The Biggest Financial Problem Facing Americans Today

Biggest Financial Problems Americans Are Facing (1:07)

Brian: The biggest financial problems Americans are facing.

Bo: Brian, I am so excited to talk about this because not because we like financial problems, because we do not want our people to struggle with the same problems. And yet a lot of these things, a lot of these issues we’re going to talk about are fairly common to all Americans, at least right now in this season.

Brian: Well, look, it’s pretty much every year people, money is stressful to a lot of Americans. So, it’s not a surprise, but I think we wanted to go a little deeper. So all of our financial mutants and people who are new to our content, all those biggest ones are the ones that make the headlines, you are equipped and know how to process and even succeed no matter what you’re facing.

Bo: So Gallup did a poll and they asked this question, “Hey Americans, what are your top financial concerns?” And they kind of rated what the responses were based on the volume of people that responded. And what’s wild is when they looked at the respondents, 29% of the respondents said that inflation was their top financial concern. And the next was cost of housing at 12%, low wages at 12%, health care at 7%, stock market at 6%, then taxes, debt, unemployment, social security, retirement savings. So there are a number of financial things that Americans are worried about. And so we want to be able to speak to some of these. And while we might not be able to fix them, we can tell you how should you think about them and how should you navigate them and how can you navigate your finances amidst these troubles in the best way possible.

Inflation (2:35)

Brian: So let’s jump right in. Talk about inflation. Now look, I think all of us as humans, we have some recency bias. When we have something that happens and it hurts, it sticks around for a lot longer. So when we see 29% as the number of concern that people have for inflation, I think that’s interesting because it’s down from 41% just a year earlier. But this is something that obviously is just in your craw and we want to make sure that we give you what you need to know how to process this.

Bo: And so when we look at inflation, it makes sense that this would be a concern because you all know the way inflation works. And if you’ve maybe heard some headlines, “Oh inflation is down, inflation is down.” While that may be true, while the year-over-year change in the cost of goods may be down, it doesn’t mean that prices have actually come down. So coming out of the pandemic, coming out of 2020, 2021, we saw this rapid rise in prices, all the consumer goods that we buy. And while inflation now has dropped from those peak levels at like 8 to 9% increase year-over-year to what’s a more reasonable 2.7%, we’re still struggling with the fact that goods are more expensive now than they were four, five, six years ago.

Brian: So, let’s talk about how do we actually deal with this. Here’s some tips on how to deal with inflation. First of all, don’t get fancy with it. You know, a lot of people think that, you know, I got to go out there and buy some gold. I’ve got to go buy some real estate. I will tell you the answer is you do want to own stuff because one of the best ways you can protect yourself is actually owning assets as things keep going up in value. But a lot of people sleep on the fact that one of the best ways to own and one of the best inflation hedges is actually just own the economy like the S&P 500.

Bo: Another thing that you can do is if we are in a place where the cost of living the lives that we want to live gets more and more expensive, one of the things you can focus on is keeping your fixed expenses as low as possible. If right now you’re thinking about maybe making that stretch to get into that bigger house or maybe making that stretch to buy the more expensive car, you may want to reconsider and rethink that decision because if inflation is increasing and if prices of goods are increasing, you want to be careful how big your footprint is, how much your guaranteed outflow is every month. And if you can keep that down and tamp that down, you might give your financial situation a chance to catch up to the expenses that are around you.

Cost of Housing (5:03)

Brian: Okay, let’s jump to the second big concern, a financial concern for Americans is cost of housing. And look, Bo, this is one it just hurts.

Bo: Yeah, this one is pretty painful. And I think a lot of people are feeling this and I even, this is something and I’m curious if you’ve seen this too, Brian, across like social media. There’s just a lot of like vitriol and a lot of angst and anger around this because people said, “Oh yeah, it was great that you could have afforded a house, you know, 30 years ago and that’s just not the way that it is today.” And it’s a sad state for a lot of folks.

Brian: Yeah, this one’s going to take a little bit of time to work itself out. If we actually look at the data, I mean, a lot of that anger and frustration, it’s not false. Because if you, I mean one of the things I think is interesting is look at even people who make household income somewhere between $75,000 to $100,000 back in March of 2019. Not that long ago. Yeah. I mean that as a blink of an eye. 49% of you could afford homes. If you made $100,000, it was 65%. 49% of the housing availability was affordable. So, I think the point can be made is that housing didn’t seem that much of a stretch for you. Fast forward to where we are in March of 2025, somebody who makes $75,000, 21%. That’s one in five homes. Somebody who makes even $100,000, you’re six figures, you know, that should be a celebratory thing, still only you’re not even a half, 37%. So I, that brings back to the point that I’m not, I’m a glass half full type person and there’s always going to be something out there that is not perfect or there’s going to be a struggle but this is going to be one that’s going to take a while to kind of repair itself. Hopefully we are going to continue to see some rising in wages or something to help offset it. I’ve seen, I know here in the Nashville market, this has been a white hot market for a number of years now. Inventory levels are way up. Typically, when you see inventory numbers going up, that starts putting pressure on pricing. And then we’ve even started seeing some whispers. It’s not even so much a whisper, it’s more of a conversation at this point that the Federal Reserve is feeling more and more pressure to start lowering rates. So, if we can think about affordability, wages going up, inventories up, putting pressure on housing, and potentially interest rates going down, I at least like knowing that maybe tomorrow we see some better opportunities.

Bo: But if we’re in this moment right now, and while there could be some reprieve coming, what are the tips right now in terms of how to approach this? Well, the first is if we think there might be some reprieve or if you think that your financial situation might be changing, it’s okay to wait to buy a home. I think a lot of folks feel this pressure. I got to get in a home. I got to buy a house. I got to buy a house. That’s the next thing. If it does not make sense for you right now or it will put you too far out on the risk spectrum, right now may not be the time for you to go over to the home ownership side of the equation.

Brian: Yeah. And this is you got to protect yourself. Don’t be house rich, life poor. I know this rule gets a little pressure because of what’s happened with housing, but we would love for you to keep your housing costs somewhere around that 25% mark because if you can do that, it’s still going to allow you to save for your great big beautiful tomorrow. It allows you to actually experience some life. But I recognize that’s a tough pill to swallow and that’s why you probably will have to get creative with how you’re doing housing. And when we say creative, we like house hacking. We like, you know, doing anything that can help offset, bringing down that cost so that you can afford more.

Bo: But we’re also realist. We recognize that it’s a very unique environment. A lot of folks have said, “Guys, I hear you. I want to stay in the 25%. That’s my goal, but it’s just not realistic in the area that I live, and the place that I work with my family situation, whatever it is.” So, if you can’t find something that fits into that frame or doesn’t fit in that frame right now, you better start being realistic around, okay, if I’m going to make this decision, if I’m going to go further out on the risk spectrum than I should go, where are the other areas I can cut back? What other parts of my life can I change so that I can either protect myself from this aggressive decision or better prepare myself to be able to make a better housing decision in the future?

