Financial Advisors React to Jaw-Dropping Money Clips

Jaw-Dropping Money Clips (0:00)

Brian: The content team has given us some videos to chew through and they’ve told us they’re jaw-dropping.

Bo: Brian, I am so excited for my jaw to drop. Let’s dive right in.

Clip #1: The $42 Million Peanut the Squirrel Coin (0:11)

[Clip] I put I think $1,300 into a coin called Peanut. Do you know when they killed that squirrel? Peanut the squirrel. So I’m like, “This makes sense. This might go up.” And I sold it for a loss. I put that $1,300 in and I sold it for $600. A week later, Binance added that coin as a tradable asset. It went from a $50 million market cap to $2 billion. My Peanut holdings right now would be worth $42 million.

Bo: Hindsight is always 20/20 when it comes to investing. I don’t know that this guy specifically would have watched his Peanut holdings run all the way up to $42 million.

Brian: Does that count as one of those poop coins? I actually expect my money to work for me. I’m not hoping to get lucky. Some people go with that saying it’s better to be lucky than to be good. I’m leaning more towards being good and consistent than just being lucky and hoping that lady luck smiles on me.

Bo: I love that.

Clip #2: How Would You Invest $1 Million? (1:07)

[Clip] How would you invest $1 million? Would you put it all into the S&P 500 or would you use it as a down payment on a property?

[Clip] S&P 500.

[Clip] S&P 500 or buying into a franchise?

[Clip] S&P 500.

[Clip] S&P 500 or buying a business that already makes money?

[Clip] Buying a business that already makes money. Depends on how much money it makes.

[Clip] Business or investing it across 20 startups?

[Clip] Buying a business, because when you have one business and you’re investing in it, you actually control all the risk in it and you can actually operate that business.

[Clip] Buying a business or Bitcoin?

[Clip] Buying a business.

[Clip] Buying a business or multifamily real estate?

[Clip] Multifamily, for one important reason. When you buy single family real estate, you’re buying real estate. But when you’re buying multifamily, you’re actually getting two things. You’re getting the real estate and you’re getting a business that works together. So in this case, you’re not only getting a business, but you’re also getting real estate. It’s a two for one.

Bo: I don’t disagree with a ton of what he said, although some of those are much easier to do than others. He said okay, if you had a million dollars, how would you do this? A lot of times if you want to go invest in multifamily real estate and you have a million dollars to operate with, there’s likely going to be a whole lot of debt. Whereas if you take that million dollars and put it in the S&P 500, you don’t have any debt. So those were not exactly apples to apples comparisons throughout that entire flowchart.

Brian: Good on him. He gave binary answers, you know, this or that. But I’m here to tell you life is not like that. For the majority of people out there who are not in Step 8 of the Financial Order of Operations, the S&P is going to be your friend. Everybody loves to do the math of what leveraged debt will do for you because exponentially your money can grow. You put down a small amount of money and then because it’s all leveraged up, you’re going to make 10 to 20% because of the leveraged debt. The problem is when you’re using other people’s money to pay that debt and then they quit paying you the rent, all of a sudden you find out that leveraged debt can get really expensive really quick.

Clip #3: Going Into Debt for Disney (3:09)

[Clip] Did you know that nearly 50% of parents go into debt to take their kids to Disney? The average parent spends $6,000 on their Disney trip. Things like flights, park tickets, food, and hotels are all really expensive when you go to Disney. But by going into debt, you’re putting your family at a huge financial risk. So instead of going into debt, save up in cash. But there are also really great ways that you can travel hack to reduce those costs significantly when you go.

Brian: The most important thing when you go on a family vacation is the time with the family. It’s not the expense of the trip. It’s actually how strong are the memories and how good are the things that you’re doing as a family to build that depth of relationship.

Bo: Spending $6,000 for a Disney trip but putting that on a credit card and paying punitive interest rates on that — that one trip that you thought only cost you $6,000 very likely could cost you $7,000, $8,000, or $9,000 by the time you get it paid off.

Brian: And don’t skip out on the ounce of preparation. The difference a week or two can make on when you go can mean you don’t have to buy all the premium stuff like the Lightning Lanes and other add-ons. If you go when the crowd calendar is low, it’s going to be cheaper and more than likely there are going to be many more discounts that will lower that price for you.

Clip #4: The True Cost of Delivery Apps (4:35)

[Clip] So if a large iced coffee is $4.99, you would pay $4.99 plus tax.

[Clip] No, you would pay $5.75 plus tax. You don’t see it because the restaurants raised the menu prices to cover the fees. Which means the total you would pay would be $6.15.

[Clip] No. Why would you think that’s not enough? You don’t see it because you still need to add the $4.99 service fee. Which means the total you would pay would be $11.14.

[Clip] No. Why do you think that’s still not enough? Because you still need to pay the $3.99 delivery fee. Which means the total you would pay would be $15.13.

[Clip] No. Why? You still need to add a tip. Let’s say you tipped $4. Then that means the total you would pay would be $19.13.

[Clip] $19.13 for what? A large iced coffee.

[Clip] No. Why? Because you didn’t pay the $1.99 priority fee.

Brian: This is something we even added in our millionaire survey this year – do you use DoorDash or Uber Eats? It was like 66% or 67% don’t use it at all. Look, I get it if you get a gift card or some promotional thing. You might dabble in it, but I don’t consider that really using it. That’s kind of being a Financial Mutant by using a coupon or discount code. But this is my whole problem with this business concept. Sometimes we’ve seen people go to Chick-fil-A and turn a $10 value meal into something that’s $25 or $30. Or if you’re feeding the family, you can turn a $40 meal into $60 or $70. It feels disconnected. I actually don’t use those services. It’s a lot of hands in the kitchen for a simple product that’s already kind of an excess of life. That’s something you ought to really think about.

Bo: If you’re going to make bad decisions and in our opinion Uber Eats and that stuff is a bad decision at least make bad decisions rationally. Ordering an iced coffee on Uber Eats is going to be melted and watered down. It’s not going to be cold anymore. Same thing if you’re trying to DoorDash ice cream. Maybe that’s not the wisest decision. So if you are going to spend a lot of money and overpay for something, at least make sure you’re doing that on something that somewhat makes sense to do.

Sponsor: Monarch Money (7:27)

Bo: Even if you followed bad financial advice, made some mistakes, your money story doesn’t have to stay the same.

Brian: That’s exactly right. You can always make better decisions going forward. And even simple things like tracking your expenses can make a big difference.

Bo: Oh, so get this. My wife and I started tracking all of our stuff through Monarch. We said, “Hey, we just want to do sort of an audit of what we have going on.” And we were amazed to find that we actually had a few mystery subscriptions that we had no idea about. Had no idea they were going. One of them we didn’t even mean to sign up for. My wife literally signed up for it a year ago. So we canceled that one immediately. Without Monarch, we would not have found that leak.

Brian: That’s part of building wealth. Not just making more money, but paying attention to where it’s going. Monarch is the personal finance app that tracks everything so it’s easier to spot those sneaky charges that are draining your bank account. And Monarch doesn’t just tell you what already happened. The AI weekly recap and AI assistant can point out spending trends and help you answer questions about your finances before small problems become big ones. 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 #5: When Can You Financially Move Out? (8:42)

[Humphrey] When can you financially move out to your own place? Whether you live at home or have roommates, use this test. You need to get four out of four. Number one: your rent should be less than 35% of your take-home pay. Here’s a table based on salaries. If you make around $100,000 per year, the monthly rent you can afford is around $2,327 per month, based on your take-home pay so you don’t get stretched thin. Number two: you have an emergency fund of at least three months, because moving out is expensive. You need first and last month’s rent plus a deposit, so you need a cushion in case an emergency happens. Number three: you’re still contributing to retirement even after moving to a new place and paying that new rent. And number four: you have no high-interest credit card debt or buy now pay later debt, because those are wealth killers long term.

Bo: Well, Humphrey, I agree almost exclusively. The only thing I would change is you said your housing cost should not exceed 35% of your net pay. Net pay can fluctuate so much depending on your benefits, your 401(k) contributions, and your cafeteria plan. That’s why we like saying instead of 35% of your net pay, do 25% of your gross pay. That way you really know based on the income you have coming in where you are threshold-wise. But everything else, I agree fully.

Brian: I was going to add a step five and step six. Step five: get roommates and all of this happens much faster. Step six was live at home for a month or two more so you can afford that purple leather recliner or the subwoofer. These are the things that went into my decision-making when I graduated college. I think I went back and lived at home for two or three months. It wasn’t purple leather but it was definitely some purplish burgundy color. Man oh man, was I proud of that leather recliner, and it was paid for because I stayed at home just a little bit longer.

Clip #6: Are Pokemon Cards Crushing the Stock Market? (10:52)

[Clip] Why does investing in Pokemon cards seem to be what everyone is currently doing? It’s because these little pieces of cardboard are currently crushing the stock market. If you look at the data over the past 20 years, the S&P 500 is currently up 421%, which gives it a very respectable rate of return of 8.79% per year. However, compared to the world of collectibles, these are rookie numbers. Baseball cards are currently up 716%. Basketball and football cards are currently up 1,200%, which is a rate of return of 14.22% year-over-year. Where do Pokemon cards land in all of this? Pokemon cards are currently up 3,261%. Pokemon cards are currently in a league of their own. That is a 20-year average rate of return of 21.42% year-over-year. This is 2.5 times better than the S&P 500. Will Pokemon cards continue to outpace the stock market, or was this just a 20-year fluke?

Brian: This is just a lot of people running to where the attention is.

Bo: Now I’m frustrated because this was a math crime. There are lies. There are darn lies. And then there are statistics and numbers and how you can manipulate them. And that’s exactly what happened right here. What he did is take an average across all American football cards, the average across all baseball and basketball cards, and compare that to a basket of goods in the S&P 500. If you were to go pick any of the individual stocks in the S&P 500, or if you were to look at Amazon over the last 20 years, Nvidia over the last 20 years, Tesla over the last 20 years, fill in the blank on the company you want to choose, there’s a really good chance those companies would smoke the numbers here. But it’s not comparing apples to apples. Because if you were to go buy right now a pack of Pokemon cards, whatever that is, a $10 pack, and hold that singular $10 pack for the next 20 years, I don’t know that I believe you will have gotten so lucky that one of the cards in your pack was so valuable that you recognize a 3,000% rate of return. However, if you go buy the S&P 500, you will own the 500 largest, best-performing companies by market capitalization in this country. It’s not opening a pack of stocks and hoping you get lucky with one of them.

Brian: I think you are making a solid point because he very well could have flipped the script on this. Instead of the S&P 500, you could have done Nvidia or Tesla or any of the high-flyers and it would have completely crushed what happened to Pokemon.

Clip #7: How High Should Your Credit Score Be? (13:27)

[Clip] How high can your credit score be before it gets kind of weird? Building a credit score, you’re trying to build trust from another man so he can give you money. Oh, I got a high score. You trust me? Give me a loan. I think you stay mids. You don’t go all the way to 700. I think you just stay around 650. I say 610. 610 max. Because at that point you’re begging a grown man to approve you. Oh, I got this loan. Thank you, sir. Oh, you trust me that much? And you’re repeatedly going back because he’s going to repeat it. So you really want to be chasing a better interest rate? Like come on. Why would you want a lower interest rate?

Bo: That’s hilarious. That’ll work once. You can ask for some money and say I’m not giving you this money back, but you won’t get it the second time or the third time or the fourth time. Obviously that’s hilarious. And what people don’t realize is a lot of people want to suggest that having a really high credit score is like an “I love debt” score. That is not the case. Having a really high credit score suggests I am responsible and understand how to use money as a tool and use it well to my benefit.

Brian: It’s also not just for borrowing money anymore. It’s also, hey, are you going to have to make a deposit when you set up your utilities? Or is your property and casualty insurance going to be at the preferred rate because you seem like less of a risk? There are a lot of things that now go into your credit score. And I’m here to tell you, if you just pay your bills and pay off your debt exactly like we share in the Financial Order of Operations, you’re going to be in the high 700s to 800s range without even trying. It just happens naturally. So just respect the obligations you’ve set. Don’t borrow outside of what your wallet or your purse can afford and you’ll be just fine.

Bo: There is a better way to do money. If you want to know how to do money better, you can go check out all of our resources, all of our archives, and all of our tools at moneyguy.com/resources to help you make better financial decisions.

Brian: I think we chewed through the jaw-dropping videos. I’m your host Brian, joined by Mr. Bo. Money Guy, out.