This Financial Crutch is Devastating Americans

Buy Now Pay Later: The Financial Crutch That Can Lead to Devastation (0:06)

Brian: This financial crutch can lead to devastation.

Bo: And Brian I am so excited to talk about this because I think it is something that the world needs to hear right now. Because in our world, in the world of personal finance, there are all sorts of tools and some of those tools are incredibly valuable and incredibly helpful. You know, one would be like a mortgage. A lot of people can’t go pay for their house outright in cash. So they end up taking out a mortgage and borrowing money to do that. That’s great. That’s noble. That’s a tool that can be used correctly. But there’s another, and I’m going to use tool in air quotes, there’s another tool right now that a lot of people are using that I don’t think is beneficial for them or for society as a whole.

Brian: Hey, listen. We talk about sometimes there are things that make me feel like the system is designed to try to keep you poor. It does bother me when all the innovation that’s going on in banking and consumption seems to be making it easier for you to waste money on stuff, not necessarily on saving or building wealth. It’s on how do we get more of your hard-earned money into consumption. And if you didn’t know, we’re talking about Buy Now, Pay Later. But look, a lot of you right now are like, “Ugh.” You breathe out and you’re like, “I don’t struggle with that because I can see where the trap is.” Even though they put pine straw on it, I see the trap right there. You’re right. You probably as a financial mutant do see this trap. But your friends, your family members, your peers, when we share some of these stats, I beg of you, please pay attention. Lean in, write notes, because you might be the lifeline that keeps your friends and family safe from this trap that they don’t see the pine straw like you do.

Bo: Yeah. And if you’ve been living under a rock, buy now pay later is exactly what it sounds like. You buy a good, you order a good, you check out with a good or a service, and rather than paying for it all upfront today, you get to pay for it in installments in the future. Now, it’s a little bit different than credit cards and that sort of thing because supposedly interest does not accrue. So it’s a different type of transaction. But what’s interesting is when we look at the data, this is according to Northwestern Mutual, 33% of US adults used buy now pay later options when making large purchases in 2025. So while it may not be widespread necessarily amongst financial mutants, one in three Americans last year were using it. And I don’t know about you, Brian, but I feel like every single time I check out on something, no matter what it is, I’m offered the option.

Brian: It’s even worse when I go to pay my credit card bill. I pay it seems like twice a month because I always just want to make sure I don’t have any interest carry costs. It never fails me that recently, specifically, I noticed that Chase is doing it for sure, where they’ll have, “Hey, this transaction right here, you sure you don’t want to spread that payment out over a few months?” And you’re like, come on, guys. Let’s get this thing paid off. Let’s not run into any traps on the consumption side of things.

Bo: And so I imagine what financial mutants are thinking in their mind is, oh, there’s an arbitrage I can take advantage of if I’m going to buy this large purchase. If I’m one of these one in three Americans doing this large purchase, then maybe buy now pay later is a way for me to game the system, beat the system. But if you dig a little bit deeper into the data, 23% of US adults, so almost one in four, actually use it for daily purchases, things like groceries, things like gas, not large one-time singular purchases. And if you’re doing that, that makes me really really really nervous.

Brian: Yeah. I mean, think about it. If you are literally turning your tank of gas into four payments or installments, you’re deferring the payment on just day-to-day consumption items. It’s your lifestyle. And that’s a big problem because remember, the secret to wealth building is you have to live on less than you make. So if you have things that are amping up your consumption, it is working against the long-term wealth building. And the previous slide we showed was it’s 33% for large. Here’s what’s scary. When you look at the stat that 49% of Gen Z and millennials will use this or plan to use this in 2026, that is what really scares me. Because if you want to know who has the world’s tail, despite what’s out there in the financial media, it’s people that have the component of time where you’re literally a billionaire of time. You can do anything if you just point that power of time and your resources in the right direction. Compounding growth will change your future self.

Bo: Yeah. What I think frustrates me is that it starts so simple. Okay, I’m going to buy now pay later this one thing and I’m going to have these four payments into the future. Then I’m going to do it again and then I’m going to do it again. So as my timeline goes further and further out, I just end up stacking these payments, stacking these payments, stacking these payments. All of a sudden I’ve got a hundred different payments moving in a hundred different directions, not recognizing that if I were to flip the script on that and I were to actually take advantage, if I’m a young person, if I’m a millennial, if I’m a Gen Z, take advantage of the time that’s on my side, rather than stacking up those future payments, I could actually take advantage of the wealth multiplier. I could recognize that, okay, instead of me spreading out this $20 purchase over the next four months, I could take this $20 purchase, buy in cash today, and then next month, I’m going to put some money to work. I’m going to have that operating for me. And if I’m a 25-year-old, every single dollar that I can deploy, every single dollar that I can put to work and not consume, has the ability to turn into $44 by the time that I retire. If I’m a millennial and I’m 35 years old, every single dollar I put to work can turn into almost $13 by the time that I retire. If all I’m doing is stacking up my future payments, I’m missing out on this wealth-building opportunity.

Brian: Well, look, I feel like we already have a lot of slack in the system because credit card use is A-OK for us. It’s just credit card debt that has no way because we don’t want to pay the crazy interest rates. But it is one of those things I think that we all need to be aware of. Buy now pay later, there’s a lot of research on the behavioral side of things. 85% of users are actually spending more than if they had just paid cash for this or some other structure. So just be aware that this is one of those things. If you are already struggling with some form of discipline where you’re not hitting your savings or investment rate right where you want to, I don’t know that the innovation of using buy now pay later is going to be the thing that’s going to put you where you want to be.

Bo: Yeah. This falls into the camp for me of just because I can doesn’t mean that I should. Just because I could spread this out doesn’t mean that spreading this out is what’s going to be in my best interest or even the best decision. So what are some key takeaways? What are some things that we want you to be aware of? Well, when it comes to making consumption decisions, when you’re checking out, when you’re spending your dollars, recognize that most of these things are not built with your best interest in mind. Most of these things are built with a profit motive in mind, and if you make a poor decision, it works out better for the company that convinced you to do that. So be careful. Be wary of these consumer traps. They exist for a reason and that reason is not unprofitable to the company that’s offering them.

