Her Finances Need a TOTAL Reset…

Introduction: Meet Megan (0:00)

Bo: If we’re going to show you an illustration to drop your savings rate by 20%, how does that make you feel?

Megan: Unwell.

Bo: Unwell. Why?

Brian: I’d like to have a—I need your percentage.

Bo: How do you choose your investments?

Megan: I’ve got no idea.

Brian: I can’t imagine what you’re probably going to sleep at night. I bet your brain is going in 50 different directions because you’re trying to control it all.

Megan: Never. No, you sleep great. No, I’m lying. Yes. 100%. I can’t sleep.

Brian: Megan, you were saving like 60%.

Background: From Yachts to Beef (0:30)

Bo: How long have you been in the States?

Megan: Three years. But I used to live in Miami when I was young, wild, and crazy.

Bo: How old are you?

Megan: 36, turning 37.

Bo: You said you did Miami and then you went back to South Africa and then you came—what was that?

Megan: Family business, cattle rancher, and then my dad brought the Wagyu cattle, if you know, into South Africa. So it went from like five animals up to a herd and now we’re like, “Oh, let’s process beef.” So there’s a difference between a cattle rancher and aka a butcher. Beef production, food safety. So I went and did that. So I went from Miami, the boats. I was a yachty.

Bo: What’s a yachty?

Megan: Glorified cocktail waitress, cleaner, photographer, you name it.

Brian: This guy’s never seen Below Deck. That’s what he said. When I saw the notes, I was like, of course, because South Africans—if you watch any Below Deck, they’re all surfers, aren’t they?

Bo: So that’s what you did like in your early 20s. Yeah, they typically That sounds like an amazing—sound like a super fun job, right? Like you get to be on a yacht.

Megan: Oh, he watches the show. He knew. Yeah, he knew it. So I had to finish uni and convince mom and dad that I was like, I’m going to do nothing but work and travel the world. So glorified maid if you want to call it that. Just go to Italy, do the Caribbean, you name it. We’ve been there. The craziest little island. Been there. You’re so tired because you just came up from either doing laundry or changing someone’s bed or making a—I don’t know—coffee, lighting your cigar with a cognac for you. But we’re like in the Amalfi Coast.

Bo: So you’re in awesome places, but you’re not like getting to enjoy it. You’re like working, right? You’re grinding.

Megan: Oh, mate. So hard.

Brian: Did you come out of that experience—this is a little off-topic—liking wealthy people more or being more disappointed in people with resources?</p

Megan: Everyone’s different. Everyone’s different. Some born into it. So, this is the 1% of the 1%. Sure. These are yacht people, right? These are yacht people. Yeah. Most people are kind. Yeah. Okay. When their friends get together, they’re jerks. Can I say that? Sorry.

Brian: You say whatever. That’s great. You didn’t really cuss. Jerk is okay. That’s acceptable Money Guy language. That’s okay. That’s wonderful.

Bo: All right. So okay. So you did that, but you’re not still a yachty, right? What do you do? What do you do now? What’s your vocation now?

Megan: I’m in the protein industry. I manage a beef team.

Bo: Oh, so you’ve been in—you’ve been in cows your whole life from like back in South Africa all the way till now. Like that’s what you do.

Megan: Yeah. I’ve been brainwashed since very young. I have. All I know. Ask me beef questions. Ask me about the cattle cycle. Don’t ask me the weather. No idea.

Bo: Okay, great. So, that’s what you do now. You work in the beef industry. And so obviously you’ve had all these wild experiences, right? Like dealing with super wealthy yacht people. It sounds like your family were like small business owners. What was your history with money? Like, did y’all talk about money a lot? Did you know a lot about money? Did you kind of start out like, “Oh, I know how this stuff works.” Give me the background there.

Megan: Didn’t really talk about money, but I saw what money could do. Okay. And I also saw what it couldn’t do like when there wasn’t money. So, you know, if you’re a rancher or a farmer, money does this based on weather or cattle cycles or crops and all that good stuff. So, there was money and then there wasn’t money, then there was money, then there wasn’t. But everything was handled by others. So, it was never spoken about.

Bo: Okay. So, it was never like front and center for you.

Megan: No, no idea. So, that’s why I’m trying to learn. I’m like, whoa. Okay. Taxes, what else? Balance sheets. There’s all that good stuff. And you know, to be independent, you need to learn and study and grow. And I know nothing. So, please help.

Net Worth: $220,000 in Just Three Years (4:19)

Bo: Well, well, hold on. You can’t say you know nothing because you’re in a great spot. You impressed us. You sent us a net worth statement, right? We’re able to look and see where you are today. And it’s pretty wild. So, you’re 36 going on 37. And as you can see right now as a 36 going on 37, your total net worth is nearly a quarter of a million dollars. And you have a huge income, right? Make almost $200,000 a year. You have over $220,000 in net worth. So you must know something like you must have something figured out, right?

Megan: Save. Save.

Brian: So that’s the question I also have. When did you start? Because you’re acting like you had this life. So this is all really within three years?

Megan: Three years. You’re bringing me to tears. Sorry, I’m a crier.

Brian: No, you’re going to—but this shows you at the beginning. Holy cow, man. Three years, living expenses and everything. You’re crushing it. I’m worried. And look, are those tears of excitement or exasperation of what you’ve had to go through? See, that’s what I think. Today my biggest goal is for you to leave and feel like you’ve had a big exhale. You’re that duck floating in the pond that your exterior and you look on your balance sheet or net worth statement and you see your income, you’re like, “Holy cow, this person’s got it all figured out.” Meanwhile, under the surface, you’re just going to town. I mean, you just can tell that you are just rolling through it. And I think you’re putting so much Type A pressure on yourself that you don’t even—you can’t even enjoy what you’re creating. And I think we can fix that. I really do.

Megan: I think Tanner is smiling in the wings for sure.

Goals: Beat Tanner to a Million (5:50)

Bo: All right. So we—you heard our goal. We want you to have a big exhale. What’s your goal? Like you obviously came on Making a Millionaire. You obviously came here to do something. What is it you’re hoping to get out of this today?

Megan: Am I doing the right things? Is there a more efficient way to do it? But my actual question is Tanner and I have a goal or a bet, a contest, and I thrive under pressure. And who can get to a million first? So, please help me win. Okay. I want to get there first. But I think I’m doing it the hard way, not the smart way. And then obviously beyond that, look at retirement, starting businesses. We’re about to start the messy middle. So, short-term saving, long-term saving, and then I don’t know how to do the taxes. I just feel like I’m sprinkled everywhere. How do I have a clear strategy and that will help my decision-making, please? And let me win. I’m going to win.

Bo: I love it. So, clear strategy and help you beat Tanner. Got it. Two goals that we have.

Cash Flow: Automation and Budgeting (6:50)

Bo: So, all right. When it comes to like you said, hey, I really just started taking this serious three years ago from a like cash flow management standpoint or budgeting or like money in, money out. Tell us how it works. Like how does it work in your household, in your purse, in your wallet? Like how do you think about money in, money out?

