Average Salary By Age (How Do You Stack Up?)

How Does Your Income Stack Up With Your Peers? (0:06)

Brian: Average income. You ever wondered how you stack up with your peers?

Bo:Brian, I am so excited to talk about this because I think it’s just innate in human nature whenever we start working or whenever we start hanging out with folks. And maybe you’re not this way, but this question always comes. I’m always like, I wonder what they have going on. I wonder where they are from an income standpoint. And it’s more out of general curiosity, not for some of the more toxic reasons why people come at it.

Brian: Everybody always says comparison is the thief of joy. So why even create this type of content? And I want to be straight with you. A lot of times it’s because I think the public perception of what your peers make is actually exaggerated on the other side, meaning we overestimate what everybody around us is doing. So it’s actually good for you to find out the truth so that you don’t have to fall into the consumption traps that are set out there, because it is so much more profitable if you’re trying to keep up with the Joneses versus if you know what makes you tick.

Bo: And I get asked this question all the time by my kids or by peers. They’re like, “Oh, look at so and so. They’ve got the nice car or the nice house or the fancy boat or whatever thing.” And I’m like, hey, you recognize that those things are not necessarily a sign of how much money someone has or even how much money someone makes. They’re more an indication of how much someone spends. And I think a lot of people live a life that is beyond their means. And I think if we level set on where average or median incomes, median salaries are, I think it’ll be a breath of fresh air to most folks out there to recognize, okay, maybe my perception is not actually accurate of what everyone else has going on.

The Real Median Income Data by Age (1:46)

Brian: So without beating around this too much more, let’s actually see the numbers.

Bo: There was a study done, this is from the Federal Reserve, and this is the median salary by age. I know it says average, but this is actually the median because we wanted to not have the big outlier skew it. So this is an accurate representation by age of where folks in this country are right now. And what you can see is if you think about the early folks starting out coming out of college, college age to young adults, the median salary is about $40,000. That’s age 16 to 24. Then as you get from 25 to 34, it goes to about $60,000. From 35 to 44, about $72,000. 45 to 54 also about $72,000. 55 to 64 about $69,000. And then once you get over 65, the median salary is about $62,000.

Brian: Yeah. So we highlight that those peak earning years, you really need to be paying attention to that 35 through 54. But I also like people focusing on, I know those early years where money is tight, those are also the years that your money can do the most work because you have the most time and compounding growth can do a lot more. But do you notice that myth that everybody around you is making $100,000? It’s just not true.

Bo: That’s right. That’s exactly right. When you look at this, there are not people on the median making $100,000. What’s really interesting too is it’s not the young people again on the median that are making the highest incomes. You can actually see that the peak earning years actually happen somewhere around the mid-30s to mid-40s. This idea that someone comes out of school and all of a sudden they’re making hundreds of thousands of dollars and they’re 22 years old and they have the house and the beach house and the fancy car, that is not grounded in reality. That stuff that you see on social media does not accurately reflect what the real world looks like.

Brian: And I mentioned people aren’t making the hundred thousand that you thought. And I remember, I had the content team go pull this up. There was a YouGov survey that came out where they asked the population how many of your peers make half a million dollars a year, and somehow 19% of people said, hey, one in five are making half a million dollars a year, even though that number is actually less than 1% of earners.

Bo: It’s wild. If you think about one in five people making $500,000 a year, it’s so far outside of reality. It’s actually less than one in a hundred people making that much money.

Brian: So let’s focus on what you can control because you’re not trying to keep up with the Joneses. You’re not worried about these people you perceive as making half a million dollars. Let’s talk about how do you maximize that lever of income? Because remember, there are really only two ways you can boost what you have on your net worth statement. You can either make more income or you can spend less money. We want to talk about how you focus on that.

Bo: And so what we want you to do is recognize, okay, what are the ways that I can maximize my income? Are there things I can be doing at my job, at my vocation, with my skill set, to increase my skills, to further my career, to build what my shovel is? Because the bigger my shovel is, the more I can save, the more impactful it can be. But, and we know this from both the lives that we’ve lived as well as from work with clients, a big shovel is not absolutely necessary to build wealth. It’s helpful and it can be an asset, but if you don’t have a big shovel, if you don’t have a ton of money, if you don’t have a ton of margin, then you can actually tap into the other two ingredients of wealth creation and they can be wildly powerful for you.

The Three Ingredients of Wealth: Average Allen vs. Manny the Mutant (5:41)

Brian: Well, that’s what Bo talked about, maximizing the income. But the second part of that is, and we always say this, you’ve got to live on less than you make. And that’s when we talk about those three ingredients to wealth. Living on less than you make is the first key component. That’s discipline. And it’s exactly what Bo was talking about with creating that margin or the money that gets invested. And then if you give it enough time, that’s why all of you who are in your 20s watching this, don’t worry. I know you’re not in your peak earning years, but you are a billionaire of time. And when you see how small incremental decisions can actually create huge results, I think it will change the way you look at money. We actually have a great case study to show you how powerful just a little bit of change can be.

Bo: Yeah. You can take two individuals with the exact same earning capacity, the exact same earning potential, but if you adjust their behavior, the results, the outcome is wildly different. So let’s think about Average Allen. Let’s say that Average Allen starts out making the median income at age 20. And he makes the median income from age 20 all the way out till age 65. And he’s going to have a 10% savings rate, which is still much higher than the national average. Not quite 25%, but much higher. Allen over the course of his entire working career goes from 20 years old to 65 years old just saving 10%. His retirement portfolio, his financial independence portfolio would be worth almost $2.7 million.

Brian: Full stop. This is the thing that always gets me when I see the actual data for the typical American. This shows that we often say, look, all of us have the potential to build wealth. Because here’s somebody just doing 10%. Remember, a lot of you have employers that are doing close to 5%. Just off the cuff. So if you were just consistently not touching the money from your 20s on, you would be worth close to $3 million at retirement. But the typical American just has no discipline and actually touches the money. We show you how leaky retirement accounts are. They just don’t stay consistent to doing this. So we wanted to go a step further. We said, “Okay, this was as if you just did 10%.” What if you’re a financial mutant and you took the 10% in your 20s, but then you added every time you got a pay raise or every year you got a little bit better and added just 1% until you capped out at 25%? What would that 1% difference do for you?

