Low Income, Late Start: What Should I Do?

"Is there a good way to know how much to contribute if you are behind? I’m 32 with about $40k invested. I make $55k in gross annual income. I’m currently saving 25% between 401k and HSA (including match). I'm honestly not sure how much more I could contribute realistically, but I like to have goals to work towards." We'll walk you through that question and more in today's Q&A episode! Jump start your journey with our FREE financial resources Reach your goals faster with our products Take the relationship to the next level: become a client Subscribe on YouTube for early access and go beyond the podcast Connect with us on social media for more content Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:07Brian Preston?

  Low income, late start, what are you to do?

• 0:10Speaker 01

  Brian, I am so excited to talk about this because people ask us all the time, "Hey, based on where I am today, I think I may be behind," or "I don't know, "maybe I've made a mistake that is insurmountable." I want you guys to speak into it. And we love that we get to speak into that kind of stuff. We love that we get to answer the things that you care about. We love it so much that every Tuesday at 10 a.m. Central, we do a live stream where we want to answer your questions and load you up so that you can do money better. So with that, right now, we have the team out in the wings collecting your questions so that we can load you up. So with that, Senior Content Developer Megan, I'm going to send it over to you.

• 0:50Brian Preston?

  Did you write that down?

• 0:51Speaker 01

  I didn't, I just pulled out. Thought about it all week.

• 0:54Brian Preston?

  I was sitting here thinking, there's no way he's going to stick this.

• 0:55Speaker 01

  Thought about it all week.

• 0:57Speaker 02

  Fifth time's the charm, Bo. All right.

• 1:03Brian Preston?

  Dropping bombs over there.

• 1:05Speaker 01

  All right, cool.

• 1:07Speaker 02

  All right, we're starting off with a question from MH. They say, "Is there a good way to know how much to contribute if you are behind? I'm 32 years old with about $40,000 invested. I make $50,000 per year in gross annual income. I'm currently saving 25% between my 401(k) and HSA, including the match. I'm just honestly not sure how much more I could contribute realistically, but I like to have goals to work towards."

• 1:34Speaker 01

  Well, MH, first of all, okay, so let me restate what I just heard. You're 32 years old, you've already accumulated $40,000, and you're saving 25% of your gross income already. So like, when I read that, I'm thinking to myself, like, where are you behind? Like, are you even certain that you're behind? Or how did you even arrive at the conclusion you're behind? Because we have a great tool. If you go to moneyguide.com/resources, we have a Wealth Multiplier tool. And what it will show you is how much each dollar that you put to work can turn into by the time that you get to retirement. What I think is amazing is for a 32-year-old, if you go look at what your wealth multiplier is... Brian, do you have a thing? Do you know what the wealth multiplier is? Oh, gosh, he's got a psychopath.

• 2:18Brian Preston?

  Oh, my gosh, it's somewhere around here. Yeah.

• 2:21Speaker 01

  All right, so for a 32-year-old, Brian, what is the wealth multiplier?

• 2:24Brian Preston?

  32-year-old.

• 2:27Brian Preston?

  It is 18.05.

• 2:30Speaker 01

  So if you just were to take that $40,000 that you have today and multiply that times 18.05, that would tell you what you're on track to have without saving another dime. And I bet that's going to be a pretty big number. So I'm curious, are you actually behind? But MH's question was, okay, if I am behind, if I do arrive at that conclusion, what are some ways that I should catch up? Or how do I think about catching up? What would you say?

• 2:55Brian Preston?

  Well, first, I think when in doubt, zoom out. I talk about that for market volatility, but I also think it would be helpful in this situation for context. We just know, look, we aspirationally focus a lot of our content on trying to help 20, 30-somethings, and even 40-somethings because of that whole component of compounding growth. But the reality is, is that if you do the research, the average age Americans begin investing is 33 years of age.

• 3:26Speaker 01

  Already ahead of the curve.

• 3:28Brian Preston?

  By that context, MH is actually ahead of the curve. When we talk about the 20-somethings, that's why we always talk about that 25% is aspirational in your 20s. We know that it takes a while to catch your footing, to get inspired, to even make this happen. I also want to give MH some additional context. I don't like to do public math, but I did bring a crutch of my public calculator here. And I was going to type this in. So he makes $55,000, 25% works out to be about $13,750 a year. That's pretty aggressive, but he is counting his employer match. So I think a lot of people, if you have a very generous employer, this is actually very doable.

