Why These Things Aren’t Worth Your Money (Feat. @ErinTalksMoney)

Introduction: Are You Wasting Your Money? (0:05)

Brian: Why these things aren’t worth your money, with special guest Erin Talks Money.

Erin: Hey guys.

Bo: Brian, I am so excited because we know just how powerful every single dollar in our army of dollar bills can be. And when people waste them, they are literally wasting valuable soldiers. So we thought today we’d walk through some things that we see people spend money on right now, find out if Erin sees these same things, and talk about why they are bad uses of money and what you should potentially be doing instead.

Erin: Absolutely. I’m excited for it.

Brian: Now, by the way, you can disagree with us, Erin, if you want to. If you’ve got any hot takes.

Bo: Do you think Erin is going to be like a victim or a perpetrator of some of these bad ones?

Brian: I don’t know. We can only hope for good content.

Erin: I always say I’m a frugal noodle.

Food Delivery: Worth It or Waste? (0:59)

Bo: All right, well let’s see. This first one is a generational one. I think there’s a high likelihood of Erin falling into this one potentially, but it’s something we see so often, specifically among young people, and it’s food delivery services.

Brian: This is when I feel like I’m the old man on the front porch, because when I found out how expensive this makes the food that’s going to be delivered, I tapped out pretty quick. How about you, Erin? Do you do food delivery?

Erin: I don’t, but I had a one-week stay in Washington that a company paid for. They gave me a food budget that was pretty much unlimited. Breakfast, lunch, and dinner. I had them all delivered. I had ice cream delivered. I abused it because it was somebody else’s dime. But if I’m spending my own money, I’ve never used it.

Bo: What’s interesting is that a lot of our clients say the same exact thing. We do an annual wealth survey where we ask how people use money, what they spend on, and what they consume. And we found that 68% of our clients don’t actually use food delivery services. They don’t DoorDash. They don’t Uber Eats. Even though it’s convenient and might technically save you time, they have discerned it’s just not worth it.

Brian: And there’s good reason for that. According to LendingTree, delivery now costs 80% more than just picking up the same food item. I’ve seen people pay $18 for a Chick-fil-A meal that’s already expensive enough at $10. That’s the part where I tap out.

Erin: I feel like part of the experience is going out. It’s going and seeing people at the restaurant or going with your friend. I don’t want to have it delivered and then eat alone at home anyway. If I’m going to go out, I’m going to go out.

Bo: Now, I don’t want to say any names, but I know that young parents will say, “Oh, but it’s just so hard. I’ve got to load the kids up.” I even think that’s a poor excuse, because even now it’s not that hard. Even if you’re going to go get the Chick-fil-A, for example, I would much rather you go through the difficulty of putting the kid in the car seat and loading them up and going to get the $30 Chick-fil-A for the family as opposed to the $90 delivery to the door. I’m not saying that’s ever happened, but if it did happen, I would be very much opposed. It sounds like we hit pretty close to home with that one.

Brian: Sounds like there’s an issue at the Hanson household.

Bo: Can I go off script here? Food delivery from restaurants like Uber Eats and DoorDash is something that I rail against. But there are other types of food delivery, like groceries and that sort of thing. I don’t hate those so much. Are you super against grocery delivery?

Erin: I get all my groceries delivered. I do not set foot in a grocery store. I have a two-and-a-half-year-old. That’s when stuff just gets thrown in the cart as you’re pushing it through.

Brian: And look, they’ve made it so easy. When I’m doing an Amazon purchase, at the end it’s like, “Hey, would you like some fresh organic bananas?” Sure. “Would you like some milk delivered by 4 a.m.?” Sure, let’s throw it in there. And Walmart Plus, if you’re a member, you can get about anything delivered a few hours in the future. I do think that’s different from what we’re talking about because the markup just isn’t there. And it might even give you a little more of your time back, which we all know is valuable.

Bo: And I think you’re more dialed in to what you’re ordering when you do grocery delivery. But when I’m walking down the Oreo aisle, those Oreos are just going in my cart. That’s a thing that actually happens.

Brian: And don’t forget, even if you just want to drive to a location, I know the Chipotle down the street from me has a pickup window now. You just sign up, ride by, and barely have to be moving. They’ll throw it in the window these days.

Bo: I love it. All right, so food delivery from restaurants is one that we don’t love. But grocery delivery we’re kind of okay with.

Sports Betting: A Losing Game (5:16)

Bo: This next one I’m going to draw a hard line on, and we’re going to get some hate in the comments because this is super popular right now, specifically among young folks. Sports betting. Erin, do you sports bet?

Erin: People throw balls.

Bo: In some of the sports they throw balls, in others they don’t throw the balls.

Brian: Let’s put some context on this. 65% of bettors participate to make extra money. If you don’t realize you’re the mark sitting at the table when it comes to online sports betting, that’s exactly what you are. And 31% of sports bettors view it as an investment. I’m doing air quotes on purpose. I think a lot of people have lost the plot when it comes to sports betting. If it’s truly an investment, you go into the market.

Bo: If you’re doing this to make money, you’ve got to get a side hustle, grow your skill set, do something that’s going to bring more income in. A gamble is not a way to make money. It’s literally hoping you get lucky. I don’t care how much sports you watch or how in tune you are. It’s gambling. And we know that for every $100 bet placed in 2024, the expected loss was $9.30. You’re taking nearly a 10% haircut right from the jump when you participate in these. I don’t think it’s an investment. I don’t think it’s a way to make more money.

Brian: Did you see the source of that, though? It’s the American Gaming Association. That’s just what they’re telling us is $9.30. The real number is probably even higher. There’s nothing wrong with it if it’s a hobby, but don’t let this be something that’s replacing you doing your Roth IRA.