Bo: Yeah. What you can see is starting at 10% at 20, going 1% increased up until you get to 25%, and then saving 25% for the remainder of your career. Rather than being like Average Allen, who ended up with $2.7 million, which is wonderful, you could look like Manny the Mutant who actually retired with $5.2 million, double the amount that Allen had with the same earning trajectory. These are not two individuals with huge shovels. These are not two individuals with huge incomes. They both earned the median salary relative to their age range, but their behavior was different. So we want you to control the things that you can control and influence the things that you can influence. One of the most powerful, most impactful things you can change is your savings rate.

Brian: Yeah. And don’t let a case study just be the only thing you use to fill your head up with. We want you to actually go to moneyguy.com/resources. Please go take advantage of our resource on where you actually can take your current age, when you want to retire, and we’ll fill in the void and actually tell you what your savings rate needs to be. Please go look at this powerful resource. You’ll be able to see specifically what you need to be doing in your situation. We’re really proud of this and that’s why I want you to go take advantage of these resources we’re trying to load you up with so that you can go ahead and start planting the seeds today that are going to build that huge live oak tree that you’re going to get shade under because your money will work harder than you can with your back, your brains, and even your hands.

Bo: You don’t need a huge income to build wealth, but you do need the three ingredients. You do need discipline. You do need to be able to create margin. And you need to apply that over time. And if you can do that, wealth is attainable to anyone. And we believe that so much that every Tuesday at 10 a.m. Central, we like to sit right here and load you guys up. We want to answer questions and speak to the things that you are curious about. It’s why we have the team out in the wings right now collecting your questions. So if you have a question for us, make sure you get it in the chat. That’s thing number one. Thing number two, if you are not subscribed, make sure you subscribe right now so we know that you are out there. Don’t just rent your seat. We want you to own your seat here at the Money Guy Show. With that, creative director Rebie, I’m going to throw it over to you.

Rebie: Yeah, let’s go.

Q&A: What Documentation Do I Need to Reimburse Myself From an HSA? (10:28)

Rebie: We’re going to kick it off with a question from TCMR4250. It says, “For an HSA, what documentation is needed to reimburse yourself for a past medical expense? For example, would an ER receipt along with the corresponding credit card statement be sufficient?” You guys are big HSA fans, so give them some thoughts.

Bo: Yeah, I think a lot of people have a misguided understanding. They think that every time I want to reimburse myself from my HSA, I’m going to have to attach those receipts and bills when I file my tax return. That’s not actually the way that it works. You’re not required every time you take a reimbursement from your HSA to show justification. However, if the IRS ever were to ask and come request that information, you better make sure you have it. So don’t think, “Oh man, I don’t want to pull this money out because I don’t want the logistical nightmare.” But if they ask for it and if you have to reproduce it, you better be able to do that or else it’s going to be a taxable event to you.

Brian: I always go break down the first thing with health savings accounts, you’ve got to have the high-deductible health insurance. That’s the first thing to make sure you’re on the right side of the law. The second thing I was going to go a little deeper on is what the process looks like when you file the tax return. Because a lot of people, if you understood the process, you’d know how you ought to approach this. What happens is when you have a high-deductible health plan and you’re funding a health savings account, every year you’re going to get a form, I think it’s called a 5498-SA. It’s the form you’ll get from the HSA provider that will tell you how much you either contributed or how much you’ve taken in distributions from the plan. And if you’re actually using the plan in the year that you take distributions for the qualified medical expenses, that’s when they’ll send you this 5498-SA. All you’re going to do is when you go and input in TurboTax or use a professional tax preparer, they’re going to want to know, hey, what are the qualified expenses that you could show that match or exceed this number that we’re showing on here? And that’s when you will have your spreadsheet, you’ll have your folder you scanned in with your receipts, and you’re just going to tell your tax preparer or the tax preparation software, “No, this is how much I spent.” And then that’s it. And then after three years, you can throw the receipts away. But the receipts are there just in case the IRS says, “Hey, we saw that in this tax year, you filed on your tax return that you had these qualified medical expenses. Can you show me the proof?” You’re going to say, “Yeah, I sure can.” And that’s when you’ll pull it out. But more than likely, you will do this tracking, you will keep these receipts, but then you’ll file it at some point in the future, and then after three years you can basically throw them away. They’re there just to keep you safe and protected. The big advantage is you’re trying to build your health savings account. We want it where you’re investing that money and it’s growing upon itself. You’re activating the compounding growth so that you can maximize what those dollars can be where you not only got the tax deduction on the contribution, not only did you get the tax-deferred growth, but you’re getting a tax-free distribution. That’s the triple tax advantage. That’s how you maximize a health savings account.

Bo: I’m just going to throw in there what I specifically do. I keep a digital record system. I’m not keeping physical receipts or manila folders in a filing cabinet. I have them broken out by year, so 2022, 2023, 2024. Every time I get a bill, I scan it in. I put the bill in. Every time I go to pay the bill, I have a spreadsheet where I keep a running total. You might say, “Well, why do you have the spreadsheet? That seems like redundancy.” No, I want to know at any point in time if I wanted to reimburse myself and say I wanted to go pull $20,000 out of my HSA, I could just go look at any given year. Okay, 2022, I need to go find these seven expenses. Okay, I got those. I can reimburse myself. Or I take a picture on my phone, drop it in the digital vault, and it’s that easy. I don’t have to have a ton of paper, I don’t have to have a ton of complication, but it is easy to get to, easy to replicate, easy to have a running total by year of what I have access to tax-free. You do the same, or do you do something different?

Brian: No, I’m pretty close. I have a spreadsheet, but I’ll be honest, sometimes in some years, because remember I’m running because my youngest daughter’s private school is going to count as qualified medical expenses. So I probably haven’t been as diligent as adding up those folders every year. I should do what you’re doing every year. I just haven’t. At some point I will need to go do that exercise. I think it’s smarter the way you’re doing it because it’s sitting there on the go. That’s right. And you’re ready. You know what you have in expenses so you can go know what your qualified amount is.

Rebie: Love it. Well great, TCMR4250. Thank you for the question. That was a great breakdown, guys. Thank you for that. Robert S is up next.

Q&A: I Feel Guilty About Adjusting My Savings Rate for a Second Child. What Do I Do? (15:57)

Rebie: It says, “I am in the messy middle. Welcome. I’ve been maxing out my 403(b) and contributing to other investments. A second child is on the way and we may have to adjust our savings rate. How do you deal with the guilt of adjusting savings?”

