. And that's totally valid, because that's something that a lot of people want to do and really value. I'm kind of like, I love doing stuff here. Like, that's how I bedazzle my basic life. Like, things like, it's about to be fall. We love taking our kids to like the pumpkin patch.

• 46:11Speaker 03

  Love that.

• 46:11Speaker 02

  And buying the stupid overpriced pumpkin, letting them pick one out.

• 46:15Speaker 03

  Absolutely.

• 46:15Speaker 02

  Like, stuff, things like that, that are truly bedazzling, but are like way less expensive than a trip to Disney. That are just as like memorable and wonderful. And so like, if there's little like traditions you can do like that, or like you said, things that are gonna lower friction in your household, or I love that kind of bedazzling your basic life. So I just wanted to throw that out there.

• 46:34Speaker 03

  You make such a great point. There are some people who, they love travel, and they love experiencing the world. And, and, and we do too. Don't miss, hear me there. But my wife and I talked a long time, like, man, we spend every single day in our home. Like, we spend every single day, I want our home to be nice. Like, I want us to have things and conveniences and doodads at the house that we love. And so, rather than like going on nine trips a year and all that kind of, well, hey, we're gonna do this thing to the house, and we're gonna have this improvement, we're gonna do this. Again, it, it's knowing what matters to you and using your financial, using your financial success as a mechanism to move towards that thing, whatever it is. If that's not your jam, by all means, don't do that.

• 47:15Speaker 02

  I may be a little biased, just because of my own, you know, things that I like, or like, my kids are really little, so traveling isn't as easy, right?

• 47:22Speaker 03

  No, it's parenting in a different location with different obstacles.

• 47:26Speaker 02

  Which can be fun. Like, I'm not trying to knock it, but just, yeah, like, I like that you can buy the expensive pumpkin. Or like, if my husband's out and says, you want a coffee, I can just go, yes, in a lot of cases. You know, that's bedazzling my basic life to me in this season. So I just, I don't know. I thought about that last week. I was like, we always talk about travel. I'm throwing that out there sometime.

• 47:46Speaker 03

  Yeah, that's a great, that is a great point.

• 47:49Speaker 02

  All right, with that, first of all, that was Jesse's question. Thank you for the question. If you would like a Money Guy Tumblr, just email [email protected] to cash in on your Tumblr, Jesse. We appreciate you being here. And without further ado, we're going to dive into our rapid fire segment. This is our it does not depend rapid fire segment, where Bo has a luxurious 30 seconds, honestly.

• 48:11Speaker 03

  That's a long time.

• 48:11Speaker 02

  To answer your personal finance questions, but he cannot say the phrase, it depends. Now, since he has a little extra time, since he's not sharing with Brian, I expect there to be very good answers here.

• 48:23Speaker 03

  No, no, like, follow-ups afterwards?

• 48:24Speaker 02

  I usually leave room for follow-ups, and we still will, because we need to get the people the information. But I challenge you not to have any follow-ups.

• 48:31Speaker 03

  All right, I'll do my best.

• 48:33Speaker 02

  Let's see what we can do. All right. We'll put 30 seconds on the clock. Are you ready?

• 48:39Speaker 03

  I'm ready.

• 48:40Speaker 02

  First question. Hey, Money Guy team, I recently got a new job and my old 401k was converted to a traditional IRA. Only about 5K in there after the fees, but I have a Roth IRA with about 10K. Should I transfer to Roth?

• 48:57Speaker 03

  If you transfer to Roth, it'll be taxable. That $5,000 will count as ordinary income. So, look at your tax rate and say, hey, do I want to pay, even if I'm in 12% bracket? Do I want to pay 12% of that $5,000 to convert it to Roth? Or would I rather just leave it in the traditional? Let it continue to grow tax deferred and build my Roth assets elsewhere? Maybe I'm doing Roth 401k contributions. Maybe I'm doing Roth IRA contributions. Just because you can convert, doesn't mean that you should or have to convert.

• 49:25Speaker 02

  Ooh, okay. That was good. That took up the whole 30 seconds. A little more complex. Next question. I'm on step six, but really like the idea of paying off my mortgage early. How foolish, quote unquote, is it to put 10% of my income into a 10-year horizontal portfolio, which I will then use to pay off the house?

