Can a $100K Family Ever Get Ahead?

One Year Later: Where They Stand (0:00)

Brian: Last year, your total net worth was right at about $104,000. Annual income right there at six figures.

Hannah: Roughly a year later, our net worth is at $154,000.

Bo: There is something on this net worth statement that was not on the other net worth statement. There was no debt previously. Now we have this whole new column on the ledger. We’ve got a car and a vacation and some furniture. What’s going on there?

Reconnecting a Year Later (0:22)

Bo: Here we are, we get to sit down again. You guys came and hung out with us a year ago and I’m excited to hear what’s happened over the course of the last year. Give us a run at what happened immediately after last time we sat down.

Daniel: It was a lot of fun. It was kind of like a whirlwind. It was super fun just for us to be on here. It was a tremendous opportunity. Thank you guys for having us again. We’re absolutely, I’m not supposed to say the E word, I said that last time.

Bo: No, no, that’s okay. You can say it. I like our lines.

Daniel: We were elated. But we had a great time. Thank you guys for being gracious with us and having us on. Truly, I think we were saying earlier we were a little nervous just kind of going out there and putting yourselves out there and talking about some stuff that is really important, obviously, personal finance, and just some of the good and some of the bad that comes with that. But it was a great opportunity and it was a good conversation starter with family and friends and I think it’s been a great blessing.

Bo: How’d the conversation go with you guys? Did you leave and have conversations, or did you leave and go, okay, made it through five minutes of that, but it’s sparked good conversation ongoing?

Hannah: It wasn’t just for the first month or four or six months afterwards. It’s something we’ve continued to talk about, which is very beneficial. It’s an open line of communication that I think sometimes in marriages, you handle the money as long as I stay in my lane, then we don’t have to talk about it. But it helps our communication and ultimately it strengthens our marriage. So it’s been good.

Brian: Wonderful. I was impressed. Y’all’s comment section, everybody loved y’all as a couple too. And that’s not always the case, unfortunately. But the world loved y’all. So congratulations on that. The comment section is not always right, but it doesn’t hurt when they’re so affirming of what y’all have as a couple as well.

Looking Back at Last Year’s Advice (2:10)

Daniel: Well, that was humbling. Very cool.

Hannah: It was interesting to see because we’re not in any kind of space like this. The comments we receive are from our children.

Brian: Did y’all read the comments?

Daniel: We did.

Brian: See, I kind of wish our guests didn’t read the comments because there’s additional context going on, and I just hope everybody will always treat people like they were sitting in the room with you. And that’s not always the case with the comment section. Sometimes you can fire out a comment without thinking that there’s a living soul beyond it.

Daniel: Yeah. But it was good. Some of it was used as fuel too. It’s sometimes good to feel the pat on the back. Other times it’s good to go, hey, this guy, they’re doing this and that, that’s not what I would do. The beauty of it is personal finance is personal and our journeys, while it’s very similar to a lot of people, ours is very unique in its own way.

Daniel: So to answer the other part of your question, did we come away a little nervous? Yeah, I think there was a little time where we said, let’s stay away from Money Guy content for a little bit. I just needed a couple weeks to not watch the show every day or every week. But we came back and anyway, it’s been a lot of fun.

Did They Finish Their Homework? (3:21)

Bo: For folks who didn’t watch the original episode, we concluded and gave you guys some homework. I thought it’d be fun and interesting to look back at the homework we gave you and see, did you do it? Did you follow through on it and what changed? Because personal finance is personal, and we can set out with best-laid plans, but sometimes life happens and things change. I’d be curious to know if that’s what happened over the last year for you guys.

Brian: One of the first things we looked at on your net worth statement last year, there were a number of different old retirement accounts. We said, hey, one of the things you could do that could simplify your financial life is look at maybe consolidating some of those old retirement accounts. A few phone calls, a few pieces of paperwork. Did you guys work through that exercise of consolidating and putting some of those accounts together?

Daniel: The first homework, no, we did not do a great job of that. We’re not off to a great start.

Brian: That’s fine. Any reason why you didn’t work through that?

Daniel: Not necessarily, other than laziness. But truly I think it wasn’t a priority. I should say that we didn’t make it priority number one. I knew that we, correct me if I say it wrong, pulling from investing which was another part of the homework and starting to go into the emergency fund, that is what I think within probably the first two weeks of being home we did. And that was the conversation. And then consolidating, we said, oh yeah, there’s still some work to be done there.

Brian: Is the consolidation station part of it because you have to reach out to an old employer, or is it logistics? What’s the pain point?

Hannah: I probably do have to reach out to my employer. I’m pretty sure I do now that you say that. I’m not afraid to. I left on really good terms. We moved. That was the only reason we left. At the risk of sounding naive, I just don’t know the process. Didn’t want to make a fault or something like that.

Bo: Well, it’s interesting. For those who maybe didn’t watch the episode, how old are you guys?

Daniel: 32.

Hannah: And I’m 30.

Bo: And then you’ve got kids at home?

Daniel: Yes sir. Two kids.

Bo: All right. So when I hear 32 and 30 with kids, that immediately sounds like sort of a messy middle type situation. It is not incredibly uncommon for folks in the messy middle to have financial stuff just not be top priority. And it sounds like that’s exactly what happened for you guys. Hey, we have these other things we have to prioritize. Sometimes that’s okay. When it comes to consolidating retirement accounts, I’m going to give you guys a pass. It’s a thing that’ll make your life easier a little bit, but it’s not the worst thing that you didn’t do it. It’s much worse if you’re like, oh, we didn’t get our estate documents, we didn’t do insurance, we didn’t do that kind of stuff.

Brian: But in terms of account cleanup, that’s okay. I would at least like to ensure the money is working. It’s invested, it’s in index funds, low cost, because I also gave you some homework on trying to get the best investments, lowest cost, index varieties if possible. As long as that’s working, I think it’s okay that it’s in separate accounts. Just that’s more homework for down the future.

Bo: Yes. I guess I should keep homework for after this episode. Guess what the first one’s going to be?

Hannah: I’ll take the fall for that one. It’s my 403(b). I need to roll it over.

Daniel: It’s my 401(k) too.

Net Worth Update: $104K to $154K (7:23)

Brian: Y’all both had homework. That’s very selfless. I appreciate that.

Bo: Well, okay. So another thing we said is, hey, y’all ought to start doing an annual net worth statement. Y’all ought to sit down and look at, okay, what’s everything that we own? What’s everything that we owe? Has that been a practice that y’all put into place since we got together?

Daniel: Yes. We used this awesome template that we got sent. If you guys don’t have one, I recommend getting one from the Money Guy show.

Brian: Are you using the tool or the template that we gave? Because the tool is the one that has the dashboard and all the calculators and so forth.

Daniel: It was really cool to put that in, you could see the whole story. We went even back to when we first got married and everything was negative. But it’s been really cool and reassuring just to see that over the past couple of years.

Bo: Well, one of the best parts about tracking is that you actually do get to see progress. Hey, where were we? We did some things. Where are we today? And I thought it’d be really fun for us to look at because now we have these two data points. We looked at your net worth statement last year. This is what it looked like last year. Your total net worth was right at about $104,000, annual income right there at six figures, with the bulk of your net worth being in your investment accounts, about $99,000 to $100,000 of liquid investments that you guys had put together, which was awesome. Well, now fast forward roughly a year later, our net worth is at $154,000. Look at that. That’s a big increase. Household income has also increased. Your investments went from $99,000 to $130,000 in roughly a year. So we’ve seen some really great things happen.

Brian: Had you not been tracking, had you not done the exercise, you wouldn’t know, right? You wouldn’t be able to look back and say, look at all these things that we accomplished.

Why They Took On New Debt (9:13)

Bo: Now, there is something on this net worth statement that was not on the other net worth statement. There was no debt previously. Now we have this whole new column on the ledger. You’ve got a car and a vacation and some furniture. Walk us through. What’s going on there?

Daniel: I’ll start at the bottom if that’s okay. Maybe we’re getting a little cute with the needs and wants. There’s some differences there, but we wanted an upgrade. Needed some different things in the furniture realm. Just growing family, bedding, things like that, furniture. And at 0% APR, we’re paying it monthly essentially, but we have $1,200 left to pay it off.

Brian: Okay. So walk us through how much did you spend on the furniture and what are you paying monthly on that to knock it out?

Daniel: We are paying $52 a month.

Brian: $52 a month. So how much did y’all start off with? How much was the furniture?

Daniel: I want to say it was over $3,000. I think it was close to $3,000.

Brian: But y’all are obviously sending extra money then, because if you’re only paying $50 a month and you’re down to $1,200…

Daniel: We put a good bit down. And then anyway, it is down just to $52. It was for about two years, but we started that about a year ago. So that’ll be gone in about two years.

Bo: Okay. So that’s the furniture. What about the vacation?

Daniel: That’s getting really cute with it. I guess part of it was, you know, we were kind of clapping for ourselves. One of our goals was to get to that one times our income. And since we got to that point, we wanted to have a small celebration. We took the milestone. We took a family vacation. And where did we go? We went to Disney World.

Brian: Oh, look at that. Now he’s just baiting. Disney’s a little not as cheap as it was when I was taking the kiddos there, but it’s still great memories. So $1,500 left on that. What’s the payment on that?

Daniel: $100 a month.

Brian: That was just for the parking. I think we got a balloon. I’m kidding, of course. How much did y’all spend on that trip?

Daniel: It was a good chunk.

Brian: I mean, there is what I’m amazed by is that it’s hard to go to Disney for less than $4,000. So y’all probably only have $1,000 left. And I do want to know about the car loan. Actually, I’ll hit pause because I want to hear about the car loan before we talk about cash.

Car Crash, ER Visits, and the Emergency Fund Test (12:05)

Daniel: You want me to do the car? I feel like I’m telling all the fun stories.

Hannah: I’ll tell the car. The month of February was a lot of fun. We were cruising April all the way to January and I think we went to the ER three times in the month of February. But the first one, she fell in the yard, couldn’t walk. Turns out she just didn’t want to walk. Everybody’s okay, I should say. This is the lead-up to the car. I had an emergency appendectomy, but to start everything off, Daniel went to the ER because he was hit head-on in a car crash.

Brian: Oh wow. So totaled the car and that is where we… What speed?

