Why $250k is Halfway to $1 Million

No - it's not bad math. You might be closer to your goals than you think. We're using compound interest to blow your mind about your path to $1M (or any other target). Plus, we answer questions on emergency funds, Coast FI, sinking funds, and more. This special Fall Break edition of The Money Guy Show features Rebie in the big seat as co-host with Bo - don't worry, though, it is a Tumbler Day! 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. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠NordVPN.com/MONEYGUY⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:00Speaker 00

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• 0:27Speaker 01

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• 0:58Speaker 02

  No, it's not bad math. 250K is indeed halfway to $1 million.

• 1:05Speaker 03

  Ruby, I am so excited to talk about this because math. And we love math here at the Money Guy Show. And I am super stoked about this because whenever you kind of get into the numbers, start playing with them, there are some fascinating things that happen. Now, you know this. I, right now, for the past year, my wife and I have been homeschooling the kids.

• 1:29Speaker 02

  You have.

• 1:30Speaker 03

  And you know what every Friday morning is?

• 1:33Speaker 02

  Math class, right?

• 1:34Speaker 03

  Every Friday morning is muffins and math with dad. And it's awesome. And you have young kids too, right? And so as you start kind of like having these conversations with your boys, you're going to be like, hey bud, what's 2 plus 2? And he's going to say?

• 1:49Speaker 02

  4, hopefully.

• 1:50Speaker 03

  And then you're going to get to teach him like how the math works. And then you're going to say, okay bud, you're doing awesome. What's half of 10?

• 1:57Speaker 02

  Five.

• 1:58Speaker 03

  She's so nervous because I'm making her do public math here. And we're gonna keep working on this. And so with my daughters, we're working on multiplication and we're getting into money and doing that kind of stuff. Now, what are you gonna say, Rebi, one day when your son gets there or when my daughters and I get there and I'm like, alright sweetheart, what's half of 1 million?

• 2:21Speaker 02

  What I hope they say is 500,000.

• 2:24Speaker 03

  To which I would say, yes, baby, that's, that's true. But when it comes to money, when it comes to money, halfway to 1 million happens a little bit before then. $250,000 is actually halfway to 1 million. They're gonna say, Dad, what do you mean? That's, that math doesn't math. And then what do I get to explain to them?

• 2:45Speaker 02

  Then you get to explain to them one of my favorite things that I have learned from you and Brian, which is the power of compound interest. So when I was in mid twenties and met you guys, which is too long ago, first of all, can I just say, this is the concept that took someone who had the basics down and truly changed my mind and really blew my mind, if you will. So the power of compounding interest is if you take just $833.33 per month, which is 10K annually, exactly, with a rate of return of 8% annually,

• 3:23Speaker 02

  that only takes you 13.8 years to get to $250,000, which we're saying is halfway to 1 million. And here is why. After you get past that 250K, that first 250K, it takes the same amount of time, 13.8 more years, to get to 1 million. If that money is invested, the power of compounding interest is working in your favor and it's making your money work harder than you do. And so Thankfully, I felt like I was a little late, but by mid to late twenties, I was on board and I was getting to benefit from the power of compounding interest and get on this path.

• 4:04Speaker 02

  And so that is something I love about the Money Guy Show. It's one of our core principles. And so indeed, 250K is halfway to 1 million.

• 4:12Speaker 03

  What I love about this is that the bigger the numbers get, the bigger the numbers get. And what's great is when you think about this, your behavior didn't change. You did the exact same thing, day one, that you did all the way nearly 27 years out into the future. But what's great is when you do that same behavior, it takes you a long time. And it feels like in the early stages, you're moving slow, you're moving at a snail's pace. But as that snowball begins to roll down the mountain, it gets bigger and bigger and bigger and more effective and more effective and more effective. And so when you actually get to start seeing this, when you begin tracking your annual net worth statement, you say, okay, last year, I saved $10,000, I got $10,000.

• 4:57Speaker 03

  But then you get to the next year, like, okay, I saved another $10,000, I have $20,000, but actually have a little bit of growth on there. I've got like $21,000, $22,000. And you see that start to happen and that start to compound. It really does kind of become addicting. And what I think is awesome is this illustration we laid out shows, what if you don't change the behavior? But what's beautiful about finances and what's beautiful about your financial journey is that your behavior can impact the speed in which you move. So we laid out for you, okay, what's it look like if I just save $10,000 a year? Well, how fast you get to a million changes based on how you want to save. So if you're someone, maybe you can't save the full $833 every single month, but maybe you can save $500 a month.

• 5:42Speaker 03

  If you can do that, it's going to take you about 33 years to get to $1 million if we assume an 8% annual rate of return. Well, if you're doing that, when you're on that path, by the time that your portfolio hits $209,000, you have covered half the time it takes to make it to a million. Yep. That means that you will make $800,000 in your portfolio in the same amount of time it took you to get to 200. If you can save $1,000 a month, it takes you about 25 and a half years to get there. Your halfway point is $266,000. $2,000 a month takes 18 years. Your halfway point is 325,000. If you can save $4,000 a month, this is what's crazy.

• 6:24Speaker 03

  It only takes a little over a decade to get to $1 million. So your halfway point happens at 384,000. What I think is great about saving, and this is what we see time and time and time again from our financial mutants is that, okay, I may start and I may only get to start doing $50 a month, but I do that for a season and then I can increase that to 100. And then 100 becomes 200 and 200 becomes 500. And then 500 becomes 1,000. Brian and I talk about, we remember both of us individually, when we finally hit it like the one comma a month savings club. When you ever save a thousand bucks a month. Right, it's a milestone. It was mind blowing, right? And then you get to where, okay, maybe I can save 2,000. Maybe I can save through. And you begin to see how much of an impact

• 7:09Speaker 03

  that increase in savings has in your financial life. It becomes mind blowing. And so we talk about compound interest. We talk about how your dollars can grow. It really is crazy. And my kids have not gotten on, they haven't gotten on this just yet, but I'm so excited because when it does take hold, when I finally get my oldest daughter to reckon, I was, wait, wait, I can take some money and rather than spend it, I can just put a little bit of aside. And if I put it aside, that money can make money and it can actually grow while I'm sleeping. Right now in homeschool science class, they're both growing these little plants. And so every day they go out and it's wild because like they'll like, they're kind of competing. They're like, oh, there's a speck, there's a leaf, there's a. I have a leaf.

• 7:54Speaker 03

  And what's so. I don't. If they're getting this excited about watching plants grow, that makes me very, very excited about getting excited about what happens when compound interest begins to take hold.

• 8:06Speaker 03

  Mind blowing.

• 8:06Speaker 02

  Oh, for sure. Cause yeah, compound interest is there for really anybody like anybody can do this, which is the beautiful thing about it. And I loved how you laid out, you kind of get to decide based on your personal circumstances, how fast or slow you want to go. And no matter what you can and are able to contribute, uh, there's a benefit and there's growth there for you. And then like Bo said, I think it's easy to like extrapolate out these numbers like, okay, $500 a month for 33 years, but like that might change. And that's kind of the beauty of it. You get to kind of be the driver there and um, keep it growing, keep going.

• 8:42Speaker 03

  If your mind was blown and you thought, man, this is crazy. We have a great show that just came out for you called 10 my top 10 mind blowing money stats that similar type of stuff. Hey, how can $250,000 be halfway to a million? It's a great show. If you've not checked that out, make sure you do it because we love that we get to put this information together. We get to curate these shows. We get to come up with these ideas, share these concepts. But in addition to that, we love that you guys have questions, that there are things that you want us to weigh in on. So if you have a question right now that's burning in your mind, let it come from your mind into your fingertips, down into your keyboard and get it in the chat. Cause right now we have

• 9:23Speaker 03

  the team out in the wings, collecting your questions. Cause we really do believe that there is a better way to do money and we want to be the mechanism that shows you that better way. So with that, Rebi, creative director, Rebi, sitting in the big seat today, co-host Rebi?

