You Won’t Be Happy Until You Have $X…

Can Money Buy Happiness? (0:07)

Brian: You’re not going to be happy until you have X.

Bo: Brian, I am so excited to talk about this because I think there is this idea that all of us, or a lot of folks, fall into this camp where, man, if I just had a little bit more, if I just made a little bit more, if there’s just a little bit more in my bank account, surely that would ultimately lead me to be more happy. But Brian, I don’t think that’s true.

Brian: Look, a lot of people turn money into an idol or they turn money into something that it just is not. But I also want to be honest because we’ve been poor.

Bo: Sure.

Brian: And now we kind of live in this abundance. And I will tell you, money can be an amplifier. So I don’t want to be so tone deaf that you think I’m saying money doesn’t actually buy any happiness. No, it can buy you a boat, as somebody might put it in a song lyric, or it can get you good tickets to a concert. There’s a reason when we watch the Bachelor, everybody falls in love with everybody, because they have set up the right scenario for things. But getting to the point of what money can and cannot do, I think it is important for us to dispel some of the rumors.

Bo: Yeah, it’s interesting. Now, you guys are all financial mutants, so perhaps you’re already in that camp of money can’t buy happiness. But would you believe that according to a study by Empower, 51% of Americans, so one out of two of your peers, actually say that money can buy happiness? That it is something that can be acquired by monetary means. So if that’s the question, then the next question is, well, how much will it take? How much money would be required in order for me to be happy?

Brian: And here’s the most human nature answer you can give. The answer is more. No matter where you are, more. And that’s what you see. How many times have you set a goal for yourself, you reach that goal, and you look around and go, I think I’ll be a little happier when I get more. And that’s what even the data shows. 74% of people say having more money would solve most of their problems. Not what they currently have. More. 74%. And then 71% said even as little as $5,000 would boost their happiness for at least six months. And I’m here to tell you, there was a moment in my life where I would think about, you know, listening to the radio on the drive in, they’d have giveaways where they’d say, “We’re going to pay your biggest bill for the month if you’re caller 97,” whatever the number was on 99.7 or 96 Rock, all the Atlanta stations that were big back then. And the thing is, it really would change your life because you’re thinking about covering the basics.

Bo: We’re obviously talking about having more and more wealth and more saved up, but I think a lot of people when they’re talking about having more, they mean income. And what’s really interesting right now is that there is a large disconnect between what is reality when it comes to income and what is perceived when it comes to income. Would you believe that the average American believes they would need to earn $284,000 a year in annual income to be happy? That is so far off from the median income in America. There is a perception disconnect for sure.

Brian: I mean, it’s practically triple the median. That would put you in the top 3% of your peers. So that’s a disconnect. And that’s what we wanted to figure out. There’s got to be some research on this. What can actually make people happier?

What Actually Makes You Happy? (4:23)

Bo: So we said, okay, if it’s not money that will do it, and we believe that because we have done this ourselves and we’ve also worked with clients all over the country in various stages of life, and we’ve seen that exactly what I said is true. Money is not the mechanism that delivers happiness. So if money’s not the thing, if wealth is not the thing that delivers happiness, what actually will make you happy? There was a great article inspired by Jonathan Clements. One of the things the article walked through is that when it comes to true happiness, the experiences you have and the environment you’re able to place yourself in will likely lead you to happiness much more than how many zeros are in your bank account.

Brian: By the way, I want to give a little love to Jonathan Clements. He passed away last year. If you follow his content, you know I have a special place for him because it was one of Jonathan’s Wall Street Journal articles that I showed to Clark Howard back in 2005 that kind of inspired the Money Guy Show. So Jonathan always wrote books, wrote articles for the Wall Street Journal, did great research on what it takes to create happiness. I love the fact that he focused on experiences over possessions. But then the next one, because this is what I found in my own journey, I think a lot of us say, “If I have a million dollars,” or as Chris Janson said, “If I could buy a boat.” What I think people are really saying a lot of times is that what’s really important is having the people around you. It’s your family. It’s your friends. That’s why experiences coupled with having friends and family that bring you happiness and fulfillment is really where we’re getting into what money can amplify for you in your life.

Bo: So obviously having experiences rather than buying things, spending time with people that you care about and building relationships. But it’s also about what you do with your time. Two other areas that would actually lead to happiness. One was giving back. Figuring out how you serve your community, serve those around you, how you pour back into those that have poured into you. And then also engaging in passionate work. It’s not about just checking in and checking out and finding the vocation that pays you the maximum dollar. It’s about actually feeling passionate about the things that you’re doing. Whether it be through your vocation or in your extracurricular time, if you can find the things that actually bring you fulfillment and devote your time, energy, efforts, and talents towards those things, there’s a really high likelihood you’re going to be happier because of that.

Brian: And then this next point is more prescriptive, but I think it’s getting to the point of just understanding the value of your time. We do a podcast and a YouTube channel, so we need you to have long commutes because you can actually absorb and enjoy our content. But there is a lot of happiness research that shows sitting in the car 35 minutes to an hour each way can actually take away from your overall happiness. Be aware of that. And then the kind of closing point, and I always thought this was great, is spiritual fulfillment. Can you build a life outside of yourself? You saw tendencies of this with the giving back point, because a lot of people turn money into an idol and think it will drive their happiness. But a lot of the research shows that it’s better to be generous. It’s better to give than to receive. Spiritual fulfillment, trying to get outside of yourself so that when you wake up in the morning, you feel like you’re making the world a better place, and you’re also connected to something bigger than you. All of this will lead to a more fulfilled and happy state than if you’re just focused on what money can do in terms of trying to get to a million dollars or $5 million without knowing the why of what that money can do.

