This Real Estate Nightmare Could Derail Their Financial Freedom

Summary

Money Guy Show – Episode Summary

Podcast: Money Guy Show
Hosts: Brian Preston & Bo Hanson
Episode Title: This Real Estate Nightmare Could Derail Their Financial Freedom
Air Date: September 15, 2025

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Episode Overview

This episode brings listeners into a candid coaching session with Luke and Hannah, a young couple who, while building solid financial foundations, face a real estate challenge that could disrupt their journey toward financial independence. Brian and Bo break down the couple's situation, highlighting lessons and pitfalls, and coach them—and listeners—through the real-world consequences of jumping into rental real estate too soon. The tone is a mix of optimism, realism, and the trademark “Money Guy” blend of empathy, straight talk, and humor.

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Key Discussion Points & Insights

1. Meet Luke & Hannah: Financial Background and Personality

• Age and Background: Luke and Hannah, both 27, married five years, met playing soccer in college ([01:19]).
• Financial Foundations:
  • Net worth of ~$200,000.
  • Household income: ~$180,000.
  • Luke: Project manager in healthcare IT ([05:01]).
  • Hannah: CPA and forensic consultant ([05:13]).
• Childhood Influence: Both came from large families and learned the importance of saving early ([03:13], [03:46]).
• Money Personalities: Luke is a disciplined saver; Hannah values experiences and is more willing to spend, providing a healthy balance ([04:14], [04:28]).

2. Real Estate Moves: Windfalls and Whirlwinds

• Rapid Moves: Bought first house in 2021 for $193k, sold in 2024 for $295k, then purchased a fixer-upper ([08:00]).
• Rental Property Decision:
  • Used equity windfall to purchase a rental property in Indianapolis for $150k with 20% down ([10:56]).
  • Managed from out of state (Luke’s family nearby, sister is a realtor) ([10:27]).
  • Marketed through a property manager, but after two months, property remained vacant ([11:47]).
  • Shifted to self-management and aggressive cost-cutting to cover two mortgages ([12:31], [13:50]).
  • Invested $16–17k in improvements; still vacant at time of recording ([13:27], [12:56]).

Notable Quote

"For the first two months after owning it, you were vacant. There was no one in there."
— Brian Preston ([11:47])

3. The Real-World Challenge: The Rental Reality vs. The Dream

• Financial Strain: Vacant property means dual mortgage payments are cutting into emergency funds and investment rate ([13:50], [14:16]).
• Brochure vs. Reality: Hosts comment on how social-media promises of “mailbox money” from rentals are rarely this smooth in practice ([12:58]).
• Risk Management: Lack of preparation for “worst case” (the “doo doo plan”)—highlights importance of planning for things not going as expected ([13:04], [20:38]).

Notable Quote

"Is this brochure not popping yet? Where is this brochure of this passive income... on Instagram?"
— Bo Hanson ([12:21])

4. Multi-Goal Conflict: Family Planning vs. Financial Moves

• Short and Long-Term Goals:
  • Short-term: Begin family, home renovations ([18:24], [25:58]).
  • Long-term: Financial independence, possibly building a real estate business ([26:20]).
• Goal Clashes:
  • Family planning could require one partner to reduce or quit work; unsure who ([20:06]).
  • Rental property requires increased cash reserves, taking away from other savings goals ([24:09]).

Notable Quotes

"Money is just a tool... if we make a decision that locks us into this rut, now we don’t get to live our best life."
— Bo Hanson ([27:02])

"I don't want to delay our family because we feel like we have to get to this number."
— Luke ([29:17])

5. Scenario Planning: The 3D Glasses Approach

• Hosts model three financial scenarios for listeners:
  • Dream Plan: Both work, continue existing income and savings (25%), achieve ~18M portfolio at 65 ([32:07]–[33:35]).
  • Down-to-Earth Plan: One works part-time/combined $135k income, savings drops to 20%, portfolio outcome: $12.7M ([34:26]–[38:44]).
  • Single Income/Rice & Beans Plan: One income ($90k), savings drops to 15%, less lifestyle flexibility, portfolio: ~$8M ([38:58]–[40:45]).
• Rental Property as a Wildcard:
  • Any significant ongoing cost, vacancy, or repairs in the rental derails each scenario ([36:03], [37:38]).
  • Opportunity costs of not investing in markets can exceed potential real estate gains.

Notable Quotes

"Just because you have a tenant today does not mean you will have a tenant in the future."
— Brian Preston ([36:21])

"This is almost fairytale land here, because we know the savings rate is way below 25% right now, but this is bringing it back. A lot of good stuff happens if this was what was working in the background."
— Bo Hanson ([33:35])

6. Practical Takeaways and Assignments

• Clarity Through Numbers: Visual aids and candid breakdowns helped Luke & Hannah see the opportunity costs and risks of their current path ([41:32], [41:52]).
• Action Steps Assigned by Hosts:
  1. Solve the rental problem: Get a tenant or sell ([49:33]).
  2. Rebuild emergency fund to at least $20k (preferably $40k if income drops) ([49:33]).
  3. Do thorough 3-scenario planning—including family planning and home upgrades ([44:40], [50:26]).
  4. Consider selling the rental if it’s too much of a drain; option to offload to family already in real estate ([44:40]).
  5. Only focus on advanced investing (e.g., Roth IRA vs. Roth 401k) AFTER addressing liquidity and stability ([47:01]).

Memorable Advisory Moment

"The grip and rip, that's not going to work... Life is already hard... If you just grip and rip and don't plan, it just opens up a lot more turmoil and chaos."
— Brian Preston ([45:00])

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Important Timestamps and Segments

| Timestamp | Segment / Topic | |-----------|--------------------------------------------------------------------| | 03:13 | Hannah & Luke’s money backgrounds and childhood lessons | | 05:13 | Career summary and personality dynamics | | 08:00 | Homeownership timeline and selling/upgrade details | | 10:27 | Out-of-state rental, family pressure, and financing | | 11:47 | Rental property vacant – reality sets in | | 13:04 | "Doo doo plan" and risk management in real estate | | 18:24 | Family planning goals and how rental/income impacts them | | 24:09 | Emergency fund shortfall and impact of rental property | | 25:58 | Competing short- and long-term goals | | 32:07-33:35 | “Dream Scenario” modeling | | 34:26-38:44 | Part-time and single-income scenarios, rental as wild card | | 41:32-41:52 | Opportunity cost and lessons in real estate vs. investments | | 44:40 | Recommendation: do a true 3-scenario/3D plan, possible exit sale | | 45:00 | Why “grip and rip” is a risky path | | 47:01 | Roth IRA vs. Roth 401k advice—after cash/liquidity addressed | | 49:33 | Concrete homework assignments (rental, emergency, planning) |

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Notable Quotes Recap

• On conflicting goals:
  "What you've laid out for us is that there are multiple goals in conflict." — Brian Preston ([25:58])
• On real estate reality:
  "Where is this brochure of this passive income when I watch my home improvement channel?" — Bo Hanson ([12:21])
• On patience:
  "This is why you have to be patient and do it in the right order... opportunity costs... can have a bigger drag on your future than you might realize." — Brian Preston ([16:06])
• On lifestyle vs. money:
  "Are you sacrificing more family time just for the sake of a dollar bill?" — Luke ([41:32])
• On planning:
  "Do the 3D glasses legitimately. Do it now." — Brian Preston ([44:40])

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Closing Thoughts

Brian and Bo deliver a valuable, non-judgmental coaching session that highlights the importance of proper sequencing in financial growth—especially as it relates to real estate investing. The episode is packed with relatable stories, hard numbers, and pointed reminders that financial “wins” can carry hidden strains, especially when life transitions and multiple goals collide. The takeaway: Deep planning and cash reserves are essential to avoid derailing your bigger life dreams for temporary, illiquid wins.