Wage Growth (9:28)

Bo: So housing was one. Another one you’ve already kind of alluded to, Brian, is that a number of respondents to the Gallup poll said that wages were one of their financial concern and it’s not incredibly surprising. We’ve seen the cost of all the goods that we buy on a daily basis increase, but it does not seem that the level of wage increase has necessarily kept up with that rise.

Brian: Yeah, this is one, you see right after the pandemic we did see wages spike up to close to 7% wage growth. Now we’re a little above average, but we’re right around 4.1%. So if you’re looking at the actual wage data, it’s showing that this is not in any hurry to fix all the housing issues and affordability issues. So we got to kind of take it upon our own shoulders and figure out how do we get to push our wages up that kind of separates us from the general population. So we want to give you some tips on how you can approach increasing your wages.

Bo: Now this is one I think there’s so much literature and so many people out there telling you how to do this and frankly I think they’re telling you how to do it the wrong way. They essentially say, “Hey, march into your boss’s office and say, ‘Boss, I demand more wages.'” And I just don’t know that that’s the best way to communicate the value that you provide an organization. But if you are someone who works for a company and has superiors, if you can find a win-win, find a way that what can I do that would be so valuable for the entity for which I work that would also allow me to generate more value for myself. And if you can create that win-win, you create a scenario that makes it very easy for everyone to be excited about. So, I am not a fan in the business world of like financial ultimatums. “Hey, I need you to show up here or else.” I just don’t think those often end in the place you want to be, especially for folks earlier on in their career who perhaps don’t have the same leverage as more seasoned workers.

Brian: Well, I mean, think about it. You spend just as much time with your work family as you do with your personal family. So, you always have to navigate work experience in tactful ways. And that’s why I love the win-win philosophy is because it’s more persuasion versus ultimatums like you said. And that’s because even if you win, did you win in the long term if you create a sour situation for the future? So, try to find that win-win. I know that sounds, it’s very easy to say out loud, but I do think a lot of people, it is very helpful if you can try to figure out how you help your employer, but also create a win for your personal family. And then the second thing is we put on here, don’t be afraid to look for a new job. But this is definitely a measure twice, cut once because I think sometimes, now look I have a bias. I’m a decent size employer so I’m always nervous when you say hey go find a new job. I don’t want my people leaving either. So it’s one of those things just be honest with yourself, put on your 3D glasses because sometimes the grass is not greener. I’d rather you find the win-win before you grab the ultimate, you know, eject seat and find that new job.

Bo: Well, I think a lot of folks arrive at the conclusion the grass is greener, the grass is greener without thinking really on the long term. What you ought to do is just like you do all of your other major financial decisions, if you are considering changing jobs, do a 3D plan. Go ahead and figure, okay, if I go, what’s the dream? What’s the down to earth? And what’s the doo-doo? And if I stay, what’s the dream? What’s the down to earth? What’s the doo-doo? And then you assign probabilities to each of those because what you want to make sure is yes, if you’re in a job where there’s no career trajectory, there’s no upside potential, you don’t have a way to influence where you’re going and you’re unhappy, that may make sense to look for a new job. But if those things do exist, it might just be a matter of patience, waiting and doing what’s necessary in order to change your future financial circumstance. But only you’re going to be able to assess that. But like you said, Brian, you want to measure two, three, four times before you make that huge life change. You don’t want to make a long-term mistake for a short-term problem.

Brian: That’s right. That’s the biggest thing we’re trying to protect you from. So, that’s why I like doing the 3D glass plan on both your current job versus the other job. We’ll let you handicap what’s the career opportunity in the long term so you can compare and contrast and make the right decision.

Bo: And then also consider furthering your education. And that may not mean like going back to college or going to get some degree, but is there a way, is there something you can do in your current vocation that increases your skill set? Maybe it’s learning some new skill that was not previously there that makes you more valuable either to your current employer or to future employers. And right now it’s easier than ever to be able to do that. You don’t have to go get a piece of paper, spend a lot of money, take on student loan debt. You can actually do that on your own. So don’t forget that you also have the ability to make yourself more valuable by how you train yourself and how you equip yourself with skills.

Stock Market Concerns (14:24)

Brian: And that leads to the last stress point or problem that Americans are facing. And that’s just concern about the stock market or even investing in general. And this is one we might know a little thing about is that I get it. Money can be very emotional and you know people, what feels good in the short term or safe in the short term can actually be risky in the long term and what’s great for you in the long term in the short term can sometimes feel really scary and risky. So, how do we bring this all together? And I think Bo, if we just look at the last two years, this is a perfect example on how irrational or emotional things can feel, but still make the point that if you just stay consistent and always be buying, you’ll be okay.

Bo: Yeah, it’s wild. If we think about from January of 2024 to June of 2025 to right now, the S&P 500 is like up 30% over that time period, but it has not been a straight shot from 1% to 5% to 10 to 50. There were some fits and starts. And if you remember back in April of this year, the market lost 18%, like we were right there on the cusp of bear market territory and it was kind of frightening. But as we sit here and look at it right now, this has been a great year for most investors in 2025, even though there was that intra-year decline. But I think a lot of new investors, a lot of people coming out of the workforce, maybe people that aren’t as well-versed in how the markets work, they saw that April downturn and they got spooked and they got scared. They said, “Oh man, this feels very, very uncertain.” But I don’t think it’s quite as uncertain as that.

Brian: Well, I mean, this is something that everybody needs to understand. Historically, markets recover in what’s called a V-shaped recovery. And that’s what you look at these illustrations. You can see the V’s. And the fact that that’s why it’s hard to time it because you have to not get it right once, you have to get it right twice. Because even if you miss the downturn, a lot of times you miss the recovery and you didn’t really do yourself any good. So, be careful. We want to give you some tips. Here’s the part we want everybody to know. Investing doesn’t have to be a gamble. If you create a good investment plan, it will serve you well before, during, and even after the next market volatility moment that you’ll have. It’s just that’s why you have to create a plan, triage your personal finance situation and let your investment plan actually reflect who you are and what your goals are. And it’s not a gamble then. It’s more of this is what I have to do to create success.

Bo: And when it comes to investing, it’s not a short-term endeavor. We just showed you the S&P 500 over the last two years. Not even two years, over the last 18 months, 2024 and so far this year. That’s a short timeline. Even if we would have gone 2, three, four years, that’s a short timeline. When you put money to work, when you invest in risk assets, we want you to have a timeline of at least five years or greater. And if you can think about the money in those terms, it doesn’t matter what the market’s doing this day, this month, this quarter, or even this year if you have a long timeline. So recognize that when you’re putting your money to work, it’s a long-term endeavor and you need to treat it as such.

Brian: And that leads to the last thing. We say this a lot because I think it’s worth an echo just so you get the perspective just kind of pushed deeper into who you are and what you do with your money is when in doubt, zoom out. Guys, people, you know, we just told you there’s lots of fits and starts with things and there’s lots of volatility. It’s scary. Every year the market’s going to probably go up or down and have intra-year changes of close to 14, 15%. But if you just can understand and know what you expect out of your assets and know historically, look, markets make, especially if you’re looking at the S&P 500 somewhere between 9 to 11% on average. It will give you the perspective to understand when in doubt, zoom out, always be buying and your future self will give you those happy sloppy tears because you’ve done the hard work and building your great big beautiful tomorrow.

