Best and Worst States for Saving a Down Payment on a Home

Introduction – Where Is It Easiest to Buy a Home? (0:00)

Brian: Have you ever been curious on which states it’s easiest to get into a new home? We’re going to cover that today.

Bo: Brian, I am so excited to talk about this because we know that home ownership is difficult and it’s always been difficult, but over these past couple years, it’s gotten even a little more difficult. And there is some really interesting research and some really interesting data that comes out. But in my opinion, oftentimes the data that comes out and the research that we see is more discouraging than encouraging. And I think that it makes sense that we ought to dive into the numbers to figure out where the truth really lies.

Brian: Well, and that’s what I was going to say is when we went over this in the show meeting, I was like, look, life is already hard. And when research comes out like this and starts getting press, I’m like, somebody needs to go into the numbers to actually give you the nuts and bolts so you can figure out if this is something, is it the shock stat that we’re about to cover, or is there more to it? And that’s what I like is that we’re going to give you the shock and awe because this is what the press does, but then we’re going to actually pull back the numbers. So hang in there with us. Don’t just watch this and go, I’m tired of all the negativity. I’m tired of all the bad stuff. We’re going to show you how even in a bad community or bad cost of living where it’s hard to get your foot in the door of home ownership through our money guy methods and getting into the methodology, we can cut the years off of this by literally decades. So with that, we can carry on.



The Shocking Numbers from Consumer Affairs (1:33)

Bo: As we’re talking about this, there was a recent report from Consumer Affairs that ranked all 50 states and it ranked them by how long it would take for you to save up a 10% down payment for the median-priced home in that state. So, we’re going to have a median priced home and we want to see what the length of time it takes for us to save a 10% down payment. And so, a lot of people are wondering, okay, well, where does my state fall in? And so we thought we would show you the three states that they ranked as the fastest to be able to achieve that 10% down payment and then the three states that were the slowest. And I thought it was interesting where it was fastest coming in in the number three spot. According to this research by Consumer Affairs was Texas. Based on their methodology, which we’re going to dive into in a moment, it would take you about 10 years and 3 months to save up 10% for a down payment for the median home price. If we just pause there for a moment, Brian, and you’re thinking about buying a house or getting into a home, how does it make you feel to hear that it might take 10 years? And this is supposed to be the fastest.

Brian: This is very discouraging. But this is also I mean we’ve also seen the stat that’s come out that the new age of home ownership for a while it was early 30s and then it went to 37. That’s right. And then most recently it’s even crossed over into 40. It’s already ridiculous. And then you see stuff like this where it says it’s going to take you 10 years, 3 months, and this is the fastest. I would be if I was a young person be super discouraged. But we want to tell you that’s why there’s a better way to do money. Just hang in there with us, and we’ll show you what we’re talking about.

Bo: So, Texas came into the number three spot. The number two spot was Ohio. And again, according to their methodology, it would take you nine years and 11 months to be able to save up for a down payment for a median-priced home in Ohio. And then number one, the fastest state in terms of being able to save up for a down payment is Iowa. If you want to purchase a home in Iowa, it would take you about eight years and nine months. So, we’re thinking about the three fastest are anywhere from eight years and nine months to 10 years and three months. Again, I don’t feel like that’s encouraging. I feel like that’s discouraging. That’s a hard pill to swallow.

Brian: Before we open the curtain, though, let’s go ahead and give them the real shock and awe on this and let’s show the slowest.

Bo: So, the slowest states in terms of longest time period it takes, number 48, technically, New York, according to their methodology to save a 10% down payment of the median home price in New York, 23 years and two months to do that. The 49th spot, Montana, 24 years and five months. And again, I don’t think anyone’s going to be incredibly surprised by this. The 50th state, the slowest longest time frame it takes to save for a home is in California. According to their methodology, 25 years and two months to be able to save up for a down payment for a home in California.

Brian: So, congratulations. You sign up for Medicare and Social Security as you get your first mortgage. Now I want you now look we know even in their methodology and we’re going to get into this in a minute but the best and worst if you compared this there is a three-fold difference. I mean but I even think I’m not even like it’s not like I look at Iowa and go 8 years 9 months that’s still ridiculous. That doesn’t get me jazzed up whatsoever. So Bo, why don’t you walk them through kind of how did Consumer Affairs even come up with this calculation?

Breaking Down the Methodology (5:02)

Bo: Yeah, let’s look at their methodology and compare it to what we would consider a more reasonable methodology. And what they looked at is, okay, total down payment and savings rate. Now, the total down payment was not that difficult to discern. They said, we want to look at the median home price, and we’re just going to assume 10% of that. So, that’s not a difficult thing. But when you determine savings rate and how quickly someone’s going to be able to save and accumulate, this becomes a little bit more nuanced, and this is the way that Consumer Affairs approached this. They said, “Okay, for each state, we’re going to start with the median household income for that particular state and then we’re going to take out the typical tax burden in that state and then we’re going to take out the average annual living expenses for things like food, clothing, gasoline, housing, utilities, health care, transportation, and insurance.” So if we think about California as an example, the median household income in California right now is a little over $100,000. They then take out the tax burden for Californians of about $27,000 on average, and they pull out the essential expenditures, and according to them in California, that’s just under $40,000. So if you take that, you come up with this number that’s about $33,000 of discretionary income. That’s the number they define. Now, this is what Consumer Affairs said. If you want to save for a house and you want to be able to save for a down payment, all that you would be able to save is 10%. Well, they just said that’s what’s reasonable. 10% of the discretionary income that you have to be able to attack that goal. Now, Brian, when you’re saving for a house or when you have like a big goal that you’re saving for, do you feel like that’s the way that you save, or would you save a little more aggressively for a goal like that?

Brian: No. I mean, it’s a lot of people get very excited. Housing is obviously one of those goals when you want to buy your first home, set down roots. People go pretty hog wild with it. They kind of go ham on trying to save. I must be hungry based on the methodology. I’m hungry. And so, okay.

