Are We On The Brink of a Recession? (What You Need To Know)

Summary

Money Guy Show: Are We On The Brink of a Recession? (What You Need To Know)
Hosts: Brian Preston and Bo Hanson
Release Date: April 2, 2025

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Introduction

In the April 2, 2025 episode of Money Guy Show, hosts Brian Preston and Bo Hanson delve into the pressing question on many minds: Are we on the brink of a recession? With recent headlines casting doubt on the U.S. economy's stability, Brian and Bo aim to demystify the situation, provide historical context, and offer actionable financial strategies to navigate potential economic downturns confidently.

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Understanding the Recession Threat

Defining a Recession

Brian begins by clarifying what constitutes a recession, noting that "a common definition of a recession is two consecutive quarters of negative GDP growth" (02:01). However, he emphasizes that the reality is often more nuanced, and the mere dip in GDP doesn't automatically spell doom for the markets or personal finances.

Current Economic Indicators

Bo shares current economic data, stating, "As of March 28, real GDP for first quarter 2025 is projected to be a negative 2.8%." (02:42). He references the first quarter of 2022 as a prior instance of negative GDP growth, distinguishing it from an official recession and highlighting how market interpretations can vary.

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Historical Context and Market Performance

Brian and Bo explore historical trends to contextualize the current economic indicators. They present a comprehensive chart illustrating bear and bull markets from 1942 to 2024, demonstrating that recessions have both overlapped with bear markets and occurred independently of market downturns.

Brian confidently asserts, "A recession does not necessarily mean poor market performance." (04:06) This perspective serves to alleviate common fears that a recession will necessarily lead to significant market losses.

Bo adds, "Recessions are often the launchpad for the next phase of a new bull market." (05:18) He encourages listeners to view economic contractions as opportunities for portfolio recalibration rather than signs of impending doom.

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Strategic Financial Planning Amid Economic Uncertainty

Assessing Personal Financial Health

Brian stresses the importance of not succumbing to panic despite fear-inducing headlines. He advises, "Use this as a tool or an opportunity to take a stress test on your own personal finances." (05:18) This involves evaluating asset allocation, risk tolerance, and ensuring that one's financial plan aligns with their long-term goals.

Diversification and Risk Management

Bo emphasizes the critical role of diversification in mitigating market volatility. He states, "A well-diversified portfolio based on your unique financial journey... can help you navigate through volatile times." (07:51) Brian echoes this sentiment, highlighting that market performance is not solely dictated by GDP growth figures.

Capitalizing on Market Volatility

Bo introduces the concept of the "financial mutant superpower" — "Always be buying." (09:03) He advocates for taking advantage of market dips by investing consistently, especially for those with a longer time horizon before retirement.

Brian reinforces this by encouraging listeners to maintain their financial plans despite market fluctuations, ensuring that their strategies remain robust and adaptable.

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Listener Q&A: Practical Financial Advice

The episode features several listener-submitted questions, allowing Brian and Bo to provide tailored financial advice:

1. Increasing Savings Rate Amid Financial Challenges

Leandra Jo asks about increasing her savings rate from 14% to 25% while managing a $100k household income on a single income with three kids under seven.

• Brian's Advice: Emphasizes the importance of cutting both large and small expenses, as well as eliminating wasteful spending. He suggests evaluating major expenditures like insurance or mortgage rates for potential savings opportunities (13:13).

• Bo's Input: Highlights the significance of diversification and adjusting one's portfolio to align with risk tolerance, especially during uncertain economic times. He advises leveraging employer matches and adjusting lifestyle expenses to boost savings incrementally (14:45).

Notable Quote:
"Sometimes people get so focused on cutting costs that they forget to look for hidden savings opportunities, like employer retirement matches." — Brian (13:13)

2. Balancing Student Loan Repayment with Investments

Kurt B. inquires whether to liquidate investments to pay off $37k in student loans at 7% interest.

• Brian's Perspective: Suggests that while paying off high-interest debt is crucial, liquidating investments may not always be the best approach due to potential tax implications and lost investment growth (43:27).

• Bo's Counterpoint: Argues for a strategic approach, such as assessing the tax impact of selling investments and considering a phased repayment plan that doesn't derail long-term investment goals (46:24).

Notable Quote:
"If you're 25 years old with $37k in debt at 7%, it's about finding a balance between extinguishing that debt and maintaining your investment trajectory." — Brian (43:27)

3. Aggressive Portfolio Strategies for Late Starters

A listener asks if it's advisable to adopt a more aggressive investment strategy when starting retirement savings later in life.

• Brian's Response: Cautions against taking on excessive risk without considering one's ability to recover from potential market downturns, emphasizing the importance of aligning investment strategies with retirement timelines (33:03).

• Bo's Advice: Recommends evaluating both risk tolerance and risk capacity, ensuring that aggressive strategies are sustainable and won't jeopardize retirement security (37:27).

Notable Quote:
"Taking on too much risk late in your investment journey can leave you vulnerable to significant losses you might not have time to recover from." — Brian (33:03)

4. Saving Aggressively Without Straining Relationships

Alana R. questions whether saving 25% of gross income can lead to financial strain within a marriage.

• Brian's Insight: Shares personal experiences highlighting that overly aggressive saving can cause marital tension if not balanced with mutual financial goals and open communication (55:25).

• Bo's Recommendations: Encourages couples to align their financial strategies with shared goals, fostering transparency and ensuring that both partners feel valued and heard in financial decisions (56:39).

Notable Quote:
"Money is a tool, and if it's leading to constant arguments, it's time to reassess how you're using it within your relationship." — Brian (55:25)

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Key Takeaways and Conclusions

Brian and Bo wrap up the episode by reiterating the importance of:

• Staying Informed and Proactive: Understanding economic indicators and historical contexts helps in making informed financial decisions.

• Diversification and Long-Term Planning: Maintaining a diversified portfolio tailored to individual risk tolerance can mitigate the impacts of market volatility.

• Strategic Saving and Investment: Continuously assessing and adjusting one's savings rate and investment strategies ensures alignment with financial goals, especially during uncertain times.

• Open Communication: Whether it's within a marriage or with financial advisors, clear and honest discussions about money are crucial for financial and relational well-being.

Final Notable Quote:
"There's more to wealth than money. It's about making sure you're also leaning into the things that give your life color and zest." — Bo (63:30)

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Additional Resources

Listeners are encouraged to visit moneyguy.com for a plethora of free resources, including savings rate calculators, investment guides, and personalized financial planning tools. Engaging with these resources can help individuals tailor the discussed strategies to their unique financial situations.

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Disclaimer:
The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

Transcript

[Brian]

Are we on the brink of a recession?

[Bo]

I am so excited. Almost like I am Sunday morning eating my cheese grits with some shredded bacon in there. This doesn't.

[Brian]

Nailed it. It was so good. This doesn't work. It was so good. Yeah, it was so good. I can't do it. I gotta switch. I can't do it.

[Bo]

Remember, you're outside. I'm in.

[Reby]

Wow, that was even more short lived than I thought.

[Brian]

I was gonna try to make it all the way through and I couldn't do it. I was gonna try to see if I could go the whole time.

[Reby]

You have to sit in your seat and Ryan has nowhere near.

[Bo]

Hey, I'll bring up my tip screen in a minute so you can give me 20% for moving all my drinks for me. Good morning. Happy April Fools. I don't know. This is how creative we are. We thought that would be funny.

[Reby]

I enjoyed it.

[Brian]

I will say this though, Brian, I actually am super excited to be talking about this because there is some very interesting information that just came out. And I don't know if you've seen the headlines yet, but a lot of people are nervous, a lot of people are concerned, a lot of people are wondering, does this mean that doom is impending and we are moving in a bad direction? Are we about to enter into a recession?

