How to Make Money in a Market Crash

Summary

Money Guy Show: How to Make Money in a Market Crash

Release Date: April 23, 2025
Hosts: Brian Preston and Bo Hanson
Description: In this episode, Brian and Bo delve into strategies for thriving financially during market downturns, addressing listener questions with practical advice and insightful discussions to help you navigate uncertain economic times.

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1. Introduction to Making Money During a Market Crash

[00:06] Brian Preston kicks off the episode by presenting a timely and pertinent topic: "How to make money during a market crash."
[00:10] Bo Hanson expresses enthusiasm for the subject, acknowledging that while market downturns can induce fear and uncertainty, they also present unique investment opportunities. He emphasizes the hosts' commitment to providing listeners with better financial strategies:
"I love that we get to speak to all kinds of questions that you guys care about because we believe that there is a better way to do money."
[00:51] The episode transitions to answering listener questions, starting with Mike J's inquiry about reinvesting assets after a market peak.

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2. Listener Question: Reinforcing Investment After Selling Assets

Question by Mike J:
"We, 32, have inadvertently sold about $70k in pre-tax assets at the peak. Would you recommend we buy back in dollar cost average or wait for a low point and reinvest everything at once?"
[00:51 - 02:30]

Discussion:

• Bo Hanson begins by analyzing Mike's situation, noting his age and the significance of selling assets in a pre-tax account unexpectedly.
  "I do not understand how you inadvertently sold a bunch of assets in a pre-tax account..."
• Brian Preston underscores a fundamental investment principle:
  "Time in the market is better than timing the market."
  However, he also acknowledges the role of luck in short-term market movements:
  "Sometimes it's better to be lucky than good."

[02:30 - 06:44]

• Bo Hanson discusses the nature of pre-tax versus after-tax accounts, deducing that Mike likely cashed out a traditional 401(k) rather than a Roth IRA.
• He emphasizes the long-term horizon at Mike's age (32 years) and advises against emotional decision-making, suggesting that time is on his side for wealth accumulation.
• Creative Director Rabe then introduces the "Goldilocks Rule for Dollar Cost Averaging," outlining strategies based on the proportion of the lump sum relative to the total investment portfolio:
  • Less than 10%: Lump sum invest.
  • 10-20%: Spread over four months.
  • 20-30%: Spread over six months.
  • 30-40%: Spread over eight months.
  • 40-50%: Spread over ten months.
  • Greater than 50%: Spread over twelve months.

[06:44 - 07:09]

• Brian Preston adds a dynamic aspect to this strategy, suggesting an accelerated dollar cost averaging approach if the market enters a bear market (losing 20%). He recommends adjusting the investment timeline in response to further market declines to optimize growth potential over the next three decades.

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3. Listener Question: Prenuptial Agreements and Financial Dynamics

Question by Trevor M:
"My fiancée and I are struggling with if we should get a prenup or not. She makes about double what I make but has no invested assets yet. I have $70k in invested assets but make much less. We are both 29. Thoughts?"

[06:44 - 15:12]

Discussion:

• Brian Preston humorously references a fable to illustrate differing financial contributions in a relationship but admits to not fully grasping the initial analogy.
  "It's that fable where they give up the opposite... They've both done it, but it doesn't really fit."

• Bo Hanson explains that prenuptial agreements are typically used when both parties bring substantial pre-marital assets that they wish to keep separate post-marriage. He clarifies that future earning potential and income generally do not fall under prenup considerations.
  **"Another aspect is that income and future earning potentials are generally not considered in prenuptial agreements."[08:32]

• Brian Preston emphasizes the importance of maintaining a healthy relationship dynamic, where money doesn't become a tool for power imbalance:
  "Money is nothing more than a tool. But I have seen this... you will find in a marriage, if... money as a blunt instrument in the relationship, that's not a healthy thing." [10:05]

• The hosts advocate for focusing on future financial goals as a couple rather than past or present income disparities. They encourage open communication to address the underlying reasons for considering a prenup rather than viewing it strictly as a financial safeguard.

[15:12 - 15:08]

• Creative Director Rabe and Bo Hanson interject light-hearted remarks about their own content offerings, briefly diverting from the main discussion to promote subscription services like "Making a Millionaire Mondays," "Mini Show Wednesdays," and "Full Form Fridays."

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4. Listener Question: Handling a Profit Sharing Bonus

Question by Hunter M:
"My fiancée, 26, and I, 23, both work for General Motors and just recently got our profit sharing check. It's $21,000, and we are already hitting the 25% investment rate. What should we do with the money?"

[15:22 - 19:09]

Discussion:

• Bo Hanson first seeks clarification on whether the profit-sharing is a bonus or tied to retirement accounts. Assuming it's a bonus, he reflects on how substantial this sum would have been years ago and underscores its significance for young earners.
  "At 26 and 23, this is a substantial sum now."

• He questions whether the couple is truly saving 25% of their total income, including bonuses, or just their base salaries.
  "Did you factor in that $21,000 bonus or was your 25% savings just on your base salary?"

• Brian Preston introduces the "Financial Order of Operations," implying that since the couple is already saving a significant portion, they can strategically decide on allocating the bonus for long-term growth or immediate enjoyment.

• Bo Hanson advises balancing the investment of the bonus with both future financial goals and present enjoyment, suggesting investments that compound over time and allocating a portion for experiences like vacations to enhance happiness without undermining financial growth.
  "Maybe there's a healthy balance... a little bit of both, you know, a little bit." [18:51]

• The hosts highlight the importance of communication between partners to align on financial priorities and ensure that both immediate and long-term goals are met without jeopardizing their investment momentum.

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5. Listener Question: Paying Parents Rent and Saving for College

Question by Tyler Koenigt:
"Any advice for an 18-year-old that pays their parents? I pay my mom about $20k a year, which is $1,667 per month for rent. So it's hard to save for college."

[19:09 - 27:42]

Discussion:

• Brian Preston commends Tyler for his responsibility in supporting his mother at a young age, recognizing his admirable work ethic and the challenges he faces. He relates to Tyler's situation by sharing his own humble beginnings and emphasizes the importance of education and financial planning.
  "It's great that you're also using that talent and that blessing to try to pay help your mother out." [21:07]

• Bo Hanson addresses the high rent relative to what is typically recommended (not exceeding 25% of gross income) and suggests negotiating with his mother or exploring more affordable housing options, such as finding a roommate or relocating to a less expensive area.
  "Is there some way to negotiate on this rental amount or two... maybe rent an apartment for $1,000 a month." [22:08]

• Bo Hanson further advises on minimizing student loan debt by:

  • Dual Enrollment: Taking college courses while still in high school to reduce overall education costs.
  • Scholarships: Encouraging Tyler to prepare for standardized tests like the SAT or ACT to qualify for merit-based scholarships.
  • Community College: Starting education at a local community college to complete core classes affordably before transferring to a four-year institution.

• Brian Preston adds life tips, emphasizing the importance of understanding financial aid processes and seeking scholarships to alleviate the burden of college expenses. He warns against accumulating excessive student loan debt that could hinder financial stability post-graduation.
  "Don't sleep on the fact that you need to probably go take a prep course so you can get [scholarships]." [25:26]

• The hosts also touch on the emotional and relational aspects of financial responsibilities within a family, cautioning against scenarios where financial obligations prevent personal independence and growth.

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6. Concluding Remarks and Disclaimers

[27:42 - 27:42]

• Bo Hanson provides a standard disclaimer about the show's content, clarifying that Abound Wealth Management does not offer personalized financial, tax, investment, or legal advice through the podcast.
  "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."

• The episode wraps up with light-hearted banter among the hosts and Creative Director Rabe, maintaining an engaging and personable atmosphere even as they conclude the financial discussions.

---

Key Takeaways:

• Market Crashes as Opportunities: Emphasize the importance of time in the market over timing the market, utilizing strategies like dollar cost averaging to mitigate risks and capitalize on long-term growth.
• Financial Dynamics in Relationships: Open communication about financial contributions and future goals is crucial to maintaining a healthy relationship, especially when income disparities exist.
• Strategic Use of Bonuses: Allocate unexpected financial gains thoughtfully, balancing investment for future growth with enjoying present opportunities.
• Managing Financial Responsibilities at a Young Age: Explore all avenues to reduce financial burdens, such as negotiating living arrangements and seeking educational funding through scholarships and community resources.

Notable Quotes:

• Bo Hanson [00:10]:
  "I love that we get to speak to all kinds of questions that you guys care about because we believe that there is a better way to do money."

• Brian Preston [01:40]:
  "Before we answer your question, I have to give you the basic understanding that time in the market is better than timing the market."

• Bo Hanson [02:38]:
  "Time is on your side, in all likelihood, it will not matter what strategy you employ to get back into the market, because 30 years is such a long time to have those dollars working."

• Brian Preston [10:05]:
  "Money is nothing more than a tool. But I have seen this... you will find in a marriage, if... money as a blunt instrument in the relationship, that's not a healthy thing."

• Bo Hanson [18:51]:
  "Maybe there's a healthy balance... a little bit of both, you know, a little bit."

---

This episode of the Money Guy Show provides valuable insights into navigating financial challenges during market downturns, managing financial dynamics in relationships, and balancing responsibilities while pursuing personal and educational goals. Brian and Bo offer practical advice grounded in experience, encouraging listeners to adopt strategic and thoughtful approaches to enhance their financial well-being.

Transcript

[Brian Preston]

Here's a timely one. How to make money during a market crash.

[Bo Hanson]

Brian, I am so excited about this and I know that sounds a little contrary but a lot of times people get nervous and they get freaked out and they get uncomfortably get uncertain but they recognize, hey, I feel like there might be some opportunity here and there might be some opportunity that I don't want to miss out on. And I love that you and I get to sit in this spot and we get to speak to that. I love that we get to speak to all kinds of questions that you guys care about because we believe that there is a better way to do money. So right now, Every Tuesday at 10am we love that we get to load you up and answer your questions. Today is no different. So with that creative director Rabe, I'm going to throw it over to you.

[Creative Director Rabe]

All right, let's start with Mike J's question and talk about this. He says we 32 have inadvertently sold about 70k in pre tax assets at the peak. Would you recommend we buy back in dollar cost average or wait for a low point and reinvest everything at once? What do you think?

[Bo Hanson]

Okay, first thing, look Mike, I'm going.

[Brian Preston]

To, we have to scold him.

[Bo Hanson]

I'm going to pick on you because I won. You're 32, so you were very young. I do not understand how you inadvertently sold a bunch of assets in a pre tax account. Now this is after tax, like oh I thought I was going to buy a house or I thought I was going to do this, whatever. I get that one. But inadvertently inside of a pre tax account. Something seems awry here to me.

[Brian Preston]

Before we answer your question, I have to give you the basic understanding that time in the market is better than timing the market.

[Bo Hanson]

That's exactly right.

[Brian Preston]

However, sometimes it's better to be lucky than good.

[Bo Hanson]

Well you're. I guess he said he got out at the high. So okay, I guess he got out.

[Brian Preston]

I mean he got lucky. You got, I mean because look the market in the short term can be very irrational over the long term this thing really is a wealth creation opportunity. So in the short term there are some craziness things where you know, because we know every year markets go down 14% on average intra year, you know and that's, that's, that's correction territory that's getting really close throwing you know, throwing a stone to even bear market potentially so. But now let's address the question because.

[Bo Hanson]

Here'S what I think is interesting and I think there's going to be a Little nuance to this one, because Mike said, I've got $70,000 pre tax. Now, when he says that means a.

[Brian Preston]

Retirement account, I'm going to assume that.

[Bo Hanson]

There'S two different types of.

[Brian Preston]

It's like a traditional retirement account.

[Bo Hanson]

Well, I'm going to assume because it might be actually be Roth, because Roth would also be technically pre tax assets.

[Brian Preston]

No, it'd be after tax.

[Bo Hanson]

You think that's what he's talking about.

[Brian Preston]

When he says Roth IRA has already been taxed money. So that's after. That would be after tax assets.

[Bo Hanson]

So you don't think he cashed out any of his Roth?

[Brian Preston]

No, I think that he's got traditional 401k or employer match money that he's cashed out or he's using the wrong.

[Bo Hanson]

Term, freaked out, sold at the top. And he only sold his 401k, did not sell any Roth. I just feel like there's a chance, because I've seen people do this, that when they get scared, they get scared all across the realm. And what frustrates me about that is you are 32 years old. 32 years old. Realistically, any dollars that you have inside of any retirement accounts, whether it be 401K, 403, Roth, et cetera, those are for retirement. So we're Talking about almost 30 years in the future. So those should be just kind of like money that you just put aside, set it, forget it, ignore it, act like it does not exist. But that's not what you've done. And so now you're in this position to decide, okay, well, how do I get back in? The only thing that I want to say to this is because time is on your side, in all likelihood, it will not matter what strategy you employ to get back into the market, because 30 years is such a long time to have those dollars working. But we are also emotional creatures. So sometimes, even though the math might suggest one thing, there might be a behavioral aspect that we have to factor into the equation.

[Brian Preston]

Well, that's what I will tell you. My gut reaction, because this was pre tax, I'm going to take it him as his word that he's a financial mutant, knows what the term pre tax is. He made this mistake. Now you come back a few weeks later and all of a sudden the market, everything is, you got a 10% off coupon. So if that's the case, there's a part of me that's just like, man, the money was working. And this Money is for 30 years in the future, put it back to work. As fast as possible because we know markets make money 8 out of 10 years. You just got a 10% off coupon. Now if you are more concerned because you're an emotional person and you made this inadvertent mistake because of behavioral issues or concerns or fe, then okay, we can ease you back into this, but it's going to have to and that's where BO I always like to talk about we have a Goldilocks rule for dollar cost averaging. Can you explain what that means?

[Bo Hanson]

Yeah. Essentially what we have laid out for you is that depending on the size of the lump sum you're putting into the market will dictate how long you should consider easing it into the market. And here's the way the rule generally works. If the amount that you're going to invest is less than 10% of your total investment portfolio, we think there's a really high chance that you ought to just lump sum invest. That is fairly inconsequential to your total wealth building journey. So just invest that all at once. If the lump sum is between 10 to 20% of your liquid portfolio, maybe ease it in four purchases over four months, between 20 and 30%, maybe six months, 30 to 40% eight months, 40 to 50% 10 months. And if what you're investing is greater than 50% of your entire liquid net worth, then perhaps it does make sense to ease that in over the course of 12 months. If you're more concerned about the behavioral aspect of oh no, what if I do this today and tomorrow the market tanks? Is it going to cause me to freak out and make another bad decision again?

[Brian Preston]

And then I have I'm going to give you a bonus just in case this thing hits bear market status. If the market does get bear market status, meaning that we lose 20%, then every time we cross over another 5% loss, you can accelerate a month early. That's a dynamic dollar cost averaging strategy because we know this statistically. Once you get into Bear Market Status 12 months, 24 months in the future, especially retirement money, that you have all this ability to watch it grow and compound over time, that's a strategy that gives you the best of all worlds.

[Creative Director Rabe]

Fantastic. Mike J. Great question. Thank you for asking it. Trevor M has a question next for you guys. He says, my fiance and I are struggling with if we should get a prenup or not. She makes about double what I make but has no invested assets yet. I have 70k in invested assets but make much less. We are both 29 thoughts on this is a tricky question Right.

[Brian Preston]

It reminds me. And I'm going to screw this up because I'm the old one who. My kids are older, so I don't do the fables and all that stuff. But what is it like the. The person, she gives up her mirror and he gives up. You know, it's like this couple.

[Creative Director Rabe]

Oh, I know what you're talking about.

[Brian Preston]

It's that fable where they give up the opposite. You know, they give up their favorite thing for somebody they love, and then they find out that they both did it and it doesn't really fit, but it's just. They're the opposites. Here is that you got one that makes a great income. Do you see what I'm saying? You got one that makes a great income. This is. I've screwed it all up. But here, let me get to the point.

[Bo Hanson]

I'm excited to see it later.

[Brian Preston]

Beau will save this. She makes a great income. He saved. He has money from some source. That is a strange dynamic. And that's probably. I'll let Bo do the hard, heavy lift here. But some of this is relationship stuff, too.

[Bo Hanson]

Yeah. So when do we most often see prenuptial agreements used? It's when two people come into a marriage, and one or the other, maybe both have substantial assets that they have accumulated and accrued pre marriage. And they just want to make sure that what they brought into the marriage kind of stays separate so that if something were to not work out and it were to dissolve, that those assets would be protected. That generally has to do with assets that you've built up, not future building or future earning potential.

[Brian Preston]

Income doesn't typically. That's not prenup territory.

[Bo Hanson]

Yeah. Even though she makes double what you make once you guys get married and you begin building assets jointly and you begin saving together and working towards common goals, that's all kind of like household property. That's likely all going to be joint property. All the wealth that you guys create. So income and future income is less of a consideration over assets. Now, you said, hey, I'm bringing to this equation $70,000 of assets, and she has not yet built those up. Well, 29, I don't want to discount this. $70,000 is a lot of money if you put it. If you go to moneyguy.com resources, check on a wealth multiplier, dump $70,000 into that at age 29 and see what it can turn into. It's huge, it's significant, it's substantial based on what it can grow into. But as it stands right now, today I would not argue that that's like a huge sum of money necessarily to be bringing into the marriage. And so I. When I look at your situation, whether or not to have a prenuptial agreement, the finances and the mathematics in my mind don't play in as much as the relational aspect. Where do you both feel comfortable? I don't know that this is one where I look at this and see a slam dunk and say, yeah, this absolutely makes sense. It's more, ah. I would ask the question why. Why are you having the conversation? What is it that you are both nervous about? And perhaps let's deal with that nervous thing first before we think about putting the legal agreement in place that maybe is only addressing a symptom and not the root cause of the issue.

[Brian Preston]

You're being nice. I'm just going to put it out there. This is my opinion. I don't see a prenup issue here. I see, I see. I know. But here's what you're. Here's what you're not saying. That needs to be said because this works both ways. I don't care who makes the money. Whether, you know, in the dynamic of a relationship, money is nothing more than a tool.

[Bo Hanson]

That's right.

[Brian Preston]

But I have seen this, and it drives me crazy, and I talk about this on the show, is that you will find in a marriage, if this is going to be a lifetime marriage, I've been married close to 30 years. One of your careers is going to do something the others doesn't. And if you are, if everybody's keeping score based upon what they earn, there's power to that. And do you see how you're using this tool of money as a blunt instrument in the relationship? That's not a healthy thing. Because how does that. I've seen that dynamic work in multiple ways, and I've tried to counsel friends, neighbors. Is because when I see when you're holding the purse strings because you make the money and you're separating everything and you're making your spouse come to you for every dollar, that's not healthy. I mean, it's just not. It's mine. And I don't like that. That might be different than what a lot of people think in this new modern world, but I just don't think to becoming one that that is a healthy thing. I've tried to do everything in my power to take the power of who earns the money out of our relationship so that our dynamic stays healthy. And I worry this might be a deeper conversation that Needs to be had is why is a prenup needed for either one of you even considering it? Because earning potential shouldn't do it. That's going to become marital property just because it was earned during the marriage. Your assets. Yeah, it's decent. Now, look, I bet a bunch of.

[Bo Hanson]

It's retirement assets, bro.

[Brian Preston]

I mean, it's probably retirement. Now, look, if it's inherited property, there are some legal protections as well as money you're bringing in the marriage. But, I mean, that's something. Y'all need to have a conversation because power should not. Money as a tool should not be a blunt instrument of power in a healthy relationship.

[Creative Director Rabe]

That was really good thoughts, and I kind of agree. Like, it's more about looking forward to your financial goals that you want to do together and not, like, looking back like, well, I saved this much or I make this much. It's like, what's coming next is the ideal thing you should be thinking about. So good thoughts, you guys. All right.

[Bo Hanson]

Hey, I had a good thought.

[Creative Director Rabe]

Yes.

[Bo Hanson]

If you've not subscribed to the channel, make sure you subscribe, because that's the only way that you're gonna stay up to date on all the brand new information we're putting out. Like Making a Millionaire Mondays or mini show Wednesdays or Full Form Fridays. I just coined all those. Did you like that? That's pretty good.

[Brian Preston]

Fridays.

[Bo Hanson]

Full Form Fridays. That's like the full workshop, right? That's a good one.

[Brian Preston]

Full Form Friday.

[Bo Hanson]

Isn't that like a good. That's. Y'all can't see this, but everyone out in the wing is nodding like, yeah, that's good stuff. We should put this guy on the marketing team. Brian doesn't say that, but everyone else is saying that. So if you've not subscribed, make sure you subscribe right now so you stay up to date on all of our new content.

[Brian Preston]

Full form.

[Bo Hanson]

What would you call Fridays?

[Brian Preston]

Flex Friday.

[Creative Director Rabe]

You're both fired. Leave it to the market.

[Brian Preston]

Flexing that mental. That mental muscle of learning more about money.

[Bo Hanson]

Here's what I like about you, Brian. You could have just left me there, squandering on my own, just flailing in the water like, you know what? I'm gonna jump in and flail with him. Thank you.

[Creative Director Rabe]

Full form was so nice.

[Brian Preston]

Oh, fff. Oh, Full Form Friday.

[Creative Director Rabe]

We do have some incredible full episodes that come out F cubed.

[Brian Preston]

In case you didn't, it's just called F cubed. Welcome to F cubed Friday.

[Creative Director Rabe]

Yeah, we'll keep working on it. By the way, it's a short story called the Gift of the Magi that you were thinking of.

[Brian Preston]

Thank you.

[Creative Director Rabe]

Written a long time ago.

[Brian Preston]

Can you give a little detail? Because I obviously screwed it all up.

[Creative Director Rabe]

Basically, like, the premise is like, she has really beautiful hair. So he let. And he has a really nice watch. And she cuts her hair and sells it to buy him a watch chain. And then he.

[Bo Hanson]

I've heard this.

[Creative Director Rabe]

Yeah, right. Like it was ringing a bell. And then she. He sells the watch to get her a comb. And then like it's. It's ironic because like.

[Bo Hanson]

So there was no mirror in this story at all. No, but.

[Brian Preston]

No, I mean, but that is the story. But this is what I would ask. The gift of maybe this couple as part of their relationship and communication. Go read Gift of the Magi because I want to book.

[Bo Hanson]

Or is it like a fable? Okay.

[Creative Director Rabe]

Yeah. It is written in 1905, like very, very old.

[Brian Preston]

Yeah. But don't get in a relationship if you can't be selfless. I think everybody should understand that. You, we all hope the relationships are 50. 50, but you ought to go into the relationship thinking it's going to be 80, 20, meaning you're going to give 80%. And if both of you do that, you'll be incredibly happy.

[Creative Director Rabe]

I didn't want to leave you hanging. I was like, there is a real story. I thought it was a good exclamation point. So there you go.

[Bo Hanson]

Away from F cubed. I know. I bring it back.

[Creative Director Rabe]

All right, let's move on to Hunter M's question. It says, My fiance, 26, and I, 23, both work for General Motors and just recently got our profit sharing check.

[Brian Preston]

Nice.

[Creative Director Rabe]

What should we do with the money? It's $21,000 when we are already hitting the 25% investment rate.

[Brian Preston]

Yeah, but profit sharing is going to be in their retirement account. Or is this. Or is this a bonus?

[Bo Hanson]

I think this means a bonus. Yeah. So it sounds like they call that profit sharing.

[Creative Director Rabe]

$21,000 of cash.

[Bo Hanson]

I wouldn't go on a limb. And Hunter, I'm just thinking back to when I was 26 or 23 years old. And if I would have come into a $21,000 check, I would have been like, oh, my goodness, that would have been life changing money back then. And I'm going to assume for you at 26 and 23, this is a substantial sum now. You just said one thing I think that was really, really interesting. You said, hey, I'm already hitting my 25%. Here's my question for you, when you calculate your 25% savings rate that you're doing, did you factor in that $21,000 bonus or was your 25% savings just on your base salary, the base income that you have coming in? Because I would argue if it's only on the base salary, that's great. But when you factor in your total income, base salary, plus this bonus, you have not yet saved 25% of your gross income. You still have more to do. And mathematically the way that work out is at least 21% of that $21,000 should be saved so that you could continue saving 25% of the gross. Now then the question becomes Brian. Well, what do I do with it once I get it?

[Brian Preston]

It's almost like this stuff writes itself. The financial order of operations. Hang on, let me give it to all my people. ASMR people.

[Bo Hanson]

So I see, I see, I see a future for them.

[Brian Preston]

So, so, so here's the thing.

[Creative Director Rabe]

Financial doesn't work out.

[Brian Preston]

I love, I love. Cause you're already paying some respect to the financial order of operations because I didn't hear anything about high interest debt or anything. You've already hit 25%. So this is like step six type stuff. And you're 26 and 23. Wowzer.

[Bo Hanson]

It's huge.

[Brian Preston]

So you get to step seven because hyper accumulation is why it's called means that we're going beyond the 25% or at least considering what we need to do. You need to ask yourself what is the why and what's the purpose of this money in the long term? Because there's a part of you that it's probably you're trying to figure out, can I go to step eight? And that's where we either expand a lifestyle or do other things. You first need to ask yourself, what's the. What do you go do with your money? Are you retiring early? And then the other thing I always think about, for 26 and 23 year olds, you're just so new to the process that you just haven't had enough time more than likely because I don't think they shared their numbers yet on what they have in investment assets. You're just not at a critical mass point. So y'all just need to have a conversation as a couple and say, look, why don't we do something that gives us even a go look at our wealth Multiplier? Go to moneyguy.com resources, figure out as a communication tool, is there a portion of this that we can accelerate building up that critical mass even faster and maybe even reach some of those. Think about how we're going to use this money in the long term over the decades, then figure out, okay, well, maybe there's a healthy balance here. Maybe we're going to put half of this to work to 60% of this to work, because this would be a huge head start. Maybe a portion of this can be to go splurge, do a vacation, you know, because that's what I love. I love kind of a little bit of both, you know, a little bit. Because then you do those vacation, have those memories, because I didn't hear anything about kids either. So let's go, you know, let's go make some memories as well as build a head start on even more years in the future.

[Bo Hanson]

So I'm hearing you. At a minimum, you got to make sure that if once you factor in Your total comp, 25% is what you're saving. But above and beyond that, you kind of get to pick and choose. Do I want this to be used for future purposes, future goals that we have, or are we on a good pace, Are we on a good path? Or we can use some of this just for now to enjoy the present?

[Brian Preston]

Well, and I want to bring in a little. This is where I coach is, because I've lived a life where come into a marriage. My wife and I, when we both got married, neither one of us, like, our idea of traveling was like our parents loading us up, going down to Panama City.

[Bo Hanson]

Yeah, buddy.

[Brian Preston]

And loading every. The entire family in one room. Kids slept in the closet, you know, in sleeping bags. And, you know, and so you do it. So when we got married, we hadn't done anything. Everything was nice. I remember we went to Cancun, Mexico, on our honeymoon, and the place was not that great, but looking back on it, but for us, I was like, what?

[Bo Hanson]

You got to be kidding me.

[Brian Preston]

They give you this, that. So it took very little to peak my happiness factor. And I would encourage you and your spouse talk about it and y'all figure out if there's some little thing, because I think always think about, like, lottery winners. Lottery winners. Their problem with their relationship with money and happiness is they try to do everything all at once. And that is a failure for understanding how the hedonic treadmill and happiness and dopamine and all the other good things that happen when you. You feel this rush of, man, we're doing. We're doing something together. So that's why I think you could probably take inventory in your relationship. Do Something special that creates a memory. But then also make sure that this, this has potential to have fingerprints for many years to come in your financial success.

[Bo Hanson]

Love it.

[Creative Director Rabe]

Awesome. All right, we've got a question from Tyler Koenigt. This, this is an interesting one. He says, any advice for an 18 year old that pays their parents? I pay my mom about 20k a year, which is 1667 per month for rent. So it's hard to save for college.

[Brian Preston]

Man, how noble man this Bo you were. I want to give you a compliment and set the table for you.

[Bo Hanson]

Okay.

[Brian Preston]

Bo, when he started working for me, 20 years of age, by the way, made it through college. 20 years of age was literally making money, more money I think, in college than it was when I offered him because he was on. He had so many scholarships. Tyler, obviously tough situation if you're, if you're having to pay your mom rent. I mean, I think this is so noble that you sounds like you got a rough situation, but yet somehow you are this unique individual that's able to go out and make money already at such a young age. That the reason I make the correlation of O is that it just sets you up that you obviously are a dynamic person that seems like you have a lot of things going for you. And I think it's great that you're also using that talent and that blessing to try to pay help your mother out who might be struggling with stuff. Bo, you, since you resemble a lot of this because you came from a tough, humble beginning, but then you always seemed like you just were able to make things happen. What would you share with Todd?

[Bo Hanson]

Yeah, it's interesting because here's what I don't know. I don't know the familial dynamic here and I want to be sensitive to that. So I'm going to speak sort of just in absolute terms, kind of removing the family relations out of the equation. Because one, I think it's remarkable that you are 18 years old and you make enough money to be able to pay $20,000 a year in rent like that in and of itself is pretty impressive. But you've also said, hey, because I'm paying this rent, it's going to be really hard for me to be able to pay for college because it sounds like the burden of that is going to fall on your shoulders as well. So what are some things I can do now? Again, this is where I want to be sensitive to the familial relationship and I want to kind of like, I don't know, the unique circumstances there but when I Hear about an 18 year old paying $1,667 of rent every month, where my mind immediately went was, man, that's pretty expensive rent. Like, that's a pretty expensive number. And so one of the things that I would try to think through.

[Brian Preston]

Go negotiate with mom.

[Bo Hanson]

Well, so one might be negotiate with mom. Hey, is there some way to like negotiate on this rental amount or two, if you are, let's assume that you're 18 and independent and sort of on your own or whatever. There might be other circumstances where you could provide shelter and housing for yourself that would be less expensive than $1,600. You might be able to go rent an apartment for $1,000 a month, or you could go rent somewhere and have a roommate and split cost or something like that. Again, I don't know the familial circumstance, but when I see that so much of your money is going to rent without knowing your income, I immediately think, okay, does this $20,000 you're paying in rent represent more than 25% of your gross income? Because that's generally our rule on housing. You don't want housing to cost you more than 25%. If that's the case, is there a way that I can get my housing costs down? So now let's pause there. Let's assume the answer is, no, I can't do any of that stuff. I gotta pay mom, I gotta stay in the house, gotta do all this. Well, then what I'll do for college, it sounds like if you don't have any money to save for college, and you still have a desire to go to college, odds are you're probably gonna have to borrow money to go to college. So I would think about what are the least expensive ways that I can get my secondary education instead of going to, like, the large state public school, Are there ways I could begin taking classes right now at the local community college, begin knocking out some of my core classes?

[Brian Preston]

Dual enrollment.

[Bo Hanson]

Doing dual enrollment. Are there solutions in place now that I could begin to satisfy my higher education requirement at a lower price point? And then if it does get to the point that ultimately I have to take out loans, want to keep my footprint? Absolutely. As small as possible. And I don't want all of the student loan debt that I accumulate between now and the time that I leave college to be more than what I anticipate my first year salary being. So if I think I'm going to go get a degree in a vocation that's going to allow me to make $50,000 a year, I want to make sure that my total student loan debt does not exceed $50,000 for whatever I have to take out. So if you only have to accumulate 10, 15, $20,000 of debt, and that's something you have to do in order to be able to graduate, you're gonna find that once you get into the working world, that's gonna be much better than graduating saying, oh, I had this blank check. I have $80,000 of college debt. Now I gotta go pay on that for the next 10, 15, 20 years. That's a hard one. What did I say there that you like and what I said that you don't?

[Brian Preston]

Well, I wanted to add just a few life tips here because, I mean, sometimes when you. I'm just assuming based upon paying rent to your. When you're that young, that this is a humble beginning situation. And I remember humble beginning for me was I didn't understand how scholarships worked. I didn't know how. And I always look back and I go, man, I didn't. Like, I took the SAT like, once. You know, look, I was really good at math. And you would wonder if I was even literate like you probably do watching the show on the other side. So I'm lucky I got into the University of Georgia. Fortunately, it was a lot easier to get into back then. But what I have now, having resources, I realize how powerful it is for young people to go take an ACT or an SAT prep. Do you realize how colleges give so much weight on scholarship and grant scholarship money based upon those test scores? So don't sleep on the fact that you need to probably go take a prep course so you can get. Because if you pair a great test score with your humble beginnings and this life story, you probably will qualify for a lot of scholarships. And that would be a huge head start on not even having student loan. And then the other thing I was immediately thinking about is you. We hear this thing all the time, talk about failure to launch, where kids just never go out on their own. And this is the opposite of this situation is that you've got. I've got. I'm worried about failure to. Well, I mean. Well, because I'm just. If your mom is counting on you to provide this much money every year, now, maybe you're going to be. If you're a professional athlete and you can go buy mom a house and do the things that you typically see on the news headlines about, that's great. But if you're just going a traditional path that you're going to become a professional in something and you have to build. We need to start creating a process to where your mom's not counting on that rent. So that's healthy for you as well as for her to figure out where that transition point is. Because you have the opposite of a failure to launch standpoint is because if you're having to never be able to launch yourself because of having to cover family expenses, that that can be an unhealthy relationship as well.

[Creative Director Rabe]

Yep, really good thoughts for Tyler. Tyler, thank you for being willing to ask that question and get that conversation started and we hope that really helps.

[Bo Hanson]

The Money Guy show is hosted by Bryan Preston and Bo Hanson. Brian and Beau are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss.