How Student Loans Are Crippling Americans (& What They’re Doing About It)

Student Loans and Education Landscape (0:11)

Brian: Student loans, man. How they are just messing up my favorite thing, which is education.

Bo: Brian, I am so excited to talk about this because it seems like the educational landscape has shifted and folks today that are graduating or have recently graduated from higher education are facing a different problem, a different type of dilemma than generations past. And we want to walk you through what that looks like and maybe what people are beginning to do about that to try to help that out.

Brian: Yeah. Well, I’m always glass half full and I think that what I do, we’ll give you the data, but also we’re going to tell you how you can avoid this or navigate your way out.

Bo: So, it’s really interesting when you look at the stats. The average US undergraduate graduates with approximately $26,000 in student loans. And that’s just very very different. Brian, when you were coming through school, it was not commonplace for someone to come out of college with five digits worth of student loan debt.

Brian: Yeah. It’s one of those we love education. I always say that even when we were doing the launch of Millionaire Mission I talked about my own journey where I felt like education is really the ladder of opportunity because you can better yourself, doesn’t matter where you come from. So it really troubles me when I see that somehow the system has gotten skewed to where cost of education’s gone up, the amount of people going out there and having to go leverage it up and start out when they come out into the world instead of thinking about how do we start putting our army of dollar bills to work for us we have to think how we’re going to pay back all these financial institutions. It just seems like a trap in a lot of ways. So we want to kind of help people because what I’m seeing is also this is playing out in decisions people are making. There’s some data that’s come out now with what are the younger generations doing to kind of address this headwind that’s facing them. And a lot of them are putting off now. And we broke this out by generations, Gen Z, millennials. But you can see both Gen Z and millennials are putting off now, kind of improving themselves or taking opportunities for career advancement. If you look at it, they’re definitely they’ve soured on the thought and they’re putting it off. Additional education, that’s probably with how much things cost, that might not be the worst thing to be honest. And I am happy to report that the least of these three that we are reporting is that Gen Z and millennials, 17% for the Gen Z, 13% for millennials are even putting off having children. So this is going to have a ripple effect for actually multiple generations because of this headwind or this ball and chain that we’ve strapped on to our younger generations.

Young Americans Becoming More Resilient (2:53)

Bo: But young Americans are catching on. I think the millennials came through this. Gen Z is recognizing and now even the next generation is recognizing this and young Americans are becoming more and more resilient. They’re now doing things like prioritizing affordability, thinking more about like career readiness and having a bigger focus on, okay, what are the long-term implications of this? I recognize that if I go take out tens of thousands of dollars of student loan debt, I’m going to have to carry that with me into my career. And frankly, starting out in your 20s is hard enough already without having to also start in debt. So, as we’re looking at younger generations, we know that right now 54%, this is according to a survey done by Fidelity in 2025, 54% of high schoolers listed cost as the most important consideration for college. I’m excited about that, Brian. When I was coming through, it was much less about how much did college cost and it was much more about the experience. Where am I going to have the best Saturdays? What’s the most fun place to go? What’s the most prestigious name? It seems like high schoolers now are beginning to recognize, man, maybe cost should factor into this equation some.

Brian: Yeah. I mean, how many, and look the colleges are not blameless on this. I mean, when I look at, I was talking to somebody and they had a daughter who was going to this is a major public university and I found out that every one of them in their freshman year is going to have their own bedroom, their own bathroom, en suite and I’m like, how much is this all going to cost? I mean, what happened to the cinder block dorms where you silo the showers? I mean, because look, I get it. I mean, as I get older, I’m bougier and bougier. But the thing is you go to college. This key point, you go to college on how you can improve yourself academically while you’re in this young stage of life where you can put up with anything. You know, if there’s ever a time in my life where cinder blocks and just rows of showers that I had to go share on left side is showers, right side is commodes, this is the time when you’re trying to improve yourself because there’s going to be plenty of time as you improve yourself to go have your en suite and all the other things. I think we’ve lost the plot in some ways with how we’ve structured college.

Bo: But again, there are some bright spots in terms of how the mindset is shifting. I just said that 54% of high schoolers have said that the cost of college is a super important consideration. Well, 61% of students listed career viability as their top goal for college. Meaning when I go off to school, when I go get this vocation, it’s less about the experience and it’s less about, oh, I just want to go do the college thing and it’s more about what is this preparing me for? How am I going to use this next step or stage to prepare me for when I enter into the real world? And it’s wonderful that young people are beginning to think through that and parents are beginning to educate their kids around making those decisions.

Tools to Navigate Education Costs (5:55)

Brian: Well, so let’s talk about because I’ve thrown enough on to education. Let’s actually talk about how what you can do to get yourself out of this. The first thing we always say is know the tools available to you. Look, I was guilty of this, too. I remember when I went to college, I way underplayed how many scholarships I probably could have gotten because just nobody was ahead of me telling me how to do this. Another thing that I was shocked, now I’m glad for my daughter because I have a senior in college is that I had enough knowledge or people had shared the experience shares. We did an ACT prep and you realize just doing things like ACT prep and the amount of scholarships that my daughter qualified for just by boosting her standardized test scores. I think me in my humble beginnings, I didn’t know about all that stuff. I took that test. I mean, I probably got credit for my name and then I probably if you saw the disparity between my English versus math on the SAT, it was bad. I mean it was really rough. If I had anybody who had knowledge ahead of me, we’d hey, let’s go do some prep and let’s see if we can push those numbers up because maybe you qualify for more financial aid. If you do that, you can take an active role in some of this.

Bo: Another thing that you can do when it comes to making this decision is measure twice, cut once. We used to always say that the single largest decision that most people will make from a financial perspective in their life is to buy a home. Well, we know that the average age of first-time home buyers is now at 38. That means that the college decision that you make will likely be the most expensive decision you make for the next two decades. So, you want to make sure that you make it well. Make sure you’re choosing a university or an institution that aligns with where you are financially. And don’t forget that there are things like, hey, okay, maybe I don’t need to go to the more expensive public university. Maybe I can go to the local community college and I can do the two-year school and I can do the things that are going to get the cost down so that when I actually do graduate, I’m not saddled with a ton of debt trying to take it into the real world with me.

Brian: I want to tell people something that I tell this to all my neighbors and friends. This is a hack. If you live in the Southeast, I don’t know, Northeast, y’all are different. West, I don’t know. Midwest, I don’t know what y’all do either, but I know the SEC. I know the Southeastern Conference. And I’m always amazed when parents move into our neck of the woods and then I find out that they’re touring like 20 colleges. I’m like, where does your kid want to live post college? That is the key thing you ought to do. If they’re going to live in the southeast, go to the state university in that. And why do I say this? Go look at where all the governors are coming from. Go look at where the business owners are coming from. Usually in the southeast because look we have, and it all ties into great football programs, great business, bang for the buck in-state tuition. It’s just amazing but I’m always, people go and run up out of state tuition and all these other things and then I got this from my own father. You know my father was a great football player, went down, he was from Columbus Georgia, went to Baker High School but then he went down to the state of Florida, had a very successful collegiate career down there but he knew he was coming back to Georgia, moved right back to the city of Atlanta after he graduated from University of Florida. And he always said it was a big regret because all of his power structures were gone. You know, all of the benefits. Meanwhile, when I was in the state of Georgia, I mean, it’s amazing if you go look at who I was in fraternities with, who I was in classes with. I know a lot of the power structure for the state of Georgia because I was in proximity to them while I was at the University of Georgia. And that’s why I’m always amazed when parents who in the SEC, if your kids are going to live in the state of Tennessee. Like if my daughter had said she wanted to go to UT, a lot of people be like, “You’re a bulldog.” You would hate like, “No, I love the state of Tennessee now.” So I would have loved for her to go to Tennessee because I think that in the long term there’s a lot of opportunity to have proximity to people that will have some impact with you and that network is strong. But I’m always amazed when people send their kids all over the place and pay out of state tuition. They don’t take advantage of the community colleges because here in Tennessee that’s free. I mean, there’s all kind of great opportunities. Measure twice, cut once. Don’t let some college sell you on lifestyle because they’re not going to be there to pay the bills for you after you get out.

Bo: Oh, and that was the last takeaway is that personal finance is personal. When you make your college decision, make sure you make the one that’s right for you. Be careful. Okay, well, I’m just going to send my kid to the school that I went to because it was my alma mater or hey, my kid wants to go to this school because it has the really fun Saturdays. Don’t let someone else tell you why you ought to make this huge financial decision. You want to consider your unique circumstances, your unique goals that you have related to higher education or that your children have related to higher education and pursue those because what you don’t want to do is get four years, 5 years, six years down the road and think, “Holy cow, what did I just do? And how am I going to get myself out of this pickle?” And be okay and prepared to adjust. That’s why I tell students all the time or parents who have students that are graduating, hey, if your kid doesn’t know what they want to do, they don’t know what vocation they want to go into. There’s nothing wrong with just starting easy with a local community college to begin to get the core classes out of the way as you begin to develop and figure out what direction you want to go. That’s not a horrible solution. So, build in a plan and a strategy that’s personalized for you.

Brian: Yeah. Begin with the end in mind. Don’t let some school sell you on something. Go ahead and figure out how you can hit the ground running. Because the reality is 5 years, 10 years out of school, once you get the opportunity, college is supposed to just open the door of opportunity for you. After that, it’s kind of just part of who you are. It’s part of your pedigree, but it doesn’t define you completely. And most people don’t ask you other than on Saturday what shirt you’re wearing for the football game.

Bo: That’s right. And it should be Georgia. So, we love that we get to sit here. We love that we get to answer these questions for you guys, but we also love that we get to speak to the things that you actually care about. It’s why every Tuesday at 10 a.m., we have our team out in the wings collecting your questions. So, if you have something you want us to weigh in on, make sure you get in the chat right now. So, with that, creative director Rebie, I’m going to throw it over to you.

FOO Steps 8 and 9 Simultaneously (12:40)

Rebie: Yes, I have some questions queued up. The first one is from Paximal. He says, “Congrats on 600K subs. Let’s go.” So, we just hit that this morning, which is super exciting. So, thank you for that. And then his question says, “Is it okay to do both step eight and nine of the FOO at the same time? I automatically contribute monthly to 529s, but also throw the remaining surplus at the house. What do you think of doing two steps at once?”

Bo: Paximal’s on to something here. Yeah, here’s my, I’m gonna tell you, you wrote the book on this, Brian. But I’m going to tell you the way that I think through the latter steps of the financial order of operations. Once you pass through step seven, once you get into hyper accumulation, once you’re saving 25% of your gross income for the future, for your future goals, and you know that you’re on track, you get to kind of pick and choose what you want to do with your money at that point. And for some people it’s hey I want to start saving for my kids college. And for some people it’s hey I want to buy that vacation home. I want to upgrade to that luxury car. I want to do that home renovation. And for others it’s hey I just want to be debt-free. I’d love to start knocking out low interest debt because that’s one of my goals. So I think that once you get to step seven what you quantify as an abundance goal because for some people an abundance goal may be prepaying low-interest debt. That’s okay. You get to pick and choose and you get to control your own destiny there.

Brian: Yeah. Paximal, I’m gonna go ahead and this is something I have so many people who come to us and say, “Hey, when I started out, I was following this mantra.” And I’m like, “Oh, you’re a debt crusader. You know, you’re trying to knock out the debt before everything else.” And they’re like, “Yeah.” And I was like, “But I usually have a question.” Now, I was saying this was 100% but I think we ran across a Making a Millionaire couple that actually broke my 100% rule which kind of made me sad a little bit because forever it wasn’t scientific but forever everybody I’d asked this question like no you’re right that’s exactly what I was doing. So I found out that there is somebody that’s an outlier because what I found out when I’ve talked to, I’ve gone to FinCons, podcast movements and when all these people who are in the personal finance community when I find out they paid off their house when they were 32 years old or so forth I always ask them the question. I say hey I know you paid off your super low interest mortgage because you hate money really early, way earlier than 45 years of age while you’re still in the make wealth phase but answer this for me: were you at least saving and investing 25% first? And up until we recorded that episode of Making a Millionaire the answer 100% of the time was yes. So these people were already loading up the Roth IRAs, they were already maximizing their employer 401(k)s and yes they got to step eight of the financial order of operations and they kind of looked at it and said you know what I want to be debt-free I’d love to have this mortgage paid. Knock yourself out. We’re a-okay with that because the reason we can say it’s okay is because you’re not skipping the make wealth phase. That’s what a lot of people because you hear the argument that well I want to de-risk my life. Well, I’m like there’s a bigger risk when you’re in your 20s and 30s. You’ll never be wealthy because you didn’t build up enough dollars working in the background. Because once that money goes into the house, yes, you might have extinguished that 3% mortgage or 4% mortgage, but what could that money have become? What’s the delta between what the interest rate on that mortgage was versus if you had this money out there compounding? Yes, I know your real estate is appreciating too, but it was going to appreciate whether you had a mortgage or not. It’s really what happens to that locked in equity. And that’s the part, look a lot of people are going to say like, “Oh, you’re one of those leverage guys.” No, if you knew my mindset, it’s more balanced. I think there’s a time and a place. There’s make wealth, there’s maintain wealth, and then there’s multiply wealth. I just want to make sure you get to the wealth phase and don’t skip it. That’s why I think 45 years of age, you know, you’ve done the 25%. All these things need to be accomplished so that you don’t get to my age now and go, “Yeah, that was probably a six figure mistake that I made by misprioritizing this.”

Rebie: Well, Paximal, great question. Thank you for being here. And it is your lucky day because it is a Tumbler day. So, if you would like a Tumbler, just email [email protected] and we’ll get one sent out to you.

20/3/8 Rule for Two Cars (20:08)

Rebie: Next question is from Cara W. It says, “Hi, Money Guys. My spouse and I will need to finance two cars at the same time. With 2/3/8, do we aim to have the combined monthly payments less than 8% of our income or two payments individually below 8%?”

Bo: Cara’s not going to like my answer.

Brian: No. Go ahead and tell her. Go ahead and break it in.

Bo: It’s actually 8% for both. For all car payments, all the auto payments you have to be less than 8% of your monthly gross income. So whether you have one payment, two payments, five payments, 10 payments, you cannot exceed 8%. So, some people really struggle with this. Like, guys, I can’t do that. To which we respond lovingly, perhaps you should not have two car notes at the same time. Maybe is there a way you could figure out instead of replacing cars on the same schedule? Is there some way we could stagger them every 3 to four years so that once I get this paid off, I’m able to then have another payment so that I don’t have them both at the same time.

Rebie: Why is that 8% number so important though? Can we talk about that?

Brian: Well, yeah. I mean, because think about it. Not only are you going to have a car payment and realize we want you paying cash for cars. That’s the first thing we have to get past. We want you to pay cash, but we have a no hypocrisy policy where I know in the beginning of my financial career, I had to have a car loan. I couldn’t pay cash. But I needed to have a job. So, to make it work, the bridge that got me there was something like a 2/3/8 because I had to go take a loan. And what this does, the 20% down makes sure you have a little skin in the game. The three-year amortization, meaning you’re going to pay it off within three years, is going to force you that you don’t go beyond what your wallet or your purse can actually afford. And then the 8% is now going to work within all the other elements of your financial life. Think about housing is 25%, your car loan is 8%. We’re trying to keep your total debt load below 35 to 40% at the maximum because what we want to do is make sure you can still save and invest for the future. You still have enough money to go bedazzle your basic life. If you go out there and you run up 50% for housing, 16% for your cars, and then whatever your student loans that you’ve been strapped with, you’re going to look at and go, “Holy cow, there is zero left over for me.” This is the component of discipline that we want you to structure your life so that you can actually live on less than you make so that you can go ahead and start creating that margin that given enough time creates the magical recipe of wealth.