Bo: Happy sloppy tears. You heard it.

Brian: No, it’s sloppy. Anybody when we do our millionaire surveys, if you think about how often our audience and our clients will tell you these guys are right, you know, if all the things that I was scared about if I just stayed consistent, made it automatic for the people, through automation and just taking a little bit today for that great big deal tomorrow, you’ll wake up one day and be like, “Holy cow, this worked. This slow process has created a tremendous opportunity and wealth for myself.” And Bo, I did it by accident, but I still think it’s worth mentioning. I said the word survey. What should that stir up with the audience?

Bo: If you have not, you absolutely should take the Money Guy financial mutant survey at moneyguy.com/survey because what we want to know is we want to know what does your financial life look like? How do you approach financial decisions? How are you building your great big beautiful tomorrow? And right now we have the survey open. I think it’s open till next Tuesday. I think we have one more week to go to hear from you so that we can begin compiling this data. And we want to show you not how the average American looks, not how the average person looks, but we want to show you what do financial mutants look like. But we can’t do that without your response. So, if you’ve not gone out and taken the survey, go to moneyguy.com/survey and make sure you get those responses in because we have some dynamite content that’s going to come your way. We’ve already got some ideas of some different ways that we’re going to be able to slice and dice this to hopefully show you that there is a better way to do money and a lot of you are doing money better right now. We can’t wait to share that.

Brian: Well, I think it’s interesting. Last Friday’s show drop was actually our survey on our millionaire clients. I’m super excited because this year we’re planning on creating multiple shows off of your survey data because I think there’s going to be some opportunity to compare and contrast from our millionaire clients to our Financial Mutant audience. It’s just going to be, I’m excited. I mean, because it lets us really use you guys to kind of compare and contrast and show what creates success and how Financial Mutants are just wired differently. And I love because it also creates a connection with our audience on this, too.

Bo: Yep. I love that we get to do this. I love that we get to sit in this spot there. Look, and don’t we start the show by talking about there’s all kinds of financial stuff out there that you can be worried about. And what we hope we can do is be the voice of reason to say, “Okay, yeah, while there are uncertainties out there, it doesn’t need to cause confusion. It doesn’t need to cause chaos. We want you to be confident in your financial future.” So much so that every Tuesday at 10 a.m. we sit right here and answer your questions. So right now if you have a question you want us to weigh in on, we have the team out in the wings collecting those. So make sure you get them in the chat so that we can load you up with that. Creative Director Rebie.

Trees Don’t Grow to Heaven vs Always Be Buying (21:31)

Rebie: I would have liked to see what you would come up with. But for now we’ll go to Nelly Bee’s question to kick us off. It says, “Money guys, you often say trees don’t grow to heaven. Yep. But also always be buying. Yep. I’m curious how you think about and process these statements coexisting.” That was a good question. These are two very like money guys. You do say a lot.

Brian: Okay. I’m in a great mood, but I’m going to just give you a cold hard answer that’s not going to sound like I’m in a great mood because it’s terminal. We don’t live forever. So I mean I will tell you during your lifetime, trees live much longer than us humans do. So it’s true. Trees don’t grow to heaven. But you plant a sapling today, 20, 30 years in the future, that thing is going to turn into a much bigger tree just over your lifetime and you will be able to eat the fruit. You’ll be able to sit in the shade from that tree. But it’s also not going to live forever. It’s just its timeline is much longer than our timeline. And it’s the same thing with always be buying. I mean I think that there is so much opportunity with what’s going on with the ever-expanding pizza pie of opportunity as the economy just grows and grows and grows upon itself. So that’s my answer. I mean it’s kind of, it’s a positive but it’s got a little seed of negative in the fact that we just don’t live forever.

Bo: I’m going to go a little bit more tactical with it. Is that okay? Sure. Always be buying. We affirm that and that’s something we say. But in the life cycle of an investor, the way that your dollars look and the way your portfolio looks at age 20 versus age 60 is very very different. So while we’re saying always be buying, always be putting your money to work, always be participating in the markets, that is a true and factual statement for folks that are 20-year-olds as well as folks that are 70-year-olds. But what looks different is their actual portfolios. So while you are that young 20, young 30-year-old, you may just be dollar cost averaging, putting your money, always be buying into low-cost indices, S&P 500, small cap, international, these more aggressive risk on assets. But then what happens is as you age, as your portfolio changes, it begins to become more and more conservative, less and less aggressive. So that when you look at your entire pizza pie, a smaller portion is going to represent the risk assets than when you were young. You’re always still buying, you’re always still participating, you’re always in the markets, but the composition of your portfolio changes. That’s why we don’t tell people, “Hey, let’s just go V for life. Let’s just go, we’re going to go all S&P 500 all the time.” Because we do believe that trees don’t grow to heaven. And at the time that you might need to start building your treehouse, right when you hit financial independence, right when you hit retirement, you don’t want to be in that fourth quarter of 2018 or that great recession or that dot-com bubble burst. It’s why we begin to diversify away from an all equity portfolio as we age and as our portfolio grows because we recognize yes over the long term markets are most often going to go up. Eight out of 10 are going to go up. It’s an ever-expanding pizza pie. But when I actually need those dollars, I want to make sure my portfolio reflects my current age, current risk tolerance, current risk capacity, and current need for those dollars. So always be buying is true, but it will change what that looks like.

Brian: It’s almost like there’s some phases of wealth building. You have to act accordingly with the make wealth phase. Once you reach that level of success and actually cross the boundary and say, “Hey, maybe I don’t need to take as much risk anymore,” you maintain that wealth and you change your behavior there and then you start getting even to the point of success that you say these guys are saying I should be always be buying but it seems like my money’s just growing upon itself, let’s start thinking about legacy and even better things through multiplier wealth. That’s where I think a lot of you financial mutants find yourself is because you’ve been so good at building and saving that we got you, we’re going to reach you no matter where you are and help you know how to navigate this. So as you can see Nelly, those are great questions, but those things are not as in much conflict as you might have initially thought.

Bo: That was great. You covered all the angles.

Rebie: Nelly B, thank you for asking the question.

Wedding Sinking Fund (25:59)

Rebie: Next question is from Matt. “Hello, money guys. My fiancé and I just got engaged this past weekend.” Congratulations. Wow. First week. Let’s go. Fresh off the presses. This is probably still feeling weird even thinking about, “Hey, she’s got a ring on her finger now.” I love it. Well, the rest of the question says, “And we are saving towards a wedding next year. Where do you think a short-term sinking fund plan fits in with the FOO? Thank you.”

Brian: Yeah. And by the way, I mean, the simple answer is you said a year. You ain’t, you’re not, I was about to, I’ll just use my grown. You ain’t going to be investing that money. That’s right. A year is short-term money. So, let’s load up whatever best cash equivalent that you can find. And so, that might be a money market mutual fund, that might be a CD, that might be just a high yield savings account. Load it up, but don’t take that risk.

