Dan Carney (1:51)

I've never paid $20,000 a month for customer service before.

Brian O'Connell (1:55)

A ford Edge was $60,000.

Brian Preston (1:57)

Yeah, that's. I'm having a hard time. She said 89,000 is what she paid for that. And so the ford Edge was 69. It's a nice Ford Edge, isn't it?

Brian O'Connell (2:04)

I didn't know Ford Edges were that expensive. I think she might be doing some creative math there.

Brian Preston (2:08)

Obviously, if you have financial woes to where you can't afford groceries, you can't pay your Bills you're not saving for the future and you're having to go finance a luxury automobile like that, you may be in too much car. The car that you're driving may be too far along in the financial journey to you are not there yet. And it certainly seems if she has a fifteen hundred dollars a month payment, she's likely doing it.

Brian O'Connell (2:30)

Here's an idea. Look, we all need a vehicle and I think sometimes the human condition is we say, well since we have a need to get to our job so we can build some wealth, I can go crazy. Why not have some boundaries to know what you can and cannot afford. Look no further than 23. 8. That's right, 20% down. Don't finance longer than three years and make sure it doesn't exceed 8% of your gross income. And here's a few more rules just to make sure you don't let your eyes exceed your wallet is make sure that you don't finance luxury cars and also that your Roth and your investment contributions are greater than that car payment. You do those things, you don't end up in Caleb's chair.

Greg (3:08)

Can astrology predict the stock market? Financial astrology, also called astro finance, is the belief that planetary movements, people pay for anything and cosmic events influence human behavior and by extension the markets.

Brian O'Connell (3:21)

If you've ever rage sold your portfolio.

Greg (3:25)

During a minotaur, maybe it wasn't just you, maybe Mars was feeling spicy. Use your brain, check your charts. And hey, no harm in checking the stars too.

Brian Preston (3:36)

It's a bull.

Brian O'Connell (3:40)

A minotaur is a horse, right? With a man, I just think, I.

Brian Preston (3:43)

Don'T know there's any.

Brian O'Connell (3:44)

Oh gosh, now we're going to just show how shallow the nerd goes.

Brian Preston (3:47)

Well, so here's, here's what I think. What it's so often people will tell you they have some, some trick, he's.

Brian O'Connell (3:52)

Got a towel, he's something or some.

Brian Preston (3:54)

System or something that they figured out. If someone figured that thing out, they'd be the wealthiest person on the planet. And you know what they would not do? Would not tell you their secrets. They would not need to sell you their course or sell you their system. They would go make money implementing that system. So if someone tells you they figured out the trick, the key, the hidden trap door into the stock market, I would run the other way because nobody knows what the stock market's going to do over the short term. But over the long term, if we have a well diversified basket of goods, it seems to be a high probability that we're going to be successful as investors, but I don't know that I'm looking at the stars in the sky.

Brian O'Connell (4:35)

I don't know. I think they deserve a lot with that good use of AI to create the. That was a bull man. I don't know. I mean, I'm. I'm assuming the bull man may or may not be a minotaur that could be there. Where's the beef Moment that creates. They're crazy. Look, they got on the money guy show. It worked for them.

Financial Advisor (4:52)

The 401k is a trap.

Brian O'Connell (4:53)

I'll prove it to you.

Financial Advisor (4:54)

We are right now sitting on the lowest tax rates we've ever had in the history of the United States. I'm not sure if you know that. That being said, because the tax rates are the lowest that they've ever been. I have a question for you. Do you think that taxes are going to go up in the future? I'm sure your answer is yes. So if you put money deferred 401k plan, you're essentially saying, I want to save money on taxes right now, but then I'm just going to let that money go get taxed at a higher tax rate later when I pull it out in retirement.

Greg (5:20)

False.

Financial Advisor (5:21)

When you pull that money out when you're 59 and a half, do you think your tax rates are going to be higher than where they are today in 2024? If your answer is yes, why are you stuffing so much money into your 401k without a plan?

Brian Preston (5:31)

Because I understand how the tax system works. I recognize that right now and in my highest income earning years, I'm going to defer those taxes. At some point in the future when I go to pull my money out, I'm going to be able to legally manipulate the tax code. I'm going to pull out ordinary income assets at lower tax brackets. I'm pull out taxable assets and then Roth assets and not pay any tax on those. I recognize that yes, tax rates could likely go up in the future in terms of tax brackets, but that doesn't mean that I have to participate in those higher tax brackets.

