Don't Make These Inheritance Mistakes!

Summary

Podcast Summary: Money Guy Show - "Don't Make These Inheritance Mistakes!"

Episode Overview In the January 1, 2025 episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into the intricacies of managing inheritance, balancing adult responsibilities with education, assessing net worth, and strategic real estate decisions for future financial goals. Through engaging discussions and real-life questions from listeners, Brian and Bo provide actionable insights to help listeners navigate their financial journeys with confidence.

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1. Navigating a Significant Inheritance

Listener Question: Inheriting $300,000 The episode kicks off with a poignant question from Peter M., a 28-year-old on step six of the Financial Order of Operations (FOO). Peter is set to inherit $300,000 and seeks advice on optimal placement to achieve his goal of early retirement. His options include taxable accounts, index funds, or target retirement accounts.

Bo's Expert Analysis [00:44 - 02:34] Bo Hanson begins by highlighting the uniqueness of Peter's situation, emphasizing that not everyone encounters an inheritance. He questions the current structure of the inherited funds, pondering whether they are in checking, savings, IRAs, or Roth IRAs. Bo advises against immediate liquidation and suggests maintaining the tax-advantaged growth by rolling assets into an inherited IRA or Roth IRA, allowing for continued tax-deferred or tax-free growth over the next decade.

Bo Hanson [01:05]: "It's important to let that money keep rolling instead of cashing it out and paying taxes immediately."

Brian's Perspective on Legacy and Financial Steps [02:34 - 05:10] Brian Preston acknowledges the sentimental value of an inheritance, referring to it as a legacy and an opportunity to "pay it forward." He ties this into the FOO, noting that Peter is transitioning into step seven, hyper-accumulation, where strategic use of assets becomes paramount. Brian advises a measured approach, urging Peter to consider both short-term and long-term financial goals without rushing decisions.

Brian Preston [02:34]: "Measure twice, cut once. Be mindful of making good decisions with this inheritance."

Advanced Investment Strategies Beyond Target Retirement Funds [05:10 - 07:41] Bo elaborates on investment options, praising target retirement index funds for their simplicity and automatic asset allocation adjustments over time. However, he suggests that with a substantial inheritance, it may be beneficial to move beyond generalized portfolios to more specialized, custom allocations tailored to individual risk tolerance and financial timelines.

Bo Hanson [05:10]: "When your portfolio hits critical mass, a specialized portfolio might better serve your specific needs."

Brian echoes Bo's sentiments, emphasizing the importance of tax-efficient investing and the potential need for personalized financial advice when managing larger sums.

Brian Preston [06:10]: "If your life gets complicated, find somebody who's navigated this hundreds of times to help you avoid traps and blind spots."

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2. Balancing Adult Life with Continuing Education

Listener Question: Returning to School at 30 Tori T., a 30-year-old accounting student, asks for general advice on balancing school with adult responsibilities amidst the "messy middle" of life.

Bo's Guidance on Financial Continuity [08:06 - 09:18] Bo commends Tori for pursuing further education despite the challenges. He advises maintaining financial discipline by continuing contributions to employer-sponsored plans, building an emergency fund, and maximizing tax-advantaged accounts like Roth IRAs and HSAs. Bo underscores the value of small, consistent financial actions even during transitional life phases.

Bo Hanson [08:46]: "Keep doing everything else, too. Max out the Roth, choose attainable goals that don’t break the system."

Brian's Behavioral Insights on Financial Planning [09:18 - 13:23] Brian offers a behavioral perspective, encouraging Tori to view her education as an investment in her future earning potential. He discusses the trade-offs between short-term sacrifices and long-term gains, emphasizing the importance of not overwhelming oneself and maintaining momentum in financial planning.

Brian Preston [10:01]: "Take a deep breath, don't put too much pressure on yourself that you create the potential for failure."

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3. The Importance of Regular Net Worth Assessments

Listener Inquiry: Excitement About Net Worth Statements Megan introduces a light-hearted topic, asking whether listeners are excited about preparing their net worth statements as the new year approaches.

