Financial Advisors React to YouTuber Financial Advice

Financial Advisors React to Other Financial YouTubers (0:00)

Brian: Hey, hey, hey. It’s Brian and Bo, and guess what?

Bo: What?

Brian: We’re reacting to other financial YouTubers.

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

Clip #1: Can You Start a Business Just for Tax Write-Offs? (0:11)

[Clip] Every single American can save $10,000 a year if you listen to what I’m about to tell you. File yourself an LLC, which you can do through any online platform. As long as you show reasonable effort to starting a business, you can expense your Wi-Fi, your cell phones, your gas, certain meals, and then you can take that off of your taxable income as an expense for a business that you were trying to create. And so as a loss in the business against your regular income, anyone can do that.

Bo: He is right. You can try to start a business and you can deduct expenses. But if a business all it ever does is lose money, lose money, lose money, and there’s never any profit, never any revenue, never any income generated, then it’s likely that thing that you’re doing is not actually a business. It’s a hobby.

Brian: By the way, Bo loves some Alex. If you want to know what I get videos sent to me, it’s usually Alex Hormozi that Bo has sent me, nasal strips and all. But the thing is Alex is not wrong. Bo’s already covered that. But I would tell you before you start any business, don’t let the tax tail wag the dog. Come up with actually the business idea. What’s the value proposition that people will willingly give you their money for over and over again? That’s probably the most important thing, not just trying to figure out how you make your home internet deductible.

Bo: Yeah. People so often want expenses and losses and expenses and losses. It’s actually much more fun to create income and revenue and generate profit. I would focus on that, not solely on the expense side.

Clip #2: Should You Use a 401(k) Loan to Buy a House? (1:33)

[Clip] 21% of home buyers use this strategy, but a lot more people would use it if they knew how it worked. A lot of you might be holding off on buying a home because you don’t have a down payment, but you could leverage the money in your 401(k) without messing up your retirement. The way you do this is not by withdrawing the money from your account, but taking out a loan against your 401(k). That way, your 401(k) stays invested and growing over time, and the loan gets paid back through payroll deductions each paycheck over a long period. And here’s the best part — that small amount of interest that you pay on the loan goes back into your 401(k). So other than a little setup fee, a 401(k) loan really costs you nothing. There’s no taxes, no penalties, and it doesn’t even show up on your credit report.

Bo: I liked him a lot to start because he looks to me like a young Mark Ricker. That’s all I can think of, guys. This is young Mark Ricker. Go Dogs. But then he said to borrow from your 401(k), and I just think that is tragic, awful financial advice.

Brian: Well, he said, “Look, there’s no taxes due now.” But if you lose your job while you still have that 401(k) loan, not only will you have to immediately pay the loan back, and if you can’t, you have to pay the taxes plus a 10% early withdrawal penalty. There’s a lot of risk. And then also, you have to look at how your employer structured their 401(k), because a lot of times while you have a 401(k) loan, you might be forfeiting a portion of the matching or other benefits within the 401(k) until the loan is completely paid back. So you’re borrowing from your future for this moment. What I would prefer somebody to do is we have a lot of flexibility on that first home purchase. That’s why if you follow the Money Guy rules on home purchasing, we let you get a pass and say, “Hey, how about just coming up with 3 to 5% for that first home down payment?” That way the barrier to entry is as low as possible to still get you into homeownership without leveraging off of your future retirement.

Bo: Another thing I want you to do is go play with our wealth multiplier tool. Based on your age, if you were to take a $10,000 loan out of your 401(k), what you’re doing is taking 10,000 soldiers in your army of dollar bills off of the battlefield. Put that into the wealth multiplier to see what that $10,000 could turn into by the time you get to retirement. You’re going to recognize that it is not just $10,000 that you are borrowing. The opportunity cost of not having those dollars working for you is huge. You don’t want to do it. There are other better ways to access capital, especially to buy a first home.

Clip #3: What Should You Do With an Unused 529 Plan? (4:10)

[Clip] I’ve got a 529 that I started for my daughter years ago and now my daughter is older and has pretty much disowned me. What should I do with that 529 since I don’t see any future reconnection with my daughter?