Bo: So all of these are the things that can actually make you happier. But I don’t want to do it a disservice. Obviously, if you have wealth and you’re able to save and build, having resources does allow you to do more of these things. It allows you to have more experiences. It allows you to spend more time with friends and family. It allows you to give back more. But it is a tool moving towards these common goals. It is not the goal in and of itself. And far too many people make that mistake. They say, “Okay, if I just get to a million, then if I just get to 10 million,” and what we would then ask is, well, so what? You have a million dollars in your bank account. What would you do tomorrow if money was not an option? Are there ways you could begin doing that now? Are there ways you can start moving towards that goal even today so that you’re not having to wait for some future happiness or some future fulfillment?

Brian: And I think to put a bow on this, a lot of you are wondering, “Where’s the $75,000?” Because anytime anybody does financial content on happiness, you hear that $75,000 stat from the Princeton research. We’ve already dispelled that. We’ve done other shows on what money can do. That is about understanding covering the basics. That’s why when we built the Financial Order of Operations, the first few steps are to help you keep your life out of the ditch from making desperate decisions. That $75,000 from the Princeton research, adjusted for inflation, would be around $107,000 today. That’s the amount of money that lets you at least not be stressed out about how you’re going to pay for food for your family or how you’re going to pay for rent. But when we cover topics about fulfillment, because that’s really what happiness is about, I think people are really talking about fulfillment. It’s how do you become the better version of yourself and how do you own your time? That’s why we love creating this content. We not only give you the analytics and the math, but we also try to give you the why so you can make sure as you’re going through your 20s, you maximize the moment while putting a little bit away for the future. While you get into your 30s and your messy middle, you don’t miss out on everything you should have. I don’t want you to have the goal of deferred, deferred, deferred, and I’ll live my best life in my 50s and 60s. No, I want you to enjoy your 20s, your 30s, your 40s. You only have one life on this planet. We want to make sure you give the right balance of money, happiness, and fulfillment so you can be a financial mutant that lives your best journey through this walk.

Three Steps to Get Started and Military Ebook Announcement (11:06)

Bo: All right, I’ve got three steps for you. Maybe you’re new here, maybe this is the first time you’re hearing some of this. One of the first things you can do, Brian, will you hold the thing up for me? You’ve already referenced it. If you’re trying to figure out how to use money as a tool to move towards these goals, we’ve designed a roadmap for it. It’s called the Financial Order of Operations. Go to moneyguy.com/resources and download your free copy right now. That’s step number one. Step number two, subscribe to this channel. If you are not subscribed, you will not know when we are putting out brand new content, and we have some bangers coming out over the next couple of months. Step number three, we love that we can answer your questions. It’s why we show up here every single Tuesday morning at 10 a.m. Central. If you want to get our take on something, you want us to weigh in on your personal situation and answer your question, make sure you get it in the chat right now. We have the team out in the wings collecting your questions because our goal here at the Money Guy is to load you up to help you go beyond common sense. With that, creative director Rebie, I’m going to throw it over to you.

Rebie: I’m excited to dive into your questions today, but real quick, I have something new and free that I wanted to make sure everybody knew about.

Bo: I like new and I like free.

Rebie: So do I. This one is one we’ve been asked about a lot. It’s specifically for our military service members. We have a brand new, very robust ebook out on our website right now. Go to moneyguy.com/resources. The “Maximizing Your Financial Benefits for Military Service” ebook will be right there at the top. All you have to do is put in your email address. It’s completely free. We hope this is a place where you can get a lot of your questions answered about the specific nature of your career path, your different retirement options, and how buying a house becomes more complex. We know that while your job can be very rewarding, it’s very high pressure, and it comes with some unique opportunities and challenges. So we wanted to provide a resource for that. Go check it out and share it with any friends that may benefit. moneyguy.com/resources. We get that question more than you might think. It is very vocal in the comments and I’m really excited to get that out there for everyone.

Bo: I’ve never served, but I’m so thankful for all the folks who have – why are you laughing?

Brian: And by the way, somebody asked me once if Bo and I hang out, and I said I don’t have the right pedigree, because Bo hangs out with a lot of military guys. I didn’t mean to go in that direction.

Bo: A lot of these military benefits don’t apply to me, but one of the things I did as soon as this dropped was immediately message my buddies and say, “Hey guys, I don’t know if this is valuable for you, but go download it. It’s totally free.” I’m sure a lot of you have people in your life the same way. Hey, if you know someone who could benefit, there are no strings attached. We just want to serve and love on those folks that are serving and protecting us. Feel free to use it inside your circles. That’s what I’ve been doing.

Brian: Yeah, Franklin has dividends. I moved here for my daughter to go to that unique school she goes to, but there are so many creatives that live here, and also so many retired military folks. It’s pretty amazing this area. One of the things I like is that we just did a collab with Erin on ABLE accounts, and we have an ebook out there for families with special needs children. And then I love the fact that we had so many questions from people in the military that these were books that were originally written to be sold, but after we got to creating the content, we thought, you know what, this is so valuable and it’s such a small slice of the population, let’s not sell it. Let’s just give it away. Let the abundance cycle kind of pay for itself. I’d encourage you to please go take advantage of the research that we’ve done and how we’ve tried to compile this, and hopefully it will help accelerate your journey to building your own abundance.

Rebie: That’s great. And with that, let’s dive into some questions.

Q&A: Home Addition with No Mortgage (15:43)

Rebie: We will start with Beth’s question. It says, “We want to do an addition on our home. We have no mortgage.” It says, “Before we met you,” so I’m guessing maybe they paid it off. “We are prodigious accumulators in retirement accounts by Money Guy standards. What is the best way to access money to do this?”