• 4:08Brian Preston?

  So if we divide that by 12, we can come up with, that's a little over $1,100 a month of investments. He says he has $40,000 already in his investment accounts. And I'm just going to use a conservative 8% ongoing, and we'll just say, take him to 60. We're not even, I don't know if that's fire. That's not probably too aggressively fire. But it's earlier than 65. It's earlier than 67.

• 4:33Speaker 01

  You're right.

• 4:33Brian Preston?

  So if you do 27 years, times 12 months, that's 324 months. That puts him at? Check this out. $1.6 million, $1,652,000 when he crosses into his 60s. I don't think you're really behind MH. I think it's just you need to reframe your perspective. Instead of being glass half empty, let's be glass half full.

• 5:01Speaker 01

  I love it.

• 5:03Speaker 02

  Wonderful. All right. Thank you so much MH for your question.

• 5:06Speaker 01

  That was great. It was so good.

• 5:08Brian Preston?

  I mean, how many more props can I put into question? I mean, we got calculators, we got deliverables, we got cups.

• 5:15Speaker 01

  Look at your desk.

• 5:16Brian Preston?

  I feel like Carrot Top. I've used that joke before.

• 5:20Speaker 01

  I often, I often think of you as Carrot Top in my mind.

• 5:24Brian Preston?

  Bigger Carrot Top though, right? When he was kind of like...

• 5:27Speaker 01

  No, that's... Oh, you're talking about, he is bigger Carrot. Yes, yeah, yeah, he's... Did you know Carrot Top got super jacked? Is a thing?

• 5:34Speaker 02

  I'm not following any of this.

• 5:35Brian Preston?

  Did y'all know that I actually saw Carrot Top at live?

• 5:38Speaker 01

  No, you did not.

• 5:39Brian Preston?

  At UGA.

• 5:40Speaker 01

  Did you really?

• 5:41Brian Preston?

  He came to UGA and did a whole stand-up comedy routine. That's how I was introduced to him.

• 5:46Speaker 01

  This is before he like hit mainstream.

• 5:48Brian Preston?

  That shows Carrot Top is my age. Maybe a little older since I was the student and he was actually the performer.

• 5:54Speaker 01

  That's hilarious.

• 5:55Brian Preston?

  That's a...

• 5:56Speaker 01

  Do you even know who Carrot Top is?

• 5:58Speaker 02

  I don't.

• 5:59Speaker 01

  I was like, she has no idea. She has no context for this. He's a comedian.

• 6:02Brian Preston?

  If you go to Vegas, you can probably still see him.

• 6:04Speaker 01

  He's a comedian, is a comedian, and then he got super, he got super jacked. Like he got super big and started lifting weights and he got super swollen.

• 6:13Brian Preston?

  I loved his stuff. A lot of people, I felt like sometimes were hard on Carrot Top, but I actually liked his prop comedy.

• 6:19Speaker 01

  We'll have to add, you know, we have a resident comedian here on the Money Guy team. We'll have to ask him in show meeting, uh, what his thoughts on Carrot Top were. I'd be curious to know.

• 6:29Speaker 01

  Looks like it's thumped up.

• 6:32Speaker 02

  Uh, all right. Thank you MH for your question. If you would like a Money Guy Tumblr, you can email [email protected]. Y'all ready for the next one?

• 6:42Speaker 01

  Yes, ma'am.

• 6:43Speaker 02

  All right, this next question is from the Mr. Broxley. Says, "My employer contributes 10% to an ESOP each year while also letting me contribute 8% to my 401K with a 50%, so 4% total match. I also work in an intense career at a CPA firm, Brian would know. How can I justify leaving this role with a 14% employer retirement contribution?"

• 7:09Speaker 01

  You know, it's hard. It's really, really hard. So for those of you who do not know, an ESOP is an employee stock ownership plan where basically you get to become an owner in the company for which you work. So it's a little bit different than like a profit sharing contribution. You're actually receiving an employer contribution, in this case, 10% into ownership of the company. So as the company grows, as the company becomes more profitable, you get to benefit from that at some later date when you cash in your ESOP shares. Well, in addition to that, Mr. Broxley puts in 8% of his pay and his employer puts in the 4% as a matching contribution. So there is indeed a 14% employer dollar figure going in.

• 7:51Speaker 01

  And some of it's going into a liquid 401K account that can be invested and some of it's going into ownership of the company. Mr. Broxley, it certainly sounds like your company is trying to implement a plan where they want to incentivize people to be here and stay here long-term and have an ownership stake. I would argue this is a very good example of some golden handcuffs. And so I think the question he's ultimately asking is, Brian, when we are measuring our current existence, the current life that we're living, the current job that we have, and we're measuring that against other options, other alternatives, how do we decide, is it actually worth leaving? Is the grass actually greener on the other side? Or are the situations sometimes too good that you can't even walk away from?

• 8:34Brian Preston?

  Yeah. By the way, when you first gave this question, I thought you said Mr. Broccoli.

• 8:39Speaker 01

  We know Mr. Broccoli.

• 8:41Brian Preston?

  But I'm so glad we had the name actually up on the screen. Because I mean, for a few seconds it took, we had to recalibrate the brain because all I could think about was broccoli? And then, okay, back in.

• 8:52Speaker 01

  So you heard the question, right?

• 8:53Brian Preston?

  I did hear the question. I mean, I will say 14% employer contribution is strong.

• 8:59Speaker 01

  With some of it going in ESOP.

• 9:00Brian Preston?

  So that's why I would definitely, this is a measure twice, cut once type component. Because employers do this, you see it, we've seen it like... Mayo Clinic doctors, all kind of people who will load you up because they want you to stay invested in their organization. And that's pretty noble. But you have to ask yourself, what am I, where am I going? Am I happy? Am I fulfilled? Am I living my best life? And even with a generous compensation structure, I would say if you're having doubts on that, you know, maybe you want to create another plan, but that doesn't mean you execute the plan. It means you have to do the steps for it. So always, you first have to kind of take

• 9:42Brian Preston?

  inventory of yourself. How marketable are you? How successful will you be if you go out on your own? He's already kind of given us some indicator. He's got a background in public accounting.

• 9:51Speaker 01

  Sounds pretty marketable, right?

• 9:52Brian Preston?

  I'm going to come and give some specific thoughts on public accounting after I give the general stuff for everybody else. And then we'll nerd out for the accountants out there. And then I think you just got to know where you're going. This is the 3D glasses, where you're talking about creating your own plan for the future. A lot of people think that when I say put on your 3D glasses, meaning you have a doo doo plan for how horrible can it possibly be? There's the down to earth, the reasonable plan. And then of course, there's the dream plan. That's not just for starting a business. It's not for anything that's that exotic. It can be just for changing jobs, or changing careers, or any of the above. Because it's basically putting you in the mindset of looking at all the scenarios. So

• 10:33Brian Preston?

  you're not surprised, and you can actually attack it. Now, here's the specialized advice for the CPAs. And don't send me hate mail if you work for a large CPA firm. I have a lot of, I mean, I graduated with an accounting degree, worked in public accounting. I have relatives, because I try to convince everybody to become a public accountant, because I think it is great training. But you will, anybody who goes into public accounting, you're going to have a dilemma, career dilemma, somewhere between years four and six, is you either stay in public accounting, or you probably need to kind of exit and go into consulting or do something else. I know quite a number of people that have stayed in, and it's a great career. I mean, there is nothing wrong with it. But there is a lot of times with

• 11:18Brian Preston?

  Accounting, it's the issue of you only get paid when you're doing hourly work. And that sometimes can be hard. I mean, all my, all my friends that stayed in public accounting and run large firms now. They, they just get burned out. They're tired. I mean, they, they make great incomes. They, they live a great life. But it's just sometimes they don't want to be on and it's so much so with how they get paid and so forth. So it's, it's stressful.

• 11:48Brian Preston?

  So it's, it's not a negative towards accounting, but I think that fortunately this skillset is very marketable. Because if you think about what is the language of business, it is the financial statements. It's the income statements. It's the balance sheets. It's the cash flow statements. And guess who knows how to speak that fluently? It's the public accountant. There's a reason why so many CPAs run companies. There's so many reasons that, that you see public accountants that run real estate empires. It's because when you get really nerdy with the math, you have the foundation to, to be really successful in life. And that's why I try to encourage everybody who, you know, I find out you have a, an aptitude towards math and you have an aptitude towards business.

• 12:29Brian Preston?

  I usually try to talk people into it and that's what, this is the same advice I'd give my niece who's working for a big six firm right now, but um, or big four.

• 12:38Speaker 01

  Big four.

• 12:38Brian Preston?

  Big four. Yeah, I'm old. So it's, um, it's one of those things. So I could just gave you the exact same advice that I would give my niece.

• 12:45Speaker 01

  And I think if you're thinking through like, okay, how do I justify leaving? There are financial things that you have to think about and there are non-financial. Obviously you talked about some of the non-financial stuff, like are you, uh, do you have a long commute? Do you not enjoy the people you work with? Do you not enjoy the people that you're working for? Those are all things that you have to factor in, but there are realistic financial aspects where sometimes it does make sense to stick it out in a less than ideal situation. So that either you can get to the part of your career where you get to enjoy the fruits of your labor or to position yourself to be able to move somewhere else. We've seen people do this before where, oh man, I just, I'm in an industry and I just don't like this. I don't enjoy it. Don't want to do the work. Don't want to be part of this. They make a career shift and that made.

• 13:28Speaker 01

  All the sense in the world. And then we see people who just say, man, I'm impatient. I don't want to wait, don't want to wait, don't want to wait. And they end up leaving an amazing opportunity simply because they were impatient, or simply because the early stages got difficult. So in your circumstance, you have to assess which one of those is true. Uh, should I continue to maybe do this, maybe continue to save up, build up, begin with the end in mind? To position myself to be able to make a career transition, three, four, five, six years down the road? Or is now the best time to do that? And it's a weighing of both the financial pieces as well as the non-financial pieces.

• 14:07Speaker 02

  Wonderful.

• 14:08Brian Preston?

  How much am I getting beat up in the comments by any public accountants?

• 14:12Speaker 01

  No.

• 14:12Brian Preston?

  Any hate, anybody, or do anybody agree? Or does nobody care? Cause we don't, maybe we don't have a, they're all working on tax planning right now.

• 14:20Speaker 01

  I'm about to say, none of the, none of the, this is almost tax season.

• 14:22Brian Preston?

  They're all doing compliance work right now as we speak.

• 14:24Speaker 01

  Actually in the chat right now.

• 14:26Speaker 02

  Maybe we'll see it later in the comments. Um, all right. Thank you so much, Mr. Broxley for your question. Hopefully that gives you a lot to think about.

• 14:34Brian Preston?

  I heard it again. Broccoli.

• 14:36Speaker 02

  Broxley.

• 14:37Brian Preston?

  Broccoli. By the way, it's not, you didn't say anything wrong. I just, my ears hear what they want to hear.

• 14:42Speaker 02

  It's cause you were talking about carrots before.

• 14:44Speaker 01

  Carrot, Tom, oh, can we have a vegetable in every question so far? Let's see. That'd be a fun game for me to play.

• 14:50Speaker 02

  Uh, Mr. Broxley, if you would like a Tumblr for asking a question, you can email [email protected].

• 14:55Brian Preston?

  I did have broccoli last night.

• 14:58Speaker 01

  Funny enough, you won't believe this, so did I. My wife made this like new, uh, this new dish I'd never had, we, she'd never done before. She crushed it. Um, if you're listening, honey, you crushed it.

• 15:07Brian Preston?

  My wife went out with some, some neighbors last night. So it was me and Emery.

• 15:12Speaker 01

  Uh huh.

• 15:12Brian Preston?

  You know, so we went to Cheddar's. I mean, that's a flash from Georgia. I mean, cause I, we never go to that place up here. And I got me a ribeye. Cause I mean, it was very affordable. Like my wife went to a steak restaurant last night and, uh, and we compared and contrasted, and I think she paid three times what

• 15:28Speaker 01

  Very different experiences.

• 15:29Brian Preston?

  My ribeye cost.

• 15:31Speaker 01

  That's hilarious. Oh, Megan, you're still here? Okay. Yeah.

• 15:36Speaker 02

  This next question is from Sol Fu.

• 15:40Speaker 02

  He says, "How does a future pension affect the Roth versus traditional calculation? The pension essentially puts me in a higher tax bracket at retirement."

• 15:50Speaker 01

  Man, that's a, that's a great question and not one that people often think about because the general line of thinking is that, okay, right now, if you're in a higher income situation, you may want to take advantage of pre-tax contributions, build up pre-tax assets because there's a good chance later in life, you'll have the ability to convert some of those assets to Roth at lower tax brackets. And then even as you get into like required minimum distributions and that sort of thing, if you need to pull off of your Roth assets to supplement lifestyle, you can do that and control your tax situation. But Sol Fu brings up a great question here. What if I'm going to have a pension? And what if, when I exit the workforce at 55, 60, 65, I'm going to have some sort of guaranteed income stream coming in?

• 16:34Speaker 01

  Well, that idea of me being able to convert assets later on in lower tax brackets may not be there. What if I'm someone, we have people in the chat all the time that say this, "Hey, you think that when you retire, you're going to be in a lower tax bracket." But my experience is, is when I retire, because I did such a good job saving, I'm still in higher tax bracket. So there are people who do have that reality. So when that's the case, when that's the scenario, Brian, should you rethink how you do Roth versus traditional? Or are current day tax savings still super, super valuable and you take advantage of it while you can because that's what makes the most sense in the present time?

• 17:12Brian Preston?

  Well, I love this because this is actually a great kind of thought exercise. When I talk about doing a personal financial triage on exactly where you are with your finances, we all know that finance is going to be personal, hence personal finance. And for somebody who does have a pension, a lot of times when you have a job that offers you a very lucrative pension, your current income might be lower than if you were in a job that just offered the traditional defined contribution, not the defined benefit. Because that's always the trade-off is because the defined contribution, like your 401Ks, you're Is going to give you a match and then you have to fund it, but with a pension, that's a defined benefit.

• 17:55Brian Preston?

  They usually, because there's a premium on that, you might have a little bit lower income. So it goes through the exact same, you know, filter of if your income is lower now than it's going to be in the future. Then obviously a Roth is outstanding because a Roth, if you, if you think about what's the, why do we love Roth? You don't get a current tax deduction. You get tax free growth though. That's the opportunity that you get with Roth contributions. So it makes complete sense. Somebody who has lower income now because they're in a very generous employer plan with a pension, something like that, but they're going to have much higher income in retirement because not only go have their, their retirement savings, but they're going to have this pension. They're going to have social security. You're going to start stacking up all these things.

• 18:39Brian Preston?

  And so you're going to be a higher tax rate. By all means, you never go get the Roth conversion opportunity that you see a lot of people. However, there's a lot of people, high incomes now, you're in a defined contribution plan. And you do think you're going to be part of maybe the FIRE movement or FINE movement and you're going to leave the workforce at 55. You're not going to start making required minimum distributions until your mid seventies. There is going to be a drop off of your earned income. You're not going to have any other cash flow. You're going to have three bucket strategy that's completely diversified. So you're going to be able to legally manipulate how your taxes work. By that situation, if you're in a high tax bracket right now, but in a much lower in retirement, we want to go ahead and take advantage of traditional because the tax deduction now is much more valuable than it will be in the future.

• 19:23Brian Preston?

  When you're likely can manipulate those tax rates easily. So Solfu, I think that you're thinking about this right and the fact that, yeah, if your pension is going to drive your taxes up in retirement, but you maybe you're in a lower tax rate right now and you also have decades of tax free growth. That, all those things are checks into the positive for, for why Roth contributions are so valuable right now.

• 19:47Speaker 01

  The only thing I throw in there is let's assume that you've projected this out and you think that you'll always be in the same tax bracket. Maybe you're in this working tax bracket and then when you retire, you're going to be in the same tax bracket. Okay. Well, if there's not that. Which way do I lean? I still think Roth makes a lot of sense because not only can Roth dollars grow tax-free for your entire life without being subject to requirement minimum distributions at age 73 or age 75, they can also grow tax-free for the first 10 years of your beneficiaries' life. So it is a long timeline where if you can justify Roth and you're not walking away from a substantial tax benefit today to do so, I think Roth is great.

• 20:26Brian Preston?

  One final just word of caution now. Pensions, I know a lot of employers, you don't see as many pensions, a lot of governments have pensions, and even governments have pensions because they were so underfunded for so long, they've changed the vesting for a lot of pensions from like five years to now a lot of them have gone to where they might take 10 years to qualify. So just pay attention to what the vesting is on your plan because you don't really have anything until you know you've locked in some of those benefits. So read the fine print too.

• 20:56Speaker 02

  Wonderful. So food, thank you so much for your question. If you would like a Tumblr for asking one, you can email [email protected]. Brian, you did get some support in the chat for your public accounting comments.

• 21:10Speaker 01

  Look at that. Birds of a feather.

• 21:14Brian Preston?

  Well, it all depends on what your perspective is.

• 21:16Speaker 02

  The chat also says that they definitely prefer broccoli over carrots.

• 21:22Speaker 01

  Of course. Who wouldn't?

• 21:24Brian Preston?

  I kind of like them both.

• 21:25Speaker 01

  I mean, yeah, but if you had to choose one or the other, you're definitely going broccoli.

• 21:29Brian Preston?

  Well, I will give it this, broccoli, I don't have to dip in a ranch. I'm typically putting some carrots or, you know, well, think about when you eat wings.

• 21:36Speaker 01

  Have you ever dipped broccoli in ranch? It's pretty fantastic also.

• 21:39Brian Preston?

  But I don't. I mean, I always just have steamed broccoli, like with a steak or something like that. Whereas carrots, the typical time I eat carrots is when we eat in hot wings and they're right next to the celery.

• 21:49Speaker 01

  You know, there's a, there's a plate, this is a shameless plug, so if they're watching, they're going to get, you know, this is free promotion for you. There's a little meat and three place here called Bishop's. Remember, we used to eat there all the time? And they'd always have this carrot souffle. You know what I'm talking about?

• 22:03Brian Preston?

  I think it was more sugar.

• 22:04Speaker 01

  And it was literally, my kids.

• 22:06Brian Preston?

  I think you like the, I think you like the sugar in it.

• 22:08Speaker 01

  My kids think that they Love carrots because of that carrot souffle and it literally just tastes like dessert. Cause they put, they put marshmallows on top. Have you been, have you had this?

• 22:17Speaker 02

  I haven't, but that sounds great.

• 22:18Speaker 01

  Oh, it's so fantastic.

• 22:19Brian Preston?

  Well, I mean, the first time I had it and it's, once again, it's because you're, it's really a, a vector to get the sugar into your, into your body.

• 22:27Speaker 01

  That's right.

• 22:27Brian Preston?

  Because Thanksgiving, for years, I love sweet potato souffle. So you think you love sweet potatoes. No.

• 22:34Speaker 01

  You don't still?

• 22:34Brian Preston?

  You, I, I do.

• 22:35Speaker 01

  I bought a stash.

• 22:36Brian Preston?

  But, but, but it's really the, the melted marshmallows. It's the sugar that's poured in. So when we ate this carrot souffle, I thought it was sweet potato souffle first time and it was only until like the third time I ate it that we, they were like, no, this is carrot.

• 22:49Speaker 01

  This is carrots.

• 22:49Brian Preston?

  I'm like, oh, so it's the sugar is what I really like.

• 22:52Speaker 01

  Yeah. Hot take, uh, cause we had to decide this at Christmas this year. You know, when I have, when it comes to sweet potato souffle, I don't prefer the marshmallows on top.

• 22:59Brian Preston?

  You like the pecans?

• 23:00Speaker 01

  Pecans.

• 23:01Speaker 02

  I agree. I'm not a big marshmallow person.

• 23:03Speaker 01

  Right. I was like, I'll have a marshmallow smore, but I don't want it on my vegetables. That's the way that I feel. General consensus.

• 23:07Brian Preston?

  Can you do both? Why do these things have to be an either or?

• 23:10Speaker 01

  See, that's, that's Brian Preston. That, that is.

• 23:12Brian Preston?

  Why can't we do both? Cause I love them all. I mean, let's throw it on there. Let's do, let's put some pecans. Let's throw some marshmallows. Let's see what happens. There must be some chemical reaction that occurs because I'm not the first one to come up with that idea. I'm sure. You do both?

• 23:26Speaker 01

  Nate does both. Look at that.

• 23:27Brian Preston?

  Look at Nate.

• 23:28Speaker 02

  We'll have to try it.

• 23:29Speaker 01

  Thanksgiving and Nate tells. I love it.

• 23:31Brian Preston?

  You're over 27 though, right? We're all right.

• 23:37Brian Preston?

  A little internal humor.

• 23:40Speaker 02

  All right. Uh, this next question is from Snow Cross Fan. He says, I'm 45 and I have $44,000 in student loan debt and only $10,000 in retirement. Should I keep investing, prolonging out the student loan payments, or should I keep hitting them with all of my cash if they will be done in 18 months? So how do you decide student loans or retirement savings?

• 24:02Speaker 01

  Well, so this is a difficult question. So every, every financial decision that we make has an opportunity cost associated with it. If I decide to buy X, that means that there's a plethora of other things I'm not buying. If I decide to spend X. Dollars, I'm making the decision to not save X dollars. Or if I'm going to make the decision between satisfying student loan debt, I'm going to go pay off this student loan debt, which means I'm going to decrease my debt balance. I'm going to save money and interest, or I'm going to go fund some other goal that I have, like funding retirement or saving for the future, whatever. At 45 years old, you have to really think through, okay, what are my goals? And what does the end of my plan look like?

• 24:45Speaker 01

  Am I building towards financial independence? And is that a top goal that I have? Or am I aiming to be debt free so that I can free up cash flow? And how would I prioritize those two goals? And depending on how you prioritize those goals, as well as factoring in the external factors, like the interest rate on your student loan debt, and the assumed rate of return you might have on your retirement assets, you need to make a determination. Which one of these goals am I willing to and desire to pursue the most? And you have to make that judgment call because at 45, with $10,000 saved up for retirement, I would argue you're a little bit behind. But also, having $44,000 student loan debt,

• 25:26Speaker 01

  I would argue that it's hung around longer than we would prefer to hang around. So you've got to make some assumptions in your financial life to determine where will my dollars best be utilized to pursue the goal that is the most important to me?

• 25:40Brian Preston?

  So this question is, here's an easy way to put your mind in the way to find the solution. Please excuse my dear Aunt Sally. A little Pim Doss love.

• 25:51Speaker 01

  A little Pim Doss.

• 25:51Brian Preston?

  If you think about it, if you were doing a math problem, you're trying to figure out, is it the parentheses? Is it the multiplication, the division, the addition? What comes first? And that's exactly what Snowcross is dealing with right now. The good news is, is we've created the all-terrain system that just like it works in math, there is a financial system, and it's called the Financial Order of Operations. If you go to moneyguy.com/resources, you can download this if you really want to go deep. Of course, my New York Times bestselling book, Millionaire Mission, will kind of give you the origin story for all this. But here's the way Bo kind of gave you the things, because there's variables that are going to determine what you need to do first. I don't love the

• 26:36Brian Preston?

  fact that you're in your mid 40s with this much debt sitting out there. And that's why, fortunately, when we get into the chapter on high interest debt, step three of the Financial Order of Operations, we actually give you the details on what is high interest debt when it comes to student loans, based upon and how that's influenced by age. So you can then figure out, is this something that needs to be part of step three? Or is this something I can defer down to step nine of the Financial Order of Operations? So then you can get to work, you know, after the emergency reserves of step four into step five and get the Roth and so forth. But you've just got a lot of variables that you're going to have to kind of figure out how you do that triage moment where you figure out where you are, what's

• 27:18Brian Preston?

  going to be the best use for the next dollar that's in your army of dollar bills, and then get to work and get serious. You know, look, at 40, because he's 45 with $44,000 of student loan debt, these are things that you're fortunate that the guy talking to you, I'm older than that. So you're still young in my eyes, but we got to get to work and you got to be deliberate and don't let another day pass you by without attacking this.

• 27:43Speaker 01

  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.