How Much You Should ACTUALLY Save

New Resource: How Much Should You Save? (0:00)

Brian: Wouldn’t it be awesome if somebody actually would just tell you how much you should save and invest to reach all your financial goals?

Bo: I am so excited about this because we love that we get to constantly iterate and improve and come up with ideas and change things and adjust things. And we have something that we’ve been working on for a while now that we are so excited we get to release to you guys that will hopefully help you do money better.

Brian: Well, if you hang out with us at any point in time, you find out one of our cornerstone things is we tell people we want to get you, if you can live on less than you make and start saving and investing 20 to 25%, you’re going to be set.

Bo: Yep.

Brian: But I’ve always known there are a few warts to this. Sure. First of all, if you start saving and investing when you’re 20 years old, 25%, that’s more aspirational. It’s going to be hard to do. And then if you do it, you’re probably going to end up with a lot more money. But I just knew enough factors that if I could just throw it out there for everybody, even for the 20-somethings, they would be okay saving 20 to 25% because the net was catching enough people. I’m happy to report we’ve been like some mad scientists in the lab working through some deliverables. We’ve now emerged from the lab and we’re willing to share with you a brand new updated resource that I think you guys are going to absolutely love.

Bo: Yeah, this is our new and improved How Much Should You Save resource, intended to show you that based on your age and based on the goal that you want to retire, the goal that you want to hit financial independence, what should your savings rate be at all times? Because we get the question, well, is 25% right for me? For most people we say, hey, you want to start out and that’s what you want to be aspirational for. We’re going to walk you through why we say that. But now we’re actually showing you the data that we base that off of.

Bo: Now, before we actually talk about the deliverable itself, and obviously we want you guys to go download this and check it out, I want to tell you how we did the math because I think understanding how the math works is going to let you appreciate what we’re showing here. So what we assumed is when you invest, we’re going to assume for a 20-year-old, you get a 10% rate of return and then the rate of return drops by one-tenth of a percentage point every single year. So 10%, 9.9%, 9.8%, so on and so forth. We also assumed a 3% inflation rate. We know that since 1980, the average rate of inflation we’ve seen in this country from 1980 all the way through 2026 is exactly 3.07%. So with a 3% inflation rate, we assume that your wages in this scenario increase at the rate of inflation, about 3%, because we want your buying power to remain the same. If you’re a 20-year-old or 30-year-old, we’re projecting out what you’re going to live on when you’re 55 or 65. We wanted them to stay the same. And we assumed that across all categories, we’re going to look at a 4% withdrawal rate. How big does the portfolio need to be in order for me to pull 4% off and be able to do that in perpetuity? And the goal is that we want, when you reach financial independence, for you to be able to replace 80% of your pre-retirement income. Now Brian, people are already going to say, “Guys, when you retire, you don’t base off income. Why are we talking about income?” Let’s go ahead and address that elephant in the room right now.

Brian: Well, the big thing is we don’t know what your expenses are going to be and we have to create a deliverable that catches as many people as possible. And what’s consistent is we can use at least income and then know that you’re only going to need a percentage of that because you won’t have to save the savings rate and so forth. So it’s easier to base it off of income because it captures way more people. Obviously, if you’re landing the airplane and you’re within five years of retirement, for sure know what your expenses are. Base your retirement plan off of your expenses. We’re financial planners. That’s exactly what we do for our clients. But if you’re looking for a great resource that gets you really close and gets you motivated while you’re young and decades from retirement, this is a much more effective way to do it.

Bo: All right. So how do you read it? So now that you understand the math, let’s say you’re a 24-year-old and you want to retire at age 55. And at age 55, you want to be able to replace 80% of your pre-retirement income. You would need to save 20%. So for a 24-year-old, if you can save 20% of your gross income, that will put you on the path to have an 80% income replacement ratio at age 55. Does this mean that this is your retirement plan? No. May it never be. But does this give you an idea of the direction that you ought to move, or some general guidance and guidelines for you to figure out, okay, am I ahead of the curve? Am I behind the curve? Am I right on the curve? And so a lot of people ask this question, Brian. Okay, but I see this. Well, here’s why 25. Why, you could have picked any percentage between zero to 100. Why did you guys stick to and camp on 25? And why is that what you recommend?

Brian: Well, once again, wisdom of knowledge and experience. We know, and it’s confirmed, if you go look at what Charles Schwab found, the actual average American doesn’t even begin saving and investing until age 30. Now the ideal, we want you to be a financial mutant just like I was, where you come out of college and day one you put your army of dollars to work. But that’s just not what most people do. Even when we do our questionnaire of our millionaire clients, we often find that people feel like their biggest regret is they started a little bit later than they should have, and the typical American is age 30. So if you now apply that age 30 to the charts, voila, look at that. Somewhere between, and we use the retirement age of 60, we didn’t even go to traditional 65, we went 60 because we’re financial mutants, we want to live life a little differently. You can see there we are right there between 24 to 26%. Right in the middle of 25.

Bo: And we know that even let’s say you got started even a little bit later. Maybe you were a little bit further down the road when you figured this out. Even if you’re someone who doesn’t start saving and investing until your mid-30s, age 34, age 35, a 25% savings rate will still get you to retirement by a normal retirement age of 65. So perhaps you’re starting late, or maybe you’re not someone who started late, but perhaps you don’t know what unknown unknowns are going to come your way. Oftentimes we hit the messy middle and we get married and we have kids and we buy the house and we have these other goals and perhaps our savings rate doesn’t stay static. If you can get to 25%, the earlier you can get to 25%, the more flexibility, the more freedom you’re going to allow your future self to take. So that’s why we love saying 25%. A lot of people are like, man, but that just still seems high.

Brian: Even a friend of ours, Rob Berger, reacted to something with our savings rate, and Rob loves our stuff, but he even was like, man, they’re just way high on that. I always like to remind people, look, our system also includes that free money from your employer, and we know that the typical employer is giving contributions close to 5% towards your retirement. You get to count that as long as your income for a single individual is under $100,000, $200,000 for a married couple, because that way we’ve even built that into a mathematical calculation. Because anybody who makes lower than those levels, you’re close enough to getting Social Security and other things. We think that that’s appropriate. If you make higher than that, it’s going to put more weight on your shoulders. You need to plan accordingly. But if you take that into account and go back to the chart now, you can see for a lot of people, if you find, if you discover this in your 20s, if you do 15%, your employer does 5%, you’re going to be A-OK. If you’re like the typical American and you don’t even discover investing until you’re 30 years of age, you do 20%, your employer does 5%, you’re going to be A-OK. Discover this later, you’re going to need to save at higher rates. If you want to retire early, you’re going to need to save at higher rates. We’ve built this into the system.

