Are You Actually Wealthy? Here’s How to Know

Are You Actually Wealthy? Five Ways to Know (0:00)

Brian: Are you actually wealthy?

Bo: I am so excited about this because this is an age-old question people want to know. Am I where I’m supposed to be? How do I measure it? How do I know how I stack up? How do I know if I’m doing the right thing? I think there’s been a lot of publications and articles and resources that have sought to answer that question.

Brian: We found an article out on Investopedia, and what was unique is it actually went through five different ways you could consider on this range: are you wealthy? Five ways to actually look. And stick around to the end because we’re actually going to bring it all together. I really loved how we put some purpose to every one of these five variables. There was an interesting way the article kicked it off. Charles Schwab had a research study done on what is wealthy, and what came back from that survey was that $2.3 million is what people needed to feel wealthy. That’s how much money you need to be wealthy. $839,000 to feel financially comfortable. Interesting numbers.

Bo: And so that’s obviously a measure of net worth. That’s one measure. But this Investopedia article was interesting because it gave you five unique metrics that you can use to determine if you’re wealthy. We wanted to give you our thoughts on each. The very first one was income. Income is simply how much money you make every year. How much money do you have coming in? And we often say all the time that this is your greatest wealth-building tool, but is it really a way to assess if you’re wealthy or not?

Brian: Yeah. And if you want to put some numbers to it, I like how we put numbers to actual data points. The actual median household income in the United States is around $84,000. But as you’ve already shared, income is a way to build wealth. I don’t think it’s a very good way to measure how wealthy you are. It’s a tool to build. It’s not actually what lets you see if you’re wealthy. You can have a great income and still be broke as a joke.

Bo: Well, I was going to say, how many people have we interacted with, both in our lives and our careers, that have huge incomes that by that measure should certainly be wealthy? And yet, as you say, they are broke as a joke. So income is probably not the best metric. How about the next one? The second thing that the Investopedia article said was your debt balance. How much debt or how little debt you carry could be a metric to assess whether you’re wealthy or not.

Brian: To give some perspective with numbers, if you take out mortgage debt, the typical American has around $22,000 of debt. So you think about credit cards, loans, other things. The typical American is walking around with debt on their net worth statement.

Bo: Now, if you’ve followed us for any amount of time, you know that we say in the Financial Order of Operations, high interest debt can be devastating. It can be a wealth killer. But that does not mean that we are necessarily anti-debt. We do think that debt can be a tool that can be used. The most common and easy example is a mortgage. Being able to buy a primary residence and having a mortgage on that doesn’t necessarily mean that you’re bad with money. And just because you have a mortgage on your balance sheet does not suggest that you are not wealthy. In the same way, just because you don’t have debt on the balance sheet also doesn’t mean that you are wealthy. So again, debt can be a tool that potentially could work for you, or more often it can work against you, but probably not a great measure of wealth.

Brian: Well, look, there are a lot of wealthy people. Robert Kiyosaki, for example, has made his entire wealth off of leveraging debt. So you can have a lot of debt and still be wealthy, depending on how the value of the assets compares to that debt. And think about two people with the exact same level of debt but completely different asset levels. That’s why it’s also not a good variable by itself to determine wealth.

Bo: All right. So then they went to the third way you can assess wealth. And that’s your financial flexibility. How much margin exists in your life on a month-to-month, pay cycle to pay cycle basis.

Brian: Now this is the one that kind of shocked me. When you look at the data points on this, 24% of US households live paycheck to paycheck. What I thought was interesting was that the article pointed out that high income does not mean wealth. And high income families in the United States? 19%. So only 5% better than the typical American, even though they have this tool of high income. Even high income families are living paycheck to paycheck at close to the same rate. There seems to be elements missing, like discipline.

Bo: Yeah. Financial flexibility means having margin available to be able to fund and reach your financial goals. And you hear us say this all the time: if you don’t have margin, or if you’re trying to increase the amount of margin or flexibility you have, there are really only two levers you get to pull. You can increase your income, how much money you have coming in, or you can decrease your expenses, how much money you have going out. But even this fails in a small sense as a great metric for assessing whether someone is wealthy. Because even someone who can have income coming in and live on less than they make, if they don’t actually do something with that margin, if they don’t actually take it and put it to work, how often have we seen people who just go out and buy CDs and put it in cash? And while they’re not paycheck to paycheck and they do have financial flexibility, I would argue they’re still not quite at the wealth phase because they didn’t actually deploy the dollars in the right way.

Bo: And that leads to the fourth one here. And this one, as a whole, is very powerful. So much so that on an annual basis we actually make a habit, a tradition, where we do our net worth statement, where we try to figure out what we own, what we owe, and then we get our net worth. This is valuable. This is very powerful to look at at least on an annual basis to know: are things going in the right direction? Is my debt going down? Are my investments going up? Because hopefully one day, if you build up your net worth, especially the investable net worth, your money can work harder than you can.

Brian: Yeah. According to the U.S. Census Bureau, the median net worth for all American households is right around $205,000. Which sounds okay, right? It sounds like it’s not negative, it’s a couple hundred thousand. But the problem with net worth, and we have talked about this a ton, is that a lot of Americans’ net worth is really based more on the fact that their primary residence, the home that they own, has increased in value. It’s based a lot less on their behavior, how much they’re saving, and how much they’re building.