Bo: Here’s what you do. You take a deep breath and you go, I’m not alone in this. I mean, there are messy middle folks all over the country who decide, okay, yeah, I got to change homes or I got to go buy the house or I’m going to have the kid, I got to change the car. And it’s not uncommon for financial mutants to have to take a step back in their savings rate. So often we think that the path to financial independence is this straight line of the FOO. It’s step one and step two, then step three, then step four, then step five, and it’s this constant trajectory from bottom left to top right, nice and smooth. But in reality, that’s not the case. Both you and I, Brian, in our financial lives building towards wealth, we’ve had fits and starts. We’ve had years where we’ve had higher saving years and years where we had lower saving years. Sometimes it was because of life circumstances that presented themselves. Sometimes it was because of other opportunities that we chose to pursue. That’s okay. I think the guilt that you’re feeling is an appropriate feeling, not something that you should be ashamed of, but it’s something you ought to keep in check. You ought to let the guilt be motivated guilt, not like crippling, “Oh no, what am I doing, I’m a horrible person” type guilt.

Brian: Well, look, first of all, if you want to make yourself feel better, go watch some of our Making a Millionaire episodes where at the end when Bo and I go back over our guest to kind of do the after-action reports, we always usually show what their savings rate in the future will be. And because a lot of these people are in the messy middle and have a lot of life going on, it’s not uncommon that we see people who were saving very aggressively when they’re much younger, but then they have these big life events happen and then maybe their savings rate could only be 10% or 12% with the employer match, and all of a sudden they’re like, “Wow, it still works.” And I love that we get to create that dynamic. That’s why I would encourage you, you need context before you start beating yourself up, Robert. You’ve got to figure out, are you ahead of the curve, behind the curve, or right where you’re supposed to be? Because you said something pretty key there. You have your second child on the way, but you’ve been maxing out your 403(b) plus some. So anybody who’s maxing out the 403(b), these are above-average behaviors. I bet you’re ahead of the curve. So you might get some goodwill because that’s what I love about anybody who starts and hits it heavy and often in the early years, because it gives you flexibility down the road. You might find that you have a huge dividend coming your way from your early discipline that’s now going to let you, while life gets complicated, pull your foot off the accelerator of savings and investing and you’re still not behind because you did such a good job on the front end. But you won’t know that unless you go through the exercise. That’s why currently we want you to go to learn.moneyguy.com and look at our Know Your Number course, and I think you’ll find out that you’ll answer that question if you’re ahead of the curve. And that’s going to give you a lot of peace of mind.

Bo: Can I share one other thing? Brian, you’ve known me for a long time, decades at this point. I used to be like super buttoned up and everything had to be perfect. My desk had to be perfectly neat and the savings rate had to be perfectly this and all these things had to be just absolutely wonderful. A lot of those things are still true. And then the Lord was incredibly kind to me and gave me some kids. And boy did I learn the beauty of imperfection once kids burst onto the scene. I think a lot of financial mutants when they go from the pre-family thing to the post-family thing, it’s a wonderful exercise in understanding, hey, not everything has to be perfect in terms of cleanliness of the house, in terms of obedience, which is what I’m dealing with right now, in terms of your financial situation. It’s okay if it’s not perfect because if you’re just moving in the right direction, putting one foot in front of the other, taking those steps, there’s a really good chance that things are going to work out so long as you avoid making the really really bad, really really derailing decisions. I just feel like that’s something that needs to be spoken out into the ether. You were this way, I mean, you had this. I know I’ve gotten old and sentimental in the fact that I think the things you are so panicked about when you’re in these early years, you’re going to look back on and realize much of it is much ado about nothing. But still do the key strokes of savings rate, taking temperatures of where you are in your journey. And then make sure you don’t miss out on the stuff. That’s why we always talk about bedazzling your basic life, because I want you to make sure that you’re enjoying every decade that you’re on this planet. Because sometimes as financial mutants, we get so caught up in accomplish, accomplish, accomplish that we miss some of the sweetness of each decade even though it’s chaotic.

Rebie: Yeah. Well said. Something that struck me, we don’t know Robert your specific situation. Like Brian said, there’s some homework you could go do to really make sure where you are. But he didn’t say, “Hey, I’m going to stop all saving and investing.” He said, “I need to adjust it. I need to pull it back a little bit.” Like that’s still could be really good for you. That’s why we provide all of our resources and benchmarks so you can kind of see where you are so you can live the life you want to and have the experiences you want to and have a second kid, which is so exciting. Congrats on that too.

Q&A: When Does Whole Life Insurance Actually Make Sense? (21:23)

Rebie: All right, ready for the next question? Marenjock says, “I know for the majority of people term life is the best option, but you guys also say it depends and for a small portion of people whole life is better. What are some examples of when that’s true?”

Brian: I want you to answer this one, but I want to clarify one little thing in that sentence. I’m not saying it has to be whole life.

Bo: Yeah. And we’re not suggesting that whole life is better than term insurance in that circumstance. What you’ve heard us say in the past is that there are times when permanent life insurance is an acceptable solution to a problem that exists. That is not pitting them against each other because we still think even in those situations someone likely needs term life insurance, but there are areas and times when permanent insurance makes sense.

Brian: Yeah. I mean, it’s really not term versus whole life. It’s term versus permanent insurance because whole life is a form of permanent insurance, but there’s a lot of other versions of permanent insurance too, a little more cost-effective and take a little pressure off of the annual premium. What I’ve actually experienced is I had a gentleman who was an entrepreneur who came to me and he had tons of net worth, because he had made some really key real estate investments. He had a really valuable business, tens of millions. It was a lot of money. But his liquidity was nothing. And this was a time back when the exemption on estates was between $675,000 to a million dollars on your estate. So we had a gentleman here who on paper was worth a deca-millionaire-plus who had zero liquidity. If he died tomorrow, his family would be screwed because you’d have to liquidate the businesses, you’d have to liquidate the real estate, all this stuff, to come up with the estate taxes. All these things are illiquid investments. So I looked at his situation and I was like, we’re going to have to immediately go buy you some type of life insurance so that you could at least extinguish this issue if you died prematurely. And I remember, it was a very expensive premium for the $5 million that we were able to go buy the insurance. But it was a necessary thing. So that’s when I have said, look, there are times when permanent insurance makes sense because it wouldn’t have made sense to do that with term at that moment in time.

