Financial Advisors Debunk TikTok Money Advice

TikTok’s Money Rules — Debunked (0:00)

Brian: Hey, hey, hey. We’re back with some TikToks that are unleashed and about to be debunked.

Bo: Brian, I am so excited. Here we go.

Clip #1: TikTok’s 4 Money Rules (0:08)

[Clip] Number one, take your monthly income and multiply it by 200. That’s a rough target for how much you should aim to have invested if you want your investments to eventually replace your income. Number two, take your monthly income and multiply it by 0.1. That’s the minimum amount you should aim to invest every single month. Number three, take your monthly income and multiply it by four. That gives you a simple target for how much you should have saved for emergencies. And number four, take your monthly income and multiply it by 0.55. That’s roughly the maximum you should aim to spend each month on essentials like housing, groceries, bills, and transportation.

Bo: I’m not great at public math. So okay, one thing says take your monthly income and multiply it times 0.1 to figure out how much you need to invest. That’s a 10% savings rate. I kind of disagree with that.

Brian: I think that’s a little low, especially for young people. Well, if you’re in your 20s, I’ll just be glad if you do anything, because we know the typical starting age for saving and investing in America is around 30. So if you’re in your 20s, yeah, let’s start off with 10%.

Bo: But what was the first one? He said take your monthly income and multiply by 200. I think rules of thumb are helpful, but you want to make sure that you have a good one, one that actually ties, because if all you do is that simple stuff that he walked through, I don’t think that’s going to be quite right. You likely might be undersaving. And he also said take your monthly income and multiply it times four and that’s how much you have in an emergency fund. I would argue that may or may not be right. What I’d rather you do is take your monthly expenses and multiply those times either three or six to determine how much of an emergency fund you should have. Four times your income may or may not be enough.

Clip #2: Turn $50 a Week Into $1 Million? (1:51)

[Clip] Here is exactly how you can turn $50 a week into $900,000 in just five years. Number one, open a Roth IRA through Fidelity, Schwab, or Vanguard. Takes 10 minutes. It’s free and you never have to use it if you don’t want to. Number two, now invest $50 a week into an S&P 500 fund like Fidelity’s FXAIX or a growth fund like Vanguard’s VUG. Number three, do this from 25 years old to 65 years old and you’ll most likely wind up with close to $1.4 million, 100% tax-free, and you contributed $104,000. Number four, but if you wait until 30 and do the same thing until 65, well, that investment is now only projected to grow to about $493,000. That’s a $900,000 hit, all because you waited just five years to start investing $50 a week.

Bo: All that math is good and that is true. If you wait in the early years to start saving and investing, that is a very expensive, very costly decision. The earlier you can decide to do it, the better off you’ll be.

Brian: The 88 times over concept that we’re always talking about is a dollar for a 20-year-old has the potential to be 88 times over, $88 at retirement. More than likely, even if you discover us in your 30s, you’re going to live to be in your 80s. So you still have dollars in your army of dollar bills that are also going to grow significantly. Get in there. Don’t wait for tomorrow. Start today.

Bo: If you want to see how powerful your dollars can be, go check out our wealth multiplier tool where you can see exactly what each dollar you put to work can turn into.

Clip #3: “Don’t Diversify Too Early” (3:20)

[Clip] Things my parents taught me about money that schools didn’t. Most financial advice only works once you already have money. This is what works if you don’t. Number one is don’t diversify too early. Diversification protects wealth, but it doesn’t create it. If you split $500 into 10 different things, nothing will move. But if you focus $500 on one path, whether it be a niche or a business, it can compound. A lot of people stay stuck because they spread themselves out too thin. Second is buy time before you buy assets. If $100 can free up 10 hours of your time, and in those 10 hours you can earn $500, that’s a 5x return. Time is the only asset that can increase your earning capacity. Disclaimer: I don’t know anything about anything, so don’t come for me.

Brian: I love the concept of focusing on buying and owning your time, but the reality is in the beginning you’re probably going to have to take a sacrifice and work somewhere. Just be disciplined so that you can actually save that money and start putting it to work.

Bo: I also love that in the beginning she said be careful not to spread your money across too many different things. And I would say be careful not to major in the minors. Rather than going out and trying to buy 10, 15, 20 different things, a low-cost target retirement index fund or a low-cost S&P 500 index fund is going to get you the diversification that you need without having to overthink it. Keep it simple in the beginning.