Bo: So, let’s look at how this played out. So, again, in California, if we know the median home sales price in California right now is $832,000. And they said that you need a 10% down payment. That means you would need to save up $83,240, but you’re only saving 10% of the discretionary flow. So about $3,300 a year to save. Well, it’s no wonder what they came up with is that in order to get to 10%, in order to get to $83,000, it would take you 25 years and two months to be able to do that. I just believe, Brian, there’s a better way to attack that.

The Money Guy Way – 3/5/25 Rule (8:00)

Brian: This is where I can wake up and get excited and tell you guys this is where we’re going to blow the doors off this. Even using their numbers because I like the data, the research that they were able to provide is now going to allow us to apply the money guy way and show you that this isn’t as dire as they’ve made it out to be. And if everybody you’re aware, if you’ve listened to our content, we have the 3/5/25, which is you’re going to put down on your first home, not the upgraded house, not when you get in the bigger home and the bigger upgrades, but the first home that you’ve ever bought for yourself, we’re okay if that down payment is 3%. That’s right. And you know why? It’s because we have a no hypocrisy policy. Because if I didn’t put down 20% on my first home, why should you? It’s, you know, rules are for everybody, not just rules for thee, not for me. I don’t like that stuff. So that’s why we are very realistic with this. 3% down payment is reasonable on that first home purchase. Also, we want you to be in this home for at least five to seven years at a minimum because real estate has a lot of transaction costs. Plus, you don’t know if you’re getting into a great time, bad time from price fluctuations. Time will be your friend that smooths that out. And then we also want to keep your monthly cost below 25% of your gross income. I get it. If you’re in a high-cost-of-living area like New York, like California, you’re going to say that is wacko. But I just don’t want you to be house-rich life-poor. And also, if you live in one of those high cost of living states, more than likely, you don’t have a car payment. So, you might have another 8% you could work with the rules on because we have 20/3/8 for cars as well. And if you have public transportation, you might be able to work California, you have to just work within the rules here. I’m trying to help you here.

Bo: And so we think that 3/5/25 is a better way to buy a house. If you want to play with some numbers if you want a really helpful tool, we would encourage you go to moneyguy.com/resources and check out our home buying calculator and you can actually put your numbers in here to help you determine how much of a house could you afford, how much of a mortgage could you afford to make sure, like Brian said, you don’t become house rich and life poor. So, if we just take this 3/5/25 idea and assume that for folks that are trying to get into a home, they want to get into their first home. So, we have to save a 3% down payment and we apply a similar methodology. Watch how the numbers change. We’re going to buy the same house in California, $832,000, but instead of doing the 10% down payment, now we’re going to do a 3% down payment or just under $25,000. Even if we don’t impact or change the savings rate, we still use their methodology on saving 10% of your discretionary cash flow, $3,300 a year. Now, in order to save for a home in California, it would only take you 7 years and 6 months. That is a far cry from the 25 years that their methodology and remember this is with their savings rate. I’m telling you, you’re going to do more than 10% when you really have that house on the brain. I just think that so we’ve already cut this down to a third of what it was, but it’s even a faster way. And so that was for the longest house. What about in one of the faster states like in Iowa? So again, same methodology. In Iowa, the median home sales price right now is about $247,000. If we’re going to save up for a 3% down payment, we need to save about $7,400. Based on the median income and median tax burden and median living expense spend, the savings rate that we could count on if we’re going to save 10% of discretionary cash flow in Iowa would be about $2,800 a year. So, if I got to get to $7,400 and I can save $2,800 a year, it would only take me about 2 years and 7 months to save for a house in Iowa. This again is much more palatable, much more reasonable, much more in line with people that want to be homeowners actually being able to achieve that goal in a reasonable time frame. This makes me feel more excited. This makes me feel more encouraged.

Brian: Well, yeah, I think about it. I mean, $7,000 down payment, you can do that even faster than two years, seven months if you put your mind to it.

Key Takeaways (12:05)

Brian: So, there’s some key takeaways. First thing, we all should move to corn country and move to Iowa.

Bo: That’s it. Obviously, that’s the big takeaway here. No, it’s not the takeaway, but where you end up moving matters. So, when you’re choosing where you’re going to live, when you’re choosing where you’re going to settle, make sure you consider the cost of living. If you’re looking in a major metropolitan area, home prices are likely going to be higher than if I go a little bit further away, if I go a little bit out in the suburbs in a different area. Make sure that factors into your calculus when you’re making those decisions.

Brian: Yeah. And I just want to make sure we’re the glass half full because I feel like there’s so much content out there that is just dumping on the younger generations, telling them how everything is impossible. And look, it is going to be expensive. We don’t stick our heads in the sand about affordability, but I just think that there is a better way. And we try to give you all the tools, all the resources. It’s going to be hard, but definitely not impossible. So don’t let somebody just rain on your parade and tell you how bad everything is because for all the bad, there is still a lot of positives as well. I mean, we just came through a financial year where the markets made great money. Hopefully, people are seeing some type of opportunity with your careers and getting better money skills by watching our content. We’re here to be with you. And I think that leads to the third point. You don’t have to be average.

Bo: That’s right. I always get mad, you know, because look, I’m of the age now in my 50s. Whenever they show me stats, I’m like, “No, no, no. I’m focusing on my health. I’m focusing on I don’t give me what a typical average 50-year-old does because I’m not average on that stuff. I don’t want you to be average on the way you look at your finances either. I want you to be a financial mutant and do things in a better way.

Bo: And one of the ways that we’re going to help you be a financial mutant. We have all kinds of tools for you to take advantage of. Again, if you’ve not done this, go to moneyguy.com/resources. We have a whole home buying checklist. If you’re trying to decide, is home ownership right for me? Is now the right time? What are the things I should be thinking about? We have an entire checklist out there for you. Moneyguy.com/resources. Because we really do believe that there is a better way to do money. And we think that you don’t have to be average. You can be a financial mutant. And if you can be a financial mutant, the decisions that you make today can change what your future life looks like. And we’re so committed to that, Brian, that we do this show and we put together these episodes and we sit down with guests, but we also every single Tuesday at 10 a.m. we like to show up right here and answer your questions because we care about what are the things that matter to you. So, if you have a question that you want us to weigh in on, if you have something you want to get our take on, make sure you get it in the chat right now. We have the team out in the wings, an extended, enlarged team as of this morning out in the wings collecting your questions. So, get them in there and we will load you up. With that, creative director Rebie, I’m going to throw it over to you.

