Loading summary
Transcript80 lines
- [00:08]
Brian Preston
The hard truth about helping friends with money.
- [00:10]
Bo Hanson
Brian, I am so excited to talk about this because a lot of times money has a difficult nature associated with it. Sometimes it's difficult to talk with people about it. And it's even difficult when you see people making decisions that, you know, might be less than optimal. And I loved it. We can speak into that kind of stuff. Matter of fact, I love that we can speak into all of the things that you guys are curious about. So right now we have the team in the wings collecting your questions. So if you have a question you want us to weigh in on, you want us to get or you want to get our take on, I would encourage you get it in the chat right now. So with that, Megan, I'm going to throw it over to you.
- [00:51]
Megan
Great. Well, our first question is from Michael T. And he says my STEPSON Just turned 20. What is the best way to teach him about making his dollars work for him versus sounding like I am preaching about it? I feel like this is definitely something a lot of our mutants face. Wanting to help people but not knowing how to go about doing it.
- [01:10]
Bo Hanson
One, I love it. This gets me super excited because when you think about a 20 year old, they are right there at the beginning with the entire life ahead of them and man, if you can start getting some of those like financial nuggets, some of those little pieces of valuable financial information into their minds at this age and if it takes hold, it can literally be life changing and generation changing. So much so that we do an annual survey, Brian, of our clients and of our money guy family every year. And we say, hey, what's one thing that you wish you would have done differently? Or what's one regret you have? Or what's one thing that you wish you could tell your younger self? And so often we hear, I wish I would have started early. I wish I would have saved early. I wish I would have began sooner. I wish I would have. And so it is wonderful, Michael, that you sit here with your stepson, with this opportunity to relate to him, this amazing financial information. But how you do it, Brian, like what's the way that you. How does. How do you do such a good job of connecting with the youth?
- [02:13]
Brian Preston
Well, here's the thing, let's all be honest. Sometimes when you love someone or you're too close, it does either come off preachy or they're just so close to you, they don't even give you the weight that maybe your voice has. Yep. I mean, look, I'm even guilty of you know, we had our Christmas party last week and I shared that in the last 90 days we've had over 5 million people come through YouTube. Unique individuals. That's not repeats. And. But I said, yeah, I have struggles with even my own adult daughter, you know, because she loves me, knows me. But sometimes advice from me is different than if somebody else gets gave the advice.
- [02:52]
Bo Hanson
Sure.
- [02:52]
Brian Preston
And that's why I think if you're worried about coming off as preachy, you gotta, you gotta find trusted sources. Sometimes it's better or even uncomfortable conversations. It's better to see if there's something on YouTube, if there's a book, you know, and that's one of the things I mean. Well, that's why a lot of you have noticed we have these new miniseries, kind of these little mini episodes that we've been releasing. You're like, what's going on? Why are the guys doing these five to eight minute videos where they're talking about like Bowling Point or Wealth Killer or knowing the difference between different account structures or even the way income taxes work? We've done that on purpose because we give you guys a lot of long form content, but we wanted to kind of shorten some things up so we could give you more educational tools. And then I'd be remiss if I didn't share that. The way I got into the whole financial game was I read the Wealthy Barber and then Millionaire Next Door and I've tried to continue on that legacy of paying it forward when I wrote my New York Times bestselling book that's.
- [03:54]
Bo Hanson
Still going to say that.
- [03:56]
Brian Preston
By the way, it made it back on the bestseller list last week. So I don't know if it was the Amazon lightning deal or what, but I appreciate every one of you guys and I still am reading those reviews, as a few of you guys have noted in the reviews on Amazon. But I thank you and I think that providing a trusted source can go ahead and front end some of those hard conversations early.
- [04:17]
Bo Hanson
Yeah, I think so. Those mini shows, they come out every Wednesday. So again, if you are not familiar with that and you haven't paying attention, those shows are now coming out every Wednesday. Brand new content that you do not see anywhere else. So I would encourage Michael, you to tell your stepson to check those out. And then the other thing that I would do is if you can get him excited about what that opportunity can turn into, I think that'll be a real way for the financial information to take hold. So if you've not gone out to moneyguy.com resources and played with our wealth multiplier tool and showed him that for him, $1 can turn into $88 by the time he gets to age 65. And you let him begin to play with that and say, okay, what would happen if I say $50, $100, $200. What could that turn into? If he can grasp that concept and get excited about that, well, then you begin to create a behavior that will take him through the rest of his life and be super, super, super exciting.
- [05:13]
Brian Preston
No doubt.
- [05:15]
Bo Hanson
You were smiling. I thought. I thought you're smiling.
