Financial Advisors React to MASSIVE Money Mistakes

Introduction – Massive Money Mistakes (0:00)

Brian: Why go small when you can go massive? That’s what we’re covering today. Massive money mistakes.

Bo: Brian, I am so excited to see what the content team has in store for us today.

Steo Got Me Rolling – 120-Month Car Loan (0:10)

Video Clip: What’s going on, folks? It’s your boy, Steve-O got me rolling. Got me rolling. Today we got my dog TK. We got him approved on this Dodge Charger. TK today, baby. Great experience. I highly recommend it. They got me on 300 monthly payments for only 10 years.

Brian: He’s going to pay it off and then be able to put an antique tag on. If it’s still rolling. Unlike Steve-O

Bo: We believe that there’s a better way to buy cars. We want you to do 20/3/8. We want you to put 20% down. We don’t want you to finance for any more than 3 years or 36 months. By the way, 120 months is more than 36 months. And we do not want your total monthly payment to exceed 8% of your gross income. You can do that. You can prevent your car from becoming financial napalm in your financial life.

Brian: I’m surprised Steo hasn’t figured out how he can slap a tent in the trunk and then give them the mortgage interest deduction for how long he’s financing these cars.

Bo: I don’t know that I want Steve-o to get me rolling.

Brian: People willingly go in to get slaughtered financially.

Losing Grandma’s House to Fund a Business (1:15)

Video Clip: Clothing company, very successful. Made it to seven figures. Didn’t have no coaches, no mentor, none of that. What I did was I was borrowing from my property to invest into my clothing company. I didn’t know about credit. Didn’t know about funding. I didn’t know that I could borrow some credit from my own property to invest. So, I was using my own cash. So, when we started to have issues with cash flow, I wasn’t paying my mortgage. So, then my house got foreclosed on. And it was a house that I grew up in. It was a house that my grandmother fought for to purchase when she moved from, you know, a different state. She was living in New Jersey. So, when I lost that house, bro, I was super embarrassed.

Bo: You know, this is a great example. Obviously, his was an entrepreneurship thing. He took equity out of his home to invest in a business, but we see this all the time. Someone might have credit card debt or auto debt or student loan debt. And they come up with this great idea. Hey, you know what? My mortgage rates are lower than the rates that I have on my credit card and lower than the rates I have on my car, lower than the rates I have on my student loans. So, what I’m going to do is I’m going to go take a home equity line. I’m going to refinance my mortgage, take that cash out, and I’m going to consolidate that debt into the mortgage. And one of the problems is if you replace unsecured debt like credit cards, like student loans, those sorts of things, with secured debt, like a mortgage, which is backed by your house, you have now taken that hole that you’ve dug and you’ve put your house at risk to try to satisfy that debt. It is not a sound strategy and it adds a lot more risk to your financial life.

Brian: I always share with people if you’re thinking about doing anything with an entrepreneurial bend to it, or you’re thinking about even changing jobs, anything that’s going to radically change your life, make sure you put on your 3D glasses. What I mean by that is I want you to run it three different ways. I actually want you to create a plan for the next 5 to 7 years where you say, “Hey, here’s the dream.” Everybody’s good at doing the dream plan, but then take it from there. Go to the down to earth, and then don’t forget the most important step, the doo-doo plan. Go ahead and look at it and say if this doesn’t work, how am I going to come out on the other side? I think if he had done that, he’d have still had grandma’s house.

Bo: Before you start investing in unique things or executing complicated investment strategies, make sure you understand the ins and outs so you know what the negative consequences of that decision could be if it happens to go the doo-doo route.

Man on the Street – Biggest Money Mistakes (3:29)

Video Clip: What is your all-time biggest money mistake?

Person 1: Oh god, there’s been a few. Paying $100,000 for my bachelor’s degree.

Interviewer: Are you currently using the degree?

Person 1: Yes.

Interviewer: Are the loans paid off?