Daniel: Going about 35. It was an intersection type thing. Routine on the way home. Less than a mile from my house kind of thing.

Bo: Everybody’s okay?

Daniel: Yeah. I’m okay. And thankfully I was driving by myself. Didn’t have the girls or anything like that.

Brian: That’s terrifying. So two emergency room visits.

Daniel: Three.

Bo: Three emergency room visits back to back to back and a totaled car. You know, one of the things we talked about last year, and we’re kind of getting ahead of ourselves, is that you never know when the unknown unknown things are going to happen. We always talk about the proverbial bus, but you literally got hit by the literal car and then had the other things happen. How were you able to cover those emergency room visits and the car stuff?

Daniel: So yeah, when we left here, the goal was, hey, we’re spending a lot of money going outside of the FOO out of order. So we dialed all that back and really started getting aggressive into our cash just so we could have the 3 to 6 months, and that was our goal, and we were getting really close to that goal, very close on pace. Really excited about it too. And thankfully, just like we talked about, you never know when these things are going to happen. We were very blessed. Maybe we had a bubble and in our minds we thought we were invincible, everything’s going to go to plan. And then out of nowhere on a random Monday, excuse me, everything can be very outside of your plan. So basically we took a good bit of the cash and went towards, you know, obviously we have insurance and all that kind of stuff, but you don’t plan for an emergency surgery. You don’t plan for multiple trips to the ER. And then obviously, we had a car that was completely paid off. So that was hard. And the car I only had, you know, had 70,000 miles on it and I was going to drive it forever, was a Honda Civic. It was great.

Brian: Charlie’s car is gone now.

Daniel: Yeah. The goal was to give that car off maybe one day.

Brian: So all the medical, because even if you have health insurance, most medical nowadays, emergency room visits are $500 bucks, it feels like, and surgery you have a deductible typically. How much did y’all have to come out of pocket for that stuff?

Daniel: It was in the thousands for sure. It took at that time, it probably took overall close to half of what our savings were at.

Bo: Well, I was going to ask because last year when we sat down, you had about $5,000 in cash saved up. We said, hey, let’s dial down the Roth contribution. It’s a hard thing for us to say, but it’s the right thing to do in this situation. Where was the emergency fund before February? What number had y’all gotten up to?

Daniel: $8,500 is my guess.

Bo: Awesome. So you’re making some really good progress moving towards that goal. And then this stuff happens. Well, that’s exactly what an emergency fund is there for. I’m so happy everyone’s okay and everyone’s healthy. Once you get past that, it’s okay that this thing happened. So often people think that the Financial Order of Operations is I go from step one to step two, step two to step three, and it’s this straight line up and our life just moves. That’s not the way the real world works. That’s not the way life works. And you guys are a great example of why it makes sense to have that emergency fund in place, because had you not had it, what we’d be looking at right now would look very different than what we are getting to look at right now.

Brian: What I like is that you didn’t have to make any desperate decisions. You had the money to cover all the stuff. I also did some loose math here. You figure the medical stuff was at least three grand, you figure the Disney trip was probably around four grand, and then the furniture that y’all paid down is about two grand. There’s $9,000 that y’all have used, whether it’s all these things that have come your way. Plus, we’ve still seen an increase. I know y’all don’t like to count the checking because that’s more of a clearing account. But your emergency reserves are getting close to $11,000. It was around five the last time y’all were here.

Bo: Well done. You can also see your army of dollar bills, even though y’all feel like you’re not doing what you’re supposed to all the way because you’re still stuck in this cash stage, and we’ll talk more about that. But to see your army of dollars grow close to 30% last year, going from $100,000 to $130,000, a lot of good stuff is building in the background, even though life didn’t exactly go the way you wanted it to.

Buying a New Car After the Accident (17:03)

Brian: Before we move on, did you say what the new car is? Because I know you got rid of the Civic. How did the car buying transaction go? Did you stay within 20/3/8?

Daniel: Do we need to put a little something in there? Car buying experience is never easy. It’s not a great experience. It was great. It was wonderful. What a great time. We had the most expensive hotel stay while doing it.

Brian: Okay. So y’all are awesome. We know about 20/3/8. We love 20/3/8. Uh-oh. We went foolish, didn’t we?

Daniel: We went foolish. There’s an asterisk, but we did a lot of the math just to make sure that what we were doing wasn’t a completely terrible decision. Although this one’s not going to get a pass. We got a Honda CR-V. We have two small kids. Driving a Civic was already difficult enough with just me in it, let alone having the two girls in it.

Brian: You’re 6’4″?

Daniel: Slightly tall. So we got a little bit bigger car. It is new, it was a new CR-V, it’s the EX, it’s not nothing crazy. Overall it was about $32,000 and some change and we put 50% down on it.

Brian: Wow. Okay.

Daniel: Just from some of the cash we got back from the insurance. And we’re paying at 3.49%. So we’re paying about $320 bucks a month now.

Brian: So not 20/3/8. I’m not going to do the public math on that, but it’s 50-something. Look, you know what, 20/3/8 is a guardrail. I have no problem with you putting 50% down. Now, I would like for the emergency fund to be fully funded, kind of hearing you did that as a trade-off that I wouldn’t have chosen, but what did you say the car payment is?