[Bo]

Yeah, I mean, it was interesting because I did see the headlines and I was super happy that we're covering this is that whenever you have a quarter that, you know, GDP goes negative, you go, oh, we probably need to pay attention. And that's why here's the headline that's getting all the news right now is Goldman Sachs has raised the odds of a U.S. recession to 35%. Well, duh, yes, because the projection that just came out was that first quarter GDP is indeed going to go negative.

[Brian]

Yeah. So one of the things I think that'd be helpful is how do we define recession? Now this, you may not know this, but this is a little nebulous. But generally speaking, the definition of a recession, or at least a common definition of a recession, is two consecutive quarters of negative GDP growth, meaning that the economy actually shrunk in value, did not increase over a quarter. So if the first quarter just turned out negative, does that mean if we have a second quarter of negative GDP growth that we're going to be in recession? Well, it's not always quite that easy. But the real question, I think people are wondering, Brian, is does it matter? Is it important? Is it even a significant thing?

[Bo]

Yeah, I mean, and that's Why? I kind of want to cut through the noise. We'll give you the numbers first. Just so everybody kind of knows we're on the same page. This is what, as of March 28, real GDP for first quarter 2025 is projected to be a negative 2.8%. Now, realize they always come back and restate these things. Sometimes it gets restated more positively, sometimes it goes more negative, but right now we're sitting that the economy is actually going to contract 2.8%. If you look at the last time we kind of had something like this happen, it was first quarter of 2022. This now 2022 was not exactly. We didn't even hit the second quarter, so we didn't hit the traditional recession. But still, 2022 was not something that I think people get super excited about from an investment standpoint. But it is, I think when in doubt, we should zoom out. But what should people be thinking about?

[Brian]

Yeah, I want you to hold onto that idea that the last time we saw negative GDP growth was in Q1 of 2022. 2022 was a negative, was a down year in the market, but it was not a recession. We're going to talk more about that in a moment. But I just want you to remember that that recession and bear market and downturns aren't always married together. So if you are sitting out there thinking, okay, this just happened, what is it that I need to know?

[Bo]

Well, sell everything. Right?

[Brian]

That's right. Of course, obviously. No, of course not. That's the biggest April Fool's joke of all the. The number one thing that you need to know is that a recession does not necessarily mean poor market performance. And whenever we're faced with times like this, we always want to ask ourselves, okay, have we seen this before? Can we look at history to have any sort of insight into what could or could not happen? And you've seen this chart a ton. This actually shows all of the bear and bull markets from 1942 all the way out until 2024. And what you can see is it shows you how big the bear market was and how long it lasted and how severe the how big the bull market was and how long it lasted, how severe the bear market was, how long it lasted. And then it shows you where recessions took place. Like at what parts and points of time were there recessions. What I really think is interesting when you look at this chart is that sometimes recessions happened while there was a bear market taking place, and sometimes recessions happened while there was still a bull market taking place. So just because you have two consecutive negative quarters of GDP growth does not necessarily mean the market's going to perform poorly just because of that.

[Bo]

Well, and when I look at these charts and when you see the recession overlays on there sometimes, I mean, there's nothing wrong with some pruning. I mean, and a lot of the analysts and economists that I follow have been calling, you know, where the S and P and some of the valuation indicators that we were a little overheated. So I think it's okay to expect some volatility to even have some pruning. But if you look at the overlay of where these recessions typically fall, it is in a lot of times it's the launchpad for the next phase of a new bull market. So I don't always consider this. It is going to be bad if you are way outside of your skis. And that's probably the great time for us to kind of transition on. What do you need to know? And even better yet, what do you need to do so that you don't get caught flat footed? Because always whenever see indicators like GDP growth has gone negative, I'm always in it because the news media is going to try to scare you. But what you ought to do is use this as a tool or an opportunity to take a stress test on your own personal finances to say, have I gotten a little greedy on the way I've been handling my asset allocation and my portfolio? Because right now is not the worst time to reset.

[Brian]

That's right.

[Bo]

And that's a great way for us to kind of figure out what are the next steps for you to go forward.

[Brian]

Yeah. Another thing that you need to know, in addition to recognizing that poor market performance is not a given, is that no one can predict the future. So even as you see these headlines and as you hear people talk about, oh, we're headed for recession, doom and gloom and bad, no one knows what the outlook is going to look like. The rest this year, no one knows what the market's going to do in the next 6, 12, 18 or 24 months. And if someone begins to tell you that they do know exactly what's going to happen, I would have my spidey senses immediately start to go off.

[Bo]

And then I think that probably now leads to what can you actually do? The first thing, look at your cash reserves.

[Brian]

Great.

[Bo]

Where, where are you at with your cash reserves? You know, because I want you to have a plan that was good before we hit recession. If there is going to be a recession that's going to be good during the recession and even going to be good post recession. That's why those cash reserves is going to be a key part of this. Bo. I teased it up, but I want you to take it home. What do we mean when we talk about looking at your diversification?

[Brian]

What we want you to have is a well diversified portfolio based on your unique financial journey and based on where you are in your accumulation phase. If you're someone who's younger, it's okay to be more aggressive, but if you're someone who's further along, your portfolio should not be experiencing the same volatility as the broad markets because you diversify your assets across a number of different asset classes. So if you find yourself in this place where you're reading the headlines and you're looking at your account statements and you're getting very nervous and very uncomfortable, Brian already said it. This is a great time to recalibrate and think, okay, maybe my tolerance for risk is not quite where it should be, or maybe my portfolio does not accurately match my tolerance for risk and I should think about pruning. Are there areas of my portfolio that I should tweak and adjust so that I have more peace going through volatile times? These are always a great time to reassess that because when the market's going up and everything's happy and GDP is growing, everyone's aggressive, everyone's a cowboy, everyone loves to take on more and more risk. It's in times like this, when there's uncertainty around that we begin to really see where our true risk tolerance lies.

[Bo]

And then let me give you the final step thought here is let me give you the financial mutant superpower that's abb. Always be buying. I'll even add the baby because this gets so exciting. If you're trying to figure out how do you cut the blunt force off of volatility, buying into it can be an incredibly powerful tool. So if you're 10 plus years from retiring and you're looking at this and being, oh my goodness, what do I do? I would tell you just keep buying. Just buy into the the volatility you will be rewarded for staying the course. This is not the time to be emotional. This is the time just to to measure twice, cut once, and make sure your plan reflects your future goals, but also maximizes the moment that we're currently living in.

[Brian]

I love it, Brian. I love that we get to be a voice of reason even when the financial world is saying that things are crazy. I Love when there are these huge headlines that are fear inducing and we get to slow down and say, hey, you know what? It's gonna be okay. You have a good plan that's in place today, and it should be a good plan tomorrow, and it should be a good plan the day after. And I love that we can speak to those things. I love that we can answer the questions that you guys have. It's why we show up every Tuesday at 10am Central to answer your question. So if you have a question you want us to weigh in on, we have the team out in the wings right now collecting your questions and we would love to load you up because we really do believe that there is a better way to do money. So if you have a question, get it in the chat right now. And with that creative director Reby, I'm gonna throw it over to you.

[Reby]

Excellent. Because I've got some questions in the hopper and we're going to start off with Leandra Jo's question.

[Brian]

How'd we do. How'd we do on the first part? Was it pretty good? You know, the. Not the recession part, but like the opening, the April Fool's part, Like, it was pretty good.

[Reby]

It was. People enjoyed it.

[Brian]

Awesome.

[Bo]

No, they didn't.

[Brian]

I didn't.

[Reby]

I mean, in the chat, I think some of our friends who are here all the time, I definitely enjoyed it.

[Brian]

I already know that I'm a creature of habit. Like soup. Like creature of habit. A very, like, you know, I like things that are. I did. I could not have liked that less. Like, I just. No part of that was enjoyable.

[Bo]

I want you to know, if you want to know how I'm punishing myself for even playing along with these shenanigans. When I came to the studio today, I realized that the Lacroix that's in my koozie here was left over from the last time we recorded. I don't remember was that, was that last week? So a full Lacroix was sitting here and I was like, you know, I'm gonna punish myself by drinking this lukewarm flat Lacroix flat.

[Brian]

And it is Lacroix. Sounds fantastic.

[Bo]

I don't know if I. Maybe, maybe we. Maybe I've gone a bridge too far. But we're, we're gonna keep it going.

[Reby]

What was the question on that note? Yes. I didn't get to it. But let's get to it now. Le Jo says we're deep in the messy middle. We're in our 30s with three kids under seven. Well, seven and under to be fair, living on one 100k income, and I'm a stay at home mom. What are the best ways to make our way to 25% savings rate from 14%? So maybe she just kind of is getting acquainted with the money guy rules. And of course, we talk about that investing rate of 25%. So you can, can you talk about that?

[Brian]

I want to, I want to pause for a moment, Leandra, and I just want to say good on you for being at 14% right now. So often we tell people, hey, you got to save 25. You got to save 25. You got to Save 25. And that's true. That is where we want you to be. But you're in this season of life. You have three kids, seven and under. You have $100,000 household income on a single income in the household because one of you stays home. That's amazing that you're still able to save 14%. And I don't want to minimize that. I don't want you to lose track of the fact that, man, we're doing a hard thing right now. And that's great. And I love that you have this financial mutant mindset. Okay, I know I'm at 14, but I want to be at 25. How are some, what are some things and how are some ways I can move in that direction?

[Bo]

Well, first, let's make sure. This is one of those moments where I always like to find secret pots that she might not even be counting. Is that because that income is less than $200,000? I hope in that 14% she's counting the match. If there's an employer retirement plan and there's match, I do like people to include that in their 25%. So if your employer, let's say your employer, requires you to put in 6%, so they give you 3%, you would actually have a savings rate of 9% just off of that plan. Not 6%, but 9% because of that 50 cents on the dollar matching. That's the first thing I want to cut the corner off. Because imagine if all of a sudden her 14% was actually 17% or maybe 14% actually could be as high as 18 to 20%. We've seen that in some of these generous employers out there. So that's the first tip I have. Bo, how do we. Because now we got to think about. Because I don't think. You don't build this all in one day. You don't build it in one year. Especially while you're in the messy middle. Look, there's nothing wrong with being hard on yourself, with the fact that you should feel some type of like there's a clock ticking in the background that is going to ring, meaning that you should feel some pressure that you need to be saving more for retirement. But I want you to give yourself enough grace to know this is going to take time to transition. So what's some incremental ways that they could, as a household, increase this?

[Brian]

Yeah, I think whenever. And this, Lander, this is for you. But this is also for anyone out there trying to figure out how do I get my lifestyle a little bit smaller so that I can increase my savings rate? Because whenever it comes to building wealth, we only really have two options. We can either make more money, go increase our income, or we can spend less money. That means decrease our expenses. And so I just wrote down sort of three quick things. I want to cut the bigs, then I want to cut the littles, then I want to axe the waste. So I would take all of the expense. I'll say, what are the things we're spending a lot of money on every month? This might be car payment, insurance, mortgage or rent, utilities, all those types of things. And I'm trying to figure out, okay, are there areas where I can improve that? When was the last time I shopped my insurance? Is my auto insurance just what I've been on for the past six years and I've never shopped it? And is there a way for me to maybe get a better rate? And I would start looking at all those big expenses and figure out how can I whittle those down? Okay, once I know that I've got my big expenses knocked out, then I go down to the little expenses and I want us to cut those. Because I am not one of these people advocates. Oh, you just can't go out to eat at all if your savings rate isn't there. That that's not true. Maybe going out to eat is something that's valuable for your family and it creates family time. You want to do that. But maybe if you're eating out, budget is $200 a month. You want to decrease that to $150 a month. Or maybe the gym membership that you have right now that you're not really using, maybe you can cut that out for a while and start doing stuff at home. Or you figure out what are the little expenses that I have to get rid of, but I can minimize to create additional margin. And then the third thing I'll do is we all, and I think all of Us have these things in our budget that are just waste. Oh, I was at the grocery store and I grabbed the Butterfinger or I stopped at Starbucks just because it was on my thing, or I wasted the money here, I did the thing there, whatever that is. And you got to figure out where are those things and how can I target those things to completely cut those out. And if I do cutting the big, cutting the littles and then axing the waste, what I'm likely going to find out over the course of a few weeks or a few months is holy cow, that equated to a couple extra hundred dollars and maybe $1,000 or whatever that number may be for you. And if you can then redirect and redeploy those dollars towards your savings, all of a sudden you're going to recognize, holy cow, I was at 14% but now I'm at 16%, I'm at 17%. It can have a meaningful impact.

[Bo]

Well, I think the underlying thing I'm hearing you talk about is actually doing, actually doing the budgeting. That's right. If you are not doing that, I would encourage you to at least go start running using one of the apps, do a spreadsheet, whatever you need to to actually start tracking where's your money going. And then after you've had a little experience, a few weeks to a month of actually tracking the expenses, now let's actually do some zero based budgeting. What do you actually need to do? What's a want, what's a need? Then the other thing I was going to say is because BO is talking about the two levers, so we're talking about the expenses is where we primarily focus. The second one is you got to increase your income well over time. That typically happens. What I like to say for especially somebody in their messy middle, when you get your next pay raise, your spouse gets their next pay raise, I would encourage you to try to make see if you could get 60% of that pay raise to go towards additional saving and investing. That way you still get a little bit to get to help you through this messy middle, to get a little grace in your lifestyle. But do try to apply 60% of that pay raise towards increasing this from 14% to maybe you go to 16 to 18% depending upon what the pay raise was for the year. Then slowly you work your way out. Then before you know it, you're going to look back and go, holy cow, we are saving and investing 25% and knowing where we are in this process. This is another thing I would Encourage you down the road, not while you're right in the middle of it, but maybe after you've done some of these initial things we've talked about. There's nothing wrong with going to learn.moneyguy.com and looking at the know your number course and seeing that way you can actually have a measurement. Are you ahead of the curve, behind the curve, or right where you're supposed to be? Because I think you might find out, you know, depending upon where you are in your 30s plus, you know, what your monthly living expense is, you might be in a better shape than you even realize. But you do need to do, need to do the homework to kind of know that.

[Brian]

Yep, I had one more thing. This is one more thing. I just, I have so much compassion and so much empathy for messy middle because oh my gosh, it's messy. I know some people who've done everything like, well, I've cut and we're lean and we're doing this and we're doing this. And 14 is a number. That's great. That's great. Recognize it maybe for a season because you just said you got three kids, all seven and under. Maybe one of those kids is in daycare or maybe one of those. Maybe there's some sort of cost. Maybe something will shift in your life as you move through the messy middle. And it's okay, you know that right now 14% is going to be your number. But in two years there is lighting in the tunnel. The kid's going to start kindergarten or whatever the thing is. And okay, boom, now I can go get a part time job or I can. We're not going to have the daycare cost or whatever that thing is and then I'm going to be able to save. That's okay. I don't want you to like, like absolutely hate life right now because you're not hitting that number because the messy middle is messy, man.