Bo: You know this weird phenomenon that I’ve noticed recently that I didn’t know was a thing. Car shaming. You know what car shaming is? And I love this because financial mutants out there will so appreciate this. Sometimes financial mutants make the decision to drive a car because they could pay cash for it or it was more reasonably priced or it makes more sense for their family and their circumstance. And when you try to communicate this to the world around you, they look at you like you’re crazy. Oh, why do you drive that car? That’s insane. You should drive this. You should drive that. And I’ve had this conversation, no lie, at least five times in the last two weeks. I’m like, “No, no, why should I drive that car? Why should we be driving that? Why should we change? The car that we have makes perfect sense for where we are and what we’re doing.” So for my financial mutants out there, don’t let yourself be car shamed if you’re making fantastic financial decisions with your automobile because they can be napalm for your financial life. Don’t let the world try to tell you otherwise.

Rebie: Was that five different people that you had that conversation with?

Bo: No, we went to dinner. There were five couples. It was a birthday dinner the other night. Five couples. It was nine versus one. Nine versus one trying to suggest to me what automobile we ought to drive.

Brian: Well, that’s because your wife had primed the pump.

Bo: Oh, yeah. She was the ring leader of the nine.

Brian: If y’all didn’t know, Bo, you know, very functional minivan. Great. Super nice. Really nice. And I think that there is a lobbying source in the household who wants to get outside of minivans. Oh yeah, that’s what we always knew the minivan, I knew. I’m sure Rebie did too. This was a pawn piece in a big chess game. Oh, for sure. That has been played, but now a new piece is being played. But I still do agree. I wanted to know what car shaming was because I do think it’s one of those things where there’s a time or place. It’s back to cars depreciate. I mean, there’s something. And look, I’m now at the stage where we drive nice cars, but I look at it and go, these things are consumption and napalm for your financial life because they depreciate like a rock. They cost a fortune to maintain. So don’t buy something that’s reliable.

Bo: Opposite car shaming. Like if you’re driving too expensive of a car when it shouldn’t be. Yeah, that’s right. That’s the thing.

Brian: No, I’d rather somebody, I think in the beginning of your journey, the best thing you can do is be disciplined about the car you’re driving. I still have the, if you ask me all the cars I’ve driven in my life, which ones still give me the biggest warm fuzzies. Now, there’s an exception. The Jeep, the Cavalier. The Jeep has an exception. You know, when I had that because it was a season of life, that was more of a lifestyle of what I couldn’t do at 16. Now, I got to do as an older person. But that first car that I financed with the original 2/3/8, that Mazda 626 with five on the floor and then it had the oscillating, we’re also not sponsored by Mazda either. That oscillating vents, which I still don’t understand why more car manufacturers don’t put an oscillating vent. Think about every cool fan that you’ve ever had. Like the fan I have in my office right now, I have a button I can put and the thing just rotates around left and right and it blows you here and then blows and the car did that and I was like this is the coolest feature I’ve ever had on a car. So auto manufacturers hear that, bring back the oscillating vents. I love that Mazda. I thought it was the coolest car. I don’t know how we got on this tangent.

Bo: Did you give a Tumbler?

Rebie: I didn’t. Cara W, if you would like a Tumbler, just email [email protected] since we answered your question.

Emergency Fund Sizing (26:56)

Rebie: All right. Next personal finance question is from Derek S. How do you determine if a three-month or six-month emergency fund is necessary for an emergency fund? My wife and I both have stable jobs and our home hopefully has gone through most of the major repairs recently. So, how do they determine how much cash they need to have?

Bo: Yeah. So, this is one of those questions where personal finance is personal, but we can give you some benchmarks to think through. What we often say is if you’re someone, you mentioned, okay, you and your wife both have stable jobs. That’s great. That’s a solid indicator. The next question I ask is, okay, what does the income disparity look like? Is one of you a much higher earner than the other or are you relatively equally yoked in your earning? And when you look at the living expenses your household has, what are those living expenses relative to either one of the individual incomes, right? If the answer is, hey, we have a pretty modest lifestyle. We’re both fairly equally yoked. We have stable jobs. Then you may be one of those folks that a three-month emergency fund makes a lot of sense for. But if you’re someone who’s like, “Okay, well living expenses are a little bit higher. We have a lot of fixed costs because we have mortgage and we have auto loans, we’re paying on student loans and we have a couple kids and we have an income disparity or it might be harder for one of us to find a job than the other. Any of those that you answer in the affirmative would cause you to potentially expand your timeline out to that six month of living expense timeline.

Brian: Yeah, you laid it out nicely. I think that what I would always share is kind of where stage of life too is that I think somebody when you’re younger even in that messy middle phase like let’s just say a staff accountant. I mean that’s a great income, that’s a stable thing. If you had two staff accountants that married each other they both can probably be closer to three months because they check all those boxes you said. But if that staff accountant fast forward 10, 15 years and one of them now is the chief operations officer or the CFO of a mega corporation and they have a very large salary. They’re going to have to move probably to replace that income if all of a sudden they got laid off. So that’s why the specialization, and that’s why I see it all the time like in my neighborhood is that these are higher earning people. Sometimes their careers cause them because there’s just not as many opportunities. It’s going to take longer to get that job. So that’s why sometimes the higher your income, the more scarce your skill set is, you probably want to go closer to six, maybe even beyond. But for a couple that’s in the messy middles and y’all both, like you said, equally yoked and very close to your living expenses, the three months, you just had to go through the exercise. I actually detailed a lot of this also in Millionaire Mission. So you could go through the exercise of trying to figure out are you three months, are you six months? But I know Bo gave a very good summary right there.

Bo: And another thing, and people often forget to do this, but this is a great time to say this, as we’re coming up at the end of the third quarter, coming into the fourth quarter, sort of coming to the end of the year. One of our favorite things to do every single year is an annual net worth statement. We literally have a little celebration between the two of us and we do it and look at the numbers and it’s so exciting. I would encourage you to do the same thing. Well, one of the things that you do every year when you do your net worth statement is you should review how much cash you have on hand. And as you’re doing that, and as you’re putting your cash and equivalents in that box on your net worth statement, I want you to think through, man, are our living expenses still the same that they were when we established that was our emergency fund. Because if you used to spend $3,000 a month, but now your living has expanded now where you spend $5,000 a month, you want to make sure that your emergency fund represents that correctly. And far too often, people will have the emergency fund from a decade ago, not realizing it is not actually the emergency fund that they need in place today.

Brian: And then back to stage of life is that if you’re somebody who’s about to land the plane in the next three to five years, you’re going to see your cash reserves expand because just at retirement, you’re going to go beyond three to six months, too.

Rebie: Great. Well, Derek S, thank you for the question. Hopefully that helps you think through your emergency fund. And if you would like a Money Guy Tumbler, you can just email [email protected].

Second Home Purchase and Relocation (31:45)

Rebie: I’m being forced to relocate for work. Your guidance says to put 20% down on a house. Since this won’t be my first house, but my wealth multiplier is above $15. Why no nuance on the 20% down for the second home rule? And that’s true. So to recap, you like to say put 3 to 5% down on your first home, but then on your second home do 20% so you make sure you don’t get out of your skis, right? So how should Brandon think about this?

Bo: Yeah, I’d want to know a little bit more specifics. Most often when we tell people, hey, the goal is to put 20% down on your second home. It’s because normally people make the decision for a second home because they are increasing lifestyle. I had the home that I started in, but now maybe the family’s gotten larger or I want to have a larger yard or I want to have whatever that thing may be. So, it’s literally a lifestyle decision that I want to upgrade and change homes. Well, if you’re making a lifestyle decision, we want to make sure that you’re making it the appropriate place in your financial journey. And that place is where you say, “Okay, I had this house that I put 3 to 5% down. And I likely have been in there for 5 to seven years because that’s what I’m supposed to do when I buy a house. And over that 5 to seven-year time horizon, the price of the house has probably increased. I’ve also been able to pay down the mortgage so that the debt has decreased. I have a decent chunk of equity in this house.” Well, the way that I make the decision to upgrade is, okay, I know that I have that equity plus any cash or capital I’ve accumulated. I can put 20% down on the next house. So, it’s okay for me to be making this lifestyle decision. Yours is a little unique, Brandon. I’d want to know some more specifics about your situation. For example, when did you buy this current home? Like, what were the details around the purchase of the current home that you’re in? How long ago is that? Because if you bought this home last year, but now you’re having to move because of job change, there may be some extenuating circumstances that cause the mathematics to be a little bit different for you. But then the next question I would ask is, okay, this next home that you’re going to buy when you move, is it going to be a similar and comparable home to the one that you are leaving or when you buy the second home, are you upgrading? And I think that has to factor into the equation.

Brian: Here’s what I think. He didn’t say it, but I think Brandon is thinking this because he’s having to relocate and he already owns a house, but he’s getting moved. I think he’s thinking this is going to be his opportunity to become a real estate investor, meaning that he’ll go buy new house, leave his existing and start renting it out.

Bo: You don’t think he’s going to sell it?

Brian: I think that’s why he’s asking the question because the natural assumption is that you would sell your existing home and use the equity of that and anybody who’s owned a home for the last three or four years has probably got the 20% just because of what happened with inflation and everything else. So, this leads to me just putting on my inspector gadget hat is that he’s actually trying to keep the existing home but he doesn’t want to put down 20% when he moves into the new area. And that’s why I want to give Brandon the why because that’s what he’s asking for. If you look at the Fed data, meaning the data coming from the Federal Reserve on the typical American, and I don’t want my financial mutants to be typical Americans, all of their net worth increase is in their personal residence. When I see that like net worth of the typical American went up like 25, 30%. You’re like hot diggity dog. Finally, people are saving, investing. They’re watching the Money Guy show and nope, it’s all home equity. Their actual financial assets did absolutely nothing different. There’s a big risk sitting out there is that people don’t start saving and investing. But wait till you see in an upcoming episode what financial mutants do. No kidding. That’s a teaser. Keep going. So, Brandon, here’s why this is important to you. You just said your wealth multiplier is this. We want to make sure that you actually are doing what you’re supposed to. Now, you’re going to say, “Well, Brian, that’s why I’m asking if I can just put down 3% on the new house.” No. What you’re asking is, “Can I be a real estate investor?” Well, a real estate investor is step eight of the financial order of operations. So, I know, look, we’ve had Making a Millionaires, you can get lucky and become incredibly wealthy doing things. We had a military couple that they had some additional subsidies coming from the government that they built up a tremendous net worth very quickly by never selling a house. And that is a very popular thing. But I also think that you can’t sleep on the fact that you could take the $500,000 capital gain if you’re a married couple tax-free, use that with the new house. Also, use that to top off all the, put down 20% but take anything else to top off the financial order of operations. I’m not going to shy away from that because I like you building assets outside of just real estate equity because, and people are like, why? Because real estate’s done so well historically. Realize real estate is very illiquid and it also is very capital intensive when things go bad. So, I just want to make sure that you’re not faking it and get caught swimming naked when the tide goes out when real estate goes into the doldrums and you don’t actually have any true financial assets to give you depth to get you through whatever might be coming your way financially.

Bo: Yep. It’s so funny. I didn’t read that. I did not read that.

Brian: Why else would you if you already own a home? It’s his second, he wants to get—

Bo: Here’s what I think. I think his job changed and he’s moving out of this home before he wants to but he hasn’t been in there long enough to have built up 20% equity for the next one. He put 5% down and he’s being, his hand is kind of being forced because of this relocation but in his mind because he’s a rule follower and Brandon I appreciate rule followers, he’s saying this is my second home. It’s not my first home, it’s my second. I got to come up with, we might give it the asterisk. You know, it’s just like the government tries to give it, has all these first-time home buyer rules and you’re like, well, I owned a house and you’re like, you still might qualify as a first time home buyer as long as, there could be some crazy extenuating circumstances. Brandon, put in the comments who’s right, though. Because I still want to know, are you the woeful me? I bought this house 18 months ago and now I’m getting myself in a pickle of a situation. Or are you the potential real estate investor who’s like, man, do you see how much I could turn this into rental property out of state rental, which is less than ideal, by the way.

Brian: I’d be curious to know what Brandon says. When you’re putting in the comments who’s right, it’s spelled B O, not B AU. I just want to make sure you get that right.

Rebie: Well, Brandon, as you’re writing your comment and considering what Brian and Bo have said, you can email [email protected] to get a Tumbler.

DVC on Net Worth Statement (39:20)

Rebie: This next question is for Brian. I mean, Bo, you’re going to have something to say, too. You’ll see. This is a very Brian question. It’s from Eric 1. It says, “Can I count my DVC Disney Vacation Club ownership towards the assets in my net worth? It was paid for in cash.” Brian, you’re the resident expert on Disney. You’re also a net worth expert. What do you think?

Bo: Oh, man. How do you value a DVC ownership interest?

Brian: Look, I will say out of all the, I don’t love time shares as you can imagine. I mean, but the only one, unless it’s in the Riviera, which, man, they, man, oh man, did they screw up the Riviera because that’s such a beautiful property. If you’re a Disney person, you know what I’m talking about. But Disney Vacation Club is one of those unique things where it actually has done okay. I will tell you, I have probably done three Disney DVC tours and always thinking, you know what, I am probably the intention to be. Yeah, I have never pulled the trigger. I’m not a DVC member. Even with all the perks because it just the thing and that’s not, how would you say that? Arch, but I didn’t know that’s not to say that it’s not a good decision for your family. It’s just that I didn’t like the and it comes back to the root problem I have with all time shares is I don’t like that they own my future decision-making with all the maintenance costs and those things. It doesn’t matter even if the property or if there’s an appreciation potential with it. There’s an obligation sitting out there with what they can do with the maintenance costs, annual ongoing maintenance that just was a bridge too far for me. So that’s why I was never able to hold my nose and get to the point that I could do DVC even just because it couldn’t overcome that problem that all time shares have is that they promise you this great vacation at a minimal cost. But as we all know in the background what’s going on is those maintenance costs keep going up every year and getting restructured. The capital calls, all that type of stuff just makes it very expensive over the long term. And you don’t get to just opt out. It’s not one of those things where you cry uncle and say I’m out of this. Now you do have the potential where you can potentially sell DVC. But because of all the caveats and because of the control that the market has an outside influence of Disney because if you’ve ever priced buying DVC property, you have to catch Disney when they’re asleep. Meaning that when they’re in, you wait for the world’s worst time where Disney is struggling financially too where they let some sleepers through on the value where you could actually get, because they kind of control where the bottom is because they reserve the right to say hey if a deal is too good Disney can step in and buy it for itself. So that’s, I’ve given way too much.

Bo: Can I dive in while— Okay, I love all the Disney content. I’m trying to think through because the question was, hey, can I put it on my net worth statement? Well, the easy answer is no. Well, I’m thinking it’s more of a footnote for the obligation and I’m thinking through like other things, other use assets that I might spend money on that may or may not show up on my net worth statement. I said like a country club membership. Okay, I have a membership to a country club and technically I guess I can, some clubs I can sell that when I sell the house or whatever. Should that show up on statement? Is there a chance in the future that when I sell the house, the membership associated could go up in value? That’s what they tell you when people get convinced to buy these. Okay, there’s a chance, but does that mean it’s a net worth item? I don’t know. What about ATVs, four-wheelers, boats, other use assets that you have? Okay, can I put them on my net worth statement? Sure, I can list them there. What I would be very very careful of is I don’t want to put anything on my net worth statement where the future outcome is not a high probability thing for me. So like I can put my investment accounts on my net worth statement because in the future there’s a high probability they’re going to be worth more than they are today. I’ve got history that shows that. But if I paid X amount for a boat today and I’m going to use that boat and five years from now I’m going to sell the boat. Is there a chance I’m going to sell the boat for more than I paid for it? Is there a chance I’m going to pay more for this DVC property than I paid for it? So if I was going to list it at best, if I’m going to put it on there, I’ll put it on there at my cost and then I’m probably not going to increase it at any point in time. So that if it actually does turn into an appreciating asset at some point, the only time I’ll ever recognize the appreciation on that is when I’m actually able to successfully dispose of it. So in my mind I would not consider it an asset on a net worth statement in the same way that I’ll consider other assets. It’s a use property.

Brian: It’s a use property. So it’s probably more of a footnote so that your kids know what their obligation is if something happens to you.

Bo: Yeah, that makes sense.

Rebie: So Eric 1, I read it. Eric 1. I’m so mad at myself. But it was all one word. So I did the same thing. You saw me. I was trying to phonetically, I literally questioned it and then I was like I’m just going to read it and go with it. Have we heard from Brandon yet by the way?

Brian: We have not that I’ve seen. Come on, Brandon. What’s going on here? I want to know who’s right, Bo or me? Is it me being like oh humbug-ish and old man on the front porch or is it Bo like who was helping you out?

Rebie: Well, Eric 1, if you would like a Money Guy Tumbler, email [email protected]. Brandon has responded. Bo was right. I’ve been in the house for two years and I don’t have a lot of equity yet.

Bo: So, here’s that makes sense. That is a tricky bummer. Here’s what we don’t ever want are the Money Guy rules that we suggest as guard rails for you guys. We never want them to like harm you financially. So, like you’ve been in this house for two years, you put 3% down, houses probably have not in the last two years gone up a ton in value. And you just haven’t been able to pay on the debt a ton and now you’re having to move. Probably wasn’t something you were planning on, job changed, whatever. And you’re like, man, okay, I’m buying a second house. I got to do 20% now because that’s what the rule says. You’re missing the spirit of the rule in that. But I will tell you there is a learning lesson here for you to take away since I’m just going to throw this out there. You bought this original house and you thought I imagine you went through this thing. Hey, I’m going to be in this house for 5 to seven years at least and I can make the decision. And then that changed. Now you’re moving to a new area. I would want to, are you familiar with the area? Do you know the traffic patterns? You know the parts of town you want to be in? Do you know the school? Like all those sort of things. It is not uncommon and we see, we have clients that do this all the time and I think it’s a great idea if it works for your family. There’s nothing wrong with selling your current primary residence. Make sure you go ahead and like take care of that transaction. And when you get to that new community, man, can I rent for 6 months to a year just to kind of figure out where I want to be and to make sure that I love this job and I’m going to be here for the next 5 to seven years because what I want to do is there’s a really good chance that based on what you put down and what your closing costs were on that house, you may not have even broken even at this point on the transaction cost to acquire the first home. So, you want to be careful not just rinsing and repeating that if you’re not somewhere that you’re actually going to be able to be for the next 5 to seven years.

Brian: Well, I mean, I don’t mind giving the additional context that I think that you got to get out of the first transaction so that we can level set back to zero because I wouldn’t want you even if I gave you the asterisk and said, “Hey, since this was less than two years, you’re kind of in this unique situation.” You could go do 3 to 5% on the next because now you’re going to have two highly leveraged pieces of real estate outside of your control with a brand new job. This is a horror story right in itself. But if you can level set, get out of the old property, rent like Bo said, I do think that there’s probably some grace just in the fact that you never really got to live in the house. The rules are designed for you to live in that primary residence for 5 to seven years because guess what happens over that 5 to seven years? No matter how bad your timing is, typically the time is going to be the cushion that protects you to where equity’s building because of just inflation and you paying down principle, you kind of have gotten caught. And that’s why we do have that five to seven year rule in there. So, you can level set and then probably give yourself an asterisk to kind of once you get it back to zero, restart the process. But don’t restart the process if you can’t promise yourself that you’re going to be in this area for 5 to seven years. If there’s any chance they’re going to relocate you again then you’ve got to probably consider rent. It used to be corporations and others used to have these guaranteed or protection programs. I knew a lot of Caterpillar executives that they would buy your house or pay you, make you whole on any negative equity. The Great Recession ruined that for everybody because now these corporations realize, oh my gosh, we cannot risk that promise. There’s a big risk. Real estate doesn’t just only go up. So that game has changed completely. So, you now need to put more and more pressure on you, the potential homeowner, to make sure you go through our checklist. Go to moneyguy.com/resources. Make sure you can fully and confidently go through that checklist so that you don’t get caught in a situation getting moved way too soon.

Weaning Off Aggressive Savings (52:25)

Rebie: Next question is from Danche. It says, “Our army of dollars have been working hard for years, and we know we can stop saving and investing so much, but it’s hard to slow down. Any advice on starting to wean, on starting the weaning process? Any advice on that? How do they slow down? How do they know it’s time? How do they get used to that idea?

Bo: Well, first here’s the exercise. And there’s we in here. We and uses. Okay. Yeah. So, I’m going to assume there’s like a family unit here or a couple. Here’s the first thing I would do, and this is an exercise I would work through. I would take all the money out of the equation, like completely forget about money, and let’s assume that money was no object at all. You have all the money in the world to do everything in the world you want to do. What are some things you would do? Oh, okay. Well, we would travel or man, you know what? We’d redo the floors in the kitchen. Or, man, we’d really like to redo that backyard or we’d do that. And I want you to list out all the things that you would do if money were no object. And then I want you to go through and I want you to kind of just mark through the things that are unrealistic if money is an object. Meaning, oh, you know, we would travel the world for 365 days. Okay, maybe that doesn’t make sense based on current trajectory. I’m going to mark through that. But man, redoing the hardwoods in the house, we could and I would list those things and then what I do is I’d figure out what that list looks like and I’d have my list of eight to 10 things and be like, “Okay, is the way that I’m saving right now, this aggressive savings rate I have that I’m going to assume is much higher than 25% of your gross income, is it causing me to miss out on other things that I would like to be doing or that I would like to experience? And is the sacrifice that I’m making absolutely necessary or is there a world in which I can still save at the 25% or whatever the necessary savings rate is for me to hit my number and still be able to do the things today that I would like to do?” Because far too often and we see, I don’t want to call it a horror story that’s too aggressive but we see far too often Brian there are folks that defer defer defer defer defer defer and they get to 60 and they’ve got this huge pile of money, but then you look back like, man, I wish that I would have done that trip in my 30s. I wish that we would have done the family vacations. Man, I really wish that we would have done the backyard so I could have spent time there with kids while they were in the house. You don’t want to have those kind of regrets. And so you want to make sure that you’re not sacrificing all of today for tomorrow because the beautiful thing about compound interest and wealth building is you only have to sacrifice a little bit of today if you can do it early and do it for a long time period. It’s the folks who don’t do that that have to sacrifice a lot of today for a great big beautiful tomorrow.