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Action for Listeners

Before chasing rental real estate, ensure your finances are rock solid, your reserves robust, and your major life goals aren’t in conflict. Use “3D planning;” run those scenarios—your future self will thank you!

Transcript

[Brian Preston]

Mike and Alyssa are always trying to outdo each other. When Alyssa got a small water bottle, Mike showed up with a 4 liter jug. When Mike started gardening, Alyssa started beekeeping.

[Luke]

Oh, come on.

[Brian Preston]

They called a truce for their holiday and used Expedia trip planner to collaborate on all the details of their trip. Once there, Mike still did more laps around the pool.

[Bo Hanson]

Whatever.

[Brian Preston]

You were made to outdo your holidays? We were made to help organize the competition. Expedia made to travel.

[Luke]

So we bought a house during COVID getting married.

[Bo Hanson]

Buying a house. This sounds like y' all are just checking the boxes.

[Brian Preston]

You know, a lot of people hear about the automatic millionaire idea. You actually sold and made the decision to buy basically two houses at one time.

[Hannah]

We're kind of hemorrhaging cash here and we need to build our reserves back up for some type of worst case scenario.

[Luke]

Well, we do have that. Our primary house, where there's things that we want to do to that there's.

[Bo Hanson]

Some bigger things going on here. How many kids have you all talked about?

[Hannah]

2 to 3.

[Luke]

And I would almost. Maybe I put my rose colored glasses back on and just say, nah, let's just figure it out.

[Bo Hanson]

So you're saying you'd grip and rip and just start a family and not worry about how the money's gonna come?

[Luke]

That's right.

[Brian Preston]

Where are you guys from originally?

[Luke]

I'm from Indianapolis, Indiana.

[Brian Preston]

Okay.

[Luke]

Yep. So my whole family's still down there.

[Brian Preston]

Awesome.

[Hannah]

I'm from Michigan. We met in school and then moved back up for jobs to Michigan.

[Bo Hanson]

Two soccer players too, right?

[Luke]

Two soccer players. That's how we met. Pre season, freshman year. Classic.

[Brian Preston]

That's awesome. When did y' all get Marri?

[Hannah]

Right after college.

[Luke]

Yeah. 2020. June of 2020.

[Brian Preston]

That's a great time to get married. Nothing else going on in the world, right? That's awesome.

[Luke]

How many weddings did you plan?

[Hannah]

We the running joke that we planned like 30 different versions of our wedding.

[Luke]

Gosh. Invite everybody. Uninvite everybody. Invite them back.

[Brian Preston]

Yeah.

[Luke]

Yeah, man.

[Brian Preston]

So you get. You get married at 22. Is that what you say? 22 years old. Awesome. So I've been married for like five years now, right?

[Hannah]

Yeah.

[Brian Preston]

That's awesome. Been going pretty good, I'm guessing. We're having fun, right? Awesome. Good, good, good, good. Well, it looks like you guys have been crushing it, right? I mean, you were kind enough to share with us a net worth statement, kind of showing where you guys are presently. And for 27 year olds, like, you guys are rocking and rolling. Does it feel that way? Or are you like, I don't know. We're just kind of doing the best we could get. How do you guys feel about where you are?

[Luke]

Yeah, that's a good question. I feel like we're both the type of. I think the personality or we're grateful for what we have, but we're like, are we doing enough? Should we be doing more? What does that look like? But no, I think we recognize that we've been blessed and have made some good progress. And so trying to figure out, okay, now what's next? How do we keep that ball rolling?

[Bo Hanson]

Are both of you guys type a type personalities, where you're just like trying to pack in 10 biscuits in a five biscuit container? Is that kind of what y' all are trying to do?

[Brian Preston]

What kind of analogy is that?

