Should He Give Up Job Stability to Build His Dream?

Introduction: Meet Collin, Financial Analyst (0:00)

Collin: I’m 28 and I’m a for now a financial analyst because as part of my job I had to analyze how profitable our department is and found out that it’s not that profitable.

Bo: Oh no, you literally analyzed yourself out of a job.

Collin: I have this passion for talking about finance with people. Seeing if I can grow that as like the main career rather than a side thing. One of the things that’s somewhat on my bucket list is to record and release an album. Very different from financial coaching.

Brian: As soon as you tell us where you’re going, the FOO falls into place very easily for you. I can tell by your reaction you haven’t completely figured out what you’re going to do yet.

Welcome to Nashville (0:38)

Bo: Are you from Denver originally?

Collin: Colorado Springs, which is about an hour away. Yeah. Yeah. Air Force Academy. Yep. Right. Yeah. Right. My high school was like on the Air Force Academy.

Bo: Never been to Nashville before?

Collin: No, only Memphis. Like on a slight trip just going through the state, but we’re going to be checking out Nashville.

Bo: Be careful. You’re going to fall in love with it because it’s one of the coolest places on the planet.

Collin: Yeah. I’m also huge into music, too. So, we’re excited about checking out all the music and everything.

Bo: Listening music, playing music. What’s huge into music, man?

Collin: Both. Okay. Yeah. Big into playing music. Both like mainly drums is like my main instrument, but a little guitar.

Bo: Did you know we have a drummer here on the Money Guy team, right? Yeah. You know, you sent us all your stuff and it’s super impressive, right? Like, so you sent us your net worth statement, right? And it was awesome kind of seeing where you are, what you have going on. Do you recognize like you’re way ahead of the curve for your—because how old are you and what do you do for a living?

He Analyzed Himself Out of His Job (1:32)

Collin: Yeah, I’m 28 and I’m a for now a financial analyst.

Bo: Okay, we got to talk more about for now.

Collin: For now because as part of my job I had to analyze how profitable our company is or our department is and found out that it’s not that profitable.

Brian: Oh no, you literally analyzed yourself out of a job.

Collin: Exactly. Yeah. So analyzed myself out of a job. I have about a month from now before I’m going to be fully let go and then I get at least three months severance which is—I mean that’s nice.

Brian: I mean, it’s very noble, but was there not any part of you in your report that from a self-preservation standpoint, you said, “Hey, why don’t we cut off this section—we’re not very profitable except for this one department saving you all this money, man. This department, we probably ought to protect this at all because it’s rich.”

Collin: Yeah. I mean, I didn’t expect that they were going to fully lay people off with that. So, I mean, I’m lucky that I still get a little more time before being laid off because a lot of people were right away.

Bo: Okay. So, financial analyst—is the industry in which you work like a super niche industry or is it like a broadly applicable skill set where finding another job is not going to be a problem?

Collin: It’s pretty broadly applicable. There’s a lot of different companies that you can work for that are looking for financial analysts. The thing is it’s a really hot field right now. So, a lot of people are trying to get into that. Okay. But now that I have a little bit of experience that’s probably going to help put you just a few steps in there.

Bo: Have you already started that process? How’s all that going now? Because this is relatively new news and you’re trying to figure out okay what’s the next step look like right?

What Are Collin’s Next Steps? (2:56)

Collin: Yeah I haven’t officially applied for anything yet but I’ve been looking at a lot of the positions knowing that I have a month out. I’m torn on between applying for senior analyst positions.

Bo: Are you a senior analyst now?

Collin: Yeah. And with that I’m making right now $80,000 but a lot of other senior analyst positions seem to be a little bit higher so there’s a good chance that I might be able to get like a little bit of a raise there which would be nice.

Bo: Awesome.

Collin: But I’m also torn a little bit too because I know right now I have a good situation knowing that I’m in a pretty good spot financially to maybe take a little risk because I also don’t have kids or any extra huge responsibilities. So I’m also interested in trying to build a financial coaching practice. Okay. Because I love talking about finance with people and one of the reasons I applied for this show and getting your guys’ advice on stuff. But I just love talking finance with people and I have a big passion for that and I’ve done some coaching for people for free just for friends and family and people that just might need assistance. So I’ve done some of that and I’m interested in pursuing that a little bit and maybe using a little bit of that severance time to start building up a little bit and seeing if I can get anything. If not, still then applying for other analyst positions.

Bo: So one of the questions it sounds like you want to answer is like how to handle time in between jobs. Like what’s the appropriate way to tackle that?

How He Saved $200,000 by 28 (4:13)

Bo: Well, let’s talk about where you are presently, right? Because you’ve done—obviously you said, “Hey, I feel like I’m in a really good spot right now.” And you were kind enough to share with us a net worth statement. We can see right now that you have a net worth of $200,000 at 28 years old. How did you get there? What—for folks that are listening out there right now that maybe are just starting out, they just graduated college. How did they get to where you are right now at 28? And I don’t even see any debt on here either. So, I mean, this is really bizarre.

Collin: When I first graduated college, I was watching a lot of Graham Stephan at the time and he was fully encouraging like if I was young, I’d be staying at home and trying to save up a little extra money as much as I can—save 90% of my income for a year or two. I’m like that sounds fine, I’ll do that. I’ll sacrifice. Makes sense. I can do that. Yeah. So, I really saw the compound interest being a huge incentive there to stay at home. So, I did that.

Bo: How long did you do that? Like how long into your career did you live at home?

Collin: Well, it’s interesting timing because I first started making like $38,000 a year right out of college, which was a little tougher. As I was getting closer to moving out probably within like a year or two, that’s when COVID hit.

Brian: Oh, wow.

Collin: So, then I’m like, social life’s gone anyways. So, might as well stay at home a little longer.

Bo: I love it.

Collin: So, I ended up staying at home a little longer. About another two years. It never like there was no end date like we all expected. But ended up just staying at home and saving up a lot of money and eventually moved out—moved out with my brother. So ended up still saving money there and we just rented a townhome and just split the cost of that.

