Money Trends By Generation (Where Do You Stack Up?)

Generational Wealth Trends Introduction (0:00)

Brian: Generational trends. Where do you stack up?

Bo: Brian, I am so excited about this because we know that different generations think about money differently. It’s interesting to see how those threads of what’s possible and what’s difficult and what’s not difficult tend to change through time depending on what generation you’re coming up in.

Brian: Now look, despite what the comment section tells you, I am actually a proud Gen Xer. And we all know that as a Gen Xer, I drink out of garden hoses out in the backyard primarily because our parents made us stay outside all day. We’re the last generation that had one foot into analog and then we got to watch this transition into digital and even beyond. But it is one of those things where I think there’s an American promise that’s been, you know, we’ve always kind of considered this and I think this is an American concept is that we want our kids to be more successful than we were. Want them to have a better opportunity than we had when we were—Don’t you feel like that’s kind of been a promise or a desire since the beginning of time? So, and I think you could actually talk about and put that in terms of generational wealth of what you hope for the coming generation. But I got to tell you, I think that there’s because, and that’s what we’re going to get to today. There’s been groups out there, you know, YouGov and survey results where it says maybe things aren’t as rosy as they’ve been for prior generations.

YouGov Survey on Generational Wealth (2:26)

Bo: Yeah. YouGov did a fantastic study around generational wealth and what different generations thought. And there were a few really interesting questions that they posed. And here was the first one. YouGov said, “Do you think that earning generational wealth is more or less possible to Americans born after 2000 than it used to be?” Meaning if you were born in the ’50s, ’60s, ’70s, ’80s, ’90s, building generational wealth, wealth that can not only provide for your lifetime, but you can also pass on to the next generation. Is it more or less difficult for folks that have been born in the last 25 years? And I think the responses were kind of interesting.

Brian: Well, it’s twofold in the fact that I think general population what you’re going to see is a little bit of pessimism in there is that man, there’s not been a harder time and it’s understandable, you know, with housing and some of the other things that we’ve, the inflation period that we went through. It is understandable that there’s this little cloud over the generations. But here’s the bright spot and that’s what we’re going to compare and contrast is the general population versus Gen Z. And look, that’s my daughter. My oldest daughter is Gen Z and you know she’s in her senior year of college and I kind of see this even in her when I think about this optimism that is a kernel of optimism that really is a stark difference from the general population.

Bo: So when you’re looking at these survey results the dark blue is general population and the light blue, baby blue is Gen Z. And what you can see is the dark blue tends to be weighted just like you said towards the pessimism that 23% of general population says that it’s much less possible to build generational wealth than it used to be. And then another 26% said that it’s somewhat less possible. So half of the general population is saying man it’s not as easy as it once was. It’s getting more difficult. But the folks in your daughter’s generation, the Gen Zers, they tend to skew on the other side. You can see that 25% of Gen Zers said that it’s somewhat more possible than it used to be to build generational wealth. And a whopping 30% of Gen Zers said it is much more possible. And so I’m curious and Brian, we didn’t talk about this. Why? Like what do you think it is that’s driving that?

Brian: Well, I think that because we are in one of those—I was thinking about, we didn’t even talk about this in the show meeting. So I’m out here, I don’t know where, in the wilderness. Y’all never know what I’m gonna say. But I do think we are at one of those inflection points with technology is about to do some big changes. And I think that this generation, because I felt this and I kind of resembled this generation in the fact that I was there when I remember it was college that the internet kind of took off because I went from the period where I was literally registering for classes where you’d go into this huge room, fill out scantron sheets, dump them into the side of the wall, then go wait for them to call your name and find out if they got it to by the senior year I was logging in through the modem. Yes. It sounded like War Games where you know all the other, you know sounds but you would use some DOS prompts and then you’d get into and you’d register on that green screen for your classes right from your house if you had a computer at the house. So, it’s amazing and I think that’s what’s going on with the younger generation, too, is that they feel that they’re at the beginning of something. And you know what happens when you feel like you’re on the front row seat and you’re the youngest and probably have the most opportunity, the most knowledge on something is you feel like you might be able to turn this into a benefit for yourself.

Best Paths to Generational Wealth (6:03)

Bo: Well, I love it. One of the things that YouGov did with the survey is they didn’t just say like how likely or how unlikely it is. They asked the same group of people, hey, if you had to choose one, and you can only choose a single one, which of these paths would you think is the best way to achieve generational wealth? So, if it’s something you’re going to do, how are you going to pursue that? Or if you had to go in one direction to try to create that kind of wealth, what would you do? And again, I thought this was really, really interesting. And I think that the generations were a little more aligned perhaps than I thought. But the two highest responses, the two that carried the most of the survey respondents were starting your own business and investing in property, meaning like investing in real estate. So if you want to be generationally wealthy, you either need to be an entrepreneur or a real estate investor. Thoughts on that?

Brian: Well, I mean those are two good places. I mean I think that those are very positive. Look, truthfully, I’m proud of all three of these. If you think about it, starting a business, we’ve been down that path. Now, we’ll talk a little bit, we’ll give some color on that in a minute to show why it’s kind of scary, but I also see once again, I think they’re on a threshold if they feel change is coming. And I think also this younger generation feels like we’ve noticed this, you know, it’s like if you want to be a creator—I’ll take my daughter, she’s an animator, you know, in the past, I think you hoped that you landed a job with like a Disney or something, but that’s got to be much harder and even there’s going to be concerns in that. Now, this younger generation because of the technology and stuff, I think you think, well, can I go create my own audience and I don’t need to be Disney, but I could create something. I think that’s where, so I love the starting your business. We’ll talk about the risk with it. And much in that vein, much smaller levels of exposure can lead to much greater success. We joked forever. Look, now it’s gotten, I love to say that we’ve talked it into existence, but forever the joke Bo and I had is that we have 20,000 people that like watching this show. I’m happy to report we have millions of you now, but forever we’re like, as long as we got 20,000 people that like our show, I think this will be okay. But I think that is the same mindset that goes into it. And investing in property. Look, that is very valuable. I will tell you, I’m glad to see Gen Z understands, they put it high, but they’re not like the general population because I think that there’s, you know, you make all your money on real estate when you buy the real estate and we just came through a post-inflationary period. It’s harder actually to make money in real estate. I think right now with interest rates and where we just came through that post inflation and that’s the only real estate market Gen Z knows. The only thing they know is super elevated real estate prices and very high interest rates. They haven’t seen some of the other real estate markets the general population has seen. And then I like the third one which is investing in the financial markets where you don’t have to choose the winners or losers, just be in the market.

Bo: Yeah, I think that’s the one that gets me the most excited because that’s available to everyone at the end of the day. Not everyone is going to be an entrepreneur. Starting a business and running a business and owning a business is a wonderful thing, but it’s not for everyone. And the same is true for investing in property and real estate. A lot of people don’t want to be real estate investors. They don’t want to be landlords. They don’t want to have illiquidity. They don’t want to have to deal with maintenance and tenants and those sorts of things. But I do think we live in a time that is so wonderful that investing in the stock market, allowing your dollars to work for you while you sleep is easier than ever. And I think it really is available to everyone now, even more just in your working career. Brian, it is so much easier now for someone to go online, open an account, fund an account, link a checking account, and get their money working. Back in the ’90s, you couldn’t do it that easy.

Brian: Yeah. I hate to be the compare and contrast, but it is such—I had to go find somebody. I mean, because like I said, I came out of college right as the internet was getting started. But it wasn’t like you could go open up an account, right, at fidelity.com or vanguard.com. You had to go find. So I found like an insurance salesman who sold me a B-share in this specialized banking fund. I mean and now it looks back, now look I have no regrets because it got the little pebble rolling down the hill to turn me into who I am and go on this journey. But you’re spot on, Bo. This has gotten so much easier. The boundaries or the barriers to entry are completely diminished at this point. So there’s no excuse not to take your billionaire of time resources and turn it into actual assets in the long term.

The Power of 10% Savings (10:34)

Bo: And what I love that you said is even though you didn’t do it perfectly, even though you didn’t get it exactly right early on, just doing something was hugely impactful in your financial life. And we wanted to put some actual numbers to this. So let’s just say that you right now earn the median household income of about $84,000 a year. No matter where you are, whether you’re Gen Z, whether you’re general pop, young or old, let’s just assume that that’s where you are. $84,000 of household income. And let’s say that you’re going to commit. I’m going to save 10% of my earnings into my 401(k). Now, perhaps some portion of that’s employer match. Perhaps it’s all you. But we just know that you’re going to have about $700 a month going into your 401(k). And let’s also assume that you can earn an 8% rate of return over the long term. You’re going to put this money to work and you’re going to let it work for you. And let’s be real, real conservative. Let’s say that your household income does not change. You just stay at $84,000 this year, next year, the years beyond, and it does not move. What’s so amazing about investing in the stock market, what’s so incredible about letting your dollars work for you is that no matter where you are in your journey, it’s pretty exciting. If you are right now a 40-year-old, that is where you are, and you’re starting out and you just begin putting that money to work, just that 10% has the potential to turn into $663,000 by the time that you get to retirement. If you’re a 30-year-old, just doing that 10% has the opportunity to turn into $1.6 million by the time that you retire. And if you’re a 20-year-old, just saving that 10% because you have time on your side can turn into $3.6 million by the time that you retire. And if you get to retirement and you have a portfolio that is $3.5 million, you certainly are now crossing into that precipice where you are now talking about generational wealth that can last for your lifetime and also provide for the heirs that come behind.

Brian: Well, and I think that this is actually probably to put the cherry on top of the sundae of explaining between those three different ways why this is the easiest. And by the way, it doesn’t have to be an either-or. I know in my own journey a lot of times it’s “and” because so I would encourage everybody to understand even if you’re going to be a real estate investor or you’re going to be an entrepreneur, you’re going to want to “and” be an investor into this broad economy. So, memorize and learn what we just talked about with that 10%. But I did want to talk about for two quick comments. I think like starting a business, the reason I think most businesses fail because you see the stats, they’re dreary about how hard it is to be an entrepreneur is because people just don’t prepare. They don’t plan. They don’t realize that it’s going to take three years to likely catch traction. And if you don’t have that valuable resource of cash to not only fund the new company, but to also sustain you, you’re not giving it a fighting chance, no matter how talented, how passionate you are. So, make sure you’re taking an ounce of preparation before you make the big jump into starting something. That’s why we always talk about putting on your 3D glasses. Real estate, it’s a little bit of an echo. I’ve already said it. It’s all about the purchase price. And you also have to have a financial foundation underneath you. That’s why I just did this because I’m thinking about the Financial Order of Operations. It’s a step seven, eight type thing before you’re getting into, really step around step eight where you have the abundance of resources that you can cover if bad things and you’re using leverage and debt and other things to buy real estate. So don’t skip out on those steps. Get in there, start building your investment portfolio and then use this as an amplifier when you want to go become an entrepreneur, when you use it as an amplifier when you want to get into real estate. You can do all the above.

Becoming an Influencer and Gambling (14:32)

Bo: Now, I do think there was one thing that is worth addressing that came out of the survey because again, we acknowledge, we love that starting your own business was up there. That’s a great way to build wealth. Investing in property at the right time is a great way to build wealth. We love investing in the stock market and letting our dollars work for us. But there were two on here that caught my eye and I was a little surprised even though they were small numbers to see that when asked what are the best ways to build wealth or what’s the best way to build generational wealth, there were two on here that folks actually answered. One of them was becoming an influencer, meaning I’m going to be on TikTok, Instagram, YouTube, fill in the blank and I’m going to become famous, or the other was gambling, sports betting, lottery, casinos. Those are not the ways that people build wealth. Certainly, there are people out there able to have some influence and be able to develop some sort of audience and some sort of following. But it’s only if you develop that following and then you’re able to monetize the following you developed and then you can put that money to work doing the investing in the stock market or turning the influence into a business. And those are the exceptions. They are not the rules. And it’s important to keep that in mind when you figure out how you’re going to begin building your financial future.

Brian: If you’re trying to figure out what’s the mirage in the desert versus what’s the reality, I would encourage everybody, please go to moneyguy.com/resources. Take advantage of all of our free stuff if you’re at the beginning of your journey. You know, last week I got kind of emotional thinking about some of the reviews I see on Amazon for Millionaire Mission because you guys have talked about how I’m changing your life. That’s exactly what we’re trying to do with our resource page, too. I mean, because we’ve added so many different hubs, tools, and other things. You’re crazy if you don’t get in there and take advantage of some of this free stuff so that you don’t have to be like a 22-year-old version of myself where I was like, “Okay, I’ve got this education and I’ve got my first job. Now what?” We are the “what.” So that you can really maximize your billionaire of time opportunity, especially in your 20s and 30s.

Bo: I love that we get to do this. I love that we get to see what interesting research studies are out there, break them down, put the little Money Guy spin, Money Guy flavor on it. But I also love that every Tuesday at 10 a.m. we can sit right here and we can answer your questions because we do believe that there is a better way to do money. So, if you have a question for us, you want us to weigh in on it, you want to get our take on it, make sure you get it in the chat right now. We have the team out in the wings collecting your questions and we want to load you up. So, with that, Creative Director Rebie, I’m going to throw it over to you.

Net Worth Review with Spouse (17:20)

Rebie: Yes, I have a question from Todd S to kick us off. It says, “Hi, Money Guy Show. With net worth review season upon us, your favorite time of year, guys,” it says, “How do you all set up your net worth review with your spouses? What does the agenda look like?” And I know you guys like talking about this.

Brian: Let Bo go first on this because he’s—I have basically, you know, how NASCAR they draft off of each other to really maximize on the super speedways. I have totally drafted off of Bo’s brilliance on this. So, I’ll let you go first.

Bo: Yeah. So, whenever you have any sort of like really important business meeting, one of the things that I like to do is I like to create a sandwich where I go with, “Hey, here’s a good thing and then here’s a bad thing and then here’s a good thing.” And I set these meetings with my wife up the exact same way. So, normally I’ll start with, hey babe, 2025 was a fantastic year. Well, by the way, I will skip work and we’ll make a whole day out of this. So, I’ll take a day off and we’ll make a whole day. We’ll pick somewhere to go get brunch and we’ll hang out and we’ll go for a hike. We’ll do all those things. And while we’re sitting down, I’ll say, “Hey, 2025 was a great year. I just finished up our net worth statement. Let me show you how exciting it was.” And I’ll show her all the accounts and where everything’s listed out and all that. But then here’s where the morbid piece comes in. I say, “Hey, and by the way, I want you to know that if I die, here’s everything you need to know. This is where all the money is. This is the insurance policies. These are the executors. This is everything you need to know if something were to happen to me since I tend to be the financial head of our household. So what you’ll do is I get hit by that bus, you’re going to take this document, you’re going to call Brian and you and the kids will be okay. Like that’s the thing that’s going to happen there.” But then I say in the event that I do not get hit by a bus, let’s talk about what we want to do this year. What is all the travel? Obviously we saved last year. We built, the net worth grew. It was a wonderful year. Now, let’s talk about how we’re going to use money to be a tool to accomplish the things that we care about. One of the things we care about is creating memories both with us together as well as with our family as well with our friends. And so, we will sit down in that review after we’ve gone through all the finances, after we’ve gone through footnotes, and we’ll start daydreaming about, hey, where do we want to go this year? What trips do we want to do? What experiences do we want to have? And it’s so fun. And basically, right there in that meeting, we kind of build out our bucket list for the year. And it’s so exciting. It’s a thing that we get to celebrate the wins we had in the last year and talk about the wins that we’re trying to set up for the coming year.

Brian: Well, and look, like I said, I’m going to draft on top of this. This is legit. You actually need to create an agenda. I created an agenda. What I’m excited about also is that we tried to set three goals for the coming year. I’m excited this year to go back and review what those three goals are. So we can go back and look at it and make this, you know, everybody thinks what I think is interesting. A lot of people think talking about money with your spouse is not going to be romantic. It’s kind of dry. Guys, this can be romantic. This can be really cool because you’re going and breaking bread for breakfast. That’s when we started. We got coffee just catching up because, you know, life’s busy, especially during the holidays. So, you’re getting to just have some coffee time and then you start broaching. Hey, let’s start talking about some of this stuff. And by the time you get to lunch and stuff, this is a celebration. Even if, think about this, I know a lot of you don’t shy away if you’re at the beginning of your relationship, beginning of your career, and you even have a negative net worth because a lot of you have student loans and other things. That’s A-OK. Okay? Because it’s kind of fun. You can still find celebration and moments of things to kind of look at and go, “Well done. We made it through this.” And also that can be the rocket fuel that kind of gives it the extra oomph because a lot of times as a couple you have to do hard things in the beginning when you’re in that messy middle to make it through these things. If you can come together and have a kind of a consolidated plan, it kind of gives you something, you’re in this together. That’s why anytime I talk to entrepreneurs or people who came from a period of poverty or something in their early life, you’ll see their eyes when you ask them after they come out the other side, they get that glazed overlook, but they’re actually reminiscing about how hard that journey and coming out the other side. There’s some sweetness to that that I don’t want you to miss out on. So, go to it. Todd S, you’re exactly right. This is the best time of year. I mean, I get so excited because I love how special the holiday season is and Christmas time and spending time with family, making memories, but then I love that we get to kick off January and we get to say, “Hey, that was great. What else can we do?” And what’s more is coming and choose some moments to create once again special memories even for you and your spouse off of that. Todd, we didn’t even say if you’re wondering because a lot of people like, “This sounds great. What do I use to kind of have the dashboard to make this?” You’re crazy if you don’t go to learn.moneyguy.com. Now, look, we have a free version on moneyguy.com/resources. We have a free net worth template you can go download. But if you want to actually amp this thing up and we’ve priced it very aggressively on purpose because we want this to be affordable. People say, “Why do you even, you know, because I know influencers or financial people, they’re like, why are they always selling courses or tools?” Ours is to amp you up to kind of accelerate your journey. If you saw, look, we make money off it, but it’s not paying that many bills. I mean, just being honest, but it feels like this is to give you the best version of what you’re trying to do and accomplish. It’s a very valuable tool. And it’s the same tool that we’re using for our spouses, too. That’s not an exaggeration. We’re using our own template. Learn.moneyguy.com.

Rebie: Click on that net worth tool. All right. Oh, and Todd, it is Tumbler day. Let’s go. I forgot. But yes, it is Tumbler day. So Todd, since we answered your question, just email [email protected] and we’d love to send you a Money Guy tumbler/koozie.

Brian: Well, I got the sparkling and I got the, I’ve got my water, but I’m keeping it chilled through the koozie function.

Bo: When you go to a fancy restaurant and the waiter comes and they ask you, “Would you like sparkling or still?” When they ask for the water, at fancy restaurants, they go, “Do you want tap?”

Brian: No. They’re making it like they pull it out of the commode out back. They want you to buy the fancy water.

Bo: You’re not going fancy enough because when you go to a fancy enough restaurant, they will say, “Do you want sparkling or still?” And do you know what the correct answer is? Tap. Tap is the right answer. They don’t give you that one because you’ll think you’re saying still and you think you’re getting tap water and you get a $9 bottle of water on your bill. Very frustrating.

Rebie: Good to know. Good to know.

Brian: The only place that’s not true because, you know, we’re spending the holidays down in Florida is Florida. You want the bottled water in Florida. Florida water has that lovely sulfur taste, which my youngest, this is another tell that she might process the world a little differently, likes the taste of Florida water.

Bo: No. So weird.

Brian: So weird.

Abound Wealth Hiring (24:42)

Rebie: Rebie, I have a question for you. With it being the Christmas season, do you have any big Christmas? Is there anything that you specifically want for Christmas? Like this is what I’m hoping to get for Christmas this year.

Rebie: Not really. No.

Bo: Okay. Brian, you?

Brian: No, I’ve asked there, I’ve asked for no gifts except for my sister-in-law because she lives over in Rome and last time we went and visited her last summer and I bought this, I’m actually wearing it today. I have a brown belt that I bought from this artisan leather master over there. You know, they sell them everywhere. You walk around Rome and there’s and I was like, why didn’t I buy a black one, too? Because I bought a brown one. So, I’ve asked her to buy me a leather belt from one of those leather masters over there in Rome. But otherwise, I’ve told everybody, please don’t buy me gifts. I would rather make memories than, I don’t care about the gifts.

Rebie: I’m a little bit in that zone, too. That’s why my answer was boring. But what about you? You have a good answer. You would never ask.

Bo: Thank you so much for asking. What are you going to say? Let me tell you what I would love to have for Christmas this year. Here at the Money Guy Show and Abound Wealth, we are growing.

Brian: I answered this like a real question. Bo’s using this as a gimmick. I can’t wait to hear. He has something to share. Something was going to happen.

Bo: We are growing so so fast. And what that means is we have a lot of opportunities, a lot of things available, and we have a lot of spots that we need to fill here. So, if you’ve not gone to aboundwealth.com/careers, we want you to do that because specifically, there’s one that we’re so excited about. We are looking to hire a hiring and HR manager, someone with specific skills in hiring, recruiting, bringing in candidates, training, HR. So, if that happens to be you and you are a financial mutant or someone in your life would satisfy that, we would love to hear from you. I think it’d be wonderful if we were able to fill that position as a Christmas present to Abound.

Brian: Well, I think this is what’s so cool. I called my mom this morning on the way in to work and you know, and her husband Frank and I, we’ve gotten really close, too. And he was like, “Hey,” because I said, “We have four new employees starting in the first week of January.” And he’s like, “Are y’all recruiting out of specific colleges now?” And I was like, “Actually, we’re trying to hire a new like human resources hiring manager, somebody who will be working directly with us too and the leadership team here.” And then we do want to kind of start fostering better relationships with colleges because we think that we’re just getting heated up. We think this thing’s going to actually accelerate even more. And I get excited because I think that whoever we hire in this position will be able to really go meet some programs out there and they’ll also be working directly with us, help us kind of shape the culture because by the way, that’s the thing is I was doing employee reviews this year. Bo and I were giving pay raises and giving bonuses. The thing that kept coming back was the culture here. And I know y’all are like rolling your eyes. Some of you who are in jobs, it’s just not perfect. It really is. I find out because here’s, I’m the boss man. So, I don’t get invited to anything. I just get to see the fruits of it. But when I find out that some employees are like doing Wrestlemania pay-per-views together, they’re playing pickleball together, they’re doing a card night, I mean, we have all kind of culture and these things are happening organically when you find out couples are doing double dates together. I love it and I’m A-OK that the boss man’s not getting invited to these things. Because I did get my tin of toffee this year which I was very excited from one of the mothers of one of the employees. The world is all A-OK. But I think whoever this hiring, we’re calling it hiring manager HR, it would be a really cool opportunity. But that’s not the only position we’re actually looking for. We have other things that we’re growing. I’d love if you watch the show and you’re like “these guys can’t be like this.” Come meet us. I think you’ll find out that we are very much like the brochure shows and we’d love to keep growing the family here because that’s really the way I look at it. Aboundwealth.com/careers if you want to see what’s available.

Rebie: It’s also up at moneyguy.com.

Brian: Good. I should have gone there first.

Bo: I’m really glad you brought that up. Well done. I feel bad for picking on you about that now.

Brian: Well, you know, I do what I can. Hey, I’m excited to answer the questions.

Car Loan Payment Question (29:22)

Bo: I got another one. Someone in the chat said over/under how many questions the guys get to. So far, we’re this far in and they’ve gotten to one.

Rebie: All right. What are the guesses for anybody actually predicts? We’ll see if anyone does.

Bo: Ask us some easy ones so we can go fast.

Rebie: Well, here’s one from Momto3-162. It says, “We’re in our early 40s with a car loan of $10K at 6.99%. Should we use some of our emergency fund to pay it off? We have $28K in a high yield savings account, but with three young kids and one primary earner, it makes me nervous.” So, why would one want to pay this off right now? Should they do it? There’s a lot to talk through here.

Bo: Yeah. So, there’s a few additional questions, mom to three, that I’d really like to know. I’d like to know what the monthly burn rate is for the family, right? Because at $28K with a one-income household, three dependents in the household, I’m going to argue you likely should probably be around six months of living expenses in your emergency fund to be fully funded if you’re going to have step four knocked out. So, one of the things I want to know is, is $28,000, does that appropriately and adequately cover six months of living expenses? If not, ah, we may have a little bit of an issue. The other thing I’d want to know on the car, 7 or 6.99% is a high interest rate loan, but I want to know for this automobile, did it fit inside of 20/3/8 when you bought it? So, when you originally acquired the automobile, is it being paid off inside the 20/3/8—20% down, don’t finance for more than 36 months, and you cannot have more than 8% of your monthly payment going towards the car? I’d want to know those two pieces of information, I think, before I could answer this really, really well.