• 49:48Speaker 03

  I love that idea. What you just said is rather than paying the house off directly, I recognize there's probably an arbitrage. What I can go out and make in the market is likely higher than what I'm going to save in interest on my mortgage, especially if I'm one of those people that has a sub 4% mortgage. So, rather than pay it off quickly, I'm going to invest those dollars. I'm going to dollar-cost average what I would be prepaying, and I'll let those dollars grow and grow and grow and grow. What's likely going to happen is that you will have more in that after-tax account than your mortgage balance sooner than if you were to pay the mortgage directly. You know what's better than me in debt-free? I'm asking you.

• 50:20Speaker 02

  We'll never know.

• 50:21Speaker 03

  I'm asking, I set that question up perfectly.

• 50:24Speaker 02

  It's the ability to be debt-free.

• 50:26Speaker 03

  Nailed it.

• 50:27Speaker 02

  I'll finish it.

• 50:27Speaker 03

  Nailed it.

• 50:30Speaker 02

  Next up, my managed Roth IRA has expense ratios of 0.55%. Should I go to a self-directed one?

• 50:40Speaker 03

  Value is what you get, price is what you pay. If you're paying 0.55%, I want to know, why is that fund so expensive? There are a lot of really low-cost index funds that are 0.015%, like the S&P 500 index fund, which is fantastic. So, are you getting something for that 55%? Perhaps you're working with an advisor who's adding value through tax planning or through long-term financial planning or whatever. Why does it cost 0.55%? Is that cost justified?

• 51:10Speaker 02

  All right.

• 51:11Speaker 03

  Since, I want to come back to that one, because he's, no, no, but no, no, no, I just, people, because I'm going to get hit in the, I'm going to get hit in the comments for this, because this is what he said. He said the expense ratio specifically. So, what that tells me is this is likely a fun decision. So, it's like an actively managed fund that costs 0.55%. That's a real hard sell for me, like actively managed 0.55%. Depending on what it's doing, now, we have some funds at Abound that are more expensive than that, inside the alternative sleeve or inside the other, some of the fixed income funds that we use. International aren't really so much anymore. But there are some funds that tend to be a little bit more expensive, but they serve a very specific and unique purpose inside the portfolio. If that 0.55% fund inside your Roth is really just a closet index fund, it's just an S&P

• 51:55Speaker 03

  fund, it's just a total market fund, but they're jacking the cost up, yeah, that probably doesn't make a whole lot of sense. But if it's a managed Roth, and you have an advisor on it, and that advisor is adding some sort of value, it's unclear. You said managed, and then you said expense ratio. So, both of those could be going on. If you've got that expense ratio and it's managed, I just want to make sure you're getting what you're paying for. Is the value you're receiving more than the cost that you're paying? If it's just, if it's just index funds, likely not. But if there's some other reason, maybe so. We'd have to come back to that one. Stop it. Stop, okay, it's a rapid fire. I get it, guys.

• 52:34Speaker 02

  Listen, I mean, that was some, I liked the answer, and I had to let it happen, because we need to know that, but that was the most egregious break of the rules I've ever seen.

• 52:42Speaker 03

  All I did was, instead of waiting till the end to come back, I just came back in the middle. That's all that was. I still got it inside 30 seconds.

• 52:49Speaker 02

  Oh, I need Brian back, so we can get this back on the rails. I never thought I'd say that. Okay, let's see.

• 52:59Speaker 02

  All right, let's go to the next question.

• 53:01Speaker 03

  I won't do that again.

• 53:02Speaker 02

  If you could only put away a modest amount of money for a child, would you recommend Trump account, or 529, or a combo of both? If so, what split would you consider?

• 53:12Speaker 03

  Trump account, I want to go get the free money. In the 529, if I'm saving for college, I want to use that one, because Trump accounts are fine, they're great for free money, but we are of the opinion presently, there are other accounts that are better for building assets for kids, for college, 529s are great for other types of expense, types of costs, like first car, first home, first whatever. UTMIs are great. The Trump accounts, I think, free money, makes all the sense. I would go elsewhere for the other accounts.

• 53:42Speaker 02

  All right. Next, is it worth participating in a 401k if there's no employer match?