[Bo Hanson]

I mean, have we not opened canned biscuits? You know, where they pop, you know, and they're already. They're already packed in there.

[Brian Preston]

Would you saying you guys are a tin biscuit kind of couple is what he's asking.

[Hannah]

We're both oldest children, so I feel like we kind of fit that stereotype in that sense. So I would say, yes, we know.

[Brian Preston]

Where you are today. I mean, here you are, 27 years old, total net worth of like over $200,000, which is incredible. Did you guys know about money early on, or y' all figure it out when you got married?

[Hannah]

I had a very healthy view of finances growing up. My dad was an entrepreneur. We grew up with the savings jar and the spending jar and the charity jar.

[Bo Hanson]

Bo resembles that.

[Hannah]

So I had a very healthy mindset around finances and I understood the importance of stewarding your money well, too. Especially. I grew up, we had four kids total, and my dad was the sole breadwinner, and he did well. I think growing up with that mentality definitely helped me now in the future, planning for our family and seeing how that turned out.

[Luke]

Yeah, I was similar, but a little bit different because I was the oldest of five. So big family. My dad was big family. Yeah, my dad was a pastor, so it looked a little bit different for us. And my mom was a stay at home mom, so a lot going on and they sacrificed a lot. But still, you know, growing up, I always remember they're very generous, you know, with their money. Sent us to private school, which was great for them. I had the envelopes too, the give, save, spend. But I was a personality. I didn't put anything in the spend. It was all save.

[Brian Preston]

You see her nod? Is that still the case now? Is he for sure? Okay, awesome. It's a good balance.

[Hannah]

It's a good balance.

[Bo Hanson]

And how's your balance? Because now that we've kind of heard Luke is tight on that save part, where do you fall between the spend and the save?

[Hannah]

I used to be a really big saver, especially growing up. When. Especially transitioning into getting my first big girl job and making a decent salary. I have swung more to the save or spend. Excuse me. Yes. But I'm definitely more of the. I like to have experiences and travel. I'm the spender, by the way.

[Bo Hanson]

Don't misread. I wasn't saying that Luke was right with being super tight either. I mean, I think there is definitely a healthy balance. What do y' all do? Because I don't know if we got the scoop. What y' all do for a living.

[Luke]

I'll start first because my job is the boring job, but I'm a project.

[Bo Hanson]

Not necessarily.

[Luke]

But it is. But I'm a project manager, so I work for a healthcare IT company.

[Brian Preston]

Awesome.

[Luke]

And I'll just leave it at that. Cause it can get kind of complex.

[Hannah]

But, yeah, I work in public accounting. But I.

[Brian Preston]

You see how he started grinning from ear to ear as soon as you said that made him so.

[Hannah]

I know. I know. The cpa. Yes. So I'm in public accounting, and I work as a forensic consultant right now, which is pretty fun.

[Bo Hanson]

That's pretty cool. Forensic accountant.

[Hannah]

It is fun. It's the most fun version of accountant.

[Bo Hanson]

If you're not going to get a TV show, it's gonna be a forensic accountant. It's not going to be any other version of accounting. It's not like you're going and taking inventory of a car lot or a lumber yard. It's going to be a forensic accountant. So you have, like, the sexiest version of accounting job.

[Luke]

So it's pretty cool.

[Brian Preston]

Here you are, 27 years old, $200,000 net worth. A great income for two. Folks in their late 20s. Make about $180,000. As a household. You guys are doing really, really well. And you've had some really solid behaviors. When we look at your cash right now, you have about $13,000 in cash. We'll talk about that in a moment. Your total investment assets are right at about $132,000. You have real estate representing about half a million dollars of your total portfolio. And then you do have some debt on the books. You have a primary mortgage of about 315,000, a rental mortgage at about 120,000. And then it looks like you Have a small car loan right there at about a thousand bucks. Now, as we were looking through this one thing that immediately jumped out to us. We said rental, rental property. That kind of walk us through, how'd that end up on the balance sheet?