[Bo]

Right? This reminds me of that. We just did a Making a Millionaire episode where that exact situation where in two years things were going to change dramatically just off of daycare alone. So while you're in the messy middle, pay attention to those things and then see, you know, there's nothing wrong with measuring twice on what assumptions are going to be changing. But my encouragement, once again, it's back to that ticking clock in the background when some of those expenses go away, like daycare. Actually do something productive with it when, you know, don't just let that turn into additional consumption. Actually try to turn that into additional money because you Feel a little behind.

[Brian]

Love it.

[Reby]

Yeah. That was great. I think sometimes you have to remember it is a goal. Like next year could look completely different. So I love what you guys said.

[Bo]

She's staying, you know, she's at the house. So that maybe that. But still, there's additional programs. There's, you know, whether you're doing mother's morning out or other things, there's. There's costs that will go away as those children start getting a little bit older, right? I mean, heck, diapers alone, buddy. Especially if you use fancy diapers like Beau.

[Reby]

Hey, what's the shots fired?

[Brian]

I'm asking you for a friend. What's the age range that boys Potty train? Anybody know?

[Reby]

I know you're looking at me because I'm a boy mom, but I don't know. Figuring that out as we speak, I just. I'll let you know.

[Brian]

I'm. I'm ready for it. You know, we were. Me and my wife, we were out of this whole diaper thing.

[Reby]

I think it's anywhere from like 2 or 3. It depends on the kid.

[Bo]

I mean, I'm old, so I don't know. I bet boys are slower.

[Brian]

I've heard that.

[Bo]

You know, aren't boys slower at everything?

[Reby]

I have heard that.

[Brian]

Actually.

[Reby]

I don't know.

[Brian]

I think it depends on this child. We were in this sweet spot. Our girls were out of diapers, and we were living the good life, and then we just got thrown back into these. I'm ready for this diaper stuff to be gone. Like, I'm just. Every time I change his diaper, I'm like, buddy, we gotta fix this, man. We gotta. We gotta do something.

[Bo]

By the way, this is way too much information. I spent a lot of time with Bo and his family, FaceTimes him at constant times. And I've heard his boy celebrating.

[Brian]

Hey, Daddy poo.

[Reby]

Potty humor is here.

[Bo]

Big celebrations in the Hanson household.

[Brian]

I love it.

[Bo]

I'm not making it up. It really happens. And you hear his son bragging about his.

[Brian]

He's just a hat.

[Bo]

His movements.

[Brian]

Proud boy.

[Reby]

All right, you ready for the next question? Bert Beezing has a question. He says I'm a new college grad thinking through my insurable needs. I don't have a spouse or kids right now, so I know life insurance isn't a priority yet, but what about disability insurance? Is that something I should be looking into at this stage of life? And if so, what kind should I consider? Consider? And when should you be considering all these insurances is really the question.

[Bo]

Way ahead of the curve.

[Reby]

I know.

[Brian]

Bert1, I love this question. I love that you are thinking through this because a lot of people don't realize this. And this is, I think this is a little bit of a hot take early on in, in your career, early on in your financial journey. I counsel young people all the time. Like, I'll be looking at their expenses and I'll be like, kind of going through it with them and I'll see this thing and it's like, you know, 50 bucks a month or actually less than that, 20 bucks a month. And it's like life insurance. And I'll be like, hey, why, why do you have life insurance? Like, oh, well, I just, you know, I signed up and I was able to do this and I had a friend who was selling and I'm like, man, I don't know that you have a need for life insurance. No one is dependent upon your income. If you, if something were to happen to you, there's no one who's going to be put out because you're not able to go generate that wealth. So you really don't have an insurable need on your life at this time. And so it sounds like Bertram understands that and recognize that, but a lot of young people don't. They just think, okay, I'm an adult, I've got obligations now, I'll go buy life insurance. That's not the case. It's not something that you have to have. Right on. But then the second question is a really interesting one. All right, so disability insurance. And for those that don't know, this is a type of insurance that if you were to become disabled and unable to, and Brian will talk more about this, perform your job, or perhaps perform any job, then there is a benefit that you can receive so that you can provide for your well being. So the question becomes, who needs disability insurance? When do you need disability insurance? How do you decide what kind of disability insurance? And what do you know about disability insurance?

[Bo]

I have to pick on you about your answer on that a little bit. Like, if somebody has $20 a month coming out, I'm probably not gonna pick on them about that. But even though they don't have a huge, just because of, down the road they might have a medical, you know, situation, they're not as insurable. But what I see is that because you mentioned a buddy who sold it to him, it's the whole life policies where it will be 20 times the 20. So they have a $400 a month premium. And then I'll Be like, yeah, what are you doing? You have nobody. But that's basically like they just didn't get Starbucks two or three times. And you're so I'm just picking on you. You're spot on. But 20, I would have said $400 a month because that could be funding your Roth IRA instead of funding a whole life policy for your college roommate that is tipping their hat towards insurance sales. We've all been there or know somebody who's, who's done that. But when it comes to disability, this is what Beau's talking about. First of all, your employer might very well offer disability insurance and there's nothing wrong with looking at that. And then there's two. There's quite a few tips that I want to give on this. First of all, you always want to pay for disability with your money after tax, meaning if your employer offers a deduction through your payroll, be careful if it, if it lowers your income taxes. Because the reason I say that is because if you pay your disability insurance premiums with after tax money, meaning that money was subjected to income taxes before you paid the premium, if you become disabled, that insurance will pay out completely tax free. That's great. You can imagine because a lot of times you don't have to have 100% replacement if you take out the income taxes. You might only, especially if it's tax free, you might only need to replace 60% of your income because you're not having to cover the income taxes, the Social Security and Medicare taxes and all the other things. So that's why be very careful how you pay for your disability insurance. The second thing is, is what BO was alluding to, is it ownoc or is it any occ, meaning occupation? If you're a person that is in a very career and you see this with doctors, you see this with all kind of people where you might be, if you just go by a general disability policy that's very affordable, you might be sorely disappointed to find out that as long as you can go be a greeter at the local value store, that you don't qualify for disability. And you're like, wait a minute, my family or potential future family might need this. Then I would just pay attention to those description terms because that will impact the premium. And look, if you're super healthy, you know, typically you want to buy your own policy outside the employer. But I have to say, but there might be like your employer might be buying through a trade association or something like that. So it's one of those things where you Kind of need to try it both ways to see disability is a little different than life insurance in that aspect because I know I buy my disability from both of my trade organizations. I have like the AICPA as well as the NAPFA Financial Planning Group. That's how we bought our disability is because those trade organizations usually work with insurance companies specifically for your industry and they give you a pretty good deal. So if you're in a specialized industry, see if there's some type of membership benefit or industry specific policy that you might be qualifying for as well.

[Brian]

So for your question, Bert, is this something you should be considering? Absolutely. Is it something you should investigate? For sure. Is it likely that you have an insurable need? If you were to become disabled, you would still need to have cash flow coming in. Yeah. So I think this is often one that we see is incredibly uninsured and a lot of people avoid. And yet it's one of the ones that's probably more likely to happen. What was it? Something like one in. I'm going to mess this stat up, Nick.

[Bo]

Well, here before you give a stat, because we don't know the stat is that we're all going to die, but you're more likely to become disabled while you're working age than you are to die.

[Brian]

That's exactly right.

[Bo]

That's the stat. Without giving the percentage. Okay, four times more likely. Four times more likely.

[Brian]

Four times more likely.