Money Guy Questionnaire Announcement (15:02)

Rebie: Yes. Can’t wait to get to the questions, but I wanted to start with a big thank you to everybody who comments, who talks to us in the chat, who lets us know what you think, where you are, how these topics are hitting you. I love hearing from you all. But here’s the thing. There’s a lot of social media platforms. The chat kind of comes and goes every Tuesday, right? And we see it. But I want to know your opinion in a more formal way where we are sure to see it and listen to it and really keep that data as we move into 2026 and think about what we want to talk about, what financial problems you’re having, what financial solutions we can discuss. So, I am very excited to tell you that we have launched the Money Guy questionnaire. It is live right now at moneyguy.com. Just go to moneyguy.com/questionnaire and it just takes a few minutes to fill out. We want to know your opinion truly on all of our dream ideas on topic ideas. We want to know what you want to see from Money Guy. So, I’m going to throw some stuff out, okay? If you’ve ever heard us talk about merch. If you’ve ever said we should do a live event. If you like our free resources and calculators and want us to do more. I’m just not going to step all over. But also like free resources, calculators, if you like that we do those and make more of those or if you like when we do deeper dives on topics, you want to take this questionnaire and I want you to take this questionnaire. I want to know what you think. So while I can’t promise every single thing will be implemented, every single thing will come to fruition or even maybe it will take a little more time. I don’t know all those details yet. But first, the first step is I want to formally know what you want. So, go to moneyguy.com/questionnaire and take the poll. Give us your opinion. We really want to know what you think. And I cannot wait to see the results. Thank you for being part of the Money Guy family. And this is really just another opportunity for us to come together as a community and listen to you and hopefully just keep making your financial life just a little bit easier every single day.

20 Year Anniversary Celebration (17:25)

Brian: You want to know why I was so quiet? Why? I was sitting here thinking I was like, “Holy cow, this is why Rebie’s so good at her job.” Is because Bo and I we’re two knuckleheads. Oh, yeah. I mean, I’ve been doing this show for 20 years now. I mean, can you believe we can say that? And did you know it’s as of today? I know. That’s what I mean. 20 year anniversary is today. Thanks for We didn’t do We did. I know. Y’all let this sneak up on you. We had 20 years to prepare. Well, but here’s the thing. We’re going to put that in the corner because I am so pleased because when I saw the questionnaire questions in the content meeting this morning, I was like, bravo. I mean, because this is it’s all the things that we should have been asking for years. And I just please I would ask you go in there and participate on this. We need to hear what your voice is just like y’all helped us. What’s so funny is it’s interesting to me how we come up with ideas and I think I can see how our brain works and the fact that we start you know I was inspired always by Millionaire Next Door and some of the other surveys out there in the marketplace and I loved when we got started surveying our clients and then we’ve expanded that to surveying our listeners to find out you know how you handle your money. It’s crazy that we haven’t done the same thing with the questionnaire to figure out what’s things that you guys even more feedback into the content creation into the merchandise into the other things that we’re considering as we’re shaping the direction of where the Money Guy show goes for the next 20 years. That’s right. I’m saying it for the next 20 years. So please go out there. I’ll give the website again. It’s moneyguy.com/questionnaire. Also if you just want to go to moneyguy.com because I don’t spell anything good. I was about to say I mean if you ask me if you cut this off I couldn’t spell questionnaire because there’s two n’s there. I know there’s two something. I don’t know if it’s I would screw that up. So just go to moneyguy.com and I think we have a banner right now that will help you guide you right into the question will lead you to that questionnaire.

Rebie: Yep. And if you’re on your email list, you probably might have gotten an email about this yesterday. So also get on our email list so you can know about these things. Be the first to know.

Brian: So did it really sneak up on you? It was 20 years.

Rebie: I knew it was in January, but I just forgot it was today. And I feel terrible now. So, it’s all right. I’m going to cry later. You Why didn’t you say anything then? Should have been like, Rebie, what are we doing? We didn’t scheme or do anything.

Brian: I even You know what I’ve been impressed by is there’s people in the comment section. I read the comment section if you’re curious. And somebody even noticed that somebody had gone and backed into these guys are about to be at the 20 year anniversary. Yep. I love it. Wow. Amazing.

Rebie: Well, to celebrate, you want to do some questions?

Brian: Yeah, let’s do some questions. Happy birthday to the Money Guy Show. Happy birthday.

Bo: Everybody is really excited about 70-year-old Brian cranking out some shows, right? That’s the math that everybody just did. Let’s go. I’m here for it. It’s going to be fun.

Brian: Hey, you know what? If we do this another 20 years, I still won’t be at required minimum distribution age. That’s true. That’s right. See, there’s positives. Perspective.

Live Q&A – Net Worth Statements and Rental Properties (20:15)

Rebie: All right, we’ve got a question from GymMan44. It says, “When doing your annual net worth statement, do you include the increase in value of rental properties?” I thought this would be a great question to ask because it is early January and is that most wonderful time of the year of doing your net worth statement. So, what do you think?

Brian: By the way, because I know you’ll give real answers, when I heard Jim Man, I heard Jim M. No, and then when I see it up on the screen, I’m like, this is Bo’s people right here. If you know, you know. So, go ahead. I’ll let GymRat talk to each other.

Bo: The answer is personal finance is incredibly personal. So, can you increase the value of your rentals on your net worth statement? Can you mark them to market and can you use an estimated value? Absolutely. That’s something that you certainly can do. And even considering that they are investment properties, I’m not even going to fight you on that. I’m not even going to give you because, you know, we talk all the time about how we value our primary residences and we value them at original cost. We don’t inflate them up unless we end up selling them so that the net worth statement stays conservative. Rental property is a little bit different. So, you get to choose if you want to do that. Now, here’s one thing I do because Brian and I, we own a couple different commercial properties. Rather than marking them up to value, I want to be careful letting my net worth statement move because of factors that are too far outside of my control. What I want to see on my net worth statement is how do the numbers change based on the things that I directly control, based on my savings rate, based on the way my investments are growing, based on the way that I’m paying down debt, those types of things. Just because I happen to be in a really hot real estate market and something might change and might go up in value, I want to be careful getting too excited about increasing those real estate values, especially if I have no desire in the near term to turn those into liquid capital. If I know that I have real estate properties going to be long-term properties, I likely care more about the income that they’re generating than the capital appreciation that might show up on my net worth statement. So, if it were me, I would probably list them at cost plus improvements, but I’m not going to fight you if you want to do them at market value.

