Are You a Wealth Builder Or Buster?

Are You a Wealth Builder or a Buster? Seven Questions You Need to Answer (0:05)

Brian: Are you a wealth builder or a buster? Seven questions you need to answer. The TLC episode.

Bo: Brian, I am so excited about this because when it comes to being wealthy, when it comes to being a financial mentor and having financial success, when you look at all the people that have been able to do that, all the people that have achieved that level, it seems that there are some common traits, some common characteristics that exist amongst that population. So if we can define what those characteristics are and then ask ourselves the question, do I possess these characteristics, it should give us an indication of whether we are on the right path.

Brian: And we were like, look, somebody who has literally written the book: Dr. Thomas Stanley and Danko, when they did The Millionaire Next Door, they list the seven traits that millionaires have. Now, we took some and we massaged a few of these to bring them up to 2026. We were also like, while we’re doing this mashup, why not incorporate, because I couldn’t help but think about it when you’re thinking about wealth builder versus a buster, why not bring this out because we have six TLC references in today’s show. Because at the end of the day, we don’t want no scrubs. And I want to invite you to figure out if you can find all six of them and put them in the comments.

Do You Live Below Your Means? (1:23)

Bo: I love it. All right, let’s talk about the very first trait. And this is one I would say is a Money Guy echo, but they were probably saying it before we started saying it, but it’s something you’ve heard here a lot. Answer this question: do you live below your means? Are you actually saving and deferring a little bit of today for a great big beautiful tomorrow? And I think, Brian, most Americans, they actually don’t fall into this camp.

Brian: No, there’s, you know, look, we’ve known this. Most people are busters in the fact that they just don’t live within their means. I mean, they’re basically using leverage. They’re using debt. They’re living a life beyond what they actually can afford. So I don’t like the living paycheck to paycheck, and that’s the thing Dr. Stanley said. Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction. So we’ve got to do better than that.

Bo: Yeah. If you’re someone who finds yourself not doing this well and you recognize that, man, at the end of every pay cycle, end of every month, there’s just not enough money left over, perhaps you should start budgeting. Are you at least just listing out where are my dollars going? Because it’s hard to know what to change and what to alter if you don’t have a clear picture of where those dollars are disappearing to. Because when it comes to changing your financial life, most of us really only have two options: we can either make more money and increase our income, or we can spend less money to create that margin. So you have to figure out which one of those two do you have control over and what are the steps you can take to move in that direction.

Are You Maximizing Your Time, Money, and Discipline? (2:54)

Bo: The next one, question two to ask yourself. Now, Dr. Stanley, when you read Millionaire Next Door, he frames it as time, money, and energy. We were like, well, energy, I would rephrase it as our three ingredients to wealth building, which is: are you making the most of your time, money, and discipline? As I just alluded to, we lay out that there are three key things. Discipline: are you living within your means or on less than you make? And if you do that, you’ll create margin or the money that, if you give it enough time, this thing gets magical with this power of compounding growth. And what’s really interesting is no matter where you are in your financial journey, the amount of these ingredients you have available might not be the same. You might be someone who perhaps didn’t figure this out early on in life and so you don’t have as much time. So that means you have to increase how much discipline you’re exercising. Or maybe you are brand new in your financial journey and it’s very difficult for you to create a ton of margin or a ton of money in your life. But if you have a lot of time, you can then use that to your advantage. So you have to figure out where do I fall in each one of these three ingredients and how can I maximize them for my own personal benefit. People, especially in this country, they care more about the way they look, the way they’re perceived, the way that they show themselves to the world around them, rather than what their balance sheet actually says.

Do You Value Financial Freedom Over Status? (4:24)

Brian: We have a show coming up that I can’t wait to record where we show just three small decisions in your life will change how your entire wealth-building journey goes. And one of them, I’ll go ahead and give a little peak behind the curtain: it’s the car you drive. Because I can just tell you in my own life, I’ve watched so many of my friends, family, and peers who as soon as they graduate and get their first big job, they go and load it up with the new car loan. And you see that across the board with most people. And I think you have to quickly realize if you’re going to be a financial mutant, you value more the freedom than how you look. And if you don’t believe that this is what true wealth builders do, look at the stats on the top car brands that millionaires are driving. And it’s no surprise that Toyota is number one at 16%. Honda is number two at 15%. Ford with that F-150 stat that Millionaire Next Door made famous is right there. Lexus, Subaru, surprisingly BMW is number six. But it is one of those things where I think when you look at this data, it doesn’t shock me to see Toyota and Honda at the top of the list.

Bo: Yeah. When you think about millionaires, they value staying out of high interest debt. They value building up their investments. They value building up and saving for large future purchases. They don’t care as much about what other people think. They care more about how they’re providing and saving for their future financial self. I think the big takeaway is that with truly being wealthy, wealth on your net worth statement is stealth wealth. You don’t hear it. So in other words, you got to creep. I’m telling you, do it stealthily and creep.

Are You Building Wealth Without Parental Support? (6:36)

Bo: All right, question number four. When you think about how you’re building wealth, are you building wealth without parental support? Are you someone who actually was able to leave the nest and get out from under the wings of your parents, meaning that you are self-sufficient, independent without someone else pouring into you? Economic outpatient care. Now listen, we ain’t too proud to beg, but at some point you have to ask and figure out, do you really need help or can you do this on your own without help from loved ones? In a survey that we do for our millionaires and our Abound clients every single year, we ask, “Hey, how much did an inheritance play a role in you building wealth and getting to the financial status that you’re at?” And 74% of our clients here at Abound Wealth received less than a $25,000 inheritance on their way to reaching $1 million. So what that means is these are first generation self-made people who were not depending on their parents to prop them up to get them to financial success.

Brian: And by the way, it’s not just our surveys. This was one of the big stats that came out of Millionaire Next Door that shocked me. And it’s close to 80% of millionaires are first generation. But that also means 70% is gone by second generation, 90% by the grandkids. Be deliberate with how you’re using your money. And this actually goes both ways. One trait is that millionaires don’t receive economic outpatient care from their parents, but they also have the ability to build self-sufficient children on their own.

Are You Raising Financially Independent Kids? (8:06)

Brian: Millionaires have the tendency that they teach their kids how to make wise financial decisions, how to fly out of the nest and be self-sufficient on their own. 75% of parents are supporting at least one of their adult children out there to the tune of around $7,000 a year according to AARP. This is one of those things where look, I know we love our children and I think we get a lot of pushback whenever I cover the Financial Order of Operations with the fact that there’s a reason we have the cap and gown on step number eight: we want you to build your financial security first before you help the kids out. But also we want you to help them build the skill set to have independence. When I gave you that 70% is gone by second generation, 90% by the third, this is so you don’t have to fall into that trap. Make sure that your kids’ best days are not just the days they live under your roof.

Bo: And again, it’s worth repeating. It’s okay if you help your kids out if they’re in a tight spot or maybe you have the means and mechanism to create an opportunity for them that might not have been available otherwise. That’s different than subsidizing lifestyle. If what you’re doing is covering the mortgage payment or covering the car payment or paying for the fill-in-the-blank, that’s where the line becomes very blurred and it can be not a super great situation.

Are You Good at Identifying Market Opportunities? (9:45)

Bo: Are you good at identifying market opportunities? When Dr. Stanley and Dr. Danko looked at their millionaires, they found that their millionaires could find specific niches and they were able to take advantages of needs in the marketplace to find ways to position themselves for the opportunity to build wealth. They didn’t sit back and let life happen. They were very proactive and opportunistic when opportunities presented themselves.

Brian: Yeah. I mean, this is one of those things, you know, one of the big things we’re always talking about is always be buying, because I think that all humans struggle with this fear and greed component, but I think once you build a little wisdom or depth of understanding of how money works, you’re going to find that you won’t be prone to all those emotional things and you’ll be right there in the right position with your cash, with your structure, with your Financial Order of Operations to where you get to identify and then maximize any market opportunity that comes your way in life.

Did You Choose the Right Career to Build Wealth? (10:43)

Brian: And then one of the final things, one of the ways that you make sure you’re recognizing opportunities: did you choose the right occupation? When you set out to say, “This is what I want to do professionally for my career,” did you choose an occupation that aligned both with what the marketplace desired as well as your unique skill sets?

Bo: Something you want to know is that not everybody’s a brain surgeon, not everybody’s a professional athlete. You’d be kind of shocked to see the typical careers that millionaires occupy are everyday things. It’s like your engineers, your accountants, your teachers, your management, your attorneys. These are people who consistently are just saving and investing, putting money forward, consistent income that allows you to let this wealth build up slowly in the background. They provide ample opportunities, job stability, stable income, the ability to create margin, the ability to exercise the three ingredients of wealth creation.

Brian: So if you were going to summarize what these seven traits are, these seven questions you ought to ask yourself, this is what’s true of millionaires, of people that are able to build wealth. They live well below their means. They make the most of their time, their money, and their discipline. They value financial freedom over luxury or financial status. They don’t depend on their parents for financial support. They have self-sufficient children. They recognize and take advantage of market opportunities. And they chose the right job and the right vocation. At the end of the day, I want you to be a builder, not a busta. And how you do that is with the Financial Order of Operations. If you were one of these people just like I was, just like Bo was, where you don’t come from money but you have a lot of ambition and you know you want to better yourself, we have created the thing to tell you exactly the instruction manual to know what to do with your next dollar.