Daniel: $320.

Brian: And so 3.49%, not a crazy rate on an automobile right now. And how long did you finance it for?

Daniel: 60 months.

Bo: It’s not okay. We’re not going to get a pass on that one.

Brian: You were doing so good. If the payment, you can still keep it as a 60-month loan, they let you prepay them. If you just increased your payment to $498, it would be paid off within the three years.

Daniel: That’s cool.

Brian: So there might be some potential to grow a little bit extra, but that’s still, I think you’re going to leave some margin there for still doing life, but it just makes sure that you always stay ahead of the depreciation on the car, which you’re already going to be well ahead of with the 50% down, but it just gets you out of the car game that much sooner. Because what happens when all of a sudden Hannah’s car needs to be replaced? We don’t want to have two car payments. What kind of car are you driving right now?

Hannah: 2018 Toyota Highlander.

Brian: It’s practically brand new. That’s great.

Daniel: Hers is in good condition. Also paid off.

Brian: But y’all are a perfect case study because that’s the same thing. I’ve had that happen twice with my wife’s car, is that it’s the car accidents, it’s the engine blows up, there’s things that happen that you just don’t count on. Even though I was kind of hoping this would last another three or four years.

Renting vs. Buying a Home (21:17)

Brian: Over this past year you’ve had some stuff happen. You had February happen, which was super intense. We also went through some goals that you guys had, here are the things we want to do, here are the things we want to accomplish. What’s changed or how have you rethought your goals? What does that look like? Do you want to buy a house? Where does that fit in, as you guys sit here today having lived through the life you’ve lived through?

Hannah: Those are the goals we had last year. Same goals we have this year. We still want to move in that direction.

Brian: Where are you guys at there? Start with the house.

Hannah: Start with rent too, whatever you want. So our rent last year was $1,000, which at the time I was itching to get out of the house. Everyone in the comments was like, wow, the biggest line there is the utility bill. It gets hot, it’s a poorly insulated house, but it’s at a very affordable rate for us. But now instead of $1,000, it’s $1,250.

Brian: Okay, so it went up 25%.

Hannah: We are still not itching to get out though, because when you guys helped us walk through everything, putting things into perspective, we’re good where we are. We would much rather do the $1,250 than take on a mortgage that’s a lot more than that. Saving for a house, we have that savings account still, but it’s not something that has to happen immediately. It’s a dream. It’s definitely something we want. We haven’t, our ideas, and we like Zillow as much as anybody else.

Daniel: Shameless plug, if that’s another problem. But yeah, right now it’s not even at $1,250 with a 25% increase, even if it were to go up. Maybe our landlord watched the video, I don’t really know. But they’re great, it’s a family friend and we’re blessed to have it even at $1,250. I’m sure they could rent it higher than that. And I will say it helps on gas too. We don’t think about that a lot. We’re very close to everything. It’s right down the street from where our kids go to school. So that is a huge blessing.

Bo: I think so often, and we talked about this last time, but it’s worth repeating, renting gets such a bad rap. People say, I’m just throwing money away, throwing the money away. That’s not the case anymore in terms of how expensive housing has gotten. We still love home ownership and we still think it’s a wonderful goal when it makes sense. And for the circumstance you guys are in right now, I do think renting is probably the best solution for you guys to be able to do the things you want to do over the long term. And that’s okay. I just want people out there to hear it’s okay to rent. You can still build wealth. You can still have your net worth go up by 50% in a year even if you’re a renter. And that’s a totally okay thing to do.

Brian: Well, I think a lot of people have a recency bias in the fact that post-pandemic we watched housing go up over 50% in most markets and everybody felt like, oh my gosh, this thing’s running from me. I will say the last two or three years we’ve seen things kind of level out to a degree. They’re still going up slightly in some markets, but it’s not running from you like it was back from 2021 through 2023. So I think it’s okay if you take a breather, get caught up on some of these other goals, build it up in the background. You’re going to be okay. You’re going to have the time to make this dream happen for you.

Why Financial Planning Matters (24:10)

Bo: And this is literally it. What we’re doing right now is literally one of my favorite things that we get to do, sitting across from other real people talking about their finances.

Bo: Yeah, you guys get to see this on Making a Millionaire, but we also do this for our clients every day at Abound Wealth. We get to dig in where they’re at, figure out where the gaps are, and find where we can optimize and build a plan that works specifically for them and for their financial goals.

Brian: If you’ve been watching this and thinking to yourself, hey, I want that, I want a professional with decades of experience in my corner looking at my specific situation, we’re here to help.

Bo: Yeah. Here at Abound Wealth, we are fee-only fiduciary advisers. That means that we are legally required to work in your best interest, and we love helping our clients optimize their army of dollar bills so that they can live their best lives.

Brian: If you’ve reached a point where you’re ready for some help, go check us out at aboundwealth.com or click on the link right below. We’d love to connect and see if we’re a good fit for you.

Bo: That’s right. Head to aboundwealth.com and let’s see if we can do this for you too.

Family Financial Planning (25:08)

Bo: What about schooling? Because we talked a little bit about schooling last year. Has that changed? Still a goal? Thinking about how you’re going to navigate that?