Person 1: I got $40K left.

Interviewer: All right. Okay, that’s progress.

Person 2: My ex-wife.

Interviewer: Oh gosh. What did that cost you?

Person 2: Couple million.

Bo: We make one of the biggest financial decisions we’ll ever make in terms of how much student loan we take on, not recognizing the gravity of that decision, that we end up taking that student loan well into the rest of our life, well into our working career. So, you want to make sure you do that well. And then when it comes to getting married, yeah, you probably want to make sure you do that one well also.

Brian: Don’t let it just be how much somebody gets you excited because you think they’re pretty or attractive. Make sure there’s a lot more substance that’s going to carry you through the future. And then talk about the heavy stuff. If you’re not talking about religion, kids, and how you do money, you’re probably skipping a lot of the steps.

Robert Herjavec – Stock Tip Gone Wrong (4:24)

Video Clip: Biggest investing mistake I ever made was listening to other people and not my gut feel. Long time ago, one of my family members who I thought was really smart told me to buy this stock. I bought it. The company went under. I lost all my money. I mean, it wasn’t that much money back then, but at the time it was a lot of money. So, do your own research. The only person responsible for your money is you. I met Oprah one time and unbelievably she told me that she signs every check in her company above $10,000. So, it’s your money. It’s your responsibility.

Bo: You have to be so careful of what advice you let into your head and whose advice you take when it comes to making financial decisions because not all financial advice is created equal.

Brian: Well, I think Robert needs to differentiate entrepreneurship-wise. I completely agree with him. One of the biggest things when I was in accounting and working with small business owners, I was like, “Nobody’s going to know your business like you.” So, you can’t just skip over understanding how the bookkeeping and everything works. But I will say if you’re just starting out on the financial journey and you’re just trying to figure out how do I fund my Roth IRA, how do I get into the basics, find somebody who’s done it. Go let that be your mentorship step. And that’s what I like to do with the Financial Order of Operations. That way you can get your life working for you and you cannot waste a dollar because the experience is baked into the system.

Caleb Hammer – Solar Panel Loan Disaster (5:49)

Video Clip: How much do you owe?

Caller: Over $30,000.

Caleb: Okay. What’s the interest rate on them?

Caller: If you’re going to say eight or nine, it’s 12. I sent you all of the paperwork for him.

Caleb: Oh. There is a small window, and I want to be very clear that it is the small window where solar panel loans work, and that’s when they’re like two to three, maybe 4%. This is not returning the value. It can’t be. The break-even point with the interest and how long you’re going to be paying them has to be a ridiculous amount of time. Has to be. We’re paying $120 a month.

Caller: Yeah, but for how many months?

Caleb: 32? 36?

Caller: What’s your monthly payment?

Caleb: Are you sure? I don’t— What’s your monthly payment?

Caller: $120.

Caleb: That’s more like a 250-month thing. So, I don’t know what you’re talking about. You said 30 months.

Caller: Well, I didn’t.

Caleb: No, you have no idea what you’re talking about. How many years is that, dude? This is like a 20-year thing. You have this debt for 21 years. You’re not going to live in the house for 21 years. Statistically.

Bo: We see this all the time. People want to do upgrades to their home, add solar panels, whatever the thing is, and they end up financing it, this improvement or this thing they want to do, for longer than they’re even going to be able to utilize it. Solar panels are a great example of people that we’ve seen in the past where you can do it and you look at the economics and it might make sense, but in a lot of cases it is not economically viable to try to do it, and yet a lot of people still fall into that trap.

Brian: You have to be careful when things feel like you’re doing the right thing and then you get these government subsidies that are also put on top. It feels like, well heck, two of the three boxes are checked for why I should go ahead and do this. This has to be a great idea. Otherwise, there wouldn’t be all these companies doing it. The government wouldn’t be incentivizing it. And then I feel good because I’m now going to be self-sufficient and solar powered. But if the math doesn’t work, don’t skip that step and don’t assume the person that’s selling you the product is going to do that math for you too. Their incentives are not aligned with your incentives.