Bo and Brian's Enthusiasm for Net Worth Tracking [14:34 - 18:49] Bo shares his enthusiasm for net worth statements, highlighting how they provide a clear snapshot of financial health and track progress over time. He mentions the proprietary tool available at learn.moneyguy.com designed to visualize changes in net worth and monitor key financial metrics.

Bo Hanson [14:34]: "I love using the tool to see what has changed from last year to this year. It's awesome."

Brian concurs, sharing his personal excitement and the value of seeing real-time compounding growth in his own finances. He encourages listeners to utilize net worth tracking tools to gain insights into their financial journeys.

Brian Preston [15:18]: "Seeing the changes over time is so magical. It’s not just theoretical; it’s your numbers growing."

Megan adds that even small financial actions can significantly impact net worth, reinforcing the importance of consistent financial management.

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4. Strategic Real Estate Decisions for Future Goals

Listener Question: Renting vs. Selling First Home for College Tuition Foo, a 39-year-old on step eight of the FOO, inquires about the merits of renting out his first home and later selling it to fund his children's college tuition.

Bo's Comprehensive Analysis [19:15 - 21:07] Bo approaches the question by framing money as a tool to achieve personal goals. He outlines scenarios where renting out the first home could be beneficial, especially if it generates positive cash flow and allows for the accumulation of capital towards a second property. Bo also addresses the tax implications of converting a primary residence into a rental property, noting the capital gains exclusion available if the home is sold after fulfilling the required residency period.

Bo Hanson [19:15]: "Primary residences offer up to $250,000 in capital gain exclusion for single individuals and $500,000 for couples if sold after two years of residency."

Brian's Mindset on Diversification and Financial Tools [21:07 - 27:57] Brian cautions against relying solely on one financial asset (the primary residence) to achieve multiple goals, likening it to using a Swiss army knife for complex tasks. He advocates for diversification, suggesting the use of additional financial vehicles like 529 accounts for college savings and maintaining tax-efficient investment accounts. Brian illustrates how leveraging multiple tools can create a more robust and flexible financial strategy.

Brian Preston [22:07]: "Instead of relying on one asset, use the full toolbox—529 accounts for tax-free growth, rental income, and tax-free gains from selling your primary residence."

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5. Light-Hearted Segment: The Swiss Army Knife Analogy

Tool Talk and Fun Anecdotes [24:43 - 27:57] The hosts transition into a humorous discussion using the Swiss army knife as a metaphor for financial tools. Brian shares anecdotes about his experiences with multi-functional tools, emphasizing the importance of having specialized tools for specific tasks. This analogy reinforces the episode's theme of using diverse financial instruments to effectively manage wealth.

Brian Preston [24:10]: "A Swiss army knife might seem versatile, but sometimes you need specialized tools to get the job done right."

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Conclusion In this episode of the Money Guy Show, Brian Preston and Bo Hanson provide a wealth of knowledge on managing inheritances, balancing educational pursuits with financial responsibilities, tracking net worth, and making strategic real estate decisions. Their blend of expert advice, listener engagement, and relatable analogies offers listeners valuable strategies to enhance their financial well-being and achieve their long-term goals.

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Notable Quotes with Timestamps:

• Bo Hanson [00:44]: "It's really interesting...inheritance is a blessing with a legacy component."
• Brian Preston [02:34]: "Measure twice, cut once. Be mindful of making good decisions with this inheritance."
• Bo Hanson [05:10]: "Target retirement index funds are a fantastic solution for the beginning of your financial journey."
• Brian Preston [06:10]: "If your life gets complicated, find somebody who's navigated this hundreds of times to help you avoid traps."
• Bo Hanson [08:46]: "Max out the Roth, choose attainable goals that don’t break the system."
• Brian Preston [10:01]: "Take a deep breath, don't put too much pressure on yourself that you create the potential for failure."
• Bo Hanson [14:34]: "I love using the tool to see what has changed from last year to this year."
• Brian Preston [15:18]: "Seeing the changes over time is so magical."
• Bo Hanson [19:15]: "Primary residences offer up to $250,000 in capital gain exclusion for single individuals and $500,000 for couples."
• Brian Preston [22:07]: "Instead of relying on one asset, use the full toolbox—529 accounts for tax-free growth, rental income, and tax-free gains from selling your primary residence."