What Was Your Highest Savings Rate? (5:46)

Bo: Do you remember when you were living at home? What was your savings rate? Because obviously you started out at $38,000 but I imagine income increased. Like how much were you able to save by living at home?

Collin: It was literally like 90 to 95% of my income.

Brian: Gosh, the whole FIRE movement and everything. You extinguished some debt from that too, didn’t you have some student loan debt that you took care of?

Collin: Yeah, I did something that’s maybe a little bit of middle ground between your guys’ mindset and Dave Ramsey’s mindset. I saw the big incentive of the people that continue to just invest and take the advantage of the extra arbitrage that you can take of just having a higher return in the market. So, I let that grow and then saw eventually just last year that my income or the amount that my brokerage had grown was enough to fully pay off my student loans. Like just the growth on it, just the growth on it was enough to pay it off. I was like, “Okay, well, I can—I’m playing with house money now, right? I’m playing with house money.”

Brian: I’m not going to get mad at you for that.

Collin: Okay, I’m not going to fight on that at all. So, yeah, I sold the growth there basically.

Current Savings Rate and Annual Savings Plan (6:49)

Bo: Okay. So, you’re saving 90%. That was at least when you started out, like when you’re living at home, but even it’s not like you moved out and your behavior changed a ton. What does your current savings look like now? Like how are you building now as someone who’s not probably at a 90% savings rate anymore?

Collin: Yeah. So, when I first moved out with my brother, I was at like 33%.

Brian: Still a great dude. That’s awesome.

Collin: But then after that, he got married. So then he ended up obviously living with his wife and then—they didn’t say, “Hey, just come.”

Bo: You were thinking, “This is great. Third roommate. We’re going to cut rent even more—go in thirds.”

Collin: Yeah. But yeah, so now moved out to my own single-bedroom apartment for myself and still trying to get as much as I can because my emergency fund’s a little bit lower. I did lower my savings rate some. I know I’m kind of doing two things at once with saving the cash. But right now I’m—yeah, 18.5% is like my total number that I also came up with that as well.

Bo: I love it.

Collin: For what my current savings rate is while I slow that below the 25% just to rebuild the emergency fund.

Bo: So, we have about $4,800 going into your Roth 401(k). You get an employer match and based on your income below $100,000, you get to include that. So, you have about 3% or $2,400 match going in. You’re maxing out your Roth at $7,000 and then you’re doing HSA for $600. So, total savings is about $14,800. So, where would you say you are in the Financial Order of Operations? I mean, now when I see this, I kind of have a good feel about it. Where do you think you are in the FOO?

Collin: So, I know I’m in the rebuild the emergency reserves stage, but I know I’m also doing wrong.

Brian: He’s dabbling.

Collin: I’m dabbling in a little bit of both.

Emergency Fund Reality Check (8:29)

Bo: Well, when we look at your cash right now, you have about $14,000 in cash on hand. Just so we know, what’s the monthly burn rate? How much does it cost for you to live your life on a month-to-month basis?

Collin: $2,600 a month.

Bo: $2,600 is like bare minimum needs, no fun.

Brian: Now, you’re falling into one of those things I always ask people. You’re giving us the bare bones what you could make it if you basically probably peeled some potatoes, threw them in a pot of water. I had a different number from our pre-show planning. What’s the realistic on what life costs though a month?

Collin: Probably closer to $2,900 if I get a little extra fun in there.

Brian: Not $3,500. Is that what you came up with? I have numbers behind the scenes.

Bo: Let’s go to the tape. Yeah. When we looked at your budget that you sent, it was great. But we know that right now your take-home is right under about $4,600. And then you did a great job of kind of breaking out your expenses for us across rent, utilities, groceries, car maintenance, insurance, gym, giving, and one-offs, right? So we have all of these needs. We’ve got your investments. We can put a pin in that for a moment. And then we have the wants, things like eating out, shopping, equipment, lessons, subscriptions, gifts, travel. So we ask you like what your living expenses are. You threw out a number like $2,600. That means you’d be completely comfortable first wiping out all those wants—like no eating out, no shopping, no equipment, no lessons, no subscriptions, no gifts, no travel.

Collin: I mean, I’d like to have some of that.

Bo: Okay. Okay. And then you even said $2,600. That’s going to trim another $1,000 even out of the needs bucket, right? And you’re like, “Oh, okay.” So, whenever we tell people this all the time, they’re like, “Oh, well, if I had to really cut to the quick, this is—when it comes to step four of the—we have the thing up—when it comes to step four of the Financial Order of Operations, we really want you to have depending on your circumstance, 3 to 6 months of living expenses, but true living expenses, not like, oh, what would it look like? Because at the end of the day, what we hope is when unknown unknowns happen, like I analyze myself out of a job. We don’t want your lifestyle to have to dramatically change. We want you able to maintain the same lifestyle as you transition from this season to the next season. So when we look at your overall financial circumstance, I think that your true spending is somewhere closer like $4,000—$3,500 to $4,000. And so if we’re just going to do some little math not in my head on my calculator, that means that we’re probably going to be somewhere around $40,000. No, that was bad math. $3,500 times 6 months, it’s going to be about $21,000, right? So, somewhere around $20 to $25,000 is probably where you would likely need to be with emergency fund. And we can see right now you’re at $14,000. Not bad, but we just need to boost it up a little bit to keep you safe. It does give me a little bit of pause though because one of the reasons we want emergency funds there is because we want to be able to plan for the unknown unknowns. And it sounds like what you just said to us like 3 minutes ago is you are living in an unknown unknown. So, in that realm, does it make you nervous that you only have I would say maybe 3 months of living expenses or are you not so concerned about that?

