Is Aggressive Saving Derailing Their Short Term Goals?

The Achiever’s Trap: When Doing Everything Right Still Leaves You Cash Poor (0:00)

Brian: That’s one of the biggest things I have with achievers. You’re running an internal checklist. You’re like, good student, check. AP classes, check. You’ve been rewarded for every one of these decisions. But I’m here to tell you, your internal narrative is separated from the reality.

Meet Joey and Lia: From California to San Francisco (0:23)

Bo: Give us the background. Who are you guys? You come from San Francisco. What got you from birth to San Francisco and now here today?

Joey: I grew up on the central coast of California. I’m one of five sons. I have four brothers.

Brian: Where are you in the order?

Joey: I’m number four.

Brian: Number four. Almost the last one. Did they have a female name for you just in case?

Joey: Yes. Probably Josephina.

Brian: I figured. Every time they’re like, okay, here’s the daughter, here’s the daughter name just in case.

Joey: And then after five they’re like, okay, I guess it’s just not happening. So, grew up there, went to college locally. I kind of knew I would have to cover most of college so I was researching when I was in high school. I knew the college I wanted to go to. I knew I wanted to go into business. And I was researching which AP credits were going to transfer to this college because I knew I was going to have to front that cost. I ended up going to Cal Poly San Luis Obispo, which is where Lia went. I graduated with an accounting degree.

Bo: How old are you now?

Joey: 24.

Bo: 24. What do you do? Are you doing accounting?

Joey: Yes. I got my CPA license a few years ago. I was working in tax after I graduated. Got a job locally doing tax, which I did enjoy. And then Lia actually ended up getting a job offer in the Bay Area. I started looking for different jobs, wasn’t sure if I wanted to stay in tax or branch into something different. But I found a really cool opportunity and went into forensic accounting. I’m about two years into that and really loving it. Forensic accounting can mean a bunch of different things. Most people think you’re in the FBI catching criminals.

Brian: He’s at the crime scene, right? Have you seen the movie The Accountant? Not quite, but you presented that the most accountant way ever. I love that.

Bo: Lia, what about you? What’s your backstory?

Lia: I was born and raised in Sacramento, California. My dad always did science experiments with me growing up and we were always working on something. That really sparked my curiosity. I had a great chemistry teacher in high school and my college actually offered a blended BS/MS program. I work a side job as a professor at a local community college in addition to my day job as a research and development scientist for a consumer packaged goods company in the San Francisco Bay Area.

Bo: What does that mean exactly? Give us more.

Lia: I’m a product development scientist. It’s called product and process development. We carry products in early phases through discovery work and then lead them all the way to activation and large-scale manufacturing.

Bo: So like new flavors of Doritos. That kind of stuff?

Brian: Is it the packaging or the flavoring and the actual product?

Lia: All of the above. We have special scientists that focus on packaging development. My role is more of the product development. How do we slap a great claim on the package? How do we sell this? So it’s very cross-functional and very consumer forward.

Bo: You guys are engaged, not married yet, right? Correct. So you met in college, stayed together through graduation and into the working world, and now you’re preparing to get married. When is the wedding date?

Joey: It’s in July of 2027, so about a year out.

Bo: Okay. And how long have you guys been out of school working?

Joey: Three years.

Lia: I’ve been working for two years full time.

Bo: All right. So you guys are not fresh out of school, but you’ve been in the working world for a while. And what’s wild is as you guys are sitting here thinking about, okay, what’s the path? We’re getting married. We’re going to talk about joining finances. You were kind enough to share a net worth statement with us. And for 24 and 25, you guys have a total combined net worth of $238,000. Of that, $27,000 is in cash or liquid assets. Investments represent about $28,000. There’s a cabin on there, which is a thing. And then the only debt you have is some debt on the cabin and some student loan debt. About $37,000.

Brian: Not a bad interest rate though.

Joey: Oh, it’s super low because we were in college during COVID.

Bo: So when we look at this, 24 and 25, $238,000 net worth, almost $200,000 household income combined, do you guys recognize how unique that is?

Joey: Yes, we are extremely grateful. We have great jobs. I think we set ourselves up very well with our majors and careers. We’re obviously in a very high cost of living area and we’re trying to balance that. Housing is an expensive thing. Wanting to break into owning a home one day seems a little out of reach. And it’s hard to prioritize that when you know the power of your dollars and what they can grow to at our age.

Joey: It’s hard to know when to scale back that savings.

Life in the Bay Area: The Real Cost of Housing (6:13)

Bo: Can you give us some context? You said you live in the Bay Area in San Francisco. For folks who don’t know, when you’re talking about wanting to be homeowners, what does that mean in real dollar terms?

Joey: Well, we’re not in the city of San Francisco. We’re in a suburb, but a single-family home is probably somewhere between $800,000 and $1.2 to $2 million.

Bo: And how many square feet is that on average? I’m trying to level set for different parts of the country.

Joey: That’s probably a couple thousand square feet.

Lia: When we first moved to the San Francisco Bay Area, we were kind of unfamiliar with what suburb we wanted. We’re not city people. We just wanted to live somewhere in a nice downtown area. There are parks, maybe some gated parking just for peace of mind. The first one-bedroom apartment we got was around 770 square feet, which is considered on the larger side of a one-bedroom. We chose a place that’s close to downtown. We live in a town called Walnut Creek. Beautiful place. It comes with a pool, a barbecue, and a gym. One of those all-inclusive copy-paste apartment complexes. We signed our first lease in 2024 at $2,660 base rent, and then that comes with paying for an extra parking spot and utilities. That’s added probably another $300 to our bill each month. Over the past couple of years, we just got a lease renewal notice and they renewed us at $2,890. So you’re like, we need to search for something else. We have two cats. The cats need more space.

Bo: It’s not you two that need more space, right? It’s the cats you’re doing it for.

Bo: It’s almost $3,000 a month to rent a one-bedroom. But you said something so interesting, Joey. You said it’s hard to even prioritize saving for a home because home ownership seems so unattainable when you have to start at $800,000 to $1.2 million. I think a lot of people, especially right now, a lot of recent grads and young professionals feel that exact same way. Okay, there’s no point, so why would I even try? So you guys are saying home ownership is still a goal, right? What are you doing with your current dollars if you’re not socking it all away to buy a home?

Joey: We’re investing a lot. I’m trying to reach that 25% savings rate. I currently do 20% into my Roth 401(k). I get a 5% match on that. And then I’m also maxing my Roth IRA each year. So it’s about 25 to 30% something like that.

Lia: For my full-time scientist job, I put away 30% into my 401(k). And when I met Joey, I had $30 in my Roth IRA when I was 21 years old. And he put me onto the Money Guy show and the power of the wealth multiplier. So here we are.

Brian: 88 times $30. Adds up. You guys are crushing it in that aspect.

Lia: It’s wild. We also have a 4% employer match and then an additional contribution over a certain period of years.

Goals, Wedding Planning, and the Tension of Competing Priorities (9:53)

Brian: Look, a lot of people are going to see your situation and be like, you were wicked smart, you went to college, fell in love, you’ve got great jobs. Okay, you want a house. What other struggles or goals do you have that we can address?

Joey: I don’t know about drama. We actually don’t have much conflict over finances. We’re not married yet. We haven’t combined finances, but there hasn’t really been conflict there. I think we’re really aligned in our goals. Housing is a big one. We want kids one day. And that’s a hard thing, especially if we stay in the Bay Area. Knowing whether that can be done on one income, how to prepare for that, hopefully our salaries go up over time.

Lia: An additional question I had, especially since we’re in this season of life preparing to get married, everything around the word marriage, bridal, anything, there’s a tax that goes on top of it.

Brian: Well, there’s a whole industry helping you relieve yourself of your money.

Lia: Luckily, we have some help. We’re very grateful that his brother is a caterer and my sister in law’s a wedding planner.

Brian: That’s really helpful. You probably get some good deals on locations and stuff too hopefully.

Joey: Yes. Venues are just expensive. Everything else that comes with a wedding is expensive. Photographer, DJ, everything.

Brian: But there was a question I was probably going to get to.

Lia: Is there a point of reference when planning for something like that? When I speak with people, they’re like, okay, we were able to have a very micro wedding at $20K. And then I hear people that spend $80,000 to $100,000. We don’t want to spend all of our savings on this event. But we want to…

Brian: Who’s paying for the wedding? You guys paying for the wedding?

Joey: Most of it. Yes.

Lia: My parents are assisting with some of it. But they don’t have a big pot of money waiting to spend.

Brian: That changes the algebra a lot when you guys are funding it, because you’ve already given yourself the head start and the knowledge about the wealth multiplier. So how much do you plan on spending on the wedding? What conversations have you guys had around that?

Joey: Our estimate based on where things are currently going, we have a few vendors locked in, it’s probably going to be around $30,000.

Bo: Hard stop at $30,000 or is that maybe what it’s going to be?

Joey: It’s so hard to know. We want to have a fairly large wedding, like 150 people. It’s just hard to gauge. We don’t have I think we’ve had some big expenses, so our cash balance is probably lower than what is even shown there right now.

Bo: I’m doing the math. All right, $30,000 for a wedding next July. We’re a year out from that and we have $27,000 readily available in cash in total. Got to come up with that. There’s a mismatch there, right? The first question is, is $30,000 a hard stop? Like, hey, we will not spend more than $30,000, or are we going to have this wedding and cross our fingers and hope it’s under $30,000? Because those are two different things.

Joey: Right now it’s looking like the cross-our-fingers approach. Of course we have a spreadsheet because I’m an accountant. But I more just keep track of it. I don’t actually budget and keep track of every dollar. I just know what we bring in and an idea of what goes out and there’s money in the bank account at the end of the month. So I don’t think I’m the best at it. We don’t have that amount of money right now to spend, so that’s a little nerve-wracking.

Bo: You have laid out for us that you begin with the end in mind. I chose this major, I did this, I looked at the AP classes like you guys are thinkers. So I know this is not something you’re thinking for the first time. What’s your plan for how you’re going to come up with that $30,000 between now and then?

Lia: I’ve been teaching on the side and that’s been a great source of extra income in terms of putting cash away. With my full-time job, I’m putting 30% away in my 401(k) and after taxes and everything, it’s kind of like I have my bare-bones cash amount. And then everything I receive for my monthly teaching paycheck just goes right into the high-yield savings account.

Brian: Is that already a sinking fund for the wedding?

Lia: It is not. No.

Bo: Okay. So when we think about the side gig teacher income, how much is it on average monthly net?

Lia: Net would be around $2,800.

Bo: Okay, great. And it’s exclusively getting parked in high-yield savings.

Lia: I don’t see much of that unless we have like emergency funds. Recently we had an opportunity to rent a home and there’s some overlap in our rent. So there’s that security deposit, first month’s rent. We’re really feeling the hit because this happened like a couple days ago. But yeah, we’re using that pot of money for the transition.

Brian: But you’ve got a year. I don’t want you to feel like you have to force it because you’ve got a year and you just solved half the problem right there. If you can do that consistently for six months, that alone is big.

Joey: She teaches a five-unit general chemistry course. She has a full-time job and then she also goes straight to school and teaches until 10 p.m. at night, two days a week. And then she has office hours the other days. It’s not completely sustainable. That’s one of the things we wanted to bring up.

Brian: Give us a reality check then on $2,800 a month.

Lia: I’m teaching both semesters this year. Spring semester and fall semester of 2026. So through the end of the year, we feel pretty comfortable in that. I’m getting paid 10 months out of the year. It’s about $15,000 per semester. But I am taking a break next spring. That was for the wedding, you know, like maybe I should try to enjoy life and have more of a balance because it has been such a grind the past year and a half. I love that job. It gives me the best of both worlds. I can work my industrial scientist job but also exercise my passion for teaching and getting to know students and build a classroom community. It’s been a great learning experience but I’m tired at the end of the day. And I’m grateful for Joey because I come home at 10 and he folds the laundry and cooks dinner.

Bo: So six more months, right? That’s going to get us somewhere around $14,000 to $16,000 depending on when the pay hits of cash to bank up. You’ve already got $27,000, but we want to make sure we don’t get too lean on cash. When we think about your monthly burn rate, do you guys have an idea of what that is?

Joey: It’s around $6,000.

The New House and What It Changes (17:24)

Brian: I was going to ask because you let something slip that you’re potentially renting a house now. Give us the scoop on that.

Joey: This all just happened in the last week. Our previous landlord, we’re still living there in the meantime, but it’s a big corporate landlord, a big apartment complex. In the Bay Area, because housing is so unobtainable for a lot of people, there are a lot of these huge apartment complexes everywhere because that’s what a lot of people have to do. When we moved here, we chose that to start. But they kept raising our rent every year pretty consistently. Even this last increase, they raised it and then we noticed they post their current rental prices online. The exact same unit that we could rent today and sign a lease for, they want $200 less than what they’re trying to renew us for.

Brian: Different tenant, different deal.

Lia: So we’re like, you know what, it’s time to get out of here.

Brian: Tell us about this house. What’s the deal?

Joey: We got a really good deal. It’s $2,900 a month for a three-bedroom house, pretty close to where we currently are. That’s almost the same rent we were paying for this one-bedroom apartment.

Brian: What’s the story with the landlord? What’s their goal with why they’re renting this house?

Joey: He’s owned it for a long time. The tenant just moved out and he was looking for some long-term tenants. This was a pretty competitive house to get. A lot of people were interested. We really jumped on it when we saw it come up and we’re really grateful that we got it. Owning a house, a lot of that was just we kind of want to be in a single-family home. And now that we have that, I’m fine with staying here until we’re eventually able to make that purchase.

Brian: Not to be the crazy uncle asking family questions before you’re even married, but you’ve already let it out of the bag that you’re going to have kids. What’s your timeline on that?

Joey: We’ve talked about it. Around five to seven years. Which is also kind of the home ownership timeline.

Brian: Five to seven years. How many kids do you want?

Lia: Well, Joey comes from a family of five, so maybe he has a different perspective. But I’m like two max perhaps. Two to three. We’ll see how we’re doing. But I feel like our finances are a big part of, do we feel ready? Do we feel comfortable? Can we afford childcare? Our families live far away, so it’s not like we can have grandma babysit during the day, unfortunately.

Joey: We both bring in similar incomes. So if one of us were to not work, that’s obviously a big hit.

Bo: On your career trajectories, does one of you have a more rapid increase in income potential or a higher ceiling than the other?

Joey: Fairly similar. My career goal is to one day be able to provide expert testimony in the counties surrounding the Bay Area and potentially become a partner at a firm. That’s going to take some time and require me to get more experience, but if I get there, there would obviously be a considerable bump in pay.

Lia: I like where I’m at. My goal is to continue climbing that corporate ladder and build up a diverse set of skills. I know research and development can sometimes be limiting depending on the area. That’s part of why we’re living in the Bay Area, because it’s a technology hub. It’s a great place for us to start our careers.

Joey: I have more flexibility in where we would end up living, but Lia, a job as a scientist or a chemist, those are more concentrated in urban areas. Not quite as much flexibility there.

Brian: Well, and I’m not afraid to ask this question. Are you guys set on staying in California? Because we already know it’s a high cost of living area. You’re both highly educated, you’re talented, you really can do anything. So it’s worth asking. Are you staying in that area for a long time or is that open-ended?

Lia: Well, I’ve tried to convince Joey.

Joey: She’s trying to plant the seed.

Lia: Yes, actually. Because I got the chance to live in North Carolina for like an extended co-op. It was in the Raleigh-Durham area. Beautiful. The grass is green, the trees are green. Not used to the hurricanes or the humidity. It reminded me of where I grew up because it’s two hours from the mountains and two hours from the beach. And I had a very bougie one-bedroom apartment for $1,500.

Brian: Defies gravity, doesn’t it?

Lia: Yes. So I’m flexible. But I totally understand, like, our families are in California. And Joey has a cabin in California.

The Rent vs. Buy Reality Check (23:42)

Brian: Before I want to hear about the cabin, what are your thoughts on the moving question? I want to make sure we close that loop and then talk about the cabin. He’s going to say he can’t because of the cabin. That would actually close it.

Joey: No, I am open to it. Family is here. I do love California. It is very expensive. But as long as we can afford it, I would like to stay. We’re both aligned on staying here for at least the short-term near future, you know, 5 to 10 years, just because we want to stay with our jobs for a while.

Bo: You said one of the goals is to own a home, but then you said, well, I really want to be in a home. And then you said, well, maybe in 5 to 10 years we might be open to not being here. Is home ownership as big of a goal, or not so much now that you’re going to be in a three-bedroom that’s affordable and you get the home experience without the home ownership?

Joey: I keep going back and forth on it because when you look at the cost of renting versus buying a house and what you can do with that extra money and the power of those dollars, it’s really hard to justify it, especially at our age. And now that we’re in the home, I’m like-

Brian: So why do you want to buy a house?

Joey: I just like the idea of it.

Brian: It’s built into this is what the American dream is. This is what successful people do.

Leah: Put nails in the wall without asking the landlord.

Brian: Did you watch our episode on is it better to rent or buy currently?

Joey: I did. Yeah.

Bo: What did you think?

Joey: It seemed like a pretty clear answer to me.

Brian: I did the math for you guys and I still want to hear about the cabin. But what’s funny is I took a $1 million house. I only had you put down 3% because on a first-time home buyer we give you lots of grace. So you only had to put down 3% but then we financed the other… anyway, the monthly payment at 6.5% is $6,100. And that’s not property taxes. That’s just the principal and interest. That’s not even the property taxes, not the insurance, not maintenance. And I just heard you tell me that you’ve got a three-bedroom house not too far from where you are for $2,900. Do you know why they can give you that house for $2,900? Because it’s either paid off or he’s got a really low interest rate. It’s either exactly that, paid off, or there’s probably a less than 4% mortgage rate on there. And you’re getting the benefit of that. Plus, the purchase price was substantially lower before we had the 2021 run-up in real estate where it almost doubled in that 3 to 5-year period. Financially, it doesn’t make sense to buy a house, especially with all the life stuff you just said. You just answered your own question. And that’s one of the biggest things I have with achievers. You’re running an internal checklist. You’re like, good student, check. AP classes, check. Hard major because I want to flex this muscle I have in my brain that can do a lot, check. And you’ve been rewarded for every one of these decisions. But I’m here to tell you, especially in this high cost of living area, your internal narrative is separated from the reality of what you could do. Because that is 125% more expensive than just renting the house you’re in right now. You run that by the wealth multiplier. At our age that changes your life in the future. It really does.

Joey: I agree. I still want that to be a long-term goal for us. It’s just so hard with the current market. We’re probably not expecting prices to increase at the rates they have in the past five years. It’s just hard to know when to jump in, especially if we aren’t completely set on staying in the Bay Area. If I buy in at the wrong time and then we decide to move and prices went down, you’re kind of stuck.

Brian: Yeah. That’s the problem with leveraged debt. If you lose 10% of the value of the house and you have to sell it to relocate, you feel that loss by hundreds of thousands of dollars.

Bo: And you know, people often pose it as, oh, well, renting is just throwing money away. It’s not throwing money away. You’re buying yourself options and flexibility. You’re only committed for 12 months or 24 months, whatever your lease term is, and then you can choose to do something else. Once you buy that house, you are sort of at the mercy of what happens with the housing market and what happens with that particular home. And if that stuff isn’t set, I would be careful rushing into it, especially in a super high cost of living area like the Bay Area. So even if you were going to do that, you’ve got to save up for the down payment. At 3%, that’s $30,000. We already have this wedding we’re trying to save up for that’s also $30,000. So now we’re having these multiple goals stacking up. You guys said your monthly burn rate is about $6,000, right? Even with this new house in there, somewhere in that ballpark. Your incomes are roughly equal, so there’s not a wide disparity. In that sort of environment, a three-month emergency fund is probably prudent. So you take $6,000 times three months, that’s $18,000. Let’s just go ahead and have a $20,000 emergency fund. When I see your current cash on hand of $27,000, we’re about $7,000 over that. So in my mind, if I’m trying to fund goals, I’ve got $7,000 for another bucket for the wedding. We’ve already laid out that if you can continue this pace of teaching for the remainder of the year, that’s going to be another $14,000 to $15,000. Well, now we’re at like $21,000 to $22,000 of this $30,000 goal. How are we going to bridge the last $7,000 to $8,000?

Joey: So that was one of my questions on whether we can scale back on the savings at least temporarily. One of my thoughts also was that I think we’re kind of on that borderline of Roth versus traditional contribution. Because California tax rates are quite high. We’re looking at around a 30 to 31% marginal rate. We’ve been contributing to Roth in the past. But if we switched to traditional, we could free up some cash flow that way. Or just dialing back the percentage that we contribute.

Brian: And you’re still going to be putting money into the Roth IRA too. I mean, even if you started blowing through the income thresholds, you could structure it as a backdoor Roth contribution. But there’s a good chance you won’t have to do that at your income. You said you’re putting in 20% and you’re putting in 30%, right? So how much total do you have going into your 401(k) annually?

Joey: It’s about $20,000.

Bo: So $20,000 between the two of you or just yours?

Joey: Just mine.

Bo: Just yours. $20,000 for you and then 30% of Leah’s pay. So it’s like $44,000 to $45,000 a year going in. Do you recognize that if all you did was switch your contributions from Roth to pre-tax at that 31% tax bracket, that alone would save you $12,000 in taxes?

Joey: Wow. Just doing that.

Bo: That’s an extra thousand a month in savings that you guys could have, to still fund Roth IRAs because you’re below the Roth limit, or if income increases you could do the backdoor, or to fund some of these other goals. We love Roth and you guys are young and Roth makes tons of sense. But you are the case study for why, if I told you that by clicking one button you could potentially have an additional $12,000 every year, that’s pretty substantial.

Joey: Yeah. And I think that could just be a temporary thing. With the numbers you brought up, we don’t even necessarily need to dial back the percentage and we can still get to that $30,000 goal for the wedding.

Bo: So the wedding is a goal and the home ownership, I don’t even know if home ownership is a goal right now. I think it should be put on the shelf for a while. All right. So it’s come up a few times, but I want to address it. When we were looking at your net worth statement, there was this cabin. This thing that showed up. You don’t own a home, but you don’t see a lot of 24-year-olds with a cabin. Walk us through. What is this thing? Where’d it come from?

The Cabin: A Hundred-Year Family Legacy (32:27)

Joey: Okay. Kind of a unique situation. There’s this cabin that’s been in my family for about a hundred years. Very old. It’s near Sequoia and King’s Canyon National Parks in California. That was a big part of my childhood, going there every summer, going there Memorial Day weekends. It’s part of this group of cabins. There’s like 13 of them. They rarely if ever come up for sale because they’ve been in families for a long, long time. An opportunity came up three or four years ago. Someone was selling and they wanted to keep it within the group, so they offered it to somebody first. I got approached and asked if I was interested in purchasing it. I had just started my first job out of college. Didn’t have a ton of money saved up. But I asked my brother, “Hey, do you want to go in on it with me?” Because this might not come up in the future. He decided to go in on it with me. We bought it for $80,000. It’s very rustic. It’s more of a glorified wooden tent at the moment. Built about a hundred years ago. There’s technically electricity, no running water. There’s a lot of work that needs to be done. We put down $20,000 and financed the rest with seller financing at around 5% interest rate. We’re paying about $650 a month total combined. We’re spreading that over 10 years and we’re about a year and a half into the payments.

Brian: Does it balloon in 10 years?

Joey: No, it’s evenly amortized over the 10 years. So if we pay the $650 a month for the next eight and a half years, it’ll be paid off.

Brian: Okay. So the idea is one day this will be a place where your kids spend time and that’s exactly the point.

Joey: Exactly. Yeah. I didn’t want to miss out on this opportunity that I just didn’t think was going to come up again. Even though it felt like a very premature move when I made it. My Roths and everything were not funded to where they are today at that point.

Brian: So it didn’t hurt you. It doesn’t sound like it bit you too badly since you’re still maxing out your Roth.

Joey: Exactly. There’s still enough margin to make those payments. I’m only paying for half of it. And my brother and I are aligned. There’s a ton of things we could do to the cabin. Right now it’s more of a campsite. It’s still usable in its current state and it’s more of a long-term thing. We’ll get to those improvements.

Brian: Any chance you’re inheriting the family cabin that’s been in the family for a hundred years, the one down the street?

Joey: The issue is because my great-great-grandfather bought it, it’s now split between a bunch of relatives.

Brian: So there’s a good chance you won’t have exclusive access to it. Use it, but not exclusively. That’s a solid answer. Next question: what does your soon-to-be wife think of this?

Lia: I think Joey made this purchase when we were kind of freshly dating and he was like 21 or 22. And I was like, really? You’re going to buy a cabin right now? But being able to go up there with the family and experience it…

Brian: Have you been there?

Lia: Yes. I will say the only bad thing is the mosquitoes. But it’s a gorgeous place.

Brian: No running water sounds like a bad thing too. You said the mosquitoes are the only bad thing.

Lia: There’s a creek that runs right by it. So there is literally running water.

Brian: Definitely marry this person. If running water is not the issue, lock this down.

Lia: I saw how important this was to him and his family, and it made more sense over time once I could actually see it for myself. But like totally, months into dating and him buying a cabin, I’m like, whoa, I’ve got to think about this.

Brian: From a blossoming memory standpoint, does this seem like something that’ll be fun to do with your future kids as well?

Lia: Absolutely. I had so many wonderful memories going to Lake Tahoe with my parents growing up. Having the privilege of a secondary space to enjoy summer is awesome. So I’m here for it. I don’t think we have the cash to invest in those renovations immediately, but I’m glad we’re all on the same page. It’s going to take some time and we’re not in any rush.

Joey: Similar. We’re both not in a rush.

Brian: You’re not in a rush. You’re on the same page. I’d encourage you, go ahead and have a conversation with your brother now while it’s low on the life concerns scale. Be like, “Hey, when do you think we’ll start renovating? I just want to kind of figure out what the next 10 years looks like and make sure we don’t have any weirdness down the road.” Figure out the push-pull system that’s going to create action on this. There’s nothing wrong with it as long as you’ve got good communication about expectations. You don’t want to get into a weird dynamic where you want to renovate but your brother doesn’t, or one of you has the money and the other doesn’t. Go ahead and have those conversations while it’s really low on the priority scale.

Combining Finances Before and After Marriage (39:10)

Bo: I’m curious because you said right now you guys are on separate finances. What’s going to happen when you get married? How does that work? And I think it would be valuable for couples out there who are perhaps dating right now or engaged. How do you guys navigate finances now and what will change when you get married?

Lia: I want to start off by saying Joey really impressed me. His nature, he’s a financial mutant by nature for sure. But I feel like he’s always been very generous. The way he handles money and the way he treats me, we enjoy our money but I also respect the fact that he prioritizes saving and encourages me to do the same in a respectful way. Learning that about him has made me feel very comfortable with the idea of combining finances during marriage. I don’t want to feel any anxiety about not spending a lot on material things.

Joey: I think we’re both aware of what we spend money on and we don’t really spend on extravagant things. There haven’t been much conflicts over money. There’s a lot of Venmos happening just because we’re not yet combined. Is that what you do? You square up via Venmo?

Bo: Yeah. So you split everything 50/50? Is that the way it works?

Lia: For the big stuff. And then for smaller things, we just pick things up here and there. But it’s never, I don’t want to feel anxiety if I go buy a shirt for example. It’s like, oh, I see $40 on the account. I feel like that’s not going to be a concern going into marriage.

Bo: Do either of you use some sort of budget tracking like Monarch to see the transactions?

Joey: No.

Bo: When you combine, will you see all the transactions that she has and vice versa?

Joey: Yeah, I imagine we’ll have a joint checking account and then separate credit cards that you can spend what you need to spend.

Brian: But how are you going to pay for those credit cards? From the joint account?

Joey: Yeah.

Bo: Okay. So what if this month you spent $1,000 on yours but she spent $2,000 on hers?

Lia: Most of the time it’s eating out together. I feel like that’s our crutch is just food right now. But I feel like I trust you with your money. Hopefully you can say the same about me. I’m not too concerned about the transactions.

Joey: I’m not too concerned, but I mean it’s obviously hard to say until you get there.

Lia: Who went to Costco for $500 last week? You went without me.

Brian: Every time I go to Costco, I feel like I come home with some pillows, some mixed nuts, and then I end up with a case of some flavored drink that I didn’t know I needed.

Bo: Let me ask you this. We were asking you questions about combining finances. Are there questions that we could answer as two guys who’ve kind of gone through that threshold? Anything you’re curious about that we could speak to as you have your conversations moving forward?

Lia: Going into marriage, do you have any advice in terms of approaching finances? We have a pretty stable relationship with money and similar values going into this. But of course life ebbs and flows. There’s going to be big expenses. There’s going to be a purchase made where we’re like, what the heck, why did you do that? Would you recommend we have personal savings that we can make our fun purchases on? How could we mitigate or prevent future conflict with money going into marriage?

Bo: I’d like to speak to the “what the heck” question. My wife and I never really had conflict over finances. However, we had a very different understanding of what were justifiable expenses and what were not. Where I struggled early on, and sweetheart, I love you, this was on me, is I did not assign enough value to the things that she valued because I didn’t value those things. So when she’d spend X number of dollars on something, in my mind it was wasteful. I’d see the transaction come through and I’d be like, hey, you’re blowing through the miscellaneous budget, and she’s like, yeah, I’m blowing through it because I care about the shampoo that I use. I’m not going to use Suave. I care about not using Kirkland brand shampoo. And so I think having an understanding around, just because you don’t think this is important, just because you don’t think this is valuable, doesn’t mean that it’s not. It means that’s your opinion. And if she feels differently, you need to figure out how to reconcile that. The earlier you can have those conversations, in my opinion, the more valuable. Because what happens is, new marriage, in love, all the wonderful stuff, you don’t want to say anything. So you just let these thoughts fester and they get worse. You start making passive aggressive comments and it turns into this nasty thing. If you can communicate on the early end, I think you can avoid a ton of that.

Brian: Let me give you some homework. Bo got married on June 9th of 2012 and we’ve been creating content for 20 years now if you can believe it. Right around that June 2012 period, I did a show with Bo where we interviewed him on what he thought was going to happen with his upcoming wedding. And then we did a one-year update episode. Go listen to the one before his marriage and then listen to the one-year later episode. You’re going to hear a lot of growing up that went into it. And because I remember Bo said any transaction that she spent over $40…

Bo: 40.

Brian: Bo said any transaction over $40. And I was like, “Bo, her shampoo costs more than $40.” And he was like, “No, it’s not $40 worth of shampoo.” You can tell this still has a scar on it. That’s why he brought up the Suave thing, because I told him on that show that her shampoo is going to cost $40 and he was like, no, she can go Suave just like I do. If you go listen to that, there is a growing element because what any couple has to do, and you guys have already done a great job, you’ve already probably graduated beyond budgeting. You aren’t using Monarch or anything like that because your money is going where it’s supposed to through automated savings. So you don’t feel any pressure about doing budgets.

Joey: Exactly. And I think that’s one of the reasons this hasn’t been an issue, because we have the margin.

Brian: You’ve been blessed that you make enough money that money just goes where it needs to. There might be a future where you have to do the family planning where you say, you know what, we’re going to take a few years where maybe we live off one income and we’ve got to figure out how that’s going to go. I encourage you when that happens, do a budget. Do something where you’re actually tracking. But then once you get to that point, what I’m trying to help you do is take the power out of the money. So many people struggle when you put value to what people are spending. My money is my money, her money is her money. And it creates these weird dynamics. You don’t want to get into a situation where one of you is staying home with the child for a while, and then that person feels like they have to go ask the other spouse for money. What a weird dynamic that is. That’s why I love that you’re already planning to open a joint checking account. Go ahead and redo your direct deposit forms with your employer so everything goes right into that joint checking account. That way it just seems like two became one. Our household expenses are one. The good news is the government is already protecting your Roth IRAs. Those aren’t joint. They’re individually tied to you. There are already some protections on what you’ve each brought into the marriage. But I love everybody setting up a joint checking account, setting up maybe a joint brokerage investment account at one of the low-cost providers, and then building this thing together. It’s you two versus the world.

Bo: I’m excited about the plan we’re going to put together. I do have one clarifying question. You’ve got 20% going to your 401(k). You said you’re maxing your Roth IRA. You said you’ve got 30% going to your 401(k). Are you also maxing your Roth IRA?

Lia: Of course.

Joey: Just to clarify the 30%, she was contributing 20 to 25% but since her teacher paychecks aren’t having any investments withheld, we increased it to get her to 25% gross.

Bo: Got it. Makes sense. I’m excited to put this together. I don’t want to give away what’s going to happen, but it’s going to be an awesome picture because you guys have done a lot of really great stuff early on and I don’t see you guys stopping.

The Rethink: When Doing Everything Right Is Too Much (49:21)

Bo: Brian, what a great conversation with Joey and Lia.

Brian: I mean, think about this. What do you get when a scientist and an accountant walk into a bar?

Bo: I don’t know, Brian. What do you get?

Brian: You get a very successful young couple named Joey and Lia. This is a great situation. They’ve got a lot of great stuff going on. And I’ve got to tell you, I’m shocked that the problem we’re going to solve for them is that they oversave.

Bo: Yeah. It’s not something we often do here. We don’t often talk to people that are oversaving. But they have a lot of big goals coming up. Obviously a wedding coming up in July, home ownership, they’re trying to figure out if that’s the right move. But there’s this pressure I feel like they’re putting on themselves. They are saving so much that perhaps it’s crowding out some of these other goals they could be pursuing and could be putting resources to.

Brian: They are literally the perfect example of why personal finance is personal. You just said it with the wedding coming up. They want to know, is home ownership something they ought to consider? Well, how can they have these goals when they’re going to be so retirement rich but not have enough margin or leftover to fund some of these other important things that are coming up?

Bo: Yeah. So when we look at their current savings, it’s pretty wild. Right now Joey’s putting 20% in his 401(k) and getting a 5% match. Lia’s putting 30% into her 401(k) and getting a 4% match. They’re both maxing out the Roth IRA. With an annual savings of almost $67,000 a year, it puts them at a 34% savings rate, which for two young folks at their age is a super heavy big-time savings rate that I don’t think is absolutely necessary.

Brian: And they also know they have a time-certain wedding coming. And when you look at the funding of that, you’re like, wait a minute, how are we so wealthy but cash poor?

Bo: I think what’s happened is they know that saving is a good thing. They know that Roth is a good thing. And so they’re doing all these noble good things. But perhaps, and I say this lightly, maybe there is a little too much of a good thing going on for them. Because when we thought about, all right, if we were going to triage, if we were going to adjust this, what would we think about? We’d say, okay, what if we reverse-engineered to figure out what would it take for them to hit a 25% savings rate as opposed to 34%? Well, for them, following the Financial Order of Operations, max out Roth IRA at $7,500, max out Roth IRA at $7,500, and then let’s back down both of their 401(k) contributions. Let’s take Joey’s down to 14% and Lia’s down to 15%. And instead of just backing it down, we flipped the script and turned it into traditional. They’re in a high tax situation. Even though they’re young and I get it, there’s a lot of pressure when you’re young to do Roth, and we love it because you get more time for compounding growth, at the tax rates they’re currently paying, this could actually save them over $2,000 a month.

Brian: That’s right. Backing down those contributions plus the tax savings is going to end up with almost an additional $25,000 a year. $2,000 a month they’re going to be able to save. And the math works out wonderfully. We know right now they have about $7,000 in their wedding fund. We asked them, “Okay, how much do you think you’re going to spend at the wedding?” And they said, “Maybe around $30,000.” Well, if you just take the timeline from now until next May, June, July, and they have an extra $2,100 a month, if they just took that $2,100 and parked it in a high-yield savings account between now and then, they would get that wedding fund fully furnished up to $30,000.

Bo: Is the term serendipity? Isn’t it kind of amazing that the $2,100 a month savings they’re going to have if they change this from a tax standpoint, you multiply it by the months they have until the wedding, it gets them within $1,000 or so. That’s pretty magical. It’s almost like a big wedding gift. But I know the question they’re going to be asking is, “Okay, guys, if we back this down, if we’re not saving at this same clip, what does that ultimately mean long term? Are we actually going to be able to reach our financial goals?” And what’s amazing is they’ve done so much heavy lifting and hard work thus far. At 25 years old with over a $200,000 portfolio, if they were to just save the 25%, not the 34% they’re currently saving, they’re on track that by the time they get to 55, they could have almost a $12 million portfolio. By the time they get to 60, almost $20 million. So they’ve done the hard work and heavy lifting where they don’t have to be in this hyper-save, hyper-accumulation mode, unless they have some crazy financial goal they haven’t told us about like super early retirement. What they’ve been able to do by building up the pot of money they’ve done is now give themselves options and flexibility as they move forward in their life.

Brian: Yeah, I think they are definitely on a healthy path for a great retirement. The thing I did want to circle back on is the house. I could tell we hit on something. I felt a little guilty because it’s usually considered such a noble cause to save for a house. But when they shared what they can rent this three-bedroom house for in the Bay Area versus if they had to buy, it just didn’t make sense. Oh my gosh. If we’re talking about maximizing the opportunity of wealth building, there’s a little bit of disconnect. I would encourage them, we like home ownership, but in their specific situation, personal finance is very personal. Don’t get in any hurry to fund paying for that house.

Bo: And again, they’re just getting married. Home ownership may be something they want to pursue at some point in the future, but right now they have enough slack and margin. Even when they get that wedding fund fully built out and they get married, if they stick to 25% savings, they’re going to have excess liquidity. They can move towards one of these other goals like saving for a house or doing the family thing. I don’t think they have to worry about getting all of it into retirement accounts as aggressively as possible. I think they’re going to appreciate the liquidity.

Brian: Joey, Lia, hopefully you feel like we just released the pressure valve on you because you’ve got some big life stuff going on. We want you to enjoy that. Go save for that wedding. Make beautiful memories. You’re going to be okay. Bo, for those who want to come on Making a Millionaire, how do they apply?

Bo: If you’d like to be a guest, you can go to moneyguy.com/apply. Or if you want to check out any of our tools or free resources, go to moneyguy.com/resources.

Brian: I’m your host Brian, joined by Mr. Bo. Money Guy team, out.