Erin: It’s money you’re okay with losing. If you want to have fun, that’s fine. Have you seen there are now apps where you can bet on anything? It’s not just sports. Betting itself is becoming the sport.

Bo: And what’s really dangerous is there are now legitimate investment platforms where when you log in to look at your account, you can see your Roth IRA, your traditional account, your investments, and right there next to it it says, “Hey, participate in this prediction market. Go do this gambling thing.” I think that’s dangerous, especially for young folks who can easily be pulled away and take their eye off what they should actually be doing.

Erin: It’s hard in the beginning because you’re doing the legwork. So if you think you can turn $100 into $200, there’s a lure there.

Brian: There’s also sports arbitrage betting, but the gaming sites are so smart about that. Even financial mutants who think they can find a better way, the gaming sites are so smart that even if you work that arbitrage angle, they will start limiting your bets very quickly. It’s just not worth going down those roads.

Whole Life Insurance: The Investment That Isn’t (8:16)

Bo: All right. So we’ve talked about two things that specifically target younger folks. This next one doesn’t discriminate age-wise because we see young people making this poor decision and we see people much further along in their careers making it too. And it’s buying or using whole life insurance as an investment vehicle. Erin, do you have any whole life?

Erin: No.

Brian: Do you have term insurance?

Erin: No. I do have some coverage through my husband’s military benefits, and then the smallest amount imaginable.

Brian: Oh my gosh, we just broke something here. All right, we’re going to give you some homework to take home today.

Erin: I feel like there gets to be a point where you can self-insure. I’ve weighed the pros and cons and with a paid-off home and my son’s college paid for, I don’t see the point.

Bo: We do agree that when it comes to life insurance, it’s ideally a temporary solution to a temporary problem. As your life progresses, you eventually reach the point where insurance is no longer something you need. But whole life insurance, or permanent life insurance, does the exact opposite. It says, “Hey, we’re going to make sure this is a solution that’s in place forever.” Investopedia said it well: whole life insurance is more expensive than term life and you’ll receive a lower death benefit than you could get with the same amount of money in a term policy. You’re going to pay a whole lot more to get a whole lot less. That does not sound like a favorable financial trade-off to me.

Brian: There is a small segment that benefits from getting the underwriting done while young and healthy, but for the majority of people out there, you can buy term and invest the difference. I will encourage Erin to go check because I think she’s selling herself short. If she left the planet tomorrow, her spouse and her child would probably say, “Hey, we might need some additional resources because Erin does a lot.” We know just from what we’ve seen, Erin does a lot. We need to plan accordingly.

Luxury Cars: The Cost You’re Not Counting (10:34)

Brian: All right, so we’re talking about things that are likely not worth the money. Now, this one I think is going to get the most pushback. We’ve said there are things that young people do and things that people further along in their careers do, but this one is specifically for a certain type of person. The car person. Because people say all the time, “It’s okay, I buy a luxury car because I’m just a car guy. I’m just a car gal. It’s part of who I am.” Oftentimes I think that is a suboptimal financial decision. Erin, what’s your take?

Erin: I bought my first car last year.

Bo: Was it a luxury car? Did you go Mercedes, BMW, Bugatti? What did you do?

Erin: Marin Toyota Camry.

Bo: Toyota Camry! That is a wonderful financial mutant choice. What made you decide not to go get the fancy expensive German fill-in-the-blank?

Erin: I live downtown. I walk. I don’t want to drive anywhere. I hate driving. I’m good for about 20 minutes in the car, then I become a prone napper. So I don’t want to go anywhere. I would rather have a driver.

Brian: I love that. You’re in good company. We actually survey our clients and found that 84% of our clients drive cars for seven-plus years.

Erin: My first car, which was a gift from my grandma, I drove for 18 years. That’s why I bought my first one last year.

Brian: Wow. And look, there’s good reason for this. Some of my biggest rants ever on this show have been about my wife’s European luxury SUV and the maintenance costs. Even when there’s a class action lawsuit over a known problem, like having to replace the brakes at less than 20,000 miles, they still find a way to get you. On top of that, the premium fuel, the higher insurance, and they depreciate really fast. These are all bad decisions stacking up. And if you compare that to the fact that 65% of Americans drive their cars for less than five years, that’s shocking. Our millionaire clients are driving seven-plus years. The typical American is turning over a rapidly depreciating asset in under five years. You can see there’s a disconnect.

Erin: I feel like the typical American is just getting their car paid off at five years.

Brian: Hopefully. Although there’s actually negative equity in the majority of transactions too.

Bo: I think what’s wild is the reason a lot of people drive luxury cars is because they want to look cool. It’s a fancy car, it looks nice, it has all the trappings. But then a few years go by and they’ve got to rinse and repeat. That’s why so many folks are doing it so often.

Brian: Now, don’t mishear us. We’re not saying luxury cars are bad. We’re not even saying you shouldn’t buy a luxury car. What we are saying is that if you’re going to buy a luxury car, you better make sure you’re doing it at the right time and you truly understand the opportunity cost of making that financial decision. You all know I have a no-hypocrisy policy, and I would be a hypocrite if I didn’t say we do drive luxury cars. But it’s a step eight thing. In my early 40s, I went from being a full tight wad where I was doing things so cheap, and then once I realized some of these decisions were having an impact on my relationships and that I’m not going to die broke, I probably should loosen it up. And I was well into step eight of the Financial Order of Operations. That’s when you can give yourself permission to do the bigger, nicer cars. Even my big confession recently is that we’re now leasing our first car. And look, leasing is not the greatest idea. Notes for Erin, not Brian.

