They Want to Cut Their Income By 50%… Is It Possible?

Meet Luis and Kori: Twins on the Way (0:00)

Bo: On the career trajectories that you guys are on, is there a reality for backing down the hours you’re working when you get into your 30s?

Brian: Is 30 the time to back it down?

Bo: It sounds a lot less to me like your goal is Coast FIRE, but more like the goal is, hey, can we get to a position where we could be a one-income household. Is that more the goal than actual Coast FIRE?

Luis: We’re both 28. Kori just turned 28 in April. And I’m the one who watches the show. She’s the financially minded one, the financial mutant of the household.

Bo: So how does that conversation go? She says, “Hey, I watch these guys, I submitted our info, and guess what? We’re going to go be on TV now?”

Kori: Yeah. I honestly never planned to be on a YouTube show or anything like that, but once we found out we were pregnant, I was like, let’s go.

Bo: Yes. You’re having twins. Is this the first baby?

Kori: First baby.

Brian: If you’re going to go, go big, right? Holy cow. Messy middle on pronto speed here.

Luis: Exactly.

Bo: Do you have twins in your family? Did you know this was going to be a potential?

Kori: I didn’t think it was going to be a potential for me, but it does run on my mom’s side of the family.

Bo: Twins. All right. So, 28 years old, live in Arizona, got twins on the way. Awesome. She watches financial content. You don’t, that’s not your thing?

Luis: Well, I watch it because Kori works from home and I work from home some days. While she’s working, she always has a video playing or something. So I’m hearing it as we’re both working and I kind of look over and I’m like, “Oh, okay. This is actually pretty interesting.”

Brian: When she’s watching our show, right? That’s when you say that. Not for the other stuff.

Luis: She’s like, “Oh, you should check it out.” And then we just watch more after we were done working, just in the living room. And I was like, “Okay, this is actually pretty cool.” And then once we found out that Kori was pregnant, we were like, “Oh man, are we in the spot we want to be? Are we doing the right thing?” So that’s when the real questions really started to come for us. We were like, “Okay, we’ve got to really hone down and look more into this.”

Their Backgrounds and Financial Upbringings (2:30)

Bo: How long have you been married?

Luis: Four years.

Bo: Awesome. And when you first got married, from a financial standpoint, did you have similar financial backgrounds? Were you on the same page, or have you had to work on that as you’ve moved forward?

Luis: I think we were on the same page. We both wanted to make sure we were saving and investing because that’s something I didn’t see a lot of growing up.

Bo: What did you see growing up?

Luis: I come from a one-income household. My dad was always working, super hard worker, and my mom was always stay-at-home making sure she would cook really amazing food for us. Shout out Mom. We didn’t make a lot of money. So early on I learned that it’s not about how much you’re making, it’s really about how you’re saving it as well. The discipline was put in us at an early age from my family. But I knew I didn’t see much investing, and that’s something I always really wanted to get into once I started making my own money.

Bo: I love that. What about you, Kori?

Kori: A little different. My family was kind of middle class. My mom always had a work-from-home job, so she was mostly home with us. And my dad was always working, but also a good cook.

Bo: Shout out to both moms.

Kori: My family definitely didn’t save much. It was more, you know, spend what you have, enjoy it while you’re alive, spend it with family and have experiences. But I always knew I wanted a little bit more security once I got older. I think Luis is definitely more of the saver compared to me because I do have those tendencies from my family to just spend what I’m earning. But yeah, I think we’re now for sure on the same page. We want to save, invest, and make sure we have our future planned out a little bit more.

The Net Worth Reveal (4:43)

Bo: Well, you must have done something right because looking at your net worth statement, you guys are 28 years old with a household income of just a little over $200,000 and a total net worth of right around $200,000. You’ve got about $20,000 in cash, about $151,000 in investments that we can chat about. You have a home that you own, you have an automobile, and then you have a little bit of debt. Looks like you have a car loan, some student loans, and some mortgage debt. But I think there are a lot of 28-year-olds that would look at this situation and say, “Holy cow, you guys are doing okay.” Do you feel that way, or do you feel like you don’t know what you’re doing?

Kori: I felt comfortable with just us. Very comfortable, until I’m like, oh, now we’re having kids. We have a family coming at the same time. I’m scared that we’re not being as conscious with where our money’s going as much as I’d like to be. But I felt good.

Brian: You’re both unique in the fact that you both seem to be interested in financial skills. What do you do for a living? I see a very strong income, so I’d love to know what you do and how that income is broken out so we can figure out all the options available to you.

Kori: I’m a senior tax analyst. Indirect tax.

Bo: What is indirect tax?

Kori: I do sales and use tax and also excise taxes for a corporation. I got my master’s in tax with the goal to become a CPA, but I definitely feel the pressure now.

Brian: I wish I had gotten the certifications before the kids. It’s going to be a little harder now, but you’ll still get through it. You’ll be all right. And Luis, what about you?

Luis: I’m an aerospace project manager.

Brian: Okay, that sounds fancy. What does that mean? Like a rocket scientist?

Luis: No, that’s not the same thing. It’s customer-facing. Whatever repairs need to be done to aircraft on the commercial side, customers send in valves or engines, whatever we’re building for them, and we quote them and get a repair done so we can get their engines back and running.

Brian: What was your degree in?

Luis: Business sustainability. Nothing to do with aerospace, but I finished college, wanted to find my career and my first real job, and I just started applying everywhere. They called back and I’ve been with them four years now.

Bo: Okay. Awesome.

Their Financial Questions and the Car Situation (7:19)

Bo: So as you guys are thinking about this, you said, “Hey, we feel like we’re in a great spot so far, but now life’s about to change. We got twins on the way.” If we were to ask, what are the things you’re concerned about from a financial perspective, or what are the questions you’d love to get answered right now?