Brian: Yeah. I think it look for investment property, it’s perfectly fine if you want to do market value. Here’s what I would use as the decision matrix for myself is the reason we get so hard on personal residences is because it’s just hard to unless you have to you have to sleep lay your head down somewhere. So, we just don’t want you to have this false sense that you have all this money or net worth behind you when it’s all just tied into your home net worth because like Bo, you even talked about the house that you bought in 2020. Yeah, we built it in 2020. It’s already doubled. So, I mean, if we just counted that, what did you do to create that? I mean, and could you use it? Because if you moved here in Williamson County, you would more than likely have to still come out of pocket. You’d have to come way out of pocket. Your interest rate would probably be twice the rate of what you’re currently under. So maybe it’s just that there’s a lot of stuff there. It would not be a positive for you to sell this. You’d have to go move to Iowa to actually make this work for you, which is what we learned from the content earlier today. And that’s just not the reality of the world. Now with investment property, I’m willing to give you a little more grace. So here’s the thing you need to ask yourself is how are you looking at your investment property? And if you think you are going to use this as part of your retirement and you’re also being honest with yourself that this is going to be liquid because real estate’s not liquid but some markets are more liquid than others and if you think that hey this market I would be able to move this asset and yes I’m going to use this asset even including the appreciation in my retirement plan and you know so there’s a lot of assumptions going into this by all means I think you could because you’ve now leaned on the fact that this is going to be usable assets for my future and built into the plan. What I don’t like is when people use their primary residence in the net worth, and it’s an artificial comfort because you’re going to live in that house and if you had to go reset where you lived, it’s just so hard with interest rates and without moving and changing school zones and everything else. And I think a lot of people are fibbing to themselves if they’re not going with that more conservative cost plus improvements to keep you honest.

Rebie: Well, GymMan44, I hope that helps as you do your annual net worth statement. And you know what? Today’s a day of celebration. I’m going to go off script and call today Tumbler day. Oh, look. I think this is three weeks in a row. Rebie’s feeling good. It’s two in a row. Holy. I love Tumbler birthday day. Tumbler birthday. We’re giving out birthday presents for our birthday. I like that. I like that. Better to give than to receive. Jim Man44. If you would like a Money Guy Tumbler, just email [email protected].

Backdoor Roth Questions (25:35)

Bo: Can we do a quick question? I’m just curious about our financial mutants. Can we do a quick poll of who has already completed their net worth statement? Like, can we ask our audience? Yeah. Can we do that? Can we content team in the chat? See if we can get those those knobs. We’ll check back. Yeah. I had to confess because I didn’t even This microphone just attacked me. Y’all see that?

Brian: I didn’t even get into town until Saturday night. So I didn’t even get to work on my net worth until yesterday and I was twitching about it a little bit, but you got to it. I got to it. I didn’t get it completed because the problem I realized and Bo’s been so busy that to get access to see what my wife’s assets are worth in the investment programs. I need Bo’s help because I don’t have all her user ID and passwords. I do, but then it sends a message to her phone and it’s just magical. It’s a mess. So Bo is part of my net worth process and I haven’t been able to go get what her 401k and Roth are worth. It’s so funny. These guys even like each other off air, but you’re seeing it, right? Like Bo is a crucial part of the process, but it is proof right there. Right there. All right. You know that you’re a delay of why I couldn’t complete all the liquid assets. I love that all my stuff though.

Rebie: Let’s let folks answer that have you done your net worth statement yet question in the chat and we’ll do another question and come back to it. Liam C is up next. It says, “If Roth assets are so amazing, why not just go straight for backdoor Roth or mega backdoor Roth conversions all the time? Are there any downsides?”

Bo: Well, okay, you asked in the testing world, we call this a trick question, right? Should you take advantage of backdoor Roths and should you take advantage of mega backdoor Roths? For those of you that don’t know, backdoor Roths are where you make too much money. You can’t put money directly into a Roth IRA. So, you have to fund a traditional IRA. Do not take the deduction. You convert it to Roth. It’s called a backdoor. Mega backdoor is where you put money into the after-tax portion of your 401k and you convert those after tax contributions to Roth. It’s a completely tax-free conversion because you’ve already paid tax on the money. Do we love those? And should you do those whenever you can? Most likely, yes. Because what happens when you’re following Brian, hold the thing up for me. When you’re following the financial order of operations, and you’re in the place where you’re having to begin to make those kinds of decisions, I need to do backdoors because I can’t do direct and I need to fund after tax. It likely means that you’ve already exhausted all of your pre-tax opportunities. You’ve likely already done your full salary deferral, the $24,500 into your pre-tax 401k. So, you’ve done step six and now that you’ve done that, you are looking at the other areas where you can still get some tax incentivized saving. If Liam really wanted to ask a good question, I think the way I would have switched it is, hey, should I just do Roth salary deferrals as well?