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The Money Guy Show is hosted by Brian Preston and Bo Hanson of Abound Wealth Management. The insights provided are for informational purposes only and do not constitute personalized financial advice.

Transcript

[Brian]

I'm inheriting $300,000. How do I not screw this up?

[Bo]

Brian, I am so excited to talk about this because sometimes life throws us these curveballs that we're not expecting and sometimes the curveballs are pretty good and we want to figure out, okay, I've got this once in a lifetime opportunity. What do I do and how do I navigate it? I love that we can answer those kind of questions. Matter of fact, I love that we can answer all of the question that you guys send. It's one of our favorite things to do every Tuesday morning at 10am Central. So we want to answer the questions that you care about. So with that, Megan, I'm gonna throw it over to you.

[Megan]

Great. We're gonna start off with a question from Peter M. He says, I'm 28 and on step six of the foo. I will inherit $300,000 soon and I'm unsure where to put the money. I would like to retire early. So should it be in a taxable account, index funds, or a target retirement account? What do you guys think?

[Brian]

This is exciting.

[Bo]

So it's one. Peter, this is a unique opportunity. A lot of folks don't have a situation where they get to inherit some level of wealth. And so it sounds like you're in a position where you are. It's really interesting. And your question doesn't state this, hey, I'm going to inherit $300,000. My immediate first question is, okay, how is that money currently structured? Because most often when there's an inheritance, you might inherit some checking accounts and savings accounts or maybe there's a piece of property that got sold. But oftentimes there are things like IRAs or Roth IRAs that you inherit as a beneficiary that what you're supposed to do is you're then supposed to open an inherited IRA or an inherited Roth IRA and you roll the assets into that. And then there are certain required, distribute required minimum distribution requirements on those assets. I'm going to guess by the question that he's talking about inheriting $300,000 after tax. Because obviously if you're inheriting anything inside of a tax structure like a 401k IRA or Roth IRA, it likely makes the most sense to open up an inherited account to put that money in so you can continue either with the tax deferred growth or the tax free growth from now for the next 10 years. So I would not think about using any of that money immediately to go cash it out, pay taxes and do something on. I let that money Keep rolling. But he poses an interesting question. What does he do with the money that comes to him after tax that 300,000 first.

[Brian]

Peter, you know, typically inheriting money is after the loss of somebody. So first we're sorry for the loved one that you've lost. But it is, it's one of those things where I always think about with inheritances. There's a legacy component of this too, is what a cool thing for somebody's discipline or hard work to, to kind of pay it forward and give you an additional opportunity for the future. And I think this one even has an extra special sweetness in the fact that you're already at step six of the financial order of operations, which everybody knows by the time you get to. Or if you haven't, I'd invite you to go to moneyguy.com resources or if you even want to go, a deep dive. And what I'm about to talk about is step seven, hyper accumulation. I really think that this book puts an exclamation point on what that step is and how to leverage that to the most. But it is one of those things where you're going to be able to hit the 25% savings rate just off of not only your good discipline, but also the little bump that this inheritance is going to give you. But then beyond that, you're going to move into step seven. And that's why I think that like I said, this is a blessing with a legacy component that you get to move into step seven. And the key thing about hyperaccumulation is that you say all the other steps were how do I maximize, keep my life out of the financial ditch and avoid the traps like high interest debt. Step seven is the first one that says how are you actually going to in the long term use these assets? So this is going to be a great time to pause. You don't have to get in a hurry on this because that's the other thing I tell people when you inherit money is measure twice, cut once. You can be very mindful of making good decisions with this. You said you're retiring early. For me, that does mean like maybe an after tax account might really be a good thing. But then as you go through your checklist mentally of what the long term goals, you said early retirement or opportunity to early retire. That is an after tax. But then you need to think about are there other lifestyle things that you and your family have talked about to pay it forward with this legacy is that are you going to be moving to a different house or are you Going to change careers because this allows you to have more flexibility and resources. Make sure you're just looking at all of those intermediate goals, meaning in the next six to 10 years, 10 years and beyond as long term goals. And you balance that out and then you structure your accounts in step seven to go ahead and start taking action to reflect those goals.

