Financial Advisors React to Money Advice with Humphrey Yang

Introduction – React Content with Humphrey Yang (0:00)

Brian: The content team’s been busy putting together new reacts, but does it matter what it is? Because we got Humphrey. Yay.

Bo: Brian, I am so excited about this. Humphrey, we are stoked that you’re here. We’re stoked that we get to do some react content with you. Are you ready?

Humphrey: I’m stoked, as they say here in Tennessee.

Brian: I love it. All right, let’s dive right in.

Humphrey: And anywhere else. I guess they say stoked everywhere.

Make a Million, Get Rid of $930K (0:25)

Video Clip: Let’s say I make a million dollars a year. My goal is to get rid of $930,000 of it.

Brian: What?

Video Clip: Why? So that I could be in a 12% tax bracket. Because I understand that it’s a net worth game, not how much money you make. I don’t want to be in the top tax bracket. I want to make a little bit over $70,000 a year on paper. Right? So my goal is this. My goal is to increase my net worth and reduce the amount of money that I have to pay in taxes. This is a life lesson for y’all. All right? They not teaching y’all this in school. All of you NFL players, all of you rappers is out here throwing money around, but you don’t know about money. Let me break it down for you, big dog. You make a million dollars a year. Your goal is to get rid of $930,000 of it. How do you do that? You then invest in things. The government incentivizes business owners, real estate holders, etc. to invest in themselves. Well, why would I do that? Because what it does is it reduces the amount of money I have to pay in taxes because I can write that off as a business expense. The cars that I need to use, the flights that I have to take in order to be able to help my business, to do research, to go and look at prospects, opportunity.

Brian: Humphrey, thoughts. Immediate thoughts.

Humphrey: Okay, immediate thought was like at first I was like, “Oh man, this is kind of crazy. We’re going to talk about, you know, marginal tax bracket or, you know, progressive tax rates here and how you shouldn’t make more than $70,000 to lower your tax burden.” But then he got into the more of the write-offs and the business deductions and I kind of like that part.

Brian: He was close. He was nibbling around the edge. He did a shocking great content creation because he actually went with a huge headline of if you make a million bucks, you got to get rid of $930,000. He threw out the little bit that you only want to pay taxes at that lower, that was a throwaway. Owning stuff is where it’s at. Unfortunately, for people who don’t come from money and you see people just building up cash and other things, they never get ahead because you have to create money that works harder than you can. And ultimately, that’s what he was talking about investing the money, trying to get rid of, if you make a million dollars, figure out how you minimize the taxes, but then get as much of that money working for you in the background by owning stuff that can work so you don’t have to work.

Bo: No, but I want to be clear. I feel like he oversimplified it a touch. If you are someone who makes a million and you want to get rid of $930,000 of that and you go buy an asset for $930,000, that means that you now only have $70,000 to live off of because you have sent that money somewhere else. So it doesn’t quite work out exactly the way he described. But conceptually, theoretically, that is something that you can do with your dollars to reduce your taxable income so long as you’re doing it in the right way.

Humphrey: Yeah, I kind of read it as like you can’t take it too literally. Like maybe that’s what his meaning behind the content was, but if you did take it literally, it is a bad idea.

Bo: It’s not going to work.

Brian: It’s not going to work. It’s hard to do things, repeat it over and over. If you found like a piece of real estate or something, it’s not like there’s a bunch of it laying around. You have to

Humphrey: And the other thing I didn’t like what he said, it’s like not everyone can write off their car. That’s right. Or assume that you can do that.

Bo: That’s right. Yeah. Exactly. A lot of bad advice out there about people saying, “No, I write off my clothes. I write off my haircuts. Write off everything is deductible.

Bo: Mortgage fraud. Everything is deductible. Everything is

Brian: Until you get caught.

Bo: Oh, there you go. Until you get caught.