Brian: Here’s the downside of both of those things, you have to be in the highest of income tax brackets because anybody because backdoor Roth means you make too much money to do traditional Roth contributions. Mega backdoor Roth means you make so much money that you’re going to maximize the 415 limits. And that is, you know, that’s over $70,000 for somebody who’s my age. So 72. Yeah. Yeah. 72 was the new 415 limit. Is that even for everybody? For everybody, plus catch-up for over 50. So Wow. We’re getting close to $80,000. So, to be able to save that level of assets, you got to be cranking through some high income. So, now let’s say, well, okay, so if you’re making that type of income, 37% marginal, I mean, federal marginal rate and then if you live in states like California or somewhere else, it could be 12, 13% on top of that. So, and then you put on top of that, what if you’re self-employed and you’ve got search charges and you’ve got the self-employment taxes and those type of things, it’s conceivable that 45 to 53% of your money is just evaporating to taxes. So, as much as I love Roth money, do I want to while I’m in my peak earning years, paying 50 cents on every dollar I earn to taxes? Is that the best use of it? I would say no because more than likely, what I could do is take advantage of all these huge savings opportunities, take the tax deduction now because now I’m saving the government’s funding half of my contribution, essentially because I’m saving that much in taxes. And then if I leave the workforce before required minimum distribution age at 75, I might have an opportunity where I get to legally manipulate the tax code by doing Roth conversions at much lower tax rates. Because think about how many states also exclude retirement-type distributions and other things. Plus, you’re in a lower tax bracket for a federal standpoint because you don’t have earned income anymore. All of a sudden, your light should be going off and going, “Wow, this is, yeah, I love Roth. It is my favorite child.” But when I know that there’s a headwind of 50 cents on every dollar going to taxes, I’m going to be thinking a little bit different about how I’m making those contributions.

Bo: That’s right. That’s exactly right. So Liam, it’s not an either or. It’s a both and. We love when we see folks doing all these things. Maxing out pre-tax. You should be doing a backdoor though. Doing backdoor, doing the mega backdoor if you have the right account structure.

Brian: I do need to always remind people because I still remember one of my dearest friends. He wrote me, this is probably a year and a half ago, and he’s like, “Brian, I did that Roth conversion. I saw that show. I mean, I did the backdoor Roth contribution because I saw your content on that.” And I was like, I almost said his name. I said, “You can’t do that. You have a big IRA sitting out there.” And he’s like, “Oh.” And I said, “So, make sure you have the right account structure before you just start gripping and ripping.” That’s what this is one of the reasons. This is why we do what we do is I love for you guys when you get into more complex stuff, consider taking the relationship to the next level because this is exactly what we help our clients navigate is doing the backdoor contributions to their Roth IRAs, making sure it’s right on the tax return because by the way that gets screwed up all the time, too. Also working through should you be doing Roth conversions if you’re leaving the workforce early or even in plan conversions if your plan allows that. We look at all that stuff.

Rebie: Yep. That’s great. If you want to learn more about Abound Wealth, you can click on become a client at moneyguy.com and learn a little more about it. And also to Liam C, if you would like a Money Guy Tumbler, just email [email protected].

Brian: And by the way, we’re still doing in true tried fashion. I’m using as a tumbler. I mean, I’m actually using as a koozie. Bo’s using as a tumbler. It can transform in case you wondered what that sound was.

Rebie: Okay, we have some results from the poll. 76% say yes, they have done their net worth statement. Financial mutants.

Brian: That’s unbelievable. That’s probably killing the microphones, but still it’s worth a clap. It’s worth a clap.

Reducing Retirement Contributions (36:15)

Rebie: Keith S has a question. It says, “How would we know how much we can reduce retirement contributions if we have been contributing 25% and DDD plan forecasts show we are well ahead of retirement needs. We’re 36, have $500k plus retirement balance, and a net worth of $1 million.”

Brian: Let’s go. Well, I’ll let you answer the technical, but I want to give Keith some just finger-in-the-air feedback on this is I know most people don’t cross millionaire status until they’re somewhere between 47 to 49 years of age after saving and investing for 27 years. So, the fact that Keith has already got over half a million dollars in retirement assets, a million-dollar-plus net worth, and he’s 36 years of age. So, you know, you think about that, that’s 11 to 13 years ahead of schedule. Unbelievable. That’s pretty amazing.

Bo: Yeah. I think what’s interesting, do we have wealth multiplier over there? I do. At 36, the wealth multiplier. What is that? Oh, I got to go to the back page for that one. 36 is 11.33. Yeah. So, you just think the work that you’ve done up to this point, if you just took that $500,000 of investments and multiplied it by 11.33, that’s what you’re on your way to without even saving anything else. So you and let us tell you from where we sit objectively, you are way out ahead of the curve relative to your peers. Like other 36-year-olds, to have half a million dollars of investments and to have a million-dollar net worth is unique. You’re in a fantastic spot. And so your question was I had to read it twice. I thought you were saying, “Hey, when like how do I know when I can back down?” But that wasn’t actually your question. You asked, “How would I know how much?” Okay, I feel like I’m in a great spot. How to know how much? That’s one of the reasons why we designed the know your number course. Because the way that you determine how much you can put back into your savings down is really a mathematical function. You have to determine, okay, what’s the finish line? What’s the goal that I’m working towards? And once I can define the finish line, and I understand where I’m at today, my starting point, then I can put together what’s required to get me from where I am today to where I ultimately want to be. And that number will tell you what savings rate is required to do that. Now, let me give you a few words of caution. There was an episode that released yesterday of Making a Millionaire with Danielle. If you’ve not watched this episode, you should watch it because she was in a fantastic spot as a young person and she had this desire to do Coast FIRE and she said, “Hey, here’s what I’m going to do. I’ve really been killing it since I was young. I want to back down now so that I can hit this number and then at this age it was like 37. I’m going to back down even more and I’m just going to coast.” We said, “Hey, we love that. That’s a great idea. Have you done the math on it?” And what we did is we had this wonderful conversation. And we actually did the math with her for her showing her, hey, the goal, the thing that you want to do is possible, but the strategy that you have in place right now is not likely to get you to where you ultimately want to be. There are some tweaks and some changes that you should make now and it was purely a mathematical function of how much do I need to be able to live the life that I want to live and how much do I have to save now to get there. So Keith, what I would encourage you to do is work one, go watch that episode and two, work through that exact same exercise. If we know where what our goal is and we know where we are today, what steps are needed to accomplish that? And this is one of those times, Keith, where when you begin trying to answer those kinds of questions, it does get a little more nuanced and it does get a little more complicated and you begin to introduce yourself to maybe I don’t know all the things that I should know. This might be a wonderful time to consider having the conversation about when it might make sense to bring on a professional to take the relationship to the next level because you’ve only navigated this one time. But a well seasoned professional has likely done this hundreds of times. So, we would encourage you if this is something you’re really thinking about and you’re going to make a big decision like backing down your savings or taking your foot off the pedal, you want to make sure that you’re doing it at the right time and you don’t have a false sense of optimism like what Danielle had.