Bo: Brian, I love that we get to sit here and we get to define what makes a builder and what makes a buster. And we can even answer your questions around how do I make this decision as a builder. And so with that, we want to answer your questions and load you up. So if you have a question right now, we have the team out in the wings collecting them. Make sure you get them in the chat because we do believe there’s a better way to do money.

Rebie: Absolutely. Go to moneyguy.com/survey if you want your voice to be heard and your voice and perspective to shape the Money Guy show really into the new year and for the whole next year. Every fall we give our audience a chance to fill out the Financial Mutant survey and tell us where you are. What are your pain points? What does your financial situation look like? What problems are you trying to solve? And how can Money Guy help you figure that out? That survey is only going to be open for one day more. So this is your last chance to get in and have your voice shape the show. We’re going to be creating not one but two episodes off of that content sharing the results. Be sure to go out to moneyguy.com/survey to take part before it closes tomorrow.

Q&A: How Do You Prevent Lifestyle Creep as Your Family Grows? (17:29)

Rebie: You want to answer some questions? We absolutely do. Galaxy9 is up first. He says, “I’m 30 years old, married with a second kid on the way. Cash reserves are great, but baseline expenses are climbing. How do we prevent lifestyle creep versus legitimate family budget growth?”

Bo: Yeah, I think this is because you’ve heard us say, Galaxy, that lifestyle creep gets such a bad rap and it’s always perceived as this negative thing, but the increase of our lifestyle through time is not a bad thing. I think most people want their 30s lifestyle to be better than their 20s lifestyle, their 40s to be better than their 30s, so on and so forth. And so the question you’re asking is: how can I do that but make sure that I’m not doing it wrong or getting it out of whack? This is one of the reasons why we love the idea of paying yourself first. So when you get pay raises, when you get bonuses, what we want you to be doing is shooting for and striving to get to a 25% savings rate. While you may not be there today, maybe you’re 30 years old and you’ve got these two kids, you’re at a 15% savings rate. That’s fantastic. What we want you to do is as you have a bonus come in or as you have a pay raise come in, have some portion of that automatically go to your savings. Say, I’m going to increase my savings rate. And then with the remainder, what’s left over, it’s totally fine for that to go to lifestyle, for that to go to increasing whatever those things are. It’s not like every additional dollar you make has to be saved. So if you can save first and then spend, you’re going to keep yourself on solid financial footing through time and make sure you don’t get out ahead of your skis.

Brian: G, I need you to have accountability because this is something we just did a show on that did really well: the wealth window. Because yes, of course, if you can start saving and investing in your 20s, you’re going to be golden. But most people just don’t have that margin in their life. So it’s really that period of time between 32 to 48 that you’ve got to get the work done on saving something for the future. But the problem is that’s also when life starts really stretching on you because you have kids, you get married, you start having to buy a house, you think about all the activity fees for the kids. We’re just here to tell you there’s nothing wrong, exactly what Bo said, with your lifestyle growing during this very important season of your life. But I just want you to be whispering and pushing a little bit of the small incremental, you know, as you get those pay raises. Because that’s the other thing the data shows is that you are getting more mastery in your career, you’re getting bigger pay raises. Make sure some of that is showing up on the net worth statement. And it doesn’t have to be all of it. A 60/40 split is what we talk about with pay raises: let 60% go towards your automated investments until you can ultimately get it up to 25% of your gross income, count that employer match. But do something so that that money is growing so you don’t get into your 50s and beyond and have huge regrets because you didn’t take any bit of time to sacrifice and build something for the future. Galaxy9, thank you for the question.

Q&A: What Happens to Your HSA After Death? (20:49)

Rebie: Next is Shay S’s question. “What happens to my HSA after death? I’m 44. Today I have $90k and I max it annually, investing and never using it. Will my kids be taxed? Can they use the funds if they don’t have a high deductible health plan?”

Brian: Interesting question. We love HSAs. What happens if somebody inherits it? I mean, we did a full deep dive HSA show. This part of the tax code hasn’t changed. And we actually shared the tax code in that earlier episode to where it showed that indeed your executor can go back and claim that tax-free distribution from the health savings account. But you make a great point, Shay. If you’re doing this strategy where you’re, and for those who don’t know, we love health savings accounts because they are triple tax-advantaged. It’s one of the few vehicles out there where you get a tax deduction for your contribution. It grows tax-deferred while it’s in the account. And if you pull the money out for qualified medical expenses, it grows completely tax-free. So you’ve got it all going in and coming out if you structure it right. That’s why there’s a lot of incentive to not use it as a clearing account, but to actually let the money grow and invest. But you probably need to write a note to your executor and put it with your will and all of your other important documents about what you’re doing so that it’s not overseen, because it’s sometimes chaotic after you leave the earth. You want to make sure you let the people you love know what you’re doing.

Bo: Yeah. If your estate does not have copies of the receipts or of the charges, they won’t be able to reimburse that money for free. And then once you pass, you can’t then use those dollars in the same way that you could prior to death. And so one of the things that we tell our clients to do is we love building up HSAs, treating them like long-term retirement vehicles. But what ends up happening, and this is what we’ve seen practically, is someone will build up their HSA and they might have $100,000, $200,000, a substantial sum of money in there, and they’ll have all these expenses that they’ve accumulated over the last 30 or 40 years where they could reimburse themselves if they need to. But what they’ll start doing is they’ll just start using that for their retirement medical expenses. And then if we’re doing some tax planning, we get to the end of the year and we’re like, “Hey, I know we did that tax planning where we wanted to make sure we stayed below the IRMAA surcharge, but we’re going on this trip and I got to make a deposit and I need $10,000. What do I do?” Well, the HSA is a great place to go get tax-free money for those expenses that maybe you weren’t counting on that won’t affect your other tax plan that you’re doing. So our clients kind of use it as a current medical expenses in retirement plus one-off. “Uh oh, I didn’t know I was going to have this expense need.” And it’s tax-free, completely available money. That’s how most people end up. Most people spend them down relatively quickly in retirement. Very rarely do I see someone passing away with a large HSA balance because it usually shifts once you retire.

Rebie: Shay, thank you for the question. Appreciate you being here. If you are watching us live right now, be sure to get your rapid fire questions into the chat. Just put RF at the beginning of your question and we may choose that for our rapid fire segment coming up a little bit later in the show.

Q&A: Why Aren’t More People Building Wealth? (25:10)

Rebie: DVO6912 is our next question. “Are less people wealthy because they do not understand compounding and time, or is it that they have high housing, vehicle, or lifestyle costs and never give those costs a second look?”

Brian: Can I give the hot take here? I’ll let Bo be the nice guy because hopefully I get enough goodwill from talking about TLC earlier. I mean, look, the stat: the typical 65 to 74-year-old doesn’t have more than $200,000 saved for retirement according to the Federal Reserve. And look, without a doubt for young people right now, housing stinks. We’ve done a lot of content on that. But housing didn’t stink for those baby boomers who are between that 65 to 74 age, and yet there’s no savings. So I think that yes, it is harder for younger people to think about it with housing, but if you go look at the stats for the people who are the generations ahead of the current generation, they had cheap housing and they still don’t have money for retirement. So I think there’s definitely a discipline component that is disconnected: people just procrastinate and don’t realize how valuable it is to start saving something. Just doing something, I don’t care if it’s just getting your employer match and then maybe funding a Roth IRA while you’re in your 20s, 30s, and 40s, will literally change your life.

Bo: I think that we as a society struggle with deferred gratification across the board. That’s why we’re probably not as healthy as we ought to be. We don’t make as wise decisions around that as we should. It’s the same with our finances. It’s really easy: oh, well, I want this thing today, so I’m going to do it. Or I want to have this thing. And so we live in this consumption society with the idea of procrastination. Oh, well, I’ll save next year. Or when I get the pay raise, then I’ll save. And they end up pushing it, pushing it, pushing it. It is a reality that housing is expensive and vehicles are expensive and lifestyle even in today’s society can be expensive. But we really do have a belief that anyone can build wealth no matter where. We’ve even done episodes on how to build wealth if you only make X number of dollars and we’ve done it with different strata. It is possible. But if you have a lower income, if you have less margin, you have to exercise a whole lot more discipline and be willing to do that for a longer period of time. I think it’s a combination: people don’t understand that $95 for a 20-year-old invested monthly until 65 can turn into a million dollars. They don’t understand it. But then they’re also blinded by, I want what I want right now today. I don’t want to think about the future. I’d rather have it right now. It’s why we have such a big debt problem. Not only are we really bad at deferring into the future, we’re also really bad at robbing from our future selves while we have this debt epidemic going on in America.

Brian: We were reviewing a show that we’re going to be recording after this live stream where it was showing the savings behaviors of Americans from the 1960s all the way through recently. You know, we were saving over 10% as a country all the way until the early 80s. And I think that’s remarkable and realize this is from the 60s and 70s and even early 80s where most people had pensions. So it was 10% and then they had pensions on top of that. We lost something. And I blame a lot of this on the banking system, which has gotten really good at encouraging consumption through credit cards and other products. And we try to create and educate you guys so you don’t fall in this consumption trap that has been laid for you. Because with index funds and access to where you can do everything on your mobile phone now, it’s actually the easiest time in the world to actually start doing something. But so often people just get distracted and then they create their own trap of debt that they can’t even get out of. And not only is it the easiest time in the world to invest, it’s also the easiest time to get distracted because now you pull up your investing app and all of a sudden on the side there’s sports betting or prediction markets or a thousand different things vying for your attention that can very easily pull you away from doing the thing that’s worked for the last hundred years: living on less than you make, putting it to work, investing in low-cost indexes, and watching your dollars grow. Don’t try to beat the market, be the market, and you’re going to be just fine. DVO6912, thank you for the question.

Q&A: Pay Off a 7.5% HELOC or Fund a Roth IRA? (30:08)

Rebie: Fast Bullish is up next. “Hey, Money Guy team. Would you prioritize paying down a 7.5% HELOC or funding a Roth IRA? I have no other debt.”

Brian: If you have a 7.5% HELOC, when you say no other debt, does that mean you don’t have a mortgage either? I bet there’s a primary mortgage outstanding on that. And then you have this home equity line of credit. A few things I’d want to know: I want to know your age. And I’d love to know what your current balance sheet looks like. How much do you currently have saved and invested? Do you have a big pot of assets that are working for you that are growing and compounding right now, where it makes sense to really attack the 7.5% HELOC to knock it down? Or have you procrastinated? Have you not been building and you really don’t have any investment assets built up? And I’d also like to know the size of the HELOC. Is this a $150,000 home equity line at 7.5% or is it a $10,000 home equity line?

Bo: Well, that gets to the point of the context of what created the home equity line. Because if you went and bought a car with a home equity line, that’s a disaster. I mean, we can at least give you the context of what the mistake was that was made and then how we get back on track. Treat it like 20/3/8, you know, so that way maybe we can still do our Roth IRA and correct the mistake. And then if it’s something where you actually did make an improvement on the house, I will tell you I don’t mind people using home equity lines, but it needs to be just a momentary bridge to get you through this moment in time and probably not any longer than three years. Maybe you could convince me four years. Because I don’t want this thing to occupy all of your free cash flow. If you can’t do a home improvement and pay off the home equity line within that three to four-year period, you might just need to defer not doing the home improvement so that you’re not sacrificing your future retirement. That’s why I hate retroactively, but we have to triage your financial life exactly where it is.

Brian: I need a little more context so we can give you the right pinpointed plan of action for your specific situation. I don’t think we ever got that information. That’s all right. I think you talked around the possibilities there. So we appreciate the question. We’re going to move on for one more question before we get to our rapid fire segment. So put RF in front of your question in the live chat if you want to be part of our rapid fire segment.

Q&A: Should You Take a Pay Cut for a More Fulfilling Career? (33:12)

Rebie: But first, B892 has a question. It says, “Hi, Money Guy team. I’m 25 with $105k in annual income, on step four of the FOO. I want to change to a more fulfilling career that would likely drop my salary by $20k and have less benefits. How do I plan for this?”

Bo: I mean, this is probably the time to do it. If you’re in step four, you’re building up an emergency fund. What I would do is I’d probably build up that emergency fund even more than I think I need. Like if I’m building it up for 6 months, but I know I’m going to take this step back in pay and I’m probably going to have to do some lifestyle adjustments because of that, I may want to build up to maybe seven, eight, nine months of liquidity just so that I don’t have any shocks to the system. And then if I was used to living off of $105,000 and now all of a sudden I’m going to be living off of $85,000, my net take-home is likely going to drop, assuming I’m saving the same percentage. I want to make sure that I adjust my lifestyle accordingly to make sure I can do that. And by the way, there’s nothing wrong with that. We see people all the time, Brian, who want to come and work here and they’re doing very well in their careers, and they end up coming and restarting and repivoting. They might have to take a step back. And that’s totally okay because it’s a better lifestyle choice, better long-term opportunity, better metrics looking forward. But you have to decide for yourself: what are the things that matter? What’s this going to affect long term for my plan? And am I willing to accept those trade-offs?

Brian: B, let me be like your favorite nerdy uncle that you like to approach with decisions like this. You’re at the perfect stage to make a choice like this, but is this a short-term solution, meaning that you have to take this step back to get you out of the unhappiness of the situation you’re in, but this is only the first of multiple steps? Or is this truly you going to take a step back for a much bigger opportunity down the road? Because Bo, as you just alluded to, we do have career changers that come in here. And I got one of my favorite things as an employer because we’ve had some brilliant engineers, people from the medical profession, musicians, producers who’ve come in and done this. And I like to think that for many of them, this has turned out to be the best career not from just a quality of life, but also even economically for their families. That’s the filter, B, I need you to do. Because despite what society tells you, jumping around every two years is not ideal for creating the resume that lets an employer or your future self feel like you built community or the best version of yourself. Think long term. Begin with the end in mind of how this transition is going to change things. Measure twice, cut once. If this is the right decision, do it. But just make sure you’re not thinking just in this moment in time for the next 12 or 24 months. Let’s think about what 60 months or even 10 years looks like if you make this step.