Brian: Look, I’ll put it down like this is that the easy answer is I always tell people you have to take inventory of where you are. This is why we talk about the net worth tool. This is why we talk about Know Your Number. That resource that we have at learn.moneyguy.com of just going through the exercise because you’re trying to figure out are you ahead of the curve, behind the curve or right where you’re supposed to be. But also what comes into play is where are you at in this journey? Because what I don’t want to, look we’ve done the millionaire, we’ve done our financial mutant survey and we can’t wait because we’re actually recording that content later today and it’s fabulous. You guys are phenomenal. But what I struggle with is financial mutants. So many of you guys are in your 20s and 30s and you’re right there close to the starting line and you’re crushing it. Absolutely crushing it. But just because you haven’t been in the journey long enough, your army of dollar bills just haven’t reached that boiling point of having enough time to build traction or to reach the critical mass. So I always tell people it’s kind of a balance here. If you would lay out the wealth multiplier, look at all the multiples of for a 20-year-old, a 30-year-old, a 40-year-old, a 50-year-old, you’ll quickly start to realize that for 20s and 30s, it just hits differently than for somebody in their 40s or 50s. And where this played out in my life is I told my wife, look, if we could save and invest 25% of our gross income when we get in our 40s, we’ll be able to take our foot off the accelerator. And that’s a choice at that point. Do you actually do it? But you’re at the actual point. You can do it. And the question you then ask yourself is, are we maximizing all the memories and things so I don’t have regret when I’m in my 40s, 50s, and 60s and beyond? And I’m happy to report I have zero regrets. I mean, I’m actually in the situation now where money just doesn’t do as much. And that’s what I talk about when I think employees are worried, am I going to sell the business or anything? I’m like, what can money do? What can an extra dollar do for me today? It’s just not the same thing as what a dollar could do for me at 20s or 30s. So, I’m insulated from the money stuff. And I get to, it’s a fabulous place to where you get to make decisions because of what you want to create or do in life with your family, with your friends, with the Money Guy show, with our audience. That’s what I want you to be able to maximize that as well. Because I think, you know, I’ve had so many financial mutants that write me that they’re in their mid-40s and their family hates going on vacation with them because they’re doing it so cheaply. I don’t want you doing that, but I also don’t want you living your fabulous 32-year-old life just because you got a big promotion and you’re making now $150,000 to $200,000 a year, but yet if you looked at your investable assets, you haven’t even reached one time your annual salary yet. You’re too close to the starting line, you know. So, there’s a balance here that we’re trying to give you all the variables so that you can be the field general that navigates this well. But hopefully through those things because if you lay the wealth multiplier and then look at the timeline of happiness and satisfaction by age, you’ll quickly see that you have a journey there that you can fill in and put the personal in personal finance. But there’s a path and that’s what we’ve built with the financial order of operations. We’ve built it with all the experience shares that I put in Millionaire Mission because I think you’ll see that we have given you the guide that not only maximizes the math, but man oh man am I a sentimental millionaire where I’m trying to make sure you get to learn through what we’ve experienced by helping so many other millionaires with their journeys of there is a better way to do money and we’ve tried to climb the mountain and shout it out to as many people as possible.

Closing (1:00:34)

Rebie: Like Brian and Bo both said, we are so excited because we are very soon going to be recording the exciting content that we are doing based off of the survey that you so generously took part in. We broke our records from last year. We have so much great data and I’m really really excited. So first of all, be sure you’re subscribed to the channel so you’ll see when that episode comes out. And also, if you took part in the survey, we’ll be emailing you like a special note to let you know, hey, your data, like everything that you shared, all your voice, it was used to shape this episode. So, watch your inbox and subscribe to the channel and be excited because that episode’s going to be great.

Bo: Man, I felt like we had a good time today. I definitely had a good time. We have a lot of content to record even after this live stream ends, but we don’t, I think, you know, amazing day and crossed 600,000. I mean, we’re about to record the financial mutant survey and you guys showed up in force with so much so that we’re even going to include it in the title likely. I mean, as we’re brainstorming this as we speak. Thank you. Thank you. We don’t take this for granted. I mean, when people come and do studio tours and when we meet you out in public, hopefully you can tell from our expressions that this is, my heart just beams with happiness because this is so far beyond what we ever imagined. The educator in me is just so tickled that that Bo and I have created something and the rest of the content team. It’s truly magical and you guys are a big part of it. You are the heart of making that possible. So I thank you for that. So, please take advantage of all the free stuff. We’re trying to load you up on purpose. If you go to moneyguy.com/resources, we’ll love on you, give you tons of free stuff because we know if you do what we say and follow the lead of what we’re trying to do, just the success will create complication and that leads to the next part of our relationship. You get to take it to the next level, consider fulfilling the abundance cycle with continuing to work with us in the professional capacity where we get to now personally know you and turn the personal into personal finance. I’m your host Brian, Mr. Bo Hanson, Money Guy team out.