Brian: But when you look at how bad the decision is on these luxury cars, I was like, I’d rather rent this bad decision than own it. And at this point it’s not moving the needle financially. It’s more about what keeps the household happy.

Erin: I think that’s fair. It’s kind of like the Dave Ramsey principle: if you would put this money on a table in the middle of the living room, light it on fire, and it doesn’t affect your life, then it’s okay.

Brian: It does feel like that in some ways. I’m the financially responsible one in the house, but my spouse loves that car she’s riding around in right now. If it makes her happy, it makes me happy.

Worth It or Waste? The Game (15:14)

Bo: Rebie, we were talking about some things that people spend money on that are likely not worth it, but you said, “Hey, we have a few more.” Isn’t that right?

Rebie: We do. We’re going to play a game called Worth It or Waste. You guys have your thumbs up and thumbs down paddles, so go ahead and grab those. I’m going to name off a few more items and I want you to tell us, from your personal opinion or your opinion as a financial professional, whether it’s worth it or a waste.

Brian: And I want to preface this because the last time we did a segment like this it was on cars and I offended some of my clients, and I did not mean to. We don’t see this stuff beforehand. The content team just kind of has their way with us. So I’m putting that disclaimer out there: if any of my clients write me after the show, I didn’t mean to offend you.

Erin: And if you’re on step eight, if it’s not worth it to us, it could absolutely be worth it to you.

Rebie: This is just for fun. And if you three disagree, let’s talk about it. That’s the fun of it. Let’s discuss the pros and cons and see where we land. All right, diving right in. The first one is recreational vehicles: RVs, boats, jet skis. Worth it or waste?

Brian: I want to hear Erin’s first.

Rebie: Erin says worth it. Bo went on a boat this weekend, so he’s probably got a thumbs down. All right, Erin, you start.

Erin: I grew up on a lake. Every Friday, Saturday, Sunday, sometimes after work, we would be out on a boat, on a jet ski. As long as you use it, as long as it’s an experience, I think it’s okay. If you don’t use it, you don’t need it.

Bo: I want to speak for all my friends out there listening. I think it is incredibly worth it for you to buy a boat, a jet ski, a lake house, a mountain house, a beach house. I would love for all of my friends to make those decisions because then I get to benefit from said decisions. So is it worth it? Yes, recreational vehicles are 100% worth it if your friends are spending the money and you get to use it for free. That’s what I did this weekend.

Brian: That’s exactly why I did thumbs down. We did a show a few years ago called “Financial Mistakes You Hope Your Friends Make” and this is definitely one of them. But look, I kind of agree with both of you, because if you’re at a successful place, you’re going to find out that money is nothing more than a tool. If you can make the biggest and best memories with your loved ones and even prime the pump to keep them coming back around, there’s nothing wrong with using some of these things as long as they’re getting used and as long as they’re done at the right time in your financial journey. The thing I hate is that everything in this world is structured around you can afford it for a few hundred a month and you finance it. That is not what’s going to help you build memories. Build your financial foundation, have some success, and then go reward yourself. And you can always start with a modest version. A better boat doesn’t buy a better experience.

Erin: That’s great. And once you do that, become friends with me.

Rebie: Next one: extended warranties. Worth it or waste? Everybody said waste. Except for one.

Bo: There’s one extended warranty that I am for, which is AppleCare. I’m not going to fight on that one. AppleCare I’ve actually benefited from. I turn down every single other extended warranty, but on any Apple products, I put AppleCare on them.

Erin: What about if you buy on a credit card? The credit card would cover it anyway.

Brian: It covers it for like a year. But AppleCare has gotten to where it’s almost like, “Hey, since we’re making this thing, we’ll just let you keep protection forever.” They’ve even added coverage for lost items. I lost one of my watches somewhere in my house. I have no idea where it is. And the guy said, “You realize with the new AppleCare, if you lose it, we’ll even replace it.” A hundred bucks to replace it. That’s it.

Brian: I will say, setting AppleCare aside, we do quite a few studio tours and we had a gentleman who worked on the wholesale side but then for a season of his life was the finance guy at a car dealership. That’s the last room they throw you in when you’re buying a car, and that’s the shark you need to be aware of. Even if you’re paying cash for the car, this is where they’re going to sell you on maintenance packages and extended warranties. And you shouldn’t buy this stuff. Let me give you my personal experience. I bought the extended warranty for the rims on my wife’s European luxury SUV, which I’ve ranted about. I make fun of myself for it because I’m basically a 16-year-old. If they sold subwoofers I would’ve bought those too. But the guy says, “You realize each one of these rims is $4,000. For this price right here, we will protect your rims.” And I thought, okay, my wife is definitely going to curb the heck out of these rims, so let’s do it. Well, my wife eventually took the car in to replace the tires, which felt like it happened every 10,000 miles, and they told me, “Sir, you’ve bent the rims. We’re going to need to replace this rim.” And I said, “Good news. I bought the extended warranty.” You know what they do when you pull out the extended warranty? They say, “Wait a minute,” and instead of replacing the $3,500 rim, they sent out a guy with a trailer who bends the rim back into shape. It showed me the whole thing is a scam. Now I have a great guy for $125 a rim who can make any rim look brand new no matter how distorted it is. Curb rash, everything. He fixes Teslas, everything. I now have the guy. Don’t buy the extended warranties. It’s a complete scam. AppleCare being the one exception.

Bo: What about when you bought your new car last year, Erin? Did you do any extended warranties? I got a maintenance package with six or eight oil changes. See, these guys are sharks. They even sold it to Erin Talks Money.

Brian: Did that work out for you, Erin?

Erin: No, I don’t drive that much. Hence why I had a car for 18 years. I think it had 70,000 miles on it in 18 years. I finally got the new car and they said, “We can give you six oil changes if you just pay X amount.” And I said, “Okay, I’ll do that.” I haven’t even had one oil change yet. I bought the car last January.

Brian: Wait, they have an expiration date on them?

Erin: Yeah, they do. They’re expiring this June. I got a phone call saying, “We should probably get one oil change in.” So they really sell you six oil changes, but if you think about it, cars go at least 5,000 miles between changes, and a lot of them with synthetic oil can go 10,000. So at 5,000 miles, six oil changes means 30,000 miles you’d have to drive in one year. And I drove three thousand.

Brian: So what did you actually get out of it?

Erin: I took it in in November. They rotated my tires and gave me a car wash. Two grand well spent.

Brian: Look, I’ve made mistakes, you’ve made mistakes. That’s what I love about money. You don’t have to be perfect. But they did give me an extension.

Erin: They’re extending it till December, but I’ll call them back. I think they’ll move it.

Brian: Just keep pushing down the line. You just say please. Do you ever say the statement: “Do you know who you’re talking to?”

Erin: No. I did actually when I bought the car. I said, “I’m Erin Talks Money. I can’t buy these packages.” And now apparently the finance guy uses me as marketing. “Hey, if Erin Talks Money bought this package, maybe you should too.” Could you imagine?

Rebie: All right, let’s do a couple more. How about rent to own? Is it worth it or a waste? We’re talking furniture and TVs.

Bo: Come on. This is too easy.

Brian: There are two thumbs down. What are you doing, Erin?

Bo: I’m just pondering if there’s anything that makes sense to rent to own. What about a home?

Brian: I was thinking PlayStation 5.

Bo: I was thinking about a home. I guess you’re not technically renting it, but you kind of are, right? You’re in it for the first 30 years. A home is like layaway. You’re just doing layaway for 30 years.

Brian: I get what you’re saying, but that’s not rent to own. You’re talking like rent-to-own stores. Yeah. You can go to Costco and buy a TV for a few hundred bucks or you can pay for a TV six times over by renting. It just ends up being more expensive.

Erin: I would rather sit on the ground and save up for a couch.

Bo: Isn’t buy now pay later essentially rent to own? Isn’t that kind of the same idea?

Brian: Kind of. It’s kind of the new layaway. Layaway is a little different because you get the item at the end. With rent to own, they basically wink at you and say, “Hey, we’re not going to sell that one. We’ll let you pay a few bucks every week and you can come by once a week in the back.” That’s it.

Rebie: All right, let’s do two more. This one is checked luggage. Worth it or waste? Erin and Bo say worth it. Brian says waste.

Brian: Well, no. I think what you’re getting to is gate checking.

Rebie: No, no. Let’s start with regular checking and see where this conversation takes us.

Bo: Just point blank: you get to the airport, you check your luggage, you put that baggage on the conveyor belt, then you have your backpack and you just walk through TSA Pre and you don’t have to pull anything around. Travel is so enjoyable when you don’t have baggage.

Erin: Back in the day when Southwest had open seating, I checked my bag and I wasn’t worried about when I got on the plane. It was fine.

Brian: I’ll say it depends. If you’re going to Europe or on a long vacation for a week, obviously checking bags makes sense. But I come in to do a show every Tuesday at 10 a.m. live, so I don’t get to go on super long vacations very often. I pack like a ninja. We pack light, we’re quick on our feet. I want to carry my bags with me and put them up in the overhead. I treat my luggage well. Carryons are like a go bag for me. That’s why I did thumbs down.

Erin: I took a 55-minute flight to come here and I checked that bag. You only get one Ziploc baggie at 3 ounces or less. My skin care alone needs a suitcase. I need eye cream, lip creams, face masks. It all has to come.

Brian: Health is wealth. And Erin, you’re tight on a lot of things, but not necessarily on the skin care.

Erin: It all has to come. Big thumbs up on checked bags for me. And in true financial mutant fashion, I’m not just pro-checked bag, I’m super pro-gate-checked bag because then you get to check a bag and it’s free. Just throwing that out there.

Bo: Love it. Your travel is so much more enjoyable when you’re not carrying something. I agree.

Brian: I will say, whenever I travel in groups, they always do the thing: “Hey, nobody’s going to check bags.” And I go along with it. But I think gate-checked bags should be voluntary. There are times where they force gate check and it blows my whole ninja theory out of the water.

Bo: It always starts voluntary, but nobody volunteers. And then you’re voluntold.

Brian: It makes me sad. The time it happened to me was with Delta. And I’m a Georgia boy. I even worked for Delta for a summer on the ramps. I was almost a flight attendant for Delta. I love Delta growing up, but Delta failed me by making me gate check, even though they said the overheads were full. When I got to my seat, the overheads were completely empty. They lied.

Erin: Southwest betrayed me with their new checked bag fee. So now my only free option left is gate check.

Bo: I guess you could just pay for the checked bag too.

Brian: Twenty-five bucks. And it’s 25 bucks well spent.

Bo: No, I hear you on that. I really do. All right, that was great.

Audience Q&A: Lifestyle Creep in the Messy Middle (29:00)

Rebie: Let’s go ahead and move into some financial questions from the audience. Are you guys ready? We’ve got the team out in the wings. They’ve been sending me some questions. The first one is from Dual Nature 5. It says, “Hey Money Guy team and Erin. My wife, who’s 33, and I, 38, are firmly in the messy middle with one-year-old twins. How do you decide what’s actually worth it versus lifestyle creep in a season full of so many unknown variables?”

Bo: This is a great question. Erin, I think you should start because you would define yourself as being in the messy middle. For someone who’s self-proclaimed tight, how do you make the decision on when it’s okay to spend money on things and when it’s not?

Erin: So we do daycare because we both have to work. That gives us the ability to have a paycheck, so we’re going to splurge there. But I’ll take my son on a trip, take him out to dinner. We go to Cheesecake Factory every week. We have a mommy-son date and it’s very expensive. Once a week at Cheesecake. But we have a regular server that we see. It’s this whole experience. It’s so fun. But outside of that, we have a membership to a children’s museum, we do parks, we do affordable things. I’ll splurge on an experience. As far as toys and clothes, I live on a street with a lot of kids and we get a lot of hand-me-downs. Just ask your friends. Go to Facebook Marketplace. Buy Nothing groups. Kids can be as affordable or as expensive as you want them to be. I’m focusing on the twins aspect here because I think that’s where a lot of the money is going to go.

Bo: Brian, what say you?

Brian: I think the answer is also in the question. “What’s actually worth it” is going to depend on every unique person. Just like earlier when we were talking to Erin about her skin care, which I know is not cheap, but it’s definitely worth it to her. She gets a lot of value out of that. Bo, you love coffee. If you went strictly by the latte effect, you might not get to do what you love as much. So I would say first of all, prioritize the Financial Order of Operations as your backbone so you’re not leaving anything on the table. Do the basics: emergency reserves, employer match, funding the Roth IRA. But then it’s okay to lean into things that you get value out of, whether it’s experiences, skin care, or coffee. Just make sure you’re not leaving the basics behind so that you can live your best life.

Erin: What’s the saying? You can’t have everything, but you can have some things.

Bo: Just hit it with some confidence. Well, there’s some kind of slogan there. It’s really interesting. One of the things I’ve noticed is that parenting is one of the most peer-pressured environments since high school. Especially with one-year-olds, you start seeing what other parents are doing. This family went to Disney, this family got the SUV. And you find yourself making all these decisions based on what other people are doing. I think at 33 and 38, if you can slow down and ask yourselves what matters to you, what do you value, what experiences do you actually care about, you’re going to save yourself a lot of heartache from trying to keep up, not with the Joneses necessarily, but with the other parents. I’ve seen friends get themselves in trouble because so-and-so is doing swim team, piano, softball, and soccer. If that’s what your kid wants to be doing and that’s what your family is doing, great. But be careful just doing those things because you see everyone else around you doing them. That’s where parents get themselves in a lot of trouble. Your kid just needs you to show up. Just be there for your kids. That’s it.

Audience Q&A: Mortgage at 30% of Income, Moving to Step Five (32:55)

Rebie: All right, next question. I did not make up this username. It’s from Bo Hansen Spotter. It says, “Hi Money Guy team. My wife and I, both 28, are finished with step four. Our mortgage payment is 30% of our household income. Could we move on to step five if that is our only debt? We should be getting raises within the next one to two years as well.” So it looks like they are a little technically outside of your 25/3/5 house buying rules. How should they think about moving on to step five given the debt they have?

Bo: I think what they’re assuming here is that because they’ve run afoul of 25/3/5, that must mean they’re stuck in step three, that their mortgage must count as high-interest debt and maybe they should start paying it down aggressively instead. Our rule is 3% down on a house, you want to be in the house for longer than five years, and you can’t have your housing cost exceed 25% of your monthly gross income. But I don’t agree that running afoul of that means you’re back in step three. In the environment we live in right now, especially for young people, it’s not uncommon to have a stretch mortgage early on when income is still ramping up. Rather than deploying all your dollars to pay down the principal and then recast the mortgage, I’d rather see you put those dollars to work in the Roth IRA and the HSA and just understand you’re a little further down the risk spectrum. Do everything you can to increase your income to get that percentage down.

Erin: Beef up the emergency fund a little bit. Then work on increasing your income.

Brian: At 28, these dollars are so powerful. And you gave a really big clue: this is your only debt. When we wrote the 25% rule for housing, a lot of times we have to write rules for the general population. And what is the general population dealing with? A lot of people have student loan debt. A lot of people have car debt, which by our own rules can be 8% or more. If the mortgage is your only debt, your 30% seems much more reasonable knowing you don’t have student loans or car debt. And you also said we’re going to get pay raises over the next one to two years. In professional jobs where income is going up in large chunks, especially in those early years, you’re going to be in a good situation. I wouldn’t carry any regret about that. It sounds like you’re making a lot of disciplined decisions. Rules are written to give guidance, but your specific situation is always more nuanced. That’s why we give these rules so you can accelerate your journey, but it’s also why financial planners have a place. We try to give you your best life, not just the best life for the general population. And 28 is a young homeowner. That’s something to be proud of.

Rebie: Good thoughts there. Thank you, Bo Hansen Spotter, for joining us tonight.

Brian: That means he’s strong, too, by the way. If you’re spotting Bo’s stuff, you’ve got to be able to lift some weight.

Bo: That’s actually a backhanded insult. If the spotter has to lift the weight, that means I’d be failing. If I’m under a bench press, there’s somebody above me.

Brian: The spotter helps you get it off the bar! I’ve been in the gym enough to know that.

Rebie: I took it as you’re lifting such heavy weights that the spotter better be up to snuff. They better be able to catch it if they need to.

Bo: You want to hear a hilarious story? The last time I bench pressed heavy weight without a spotter was in college at the University of Georgia. Our weight room was called Ramsey. I went down for that rep and I couldn’t get it back up and I didn’t have a spotter. There was a young lady working the desk and I had to call her over to help me get that bar off my chest. I will never bench press without someone around again.

Erin: I’ve been trapped under the bar too. The trick is you don’t put clamps on. You dump one side, it slams down, then you dump the other side.

Brian: I’ll take scenarios I’ll never be in. These are situations I’ll never have to worry about because if I’m under a bench press, there’s somebody above me.

Audience Q&A: Withdrawal Planning at 30 (38:14)

Rebie: All right, that was a good anecdote. Next financial question is from Seth McFu, another good username. He says, “Hi Erin and Money Guy team. Is it worth creating a withdrawal plan at retirement? I’m in my young 30s and I want to optimize three buckets to minimize taxes, but it seems foolish given all the changes that can happen. What do you think?”

Brian: Oh, can we tell who Seth is excited about? Seth is excited Erin’s here.

Erin: You guys got the handle, though. That’s kind of permanent. I love that. I love the idea of going into retirement with Roth, traditional, and brokerage. I like having different buckets to pull from. At 30, it’s hard to plan what your life is going to look like at 60. So fund both. Fund them all.

Bo: Too many people get so caught up. We always say begin with the end in mind. That’s great. You want to have an idea of the end you’re ultimately working toward. But at 30 years old, you’re not going to know on a granular level exactly when you’re going to retire, what sources you’re going to have, where you’re going to pull from, where you’re going to live, or what your lifestyle is going to be. If you get so focused on needing exactly 72% of your wealth in a Roth IRA and another 18% somewhere else, you’re going to get yourself wound up. That’s why we came up with the Financial Order of Operations, to take the guesswork out of it. Early on, we want you focused on what you’re putting in. There will come a time where it makes sense to shift and think about how and where you’re going to pull out from. But let the FOO be your guide early on.

Brian: Seth, if you’re not at step seven, take the pressure off yourself and just do what we’re telling you to do in the Financial Order of Operations. Right now, the FOO is keeping your life out of the ditch in the beginning stages by making sure you have emergency reserves. It’s also making sure you’re maximizing the amplifiers, like the free money from your employer. And then it’s helping you do all the tax-advantaged savings. Step seven is where you’re talking about, and most people don’t get there until their late 30s or early 40s. That’s when you say, “How am I going to use this money in retirement?” And yes, the system will likely change, but in a lot of ways it gets better. What has surprised me in my career is that when Roth accounts came on the scene in 1998, you could only put $2,000 a year in. Now we have Roth 401ks. They’ve eliminated required minimum distributions from Roth accounts. They’ve pushed RMD ages back. It’s amazing the way things have actually improved. Plan with the system you have now. The three buckets are probably going to still be around in some form, and step seven is where you build out your begin-with-the-end-in-mind withdrawal plan. You’ll be okay.

Erin: And as your income changes, where you want to put your dollars changes too. What you’re making at 30 is going to look very different at 40, 50, and 60. And all the life stuff, the kids, the housing, all of that changes the shape of what things look like in the long term. A lot of this happens organically. You don’t have to overthink it. Just invest. You don’t have to be perfect with money if you’re doing a lot of the big things early and often. You get a lot of flexibility. You’re rewarded for that early discipline.

Rebie: Next one is from Beanie Weeny 1059. I should have just made it up.

Bo: When was the last time you had beanie weenies? When I was a kid, that was a staple. Were you a beanie weenie person, Erin?

Erin: Oh yeah. But I have mild OCD, so my mom would cut up the hot dog to put in the beans, but she would always eat one of the ends of the hot dog. So whenever I got my bowl, I’d look and make sure my hot dog had two ends.

Rebie: Are you serious? That’s so specific.

Brian: We had a big neighborhood event at my house yesterday and my next-door neighbor ordered the food. He’s carnivore. So we had barbecue, and one of the sides was baked beans. I forget how good they are. It had brisket, all kinds of stuff in it. It was glorious. But I told myself while I was eating, “There is no way these beans are healthy. There’s no way something that tastes this good is not unhealthy.” There are a lot of things my parents fed me that you look back on and realize weren’t healthy. I mean, the Kool-Aid. Who would have thought? My parents were like, “Yeah, load it up, son. Pour the sugar in there.” My kids have never had Kool-Aid or beanie weenies. We should do that once, right? They should experience it at least.

Erin: Once leads to they realize they like it.

Bo: My wife would murder me if she found out I gave my kids Kool-Aid and beanie weenies. But we haven’t even gotten to the question. Let’s get to the question.

Audience Q&A: FOO Step 8 and the Abundance Mindset (43:57)

Rebie: The question says, “I’m asking for some help on the FOO, Financial Order of Operations. The path to step eight is very well defined. And when you get to step eight, it can feel like you are making suboptimal decisions. How do you think about step eight?”

Bo: Brian, if I’m not mistaken, you wrote the book on the Financial Order of Operations. We get asked all the time about the transition from step seven to step eight. We often talk about the planning transition, but there’s also a mental transition. What did you write about in the book as that changes?

Brian: I had to create essentially a mullet title for step eight because of this exact problem. The original title is “Prepaid Future Expenses,” and I said it in my nerdy voice on purpose. I realized that financial mutants who are so good at saving money are still going to feel constrained by a professional-sounding title like that. I wanted it to feel like good-time Uncle Bobby was in town saying, “You’ve been doing good things. You should be rewarded.” So now we also call it Abundance Goals. This is where you free yourself to actually enjoy this money. Because guess what? Your kids will love spending all your money down the road, and your grandkids for sure. You might as well get very comfortable now that you’ve done the hard work of steps one through seven. Reward yourself. Spend time on what you actually enjoy doing. This is why I had to give up my tight-wad card in my early 40s, because I realized that now that I was beyond step eight, I needed to think about how I want to use this money. You could also be more charitable. My charity has gone way up. But we have the luxury cars, we do the nicer vacations, and I look at it as a dividend for all that hard discipline spent in the early years.

