The ONE Financial Tool That Will Transform Your Year-End (Works at Any Income!)

Introduction – The Ultimate Financial Tool (0:00)

Brian: What if I had a universal Swiss Army knife of personal finance that will transform your year end?

Bo: Brian, I am so excited to talk about this because this is literally something when someone says, “Hey, where should I start on my financial journey or what tool should I use? What thing should I be thinking about to kickstart me? No matter where I am, whether I’m at the very beginning of my journey or even if I’m well into it, what tool should I use?” This is the tool that I always tell them.

Brian: So, all of my financial mutants are right now saying, “I can name that tune with one note.” And they know we’re talking about the net worth statement.

Bo: That’s exactly right. It is the statement that gives a detail of where you are right now currently in your financial life. Because how on earth can you know where you’re going? Or how can you know if you’re even on track to get there if you don’t know where you are today, if you don’t know what your starting position is? And that’s exactly what a net worth statement does.

Who Should Do a Net Worth Statement? (1:01)

Brian: How about since I’ve already kind of broken the seal and made this into a game of saying name that tune. Let’s play a little game here of Bo, is a net worth statement, is there like an age restriction for this?

Bo: Nope. No age. So the question, who should do it? People at any age. So whether you are an 18 year old just now graduating high school or you are an 88 year old in financial independence, you should do a net worth statement.

Brian: How about is there like a season of life like maybe after you get out of debt and you actually start saving and investing? Is that when you should actually do a net worth statement?

Bo: Yes. And yes, to every other stage, any other age and stage of life, whether you are single, no kids, just starting in the workforce, or maybe you are deep in the messy middle with a gaggle of kids and a thousand different things pulling you in a thousand different directions, you should be doing a net worth statement.

Brian: And I think you guys are catching on. It doesn’t matter if you’re deeply in debt or you’re knocking things out of the park. And it doesn’t even matter if you’re at your entry level right out of college first job or if you’re absolutely crushing it. This is also good at any income level.

What Is a Net Worth Statement? (2:10)

Brian: So, let’s talk about what is a net worth statement because some of you, we realize 40% of our audience is constantly coming through this door trying to figure out what is personal finance. We ought to probably take them back to the basics of what is a net worth statement.

Bo: Yeah. Essentially, when you put down your net worth, what you’re trying to get a hold on, what you’re trying to get your head wrapped around is, okay, what are all the things that I own, the assets that I have, and then what’s all the money that I owe, the liabilities that I have incurred? And if I take what I own and I take away what I owe, that gives me my net worth. That tells me where I’m at today. And a lot of folks starting out, Brian, they do this, man, I don’t own a whole lot and I owe a whole lot because maybe I have an auto loan, student loans, and other things. That’s okay. That’s not necessarily a bad thing. Even if you have a negative net worth, you should start tracking it today.

What You Own – Assets (3:03)

Brian: I want to go through this next section pretty quick because I want to go a little deeper into what is what you own, what is the debt components of what you owe. So, we’ll go through this and then stick with me because I need you guys in the audience to understand why this is so valuable. We’ll kind of give some color to that. That’s why this is one of our favorite times a year to use this as a tool to shape your financial life and be that much better for it.

Bo: So, when you think about listing out the things that you own, here’s some common stuff that you might find in your net worth statement. You might find the value of your cash account. So, this is checking accounts, savings accounts, money market accounts, high yield savings accounts. You’ll also list out all of your investment accounts. And that’s across all three buckets, your after tax accounts, your tax deferred accounts like 401ks, 403bs, your tax free accounts like Roth IRAs. You’ll list out any business interests that you own. If you’re a small business owner, maybe you have a side gig that has some sort of enterprise value. You’ll list out the value of your real estate though. So, this is not only your primary residence, but also like rental homes or other type of rental properties that you own. And Brian, this is one we get a lot of questions on and this is something that’s a little unique about the way that we tell people they ought to think about their net worth because we hear this all the time. Guys, I’ve got my house, but how should I mark this? What should I put down for the value of my home on my net worth?

Brian: Now, look, a lot of people don’t like this, but it’s more of an accounting principle that I’ve just used forever is that I use the lower of cost plus improvements. And the reason I do this is because this is a use asset. I mean, one of the worst things, it’s just like right now, I’m sitting on tons of home equity. But the only way I could unlock it is that I have to sell the house or go take on more debt, which is not something that I think is a viable solution. So, if I was counting on, if I was trying to figure out, do I have enough net worth or enough assets behind me to support me so I don’t have to use my labor or time anymore, I would have a false sense of comfort if I was just basing it off of home equity because we live in an area that’s just had a huge run up in value of houses, but it’s not usable unless I actually liquidated or took out debt. And that’s just that’s no go land for me right now.

Bo: We want to be careful allowing too many things that are outside of our control to influence both positively and negatively the things that we see in our net worth statement. We can control our savings behavior. We can control adding to our investment accounts. We don’t necessarily get to control how much our house increases in value in any year, 2 year, 5 year, 10 year period. And just like you said, it’s a use asset. So we like to be super conservative in that, even recognizing that if you do that, there’s a really good chance you’re understating the value on your net worth.

Brian: Well, and think about this. I’m kind of jumping ahead, but think about the years we had the crazy distortions in real estate. We’ll have reversion to the mean on this, but the fact that most real estate goes up like inflation 3%, 4% a year. We’ve had periods post pandemic where it was like 10%, 15%. If you looked at your net worth statement in those years, what if you were saving 15% with the goal of trying to get to 20%. But because you had a huge run up in your primary residence, you would have a false sense that hey, I made a gazillion dollars last year because my house, it wasn’t because of your behavior. And I think that skews your dashboard view as the kind of executive of your personal financial situation. It’s not good information that you can actually control.

What You Owe – Liabilities (6:31)

Bo: All right, so we’ve talked about the things that you own, the asset side of the equation. Now, let’s talk about what goes on what you owe, the liability side. This is going to be things like consumer debt. So, maybe you have a credit card balance that you’re trying to knock out, you’re trying to get rid of. That would go on the what you owe. It’d be personal loans, auto loans, other types of debts. Maybe you have student loans or home equity lines of credit or mortgage balances or the value of mortgages on rental properties. Any debt that you owe, any amount you have outstanding would go on the what you owe column. And again, if you can list everything in your life in these two columns and you take what you own minus what you owe, that’s what delivers to you your total net worth.