• 9:40Speaker 02

  Yes.

• 9:41Speaker 03

  I'm going to throw it not very far over to you.

• 9:43Speaker 02

  I've got some questions queued up and it's a little extra motivation to get your question in the chat. It is a money guy Tumblr day. So if we answer your question right here on the show, you get a Tumblr. And I'm realizing we are being terrible Tumblr models today.

• 9:58Speaker 03

  Guys, what production team, nobody put some tumblers on the table for us?

• 10:02Speaker 02

  I didn't think of that until just this moment.

• 10:04Speaker 03

  I went koozie, no Tumblr.

• 10:05Speaker 02

  Maybe we'll change that, maybe we won't, but we love a good money guy.

• 10:08Speaker 03

  I can see where they are. They just, they decided not to put them on camera. It's, oh my goodness.

• 10:13Speaker 02

  I think we decided not to drink out of them. There you go.

• 10:15Speaker 03

  Magic Tumblr coming from off screen.

• 10:17Speaker 02

  Money guy Tumblr day. Amazing. All right. We're going to kick it off with Matt Yoo's question. He says, "My wife, 28, and I, 32, will be welcoming our first child in early January."

• 10:29Speaker 03

  Congratulations.

• 10:31Speaker 02

  Which is so exciting. We love that. Uh, we have a savings rate of 27% and are holding six months, a six-month emergency fund plus 100K in sinking funds. How much is too much cash in the messy middle? Can I just say, first of all, as someone who has had some children, done the emergency fund thing, this is like a dream scenario.

• 10:55Speaker 03

  I mean, holy cow.

• 10:56Speaker 02

  Because we like to say, there's not a perfect time in your financial life. Like, having children is not a step in the foot.

• 11:02Speaker 03

  Nope.

• 11:02Speaker 02

  That is a life decision. That is an exciting thing. Um, but then, you know, then we always talk about like, oh, how can you prepare financially? Uh, you're prepared. So I just want to congratulate you on that one, first of all. But I do want to hear your perspective, Bo. This is a lot of cash.

• 11:17Speaker 03

  There's a lot of cash.

• 11:18Speaker 02

  Um, there's a lot of good things going on, but how should they think about this?

• 11:21Speaker 03

  Yeah. Uh, one question I'd have for you, Matt, is, man, a hundred thousand dollar sinking fund, what exactly is it that we are sinking for? Like, is this a sinking fund for like, another house? Another, I mean, oftentimes, we think about sinking funds, and for those of you that aren't familiar, a sinking fund is just this idea that I have this future expense coming up, and so I want to begin pre-funding it right now. So, now, man, I'm gonna need to replace the tires on my car, and that's gonna be $2,000. I'm gonna start a sinking fund and save towards that. Or, I might have an HVAC repair coming, and that's gonna be $8,000. So I'm gonna create a sinking fund. To hear that you have a $100,000 sinking fund, that's a big old boat that you're planning on not letting sink. And so, uh, I would ask the question, why is that there? Because

• 12:06Speaker 03

  one of the things that you already have in place is you already have six months of living expenses in place. Now, I don't know what your monthly burn rate is, but I would imagine if you have a six, a $100,000 sinking fund, I bet your six-month emergency fund is probably pretty big too, and pretty substantial. Now, I love having cash, and I love having liquidity. Now, especially like having liquidity going into like, unknown circumstances. And having kids is certainly an unknown circumstance. There's a lot of stuff, a lot of life that changes. So I'm not gonna fight you for having a little bit of excessive liquidity there. However, here's what I want you to do. I want you to go to moneyguy.com/resources and I want you to play with our wealth multiplier.

• 12:47Speaker 03

  And I want you to see for a 28-year-old and for a 32-year-old, what each one of your dollars could multiply into by the time that you get to age 65. And what you're going to see is like, I had this number, remember, for a 30-year-old, which is right in the middle of you guys, it's 23 times. Every $1 that you save at age 30 can turn into $23 by the time that you get to age 65. And so while you're keeping this liquidity, while you're keeping this powder money there, oh, look at this wealth multiplier, that's beautiful. For a 30-year-old, it's a 23 wealth multiplier. Well, while you are keeping this money liquid, while you're keeping it dry powder, while you're planning for this sinking, there is some real opportunity cost that's taking place.

• 13:31Speaker 03

  So here's some questions that I would ask you if you were sitting across from me and we were kind of analyzing this. I'd say, okay, what's your current savings rate look like? Like, are you saving 25% of your gross? 27%. 27%. Okay, great. What's the rest of your portfolio look like? Like, are you someone who's been saving and you have a 800, 900 million dollar portfolio? And so $100,000 sinking fund isn't... Or do you have $150,000 saved up investments, but you only have $100,000 sinking fund? I would begin to think, man, there's some major opportunity cost from that money sitting there. So I'd answer the question, what's the sinking fund for? Is that prudent? And let me say another thing that I see people doing all the time.

• 14:13Speaker 03

  They will have multiple sinking funds, right? They'll be like, I got a sinking fund for the new car. I got a sinking fund for the HVAC. My roof might go out. I got a sinking fund for that. My kid might need braces that I'm about to have in like 14 years. So I'm going to have a sinking fund for... And you just, you realize I've got like nine different sinking funds? We've done this a few times on Making a Millionaire. The probability of all of those things happening all at once is a relatively low probability thing. So you can think of your sinking fund as multipurpose. Like, I have a sinking fund and it might be for the tires, or it might be for the HVAC, or it might be... But I don't have to have each one of them separately, like chiseled out inside there. Because if you do it that way, you're going to end up with a ton of cash.

• 14:57Speaker 03

  So the answer to your que... I think the ultimate, what was the ultimate question? How much cash is too much cash? How much cash is in the messy middle? The answer is it depends. You'll have to decide for yourself, but some of the things I would think through is everything I laid out. What's the sinking fund for? Why I'm holding it there? What's the rest of my portfolio? And is that money going to be best utilized sitting there for the unknown unknowns? Or am I in a position where maybe my sinking fund should only be $40,000, $50,000? And if I am there, but you are someone who's super risk averse, I literally just had this conversation with an advisor in my office before we went live. She has a client and she's like, hey, this client has some like apprehension. She has a bunch of excess cash and she wants to put it to work.

• 15:38Speaker 03

  And I'm trying to counsel her. I'm like, hey, you know what? Do this. Tell her, don't put the excess cash to work all at once today. Rather than even giving you a lump sum, let's just increase how much you're investing on a monthly basis. And so maybe Matt, for you, maybe, I don't know what your monthly savings is, but let's just say that right now you start doing $10,000 every month into your taxable brokerage account, assuming that you're in step seven of the financial order of operations. And you just let that start happening and you'll be amazed at how through time you will buy down that sinking fund. And once you get to the point that you're comfortable, 40,000, 50,000, whatever that number is, you can stop there. Turn, turn off or bring back down the monthly contribution and you will have gotten all that money to work, working for you.

• 16:23Speaker 02

  I think that was some good guidance. Matt, you, thank you for the question. Congratulations on the new baby. And we hope that helps you think through what you might be doing with that cash.