- [05:17]
Brian Preston
Can I. Can I tell you why I'm smiling?
- [05:18]
Bo Hanson
I'd love to know.
- [05:20]
Brian Preston
I just noticed behind Megan's set that somehow Nick has made it on there. By the way, Nick, I worry for you, brother. Your parents. Your parents love you so much that I'm like, oh, man. I worry for us, not for him. Yeah. By the way, Nick's got a little cameo in the background next to the clock.
- [05:42]
Megan
I'm glad you noticed that.
- [05:43]
Brian Preston
Oh, I'm sitting here and I'm like, oh, my gosh. Somehow these things are all over the place. We added because we have a Advent calendar here in the office for Buddy the elf, and somehow it's Nick and all the elves. Nick and the elves hanging out at the Advent calendar.
- [05:59]
Bo Hanson
It's amazing.
- [06:00]
Megan
I love it. All right, Michael, thank you so much for your question and for those mini shows. We've been super excited to have them going out. So if you have any feedback, if you have videos that you want us to make that you want to send to people, definitely leave a comment so that we know what content you guys are looking for. All right, you guys ready?
- [06:19]
Bo Hanson
Is today a Tumblr day?
- [06:21]
Megan
It can be.
- [06:21]
Bo Hanson
I think it's Christmas season. Brian, what do you think about that? Should we give away some Tumblrs? I think we should. Can we give away and say it's Christmas. Can we give away today?
- [06:28]
Brian Preston
You're going to kill us. Because I know for a fact we did tumblers last week, but why not? It's Christmas season. We can do more tumbler.
- [06:35]
Bo Hanson
That's what I think.
- [06:36]
Brian Preston
All right, Michael, That's a BO. Y'all can thank Beau for, you know, winner, winner, getting tumblers today, because I don't think that came up in show content meeting at all. So it just kind of hit me.
- [06:47]
Bo Hanson
It's the season of giving. I like it.
- [06:48]
Brian Preston
All right. Why not?
- [06:49]
Megan
Michael's lucky day. All right, just email winner w I n-n e r@moneyguy.com for your own Moneyguy.
- [06:55]
Brian Preston
Remember to, you know, really do some good tax planning. You want to accelerate your expenses at the end of the year and then you want to defer income. So I think accelerate some additional expenses here at year end.
- [07:08]
Megan
I love it.
- [07:09]
Bo Hanson
You're welcome.
- [07:11]
Megan
Alright, you guys ready for the next question?
- [07:12]
Bo Hanson
Sure.
- [07:13]
Megan
This one is from Carlos E. He says, good morning moneyguy family. Is it okay to continue to invest even when you're laid off? I'm getting a six month lump sum payment and I want to invest 25% into a mega backdoor Roth if possible. What are your thoughts, man?
- [07:31]
Bo Hanson
Okay, so this is Carlos. I've actually had clients that have asked me this question before. There's like they either get laid off or there's a reduction in force. And they are so wired to be financial mutants. And they are so wired understanding how to build and how to grow their assets that it's hard for them to like flip that switch and turn that off. Now, Carlos, we cannot give you specific advice because we don't know the unique intricacies of your financial situation. Here's what I do know though. A lot of times when people are laid off or out of work, specifically if there's something industry specific that caused it, the amount of time that it's going to take for you to get back into the workforce is likely unknown unless you're at a vocation where you're highly employable in a very short amount of time. So given the uncertainty and the unknowns, whenever someone enters into an uncertain time, whether it be being laid off or whether it be entering into retirement or financial independence, we always love the idea of erring on the side of conservatism. We would much rather you be more conservative and things turn out better than you thought, then more aggressive and you have to make some desperate, dire or less than ideal decisions. And so when I hear that you're laid off and your income is going away and you have a severance package, rather than you getting super excited about doing the mega backdoor and dumping 25 and captivating those dollars. Because once you do the mega backdoor and you get them into Roth, unless you do an in service to get it out of the plan, you roll into a Roth and you try to tap into your basis. Those dollars are pretty much locked up until 59 and a half. Or at least they should be locked up until 59 and a half. And I would argue that as you go through this season of uncertainty, I want you to make sure that you're flush on cash so that you give yourself the amount of time to get back on your feet, to get back into stable footing. So in my opinion, I think someone going through this situation, I would err on the side of parking it in cash to give myself flexibility as opposed to trying to invest it, trying to be aggressive, try to implement investment strategy.
- [09:37]
Brian Preston
I wrote, I wrote two big things down. I said, timing is everything because, Carlos, I think you're in a season and Bo would use the word uncertainty. You know, having a layoff now, this could turn into a blessing in the fact that, you know, if you get a new job that much sooner and you still have leftover, by all means, let's reward good with good. Good news can turn into even better news by putting that money to work. However, don't do it beforehand. I mean, I think you need this money because what's. You just don't want to get to a situation. Cash, as I've shared in Millionaire Mission and I've talked about on the show many times, is really taken for granted. It's like the air we breathe. We take it for granted until you go underwater, and then you quickly realize, oh, my gosh, this is priceless to have liquidity during this emergency. So let's not get so excited being a financial mutant that we go ahead and soak up all the oxygen in the room before we make it out of the emergency situation. Let's actually make sure that the vault door or you've come up for air and you've got your new job and life is looking good and it's optimistic. And then let's then evaluate how do we reward the good with good. And that's why I say timing is the most important part in this. Hold and wait until you actually have the good news come your way, and then you can reward yourself.
- [11:03]
Bo Hanson
That's great.
- [11:04]
Megan
Wonderful. All right, thank you, Carlos, for your question. If you would like a money guy Tumblr, you can email winneroneyguy.com all right, next up is a question from William C. He says, I'm 42 and my wife is 32. We're currently saving 25% or $51,000 a year. Should I use any remaining money to pay off the house or to invest? I got started late. Our current investments total $253,000. So with that extra money, paying off the house or investing it, I feel like this is another common mutant question that we get.
- [11:40]
Bo Hanson
So saving 25%, and that 25% comes out to $51,000 a year.
- [11:45]
Megan
Yep.
- [11:47]
Bo Hanson
And so should I. Well, you know, William, you said it. So it's interesting. I think the reason why William's asking the question is because there's some age discrepancy between he and his spouse. Right. He is in, I'm going to call it early 40s, but nearing the mid-40s, but she is in the early 30s. And so they're trying to figure out, where are our dollars best utilized? Because that's ultimately, whenever you make the decision around deploying capital to go grow for you or deploying capital to satisfy debt, it's an opportunity cost decision. Where can my dollars be best utilized? Well, when I hear you say, hey, we are kind of behind, I got a late start. I've not been putting my money to work as early as I should be, the immediate first question I would have is, okay, well, what's the interest rate on that mortgage? Because I think that's an interesting piece of information to have. Now, no matter what the answer to that question is, I don't think that my advice or my counsel would change, but I'd want to know that piece. And certainly, William, if you were someone who was in one of these mortgages, that's it, like two and a half, three and a half, 4.5%, in my opinion. That's a really hard argument to suggest going to pay off the debt. But what if there's someone who got into a house more recently and they're at 6%, 7%? Does that change the advice, Brian, or what would you tell?
- [13:04]
Brian Preston
Well, I think it's like, you know, it's a financial triage moment. You have to immediately ask yourself, where, where am I? Because you have a gut feeling that you're behind. So I would, I would encourage you to. And this is why we came up with this tool, is because we realize there's a lot of you out there that are trying to figure out, are you ahead of the curve, behind the curve, or right where you need to be. So go to learn.moneyguy.com and check out our know your number course, because you really, you got to know where you are in this process. Because I would love if you're already at the goal of saving and investing 25% and you're right where you need to be or even ahead of the curve, you know, yeah, you're probably three years too soon. I'm just going to, you know, challenge you. Is this the right time to pay off the mortgage? But I'm not going to hold it against you if you're Ahead of the curve. However, if you, if your gut is right and you do the, you do the use the tool and you find out, yeah man, yeah, I'm up to 25%. But as even if you go to moneyguy.com resources and what's the new I screw this up every day.
- [14:06]
Megan
How much should you save?
- [14:07]
Brian Preston
How much should you save? Or I was going to say what 25% could you. You save. If you go check out that resource, it's going to show you that yes, for anybody who started saving investing in their 20s, it's probably under 20%. But you'll quickly find out if you started a later beyond age 35. You kind of, if you really want to be ahead of schedule, you've got to go beyond 25%. So the start date that you started saving and investing does have an impact on that. But you, you've got to really turn the personal into personal finance by doing the homework, figuring out exactly where you are in this process and then being deliberate. And don't forget, I'm still a big fan of paying off the mortgage post 45. And so I think that you're under that and you feel like you're behind. There's some things there. If you just do a little additional digging, do some homework, I think all this will start to be uncovered, the plot will thicken and you'll understand exactly what you need to do as your next steps.
- [15:08]
Bo Hanson
I think one of the exciting is they have a big shovel. They said that they're saving $51,000 a year, which is 25%. I'm not good at public math, so I did it on my calculator. That's like a $200,000 household income, right? With a shovel that big, even if you are behind and maybe you haven't made the perfect decisions at 42 years old, if you're planning for normal retirement age 65, you still have plenty of time to get your dollars working for you have to work a little bit harder, get that savings rate, savings rate up a little bit higher. But with a shovel like that, it is certainly doable in most parts of the country to be able to really sock away wealth and build for the future. So kudos to you guys for being what sounds like in a great spot moving forward.
- [15:51]
Brian Preston
Yeah, agreed.
- [15:54]
Bo Hanson
Love it.
- [15:55]
Megan
All right, William, thank you so much for your question. If you would like a money guy Tumblr, you can email winneroneyguy.
- [16:02]
Bo Hanson
You know, you know what else, Megan? I just thought of this. This hit me, you know, another Thing that I want to make sure that William does. Make sure you subscribe right now to the channel. Because if you have not subscribed, you have not rung the bell. You won't know when we're putting up new content. Like, you guys might not know this, but every single Wednesday, we have a brand new mini show coming out that we want you to know about. So if you were just renting your seat, we would love for you to purchase it. It is so, so cheap. All you have to do is subscribe so that we know that you are out there.
- [16:34]
Brian Preston
Hey, before you do the next question, you know how. Because I was doing the. When I was giving the talk at the firm Christmas party, and I gave the $5 million stat. 5 million unique visitors in the last 90 days. I just get it right. The unique thing. I thought. Speaking of unique. Well, I don't know. How many times can I say unique?
- [16:53]
Bo Hanson
Keep saying it.
- [16:54]
Brian Preston
Is that 2.2 million of the five were people who were not returning visitors, meaning that these were people who just discovered the Money Guy show for the first time. So I thought that that was kind of an interesting thing, that people are discovering us at all times. So if you think that we're doing something like, man, that's stale. These guys cover this. Realize a lot of the people who are coming through our doors are brand new to this concept of the wonderful world of personal finance. And we're trying to catch them up.
- [17:26]
Bo Hanson
What I just heard is that something like two and a half million folks are returning viewers who have not subscribed to the channel. So subscribe to the channel.
- [17:33]
Brian Preston
You know what? I didn't even think about that point. That is a good point, too. Is that our channel? We have a little over 520,000 subscribers. And then there's 2.7 million people who are returning who obviously were part of their hangout time. And. Yeah. You know how much cooler it'd be if this thing was over? Go ahead and let us have that gold button.
- [17:51]
Bo Hanson
It'd be so cool. I really want that gold button.
- [17:53]
Brian Preston
We have to hurry up and get it before they quit giving.
- [17:55]
Bo Hanson
Before they do away with the buttons. That's the idea.
- [17:57]
Brian Preston
I'd like to be old school. Hey, remember that time that YouTube used to give out buttons for the, you know, subscribers?
- [18:05]
Bo Hanson
Is that what you're gonna sound like when you're an old man? Is that. Is that Ryan's old man voice?
- [18:08]
Brian Preston
Yeah, the bowling point.
- [18:11]
Megan
Can't wait for that. All right. And we do have a lot of new content put that in my standup.
- [18:20]
Brian Preston
Routine, that obviously killed. We're gonna put that in there.
- [18:24]
Megan
I love it. All right, you guys ready for this next one?
- [18:28]
Bo Hanson
Yes, ma'am.
- [18:29]
Megan
All right, this is from Andrew B. He says, how long does it take to break even when you're doing a Roth conversion? And are there other things to consider on Roth conversions other than just the break even point?
- [18:43]
Bo Hanson
How long does it take to break even for Roth conversion? I want to think through the question that you're actually asking here. So if I convert pre tax assets to Roth, I'm going to incur some sort of tax liability. So let's say that I'm in one of the lower tax brackets and I. If I convert a dollar to Roth, I got to pay 12% federal taxes on that. I think what you're asking is, okay, well, how long will it make for me to make up that 12%?
- [19:11]
Brian Preston
But in 2024, it'd be very fast.
- [19:14]
Bo Hanson
A couple months, right? A couple months.
- [19:16]
Brian Preston
Because the stock market made a great return.
- [19:18]
Bo Hanson
I think that a lot of times when we're making decisions, we think about, like break even analysis. A really easy example would be like when to draw Social Security. If I delay it, how long do I need to live to make sure that I recoup what I. What I forewent in drawing? I think Roth conversions are a little bit different because it's less about the time that it takes to break even and more about the unique strategies and goals that you have. And oftentimes when we talk about Roth conversions and whether or not they make sense, we're less thinking about. Less so thinking about the timeline that it takes to justify the taxes, we're more thinking about the ultimate taxes that we pay. Meaning if I can convert Roth dollars today at 12% or 22% marginal brackets, and I know that in the future when I go to pull money out, perhaps I'm in a higher tax bracket. I'm in 24, 32, 35, or maybe I get hit with RMDs and I lose track of controlling my tax situation. I would much rather convert dollars to Roth at lower brackets today so I don't have to pull it out at higher brackets later. It's less about a time to break even, and it's more about an arbitrage, which one will be more favorable. And then there are other goals that come into it, like legacy planning and that sort of thing. So I don't know that it's strictly a time like he's asking the question, like refinancing. If I refinance.
- [20:41]
Brian Preston
He's trying to turn it into a math and they're look, you could, it's like nobody has the crystal ball to know the years the stock market's going to make 20 plus percent. That's why I made the joke is that, yeah, anybody who did this at the beginning of 2024, probably feeling pretty good about it because you got that tax free growth even after you paid the income taxes at that you assume a lower 12% tax rate. You had a great rate of return, but nobody knows that. So I'm going to take that out because I don't think that's why I do Roth conversions for clients. I really think about this in term of you could think about like plot for any, any number of movies that are out there where you're worried about this ticking bomb that's going to go off and you know, or maybe you can't, you know, drive the bus below the age of, you know, the speed of 55 or whatever it is, Keanu Reeves, you know, reference there. But think about any plot where you're like, oh my gosh, there's this horrible thing that's going to happen in the future. But if they will just take these key steps, they can save us all from these things. And I think for a lot of you financial mutants, you're great at saving and investing for the future. So much so that even in the financial order of operations, I've had to create a step of hyper accumulation where I talk about the three bucket strategy because you guys are so good at making the taxes work for you and avoiding them that you get all your money in these, these tax deferred or pre tax money that down the road now the government's doing you a huge favor is they have made required minimum distributions depending upon your date of birth. But for a lot of you listening, I've seen the demographics. You're all going to be beyond 75 years of age when you have to pull this money out. So any of you that are retiring at age, say 55 to 75, you're going to notice as soon as you drop your earned income. That's usually your, your, your highest earning thing is your, your wages and your labor and your time. As soon as that drops off and you have the three bucket strategy, your tax rates are going to dive down to the seller. And that's a great peak opportunity to do exactly what Bo said. You have this arbitrage of you can max out these low rates. Because when I asked the question, hey, is a 12% tax rate a low rate? I think universally everybody goes, yeah, that's pretty good. Especially knowing how in debt the federal government is and all these obligations that we have. If you can lock in 12% taxes, let's, let's do it. Heck, there's cases where I've got clients, we're doing it for 22%, we're doing it even for 24% because their states either have tax favored things for retirees, there's all kinds of planning things. Also, you're worried about IRMAA with your Medicare premiums in the future. You're also worried about, because it's not uncommon that we have clients all of a sudden get to these required minimum distributions and they did such a good job of building up these tax deferred assets, all of a sudden your income goes from practically nothing to where you got 200, 300, $400,000 being forced down because you have such huge seven figure retirement accounts. So that's why don't sleep on this. It's very common, I think, when people retire in there in those go go years and you're celebrating how disciplined and how good you were and you're like, man, isn't it great that I only paid 1000 bucks in taxes last year on this multi millions of dollars of net worth that I have out there and you're feeling all proud of yourself. But I'm telling you, you might have missed a huge opportunity to go ahead and cut off literally seven figures of taxes from your future. We've run scenarios for clients, for others where we've seen this. A little bit of pressure, a little bit of preparation, a small incremental decision can have a huge impact for your future. So don't sleep on this. That's great.
- [24:28]
Megan
Wonderful. All right, Andrew, thank you so much for your question. If you would like a MoneyGuy Tumblr, you can email winneroneyguy.com the Money Guy.
- [24:38]
Bo Hanson
Show is hosted by Brian Preston.
- [24:39]
Brian Preston
Abound Wealth Management is a registered investment.
- [24:42]
Bo Hanson
Advisory firm regulated by the securities and Exchange Commission.
- [24:45]
Brian Preston
In accordance and compliance with the securities laws and regulations, Abound Wealth Management does.
- [24:51]
Bo Hanson
Not render or offer to render personalized.
- [24:53]
Brian Preston
Investment or tax advice through the Money Guy Show.
- [24:56]
Bo Hanson
The information provided is for informational purposes only and does not constitute financial tax.
- [25:02]
Brian Preston
Investment or legal advice.