[Bo]

Now, there was one little extra piece at the end of the question. He said, hey, should I consider index funds or target retirement funds? And for those of you that don't know, we love target retirement index funds. Because all you have to do is decide two things. How much can I save and when do I think I want to retire? And if I think I'm going to retire in the year 2050, I'll select the Target Retirement Index 2050 fund. And right now it'll be pretty aggressive, heavy on the equities. And then as I move through time, it'll get naturally more conservative. And we say for most people starting out the beginning of your financial journey, target retirement funds are a fantastic solution. But once your portfolio hits the asset size to where you are at critical mass, you might be able to benefit not just from a generalized portfolio solution, but it might make sense to move to a more specialized portfolio solution. So when I hear that you have $300,000 coming your way and you're already in step six, there's a really good chance that you may be graduating beyond just the target retirement index funds. You might want to think about how do I design and build a custom allocation specific to my needs, my risk tolerance, my risk timeline, my risk capacity, and what does that look like, especially given there's going to be this large inflow and then how do I think about allocating into that portfolio? Do I do it all at once or do I potentially dollar cost average into that allocation over time? These are the kind of things you want to think through as you figure out how to utilize these dollars.

[Brian]

Yeah, I mean, you're spot on. I think index target retirement funds are great in the fact that it helps you with what you know, how much can I save? And then the asset allocation and how it changes. What I love about what you said, once you get into larger sums of assets, that tax location is just as valuable as the asset allocation. If you don't know what tax location means, that is just that it's kind of, you asked it in your question, what's the difference between after tax or taxable brokerage accounts, tax deferred accounts, and then of course those Roth tax free accounts, they all do things differently and well. And you want to put different investment types to maximize the benefits that each one of those can provide, as well as the liquidity and access. So that's why this is probably a great point. When you come into this type of money, you've only had one chance at having these type of assets. Six figures, multiple six figures. On top of your already good discipline and behavior. If your life gets complicated, go find somebody who's done this hundreds of times to help you navigate it and avoid the blind spots and all the traps. And taking the relationship to the next level is probably warranted at that point.

[Megan]

It's great, great advice. All right, thank you, Peter, for your question. Hopefully that gives you a lot to think about. Next up, we've got Tori T. They say, do you have any general advice for adults going back to school later in life? I just turned 30am in my senior year as an accounting student. Balancing school with adult life and entering the messy middle is rough. What advice do you guys have for Tori?

[Bo]

As if the messy middle weren't messy enough. Right. First of all, I commend you because it's hard. Going back to school later in life is a difficult thing because most folks enter into the 30s, enter into the messy middle. They have a thousand different things pulling them in a thousand different directions. They're short on time, short on money, and there's not a whole lot of room for excess. And yet, Tory, here you are saying, I've got all that stuff likely going on and I'm going to go back to school. I'm going to go finish up because I want to perhaps pursue a different vocation. I want to go into accounting. I love that. So the question is, what's the general advice? This is the way that I would pose a general advice I would give you is do the best that you can as often as you can. Because what's going to happen is if you're back in school, you're likely not working full time or you're likely not making the same income you were. And so the messy middle gets even messier. While it would be very easy just to shut everything and say, you know what? I'm going back to school. I'm going to get my education. I'll put everything on pause until I get to the other side of that. While that is a strategy, I don't know that it's the absolute best strategy, because the money that you're able to accumulate in this early 30s at this stage of life can be incredibly valuable for you. So as you look at the. Brian, can you hold the thing up?

[Brian]

Oh, yeah.

[Bo]

As you, as you look at your financial order of operations, think about where you are. Maybe before I went to school, I was at step six and I was moving towards maxing out that employer plan. Maybe you do have to take a few steps back, but I would encourage you if you can, you are still working. Let's still get the employer match, let's make sure we have a fully funded emergency fund. And then can we be doing things like maxing out the Roth or maxing out the hsa? Because even little small marginal decisions that allow you to stay the course at this stage, when you get to the other side, when you get into your new career, when you get to age 40, 45, 50, you'll look back and think, man, I'm so glad that I didn't shut everything down. I'm so glad I kept, I kept the ball moving forward.

[Brian]

I agree, but slightly disagree too. And I'm going to, I'm going to just go ahead and say it. I think you're giving, setting up a good cop, bad cop. And I appreciate you taking the role of the bad cop there by basically saying, hey, even though you're doing this incredible thing to better yourself, make sure you keep doing everything else, too. And I just worry from a behavior, I worry from a behavioral standpoint because you already heard when Tori was asking the question that it feels like there's just a lot going on right now. And what I worry about is that is, look, whenever I'm dealing with hard life things, I have an internal question. I always ask myself, is this a season or is this just the way things are? And I want to commend you. Is that obviously at some point you asked yourself that question and you said, you know, I feel like I'm in a bad place or I need a better opportunity. So you're like, I'm going to turn this trajectory I'm on and I'm going to go take a season for myself where I'm going to invest, go get an accounting degree and better my life. That's an incredible choice, first of all. So then you ask yourself, once you're in this decision of your back in school season, or it's just how things are. Well, now you're in a season where you've got to do good in school, you got the family, but you've also got this pressure of your financial life going on as well. And I don't. And I think Beau is spot on. It is, I want you to be scared but purposeful that every when you're 30 years of age, every dollar has the potential to become $23. You know, when you were 20, back when most people were in college, every dollar had a potential to be $88. But I know in your future self, your 40 year old self, every dollar only has a chance to become seven. So Bo is exactly right that it is important. But think about the fact if your income is going to have the potential to double, triple, maybe even quadruple over your lifetime, the season you're in, where you're investing in education is going to be so much more valuable even within some of that compounding growth because the savings rate is even more important than the compounding growth. And when you're talking about how big your shovel is. So I just would say take a deep breath, don't put too much pressure on yourself that you create the potential for failure. Meaning that if you overwhelm yourself through all this season that you just don't accomplish anything, then take a deep breath and maybe you pause some of the financial stuff, accomplish the school, accomplish the family, but then you get back to it as fast as you possibly can. Or you do what Bo said, you try to max out the Roth choose what the goal is that's attainable and doable right now, that doesn't break the system and make that happen. But then you promise yourself while you're because like I said, you're scared and purposeful if you do make any concessions. You promise yourself when you come out to your great big beautiful tomorrow at the end of this education goal and you get that great new job and you start making more money than you've ever made, you're going to be double on the discipline to pay back what you missed out on in opportunity costs and then some. So that you do really get to build that just incredible vision for your future and maximize your financial life as well as live the memory building awesomeness of this sacrifice in the moment you're in.

[Bo]

I'll allow it.

[Megan]

Great. Well, thank you Tori for thanks for being bad cop.

[Bo]

I just find Megan, I'm curious if you agree with this. I feel like we as humans often have this tendency that we overestimate what we're capable of when things are good, like when life is going good, we're like, oh my gosh, I can. Oh, it's going to get this much better and do this and do this and do this and do this. And we fall in this trap of like really overestimating what is Possible. But I think on the flip side of that, when things are bad, I think we tend to underestimate what we. Oh, life is falling apart. Things are hard. Job's gone. This is hard. This is hard. I just can't do anything. And in reality, maybe you can do more than you think you can save that extra hundred dollars. You see this?

[Megan]

You know what I mean?

[Brian]

I was like, man, what a good thing. And, you know, this knucklehead's trying to win this thing still. He's such a mess.

[Bo]

You know, different strokes. That's all I'm saying.

[Megan]

Well, hopefully Tori can find the balance that works for them. Thanks for your question. I've got a question for you guys that's not on the hopper. This one's going out on New Year's Eve.

[Bo]

Okay.

[Megan]

Are y'all excited about doing your net worth statement?

[Bo]

Oh, buddy, am I ever. I wouldn't say it's our favorite day of the year, but, man, it is up there. I mean, around about this time of year, we start having a conversation. We start talking about, hey, you ready? You're getting ready. You're getting everything lined. You get looking at. And it's awesome. And what I love more than even, like the point in time, Brian, because it's great seeing the point in time. What's my net worth today? How you know, I love because I use the tool that we, by the way, we make available for [e-mail] I love using the tool to see what has changed from last year to this year. Realistically, what's changed from five years ago until today. And I just think it's awesome.

[Brian]

So I have to confess, and it's funny that Megan's asking this question because yesterday my fidelity statement for last month showed up at the house. And I don't look at every month's statement, but I did look at yesterday, and I was like, man, it is going to be fun to do the net. I actually had that middle thought to myself. I was like, it's going to be fun doing the net worth statement this year because it's been a good investment year. And I had that. So I'm already kind of starting to lick my chops and get excited about it. And Bo's exactly right. We eat our own cooking. Meaning that the same template that we offer to you [e-mail] is the exact same template that we use. And what I like about it is it's that dashboard view. It allows me to kind of see where the Debt's at now because they're going down every year. Where are the investable assets at? What are my three bucket strategies, meaning the after tax assets? My tax free, my, my tax deferred. How are those things balancing out? And then one of my favorite things is, is just we're trying to always figure out the bowling point or if you're at the point where you actually make more money from your capital than you do from your labor. We have all that built into the dashboard. So this thing, if you're trying to figure out maybe you're new to this whole journey of building a net worth, by the way, if you are brand new and you just say, I appreciate the tool, guys, but I'm all about the free stuff, you can go to moneyguy.com resources. We have a great template there to just get the good behavior going. But when you get to the point that you actually want to accelerate the journey and actually take an active role of seeing the metrics that are changing every year, I would encourage you to go check out that, that, that, that tool because we were very deliberate with how we designed it.

[Bo]

Are you, have you been a Megan, a net worth preparer for a long time? Are you new to, like, what's.

[Brian]

How.

[Bo]

What are you thinking about as it's almost net worth day?

[Megan]

I'm excited. I wouldn't say a long time. I've only been working for like four years, so not a long time.

[Bo]

Did you start at the very beginning or.

[Megan]

Yeah.

[Bo]

Okay. Look at that. She's gonna have it from the very beginning.

[Brian]

I will say. I'm not gonna say any names, but I had someone on the Moneyguy team who's kind of at the beginning of their journey too. And they said, I don't do it yet because I just don't have enough variables going on necessarily. And I was like, no, no, no. I was like. I was like you. I said if I could go back in time because I didn't start doing my net worth until I was in my early 30s. And I regret it because it's so fun. Part of what we do with the visuals is you can see your changes over time. And it is so magical to watch compounding growth actually happen in real time for you. Not some theoretical thing when you watch one of our shorts or our videos where we show you the charts, but when you see it's your numbers and you actually get to see the compounding growth, don't take that from yourself. Go ahead. Even if you only have, like, you started your roth IRA last year and you have some student loan debt and you're just getting out of some bad decisions you made in college with credit cards just because it might be right at zero, even below zero, don't, don't skip the step because your future self will pay. Thank you immensely. Immensely. If you start this as soon as possible.

[Bo]

I think I did my first one at 20 years old.

[Brian]

Yeah.

[Bo]

How awesome that is. Like just how much data that. Oh, it's so fun.

[Megan]

Yeah. And even like starting out, it's still crazy. Seeing the progress from the beginning of the year, like all the stuff that you forgot that you did, that's that little small.

[Bo]

That's why it's like, it's like Christmas morning. Little small decisions you made in January, February, you're like, holy cow, this is paying off by the end of the year. I think it's awesome.

[Megan]

All right, y'all ready for the next question?

[Bo]

Yes, ma'am.

[Megan]

All right, this is from Foo number 8 said hi. Hi Money guy show I am.

[Brian]

That's abundance goals or prepaid future expenses? I'm sorry, Keep going.

[Megan]

No, you're good. I'm 39 years old and on step eight of the Foo question, would you consider keeping your first home to rent out, then sell it and use the money for the kids college tuition? So a different take on saving for college. What are yalls thoughts on that?

[Bo]

Okay, so, okay, this is the way they'll answer this. Money is nothing more than a tool that allows you to accomplish the goals that matter to you. And money is fungible, meaning money that you have in one place is still the same money, even if it's taken somewhere new somewhere else. So there's a few different questions you have to think about. Alright. If I have my first home and I've bought that home and maybe I got a great deal on it, and maybe I have a low interest rate and it's in a highly desirable area that's going to be easy to rent. It might make sense to rent that. And I can rent that house and I have the low mortgage and I can charge enough rent that it cash flows. And so the notes covering itself, so long as I was able to save for a 20% down payment on the second house that I bought on my new primary residence and I have enough capital, enough income, enough cash flow to be able to cover both mortgages comfortably, I don't think it's crazy. If you want to continue to hold the first home and then down the road potentially sell it now there are some tax consequences Associated with that? Well, there are benefits to rental property and there are some deductions you can take there to offset that income. One of the beautiful thing about primary residences is that when you do sell them, if you've lived in the home for two of the last five years, you get to exclude a lot of that gain. Up to $250,000 for single individuals, half a million dollar for couples. If you turn this property into a rental property and then you just decide to sell it seven, eight, nine years down the road so that you can pay for college now rather than you having all that capital appreciation tax free, you do have to pay capital gain taxes on that because it did become an investment property, investment asset. So I think you have to think through those contingencies as you go about navigating this.

[Brian]

I love that you got because you went through a lot of the technical stuff that I was sitting, I was like, I hope we make sure we get the technical. But I want to talk about some of the mindset stuff that I see as a potential trap. First of all, congratulations. Being on step eight of the financial order of operations, reaching to where you're actually living in abundance and you get to think outside of just doing the basics is always something to be celebrated. So I'm super happy for you. But the thing I kept thinking about as I'm hearing this is that it's amazing that you've got just primary residence. Sounds like the fact that it's appreciated and gone up. You want it to do everything financially. It's like choose one thing and then it's going to. Its goal is it's got to switch your price. That's exactly what I wrote down. It's a Swiss army knife of your financial life and the fact that it's your primary residence currently you're going to move out, turn it into rental property and then voila, you're going to sell it down the road, make so much money to go pay for the kids college. It sounds great that this one thing, this one asset is going to do all these great things, but have you actually ever tried to do a home repair with a Swiss army knife? It sounds so good that all you have to do is whip out this one tool and it is going to help you do this awesome thing. But I always find myself when like it because it has a screwdriver function on it. It has, you know, both a Phillips and then the traditional screwdriver. But if you try to, you're like, dad gummit, this thing isn't the right size. Then I'm stripping out the screws. This stinks. The knife is dull because it's also only about this, this long. Whereas I need something that can cut a little better. And I end up getting so fed. I'm like, this thing would be great. I guess if I got stuck on a, on a, on a deserted island, I'd be glad I had this Swiss army knife. But this stinks compared to. I'm just gonna go out to my, my, my toolbox, my full toolbox. I'm gonna get a Phillips screwdriver that actually matches the size of the, of the bit of the screw. I'm also going to just make sure that the knife I have is sharp enough and long enough that it can allow and cut this. And maybe I even need scissors instead of this feature. And scissors that aren't just this big like the Swiss army knife scissors. So I end up getting so frustrated because it doesn't that one thing just even though it on the brochure it will do all these 12 features, it doesn't do any of them good. And that's kind of what I feel like you're doing here is that your primary residence sounds like it potentially could do these things. But is it the best? And because I don't, I don't think it is necessarily because you have a choice. Let's take the primary residence. You do have a choice. Rent it out or sell it Bo gave you. If you sell it, there's some huge tax benefits, meaning tax free gains for a married couple up to $500,000. That's nothing to sleep on. And by the way, you can still do both because it's, you can rent it out for like two or three years. And as long as you sell, because it's two out of the last five years that you, you know, it was your primary residence, you could rent it out for a few years, see how that goes, and then still sell it for the tax free gain. So you can kind of have you choose your own adventure. But then when it comes to kids College, I love 529 accounts. I mean, because they're tax free growth. It's another way to get tax free growth. And if you did this instead of relying on one asset, if you actually went to the full toolbox of your financial tools, you could be like, maybe I take advantage of doing rental, but then also take advantage of taking this tax free gains. And then maybe I'm also in the Background Funding A529 account for these kids so that I get Tax free growth. Do you see how all of a sudden this got a lot better? Instead of just using one tool and hoping that it fixes all your financial problems, specializing and maximizing is definitely going to be your friend in this adventure.

[Bo]

How many home improvement projects have you tried to do with a sort of knife? Because, you know, pretty passionate as a great analogy and very passionate.

[Brian]

No, it is. It's one of those things because I do I have a. Is it. Is it a. Oh, gosh. Because I have like three of them. Because they are very effective for doing Christmas lights. Oh, gosh. It's something with man in it. It's tool man. Speak man. I'd have to. If I went on my Amazon history, I could tell you because I bought like three or four of them. No, you're looking at it. It's not a light bright or Christmas tree.

[Bo]

I typed in tool for Christmas lights. That seems like Speakman.

[Brian]

Type in Speakman tool. Okay, we shouldn't be doing this on.

[Bo]

Tell me more about it. It's a special tool that does Christmas lights.

[Brian]

No, no, it has nothing to do with Christmas lights. It's just a great tool that can cut. It can strip wires. It can do. It does a lot of things.

[Megan]

Claw.

[Bo]

The Speakman claw.

[Brian]

There's different tools. I use the scissors and cutting and the stripping wire stripping feature. But anyway, there are tools. But I find myself like, screw. If you've ever used a Swiss army knife for the screwdriver, it stinks.

[Bo]

Got it.

[Brian]

For all those things I just told you.

[Bo]

Yep. Wonderful. So it's not actually you aren't trying to do home projects, but you have a special tool that.

[Brian]

So Bo just took my masterful analogy and tried to see if he could minimize this. This is probably because I called him the bad cop on the street.

[Bo]

No, it was an amazing analogy. You just spoke with such fervor and passion. I was like, I can. I felt like I was in your house when you were getting frustrated with that knife. That's how much passion you brought to that analogy. I thought it was wonderful. Let me be clear.

[Megan]

Do you have a Swiss army knife?

[Brian]

I have these Speakman tools. I do have. No, you know. You know what? Okay, sidebar. I thought my first job ever out of college, I worked at the CPA firm. And at Christmas time, they gave everybody, all the associates these Swiss army knives.

[Bo]

At an accounting firm.

[Brian]

Yeah. With the firm logo on it. And. And I had this thing for, like, good 10 to 12 years. It was on. It was on the. It had a keychain on it. So it was on my keys. And then one year, TSA took it. I went to an airport. I was, I was so sad as I was going through security. And it was my fault. I mean, I'm the idiot that goes through security with a Swiss army knife on my keychain. But it was still. It made me so sad because that thing had my old firm's, you know, logo was all faded off, you know, flaked off in my pocket. So it had a little sentimental, but it had a. And it had. This is gross. Had a toothpick feature that was probably the most used tool tool on there.

[Megan]

That's not normal for Swiss army knives.

[Brian]

No, it is on those little ones. You slide out the toothpick. That is key for a good southern boy. That is a key reading that you want to have there now. I don't know. It's hygienic.

[Bo]

So you would use it. Yeah. Cool about.

[Brian]

If it doesn't kill you, it makes you stronger.

[Bo]

Yeah. You got a great immune system.

[Megan]

What did you say about wealth? Christmas gift 2025.

[Bo]

There we go.

[Brian]

How about I'll just give you all. We'll order some toothpicks.

[Bo]

Box of Abound toothpicks.

[D]

The Money Guy show is hosted by Brian Preston. 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 Moneyguy Show. The information provided is for informational purposes only and does not constitute financial tax, investment or legal advice.