Hannah: So the CHOOSE Act is something that is enacted in Alabama now, and you can apply to send your child to any school that is participating in it. It’s a lot of private schools. It’s a set amount, $7,000 they will give you to put towards schooling for like a scholarship, basically a scholarship for kids to go to private K through 12 in the state of Alabama. We have to apply and we have to get it. I know there’s a pool. Our applications would start. We are not in the priority, so that is something we have to factor in, but it’s an option.

Brian: How did you guys find out about that?

Hannah: It’s highly advertised in Alabama. A lot of word of mouth.

Brian: Well, I just think it’s one of those things people might not realize. Oh wow, my state has this thing where they have this opportunity that I can apply for that might be available.

Daniel: Yes. We know several families who have done the CHOOSE Act and they’ve received it, so we’re hopeful.

Brian: How old are your girls right now?

Hannah: Five, and Allie’s three.

Brian: So five in kindergarten already?

Hannah: Yes, in August.

Brian: At your school? Because I know that was one of the things we talked about.

Hannah: No, not at my school. Daniel’s mom is actually going to teach her. That’s a choice that is at the same school she’s currently at. It goes to kindergarten. And I say this unbiasedly, she’s a phenomenal kindergarten teacher. I’d want to keep her there. She is worth every cent that we’re making.

Brian: You hear that, Mom? She thinks you’re great. That’s awesome. Good. You guys are doing wonderful. You’re in a fantastic spot. I love that we were able to have this conversation last year. That conversation wasn’t the end of the conversation, it was kind of the beginning of the conversation, and it allowed you guys to keep it going. And here we are a year later, you’re in a great spot. I can’t wait to see where you guys are three years from now, five years from now. Maybe some less Februaries between now and then.

Keeping Expenses Flat Despite New Payments (27:18)

Brian: I am curious though. There are a few things cash flow-wise. I remember last time y’all were in here, I was always so impressed and I gave y’all several compliments. Y’all’s expenses, your monthly budget, your burn rate was right around $5,000 a month. So when the team presented to me your update and I saw it had the car payment built into it, $320 right there instead of the $500 and it’s got some debt payment in there at $157, how are we still at $5,000? What did y’all cut?

Daniel: I got a really exciting wild hair I guess. You remember Christmas Eve? Christmas Eve I spent a whole day talking to our Wi-Fi and insurance. We went to all the ungrateful service providers.

Brian: Let’s go, Christmas Eve.

Daniel: It was totally worth it.

Brian: Christmas Eve, that’s when you decided to call your insurance too? Did you do all your own insurances as well?

Daniel: I did. Yeah. So anyway, we found, we’ve been with the same people for years and years and we watched that number climb and climb, and just talked with a couple folks and just like that we’re able to cut, I don’t off the top of my head, I think for even just internet and phone we were able to cut like $70 or so per month just on a phone call.

Brian: Phone call. Absolutely worth it then.

Daniel: Yeah. And insurance was even better. It’s not represented on here, because last year our insurance was X. After the accident and a new car, our insurance was 2x, almost 3x. So I called and I thought that had to be a mistake, and they said no, that’s the real rate. So after shopping that, we were able to get it down even below what X was last year. So now the ungrateful service providers are going to up it again now that I’m talking about it. But yeah, we’re able to keep a lot of, and we cut a couple small subscriptions here and there. We don’t have a ton of subscriptions, but just little things like that.

Brian: I gave you so much grief, but I do appreciate that.

Hannah: No, but that’s in the moment, not the best timing. Not the best timing trying to get girls ready and stuff like that.

Brian: But anyway, it’s kind of genius because I got to believe the person on the other end of the phone’s like, this guy’s calling me on Christmas Eve. Yeah, okay, whatever, I’m going to do what you want, I want to get home too. I’m going to do whatever you want. It kind of was genius.

Bo: It was next level. That’s a lot of money. And for anybody who doesn’t know in the audience, when we say ungrateful service providers, a lot of our service models are set up to reward new customers but not reward existing customers. So you have to be a proactive user of their products, and that’s why we call them ungrateful because they don’t want to keep your business. You have to go advocate for yourself and get the best prices.

Daniel: And we were able to lock in just the phone and internet for five years. So that’s not moving for five years. Really excited about that.

Brian: Well, I think what’s so encouraging to the folks out there listening is that even though you added a car payment and even though you have these two other debt payments that are kind of silly, but they’re there, you got these two other car payments and your rent went up too. Even with all those increases, because you guys were very diligent, you were able to keep your budget roughly the same. You were able to be an active participant in your financial life, command your army of dollar bills well, and even with those additional expenses, you guys were able to say net neutral. That’s awesome. That’s a great example of not allowing your lifestyle to creep, but allowing your lifestyle to improve and your budget to stay the same, which I think there’s a lesson to be learned from that.

Reaching a Fully Funded Emergency Fund (30:32)

Brian: I am starting to think, how y’all are doing so well. What’s your new update on when you think you’ll be out of step four? Because that was the big focus from the last meeting, was that y’all, and I could know the frustration because you want to get to step five so you can start funding those Roth IRAs again, especially when you see your army of dollar bills is growing so well. Y’all seem to be closer, in months. Give us feedback on how fast we’re going towards this.