[Luke]

Well, we sold our first house. So we bought a house during COVID getting married.

[Bo Hanson]

Buying a house. This sounds like. Yeah, we're just checking the boxes.

[Luke]

We get in trouble sometimes because we like to go fast. And so I was like, let's, let's do the next thing. What's the next thing? We'll check it off the box. But it was sad to see that, you know, that Covid interest rate go for the second house.

[Bo Hanson]

So. So you, you. But you sold a house. How did we get into this rental.

[Luke]

With the cash from that house? Okay, we took some of that. We replaced what we put for the down payment for the second house. And then we were sitting there trying to think what would we do with the rest of that cash? Because the house that we moved into was a little bit of a fixer up or two. So there's some projects that we wanted to do to build some equity. But we've always talked about real estate. We like the idea. We've been trying to learn a little bit about it. And so we just said, we're young, we don't really know what we're doing, but we have this cash. So let's try and like get in that space and figure out as we.

[Brian Preston]

Go what was the impetus to leave the first home.

[Hannah]

We kind of lucked into it. We knew we weren't going to stay in the starter home. So we were passively looking and we came across this house that we really liked. The market in Grand Rapids, where we live is wild. I mean, houses go for way over asking cash buyers. So we, I mean, we really couldn't compete. Traditionally, when we walked through the house, we figured out just with the seller situation, like maybe we would be able to come in and actually get it for market value, which we were. So it was kind of a no brainer decision because that just doesn't happen getting a house at market value.

[Luke]

And it was one that we could see ourselves.

[Bo Hanson]

So when did you buy the first house? What did you pay for it and what did you end up selling it for?

[Luke]

We bought the first house in the spring of 2021.

[Bo Hanson]

Okay.

[Luke]

I think we bought it for 193.

[Hannah]

Yep.

[Luke]

And then we sold it for 295.

[Bo Hanson]

Wow.

[Luke]

So the market and what year did you sell it? We sold that Last. Was it last year?

[Hannah]

Last year?

[Luke]

2024, yeah.

[Brian Preston]

Awesome.

[Bo Hanson]

Wow. It's incredible.

[Luke]

Fortunately and kind of, you know, luckily, we timed the market pretty well for that house.

[Brian Preston]

How'd you guys think through? Okay, do we roll all of this into the new house? How much do we put down in the new house? It's a fixer upper. I just want to know where the mentality was, because a lot of folks out there are in their first home, they've never bought their second home, and they're facing that kind of thought, like, oh, okay, I've made money, but interest rates are the same. What do I do, and how do I approach that? Walk us through how you guys had a conversation around that.

[Luke]

A lot of long conversations. Because it took us a while to figure out what to do with that equity. We parked it in a high yield savings account. Just said, let's try to figure it out. We already had money in the stock market through our retirement accounts, and we had some in the brokerage account at that time. So we knew we liked the idea of diversity diversification and then even figuring out, again, getting into the real estate space. So that was kind of the rub. We were like, well, we could do this bathroom project that we want to do in the new house, or we could buy a rental. So I bought a rental.

[Brian Preston]

You know, a lot of people hear about the automatic millionaire idea. Like, I buy a house and I live in it, and then I move out of that house, and I just keep it as a rental. You guys didn't do that. You actually sold and made the decision to buy basically two houses at one time.

[Luke]

So that was another decision was we talked with our realtor and the house that we were in, just based on what the mortgage was and then what rents were in the area and the age of the house. He's like, I wouldn't keep it as a rental.

[Hannah]

Yeah.

[Luke]

Just from a cash flow standpoint.

[Hannah]

Yeah. It would just feel. Felt like the best decision. And we did need the cash, probably from the house, the equity to buy the second house. We just didn't foresee that it would be so much equity. Like, we sold it for way more than we ever thought we could.