Brian: Now, the problem I have with the way insurance is sold in the industry is that most people who are coming and watching and consuming our content, you’re the typical American who, yes, first you need to protect your family because if you died prematurely it would leave your family members in a horrible situation, but you also need to be saving and building wealth in the background. So at some point, you’re self-insured, because that’s the whole purpose. If you can save and build enough assets, you don’t need to go buy life insurance from an insurance company because you will be able to pay for all of your expenses out of the big nest egg that you’ve built up. So these things can be happening at the exact same time. And that’s why I love term insurance, because term insurance lets you just buy the actual coverage, the protection. None of the extra cash value or the other things. You’re just on a yearly basis paying for the insurance. In the meantime, you’re building up assets in the background so that 20 years in the future, 30 years in the future, you’re self-insured because what happens during that 20 to 30-year period is your kids grow up and move out of the house. They don’t need your income anymore. You’ve hopefully built up enough money that you’re now self-insured from your retirement assets. Do you see how this all works? This doesn’t have to be us versus the insurance agent. This is about understanding the way the financial components work in the insurance industry so you can maximize it and use it as a tool in your wealth-building journey.

Bo: I love that, Maren. I hope that was helpful.

Rebie: I think it was. Thank you for the answer. Hey, remember, if you are listening to these questions and you want to dive deeper or refresh, just go to moneyguy.com because we actually have an ultimate guide that’s all about different types of insurance and how to think about it. So I just wanted to throw that out there. If we’re talking about it on the show, we probably have a free resource, a calculator, or an ultimate guide that’s kind of consolidating that information for you as well. I know we didn’t talk about it, but we have a lot of our military families always asking us. I know it’s not ready for prime time yet, but behind the scenes we’re about to have a resource for our military families to go check out at moneyguy.com/resources as well. We are actively in the home stretch of that one.

Brian: That’s the thing, like when we did the special needs release, we have a free ebook out there for that. We’re always trying to think about what are areas that we would love to just love on you guys and give away free resources. Because the origin of the Money Guy Show, back in 2006, I looked around and I was like, holy cow, if I was my 22-year-old or 25-year-old version of myself and I’m just trying to figure out what to do with money, to not waste time, not waste this resource so that I can actually live my best life. Most people are out there selling commission products or they’re trying to get in my back pocket. Wouldn’t it be nice if somebody created an education platform where I could just learn how this worked? And that’s what drove it. And that’s why we’ve tried to keep giving away free resources to make that platform even stronger. And if you’re sitting there thinking, “Man, I really want to know when you guys release these free resources,” whenever we have a new one come out, we always mention it in our weekend newsletter. So if you’re not subscribed to our newsletter, I would highly encourage it. It’s pretty balling. I actually find myself reading it every single week. That’s not a fib. I really do read it. I even look for it if I don’t if I haven’t seen it for that Saturday morning release.

Bo: And here’s what we don’t do. We’re not going to like sell these email addresses. We don’t spam you with all kinds of content. We just want to make sure that if you want really valuable, really helpful, sound financial advice, we can get it in your inbox. Team in the wings, if you wouldn’t mind, somebody might drop in a link to how to subscribe. You can go to moneyguy.com and subscribe there. If you actually click on the very top, it says follow. It’ll let you put in your email address and get on our newsletter, the Money Guy email universe.

Brian: That’s also where the team typically drops pictures behind the scenes and other things. It’s usually a fun newsletter. The team is in the wings making that really fun every week.

Bo: I’ve also noticed it’s where the team likes to make jabs at me. I read it now and I see that they’re making jokes at my expense. It’s offensive. I don’t like it at all.

Brian: I see. Guys, have y’all seen anybody who’s looked at the Iced Coffee Hour release that had come out on Sunday? And I feel a little offended because I’m a victim of the forced perspective. You know, I’m a huge Disney fan and you know, you go look at Cinderella’s Castle and you’re like, “That thing is huge.” And then you realize, “Oh, they tricked me with forced perspective.” And then you find out Bo Hanson’s biceps, the way we set up those shots, they are big. They are big. But I’m telling you, mine look much smaller because we put Bo closer to the camera. It’s like if you ever watch Buddy the Elf. You’re like, “Man, those are some really cool tricks.” It’s all forced perspective when they made Buddy look so much bigger than everybody else. Who would have known that we did the exact same thing when we designed our sets.

Bo: That was the production team. I really appreciate the little boost. Thank you. Cinderella’s Castle. Bo’s biceps.

Brian: And even my favorite comment that came out is the guy wrote, “I’m a bodybuilder. I like how this guy is popping his pecs.” Which was not true. And then the other one picking on me is, “When Brian gets his canker sore fixed he can come back,” because look, my tongue is very active. I don’t mean to, I chew on my tongue. I do it, my tongue is very, I don’t know what’s wrong. I see it too, guys, and I am so embarrassed but I don’t know what to do to control it. My tongue just, it’s not that big of a deal.

Bo: That’s hilarious. But people, guys, the internet is undefeated on finding if you have any insecurity from high school or in life. Just go and get yourself on social media and there will be somebody who unearths and figures out something.

Rebie: We won’t mention Bo’s eyebrows in the comments he gets on.

Bo: Oh, that’s cruel, man. Why would you say that?

Rebie: It’s because I’m giving you a lot of flowers. I asked Bo this morning, because you know he works out at like 2:30 in the morning, he wakes up so he can nurture and nourish these biceps with his other gym rat buddies. And I asked him, “This morning, did y’all actually work out or did you just sit there and hold court and read the comments from the most recent shows because they have to feel a part of your success?”

Bo: I do want them to know that the Third Bay Boys, they’re part of it. Y’all have like, do you have decals on the back of your cars?

Brian: We have t-shirts and hoodies and tank tops. You’ve seen them. I’ve worn them before. I just didn’t know what it was. Yeah. That’s it, man.

Bo: Oh, y’all really do. Y’all designed a logo and everything. Oh yeah. Yeah.

Brian: Was that like a ChatGPT or did y’all actually bring somebody in?

Bo: I don’t know. We’ve had the logo for a couple years. So I think we got the logo pre-ChatGPT. It’s good. No, we got a whole brand thing here.

