7/11/25 Back to Basics: Gen-Z, Retirement, and Crushing Debt

The Moneywise Radio Show and Podcast Friday, July 11th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management LinkedIn: Moneywise_Wealth_Management

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  From the Garo Ellis padded radio room off Stockdale Highway, here is Money Wise.

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  Call or text into the show 24/7 at 396-1000.

• 0:39Speaker 00

  Here is Money Wise.

• 0:40Speaker 01

  Money, money, money, money.

• 0:45Speaker 00

  Welcome, welcome, welcome to the Friday edition of the Money Wise Show. We're live from the Garo Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 AM, 101.1 FM, and as always, streaming on the old interwebs at MoneyWiseGuys.com.

• 1:03Speaker 02

  Interwebs.

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  I'm your host, Justin Leland with

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  Dustin Weaver.

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  We're your Usten Crew today, taking you into the weekend.

• 1:13Speaker 02

  Yes, sir.

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  We have a great show for you today. We haven't done this in a while. Steve Z, have we done this, this style of show in a while?

• 1:21Speaker 02

  Back to the basics.

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  It's, it's been a while since we've done one of these. So you're going to want to stay tuned because you've got two CFPs in the room.

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  Look out.

• 1:29Speaker 00

  Look out. We're going to bore you to death.

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  Not too much in the weeds.

• 1:33Speaker 00

  Not too much in the weeds. No, you've got two CFPs in the room. We want to engage with you. So please, by all means, you can call or text into the show at any time, 24 hours a day, 661-396-1000, 661-396-1000.

• 1:51Speaker 02

  Justin, what's a CFP?

• 1:53Speaker 00

  Certified Financial Planner.

• 1:55Speaker 02

  Yes, sir.

• 1:56Speaker 00

  We are Certified Financial Planner Professionals. That's what we do for a living. We plan people's finances.

• 2:05Speaker 02

  That's right.

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  It's our job. Other than being, you know, world-class radio hosts.

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  And podcasters. We do finances. That's what we do. Uh, so we're going to get down to basics today. We're gonna, we're gonna, we're gonna kinda go back to budgeting, saving, debt.

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  401ks.

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  Credit.

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  You name it. You have questions, hit us with the questions.

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  Send them in.

• 2:43Speaker 00

  Send them in because that's what we're here to do today.

• 2:46Speaker 02

  That's it.

• 2:47Speaker 00

  But. Before we do that. We're gonna do what we do, and that's gonna talk about some market numbers. It was an interesting day on the market the last couple of days. Uh, after the close of the day yesterday. Uh, uh, President got by the microphone and what happened yesterday? He announced some more tariffs. The, the, the big, the big bad T word. On Canada. Again.

• 3:15Speaker 02

  Did they talk percentages?

• 3:17Speaker 00

  I think, did they say? A 35% tariff on Canada?

• 3:22Speaker 02

  Blame Canada. Blame Canada.

• 3:24Speaker 00

  Oh, I remember that. I wanna go, I'm gonna go home and watch that movie now.

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  Sorry, Gary.

• 3:31Speaker 00

  I know. Genius movie. That and Team America, World Police.

• 3:36Speaker 02

  That one's good.

• 3:36Speaker 00

  That's another one.

• 3:39Speaker 00

  Um. Yeah, so after the close yesterday, uh, you know. Announced a 35% tariff on Canada across the board and sent letters, uh, to a bunch of other countries, uh, regarding anywhere from 10 to 20% tariffs. So, uh, remind me if you've heard this before, uh, but we're, we're, we're back on the tariff train, uh, 90 days after we did the previous tariff train. Um, so markets.

• 4:10Speaker 02

  Little, little volatile. S and P was down, what, .3% today? So one, uh, yeah, .33. So about one third of 1%. Nasdaq down .22, Dow Jones down .63.

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  The dumb Dow. That dumb Dow.

• 4:25Speaker 02

  Yeah.

• 4:27Speaker 00

  Yep.

• 4:27Speaker 02

  So that one, you know, the Dow's 30 companies, S and P's 500. I think that's why frequently you hear the dumb Dow, right?

• 4:35Speaker 00

  Yeah.

• 4:35Speaker 02

  I got a lot more gauge on what's happening in the markets out there, looking at the S and P 500, some of the largest 500 companies here in the United States.

• 4:49Speaker 00

  Yeah, with the NASDAQ obviously being tech savvy and tech heavy.

• 4:54Speaker 00

  That's more than 500 companies though, right? The NASDAQ. What is that made up of? I mean, I know it's all tech, but I, I always kind of wonder how many are on the NASDAQ. It's more than 500, I believe.

• 5:07Speaker 02

  It's a pretty large list.

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  It's a larger list, but because it's so heavily laden with tech,

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  I shudder to give that one as much credence as the S and P 500.

• 5:21Speaker 02

  I look at the Russell 2000 a lot too.

• 5:23Speaker 00

  You're right.

• 5:23Speaker 02

  Yeah, NASDAQ has 3,500 companies.

• 5:26Speaker 00

  Yeah. So it's broad, but it's targeted is the way to look at it. So yeah, just an interesting couple of days. The, the S and P is down for the week. The Dow is a little bit more flat for the week. But overall, just kind of a weird, weird week. Again, we're, we're at the 90 day. Remember, you know, back in April, we announced all these tariffs and then we backed off.