Collin: A little concerned, but I also know that I’m going to get 3 months severance here soon, which that’s going to be closer to $20,000. Great. Around $19,000. That’s before taxes, so after—we’ll see. I think that’s going to add a bit of a buffer as well. And I had to dip into my emergency fund because of some of those one-off expenses, which like taxes ended up being more last year because Colorado had some incentive that they would give every year and I found out that it was renewed. But then I didn’t see that they had an income limit on that and I made too much, which I mean good problem to have, but it caused me to unexpectedly have a random extra amount in taxes.

Bo: Sure. So the idea is with this three months of severance, it’s nearly $20,000. In your mind, you’re compartmentalizing, okay, I know that my emergency fund is probably underfunded to touch. I’m going to take a big chunk of that and dump that in my emergency fund to get it tidied up.

Collin: Yes.

Bo: Okay. Awesome. Yeah. Exactly. Well, that makes me feel a little bit better.

Brian: Because I could get it well over the $21,000 that you calculated out.

Roth Breakdown (12:31)

Bo: All right. So, now let’s keep going with the net worth statement. I thought it was interesting. You have a couple of different things going on here. You have an IRA rollover account that has a little over $33,000 in it. And then you have sort of two Roth accounts. You have a Roth IRA rollover of about $12,900 and a Roth IRA with about $33,000. What’s the difference in those? Why do you have two separate accounts there?

Collin: Yeah, I rolled over a 401(k) into two different rollover accounts. So, I had a Roth portion that was my contributions to that 401(k) that I moved to the Roth rollover IRA. Okay. And then for the Roth IRA, just the one there with the $33,000, that’s my own personal contributions.

Brian: Different custodians or are they the same place?

Collin: Same custodian.

Brian: So, why not just roll the 401(k) Roth assets right directly into that Roth IRA that you had?

Collin: It might not matter, but this was a deep tax question I was curious about, or lawsuit question. One of my big fears is somehow I would lose all $200,000. Like, I don’t want to lose everything. And I heard that 401(k) or retirement plan funds are more protected than Roth IRA funds if something horrible happens and I get sued for something—just that extra protection there. So I wanted to keep it separate in case that ends up mattering knowing it might not but I figured it’s easy enough to just set up another account and keep that separate.

Bo: Well there’s been some loose legislation. So yes you are correct. One of the unique things about ERISA accounts is that there is ERISA creditor protection on there. If you were to face a lawsuit there’s a separate level of protection. Generally speaking though, historically the thought has been is if I roll those ERISA assets out of the ERISA plan, so I take it out of a 401(k) and put it in an IRA, I end up losing that creditor protection. Now there have been some recent legislations come out that has maybe combed that a little bit that maybe it does follow. What I don’t know is I don’t know that keeping them separate in two separate IRAs is actually accomplishing anything additional. Okay? Meaning most often we see people consolidate accounts when they roll it over. If they’re going to consolidate pre-tax assets, they’ll do it into a traditional IRA rollover, Roth assets into Roth IRA. So that way you just have one account housed in one place and that account is actually likely going to have the same protection as any other types of account you’re going to open if it is at that custodian with the same registration. Does that make sense?

Collin: Yeah, that does.

Bo: Because that leads into the next question we had when we think about consolidation. You have a taxable brokerage account and you also have a cashback brokerage account. What’s going on there?

Collin: Yeah, so taxable brokerage, I originally was throwing a lot of money in that expecting for it to be a down payment on a house, which as I continued contributing to that, I was looking at buying a house at one point, but that’s when house prices kept going up and up and up and the same amount that I was raising my brokerage account to just stayed at.

Brian: Yeah, it was running away from you.

Collin: So, that made things a little bit tough. So, I’ve kept that in there as potential future house down payment money. And then also the cash back part. I at one point had the Fidelity 2% cash back card that then you get—it doesn’t work with Rocket Money, which I love using, but then I switched to SoFi, which also has a cash back. I mean, there was also convenience out of SoFi just because I was using them for my bank anyway. And then also if you use them as your bank and you have that card, you get 2.2%. So, me trying to maximize everything.

Bo: So are those at two different custodians? SoFi cash back brokerage account. That’s not Fidelity.

Collin: That’s the Fidelity one on there, but I also now have the cash back through SoFi.

Bo: And where does the SoFi cash back deposit to?

Collin: Just right into the bank account.

Bo: Just right in your bank account. Are both of these accounts held at Fidelity? The taxable brokerage account and the cashback account?

Collin: Yes.

Bo: So, in theory, those could be consolidated into one because they’re the same. Again, it just makes life, in our experience, life a little bit easier. It makes tax reporting a little bit easier. Just less things to have to keep up with, especially when you have a bunch of moving pieces and it sounds like in a second we’re going to talk about what you want to do and like as your next endeavor. So again, you’re in a great spot, 28 years old, $200,000 total net worth.

Turning His Side Hustle Into a Full-Time Job, Or Take the Safe Route? (16:27)

Bo: Now, let’s talk about where you’re going, like what the next steps are. All right, so you’ve analyzed yourself out of this job and now you’re trying to figure out what’s next. Walk us through what you’re thinking the next step is or your plan moving forward is.

Collin: I worked at a place that also managed retirement accounts for a while. So, I got really deep into retirement and just finance in general. But then I started to find that I have this passion for talking about finance with people and helping give especially insights to people who might not have learned anything before. So, I’ve had that as a side passion of mine and then yeah, now seeing that I’m in a place where I have less risk just at least personally, I don’t have any responsibilities outside of just myself surviving. So, I’m looking at doing the coaching—seeing if I can grow that as the main career rather than a side thing anymore. And then I am also just torn of do I go to another financial analyst position and then continue growing that on the side. And then I just have other passion things that aren’t as much career focused that I’m also excited about. So, I’m also really big into music. One of the things that’s somewhat on my bucket list is to record and release an album. Okay. So, very different from financial coaching, but I just love music so much and I have some songs that I want to be able to get out there. And I mean that would cost a little bit like around $5,000.

Brian: Vocal and instruments or I mean what? So you got lyrics as well as full songs written.

Collin: Yeah, full songs written with lyrics.

Brian: What genre are we performing this in?

