Grow Your Money Faster With These Wealth Accelerators - Money Guy Show

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[00:01]
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[00:30]
Brian Preston
Do you ever wish you could build wealth faster? Today we're going to show you how.
[00:35]
Bo Hansen
Brian, I am so excited because today we're talking about wealth accelerators that can speed up your wealth building journey. And stick around to the end because we'll cover some advanced ways to grow your money even faster.
[00:46]
Brian Preston
So I'm Brian, he's Bo, and this is the Money Guy show where two financial advisors help you modify your money with financial nitrous oxide so you can Tokyo drift your way to wealth. I said that. And with that, let's launch.
[01:07]
Bo Hansen
So, Brian, today we're talking about wealth accelerators. And we say accelerator. We mean anything that can help you grow your money faster without gambling, speculating or skipping steps. And as we thought about how to lay this content out, they really fall into three general categories. There are things that can provide more fuel, there are things that can provide less drag, and there are things that can create better systems.
[01:31]
Brian Preston
Yeah, if we put some color in this, more fuel. Those that help you generate more money to invest. Talking about drag. These help you stop losing money and the momentum you're hopefully building. And then of course, on the system side, these are to help you navigate money decisions to stay on the course long enough to truly build wealth.
[01:49]
Bo Hansen
All right, so let's start with the first one. Let's talk about the accelerators you can do that can provide more fuel. These are things that you want to maximize and that you want to increase. And the first one, I think is no surprise. If you've been listening to our content for any amount of time. Increase your savings rate.
[02:06]
Brian Preston
Yeah. By the way, we lean in heavily on discipline, on, you've got to live on less than you make. If you can't do this, you're never going to be on the journey to building wealth.
[02:18]
Bo Hansen
Your savings rate is likely the number one metric that determines and defines how quickly you can build wealth. And if you want to see this in real time, if you want to really understand what this looks like, check out our compound interest calculator. So let's Say that you're earning $100,000 a year and your goal is to save 10% of your income. If you divide that out monthly, that comes out to $833.33. If you could invest that amount for a 30 year period and let's just say that on average you earn a 10% rate of return, do you realize at the end of that period you would end up with over $1.8 million and you would reach the $1 million mark after 25 years of investing. Now that is just assuming that you save 10%. Imagine now what if you would save 25% of your income. That would come out to a little under $2,100 a month. If you did that same savings over a 30 year time horizon, again still earning a 10% rate of return, you would end up with $4.7 million.
[03:28]
Brian Preston
Now look, there's a lot of people that say a million dollars isn't much money. I disagree with them, by the way. But 4.7, I mean that's the type of, we're talking about the level of wealth where even if you're using conservative withdrawal rates, you're doing tremendous things in retirement.
[03:44]
Bo Hansen
So I want you to think about this. Increasing your savings rate from 10% to 25% allowed you to cross the $1 million mark eight years earlier. Because you increased your savings rate, your army dollar bills is growing faster and faster and faster. So your savings rate is by far one of the biggest impactors you can have to your financial wealth building.
[04:05]
Brian Preston
So we want to encourage you go out to moneyguy.com resources to try out our compound interest calculator.
[04:12]
Bo Hansen
And while you're saving, we want you to shoot for a 25% savings rate. And why do we say 25%? Well, the truth is, Brian, a lot of people don't start their savings journey super early.
[04:24]
Brian Preston
Yeah, we know from our own research is that the typical American doesn't even start saving and investing until they're 30 years of age. And if you start saving and investing at 30 years of age, even at our healthy 25% savings rate and investment rate, you're more than likely not going to have independence until you're age 60. So that's why we have such an aggressive savings rate. If you want to personally know what your savings rate should be, we'd once again encourage you. Go try out our free resources, go to moneyguy.com resources. We have the option for you to see exactly what you need to be saving for the future to live your Best life.
[05:00]
Bo Hansen
All right, so you're sold and you want to start saving more. You want to increase your savings rate. But how do you do it? You can't always just save more. You have to be able to pay the bills and meet your expenses. So what's the next accelerator that you should tap into? Well, we want you to maximize your margin.
[05:20]
Brian Preston
Yeah, a lot of people I've already kind of, I've given a little bit of a prelude on this is I said you have to live on less than you make if you're ever going to build wealth. The problem is most Americans, they never reach that margin. If you look at this, 57% of Americans are living literally paycheck to paycheck.
[05:38]
Bo Hansen
And as you imagine the less margin that you have, the less difference in what you have coming in and what you have going out, the less money you have to move towards other financial goals. So when it comes to creating margin, there are really only two levers that you can ever pull. You can either figure out how do I make more money, increase my income or, or how do I spend less money, decrease my expense.
[06:01]
Brian Preston
So we're going to come back to the spending less money. But right now let's first focus on earning more money.
[06:08]
Bo Hansen
Yeah. Your income is likely your greatest wealth building tool. How big your shovel is dictates how much margin you can create. So the bigger your shovel, the bigger your margin, the more margin, the more rapid you can accelerate your wealth building journey.
[06:24]
Brian Preston
This is one of those things where when people come to us and say, what do you feel about education? What do you feel about going and getting some credential? I'm always like, look, if you can first do the cost to benefit ratio, see if you're going to get a return on the investment. But if you definitely can go back to school and increase your income without running up a bunch of debt and other things, go investing yourself. There's very few investments that are better than you investing your ability to make more income.
[06:49]
Bo Hansen
And if you can't go out and add a new skill or a new credential or increase your education, maybe you can consider starting a side hustle, some sort of freelancing or consulting some way to generate income on the side in addition to your day job. Because again, if the goal is to move one of the levers and increase income, perhaps spending some of your extra outside of work time, generating income is a great solution.
[07:14]
Brian Preston
And realize, you know, we just gave you a few examples on how to increase your income or add more fuel, all these things can work together, you can side hustle, you can go invest in your own education. There's all these things. We're just trying to help you increase your savings and investment rate so that you can increase how fast you're going to reach your financial goals.
[07:37]
Bo Hansen
Now remember, these accelerators fall into three categories. There's more fuel, less drag, and then there's building better systems. We just talked about more fuel. Now let's talk about the next wealth accelerator which is less drag. How do we minimize the things that slow us down on our wealth building journey? And one of the very first things that we want you to consider minimizing is minimizing your debt.
[08:01]
Brian Preston
Yeah, I feel like this is the first trap that most Americans fall into is that they, hey, we get it, you've been in school for a gazillion years. You start actually getting your first real adult job, you feel like you ought to be rewarded or celebrate that. So people go out there and they either run up credit card debt, they go out there and they get a car loan. You need to be scared of debt. If you're using debt and you're not scared of it, you are using it wrong. That's why we literally say debt is chainsaw dangerous.
[08:30]
Bo Hansen
Yeah, it can be napalm to your financial life. So much so that right now, according to Northwestern Mutual, 35% of Americans, so 1 in 3Americans say they are carrying close to or at their highest level of debt that they have ever carried. Americans right now have a consumption problem because they are allowing their present day selves to borrow from their future selves and subsidize lifestyle today. If you're doing that right now, you're doing money wrong.
[09:00]
Brian Preston
If you fall into this debt trap, they charge such predatory rates on a lot of these types of debts. You'll never get ahead. So that's why we definitely want you to lean in, get serious about avoiding this high interest debt, especially if you can.
[09:14]
Bo Hansen
That's why, Brian, we hold the thing, we actually have the financial order of operations. It says if you do have high interest debt, it is step number three. So we want you to pay that off as quickly as you can. And once you get it paid off, we want you to avoid it at all costs that come. That's the consumption, that's the decisions that you make on a day to day basis. But we also, when it comes to buying the big things, when it comes to the large life decisions that you're going to make, we want you to follow our money guy rules for buying big Things like vehicles or homes.
[09:43]
Brian Preston
Yeah, I mean, the first one, cars. I told you, these are the traps that people fall into. I understand that a lot of you, your first wealth building opportunity is going to be getting to your job reliably. And we want to encourage that. You have a car, not just a jalopy, that you, every morning you go out there, you have to do your little rain dance hoping this thing cranks up. We want you to have reliable transportation. And for a lot of you, if you don't have resources when you're starting out, you're probably going to have to follow our 23 8. And what we say, when we say 23 8, what we mean is you're going to put down at least 20%, you're going to pay the car off within three years. That's going to keep your wallet very sober so that you don't let your ego trying to get you to buy a car and fall into that trap of financing it for six years, seven years and beyond. And then we don't want your gross monthly payments to exceed 8% of your monthly income.
[10:36]
Bo Hansen
Now, there are two caveats. If you're buying a luxury car, you don't get to do 23 8. You got to pay a luxury car off in the same year that you bought it inside of 12 months. And as a rule of thumb, your car payment should never exceed what you are investing on a monthly basis. If you have $1,000 car payment but you're saving $100 a month for your future self, you are doing it wrong. So most Americans don't make the car decision well. They also don't make the house decision well. And it's gotten even more difficult as we've seen home prices increase and interest rates go up. So if you want to make sure that you are staying inside the lines when it comes to buying a house, follow our 3 5, 25 rule. That's on your first home, you'll have to put 3% down. We want you to make sure that you're going to be in the home for at least five to seven years. And we don't want your total housing cost to exceed 25% of your gross income.
[11:29]
Brian Preston
Now realize in future home purchases mean you go to upgrade because you have a growing family. We want you putting down 20% on the second home. But we do have very, very approachable rules on that first home purchase because we understand in this crazy real estate marketplace it is going to feel like the housing market's running for you. So we give you a Lot of grace on that down payment, but don't feel like you have to force it. We've done shows on is it better to rent versus own? Do your research, measure twice, cut once. Because in a lot of American cities right now, it's actually cheaper to rent than it is to purchase. Because the rent. The person that's renting the house probably bought that house at about half of what you could buy that house for. And they also got interest rates that historically just are not around at this moment in time.
[12:14]
Bo Hansen
All right, so we're talking about how do we red. Reduce drag, reduce friction in our financial life? We already said that we want to minimize the debt that we're incurring, but even further than that, we want you to. To minimize your expenses. Remember, we have two levers that we can pull when it comes to impacting our financial life. We can either make more money and increase our income, or we can spend less money and decrease our expenses. While decreasing our expenses is one of the things that we have the most control over.
[12:42]
Brian Preston
Yeah. This is why we love people to track their spending. A lot of you, when you're trying to build that muscle memory of how you handle money, well, you actually have to do. Nobody likes the budget. But I think you have to do it in the beginning so you can find out where things are leaking so you don't fall into financial traps.
[13:01]
Bo Hansen
Yeah. If you can find, like, oftentimes we think about, okay, well, I'm going to know where my rent is. I'm going to know what my grocery bill is. I'm going to know what my fill in the blank is. And that's fine and good. But as time goes on, as life gets more complicated, a lot of times when you're in the messy middle, you might recognize stuff just kind of sprouts up and things kind of happen, and all of a sudden you start having money falling out that you didn't even know was falling out. I mean, I signed up for that Hulu subscription because I wanted to watch that one football game, but then that football game passed, and I never canceled it. Or, man, my. I signed up for this thing so my kid could watch this PBS special, and it was six bucks, but now they can't watch it anymore. And all of a sudden you have these money leaks that are just happening that you didn't even know were going on. So if you can start tracking, if you can start seeing those dollars leave, it's going to allow you to start patching and plugging those holes.
[13:51]
Brian Preston
Well, I'll Tell you, a lot of us even have mystery subscriptions. So go and audit your, you know, go look at your credit card statements, look at your monthly bank statements, see what the outgoing things are every month so you can figure out if there's ways that you can definitely plug up those leaks. And then also I want you, because what's interesting is we all in high school are so insecure. And you get into adult life and you think, hey, I'm not going to be insecure anymore because, you know, I'm an adult now. And then you find out what. Nope. There's still a lot of peer pressure, is that we have to feel like we have to keep up with the Joneses. And that's why I would really strongly encourage you take an active role in your life. You can avoid lifestyle creep. You do not have to feel like you have to try to keep up with your peers to impress people who probably realistically don't care what you have going on.
[14:37]
Bo Hansen
A really good way to combat lifestyle creep is as you have bonuses or pay increases or pay raises. Think about the 60, 40 rule. It's okay when you get a raise or bonus if 60% of that money goes towards additional savings, additional financial order of operations, and then let 40% go to lifestyle. If you do that, you are going to make sure that your lifestyle does not outpace your savings rate. If you can do that, you're going to keep yourself on the path towards financial independence.
[15:06]
Brian Preston
Another big thing that happens within less drag is we just talked about expenses, but don't sleep on the fact that taxes are a big part. So you've got to minimize your taxes as much as possible. It's important for us to share with you guys. We realize tax evasion is illegal and there's a lot of people out there selling systems or other things that might get you in some hot water. But if you're smart about this, think like a financial mutant. Tax avoidance is actually highly encouraged. Meaning if you're following the letter of the law and doing things that are actually structured in the system, you're going to be a okay. And you'll actually be rewarded for this.
[15:43]
Bo Hansen
A number of accounts, even the way that they are established, are tax incentivized. You have Health Savings accounts and 401ks and Roth IRAs and 529. All of these accounts help you minimize the taxes that you pay either today, in the present year, or in the case of HSAs and Roths in future years when you go to pull that money out. And so one of the questions you may be asked is, okay, well, based on my situation today, how do I know if pre tax is more valuable for me or if Roth is more valuable for me? And again, we have a rule of thumb that can help you. If you add up your marginal federal rate and your marginal state rate, it's below 25%, there's a really good chance that Roth contributions would be beneficial for you. Tax free in the future is what you want to do. But if you're a higher earner right now and you add up your marginal federal rate and your marginal state rate and it's above 30%, there's a really strong case to be made that maybe you should consider pre tax contributions because the current year tax benefit is so valuable that you don't want to miss out on it.
[16:44]
Brian Preston
Yeah, this is. And we even there's a gray area there between 25 and 30% that it's kind of more going to be specific specified on. Are you young? Because young is definitely going to be more of a Roth person's game because you have many more years for compounding growth. But also where are you at in your asset level? Because even no matter what your tax rate is, somebody who's in the legacy building parts of things, they might want to think about Roth assets. We've tried to give you tax efficiency pre tax versus Roth, but there are a number of you that when it gets complicated, your simple life gets complicated. That's when a financial advisor might be able to help you navigate this even better.
[17:19]
Bo Hansen
And then if you're trying to minimize taxes, the more educated you can make yourself, the more powerful you can be. So are you utilizing all the tax deductions and all the tax credits available to you? Maybe you're paying student loans. Are you remembering to track the student loan interest that you're paying? Maybe you have children. Are there income thresholds that you fall under that would qualify you for tax credits you may not have gotten otherwise? If you can understand where those deductions are, where those credits are and what you need to be due to be eligible, that could literally be more money in your back pocket and less money going towards Uncle Sam.
[17:54]
Brian Preston
You know, one of my favorite tools that we use for turning a negative situation into a positive is tax loss harvesting. This is literally turning those lemons into lemonade. And the fact that what you'll do on this is if you will take losses and then you'll, you'll get a current tax deduction. And even if you can't, once you, you can't even use that current tax deduction because it's $3,000 a year, you get to carry forward into the future. And guys, I'm telling you, we use this all the time with our clients is where we can strategically lock in losses. So when you hit those volatile times in the marketplace, that when then in future years. Because realize about 80% of the time, you know, markets are good, but that 20%, that two out of 10 years, you're going to love that you use this tool to minimize your taxes, not only right now, but also in the future.
[18:42]
Bo Hansen
And then even things that you do automatically, maybe that you don't think about. You ought to ask yourself a question. Is there a way for me to do this in such a way that might be more advantageous from a tax standpoint? For those that are charitably minded, there are incredibly efficient ways to either bunch charitable contributions or even potentially use highly appreciated securities to make those charitable contributions. Where now you're making taxes that you would otherwise have to pay disappear forever. Again, if you can educate yourself and know what tools and tactics are available to you, you can keep more money in your back pocket.
[19:17]
Brian Preston
I feel like we just covered more fuel, less drag. Those are kind of the basics things. But at some point you have to actually get to what's the horsepower of this system. And a lot of times that's the system you know, is what, how powerful are these components that you've been compiling. And that's where we want to kind of go through what are things that you can do that create a better system, better success, better opportunities for your future self?
[19:43]
Bo Hansen
I think number one is automate your finances. The more things that you can automate, the less likely you are to screw it up. You want to make the good habits as easy as possible, you know, the bad habits as hard as possible. So are you doing things like setting up automatic payroll contributions into your employer sponsored plan? Are you automatically funding your Roth ira? You automatically having money going into your taxable brokerage account? If you can set those things on autopilot, you don't have to make sure at the end of the month there's enough money to fund them, you've already paid yourself first and taking care of that thing.
[20:17]
Brian Preston
Here's the other thing. It's not only the good stuff that you can automate. You can also automate the debts and bills so that you don't. You minimize, you know, payments and penalties and other things. If you can set these things up. This is what we like to call our forced scarcity. System too. If the money's already going out, it does a better job once again of what Bo said, making the good habits that much easier and the bad habits that much harder. If the money already has a time and a place of where it's going to be, you can't fall into traps that you might have done just from a behavioral standpoint.
[20:46]
Bo Hansen
Now again, we're talking about putting better systems in place. And a lot of times people are doing good things with their finances, they're making the right decisions, but oftentimes they're doing them out of order. They're not following the order that's the most efficient. And that's why another system that you can implement is the financial order of operations.
[21:07]
Brian Preston
You knew it was coming as soon as you heard systems. You're like, there's definitely a better way to do money. And it's gotta be the financial order of operations.
[21:15]
Bo Hansen
If you want to get your free copy, you can go to moneyguide.com resources and download your free copy of the Nine Step Process to tell you what you should do with your next dollar.
[21:28]
Brian Preston