Kori: We look at our debt. We just bought a car because his first car kind of…

Bo: All right, hold on. Tell me. Wait, wait, wait. I got a problem. The debt on the car is more than the value of the car. That’s not supposed to be that way. Walk us through this. What type of car did you buy?

Kori: We bought a 2023 Toyota RAV4 Premium.

Brian: Okay. This car doesn’t sound bad, but did you not put a down payment on it?

Kori: We put five down in cash. We did a trade-in for the car that didn’t last very long.

Brian: Like five in cash or five was the trade-in?

Kori: Five in cash. Six was the trade-in.

Brian: So the car they traded in was worth $6,000. They put $5,000 in cash. So $11,000 total as a down payment.

Luis: Yes.

Brian: Somebody ain’t mathing here.

Kori: I know. We also got the maintenance plan on the vehicle and rolled that into the loan.

Bo: Okay. So how much was the RAV4? How much did you pay for it?

Luis: We paid $28,000 I think, and then plus the maintenance plan.

Brian: And how much was the maintenance plan?

Kori: It was like $5,200.

Brian: You bought a Toyota, didn’t you? So it was a really good salesman, wasn’t it? Very effective salesman.

Bo: What do you get with that maintenance plan? What does it cover?

Kori: It’s 10 years of maintenance. If there’s anything wrong with the system controls, it covers oil changes and all that kind of stuff.

Bo: So in theory, the only thing you should have to do is replace tires, brakes, and put gas in it. That should be the only thing in theory, right?

Luis: Yeah.

Brian: I would definitely not have bought that. I’m just being honest. I don’t think that’s one you’re going to look back on fondly, especially after the car is reliable and doesn’t give you issues, and be like, “Yeah, I paid for somebody’s trip to Cancun.”

Bo: But I want to make sure I have the math right. The sales price of the RAV4 was like $40,000. And so you put $11,000 down, $5,000 in cash, $6,000 traded. So you financed $28,000 and then added $5,200 for the maintenance plan. On here you have it valued at $31,000. When did you buy this car?

Kori: Like a month ago.

Bo: Okay. So if you paid $40,000 for it, but you have it valued at $31,000, help me understand that.

Kori: He just put it in Kelley Blue Book using the VIN. The VIN value. But it had 15,000 miles on it.

Brian: How long did you finance it for?

Kori: 60 months.

Brian: How fast do you want to pay it off?

Kori: We want to pay it off in three years.

Bo: She’s been studying. She knew what was coming. You put down a good down payment on it. The financing term is a little bit longer than we would like. What’s the minimum car payment?

Luis: $548.

Brian: That’s the minimum?

Kori: That’s the minimum.

Bo: This was last month. The fact that it was last month means we can do some stuff. Luis, has Kori told you what we think about car buying? Has she mentioned this to you?

Luis: No.

Bo: Okay, let me tell you what we think about it. Obviously if you can pay cash for a car, that’s great. But a lot of folks, young or old, don’t have the ability to pay cash. And I would argue that for you guys right now, paying cash for this car probably didn’t make the most sense anyway. But when it is time to buy a car, we think there’s a better way to do it. We want you to follow what we call 20/3/8. We want you to put 20% down. Check, you did that. We don’t want you to finance for any more than 3 years or 36 months. You did not get a check on that one. You financed for 60 months, but that’s okay. And we want the total car payment to not exceed 8% of your monthly gross income. At $200,000 a year, I don’t think $548 is going to be up to 8% of your gross income. So one of the things we’ll craft as part of your plan is calculating what it would take to get this car paid off inside of 36 months. Even though your payment is $548, we may recommend you pay more than that each month.

Brian: Something isn’t mathing though. I just did the calculation at 60 months and 5.99%. If I just did a present value, that’s $28,352. But they said the actual outstanding is higher. If I change it to $32,697 on the present value, the payment jumps to $632. And to pay off $32,697 in 36 months, you guys need to be paying $995 a month.

Kori: About $1,000 a month on that. Did we do 72?

Brian: That’s what I was about to say. That’s the math that’s not mathing. I think they actually chose longer than 5 years.

Bo: If I go to 75 months… they called me on it.

Brian: We want the receipts around here. The math guys did the math. So this is $548. Watch this. $33,750. So you financed it for six years. We’re going to cut that in half. It makes sense that the payment almost doubles. You guys should be paying about $1,000 a month.

Bo: When we tell you that, does that give you anxiety? Or do you feel like if you had to make an extra $500 car payment, you could do that? Or do things feel pretty tight?

Kori: No, I think that would definitely be comfortable. You’ll see with our budget, we have some wiggle room.

Brian: Did you do this before or after you knew about the pregnancy?

Kori: We did it after we knew about the pregnancy because we had bought a car cash a year before and the engine basically said it needed to be replaced.

Bo: Was it like a clunker that you bought or did you think it was going to last?

Luis: We thought it was going to last longer than 12 months for sure.

Brian: If we’re flipping cars every year, that’s because you’ve got so much going for you. But I’m seeing an Achilles heel with vehicles, which is the trap a lot of typical Americans fall into. It is financial napalm for your wealth-building journey. We’ve got to get this rectified.

Emergency Fund and Savings Breakdown (14:35)

Bo: So before we look at your budget, talk to us a little about your savings based on where you guys are at now. When you’re thinking about saving for the future, what pots is your money going to? How much is going into each?

Kori: Right now our emergency fund, we’ve honestly been comfortable with where it’s at.

Bo: How much does it cost you guys to operate the household on a monthly basis?