Bo: So while net worth can be a fantastic metric to assess where you are, how that net worth is comprised and what it’s made up of makes a really big difference. And that was actually the fifth metric that this Investopedia article laid out for how you actually assess whether you’re wealthy. They called it retirement savings, or what we would say is your liquid net worth or your investment portfolio.

Brian: Yeah. Because retirement savings immediately gets put into the category of your 401k, IRAs, Roth IRAs, and so forth. What I like about liquid investments is that yes, you could account for all of those, but you can also count taxable savings and your emergency funds. So it all goes in because that’s just money you actually have access to. It’s really your army of dollars that you can put to work for you so you don’t have to work so hard with your back, your brain, and your hands. And then again, looking at the numbers, according to the U.S. Census Bureau, looking at median retirement savings by age, for those folks under 35, the median retirement savings is only about $25,000. For those 35 to 44, about $79,000. 45 to 54, about $97,000. 55 to 64, about $150,000. And then 65 and above, median retirement savings is about $200,000. I would argue that’s not quite enough to be financially independent.

What These Five Metrics Actually Mean for Your Wealth (8:56)

Brian: Well, let me kind of bring this home because this is what I love. I want to close this out and tell you how these five things are important and helpful, but in their own ways. We in America have a discipline problem. We have high income, even in the research from this article, and high income people should have all the capacity in the world to build wealth because they have the big shovel, they’re bringing money in. But yet even close to 20% of high income earners, compared to 24% of the typical American, are not building wealth because we never actually engage the tool of saving and investing. And if you need proof, this is why we love to give you some metrics to go by. We say all the time that for the typical American, what we’d like you to have are some benchmarks and goals. Like by age 30, try to have one time your income saved and invested in a liquid portfolio. If you think about a 40-year-old, try to be up to three times. 56 times 4. You can see what’s happening is you’re building in the background where it starts very slow, but through compounding growth, it picks up more and more momentum. One day your money works harder than you do.

Bo: So let’s assume if you are a 40-year-old with a $100,000 household income and your investment portfolio is $300,000, we would argue that you’re on track. You’re moving in the right direction. You are where you need to be. But on the median, Americans are not doing that. So we want you to have a more accurate assessment of whether you’re wealthy and where you’re supposed to be.

Brian: While you may have a high income, while your debt load may be low, while your net worth may be growing, we want to make sure that your behavior is actually matching that. So we thought, rather than using these five metrics as a mechanism to assess whether you’re wealthy, what are some takeaways we could take from each of their metrics? Let’s go through each of these. Income: this is your shovel. This is actually your number one wealth-building tool. Make it valuable by then leveraging discipline so that this income turns into assets. And if you are living beyond your means and using high interest debt to subsidize your lifestyle, there’s a really good chance you’re never going to be able to build wealth. High interest debt truly is a wealth killer. And then financial flexibility: we talk about this a different way. We say this is margin. This is living on less than you make. And when you utilize this, it’s one of the three ingredients to wealth building, because you have discipline and then you have living on less than you make, which creates the margin or the money that, given enough time, can be really valuable. And then if you want to really assess behaviorally how you’re doing, and whether you’re actually moving towards financial independence, we think that your investable net worth is probably the most accurate way to measure where you are. Am I on track? Am I ahead of the curve or am I behind the curve?

Bo: And that way you can determine, and this is what I think is so interesting too, we gave you these numbers of where the median American is. And if you’re ahead of that number, maybe that’s good. If you’re behind that number, maybe that’s bad. But you have to assess for yourself. Personal finance is personal. What is the life that I ultimately want to live? How am I going to use my money to achieve the goals that I have? And am I on track to be able to do those things? Kind of to close: we’ve already talked about the Financial Order of Operations. If you’re looking for a system that will actually tell you what to do with your next dollar, this is the instruction manual. But I want to take it even a step further. We gave you at the beginning that to feel comfortable according to Schwab’s survey, $833,000. To feel wealthy, $2.32 million. Go to our website, moneyguy.com/resources. Look at our Wealth Multiplier. Use our time value of money calculator and you can figure out, based upon your age right now, what you would have to save and invest to reach those goals. I think you’ll be shocked, especially for all those in their 20s and 30s. You can do every one of those things if you’ll just take a little bit today to build your great big beautiful tomorrow.

Brian: Love it. So figure out your number. Well, one of the things we get to do is as you figure out your number and you’re trying to figure out how to continue marching along, you’ve got questions and things you want to get some insight on. You want to figure out how you can do money better, because we do believe that there is indeed a better way to do money. It’s why every single Tuesday at 10 a.m. we sit right here so that we can answer your questions and load you up. So if you have a question, if you have something you want us to weigh in on, we have the team out in the wings right now ready to get that in front of us. Make sure you get that in the chat. With that, creative director Rebie, I’m going to throw it over to you.

Rebie: We are actively adding questions to the hopper. So thanks for submitting those and we will get to those very shortly. But first I have a secret announcement for you. You are the first to hear that something is coming. We’ve been sitting on something for a while and we’re not quite ready to share it with everyone. And that’s why we wanted to give early access and some hints leading up to that big announcement to you. So if you want to know what we’ve been cooking up, what’s going on behind the scenes, go to moneyguy.com/earlyaccess and you can get on the list. We’re going to be giving hints, some surprise perks, and ultimately early access to this secret thing that we’ve been working on before anybody else. So that’s mainly all I can say at this time. But what I want you to tell us right now is: if you had to guess, if we’re working on something big, if we have a big announcement coming, what do you think it is? Drop those guesses in the chat or in the Moneyverse. And maybe we’ll even get Bo and Brian to react to them on the show today.

Brian: Can I say something without giving away too much? Because you guys told me to. Here’s the thing: I love what is coming out, because it pays so much homage to the abundance cycle. The whole thing with the abundance cycle is to give so much value, learn, apply, grow, and become the best version of yourself. And I think anyone and everyone out there in the audience, it’s going to be a little shock and awe. You’re going to be like, holy cow, they really did that. As the educator, I feel really good about what’s coming out. So get on the list. First go to moneyguy.com/earlyaccess, and then put your guesses in the chat.

Q&A: Is 18 Months of Emergency Reserves Too Much? (16:28)

Rebie: Let’s jump to a question and we’ll gather up some guesses. Let’s go to question number one from Alyssa right now. She says, “Hi Money Guy. I’m 35, in the messy middle.” Welcome! “My hubby wants to keep 19% of net worth in cash. That’s 18-plus months of an emergency fund. The opportunity cost seems too high. I get wanting to have cash on hand, but not at the expense of investing. 50% of net worth is invested now. What do you think?”

Bo: So it’s difficult to assess without knowing all the variables, all the unique parts of your financial situation. But what I can equip you with is some questions to ask. Because at 35, that’s young. Even being in the messy middle, that’s really young. And so to hear that you have 19% of your total net worth in liquid cash, not really out there working, not really earning for you, and the fact that that represents 18 months of your expenses as an emergency fund, the very first question I would ask your husband if he was sitting in here with us is: why? What’s the reason? And his answer may be, “Well, we know that we have a new car we’re going to have to replace in the next 12 months.” Okay, well, that’s just a sinking fund. That makes sense. Or, “Hey, there’s a renovation on the home that we know we want to do and we need cash.” Okay, that’s justifiable. But if it’s just, “Well, I’m just nervous about the market, nervous about what’s going on,” then I would walk him through: what are emergency funds supposed to do? Because it’s an exercise we work through. If the worst thing happens, so what? And then that happens. So what? And then that happens. So what? And likely if you have a fully funded six-month emergency fund, you can get through the “so what’s” without having a cataclysmic outcome.

Brian: Look, I don’t know your husband’s background. If some of this is just for safety, or what helps him sleep at night, this is one of those things where a little bit of education helps. What feels safe in the short term can actually be risky in the long term. You know, I grew up in a household where my parents’ whole idea of investing was CDs because they just didn’t know how money worked. They had never done the stock market, so it felt kind of like gambling to them. It’s only later when you find out, no, that’s the economy, all this innovation, all the things going on in the world. You’re getting in on that. Instead of trying to beat the market, you’re actually just being the market. But for a lot of people who’ve never done it before, that feels foreign. There needs to be some education and comfort built into that. And that’s one of the reasons for the Financial Order of Operations, because what it’s going to protect you and your husband from is having to think through all of this alone. We cover you in all aspects. Emergency reserves are so important to your husband, and to us as well, that we gave it two steps in the Financial Order of Operations: steps one and four. We want to make sure you’re not leaving money on the table with free money from your employers, and that it sounds like you don’t have problems paying off high interest debt because if you have huge reserves, you’re super disciplined. But I don’t want money left on the table with your Roth IRAs, your health savings accounts, that tax-free growth, and the retirement accounts with your employer plans. It’s really steps seven and eight that you’d look at. If you’re so far ahead of the curve that you want to keep this extra cash for a specific goal at step eight, maybe you can do it. This is why I give people permission: if you’re in your 20s and 30s and you want to pay off a 2.5 to 3% mortgage, I don’t love it. But when you’ve done everything else so well that you’re in step eight, it’s your money. Do what makes you happy because you’ve paid respect to the other parts of the system.

Bo: Really quick exercise that I would do: if you go out to moneyguy.com/resources, check out the Wealth Multiplier. If you and your husband, both about 35, say, “Hey, let’s just think about this. We’re at 18 months. Let’s assume that maybe we need a 12-month emergency reserve because of a super conservative risk tolerance.” If we just took that six months of additional emergency reserves and put it into the market to work for us, do you know that the Wealth Multiplier at 35 is 12.69? Every one of those dollars that we could put to work could turn into $12.69 by the time we retire. And it’s going to be a big number. That’s the opportunity cost you’re walking away from. So I think education would be a great way to start that conversation.

Brian: Is it a tumbler day?

Rebie: It is. Quack quack quack quack. Since we answered your question on the show, you get a tumbler. If you’d like one, just email winner at moneyguy.com.

Brian: By the way, if you’re wondering what that sound is, we have new audience members coming in every week. We even had someone say yesterday, “I accidentally clicked on the link and then I finished the entire episode. Thank you for teaching financial literacy.” Another happy customer. We give out tumblers on Q&A days. And by the way, this thing serves multiple goals, so that’s why I say it’s a transformer. It can change your life.

Bo: Just like I can grow a mustache. You have to buy your own fake mustache, just like Bo does.

Brian: I know you said I’m never mean to Bo. And then you’re like, “Every day.” Literally every single day. But it’s all right though. Look, if I wasn’t picking on you, I didn’t care about you anymore. That’s what my coach used to tell me back in the day when I was learning how to swim. Because I’m a pretty good swimmer.

Bo: If you would have taught me, I bet you would have just thrown me in. “He’ll swim.” Hey, let the record show: when he almost drowned in the ocean, I was positioned to save him. I was sitting behind him so he couldn’t drown me, and I could throw him on my hip and do the whole lifeguard move. He’d have had no problem getting me in. Oh man.

Q&A: What Counts as High Interest Debt? (23:38)

Rebie: All right, we’re going to go to Foolish Parents’ question next. “My wife and I are 27 years old, with a baby arriving in weeks.” Congratulations! “We are working our way through the FOO. What counts as high interest debt? We have a land loan at 7% rate with a balance of $127k. What do you think?”

Bo: All right. Let’s see how good our editing production team can be. We do have a little metric, a slide that we share all the time about what counts as high interest debt. How do I determine that? Let’s start with the easy stuff first. Credit cards: no matter the interest rate, they’re high interest. Even if you have a 0% credit card, we would argue that using a credit card is totally fine, but carrying a credit card balance, no matter the interest rate, is never okay. So credit cards are always high interest debt. Then you step down to something like auto loans. We believe if you’re going to go borrow money for a car, you should fall into the 20/3/8 rule of thumb: 20% down, don’t finance for any more than three years or 36 months, and your payment can’t exceed 8% of your monthly gross income. Well, if you’re inside of that 20/3/8 framework, it’s okay even if we go through a season where car interest rates are higher. So if you’re in your 20s, even if you have an 8 or 9% car loan, which is not ideal, if it’s inside of 20/3/8, we would say that’s okay. And then for student loans, same sort of metrics: if you’re in your 20s and you have student loans below 6%, probably not high interest.

Bo: This one is really interesting though, because it’s a land loan, which I’m assuming is some raw, undeveloped land they’re probably going to build on in the future. That’s going to be part of their home. That’s the context we need. Because there are two paths this could go on. If this is an investment, like you own raw land for investment, I kind of put that into potentially the higher interest category. Because if you look at that column for student loans, I would look at 7% and say that’s pretty high. So that likely, with an asterisk, qualifies as step three.

Brian: However, if this is land that, exactly what Bo said, you purchased with the thought that you were going to build on it and turn it into your primary residence, okay, now we have an issue. Because I look at this as an issue: you could build a house on this land and then refinance into a much lower interest rate, or at least lower than 7%, depending on where markets are at the time that you close on the actual refinanced house. And at that point, I don’t consider this high interest, because it’s just like mortgages. We’re always very careful to say: if you have like a 7.5% mortgage, I don’t necessarily treat that immediately as high interest because you always have the ability to refinance. Markets change constantly. There’s also the deductibility of the interest, which lowers it down to a degree. So there are some features. If this is part of something that’s going to be your primary residence, that gets the asterisk. But if it’s an investment, I would consider this high interest. Let me give you some context from the live chat. Foolish Parents let us know: we plan to build on the land in four to five years. We placed a 15% down payment. The total cost of land and our current unrelated mortgage is 25% of gross income. We make about $150,000. We currently have $200,000 invested. And the land is on a 15-year term.

Bo: You have this other home, this other mortgage that you’re paying. But I imagine once you build on this property and build your new home, you’re probably going to sell your old home. Well, assuming that’s the case, a lot of the equity in that is then going to come over to this new home that you’re building. So given that’s the case, and given the 7% is likely a short-term thing, I don’t know that I would consider that high interest in this situation and begin aggressively paying it down. Because there’s a really good chance when you sell your other house, it will then extinguish this land loan. And it sounds like they have a very healthy income, so they’re hopefully able to manage. I heard that investments are $200,000. Yes, it’s less than ideal that you have a 7% interest rate on this. But I don’t want you not funding a Roth IRA. I don’t want you missing out on 401k contributions because you have this moment-in-time thing where over the next two to four years, as you said, this will be your forever home that you refinance into. So I think it’s just an uncomfortable nuisance that you have to make it through in this season of life.

Brian: Agreed. And I like it when we get more context because if that person were a client, these are the things that I would try to navigate. Instead of giving a blanket rule, I try to look at the situation, triage your financial circumstances, and meet you exactly where you are. Personal finance is very personal.

Rebie: Foolish Parents, if you would like a Money Guy tumbler, just email winner at moneyguy.com and we’d love to send you one. All right, let’s have your reaction to some of these guesses. Something big is coming from Money Guy and Brian don’t give it away. Is it a dating app? The Mutant Mingle?

Brian: Let the record show I was on vacation when this all came out. I come back and this is where the live stream went. Not mad at it, but it is interesting that I go on vacation and this is where you guys take the live stream.

Bo: Maybe it’s Mutant Mingle. Is it HBO’s Mutant Gym launching? Let’s give a brick and mortar.

Brian: Oh man. The third Bay Boys would be very, very excited about that. We do have merch. We actually just ordered some brand new sleeveless hoodies, trucker hats, and tank tops.

Bo: Flex or weird that his group of friends has merch? I want to yell nerd! But then you’re like, can mega chads be nerds? It just seems weird.