[Bo]

There we go. That's why we have outside researchers that can real time make us look smart. Thank you, Nick.

[Reby]

Well, wonderful. Bert Beezing, great question. Thank you for asking it and I hope that that helps you as you think through that and way to be on it, by the way.

[Bo]

I wasn't trying to pick on you. It's just what you said, $20. Then I was just like, no, I'm ready to fight. I wasn't trying to be.

[Reby]

He wasn't ready to fight.

[Brian]

I'm ready to fight. Cause you know what I'll tell you to do? As soon as you said $20, I'm like, Brian, I want you to go to moneyguy.com resources. I want you to check out our wealth multiplier tool. And I want you to see that even for a 20 year, even just $20 a month, that's $240 a year. What that can turn into by the time that you turn 65, we know that this $1 koozie cost me $88. Take that one, multiply it by 240 and it will be 88 times 240. It's huge. So boom, $20.

[Reby]

Don't discount it, Brian.

[Bo]

I know. I just.

[Reby]

I like how I'm telling you that, like, you're like the biggest proponent of that concept.

[Brian]

You did say something earlier, though. You said you're talking about an episode of Making a Millionaire where we talked about this. If you guys, two things. If you've not checked out Making a Millionaire yet, you should, because we love doing it. Every other Monday, we have a brand new episode come out. We just had a brand new episode come out this week. And the way that you can know when we have new content released is if you subscribe. If you're not subscribed right now, you will not get notifications. You will not know when we release new content. And we have some exciting new content coming your way every single week.

[Bo]

By the way, I'll share because I did this. I feel like I'm the old man on the porch. Or just call me like, Uncle Buck. You know, I feel like I have to share.

[Brian]

Why would we call you Uncle Brian?

[Bo]

I don't know. You can call me Uncle Brian, too, but Uncle Buck's more fun. Here's the thing. We just like when we came out with Making a Millionaire and everybody knows, we know Caleb, a lot of you guys, there was some negativity towards Caleb and I was like, please, guys, let's, let's, let's keep it on the up and up. Well, I've started noticing a trend sometimes when we do these Making a Millionaire that the comments have been harsh on our guests. Now, look, I expect we're gonna pick on Bo's mustache and.

[Brian]

Nothing to pick on there.

[Bo]

There's a lot to be. And that's fair game because he knows and I make fun of my. I, you know, I pick on myself that I can't grow facial hair myself. But it does bother me when because everybody who comes on Making a Millionaire volunteers to do this and we try to make a win win scenario, meaning, and Bo tells this, every guest that comes on the show, we let them know that not only do we want this to be engaging content that hopefully you, the audience are going to learn something for, but I want the people who are willing to put their financial life out before the world to kind of leave feeling like this was a good experience. And it hurts my heart when I see physical traits kind of hit on these because these are just general people. And then even, I don't know, it's just there's things that I was like, I don't know that the People who are posting these comments would say it to these people's faces. And that bothers me because I know the Internet lets you do that and feel like you're getting away with it, but these are real people sharing their real lives. These are not paid actors. They get a hotel stay. I think I'll say some of them do, because some won't even take that. It's kind of crazy how great the people who have volunteered to go on Making a Millionaire have been. But I just say treat them like you were in the room with them and be kind.

[Brian]

Love it.

[Reby]

You heard it from Uncle Brian. Be kind. And I agree.

[Brian]

Uncle Buck.

[Bo]

Anybody who's my age and.

[Brian]

Knows John Candy, this is a John Kennedy, right?

[Bo]

Yeah. I mean. I mean, Uncle Buck.

[Reby]

Yeah, we know. Yeah, we know.

[Bo]

And once again, it confirms. Yeah, John Candy is an uncle. Probably a lot better than Uncle Brown.

[Reby]

All right, you ready for the next question?

[Brian]

Yes, ma'am.

[Reby]

Alyssa B. Asks, is it okay to be more aggressive in your portfolio mix when you're trying to catch up for retirement? I want to help my mom start on her retirement. She's turning 49 this year, and she's starting at zero. What do you think? Because I know you have thoughts about how aggressive you should be. What if you're starting later?

[Brian]

Here's. I. I liked your. I liked your question, Alyssa, when it. When in my head it was going this way. Is it okay to be more aggressive in your strategy when you're behind? To which I would unequivocally say, yeah, if you're behind and you're starting at zero later in life, man, you do have to be aggressive. You have to save aggressively. You have to cut expenses. You have to make hard decisions. You have to do some aggressive things in order to make up for lost time. But you kind of went a slightly different direction. Said, is it okay to be aggressive in my portfolio? Which means take on more risk than likely would be appropriate given my circumstances. And that one makes me a little nervous. That one I don't know that I'm willing to sign off on.

[Bo]

I'll give you some experience share and then tell you some actual terms that you can do a little research on to. To see why we have this hesitation. I have been managing money since the mid-90s, and I can tell you many times this is a common trend you see with people. They figure out personal finance at a later age, and they're like, you know what? I'm going to let my money work as hard as possible. And I think about the late 90s where everybody was just buying all the tech funds loading up and they were so happy because you know, for a period it was working because we were crushing it. You had you know, 20 plus percent for two or three years in a row. But trees don't grow to heaven. And here's why. You have to be careful just loading it up on what the latest and greatest trend is that seems to be doing, you know, growing that tree to heaven is that you. There's two terms. There's risk tolerance. That's, that's the term where when you have the ability will the market, when the market has volatility, are you immediately going to reach for the sell button because emotionally it's just too much for you to handle. That's what mo. And whenever you sign up with as a client with like a brokerage company or anybody, they're usually going to do some type of attention to risk tolerance because it's a compliance thing as well, is how much, how much risk can you handle before you call and cry uncle. I don't know why I have this uncle theme going through bunch of uncle today. But, but that's risk tolerance. The second thing that people never talk about, it's that, that component of risk that's kind of the silent part, but it is a very powerful part. It's called risk capacity. Is that as you get older and you said Your mother is 49 years of age now look, if she has got, if she's going to traditional 65 on her work life, then just her time horizon allows her to be more aggressive. Just because she's got 16 years before she's actually retiring, that's going to, that time horizon is going, going to allow some, some aggressiveness just because you're 16 years from actually reaching the date. However, if you tell me your mom is trying to retire at 55 and she's 49 years of age right now and starting at zero, you might actually be cutting your knees out by taking on more risk. Because what happens is, is that you get too close to retirement age. Let's just say this thing works out spectacularly for the first three years and you take all this risk. But then the year that she's getting ready to retire and you get a sequence of return failure, meaning that all of a sudden the market goes down 40%. It does happen by the way. Go look at the Great Recession and then all of a sudden you see your portfolio get almost halved and you have to ask yourself how many years would it take for my portfolio to recover. And if it's like six years, seven years because you took so much risk that the portfolio. Because remember, if you lose 50% of your money on an investment, what do you have to make to recover that money? It's not 50%. You have to make 100%. And if you think about the average rate of return that we're telling people is 8% a year. And then, you know, you just lie. You have to have 100%. You start doing the math. On you go, oh my gosh, this is going to take a decade. Well, I got to live off this money. You don't have the time to actually recover. That is what is called risk capacity. You might be the biggest cowboy, the cowgirl where risk tolerance doesn't. It's just water off a duck's back. But I'm telling you, if you don't pay attention to risk capacity and your ability to have the time to recover, you're going to have a failure that you might not be able to recover from.