Collin: It’s like singer-songwriter-y like maybe folk-type or country.

Brian: You’ve thrown out a few things. Not super country but—

Collin: Kind of country.

Bo: Kind of country. I love it.

Collin: So folksy maybe a little folksy in some ways but yeah a little more singer-songwriter-y stuff.

Brian: Chris Stapleton.

Collin: Yeah. Maybe a little less country than Stapleton.

Bo: Okay. Let’s start with the first one. All right. You said I have this idea. I want to grow coaching as my main gig instead of the side gig. Yeah. Walk me through the mindset there, right? Because most often what we see happen is someone will—they’ll go to college. They’ll get a degree. They’ll begin to pursue a vocation and they may decide I like this vocation but maybe it’s not what I want to do forever. They slowly begin building up something on the side. They do a side gig until that side gig reaches critical mass to where then the side gig can become the main thing. Walk me through the mindset that you have right now of okay rather than trying it that way. What if I just dive head first into making the side gig that doesn’t presently exist the main thing?

Collin: I have some confidence in it just because I’ve done some coaching for people before and had really good results from that and then have already been referred to other people because of that. It’s not reached any critical mass though. So I know that that’s a big risk.

Bo: Did you get paid for it or was it free?

Collin: I’ve always done free, but I have some referrals for people that right now are wanting to schedule actual paid ones. So, very early stages and maybe a bit aggressive to switch fully to doing that full-time in a month from now. But yeah, I’m curious to see if I could grow it enough over 3 months to at least help start getting a little bit more of the foot in the door.

Bo: What I’m not hearing you say is, “Man, I really just love financial analyzing and I’m just not going to feel like my true self if I’m not financial analyzing. I want to do this other vocation.” Walk me through the thought process to like, okay, I’m going to start my own thing and be a financial coach as opposed to just pivoting careers and moving towards like a financial advising career. Hey, I want to go become a financial adviser and figure out what that looks like. Walk me through one over the other.

Collin: Yeah. So, I am interested in either advising or coaching, but as I’ve been looking at advising, and I’ve gone through this several different times looking at that, there’s a lot of positions that are not fee-based advisers like you guys do, which I admire a ton, right? Because yeah, I just am hesitant to work for a place that so heavily incentivizes one type of investment like life insurance and I’m skeptical of places like that.

Brian: So, it’s the majority of the industry.

Collin: Exactly.

Brian: It is more of an apprenticeship. I mean everybody who we hire to be financial planners, we tell them don’t go get business. We want you to kind of be the best version of yourself. Get the four years, five years of experience. Become a monster of knowledge and then yeah of course I want you to go get business but we’ll inbound market you business too. But what’s wrong with getting the reps in before we jump full head first into this?

Is the Risk Worth It? (20:41)

Collin: I’ve searched quite a few different places in Denver. I’m sure there’s some that are fee-based, but I was having such a tough time finding one that I trusted.

Brian: As access to the career pipeline.

Collin: Yeah. I fully looked at your guys’ website for careers, too, in case you guys hire remote. So, if you build Abound Wealth in Denver, let me know.

Bo: So, the idea is, okay, there’s not an opportunity for me to go get a job as a financial adviser in the area in which I live. So, I’m just going to start this thing. But we know that right now because anytime we face a financial decision there’s an opportunity cost conversation we have to have. If I do this that means I do not do this or if I don’t do this that means that I can do this. Well we know that right now you said hey as a financial analyst I make like $80,000 a year and I’m likely if I’m going to pursue that field I might even be able to move into a senior financial analyst role where I’m going to get paid even more. So maybe it’s $80,000, $90,000, $100,000 a year. That’s a lot of income and opportunity to walk away from. I don’t know what your fee schedule or what the cost you’ll charge for your coaching services is, but I got to imagine you got to see a lot of clients to be able to replace $100,000 of income. Is that a fair assessment?

Collin: Yeah, I—it would probably be several months or a year or years. We’d have to see before fully getting up to that point. Looking at the normal coaching cost from what I’ve seen for people who have done Ramsey coaching and other just independent coaches as well, they tend to charge between like $120 to $150-ish. And I’d want to be able to help out people that are more low income.

Bo: Is that like hourly? Like $150 an hour, $150 for a plan? How does that work?

Collin: Like $150 I think for an hour for a session with them. Okay. But then they are prepping before that as well.

Brian: I’m sure this is all new data. So it helps. I’m—and right now I see two paths that Collin—just talking this out with you and you have to choose your hard in some ways. The easy low-hanging fruit is obviously go just be a financial analyst. You’ll have this severance come your way that potentially if you get a job fast enough you now get to roll that right back into all these other assets. If you are going to go this road less traveled which by the way I mean we’ve resembled this path so I mean it’d be a shame for us not to at least have the conversation and tell you some of the things that might be coming in your future. I would ask you have you put on your 3D glasses though because one of the first things if you’re going to do this big jump because in your own words you’d be taking on more risk—have you actually written out kind of the five-year business plan and then written it in the three what we call the 3D glasses version mean you’ve got your dream plan, you’ve got your down-to-earth of what you think will happen and then you don’t skip a step and you actually do the doo-doo plan too. When things go really bad and maybe—I found the doo-doo plan very easily when I was—I’m glad I did that part of my business plan is because I thought everybody in my hometown that I grew up with that their parents would be like, “Oh my gosh, Brian was such a nice guy. Did you see how good he was in math and on the math teams and all these other things—I’m going to go hire that smart boy. He’s going to be great.” And the problem is you start a business and nobody shows up because nobody wants to go work with the startup company. They want to work with the company that’s kind of an assured shoe-in on success. And so I had a really hard road that first three years.

Brian’s Business Journey (23:59)

Brian: And I always tell people when you start an entrepreneurial type business, you need to probably plan that it’s going to take three years to get traction. You got to have a plan that will cover all of your expenses because your net worth statement looks completely different to me if you’re going down the entrepreneurial path because it’s way too—now you have some fortunately you have that taxable brokerage account but I’m going to tell you we’re not worried about houses anymore. You’re going to probably need a lot of that brokerage account just to be your seed capital so you don’t—the dream doesn’t just dry out and die because you didn’t give it enough time to catch traction. Which way are you really leaning? Or is this kind of one of those things where since you have possibilities, you’re like, “Hey, this might be an interesting thing, but this is only a 10% chance.” Or are you telling us this is—you know, you’re in this? I mean, what handicap this a little bit for us?

Collin: Even if it’s part-time, I’m in that whole business and I want to be active in that and continue just growing my knowledge more and more. So, I think either way, I’m in it, but it’s just a matter of am I in it as a full-time thing versus on the side. And maybe knowing that, hey, I’m losing my job and also yeah, going to be in this situation where is that emergency fund going to last long enough to grow that and do I want to take that risk? I see the questions there. It might make sense to push it towards being a side thing until it reaches that critical mass.

Bo: Now, because that’s what I’m thinking about is—Brian always used the analogy of cash and liquidity being like oxygen for us, right? Yeah. It’s one thing if you decide to go scuba diving and you have an oxygen tank on, you can last a lot longer. Like you can actually enjoy that ride. But if you just take a deep breath and you’re trying to hold on to that breath and you go underwater, it’s not going to be very long before you have to start freaking out. And when I think about you have a monthly burn of like $4,000, right? Or let’s call it $3,500. Let’s call it $3,000. And you’re billing at $150 an hour. It’s very easy math to figure out how many hours do I have to bill to just do that. And that doesn’t factor in any sort of overhead, any sort of other costs. The amount of pressure and tension that exists. If it’s, oh, it’s this side thing that I’m doing on nights and weekends when I have time and I don’t have to get that billable hour to make sure that I keep my lights on versus, oh, I’ve got income coming in. I have—I’ve got this analyst job. I can put as much or as little time into this side gig as I want, so I can do it. Do you understand what I’m saying? There’s a different level of pressure that you’re going to put on yourself if you say, “Hey, I got to go do this.” Because the way I see it, you have a $20,000 severance and you have $14,000 in cash. That’s going to give you $34,000. That’s all you got before you have to have enough billable hours that you can pay rent. And that’s just a risky spot. That’s a frightening spot to be in. Now, a lot of people think risk and reward. The way it works is the more risk I take, the greater the reward. Those are probabilistic—it’s a probability that if I take more risk I can get a greater reward but the other issue of risk is I can take more risk that ends up completely tanking my situation that ends up putting me in the spot that I don’t ultimately want to be in, right? I love the fact that you want to be a financial coach. I love that it’s something you’re passionate about and I think there is even a way and method for you to move in that direction. I get real nervous when your ability to eat depends on your ability to get billable hours of coaching in for this brand new business.

Brian: First year I went out on my own, I went from—I had a great gig. Making close to six figures and first year I think I made $17,000. Oh, okay. And that’s with, by the way, that’s with me doing tax prep. I have a skill set that allowed me that I had an escape hatch that if I couldn’t find money from being a financial adviser, I could go do a tax return for $300 and $400. And so I’m almost embarrassed if I had to go pull my financials and tell you how much of that $17,000 was probably tax prep more than it was financial planning because it’s just hard because you’re going to suffer because I was approximately 28 years old when I started my company, my financial firm. It’s hard to convince 50-year-olds to give 28-year-olds money. I’m just being honest with you and that’s what—and I thought I had the hometown advantage and it just came up zeros. Now it’s all—as you can see it’s all worked out beautifully. I mean so taking a risk can turn out to be a magical thing but you have to plan accordingly. I was very blessed that I had built up enough cash because my wife and I were very deliberate—years’ salary before you actually—

Brian: I mean we had built up a lot of cash to make sure. So you’d probably if that brokerage account is invested, you’d probably want to try to in a tax efficient way as possible turn that into liquid capital as well. And then I would also try to—because you’re in this new phase where you see all kind of opportunities because you have the severance money coming your way. The other things like this album unless the album’s going to be your thing just like the financial coaching is going to be your thing. You can’t be the master of all domains. You kind of need to choose what the next thing is and then get just very sober serious about it. If you’re taking this in a different direction of you want to start an entrepreneurial endeavor, we’ve got to get really serious about—you got to start dumping the water out of the boat to get yourself as lean as possible because every dollar is going to be very valuable because you really don’t—it’s not all the retirement assets you’re never going to touch. So, it’s really your taxable brokerage account, which is $75,000. You need to figure out what the net after-tax amount that could become. And then you compare that with—add your savings and you add your severance after tax. Take into account the taxes. Now, you’ve got your powder money and you now can back into the math of how many months of protection does this give me while I’m trying to become this new version of myself and start this new endeavor.

Collin: That makes sense. So, I can recognize that. Yeah, that would be maybe too big of a risk to take just right away. But yeah, maybe I take a small portion of time between officially being laid off and starting my new position to just work a little more on the side.

You Don’t Know What to Do Yet, Do You? (30:08)

Brian: I can tell by your reaction. You haven’t completely figured out what you’re going to do yet. Is that true? Is that a fair statement?

Collin: Well, I know the favorite thing I’ve ever done as far as potential career things is financial coaching. So, to me, that’s the thing I know that I want to do. It was just a matter of when can I fully pull the trigger on getting that as a full-time thing. So, yeah, I feel confident in that part.

Bo: And one thing I would think through is you don’t know how long it’s going to take you to be a successful financial coach, right? If you make this your main gig, it has to work or you have to find something else, right? Like if you try it for five, six months and it’s just not taken, then you have to abandon this thing that you love so that you can go pay the bills. I do see a scenario where, hey, if—okay, I know I have a skill set that I can go get a job to pay the bills. You give yourself plenty of time to let yourself be a successful financial coach and you may catch enough traction that after a year, after two years, you can make that flip. And we’ve seen people all the time that turn their side gig into their main gig, but they give themselves enough time to allow that to happen as opposed to forcing it to have to happen right now. Right? If the dream plan and the down-to-earth plan don’t work out and you have to go the doo-doo plan route, well then you have to start making decisions you don’t want to have to make and you’ve already said you’re 28 years old. You’re already—you’re ahead of the curve. So you’ve given yourself some margin to be able to do some things. I’d hate to see you make a decision that isn’t putting you behind, right, where you didn’t have to do that.

Collin: Yeah. I mean that makes sense. And yeah, so then does it still make sense for me to continue going as a financial analyst but then focusing on the coaching on the side and because I’m still incredibly passionate about that and that fully would be a dream career of mine. I love that so much.

Brian: That’s the more balanced approach.

Bo: I like that. You try not to have favorites when it comes to planning, but I like that. That’s the one. Okay. Here’s what I love about it. You said you’re 28. Not married. Don’t have kids. Don’t have all these obligations. So nights are available to you. They’re open. Weekends are available to you. They’re open. You have some margin in your life that maybe later on in life you would not have that if you wanted to work two jobs because that’s essentially what you’re doing. Financial analyst by day, financial coach by night and working those two jobs, you actually have the capacity where you can do that right now. And I think that’s a great solution without taking all this risk that could potentially derail someone who’s well ahead of the curve right now.

Brian: I’m still—I’m open by the way, Collin, if you want to. I mean, I’d love to hear your rendition of Tennessee Whiskey and we could figure this out. I’m trying to give him every opportunity to make sure we—I want to be the whisper of Collin’s dreams here. I want to make sure that we have scratched all the itches and we have it all figured out.

Wealth Multiplier (32:55)

Bo: Here’s what I think is what I don’t want us to lose sight of the things that you have done thus far that are incredibly fantastic. We know that right now you have $189,000 of assets, of liquid assets built up. We know because we talk about the wealth multiplier on the show all the time that just based on what you’ve done now, even if you didn’t save anymore, if you didn’t add any more to it, you are already on your way for that $186,000. If it all stayed invested, by the time that you got to retirement, it could turn into $5.5 million. Yeah. Just based on the work you’ve done from graduation to 28. $5.5 million. Amazing. Now, but you even said, “Hey, I’ve got maybe this money I have in my taxable accounts for a house.” So, even if we take that out and we just look at the retirement assets based on the work that you’ve done for retirement, you’ve got $112,000. You’re already on your way to be a multi-millionaire already, right? So, you’ve done some wonderful things. I just don’t want to see you get in a spot where you derail this trajectory where something happens where you have to start making some dire decisions because then you do get behind the eight-ball. You’ve done awesome things. You even hear us talk about this is another one. We talk all the time about these Money Guy markers like these mile markers. Hey, where should you be at age 30? Where should you be at 40? Where should you be at 50? You know that we say that by age 30 we want you to have liquid assets portfolio built up of at least one time your annual salary. Yeah, you’re already smoking that. Like you’re already ahead of the Money Guy markers. My hope for you is that you will be able to still accomplish all the goals that you want to accomplish and do all the things you want to do and still be able to hit those markers. I see the financial analyst job as a means to be able to ultimately live the life that you want to live. It might just be the conduit that takes you to your great big beautiful tomorrow of being the financial coach, but it gives you time to get there.

Collin: I relate a little bit more to that thinking of all right let’s be safe with it and still—I mean it’s such a motivating thing because I know everything I put into that would also then be helping somebody but then also could then turn that into the dream career that I would love. So yeah, I think that makes sense.

Should Collin Still Be Contributing 25%? (35:03)

Collin: One thing I was curious about with my retirement there is I know we looked at that and saw that it’s going to turn into what I think it was like $3.5 million. So that leaves me wondering, I know that’s going to matter in terms of where I have my money invested—retirement versus brokerage. So I’m wondering, do I still contribute 25% to try to keep that in retirement? Is that the goal? Or should I split it up a little bit more and just take bare minimum match and make sure I do the minimum or maximum Roth IRA contributions and just take that and then throw the rest into brokerage since—am I overfunding my retirement?

Bo: Well, I think you’re asking the wrong question at the wrong time right now only because you don’t know what the next steps look like because for you 401(k) technically is about to go away, right? Like you do not know what opportunity is going to be available for retirement savings for you three months from now until you know once you get past that you have to figure out what your next steps are. What I see more realistically playing out is let’s say that you do get another job and let’s say it’s just $80,000, but then you do start to do this financial coaching thing on the side and maybe you have some success with it and then year one you make another $20,000 and then this income goes up and this income goes up and what’s going to happen is it’s going to create an allowance for you to save even more so that not only are you able to save all the retirement assets, but you’ll also be able to save the brokerage assets. Your circumstance is so in flux right now. It’d be very difficult to design a FOO for you because what’s going to be available to you 6 months from now is very different than what’s available for you today.

Brian: Well, it’s only hard to design it because we don’t know where you’re going. That’s right. As soon as you tell us where you’re going, the FOO falls into place very easily for you. Okay. Because that’s why I want to make sure everybody understands this thing is still an all-terrain vehicle. It can handle anything. It’s just you got to make sure you put into the navigation system where you’re going so that you don’t get lost wasting efforts or resources in the wrong places.

Collin: I think yeah, what I would be wanting to do is likely then going to a financial analyst position that hopefully would at least be the same, maybe a slight upgrade in terms of pay and then going a lot harder on financial coaching at night and then seeing if I can get to that critical mass to then switch that to being the full-time thing. But then I’d need to build a good cash reserve.

Bo: And you can approach it with the same fervor. If I were sitting on your side of the table and I were doing this, even if I had the financial position, I’m still for the coaching, I’m still setting deadlines. And if growing that is something that matters, okay, here’s the list of 50 people I’m going to call this week and then here’s a list of 50 people I’m going to call this week and here’s the list of the Rotary Club or Chamber or whatever those things are, however you’re going to—if I’m going to do YouTube videos, I’m going to make sure that I get a new video out every single week. Like I’m going to approach it with the same level of fervor as though it were my only thing in reality knowing that okay I’ve got my basis covered with my analyst job. Right. Does that—I don’t want the analyst job to be the thing to cause you to not pursue it as aggressively as you would have otherwise. If you can have the analyst job and still pursue the other thing I don’t see—you’re going to literally stack the deck in your favor of having success with this thing. Even if the coaching is not your main gig, I would still prepare a business plan for it. Hey, these are the things I’m going to do. This is the—even if it’s my side gig. This is my dream plan. This is my down—this is my doo-doo. And these are the steps I’m going to take over one week, over one month, over six months, over one year. So that way you really are treating it like a real business. Because if you don’t treat it that way then it is just a hobby. It’s no different than and not that I’m suggesting music being a hobby is a bad thing, but that’s the thing that differentiates it. The level of intentionality behind each one of them is what will give it the necessary power to become your main gig.

Collin: Yeah, I yeah, I resonate with that really well. So, yeah, that makes a lot of sense to me.

How to Stay Motivated with Small Changes in Your Portfolio (38:47)

Bo: What other questions do you have for us? What else can we speak to that might be helpful for you as you think about your next steps?

Collin: One I’m curious about is just staying motivated because I know I’m in a good spot for my age, but it’s also like I know the difference between $0 and $5,000 is $5,000 and it feels huge. But now seeing if I have all of a sudden $200,000 versus $205,000, it feels more or less meaningless even though I know it’s not and it’s still a $5,000 gain. So, I don’t know like as you reach those higher levels of crossing $100,000 versus $200,000—if I’m putting in $6,000 or $7,000 in a Roth IRA every year, but then market fluctuation throughout a week can sometimes be enough to change it just the same amount. It feels like I know it’s not going into an abyss, but how do you stay motivated with investing there?

Bo: I really think and this is going to sound so silly. I think the wealth multiplier is your friend there because even small sums at your age at 28—even oh well what’s the difference in $7,000 versus not doing the Roth this year? You go see what $7,000 for a 28-year-old can turn into by the time you get to 65 and it will blow your mind. You do that with $5,000, with $1,000 what it can turn into. You recognize that when you have a long enough timeline even those small incremental changes can have these huge ripple effects downstream. That’s why you want to keep doing it. The more I can get in, the earlier I can get it in, the better I can do it, the more it’s going to be able to compound, the bigger that snowball is going to get as it continues rolling down the mountain.

Brian: Well, also you laid out that you see a monthly market change is bigger than your contributions could be. And that kind of dissuades you. I would say one of the illustrations we’ve done on some of our milestone episodes is we say if you have $100,000, $200,000, you have $200,000—if you just let it grow upon itself, how long would it take to double? And you can use the rule of 72 or whatever you want. But what I always challenge people is watch what happens though if you start adding and you choose—is it 20%, is it 25%, is it just your Roth IRA? If you start putting what your annual contributions are on top of it, when you see that number now double in four years versus seven or eight years, you start realizing—yes on a small incremental scale of the month, yes, the market change was bigger than my monthly savings. However, the consistent behavior of building on top of it is what will accelerate it even more.

You’re Not Actually Wealthy Yet. Don’t Fall Behind the Curve. (41:16)

Brian: And then I want to challenge you. You know, you are way ahead of the curve right now. When we showed you that chart and we showed you the one—the milestones or the Money Guy markers at one or three times, you’re ahead right now and you should embrace that and be happy with it. But it wouldn’t be that hard in a few decisions for you to be right on the curve. And then fast forward another two or three years. You might be behind the curve if you didn’t nurture this. And just make sure you respect it because you’re not assured. You’re way ahead of the curve that you will be on the make wealth side of things before we reach maintain wealth. You’re way ahead of the curve on the make wealth, but you’re not actually wealthy yet, right? I mean, let’s be honest. It’s not like this is a multi-million dollar—it’s great portfolio for a 28-year-old. But that’s the thing we—and you hear us when we do all of our net worth by age and those shows, we always try to caution the 20-somethings who are way ahead of the curve because you’re using the wealth multiplier and you’re saying, “Oh my gosh, this is going to be $20 million if I do nothing.” Maybe. I mean, there’s a lot that goes in between $200,000 and $10 million and we just need to—let’s get you to your first million for you. You’ve already reached the $100,000 milestone, but there’s still a lot of ocean between you and the first million, right? Let’s make sure that you stay on that path. And because I don’t like it when young people who are still at the beginning of their journey are already doing decisions like the maintain wealth phase when you’re not there yet.

Collin: I can try to keep that motivation going and yeah, I’ll keep checking the wealth multiplier and seeing that is the motivation.

Bo: The way I stay motivated, annual net worth statement, I just get excited every year that I do it. I just get excited seeing how the numbers change because then the more things you have going on—yeah. You’ve got your maybe it’s just your Roth contribution but your 401(k) and then you see it year-over-year. You’re like, “Holy cow, this thing’s moving.” So, if you’re not tracking your net worth annually, you absolutely should be. And you should tell all your coaching clients, they should also because it’s an awesome thing to be doing.

Collin: Yeah, I’ve done it monthly and maybe that’s also where there’s a little less—

Brian: That’s why—you’ll never see your grass grow if you stare at it every day. You got to give yourself some time. Step away from it and then when you look back you’ll be like holy cow I can’t believe it covered that much ground.

Collin: Yeah. Okay, that makes sense.

Converting Pre-Tax Dollars to Roth? (43:26)

Bo: Awesome. What other questions do you have for us?

Collin: I’m also curious. My pre-tax money almost doubles what I have in Roth money. So it’s like 2 to 1. Does it make sense for me to take some of the pre-tax money that I had from my 401(k) previously? So from my employer and converting some of that to Roth? I know that’d be a bigger tax bill and I’d have to save up to cover that.

Brian: What’s your marginal rate right now? Are you 22%?

Collin: 22%.

Brian: Doesn’t get me as excited as 12%. That’s right. I mean, if you had an extended pro—say you start this new endeavor and you had the same success I did and you make $15,000 your first year—

Bo: Give me a lower bracket.

Brian: Now, potentially you could convert some money. I bet you, but now you see the conflict you have is because even though you could convert, you might need that money for it to be your powder money. So you’re going to see the drama that—that’s why we always do the financial planner answer is it depends—you have to tell us the direction you’re going and then we can take those variables and tell you what the optimal path is. Right now 22% plus—do you have a state income tax?

Collin: Yes.

Brian: Yeah. So what is that? What’s the marginal rate on that?

Collin: I don’t fully know but it’s probably six, seven, eight somewhere in there I would think. Maybe even a little under that.

Brian: But even if it’s 5% I mean if you add that to your 22% you’re at 27%. So, you’re not—it’s not a slam dunk that you should start doing Roth conversions all over the place. If your income in a prolonged way was really low and you could get below 12% on your federal tax rate. Now, now we’re like, yeah, that’s historically that’s a pretty incredible thing at my age with the compounding tax-free growth, but I wouldn’t get in a hurry while you have so many question marks on what your future looks like. I think there’s going to be opportunities in the future for you to begin or for you to continue building Roth assets. I mean, in your 401(k), are you doing traditional or Roth?

Collin: Roth.

Bo: So, you’re already building it in your Roth salary deferrals. You’re already building it when you’re doing your Roth IRA contributions. You’re going to keep building taxfree dollars. I don’t think that you have to be super aggressive about accelerating that tax bill today because I agree, 22% is just not—it’s not that exciting relative to like 0% or 12%.

Dollar Cost Averaging Weekly? (45:26)

Collin: Yeah. And then I’m curious about this one, Brian. I know you said recently on an episode that you like dollar cost averaging weekly in your accounts. I also have been doing that because especially seeing some of the more recent volatility—knowing the more frequently I’m contributing, odds are I’m dollar cost averaging better.

Brian: Now what was your monthly purchase though?

Collin: It was $58 or $538 for that last month. Okay. But then there’s other months because I think that’s what it is. $100 bucks a month or $100 bucks a week.

Brian: Look, I’m a mess from a behavioral standpoint. I’m doing it. It’s not—it doesn’t mean it’s the best way. Just because you hear me say some of my crazy ideas doesn’t—and I think I try to give a disclaimer every time I say that is that I know that it probably—it doesn’t matter if you looked at the delta between me investing weekly versus if I just batched it all to monthly. Yeah, I’m not so sure I’m really probably—the hassle factor is not being overcome, but it sure is fun from a behavioral scratch the itch standpoint for me. So you have to—I would give you the same freedom is that because statistically it’s probably not that big of a difference that you could just make this a monthly purchase. Yeah. And that would probably be the most efficient way to do it. But if you find that you actually get enjoyment from it being weekly and there is some behavioral benefits from that, then I’m not going to pick on anybody for doing the same things I’m doing.

Collin: Okay, that’s fair.

Brian: I know you’re making fun of it because it is—it’s not worth the hassle factor. I will admit it’s not worth the hassle factor.

Bo: I want you to do the thing that’s going to give you the highest likelihood of sticking to the plan and staying on the plan. And if that’s buying every week, then buy every week. If that’s buying every month, buy every month. Whatever that thing is for you specifically that’s going to allow you to stay the course, I want you doing that thing.

Brian: And I don’t want people creating behaviors that make their life stressful, too. And that’s the other thing that because we had a guest on recently that she was doing so many things that I felt like she was overwhelming her financial decision-making. Yeah, if this is just one of those one-offs because you just have a way that you’re wired and this is a positive for you, then do it. But if this is something where this is one more distraction and something that already feels overwhelming, I would encourage people to make your life as simple as possible when it comes to finances.

Collin: Okay, that makes sense. Yeah, and I relate so much to so many ways that you think about money as well and the stories you’ve said. So, yeah, I also have that itch of wanting to just every week it feels nice, but then there is that burden sometimes. But I’m going to be maxing it every year regardless.

Brian: I love it. I love it.

Homework (47:54)

Bo: All right. Are you ready for your homework?

Collin: Yes.

Bo: Okay. Here’s your homework that I wrote down. First thing, this is just kind of blocking and tackling. We wanted to get your emergency fund up. You said the severance is going to do that. Make sure you actually do that, right? We came up with somewhere between $20 to $25,000 for an appropriate emergency fund. Step two, and this is kind of big picture, is you got to decide your path. What path are you going to go down? And then once you design that path, what are the next steps you’re going to take? So if you’re going to make financial coaching the main gig, what’s the immediate next one, two, three, four steps towards that? If you’re going to go get the financial analyst job, what’s the next one, two, three, four steps towards that? And then either path that you go on, the last thing for you is make sure you build a business plan. Build the three, use your 3D glasses, do your dream plan, your down-to-earth plan, and then your doo-doo plan. Either way you go, and then hold yourself accountable. Make sure you actually see it through because I would love a year from now, two years from now, we follow up, we get to hear how successful the financial coaching business is. I’d love to hear that.

How to Apply for the Show (48:54)

Brian: In the meantime, because I know after you record this show, you’ve never been to Broadway. You’re going to go to some honky tonks. I want you to send us a video of you up on stage singing some Tennessee Whiskey. I’m not letting this music dream go completely away either. So, I’m fully expecting an interactive video that we can share with the audience so they can be a part of your journey as well.

Collin: Fun. Yeah. All right. Cool. Sounds good.

Brian: Bo If somebody wanted to join us for an episode of Making a Millionaire, what do they need to do?

Bo: That’s right. If you’d like to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you’d like to check out any of our free resources, you can go to moneyguy.com/resources.

Brian: Guys, we have a blast creating content helping people live their best financial lives so they can also build their great, big, beautiful tomorrow. I’m your host Brian Preston. Mr. Bo Hansen. Collin, thanks for joining us. Money Guy team out.