Why Now Is the Perfect Time (7:12)

Brian: So the question is why bring this up now? Well, we’ve already, this is the big time for us is that we love closing out the year end because it does mean it’s the annual tradition that Bo and I have is to do our net worth statements. And here’s the thing, the tool that we offer to you guys, if you go to learn.moneyguy.com is the exact tool that we use for ourselves. And I absolutely love this tool because it really does give you that dashboard view. So you can compare how’s my liquid net worth doing? How much debt am I paying off? You know, how much am I a high accumulator of the assets, a prodigious accumulator? We have all these things built into the actual dashboard so you can kind of go in there, see how well you’re doing, and navigate this journey to abundance. Because that’s the thing, a lot of people will have this tool, but not know how to use it. But Bo, I almost feel like I’m selling a what is it? ShamWow or whatever the thing, like, wait, there’s more. ShamWow in the fact that I know I never get it right. But right now we think most people think Black Friday, Cyber Monday. We actually have Brian’s birthday. So we’ve actually expanded the sales right now where we’re giving and I don’t want to screw this up. Are we doing 20% off right now?

Bo: 20% off. So, if you go to learn.moneyguy.com, all of our products right now are 20% off because we’ve gone ahead and we want the birthday celebration to extend to you guys, too, for another day. So, you can get in there and do this Financial Mutant style, not Gangnam Style, but Financial Mutant style and get that discount.

The Power of the Net Worth Tool (8:46)

Bo: Well, here’s what I love about the net worth tool that we designed. One, this is something that we’ve used for years and years and years and years. Like, man, if we use this so much, we ought to make this available to our financial mutants. You guys in the chat, because I can see the chat coming in, you’re super intuitive around the questions you’re asking. Oh man guys, some of this I don’t even include my primary residence on my net worth because I can’t use it. That’s one of the reasons why on the very front of the dashboard, not only track your total net worth, we track your liquid net worth. What part of your portfolio can you actually eat? What can you turn into living expenses? You also mention some of the stuff on here about okay, well, how effective am I using my shovel? How effectively am I turning my income into my army of dollar bills? We actually have a thing on the dashboard that shows how powerful that will be. Some people even asked in here about, hey, what about cars? Well, why didn’t you guys mention automobiles on there? You can actually list, maybe you’re someone who has cars, collectibles, art, jewelry, weapons, whatever the thing is for you that would find a place in your net worth statement. You can track that if you so desire on there. But on the dashboard, it actually removes some of that stuff so you can focus on how am I actually building towards financial independence year over year over year. I get so frustrated when I talk to someone that says, yeah man but my net worth isn’t impressive. Yeah, I got a thousand bucks in my Roth IRA and I’ve got student loans and I’m like that’s awesome. If you can start tracking it today, you will be amazed at how much ground you can cover in one year. You’ll be blown away by how much ground you can cover in five years. And you will not even believe how much you can cover in 10 years. But you won’t know if you’ve not started tracking it, actually putting a line in the sand today to start that journey.

Using Net Worth as a Communication Tool (10:41)

Brian: You know, I’ve often shared because I’m very transparent. I’ve always been jealous that Bo started this from ground zero, really, you know, graduated college, you’re doing the net worth. It took me until 2006, so well into your career. I mean, so yeah, I’ve got 20 years of history, but man, I always wish I’d have had the beginning beginning parts because we’ve used this as I was writing Millionaire Mission. What’s funny is I was going back and looking at my net worth statements just to make sure that transparency policy, no hypocrite policy that I have was making. Another way I use the net worth statement and then we’ll move on is as a communication tool. We both live in households where we have awesome spouses that are brilliant but they don’t want to be the financial people. So we have taken this to use this as a communication tool. So not only does my wife know where this is if I was not here, but also we use this in our annual, we do a whole date day and I think I stole this from you Bo where I actually will put it on the calendar. I’ll skip work that day and we go hang out in coffee shops, go have a restaurant lunch, and then even do a dinner that night. And a big part of this is planning around what does the dashboard from the net worth tool say? What are our goals for next year? What did we say we want to do last year? And we’ve reviewed this. This is a superb communication tool, especially if you have a non-financial spouse because it just brings everybody up to speed. So you have that executive summary tool to make sure that we’re doing this together. That it’s not just a one person show. It’s actually we’re doing this together because two becomes one.

Bo: I love that. I love that we get to sit in this spot. We get to share the tools with you that we’re using in our own personal finance journeys and we get to tell you all of the ways that you can do money better. We love it so much that every Tuesday at 10 a.m. Central, we like to show up right here and answer your questions, load you up with information. So, if you have a question you want us to weigh in on, right now, we have the team out in the wings collecting your questions, and we do indeed want to load you up. So, make sure you get your question in the chat. With that, creative director Rebie, I’m going to throw it over to you.

Q&A – Total Stock Index vs S&P 500 (12:56)

Rebie: Yeah, we’re going to kick it off with delmink’s question. It says, “Is investing in the total stock index worth it for diversification rather than just the S&P?”

Brian: Yeah, I mean they’re very similar. I mean the overlap is high correlation. The difference is the total market’s going to have some small cap, mid cap bleed over that if you want to have more control on that. Because what you guys, we love index funds, but you will get to the point, this is why we’ve also talked about index target retirement funds is that if you want to get beyond just primarily large cap US companies, you kind of have to expand that envelope of what diversification means to you. And that’s what, there’s nothing wrong with a total stock market index. I’ve used it for education accounts. I’ve used it and other things where I was looking for a little something beyond just the S&P, but there’s not a huge difference. There’s a lot of overlap.

Bo: Yeah. So, you’ve already mentioned we love target retirement index funds when it comes to folks kind of just starting out. What we would call a generalist fund. There’s a general mandate that tries to employ when it comes to investing. Well, total stock market funds are kind of like that as well. They’re sort of like this generalist fund. They just want to get you all equity exposure. If you’re looking at like a total market US fund, they want to get you all equity exposure. As your investing life changes and as you kind of mature into the place to where now maybe employing some different tactics might make sense, you’ve reached that critical mass. We do generally like to move away from generalist funds. We want very specialized funds. And what I mean by that is, okay, if I want US large cap exposure, I want to go buy a US large cap fund. If I want US small cap exposure, I want to go buy a US small cap fund. And I want that one fund to do one thing very, very well. Early on in your journey, you kind of want the funds that you have in your portfolio, whether it be a total stock market index or a target retirement index, you want to do a bunch of things really well. As you progress as an investor, you want the individual parts and pieces to do something really well. So I want my real estate fund to do real estate very well and small cap to do small cap and developed international to do that and emerging to do that and you kind of build it that way. Well, one of the other benefits that you have when you move into something like changing your strategy across your domestic equity exposure is then you can unlock stuff like tax loss harvesting. Oftentimes small cap funds might move in a different direction at a different speed than large cap funds. Well, if you hold individual funds, you might be able to loss harvest. You might be able to rebalance and take advantage of those movements. When you buy a total stock market index fund, you lose some of that flexibility to be able to do that. So, the answer to your question, Del Mink, is it really depends on where you are in your financial journey. Are you at the place where having a more sophisticated, more well thought out investment strategy really makes sense to where the juice is worth the squeeze? Or are you someone who’s still pretty early on in your journey where you don’t really need to focus on all that stuff. It’s more minutia and you should just focus on the two main things. How much can I save and what accounts should I be putting it into?

Brian: So, the notes I had written, I think you’re spot on. Generalist, you don’t, you know, if your account’s not big enough to worry about it, that’s perfectly fine. But you have to realize when to specialize. And then I wrote down three quick things that you kind of said, I think it’s worth highlighting. The big things you’re walking away from by staying in a generalist portfolio is you lose the power to rebalance. You lose the power to loss harvest. You lose the power to give away highly appreciated assets. I mean, you could give away the total, but when you segment between different asset groups, you could, if small cap knocked it out of the park, you could give that away. Or if small cap got its teeth kicked in, you can loss harvest that versus on a total market, it might be all grouped in together. So, it’s a little bit harder doing that in a generalist format.

Rebie: Love it. Good stuff. And delmink, it’s your lucky day because today is Tumbler day.

Brian: Oh, wow. Everyone’s favorite day. That means if you quack quack quack. That was slow motion style. I think that was straight up duck. Let’s see if I can make it a little more metallic. Is that better? Is that a little more like the Transformer show?

Rebie: That was more what I was used to. But yes, these tumblers can transform into a koozie as well. And if we answer your question today, both formats, just email [email protected] and we will send you one.

Tangent – Never Knowing What Brian Will Say (17:49)

Bo: You know, one of my favorite things, Rebie, about doing this show, about being here, getting to sit in this spot. I never know what Brian’s going to say. I mean, sometimes I can guess and sometimes I can be there. I don’t know. Did you watch the react video that went out yesterday? Did you see that?

Rebie: Yes I did. It was fun. Unhinged.

Bo: In the best way. You never know what’s going to come.

Brian: What’s funny is people ask, do we watch our own content? Not generally, but reacts, I do because I want to see what the content team has done to us because we don’t see it when it gets published. I like to say we’re such good managers that we’re saying, “Hey, send all the previews to us so we can watch it before it goes hot.” No, we just let the team let it rip. And so when it goes public, I’m like, “Let me see what they did to us.” And the video editors crushed it. It was pretty awesome. Yeah. I thought it was even funny that they brought Caleb in as kind of like the Charlie Brown voice at the very end in the background. I love that. It was good stuff. Well done.

Bo: So, if you’re not subscribed to the channel and you’re not getting updates when we have a brand new Making a Millionaire come out or a brand new React come out, make sure you subscribe right now so that you can get those notifications to know when we are releasing fresh new content for you.

Brian: Absolutely. I saw those comments. People are like, you can tell Bo doesn’t know what Brian’s gonna say. And that’s what, we all know our roles.

Q&A – Two Car Payments and the 20/3/8 Rule (19:14)

Rebie: All right, let’s move on to Skyler’s question. If each spouse needs a car, how does that affect 20/3/8 rule? Does each car individually need to follow 20/3/8? Should each car only be 4% of the total monthly income so that they add up to 8%? I think this is a great question.

Brian: Let me give, Bo can you explain the 20/3/8 rule real quick as well?

Bo: Well, can I just give one little small piece of advice because I want, you said you got a thing. So much as you can control it, one thing that we’ve seen both in our personal lives as well as in the lives of our clients, if you can stagger automobile purchasing decisions, it often works out a lot better. I’m always amazed when I have friends and you know, one spouse will get a new car in February and two months later the other spouse, I’m like, “Guys, what competition? Why don’t we just spread this out a little bit?” So if you can spread it out and buy cars on a different schedule, on a different timeline, often that’s more advantageous from a financial standpoint. But undoubtedly, Brian, life happens and sometimes we have to be in that place where we have to buy two cars or we have to have two payments at the same time. And I think that’s where Skyler’s going is how do I navigate that?

Brian: Well, I mean the way the rule is designed is it’s supposed to be 8% total. And that’s why your staggering is such a valuable thing is because the ideal thing is you don’t do this all at once. Now I realize people are going to quickly do the math based upon your income and be like, “Holy cow, that’s just if I had to do this for two cars, that means one of these is either going to, they’re both going to be not great cars or one of these is going to be a beater.” I mean, yes, it creates some hard decisions, but that’s why I would spread this out as much as possible. And then it also puts pressure because what if you did get stuck with the emergency situation where you know you got in a car accident and you had a gap from the value because maybe you had some negative equity and you had to buy two cars in a very short period of time. I want this rule to create the pressure so that you will do dynamic things to get yourself back on track as fast as possible. Because I recognize you might have to go outside of this, but I want this to feel like a weight on you to get back on track as soon as possible.

Bo: And anyone out there who’s ever had two car payments at the same time, it just kind of stinks. Like it’s a hard thing. That’s why one of the things we love and you can just think about this mathematically. If 20/3/8 is 20% down, I don’t finance for any more than 36 months or 3 years and I don’t spend more than 8% of my monthly gross income. But if I drive cars for seven years, that means that I pay off the car in three years and I get to drive it payment free for four years on average. If I can stack my payments instead of having two payments at the exact same time, it’s going to give me a lot of reprieve in my monthly expenses, my monthly spend, which I think is a huge benefit if you can do that.