Brian: But I was just going to share because you said the know your number course, which it is a course, but when I hear the word course, I’m like it’s going to feel good, you know, unicorns, roses, and those type of things. No, this is actually a tool as well. It’s actually got a spreadsheet built into it for you to go navigate and you can figure out if you’re ahead of the curve, behind the curve, or right where you’re supposed to be. And I even liked it because it really lets us nerdy folks toggle the numbers. You can change rate of return. You can change your savings rate. You can change inflation predictions. I’m dropping stuff. So it’s really valuable to let you kind of toggle and find out exactly where you are in that process.

Rebie: That’s great. Keith S, thank you for the question. Just email [email protected] if you would like to cash in on your Money Guy Tumbler.

Second Mortgage at 8.25% – Pay Off or Keep Investing? (41:24)

Rebie: Kenneth S has a question next. It says, “Hey, money guys. I’m stuck on a decision to pay off a second mortgage at 8.25% rate early.” So, he’s paying that off early or continue to max out retirement. Is a second mortgage technically high-interest debt? How does he decide?

Brian: I mean, we’re going to need more information, but I will tell you, eight and a quarter doesn’t get me excited. I mean, that’s well above I mean, because right now mortgage rates are below six. So, to know that you’re paying over a 3% headwind, that seems like a bridge into high interest debt.

Bo: Let me tell you some questions I’d want to know the answer to, Kenneth. I’d want to know how old you are. I’d want to know what the rate on your primary mortgage is. I’d want to know what your asset structure looks like outside of this home. And I’d want to know what your income and savings rate looks like. I’d want to have all of those different variables to determine, okay, what does make the most sense? Because depending on your age, 8.25% may indeed be high interest. If it’s high interest, it falls into step three. You got to really extinguish that. But perhaps based on where you are and based on your age, maybe 8 and a quarter is not all that high. Maybe it shouldn’t be considered high interest for you for some unknown reason that we may not have clarity into. Because I’d also want to ask, what are your long-term plans with this house? Is this a house you plan on being in for a long time? Or is this a house you think you’re likely going to sell in the next year, 2, 3, 4 years? So, I’d want to know all of those variables to help discern and determine does this qualify as high interest debt? Because I think so often people just make the assumption when it comes to personal finance, it ought to be one size fits all. Oh, if I got a mortgage, I got to pay it off. Or, oh, if I have car loan, I got to pay it off. Or, oh, if I have student loans, I got to pay it off. And there is nothing wrong with getting rid of debt, with paying it off. We love being debt-free. We love folks not being encumbered, but we recognize that every financial decision we make has an opportunity cost associated with it. If I choose to do this, I’m choosing to not do this. If I choose to pay this off, I’m choosing not to deploy the dollars elsewhere. And when it comes to finance, we think there’s a better way to do money. We want you to make sure that you’re making optimal financial decisions that give you the highest probability of reaching your ultimate long-term goals.

Brian: But real talk though, Kenneth, I don’t know if you’re a financial mutant, but I’ll talk to you like you are. That would bother me if I had eight and a quarter sitting out there like that. So, you know, do the math, do the homework that Bo is suggesting to figure out where you are and where the purpose is. But then any margin or excess you have in your life, let’s extinguish that because that would just yuck. That would just not be fun to have sitting on your net worth statement.

Rebie: All right, good stuff, Kenneth. Thank you for being here.

Brian: I know you’ve had to do some research on home equity lines and stuff. What were the rates that you found when you looked at it last year?

Bo: Well, when a year or so ago, it was like seven and a half, seven and a quarter. So, this seems high. But here’s what I don’t know. I don’t know. I’m just thinking through all the different scenarios we’ve seen. This could have been something where Kenneth bought his home and he got a primary mortgage. Well, this is a piggyback, right? So, this is really an interesting thought exercise. Again, we don’t know values. We don’t know how much is there, but let’s say that his primary mortgage is at 7.5% and he also has this secondary that’s at like 8 and a quarter. Well, rates have come down. Now, 30-year rates might be somewhere like 6 and a half, 7%. So, it’s just worth entertaining and looking at all of the different options that you have available to you to make sure that you make the most optimal decision because the decision that makes the most sense today given today’s interest rate environment might look different than the decision that would have made the most sense three years ago. That’s why again it’s very nuanced and it’s very personalized almost like personal finance is personal.

Brian: That’s it. It’s personal.

Rebie: Kenneth, if you would like a Money Guy Tumbler since we answered your question today, email [email protected].

529 Timing for College Senior (45:29)

Rebie: Carson has a question. It says, “I’m a senior in high school.” Oh man. I have a 529 account for college with about 80% of my four-year tuition cost to earn my CFP degree. Let’s go. It’s currently invested. When should I start moving funds to less risk?

Brian: Carson, if you’re a senior, he’s in the window. That means that graduation’s in May. Semester starts and you don’t have to do it all at once because by the way, they’re not going to make you pay all four years of your tuition when you show up on your freshman day. But that August tuition, that’s pretty short-term money, right? Like that’s there. I would definitely be starting to dial down that asset allocation on that money.

Bo: This is one of the reasons why because and Carson, you may not struggle with this, but we see this all the time. Someone finds himself in the situation like, “Oh, okay. Well, yeah, but I think the market’s going to have a good first quarter, so maybe I’ll just maybe I’ll just wait until March.” And then the market kind of goes down a little bit. Oh well gosh it was so much maybe I’ll just wait until June and you get into this mindset where you begin trying to time it and trying to play with it. It’s one of the reasons why when it comes to goals like education funding and we look at 529s we love and this is a time where like a target date type fund is a wonderful solution because if your 529 were invested in some sort of target date fund the glide path would have likely already happened for you. So when you were younger and these dollars were building they would have been more aggressive but now as you are approaching that time when you are going to need these dollars and tuition is going to come due it’s probably going to be in a much more conserved allocation where you actually have liquidity available when you need it. So I would think certainly for this first year and maybe even for two years I would start thinking about having cash available no matter what happens in the market.