Rebie: Love it. Thank you so much for the question. B892, appreciate you being here. With that, we are going to move into our “It Does Not Depend” rapid fire segment where Bo and Brian answer your questions in a combined 30 seconds without saying the words “it depends.” And just in case there’s something really important they can’t fit into that time, we will address them in a segment at the end. And I do have a little bit of a twist halfway through this one as a surprise.

It Does Not Depend Rapid Fire Segment (36:48)

Brian: No, don’t make me do that. I already feel like a buster. We’ll get 30 seconds on the clock.

Rebie: I’ll go first since you went first last week. And we will kick it off with the first question for rapid fire. Are you ready?

Brian: Born ready. There we go.

Rebie: First question. In retirement, do you have a set percentage of net worth that should be your primary residence? Assumed it’s paid off.

Brian: No. As long as your primary residence is paid for in cash, I would take into account the living expenses and make sure that fits within your withdrawal strategy.

Bo: I would also say no. A lot of we’ve had a lot of people who retire in a home that they might have bought 30 years ago, but it might have been on the coast or something like that. And if you look at the value of their home, it might represent a large portion of net worth only because they’ve owned it for so long. We care more about: is your liquid portfolio that’s going to provide for your living expenses? You want to make sure that’s large enough. I wouldn’t worry about the size of the primary.

Rebie: All right, we’ve done the first question. Number two: what are some financial mutant hacks or tips for moving?

Bo: Pay someone else to do it. I mean, that’s not a financial mutant hack, that’s not a financial mutant tip, but I do not like moving. Try to minimize it as much as possible and protect your back. It’s more a longevity thing. Health is wealth.

Brian: I need to come back to that moving financial hacks and tips question. I mean like I got some thoughts. I’ve moved four or five times and had to do it different ways.

Rebie: Question three. Does the rule of 55 apply to a solo 401k when you are a sole proprietor?

Bo: No. Do you know why the rule of 55 does not apply to a solo 401k? Because in order to have a solo 401k, it has to be an active plan that’s opened up. Our position is that a solo 401k does not qualify for rule of 55 because you are not an active participant. If you’re not active, you can’t have a solo 401k.

Rebie: Next question. Ramsey Solutions has a rule that quote unquote things with motors should not have a value over 50% of your yearly income. Do the Money Guys have a similar rule?

Brian: You know, I’ve heard Dave do that in an interview. I think he did it on the Bobby Bones interview and I was really impressed at the time because it is one of those things, but I’ve never, I mean that seems like common sense to have because all those things are depreciating. I wouldn’t want 50% going towards depreciating assets.

Bo: Yeah, I think it’s a good rule of thumb, but again, stage of life matters. If I’m a retired individual with a huge portfolio, but I don’t have a huge income, but I want to buy a nice car, I’m not going to fight you on that.

Rebie: All right. Next question. And then after this question, we’re going to have a little twist. So stay tuned. Is it okay to pause investing except for your 401k match for just a year so that I can save for a home?

Bo: Yeah, it’s absolutely okay. Your financial goals are your financial goals and you want to use your money to achieve whatever your goals are. And if one of the goals is home ownership and in order to do that you have to pause investing to get there, that’s okay. You just need to recognize there’s a big opportunity cost for doing that.

Brian: I’m okay with it as long as it covers steps two, three, and four. Anything after those it’s okay to defer, but don’t skip out on the match. Don’t skip out on paying 20% interest to banks, and definitely have cash reserves.

Rebie: Well done. All right, for the last few questions, we are going to change it up and put 15 seconds on the clock.

Brian: No, we can’t do that.

Rebie: Let’s just see what happens. Humor me. You go first. If it doesn’t go well, we’ll tackle them all in the ending segment. So with 15 seconds on the clock: is it worth it to withdraw Roth IRA contributions to pay off high-interest debt?

Brian: No.

Bo: I say no too, because those dollars, it’s very costly from an opportunity cost standpoint. I would find every other mechanism in the world to pay that off without pulling out the Roth. Go work a second job.

Rebie: Solid answer too. Next question: how do you acknowledge your accomplishments? I finished my credit card debt earlier this year at 24, but feel underwhelmed still that I have less than a month in my emergency fund.

Bo: That’s okay. You’re still in the beginning stages. Small wins, small victories lead to big wins, big victories.

Brian: And then join the Moneyverse and go enter your wins there because you’ll be surrounded by people just like you. Hype squad, moneyguy.com/moneyverse.

Rebie: Next: does it ever make sense to target brokerage instead of maxing your 401k after getting your 401k match and maxing Roth IRA?

Brian: No. This is something we’ve covered. I think it’s a marketing hype that there are groups out there saying this. Unless you’re part of the FIRE movement and you’re retiring like at 50 to 55, I would rather you get the tax-favored investing.

Bo: Yes, there are times when you need to do that. We’re coming back to that one. Agree, disagree, want to fight a lot.