Brian: Haven’t y’all ever ridden down the interstate and, I saw I was behind a car and like, “I-65 boys,” and like, you know, somebody really enjoyed their friends so much that they came up with a logo and then put a decal on the back. That’s bonus gym buttons. You know, we always want to wear one of the shirts on the show, but they’re t-shirts, you know. It wouldn’t be like Money Guy Tuesday. Be a little strange.

Rebie: Yeah, that’s a little, that’s not so used to seeing you guys in collars. It’s not only for just living on less than you make. It’s also knowing not to wear your gym rat shirts on a national broadcast.

Brian: All right, let’s get back to a question because I do have, look how quick she changed topics.

Rebie: We’ve got to get back. I’ve got a lot of questions. We’ve only done three questions. And I do have a fun segment for us to do. We’ll probably do another question or two and then move on to our From the Wings segment. So stick around for that. We’re going to get Brian and Bo’s reaction to some things. And you know the other one, the “it depends” rapid fire.

Brian: I thought you were trying not to say it on purpose.

Q&A: Why Is 36 Months the Limit for Car Loans? (32:14)

Rebie: All right. Next question is from Luis. “Can you explain the reason for 36 months being the limit for car loans? Why should I push to get rid of a super low interest car loan so quickly?”

Bo: Well, it’s sort of mathematical based on the way that cars operate. Cars are one of these unique assets that we buy, we spend a whole lot of money on them, and they become less valuable through time. And depending on how new the car you’re buying is, the brand of the car that you’re buying, and the cost of the car you’re buying, oftentimes in the first couple of years of ownership, especially if you’re buying a new one, that’s when you see the most rapid decline in value. You see this huge thing where depreciation could wipe out anywhere from 40 to 60% of the car’s value in the first three to four years. And so the reason why we like the 3 years or 36 months is so that we can create an environment where hopefully, ideally, you won’t be underwater in your vehicle. You won’t end up owing more on the vehicle than the vehicle is actually worth.

Brian: Can I be meaner? I’m going to be, because look, the trap that you fall into with car purchases is if you expand out how long you can pay for the car, you can afford anything at a monthly amount. And that’s what the car dealerships take advantage of you on. That’s why you see every year it seems like the average length that cars are financed keeps going further and further out. I think we’re getting close to seven years at this point. So on purpose we tell you 36 months so that it puts as much pressure on what you can actually afford. That way there’s not separation from your income, what you’re hopefully building in the background, and your ego on the car you should drive. It keeps it in check because if you have to pay this thing off in 36 months, first of all you’re not going to get crushed by depreciation and it’s also going to keep you honest with what you really can afford. So that way you take your income with the 8%, you take the down payment that you have to put down and then you put the three years, you’re going to end up with something that’s going to be reliable and it’s going to be something that’s also going to be reasonable. Versus if you go out to 84 months, all of a sudden now you’re thinking, “Hey, I can afford a $75,000, $80,000 car because the monthly payment gets digestible.” That’s the opposite. We want your money working for you, not depreciating in something that’s sitting in your driveway.

Bo: And I think you said this, we always prefer if you can pay cash. We get some flak on that. We love 20/3/8. 20/3/8 is amazing. It’s a great tool and mechanism, but if you can pay cash, cash is ideal when it comes to purchase decisions. I just want to throw that little disclaimer out there.

Brian: Another thing I want to throw out there, if you want to understand how detrimental this can be, we have an episode of Making a Millionaire coming out, and I’m not going to give you the details, but do you remember how much the car payment was? It was a thousand dollars a month for a car payment, and it was 84 months.

Bo: And I was about to say, you won’t believe how long this loan was for. Make sure you subscribe right now to see it when it comes out. That almost is beautiful. That was great. This is why, fortunately, my wife is designed to not like surprises because I can’t keep a secret. I can’t keep a secret. I was setting up the knock-knock and he said the punchline. You know what I mean? Like he just didn’t even let me build it. Make sure you subscribe. Check it out. It’s a, and you won’t believe what this couple did. 84-month car loan, $1,000 a month car payment. You will not believe what they did next.

Rebie: Don’t say anything, Brian. Leave it a surprise. Lovely couple, too. Subscribe here. Watch Making a Millionaire when it comes out every other Monday. All right, we are going to do our segment. Are you ready?

New Segment: From the Wings (36:10)

Rebie: This segment is called From the Wings, where the content team gathers some recent headlines and we are going to get Brian and Bo’s reaction to them. Brian and Bo, in your drawer at your desk, you have thumbs up and thumbs down paddles.

Brian: Oh, look at that, we got props hiding in the drawer. Did you? Are you kidding me? We have props for this one today.

Rebie: We have thumbs up and thumbs down. Here’s how this is going to work. I’m going to read one of the headlines and you guys will tell me thumbs up, this is news, we should pay attention, here’s why. Or thumbs down, this is noise. This is not going to have a big impact on our financial lives. All right, got it. You ready?

Brian: Yep.

Rebie: First headline is “Inflation soared to 3.8% in April driven by gasoline prices” from the Wall Street Journal. And the question is, is this news or is this noise?

Rebie: Oh, we got one vote. Both say it’s noise. Why do you say so?

Brian: Well, inflation. Look, I want you to do the things we always tell you. I want you to look at your emergency reserves. Look at the things you can control. But this is a bigger game that’s going on. There’s geopolitical stuff going on, there’s the Federal Reserve meeting and there are inflation concerns, but you can’t control any of that. So focus on what you can control, because I don’t want these things causing analysis paralysis from too many data points.

Bo: I don’t want people, I’m going to give you the benefit of the doubt. I don’t need to tell you that the prices of things have increased. If you filled up your gas tank, if you’ve gone to the grocery, you’ve seen that the erosion of purchasing power is a real thing that takes place. So I don’t think this is newsworthy as in, “Oh, I need to be actionable right now.” I think inflation always exists. A couple years ago it got as high as 9.3% and then we’ve seen it as low as 2% year-over-year change in recent memory. I think in the way that we build our wealth and think about the future, we ought to recognize that’s why we should be investing, that’s why we should be owning things. But I don’t think knowing that it hit a certain number in a certain month should dictate any of our short-term to intermediate-term behavior.

Rebie: There you go. All right. This next one is an interesting one. “Google, SpaceX in talks to explore data centers in orbit.”

Brian: Bo says it’s news.