Brian: And we want you to be intentional with every purchase. On the day-to-day things, I made the example that if you’re using buy now pay later for a tank of gas, that’s a consumption decision. We don’t want you stretching that out. And for big purchases, be intentional in the fact that you can have sinking funds. There’s nothing wrong with that. A lot of your banks, online banks specifically, will allow you to start allocating the money out and still let it be invested in a high-yield savings account. You can be intentional even with the big purchases. And then recognize the future power of your dollars. Rather than having yourself tomorrow pay for something you consume today, have yourself today save for something that you can consume in the future. That’s what we’re all doing when we save for the future. When we let $1 turn into $88, we’re making the decision that instead of me spending $1 today, I’d rather have the opportunity to spend $88 in the future. So if you could recognize how powerful that is based on your age and your stage of life, it’ll change the way that you think about consuming. And you can be part of the change. Be the solution for your friends and family. I know when we do content like this that a lot of my financial mutants, this is not you, but you are still the audience because you can still have the heart of an educator and be the guiding light for your friends and family so they don’t fall into this prey. And if you need teaching tools, go to moneyguy.com/resources. We have the wealth multiplier calculator. We’ve got graphics attached to this, animations. It can be really motivating so that you can not only use the education you’re sharing with your friends and family, but also let them see what their army of dollars are actually worth.

Bo: There is a better way to do money. One of the best things you can do for your dollars is subscribe right now to the channel so that every time we put out brand new free content, you are aware of that. And it lets us know that you’re sitting out there because we want to know where you guys are. We love showing up right here at 10 a.m. every Tuesday morning, answering your questions, loading you up. There are things that you want to get our take on and we want to give you that take. So if you have a question right now, we have the team out in the wings collecting your questions. We believe there’s a better way to do money. So get your question in the chat right now. With that, creative director Rebie, I’m going to throw it over to you.

Brian: You know what I noticed? Bo says the same thing every week, but it really is wings if you think about it. Like we have the wing over here and then we’ve got the wing over here with the guys running the boards, and then they’re in the pilot seat right there with the yolk in hand.

Bo: That was very literal. Because he does say “the wings.” But if she’s in the pilot seat and these are the wings, that means me and you’re over here in the bathroom.

Brian: No, we’re in first class.

Bo: First class? Are you kidding me? We’re sitting right behind the plane. These are the first class seats. These are lay-flat seats. I love it. Interesting. Interesting.

Brian: Can you tell I’m going on vacation after this?

Rebie: I was thinking we were talking in theater terms, you know, in the wings of the stage. That is an actual production expression and that’s where the actual expression comes from. It’s legitimate.

Bo: I don’t think it’s an airplane. It may be an aviation literal.

Brian: I’m sure you’re right. But in the way my brain works, I have a whole other way of thinking about this. Are the Money Guy team in the wings of an airplane or of a production show? Let me know. I like thinking Bo and I are in first class and you’re flying the plane.

Rebie: And I’m flying the plane. I’m very honored, first of all. Okay, moving on from that. We do have some questions queued up so get your questions in the chat.

Q&A: My Company Is Going Public. What Should I Watch Out For? (11:29)

Rebie: The first one is from Ken. It says, “My company just announced they are going public. We have the opportunity to participate in a Founders Equity Day program. What are some yes and nos or things to watch out for?”

Bo: Well, so this is exciting. Let me kind of explain what’s going on here. Ken works for a company that’s owned by some private individuals or a private entity. And they said, “You know what? We now want to be traded on a public stock exchange. We want to have a stock ticker similar to the way you think about like an Apple or a Home Depot or a Google or something like that.” And since Ken works for them while they’re a private company, he has the option, it sounds like, where they’re going to be able to buy in and participate in this initial public offering when they initially issue those shares out. And so for a lot of people, this could be an incredibly exciting thing. A lot of folks have become very very wealthy by having founder shares pre-IPO for a publicly traded company. But I do love that Ken’s asking the question, hey, what are some things I should think about? What are some things that I should be aware of? And how can I decide if this actually makes sense for me and my family?

Brian: Well, there are a few things. I’ll say the two quick things that popped into my mind. A lot of times with your IPO when the company is offering you this opportunity, you need to know what trading restrictions or trading windows you’re going to have. Because a lot of people get super excited about IPOs and, as I’ve seen employees struggle with this, the stock goes public and even if you play best case scenario and it pops and goes way up, you can’t sell like everybody else. Usually you’re kind of restricted on that. And it’s not uncommon that when the window opens and everybody jumps off the boat at the same time, you get crushed. You’re like, how is this not a pump and dump? That’s why you need to pay attention to what your trading windows are. And that leads to the bigger thing. When in doubt, zoom out. What do you really think about this company? Now, you already have your human capital, meaning you work for this company, but now that you’re about to put some investment capital into it, is this part of your permanent portfolio? I’m not really saying to make this part of your permanent portfolio because that’s going to be the next thing, where we’re going to say, hey, get rid of a portion of it once you can, because you have so much human capital tied into it. But you do need to say, is this more sizzle or is there actually a foundational reason this is a great company and this would be a great opportunity so that I can weather whatever crazy volatility happens during these IPO windows.

Bo: The other thing that I would ask in your specific situation is where am I in the Financial Order of Operations? Brian, hold that thing up for me. Now, if you have a solid financial foundation and you have been following the steps and you’ve been building up a solid financial base, this may be an area where you want to take advantage of. But if you have a lot of high-interest debt out there, or you don’t have a fully funded emergency reserve, or you don’t have adequate dollars flowing into retirement accounts like health savings accounts or Roth IRAs, this may be premature for you. What I want to see you do is get a lot of your capital invested in something that may not be liquid for a certain period of time when there are other things that you should have been checking the box on. So I’d make sure that if you were going to participate, you’re at the stage of your financial journey where participation makes sense.

Rebie: Fantastic. Well, Ken, thank you for your question. Appreciate you being here.

Q&A: When Does Tax Diversification Outweigh Immediate Tax Savings for High Earners? (15:06)

Rebie: We’re going to go to Connor’s question next. It says, “At what point does the benefit of tax diversification, Roth plus taxable, outweigh the immediate tax savings of traditional 401(k) contributions for high earners trying to catch up?”

Brian: All right, I got two answers. There are really two things, two levers you’ve got to be paying attention to. Your current tax situation tied into your overall long-term tax outlook. And that’s why if you notice, we have slides that we pull up all the time. If you’re young and in a low tax situation because you’re not in your peak earning years, that leads to Roth savings. It’s pretty easy to do a Roth 401(k) so you can really maximize the tax-free compounding growth. But if you’re a person that’s in peak earning years and you’re paying close to half of what you earn to taxes both local as well as federal, then we’ve got to think about that. Because maybe when you take your earned income off the table in retirement, you might have a tax arbitrage situation where you could do Roth conversions or other things. And then the other part is it needs to be goals-driven. That’s why we have step seven of the Financial Order of Operations, because so much of the early stages is taking advantage of all the tax opportunities that the government has built into our tax policies to incentivize you to save. It’s when you get to step seven that says, hey, wait a minute. If you’re part of the FIRE movement, you want to move on to a next endeavor and change jobs and have options to use your army of dollar bills, we better make sure we pay attention to the structure or makeup of each of these accounts so that we can actually fulfill those goals and have access to them.

Bo: Yeah. I wrote down two things and it’s sort of an echo of what you said. When do you need the dollars? If you are doing like an early retirement thing, you need access and having an after-tax account may be something that’s incredibly valuable so you get to those dollars. And then the second thing I put is what’s the ultimate purpose of the dollars? We have a number of clients that reach this position where we recognize that their qualified accounts are going to be so large that even with the tax planning we plan to do at financial independence retirement, we’re still going to have an issue of being able to convert dollars for long enough. And ultimately the reason why they might switch to building up the Roth dollars is more about legacy planning than it is about their own financial planning. So when you think about the dollars that you’re saving, okay, I could get this current year tax benefit, but based on my financial circumstances, based on where I’m going to pull my dollars, based on the money I’m going to need to use, it’s more advantageous for me to build up Roth dollars, so that this is something I’m thinking for the next generation, something I’m building up there. So when will you need the dollars and what’s the purpose of the dollars? I think answering those questions will dictate when you should switch and actually think about switching from pre-tax to not exclusively pre-tax.

Rebie: Well, Connor, thank you for the question. Remember, we are doing rapid fire today, the “It Does Not Depend” rapid fire segment. That will be coming up a little later in the show, probably between the 30 to 40 minute mark. So if you’re watching live, add your rapid fire questions to the chat. Just make sure to put RF for rapid fire at the beginning so we know that you want to be a part of that. So get those questions in. And in the meantime, we’re going to keep answering your questions at a normal speed.

Bo: Can I ask a question? We announced and launched our brand new deliverable last week. Can we do a poll? Has everyone checked it out? Did you guys go out and download that deliverable? Because we are super super excited. We even got some press on it this past week. There were some large institutions that grabbed it and did a little write up on it, which was super cool. We put a lot of work into it. If you’ve not checked out How Much Should You Save, go to moneyguy.com/resources. Download your free copy right now. And let us know what you think because it’s something we spent a lot of time thinking through to hopefully be super valuable for you guys. Definitely check out How Much Should You Save.

Q&A: What’s the Most Optimized Way to Save for a Car in Seven Years? (19:14)

Rebie: All right, ready for another question? Let’s do it. Kai Gunto 230 says, “I’m about to pay off my 20/3/8 loan and I want to pay cash for a car in seven years. What’s the most optimized way to do a sinking fund? High-yield savings account or brokerage? If brokerage, when and how do I exit the market?”

Brian: See, Kai’s got us a little bit because he said seven years. I know it’s right on that cusp, isn’t it? I mean, that is getting out there to where this is going to be a more diversified answer than just saying go straight cash.

Bo: I’ll tell you what I would do if this were me, so you write this in pencil because this is sort of like an opinion. I’d probably go sort of a half-and-half strategy. If I know that I want to pay cash for a car in seven years, I’m going to save up, do my time value of money calculation, figure out how much I need to save up, and I might have half of it going to a brokerage account in low-cost index funds, half of it going to a high-yield savings account. Because I know realistically a lot of stuff changes over the course of seven years. I might get pay raises, I might get bonuses, my expenses might decrease, I might have other capital inflows that take place. So I want to be careful about being all or nothing one way or the other. But I do think seven years is far enough out there that a sinking fund in pure cash, pure high-yield money market, you’re going to miss some opportunity. But I also don’t want to go hog wild and have all of it in a brokerage account and then in the moment when my car dies or when I need to replace it, the market’s not at a great spot. I kind of like the 50/50 approach.

Brian: So let me put it because I think Bo’s answer is right on. I would say if you have the need for the car within the next three years, it’s a no-brainer to do high-yield savings account, cash only. That three to five years starts to become a gray zone where you can start introducing maybe 20%, 30% into investments. Five years and beyond, now you’re kind of in the territory where Bo is on solid ground. I think it’s okay to have a balanced approach where you have half of it in investments or index funds and then you can do half of it in liquid investments. That way just in case decisions are forced upon you sooner than you planned, you’re going to be able to weather it. Whether that comes in as the car breaks down in the next few years or even in the next three years, you have some market volatility, you have enough time frame. It’s going to be A-OK.

Rebie: Love it. Good question, Kai Gunto 230.

Q&A: When Should I Get a Financial Advisor? I Just Hit $1 Million Net Worth (21:55)

Rebie: All right, let’s move on to NewberryCharles. His question is, “When’s the point you should get a financial advisor? I just hit one million net worth this week.” Oh, congratulations. And I want to thank you guys for that too. Been a blessing to learn from you all. Very kind. Big milestone. We’ve even got some shows coming up on that soon. So make sure you’re subscribed here on YouTube. But what would you say to Newberry Charles? When should he think about hiring a financial advisor?

Brian: Bo, you know, there’s a big difference between one million net worth and one million of investable assets. How does that shape the answer?

Bo: Yeah, because if you had a million-dollar net worth and $800,000, $700,000 of it is a liquid portfolio with different account types, different account structures, then I’d argue potentially a financial advisor makes sense. But maybe you hit a million dollar net worth because you bought a home and you’re in a high cost-of-living area where the value of homes have gone up substantially and your $400,000 house turned into an $800,000 house. There’s nothing wrong with that, but that’s a different level and different component of complexity than the other one. And so generally we say that it makes sense to hire a financial advisor when one of three things happen. Can I say the three things?

Brian: Go ahead. Go through the three things.

Bo: When one of three things happen. Number one, the gravity of your financial decisions is greater than you feel like navigating on your own. Meaning, okay, if I made a 10% boo-boo on a $100,000, maybe it doesn’t change my life, but I make a 10% boo-boo on a million-dollar net worth, well, now it’s substantial, and I just want to make sure I’m not missing anything. The second point is I just don’t know what I don’t know. Life has gotten complicated. My taxes are more complicated. My portfolio structure is more complicated. I have access to more accounts. Whatever that thing may be in your world, complexity has entered in and you’re just nervous. I want to make sure that I know what I’m supposed to be doing and I’m not doing the things I’m not supposed to be doing. So there’s a complexity component. Number one is gravity. Number two is complexity. And then number three is time. Often in our lives, as our lives take shape, the important financial matters tend to fall to the back burner. Oh man, I’m in the messy middle and I know I should get life insurance but I can’t reach out to the agent, or I know I need to do my estate documents, or I haven’t rebalanced my portfolio in the last seven years just because I don’t have time to look at it. If you find that really important financial matters are falling on the back burner, a good financial advisor can help keep the important stuff in front of you. So if you find yourself in one of those three areas, or potentially all three simultaneously, that might be an indication that you should reach out to an advisor. Does that mean as soon as I hit a million dollar net worth I have to have a financial advisor? No. Not at all. And there are a lot of people who will never hire a financial advisor, and I’d argue that’s okay. You’ll have to decide for yourself, okay, could I get value? Or is this something where I would have a greater sense of peace and a higher confidence in my future financial security by having a personal CFO on my side?

Brian: And Charles, if you realize, hey, I think I qualify or I definitely see a need, I’d encourage you to go to moneyguy.com/resources. We have the eight questions you should ask anybody you’re considering for financial advisors because, by the way, we’re not all created equally. We just did a react recently where I was like, there’s a huge difference between an investment advisor who’s only just helping you shape allocation versus a full financial planner who’s impacting all parts of your life, whether it’s education planning for the kids, retirement planning, estate planning, taxes. I feel like we pay for a lot of our fees by just not doing the tax return, but just making sure that all of your wishes are fulfilled or recorded correctly when you’re filing those annual tax returns. That’s the type of stuff that a financial planner should be doing for you. It’s outside of even the investments so that you’re getting that extra what we like to call the alpha and the gamma and all the things that when you do look into the research on it, a good financial advisor actually adds a lot of value to your life and frees up more time.

Rebie: Update on our poll from the YouTube live chat. Have you seen our latest resource? We asked. 61% said, “Of course.” Nice. They’ve gone and downloaded it. 39% said, “Going to check it out now.” Yeah, we’re very excited about that resource. I think it’s very powerful and very interesting.

Brian: It is cool when you see articles written on some of the research and content deliverables that you do and you’re like, all right, this is connecting. It’s connecting with the general public. And I think the thing I like about this one, because we’ve always been pretty consistent with the 25% savings rate, but we’ve known that the flaw in it was that for somebody who starts super early, you have such a powerful component of your army of dollars because of time being a billionaire of time. I didn’t like it in the old version saying you have to save 15%. What I like about this is the rubber meets the road. If you’re starting early, this tells you, hey, maybe your savings rate goes as low as 15% in some situations, or even 10%. But if you’re somebody who kind of procrastinated, this is going to give you the tough love that you need. So it kind of meets you right where you are.

Bo: Yeah, I like that it’s not discouraging. A lot of people are saying, because we’ll talk to 20-year-olds like, “Guys, I love your stuff, but I’m never going to hit 25%. So why should I even start?” That was one of the biggest reasons why we did this one, because we don’t ever want building wealth to be discouraging. No matter where you are, no matter where you started from, the way your journey begins does not define the way that it ends. And we think this deliverable really shows that it doesn’t take a whole lot if you can figure it out early. And I’m excited that we now have one that shows that.

Brian: Listen, you and I both eat pork rinds. So we don’t say the words impetuses or whatever that is. That’s not a pork rind type vocabulary. By the way, I love pork rinds. So that’s not a compliment or a cut if you like pork rinds yourself. I’m just saying that we’re just everyday folks, you know. I try to eat healthier and do that kind of stuff. And I convinced myself too much. I convinced myself that pork rinds are like a healthy snack because it’s like protein, right?

Bo: I don’t think pork rinds are good for you. My favorite thing is, I have a friend and he loves this as a conversation starter, things that rich people and ultra-poor people have in common.

Brian: Okay. And there are some funny things if you’ve seen people go down that line of thinking. But I actually had an experience where my wife and I were doing a staycation at the Hilton Conrad in Nashville. And you know how these fancy hotels will do things sometimes where you’re like, “Ooh, I’m on this.” Their thing that they brought out to open the meal were like fancy versions of pork rinds. And then when I was out in Vegas, we had a dinner at some meat-heavy restaurant and they brought out pork rinds and I was like, they don’t call them pork rinds by the way. It’s kind of like grits and polenta, you know. They’re all related. But if you know, you know. Is that a pork rind?

Bo: Whenever I see fried bologna on a menu, I’m like, okay.

Brian: Now you might have actually broken the system. I don’t think bologna has cracked the hallowed hallways of what wealthy people eat. But I know when I was a kid, that was like a big deal. And if you go into the honky tonks in Nashville you still go to the recession special and they will get you a fried bologna sandwich, I think at Roberts.

Bo: Have you ever had fried bologna before? Okay. Are pork rinds big in Ohio?

Rebie: Yes, when I was younger. And I don’t know. I don’t think so. I never really had them much. I’m trying to think if I’ve actually had a pork rind. Oh, well, I guess.

Bo: Really? Yeah. But I don’t know if that’s just a me thing or if it’s an Ohio thing. I mean, I literally, when I went down to Augusta a few weeks ago, I literally had a bag of pork rinds. You know how I know she’s never had a proper road trip? Because she ended the word with a D. She said pork rind. I don’t know if you’re listening to me and Brian, we’re calling them pork rind-s because that’s what they are. It’s like an R and an I and an N and there’s a bunch of N that ends with an S. That’s how you know.

Brian: I know another thing we’ve got to do with Rebie. How about boiled peanuts? Have you had boiled peanuts?

Rebie: Don’t make me say it. I think I have had those. But I don’t say it like you do. I say it like a Midwesterner. Boiled peanuts. I think we’re really the same person. Okay, well, on that note, we are going to do rapid fire after the next question. So last chance to get your questions in. But until then, Skippy has a question for you.

Q&A: When Is It Better to Lease a Car Rather Than Buy? (31:56)

Brian: Next to Jeff. I like me some Skippy. You’re going to love this question.

Bo: Wait, what? Skip. We both were thinking about peanut butter as soon as you said Skippy. That’s hilarious. Oh man, I’m so hungry.

Rebie: All right. The question, you’re going to love the question even more. Are you ready? When, if ever, is it better to lease a car rather than buy? At the end of a lease, how do I decide on buying the car or moving on?

Brian: Okay. Look, I’m going to give you the easy answer and then I’m going to level set with you. You need to be in step eight to even consider leasing a car of the Financial Order of Operations. But now, let me get down into the weeds on this. I have actually leased my first car because I love my wife. And look, we make, sometimes love is irrational and you see things for what they are. I’ve told y’all, some of the biggest rants of my broadcasting career have been on her prior European luxury SUV. And to repeat the same mistake over and over is insanity. So I was like, at least we’re going to mix this up and instead of buying this horribly depreciating, expensive-to-operate vehicle, we’re going to lease or rent this bad decision. So that’s what I’ve done. And then she, by the way, she is happy as she can be with that car. And she does look good in it. I pass her on the road in it every now and then coming in and out of the neighborhood and I’m like, she looks good in that thing. But we’re going to be able to get rid of this bad decision before it actually starts showing its warts.

Bo: So here’s the question. When, if ever, is it better to lease a car than buy? And so what we’re asking is a comparative question, not an absolute question. Because I would argue that auto leases are not a very sound financial decision. But there are consumers, and I agree with you, Brian, step eight is where it should happen. But we have people, and there’s someone in my life, a relative of mine who I love incredibly dearly, and she sent me a text message the other day and she said, “Hey, look what I just got.” And it’s a brand new car. And I’m like, “Whoa, why did you get, you just got that other car like three years ago.” And she’s like, “Well, guess what? I took it in for some service and they made me a deal I just couldn’t turn down. I actually have a lower payment now and I borrowed it for even less time than my last car.” And I’m like, “No, all you did was reset.” And so I kind of walked through and explained the mathematics to her. In the situation where someone is trading out new cars every two, three, four years, if you were a buyer and you’re buying those cars, all you’re doing is paying for all the depreciation up front. You just keep paying it over and over and over again. So if you’re going to be that kind of consumer, there’s a mathematical justification that leasing a car may actually be more advantageous than you buying the car, paying the depreciation, losing the value, rinsing, and repeating. Now, neither of those are good choices or good decisions, but that’s a scenario where if that’s the kind of consumer you’re going to be, you’ll likely save yourself some money by making that poor decision slightly better.

Brian: Yeah. By the way, this vehicle that we are renting, it depreciates like a rock because I don’t think anybody, go look at these vehicles seven years in the future and you’ll be like, man, why are they giving these cars away? It’s because they have air suspension systems that are definitely going to need attention. They’re overengineered and they create a lot of trouble. So that was my thing, that they depreciate like a rock. And then I knew the maintenance because, by the way, this one that we have is not only an overengineered car, it has an electric battery in it too. It’s one of those plug-in electric hybrids with a motor in it. And I’m also being told, we’re getting a mid-quest update, that Skippy is in step three. So without a doubt, you do not need to be leasing a car. You need to get something that gets you reliably from point A to point B. It’s not to maximize the love in your relationship or how cool you look to society. You’ve got to figure out how to get your transportation costs down to as low as reasonably possible. I don’t say as low as possible because I’m not specifically an advocate for going to buy a $1,000 clunker. I think oftentimes that can be more expensive. But buy the lowest-priced, most reliable car that you can to get your transportation costs as low as possible, because you need all of that margin right now to be going to step three, knocking out that high-interest debt. Car leases and buying new cars and replacing cars are not where you need to be if you’re in step three. I’ve got some things I’m not ready to share at all but I’ve been writing a lot and Rebie knows she’s read it. The timing of major purchases definitely matters. And if you’re only in step three and you’re a young person, you need to make these type of decisions. That’s why step eight is going to be there to protect you. But most people are going to reach step eight when their wealth multiplier is in a completely different place. So don’t make fake purchases in your 30s or 20s. Let yourself actually have some success so that you can buy those abundance goals and maybe that’s when you reward yourself with the fancy car.

Rebie: That’s great, Skippy. Thank you for the question. We’re glad you’re here.

Bo: And I think Skippy said they’re new here, so hey, welcome. If you’ve not subscribed, subscribe right now so that every time we put out brand new content, you will get updated so you can continue to do money better.

Rapid Fire: It Does Not Depend (38:00)

Rebie: All right, it is time for the “It Does Not Depend” rapid fire segment where Brian and Bo will answer your questions in 30 seconds or less. And I will give them the opportunity at the very end of the segment, in our “Maybe It Does Depend” segment, where they can expound if they really feel the need to on the questions. Are you guys ready?

Brian: It feels like when we do these typically I take 25 and you get five. So I apologize. Bo just said the quiet part out loud. You only get 15.

Rebie: Are you guys going to alternate who starts or are you just going to go? Who’s starting? This is a gentleman’s game. All right, Brian’s up first then.

Brian: Oh, wow. Are you ready? No. But let’s go. Should I make Bo go first? No, we go.

Rebie: All right. Brian’s first. 30 seconds on the clock. Here’s the first question. Where does accelerated 401(k) loan repayment come into the FOO?

Brian: I mean, that’s probably like a step three type thing. Because you want to get that 401(k) loan paid off very quickly.

Bo: Step three. Any 401(k) loan is a high-interest loan because of the opportunity cost of those dollars. You should get that knocked out quickly.

Rebie: Very well done, team. Next question. You both used your 15 seconds.

Brian: I like that. I’m like fishing around in the dark and then Bo comes in definitively with an exclamation point and then he gives me the fist bump.

Rebie: All right, next question. I’m in the 25 to 30% tax rate. How do I determine if I should do Roth or traditional?

Bo: You need to look at your other accounts. How much pre-tax money do you have? How much Roth money do you have? What is your timeline to being able to need those dollars? How young are you? How old are you? And based on the answer to those questions, it’ll lean you one way or the other.

Brian: Yeah. If you’re young, Roth IRAs are going to be really powerful. All the compounding growth you get out of that. If you’re older and you think your taxes will be lower in the future, you might want to take advantage of traditional.

Rebie: All right, we’re covering a lot of ground here within the time limits. Next question. Did we say it?

Bo: No. No, we didn’t say it. But we kind of, you know, I mean, you did skirt right around it, but you didn’t say the D word.

Rebie: None of them actually. You didn’t say any D words. Okay, next question. Is a concierge doctor worth it? Step eight, at 26 years old with $500K invested.

Brian: Yes. I mean, health is wealth and so you should act accordingly, especially with the way technology and innovation is going on in medical science right now.

Bo: Money is nothing more than a tool that allows us to achieve our goals. For me specifically, health and being as healthy as possible for as long as possible is super super important to me. So for that, a concierge doctor is justifiable to the cost and something that if you’re at that stage where you can afford it, I am a huge advocate for it.

Rebie: Nicely done. All right, next question. If you’re the trustee and ultimate beneficiary of an irrevocable trust, would you include said value in your net worth? Principal and corpus is protected from spend-down per trust docs.

Bo: So you’re the trustee and the beneficiary. You’re asking, should I include the value of this trust in my net worth? There are spendthrift provisions that don’t allow me to get to the principal and corpus. In that scenario, the trust is an income-producing asset for you, not an actual asset yet. It’s likely, if you’re the beneficiary, you’ll get it at some point in the future. I would treat it like an income source, an income statement item, not a balance sheet item. So probably not on your net worth statement. I’d put it in the footnotes.

Brian: I was going to say the exact same thing because it’s basically promises of future cash flow things. It’s no different than like Social Security or other things. There is definitely going to be value for health, education, maintenance, and support, but it’s not something that you have access to so you can’t put it on the net worth.

Rebie: Next question. New baby. What’s the best account option for him and why?

Brian: Are you at step eight is the first question. If so, then I like custodial accounts for weddings and house purchases. I like 529s for education and priming the pump to make sure your kids are going to be productive with their labor. I love both of those. I do not love people that get really really aggressive and try for a newborn to do custodial Roths because their baby’s little baby model. I would say stick to 529s or UTMAs.

Bo: The end. I was going to say depending on it but I didn’t say it. I didn’t say it. I stopped. That’s called discipline. That’s one of the three ingredients of wealth creation.

Rebie: Okay. You came too close to it. I know. I’ll let it slide. All right. Next question. I would like to start working for myself soon, next year or two. How can I best plan for my future as I transition from an employee to a self-employed 29-year-old?

Brian: Put on your 3D glasses. There are some D words in this. You want to have your dream plan. Run the scenario for the next few years. You want to have the down-to-earth of what you actually think will happen. And don’t skip out on the doodoo plan, meaning it doesn’t go as you planned. In addition to 3D glasses, cash. Cash cash cash. Cash is the oxygen you’ll need as a small business owner. I would save up more than you think you need so you can give it longer than you think it will take.

Rebie: Wow. Well done. There was some time lost because you kind of looked at each other for the first couple seconds. All right. Next question. Bo, leg day, arm day, or cardio, rank from favorite to least favorite?

Bo: Arm day favorite, cardio because then it helps you get ripped, but I love legs too. So I like all three. I’d say arms first, then like it’s a 2A, 2B deal.

Brian: Why did that question get asked for Bo only? Is it because he’s a giga chad and then everybody just assumed I don’t know?

Bo: Did I say it depends? Did I say it? Somebody just called that. Did I say it depends? Did I say it?

Rebie: No. No. I really have to say, it is true that somehow you easily could have thrown it in.

Brian: If we didn’t say the adult diaper, then it doesn’t count. And I’m not going to screw up a weightlifting question, right? Like that’s not one I’m going to screw up. Me and the boys, we love our day.

Rebie: Your time is up. We’ll come back to it. Are we still doing this? Because you even got a gift yesterday.

Bo: I did get a gift yesterday. Stay around after the rapid fire segment. I’ll tell you about the awesome gift we got yesterday.

Rebie: Next question. When calculating your emergency savings, can you factor in a guaranteed severance from your employer?

Brian: No.

Bo: No. Here’s why. Being unemployed is an example of an emergency. But what if the emergency you have does not involve losing your job? What if it’s the car goes out, HVAC goes out, a medical emergency, some of those things where that severance doesn’t pay out just because it’s guaranteed if you get severed? It’s not necessarily guaranteed. And a lot of guaranteed severances say so long as you’re not fired for cause. Like what if you screw something up?

Brian: Yeah, that was the only thing I was getting at. I’m on the same page as you.

Rebie: We’re going back to guaranteed severance because we’ll come back to it in our next segment. Okay. Next question. Wife and I are aged 35 with three kids and eight times our income invested.

Brian: Wow. Wow.

Rebie: Our dream home breaks the home-buying rules and will cost five to six times our income. Since we are ahead of the curve, can we buy it?

Bo: You’ve got to stress test this to see because being ahead of the curve does give you flexibility. Now, what I don’t think you can do is allow your monthly note to be exponentially above the 25%. What you may be able to do is decrease your savings to build up the down payment to then be able to afford the home and get inside the affordability. Or even go see how ahead of the curve you are and be honest with yourself and maybe use a little bit of capital to increase your down payment so that payment does reach within our 25%.

Rebie: We’re coming back to this one. I am very impressed that you actually got a good answer there in 30 seconds though because that was a doozy. There’s a lot of “it depends” in there. Okay, next question. Is slowly investing $50 per month in a cloud storage and AI-focused fund like FSPX too non-diversified? Currently investing roughly $400 per month at 23 years old. Am I too bullish?

Brian: Look, we’ve been there, done that. I did the internet fund when I was your age and I made money immediately and then ended up selling it at a loss eventually. So, nothing wrong with you dabbling in it, but just don’t don’t let it be you’re eating money. I want to know what else you’re saving because at $400 a month for a 23-year-old, if you were just to plop that in the S&P 500, go play with a wealth multiplier. See what that can turn into. I don’t want you to waste opportunity. Nothing inherently wrong with those sector plays, but that’s more the vacation stuff, not the main core. That’s more like the dessert, not the main course.

Rebie: She missed. It was slightly over. I don’t know why I had grace. I think I was just looking at the next question, which is our final question. Last but not least, Star Wars or Star Trek, and why? And does Bo know the difference?

Brian: I mean, we just came through the May the Fourth be with you. So I’m going to choose Star Wars, and they’ve made it easier with the way they’ve handled the Star Trek franchise, but Star Wars.

Bo: I would say Star Wars also because you know more about that. I do like them both though. And I hope that the next decade’s going to be good for both franchises. I really do.

Brian: Oh, they’re still adding to both of them. They’re still doing more stuff. Star Wars at Disney, like the whole thing. Wild. I was very impressed by that. Like the whole like, you do feel like you’re in a different universe, man.

Maybe It Does Depend: Deeper Dives on the Rapid Fire Questions (49:30)

Rebie: Very fun. Well, that concludes our “It Does Not Depend” rapid fire segment. Now it’s time for our “Maybe It Does Depend” segment where Brian and Bo get a chance to expound on any questions they didn’t have enough time to do. I have one where you said you definitely wanted to come back. It was talking about calculating your emergency savings. Can you factor in a guaranteed severance from your employer? Did you have anything else to say on that?

Brian: Yeah, that one is, look, the reason you have emergency reserves is to keep you from making desperate decisions. And part of what makes desperate decisions is your employer’s cash flow coming in. And yes, they might tell you we have a guaranteed severance if we ever separated ways or went out of business. But I bet if you read the fine print, you’ll see exactly what Bo said, is you’re still an at-will employee in a lot of cases. There are lots of outs for your employer. And we’re trying to build independence outside of the obligations of your employer. So that means you need to stand on your own feet.

Bo: I love that. And I don’t have anything to add to that because I do agree that emergencies are the things that you’re not counting on. They’re the things that can come out of left field on a random Tuesday. I think your emergency fund should be a true emergency fund and you should not try to find ways to shrink it or minimize it. Set it, let it hang out there, chisel it away, compartmentalize it, and then get under wealth building. But don’t sacrifice it. Don’t try to get too cute with it, because when you need it the most is when you will be the most thankful that you actually have it there.

Rebie: That was guaranteed severance. There was another one. Yes. About buying the dream home. They have eight times invested. They’re 35 with three kids. I know you have more to say.

Bo: Yeah. Because here’s what. All right. So I’m going to reframe this for those of you that just got here. This 35-year-old couple, they said they’ve got eight times their income saved up in their investment portfolio. We say that by the time you get to 40, we want you to have six times your annual. So they’re like well ahead of the curve based on the milestone trajectory. What I’d want to figure out is, okay, well, what goals are you ultimately working towards? What’s the future? Because money is nothing more than a tool that allows us to do the things we want to do. One of the things that might matter to you at 35 is my kids are young, we’re young, we want to have our dream home. There’s no point in us waiting until we’re 75 years old to finally be in our dream home and not be able to enjoy it. And because you’re so far ahead of the curve, because of all the hard work you’ve put in, you give yourself some latitude and flexibility to make some different decisions that other people who have not been as diligent might not be able to make. So I would figure, okay, are we on track for retirement or financial independence, whatever we’re working towards? If we were to decrease our savings in order to save up for the down payment, in order to afford the house, what would that look like? And how much would that change our trajectory? Because what I don’t want you to do is be so far ahead of the curve and then you make this life decision and you end up drastically behind the curve. You’ve got to make sure that doesn’t happen. But I’m all for people living their absolute best life today, so long as they’re not sacrificing the ability to also live their best life in the future.

Brian: Well, I think that’s the balance you just said. They’re ahead of the schedule right now. Nothing wrong with you running scenarios where you take a little bit of that capital to boost the down payment so it fits within our 25%. But then also run it the other side. If you’re planning on leaving the workforce at 55 or 60 years of age, let’s make sure what do you need to have so that you don’t cut it to the bone. We want you to basically be cutting a little bit out of your resources to make this life goal happen, but you’re not cutting it so close that when you prune the bush, it actually doesn’t grow back. So that’s the delicate balance you have to do. Nothing wrong with you pruning and using your assets to live your best life. Just make sure you don’t cut it so low that you’ve now jeopardized something that you were ahead of the curve and even potentially on easy street for life. Now, this is one of those areas where when I hear this question, what immediately comes to my mind is, man, you’re making a big decision that likely has a lot of gravity to it. The consequences of this decision if made correctly can be huge in terms of how much life you’ll get to enjoy. Or if made poorly, could be detrimental in terms of what it costs. There are extenuating factors where maybe you don’t know what you don’t know and you’re unclear about what variables and how to test it and how to stress test it. This is one of those things where you may very well be at that point in place where having a professional, having a guide, having an advisor on your side helping you navigate and weigh this decision and how it might play out and what it might look like could be hugely valuable. It’s one, to either validate or devalidate the decision. And then two, if it does work, to give you the encouragement, yes, do this. Yes, it’s okay. Yes, spend the money. Live the life. Make the improvement. Sometimes it’s great just to have someone in your corner giving you that confirmation that okay, I can do this and I’m still going to be okay.

Rebie: Great thoughts. You know, you mentioned your 25% rule on housing. If you’re curious about how to stay within the Money Guy guide to buying a house, go to moneyguy.com/resources. We have a home buying calculator and a home buying checklist that you can download. Both of those are completely free. It’ll give you some more insight on our 25/3/5 rule for buying a home. And I think that you’ll find it very helpful if you’re thinking through how to do this the smart way and even some of these more advanced areas of how can you get it within that window in the situation we just talked about. So moneyguy.com/resources. Just wanted to throw that out there before we dive into a final question if you guys are ready for it.

Brian: All right. Oh no. I got one more. The workout thing. I was ready to get back to personal finance. Sorry.

Bo: I still think we should answer one more though. That’s, I just want to say it’s so interesting. It’s a both-and situation. Obviously this is a personal finance show, but we care about health. Obviously we talk about it a lot. Brian has made tremendous strides for his health over the past couple years. I’ve tried to do the same thing. Because health is wealth. It matters. We want to be able to live as long as we can, as well as we can. And so I work out every morning. Some of the dudes, we call our gym Third Bay. So it’s the dudes at Third Bay that work out. And it’s so funny, we talk about this sort of casually enough and tangentially, and you guys catch on to it. And so yesterday, a package shows up and our administrators open it and they say, “Guys, what did y’all order?” And I kind of saw, “Brian, what did you order?” And he looked at me and said, “What did you order?” And we open it. It turns out it was one of you. One of you said, “Hey guys, here’s a picture of it. I just love so much that you guys talk about health is wealth.” And the guy that wrote it, one of the owners of this company, said, “Hey, I made some really good financial decisions and I was able to become an owner in this company, and I just, you guys have added so much value to my life. I want you guys to stay safe when you’re lifting.” And they sent us a bunch of workout gear. I just think that’s awesome. I think it’s amazing that you guys recognize that the stuff that we talk about here, the financial stuff and even some of the other stuff, it really is about living your best life, the best version of yourself that you can be. And so he sent that and he sent an incredibly nice letter and write-up with it. And that kind of stuff makes us so happy.

Brian: Oh, that’s the first time I saw the poll results. How was that not like 95%? On Instagram, Money Guy Show, if you want to follow. Who do you think is more excited to use the equipment, Brian or Bo? And it was like a pretty high, what? I just, it was like 60/40.

Bo: Yeah. 60/40. You’re not excited about it. I think we know who actually lifts weight to where they need a belt on versus, and then you like, you even knew what this stuff was like, oh this is, I can do muscle-ups and pull-ups. I was like I don’t even know what that is. And then Marcy and I had to go and look at the ankle things so that you can strap more weights on. What I don’t need when I’m doing a pull-up is more weights. I mean, I’m giving it all I got just to get what I got up. I don’t need more weights.

Brian: I agree. This is a very Bo-coated package we received. But Brian believes health is wealth too. You’ve had a great co-ed class where we’re doing a lot of cardio, we’re doing some dumbbells, we’re getting on the treadmill, but we’re not out there doing Olympic lifts. Just trying to stay active. Matter of fact, on days that I find out there are burpees, I’m like, “Oh, maybe I need a water break during that burpee segment.”

Rebie: That’s hilarious. Oh, that’s good stuff. No, I’m glad you went back to that. That was good. All right. Do you want to do one more question?

Q&A: If You Could Go Back in Time, What Would You Spread the Word About Earlier? (58:49)

Rebie: This is a fun one. It says, “Hey Money Guy team, if you could go back in time, is there anything you would start spreading the word about earlier?” I’m thinking personal finance related, of course.

Bo: Well, I have one, but do you want to go first? I mean, I really do love index funds, and Roth accounts are something I’m pretty passionate about.

Brian: Yeah. But I’m going to say you’ve always been passionate about those. So for those who don’t know, I started this podcast back in 2006, 20 years ago.

Rebie: Honestly, you started sharing things you were passionate about pretty early.

Bo: Yeah. And so he was sharing index funds and Roth IRAs. Here’s something I wish we could go spread the word about earlier. It wasn’t until a number of years into our career that we actually synthesized and figured out a clean way to communicate the Financial Order of Operations. It always kind of existed. It was the amalgamation of our experience and working with clients and being able to put the information together, but it wasn’t around in that form in 2006.

Brian: And man, if we could go back in time, I think it would have been cool starting in 2006 to have started with the purity of this, because there were a lot of, you talk about 10,000 hours to become an expert, there was a lot of really getting in the weeds to get this right. The origin story on the Financial Order of Operations, if you remember, was the 30-minute financial plan. We did that show every year. That probably came about, what, because you were on the show then Bo, so it was probably 2011 somewhere around there, 2012. And then we kept doing that show and then finally we were like, you know what, we go through the mindset, the order, and then it hit us when I saw that LinkedIn post on “Please Excuse My Dear Aunt Sally” and I was like, you know, this is, we ought to own this because there’s a financial order of operations as well. And I agree that that would have been better even if it came out even sooner.

Rebie: I do love that though because it goes to show you the Financial Order of Operations is truly baked in with tons of your life experience, tons of your client experiences.

Brian: It was a long time in the making. Well, that’s why, and by the way, this is probably a great way to close it too. I still am reading the Amazon reviews. I mean, and the Goodreads reviews, because a lot of you, I wonder if he’s still reading. Yeah, I’m in there. He doesn’t scroll. I love it. And you guys, y’all make me so happy because the book as well as the Financial Order of Operations are changing folks’ lives for the better. And I know that that’s all driven by what we get to do with y’all in the wings, whether that’s in the theater or on the airplane, either way.

Closing (1:01:42)

Brian: And I appreciate y’all being my co-pilots with me or while I ride in first class.

Rebie: Am I a co-pilot or am I the pilot? I think the pilot. You kind of stepped out of the cockpit and said, “Here, Rebie.”

Brian: And since this is a private jet, you’re not locking the cockpit to make sure we don’t come up there. We have free access to come from first class up into the cockpit. Or we’re like Southwest where all seats are first class. Every seat on Southwest is first class, right?

Rebie: Wow. This analogy is getting way too deep. But I do like it. I appreciate everybody being in the wings so that we can make this show for you. And we’ll be back every Tuesday at 10 a.m. Central live streaming along with lots of other original content throughout the week. So be sure to subscribe wherever you’re listening. And we will continue to show up here on the Money Guy Show channel with brand new content, talking about what matters to you, about your personal finance, and hopefully just helping you build that confidence so you can focus on what really matters and not just stay in the weeds or the anxiety of personal finance. That’s what this is all about. So be sure to subscribe and visit moneyguy.com/resources for all that free stuff we talk about that we have made for you to help continue these conversations.

Brian: I’m your host Brian, joined by Mr. Bo and the rest of the Money Guy crew. Money Guy out.