HUGE Pay Cut for a New Career - Is it Worth It?

Summary

Money Guy Show Episode: HUGE Pay Cut for a New Career - Is it Worth It?
Hosts: Brian Preston and Bo Hanson
Release Date: March 5, 2025

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Introduction

In this compelling episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into a significant career dilemma: taking a substantial pay cut to pursue a new, more fulfilling career path. The episode not only addresses the financial implications of such a decision but also explores the emotional and lifestyle factors that come into play.

Listener Dilemma: Zach J.'s Big Decision [00:29]

The episode kicks off with a listener question from Zach J. He presents a scenario where he is considering a 40% pay cut to transition out of his current career field, which he no longer finds satisfying. At 34 years old with three dependents, Zach has a net worth of $1,000,000, with $700,000 in liquid assets. Despite his impressive financial standing, Zach is concerned about maintaining a tight budget and ensuring financial stability for his family.

Rivi introduces Zach's question:
“Should I take a drastic pay cut of about 40% to move out of my career field that I'm no longer interested in? Our family has a net worth of $1,000,000 and a liquid net worth of 700k. It would make a tight budget, though. I'm 34 with 3 dependents. What do you think about this moving to something maybe he's more passionate about? Would enjoy. But big pay cut in the messy middle. What should he be thinking about, man?” [01:21]

Analyzing the Financial and Emotional Factors [01:53 - 03:34]

Bo Hanson acknowledges the difficulty of Zach’s situation, especially with dependents to consider:
"First of all, 34 with three dependents. That's hard. Oh, that's hard." [01:53]

Brian Preston commends Zach's financial acumen:
"Did you see that net worth, $1,000,000? 700,000 of it's pretty liquid. That's awesome." [02:05]

Bo emphasizes the importance of evaluating both economic and lifestyle reasons for the career change:
"Is the reason you're making this decision because... Or is it because you recognize... what it's going to position me to do is take four, five, six, seven steps forward over the long term." [02:40]

Brian introduces the concept of 3D Planning, encouraging Zach to envision three scenarios:

1. Dream Scenario: Everything works out perfectly, leading to increased happiness and fulfillment.
2. Down-to-Earth Scenario: Short-term sacrifices lead to long-term benefits.
3. Do-Over Scenario: The new career doesn't meet expectations, prompting second thoughts.

Comprehensive Financial Planning [03:34 - 08:43]

Brian Preston elaborates on creating a detailed financial plan, emphasizing the need to forecast income and potential growth over the next five years:
"I would expect Zach to lay against or create his own five year trajectory of what his current income is and what it potentially could be in five to seven years and see where the intersection point was." [05:44]

Bo Hanson adds the necessity of aligning financial decisions with personal happiness:
"I think you have to measure both the art, the art and emotional piece of it, as well as the math and the science piece of it before you can decide if it's worth it or not." [03:34]

Key Takeaways:

• Economic Impact: Assess whether the pay cut can be sustained in the short term and whether it positions you for future financial gains.
• Lifestyle Improvement: Consider whether the new job offers a better quality of life, such as more family time or less stress.
• Long-Term Planning: Use financial projections to determine if the new career path will lead to significant growth and satisfaction over time.

Building a Financial Bridge [08:43 - 10:22]

Brian Preston emphasizes the importance of having a financial bridge to support the transition:
"Do the extra the next step is how long of a bridge is going to let you recover before you start hitting success." [08:55]

Bo Hanson underscores the necessity of family consensus in financial decisions:
"You also have to make sure that, you know, this isn't just a you decision. This is a family decision." [09:39]

Key Points:

• Bridge Financing: Ensure you have enough savings to cover the transition period until the new career becomes financially viable.
• Family Agreement: All household members should agree on the financial sacrifices and understand the long-term benefits.

Additional Listener Questions and Discussions

The episode also addresses several other listener questions, providing valuable insights into various financial scenarios:

1. Factoring in Pensions for Retirement [10:35 - 14:23]

Listener: Revy N.
“How should I factor in my pension to my retirement percentage?” [10:35]

Discussion Points:

• Pensions as Promises: Pensions should be considered as part of cash flow in retirement planning rather than static assets.
• Pension Benefit Guarantee Corporation: Ensure pensions are protected and understand their reliability.
• Supplementary Savings: Continue saving through options like Roth IRAs and HSAs to enhance financial security.

2. Balancing Saving for a House and Roth IRA [14:58 - 21:12]

Listener: JW116
“I’m balancing saving for a house and taking advantage of the Roth IRA. How should I prioritize?” [14:58]

Discussion Points:

• First-Time Home Purchase: It’s acceptable to put down less than 20% if managed well.
• Budgeting: Keep housing costs within 25% of gross income and avoid lifestyle creep.
• Discipline in Buying: Stick to financial plans to prevent overspending on home purchases.

3. Saving for a Child’s Future [36:03 - 51:28]

Listener: Marcus P.
“Where should I be saving and investing for my adopted child's future?” [36:03]

Discussion Points:

• Financial Stability: Prioritize overall household financial health before specific savings for the child.
• Savings Vehicles: Consider UTMA accounts and 529 plans for education savings.
• Family Consensus: Ensure the financial strategy aligns with family goals and stability.

4. Managing Emergency Funds During Unemployment [51:30 - 57:46]

Listener: Adam C.
“How low can my emergency account get before I have to make tough decisions like selling my house?” [51:31]

Discussion Points:

• Emergency Buffer: Maintain a sufficient buffer to avoid desperate financial decisions.
• Immediate Actions: Make tough, but smaller, financial cuts early to preserve long-term assets.
• Timeline for Decisions: Create a structured plan for when to implement larger changes based on financial recovery.

Insightful Banter and Real-Life Examples [25:04 - 38:34]

Throughout the episode, Brian and Bo engage in light-hearted conversations and share personal anecdotes, such as the story behind their custom koozies. These segments add a relatable and entertaining dimension to the financial discussions, illustrating the hosts' approachable and down-to-earth style.

Notable Quote:
"Our team did such a good job with this koozie that it cost more than a dollar. And I was kind of like, we couldn't have. But that's good because the first ones." - Brian Preston [29:40]

Conclusion and Final Thoughts [57:46 - 57:46]

As the episode wraps up, Brian and Bo reiterate the importance of balancing financial strategies with personal well-being. They encourage listeners to utilize the resources available on moneyguy.com for further financial planning and to maintain financial confidence.

Brian Preston:
"We have this whole abundance philosophy, but we also know that there's so much more to wealth and money beyond just the dollars and the bills. And that's why we've tried to balance that and give you guys all the tools so that you can be good with money, both from the financial standpoint and the math and numbers, but also so you live your best financial life." [57:46]

Key Takeaways:

• Comprehensive Evaluation: Assess both financial and emotional aspects before making significant career changes.
• Strategic Planning: Use financial projections and emergency funds to support major life decisions.
• Family Involvement: Ensure that all family members understand and agree with financial decisions.
• Continuous Learning: Utilize available resources and stay disciplined in financial planning to achieve long-term goals.

For more insights and financial strategies, visit moneyguy.com and subscribe to the Money Guy Show for future episodes.

Transcript

[Brian Preston]

I'm ready for my life to change.

[Bo Hanson]

Abc Sunday, American Idol returns. Give it your all.

[Brian Preston]

Good luck. Come out with a golden ticket.

[Bo Hanson]

Let's hear it.

[Brian Preston]

This is immense world. I've never seen anything like it.

[Bo Hanson]

And a new chapter begins. You're going to Hollywood. Carrie Underwood joins Lionel Richie, Luke Bryant and Ryan Seacrest on American idol. Season premieres Sunday, 8, 7 Central on ABC and stream on Hulu.

[Brian Preston]

Here's the dilemma. Huge pay cut for a new job. Is it worth it?

[Bo Hanson]

Brian, I am so excited about this because sometimes in life we have to make decisions. We don't know exactly what the right decision is. Should I do A or should I do B? And I love that we get to step in and we can speak into that space around how to think about making financial decisions in your life. As a matter of fact, we love it so much that we like answering your questions Every Tuesday at 10am Central right here on the Money Guy show. That's why we have our team out in the wings right now collecting your questions. So if you have a question you want us to weigh in on, you want something? You want. You have something you want us to speak into? Make sure you get that in the chat right now. And with that creative director Rivi, I'm gonna throw it over to you.

[Rivi]

Yep. We're gonna kick it off with Zach J's question. He says, should I take a drastic pay cut of about 40% to move out of my career field that I'm no longer interested in? Our family has a net worth of $1,000,000 and a liquid net worth of 700k. It would make a tight budget, though. I'm 34 with 3 dependents. What do you think about this moving to something maybe he's more passionate about? Would enjoy. But big pay cut in the messy middle. What should he be thinking about, man?

[Bo Hanson]

First of all, 34 with three dependents. That's hard. Oh, that's hard.

[Brian Preston]

That's hard. But I was impressed with. Did you see that net worth, $1,000,000? 700,000 of it's pretty liquid. That's awesome.

[Bo Hanson]

Yeah. So you've obviously done an incredibly, incredibly well thus far, building wealth on your financial journey. And now you're at this place where, all right, do I take a huge pay cut for a different job for a different opportunity? And my answer is going to be, well, it depends. It depends on what's on the other side of the decision that you're making. Is the reason you're making this decision because. Oh, I just kind of don't Love my job and oh, it's not my favorite thing and I think this other thing will be better. Or is it because you recognize, man, if I take this one step, two step, three steps back and take this new job, what it's going to position me to do is take four, five, six, seven steps forward over the long term. Because there's really two things to weigh here. There's the economic impact of this decision. Can I take this pay cut to ultimately get back to where I am and hopefully even move upon beyond that. That would be the economic, the economic reason to do that. But there is also a lifestyle reason. Is this job I'm in something I hate, something that keeps me away from my family, something that I just cannot see myself doing? And changing jobs would allow me to have a better experience of life and I understand the cost and the sacrifice associated with that, and I'm willing to do that. So I think you have to measure both the art, the art and emotional piece of it, as well as the math and the science piece of it before you can decide if it's worth it or not.

[Brian Preston]

Well, I think about, you know, part of, I think the things you pick on fire about is that you like why somebody who has a talent and can make a good income, leave the workforce so early versus if you could go actually find something that you love and have a passion for and do it for the rest of your life, potentially retire. But you work kind of out of choice, not because you have to. So here's. Let me bring it to Zach. Zach, you've come to the right place. We are your warm and fuzzies, plus we're your nerdy that are going to hopefully load you up with the analytics. I would have to immediately. I want to kind of create that intersection of the quantitative and the qualitative stuff that Bo was talking about is first you have to put on your 3D glasses. You've got to create a plan for all three of the scenarios you think that could happen. And let me tell you what you need to build into this plan. And by the way, if you don't know what 3D glasses is, this is your plan where you go do the daydream. This is the dream of. Holy cow, things have worked out beautifully. The guys will right now wake up every morning with a little extra pep in my step because I am doing what I was put on this planet to do. The down to earth plan is, man, I'm going to make this because I think for the long term, this is going to be Better. But man, oh man, there's going to be a lot of sacrifice in the short term that lines it up. And then the do do plan is you make the step, you walk away from a career that really put you on easy street. Now here you are and maybe this opportunity wasn't everything you thought it was going to be and you're really wishing you to measure twice before you put pull the trigger on this. So let's kind of jump into each of these. First thing you kind of need to do when you're running these different scenarios is you need to create the timeline for both recovery and what is success. Because like I'll tell you, we right now we have a case where we've made an offer for, for a new job for someone and, and we found out where it was kind of surprising what a pay cut it would be for this person to take the job. But we know and one of the things we do when we offer in this particular role is we show what the 5 year path is from a career and earnings potential.

[Bo Hanson]

Realistically, this is what you could expect.

[Brian Preston]

I would expect Zach to lay against or create his own five year trajectory of what his current income is and what it potentially could be in five to seven years and see where the intersection point was. Now if there's never an intersection point, maybe your current career because we've seen doctors and attorneys who are making great livings but absolutely, absolutely wake up with dread to go do that job. If you're never going to have the intersection where the economics becomes a win, you then have to do some soul searching and figure out if the happiness factor of. Because money is only a tool. Look how empty is it if you stay doing something you absolutely hate for the next 10, 15 years just so you can have money that feels empty as well. But you at least got to do the exercise where if there's any potential for there to be a crisscross, meaning that the new endeavor that you took the pay cut for actually eclipses the old one. That as you can imagine if that's the case, that would be a win because I think there's a lot of jobs and look, this is. Can I say the names of the company? There's a big Fortune 500 company that pays really well but you might only get cost of living adjustments for every year get you in the door. But then once you're in the door you kind of expect cost of living increases. Whereas sometimes with upstarts, yes, they don't pay what these big Fortune 500 companies, but if you're picking up 15%, 20%, you're picking up big pay raises, there potentially could be a crossover point. And then, you know, I kind of laid out doing the math, finding the intersection point. And then at the end of the day, you have to ask yourself, what's your why now? One of the things I think is interesting here is you admitted you have a spouse. It sounds like independence. Children, I'm assuming those are all together lumped into that number. You've got to look at the enterprise value to make sure you're not making a decision that feels good in the short term but jeopardizes what you've built. I would, you know, all those need to be. Because sometimes we go through seasons. And that's the other question I'd ask myself. Is this a season or is this just the way it is? And if you're in a career that you absolutely chew your fingernails on Sunday and you hate going to work, that's not a season, that's just the way it is. And you have to put that into your equation. But if you figure out this is a season, maybe it's because there's stress at the house or there's, you know, you've got a boss or a project that's coming up that's just going to wear you out. Take that into account, too. I feel like I went all over, but I was trying to put the analytics in of doing the 3D glasses, but also really giving some, some nurturing to the, to the soul so that you can hopefully balance those two decisions and let that, that qualitative and quantitative kind of work together.

[Bo Hanson]

That's great.

[Rivi]

Love it. Zach J. Thank you for the question. I hope that helps. This is a big decision and, you know, we hope we can shed some light on some things that you should consider.

[Brian Preston]

I have one more thing.

[Rivi]

Yes?

[Brian Preston]

Because I skipped one of my third thing I wrote down. Do you have the bridge?

[Bo Hanson]

Rewind it. Rewind, Josh.

[Brian Preston]

Let's get it. Well, do you have the bridge? Because like I did this, the no hypocrite policy is I left a great paying job, a six figure job, to start my first company. But it took me a year and a half to two years to build the bridge of cash to give me the best chance of success. So. And I would tell Zach, since he's sitting in a moment of success right now, don't. Just because you find the answer to the equation and you do all this and you're like, yeah, it seems like I should jump now. Do the extra the next step is how long of a bridge is going to let you recover before you start hitting success. And if you don't have enough cash reserves, maybe you need to beef up or figure out how you're going to cover that time before you make the jump.

[Bo Hanson]

Since you tack something on, I will, too. You also have to make sure that, you know, this isn't just a you decision. This is a family decision. Because it is easy for our lifestyles to creep up, it is much more difficult for our lifestyles to wind down. And if you are taking this big pay cut, there's a big chance that your spouse and your kids, there are going to be some sacrifices that have to be made by everybody, by all parties, and you need to make sure that everyone is on the same page and comfortable. Because what you don't want to do is take this 40% pay cut, continue to live at the same standard of living that you were doing, and now all of a sudden, you're burning through savings, you're running up credit card debt and that kind of stuff, because we see that happen, and it happens quicker than you realize if everybody in the household's not on the same page.

[Rivi]

Yep. So true. Yeah. Are you willing to look at each other and be like, oh, yep, we're not gonna take that vacation. Like, you have to both be on the same page for sure. All right, good additions. Are you ready for the next question?

[Bo Hanson]

Yes, ma'am.

[Rivi]

All right, Revy N is up next. It says, how should I factor in my pension to my retirement percentage? I contribute a percentage, and so does my employer, but my actual pension payout will be based on the number of years employed and the five highest years of salary. What do you think, Brian?

[Bo Hanson]

This is not an uncommon question that we get. How do you factor. And I think you even. You wrote. Did you write about this in Mission?

[Brian Preston]

A little bit.

[Bo Hanson]

Talking about.

[Brian Preston]

There's definitely some. Some understanding what is net worth versus income statement. And pensions are promises. So that's why they don't make it on your net worth statement unless they actually offer you money at the end of each year as a lump sum. But even then, I think the way I would encourage people to think about this is from the cash flow promise perspective. And that's why what's really powerful as you get closer to retirement is knowing what your living expenses are going to be when you go into retirement. And then you use those pension promises to back away from that number to get kind of a net. What money you will be needing from your portfolio. And Other sources of cash flow, whether it's Social Security and so forth. That's why I don't typically, unless there's a lump sum offer, I don't even put pensions on the net worth statement because they're more promises than they are assets in some aspects.

[Bo Hanson]

What about when you're thinking about how to save? Right. So he says, I put some money in and my employer puts some money in, but it's going into this pension. Does that count against the 25% savings rate or how does he think about that from a retirement building standpoint?

[Brian Preston]

I do think it could if it's lucrative. But also, man, it's going to create some homework because first of all, make sure it's covered by the Pension Benefit Guarantee Corporation. That's a pretty most pensions. A lot of pensions are. But you just at least need to go out, ask the question and then you need to compare your benefits to what that protection is because you don't want to have like we saw with Delta employees a few decades ago, where everybody's counting on getting pensions of like 150 to $180,000 a year. And then Delta decides, you know what, we have a big obligation that we can't afford to pay. And all of a sudden all these pilots realize, oh my gosh, I'm not going to have that 150, $180,000 a year. It's going to be something much, much smaller or there' that's going to come out of this is much, much smaller. So that's why you have to figure out how close you are to the protected level to even consider out if that's reasonable. Assuming if you check those boxes and it's a reasonable pension that you'll receive that's well within the Pension Benefit Guarantee Corporation protections, then yeah, I think you can count that as part of your savings rate. But it doesn't mean that you like if you're putting in 5 and your employer's putting in 10, because these pensions, sometimes they are funded like that. I still would strongly encourage you to try to find another 15 to 20% of your own savings saving into the Roth IRA, basically following the financial order of operations so that you're making sure you're having money build up outside of that pension plan.

[Bo Hanson]

Yeah, the worst outcome that happens is you end up saving 25% of your gross income and you give yourself more flexibility, more options earlier on a lot of pensions, you cannot begin taking them until you reach a certain age or certain stage. Well, you may decide, okay, I know I've got that money there. But I really want something to have in the interim. I want to have some sort of bridge. I want to be able to do something different sooner than I would be able to otherwise. So if you can do it without sacrificing too much presently today, and without letting today's life pass you by, if you can get to 25% savings rate or near that, even with funding a pension, odds are you're gonna get to choose what your financial life looks like much, much sooner.

[Rivi]

Revi n, thanks for being here. Thanks for your question. JW116 has a question for you guys. It says male 27 and female 28 with 3 kids. So that's their situation. One income making 4.6k a month. I just finished step 4 of the Foo and I'm maxing out my HSA. How do we balance saving for a house and taking advantage of the Roth ira? Thanks for all you do. Good question. Where does that house come in to the Foo?

[Brian Preston]

Bo? I just want to have one little. First of all, jw, kudos to you, Bowie. Clearly messy middle.

[Bo Hanson]

Oh yeah.

[Brian Preston]

I mean everything here, full, full embracing of the messy middle where he's short on time, short on money. But I want to give JW a prop. Shout out that this is the time after you funded step four, your emergency reserves is the time you start figuring out how does housing and cars, you know, if the home purchase and car purchases and those things. You've got to have a good emergency fund before you even start making those life decisions.

[Bo Hanson]

Yeah. I think what you have to do, jw, is you and your spouse have to sit down and you have to figure out, okay, what are our goals? What are our life goals? I mean, obviously we want to be financially independent, we want to retire one day. But we also have this family. It says, I think was there three kids, young family, young kids. And we'd like to have a home, we'd like to have a place where we can call our own, we can begin to raise our family. And I just want to like pause for a moment for first time home buyers. It's still hard out there. Yeah, it is a difficult market. Home prices have gone up. I mean they're not rising quite as rapidly as they were, but they're still expensive. Interest rates have come down a touch, but they're still high. It is really, really hard to get into a home right now. And I just want you to recognize that. We recognize that. We know that home owners perhaps is more difficult today than it has been in the past. But we do have some rules and some guidance that we would give you when it comes time to buy a home. If you go out to our website, moneyguy.com resources, we have a whole home buying checklist of some questions that you can ask yourself to make sure this is the right time and you're approaching this the right way. Another thing that we do is when you do think about, okay, how do we savor this, how do we prioritize? A lot of folks out there will tell you that when you buy a house you have to put 20% down as a down payment so that you can avoid pmi. And while it is true, it's great to avoid PMI if you can. For a lot of people putting 20% down is just unrealistic. For most of the folks here that work at our firm, they did not put 20% down in the first house. So we believe that for a first time home purchase, it's okay if you can only put 3.5% down or 5% down so long as the monthly housing cost does not exceed 25% of your gross income. If you can put that down payment down and keep the housing parameter there, what it allows you to do is if you and your spouse sit down and say, man, okay, this is our focus. We want to get into a house, we want to save for down payment. We just got emergency fund funded. We're putting money, the hsa, okay, now we're going to start just plowing money away towards this household, towards this three and a half so that you can do that, get the down payment down, get in the house and immediately get back to the financial order of operations, funding your Roths and beginning to build wealth towards the future. I think the question that they have is where's the priority? How soon does this housing thing.

[Brian Preston]

That's the question because that's what I was going to ask is if this is something that's 12 to 18 months in the future, it's probably going to be an all hands on deck is that you're essentially pausing step five and going and dumping as much money into your step four to boost up emergency reserves. Because a portion of that's going to be earmarked for a down payment, the 3 to 5% on the house. But then if this is something that's three to five years in the future, then now you have a little different. You can essentially do both. You can set up a monthly amount that's going and boosting up cash reserves that's going to be used for the down payment. But then a portion of this could be going towards step five of the financial order of operations with Roth IRAs and HSAs. The big thing is, if it is, even if it's something that's 12 to 18 months, I just want you to get back on track as fast as possible. And that's why they're also discipline is going to come into play, is because I can go ahead and tell you it's a slippery slope when you start looking at housing is because it feels like for just a few hundred bucks more here, a few hundred bucks more there, you could get this, you could get that, and all of a sudden this thing starts spiraling out of control on what your purchase price is of the home. So be disciplined on what you're buying. I want you to get as much as you can, especially with three, you know, three kids in the house. You're going to, you know, it's not a tiny home you're probably looking for. You're trying to get a home that lets you everybody, you know, have the right space, but do it in a healthy way. Just make sure you're trying to balance that so you don't bite off too much. Because I don't want you to be house rich, life poor, because you got too much. But I also want you to be reasonable enough that you don't buy a house, that you're like, man, if we'd have just been a little wiser, maybe saved for an extra six months, maybe we could have gotten a house so we don't have to move seven years down the road. We could actually stay in this house for 15 years and really make some great memories and get back on track that much sooner.

[Bo Hanson]

I love how astute our financial mutant audience is. Chris in the chat said this. He said, bought in February 2023, put 10% down. PMI is only $38 a month. Don't let anyone tell you 20% is the only way is the only way. I love that because a lot of us, we get scared of something that's irrational. Oh, my gosh, I can't pay PMI. And here's Kris saying, yeah, it was an extra $40 a month, but because I was willing to do that, I was able to get into a house much sooner than I would have been able to otherwise.

[Brian Preston]

And also I think that, you know, there's a lot of research when you look at what like the Fed, when they release net worth value, majority of Americans, all their net worth is in their house. And I Do think that owning a house in the long term, especially if you're setting roots in the area and you're trying to raise a family, there's a lot of benefit to getting into that ownership side of things. Because not only does it allow you to set down roots in the neighborhood and the area, you're trying to grow up and make friends and family, there's also a capital appreciation over the long term. That kind of just happens behind the scenes. But don't force it. And that's why back to kind of bringing it full circle like Bo was talking about. Make sure you're going and looking at our checklist so that you know you have resources, you're protecting yourself from the emotions of because this is a big, big life decision. So make sure you go out to moneyguy.com resources to really just check yourself, but also know you have everything lined up.

[Rivi]

Love it.

[Bo Hanson]

Yeah, you guys, before you wreck yourself. I thought it was coming.

[Brian Preston]

You could add it. You can add it.

[Rivi]

So close. So close. Yeah, you guys. Jedi mind tricked me into not feeling like I had to put 20% down. I am forever grateful because I probably would not have a house. It's tough out there, and it's an imperfect journey to get there. Sometimes on your first purchase.

[Brian Preston]

I've been playing around with artificial intelligence, and I'll ask it all kind of questions. You know, use it for brainstorming.

[Bo Hanson]

He does.

[Brian Preston]

And no. It drives everybody right here crazy. Yeah, I know. It's kind of. But I feel like if you're not at least dabbling in it. I mean, it's the same reason when I played around with crypto for a. I was trying to. I like to educate myself because I'm curious. I just want to know how things work. And one of the things. I mean, this is why you do have to be careful with AI too. They're not smarter than us yet. Is that it made an assumption. I was asking about timing elements between investing, between lifestyle choices and all these other crazy things. And it was pretty positive that you should defer. When we talk about timing. It was trying to convince. It made this. This is why, you know, it's not connected to a human is like, yeah, it'd be so much smarter if you deferred getting married until you're 45. You know, because it was. It was. It was. It had taken. Because I was trying to show the value just like we do 88 times over, you know, value. And it went the wrong way. And I was like, look, if you wait on all These things you'll get outside of the appropriate years to be like, have a growing family. And I was like. And he's like, oh yeah, I guess that's a point. What? Also when it was trying to figure out, I was like, yeah, if you just put off buying a house for 12 years, you would have this much more in investments. I was like, yeah, but if we actually took into account the appreciation of that house because it was levered debt and it's like, oh yeah, you're right, that probably would be very valuable. And then it recalculated. Oh man. Maybe you should have bought the house at 30, not 45 like it was trying to set up in this scenario. All this to say is, is that there's a lot of value to owning things as soon as you possibly can. I'm talking about Roth IRAs have value. All these things are capital assets. Now you don't get to eat your house, unfortunately that's where I think a lot of Americans. But it doesn't mean it doesn't sit in some value on your net worth statement. So when you downsize later, it can turn into retirement assets. It's just that sometimes we don't have balance in our lives. But there is nothing wrong with trying to get on the ownership train sooner than later as long as you're paying respect to the money guy checklist on all the things. Because one of the first questions, are you going to be in this house for at least five to seven years?

[Rivi]

You are the only person I know that talks with AI like that. Like it's like a conversation like, well.

[Bo Hanson]

Let me tell you, let me try.

[Rivi]

To convince you this.

[Bo Hanson]

And most people, when they interact with AI, they're trying to like receive information. You're actually trying to convince them, no, it's your buddy and I love it, I'm here for it.

[Brian Preston]

Well, I'm just, I'm trying to test to see where the boundaries of how good this is. But I will tell you, one of the things I do like about what's going on with all these chat things and AI bots is that I've used it now instead of Google is because Google, I have to keep refining my query. If it gives me not a good answer, I have to then, okay, I have to rethink how I'm prompting things I like with at least AI, since it has the context from the conversation of what I was asking, I can correct it. I can say you're close, but you missed this, this and this. And then it typically gets closer to what I'm looking for. And so it's kind of intriguing, it's fun. It's not super creative yet. That's the only thing. Like, I. I've told it. I was like, go check this show now. Tell me a turn my head upside down element or idea. They don't. It can't do that yet. I mean, that's why we're not in trouble of being replaced, because creativity is still something, but it's getting better, but it's just not there yet.

[Bo Hanson]

Love it.

[Rivi]

AI thoughts from Brian.

[Bo Hanson]

Did you see that comment that just came through? Somebody noticed a change on the desk.

[Brian Preston]

Oh, yeah.

[Bo Hanson]

And they called it out that this.

[Rivi]

That's true.

[Bo Hanson]

$1.

[Rivi]

This is freshly minted.

[Brian Preston]

This dollar.

[Bo Hanson]

One koozie cost me $88. Yeah, we got some new koozies.

[Brian Preston]

Well, I mean, it's multiple things. I mean. Okay, I'll just say, first of all, could anybody buy a beer for a dollar anymore? I mean, it gotten to the point where it was kind of getting disconnected from the reality of life. The other thing and somebody. Y'all are very astute. You know, if I. I'm gonna take a sidebar. I don't know if we've ever shared the story of where these koozies came from. Is that okay if I share that? Oh, yeah. Buckle. Do you think that's okay?

[Rivi]

Here we are. Yeah.

[Bo Hanson]

I got nowhere to be.

[Brian Preston]

We were this backtrack in time. Getting your DeLorean go back to. I can't remember if it was late 2019, early 2020. I think it was early 2020, because I'm trying to remember when we got the first call that we were doing this. We were sending a crew out to a local university to recruit. And I just said offhanded. I was like, you can't show up and have a booth without giving away something free. Because people like free stuff. There's a reason you go to moneyguy.com resources we give you all this free stuff is because it intrigues. It spikes your curiosity. So if you're just sitting there, you can have the best career fair in the world. But if you're not giving away something, the guy over here that's probably life Insurance R Us is going to be giving away a pen or a coffee mug, and the kids are going to go talk to that person because. Not because that's the better career path, but because there's a coffee mug over there. Swag. So I was like, we need to show up with something. And they're like, what? And I was like, well, you know, koozies are cheap. And like, what do you put on the koozie? I was like, oh, man. Okay, let's do this.

[Bo Hanson]

How about it's back before our creative department was as creative as literally was.

[Brian Preston]

They came to me and they said, what do you want? Put on the koozie. And I was like, you know what? Let's make it college facing. Remember I went to University of Georgia back in the 90s when things were a little more wild, wild west. And I said, this $1 beer cost me $88. Because you could, by the way, when I was in Georgia, you could buy beer for a dollar, by the way. Okay, this is. You don't want me to say that. Don't. Sidebar the. Sidebar the content. He just put up a note.

[Bo Hanson]

Stay on the same bar that you were going.

[Brian Preston]

Well, anyway, as you guys are very not this astute because we have all these koozies printed up. Well, then Covid blew it all up anyway because, you know, Covid shut it all down. We ended up having these koozies. So that's why, you know, for years you came on a studio tour. Here's your koozie. You know, just throwing them away, throwing them around. Anybody. You get a koozie. You get a koozie. You get a koozie. Well, we knew that we were kind of coming to the end of those koozies. And then you guys very astutely pointed out the math. For a one year old to turn into $88 of $1 to turn into $88 is for a 20 year old. Ooh, we are not in the.

[Bo Hanson]

Is it what he's drinking yet?

[Brian Preston]

By the way, when I was in college, you could go to New Orleans. In New Orleans, it was under 21 to drink. Did you know that?

[Bo Hanson]

Was it really?

[Brian Preston]

Yeah, Back when I was in college, you could drive to New Orleans and down go to the French Quarter and they. And Bourbon street and it was under 21. It was 18 to drink. That's why every pothole. Because the federal government was so ticked off at that state for the under their things, they got no like dot money during this season. So I mean, you'd be potholing yourself to the bar. That's why they probably eventually took the carrot approach and said, okay, let's raise our age to 21 like everybody else. But so there was a season in America where it was 18 for in some states.

[Bo Hanson]

So we recognize that a $1 beer to turn an 88 would be a 20 year old. So we're like, you know what? That's not. That's. We don't want to support that. So we changed it to a $1 koozie. And by the way, koozies are much closer to $1. And so that's why we came up with this $1 koozie. Cost me $88. So if you're drinking your favorite sparkling water or soda pop or whatever is that you drink, you can hold it in that koozie and still feel vindicated that you are not false advertising and you're spreading the good message of sound financial management.

[Brian Preston]

I will tell you though, there's a falsehood here. Our team did such a good job with this koozie that it cost more than a dollar. And I was kind of like, we couldn't have. But that's good because the first ones.

[Bo Hanson]

By the way, first rendition, we did buy some $1.

[Brian Preston]

No, those were the ones. This $1 beer ones, the original ones. I mean, every one of them, I'd have to give away one. I'd have to go through five because they all. The seam was coming apart on every one of them. I was like, well, I can't give that one away because it's one of those strings. If you pulled it, the whole thing just falls. AP was like, oh, okay. It cost a dollar, though.

[Rivi]

There you have it.

[Brian Preston]

Is. Is the room empty now? Did we just clear the room because we went too much on the tangent?

[Rivi]

Don't think so, by the way, the.

[Brian Preston]

Tangent of the tangent, because I do have room.

[Bo Hanson]

I told him not to. Sidebar. The sidebar.

[Brian Preston]

We went and spoke to a college athletic program. Murray State, by the way, is so cool. Shoes up.

[Bo Hanson]

Nailed it.

[Brian Preston]

But some of those, I'm assuming Matt, they were baseball players, weren't they? I can pick on baseball players because Bo was a baseball player. Because baseball players, they got it all. You know, they're the good looking guys. They also. They think they're smart and they got their athletic. There's an overconfidence that comes with some of these. These, these guys. Some of them wouldn't take her koozie. I'm all right. I don't need your free swag.

[Bo Hanson]

I'm good. I'm good.

[Brian Preston]

Kind of humbling.

[Rivi]

I don't know if that was a dig on the baseball players or BO.

[Bo Hanson]

So it's BO.

[Brian Preston]

No, BO's the one self admitted it. When Matt came back and reported that everybody was so polite and took him except for the baseball team. And Bo was like, well, that Tracks and then he recited why that tracks for him. So I didn't make that up. Yeah, I'm picking on Bo. But Bo resembles it because he understood it. He lived it.

[Bo Hanson]

I was in that. I lived that life. Oh, man, I live that life.

[Rivi]

All right.

[Brian Preston]

By the way, also, I tried to win over these athletes by saying, hey, I brought Bo, who was a college baseball player about Nick, who was a college runner. And then I'm the nerdy friend that hangs out.

[Bo Hanson]

It kills.

[Brian Preston]

No, it does not. Stadium rule. I don't know that they were ready for this 50 something year old's humor.

[Rivi]

Oh, man.

[Brian Preston]

But it was great. It really was good.

[Rivi]

That was really great. It was really glad you guys to do that. Okay, do you want to do some more personal finance questions?

[Bo Hanson]

I learned my lesson about calling out a comment. That's what I just learned as we kind of went on this path. I mean, it was funny.

[Rivi]

It's all good.

[Bo Hanson]

I own that one.

[Brian Preston]

Well, we talked about the wealth multiplier, by the way. Go to moneyguy.com resources. You too can look at the wealth multiplier. See what a dollar can become for you.

[Bo Hanson]

Hey, while you're doing that, you should subscribe to the channel right now.

[Brian Preston]

If you're not subscribed, do a real question now.

[Bo Hanson]

Sign up for all of our before.

[Brian Preston]

We probably are down to four people in the room now.

[Rivi]

Well, Jordan has a question so we can at least talk to Jordan. It says should we add a nominal line item to our monthly budget to increase our emergency fund considering increasing costs?

[Bo Hanson]

So it's a little bit of a nerdy question, but I like it because the answer is yes. But this is what I think you're really saying. Hey, just because I fund step four, by the way, will you hold the thing up?

[Brian Preston]

Brian, can you hold on? Wait a minute, wait a minute. This is like when we go into Waffle House. Now are the all star. What do we got? All American Cafe.

[Bo Hanson]

Is that the all American diner?

[Brian Preston]

But everybody has now when you walk through the door, we're going to add a 50 cent surcharge for every egg of your on your meal. Is that what Jordan's asking? They want to put a little line item down at the bottom for this much eggs or something.

[Bo Hanson]

This is what I think the heart of Jordan's question is. Hey, I got through step four and we hold the thing up again for me, step four is a fully fundamental reserve that covered three to six months of my living expenses. But man, I fit. I did that. I finished that step three Four, five years ago. And I've been in the financial order of operations doing other stuff. And over those years my lifestyle has crept up. Not because it's bad, just because lifestyle changes. Lifestyle creep is a natural thing that happens. And what I recognize is that today six months of living expenses is more expensive than six months of living expenses were two years ago, three years ago. So is it prudent and does it make sense to review your living expenses on some sort of regular cadence to make sure that you have a fully funded emergency fund? Absolutely, yes. Now whether you have to add that as like an inflationary budgetary line item to your budget to have money going to cash, or maybe it's just something you could review every year when you do your annual net worth statement, you look at your cash on hand and you look at your last month spending and say, okay, yeah, that still satisfies six months, or oh, it only satisfies five months now because life has changed, we need to go true that up, we need to go make that hole. So I am an advocate for going back and revisiting that. Because if you had an emergency fund that was appropriate when you were 25 and now you sit here today at 35, there's a really good chance it is no longer a fully funded emergency fund if you've not gone to revisit it.

[Brian Preston]

If it's a one off line item underneath, I look at that as like a surcharge, that means it's temporary, it's going away. Whereas I, I think what's going on is as you are more years out, as your income goes up, your lifestyle expands and increases. You just need to look at the whole aggregate of this is what steps one and four modernize and updated to your cash reserves increased to reflect your standard of living has gone up. Otherwise if you just put a line item on there, like I said, that means it's temporary, it's going away. Because I fully expect hopefully in the next six months after all this chicken issues and all the other things go away, I'm going to walk in and a Waffle house and that 50 cent surcharge is going to be gone. And so that's why I don't want you to have this false sense. And I also don't want to make your. Because your net worth statement and your budgeting, these are all tools that hopefully as you have a significant other you're going to be using together, you can create too much minutiae on there that loses the whole point of what you're even doing this exercise for. So keep it simple by doing the analysis. But don't just have a bunch of one off line items that just convolutes and makes it even harder.

[Bo Hanson]

It's great.

[Rivi]

Wonderful. Jordan, thank you for your question. We appreciate you being here. Bruno A has a question for you next.

[Brian Preston]

He says, can I add one thing?

[Bo Hanson]

Of course. We knew it was coming. Go ahead.

[Rivi]

Why not?

[Brian Preston]

What was the name of that restaurant we went to? All American Diner.

[Bo Hanson]

First time I had been there.

[Brian Preston]

Well, I thought it was a franchise. And I was like, oh my gosh, somebody is so enterprising. Is there like, you know what? I like Waffle House, but we can do it better. And we went in this place and everybody's wearing like the chef was wearing this screaming bald eagle shirt on. And I was like, oh my God, that's the greatest shirt I've ever seen. And then this is what I liked about. Say the name one more time.

[Bo Hanson]

All American Diner.

[Brian Preston]

All American Diner. Was it there? Like we all know. So the All Star Breakfast, right? And it used to be seven and a quarter. Now I think it's like, it's like 11 bucks. Now. It's gotten expensive. But what's great about the all stars you get, you don't have. You're basically saying yes to a lot of stuff. You get the waffle, you get eggs, you get the choice between grits and hash browns. And then of course your protein. Well, here's what they had at this place. It was called the American Dream. And it was dreamy. It was amazing. Because I'm used to, as a good southern guy, I never get. It takes a rare night that I get the hash browns because I get grits.

[Bo Hanson]

Because you're a grits guy. Over hash browns.

[Brian Preston]

Yeah, but not at this place. They give everybody hash browns. You get a hash browns. You get hash browns. And then they let us do waffle instead of toast. I mean you're go choose waffles. I mean think about toast is like a quarter. Waffles are like $2.

[Bo Hanson]

I'm going to choose.

[Brian Preston]

And then this one is the one that blew my mind. It was, the choice was grits. Was it grits or biscuit and gravy? Am I getting that right?

[Bo Hanson]

Yeah, that's right.

[Brian Preston]

And I was like, wait a minute, here's another quarter item. Because grits are just ground up corn or biscuit and grits, another two or three dollar item. I mean I made myself sick. But man, was it glorious. From a value proposition. Value, you know, the value proposition was incredible. And I just. I just couldn't believe that they, they gave away that much stuff. And it's been. It was just amazing.

[Bo Hanson]

Is this the point where we say that we are not sponsored by all American diamonds?

[Rivi]

I guess so.

[Brian Preston]

Maybe it was an oasis. I mean, that place was. It was amazing.

[Rivi]

I just love how much of a financial mutant you still are. It's just baked in. It's baked into the recipe of Ryan Preston.

[Bo Hanson]

They should have had merch.

[Brian Preston]

That place would have offered merch. They were that just sitting on a gold mine.

[Rivi]

Okay, great. Sidebar. Are you ready for Bruno's question?

[Bo Hanson]

I love it that Bruno said, yay. They picked my question. And then we went on a. I.

[Brian Preston]

Don'T even know what Bruno's question is. Let's get a refresh on that. Go ahead.

[Rivi]

I don't think I asked it. So Bruno's question is, I'm hoping you can help me out. My wife and I are in the process of building our forever home. Can you explain buying down points and if it's worth it over a larger down payment? I don't know if everybody knows what this is, so I'm interested to hear what you say.

[Bo Hanson]

So right now, you know, interest rates are a little bit higher on 30 year mortgages than they have been historically. Interest rates are somewhere, you know, 6.57%, depending on the type of mortgage where you live, your credit history, that kind of stuff. And so it's not incredibly attractive. I mean, we all have some recency bias. We remember mortgage rates were two and a half, three and a half, four, even 5%. And that seems pretty desirable. And yet here we sit today with mortgage rates somewhere around like 7%. Well, one of the things you may recognize when you go through closing or when it's time to figure out the mortgage on the home that you're buying is they'll say, hey, would you like to buy down points? And you kind of turn your head like, oh, what does that mean? Well, buying down points simply means I can spend a certain dollar amount and with that dollar amount, I can decrease the interest rate that I'm going on my mortgage. So if 7% was the prevailing rate, I might be able to buy down points and I could end up with a six and a half percent mortgage rate on my mortgage for the 30 years or the 15 years or whatever type of product you're taking out. So the question becomes, all right, well, isn't a lower interest rate better? Why would I not buy down the point? So when you're faced with this Decision. Brian, how do you decide what sort of exercise do you go through to figure out do I buy down the points or do I not buy down the points?

[Brian Preston]

Yeah. Let me, let me give you a few things to understand. First of all, is it deductible? The reason I put a question mark on is that points are interesting, is that when you're on a brand new house that you're purchasing, not a refinance, you do get to automatically deduct your points in the year of purchase for tax purposes. The problem is now, you know, standard deductions have gotten so big, a lot of times people just don't use itemized deductions anymore. So I don't want to get you all excited about this is deductible because people put that stuff in the brochure. You actually need to do the exercise to see do you have enough deductions in total that you even itemize. So that's the first thing is because, and that's why I put the question mark, is it deductible on the tax code? Of course it's deductible, but is it deductible for you? You have to do a few extra steps to make sure. The next thing you'll need to figure out is, is the break even point from time, meaning that obviously a lower interest rate on your mortgage is going to create a better payment structure. So you just need to compare and contrast without the points versus the points and figure out how do you have to live in this house to get the break even on that. It makes sense to go ahead and buy down the discount on the interest rate because it's going to pay for itself and whatever X is on the amount of time. And the reason that's really important right now is that interest rates, look, I'm not going to say mortgage rates are crazy high from a historical perspective because the first house I ever bought in the late 90s was at six and three quarters.

[Bo Hanson]

But they're a little high, but they're.

[Brian Preston]

Higher than what we've been used to for the last 20 years. That's for sure. You have to ask, you balance out that breakeven point that you calculate to. What's the potential that you'll get to refinance this in that time? That's why if it's a very short recovery period, like say two to three years, you might say, yeah, well this, this makes sense that I'll be making, you know, it'll be paying down more, have a lower payment. And I got. And it was a quick recovery period. But if it's going to take you, like, I don't know, five years, seven years to recoup the cost of the discounted points, then I'd be like, well, gosh, I like to think that I'm probably going to get a refinance opportunity in that window. So it's not just not as easy to know that this is a slam dunk.

[Bo Hanson]

And then the other part of the math you have to do, because your question, Bruno, was, all right, what are buying down points, then? How do I compare that to putting a bigger down payment? It's the same sort of mathematics, okay, if I put X down payment, what's the monthly payment going to be with no points? And if I put on a bigger down payment, you figure out mathematically which one is the most advantageous based on how long I'm going to live in the home, based on what my monthly cash flow is going to look like, which one turns out better. Putting a larger down payment, increasing or decreasing the amount that I'm borrowing or buying down the rate, having on one time upfront cost, and then recouping that cost over a certain number of months. But you got it. You got to get out a spreadsheet, you got to do the work, you got to do the math, and then you can make the decision.

[Brian Preston]

And then I've found, because I was giving counsel, this is probably about a year ago, to a close family friend, and they were making this decision, and I ran the numbers for them the three different ways, and, like, which one's the right answer? I said, well, really, there's not a right answer. It's really what feels best for you in this house. Is there a psychological issue with your payment being this versus this, or how does it feel to have this interest rate? We worked through all the. Because it was, once again, the intersection of both the qualitative and the quantitative factors to figure out what was that sweet spot or that Goldilocks formula that made you feel really better about the transaction and the structure of the deal.

[Rivi]

Good stuff. I know it's one of those. It depends answers, but you covered a lot of ground there, so good answer. All right.

[Bo Hanson]

One time they'd be like, that answer was awful. Guys go.

[Rivi]

You never know. I could surprise you one day and be like, what was that?

[Brian Preston]

Oh, I also want to thank the audience. Somebody came through. I'm just going to say that they are probably a fellow CPA or an actuary, and they're just, you know, give me the data, give me the numbers and they're like, Brian makes These Q&As the worst thing ever because of his tangents or something like that. There was a comment like that. I saw it.

[Bo Hanson]

There must have been one comment because I see the exact opposite.

[Brian Preston]

Everybody. There were quite a few people said, this is why you show up for this. If you want consolidated and concise stuff, they have full shows that are just, you know, packed with chock full of data. This is where you let Brian run through the field and just do the thing.

[Bo Hanson]

Hey, if you really like condensed, tight, very well curated info, every Wednesday we have a new mini show coming out. That it is, that is a short form deep dive, very quick. If you've not checked out the mini shows out in the channel, make sure you do that. And if you want to know when they get released, make sure you subscribe because if you subscribe, then you'll get notified every time. We're putting out brand new content so you can figure out what kind of content is your kind of content.

[Brian Preston]

Yeah, it's getting. We almost need a key because you know, Mondays, every other Monday is now making a millionaire. Tuesdays is the live stream, baby, the wacky live stream. And then you think about Wednesday. Are those. Those mini shows that are consolidated Thursdays?

[Bo Hanson]

Who knows what we'll start doing on Thursdays. I can't wait to see.

[Brian Preston]

Well, we just do it highlights on.

[Bo Hanson]

Thursdays and then Friday the big long form show comes out.

[Brian Preston]

Look at that. Sounds. Sounds like we got a Thursday. Got a placeholder currently.

[Rivi]

All right, are you ready for another question?

[Bo Hanson]

Yes, ma'am.

[Rivi]

Marcus P. Has a question and it starts off strong. He says, I'm 39 on step four, but I have to break the foo.

[Brian Preston]

Uh oh.

[Rivi]

My daughter was a foster child that I was blessed to be able to adopt. California is a ca. So I think California provides money to parents that adopt foster children. It feels wrong making money off the best gift I've ever received and. But I would also keep. It would keep me up at night knowing that I could be investing at least a portion of that directly into her future. Where should I be saving and investing for a child? And remember he said he was on step four, so he feels like he's breaking the foo. What do you think about this?

[Brian Preston]

So now I'm not. By the way, this is awesome, Marcus. Congratulations. And for your daughter. Yeah, I mean, because my mom was. Was adopted and I. So I mean, I think that that's. I mean that is just such an incredible, incredible thing to do that. But I want to make sure I understand. How much money are we talking about that California provides to parents that adopt foster children?

[Bo Hanson]

I don't know the answer to that, but I do think it's interesting. A lot of people face a similar. I'm gonna give you a few different examples. So maybe you're not in this scenario where you're specifically thinking about adoption, but a lot of people do say, hey, there's this thing that happened, or there's this policy that passed, or there's this opportunity that's available to me. And man, I'm struggling with. Maybe I don't agree with the policy, I don't agree with the platform, I don't agree with whatever, but I would be a beneficiary of that. How do I navigate that? I mean, we've seen this through. There was a cars for clunkers thing. There was a first time home buyer thing. There's been a lot of different policies where there was an opportunity for you to make a decision. If you made that decision, you then benefited economically from that.

[Brian Preston]

But I think Marcus is worried. He thinks he ought to take this benefit and a portion should go towards his new. His daughter.

[Bo Hanson]

Well, yeah, for sure. I think. I think that, that.

[Brian Preston]

Because I don't think he's foregoing the benefit. I think he's feels guilty if he uses it for his retirement instead of hers and it wouldn't even happen without her.

[Bo Hanson]

Was that the question?

[Rivi]

I read it as he did feel kind of guilty taking it. Like, I don't need money. I got this.

[Brian Preston]

He wants to put it for her benefit.

[Rivi]

If he took it and invested it for her, like that felt better to him, which it's very noble.

[Bo Hanson]

So it wasn't. He felt bad about getting the money?

[Brian Preston]

No, I think. But he feels like if he used it all for his benefit, which, by the way, you're not. I mean, I'll just. Let me go ahead and just set your mind at ease. Marcus. The biggest blessing is that you've taken on and you've adopted this daughter. Kids are not cheap. So the government is. By the way, they might be giving you a credit. I guarantee your outflow as a household is more than whatever that credit is that's coming through. So I think it's noble that you're thinking that, but it's offsetting the portion. I still stand by the fact that I want you to make sure your financial situation, because that's going to also be great for your daughter, is if you're on good financial, stable ground. And then of Course, when you get to step eight, let's load up all the college savings and other things. But your most important job as a parent is to make sure that your household is stable and in a good financial place. I really do stand on that. So I don't know that I'm telling giving Marcus permission just because the state of California has a credit to break the fu. Because it still stands in pretty solid foundation that a good, healthy financial household is going to be the best place to raise that child.

[Bo Hanson]

Yeah. And so as that money comes in, you said you're in step four. Perhaps what that allows you to do is move through the food more quickly, get to step five, get to step six, go to step seven, and then you get to step eight where you can do the things. And you said, where should I save or invest for a child there, there's a number of opportunities available. The two that immediately come to mind are you could open up once you're at that stage of the financial order of operations. An UTMA account where this is just an account where you serve as the custodian and the kid serves as the beneficiary. And you can invest it on their behalf. And it can be used for anything. First time home purchase, first car, potentially college, whatever the thing they might need that money for, the dollars can be there. Or if you're trying to figure out how you pay for college later on. We love 529s. 529s are an amazing way to save for higher education. But I do agree with you. Now that I understand the context of the question, I think it's okay for you to shore up your financial life before you begin saving and investing for the child's future.

[Brian Preston]

And then I want to give a. I like win wins. I like all win win situations. There's nothing wrong with everybody that's in your life. Like, think of if there's a godparent, if there's your parents, which are now the grandparents, if they're in part of this celebration with them, make sure that they know, hey, you know what would be really cool is instead of giving some toy or an outfit that she's not going to really, you know, be as involved with. How about funding the 529? Because I'm in this dilemma of trying to get the household set up, but I also would love to pay it forward for her future. I mean, I can, because I can tell you $1,000 from a grandparent will be just pull up the wealth multiplier and amazing things happen. In the future. Future.

[Bo Hanson]

Love it.

[Rivi]

Love it. That was a good answer. And Marcus P. We loved. We loved your story. Thanks for being here. And we hope that that helps you think through that and feel good about setting your family up for success. I think that was a great answer.

[Bo Hanson]

I think it's incredible.

[Rivi]

Yeah.

[Bo Hanson]

To foster, to adopt is a huge life changing thing that you're able to do, and I think that rocks.

[Rivi]

All right, ready for another one?

[Bo Hanson]

Yes, ma'am.

[Rivi]

Adam C. Says, when dealing with unemployment, how low do you let your emergency account get before you have to make tough decisions like selling your house or more desperate things like that? What do you think?

[Brian Preston]

You don't want to let it get so close to the bone that you then are stuck with desperate decisions. I like a little slack. Bo and I just had this discussion because on a big life decision, and I was like, man, it stinks. You sure you want to do that today? And he was like, it ain't gonna get any better. Even if I'm wrong on the timing of this, you know, yeah, it's gonna cause some taxes or some other things. I mean, so you do not. I would, I would want a halo, period, so that you can keep your emotions out of it. If you wait until now, like, man, if I don't come up with this money, it's like every bad movie plot line. Either have to go to the mob to get the money or you have to make some crazy or win some dance contest. Don't get to that situation. You need to give yourself a few months of buffer so that you can still maneuver within the scenario.

[Bo Hanson]

And I would argue the question was framed, how long or how low do you let the merger get before you make tough decisions? And then you put like, selling the house. I'm going to take that little last prepositional phrase. Out. Out. Whenever we have clients who go through like a reduction in force or a layoff or they get fired for whatever reason, I am always a proponent for making the tough decisions immediately, as quickly as possible because you give yourself the. The most amount of time. But you have a hierarchy of tough decisions that you have to make. Obviously, selling your house is a dire one. Like, that's like a really, really tough decision. But as soon as the layoff happens, the unemployment happens, whatever. What I see people do, and I see them get themselves in a bad spot is they try to pretend like it didn't happen or try to pretend like, oh, it's not that big of a deal. Oh, it's okay. Oh, I've got Time. Oh, I've got time. And that might work for, for a bit. But then when you run out of time, you run out of time very, very quickly. When you run out of money, you run out of money very, very quickly. So when something like this happens, I always counsel, encourage my people, hey, this is where you go, download last month's credit card statement, download last month's bank statement and cut ruthlessly through everything that is non essential. Do you need Netflix? Do you need Prime? Do you need Instacart? Do you need all the things that you're spending money on? And you have to shore up your financial life making these small, tough decisions. And hopefully, if you can make enough small, tough decisions to give yourself time to get back on your feet, you won't have to start plowing through your emergency fund and get to the point at the end of that period where you're like, oh, gosh, now I gotta sell a car and go from two cars to one car. I gotta sell the house and downsize. You want to make very small, tough decisions early and rapidly so that you stave off having to make the very large, tough decisions.

[Brian Preston]

Well, what I like, and I want to add to what you're saying I like because we all know on Hedonic Treadmill and the research on getting back to baseline happiness, if you're in a bad situation and unemployment could be one, you should do everything all at once because you'll get back to your baseline happiness that much sooner if you make all the hard decisions. Now, the actual practice of doing that is, I like what you said, is that you go ahead and sit down, you figure out all the small decisions you can make at once. And then I would also then create a timeline so you can communicate with loved ones and family that, you know, look, we're going to make all these cuts right now, and then if we don't have like a new job lined up by this date, we're going to put the house on the market. You essentially go ahead and put a timeline while you're in this rational form of where the small decisions are going to be and then where the trigger points are on the big decision. So that way, while you are in a sanity moment, you can go ahead and know, well, gosh, we didn't fix. Because I think there's a lot of coping that happens emotionally where you say, you know, if I get this job next week, I don't have to do anything. Well, that would be better served if you had it built into the timeline of the decision matrix. That you're doing. And that's why when I talk about hedonic treadmill and those things is bad stuff. You should stack as fast so you can get back to your base level happiness as fast as possible. When you have really good things happen to you, usually you want to spread out those life decisions so you maximize the wins or the gains as you're getting into those those type of things. So that's just to give you a little concept of the color to what Beau was just sharing.

[Bo Hanson]

Love it.

[Rivi]

Whether it is buying a house or finding out your wealth multiplier or just going deeper on something else that we talked today. Just because we might be turning the cameras off soon doesn't mean that it ends. You can go to moneyguy.com resources we have tons of calculators and free downloads. There's for you to continue your financial journey and continue learning and growing and hopefully building that financial confidence so that you can focus on what truly matters. That's what this is all about. So we really appreciate you tuning in and hanging out with us every Tuesday at 10am Central. We'll be back next week. And don't forget to hit up moneyguy.com in the meantime.

[Brian Preston]

I loved. I mean I'm still reflecting on today's. I like that we got some tangents in there, but I gotta tell you, I think mvp Ryan's favorite. No, but mvp. I thought Marcus. I mean that one almost got me a little bit. Just the way with the turning, the adopting the foster child. That's just sweet. And that's why I think it ties into our mantra. We have this whole abundance philosophy, but we also know that there's so much more to wealth and money beyond just the dollars and the bills. And that's why we've tried to balance that and give you guys all the tools so that you can be good with money, both from the financial standpoint and the math and numbers, but also so you live your best financial life. We're going to keep kind of trying to continue to create that type of content. I'm your host, Brian Preston, joined by Mr. Bo Hanson. Money Guy Team Out.

[Bo Hanson]

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