Bo: Well, I mean it’s news, but it’s not actionable for you. Is that an interesting filter? I mean, it’s entertainment. It’s reading for entertainment.

Rebie: Brian is flipping his paddle back and forth.

Brian: So I think, do not even say “it depends.”

Bo: Yeah. I think it depends, but that’s the segment for that one.

Brian: Okay. Go ahead. I just think it’s fascinating, right? Like I think it’s fascinating when you think about infrastructural change, right? Like how things change. We are now getting to the point, I was reading this thing the other day, that it might be more cost-effective, or if it hasn’t happened now, it’s moving that direction, to put servers or whatever on a satellite, shoot it into space, have it orbit, have solar panels up there because it’s outside the yellow zone so it’s getting all the power. More cost-effective than to develop and build it down here. I just think that’s a really interesting way that technology is advancing. And this is where my mind sort of wanders to. Does that mean that one day even real estate investing is going to be like space real estate? Like that’s going to be a thing you have to think about? That is crazy. It’s not out of the realm of possibility. Right now, like, the law of accelerating returns is that innovation and things like this are changing constantly. And if you want to invest in something you can control, buy the market, don’t try to beat the market, buy the market. Because guess what, one of the largest holdings in a total market index or the S&P 500 is Google/Alphabet. And SpaceX is probably going to go public, and when it launches into the public world of us being able to invest in it, it’s going to become an S&P or total market index investment. You’re going to own it. So you don’t have to waste your mental horsepower or time trying to figure these things out. You can instead of beating the market, be the market, and then focus on how you live your best life.

Bo: I completely agree. So yeah, I think Brian turned his answer around. These are important things, but in the context of the lens of what we’re doing here with the Money Guy Show, read this stuff if it fascinates you, but don’t feel like it’s something you have to hyper-change your behavior for.

Brian: Yeah, I think this is just supporting the idea of the law of accelerating returns and buying the market. I love that. And by the way, if you don’t know what the law of accelerating returns is, I talk about it in Millionaire Mission. It’s something I remember when intern Daniel, y’all know we love Daniel, me and him were talking about this concept and then he was the one that said, “Hey, you know, there’s actually a term for that called the law of accelerating returns, where the pace of innovation actually speeds up.” And that’s why the change that will happen over the next 10 years will make the last 50 seem like it’s standing still. And that stuff, it’s crazy when you think about how fast things are moving. I feel it all the time. It creates a little anxiety to a degree, just because everything is moving so fast these days. But it’s so interesting. Think about it, it was five years ago that we as general consumers were not using artificial intelligence in the way that we are today. We weren’t playing with agentic type stuff. The iPhone wasn’t even until 2008, right? And from 2008, when the iPhone came out, you have like multi-billion dollar businesses that could be operated singularly from a handheld. It’s just, what will the world look like 10, 20, 30, 40 years from now? It’s fascinating.

Bo: It’s back to the point that Apollo 11, your phone has more processing power than what landed on the moon.

Brian: So crazy. All right.

Rebie: We’ve got a couple more. Next headline from Business Insider. “The market has jumped the shark. Michael Burry says stocks may finally be at the precipice of a major reversal.”

Brian: Michael Burry has called a hundred of the last one recessions. Back pre-2008, right? Like that’s the thing. I’m not picking on Michael Burry specifically, I don’t want to single him out, but oftentimes someone who has a credibility for making a singular call or being able to say, “Hey, I saw this thing coming and I rightly predicted it,” they fall into the trap oftentimes in my experience where they begin doing that over and over and over again.

Rebie: We didn’t hold up anything.

Bo: Oh, that’s true. You’re breaking the format. We’re not very good at games. You both said it’s noise.

Brian: Yeah. And so nobody knows. Nobody knows what the market’s going to do in the next 6 months, 9 months, 12 months, 24 months, 36 months. And anyone who tells you that they do know, in my opinion, is guessing. One of my greatest achievements that nobody knows of is that back in 2002, before podcasting, I was like, how in the world am I going to get clients? I just want to be an educator and show people how finance works. So I started writing a column in the local newspaper. Too bad that probably hundreds of people read the Henry Herald instead of the millions that we get exposure to now. Because I actually wrote a piece in 2002, and it was actually the day before we reached the bottommost point of the stock market of 2002, on why everybody in the world should start investing. Because if you invest when things are so bleak and horrible, you can average and expect these type of returns in the first 30 days to 12 months after a market V-shape recovers. And we nailed it in the article. I said markets typically make 26.2% when they hit the dead bottom of a market. Fast forward to a year in the future from when I wrote that article, it was like 45% if you would have invested on the day that I wrote that article. The problem is I didn’t have a national publication for people to go, “He was a genius. He spotted it.” And by the way, did I have a crystal ball? Did I have it figured out? No. I just kind of saw what was going on. I saw how markets recover. That’s what I was trying to share. That’s what I was trying to educate.

Bo: Michael did a great job of predicting something in the past. But it’s exactly what Brian said. He’s predicted it over and over, but because he got it right once, he gets to make a career off of that. Just be careful. That’s why, without a doubt, this is noise. Because of the law of accelerating returns that I was just talking about, there are going to be more and more all-time highs. There are also going to be scary bear markets that will come our way. But if you’ll just always be buying and hold your nose through it behaviorally, you’re going to come out in a better place in the long term.

Rebie: All right, good stuff. Last one. Very interested to get your take on this. Is this news or noise? “Male coyote swam two miles to Alcatraz Island, twice as far as biologists had expected.”

Brian: Who found this one?

Rebie: For context, this coyote also escaped from Alcatraz. Quote, “There is no evidence the coyote is still on the island.” So he swam there and swam back.

Bo: So he went from like San Francisco to Alcatraz?

Rebie: 36 men attempted 14 separate escapes from Alcatraz. Nearly all were caught or did not survive the cold, swift current, but this coyote did. What does it mean? News or noise? Are coyotes good swimmers?

Bo: Yeah, they’ve got four legs.

Brian: Look, I’m going to go out on a limb. I don’t think I’d make that swim. I’m going to be honest. I know there are a lot of people asking about my swimming proficiency. It’s not good enough to go from the coast to Alcatraz and back. Even if I made it there, the way back would probably get me. Have you ever toured Alcatraz?

Bo: No, I want to. Is it awesome?

Brian: Yeah, it’s pretty cool because that’s where, you know, because we’ve made the joke, don’t cheat on your taxes because taxes is how they got Al Capone, and Al Capone was out of Alcatraz. So they show you all that stuff. And then there have been some escapes. Now I thought in the asterisk on Alcatraz they have like one or two people that they’re not quite sure if they made it because they never found them.

Bo: Well, and here’s the thing. When you’re on Alcatraz, you can see the land you’d have to swim to and it looks like you could do it. So that’s why I think this is probably noise. This is noise, but it is interesting. A coyote is not a human and I don’t know if I could do it either.

Brian: Was it Sean Connery? Wasn’t there, talking about The Rock?

Bo: The Rock. Yeah, that was Nicholas Cage, wasn’t it? Sean Connery, Nicholas Cage. They made it out, right?

Brian: Was it Alcatraz? I think so. Wasn’t that somewhat? Okay, we’ve, it’s a great movie. We’ve aged out of anyone from the Wings knowing that reference. I feel like, because Bose’s babysitter was the Superstation, you know, which is Channel 17, which is appropriate because Ted Turner just recently passed away, and he definitely shaped my life. Because anybody from the Atlanta area, the Superstation was legit. I mean, between pro wrestling and all the movies that were edited down so that you now show them the real version to somebody. If you’re trying to show your kids, “These are the greatest movies. Let me show you from my childhood,” and then you cut it on and you’re like, “Oh my god, on the Superstation, they didn’t cuss that much. On the Superstation, they didn’t have nudity like that.” Ted was protecting us from so much. And then also the stadium. I mean, a lot of my, I remember when the Olympics opened in ’96. The TED forever, they called it the TED. Because it was Atlanta Fulton County Stadium and then it was the TED right after that, right? That was after the Olympics? Is that when that started? Yep. Look at that. Well, wow.

Rebie: That was a great conversation starter. And what I’m hearing is the coyote story is news. I still want to know what content member was like, this is the closer. How long do you think it takes a coyote? Because they’ve got four legs, but they can’t like, no, if you never, you don’t have a dog. Is a dog, like, we have a little Chihuahua and every now and then we’ll put the Chihuahua in the water and she can swim like a, I mean, she can swim but she’s so entertaining. You know what I mean, animals that you put in the water and see them, they’re so entertaining. Oh gosh, you’re going for otter.

Brian: That little Chihuahua that looks like an otter in the water.

Rebie: From the Wings, they were tracking with you, Brian. They were tracking. She’s a Chihuahua Terrier. It’s probably the terrier that makes her such a good swimmer. It’s not the Chihuahua.

Bo: She can make it to Alcatraz. The Chihuahua just makes her mean. That’s unbelievable. Except for my wife’s Chihuahua, Lily. Lily is not making it to Alcatraz.

Rebie: Hey, raise your hand if you’ve been bitten by a Chihuahua in the last week.

Bo: Honestly, I mean, whenever I take that dog out at night, there’s about a 50% chance I’m getting bitten. Unfortunately, her teeth are so just in a bad place that it doesn’t hurt. Look, Lily is going to get eaten by a fish, and it would not even be that big of a fish. It would just be like a medium-sized fish would eat Lily. 100%.

Rebie: Okay, I’m glad we covered that. This has been From the Wings. Thank you for joining us. We do have some more financial questions to get to if you guys are up for it.

Brian: Let’s do it.

Q&A: Is It a Bad Idea to Buy a House With a Friend? (50:39)

Rebie: All right, we’ve got a little bit of an interesting one. From Amber, it says, “As a single person, buying a house seems out of reach. Is it a bad idea to buy with a friend? What should I consider?”

Brian: I think about one of our associates. His college buddy, think about this hack. He bought a townhouse. And then he got his two college buddies to move in. Now, he was the only one on the mortgage. So this could be Amber could be house hacking too, because that’s basically getting roommates and other people’s money to help you pay for the house. As long as, Amber, I think this is great to have other people’s money to help you do this house hacking, as long as your emergency reserves and your bench of financial resources are deep enough that if the roommates move out, it doesn’t deep-six your financial life.

Rebie: Here’s the thing. I don’t think she’s talking about house hacking. I think she’s talking about like putting both names on the settlement statement, pooling money to get in.

Brian: I like house hacking. I think that’s a good differentiator. I love the idea if you have a person who you know is going to be a roommate and you want to charge them rent. That’s wonderful. But let’s talk about why, because she’s right, it’s hard to come up with a down payment.

Bo: But when you go to buy something together, you’re forming a partnership. You’ve got to really understand and know what’s going on with the counterparty. Brian, you and I have bought a number of commercial buildings together that you and I own, but we kind of knew going into it. We had a history. We had a backstory. And I think what changes it is neither one of us lives in those buildings, because if you buy a house together and then what if one of you decides to go get married? Well, okay, does the spouse move in there or do they have to move out, or do they buy you out, and what do they pay for? And how do they, yeah.

Brian: And let me nerd out as the CPA here who’s done tax returns. One of the things, because I’ve seen people buy lake homes and beach homes where they don’t form a partnership, they just go buy it together like this, and it’s a tax mess. Because what happens is whoever’s name is first is the Social Security number that you’re going to get the 1098 or whatever the mortgage interest is on. And then whoever else, as long as you own this property, you all have to list the full amount of the 1098 and then you have to put a note on the tax return of the other people who are claiming the interest deduction on their taxes. So then when they put it on their taxes, you’re still likely going to get a notice every year because it’s just not clean from an administrative perspective. That’s why I like when, yes, we have bought property together, but we formed partnerships to go do it. So there’s only one tax ID associated with this. It works when, like when you and a spouse bought, since y’all are filing a tax return together, it doesn’t matter that it’s only on the first person’s Social Security that’s reported to the IRS. This just creates an administrative nightmare for your taxes every year. But it also creates a life mess in a lot of ways, because at the end of the day, who’s responsible for the house and the decisions that go on? That’s why I like when one person is, if you’re using this as a house hack, you get to kick out your roommates. You say, “Hey, you know what? It was a great time, but when we go up for renewal in a year from now, I’ve got a spouse now. I don’t need you as a roommate anymore.” And in a nice way you come to an agreement to separate ways. If you both own it, how do you have that conversation? It’s just weird.