Rebie: All right, last but not least: is the S&P 500 too concentrated in tech? If so, how do you recommend diversifying?

Bo: No, I don’t think it’s too concentrated in tech. Right now it does have a tech bias, but I don’t think it’s too concentrated in tech. When you have a diversified portfolio, you’ll branch out outside of just S&P.

Brian: It’s been over-concentrated in tech for probably the last 30 years.

Rebie: Not too shabby. Friends, how did 15 seconds feel?

Brian: Not good. That’s like somebody asking you to help them move a piano. That’s what that felt like to me. 15 seconds was like moving a piano.

Rebie: Noted. Let us know. Give us some feedback. Do you like adding some 15-second timers in there or do you like 30? With that, let’s move on to our maybe it does depend segment where we’re going to revisit some of these questions.

Maybe It Does Depend Segment (44:19)

Rebie: The first one was the tips for moving. So the context was: step one, just finished grad school and taking the CPA exam. Will be in step three as soon as I start work.

Brian: Okay, that’s the context. So I was going to give the experience share. Early in my life, I did it on the cheap with a U-Haul and called my friends and family to help me move because I didn’t have a lot of stuff. Didn’t inconvenience a lot of people. Next move I upgraded to where I did U-Haul, but I used professional services to help me move the heavy stuff, meaning I did all the self-packing, but then I had professional services because you can now add on professional services to help you actually load and unload the truck. And then the third, when I started moving into the nicer house, when I moved to Tennessee, I overlapped, meaning I didn’t sell my first house until I’d already moved into the second house. And that’s a luxury, but man oh man does it make moving easier. But that’s a privilege that you get to do after you’ve done all the other steps. That’s kind of like a step eight thing of the Financial Order of Operations.

Bo: You know, I generally have a rule: don’t move furniture after the age of 30. But you’re 32, so I’m going to give you a little bit of a pass. Here’s what I would do. I’d call a bunch of my buddies, be like, “Hey, you got pickup trucks. I’m going to rent a U-Haul and bring pickup trucks. We’re going to load those up. I will buy pizza and beer, and that’s how I’ll pay you to do this.” And get it knocked out. Now, two tools you ought to buy that are game changers. The first: furniture pad sliders. You know, the little things you put on the ground. You can set the furniture, you can actually move it around the house nice and smooth before you actually have to lift it. And second, the over-the-shoulder straps over your shoulders down under the piece of furniture. You can lift and move anything like that. It makes it so much easier. It will save your back and you’re like, “Holy cow, this is not nearly as hard as I thought.” I still have the straps at my house because every now and then I’ve had a few neighbors.

Brian: Look, I’ll tell you one of the reasons I don’t like moving anything. I am in my 50s and I don’t have back problems. And we have millionaire clients who have back problems because they did inappropriate stuff. So really measure twice, cut once on moving heavy stuff past a certain age too. But Bo is exactly right. Straps are great for moving appliances. They’re great for moving couches, dressers, everything. And it’s so cheap. Every household should have them. Go bag for if things got really bad in your area, flashlights, fire starters. And then moving straps. These are things that should be in every person’s house.

Rebie: The other one that you kind of waffled on was about Ramsey’s things with motors not having a value over 50% of your yearly income.

Bo: Wait. Okay. So that means like if you make $100,000, you can’t have cars worth more than $50,000. Okay. Well, what do you do about retirees? There you go. That was the whole point. It’s disconnected from the reality of your net worth. I think I’d rather use net worth to drive what type of car you can afford, not income. In your early journeys, we’re on the same page as Ramsey: we want you to limit depreciating assets as much as possible. But I think there is a disconnect as you get older and have more success because I’m trying to free you to use and live your best life in retirement. I think about even like my buddies who own boats. I’m so happy they own boats so I don’t own a boat. But those rules would kind of start to fall apart. I think it’s good when you’re young. This is back to the rule. I think Dave is so good at getting people out of debt that it definitely helps out in your 20s and 30s, but if you’re somebody who’s gone beyond the basics, that’s when those rules get very nuanced.

Brian: By the way, we also realized, you know, we did the whole busta and TLC reference with no scrubs. You know, no scrubs: in your best friend’s ride. We kind of realized that’s the financial mutant in this song. I know that in TLC’s song that would be the buster. But part of my life, that’s actually the financial mutant because you want your best friend to have the fancy car that you can hang out of. The person hanging out the passenger side of his best friend’s ride not having a car payment, just ask him if he funded his Roth IRA.

Bo: She should want the scrub. That’s what you’re trying to say. Not a buster there. Just doesn’t have a car payment. Oh my goodness.

Rebie: There was one more. Last but not least, does it ever make sense to target brokerage instead of maxing a 401k?