Brian: And the why is, look, cars are napalm for your personal finance. They are absolutely, that’s where when people talk about the latte effect. I’m like, it’s the car payment is usually the first huge mistake I see people making. Even beyond student loans, it’s the car. They go out there and they buy a car. Way too much debt. That’s why when we react to these Steve-o’s got me rolling and I see all these people with thousand plus car payments. It breaks my heart because and that’s what, but here we are. We speak out of both sides of our mouth but with purpose in the fact because I’m telling you these things are napalm for your personal finance, but then I’m over here with an open hand saying look I don’t want to be hypocritical myself in the fact that I knew the only way I could get to my first job was through car debt so I could actually start building this financial empire was I had to get to my job. So that’s why we gave you 20/3/8 is because we recognize these things are horrible, but we’re going to try to give you some grace and some flexibility by taking on debt. But you have to be scared. That’s why this will also hopefully keep you humble and create character building where you drive a car that’s not as nice as maybe you want and your ego wants and what your co-workers and your peers have. That’s okay. That’s why we say think Corolla, not Land Cruiser, is because we’re trying to keep it as reliable basic transportation until you actually are a level eight or beyond in the Financial Order of Operations and then you can go crazy and do the Dave Maserati or whatever you want to do.

Rebie: Good stuff. All right. Well, Skyler, thank you for that question. If you would like a Money Guy Tumbler, just email [email protected].

Q&A – Savings Rate Drop After Pay Raise (24:05)

Rebie: Next question is from Nathan B. “Our savings rate dropped from 26% to 19%. I can’t include the employer match anymore.”

Brian: Congratulations. That’s why it dropped. Got a big old pay raise.

Rebie: I know that’s a great problem to have. He goes on to say, “You often recommend getting serious about reaching a 25% savings rate in your 30s. How aggressive should we be about getting back to 25% while balancing other goals? And how does the early retirement plan change the equation?”

Brian: Oh man, there is so much to unpack because what Nathan didn’t give us was he’s obviously in his 30s, but he didn’t tell us what his current age is and I don’t know when he started investing because when we, if you go to moneyguy.com/resources, we do have how much you should save. Obviously if you started saving investing you know 20 or younger, 10, 15% does amazing things for you. Unfortunately, the typical American doesn’t start saving investing until they’re 36, so that’s where the 25% comes into play. So Nathan you might be, if you started young enough you might be okay at 20%. But then you threw in a curveball. You said but we might want to retire early. Well, when you have big obligations that you’re putting on your financial resources where you want to quit using your time for labor and you want to start using it on your terms, you better save like a son of a gun because I mean that’s where we see the fire movement. The dirty little secret for the fire movement or financial independence retire early movement if you want to go the next endeavor instead of retire early is that this is why these people save 40 to 50% is because if you’re going to drop out at 45, 50, 55 years of age you better build up your nest egg that much sooner so you can have that flexibility that much sooner too.

Bo: All right let’s think about this pragmatically because your question is how aggressive should I be getting back to 25%. We know that money is nothing more than a tool that allows us to accomplish our goals. So step one, you need to list out what all your goals are, right? What are my goals right now today in my 30s and what sounds like potentially the messy middle? What are my goals for early retirement? What are my goals long term? Then you have to assess, okay, where am I in pursuit of those goals? Has the savings rate we’ve been on caused us to really miss out on some life stuff? And now that I’ve gotten this pay raise where I can’t include my employer match anymore, I’m now able to do some of those short term life goals and that’s going to eat up some of that new pay raise or have I been doing that and I can begin saving this and I need to deploy the dollars that way. And then how much have you built towards those goals whether it be financial independence or whatever. So you have to define okay I have these five different goals I want to achieve. I am 60%, 70%, 20% of the way towards each one of those goals. The answer to those questions will then dictate how aggressively you need to get back to 25%. There’s a great tool that we have that could help you if you go to learn.moneyguy.com, do our Know Your Number course because one of the things that’s going to help you define is okay what is my finish line if I know that I want to be financially independent at 50 years old and I need to have $5 million and based on my current savings I’m getting there no problem, then okay, maybe I can just stay at my current savings rate and then I can focus on funding some of these other goals. If however, I have a shortfall and I’m not there yet and 20% won’t get it done or you drop down to 19% won’t get it done, maybe then I do need to increase my savings rate back to 25% to make sure that I can get back on track. So, there’s some homework you have to do to triage your situation to determine what the best path forward is.

Brian: You’re spot on with the Know Your Number, but we got some additional information just came across the line here. Nathan is 28. They already have one and a half times their income already saved, their new income. And by the way, we know for a married couple, the rule where you don’t get to count matching is $200,000 and greater. So, wowzer. This is Nathan, you are crushing it. Congratulations. Well done. And by the way, don’t forget on the work with us.

Bo: Yeah, I was gonna say we can get you from the financial mutant survey to the client survey very quickly. With that type of course and trajectory that you’re on.

Brian: True. That is moneyguy.com/become-a-client.

Rebie: You just go to moneyguy.com and click on become a client. It’s right there.

Brian: She said it cleaner than us.

Rebie: Oh, I thought this through. So, I thought about where that button was going to go.

Brian: That’s good stuff. 28, one and a half. I thought he said in his 30s but then he’s 28. Of course, financial mutant status. Beast mode. That’s beast mode.

Rebie: All right. Ready for the next one?

Bo: Did you give him a thing? Nathan, hey, because I’m looking out for you.

Rebie: Oh yeah. Go to moneyguy.com and you can email [email protected] and we will send you a Tumbler.

Thanksgiving Talk (29:44)

Brian: Nathan, everybody have a good Thanksgiving?

Rebie: I did. Sure did. Getting some thumbs up from the team. What about you?

Bo: We did. You get some walks in. Are we going to have some new tangent Thanksgiving edition tangent times?

Brian: You should know. I went with two intentions into Thanksgiving because I traveled last week. I was down in Florida. I was going to read the Reddit thread for the book things that Rebie and I are talking about and then I was going to record some tangent time. Did I do either? The answer is no. Because I mean we had relatives. We had two days where it was just the family. But realize when I say the family, my oldest daughter actually came with us. And you have to know if you have a senior in college, you don’t get them anymore. I mean I’m barely in the crumbs of the bag that I’m shaking out knowing that she’s about to do this adult thing. So it was glorious to kind of, we were doing bike rides, we were hiking. We were going to parks. It was glorious. So I didn’t and then the relatives all showed up on Tuesday and then it was off to the races. I mean because once, you know, it’s funny my wife would go to bed at night and she’d say, woo I am just drained. Whereas I’m like amplified because I think this is the extrovert versus introvert because she’s like every morning you’re out there and I’m like putting casseroles in the oven. And I’m like whipping up eggs, you know, making coffees. I mean, I love having a house full of people. It’s just fun. So, I did absolutely nothing that I was supposed to do and I’m feeling a little guilty and a little behind now because I was like, “Well, I’ll just catch up at Christmas.” No, I won’t because we have the same problem. I’ll have a house full of relatives in the house and I won’t do what I’m supposed to. So, I got to get serious about catching up.

