Quit Saving Money? The CoastFIRE Epidemic

Quit Saving Money? Everything You Need to Know About Coast FIRE (0:00)

Brian: Quit saving money. Everything you need to know about Coast FIRE.

Bo: Brian, I am so excited to talk about this because oftentimes there are good things that come out of movements, and there are exciting things that are worth talking about and taking advantage of. But sometimes I think there can possibly be too much of a good thing, or maybe even a misunderstanding of how that good thing should be rightly applied.

Brian: Well, look, the FIRE movement, financial independence, retire early. People call us the fire extinguisher because that whole retire early concept is a little unique. I always say people always go to the next endeavor. But one concept that seems to really be in the conversations if you dabble in the wonderful world of personal finance is CoastFIRE. And I kind of get this because it’s one of those things where you can save heavily and then see light at the end of the tunnel and take your foot off the accelerator. How does this work?

Bo: So if you’re looking for the Webster’s definition of what Coast FIRE is, here’s what it is. When your current investments are projected at the level they are today to grow to 25 times your annual expenses by a traditional retirement age without you contributing any additional money, it’s the idea that I’m going to save, save, save, build, build, build. And once I hit a number, that number will allow me to coast to true financial independence. I can front-load all of my saving, then not add more dollars, let my dollar bills grow, and ultimately that army of dollar bills will be able to pay for my living expenses at some point in the future.

Brian: Now look, we’ve gotten some exposure to this. We even covered this on one of our Making a Millionaire episodes. We had a great guest, Danielle, and her goal was to get to $4 million. She felt like she had saved enough money and was going to take her savings rate down to 8%. Meanwhile, in the past she had been doing 30 to 40%. But when we did the analysis, we were like, whoa, hang on, put the brakes on. Because in her assumptions, she might be pulling back a little too early.

Bo: So by tweaking her assumptions and making some adjustments, we were able to put together a plan that had her saving a little more diligently until age 40. She was trying to stop frankly too soon in her journey to where she wasn’t actually going to be able to coast to where she wanted. By saving diligently until 40, we put it together, and then at 40 she was actually going to drop her savings rate even lower than she thought, down to as little as 5%. It’s all about the variables that go into the calculation, and you want to make sure you get those variables right. Because if you don’t get them right, man, you can end up in a real pickle.

Coast FIRE Case Study: Meet Coast FIRE Carly (2:52)

Brian: Well, let’s take it beyond just the Making a Millionaire guest. We’ve done a case study on what Coast FIRE Carly looks like. Walk us through this.

Bo: Yeah. So let’s assume that we have Coast FIRE Carly, and she starts working in her first job at 25 years old, and she’s going to aggressively save for the next decade. From 25 to 35, she’s going to do everything in her power, super high savings rates, to build her assets all the way to $500,000 by the time that she gets to 35. She then wants to participate in Coast FIRE, which means she’s built up to half a million. She’s not going to save any more, not going to add any more to the pot. She’s just going to let that $500,000 grow from age 35 out until age 65. Well, if she does that and we assume an 8% rate of return on average, just the $500,000 that she was able to build in her first ten years of working has the ability to turn into almost $5.5 million by traditional retirement age. She did a lot of hard work in the first decade, and then for the next three decades, she let her money do a whole lot of the heavy lifting.

Brian: Now, a lot of you are going to look at that $5.5 million and go, holy cow, that’s a lot of money. And it is. But I’m going to bring this back to today’s dollars. In today’s dollars, it’s just under $220,000 a year. So when I hear that, I’m like, oh, that’s a lot of money. But we have to bring it back because this is the problem with sometimes looking so far out into the future. It really messes with your orientation on what money is. You see $5.5 million. You see $220,000 of living expenses. You’re like, what could go wrong? Well, the problem is when you bring it back to today’s dollars, it’s still a healthy sum of money: $90,000. But that is a lot different than what I think a lot of us picture when we see $5.5 million projected. And that’s why it’s probably a good time to hit pause on Coast FIRE and explain why is this so popular, what are the benefits, what’s in the brochure, but also what are some flaws or things you need to be mindful of so you don’t fall into a trap.

Bo: So okay, why is it so popular? I think that people generally love the idea of taking their foot off the gas. We as humans don’t often like lots of discomfort, but we’re willing to put up with some discomfort for a short amount of time if the payoff is worth it. And so people say, okay, I’m going to save really diligently, I’m going to do this really hard thing for a short period of time, and then once that period of time has passed, I’m going to ease off and take my foot off the gas and it’ll be much more enjoyable experience.

Brian: And I do like this. We talk about money only being a tool, and I think a lot of people think when they get to $1 million or $2 million or $3 million, their life is just going to get easier. I do like how Coast FIRE is making these people think about work-life balance, how they can take more control and more enjoyment and spending in the present. I’ve done this period of being super disciplined. That is a positive and I like that part of it. There’s also comfort in knowing that your retirement is already well funded. If you’re ahead of the curve, you know your army of dollar bills is doing a lot of heavy lifting. And if you do this correctly, if you follow Coast FIRE, you’re going to be able to actually increase your standard of living much earlier. You’ll have this super high savings rate very early on, but earlier than retirement, you can drop your savings rate and actually enjoy more of the present. A lot of folks like that idea. I don’t have to wait until I’m 60 or 70 to live the life I want to live. I can start doing that in my 30s and 40s.

The Risks of Coast FIRE: Variables That Can Blow Up Your Plan (6:48)

Brian: This is the thing. Reality is, it’s not bad in concept. What happens is life just has a cruel sense of humor. When you think you have everything figured out, it’s typically when you get punched in the jaw on a Tuesday afternoon with something in life. And it doesn’t always have to be bad stuff. It could be good stuff, family planning and other things. Life sometimes has other thoughts, and if you’re not careful, you might take your foot off the accelerator of savings a little too soon.

Bo: That’s exactly what we saw with Danielle. She wanted to stop saving in her mid-30s, and unfortunately that just wasn’t going to get the job done. Because in reality, if you are a Coast FIRE participant, it’s a very long two-stage time horizon: the time horizon from where you start coasting to true financial independence, and then true financial independence all the way to the end of your life. There are a lot of things that can change and a lot of variables that can affect the probability of success in the plan you’ve laid out. And the earlier you try to do this, the more variables enter the equation and the more small deviations those variables can have huge impacts to your plan.

Brian: This is the thing. We get a bad rap because, just like financial planners on everything else we say, it depends. We just try to make sure everybody knows the variables. And that’s why this is definitely a measure-twice-cut-once situation. Because for a lot of you high-earning individuals, once you cross that threshold of leaving a well-paid job or a career, it’s hard to fire that back up three to five years in the future if you’ve misjudged this. So let’s make sure you stick the landing. These are the variables that could cause the plan to blow up if you don’t think about them. What happens if your expenses end up higher than you thought? For Coast FIRE Carly, what we’ve planned out is that at the end of her coasting period, when she hits true financial independence, she’s banking on a portfolio that can provide about $90,000 of living expenses in today’s dollars. Well, if her actual expenses are $110,000 or $120,000 at that time in the future, 30 years from now, she’s going to have a problem.

Bo: I kind of foreshadowed it earlier. Life circumstances. This is why I tell everybody to put on their 3D glasses. You can kind of go where you think the ball will be on your financial life. Think about if you’re not married when you’re planning this, go ahead and build that into the plan. How about family planning with kids? Go ahead and put whether it’s going to be two kids, three kids, or no kids. Have a plan for all of the above so that you’re just not caught flat-footed. And then think about if you have to move to a different part of the country, what that might also require of you. Because that’s the thing I’ve seen when people leave early: it’s the family planning. It’s all of a sudden private school or daycare. You’re like, holy cow, these things are a lot more expensive than anticipated. That’s just us wanting to make sure that when we say measure twice, cut once, you’re taking all this into account. And then even in terms of how you do your projections, what happens if the rate of return you actually end up achieving is lower than what you expected? For Coast FIRE Carly, we were relatively conservative with an 8% rate of return. But what if she had done her projections off a 10% rate of return and she only achieved 8%? That creates a problem. Or what if your assumptions around something like inflation are different? For Carly, we projected with an annual inflation assumption of 3% over the next 30 years. If what she actually experienced over her coasting period were a 4% inflation rate, that $90,000 of spending would actually only have the same purchasing power today of about $67,000 in spending. That is a 25% reduction in purchasing power because of nothing that she did, nothing that was inside of her control, but an external factor that impacted her plan.

Coast FIRE Done Right: It’s Not All or Nothing (11:14)

Brian: Now that we’ve given you the things to think about and the variables, I’d like to pivot your mindset. This doesn’t have to be an all-or-nothing thing. If you decide you want to be part of this movement, there’s nothing wrong with you still getting your employer’s match. There’s nothing wrong with you still going out there and maxing out your Roth IRA if you’re under those income thresholds. Nobody ever regrets having more Roth dollars, because these things have incredible legacy building from an estate planning standpoint. I always remind people there is a nice middle ground, even if you want to be part of this movement.

Bo: And if you are going to do this, I hope what you’ve discerned from this is that it makes sense to measure two, three, four times, and then check your progress. Even if you were Coast FIRE Carly and you began to do this, and you got into the first couple years of coasting and you recognized that inflation is higher than you thought, or you got married or you had a kid, it’s always okay to go back and revisit the plan. Maybe now you need to start saving again. Maybe now you need to start adjusting. Because if you can adjust the plan as you go, it doesn’t have to be 100% right at the very beginning. But the more accurate you can be in the beginning, the easier the path and the easier the journey will be. We are not fire extinguishers. We just recognize that fire can be dangerous, and if it’s not handled correctly, you can burn yourself. But if you use it correctly, it can be an unbelievably powerful tool that you have at your disposal.

Brian: Yeah. My biggest thing is I do love the fact of people owning their time that much sooner, because that’s the why. If you know that when you wake up in the morning, you’re doing what you’re meant to do, not only are you going to be happier, you’re going to feel more fulfilled with how you’re using this powerful tool of money. And that’s the biggest part. We want to empower everybody out there. That’s why I love that we get to do these live shows where we get to answer questions. It’s always a mystery what every show’s personality is going to be, so I’m curious to see what shape things take today.

Bo: Yeah, I love that. Every single Tuesday at 10 a.m., we show up right here to answer your questions. We have a team out in the wings collecting them. So if you have a question, something you want us to weigh in on, something you want to get our take on, make sure you get it in the chat right now. Because we do believe that there’s a better way to do money, and we want to help you do money better. So with that, creative director Rebie, I’m going to throw it over to you.

Rebie: Yes, I’ve got some questions queued up from the live YouTube chat. We’ll also be doing a rapid fire segment later in the show, but these questions are going to be pulled directly from the Moneyverse, which is our free Discord server. You can go join right now at moneyguy.com/moneyverse. If you want to submit for rapid fire or just see what people are submitting, you can go do that right now while you watch. But while we get the rapid fire stuff in the hopper, I’m going to start with some of our questions straight from YouTube. Are you ready?

Bo: Yes, ma’am.

Q&A: $2M vs. $4M vs. $8M — How Much Is Enough at Retirement? (14:24)

Rebie: First one’s from Tumblr Bait. It says, “Hi Money Guy team. My wife, 33, and I, 38, have reached our CoastFIRE number. We are trying to decide how rich we want to be later versus spending now. What’s the difference between $2 million and $4 million at 65? How about $4 million and $8 million?” These are some pretty different numbers, but I think it’s an interesting question. How would you answer it?

Bo: You’ve got to run the numbers. Even as we were talking, Brian, in the live chat, people said, “Wow, it’s incredible. $5 million sounds like so much money.” And it is, $5 million is a lot of money, but $5 million 40 years in the future would be the equivalent, at a 4% withdrawal rate, of $90,000 today. Inflation and the time value of money are very real things. And so the question you asked, well, what’s the difference between $2 million and $4 million? I want to argue that difference is going to be much smaller in the future than it is today. So you want to think through it correctly. That’s why I like thinking about retirement in terms of consumption or living expenses. Figure out what your burn rate is. And then I want you to stack on, if you were doing all the things that give you the best version of your life, if you’re a golfer, if you’re a traveler, whatever your hobbies, go ahead and bolt that on in today’s dollars to what that retirement looks like.

Brian: Now we can project that out at an inflation factor of 3 to 4%, whatever you feel comfortable with, and you’ll quickly see there’s a big difference. $2 million and $4 million, $4 million and $8 million. Those are going to have significantly different withdrawal numbers on them. But you also have to inflation-adjust it, because with your naked eyes $2 million sounds like plenty. But if you’re thinking you’re not going to save another dime, that $2 million goal might not be enough to get it all done.

Bo: And I just think this is an interesting thing from our experience. There are stories, and it is a reality, that there are people that get to the end of their life and they have a lot of money left over and they recognize, man, I kind of didn’t take advantage of the things I should have taken advantage of. Those are the financial misers. But let me tell you what we have never had, and I want to be careful using an absolute like never, but I think this is true. We have never had someone get to financial independence or get to retirement and say, “Gosh, I’ve just got too much money. I’ve just saved too much money. I feel too comfortable in my retirement.” Most people say, “Oh wow, I am not nearly as worried in retirement with my financial circumstances as I thought I was going to be.” Or, “Man, I thought it was going to be a lot more difficult for my dollars to grow even after I left the workforce than they are.” Those are realities. But Tumblr Bait, I would not be so concerned. If I have $8 million when I start retirement versus $3 million when I start retirement, am I going to be upset about that? I don’t think so. I think what you’re going to recognize is it’s going to give you more options, more flexibility, more choices that you get to make earlier on in life than you would get to make otherwise. Now, don’t mishear me saying that you ought to not spend anything, not enjoy anything, and wait until you’re 95 to start using your money. That’s not the case at all. But there’s nothing wrong with going into financial independence and retirement with a little bit more of a healthy balance than you think you need, to give you a little bit of extra comfort and cushion. Because there is a psychological thing that’s going to happen when you’re no longer working with your back and your hands and your brain, and instead you’re having to let your dollars work for you. The more dollars you have working for you, the more cushion and slack you have in the system. In our experience, the more peaceful and comfortable retirement and financial independence tends to be.

Brian: TumblerBait didn’t give us ages beyond 33 and 38, so I’m assuming a lot of the family planning is probably done at those stages. I just want to make sure that you are building in enough for today. I mean, I think there is a balance. Remember, I covered this at the beginning of the show. It’s not all or nothing. That’s the problem. We all go to these extremes, and that’s where there’s usually some nice common ground that lets you make great memories with your family, but still lets you get the free money from your employer, max out your Roth IRA, and have this healthy life and the best version of your life where you have no regrets in the future.

Rebie: Love that, Tumblr Bait. Thank you for the question. It is your lucky day because your TumblerBait worked. You get a Money Guy tumbler. Just email winner at moneyguy.com.

Bo: I was just informed that the Moneyverse hates the word frothy. Both of us said it today. I thought it was a thing. I guess it’s not. If you wouldn’t mind, in the chat right now, give us some synonyms for the word frothy so that we can use other language that’s more appropriate.

Brian: Well-lathered. Oh, no.

Bo: I don’t like that at all. No. Someone said, hey little brainstorming. We’ll keep that going. No bad ideas here. Someone said, hey, I love the butterfly mug, Brian. You’ve got a new mug right here. You want to tell us about that?

Brian: I don’t know if y’all heard, but Dolly’s got a new truck stop and I came. I have not been to it yet, but I have a dear friend here in the office who went. I think she might have gone on opening day and she came back with all kinds of merch. And I’ve watched at least two YouTube videos on Dolly’s new truck stop. It’s essentially like Dolly’s version of Buc-ee’s. I had the girls all signed up to go. It was my wife that kind of threw the cold water on it. I was like, you realize, I pulled it up on Waze and it was only going to be like a 40-minute drive from the house to get to Dolly’s truck stop. And I was like, we could go eat! They have chicken and dumplings on the menu.

Bo: Chicken and dumplings at a gas station?

Brian: Oh no. They have a full restaurant. This thing is legit. So I’m kind of excited to go check it out. It was my wife that threw the cold water, and it was probably because I bet it’s loaded up. I probably need to let the dust settle and then we’ll go try to do this in the next two weeks. But y’all know I’m a big Dolly fan. And for those of you who are not affiliated with Tennessee, Bo’s kids, his daughters and sons, everybody gets books. If you have a baby in the state of Tennessee, you get books. This is what elevates our literacy probably from a lot of other states. Dolly Parton has made sure that everybody feels some love on this. I think that should be celebrated. It’s pretty incredible to be that generous. And that’s why Dolly is universal.

Rebie: But I do like your mug. It says “Cup of Ambition” on the mug.

Bo: What if we had our next content meeting at the truck stop?

Brian: Well, the problem is Dolly doesn’t need us to draw crowds.

Bo: I wasn’t saying this was the Money Guy meetup. I was talking about our team just going there for a meeting.

Brian: They’ve got biscuits, they’ve got chicken. They’ve got all the stuff.

Rebie: Biscuits. Just to note, if you’re ever having breakfast with Brian and Bo, don’t order toast. Just take my word for it.

Brian: Look, we love everybody. But if you’re in the South, especially eating at a restaurant known for southern breakfast, you get the biscuit. You get a cat head biscuit. You do not order toast. It makes me want to turn the table over when you order toast. Toast is moderate, biscuits are luxury. The three-star versus five-star.

Q&A: $120K Student Loans at 22 — Follow the FOO or Prioritize Debt? (23:48)

Rebie: Okay, let’s move on to the next question. It’s from Jason. It says, “Hey Money Guys, I’m 22 and just graduated college. I have $120,000 of student loans at 6%. Should I follow the FOO while living at home with no expenses and invest and save as much as I can now?”

Bo: Okay now, Jason, here’s one thing I want to know. What’s your degree in? And what are you doing professionally now? What’s your income? Because the question is, should I follow the Financial Order of Operations? And I always think that following the Financial Order of Operations is a great answer. If you don’t have your own copy, go to moneyguy.com/resources and download your free copy. And one of the things that we do talk about in there is that there are two different segments for debt. There is step three, high interest debt, and then there’s step nine, low interest debt. And what you have to decide is how do you determine what is high interest debt versus low interest debt? And specifically for young folks like you, where does student loan interest fall?

Brian: Well, look, I think because Jason gave us the details, here are the deets. This is at 6%. But the thing that kind of made us go is this: $120,000 is a lot. I’m hoping because if you’re following anything Money Guy related, $120,000 of student loan debt means I’m hoping you’re coming out of school making pretty big bucks. Because that’s a lot of debt. Now, you can do all the above, and let me tell you what I mean by this. You can follow the Financial Order of Operations. You’re living at home, meaning your footprint of expenses is pretty much nothing, depending on whether your parents are making you pitch in or not. So you could run the gamut on this. Get some emergency reserves, get the Roth IRA, load up your employer’s retirement plan. You’re going to get to that 25% savings rate so quick because you’re living at home, and then every dollar above and beyond that, go start extinguishing the debt. Because I wouldn’t, you could do some incredible things in about a year, year and a half. Yes, it’s not cool to live at home, but with a high income, you really should get ahead of this $120,000. You just do not want that albatross hanging around you for years. Go ahead and see if you can do all the above. I think you can. Living at home, you’re one of the unique people because you have zero responsibility other than, hey, let’s get out of debt, let’s build our financial foundation, respect the Financial Order of Operations, and build your army of dollar bills while you’re vanquishing the debt. You’ll conquer the world. That was a clarification because $120,000 of debt, I’m counting on some pretty big things from you. What was the username again?

Rebie: Jason Q.

Bo: So assuming Jason Quinn just said he’s a business major going into a sales rep position. I wonder if sales rep means commission. You kind of have to go eat what you kill. But I would do everything I can to get my shovel as big as possible, as early as possible, so that I can do exactly what Brian said and try to get out from under this albatross of debt.

Brian: Albatross. Am I using the right word? I mean, if you saw my SAT scores, you’d know he’s really good at math. A large web-footed oceanic bird? No, metaphorically. A psychological, physical, or social burden that feels like a heavy curse or inescapable handicap. Hey, there we go. Crushed it. Assuming you didn’t mean the giant bird, you nailed it.

Rebie: Jason Q, thank you for the question. You can email winner at moneyguy.com and cash in on your tumbler.

Q&A: All Retirement Funds in a 401(k) — How Do We Access Money Early? (28:09)

Rebie: Next question is from Joey. It says, “Hi Money Guy team. We are 31 and 36 and are hoping for retirement in 13 to 15 years. However, 99% of our retirement is in a 401k. We don’t have Roth because we make too much, $270k married filing jointly. How do we access money early?”

Brian: Whoa, hold on. 31 plus 13 is public-math mid-40s. Some early retirement time. This is almost like the Financial Order of Operations, if there was a step, step number seven, where it talks about hyper-accumulation. What happens when you’ve just been going through the process of letting your 25% be tax-incentivized only? And that’s what Roth does, that’s what your retirement plan does. But it’s step seven where we actually say, hey, take a break and ask, how am I going to use this money? When am I going to use this money? And for yourself, since you’re going to be trying to access this money in your mid to late 40s to early 50s, you’re going to need a bridge account. And the easiest answer to that is probably start building some after-tax brokerage assets. I’m assuming if y’all make beyond $270,000 as a couple, y’all can save a healthy amount beyond the 25% or even a portion of that 25% after getting the free money from your employer. Let’s start building out that after-tax account so that when you get to your mid-40s to 50s, you have a very large account that’s going to give you lots of liquidity, still lots of opportunity to grow the army of dollar bills, but without distribution limits or early withdrawal penalties.

Bo: I love that. I’m going to give a slightly different angle. Can I tease a thing that we just recorded, Rebie? Is that okay? So we just had a collaboration that was super cool, and it was with Carl and Mindy. Yeah, Carl and Mindy. We had Mindy from BiggerPockets Money, and it was just so great. We got to do a deep dive on their financial situation. And one of the things we uncovered was this access to capital conversation. A lot of folks find themselves in a position when they save diligently throughout their career where they have tons of pre-tax assets they can’t easily get to. One of the things I would encourage you to think about first: you said you don’t have any Roth assets because you make too much money. Once you’re over whatever the income limit is, whether it’s $270,000 or over that limit, I’d be curious if you could do backdoor Roth contributions. Make sure you have the right account structure. If you don’t have any IRAs and everything’s in a 401k, you could do a backdoor. And so even building up Roth basis over the next 13 to 15 years and letting those dollars grow tax-free would likely give you some sort of flexibility if you had to do it for early retirement, even though it’s not our favorite. But you said one of you is 36, so I’m just thinking through the math: 36 plus 15 years is 51. Depending on how your 401k is structured, if you could get to age 55 and you’re still employed with the company that sponsors your 401k in the year that you turn 55, you can access your 401k starting at 55 without having to pay the 10% penalty. So you’re really only within four years. Maybe if it was a part-time thing or something like that, you could potentially do that.

Bo: But assuming that’s not the case, we did a great show, and the title was something like “Three Ways to Retire Early That You May Not Know About.” We walked through how you can do Roth conversion ladders, how you can access Roth basis, how you can build taxable brokerage accounts, and we talked about 72T distributions. Because one of the things that may potentially be compelling to bridge that gap: if you are going to truly retire at 51 and have no income, no access, you could do what’s called a 72T distribution to get you from 51 to 59.5. I think Brian’s method of building up a taxable asset bridge makes the most sense since it has the highest probabilistic flexibility. But there are methods and mechanisms by which you could still retire early. I’d encourage you to check that show out if you haven’t already. Joey, if you would like a tumbler, thank you for your question. Just email winner at moneyguy.com to cash in on that.

Q&A: How Did You Overcome the Guilt of Lifestyle Expansion? (33:08)

Rebie: Next question is from Debit or Credit CPA.

Bo: Nerd.

Rebie: It says, “How did you personally overcome the guilt of upgrading your lifestyle once you hit financial escape velocity? At what point did you realize delaying gratification was turning into depriving yourselves?”

Brian: I mean, look, I think it’s all about the balance of your life. Because earlier in my career, I was, you know, Bo has always been generous from Jump Street. He graduates college and he’s throwing out beyond 10% to charities and other things. But the financial mutant in me was like, well, I’ll just do this later. And I don’t think, looking back on it, that’s the right path. I was hanging out with Bo and I started becoming more generous. So I never had guilt about the success because I felt like the more successful I was, because I was doing a very healthy, beyond 10% generosity of giving, we were growing this thing together. Not only were my assets growing and my income growing, but also the organizations I could help and the charities and so forth. That meant a lot to me. It was more of the why of family and realizing the scarcity of time with people you really care about and the things you could do to make sure you’re maximizing the memory making. That made me say, hey, instead of us doing this as small as possible, let’s make this really enjoyable. Because I don’t want to shower my kids in gifts to where they’re entitled. I want to shower them with memories to where they’re more knowledgeable about life and how great it is to have a loving family, and how you can use this tool of money to do a lot of positive stuff. Those were the intersection points that I kind of had.

Bo: Yeah. I would say: how did I personally overcome the guilt of lifestyle expanding? One of the things I did is the Financial Order of Operations allows you, once you get to a 25% savings rate, to be freed from thinking, “Oh man, is it okay if I buy the nicer car? Is it okay if I go on the nicer vacation? Is it okay if I do the home renovation or the improvement?” Because if you know that you’re paying yourself first and you have your dollars automatically going in the places they’re supposed to be going, it should be a freeing thing to let you recognize, okay, it’s okay to do this. It’s okay for me to spend. It’s okay for me to let loose. It’s okay for me to let my lifestyle increase so long as that lifestyle increasing does not crowd out me actually saving and building for the future. That’s kind of how I escaped the guilt. And then when did I recognize that delayed gratification was depriving me of memories? For me personally, it was with my kids. It was me and my wife having this conversation like, okay, yeah, we’re saving and we’re building and things are going good, but we want to do this thing, and this thing might be very very expensive. And we look at the cost of this thing, we put it in the Wealth Multiplier and say, man, at our age, spending that much money on that thing is a substantial sum of money later in life. But our kids are only going to be young once, they’re only going to be in the house once, and we want this to be the childhood they take away. And even if we do this thing, while there is an opportunity cost of those dollars not being there in the future, it’s not going to inhibit us from reaching our other financial goals. And so it was: okay, money is nothing more than a tool that allows me to do the things I want to do and accomplish the things I want to accomplish, both in the future as well as now, in terms of what I’m able to do with my kids and the experiences and memories we’re able to build and create. If you can have that balance, it’s not about all deferred. We say deferred gratification is a wonderful thing and something you should likely always exercise, but not complete and total absolute deferred gratification. Because if it’s complete and total, tomorrow is not promised and you will not get back the moments that you are missing today, especially if you have young children in the house. So you’ve got to figure out how you balance both of those things.

Brian: Also, look, I’ve had a few fellow creators who’ve reached out to me about housing purchases and other things, and I always bring it back to a grounding of what are the things that create fulfillment and happiness. When you do all the research, it’s relationships. It’s your family, it’s your friends, it’s who you’re hanging out with and making memories. Think about for your kids too, because I often wonder, if you go too far up on the food chain on housing, I think that’s why when we do our millionaire study of our clients, you’re surprised. Yes, we have a few clients that have $10 million-plus homes, but most of them don’t. When you start thinking about, hey, I want to live in a neighborhood where my kids can go meet the other neighbor kids and play, that’s probably not going to be in the highest end neighborhoods. You can price yourself out of family neighborhoods with lots of families in it. I vacation with my neighbors. I hang out on the weekends with a lot of my neighbors. But my biggest pet peeve with my house is that I live in the valley of country music stars who all live on hundreds of acres, and then I’m down in this little valley on my point four acres. So I can see my neighbors around me, which is a blessing and a curse when you want privacy. I’ve entertained going for bigger land, but then I asked my builder, who I got to be friends with when we were building our house, when he approached me about buying into another neighborhood with three to five acre lots, I asked the superintendent: so, are any of these neighbors talking to each other? And he was like, no, none of them talk to you. And I was like, well, see? Sometimes going too far up, you might crowd out the things that actually bring you the happiness and fulfillment. Yeah. So you don’t have to. Just because you can doesn’t mean you have to. What you’re saying is if you increase your lifestyle too much, you can price yourself out of enjoying life the way that you actually want to enjoy it. And also, toys. We like toys. I mean, if your hobby is being a private pilot, how often do we see private pilots start off with a Cessna, go to a Cirrus, and then as they start going up into the other planes, the cost per hour to operate just gets more and more expensive. You can price yourself out. You can do the exact same thing on all the things that create happiness in your life. So just be mindful of that stuff. Nothing wrong with you enjoying what you’ve created, but just understand the why and how it intersects with the things that bring you purpose and happiness.

Rebie: Love that. And now it is time to give Debit or Credit CPA Nerd a Money Guy tumbler. Just email winner at moneyguy.com.

Bo: And hey, can I apologize? I just had a visceral reaction and said “nerd” in your screen name without even thinking, because I don’t think CPAs are nerds. I have a lot of friends who are CPAs. And honestly, anybody who’s in this audience, we’re all nerds. I’m a proud nerd.

Rapid Fire: Moneyverse Edition (41:43)

Rebie: All right. It is time for our rapid fire segment. Remember, this is our “It Does Not Depend” rapid fire segment where Brian and Bo get 30 seconds combined to answer your questions and they cannot say the words “it depends.” We will have a “Maybe It Does Depend” segment at the end where if you really need to say something you didn’t get to say, you can. And also, shout out to the Moneyverse. All of these rapid fire questions are coming from our Moneyverse Discord server and all of the great financial mutants in there. So thank you for submitting. Are we ready?

Bo: Yes, ma’am.

Rebie: Question number one. 30 seconds on the clock. Age 34, step nine of the FOO, with a $1.5 million investable portfolio spread evenly across three buckets. Is 100% target date index funds still adequate?

Brian: I would argue that you’re at the point where you’ve likely graduated past a generic portfolio solution. Target dates are great generic solutions for the general public. You now, at this level of wealth, likely need a specialized solution built to your unique circumstances, time horizon, risk tolerance, and goals.

Bo: Yeah, because you’re going to want to look at the tax advantages. You want to look at how you’re going to access the accounts. It’s really more of a step seven operation. So I think you’re beyond index target retirement funds.

Rebie: Question two. What are your thoughts on being generous toward friends in need? I’m worried that monetary help instead of educational help will lead to an awkward dynamic in the friendship.

Brian: Yeah, it can be awkward because sometimes people, even though you’re trying to be generous, will think you’re just showing off. So I would be very nervous about loading up people you care about. In my experience, one of the best ways, if you can do it, is to do it anonymously. If you really want to help them and it’s less about you getting anything for it and more about actually helping someone in need, if you can find a way to satisfy the need and not take credit for it, I think that’s a great thing. We can probably give more on that later.

Rebie: Next question. Where should I save for a down payment for a house if you’re buying the house in the next five years?

Bo: I think a high yield savings account and liquid cash is going to be your best bet. Make sure you hold it somewhere that can likely earn somewhere between three and a half to 4%. If you’re not getting that, you’re probably not getting enough on your cash.

Brian: Yeah, I mean, you can use money market mutual funds at brokerage accounts like Fidelity or Vanguard, or you can do the high yield savings accounts. Ally’s a good one.

Rebie: Next question. My wife and I, 27 years old, $230k income, $800k net worth, are buying a new $35k car to have something reliable for their first baby on the way. Congratulations! Should we sell stocks in our brokerage account or take on a 5% loan?

Brian: Yeah, I think with an $800,000 assuming liquid assets, I would look and harvest some losses and I would go pay cash for this vehicle. I would use it in negotiations where maybe you finance for a little bit, but you pay it off quickly. At a $230,000 income, assuming there’s margin in the system, I don’t know how big your emergency fund is, but perhaps you could borrow from your emergency fund, not trigger any taxes, and use that high income to rapidly pay back the emergency fund.

Bo: That’s a better answer. And within the timeframe. Well done.

Rebie: Next question. What are the three things you would bring to a deserted island?

Brian: A cell phone to call for help. Some Mrs. so that I can survive. And a boat to get off the deserted island.

Bo: Such a cop out. I watch TV so I know the answer is you need a fire starter, you need a tarp to keep you dry, and then you need a bow and arrow so you can hunt.

Brian: Do you realize how much faster I’m getting off this island with my boat and cell phone? You’re camping out on it. I said I have a boat and Mrs. And with the new Starlink phone I said I had, there’ll be cell reception. I’m out of here. The last time we end up trying this I’m not swimming off that thing. I’m saying that you need a life jacket. That should be number one.

Rebie: Okay. Let’s do some more. Next one says, should anyone in their 20s hold bonds in their portfolio at all, assuming retirement in their 50s and 60s?

Brian: Only if it’s in your index target retirement fund. I don’t want you actively going out there buying bond mutual funds in your 20s typically, unless there’s a unique situation.

Bo: I think target retirement index funds will likely have some fixed income exposure. But if you’re just starting out early on and you’re just buying low-cost S&P 500 index funds, I think that’s totally fine. Totally fine.

Rebie: Next question. Brian regrets missing an early Roth contribution and has talked about it on the show. Are there any life experiences or purchases you regret delaying because you were too disciplined?

Bo: I won’t say I regret delaying, but there are some purchases I made where I was like, man, that was so good. A really nice coffee maker was a gift I got myself and my wife when we got our first house. Holy cow, why didn’t we do this earlier? And lawn services was one that I should have done way earlier in life.

Brian: I don’t have a lot of regrets. I’m pretty happy with my life. But there are things I wish I would have done earlier.

Rebie: Next question. What counts for prepaying future expenses? I believe they’re referring to step eight, the abundance goals.

Brian: Yeah. The big things. This is when you can give to your kids’ college without regrets. You can get into commercial real estate. You can live a little nicer lifestyle with a nicer car, nicer house. It’s just all kind of, live your best life. Realistically, steps one through seven are about building towards financial independence. Once you get to step eight, it’s those goals that exist before you get to financial independence. So whatever that intermediate-term goal may be, that’s going to be what those prepaid future expenses are.

Rebie: Nicely done. Three more. How often to rebalance? Does it change with age or progression in the FOO?

Bo: It does change. It likely changes with the size of the portfolio more so than age or where you’re at in the FOO. What we do professionally at the firm is every quarter we look at the allocation. We’re not always making changes. At least twice a year we look at rebalancing, again not often making changes, but looking for loss harvesting or capital gain avoidance opportunities. And then as life circumstances change.

Brian: Yeah, I wouldn’t try to do daily rebalancing. Even quarterly, as long as you’re looking at this once or twice a year, you should be good.

Rebie: Next question. Is an extended car warranty worth it on used vehicles?

Brian: I don’t think so. No. The good decision is buying a vehicle that has good reliability built into the manufacturing of it. One of the big benefits of buying new as opposed to used cars is you do get the manufacturer’s warranty and the early mileage warranty and all that kind of stuff. It’s one of the things that kind of tilts the scales towards new purchasing instead of used right now.

Rebie: Last but not least. You’ve said a lot about biscuits and toast on this live stream. What if the toast is homemade sourdough bread?

Bo: I love it. But I don’t eat that for breakfast. If you put avocado on there and a fried egg, that’s what I’m talking about. That’s avocado toast. That’s what I would put on there.

Brian: Look, I love sourdough. Cinnamon sugar on sourdough would even be awesome. But for breakfast you want biscuits. You can put some gravy on there, put some bacon on there. Biscuits for the win. Because here’s the thing. The biscuit is like the all-weather vehicle. If you want something savory, you can put an egg on there and make a sandwich. Or you could put some honey on there or some jam and make it a dessert. It is so multifunctional. Sourdough bread is wonderful, I’m not going to fight you on that. His wife makes sourdough too so he’s hitting below the belt. But it still doesn’t rise to the biscuit for breakfast. And by the way, we’re not talking about Pillsbury biscuits either. If you’ve ever had homemade biscuits, when you crack that bad boy open and you see the steam coming off of it, it’s a little slice of happiness. Even Cracker Barrel, you go there and they bring out fresh right out of the oven biscuits. I’ll tell myself, Brian, you only need one, and three biscuits later I’m like, how did I end up here? Biscuits just pull you in.

Bo: After I mentioned avocado toast, someone wrote, “Bo’s never going to be able to afford a home.” That made me laugh. That’s too real.

Maybe It Does Depend Segment (52:50)

Rebie: Okay, let’s wrap up the show with our “Maybe It Does Depend” segment. You did say you wanted to come back to a few questions, so I will honor that. Our very first question, the asker said they had a $1.5 million investable portfolio. I did kind of cut you off when you were mentioning a pretty important resource they may want to know about.

Bo: Yeah. I was just saying that a lot of people are at the point of, “Okay, I’ve done the target retirement thing and I did that, but now I do want to graduate to a more specialized solution, something that takes into account my unique circumstances, account structure.” That’s exactly what we get to do in our day job. That’s exactly what we get to help individuals just like you do. So if you think you’re at that point where now the gravity of your decisions is so big because you have a million-and-a-half-dollar portfolio, I would argue: at least have the conversation. Go to moneyguy.com/become-a-client and look at what it might be like to partner with a professional advisor.

Rebie: Also, you said you may have more thoughts on being generous toward friends in need.

Brian: I’ve had a few situations where I want to qualify this a little more. Like somebody wasn’t going to make a trip, and I’ve approached them privately and said, “Look, you being at this trip is more important than the money side of it. Let me help out.” And I’ve had a mixed bag. I’ve had one that went swimmingly well and it’s never been spoken about again. And they got to come and I love it. And I have had another one that didn’t go so well. So I think you have to know who you’re dealing with, because some people just don’t receive generosity well. You need to kind of base it off of the person, because some people will bite the hand that feeds sometimes if you’re trying to be helpful. But I’ve had other people where I’ve helped them through some really tough life situations and you see a lot of the fruits. So it’s a case-by-case situation. I don’t want you to be a miser just because you listen to us answer the question, and we said no. And money can be so charged. If you are going to be generous, one thing you have to do is that if it’s truly coming from the place of generosity, be very careful trying to receive something for it. Because all too often you give somebody some money or you help them out with something, and there’s this expectation that they owe you something. That’s not what generosity is. Generosity is, hey, I’m going to do this. My wife and I, we’ve had some people that have been in some tough spots and we were able to take care of a thing. And then unfortunately, we see that person go make a horrible financial decision and we’re like, oh my gosh, that’s not what it was about. It was about helping someone in need in a moment of need. So if you can remove yourself from it entirely and you have the means and mechanism to do that, in my experience, that’s been the best way. There is a way to be generous without getting yourself in financial trouble.

Rebie: That’s right. You also mentioned it was about Brian regretting missing an early Roth contribution. Is there anything else you may regret delaying?

Brian: One of the best decisions my wife and I ever made, if you’re going to get married, was we bought a king bed. And I know that’s so silly and out there, but I’m amazed at how many people, even good friends of ours, say, “Oh yeah, we have a queen.” And I’m like, oh, what? It’s funny because it was seven or eight years of my marriage before we were on a king bed, and I remember when we got one. But the problem is, it ruins you. Because now when we go stay at somebody’s house and it’s a queen bed, I’m like, how did we fit on this for seven years? We must have loved each other more back then. Because right now it’s just tough. I had that recently when I went and visited my mother-in-law and all she has is full and queen beds. So we slept on a queen bed. And that may be millennial and bougie, whatever, but holy cow. Two other things I was going to say: adjoining rooms. Once I could afford to put my kids in an adjoining room next to us, I should have done that probably sooner. You just get a little more space. And then the other thing is, if something is beyond six hours of driving, we do flights. Anything because I remember when we were down in Georgia, I could drive to Orlando in 6.5 hours and it seemed reasonable. I moved to Tennessee, I made that drive to Orlando and it wasn’t ten hours like the GPS told you. It was like eleven with traffic. And I was like, never, ever, ever, ever again. Because that’s like an hour-and-a-half flight. The last time we did that drive was driving back from Disney and I’ll never again. That broke me. Never again at six hours. And I can tell you, the last time I did it, after we went on a cruise, my oldest daughter got sick and was about to throw up in the car. So I pulled off the interstate and I chose this exit where I didn’t realize they had cameras on the lights, and ended up being like a $150 ticket because I did a U-turn on an intersection trying to get her not to throw up in the car. So I wrote the check and I was like, this probably paid for part of a flight with that ticket.

Rebie: All right. And last but not least, I did kind of cut you off on the rebalancing question. I just wanted to make sure there wasn’t anything else to say.

Bo: Financial mutants often think that we have to take action when it comes to decisions. Remember, you are awarded as an investor or as a financial decision maker based on the quality of the decisions you make, not on the quantity of decisions you make. A lot of times when we look at client portfolios, one of the decisions we make around rebalancing is not to rebalance, because oftentimes when you’re rebalancing, there are friction costs, there are taxes depending on account structure. So a lot of times we will make the active choice to do nothing. And that’s still an active choice. So if you are going to view your portfolio quarterly, twice a year, annually, whatever, just because you’re reviewing and looking at rebalancing does not mean you absolutely have to rebalance. Because a lot of times you can actually underperform by overdoing that.

Closing (1:00:00)

Rebie: That’s fantastic. Well, thank you so much for joining us. Every Tuesday at 10 a.m. Central, asking your questions, chatting with us on YouTube and in the Moneyverse Discord, we really appreciate you. We love chatting with the financial mutants and hopefully helping you grow your confidence in your financial situation so you can focus on what really matters. That’s what it’s all about. That’s why we do the show. And that’s why we have moneyguy.com available to you at any time, full of free resources, calculators, and all of our shows archived. So go check it out.

Brian: Yeah, take advantage of the abundance cycle. There’s a reason we give you so much free stuff: we want to give you value, value, value. Let you live your best life, own your money and your time that much sooner. And then hopefully you’ll find, and I know it will happen, your success will create complexity. Remember who planted the seeds of success will leave the porch light on for you. I’m your host Brian, joined by Mr. Bo, Rebie, and the rest of the content team. Money Guy out.