Bo: And so what I would do is rewind a little bit. Okay, you’re a single person, but buying a home is, I would go through the exercise of okay, why do I want to be a homeowner? What is it that I’m looking for? What’s the problem I’m solving? And can you answer in the affirmative the questions we’d want you to answer to be able to buy a home? Do I see myself being in this location for the next five to seven years? Do I see my life circumstance staying the same, meaning I’m likely not going to get married or I’m likely not going to have kids? Is home ownership the right thing at this point in time? If you arrive at the conclusion that yes, it is, I think you would likely be better served maybe going to rent a place with this friend of yours so that y’all can split the rent, you can save a lot of money, build up so that ultimately one day you can buy. But I think there are more risks than rewards if you try to go buy a home with a non-spousal partner just to get on the housing ladder.

Brian: And like, if you say, “Hey, we’re going to live in this for the next two years and then turn it into a rental property,” y’all go form a partnership and write out an operating agreement or a partnership agreement that lays out all these different things, because begin with the end in mind. And maybe then it works. But just throwing it against the wall and hoping life’s not going to make this messy, that’s a disaster. That’s why I always begin with the end in mind and think through all the life changes and everything that’s going to happen.

Rebie: That was a good and well-rounded answer, Amber. Thank you for the question. We have a home buying hub you should go check out too. Go to moneyguy.com. Look at our ultimate guide for home buying. Also, we have two free resources. A home buying calculator and a home buying checklist that you can download at moneyguy.com/resources. I’m telling you, moneyguy.com, we just keep putting all kinds of stuff up there and it is there for you just whenever you need it.

Brian: That’s the goal. That’s the goal. Learn, apply, grow, rinse and repeat. And then we create this abundance cycle all over again.

Brian: Yep. So whether you’re ready to dive deeper, watch some old episodes, get some free resources, or take it to the next level and become a client, moneyguy.com is your place to go. Even though we’ll turn the cameras off today, we will be back every Tuesday at 10 a.m. Central. What?

Brian: I thought we were going to do one more.

Rebie: Oh, do you want to?

Bo: Is that Brian wants to answer more questions? Let’s go. Well, he said let’s, he said let’s give the people what they came here for. We got silly going into new content. New employees are in the wings watching too. So let’s give them one more for the folks.

Rebie: I just wasn’t sure if you’d be able to do this one quick enough, but we’ll go over. Let’s give the people what they want. Let’s give Brian what he wants.

Q&A: My Company Offers an ESPP at 15% Below the 26-Week Low. How Do I Handle It? (57:26)

Rebie: All right. This one’s from UnBEVlievable. It says, “My company offers an employee stock purchase program. Twice a year, employees can invest up to 10% of their base in company stock. The price of the stock is set at 15% below the 26-week low. Help.”

Brian: Well, see, by the way, this is help in a good way because you’re like drowning in opportunity. And let me just, everybody who doesn’t know, because we’ve gone through a whole show and have not popped this thing up. This is why we did this question. This is the Financial Order of Operations. The reason that Unbelievable is having so much issue is that step number two is you’ve got to get that free money. When your employer is opening up the checkbook to load you up with free money, you say, “Thank you. Thank you. Thank you.” And you try to maximize. So if you can’t do 10% right off the get-go, try to figure out how over the next year or two, as you get pay raises, you can maximize that free money.

Bo: Yeah. I would say do everything in your power. This would be a step two thing in my mind to try to get to that 10%. And what’s interesting is the way I imagine your plan works, based on the familiarity we have with ESPPs, is every pay cycle you defer money into like this holding account and then twice a year it reviews. Okay, you’ve built up all this money, what was the 26-week low, plus 15% discount, you buy. I would imagine with your plan because it’s structured that way, there’s not like a minimum holding period. So even if you were to then go liquidate that stock after it was purchased, after you acquired it, yeah, you’re going to pay ordinary income, but it’s still free money. You’re paying ordinary income tax when the stock is likely higher than it was on the 26-week low plus 15%. Even after you net out the ordinary income taxes, you’re still going to have substantial free money that you can then go back to the financial order of operations. Brian, you hold the thing up for me. Back to the Financial Order of Operations. Okay, well, now do I need to beef up my emergency fund even more? Do I need to do a Roth? Do I need to do an HSA? If that money is there and it’s available, I would try to do everything in my power to be able to take advantage of it and then figure out how I invest and how I divest and then redeploy.

Brian: Okay. So now that we’ve got you all hopped up and excited about how good of an opportunity this is, let’s give you the other side. Remember, there is the risk that you already have your human capital, meaning your wages and your time, tied into this company. You want to be very mindful not to build too much of your liquid investments into the same company. So that’s why you do need to follow the shampoo bottle approach. Rinse and repeat. Meaning that after you take advantage of the situation, come up with a plan where every year you’re kind of cleaning out, you’re selling it, taking advantage of the money, putting it in, diversifying, exactly what Bo was talking about, through the Financial Order of Operations, and then repeat the process over and over again. Because you just don’t want to have too much of your money all tied up into your employer. But yes, please take advantage of that free money because this stuff will amplify your wealth-building journey.

Closing (1:00:35)

Rebie: Don’t worry, I’m not going to give my whole spiel again. Just go to moneyguy.com. You’ll love it. Thank you for being here for our Ask Money Guy Show. We’ll be back every Tuesday at 10 a.m. answering your personal finance questions and having a little fun.

Bo: I want to throw one thing out there because we’re at the very end of the show, so it’s probably not very many people out there. We have a lot of exciting stuff coming out. I’m not going to tell them what it is, but I just think that you’re not doing a good enough job telling people. Remember the thing that I talked about that we’re going to do that people don’t know about. Man, if you are not subscribed to the channel, if you’re not on our email newsletter, you’re not going to know about some of the stuff we have coming. And some of it Brian already let the cat out of the bag. We got some new ebooks coming out, but we have things even bigger and better than ebooks that are happening later on. It’s going to be this year. I just want you guys to be as excited as we are because we cannot wait to get it out into the light of the day.

Brian: In all seriousness, learn, apply, grow. That is the abundance cycle. I love that our system lets you create the results before we ask anything of you. And that’s why we’ll leave the porch light on for you. If you’ve figured out, hey, your simple life has created this level of success that now this thing is just straight up complex, consider working with us. I’m your host Brian, joined by Mr. Bo, Rebie, and the rest of the crack content team. Money Guy out.