I mean that's what, that's what I love about it is it really literally tells you what to do with your next dollar. No matter where you are. You could be a person just now starting out in your early 20s. You could be somebody who's middle of the journey as well as somebody who's within three to five years of retirement. The financial order of operations is going to be your path so that you can maximize and be the best financial mutant version of yourself.
[21:51]
Bo Hansen
Now another system that you can put in place is part system, but it's also part habit. And this is something, Brian, that both you and I started doing very, very early on in our financial journeys. And that's tracking your net worth, having an understanding. Okay, where am I today? What are all the things that I own? What's all the money that I owe and what's that net difference and how has it changed over time? Because seeing your progress can be wonderful motivation to keep you moving forward towards your goals.
[22:19]
Brian Preston
Yeah, and that's what I like is it gives you milestones to celebrate. I mean, think about the first time you hit the 2 comma club. A big deal, a millionaire. Think about it. We can even back it up before that of thinking about when your, your army of dollars is actually making more money than you save in a year. How about even better, when is the first year that your army of dollars makes more than you made at work? I mean this stuff, these are these are magical milestones that will start showing up. If you are tracking this and putting it into your net worth, I love that you actually get these moments to celebrate. And if you want to know the actual tool that Bo and I use for ourselves, I'd encourage you, go to learn.moneyguy.com you can actually see our net worth tool that we have that gives you a great dashboard so you can track how are you paying off debts, Are you, how are your, your three bucket strategy between your different asset classes? Are you on the journey to abundance where you actually your money is making more than you do? All these things are available to you just that easy?
[23:17]
Bo Hansen
All right, Brian, we've been talking about wealth accelerators. We've been talking about how do you have more fuel, how do you have less drag, how do you have better systems? And we really covered things that pretty much apply to everyone. We said, hey, we want to cover accelerators that don't involve gambling or speculating or taking on unnecessary risks. But it would be disingenuous of us to not at least acknowledge there are some other wealth accelerators out there that exist. And we're just going to affectionately call these advanced accelerators because I'm going to contend these are not for everyone. These are not things that. This is where you start, this is not where you start. This is not for the everyday person. But there are things that can be incredibly valuable from a wealth building standpoint, assuming you're at the right place in your journey to implement.
[24:03]
Brian Preston
So let's go through these pretty quickly. The first one is real estate investing. Now look in the brochure. This is buying property is good generate. It's going to be rental income, it's going to give you equity, it's going to have all these tax benefits. What could go wrong with this? And it really is a cool thing where you actually get to have both an income source and an appreciating asset. But Bo, there's more to this. There's risk. What are the risks that a lot of people sleep.
[24:25]
Bo Hansen
Yeah, if you're doing rental real estate, like residential, you could have bad tenants, you could have vacancies, you could have repairs that you have to cover. You could buy at a very poor time from a market standpoint. And oftentimes you buy real estate, it's not super liquid. So you sink your money into this thing. There's no guarantee you can get your money out of it very quickly. So again, you want to make sure you have a sound financial foundation before you start eking in to illiquid investing like real estate.
[24:53]
Brian Preston
That's why it's more of a step eight of the financial order of operations. Another one that we actually are big fans of. We've talked about this house hacking. Look, if you think about the way bank underwriting works, as well as incentives that the government gives us from a tax benefit, your primary residence is already one of the biggest wealth builders that most Americans have. You slap on top of that is that you can go bring in other people's money to help you pay for your primary residence. I'm talking about it could be renting out a room in your house. It could be buying a duplex and you living in one half or a quadplex that you live in a quarter of it. All these things are opportunities where you get the benefits of a primary residence. But now you're also bringing in the res, the rental real estate side of it. This is a win win type situation.
[25:38]
Bo Hansen
It frees up more margin for you to now have money that you can save or you can invest or you can pay down debt. But it too is not without its risks. Those risks include tenant issues, especially if it's friends or family and circumstances change. If this is your primary residence, there's another human being living in that with you. You have less privacy. Some local markets have rental restrictions where they won't allow this. You're still on the hook for repairs if you own it. And if you have a tenant move out, you still have a vacancy problem. So house hacking is a wonderful and useful tool, but it is not a free lunch. And there are still risks involved.
[26:13]
Brian Preston
Another advanced accelerator that we have a lot of experience and we see it all the time. You work for a company that gives you equity compensation. A lot of you go to work for a company and they're going to offer you stock options, restricted stock units, employee stock purchase plan. And here's the thing about a lot of these. They give you incredible incentives. Think about the employee stock purchase plan that gives you a discount of like 15% and then it even does a price at either the lowest at the beginning of the quarter, the end of the quarter. These are things that are so strong that you at least have to pay attention to see how does this fit into my situation?
[26:45]
Bo Hansen
Yeah. And you may be wondering, okay, well, how is this an accelerator? Well, when you actually have equity in your company, you're an owner, you sit alongside the C suite in terms of owning the company. So if the company does well, if the equity increases, if the value of the stock goes up, it can oftentimes outpace your salary, outpace your pay raises, outpace your ability to save. So there could be large opportunities down the road if it does well. But just like all the other advanced accelerators, it's not without risks. There could be tax surprises. You may have a huge bit of your compensation that comes in RSUs and invest at the end of the year. Well, all of a sudden you, that now becomes a taxable event. Sometimes if you're an insider or even if you're just participating in these plans, you may not be able to sell the stock as quickly as you want. Or you may have tons of concentration, not just of your human capital working for this company, but now all your financial capital is tied up in there as well. So you want to make sure you recognize, okay, this is wonderful and it's a great opportunity, but how does it fit inside my entire financial picture?
[27:45]
Brian Preston
Yeah. And you can see we're trying to give you the balance perspective on this, which is probably a little different than what you're seeing with a lot of other social media channels. Because the next one, leveraged investing, I feel like I can't help but watch my feed and I have a lot of personal finance content coming through. And there's always somebody that's over and over again showing how you just can take a little bit of a down payment and either go use options, you can use triple levered. You can do all kind of crazy things to really get leveraged investing to speed up my path. But what are they not sharing? What are the benefits and what are the negative?
[28:20]
Bo Hansen
Well, what leveraged investing allows you to do is it allows you to invest more money with less capital and then it can magnify returns when things go well. But in that same vein, just like levered investing can magnify returns on the upside, it can also magnify losses on the downside. And if you're doing something like borrowing against your portfolio to access capital, then be able to invest and then the market shifts, the stock goes down, the economy takes a hit. All of a sudden you might find yourself in a position where you do not have enough equity in the account to cover that margin. So you get called, meaning you have to either start fire selling assets or you have to find some way to come up with capital to make the brokerage whole. So it is a risky endeavor when the stuff hits the fan.
[29:04]
Brian Preston
Yeah, I mean it can work. That's why every one of these that we're using is advanced wealth. Accelerators are viable things you can use it's just. But pay attention to the risk and also where they fit in. That's why we're putting this at the end. This is not where you start your journey. This is something that you put in as a sweetener after you've had a little level of success. Now, the last one, we want to kind of have something we know a little bit about, entrepreneurship.
[29:27]
Bo Hansen
Yeah. This is a big one. This is starting buying, building, owning a business. And this can be wonderful because not only can entrepreneurship help increase your income, it can allow your salary to increase, can allow your profit to increase, but it can also become an actual asset in and of itself that provides you the opportunity to sell it down the road. And it creates wealth that is apart from just your labor executing and doing the job.
[29:53]
Brian Preston
Yeah. And look, this has risk as well. I mean, if you look at what the SBA shares on failure rates of small businesses, it's a pretty high. There's also you're having to do the work. So how high? Burnout. There's definitely tax complexity, irregular income, lack of benefits until you reach a level of success. And I'm even willing to go a little deeper on this, is that the amount of people that come to us even with a level of success that haven't maximized their business structure, haven't maximized the retirement benefits and other things that are easy layups on lowering and minimizing the taxes. This is why I always tell people, guys, when you create success, success, your simple financial life is going to get so such to a level of complexity. You say, I just don't know what I don't know anymore. And guys, that's when we're going to leave the front porch light on you. This is exactly what we help people do across the country, is that we help successful people navigate their personal finances so they don't leave anything behind, so they don't have regrets. We can load you up with all the free advice in the world to try to get you motivated. Plant those mustard seeds all over the place. So that's why I would encourage you go to moneyguy.com resources if that's where you're at. But if you've reached that level of success where you're starting to panic, you just don't know what you don't know, we'd really encourage you, go consider becoming a client. I'm your host, Brian, joined by Mr. Bo Money Guy team out.
[31:17]
Indeed Advertiser
The Money Guy show is hosted by Brian Preston and Bo Hansen. 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, A Bound Wealth Management does not render or offer to render personalized investment or tax advice through the MONEY GU 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.