Daniel: Before today, before we talked about getting the car payment to $500, we were going to move the cash up to about $350 is what we were thinking. Right now we’re doing $250 a week into the high yield savings, which gets about 3.1%, and that changes all the time I feel like. Standing today, we are closer to that $112 to $113. Originally our goal was about $16,000 that covers three months living expenses and some change, and $1,000 that is to cover the deductibles. So we’re really close. I would say by October, that’s bad math maybe, but something like that. October, November.

Bo: And I would argue if you have three months of living expenses, you don’t have to add the deductible on top of that, you can include that in that. So maybe the goal is really closer to $15,000. I think $16,000 is okay because you’re like $15,100. But somewhere in that ballpark, I think once you get there, I’m going to argue that for you guys that is a fully funded emergency fund, or at least it’s a well-funded emergency fund where now you can start doing some of these other things.

Brian: Well, think about, I’ll make the same point I made last time. If you reach here because Bo just found you another thousand, maybe in September, if y’all cross into this threshold in September, you still have until the following April to fund these Roth accounts. Y’all are still going to be able to get some of this money in there. So we might only have to sit on the sideline even with the chaos that y’all had in the last year. You missed last year, or whatever the year was. I think I’m optimistic because the good news is you had money when the emergencies came. And the good news is when it rains, it does pour. And that’s the point I made last time, but y’all probably do have a good patch, knock on wood and prayers be answered, where you don’t have the chaos y’all had in the last year, because it just doesn’t normally happen all at once like that. But hopefully we get a good stretch and y’all get some dividends from all your discipline.

Bo: Well, and I think about what was the car payment you calculated that need to increase it. Do you remember the number?

Brian: Yeah, I have it over here on this, $498.

Bo: $498. We know that if you continue on this 0% payment plan that you’re on, in 10 months you’re going to have the vacation paid off. In 24 months, two years, you have the furniture paid off. That’s going to free up $150 bucks a month that’s going to be free and clear capital. If you adjust the car payment and you follow 20/3/8 and you get it paid off, that’s another $498 to $500. There’s an extra $650 per month inside of the next three-ish years that you’re going to be able to deploy towards these goals. Well, if you’re putting away the $250 a week you’re doing right now, then you have another $650 a month you have to work with. You’re going to blow through getting the emergency fund filled up and also getting Roths filled up and building your army of dollar bills and being able to save for a house down payment. It’s going to be awesome.

Brian: And that’s probably when you start funding the sinking fund for the house down payment at that point too. Because if you remember from our previous discussion, just because y’all had good employers that were pretty generous with your contributions in the teacher retirement system, y’all were doing close to 22% just by funding the match and other things. And once you fund the Roths, I think you’ll be pretty much back to that same category to where you can feel really comfortable with funding the house down payment.

Any Other Questions? Marriage, Money, and Furniture (34:13)

Bo: Any questions you have for as you think forward, as you think about the direction you’re moving, any questions we can answer for you guys between now and when we do this again next year? Let’s say this is an annual thing now. I’m kidding.

Daniel: One of them you just answered, that was about the sinking fund, about what does it look like getting back into Roth going into the house payment. How would you, I guess follow the FOO. That would be the best way to do it.

Brian: Get in there and max that Roth and then, right. Okay. No, I would, after you get the Roths funded because you get to step six, and that’s where I was saying y’all were kind of do the math to figure out what your savings rate is at that point. But assuming it’s going to be greater than 20%, because it was like 22% last time y’all were in here, then I would feel very comfortable with you guys, because that’s really step five, that’s close to having step six completely funded. Then it’s step seven. And you say, wait a minute, maybe we amplify up our emergency reserve, which is step four, for having that sinking fund to fund this goal of housing. Because remember, with your first house, you can put down as little as 3%. And y’all had originally told us the goal was around $300,000 purchase price. I think that starts working, and you can reach that $9,000 to $10,000 down payment pretty easily, it starts stacking on top of each other and you’ll feel really good about it.

Brian: We’ve still got a little time. I’d love to know what chaos or anything, because y’all said you’ve had conversations.

Daniel: You heard about February. February was the chaos.

Brian: I want to know now that y’all are having such good communication about your money, has it unearthed or turned over a stone that previously wasn’t there because y’all weren’t talking about it as much? Because it seems like y’all are healthier with your conversations on money. We help your marriage, that’s what I mean. We were looking for some back padding.

Hannah: It’s absolutely a net positive for sure. We were raised differently with money, and so even, we’re seven years into marriage, that’s not a long time, but it’s a good amount of time to kind of…

Brian: That can be a shaky time by the way. Seven years is when you hear about that shaky seven-year itch.

Hannah: But we’re still learning, even if it’s not like the obvious, oh, I know that she likes to spend or I know that he likes to save. We’re learning little micro things about each other, even in money, that we didn’t know in the first six years. We’re going, oh okay, I didn’t realize that this was a priority. Okay, we need to talk about if this needs to be a big priority, small priority. So we definitely are still learning, and we revisited some of the, let’s bring up old videos and stuff.