• 5:53Speaker 02

  We're gonna pause that for.

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  Yeah, we backed off and we, we said, oh, 90 days. Well, guess what yesterday was? 90 days. So.

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  And now we're going to push it another two weeks until August 1st, when these tariffs are going to go into effect again. So just be ready for the, the tariff trade, the taco trade, if you want, for the next couple of weeks. That's probably what we're going to see. It's probably a little volatility. Again, now what we are also going to see is next week is the start of earnings season. Now what that is, Dustin, you want to explain what earnings season is?

• 6:33Speaker 02

  It's the season where we learn about earnings.

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  Thanks for that.

• 6:39Speaker 01

  Appreciate it.

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  Wow, that broke it down really well.

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  It's so all of the companies on the S and P 500, they're publicly traded. And CEO, CFO, whoever is the the mouthpiece for the company gets on the phone, conference call with all of the analysts and folks that pay attention to that particular stock. And they go over their guidance. Hey, what were our numbers for this quarter? And did we meet our numbers? Did we beat our numbers or did we come short? And what is our outlook for the next quarter and for the next, say, four quarters looking forward? Right? It's it's what are our estimates?

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  And this is what when we look at when when these analysts come in and and say, oh, we expect earnings per share over the next 12 months to be 30 cents a share. Well, if the numbers come in at 29 cents a share.

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  The stock tumbles.

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  You often hear they miss.

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  They missed their numbers. They missed their target. Even though they missed it by one penny.

• 7:49Speaker 02

  Right.

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  Um, so these numbers are very, very important for traders and for analysts and for these companies to meet their numbers. And so those those 500 companies and basically all publicly traded companies, but really the S and P 500, those numbers are going to start coming out the beginning of next week. So for the next two weeks, you'll start seeing the two to three weeks, you'll start seeing these these earnings reports coming in because the quarter has ended at the end of last week. Um, so you'll start seeing these these numbers coming in.

• 8:26Speaker 02

  That gives a good gauge as to, okay.

• 8:28Speaker 00

  Right.

• 8:28Speaker 02

  What's happening out there?

• 8:29Speaker 00

  Right, we're going to start seeing now. Because some of the tariffs have been implemented, not the most draconian tariffs, but some of the tariffs have been implemented. Some of the revenues from those tariffs have been brought into the treasury. But some of these publicly traded companies, that's going to be part of their report. Has it slowed down their sales? Has it increased inflation? Like, what are they gonna say in their reports?

• 9:06Speaker 00

  And typically during earnings season, you're gonna have some normal volatility just because of earnings season. This earnings season might be a little bit more...

• 9:20Speaker 02

  Yeah, people are thinking about tariffs. They're also thinking about interest rates, right? We're watching inflation, they're watching unemployment, and they're saying, hey, we know we need to lower rates at some point, but how much and when?

• 9:35Speaker 00

  And I think the Fed has been very clear that they're data-driven. They're leaning towards lowering rates, but there's too much uncertainty with tariffs, inflation, labor market, all of the things according to that. And maybe these earnings reports come in and they're not that great. So, maybe they do have to lower rates at that point.

• 10:00Speaker 02

  And that's why they sometimes say that they're surprised, too. The earnings surprised when they're on the...

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  The low side.

• 10:07Speaker 02

  Yeah.

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  Yeah. So, yeah, pay attention over the next couple of weeks. We might have a little bit of volatility in the markets just because of it's earnings season, and that's what happens. So, but yeah, we're gonna take a quick break. We're gonna take the break a little bit early because when we come back, we're gonna get to some of your questions, and we are gonna get back to basics on all things financial when we get back.

• 10:30Speaker 01

  Are you an employee with a company-sponsored retirement plan? Do you fully understand how you're invested and whether or not you are maximizing your retirement plan's options? For more information on a free assessment, contact MoneyWise's 401(k) Specialist, Justin Leland, at 661-847-1000. That's 661-847-1000.

• 11:08Speaker 00

  Welcome back.

• 11:12Speaker 00

  Just as long as we don't let that song play all the way to the end, we're okay.

• 11:16Speaker 02

  It's all clean. I cleaned it up. Radio edit.

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  Welcome back to the Moneyline Show.

• 11:25Speaker 02

  When he said that. Radio edit.

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  Radio edit.

• 11:31Speaker 00

  Such a great song. Such a great band.

• 11:34Speaker 02

  I have a cousin that lived with me sophomore year and he listened to that entire album on repeat. Yes. Nothing but rage. It was Rage and Tool and then back to Rage.

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  Hey, that's a good cousin.

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  I had Tool first and I took it off of Rage.

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  Yeah, well. That's a good producer.

• 11:53Speaker 02

  That's a good cousin.

• 11:56Speaker 00

  Hey. It's tough out there right now. I know that a lot of people are struggling with, you know, obviously inflation and wages and labor markets maybe getting a little bit, a little bit soft out there and grocery prices, rent, I mean, for crying out loud, renting a two-bedroom apartment nowadays is getting pretty dang close to what, eighteen hundred to two thousand dollars a month?

• 12:24Speaker 02

  Yeah.

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  For a stinking two-bedroom.

• 12:30Speaker 00

  It seems pretty darn difficult for young adults, Gen Z, getting out into the world and trying to make it in this world.

• 12:46Speaker 02

  Yeah, thinking about that, I've got two teenagers that are, you know, not too far away from.