[Brian]

Yeah, I think a good resource I would point you towards. If you go to moneyguy.com resources, we have a deliverable called how much should you save? We oftentimes say incorrectly call it what can 25% do for you? But this is a great one to show. Based on savings rates, how much of your income could you replace at different ages with different savings rates? Well, if your mom is 49 years old, I'd point her to, okay, if you're 50 years old, what would your saving rate need to be? And what kind of income replacement can that create for you? And what you might have to do is redefine what retirement looks like. It may not look like the traditional age 65 completely leaving the workforce, but it may be something where it's a graduated step down from work to at least get moving in that direction. But it's a great resource you can use to figure out what is still possible in this next 16 years.

[Bo]

And remember, when you do retirement planning, you're basing it off of the expenses need in retirement. And don't forget to take into account like Social Security and other things to really hone in on what is that goal you're trying to build for or build to.

[Brian]

Love it.

[Reby]

Alyssa B. Thank you for that question. I hope that helps as you think through helping out your mom.

[Bo]

By the way, it shows me like I literally can never remember what that resource is called. How much did she save? It showed me. You do actually know what it's called. You just feign like solidarity brother issues to make me feel better about my inability.

[Brian]

Solidarity, bro.

[Bo]

So well done.

[Brian]

Thanks, man.

[Bo]

We always knew he was a smart one.

[Reby]

I don't know.

[Bo]

I think it's salt shaker talents just going down the assembly line. No, no, no. Biceps pectorals. We'll give him some IQ too.

[Reby]

Wow. High praise.

[Brian]

Tell me more high praise.

[Bo]

Facial hair. No, Got dipped up on the facial hair.

[Reby]

Yeah, for every compliment, somebody brings Bo back down too. That's how the comments are as well.

[Bo]

Believe me. You ought to see me. Me and his wife together, we. Nothing better than. Lots of picking on Bo.

[Brian]

Lots of humility there. Lots.

[Reby]

Keeps you honest. All right, we're going to move to Kurt B's question. It says, I am 25 years old.

[Brian]

Is it still lukewarm? Is it still flat?

[Reby]

Are you still drinking?

[Bo]

I totally forget myself that I'm drinking like. Like week old Lacroix. It's fine.

[Reby]

Why? Look, our team is already like.

[Bo]

No, no, let's go. I'm going. I'm down now.

[Reby]

Got a new drink, Self.

[Bo]

Was it self flagellation where you. That is punish yourself for the sunk.

[Reby]

Cost fallacy at its worst.

[Brian]

Did you what she just said? What that is Sunk cost fallacy. Look at Rabie throwing out the financial bombs right there. Behavioral finance.

[Bo]

Yep, she's right. Sunk cost fallacy. Let's get rid of this. Yes, this is. This is horrible.

[Reby]

Use Ryan's own logic to convince me.

[Bo]

I need a stash though. So since I can't grow up my own, we'll just trade cans.

[Reby]

Okay, now that Brian has. Take a sip, make sure you're nice and refreshed. Then we'll get back to the personal finance.

[Bo]

That is. That is. I'd be a product placement for a cold version of this Lacroix.

[Brian]

If you're looking for sponsorships, you can write sponsorshiponey.

[Reby]

Oh, don't do that.

[Brian]

That's not really a thing. I'm just kidding. That's not a thing.

[Reby]

You can reach out to us.

[Brian]

You see how nervous Ruby got?

[Reby]

Well, we don't have that. Email doesn't exist. That'd be sad.

[Bo]

Winner.

[Reby]

Reach out to winneroneyguy.com. that one does exist. All right, now that we've recovered from our sunk cost fallacy.

[Bo]

Thank you, Revi.

[Reby]

Let's talk to Kurt B. He says, I am 25 years old, about to graduate business school with 37k in student loans at 7%. I have invested 66k in the market. Is it worth me pulling money out of the market and paying off my loans entirely. I just got a job.

[Brian]

Here's what I'd like to know. One, it's very difficult to give specific financial advice. Not knowing your specifics. Right. But I've kind of got some leanings and some inklings here. And what I would like to know is if I were to look at that $66,000, what type of accounts is it in? You're 25 years old, about to go to, about to graduate business school. So I'm going to guess you're probably working at some like point in time along the curve. I'm hoping some of that $66,000 is in Roth IRAs. I'm hoping you were loading up those Roth IRAs while you had that earned income coming in. And so, so if that's the question, should I cash out my Roth IRAs and go pay off this high interest student loan debt? I don't think I'm going to vote for that. Or maybe this 66 is something that it was a gift from family earlier in life and they gifted you some stock from the publicly traded company in the town that you leave and it's highly appreciated. And so if you were to now sell that, you're going to incur a significant capital gain on that because it's gone up in value. Would I go cash that out and liquidate that and pay off that high interest debt? Ah, maybe not. Here's what I would like for you to do. You're 25 years old, about to graduate from grad school and start your first job at 25 years old, with student loans at 7%, we would argue that that is high interest debt. Brian, do you have the thing that you can hold up? Do you know the thing? We have a nine step tried and true process of what to do with your next dollar. And instead step three, we call that high interest debt. And so even though you've gotten a little out of order in terms of you built up some wealth before that, I do think as you begin your career, as you get your first job, as you begin to move along on your financial trajectory, I don't think there's anything wrong with attacking and knocking out that student loan debt super, super early on in the journey. But I don't know that you have to take assets that are currently invested and working for you, ax those assets and then squash that debt. Agree, disagree, want to fight.

[Bo]

I think I disagree with you because here's where I am, okay, is this is $37,000 of debt at 7%, which, that, that, that's pretty high on the interest rate. He's got 66,000. Now what I don't know. Look, I will agree with you if this is Roth money, that one would give me to pull out. But if this is after tax money, meaning that it but it's got some tax basis, first question is how much of this is a taxable gain. But if assuming that in realize you might be in a low, you're a student currently, you might qualify for 0% capital gains in that first year. Well, it depends on when you start your career, what your income. But look into the 0% capital gains rate and then compare that to what your new income, your partial year income is going to be after you graduate and see if there might be an opportunity to get this money tax free. And then here's the second thing, you got a third because I've given that's one component. The next component is it's kind of like a quarterback throw in the ball. You don't throw where the receiver is currently. You throw where the receiver is going to be when they intersect. Because the player, once you start working, you're running just like that receiver is. So I don't discount how much you could actually save over the next six to 12 months. Because if you are just being a financial mutant asking this question at 25, you might realize, oh man, this is because I've been in school a little bit extra. I've got a unique skill set and I've landed this great job. I think I'm going to be able to save $1,000 a month, you know, as part of and use this as your backbone. We know your first you already have step one as long as a portion of that account that's $66,000. Hopefully some of this is cash equivalent to cover your highest deductible. Of course with your brand new job, once you start you're going to make sure you get your employer match so you get that, that 50 to 100% rate of return. But then when you get here I would look at okay, I got $37,000 I want to extinguish. I think over the next nine months I can save up, you know, $8,000 of this. I'm going to take $29,000 of my 66. Assuming I can get this for not paying a gazillion dollars in taxes, that's going to undermine it. And then I'm going to over the next six to nine months going to pay off the other remaining $9,000. And that way you finish your first year out with this extinguished. Now that's just. I can't give you. That's just a scenario because personal finance is very personal. I don't know your tax rates, I don't know all the other components of your income and so forth, but that's just kind of doing a Sheriff. I was kind of looking at this from a situation that gives you the best of all worlds. What do you think?

[Brian]

I think we can. You know what? I think it's okay for us to disagree a little bit because I don't think either one of those is wrong. I think that. I think either what I do, like you said, I think you should have a finite timeline on which you should satisfy the student loan debt. Because what I'm seeing is if you are graduating from grad school, you're going to be. Let's assume a higher income, higher starting salary when you come out. I'm, you know, if you can get that student loan debt knocked out in the first year to, you know, 24.

