The Salary Required To Buy A Home (Money Guy vs Ramsey)

Money Guy vs. Ramsey: The Home Buying Rules Compared (0:06)

Rebie: Today we’re going to answer an important question: what’s the salary you need to make to buy a home? I am so excited, Brian, because this topic, not only is it a big financial decision, if not the biggest financial decision a lot of you may make in your time on this earth, it is a decision that you single-handedly really helped me make. I don’t know if I would have a house right now, or at the time that I did, if it were not for the Money Guy rule. So I think I have you bullying me into not putting 20% down on my first house to thank for what turned into a very good financial decision.

Brian: If you use the term bullying, because that is kind of how I did it. I did not take it that way, but I know you’ve described it that way. So you guys know Bo’s trap. And look, y’all know my story. I am a financial mutant through and through. I never had the bust cycle where I was bad with money. I’ve always kind of known there was a better way to do things. And homeownership was one of those things where when I went to go buy my first home, I was like, wait a minute, there are creative products that let me buy into this with 3% down. And so I did that. Then as I grew my financial planning practice, I asked all my advisors, we even did a survey one time, and I think it was 70-plus percent put down less than 5% on their first homes. I was like, wait a minute. If this is what people who are good with money are doing, why are all the talking heads out there telling everybody to put 20% down on your first home? Because that seems so disconnected. And by the way, this has nothing to do, at least for our rules, with the 2021 inflation runup of real estate. These were rules that even back when I was buying my first house in the 90s, it kind of hit me that there is a better way to do money. So we thought, hey, if you think about all the talking heads out there in the money world, it’s us, and then there’s Ramsey Solutions out there. And I just want to say: we love Dave. We love Ramsey Solutions. George gave us a shout-out recently on a show on something. So we love those guys. Nobody gets you out of debt better. However, I do think that if you follow their home buying rules, it might keep you from this valuable goal. It’s going to cost you time because the requirements are just different than our rules. So we want to clarify the difference in the rules. Hopefully if you’re out there sitting on the fence going, should I buy my first house, and if I do, what are the rules? We got you covered. Let’s dive into the comparison of the Money Guy home buying rules and the Ramsey home buying rules. And let me just say, to give a shout-out to our friends over at Ramsey: some of these sound great. If you can afford to do this, this isn’t necessarily a bad decision. But you’re going to see it makes it more difficult. We’re going to dig into that now. So for Ramsey, they say a down payment needs to be 5 to 10%. Money Guy says 3 to 5%. So right off the bat that is easier for a lot of younger folks and families.

Rebie: Well, there’s more to the story here because you have to admit, when you told me on your first house, what were you really thinking you had to put down?

Brian: I thought I had to put 20%. And for a long time it was because I grew up with the Ramsey Solutions knowledge just in my head. So this is about systems change. And I want to give credit to Ramsey Solutions in the fact that pre-2022 they were 20% all the time. That’s what you had to put down. I do give them credit with the post-inflation runup of housing. They realized, hey, this thing is starting to get away from affordability as a true issue. So they amended their rules post-2022 to 5 to 10%, which is still a lot, but way more doable. I give them credit because they were willing to update this. We’re at 3 to 5%. We’ve been 3 to 5% all the time on any first home purchase. So to keep going: Ramsey says you need to use 25% of your net income on housing expenses. Money Guy uses 25% of your gross income, which is going to come into play.

Rebie: Net is actually going to be a smaller number because that’s after your 401k, after your tax withholding, after all your benefits from your cafeteria plan. All of that to say, we use gross because not only does it give you more, but it also is harder to manipulate. Because you can take whatever your gross amount is. What is the amount they tell you? Hey, congratulations, you got a pay raise, this is what you’re going to make this year. That is your gross. After all the withholdings is your net. We like using gross.

Brian: Mortgage length is another big difference. Ramsey is really set on you doing a 15-year mortgage. Money Guy says you should do or could do a 30-year mortgage. And look, all mortgages, the majority of the mortgages I’ve seen from clients, I haven’t seen a prepayment penalty in forever. So all mortgages pretty much allow you to prepay them however you want. You could do a 30-year mortgage and prepay it in ten years. You could prepay it in fifteen years. So it’s all on how your cash flow and your money is flowing in. Now I will say the benefit of 15-year is it’s going to be a lower mortgage rate. But I like the additional flexibility you get from the 30-year mortgage, because you also could not prepay it and invest more. I do think that post-45, once you’ve made wealth and you’re in the maintain phase and multiply, there’s going to come a season where you’re going to try to extinguish that debt. But there’s a time and place for it. The truth of the matter is that the 30-year often allows you to stay within that 25% of your gross income on housing. That’s just the reality. And then lastly, the ownership period. Ramsey doesn’t really speak to this. We say you need to be in the house for five to seven years to truly make that transaction worth it. We even have a data point that buying a home doesn’t beat renting financially until you’ve owned it for approximately six years. It lets all those closing costs and additional costs with owning and buying a home kind of work themselves out and come out in the wash after you’ve been in it for five to seven years.

Rebie: There’s a lot of transactions. Anytime you do a real estate transaction, you’ve got the county governments involved, attorneys involved, recording fees, insurances, a lot of hands in the cookie jar. So you’ve got to have enough time to smooth out the costs and the friction costs of those transactions. And it is just a big transaction and a big decision, so you want to make sure you’re thinking through the long term as much as possible.

What the Numbers Actually Look Like: Ramsey Rules vs. Money Guy Rules (7:21)

Brian: So now we get to what everybody’s waiting for: the numbers. What is the difference between these two home buying rules in reality? So if you’re buying a home the Ramsey way, we’re assuming a 15-year fixed mortgage at 5.85%, putting 5% down, a PMI of 0.75% of the home value, plus taxes, insurance, and all of that. If you wanted to buy a $300,000 home the Ramsey way, you would need $15,000 for a down payment, a resulting loan amount of $285,000, and your estimated monthly housing costs would be $2,935 per month. So your required take-home pay, that net number, would be $141,000, which means your gross income required to buy a $300,000 house would be $184,000. Now that’s got a shock-and-awe factor to it. If you’re trying to say where does that fit in the number of American households, you’d be in the top 19%. It’s the 81st percentile. So it’s one of those things where it just seems hard. And it’s all because we’re looking at a 15-year mortgage and we’re using net, so you have to take into account all the withholding rates and so forth. It gets grossed up to an even higher number. That’s a lot for a starter home.

Rebie: What happens when we’re talking about a higher cost of living market? Because the average home price in the United States is in the $400,000 range. So if we’re looking at a $400,000 house, you would need a gross household income of $253,000 by these rules. For a $500,000 house, it’d be $326,000 gross income required. And then for a $600,000 house, you would need a gross household income of $406,000. And that’s where it just starts to hurt, because we’re truly talking in the 96th percentile of income out of all of America. These are difficult times to buy a house. Let’s talk about the Money Guy rules.

Brian: Comparing and contrasting here. By the Money Guy home buying rules, just to refresh: it’s a 30-year fixed mortgage at a 6.54% interest rate. So it is a little higher. 5% down, same PMI and insurance values as before. For a home price of $300,000, you would need a $15,000 down payment, with a loan amount of $285,000. Your estimated monthly cost of housing is $2,362. So that’s already about $600 less per month, which is pretty huge for most families. And your gross income required would be $113,000. Now, I’m going to shoot straight: this is still hard for a lot of people. Average household income in America is $83,000. But man, that number hits different compared to what we just said. If you have two workers in the household, at least it makes it, well, at least possible. That’s why homeownership is going to likely happen. And we took out the net column, which made the math a lot easier. We tried to make this an apples-to-apples comparison. We could have done a 3% down payment if we wanted to make this even easier to get into homeownership, but we said let’s keep it consistent with 5%. For a $400,000 house, gross income required is about $151,000. For a $500,000 house, it’d be $189,000. For a $600,000 house, it would be $227,000. Not saying these numbers aren’t still high, but man, this is more realistic, or at least possible, for more people. And there are still levers you can pull, like if you did 3% down. And then if you’re upgrading, you can use your equity and put more like 20% down on a home upgrade. Those all change the numbers and at least give a path forward. And that’s something I’ve always appreciated about the Money Guy approach. That’s honestly why I own a house right now.

Brian: Just to quickly put up the income comparison for everyone out there: for that starter home of $300,000, the difference in these systems is 63% more income required, or $71,000. That’s like an additional household income just for that starter home. And then if you need a $600,000 house, the difference is $179,000 of income. That just seems separated from reality. So I think the big key takeaways are that both of these rules have the same goal. We’re not here to pick on Ramsey Solutions because they have a great message to keep you out of debt. When you’re looking at how you’re going to buy your first home, both of these rules will keep you from the house owning you. You won’t be house rich, life poor. They will both protect you. But if you’re younger and trying to buy that first home to raise a family with, you need a little nudging saying, hey, don’t try to do this with 20%. The 3 to 5% down and a 30-year mortgage is A-okay. And it was okay. It did turn into a good decision. Also the key takeaway here is that homeownership is currently historically expensive. You really do have to weigh your options. Is homeownership right for you? Is renting right for you? And that’s going to look different for different people because personal finance is personal.

Rebie: And Bo did an incredible breakdown of this. If you want to go check out our episode called “Should You Buy or Rent in 2026?”, the numbers shocked us. They do full case studies breaking down scenarios where a person rents versus buys, and it will help you start to hone in on what is going to be right for you in this season.

Brian: I wanted to shoot everybody as straight as possible because I do think a lot of people have a recency bias from how much houses appreciated around 2021, 2022, and even 2023, to the point that a lot of people are like, this thing’s just going to keep running from me. And we’re like, no, no. Realize there are some distortions in the market currently that it might make sense in the moment to rent versus buy. So go watch that episode if you’re even considering buying a house or thinking about any housing decision. We really tried to think about this in a different way, to take into account all the unique things going on in this crazy marketplace.

Rebie: And that kind of brings us to one last key takeaway: this isn’t just a mathematical decision. Just because homeownership can be a great goal, it doesn’t mean you have to do it. It’s not required to build wealth. And just because you’re renting now and that’s the best option, it doesn’t mean you won’t reevaluate later and find a different option that works for you and your family.

Brian: I always want people to understand the why. And I’ve shared this before: a reason that you can rent in a lot of markets cheaper than you can buy is because the person who bought that house that they’re renting to you probably paid about half of what it costs to buy it on the market today, because we’ve had such a huge inflation runup with housing. And then the other part is they probably have an interest rate that’s half of what the interest rate you’re going to borrow. So take advantage of those unique things in the market. And then as things adjust, because we live in a dynamic world where the financial system is always changing, if you understand this and you understand what your metrics are, you’ll be primed to take advantage of the next opportunity. That’s why you’ve got to go to moneyguy.com/resources. We’ve got checklists, calculators, anything and everything you might need to help you make better decisions so you’re measuring twice, cutting once on this big financial decision. It’s all completely free.

Rebie: Personal finance is personal. Our goal is to equip you with this type of information, these breakdowns, and even discussing the non-mathematical parts of it. And that is why we’re going to dig into your financial questions next.

Q&A: Unexpected Medical Bill on FOO Step Five (17:29)

Rebie: The first one is from Jacob. It says, “Hey Money Guy Show. I have a medical bill coming up that is a lot more than I expected, and there’s no way I can pay for it without going into debt. I’m on FOO step five and I’m curious how you guys would go about it.”

Brian: Great question. The unknown happens, what do you do now? First, I’d be curious: is this post-insurance? Has your insurance gone through everything and you’re left covering the high deductible? Just triple-check that first. If that’s the case, then you just have to figure it out. If you didn’t have insurance and you had a big medical thing come up and you have a medical provider sending you huge bills, realize that sometimes those brochure rates they send you are more of a shock and awe tactic. If you’re a cash payer, you can go negotiate. Everything is negotiable. And what’s crazy is you can even use ChatGPT or Grok or whatever to help you write a letter campaign or come up with a call script. You might be shocked to find out that you can literally pay nickels on the dollar for medical debt. Now if you have insurance, there’s a limit on what you can do because they’re supposedly already doing all that negotiating on your behalf. But it’s one of those things where I would first want to know the situation. Now, if it is a deductible, this is why we have steps one and four of the Financial Order of Operations. Those two steps are there to make sure you have your deductibles covered. He says he’s on step five. The FOO is not just a walk up the stairs. There’s nothing wrong with going back to step four to build up the emergency reserves, use the reserves to pay off the medical expenses, and then get back to work to build those back up. And I’ll go out on a limb: if you did drain your emergency fund and had to go into debt, that means you’re back on step three. You’ve got to knock out that debt. We don’t want you to just stay in that debt.

Rebie: Don’t be scared to call the medical provider to see if they can give you a payment plan instead of using a credit card to pay it off immediately and running up 20-plus percent interest. A lot of them do payment plans, and that’s probably going to be a better interest rate. So yeah, definitely ask all the questions. Just don’t be embarrassed about it. All right, well, Jacob, thank you for the question. And since Bo is not here, I am going to dub it a tumbler day. So Jacob, if you would like a Money Guy tumbler, since we answered your question on the show, just email winner at moneyguy.com and we would love to send one to you.

Q&A: How Does the FOO Apply to Working Teens? (21:19)

Rebie: Next question is from Chancellor Carter. “Chancellor, how does the FOO apply to working teens with no debt, bills, et cetera? How can I best help my kids get a head start in life?”

Brian: Look, when you’re 15 years of age, you’re getting the basics. And the Financial Order of Operations can work in a lot of ways. Here’s how: most teens don’t have a deductible to cover because they’re under their parents’ insurance. So step one is kind of covered. But guess what? If you’re doing what I’ve shared, I love a parental match campaign. Meaning: if your kids go get that first job in fast food that I recommend, you can offer $1.50 on the dollar, or a dollar-for-dollar match, on every dollar they make to start funding a custodial Roth IRA. That very much matches into step two of the Financial Order of Operations, because you can set up your own prime-the-pump mechanism. Just like you have to pour a little gas in the carburetor to get an engine started, you can do the same thing with your kids’ savings behavior. I love that first job because it not only scratches the itch of them figuring out they have a work ethic, but then you get them into a behavior of living on less than they make by saving a portion of those dollars into a matching fund. This gets really exciting really quick. And a 15-year-old typically is not going to open up a credit card, so they don’t get out of step. They’re really kind of stuck in step two. So the parental matching is where I’d really like you to encourage them to save and invest for the future. Also, teaching them about compound interest, both how it can work for you and against you, is key. Because then once they do have a job, they can follow the FOO and they’re already set up with the behaviors that will help them do that. I would definitely go to moneyguy.com/resources and look at our Wealth Multiplier. A wealth multiplier for a 15-year-old is $145.37. So every dollar has the potential to become $145. To know that if you just want to build your first million dollars at retirement, you only have to save $58 a month. You’ll think about spending differently. If you know that your money can be that powerful, that mindset shift can do a lot for somebody who’s 15 and carries that into their adulthood. It’s pretty powerful stuff. So I love that you’re thinking about that. Chancellor Carter, if you would like a Money Guy tumbler, just email winner at moneyguy.com.

Q&A: Deferred Compensation — Is It Right for Me? (24:21)

Rebie: Next question is from De Glove. It says, “I just got promoted and I’m now eligible for deferred compensation. I am married, I’m 50 years old, and I’m in step eight of the FOO. How do I figure out if deferred comp is right for me?”

Brian: Great question. I actually consider this more of a step seven of the Financial Order of Operations, because you’re thinking about: once you’re beyond a 25% savings rate, how are you going to use this money in retirement? And by the way, qualifying for deferred comp is probably a compliment to you, because they usually structure these type of plans for people who are going beyond the limits of what you can fund in your 401k annually. So good on you for reaching that level of success. I would start thinking about this because the way we’ve used deferred comp is: a lot of people, if you’re 50 years old right now but you want to retire at 58 or 60, which is earlier than most people who are working until 65 or 67 like Social Security would have you believe, you could use a deferred comp plan as a bridge. What it allows you to do is put money into these plans, you don’t pay current compensation tax on it, they’re building in the background. But then as soon as you have separation from service, they start paying out and you can structure right now how that’s going to look. That could be your bridge until you start qualifying for other income streams. And then this allows you to create your own little mini pension as you go into retirement, so you don’t even have to use your other assets. That’s why I love setting up whether it’s a five-year, eight-year type plan where you’re funding these deferred comp plans. You can really start laying out what those first few years of retirement are going to look like for you, and also lower those taxes because you’re probably in a higher tax bracket situation right now. This allows you to legally manipulate that into a lower bracket. And then hopefully when you leave work, you’ll have lower taxes and this bridge money coming in. It really creates a lot of cool planning opportunities for you. Now the only downside with deferred comp: realize that it’s a promise to you in the future. And if that company ever gets into financial trouble before you get your money, creditors would have access to that money before you would. If your company is in a great financial place, that’s usually not something to worry about. But I felt like I need to disclose it to you.

Rebie: How common is deferred comp as an option for people?

Brian: It depends on the size of the company. Once companies get to a certain size and they have enough employees at higher compensation, they’re trying to figure out how to help those employees plan for higher income and take advantage of all the benefits out there. They have top hat plans, deferred comp, there’s all kinds of cool planning opportunities they’ll do to incentivize executive teams. So if you would like a Money Guy tumbler, we would love to send you one. Just email winner at moneyguy.com. Thanks for being here and asking a question.

Q&A: Should I Move My HSA to Fidelity? (27:26)

Rebie: All right, Christian is up next. He says, “Hi Money Guy team. I’ll stop contributing to my HSA after switching insurance next year. Is it better to leave the money in the Wells Fargo account with limited options for when I contribute again, or should I move it over to Fidelity?”

Brian: Yeah. There’s nothing wrong with it if you change employers and maybe now they offer you a Cadillac health insurance and you don’t even qualify for a health savings account anymore. Remember, before you can even fund a health savings account, you have to be under a high deductible health plan. So it sounds like Christian is moving to a different employer, going to be on maybe a PPO or some other plan that’s not high deductible, so you can’t make additional contributions. But he’s got money left in there. He’s part of the 10% of people who are actually trying to invest this money, not just using it as a clearing account. My personal opinion: I think I would try to move it to Fidelity, because I think Fidelity is just going to have easier and better investment options, lower cost index funds. It’s going to be a pain though, because moving HSAs is not the easiest process. But it will set you up better going forward, because if you’re already investing at Fidelity, I do love how it’s all integrated into their one mobile app. It just makes your life a little bit easier. Fidelity is where I have my health savings account. I get nothing from Fidelity for saying that. It’s just where I have mine. I like that I can administer and invest it right there from the same mobile app I use for my other accounts.

Rebie: When you say it’s a pain to move, is this still something that an individual could do on their own?

Brian: Oh yeah, you can do it. It’s just you have to shepherd it. Because every custodian has a process to help you transfer the money, and sometimes it goes very cleanly and other times it requires a follow-up call here or there. It is something we do for clients though, and we have a whole team that handles it. If you’re going to use a financial advisor, one of the benefits is that sometimes these custodians play reindeer games and don’t want to let you move your money. It’s almost like they’ve designed a system to keep the money in-house. We have a crack recovery team. They’ll go out there and make it happen. You’d be surprised: they don’t look like it on the outside because they’re the sweetest-looking people, but they’ve got the knowledge and they know how to get those assets. If you are ever interested in becoming a client, you can just go to moneyguy.com and click on the become-a-client button and fill out the form there. And I think that’s a really good point: that is a great benefit of being a client, especially when you start having larger assets and you don’t want to mess around with it. There are so many things when you get to retirement where you’re going to be thankful to have somebody tracking your basis and all the other stuff for you because success does create complexity.

Q&A: What Goes Into MAGI and What If I’ve Already Maxed My Roth? (31:30)

Rebie: All right, we are going to do one more question and then we’re going to get to our From the Wings segment. This is from JB. It says, “Hey Money Guy team, what all goes into MAGI, modified adjusted gross income? I got a promotion from $100k to $135k, with some unexpected bonuses. I’m looking at $150k this year, close to the Roth limit. What should I do if I’ve already maxed my Roth?”

Brian: There are several questions here. We could get into what modified adjusted gross income is. There are things within the tax code that go into it. It can be IRA contributions, charitable contributions, teacher expenses, half of self-employment income, just a whole list of things. But for most people, the thing I want you focusing on is it’s really your gross income before deductions and all the other things. That’s what your AGI is. So if he’s looking at $150,000 a year, he’s close to the Roth IRA income limit. For 2025, the phase-out for single individuals starts at $150,000 to $165,000. For married filing jointly it’s $236,000 to $246,000. So when you’ve crossed it, when you’ve maxed out both steps five and six of the Financial Order of Operations, I like funding an after-tax account. That’s part of step seven. There’s nothing wrong with opening up a brokerage account and starting to invest for the long term in that after-tax account. You can buy index funds just as easily in an individual brokerage account as you could a retirement account. It’s just the tax treatment that’s a little different. The year I was technically the best financial advisor was probably when I was 28, and I could tell you any figure off the top of my head. I was like an encyclopedia. Now I think most people think I’m a better advisor because I have all this wisdom and I’ve built my own wealth. The complexity that comes with success is why you don’t have to figure all this out by yourself. That’s why I love that we get to do what we do. JB, you get a tumbler if you would like one. Just email winner at moneyguy.com.

From the Wings: News or Noise? (36:45)

Rebie: With that, let’s move into our From the Wings segment. From the Wings is where I read a current headline and then Brian holds up a thumbs up or thumbs down. Is this headline news or is it noise? Are you ready to dive in?

Brian: Yes.

Rebie: First headline from the Wall Street Journal: “Moving back home used to be a sign of failure. Now it shows financial savvy.” A little context from the article: nearly half of American adults under 30, pinched by the high cost of housing, are living with a parent. Is this news or noise?

Brian: I think it’s noise. Look, I moved home for like three months after college, and I saved up enough to buy my Burgundy recliner. The content team, in that react video, nailed the color on that by the way. Hats off to the editors. But look, we know this whole thing. You’ve heard the term failure to launch. We just started the show talking about how hard housing is right now, so there are definitely unique things going on. But personal finance is so personal. I don’t want you to see a headline like this and let it cloud your judgment on how you’re navigating the financial world. You can do this. Staying at home can be a tool for a moment. But I do want you to try to get out on your own as fast as possible, because life just happens differently when you’re out on your own. I have a daughter, and she’s come back to the nest for a few months, but she already has a plan. We actually asked her to stay until we get back from our big trip to Scotland in September. But I want her out of the house at some point so she can start living the adult experience.

Rebie: I said noise too, because just because somebody is living at home, you don’t know on the surface if this is savvy or failure. It still could be either one, in my opinion, because personal finance is personal. What’s the reason, what’s the impetus, what’s the plan for the future? Is there some family dynamic that’s making this a big win, or some family dynamic that’s making this a big L? It’s not all just “housing is expensive.” I think you have to do what’s best for your financial life, taking all the variables into account. Don’t let the noise of the news media or people outside of your influence color your judgment, because a lot of times they don’t know the full picture.

Rebie: Okay, we’ve got more headlines. The next one from CNBC: “June home sales disappoint as prices reach an all-time high.”

Brian: I’m going to say news. We came through a unique period where for 2021, 2022, and 2023, the typical house price went up by over 50%. So you can’t have such a huge market event and it not create some weird distortions going forward. So I’m not surprised at all. That’s why when people think trees grow to heaven, just because houses ran up so fast, there are going to be some distortions that come. Under the surface of this, inventories are getting bigger and bigger on houses for sale. And when you have too much supply, the only way you can get more demand is to start lowering the price to where you start clearing out the inventory. So if you see June sales prices disappoint and prices reach all-time highs, right now we’re still in the denial phase where inventories are going up but people haven’t necessarily dropped the prices as much as they’re going to have to. The distortions from that huge runup are slowly starting to work their way out. That’s why I wouldn’t panic. Don’t feel like you have to force the home decision. There’s going to be opportunities in the future.

Rebie: Next headline from Forbes: “SpaceX stock down 25%, inside the debt and equity risks.”

Brian: I said noise. SpaceX was the zeitgeist, right? Because I’ve said it, when my mom calls me up at 80 years of age asking about SpaceX, and my mother-in-law, who’s well into her 80s, asked me about SpaceX too, this thing got way out over its skis. It’s not what you need to be focused on. It was more of a sideshow. I think it’s exciting to keep up with what SpaceX is doing because there are big technology developments going on. But instead of trying to beat the market, just be the market. Buy an index fund. If SpaceX continues to do well, eventually the S&P will add SpaceX after a twelve-month seasoning period and we’ll know much more about what the real price of SpaceX is. I was very transparent there: I’ve made money with Elon companies in the past. I will eventually own some SpaceX. But I was not buying into the IPO. I was going to wait to see what settled out, because we haven’t even seen what happens when all the insiders start selling their shares. There’s such a small trading of shares available. We really haven’t seen what’s going to happen with the stock. I don’t think this should play into your financial life much or even at all. It’s noise. It’s not what you should be making decisions for your main financial life on.

Rebie: Last but not least, Brian, this is from US News. “Australian officials ask fans to respect the privacy of Neil, a one-ton seal who respects nothing.”

Brian: Is this the seal that keeps coming back and is wreaking havoc? He knocks over fences? I saw a report on this. Neal is literally laying right next to what looks like a roundabout or an intersection, and cars are literally driving by this big monstrous seal that’s just hanging out there. I mean, I think it’s cool. If I lived in this town, I would think it’s pretty cool that they’ve got Neil coming back to hang out and visit every year. It’s like their version of Groundhog Day. Neil’s back. He’s back. But Neil seems like he’s not very nice. He’s not very well-behaved. I watched him taking over a utility transformer, putting his weight on it, knocking it over. He took over a fence. But apparently Neil has a very large social media following, so that itself has become its own potential problem. Now he’s famous and people want to see him. Hopefully people aren’t touching him. They keep people out there to protect Neil too. There you go. Well, I’m just tickled that you already knew who Neil the Seal was.

Rebie: I think you know more than me. Bo wouldn’t know. Oh, he definitely would not know what a seal is. He can’t swim. All right, with that, that completes our From the Wings segment. We do have a few more questions before we wrap up the show.

Q&A: Stuck in a Budgeting Cycle of Saving and Spending (46:11)

Rebie: Tony is up next. He says, “My wife and I are in a cycle of saving and spending. We keep falling off budgeting after two to six weeks. We will save $3,000 to $6,000, then flip and pull from savings down to about $1,000, and then repeat. Any tips for us?”

Brian: How much of this is goals-driven? That’s what I’d want to know first. When we’re doing budgeting, it’s not because it’s fun. It’s not like what we do as a hobby. We do budgeting because we’re trying to set up some muscle memory so we can hopefully graduate to a cash management plan at some point where the money is automated going to where it’s supposed to. But in the beginning, it’s just about knowing where all the money is leaking out. So it’s goal-driven. I don’t love the fact that so far it feels like you get very excited about doing it and then you fall off after the money builds up. It sounds like you literally fall off the wagon of good discipline and go spend the money and start the process all over. You need to figure out and that’s why I do love, whether it’s Millionaire Mission or just going and downloading your copy of the Financial Order of Operations, you have to figure out the why part of it. Because if you’re just trying to save money for the sake of saving money, it will feel empty. And you’ll find yourself highly susceptible to the behavioral stuff. Whereas if it’s goals-driven and the why intersects with a bigger purpose that you’re trying to build money for, I think the stick-with-it factor starts building up much more. It also helps you communicate better as a couple.

Rebie: I agree. And here’s what I’m thinking about: the part that I don’t get is that you say you save up $3,000 to $6,000 and then you get down to $1,000 in your emergency fund. That scares me. It’s different if you have a full three to six months of expenses and you spend $2,000, then put it back up. But if you’re getting all the way down to $1,000, I would let that fear drive you. Like, hey, we can’t spend that $3,000 right now because what if an emergency happens? Because once you have the full emergency fund, it truly is a backstop and it does change some things. I would use a little bit of fear to help you get that behavioral muscle started.

Brian: I think the budgeting might be too restrictive. If you’re going hog wild with the budgeting and shutting it all down, then you build up a nice little pot of money and then you just can’t stick with it because you’re depriving yourself so much and you then spend it all back out. Maybe I would ask yourself if you’re even doing budgeting the right way. It needs to be realistic to where it’s sustainable. This is like health and wealth: if you go on a fasting diet, yeah, you lose a lot of weight because you’re just not eating. But it’s not sustainable. So you go and binge spend the money back out. Go look at how you’re doing the budgeting process and make sure your assumptions are sustainable. You have to have a good budget, not just an artificially restrictive budget. And from a marriage advice standpoint, it’s going to be much better if you’re also realistic about what’s going on in the household versus what you want going on, because you don’t want to come off as a stingy tightwad spouse that doesn’t let any dollars slip out to have fun and build memories.

Rebie: Practically, Brian’s right. If you’re depriving yourself so significantly for too long of a time, it does become not sustainable. I love the idea of putting a time limit on it, and then also reevaluating your budget to make sure it’s actually realistic. I also wonder if, for a season, there’s an opportunity to bring in a little extra income. Or what else could you do to get up faster so that when you do want to go on a road trip and you need that extra $500, it’s not as big of a deal because you have your six months of emergency fund built up? There’s a reason that in the Financial Order of Operations, both steps one and four are cash reserves. It’s to keep you from making desperate decisions. If you know you’re prone to that behavior, you’ve got to build that into the system. It sounds like there’s definitely some mindset and behavior stuff going on. You definitely need to define your why and put a time limit on hitting those goals. All right, Tony, we do appreciate you being here. We would love to say thank you for that by sending you a tumbler. Just email winner at moneyguy.com to cash in on that.

Q&A: Should I Buy a $16,500 Porsche at 25? (52:42)

Rebie: Next question is from Penguins 242. It says, “I’m looking to buy a Porsche from a good friend and mechanic for $16,500. I want to take money out of my individual brokerage account. I’m 25. I would be left with $265k in retirement and $39k in individual accounts. After all that information: is this bad?”

Brian: I wasn’t expecting that. Thank you. Here’s the thing. You’re 25 years old, and to have $265,000 in retirement and $39,000 in individual accounts at 25, that’s pretty wild. But the practical side of me is also curious. Because I think about when Elon hit his first big transaction, I think he went and bought a McLaren and was driving it around every day. And he realized very quickly that’s a bad car to drive around every day. Now a Porsche is a little different than a McLaren, but it’s still a Porsche for a 25-year-old. For $16,500, though, I’m trying to figure out: is this like a Boxster? What type of Porsche is this and what’s the why? Because that might be a hobby car. For $16,500, this might just be a secondary hobby car. And for somebody at step eight, you’re trying to figure out if this is rage bait or whatever. But if it’s $16,500, I’m not going to pick on you if you went and bought this car as a hobby type thing. You obviously have $265,000 in retirement and $39,000 in other accounts at 25. That’s through hard work and saving. That’s different than if you’re trying to buy a $145,000 Porsche as your day-to-day driver. That I would not be for. But if you want to just go have a hobby and dabble, I grew up with my father restoring classic cars and getting tremendous joy out of that. There’s nothing wrong with getting pleasure out of using the fruits of your labor, but I probably wouldn’t make it a day-to-day driver.

Rebie: So in summary, is it bad? Brian says no. And then we got some context from the chat: it is a hobby car. He already has a paid-off 2016 Camry. So you were right on.

Brian: Yeah. So go have a hobby car. And that’ll be something from a memory standpoint that could be pretty powerful, especially if you’re doing a lot of the work yourself. That’s a fun little thing to be working on. And look, I like when we get to tell people they can spend the money. Because I was kind of like, always, he’s 25 and he’s buying a Porsche, and he’s pulling from his investments. That’s the brochure part of it. You look at that, a 25-year-old buying a Porsche. No way. But then the deductive reasoning was, I bet this is a hobby. And he’s done a lot of hard work. If he has $239,000 in retirement at 25, he’s done a lot of the hard work. We could answer these questions by you going to moneyguy.com or Abound Wealth and clicking on the work-with-us page in a few years. As soon as you get that thing over half a million dollars, man, we can make some magic. So click on become-a-client at moneyguy.com.

Q&A: Is a 457 Plan a Better Bridge Account for FIRE? (56:55)

Rebie: All right, let’s do one more to close it out. B wasn’t, I think that’s what we’re going to go with. He says, “Hi, Rebie and Brian. My wife is about to take a state job and will have access to a 403b with a match and a 457. Is the 457 a better bridge account for FIRE versus a brokerage?”

Brian: Yes. The reason we love the 457 is because they don’t have the early withdrawal restrictions. Most retirement plans like a 403b or a 401k, you have to be 59.5, or you have to be separated from service and beyond 55, to get access to that money penalty-free. 457s don’t have those restrictions. And that’s why it’s typically government-associated plans. I love this for law enforcement, fire departments, other things, because those employees usually get to retire earlier than your traditional 60. And I like them to have access to the money. Now there is a caveat here: there’s a 403b as well. By the way, you can do both. You can have a 403b and a 457. And it says with a match, so you’ll know where the match money is. Get that free money. That’s step two of the Financial Order of Operations. So before you jump immediately over to the 457 because that gets you excited about funding those Coast FIRE type things, I would make sure you’re getting the free money from your employer on the 403b first. Whatever the funding limit is up on the 403b, and then the amount after that, you can go down to the 457. You can do both.

Closing and Upcoming Announcements (58:43)

Rebie: Good answer. B wasn’t, thank you for the question. If you would like a Money Guy tumbler, just email winner at moneyguy.com. We would love to send you one. And there’s something I need you to do, and that is to click the subscribe or follow button wherever you’re watching or listening, because I want you to stay in the know. Here’s why: we have been scheming behind the scenes about a lot of fun things that are coming out. We have some launches, some announcements, some new things that may or may not be free. We have collabs coming. We have a lot coming in the next couple of months, and I want you to know about it. So subscribe to the channel, and then even better, go to moneyguy.com, click follow, and subscribe to our email newsletter, because there are times where you’re going to get more details or even be the first to know about certain things. And I don’t want you to miss out.

Brian: And by the way, our newsletter, I can’t say enough good things about it. That’s worth subscribing right there. Every Saturday morning I open our newsletter because I love to see what our content team has put together. Usually they’re either picking on me and Bo, they have a headline, there are tips and tricks in there, some of our social media posts. It’s our recent releases. You’re going to keep up on it, and we don’t spam you. We take your giving us your email address very seriously. We don’t sell it, we don’t spam it. It’s just something to help you be better with money and accelerate your journey. Hopefully you guys hanging out with the brand, you’ll see there is something to this abundance cycle, meaning that we’re going to love on you so you can learn these concepts, apply these concepts, and accelerate your journey to success. And then when you reach that success point, you’re like, oh my God, Brian was right. Complexity does create itself with success. And you’ll remember who planted all the seeds of knowledge that have now sprouted into your success. That’s the abundance cycle. We’ll leave the porch light on for you so you can come and take the relationship to the next level. I’m your host Brian, joined by Rebie this week. We’ll be back next week. Money Guy out.