Money Guy Show: Episode Summary - "Low Income, Late Start: What Should I Do?"

Podcast Information:

• Title: Money Guy Show
• Hosts: Brian Preston and Bo Hanson
• Description: Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.
• Episode: Low Income, Late Start: What Should I Do?
• Release Date: February 10, 2025

Introduction

In this episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into the challenges faced by individuals who perceive themselves as being behind in their financial journey, particularly those with low income or who are starting to save later in life. The episode emphasizes personalized financial strategies, addressing listener questions to provide actionable insights.

Key Discussions and Insights

1. Assessing Financial Progress for a 32-Year-Old Listener (00:07 - 05:06)

Listener Question: MH, a 32-year-old earning $50,000 annually with $40,000 invested and saving 25% of their income, questions whether they are behind in their financial planning and seeks guidance on realistic contribution goals.

Hosts' Analysis:

• Bo Hanson (00:53): Highlights that MH might not be behind. Points out that the average age for beginning to invest is 33, suggesting MH is actually ahead.

  "MH is actually ahead of the curve when we talk about the 20 somethings." (02:30)

• Brian Preston (01:34): Explains the power of compounding by using the wealth multiplier tool, projecting MH's current savings could grow to approximately $1.6 million by retirement age with continued contributions.

  "When you just were to take that $40,000 that you have today and multiply that times 18.05, that would tell you what you're on track to have without saving another dime." (02:18)

Conclusion: MH is encouraged to reframe their perspective from feeling behind to recognizing their proactive savings habits. The hosts stress the importance of setting realistic and personalized financial goals.

2. Evaluating Career Decisions with Generous Employer Contributions (05:06 - 15:50)

Listener Question: Mr. Broxley from a CPA firm questions whether to stay in his current role, which offers a 14% employee retirement contribution (10% ESOP and 4% 401k match), despite it being an intense career path.

Hosts' Analysis:

• Bo Hanson (07:09): Explains the benefits of an ESOP (Employee Stock Ownership Plan) and how it acts as a form of "golden handcuffs," incentivizing long-term employment.

  "It sounds like your company is trying to implement a plan where they want to incentivize people to be here and stay here long term and have an ownership stake." (07:09)

• Brian Preston (08:34): Advises assessing personal fulfillment versus financial benefits. Emphasizes evaluating marketability and long-term career satisfaction.

  "Am I happy? Am I fulfilled? Am I living my best life even with a generous compensation structure." (08:40)

• Custom Advice for CPAs (09:53 - 12:45): Brian provides specific insights for those in public accounting, discussing the potential for burnout and the marketability of accounting skills for future career moves.

  "Anybody who goes into public accounting, you're going to have a dilemma, career dilemma somewhere between years four and six." (10:00)

Conclusion: The decision to stay or leave hinges on balancing financial incentives with personal and professional fulfillment. The hosts recommend a thorough self-assessment and strategic planning to ensure long-term career satisfaction and financial stability.

3. Roth vs. Traditional Retirement Accounts with Future Pension Considerations (15:50 - 21:11)

Listener Question: Sol Fu asks how a future pension that places them in a higher tax bracket at retirement affects the decision between Roth and Traditional retirement accounts.

Hosts' Analysis:

• Bo Hanson (15:50): Discusses the general benefits of Roth accounts, especially when expecting higher income in retirement due to pensions and Social Security.

  "Roth is outstanding because... you're going to have this pension, you're going to have Social Security." (15:50)

• Brian Preston (17:12): Elaborates on strategic financial triage, emphasizing that Roth contributions are advantageous for those anticipating higher tax brackets in retirement. He also highlights the importance of evaluating current versus future tax scenarios.

  "If your income is lower now because they're in a very generous employer plan with a pension or something like that, but they're going to have much higher income in retirement... Roth contributions are a lot of checks into the positive." (17:12)

• Additional Considerations (20:27): Addresses scenarios where tax brackets remain consistent, still favoring Roth due to tax-free growth and benefits for heirs.

  "Roth dollars grow tax free for your entire life without being subject to requirement minimum distributions at age 73 or age 75." (20:27)

Conclusion: For individuals like Sol Fu who expect higher taxable income in retirement due to pensions, Roth retirement accounts are generally more beneficial. This strategy leverages tax-free growth and provides flexibility in managing taxes during retirement.

4. Student Loan Debt vs. Retirement Savings for a 45-Year-Old Listener (21:11 - 27:43)

Listener Question: Snow Crossfan, age 45, with $44,000 in student loan debt and only $10,000 in retirement savings, seeks advice on whether to prioritize investing for retirement or aggressively pay down student loans.

Hosts' Analysis:

• Bo Hanson (24:02): Emphasizes the importance of opportunity cost in financial decisions. Advises evaluating personal financial goals, interest rates on debt, and potential returns on investments.

  "You have to make that judgment call because at 45, with $10,000 saved up for retirement, I would argue you're a little bit behind." (24:02)

• Brian Preston (25:40): Introduces the concept of the Financial Order of Operations, a system to prioritize financial decisions based on individual circumstances and goals.

  "We have created the all-terrain system... it is called the Financial Order of Operations." (25:51)

Conclusion: Snow Crossfan is advised to perform a comprehensive financial assessment, considering factors such as debt interest rates, investment returns, and personal financial goals. The Financial Order of Operations framework is recommended to prioritize actions effectively.

Notable Quotes

• Bo Hanson on Wealth Multipliers (02:30):

  "So if you just were to take that $40,000 that you have today and multiply that times 18.05, that would tell you what you're on track to have without saving another dime."

• Brian Preston on Career Fulfillment (08:40):

  "Am I happy? Am I fulfilled? Am I living my best life even with a generous compensation structure."

• Bo Hanson on Roth Accounts (15:50):

  "Roth is outstanding because... you're going to have this pension, you're going to have Social Security."

• Brian Preston on Financial Order of Operations (25:51):

  "We have created the all-terrain system... it is called the Financial Order of Operations."

Conclusion

In this insightful episode, Brian Preston and Bo Hanson address crucial financial dilemmas faced by listeners at various stages of their financial journeys. From reassessing one's savings trajectory to making informed career and retirement planning decisions, the hosts provide valuable, personalized advice. Emphasizing the importance of strategic planning and self-assessment, the Money Guy Show equips listeners with the tools and knowledge to make confident financial decisions, regardless of their starting point.

Disclaimer:
The Money Guy Show is hosted by Bryan Preston and Bo Hanson, partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the SEC. The information provided is for informational purposes only and does not constitute financial, tax, investment, or legal advice.