[Bo]

Months or so, it's high interest debt though. I know 7% is high.

[Brian]

I know. But you know what makes it even more, you know what makes that interest cost even more costly is if you got to go incur taxes in order to be able to satisfy it.

[Bo]

Hopefully he's in a low. I mean the income even. Because even if he's in a higher income, it's going to be a partial year. He's going to be 15%. Hopefully he lives in a no tax state.

[Brian]

I'm not trying to convince you to come onto my side.

[Bo]

I'm trying to convince you.

[Brian]

I think this is where personal finance is very personal. When it comes down to your unique circumstance and your unique goals, I think that either one of those solutions is acceptable.

[Reby]

Well, there you go. Kurt, you have a lot. Ryan is not for having problems.

[Bo]

We could be a laboring it.

[Reby]

But regardless, those are really good thoughts for you to think through. Thank you for asking the question and we hope it helps as always.

[Brian]

Can we do. Can we do something? Since some. Since I. Can we pull the audience just out of curiosity, say, what would you do, financial mutants? Would you use the 66 to pay off debt or leave the 66 invested just to be.

[Bo]

Is that it? It's just an ab.

[Reby]

Is there a third? I thought there were two options that.

[Brian]

We were talking about.

[Bo]

Know I'm going to drink some more of my cold water.

[Reby]

All right.

[Bo]

Cold stash water.

[Brian]

Stash. That sounds gross.

[Reby]

On that note, moving on to S. Sands question. It says the wife and I are 28 and 33 and on step seven and on track with our number, meaning the retirement number. How do you weigh the opportunity cost of a needed home? Repairs, home improvements and seeing our wealth multiplier. Thanks.

[Bo]

Well, here's something that's interesting, Bo because a lot of people get confused on this is because when you get to step seven, that means that you've already passed step six, which means you're saving and investing 25% of your gross income. So if I was s sand, a lot of people go, well, why wouldn't I immediately be in step eight, which is abundance goals or prepaid future expenses? Well, I love that. S sand is really giving it the respect that step seven is the first place where you kind of pause because steps one through six are very progressive. They're progressing with a very purposeful, whether it's emergency reserves, keeping you from making desperate decisions and then after you get through, keeping you from making desperate decisions. With the two steps that are cash based, there's maximizing free money, there's making sure you're not turning compound interest upside down by working against you with step three. And then of course we've got all the tax incentivized savings of Roth health savings accounts and even your employer plan. Step seven is the first step that allows you to say, hey, how am I actually going to use this money? Or when will I need this money? So as saying, I hate to answer a question with a question, but the question is when will you plan on using this money? Like if you're part of the fire movement or fine movement, financial independence next endeavor where you think that, hey, I'm not going to do a traditional retire at 60 to 65, I think I'm going to drop out at 50. You have different savings goals than somebody who is going to plan on working until they're 60. So that needs to kind of be taken into account to figure out. But if you are, you figure out that you especially if you use a resource like know your number.

[Brian]

Sure.

[Bo]

And you go to learn money guy and you find out are you ahead of the curve, behind the curve, right where you need to and you find out you're ahead of the curve, then I would say you're actually graduating from step seven to step eight. And while all means go upgrade that kitchen.

[Brian]

Yeah. I think your question was, you know, how do I weigh the opportunity cost between doing these home improvements or the fact that I recognize that at 28 and 33, our wealth can multiply substantially over the long term. And when I Hear that? I think it's really a goals based question, you know, what are the ultimate goals that I have or that we have? Because. Because if you're in step seven and you're already saving 25%, you're doing all the things, but you're just saying, okay, man, yeah, I know I can do the home improvements, but if I do that now, that money's not going to be working for me. You guys have to figure out where does that fall on your priority hierarchy? Now, here's a really practical example. Let's say that your family's grown and you got a bunch of kids and inside of your current home, you've recognized that, man. We got two of the kids sharing a room, or maybe all three of the kids sharing a room and we have an unfinished space over here, man, we could really go for finishing this space. And we finished that space. It's going to allow the kids to spread out. It's going to give us another bedroom. It's going to allow. It's really going to increase our standard of living that we are experiencing right now every single day. If I'm already in step seven and I'm already doing all the 25% and I'm doing those sort of things, well, okay, yeah, if I spend whatever it is going to cost to renovate that and to do that yet that money is not going to be working for me. But there is very real family value that takes place by me improving the home in which we live so that it better works for us. And you can feel that for outdoor living or for a kitchen or for whatever the thing is inside your family. But you have to figure out how much of a priority is that? I mean, you could do it with something like a swimming pool. Okay, hey, I really want a swimming pool. Okay, great. But is the swimming pool going to be worth the opportunity cost of those dollars in the future working for you? Some people are going to answer that question the affirmative. Yeah, absolutely. I want this to be the thing that my family does and I want this to be experience that we have. And I'm not sacrificing financial independence. I'm just sacrificing how big the number is going to be. That's okay. But if you look at it and say, okay, I can do this, but man, it doesn't really matter if we have a theater room in the house. That's not something that's like so, so valuable. Maybe it doesn't make sense to do that yet. Maybe you set some goal that once our Net worth hits this, or once we get our account value here, then we will reward ourselves with doing the home improvement. You have to decide where the priority lies and what that. Especially if you have, like, kids in the house where the timeline is on actually being able to do that home improvement.

[Bo]

I think you're spot on. I mean, the big thing, the way I would put it, is you have to have a conversation with your current self, but also your future self and make sure that you're giving them both a seat at the table. Because I don't want you to get to be 50 years old and have regrets that you were living not a financial mutant life, but a financial miser life in your 20s and 30s. Because I want you to look back with a smile on your face and say, I lived my 20s the way I should have. I lived my 30s. I lived my 40s. That's why we're very intentional. I think you're at the right place because, man, are we nerdy on the numbers, but, man, oh, man, are we also super sentimental about making sure that you understand that money is only a tool.

[Brian]

Love it.

[Reby]

That's awesome. All right, well, I do have some results on that poll. We asked the financial mutants in the live chat, what would you do? Would you leave that money invested, or would you use it to pay off the debt? 65 said they would leave it invested.

[Bo]

Whoa.

[Reby]

True financial mutants.

[Bo]

Whoa. Bo whooped me. Do you see that? I might beat down? And I'm like, oh, my God.

[Reby]

Take another sip of that cold Lacroix, Brian.

[Bo]

We got some.

[Reby]

I'm really surprised because, I mean, that's. I feel like we talk so much about the power of compound interest multiplier. Like, there's something to consider there. That's. We've trained them well. That's what I'm hearing.

[Brian]

But I want to be very clear. I want to be very clear. You know what?

[Bo]

I know what I know. What was it missing in that.

[Reby]

Yeah.

[Bo]

In that poll, you should have taken a sad face with my bottom lip puckered out and see if that swayed the vote. I could have lobbied this a little.

[Reby]

It.

[Brian]

Love it. Kurt, if you did make the decision, I'm going back with two questions.

[Bo]

Sorry.

[Brian]

If you did make the decision to cash out some of it, or maybe cash out all of it, pay it off. I think that's perfectly permissible. And okay, I want to be clear. It's not like, one way or the other. I think this is one that there's a little bit of gray there.

[Reby]

Yeah. Some nuance.

[Bo]

Trying to be nice. Personal finance bridge builder, bro.

[Brian]

There are many paths to wealth, and I think that's okay, not wrong.