Daniel: One of the videos you guys talked about even recently was talking about you and your marriage and some things that are important to you that aren’t shampoo, things that are important to you that aren’t important to me or vice versa. It’s been, we open up the conversation and we have some of those line items in there for, hey, this is fun money, this is your fun money. Who am I to say what you’re going to do with your fun money? If we have everything automated and we’re doing the things that we set out to do with our plan, everything else is fair game, I guess.

Brian: You know, I love that. Is that where the furniture came from? Who pushed the furniture?

Daniel: Someone, I’m not going to say who pushed or anything like that. We’re definitely a team. It was an us decision, obviously. And I love it. Now I have drawers. I used to put all my stuff in plastic bins that we got from Walmart. So all my clothes were in plastic bins for like the first four years of marriage. With plastic bins, nothing wrong with plastic. I love them. I’m very frugal, so the plastic bins were cool, but now I got matching sets.

Hannah: Do you remember that? It was breaking though.

Daniel: It was breaking. Yeah, the foundation of the furniture was breaking.

Daniel: I do have another question. This is probably going to be no-go territory, maybe, but it’s a question that came up nonetheless.

Should They Sell Their Publix Stock? (37:47)

Daniel: This is going to be a probably no-go territory, maybe, but it’s a question that came up nonetheless. We talked about, so I work at Publix. We have the employee stock. And we feel very weird having just a large amount, I’m again not doing great math, but let’s say it’s like more than 10%, 12 and a half percent of our investment assets are in one holding, in one company. That just kind of makes us feel weird a lot of the time. Now I love the company. I think it’s going to do great. I don’t work there anymore necessarily, but I hope it continues to do great. I always tell my friends that as long as Publix is doing well, my kids are going to go to college. So would it be a dumb idea to pull some of that out at the risk of what the tax burden might be and then fund some of those things like Roth or fund the rest of our cash to get us there? That way we’re not completely in one holding, I guess.

Bo: Yeah. I don’t think it’s crazy. One of the things you’ll notice is that obviously it was a larger percentage of your portfolio last year than it is this year, because as your portfolio grows around it, it represents a smaller portion. But you’re the person who likely knows the enterprise and knows the organization better than anyone else. Now not being there, perhaps not as much. And so if it is something where you feel like you are overly concentrated there, there’s nothing wrong with saying, hey, it’s done well, it’s performed well, I’m not tied to the company, I don’t have any insight into that company. Because the question I would always ask when I sit across from clients and do this with the old ESPP, the $16,000, if I said, hey guys, I’m feeling very generous right now and I’m going to write you guys a check for $16,000 just because I want to do that, but you have to invest it, would you go buy $16,000 of Publix stock?

Daniel: I would not do that.

Bo: Every day that you make the choice to not sell a holding you have, you’re kind of making that choice. Now obviously there’s some tax cost and some friction. If I gave you that $16,000, what would you do with it instead?

Hannah: Oh, I’d fill up the cash immediately.

Daniel: We’d fill up our cash. We’d probably fund Roth IRAs. We’d buy S&P 500.

Brian: And so if you’re in the position where you are not as convicted around, oh, I want to be a holder in this, I want to be a shareholder, I like the individual stock, I don’t think it’s crazy. Do the exercise to figure out the tax impact and think through that. I don’t think it’s crazy to think about decreasing that position and you can use that to fund some of these other goals to accelerate the process. The only asterisk I’ll put on it is that you have to ask yourself which column am I in, am I a builder or am I a consumer. As long as all the proceeds, take out the taxes, but the proceeds are going into the builder column, I think it’s a win for the long term. Now, if any portion of this is to take your pain down so you can consume or do something easier, I don’t love that, because sometimes it’s the same point I made last time y’all were in here. I want the fact that you’re not funding your Roth to hurt so that it keeps driving your positive behavior and discipline to try to fix it faster. Sometimes when we pull the easy button and just go squeeze the balloon and find assets somewhere else, we don’t get the behavioral benefit that we should. So as long as you guys are using that $16,000 only for builder column transactions, I think it works.

Bo: Don’t shortchange yourself on that. I happen to notice in your budget there was a line for giving that was like $325 a month, right? That’s something that’s important to you that you’re doing. One of the things I immediately hear is, oh, I’ve got these highly appreciated shares over here of Publix stock. It’s done well. If I were to sell it, I have to pay some capital gains. One of the things I can do though, if I chose to use what’s called a donor advised fund, you guys heard of these, right? You can open up a donor advised fund at Fidelity Investments, Charles Schwab. Well, rather than giving that $325 every month to the organization I’m giving that money to, I could donate appreciated shares to my charitable giving account and give the $325 from there. So one of the things you might want to do is, if I just take $325, multiply it times 12, that’s almost $4,000 a year that you’re giving to an organization. You could fund that $4,000 with those Publix shares and the money you were giving you can use to deploy to these other goals, and then you won’t pay any taxes at all on those gains. Because when you gift the appreciated security, you get a deduction for the fair market value and all those embedded gains go away. You don’t pay them, the organization doesn’t pay them. So that might be a way to shift your cash flow a touch to be able to do what you’re trying to accomplish without having to bear a tax burden to do it.

Brian: Well, and also realize the 0% capital gains tax for married couples, if taxable income is right under $100,000, I bet if y’all go and look at your taxable income, y’all might have a little room for some of this to not even be taxable. And I would work within those confines because maybe you don’t do it all at once. Maybe you figure out how much of this can we get into the 0% capital gains column, because that’s free. And then maybe we fund charitable goals with some of this other portion. There’s a really creative tax way that lets you fulfill the goals of still being a builder but minimizing the taxes as much as possible.

Daniel: That’s really cool. Love it. I’m glad I asked. We talked about not asking, but I’m glad we asked.

Brian: No, that’s a powerful one. Y’all are in the perfect income threshold to where you’ve got a lot of planning opportunities. It’s not even the worst when you cross those thresholds, because it’s 15% federal, but in Alabama y’all have around a 5% state income tax.

Final Homework and Biggest Lessons (43:32)

Bo: We gave you homework last time. I want to give you some homework this time. Number one, you should consider consolidating some of your old retirement accounts. Those are some cows to clean up. Maybe that’s a priority you guys think about.

Hannah: Love that. I’ll take that one.

Bo: Keep building your emergency fund. I think a realistic goal for you guys should be somewhere between that $15,000 to $16,000 threshold, which you’re already doing. I think you should have a serious conversation about potentially revamping your car payment so that you can fit it inside that 20/3/8. Brian already did the math for you, you take it from $320 a month up to $498 a month, you get that knocked out inside that 36-month window. And then you ought to look at last year’s tax return, do a very quick projection, there’s software you can use, you can do it through a spreadsheet, see how much room you have left in the 0% capital gains bracket this year. Consider liquidating the Publix stock at 0%, or if you’re over the 0%, maybe think about shifting how you do your charitable giving. Use a charitable giving account, gift appreciated securities, donate to your organization from there, and the money you were going to give the organization, use to fund some of these other goals. I think if you can do those things, you guys are going to continue on an awesome trajectory.

Brian: You are awesome. Thank you guys so much for coming to hang out with us. Thank you for letting us get a peek behind what it actually looks like when you put a plan in place. I think a lot of people are going to value getting to see that and recognize, holy cow, this stuff works. The FOO is actually there, emergency funds matter, they do a thing. Thank you guys for being a living example of that actually happening. And I’ll play the uncle part in the fact that the consolidation thing that didn’t surprise me at all, because I think a lot of people run into the exact same wall y’all do, you just don’t know how to do it, because that’s where all of a sudden your simple financial life gets very complex.

Bo: That’s exactly it, you have no idea. We have an entire team that that’s what they do, logistically they’re paperwork ninjas, they know how to call all the administrators. And so that’s something that typically a good financial planning firm will help people out with.

Brian: Also, I think you guys coming back, because y’all are our first kind of repeat guest here. This is the accountability, because I love the fact that it sounds like even there was a halo effect of the first time you came, it expanded your conversations for months after. I like to think that probably for the last week, as y’all knew y’all were coming back in town, there was probably like, oh my gosh, are they going to ask us about this? And it probably spurred a whole another level of accountability and discussion on things. And I think that’s like all things, we talk about health is wealth and other things, I’m the same way with accountability on what I eat, when I go to the doctor, when I go to the gym, because anytime I know I have to be held accountable for the actions I took, I straighten up a little bit. And I think a lot of people do that with their personal finances as well. So I love that y’all got to let us shine a light on that and show that this can be a beneficial thing from a behavioral standpoint too.

Hannah: And it’s not just us. Obviously we talk about it because we share the experience, but people that we work with, they’re excited that we had this experience, and so we’ve had the opportunity to share with them.

Brian: I love it.

Hannah: And they go, well, who are they? My friends at school call them wise guys.

Brian: Like the mafia in Alabama, the money man, the diero dudes.

Hannah: That’s amazing. But it’s spurred conversations with our co-workers, and I have a friend who actually I think she opened a 401(k). Hi, Emily. We started talking about these things. She’s my closest friend at work and she said, well, what did you guys talk about? I was like, well, we talked about all these things. And she said, okay, I have a question about that later. And so we’re even calling Daniel at work. So there’s a ripple effect.

Brian: Thank you guys for what you do.

Daniel: Obviously you can see we’re not perfect by any means, it’s been a difficult journey but it’s been a fun journey. We’re really excited just for the effort that we’ve put in. Thank you guys for what you do, and I hope this reaches millions and millions of people, not our video necessarily, but the work that you guys do.

Brian: It’s encouraging in the messy middle, because that’s what everybody is, short on time, you’re short on money, and you’re trying to figure out how do I make this little go a long way. Y’all are a perfect example of a little can create huge ripple effects for the future. And I think that probably spurs a lot of good conversations. Actually, we want to even talk to more people like you guys, where yes, you make a good income, but it’s not your shovel’s not so big that everybody’s like, ooh, of course they have money. You guys are a case study of that. Yes, you can have good income, but it’s really your discipline and your good decisions that are generating the fruit that’s growing in the background. But if others want to apply to Making a Millionaire, where do they need to go?

Bo: Yeah, if you want to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of our resources, any of our free tools, you can go to moneyguy.com/resources.

Brian: And we already bragged about earlier and I don’t think we gave the website. Go to learn.moneyguy.com if you also want to know about our net worth tool. I’m your host Brian, joined by Mr. Bo. Money Guy team, out.