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- [00:02]
Brian Preston
Ready to soundtrack your summer with Red
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Bo Hansen
Bull Summer All Day Play.
- [00:05]
Brian Preston
You choose a playlist that fits your
- [00:07]
Bo Hansen
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- [00:13]
Brian Preston
Just add a song to your chosen
- [00:15]
Bo Hansen
playlist and put your summer on track. Red Bull Summer All Day Play.
- [00:20]
Brian Preston
Red Bull gives you wings.
- [00:21]
Bo Hansen
Visit Red Bull.com BrightSummerAhead to learn more. See you this summer.
- [00:28]
Brian Preston
So good, so good, so good.
- [00:30]
Show Host / Content Team Member
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- [00:45]
Bo Hansen
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- [00:47]
Show Host / Content Team Member
your favorite Rack store for free. Great brands, great prices. That's why you rack foreign.
- [01:03]
Brian Preston
You need to know, Brian, I am so excited about this because it seems like the entire world is talking about this right now. It has, as some would say, entered into the zeitgeist.
- [01:17]
Bo Hansen
It's fun being a human and I think about but hear me out on this. It's entertaining in some ways. And the fact that you hear that SpaceX is going IPO and look, this has been out there for so long because you know that promises have been made to all the SpaceX employees. Hey, we don't overpay. But you're going to be fabulous wealthy because we're going to take this thing public. You know, years have gone by and then I started thinking about, you know, you can't make this stuff up is that NASA announces that they're going to partner with Bezos and Blue Origins to go to the moon. And then fast forward like two or three weeks, Blue Origins doesn't work. The rocket blows up on the launch pad and you're like, oh my gosh, SpaceX is still going public. And then I think about, I'm having a call last Friday with my mom. My mom is like 79 years old and about halfway through the call she goes, brian, should I be buying some of the SpaceX? I'm like, what in the world? And then I think about the fact that you start looking at the numbers and you see that the sells to the price offering of what they're anticipating SpaceX to be. And you're like, whoa, this thing is close to 100. That's insane. And then magically Google comes out and says, you know what? Starting in October, we're going to pay SpaceX close to a billion dollars a month just so we can have access to some of their Data centers and processing power. And I'm like, what? Where did that come from? And then this is the last one. I'll let you get into it. But it's just that I can't imagine as you out there, as y' all are processing this, all I have, Fidelity sends me a notification and says, you know what? Our minimums of $500,000 account value to get access to IPOs, we're waiving that now. It's going to be $2,000. We're just going to open this up for everybody. And then all of a sudden I find out that all the exchanges are trying to make it where they can have SpaceX, you know, pretty quickly without any type of rules or anything. Or I'm like, okay, man, somebody needs to go through this and tell me what I'm supposed to think.
- [03:34]
Brian Preston
And that's exactly what we want to do for you today. We're going, okay, what is it? For those of you maybe you don't watch a ton of financial media, maybe this is all news to you. What is it? What's happening? How could this be a good thing? How could SpaceX be a good thing? How could the IPO be a good thing? How could it be a bad thing? And what are the things you ought to know about it? And then ultimately, what should you do? You as an investor out there trying to build your army of dollar bills, trying to grow your wealth. What should you do and what should you know? So I think, Brian, let's start at the very beginning and let's just kind of talk about what's taking place. Again, this is for folks who are not super familiar. What's going to happen later this week, as of Friday, is that SpaceX is going to go through what's called an initial public offering. Brown, what is an initial public offering?
- [04:23]
Bo Hansen
I mean, this is when a private company, usually they're much smaller. I mean, let's face it, we've only recently had trillion dollar stocks. And then here we are, we're about to have a string of trillion dollar IPOs, which is so unheard of. But this is when basically a private company says, you know what, we need additional money so that we can invest and do other things. And the way we want to do this is bring it. So the public can now have ownership in this company.
- [04:52]
Brian Preston
And the people who currently had ownership in the company were the early investors and founders and early employees. So one thing that initial public offering can do is it can provide liquidity opportunity for those early employees, for venture capital firms, for other types of private owners. And it provides a mechanism by which everyday investors who are not involved with the actual day to day operations of the company can now get exposure to the company. And what's really interesting, SpaceX is getting all of this hype and all of this attention right now. But this is not the first like super hyped up initial public offering we've seen. It's not even the first one we've seen in the last decade or so. We've seen a number of these through time.
- [05:38]
Bo Hansen
Yeah, I mean, we wanted a good one that comes to mind is Facebook. Yep, Facebook. And by the way, it was hard. When I was talking to Justin, as we were putting together these show notes, I was like, let's show a chart of what Facebook's first day of trading. Because the first day that SpaceX goes hot, it's going to be crazy. I think, I think there's going to be a lot of trading. And this is what happened with Facebook is that, by the way, it's hard to find screenshots from that first day and it's hard to go pull it up even. We have really good charting software that we pay a gazillion dollars and it didn't even show us what we wanted. But this is, by the way, this shows it goes up to 42, but it actually, Facebook went all the way up to 45 that day. So there was.
- [06:20]
Brian Preston
The IPO price was $38.
- [06:22]
Bo Hansen
So it was an 18% surge on day one.
- [06:24]
Brian Preston
So it popped really, really quickly. And so people, the idea is, ooh, I really want to be involved with an ipo, because there's a chance that so many people want to go in. So many people want a piece of this. As soon as it's the market, the price is going to shoot up. And a lot of times with initial public offerings, that is indeed what we see. And that's what we saw in the first day of trading, or at least during the intraday trading of Facebook. But that's only part of the story because if investors end up arriving at the conclusion that valuations are too high, or perhaps the enthusiasm around a company, around the valuation begins to wane, then the actual price of the stock that is now offered publicly can fall. And that's exactly what we saw happen with Facebook's ipo. If you look at what happened just a few months later, it actually dropped 54% from its initial public offering price.
- [07:21]
Bo Hansen
And for those of you who are like, okay, man, that stinks, but I think this is going to be different for SpaceX. I think it's important then because we said, well, wait a minute, let's go look at what does the data say for the majority of IPOs? And you can see the study of the 30 major IPOs found that the average maximum first year drawdown hit 55%, right in line with what happened with Facebook. Now, look, we're not saying that that's necessarily what's going to happen with SpaceX, but nobody really knows what SpaceX is worth. That's what this is, the initial offering for you to buy it. But it is important and we'll talk about this later. You have many more opportunities to buy SpaceX, because by the way, it's coming to you daily on the exchange in the future. It's just this is the day that all lights will shine on that offering.
- [08:07]
Brian Preston
And so the question then becomes, okay, well, what's the big deal? Why is this significant? What's unique about SpaceX relative to other companies that have gone public? And we think it's a few things. Number one, with this initial public offering and the valuation that they are putting on SpaceX, Elon Musk is well on the way to become the first trillionaire, the first person to have a net worth of a trillion dollars. So that's culturally significant. That's a unique thing that's never happened before. That likely could happen through this initial public offer.
- [08:39]
Bo Hansen
I mean, listen to this list. I mean, company intrigue is definitely hot on this. And the fact that there's AI with Grok, Starlink, Rockets, you know. Yeah, there's rockets, there's X, which is Twitter. SpaceX, you know, so they've got this thing, they're anticipating it to come out at around 1.75 trillion, or it could come out somewhere close to $2 trillion. That's instantly a top 10 publicly traded company.
- [09:08]
Brian Preston
Yeah, it's not just a market event. This is or not just a company event, it's a market event. There's the unique thing relative to the stock market. And it's likely that this year, in 2026, this is going to be the first of a number of mega IPOs. SpaceX is likely going to be the first. And then perhaps we're going to see.
- [09:27]
Bo Hansen
No, they've already announced anthropic and OpenAI.
- [09:30]
Brian Preston
Then open.
- [09:31]
Bo Hansen
They've both filed for their IPO. So look, there's a lot of. Who blames them? I mean, if you see how we've already used the word zeitgeist, you see how SpaceX is getting all the Media attention, you know, with just the AI frenzy that's going on, all these companies have to be somewhat rubbing their hands, you know, really frothy and excited because. And also it's important to notice SpaceX, we just heard 1.75 trillion. You're like, wow, that's a lot of money. It's about to come into the market. But no, no, no. Elon is only selling. It's less than 5%. I think it's around 4%. So this is going to be a very lots of interest. It's going to be oversubscribed because a lot of people are going to be very interested in this. But there's only a small portion of the shares that are actually even available. So it creates a scarcity moment that it's going to create some crazy distortions.
- [10:27]
Brian Preston
Well, and the other thing that's really, really unique and why this perhaps is a significantly larger deal than other IPOs in the past, is there are some rules that are changing and some that have been proposed to change that aren't going to change. But we'll talk more about that in a moment. But there are some metrics that have been in place, some protections have been in place that likely could be changing. And so we want to address that. But before we do that, let's talk about why this could be a good thing. Like, why would participating in the SpaceX IPO and being a shareholder, why could it likely be a positive thing if you're an investor on that side of the equation? And the answer is is that a lot of, like, really flashy, really highly publicized IPOs have led to generating a lot of wealth. If you just take two companies that have been in the media recently. If you look at Nvidia, one year after its initial public offering, it was up 127%. Palantir, one year after its initial public Offering, up 153%. If you look five years out from those companies IPOs, Nvidia was up 380% over the first five years of trading. And Palantir was up over 1800% since its first five years of trading. So if you are, quote, unquote, an early investor in this initial public offering, there has been a precedent where those companies can do incredibly well over the next 12, 24, 36, 60 months.
- [11:50]
Bo Hansen
Yeah, I mean, and I get the hype. Don't you understand why everybody's kind of excited in some ways is because Elon has done some crazy things from creating companies that really do change the way we live. And I know, he's controversial. You put that up on a shelf and just start thinking about the fact that now when, I mean, look, one of the reasons I used to love going on cruises is because you really did drop off.
- [12:16]
Brian Preston
You were off the grid.
- [12:17]
Bo Hansen
You were off the grid for a week or so now because of what we've done with all the satellite technology and Starlink, I mean, you're not off the grid anymore when I'm on. I mean, even when you fly on any of your airlines now, I mean, you can, you can sit there and fly, flip, doom, scroll for the entire hour and a half flight because nobody restricts anything anymore because now we're able to stream. So and I remember even when I went on a catamaran trip, I mean, where you're in the parts of the ocean where you're sleeping and there's no artificial light and you look up, you literally can see the satellites flying over and you're like, this is a new world we live in and there's a lot of excitement. But I'm worried that the excitement of all this new innovation and ever expanding technology that we're doing is having people disconnect from the reality of what you're actually expecting from this company.
- [13:14]
Brian Preston
Yeah. So while there can, can be massive upside and there can be a lot of opportunity we've already highlighted, there's already, there's a lot of risk and there's even a precedent that in the first few months or years after a company goes IPO, there could be a large drawdown on average a 50 to 55% drawdown in the first couple months. And that would be right in line with other IPOs. So we recognize that that's in place and that's there. But there's also another thing going on and this is something that you've likely been hearing or been reading. There have been a lot of headlines that have been out there that say something like Elon is about to steal from your 401k or index investors. Now here, here, here, they actually are experts. Sound alarm over Elon Musk's coup that's about to rob your 401k. Wall street is already bending its rules to suck more people into SpaceX's IPO or SpaceX to land in your 401k. No matter what. Michael Burry flags retirement savings are exit liquidity for insider. So even if you're not all hyped up about Space X and trying to figure out how you get your exposure and what it's going to do to you, you may be asking the question, well, am I as a casual bystander, going to be negatively impacted by what's taking place with this ipo?
- [14:28]
Bo Hansen
And this is back to look Elon, because he's somewhat of a controversial figure. I feel like sometimes in the media they're doing some rage bait, clickbait farming with some of this. And look, the whole thing about the coup to rob your 401k and other things, without a doubt, Elon has got the cards stacked in his favor in this thing. He's selling such a small portion of the company, it's going to reward the employees and all the other things. But because it's so scarcely, you know, the 4%, there's going to be a lot of demand. But fortunately, there's safeguards. And it's not by. It's not just Elon that was trying to get this thing into the exchanges. You got to think because of anthropic, because of open AI, these indices want to. They're vying to get these companies because the world is so gaga over AI currently that there's a lot of things that have lined up at the perfect time. But I am curious and this is what I want to show this slide. What specifically are these exchanges asking and what are they taking away the protections? We have a slide to kind of go through this.
- [15:32]
Brian Preston
Well, and oftentimes, what will happen when a company is released initially through an ipo? There will be some seasoning period that has to take place before it can even be included or considered in the index. But what we've seen is a lot of the indices. Exactly. For what you just said, have been changing or altering what those seasoning periods might be.
- [15:52]
Bo Hansen
Why is that necessary, though?
- [15:53]
Brian Preston
Because what's happens after the IPU comes out. We just saw it. We saw it with Facebook. There's this wild undulation. Stock goes up, stock goes down, it could drop 55%. It takes an amount of time for traders to be able to trade in the open market for true price discovery to figure out what is the actual price, actual value of this stock and of this company. And so generally, the indices don't want to include the stocks in the index until that price discovery has settled out. Well, some of them, again, I think probably to stay relevant, have been adjusting those seasoning periods. The NASDAQ has announced, instead of having to be seasoned over 30 days, I mean, three months. Three months, they're going to now drop it to only 15 days.
- [16:35]
Bo Hansen
Yeah, that seems a little opportunistic, a little, little fast. Because you know, it's also distortions that happen with insiders when they sell because look, they're all, they've been waiting 10 years to get turned their money into, to get it into their wallet in their portfolio. So you see crazy things and then a lot of speculation will go in. So 15 days sounds really fast.
- [16:55]
Brian Preston
Even the footsie Russell Index has said they had a 12 month seasoning seasoning period. They're now dropping that to five days. So rather than a full year, five trading days before it would consider inclusion and then the one that everyone has really, that's been on like a lot of people's radar that's been a significant thing is the S and P generally had a 12 month seasoning period with some other things that had to be had to be taken into consideration as well before it could be included in the index. And what was proposed that they were actually going to drop that to only six months half the time before they would begin including a company in the index itself.
- [17:33]
Bo Hansen
Well, also because the S and P also had a profitability requirement for an extended period of time and that's what kept Tesla out for so many years. But look, I'm so By the way, 12 months is six months. So at least they were trying to. But I am so happy to report S and P has come out standard and Poor's has come out and said no, they're not going to change their seasoning requirements. I think this is good because that's when if you really think about what's going on with your 401k, your typical portfolio, it's usually the S and P is what people are really using as that market indicator when we say they'll try to beat the market, you know, be the market.
- [18:08]
Brian Preston
That's right.
- [18:09]
Bo Hansen
A lot of times we are, you know, leaning into the S and P because there's so much historical data on it. I'm happy to report that they're still going to keep some of those protections in place.
- [18:17]
Brian Preston
And you've already alluded to this. There are also before you could have index inclusion previously there was a minimum float requirement. Like how much of the company is traded out on the open market before it could be included in the index. Well, they have waived that. Even though Space X is not going to have a large chunk of its own. I think it's less than 5% is going to be what's publicly traded out on the open market. It's likely going to be able to be included in the.
- [18:42]
Bo Hansen
But I did see, you know, you notice we have the footsie, we have Nasdaq. Those look like they're going to let it in there. So how much is the real exposure? Because now if we're going to let this out there, are we stealing value? Because I already told you, it's a scarce scarcity moment. So there's definitely gonna be some, probably some squeezing or pushing the price up. How much of the bag is the index investor gonna be left holding?
- [19:05]
Brian Preston
Yeah, in reality, SpaceX is only initially expected to make up around a half a percent of the NASDAQ 100. So even though it has this large valuation, even though it's likely going to be included in the index more quickly than it would previously, it's not like it's going to drive the, the entire index itself. It's going to represent a relatively small portion. So even for you as an index investor, you are likely not going to get hammered by inclusion and the wild volatility that could potentially take place inside of this holding.
- [19:37]
Bo Hansen
So let's talk about now, I'd like to pivot and. Because look, we've already kind of, I think we've laid out the groundwork. Well, let's lay out what you should do if you're considering this space X exposure. Because how do you, I mean, you'd have to live under a rock not to even have this in your face at all times right now.
- [19:55]
Brian Preston
Well, one thing is you should understand the valuation. Okay, when we look at this and when this comes IPO and when they're listing this out at this IPO price, what are they actually saying about how valuable this company is? I mean, the number we keep hearing is like, oh, 1.75 trillion. Well, what does that actually mean? And how can I think about that as a general investor?
- [20:20]
Bo Hansen
Well, I mean, what you keep seeing all over the news media is that price is anticipated around $135 per share. If you think about that, compare that to the whole, what they call the psr, the price sales ratio ratio, that's the number that I'm seeing all over my social media feed is that people are saying that 90 to 1 ratio. And when you see a 90 to 1. And by the way, if you think about what that means, that means that assuming that we don't have crazy rapid growth, which by the way, if you're investing in this, you're counting on that everything's going to rocket ship into. You get lots of growth, but just assume it didn't. I mean, you'd have to have close to 100 years of good things just to recoup the value of all operations, not profit, just the sales that have been booked on paper. That's a scary thing because that means a lot of good stuff has to happen without any hiccups for you to truly get that type of valuation.
- [21:18]
Brian Preston
And so we know that if you look at statistics and Market Watch did this, companies who price, whose price to sales ratios were above 40 when coming to market tended to lag the market on average by 58 and a half percent over the following three years. At this wild valuation at IPO, they actually underperform the market over the next 36 months. If you want some context for what the price to sales ratio of The S&P 500 in general is, it's 3.7 price to sales for the whole S&P 500. The NASDAQ is a 6.1 price to sales ratio. So when SpaceX comes out at 90 to 1, it does seem like a very frothy, very aggressive valuation on the high end.
- [22:02]
Bo Hansen
So let me say something to kind of look, because I feel like if you were outside watching this, you'd be like, man, these guys are against this. And I think two things can be true at the same time. You can be really excited about what SpaceX is creating for the future, but also look at this IPO and go, man, there's a lot of frothiness to this valuation where there's an extreme premium, there's a lot of scarcity to actual shares. This is going to create some distortions in pricing that I'm not so sure I want to just be on that ride initially. And I don't mind, you know, look, I'm pretty transparent with you guys. Elon is a unique personality is because a lot of people. Why do people not become billionaires? Go with me on this. A lot of times when people get a build a company and it turns into $100 million, they go, hey, I've won the dream, I've done it, I'm out. And they go, you know, live their best life or whatever. But there's a unique breed of people that the money just doesn't matter. It's more about what. There's something else that's going on that's driving. And obviously Elon is this person. He sleeps in these factories. He's not buying the yachts, he's not doing the other stuff. He's got a history of creating, doing incredible things for capital. I think he's playing only for the scoreboard and the changes that he's creating in the world. I think that that's a unique personality that is pretty exciting. But you can be excited about SpaceX and still say, I'm going to wait to see what happens with this price. And that's where I was going with my transparency. I'm probably going to own some SpaceX, but it won't be at the IPO.
- [23:42]
Brian Preston
That's right.
- [23:43]
Bo Hansen
Is because I'm going to. This is not. And I think that's a good point to make, is this is not your only chance to buy. This is just the first public offering of these shares. And what's going to be crazy, this all happens, what, Friday, right?
- [23:56]
Brian Preston
Yep.
- [23:56]
Bo Hansen
Guess what's going to happen next week? Every day, Space X is going to trade. Now, look, I think a lot of people, and I think this is important for us to share with people, you're probably going to feel really good about yourself initially because of the scarcity, the oversubscription, this thing could pop. I mean, you could see it go from 1.75. We could get as crazy as $3 trillion evaluation. Does that mean it's really worth $3 trillion to you? Probably not. Because remember also, whoever's offering you this ipo, they don't want you to sell. There's even penalties to you that you won't be able to invest in other IPOs in the future if you flip this thing. They don't want you to flip it. They want you to buy and hold this for a period of time. And then that's the other thing is you have to know there's also distortions with IPOs is that once the insiders can sell their shares, they've been waiting for 10 years to get in, get out of this stuff. So they're going to go sell their shares and that's going to create crazy price distortions as well. So this will not be an easy ride. Even if you feel like a million bucks after day one or day two, more than likely there's going to be a lot of price volatility in the coming weeks.
- [25:04]
Brian Preston
Yeah, you need to, you need to recognize that as exciting as this is, as much hype as this is, as much as the, as many zeros are behind the dollars, there are a lot of risks involved that revolve around an initial public offering and the early trading of a stock and what that means, because maybe you're someone who says, hey, I'm. I'm not gonna, you know, I didn't reach out to my broker. I'm don't, I don't know that I'M gonna get allocated shares, or maybe my accounts aren't at a broker that's allocating IPO shares, but as soon as trading opens on day one, I'm gonna go buy those shares. I would think long and hard about, okay, how does this fit into my overall investment strategy and how aggressive am I being with my allocation? Is this a small speculative thing that represents less than 5% of my total holdings, or am I just going out there and gambling on the hype? And you understand that just because a lot of people can be excited about it, a lot of people can be very, very excited about very, very poor investments. And really, really great companies can trade at really, really poor prices. So you have to make the assessment, when does it make sense for me to participate in this if I'm going to. And does it make sense in my overall financial situation?
- [26:19]
Bo Hansen
You heard me earlier say that Fidelity, like, dropped their 500,000 down to 2,000. Close to 30% of this offering is going out to retail investors. That's going to create some crazy distortions in and of itself. It's probably going to get a lot of people to jump in early, but then they also, they're going to be like that flip rule. They're going to be like, I don't care. I want my money. So you're going to see some crazy distortions because you have people in the marketplace. And then the other thing is, we often say on individual stocks in general, you don't want it to be more than 5% of your total net worth. It's just too much risk to tie so much into one company. And that's what. So Beau and I were talking about this. If somebody is. If you're. If your total investable assets are less than $100,000, if, even if you took me at my rule all the way up, you're going to buy $5,000 of this? Is that. You know, I don't know, it starts getting to, what are we doing? And it leads to my final point on what I want to think about this. This should be vacation money, not eating money.
- [27:21]
Brian Preston
That's right.
- [27:22]
Bo Hansen
And I think a lot of people are getting so caught up in just the momentum of the discussion that they're losing the touch of the reality of it.
- [27:31]
Brian Preston
When it comes to your personal finance, when it comes to building wealth, if you can, or to the largest extent that you can, don't make emotional decisions. Don't let yourself fall into the emotion. You know, Warren Buffett has made it so popular that fear and greed exist. When it comes to investing, but we always want to be so careful that we are never too fearful nor too greedy when it comes to what we do. So how do we approach it? How do we think through it? Well, one of the best ways that we think you can remove emotions from your financial decision making is to follow the financial order of operations. Brian, can you know the thing up for me we have a nine step process to help you figure out what you should do with your next dollar. And I would argue that if you're not well into the foo, if you're way past step five into step six, into step seven, maybe initial public offering shares and participating in speculative stocks, that may not be where you should be in your financial journey. So if you want to go check out your free copy, go to moneyguy.com resources. You can download your free copy of the financial order of operations today.
- [28:38]
Bo Hansen
27 minutes. I was hoping we did this in less than 20.
- [28:42]
Brian Preston
Oh, he said, he said, oh, 10 minutes.
- [28:44]
Bo Hansen
We're going to do this. Goodness gracious, I am. So all of our Q and A fans, I mean we'll get to some questions but man oh man, did this. It just, it's all over the place and we've had so many people, I mean I haven't talked to a single person in the last week that didn't usually ask me about sponsors SpaceX. So I felt like we should cover this.
- [28:59]
Brian Preston
And I love that we get to sit in this spot and do it. I love that we can speak to things that are culturally significant, that are economically significant and really that are significant in your financial life. That's why every Single Tuesday at 10am we sit in these chairs to answer your questions because we believe that there's a better way to do money and we want to load you up. So if you have a question, you want to get our take, you want us to weigh in on something in your life. We have the team out in the wings right now collecting your questions. Make sure you get them in there. So with that creator direct to Reb, I'm finally gonna throw it over to you.
- [29:34]
Show Host / Content Team Member
Wonderful. Yeah, we've got some questions queued up. Keep em coming. Feel free to drop them in the chat, but first I do have an announcement or really an invitation for you if you would like. Have you ever wondered what actually goes on behind the scenes of making the Money Guy show?
- [29:49]
Bo Hansen
Be careful what you ask.
- [29:51]
Brian Preston
Imagine if they could have seen behind the scenes this morning. Imagine what that would've been.
- [29:55]
Show Host / Content Team Member
I mean, I'm assuming you can tell because you just watched the first half of the show or listened, but they were. The energy was good and exciting and spicy today and I like it. I like it. But yeah, if you want to know all about those details, if you have questions, if you've wondered things about the team, about what Brian and Bo are really like, then I want to invite you to join us in the Money verse tomorrow at 3pm Central because I will be hosting an Ask Me Anything and I will be hanging out here in the studio with the team and I just wanted to invite you. The Money Verse is our Discord server. Just go to moneyguy.com moneyverse to to join for free and we'd love to see you there. It'll just be fun. We're gonna have a channel set up to chat about questions about the content of the show, about behind the scenes and just, I don't know, get to know you in the Money Verse.
- [30:44]
Brian Preston
So you're gonna allow them to ask you anything about the show, about the behind the scenes, about us, about she knows too much. You know, way too much. Way too.
- [30:55]
Show Host / Content Team Member
It'll be fun though. That's tomorrow at 3:00pm Central Time, so check it out. All right, with that, let's dive into some questions. The first One is from Jakester 2003.
- [31:07]
Brian Preston
Hey Jake.
- [31:08]
Show Host / Content Team Member
It says how should you evaluate salary versus equity with private company job offers? I have a job offer and you get to pick how much of the total comp you want in cash versus equity.
- [31:21]
Bo Hansen
Oh man.
- [31:21]
Brian Preston
Now this, this is a really hard one because it's, it's, it's actually a little bit easier or maybe it's a lot bit easier if you are someone who is compensated where a big chunk of your income comes in terms of salary and wages that you receive. But you work for a publicly traded company. It's really easy to understand. Okay, well, if I'm going to get awarded this many RSU's or this many options or this many performance units, you can put a market value in that. Because they're publicly traded, they every single day you know what they're worth.
- [31:49]
Show Host / Content Team Member
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- [32:20]
Brian Preston
play come together on a Windows 11 PC and for a limited time, college students get the best of both worlds. Get the unreal college deal everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass ultimate with a custom color Xbox wireless controller. Learn more@windows.com studentoffer while supplies last ends June 30 terms@ aka ms.collegepc with private companies, it's a little bit different. How do I really know the valuation of a private company and how do I assess that? And it's a hard thing. We have a lot of clients who bump up into that. I think, Jake, the first thing that I would encourage you to do is ask for the most recent valuations of the company stock over the past couple years. Some some private stocks are valued quarterly. Some are valued twice a year, Some are only valued annually. What I would want to know is historically, how has this private stock performed? Is this a stock where every year it's got a 5, 7, 10, 12% increase in value? Or is this something that's kind of flatlined, or has it gone down in value? So that way you can understand at least with some sort of like reasonable idea, what do I really believe that the trajectory of this company is going to be? That's the first question I would ask. Second question I would ask is, what does liquidity look like if I decide to take this job and I leave, or I want to cash out shares or I want to redeem shares or whatever that may be? What's the actual process for doing that? Meaning are these actual shares that have real economic value to me either today or sometime in the next few years, or are these shares that just show up as like phantom equity in the event that there is some liquidity of it in the future? And I'll have a piece of that. There's not a right or wrong answer to either one of those. But you really want to understand and know what it is you're getting into.
- [34:15]
Bo Hansen
I wrote some questions.
- [34:17]
Brian Preston
No, we're here for the answers. They asked the question.
- [34:19]
Bo Hansen
No, this will give context because we would do people wrong if we didn't share what we were on the front row of, seeing people create from these type of opportunities. So the first question I'm going to ask you is, do you truly believe in this company? Do you think this company is really creating something that's going to be very profitable, changing the world and creating opportunity for years to come. Now look, you should know just because you believe doesn't mean it's true. I don't know. My voice just cracked. He gets real emotional about doesn't mean it's true. Because I've dealt with a lot of executives in Atlanta back with Lucent Technologies. You don't even know who that is anymore. But that's how old I am. Is that these things were trading changing the world and the company still can go to zero. So even though you believe you might go to zero and that leads to my second question is where are you in your journey? We actually have some clients that Bo, you know who I'm thinking about is one of them. When he was in his I think he was in his 20s. So this is why this will be the context will make sense. He got to make this exact decision with a very well known public company that we all are very aware for our entertainment now where he pretty much loaded it up. He said look, I'm young, I don't require much to live. I'm going to throw as much as I can into the the equity side of this and buy these shares at these discounts that my employer's offering me. And it created multiple seven figure opportunity for this individual in the long term. But did you hear the context? They were in their twenties. If this all went to crud. It didn't really. They could start over and yes it would hurt and they would lose some of their wealth. Multiplier opportunity. The opportunity cost would be there but it wasn't catastrophic because they still had their big shovel, their knowledge source. They could go get another job. That's different than somebody who gets this opportunity. When you've got a spouse, you've got children, you've got a big mortgage. I think you just have to look at what your risk. You have to understand the risk versus reward and you have to act accordingly. So if you're at the beginning of your journey and you can throw it against the wall, you can probably break some of our rules and see if this sticks. If you truly believe. But if you've got the whole family, this is the whole risk that goes on with entrepreneurship as well. And you have to just kind of really hone in on where you at in the situation. And I'd also look there's nothing wrong with doing the 3D glasses even to this type of scenario. And if you don't know what the 3D glasses are is run the scenarios. Your dream plan of holy cow, we're going to Be rich. This company really is going to change the world. I'm going to make a lot of money off of this. Or you can do the down to earth is maybe it doesn't go as well as you think. So you need to act accordingly and balance out what that looks like over the next five to 10 years. And, and then don't skip the doo doo plan which is holy cow, this company I work for goes to crap. Not only do I lose my job but also lost all the money I invested in it. How is that going to play out?
- [37:17]
Brian Preston
And I'll give a little bit more context just because we happen to know Jake. Right. So Jake is, you know, family. I'm not going to say middle age, but yeah, you know, it's around that. And he said hey, this is a four year old company, it's series A. So which means it's early on in its funding cycle and these are stock options. That's what is being awarded. So what's great about that is that there is an option for you to participate in the upside but it's not like there's a big capital outflow. So I would imagine that what's probably going to happen is if you were to sign on with this company, they're going to give you some sort of bonus today based in options that you're going to have the option at some point in the future to be able to buy and participate. It is a little bit, I'm going to say lower risk in terms of, well, it depends on how much they're trading off, the salary you're going to make for the options. But you really want to measure what do I think this company is going to do? It's a four year old company. What do I think the prospects for this company are? And based on the valuation it's at right now, am I in a place where if I wanted to exercise these options and I wanted to turn them into actual stock at some point in the future, whether I did that cashless or whether I actually held the stock and exercised it, do I have the financial means to do that? Is that something meaningful that I could do and I'm in the right place? The financial order of operations, did it make sense for me and my family presently? Anything you added that.
- [38:39]
Bo Hansen
No, I think we're good.
- [38:42]
Show Host / Content Team Member
Thanks for the question Jake.
- [38:43]
Brian Preston
Still, I don't. It's 45, is not really middle aged. That's. I thought that's really on the young age. That's, that's not.
- [38:48]
Show Host / Content Team Member
Well, that's fair. Bo.
- [38:49]
Brian Preston
That's not. It's not. It's not middle aged.
- [38:51]
Show Host / Content Team Member
Do without what you will.
- [38:53]
Bo Hansen
I think everybody's young. The older I get, the younger everybody else is.
- [38:59]
Show Host / Content Team Member
Young at heart. All right, we've got another question queued up from Leah. It says, what are the guidelines for buying a vacation home? I'm on step 8, 32 years old with a 220k income and 450k retirement savings. We have two young kids. A lake home is a dream of ours, but it feels like we'll never be able to justify the. The splurge. So what do you think? When is it okay? It's okay if it's not now, but when would it be okay?
- [39:30]
Brian Preston
Well, can I lament for a second? You can, because I kind of get this. I just want to, like, here, here's what Leah's thinking. I'm 32. We have two young kids. If we're going to buy the lake house, man, we should have the lake house while the kids are young and they can enjoy it and we can go do the boat and we can pull them on the tubes and we can do. And I get that. And I think a lot of people in the messy middle fall in that category. Hey, I don't want to wait to be able to do the things. I want to be able to do the things now so I can create memories for my kids and how and allow them to do it. And I love hearing that. You're 32 years old, you have a great income, you have a great amount of savings built up. The question I would ask is, okay, why the vacation home? Like a few different metrics. Like, is the vacation home you're going to buy something that's like a drive away? Like, is it like this lake has like an hour away? Are you buying a lake house? It's going to be like two states away, right? How often will you be able to use it? Are you in the place? Do you have the cash flow in your budget to be able to pay for the carry cost of having that? Or if lake house or lake living is something you really want to do, have you priced out? What would it be like if we just spent a lot of time at the lake during the summers or during the, you know, whatever the time you want to go is? I would really want to investigate what's the thing or what's the reason that I'm thinking about trying to own this second property? I'm a huge proponent. I know we have a little bit of a disagreement on this. I don't love second properties. I'm just, I think there's a lot of times if you actually measure the math. Measure the math, that doesn't make any sense. If you actually do the math, you can enjoy and experience the thing that a second property can offer without having to do ownership. And you just factor it as an expense and cost. You agree with that? You disagree with that? You want to fight about that?
- [41:14]
Bo Hansen
No, I mean, look, I'm going to give really clear context on this because I think that you're not wrong in the fact that even Dr. Stanley in his book Stop Acting Rich. It's the book that came out after Millionaire Next Door. I love it because it really dispels a lot of the things that you think rich people do and they don't really do it. And the reality is from a context standpoint, most rich people don't have second homes despite what Robin Leach told me as a child. So it is one of those things. But I'm also no hypocrisy policy. I own a vacation home. And so I want to tell you the context that led me to and will hopefully give you some clarity on this too. Vacation property is kind of a disaster in a lot of ways is because stuff can go wrong pretty remotely. And what saves me is I actually have a great person that goes and visits my property weekly to make sure that things aren't falling. Cause I don't rent it out. I mean it's just for our personal use.
- [42:13]
Brian Preston
Just a second home.
- [42:15]
Bo Hansen
And here's the reality of the situation. You're 32 years old. I would count on you. Hopefully your savings rate is beyond 25%. You said you're in step eight, so I'm assuming. But I want you, if you do the vacation home, your savings rate still has to be well beyond 25%. You need to be in the frothy phase of life to where you just have so much income and you have so much assets built up that you look at yourself and you look at the memory making opportunity and go, well, I can't take it with me. I mean, and I don't think most 32 year olds are there. It took me being in my 50s before I was like, okay, I'll give this to the family because this is just not going to move the needle whatsoever in the long term success. Because I knew it was a horrible decision and I met that look, I leased a car for my wife. I'm in the horrible decision phase of my life because it just doesn't move the needle Anymore.
- [43:10]
Brian Preston
What step of the foo are you in? Oh, the horrible decision.
- [43:13]
Bo Hansen
No, you get to a point that it's not about the math anymore. It's about, hey, what creates the happiness and all the other stuff that's beyond the mathematical parts of it. For a 32 year old, that's going to be a pretty high bar to be beyond the math of the situation. So I'm not saying you can't do it. I'm just saying you have to be so frothy in your savings rate and the success and opportunity you have in your life that you're at the, you can't take it with you. And that's a pretty hard thing for somebody at that age. I think it gets easier as you get in your 40s and even 50s, but I'm not going to tell you no. But it's just you need to measure twice, cut once on such a big life decision because it's not in the normal context of what people who are good with money do.
- [43:56]
Brian Preston
And it's, it's, it's so specialized because I'm thinking Brown. We have a buddy of ours bought a lake house a couple years ago and he loves it and it makes tons of sense for his family and they go down there all the time and it's only a few hours away. And we have other folks who, who've asked us about buying lake house. They're like, hey, don't do it. You can't. It doesn't make sense. It's not where you are.
- [44:14]
Bo Hansen
I've got two or three friends that have bought lake houses. They, they were all hot and heavy on it for two years and then something happens and they haven't been to the lake house and you know, now they just go to do maintenance on it.
- [44:24]
Brian Preston
That's right.
- [44:25]
Bo Hansen
And they end up trying to sell it. And it's, it can be good from maybe an investment. But I don't even know if that's the case with how much of real estate run up we've had in the last five years. You have to be careful. Are you the one that's going to buy this thing and if you decide it doesn't work in five to seven years, if all the frothy gains were in the last five years, you might put a lot of money into this thing and not make a ton of money. It's back to if you're in the phase of life where you can't take it with you, it's okay that you lost a little money on this, this life, adventure. But if you needed this money to be successful, then, then you probably shouldn't have bought it.
- [44:58]
Brian Preston
My family and I, I've got three young kids, we've kind of turned into like a lake family. We love going to lake. We love it. But here's what we do. We get an Airbnb, a really nice lake house and then we travel with friends who have a boat. You do those two things. It's the most cost effective way to get to live the lake life.
- [45:13]
Show Host / Content Team Member
Step one, find a friend with a boat.
- [45:14]
Brian Preston
Right.
- [45:15]
Bo Hansen
That's no, there's a lot you mistakes you hope your friends make.
- [45:20]
Show Host / Content Team Member
Well, Leah, thank you for the question. I hope that helps you think through the decision and everything that would go into it. Next question is from really bored man. I hope he's not bored watching the show change.
- [45:32]
Bo Hansen
Goodness gracious, that IPO show really got him.
- [45:36]
Show Host / Content Team Member
The question says, hey Brian and boy, finally catching this live. So he must not be there.
- [45:41]
Bo Hansen
Welcome.
- [45:42]
Show Host / Content Team Member
I know that you guys are big fans of term life insurance. When do you know that you no longer need it? Is it when you hit Coast Fire and are still working or another time? What do you think?
- [45:54]
Brian Preston
Is it? So, okay, let's think through this. When you hit Coast Fire, you have built your assets to a level that they will grow to be able to provide for you later in life when you decide to fully retire. It's the definition of co star. That's the way it works. The problem is what life insurance really protects you against is not the expenses that you will have in the future in retirement, it's the expenses that you incur today while you're living. When you have other people depending on you to go out and generate an income and provide for housing and shelter and food, that's when there's an insurable need on your life. So even if you've attained Coast Fire and You've covered years 60 through 90 based on the assets you saved, you likely still need to have term life insurance in place to cover years. If you're 40 years old, 40 to 60, because those are the expenses you're incurring today that you need your current present day income to pay for. So it's not so much about net, it is about net worth, but it's more about if someone, if your income went away today, are there folks that would be put out or in a bad situation because that income is gone? And if that, if that's true, spouse, kids, whatever it may be, then we would argue you have an insurable need on your life. If you pass away and there's enough assets to provide for the well being of those people that depend on you then we would argue that you're self insured. Most folks don't reach that level until significantly later in life.
- [47:23]
Bo Hansen
You said all the things have you reached the age of self insurance? Meaning that you have enough in assets today, not 10 years from now, not 20 years from now, but today that if you left the earth prematurely that your air you could cover all the debts. Your heirs wouldn't need the money. They'd have all the income covered and all their expenses covered. Then, then that's where we are now. Here's, here's a weird dynamic with that though. I have I am on paper at that level but I still am paying some of my my annual fees on my term insurance because it's so daggum. Cheap. Cheap. I bought a 30 year policy when I was in my mid-30s and so the premium for millions of dollars of coverage is just not that much money that there's a kind of an arbitrage situation that I don't need the money to insure my family but I kind of am now in the stage where the cost of the actual insurance, if you had to go get underwritten again would be substantially higher than the premium that I'm actually paying for this term insurance. So there's a little bit of an arbitrage. Look I don't want anybody to get excited if I pass away but it is a financial decision that okay, I can pay this thousand dollars here but if I died prematurely, my family gets this three or four million dollars then yeah, I probably from it's not an investment but just from the arbitrage opportunity I should wait until that term resets before I actually do away with the policy.
- [48:51]
Brian Preston
Love that.
- [48:51]
Bo Hansen
Does that make sense?
- [48:52]
Brian Preston
Makes perfect sense. Even though you might not need it. It's so cost effective it's kind of crazy not to keep paying for it.
- [48:58]
Show Host / Content Team Member
Yeah, makes sense. Good thoughts, good thoughts. Thank you for the question. Really bored man. Hopefully you're no longer bored. All right, next question is so kindly. Well, how would you want to say it mean?
- [49:10]
Brian Preston
No, no, I just. It's so. You're just so nice to everyone else.
- [49:14]
Show Host / Content Team Member
Thank you.
- [49:15]
Brian Preston
What to keep going.
- [49:16]
Bo Hansen
Shots fires Are you buying the SpaceX IPO?
- [49:18]
Brian Preston
Ruby?
- [49:20]
Bo Hansen
No.
- [49:22]
Show Host / Content Team Member
Did you consider it wrong to say I'm not. I don't know if you know this but I'm not much of a stock picker because I follow the foo and the money.
- [49:29]
Bo Hansen
Look at that. Solid answer.
- [49:31]
Brian Preston
Brian, are you participating in the SpaceX IPO.
- [49:33]
Bo Hansen
Now, I'm going to. I will own some SpaceX, but it will not be at the IPO.
- [49:39]
Brian Preston
Love that.
- [49:39]
Show Host / Content Team Member
Fair.
- [49:40]
Bo Hansen
But look, I'm also willing to say, because we're humans as well, because I still have a client that asked me to get them in on the Google IPO in 2004. Now, they're still clients, by the way,
- [49:50]
Brian Preston
but, I mean, they like to remind you of that.
- [49:53]
Bo Hansen
Yeah, they remind me.
- [49:54]
Show Host / Content Team Member
I will say I put a survey in the moneyverse. Are you planning to buy SpaceX? And 70% have said no. I'm on the ABB train.
- [50:02]
Brian Preston
Look at that.
- [50:03]
Show Host / Content Team Member
So they're with me.
- [50:04]
Brian Preston
Love that.
- [50:05]
Show Host / Content Team Member
Just saying.
- [50:06]
Brian Preston
Love that.
- [50:07]
Show Host / Content Team Member
And we did have a few say, no, not yet, or no, I'm too early in this. There were some other options.
- [50:13]
Bo Hansen
This thing is going to be fun to watch, but I can imagine if you actually put some shares into it, put some money in it, it's going to be an emotional roller coaster. It's going to be wild. You're going to feel euphoria on some days, and then other days you're like, oh, my gosh, I can't believe what's going on here.
- [50:29]
Show Host / Content Team Member
I hang out with you too much. I'm like, why would I want to ride that emotional roller coaster when I don't have to? That's just me, though.
- [50:35]
Brian Preston
I didn't mention this, but there's also another behavioral thing that takes place. I didn't mention this in the, in the show, but if you would have participated in Nvidia's IPO and you would have still held on those shares today, I think the return was like. It was like 593,000% gazillion dollars. You know what you're probably not going to do? You're probably not going to hold it all the way to 593,000%. Sometimes write this in pencil because it's dumb, but I'm going to say it. Sometimes making a lot of money on a stock is a bad thing because you don't know when to exit, you don't know when to get out, you don't know what's. Or if you do exit and you do sell and you do get out, then you have all this remorse. Oh, man, I can't believe I sold my Nvidia and I was up 1,000%. I could have been up 593,000%. If you are someone who's ABB and you're buying the indices and you're rebalancing, you don't have to, like, concern yourself with that as much. You just focus on building your net worth, building your portfolio and removing a lot of that emotion from the equation. That's my two cents.
- [51:33]
Show Host / Content Team Member
Yeah, Good two cents. Good two cents. Let's go to Kyle's question next. Says, hey, moneyguy, show. My wife and I just had our first child. We want to get ahead of the curve for college in Wisconsin. The max tax deduction is $440 per month for a 529. Should I max this out? We are 30 and 28. We have 260k income and 180k saved.
- [52:01]
Bo Hansen
Well, look at that. They just answered because the income is incredible, by the way. Wow, that's pretty awesome. But I am surprised that the amount saved doesn't equal the income. So that means that we've probably had a huge pay bump in the last year or two because it hasn't equalized yet to where your savings and investments are reaching. So I would put it back on you, Kyle. Are you saving and investing 25% of your gross income? If you are, then above and beyond that, yes, you can get into step eight and you can start funding the 529. And it depends on how much frothy your excess cash flow is from that 25% savings to see if you get to max out. But I'm not going to prioritize the 529 over your own retirement savings for the future just because of a tax deduction. Just because. It's back to our saying you got to put your oxygen mask on before you take care of the children.
- [52:57]
Brian Preston
Yeah, I'm going to echo what he said. You got to make sure you're at the right place. The financial order of operations. I want you to be saving 25% for yourself, for your future, before you say for the kids. But let's assume that you're there. You ask another question. A lot of people run in this. Hey, should I do the maximum that the state allows for me, Get a tax deduction? Well, $440 a month, I'm going to round up to. I'm going to run it down to 400 because I can do the math in my head. If you do $400 a month for 12 months out of the year, it's $4,800. Right? That's good math.
- [53:28]
Bo Hansen
Yeah, it's close to five grand.
- [53:29]
Brian Preston
Five grand a year. If you start doing that when your child is brand new like it is, like at a zero age, baby, $5,000 a year. Growing for college is going to grow to a ton of money over the next 18 years. So I would even do the exercise of projecting out, okay, well, do we really need to save $440 a month? Or if, you know, we live in this state and it's likely our kids are going to go to a state public school and, you know, whatever your thoughts on education are for funding4,440 may be overly aggressive to save in that529. You may arrive at the conclusion, hey, if we just saved 100 bucks a month or 200 bucks a month, that would fit the bill. I never want to let the tax tail wag the investment dog. If it doesn't make sense to save that much in the 529, don't save that much in the 529. Figure out what you should be saving. Five grand for a brand new baby a year. That's going to add up to a lot.
- [54:25]
Bo Hansen
Yeah. And again, back to the equation of education is a lot of people are putting a question mark on it because of some of the student loan issues and all the other things that are going like, what is the value disconnected from the return on investment that you're getting? I think a lot remains to be seen. I still think it's a, a good thing. You know, I, I just had my oldest daughter graduate College and the 529 was a blessing to us because the compounding growth worked out and, and built up a nice egg that covered three years of her college.
- [54:55]
Brian Preston
But you didn't say five grand a month. Five grand.
- [54:58]
Bo Hansen
I was doing two. I was doing $2,000 because that's what Georgia's benefit was back then. I was doing doing $2,000 a year.
- [55:05]
Brian Preston
That's great.
- [55:07]
Show Host / Content Team Member
Good stuff. Thank you for the question. Kyle. We are going to go to Jack's question. This is a good one. It says, hey, moneyguy team, how do you enjoy the benefits of financial success without unintentionally raising entitled best question in the world.
- [55:23]
Brian Preston
Jackman. Yes.
- [55:24]
Show Host / Content Team Member
What's your approach to instilling work ethic and gratitude while also enjoying your money? Let's discuss. Discuss, because I know you guys have thoughts on this one.
- [55:33]
Brian Preston
This is the number one conversation. This is, this is the number one conversation my wife and I have around money and around finances. Our children are growing up in an environment that is very different than the environment that either one of us grew up in. Me specifically, I grew up in an environment where there was no excess, there was no frothiness. There was none of that kind of stuff there wasn't like sound financial decision making. And so a lot of the reasons why I turned out the way that I did I'd attribute to kind of seeing the other side of it, being on the wrong end of that equation. Well, those are a lot of the things that kind of made me want to work hard and do good in school and be successful and you know, all these things. Well, if my kids aren't going to face that same level of adversity that I faced, how do we make sure they still get those same skills and that same stuff? And it's a really, really hard thing. And so what we've tried to do with our kids is be very, very open with them and about what we expect of them. My oldest, she's 11 now, she has a job and I say a job. She has a job in the neighborhood, which is awesome, but she's responsible for it. Every Thursday she's got to go pull the trash cans out. Every Friday she's got to go to all the neighbor, all of her customers and pull them back in and she gets the money and we deposit her bank account and last night her bank statement came in. She made $5.52 in interest this year so far. Do you know how awesome is showing 11 year old free money showing up in an interest bearing account? I want them to understand, hey, we save and we have a goal and we're moving towards this, but it's hard. And so I think what we have to. I'm sorry, I'm going long on this. One of the things that me and my wife have to do is we have to be careful not defaulting to convenience for us right now. A toy, toy break, something goes wrong, whatever. I can literally pull up my phone, I can order on Amazon, I can have it there between 4am and 8am tomorrow morning and not have to think about it. Crazy with my kids. I don't know that's the right response. Even though it's what's easy for us. I'll be like, hey, you broke that thing, you ran out of that thing, you ate all those snacks too fast. Whatever the thing may be. Hey, we're not just going to buy more, we're not just going to replace that, we're going to wait till or whatever. We have to like be very intentional around how we operate at our convenience level, recognizing that our kids need to experience a little bit of the inconvenience.
- [57:58]
Bo Hansen
Let me give you some context. I think every parent who has money should be scared to death because the stat that consistently exists, both sides of it is that Most millionaires are first generation. 80% of them, even our own research is around 75% of our clients are first generation. We're both first generation millionaires. That means for that stat to be true, the stat that gets me is 70% is gone by the kids of that first generation millionaire. 90% is gone by the grandchildren. Anybody who has resources or you're growing up with resources, you should be like, holy cow. Maybe growing up with money can be just as scary as somebody who grows up in scarcity because they lose some of the mindset issues. So I'll give you the Cliff Notes. Experiences over stuff. I think it's don't give your kids everything. We can all think about. I know in my childhood, I can think of my friends that seemed like they had the latest GI Joes, they had every transformer. They even had the aircraft carrier for GI Joe, which no kid's supposed to have. It's all the stuff. Or even think back to when you get into high school school and your, your friends that got the brand new Jeep Wrangler cars or the fancy cars and everything, you're like, did the parents do that for the kid or they do that for themselves? And, and by the way, I, I live in a very, we live in a very wealthy community and I tell people ask me these questions and I tell them and they do the exact opposite. So I'm just like, whatever, you know, do it. Do what you want you do. I'm just. This knowledge is just here to be shared, but it's. So I always say what I've done for my daughter, and I'm pretty pleased so far. Like I said, she just graduated college and I can already tell she's a hard worker, she values money. She's not a materialist.
- [59:48]
Brian Preston
She's a good person. She's a good saver.
- [59:49]
Bo Hansen
She's a great saver. And here's what I did to kind of make that. We've had discussions probably from whenever I started noticing an aptitude to even or a curiosity that's probably started when she was 13, 14 years old. I started talking to her very clearly about how money works to try to instill the skill set that I knew I didn't have. And I was like, man, if you can start creating mastery or building that 10,000 hours of knowledge and experience at a young age, this actually could turn into a benefit. Instead of, you know, a weight around their, around their body that's going to weigh them down in the Future also, I started as soon as she started working babysitting in the neighborhood and then eventually working in fast food because she worked at Chick Fil A all through high school. I primed the pump, you know, I said, hey, look, I'll open up a custodial Roth IRA and I'll do a dollar for dollar match into your custodial Roth ira. I mean, her eyes lit up and that thing, that account is big now. I think about that and I'm so proud of her for doing that. And then it went on even to the first car. And this one was so tough. Having money and my daughter getting close to 16 is because I knew, you know, I heard Dave Ramsey say it for years. I was like, you know what? I'm going to do this. I'm going to make my daughter pay for half of her first car. And that is so hard when you have money because in your brain you're like, well, if I buy her a new car, it'll have the latest and greatest, you know, the technology, all the safety. And that is a true thing because I, I wrecked my car when I was 16. Did you wreck in your first year of driving?
- [61:15]
Brian Preston
Yeah, I didn't wreck it, but I, you know, the gas station, I ran into a thing.
- [61:19]
Bo Hansen
So, so most 16 year olds, when you're learning how to drive a car, you're worried they're going to run it into something. And so as a parent with resources, you're like, I'll go buy them the nicest car to make sure they're safe. But you have to be careful, there's a balance there on making sure that they have ownership. Because you also, let me go and tell you, we talk about hedonic treadmill. I don't want my child's best experiences in life to be while they were only in my household. And if you give your child, you know, you pass them down their 5 Series BMW, what are they going to do when they graduate from college? What, what, what in the world does life look like on the, on getting a little bit nicer and nicer or you just go send them out into the world is the bougie, bougiest version of themselves right from jump street. It's, these are the things that I would carry a lot of weight with. Coming from resources and trying to make sure you're creating good humans that want to work hard who understand the value of a dollar and actually will put that to work so that they can hopefully turn into something bigger and better than what you started with versus that Horrible stat of they blow it up either as your children 70% or their grandchildren or your grandchildren 90% likelihood. You've got to work against the grain.
- [62:40]
Brian Preston
Can I throw one thing out there? You so often tell that story about doing the dad match and the custodial Roth and I love that. And I get asked this question all the time and people are talking the comments. You don't have to wait until they do a Roth IRA to do that. You can do a dad match inside or a mom or a parent match inside of like an up month inside of a custodial account without having to like do the tax return filing and that sort of thing. So don't think you have to like do all the things at once. A lot of people ask me, oh, Bo, you know, your kids, my kids don't have custodial Roth IRAs. We're going to get there one day when they get like real jobs that I'm not paying them or neighbors aren't paying them for. We'll do that. But I have told her once her savings account hits this dollar amount, we're going to start investing after that. And I'm going to match everything that she wants to invest, I'm going to match with her interrupt. I'm going to get her used to that. And I think you can do that. It doesn't have to be all the steps at once. You can ease into it with your kids. So that way it's a gradual learning experience over time.
- [63:41]
Bo Hansen
One thing I didn't put in, I gave the experience share, but I didn't say I kind of forces. I think your kids should go work a cruddy job in high school, go work fast food, go do something that puts you out with the general public because you're gonna realize how crazy the general public is. You're also gonna realize, hey, maybe working with my brain is better than working with my back. And then it also creates some skillset that you learn how to deal with the general public, you learn how to manage money, you learn how to deal with bad bosses. There's a lot of benefit to your child. And I know you a lot. I deal with a lot of my peers. I think they think it's beneath them for their kids to go work in these atmospheres. And I think that is a, if you, if you have that feeling, your kids can sense it and you say no, hard work is good and is rewarded. Go out there and take that entry level job so you can get experience and start the journey of learning to appreciate and understand the value of hard work.
- [64:36]
Brian Preston
This what we do right now. This is my favorite job that I've ever had. My second favorite job that I ever had, waiting tables at Chili's. If this all, like, folded up tomorrow, I'd probably go wait tables because it was awesome, and I took away so many skills from that. But use. My first. First semester at University of Georgia, I had a cousin who was like. Did, like, real estate and stuff. I got to do construction for one summer in Georgia, starting in August in the heat. I learned very quickly in that moment that I was going to go do really good at school and study finance and do financial planning because it was a wonderful experience to show me what I did not want, like, a vocation I did not want to pursue. I think the more experiences like that your kids can have, and the earlier they can have them, the better it'll be.
- [65:21]
Bo Hansen
Yeah, so don't I just say that? Because I think a lot of parents say, my kid's job is school, and I'm like, well, that's good, but eventually they're gonna need to work. So you might want to introduce it before they leave the household, because if their first job is after they graduate college, be careful with that. I think that you ought to introduce them to this. This concept of work a little bit sooner than that. That's gonna be controversial to some people.
- [65:44]
Brian Preston
I don't think so. You know, I had a. I think
- [65:46]
Bo Hansen
it's controversial amongst people with resources. Well, I think people who are poor.
- [65:50]
Brian Preston
No.
- [65:50]
Bo Hansen
Your kids. Go work. This is something that I think people with money, they. They. They. This is part of the. The. The. The. The protecting your child at the expense of their future self.
- [66:00]
Brian Preston
Now, I did have. When I was in. When I was in high school, it was either you. Either our thing was you're either an athlete or you had a job. As soon as. Like, once I got to college and my athletic career was over, they were like, hey, go get a job. You want. Go get a job. So then you got to figure out what works for your family.
- [66:21]
Show Host / Content Team Member
I knew you guys would not disappoint on that one.
- [66:23]
Bo Hansen
I feel bad today. We have done nothing but filibuster answers.
- [66:27]
Brian Preston
We did.
- [66:28]
Bo Hansen
We were long on the IPO discussion. We're long, I think. What would we answer for five questions? Shame on us.
- [66:34]
Show Host / Content Team Member
We had a lot to say. I thought a lot of good stuff. I thought it was good. And, you know, you want to go
- [66:40]
Brian Preston
for 30 more minutes and just.
- [66:42]
Show Host / Content Team Member
Let's just keep going.
- [66:43]
Bo Hansen
You know, I'm doing the mini show that's the only reason.
- [66:46]
Show Host / Content Team Member
24 hours. Oh man. Well thank you for joining us on the stream. Just in case you didn't know, the conversation does not end here. We have actually released I believe it's six free resources, brand new ones just in this calendar year so far. So if you have not checked those out yet, those are always there for you@moneyguy.com resources. Our most recent one was for the folks in the military financial planning, specifically for all of your unique considerations for military families. So go check that out if you haven't yet and we'll be back here Every Tuesday at 10am Central doing more of this, answering your financial questions, talking about what's going on in the financial world and what's on your mind. So thanks for being here.
- [67:26]
Bo Hansen
We've also been doing some collabs. Aaron talks money we had an Abel account up deep dive into that. That's that she's let us know has done really well. You know we were on iced Coffee hour recently. I know we've got more collabs coming up. This is pretty exciting time. I would love for everybody. You know, look we talk about usually we're pitching the abundance cycle and stuff but I do think go sign up to get on our newsletter list every Saturday. I kid you not, every Saturday I read our own newsletter because the team here does such a good job. I can't wait to see how they're either roasting us or unique content that they're putting in that newsletter. So don't sleep on that. I think you'll find most of the time, most of the stuff that we share is either when we're doing job postings, big content releases our newsletter. We're not out there selling our newsletter list. We're just trying to make sure we know who's out there and part of the family. So I'm your host Brian, joined by Mr. Bo Reby and the rest of the content team.
- [68:20]
Show Host / Content Team Member
Money Guy out the Money Guy show is hosted by Brian Preston and Bo Hansen. Brian and Bo are partners with a bound 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.