Brian: Next guess: a giveaway of $1 million to every person on the stream. You know, if I was trying to run for class president of the high school, that’s the exact type of thing I would say. No accountability. Pizza, no homework, and you get $1 million. How about a new course? Oh, new course. Maybe. Bow swim lessons. Maybe. What if it was Brian teaching swimming given by Brian?

Bo: I have the heart of an educator. How about a new on-screen personality so Brian can start planning for his retirement?

Brian: Whoa. Okay, one: I love the idea of another personality. I do not like the idea of Brian retiring. I’m going to be leaned up against the wall in a glass case. People in the Moneyverse: Brian is never retiring. He’s going to croak and go. Come do studio tours.

Rebie: Last but not least, how about a Money Guy cruise?

Brian: Oh, Brian, no! You’re preaching to my heart. That almost happened. I’ve been trying to convince us of a cruise for a long time. You know, we even joked about what if we showed up and did a stowaway on the Ramsey Solutions cruise? And then we even thought, what if we came up with our own affiliate code and marketed it as the financial mutant takeover? That’d be hilarious. Thank you for all of those guesses. That was fun. Keep them coming, and definitely go to moneyguy.com/earlyaccess if you’re not on the list yet.

Q&A: Is Knowing Your “Why” Required for FOO Step Seven? (33:06)

Rebie: All right. We’re going to do another question and then hop into our segment. The question is from Cosmic Penguin 0001. What’s wild is you guys wonder, do we read comments? Absolutely. Are we in the Moneyverse? Absolutely. Even though you don’t know where we are, we are in there. We pay attention. We love that even though this thing has gotten bigger, it still feels like a family. So when I see that it makes me happy. Cosmic Penguin asks, “Good morning Money Guy team. In the step seven chapter of the book Millionaire Mission, ‘Hold Me Accountable,’ you discuss finding your why. Is knowing your why a requirement for completing step seven? If so, do you find that people’s why still changes after step seven?”

Brian: This is a really important component of really everything we teach. I don’t want people to get stressed out, because that’s not what step seven is supposed to be about. Step seven is actually supposed to be the first step where you’re saying, hey, all these other things were very kind of automatic for the purpose of either protecting you from yourself. That’s what steps one and four are: from emergencies. The free money is just so important. Step three is high interest debt, because you can never have wealth if you’re paying 20% plus to a bank. And then you get really excited about steps five and six because those are tax-favored investments. Step seven is the one where you’re supposed to say, how am I going to use this money? What makes me happy? And what’s my relationship with money and how does the rest of the world connect? So the why component is just to give you the context, the flavor of how you’re supposed to live your best life. But I think a lot of people, if you’ve been good with money and you’re analytical, a lot of you may have never even given thought to that. You’re just like, hey, I think I wanted $1 million since I was in the fourth grade. And the exercise is important because I don’t want you to get overwhelmed with somebody flipping the script and saying, hey, instead of being so goal-oriented, let’s actually start thinking about what makes money the tool that gives us our best life. So if you get there and you’re not really showing your why, that’s okay. It might just take some time to let it start working in your brain, processing behind the scenes. So don’t get overwhelmed if you don’t know your why just because you’ve gotten to step seven.

Bo: Yeah. And I want to give you guys some more on the last part of this question. Do you find that people’s why changes after step seven? I would argue yes. I think about our personal journeys. We were fortunate enough that we both hit step seven a long time ago. And our why when we hit there was very different than our why today. As this show has grown and the firm has grown, the reason why we get to do it and the impact that we’re able to have is so much different than when we first started hitting 25% savings rates. I think it’s okay. So long as you’re going through the exercise of revisiting your why and reassessing your why and rechecking your why, and making sure that the decisions you’re making still align with the why. If the decisions don’t align, then ask the question: why am I doing the things that I’m doing? So long as you’re constantly working through that exercise, I think it’ll help you stay on track. It’s one of the things that my wife and I do at the beginning of every year: we’ll go over the net worth statement, we’ll go over the “what do you do if I die” thing, and then we do all our trip planning. And then we ask the why: why are we saving this money? Why are we building this wealth? Why do we want to do this trip? Why do we want to create these experiences? If you can work through that exercise, it just reminds you and keeps it top of mind while you’re making hard decisions when they’re hard, and why you get to make easy decisions when they’re easy. And it’s okay that it changes through time. It’s supposed to change through time as you mature.

Rebie: Wonderful. Well, Cosmic Penguin 0001, it’s my honor to give you a long-awaited tumbler. So email winner at moneyguy.com if you want to cash in on that.

From the Wings: Headlines — News or Noise? (37:23)

Rebie: All right. Next we are going to move on to our From the Wings segment. This segment is where we get to get Brian and Bo’s reactions to some recent headlines going on in the news right now. And they are going to tell us: is this headline thumbs up, news we should pay attention to for our financial lives? Or thumbs down, it’s noise and it doesn’t really hold any weight? So without further ado, I’m going to read the first headline. “Mortgage rates in the US increase to 6.69%, highest since July 2025.” Is this news or noise?

Brian: Bo says it’s news. Brian says it’s noise. Look, I even think the headline is hilarious. The highest since July 2025. If you’re going to try to hit me with a shock-and-awe stat, it needs to at least be like three years in the past, not 90 days ago. Mortgage rates are constantly evolving and they go into the calculation of affordability and what you should do with your own personal finances. But I don’t know that watching where mortgage rates are on a daily basis is something to fret about in your long-term planning.