Summary7 min read

Episode Summary: Grow Your Money Faster With These Wealth Accelerators

Podcast: Money Guy Show
Hosts: Brian Preston & Bo Hanson
Date: July 31, 2026

Episode Overview

In this lively and actionable episode, Brian Preston and Bo Hanson break down practical, proven strategies—what they call "wealth accelerators"—that help investors build wealth faster without unnecessary speculation or risk. The hosts organize these accelerators into three categories:

Providing more fuel (ways to generate or save more money to invest)
Creating less drag (removing obstacles and inefficiencies)
Building better systems (habits and processes that keep your financial journey on track)

They also conclude with a candid discussion of more advanced (and riskier) accelerators, like real estate, equity compensation, leverage, and entrepreneurship, while emphasizing that systematic, disciplined actions are what truly move the needle for most people.

Key Discussion Points & Insights

1. Wealth Accelerators: Setting the Foundation

(00:30–01:31)

Accelerators are simple tools and habits that turbo-charge your wealth-building—no gambling required.
Three categories: More fuel, less drag, better systems

Quote:
"We're here to help you modify your money with financial nitrous oxide so you can Tokyo drift your way to wealth."
— Brian Preston (00:46)

2. More Fuel: Maximizing Money for Investment

a. Increase Your Savings Rate

(01:49–04:24)

The #1 accelerator: Save more of what you earn.
Compound interest is magic the higher your savings rate.
Example: Saving 25% vs. 10% drastically speeds up wealth (8 years faster to $1M; more than quadruple ending wealth in 30 years).

Quote:
"Your savings rate is likely the number one metric that determines and defines how quickly you can build wealth."
— Bo Hanson (02:17)

Tools Mentioned:

Compound Interest Calculator at moneyguy.com/resources

b. Maximize Your Margin

(05:00–06:08)

"Margin" = Difference between income and expenses
Most Americans (57%) live paycheck to paycheck.
Gain margin by earning more or spending less.

Quote:
"Your income is likely your greatest wealth-building tool. How big your shovel is dictates how much margin you can create."
— Bo Hanson (06:08)

c. Tips to Grow Income

Invest in education or credentials, if ROI is positive (06:23).
Consider side hustles, freelancing, or consulting (06:48).

3. Less Drag: Minimizing What Slows You Down

a. Minimize Debt

(07:36–09:59)

Debt, especially consumer and high-interest, is "chainsaw dangerous" (Brian, 08:00).
Americans are at record debt—don’t rob your future self.
Pay off high-interest debt urgently (step 3 in Money Guy Order of Operations).
Follow smart borrowing rules for big purchases:
- Cars: "23/8" rule—20% down, 3 years payoff, payments <8% monthly income; luxury cars must be paid in 12 months.
- Houses: "3/5/25" rule on first home—3% down, stay 5–7 years, <25% of gross income.

Quote:
"If you're using debt and you're not scared of it, you are using it wrong."
— Brian Preston (08:00)

b. Minimize Expenses & Lifestyle Creep

(12:13–14:37)

Track your spending—start with a strict budget to find leaks.
Audit subscriptions/memberships regularly.

Quote:
"If you can start tracking, if you can start seeing those dollars leave, it's going to allow you to start patching and plugging those holes."
— Bo Hanson (13:00)

Combat lifestyle creep with the "60/40 rule" when you get raises or bonuses:
- 60% goes to increased savings/investing, 40% to lifestyle upgrades.

c. Minimize Taxes

(15:06–18:41)

Tax avoidance (using legal strategies) is smart; tax evasion isn't.
Use tax-advantaged accounts: HSAs, 401(k)s, Roth IRAs, 529s.
General rule: If marginal tax rate <25%, favor Roth; >30%, favor pre-tax.

Quote:
"Tax avoidance is actually highly encouraged. Meaning if you're following the letter of the law and doing things that are actually structured in the system, you're going to be A-okay."
— Brian Preston (15:06)

Use all available deductions and credits (student loan interest, dependent credits, etc.).
Tax loss harvesting—realize losses now to offset future gains and reduce taxes.

d. Charitable Giving for Tax Efficiency

Techniques: Gift appreciated securities, bunch charitable gifts, optimize the tax impact of giving (18:41).