Bo: Yeah. So, I think what Matt’s asking is, okay, what step is it? Brian, will you hold the thing up for me? We have this framework we like to use called the financial order of operations. There are nine steps that tells you what you should do with your next dollar. And what Matt has asked is, “Hey, I just got engaged and I want to get married and I’m looking and I see deductibles covered and I see emergency reserves and I see max out retirement and I don’t see wedding on there. I don’t see where that falls in.” And so, how do I know if it’s okay? And this is one thing where we like to remind you that personal finance is personal. And it’s about what your goals are. And a lot of people have financial goals of, “Hey, I want to own a home one day or I want to be able to start a business or I want to be able to retire and be financially independent or maybe I want to be able to pay for a wedding.” And no one can tell you that your financial goals are right or wrong. And so you may have this goal of, “Hey, I want to have, I want to get married. We’re on the hook for the wedding. We’re going to pay for it.” And so because of that, we have to begin deploying dollars to fund that goal. And based on where we are stage of life, we might not be able to fund that goal and some of our other goals at the same time. That’s okay. You just have to understand that there’s an opportunity cost. There’s a trade-off and you want to make sure you keep yourself in check. So when there are life goals like getting married, buying a house, starting a family, those are not specific and unique steps inside the financial order of operations. In our experience, they’re riddled all throughout the financial order of operations. What you have to decide is how can I make that decision? What steps do I need to be able to make that decision? And then once I’ve got my plan, my path in place or once I move past that goal, once I get married, have the kid, change the job, whatever that thing is, how do I get back to the big goal that I have of one day being financially independent. And the financial order of operations is the tool and mechanism that allows you to continue moving towards that goal.

Brian: And that brings it to the point that it’s really a bolt-on to probably step number four, emergency reserves. This is going to be a sinking fund that you attach on top of and go ahead and do an analysis, 3 to 6 months. Where do you fall on this? Try to protect so you don’t start making crazy decisions getting way out over your skis. But then I’d probably add this sinking fund to step four. And then that leads, I’ll give you some Uncle Brian advice. I’ve been married for over 27 years now. Is that, look, the real celebration of marriage is actually the marriage. This is just your celebration to let your friends and family be part of it. I barely remember my wedding because you’re so busy running around shaking hands and making sure everybody’s comfortable that don’t get crazy with your budget. If you’re self-paying for this, if there’s not an already existing sinking fund from family members and other things because you’re having to bootstrap this yourself, be realistic on what type of wedding you have so that you actually get a moment to celebrate this life together versus the burden of carrying a bunch of debt or other decisions for a 24-hour cycle that hopefully will create great memories, but doesn’t create a legacy of just battles and struggles because you overstretch. Because I think most people would tell you they want to celebrate you. It’s the relationship. It’s like a lot of things in life. Happiness doesn’t have to be expensive. That’s right. It just needs to be purposeful. And so don’t go out there and let the consumption society we live in put you in some false mirage that creates a legacy of struggle for you and your bride for the coming years because it’s more of the marriage is the important thing. This is just the ceremony or the celebration for your friends and family.

Bo: I am completely in agreement with you on that one, Brian.

Rebie: Very good conversation and congrats again to Matt and your fiancé. We hope that this next season goes well and that gives you some things to think about as you start saving up.

Brian: I will say I’m okay with people spending decent sums on like good photographers. Let your bride feel as comfortable and happy. You don’t have to get crazy with the dress, but at least, you know, make sure she’s comfortable. But some of the other stuff, cut budgets as much as possible.

Brian: That was very specific. I like that. I mean, I’m not the bride, but I’m just telling you things I see.

Bo: This is a hot take, and I want to see if you agree with this, Rebie. I do not remember the place setting for my wedding or for a single wedding I’ve ever gone to. Like you know the centerpiece, like the thing they put in the middle of the table. People care so much about. I don’t remember and I remember that being such a big deal. My wife spent so much time fretting over the flowers and I can’t even remember the flowers. I couldn’t tell you anything about it.

Rebie: Yeah. I’m like you know into that stuff enough but I like people were like surprised like I would almost get in a little trouble for not caring a lot. But Bo is not wrong.

Brian: And I know we can cut this off whenever it gets cut up but Bo did a, he had to bootstrap his wedding in a lot of ways and I thought y’all had a great wedding. Oh it was awesome. I mean, it was incredible. So, you don’t, it’s back to my point. One of the most fun weddings I’ve ever been outside of I was in Bo’s wedding. The only thing I ever pick on him about is that these shoes that he made all of us groomsmen buy were these little, I have very wide feet. This is why I’m a great swimmer. If y’all haven’t ever heard me talk about that look, these little Van shoes that he made us buy were so thin that my feet hurt all night.

Bo: Here was my take since we’re going to go on this tangent. I get, it was in a season where all my buddies were getting married. We had to keep like renting these tuxes and like you spend all this money renting this tux and you take it back. And I’m like ah no I want my guys to have stuff that they can actually use. So we bought suits. They were not expensive but they were good-looking. You could wear them to whatever. And I was like well my guys don’t need dress shoes. So let’s go with some like cool, I say cool, some casual. They were just white canvas Vans because I wanted my people to be able to wear them other than just in this one event. Like if you’re going to spend money on this thing I want you to be able to get some use and utility out of it. And so that was our stretch. Here’s one other since this is where we’re going with this. I don’t like, I enjoyed the tastings for the wedding. You know, you do this thing like, “Oh, come try all this and come try.” I got to eat way more food during the tasting than I did in the actual wedding. And it wasn’t even hot when I got it at the wedding. And anybody that tells you about cake being good after a year, they’re lying to you. Eat a bunch of it the night of.

Brian: Your guests will remember the food, though. Guess what? Like they’re going to remember the food more than some wedding cake. Be careful. Don’t go crazy with the fondant. Fondant doesn’t taste good. I know it’s pretty. So specific. Go let your cake have buttercream on it. I’m sorry. That’s just these are, that’s the wedding participant. That’s the person who’s been to a lot of weddings. By the way, a lot of people now all the conspiracy theories that because you see comments say, “Do those two even like each other?” They’re probably like, “He was in his wedding. He was in my wedding. We lived together for a season.” That sounds a little, I’m nervous.

Bo: No, no, it was all, it was the whole family. It was communal. It was awesome.

Rebie: Oh, you guys are funny. All right, Matt, you got a little extra for free. You can do with that what you will.

HSA Reimbursement Timeline (34:18)

Brian: Hey, after the next question, I have another sidebar, but we probably need to do one more question. It’s not about the wedding, but just give me a placeholder. Do you want to write a note so you don’t forget it?

Rebie: He’s going to do it. Oh, because I don’t want him to say. All right. Well, let’s move on to another question. We do have a lot more questions in the hopper. Two in, Brian. Keep this thing moving. No, it’s all right. Rock hopper is the next question. It says, “How long?” Like a cricket. Sure. That’s what it makes you think. Okay. No, that’s somebody who’s probably, okay, mountain climber. I’m sorry. We’ll keep going. Yeah. Okay. Rock Hopper, you can let us know what your username is for if you’d like. Could be interesting. His question says, “How long should we save receipts before seeking reimbursement for our HSA in 20 years? Is 20 years too long to wait? Is 5 years too short?” Somehow I can already hear Bo saying it depends.