Erin: I don’t think you have to be optimal when you’ve checked all the boxes. At that point, it’s more about life optimization rather than dollar optimization at that point.

Bo: So many people get to financial independence and they’ve waited so long to actually do the thing they dreamed about that they can’t enjoy it the way they imagined. People say they want to travel the world and then wait until they’re 70 years old. Now they can’t hike the mountain or swim in the waterfall or do whatever the thing is. If you can find ways to do those things while you’re still on the journey, while you’re on the path, you’re going to unlock this realization that money is not only a tool for your future self. It can be a tool for your current self. And that’s okay.

Brian: I want you to enjoy your 20s, your 30s, your 40s, your 50s, and beyond. Make sure you’re doing something in every decade that you can look back on with excitement, not with regret.

Rebie: Money is a tool. It’s a tool that helps you focus on what actually matters. Step eight is where you squarely get to do that, which is awesome. All right, next.

Brian: Thank you, Beanie Weenie.

Rebie: I really have the power. I could just change their usernames. No one would know. They would know. The person who asked the question would know. But then I wouldn’t get your reactions. There’s something in me that wants to see what you’re going to say. All right, this next one is a pretty normal username. Just KM with some initials.

Audience Q&A: SpaceX IPO and Concentrated Stock (47:34)

Rebie: It says, “Hey team, I am in my 30s, married with two kids. I am an ex-SpaceX employee. And the new IPO will mean that SpaceX stock will have around 75% of my net worth. Do I diversify or do I take a gamble?”

Bo: I’m assuming because you’re a former employee, you still have some equity.

Brian: Let me throw out something interesting. The current way to get SpaceX is by being an employee. More than likely, now that you’re no longer an employee, when this IPO pops, you’re going to be without the lockout restrictions that current employees face. SpaceX is only offering a very small percentage of the ownership pool for this IPO, so it’s going to be a situation where everybody wants in and very few are going to get access. That’s the perfect recipe for a huge runup. The current employees are going to have a lockout period. They’re not going to be able to sell during this. A lot of the insiders are going to be locked up. And if you don’t know, traditionally the way IPO behavior works is the stock goes IPO, you get all the huge distortions because everybody piles in at the same time, but then over time it trickles down, and as soon as the gates open for employees and insiders to sell, watch out below, because they all just dump it. Then it usually takes a few months to recover and then you get into the actual trading range. KM might be in the perfect position to where when the stock pops, you’re going to be without restriction. Know what your price is. Know what you want to do. Decide if any portion of this is going to be your permanent portfolio because you support SpaceX and want to own a piece of it so you don’t have regret later. But also figure out how much of this you should sell and at what price. And be prepared now, not when it happens.

Bo: I want to zoom out and take the company name out of it for a second. If someone told me 75% of their net worth was tied up in a single company’s stock, my concern would kick in no matter what the stock was. SpaceX may do incredibly well, but just the fact that you were an employee and got in early means you’ve probably already got some built-in equity. The question is whether you want to strategically, systematically, and unemotionally pull some chips off the table. Maybe leave some there for growth potential, but balance that with the recognition that you’ve already won the lottery once. If you win the lottery, do you immediately take all the proceeds and go buy more lottery tickets? Or do you begin to think about wealth and money a little bit differently? I’d encourage KM to have a plan in place before the IPO happens so that the emotion of the moment doesn’t drive the decision. Once it goes IPO, you’re going to be rushed with all these emotions, up and down, excited. Have a plan in place to remove the emotion from the equation. Prepare now, not when it happens.

Erin: I always use the pillow test. If something is going to keep you up at night, it’s too risky. 75% in one stock would keep me up at night. It’s not an all-or-nothing thing. Have a written plan. Whether you diversify slowly or quickly is up to you. But would you sell it all?

Bo: No. I don’t own any SpaceX currently. If it were me, I would not sell it all. I would taper. Would you sell it all?

Brian: No, I’d probably keep 5% or 10% of my net worth in it as a permanent portfolio position. But I agree with you on the taper. And I think this is going to be a very unique moment in time for KM. You need to understand how IPOs work to know what you’re working with, because a lot of people are going to be restricted when this happens. That creates a very unique window for KM, and you just have to be prepared to know what your unique position and opportunity is in that moment.

Rebie: That was great. KM, thank you for the question. Good luck as you figure out what that 75% is going to look like in the future.

Brian: It is interesting that just in the last week they’ve announced who they’re doing the IPO with, and they did include Schwab and Fidelity on the list. If you’re with Schwab or Fidelity and you think you’re going to try to get in on this, I’ve heard you may need to go sign up for IPO alerts. I haven’t verified this, but it’s a PSA worth sharing for anybody who wants to dabble in this.

Bo: It’s interesting that a former employee still has equity. We do have a few clients that have SpaceX, and the way they got it is because there are pools out there where investment companies are buying shares from former employees and then reselling and bundling them up in a secondary market. So there have been ways to get access to this. It’s so interesting to see how this is all going to play out.

Brian: Time will tell. The other way in was Baron, wasn’t it? There are a couple of mutual funds that are very big holders of SpaceX stock right now. This is the nerdy stuff. I can’t help myself. I go down these rabbit holes.

Audience Q&A: Selling Investments for a Wedding (54:19)

Rebie: All right, next question. He’s 26 years old, getting married in a year, trying to save or cash flow a wedding. If he needs to dip into assets to help fund the wedding, should he one, sell investments in an after-tax account, or two, dip into his emergency fund?

Brian: Erin, I want to put you on the hot seat here. What do you think?

Erin: My wedding was $5,000. We had 14 people. I’m not a wedding girl. Again, frugal noodle. It’s one day. Now, if you want that party, that’s fine. But I personally would never sell investments for a wedding. For a party.

Brian: I want to give a compliment here. I was in Bo’s wedding. Bo, how many people did y’all have?

Bo: It was like 80 or 90 or something like that.

Brian: Y’all did a great job. Do you mind disclosing how much you spent?

Bo: I want to say it was less than $12,000. Something around that ballpark.

Brian: The reason I shared that about Bo is because I remember thinking, as an active participant, that it ties into everything else we talk about. You can create incredible memories and not go broke. The system is trying to sell you on this consumption story, but truthfully, what both of you described wouldn’t even cover the flower budget for a lot of people. And look, I’ve been married 28 years. My wife wanted the wedding, and I think we had around 100 to 120 people. But I don’t even really remember our wedding because it was so overwhelming. You’re running around trying to make sure everybody feels taken care of. It’s really a party for everyone else. And it is one day. That’s not what the marriage is built on. Yes, you want to create great memories and experiences, but it’s the rest of your life that is actually what the marriage is. So I wouldn’t go run up a bunch of debt. Don’t fall into that consumption trap.

Bo: And you said don’t run up a bunch of debt. I’d even take it a step further, because the question was emergency fund or sell investments. The very first thing I would do at 26 years old is go to moneyguy.com/resources and check out the wealth multiplier. However much money you’re thinking about liquidating, $5,000 or $10,000, go put that in for a 26-year-old and see exactly what the real cost of doing that is. Do you remember the centerpieces at my wedding? The food we ate? The only thing I remember is that you had Blue Moon on tap. That’s it.

Brian: That is so horrible.

Bo: And I remember the uncomfortable shoes you made me wear. That was the only other thing. The point I’m making is we get so spun up on details that ultimately nobody is going to remember. Realistically, even people who are in your life 20 years later aren’t going to remember the centerpieces. They’re going to remember the experience and the party and the fun. If you’re going to spend $10,000 or whatever the number is, and it’s going to cost you hundreds of thousands of dollars down the line, would that trade-off actually have been worth it? Have a very sincere conversation with your significant other. My wife and I did this. I said, “Sweetie, I love you. We’re not going to go into debt for this. We’re not going to start our marriage on the wrong side of the ledger. We just have to work inside these confines.” And she did great. Once you’ve arrived at that conclusion, then you get to the actual question: emergency fund or investments? The answer is it depends. I want to know how much I’m going to have to pull out, how robust my emergency fund is, and how quickly I could build it back up. If I’m going from six months fully funded down to four and a half months and I can rebuild that up in three or four months, I may go emergency fund. If it’s going to leave me with an anemic emergency fund for a long period of time, then I’d likely sell investments instead. That’s how I would measure those two.

Rebie: Yeah, I think you’re all agreeing it’s a big bummer if you have to do that.

Erin: And this person is in good financial shape. They’re in their 20s, they have a brokerage account, they have an emergency fund. I’m impressed. Hopefully that gives you some food for thought and you have some levers you can pull.

Bonus Q&A: Do You Own Individual Stocks? (59:54)

Brian: Let’s do one more. Is that bad? Come on.

Rebie: Honestly, yes, because we’ve got Erin and we’ve got stuff to do with Erin after this.

Bo: I know. I hate that it’s going to be over. You mentioned we have stuff to do with Erin. If people want to know when that content comes out, what’s one thing they should do?

Erin: Subscribe to both of our channels: Erin Talks Money and the Money Guy Show.

Bo: Love that. All right, one more question. This one is from Bo Spotter’s Weightlifter. Erin, do you own any individual stocks in your portfolio?

Erin: I have a few. When I first started investing, that’s actually how I started. I thought I was going to be the next Warren Buffett. That didn’t pan out. I was eight at the time, so forgive me. But I struck gold a couple of times. I got in on Facebook right when they launched and held on to that. I’ve bought others over the years, but I would say it’s less than 5% of my portfolio. Nowadays I’m just index and chill.

Bo: Love that. Awesome.

Closing and Subscribe to Both Channels (1:01:14)

Rebie: Maybe next week. Tuesday, 10 a.m. Central. We’re back here every Tuesday answering your questions. It has been really awesome to have you, Erin. Thank you for jumping in. Remember to subscribe to both channels, Erin Talks Money and the Money Guy Show. And check out moneyguy.com/resources for all the free stuff we talked about and more.

Brian: And you heard it. We’re going to have more content with Erin. I woke up this morning and told my wife, “You wouldn’t believe how many shows we’re about to record today.” So there’s more to come. As you can tell, we’re having a blast. That’s why we didn’t want it to end. We don’t ever want it to end with you guys either. I would encourage you to please go to the website and sign up for our weekly newsletter. It gives you the greatest hits from the past week. We don’t sell the newsletter list. We’re truly just trying to love on you and know who you are, because in this rapidly changing world, staying connected is how we keep building this great big beautiful tomorrow. Erin, you’ve been awesome. Thank you for coming on.

Erin: Thanks for having me. This is our second time doing this and we always have a great time. I’m sure this won’t be the last time.

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