4. Better Systems: Habits and Automation

a. Automate Your Finances

(19:43–20:46)

Automatic contributions = Consistency + less temptation.
Also automate bills/debt payments to avoid fees.
"Forced scarcity"—pay yourself first, then live on what's left.

Quote:
"You want to make the good habits as easy as possible, the bad habits as hard as possible."
— Bo Hanson (19:43)

b. Follow a Financial Order of Operations

(20:46–21:50)

Always know where your “next dollar” should go, at any life stage.
Money Guy’s Nine-Step Order of Operations guide is available for free.

c. Track Your Net Worth

(21:50–22:18)

Record all assets and liabilities regularly.
Celebrate milestones (e.g., “two comma club”—millionaire status).
Net worth dashboards help you visualize progress and stay motivated.

Quote:
"These are magical milestones that will start showing up if you are tracking this and putting it into your net worth."
— Brian Preston (22:18)

5. Advanced Wealth Accelerators

(23:16–30:52)
Not for beginners; only after core foundations are in place!

a. Real Estate Investing

Rental properties offer income, appreciation, and tax benefits.
Not liquid, carries risks (bad tenants, repairs, downturns).
Should only be considered once basic financial stability is secured.

b. House Hacking

Living in and renting out part of your home to offset costs.
Can build equity faster but comes with risks (privacy, regulation, vacancies).

c. Equity Compensation

Stock options, RSUs, Employee Stock Purchase Plans.
Can result in wealth that outpaces your salary, but beware of tax surprises and portfolio concentration.

d. Leveraged Investing

Using borrowed money or derivatives (options) to magnify returns.
Upside and downside are magnified; can lead to margin calls and rapid losses.

e. Entrepreneurship

Starting, owning, or buying a business can create wealth outside salary.
Risks include failure rates, burnout, complex taxes, irregular income, loss of benefits.
Many owners don’t optimize their own retirement plans—seek help as complexity rises.

Quote:
"This is not where you start your journey. This is something that you put in as a sweetener after you've had a little level of success."
— Brian Preston (29:04)

Notable Quotes & Memorable Moments

On the power of savings rate:
"Increasing your savings rate from 10% to 25% allowed you to cross the $1 million mark eight years earlier." — Bo Hansen (03:44)
On dangerous debt:
"Debt is chainsaw dangerous." — Brian Preston (08:00)
On lifestyle creep:
"You do not have to try to keep up with your peers to impress people who probably realistically don't care what you have going on." — Brian Preston (14:17)
On automating:
"If the money already has a time and a place... you can't fall into traps you might have done just from a behavioral standpoint." — Brian Preston (20:17)
On advanced strategies:
"Every one of these advanced wealth accelerators are viable things you can use—but pay attention to the risk and also where they fit in." — Brian Preston (29:04)
Aspirational note:
"We can load you up with all the free advice in the world to try to get you motivated. Plant those mustard seeds all over." — Brian Preston (30:43)

Key Timestamps for Important Segments

01:07 — Three categories of wealth accelerators
02:06 — Savings rate and the compound effect
05:19 — The importance of creating margin
06:08 — Strategies for increasing income
07:36 — Minimizing “drag” (debt, expenses, lifestyle inflation)
09:43 — Rules for buying cars and homes
13:00 — Budgeting and plugging money leaks
14:37 — 60/40 rule for raises/bonuses
15:06 — Tax minimization principles
19:43 — Automating finances and the power of systems
21:06 — The financial order of operations explained
21:50 — The value of tracking net worth
24:02 — Advanced strategies: Real estate, house hacking, etc.
29:27 — Entrepreneurship as a wealth accelerator

Final Thoughts

Brian and Bo’s approach throughout this episode is practical, direct, and anchored in behavioral finance—make simple things automatic, focus on what you can control, and don’t rush into advanced strategies until the basics are mastered. Their blend of foundational habits with strategic “next-level” accelerators offers listeners a comprehensive roadmap to financial independence, with signature energy and a few great one-liners along the way.

Resources: All tools, calculators, and free guides mentioned are available at moneyguy.com/resources.