Brian: Well, I’ll let, but you remember was it Braveheart where he’s like, “Hold, hold.” You know, and it was something like till you see the whites of their eyes or whatever. I feel like this is one of those because it’s definitely going to be a depends but it’s also until you see the whites of their eyes. Go ahead.

Bo: I’ll tell you I’m going to tell you how because I’ve thought a lot about this because I keep getting this question. So I’ve really tried to like spend some time thinking, okay, what am I doing? How am I approaching mine? So what I do is I’m one of those 13% of folks that uses my HSA as a triple tax advantage savings vehicle. I put money in every year, max it out, and I then invest that. And whenever me or my family incurs medical bills, we just pay for it out of pocket. So, I go and pay for, you know, the dental cleanings or urgent care or, you know, whatever the thing is out of pocket. I then have a spreadsheet where I put that expense and then I scan in the bill or the payment receipt or whatever so that I can do that, right? And so, I’ve been doing this for years. So, if you look at my spreadsheet, I’ve got them all tabbed out by year. So, I’ve got, you know, five years ago, four years ago, three years ago, and, you know, the HSA’s gotten to be a pretty big, pretty decent size now. And I was like, “Oh, man. Should I reimburse myself?” And I’m like, “No, here’s the way that I’m going to use my HSA.” It can pay for past medical expenses that you incur or future medical expenses. Well, I just have a feeling that when I get into my aged years, when I get into my 60s and 70s, I’m going to have medical expenses that I’m going to incur at that time. So I can then use the HSA dollars at that time if I choose or at that time I can treat it kind of like a Roth IRA where so long as I have the justifiable medical expense I can pull all that money out completely tax-free to reimburse myself for past stuff. So, I’m not actually planning on me personally reimbursing myself for all those expenses I’ve incurred, but I’m keeping in the background as an insurance policy in case I ever need to. I’m likely going to use my HSA for future medical expenses.

Brian: I mean, we pulled the code on this is that really there’s as long as your executor goes and matches up the expenses and knows what you’ve done. I mean, the ultimate thing is death. But that’s not what I’m telling you your timeline is. I’ll give you an example. I had a client recently that’s retired. They built a new house in a new part of the country that they were moving to. And it was the HSA which was the easiest place so they could pay cash for their house. We were able to go reimburse for all these years that they had been saving in the HSA and it was a big part of that. There was multiple accounts that went into it, but the HSA was one of those accounts that they were able to get access to for the cash to pay cash for the house so it’d be mortgage free in retirement. I thought that was cool. So, it’s the personal in personal finance. It’s going to be different for everybody. I think a lot of people are kind of thinking this will be earmarked for retirement for the future. But I mean it can be used for other parts. That’s the cool thing with this planning is that it lets you be a choose your own adventure with the entire process.

Bo: And you made a great example of the client because I’m thinking it’s a beautiful little slush fund to have. Like I’ve had clients where they were, you know, right there at the cusp of the 0% capital gains and I’m like, you know what, they needed some sort of distribution. Okay, let’s take it from the HSA. It’s not going to hit your tax return. You can still stay 0% capital gains. Be really creative with your tax plan. Medicare surcharge. Oh man, I need a little bit of money. Let me pull that. Taxability of social security, like all these different things. If you have a well-funded HSA, it allows you to legally manipulate your income to make sure you stay inside the threshold you need to stay. And so, it’s just this, it’s like the Swiss Army knife of financial accounts when you get into retirement, when you get into financial independence.

Brian: Yeah. I mean, and just to remind people of why, and I think we take full credit for this, the number went from 4% were financial mutants who let this money, now it’s up to 13%. So, more and more realizing the power of these health savings accounts. The big thing is understanding and what I’ve loved seeing is I mean, my HSA now has got like unrealized gains built up that are getting 30, 40% built into them. I started thinking about, man, how cool is it? I’m going to be able to pull money out without even touching the original investment. That’s basically going to be tax-free gains that I’m paying for stuff with. That’s the exciting part of that’s why it’s step five of the financial order of operations.

Bo: Yep.

Rebie: That’s great.

Financial Order of Operations vs Baby Steps Clarification (39:52)

Brian: Can I do my sidebar now? Oh, good. Sure. I was just going to thank Rockhopper for the question. That’s it. Did he give, did he let us know he’s a mountain climber?

Rebie: He did not say anything. Somebody did say Rockhopper was a type of penguin.

Bo: What type of penguin? Oh, really? What if it’s just like Dennis Hopper’s younger brother whose name was Rock and it’s just his last name. This was Rock Hopper, literally.

Brian: Okay, that’s a choice. That’s an option. We still don’t know. Reasonable to me.

Brian: Hey, so here’s my sidebar. Rob Berger did Financial Order of Operations versus baby steps. I watched it and I want to thank our financial mutants because you guys, Rob, look, Rob is one of those conference friends whenever we go to like FinCon or other things like that. We always, you know, “Hey Rob,” you know, give him a high five or handshake, you know. So when I saw I got a little nervous when I saw I was like, uh oh, you know, I think we’re friendly with Rob. Is Rob going to be cool to us or not? So I think he did a good job with it. But there was one point of clarification. And I was so proud of my financial mutants is because the biggest push back that Rob gave to us was our savings goal of 25% of your gross income. And he really, he was like, “Man, that’s just that seems way too much.” Sure. I’m probably paraphrasing too hard on it, but you know, if you’re the creator of something or involved with it, you of course are a little more sensitive, but you guys rightly showed up and shared, “Hey, that 25% for most people, assuming your household income is less than $200,000, gets to include your employer match.” And then the other thing that I didn’t see in the comments, but I was sitting there, I was like screaming at the screen. If you go to moneyguy.com/resources, we have what you should be saving for retirement. And rightfully so, there it is. Our content team is so smoking hot good at this is that you can see if you retire in your 20s or if you start saving in your 20s, that number is well below 25%. But unfortunately, the sad reality of the world is is most people don’t start saving and investing for the future until their mid-30s. And if you go look at our chart, that slide rule that’s backed up by the math, you can see you better get busy saving close to 25% if you want to still be in the green on replacing your current income in retirement. So, I thought that was great. And then, yeah, and this is not to throw shots at Dave, but it’s just to kind of put us on equal footing in some degrees. The 15% that Dave puts in his baby steps, he says exclude your employer match. So, I think that puts us, the delta between those two savings goals is not as far as was originally presented.

Bo: Okay. Is that okay for my PSA?

Brian: That’s great. You did awesome. Would you have brought that up or you like what are you doing?

Rebie: No, no, it was great. Okay, that was great. That was great. 25%. Moneyguy.com/resources if you want to go download that how much you should save resource and check it out. And thank you to all of you who said, “Hey, have you seen what’s going on out here?” So, I probably wouldn’t have, I like knowing what’s going on. Now he has seen what’s going on.

High Interest Debt by Age (43:13)

Rebie: All right. Next question is from Morbo the turtle. It says, “In the FOO,” is that some cool thing that I’m supposed to know? I don’t know. Again, I need more pop culture references in my library when it comes to these names. Morbo the Turtle asks, “In the financial order of operations, why is high interest rate debt dependent on age but retirement savings rate isn’t? Could someone that starts at 25 be rewarded with a 15% savings rate so they can focus on other goals?” I cannot believe it. I literally had this chosen for the whole tangent.

Brian: Based upon even that like I said other content creators are covering the financial order of operations and they focus on this 25%. I think it’s important for us to kind of highlight this. So I’m glad you asked this question.

Bo: Right. Oh, I thought you were just going to repeat yourself. No, I can sort it off. So, why does, let me start with the first part. I’m going to let you handle savings rate because you just answered that. So, well, let me talk about the high interest debt because it is one that we say high interest debt depends on your age. What’s high interest for one person may not be high interest for another. And that seems somewhat subjective, but the reason is is because every financial decision we make has an opportunity cost associated with it. If I choose to do this, that means I’m choosing not to do this, or if I choose not to do this, it means that I’m choosing to do something else. So, when it comes to high interest debt, we want to think about what’s the best use of our dollars. Okay, I can take $1 if I’m a 20-year-old and I can go deploy it to work. I know that $1 by the time I get to retirement can turn into $88. And we call that the wealth multiplier. It allows our money to literally multiply through time. Well, if I’m that 20-year-old and I have, I’ll use auto loan as an example, and I have an auto loan of 7%, but I did the thing I was supposed to do. I did 20/3/8. I put 20% down. I didn’t finance for more than 36 months, and the monthly payment is not more than 8% of my gross income. Well, I could take $1 and I could go extinguish that 7%, 8% car loan, or I could take that $1 and I could go have it multiply 88 times over for me. And so that’s why we say that depending on where you are, for a 20-year-old, your dollars can turn over 88 times, but by the time you get to 50, your dollar turns over three times. So it’s much less powerful for a 50-year-old than it was for that 20-year-old. So how valuable satisfying that debt can be changes. That’s why debt levels matter based on your age.

Brian: So now 25% savings. Yeah. Savings rate. Look, you’re without a doubt, and I’ll even have the content team put it up again, is we have, if you go to moneyguy.com/resources, we have how much you need to save, and you’re spot on. Somebody who starts saving in their 20s, 10%, 15% will more than likely get it done. The sad reality is for most Americans, they don’t start doing this until they’re mid-30s. So, we have to create content for, that’s the thing about content creation. Personal finance is very personal. So, if I did it off of every 22-year-old who started saving, investing, it would miss all the 36 year olds who just discovered, you know, the financial order of operations and this stuff and it would be disconnected. So, I have to build content for the greater good, but then tell you wholeheartedly, many times over, personal finance is very personal and it depends. And that’s why a lot of our content, you’ll also notice we talk about a 25% savings rate for somebody in their 20s, super aspirational. I have a no hypocrite policy. I could, you know, I was struggling in the early part of just trying to make sure I’m paying the bills and keeping up with things because my first salary right out of college in public accounting was $28,000 a year. So, I mean, that’s, you know, that’s why a lot of people I can’t remember I was talking to somebody who came out about the same time, but they were a police officer or went in the military and like, “Yeah, I’m sure in accounting it was a lot different.” And I was like, “No, my starting salary is $28,000.” He goes, “Wow. I’m a little shocked. I would have thought,” I was like, “Yeah.” No, it wasn’t as fruitful back then to be an accountant as it is these days. But it is one of those things where I think it’s more of it’s aspirational in your 20s, but we’re building content. But it still brings it back to I want you even in my 20s, because you guys are financial mutants, if you start having some success, I will tell you if you do get ahead of the curve, it lets you own your time that much sooner because I was very aspirational. I was hungry to kind of hit the ground running when I was in my 20s and I’m thankful for it now because you know that is the thing. If you want to be part of the fire slash FINE movement, moving on to your next endeavor and not have to work in the same job or be able to control your life and your time that much sooner, it’s probably going to require you to save a little bit more because that assumption that we have built into those numbers that are on that deliverable, they’re assuming a normal retirement. So, if you want to get to things in your 50s, you got to save more. But I also don’t want people to feel a false sense of pressure if they do plan on having a traditional retirement, do what fits your financial life because personal finance once again is very personal.

Bo: Well, and I think the earlier you can get to 25%, the more margin you give yourself because none of us know the unknown unknowns that are going to come our way. We all start out our career, we always have this vision of what it’s going to be like and it’s just going to go, you know, bottom left to top right. Life’s going to be good. Income’s going to increase. I’m going to get married. I’m going to have kids. I’m going to buy the house. I’m going to do the white picket fence. I’m going to do all these things. But then life happens. Maybe there’s a sickness, an illness, maybe you have to move, maybe your job changes. What we want you to do is if you can save 25% early, it then gives you the margin to be able to make different decisions later on. I have some clients, dear friends of mine, and he was crushing it early on in his career. I mean, huge income for a really interesting company and was just saving like a banshee. And then all of a sudden that industry shifted and changed and he was out of a job. And he went from making like mega mega like big money down to making a very very paltry salary. And he did that for three, four, five years. But it was that savings rate that he had early on that allowed them to be okay and still on the path for financial independence until he could get back on his feet. So the earlier you figure that out, the earlier you can do it, the more you set yourself up. Yeah. For a 20-year-old, you could probably start saving 15%. And if you can do that your entire career, you will likely be okay, but there’s no guarantee you can do that. So, the sooner you can get to 25%, the more margin you’re able to build out.

Brian: Yeah. Well, here’s something. If you’re brand new to our content, give us 5%.

Bo: If you’re just starting out, there’s a, I like that a lot. I like it. I like that a lot. I like that a lot, too.

Selling Gifted Individual Stock (50:25)

Rebie: Well, great. I’m glad I asked the question. All right, next question is from RRA. “I have some gifted individual stock that has done really well, but I want to switch to index funds. What do you do when you want to sell, but you still have an income marginal and federal, marginal, federal, and state is 27%?”

Brian: So, I think he’s talking tax rate, but you guys, let me give some foundation here, Bo, and then you answer the question here. Here’s the thing when I always perk up the CPA in me is when I see somebody got gifted individual stock. For some reason, this is something people get so excited about gifting highly appreciated stock. And I’m always like, you know, now look, this is going to sound a little morbid. It’s better to die with highly appreciated stock because you get what’s called a step up in basis significantly better because you get what’s called a step up in basis. And then your heirs don’t pay any income tax. What happens? That was going to be the part two of this is when you give highly appreciated stock to a loved one. Yeah, it got you out of the taxes, but essentially whoever you gifted that stock to, they inherit your basis. So whatever you paid is now what they’ve paid and whenever they sell it, they’ll have to pay the income taxes on it. So you can see from structure of what you’re trying to give or pay forward there’s a better way to do money and that’s what. But now that’s water under the bridge. So I’ll leave that I just want to set that context so now Bo can answer the question.

Bo: Well it’s a great thing you use specifically the term gifted. If it was a gift the basis carries over but if this was inherited make sure you go back and do the research to figure out what the value was on the date of passing because you will get that step up. Custodians do not do it automatically. We see this time and time and time again. Someone will come to us say, “Oh man, my mom, my dad, my uncle, they passed away last year and I came into this money and I’m trying to figure out what to do.” We’re like, “Oh, this has not gotten a step up in basis.” And so, make sure you’ve done that due diligence. So, my first question for you, Aaron would be, okay, how significant, what for some reason? Oh, never mind. No. Cool. Have you ever seen Substitute Teacher? Substitute Teacher. RRA sounds like Aaron. Oh, Aaron. A A Ron. I don’t know. It just makes me tickle. Sorry. I didn’t mean to put that out there. So, all right. The question that I would ask you is how significant are these stocks relative to your total financial picture? Meaning is this like hundreds of thousands of dollars of stock that is going to be meaningful for a long term inside of your financial picture or is it something, you know what I was gifted $10, $20, $30,000 of stock but I’m still saving and I’m still building because a lot of times we’ll tell clients, “Hey, it’s okay you may have this individual stock and it may represent more of your portfolio than you want it to but rather than, if it’s a good stock, if it’s a company that you have confidence in, you think about like the names you’ve heard about that are like really great stock holdings long long term. Can I hold this? And then can I build my portfolio outside and around it? So as I’m dollar cost averaging, as I’m saving, as I’m doing my 25%, can I just grow my portfolio such that this stock represents a much smaller portion of my portfolio?” A lot of times that is the solution. Now, if that’s not the solution for you, and maybe this does represent a material part of your portfolio, there’s a few things that you can do. One, whenever we hear highly appreciated securities, we think, okay, are you charitably inclined at all? Like, is there any sort of giving or gifting that you do in your financial life? If you do, using a donor advised fund is a great way to gift highly appreciated securities. You can open it up. You gift the highly appreciated security. You get a tax deduction based on the market value of the gift. All of the embedded gains get wiped away forever completely. So that is a solution. But let’s suppose you’re not charitably minded and you’re not trying to give any of this money away. One of the things you might want to think through is just like we talk about dollar cost averaging into the market or into positions. You may want to think through, okay, I’ve got this stock position. I’m at a 27% I think he said marginal. Did he say marginal?

Brian: He said marginal, but make sure you’re looking at capital gains rates.

Bo: There you go. Marginal tax rate is not what long-term investments are taxed at. They’re actually taxed at long-term capital gains rates, which for most folks are going to be 15%. So, think through, okay, if I were to sell this today, what tax would I incur? And do I believe reasonably that if I were to put this in index funds, the index funds would perform better than the individual stock to compensate me for the tax that I paid? Or if I’m nervous that the stock might go up because maybe it’s one of these high-hitting big names that’s been doing really well, maybe I just dollar cost average out of that position. Dollar cost divest systematically over time monthly, quarterly, annually, whatever that may be for you. So that way you remove the emotion from the equation.

Brian: Good job, Bo.

Rebie: Good job, Bo.

Bo: Dude, it’s so funny. And I knew it would happen. As soon as he referenced that, the chat just went wild. What? Oh, everyone knows that because everyone knows that skit. So now everybody’s dropping in all the different names that were in that skit. It’s a brilliant podcast is fun.

New York City Trip Tangent (55:56)

Rebie: All right, I’ve got another question from Bob near retirement.

Brian: By the way, do you want to know how consumption society pushes things? I’m sitting here doing a show and I keep getting Uber Eats. I’ve never used Uber Eats. I’ve never used buy now pay later. If you’re getting an alert, does that mean you have like Uber Eat? Is Uber Uber? I mean, we were in New York last week and I used a heck of a lot of Uber in New York. So, I think it assumed, “Hey, he’s been using Uber a lot. Let’s team up with some Uber Eats.”

Bo: Is Uber Eats a separate app or is it part of the Uber app?

Brian: No, you can do it. I think it’s built in there because it’s always trying I think it’s always trying to get me to use it. I was about to catch him. I was about to call him out having the Uber Eat app. I don’t use it much either clearly because I couldn’t remember if it was separate.

Rebie: I’ve not like ashamed. I’ve used it a handful of times. In our survey this year, did we ask how many financial mutants use Uber Eats? Awesome. I can’t wait to see.

Brian: Okay. I didn’t, I’m so sorry. You don’t have to be sorry. And by the way, yeah, I did mention we went to Colin and Samir’s meetup. Yeah. Is that what you, Press Publish NYC. I screw that up every time. The video production team just pulled up a photo of it. Look at that. Oh, wow. You guys were standing at the ready.

Bo: That’s us in New York City. Yeah. So, we got to for me, which was pretty cool. I can share this. Can I? First time ever going to New York City. I thought it was wild. It was, we were going through all the first times you’ve gotten to do it with me. It’s awesome. You remember that time when we were flying into DC and I’m like dude I’ve been here before. I’ve been to DC and then we land and I’m like I have not been here. Nicholas Cage taught me. I had the same experience in New York. I’m like I’ve never been here. I’ve never been here. Kevin McAllister taught me everything I know about this place. So that’s lots of movies. We had fun. By the way, we did get to see a subway rat. Oh, it was wild. It was so almost was polite.

Brian: He took a left turn across everybody walking up the stairs and just, he’s a big old boy. He had a briefcase off the right just going to work. I mean, this was 3:00 in the afternoon. Secret of NIMH. Well, I’m trying to think of my childhood. There was a whole rat movie. Ratatouille.

Brian: No, that’s your childhood. There was a different one that was a little creepier from my childhood. Oh, the Secret of NIMH. Is that Secret of NIMH? There you go. Nick knew it. Yeah, it was there’s a whole society in New York on that.

Rebie: Brian is still Brian. You should have seen him. He was so excited about the experience of riding the subway and all the money that you could save riding the subway.

Brian: Oh my gosh, we saved so much money riding that subway. Well, in part of it I did say I used a lot of Uber. We did use Uber and we got there and we were going to do some sightseeing because he had never seen, he was like I was like, “Bo, what’s your short list?” So he was like, “Hey, I want to see Time Square. I want to see The Bull.” By the way, what is wrong with society? I knew he was going to say, “What is wrong with society?” I knew he was going to say it. That there are more people posing with the bull balls than there are with the head of the bull. I don’t understand you people. By the way, there is zero pictures of Brian and Bo with the balls because that was, I was like that’s crass. Why would we do that? But there is a huge line. Meanwhile, there was only two people waiting to get a picture with the front of the bull. What in the world? We couldn’t have just said back of the bull. The front of the bull. Back of the bull. That’s the, were they posing with the back of the, they were touching. It was weird. Really weird. I’m just telling you.

Bo: So, it was what I got to see all kinds of firsts in New York, which is why, so it was like even Nintendo store was cool. Even the Uber drivers got in on this. They would have been like, “Oh, hey, hey, that’s the hotel from Home Alone.”

Brian: I think most of cab drivers and Uber drivers in New York have a reputation of probably not wanting you to talk to them. But you were so like a kid who was excited to be in New York for the first time. So exciting. And so much so I think people could see the excitement is that as we pulled by because what was the hotel there? The Plaza. The Plaza that even the doorman who happens to be in the front of that picture smiled at you, might even gave me a thumbs up and that’s so not New York but I think you just had this endearing childlike look that they were like oh let’s not break his heart. It was super cool. It was super super cool. It was a good trip for sure.

Target Date Funds (1:00:25)

Rebie: Want to do one more question? No, I think we’re good. Yeah, we could do one more question. We’re doing it. I’m sorry. It’s my fault. He already said his username. So, I’m like, we have to ask his question now in case he was like, “Oh, that’s my question.” And then we went on. We were talking about near.

Brian: By the way, there’s a lot of you guys that watch our content that are content creators, too. And it does not miss on us. And I’m hoping that there might be some creative opportunities to maybe do collabs or other things. We haven’t fully sussed out because this is all fresh off the press for us. But it was cool and very heartwarming. And we all, it should be noted, we had the biggest, and it probably is because we had Rebie there, we had Bo there, myself, us traveling as a pack. We had more people approach us in the airport than have ever approached us before. We broke a record, a Money Guy record. And that was not lost on me. It was pretty awesome. And we got to share it with our spouses. Made us look a lot cooler.

Bo: Okay, now ask that last question.

Rebie: All right. Bob near retirement says, “Can you speak to why you promote target date funds so much? The fees for TDFs are relatively high compared to ETFs and they are not customized for financial mutants.”

Bo: That they’re not customized. And I want to be very clear when we talk about target date retirement funds. We’re not specifically suggesting a customized solution. What we’re suggesting for folks is a generalized solution to remove the friction points that often cause people to miss the mark of moving towards financial independence. Target date retirement funds are wonderful because you only have to answer two questions. How much can I save? When do I need the money? I don’t have to think about allocation. I don’t have to think about location. I don’t have think about any of that kind of stuff. If I can answer those two questions, all I have to do is start mastering the behavior. Because before you can become a financial mutant, before you can become financially independent, before you can do any of those things, you have to get the behavior right. And in our experience so many times, we’ve seen this. “Hey young person,” this is us talking to our young people when we were young people. “Hey young person, do a Roth IRA.” “Awesome. Okay, I’m going to do it. What should I go buy? I’m going to go buy Apple stock.” Okay, great. Do that. And then Apple has a downturn, or oh, I bought my Roth in 2007 and it lost money. Ah, what’s going on there? We don’t want things that will cause you to stop doing good behaviors like buying, like putting your money to work, like having a long-term view. And so, target retirement funds remove a lot of that guesswork. And it gives you an allocation. Now, look, it’s not the perfect allocation. And it’s not going to be a specific allocation towards you, but it gives you an idea for the way that investing and investments work. And it has you focus on the big picture because early on in your investing journey, your savings rate is exponentially more valuable, is exponentially more important than your rate of return. And we’ve done tons of illustrations on this. You can make 20, 30% rates of return annualized and it will never catch up or it will take decades to catch up to a 20 to 30% savings rate. And so that’s why we like suggesting those because we want to remove friction points that could cause you to not move in the direction that you ought to be moving.

Brian: Yeah. Like I look, we both come from humble beginnings and this whole game of money, it really stinks when you’re starting out. You catch content like ours, we get you all excited and motivated. And I think about my first investment when I got my first real job. I didn’t know what I was doing. I didn’t know where to go invest. So, I was just looking. I feel like our system, we wanted to give you a good starting point. So, you know, a place that you’re not going to go get ripped off. You’re not going to go get, you know, distracted chasing the hot dot. And that’s why I love the thought of, “Hey, how much can I save and when will I need to use it?” If you can answer those two questions, all the other noise and friction just goes away. Now, that leads to the next point you made, the high costs, the fees. Well, guys, I’m glad we get to defend this is because we are very specific on this. Without a doubt, target date funds can have high expenses. But that’s why if you listen, we’re very prescriptive. We say we want you to go look at index target retirement funds because guess what happens when you put index funds into target date retirement funds. A lot of those fees just seem to wash off because now you’re not paying all the managers and all the other stuff. Index funds are very tax efficient naturally. So a lot of those fees come down and we even go a little deeper because then people say, “I don’t like the portfolios, what the portfolios look like. They’re too safe for me because I’m a financial mutant.” Here’s the thing. We tell you if you want to go do due diligence, the biggest providers on the low-cost side of things, Vanguard, Charles Schwab, Fidelity Investments, all have index variety versions of their target retirement funds.

Bo: You want some numbers because I literally looked it up right here. Fidelity, I just this is random. This is not endorsed, but Fidelity Freedom 2040 internal operating expense of 0.12%. 2045, the Vanguard target retirement 2045, 0.08%. These things are not expensive.

Brian: They’re pennies on every dollar that you invest. So the fees are not the thing. So all of you who say, “Yeah, but I don’t like that this had 8% bonds or 12% bonds. Go look at, do your due diligence. Do your work. Go look at each of those age groups. And they’re going to have variation. They’re going to have differences even though they’re using indexes. And choose the one that you think reflects what you’re trying to accomplish.” But yeah, I love and look, there’s a reason we’re creating content for financial mutants who might be starting out. If you’re a little further in your journey and you got a little more wisdom, I’m not going to get mad at you for having index funds. I’m just trying to make sure that the version of myself if I had had a tool like the Money Guy show, what would have helped me and I’ll tell you what it would have helped me tremendously to know about index target retirement funds because it would have saved me from the noise of the world that is telling people that you know all the different ways you can get rich that lead to roads of ruin.

Bo: Yeah. And I just Bob asked and it’s so I love the question but the way he started, “Can you speak to why you promote target date funds.” I would argue we don’t promote target date funds. We promote behaviors that will move you towards a great big beautiful tomorrow and we try to remove behaviors that will not move you towards that. We want to make the good decisions as easy as possible. We want to make the bad decisions as hard as possible. And a lot of people even though investing is a great novel wonderful thing, they end up overcomplicating and screwing it up. And so target date retirement funds on the index variety are a great way to remove that friction.

Rebie: Well said. Yeah, Bob, near retirement, thank you for your question and thanks for being here on the live stream. I’ve seen more financial mutant survey submissions popping in all morning. So, thank you for that and keep going. If you haven’t taken the survey yet, go to moneyguy.com/survey. We would love to hear from you and have your voice speak into these episodes that we’re going to develop that speak to where financial mutants are. So, thanks for being a part of that. Moneyguy.com/survey.

Closing (1:07:48)

Brian: Guys, we had a blast creating content. It was fun. I think hanging out with you guys socially at the conference was a lot of fun. It’s created a lot, you guys are going to see the fruit from all those creative juices just flowing. So, thank you for all of the support you guys give. Definitely go check out those surveys. We don’t take that for granted and you’re helping shape the content because we truly believe there is a better way to do money and you’re a big part of that. I’m your host Brian Preston, Mr. Bo Hansen, Rebie and the rest of the Money Guy crew, Money Guy out.