Bo: I know personal finance is personal. There are seasons and times when you’re moving through the Financial Order of Operations. As you get closer to when you’re actually going to use those dollars, like when you get into step seven and you’re thinking about, all right, I’m about to retire and I want to make sure I’ve got my three buckets filled, maybe it doesn’t make sense for me to continue saving in my employer-sponsored retirement account, my 401k, because I need to have those bridge assets for some reason or another. Maybe I’m retiring before 55 or I want some liquidity or flexibility for something. It may make sense at that time to shift and start building an after-tax brokerage account. We see people do that, but that’s later on in your financial journey, not at the beginning.

Brian: But if you’re in the first saving of 25% of your gross income, now because there are people who if you make under $100,000 and you’re saving somewhere between 80 to 100% of 25%, you might reach 25% without maxing out your 401k and then could still even get to doing it after-tax in step seven. But that’s what you’re going to want to do: the tax-favored stuff first. On the first 25%, I think that is bad advice when you’re helping people on the foundational side. Of course when you’re close to retirement it gets much more nuanced because it then gets very personalized. But I do know there are firms out there marketing this because they want to have a contrarian point that they can say is the way to draw more clicks and eyeballs. And I’m here to tell you just be careful when people try to create sensation that’s disconnected from what is probably the advice that you need to be doing at the beginning of your journey. There’s a financial order of operations and don’t let somebody’s marketing or contrarian point get you in trouble when they’re giving advice that might be great for a 55 or 50-year-old.

Q&A: How Much Can You Spend on Travel and Experiences? (55:13)

Rebie: All right, we’re going to close it out with a question from our friend Grill This, Smoke That. He says, “I want my family to start chasing waterfalls through travel once we are at steps seven and eight. What percentage of income is acceptable to dedicate to experiences for the family?”

Brian: We know you personally. You should go spend a ton of money. I just know how good Ben’s doing. And by the way, if you’re not watching Grill This, Smoke That, I see it shows up all over my TikTok. I know it’s on Instagram. Ben makes me want to go buy one of these grills just so I can cook breakfast the way he cooks breakfast. He made something the other day: pancakes where he used food coloring and made a Georgia G. He is killing it. And I think you should go make all the memories you want to make. Okay, now give the real advice.

Bo: Yeah. So the answer is once you’re in step seven or eight, hold the thing up for me. Once you’re in step seven of the Financial Order of Operations, that lets me know you’re already saving 25% of your gross income for the future. Well, the reason why we say to save 25% is so that after that point, you can spend lavishly on whatever you want. So how much is acceptable to spend on travel after that point? As much as you want. If you want to spend all of your extra discretionary cash flow on travel, that’s totally fine. That’s what the 25% is supposed to do for you. It’s supposed to free you so that you can spend guilt-free. It doesn’t matter if I spend on the hobby or I spend on the travel or I spend on the increasing lifestyle, whatever that is. 25% is that threshold that you cross over that now frees you to use your money however you want for today. So I think if you’re already in step seven and eight, absolutely. And we would argue if you’re looking for some advice, spending money on travel and making memories and creating experiences is way more valuable, way more fun, than spending it on things and cars and homes and that kind of stuff. So if you are at that place where you can start doing that, by all means start doing it and don’t feel guilty about it because I think that’s awesome. That’s exactly where you should be.

Rebie: Everybody’s going to go check out Ben’s stuff and then you’re like, “Wow, my feed is now just covered up in his stuff because once you watch one, you’ll keep getting this stuff over and over again.” And I think that’s part of why he’s so successful with it. That’s not a bad thing. Well, we love that. Thank you, Ben, for the question. Thank you, everybody who submitted a question today. It’s been really fun.

Closing and Financial Mutant Survey (57:39)

Rebie: Remember, you can continue to shape what we talk about on the show, but you only have a limited time. Tomorrow our financial mutant survey closes. So go to moneyguy.com/survey to get in on that before it’s too late because we want your voice to be heard. It matters. We want to speak to your pain points. And the survey will only take a few minutes of your time. It’s completely free. It’s going to shape the show for the next coming year. So please do that. We are really excited about it. We love doing these episodes every year. Really a favorite annual tradition if I say so myself.

Brian: No, we love this. And you guys, there are so many things going on in the world right now that you could be spending your time doing, but we do not take for granted that you give us this time. Some of you, that’s why go check out the Moneyverse too, because I mean the quality of this audience and the people, it blows my mind. You would be shocked at some of the comments and I know the context of who these people are and are in our midst and I’m just like, this is the right people to be hanging out with if you want to have the right influences on your life. If you want to have these conversations, money is a taboo subject that’s hard to talk about, but you can create a community where you can carry forward and have these conversations, make some friendships. It’s fun that we get to do this with you. We don’t take it for granted. I’m your host Brian, joined by Mr. Bo, Rebie, the rest of the content team in the wings. We’re out of here. Money Guy Show out.