Rebie: So, Brian really did have a fantastic thing. It sounds like it was a great thing.

Brian: Oh, it was good. And I ran into a few of you guys out and about, too, and that was always glorious. I had one in Hollywood Studios. We were in the parks in 50s Prime Time. That was kind of fun. Had another one in a restaurant that I had taken the whole family to. It’s too close to my house down there, so I don’t want to say where that was, but it was glorious. You guys are always so awesome when we get to see you in public, and I appreciate you making me look cool in front of my relatives, too.

Rebie: That’s what it’s all about. No, I’m just kidding.

Brian: You know, it’s, I don’t ever know if people know who we are because we’re nerd famous. We’re not real famous. You know, it’s not like we’re Chris Pratt when I went to the bathroom four times walking past Chris Pratt’s table when I saw him in a restaurant one day because I know who Chris Pratt was. But so we’re not like that. But it is one of those things where if you watch that Eddie Murphy documentary that’s on Netflix or whatever, he talks about that your crazy fans are only like the teenagers and 20 somethings. Well, we know in our key demographics, I mean, our key demographics are like from 26 to 50 something. These aren’t exactly the people that are going to be, you know, Justin Bieber chasing you down the street. So I never know if people know where we are. Oh. Oh, look at that. It doesn’t make all the sounds anymore, but we just crossed 620,000 subscribers. Hey, look at that. That’s awesome.

Bo: Thank you for all of you that actually just subscribed. You did that. Thank you so much. We do appreciate it. That’s always fun.

Brian: Okay, we probably ought to start giving value here otherwise people are going to start, the tangent time’s going to take people out.

Q&A – Asset Location and the Three Bucket Strategy (33:23)

Rebie: I do have another question queued up. It’s from Hellog0odfriend. It says, “When considering the three bucket strategy, is there an optimal bucket that high growth assets like stocks and low growth assets like bonds should go in? Should each bucket just include a mix of both?”

Bo: Here’s the answer. It depends on where you are in your financial journey. If you are someone who is just starting out very early on in your financial journey, we don’t really want you thinking about what’s known as asset location too much. We want you focusing on how much can I save, how much can I save, how much can I save because what’s going to impact your future of financial security more than anything else is going to be your savings rate and just putting that money to work. So, how much can I save and then where should I put it? And we actually have, Brian, can you hold a thing up for me? We actually have a nine step process to help you figure out the most efficient places to put that savings. And you can use things like low cost index funds, target retirement index funds, all of those sorts of things. But at some point, you likely will graduate to the point where not only does it matter how much you’re saving, but you actually can actually have some benefits from think about how you allocate your assets and how you locate your assets, what type of assets you own, what types of accounts. And we do have some guidelines and thoughts there.

Brian: That’s why the best most improved chapter when I was writing this book was step seven hyper accumulation. If you look at Millionaire Mission, because exactly what Bo says, most important thing in the beginning, that’s why steps one through six is to keep your life out of the financial ditch and then to focus on the savings and investment rate with the Roth and tax advantage. But then you get to step seven, you start thinking about how you’re actually going to use the money and I don’t mind just giving you the answer, kind of the cliff notes version of this is growth assets, but not so growth that if you lose money you’re like oh gosh it went to zero, growth not speculative is Roth. That’s your tax free account, that bucket, you really want to stick it to the government as much as you can legally by putting those growth assets because man don’t we all want to be tax free millionaires, that’s always been my dream to have the Roth assets over seven figures. You want to put into the taxable account, this is stuff where not only you have access to liquidity for getting to the money quickly, but you can still put in tax favored stuff like dividends, capital gains, things like that. But you know, because there’s some tax benefits there as well as being easy access. And then your tax deferred, your traditional your employer match and other things if they’re not in the tax free buckets, is this is where you’re going to put your bonds, things are going to be taxed at the ordinary income tax bracket. But you know, load up things like that, conservative type assets will go in there. And then this is the magical thing we get to do when you get more sophisticated in your investments. When they get to a size where you go, man, these guys make money sound so simple. But I’m finding as I have more and more success, it seems to get more complex. That’s what we’re here for is that we tell you, yeah, focus on the savings, right? Keep it simple. Don’t let all this noise and how to do it right keep you from making good decisions. That’s why we do index target retirement funds in the beginning, but then yes, once you start having success, this is exactly the financial mutant type stuff that we try to maximize and help you take advantage of, but it does add some complexities to your personal finances.

Bo: Love it. Can I just throw one other thing? Word of caution, do not sacrifice allocation for location. Meaning, I see this all the time. Somebody will have come, oh man, I don’t really have a whole lot of qualified assets. I don’t have a lot of tax deferred assets and I got my Roth. So, I have my aggressive growth assets. So, all I have is this after tax account, but man, I know that it’s really inefficient to hold bonds and fixed income in an after tax account. So, I’m just not going to hold any of those things. Don’t do that. Remember, you always have to define your allocation first. Should I be a 80/20, a 20/80 or somewhere between? You define that first. And then once you have the appropriate allocation that matches your unique risk tolerance and your unique risk capacity, then you figure out based on your account structure, how can I locate the most efficient way possible? And sometimes, this is crazy, but we have clients based on strategy that we’ve implemented where they might have to hold bonds inside of a Roth IRA.

Brian: I just got acid reflux.

Bo: I know that sounds insane. I know that sounds crazy, but if we’ve done a really good job of doing like Roth conversion strategies and we now converted all the qualified assets into Roth assets and the Roths are in those big like high seven figure numbers, yeah, you got to make sure that you keep the allocation intact. Location is great, but it’s like a cherry on top. It’s not a main course.

Brian: I don’t know if I’d have given that example, but it’s true. It’s the exception to the rule, though.

Rebie: What? You said it was true.

Brian: Well, I mean, we just see, you see stuff like that because some people do have huge three, four million bucks in Roth assets. I mean, we have some clients that have seven figure Roth accounts. It’s glorious when you see it. You know, I don’t mind sharing because it’s public. You know, when Delta went through that whole restructuring, they offered their pilots when they gave up some of those pension rights, they offered to convert some of that money into Roth assets. If you’re a Delta pilot and you did that and went into the Roth, well played because it was right around the Great Recession. Because the market was getting its teeth kicked in. So everything that you put into those Roth buckets got completely amplified up. That’s why it’s fun what we do for a living because we get front row seats to see unique things in history. Yeah. And then you get to, you’re like, “Oh, there’s an example that I can share.” Like I was on an estate call yesterday with a client and they were asking me, we were talking about irrevocable trust. We were talking about revocable trust and living wills and all these terms and they were asking me how this worked. I said, “Well, let me tell you a story.” And I was telling them like one example was a client that didn’t need the complexity but had gone to a seminar attorney who was setting up LLCs for like four wheelers and, you know, all these weird strange things. And then, you know, another one setting up irrevocable, trying to set up irrevocable for somebody who just didn’t have a net worth that required that. So, I loved having examples to share. And then I had another example where I was like, hey, I had a super successful client, mega success, where multiple deca millionaire type success, but had a physician father who set up all these irrevocable trusts and then now the legacy that this father left for his super successful family is that they have for the next 15 years trying to unwind the complexity of this crazy estate plan. So just be careful. I mean, that’s what I love. But I mean, getting back to the point of I just love that we see these things. So then we get to share it with you. So you guys don’t have to fall into those traps and you go into this whole experience with no matter if you’re at the beginning of your journey where you just need to focus on the basics and keep it simple, but keep it functioning and moving forward. Or if you’re at the point where you’re at the level of complexity that you just don’t know what to believe, we got you covered.

Rebie: Love that. Hellog0odfriend. If you would like a Money Guy Tumbler, just email [email protected]. We had a poll running. You may not have realized. But the results are in and I literally just clicked away from it there. Would you Justin Bieber chase Brian down the street? Disclaimer, not a recommended strategy. 55% said yes, they indeed would. That is a big enough deal to them.

Brian: Because the Financial Mutants are trying to put a little dab of a dollop of humor in there because nobody is chasing us down the street. I’ve been to Vegas with some friends and then I was in Disney and they’re like, I thought you’d be recognized more. And I was like, look, we’re in two places that I don’t think there’s as many financial mutants running around because this is not good decision making going on in a lot of these places. It’s just like we go to Steo, got you rolling. Probably not a lot of Financial Mutants, you know, hanging out in the lobby of wherever his dealership is.

Bo: I got a question for you. Do you and John do your net worth statement December 31?

Rebie: I’ll be transparent. I never get to it on December 31st like you guys.

Bo: And then my other question was like, do you all do it together or does one of you take charge of doing it?

Rebie: I usually take charge of doing it.

Bo: You take charge of doing it. I love it. I’m just curious. We’re a good influence.

Rebie: You are a good influence.

Bo: I’m curious how other people handle it. You know what I mean?

Brian: How about when we hire new content people like, “Hey, are you doing a net worth statement?” We immediately, like the peer pressure is strong. They just showed up and they’re like, “Sure.”

Bo: You know it’s funny you mentioned earlier you mentioned the date that my wife and I do and what we do is we plan on all of our travel for the whole year. We’ll get together in January, book everything. She’s already starting to like plant seeds in preparation. Hey, let’s do this for the, let’s go here with the kids this year. And hey, I was thinking about with this couple. Let’s go. Like she’s already got her and it’s awesome because now we get to like talk about it and enjoy getting to look forward to that. And the net worth statement is just kind of one part of that day date.

Rebie: I usually do it early to mid January just because that’s when I get to it. Yeah. And then you have all the numbers from the year.

Bo: And then you have all the 12. Love it.

Rebie: Since you asked, this tool is currently on sale with code Black Friday 2025. If you want to do your net worth statement as well, go to learn.moneyguy.com.

Brian: If I was being completely honest and transparent, the things that typically are not the most accurate on my net worth is sometimes I forget to update my footnotes. And then the cars and the house don’t always get updated as much as they should for any improvements or things like that or just the value of the cars. And my household, I think I’ve been saying for years that my household assets, meaning furniture, is like 25 or $40,000. The same thing. It hasn’t changed, you know, since I started doing this in 2006. And believe me, the furniture is worth a lot more now than it used to be.

Rebie: I feel weird putting things like that on my net worth statement. Like we have gear or like things that probably are worth, well, I know they’re worth, let me not, but I’m like, we’re not going to sell this. I don’t know.

Brian: Our net worth tool has sometimes been too good for the, it confuses bankers because I put deferred taxes. Yep. And I’ve learned anytime I talk to a banker or anybody, I have to remove all the deferred taxes because they just get confused by why would you show deferred taxes? I’m like, well, because I’m trying to minimize, I want to know how much of this money really is mine, not how much the government would have a hold on just because I have large 401ks and businesses. We were doing a thing one time and we submitted stuff to the banker and both of our net worths had deferred taxes on it. And he said, “Hey, what are these back taxes for and what’s the payment schedule?” And we were like, “No, no, no, no, no back taxes. It’s assets. You can count it.”

Bo: That’s funny. That got real nerdy real fast.

Rebie: That really did. I was like, I’m glad that you all understand that. That sounds great.

Q&A – Avoiding Financial Miser Status (45:11)

Rebie: All right. Brandon161 has a question for you. It says, “Hi, Money Guy Show. Do you have any tips on how not to be a financial miser? I recently doubled my income, which is amazing, but I find myself penny pinching and I feel it is affecting my social and personal life.” So this is a good question because I do feel like one of the first things you guys talk about is, is it affecting your relationships, right? So do you want to expound on that?

Bo: Well, Brandon, if you were a guest on Making a Millionaire, it’s a show that we release every other Monday. If you want to be a guest on there, you can go to moneyguy.com/apply and you can apply to be a guest on Making a Millionaire. If you were on there, one of the questions that we would ask when we sit down with you is okay, why are you penny pinching? Like what’s the purpose? Because what we really want to get to the base of is what’s the thing that’s causing you anxiety in your life that even with this increase where you’ve doubled your income, why is it that you feel the necessity to penny pinch? Is it because of some, you know, baggage from childhood or some experience you’ve gone through? Is it because maybe you were not as disciplined as a saver early on as you should have been? Or is it because you have an unrealistic view of what your current financial circumstance is? And a lot of times that’s what it is, Brian. We’ve had clients as well as friends where we’ve talked to them like, “Hey, you’re doing this and this does not make sense. You’re tracking your expenses right now and you’re squabbling over this eating out meal when it cannot change your financial situation. You have to really dive in to the behavioral aspect of why that mindset still exists.

Brian: It’s funny. I think we’re a good balance because look, the majority of Americans are not going to be wealthy and the biggest problem they have is they don’t have discipline. You know, that first ingredient of the wealth creation formula. But then there’s the sad part for me and we can see it by doing our annual surveys not only on our financial mutants but also our clients is most of the people who are consuming our content, you’re just not going to die broke because you have the opposite problem that the typical American has is you have discipline for days and I just know in my own journey and what’s funny is I was listening to a podcast this morning and then we even just pressed publish. Did I say that right?

Rebie: You did.

Brian: And the gentleman who, because I described to everybody when he gave the keynote, he basically said I got to the top of the mountain and then I quickly realized it was not what I thought it was going to be. So I was running back down the mountain telling everybody quit. It’s not what I thought it was going to be. What’s that guy’s name?

Rebie: Casey Neistat.

Brian: How can you guys remember this stuff so easily? But anyway, so I kind of have the same experience is that if you’re a financial mutant and you think that when you get to $3 million, $5 million, whatever the X is and you’re formulating your brain, that once you have this, it’s going to solve all your problems. I think you’re going to find it’s much more empty than you realize. So that’s why I’m always very deliberate with telling you, don’t ruin your relationships. Since you have this key muscle of discipline, make sure that when you get to be my age in your 50s that you look back at your 20s, you look back at your 30s, you look back at your 40s in these very distinct phases of life and that you don’t have regrets. Because it breaks my heart when I find out like I had a very dear friend that his marriage almost ended because he was still making his wife keep receipts to give to him every time she used a credit card. And they didn’t need to be doing that anymore. That might have been very valuable at the beginning of the marriage in your 20s when you’re doing budgeting and other things. But when you go to a more cash management plan and you’re making your money go to the pots and you don’t have to track every little thing, that’s going to be healthier for somebody than to look like you’re hyper managing, micromanaging everything that your spouse is doing. And it’s the same way when your kids don’t want to go on vacation with you because you still got them sleeping in the closet in a sleeping bag on a blow up mattress because that’s cheaper than actually getting the adjoining rooms. You might be losing the plot a little bit on what money as a tool can and cannot do for you. Now, don’t mishear me. This is not die with zero where I’m assuming that you’re going to be an investment banker who can make multiple hundreds of thousands of dollars a year, so you should go live a hog wild life in your 20s. I’m trying to give you the balance that there’s definitely a dance here. I want you to be disciplined, but I want you to not have regrets when you get older.

Bo: It’s one of the reasons why we say we want you to save 25% of your gross income so that it can be an unlock for spending. It’s not so that can be restrictive like, oh, I got to save, save. It really is more for financial mutants to say that, okay, if I do this, I can check the box. You guys can’t see this, but I made this little like sticky note flowchart. And this is what I basically said. I want you to ask yourself these questions, Brandon. Hey, am I under 35 years of age? If the answer is no, I’m older than 35. Okay, have you done the Know Your Number course? Do you know what your number is? Have you assessed where the finish line is? Do you know where you are today? And are the steps you’re taking on track to get you from where you are today to where you want to be? Right? That’s if you’re over 35. If you’re under 35, ask the question, okay, am I going to be part of the FIRE movement? If the answer’s yes, same thing. Have I done the Know Your Number course? I know where I am. Do I know where I need to be? Am I on the right trajectory? Do I need to make adjustments? If you’re under 35 and you’re not trying to do FIRE and you’re saving 25% of your gross income, then you can stop there and you can just free yourself to say, “Man, I’m doing what I need to be doing. I’m paying myself first. I’m checking that box. I don’t have to pinch pennies once I’ve done that. Whether I spend a gazillion dollars on whatever this thing is, so long as I’ve paid myself first, I’m okay and I can do it freely without any guilt.”

Brian: I feel like we just in real time watched Bo create a decision matrix that will show up potentially on the resource page. No, because this is a great point because a 28 year old comes to us, it’s completely different than if somebody comes to me who’s 42. Because if you’re at the beginning of your journey, I want to acknowledge and celebrate with you that you’re a hyper accumulator when you’re at the beginning because that is going to add flexibility. But when I find out that you’re doing this stuff because it’s back to the make wealth, the maintain wealth, and then the multiply wealth, where are you at in the journey? And that’s why the 40 something year old who is already at the maintained wealth but still living like they’re you know broke as a joke. You might have lost the plot. I think that’s a great, I see where your brain, we share a brain so I see what you just did there with that decision. We should create something like that. Can you hold on this sticky note so y’all can, okay, we’ll archive this one away. That’s the archive right there on the, no, but that could be because then you could put little bubbles with the products that kind of help with, you know, the things because that’s what people say. Are you just trying to sell stuff? No, I recognize that there’s going to be things you need on this journey before you actually need a wealth manager. And that’s what we tried to design. And that’s what the Know Your Number, that’s why the net worth tracker. We’re trying to give you the resources so that you can kind of go grab those tools when you’re in need before you need to hire a wealth manager.

Rebie: Love that. Great. Well, Brandon161, if you would like a Money Guy Tumbler, just email [email protected].

Q&A – 529 Plans on Net Worth Statement (52:57)

Rebie: Let’s go on to Moneyandmarathon’s question. It’s about the net worth statement. It says, “Are kids 529 on the balance sheet? I ask as the balance can potentially be converted to an IRA for unused funds. We never have a crystal ball if they don’t attend college or have over saved.” Basically saying, you know, you don’t know what they’re going to use the money for in the future, whether or not they’re going to do college. So, do you count this on your balance sheet, on your net worth statement?

Brian: This falls under the category of you just heard I made a confession earlier in today’s show that I don’t update the footnotes like I should sometimes because I’m so excited to update account balances. I will tell you I consider 529s to be footnote items. They’re not to be listed under your assets. They serve a very valuable purpose, but they’re not for you. They’re for your children and their education goals. The same thing with pensions. I think pensions are more of a disclosure that you put on the footnotes than your ability to put them on the net worth statement unless there’s a, you know, convert it to an IRA because a lot of them now, if that’s the case, it’s a gray zone and we can talk about that, but for people who are strict like government employees, those promises are more footnotes to offset. And it’s the same thing with 529s. It’s not your money.

Bo: Yeah. The other thing I would say is you said, “Oh, well, one day they can be converted to IRA balances.” They can be converted to IRA balances for the beneficiary. That’s often going to be your kids and your kids assets wouldn’t be listed on your net worth statement anyways. 529s in our mind are a prepaid future expense. So, we’re okay getting that off of the balance sheet. Now, let’s say something happens and your kid doesn’t go to college and you decide that you’re going to recoup those funds and you’re going to distribute them all and you’re going to pay the tax on the earnings and you’re going to pay the penalty on the earnings and cash it back out. Once you’ve done that, it will come back into your net worth statement. But right now, while it is still a prepaid future expense, I think it stays a footnote item. No different then home equity is not going to be a balance sheet net worth statement item unless you sell your house and then it becomes part of your net worth. But while it’s not actually there in existence, we do not include it because we want that to stay conserved. We want your net worth to really point towards what is building towards your financial independence, your great big beautiful tomorrow. Trying to think through other things that don’t show up on, you know, some of the stuff that aren’t footnotes. And for us, if you again, if you use our tool, it’s like accounts for kids, 529s, UTMA accounts, that sort of thing. It’s insurance. Okay, I have this term insurance. Here’s a policy number. Here’s how much. Here’s who, you know, here’s who the owner is. Here’s who the beneficiary is. Disability insurance. One of the things I think that’s very very helpful to list in your footnotes is who are the people in the estate documents that matter? Who’s the executor and who are the trustees and who are the guardians? If you can have that all in one place and something were to happen to you or something were to happen to you and your spouse, it just makes it very easy for whoever that executor is to step in and say, “Okay, here it is. I have the playbook of everything I need to know to be able to pick up these pieces.” And so if you can keep that information there and updated, it really really helps everyone be on the same page, especially if you have a less involved spouse. And here’s another thing it does because we just did this. This year we updated the guardianship provision in our estate documents for our kids because one of the things I was doing when I updated our footnotes, it’s like, man, okay, the people that were going to be guardians, we still love them. They’re still amazing. They live in a different state and our kids at the age now that if something happened to us, we don’t want our kids to have to move into a different state. So, we changed who the guardians are in our estate documents. It was updating the footnotes on the net worth statement that illuminated the need to do that. So, if you’re doing this consistently, it will bring to light the things that need to be updated and adjusted.

Brian: Well, yeah, it’s a great communication tool. That’s why we try to share that insurance agents, CPAs, and then another thing that I think is very valuable is I like that this is essentially the decoder ring for if you share like a password manager with your spouse and you have a shared password manager. The net worth statement is going to be the decoder ring to know where all the institutions that you have accounts are. So they can if something happens to you and they’re the non-financial spouse, they can go recreate or know where everything is. That’s great.

Rebie: Very good thorough answer there for Moneyandmarathons. Thank you for your question.

Brian: I don’t know how we went from 529s to password managers to pensions. I mean, we tried to give all the facets to it.

Bo: You’re right. Us starting in one place, wandering in the woods for a while, and ending up in a wild location seems very uncharacteristic.

Coffee Talk (57:53)

Brian: I don’t know why I didn’t make two cups of coffee. I keep looking at this thing, why is there only, or did I not put enough volume, you know, on the coffee maker.You can add more because it’s, whatever. I know what y’all don’t know behind the scenes. We’re not sponsored yet. I know. I’m not going to say any names. I’m not saying any brands. Rebie for the last 3 months has been changing out the beans in the espresso machine and I keep like and I’ve been like no yuck no one of them didn’t work and I don’t even like to think that I’m that high maintenance but this one was pretty good.

Rebie: And Josh recalibrated the machine, he just helped a lot. So I think there were a couple issues going on. Chef’s kiss. Your coffee machine’s a little too fancy in a way.

Bo: I refuse to agree with that premise.

Brian: And by the way, it might also be because I just came from the Thanksgiving holiday. I have been loading it up with peppermint mochas. Cookie butter in your machine. No. All these flavored. You go to the grocery store and it’s like creamers. You know, some people get excited about going to liquor stores. I get excited about going and looking at the creamer aisle in the grocery store because that’s where my indulgence is these days. It’s not the liquor store anymore.

Bo: That’s the most Mr. Rogers thing.

Brian: No, but it’s true. I go in, I’m like, “Oh my god, cookie butter. What is that?” And then I’m like, “Oh, oh, wow. Coffee cake. Yeah, I must try that.” So, that’s my fun. So, drinking coffee as coffee this morning because I didn’t put, you know, anything but a splash. Just a little splash of half and half. It’s like, “No, I still like coffee. It doesn’t have to have all the gimmicks that I put into everything.”

Rebie: I love it. But I did, I saw him several times just look kind of sadly.

Brian: A good cup of coffee. Now we are past, oh, yeah. I’m glad. Thank goodness it’s past, it’s almost 11:00. I don’t need to have any more caffeine.

Bo: That’s another one of our Money Guy rules is Brian does not take any caffeine after 11:00 a.m. He’s too powerful if he does that.

Brian: No, I just don’t sleep.

Closing (59:57)

Rebie: Well, this has been amazing. Thank you for all of your financial questions. We will be back here Tuesday at 10:00 a.m. Central answering even more of your questions. And remember to head to moneyguy.com. We have the Black Friday sale happening right now. Only one more day of that. So be sure to take advantage if you are interested in the net worth tool or any of our courses. Go to learn.moneyguy.com and use code Black Friday 2025 to take advantage of that 20% off because then it will go away and it will be back to normal price. So we know you would love a deal like we would. So please take advantage.

Brian: I know I said it last week but still I’ll give a belated thank you. Thank you. Thank you. Thanksgiving was just last week and we couldn’t do half the things. When we do studio tours, people say, “Did you know it was gonna be like this?” No. And we’re still like we’re an overnight sensation that’s been doing this for 20 years at this point, but it’s still I don’t take for granted anytime we get to meet you guys in public or you come do studio tours or just even you show up in a live stream means the absolute world to us because we are having a blast. I mean, this is I couldn’t think of a better thing to do for a living and the changes we’re making in people’s lives and you make all that possible. So, I just want to make sure I said thank you. I’m your host, Brian, joined by Bo, Rebie and the rest of the content team, Money Guy Team out.