Bo: All right, so I want you guys to go out to moneyguy.com/resources and download this deliverable. We want this to be useful for you. We want it to be useful for people that you influence. We want it to be useful for people in your family so that you can show them exactly how powerful starting early can be, but also give them an actual number that they can shoot for to end up in the place that they want to be if they are just starting out. How much should you save? Moneyguy.com/resources. Now, I love this. The comments are coming in. They’re amazing. And like, okay, well, does this assume starting at zero? Yes, this assumes starting at zero. Well, what if I have some savings? What if I’ve done, well, we have some amazing calculators out on the website. If you have $4,000, $8,000, $50,000 saved up, you can go put it into our compound interest calculator and see what that has the ability to turn into. We want you to have all of these tools available at your disposal. So whatever question you’re trying to answer, if you go to moneyguy.com, you can find the answer to that question. It’s one of the reasons why, Bo, every single Tuesday at 10 a.m. Central time, we like to sit right here and answer your questions, the things that you’re curious about, the things that you want us to speak to, the things that you want us to answer. So right now, if you have a question that you want us to weigh in on, we have the team out in the wings collecting your questions. So make sure you get them in the chat because we believe, and we really do believe this, that there is a better way to do money. So with that, creative director Rebie, I’m going to throw it over to you.

Rebie: Yes, we’ve got some questions queued up.

Q&A: My Son Got Into a $100,000 Per Year College. How Do I Explain the Debt? (9:50)

Rebie: The first one is from J Karen O1. It says, “My son got into a very good college, but the full price is $100,000 per year. We have enough to cover one year in a 529. How do I explain that having this much debt when you graduate is not ideal?”

Bo: Man, this is a really really hard one. And I feel like I have some counterparts that I graduated high school with, and even some people younger than me, that they got accepted into very prestigious schools. And it was one of those things that like, man, if I can, then I should. Like, if I can get in, if they do accept me, then I have to go there. How could I not? I’d be wasting a lot of opportunity. And I worry that that is perhaps flawed thinking. Now, I don’t want to suggest that a $100,000 a year tuition in certain instances and certain circumstances might not make sense. Graduating with $300,000 of student loan debt is not something that’s entirely unfounded amongst even the clients with whom we work. But you have to begin with the end in mind. And the question I think that I would have, the conversation I think that I would recommend you have with your son, is all right, let’s play this out. Let’s see what the endgame is. You get through this degree, you get this diploma, you get this thing, then what? Where are you going to go? What are you going to land? What will be the ROI, the return on investment, of this degree? And what I worry about, and I think this is going to happen for a lot of big, expensive schools, when you really do the math, oftentimes I don’t think the ROI is going to shake out.

Brian: Look, I’m just going to be blunt. One of the things we just did, we have a show coming out in the next few weeks on whether it’s harder for the new generations versus the older generations. We kind of looked at the baby boomers versus Gen Z. And the category that just was a huge disappointment is education. Because if you want to know something, because a lot of the stuff that is out there on affordability and so forth, when you watch this show you’re going to say it’s not as bad as you would think. But education, it’s a dumpster fire. Straight up dumpster fire. Because these institutions have run up the cost of tuition so much that it’s almost like, what is the whole purpose of going to college? The purpose of going to college is to better yourself so you can make more money and be a productive individual when you hit the workforce and maximize your earning potential. I think they lost the plot on that to a degree. And that’s exactly why I wouldn’t do this. I’m just straight up telling you I don’t care how prestigious it is and who you think you’re going to rub elbows with. This is Brian talking. Because $300,000 of debt, you imagine you come out of college at 22 years of age with $250 to $300,000 of debt. You better hope they load you up day one with a corner office being a hedge fund manager. And that’s not what’s going to be happening. That might be what they put in the brochure. And maybe your kids get to go to school with a hedge fund manager’s kid, but it’s, you know, so you get to hang out on their yacht for the three years you’re in college, but then after that it’s going to be like, whoa, you don’t get to do that anymore. So it’s just, and plus if you read Millionaire Mission, I have a whole section on begin with the end in mind with education. I put the majors that have the easiest potential of paying back student loan debt and the majors that do the worst. I’ll also put some stats in there on how many of your CEOs and successful people come from state colleges, not the Ivy Leagues. At the much more affordable state colleges, you’re going to find that if you’re a good apple that is really smart, and I just had this advice with the young man who’s dating my oldest daughter, go choose a major. You have to know. There are some conversations that came out of this, and I found out he just recently updated his major. I kind of felt guilty later when I found out his major, and I was like, “Dude, you are a smart guy, you got all these presidential scholarships and so forth. Choose a major that’s going to thin the herd. Because if you go to college with this super horsepower brain of yours and you get the major that the person who struggled to get in would get, you’re just not going to be different enough to get a job that’s going to pay you. Go choose a high-powered, high-octane major.” And look, I’m biased. I said accounting. Who would have thought that? And that’s not because, look, I know AI is going to take out the taxes. We’re probably going to do taxes differently in the future. But still, it is the language of business. There’s a reason that all through my career, everybody’s always wanted to go into business with me, because I know how financial statements work, I know how compliance issues work. Everything, because you get thrown in the deep end with the language of business with accounting. And I think that’s what I would just come back to this individual and say, look, begin with the end in mind. What do you actually want to do? Because if you’re going to go to an Ivy League school to work in a community or be a parole officer, there’s nothing wrong with that, it’s just, how are you ever going to pay back a $300,000 student loan debt? You have to choose a major and then work in that field. That’s the other thing. Every year when we do our study on our clients, 66% of them work in their field of study, whereas the general population, I think it’s around 62 to 64%, do not work in their field of study. So don’t get trapped into this brochure of doing an Ivy League or an expensive private school and just strapping yourself with $300,000 of debt. That’s my opinion. That’s not personal advice. That’s an opinion from a guy who loves education but hates what’s happened to education.

Bo: Two additional thoughts that I’m going to throw on this. When you get your college diploma and they print it out and you hang it in your office, nowhere on your diploma does it say how many years you went to that school. So if you’re going to go somewhere that’s crazy expensive, perhaps it makes sense to go somewhere much less expensive to get your core classes out, to get all those base levels, and then once you actually get into your major and get into the special schools, well, maybe then that school pays off. So just because you want to graduate from a school does not mean you have to attend that school for all of the years necessary to graduate. That part was for free. Here’s the second part. We hire tons of people and we interview tons of people for different types of jobs and different types of positions. Generally speaking, the college that you went to, the education that you received, matters the most for the first job that you get. I understand this is blanket advice, but in our experience it matters the most for the first job. Once you’ve gotten your first job, after that it becomes much more about your realistic, pertinent work experience. What have you experienced? What have you encountered? And it’s much much less about the degree. So when we hire someone who has a few years in financial planning, we really don’t care what school they went to, whether it was some prestigious Ivy League or some local community college. We care about what’s happened since then. So a lot of what the college degree is doing is getting your foot in the door of the career. Now, I know that doesn’t always hold, but for a lot of us, a lot of our employees, and for a lot of our clients, and for a lot of the people we interact with, that’s the way that it works. And so, again, if I’m thinking about ROI, I want the largest return at the lowest cost. I think you have to measure that out.

Brian: Can I say one other thing that just blew my mind, and I actually wanted to turn over the desk when I heard it. The Ivy Leagues, you can’t get merit-based scholarships. Or they don’t do merit-based scholarships. Somebody correct me in the comments, but I think I had a client whose daughter really wanted to go to Yale, and I was like, “Well, I’m sure they’re going to qualify for a scholarship.” And they’re like, “They don’t do those types of scholarships.” Somebody correct me in the comments section. But when we were working with this client on their Yale-bound child, I was shocked that these schools have created such a scarcity environment that it really does hose your future. Last little thing I would do, because I like going to college for free if you can, look at those scholarships.

Bo: And the crux of your question was, “How do I communicate how expensive this $300,000 of debt might be?” Well, you can calculate the payment schedule and you can amortize it and you can show your child that. I’d also encourage you to go to moneyguy.com/resources and either use our compound interest calculator, wealth multiplier, and show them realistically that $300,000 that’s going to go towards satisfying debt, if that money were deployed elsewhere over the course of time it’s going to take to pay back that debt, what could it turn into? And what you may find out is that degree doesn’t really cost $300,000 or $400,000 if you include your contribution. That degree probably costs millions upon millions of dollars, and the opportunity cost of paying back those dollars. So it’s worth just going into it eyes wide open.

Brian: I bet there’s a math calculation like, if this were a financial planning client, I would create a spreadsheet that would show that because of the $300,000 of student loan debt, even if this job paid you 30, 40, 50% more your entire career, I don’t think you could overcome the opportunity cost of just going to the state college for free on a full scholarship. Probably. Because that’s the situation. Truthfully, a lot of these state colleges will pay you to go to school if you’re that smart and you get high SAT or ACT scores. You literally can go to college for free and then potentially even get scholarships. Be like Bo. Bo took a pay cut when he took his first job with me, because he was on so many scholarships. Bo had merit as well as needs-based scholarships because he was a poor kid. And so he was literally just making bank off going to college.

Rebie: Look out for him. Okay.

Bo: I love it. It’s true.

Brian: I mean, I didn’t say that for comedy. You know, good comedy has a touch of reality to it. It’s true. It was a pay cut. There was a great opportunity in coming here. But you did take a pay cut leaving college to come to work here.

Bo: I did. But I did learn, what was it, two weeks ago, that if I really want to advance my career, I’ve got to jump jobs.

Brian: Yeah. Somebody said, we did react to that. I was like, Bo, you’re doing it wrong. Stay in the same job.

Bo: 20 years into this one. I’ve got to start looking.

Brian: If we do this, we’re only going to cover three questions today.

Bo: Somebody just said, “This is the longest answer to a…” Well, it hit a chord. I was just like, “Oh my gosh.”

Rebie: Jay Karen O01. Great question. Clearly got us really talking. And if you would like a Tumblr for that one, I am dubbing today Tumblr day. So if you would like a Tumblr, you can cash in on that at [email protected]. Just send us an email. Let us know we answered your question on the show. All right. I do want us to get our rapid fire questions in the live stream chat. If you are watching live, we’re going back to rapid fire after the 50-minute mark question.

Brian: We’re not doing like movie quotes or headline reviews.

Rebie: We do have a fun add-on for you guys to try again just like we did fruits and vegetables last week. But I’ll let you know when we get to the rapid fire. Put RF at the beginning of your question in the live chat and we will get that queued up and get ready for rapid fire in a few minutes here, probably between the 30 and 40 minute mark of the show.

Q&A: Is an ESPP With a 15% Discount a No-Brainer? (22:02)

Rebie: All right, let’s go to the next question from TotheHouse4368. It says, “Hi Money Guy team. My employer is introducing an employee stock purchase plan, or ESPP, through Fidelity. They are offering a 15% discount with a look back. Is this a no-brainer to invest in if I have the funds? Could you explain what it is as well?”

Brian: Yes. Next question.

Rebie: Could you explain what it is as well? Maybe just give a little context, or were you trying to outdo your last one? You did the longest answer on this.

Bo: So for those of you that aren’t aware, an employee stock purchase plan is an opportunity that an employer, and it’s not just publicly traded employers, a lot of times you can do this with private employers as well, where there’s an opportunity for you as an employee to purchase the stock of the company with whom you work. And even better than being able to become an owner of that company, they often issue that stock at some sort of discount. In this case, it’s a 15% discount and there’s a look-back period, which I’m assuming for To the House means that they look at the price at the end of the period and the price at the beginning of the period and they pick the lowest price there. So it amps up the return and then you get a 15% discount on that. So we’re talking about free money on free money on free money on free money, and that’s exactly how we look at it. We think that ESPP plans when there’s a discount available are just like step two of the, Brian, can you hold the thing up for me, are just like step two of the Financial Order of Operations where you get free employer money. Now, where do you have to be careful? Well, most ESPP plans are capped at a certain dollar figure. You can only participate up to $25,000 of benefit per year inside the ESPP. And some ESPP plans have a lockup where you actually have to hold the stock for a certain period of time for it to enter qualifying disposition. Sometimes that’s 12 months, sometimes that’s 18 months. If you’re in this scenario where they don’t let you liquidate the stock and you have to hold it, and let’s assume that you have other compensation coming your way as well, like stock options and RSUs, it would become very easy to become highly concentrated in your employer stock. Does that mean that you don’t need to do the ESPP? Not necessarily. It just means that you ought to have a strategy in terms of how you’re thinking about all the different pieces of stock exposure you’re going to have. But we love ESPPs. In this case, it sounds like yeah, this one is a no-brainer, but it’s a no-brainer that you’ve got to use your brain for a little bit.

Brian: Yeah, you’ve got to make it automatic. Create a system where you don’t want to have all of your human capital tied into where you have all your investment capital. And that’s what happens when you have too much of a good thing. So that’s why you will need to create a structured system where there’s a plan to liquidate these funds to diversify, take the gains, and diversify. What you’ll have to figure out is how fluid your liquidity is in your emergency reserves and other things to really go for the bonus round of getting the 12-month holding period so you qualify for the long-term capital gains versus ordinary income tax rates. But you can still create a system with that structure and then every year you just get on a conveyor belt of turning parts of this ESPP into part of your liquid capital outside of the company. It’s powerful, but you just got to go into it with your eyes open so you don’t get too concentrated where you have both your human capital, meaning your wages and your time, tied up into where you’re trying to build financial independence and your investment capital. There is too much of a good thing. So create a system that protects you from that.

Rebie: That’s great. TotheHouse4368, if you would like a Money Guy Tumbler, just email [email protected] since we answered your question today. I saw we had a friend show up in the live stream chat. It was Money Guy Clips channel. So if you have not checked out that channel yet, be sure to go subscribe.

Brian: Just a gimmick to get people to go look at our clips channel.

Rebie: Well, I thought it was clever of our team to pop in there as Money Guy Clips. And I was going to mention it anyway. We’ve been really, it’s been fun to watch everybody. Go check out the clips channel and also just the response. A lot of you spoke very positively of how we split our highlight clips onto one channel for folks who want those. And now on this channel that you’re watching or listening to, the Money Guy Show channel, it’s all unique content. We’re only posting original long-form content here. So when you subscribe to each channel, you know what you’re getting. So if you haven’t subscribed to Money Guy Clips and you like watching our highlights, be sure to go check it out and give us some love or share with your friends. It’s a great place to kind of get started on the Money Guy Show in more bite-sized chunks that may be a good thing to share with folks as well. So just wanted to give that a shout out.

Brian: It’s the free sample selection.

Rebie: You know, you walk around. I mean, our entire show is kind of a free sample, I thought. But okay, cool.

Brian: Give us a sample. Here you go. Here’s your sample. You’ll love it. We have the best chicken in town.

Bo: A lot of people have asked, “Hey, why did you do that? Why did you split it off?” And it’s one of those things that at the end of the day, what we really want is we want things to be better for you guys. So whenever we make any kind of decision of something we’re doing around here, there’s usually a reason and thought process behind it, like, man, this is something we can do, and if we do this thing, it’s going to be able to make something more valuable, better, more available, more attainable. And the Clips Channel is just one example of us doing that.

Brian: It’s almost like we’re planners. It’s like beginning with the end in mind. There’s thoughts behind the decisions.

Q&A: We’re So Far Ahead of Our Goals. Can We Take a Savings Gap Year? (27:44)

Rebie: Ready for another question?

Bo: Yes, ma’am.

Rebie: Awesome. KevinB8679 says, “Hey Money Guy team. My wife and I, both early 40s, have been diligent investors since our 20s. We are so far ahead of our goals. Could we take a savings gap year to fully enjoy the fruits of our labor?”

Bo: We say all the time that one of the benefits of saving early, getting out ahead early, hitting 25% early, is you give yourself future flexibility. You give yourself future options, you give yourself the choice to be flexible in the future. And if one of those things you want to do is take a savings holiday or a savings gap year, I say that’s A-OK. That’s one of the things about knowing if you’re ahead of the curve, behind the curve, right on the curve. Yeah, can you do it? Is it all right? Absolutely. Now, I will say one of the things, we have clients who have done this, there are a lot of times you still want to think about the tax stuff. So even though I have like a savings year, well, this might have been the year that I’m able to do some Roth stuff, or there might be a compelling reason to put money in my 401(k), less so for the savings aspect but more for the tax savings. I still want you thinking through those things. But if you are so far ahead that it allows you to take your foot off the gas, I think that’s awesome.

Brian: Yeah, just make sure you do the work. Measure twice, cut once, so that way it’s not “I feel like I’m ahead” but that you actually know you’re ahead. And then I do think you’re probably going to want to lean into the things that Bo was just talking about, like employer free money. Yeah, you’ve still got to do that because you’re just good with money. You can’t leave free money on the table. And then also I would tell you, just like I talk about in Millionaire Mission, I talk about Roth contributions that I missed because I was either starting a company and I missed about $10,000 of total contributions over a four or five year period. And I still kick myself for that because I know what that opportunity cost with that legacy for my daughter and my family could be if I had fully funded those Roth IRAs. So I would just, things like that that you just can’t get the water back up the hill because the opportunity is just so strong. You probably fund those, but then use the rest. Reward yourself. And I think it’s A-OK.

Bo: Now, someone, I don’t want to take credit for this because someone said this in the chat and I think it’s a great idea. It says, “Hey, you just got to be careful. Don’t let a gap year turn into a gap decade.”

Brian: Yeah. Because don’t we all know college friends that did that, man? Absolutely. Hey, I’m just going to take a year and go find myself. And they took 20 years. They never got a degree. I have several friends that said I’m going to take a gap year, I’m going to take off and go work this job just to build up a little extra money, and never got the degree.

Bo: Being ahead of the curve is great so long as you don’t make decisions that end up putting you behind the curve. And remember, one of the things that most likely happens is when we take a break on savings, what we tend to do is we ramp up our consumption. So we allow our lifestyle to increase for that year. Well, if it’s a sticky lifestyle increase, meaning I use that to buy a newer car, buy a newer house, go on the vacation, whatever that thing is, recognize that now you’ve increased your footprint. So the additional savings in the future may need to be higher to account for that additional lifestyle. Again, these are all wonderful things and all things that you can do. You just don’t want to surprise yourself. And I love what just worth noting, Kevin said, “Hey, we’ve started in our 20s and we’re now in our 40s. Can we do this?” This is different. And I want all of my young 20-year-olds, this is not someone who says, “Hey, I started saving when I was 23 and I’m 26 and I’m way ahead of the curve.” Can I take a, that’s not the same thing. So just recognize there’s a time and a place for being able to do this, and it’s after you’ve been doing it for a while.

Brian: No, they’ve built up enough assets. I bet these things have reached a lot of our millionaire milestones just off the size of their army of dollars.

Rebie: Fantastic. Well, KevinB8679, thank you for the question. We hope that helps. Just email [email protected] if you personally would like a Money Guy Tumblr. Oh, Kevin said they have eight to ten times their salary invested.

Bo: You know, the goal for about, he did say way ahead of the goal. Should you pull up the slide? moneyguy.com/become-a-client. Just go check that out. That’s a great thing for someone in their early 40s. Go drop in. We’ll leave the porch light on for you.

Rapid Fire: It Does Not Depend, Disney Edition (32:13)

Rebie: All right, let’s move into our “It Does Not Depend” rapid fire segment where Brian and Bo will rapid fire answer your personal finance questions, but they cannot say the words “it depends.” They have 30 seconds combined after the question is read. I am going to give them an additional fun challenge today to see what they do with it. I want to see, Brian, give you a little nod, and see how many Disney references you can bake into your answer. And remember, I am going to be a little harder on you if you just kind of say, “Oh gosh,” at the end of your question. That does not count. Brian is stressed. Look at him. But you can recall Disney stuff, Disney characters, Disney phrases. I think you can, Bo. I’m not positive about that, but we’ll see what happens.

Brian: Well, I can, but normally, but you put stress on me and all of a sudden I turn into a different animal.

Rebie: The fun of this game.

Brian: You were getting too good at 30 seconds, so we’ve got to do something. Bo’s good at it. I think everybody comes to see the hijinks of struggling and failing.

Bo: Did you see how many people began in their normal nomenclature on the internet using kiwi happy, banana happy? Like it’s a thing you created. It’s a trend of being kiwi happy. Makes me kiwi happy. Makes me banana happy over here.

Brian: Exactly. If you don’t know what we’re referencing, go listen to a couple of past Money Guy episodes.

Bo: That makes me banana happy.

Rebie: Oh man, I love that. All right, so with that, let’s move into rapid fire. Here we go. Question one. Can you do both step four and five together if you’re past a three-month emergency fund? And why?

Bo: I’m going to say yes, because if you have the three months, you have an emergency fund in place, but you are building towards a full emergency fund. And I really want you to be able to take advantage of that Roth if you can and you can get those if you need them.

Brian: Look, first you’ve got to make sure the slipper fits just like Cinderella and make sure that three months really does give you the protection so at midnight you don’t turn into the pumpkin.

Rebie: I’m so impressed.

Bo: I’m going to lose this one.

Rebie: This is magical. Brian just got 10 points on the board and we are moving on to question two.

Brian: Yeah, I like Roth IRAs. That’s step five.

Rebie: Next question. In your opinion, what is the best way to save HSA receipts for future reimbursement?

Brian: Oh, don’t think I’m going first every time. I mean, you have to put yourself in the future like in Wall-E and you have to kind of plan ahead. So I’m scanning the documents in and then saving them so you have them in the future no matter what happens to mankind.

Bo: For all of my receipts, I scan them into a folder by year and I also have a spreadsheet where I’ll list them out. So if I have to show the spreadsheet and the receipts, I have a repository that I could very easily come up with whenever I do HSA reimbursements.

Rebie: Well done on all fronts. 10 more points to Brian. All right, next question. Is it okay to buy a fun car with a loan if you are on step eight and ahead of the curve?

Bo: Yeah, if you’re on step eight, you get to do what you want to do the way that you want to do it. If you’re saving 25%, you’re building towards financial independence, you’ve done all the things that you need to be doing, then absolutely you can go buy a fun car. And if you choose to finance it, that’s your prerogative at that point.

Brian: I’m sitting there trying to think of his. Look, Gaston would drive a fancy car financed, but I don’t know that I think it’s the greatest idea.

Rebie: Time’s up. I don’t know if you get that one, Brian. That seemed like you just threw that one in.

Brian: No, I knew how I was going to go in it, but I just didn’t have enough time. I was blanking on Gaston’s name for some reason. So no points on the board for that. Although, valiant effort.

Rebie: Okay, next question. When Brian says “automatic for the people,” is he referencing REM?

Brian: Well, it’s actually R.E.M. and Weaver D’s because I’m from, remember, I went to UGA, Bo went to UGA. That’s where we got “automatic for the people.” It’s a slogan from a famous restaurant. Really really good restaurant. Nice little bit of trivia for you. I didn’t give any Disney. I should have put a Disney on there too.

Rebie: That’s all right. You did a UGA reference and apparently a lot of references there. Anyway, moving on.

Brian: A lot of pixie dust there.

Rebie: Where does saving for maternity leave about to start the messy middle fall in the FOO?

Bo: It’s going to be like a step four thing. Emergency funds. And it’s one of those things where if you’re saving for maternity leave and you’re going to be out of income, you need to make sure you have enough resources to cover while you’re out, especially if it’s going to be non-paid maternity. So I’m going to say it’s inside step four.

Brian: Yeah, I was going to say it’s just like, you know, because when you have kids you get in the weeds just like Rapunzel and you’re stuck up there worried about how you recover things. So make sure you have good emergency reserves. It gets you 3 to 6 months so you can survive that well. Don’t be stuck like Rapunzel.

Rebie: 10 points for Brian. All right, next question. This one’s for Brian. Your view on the future of the CPA career path as AI capability continues to improve.

Brian: I think it’s like most things. I think that a lot of people are calling for destruction, but I think there’s going to be opportunity to maximize. Yes, compliance is going to be different, meaning tax filing, but if you don’t think that we’re going to still need people’s intelligence on how financial statements and businesses work, I think you’re mistaken.

Bo: You said this was for him, but I’ll just tack on too. I agree. I think that tax preparation will become much more automated, much more efficient, and it will allow CPAs to not fall into the slog of tax season the way they have previously. Mulan.

Rebie: Oh, that’s exactly what I said not to do. Come on. You know Disney.

Bo: I wouldn’t have even come up with that one.

Rebie: All right, next question.

Brian: I’m just waiting for one single question about lions or about fatherhood or about something because that’s the only thing I can think of is Lion King. I’m literally just naming every character in the Lion King right now. I’m just telling you.

Rebie: Anyway, moving on to the next question. Does it make sense to withdraw from an HSA with the required medical receipts to fully fund a Roth IRA in a given year? Nobody who’s listening can see you shake your head.

Brian: Well, let me, but if you’re tight on money, you have no money and you could pull out of that, would you not fund a Roth IRA with that? I think we let them get into emergency reserves for funding that.

Bo: Yeah, but I think HSAs are more valuable than Roth. So I think that would actually be maybe stepping it down a touch, especially if I have the receipts to be able to do it, because I don’t want to rob Peter to pay Paul. I want to add to both.

Rebie: Time is up. We’re going to come back to that. I’m just saying that after the fact, 10 points from your score.

Brian: I want to think through why it would depend. But we’re going to talk about it. We’re going to come back to that.

Rebie: You did not fulfill the time requirement on that. All right. What skills would you recommend to people who are new to the workforce with AI up and coming?

Bo: In my opinion, interpersonal skills. The ability to talk and communicate directly with another human being, look them in the eyes, have a conversation, make people feel heard, make people feel welcomed. I think that’s something that AI is not going to be able to replace.

Brian: Yeah. I mean, you want to be the Tigger of Pooh, and the fact that you want to be so bubbly and friendly, because no AI is ever going to be, if you’ve ever noticed, AI can’t write jokes very well. They’re just not funny. So be Tigger. Let’s face it. I dialed that one in.

Rebie: It still worked though. Like, I feel like I still give you the points for it.

Brian: Well, I mean, Bo had already taken all the good easy answers on that, so I felt like I was just giving it a punctuation.

Rebie: All right, next question. “My adviser at 1.5% actively manages equities and is confident he’ll always outperform, but most data shows index funds win in the long term. How should I evaluate that? I’m 29, married, we’re DINKs, and in step six of the FOO.”

Brian: I just have one statement, then I’ll let you take it. Pride and ego comes before the fall.

Bo: Yeah. If he says he’s going to do that over and over, has he been doing it? Like, has he been outperforming? For asset management only, active management at 1.5% is pretty steep just to try to go out there and pick and do selections. But I don’t want to be so presumptuous and say, “Oh, no, he can’t do it.” I mean, if your adviser is Warren Buffett, he has a track record of doing that. But I’d want to see the person, the adviser’s track record.

Brian: It’s not Disney, but I’d like to see the sports almanac.

Bo:That Back to the Future is not Disney?

Brain: That’s Universal.

Rebie: Last question. Buckeye fan here. This is not from me, by the way. “As UGA alums, do you hate Florida, Auburn, or Georgia Tech the most?”

Bo: Yes.

Rebie: No, that was not the question.

Bo: We have friends at all of those. I wouldn’t say that I hate any of them. I don’t pull for any of them very often.

Brian: I can’t, I don’t hate any of those. And I have a story. That’s why I have to say it depends on every one of those. Oh, you just, okay. Because I want to give a better answer on that one. I can give a much better answer on that one.

Rebie: And Bo did not try at all on the Disney reference. So Brian won 40 to nothing.

Bo: I mean, not even skunked me and just absolutely demolished me.

Rebie: I can’t believe neither of you just threw in a “great big beautiful tomorrow.”

Brian: You know what, I actually wanted to say it for retirement. I wanted to say it.

Rebie: 10 points on the board, but I will take those 10 points because I thought of it. No, that would have been good. Great game tomorrow. So, can I clarify the college question?

Brian: You can. We’ll start there.

Maybe It Does Depend: Deeper Dives on the Rapid Fire Questions (42:52)

Brian: Look, y’all realize I grew up a Florida fan. My dad played at the University of Florida. He was Steve Spurrier’s blindside left tackle for all those years. He was friends with Steve. So I went to the University of Georgia because of this beautiful thing called in-state tuition, because I had some scholarships because of the Gulf War that didn’t end up happening. So it was kind of a coincidence that I ended up at the University of Georgia. That’s why I don’t dislike Florida. I’m one of the unique Georgia fans. I want Georgia to win, but I don’t have the hate for Florida because I’m just too close to that program from childhood. The other thing, Auburn, I almost went to Auburn. I even did a walking video on this, that I was early accepted to Auburn. And I’ll give the story that Auburn’s recruitment plan back in the 90s was they just had your family pull up in a minivan. They threw the most attractive person you’ve ever seen into the minivan with you and rode around with your family, showed you the campus, took you in to meet the professors. It’s brilliant. It was diabolical. And the fact that I immediately was like, I was going to go to this school. So I told all my buddies in my junior year after I had done this and got early acceptance, “Hey, I’m going to Auburn.” A lot of my buddies from high school ended up going to Auburn because we had this pact that we were going to do it together. And then of course that scholarship fell through. I ended up going to UGA, but I spent a ton of time at Auburn. Went to a lot of house parties and other things. I mean, I would literally skip weeks because there’s this thing called student notes back when I was in, I’m sure it’s illegal now, but student notes, by the way for those who didn’t know, they printed them on red paper. They would pay nerds to go sit in class and write down notes. And then for the people who didn’t want to go to those big lecture classes, you just go buy the notes. And I can memorize anything. So I would ace exams. Those big classes were easier. But majors, I had to actually go to class. But I would spend weeks over in Auburn. So I have a lot of love for Auburn as well. That’s why I pick on all Auburn fans is because there’s a likeness there. And then speaking of nerds, what’s the other one? I pick on Tech a lot, but I do have one of my dearest friends, and I toured Tech because I came really close to thinking about Tech too, because it’s nerdy and I was good at math all through high school. So one of my dear friends went to Tech and so I have a lot of love for Tech as well.

Rebie: Very thorough answer.

Brian: Well, I mean, all those schools I have some affinity to because of just personal friends and close dynamics.

Bo: I’ll throw in a go dogs to respond on.

Rebie: Now, since we’re in our “It Does Depend” segment, there was a question that you guys just kind of stopped and did not fulfill the requirement on. It was: does it make sense to withdraw from an HSA with the required medical receipts to fully fund a Roth IRA in a given year? There was a lot of debate.

Brian: I think Roths are better than HSAs in the long term. I think that where we have a disagreement. Because look, I do agree HSAs are triple tax-advantaged, quattro tax-advantaged if your employer has the right structure, which is just completely incredible. But it is amazing from a legacy standpoint. Maybe it’s different because I’m now in this stage where I’m thinking about the legacy of my assets and having a special needs child that can actually stretch the retirement accounts over her life expectancy because of her struggles. The Roth is just so dagum cool that it’s tax-free forever essentially.

Bo: And that’s why I’m not suggesting that you don’t do the Roth. I’d love to see you do both. But if you already have the receipts that can justify pulling the money out of the HSA, I’m going to argue you already have the receipts that you could do that at any point in the future. So you’ve already got the dollars acting and behaving like a Roth in every single aspect except for the legacy aspect. That’s a really great point. But I think I’m going to leave the HSA because once I put them in, I mean, I guess technically I can get to them penalty-free, tax-free, I pull my basis out, but man, that HSA money, it’s still growing tax-free and it’s free and clear if I’ve got the receipts to get it out. I like the HSA dollars, but I would find some way to do both of them if you can. That would be my absolute best answer.

Brian: Instead of or it’s an and. Instead of or it’s an and. There you go. Go make more money.

Bo: There’s the answer. Spend less or make more.

Rebie: That was fun. A few honorable mentions that I do agree with our audience on. Can’t believe you didn’t do a Cars reference in a question about cars. Lightning McQueen. Anyone? Also, somebody said, “Can’t believe you didn’t say ‘a whole new world’ when it comes to talking about AI.” Good one too.

Rebie: I know there were some good ones in there. What’s a quote from Cars? I thought like, you know, oh, you could say you’re on step eight, you could take out a loan to buy a fancy Lightning McQueen, or like, I don’t know, you could throw in one of their names or something.

Brian: I’d probably have been more of a Mater.

Rebie: Oh yeah, we’re both, exactly. So anyway, you could take it several ways, but just for fun, I wanted to shout out because the audience was having some of the same thoughts that I was having.

Bo: All right, that’s Pixar. That’s not Disney, right?

Brian: Well, Pixar is Disney. Yeah, Pixar, Marvel, Disney. So in a weird way even the Simpsons are now Disney. Because they bought Fox.

Rebie: But you’re not going to like go to the Disney parks and see the Simpsons there. Lightning McQueen, I mean, they’re currently at Universal, but give it a few years. You never know. Some weird dynamics.

Bo: We rode the Simpsons ride at Universal, and it was funny because they have like a little thing that plays. That stuff was so funny when I was a kid. My kids did not think it was hilarious and would not get away with that being like cartoon programming these days. Very difficult.

Bo: I don’t know if it was ever designed for children because it’s Crusty. He’s always ripping off heads and stuff and doing all kinds of crazy gross stuff.

Rebie: Oh man. All right, we’ve got a few more questions. Oh, also, 20/3/8 for Mater, cash only for Lightning McQueen. That’s good. It writes itself. That’s really good. Also, Brian literally said “pride goes before a fall.” You instantly had Mufasa falling off the cliff. Pride Rock. Like, you could have incorporated. This rapid fire was for you. Honestly, I thought this would be so easy. They’re going to nail this.

Brian: It’s hard to do stuff under pressure. It’s true.

Rebie: Well, that’s meant also to be meant. I overestimated your Disney catalog. But it was fun. Thank you for humoring me. Thank you for the great answers to the financial questions.

Brian: I think Bo classified himself as a Universal family anyway because they just got back from vacation.

Bo: It was great. Really great. Next. No, we won’t do Universal references.

Brian: All I’m going to do is Back to the Future the entire time.

Q&A: When Do You Circle Back to Fund Your Emergency Fund More? (50:04)

Rebie: All right, let’s do a couple more long form questions and give away a couple more Tumblers maybe. Let’s move to Haley’s question. It says, “As you make more income over time, when do you circle back to fund your emergency fund more? I’m having a hard time grasping when you go back and fund it further, assuming you make more over time.”

Brian: It’s not a one and done.

Bo: Yeah. This is where like the art meets the science of it. And I think there’s not a right or wrong answer, but a really great time to do it is every single year when you do your annual net worth statement. One of the things you’re going to put on there is what are my cash and cash equivalents? Well, as soon as you see that number sitting there, you want to do a mental check. Say, okay, what’s my burn rate right now? Okay, I spend $5,000 a month every month. I need a six-month emergency fund. I need $30,000 in there. Oh, I’ve only got $25,000. Okay, I need to beef that up. That would be a really good time to check it and it gives you a reminder annually. But that’s not like a hard and fast rule.

Brian: Also, I think when you get pay raises or your income’s going up, for sure, you immediately look at it and go, “What?” Because look, life happens. So you’re going to have stuff coming in and out of your emergency reserves because, you know, your water heater goes out, you have to replace the roof, there’s all kinds of things. So a perfect time is when you get a pay raise, you can think about, hey, from a forced scarcity standpoint, yes, I’m going to have 20 to 25% of my money going towards investments, but I probably should go ahead and beef up my emergency reserves because 3 to 6 months is not what I made last year, it’s 3 to 6 months of what I’m spending now. And so it’s an ongoing analysis of what you have coming in and out of your household and financially. And the engine is getting beefed up every year as your income production gets stronger and stronger. You need to act accordingly and keep money going to feed the fuel of not only your emergency reserves but your Roth IRAs and everything else as you’re going through the Financial Order of Operations. Your shovel is, you’re shoveling the coal into the different furnaces. Keep the motors running.

Rebie: Great. Well, Haley, if you would like a Tumblr, just email [email protected]. We would love to send you one.

Q&A: Should I Adjust My Portfolio to Be More Conservative at All-Time Highs? (52:28)

Rebie: Next question is from Pepster60. It says, “What do the guys think of adjusting my portfolio mix to be more conservative when markets are at all-time highs and less conservative on corrections?” For context, they’re in step nine and have about $2.5 million saved and are 65 and retired.

