Falling Behind? The RIGHT Way to Catch Up This Year

Summary

Money Guy Show: Falling Behind? The RIGHT Way to Catch Up This Year

Release Date: January 22, 2025

Hosts: Brian Preston and Bo Hanson
Description: Bringing confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

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Introduction

In the January 22, 2025 episode of the Money Guy Show, hosts Brian Preston and Bo Hanson address a pressing concern for many listeners: feeling financially behind and seeking effective strategies to catch up. The episode emphasizes that while the best time to get your financial house in order was yesterday, the second-best time is today. The hosts are eager to assist listeners in navigating their financial challenges by answering live questions and providing actionable advice.

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Key Discussion Points

1. Overcoming the Feeling of Financial Lag

Brian Preston initiates the conversation by acknowledging the common feeling of being financially behind. He encourages listeners by stating, “the absolute best time to do it was yesterday. Which means the second best time to get your house in order is today” (00:10). This sets a motivational tone, assuring listeners that it's never too late to start improving their financial situation.

2. Audience Q&A Session

The episode features several listener questions, each addressing different aspects of financial planning and wealth building.

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a. Amy B.’s Dilemma: Maximizing Retirement Contributions

Question: Amy B. is uncertain about where to allocate her savings, currently contributing 8% to a 401A with an 8% match and contemplating additional investments in a 457A Roth IRA.

Bo Hanson responds by highlighting Amy’s commendable savings rate:

“You’re saving 8% with an 8% match. She’s got 16%. That’s huge” (02:04).

Brian Preston adds that simply starting to save puts Amy ahead of many peers:

“Just the fact that you are saving now puts you way ahead of a lot of your peers” (02:27).

They introduce the Financial Order of Operations, a systematic approach they advocate for managing finances, which includes prioritizing debt elimination, building emergency reserves, and then optimizing investments.

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b. Josh M.’s Concern: Roth IRA Income Limits and Dollar Cost Averaging

Question: Josh M. faces income limits impacting his ability to contribute fully to a Roth IRA and seeks advice on balancing dollar cost averaging.

Brian Preston explains the Backdoor Roth Contribution as a viable solution:

“You can fund a traditional IRA with a non-deductible contribution... then convert those dollars to Roth” (10:00).

Bo Hanson compliments Josh for proactive planning:

“I wish Amy didn't feel so far behind because you’re already working huge with your 8% match” (02:04).

They discuss the practicality of dollar cost averaging versus lump-sum conversions, advising against frequent conversions due to hassle factors and recommending an annual approach instead.

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c. Future Polyglot’s Plan: Balancing HSA and Law School Savings

Question: At 26, Future Polyglot is maxing out his Health Savings Account (HSA) due to medical reasons and is planning for law school. He wonders whether to prioritize law school savings over contributing to a Roth IRA.

Brian Preston emphasizes the importance of a holistic financial picture:

“Is your ability to save for law school going to allow you to pay for law school in total, or are you still going to have to take out some sort of debt?” (17:00).

Bo Hanson advises maintaining robust cash reserves before venturing into additional investments:

“I don't want your cash reserves to be a little frothier... I just don't want to break the moat of your cash reserves” (14:12).

They recommend evaluating the long-term costs of law school and the impact on financial stability before diverting funds to retirement accounts.

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d. Ashley Kate’s Inquiry: Harvesting Capital Gains in Kids' UTMA Accounts

Question: Ashley Kate asks about the downsides of harvesting capital gains in her children’s UTMA accounts while keeping income below the kiddie tax threshold.

Brian Preston clarifies the strategy:

“You can sell positions and harvest these gains... ensuring they remain below the 0% capital gains rate” (23:38).

Bo Hanson provides tax details, noting the importance of understanding income thresholds to maximize tax efficiency:

“In 2024, any amount above $2,600 of income generated in a custodial account... is taxed at the parent's rate” (25:42).

The hosts highlight the benefits of using tax-efficient funds like index funds and the potential advantages of harvesting gains to optimize tax outcomes for children’s investments.