Renting Is Not a Waste of Money (3:26)

Video Clip: Renting is absolutely not a waste of money. No matter what anyone tells you. Statistically speaking right now, it is much cheaper to rent in 80 to 90% of America right now. The problem is people don’t understand that when you own a home, you don’t just have the mortgage. You’re going to have home insurance, property taxes, you’re going to have maintenance. You’re going to have repairs. All of these additional expenses on top. When you rent, you have rent, utilities, renter’s insurance, which is like 10, 15 bucks a month, and that’s it. Now, the reason why people still push for a house is because people don’t automate their savings. So, they’re saving all this money on all those housing expenses, they don’t see it when they rent. It’s invisible. They’re saving so much, they don’t realize it, and they’re not doing anything productive with that money to save. So, a home, it can be a good investment. It’s almost like a forced savings vehicle. Building equity, all this is going into the home. And then, of course, when you retire, your housing costs will be substantially less.

Brian: There’s a lot in that video.

Bo: I actually love that. I think that was, I think it was great and well laid out. I think so many people assume that you have to own a home in order to be financially successful. I don’t buy that.

Humphrey: Yeah, I would agree. You know, I currently rent right now and I haven’t really considered buying a home just yet just because I don’t want the hidden costs of owning property. I do not necessarily agree with what he said like people just because they rent their savings are going up. I don’t actually necessarily agree with that, but I’d like to hear your take.

Brian: Well, look, the facts actually show that they don’t because the Federal Reserve releases what net worth information is going on for the typical American and pretty much only thing that’s going up is people’s home equity. It’s the forced savings. They’re not actually building financial assets. Now, with that said, I think that because you’re watching financial content, use the difference. It is okay because it is cheaper to rent right now. Don’t feel pressure if you’re in your 20s, early 30s that you have to own to be part of the American dream. You just need to make sure you use the extra margin, the discipline to actually put financial assets together. And I will say I’ll go counter to this. I do think there does come a point and it’s when you’re in that messy middle, you’re growing a family that there are some benefits to home ownership that are beyond the economics and the mathematics of it, you know, for community, kids, and all the other things. But you have to be so financially stable that it all kind of coexists and it’s copacetic. And that’s the thing where there’s a balance there. When you’re young, don’t put pressure on yourself. When I see 26-year-olds, you’re like, I need to stop my savings right now so I can come up with a house down payment. Why? Don’t put that pressure on yourself. Wait until life intersects with the need and then you can make it happen.

Bo: And if you are someone who’s thinking about buying, we have tons of great resources out there. You can go to moneyguy.com/resources. We have a home buying checklist. We have a home affordability calculator. For most folks, when they decide to buy a home, if they decide to buy a home, it’s the most expensive thing they will ever spend money on. So, if you’re in that position, it does intersect with what your need is. Make sure you’re making that decision well.

Humphrey: I do want to also say even though I am a renter, the case for home ownership is always like, oh, if you’re renting, you’re throwing your money away, but it also assumes that the renter will also invest that money, which as you said, sometimes they don’t invest that money. So, you want to make sure if you are renting that you are actually taking that difference and actually doing something with it, or else you’re not making the best use of your opportunity.

Bo: And I agree, it’s not throwing your money away at all. It’s actually buying yourself flexibility. When you go commit to a mortgage for 30 years, you’re saying, “I am removing flexibility from my life for 30 years or until I sell this piece of property.” With your rent, you’re only committing to 6 months, 1 year, 2 years, whatever it is at a time. You are buying flexibility to allow you to do the things you want to do in the future.

Humphrey: Yep.

Don’t Cut Your Gym Membership (7:00)

Video Clip: The worst financial advice that I’ve seen is when someone tells you to cut out your gym membership.

Bo: Agreed.

Video Clip: Do not cut out your gym membership. Use your gym membership. Get into better shape.

Bo: I think we can move on from this one. That’s the best financial advice I’ve ever seen. Obviously.

Humphrey: What a piece of advice.

Brian: Can I give some good advice, though? Be careful recording content while you’re riding on a bicycle in a crowded street. Did he have a helmet on?

Bo: He didn’t have a helmet on.

Brian: No, he didn’t have a helmet on either. There’s a lot of things going on there from the risk adjusted side. I was like, I love content creation, but let’s do this in a safe, effective way.

Humphrey: And he’s probably used to riding the bike in the gym because he’s not getting rid of it.

Brian: A lot less risk there.

Humphrey: So, yeah, gym membership is a good investment. And if you’re investing in your health, you’re going to live longer and hopefully you can make more money because you’re living longer. Or perhaps you’re just in better health.

Bo: Health is wealth.

Brian: Everybody talks about the latte effect or the gym membership. It’s really your housing and it’s your car payments and other debts you’ve taken on. Focus on those big things. Now look, in the beginning, you will want to make sure you’re focused on the discipline of those small paper cut type decisions that you’re making can eat away any margin that you have to actually put assets to work. But there’s a balance there that we want to kind of give you that financial mutant mindset so that you can kind of know what’s the right things to spend money on versus what’s the right ways so that every dollar has a purpose and a why so nothing gets wasted.

Mr. Wonderful – Save and Invest (8:18)

Video Clip: What piece of advice do I give my kids over and over and over again about money. Don’t spend it. Save it. Invest it. Let it compound. That’s the gift the market gives you. Take 15% of all your paychecks, all your side hustle, any cash granny gives you and put it in the market and just let it compound. If you make $68,000 a year, the average salary, and you do this your entire life, just 15% of your paycheck, you’ll end up a millionaire at retirement at 65. Best piece of advice I can give anybody, don’t buy stuff you don’t need. Invest it instead.

Humphrey: Spot on. I mean, Mr. Wonderful nailed it.

Brian: Time is money, man. That’s the thing is if you’re a 20-something and you’re jealous because you look at people who are in their 30s and 40s and you’re like, man, they had it easier than me. It’s better. They are jealous of you because you are a billionaire of time. And once you understand the value of your time and compounding growth, why it’s the eighth wonder of the world, you will quit being jealous and you just need to put that margin to work. I don’t care if it’s $50 a month. Little makes huge impacts.

Humphrey: The one counter argument that I think people are going to have, Brian and Bo, is that a million dollars at the age of 65, let’s say someone’s 20 right now, won’t be worth a million dollars of purchasing power. But I also assume that the median wage will go up over time. So 15% of whatever that wage is going to slowly go up as well and compound over time. So, I like the 15% adage that he has.

Brian: Once you hit a million, do you know how short of a period of time it is before that second million happens? Because the assets start growing upon themselves. That’s the whole thing about compounding growth. So, if you think a million isn’t enough, how about $2 million? How about $5 million? I’m telling you, this thing picks up speed the bigger it is.

Bo: The bigger the numbers get, the bigger the numbers get. Don’t spend money you don’t have on things that you don’t need to impress people whose opinions don’t matter.

Humphrey: I also know that you guys have a video on your channel titled, “Once you make your first million, the next four are really easy.” So maybe that’ll be the end screen of this video. You never know.

Middle Class Now Requires $100K (10:10)

Video Clip: You don’t have to be an economist to know that the middle class salary is now $100,000. In 2019, $40,000 to $50,000 would buy you a middle class life. In 2024, it’s $100,000. Even if you look at my life, my wife and I bought a $400,000 home, which is the average home in America. We drive two Volkswagens, not BMWs. The payment total is $850. We do spend $1,000 a month on groceries. We eat healthy Whole Foods. We make our coffee at home. We don’t do Starbucks. We have a 401(k), health insurance, car insurance, gas, cell phone. My wife does get her hair and nails done once a month. We go to date night every single Friday, but at like a local tavern or even Chili’s for $100. And our bills, monthly bills are $7,000 a month. And we have no credit cards, no student loans, and we don’t have children. I can’t imagine when people tell me that their daycare is $2,500 and their student loan is $500. I’m like, that would make our monthly bills $10,000. What? So, the reason we keep bringing this up is that we don’t want to see a repeat in the next 5 years of it going to $150,000 or $200,000 for the middle class. Like, we’re watching the middle class just be pushed right out.

Humphrey: I think according to the Pew Research Center, which says that the current middle class is between like 2/3 of the median income all the way up to I think 1.66 times what the median income is. So $100,000 does actually fall in there squarely right in the middle of that range. So I don’t disagree with him. I do think bills are getting more expensive. Is $100,000 still worth $100,000 these days than you know when maybe we were growing up? I don’t know.

Bo: Well, I think life is definitely getting more expensive. The things that we do on a daily basis are costing more and more. That’s why it’s more important than ever to make sure you are an advocate for yourself. Are you doing the things in your life to increase your skill set to hopefully come up with other ways to increase the size of your shovel so that you can begin saving and investing so that whatever the cost of living becomes 5, 10, 15, 20, 40 years from now when you need to count on your army of dollar bills to provide for you, you’re able to save now to be able to build towards that future point.

Brian: There’s several things that jumped out to me. First of all, we all have a recency bias. I mean, we just came through a once every 30 year probably inflationary period. You know, I’ve lived through now two of these because I was around in the 70s and early 80s when we had that huge pump in inflation. Now, we just lived through another one through the pandemic and post pandemic. Don’t assume that next year is going to be 10% inflation like it was a few years ago. But that doesn’t mean that you’re not dealing with the ramifications. What I’m here to tell you is as employers, we feel that pressure. There is going to be some hopeful opportunities that your income is going to go up, but you need to do everything in your power to facilitate speeding that up. Grease the skids. You know, can you invest in yourself? Can you make yourself better so that you can get that income to go up? Because look, it’s always going to get more expensive. That’s the natural state of inflation and growth. It just is not going to be at this 8 to 12% that a lot of his assumptions were assuming. It’s going to go back to more of probably likely a historical 3 to 4%. But you still need to take the responsibility. Do what you can to increase your shovel, your income that much faster so you can outpace what’s going on with inflation.

LeBron James – Cheapest Guy in the NBA (13:10)

Video Clip: Who is the cheapest guy in the NBA? And Dwyane Wade says LeBron James.

LeBron: That is so so false. False.

Interviewer: From the airport and going through customs to then getting to our hotel. There’s no data used at all.

LeBron: I’m not turning on data roaming. But I’m like, come on, bro. Like, seriously, I’m not buying no apps. I still got Pandora with commercials.

Interviewer: What’s the finance saying? A small leak can sink a great ship.

LeBron: You know, my uncle’s always taught me like, you know, if they give me a dollar, they’d be like, “Listen, nephew, go over and spend 35 cents of it and keep the other 65.”

Interviewer: You know, you’re rich, right?

LeBron: I’m not paying for it. I’m not paying. True.

Humphrey: I think maybe he’s changed his tune slightly since that video. I can tell he’s a lot younger in that video, but it also kind of shows you that maybe, you know, the way that you’re raised is really set. You’re going to be really set in your ways depending on who raises you. So, just like his uncle telling him to save, or spend 35 cents of every dollar that he makes, I like that as a good maximum to live life. But I think at his level of wealth, he could probably afford to spend a little bit more.

Brian: Well, but it does, I think what’s funny for me is that if you think about your friend group or your peers who you hang out with, for them all to point at you and say you’re the cheapest out of all your friends and these are all NBA players and it’s LeBron is who they’re pointing at, that’s actually a great thing to be known as the cheap one of your friend group because you’re still living a great lifestyle. And another thing, a compliment to LeBron, I remember years ago because we follow a lot of Warren Buffett content. I remember there was a spotting of LeBron in Omaha because he was walking the streets with Warren Buffett because I think when he started making money, he wanted to go hang out with people who had money so he could know how to do it better. Kudos. That’s we all should aspire to live on less than we make and then try to figure out how we use this system through knowledge, somebody who’s done it ahead of us so that we can become better versions of ourselves.

Bo: What a great reminder that money is just an amplifier of who you are. So if you’re someone who can make really good wise decisions when you have small amounts of money, the odds are when you have larger amounts of money later on in life, hopefully those behaviors are still the behaviors that you implement. Hopefully those that are good with small amounts will also be good with big amounts. And it seems like LeBron is certainly following in those footsteps.

Humphrey: I didn’t know that about the Warren Buffett thing. That’s pretty cool.

Seven Buy and Hold Forever ETFs (15:29)

Video Clip: Seven popular buy and hold forever ETFs by Brian Feroldi. Here are the ticker symbols of seven of the most popular ETFs on the market. All of these funds hold tens of billions of dollars in investor assets. These funds are popular because of their low expense ratio, which in every case account to just pennies per year for every $100 you have invested in them. Each of these funds have had solid positive returns over the last decade. And while the variability of their returns does fluctuate from year to year, their overall track record over the long term is very solid. Which one is the best choice for you depends on your specific investing goals, risk tolerance, and asset choices depending on the broker account that you use.

Bo: So, here’s my question. How many people watch this video and they go say, “Okay, great. I’ve got seven of these funds. I’m going to divide my entire $100,000 by seven and I’m going to go buy every one of these funds and I’m covered.”

Humphrey: That’s exactly what I was thinking because, you know, I make a lot of these like top five index fund videos and people are always like, “Oh, you know, how much should I put in each?” I’m like, “No, you want to pick one because there’s a lot of overlap between all of them.” And actually, of the seven that he had, there were like four of them that were heavily correlated, right? Heavily overlapping. So, if you were just kind of blindly putting your money in, you would just be buying the same thing.

Brian: I always, I know Brian, we’ve hung with Brian at conferences before, he’s good hanging. I look at this and I’m like, gosh, I’m jealous that Brian came up with this. Why didn’t Brian and Bo come up with this? Because I love the layout of how he did it was just so genius on how simplistic it was, but there was great information there.

Bo: Another thing that I loved is even if you don’t take away the seven funds, he told you right there showed you how you should think about selecting your investments. Hey, I want to look at ones that have a large market cap. I want low expenses. I want to understand what they’re doing, how they’re performing, what’s the track record. Then if you can analyze all the investments in your portfolio that way, there’s a high likelihood you’re going to design at least a fairly efficient portfolio by focusing on those factors.

Humphrey: Yeah. He also showed the downside, right, of every one of those ETFs in the last whatever years that he chose, right?

Brian: I saw you nodding. Were you thinking the same thing? Man, why haven’t I benchmarked something like that? Because I love it when people. Well, what’s funny is if you go on Instagram and all mine is just like all financial content creators. I’m constantly talking to myself like, “Oh, that was good. Good for them. Did they copy that from us?” You know, it’s so funny. I’m sure you’re the same way as you’re watching.

Humphrey: All good. As long as it’s like financial literacy, you know, it’s a positive sum game. I don’t view it as a bad thing. So, that was a great video.

Alex on a Budget – Investment Strategy (17:52)

Video Clip: My number one money goal this year is to invest as much as possible because I paid off all of my debt and I don’t really have any interest in buying a house right now. So I want to tell you the accounts that I use and also what I invest in. An investment account just gives you access to the stock market and the ones that I use are Roth IRA, 401(k) and also a brokerage account. And you can open those with any brokerage firm like Fidelity, Vanguard, Schwab, and even Robinhood. And I also prioritize them in this exact way because the Roth IRA and the 401(k) have tax benefits. But the brokerage account allows you to invest in anything and as much as you want, but it doesn’t have any tax benefits. That’s why I put it at the bottom. Now, what do I invest in? I only invest in ETFs. An ETF is just a basket full of companies. And when you buy one share, you kind of get a piece of all of them instead of just looking for one stock or one company like Apple. And the ETFs I invest in are VTI, VXUS, and QQQ. VTI includes all of the companies in the US. So, from the biggest to the smallest, it’s like the everything fund. VXUS invests in the international market. So that way it doesn’t have any overlap with VTI and QQQ follows the NASDAQ 100 which is 100 of the top tech companies. Let’s think of it that way. It does have about a 50% overlap with VTI though. I’ve also invested in VOO but the problem is it has such a huge overlap with VTI that I don’t think I need to invest in both of them. I just need to choose one and stick with it. I like to share this type of information because I also look for it and I enjoy watching it and I learn from it. So maybe you learned something from this video, but of course I’m not a financial adviser, so look into this information for yourself and decide what’s best for you.

Humphrey: Yeah, I like her. I recently followed her. I think her name is Alex on a Budget and she’s been very transparent about her finances on Instagram. So I like the content. I would say it’s 100% in equities and I think she’s maybe in her 30s. So I don’t know if Brian and Bo, you guys have some sort of thing to say about that, but also depends on her goals. But I know that she has a husband and they are both investing towards maybe early retirement or buying a home, something like that.

Bo: I love what she laid out. It was great. The only thing that I might add just sort of a little bit nuance and since she says she loves watching financial content and learn, she ought to go to moneyguy.com/resources and download the Financial Order of Operations because how she laid hers out was great. Hey, I like Roth. I like 401(k). I like taxable. I would say that there’s even a little more nuance in there because even just something simple like a taxable brokerage account, you don’t get a tax deduction in the same way that you would on a pre-tax 401(k) or tax-free distributions but even in after tax brokerage accounts you get long-term capital gains rates if you hold your securities in there and you can harvest losses which can be used to offset other capital gains or even ordinary income. So, there are benefits with all of these accounts, but I would be a little more nuanced than just going 1, 2, 3. I’d go steps one through nine.

Brian: This is why I should have jumped in front of you because I was immediately two things popped out. FOO, baby, Financial Order of Operations because it goes deeper. And then I was also thinking about I love my brokerage account. You’ve already named the capital gains. I was saying dividends are tax favored. Also, I love charitable giving out of those brokerage accounts because appreciated holdings fulfilling charitable desires. Man, oh man, a win-win situation. But I loved it. I was sitting there thinking that was a lot of nodding. A lot of nodding through that video. So that was great. Good content.

Bo: And we are financial advisors, so we can say that.

Humphrey: You can say that. Not me. Not me anymore. But whenever there’s a FOO sighting, you guys put a little graphic on the screen, right?

Bo: We sure do. That’s right.

Humphrey: Maybe we should put it right over there. FOO sighting.

Brian: Moneyguy.com/resources. You too can have a free FOO. It’s like VOO but better. Put that in the koozie.

Always Be Buying (21:29)

Video Clip: Here’s my market timing strategy. I simply buy every single month no matter what is happening with the market. This means some months I’m buying at a recent high, other months I’m buying at a recent low. But following this strategy ensures that I’m constantly putting my money into the market and over time my wealth is going to grow.

Brian: Oh man, no notes. The hook was good. The hook was good.

Bo: No, we love creating.

Brian: I don’t know. Boom.

Humphrey: Is there another acronym you got here? Like TTYL.

Brian: Be careful using sound effects. These guys will have stuff blowing up. Have a great summer. HAGS. Boom.

Closing (22:09)

Brian: Guys, we absolutely love creating content. We had some good ones today. There was a lot of stuff there. We had compounding growth. We had always be buying. We have even shout outs in an indirect way to the Financial Order of Operations. And how I’d be remiss if I didn’t say best of all, we had Humphrey Yang on the show today. If anybody wants to know more about Humphrey Yang and what you’ve got going on, where can they go?

Humphrey: Just look me up on YouTube, Humphrey Yang, and maybe they’ll put it in the description below. And maybe if this is a collab post, you can just click on my channel.

Brian: Thank you. Thanks so much for joining us for the content, Humphrey.

Humphrey: Thank you. Nice to see you. Handshake. Handshake. Let’s do a handshake.

Bo: Oh my gosh.

Brian: I feel like we’re doing the, what is it? Oh my god, he’s so jacked. I feel like we just did the English Bake Off. You know, where you get the handshake. Is that what they do in the English Bake Off?

Humphrey: I think you should cut it here, guys. Just cut it.