Brian: Oh yeah. I mean, look, the typical the allocation that a 529 is going to do if you’re using their age-based program, it’s getting probably pretty close to 100% of this money is going to be in short-term reachable assets. So that right there, that ought to be an indicator that you at a minimum probably want at least half of this money to be off the table because you have the next two years covered of college. But that doesn’t I mean because that’s the thing is it then becomes a personal decision on how fast you want to wind down the I’m assuming you’re in a 100% equity allocation of some sort. It’s back to an analogy we made at our last live stream that I was at which was Bo was talking about playing Russian roulette. Yeah. And I was talking about landing an airplane. Is that neither you know there’s ways you’ve got 80% of your education funded. It would be really sad if all of a sudden we had a 2008 type market and all of a sudden you had 40 to 50% of your education funded and now instead of coming out of college probably debt-free, you might have to come out of college with student loan debt all because you were getting really cute and sensitive trying to time the market. Don’t get caught up in those games.

Bo: I’ll tell you what, Carson, though, to be a high schooler and to be in this live chat listening to this show, good for you, my man. That is awesome. The future looks bright. If you can start figuring out how to make wise financial decisions now and you take that through your college career into your early adulthood, the sky is the limit for you.

Brian: By the way, for an 18-year-old, because I have a dear friend that was on our family vacation over the Christmas break. He’s turned 18 today. I give a shout-out to Finn. His wealth multiplier at 18 years of age is $107.83. That’s wild. Think about that. Every dollar you save by the time you retire is going to be worth close to $108. Don’t sleep on that.

Rebie: That’s powerful stuff. Anytime I see a question or comment that’s like, I’m in high school or I’m listening with my high schooler, I’m like, yeah. Like they have so much opportunity. It’s just so fun. And we’re really glad to have you, Carson. So, thanks for your question. If you would like a Money Guy Tumbler, we’d love to send you one. Just email [email protected].

401k Match with Job Change (49:49)

Rebie: Next question is from Jack M. It says, “My work matches our 401k contributions in a single lump sum contingent upon working through the end of the calendar year. Last day provision. If I’m planning on finding a new job this year, should I redirect those funds?”

Bo: That’s only on the matching money. Yeah, because your money is still going in there and we still want you again assuming that you’re in the right place of the financial order of operations, right? Now, if you have high-interest debt or if you don’t have a fully funded emergency fund, then I understand where you’re coming from here, right? You’re like, “Ah, maybe I shouldn’t do this because I’m going to leave.” But what happens if you don’t leave? And we see this all the time. People have these plans. They’re like, “Man, I’m planning on finding a new job. I’m planning on looking.” But what if that doesn’t happen? You don’t want to get to November, December like, “Holy cow, I had this wonderful opportunity to go make 100% rate of return, a 50% rate of return, and I thought I wasn’t going to be there, so I didn’t do it.” In our experience, most often, if you can get a match, if you have the ability to go grab a match, even if there’s a chance that some of it may be forfeited, it likely still makes sense to go do it just in case it doesn’t get forfeited.

Brian: Well, and Bo, if you’re curious where Bo came up with those things about the employer match versus emergency reserves and high-interest debt, he was using the financial order of operations. You too can go download this, go to moneyguy.com/resources. I was personally thinking about myself. The two jobs I left before I went and started my own firm. I left the public accounting firm. I put in my notice it was like April 16th or whatever it was. No, I did it right. I didn’t want to stick my employer during the middle of tax season. Okay? So, I’d plan. Plus, I mean, let’s face it, this is something I always tell people. Pay attention to when bonuses are paid. You know, if you know that you’ll get a large year-end bonus. Don’t go transition to your new job on November 15th. I mean, because you have worked 11 and a half months of the 12 months to get that year-end bonus and they’re more than likely not going to you don’t get the year-end bonus if you put your resignation in or the big profit sharing contribution whatever it is. That’s why the second firm I left I put in that notice on February 15th and it was primarily so I could capture the two things I wanted to capture my year-end bonus and I wanted to make sure I qualified for another plan year on the retirement plan. That stuff went into my calculus on once I made the decision that I was leaving. I was like, “Okay, now that I made the decision I’m going to leave this job. Now, let’s talk about when, based upon all the variables of bonuses and other things.” And also I mean back when I was working in government, I was troubled by like police officers that would leave the county government that I was working with to go to a neighboring county when they were for at that time the vesting into the pension was much much easier and they were to be within 12 months of being vested in the pension and see people leave to go get a job in a neighboring county for 5% to 10% pay raise. Heartbreaking. It broke my heart because they just weren’t doing the calculus on what is that pension, you know, some benefit from that pension worth. So take into account when you’re making those big life decisions. This is part of the measure twice cut once timing matters on some of these employer benefits.

Rebie: Well, Jack M, thank you for the question. We would love to send you a Money Guy Tumbler before I go on. Email [email protected] if you would like to get one.

Refinance Closing Costs (53:41)

Rebie: All right, we’ve got another question from Hoke4. It says, “Hey, Money Guy team. The wife and I are 28 in step 8. We are refinancing our home from a 7.5% 30-year to a 5.99% 25 year. Okay. Should we pay closing costs in cash or roll them into a loan? We have cash and plan to stay for 7 years.

Bo: What do you think, Brian?

Brian: Well, this is always a math equation. It really is because, you know, I know we think right now 5.99% by the way kudos to you. I mean, because you dropped your interest rate by over a percent and a half. That’s pretty powerful stuff. And if you’ve been in the house for 5 years, you’re staying on the same payment schedule, which isn’t crazy. I kind of like I like the logic that you’re going on this. The thing is, and I don’t mind, you know, paying cash for the closing costs, but it’s just sometimes you’ll find out when you start getting into this refinance game is that if you especially if you shopped the refinance, you might be able to refinance not once but twice, you know, and the closing cost is just part of the field of play and it goes into the equation. And so that’s why I’ve seen where you can actually, especially on such a big drop in rates, you might be able to just take a little hit on the rate, not have any closing cost because of the way they price the structure out with the thought that if rates dropped another half a percent to a percent. You could do this game all it just if you pay cash, it is a sunk cost at that point. Whereas if you roll it in, but that doesn’t mean you shouldn’t do the calculation. When I’m talking about doing the calculation is you figure out the payments and you figure out how many months it’s going to take you to break even on this. I mean, do you agree or disagree?