[Clip] I’m sorry. How old is she?

[Clip] She’s 16.

[Clip] How much is in there?

[Clip] $16,000.

[Clip] The legal technical answer is the money is hers. It’s in her name and you put yourself in the seat of the manager of her money, and you have a legal responsibility to manage her money for her. The setup doesn’t account for the relationship one way or the other. I assume you’ve got this with a financial advisor, right?

[Clip] No, not yet. It’s through our state. It’s not through a financial advisor.

[Clip] Okay. You might contact them and ask them if you can transfer the custodianship to her mom. In other words, take your name off of the responsibility line and then her mom is in charge of the money for her until she’s 21, and that would get you out of the loop. That’s probably the cleanest thing you can do. Can I change hats? I’m just going to be dad. I wouldn’t do anything. I would just let her mother know, and I would write her some letters. They may or may not get through to her. Just telling her how much you love her and that you’re here, and that when she gets ready to go to college, there’s a college fund and all she’s got to do is get in contact with you and you’ll be happy to help her with that.

Brian: I mean, I think Dave was wondering if he was going to put on the dad hat because this is such a painful situation. I just don’t know that disowning or trying to make use of this money is the best play for a 16-year-old.

Bo: I want you to speak to the dad part. I’m going to speak to the logistics part. One thing that Dave I think missed just a touch is that when you open up a 529, you have a beneficiary of the account, but one of the things that you can do with the 529 balance is you can, as the owner, transfer it to different beneficiaries. So if you have other children, it’s not like that money has to stay captive in that account for that beneficiary. You actually have the ability to roll it down to other siblings or roll it into other plans with a different beneficiary. But I agree with you. The sadder thing about this was the dad hat situation. At 16 years old, I would argue that’s not a point that’s beyond all repair.

Brian: Well, yeah. I mean, 16, there’s so much in flux. And obviously the undercurrent here is that he’s not with her mother anymore. So there’s all kinds of baggage that’s blown up in this thing. But I wouldn’t be making decisions right now that could cause a ripple effect of long-term irreconcilable differences, because can you imagine the story your daughter will tell forever? That my dad took my college funds because I wouldn’t talk to him. That just breaks my heart. I would try to be the bigger person on it and just say, “No matter what chaos we have in this moment, you’re always going to be my daughter and I’m always going to love you.”

Clip #4: Is Traditional Saving and Investing Bad Advice? (7:07)

[Clip] Just save more money. I’m going to give that a four. I think a lot of people do need to increase their savings rate, but savings alone will never make you financially free. Follow the 4% rule. Oh man, that is the worst possible advice you can get. That is where savers are losers comes from. I’m going to give that a one. Work until 65. I’m going to give that a one as well. When you believe that 65 is your retirement age, you lose. Buy a house ASAP. I’m going to give that a three. There’s a lot of math behind owning a house, but there’s a lot of money that goes towards owning a house as well that could otherwise be put to investing. Max retirement accounts. Complex retirement accounts is basically a default saying I’m never going to retire.

Bo: Hold on. Okay. You know what? If this was ranked where one is the best and 10 is the worst, he actually did pretty good, right? I agree. All the things that he said were ones that are like the best things you should do, like save more money, adhere to the 4% rule, plan for retirement many years in the future. I think that’s all great advice. I think he just didn’t understand the ranking system.

Brian: Yeah. The thing that kind of was a stick of dynamite when I was 17 years old was I had an economics teacher who told me $100 a month would make me a millionaire. I was like, how am I ever going to become a millionaire? And little did I know that holds up. It works even for somebody who’s 20 years of age. So imagine what happens if you start saving as soon as you get your first job in your 20s. $100 a month, $200 a month, $400 a month, just maxing out your Roth IRA — those small decisions will change your life. So to hear somebody say that’s not going to do it — well, if I had to guess what his future recommendation was going to be, it was probably going to be real estate, or life insurance, or some product that uses leveraged debt or cash value life insurance. There was probably some pitch coming that we cut out.

Sponsor: Monarch Money (9:02)

Bo: Brian, name something you love so much that you would recommend it to anybody.