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Transcript63 lines

[00:01]
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[00:30]
Brian Preston
Do you ever wish you could build wealth faster? Today we're going to show you how.
[00:35]
Bo Hansen
Brian, I am so excited because today we're talking about wealth accelerators that can speed up your wealth building journey. And stick around to the end because we'll cover some advanced ways to grow your money even faster.
[00:46]
Brian Preston
So I'm Brian, he's Bo, and this is the Money Guy show where two financial advisors help you modify your money with financial nitrous oxide so you can Tokyo drift your way to wealth. I said that. And with that, let's launch.
[01:07]
Bo Hansen
So, Brian, today we're talking about wealth accelerators. And we say accelerator. We mean anything that can help you grow your money faster without gambling, speculating or skipping steps. And as we thought about how to lay this content out, they really fall into three general categories. There are things that can provide more fuel, there are things that can provide less drag, and there are things that can create better systems.
[01:31]
Brian Preston
Yeah, if we put some color in this, more fuel. Those that help you generate more money to invest. Talking about drag. These help you stop losing money and the momentum you're hopefully building. And then of course, on the system side, these are to help you navigate money decisions to stay on the course long enough to truly build wealth.
[01:49]
Bo Hansen
All right, so let's start with the first one. Let's talk about the accelerators you can do that can provide more fuel. These are things that you want to maximize and that you want to increase. And the first one, I think is no surprise. If you've been listening to our content for any amount of time. Increase your savings rate.
[02:06]
Brian Preston
Yeah. By the way, we lean in heavily on discipline, on, you've got to live on less than you make. If you can't do this, you're never going to be on the journey to building wealth.
[02:18]
Bo Hansen
Your savings rate is likely the number one metric that determines and defines how quickly you can build wealth. And if you want to see this in real time, if you want to really understand what this looks like, check out our compound interest calculator. So let's Say that you're earning $100,000 a year and your goal is to save 10% of your income. If you divide that out monthly, that comes out to $833.33. If you could invest that amount for a 30 year period and let's just say that on average you earn a 10% rate of return, do you realize at the end of that period you would end up with over $1.8 million and you would reach the $1 million mark after 25 years of investing. Now that is just assuming that you save 10%. Imagine now what if you would save 25% of your income. That would come out to a little under $2,100 a month. If you did that same savings over a 30 year time horizon, again still earning a 10% rate of return, you would end up with $4.7 million.
[03:28]
Brian Preston
Now look, there's a lot of people that say a million dollars isn't much money. I disagree with them, by the way. But 4.7, I mean that's the type of, we're talking about the level of wealth where even if you're using conservative withdrawal rates, you're doing tremendous things in retirement.
[03:44]
Bo Hansen
So I want you to think about this. Increasing your savings rate from 10% to 25% allowed you to cross the $1 million mark eight years earlier. Because you increased your savings rate, your army dollar bills is growing faster and faster and faster. So your savings rate is by far one of the biggest impactors you can have to your financial wealth building.
[04:05]
Brian Preston
So we want to encourage you go out to moneyguy.com resources to try out our compound interest calculator.
[04:12]
Bo Hansen
And while you're saving, we want you to shoot for a 25% savings rate. And why do we say 25%? Well, the truth is, Brian, a lot of people don't start their savings journey super early.
[04:24]
Brian Preston
Yeah, we know from our own research is that the typical American doesn't even start saving and investing until they're 30 years of age. And if you start saving and investing at 30 years of age, even at our healthy 25% savings rate and investment rate, you're more than likely not going to have independence until you're age 60. So that's why we have such an aggressive savings rate. If you want to personally know what your savings rate should be, we'd once again encourage you. Go try out our free resources, go to moneyguy.com resources. We have the option for you to see exactly what you need to be saving for the future to live your Best life.
[05:00]
Bo Hansen
All right, so you're sold and you want to start saving more. You want to increase your savings rate. But how do you do it? You can't always just save more. You have to be able to pay the bills and meet your expenses. So what's the next accelerator that you should tap into? Well, we want you to maximize your margin.
[05:20]
Brian Preston
Yeah, a lot of people I've already kind of, I've given a little bit of a prelude on this is I said you have to live on less than you make if you're ever going to build wealth. The problem is most Americans, they never reach that margin. If you look at this, 57% of Americans are living literally paycheck to paycheck.
[05:38]
Bo Hansen
And as you imagine the less margin that you have, the less difference in what you have coming in and what you have going out, the less money you have to move towards other financial goals. So when it comes to creating margin, there are really only two levers that you can ever pull. You can either figure out how do I make more money, increase my income or, or how do I spend less money, decrease my expense.
[06:01]
Brian Preston
So we're going to come back to the spending less money. But right now let's first focus on earning more money.
[06:08]
Bo Hansen
Yeah. Your income is likely your greatest wealth building tool. How big your shovel is dictates how much margin you can create. So the bigger your shovel, the bigger your margin, the more margin, the more rapid you can accelerate your wealth building journey.
[06:24]
Brian Preston
This is one of those things where when people come to us and say, what do you feel about education? What do you feel about going and getting some credential? I'm always like, look, if you can first do the cost to benefit ratio, see if you're going to get a return on the investment. But if you definitely can go back to school and increase your income without running up a bunch of debt and other things, go investing yourself. There's very few investments that are better than you investing your ability to make more income.
[06:49]
Bo Hansen
And if you can't go out and add a new skill or a new credential or increase your education, maybe you can consider starting a side hustle, some sort of freelancing or consulting some way to generate income on the side in addition to your day job. Because again, if the goal is to move one of the levers and increase income, perhaps spending some of your extra outside of work time, generating income is a great solution.
[07:14]
Brian Preston
And realize, you know, we just gave you a few examples on how to increase your income or add more fuel, all these things can work together, you can side hustle, you can go invest in your own education. There's all these things. We're just trying to help you increase your savings and investment rate so that you can increase how fast you're going to reach your financial goals.
[07:37]
Bo Hansen
Now remember, these accelerators fall into three categories. There's more fuel, less drag, and then there's building better systems. We just talked about more fuel. Now let's talk about the next wealth accelerator which is less drag. How do we minimize the things that slow us down on our wealth building journey? And one of the very first things that we want you to consider minimizing is minimizing your debt.
[08:01]
Brian Preston
Yeah, I feel like this is the first trap that most Americans fall into is that they, hey, we get it, you've been in school for a gazillion years. You start actually getting your first real adult job, you feel like you ought to be rewarded or celebrate that. So people go out there and they either run up credit card debt, they go out there and they get a car loan. You need to be scared of debt. If you're using debt and you're not scared of it, you are using it wrong. That's why we literally say debt is chainsaw dangerous.
[08:30]
Bo Hansen
Yeah, it can be napalm to your financial life. So much so that right now, according to Northwestern Mutual, 35% of Americans, so 1 in 3Americans say they are carrying close to or at their highest level of debt that they have ever carried. Americans right now have a consumption problem because they are allowing their present day selves to borrow from their future selves and subsidize lifestyle today. If you're doing that right now, you're doing money wrong.
[09:00]
Brian Preston
If you fall into this debt trap, they charge such predatory rates on a lot of these types of debts. You'll never get ahead. So that's why we definitely want you to lean in, get serious about avoiding this high interest debt, especially if you can.
[09:14]
Bo Hansen
That's why, Brian, we hold the thing, we actually have the financial order of operations. It says if you do have high interest debt, it is step number three. So we want you to pay that off as quickly as you can. And once you get it paid off, we want you to avoid it at all costs that come. That's the consumption, that's the decisions that you make on a day to day basis. But we also, when it comes to buying the big things, when it comes to the large life decisions that you're going to make, we want you to follow our money guy rules for buying big Things like vehicles or homes.
[09:43]
Brian Preston
Yeah, I mean, the first one, cars. I told you, these are the traps that people fall into. I understand that a lot of you, your first wealth building opportunity is going to be getting to your job reliably. And we want to encourage that. You have a car, not just a jalopy, that you, every morning you go out there, you have to do your little rain dance hoping this thing cranks up. We want you to have reliable transportation. And for a lot of you, if you don't have resources when you're starting out, you're probably going to have to follow our 23 8. And what we say, when we say 23 8, what we mean is you're going to put down at least 20%, you're going to pay the car off within three years. That's going to keep your wallet very sober so that you don't let your ego trying to get you to buy a car and fall into that trap of financing it for six years, seven years and beyond. And then we don't want your gross monthly payments to exceed 8% of your monthly income.
[10:36]
Bo Hansen
Now, there are two caveats. If you're buying a luxury car, you don't get to do 23 8. You got to pay a luxury car off in the same year that you bought it inside of 12 months. And as a rule of thumb, your car payment should never exceed what you are investing on a monthly basis. If you have $1,000 car payment but you're saving $100 a month for your future self, you are doing it wrong. So most Americans don't make the car decision well. They also don't make the house decision well. And it's gotten even more difficult as we've seen home prices increase and interest rates go up. So if you want to make sure that you are staying inside the lines when it comes to buying a house, follow our 3 5, 25 rule. That's on your first home, you'll have to put 3% down. We want you to make sure that you're going to be in the home for at least five to seven years. And we don't want your total housing cost to exceed 25% of your gross income.