Kori: On a monthly basis with our guilt-free spending, it’s about $8,000.

Brian: But is that counting a $1,000 car payment too?

Kori: Maybe go $8,500. Yeah, maybe $8,500.

Bo: But hold on, before we get down to investing, since you started with cash, let’s go there for a moment. $8,500 a month. Income between you guys, you earn about the same?

Kori: About the same.

Bo: And I think I saw in your budget your discretionary spending, you called it guilt-free spending, was a decent chunk. Like $2,500 a month. So I would argue that pre-kids, maybe you’d get away with like a three-month emergency fund. So $8,500 times three is $25,500. You’re a little bit lean on where your cash is. You guys have about $20,000, and you have some kids coming on the scene. When the kids get here, are you both going to continue working? Is one of you going to stay home?

Kori: Yeah, I think for me I would like to stay home for like six months.

Brian: Okay. What’s the natural maternity policy?

Kori: It’s three months maternity leave. 60% of my income for the first six weeks, and then 100% for the other six weeks, and then the next three months would be unpaid.

Brian: Okay. Do they give you an option if you wanted more time? It sounds like your job is flexible.

Kori: Yeah, they seem pretty flexible with that.

Bo: That’s great. So we need to account for maybe three months of unpaid leave. That would be one of those things where, when we think about your emergency fund, where normally you guys would probably stick to three months, we may want to be closer to six months, or likely somewhere in between. Maybe four and a half months. Either way, I would argue it looks like right now you’re a little low on your emergency fund, especially considering the changes coming your way.

Kori: Yeah.

Bo: What’s the due date? What’s our timeline before the income change?

Kori: October 25th.

Bo: October. All right. Now walk us through how you guys are saving when it comes to retirement. What buckets?

Kori: Right now we each have our 401(k)s that we contribute I don’t know, like 13 to 14% to.

Bo: Like each of you does 14%?

Kori: Yeah.

Bo: How did you come up with that number?

Kori: We just slowly increased it over the years, honestly. And then we max out our Roth IRAs, and we both have individual HSAs.

Bo: You max out your Roth on a monthly basis?

Kori: Yeah. Well, we do it weekly, but monthly.

Brian: Look at you guys. Trying to get gold stars over here.

Bo: And for the HSAs, you each have individual ones. Are you both doing the individual max on those?

Kori: We’re not maxing those out.

Bo: Okay. Did you do the analysis on your benefits and say, okay, does it make sense for all of us to be on yours, or for us to be split?

Kori: We have not gone through that analysis. We just once we got married we had our individual insurances and we just never changed it.

Brian: They’re both probably subsidized though, right? Your employers probably pay at least half of your premiums for you?

Kori: Yes.

Brian: The only thing now, the twins, was this a surprise or was this like…

Kori: Double surprise.

Brian: Double surprise. Sorry. I was just asking because we love HSAs, but sometimes the exception is on years that you have big family moves going on. Sometimes you go with the Cadillac plan so that you get that all-inclusive treatment at the hospital versus when you’re on the high deductible, you’re bearing more of that deductible cost with bringing babies into the world. But you know what, it was well-intentioned, and you have plans. We’ll work through it. Have you calculated what your out-of-pocket is going to be? Because that’s also going to impact the emergency reserves. Is it going to be like six grand?

Kori: Yeah, at $3,000 out of pocket to hit my deductible.

Brian: Okay. And then after that, what’s the share?

Kori: It’s 70/30. I would have to cover 30% of the cost, and I think that would be another three thousand.

Brian: So about six grand is probably a pretty max out-of-pocket scenario.

Kori: Yeah.

Brian: And do you know your out-of-pocket maximum? Is it like $6,500 or $7,000?

Kori: $7,000.

Bo: How much are you putting in your HSAs currently?

Kori: I think I do $75 a paycheck, bi-weekly.

Luis: And I think mine is like $60 a month.

Bo: Do you know off the top of your head what percent you’re saving overall?

Kori: I think it’s maybe around 32%.

Bo: And what about employer matches for each of you?

Kori: 3% for mine and 4% for his. And I was also investing in an employee stock purchase plan. I did stop that this month though, just getting ready.

Bo: How does that employee stock purchase plan at your company work?

Kori: It’s just a discount. I’m not sure what the exact discount is, maybe around 15%. I was doing $118 a paycheck bi-weekly.

Bo: A lot of levers to pull for you guys, which is awesome. You have a lot of different options available to you. And I imagine one of the things you’re trying to figure out is, how do we know which ones we should be doing and where the money should be going?

Their Goals and Questions (20:35)

Bo: So obviously you said, “Hey, we’ve got these twins coming in October. We want to make sure we’re well positioned for them. We want to make sure that if there’s some sort of gap in employment, it sounds like you want to take six months off, but three of those will be unpaid and then you’ll likely go back to the workforce.” What are the other financial concerns that you guys have or what are you nervous about as you shift into this new stage of life?

Luis: Should we keep investing the way we’re doing? Should we pull back? Where should we put our money now that the twins are coming? Should we focus on paying off the car quicker? Should we increase our emergency fund? What steps should we do first to take some stress off the line?

Kori: Yeah. What’s the first thing we should tackle in these next five months we have left?

Brian: Well, answer this for me. On a month-to-month cycle, life feels pretty easy right now, right?

Luis: Right now, yes.

Brian: Where are the stress points on the cash flow? Because on paper it looks like you should be swimming in extra money. Are you feeling like you’re allocating to the 401(k), allocating to the HSA, allocating to the Roth, you have a big bucket for discretionary spending, and is all that building? Or are you finding those cash accounts are kind of overflowing over time? Give me a feel for the month-to-month basis.

Kori: I think it depends on the month, but our guilt-free spending is kind of where we struggle the most. We don’t really have a plan for it. We just kind of go out to eat or go on little short trips together. I really want us to hone in more on what we should do with our extra money. Sometimes it does go back into our checking account, but most of the time when we see our checking account over the $5,000 mark, we’re like, we need to find some way to empty that out. I really want us to be more disciplined with our guilt-free spending, especially now.

Bo: I love how you labeled it because ultimately, when you have a cash flow management plan in place, you should have guilt-free spending. If you’re expecting us to be like, “Oh, we’ve got to tighten that down,” maybe not. We want to make sure it’s the right number. We want to make sure that you’re funding the right places. But the idea that you have this bucket that is labeled guilt-free spending, if we’re going to travel or go out, we’re going to do it. That’s wonderful. That’s what we love to see people do. And if you can set up your system to pay yourself first and know the money is going where it’s supposed to be going, then you don’t have to have any guilt at all. There are some things we’re going to have to tweak though, like the 72-month car payment and the slightly lower emergency reserve. So we might not be able to be completely guilt-free initially, but I definitely think that’s something we can work towards so that then you know your dollars are going where they’re supposed to go. Our dollars are going where they’re supposed to be going.

Brian: The structure is right, but the fake-it-till-you-make-it approach is wrong. When you underfund your emergency reserves and underfund what your car payment should be, it can make you feel like you’re being responsible when you might actually be over-consuming. That’s why I love the way Bo put it. If we can make sure your numbers are right, I like you having the comfort to go out there and make the best of your 20s and early 30s as these babies come. But you’ve got to measure twice, cut once, and make sure those numbers are right. Otherwise you might be shortchanging yourself in the long term when you have so much time on your side.

Long-Term Financial Independence Goals (24:25)

Bo: One of the interesting things about financial planning is generally the goals we have live on different timelines. Obviously we have a goal that by October we want to feel pretty good. A giant tornado is going to hit in October and it’s the most wonderful, amazing, incredible tornado ever. But life is just going to be different and wonderful and amazing and maybe even messy, is what we would call it. But I imagine there are goals that exist even past that point, right? Like financial independence and retirement. Have you guys had conversations at this stage about what your ultimate financial independence goals are?

Kori: Yeah. I mean, I really want…

Bo: He looked at me. He goes, “We’ve done that, right? We’ve done that.”

Brian: She’s doing the homework.

Kori: I really wanted to pursue Coast FIRE for a while.

Brian: Why? And what’s the vision for that?

Kori: I really want us to focus on investing while we’re in our 20s, and then in our 30s I’d like to take a little bit more of a backseat on it and really focus on traveling and enjoying our free time and having flexibility with our lives. And my goal was for us to retire with somewhere around $2 to $3 million, which felt like a comfortable range for retirement.

Bo: And why $2 to $3 million?

Kori: I think for what I think we’ll be spending when we retire, like somewhere around $80,000 a year felt like a comfortable retirement. And I think probably around age 60. I wouldn’t want to retire super early, but somewhere in the 60s.

Bo: When you think about Coast FIRE, the way you described it was not so much like a financial thing, like hey, we want to save less and spend more. You were describing more like time freedom. Is that am I understanding that correctly?

Kori: Yeah.

Bo: So it’s less about, we’re going to save and then start spending spending spending. You’re trying to figure out how to structure your life so that you have time to do the things that you want to be able to do. Do either of your jobs allow that? On the career trajectories you’re both on, is there a reality for backing down the hours you’re working when you get into your 30s? Is that a path available in your vocations?

Kori: Yeah, I think for me specifically where I’m working now, there are a couple women on our team that are part-time or have flexible schedules. I could see myself doing that.

Luis: I would say for me, not so much.

Bo: Do you have the same vision, Luis? Would you want to back down your hours starting in your 30s?

Luis: For sure yes.

Brian: Is 30 the time to back it down? I just want to make sure we’re on a joined vision here. You guys said you are 28. We’re about to cross that threshold really quick. And that’s still in the grand scheme of life, especially with a retirement age of 60, that’s pretty early. I just want to make sure we’ve really fine-tuned that before we start throwing spaghetti at the wall to make sure the numbers work. Is that where you’re feeling you want to back down your work as well?

Luis: Yeah. I would like to back it down as well, but if it means I have to work a little bit more, if she can take a back seat so I can provide more, then I’m willing to make that sacrifice as well.

Brian: So like now or even in your 30s, you’re willing to work more?

Luis: Probably early 30s, I would be willing to work more.

Bo: He’s thinking but around 35, I’m thinking I want to back down.

Kori: We had plans to wait to have kids until our mid-30s. We wanted to wait till like mid-30s to…

Brian: Well, as the old guy at the table whose oldest just graduated college, I think you’re going to be happy. Look, I’m going to tell you the next few years are going to be in the weeds. It’s going to be rough. Especially with two. I have a niece and a nephew who are twins, and we kept them for a few weekends. They’re now about 24 years old, all grown up. I get the good part now of just hanging out, but they’re tough when I only had them for a weekend or two. It’s going to be in the weeds for you guys, but I think you’ll look back and say, man, this is all right. Even if you want to pull the lever again and see if you can have another set of twins. As you get to be my age, you kind of get sad that they start leaving the house. You’ll be very happy that you started this family because then you get to build even more memories on it. The thing I’m trying to figure out though is, because I always want everybody to live their best life, and if you’re already trying to figure out how you can get out the escape hatch in your 20s, I kind of understand on your side it’s more of a family planning type thing, but I want to make sure. Do you love your job, Luis?

Luis: I like it. I don’t love it. If another company calls and it’s a better opportunity, I would definitely seek it.

Bo: What would define a better opportunity?

Luis: More money for the same hours I’m working currently.

Bo: So it’s not that you dislike your job, you dislike how much money you make.

Luis: Yes.

Brian: So you like the work that you do. There’s a lot of opportunity for you to move around and do different jobs within the company?

Luis: Currently I wouldn’t say I absolutely love what I’m doing, but the paths to other areas that I have worked previously…

Bo: Do you know a department or a job that you would love doing?

Luis: I would love to be director of planning. That’s where I would really enjoy working.

Brian: Is that something you could do now? What steps can you take at the office right now to let them know that’s what you want?

Luis: The office is aware of where I want to head. My next step is to move to a different department in June or July, do that for about a year to 18 months, and then just keep moving toward planning.

Bo: So you’re already on the path to what I’m going to call a director of planning role. When you land in that role and you’re doing work that you love and you’re making money you feel good about, do you still want to back down your hours in your mid-30s? Or if you’re doing the job you love and making the money you feel great about, is that something you’d be comfortable continuing?

Luis: I think I would like to exit that. Yeah. Get there and then get out.

Kori: Yeah. I feel like he would be a great stay-at-home dad. He already does the things that I think make a good stay-at-home parent. He cooks, he cleans, he really takes care of a lot of the household.

Brian: Let’s play the other side of this. Kori, you love your job?

Kori: I do, actually. I think my next step would be a manager role. In industry it’s a little bit harder to move up in accounting just because you have to wait until someone retires or leaves. So I don’t know what the timeline would be for that, but that would be my next goal. Maybe in the next three or four years, be a manager at the company I’m at.

Bo: Is that a path or a program you’re already on?

Kori: Yeah, right now. I’m working with my senior manager and he’s like, “Yeah, I could see you being a manager if there’s a spot that opens.” Right now we don’t currently have a manager role for indirect tax, so there could be an opportunity. There’s another senior on the team that’s probably going to be vying for that spot. And I do get worried now that we’re having kids. I don’t know what that’ll be like or if I’ll be able to get that spot before he does. But yeah, I like my job. I could see myself working there for 20 years. A lot of people on my team have been there for 20 to 25 years.

Bo: Let’s say you get through the kids and get comfortable going back to work, and you continue on this trajectory and get into the manager role in your early to mid-30s. If that’s taking place, is that something you then want to pull back on and exit, or would you be okay continuing on that path?

Kori: Yeah. I think I would be okay with continuing on the path.

Brian: Okay. So you might have a hybrid type approach here, which is nothing wrong with that. That’s why I love family planning and couples leaning into where their skill sets are. You’re both unique in that you’re both analytical and good with money. But Kori, if you’re the one who’s passionate about the career, that’s spectacular. Take the time, especially with an employer that has really good benefits on the family side of things. And I’d be curious, are any of those part-time or flexible positions in management roles?

Kori: None of them are in management roles. That’s the only concern I have about moving up. They’re all in my role or below. So I would have to be in office as well. And right now I’m fully remote. Managers and above have to be in office four days a week.

Brian: I can kind of understand that.

Bo: As I’m hearing you guys talk, it sounds a lot less to me like your goal is Coast FIRE, and more like the goal is, hey, can we get to a position where we could be a one-income household where one of us could work and one of us could stay home, and that provides flexibility to still do the things we want to do and have that sort of freedom. Is that more the goal than actual Coast FIRE?

Kori: Yeah. We’re really not looking to fully slow down, I guess. Yeah, we’re just looking for that flexibility so that if one of us wants to stay home, we have that ability to do so.

Bo: Let’s say you get into the manager role and you’re rocking and rolling in that. From a household income standpoint, what kind of income do you think that position would generate for the household?

Kori: At least another $20K, and then I’d be eligible for a bonus. So total comp, maybe about $125,000.

Bo: Okay, $125,000. Realistically, we could be in a position where if you decided to stop working or really back down, you could make $125,000. And if we’re planning, we’d be planning toward the goal of can we make the household operate and work on that income. Is that fair?

Kori: Yes.

Bo: For the immediate future. So what we’re going to do is plan this in stages. What do we do between now and October? Between October and your early to mid-30s? And then what do your early to mid-30s all the way out to 60 look like?

Bo: Does it seem likely both your incomes are going to stay where they are for the next four or five years, or are the income trajectories significantly different?

Luis: I think for me it will significantly change. Being in the company, I’ve usually gotten a $10,000 to $12,000 raise every year, just switching positions and seeking promotional opportunities. That’s something I’d like to keep pursuing.

Bo: So if you’re at a household income of $200,000 now, it seems feasible that by your early 30s you’d be at a $250,000 household income. That seems like a reasonable trajectory.

Luis: Yes.

Embracing the Messy Middle (36:51)

Brian: It does feel like you’ve got a moment in time here. And it might time out perfectly in the fact that when you have littles, for the first two years you’re kind of gloriously trapped at the house. And kids are not as expensive as everybody scares you into thinking. What I’m seeing develop based on your conversation is that you need to hit this big life change with some velocity. Meaning that while you’re stuck at the house and while you want this big change sometime in your 30s, you ought to really boost up that savings rate substantially. Because what that does is saving early and often is going to give you maximum flexibility in the future. It’s not full Coast FIRE, but it at least allows you to know where your options are and have the tolerance while you’re making big changes financially that it doesn’t feel stressful. That’s what you don’t want, to run it so lean that you make these choices for happiness and fulfillment sake but feel like you’re shortchanging yourself because there’s lots of conflict and stress that comes from it. There’s a better way to do this, but we have to really maximize these next few years and try to save at a hyper pace so that you feel really good about the future. Do you feel that a little bit? Does that scare you?

Kori: Oh yeah. It’s a little scary. I know one of the things when I was reading through the planning is that you can see it’s spontaneity through non-spontaneity. You have a sinking fund for spontaneity. And I think that’s very noble and good that you can see it. But it is one of those things where I’m just saying that embrace the hardness of the next few years of the messy middle to maybe build yourself some spontaneity a few years in the future, if that makes sense.

Bo: That’s right. Because when I think about this, I think we’re going to be able to put together a plan. The plan is going to be how do we get from now until October, then how do we get from October back to two incomes, then how do we work at two incomes to get down to one income, and then once we’re down to one income, how do we get to financial independence? Those are the stages we’re going to build toward. Does that sound like what you guys are looking for?

Kori: It definitely does. Awesome. Yeah. I do want to add, we do have a house and we love our house. I think it’s perfect for the family size we’re going to have very soon. But…

Bo: Yeah, I can see you knew the “but” was coming.

Kori: We don’t live in a great school district area.

House, School District, and Impulsive Tendencies (39:40)

Brian: When did you buy this house?

Kori: We bought it a year after we got married. We did not plan for it very well. We kind of figured out the numbers afterwards and started living near that area after we signed on the house. We signed for it three years ago. It was built two years ago. We’ve been there for about two years.

Brian: Did you use our home buying checklist when you bought the house?

Kori: We did not. After we signed for it, we were like, okay, we need to figure out how we’re going to make this happen.

Brian: Begin with the end in mind. Look, you’re both without a doubt very analytical in your skill set, but you also have some impulsive tendencies on big purchases.

Kori: Very.

Brian: And I’m just going to tell you, that’s not typically a success recipe. It also plays on the psychology of salespeople who can recognize when someone falls into that trap of feeling the scarcity of the moment and making a decision. You should go into big decisions scared to death. That’s why I say measure twice, cut once. For all future car purchases, home purchases, anything that gets into multiple thousands of dollars, take more deep breaths and slow down the whole process. You have the natural skill set, but somehow there’s some impulsiveness that is overriding your analytical nature and it’s not for the best long term. You’re probably feeling that right now. The good news is you’re going to be able to recover from these missteps, but you’ve got to start course correcting on falling into those behavioral traps.

Kori: Yeah.

Bo: And to put your mind at ease, kids don’t start school until kindergarten. So you have from now until October plus about six years to get there. There’s a lot that can change in real estate and in your personal circumstance with an eye toward, hey, at some point we might need to be in a different home. It’s going to be six years in the future, and by then you’ll have been in this home for eight to ten years, which is great. I don’t think you have to have that completely figured out, but it is good for us to know because in terms of the buckets you’ll be funding as you save, that may change things a little bit if we begin to think, okay, we’re going to need to have some capital to potentially move into our next home. But I wouldn’t freak out too much about that right now.

Brian: You’ve got time to freak out about that. This would be a perfect time to be thinking through it though.

Kori: Yeah. I just wanted to bring it up because when we got our first house I was like, we did not plan for this like we should have. We should have run the numbers. Okay, now the planning starts.

Life Insurance, Estate Planning, and the New Parent Guide (42:25)

Bo: Well, another thing, just as new parents, we have tons of resources out there on the website at moneyguy.com/resources. We have a whole new parent guide covering what you should be thinking about, what you should be looking at, what you should be considering. Obviously there are going to be some things that change in your life, like your need for life insurance. That’s going to be something you’ll want to think about and analyze and figure out.

Bo: Estate documents. Do you guys currently have estate documents in place?

Luis and Kori: We don’t.

Bo: Once those babies get here, it becomes really important. You have to answer the question, hey, if something were to happen to us, who do we want to be the person that would step in to provide for our children? Do you know the answer to that?

Luis and Kori: No, we don’t.

Bo: Would you fight about that? Would you have two different opinions on who should raise the kids if something should happen to both of you?

Kori: I don’t think so. It could probably be like your brother.

Luis: Yeah, probably my brother.

Brian: Do you have multiple brothers?

Luis: I do. Yeah.

Brian: Is one really good with kids and the others aren’t? Do you know which brother? You can’t raise children by committee. You kind of need to know specifics on where things are going to happen.

Kori: We know which brother. Definitely his second oldest brother.

Brian: All right. I want to know who to give the compliment to. At Thanksgiving this year, you wink at that brother a little differently.

Bo: So again, you have time. You don’t have to have this all figured out just yet. It’s still early. The babies aren’t even here yet. But once the babies do show up, you do want to have those conversations and recognize that your risks change when there are other lives that depend on you. So you want to make sure you’ve got the appropriate documents in place and the appropriate life insurance in place. It is something you want to be thinking about. It’s probably not a 2026 item, but certainly going to be a 2027 item for you guys.

Brian: Well, it could be 2026, okay? Because estate documents and stuff. I like hitting the ground running on that stuff. You can’t be assured that tomorrow’s coming, so you need to plan accordingly. We’ve seen enough to know that. Life insurance is dirt cheap at this age. Estate documents are not that expensive. I don’t disagree with Bo, but it needs to happen. I would put yourself in a homework category of having it done within the first 3 to 6 months the kids are here, if not done beforehand.

Bo: You think I’m being too hard?

Brian: How often is this a serious issue?

Bo: I’m not fighting you. We’re on the same page. Same page.

Mortgage Prepayment and the Budget Reorg (44:54)

Bo: What other questions do you guys have for us?

Luis: We were doing an extra payment on the house. Is that something we should continue to be doing? Should we focus on other areas?

Brian: When you’re talking about staying home with babies and changing jobs, no. Or when you have a 72-month car loan, there are better uses for that money right now for sure.

Bo: To help us understand, the budget shows $2,925 going to your mortgage. Is that the actual mortgage payment or does that include the extra?

Kori: Includes the extra.

Bo: Okay. What’s your required mortgage payment?

Kori: $2,549.

Bo: So there’s about $300 to $400 extra going toward the mortgage every month. You realize if all we did was take that $300 and put it with the car payment, we’ve started righting that ship without really changing your cash flow a ton. I do not believe at your age, even though your mortgage rate isn’t super low, you need to be in a huge hurry to prepay that mortgage interest. Same thing with your student loans. They’re not at a crazy interest rate. I just think there are other areas where your dollars can likely be better used, like knocking out that car payment and getting the emergency fund fully funded. But don’t worry, we’ll put together a plan and give you some step-by-steps.

Kori: Okay. Yeah, that would be really great. And I think the only other thing is travel. We know we’re probably going to have to take a backseat on that, but Luis’s family is from Mexico, so we go to Mexico at least once a year. His grandparents are definitely getting older, so we definitely want to make plans to be able to visit them.

Bo: That’s normally encompassed inside the guilt-free spending bucket, right? So long as there’s still some there, I imagine you guys have a small enough footprint and a large enough income that all of these things should be possible. It’s going to require a little bit more discipline from you guys. But nothing you’re saying is freaking us out. This is all tweaking around the edges to make sure that at this early phase you don’t get yourselves out ahead of your skis and find yourselves in a bad spot in your early 30s. All the research on happiness and fulfillment shows that once you get past covering the basic bills, what really drives fulfillment is your spiritual faith, the friends you keep, and the family that’s in your life. So traveling to go visit family and make the memories you’re going to get to keep forever, I think, is pretty foundational. Build it into the budget and be disciplined, so that you actually don’t have to feel like you’re cutting away from something else.

Brian: Bo laid it out perfectly and you guys have the income. It’s some of these other things, the compulsion on some of these big purchases, that’s squeezing you. It’s not going to go make memories with family members.

Bo: I’m excited. We’re going to be able to put something together. You guys are going to be awesome.

Post-Session Analysis: Building the Plan (48:26)

Bo: What a great conversation we had with Luis and Kori. And how exciting that they have twins on the way.

Brian: Yeah, they’re overachievers in a lot of ways. I think they’re going to get a lot of dividends off of how much they’ve done at such an early age. But life’s about to change. Let’s face it, it is about to get really messy for them. Just having a baby in general makes things hard. But throwing in twins is going to rock the boat.

Bo: What we wanted them to recognize is that as they make a plan, you don’t have to have a plan in place today that’s the exact same plan you have in place 20 or 30 years from now. It’s okay to think about it in stages. And I think for them, that’s exactly how we ought to approach it. There’s this timeline between now and when the twins arrive in October. There’s going to be this time when they’re briefly on a single income, and then Kori’s going to go back to work and they’ll be a dual income household. And then it sounds like in the future they even want to go down to one income where one spouse stays home and one works. And then ultimately they want to work toward financial independence. So they ought to think about it in those compartmentalized buckets.

Brian: What was really fascinating to me as we got to talk to them as a couple and see the dynamics, Kori is clearly the one who loves her job. And it was kind of fun to walk them through what that plan looks like. So what happens when we actually put numbers to the plan?

Bo: Yes. We said, okay, if we’re going to plan through these different phases, let’s think about what that means for income for the household. Obviously right now they’re a dual income household, and then Kori’s going to go on a brief maternity leave. So there’ll be a small period where they’re down to one income or 60% of her income, and then three months without any income from her, and then they go back to two incomes. And for planning purposes, we said, what does it look like if they have a dual income household out until about age 35? So we’re going to do this for the next six or seven years. And then at 35, let’s get them to the place where they make the decision to go down to one income, live at the same standard of living and same lifestyle, but hopefully they can do enough work up to that point that they can still save appropriately to reach their long-term financial goals as well.

Brian: This was powerful for setting up the long term, but before we get too far over our skis, there are some current things they need to do. With all these big life changes, we had to ask, is the emergency fund even going to be where it needs to be?

Emergency Fund: The First Priority (51:06)

Bo: It wasn’t quite where it needed to be, and they have some other stuff coming down the pipe. They have two babies who are naturally going to be more expensive, and their income is going to go down. So we said that if we expect medical expenses in the next three months to be around $6,000 to $7,000, and we’re going to have the additional responsibility of children, they should shoot for probably four and a half months of living expenses in liquid cash. If we assume an $8,000 monthly burn rate, four and a half months of that would be a $36,000 emergency reserve target. And right now they have about $20,500. They have some work to do. It’s going to be the main work they do between now and October to build up their emergency fund.

Brian: So you’re kind of recommending we shut it all down, all the funding for everything else except for the employer match, and focus on the emergency reserves. We think that’s going to have them in a pretty good place within that six-month time frame.

Bo: Yeah. When we back all of that down, I think they’re going to be able to save about $2,740 a month toward that emergency fund goal. If they can do that over the next six months, that’s going to get them to just a touch under $37,000. Right about the time the babies are showing up on the scene, boom, they have the emergency fund fully funded and ready to roll.

Brian: Now I want to put them on notice. They need to take this seriously and make this time work because it bothers me, it kind of makes the hair on my arm stand up, that they’re not going to have the Roth IRA going, the health savings account isn’t getting heavily funded, and they’re only doing the 401(k) up to the match. If I was them, yes, do this in the moment, but let’s not get crazy with it and let’s focus on what needs to be done.

Bo: And I don’t disagree with you, but they also had another thing going on. I want them to be building and saving, but they have another thing. They bought this new car and it wasn’t like it was crazy, it wasn’t like they went all out, but they did sort of break the Money Guy rules.

Brian: I love how we captured that. It’s kind of like we caught them.

Bo: Is it because I was like the math ain’t mathing?

Brian: That’s right. And we found out that it wasn’t, because I think they originally said it was only five years and then it was six. We found out this thing was definitely extended out to 72 months, a six-year term.

The Car: Getting Under 20/3/8 (53:17)

Brian: We’ve got to get it under 20/3/8. For those who aren’t familiar, 20/3/8 means you need to put at least 20% down on your car, don’t finance it for longer than three years, and the payment can’t exceed 8% of your gross income. Cash is always ideal, but sometimes when you’re early in your career, you don’t have the money to pay cash for cars. That’s why we have 20/3/8 as guardrails. But they’ve taken some liberties with that 72-month term. That doubled the length of the loan.

Bo: Right now their required car payment is about $549 a month. We did the math to determine what they’d need to pay to get it inside of 36 months, and it’s almost double. It’s about $1,000 a month. But there are some places where we’re going to be able to pull from. We know that right now they’re paying an extra $300 a month into their mortgage. If they just stopped paying the extra on the mortgage and instead diverted that to the car payment, they go from $549 up to $849. Now they only have a $150 shortfall. Our recommendation would be to take $150 out of that monthly guilt-free spending allocation, add it to the $850 they just found, and then they’ll have $1,000 a month going toward the car. They can get this thing paid off inside of 30 months.

Brian: So short term we have the car and boosting up the emergency reserves. Let’s get back to what it looks like on the long-term planning with the setup we had, with the dual income dropping down to one and then what this is going to look like in the long term.

Long-Term Projections: Dual Income to One Income to Financial Independence (54:55)

Bo: So if we assume the babies get here and then Kori goes back to work and now they’re a dual income household, here’s what their Financial Order of Operations would look like. We’re going to want them both putting 15% into each of their 401(k)s. Luis is entitled to a 4% match and Kori is going to get a 3% match. We want them both to max out their Roth IRAs at $7,500 each. They’re both on individual high-deductible plans with individual HSA maxes they can hit. If they do all of that at their level of income, they’re going to be saving over $70,000 a year, even with having the new babies, even while paying off the car quickly. That’s pretty amazing. That’s a 24.5% savings rate, which is going to put them exactly where they want to be.

Bo: But they’ve already shared that once their kids get a little bit older and get to school age, they may want one of them to stay home. It sounds like it may actually be Luis. So we said, okay, if we go from a household income of around $250,000 down to one income at about $125,000 a year, obviously they would not be able to save at the same clip. They’re going to have to decrease their savings rate from around 24.5% down to somewhere more like the 10% range. That’s just what’s going to be necessary based on their living expenses. So what does the plan look like if they start today, save 25% until they get to 35, and then drop to 10%? Does it actually get them to financial independence? And this is what we found. They have $150,000 saved up right now. If they can follow that trajectory, by the time they get to 55 they will still be able to, even after dropping to one income and dropping their savings from 25 down to 10, build up a portfolio of almost $5.7 million. At 60, it could be worth almost $9.2 million. And by the time they get to full retirement age at 65, it could be almost $15 million. And remember, they said their goal, what they needed to be able to live the life they want to live, is about $8,000 a month or about $100,000 a year. They would still be on a trajectory to accomplish that standard of living somewhere between 55 and 60 years old.

Brian: Yeah. A lot of people see these big numbers and say, “Wow, that ought to be no trouble at all.” But remember, when you bring it back for inflation, these numbers get much more reasonable. I am happy to see that they’re going to have a lot of opportunity. But here’s what actually made this all possible. They’re in their 20s. They started early and they started doing it often with the saving and investing. That head start of already having $151,000, combined with a plan that’s going to get them to close to 25% while they’re in peak earning years, is going to pay huge dividends. If you can be a financial mutant and save this money early while the money’s there, you get flexibility. You get to make choices that others in your peer group aren’t getting to do. And in this case, that’s living off of one salary and even dropping the savings rate down to 10%. Pretty amazing.

Bo: Everything they want to accomplish is possible. But it’s possible if they stick to the plan. One of the things they said is they kind of love spontaneity, and oh, we’re going to buy this house, and oh, we’re going to buy the car. If they really want to do this, because they have some pretty lofty goals and age and youth is on their side, they have to recognize they need to stick to the plan. They still have a guilt-free spending budget in there, so it’s not like they’re having to do without. But they’re going to have to be careful not to let lifestyle creep cause their savings to fall by the wayside, and not let themselves get too comfortable too soon. Even though the long-term path looks great, they still have to take the next step and the next step and the next step to actually move in that direction.

Brian: Watch the impulse control. Even the car purchase, they knew that was not the right decision. They have all the factors that should create success and they’ve done it. We’re pretty pleased. I remember right after we finished the recording I said, “Wow, what a couple.” They’re in a really good situation. Just do the plan. Let the compounding growth do its magic. Luis, Kori, you guys are wonderful. Thank you so much for letting us be a part of your financial journey. Congratulations on growing the family. It’s going to be an exciting and maybe messy next chapter.

Closing (59:33)

Brian: Bo, if others want to come on Making a Millionaire, what’s the way they apply?

Bo: If you want to be a guest on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to check out any of our free resources and tools, you can go to moneyguy.com/resources.

Brian: We love creating this content because we really do believe that money is nothing but a tool and we want to help you own your time so you can live your great big beautiful tomorrow. I’m your host Brian, joined by Mr. Bo. Money Guy Team, out.