Brian: That’s easy. Smokey and the Bandit. You know, come on.

Bo: Okay, that is very on brand for you, but for me it’d be something that’s been a big part of my money story lately, and that’s Monarch.

Brian: Oh yeah. You know, I’m willing to change my answer to Monarch. And it’s not just because they’re a sponsor of the show, but because it’s probably a better idea to recommend a tool that can help people reach their money goals than a movie about an outlaw who volunteers to transport beer across state lines.

Bo: Yeah. And here’s what I love about Monarch. It gives my wife and I a clear picture of our finances because everything is in one place, our accounts, our investments, our spending, and it can help us stay on track with all of our savings goals.

Brian: And Monarch’s AI weekly recap shows you spending trends so you can use that data to make better decisions.

Bo: Yeah. When Monarch shows Brian he’s rented Smokey and the Bandit three times in one month, it becomes painfully clear he probably ought to make better financial decisions. So 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.

Brian: Why don’t I just buy the movie?

Clip #5: How Should You Use Your First Credit Card? (10:18)

[Clip] I just got my first credit card. How do I use it properly?

[Clip] Oh, let me show you. When you go on your weekly shop or fill up with fuel, put it all on your credit card.

[Clip] But why can’t I just use my debit card?

[Clip] Because this will boost your credit score, which will make it cheaper for you to buy a house or car in the future.

[Clip] But I heard credit cards ruin credit scores.

[Clip] Not if you keep the balance low. The trick is to use less than 30% of your available credit.

[Clip] But won’t that just put me in debt?

[Clip] Well, temporarily, but if you pay it off in full at the end of every month, you’ll never pay any interest.

Brian: And by the way, it will lower your property and casualty insurance. This is the thing. Credit card use is A-OK. Credit card debt, no way. And what I mean by that is you’ve got to pay it off every month. There’s nothing wrong with the convenience because anytime you go on the internet, a lot of times I like using a credit card on sites. Whether it’s travel sites where I know I’m getting additional insurance, or sometimes you’re just on a deal website and you’re like, it’s a good thing that just in case this is not the greatest place and they’re harvesting my information, I’d rather use a credit card than my debit card, which is direct access to my savings.

Bo: And I think for most folks, becoming a good credit card user is a process. I would not say start today and put everything on your credit card right now. I like what he said. Hey, maybe start every time you fill up gas, put it on your credit card. Or maybe one meal a month, put on a credit card. That way you build the muscle memory of actually using it, paying it off, using it, paying it off, until eventually you get to the point where all of your consumption can happen on the credit card because you have an automated process to get it paid off. But you don’t have to start there. It’s okay to ease your way in. If you’re young, maybe a college student or a young adult, the earlier you start figuring out how to do that, the better your credit score will be long term.

Brian: Now, there is one big asterisk statement. A little over 50% of Americans carry a balance on their credit card every month. If you’re one of those people, don’t use a credit card. It really is a privilege to use a credit card because you have to earn that privilege by showing that you have the discipline to pay off that balance every month.

Brian: Every time I see Mark, all I can think about is Alfred. I felt like right there I was Batman and he was showing me one of my tools. That’s all I could think about.

Bo: You got about 75% right. If we’re going Mickey Mouse, I would be Batman and you would be Robin.

Clip #6: Are Covered Calls Really “Free Money”? (13:01)

[Clip] If you have 100 shares of a stock, then you are eligible to sell covered calls on your stock. When you sell a covered call, what you’re doing is telling your broker, “I am willing to give up my shares as long as it gets to the strike price that I specify on the date that I specified.” And the best part about this strategy is if your shares are called away in profit, so you got them at one point and you’re selling them at a higher point through the covered call, you cannot lose money. So that’s what’s so great about this strategy. Now, when you see it in your broker, you can select a strike price that is too low and it can go much higher and you can leave money on the table, but you can’t lose money. You can just see in your broker, it’ll show a negative next to your position if it’s pushing higher than your strike price.