Megan: Okay, so get paid twice a month. So every two weeks I get a paycheck and most deductibles are immediately taken out. So the best, you know, if someone says, “How do you do it?” Automation—get all of that taken care of. And then I run a pretty strict budget on, you know, whether it’s food, utilities, travel, fun, health, beauty. I have buckets for everything and try and play within that. Every month is different. And I know I need—I have an idea that I need to do that, but I don’t necessarily stick to it. And when I’m frugal, I’m extremely frugal, but I’m also extremely lavish. Like I’m like, “Tanner, let’s go get a chateau in Cape Town for our buddymoon.” Like I’m unwell. I live a life here, but I’m actually in reality trying to budget down here.

Bo: So, but you have a big income. So, do you feel like there’s excess cash flow on a paycheck-to-paycheck cycle or on a month-to-month cycle or do you feel super tight and super strapped?

Megan: Tight.

Bo: What do you spend? So, where’s your money go?

Megan: Well, after everything’s taken out, I’ve got $2,600 left.

Bo: Hold on. When you say after everything’s taken out, so that means like you’re talking about after like taxes and automated savings and all the money goes—

Megan: Yeah, there’s $2,600 left every two weeks.

Bo: So that’s about $5,000 a month, right?

Megan: Yeah.

The Math: You’re Saving 60% (8:28)

Bo: So I’m thinking through this—all right, $5,000 a month. I don’t do public math, but 12 months in a year, $60,000 a year that you have to spend. Your gross income is nearly $200,000. That means $140,000 is going somewhere else. Where is that $140,000 going?

Megan: Saving. I think.

Brian: Saving. So we got some taxes, right? But it sounds like if you’re saving all the additional amount of that money—what would you—where do you think your savings rate is? How much do you think you save?

Megan: More than the 25%.

Bo: More than 25%. Out of curiosity, how much more than the 25%?

Megan: 29, 30%?

Bo: 29, 30%. Okay, that’s a great guess. That’s a great guess. We’ve actually calculated the math. We know where it is. Okay.

Brian: And the way Megan, you manage your money is—I want to make sure I got this right. And Bo can get into the details on it. Your 401(k), we found some very peculiar things going on in your 401(k). And we were like, what? Surely this has to be a typo or misprint because we saw like a big after-tax account. And we were like, well, typically this is—first of all, kudos to your employer for having after-tax is even an option because most employers don’t even have that. Now, what that does is it sets up what’s called mega backdoor Roth conversion opportunities. I see your eyes light up because you’re like, I don’t even know what that is. But yet, you have this huge bucket of what’s called after-tax savings. And Bo can get into the details of what that means, but I just want to know how we got here. Our Megan on the content team shared and I was like—that’s how that ended up. So how did you get to this account?

Megan: Literally very simple. I knew I had to save and there’s little bars on the platform that we’ve got. You gamified your saving by putting these savings bars. And then I had to save for a down payment on a house. So then I brought that all the way back down. I was like, this thing’s growing so slowly and I’m competitive. Then after I got a little down payment on the house, I’m like, whoop. So, you just slid the bar all the way over and then just left it as high as you could put it. High as I could put it. I have nothing. I had to save. I had to do it like no one’s going to do it for me.

Brian: Let me make sure I fill in the gaps because we’ll have people watch this. So essentially you are overloading your 401(k) where you’re filling up the bucket for what the government kind of allows in pre-tax or Roth accounts and then the spillover is just automatically filling up this after-tax account. But we’re missing out and we’ll talk about the strategy of what you need to do with that. But what I don’t love is that I wanted to ask you happiness-wise, do you feel like you’re enjoying your 30s right now? When you came in, you talked about Miami, like it was kind of wild, it was fun. And then when you were—did you say a yachty? That I could see your eyes light up on that. I can tell you love your job because even the way you were talking about the cows and the background, but what I can’t tell is do you feel like you’re living your best life in your 30s right now, though?

Megan: Yes or no. I’m so proud of where I am. I like the person I am. There’s so much more room and growth. No. Yeah, it’s hard. Yeah. And I feel the tears coming again because you feel the pressure you’re putting on yourself. There’s so much pressure. Yeah. I just need to survive. And I made a promise to myself. I was never going to ask mom and dad for anything. No one is going to—no one’s going to help you. We’re adults. I came on my own. Survival mode.

You’re Thriving, Not Just Surviving (12:09)

Brian: You’re not—you’re not only surviving, you’re thriving. I mean, you really are. And we’re going to show you these numbers. I mean, and Bo, I hope it’s okay if I just share this. You just told us you think you’re saving 29, 30%.

Megan: Mhm.

Brian: We backed into it, Megan. You were saving like 60-plus% right now. I mean, which is great, but like—but you’re putting pressure on yourself that you don’t have to. I don’t—it puts me in despair to know that you have—I see so much potential. We’re going to show you how this thing’s going to explode and all the things and you’re focusing on all the things. You’re getting busy what we call getting busy doing nothing. And the fact that—and look, I’ve been there myself. I think all of us Type A personalities, we feel like, hey, if I’m trying to conquer something, the more I do, the better I will be. But that’s not the case. You’re actually doing a lot of activities that are generating zero benefit for you. They’re just stressing you out, creating anxiety, making you feel like you’re not living your best life. We’ve got to streamline so that you actually know what you’re doing with your money because right now you just feel like you’re that duck. And I’ll even throw in another analogy you hear all the time is, you know, if you tried to eat an elephant all at once, you would overwhelm yourself. Whereas you just take little parts of your life one bite at a time and you can process. Maybe I should have said cow because it’s much more appropriate to eat a cow. But if you as one person tried to tackle eating a cow all at once, you’d be overwhelmed by the process. But if you just thought about, no, I’m going to have a steak tonight. I’m going to do this. And you actually know the three to five measurable goals, your life will be changed, elevated, and I think you’ll have that exhale that we talked about briefly at the beginning, too.

Bo: Well, you know, one of the reasons why we talk about saving 25% of your gross income is we want to give people the freedom to be able to spend. And so, a lot of times people have to budget and begin tracking so that they can find how to get to that 25%. You’re kind of on this other wild end of the spectrum where you said, “Hey, I budget and I track and I have all this stuff and we can talk about your cash flow, but saving is not an issue for you. You’re saving 60% of your gross income every single pay cycle or every single month or every single year.” And so, one of the things that I would hope we could figure out is, okay, well, how much should you be saving? And does adjusting that now give you some freedom to get to live the life that you want to live not just in the future building for the future but also today? Can I begin to do the things today that I actually want to do? Because is $2,600 net every pay period enough for you to do all the things you want to do or does it actually feel tight?

Megan: It feels tight. I would like a little bit of leeway there. I need a comfort blanket and I just put a number on it and I’m like once I get there then I can breathe and then I can figure out—I’ve got so many goals and that’s why I have to save for them.

Brian: I know, but you don’t have to make it so hard because it’s not sustainable. If it brings you to tears, it is not sustainable. You are putting yourself under such obligations, you’ll eventually break. Whereas if we could teach you sustainable goals and how to look at this from an executive summary standpoint instead of feeling like you have to tackle everything, we can delegate some of this as well as give you better dashboard tools so that then you can focus on what really matters and then own your time too because that’s the thing I don’t love is that I can’t imagine what you’re probably going to sleep at night. I bet your brain is going in 50 different directions because you’re trying to control it all.

Megan: Never. No, I’m lying. Yes, 100%. I can’t sleep. There’s so much pressure.

Brian: We got to get—and by the way, this doesn’t get better with age. I can go ahead and tell you as a Type A personality in my 50s, if we don’t get this under control now, this will manifest in weird ways later. So, it’s better if we can give you those moments so you can do this in a healthier way, but also a happier and much more fulfilling way, too.

Simplifying Cash Flow Management (16:12)

Bo: When it comes to finances, a lot of times we make things a lot more complicated than it ultimately has to be. And what’s interesting is, again, you were so kind to share all your stuff. We got to look at all your statements and got to look at all your spreadsheets and your cash flow. It seems to me a common theme that I noticed is there are a lot of things that you’re doing perhaps a little more complicated than they should be. Even when it comes to cash flow management because you shared some spreadsheets with us showing like where your inflows come in and then you have these expenses going out, then you have these debt payments going out. And even when we think about your income, right? So you said your total income in the month of March was $21,300 according to your spreadsheet.

Megan: Oh yeah.

Bo: But the way that you calculated that was you considered your starting checking account balance as part of your income because there was like $6,000 at the beginning of the month when you started and you called that income. And then you actually had your paycheck come in. That’s a little over $5,000. But then you had this other income that you also accounted for. Some of it was a boyfriend, now fiancé, who helps with some of the bills. Some of it was like reimbursements for work and some of it was your tax refund. When we look at all of these things, those are not all income sources. So when we think about what’s your true income, it’s really that middle line. It’s really that $5,000. Like that’s the part that we ought to be—that’s your net income by the way too after the 60% withholding.

Megan: Yeah.

Bo: For savings. And so when we looked at your budgeting, we noticed what seemed to be a lot of double counting. Like I’d have an expense go out for—I’m going to say hair care because you mentioned that for beauty stuff, right? And it went on the credit card, but then there was another expense went off for the credit card payment and you sort of double counted those things. I think that you could much more simplify. And our content team did a great job. We’ve built out some spreadsheets that we want to give you after this recording to help you better track what you’re doing so that really what you can focus on is okay, what do I actually have coming in? What’s my paycheck? What are my expenses? That’s the tracking that you do. And then using your credit card is just a whole different thing. It’s just the conduit by which you pay your bills.

Bo: Do you feel like you have a solid grasp? Because we could pull up some of the illustrations of what’s going on on your spreadsheet and it for two spreadsheet guys, it was just too much.

Brian: Well, where did you get those spreadsheets? And don’t give the source, but you bought them. You bought a template.

Megan: Yeah, I’ve bought multiple templates.

Brian: So, the thing—you have to always, and this is what I always remind people, be careful who you let into your financial life because, and I don’t want you to share who it was because they were—as an accountant, it made my skin crawl a little bit because, well, here’s the problem. It wasn’t good feedback because they were including net worth aka balance sheet items with cash flow/income statement items. So it really muddied the waters. Exactly what Bo’s showing here is that when you’re putting your beginning balance from what’s in your checking account—that’s included in the cash flow element or even double counting on credit cards and when you’re not—you’re not running credit card balances are you? You’re paying them off every month.

Megan: Yeah.

Brian: So why treat it as like you have these huge debt payments but you’re also then tracking the one-off one transaction expenses in your cash flow. It’s maddening. I was like this is the craziest thing I’ve ever seen. It was very pretty. I mean, visually stimulating. It was nice to look at, but from the actual output being efficient and effective for you, you got a snow job here. Somebody sold you a very attractive spreadsheet, but really the data was worthless from an executive summary of you trying to know how to navigate this.

Work Smart, Not Hard (19:50)

Brian: So, I think the first thing when we looked at this, I was like, do you realize how much more peace of mind you’ll have if you just know—don’t track all this stuff? You don’t have to. You’re already doing all this automated saving and investing. Money knows where it’s supposed to go. You don’t have to keep now putting envelopes or methods because it’s unnecessary. One of the biggest things that when we were looking at this is why not just keep one month of expenses—above one month of expenses in the checking account so you never—because you’re getting caught up in that I get paid twice a month. How much of each paycheck should I put into this? And I’m like, well, no, no, don’t—zoom out of that and just say, what do I need this month so that I know I can’t bounce a check? And then we’ll just tidy that up at the end of each month with one transaction because you’ll either have money left over or we’ll have to transfer it from savings. But instead of you hyperfocusing on all these different transactions and going places, you could do this by just having a certain lump sum in there that you know will ensure you never bounce a check and then you will be okay. This gets so much more simplified. It really does.

Megan: Work smart, not hard.

Bo: If I asked you what your burn rate is, how much does it cost you to live the life that you live every month? You have any idea what that number is?

Megan: I think it’s around about $7,000.

Bo: Seven. Perfect. So, let’s just say in theory, if it was $7,000, that at all times you just kept $8,000 in your checking. Maybe let’s go maybe even go $10,000 because you’re in a great spot. If you just start with $10,000 in your checking account and then you just have all your bills come in and all your paycheck come in and then your bills go out, you’ll never have to worry about what’s happening inside your checking account. You’ll know what’s going on. So then all you got to do is you could use a software like YNAB. Have you ever used any like YNAB or Mint or any apps like that?

Megan: I like when things are automated very much. I love them and I hate them.

Brian: Okay. So, do you find it cathartic to go in there and track the expenses and put it in there?

Megan: Like a good habit—like my Sundays I’m in the office for hours doing this hard work and sorting the bills out like $3 here, $3 there.

Brian: What’s the part of—let me ask the why part because I do think look in the beginning of your investment and saving journey if you focus on doing this so much it’s taking time away. I like it in the beginning because you’re basically creating the habits. You’re affirming the good behavior, but there does come a point, especially since now you have a fiancé. What I don’t want is y’all to have these hyperfocus things that create weird dynamics in the relationship. Are they also taking excess time from you? So, but if it’s therapeutic in the beginning and affirming your behavior, I think that’s okay. But you have to just figure out when you are graduating beyond the healthy habit and now this is hyperfocusing for the sake of just being busy even though you’re not really creating additional benefits. So where are you at in that? Are you still at the beginning where you need the reinforcement and the habit or is this now hyperfocusing for just the sake of doing busy work?

Megan: No, I definitely don’t want to be taking on more busy work, but I like the habit of knowing where my money’s going and if it’s growing and that’s the why. Is it growing? Can I save for another car, all these emergencies or whatever that may be just so—just keeping an eye that I know I’m okay.

Bo: I used to do the same thing and I was a spreadsheet person and every single transaction go on a spreadsheet. But then I sort of graduated and I started letting technology be a resource for me. So that now if I link my credit card and I link my checking account to one of these online softwares, it’ll automatically pull the expenses. So instead of me having to put stuff in a spreadsheet and move it around, all I got to do is say, “Oh, okay. Chick-fil-A, that was a restaurant.” And I click the button. Oh, okay. Shell Station, that was gas. And I click the button. And it’s much easier. And I can do that in the morning in like 10 minutes while I’m sipping my coffee instead of spending 3 hours on a Sunday going through it all. And I think if you were able to simplify and automate your life like that, you may recognize you’re actually going to understand your situation better by spending less time in it and focusing less on the very minutia of it. You’ll be able to zoom out and see the big picture and actually see, okay, my stuff is moving in the direction I want it to be moving. It is growing. My money is going where I want it to be going. I think you could make it a whole lot easier.

Brian: Answer this question. What’s more effective? 3 hours of you data inputting or 20 minutes of you actually reviewing the actual output report of how you spent your money last month?

Megan: The output report.