Bo: Yeah. I’m going to agree with you. I don’t believe watching it on a daily basis is something you ought to do. But I just think there are so many young people, and I’m going to classify young as people below 40, who really want to get into the homeownership side of things. It’s probably one of the most difficult decisions to make right now in our present day for folks who have not already been on that side of the equation. And so I just think that mortgage rates are super important because that is a financial goal for a lot of people. Not so much that “oh, they’ve hit an all-time high,” but more recognizing: okay, now might not be the right time for me to buy a house because a house isn’t affordable, but I am going to begin saving cash. I’m going to build up that down payment. I’m going to keep my finger on the temperature of mortgage rates, because whatever goes up generally speaking should come down at some point. If mortgage rates get down to six, five and a half, five, maybe that introduces a more favorable time to buy for those folks who are trying to get on that side of the equation. So I think it is newsworthy just because it’s home related and so many people right now want to be in homes.

Brian: I hesitate because I sent something to the whole Money Guy team over the weekend. I came across two or three pieces of information that there are some glimmers of hope with housing. With home prices now, interest rates still stink, but so that facet’s not fixed. Which would y’all be interested in? I know our rent versus buy show did really well. So that makes me think there is an audience of people wanting to know our thought on housing. Let us know in the comments, because I think I could do an update as probably a Q&A. We could give you guys some feedback on what’s going on with first-time home purchases, with the idea being it seems like prices are cooling off a little bit. One indicator. Mortgage rates still stink. We’ll see.

Rebie: Next headline from Investopedia. “Stock market today: major indexes are steady as S&P 500 looks to add to record high.” Both said noise. How come?

Bo: If you think it’s high now, what do you see ten years from now? Always be buying, baby.

Brian: I think this headline cracks me up because it’s like they need a little shock and awe. But things are the same as they were last week. So it’s steady, but they are at all-time highs, so they were like, let’s put some sensation with our boring headline. Look, all-time highs just happen. Markets go up 80% of the time on an annual basis, 20% they’re down. So you get two recessions typically through a decade. As the economy is expanding and growing through innovation, you’re going to see more and more all-time highs. I remember we had a conversation probably right post-2008 where we were telling a client, hey, if you think the Dow had gone down to below 10,000, I said, you realize there will be a time when the Dow crosses 100,000. He’s like, no way. And I was like, just give it enough time. It’ll happen in your lifetime.

Rebie: Next headline from MarketWatch: “Americans are spending plenty, but they’re saving much less.”

Brian: Bo says news. Oh, Brian switched to news. Well, he looked at mine. He cheated. Let me tell you something that’s newsworthy: Americans are consumers. They have been for a long time. We thought when the pandemic happened and savings rates shot up, we were like, oh my goodness, people have woken up. They’re going to change their behavior. No, it’s just because they were trapped inside. They couldn’t go spend. As soon as we got out of the pandemic, as soon as stuff opened back up, people started spending money again and we saw savings rates plummet. We have a real deferred gratification, saving and building for the future problem in this country. So I think it is newsworthy. And the more we can talk about it, the more we can tell people: hey, the earlier you start, the earlier you figure this out, the less hard you have to work at it. It’s really easy if you start early. But maybe you didn’t start early. Maybe you’re in your 30s, your 40s, even your 50s. Even though you have not done the things up to this point that you wish you would have done, the second best time to change your behavior, if you can’t go back in time, is to change it today. Start living on less than you make today. Start building for the future today. Start saving for tomorrow today, and your future self will thank you. So many Americans ignore it, don’t pay attention to it, and let our feeds and all the stuff we’re looking at pull the dollars out of our back pocket. And that’s not the way it should be. There’s a better way to do money. We live in a consumption society where most industries are set up to help you spend all of your money. And that’s why our counterculture point here at the Money Guy Show is that we actually try to help you be that financial mutant who actually builds and grows versus just consumes and spends.

Rebie: There’s video for this last headline. “Bear gets trapped inside SUV, honks horn all night.”

Brian: Oh, talk about a rude awakening. A bear somehow broke into a car and got locked inside. A Colorado man did what any of us would do. Wrong. He used a long rope to free the animal.

Bo: What? Wow. That bear in the car. I heard honking all night. I thought it was a neighbor. And this guy just yanked the door open with a rope from far away and the bear took off into the woods. For those listening on podcast, a man is like putting a string around the door handle and running far back. Was the door locked? Or was this bear like Yogi Bear and walked up and opened the door himself? Because there were no broken windows.

Brian: Bears know how to do that kind of stuff because they’ve been around people. They can get in but they can’t get back out. What would you have done?

Bo: I don’t know, because I mean, it’s not like I could just tell my car to open doors remotely. Actually, I could open doors on mine with my mobile app. Could you imagine how heartbroken Brian would be if there was a bear in his Tesla? I was going to say it would just give it a bear ride. Put it on pet mode, cool it down so it was comfortable, and then give it a ride.

Brian: I like the idea that the guy went and got the rope. But I think I would have called a professional. Like, hey, do you think local animal services is set up to get a bear out of a car? I just think they’re more prepared for it than I am. It’s more than my training, that’s for sure.

Bo: So I say it’s news, by the way. Yeah, it’s news. Clearly it got out. I love it. I love the pictures, the videos, all the things that let us have an extra angle. Somebody said, “Oh, it’s going to be fun to clean that car.” I don’t even want to think about the bear scat that’s probably in there. That’s a different type of scat than singing scat.

Brian: You guys got that for free. You’re welcome.

Q&A: Fully Subsidized Health Plan — Should I Still Choose the High Deductible Plan? (48:424)

Rebie: All right, let’s go back to the hopper and pull some more financial questions. This one’s from Phil V5. It says, “I have a great employer-sponsored health plan where all the plans take nothing out of my paycheck.” Whoa. “Should I still do the high deductible plan for the HSA eligibility, and take the Cadillac plan as the most financially sound option?”

Bo: We can’t just come out and say no. We don’t know all the variables. But it seems like the best solution for you would be to take the fully subsidized Cadillac insurance. Because even if you were to do the high deductible plan and you were able to contribute to an HSA and get a tax deduction for the contribution, there’s a good chance that tax deduction is not going to be more than the premium that you’d be paying to be on the high deductible plan if you have a fully subsidized option. So it seems likely that the fully subsidized option is going to be the best. But you still need to do the math. You still got to do the math just to make sure, but I’d be surprised if that wasn’t the case.

Brian: Yeah, and look, a lot of them, I don’t know how big your company is, but a lot of companies, it’s an issue for most small businesses. I’ll just go ahead and confess it to you: it’s one of the most expensive things we do for our employees, and they hate us for it because everybody complains about their health insurance. It doesn’t matter how much money we sling at this thing. Do you think they hate us? Well, I mean, because here’s the thing: it’s every year. I won’t even say the provider’s name, but it’s like, is anybody shocked it goes up 18 to 22%? It seems like every year that’s what we deal with in health insurance. So you can imagine it’s just hard to keep up when things are going up that much. But it is one of those things where a lot of small businesses want to do the right thing and give you health insurance. But what they might have done is just heard, hey, let’s add a health savings account eligible high deductible plan. But they still, because of what they did last year, just have all the money going into the Cadillac plan. You ought to ask your employer: hey, how much are you putting into that Cadillac plan per employee? And has anybody actually done a benefits analysis? Especially if you have a young workforce: if all of your employees are in their 20s and 30s, maybe the way you did it last year isn’t the best benefit for the employees. We ought to look at, hey, should this be a set amount per individual or family? And that way you get true choice in the plan. Because if it was just done by what was done last year or five years ago or seven years ago, and they’ve added the high deductible but haven’t put the benefits in of why the high deductible was supposed to be there in the first place, for young people who don’t have a lot of medical need, this allows you to get a saving in the premium but also to build assets for the future. You’re really not honoring all of that if you just keep loading up the Cadillac plan. So there might be a discussion with your employer on what the why is, while one is heavily subsidized and the other one gives you the HSA benefit but not the premium savings.

Rebie: I love that. That’s great. Well, Phil V5, you get a tumbler if you’d like one. Email winner at moneyguy.com since we answered your question here on the show.

Brian: Rebie, did you happen to see what kind of car it was that the bear was in from the story?

Rebie: It was either a Toyota or a Subaru.

Bo: Are you kidding me right now? Did you come up with that or did somebody put that in the comments?

Rebie: That’s where my mind went when I was trying to come up with a third option. Subaru is pretty good, but it was a Toyota. Yogi. A Toyota Yogi. Something to that one.

Brian: That was almost as good as my sketch. Extra bonus content. Justin still hasn’t forgiven us. He’s salty because we made fun of his hilarious react video. By the way, if you’ve not watched yesterday’s react video, you should totally watch that after. They put some riddles and traps in there and we fell right into them. They even put pine straw in it and we fell right into it. It was a full mutiny from the content team. Instead of financial mutants, we have financial mutinies. Go watch that video, especially around the six-minute mark. You’ll see. Nothing is sacred here.

Rebie: If you want to watch that, it’s called “Financial Advisors React to Hilarious Money Clips.” Go check that out. It’s got Brian and Bo and George Campbell on the thumbnail. That’s how you know you’re in the right place.

Q&A: How Does a Pension Affect Stock and Bond Allocation? (54:24)

Rebie: All right. Let’s do another question from Huskers2216. “Hey Money Guy. How does one spouse’s pension that will replace 33% of household living expenses in retirement affect the stock and bond glide path strategy nearing retirement? It has a max of 1% cost of living adjustment.”

Bo: Yeah, this is a more specific question to a general question that we get often: hey, if I have pensions, if I have guaranteed income, how should I think about portfolio allocation? Would it be appropriate? Would it make sense for me to think about my pension income as sort of a pseudo fixed income or risk-reduced part of my portfolio, so that with my liquid portfolio I could be more aggressive? Could I have a higher equity allocation than I would otherwise, given I have this guaranteed source of income? How would you answer that? What things would you tell them to look at to assess that?

Brian: Maybe it depends, because I do have specific clients where they have enough pension income that it offsets all their needs. So we started in there. They have children and grandchildren that they want to leave a legacy for. So it did make sense to think more long term than even what their life would be, because the glide path is, if somebody’s in their 70s, you might be thinking, hey, this is going to be a super conservative portfolio to make sure the money’s there and we don’t get into risk capacity issues. But if all of a sudden they don’t need the money and it’s more about what can we grow this for their charities or loved ones, that comes into play. Now, the question here, this isn’t covering all of it. This is only 33%. So I would want to build this as part of a bigger plan to see how much that moves the needle.

Bo: But potentially this could allow you to dial down some of the risk-off asset class. Only two things I would add to that: I’d want to know a little bit about the pension. Who’s the sponsoring company? How well-funded is the pension? Is this a government pension or is this like a Pension Benefit Guaranty Corporation-backed pension? And is your benefit, how far above the minimum guaranteed benefit is your benefit? Because with a 1% cost of living adjustment, odds are if we see historic average inflation somewhere around 3 to 4%, the value of your pension will become less and less through time because it’s not going to keep up with that. But then you’ll likely have Social Security and other guaranteed income sources. So you want to kind of measure all of those things to determine: okay, for me personally, how should this affect my allocation? This is a great time when a lot of folks want to take the relationship to the next level. I’m making big decisions around allocation for the next 30, 40, 50 years. How should I think about this? What consideration should I put into this? Because two different people with two different pensions and two different portfolios of the same size might have two different solutions that make sense for each one of them.

Rebie: Great. Huskers 2216, you get a tumbler. Email winner at moneyguy.com to cash in on that. Let’s do one more.

Q&A: Should I Take Subsidized Student Loans and Invest the Cash? (57:30)

Rebie: Lucky Monkey has a question for you. “Hi Money Guy team. I have the ability to cash flow college, but also have subsidized student loans available. Should I take the loans and put the loan in a savings account to get the interest, or just cash flow?”

Bo: Let’s see what he’s going to say.

Brian: Here’s what my mind went to immediately. I need to know the numbers. “I have the ability to cash flow college” — does that mean your college is $2,000 to $3,000 a semester and you can cash flow that? Or does “I have the ability to cash flow college” mean college is $40,000 a semester? The scale and scope of those are very different. I’d want to know that. And then I want to know: what degree are you pursuing and what does the vocation look like after that? Are you going to have the ability, if you do pay cash, to then generate an income where you can replace that money you walked away from over the last three to four years? I’d want to do that assessment to figure out what’s the best use of those funds. And I do think in this case size matters. The biggest question with education, because this is the one that I get the most ticked off about, is the lie that has been told to young people: “Just go to college and it’ll all work out.” And hence now we’ve been left with an entire generation where the most noble thing in the world, bettering yourself through education, has been distorted in a way that now it is entrapping people with huge debt loads. So before I even do this, exactly what Bo said, I want to know: what is your degree going to be in and what are you going to do afterwards? Because before we even start talking about student debt and cash flow, I want to know that you’re not going to leave college with more debt than what you can make in your first year out of school. How often have we had people on Making a Millionaire who got a degree in something, and their debt was like a factor of three over what they were going to make? That is a trap from the get-go. So put that on the shelf first. Answer that. Okay, what are the ground rules of education? What am I going to make at the end of this? And then after that, it becomes more of a scale question, exactly what Bo is talking about.

Rebie: Good news: we got some context from the chat. Lucky Monkey says, “College is $8,000 per semester, but I have grants covering $5,000. So for me it’d be $3,000 in loans. I’m going into electrical engineering.”

Brian: This is awesome. What do you think? Should you take out loans or pay cash?

Bo: I mean, at $3,000. But see, this is where I need a little additional context, because especially with electrical engineering, there are probably going to be co-op opportunities. There are going to be other things where, if you can be funding a Roth IRA every one of these years, I don’t want you to forego doing that. But if you are co-oping and you’re going to be able to pay $3,000 off, and then go tell yourself, hey, I’m also going to work, I’d love for you to fund a Roth IRA and pay this $3,000 off every year you’re in college, and I think you’ll be okay in life.

Brian: I love that answer too. That’s great. Well, Good Lucky Monkey, thanks for the question. If you’d like a Money Guy tumbler, email winner at moneyguy.com. By the way, electrical engineer with grants and all the other stuff, we’re going to be doing this show for the next 15, 20 years. Remember who planted the seed. Who was planting all the apple seeds? Johnny. Johnny Appleseed. Bo and Brian Appleseed. Money Guy Appleseed, Bo and Brian. That’s much better. Go Lucky Monkey, email winner at moneyguy.com if you would like your very own Money Guy tumbler as a thank you for asking a question.

Closing and Early Access Announcement (1:01:45)

Rebie: Remember, go to moneyguy.com/earlyaccess. Get on the list. We’re going to be having a lot of fun with some hints, some perks, some early access over the next undetermined amount of time. Well, I’ve determined it, but you don’t know it yet. But you will if you get on the list. So definitely do that. I’m really excited to share what’s coming and what we’ve been working on that we’ve made especially for you guys.

Brian: Thanks so much for joining us. Remember, value is what we’re trying to load you up with. It’s the abundance cycle fulfilled. You get so much value, you learn these concepts, you apply these concepts, you reach a level of success. And that’s why if you haven’t gone to moneyguy.com/resources, we literally are creating a library for you to be the better version of yourself. Actually, a financial mutant. I’m your host Brian, joined by Mr. Bo. Money Guy team out.