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Strategies and Insights

Financial Order of Operations

The Financial Order of Operations is a recurring theme, guiding listeners through prioritizing financial tasks:

1. Covering Deductibles: Ensuring health insurance deductibles are met.
2. Maximizing Employer Matches: Fully leveraging 401A or similar retirement plans with employer contributions.
3. Eliminating High-Interest Debt: Prioritizing the payoff of credit card and other high-interest debts.
4. Building Emergency Reserves: Accumulating 3-6 months’ worth of living expenses.
5. Optimizing Investments: Maximizing contributions to Roth IRAs, HSAs, and other tax-advantaged accounts.

Backdoor Roth Contributions

For high-income earners like Josh M., the Backdoor Roth Contribution is a pivotal strategy. It allows individuals to contribute to a Roth IRA indirectly by converting after-tax traditional IRA contributions, thereby bypassing income limits.

Capital Gains Harvesting

Ashley Kate’s question underscores the strategic use of capital gains harvesting in custodial accounts to maintain tax efficiency. The hosts elaborate on leveraging income thresholds to minimize tax liabilities, enhancing the growth potential of children’s investments.

Wealth Multiplier Tool

Brian Preston introduces the Wealth Multiplier, a tool available on moneyguy.com. This tool allows listeners to project the future value of their investments based on varying contribution rates, serving as motivation to increase savings rates.

“Let that be your motivation to keep plowing forward... you can get the shit moving in the right direction towards your great big beautiful tomorrow” (05:04).

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Notable Quotes

• Brian Preston: “The absolute best time to do it was yesterday. Which means the second best time to get your house in order is today.” (00:10)

• Bo Hanson: “You have 16%. That’s working huge.” (02:04)

• Brian Preston: “Creating the muscle memory of doing the work necessary to build wealth before you even get to the mathematics.” (15:39)

• Bo Hanson: “This is going to let you triage your personal financial situation, figure out exactly where you are.” (04:00)

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Insights and Conclusions

The episode reinforces that feeling financially behind is a common concern, but proactive planning and strategic financial management can significantly mitigate this feeling. By adhering to the Financial Order of Operations, leveraging tools like the Wealth Multiplier, and employing strategies such as Backdoor Roth Contributions and Capital Gains Harvesting, listeners can effectively catch up on their financial goals.

Brian Preston and Bo Hanson emphasize the importance of disciplined saving, strategic investment, and continuous financial education. They provide a blend of motivational support and practical advice, empowering listeners to take control of their financial futures.

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Final Thoughts

"Falling Behind? The RIGHT Way to Catch Up This Year" serves as a comprehensive guide for individuals seeking to improve their financial standing. Through real-life examples, expert advice, and interactive Q&A sessions, the Money Guy Show equips listeners with the knowledge and tools necessary to build a more secure and prosperous financial future.

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For more resources and tools mentioned in this episode, visit moneyguy.com.

Transcript

[Brian Preston]

Feel like you're falling behind.

[Bo Hanson]

Here's the right way to catch up.

[Brian Preston]

Brian, I am so excited to talk about this because a lot of people find theirselves in this situation. Say, man, I feel like I'm behind. I haven't done what I needed to do the way that I needed to do it when I needed to do it. But what's wonderful about getting your financial house in order is the absolute best time to do it was yesterday. Which means the second best time to get your house in order is today. And that's what we want to help you guys do. A matter of fact, we love that. One of the ways we get to do that is by answering your questions. So if you have a question right now, we want you to get it into the. Into the live chat. We have the team out in the wings collecting them because we want to load you up. So with that may. Ah, I forgot what it was. It's. Yeah, I'm close.

[Megan]

Senior content developer.

[Brian Preston]

Senior content developer. Megan, I'm gonna throw it over to you.

[Bo Hanson]

You should just made up a title. I'm a little rusty, but you could welcome to 2025.

[Megan]

Brian, you should know that the chat is blowing up about your jacket.

[Brian Preston]

Yes.

[Bo Hanson]

Well, if y'all didn't know, Nashville's got some cold weather going on, so all the schools either got canceled or delayed starts. So I left a sleeping household. And I was like, you know what? I'm gonna pull that red jacket out.

[Brian Preston]

And I put it on.

[Bo Hanson]

Nobody noticed. They'll be just as surprised as you guys were.