Financial Advisor (6:01)

Yeah, I got an album, how many.

Brian Preston (6:03)

But I'm not a rapper.

Brian O'Connell (6:04)

He is right about one thing. You do need to have a plan. That's why if you listen to any of our content, you'll notice we talk about people who are young and have income taxes. Effective tax rates less than 25%. Take advantage of the Roth. That way your money grows completely tax free. If you're, you know, effective tax rate if you take the federal and state, it's somewhere between 25 and 30%. You're kind of in that gray zone. You need to probably pay attention to what your age is, what your goals when you want to leave the workforce. If you're over 30%, you probably do want to consider the traditional. And here's why is because what we have found is that especially if you leave the workforce before four, you have to do required minimum distributions as soon as your earned income, your wages, or your, you know, your business income falls off of your tax return, your tax rates fall to the basement in a lot of cases. And that creates exactly what you're talking about. An arbitrage situation where maybe you're at the tippity top tax rate, but then when you're in retirement, you can legally do conversions and other tax planning strategies that put you at the lowest tax rates and turn that money into Roth. It's a beautiful scenario. So he does. He is right. You do need a plan. But the 401k is not a trap. It's actually a very beautiful tool that can maximize and help you build wealth.

Dan Carney (7:18)

Always extra meat. It's just going on the credit card. My name is Dan Carney, and I haven't checked my credit card statement in three months. You got to be able to enjoy the life you want to live. Of course, I would love some guac. The dream of owning a home is dead. I do digital marketing for a dentist office in Brooklyn. If I'm ever gonna have a family, why deprive myself of daily impulses? I finally have a katana. Now that is one of those words where if you say it enough times, it just stops bothering you. I will never make myself coffee. This was a nice little gift from bank of America. If I want something, I just get it delivered.

Brian O'Connell (7:51)

Vladimir.

Greg (7:52)

Hey.

Dan Carney (7:52)

It's so good to see you again. Thank you so much. How's the family? Why leave the house? You know, I'm busy. Phone charger, laptop charger. Here's the thing. There is no fuse. There's Nothing. I pay 200amonth to chat GPT to give me financial advice. That big purchase that you. You can just get that drinks on me. I used to be stressed out all the time.

Greg (8:13)

Grey Goose martini.

Dan Carney (8:14)

Now I'm never stressed. Five beers, please. We're all gonna die. I'm just gonna die with a little bit more credit card debt. I can live with that. I have another one. Who cares? Sorry, who is this? Collecting what?

Brian O'Connell (8:28)

Look, the banks don't start calling you in month One or two, they call you maybe in month four. This is the same way for people who don't pay your income taxes. Also, just because the government doesn't start sending you letters immediately doesn't mean you're making good financial decisions. I know that was a complete joke. But there is a lot of reality for what I see with the general public and the typical American is that they would rather just ignore and pretend everything's okay, then taking an active role and being the star of their action adventure financial film.

Brian Preston (8:58)

There is a behavioral thing that when we get so used to just swiping for all kinds of consumption purchases, it does start to feel really, really easy. And it does become of those things that he mentioned, I'm paying $200 a month on Chad GPT. It's not just that subscription. I can afford anything in the world $100 at a time, $100 at a time. I can even swipe my credit card. And so as I make my minimum payment, the bank's not going to begin calling me. But that is a hole that the more you do it, the deeper it get, harder it is to get out of anything that you regret buying.

Brian O'Connell (9:29)

Just the stewardship that I had with my money.

TJ Watt (9:32)

I got to a point, sue, where.

Brian O'Connell (9:35)

Enable the people around me to spend.

TJ Watt (9:38)

Like 400,000 at most. Yeah, like it was a month. A month, bro. Like on, on clothes, on.

Brian O'Connell (9:46)

Trying, trying to do stuff on ebay.

TJ Watt (9:48)

Like, bro, it was a lot.

Brian Preston (9:49)

I think we see this a lot. A lot of folks, especially those that are first generation, maybe they didn't come from a household where there was a lot of wealth and they hadn't been taught how to make financial decisions. A lot of time the people with whom they surround themselves tend to take advantage of, oh, you. Well, you have this huge. You make $100,000 a year, you make five, you make a million dollars a year. Surely you can afford to help me with this or buy these clothes or do this thing. And Brian, you talk about this concept of go kart math. I think a lot of those people do go kart math thinking it'll never run out. And for the person's had the success, it is very, very difficult to say no.

Brian O'Connell (10:23)

When I was doing lifeguard training back in high school and college, because I lifeguarded. That was one of my crazy jobs. They teach you don't swim near the person that's struggling because they'll drown you too. You have to sneak up behind them to kind of put the whole, you know, grip under their chest to Pull them into safety. You have to do that same thing for your personal finances. Look, we love our family members, but if you were sinking because of the pressure of them, are they better for that too? That's, that's just not sustainable.

Brian Preston (10:53)

That's right.

TJ Watt (10:54)

When you've sacrificed your whole life to get here. Yeah, I played 10 years in the league and I always explain this to people. I'm like, bro, you give somebody a five year, $100 million contract, right? What is it really? It's five years for 60, you're getting tax, do the math. That's 12 a year. You know that you have to spend, use, save, save, invest, flaunt, whatever. However, just being real, I'm a buy a car, I'm give my mom a house, I'm going to do. Everything costs money. So you, if you spending $4 million a year, that's really 40 million over five years, eight a year, you know, and now you start breaking down the numbers. It's like, that's a five year span of where you're getting eight men. Can you make that last forever? And you always hear the people who ain't us and ain't been in the position, like, oh, well, that would last a lifetime. Yeah, this job that I sacrificed my whole life for, they are giving me that. I didn't ask for the certain dollar amount or whatever, but we weren't taught about no financial literacy and all the way. We weren't.

Brian O'Connell (11:55)

There's the preach right there.

Brian Preston (11:57)

After taxes, after all that 12 million a year, that's not gonna be enough to provide. Generally speaking, I disagree with that premise. I think that most folks ought to be able to, even if they only make $12 million for a five year period, that ought to be enough wealth to be able to last you for a lifetime. Agree, disagree, want to fight.

Brian O'Connell (12:14)

When I was in my 20s and early 30s and working with professional football players, basketball players and golfers, it was the football players that gave me the most trouble because I had the hardest time trying to explain to them that their contracts were the worst. Out of all the sports that we represented, their longevity was the least amount. So essentially what he was describing, that's all the money you're gonna earn in your entire career. That's what you need to act like now. Maybe you'll be fortunate you turn out to be Tom Brady and play into your 40s.

Brian Preston (12:45)

Sure.

Brian O'Connell (12:46)

But that's not the reality for most.

Brian Preston (12:47)

But he said something so wonderful there right at the end. He said, man, I was never taught about this. Never learned about this, never had the education. So no matter where you are, Whether you're making $12 million a year or $12,000 a year, it's never too late to begin increasing your financial education. Why we even do this show, it's why we have the money Guy show, it's why you can go out to moneyguy.com resources, check out all of our free resources, check out all of our free content out there. And when you find yourself in that place where you just don't know what you don't know, it's a great time to maybe consider taking the relationship to the next level and getting some professional help.

NYU Stern Professor (13:23)

I didn't realize that if the average year the money printer goes, call it 8 to 10%, even in the Western countries, even in the OECD nations, and the average return on the S&P 500 is, call it 9ish percent, including dividends, maybe 9.7, maybe a little less. That it means that all of the work of The S&P 500, all of the value created there is actually the money printer. That to me was startling.

Brian O'Connell (13:51)

That's oversimplified.

NYU Stern Professor (13:52)

That the fundamental notion that in a closed system or even an open system, when you're printing money at the rate of 8 to 10% a year, everything is losing value. And the things that appear to be gaining value are not gaining value. They're just keeping you even. So you can put all your money in the S&P 500 and you're not gaining any relative wealth at all. That's a startling insight. I mean, when you really think about the entire value of the S&P 500 on average over a long period of time, not even a long period of time is equivalent to the money printer. That was a shock to me. I just didn't get it. I didn't understand it. Even though I tried finance for 20 plus years, I'm still a professor at NYU Stern at Stern Business School. I have almost, actually more than 1,000 former students. And I still didn't get it until.

Brian O'Connell (14:39)

I'm age 58, where I feel like he's disconnected. There is that, yes, there is a problem with the printers. That's why you have to get on the right side of what you're doing with your money. But to say that there is zero value and there's not economic expansion because it's all just. The printer just feels very shallow in his understanding.

Brian Preston (14:58)

Yeah, monetary policy is a very complicated thing to try to unravel. But I think what most people, the average American can understand is that man, I went and bought a gallon of milk last year and that gallon of milk cost more this year than it did last year. I went and bought a loaf of bread. That loaf of bread cost more today than it did this time last year. That's what inflation is. Inflation is the rising cost of the goods that we consume. And so we know that in a long enough timeline, the average rate of inflation that we see in this country is around 3 to 4%. Even though there are people periods where, yes, we could see 8% inflation, 9% inflation, that has been true. But on average, reversion to the mean is a real thing and inflation is somewhere around 3 to 4%. Now, when you look at the actual return of the S&P 500, I take $100 of my dollars and I put it in the S&P 500, or I put my part of my paycheck in the into my 401k and invest in that over the long term, that's made somewhere between 9 to 11%, depending on the time period that you're looking at. So if my dollars can grow at 9 to 11%, but the things that I consume are growing at 3 to 4%, I am going to create wealth. I'm going to be able to outpace that inflation and keep up with the rising cost of goods. I think that's what the average American ought to focus on. And that's why we do things like save for the future, invest, let our army of dollar bills work for us so that it can pay for our future selves.

Brian O'Connell (16:21)

I think what he did, based upon what I'm just putting together in my head, is if you look at crazy years like 2008, during the pandemic of 2020 and even the beginning parts of 2021, the government does crank up the printing press to crazy degrees and they flood the economy with these things. And that's where you do see these periods of inflation and other things. But it is exactly what you said, reversion to the mean is that why do you think real estate almost doubled is because the market quickly adapts and adjusts. So yes, in the meantime, you could do it cherry pick the data and say the market was up only 9% and the money supply increased 9% in that one year. But when you actually spread it out, when in doubt, zoom out. And I think you see exactly what you just laid out. And that's why you have to be careful where you get your data from. Dan, I'm greg.

Brian Preston (17:08)

I'm a 26 year old software engineer and I've got about 10 grand in a high yield savings.

Greg (17:12)

Greg, I'm going to stop you right there. You have your money in a where.

Brian Preston (17:16)

A high yield savings.

Greg (17:17)

Greg, can you give me one good reason why you are saving all that money instead of using it to buy a professional sports team in 1995? Sorry, professional sports sports team, St. Louis Rams, Seattle Supersonics. You know how easy it is to make $5 billion buying one of those babies in 1995?

Brian O'Connell (17:31)

I, I wasn't alive.

Greg (17:32)

I was. Was your excuse.

Brian Preston (17:34)

You'd have to ask my parents.

Greg (17:35)

Can't rely on mommy and daddy. Greg, you walk in there with a checkbook and a good attitude, sit that for 30 years and I guarantee that investment grows 4,000% every time. My friends and I do it all the time.

Brian Preston (17:45)

You do it all the time in 1995.

Greg (17:48)

It's the perfect time to buy. Greg. It was then and always will be the dawn of a new millennium.

Brian Preston (17:52)

Do you own a sports team?

Greg (17:53)

I do. Houston Oilers.

Brian Preston (17:55)

They're not a team anymore.

Greg (17:58)

Next caller.

Brian O'Connell (17:59)

If anybody's in debt, especially with consumer debt, credit cards, nobody is better at getting you out of debt than Dave Ramsey. So I feel like before we start picking on and creating farce videos that, you know, you go buy a sports team because Dave yells at his people, I will give him his roses. Nobody gets you out of debt as well as Dave does.

Brian Preston (18:19)

I do agree with you, Brian, that when it comes to getting out of debt and making wise and sound financial decisions for those starting out, I think Dave is a fantastic resource there. But there are other fantastic resources out there as well. Like the Money Guy show.

Brian O'Connell (18:32)

Would you say both there's a better way to do money?

Brian Preston (18:34)

I would say there's a better way to do money. If you want to know about that better way, we'd encourage you to go to moneyguy.com check out all of our archive, all of our articles, all of our videos, all of our resources, all of our tools that you can use to do money better.

Brian O'Connell (18:48)

Well, well done content team. Thank you for putting these together. Thank you, thank you, thank you for tuning in. I'm your host, Brian. Guys, thanks so much for tuning in. Money got team out.