Brian: Since you know that that’s probably the most valuable activity. I have to ask you because you’re telling us you spend these Sundays inputting all these transactions. Are you then taking 20 minutes to run the report and compare it to last month to see the executive summary?

Megan: Yeah.

Bo: So you are doing at least that part. Now it’s 3 hours and 20 minutes?

Megan: That’s why I knew something was up. There’s got to be a better way. There’s got to be a more efficient way. And why is it not happening as quick as I wanted to? And it got—I don’t know which one of you were saying—it got so convoluted. I’m like, what is the clear strategy by doing less on your 20 minutes?

Brian: If you can automate out of doing the busy work, I think it will help some of this anxiety as well. It’ll relieve the pressure that you feel like you have to be doing more and more. And plus, life is going to get busy. You said y’all were about to enter the messy middle and then you’ve got—you’re getting married. I mean, all these things are going to create dynamics that if we can release the pressure on that, it saves you more time because life’s going to steal that time from you. And I don’t want you feeling the anxiety from lack of time, not feeling like you’re doing everything financially. We can mitigate a lot of that stuff just by working smarter, not harder, even as you just said.

Megan: Yeah. And I think a clear trajectory just knowing that okay, I’ve fixed this all now after today and that it’s going to hit the goals quicker will probably make me a better individual.

Simplifying Your Savings Strategy (25:49)

Bo: And so I think the theme, the goal is going to be simplification, right? So we just talked about your cash flow management, how you’re thinking about budgeting. We can simplify that—less spreadsheet work. I also think from a savings perspective, once you simplify the cash flow piece, then it makes saving a whole lot easier because remember, if we look at your saving over the last three months and how you’ve actually done it, it’s a bit sporadic. So, okay, we have money going to our emergency fund. We’ll talk about that in a moment. $600 a month each month, but okay, some months we have HSA dollars going in and we have these big chunks. And then in January, we had a Roth IRA contribution happen, but then February, we switched over and now we’re doing traditional. What happened there? Walk us through.

Megan: Simply started listening to the Money Guys. I’m like, “Oh, Roth this, oh, you don’t want to.” One of you guys said, “You don’t want to run afoul or doo-doo on your Roth.” I was like, “Oh, I don’t know if I can do Roth, so stop the Roth.” And then, “Okay, HSA, you got to get that on the steps. Let’s start doing that.” But I just started because I didn’t have the money to save in the HSA before. So then I got a tax refund. I was like, “Okay, HSA 2024, let’s now start contributing to the 2025 one.” So, I stopped the Roth one because I don’t think I can do it.

Bo: Did you already—did you already undo that Roth contribution?

Megan: Yeah.

Bo: Okay. So, you’ve already undone that.

Megan: No more. No more since January. No payments.

Bo: But did that $875—you put it in? Did you pull it back out?

Megan: No, I put it in—I opened Fidelity account and put it in the market which has been interesting.

Bo: It’s still inside a Roth IRA.

Megan: No. I put it in a traditional IRA.

Bo: Okay. So you recharacterized that contribution from Roth to traditional. Excellent. Perfect. You just want to make—because anytime somebody overfunds a Roth when they weren’t eligible to, you have to make sure you do that process of either undoing the contribution or recharacterizing it to a traditional.

Megan: But then I paid $10 when I did my tax refund because I ran—I did too much.

Bo: Because you had to pull it out and any earnings applicable were taxable. Got it. Makes sense. Okay. So awesome. You’ve done that. And then now we have your 401(k) contribution. And it looks like I’m assuming that’s just—this is the one where it’s percentage and you just drag that percentage all the way to the end.

Megan: Yeah.

Bo: And as it stands right now, I mean we can do the math on this. In January had almost $5,800. You had $4,100 going in February, $4,100 going in March. That’s like $50,000 a year going into your 401(k), which is awesome if that’s what you want to be happening. But for most people when they go to max out their 401(k), they just max it out at $23,500 a year. So if you were doing like normal 401(k) contributions, you’d be maxing out your 401(k) at like $1,958 a month instead of $4,150. I’m not saying you need to do that, but I’m just—you are aggressively oversaving. And so one of the things that we’d want to answer is why are you saving the amount that you’re saving? And is that moving you towards the goal you want to be moving towards? Or is it—I feel bad saying too much because saving too much isn’t something we normally talk about—but are you saving too much? Are there ways you could better think about this? And then you also have this deferred compensation plan that’s happening in the background, other retirement assets that are going on. And so when we add all this up and compare it to your gross income, in January your savings rate was 68%. In February your savings rate was 54%. In March your savings rate was 60%. That’s pretty wild.

Megan: Yeah I didn’t know it was that much.

Where Are You in the FOO? (29:16)

Brian: I know because you’re just letting it happen. And that’s why I have to ask where are you in the Financial Order of Operations? Which step do you think you are?

Megan: Roth five, but I also have high-interest debt. I have a house that doesn’t count as high debt. So five.

Brian: But here’s the thing I have to ask you. As Bo just showed you, you’re beyond—you’re saving $50,000-$60,000 into the 401(k) because you have that spillover into the after-tax bucket. We’ll talk about what that means. What about four? I mean, what do you need in emergency reserves?

Bo: Yeah, let’s look at the net worth statement again. That’s a great question because right now you have $22,700 in cash on hand. What did you say your monthly burn rate was?

Megan: $7,000.

Bo: So, if you need about six months of living expenses in readily available cash, $7,000 times six months should be $42,000 in cash. You’re at $22,000 in cash. Did you just lean it up to three months? Because you thought three to six months.

Megan: Oh, no. I want six. That’s why I’m still saving. But then that deferred comp you’re looking at, that’s—I’m counting as my emergency fund because that’s the spillover because I think that’s what I need to do. So that’s my emergency fund. I can pull that out.

Bo: Hold on. The deferred compensation.

Megan: Yeah. I don’t know what the—it was extra savings. So I was like, let me do that.

Brian: But typically deferred comp is not what you would consider emergency reserves because it’s a deal that you’re making with your employer where they’re saying look so you don’t have to pay taxes on this right now. We will just withhold a portion of your paycheck and let you invest it but we’re going to keep it on our balance sheet as a company because it’s going to be an obligation we owe you at some point in the future. And the win for you is that you get to minimize—lower your income because you’re in a high income type situation. I’ve worked with a lot of deferred comp clients. Never, ever, ever have we looked at and said, “You know what? That probably is a great way to have a break glass in emergency reserves.” I think you’d be woefully—most deferred comps, you have to leave employment to get access to the money anyway or have the point that it’s supposed to start paying out. And I imagine when you started participating in that plan, they probably asked you, hey, you have to choose your distribution options, right? So, what did you select for that deferred comp as your distribution option?

Megan: 20 and now it’s 10.

Bo: Well, that’s how much you’re deferring into it. That’s how much you’re putting into it. But normally for deferred comps, they say, “Okay, you’re going to put this much in today. When do you want to start receiving it?” And some of the common ways that they define that is, okay, at termination, I want a lump sum. Or when I leave this employment, I want an even distribution over five years or over 10 years. So, it’s very much a retirement asset, not an emergency fund asset.

Megan: Well, I don’t have extra money to put into the cash piece that I’m trying to say.

Brian: Exactly. This is the thing. You have automated your way out of even filling up your emergency reserves.

Megan: Yeah. Yeah. I need to get that up. I know. I want at least 6 months.

Bo: Okay. So, that’s one of the things that we would say is if we were going to write the FOO for you and put you where you should be, one of the immediate things before we even start talking about building or investing or any of that kind of stuff is getting step four filled up. So, one of the things we need to do is adjust your savings rates in the other buckets to get you to that $42,000 in step four before you do anything else. Because right now, you are very much at risk if you had some unknown thing happen. You’ve only got a $22,000 safety net and it really should be closer to $42,000 to $50,000 based on where you are.

Megan: So, does that mean just stopping some of the other buckets of money going into these other, stop immediately, convert to this, fill this up?

Brian: And I’d like to have a why to your percentage because right now you’re just—it feels like you’re just like slide it over as far as it can. Y’all just take whatever you want. Leave me the breadcrumbs at the end of the month. I’ll make it work. Yeah. It’s very noble from what you’ve built in three years because it’s pretty amazing. But from a life standpoint, it’s less than ideal. I would much rather have the why. And we’re going to show you if you save at the rate—we even dialed it down. We were like, “Let’s give Megan back some money.” So, her and Tanner can live their best life so you don’t look back when you’re my age and go, “Why did we do our 30s this way?” Because that’s what I don’t want you to have is regrets because you only get this time on Earth before you move on to what’s after life on this planet. But we got to maximize this moment. We want to spark it up as much as possible. And that’s what I talk about in Millionaire Mission, bedazzle your basic life, do the traveling. I love spending money on memories. So when you and Tanner are talking about going to Cape Town, as long as that’s budgeted, that’s fine. What I don’t like is you creating this artificial tightness to where you feel so poor and restricted and you’re living in this abundance that’s just—money is literally spilling over into huge retirement accounts. We’ve got to get this all fine-tuned.

Simplifying Your Investments: 17 Funds on $4,000? (34:06)

Bo: So the theme, right, is simplification. We need to simplify your cash flow management like how you’re budgeting and tracking. We need to simplify your saving strategy. Hey, what percent should I be saving and what buckets should it be going into? Another area where we think there makes a lot of sense to simplify is your investing strategy. So, right now when it comes to how you invest and how you think about that, how do you choose your investments?

Megan: I’ve got no idea as you can see before like the strategy on the saving. No idea. I know I need to do it. Invest. I know I need to do it. So, I listen to you guys. I listen to a couple of other people. I’m like, “Okay, now oil is a thing.” Or, you know, I—

Brian: You didn’t hear that from us.

Megan: No, no, no, no, no. So, lack of knowledge. That’s why I need some help. I know it’s something that needs to be done. There’s just lack of knowledge. So, ignorance.

Brian: What I think is interesting is that I’ve already made the analogy that you’re this duck that looks all cool and collected, but under the water, we just see it. It’s all—all heck’s going loose. I mean, I look at your Roth IRA and I see that $4,000 in a Roth IRA now. $4,000—that’s money. It’s even a good start, but it’s not what I would consider a critical mass point that we need so much asset allocation, diversification that we need 17 funds on $4,000. I mean, most of these holdings, the average value per fund is $83. I mean, you had to try really hard to go in here and go, “I guess I’ll put 2% here. Guess I’ll do 2% in this one. This one says growth. Oh, someone said oil was good. I’ll go buy some of that.” I mean, what the heck is going on here? You know, half the thing we talk about on the show for brand new investors, it’s not what you’re investing in, it’s how much you’re savings rate is greater than what you’re putting it into. Why not just go the simplest path possible and just buy one index fund or one index target retirement fund? Why? Why 17 funds?

Bo: So, that’s just in that one account. If we look at your HSA, you have six different holdings across that $2,000. In your traditional IRA, you have six different holdings across that $4,000. In your 401(k), you have 16 different holdings across $119,000.

Brian:It’s just crazy. It really is. I mean, not to use a 2020 word

Bo: Did you say cray?

Brian: Yeah, I know. But it’s one of those things where I was like, this is just disconnected from being productive.

Megan: Yeah. Got no idea.

Bo: And so I think one of the things we love, he already said it, a target retirement index fund. You can buy these in your HSA, you can buy them in your traditional, you can buy them in your Roth. And there’s a chance you have them in your 401(k) where all you have to do is answer in terms of which one to pick one question. One question in terms of which one/two questions normally, but one question is, hey, when do I think I’m going to need this money? Hey, if I’m 36 years old and I think I’m going to need this money in 30 years, then I’m going to choose a target retirement fund that’s 30 years in the future. So maybe I choose the 2055 fund, right? The index retirement 2055 and that’s it and that’s one holding and it will diversify all your assets across equity investments and fixed income investments, international and you don’t have to decide do I need this company or that company or this or that and you can focus on the thing that actually impacts your financial life which is saving, saving, saving which is what you do. So when I look at your whole portfolio we really think it could be really distilled down into maybe three or four total holdings across all of your accounts. How much better does that sound? How much easier does that sound to navigate?

Megan: Guys, just everything you’re saying, I’m like, I already feel calmer because—yeah, I know you’re shaking your head. So busy. Yeah. Why did I do this to myself? I was stressing.

Brian: And it’s education, though. But look, because this is something we’re combating all the time with high net worth clients, too, is that they think that when you reach a certain level, you have to get more complicated because this is what rich people do. And I’m like, “No, your goal in life should be make your finances as simple as possible because you are the executive. You’re the field general. And if you can’t track and know what’s going on with your army of dollars, you’ll never get ahead of this.” And that’s what I hate when people create clutter or extra busy work because it’s going to take away from your ability to actually do this well. And for you, it’s creating the unnecessary anxiety and stress that’s not even healthy. That’s a whole different version beyond just not being efficient.

Simplifying Account Structure (38:37)

Bo: Again, theme is simplify. Want to simplify our budgeting. We want to simplify our saving. We can simplify our investment strategy. We even think there’s some opportunities to simplify your account structure for sure. Because when we look at all of the different accounts you house, we even think that we could consolidate some of those because right now you have these two cash accounts. You have a high-yield account and a CD, but you don’t have a ton of cash. You’ve only got $22,000 and our goal is for you to have $42,000. Well, when we think about cash management, it seems incredibly reasonable to us that you could just have a single high-yield savings account that holds all your cash. So, you have your checking account and you have a high-yield savings account and that’s where all your emergency funds. So, that $42,000, you don’t have to go find different CDs and try to stretch it out and have one be one year and one be—you could just all dump it in a high-yield account. And right now, high-yield accounts are paying like 3 to 4%. Again, set it, forget it, and let it sit there. Okay? So, then you have your HSA and you have your Roth IRA. You have your traditional IRA. You have a pre-tax 401(k). You have an after-tax 401(k). Well, one of the things that you’ve already said to us is that you started doing a Roth because you heard how much we love Roth and then you make too much money for a Roth and you started doing a traditional. Well, one of the things that makes traditionals wonderful for high-income individuals is it does open up an opportunity to what’s called a backdoor Roth contribution where you put money in your traditional IRA, you do not take a deduction for it and then you can go ahead and convert those dollars to Roth completely tax-free. So every year there’s a way for you to do a backdoor Roth contribution of $7,000. So when we looked at your account structure and you had that $4,000 in that traditional IRA and now you’re starting to put money in there every month, one of the things that we might recommend is, hey, go ahead and convert that $4,000 to Roth today. You’re going to pay income tax on it because that’s pre-tax money, but with all the new contributions in there, tell your accountant or when you do your taxes, say these are non-deductible contributions. And so every year at the end of the year once you’ve fully funded that $7,000 you can convert it to Roth and in future years it will be completely tax-free. Does that make sense?

Megan: Beautiful.

Bo: So when you do that you’re going to essentially turn your Roth IRA and your traditional IRA into one singular Roth IRA. Right? So now we’ve consolidated those two accounts down to one. Less accounts.

Brian: I love less accounts.

The Mega Backdoor Roth Opportunity (40:50)

Bo: You tracking? I say the goal is to simplify. This one is a little more complicated but you’re going to love us. Like we’re going to tell you this the result and tax-free millionaire opportunity is just huge for you. You just stumbled into this box by just swiping that thing over. So you’ve been funding your 401(k) aggressively right for the last couple years and most people can only put $23,500 into their 401(k) but you have been putting in like $50,000-$60,000 into yours. So you filled up the salary deferral bucket and you’ve had all these dollars flowing into after-tax. So, when we look at your 401(k) right now, of that $120,000 you have, like $80,000 of it is in this after-tax bucket. Do you know how the after-tax bucket works inside your 401(k)?

Megan: No.

Bo: Okay. So, here’s what happens. You put money in, you do not get a tax deduction. So, you still pay income tax on that money. All those investments get invested and the money grows tax-deferred. And then when you go to pull that money out in retirement, you pay taxes on the earnings, but you get the money that you put in back tax-free, right? So like you only have to pay on the earnings. What you actually can do, and there’s a little bit of homework on here. We’re going to write this down for you. You need to reach out to your 401(k) provider and ask them two questions. Say, “Hey, I have this after-tax 401(k) chunk of money. Do you guys allow for either in-service rollovers where I can pull money out of my 401(k) even though I’m still working or do you allow in-service Roth conversions where I can convert that after-tax bucket into Roth? Because what happens is of the $83,000 you have in your after-tax, I’m willing to bet something like $70,000-$75,000 of that is money that you’ve put in. Right? All right, so that’s your contribution. If your plan allows for in-service Roth conversions or in-service distributions, there’s a good chance that right now today or when you leave and go back to the hotel room, you can call your 401(k) provider and you’re going to say, “Hey, I’ve got $75,000 of after-tax contributions. I want to do an in-service distribution and pull all $75,000 of that and put it in my Roth IRA.” Or I want to do a conversion inside the 401(k) and convert it so that all $75,000 of that turns into Roth dollars. If I do that, that $75,000, not only will it be tax-free like it already was, but now all those earnings, all the money that it’s going to make from now until you retire will be completely tax-free.

Megan: Beauty.

Brian: Oh, it’s massive. It’s like making an $80,000 Roth contribution right now today. Now, the thing that I would encourage you going forward, and we’ll put this in the homework notes, too, whatever portion we decide is appropriate on after-tax funding because if you’re hyper-saving and you know, we get the emergency reserves fixed and we still chose to put some of this into this after-tax account, you do need to make a practice or habit of converting it annually. Okay? Because it’s back to the key point that Bo made is that once it’s converted, all the earnings are tax-free. That’s right. But right now, you’re just—you’re only doing part of the drill. You’re using this very powerful tool. You’re funding it, but because it’s getting invested and you never did the conversion part, all the earnings that that account has made, that $80,000, that’s why we got to figure out how much is your contribution versus how much is earnings also is we have to separate those because right now all the earnings are going to be taxable to you if we converted that. The sooner you can convert it after contributions, the less time there is for it to grow and make money. So then all that earnings is tax-free. They gave you the quick start guide with that slide rule, but they didn’t give you the instruction manuals on how you actually optimize this to use this in the most efficient and appropriate way possible. We’ve got to go back and kind of clean that up. But then you’ve got to now have a new habit so that you can do this well in the future, too.

Megan: And is there a good time, bad time, or just put that—like calendar reminder?

Bo: I would do it sooner rather than later. I would go ahead and get that. So it doesn’t keep growing because the sooner you do it, the lower the tax bill will be.

Brian: You and Tanner have this crazy competition to see who can get to a million dollars. How about who can get to be a tax-free millionaire? That’s even cooler in my eyes. This one decision, this single decision to convert that $89,000 of after-tax assets into Roth could result in a million dollars by the time that you retire. It’s going to be a million dollar tax-free decision for you, right? With a phone call, right?

A Sustainable Savings Strategy (45:13)

Bo: We’ve laid out a bunch of like, okay, we’re going to consolidate the account structure. Let’s talk about what we would recommend from a savings standpoint for you. Now, we’re going to assume you’re going to still be a very aggressive saver, right? But I want it to be easier for you to think about on a month-by-month basis. So that way you don’t actually have to think about it. You can literally set it and forget it. Annually, we want you maxing out your HSA, right? Right now, you’re doing big chunks. That’s fine. But overall, we want $4,300 to go in there. We’re going to have you continue to fund your traditional IRA every month, and that’s going to be $7,000 a year. And then you’re going to convert that every year. So that is completely tax-free. Okay? Right? It’s going to be completely tax-free—back to a Roth conversion. In your pre-tax 401(k), we want you to think about in my 401(k), I’m going to do $23,500. That’s step one. Then the next step is if I want to continue saving more, if I want to continue participating in the 401(k), I can do this mega backdoor thing. If I have made all the other decisions, if I’ve gotten my emergency fund up to speed, if I’ve done all the other things I’m supposed to do, and we said, “Okay, what if we just want to land at a 40% savings rate?” Because you said, “Hey, still aggressive. I’m 36 years old. I’m behind. I want to make up time.” So 25% might not be enough, but is there some room between 25%, which we say for most people who start out in their early 30s or in their 20s, versus the 60% that you’re doing today? And we say, “Okay, well, let’s look at what’s it look like if it was 40%.” When we say, “Hey, if we’re going to show you an illustration to drop your savings rate by 20%.” How does that make you feel?

Megan: Unwell.

Bo: Unwell. Why?

Megan: You got to save. What if something? No. Get there quicker. Live a beautiful life like you were saying, quicker.

Brian: But in your eyes, should you not have your best life now? You think you have to wait until you’re 50, 55 years old to live your best life?

Megan: I got a pretty good life right now. Not going to lie. I’m aggressive like this, but I’m also very aggressive. You need to bring me back to reality. I have a good life. I believe I do.

Brian: But you just told me when you and Tanner were talking about going to Cape Town, you were feeling some pressure about that. You got to save for that. Yeah. But it didn’t seem like it was guilt-free or string-free.

Megan: Oh yeah. We feel guilty all the time.

Brian: You shouldn’t feel guilty if you are—if you’re managing this money well. That’s what I consider living in abundance. Is if you’re doing—if you’re creating all these healthy habits automatically. Then you get to, like I said, deep breath, exhale, and go, man, I am living my best life, the best version of myself. Whereas right now, you’re doing all the hard work, and I think your 50-year-old self is going to love you, but I’m worried you’re going to look back, that 50-year-old self is also going to look back at your 30 and 40-year-old self and go, “What were we doing? Why?” I mean, why were we trying so hard? It’s kind of, you know, if you’re studying for a test, do you have to make a 100? I mean, what’s wrong with making a 93? Then you get to go out with your friends and have dinner with family and all—if you just study, study, study or save, save, save, you’re not really giving your loved ones, you’re not giving yourself the best version of yourself. You’re giving some isolated restricted version for no reason. No reason.

Megan: Guys. Some powerful words spoken. It’s true. Everything you’re saying is true.

Brian: So I ask you, are you living your best life right now though? Because you just said, “I’m living a great life right now.” Which kind of shocked me because you’re crying about you have anxiety. So I’m asking, give us clarification on—you’re not living your best life right now, are you?

Megan: No. Survival mode, paycheck to paycheck, save. I know my emergency fund isn’t where it needs to be, so slowly getting that up. Just all these stresses in life. I’m in survival mode.

Brian: No, you’re not. I don’t know how you get out of—you’re in abundance mode. Start living like it. I mean, you really are. I mean, we’re going—I’ll go ahead and prepare you. You have some trolls in the comments be like, “What is this person complaining about? They make $200,000 a year. They already have a quarter million dollars and they just started saving three years ago.” Just be prepared. There will be people that will just not love how. But I understand all the anxiety, the stress. You got to unwind this so that you, like I said, 40, 50-something version of yourself goes, “Well done, Megan. Well done.” And right now, you’re not doing it.

Megan: Tanner is smiling. Everything you’re saying is like—that’s why we’re so opposite, but we’re so good. He tells me the things I need to hear, and it’s very similar to what you guys are saying. Absolutely. It’s hard to uncouple from all of that.

Brian: You are the perfect person on why taking a relationship to the next level with a financial advisor is because you need a coach. You need somebody to just basically pat you on the back and say, “Megan, you’re crushing it, but let’s fine-tune this and give you small little incremental decisions so that you’re not overwhelmed with the process.” You are the perfect coachable person out there because you have all the resources, you have the income, you have the desire, but you know and I know financial planners—we get a lot of flack because people go, “Man, but you charge all these fees.” But you getting busy doing nothing is not the best life. You do need somebody who’s in your life on a relationship—not a transactional side but a relationship—to let you kind of be free to delegate this away because you’re the CEO. You’re, as Bo just showed, you’ll be a CEO of a tax-free millionaire account. You’ll be a CEO of—I can’t wait to see what this is going to turn into over the long term. We might as well start treating it like that and give it the respect and nurturing it so that you can actually make your best decisions, too.

Megan: 100%. Speak to me like it’s business. Let’s do it. Let’s delegate. Let’s simplify.

The Plan: You’ll Be a Millionaire in 5 Years (50:56)

Bo: It’s one of our favorite things we get to do at Abound Wealth is we get to sit across from someone and say, “Hey, if you implement this, if you begin to release yourself of the burden you’ve put on yourself, let’s show you how the plan actually plays out.” And so, if you were to implement this sort of saving strategy and you’re going to start saving 40% based on the way that we’ve laid this out, let us show you what it looks like. When you begin doing this and as you start moving forward on your financial journey, you can see that from where you are today, total net worth of about $222,000. Do you realize that at even at that 40% savings rate, you will cross into millionaire status in five years and nine months? So, in terms of who’s going to win between you and Tanner at 40%, we think you’re going to hit that in a little over five and a half years. Is that fast enough?

Megan: No.

Bo: No. How fast do you need to do it?

Megan: By 40. We have goals, but by 40, I want to do this, this, and this. And one of those things is that.

Brian: Can I ask you because y’all have this contest. What’s the why on the contest? Because y’all are about to be married. There’s a big difference between financial mutants and what we call financial misers. Financial mutants are optimizers, but they also once again look back at their 30, 40-year-old versions when they’re older and go well done. Misers go more. So what is the purpose? What’s the why? zI love competition. I love the things, but the why has to also intersect.

Megan: Well, my date is my house. Pay off the house. I want a veggie garden. I want to start other businesses and the business I want to start costs a lot. So there’s—you need to have resources and first get this stuff right before you can do that. So there’s a why. Take that and then make it bigger and spread the love.

Brian: I’ll give you credit if you wanted to go, because we just arbitrarily chose 40%. Because if you go to moneyguy.com/resources we have—we based upon when you start it increases because if you’re a late starter you do have to save beyond 25%. But we did arbitrarily just pull this. I’m not going to fight you if you and Tanner sat down and you said maybe I should be saving 50%, maybe I should be saving 52%. But I think you—I would encourage you don’t just default to as much as possible. Actually make sure the why intersects with that. Because I still feel like it’s too nebulous to say I should just have more in there for these other goals.

Bo: Well, and you’re the one who picked the million-dollar threshold, right? What I think is really interesting is when it comes to long-term financial planning, we really want to focus on the long term because if you were to actually apply this savings rate, let’s show what your portfolio path actually looks like over the remainder of your working career. So right now your total investable portfolio we just said it’s about $189,000. Even just saving 40%—yeah it might take you five years to hit millionaire status but the bigger the numbers get, the bigger the numbers get. And you can see by 45 just your investment portfolio is at a million and a half dollars. By 50, $2.5 million. By 55, nearly $4.5 million. By 60, nearly $7 million investment portfolio. This is without having to save 60%, 70%. And even if you wanted to be aggressive and you said okay, I’m saving 60 and you guys are saying 40, what if we settle in at 50? Even if you save 50%, you can see how the numbers change. Okay, by 45 now you’re at like $1.7 million portfolio. By 50, over $3 million. And then by the time you get out to 60 like normalish early retirement age, you’re rapidly approaching deca-millionaire status. You’re at over $8 million. And this just assumes a conservative 8% rate of return. Obviously, if you save more and one of the things just to keep in mind, you’re about to be married. You’re about to combine with someone else, at least in terms of strategy and goals. This is just your part. If you’ve got nearly $10 million and he’s got nearly $10 million, life looks pretty good then, right?

Megan: Yeah.

Brian: As long as the why intersects because more is not necessarily better if the why isn’t in the background of doing all this stuff because that’s the only thing when I hear you and Tanner having this really intense competition about it. I just want to make sure I’m like okay—that’s all right but just make sure it’s for a healthy mental state and emotional state for the relationship.

Megan: Yeah. I’m the intense one. He’s not. He’s just even-keeled.

Bo: And so you’re going to win pretty easily is what it sounds like.

Megan: 100%. Okay. Yeah. Before I’m 40. So there is a why and yes slowly take the stepping stones, but he just says “be happy and the money will come.” That’s all he—when we first got to know each other. What do you want? Like what are the biggest things? And I was like oh all these things as you can imagine. He just had one. He’s like to be happy. I love you.

Brian: This is why y’all will be a good counterweight for each other. The yin and the yang is because you probably need somebody whispering that in your ear.

Megan: Oh, yeah. You really do. Yeah. Words of affirmation. You’re going to be okay. You’re doing a good job, sweetie. I need that all the time.

Business Goals and Mortgage Questions (56:24)

Bo: Do you at least feel like you now have an idea of the things that you ought to adjust to hopefully remove some of the chaos from your financial situation?

Megan: Yes, I feel much better. And like when I look at these numbers, I’m like, is that really me? If I make some good decisions now, and that’s why I obviously wanted to see you guys by financial advisor—like do this, Megan, and can tweak it this way. So, I’m all about that. I’ve got another question. So, I’ve got my house and that’s at 6.99%. So, I want to bash that out, but I also want to start a new business, and that is going to be a lot of money. So, I know there’s short-term savings goals, which need to go in a high-yield savings account. Anyone 0 to 5 years, high-yield savings account. Then, I’ve got this big business. We want to take on all that risk. It’s like anywhere between—is a big difference—probably $12 to $15 million undertaking.

Bo: If that’s a goal that you desire to save for. One of the things that we would do if we go back to the saving strategy that we had recommended for you, we said, “Hey, once you’ve funded all your other stuff, you could look at this after-tax 401(k) saving function. Maybe what you do is instead of actually taking advantage of the mega backdoor Roth and doing the $43,000 into your after-tax account, you start dumping that money into just a regular brokerage account.” Because the beauty of a regular brokerage account is you can use that for intermediate term goals. Maybe you want to start this business 7, 8, 10, 12 years in the future, but not all the way into retirement when you’re in your 60s. The best place to fund those types of things would be in a regular brokerage account, a regular taxable brokerage account. So, as you think about prioritizing your savings, maybe you do need to cut your 401(k) off at just $23,500 and anything above and beyond that, you start sending to that taxable brokerage account.

Brian: First of all, do the other things, the homework that Bo’s going to give you after we disclose all that to you just to clear your mind out to have the peace of mind. And then but after you come back maybe two to three months in the future, you still could begin with the end in mind. If you know this thing’s going to have a $10 million, $12 million goal. Probably some of that’s going to be leverage just because if you’re doing that big of a project, some of that is going to be—you know, a business deal. You might even have business partners who are doing those type of—because I’ve heard kind of loosely what your ideas are. I don’t think it’s going to be all on your shoulders. There’s a lot of moving parts there, but you could still begin with the end in mind. If you know—what is your portion of this $10 to $12 million project, you’re going to need to at least come up with the 30-40% down payment on it. And how do we build that into your plan so that maybe your number is you’re saving 45% or 55%. Because we back into how much needs to go towards your Financial Order of Operations type plan, but then I’m trying to get you to step eight as fast as possible because that’s where you’re now going to start loading up for this big plan in the background. But you got to get the foundation first. No reason to even think about this until we get the foundation fixed and then you can begin with the end in mind and build the plan around all the variables. But I wouldn’t even focus on that until I got my base level assets figured out and tied down and organized.

Megan: Okay, good. I got one more question. So, when I’m saving and you know the usual question. Should I—I’m doing both. I’m getting like my 13th check to pay my house off and then I’m saving aggressively. Do I maintain that or do I just try and put a little bit more on—get that house cleared off my name?

Bo: Well, you’re so young, right? 36 going on 37 is just not old at all. What did you say your mortgage rate was?

Megan: 6.99.

Bo: 6.99. My opinion (you can write this in pencil) is that there’s probably going to be a chance at some point in the future for you to refinance. I mean rates have already come down from that right now. A lot of people are seeing mortgage rates right around 6% now for new home purchases. So there might be an opportunity in the next year, 2, 3 years where you could even refinance your mortgage from 6.99% down to something much more reasonable like five, five and a half, 5.75% to where it’s not quite as high in interest. When I think about your dollars working for you and where your wealth multiplier is right now, I don’t know that prepaying the mortgage or trying to satisfy even that 6.99% interest is the best use of those dollars because I think your dollars likely could work much harder for you somewhere else in your financial picture than prepaying the mortgage. You agree with that? You want to fight about it?

Brian: No, I do agree because of your age. Now, if you were my age with a 6.99%, I would be aggressively paying that down, but you’re in a completely different place. And then it’s also—it’s back to everything we’ve talked to you about. In some ways, if you have these big financial goals, you need to be building your access to resources bridge as well as possible. That’s why I love what Bo talked about doing a brokerage account versus that after-tax because you need access to these resources if you have these big goals. One of the worst things you can do is put it into pay down this house because that’s more cash you will not have access to because the only way you can get access to your home equity is either to refinance with cash out which is a harder transaction or sell the real estate which these are typically use assets that you don’t even want to have to make those type of hard decisions. So I would bring it back—begin with the end in mind and paying down mortgages seems disconnected with all the other huge goals you have. It’s very noble, but there’s going to be a time and place. I always tell people, you have to kind of make your wealth before you have to worry about the maintain wealth decisions, and you’re still in that catch-up, make wealth phase.

Homework: Your Path Forward (1:02:13)

Brian: I would strongly encourage you, if you’re not going to hire a financial advisor, at least go read Millionaire Mission, dive deeper into the Financial Order of Operations. Because this is exactly what we’re trying to do is tell you what to do with your next dollar so you don’t get busy spending resources, locking up resources that just don’t even tie into your overall plan. You’re just trying to do it all. So instead of doing the next dollar, you’re just saying I’ll just do all nine steps at once. That’s not how it works.

Bo: All right, you ready for your homework?

Megan: Yes, please.

Bo: All right, here’s your homework. Number one, do better budgeting. We think you can simplify. Perhaps you can even use some technology to do it even better than you have been. You don’t have to get so into the minutia. You can zoom out and have a bigger idea of what your spending categories and how they play out month over month. Work smarter, not harder.

Bo: Number two, have more consistent savings. You need to figure out what your savings strategy is. Is it 60%, is it 50%, is it 40%, and then what buckets should that go through? We sort of laid out a recommendation of what we would recommend. And one of the things you need to think through is is a taxable brokerage account one of the things I really need to be funding so that I can have that future opportunity for starting that small business. Before you do any of that saving and investing though, we got to get your emergency funds tidied up. So step one of the early things we want you to do, get your emergency fund up to $42,000 of cash. That’ll cover six months of your living expenses, $7,000.

Bo: We think that you could revisit your investing strategy and rather than having 40 million holdings across $400,000, you could potentially use something like a target retirement index fund or some low-cost index and really simplify that. We also think that you should potentially consider converting your traditional IRA to Roth so that way you don’t have any IRA balances and you can do backdoor Roth contributions every year. In addition to that, you ought to call your 401(k) provider and say, “Hey, does my plan allow for in-service rollovers or in-service Roth conversions? Can I turn those after-tax dollars in my 401(k) to Roth dollars?” And then the last thing I wrote on here is you really ought to define your why. Why am I doing the things that I’m doing? And does it make sense? Am I balancing living for today but also living for that great big beautiful tomorrow? And we think you have the opportunity and the capability to do both.

Megan: I love it. Yes. I will work on all of that.

Brian: And I think you still—I mean you keep rocking and rolling. You’re going to need—you’re going to need a coach in your corner. Take the relationship to the next level and just find somebody that will give you those affirmations but also give you the efficiencies. Yeah. So, you get to live this life as full as you possibly can, both financially, but also from just your nurturing you as a person to where you’re happy, fulfilled, and have zero regrets.

Megan: Yeah, love it. Bless you guys. Thank you so so much, Megan.

Closing (1:05:13)

Brian: You’ve been a blast. Bo, if somebody wants to come on Making a Millionaire, what do they need to do?

Bo: That’s right. If you’d like to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of the resources we talked about, you can go to moneyguy.com/resources.

Brian: Guys, we covered so much today, but there really is a better way to do money. So, it’s up to you to kind of lean into all of that and build your great big beautiful tomorrow. I’m your host Brian joined by Bo and Megan. Money Guy team out.