[Reby]

All right, we do have another question queued up. It's from Alana R. It says, can saving to 25% be a financial miser? We were 31 and 36, just crossed 200k and are saving 2 times the amount needed without Social Security. However, our investment rate is only 17%. Yet we constantly argue about money.

[Bo]

Alana didn't give her age, did she?

[Reby]

Yes, she did. 31 and 36.

[Bo]

31, 36.

[Reby]

So that's her and her like. Yeah, yeah. Two spouses.

[Brian]

All right, so I want to. I want to reframe this. Okay. You guys say to save 25% of my gross income, is it possible that I can get to the place where if I'm saving 25% of my gross income, I'm actually being a financial miser? Brian, I love hearing you talk about this because you said that you've had friends and colleagues and acquaintances in your life who had this goal of saving and saving and saving and saving and saving and saving. And even we got the point to where, just based on the mathematics alone, they were going to be fine. Like, the portfolio was big enough, it was going to grow. They had done all the hard work early on, but they could not take their foot off the gas. And you said, hey, that actually led to, like some very real intangible marital problems. And you, even in your marriage, you said early on to your wife, you said, hey, if we can kill it in our 20s and we can be so aggressive saving our 20s and 30s in our 40s, we're going to give ourselves permission to let off the gas. So you even started on that. So can it be detrimental or can saving 25% past a certain point actually be a negative?

[Bo]

For sure. I mean, but without a doubt. I mean, the thing is, you have to just make sure you do the work to know if you really are at that place. Because I always worry because 31, 36, still pretty young. It's young, but it's at least not because I always worry about, like my 27 and 28 year olds who are killing it from an income standpoint, and they start saving and investing and they go, I think I got enough. I can start dialing it back because I've run the projections and since I have 25 years or 30 years of compounding growth, I don't need it. And I'm always like, yeah, but you haven't really built your assets up to a critical mass where it's actually your army of dollars is big enough, where your future is kind of of assured for you. Because here's the problems when you're Even in your 20s and even 30s, is life just has a lot of stuff that's gonna come your way. You know, I'm always amazed at people who think they can leave the workforce or make big drastic decisions when they're in their early 30s, even up to 40s or so, because you don't even know how many life has. How many kids are you gonna have? Are they. Are the kids gonna have any medical issues? Are you going to have some. Some disability or struggles that impacts your ability to earn money the way you think you are? Life just has a way of humbling you if you're not careful, and you need to plan for those contingencies. But I think that it's definitely one of those things where if y'all are fighting about this all the time, that breaks my heart a little bit, because, you know, y'all are financial mutants who are talking about it. I would encourage you to maybe see if you can redirect some of that energy into more of a positive action. Because one of the things, like we did a Making a Millionaire last week, where I got a couple, and I was like, look, for the next two years, really two to three years, your life might be harder because you've got to make some key decisions in the next two to three years. And if you can do this and gamify it as a couple and y'all are on the same page with it, your life is going to be changed forever. And so I would actually turn this into a process. I mean, Bo and myself both take a full day off of work where we sit down with our spouses, go over our net worth statements, talk about the goals for not only the coming year, but for what are the things we're thinking about two, three, five years down the road. And I think it's just really helpful to take into account each other's perspective and make sure you're on the same page so that money is a healthy tool in the relationship. Because that's the thing that I worry about is. And the example Bo gave is I had a. He was a dear friend. Now he even does some work with the client with the firm where he was having. And, you know, we were in a group together, and he shared that his spouse was having a lot of issue, that he was still asking for receipts every time that, you know, she went out to eat or did something to the point that it created marital strife. And that's why, you know, and I think about, like that couple we met with for making a millionaire for the next two years, it makes sense that they ought to track every expense that they have because they are in a goal together. They're gamifying this. But I'll tell you what, after they reach that goal, maybe you don't have to hang on so tight and track every receipt because hopefully you've moved from a budgeting plan to a money management plan where those. That money's automated and automatically going where it needs to. That's the type of stuff that I like couples to have those open conversations so it doesn't turn into something that's bubbling under the surface that could just rock you from the core. Because money is obviously one of those core things that people fight about and even leads to divorce. And I just don't want that to be your future because you're already doing so many healthy things. You just need to continue to try to figure out how you facilitate this even better.

[Brian]

You want a hot take here?

[Bo]

Yeah.

[Brian]

For some people, spending money is hard. I know for most Americans, not hard at all. But for some people, a lot of the folks in the audience, spending money is hard. You know, earlier on in our marriage, I would always just tell my wife, we're broke, we're broke or broke or broke, we got no money. We're broke or broke or broke or broke. And then every year, I'll do the net worth statement. She'd see the net worth changing, and she'd be like, wait, wait, wait, wait, we're broke. But that says something different. What, you know, what's going on here? And so we had this, like, tension around. I just wanted to save everything and not spend and not spend and not spend. And. And she didn't want us to decrease our savings rate. What? The conversation that finally, like, kind of opened it up for us is we found out. I said, okay, what do you want? What do you want to spend money on? It wasn't that she wanted us to save less than 25%. It was that there were goals that she had that we needed to be on the same page about. So I said, okay, if we're going to spend money, what do we need to spend spend money on? It's like, oh, well, I really want to travel. I want to go do this. And hey, I really like to redo this room in the house. I'd really like to think about doing this expansion. I really like and we just kind of like listed those things out that we wanted to do. And what was amazing is when we listed those things out, we were actually able to still do those without sacrificing our savings goals. I think that a lot of times spouses think it has to be either or. Okay, if we're going to do this, then we can't save. Well, if you would just have a very candid conversation. Hey, what are the things we want to do? Oftentimes you find ways to make it work. Okay, yeah, we want to travel, so we're going to travel this year. But since we're doing that, we're not going to do this other thing. And since we're not doing this other thing, we're not going to have to pull down our savings and investing. We can actually stay at the same savings rate and still accomplish those things. It just allows you as a couple to more effectively and efficiently use your dollars for the things that matter and be on the same page about that.

[Bo]

Good communication.

[Brian]

That's it, man.

[Bo]

And if, look, if it's getting to the point where this is really causing strike, y'all go talk to somebody. I mean, I'm very transparent that, you know, I've been married close to 30 years now. There's moments in your marriage where maybe you two. It's just not healthy the way things are. You're communicating with each other because it is leading to fights and stuff. It's amazing what bringing a third party in to kind of something you say your spouse might hear, even though you keep saying it over and over. But bringing that third party sometimes can help break the logjam. And then you also, the other side of the coin is you might hear something that you're like, oh, yeah, oh.

[Brian]

Okay, I should have heard that. Yeah.

[Bo]

I resemble that. I probably need to take that in to take that to heart.

[Brian]

Love it.

[Reby]

Well said, guys. Very well said. Thank you for the question, Alana. I hope that that helps. And this was a great conversation today. Thank you to everyone who asked a question and talked with the these talk to us about these things. We really appreciate you being here and making this conversation possible. Remember, the conversation continues [e-mail] check out our free resources page where there's tons of free downloads and calculators that will help you continue to customize and consider all the things that we talk about on this show. So thanks for being here.

[Bo]

I thought that last question set up perfectly. We have a statement we like to say is there's more to wealth than money. And so, I mean, if you're not having good conversations with your loved ones about what's important, because believe me, it goes well beyond money. You know, you can be very wealthy by just having good health, by just being around people that you just love spending time with. So make sure you're, you know, I know we run a financial show, so I want you to get into those analytics. Don't skip doing the homework, but man, oh, man, make sure you're also leaning into all those other things that really give you the color and really give the zest to life. I'm your host, Brian Preston. Mr. Bo Hanson. Money Guy Team Out.

[Brian]

The Money Guy show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss.