This 22-Year-Old Needs a Reality Check…

Introduction: Million by 30 Goal (0:00)

Cyrus: I told Megan the goal was a million by 30.

Brian: What’s the power source for all this?

Cyrus: I just feel like you don’t hear a million by 30 much.

Brian: There’s a reason. I love stretch goals, but I also want to make sure they don’t kill the spirit that made you as well. You can turn a power source for good into a cycle of failure. And it’s not because you are a failure, it’s because you set bad goals.

Bo: When did you get to town?

Cyrus: Yesterday.

Bo: Yesterday.

Brian: Oh, I need a koozie.

Bo: Have you been to Nashville before?

Brian: Can I get a koozie?

Bo: When someone says, “Oh, hey, what do you do for a living?” What do you say?

Cyrus: I would say a filmmaker.

Bo: Filmmaker. Awesome. How’d you get into that?

Cyrus: Honestly, I feel like my entry into it is different from most people because I’m young enough that I came into it almost kind of seeing the way paved from YouTubers, okay? Whereas most people it was like, “Oh, I’m all about the art and that sort of thing.” But I actually saw it as a possibility to make money and be in that world. And so I just dropped out of school after a semester and just dove in.

Bo: Okay. So how—you said I’m young enough. How old are you?

Cyrus: 22.

Bo: You go to college and said, “Hey, this isn’t for me. I’m going to stop doing this.” YouTube was your foray into film making. Is doing that your full-time gig?

Cyrus: I would say that YouTube was how I taught myself. Okay. And a lot of the people I looked up to were YouTubers that were kind of doing YouTube film making. So short films, stuff like that. And I actually started with photography first. Okay. So I have a running background. So I went back home and I started taking photos of track meets. And that was my first way of making money. And I was just shooting all the local high school sports.

Bo: Love that.

Cyrus: And making nothing. Okay. Had part-time jobs at a gym, just different things just to survive. And then I actually met the guy I was talking about. He was one of those big YouTube filmmakers that I watched. I met him out in Chicago.

Bo: Shooting at a sporting event or through something else?

Cyrus: No, so I actually went to a different film premiere that he was a part of. Okay. And introduced myself. I asked him to go for a run and he was just shocked because he expected everyone to talk about photos the whole time. And so he was like, “Yeah, let’s go for a run tomorrow.”

Brian: That’s awesome. Make an opportunity.

Cyrus: He gave me a full-time job 3 months later.

Bo: Let’s just let that be a lesson right there. You saw an opportunity to network and then you created this really interesting way to peacock yourself. Yeah. And that was the door in to you even being able to now turn this into a living. Yeah. That’s awesome. All right. So he gives you that first full-time job. Give me some timeline. Is that what you’re doing now? Like are you still working for him with him or—

Cyrus: No, not anymore. Okay. I do a lot of work with him. So, we have a shared studio space in Chicago with a few other guys and we all do projects together. So, he’s kind of the bigger one in terms of internet personality out of the space. He has two different successful YouTube channels. So, I work on both of those with him just as a contractor now. But I do a lot of commercial film making. I still shoot weddings here and there. Kind of just take whatever gig comes. So, I moved to Chicago from Florida February of last year, 2024. And I did a full year contract with him and then went full-time freelance back in March.

Bo: From Florida to Chicago. And the reason that you moved to Chicago was for this job. Awesome. And so that was a one-year gig. And what happened at the end of that year?

Cyrus: We agreed to keep working together on a contractor basis and I stayed in the studio. I started paying rent instead of being his employee. So, we have a very affordable space actually. So, between five guys, it’s $250 a month.

Bo: Oh, that’s great for a studio space, right?.

Net Worth Overview (3:48)

Bo: Let’s kind of level set, right? Because here you say you’re 22 years old. You were kind enough to share some of your financials with us. So, we put together just sort of a loose net worth statement for you. And this is what we can see that at 22 years old, you have a total net worth of $51,300, which is for a 22-year-old is wild. I think most folks at your age in the country right now have a negative net worth. Like they are below zero. So you are in a fantastic spot. You have about $19,000 total in cash. You have about $19,000 total investments. And then because you are—and I want to be clear, you’re self-employed—you work for—there’s not another—you don’t have another job. It’s just you right inside your business, you have another $12,000-$13,000 in cash.

Brian: So when you transitioned from Florida to Chicago, you had this one-year contract. It’s not exactly a salary, but you knew you had some money coming in. Since it’s gone away, how has the—I’m going to call it the hustle—the hustle of entrepreneurship been? Have you been able to drum up new business and find new clients and find new projects?

Cyrus: I mean, it’s a roller coaster for sure. So March was my first month as fully self-employed. It was—I feel bad saying a low month because 2 years ago I would have dreamed of this money, but it was like $5,000 type of month. And then April and May were my two highest months ever at like $14,000 and $15,000. Okay. So, it’s kind of just up and down.

Bo: When we—when you throw these numbers out like $5,000 in March, $14,000, $15,000. Are we—this like topline revenue? Is this profit? Yes, okay. Topline revenue.

Brian: You’re sending out invoices getting money back. How much of this is reoccurring versus hunt and kill?

Cyrus: I have only a few recurring jobs that kind of bring that baseline to around $3,000 to $4,000. And then everything else is kind of hunt and kill.

Brian: I see. Business profit of $67,500. Is that including your $35,000 salary or is that separate? So you’re actually over $100,000.

Cyrus: Yeah, that would be after the salary, right?

Brian: So you’re actually making close to six figures or right at six figures.

Cyrus: I would say gross this year, I’ll probably do like $120,000-ish.

Bo: $120,000 gross, but after you take out all your expenses and everything. Yeah. Take out all the business expenses. What’s the net amount? It’s probably close to that $65,000-$70,000 mark, right?

Cyrus: Taking out salary as well or no?

Brian: Well, no, salary is huge because you’re a small business owner. So, you kind of—you know, when you’re doing business analysis, a lot of times you have to strip out the business owner. So, you’re kind of the business owner. So, you kind of start lumping what do you take a salary, what is the net profit that flows to you, and that way we can kind of see what is the ultimate benefit for owning this business, both for your labor and for being the owner of the business.

Cyrus: Yeah, I would say roughly somewhere between $70,000 and $80,000.

Bo: $70,000 and $80,000. Okay. So that’s why that business profit is probably counting some of that salary as well. Okay, that makes sense. That helps me out tremendously. And you said that March is the first time you’ve been on your own. That was your first—hey without being off that contract work, right?

Cyrus: Yeah.

Bo: So some of this is even still trying to figure it out. Like we’re estimating that it’s probably like $70,000 to $80,000. But yeah, it’s all over the place.

Brian: But it’s all over the place. You said baseline maybe revenues like $3,000, but then there are months like June and July where we have like $14,000-$15,000, right?

Cyrus: Yeah.

Decision to Drop Out (7:00)

Brian: How did you make the decision to go from—do I go the traditional path of I go through four years of college, go to a film making school? I’m not saying anything’s wrong with that, but at some point you’re like, no, I’m going a different route. Give me some color on that.

Cyrus: It’s a funny story because I was straight A student—honors list in that semester at school and I was actually doing a double major in film and finance.

Bo: Oh wow.

Cyrus: So I’ve always been obsessed with personal finance. 16 years old I read Rich Dad Poor Dad—just dove in. My school that I went to—I went there to run and I had a basically career-ending injury that removed my athletic scholarship and it was a private school so I was going to go into a decent amount of debt for it. I had seen these people online that were making real money with film making. I was like, “Well, I’m just going to give it a shot.” It honestly felt like a smarter decision than staying in school and going into debt.

Brian: Did you give yourself a timeline? How was that received by the family? I mean, that’s got to be a hard thing.

Cyrus: I mean, my mom, she really struggled with it. She was like, “What was all this work for?” And I told her, I was like, “If anything, it should show that if I just apply myself in a different direction, it’s going to work.” And after a few tears and a few hard conversations, she admitted. She was like, “I know that you’ll be great at whatever you decide to do.” So, I still have support for sure, but it was tough in the moment.

Bo: Well, I love what you did is you did a cost-benefit analysis, right? Hey, here’s the cost if I go pursue the traditional education. And what I’ve discerned is that it’s going to be hard for me to overcome that cost. I’m likely going to be in a better spot not doing that. I think more and more people are arriving at that conclusion that based on the path they want to go, maybe the traditional education route is not the best fit for them.

Brian: But I don’t want to let him off the hook. I want to know if this was a jump, a leap of faith, or did you give yourself a timeline and have a path? I want to know how deliberate this was or how much of this was luck.

Cyrus: I would say a lot of it was luck and the people in my life try to tell me it’s not and that it was the work ethic. I will say that in the moment it was kind of just betting on myself.

Brian: So, you didn’t have a timeline of how long you were going to give this dream a go before you went back to school?

Cyrus: I felt confident that within four years I’d make it work.

Brian: Okay. How old were you when you dropped out?

Cyrus: 18.

Bo: 18. So, you were fresh. So we’re four years in now. We’re kind of at that mark, right? So as you sit here now, you’ve made it through these four years and now you—I mean you’ve got obviously got revenue coming in. You’ve been able to support yourself. What are some of the goals that you have? Can you kind of give us some flavor around that?

Financial Goals (9:22)

Cyrus: I have aggressive goals and I like to set goals that are pretty scary. At the beginning of this year, I wanted to have that number be six figures, okay, for net worth. So, by the end of 2025, we want a $100,000 net worth. Well, that was the goal in January. We’ve had to recalibrate so far. I told Megan before that the goal was a million by 30. That’s the dream goal.

Brian: What’s the power source for all this?

Cyrus: I would say both of those numbers are very round numbers. And I know a lot of people’s goal is a million. And I just feel like you don’t hear a million by 30 much.

Brian: There’s a reason. You don’t. Does that give you anxiety? Because I mean if you set big goals—is there anxiety or stress that you ought to be—you don’t get to live for today because you have these big goals. I’m just trying to get into your mind a little bit. I love stretch goals and audacious goals or whatever you want to call it, but I also want to make sure they don’t kill the spirit that made you as well. If you disconnect them too much from reality, you can turn a power source for good that has done so much with talent and taking opportunities and chances into a cycle of failure. And it’s not because you are a failure, it’s because you set bad goals. That’s why I’m trying to get to the why.

Cyrus: I would say I set that goal probably two years ago before I even had an increase in income. Okay.

Bo: An even crazier spot in time to set that goal. All right.

Cyrus: And I would say that honestly most of my journey over the last 2 years has been instead of going harder and pushing more financially. It’s more about—I’ve had an increase in income and realizing that that’s not necessarily the solution for the problems. More money doesn’t necessarily fix all your problems in a way. It’s been a lot of recalibrating and focusing on what do I want out of life beyond just the money.

Bo: So let’s talk about those. What are those goals? We’re going to give you some thoughts on a million by 30. Outside of the money, what’s a million dollars at 30 years old do for you?

Cyrus: I’ve always liked not necessarily FIRE because I don’t want to retire early. I enjoy working. I enjoy what I do for work, but I don’t want to have to take jobs I don’t want. I’ve seen people that have had to work really hard while their kids are growing up. And I would love to be on the other side of that and be kind of able to spend more time with kids as they’re growing up.

Bo: Do you have any kids right now?

Cyrus: No.

Bo: No. Are you—do you have a spouse? Are you married right now?

Cyrus: I’m not married. We’re discussing an engagement in the next 6 months or so.

Bo: Oh, congratulations. That’s awesome.

Cyrus: Thank you.

Reality Check on Million by 30 (12:07)

Bo: One of the things I think is interesting is we said, “Okay, look, Cyrus came in and he said, “This is where I am today and I have this goal of this is where I want to be. I want to have a million dollars by age 30.” We said, “Okay, well, what would it take to make that happen?” And we actually did the numbers for you. We actually did the math. If you look today, right now, you have $51,000 total net worth. And if we want to get to a million by the time we’re at 30, do you know how much that means you would have to save on a monthly basis?

Cyrus: With my income as it is right now?

Bo: No. I’m just telling them mathematically to go from $51,000 at 21-22 years old to $1 million by 30, how much you got to save a month to do that?

Cyrus: I’m not sure.

Bo: Well, we did the math for you and the answer, and this is assuming a 9.9% rate of return. You got to save $5,300 a month in order to be able to move from where you are to that step. So, let me pause there for a moment. How much are you currently saving towards that goal on a monthly basis?

Cyrus: I would say on a monthly basis somewhere between $2,500 and $3,000.

Brian: Your total—by your own estimation you’re somewhere between $67,000 to $70,000 of total income. This would be 90% of that.

Bo: Yeah.

Brian: So I think if you just look at it through those glasses, we go, “Wow, there’s a lot of work we have to do to make this actually happen.” You said something earlier that really struck a chord with me because I’ve heard so many successful people. You think money can do so much for you until you start getting it and then you’re like, “Oh my gosh, choosing a number of a million dollars or 2 million, 3 million, you put whatever number you want. You’ll get there and realize it is dagnab empty.” Now look, I’m not saying—don’t mishear me. Getting your first $75,000 a year, enough income coming in, reoccurring that you can cover paying for your family, paying your rent, there is definitely happiness or something good from that. But the incremental increase beyond certain levels, it just starts diminishing if you don’t have the rudder of why tied into it. When I see these goals like a million by 30, first of all, the odds are just not there. We covered on the show and I think I try to share this type of data to free the young person who’s—because we’re in this hustle culture social media where everybody’s showing you their highlight reels. It’s not tied to reality. The typical millionaire is 49 years of age and had 27 years of building and saving slowly to create this. So to put yourself at a million dollars at 30 is doing something extraordinary. Now, that’s not to say you can’t do it, but I just don’t want that to diminish or extinguish that flame of excitement for life and enjoy the present moment. There’s so many things that I have sacrificed for the goal without understanding I’ll never be this age again. You’ll never be 22 again. You’ll never be, you know, think about you and your soon-to-be significant other spouse. You’ll never be 25 without kids again. You know these are things you have to put yourself in this present mindset to maximize so that when you do get to be my age post-50 that you go job well done—not because—imagine you sacrifice your 22-year-old self, your 25-year-old self, your 35-year-old self from a ritualistic standpoint—you’ll look back and go for what.

Bo: And I think about the sacrifices that would be required in your life to attain some sort of goal like that. You were kind enough to share with us your P&L for the business. So, you were able to show us—we could see total revenue since January of this year, total expenses. So, we can kind of track your profit line and you can see that—you mentioned March not the absolute best month from a profitability standpoint, but then April was great, May was great, June was strong. It kind of settled down, right? But you can see right here your total profit from January through August of this year is about $42,000 of total profit. That’s all the money available for you to pay yourself. Well, you just said, man, or we showed you that if you want to get to a million dollars, you got to save $5,000 a month to be able to do that. You have to start choking out a lot of other stuff. That means no gym membership, no travel, no—we haven’t talked about if you’ve already funded an engagement ring and wedding and all those sort of things. There’d be a lot of stuff that you would have to give up in order to be able to achieve that goal. Not suggesting that goal is impossible, but it’s pretty aggressive based on what we’re seeing now. That’s why we’re harping so much on what the why is because sometimes it’s worth it just to kind of pause and triage and say, “Okay, where am I right now? And is where I’m at right now okay?” And then what small changes can I begin making? Because if I told you, hey, in order to do this, you got to start saving $5,000 a month. The very next thing I’m going to say to you is now you got to go figure out how to get more clients. You got to go work more. You got to go hustle, hustle, hustle to do that.

Financial Order of Operations (17:05)

Bo: So, I think we should take a step back, okay? We have, especially for young people that are starting out, we say, “Hey, a great tool that you can use to navigate your financial life is the Financial Order of Operations.” And I just thought it’d be helpful if we kind of just went through the Financial Order of Operations for a moment. So, you know, step one, Financial Order of Operations, is highest deductible covered. And we want you to list out your health insurance deductible, your auto deductible, your homeowners deductible. So, just run me through those really quickly. Do you know what your highest deductible is?

Cyrus: Yeah. Well, honestly, all of those are not necessarily a factor right now because I think I told Megan, so I don’t have health insurance.

Brian: Uh-oh. Oh, no. Why?

Cyrus: I’ve been off of my mother’s plan for 2-3 years.

Brian: And does she still have insurance?

Cyrus: She has it through work.

Brian: And why aren’t you on that insurance?

Cyrus: Not sure.

Brian: Because I mean typically that’s one of the big things that came out of the legislation is if you’re under 26 years of age—I mean half of our young employees are still on their family insurance plan. So for two or three years no health insurance.

Cyrus: Yeah.

Bo: You travel.

Cyrus: I do travel.

Bo: You do sports?

Cyrus: Yeah.

Bo: You work out.

Cyrus: Yeah.

Bo: You ride a bike.

Cyrus: Yeah.

Bo: You do a lot of things that would present an opportunity for you to somehow potentially injure yourself.

Cyrus: Yeah.

Brian: Do you feel like that’s wrong? Do you know it’s wrong? To not have health insurance with all these things.

Bo: Let’s not say wrong. Let’s not say wrong but let’s say risky.

Cyrus: Yeah. So that was one of the things I wanted to come to you guys with is I’ve looked into health insurance and obviously being self-employed, marketplace plans are pretty expensive and being a single guy currently I haven’t felt terribly terrified but I know that it would be smart to have some sort of emergency coverage and I just am not sure which direction to go.

Brian: Do you know why most Americans file bankruptcy? Number one cause of bankruptcy in this country?

Cyrus: Medical debt.

Brian: Do you think most of those people thought that they were going to get an accident? Because you’re in Chicago. You ride a bike in Chicago?

Cyrus: Not often. Mainly walking.

Bo: Okay. But okay. Yeah. Okay. Man, I’m trying to look. We are—okay, let’s pause for—let’s triage some solutions here, right? Obviously, you mentioned marketplace, right? That’s a place you could look for medical coverage. You said your mom is still covered on a group policy and you being a child under the age of 26, you could potentially be on her policy as well, right? That’s an option. Do you know how much—is your mom on right now? Do you have siblings and it’s family coverage or is it just her on the policy by herself? Do you know the answer?

Cyrus: I know that she’s paying for just her. We were once on it and then it was—I’m pretty sure something made it more expensive.

Bo: Sure. Yeah. When you go—when you have a group policy, if you go from just covering yourself, the employee to doing employee and a spouse or employee and family and kids, it does increase the premium. Do you have any idea what that premium increase was?

Brian: I bet it’s less than $300 a month. Let’s suppose for a moment it’s less than $300 a month. We have made a catastrophic mistake. You have so much talent. You have so much going on. Bo is being nice to you, but I’m sitting here and I’m not—mad’s not the right word, but I’m just frustrated that you have all this talent. You’re doing all these great things, but yet you’re willing to jeopardize all of it for what’s probably a $250 to $300 a month decision. Yeah. And when we’re talking about goals of $100,000 by end of the year, a million dollars by 30, we can’t come up with $3,000 a year to make sure that I don’t—one day on a Tuesday at 3:00 because I didn’t look left before I looked right or something like that and I get taken out and then I never recover. I mean that—that—that bothers me because it seems like a blind spot and I see a lot of financial mutants do this that it just—it hurts my heart. It really does because I see so much opportunity but I see your—I keep saying you’re a flame or extinguished but I just—seeing it completely getting wiped out. Not because you’re gone. I’m not talking catastrophic in death. I’m talking catastrophic financially because you just can’t recover because you have a $30,000 lien on you and you’re not able to go buy the equipment because you’re a filmmaker.

Cyrus: Mhm.

Brian: Is that a cheap thing to go out there and buy equipment or is it—

Cyrus: It was not. No.

Brian: So, I mean there’s probably some capital that goes into that.

Cyrus: Yeah.

Bo: So, do you have insurance on the equipment?

Cyrus: I do.

Bo: I’m not worried about myself. I’ll protect the equipment, but I’m not worried about—

Brian: Which is more valuable. The equipment or you?

Cyrus: I am more valuable personally. My gear has gotten hurt much more often than I have.

Brian: That—once—better to be lucky than good. It’s a lot easier to replace the equipment—the gear—than it is to replace you.

Cyrus: True.

Risk Management and Financial Planning Pyramid (22:10)

Bo: When it comes to financial planning, you’ve heard us talk about this in the show. There’s sort of this financial planning pyramid that we sort of walk through. And on the pyramid, you think about sort of the baseline is cash flow and spending. We get our first paycheck and we got to figure out how do we allow that to pay our bills. That’s basic budgeting. You’re four years into being an entrepreneur. So, you figured some of that stuff out, right? You figured out how to have money coming in, how to have money going out. You’re able to do that. Well, the very next tier once you just can keep the lights on is risk management. By being uninsured for the last couple years, you’ve just blown through that. It is the single thing that can derail you. All the ambition in the world, all the goals in the world, a million dollars by 30, get married, have kids, all these things, amazing goals to have, but if you’ve ignored the glaring risk-management issue, then you’ve put yourself in a pretty precarious situation. Now, you may not need it. You may not have a catastrophic injury. There is a chance that you will not have a bad outcome and there is a greater chance that you will have good outcomes based solely on the mathematics. Does that still mean that you would play that game?

Cyrus: No.

Bo: Absolutely not, because the risk that one bad outcome is not worth it even if it may be low probability because you’re young and you’re healthy and all these other things. So, it’s a risk you have to insure against. But what’s great is there are a number of ways where you sit right now to consider that. Obviously, we can talk about marketplace and we can go look at the different types of policies and what that coverage is. We already talked about another solution that may be available to you is hey mom if you were at open enrollment—because most open enrollments happen around October, November, December of each year. Hey mom, will you just see how much it would be to add me on to your insurance and guess what mom? I don’t want you to pay for it. I’ll write you a check.

Brian: I’ll Venmo you the monthly difference plus 20 bucks because I just love you. I mean, this is how simple this could be—at least that would be step one. There are some trade organizations where you can even get group insurance through that if you were a member of—because we’re both members. I’m a member of the AICPA. I’m also a member of this group called NAPFA which are fee-only financial advisors. I have disability insurance through both NAPFA as well as the AICPA because they usually link up. It’s not that these trade organizations offer the insurance. They link up with somebody and they say, “Hey, we’re going to give you access to all of our members, but you got to cut us one heck of a deal on it.” So, we have—I have life insurance through the AICPA. I have disability insurance through a lot of these things, but you can also get health insurance because I know they—especially the professional photographer association. It’s a known problem that most of your members are small business owners. What’s a big risk that small business owners have is health insurance. So they offer not only equipment insurance, not only cyber insurance, but also health insurance—introductions.

Brian: I think about a lot of our employees, there are groups—they’re not med share type plans, but they are—I think of there’s a farm bureau around here that offers. So every state has unique things that might not be exchange, but there’s still health insurance, their catastrophic protection. And then that last one is med share plans. You could get with like-minded people who just don’t like how health insurance is handled in America. So, they’ve created alternative paths where they say, “Hey, let’s take what is insurance in general?” Is a group of people get together and say, “Hey, I don’t think we’ll all get injured at the same time. So, let’s start pooling our money as a resource to figure out how we can protect each other from catastrophic events.” I mean, that’s the basis of what insurance actually is. And those things are cheap.

Budget and Emergency Fund (25:49)

Bo: Thinking through the financial planning pyramid. Obviously, you know, risk management is a big piece of it. You got to solve that, right? If I were to ask you what your burn rate is right now based on what you spend, how much does it cost you to be able to do the things that you do and kind of live the life that you want to be living at this stage?

Cyrus: $3,500 is what I told Megan and them.

Bo: All right. So, I don’t do public math. Very good. So, I’m going to do $3,500 times 12. So, you got to be making $42,000 a year after taxes just to be able to cover rent, groceries, utility, all that kind of stuff, right?

Cyrus: That $3,500 is also paying taxes, okay, on a quarterly basis.

Bo: Great.

Cyrus: And that’s also—there’s wants included in that. That’s not as low as it could be. That’s a generous—

Bo: So, you actually broke this down for us. You said, “Okay, rent’s about $1,000, groceries are about $450. We’re banking quarterly estimated payments of about $875.” And so we do have some miscellaneous wants and needs in there of about $1,200 bucks. And that’s—I got in here gym, car maintenance, eating out, those sort of things. So this is kind of—it’s a pretty good budget, right?

Cyrus: Yeah.

Bo: There’s no health insurance in here, but in the very near future, there’s going to be health insurance. Now, you have two options for that. You can either take health insurance out of your miscellaneous wants and needs or you go make more money. And I think that the thing is going to be you got to make more money, right? So $42,000 needs to be baseline. How easy is it for you to hit that? You said based on your recurring, you have, you know, $3,000 or $4,000 in topline revenue coming in. So you’re close-ish to being able to hit that or you need some of these one-off side projects to be able to do it?

Cyrus: I mean those recurring jobs are maybe 3 days of work per month. Okay. So, it’s pretty easy to hit. For example, this month it wasn’t hard to hit over $10,000. It just depends on the time of year.

Brian: Honestly, you only started this in March.

Cyrus: Yeah.

Brian: So, I mean, this is—I mean, can we pause for a moment? I’ve given you a hard time, Cyrus. I really have. But, I mean, we are a little over six months into this thing. Just so you know, as an entrepreneur to entrepreneur, my first year out, I made $17,000 for the entire year. Horrendous. I mean, so, and I always tell people—if you can’t hack it the first three years, I don’t care how good you are, you might just not make it. It doesn’t mean you didn’t have talent. It didn’t mean that you didn’t have a good business idea. It just means you didn’t have enough time to make it through the crud of what happens when you start a business because there’s a traction period for you. In 6 months to already be profitable. Man, that’s pretty freaking—$3,000 a month of reoccurring in the first 6 months. I mean, what I would be curious, you have to be careful because it’s a trap because, you know, if you get too much reoccurring, there’s not enough to go shoot for the sky on bigger things. But it’s nice having enough reoccurring that it covers all your stuff. If—are we to think that in six months in the future you’ll now have $6,000 a month of reoccurring or is that not the way you’re setting your business up?

Cyrus: It kind of just depends on my preference and I’ve tried to avoid recurring for the sense of all of the bigger jobs—I know they come and I know when they come.

Brian: Because they turn into a job. Is that what it feels like to you or?

Cyrus: Yeah, I don’t want to tie up all my time into—because the recurring projects tend to be the ones that you don’t love to do whereas the one-off ones are more fun and bigger budgets—they are just one-off. So I would say my plan was to get it around $5,000 reoccurring.

Brian: Okay, love that.

Bo: So when we look at your net worth statement, you have a really healthy cash bucket. You have about $19,000 in personal cash. You have about another $12,000-$13,000 in business cash. So, if you said that your burn was $3,500 a month, and I just take $3,500 times 6, it’s about $21,000 would be a six-month living expense. So, I love—okay, step one, deductibles covered. Check. Step two, employer match. You are the employer, so you don’t have to worry about that one. Step three, high interest debt. On this net worth statement, I don’t see any high interest debt. Do you have any debt at all?

Cyrus: I don’t have any debt.

Bo: Oh, it’s amazing. Debt-free at 22. So, we go to step four, emergency fund. And that’s awesome. Okay. So, you’ve got—$21,000 is what I kind of modeled. You probably carry a little bit extra because of the business. So, you’re kind of right there at a fully funded emergency fund, which is so exciting. That means once you’ve made it through steps one through four, then you get to the exciting stuff. Then you get to start building and you get to start thinking about how you’re going to grow towards that future, you know, million dollars.

Brian: Now, wait a minute. I think you—because Cyrus has given us some breadcrumbs here. There’s $19,000, but he said he’s about to be engaged in the next. Now, I’m not trying to spill the tea on ruining a surprise for your significant other. Yeah. But is she okay just not having an engagement ring?

Cyrus: In terms of those numbers. So, the $15,000 in savings, that’s what I consider my emergency fund. I wanted to ask you guys if that should be higher. Because right now it is around 3 to 4—

Brian: What do you think we’re going to say?

Cyrus: Yes.

Brian: Why? Why do you think we’re going to say yes? Because I love it when people ask me questions that they know the answer to. That’s, by the way, called a rhetorical question. Why do you think we think it’s going to be higher? I want you to answer this question because I think you have it in you to tell me why $15,000 is not enough.

Cyrus: Because of what I do for work and being self-employed and not having guaranteed—

Brian: See, I knew it. That’s great instinct. He knows it. You know it. So, what should that number—if we keep going—we’ll go therapist route versus financial planner route. What do you think that number should be based off of a $3,500 burn rate?

Bo: It should be—I would argue let’s take that $3,500 burn. Let’s just add some health insurance on top of that. So let’s assume that your real burn rate is probably closer to $3,900. I’m just using $400 as a placeholder, right? Let’s add to $3,900. So I just think $3,900 times 6 months because you are a solo income earner and it’s going to be somewhere between $23,000-$25,000. So for an entrepreneur I would say an appropriate emergency fund for you would probably be $25,000 in liquid cash.

Cyrus: Okay. I want to explain my reasoning for the $15,000 and how I came up with that was that that $3,500 burn rate—like I said is being generous and that’s living the lifestyle I want. I’ve always heard that emergency fund is your necessities covered per month. And my necessities are $2,500 to $3,000.

Bo: It’s a great exercise to work through. If I had to live off of spam and ramen, could I do that? But realistically, a true emergency fund should reflect your current lifestyle. Hey, to live the life that I want to live to give me enough coverage to make it for 6 months. I don’t necessarily want to have to cut down to the quick. Now, what happens in those events because we’ve worked with clients who’ve lost jobs or they lost a big client and they had to go there. They end up doing that. But what that does is that six months at this level of spending when they actually live down here, it actually gives them seven, eight, nine months. Does that make sense? So, we would rather you model it off the way you’re actually living than some hypothetical, oh, if I had to cut it down, I could. Does it make you nervous to hear that we would say you probably need about $10,000 more in your emergency fund?

Cyrus: Not necessarily.

Bo: How would you anticipate getting there?

Cyrus: Like I said, so everything in terms of income is seasons for me, especially in Chicago. So winters are slow, but the fall is big. So I know that I have big months coming. So I would just kind of attack that in the next—

Brian: You’ve hustle during those months.

Bo: No, I just—when you say I know that the fall is big. Isn’t this your first fall?

Cyrus: Second.

Bo: Second fall in Chicago. Okay. So you’ve at least—you’ve done this once before and it was big last year. So you’re supposing the same thing would likely be true this year.

Cyrus: Yeah.

Bo: Okay. Got it.

Retirement Savings and Projections (33:45)

Bo: Step one is we got to get the emergency fund up. Well, remember we kind of started with the context of, hey, I want a million dollars by the time that I get to 30. And in order to do that, I need to be investing—growing $5,300 a month. We’ve already uncovered based on your current base burn, $3,500. We need to make at least $400 more so that we can have health insurance. We need to make at least more on top of that so we can start adding to this emergency fund. And then once we do that, then we can move on to the next step in the financial planning pyramid, which is investing and building and growing. We can go from step four of the Financial Order of Operations to step five. Yeah. So are you currently saving to a Roth, putting money in Roth? I see that you have a Roth IRA. How are you currently handling that?

Cyrus: I maxed it out this year and last year.

Brian: Okay. Is that just a one-off?

Cyrus: It was when I had bigger months, I just do it and just take care of it.

Bo: And for entrepreneurs, I don’t hate that strategy. Now I wish that would have been done after you had the fully funded emergency fund but now you know right—and so that’s great. One of the things we love seeing and we encourage all of our entrepreneurs to do this—while it’s easy to think through okay man when I get these big—when I have these big months I have a lot of profit—low expenses—then I’m just going to do these big dumps in and that’s great—again a lot of nonlinear income is required to do that but what’s great about being young is would you recognize it does not take a whole lot for you to be saving on a monthly and consistent basis to make a huge impact, right? Like it doesn’t—it’s not like you have to be saving $5,000 a month right now to be able to live the life you want to do—to hit these goals that you said—to be able to be selective in the work that you do, spend time with your future spouse, spend time with your future kids. If you can start the behavior of saving early and systematically, it’s amazing what can happen. And we said, “Okay, well, if we can just—if we can triage Cyrus’s situation and kind of get him through the Financial Order of Operations to the point to where he’s just maxing out his Roth IRA, and I think the number is $583 a month. So again, we got to pay for health insurance. We got to get emergency fund. But if we could just get you to where every month you could put $583 a month into your Roth IRA, just doing that at your age gets really, really exciting. And while it may not be a million dollars by age 30, what it turns into by age 30 is pretty exciting. Look at this. We said that if all you do starting right now, you got $51,000 net worth, but you just started investing in your Roth, that’s all you did, max out your Roth every single year, you’d be at $190,000 by 30. Now, this is why this gets us excited. That’s not a million, but a million is sort of superfluous, right?

Cyrus: Yeah.

Bo: We say that for most folks, when you’re working through the milestones you want to hit on your financial journey, if by the time you get to 30, you can have about one time your annual salary in investable assets—in liquid assets—you’re doing pretty good. So, at 30, if you’re making $190,000 at 30, that’s pretty awesome. I would say that the business has worked. You were now successful at that point, but if you have almost $200,000 built up by age 30, how’s that make you feel?

Cyrus: Yeah, I mean, I’ve always said that I know the million number is a very big goal, but I know based off of what I’ve done so far and maxing out the Roth at a minimum, I’ll be fine—I know that by 65.

Brian: Okay. Not by 30, by 65. Because we agree, you’re not planning on checking out at 30, right?

Cyrus: Correct.

Brian: So this idea of I got to do all this stuff so early may be a little misplaced because I would argue if you had to make a choice right now today and all you have is the money coming in. I could either manage my risk and buy health insurance or I could max out my Roth. Which one do you think that we’re going to suggest you do?

Cyrus: The health insurance.

Bo: The health insurance. Yeah. But if you can just get some money working, some money saving, what that’s able to do for you in the future becomes really, really exciting. And then what’s even greater is you know that at age 30 when we think about the wealth multiplier—if all you did was have $190,000 at age 30. Do you know what that turns into by the time you turn 65 if you don’t save anything else? It’s wild. We know that the multiplier for a 30-year-old is 23. So just that $190,000 is on the way to be $4.4 million. If all you did, I’m going to reframe this. If all you did was save, max out your Roth IRA from this year until age 30 and then stop saving—$4.4 million. Think that you and your spouse and the future kids would be okay with a $4.5 million portfolio?

Cyrus: Yeah. I mean, we’ll see what inflation does over the next 40 years

Bo: But, okay, you know, let’s go. Let’s just—okay, then let’s say at age 30, you don’t stop doing your Roth. Yeah. What if you just keep maxing out your Roth all the way to 65? You know what that turns into?

Cyrus: $7 million.

Bo: Our goal is we want you saving 25% of your gross income. Yeah. But rather than you trying to save all of that right now today or as Brian pointed out 95% of your gross income. Yeah. Just doing something as simple as starting early and being okay with that puts you well on the path to $7 million by the time that you get to retirement age.

Brian: Realize Cyrus, you’re still in the first year of this enterprise. So when Bo asked you all these questions how we’re going to do this, I think it’s back to your original thing that got you here is I’m going to bet on myself because you’re still in the grow. I love it working with entrepreneurs when they start hitting their stride and start—things start popping. And I think you’ve got that coming. I really do. So I did the math. I was like, “Okay, so Bo just showed you $7 million. You’re already doing that. You’ve already told us you did it last year. You did it this year. So we need to do more.” And so if I add more, I was like, well, the next thing if you’re doing the Financial Order of Operations, we’re going to talk about maxing out retirement. Well, you’re self-employed. We could talk about solo 401(k)s, other things. So any type of 401(k), you could do $23,500 plus the Roth IRA up until, you know, his income starts getting over the threshold. Then we could consider doing a backdoor Roth contribution. Just putting that amount of money for just the next eight years if you just did a 401(k) plus your Roth, you would be $483,000 by the time you were 30 years old. So not a million. But holy cow—to have that $483,000—$482,851. You know what that turns into based on a wealth multiplier of 23? $11 million.

Business Structure and Tax Planning (40:16)

Brian: As an entrepreneur, I mean, you’re starting to catch some success. How are you structured? I mean, what’s all the business things that you’re doing? Are you a sole proprietor? Are you a C-Corp? What, you know, an LLC? How have you structured the business?Is that okay to talk about?

Bo: Well, I was going to ask, do you have questions around that? Obviously, being a new entrepreneur, a relatively new entrepreneur, you’re still pretty early on. Are there questions that we might be able to answer for you that would be valuable or be helpful as you’re thinking about building this business?

Cyrus: Yeah. I mean, so I am an LLC that’s electing as S-Corp. Okay. And so that’s where the $35,000 salary comes in. So for the most part what I do is that salary—once taxes are taken out and everything, it becomes a not livable number for me. It’s $2,300-$2,400 and I just save that and then I live off distributions.

Brian: Now who told you to structure that way?

Cyrus: I just went down a deep dive of YouTube videos.

Bo: But do you know the why? Why do S corporations have to have salaries?

Cyrus: So last year I was just solo single member LLC and had to pay a substantial amount of taxes all at once and I knew that I wanted to do just self-employment tax on the salary and then just pay.

Brian: So let me—because I worked in public accounting preparing taxes for over 16 years. I do want to—because I think this is something really important for business owners to understand. It is a unique thing when you have a subchapter S. You’re putting yourself in two silos. You are the employee of this firm and then you’re also the owner of this endeavor. You’re supposed to—if the IRS would tell you this. I’m just telling you so you keep yourself—ask yourself what would Brian tell me to do in this scenario. Well, I’m going to tell you to do—pretend the IRS is sitting across the table. What would you have to pay somebody to do your job within the business as the employee of the business doing the work within the business? And if you can answer that honestly, the IRS is going to be okay with it. That leaves Cyrus the business owner. Yeah, there’s going to be a premium that you get for taking an investment—going a path less traveled and if it worked out well the IRS has no problem with you just paying only income tax on that. But if they find out that you’re shortchanging them on the labor and working in, they have a problem with that because just looking to see if we can avoid payroll or self-employment taxes, they kind of frown on that as being the why. It doesn’t mean that you don’t try to balance it, but I just want you to always—that’s why I think I was a good CPA is that I would try to educate my clients to know the why so that we could honor what the desire for the IRS is, but also think about as a business owner on how we maximize this tool of being both an employee of the company as well as the owner of the company. When you’re dealing with entities that can just legally take your stuff, if you go wrong, treat it with a level of respect. Don’t be cavalier with it. Don’t just because you saw a YouTube video where somebody said you can deduct anything, you know, because there’s all kind of videos out there. What was the react we did to a TV show? Which I thought was so good. That I loved how they set that up where it was—he was deducting facial cleansers. He was deducting lamps in his house. Don’t fall prey to that culture. There needs to be a why. And if you can structure your business that way, you’re going to be so well served in the long term.

Cyrus: I picked that salary number based off of some of my fellow studio mates and what they were paying themselves and they had larger gross incomes than I do.

Bo: So that seems reasonable. $35,000. Yeah, that does not seem—that doesn’t seem unreasonable to me. Not knowing a ton about your industry, but I don’t think that seems out of line. An S-Corp probably or an LLC electing as an S-Corp probably makes a lot of sense from a business structure standpoint. So I’d say you thought through that. Well, what else could we answer that might be valuable for you?

Questions: Solo 401(k), Car Purchase, Roth Investments (44:13)

Cyrus: Yeah, I have a few written down. Let me pull out my list.

Brian: I love it.

Cyrus: Okay. It’s funny. My first question was, “Is my emergency fund strong enough?”

Bo: No, you got that. No. We—but I mean, check.

Cyrus: Okay. So, as being my own employer, at what point in terms of my business’s income does it make sense to do a solo 401(k)? Oh, look at that. I know the concept of being able to put into it as the employer and the employee.

Bo: Financial Order of Operations is the guide for you on this. I think step one, you got to build up your emergency fund. You got to get through step four. I think then you get to step five, I think you got to be maxing out your Roth IRA. Great. Once you’ve done those things, if you find, man, I’ve still got some discretionary income. I can go open up a solo 401(k). And what’s great about solo 401(k)s, Brian already alluded to this, is not only can you do salary deferral contributions, but you can also do employer profit sharing contributions. But one of the unique things about being an S-Corp is that your retirement plan contributions are only going to be based on the salary that you pay yourself. So if you pay yourself a $35,000 salary, you can defer $23,500 and then the profit sharing will be based off that $35,000 salary. So the answer of when does it make sense to do that is when you have additional capital that you can save and invest for the future. And the beautiful part is now they’ve gotten easier. You can go back in time with solo 401(k)s now. Meaning even if you don’t open it this year, you can open it next year for the prior year. And some custodians allow you to do Roth solo 401(k)s where you might not actually get a benefit on the tax side this year from doing a pre-tax salary deferral, but you can do a Roth salary deferral. And if that makes sense in your circumstance, it can be a fantastic planning opportunity long term.

Brian: You know, and our savings goal is 25%. And for most 20-year-olds, that’s very—as 20-somethings, that’s very aspirational because we don’t—I don’t really count that you’re going to be able to get to 25% that young. But I think you do have the opportunity. And just what I was using in my assumptions, once your business income plus your salary is $122,000, if you take 25% of that number, it’s pretty much the salary deferral portion of the solo 401(k) plus the, you know, Roth IRA contribution, that’s amazing. So, if you just—a base level as you start separating from what your living expenses are, hold yourself accountable to at least be saving and investing 25%.

Cyrus: Recently, my car broke down in Chicago and I’m lucky enough to be in a position where I don’t need it. So, I’m selling it for dirt cheap and I don’t need a car or car insurance. Or car insurance. So, saving money there. I’m looking to purchase a car coming next summer because I plan on moving to Austin where I’ll need a car. Okay. Do I aggressively save enough money to buy something in cash or do I do the 20/3/8 and just get a smart car loan?

Brian: Have you done any 3D glass planning? You put a lot in that question. I mean, you said, “Hey, I don’t need a car now, but I probably will in a year from now. I’m also going to be moving to Austin. We know because we have the additional context from the earlier in the conversation—going to be getting married.” You got a lot of things that are about to change again. Man, you loaded up. I can’t answer that, but we could model that. You really do need to get a spreadsheet out and start modeling. Hey, this is what I got going on now, but in a year from now, this is what I’m going to have. Two years from now, this is what I think. Three years. I wouldn’t go too much further than 3 to four years. But I would start and then I’d do the treatment for those who don’t know our content. When I say put on my 3D glasses, I want to know the dream plan. That’s where everything’s crushing it, everything’s working. Run a spreadsheet with those scenarios over this 3 to four year period. And then I want to have the down to earth—this is what I think will happen even with some bad things from life happening but good things happening—and then don’t skip the doodoo plan because what happens if you move to Austin and all of a sudden your work dries up but you’ve gone and financed this car even with 20/3/8 and it all is just not working out like you thought. I’d rather you be able to address those things on paper than in reality. Do you have something to add to that?

Bo: No, no. I think you appropriately laid out all the variables that would change. I do think that what will make sense is you will have to increase your emergency fund higher than what we suggested. And then at that time, you’ll have to make the decision, okay, are we married? Are we living together? Can we be a one vehicle family? If we can’t be a one vehicle family, do I need to buy a car? What kind of car do I need to be? Will I be using it for work? Based on the price of that car. Is it something that I can pay cash for or is it something based on interest rates and the cost of the car where 20/3/8 makes sense? So, it’s like you need to start saving for additional capital now, but you won’t be able to answer the how question until you actually get there and fill in some of those other variables.

Cyrus: My next question is in terms of my Roth investments, how aggressive should I be inside of that account? Because I’ve just been doing SPY VTI. But I’m not sure because obviously there’s tax benefits to that account. Should I be more aggressive in that account or is that something to just keep in my brokerage account?

Bo: I think that being aggressive inside a Roth makes tons of sense, right? You want to—you’re super young. You want to maximize your tax-free growth. So buying a really low-cost index fund, US large cap, whatever it makes a ton of sense. Another thing that you could consider again based on your age is a long-dated target retirement index fund. If you were to go pick a Vanguard or Fidelity or Schwab, something out to 2060-2065, the vast majority of that holding is going to be in US large cap anyways. It’s going to be a low-cost S&P 500 index. I don’t think there’s anything wrong with that. Right now, with where you are in your wealth building journey, I don’t think I’d be thinking about allocation at all. I just want to be thinking about how much can I save and start putting that money to work.

Cyrus: My next question, I have a lot of questions. I’m sorry. In terms of certain purchases that I know I’m going to make in 12 to 18 months—for example, not necessarily what I’m about to do—a car or a ring because I already plan on keeping those in my high yield savings accounts that I have at SoFi, but let’s say down the road I know I’m going to buy a house and I have a down payment. What’s the timeline where it makes sense to keep that money in a brokerage account getting bigger returns than a high yield savings account?

Bo: In our view, probably 60 months. And I’m being very specific there, but five years or somewhere around that is probably the threshold. So if you think that in the next five years, four to five years, you’re going to be using the capital for a down payment or some intermediate term expense, I think there’s nothing wrong with just parking it inside a high yield savings account. Once you get past that four to five year time frame, then I think you could probably use a brokerage account. You could dollar cost average. You could allow those dollars to potentially have some higher earning potential.

Cyrus: That was my last question.

Brian: So awesome.

Homework (50:57)

Bo: Are you ready for your homework? I bet you can’t guess what the first one is.

Cyrus: First one is calling mom.

Bo: You need to call your mom. You need to get some sort of healthcare. You offer her extra to Venmo. You know, are you going to give her 20 bucks, 30 bucks, 50 bucks? You know, he’s enterprising. He’s going to ask for a discount. Mom, I know this cost you $200, but I’ll offset the cost by $100. He’s going to use that love consideration to get a discount. You could obviously look at group insurance on your mom’s plan. You could go out to the marketplace and you could look at coverage there. Then you could also get some sort of medical sharing program.

Brian: Med share is better than nothing.

Bo: So having some sort of insurance coverage in place makes sense. Next thing is we think you ought to build up your emergency fund to get it to a fully funded six months of living expenses. That’s going to be $25,000 to have a fully funded emergency fund. But then also need to think through am I going to have some of these other intermediate term expenses. So maybe that $25,000 needs to be even a little bit higher based on the move to Austin and the automobile and that sort of thing. One of the things we’d love to see you do is turn on monthly automatic savings. You know, even if it’s just maxing out your Roth IRA at the $583 a month or if you can’t do that, just starting at $100 a month just to get that money working for you systematically. As you close out this year and you look at your total profit from the business, it may make sense to begin investigating solo 401(k) or SEP IRA, some sort of retirement plan contribution as a means to create some tax incentivized growth. And then really put together a plan around what next year’s car purchase looks like. Okay, how much—what will be my circumstance when it’s time to buy the car? And if that is my circumstance, what’s going to be the best means and mechanism to get the car and what I need to do between now and that point to be able to do it.

Brian: Bo, if other people want to come on Making a Millionaire, what do they need to do?

Bo: If you’d like 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 free resources, go to moneyguy.com/resources.

Brian: Guys, I’m your host, Brian, joined by Mr. Bo, and of course, Cyrus. Money Guy team out.