Bo: A big red flag I always see when I’m talking to someone and I ask them some questions, they always know their payment. And in this case, she said, “Oh, $120.” For how long? “Oh, I don’t know.” What’s the interest rate? “Oh, I’m not sure.” You need to understand the specifics of your financial situation. So, if you’re actually making a nightmare of a decision, if you’re borrowing money and you can’t tell me for how long, what the interest rate is, and what the payment is, you don’t know enough about the money you’re borrowing.

Brian: You know who else does that? Steve-o. Steve-o got you rolling into solar. We could help him expand this business because that’s exactly right. If you’re only focusing on the payment, you don’t really know what you’re paying for the entire product. Steve-o got me solar.

Buying a Condo for the Wrong Reasons (8:28)

Video Clip: I’m going to tell you guys the number one financial mistake I made in my entire life that cost me almost $100,000. And that was buying a condo. I credit this decision to two main factors. Number one, I compared myself to every single person around me. My co-workers, the majority of them owned property. Family members, majority of them were homeowners. People that I knew from back in the day, homeowners. Why does that matter to my life? I don’t know. At the time, it mattered. I felt like a failure because I did not own property. Number two, I was under the misconception that owning property, more specifically a condo, was an investment. And let me tell you, it’s not an investment. I did not know that growing up. Just everyone around me was always like, if you own property, that’s an investment. An investment is something that generates you income. Buying a condo in 2021, 2022, when I purchased, that is actually just a money pit. And every single year, I have a tenant in my condo right now paying $2,400 a month. That is not covering my overhead cost. Property taxes, mortgage, and condo fees doesn’t even come close. So, every single year I’m out like $6,000.

Bo: Personal finance is personal. Sometimes home ownership does make sense. Sometimes it does make sense to even perhaps buy the condo or whatever that is, but the reason that she bought it was not the reason why you want to buy real estate, just because other people did it or you think it’s the next box to check in your financial life. If that’s the reason you’re doing it, you’re not doing it for the right reason. You need to make sure that you want to be on the home ownership side, it makes sense for your current life situation and life stage. And if it doesn’t, it’s totally okay renting. A lot of people say that renting is just throwing money away. I would disagree. I think renting is giving yourself future flexibility and options and sometimes that is more valuable than trying to build equity.

Brian: Condos are unique unto themselves because they have these association fees. And we’ve seen especially if you’re looking at places like Florida where they’re now having to do some rehabbing to make sure these things are structurally sound in the state of Florida. So you’re seeing condo association fees go in crazy directions up and you have zero control over that. And that’s a lot different than just a normal HOA fee. So just pay attention to those condo association fees. In a lot of cases, they’re getting to be as large as the mortgage itself. If you’re having trouble just making the cash flow, imagine how hard it is to sell that property with that large condo association fee, too.

Man on the Street – More Money Mistakes (11:00)

Video Clip: What’s been your worst money mistake?

Person 1: We took a home equity line out and we bought a car.

Interviewer: What was your worst money mistake?

Person 2: Buying that stand and then the estate went bankrupt. Maybe trying to invest too quickly.

Interviewer: Don’t get into it too quick when you don’t know what you’re investing into.

Person 3: Exactly. What has been your worst money mistake?

Person 4: When I was traveling by myself, I used every limit of credit card I had to do it. That stays with you. It takes a long time and it multiplies.

Person 5: I pulled a bunch of my 401(k) money, paid the penalty to buy my boat. It’s very expensive to buy a boat in the Virgin Islands and that was awesome. And I met her and now looking back, being older with a mortgage, better do that stuff when you’re younger probably.

Bo: Or— or— hear me out, don’t do that stuff. Maybe.

Brian: Wait a minute. Did he say that’s how he met her?

Bo: He did say that’s how he met her. He did. But here’s what I think is— he got a dividend from his horrible financial decision. Here was the common thread throughout a lot of these— they were impulsive financial decisions. Hey, I racked up all this credit card debt so that I could travel because I wanted the experience. I pulled money out of my 401(k) and I paid the interest and I paid the penalty and I paid the taxes so that I could buy a boat. Traveling is not bad. Buying a boat is not bad. Those inherently are not bad things. But when you’re doing them impulsively and you’re making poor financial decisions to allow those things to happen, you are getting your financial life out of order.

Brian: Don’t you wish that they could just put a sign on things to give context everywhere you went? It’s just like on his boat that he had down in the Virgin Islands, it had a sign that said “financed with my 401(k).” She probably wouldn’t have jumped on that boat and the dating train as easily. Life would be better if you saw people with brand new cars and it said “financed with a home equity line.” You’d just understand a lot better the situation people are in.

Staying at Your Job Too Long Is a Mistake (12:42)

Video Clip: Mistake I made when it comes to money is staying at my first job for too long. There is a study that shows people who stay in the same company for more than 2 years on average make 50% less over their lifetime. And that stat was based on a 10-year horizon. Careers are going to be longer than 10 years, but the longer you’re working, the bigger that difference. If you’re staying in the same company, you’re getting on average a 3 to 5% pay rise. Whereas, if you’re moving and switching jobs, you can expect between 10 to 20% of a pay rise.

Brian: She just said if you stay at a job past 2 years, you’re making a mistake. What job are you still on? Should you have left?

Bo: Oh, man. I bet life would be a lot better had I left inside the first two years. Here’s what I think is interesting. Not all jobs are created equal. I will agree with one thing that she said. There’s a difference in a job and a career— something that has a trajectory, a place where you can have an impact and create a future for yourself. Now, you have to make sure the place that you are at allows for those things. But it’s not a function of just hopping around. If I’m in a great job and I’m just going to leave and go somewhere else, then it’s a factor that I’m going to be in a better situation. A lot of times the grass is not greener. The grass is greener where you water it. And if you’re watering it in the job that you have, in the company that you’re with, with the firm that you’re with, and there are opportunities there, you shouldn’t have to constantly move in order to improve your financial stake. Now, there are situations where it does make sense to move and look for something different. You lived that life. But there are others where you don’t have to do that and you have to define for yourself where you are and be realistic about what options are ahead of you.

Brian: Context matters. This is what— sometimes, look, we love career changers as employees because when they get here they go, “I’m happy as a pig in slop.” You’re just so happy where you are and you realize this is what I’ve been looking for. It matters to have the context and don’t just watch somebody say, “Hey, you got to jump jobs every 2 to 3 years so you can get the pay raises.” Yes, that will work probably in the short term, but I will tell you as an employer, we look for that on the resume. If you look like you’re bouncing around, we’re like, why would we invest in this person that’s not going to actually set roots and actually be a team-building opportunity for the whole enterprise? It’s something to pay attention to. I would self-evaluate and really look at the scenario and of course advocate for yourself if things aren’t going well, but don’t just assume because you watched some content that your career of a lifetime opportunity might not be just incredible. Not all jobs are created equally.

Closing (15:33)

Bo: At the end of the day I think we saw through all these videos, personal finance is incredibly personal. So be careful listening to a 30-second clip or a minute clip of somebody telling you something you must do in order for your life to be different, because it may or may not make sense in your situation for your unique variables. If you want to know more, if you want to check out a better way to do money, we have tons of resources out at moneyguy.com/resources. You can check out all of our deliverables, all of our free calculators, because we really do believe that there’s a better way to do money.

Brian: A side effect of making mistakes is that you get wisdom. Guys, we load you up every week. We love creating content. I’m your host, Brian, joined by Mr. Bo. Wisdom and Experience out.