Brian: Well, and I would, I love because of this time of year, roll it into that January net worth review that y’all are going to do is because I worry that that $28,000 is going to need to stay somewhat intact because of just three young kids, one primary earner, six months, unless they’re living significantly less than $5,000 a month, they’re probably going to need to keep that intact. So, if that’s the case, when you’ll have your January meeting to go over your net worth statement, you and your spouse, I want you to think about, hey, what can we do unique this year to make this a goal to knock this $10,000 off? Maybe that means when you’re writing down your vacations for the year, you say, “Instead of going on a Royal Caribbean cruise or taking the family to Disney World, why don’t we go to the national parks or go camp?” You figure out a way that says, “Hey, well, there’s two grand right there that just showed up.” And you start getting creative with things like that. That way, you’re not taking away the memory building, but you’re getting very aggressive with knocking this out and you’re coming together as a family to figure out what unique things we’re going to do to make sure we’re tackling these goals head on.

Bo: All right, I think this is super super valuable because we got some additional info here. $7,000 burn rate. So $7,000 times six, so $42,000 ought to be a fully funded emergency fund and it did not fit into 20/3/8. So, this remaining auto loan is even outside the confines. Mom, I think that what that tells me is you’ve got to make some pretty difficult decisions. And I don’t know that one of those decisions necessarily would be to use the emergency fund because I think you need that emergency fund.

Brian: No, I think this is where y’all have to sit down. I love the timing. You got lucky in the fact that the timing is y’all sit down as a couple and figure out, okay, does this mean we’re just not eating out as much for the first six months of this year or three months? You figure out what your timeline is and what these sacrifices are, but be united in this. And then think about if you need the power source for the sacrifice is think about how much easier it’s going to be for your life when you don’t have that car payment anymore.

Rebie: Yeah, that was good stuff.

Bo: Can I say one more shameless plug?

Rebie: You may.

Bo: Only because we just sat down last week, two weeks ago with this wonderful young couple and they were amazed. This was on an episode of Making a Millionaire and it was wonderful. And one of the things that they had, they had this car issue. It wasn’t the exact same issue, but it was an automobile issue. I think you’re going to be surprised to see what we told them. Hey, have you thought about this? And when we said it, I think both their eyes lit up like, oh, did not—Well, one of their eyes lit up, the other kind of looked down. I did not think about that. So, if you’re not subscribed right now, make sure you subscribe to the channel so that when we release Making a Millionaire episodes every other Monday, you get notified that it’s coming your way because this one was a lot of fun and I think it’s going to be a good one.

Rebie: All right. Momto3-162, if you would like a Money Guy Tumbler as just a thank you for being here and since we answered your question, just email [email protected].

Roth IRA vs 401(k) Conversion (33:51)

Rebie: Next question is from Tyler Weaver 6860. “I just found out that our company will allow us to convert all of our pre-tax money to Roth IRA and just have the tax consequence. Would that be more beneficial than just opening a separate Roth IRA?”

Brian: No.

Bo: No. Because if you did that, you could do and technically you’re saving less money if you did that.

Brian: But I don’t understand. Look, it’s great that they allow in-plan conversions essentially because this allows potential for even more planning in some other ways, but what I like, assuming you’re not over the earning limit for Roth IRA contributions, I like the fact that you could just contribute, go open up a Roth IRA, contribute, and you didn’t have to cannibalize your other retirement resources to make that happen. It’s an “and” opportunity. That’s why when you look at the Financial Order of Operations, truthfully, you should have probably landed on step five first, looked at that Roth IRA because you know why we love step five and a Roth IRA even more than the employer Roth accounts is because you control the custodian. You control what type of investments because a lot of times your 401(k), now there’s some good ones if you work for like a Fortune 500 company or you work for a very proactive employer who’s gotten the best retirement plan for their employees possible. But there’s a lot of 401(k)s that’s the golf buddy of the owner of the company and so they’re just not as good as what you might choose for yourself with index funds, low-cost providers and other things. Don’t skip out on step five. You’re jumping over here to step six and maxing it out before you even got the Roth IRA covered up.

Bo: I think one of the things we have to be careful of, especially financial mutants, is this thought process that oh just because I can do something means I should do it. Oh my 401(k) is now allowing for me to do in-service conversions of pre-tax dollars. Maybe I should. Or ooh I can now convert my employer match to Roth. Should I? Or ooh I have after-tax or whatever that thing may be. Just because you can do something does not mean it’s what’s in your best interest because let’s think through this. If you were to convert those pre-tax dollars, you are now incurring more of a tax liability than you previously had. Where if you could just go contribute straight to a Roth IRA directly, you’re using dollars that have already been taxed. So, one of the things if you’re really thinking through this, Tyler, is I would start back at the beginning and I’d go, okay, should I be funding a Roth IRA? Can I fund a Roth IRA? Awesome. Do that. Now, when it comes to my 401(k), when I’m in step six, should I be doing pre-tax 401(k) contributions? Just switch over to Roth 401(k) contributions and build those Roth dollars moving forward. I don’t know that generating more taxes necessarily makes a ton of sense if, just because you can, especially if you have the opportunity to build Roth directly otherwise.

Brian: And that leads to just kind of close it out. Go figure out what you should be doing. That’s why we’re one of the content creators who actually gives you some thoughts and nuggets to think about is if you’re young and you have income that’s less than 25% gross rate, your marginal rate for both federal and state is less than 25%, probably the Roth is your friend on those contributions. If you’re between 25 and 30%, you’re kind of in that gray zone. That’s where you’ll take into account when you want to retire. You’ll take into account how old you are currently and other things like that that influence. And if you’re at an income, a marginal rate both federal and state that’s greater than 30%, now you want to think about hey maybe I do want to take advantage of traditional contributions. So I take my tax deduction now because hopefully I’m going to be able to play some tax arbitrage when I retire early before required minimum distributions and lower my taxes later and then do some Roth conversions at that point. So a lot to think about there. But I don’t know that I think cannibalizing my existing retirement to do Roth is the right decision here. I think I’d give you the “and,” go add Roth IRA contributions or go back because that probably should have been before you got into step six.

Bo: Love it.

Rebie: Love it. Tyler Weaver, I just repeated you. Love it. Love it. Love it. I gotta get my responses to not be the same as yours. I know. I got to come up with another one.

Brian: That’s all right. Well, we can turn it into a melody. Y’all ever—Now, look, I’m Gen X. We’ll talk about bring it back to generational. I remember one of the things on youth camps, we’d have like a four or five hour bus ride and you’d say, “Hey, you start making a sound and somebody go and then somebody go” and you basically create a symphony of just sounds. So, if y’all were saying “love it” a different way, it kind of creates a sound.”

Bo: Anybody else do that on the bus? Okay, this is a generational—This is the first time I’ve heard of this. Was it pretty cool?

Brian: I mean, it was fun for like 10 minutes. I mean, when you’re on a 4 hour, six hour bus ride in a church van where it’s all, you know, pleather or vinyl and, you know, and the seats are all piled in. You do some fun things like that. You ask the truckers, you give them a little “blow the horn.” You know, there’s all kind of fun things.

Bo: I played that one. I know that one.

Brian: By the way, I know we’re redoing some of the pictures in the halls. One of the ones I hope that stays is that we had, now we only had one of these, we had an offsite firm retreat planning retreat and Bo and I literally rented a van and drove the whole firm in like a 12 to 15 person van and you may be wondering man how expensive is it to pay a driver to drive your whole group down. You know I was a professional—nobody ever notices the Easter egg above Rebie, maybe the camera doesn’t show it but there’s a picture of me driving my old school bus back in college. Why would you hire somebody when you have that skill? When you have that talent just available.

Rebie: Yeah. Should I put that selfie in the hallway of you in the van?

Brian: I love that selfie. That selfie made me so happy.

Rebie: I have one spot for a vertical photo that I don’t know what to do with. I could put the selfie. We’ll think about it.

Brian: Pretty good.

Using Home Sale Proceeds (40:25)

Rebie: All right, let’s go on to the next question from Travorton. It says, “We need a bigger home. We can put 20% down and still have good reserves. We can net a few hundred K from selling our current home. Should we invest the proceeds or put more down to lower the mortgage?”

Bo: Age old question. I’ve done well on my last home. And because I’ve done well, I’ve got a lot of equity in that home. I’m going to sell it. Well, what do I do with the equity? Guys say I have to put at least 20% down, but should I put more? Is it better to put down 40%, 50%? Brian, how would someone go about deciding the answer?

Brian: Well, this is that classic. We’ve even made fun of ourselves on this financial planner answer: it depends. It depends. And that’s why I, once again, people say why do you have tools on your website and why do you sell things is because people need the answers to this because here’s what I don’t know Trav is I don’t know if you’re ahead of the curve, behind the curve or right where you’re supposed to be because wherever you are determines the answer to this question is because if you’re a person that the only great thing you’ve done financially is you bought the house at the right time and now you’ve built up this money, this could be a great way for you to catch up on the retirement savings and other things that you might have skipped out on because you have no investable assets outside of your primary residence. So, that’s why if you did the Know Your Number course and you realize you’re way behind on having resources for retirement when you want to retire, this might be a catch-up opportunity. Now, there’s another group of people that are going to realize they’re going to do this and they’re going to say, “No, I’ve been pretty even keeled the whole way. The guys told me when I was 22 to start saving, investing. I’ve done that for the last 10 years. Now I’m in my 30s. I’m way ahead of the curve.” Pay that thing down because it’s not like you’re getting cheap interest rates right now on mortgages historically. Well, historically, you’re still in normal territory, but if you look at where interest rates were the last 10 years, it’s not a deal right now. So, I would probably if you’re way ahead of the curve, I wouldn’t want to be paying interest rates at that level. So I would pay down the mortgage so I could have less payment and I could, you know, since I have so much working behind me already. That’s the exercise that’s going to need to happen. That’s the beauty of financial planning is that every one of us are unique. We all have different needs. We have come with different resources. So we have to meet you where you are, do kind of a financial triage and then use the tools and resources we have so you land at the perfect place for your situation.

Bo: Yeah. I think it’s so interesting people, I see because I see this in like the Reddit thread all the time. People are like, “Hey, should I do this or this?” Depending on the variables that Brian just defined, our answer would change. In one set of variables we’d say, “Hey, yeah, you probably should put 40% down on the house.” In another set of variables we’d say, “Yeah, only put down 20%.” And it depends. And that’s what I love about financial plans. What I love about personal finance is that it is so individualized and so personal for your unique needs and circumstances. There is often not a one-size-fits-all answer for everybody.

Brian: Well, and that’s, I even think about some of my retirees. They have the assets to like pay cash sometimes and I want retirees to be completely debt-free, but I’ve had situations where a client, from the tax impact of getting those assets into cash was so high that we came up with like a three to four year plan. We took a mortgage and then we had a 2 to three-year plan to figure, because the taxes would have just eaten them alive if we’d have done it all at once. That’s the beauty is that you have the ideal but then you take people exactly where they are and you try to figure out hey from, based upon your specific situation. How do we maximize this from a risk-adjusted balance standpoint so you land up in the best place possible? That’s what a financial planner does. If they’re only doing asset allocation work for you, you don’t really have a financial planner. You have an asset allocator.

Bo: A money runner.

Rebie: Yep. Yeah. No, I like that you talked through some of those variables because there are a lot. But hopefully that gives Travorton some food for thought.

Brian: Well, I love it because I think this is one of the things I love about my career is that I think about when people ask questions. That’s why I like doing Making a Millionaire too is that people come to us and I immediately, it’s like I see the levers and depending upon how much you pull this lever it’s going to impact this over here. And like I had dinner, Sunday night we went to a neighbor’s to celebrate the, you know, Hanukkah, the first day they invited us over to this dinner to celebrate the first night of Hanukkah and one of the, I loved we had all these neighbors there. And one of the kids from college are home. Okay. And one of them, she’s only in her freshman year, but she’s an accounting major and she had just taken like an intro to accounting class and she was like, “Yeah, I’m having trouble with the debits and the credits.” And I was like, “Look, I was the same way when I got introduced to debits and credits. I didn’t know what went where and it all was confusing.” I was like, “But you do this long enough and it’s just going to become like second nature to you. You know where assets go, you know where liabilities, you know where expenses and all the things.” It’s the exact same way when people present to me all these things about their life decisions. It is no different than the debits and credits. I immediately see the levers that they should be pulling in my head. And that’s why when people ask you, “How long does it take you to decide this?” I’m like, “It takes like 5 minutes and 20 years.”

Brian: Yeah. And 30 years of experience. So, I mean, it’s funny how your brain and human nature can kind of learn how to navigate these things.

Bo: Yeah, that makes sense. That’s why we’re asking you the questions.

Rapid Fire Questions (46:13)

Rebie: Would you guys even want to do a rapid fire question round?

Brian: I want to—I think people—That’s why when we’ve done collabs, I love just, you know, answering questions. I mean, let’s flex this brain. Rapid fire.

Rebie: So you’ve taken like I don’t know a good four, we’ve taken four to five minutes to answer and ask these questions. Rapid fire is like you’re asking and answering it in probably 10 seconds.

Brian: Are there any boundaries, right? Well like what are y’all trying to, what’s the goal?

Bo: Get like I can’t take more than 20 seconds or 30 seconds. She asks a question and we say it depends, next. It depends, next. It depends, next. But we ought to have somebody because if we did something like this would you answer it in one to three sentences or—

Rebie: Okay, 10 to 15 seconds. Okay. Okay. We can, let’s try this. Let’s do an experiment. I mean, I don’t have it today, but I mean, we were just joking about it. I mean, I guess you could try to answer that. You know, ask us the next question. Let’s see if we could rapid fire answer, but do a rapid fire answer and then you can do a full-fledged Money Guy answer.

Brian: Okay. Okay. That’s—I like this. I like it. I’m game. I’m down.

Rebie: Because we, I don’t know. We’ve talked about doing it like for, you know, change it up, but I’m like, but do they actually do it because sometimes I’ve seen interviewers give you rapid fire questions before, and let’s just say they were not as rapid as maybe—

Bo: We were thinking, “All right, I feel they were good, though. They were great answers.”

Rebie: Okay. This one, this question is from apstats6198. You want to go first or second?

Brian: We ought to flip a coin.

Rebie: I think Brian’s going first. Bo’s going second.

Brian: Okay, that’s the one I’m going to say.

Rebie: All right, here’s the question. Get ready for your 10-second answer. “Is there a point of having a high yield savings emergency fund if your brokerage account is large enough? Even a market significant decline wouldn’t reduce my emergency fund quote unquote below a comfortable threshold.”

Brian: Yes. Because what will happen is is even though you have a large enough brokerage account, if it’s down 20, 30, 40%, you will hate yourself to have to sell that. And that’s why cash is like the oxygen we breathe. It is taken for granted until you have none.

Bo: Yes, you should have separate liquid cash available. I do it inside of my brokerage account. So, I’ve got a big brokerage account. Inside of that, I keep liquid cash readily and available.

Brian: But that’s not what he’s applying. He’s implying that he’s going to keep investment, he’s going to have invested assets. And I had a neighbor, he listens to the show, so I have to be careful because he knows he’s a dear friend of mine, but he used to make this. This is what we call the access to cash trap. And I covered this extensively in the Millionaire Mission. The access to cash trap is a big one that financial mutants fall into all the time. I think about—Okay, cut. And then now we’re going to just kind of open.

Rebie: Oh, yeah. No, you both did 15-second answers. I’m very proud. Nicely done. Carry on.

Bo: You and I, we bought another commercial property earlier this year.

Brian: Addicted. Addicted.

Bo: I just think about the reason we were able to move on it and the reason we were able to capitalize and jump on an opportunity and it was a unique market opportunity. It was the cash and liquidity available that we were able to do that. Had that same opportunity become available, but we did not have cash. And let’s say that the market was, say it was 2022 and the market was down, it was in a depressed spot, we likely would not have been willing to free up the cash necessary because we would have had to take losses in the portfolio to do that. So having the cash available removes you from being able to, removes you from having to one, make emotional decisions and two, not be able to make opportunistic decisions when opportunities present themselves.

Brian: That’s one of my favorite things and I, once again I don’t mean to sound like a plug but it’s just I know I put a lot of thoughts into these things. Millionaire Mission, I talked about how cash is this sleeper wealth builder that people don’t realize. So many financial mutants get this wrong in the fact that they’re trying to. Now look, I’m not saying do this. This is more of a step eight, step nine type thing of the Financial Order of Operations. But if you are at the point in your life where you’ve made it through the Financial Order of Operations, running a little fat on cash is actually a good thing because when everybody else is broke as a joke, that is the deals of a century. That’s the ones. I mean, there’s some things I’ve gotten to buy in downturns that I look back on and go, “Yes, this is why having cash, this is why Warren Buffett, everybody watches to see where his private jet has flown to when the economy goes to crap is because Uncle Warren gets in there and he turns into the JP Morgan of finance.” Yeah. Well, you know, because that’s what JP Morgan bailed out the United States, you know, and he got some really sweetheart deals out of. And I think that Warren Buffett follows in that same mentality. Having cash when nobody else does is a superpower.

Bo: That’s right. That’s great.

Rebie: Another rapid fire. I think we do it. Yes. But first, I’m going to give apstats 6198 a Tumbler. If they would like one, just email [email protected] since we answered your question.

Active vs Passive Investing (51:26)

Rebie: All right. We’ll try our 15-second answers again for fun. TheWikinator21 asks, “Hello, money guys. I get a financial advisor through work. They suggest a more active approach to my 401(k) instead of the passive approach I’ve been doing, target date retirement and S&P 500. Thoughts?”

Bo: Why does this financial advisor think that active management will outperform when we know that over a 15-year time period, 87% of active managers underperform their indices? I think it’s a fool’s errand.

Brian: Go to spiva.com so you can load yourself up with all the research on this and then ask the why. Is there maybe a specific thing from an asset allocation standpoint and access to different, because different buckets do different things and different allocations can be part of that. But otherwise, I wouldn’t buy into the hype. I like index funds.

Bo: We think that you can be a very successful investor just by being the market, not trying to beat the market. And oftentimes when we try to beat the market, we actually underperform the market and we end up with subpar investment results because of that.

Brian: Is it spiva.com or is it spiva.org?

Bo: I don’t know the answer to that. The last of the three and the more active you try to make your investment portfolio, the more you allow behavior and emotions to enter into the equation. And if you can do stuff like have a well-diversified portfolio across low-cost, oftentimes passive holdings, it removes you from getting emotional every time you make your contribution, every time you put your money to work. And the more emotion you can remove from investing, the more emotion you can remove from your financial life, likely the more peace you’re going to have around the decisions you’re making with your finances.

Brian: Now look, I want to take it from the—this isn’t part of the 15 seconds, but I want to play devil’s advocate here is that like if I had somebody who was seven figures and they had all target retirement, I would be trying to make them do better asset allocation outside of target retirement funds. So we could start maximizing tax deferred accounts, after tax accounts, and then tax-free accounts for what they’re all good at. So maybe that’s going on as well.

Bo: Yeah, I guess we have to bifurcate. Do we mean active like actively managing or active like oh I’m just going to move from a generalized target retirement portfolio to a more specialized asset allocation that matches my account structure, my risk tolerance, my risk capacity, my unique goals? If that was what the question was asking, I think oftentimes it does make sense to do that. I was thinking active in terms of like active funds, so that’s what—

Brian: I think we covered all angles there and we still—well I’ll tell you what rapid fire does make us do, it turns us into two minute answers versus five minute answers.

Rebie: You had to pack a lot into the beginning. I am impressed. A couple people are saying rapid fire failed because you’re still doing long answers, but that’s not true. No, I want to say they have successfully taken on the challenge. Like I could shut it off after 15 seconds, but I just, I always like, I feel like I’m shortchanging you guys in the audience.

Bo: That’s what I felt. I like, I could do 15 seconds, but I feel like the answer’s more valuable than 15.

Brian: This is also, you know, doing the book tour, I did a lot of traditional media. I hated it. I’m just being honest with you. Because that’s one of—I hated going on TV shows and they would cap you at 30, really 30 seconds to two minutes depending upon what the show was doing. At most you might get four minutes if they were trying to feature you. But I loved—you want to know my favorite thing about the book tour and we’ll probably try to figure out how I can do more of this in the future. I like going on a long form podcast and other people, content creators because then you get to have a conversation where you can talk for 45 minutes to an hour and you can actually share with people your knowledge and the wisdom and what you know. Whereas I find that when I do these little press junkets, what the heck are you going to get out of me in 30 seconds to two minutes? I mean I’m barely telling you my name with my southern drawl. Like, “Well, my name’s Brian. Been doing a podcast since 2006. Yeah, I got a few designations, but—All right. Thank you for your time, Mr. Preston.” Like, all right, that was good. They were probably like what the heck was that? Can you imagine the other guy up there like that guy didn’t even tell us anything?

Bo: You actually did very well with those. But I agree. We found we just like a longer form piece of content, you know, longer form conversation sometimes. Nothing wrong with that.

Old 401(k) Conversion Question (57:01)

Rebie: All right, we do have another question from Curtis O. It says, “Hello, money guys. I have $100K in my previous employer’s 401(k). I’ve been keeping it there, but recently I was told that it would be best to convert it to a Roth IRA. Is that a good idea?”

Bo: It depends. Look how fast I got that one in.

Brian: No, this one really, this is a financial planning question. How good is your employer’s 401(k)? And you know, and also what’s your tax rate situation? Where are you at in your stage of life to save for retirement? There’s a lot that’s going into this.

Bo: There’s actually two separate questions happening. Question number one is where should I house my dollars, right? And that’s okay, is your current 401(k) good? Should I roll it? Or is my old 401(k) good? Is my current 401(k) good? Or should I roll it to an IRA? That’s question number one. We actually have a deliverable for that. If you go to moneyguy.com/resources, we have a deliverable. It’s a little flowchart that walks you through what to do with an old 401(k). And it says, “Okay, is this true? Then do this. Is this true? Do this?” Just kind of flows you down through it. It’s a very helpful resource. So, you may decide to convert it to Roth and you may convert it to Roth inside of your current 401(k) or you may convert it to Roth from your old 401(k) into your new Roth 401(k) or you could convert it from Roth from the old 401(k) into a Roth IRA. Any of those three scenarios after you’ve decided where you want the dollars to be housed is going to be a taxable event. And whether to convert or not convert depends on your unique tax situation. Does it make sense for me to turn pre-tax dollars into Roth dollars today? And for a lot of folks while they’re still working, while they’re in their earning years, it’s likely that they’re in a higher income situation than they will be when they hit retirement. So for most folks, doing large Roth conversions don’t make a ton of sense until you get post-working years when your income drops and you can take advantage of lower income, lower tax bracket years. But only you’re gonna know the answer to that based on your unique income situation this year and years moving forward.

Brian: But also, you have to be kind of frothy on cash. You know, if you’re going to pay the income taxes on the Roth conversion, even if you’re in a 12% bracket, I mean, there’s going to be some, you know, you just want to make sure you don’t gut your emergency reserves. You don’t cut it so close that you get yourself in a pickle of a situation. But that’s why “it depends” is so powerful.

Rebie: That’s right. No, that’s good stuff, too. I don’t mind when you guys say it depends. Can I just say like that’s the point and then you like you can expound and give variables. I like that it’s personal finance. Curtis O, thank you for your question. If you would like a Tumbler, email [email protected] and we would love to send one to you since we answered your question on the stream today.

Closing (59:48)

Rebie: Remember, we will be back here even with the holidays and vacations and all the things. We’re going to be back here every Tuesday at 10:00 a.m. Central with content for you. Our normal content release schedule will be happening here on YouTube and on podcast platforms. So, be sure to subscribe and follow because yeah, we’re not going to slow down. We still got all kinds of good stuff for you coming whether you are in your normal schedule or on your holiday schedule. So, be sure to keep watching and we’ve made all this for you. So, enjoy.

Brian: Well, I get, I mean hopefully y’all can tell I am in the best mood possible and I think it really is a combination of during this time of year. Now look, I’m sad that we don’t get more daylight. It does stink being in the central time zone and being this far east on central time zone. This is the worst part of it. But I just get so thankful just all the things we get to do. We get to make a living creating content. We get to keep expanding the firm and growing our people and they all seem to be very happy and fulfilled. It just feels like every morning we wake up, we get to do some little part of something good. And I don’t take that for granted. I really don’t. I feel like we are very blessed and we’re very thankful for every one of you guys. So, I hope that we tell you that enough and you feel connected to us that we absolutely love doing this. I love that I get to enjoy working with everybody who’s on the team, too. We are very blessed, fortunate, and thankful, and you make all that happen. So, I hope that you guys can see that that love goes in everything we create. And if you’re not getting in there and taking advantage of our free stuff, please consider this an invitation. Go to moneyguy.com/resources. I mean, we just talked about on last live stream our brand new, well, it’s not brand new, it’s updated, more tool, more functionality, more usefulness has gone into making this website even a better version of yourself. Get in there, maximize what we’ve created for you, and know it was built with love. I’m your host, Brian, joined by Bo, Rebie and the rest of the content crew. Money Guy team out.