[11:29]
Brian Preston
Now realize in future home purchases mean you go to upgrade because you have a growing family. We want you putting down 20% on the second home. But we do have very, very approachable rules on that first home purchase because we understand in this crazy real estate marketplace it is going to feel like the housing market's running for you. So we give you a Lot of grace on that down payment, but don't feel like you have to force it. We've done shows on is it better to rent versus own? Do your research, measure twice, cut once. Because in a lot of American cities right now, it's actually cheaper to rent than it is to purchase. Because the rent. The person that's renting the house probably bought that house at about half of what you could buy that house for. And they also got interest rates that historically just are not around at this moment in time.
[12:14]
Bo Hansen
All right, so we're talking about how do we red. Reduce drag, reduce friction in our financial life? We already said that we want to minimize the debt that we're incurring, but even further than that, we want you to. To minimize your expenses. Remember, we have two levers that we can pull when it comes to impacting our financial life. We can either make more money and increase our income, or we can spend less money and decrease our expenses. While decreasing our expenses is one of the things that we have the most control over.
[12:42]
Brian Preston
Yeah. This is why we love people to track their spending. A lot of you, when you're trying to build that muscle memory of how you handle money, well, you actually have to do. Nobody likes the budget. But I think you have to do it in the beginning so you can find out where things are leaking so you don't fall into financial traps.
[13:01]
Bo Hansen
Yeah. If you can find, like, oftentimes we think about, okay, well, I'm going to know where my rent is. I'm going to know what my grocery bill is. I'm going to know what my fill in the blank is. And that's fine and good. But as time goes on, as life gets more complicated, a lot of times when you're in the messy middle, you might recognize stuff just kind of sprouts up and things kind of happen, and all of a sudden you start having money falling out that you didn't even know was falling out. I mean, I signed up for that Hulu subscription because I wanted to watch that one football game, but then that football game passed, and I never canceled it. Or, man, my. I signed up for this thing so my kid could watch this PBS special, and it was six bucks, but now they can't watch it anymore. And all of a sudden you have these money leaks that are just happening that you didn't even know were going on. So if you can start tracking, if you can start seeing those dollars leave, it's going to allow you to start patching and plugging those holes.
[13:51]
Brian Preston
Well, I'll Tell you, a lot of us even have mystery subscriptions. So go and audit your, you know, go look at your credit card statements, look at your monthly bank statements, see what the outgoing things are every month so you can figure out if there's ways that you can definitely plug up those leaks. And then also I want you, because what's interesting is we all in high school are so insecure. And you get into adult life and you think, hey, I'm not going to be insecure anymore because, you know, I'm an adult now. And then you find out what. Nope. There's still a lot of peer pressure, is that we have to feel like we have to keep up with the Joneses. And that's why I would really strongly encourage you take an active role in your life. You can avoid lifestyle creep. You do not have to feel like you have to try to keep up with your peers to impress people who probably realistically don't care what you have going on.
[14:37]
Bo Hansen
A really good way to combat lifestyle creep is as you have bonuses or pay increases or pay raises. Think about the 60, 40 rule. It's okay when you get a raise or bonus if 60% of that money goes towards additional savings, additional financial order of operations, and then let 40% go to lifestyle. If you do that, you are going to make sure that your lifestyle does not outpace your savings rate. If you can do that, you're going to keep yourself on the path towards financial independence.
[15:06]
Brian Preston
Another big thing that happens within less drag is we just talked about expenses, but don't sleep on the fact that taxes are a big part. So you've got to minimize your taxes as much as possible. It's important for us to share with you guys. We realize tax evasion is illegal and there's a lot of people out there selling systems or other things that might get you in some hot water. But if you're smart about this, think like a financial mutant. Tax avoidance is actually highly encouraged. Meaning if you're following the letter of the law and doing things that are actually structured in the system, you're going to be a okay. And you'll actually be rewarded for this.
[15:43]
Bo Hansen
A number of accounts, even the way that they are established, are tax incentivized. You have Health Savings accounts and 401ks and Roth IRAs and 529. All of these accounts help you minimize the taxes that you pay either today, in the present year, or in the case of HSAs and Roths in future years when you go to pull that money out. And so one of the questions you may be asked is, okay, well, based on my situation today, how do I know if pre tax is more valuable for me or if Roth is more valuable for me? And again, we have a rule of thumb that can help you. If you add up your marginal federal rate and your marginal state rate, it's below 25%, there's a really good chance that Roth contributions would be beneficial for you. Tax free in the future is what you want to do. But if you're a higher earner right now and you add up your marginal federal rate and your marginal state rate and it's above 30%, there's a really strong case to be made that maybe you should consider pre tax contributions because the current year tax benefit is so valuable that you don't want to miss out on it.
[16:44]
Brian Preston
Yeah, this is. And we even there's a gray area there between 25 and 30% that it's kind of more going to be specific specified on. Are you young? Because young is definitely going to be more of a Roth person's game because you have many more years for compounding growth. But also where are you at in your asset level? Because even no matter what your tax rate is, somebody who's in the legacy building parts of things, they might want to think about Roth assets. We've tried to give you tax efficiency pre tax versus Roth, but there are a number of you that when it gets complicated, your simple life gets complicated. That's when a financial advisor might be able to help you navigate this even better.
[17:19]
Bo Hansen
And then if you're trying to minimize taxes, the more educated you can make yourself, the more powerful you can be. So are you utilizing all the tax deductions and all the tax credits available to you? Maybe you're paying student loans. Are you remembering to track the student loan interest that you're paying? Maybe you have children. Are there income thresholds that you fall under that would qualify you for tax credits you may not have gotten otherwise? If you can understand where those deductions are, where those credits are and what you need to be due to be eligible, that could literally be more money in your back pocket and less money going towards Uncle Sam.
[17:54]
Brian Preston
You know, one of my favorite tools that we use for turning a negative situation into a positive is tax loss harvesting. This is literally turning those lemons into lemonade. And the fact that what you'll do on this is if you will take losses and then you'll, you'll get a current tax deduction. And even if you can't, once you, you can't even use that current tax deduction because it's $3,000 a year, you get to carry forward into the future. And guys, I'm telling you, we use this all the time with our clients is where we can strategically lock in losses. So when you hit those volatile times in the marketplace, that when then in future years. Because realize about 80% of the time, you know, markets are good, but that 20%, that two out of 10 years, you're going to love that you use this tool to minimize your taxes, not only right now, but also in the future.
[18:42]
Bo Hansen
And then even things that you do automatically, maybe that you don't think about. You ought to ask yourself a question. Is there a way for me to do this in such a way that might be more advantageous from a tax standpoint? For those that are charitably minded, there are incredibly efficient ways to either bunch charitable contributions or even potentially use highly appreciated securities to make those charitable contributions. Where now you're making taxes that you would otherwise have to pay disappear forever. Again, if you can educate yourself and know what tools and tactics are available to you, you can keep more money in your back pocket.
[19:17]
Brian Preston
I feel like we just covered more fuel, less drag. Those are kind of the basics things. But at some point you have to actually get to what's the horsepower of this system. And a lot of times that's the system you know, is what, how powerful are these components that you've been compiling. And that's where we want to kind of go through what are things that you can do that create a better system, better success, better opportunities for your future self?
[19:43]
Bo Hansen
I think number one is automate your finances. The more things that you can automate, the less likely you are to screw it up. You want to make the good habits as easy as possible, you know, the bad habits as hard as possible. So are you doing things like setting up automatic payroll contributions into your employer sponsored plan? Are you automatically funding your Roth ira? You automatically having money going into your taxable brokerage account? If you can set those things on autopilot, you don't have to make sure at the end of the month there's enough money to fund them, you've already paid yourself first and taking care of that thing.
[20:17]
Brian Preston
Here's the other thing. It's not only the good stuff that you can automate. You can also automate the debts and bills so that you don't. You minimize, you know, payments and penalties and other things. If you can set these things up. This is what we like to call our forced scarcity. System too. If the money's already going out, it does a better job once again of what Bo said, making the good habits that much easier and the bad habits that much harder. If the money already has a time and a place of where it's going to be, you can't fall into traps that you might have done just from a behavioral standpoint.
[20:46]
Bo Hansen
Now again, we're talking about putting better systems in place. And a lot of times people are doing good things with their finances, they're making the right decisions, but oftentimes they're doing them out of order. They're not following the order that's the most efficient. And that's why another system that you can implement is the financial order of operations.
[21:07]
Brian Preston
You knew it was coming as soon as you heard systems. You're like, there's definitely a better way to do money. And it's gotta be the financial order of operations.
[21:15]
Bo Hansen
If you want to get your free copy, you can go to moneyguide.com resources and download your free copy of the Nine Step Process to tell you what you should do with your next dollar.
[21:28]
Brian Preston
I mean that's what, that's what I love about it is it really literally tells you what to do with your next dollar. No matter where you are. You could be a person just now starting out in your early 20s. You could be somebody who's middle of the journey as well as somebody who's within three to five years of retirement. The financial order of operations is going to be your path so that you can maximize and be the best financial mutant version of yourself.
[21:51]
Bo Hansen
Now another system that you can put in place is part system, but it's also part habit. And this is something, Brian, that both you and I started doing very, very early on in our financial journeys. And that's tracking your net worth, having an understanding. Okay, where am I today? What are all the things that I own? What's all the money that I owe and what's that net difference and how has it changed over time? Because seeing your progress can be wonderful motivation to keep you moving forward towards your goals.
[22:19]
Brian Preston
Yeah, and that's what I like is it gives you milestones to celebrate. I mean, think about the first time you hit the 2 comma club. A big deal, a millionaire. Think about it. We can even back it up before that of thinking about when your, your army of dollars is actually making more money than you save in a year. How about even better, when is the first year that your army of dollars makes more than you made at work? I mean this stuff, these are these are magical milestones that will start showing up. If you are tracking this and putting it into your net worth, I love that you actually get these moments to celebrate. And if you want to know the actual tool that Bo and I use for ourselves, I'd encourage you, go to learn.moneyguy.com you can actually see our net worth tool that we have that gives you a great dashboard so you can track how are you paying off debts, Are you, how are your, your three bucket strategy between your different asset classes? Are you on the journey to abundance where you actually your money is making more than you do? All these things are available to you just that easy?
[23:17]
Bo Hansen
All right, Brian, we've been talking about wealth accelerators. We've been talking about how do you have more fuel, how do you have less drag, how do you have better systems? And we really covered things that pretty much apply to everyone. We said, hey, we want to cover accelerators that don't involve gambling or speculating or taking on unnecessary risks. But it would be disingenuous of us to not at least acknowledge there are some other wealth accelerators out there that exist. And we're just going to affectionately call these advanced accelerators because I'm going to contend these are not for everyone. These are not things that. This is where you start, this is not where you start. This is not for the everyday person. But there are things that can be incredibly valuable from a wealth building standpoint, assuming you're at the right place in your journey to implement.
[24:03]
Brian Preston
So let's go through these pretty quickly. The first one is real estate investing. Now look in the brochure. This is buying property is good generate. It's going to be rental income, it's going to give you equity, it's going to have all these tax benefits. What could go wrong with this? And it really is a cool thing where you actually get to have both an income source and an appreciating asset. But Bo, there's more to this. There's risk. What are the risks that a lot of people sleep.
[24:25]
Bo Hansen
Yeah, if you're doing rental real estate, like residential, you could have bad tenants, you could have vacancies, you could have repairs that you have to cover. You could buy at a very poor time from a market standpoint. And oftentimes you buy real estate, it's not super liquid. So you sink your money into this thing. There's no guarantee you can get your money out of it very quickly. So again, you want to make sure you have a sound financial foundation before you start eking in to illiquid investing like real estate.
[24:53]
Brian Preston
That's why it's more of a step eight of the financial order of operations. Another one that we actually are big fans of. We've talked about this house hacking. Look, if you think about the way bank underwriting works, as well as incentives that the government gives us from a tax benefit, your primary residence is already one of the biggest wealth builders that most Americans have. You slap on top of that is that you can go bring in other people's money to help you pay for your primary residence. I'm talking about it could be renting out a room in your house. It could be buying a duplex and you living in one half or a quadplex that you live in a quarter of it. All these things are opportunities where you get the benefits of a primary residence. But now you're also bringing in the res, the rental real estate side of it. This is a win win type situation.
[25:38]
Bo Hansen
It frees up more margin for you to now have money that you can save or you can invest or you can pay down debt. But it too is not without its risks. Those risks include tenant issues, especially if it's friends or family and circumstances change. If this is your primary residence, there's another human being living in that with you. You have less privacy. Some local markets have rental restrictions where they won't allow this. You're still on the hook for repairs if you own it. And if you have a tenant move out, you still have a vacancy problem. So house hacking is a wonderful and useful tool, but it is not a free lunch. And there are still risks involved.
[26:13]
Brian Preston
Another advanced accelerator that we have a lot of experience and we see it all the time. You work for a company that gives you equity compensation. A lot of you go to work for a company and they're going to offer you stock options, restricted stock units, employee stock purchase plan. And here's the thing about a lot of these. They give you incredible incentives. Think about the employee stock purchase plan that gives you a discount of like 15% and then it even does a price at either the lowest at the beginning of the quarter, the end of the quarter. These are things that are so strong that you at least have to pay attention to see how does this fit into my situation?
[26:45]
Bo Hansen
Yeah. And you may be wondering, okay, well, how is this an accelerator? Well, when you actually have equity in your company, you're an owner, you sit alongside the C suite in terms of owning the company. So if the company does well, if the equity increases, if the value of the stock goes up, it can oftentimes outpace your salary, outpace your pay raises, outpace your ability to save. So there could be large opportunities down the road if it does well. But just like all the other advanced accelerators, it's not without risks. There could be tax surprises. You may have a huge bit of your compensation that comes in RSUs and invest at the end of the year. Well, all of a sudden you, that now becomes a taxable event. Sometimes if you're an insider or even if you're just participating in these plans, you may not be able to sell the stock as quickly as you want. Or you may have tons of concentration, not just of your human capital working for this company, but now all your financial capital is tied up in there as well. So you want to make sure you recognize, okay, this is wonderful and it's a great opportunity, but how does it fit inside my entire financial picture?
[27:45]
Brian Preston
Yeah. And you can see we're trying to give you the balance perspective on this, which is probably a little different than what you're seeing with a lot of other social media channels. Because the next one, leveraged investing, I feel like I can't help but watch my feed and I have a lot of personal finance content coming through. And there's always somebody that's over and over again showing how you just can take a little bit of a down payment and either go use options, you can use triple levered. You can do all kind of crazy things to really get leveraged investing to speed up my path. But what are they not sharing? What are the benefits and what are the negative?
[28:20]
Bo Hansen
Well, what leveraged investing allows you to do is it allows you to invest more money with less capital and then it can magnify returns when things go well. But in that same vein, just like levered investing can magnify returns on the upside, it can also magnify losses on the downside. And if you're doing something like borrowing against your portfolio to access capital, then be able to invest and then the market shifts, the stock goes down, the economy takes a hit. All of a sudden you might find yourself in a position where you do not have enough equity in the account to cover that margin. So you get called, meaning you have to either start fire selling assets or you have to find some way to come up with capital to make the brokerage whole. So it is a risky endeavor when the stuff hits the fan.
[29:04]
Brian Preston
Yeah, I mean it can work. That's why every one of these that we're using is advanced wealth. Accelerators are viable things you can use it's just. But pay attention to the risk and also where they fit in. That's why we're putting this at the end. This is not where you start your journey. This is something that you put in as a sweetener after you've had a little level of success. Now, the last one, we want to kind of have something we know a little bit about, entrepreneurship.
[29:27]
Bo Hansen
Yeah. This is a big one. This is starting buying, building, owning a business. And this can be wonderful because not only can entrepreneurship help increase your income, it can allow your salary to increase, can allow your profit to increase, but it can also become an actual asset in and of itself that provides you the opportunity to sell it down the road. And it creates wealth that is apart from just your labor executing and doing the job.
[29:53]
Brian Preston
Yeah. And look, this has risk as well. I mean, if you look at what the SBA shares on failure rates of small businesses, it's a pretty high. There's also you're having to do the work. So how high? Burnout. There's definitely tax complexity, irregular income, lack of benefits until you reach a level of success. And I'm even willing to go a little deeper on this, is that the amount of people that come to us even with a level of success that haven't maximized their business structure, haven't maximized the retirement benefits and other things that are easy layups on lowering and minimizing the taxes. This is why I always tell people, guys, when you create success, success, your simple financial life is going to get so such to a level of complexity. You say, I just don't know what I don't know anymore. And guys, that's when we're going to leave the front porch light on you. This is exactly what we help people do across the country, is that we help successful people navigate their personal finances so they don't leave anything behind, so they don't have regrets. We can load you up with all the free advice in the world to try to get you motivated. Plant those mustard seeds all over the place. So that's why I would encourage you go to moneyguy.com resources if that's where you're at. But if you've reached that level of success where you're starting to panic, you just don't know what you don't know, we'd really encourage you, go consider becoming a client. I'm your host, Brian, joined by Mr. Bo Money Guy team out.
[31:17]
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The Money Guy show is hosted by Brian Preston and Bo Hansen. 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, A Bound Wealth Management does not render or offer to render personalized investment or tax advice through the MONEY GU 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.