• 16:33Speaker 03

  And one other thing, Matt, make sure that cash is not sitting idle. One of the things that breaks my heart so much is when I, I'll have a a potential client, a prospective client reach out and they'll kind of walk me through their situation. I'll be like, they'll say, hey, I've got a hundred thousand in cash. I'm like, oh, okay, great. Uh, where's that sitting? Oh, well, let's just set my, you know, I have it in my checking account. I'm like, oh. Do you recognize, even though interest rates have come down, we recently saw an interest rate reduction. You can still get three to 4% on your cash in high yield savings accounts or money market mutual funds. So if you are going to keep cash for an emergency fund, for a sinking fund, for whatever that may be, make sure it's at least earning something. Cause right now rates are too good to not be taking advantage of. So make sure you're doing that.

• 17:15Speaker 02

  That's good stuff. Matt, if you would like a money guy Tumblr, just email winner at moneyguy.com. We'd love to say thank you for asking your question today.

• 17:23Speaker 03

  Are you gonna, are you gonna tell them the thing? Are we, are we telling them, Matt, the thing? Are we not, are we telling them the thing? He said, tell them. Do you want to tell them?

• 17:32Speaker 02

  I would love to tell them. So next week, we have something really fun happening.

• 17:36Speaker 03

  Hold on, hold on, but let's see if you can get, we have someone hanging out with us.

• 17:40Speaker 02

  Yeah, it's a collab.

• 17:41Speaker 03

  Do we know how to, do we know how to do chat?

• 17:44Speaker 02

  Oh, yeah, can we do a poll?

• 17:45Speaker 03

  How can we do a poll?

• 17:46Speaker 02

  Can we get a poll up? Yeah, who, well, then we have to pick. I want to know who you guys.

• 17:51Speaker 03

  I just say in the comments.

• 17:53Speaker 02

  Think in the comments.

• 17:53Speaker 03

  Who do you think is going to hang out with us? Who would you love to see?

• 17:56Speaker 02

  Who would you like to see collab with us? I'm having a feeling, you guys will guess, but we will see. Do you want to do a question?

• 18:06Speaker 03

  Yeah, we'll do a question, then we'll see. We'll see if anybody gets it.

• 18:09Speaker 02

  All right. Josh D. says, I'm 36, married with four young kids.

• 18:16Speaker 03

  Nice.

• 18:16Speaker 02

  I've been a miser the past two years. This is a confession. We consistently saved 15%. In seven years, I will retire from the military. Is including the pension value in my current savings rate foo-ish? And you know, we get on people sometimes because we've got the nine step framework of the foo. And sometimes people get a little cute with it, right? And we call it foo-ish. So what would you say to Josh D.?

• 18:44Speaker 03

  Yeah, so one of the things that's really, really interesting about military pensions, that's different from some other ways that pensions are, are, are set up, is that you might actually be able to access or likely going to be able to access that when you retire. Meaning you don't have to wait to receive your military pension at some specific future age, like 65 or so on. You get to draw that when you actually retire from service. And so your ultimate question is, hey, we've been saving 15%. Seven years, I'm going to retire. Is including the pension value my current savings foo-ish? I don't think so. I think that including that in there is okay. Because if you're seven years, you're, you're, you're past the point, you're over halfway there to where it's going to be a high probability that you're going to receive this pension.

• 19:28Speaker 03

  And it's a federally funded pension. It's not like it's a company that's going to go out of business or go into like underfunded status. So you can rest assured that it's a high likelihood that those pension dollars are going to be. There. So whereas the normal person who doesn't have access to a pension, who doesn't have a guaranteed income stream coming in, they may need to be saving 25%. Hearing that you're at 15% sounds great. Now here's what I don't love hearing, Josh, that you've been a miser and 36, four young kids, being a miser can cost out, cost you a lot of stuff. Right. Because there are, and I'm recognizing this all too soon, right now at my age with my kids.

• 20:11Speaker 03

  These kids are only young for a little bit, right? And I'm like, I'm looking back at these like, I'm, I have, I have my two and a half year old and, and look, if my wife is listening, she'll start crying. I don't remember my 10 year old as a two and a half year old, like it, like it just, it blinks and it went by. And I'm looking at this little, and I'm, and I'm trying to like, remember what it was like. But I just remember being so like, oh, life was crazy and busy and all this stuff a decade ago.

• 20:36Speaker 03

  I don't want you to be making financial decisions that cause you to miss out on the sweetness that is this messy, middle stage of life. Now that doesn't mean-

• 20:45Speaker 02

  He's only gonna be that excited to just go get an ice cream for so long.

• 20:48Speaker 03

  That's right.

• 20:49Speaker 02

  I think about that with my three year old too. I'm like, oh.

• 20:51Speaker 03

  That's exactly right.

• 20:52Speaker 02

  It's gonna all go away so fast.

• 20:53Speaker 03

  My kid calls it, I need daddy, I need daddy, I need, and I'm, and like, I'm never gonna tell him the right way to say it.

• 21:00Speaker 03

  And so I, I, I hear that you've been miserly. I don't love that. So one of the things I'd want you to do, and especially since you're a military member who's gonna enter likely two different retirements. At least a lot of my folks, a lot of my friends that served, they'll retire from the military and then they'll go to like, career 2.0 or what, or like next thing 2.0. So you're kind of planning for like these two pseudo retirements. One that's gonna happen seven years from now, and then probably one that's gonna be the full retirement, where you fully decide to leave the workforce. I begin now to do some predictions. And I would use the 3D glasses, hey, what's the dream plan? What's the down to earth plan? What's the do do plan? And I would say, okay, based on saving 15% right now, every year out until I get to military.

• 21:43Speaker 03

  And then when I retire from the military and I start receiving my pension, what will I do for my next vocation? What do I estimate my savings to be? And then when do I want to fully retire? Am I going to do that at age 50? So am I going to have just a very short 2.0 career? Am I going to go to 55, 60? And you can begin, once you've done that, determining, okay, what is my actual number? And what savings rate is required to allow me to be able to get there? Because having a pension, and this is a great, it's a great thing for anyone to do. Now, look, um, this math isn't perfect. So I'm just gonna, don't, don't lambast me in the comments for saying this, right?

• 22:21Speaker 02

  Math won't be perfect.

• 22:22Speaker 03

  If you're, if you're a person who's going to get a pension, and again, I can't, I cannot express how not perfect this math is.

• 22:28Speaker 02

  This is just an example.

• 22:29Speaker 03

  Have I said that enough? Take, take your pension benefit. Uh, let's say it's a thousand dollars a month. I'm making up a number. Go, you did $12,000 a year. And just divide that by point 04. So just kind of dividing by a 4% withdrawal rate. While it's not a perfect representation, you can kind of think of that pension as a lump sum of dollars representing that value. So like, you know, whatever your pension is, divided by a 4% sustainable long-term withdrawal rate, you can kind of think about your portfolio, having that chunk there. That will let you know, man, okay, if I've got that size portfolio, creating that size income, how big does the other piece of my portfolio need to be able to supplement that?

• 23:10Speaker 03

  So I can live the life that I want to live on my terms, the way that I want to live. And I think if you start doing that work right now, being seven years away from first retirement, you're going to set yourself up to be able to make decisions that, uh, allow you to not only have a, a great, big, beautiful tomorrow, but also have a great, big, beautiful today. That's something we don't talk about enough. We want you to enjoy every phase and every season of life. And even though the messy middle is messy and crazy and hairy and hard, it can still, it can still be wonderful.

• 23:44Speaker 02

  Yep. It's a balance. If Brian was here, he would tell you to at least bedazzle your basic life.

• 23:48Speaker 03

  That's right. That's exactly right.