• 53:48Speaker 03

  There are tons of benefits to 401ks outside of just a free employer match. Number one of which being tax savings, either today through pre-tax deferrals, or in the future, through Roth deferrals. So, even if you're not getting the employer match, we still love employer-sponsored time accounts. But what happens is, what, hand me the thing, hand me the thing, come on, I got 13 seconds. What happens is, it may not be inside of step two where you begin doing that. You may skip step two, go get Roth, HSA, and when you get to step six, that's when you come back to the employer-sponsored plan. So, it may happen later in the food.

• 54:19Speaker 02

  Go to moneyguy.com/resources to download your copy of The Financial Order of Operations.

• 54:26Speaker 02

  Next question. 20K emergency fund down from 30K. Should I sell from 95K taxable brokerage or cash flow for over one year to refill?

• 54:37Speaker 03

  Okay, 20K, down from 30K.

• 54:41Speaker 02

  So, I think he needs 30K.

• 54:42Speaker 03

  It's going to take one year to get there? Should he sell brokerage? What I need to know is, is 20K, how many months of expenses is that for you? If it's only one or two months of expenses, then it probably is prudent to sell out of the taxable brokerage account, even though it's going to trigger capital gains. If it's, if it's three, four, or five months of expenses, then perhaps you can just build up slowly over time and not incur that additional tax.

• 55:07Speaker 02

  Well said. Next question. Open a custodial Roth IRA for my 17-year-old working son now, or wait five months when he turns 18 to open his own?

• 55:20Speaker 03

  Ooh, okay. I love getting that money, and if you open a custodial account now, while he is 17, you can be part of the process. Hey, let's put money in here. Hey, I'm going to match it. Hey, let's do this. Hey, let's build. That way, you kind of, it's like having, you know, when you get your learner's permit, you have someone in the passenger seat with you, and you drive, and they're in the passenger seat. Not a horrible idea, because then when he turns 18, you step out of the car, and now he can drive by himself? Just know you're going to do some additional paperwork. You're going to have to open two different accounts. It's going to change, but I don't think it's crazy going to do it now and get that money rolling.

• 55:52Speaker 02

  Interesting.

• 55:54Speaker 02

  Next question. Where would you guys recommend a sinking fund? Taxable brokerage account, money market, or elsewhere?

• 56:01Speaker 03

  All great solutions. A high-yield savings account is a great option. Where I personally keep my cash right now, both my emergency fund, as well as any additional cash that I hold, is in a money market mutual fund, because right now, it's paying like 3.47%. You just want to have that cash sitting somewhere that stays liquid, readily available, that you can get to quickly, and is earning something. Some rate of interest right now, somewhere close to 3.5%, 4%. Any of those are acceptable solutions.

• 56:30Speaker 02

  Wonderful. All right, coming toward the end, we've got another question that says, I love your show. Thanks.

• 56:35Speaker 03

  Oh, thanks.

• 56:35Speaker 02

  But I make less than 40K. Is there a point when your income is just too low for the 30, 40, 50, and 60 goals? At the end, 10 times my income is only 400K. Is this enough to retire?

• 56:48Speaker 03

  Well, if you're super young and you make lower than 40, one of the questions I'm going to have is, are you going to make lower than 40 forever, right? We know that wages likely increase through time, so don't be discouraged. That's why, early on, it's more about your savings rates than the metrics, because personal finance is personal. We're giving you these milestones that you ought to hit, and even at 40K, if you do that, if you save and invest, and save and invest, and you start young enough, you'll be surprised that by 30, you'll probably have 40 grand saved up. And then, by the time you get to 40, that 40 will probably turn into 120 grand. By the time you get to 50, you'll, my...

• 57:21Speaker 02

  Guess we'll be coming back to that one.

• 57:23Speaker 03

  I was, I pretty much, I pretty much got it all out.

• 57:26Speaker 02

  Which, it just happens to be the end of that segment.

• 57:28Speaker 03

  Oh, look at that.

• 57:28Speaker 02

  So, we are going to go ahead and come back to that. You did well.