Brian: Wow. I can already see an issue. This is one of the troubles we share when you’re a debt crusader. A lot of people look at step seven and go, “What in the world is step seven doing for you?” And what I love about step seven, the hyper accumulation, is this is the first time you actually look at your money, because a lot of the savings in steps one through four is to keep your life out of the financial ditch. Steps five and six is really where you’re starting to build your army of dollar bills. But it’s step seven that says, how am I going to use this money? What are my goals? So you can have a time and a place for every dollar. Since you’ve been a debt crusader who then transitioned to maximizing retirement savings, you’re finding out that on paper you’re worth a gazillion dollars, but you just don’t have access to liquidity. That is a problem. I’ve talked about financial mutants I’ve worked with on the client side who were worth seven figures in retirement assets but couldn’t pay cash for the vehicle they wanted. When you have money but no access to liquidity, we have to build a bridge so you can still live your life without making bad financial decisions.

Bo: Beth, I have a few questions I’d want to ask if we were sitting across from each other. How old are you? I’m assuming since you said you paid off the mortgage, you might be younger, but you may be retirement age or near retirement. Also, how much is this renovation going to be? Is this a $30,000 addition or a $130,000 addition? Because the size and scope will affect how you ought to pay for it. And then I want to know what your current income situation is. What’s your household income? What are your sources of income? Because then you can figure out the appropriate ways to pay for it. Obviously, if you have a paid-for home with a lot of equity, you could potentially borrow money through a home equity line or something like that for a short term. Depending on your portfolio, you could potentially do some sort of securities-backed loan. Or depending on the size of the renovation and your income, this might be something you could just save for. If you’re already a prodigious accumulator of wealth and already well on your way to financial independence, maybe you can back down your savings rate and save for the next three, four, or five years and just pay for it in cash. Or if you are of retirement age, you could do a distribution. You have a few different options: pay for it yourself, borrow money, or distribute money. But you have to know more of the variables to figure out which one makes the most sense in your unique and specific personal situation.

Brian: Let me give you some mindset things so you actually feel like you have some actionable steps here, Beth. I don’t know your age, but if this is a big enough improvement that you can’t pay for it in the first 12 months, you’re probably going to need to look at a home equity line or something like that. And then I think you ought to go ahead and do the exercise of figuring out if you’re ahead of the curve, behind the curve, or right where you’re supposed to be. I bet you’re ahead of the curve, meaning on your long-term savings goals, since you have a paid-for house and you said you’re a prodigious accumulator of wealth. If you’re ahead of the curve, you can dial back what you’re saving and start devoting more of that money toward the renovation. But one thing Bo said is I always worry about, and I’ll put you on the spot, Bo, like you wanted to put a swimming pool in the backyard.

Bo: And we looked at it. And you could. I’m a great swimmer. This is for family memories purposes, for sure. Anybody putting in a swimming pool, it’s not the most efficient use of money, but sometimes you get beyond money and it’s more about what it can do for you in terms of experiences and family.

Brian: And maybe this improvement for Beth is the exact same way. What I don’t want you to do is wait three to five years just so you can pay cash for it. If you miss out on making those memories because your kids are at the age where if you waited five years you’d look back and say, “What did we leave behind by doing this?” And you’ve already shown a propensity of responsibility and discipline. I see nothing wrong with it. Yes, it’s going to stink that you’re probably going to be paying an interest rate of around 7%. But if you can show me a process where you can pay this thing off very quickly and you have a plan, and you can lay the expense right next to the moment in time you have to make these memories, I think it’s okay to do. I work through those metrics of math and go, “This is okay. I’m going to be able to pay this off in this timeframe. Yes, it stinks that I’m going to pay a little bit of interest, but money is nothing more than a tool.” And I just don’t want you to look back when you get to be in your 50s and 60s. Most of us financial mutants are not leaving this planet broke. What you’re worried about is leaving a deficit in the memory-making you could have had. But there’s a balance there. I don’t want you to hear me say that and think this is YOLO. I’m just telling you there’s a delicate balance to live your best life, make the memories you can, and also use money as a tool to build for the future while maximizing the moment you’re living in.

Bo: And look, I don’t mind sharing. I did the whole exercise when we looked at doing a renovation, the pool and everything. I went to moneyguy.com/resources and put the sum of money into the wealth multiplier and was like, whoa. It was a significant investment. But we were at the right place in the Financial Order of Operations, had the right mechanism to be able to pay off the home equity line quickly, and worked through the strategy there. And even on the other side, even knowing what this cost in terms of long-term dollars, I have zero regret, zero buyer’s remorse on it. Because exactly what you said: we are building memories every single day with our kids. It’s changed the way we use our home. So when you’re thinking about this renovation, also go through the exercise of why are we making this decision? Why are we adding this? Is it something that we’re actually going to use that actually makes sense and justifies the cost? Or is it just a nice to have? The gravity of that decision will affect how much you’re willing to sacrifice for it, because every financial decision has opportunity cost. If I do this thing, it means I’m going to forego that thing over there. Make sure it’s a favorable trade-off with whatever sort of addition or renovation you’re considering.

Brian: A lot of times we have answers like this with a lot of variables where we say it depends. This is why a good financial adviser, if you’re at that level of success, doesn’t just say it depends to clients. What we do is lay out option A, option B, option C, and show you what each one does. It kind of reminds me of a home improvement show when they’re saying, “Hey, do you want to put shiplap on this wall? Do you want to put pavers on this back patio?” We actually get to walk you through the decision matrix of what those opportunity costs are. So you get to live your best life.

Rebie: Well, Beth, thank you for that question.

Brian: I didn’t mean to go seven minutes on it.

Rebie: That’s all right. You gave her a thorough answer. And at the end of the day, that’s why you follow the FOO, so that you can make these types of decisions. And since you asked the question, a very exciting thing is that you get a Money Guy tumbler. It’s a tumbler day! Beth, if you would like a tumbler, just email winnermoneyguy.com. We’re sending you one.

Bo: Did you see the newsletter this week? There was a meme of the week in there, right? And the quack quack quack actually made it into the meme of the week. So if you’re not subscribed, make sure you go to the website, subscribe to the newsletter so you can see all of these things and hang out with us.

Brian: I look at the newsletter every week because the content team creates that independently of us and I like to see what Easter eggs they’ve put in there, to see if we’re the victim of it.

Bo: Almost exclusively the victim every single time.

Brian: That’s not true.

Rebie: Our marketing mutants are so tickled right now. But it is a good newsletter. We wouldn’t do it if we didn’t have a lot of fun with it and make it valuable.

Q&A: All Money in Retirement Accounts, Want to Retire at 55 (24:51)

Rebie: All right, next question is from Alex. “Hey Money Guy team. I am 31 and I have all my money in retirement funds, solo 401k, and Roth IRA. What is your advice if I want to retire early, like 55ish, but won’t be able to pull from those accounts yet? Thanks.”

Bo: Well, one of the really interesting things, when we think about retirement accounts, most retirement accounts, IRAs, rollover IRAs, Roth IRAs, they have this 59-and-a-half age restriction where you can’t get to the money without penalty. But one of the unique things about employer-sponsored retirement accounts, specifically 401ks, is that they actually have an earlier distribution rule. If you’re going to retire at age 55, you can access the dollars inside of an employer-sponsored 401k.

Brian: Did you see me slow down on that math?

Bo: I was nervous. It’s 24 years into the future. A lot of things can change. But if you’re going to retire at 55, I think there’s a good chance that you’ll be able to access some of your retirement assets, whether that be from a 401k you have available at the time or potentially from basis in a Roth IRA. But the other thing I want you to think about is the way that you’re accumulating. I want to know what your savings rate is. How much are you putting in your Roth, how much in your solo 401k? It would be worth the exercise of figuring out, based on those numbers projected out to when you get to 55, is that the path you want to be on? Or might this be an area where, if you’re in step seven of the Financial Order of Operations, you do start an after-tax brokerage account specifically to fund a bridge from 55 to 60 if you need it.

Brian: That’s exactly right. This is definitely a step seven exercise. What’s your savings rate so we can see if you’ve graduated beyond step six to squarely be in step seven? And then there’s nothing wrong with going and using some of our resources and tools to find out if you’re ahead of the curve, behind the curve, or right where you’re supposed to be with the Know Your Number course. Do those type of exercises. But yeah, there’s nothing wrong with going to get the easy tax savings first. The solo 401k is going to have some huge tax benefits for you since you’ve got some self-employment income rolling through. Roth IRAs too. I’ve even detailed in Millionaire Mission my regrets on the small sum of money and what the opportunity cost was. So you’re probably not going to want to leave that on the table, but there could be a portion where you say, you know what, it’s time to start funding that brokerage account with after-tax dollars so that I have a bridge account for when I retire early, just in case I don’t meet all the variables or requirements of that age-55 rule on my 401k dollars.

Rebie: Alex, thank you for the question. If you would like a Money Guy tumbler, just email winnermoneyguy.com. Before we get to the next question, I just wanted to invite everyone watching in real time to get your rapid fire questions in. You can write them right in the chat. Just put RF at the front so we know it’s for rapid fire. We’ll be doing our “It Does Not Depend” rapid fire segment in a few minutes, so stick around for that.

Moneyverse Update and Mutant Mingle (28:13)

Bo: Did you hear about what happened in the Moneyverse?

Brian: I didn’t realize, but when we made the joke that I was on vacation, I’ve got to quit going on vacation because that’s where the whole discussion about Mutant Mingle came from. And then I found out once again I was on vacation last week. By the way, I try to travel around Tuesdays when I go down to visit my favorite wizards and mouses and stuff down in Florida. And what’s funny is I found out that in the Moneyverse we are creating Mutant Mingle through the Moneyverse without us even being a part of it. Unintentionally.

Bo: It is so crazy. Rebie, if someone is not in the Moneyverse, how do they get in?

Rebie: Just go to moneyguy.com/moneyverse and you can click on a button that will help you join our Moneyverse Discord server and chat with all kinds of other financial mutants. The content team likes to chat in there as much as we can too. It’s basically like the YouTube chat, but anytime we want, which is awesome.

Brian: You all know I’ve often daydreamed that we are eventually going to create our own Omaha moment, like Warren Buffett, where every year he’d have everybody come to Omaha. I think at some point, and I didn’t realize it when we kind of came up with this idea of the Moneyverse, this might be some of the grassroots to where we can set up our own annual Woodstock, or every other year Woodstock event. No pressure, but this could be a fun little origin story.

Rebie: Heard it here first.

Brian: Look, they’re going right now, “I can’t believe Brian just said that. I’m going to hear about that later.” They never know what I’m going to say. I cherish my ability to just throw stuff out there. It wouldn’t be the Money Guy live stream without it.

Q&A: Combining Finances After Marriage (30:09)

Rebie: All right, let’s do another question before we get to rapid fire. This is from What the Web. It says, “Hey Money Guy team, I’m getting married this weekend.”

Bo: Congratulations!

Rebie: “My fiance and I are discussing how to combine and manage finances. We want to live off of my income and invest hers to prepare for when she’ll be a stay-at-home mom. Any tips for this?”

Bo: I love that, Brian. What tips would you give them? You guys kind of did this a little bit when you were starting your first business, right? That was kind of your strategy.

Brian: Yeah, for sure. First of all, I think a lot of people make this whole marriage thing complicated. Look, if there are unique assets like inherited assets or family assets, it’s okay to keep those in their own registration because there are some legal protections and other things involved. But I do really like when couples get together and go ahead and set up joint accounts where all of your earnings while you’re married come into that account and go out of that account, and you set up joint savings and investment goals. That’s exactly what my wife and I did. She was the main earner because when I started my first business, I went from right at six figures down to $17,000 the first year. My wife’s earnings were the majority in those early years. And then we knew we were going to start doing family planning and there was a chance she wasn’t going back to work after that. So we came up with a whole plan. We put on our 3D glasses, meaning when you’re making big life decisions, it’s okay to pull out the spreadsheet. We just did a Making a Millionaire where the greatest line came out where the spouse said something like, “I can’t imagine a life without spreadsheets.” We were like, we’ve got to put that on a shirt. There’s nothing wrong with you creating the dream plan of how you want your financial life to play out, the down-to-earth plan, and then don’t skip out on the doomsday plan, meaning you run a scenario where things don’t line up perfectly. Set up joint accounts, live off those assets, so that when one spouse is staying home and helping raise the family, they don’t feel like the other is pulling the strings. You don’t want a power dynamic that impacts the relationship. I see that all the time with couples. They don’t understand how money can be used as a leverage point to create a lot of upset and disdain within the relationship.

Bo: And then the other thing I want to make sure I understand from your question is, when you say you want to live off your income and invest hers in preparation for her being a stay-at-home mom, are you suggesting you want to stockpile that cash so it can then subsidize your lives at that point? Or are you saying you want to get really comfortable living off of your income, and since you’re not going to spend hers, you’re just going to invest it? Because if it’s the latter, then I think you can follow the Financial Order of Operations, Brian, will you hold the thing up? Because one of the things you want to do while she’s able and eligible, if she has access to retirement plans and Roth IRAs and all these different things, is to get some really good tax-incentivized savings in there. That’s a great thing to do if you can walk away from that. Now, if you’re saying you’re going to need some of that money to cover childcare or other things, well then you might have to think about saving that in some sort of after-tax account that you’ll be able to have access to. But I think it’s the latter. And if it is, I love that. You’re going to set yourself up to do the really, really hard work now of saving, saving, saving, saving. And then what happens is even when she leaves the workforce and your savings rate drops down, you take that sum of money, put it into the wealth multiplier, and see what it can turn into. “Holy cow, the work that we did right when we got married, look at how much value that added to our future selves by making that decision.”

Brian: Also, if this is going to happen in the next three to four years, there’s nothing wrong with you boosting step four, which is your cash reserves. Because I’ve been very transparent about our own journey. I think we built up around $50,000 of excess cash that we used as a bridge account for the first three years after my wife left the workforce. It was scary because my business was pretty new at the time. My first child was born in 2003. The podcast started in 2006 and it didn’t even start generating referrals until 2008. I’m not a great salesman, guys. I didn’t like going to the Kiwanis clubs or cold calling or doing that stuff. I’m blessed that the heart of an educator has shown through and we get all the inbound marketing. But it is perfectly fine to boost the cash reserves, because cash is going to be the energy source for stability in those years of so much uncertainty.

Rebie: That is great. What the Web, if you would like a Money Guy tumbler, just email winnermoneyguy.com. We would love to send you one.

It Does Not Depend Rapid Fire Segment (35:40)

Rebie: All right, it is now time for our “It Does Not Depend” rapid fire segment, where Brian and Bo answer your questions in 30 seconds or less combined and they cannot say “it depends” or similar phrases.

Brian: Was it 60 or is it supposed to be 30?

Rebie: It’s 30 seconds combined.

Brian: No, it used to be 30, didn’t it? I think it was 30.

Bo: We found out we were going over. We got so good at 60.

Rebie: I thought it was 60 seconds. Come on.

Brian: Just forget I said anything. 30 seconds.

Rebie: You give us 60 seconds and we’ll answer a few questions in there. Um, all right, 30 seconds combined, and then at the end we’ll do our “Maybe It Does Depend” segment where if you need to, you can say anything you didn’t get to say. With that, let’s put 30 seconds on the clock and get started.

Rebie: First question: should you ever upgrade your primary residence to a cost over your investable assets? Defend your answer.

Brian: Yes. I think about myself when I was in my late 20s and bought my first house. Without a doubt, my assets were less than what my primary residence was worth at that time. The housing was more about the 25% rule.

Bo: It took a long time for the portfolio to be more than the value of the home. So if you’re doing a second home or your next home, then absolutely it’s likely to be more than your portfolio. I think we answered that one right.

Rebie: Any little-known pitfalls to UTMAs, assuming you’re in the right step of the FOO?

Bo: The biggest pitfall is that UTMAs legally become the child’s money at the age of majority. So if they reach 18 and there’s an account in their name, they can demand that money. The custodian will likely reach out and tell you that you have to put it in their name and their name alone.

Brian: The other thing is that when they get their first job in their 15 or 16 year era and you start priming the pump with their custodial Roth IRAs, if you’re using the same custodian, they’ll see that custodial account too.

Bo: Man, you’re talking slow, brother. He started on the journey, started looking at the trees. I’m glad you went first because I would have totally filled the time by accident. He was like setting the stage for a story right there.

Rebie: All right, next question. We used three months of our emergency fund for an actual emergency and were unexpectedly laid off before replenishing. Should I sell stocks from a former employer or broader portfolio to rebuild that emergency fund?

Brian: Be tax smart about it, but yeah, there’s a good chance you’ll need to replenish those cash reserves. I don’t know what your updated situation is, but you need to keep cash because cash is the currency of chaos. It’s how you survive.

Bo: And right now, depending on your company, the market is likely at a really good spot. One in the hand is worth two in the bush. I would consider selling that stock, getting the cash, having that liquidity. You don’t want to be out there swimming naked.

Rebie: Next question. First-time home buyer, 25 years old. Should I save and put 5 to 7% down, or withdraw from a brokerage to hit 20%?

Bo: Put 5 to 7% down, so long as you’re following our home-buying rules, which is 3 to 5% down on your first house, you can live in the house for longer than 5 to 7 years, and your total housing cost doesn’t exceed 25% of your monthly gross income.

Brian: Yeah, man. I just want to make sure you’re doing Roth IRAs and things like that. I don’t want you putting that toward the down payment. But if you’re loaded, maybe you have family legacy assets, then you might want to put down more money.

Rebie: Brian played hype man there. Bo went exactly 15 seconds and then he just went, “Yeah.” Flavor.

Brian: Well, that one should have had “it depends” in it. I didn’t say it during the question.

Rebie: Okay, next question. We are getting married next June. Should we combine finances now or wait until we get married? We are 26, we bought a home together, and we have a combined net worth of $280k and $130k in retirement accounts.

Brian: There’s a lot going on there. I think you wait until you’re contractually one, but go ahead and start setting up steps to prepare to become one.

Bo: I also agree with waiting. A lot can happen. How many times have you heard about engagements that end up getting called off? And the more intertwined you become, the more difficult it is to untangle. Wait until you’re officially married to do all of those things.

Rebie: Well said. Next question. “I hit my first million at 35. Amazing.” So, moneyguy.com/bookacoach. “It’s all in retirement accounts. What’s next?”

Bo: Follow the Financial Order of Operations. More than likely when you get to step seven, which it sounds like you are in, you’ll start thinking about how you’re going to use that money, and that will take you in different directions. Maybe you want to have a brokerage account. Then you can move to step eight, which is abundance goals. There’s a good chance that now the gravity of your decisions is bigger than it used to be, the complexity in your situation is more than it used to be, and your time is likely limited. If that’s true, it may be time to consider taking the relationship to the next level.

Brian: moneyguy.com/become-a-client. Wow. We got a lot into that 30 seconds. He even got a plug for the company in on a 30-second question. Incredible.

Rebie: Next question. Do I need an after-tax brokerage account if I don’t plan to retire early?

Brian: Do you need it? Not necessarily. But is it a nice to have? Sure. Because the dollars you pull out of it are not going to be encumbered. Now, if all you have is a Roth, those dollars will be completely tax-free. So as long as you retire after 60 and all you have is a large amount of Roth and pre-tax, you’ll be okay.

Bo: I like having after-tax assets because that means I can pay cash for vehicles and other life decisions. And I also like it because it opens things up. If you want to get into real estate investing and other things, you’re going to need to have access to liquidity.

Rebie: We’re getting good at this.

Brian: You are good at this. She’s going to drop us down to 20 seconds. This must be how Bo feels in the ocean. I’m giving it all I’ve got.

Bo: I was in the pool this past week playing with the kids and I was going to show Brian. I tried treading water for 10 minutes.

Brian: Did you do it? Can you do it?

Bo: No. But I did a thing. One of my buddies said, “Okay, one of the ways we can test buoyancy is you take a really deep breath, hold your knees, and you should be able to float on your back, your back should rise.” I do that. Deep breath, hold my knees. You know what happens to my body? I go straight to the bottom.

Brian: Are you sure it’s not your posture though? Because you have to hold your head a certain way to float on your back.

Brian: No, no. You’re supposed to do it on your stomach. You take a deep breath, hug your knees, and lay in a cannonball position. And you should be buoyant enough to float. When I do that, I go all the way down to the bottom. I’m not buoyant, dude.

Bo: If you fill up enough oxygen in your lungs, you should float.

Brian: Come over. Come to my house. We’re going to test this. And look, it might get great engagement, but I don’t know that I’m willing to sign up for that. It looks like I have a shirt on when I have no shirt on. Nobody wants to see that.

Rebie: This has gone so far off the rails. Okay, I’m just going to go back. We have a few more rapid fire questions. Let’s jump back on.

Brian: We just jump back on. That’s right. The struggle’s real.

Rebie: The next finance-related question: is it better to pay for pet insurance or have a sinking pet emergency fund?

Brian: Oh, don’t ask two southern boys this question. I’m going with a sinking pet emergency fund. I am not a big proponent of pet insurance because it’s so specialized. If I have cash in my emergency fund and I incur some medical bills, I can use the cash to do that. I don’t think you do pet insurance. And then I would encourage, if you’re from my generation, you saw Old Yeller and Where the Red Fern Grows, and you take that into context.

Bo: That was not an official Money Guy endorsement right there.

Brian: That was not a true answer. I’m just saying this is what shapes people of my generation. They showed us this type of stuff in grade school. My wife would have us spend a gazillion dollars on her dog. She’s 13 years old. I like their dog.

Rebie: All right, two more rapid fire. If we make too much to contribute to a Roth IRA, should we convert traditional dollars in step five so we can do a backdoor Roth? We’re 35 years old with $450k in retirement.

Brian: I’m confused, because if you have a large income, you should be able to do both step five and step six together. It’s not an either-or.

Rebie: They were just saying, “Hey, I make too much money to contribute to a Roth. Is the backdoor Roth the answer?”

Bo: Yeah, I think it’s probably a step six thing to a degree. If you can do the backdoor Roths, I would do them, assuming you have the right account structure. You can’t have any other IRAs, or the Roth conversion would be taxable. We’re going to come back to that one.

Brian: We said everything right, but that was a trick question, a little bit.

Rebie: Last but not least, did Han shoot first?

Brian: Do you even know what they’re talking about?

Bo: Who’s Han?

Brian: Do you know who Greedo is? You didn’t say Hans. Han. Not Hans. Hans would be “Hans and Franz, pump you up.”

Rebie: Where’s their timer? They’re already off the rails again. Did Han shoot first? Who shot who?

Bo: Greedo. Keep going.

Brian: Greedo. You don’t have an answer.

Rebie: All right, and that concludes our “It Does Not Depend” rapid fire segment. And more.

Maybe It Does Depend Segment (47:24)

Rebie: Today’s special edition. We’re going to move on to our “Maybe It Does Depend” segment where we go back through and you can say anything you didn’t get to say.

Brian: I love that you’re such a biff. You really are such a biff, or Chad, whatever we want to call you. That’s why we make a great team together.

Rebie: I have a few notes.

Bo: I’m guessing that the green guy and Han Solo shot each other, but they argue about who shot first. Is that the context? Am I putting it together right?

Brian: I mean, it’s because Han, you know, he’s already a smuggler, right? So he’s got this thing, but he’s also our hero. It’s kind of a rogue thing. It’s an interesting character development.

Bo: As someone who knows: did Han shoot first?

Brian: I think there’s controversy. I mean, Han walked away from it, right? At that close contact, the one person who shot first is the one that walked away. It was under the table.

Rebie: All right. We had a question where I cut Brian off. He was about to go into a story about the UTMA. Did you want to add anything?

Brian: Yeah. My daughter, it was a big shocker for me. You do the custodial Roth account when she’s 15 years old and then you show her the Fidelity app, and surprise, there’s her custodial account too. It was a big shock. So we had to have a conversation much sooner than I wanted to about how we’ve been saving monthly for her. That’s a downside to custodial accounts to consider, because it’s tied to your child’s social security number.

Rebie: And then there was one where Brian really wanted to say “it depends” about the first-time home buyers either pulling from brokerage or putting 5 to 7% down. Was there anything you didn’t get to say?

Bo: Is it really true that in the remastered versions they changed it? Like in the original, Han shot first, but in the new ones they changed it? That’s wild. So you watch a movie as a kid and one thing happens and then they change it. I couldn’t get on board with that. It depends on what version you watched as to who you think shot first.

Brian: Well, we all know I saw the original.

Bo: I’m sorry. You were talking about Roth conversions.

Brian: Oh right. The first-time home buyer. Look, some people have been saving for their benefit or other things and have big chunks of money sitting out there. I hate for people to pay PMI and other things, but for most people on their journey, that 3 to 5% down payment is supposed to be your bridge into home ownership sooner. But it all depends upon what you have in assets. As a financial adviser, I always like to see what you have and try to maximize it using the Financial Order of Operations. But it is going to depend upon how big your pot of assets is.

Bo: I agree with you, but can I disagree just a smidge? Even if you’re like a 26-year-old with a big pot of assets, I’m going to have a real hard time recommending you take a big chunk of that and pay 20% down, especially with interest rates on mortgages over 6 and a half percent.

Brian: I mean, if somebody had custodial accounts of like $220,000 and they’ve got a great income and they’re saving, and it’s not hard to turn some of those investments into liquid cash, I think there’s potentially a case to be made. But I’d want to know what their savings habits are. Are they funding their Roths? Are they loading up their company 401k? There’s a case to be made where maybe you put more down. I know it’s not optimized, but money is nothing more than a tool. I would need to know also what their risk profile is, what money they have coming down the pipe, what their career trajectory is. There’s a lot of variables that would really go into that decision matrix.

Bo: And the Roth conversion one? Can you just reread that question?

Rebie: If we make too much to contribute to a Roth IRA, should we convert traditional dollars in step five so we can do a backdoor Roth? We’re 35 years old with $450k in retirement.

Brian: Yes, definitely go ahead and do the backdoor Roth. Structure it right. Make sure you don’t have any other rollover IRAs or anything else like that. You can treat the backdoor as step five, but that also means, because your income is so high, I’m counting on you to also be doing step six. It’s both. It’s an “and,” not an “either-or.” Make sure you’re doing five and six.

Bo: Now, I want to note something worth adding here. Let’s assume that you have crossed over the threshold where you can no longer contribute to a Roth directly. If your question is, “Hey, I can’t contribute to a Roth anymore, should I start doing Roth conversions annually to build up my Roth dollars?” Maybe not, if they’re not backdoor Roths. If you’re just converting pre-tax assets to Roth and incurring taxability to turn those dollars into Roth, depending on your tax bracket, that might not make sense. There is a very big difference between a true tax-free backdoor Roth conversion, where you put a nondeductible traditional IRA contribution into a traditional and convert it to Roth tax-free, versus converting pre-tax traditionals or IRA rollovers into Roth. I would likely not recommend that latter approach if that was the question you were asking. I’m not sure which one it was, but surely you got something to work with there.

Rebie: Well, great. That concludes our rapid fire segment, with so much bonus content in between. You’re welcome.

Brian: Y’all probably notice we’re not doing as many themes because sometimes the themes took away from the content. But we’re so zany that we put enough weird stuff in there even without a gimmick.

Rebie: Brian Preston brings his own theme.

Q&A: Inherited IRA and the Pro-Rata Rule (53:55)

Rebie: All right, let’s do another personal finance question before we wrap this thing up. This one’s from OCR Dog.

Bo: And by the way, do we know what show is coming out this Friday? Have we announced it yet?

Rebie: I do know, but I don’t want to get it wrong.

Bo: It’s a show we’re super excited about. We think you should watch all of them, but this Friday was one we’re really excited about. If you want to know when it comes out, make sure you subscribe right now to the channel so you get a notification when that show goes live.

Rebie: It’ll be a surprise. Do you want to hear OCR Dog’s question?

Brian: I want to hear about some OCR.

Rebie: It says, “Does an inherited traditional IRA count towards the Roth IRA pro-rata rule? I’m in step nine of the FOO and I don’t want to run afoul of the rule. I’m trying to proactively plan out my accumulation.”

Bo: It’s one of the unique little carveouts. Inherited IRAs do not count against the pro-rata rule. So long as you’ve zeroed all of your other IRAs out except for the inherited IRA, you can still do backdoor Roths. Contribute to a traditional, do not take the deduction, and convert that to Roth.

Brian: The ones to watch out for are often those early small-business IRAs like the SEP IRAs and SIMPLE IRAs, and of course rollover IRAs from a former job. But inherited IRAs are unique unto themselves.