[Brian Preston]

I think the world is thankful for it, don't you agree?

[Megan]

So our chat. Definitely.

[Brian Preston]

Look at this.

[Megan]

All right, well, we are starting off with a question that's perfect for the new year. It's from Amy B. She says, I've been watching the money guy for a bit now, but I'm having a hard time deciding where to start. And I need to because I'm behind. I have 8% going into a 4 1A with an 8% match, but I'm not sure where to put more. A 457A Roth IRA. What do y'all think?

[Bo Hanson]

You know, I wish Amy didn't feel so far behind because I just see right off the get go, 8% with an 8% match. She's got 16. You know, if you think about that 16%, that's working huge. I wish we. We had Amy's age, you know, so we could really give her even more kudos. But that's not something to just say, hey, I'm way behind and what do I do next?

[Brian Preston]

Yeah, what's really interesting is I think just the fact that you are saving now puts you way ahead of a lot of your peers. A lot of people haven't figured out, man, I really ought to begin saving for the future. I ought to begin deferring a little bit of today for a great big beautiful tomorrow. And just the fact that you figured that out no matter what age you are is wonderful. And what I love is that it's not only that you've figured it out. Now you want to figure out how do I do it better? Okay, I've got 8%, it's going into my 401A. What else do I need to do or where else should I be saving? And Brian, that makes me think, I just wish there were a system, a method, a user manual to help you figure out what you should do with your very next dollar.

[Bo Hanson]

And by the way, Amy, I resemble a lot of what you wrote is because I can remember 22 years of age had this accounting degree on paper. Everybody's like, man, this guy's got it figured out. Because I had a good job, but I got my first dollars that I now needed to invest and I had no clue what to do with it. And I remember I got sold some bad products and I just, I've always taken and internalized that vulnerability I had when I was 22 and starting my journey. And I was like, I wish somebody would just tell me what to do with my money so that I could do it in the right way, not waste time, not waste the money. And guys, that's exactly what we've created with the financial order of operations. And I know all of our new people, by the way, 40% of you are brand new. I'm always shocked at how many people are constantly coming through the turnstiles and joining the show. And it's important for you to realize this is what this is. This is going to let you triage your personal financial situation, figure out exactly where you are. I'm already proud. Hopefully you covered the deductible. Your highest deductible covered is step number one. You've already talked about. You've maximized step number two with getting that 8% match. Now you're asking yourself what's next? Well, of course we've got to make sure if you have any credit card debt or any high interest debt that's going to be working against your wealth building journey. Let's get that extinguished as fast as possible then let's make sure that you are covered for the uncertain stuff of your life with your emergency reserves, three to six months, typically. And then we get back to the exciting stuff. And you kind of. You already had some clues for yourself. You're like, do I do 457? Do I do Roth? Well, the first thing we're going to see in step number five is look at those health savings accounts. Look at that. Roth ira. You're on the right track, and you will, if you continue going through the financial order of operations, you're going to be able to build that great big beautiful tomorrow.

[Brian Preston]

And then I think one of the things that you can do that would be super helpful is if you go out to moneyguy.com resources and check out our wealth multiplier. You can even play with a wealth multiplier tool. You can see that, okay, based on my age, if I do increase my savings from 8% up to 10% or to 15% or all the way up to the 25% that the guys recommend, this is what every one of those dollars can turn into by the time that I get to retirement, by the time I get to my desired financial independence age. And let that be your motivation to keep plowing forward, because maybe you're not as behind as you think. And with a few small tweaks, a few small adjustments, you can get the shit moving in the right direction towards your great big beautiful tomorrow.

[Bo Hanson]

That was very good.

[Megan]

Wonderful. Well, Amy, I hope that helps. Were you going to say no?

[Bo Hanson]

You thanked. Amy, I had a question, but is today a Tumblr day?

[Brian Preston]

Yep.

[Megan]

I say so.

[Brian Preston]

Yeah, Tumblr day.

[Bo Hanson]

I mean, I don't. I didn't. We didn't. We usually talk about it in the content meeting, but we're so. It's a new year. New, fresh. So I didn't know if we, if we. If it was a Tumblr day or not.

[Megan]

I asked admin, and they gave us the okay, so I'll say it's a Tumblr day.

[Bo Hanson]

By the way, if y'all ever want to know where the break is, it's usually with the administrators. They're like, quit giving away the tumblers because they're the ones that have to make it all happen behind the scenes. I thought it was so cool coming into today, you guys. I want to thank our audience is because over the break, we took two weeks off for the holidays. I'm still reading. I can't help myself. It's like a bad. I'm reading Amazon reviews on Millionaire mission. And then I'm reading our comments section on YouTube and I want to thank you guys because we do have a lot of new people that come in and see the show, and sometimes they come in with not the best mindset towards us. And I want to thank our audience for kind of filling in the gaps because we had somebody. I read a comment last week where somebody said, look at these guys. I can't remember if they called us nerds or jerks or it was something that wasn't nice. And they said, you know, preaching at us and not taking our questions. And then I love. Their audience immediately stepped in and goes, they do question and answer shows, like, every week. And then I was able to jump in as one of the few that I did write a response on, and I said, you obviously are new, welcome. But we do indeed do a Q and A Show every Tuesday, 10am Central. But I just want to thank you guys because sometimes we're not always there to fill in the gaps and help the public. Because I get it. Some people have, you know, public Persona. They're looking for the catch. They're figuring out why we're even doing this. And so if you guys can help fill that gap, it really does help us. The other thing that BO is, and we were even talking about it in a content meeting, who would have thought your mustache would. I mean, this thing almost has its own Twitter handle at this point.

[Brian Preston]

Honestly, we're thinking about it because it's.

[Bo Hanson]

Just ridiculous that Beau's facial aptitude, facial hair aptitude is just so, so popular.

[Megan]

Are you telling to bring it back?

[Brian Preston]

I do it.

[Bo Hanson]

No, I don't want it back. I don't want it back. You know, I don't want it back.

[Brian Preston]

I think that's what I just heard.

[Bo Hanson]

No, he did not hear that. And I think I'm going what I plan on doing. I probably shouldn't say this out loud, but she doesn't watch it, just like my wife doesn't watch it. I plan on working a whisper campaign behind the scenes with Beau's wife to.

[Brian Preston]

Tell her, don't let this ever happen.

[Bo Hanson]

No, I'm just going to make her realize. Come to realize how uncool the stache is or how sleazy the stache is so that I can work behind the scenes, because we all know that's where the real motivation is, and that's my master plan.

[Megan]

Those are fighting words.

[Brian Preston]

Love it.

[Megan]

All right. I don't think I actually said it. So, Amy, if you would like a Tumblr, you can email winner W I n n eganoneyguy.com all good. All right.

[Bo Hanson]

Got a snot laugh out of me.

[Megan]

Next question is, did you just call.

[Brian Preston]

It a snot laugh?

[Bo Hanson]

Well, you know, when you snort, I mean, nobody wants to laugh like that. That's just, you know, what happens sometimes.

[Megan]

Especially this time of year.

[Brian Preston]

Hashtag snot laugh. Got it.

[Bo Hanson]

Well, I don't have snot like a lot of people, Bo. Everybody in Williamson county is sick except for me. But because I went to CVS just to pick up my normal prescriptions to keep me healthy, and there was way too many people in the drive through. Went inside because I was just all these. All these posh people in Williams. Guy just don't want to get cold because it's cold here for the two weeks that it's cold here. And so I went inside and there was eight people in line there. I was like, I guess everybody's sick.

[Brian Preston]

Everybody's sick.

[Bo Hanson]

All right. Everybody's sick.

[Brian Preston]

Got it.

[Bo Hanson]

All right. That was actually, I haven't been here in a few weeks. I got a lot to say.

[Megan]

Sorry, Megan, it's been a minute. No, all good. All right. This next one is from Josh M. He says this is the first year that I will encounter Roth IRA income limits.

[Brian Preston]

Congratulations.

[Megan]

Yeah, that's a great milestone. How should I structure my contributions in light of this while trying to balance dollar cost averaging? I feel like this is a question that a lot of mutants are going to have this year.

[Brian Preston]

Well, I think a lot of folks get so excited. They love the idea of dollar cost averaging. And one of the first places that we start doing that is inside of a Roth ira. Once we finally are able to max it out, say, okay, every month I want, what is it, $583. Is that the right. I think that's, yeah, $583 a month to go in to max out the full 7,000. You get to where Josh is and you recognize, man, my income is right at that spot to where, man, I might not actually be eligible to put the full max into my Roth. Or if it goes so high, I might not be able to do Roth at all. So what do I do? Do I just lose the Roth opportunity? Well, not necessarily, because there is a bit of a loophole that might be available to you called a backdoor Roth contribution, where you can, instead of putting money directly into a Roth IRA, you can fund a traditional IRA with a non deductible contribution, meaning you put the $7,000 in. You don't take a deduction and then you can convert those dollars to Roth. Now, if you don't have any other IRA assets, no IRA rollovers, no SEP ira, no simple ira, none of that stuff going on, when you go to convert that $7,000 traditional IRA contribution that was after tax, it is a completely tax free conversion. So it's a way to do a backdoor Roth contribution. But the question Josh is asking isn't so much about backdoor. He's saying, well, what about dollar cost average? Do I just stop saving? How. How would you recommend Josh approach?

[Bo Hanson]

I want to compliment Josh though, for figuring this out in January though, because it is a big oopsie if you just go with autopilot, you fund your Roth and then you realize you made too much money because it's somewhat of a bugaboo to unwind it. So good on you, Josh, that you're at the beginning of the year, you realize, hey, there's a good chance this year I'm going to cross the income threshold. But I really like my good behaviors. Because why we like dollar cost averaging is because it makes the good habits as easy as possible and also protects you from making the bad habits that much harder because the money's already found a place, a positive place to work in your financial. But here's what I think Bo and Josh are alluding to is I don't think you have to shut down dollar cost averaging. I like the idea of allocating the money. But maybe your monthly investment is now going into your cash reserves and your savings accounts. And then you choose, after you definitively figure out, are you going just direct contribution to my Roth or do I need to go through the backdoor process assuming I have no other IRA assets and then you're going to fund that, fund that all at once. It doesn't make sense to do conversions 12 times a year. It's just worth this. Yeah, it's just too much. It's too much hassle factor to make it worse. So more than likely you're going to convert once a year. So that's why the dollar cost averaging into cash. Build up your $7,000 contribution, figure out where you are on the income threshold, whether you're doing direct or you want to do backdoor contributions and then make it happen all at once. And you do the. Here's the great thing about Roth IRA contributions or any IRA contributions, you have until April of the following year. So even though we are now in 2025, you actually have until April of this year to fund those 2024 contributions. So it's a pretty exciting thing.

[Brian Preston]

Let me ask you a question. I don't know, I don't know how you're going to answer this, but let's say that someone has a fully funded emergency fund, right? And so let's say that your, your monthly expenses are $5,000. I'm making up a number. And so you have six months of that going on. So you got a $30,000 emergency fund. What would you tell someone or would you be okay if someone said, you know what, instead of just putting, you know, saving up that 7,000 every month in cash if I wanted to be working, what if I opened up an after tax brokerage account and every month I was just dollar cost averaging into my after tax brokerage account. And then when I get into the new year, I could either I have the choice, maybe I had a bonus, maybe had some extra cash that I could use, or I could use some of my emergency fund and then just rebuild it up, or I could then sell the brokerage assets. So that way instead of having the money sit in cash, it's still working for you. Is that viable solution or are you not like that?

[Bo Hanson]

I mean, it's a balance. I mean, maybe you and I, because I'm a little older, so I'm more on that stay wealthy versus get wealthy phase, you know, make versus maintain, as we often talk about. So I don't. I would rather your cash reserves be a little frothier. Okay then. Because I just don't want to break the moat of your cash reserves because I need that to be something that is separated out for emergencies and for when things go bad. You're not. Because I just don't want. It's a slippery slope. You know, I'll take seven grand out of my emergency reserves fund, the Roth, I'll make it back up. Well, what if you don't start to make sure. It's the, it's the behavioral stuff. But I do think. But you are hitting on something I think is a very positive behavior is once you realize that your cash reserves start getting frothy and building up beyond now for me, because I know a lot of the haters out there, brand new year to be like, who has extra money? For me, it didn't start feeling like I had extra money until I was in my early 40s. So if you're in your 20s, 30s, messy middle, relax, it's going to be okay. Keep being deliberate, keep being disciplined. It will get better and easier. But for those that it does start to feel like your Cash reserves is getting frothy and building up. I do like the thought of setting up an after tax, you know, because that's really kind of a step seven of the hyper accumulation phase of the financial order of operations. But then you're also incorporating doing the Roth conversions into that process as well.

[Brian Preston]

Love it.

[Megan]

Great. Sorry, I was looking at the BO Mustache poll and I got distracted.

[Bo Hanson]

Josh M. Asked that question. So Josh M Qualifies for a Tumblr.

[Megan]

Thank you, Brian. Josh M. If you would like a Tumblr, you can email winneroneyguy.com sorry to say it does not land in your favor box.

[Brian Preston]

What was the.

[Bo Hanson]

What were the results?

[Megan]

It was pretty bad. 61% to 38%.

[Brian Preston]

That sounds like rounding error to me. That's what that sounds like. I demand a recount.

[Bo Hanson]

I do think it's interesting. Josh Elm is one of the. That is like the actual. My. One of my childhood best friends. You know, five. Like they're the ones that you call when things got really rough. One of them is a Josh M. I'm not gonna say his last name, but I was. And I know a few of them every now and then pop in, but I was like, is this my childhood friend Josh?

[Brian Preston]

No.

[Bo Hanson]

No. That'd be kind of cool.

[Megan]

Alrighty. Thank you again, Josh. This next question is from Future Polyglot. He says, I'm 26 and on step five of the foo. My HSA is maxed due to medical reasons and I'm planning on law school. Do I put everything towards law school savings or still contribute a little bit to my Roth IRA? Say $50 to Roth. Any thoughts?

[Brian Preston]

Well, here's what I love here. So we're 26 years old. Step five of the financial. Brad, will you hold up the thing for me? For those of you that aren't familiar, step five is the fifth step on our financial order of operations. You can get your free [e-mail] resources. He's already doing that part. He's already doing the HSA because of medical reasons, funding it. Now it sounds like if he's funding the HSA for medical reasons, he's probably funding it current year and then using those dollars. So while that is a step five, when we think about step five, it's more about letting those dollars grow and continue to grow. So I would be curious if you are actually, in fact in step five, you may be earlier on. And so if you have other things coming up, like you have law school, like you have some known expense coming up. I like the idea of saving for those near term expenses in cash. I want to see you be able to do that. Now, what you got to figure out is, is your ability to save for law school going to allow you to pay for law school in total, or are you still going to have to take out some sort of debt? Otherwise, I think you have to have a more robust view of what the total picture is like. Is that $50 I'm saving towards law school going to continue going to make a meaningful impact on that? Or is this something I could deploy into a Roth ira? Because I love the thought of even people very early on starting out with some nominal amount of money going into Roth. Because we know that when it comes to building wealth, 80% of building wealth are the habits that you create. 80% is actually creating the muscle memory of doing the work necessary to build wealth before you even get to the mathematics. So I kind of like the idea of doing the Roth, of saving a little bit in the Roth. And I think that he's probably in that step. But I need to know more. I need to know more about what school is going to cost, where his current emergency fund is, how much cash he's sitting on, how long he's going to save for this goal. I don't know if we have enough information on that one.

[Bo Hanson]

Well, I think. But I want to give more because that's what we do here at the money guy show. And I think you got to think about broad stroke and then we're thinking about just the shading. And I think that the $50 a month is more in the shading and the fun stuff. We've got to figure out the preparation on the broad strokes. And that's really law school. That doesn't sound cheap. So I would not, in my experience, I would look at it in the viewpoint or the, of the financial order of operations. And you figure out, is this something you're cash flowing or maybe you have, you know, some savings from the past or you have an employer that's paying for it. How is that figured out? The broad strokes of how you're paying for education? Because maybe it is a student loan that you have to get. Well, now, if it's a student loan, is that low interest rate? Is that a high interest? Because high interest is going to be a step three item. Low interest is going to be a step nine item. So you've got to kind of balance that part out before we start getting into, you know, Roth IRA contributions. But once you go through the broad strokes of what the you know, essentially the umbrella of what the financial order of operations is. Yeah, I'm not going to get mad at you if you just throw $50 a month towards the Roth, because I do the same thing with. Y'all know. By the way, I did my net worth statement.

[Brian Preston]

Yeah, buddy.

[Bo Hanson]

Y'all wanna, you wanna know how low my mortgage is now on my, on my house here in Tennessee not paid off. I know, I know it's two and a half percent interest, but because, you know, my payment due is this amount. And I rounded up every month. It's exactly like the 50. I'm, I'm doing the shading. It's down to $64,000. I have thought about just paying it off, writing a check, but it's. I don't know, two and a half percent. There is, there's some arbitrage weirdness that I keep waiting for the Federal Reserve to change interest rates enough to where it will take the decision away from me. But right now, my cash is still making more.

[Brian Preston]

I am curious. He says, this is what he says. Hey, when the interest rates drop. I'm just, I have a theory that. Now don't write, write this in pencil if you're taking notes. I think that the mortgage will end up being paid off just on its natural timeline before rates drop down to two and a half percent. So I think you have this.

[Bo Hanson]

I mean, we're, we're. Truthfully, we're, we're probably within a year and a half of that just happening naturally.

[Brian Preston]

That's what I think it's going to happen.

[Bo Hanson]

Yeah.

[Brian Preston]

That's my bold prediction on, on the saga of is Brian ever?

[Bo Hanson]

But I want to make sure. And by the way, this question, I got so distracted by his name. Okay, Future.

[Brian Preston]

It was Future Polyglot.

[Bo Hanson]

What is that?

[Brian Preston]

I don't know. I didn't want to add. I don't know.

[Megan]

Is that just speaking multiple languages?

[Bo Hanson]

Oh, is that what that means? Okay, look, poly has all kind of meanings these days. And I was like, what in the world is that title? That title threw me. And I couldn't even focus on the question. That's how, that's how my brain is like squirrel. And I'm like, I don't even know what that word means. So obviously, future multiple language speaker. Very, very smart because he's speaking words. SAT words that I don't even know exist. There's a reason I'm really good at math. Did we answer that question or did I focus all of his title?

[Brian Preston]

No, no, I think you did. I Think you did.

[Megan]

Yeah, I think we answered it.

[Brian Preston]

I think there was something in there.

[Megan]

We answered it.

[Brian Preston]

You may have chopped that up also.

[Megan]

I like how you looked surprised, Beau. Like that Brian hadn't paid off his house when you're the one trying to convince him not to do it.

[Brian Preston]

Oh, look, I know he's not going to.

[Bo Hanson]

He's like, you know, you know, the old Looney Tune. You know, where you got the angel on this. You know, maybe the angel's on this side, probably, and then the devil's on this side, and Bo's definitely on the devil's side.

[Brian Preston]

Brian left his own device. He'd have paid off that mortgage a couple years ago. But then, you know, he just got this buddy who's really good at math, and his mega knows because we worked.

[Bo Hanson]

On the keynote speech together. I had. When we were doing the keynote speech, writing the speech, I was like, I'm gonna have this paid off before we do the book tour. Oh, I heard that book tour way in the rearview mirror. And here I am carrying 64,000. But you know what? It was previous year. This is what's so cool. I think it was like 115. So, I mean, a lot of it, you know, through that rounding up and paying, it's disappearing. So maybe it is gone by the end of the year just because every now and then I round it up even a little bit more.

[Megan]

Yeah. And financial goals change. It's good to be flexible.

[Brian Preston]

Yep.

[Megan]

All right, future Polyglot, thank you for your question. If you would like a money guy Tumblr, you can email winneroneyguy.com all right, next up is a question from Ashley Kate. She says, hi, MoneyGuy team. Is there any downside to harvesting capital gains in my kids utma, assuming that I can keep them below the kiddie tax.

[Bo Hanson]

Oh, look at that. Taking advantage of the zero percent.

[Brian Preston]

I love it. Okay, so for those of you. Oftentimes you hear us talk on the show about harvesting losses, it's this idea of if you have a position mutual fund, an etf, a stock that has lost value, you can sell that position, capitalize on the loss that you've incurred of the position. You can go buy something that is not identical. You can't buy the same stock, can't buy the same index. We can buy something similar to replace it. So that way you maintain the same investment exposure, but you capitalize on that loss. And when that asset class or that type of stock rebounds, you'll still be in the same investment posture. And then you can use those losses to offset current year capital gains or future year capital gains, or you can even use it to offset up to $3,000 of ordinary income in the current year. So it's an amazing strategy to use harvesting losses. One thing that does not get as much press is harvesting gains. And there are a few different areas and scenarios where harvesting gains make sense. One of the ones we talk about all the time is when someone retires and their income drops and they've built up their three buckets to where they can manipulate their income to keep it below a certain dollar amount, below a certain dollar threshold, you're actually in the 0% capital gains rate. So it might make sense to sell some of your loss, some of your gain positions up to the point where you would trigger the 15% capital gain, but no higher because it is a cliff and you pay 0% on those capital gains. Well, it sounds like Ashley has figured out, man. Okay, well, that's something that works on my tax return, but there might be a little bit of an opportunity for my kids where I could harvest gains inside of their UTMA account. And an UTMA account is just a custodial account where the child is the beneficiary in the account, but an adult of age serves as the custodian of the account. But the taxability is generally based on the child's taxability and the child's tax rates, where I can sell these positions and I can harvest these gains. And again, below certain thresholds, the kid pays zero percent capital gains.

[Bo Hanson]

Yeah. What I was frantically trying to figure out is, you know, I have these little cheat sheets. This is my 2025 quick tax reference. Brand new, and it's worth repeating. Where the 0% capital gains rates are. For single filers, it's under $48,000 of taxable income. For married filing jointly, it's $96,000, $796,700. And head of household at 64,007 50 Trust. In estates, it's 3,000. What I was frantically trying to figure out was where the kiddie tax threshold is. And we have broke my tax reference guide because it has no reference on there to that. But fortunately, you're connected to the wonderful world Wide Web and can give us some feedback on that.

[Brian Preston]

So in 2024, any amount above $2,600 of income generated in a custodial account on a kid's behalf is taxed at the parent's rate. So my question, or the question that I would have for Ashley, the question I have for you on Ashley's behalf is does it make sense like should you be harvesting gains and trying to churn the account to reset basis or for most custodial accounts, unless they get really large, are they actually going to be generating that much income? I mean in your experience when you first opened up custodial accounts for your daughters and as you were building those account ups, did you find that they were often having to pay tax on those accounts?

[Bo Hanson]

Well this is now I like index funds. So in index funds are more tax efficient than mutual funds in a lot of ways is because what I was finding is my basis was automatically going up over time just because of year end distributions. But index funds, I do think that this is probably a very good strategy because a lot of times index funds they just don't have a lot of turnover. Even the target retirement index funds, they just don't have so much turnover that it creates these big distributions. So you can have some pretty large capital gains start to build up in them. I don't hate this strategy as long as you're just the hassle factor or the it's back to that squeeze of the fruit has to be worth the trouble you're going to. But I think that this one potentially over the long term could be helpful. So do your research. But that zero percent capital gains has always been a very effective thing. And this is by the way, we'll flip the script. This is for a young person, I think it's very important when you leave the workforce and you you know, if you're pre Social Security, think about Roth conversions, think about 0% capital gains when you're post Social Security you have to still think about those two things, but you also now take into account the taxability of Social Security. These are all the cool things of be very aware of what's going on with how taxes impact your investment as well as your lifestyle because it is definitely an important thing. There's a reason so much time is spent on doing tax planning for our clients.

[Brian Preston]

Love it.

[Megan]

Wonderful. Great question, Ashley. Thank you so much for asking it and for being here in the livestream. If you would like a MoneyGuy Tumblr you can email winneroneyguy.com the MoneyGuy show.

[Brian Preston]

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.