Bo: No, I agree with you. I’m just thinking through when Hoke says that they’re in step eight, that tells me it says my wife and I this is a married couple. When I hear that we’re in step eight, there’s a few things I know. I know you got a fully funded emergency fund. I know that you’re maxing out a Roth IRA or perhaps a Roth and a spousal or perhaps backdoor Roths. If you have an HSA, I know you’re maxing that out. You’re also in your employer sponsor retirement plan maxing those out or at least saving 25%. Or if you’re step seven, you’re saving 25%. So, if you’re doing that, Hoke, and you’re at the place where you’ve got a substantial bucket of assets behind you and you have an income that can stand this, generally speaking, and I don’t I just you just convinced me. Just paying cash for the closing cost. Now, if you’re someone and this is like you’re like, man, my first home and I’ve been saving for a down payment and I’m 28 and I don’t really have a lot behind me yet. Well, then especially at a 5.99% rate, I do think it’d be justifiable. Okay, roll the closing costs in so that way you can get some dollars working for you and to make up for lost time. You kind of have to triage where you are right now, but just based on the context clues, I’m leaning towards telling you just to write a check, cover the closing cost in cash.

Brian: That’s step eight is doing a lot of work. And that’s a great point because we don’t I mean it does bother me when people when you roll the cost in because you know you’re going to be paying those costs for years to come. I mean, it’s something to be aware of. Also, you know, a lot of people, I don’t know if we talked about this, when you refinance, those home origination fees or any points or anything, when you first buy the house, that stuff’s immediately deductible when you file your taxes if you itemize. But when you refinance, it’s amortized over the length of the loan. So, that’s something to be very mindful of as you’re keeping track of things.

Rebie: That’s great. Well, Hoke4, thank you for the question. If you would like a Money Guy Tumbler, just email [email protected]. And don’t forget, your opinion matters. I want to hear it. Go to moneyguy.com, fill out the Money Guy questionnaire, and let us know what types of things you’d like to see from Money Guy in 2026 and beyond. Even if we can’t do every single one right away, we will know that you want it, and we will take into serious consideration. So, I’m excited to go check out all of your responses, read your comments in this official place. And remember, it’s only going to be open for a week. So, do keep that in mind. We want to get everything in one place. And so, don’t sleep on this. We really appreciate you taking just a few minutes of your time to let us know what you want because we really are listening.

Closing – 20 Year Celebration (58:15)

Brian: Yeah. If you want to do a because like I said, this is a 20-year birthday celebration for the Money Guy Show. Hard to believe. It’s crazy. I mean, I think about that in the fact that creating content creation is such a unique thing because this thing, if y’all don’t know, a lot of you because a lot of people don’t know is because now this thing has turned into its own enterprise. This really did start as a passion project. I felt back in 2006, I was so inspired when I got my first iPod. I always wanted to be a school teacher. I thought I was going to close my career out being either teaching in high school or teaching at a college personal finance and then when I got my first iPod I was like Eureka this is the thing that’s going to change the world and I was like this is my opportunity to do this and I just did it as a passion project. I still never forget when I won’t say her name, but the first she’s still a client of the firm and she’d probably love to know that we’re still giving her shout outs. In 2008, because we started in January 2006, 2008, I had a listener who had a layover in Atlanta airport and she asked if we could just meet up because she was thinking about hiring me and I was like, “You want to hire me?” I had never thought of this was going to be a marketing platform. It was more of an education platform. And then I think about that conference I went to. I wish I could remember what year that was, Bo. Was that like 2012, 2013, 2014? Somewhere in there where I had an advisor that the show had gotten enough traction at that point that I was bragging about how big the audience was. And he was like, “How many clients are you picking up from this?” And I was like, I told him the number. He goes, “Wow, that number is so small compared to the audience size.” And he’s like, “Are you asking for business?” I was like, “I can’t ask for business. That would totally blow this thing up. It’d be like an infomercial then.” And he’s like, “No, I think guys, I think based upon what you’re giving away on that show, you could start asking for business.” I came back and I told Bo, I was like, you know, Raj said we should start asking for business. And it was like the most dumb, you know, it’s the most basic thing, but that’s when we started talking about taking the relationship to the next level. And you guys have shown up and you have revolutionized the ability. And then I think about us just getting into YouTube, turning a podcast into a YouTube platform and then adding all the other platforms and now having multiple studios, multiple employees. Thank you. I mean, I hope that comes through is that we are so thankful for everybody here who’s made the Money Guy go beyond this pet education project and turned it into an actual world-changing platform. I mean, I really do. Even this morning in the content meeting, if you haven’t gone to our website, go check it out because this thing has been just completely beefed up. I mean, I give kudos to Rebie and team because this thing is the search engine is legit now. In the past, we’ve had issues with it and we even have some other ideas that we’re kind of working in beta fashion behind the scenes that will take advantage of some of the newest and latest and greatest technology that we’re even kind of previewing internally. But this thing is a resource to help you turbocharge us because I’ve realized we have the perfect platform to create the abundance cycle that is a win-win. Come take all the free stuff we can give you so you can turbocharge and take your relationship, you know, and your assets to that next level. But when you do take those assets to the next level and you start feeling that success, I hope you’ll remember who planted all the seeds of knowledge, all those nuggets. And that’s when the abundance cycle takes the relationship to a whole another level because we work with clients. I think we’re in 48, 49 states at this point. So, thank y’all for making this all possible. It’s way beyond when I do these studio tours. I’m just a guy with an iPod that just wanted to be a school teacher and y’all have made us world changers and that means a lot to us. I’m your host Brian joined by Bo, Rebie and the rest of the content team. Money Guy Team out.