Bo: That one could have been part of the rapid fire segment. That was a great straight answer. Let’s do another one because I thought we were done with the rapid fire segment. I do just want to throw one thing out there if you are not aware of this. Inherited IRAs have changed over the past couple of years. The rules used to be one way, then they changed, then they kind of changed again, and then they came up with a final ruling. If you’ve inherited an IRA in the last seven or eight years, it’s worth doing the research to make sure you’re actually in compliance. We know that now there’s this 10-year rule, meaning if you inherit an IRA you’ve got to distribute all the money within 10 years. But oftentimes you also have to take an RMD in those 10 years. You can’t just wait and let it balloon all the way at the end. The rules are a little nuanced and wonky. So if you’ve inherited an IRA, make sure you’re checking that so you don’t run afoul and get a gnarly letter from the IRS a couple years from now.

Brian: This might be one of those things where you try to keep your life as simple as possible, but complexity finds you. How many times do we have clients who all of a sudden are landlords, or they have RMD issues? You can try to keep your life as simple as possible, but success is going to create complexity.

Bo: That’s right.

Q&A: Moving to a Cash Management Plan (56:47)

Rebie: Well, this next one, I feel like we have to do because the username is All I Want for Christmas Is a Tumbler. So OCR Dog and All I Want for Christmas Is a Tumbler, if you would like a tumbler, just email winnermoneyguy.com and it’s your lucky day. You get one. And with that, the question says, “How do you move to a cash management plan? Do you have separate high-yield savings accounts for emergency fund and sinking funds? How much do you suggest to keep in your checking or clearing account?”

Bo: That’s a great blocking-and-tackling question. Like, how do you actually move out of strict budgeting? I think what would be helpful, Brian, is I’ll just share what we do. So when you start out budgeting, you’re categorically tracking: I’m going to spend this much here, this much here, and make sure I stay inside those categories. Well, then once you kind of morph and you have an idea of what you spend at the grocery store and in these other categories, and you want to make sure your savings is right and you’re following the Financial Order of Operations and saving 25% of your gross, well then you don’t have to track as much how much you spend at a restaurant or wherever. That’s moving to cash management. But you make a great point. If you’re not doing some sort of zero-based tracking, you want to make sure you have an understanding of where your cash levels are so you don’t get yourself into a hiccup. Brian, do you want to share what you do?

Brian: Well, I thought I’d give some context and a teachable moment. When I was trying to figure out in my mid-30s if I should do LASIK surgery or not, every year I’d go for my eye exam and they’d say, “Man, your eyesight is stable. Your prescription doesn’t move. You ought to move to a different thing instead of wearing contacts every day. You could do LASIK because your prescription is so stable.” I feel like there’s a lot of correlation to going from budgeting to cash management. When you first start managing money for yourself and your household, it’s hard. You’ve got money coming in, money going out, and you don’t feel completely in control. But there will come a time where you build muscle memory, or stability, where from a behavioral standpoint the money’s automatically going where it’s supposed to into your retirement accounts. You set up automatic spending accounts. You make the good habits as easy as possible and the bad habits that much harder, so cash flow becomes stable. And then I found in my own cash management plan that once I set up automatic savings plans and investments for all the different categories, as I got pay raises or as my income went up, I practiced what I called forced scarcity. I thought about what I need as a household to be functional and still create happiness, without feeling like we’re doing without. But then I would squeeze myself to maximize the savings and investment element. So I was living my best life and controlling and building my time ownership that much sooner.

Bo: Yeah. And so practically, the way that looks for me is I have a high-yield savings account. I’m actually still buying a money market mutual fund for my emergency reserves. It is my emergency fund, but I guess you could also kind of call it a sinking fund because it’s more than what my prescribed emergency fund should be, only because we like to have some dry powder available if there’s an opportunity that presents itself and we might want to move and capitalize on it. That’s where I keep all of my cash. But then I have a checking account, like an everyday checking account. And for me, my personal buffer is about one full month of expenses. Whatever I spend in a month, I keep that as an extra slush in there so that as money comes in and money goes out, I never worry about it getting too low. I’m never going to worry about an overdraft. And then all of my consumption I put on credit cards because I get all of the points and the perks, and then I pay it off once a month. So I can kind of track where my cash levels are at all times.

Brian: And if you want to know cash levels in the context of the Financial Order of Operations, step one is highest deductible covered. That keeps you from desperate decisions. Step four is three to six months of emergency reserves. There is another level when you get to step eight, and that’s where my cash has actually expanded a little bit more, and that’s where I’ve gotten into doing real estate investing and other things. But there’s a time and a place for each one of those actions. The first level is to keep your life out of the ditch. The next is to protect you in case you lose your job or have a prolonged period of hardship. Step eight is where you’re thinking about cash as an opportunity fund. I detailed that in great detail in Millionaire Mission, and I’d encourage you to go check that out to see how I’ve handled cash as a wealth builder and an amplifier.

Closing (1:01:46)

Rebie: Love it. Great answer. Thank you for answering all the questions. There have been a few times where I was not fully paying attention today, and it is because I was reading the Moneyverse. I just want to come clean. I just want to invite you one more time that if you want to keep chatting with us even after the camera turns off today, go to moneyguy.com/moneyverse and we would love to see you there. Chat personal finance and just have a good time like we have today. Thank you so much for being here. We will be back every Tuesday at 10 a.m. Central right here on YouTube and Spotify wherever you listen. We’ll release this later too. We just love being here for you. Thanks so much for joining us.

Brian: We did a show meeting before we came in and were going over some of the shows we’re recording in the next two weeks, guys. It’s hot. I’m pretty excited about it. I even told Will, “Man, what we get to do is pretty dang fun.” I’d encourage you, please sign up, please subscribe. We kicked off this show talking about what creates happiness and fulfillment, and I’ll tell you what, I wake up every morning on Tuesdays especially and really do feel like we’re making the world a little bit better through education. I just want you to be part of that journey. Please be a financial mutant. Sign up for our content. I’m your host Brian, joined by Mr. Bo. Money Guy team out.