Clip #4: Save Half Your Income for Taxes? (4:31)

[Clip] You only get in debt when you don’t understand the breakdown of your finances. When you make money, split it in half. Create an account, call it the tax account. Put half of that there. As you make money, you always put this money in the tax account. I never have to worry about giving the government their money because that money’s over there. I’m never going to touch that money because it’s not mine. So now off of my half, I’m going to take another half. This half is going over here. This half is for my next real estate investment. I’m only living off a quarter of my financial gain.

Brian: I love it. That is fantastic financial advice. Now look, if you’re young and you’re not in your peak earning years, maybe you only have to put 25% towards the government. But I would tell you, take the time, figure out, look at your tax return next time you do your taxes or go look at last year’s taxes. And then let’s actually figure out how much margin do you have in your life so that you can live on less than you make and put that money to work in your army of dollar bills.

Bo: As a financial advisor, the number one thing I see derail small business owners, entrepreneurs, and side hustlers is that tax bill that shows up in April that they were not prepared for. The business owners, entrepreneurs, and side hustlers that understand every dollar that comes in and you put a little bit aside, put a little bit aside, put a little bit aside because the tax bill is going to come due — they do not have the same stress that others do. When April rolls around, make sure you are running your finances that way.

Clip #5: This $10,000 Loan “Hack” Makes No Sense (6:00)

[Clip] Next time you’re short on money, just ask someone to loan you $10,000, but to only give you $5,000 of it. And that way, you owe them $5,000 and they owe you $5,000, and you can just call it even. Follow me for more financial advice.

Brian: That only works if it’s your parents or your spouse, because there has to be love as the consideration for somebody to kind of let that bad math slide.

Bo: But if anybody wants to get into that sort of loan business, I’m happy to put in an application right now. I’ll borrow $10,000.

Brian: You would not be interested in that because as soon as I get $5,000 for free, I would ache inside to pay you back.

Sponsor: Monarch Money (6:51)

Brian: So Bo, here’s the thing — getting advice from TikTok can be a little bit like shopping at a yard sale. Every once in a while you’ll find something really good, but you’ve got to sort through a whole lot of junk to find it.

Bo: Yeah. One thing that I’ve learned both working with clients and on my own journey is that good financial advice is rarely one-size-fits-all. And before you take anybody’s advice, you need to understand what your own money story is. That’s where Monarch can help.

Brian: It brings your accounts, investments, savings goals, and spending together in one place so you can actually see your complete financial picture.

Bo: We personally use Monarch, and I love having that visibility. It lets me dig into the numbers and see how my wife’s and my spending is trending over time, and we can make sure our money is still aligned with what our ultimate goals are.

Brian: And Monarch’s AI weekly recap helps with that too. It can flag spending changes and show you upcoming expenses so you can stay on top of what’s happening with your money in real time.

Bo: Yeah. TikTok can give questionable money advice. We can debunk it and show you that there’s a better way to do money, but your own numbers can tell you what you actually need to work on. Write your own money story with Monarch. Use code moneyguy at monarch.com to get your first year of Monarch Core half off at just $50. That’s 50% off your first year at monarch.com with code moneyguy.

Clip #6: Is Working a 9-to-5 a Mistake? (8:09)

[Clip] Something my mentor told me that stuck with me even though it was years ago is that he who works all day has no time to make money. If you are relying on an hourly pay to make your way, you are cooked. And I’m not trying to roast you obviously. I want you to succeed. That’s why I’m telling you this. If you ever want to be a millionaire someday, think about your hourly wage right now. Say $500,000 and do the math. $500,000 divided by 15. You would have to work 33,000 hours. You would have to work 1,388 full days. So if you work a job that doesn’t take too much of your time, you should be using literally all of your time to try to make more money. If you really want to make it, it’s going to take every single second of your time.

Brian: I’m about to fall asleep. Hey, can I give you a little YouTube advice? Record your content before you take your melatonin.

Bo: He was nibbling all around the edges because I do agree with him. If you are working all the time and you are trying to let your wage be the thing that gets you to financial independence, it’s going to be a very, very difficult thing. If however you take the wage that you earn and you chisel off a little bit of that and you deploy your money to start working for you, well then not only are you working for yourself, but then your money is also working for you. And over time, your money actually begins to work harder than you can. So even what you can go out there and earn in 8 or 10 hours a day is less than what your money can earn. He was kind of almost sort of trying to get there, but I think the melatonin kicked in and he just lost the flow.

Clip #7: Real Estate, Stocks, or Starting a Business? (10:02)

[Clip] Real estate is for tax and it’s for long-term wealth. It’s where you go to have savings in tax and have long-term wealth, not accumulation, but preservation. So we go there to skip the IRS and we go to real estate so that long-term I have more safe assets. Stock market we do to beat inflation. So we want 10% sort of max per year. That’s why we invest in the stock market. Neither of these two things, unless you have a ton of money, are going to make you rich. Unless you’ve got $20 million in one of them. Exactly. Then you can — if you have a ton of money, these two things are great, which is why most people who are really, really wealthy own a ton of this after they’ve made their money. The only way that you’re really going to make your money is by starting or buying businesses. You can have an infinite return on a business. You can’t make real estate make you 50x return in one year. In buying a business, you can.

Brian: In one year. That’s the limitation.

Bo It’s a false premise. We get to work with thousands of people in our day job as professional financial advisors. And these are engineers and accountants and school teachers and employees and W-2 collectors who’ve recognized I can earn a wage, I can save a little bit of that for the future, and I can build substantial sums of wealth without starting a business, without being an entrepreneur, without having to go create something. It’s just not true that you can’t build wealth that way.

Brian: If you have a talent that you know is world class and people will eagerly give you their money over and over again, wow, what a feeling. Then yeah, you can pursue that. But don’t skip the steps of building up your foundation, building up your cash reserves, and making sure you have the bridge amount of money to get you to the other side of success. Most people take the passion, don’t do the preparation, and then it falls into a fiery ball of disaster and failure.

Clip #8: “Making $30,000 a Month Isn’t Hard” (12:03)

[Clip] Hi guys, my name is Britney. I make $30,000 a month. I do not work a 9-to-5. I think working a 9-to-5 is a scam. $30,000 a month is $360,000 a year. I work for myself and I’m going to teach you guys how to do it because we are not gatekeeping on this app. Making $30,000 a month is honestly not very hard. You just have to learn the systems and put the systems in place. People want to think it’s hard because it’s like a mental block in their head. But actually going to work and working 9 hours a day is way harder than learning how to monetize a skill and then make money off of that. I learned how to invest in the stock market, read stock charts, and I invested in tech and AI companies within the S&P 500, and that’s what made me a ton of money, which got me out of my 9-to-5. I flipped and twisted and turned my money so many times in the stock market by taking money from my job, investing it into the market, and I flipped $2,500 into well over $100,000 just by investing in tech and AI companies. And then boom, you have all of this money. I did not work not even one second for it, and it’s well over $100,000 today.

Brian: Look, there’s a lot going on here. First thing I want to encourage anybody to do is go check out the SPIVA research. This is where it shows professional money managers versus just the S&P 500. And I’m just telling you, professional money managers get smoked by the index out there. So to think that she is telling you it’s so easy for you just to go pick stocks in the market and turn $2,500 into $100,000 — I don’t know. Maybe she got lucky and she put $2,500 in Nvidia a long time ago. There are unicorns out there, but past performance is not indicative that you’ll be able to reproduce that, especially enough to go create content and tell people this is how easy it was. I would rather instead of you trying to beat the market, just be the market. We live in a wonderful world of innovation right now and you can actually own a part of it by doing index funds and simple stuff like that, that doesn’t have high costs and creates a lot of success.

Bo: The absolute worst thing that a new investor can do is get lucky on their first time. The worst thing you can do is make money on a bad idea, a risky endeavor, a kooky thought, and it creates this overconfidence that makes you think you have something figured out and you’ve done something that’s repeatable. If you’ve bought a bunch of AI stocks and tech stocks and you had a bunch of success on that in any given quarter, month, or year, I’d like to see you do it again next year and then the next year and then the next year, because people just aren’t able to do that. That’s not the way the financial markets work. And so her saying, “I figured out how to unlock $30,000 a month in income” — I’d love to know how she was doing in 2022. I’d love to know what she did in the fourth quarter of 2018, because the markets don’t always work that way. That’s not how investing works. That’s gambling. And it sounds like she got lucky on her first few bets.

The Better Way to Do Money (15:14)

Brian: Look, you’ve probably caught on that every one of these videos that we’ve talked about today has a kernel of something that nudges up against the truth. But if you’re actually trying to build a life where your money works harder than you do and you actually want to have success and you’re harnessing the power of compounding growth, you need to be careful who you let in your head. And that’s why I would tell you that we know for a fact that there is a better way to do money. We’ve been creating content and educating people for 20-plus years. Go to moneyguy.com/resources. We will load you up with free advice on how to get in there. We have calculators, we have downloads, and we have lots of resources for you to become better with this awesome tool of money that, if you learn how to harness it, can literally create independence and help you own your time that much sooner. I’m your host Brian, joined by Mr. Bo. Money Guy Team, out.