• 57:31Speaker 03

  Yeah, so what I'm saying is, your income's likely going to increase, but even if it doesn't, the math works out if you start early enough. Trying to get to multiples of income, even at lower incomes, if you can get your savings there, will be fine. But let's say that you don't. Let's say that you can't get there. Personal finance is personal. I don't know what your living expenses are, but I know if you have $40,000, and you're saving, and you're building, and you're getting that consistently, by the time you get to retirement, you'll have a pot of money that's been built up. You factor that in, plus, you know, social security, plus maybe your spouse's social security. We have clients, and I really mean this, we have clients here at Abound Wealth, schoolteachers,

• 58:10Speaker 03

  administrators, whatever, never made over $100,000 of household income, never crossed over there, and yet, they still were able to build seven-figure portfolios. And because they have a seven-figure portfolio, and because they have a pension, and because they have social security, they live fantastic financial lives, not because they figured anything out, not because they had some magic thing that took place, because they just started super early, they were educators, and they were just very consistent. Save and build, save and build, save and build, save and build, save and build. You can do it on low incomes. We actually have a show titled, I think it's titled, How to Build Wealth at Lower Incomes? And we actually walk through, how should you think about that? What strategy should you have? And then...

• 58:57Speaker 03

  But I also don't want to like minimize the fact if there if there's a way, means and mechanism for you to increase your income, having a bigger shovel does make building wealth a little bit easier because it allows you to save more. Notice I said having more income doesn't make you happier. It doesn't make your life better. It just makes building wealth a little bit easier because you have a little bit more margin. Three ingredients to wealth creation, even at $40,000. If you have discipline and you can create margin and you can apply that over time, you can build wealth. So if you can increase your income to where you have more margin and you can increase it at the same amount of time, you can build more wealth. It's totally possible. But don't let the milestones be

• 59:42Speaker 03

  discouragers. Let them be motivators and encouragers for you along your path.

• 59:48Speaker 02

  Personal finance is personal. And we do have some shows like that. We just released one where we do how to win financially based on your income. And so we go through different incomes. The very first one is 50K. So it's a little different, but that gives you a good ballpark on some thoughts if you're at that income. And if you go to moneyguy.com and search how to build wealth at a low income, there's going to be some stuff that pops up, some articles, some other videos we've done in the past that could help you continue this conversation as well. So thank you for the questions. Bo, rapid fire, you did well overall. We only had one failure and one egregious break of the rules. So I'll take it.

• 1:00:21Speaker 03

  Okay. All right.

• 1:00:23Speaker 02

  But a lot of good financial ideas and conversation was shared, and that is the main goal. So I can't be mad.

• 1:00:28Speaker 03

  I think we got through more rapid fire questions than we ever get through. So I'm going to take that as a record. I think I just broke a record.

• 1:00:34Speaker 02

  Hmm. That's not true, but I'll just let you think that. Let's just think that. I have that. I know how many questions we do each week.

• 1:00:43Speaker 03

  Such a sick burn.

• 1:00:44Speaker 02

  I know. With that said, we are very excited to have Brian back, but it has been an honor to be here at the big desk with you today.

• 1:00:50Speaker 03

  You've done awesome.

• 1:00:51Speaker 02

  Sharing financial information. And if you still want to talk about this after the camera shut off today, make sure you go to moneyguy.com/resources to take advantage of all of our free calculators, tools, downloads that just continue these conversations on things like home buying, the financial order of operations, how to buy a car, how to educate your kids and parent around wealth. Honestly, that's just scratching the surface. So go look at that. I would love for you to check that out because we made it for you.

• 1:01:21Speaker 03

  I, Revi, I think you've done awesome. I do miss Brian. I'm glad for you back. Big guy, if you're out there watching.

• 1:01:27Speaker 02

  Come back.

• 1:01:28Speaker 03

  We are so excited for you back here. Guys, we could not do this without you. We could not, if you didn't show up to listen, if you didn't go out to moneyguy.com and check out all the free tools and resources, we wouldn't be able to do this. We believe that there's a better way to do money. We're so thankful we get to be part of your journey in doing money better. As always, we're listening, we're in the subreddits, we're in the moneyverse. We are, check all the emails, read all the YouTube comments, because we want to make this as valuable for you guys as possible. Thank you. Thank you. Thank you for showing up. If you keep listening, we'll keep putting it out there. For Revi, for Brian, for the

• 1:02:08Speaker 03

  rest of the Money Guy team, I'm your host today, Bo Hanson, Money Guy team, out.

• 1:02:15Speaker 02

  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.

• 1:02:50Speaker 04

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• 1:03:13Speaker 06

  Dance. Ha, ha, ha, ha, ha.

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  From our tradition to yours, Stonefire.

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  Together, be naan.

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