Money Guy Show: How to Combine Finances the RIGHT Way – Detailed Summary

Release Date: January 6, 2025
Hosts: Brian Preston and Bo Hanson

Introduction

In the January 6, 2025 episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into the complexities of combining finances within relationships and navigating the challenging “messy middle” phase of financial life. Through listener questions, personal anecdotes, and expert advice, Brian and Bo provide actionable strategies for managing money in partnerships and optimizing financial tools like 529 plans.

Understanding the Messy Middle

Definition and Impact

The episode opens with a discussion about the "messy middle," a term coined by Brian and Bo to describe a life phase where individuals juggle numerous commitments, leading to scarce discretionary time and money. This period typically occurs in one’s late 20s to early 30s but can extend beyond that depending on personal circumstances.

Personal Journey Out of the Messy Middle

Brian shares his personal experience of emerging from the messy middle around the age of 43. He emphasizes the importance of transparency and discipline in financial planning, contrasting it with the often misleading highlight reels presented on social media.

Brian (01:03):
"The messy middle is where you're short on time, you're short on money, and you just feel like the world's working against you... You have to take just a little bit of discipline to put something for the future."

Bo's Insights on Individual Experiences

Bo adds that everyone's messy middle is unique. He cautions against comparing one’s struggles with others', highlighting that diverse commitments and financial situations define each person's journey through the messy middle.

Bo (03:53):
"It's not a... personal finance is personal, messy middle is personal. Just trying to get your dollars to do what you need them to do with all the different stuff pulling you in all kinds of different directions."

Combining Finances: Strategies for Couples

Communication is Crucial

When addressing listener Holly S.'s question about merging finances upon marriage, Bo underscores the paramount importance of communication. Couples should discuss their financial values, goals, and strategies openly to prevent future misunderstandings.

Bo (07:31):
"Communicate, communicate, communicate... have a very open and honest and candid conversation, you're likely going to set yourself up well, long term."

Joint Net Worth Statements

Brian advocates for creating an annual net worth statement as a foundational tool for financial transparency between spouses. This practice helps couples assess their financial standing, set goals, and track progress together.

Brian (01:03):
"You need to create some strategies and use some tools so that you have some accounting to kind of know where you are in your journey."

Navigating Debts and Assets

Brian and Bo discuss scenarios where one partner may have significant debt while the other has substantial assets. They recommend maintaining joint accounts for shared expenses while keeping premarital assets separate to avoid power imbalances and potential conflicts.

Brian (09:03):
"I like joint accounts for married couples... money is a tool that sometimes, if used in an unhealthy way, can have power."

Practical Steps for Newlyweds

For couples who are both early in their financial journeys, Brian suggests simplifying the process by uniting all accounts. This approach contrasts with more complex situations where additional considerations are necessary.

Brian (09:03):
"If you're broke and young and you both come into this marriage with not a lot going on, I want you to embrace the broke and just unite everything."

Maximizing 529 Plans Post-Graduation

Listener Question: Kyle V. on 529 Funds

Kyle V. inquires about managing excess funds in a 529 plan after graduating from college, specifically considering using $20,000 beyond the $10,000 allocated for student loans.

Bo’s Recommendations

Bo explains recent legislative changes that allow excess 529 funds to be used for Roth IRA contributions under certain conditions. He advises utilizing these funds to maximize retirement savings without compromising financial discipline.

Bo (12:43):
"You can use the excess funds to fund Roth IRA... but I would not use it as a crutch for you to lower or miss your savings rate."

Brian’s Perspective on Penalties and Taxes

Brian cautions against withdrawing excess funds from 529 plans unless necessary. He suggests paying off student loans as intended and considering Roth contributions if it aligns with one's financial strategy. Brian emphasizes maintaining discipline to avoid unnecessary penalties and taxes.

Brian (14:06):
"If you pay a penalty or even taxes on this money, you are using it wrong."

Strategic Financial Planning

Both hosts highlight the importance of integrating 529 fund management into a broader financial plan, ensuring that using these funds does not disrupt other savings and investment goals.

Closing Remarks and Resources

Brian and Bo wrap up the episode by reiterating the importance of financial tools and strategies discussed. They encourage listeners to utilize resources available on their website, including free templates for net worth statements and other financial planning tools.

Brian (16:48):
"If you have not started that journey, I'm going to give you two websites I want you to go to. MoneyGuy.com resources."

Notable Quotes

• Brian (01:03):
  "The messy middle is where you're short on time, you're short on money, and you just feel like the world's working against you..."

• Bo (03:53):
  "Personal finance is personal, messy middle is personal. Just trying to get your dollars to do what you need them to do with all the different stuff pulling you in all kinds of different directions."

• Bo (07:31):
  "Communicate, communicate, communicate... have a very open and honest and candid conversation, you're likely going to set yourself up well, long term."

• Brian (09:03):
  "I like joint accounts for married couples... money is a tool that sometimes, if used in an unhealthy way, can have power."

• Bo (12:43):
  "You can use the excess funds to fund Roth IRA... but I would not use it as a crutch for you to lower or miss your savings rate."

• Brian (14:06):
  "If you pay a penalty or even taxes on this money, you are using it wrong."

Final Thoughts

This episode of the Money Guy Show provides valuable insights into managing finances both individually and within relationships. By addressing the challenges of the messy middle and offering practical advice for merging finances, Brian Preston and Bo Hanson equip listeners with the knowledge to make informed financial decisions. Additionally, their guidance on optimizing 529 plans underscores the importance of strategic planning in achieving long-term financial goals.

For more resources and detailed financial tools discussed in the episode, visit moneyguy.com/resources.