• 12:51Speaker 00

  I got two young adult, adult children, trying to make it out in the world. They're adults. They're adults. They're adults, man. They're out of the house and they're, I mean. It's a, it's a thing. Uh, money dysmorphia is what they call it.

• 13:08Speaker 01

  I was gonna ask you, since you both have, you know, older kids. Is it, is it normal now with, with the kids, you know, especially if they're just finishing high school, going into college to, uh, let them stay in your home for a little bit longer? So they can actually be on their feet and, you know, finish.

• 13:27Speaker 02

  Family by family, but.

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  Finish the first couple of years.

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  Certainly for us, we're gonna help them launch for sure.

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  Exactly.

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  It's a case by case kind of a thing.

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  Of course.

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  Right? It, uh, depends on the kid, I guess.

• 13:39Speaker 01

  Well, years ago, I was planning on, okay, when he turns 18, I'm out of here. I'm leaving California, buh, buh, buh. And now that he's getting closer, I'm like, I'm not going anywhere.

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  Yeah.

• 13:49Speaker 01

  It is too expensive for a kid to just come right out of high school and be able to afford, you know, two grand.

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  Yeah, I mean, it, it just, just can't do it and.

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  Especially if you're a student, whether it's college or trade school or.

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  Right.

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  Learning, you know.

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  And I think in my house, it was always the rule was, hey, if you're going to college and you're, you're, you know, uh, doing that and, you know, then you have a place to stay. But once college is done and you, you're, that's the launching pad and like.

• 14:20Speaker 01

  As long as you're not staying in your room and playing video games all day.

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  Yeah, like.

• 14:24Speaker 02

  That's the caveat. Gotta be moving forward.

• 14:26Speaker 00

  If you're moving forward and you're moving in a positive direction, then yeah, you got a place to stay. But if you're, if you're staying stagnant and lazy and not doing anything for your life, then you're not gonna be 35 living in.

• 14:37Speaker 01

  Doing YouTube videos and.

• 14:38Speaker 00

  Right, you know, sorry. Um, now both of my boys, uh, older boys have, have moved out and they're, you know, college was not for them, right? Uh, one's in boot camp right now, uh, in going into the Navy. Good for him. Uh, thanks for him. And, uh, my oldest, he's, he's getting, he's working and doing his thing and living on his own. Dad's helping, right? There's, I mean, there's not any way to come up with 1,700, $1,800 a month for rent. Just not possible. So I wanted to do this show a bit more for those Gen Z'ers out there, like, okay,

• 15:22Speaker 00

  we know it's tough. We know it's really hard out there. But as financial planners, Dustin and I are financial planners. How do you start out, even though you're in a position where you you're looking at your finances and you look at it and it looks like a black hole? How do you start?

• 15:42Speaker 00

  Putting yourself in a position? To where it doesn't look as bleak?

• 15:49Speaker 02

  Well, I have an idea.

• 15:51Speaker 00

  Right? I've got a couple of ideas myself. Why you start?

• 15:54Speaker 02

  So one of the first things that comes to mind is early on, unless we've been.

• 16:00Speaker 02

  We've fallen into a position where we have some. Wealth that's been given to us. Most of us are pretty broke in those college age, right?

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  Broke college students.

• 16:09Speaker 02

  Broke college student is a term for a reason.

• 16:13Speaker 02

  One of the biggest assets that you have is your ability to earn income.

• 16:17Speaker 00

  Yeah.

• 16:17Speaker 02

  And so one of the best investments you can make is in improving that ability to earn income.

• 16:23Speaker 00

  Improving your ability to, yeah, improving yourself.

• 16:27Speaker 02

  For some folks, it might be college. For others, it might be a trade school. For others, it might be joining the family business.

• 16:32Speaker 00

  Correct.

• 16:32Speaker 02

  Learning and learning something that's going to give you the skills to be able to produce an income.

• 16:40Speaker 00

  And making yourself. Employable.

• 16:43Speaker 02

  Right.

• 16:44Speaker 00

  Right? And. You know, just just being present and being able to be employable and and and being there and like you said. In making yourself a better employee.

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  At that point, however, once you've done that. The first thing I kind of look at is. Making sure that. Before you start paying all of your bills, because that's the first thing a lot of people look at is like. I make X amount of dollars a month. I gotta pay all my bills and there's nothing left over at the end of the month because you're just.

• 17:25Speaker 00

  You make, you spend what you make. Right? The first thing I would look at is pay yourself first. Start small. It doesn't have to be a large sum. But setting aside a small amount for a savings account. Because Murphy's Law is going to happen.

• 17:46Speaker 02

  Yep.

• 17:47Speaker 00

  You are going to have to put new tires on the car. You are going to have to fix, you know, the stove. You're, there's gonna be an expense that is going to hit you. And you would rather have money in a savings account that you can actually access.

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  Right.

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  Rather than putting it on a 25 or 30% credit card.

• 18:07Speaker 02

  A hundred percent. Not a hundred percent credit card, but a hundred percent agree.

• 18:11Speaker 00

  You, you want to do that. So even if you're only able to afford 20 to $50 a month to start. Having that $50 a month in a savings account that you're not able to touch, that you're not able to really access unless it's a true emergency.

• 18:27Speaker 02

  Yep.

• 18:28Speaker 00

  Is vitally important. Cause that, that sets you up for success. Get yourself to that first thousand dollars. Then, then, then things open up for you much better.

• 18:41Speaker 02

  I know that thousand dollars is thrown out there quite a bit and it's, it's often because it does cover a lot of those small emergencies that come up.

• 18:48Speaker 00

  Because what is the statistic? It's like 70% of Americans, it's like 65% of Americans can't afford a $500 emergency. It's some ungodly statistic. I can't remember the exact number. But it's, it's like a $400 emergency that like

• 19:08Speaker 02

  63%.

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  Six, I knew it was something ridiculous. So 63% of American households cannot afford a $500 emergency.

• 19:19Speaker 02

  Yeah, that could be a medical bill. It could be

• 19:21Speaker 00

  Anything.

• 19:22Speaker 02

  Car repair.

• 19:23Speaker 00

  That's one tire.

• 19:26Speaker 00

  Right?

• 19:28Speaker 02

  You driving a race car?

• 19:29Speaker 00

  Well, I mean.

• 19:30Speaker 02

  Some tires are expensive.

• 19:31Speaker 00

  I know, like my pickup truck, those tires are like 300 bucks a pop. Right? So getting to.

• 19:39Speaker 02

  Pun intended, every time it pops.

• 19:41Speaker 00

  Every time it pops, exactly. So.

• 19:43Speaker 02

  That's real talk. I just had to get tires. That is no joke.

• 19:46Speaker 00

  Yeah, we drive the same type of truck, right? Those Tacomas, man, it's, they're great trucks, but you put a new tire on there.

• 19:54Speaker 02

  And I had to get all four.

• 19:55Speaker 00

  You put a new set, you're, you're, that's a G note. It's not cheap. So putting that 50 bucks a month away, get yourself to about a thousand dollars. Now you're better off than roughly 35% of the rest of America. Right? Cause you can at least afford to cover an expense like that.

• 20:17Speaker 02

  Right?

• 20:17Speaker 00

  Okay.

• 20:18Speaker 02

  Yeah, there, there are some folks listening, 500, that, gosh, that, that seems kind of low, but yeah, 63%. That's over half the people cannot afford that. That's a, that's a grocery store shop, like that's once a month at the grocery store these days.

• 20:31Speaker 00

  Mm hmm.

• 20:31Speaker 02

  Especially if you're buying eggs. Or have a teenager.

• 20:35Speaker 00

  Eggs have come back down from now.

• 20:36Speaker 02

  Yeah, I know.

• 20:37Speaker 00

  Right? So what's another one, Dustin? That's after you've gotten to that thousand dollars.

• 20:42Speaker 02

  Well, there's other rules of thumb when it comes to emergency funds. I've heard several over the years, anywhere from six months of worth of your expenses. I've heard 10 months worth of your expenses. There's rules of thumb all over the place. I say find, find something that works for you as an individual. Like you said, if you have to start small, start small and then adjust upwards as you can.

• 21:05Speaker 00

  Right?

• 21:06Speaker 02

  Right? Even make it, make it hurt a little bit. If you find yourself with habits that are expensive, you know, try and tighten the belt a little bit.

• 21:13Speaker 00

  Right, right.

• 21:14Speaker 02

  Because paying your future self definitely is always worth it.

• 21:17Speaker 00

  And the, one of the biggest things I think that most people, and I've, I've hammered down on this with my oldest son is the 50, 30, 20 budget. Right? And I know it's very difficult. It is, it's extraordinarily difficult if you're a, a Gen Z. But essentially the 50, 30, 20 is whatever you make in a month.

• 21:42Speaker 00

  50% of it is to be spent on your necessities. Rent.

• 21:47Speaker 02

  The have to haves.

• 21:48Speaker 00

  The have to haves. Right?

• 21:50Speaker 02

  Roof over your head.

• 21:51Speaker 00

  Food.

• 21:52Speaker 02

  Food.

• 21:52Speaker 00

  Right? Maslow's hierarchy of needs, right? I have to have these things. Okay? The 30% is the want to haves. Right? Hey, that, uh, those shoes are nice or whatever. Like the things that you want to have that you need to be able to afford. And the other 20% is for your savings, whether it be a 401k to build up your emergency savings, investing, whatever the case may be. Now, obviously, that is what you're working up to. Like, like we said before, you're, you're starting small. If $50 is $50, that's not going to be 20%.

• 22:34Speaker 02

  Yeah, for most folks.

• 22:34Speaker 00

  For most folks. You're going to have to build up to that 20%. But eventually you want to get to that 50, 30, 20, uh, budget. So you want to monitor that and, and stay as close to that as possible. If rent is $2,000 a month, though, it's very difficult to keep within that, you know, uh, that budget. You might need to find a smaller place.

• 23:00Speaker 02

  A lot of people cohabitating with other people.

• 23:03Speaker 00

  Oh, yeah.

• 23:04Speaker 02

  Right? Friends or other relationships that they have.

• 23:07Speaker 00

  You're gonna have to have seven roommates.

• 23:08Speaker 02

  And sometimes that's the case. Renting a room instead of a full on apartment, right?

• 23:14Speaker 00

  Oh, yeah. Yeah. Hey, we're gonna take a quick break, but when we get back, we're gonna talk a little bit more about debt and, and how to deal with that the most efficient way possible.

• 23:26Speaker 01

  Are you nearing retirement and currently working with a financial advisor? Are you not sure if you're invested appropriately? Call our offices at 661-847-1000 to sit down with a Money Wise financial advisor for a no obligation assessment.

• 23:53Speaker 01

  There they are.

• 23:53Speaker 00

  There we go.

• 23:58Speaker 00

  Hey Steven, did you see the video of Tool playing at the Black Sabbath concert?

• 24:03Speaker 01

  Oh, I did. That was an awesome show, too.

• 24:05Speaker 00

  They never, yeah, they never play on camera, right? It's just kind of a thing.

• 24:11Speaker 01

  Mm-hmm.

• 24:11Speaker 00

  They allowed the cameras to play.

• 24:13Speaker 01

  Yes.

• 24:14Speaker 00

  It was...

• 24:14Speaker 01

  It's funny, because I have a little treat to wrap up the show from that. It's not Tool, but it's maybe some Jack Black.

• 24:25Speaker 00

  Maybe.

• 24:27Speaker 01

  If you've seen that.

• 24:28Speaker 00

  Yeah.

• 24:28Speaker 01

  And he killed it.

• 24:29Speaker 00

  Yeah. It was, it was a pretty good concert.

• 24:33Speaker 01

  That was one of my favorite shows. One of the favorite bands I've seen live was Tool. And I went in there not thinking, "Ah, it's gonna be crap." And I was so surprised how good they are live.

• 24:44Speaker 00

  They, as far as musicianship, they are top-notch. And then you throw on top of it the light show and just the visuals that they throw in, the effects. It's just, it's a show, man. If you get a chance to go to a Tool concert, bring the ear protection, uh, but go.

• 25:02Speaker 02

  I think we should read the comment we got, because they ended it with "Tool is the best."

• 25:06Speaker 00

  Go for it.

• 25:07Speaker 02

  He said, uh, over the break here, "Steve is right. Between gas and groceries, that's a chunk out of my check. I've learned that not buying the name-brand foods aren't that bad, and it adds up. The savings add up over time at the register. Tool is the best. Have a great weekend."

• 25:21Speaker 00

  That's right. I've been preaching that to my boy. It's like, you know what? You don't need to buy the Pepsi.

• 25:28Speaker 00

  Go to his place and I see a case of Pepsi there, and I'm like, "Dude..."

• 25:32Speaker 01

  What, are you rich?

• 25:33Speaker 00

  I know.

• 25:35Speaker 02

  That has gotten expensive.

• 25:37Speaker 00

  Dude!

• 25:38Speaker 02

  And you go to Costco, it gets worse, because they sell you so many at once. I don't need 35 Dr. Peppers at once.

• 25:43Speaker 00

  I don't need the case. What do I need, what do I need a pallet of Pepsi for?

• 25:46Speaker 02

  I guess it is Costco.

• 25:48Speaker 00

  But, yeah. Hey, if you've done all of the things we just talked about, if you're Gen Z and you've done all the things we've talked about before, and you've kind of got your budget under wraps and you're trying to save money, but, you know, life, lives, right? And you wind up seeing, you know, that you've maybe amassed a little bit of debt. You know, you've gone out and bought a car and you got car payments and that's at a relatively high interest rate and then, you know, maybe you have an emergency or two and maybe you didn't have the savings built up to do that. And now you find yourself with some, some higher

• 26:29Speaker 00

  interest revolving debt, some credit card debt, things like that. And this isn't just for Gen Z, but for, for people out there, everybody out there probably, you know, a lot of people out there are carrying some high interest credit card debt.

• 26:48Speaker 00

  Last I checked,

• 26:51Speaker 00

  credit card debt in the United States is approaching $2 trillion. It's like $1.7 trillion worth of credit card debt.

• 26:59Speaker 02

  It's a big number.

• 27:00Speaker 00

  It's a big number. That was the last I checked.

• 27:05Speaker 00

  And most of that is about 15% or higher, right?

• 27:10Speaker 02

  Oh, yeah. I'd argue probably over 20.

• 27:13Speaker 00

  Yeah.

• 27:14Speaker 02

  25, 30?

• 27:15Speaker 00

  Depending upon, depending upon your credit score, yeah. So,

• 27:23Speaker 00

  this is a strategy that has been around for 50 years.

• 27:30Speaker 00

  But I'm reading this article right now. It says this viral budgeting strategy, like it's all brand new. It's not new.

• 27:39Speaker 02

  I didn't see the one you saw. What is it?

• 27:41Speaker 00

  It's, it came from the, the article I'm reading. It's a, it's called the snowball method.

• 27:45Speaker 02

  Oh, yeah. Dave Ramsey's been talking about that for years.

• 27:48Speaker 00

  It's been 50 years. This is something that's never, it's never been new, but a viral new budgeting strategies, helping thousands pay off debt fast.

• 27:55Speaker 02

  So how's it work?

• 27:57Speaker 00

  Simple. It's very simple.

• 28:01Speaker 00

  If you have a couple of credit cards, you know, we typically, most Americans will have between two, three, maybe four different revolving debts, credit cards.

• 28:11Speaker 00

  And they all have varying interest rates. Some are higher, some are lower. They also have varying balances, right? You might have one credit card with, you know, $500 on it, another one with $1,000. So the idea here is to pick the one with the lowest balance.

• 28:32Speaker 02

  So you're not looking at the interest rate, not looking at the payment, it's the balance?

• 28:35Speaker 00

  You're pay- you're, you're just paying attention to the balance only. Interest rate is irrelevant. Okay?

• 28:44Speaker 00

  That's a different snowball. So you're just paying attention to the balance. And

• 28:51Speaker 00

  let's say that you have these four credit cards and your total payment amongst, the minimum payment on all of these credit cards, let's say is $300 a month.

• 29:03Speaker 00

  You find an extra $50 a month. And now you make your total payment for all these credit cards, $350 a month. That extra 50 is going to the one with the smallest balance.

• 29:18Speaker 02

  Yep.

• 29:18Speaker 00

  Okay? So if you're following me, that card that has 50, $500 balance on it, you're gonna pay off that card much, much faster, rather than saying, "I'm gonna pay an extra $10 over here, and I'm gonna pay an extra $20 over here," and I'm like, you never, you never wind up going anywhere. If anybody's tried doing that, text in and let me know, because you never feel like you get anywhere.

• 29:46Speaker 02

  So instead of sending a little extra to all three places, you're saying all the extra to one place?

• 29:51Speaker 00

  To one place.

• 29:52Speaker 02

  The cheap, the lowest balance.

• 29:54Speaker 00

  Right. And so what happens is, let's say the minimum payment on that one low balance credit card, the $500, let's say the minimum payment on that card was, say, $20 a month. Well, now you're paying $70 a month on that card. You're gonna pay off that card in about nine months.

• 30:10Speaker 02

  And then it's paid, and then what do I do?

• 30:12Speaker 00

  You take that $70 and you apply it to the next one. You don't stop. You keep paying that $350 a month. You don't stop. You don't just, oh, I'm done with that one and now we're gonna, you know, keep paying the minimums on all the other ones. No, you, you apply that same $70 that you were, it's already in your budget.

• 30:32Speaker 02

  So like a snowball rolling downhill.

• 30:34Speaker 00

  Exactly. That's the whole point. Okay? It's the snowball rolling downhill. You take that $70, you apply it to the next one, and the minimum on that one was say $40.

• 30:45Speaker 02

  Now you're saving the whole one.

• 30:46Speaker 00

  Now you're paying $110 on that one and you just let it roll.

• 30:49Speaker 02

  Right.

• 30:52Speaker 00

  You do that and you have the discipline to do that month after month after month. Very quickly, you will find yourself making very good headway in getting rid of that credit card debt.

• 31:04Speaker 02

  I think the key word there was discipline.

• 31:06Speaker 00

  Absolutely all it is, is discipline. It's, it's just, it's, it's a mindset. It's a discipline game.

• 31:13Speaker 02

  Tighten the belt a little bit.

• 31:14Speaker 00

  Yeah.

• 31:15Speaker 02

  Reprioritize, right?

• 31:17Speaker 00

  Yeah, that is the snowball method. That is just the simple way. There's another one called the avalanche method. And instead of paying attention to, the, the whole point of the snowball method is to, to get quick, quick hits, right? To get that quick, hey, I paid off that credit card. Right? You get that in, that, uh, that adrenaline of, hey, I got that, I got that one paid off. The avalanche is the opposite. You're, you're looking at the ones with the highest interest rate.

• 31:47Speaker 00

  And you apply it to that one and you pay that one. So you're saving more on interest. But it may take you longer to pay it off because that interest rate might be on the, uh, the higher balance card or whatever, right? So, choose your method. I tend to agree with the snowball method because of the quick hit, right? Because

• 32:08Speaker 02

  Well, that it's freeing up cash flow typically the quickest where if life throws you another curveball and there's a month where you can't send the extra.

• 32:17Speaker 00

  Yeah.

• 32:17Speaker 02

  Right? Because you're going to need an oil change and you needed the extra money that month. You need the 50 bucks for that. Okay, there you go.

• 32:24Speaker 00

  Yeah.

• 32:24Speaker 02

  So you skip one month, but you know, knocking out at least one of those three cards, that's still good.

• 32:30Speaker 00

  Absolutely. And that's, I mean, that's the name of the game is the discipline, right? Just sticking with it and you'll find yourself getting out of that credit card debt relatively quickly. If you can stick with that discipline.

• 32:46Speaker 00

  That's the name of that game. So one thing I've noticed. And we're getting close to another break here, but we'll talk about this. But one thing I have definitely noticed is

• 33:02Speaker 00

  I work a lot with companies in town and do a lot of 401k business and

• 33:10Speaker 02

  Where you manage the 401k for the company?

• 33:11Speaker 00

  Right. I managed, managed the 401k for the company in, in town. And I will say that this is again, anecdotally, just in my, in my practice. I have noticed a shift.

• 33:28Speaker 00

  Boomers and Gen X and millennials, they have a certain saving technique. Okay?

• 33:38Speaker 00

  Gen Z? I'm kind of proud of you folks and I'll tell you why in just a moment when we get back.

• 33:45Speaker 01

  Don't forget, Money Wise is more than a radio show. We're an independently owned local wealth management firm with 60 plus years of collective experience. Our financial advisors are here to help you, Kern County. Together, let's be smart, be safe, be money wise.

• 34:21Speaker 00

  He did really nail that.

• 34:29Speaker 01

  Was that School of Rock?

• 34:31Speaker 00

  No. That's from the concert. That's from the, uh...

• 34:35Speaker 01

  So, uh, last week in...

• 34:35Speaker 00

  Black Sabbath, yeah.

• 34:37Speaker 01

  Ozzy did his final, final show.

• 34:39Speaker 00

  The final, final.

• 34:40Speaker 01

  So he had a lot of, uh, you know, classic bands and celebrities that came out and did, uh, like, super group of Sabbath and Ozzy songs.

• 34:50Speaker 00

  Yeah.

• 34:50Speaker 01

  So, Jack Black. And, uh, a few of the younger kids of, uh, Sabbath, uh, did Ozzy songs.

• 34:59Speaker 00

  That's right.

• 34:59Speaker 01

  And he killed it. I was, I was happy, cause I was like, "Oh dude, he's gonna make a joke out of it." And he, he killed it.

• 35:07Speaker 00

  He, he, he did it straight.

• 35:10Speaker 00

  Did a good job. Good old Jack Black.

• 35:15Speaker 00

  Now, if he wouldn't have been in that horrible movie with Jennifer Coolidge, we'd be alright.

• 35:19Speaker 01

  Minecraft?

• 35:22Speaker 01

  It's a great movie. Without the Jennifer Coolidge.

• 35:28Speaker 00

  Hey, uh, before the break, we, uh, we're talking about 401Ks and, you know, I can always kinda tell, just by kinda looking, you know, uh, savings rates and such, I can say, you know, uh, not all the time, but can get a pretty good indication of, uh, generation, you know, um, based on savings rates. But millennials, uh, Gen Xers, um, you know, tend to save a little bit, but they're not, they're not at the rate, you know, Dustin, y-you know, as a financial planner, what is the rule of thumb when we're saying savings going into like a 401K or a retirement savings plan?

• 36:12Speaker 00

  What is the rule of thumb?

• 36:14Speaker 01

  Well, it's changed a bit over the years.

• 36:16Speaker 00

  Right.

• 36:17Speaker 01

  And part of it is...

• 36:19Speaker 02

  Companies used to offer pensions.

• 36:21Speaker 00

  Right.

• 36:21Speaker 02

  Or a good majority of them did, and now it's less than 5%.

• 36:25Speaker 00

  Right, like 4%.

• 36:26Speaker 02

  Maybe have a pension. So people are paying into social security automatically.

• 36:31Speaker 00

  Right.

• 36:31Speaker 02

  And that's a whole nother conversation for another day. But you used to hear 8% to 10%. You know, my general advice is 12% to 15%.

• 36:41Speaker 00

  Exactly.

• 36:41Speaker 02

  If you can build up to it.

• 36:42Speaker 00

  Yeah.

• 36:43Speaker 02

  And when I say if you can build up to it, it just because you, if you can't do that in the beginning, doesn't mean you shouldn't do it at all.

• 36:49Speaker 00

  Right.

• 36:49Speaker 02

  Start somewhere. And then if there's raises or bonuses that come with your positions over time, that's the time to raise it. So if you get a, even a 3% raise, that's the time to do 1% or 2% more.

• 37:01Speaker 00

  Yep.

• 37:01Speaker 02

  In the 401k. Take the extra 1% so you feel a little something.

• 37:05Speaker 00

  Yeah.

• 37:06Speaker 02

  And I've seen several people over the years be able to do that and go from that 5% savings to that 10%, 12%, 15%.

• 37:13Speaker 00

  Exactly. And I concur exactly with the 12% to 15% is kind of the benchmark now, right? And that's including, you know, matches and everything else, right?

• 37:27Speaker 02

  We got a message actually on this topic too. Someone sent in, they said, people, listen to them. I started my 401k with my company at the age of 25, and by age 52, became a millionaire. And then in the last 10 years, my money has since doubled again.

• 37:42Speaker 00

  Wow.

• 37:42Speaker 02

  So.

• 37:43Speaker 00

  That's not a guarantee.

• 37:45Speaker 02

  No, no, no, no, no. No, certainly not.

• 37:48Speaker 00

  No, but.

• 37:49Speaker 02

  But if you start early enough and the timing works out, really the, just the reason that 12% to 15% works is rule of thumb is even without a strong return, even if you had a conservative portfolio, the fact that you were saving 12% to 15%.

• 38:06Speaker 00

  Just in general.

• 38:07Speaker 02

  A nice nest egg over several decades.

• 38:09Speaker 00

  Exactly. And so what I wanted to say is that with the 401ks that I manage, new 401ks for new companies, the rules have changed on these where now any new plans that are generated are required to have what's known as an automatic enrollment and an auto escalation feature. Okay?

• 38:30Speaker 02

  Right.

• 38:31Speaker 00

  Which is great because the old plans were like an opt-in plan, and now they're an opt-out.

• 38:38Speaker 02

  Well, and we've talked about those stats here in the office. Share this again. So.

• 38:42Speaker 00

  Yeah.

• 38:42Speaker 02

  When it, back when it used to be an opt-in, what percentage of people were actually signing up?

• 38:46Speaker 00

  So typically with an opt-in plan. Depending upon a couple of different factors and matching and all this other stuff, the average participation rate in these 401ks was around 35 to 40%, right? Employees were opting in at a rate of about 35 to 40%, which is really bad, right? That means you have 65% of your employees that are not putting money into the 401k, right? Now, by taking that and making it an opt-out plan, you've taken the inertia away and you've automatically enrolled your employees. And now they have to take affirmative action to actually de-enroll themselves, right? They have the option. They can kick themselves out.

• 39:28Speaker 02

  So you're a new employee. You join that type of firm.

• 39:31Speaker 00

  Right.

• 39:31Speaker 02

  You're automatically in the program, right?

• 39:32Speaker 00

  You're automatically in the program once you reach the eligibility requirement.

• 39:35Speaker 02

  So how many people say, "No, I don't want to do that"?

• 39:37Speaker 00

  About 15%.

• 39:39Speaker 02

  Significantly less.

• 39:40Speaker 00

  So you go from a 35% eligibility, you know, enrollment to now 85% or more, right? Now, what I've also seen, most of these plans have their auto enrollments set for anywhere from 4% to 6%. I've seen them as high as 8% or more. But for the most part, they're between 4% and 6%. And the reason for that is so that the company can give the maximum match for that employee. What I've also seen is that the younger the person is, they actually will increase. They will put in, say, let's say they automatically enrolled at 4%.

• 40:25Speaker 00

  That first couple of paychecks, they'll put in the 4% and they realize, "Oh, that doesn't hurt that bad." Yeah, "That wasn't so bad. I'm going to bump it up to 6." So now effectively, they're putting in, if they're getting a 4% match, they're effectively putting in 10% of their pay.

• 40:41Speaker 02

  Yep. And the earlier you start, the better.

• 40:44Speaker 00

  And I have yet to have a client or a prospect or anybody come into my office and say, "Gee whiz, Justin, I wish I started saving for retirement later in life." Not a single person has ever told me that.

• 40:57Speaker 02

  Nope.

• 40:59Speaker 00

  You know, so.

• 41:00Speaker 02

  Well, and it goes along with what we call lifestyle drift.

• 41:03Speaker 00

  Yes.

• 41:04Speaker 02

  Right, where it's the concept that as you earn more, if you earn more over the years, you might notice that your lifestyle drifts upwards. Well, if that was four, five, six percent that you never saw, you're not going to drift upwards.

• 41:16Speaker 00

  Right.

• 41:16Speaker 02

  It's you're paying yourself first. You're paying your future self, which is a good thing.

• 41:21Speaker 00

  Yeah. And, and with the auto escalation feature as well, every year it's bumping up another 1%.

• 41:28Speaker 02

  Is that the typical percent?

• 41:30Speaker 00

  Yeah.

• 41:30Speaker 02

  Is it ever more than one?

• 41:31Speaker 00

  Uh, rare, rare. Uh, but yeah, most it's 1%. And then you get up to the point where it's like, okay, I'm putting in 10% of my pay and I'm getting a 4%, I'm up to 14% effectively. And I'm not hurting for it.

• 41:48Speaker 02

  For those listening that are part of a plan that was not auto enrolled and they're on the sidelines right now, they're not participating.

• 41:55Speaker 00

  Right.

• 41:56Speaker 02

  What do you say to them? We've got a couple of minutes to go. What do you leave them with?

• 42:00Speaker 00

  Get in the plan, put in the, at least put in the minimum necessary to get the maximum match from your employer.

• 42:08Speaker 02

  I mean, you're leaving a lot of money on the table by not.

• 42:11Speaker 00

  You're just, your, your, your employer's handing you free money. All you have to do is accept it. And you're not. That's free money you're leaving on the table. And we're talking, it could be tens or hundreds of thousands of dollars at the end of your working career.

• 42:30Speaker 02

  Right.

• 42:31Speaker 00

  Right? And that's, and that's a lot of money to leave on the table just by being stubborn and not putting the money in.

• 42:38Speaker 02

  Mm hmm.

• 42:39Speaker 00

  That's, that's my two cents on that.

• 42:41Speaker 02

  Good advice.

• 42:42Speaker 00

  Right?

• 42:42Speaker 02

  I'll take it.

• 42:44Speaker 00

  You start putting money in the 401k there Dustin.

• 42:47Speaker 02

  Percentage right now, just because of this conversation. Put another 1%.

• 42:51Speaker 00

  Just go put another 1%. Get it in there. You know, and like I said, Gen Z, I've actually been pleasantly surprised by the.

• 43:01Speaker 00

  The savings that they're doing compared to prior generations.

• 43:05Speaker 02

  I've had a lot of good conversations with folks that are thinking about it now.

• 43:09Speaker 00

  Yeah, I just, I've been.

• 43:11Speaker 02

  And they're not all just turning to technology to do it. They are asking for help from professionals.

• 43:15Speaker 00

  They're asking for really.

• 43:16Speaker 02

  Also encouraging.

• 43:17Speaker 00

  That is very encouraging. They're asking for help. They're not doing all the robo stuff, AI stuff. They're, they're, they're technologically savvy, right? They definitely are there, but.

• 43:29Speaker 02

  And are also not afraid to ask someone that knows a thing or two more than they do.

• 43:32Speaker 00

  Bingo. Right? Love it. So absolutely. If you have any questions, by all means, give us a call here at the office. 661-847-1000. That's who we are. We're financial planners by trade and, you know, we moonlight as radio show hosts. But we're taking you into the weekend. We, you know, absolutely love what we do and we'd love to help you by all means. Give us a call.

• 43:58Speaker 00

  Have some, have a great weekend. We'll see you on Monday.

• 44:01Speaker 02

  And remember.

• 44:02Speaker 00

  Be, be smart, be safe, be money wise.

• 44:11Speaker 03

  Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.