How To Actually Make Money Sports Betting

How You Can Actually Make Money Sports Betting (0:00)

Rebie: How you can actually make money sports betting. Yes, you heard us right. We’re going to break it down. Everything you need to know.

Bo: Oh, Rebie, I am so excited about this because there is something going on in this country right now that’s a problem. I alluded to it a little bit last week and I’ve thought about it over the last week. We even thought about it in show prep. And it’s a problem and it’s a bad problem and in my opinion, it’s only going to get worse and it’s only going to get more severe. And I think that the headlines of the future are going to specifically call this thing that we are in right now an epidemic that is robbing from our youth.

Rebie: There are a lot of headlines surrounding sports betting in the past couple of years. You’ve probably seen them too. We reacted to one last week in the live stream like Bo said. And why is that the case? It’s because in 2018 the United States Supreme Court overturned a federal law that prevented states from legalizing sports betting. So since then online markets have grown rapidly. 2018 in the grand scheme of things is not that long ago, and now we are kind of living with the consequences or the aftermath of that decision and we’re seeing it more widespread than ever.

Bo: Yeah. And if you look, some form of sports betting is now allowed in 39 states. 30 states currently allow online betting as well as retail sports gambling like at a casino or through a sports book. So since that ruling in 2018, it’s gotten bigger and bigger and bigger and bigger. And I think one of the most haunting things, one of the most devastating truths and realities, is listen to this. Americans now spend more on sports bets than movies, arts, museums, and music combined. All of those pastimes combined. Last week I was very surprised about this. Like, I’m used to hearing more people are doing it, but I was like more than going to see a movie or going to a museum or like any of these other actually fun, fulfilling things. That was really surprising to me. In the year 2025, Americans placed roughly $166 billion in bets on sporting events. In 2018, it was just $6.6 billion. So that’s a 25-time increase from 2018 until 2025.

Rebie: It’s not good. And so one of the questions, and we’re trying to be unbiased here, we’re trying to have a discerning mind in how we approach this. So when you see something increasing that much, when you see something going from a $6.6 billion market to a $166 billion market, you want to ask the questions: okay, is there something going on here? Do people actually make money on sports betting? Is this a way that people are able to generate wealth and add to their coffers? And not surprisingly, the numbers told the truth.

Bo: So let’s put it this way. If you bet on sports over an extended period of time and you just break even, just break even, then you are doing better than the vast majority of sports bettors. That is just the reality. So you might have clicked this video looking for ways to make money betting on sports. And we will show you the better approach. We are going to talk all about the better approach. We see that a lot of people are doing this. We’re going to talk more about that, why you’re doing it, all of these things. But we do want to be upfront about some of the math behind that. One of the first things is that in a study done from the University of California, San Diego, they found that 96% of sports gamblers lost money over a 5-year period. So that is only four in a hundred people who bet at all on sports. Only four of them made any money. It doesn’t say how much. Doesn’t say they won big, hit a jackpot, were making millions. It just says that after that 5-year period, they were net positive on sports betting. Because I have buddies and friends all the time tell me, “Oh yeah, you know, I’m actually pretty good at it. I know what I’m doing.” I’d be curious if I looked at your track record across all the dollars that you spent on sports betting. How does that play out? Statistically only 4% of those people will have been positive over that five-year period. And what’s even crazier is for every $100 that you place, the average expected loss in 2025 was $10.40. What if I were to say, “Hey, you should put money in your Roth IRA.” And when you put money into your Roth IRA, you put $100 in there from the onset, you need to just go ahead and plan on the fact that you’re going to lose $10 of that. Would you do it?

Rebie: I would not be doing that. No, of course not.

Bo: And yet, that’s what people do. They go into this thinking, “Oh, I’m going to make money or I’m going to beat the system or I’ve got this thing figured out.” And so the real question in my mind is not so much how do you make money sports betting. The real question I think everyone should answer before you even wade into those waters is: why are you doing it? Because this is going to be a little bit of a hot take and something that you may not expect to hear from the Money Guy. But we’re going to advocate that if you’re betting on sporting events or you’re doing sports betting because it’s something that’s fun, it’s something that you derive utility from, it’s something that makes watching sporting events more enjoyable or allows you to be more engaged, I’m going to call that okay. I’m going to say that is a hobby that’s an okay hobby to pursue, with a bunch of caveats. But if you’re going into it saying, “I’m going to sports bet, I’m going to go play, this is the way that I’m going to make money, this is the way that I’m going to build wealth,” then in reality you’ve already lost the plot. You’re already approaching it the wrong way. If you were to walk into a casino right now and say, “You know what? This is my ticket. I’m going to make money, this is going to pay for my trip, I’m going to walk out more wealthy because of it,” logging into FanDuel or logging into DraftKings and approaching it that same way, I think, is the exact same thing. So you’re going into it right away with the wrong presupposition. And if this is your wealth-building strategy, you’re likely doing it wrong.

How to Sports Bet the Financial Mutant Way (6:34)

Bo: So let’s assume for a moment that’s not the case. Let’s assume that you’re not someone trying to build wealth that way. If that’s the case, how should I approach it? How should I think about it?

Rebie: I’m going to echo something we’ve shared before and we’ve been really transparent: we have financial mutants in this building that do it with that first reason and that first why. It’s recreational. They love sports. They have a budget for it. Honestly, they do it the way we’re about to lay out. And I don’t fault them for it because they are financial mutants through and through. They are very good with their money. They know themselves. They know their personality. And it’s fine. I don’t fault them for it because like you said, it’s more of a hobby.

Bo: If I were sitting in your shoes though, I’d want to know the people, the financial mutants we’re alluding to, not hosts of this show. There are other folks that are, you know, out in the wings that perhaps are doing that. Not us, but they do it as a hobby. And that’s okay. I’m not going to fault you on your hobby. So if you are going to do it, if you’re going to think about sports betting, if you’re going to wade into those waters, how should you approach it? The first thing, and we’re hitting this home over and over and over again: sports betting is not a replacement for investing. These are not synonymous terms. One is a wealth-building strategy, a future financial independence strategy. The other absolutely is not.

Rebie: This next stat, I’m just looking at it, and this is kind of why we’re even doing the show today. Over half of Gen Z investors redirected money for investing towards sports betting just in the past year. That is kind of staggering. That’s what really makes me sad about this change and this rise of online sports betting, because this is not a replacement for investing. And if the younger generation is kind of falling into this trap, then they are setting themselves up for some disappointment, some failures, a harder path along the way.

Bo: Yeah. And it doesn’t say some people are doing it as a hobby. It says they’re actually redirecting funds that should be going into their Roth, that should be going into their 401k, that should be going into wealth building, and instead they’re sports betting. So if you’re a Gen Z, if you’re a young person out there doing that, you are doing it wrong. We don’t mind being that prescriptive because that’s not the way that you build wealth. Rather, we want to see you saving for the future. We want to see you saving 25% of your gross income. And we want it going into accounts like your employer-sponsored retirement plan, your 401ks, 403bs, 457s, your IRA, your ESPPs if you can participate in those, your taxable brokerage account, your health savings account. We want to see you putting money in those, not in the sports book. And if you’re deploying money that should be helping you follow the Financial Order of Operations and get through those first few steps and lay that groundwork, then that’s where you’re playing a dangerous game and we would advise you not to do that.

Bo: So the second thing: if you are going to do it, treat it like fun money. Don’t take it so seriously to where it has to win, has to work out, has to be the thing. Treat it like any other hobby. If you’re someone who likes to take the weekends and you like to go play four or five hours of golf and you want to spend $100 on a golf round or $200 on a golf round or whatever, that’s okay. That’s a hobby. If you’re someone who wants to go be an avid mountain biker and you’re going to spend money on buying the bike and doing the thing, fine. Treat sports betting like a hobby. As our buddy Charles would say, this is money that should be vacation money. This is not grocery money. If you start spending grocery money on this, again, you’re doing it the wrong way.

Rebie: The third thing, if you’re going to sports bet, avoid what we would call sucker bets and do your research. So here’s where we’re going to get into a little bit of nitty-gritty. You may be surprised, but there are some things that if this is your hobby, you should know. For example, stay away from parlays.

Bo: Parlays. Do you know where the word parlay comes from? No? I have no idea. Uh, it’s interesting. You hear a lot of sports bettors talk about this. We did the research: okay, if you’re going to be a sports bettor, what are the things that you ought to do? And parlays are this idea where multiple things have to happen in order for you to win. And so a lot of gamblers love them because if these seemingly not low probability but very low probability things happen, there’s a really big payoff. Which sounds cool. But sports betting companies love them because they often rarely happen. This is why experienced gamblers or experienced bettors would call this a sucker’s bet. One study found that once gambling was legalized, parlays, that specific type of a bet, accounted for just over 27% of the money that was wagered on sports betting. So about one in four bets were done on a parlay. However, 56% of the revenue, over half of the revenue from betting companies, came directly from these parlays. So again, if you’re trying to set yourself up for success, if you want to go with the higher probability, not high probability, but higher probability, don’t try to make a bunch of bets with very limited information. Rather, figure out how can I make fewer bets with much better information. Am I looking at the lines? Am I looking at injury reports? Am I looking at weather forecasts if that applies? And I’m going to try to get as informed as I can around the thing. Is this a team that I know about? Is this a team that I follow? Is this a sport that I know? Is this something I’m very familiar with? And I’m going to place much fewer bets on much more well-informed things rather than these random happenstance things that might have a big payoff. Now remember, that does not mean that you’re going to win. It does not mean that you’re going to come out ahead. 96 out of a 100 folks over a 5-year period have less money from sports betting than they did when they started. So the odds are already stacked against you. But if you’re going to do it and you’re going to pursue it as a hobby, you might as well try to do it in the most financial mutant way that you can.

Rebie: Yeah. So those are real things like avoid parlays, increase your odds, be informed, all of these things. Those are actual strategies to help you. But keep in mind at the end of the day, you’re still the underdog. Even if you do everything right, you’re still going to be losing money probably in the long run. Just statistically speaking, remember only four of a hundred people are actually making money when you actually study this. So please do remember that. Last but not least, this is where if Brian were here, he would say know thyself probably. The last point is to be mindful of the psychological effects of sports gambling. I think this is something that gets a lot of headlines. This is where a lot of the conversation focuses on because if there’s any part of you or anything that you’re seeing in your personality that tips into addiction, that’s a real thing that people can struggle with. You do need to pay close attention to that because if that’s you, then this is not your hobby. It’s kind of similar to how we talk about credit cards: credit card use is fine, there are some really big benefits to them. But if you carry credit card debt, no way. Never carry credit card debt. And if you’re really struggling with that, then maybe credit cards aren’t for you in this season. And I think it’s the same thing: even if you like the idea of sports betting but you’re seeing yourself continuing to lose money or step outside of the Financial Order of Operations framework or seeing yourself fall into the psychologically problematic side of this, then maybe this is not for you. And so you really do need to know yourself and not be sucked in if that’s you. Like that is so okay. And I just want to be that voice that says that.

Bo: And I think before you go into it, you have to set boundaries because most of the time with addiction, it’s something that happens very gradually until it’s not gradual anymore. It’s no different than if you were someone who likes having a drink or likes having a cocktail. There’s not anything inherently wrong with doing that. But all of a sudden when one drink turns into three drinks and when one night a week turns into every night of the week, you have to be mindful that this is getting into a dangerous territory. This is getting into somewhere that’s unhealthy. This is now impacting other areas of my life. And sports betting is no different. So if you’re going to do it and you are going to pick it up as a hobby, you ought to set some very realistic parameters and boundaries about it. Hey, I’m only going to bet on football games. I’m only going to bet a max of $100. And you put these rules in place and don’t deviate from those rules. And the first time that you deviate from those rules, well, no, this is a big one and my boys got this one, I’m going to bet $250 on it. You ought to check yourself and say, uh oh, is this getting to the place to where it’s moving into that unhealthy realm? Am I allowing myself to slide down that slippery slope? And I think for far too many people, the statistics would say 52% of Gen Zers, they are starting on that slippery slope. Whereas if you’re someone who’s been investing and you’ve been saving and you’re putting money in your employer plan and you’re funding your Roth IRA and you’re funding your HSA and you’re doing all of those things, and then you want to say, “Okay, I’m going to try sports betting,” not try it, I just want to participate, and it’s going to be: I love the Georgia Bulldogs, I want to bet on my boys to win, and that’s going to be an okay thing to do so long as it doesn’t tip into that dangerous place. And when it tips into that dangerous place, you have to be mindful. One of the things I would encourage you if you are going to do this: I love it that our financial mutants here, there’s a group of them, they’re all buddies, they all hang out, they talk about it, they have conversations around it, oh I bet 14 cents on this, this, and that. That’s okay. If you can have some accountability in there and you can have someone who’s keeping you true to yourself, I think that’s going to be a benefit because I think now that it’s so easy and it’s so prevalent and it’s so rampant, 5 to 10 years from now we’re going to see headlines of Gen Zers, Gen Alphas, even millennials, perhaps Gen Xers, that holy cow, I wasted five years, eight years, 10 years of my life doing this thing and I didn’t even know I was doing it. Don’t let that be you. Don’t let yourself fall into that statistic. If you are going to do it, have guardrails, have boundaries, and make sure that when you’re making your financial decisions, you’re not making them in a vacuum. If you’re not following the Financial Order of Operations, you’re likely getting your financial life out of whack. If you want your free copy, you can go to moneyguy.com/resources to understand the nine steps of what you should do with your dollars. A lot of people are asking in the chat where does this fall in the Financial Order of Operations. Let me tell you where it’s not. It’s not in step one. If you don’t have your deductibles covered, don’t be sports betting. It’s not in step two. We just showed you that only four out of a hundred people over a five-year period ended up in a better position from sports betting than their peers. Do you know, Rebie, this is a statistics question for people that are going out and getting their employer match: what percentage of people have more money after getting an employer match than don’t? While you’re thinking about that, it’s a trick question. It’s 100%. If you go get your employer match, you are 100% in a better position than had you not. So it ain’t in step two. If you’ve got a bunch of high interest debt, you’ve got credit cards, you’ve got high car loans, you’ve got consumer debt, you’ve got that kind of stuff, it’s not there. If you don’t have your emergency fund fully funded, it’s not there either. And I’m going to argue: if you’re putting more money into sports betting, into gambling, into speculation, into this risky stuff than you are into your financial independence portfolio, you’re doing it wrong. So if you’re not saving $100 a month, do not be betting $100 a month. If you’re not saving $1,000 bucks a month, do not be betting $1,000 a month. And if you can get yourself in that place, you’re likely going to set yourself up for much better financial success.

Rebie: The Financial Order of Operations is the wealth-building framework. This is where your money should be going first, and then it’s extra hobby money being deployed to hobbies. Like if it happens to be DraftKings, okay, there’s going to be a portion that goes towards that, but it shouldn’t be holding you back from getting the Financial Order of Operations on solid ground.

Bo: And I alluded to this last week, and I know we got to answer questions, and we’re going to. But it just bothers me so much. I was at the lake this weekend with another family. It was an awesome time. And we’re just talking. I was like, it’s such a travesty that someone starts out with this like noble idea that hey, there’s this app that advertises and it’s for young people. Great, I’m going to download it and I can start investing and it’s all this. And I log in. I can see my Roth IRA and my taxable brokerage account, maybe my 401k. And then right there on the margin on the other side: hey, place a sports bet, or hey, look at a prediction market. And I just think that is so so so dangerous that we’re allowing it to just creep in right there. That’s a huge disappointment.

Rebie: It really really bothers me. It really really worries me. And I hope that we can get in front of this so that we don’t have an entire generation of young folks that are like, “Man, I blew it.” Yeah, I would love to hear more from you guys either in the chat here, in the comments, in the Moneyverse Discord server, just what your peers are doing, what you guys have seen happening with sports betting and whether or not this is showing up in your life practically. We want to hear that because there’s a lot obviously we shared today. There’s a lot of data and we are pretty passionate about it. We just don’t want the next generation to fall prey to the wrong ideas and lose out on building wealth. But with that, let us know what you think. For now, we are going to dive into your questions. Are you ready?

Bo: I love that we get to sit here every Tuesday at 10 a.m. and load you guys up. We get to answer the questions that you have and you care about. So if you have a question, make sure you get it in the chat right now so we can do that. One of the questions I see keep coming through is, “Oh, Bo was at the lake. I wonder if he was swimming.” Yeah, I was. I was swimming all over the lake, guys. I was treading water. I don’t know if you know this, I can tread water for a really long time. I’m a really good swimmer. And it was a great time. I’d encourage you if you’re not out there in the Moneyverse, if you’re not out there on socials, you should be because we got a lot of fun, interesting, cool stuff coming your way. But the only way you’re going to know about it is if you are subscribed, if you’re in the Moneyverse, if you follow us on socials. But yeah, I was wake surfing. My wife got up first time she’s ever gotten up. She rode the wave for a while. It was it was awesome.

Rebie: That’s fun. Super fun. I love it.

Q&A: Should I Put My Emergency Fund in a Bond ETF? (22:39)

Rebie: All right, we’re going to start off with a question from Comcat 9032. “Is it okay to put your emergency fund in a cash equivalent bond ETF like ESG? It feels like a waste to have it sitting in a savings account even if it’s a high yield savings account. I live in a state that doesn’t tax it. What would you say to Comcat?”

Bo: So we get this question all the time. Hey, I know I’ve got to have cash, I know I’ve got to have conservative investments, but man, I just don’t want to hold cash. What if I did something just a little bit more? Well, for those of you who don’t know, bonds: let’s conceptually, what is a bond? A bond is where you let some entity borrow money. I’m either going to let the federal government borrow money or I’m going to let a corporation borrow money, I’m going to let a municipality borrow money. And this is the way it works. I’m going to let you borrow $10,000 from me. In exchange for that, you’re going to pay me some stated rate of interest on some sort of cycle, most often times twice a year, and then at the end of maturity, I’m going to get back my $10,000. Conceptually, that’s the way that bonds work. Well, one of the problems is that between the time that you buy the bond and the time that the bond matures, the actual value of that bond will change. And most often, depending on the type of the bond, it changes with interest rates. And the way it works is when interest rates go, it’s like a seesaw. When interest rates go up, the value of bonds that you have go down. When interest rates go down, the value of bonds that you hold go up. Well, the problem is if you’re holding bonds or you’re holding cash because you want it there when the you-know-what hits the fan, you want to make sure that it’s there when you need it the most. The problem is if you start getting really cute with your emergency fund, you start investing in things that have the ability or potential or propensity to lose value, you’re kind of losing the plot. So I am not a fan, I’m not a proponent for holding bonds inside of my emergency fund or holding anything that can lose principal. What I want to hold is cash and cash equivalents. Meaning I know that money is going to be there for me whether interest rates go up, interest rates go down, whether we’re in a bull market, bare market, whether we go into recession, no matter what. When the worst of the worst happens, and oftentimes these bad things happen all at once, it’s not like they happen in isolation, I want to know that my emergency fund is there. Because the last thing that I want to have happen is, oh man, something went really squirrelly with the economy, market tanks, interest rates shoot up, value of bonds goes down, and all of a sudden that cash that I needed because I was holding it there trying to get some extra yield, trying to get some extra growth, has now lost value. And the cash I needed the most, I now have to sell at a depressed value. I don’t think that’s the place that you want to be. And in reality, the juice just isn’t worth the squeeze. I know right now that like high yield savings accounts or even money market mutual funds are paying like three and a half percent. That’s pretty decent on like safe money. Am I trying to go out there and put my money at risk to go from three and a half to maybe four? Is that really worth it? I would argue not so much. Get to step four, build up your emergency fund, let it sit there, and let all the other money you have working for you grow. I personally do not get cute with my emergency cash.

Rebie: Yeah, well said. I think this is such a classic financial mutant question because you’re thinking about money differently in a good way, but it is one place it’s easy to get tripped up. And I think everybody working on the show gets it. Like everybody wants to have that good return, and we get why cash can feel kind of unsexy sometimes, but it’s actually one of the most important pieces to your financial plan. So well said, Bo, and thank you to Comcat 9032 for the question. If you would like a Money Guy tumbler, just email winner at moneyguy.com. I see some people asking about Brian being here.

Bo: Have we put it anywhere that he was out traveling? Not yet. Just on the newsletter email newsletter. So if you’re not on our newsletter, you should be because there were some crazy pictures, some awesome stuff. There was a picture of a bald eagle holding a Money Guy. That was hilarious. Oh, there it is. There it is. And we had a tumbler in the wild picture. So if you’re not on our email list, make sure you are. But Brian is actually traveling home today. He was trying to get it where he could be home for the live stream. He’ll be home later today. He’s back in the saddle. We have missed him. It’s not the same without him. It’s not the same without him. But rest assured, he’s not gone anywhere. He’s just been out traveling, seeing the world, living his life. Yeah. Getting held by bald eagles.

Rebie: Living that step nine life. He’s a success story. We love it. We love to see it.

Q&A: Is It Okay to Be Miserly for 3 Years Before Having a Baby? (27:40)

Rebie: All right. Jay Till Swag says, “Is it okay to be miserly for 3 years prior to having a baby? We are trying to hit 35% savings rate prior to a baby and hopefully three years, because we know our savings rate will be sub 20% afterwards.”

Bo: It depends. This is an interesting question. Is it okay? Hot take. And Brian’s not here to fight me on this. Yeah. Is it okay to be miserly in seasons? Sure. But you also want to think through: okay, what am I sacrificing? What am I giving up? What decisions am I making that are going to have downstream consequences? I’ll give you a great example. When I was a younger single man, I didn’t like buying groceries. I didn’t want to spend a ton of money. It wasn’t something I got a lot of utility out of. And Publix, if you’ve been with us for any point of time, you know this story. Publix would have buy one get one cereals. And so what I would do is to save money, I’d go get 14 boxes of cereal on Sunday. Buy one get one, so I’d pay for seven, I’d have 14 total. And I just eat that every meal. I’d eat it for breakfast, I’d eat it for lunch, and I’d eat it for dinner. And that was a great way to save money. I did not spend a ton. But look, cereal is not super healthy food. No offense out there to the cereal companies that are huge fans, but it’s not like high quality food.

Rebie: It’s not whole food. It’s not rich in protein. Like, let me put it this way: we did a social video of you with some cereal and somebody said, “I can’t believe Bo got so jacked by eating cereal.” And I’m like, you didn’t.

Bo: He didn’t. He didn’t. If you just to be frank, like there could be a downstream consequence. Like that was not a healthy way to live. That was not a healthy decision that I was making. But for that season, allow me to max out my Roth IRA and save. And so that’s okay. So if you’re planning for a baby, which is amazing, congratulations, you want to do that, and you and your spouse are on the same page: hey, we’re willing to sacrifice, we’re willing to not travel, we’re willing to not do this or that so that we can enter into this season and phase of life feeling more comfortable. That’s totally okay. And by the way, it’s totally okay also if your savings rate drops after you have a kid. We call that the messy middle. It’s a reality for a lot of folks. So long as you keep doing something, you keep that ball moving forward on your financial life. Yeah, I think it’s okay. But what’s great about being miserly is there are still amazing ways that you can bedazzle your basic life. Because what I don’t want you to do, I don’t know how old you are, let’s say that you’re 24 to 27 in this next three years. You’re only going to be 24 to 27 one time ever in your whole entire life. And I don’t necessarily want you to miss out on those things. So are there ways you can still do things that you love and still create memories and still enjoy that season even if you’re being miserly? You know, when we were there and I was doing cereal, my girlfriend at the time who became my fiance and is now my wife, when she would come, I’d take her out for a nice Olive Garden dinner. I saved all that money on that cereal so that we could go to Olive Garden. That was our date night and it was great and that was okay. So find ways where you can do that. Find ways where you can still bedazzle your basic life and not totally sacrifice, because you don’t want to look back and have regrets. You don’t want to look back and say, “Man, I wish I had not given up that thing just for some future thing because none of us are guaranteed tomorrow.” So it’s a balance between how do I enjoy the present and have the things that I want now while also saving for and building for the future.

Rebie: Well, and the word miserly is an interesting one. Because I’m wondering if miserly has a negative connotation to it. I think to me it means you are sacrificing something important potentially. Maybe you and your spouse aren’t actually aligned and one of you feels like you are missing out on valuable time just the two of you. Things like that. I think you have to be really aligned with your spouse on that and I think you have to be really clear on what matters because I think being frugal or cutting way back or going through seasons or kind of challenging yourself to spend less, that is all a natural and very positive and very common part of the financial journey for everybody who follows the FOO when you’re trying to hit a goal. But I think being frugal or challenging yourself to a season of low spending, I think those are two different things than being miserly. That’s what I would maybe argue here. Like I would make sure you’re reframing that and are truly on the same page and are truly still focusing on what matters, not just a hypothetical savings rate and a hypothetical timeline. Because it is true too that like you’re giving us all these timelines and you just don’t really know how things will change over three years or how things will turn up. So I just, I think everything Rebie said was right on, but that word difference I felt like was worth noting. That was my thought even just from my own personal experience. But great question.

Bo: I did not know how many comments the Olive Garden comment was going to get. Yes, unlimited salad and breadsticks used to be the jam.

Rebie: Honestly, that’s true. I remember that as well. It was the jam at one time for sure. All right, Jay Till Swag. One thing we can do that will be free to you is send you a tumbler. Look at that. That’s how you bedazzle. You show up for the live stream, you get free stuff. You can just email winner at moneyguy.com if you’d like to cash in on that.

Q&A: When Are Roth Conversions Right for You? (33:25)

Rebie: One thing I do need to say is we will be doing rapid fire today even though Brian’s not here. So if you want to be part of the rapid fire segment for Mr. Bo Hansen, just put your questions in the live stream chat right now if you’re watching live, and make sure you put RF at the beginning so we know it’s for the rapid fire segment. So get on that. The team will be in the wings gathering that up for that segment soon. But in the meantime, Gruberty23 has a question. It says, “Hi, Money Guy team. When do you know if Roth conversions are right for you? My goal is to retire in the next 10 years by age 45. Concerned about getting bridge accounts high enough to make it to 59 and a half.”

Bo: So man, okay. When do you know if Roth conversions are right for you? One of the questions I’d want to know is: if you’re going to have to count on your Roth, one of the strategies for being able to retire early is doing these Roth conversion ladders where I convert, got to make sure the Roth dollars there for at least five years, but I create this cycle where I convert to begin building basis in my Roth, and then when I get there, I can pull the basis out, the money that I’ve put in or the money that I’ve converted, tax-free, penalty-free. I can’t access the earnings yet, but I can do that. Well, one of the questions I want to know is: if you’re going to retire at 45 and you’ve got to bridge the gap from 45 to 59 and a half, not knowing what your living expenses are, how much money will you have in a bridge account in your Roth? Because if you’re saying the bridge account isn’t going to be enough to get me there, I’m going to have to start doing these Roth conversions. By the way, when you convert to Roth, you’re going to start burning the bridge account a little bit to pay the taxes unless you can cash flow it. So I’m going to be Roth converting, burning my bridge account down. I’m going to deplete my bridge account and then I’m going to start depleting the Roth. Well, then once you get to 59 and a half, my question is: well, how big is your pre-tax account and how big is your Roth account? Because just because you have enough to get you from 45 to 59 and a half does not suggest and substantiate that you have enough to get you from 59 and a half all the way till the end of life. Are you going to be able to actually be at true financial independence? This was a problem we saw with Danielle on Making a Millionaire. She had this idea that she was going to Coast FIRE and, all right, I want to get to this number, and if I get to this number here, it’s going to get me to here, then I’ll be good. And her math was right in that scenario. But she did not have a big enough pot to last her from the final checkpoint for her all the way to the end of her life. She had not saved enough. She had not done the math correctly in our opinion. So I’d want to know, do you actually have a big enough pot that’s going to allow you to retire at 45? Most of the folks that we see, and this is not gospel, this isn’t set in stone, but most of the folks that we see are able to use that taxable account to build a bridge. Very few folks that we interact with in real life only have the ability to do the Roth conversion ladder to live off the assets from 45 to 59 and a half. So I would go revisit my assumptions, retest my strategy, and see: is this really going to last from 45 when I retire all the way out to 85 or 95, whenever I want to assume my life expectancy is? We did a show, me and you did a show last week about hey, what happens if the 30-year retirement actually turns into a 40-year, actually turns into a 50-year? So how do you know if Roth conversions are right for you? You look at your tax rate. You figure out: is the cost of converting not going to be cumbersome to my ability to build wealth? But I don’t even think it’s a question of is Roth converting right for me. I don’t think that’s the first question. I think the first question is: is retiring early right for me? Am I in the situation? Is my income high enough? Is my savings rate high enough? Is my pot big enough that I actually can retire early? Do I have enough juice in my system to get me from 45 all the way to 59 and a half?

Rebie: Yeah. One thing you could play with is our Know Your Number calculator over at moneyguy.com/resources. Granted, this is a kind of back-of-the-napkin math tool, but it’ll give you a good starting point, a good idea of how close you can get to some of these goals, how some of the variables will change your outcome. And then honestly, what Bo was just describing was a lot more complex, a lot more personal, a lot more advanced than I think we can fully dig into on the show because it’s so customized. And that’s exactly what they do for clients every day at Abound Wealth. So if that sounds like you, if you have enough of these problems and a big enough nest egg to where these decisions matter a lot, that’s exactly what we specialize in, and we are there if you ever want to start the conversation or just explore it. Go to moneyguy.com and click on the become-a-client button.

Q&A: What Are Your Favorite Ways to Bedazzle Your Basic Life at Step Nine? (38:43)

Rebie: All right, we’re going to do another question and then probably start digging into rapid fire if the team is ready. But let’s go to Jesse’s question. “For someone in step nine of the FOO and on track for retirement, what are your favorite ways to bedazzle your basic life? We recently hired a house cleaner. Love it. Any other suggestions?”

Bo: Oh, that’s one of my favorites. Any other suggestions? I’m going to throw this out there. If you’re on step nine, there’s a chance you may not have to bedazzle basic anymore. Like if you’re doing those things, when I was bedazzling my basic life, it was kind of early on when I was trying to get to the savings rate that made sense for me. But then once we were able to get there and kind of build up a foundation and build up a base and move into sort of a different place, it wasn’t so much about bedazzling our basic life. It was like, hey, is it okay for us to allow our lifestyle to improve and increase? Because all the time, lifestyle creep gets such a bad rap. In reality, most of us want lifestyle creep. Most of us want our 40s to look better than our 30s and our 30s to look better than our 20s and so on and so forth. And so there’s nothing wrong with your standard of living increasing through time. So there are things that make a ton of sense that when you get to that point, you can start increasing your lifestyle, and that’s okay. And I’d argue that doesn’t have to be the bedazzle. Now, you can still bedazzle. There are some things that no matter how wealthy you are or how successful you get, in my opinion there are always those things that are going to just stick in your craw. Like here’s mine. I don’t buy drinks at a restaurant. Cocktails is fine, right? But like a sweet tea or a Pepsi or a Coke or like whatever, I don’t buy that at a restaurant. I can’t get over the fact, Mr. Bo Hansen, $2.35 for that. One, it’s bad for you, but two, I just. And so my kids are like, “Dad, can we get a drink?” I’m like, “No, you can’t get a drink. We drink water. It’s what we do. It’s what a Hansen does.” And so I just don’t think I’ll ever get past that. And that’s okay. Hey, it’s okay to hold on to those kinds of things. But there are things that I have let go of. Hiring a house cleaner is a great one. My wife and I made the decision a number of years ago for her to stay home and for me to do this. And for me, if you were to compare the two of us, I’m the one who’s probably a little bit more, you know, things being orderly and neat matter a little bit more to me. That’s just kind of like my nature. And so we got to this point where like I would come home and I’d be like, “Babe,” and she’d be like, “Babe,” and I’d be like, “Babe,” and she’d be like, “I got all these kids I’m doing.” And I was like, all right, I get it. And so I’d love for that to be put in order, like I don’t want us to spend our time on the weekends doing that kind of stuff like scrubbing toilets. That just wasn’t something that we wanted to do when we were in the financial situation we could. So we outsourced that. It removed a lot of friction from our marriage. Me being upset at something not being the way that I wanted and her being like, “Are you kidding me? I’m literally moming all day long. That’s my number one thing. And these kids are wild.” Lawn maintenance. Like I didn’t, when I was a little kid I wasn’t like allergic to stuff. That wasn’t a thing. I just ran around barefoot. But now if I go start trimming my hedges I break out in hives and I can’t breathe and I start coughing. I have someone else do my lawn and that kind of stuff. I think those are great things to outsource. Especially if you’re like, “Hey, if I’m working all week and I want to be home on weekends, I want to be able to play and I want to be able to swim, I want to be able to do soccer, I don’t want to spend three hours cutting the grass and edging.” Now some people love that. And if you love it and it’s your passion, don’t outsource the things that you love. But if there are things you don’t love and you have the ability to outsource them and it allows you to open up to do something else, that’s great. I got a buddy, man, he’s super successful here in town, really close friend of mine, changes his oil every time. And one time he was doing it and a big wind gust started blowing and he just dumped oil all over his beautiful driveway. And I was like, “See, that’s why I don’t do it.” He’s like, “Ah, it’ll be fine, I’ll clean it up.” And I’m like, I’m just not going to do that. But for him, he gets utility out of it. Doesn’t outsource it. He does it. For me, I would rather not do those kinds of things. So you have to ask yourself, what are the things that you value? What are the things that it makes sense for you to spend money on? And as Ramit would say, spend lavishly on those things, but don’t waste your money on the things that don’t matter. Don’t think just because someone else does something, it means that you need to do that something. Just because some other family goes to Disney, if Disney’s not your thing, don’t feel like you have to go to Disney. You go do something else somewhere else. That’s totally okay. Figure out what it is that you want to do with your money and use it to do those things, because money is nothing more than a tool that allows us to accomplish our goals, not that allows us to accomplish other people’s goals.

Rebie: Bedazzling your basic life. This isn’t so much a bone to pick with you and Brian because you’re right. I just, it’s not actually that hot of a take. Maybe it is. I don’t know. I think sometimes I like that you talked about outsourcing right there, because sometimes we talk about bedazzle your basic life and we automatically start to talk about travel and vacation and trips. And that’s totally valid because that’s something that a lot of people want to do and really value. I’m kind of like I love doing stuff here. Like that’s how I bedazzle my basic life. Like things, it’s about to be fall, we love taking our kids to like the pumpkin patch and buying the stupid overpriced pumpkin, letting them pick one out. Absolutely. Like stuff, things like that that are truly bedazzling but are like way less expensive than a trip to Disney, that are just as like memorable and wonderful. And so like if there are little traditions you can do like that, or like you said things that are going to lower friction in your household, I love that kind of bedazzling your basic life. So I just wanted to throw that out there.

Bo: You make such a great point. There are some people who they love travel and they love experiencing the world, and we do too. Don’t mishear me there. But my wife and I talked a long time like, man, we spend every single day in our home. Like, we spend every single day. I want our home to be nice. Like, I want us to have things and conveniences and dads at the house that we love. And so, rather than like going on nine trips a year and all that kind of thing, hey, we’re going to do this thing to the house and we’re going to have this improvement, we’re going to do this. Again, it’s knowing what matters to you and using your financial success as a mechanism to move towards that thing. Whatever it is, if that’s not your jam, by all means, don’t do that.

Rebie: I may be a little biased just because of my own things that I like. My kids are really little, so traveling isn’t as easy, right? No, it’s parenting in a different location with different obstacles, which can be fun. I’m not trying to knock it. But yeah. Like I like that you can buy the expensive pumpkin or like if my husband says you want a coffee, I can just say yes. And that’s bedazzling my basic life to me in this season.

Bo: So I just, I don’t know. I thought about that last week. I was like, we always talk about travel. I’m throwing that out there sometime.

Rebie: Yeah, that is a great point. All right, with that, first of all, that was Jesse’s question. Thank you for the question. And if you would like a Money Guy tumbler, just email winner at moneyguy.com to cash in on your tumbler. Jesse, we appreciate you being here. And without further ado, we’re going to dive into our rapid fire segment.

It Does Not Depend Rapid Fire Segment (46:18)

Rebie: This is our “It Does Not Depend” rapid fire segment where Bo has a luxurious 30 seconds to answer your personal finance questions, but he cannot say the phrase “it depends.” Now, since he has a little extra time since he’s not sharing with Brian, I expect there to be very good answers here. No follow-ups afterwards.

Bo: I’ll do my best.

Rebie: All right, let’s see what we can do. We’ll put 30 seconds on the clock. Are you ready?

Bo: I’m ready.

Rebie: First question: “Hey, Money Guy team. I recently got a new job and my old 401k was converted to a traditional IRA. Only about $5k in there after the fees, but I have a Roth IRA with about $10k. Should I transfer to Roth?”

Bo: If you transfer to Roth, it’ll be taxable. That $5,000 will count as ordinary income. So look at your tax rate and say, “Hey, do I want to pay even if I’m in a 12% bracket, do I want to pay 12% of that $5,000 to convert it to Roth? Or would I rather just leave it in the traditional, let it continue to grow tax deferred, and build my Roth assets elsewhere? Maybe I’m doing Roth 401k contributions. Maybe I’m doing Roth IRA contributions.” Just because you can convert doesn’t mean that you should or have to convert.

Rebie: Okay, that was good. That took up the whole 30 seconds. A little more complex. Next question: “I’m on step six, but really like the idea of paying off my mortgage early. How foolish is it to put 10% of my income into a 10-year portfolio, which I will then use to pay off the house?”

Bo: I love that idea. What you just said is, rather than paying the house off directly, I recognize there’s probably an arbitrage. What I can go out and make in the market is likely higher than what I’m going to save in interest on my mortgage, especially if I’m one of those people that has a sub-4% mortgage. So rather than pay it off quickly, I’m going to invest those dollars, I’m going to dollar cost average what I would be prepaying, and I’ll let those dollars grow and grow and grow and grow. What’s likely going to happen is that you will have more in that after-tax account than your mortgage balance sooner than if you were to pay the mortgage directly. You know what’s better than me being debt-free?

Rebie: We’ll never know.

Bo: I set that question up perfectly. It’s the ability to be debt-free. I’ll finish it.

Rebie: Nailed it. Next up: “My managed Roth IRA has expense ratios of 0.55%. Should I go to a self-directed one?”

Bo: Value is what you get. Price is what you pay. If you’re paying 0.55%, I want to know why is that fund so expensive? There are a lot of really low-cost index funds that are 0.15% like the S&P 500 index fund, which is fantastic. So are you getting something for that 0.55%? Perhaps you’re working with an adviser who’s adding value through tax planning or through long-term financial planning or whatever. Why does it cost 0.55%? Is that cost justified?

Rebie: So I want to come back to that one because he’s going to keep going.

Bo: No, no, no. People, because I’m going to get hit in the comments for this because this is what he said. He said the expense ratio specifically. So what that tells me is this is likely a fund decision. So it’s like an actively managed fund that costs 0.55%. That’s a real hard sell for me. Like actively managed 0.55%. Depending on what it’s doing. Now, we have some funds at Abound Wealth that are more expensive than that inside the alternative sleeve or inside the other, some of the fixed income funds that we use. There are some funds that tend to be a little bit more expensive, but they serve a very specific and unique purpose inside the portfolio. If that 0.55% fund inside your Roth is really just a closet index fund, it’s just an S&P fund, it’s just a total market fund, but they’re jacking the cost up, yeah, that probably doesn’t make a whole lot of sense. But if it’s a managed Roth and you have an advisor on it, and that advisor is adding some sort of value, it’s unclear. You said managed and then you said expense ratio. So both of those could be going on. If you got that expense ratio and it’s managed, I just want to make sure you’re getting what you’re paying for. Is the value you’re receiving more than the cost that you’re paying? If it’s just index funds, likely not. But if there’s some other reason, maybe. So we’d have to come back to that one. Stop it. Stop.

Rebie: Okay. I was in rapid fire. I get it. I mean, that was I liked the answer and I had to let it happen because we need to know that. But that was the most egregious break of the rules I’ve ever seen.

Bo: All I did was instead of waiting till the end to come back, I just came back in the middle. That’s all that was. I still got it inside 30 seconds.

Rebie: Oh, I need Brian back so we can get this back on the rails. I never thought I’d say that. Okay, let’s see. All right, let’s go to the next question. I won’t do that again.

Rebie: “If you could only put away a modest amount of money for a child, would you recommend a Trump account or a 529 or a combo of both? If so, what split would you consider?”

Bo: Trump account: I want to go get the free money. In the 529, if I’m saving for college, I want to use that one because Trump accounts are fine, they’re great for free money, but we are of the opinion presently there are other accounts that are better for building assets for kids. For college, 529s are great. For other types of expenses, costs like first car, first home, first whatever, UTMAs are great. The Trump accounts, I think free money makes all the sense. I would go elsewhere for the other accounts.

Rebie: All right, next: “Is it worth participating in a 401k if there’s no employer match?”

Bo: There are tons of benefits to 401ks outside of just a free employer match. Number one of which being tax savings either today through pre-tax deferrals or in the future through Roth deferral. So even if you’re not getting the employer match, we still love employer-sponsored retirement accounts. What happens is it may not be inside of step two where you begin doing that. You may skip step two, go get Roth HSA, and when you get to step six, that’s when you come back to the employer-sponsored plan. So it may happen later in the FOO. Go to moneyguy.com/resources to download your copy of the Financial Order of Operations.

Rebie: Next question: “20K emergency fund down from 30K. Should I sell from 95K taxable brokerage or cash flow for over one year to refill?”

Bo: Okay. 20K down from 30K. So I think he needs 30K. It’s going to take one year to get there. Should he sell brokerage? What I need to know is: is 20K how many months of expenses is that for you? If it’s only one or two months of expenses, then it probably is prudent to sell out of the taxable brokerage account even though it’s going to trigger capital gains. If it’s three, four, five months of expenses, then perhaps you can just build up slowly over time and not incur that additional tax.

Rebie: Well said. Next question: “Open a custodial Roth IRA for my 17-year-old working son now or wait five months when he turns 18 to open his own?”

Bo: Okay. I love getting that money involved. And if you open a custodial account now while he is 17, you can be part of the process. Hey, let’s put money in here. Hey, I’m going to match it. Hey, let’s do this. Hey, let’s build. That way you kind of, it’s like having when you get your learner’s permit, you have someone in the passenger seat with you and you drive and they’re in the passenger seat. Not a horrible idea, because then when he turns 18, you step out of the car and now he can drive by himself. Just know you have to do some additional paperwork. You’re going to have to open two different accounts. It’s going to change. But I don’t think it’s crazy to go and do it now and get that money rolling.

Rebie: Interesting. Next question: “Where would you guys recommend a sinking fund? Taxable brokerage account, money market, or elsewhere?”

Bo: All great solutions. High yield savings account is a great option. Where I personally keep my cash right now, both my emergency fund as well as any additional cash that I hold, is in a money market mutual fund, because right now it’s paying like 3.47%. You just want to have that cash sitting somewhere that stays liquid, readily available that you can get to quickly and is earning something, some rate of interest. Right now, somewhere close to three and a half, 4%. Any of those are acceptable solutions.

Q&A: Is There a Point When Your Income Is Too Low for the Money Guy Milestones? (54:44)

Rebie: Wonderful. All right, coming toward the end, we’ve got another question that says, “I love her show.” Thanks. “But I make less than $40k. Is there a point when your income is just too low for the 30, 40, 50, and 60 goals? At the end, 10 times my income is only $400k. Is this enough to retire?”

Bo: Well, if you’re super young and you make lower than 40, one of the questions I’m going to have is: are you going to make lower than 40 forever? We know that wages likely increase through time. So don’t be discouraged. That’s why early on, it’s more about your savings rates than the metrics, because personal finance is personal. We’re giving you these milestones that you ought to hit. And even at $40k, if you do that, if you save and invest and save and invest and you start young enough, you’ll be surprised that by 30, you’ll probably have $40 grand saved up. And then by the time you get to 40, that $40k will probably turn into $120 grand. So what I’m saying is your income’s likely going to increase. But even if it doesn’t, the math works out if you start early enough. Trying to get to multiples of income, even at lower incomes, if you can get your savings rate there, you’ll be fine. But let’s say that you don’t, let’s say that you can’t get there. Personal finance is personal. I don’t know what your living expenses are, but I know if you have $40,000 and you’re saving and you’re building and you’re getting that consistently, by the time you get to retirement, you’ll have a pot of money that’s been built up. You factor that in plus, you know, Social Security, plus maybe your spouse’s Social Security. We have clients here at Abound Wealth, school teachers, administrators, whatever, who never made over $100,000 of household income, never crossed over, and yet they still were able to build seven-figure portfolios. And because they have a seven-figure portfolio and because they have a pension and because they have Social Security, they live fantastic financial lives. Not because they figured anything out, not because they had some magic thing that took place, but because they just started super early. They were educators and they were just very consistent. Save and build, save and build, save and build, save and build, save and build. You can do it on low incomes. We actually have a show titled, I think it’s titled How to Build Wealth at Lower Incomes, and we actually walk through how should you think about that, what strategies should you have. But I also don’t want to minimize the fact that if there’s a way, means, and mechanism for you to increase your income, having a bigger shovel does make building wealth a little bit easier because it allows you to save more. Notice I said having more income doesn’t make you happier. It doesn’t make your life better. It just makes building wealth a little bit easier because you have a little bit more margin. Three ingredients to wealth creation: even at $40,000, if you have discipline and you can create margin and you can apply that over time, you can build wealth. So if you can increase your income to where you have more margin and you can increase over the same amount of time, you can build more wealth. It’s totally possible. But don’t let the milestones be discouragers. Let them be motivators and encouragers for you along your path.

Rebie: Personal finance is personal. And we do have some shows like that. We just released one where we do how to win financially based on your income, and we go through different incomes. The very first one is $50k. So it’s a little different, but that gives you a good ballpark on some thoughts if you’re at that income. And if you go to moneyguy.com and search how to build wealth at a low income, there’s going to be some stuff that pops up, some articles, some other videos we’ve done in the past that could help you continue this conversation as well. So thank you for the questions, Bo. Rapid fire. You did well overall. We only had one failure and one egregious break of the rule, so I’ll take it.

Bo: Okay. All right. But a lot of good financial ideas and conversation was shared, and that is the main goal.

Rebie: I think we got through more rapid fire questions than we ever get through. So I’m going to take that as a record.

Bo: I think I just broke a record.

Rebie: That’s not true, but I’ll just let you think that. Burn.

Bo: Let you think that. I have data. I know how many questions we do each week. Such a sick burn. I know.

Closing (58:58)

Bo: With that said, we are very excited to have Brian back, but it has been an honor to be here at the big desk with you today sharing financial information. And if you still want to talk about this after the camera shuts off today, make sure you go to moneyguy.com/resources to take advantage of all of our free calculators, tools, downloads that just continue these conversations on things like home buying, the Financial Order of Operations, how to buy a car, how to educate your kids and parent around wealth. All honestly, that’s just scratching the surface. So go look at that. I would love for you to check that out because we made it for you. Rebie, I think you’ve done awesome. I do miss Brian. I’m referring back, big guy. If you’re out there watching, come back. We are so excited to have you back here. Guys, we could not do this without you. We could not. If you didn’t show up to listen, if you didn’t go out to moneyguy.com and check out all the free tools and resources, we wouldn’t be able to do this. We believe that there’s a better way to do money. We’re so thankful we get to be part of your journey in doing money better. As always, we’re listening. We’re in the subreddits. We’re in the Moneyverse. We check all the emails, read all the YouTube comments because we want to make this as valuable for you guys as possible. Thank you, thank you, thank you for showing up. If you keep listening, we’ll keep putting it out there. For Rebie, for Brian, for the rest of the Money Guy team, I’m your host today, Bo Hansen. Money Guy team out.