Brian Paid Off His Mortgage - Here’s What He Learned

Summary

Money Guy Show: Episode Summary – "Brian Paid Off His Mortgage - Here’s What He Learned"

Release Date: July 23, 2025

Hosts: Brian Preston and Bo Hanson

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Introduction: The Mortgage Payoff vs. Investment Dilemma

In this episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into the classic financial debate: Should you pay off your mortgage early or invest your extra funds? This age-old question frequently surfaces among their audience, prompting the hosts to explore various strategies and outcomes to provide clarity.

Brian Preston opens the discussion with a succinct framing of the dilemma:

"[00:05] Brian Preston: Age old question, should you pay off your mortgage earlier? Invest."

Bo Hanson echoes the sentiment, highlighting the diverse opinions within the financial community:

"[00:10] Bo Hanson: ...people get asked this question all the time... Should I pay off my mortgage as quickly as possible or should I get my money working for me?"

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Case Study: Debt Free Dave vs. Manny the Mutant

To address this dilemma, Brian and Bo present a case study comparing two hypothetical individuals: Debt Free Dave and Manny the Mutant. Both are 30 years old with identical mortgages of $500,000 at a 30-year fixed rate of 5.3%.

• Debt Free Dave opts to pay an extra $1,000 monthly toward his mortgage, totaling $3,768 each month. Once his mortgage is cleared in approximately 16.5 years ([02:44] Brian Preston), he redirects the entire $3,768 into investments for the remaining 13.5 years.

• Manny the Mutant, conversely, chooses to invest the additional $1,000 monthly instead of accelerating mortgage payments. Assuming a 9% annual return, Manny’s portfolio grows substantially over 30 years.

Key Findings:

• By the end of 30 years, Debt Free Dave accumulates a $1 million portfolio.

• Manny the Mutant, benefiting from the power of compounding and a higher return rate, amasses a $1.8 million portfolio—a significant $800,000 difference ([04:45] Bo Hanson).

Brian highlights the importance of time and compounding:

"[02:59] Brian Preston: ...people often underestimate the power of time and the compounding growth of deferred gratification."

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Brian Preston Becomes Mortgage Free

In a personal revelation, Brian Preston announces that he has paid off his mortgage:

"[08:19] Bo Hanson: So you are officially mortgage free. Look at that, look at that."

Brian shares the motivation behind this achievement, primarily triggered by an insurance claim that became cumbersome due to his outstanding mortgage:

"[08:56] Brian Preston: ...I just need to have this debt paid off."

However, he clarifies that while his personal residence is mortgage-free, he still maintains commercial debts from multiple properties, demonstrating leverage as a financial tool:

"[10:06] Brian Preston: ...we use debt as a tool and understand what debt is as a tool."

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Listener Q&A Highlights

The episode transitions into a Q&A segment, where Brian and Bo address various listener questions, offering personalized financial advice.

1. Emergency Funds for a 23-Year-Old Student

Question from Go Lucky Monkey:

"I'm 23, working and in college. I'm living with my parents. My monthly spend is only about $300. So my six-month emergency fund is only $1,800, which feels low for stuff like car repair. Should I still go by the six-month rule or should I save more?"

Brian Preston advises maintaining an emergency fund of three to six months' worth of expenses, considering future living costs:

"[15:56] Brian Preston: ...you are heavily subsidized by the parentals... aim for where you're going and build up cash."

Bo Hanson emphasizes understanding upcoming expenses and adjusting the emergency fund accordingly:

"[16:13] Bo Hanson: ...your lifestyle is artificially lower than it will likely be 12, 18, 24 months in the future."

2. Evaluating Umbrella Insurance Needs

Question from Jason Zach:

"Can you explain how to think about and evaluate umbrella insurance needs? I bought a $1 million policy a few years ago and now my net worth is just above that. Do I bump it up to $2 million now or wait?"

Bo Hanson suggests matching umbrella coverage to net worth, with flexibility for future increases:

"[19:27] Bo Hanson: ...carry roughly equal to your net worth in coverage... when your net worth increases, consider increasing coverage."

Brian Preston adds the importance of the cost-effectiveness of umbrella policies:

"[20:31] Brian Preston: ...it's only a few hundred dollars to protect your net worth from large liabilities."

3. Mega Backdoor Roth Conversions

Question from Nita:

"Walking through setting up a mega backdoor Roth conversions. Employer allows after-tax contributions and in-service rollovers. Is there a benefit to reducing after-tax funds to do a $7k Roth?"

Brian Preston explains the mechanics and benefits of Mega Backdoor Roths, cautioning against oversaturation of contributions:

"[26:03] Brian Preston: ...you can do what's called the mega backdoor. ...ensure you don't squeeze out your employer's matching funds."

Bo Hanson emphasizes following a structured financial order before engaging in advanced strategies:

"[27:24] Bo Hanson: ...make sure you understand your plan's intricacies and consult a second set of eyes if needed."

4. Incorporating Pensions into Retirement Planning

Question from Brandon M.:

"How should a pension factor into your retirement investment mix? Does this fixed income reduce the needs for bonds? Assume pension is about 30% of my retirement spend. What do you think?"

Brian Preston discusses the complexities of pensions, including the reliability of employer promises:

"[39:30] Brian Preston: ...pensions are promises that may not be fully funded."

Bo Hanson highlights the dependency on individual circumstances and overall financial goals:

"[42:04] Bo Hanson: ...it depends on whether you're still building wealth or approaching retirement."

5. Roth Account Allocation for Early Retirement

Question from Keith:

"My wife and I are in our mid-30s and looking to add an early retirement in our mid-50s. Can I be putting too much into Roth? Currently 65% in Roth out of $440k in investment accounts. What do you think?"

Bo Hanson reassures that a high allocation to Roth accounts is not inherently bad, especially with long-term planning:

"[46:23] Bo Hanson: ...Roth accounts provide tax-free growth valuable for retirement."

Brian Preston advises considering tax arbitrage and future tax scenarios when determining Roth allocations:

"[46:35] Brian Preston: ...consider if your tax rates will be lower in retirement."

6. Differentiating Between Bedazzling Basic Life and Lifestyle Creep

Question from Connor:

"Can you talk more about bedazzling your current life vs. lifestyle creep? I'm 29 with a 50%+ savings rate and wondering about the balance between the two."

Brian Preston defines "bedazzle your basic life" as enhancing everyday experiences without financial strain:

"[52:04] Brian Preston: ...make memories without overextending financially."

Bo Hanson counters the negative perception of lifestyle creep, advocating for balanced spending aligned with increased income:

"[58:26] Bo Hanson: ...lifestyle creep isn't bad if it matches your saving and earning growth."

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Personal Stories and Host Insights

Throughout the episode, Brian and Bo interweave personal anecdotes to illustrate their financial philosophies:

• Bo Hanson shares his experience paying off his mortgage through disciplined saving and strategic investments, emphasizing the balance between debt management and wealth accumulation.

• Brian Preston candidly discusses his recent achievement of becoming mortgage-free, highlighting the emotional relief and practical benefits, while also acknowledging ongoing commercial debts as part of his financial strategy.

• The hosts also touch on physical fitness and personal health, with Bo recounting an injury from performing muscle-ups, underscoring the importance of balancing physical pursuits with long-term well-being.

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Conclusion: Striking the Right Financial Balance

The episode wraps up with key takeaways on managing mortgages versus investing, the importance of strategic financial planning, and maintaining a balanced lifestyle that fosters both financial security and personal fulfillment.

Brian Preston concludes by reaffirming their commitment to guiding listeners toward financial confidence:

"[38:46] Bo Hanson: Love it."

Bo Hanson emphasizes the show's mission to provide actionable financial insights tailored to individual circumstances:

"[39:30] Bo Hanson: ...focus on your unique financial journey."

Listeners are encouraged to engage with the Money Guy Show’s extensive resources available at moneyguy.com for further financial guidance and tools.

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Notable Quotes with Timestamps

• Brian Preston [00:05]: "Age old question, should you pay off your mortgage earlier? Invest."

• Bo Hanson [04:45]: "Manny the Mutant... his portfolio was actually able to grow to $1.8 million. That's an $800,000 difference from what Dave was able to do."

• Bo Hanson [58:26]: "Lifestyle creep isn't bad if it matches your saving and earning growth."

• Brian Preston [08:19]: "So you are officially mortgage free."

• Brian Preston [46:35]: "Consider if your tax rates will be lower in retirement."

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Final Thoughts

This episode of the Money Guy Show offers a deep dive into the strategic decision-making process surrounding mortgage repayment and investment prioritization. Through real-life case studies, personal experiences, and interactive Q&A, hosts Brian Preston and Bo Hanson equip listeners with the knowledge and tools to make informed financial decisions tailored to their unique situations. Whether you’re contemplating paying off your mortgage early or maximizing your investment portfolio, this episode provides valuable insights to help you achieve your financial goals while maintaining a balanced and fulfilling lifestyle.

Transcript

[Brian Preston]

Age old question, should you pay off your mortgage earlier? Invest.

[Bo Hanson]

Brent, I am so excited about this because we get asked this question all the time and people want to know and there are different thoughts out there in the financial world as to what is the most advantageous strategy. Should I pay off my mortgage as quickly as possible and get that knocked out or should I not pay off my mortgage and get my money working for me? And today we hope we can answer that question.

[Brian Preston]

Well, of course the answer is it depends.

[Bo Hanson]

It depends.

[Brian Preston]

Personal finance is very personal. But we did think, hey, this is one of those things. Why not do one of the tried and true things that we like to do, which is a money guy case study.

[Bo Hanson]

We said, let's look at two different types of financial wealth builders. Let's look at Debt Free Dave and then let's look at Manny the Mutant and let's assume that both debt free.

[Brian Preston]

I wonder where those names came from.

[Bo Hanson]

I don't know. It's just the content team. Just let's assume that they're both 30 years old, they're both going to have a $500,000 mortgage. They're both going to do a 30 year fixed mortgage. And we went ahead and assumed, we looked at the average 10 or the average mortgage rate over the last number of years at about 5.3%. Right.

[Brian Preston]

Which by the way is still a good bit lower than if you walked in off the street. Right now you're not getting a 5.3, but we figured we'd go in between.

[Bo Hanson]

So if we just look at the principal and interest payments, the monthly payment for each of them would be $2,768. But they're each going to employ different strategies. Debt Free Dave is going to pay an extra $1,000 per month, every month on his mortgage. So he's going to pay $3,768 every single month. And then once that mortgage is paid off, he's going to invest all of the remaining. Because people make this argument, man, if I get my debt paid off quickly, I will have more to invest. So once his mortgage is completely paid off, he's going to invest $3,768 per month all the way till the end of the 30 year period. But then we have Manny. And Manny says, you know what, I'm at a 5.3% interest rate, but I'm young and I believe that my money can work for me. So Instead of paying $1,000 extra on my mortgage, I'm going to begin investing $1,000 every single month. And since Manny is 30 years old, we believe that Manny over the long term could receive about a 9% rate of return based on our wealth multiplier assumption. So there's the case, there's the two that are laid out. Now, Brian, when you look at these two, do you think to yourself, man, I'd rather be debt free Dave or I'd rather be Manny than me?

[Brian Preston]

Well, I mean, I think there's several things to, to pay attention to. We've done the math and we're going to show this deeper in the illustration. It is interesting that Debt Free Dave will have this house paid off at 16 and a half years.

[Bo Hanson]

16.5 years.

[Brian Preston]

So there's going to be 13 and a half years. He's going to be able to throw the kitchen sink at investing. What I will be curious, and I know the answer, but I'm just going ahead and laying the groundwork. Is that yes, it is great that you get to 100% now throw that money towards investing, but people often underestimate the power of the time. That compounding growth of just putting a little bit of today for tomorrow in deferred gratification is something pretty powerful. And that's what I like about these case studies and realize we're also. We used 5.3%. There's an argument that if we just backtrack three to four years ago, the majority of mortgages are well under 4%.

[Bo Hanson]

That's right.

[Brian Preston]

So when we show you the spread between what Debt Free Dave and Manny the Mutant, we have gone conservative. We could have really just juiced it up, totally made this thing an exclamation mark. But we were trying to be as generous as possible with that. I'll let you kind of walk through what happens after 30 years.

[Bo Hanson]

Yeah. So when we fast forward 30 years in the future, both Dave and Manny have a fully paid for home. So that is the same in both situations. However, when you compare their portfolio values, Dave has built up a portfolio of a million dollars. Remember, he was not saving for that first 16 and a half years and then he begins saving $3,700 every single month for the remainder, which is still an impressive feat. And building up a million dollar portfolio is awesome. However, when you look at Manny and you look at the fact that he let his money work for a longer period of time, his portfolio was actually able to grow to $1.8 million. That's an $800,000 difference from what Dave was able to do.

[Brian Preston]

And remember this is my point is, is that we used 5.3%. There's many of you, and I've talked to you, you debt crusaders, and you were in your early 30s paying off 3% mortgage rates. This could be a million dollar difference in the long term. And I think that's something that everybody should be aware of. But I hear you, a lot of you are like, yeah, but it's about the mindset. And most people are spending. I agree there's a majority of Americans don't have discipline and probably just you're going to be successful if you just focus on the debt and pay it off. But we know that there's a group of you, your financial mutants, that you are maximizers. And that's why you don't have to be a debt crusader, because you know thyself and you know the power of your time, you know the value of your money and you're doing in a different path. Now with all that said, bo, are there alternatives or times when maybe you throw the math out and you just still go ahead and prepay the loans?

[Bo Hanson]

Yeah, certainly in this situation when they were 30 years old and you look at Manny and you look at Dave, the math drives a lot of it. But let's say that you had a different case study. Let's say that you had someone who'd been paying on a mortgage for a number of years and maybe this person was in their early 50s and maybe they even had a really great interest rate. Maybe it was down in like the 3.2.75, 2 1/2 percent. And they've been following the financial order of operations and they've been building wealth, they've been doing all the things that they should be doing from a financial standpoint. And in that case study, Brian, might it make sense for that individual to go ahead and prepay their mortgage?

[Brian Preston]

Yeah. So this is one of those things. You guys know I've had the dream that when I was doing Millionaire Mission, because, just to clarify, because I want, I don't want people to think we're, we're anti paying off debt. As you guys know. I'm all for you, you debt crusaders. I'm like, when I meet you in person, I'm like, as long as you were saving and investing at least 20 to 25% towards your retirement goals, you can do this as a step 8 type thing and you can prepay your mortgage. I'm all for that. But I do clarify in Millionaire Mission that really under 45, I don't want you doing that until you're paying over because you have to ensure that you make the wealth. Post 45, your wealth multiplier is much lower. You've hopefully already made a lot of sacrifice and built up a base level of assets and now we can start de risking to maintain the wealth. So I am clearly visually you can tell this over 45 at this point. But I have been walking around with a mortgage now it was very small. I think when I did the book Tour it was $90,000 was what I was sharing and the mortgage rate was 2 1/2 percent. And I just was having a hard time because I was still making close to 5% on my cash. Even though I had the cash, I was walking around and you guys, I've heard you, you're like, what are you doing, Brian? And it's true. I mean because I was, I was never a minimum payment anyway. I was already putting a little bit extra. So I'm happy to report as of 8:48am this morning, is that central time. Central time.

[Bo Hanson]

Central time.

[Brian Preston]

I sent my mortgage company. So we went from 90,000 a year ago when I was doing the book tour launch around maybe to this morning. I sent them $43,161.50 to pay my mortgage off.

[Bo Hanson]

So you are officially mortgage free. Look at that, look at that.

[Brian Preston]

Printed the confirmation.

[Bo Hanson]

How's it this is the first time that you've been mortgage free in. When did you buy your first house?

[Brian Preston]

My first house when I was 24, 25.

[Bo Hanson]

So 24 years old. Here you are. There's a lot of people out there that are aspiring for this. Oh, I want to have my mortgage paid off. I want to have it gone. I want to feel the weight of that falling off of me. How's it feel? A lot of people aren't there and haven't been there. Give us some feedback. What does it feel like to be mortgage free?

[Brian Preston]

Well, I don't want to ruin. I'll go ahead and ruin it for you. I mean it feels good that this because look, I had an insurance claim. This is the other reason I went ahead and decided to pay it. When you have an insurance claim, they send you the check for the insurance claim but they put the mortgage company on. It's a pain in the rear end to get the mortgage company to sign off on it. You have to send it. It takes about three or four weeks. Adds to the process. I went there and I was like, you know what? This is one more hassle factor thing. I just need to have this debt paid off. But I don't Want to ruin it. I'm not debt free.

[Bo Hanson]

I mean, spoiler alert. I wasn't gonna say it. There's so many people in here saying congratulations on being debt free.

[Brian Preston]

And I'm like, that's why that' we said mortgage free is that I don't have any personal debt, meaning I own all my cars, own all my houses. But, but I have commercial debt. I mean because I own several commercial buildings. If you've been to downtown Franklin, you have been around our commercial buildings that we own here, here in town. And I use debt. I mean when the, when the bank offers you these buildings at under 3% mortgage, I mean mortgage rates, it's hard.

[Bo Hanson]

Not to take advantage of that.

[Brian Preston]

It's hard not to take advantage of that. And so I'll continue to. And I think that's probably a lesson for all of my financial mutants is look, I think it's great to de risk and do all these other things, but also is you can understand what debt is as a tool. You're going to be okay as long as you don't get too far out on the leverage spectrum. And nothing I have done has made me feel uncomfortable with where we are from a leverage, you know, levered debt standpoint. That's the kind of. Because that's the wonderful world of finance. And we do a lot of react content where we'll have people out here who tell you that levered debt is the secret to all things of success. And then we've got debt crusaders on the far left when we've reacted to who are saying no debt, just teetotal and stay away from it. I'm here to tell you there's a better way to do money. And we try to give you both the behavioral stuff but also the analytical stuff so you can land in that nice Goldilocks center to really stick the personal impersonal finance.

[Bo Hanson]

I love it. We really do believe there is a better way to do money. It's why we show up here every Tuesday morning at 10am Central so that we can load you up with financial information. And one of the ways we do that is we like to answer your questions. We actually have our team out in the wings right now collecting your questions. So if there's something you want us to speak to, something you want to get our take on, make sure you get that in the the chat so that we can load you up and help you do money better.

[Brian Preston]

I do have one more clarifier because I think our audience, I don't probably get mad on to me later for this. I don't mind sharing from a transparency standpoint that Bo and I are such financial mutants that we have actually structured separate accounts to where we're over funding. In addition to making the mortgage payments on our commercial debt, we have set up investment accounts that we have slated to have everything paid off within 10 years.

[Bo Hanson]

Because you know what's just as cool as being debt free? Having the ability to be debt free. And I've got him on that page now. So we are building up a pot of money that one day, if we want to stroke a check, we'll be able to do that.

[Brian Preston]

I don't mind sharing because, I mean, we've had discussions where I negotiated because commercial debt. We all know mortgages. You can prepay your mortgage, no problem. A lot of you might be surprised to find out when you start doing commercial borrowing, banks don't always give you that option. They actually charge you additional premiums or they raise your rate if you want any ability to prepay the mortgage because they want to lock you in for whatever time. So when I negotiated in on one of our larger commercial loans that I wanted to be able to prepay it every year, Bo went along with me. But then later we did a whole discussion and you've convinced me. And it's worked out pretty good. I mean, I gotta tell you, we're, you know, three years into this. It's amazing how well it's working out where we're dumping big chunks of money in every month with the goal year.

[Bo Hanson]

10, better write a check if we.

[Brian Preston]

Want to pay the whole thing off. So it's. So we're still financial mutants. We're doing this in a very disciplined way, but we're just also understanding the value of taking advantage of the tools that were presented to us at the time.

[Bo Hanson]

I love it.

[Unknown]

That's great.

[Brian Preston]

Was that too much?

[Bo Hanson]

No, I think that was a great.

[Unknown]

It's really interesting. It's a whole.

[Bo Hanson]

When you want to tell the people about a great idea that I had and how well it's worked out. I'm never. I'm never going to fight you on that.

[Brian Preston]

Well, that's why I think we're a good balance, is because I'm old enough that I'm. I'm trying to de risk, but you're still like conquer the world type stuff. So we offset that. That energy really kind of makes us a super force.

[Bo Hanson]

It's like a yin and yang.

[Unknown]

Yeah, it's a good.

[Bo Hanson]

It's like a killer bee, if you will. You Know what I mean?

[Unknown]

But no, I appreciate, appreciate the transparency behind this big moment because we've been talking about you paying off that mortgage.

[Brian Preston]

For a very long time. Mortgage free. I have zero mortgages on the houses.

[Unknown]

We actually.

[Bo Hanson]

Should we have it? Should we have him go do his like debt free scream, but have him just yell mortgage free. I'm mortgage free.

[Brian Preston]

I don't think Dave's putting me on air.

[Bo Hanson]

You don't think so?

[Unknown]

No, I have a feeling not. I don't think you quite qualify, but that's all right. You're a financial mutant. We did poll the audience at the beginning of the show. Has Brian paid off his mortgage? Has he actually done it? And we had only 57% say yes. So that we've been saying it.

[Bo Hanson]

It's like the little boy that cried wolf. Right?

[Brian Preston]

How many times have I talked about this and not done it? Right?

[Unknown]

It's true, it's true. But it all worked out. It's been a fun runner and congrats again. Lots of congratulations in the chat. Even though you're only mortgage free.

[Bo Hanson]

Only mortgage free. But that's us.

[Unknown]

All right, let's jump into some personal finance questions. The first one is from Go Lucky Monkey. It says, I'm 23, working and in college. I'm living with my parents. My monthly spend is only about $300. So my six month emergency fund is only 1800 or $1800, which feels low for stuff like car repair. Should I still go by the six month rule or should I save more? How do I know how much to save?

[Brian Preston]

Why is he saying six months? Because it's actually three to six months. So I would, I would say first, go home, give your parents a big old bear hug, because they are if you're only. If your monthly spend is $300, you are heavily subsidized by the parentals because there's not much you can do in life for $300 right now. High cost of living everywhere. So that's the first thing. And then. But I would encourage you, I still want you to have three months of whatever you make in emergency reserves because at some point you're going to open your wings and lead the nest. And I think that that would be a good step. But I also want to help you maximize the power of your time and the wealth multiplier because you've got a lot of good stuff working for you right now.

[Bo Hanson]

If you're following the financial order. Brian, will you hold the thing up? If you're following the financial order of operations One of the very first steps is you want to have your highest deductible covered. And so one of the things I'd be curious about, you're 23, so there's a chance that you're not on your own insurance. There's a chance you're still in your parents insurance. When it comes to health insurance, he.

[Brian Preston]

Said he's under 26, right?

[Bo Hanson]

Yep, he's 23 years old. When it comes to auto insurance, there's a chance you're still in your parents auto insurance. So you're not responsible for that deductible. So what I would figure is okay for the insurance deductibles that I do have because you had mentioned like a, like a car repair. If you had some sort of thing that was going to be an insurable event, you want to make sure you have at least enough to cover the deductible for that. I would imagine as a 23 year old, there are some things that you are probably desiring to save for, like getting out of the house, like getting on to your getting out of the house, living on your own, having your own house, apartment, whatever that thing may be. And so one of the things that I would encourage you to think about is why, yes, by the book, if you were going to have three months of emergency fund cash and living expenses, you would have, you know, 900 bucks in your emergency fund. However, I don't think there's anything wrong with being slightly future oriented and saying, you know what, I'm going to go probably in the next year, next two years, I want to go be in an apartment somewhere. And I know that apartments are going to cost $1,500 a month in my area. So I might want to carry an emergency fund relative to where I'm going to go. It's like you're trying to hit a moving target. So I don't think it's crazy for you to have a little bit more in cash and liquidity just because I think that right now your lifestyle is artificially lower than it will likely be 12, 18, 24 months in the future. Unless you just have like a very long term living in the home plan. And if that's the case, there's probably some sort of conversation you ought to have with your folks if it's only costing you 300 bucks a month to live. Because there's a good chance you're in their house, it's costing them more than $300 a month for you to live in the house. So I think it's okay to aim for where you're going and build up cash.

[Brian Preston]

Well, if, if he knows his living expenses are artificially low. You could also use an income percentage.

[Bo Hanson]

Sure.

[Brian Preston]

To be part of this three month buildup as well. Because you could say, okay, I know I want to save 25% once I get out on my own. Taxes are going to probably be 15%.

[Bo Hanson]

Sure.

[Brian Preston]

So there's 40%. Why don't I have take 60% of whatever I make times three? You could back into a mathematical way and save and have assume your living expenses are going to be 60, 70, maybe even 80%. But you get to play around with those variables. But there's a way to back into it if you know that you're on an artificial expense situation.

[Bo Hanson]

Love it.

[Unknown]

That's great. Go lucky monkey. It is your lucky day because today is a Tumblr day.

[Brian Preston]

Tumblr day.

[Unknown]

Since we answered your question live, just email winneroneyguy.com and we'll send you a money guy Tumblr.

[Bo Hanson]

Brian is mortgage free and we're giving away Tumblrs. What a day. Get any better?

[Unknown]

It can't. This is the peak. All right, Jason, Zach says, can you explain how to think about and evaluate umbrella insurance needs? I bought a $1 million policy a few years ago and now my net worth is just above that. Do I bump it up to 2 million now or wait? Thanks.

[Bo Hanson]

So let me give you the sort of the loose rule of thumb that we give. First of all, what umbrella insurance is, is it's insurance that sits as an umbrella over your other coverages. So it sits over your home insurance, it sits over your and it provides additional coverage for the unknown. Unknown things in life come your way that you could be liable for. So what we generally recommend is for someone who should carry umbrella coverage, you want to have roughly equal to your net worth in coverage. So if you're worth a million dollars, it would make sense to have a million dollar umbrella coverage. Well, Jason said, hey, I'm at like a little bit over that. I'm at like 1.1. Should I go ahead and bump up to 2? You can, because it's very inexpensive, but I don't know that it's a necessity. I think it's okay if you carry the $1,000,000 until your net worth starts to inch up closer to that 2 million and then you think about increasing to 2 million. And then when it goes to 3 million, you increase to 3 million. I think that's okay. I don't think you have to Be exact with that. I think give yourself a little bit of, a little bit of wiggle room.

[Brian Preston]

We could almost play this like elementary math rules is that as you round up around half, one and a half, you know, maybe now you got a 2, but if it's 1.4, maybe you just stay at 1. I mean, you could. There's the reason, and let's give you the why that we like umbrella insurance so much is that you quickly find out with umbrella coverage, if you match it to your net worth, you think, okay, a million dollars, how much of that cost? And you find out, wait a minute, it was only a few hundred dollars to give me this additional coverage. That essentially takes the bullseye of liability if I got sued or other things off of my back. And then you find out, hey, to go another million dollars on top of this is only another few hundred dollars more. It's just the bang for the buck of what you're spending to protect your net worth from contingencies that you just don't know is why it's an easy decision to make that. So if you can understand that, why you can quickly realize is that we're really splitting hairs here trying to figure out if it's 1 to 2. But you can if you want to. I like good systems because all you financial meetings do. You can base it off of elementary rounding if you want, or whatever your comfort level is. If you're a very nervous person, be proactive and maybe round up quicker. But if you're a person that's very comfortable, you know, with, with where you are in your risk profile and other things, then you, you can wait and, and do it as you feel comfort. But I do like it to match where your net worth is.

[Bo Hanson]

Love it. Give away this Tumblr and then I got 10 cents of free advice about insurance.

[Unknown]

All right, Jason Z. If you would like a tumblr, just email winneroneyguy.com I bet it's worth more than 10 cents.

[Bo Hanson]

We used to do this. We used to do a show. Brian, this is back. This is like way back in the day. This is pre YouTube days, pre, like way, way back when called ungrateful service providers. Remember we used to do this one. And here's something you may not know, and this is so valuable and I want to share like a, like a confessional story right now that you guys can benefit from. So every year, or at least every couple of years, it's worthwhile to reprice out your property and casualty insurance because what so often happens is you Get a property insurance carrier and you have your home and you have your auto, you have your umbrella. And then just every year it kind of renews. And then it renews, and then it renews and then it renews. Well, every year the premiums kind of creep up and creep up and creep up and life events happen. Maybe your spouse gets in a car accident, maybe there is a snowstorm and she like slides off the road and hits a fence. And because of that there's like some insurance surcharges because you had to have this big claim. Maybe that's a thing that happens to you, but maybe that thing that happened was like a number of years ago. But it's kind of like out of sight, out of mind, out of sight, out of mind. And your premiums continue to like just increase through time. Well then maybe you are working out with a buddy who happens to be an insurance and is like, hey, let me, let me quote your insurance. I'm like, okay, yeah, sure. You know, I've done this recently, not realizing how long ago it was. And it was unbelievable. I think I told you the number. It was unbelievable how much money I saved just by going through the requoting process. So just because you've been with someone for a long time, just because you've been with an insurance company that you like or that you know, doesn't mean that it's not worth the exercise to re quote your home and auto and umbrella, at least on some sort of regular cadence, because it can literally save thousands of dollars a year or potentially hundreds of dollars a month if you're willing to work that exercise. So don't sleep on that. It's an important thing thing to do and it's something that all financial mutants should be doing.

[Brian Preston]

So without a doubt, ungrateful service providers. It works with your insurance. And I'll add to. Because I was on a text chain with my old neighbors, I have a group of buddies from my old neighborhood in Georgia. And one of them that just their son, I think it was their second son just crossed 16. And I quickly reminded them, hey, raise your deductibles when you have those teenagers in the house because you're not filing claims on the little tickety tax stuff anyway because we've had clients who, you know, when you have teenagers in the house, first of all, as soon as your kids start driving, your, your premiums are gonna go way up because there's high risk there. And then, And I will tell you, as soon as you have those drivers on, they're probably gonna get into little fender benders or something. But you don't always need to go file a claim on that because they will drop you like a bad habit if you're. We've had clients. That happens. I always tell people if you, since you're not gonna be able to use your insurance as much with those teenage drivers in the house, might as well raise the premium, I mean your deductible up so that your premium actually will come down because you're going to self insure some of that anyway in case, you know, they back out of the driveway and hit one of the other cars in the driveway. That's where I've seen this happen the most, is little tickety tax stuff like that. You're going to need to self insure that. So go ahead and just take away the temptation of you filing claims and also reap the benefit of a lower premium by the higher deductible.

[Bo Hanson]

Love it.

[Unknown]

That's great.

[Bo Hanson]

And by the way, that's not suggesting that your current insurance company is bad. You may, you may be with a grateful service provider who gives you top tier rates, but you won't know unless you work through the exercise. It's at least working through the exercise on some sort of regular cadence.

[Unknown]

Sure.

[Bo Hanson]

A lot of people, like I've been with my insurance company for 32 years.

[Brian Preston]

You can still, you could have them re shop your rates.

[Bo Hanson]

That's right.

[Brian Preston]

That's why I like working with brokers.

[Bo Hanson]

Because they can shop across multiple, multiple carriers.

[Unknown]

Good stuff. All right, the next question is from need a tumbler? And is your lucky day need a tumbler?

[Brian Preston]

The moon and the sun have aligned.

[Unknown]

Okay.

[Bo Hanson]

Did you say that?

[Unknown]

What does that mean?

[Bo Hanson]

So I. He said the moon. I thought he said the mood because.

[Brian Preston]

I thought, no, an eclipse is occurring. And so, you know, those things don't happen every day.

[Unknown]

I understand now. I was like, I don't know. I wasn't following.

[Brian Preston]

Turn around.

[Bo Hanson]

Here we go. Somebody's mortgage free today. Holy cow.

[Unknown]

All right, Nita. Tumblr says. Hey, money guy team walking through setting up a mega backdoor Roth conversions. Employer allows after tax contributions and in service rollovers.

[Brian Preston]

Boom. Boom.

[Unknown]

Is there a benefit to reducing after tax funds to do 7k Roth?

[Brian Preston]

Well, you ought to do the 7k Roth anyway. Yeah, but his income high enough to do. Because usually we see mega backdoor Roths occur with people with incomes high enough that they usually can't qualify for normal Roth.

[Bo Hanson]

Yeah. If you think about what's the ultimate outcome here, it's Going to be kind of the same. Because doing a Roth contribution or doing the Mega backdoor and getting the money in the Roth is getting money into the same bucket. What's changing is how much you're able to do. Because with a backdoor Roth conversion, you can do $7,000 if you're under 50 years of age. With a Mega backdoor, you can actually take those all the way up to the section 415 limit. So you have your salary deferral, whether you're doing Roth or pre tax, then you have your employer portion, then you have your after tax on top of that. So for a lot of folks, it's 20, 25, 30, $35,000 that you're getting into this Mega backdoor component, which is awesome. But I would argue that before you even get to Mega backdoor, Brian, you got the thing you can hold up for me. We have a system that is nine steps that allows you to think through what's the best thing to do with my next dollar. Well, if you're working through the financial order of operations, you're going to notice that inside of step five, it says, hey, you should go fund your Roth IRAs, you should go fund your HSAs. That's before you get to step seven. And I'm even going to say like somewhere bleed between six and seven, because that's where Mega backdoor Roth would come in. So there's a good chance that if you're already doing the mega backdoor, but you've not yet funded the Roth or not yet funded the Mega backdoor, you've kind of skipped a financial order of operation. So I think it would make sense to kind of reevaluate. Have I done all the things I'm supposed to be doing before I get to this advanced stage?

[Brian Preston]

Yeah. We didn't really explain the mechanism of what a Mega backdoor Roth is because we're using language. Just real quick, I don't want to prolong it too much, but there's what's called backdoor Roth contributions or conversion contributions, where if you make too much money to make Roth IRA contributions, assuming you have the right IRA structure, because realize a lot of people walk into a pile of quicksand really quick if they have, you know, SEP IRAs, rollover IRAs and other things where they mess up how it's allocated. But assuming you have the right structure, you can then make contributions to a traditional IRA and then convert it into a Roth ira. And as long as you didn't take a deduction on the traditional ira, Contribution, that's a tax free transaction. So that's the backdoor conversion Roth contribution. When we say mega back door, that's where that's employer plans that are designed specifically to not only allow salary deferrals, not only to allow the employer portion with, you know, matching and profit sharing, but they add what's called a, you know, after tax.

[Bo Hanson]

That's right.

[Brian Preston]

And then when they allow, because getting the money in after tax is one thing, but then you have to figure out, well, how do you turn this into a Roth? Well, then they allow either in plan conversions or they allow you to have implant distribution. So then you can convert and when you have those perfect ingredients, you can do what's called the mega backdoor. Whereas you can make those after tax contributions and then convert it into Roth assets with the same thought processes. There's no limit on how much you can convert into those Roth up to, you know, I will tell you 415 limits and also I'll add the caveat. You don't want to crowd out your free money from your employer. So make sure you're paying attention to matching funds, profit sharing funds, because you don't want to get so fund happy with your doing this mega backdoor that you squeeze out. Because the government does allow your employer just to say, oops, they've already funded and filled up these 415 limits employer, you get to keep your money because they were overzealous. So you always try to leave a little bit. It's one of those Goldilocks things where you have to kind of balance it out to get it just right.

[Bo Hanson]

Unless, can I say one, can I say, because this is, this is just mind blowing, there is an employer out there. I'm not going to say the employer's name, but you've all heard of it, who has the unbelievably most generous employee comp package I've ever seen. Because they do a above double digit match on their employees comp and they don't just take into account IRS comp, they go above the limit.

[Brian Preston]

Oh wow.

[Bo Hanson]

And even if you squeeze out, even if you squeeze out the employer contribution to 401k, they will then dump it into a cash balance plan so it stays tax deferred. So this employer, I mean this literally for, for employees at certain income levels is like 60, $70,000 of employer money that flows into these plans. If you happen to work for this employer and there are hundreds of thousands of you out there who work for this specific employer. You know what I'm Talking about it's wild. So the whole reason I say that is make sure you understand the unique intricacies of your plan because not every single plan works exactly the same. So if it's something that you have a question about, ask HR or if you're doing some of these more complex strategies, it's worth getting a second set of eyes on there to make sure you're doing it correctly.

[Brian Preston]

I can't wait to ask you after the show who it is so I can apply for part time work buddy.

[Bo Hanson]

It's, it's. I know.

[Unknown]

I'm going to send him my application right now.

[Bo Hanson]

Wild. Kidding is wild. I'm, I, I'm, I'm waiting, I keep waiting to see if like anyone's gonna. Cuz I.

[Brian Preston]

You tell me the industry.

[Bo Hanson]

Nope. Cuz you'll get. As soon as I say the industry you'll get it. So serious. But I know we have tons of folks in our audience that because there's hundreds of thousands of people that work for this employer, it's, it's wild. I'm just gonna let that, I'm just gonna let that dangle out there.

[Unknown]

Just leave it there. But what we won't leave there is need a Tumblr. If you would like to change your username to got a tumblr just email winneroneyguy.com and we will send you one. Thank you for being here and for your persistence. There it is.

[Bo Hanson]

See, no one was talking. It was complete silence.

[Unknown]

Very well done with the respectful.

[Bo Hanson]

I waited a question and a half because of you. It was just sitting here. What's it called when the water bubbles up? Condensating. It was just condensating. Waiting me to drink it because I didn't want to be rude.

[Brian Preston]

Water bubbles up on it.

[Unknown]

All right, Brandon M. Has a question for you both on the MoneyGuy resource. How much should you save which you can [e-mail] resource for free? Why is a 6% return used when 9% return is used on other MoneyGuy resources? This is a great question just to be conservative or, or take into account the 3% of inflation. I thought it was good too. Can you talk about kind of our philosophy on why we use certain percentages for certain illustrations?

[Brian Preston]

I'll let BO give even more of the nerdy parts on premiums of investments and stuff. But I will tell you one of the things as a financial planner we do in all of our illustrations is that I try to be conservative on what reaches success so that you don't get into those desperate moments because I've sat across the table from people who think that they're ready to retire and they're interviewing us to hire us. And I have the unfortunate position of telling them, you know what? I think you got to work three more years. And so anytime I've designed systems that are going to require you to make big life decisions, to go across that threshold, or that you're going to go tell your employer that you're no longer working, or you're going to just drop out of whatever you're doing for a living, I'd rather be conservative with the assumption than to just assume everything is going to work out. Now. This is where it gets. From an educator standpoint, why do we use nine on other things is because I don't mind. From an education standpoint, showing you what the potential is on what assets can do, because it really illustrates from an educational standpoint how big of an opportunity it is. It doesn't mean that you should use that in your conservative assumptions to make big decisions. It just ties into everything else we do is think about all the times I talk about putting on your 3D glasses. I'm trying to always help you be the best decision maker out there. So you can know when to be super optimistic, but also when to tighten it up. Because this is a measure twice cut once type of decision. We tried to build that into our illustration. So we motivate you when you should be motivated, but we also make it as conservative as possible. But now, Bo, you've actually. Because you, you designed. If y' all could see the beautiful architecture of what Beau has designed behind the scenes, because he is a whiz on macros and all kind of things with Excel templates and so forth. You have. There is some things behind that driving.

[Bo Hanson]

I'll tell you. Here's. Here's the real reason why. I mean, the whole. Why do we share how much should you save? Like, what is it? What a lot of people don't realize. And this is where financial mutants, they get a little sideways, but not sideways in a bad way. We think so much about math, math, math, math, math. And that illustration is actually much less about math and much more about behavior. Because when it comes to how much can you save, what is the thing that you can influence? And there's only one thing you can influence, how much you save. You don't get to influence what the market does. And so what we wanted to be careful of doing is putting in some really frothy rate of return assumption. Hey, we're going to do an 8%, 9%, 10% because it's not a given, it's not a guarantee that that's what the market returns are going to give us moving forward. Now, past performance is not indicative of future performance, but man, it sure is pretty consistent when you look at like the S&P 500 over the last 50 to 60 years, it's been pretty strong. What I would hate to do though is create an educational illustration for someone that says, hey, here's what you should do. And it's based on this like very aggressive or just overly comfortable rate of return. And it gives you a false sense of confidence that, you know what, I don't have to do as much or I don't need to save as much because the market's going to carry me. And while that may be a truth, that may be a reality. What we want you focusing on, focusing in on is the behavior. Because what it's supposed to do is get you started. And then as you get started, okay, how much should I say? 25%. Then you're going to start tracking your net worth and you're going to see what are my actual rate of returns that I'm recognizing. And then the actual things that you're doing are going to be the fuel that keeps you moving forward. We want that to be the motivation not to be some 10% rate of return assumption in there. So a lot of the stuff that we use, whether we use a 10% for a 20 year old, when we talk about $1 can turn into 88 or a 6% for what can 25% do for, for you? It's because we're trying to influence the behavior of you, beginning to take steps in the direction of moving towards financial independence. So that's why we landed on that for the 25%. Because if you really like dive into the illustration, there's so many assumptions in there around like, okay, what are we trying to do? Okay, we're going for an income, income replacement ratio. Well, we know that when it comes to retirement, we don't actually try to replace income, we want to replace expenses. So even there, there are some variables that went in that aren't perfect if you're going to use it for actually designing and structuring a financial plan. But directionally we want your behavior to be right. So that's why we stayed super, super conservative on that illustration.

[Brian Preston]

Well, there's also because when you do anything that has projections, it's 30 years in the future, inflation comes into play Rates of returns come into play. So that's why it's important to structure this in a way that does tie some very conservative assumptions. But also it's not disconnected from the reality of what you see. A lot of people in their walk towards financial success reach their great big beautiful tomorrow. And I think we've really balanced that well. But I love giving the clarification because we love the math, we love the behavior. We try to give you that perfect mix right in between so you can be the best, best financial mutant version of yourself.

[Bo Hanson]

Love it.

[Unknown]

That was great question, Brandon. Thanks for being the catalyst to let us kind of, you know, talk about the math behind those things. If you want to see those resources, moneyguy.com resources will take you there. It's full of free downloads, free calculators, and you can see all of the rate of returns that we've been just talking about. So go check that out. And Brandon M. If you want a tumblr, just email winneroneyguy.com and we'll work on getting that sent out to you. Josh O. Is up next. How should a pension factor into your retirement investment mix? Does this fixed income reduce the needs for bonds? Assume pension is about 30% of my retirement spend. What do you think? Pensions?

[Brian Preston]

Well, look, this is a mixed bag is because pensions, if it was, if you're forced to make only one decision, is that this is a promise that is going to pay to you when you retire. That's not really a net worth element. That's more of a reduction in what your need is. Need is from your assets at retirement because a portion of your living expenses could be covered by your employer through this promise. Now the complicators in this are that a lot of pensions will allow you a lump sum option when you retire where you could turn this into an ira, roll it into IRA or some other retirement. So that is going to be a complicating element. The other thing is that we just can't trust our employers in some aspects on these pensions because it's gotten to be a very strong planning opportunity that if your pension is made promises that are well above what the pension benefit guarantee, corporations, the government's protection, there's a chance that if they've underfunded their pensions that they might just go to the the government and essentially shed that responsibility. So you need to be aware of that because like I said, it's a promise from your employer that may or may not be fully funded in the background. So those are the kind of the things I'll let Beau kind of tell you now how you should triage or come up with a decision matrix on this. But that's kind of the complications when people ask me about pensions and net worth and even retirement planning.

[Bo Hanson]

Yeah. And I think one of the questions depends on Josh. When you're asking this question, are you asking it as someone who's in their 20s or 30s, who is paying into a pension, is going to have a pension at retirement? You're trying to figure out, okay, well, how should I change my allocation? Or are you someone who's right at the cusp of retirement, you're about to utilize the pension, you're thinking, how should I employ this in my allocation? Because even the way that it affects the allocation changes based on the stage of life you're in. And I think so often people are looking for like a one to one metric. Okay, if this is a. If this represents 30% of my retirement spend, does that mean that I can reduce my fixed income by 30%? Well, not necessarily, because there are a ton of other factors that come into play. It's part science and part mathematics, but there is part art to it. We do have a number of clients who have really, really healthy pensions and they're also drawing Social Security. And because of those two things, the majority of their living needs are met. And so it's really interesting in that situation. You could argue that these clients have a large capacity for risk. They could go really far out on the risk spectrum because their living needs are met. Would that be appropriate? Maybe. You could also argue these clients have a very low risk capacity because they don't need the portfolio to grow anymore. They might as well focus on capital preservation and control and keeping the assets in store. And would that be an accurate assessment? Yeah, it could kind of go both directions. So so much of it depends on the individual investor and the individual financial plan that's in place for that person. Sometimes we do indeed allow pensions to replace a portion of the fixed income in someone's financial portfolio. In some cases, we don't allow it to replace because they have a risk tolerance that would suggest a more conservative portfolio anyways. And what we allow the pension income to do is control our cash position in the portfolio. So it changes through time based on your unique circumstances. And so you have to answer the question, okay, where am I today, where am I moving to and what am I ultimately trying to accomplish? And I don't mean just financially, but I mean like peace of mind wise, like, what do I want my retirement to feel like. And then you reverse engineer an allocation that matches what those goals ultimately are.

[Unknown]

That's great. Josh O, thank you for the question. If you would like a Money Guy tumblr, just email winneroneyguy.com all right, next one is from Keith. It says, my wife and I are in our mid-30s and looking to add an early retirement in our mid-50s. Can I be putting too much into Roth? Currently 65% in Roth out of 440k in investment accounts. What do you think?

[Bo Hanson]

First of all, do you know how you know how he knows that he has 65% in Roth? Brian?

[Brian Preston]

How?

[Bo Hanson]

He went to learn.moneyguy.com and he downloaded the Money Guy Net worth template tool. Because one of the great things about this tool is right on the front page every single year when you fill out all your data, it shows you your tax buckets. It shows you, how much do I have in pre tax, how much do I have in Roth, how much do I have in after tax. And because Keith has been tracking that every single year, he knows what Right now, today, 65% in Roth assets. Wouldn't you love to know that for yourself? If you do, go to learn.moneyguy.com and check that out.

[Brian Preston]

Y' all have heard me make this statement before is you know how you, as a parent, you're not supposed to let anybody know you have a favorite child. Well, it's the same way with your investment accounts, except that we tell everybody our favorite accounts are Roth accounts. I mean, because if you want proof of that, just look at a financial plan and you'll see people the last, even in the financial order of operations, Roth accounts get priority in funding because that tax free growth is pretty spectacular. But then you'll see people, even in later years, they typically don't want to use their Roth assets because they have great legacy, meaning that you get 10 years to let them grow, continue tax free before you pass them on to your heirs. So these are great accounts. People love Roth accounts in a lot of ways. The only thing that immediately popped in my mind is, is that we always tell people, look, when you're in a higher income situation, you have to ask yourself, is there a tax arbitrage for the future? Because it's not uncommon. In your peak earning years, if the top federal rate is 37% and then you live in a high tax state, let's just pick on California and you're, you know, it could be as high as 13%, you quickly see 50% of your money is going towards the taxes then in that situation you probably would want to take advantage of the tax deduction. Now a lot of people then move to lower tax states or even tax states that have preferential treatment towards retirement assets later in retirement. And you might, and you look even the most recent tax bill, a lot of giveaways for older retired people. So it's not uncommon that when you retire the tax policy really rewards the, the large percentage of older people who vote with some, some little carve outs in there. So you might be in a tax arbitrage where when you leave your earned income, especially if it's a high earned income, your, your tax rates might actually go lower in retirement. Especially if you go retire at 55 to where you might want to do a Roth conversion strategy then.

[Bo Hanson]

Sure.

[Brian Preston]

Versus pay the highest possible rates now. But otherwise. I love Roth, but I think it's worth mentioning about the Roth conversions and the tax arbitrage. But there's a lot of assumptions that go into that plan.

[Bo Hanson]

Yeah. And I would argue, Keith, let's assume for a moment that you're not in this super high tax situation. Let's assume that you're following the financial order of operations and your combined tax rate is below 25% when you look at the marginal federal and marginal state. And so, yeah, I'm doing Roth IRA and I'm doing Roth 401K and I'm building Roth and building, building Roth and building Roth. Is that a bad thing? I. I don't. You're in your mid-30s. And so when I think about this, if you're planning on tying your mid-50s, you really have 20 years. Right. So you have 20 years to try to figure out, okay, exactly how am I going to use these dollars? So do I think it's bad that you have an emphasis on Roth right now? Not necessarily. Because those dollars that you're saving right now in the Roth are going to be so valuable in your 50s, 60s, 70s and beyond. Now, as you get into your mid-40s or maybe into your late 40s, and you start to begin to see where the actual landing strip is and you're preparing for that landing. Well, yeah. Then you might want to think through, okay, well, how am I going to use these dollars? Where am I going to pull from in that gap from my mid-50s to 59 and a half, how am I going to structure that? You certainly want to put some thoughts into that, but there's a good chance that you're going to have plenty of time over the next 20 years to figure that thing out. And we actually did an episode. Oh my gosh, I can't remember the name of it. Ruby, will you come up with this? It was like three ways. Three ways to get to your retirement assets early if you have to. That was not the name of it. But basically we walked through one of those ways is. Is you can always access basis inside of Roth contributions pre 59 and a half with no taxes, no penalties. So there are some strategies that you can employ. It was a show where we walked through some 72T. We walked through Roth conversions.

[Unknown]

Okay, I do remember this show.

[Bo Hanson]

We walked through a few different ways that you could retire early. Maybe it was three ways to retire.

[Unknown]

Three ways.

[Bo Hanson]

Three ways to retire early that you may not know about was the name of the show. So you ought to go check that out because we actually walk through some of the scenarios for folks who do want to retire in that early 50s to mid-50s and how you can bridge that gap. So I don't think you can have too much Roth, certainly not at this stage of your financial journey. Unless what Brian said happens and it makes sense for you to be building pre tax assets, then it's not about having too much Roth. It's about being inefficient in how you're allocating your savings.

[Unknown]

Nice. Very thorough thoughts for Keith. Thank you for being here, Keith, and for asking a question. If you would like a money guy Tumblr, we'd love to say thank you and send you one. Just email winner, money gum.

[Bo Hanson]

If you could have a superpower, you know what mine would be? I was gonna ask you what was yours be, but mom would be. I wish I could recall the name of every episode we've ever done.

[Brian Preston]

That's the superpower.

[Bo Hanson]

Well, if like it's like a money guy superpower, right? Like not like a real super.

[Unknown]

I still think you're shooting way too low. You don't really a money guy superpower. And that's what you choose.

[Bo Hanson]

If you could archive and just pull the name of every like you had like, oh, we did a show on this. And be able to put. You know how many times I'm in that situation? I'm trying to tell somebody, oh, we did a show on this. Like, oh yeah, can you send me a link? And I'm like, ah. You're like, I don't know the name of it. I remember talking about it and stuff.

[Unknown]

Well, you can just search in our like, I know how to find that.

[Brian Preston]

I think, I think superpowers are slippery slope because Think about it. If you. If you. Even if you could do, like Superman and fly, I mean, once you have a wife and family, you know you're.

[Bo Hanson]

Not gonna fly anywhere. Well, I guess you could hold them, right?

[Brian Preston]

That seems unsafe.

[Bo Hanson]

But if you're Superman. If you're Superman, aren't you. You have, like, superhuman strength so you can hold three kids. Well, two kids and a wife and still fly, and everyone would be safe.

[Brian Preston]

And then, even if you thought, like, okay, time machine.

[Bo Hanson]

I've saved buses before.

[Brian Preston]

Think about time machine or knowing the future or being able to go in the past. Sometimes I wonder, is there too much of. I mean, if you knew everything, would that actually turn out to be a positive or would it be a negative? I think superpowers are overrated, Brian.

[Unknown]

So content.

[Bo Hanson]

We all agree flying.

[Unknown]

So wise.

[Bo Hanson]

Flying would be the one. Flying.

[Brian Preston]

Yeah.

[Bo Hanson]

Like, it would be flying.

[Brian Preston]

So you had a bird strike, and you're like.

[Bo Hanson]

If you're Superman and you strike a bird, that bird.

[Brian Preston]

You don't get to be Superman.

[Bo Hanson]

Oh, so if you fly, you do not have superhuman strength. You just have flight ability.

[Brian Preston]

We have to clarify. I mean, because it seems like all the above, everybody, I want to be Superman. You shoot lasers, so you're bulletproof.

[Bo Hanson]

I'm tracking now. You're saying if you could fly, but you weren't strong enough to, like, hold your family, it wouldn't be that useful? Or can you fly strong enough that you can, like, pull them behind you? You know, like when you have those.

[Brian Preston]

Oh, that man. Think about that lane. That'd be brutal.

[Bo Hanson]

You know, like those buggies that you can put the baby in when you ride the bike. And we did. You know what I mean?

[Brian Preston]

I don't think.

[Unknown]

Could you travel that way? Just a thought. Okay. Anyway, interesting sidebar there.

[Bo Hanson]

He said superpowers are overrated. Weird. That's not true at all.

[Unknown]

I wouldn't have expected that from Brian, but he's reached a new level of contentment. All right. Want to do another personal finance question?

[Brian Preston]

Why not?

[Unknown]

Connor says, can you talk more about bedazzling your current life? 50% plus savings rate. I'm 29. I'm on food steps seven through nine. So you have a range. And one of my fears is lifestyle. Creepy. What is the difference between the two? And then, P.S. bo, how much do you bench? But I really want to know the difference between bedazzling your basic life and lifestyle. Creep.

[Brian Preston]

Lord.

[Bo Hanson]

Brian, I'll let you at the first part of the question. I'll take the second.

[Brian Preston]

Okay. Bedazzle your basic look. I think this is a great question. Connor, you have an awesome question. Besides the, the, the over the top question for both part. But look, I wrote, I talk about bedazzle, your basic life and the fact that I want people that the power you have, this conflict that's going on for young people is that the power of your time is just, it is a superpower. Speaking of superpowers is that if you can take it just a little bit today, it can turn into something really huge for your future self. And just a lot of people just don't take advantage of that opportunity. So when I was talking about bedazzling your basic life is that I do want to make sure that when you get to be my age, in your 50s, you don't look back on your 20s and 30s with the regrets and go, man, I really felt like all I did was I was a miser and I saved and I didn't make memories. And that's why I always tell people there's nothing wrong with you taking your life and bedazzling it up. You know, for those, I don't know, maybe we're getting so far away and people don't remember what a bedazzler is. It's where you're basically putting sequins on basics on all your clothes and really making it fabulous without expensive costs and other things. Some of my favorite memories are going on road trips. I've told you guys, my parents did timeshares because they were free. We had no money to buy the timeshare, but they give you basically a free vacation that didn't cost any money. But it was still pretty incredible thing from a memory building standpoint. Now I tell people you can see how these things are imbalances because when Connor's asking this question, I felt like his was more in his lifestyle and worried about creep. That is something now because you'll get to a point, I never pick on people in their 20s and 30s. When you're living a very modest life, you're saving a lot, but you're still making great memories. It's more when I see people get in their late 30s, even early 40s, they got a family and you find out that they have multiple seven figure portfolios, but they're, they're still making the kids sleep in the, the closet at the hotel room. You're like, what are you doing? You know, because there does come a point that you, you're pushing off, you're being a miser under the terms of, hey, you told me earlier when I was younger, bedazzled my basic life. So I think it's good that I have my 13 year old kid sleeping in the closet at the condo, at the beach because we're saving all this money, you know. No. Or we're driving, you know, 14 hours to go on vacation versus buying plane tickets for. That's the balance between bedazzle, your basic life and then lifestyle. You know, there's, there's things where I want you to be able to afford your life. That's why we give you all the, the guidance on 23, 8, 25% housing, what you can do with student loans and all these other things. It's because we're trying to give you the boundaries. But there has come a point that I'm going to tell you and this is why we don't talk about tightwads anymore. You know, for years and years I was so proud of how tight I was with every dollar that I spent. But then as I got in my 40s, you start seeing the value of your investment starting to grow and you realize, oh my gosh, I'm not going to die penniless like I was always worried about. I need to make sure I'm maximizing the memories because I won't have my children at this age ever again. I won't be able to do, do this physically for the rest of my life. And it's kind I try to give you the guidance of a person who's been poor now with resources and how you balance giving the most out of your life but also being very responsible with what you're creating and building.

[Bo Hanson]

Look, this is a little bit of a hot take, but lifestyle creep gets such a bad rap. I want you to hear this from the money guy show first. Lifestyle creep in and of itself is not bad. You said that. Hey, one of my greatest fears is lifestyle creep. Where it becomes a problem is when your lifestyle advances faster than your earning potential or your savings. Like if those two things are not keeping up with your lifestyle, there you have a problem. But if you're saving the way that you're supposed to be saving and your income is increasing, it's okay if your lifestyle also increases, that's what you want. I mean, money is a tool that allows us to do the things that we want to do. And for a lot of folks, one of the things we want to do are be more comfortable. I want to travel differently, I want to drive a different type of car, I want to live in a different type of House, none of those things in and of themselves are bad so long as they don't begin to get your priorities out of whack. So if you're already saving 50%, you're 29 years old and you're doing the thing that you're supposed to be doing, lifestyle creep should not be something you are afraid of. It should be something that you embrace. I say the same thing with people about aging all the time. Oh, I'm so afraid of aging. I'm so afraid of getting old. Well, don't be afraid of it because it's coming, it's going to happen. What decisions can you make right now so that as it happens, it's not a bad thing, it's not a negative, it's not something that works against you. And so it's okay if your lifestyle begins to creep. It's okay if you begin to spend those that spend money on those things. But do it because it actually adds value. Not because you can, because I found with my family, Brian, I told you about this. You know, we did this big, I've mentioned this in the show a bunch with this like big extravagant Disney trip a couple of years ago. And it was awesome and amazing and wonderful. But my kids were super young and they fought a lot and they cried a lot. And it was not like this magical, amazing, wonderful thing. It was a great trip. But like it wasn't the poster, like they did not ask us to film for the poster for doing it. Right. But you know what, Like a year or two ago we went to a local state park. Park. And it was like not expensive and it was not far away and we had to fly there and my kids loved it. We just went and walked through the woods and we hung out and we just fully engaged. And some of that was based on their ages and that. So it didn't cost a lot of money. It was a bedazzling way to do something very basic. But it was so, so, so, so valuable. So don't just assume that you have to spend more money to have valuable experiences. That's not necessarily true. But if that is something that is required to do the things you want to do, it's okay so long as you're saving and you're staying on track with what your longer term goals are.

[Brian Preston]

Now for the second part of the question, I want to put in a little bit disclaimer is that y' all have to be careful how much you encourage Bo because a few years ago Bo really injured himself doing what's called Muscle ups. And he's very proud of the fact that he struck. By the way, if you, if you don't know what a muscle up is, because I would say probably 99% of the public can't do a muscle up because that's basically where you're going from. You know, you're one of those people, you do a pull up, which is already hard. Most people can't pull up their body. You know, it's kind of like I always think about in saving your life if you fall off a cliff. But you catch on. Just like in all the movies they do. Bo would at least be able to. Most people can pull up, but then Bo could actually save himself because a muscle up means that you not only did a pull up, but then you took your whole body all the way down to your hip. So there is some life saving value to this. Because every movie plot for my entire life with an action adventure is people typically pull themselves up from a falling off of a cliff.

[Unknown]

He may really injure himself, but Bo.

[Brian Preston]

Was doing this multiple times. And then there was a separation between your bicep and your. In your. I didn't even realize those muscles were connected. Yeah, yeah, your bicep are connected.

[Bo Hanson]

I tore. Tore my back. It was the same, Same injury that one of the Watt brother had. I think it was T.J. watt. So it's like, you know, it's pretty. It's pretty common NFL injury.

[Brian Preston]

So. So be careful when you ask, because Bo is very strong. But I'm trying to make sure that we keep him in control so he doesn't hurt himself because he's getting older. We don't need to be doing crazy, crazy stuff because it's also not how healthy you are, it's how healthy you stay.

[Bo Hanson]

That's right. And so I have, look, I have. You know, he's.

[Brian Preston]

By the way, he's confessed to me in the last two weeks, he did a muscle up. And I was like, what are we doing? I was like, you promised me you were not going to do this.

[Bo Hanson]

It happened in October 2022, and I told myself, I'll never do them again. Never do them again. But, man, the other day I was just feeling real good. And so I just, I just took it for a spin. I don't do them a workout. I don't. Don't do them high volume. But yeah, it is one of those things. Like I am at the age now I have to be more careful about the kind of weight that I lift and the kind of movements that I do because I want to make sure that I stay healthy for as long as possible. So it's something that's a, that's a big priority for me.

[Brian Preston]

If you want to know the real good life advice is the way I've protected myself from falling off the cliff is I just walk around with Bo. So now he can just, I can.

[Bo Hanson]

Just pull you up off the cliff.

[Brian Preston]

As long as I can hang on for a split second. Hopefully Bo is going to pull me up off the cliff.

[Unknown]

That's a good strategy.

[Brian Preston]

You didn't answer. Did you want to tell us how.

[Bo Hanson]

Much do I bench press?

[Unknown]

That was part of the question.

[Bo Hanson]

I'm in the middle, I'm in the middle of a bench press cycle right now. It's a strength cycle we're doing. So I will find out here in a few weeks.

[Unknown]

Oh my God.

[Bo Hanson]

Immediately pre injury I was right around 350 and I have a feeling I'm going to be right back in that range. That's my, my bold prediction.

[Unknown]

Interesting.

[Bo Hanson]

There you go.

[Unknown]

Interesting.

[Brian Preston]

And by the way, Bo's not a small man. I mean that's what I always tell people about. But bench pressing, if you're, if, if you're, if you're over six feet, because those six feet long Yankee, these arms, it creates a lot of distance that you have to cover.

[Bo Hanson]

A lot of distance.

[Brian Preston]

Whereas all my buddies in college when we used to do bench press stuff, I mean all my, all my five, eight, five nine guys, they just, you know, it's like almost like they hit their chest and their muscles big enough that it bounced right back up and like they're done. I'm like, whoa, that would be nice if you only had to go 4 or 5 inches versus this crazy plane with that much weight. So that's, that's impressive.

[Unknown]

Connor, your question covered a lot of ground and for that we would like to thank you with a Money Guy Tumblr. If you, if you would like one, just email winneroneyguy.com Brian Cheers to this Momentum mortgage free.

[Bo Hanson]

Mortgage free.

[Brian Preston]

Not free mortgage and personal loan free.

[Unknown]

But it's been a long time coming. So thank you for listening or watching, joining us for this momentous occasion. And even if you didn't get a Tumblr today, we still have a lot of good, really great free stuff for [e-mail] resources. Go check out our downloads and our calculators. They'll be right there for you. And we'll be back next Tuesday at 10:00am Central right here on YouTube.

[Brian Preston]

Guys, we have an absolute blast doing this show. I do want to, I have one little sidebar I got to go to the Dolly musical.

[Bo Hanson]

Oh yeah. That they were premiering in here right.

[Brian Preston]

There is going to be in the coming months. There is going to be Broadway in New York is going to likely have the Dolly show. And we all know we love us some Dolly Parton. And I'm happy to report also because they're doing previews out here at Belmont at the Fisher Center. Dolly has been showing up at all those shows and that's so cool. I mean, it is so cool seeing her get up there and she is just spectacular. And this show is good. And I just wanted to say that's something to be on the horizon for, for making memories. If you want to get a little bit of that, you know, mountain love in your life and a little the Dolly magic, be on the lookout for that. That was something cool. But I'm your host, Brian Preston. Mr. Bo Hanson.

[Bo Hanson]

Moneyguy Team out the Moneyguy 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.

[Brian Preston]

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