• 23:49Speaker 02

  Just make the memories now, because like Bo said, they. You will not always have this moment.

• 23:54Speaker 03

  I mean.

• 23:56Speaker 03

  Yes, my bad. That's my dude.

• 23:58Speaker 02

  That's so cute. Well, Josh, that was a great question. Thank you for asking it. And we hope that helps you think through your question and how you're spending your money and your time with your family. If you would like a Money Guy Tumblr, just email [email protected] and we will hook you up. All right, you guys are very fun. These guesses of who is coming to collab with us next week were great. Some of my favorites were Warren Buffett and Chapel Rohn.

• 24:23Speaker 03

  What? Those two seem, those two seem different.

• 24:28Speaker 02

  I like the contrast. Someone said Dolly Parton. Brian would love that one.

• 24:31Speaker 03

  We would.

• 24:32Speaker 02

  I would love that one. Let's just put that out there.

• 24:35Speaker 03

  Since he's not here, I'm gonna go and speed this into the ether.

• 24:38Speaker 02

  Yes.

• 24:38Speaker 03

  If you, one, Dolly, if you're a fan, we love you so much.

• 24:42Speaker 02

  We love you, Dolly.

• 24:43Speaker 03

  But if you're someone who's connected, we would love to have her come on and do some collaborations. So if you happen to be the inroad to Dolly, we'd love to be a resource.

• 24:53Speaker 02

  All I have to say, it is not one of those three that I mentioned, so drumroll, please.

• 24:58Speaker 03

  But almost, but, but just as, just as amazing as all three of those.

• 25:03Speaker 02

  For sure. Those were just the ones that kind of made me chuckle. But we are super excited to have Humphrey Yang on the show next week. We are recording some fun content behind the scenes, but since he's gonna be here on a Tuesday, we were like, Humphrey, you gotta come on live with us. It's gonna be so fun.

• 25:20Speaker 03

  We're gonna do it live, and you guys know the way the live show works. You get to ask us questions and we get to answer, so that means that next week, Humphrey's also gonna be answering questions live with us.

• 25:31Speaker 02

  Absolutely.

• 25:32Speaker 03

  So go ahead and start thinking about, and be specific and to be like, hey, this question is for Humphrey to stump him, because I'm not gonna stump Brian and Beau. I'm kidding. But it's gonna be super fun.

• 25:41Speaker 02

  We have really enjoyed Humphrey's content. We got to meet him in person at a conference and have interacted with him. So we're really excited to officially be joining forces and making some, hopefully, really awesome content for you guys.

• 25:55Speaker 03

  Super hype.

• 25:55Speaker 02

  So be here next Tuesday, 10 a.m. Central. Humphrey Yang will be here. It'll be awesome.

• 26:02Speaker 02

  All right.

• 26:04Speaker 02

  We're going to go to a question from Got a Tumblr? And shout out to you because after we answer this question, you will have a Tumblr.

• 26:12Speaker 03

  You will have a Tumblr.

• 26:14Speaker 02

  It says, "Hey, Money Guy, should emergency funds always be in high-yield savings accounts? With interest rates reducing, is there a balance of where to keep between high yield and a money market?"

• 26:28Speaker 03

  Hmm, okay, yeah.

• 26:29Speaker 02

  So, I think we're talking less versus more risk, and also, less versus more rate of return. What would you say?

• 26:36Speaker 03

  So, we've done a show, a show on this in the past, when rates first started like trickling up, before they hit the peak, kind of walking through the different ways that you can hold a cash. So, I'm going to answer your question this way. Got a Tumblr. Should your emergency fund always be in a readily available liquid cash or cash equivalent? The answer to that would be yes. What a lot of people don't realize is there are a number of different things that satisfy that, right? You can have a savings account at a brick and mortar. You can have a high-yield savings account that can be at a brick and mortar, or even like an online institution. You can have a money market account at one of those institutions,

• 27:19Speaker 03

  or you can have like a money market mutual fund that you hold inside a brokerage account. And what's really interesting is, which one of those that pays the highest rate will not always be the same. There were times in the not-too-distant past where the absolute best rate you can go out there and get was in a high-yield savings account. You go open up an account at a, I'm not going to give them free endorsements, but they're the names you've heard of. They would have like really attractive, high-yield accounts. You could go to bankrate.com, and you could kind of sort by, you know, yield, and all this kind of stuff. And so, a high-yield account made tons of sense. But then, we got into this rate environment where rates went higher and higher and higher, and all of a sudden, money market mutual funds became a lot more attractive. So, if you wanted to go have the highest yield,

• 28:04Speaker 03

  you'd go buy like a money market mutual fund. As rates begin to drop, money market mutual funds will probably drop more quickly than high-yield savings accounts. So, we fully anticipate it will happen again. So, high-yield savings account will probably be the one you want to hold in, or a money market account will probably be the one you want to hold your cash in. What I would encourage you to do, and this is why- Doing a net worth statement every single year is such a great, uh, it, it, it's like, um, annual physicals. You know what I mean? Like you go to your annual physical and like,

• 28:35Speaker 02

  Check up.

• 28:35Speaker 03

  You think like things are good, but you go to the annual physical and they're like, hey, you should check on this and this and this. You're like, man, I wouldn't have been thinking about

• 28:43Speaker 02

  I wouldn't have known.

• 28:44Speaker 03

  I'm glad that it's like top of, top of mind, front and center. That's what your annual net worth statement can do. And if you, if you want a free resource that you can use this year in 2025, you go to moneyguy.com/resources and download our free template. Or if you want to use the exact same template that I use, that Brian uses, that Rebe uses, that the vast majority of our team here uses, you can go to learn, uh, learn dot moneyguy.com and download our net worth tool, which has a whole dashboard there. I'm off on a tangent here. Sorry, Brian.

• 29:18Speaker 02

  Yeah, that's Brian's thing. What are you doing?

• 29:20Speaker 03

  Where I'm going with this is that one of the things you do is when you put that on there every year, I always mentally ask myself, okay, there's not much I have in cash. I've got it in this high yield money market fund or in my high yield account. Is that still the best payer? Or is that something I should revisit? Okay. You know what? Okay. What's Ally paying? What's Capital One paying? What's? And I don't want to move them all the time, but at least annually I want to check to make sure that I'm at least getting them a nearly competitive rate with whatever the going rate is out there. So to answer your question, God, it does not have to always be in one specific type of account. You can change where it's at, but I'd be cautious a few, few things. I would not change a ton because it's super annoying to have to like open a bunch of accounts and move them all

• 30:04Speaker 02

  over. It really is, yeah.

• 30:05Speaker 03

  There's also tax reporting required on these accounts. So it's going to be super annoying if you opened this account six months ago and, but then you moved it somewhere else, but then you forgot about that account. You get this tax reporting form and you forget to put on your tax return and you get a letter from the IRS and you're like, oh, I forgot about that. It's a super annoying thing. And Be careful when you're shopping rates for bait and switch type tactics. This happened to me because I'm super competitive and I wanted to beat Brian. So this is like 15 years ago.

• 30:37Speaker 02

  Let that be a lesson to you.

• 30:39Speaker 03

  Yeah, right. Pride cometh before the fall. He went and got a high-yield account back when high-yield was paying the best with like a well-known name everyone's heard of. And I went to bankrate.com and there was this other one that was just right above it for not a well-known name that a lot of people had heard of. And I was like, I'm gonna do that one so that I can beat him. And I did it and literally three months later, they dropped the rate. It was an intro teaser rate, absolutely ridiculous. So be, be aware that rates can move quickly. You don't want to do it a ton, but you do want to make sure that you're an advocate for every dollar in your army of dollar bills.

• 31:10Speaker 02

  Yeah, no, good stuff. Got a Tumblr. Thank you for the question and we would love to make your username a reality. Just email [email protected] and we will send you a Money Guy Tumblr.

• 31:22Speaker 03

  Love it.

• 31:24Speaker 00

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• 31:50Speaker 01

  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 block, 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.

• 32:15Speaker 02

  All right, Kyle S. is up next. He says, "Hey, money guys, I'd like your thoughts on coast FII. My wife and I, age 27 and 29, have about 180K in retirement accounts total, and a target of 5 million at retirement." So, doing some really great things. Can you please define coast FII as well? For those of us who are new to, I guess I'm not, I'm not new to this concept, but just thinking of people who may be. And then answer Kyle's question.

• 32:46Speaker 03

  So coast FII, so most people, they start out in their working career, and they begin saving, and their idea is, for the average person, you graduate from college around 22, 23, or maybe you don't go to college, you get out of high school like 18, you start saving, and you save for your entire working career until you get out to like age 65, and then you retire. And hopefully what you've done is, you've built up a pot of assets that's large enough that your money can provide for your needs for the rest of your life, right? It can work harder than you can with your brain, your back, and your hands. That's like the traditional financial independence journey story. Well, there are some people that say, "Hey, you know what I want to do?

• 33:29Speaker 03

  Early on in my career, I want to really like jack up my savings, because I've got this high income, I'm in this unique vocation, and I'm going to save really, really aggressively early on, so that I can build my assets to a certain level, that if all I do is let those assets sit, and I'm going to make up a number, from age 35, and I just let those assets I saved up until 35 grow, from 35 to 60, 65, I can let them just coast all the way to retirement, and so long as I can provide for my living expenses, I can make less money in my working years, not to save as much, I can be a little bit more conservative, right? It's the idea, I'm going to save up how much I need,

• 34:13Speaker 03

  I'm going to let it coast into retirement, and I can just cover my living expenses. And that's fine. A lot, a lot of people do that, a lot of people like think, think through that. So your question Kyle is, hey, I'm 27, 29. I've got $180,000 saved up. Uh, what are our thoughts on Coastify? Here is my thought, and this will seem shameless, but it's not. What I want you to do Kyle is I want you to subscribe right now to the channel. I want you to just click on the button to subscribe right now because we recorded last week? Two weeks ago, it all blends together. We just recorded an episode of Making a Millionaire and this was the exact problem.

• 34:58Speaker 03

  And I say problem, it wasn't a problem. This was the exact planning opportunity that we navigated through. We had this couple and their desire was Coastify. And hey, we have this plan and we've been working really, really, really hard and we are five years away. And we just want to kind of test and, and it was great. And they had done, I'm not going to give away what they did. They had done one thing really, really well, right? There was an obstacle that they had to overcome and, and it was the obstacle getting to the, getting to the first like little clip. They had solved that problem. What they had forgotten though, was that there's another obstacle at the end of the plan.

• 35:39Speaker 03

  And that obstacle goes from 60 all the way to the rest of your life, or whenever you're going to actually truly retire all the rest of your life. And they were so focused on the short-term goal that they had lost sight of the long-term goal. So when it comes to Coastify, I think it's great. I love it. I think it's a fine idea if that's something you want to pursue. But the further out your timeline is, the more impact even small variables can have. So like a little change that you're not aware of, and this is what I know at my age. For 27 and 29, one, to have $180,000 saved is insane. Like you're crushing it. We say that by 30, you ought to have one times your annual salary saved up.

• 36:21Speaker 03

  And it's, I don't know what you guys make, but 180 grand is pretty stinking good. So you're in, in a great spot. But there's a lot of life that's going to happen in your 30s. Amen?

• 36:31Speaker 02

  Amen to that.

• 36:32Speaker 03

  There's some life.

• 36:32Speaker 02

  Can't confirm.

• 36:33Speaker 03

  So whenever you plan for coast fire, you have like these long dated things. You better make sure that your assumptions are sound. And in my opinion, you better make sure that your assumptions are pretty conservative. Like when we think about coast fire or fire or fine, we talk about these like three Ds. We really do not spend a ton of time on the dream. The dream is great if it happens. Where we spend the majority of our time, and this is what we do for our clients. We spend a lot of time somewhere between doo doo and down to earth. Right? Like, because if, if, if that's the risk that exists, we want to make sure that we cover the risks. And then if things turn out better than we anticipate, then that's great.

• 37:14Speaker 03

  It gives us more options, more flexibility, more choices down the road. But far too often, people go into these scenarios only thinking about the dream, only thinking about, okay, I'm going to do this. It's going to be awesome. If one thing changes, oh, I thought we were going to have two kids, ended up with three kids. Or thought we were going to live in this part of the country, but had to move to this part of the country. Or thought this job was going to get us to the first benchmark, but oh, that job changed. Whatever that thing may be, you just have to make sure that your assumptions are really, really tight in order to be able to execute. So we love coast fire. It does require a little bit more forethought, a little bit more planning, a little more strategy.

• 37:57Speaker 03

  Then a normal retiree just says, hey, if I can just save 25% of my gross, I don't have to think about a whole lot else. I can just put that to work. And if I do it early enough, odds are I'm going to get to write my ticket.

• 38:06Speaker 02

  Yeah. No, that was good stuff. Kyle, thank you for your question. If you would like a Money Guy Tumblr, we'd love to send you one. Just email [email protected] to cash in on that.

• 38:17Speaker 02

  All right. We've got a, you, you got something?

• 38:19Speaker 03

  Well, somebody just said, I mean, this is a question. Hey, when is the survey result being released?

• 38:24Speaker 02

  Really soon.

• 38:25Speaker 03

  Really soon.

• 38:26Speaker 02

  Honestly, I'm not going to say the date just because I forget off the top of my head, but it's coming. So be sure you're subscribed and I mean that because you will see it when it comes out. And also if you took the survey, we're going to be emailing you like a special announcement email. Like, hey, this thing that you helped us make is out in the world. So that's coming this month.

• 38:44Speaker 03

  I don't want to, I don't want to oversell it. Uh, you know, that's not, that's not normally what I do.

• 38:51Speaker 03

  Mind blowing. Like when we actually got to see the results and look at the results.

• 38:55Speaker 02

  There were some like, I don't even know. There's a part of me that's like, was it surprising? But like, it kind of was. It was like, okay.

• 39:02Speaker 03

  You know, your kid, I keep talking, man, I'm talking a lot about my kids today. You know, when your kid does something awesome and you just like, you're just like well up with pride and you're like, oh, look at that. Look at that. That's the way I felt with the financial mutant survey. I was like, oh, they're doing it.

• 39:17Speaker 02

  That's amazing.

• 39:18Speaker 03

  And so we can't wait to share that with you.

• 39:20Speaker 02

  Oh, so our production team is awesome and they, they reminded me when it's coming out. It's well.

• 39:26Speaker 03

  Don't tell them. No, no, no.

• 39:27Speaker 02

  I think you should subscribe.

• 39:28Speaker 03

  Don't tell them. You gotta subscribe.

• 39:31Speaker 02

  That was very kind of you though, Caleb.

• 39:34Speaker 02

  But I'm going to be like that. Okay.

• 39:38Speaker 02

  We do have some more questions. This next one is from Sparinator. It says, we are at the halfway to financial independence stage. A net worth just under 900K and contributing around 80K a year. Y'all often say the first 100K and 250K are the hardest. What are the most common mistakes people make between 500K and 2 million? That slow compounding momentum? So it's true. They've got a lot of the hard part or what we often talk about as the hard part down.

• 40:20Speaker 02

  Is there, could they screw it up now?

• 40:23Speaker 02

  What would they, what do they need to be thinking of now at this stage?

• 40:26Speaker 03

  I love it. I've got, I've got three things. You ready for this?

• 40:30Speaker 02

  I'm ready.

• 40:32Speaker 03

  I'm writing myself notes. I don't forget the three things.

• 40:34Speaker 02

  That's great. That'd be sad if you got to number three and said, I don't know.

• 40:38Speaker 03

  Blank. Yeah. So one, to, to be at the point where you have a $900,000 net worth and you're saving $80,000 a year. That's fantastic. Like for all intents and purposes, I don't think you said your age. Killing it halfway to financial independence. That's awesome. And so you've done a lot of things really, really right. But what goes wrong? Where do we see people often fall off here?

• 41:03Speaker 03

  The first one I would say is they forget that I've done a lot of things right. People all of a sudden, once you cross over that two comma mark, you start thinking, oh, yeah, yeah, yeah. Well, I need to do something more complicated. I need to do something more sophisticated, do something more sexy, something more risky, something more not recognizing that the very thing that got you from zero to 900,000 with the right savings rate and enough time can be the same thing that gets you from 900,000 to 9 million, right? Like you don't have to necessarily change behaviors. And far too often we see people, once they get into like the millionaire status, they want to start doing things like, okay, well, now I'm going to go buy all the real estate, or now I'm going to get into the private equity deal, or now I'm going to start

• 41:45Speaker 03

  investing in the startups, or now I'm going to start, and they start doing things that are different than the behavior that got them to where they are. Now, don't mishear me. I'm not, I'm not suggesting that there are things wrong with investing in real estate or participating in private equity, but there is a season and a reason for doing it. And if you're not in the season, or don't have the reason, it's not something that you should necessarily do. And so far too many people like fall into that. So that's number one. Number two is, life starts getting a little bit easier. Life starts getting a little bit cushier. I'm saving,

• 42:22Speaker 03

  I'm saving $80,000 a year. I could probably afford that nicer car. True. I could probably afford to upgrade the house. Maybe true. You know what? We could probably go on the nicer vacations. And you know what'd be great? If we had the same house we could go to every year for vacation, maybe I should get that second home. Maybe I should get that vacation home. And then all of a sudden, you begin making these decisions because you have had a level of success that your lifestyle starts to get bigger. And bigger, and bigger, and bigger, and bigger. And what you recognize is, man, I used to be able to live in such a way that I was able to go from zero to 900,000 and crush it. But then I had some success.

• 43:07Speaker 03

  My income went up, my assets went up, but then all of a sudden I let my lifestyle expand. And man, okay, I saved 80,000 last year, but man, you remember we did that one big trip. So maybe it's 70,000 this year. And oh, we got to do the private school because we moved into the neighborhood and we got that and so maybe I'm only going to save 50. And then it's this thing where lifestyle creep is a real thing. And what begins to happen is your lifestyle creeps up and the type of behavior, the type of person you were that got you to the level of success begins to shrink because it gets crowded out by other stuff. So be mindful. Again, don't mishear me. Lifestyle creep is not bad. It's not inherently a bad thing.

• 43:52Speaker 03

  As our life expands, as our income increases, as our net worth increases, it's okay to enjoy that. It's okay to be living better today than you were last year or better this year than you were five years ago. So long as your savings behavior follows, so long as your lifestyle does not outpace your savings behavior. So lifestyle creep is a second place. We see people falter. And then here's the third one. You've heard us say this a number of times.

• 44:24Speaker 03

  In our opinion, with all the books, podcasts, blogs, articles, resources, YouTube channels, all the things out there, it's not incredibly difficult to self-manage your financial life when you're first starting out from like zero to $500,000 of investable assets. There's so much information out there. There's so many different resources that you can do it yourself and it's not all that complicated, right? If you want to know where to start or what to do with your next dollar, go to moneyguy.com/resources and download your free copy of the food. It's a nine step process to help you figure out what to do with your next dollar and you can do that for a long time.

• 45:04Speaker 02

  Had to do that for Brian.

• 45:05Speaker 03

  But a lot of times we don't mean for this to happen, but complexity finds us. We just wake up, we're like, holy cow, when did my life get so complicated? And when did I get, when did I start getting faced with these decisions like, man, I used to just have my W2, but now. I'm getting RSUs and I have this thing called an employee stock purchase plan. And okay, I had life insurance when my kids were little, but do I still need it now and how much? And holy cow. All right. When it was little, I said, I want this person to take care of my kids. But now my kid is like three or four years away from 18 and if I kick it, they're going to get all this money at 18. Is that really what I, and you just, complexity begins to find you later on in life.

• 45:49Speaker 03

  And so one of the things I think a lot of people do, whether it's they get too busy or they're afraid of the cost or they're afraid of being sold something, they don't recognize that taking the relationship to the next level, having a professional step in and give you a second set of odds or whatever that thing may be, whether it be on your taxes, your investment strategy, your savings strategy, whatever that thing may be. Just because you, let me, most financial, I'm not even going to say most. I'm going to talk about our firm for a moment. Everyone who comes to our firm has had some level of financial success, right? Like that, that people who reach out, it's not like people come to us like, hey, I don't know what's going on with money. No, in order to even be reaching out, you've had to have some financial level of success.

• 46:31Speaker 03

  So it's not that you're bad with money. It's not that you don't know what to do. It's not that you don't know how to handle it. You have had success and you've gotten to a point. But the question you begin to ask is, okay, am I optimized? Am I doing all the things that I should be doing? Am I doing them as effectively and efficiently as I could be doing? And so a lot of people from 900 to 2 million or I think four mil, whatever your number was, there are some things you can begin looking at. Oh man, I used to do Roth 401k, but man, maybe I should be doing pre-tax 401k. Oh, I make too much for Roth IRAs. Hey, maybe I should be doing a backdoor Roth IRA. Hey, my 401k has after-tax contributions. Maybe I should be taking advantage of those. A lot of those are optimization metrics that happen as you get into that stage.

• 47:16Speaker 03

  So just recognizing, am I at that place where one of three things is happening? One, the gravity of the financial decisions is so great, I feel nervous handling them on my own. Two, I don't know what I don't know. Life has gotten complex and I don't know how to answer all the questions that I need answers to. Or three, I'm just too busy. Life has gotten so busy that the things I know I should be paying attention to end up getting pushed on the back burner. If one of those three things is happening for you, maybe all three of those, that might be the warning signal, hey, I should maybe consider taking the relationship to the next level. I should consider reaching out to a professional advisor to help me figure out where do I, how

• 47:57Speaker 03

  do I get from where I'm at today to where I want to be five, 10, 15, 20 years in the future? And if you're at that place, I'll tell you two things. One, whether you're going to talk to us or not, we have a great tool. Go to moneyguy.com/resources. We have a great tool that's like eight questions, 10 questions to ask your financial advisor. And it'll kind of walk you through, hey, ask this to make sure the person you're working for is a great fit for you. That's the first thing. Second thing, if that does describe you, we would love for you to give us a chance. We would love for you to consider taking the relationship to the next level so that we could be part of that team to help you get from where you are today to where you want to be in the future.

• 48:36Speaker 02

  Good stuff. Sparinator. First of all, you get a Money Guy Tumblr, since you asked your question and we answered it. Just email [email protected]. And then for Sparinator, or anyone who relates to what Beau was just saying, remember, you can always go to moneyguy.com and click on become a client and you'll just find a little more information about abound wealth and the form to fill out to get connected and just start exploring that. So that's always available for you if you want it at moneyguy.com.

• 49:03Speaker 03

  Love it.

• 49:05Speaker 02

  All right. Leandra Joe is up next.

• 49:08Speaker 03

  She asked a question last week.

• 49:09Speaker 02

  I know, I've seen her before. It's a memorable name.

• 49:11Speaker 03

  Leandra, thanks for continuing to check in.

• 49:14Speaker 02

  She says, I'm in the messy middle and will be done with foo step three this month.

• 49:19Speaker 03

  Let's go.

• 49:21Speaker 02

  With what level of intensity should one be funding an emergency fund? She's about to get to step four, which is the emergency fund. And remember, you can go to moneyguy.com/resources to get your free copy of the nine steps. So Bo, talk about step four. Emergency reserves are very important. How much intensity should she be going for in this next phase?

• 49:44Speaker 03

  See, this is what's so funny, because y'all recognize, like, all of us in the financial ecosystem, right, like all of us folks that do this and everything, we all know each other. We all hang out, we're all friends. So when I hear a question, like, at what level of intensity should I be doing this? I'm thinking, man, is there some, like, safari? Is there like a safari animal out there that's like super fast?

• 50:06Speaker 02

  What animal would you say?

• 50:09Speaker 03

  I think that's what she's looking for. So, you know, if you know, if you know what animal that is, good for you. How quickly should I be doing that? Well, here's what is so great. Reba, you hold the thing up for me again. This is our financial order of operations. Leander Joe said, hey, I'm about to close out step three. Step three is high interest debt. This is stuff like high interest car loans, credit cards, which is what most people fall into, consumer loans, store credit, those sort of things. And what you recognize is that when you're in that step, money is working against you. We talk about all the time. We started the show out talking about compound interest and how it can be like the eighth one of the world. And it can be amazing.

• 50:50Speaker 03

  It's so powerful, it can even warp time. So much so that $250,000 is halfway to a million. That's, that's how powerful compound can be. But when you're in step three, it's working against you. Like, it's, it's an active force against you. And when you begin to see the light at the end of that tunnel, when you get out of that, out of that forest, or you get, you get out of that fire that is high interest debt, you think to yourself, holy cow, I did it. I got out of it. And most people I know that have had that problem, they've gotten out of it, they say, never again. Never again. I got myself in that situation.

• 51:33Speaker 03

  I'm not going to let that happen to myself again. That right there is the exact reason why step four comes right after step three. Because what happens is, for most people, They don't have enough money that if an emergency happened, they could go pull from resources to cover it. So they have to swipe. They put in a credit card and then it just happens and it happens and it happens. And the reason that it happens is because they didn't have that thing to keep their life out of the ditch. Well, step four, fully funded emergency fund now creates an environment where I know that no matter what happens, if I lose my job,

• 52:13Speaker 03

  if the car gets a flat tire, if the HVAC goes out, if I have that medical thing I wasn't expecting, I know that I've got anywhere from three months to six months of my living expenses to keep me covered. So that when that thing happens, I don't have to swipe. I can write a check. I don't have to go back into step three. Step four is there to keep me protected. So Leander, your question, how intensely or what level of intensity should I attack level four, well, step four as much as you have, as much as you can give it? Because you are literally running away from step three as fast as you can.

• 52:54Speaker 03

  You want that to be a distant thing in your past. If you were running through the woods and a bear was chasing you and you came out of the woods, but the bear was still right there in the woods, how fast would you keep running to the parking lot? Just as fast. Just because you made it out of the woods doesn't mean that you're out of danger yet. You're slightly closer to being out of danger, but you gotta keep going. So I would attack it with a level of intensity saying, I'm gonna do everything I can. And you know what? Maybe I can't get all six months right now, but I can get half a month. I can get half a month with my next paycheck. And then I can stack on the next, I can get one month.

• 53:37Speaker 03

  And then I can do that and I can do, and then once you get to that three months, you can go. Okay. And then once you define for yourself, okay, is it three months, six months? Where's my, once I get there, now I can say, okay, I no longer have to worry about my old self catching up with me because I can take care of my current self because I have the emergency fund. Now I get to start taking care of my future self. And that's when I move into step five. That's when I get to start building for my financial future, building wealth for tomorrow. But you gotta make sure that you cover today and you don't let yesterday come back to get you. So whole question, what level of intensity?

• 54:22Speaker 02

  Don't stop. That's like, keep going.

• 54:24Speaker 03

  Every aggressive animal.

• 54:25Speaker 02

  That's a great perspective that I don't feel like we always cover in the detail that you just so nicely did, that the emergency fund is truly to keep you from having to go back to step three.

• 54:36Speaker 03

  That's it.

• 54:37Speaker 02

  Like, that's really important. That's a really big milestone.

• 54:40Speaker 03

  If you don't have an emergency fund, your only option is step three.

• 54:45Speaker 02

  Credit card, loan. Yeah, that's, I love that. So Leandra Jo, really good question. I hope that we gave you some encouragement to keep going and feel motivated to not only keep yourself from step, keep yourself from step three, but also to get to the exciting part of step five as quickly as you reasonably can.

• 55:08Speaker 03

  And can we just pause for a moment, chat? Because I just think we so often celebrate, I don't know if you've gone to our Reddit, if you go look at the money, there's so many celebrations of people hitting moss. I hit, I hit 250, I hit a million. And it's, it's an amazing forum for financial, and by the way, if y'all, if y'all wonder if we look at it, yes, we look at it. I love going to check out what's going on. And it's so fun seeing people at those milestones, but I don't want us to sleep on the fact that getting out of step three is a huge milestone.

• 55:37Speaker 02

  Yep.

• 55:37Speaker 03

  Most Americans out there can't even get to zero. And getting to zero is just kind of like getting to the start. Most people live in that negative. So Leandra, I want to celebrate you. That is something worth celebrating. That's something worth being so. Proud of because you've done something that a lot of folks are not able to do behaviorally. It deserves applause and recognition. Good for you.

• 56:02Speaker 02

  Oh, my gosh, for sure. And this is a very small but sincere token of our celebration and thanks. Since we answered your question, you get a Money Guy Tumblr if you did not get one last time. Just email winner at moneyguy.com.

• 56:16Speaker 02

  All right.

• 56:16Speaker 03

  Ruby, I know a lot of people, uh, some people might not have been here at the very beginning. If not, you should go check it out because we talk about how math is awesome. But there's another thing you said that's happening next week that I think you ought to remind the people of.

• 56:29Speaker 02

  Another thing that we didn't talk.

• 56:30Speaker 03

  No, no, we talked about math at the beginning of the show. So you, people don't know that. But there's another thing happening next week. We're doing a special thing. But there's people who come in midstream that may not have heard about this special thing we're doing.

• 56:39Speaker 02

  You're not wrong. And I would love to share again, um, Humphrey Yang is coming. Uh, I know we've heard from many of you that you love Money Guy and you love Humphrey Yang and that we would be a great team to create some great content. And that is exactly what we are doing next Tuesday. And since he was here on a Tuesday, we were like, you gotta come on the live stream with us. So 10 a.m. Central, which we're so appreciative that you join us here every week anyway. But next week is going to be particularly special because Humphrey is going to be a guest and we're going to chat with him about wealth building, but also answer your questions from the chat. So it'll be Brian Bo and Humphrey, uh, offering their wisdom and perspective for you. So that's going to be really fun.

• 57:21Speaker 03

  I'm stoked.

• 57:23Speaker 02

  All right, let's do one more. Eric says, why do you say to pay off student loans at 6% in your 30s? If the S and P returns at 8% after inflation? I'm struggling wanting to pay off the 13K debt at 6% that I have. Should just put a spicy warning label on this one.

• 57:47Speaker 03

  Yeah, this one's spicy.

• 57:49Speaker 02

  But I thought he makes a good point that depending on the interest rate of. Certain types of debt like student loans, they are working against you and we do consider them a problem. So how do you think through that?

• 58:02Speaker 03

  How, alright, let's, let's see if we can put our production team to the test.

• 58:06Speaker 02

  Okay.

• 58:06Speaker 03

  There's a slide that we use all the time that talks about

• 58:10Speaker 03

  different types of debts that you have and at what interest rates you should prioritize them.

• 58:16Speaker 02

  Yes.

• 58:17Speaker 03

  We'll see if they can get that pulled up because one of the things that's interesting is in our opinion, not all debt is created the same. So we have different rules. Oh my goodness, that's close. That, look, production team, I'm going to give you a C plus for effort. You got almost there.

• 58:33Speaker 02

  They like took it down immediately. They were like, let me try again.

• 58:36Speaker 03

  That was one of them. That's student loans. But there's one that has student loans and then has a column for auto loans and has credit card debt. And so all, not all debt is created equally. And so let's start kind of at the beginning. Credit cards, that's like, it's like a zero tolerance policy. We say here at the Money Guy, credit card use is okay. It's totally fine to use credit cards. If you listen to our survey show, we're going to tell you what percentage of financial mutants use credit cards. But we say credit card use, okay. Credit card debt, no way. We'll also tell you what percentage of financial mutants carry credit card debt. By the way, it's not zero. So tune in to find out what that number is. So credit cards aren't great. Well, then we say, okay, auto loans. Well, we know that when it comes to buying autos,

• 59:19Speaker 03

  we want to subscribe to 238, 20% down. Don't finance for any more than three years or 36 months. And it can't be more than 8% of your, of your gross income. All right. If you're inside of 238, then auto loans, we're going to have a priority. If your auto loan is over, you know, 10%, don't prioritize it in your twenties. If it's over 9%, prioritize it in your thirties, so on and so forth. Well, then we come to student loans and student loans is honestly, it's a hard one, right?

• 59:45Speaker 02

  It's the spiciest one.

• 59:46Speaker 03

  It's a really, really hard one. And this is Eric's question. Hey, I got student loans that are, and did Eric say he's in his thirties or is he just postulating, so in their twenties, thinking about the future?

• 59:56Speaker 02

  He made it sound like he's in his 30s currently.

• 59:58Speaker 03

  In his 30s, okay. I got student loans that are 6%. Why would I prioritize paying them off? If I know that the SMP can likely

• 1:00:10Speaker 03

  produce 9% annualized, depending on what timeframe you look at. Well, the way that we came up with our like payoff metrics was based on the wealth multiplier. And for those of you that aren't familiar, the wealth multiplier is this idea that suggests that for a 20-year-old, $1 can turn into $88 by the time they retire, but it decreases through time. So by the time you get to 30, that $88 now becomes $23. Well, a magical thing, I say magical, a disheartening thing happens in your 30s. You start your 30s with a 23 time multiplier, but by the time you get to 40, it drops down to seven. Now, don't mishear me, seven is still amazing, it's still awesome. But there is a reality that being able to turn $1 into seven

• 1:00:54Speaker 03

  is different than being able to turn $1 into 23. So our dollars are becoming less and less and less valuable. Well, as we're thinking through these rules, what we're thinking is probably true about financial mutants is that in your 30s, oh my goodness, look at these guys.

• 1:01:09Speaker 02

  They found the illustration.

• 1:01:10Speaker 03

  They are not the fastest, but they are good.

• 1:01:13Speaker 02

  They're in the most accurate.

• 1:01:14Speaker 03

  They are good. Yeah, so we say that for student loans, if you have them above 6% in your 20s, you should prioritize them. Above 5% in your 30s, you prioritize. Above 4% in your 40s. So if you have student loans at 6% in your 30s, we would agree with you, Eric, that you should prioritize. Now, this is not what I'm saying, right? Now, this is one, because Brian's not here, I can say this. So lean in close. Student loans are really interesting. And a 31-year-old is different than a 39-year-old. And we recognize that, right? So you have to define, inside of your financial life, inside of your financial plan, at

• 1:01:57Speaker 03

  What level you attack those goals? Because here's what we, here's what, if you listen to our language very carefully, I never say something like this. If you're in your 30s and your student loans are above 5%, you should stop everything and pay off your student loans. It's not what we say. We are very specific in this. We say it might make sense to prioritize paying off your student loans. What that means is that your student loans are kind of hanging out somewhere near that step three. They might not be actually high interest debt, depending on where you are in your 30s. But rather than you just making the minimum payment, you may want to begin thinking through, okay, I don't need to just make the minimums because now this interest is becoming more

• 1:02:40Speaker 03

  punitive than my dollars are going to be able to earn on the other side of the equation, right? So I want to begin focusing more on it in my 30s at this rate. Same thing in 20s, same thing in your 40s. So this is, this is one of those areas where personal finance is extremely personal. Now, if you have student loans and they're above 6% and you are in your 30s, I don't think it's crazy for you to have a strategy to figure out how you knock those things out more quickly than you would have been knocking them out in your 20s. That's something that accelerates as you move through time, but you have to define for you, what is the right strategy based on where you are in your financial life?

• 1:03:24Speaker 02

  Yeah, no, that was a good one because personal finance is personal. But yeah, like I, just doing the minimum payments when you're in your 30s might not be the move. So you have to think about that. And that's why we have these benchmarks and rules to help you optimize. So, good answer, Bo. I appreciate that.

• 1:03:42Speaker 03

  Yes.

• 1:03:43Speaker 02

  All right, remember next week, 10 a.m. Central, Humphrey Yang is coming. And remember to subscribe, not only to see when we are going live with Humphrey, but also to see when the Financial Mutant Survey show.

• 1:03:55Speaker 03

  It's coming.

• 1:03:56Speaker 02

  It's coming out. And really only the first of the Financial Mutant Shows. And it is a good one. So that's coming soon. Be sure to subscribe and watch your email if you took the survey. We'll be letting you know when it's out. I'm very excited.

• 1:04:09Speaker 03

  Uh, dang, that's my line. That's what I say.

• 1:04:11Speaker 02

  I said very.

• 1:04:12Speaker 03

  Oh, okay. She added a superlative. That's okay.

• 1:04:14Speaker 02

  You can say so excited.

• 1:04:16Speaker 03

  An adjective. Is that an adjective or ad-? I don't know. Guys, we, we could not do this show without you guys. So, thank you so much for showing up. Thank you guys so much for being on our socials. If you've not checked out Tangent Time with Brian.

• 1:04:30Speaker 02

  Oh, why didn't we talk about Tangent Time?

• 1:04:31Speaker 03

  If you haven't checked out Tangent Time, or you don't know what Tangent Time is, stay tuned. It's on socials. See if you can go find it. We'll be talking more about that. Super fun, brand new thing that we've started doing. Uh, we love that we get to do this. Thank you so much for letting us be part of your financial journey. If you keep showing up, we'll keep showing up. I'm your host today, Bo Hanson, along with Rebi and the rest of the Money Guy Squad, Money Guy team, out. 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

• 1:05:16Speaker 03

  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.

• 1:05:33Speaker 04

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  From our tradition to yours, Stonefire. Together we Naan.