Home Prices Are FALLING, Mortgage Rates Are RISING (Here’s What to Know)

Home Prices Are Falling — What’s Going On? (0:05)

Bo: Mortgage rates are up, home prices are down. What do you need to know?

Brian: And Brian, I am so excited about this because I think this is going to be a little glimmer of hope for a lot of people that have been overwhelmed and disheartened and frustrated with how difficult it has been to get on the home ownership side of the housing equation. Before we get into this important stuff, I do think it’s important that we make sure we remind everybody: guys, we’re doing our millionaire survey right now. Make sure you get in there. We only have another week left on this. So go check it out. What’s the website on that, Rebie?

Rebie: Moneyguy.com/survey.

Brian: Now let’s jump into what I think is really worth talking about. Bo, there is a slide that just blows my mind. Look at this, guys. You know, forever it has seemed like, and this makes common sense to me, is that new homes typically cost more than existing homes because when you buy a new home, hey, nobody’s poured grease down this sink. It’s one of the things we’re historically willing to pay a premium for. But I want you to see something here. Look at this chart and you’ll see here in the last few months now, because of how bad the real estate market is, home builders have realized they need to start giving incentives not only on the interest rates, but also on prices so they can move inventory. And you have this weird dynamic now where new home prices are actually less than existing home prices. So you’re trying to figure out what does this mean?

Bo: Yeah. If you’re curious, the median sales for existing homes has dropped now to $429,000. And the median sales price for new homes is down just under about $411,000. So if you look at the numbers, new home prices have dropped about 15% over the past four years. We’ve seen a somewhat steady decline. And according to Realtor, the national median asking price fell for the 10th consecutive month in August. So we’ve seen month after month after month of houses beginning to fall. Now, I don’t want to overstate this because housing is still expensive and it’s still difficult. It’s not like housing affordability is way way up. But I do think these are glimmers of hope. And I think if you are in the market or you are someone who’s thinking about buying, your ears should perhaps be perking up because maybe there are some things you should begin paying attention to.

Brian: Well, and also a lot of you might be looking at this chart in just as much awe as me and going, does this just mean that we’re in this new paradigm where existing home prices are going to be more than new? No. We’re just in a place where there is a lot of reluctance for sellers to adjust to the new norm of what’s going on, the reality of the world. And we’re going to give you all the answers so you know what to do to really take advantage of this marketplace as much as you can.

What’s Driving Home Prices Right Now? (3:38)

Bo: So let’s talk about what’s actually driving home prices right now. Number one, we think, is that there’s actually a growing inventory of homes available in the market across the country. We’re starting to see inventory begin to catch up with demand that existed as a lot of people were beginning to relocate after COVID, after the pandemic. In 2022, home inventories were less than 400,000. Now, as of August of 2026, they’re now more than 1.14 million active listings. And interestingly, US home sellers now outnumber buyers by a little over 560,000. That’s a 58% gap. Very very different than we have seen in recent memory. So I think it would not be too bold to say that if you’re going to name the type of market this is right now, even with expensive homes, I think it’s a buyer’s market right now.

Brian: Yeah. And definitely a buyer’s market, but with an asterisk. I do want everybody to take in the history of what you’re looking at. When you see charts like this, this is what I’ve been telling you guys: a lot of times we have what’s called recency bias. We go through a market dynamic and just assume what happened last year will happen again. But we’ve gone through some crazy historic stuff and sometimes you get so numb to just how big these movements are. Look at what happened from 2020 to 2023. The separation from sellers to buyers, no wonder most people’s homes appreciated greater than 50%. You just got a distortion in the marketplace. And because of that distortion, we’re getting back to the healing process now. Look at the number of sellers versus buyers. This is going to take a period of time to work through the system when you have crazy distortions like this.

Bo: And we’re talking about the third reason too, which is that home affordability just stinks. If you look at what the Federal Reserve tracks, if it’s less than 30% of your median income going to housing, then it’s somewhat of an affordable period. You can see that all the way from 2009 to the beginning of the pandemic, affordability of housing was in a pretty good place. But then post-pandemic, really from 2021 on with that 2022 spike, you can see now we’ve got separation where as a percentage of income, housing affordability is in really rough shape. And as a result, there are fewer first-time home buyers right now than ever before. When you look at the numbers, the typical age of a first-time home buyer has climbed to a high of 40 years old. So there are less people able to move on homes and they’re having to wait longer to do it because affordability is so difficult right now.

Brian: So let’s bring this all together. What does this all mean? We live in a society now where our media is always trying to put us on high alert. The easy thing to say is, “Oh my God, this is going to be a situation where housing prices are going to get crushed. Everybody’s going to lose 20 to 30% overnight.” But I’m here to tell you, I think it’s much more nuanced than that. Yes, this is a buyer’s market, I stand by that. But you just need to know the nature of real estate by itself: it’s not a fast-moving marketplace. It’s not like the stock market where we’re used to V-shaped recoveries. Real estate is so much slower moving because a lot of people are going to be anchored to their prices. That’s why I always tell people: a lot of people see these “I’m a millionaire” content pieces where somebody says, “Look at my equity in my house. I bought my house in 2020.” Yes, on paper your house has a lot of equity. But I got caught up in this too: pre-2020, I had a house that on paper was worth a lot of money, and then I had a home equity line and instead of cash reserves I was like, “I’m loaded. Got it all.” And then we saw trees don’t grow to heaven. What I’m here to tell you is that we are in an adjustment period right now. But it doesn’t mean you have to get in a hurry to find your answer.

What Should Home Buyers and Sellers Do? (12:07)

Brian: Let’s break this into segments. Let’s talk about sellers. Look, if you’re trying to sell a house in this market right now, you better be honest with looking at what that house is worth because if you’re anchored to what Zillow told you a year and a half ago, you’re probably going to have your heart broken a little bit. I have this going on even in my own neighborhood. A house across the street with a home gym, swimming pool, golf simulator went under contract like that. But a person up the street with a bigger home was thinking, “Oh my gosh, I’m going to make a gazillion dollars,” and their house has been sitting for weeks on weeks going on months because they just assume all houses are going to be snapped up. No. Location is going to matter. The type of house, the features, all those things matter. So if you’re a seller, you better sharpen the pencil. Make sure it’s really a good price and it’s with the market. If you’re a buyer, don’t get in a hurry. You don’t have to. If you’re a person that’s been sitting on the sidelines and you have lots of capital, probably not a bad time to upgrade or start looking at the marketplace with all this inventory. If you’re looking to build and you have capital, lumber costs are in a soft spot right now. But don’t feel like you have to get in a hurry. A lot of this is a slow correction process, but you can start choosing your shots. You can start looking and paying attention, but you’re going to have to measure twice, cut once because the math is still going to be difficult because of these high interest rates. And if you are a buyer, we want you to make that decision. Take a little bit longer. Maybe the slower market gives you a better choice to do the analysis. We’ve got tools available for you. You can go out to moneyguy.com/resources and check out our home buying calculator. So that way you can make sure, okay, even though rates are still high, even though prices are still elevated, am I going to make sure that I’m buying a house that’s going to make sense for me long term? And when you buy a home, make sure you subscribe to our 3/5/25 rule where we want you to put, if it’s your very first time buying a home, only 3% down. You don’t have to put 20% down. So long as you’re going to be in that home for at least 5 years, and your total housing expenses don’t exceed 25% of your gross income. If you can follow those rules and stay inside those confines, it’ll prevent you from getting too far out over your skis.

Bo: During the big runup in housing when we had low inventory numbers, it was not uncommon that you had to make yourself stand out in the marketplace. You were waiving inspections. You were waiving appraisals. I’m so happy we’re back to a place where you actually have the time. You can go do the full inspections. Go make sure that this house is not covered in mold, has water issues, has termites, do all the things to protect yourself. This is a big big purchase. And then also you now have the privilege or opportunity that appraisals will matter again. So make sure you’re building all that into your due diligence period. You don’t have to get in a hurry and wave your rights. Slow down. Make the right decision. Use our calculators. Go to our checklist. Go to moneyguy.com/resources because I remember the first time I showed up for the first house I ever bought. I showed up with a checkbook. And I’ll never forget that real estate agent looked across the table and said, “Did you bring funds for the closing?” I was like, “I got a checkbook.” I’m sure he was thinking, “Bless his heart.” If you don’t know what you don’t know, we’re going to try to load you up so you can make this complicated decision with at least the knowledge to make the variables work in your favor. Because the more you know about the process, the more you know about the transaction, the better and more empowered you will be.

Bo: I love that. It’s why every single Tuesday at 10 a.m. we get to sit in these chairs and answer questions that you care about. So if you have a question you want to get our take on, we have the team out in the wings collecting your questions right now. Make sure you get them in the chat. With that, creative director Rebie, I’m going to throw it over to you.

Rebie: With that, first up, don’t forget to take our financial mutant survey. Go to moneyguy.com/survey. Why do you want to take it? It’s just going to inform what we create and talk about on the show for the next year. That’s all. No big deal. Also, we’re going to have two specific episodes releasing, sharing and unpacking the survey data, comparing it to the average American, and we really want your voice and your situation and where you are to be a part of that. That’s the why. All it takes is a few minutes of your time. Go to moneyguy.com/survey. We only have one more week that this survey will be open.

Brian: It is one of those things where I’m listening to a relationship book right now and they’re basing a lot of the advice in here on surveys that had 1,200 participants. And I think about, you know, Ramsey and them always talk about doing the world’s biggest. But you guys realize our audience is big enough and you guys are part of something where we are literally getting enough of your input. I think this is some of the biggest populations sharing their knowledge. And the fact that we get to create teachable information off of this just warms the educator’s heart because remember this whole journey started when I read in the late 90s The Millionaire Next Door. And now if we get to carry that legacy forward by you guys filling out the survey so that we can create content that lets the next generation know how money works, that’s powerful stuff.

Rebie: Love it. Moneyguy.com/survey to be a part of that. With that, let’s dive into some questions. I’ve got a couple home buying questions first to go with the topic, and then we’ll dive into some other financial topics.

Q&A: Should You Buy a “Good Enough” House or a Nicer Home? (19:59)

Rebie: First one is from DVO6912. He says, “What are the Money Guy team’s thoughts on buying a quote unquote good enough house and investing more versus buying in a nicer area and hoping for leveraged appreciation but having less money to invest?” How do you think through weighing all of these options?

Bo: I think the second one is easier to justify. I’m going to buy the nicer house because it’s going to be an investment. It’s going to be a better opportunity. And while that may or may not be true, what I would try to do is strip you down to the why behind your decisions. What are the things when it comes to housing that really really matter to you? When it comes to housing, I really want to be close to my job so that I have a short commute. I really want to be in a good school system. I really want to have a yard. I really want to be proximate to the gym, whatever those things are. I would base my housing decisions more on those things that are going to have a truer impact on your level of happiness, level of day-to-day satisfaction than I would on strictly the financial metrics like, “Oh, I’m going to buy this house because it might appreciate more.” In our minds, while primary residences can go up in value and they can increase your wealth and they certainly have done that the past couple years, at the end of the day, they’re use assets and they should be treated as such. What is the best use of this asset in my life and which house is going to allow me to accomplish that goal? I would let that be the driver of my decision-making.

Brian: Not strictly which house is going to appreciate more. Because you can buy the greatest house in the world in the best neighborhood in the world that’s going to appreciate more than any other house in the world, but if it doesn’t match the life that you’re trying to live, you’re not going to be happy there. I want Bo to give kind of the financial take and I want to give you kind of the uncle’s wisdom on this: don’t let this thing be just a financial engine. I have had neighbors where our houses have gone up in value and a neighbor who doesn’t understand investing was like, “I think I need to upgrade my house so I can get more appreciation because we could make even more.” And I was like, “You realize the house is just a use asset, right? Because at some point you’re going to want to live in a house in retirement. It’s better if you have your army of dollar bills and your Roth IRAs, your 401ks, your brokerage accounts, because that money you can consume or let it grow and you don’t have to work so much with your back, your brain, and your hands.” There’s also an adage that kind of drives me crazy because forever you heard people say, “Go buy the smallest, most affordable, cheapest house on the nicest street you can.” And financially that sounds like a great idea. If you go and buy a $400,000 house when all your neighbors have $700 to $800,000 homes, yeah, your house probably is going to appreciate more because it’s more affordable. But it’s back to the highest quality of life. If you’re broke as a joke because you stretched as much as you could to get in this house and all your neighbors are going on vacation and traveling because maybe they’re not as stretched as you and you feel poor all the time, what’s that going to do to your personality and your happiness factor? There’s so much happiness research that shows if you are the most successful out of the group you hang out with, your happiness skyrockets because the people you’re pacing yourself with, you feel really comfortable with yourself. Make your financial decisions based on putting yourself in a situation where you get to be the best version of yourself.

Rebie: DVO6912, thank you for the question. And if you would like a tumbler, if you don’t have one, email winner at moneyguy.com because it is tumbler day. By the way, we found out PJ came by. A lot of you guys were mad because we had a lot of questions from PJ and we did three, and I found out PJ did not have a tumbler. So even though he was taking flack from the audience that we always take his questions, he never had one. That’s why I’d like to give a caveat.

Q&A: How Should You Value Your Home on Your Net Worth? (26:40)

Rebie: All right, next question is from Justin L. It says, “With home prices fluctuating and potentially more change to come, how should existing homeowners factor this into their home value on their net worth statements?”

Brian: Look, this is one of the reasons why on our net worth statements, we both like to value our homes at price we paid plus improvements. Like if you do some big capital renovation or something, you can add that in there. And what it does is it removes all the funky business from you being like, “Oh, my net worth is way up,” or, “Oh, my net worth went way down.” Especially if you’re not someone who’s in the market to sell your home and actually turn that into wealth. Like, my house has gone up in value a ton, but I’m not selling it. I’m not going anywhere. It doesn’t matter that it increased in value. So in my net worth statement, I’m just going to list it at cost, and then at some point in the future when I end up selling it for more than what I paid for it, that’s when I’ll get to recognize that price appreciation on my net worth statement. In my mind, unless I’m going to turn it into usable capital tomorrow, there’s no value in having that phantom appreciation on my net worth statement. The accounting term is lower of cost or market. Because what you’re doing is your cost of what you paid plus any additions. It just keeps those distortions out because there’s way too many people that let the perceived appreciation of their house then impact their behavior thinking they’re millionaires on paper, but they didn’t actually start building assets, army of dollars outside of the house they lived in. And that’s not what you want to base your retirement off of.

Bo: Now look, if you are someone whose house has appreciated, when you move to a lower cost area or you downsize, voila, that money will show up on your net worth statement. So it’s not like we’re telling you to let that money disappear. I think it’s just keeping you a little more sober and honest about what you have in usable, workable assets so that you can own your time that much sooner.

Rebie: Justin, if you would like a tumbler, just email winner at moneyguy.com. Rebie, your house has gone up a ton in value since you bought it. What do you value yours at?

Rebie: Just what I bought it for, right? Like, but you watch, we’ll get some comments on that one because people are like, “I like seeing what my house is worth on there.” And I’m like, all right. And look, we’ve seen it go up a ton in value, but it’s also come down a little bit. So I don’t know what’s going to happen. I’m trying not to put it at that peak price. If your house goes up $50,000 in a year but you didn’t save any money, I don’t want my net worth to go up by $50,000 just because Zillow said my house is worth that. Yeah. I want my net worth to reflect the behavioral things I’m doing, how much I’m putting in, how much I’m investing, how much I’m paying down debt. I want those things to be reflected, not this use asset that goes up. I relate to it as a use asset. Like I’m not planning to sell it. I have to have a place to live. So I’m not getting that money for a very long time. And who knows what that’s going to look like. Yeah, I like the way you guys do it personally.

Q&A: Should You Invest in a Brokerage Account at 26? (30:11)

Rebie: All right, next question is from Skillnaps H5W. It says, “Hey, Money Guy. If my Roth IRA is fully funded and I get my employer match and I have no debt, can I contribute to a taxable brokerage? What’s the best way to invest in order to access funds before I retire? I’m 26 years old.”

Bo: That is awesome. Young person doing really well.

Brian: Old Skillnaps has got some skills obviously. Is he being kind of FOO-ish though?

Bo: I don’t know the income here, right? I don’t know where he’s at. But I think that one of the things I’d investigate is: am I fully done with step five? Have I done, am I able to contribute to a health savings account? And if not, I’m assuming he has emergency reserves. I would think that you have access to a retirement plan because you get the employer match. I would consider: is there a really exciting tax incentive for me contributing to my employer-sponsored plan inside of step six? Whether that be on the pre-tax side getting a current year tax benefit, or if I’m in a situation where Roth makes sense, I could do the Roth 401k. Because even if you want to retire early, I’d want to know what’s going to happen with your career trajectory. I want to know what’s going to happen with your family situation. You don’t have any debt now. Will you have debt in the future? Are you thinking about buying a home? There are some different things that go in there. That’s why we have the Financial Order of Operations. You don’t have to overcomplicate it too early. If you can just follow the FOO, you’ll likely set yourself up in a good spot.

Brian: And by the way, that’s no shade to a taxable brokerage account. It’s just there’s starting to be a little noise out there because I’ve seen some content creators out there trying to put brokerage accounts ahead of a lot of other accounts. And I’m like, okay. I know that’s a branding thing where you’re trying to go out there and get territory. I’m here to tell you, I don’t want you getting caught up in the branding game. I’m trying to tell you what to do to win this game of money. And those tax incentives: if you’re a 26-year-old and you’re not in like the 30-plus percent on the marginal rates of taxes, even if you’re in the low 30s, I’m still loving that Roth tax-free growth that could come from that Roth 401k. Don’t sleep on those tax benefits. There’s going to be plenty of time as you get older and build assets that you’ll be able to load up that after-tax brokerage account. We love that account too, but there’s a time and a place.

Rebie: Well, Skillnaps H5W, thank you for the question. If you would like a Money Guy tumbler, just email winner at moneyguy.com.

Q&A: Does Your Deductible Count Toward Your Emergency Fund? (35:13)

Rebie: Next question is from Skippy. Hey, Money Guy team. In respect to the FOO, does deductibles in step one count towards my emergency fund in step four, or are they completely separate from each other?

Brian: No, often I say that emergency reserves are so important it gets two steps in the Financial Order of Operations. The deductibles covered, your highest deductible covered more specifically, is to keep you from making desperate decisions. That’s the first part of it. But then, because we know free money from your employer is hard to beat, because you’re never going to get rich if you’re paying a bank 20-plus percent with credit cards and so forth, and of course we want you saving after that, the second step of the FOO that’s emergency reserves is step four: three to six months. Of course you can include that deductible coverage in there because they work together. It’s just more of an indicator of, hey, are you going with your next dollar in the right order of operations to make it through this process?

Bo: I’ve got nothing to add to that. I didn’t leave you any room.

Brian: No, I mean, this is a pretty straightforward question. Yes, it absolutely counts as part of it. They are distinct in how you operate through them, but by the time you get to four, one just gets incorporated right on in there. Skippy, thank you for the question. We are going to give you a tumbler as a reward. Just email winner at moneyguy.com.

Moneyverse Milestones Segment (40:46)

Rebie: I’m actually very excited about our next segment. Today we’re going to do Moneyverse Milestones. We are going to celebrate some money milestones from the financial mutants. Real life financial mutants. They have posted these in the Moneyverse, our financial mutant Discord channel. It’s free to join. Go to moneyguy.com/moneyverse. We just crossed 10,000 members in the Moneyverse. Can you believe that? That was last week. So I just wanted to give a shout out. It is a thriving, actually very large community we have there. Thank you for being a part of that. And there is still room for more people to come and join in the conversation. We have a channel on there where people share their milestones. Maybe you don’t have somebody that you can talk to about hitting net worth milestones or financial wins in your life. People can share that in the Moneyverse because we get it. So I’m going to read a few to you guys and I’m going to get your thoughts, reactions, and we’re going to take a minute to celebrate.

Rebie: The first one is from Wesie20. They are homeowners at 23 and now engaged. It says, “Just finished building our first home at 23 years old. We have $65k combined in Roth IRAs, $120k gross income, and 90 to 100k equity in our home. Also, we’re engaged.” And they shared a photo from their engagement as well. And what did the fortune cookie say? It looks like it said, “A lingering question will be answered happily tomorrow.”

Brian: You resemble this. I mean, 23. An engagement is probably going to be at least six months. Yeah, that checks. I mean, I’m just telling you that if you’ve got all that going on at that age, be fruitful and multiply because that is just awesome. Y’all are making the world a better place. And I’m super happy for you guys.

Bo: I was actually more impressed at 23 years old as homeowners. To do it at this point in the market, that’s that’s impressive. That’s super impressive. Congratulations. Those are all wonderful milestones worth celebrating. Kudos to you guys.

Rebie: The next one is from Jake. It says, “A summer of working nights in a cheese factory has paid off. I maxed out my Roth and I’ve saved enough for a nice road trip this spring.”

Brian: Look, Jake. Hey, you’re getting that cheese. This is what it’s about. Job maxing out. By the way, if you ever go to like France and you go into a cheese place where they make cheese, I love cheese by the way, cheese should be on everything, but it stinks. It reeks. Have you been into a cheese place? You won’t believe this. It really stinks. So Jake earned that Roth contribution. Go enjoy your vacation. And hopefully you’ll get your smell back in any time now.

Bo: At 19 years old, I had not maxed out a Roth IRA. That is outstanding, by the way. 19 years of age. Because that’s younger than 20, the wealth multiplier is 97.61. So Jake, every dollar you save and invest. We’re at $7,500 for the Roth contribution. 97.61 times $7,500.

Brian: Oh, that’s not a typo. $732,000. That’s wild. Just that one Roth IRA contribution has the potential to turn into over $700,000 by the time this 19-year-old retires. And even just the fact that he said, “I saved up for a nice road trip this spring,” I was like, shut up. Seeing what you want to do and actually saving up for it like that, that’s amazing. And making memories, bedazzling that basic life. Congrats to Jake.

Rebie: All right, lastly, Sea Dog says, “My retirement date is confirmed. After 20 years with my company, I submitted my retirement date of January 1st, 2027. New adventures already lined up.”

Bo: So he listened. He knows what he’s retiring to. And that made me really happy. Here’s what I hope Sea Dog did. I hope Sea Dog stress tested the plan, worked through all the iterations of: okay, what does retirement look like? How are we going to travel? How are we going to replace automobiles? What are we going to do for healthcare? How are we going to factor in kids, the financial situation? And stress tested it and ran it through Monte Carlo and has a high probability of success that if I leave work and I retire as of January 1, 2027, I have a high probability of success and a high comfort level that we are going to be okay. That is absolutely a thing worth celebrating. And congratulations. That’s a milestone that’s well deserved.

Brian: I’m glad you also know what you’re retiring to. Just keep planning up every year. Do the net worth statement. Come up with, if you have a significant other, come up with what the travel looks like for the coming year, what the goals are. And I think you’ll find that you can enjoy that next phase because you put all the hard work already in.

Rebie: We have loved seeing all the stories, all the questions, all the conversations shared in the Moneyverse. If you want to join, now is a great time because we actually have a special announcement. We are going to do a content team Ask Me Anything on Wednesday, September 30th at 3:00 p.m. Central. So if you haven’t joined the Moneyverse yet or if you haven’t been in there for a while and need to fire up your Discord account, now would be a great time. Go to moneyguy.com/moneyverse if you want to join our Discord and be part of that AMA.

Brian: Alright, that concludes our Moneyverse Milestones segment. We are going to move on to questions.

Q&A: Should You Pay Off Low-Interest Debt Before Starting a Family? (49:04)

Rebie: Let’s go to Bland Hound’s question. It says, “Hi, the Money Guy Show. My wife and I are 27 and 25. We now make $210k a year, which is huge, and we have $220k in low-interest debt, which is also huge. But it’s low interest, mostly student loans. Is it ever okay to prioritize this debt in the interest of starting a family?”

Bo: You know, it’s always interesting. We get these questions around, hey, is it ever okay? I want to just pause there for a moment and remind you: money is nothing more than a tool that allows us to accomplish the things that we want to accomplish with it. And not all of us have to have the same goals. We can have different goals, and depending on the hierarchy of our goals, it will influence the way we make our financial decisions. So what you’re asking, hey, is it ever okay for me to have this goal and pursue this goal? Of course that’s okay. What you have to recognize is: is there an opportunity cost? If I pursue this one goal, is there some other goal that might be adversely affected? I would argue for you guys at 27 and 25, if we’re solely and strictly thinking about mathematics, beginning to pay off low-interest debt may not be the mathematically optimal solution for you. Because for a 27 and 25-year-old, we know the Wealth Multiplier for a 25-year-old is 44.04, and for a 27-year-old it’s 33.8. So for every dollar that you invest, that has the potential by the time you retire to turn into somewhere between $33 and $44. Whereas if you’re satisfying low-interest student loan debt at 3 to 4%, yeah, you’re going to save on that interest, but is that the best use of those dollars? So is it okay to shift your priorities and use your money to pursue a priority that matters to you? Absolutely. Is it mathematically optimal? That’s also something to consider.

Brian: And look, we’ve actually given you the answer. It’s called Millionaire Mission and the Financial Order of Operations. Once you get to step eight of the Financial Order of Operations, you can do whatever the heck you want with your money. You know what’s funny is that this weekend was FinCon and all weekend I was getting texts from friends that we typically see there. One of them is Andy Hill. And I know when Andy confessed that yes, he prepaid his low-interest mortgage early, but it was after he was already following the FOO-type things where he was maxing out his retirement, he had his emergency reserves, he loaded up his Roth, all these things. So I think if you’ve got a bunch of student loan debt but you have a very healthy income like that, knock it out of the park. Get to step eight as fast as you possibly can and then start throwing some bucks at that student loan. And I think you’ll extinguish it in no time because it’s not going to be hard at all with that big of a shovel to still make it through four, five, six, and start building step eight ASAP.

Rebie: Thank you for the question, Bland Hound. We appreciate you being here. And if you would like a Money Guy tumbler, email winner at moneyguy.com.

Q&A: Should Your Down Payment Be Invested? (53:31)

Rebie: Let’s go to another question from Chandler P. It says, “My wife and I are renting, saving $1k per month for a down payment, buying in 1 to 2 years depending on rates. Is a 3.75% high yield savings account best to protect that capital or should we use broad index funds for growth?”

Brian: Chandler, if you’re buying in the next one to two years, that means you need those dollars to be readily available for you in the next one to two years. I think you’ve got to go high yield savings account. The risk is you could save that $1,000 a month and be buying into a low-cost index fund. But what if when the perfect house becomes available, the house that you’ve been waiting for, you’re ready to move on, but the reason it became available is because the economy hit the skids and the market went down, the price of that house dropped because the sellers have to get out of it, and now that money you need for a down payment is 15 to 20% lower than you wanted it to be? You would be absolutely sick. So I think anytime you have an expense that’s inside of the next four to five years and you’re saving for it, you’ve got to save for it in purely liquid safe cash. High yield savings account is a great way to do that. Money market mutual fund is a great way to do that. Anything beyond that five-year timeline, I think you could look at low-cost indices. But for where you’re at and what you’re looking for, I think you go higher yield savings account.

Bo: Well, I see what Chandler’s thinking because look, there’s what we call a financial mutant trap sitting out there. And I fell into this trap too: since 2022, the stock market’s been on a tear. So you know if you have this house down payment that’s coming up in the next 18 to 24 months and you’re like, man, the money I’ve already saved up, I could have annualized 12 to 18% for these next two years, my money would be almost 20 to 30% more than it is right now. This is a no-brainer. But Chandler, I’m here to tell you, it’s a trap. Because you need that money. And look, we love investing, but investing can be very volatile in a short period of time. What would you feel if you needed this money in 18 months and then all of a sudden the market’s down 20 to 25%? You would be like, “How was I so foolish?” because I thought I’d have access to this money versus it actually being in cash and actually having cash. Access to cash is not the same as being cash. Don’t outsmart yourself. A lot of financial mutants try to get really cute trying to maximize and get themselves caught up in a risky situation. So don’t fall into that trap.

Rebie: Well, great question. Thank you for asking it. Chandler P, email winner at moneyguy.com and we would love to send you a tumbler.

Q&A: When Can You Finally Loosen Up and Spend More? (57:36)

Rebie: All right, let’s do one more. You know what? People gave us a hard time about us asking PJ Dad Life’s questions two to three times. You about to do it?

Brian: I’m doing it again. And it’s a tumbler. But PJ did say, “Hey, you should ask one of my questions, and if you ask one of my questions, I would like to bequeath my tumbler to another one of our popular commenters.” I think that’s okay. So, PJ Dad Life says, “Hey, Money Guy team. If you are already saving 25%, how do you know when it’s okay to loosen up and spend more instead of always trying to save the next dollar?”

Bo: PJ, I’ve got a great tool for you. I want you to go to moneyguy.com/resources and play with the Know Your Number tool because what that’s going to do is tell you: am I ahead of the curve? Am I behind the curve? Am I right where I need to be? And if it turns out based on hard work that I’ve done up to this point that holy cow, I am well on my way to the finish line, and to even get to the finish line I don’t have to keep saving at the same rate that I have been saving or I don’t need to save more than 25%, when you have answered that in the affirmative and you have a high level of confidence that your trajectory has a high probability of success, I think that’s when you can begin to take your foot off the pedal if you so choose. Now, a lot of people say, “I don’t want to take my foot off the pedal. I’m going to keep doing this and rather than waiting to retire at 60 or 65, maybe I look at exiting the workforce five, six, seven years sooner than I thought.” I think that’s totally okay too. But that’s how I would do the analysis to make that decision.

Brian: Well, look, use the tool because the Know Your Number is really going to give you that knowledge of where you truly are. But also turn on your senses to the people that you care about. I mean, because you’re going to get to an age, we know real success starts kind of taking traction in your late 30s, early 40s. And this is also the phase where your kids are starting to get a little older. You’ve got to start planting seeds, guys, that you want to be the good time rock-and-roll family members so that when they leave the nest, they actually come back. So you don’t want to be, and I’ve learned this lesson, you know, my daughter came to me because when we love cruising, but I got to the point where I was buying blowup mattresses to take on the cruise ship so that my oldest daughter could sleep on a blowup mattress because we could squeeze. And she was like, “Dad, I kind of like to have my own bed.” And I realized I was being a little too tight with things and I was not setting the hook to get her to come back in the future. So there are going to be indicators. I’ve had other financial mutants write me that they’re driving 12 hours to go on vacation instead of buying plane tickets. Those are indicators that you might look at. There’s nothing wrong with using your financial mutant skills to really respect that first ingredient in the wealth-building process of discipline and living on less than you make. But there will come a point where it’s diminishing returns because your army of dollar bills has gotten so big, especially 40s and beyond, that now you’re like, what are we doing? The incremental difference on some of these sacrifices. And that’s why I do have an updated version of Millionaire Mission coming out. It’s a paperback version. I put a whole section in there on you can’t take it with you and when you can start really letting go of things. Because it’s even gotten me leasing a car. Goodness gracious. Every month I’m like, “What are we doing in the Preston household?” But it is one of those things where I think you have to hold on loosely once you know you’ve measured twice, cut once, you’ve set the foundation, and you’re getting beyond steps eight and even nine of the Financial Order of Operations. I want you to use money to the fullest to enjoy this life that you have.

Rebie: Love that. Well, PJ Dad Life, thanks for the question. And we are going to honor your request to hand over the tumbler you just won to Bo Hansen Spotter. Oh my gosh, we have seen your username in the chat. So you know what? Happy to give you a tumbler. If you don’t have one yet, Bo Hansen Spotter, just email winner at moneyguy.com. Thanks for being here. If you haven’t yet, fill out the financial mutant survey. Go to moneyguy.com/survey. We only have one more week before we shut that off and create the content. So get in on it.

Closing (1:02:49)

Brian: Guys, we love creating content. Thank you for tuning in. Still two weeks back from vacation, so thank you as we’re still working the rust off of this thing, but we’re having a blast. We don’t take for granted. Do not forget to do the survey because we’re creating content off of what you guys share and it’s valuable. Because everybody who comes into this process, we know 80% of millionaires are first generation. So there are going to be a lot of people currently and in the future who just don’t know what to do with their next dollar. It’s nice if we can give them affirmations, give them the path, give them the data that lets them know this is the way to treat this powerful tool. I’m your host Brian, joined by Mr. Bo, Rebie, and the rest of the content team. Money Guy out.