Bo: I get really nervous about people because what I’m going to do is reread your question with slightly different vernacular. “Hey, what do the guys think about timing the market when it’s scary and being aggressive when it’s not scary?” Well, we don’t think that timing the market works, for the reverse kind of reason, because it’s saying when the markets are at all-time highs. Yeah, to go more conservative and vice versa. The problem is markets, especially bull markets, can run really hot for a really really long time and bear markets can turn really really quickly. This to me just seems like a way of market timing without calling it that. So what I’d rather see with a portfolio of $2.5 million at age 65 and retired is an allocation that makes sense whether the market is at an all-time high or whether it is in a correction. And if you have the right asset mix, the right asset allocation, it ought to be sound in both of those environments so you’re not having to make those adjustments.

Brian: Yeah. I mean, that’s what I was going to say. We want to, you’re a 65-year-old, you’ve kind of won the game, and I don’t know what your burn rate is, but that’s why I immediately want to stress-test your plan, see how ahead of the curve you are, because then we could adjust the allocation based upon how much you want to build for legacy and how much needs to be built for just paying today’s expenses. And that way the plan is good before, during, or after, no matter what life or the financial markets may throw at you. I wouldn’t be so in the weeds that I’m literally trying to day trade or time the market based upon valuations, because the typical bear market is like 11 months or something like that but bull markets can run years. And I’d feel for you if you’re trying to go all of a sudden very conservative because you think we’re in a bull market and things are overvalued, and then you kick yourself. You’re just setting yourself up for a lot of hassle factor of majoring in the minors versus just, you know, your money should work harder than you do and you should be on a beach somewhere enjoying your money.

Bo: And this is not a hard and fast rule, but in our experience, as people age, they become more sensitive to changes and due to that increased sensitivity, they’re likely to seek out confirmation bias. Right now the market’s overheated. If you are constantly thinking, “I’m going to change when X happens,” you begin to start looking for and seeing X a lot more frequently. Oh, now, okay, the market just went down 5%. I need to adjust. Oh, the market’s at an all-time high. I need to adjust. And what you end up doing is creating a lot of motion inside your portfolio. And oftentimes that motion is one, going to create cost, but two, you’re likely going to be getting it wrong more often than you’re getting it right. I just don’t think it sets you up for a ton of success.

Rebie: That’s great. You want to do one more?

Brian: Let’s do one more.

Q&A: How Can the HSA Be Used as an Investment Account? (55:50)

Rebie: Scott H asks, “Can you please explain how the HSA can be used as an investment account as opposed to spending it on medical costs each year? I believe you can reimburse past medical expenses later in life. And we’ve had a lot of debate about why HSAs are so great.” So really break it down for Scott.

Brian: First, I want to take some credit because I think we have single-handedly helped a stat that comes out every year forever. And I love this stat. As we were saying, only 4% of Americans were actually investing their HSA. I’m happy to report, and I think it’s because we’ve been sounding the alarm on this, that number is like 12 to 15% now. Still, 80-plus percent of Americans are still using their HSA as a clearing account. And I would still tell you to pay attention because remember, with an HSA you have to have a high-deductible insurance plan. Make sure you’re keeping enough liquid for your out-of-pockets and any deductibles that you need to be nervous about, because you don’t want to get caught in a medical year that you can’t invest in. But assuming you have that covered, yeah, a lot of your HSAs can, and I know a lot of us are using Fidelity, and it’s very easy to go buy index funds and other things just like you would with your brokerage accounts or your 401(k)s or your Roth IRAs. You can do that within your health savings account once you figure out how much needs to be for liquidity to cover deductibles and how much can you just let work in the long term.

Bo: And so here’s what you do. You incur that medical expense today. You pay for it out of pocket with cash that you have on hand. You save the receipt. You scan it in most likely in some sort of digital form. You have a spreadsheet where you’re kind of keeping track of that. And then if you invest those dollars and they grow through time, you can then reimburse yourself at any point in the future for that medical expense. So you can be in the year 2040 reimbursing yourself for medical expenses that you incurred in the year 2026. It’s a fantastic way to build up a truly legit pot of tax-free, readily available assets. You just have to make sure that, like you said, you have the cash to cover your deductibles or anything of that nature. And then you also have the cash to actually cover those medical expenses with outside resources.

Brian: Well, I mean, if you think about it in terms of, let’s say you had $25,000 of contributions and expenses, but fast forward 12 years or 15 years in the future and now it’s worth $100,000. The thing I always thought was magical was you can go and reimburse yourself in the future for that $25,000, but the net $75,000 gain is still working and it’s not taxable. It’s like it’s magically created, because you did have to have the cash to cover those expenses in the year that you incurred them. But it really is a magical thing. I mean, here’s where I’ll take it to the bonus round. You know, my youngest daughter will never probably live on her own, and we’ve had to, we moved here to Tennessee for a special school. That special school is $50,000 plus a year. I get a letter every year from the school and we have a medical doctor and everything where this is a qualified medical expense. I’ve been paying for these tuition fees. I have without a doubt, no matter how big my health savings account gets, it’s going to be tax-free when I pull it out because of that private school that we moved up here for. So that’s why I’m like, grow baby grow. Because I can’t wait to pull the money out at some point completely tax-free.

Closing (59:26)

Rebie: Grow baby grow. And with that, make sure you go to moneyguy.com/resources to see how your savings can grow with our new resource, How Much Should You Save? You can download that for free. Again, moneyguy.com/resources. And if the slipper fits, as Brian says, you can also click on the button that says become a client and just learn more about what we do at Abound Wealth Management. So thank you so much for joining us today on the live stream. We’ll be back every Tuesday at 10 a.m. Central and we can’t wait.

Brian: Kudos to you because, you know, I probably, y’all have figured out I’m not exactly the biggest fan of the “it depends” section, the rapid fire, but Rebie somehow made it perfect. Somehow she put Disney in there so it makes me smile. You know, the things you talked about, and I did, I actually thought about I want to make sure I say “great big beautiful tomorrow.” I was also trying to get a Sherman Brothers reference in there. Maybe even the Brankoff Brothers reference in there, just because we’ve had both Tom and Tony by the studios here in the last few weeks. So just some really cool Disney stuff. And for those of you who don’t know any of those things I just said, go do a little dive and I think you’ll be impressed. I’m your host Brian, joined by Bo and the rest of the content team. Money team out.