Brian: Bo, we have a dear friend. I’ll let you decide if we’re going to share his name, but Jack, he loves him some covered calls. And what’s so funny is that last time we were hanging out with Jack, he came up and he says, “Hey, I’m going to do this strategy with you guys.” And I feel like this is one of those moments where the good Lord of the universe has a sense of humor, because Jack took a stock that on its own made 40% in the time that we started talking about this, and I think Jack made 10%. This is the problem. Nobody ever tells you about covered calls. It’s exactly right that you won’t lose money on the transaction as long as they trade within this narrow range. But when they have the run-up, and we all hope for that moment when you put a little bit here and the thing goes up 40%, if you price your covered call at 10%, that stock gets called away. Yes, you made the money you made off of selling the call, but now you’ve lost the holding before it had the big run-up. So if you want to go reset your position, guess what? You have to pay more for the stock that you already owned. The reason we know this and can chuckle about it is because a lot of people when they figure out investing, they figure out covered calls and it looks like free money. But Bo and I dabbled with options ourselves and they are very humbling because you can be exactly right with a lot of your assumptions but they have timing issues. If your timing is not perfect or the timing of the stock running up gets away from you, there’s just a lot of things. Also the hassle factor. I don’t know that the squeeze of the fruit is worth as much work as it takes to actually do this well.

Bo: Yeah. I do not think the juice is worth the squeeze. Most people would be far better off if they just bought a stock, bought an index, bought a mutual fund, bought an ETF, held that long-term, and did not overcomplicate it. Focus on the things that actually matter in your financial life. How can I increase my savings rate? What kind of accounts am I putting my money into? Am I following the Financial Order of Operations? Spending mental calories on answering those kinds of questions is likely going to be a lot more valuable for you than going and trying to sell covered calls. The most valuable resource you have is your time. Use it accordingly.

Clip #7: Should You Move to Another State to Save on Taxes? (16:15)

[Clip] One of my pet peeves is people who are very very wealthy and then they move to a place that they don’t actually want to live in just so they can save a little bit of money on taxes. What’s the point of being rich? It’s because they have fixated on this idea that they need to reduce the amount they pay in taxes. I’m very happy to pay my taxes. I know that it goes to helping poor people and middle class people. It’s a never-ending game of trying to minimize or avoid taxes. Like that’s not the point. The point is to live a rich life.

Bo: I don’t disagree with that. I think we always want to factor in taxes and we don’t want to pay more taxes than we necessarily have to, but we never want to let the tax tail wag the investment dog or wag the life dog. Meaning, if I don’t want to go live in some specific low-cost or no-tax state because I really like the area in which I live, I should probably be okay living in the area that I live, recognizing there’s going to be a higher tax burden. I’m going to have to have a larger portfolio to provide the lifestyle that I want. But I would never make a decision solely on the tax impact. I think if you do that, you’re not actually allowing your money to be a tool to help you accomplish the goals that you have.

Brian: Hey, I’ll tell you the other side of this. We live in the state of Tennessee, and there sure are a lot of people that have moved to the state of Tennessee, the state of Florida, and pretty much all over the Southeast over the last few years. I don’t know if it’s taxes or other things, but I think where we are is spot on, and we are full. Nobody else needs to come. Consider you heard it from me first. Don’t move to Tennessee for the lower tax state, or to Florida.

Bo: They’re not hiring me to be the hospitality committee.

Brian: Well, I mean, you know, we’re full. Okay. Bye.

Clip #8: Prediction Markets — Investing or Gambling? (17:55)

[Clip] Hey, what should I be investing in on Kalshi or Polymarket?

[Clip] Babe, that’s not investing. That’s insider trading and you’re on the outside. When I worked on Wall Street, if I used the information that I learned at work to then make money in my personal portfolio, I would have been thrown in jail, because the stock market and securities are regulated. But all of a sudden, government officials can now place trades on policy announcements. Tea producers can place trades on which couples will win dating shows. And the Super Bowl streaker can bet on someone streaking. 60 Minutes even did a report on Polymarket that found that there were nine accounts that had placed $2.4 million worth of bets almost exclusively on military operations and they had a 98% win rate. 98% is the exact score I would aim for on an exam so that a teacher wouldn’t think I was cheating, even though I definitely was. These companies want you to believe that dropping $5 on who’s going to win Love Island this season is the same as buying a stock. It’s not. You are not investing. You own nothing. There is no underlying asset that can gain or lose value. You are just betting. You are frolicking in a digital casino. And don’t we all know that the house always wins?

Brian: I have no notes. I agree with you. I mean, I thought it was spot on. This is a new phenomenon. I’ve even had advisors here who’ve shown me that they’ve found these inefficiencies in the different betting sites and you can play this. By the way, the sites are really brilliant and they catch these arbitrage situations very quickly. I don’t love how accessible it’s become. It used to be that gambling was something you had to go somewhere to do. It feels like gambling has come to everyone. And there’s a huge difference between gambling and speculating versus investing. So make sure you know the difference so you can have the right mindset. Is there a way to treat this as a hobby and have a healthy relationship with it, or is this something you should just avoid because it’s not part of healthy financial habits?

Bo: One thing I think is great is she says that when it comes to gambling, the house always has the edge. And that’s true. If you’re gambling against the house and the house has the edge, over a long enough timeline you will lose. So what do you do? You try to put yourself on the side of the house. If you can be the house, then you’re likely over the long term going to be on the winning side of the equation. Well, that’s exactly what investing is. When you go buy the S&P 500, when you go buy a low-cost index fund, you are now betting with the house. You’re not trying to beat the market. You get to be the market and you get to have success over the long term.

Clip #9: A $100 Million Entrepreneur’s Best Financial Advice (20:22)

[Clip] Is this your Rolls-Royce?

[Clip] Yeah. I have the biggest business media channel in the entire world called the School of Hard Knocks where I interview guys like Shaq and Mark Cuban.

[Clip] What did you do to get a Rolls-Royce?

[Clip] I invented gel nails in 1981. That’s 44 years ago. 44 years of business.

[Clip] What’s the most amount of money you made in a single year?

[Clip] I made over $100 million.

[Clip] How did you scale out to do over nine figures in sales? What was your secret to scale?

[Clip] Started with $200 on Venice Beach. There’s a picture from the first day on Venice Beach. $200.

[Clip] As a $100 million entrepreneur, what’s the best financial advice you’ve been given?

[Clip] The best financial advice in the world is save your money and don’t waste it on stupid. This car was $520,000. I bought it at auction for $175,000. I could buy a hundred of them brand new, but I wouldn’t spend $500,000 on a car.

Bo: I love it. Save your money. Don’t waste money buying things you don’t need to impress people whose opinions don’t matter. If you can figure that out early on in life, you will save yourself a lot of heartache.

Brian: By the way, I stand corrected. I said earlier that Alex Hormozi is who Bo sends me, but unfortunately Alex is now in second place because the first seat is definitely School of Hard Knocks. I’ve been getting a ton of these videos from Bo. I loved that advice from that gentleman. By the way, just yesterday my wife was arranging a nail session with my daughter and our next-door neighbor and their daughter. And I kid you not, when they got to the manicure, she was like, “I’ll have two that are regular, one that’s gel, and one dipped.” I have no idea what dipped even means, but I was like, there’s the gel. So this gentleman is still making money even off of my wife and my neighbors. What’s funny is, don’t fall for it just because you saw this gentleman in a Rolls-Royce. What people don’t realize is there’s a time and a place for purchases like that, and that’s always Step 8 of the Financial Order of Operations. What I don’t want is for some 20-something who’s in their first job making $50,000 or $60,000 to see that. That car would overwhelm what you have going on. But this gentleman here who’s got to be worth hundreds of millions of dollars, if he wants to go spend $175,000 on a car, it is a literal drop in the bucket and it doesn’t move the needle. But it sets the wrong impression for anybody who tries to fake it until you make it. Go make the money, start saving it as soon as you possibly can, and don’t waste it on stupid stuff.

There’s A Better Way to Do Money (22:52)

Bo: We believe that there is a better way to do money. If you want to know more about it, go to moneyguy.com/resources. Check out all of our resources, all of our free tools, all of the videos we have out there so that you can do money better.

Brian: We love reacting. We love giving away free advice. I’m your host Brian, joined by Mr. Bo. Money Guy, out.