[Bo Hanson]

I'll go a little harder on it because there's some things that I just. I'm scratching my head on. You did great on the first house. Now I have to ask the question, what was the interest rate on the first house?

[Luke]

299.

[Bo Hanson]

Okay, I know, 299. No fault on the upgrading of the house. I mean, if you think about it Yalls and total net worth is 211. We've just seen that over 100 grand of this is this home equity. Fantastic transaction that just man, oh man, it popped. So well done. You get to be the beneficiary of that. We have this hundred thousand dollar windfall come our way. And yes, real estate seems like something that was in the back of your mind when you're thinking about doing rental property. What led to an out of state rental property?

[Luke]

Totally. And that's a great question. I. So I've got family in Indianapolis which is where the rental is.

[Bo Hanson]

Okay.

[Luke]

So my sister's a realtor. My parents have a couple rental properties in the area. My sister has a couple rental properties in the area.

[Bo Hanson]

I'm starting to put together a picture of peer pressure here.

[Luke]

Okay, keep going. It seems cool.

[Brian Preston]

This is the thing to do.

[Luke]

So I grew up in the the area too, so we knew the area well. The price point to get into that space was a little bit lower. The rental we bought for 150 and I don't think you can get anything under 200k in Grand Rapids.

[Brian Preston]

So you paid, you paid 150 for the rental. How much did y' all put down on that?

[Luke]

20%.

[Bo Hanson]

How is the managing that rental going?

[Luke]

That's the attention right now. So we started and said, let's do this as a long term rental with the interest rate on it like 7.

[Bo Hanson]

5, a little different 2.9.

[Brian Preston]

That's not as fun.

[Luke]

So the cash flow obviously isn't great. But we knew, okay, this is an up and coming area. There's a lot of development planned in that space for the city. So we could hold it for a couple of years. Maybe it appraised for hire. So we had a property management company come in, say this is what the market rent would be. And we were happy with that number from a cash flow standpoint, felt comfortable. And so for the first time two months we had them marketing our property and didn't really love how it was going. Had a little bit of interest, but not a ton. And so we kept having to drop the rental rate a little bit lower.

[Brian Preston]

So for the first two months after owning it, you were, you were vacant. There was no one in there.

[Luke]

Okay, we're paying the second. It's our summer house is what we call it now.

[Bo Hanson]

Is there a tenant in it now?

[Luke]

No, it's still vacant.

[Brian Preston]

So. So this is your very first rental. You. I just want to be clear. It was not. Hey, I bought this rental property and we Closed on it. We had the money, we did it. And all of a sudden, day one, a renter showed up and now it's just mailbox money. That's not been. Again, a lot of people out there say, hey, I want to do rental and I want to do rental real estate. I understand how it works. I'm gonna have somebody else pay my mortgage. But that's not what you've been experiencing thus far, right?

[Luke]

Yeah. There's two sides.

[Bo Hanson]

Is this brochure not popping yet? Where is this brochure of this passive income? When I watch my home improvement channel.

[Luke]

Yeah.

[Bo Hanson]

Where is this at?

[Luke]

It looks like on Instagram.

[Hannah]

Well, we have changed tactics now. We've changed. We decided we're not going to go with the traditional property management group. We started marketing ourselves so we feel like we have more control over it. There is nervousness to it. I think we've already learned some good lessons. Like the comps that we thought we were going to be able to rent it for were not.

[Brian Preston]

Not accurate.

[Hannah]

Yeah, they were not accurate. And so I think we probably learned like we could have done a little more research ourselves. So, yes, there's nerves. I feel more comfortable. I would say we both feel more comfortable now with what we're doing, but it is still vacant. And that is something we're still paying cost. Yeah.

[Brian Preston]

Did you guys before you did this? And it's okay if the answer is no, but one of the things we tell people before they go into like some big life decision, like investing in a rental property, we want you put in your 3D glasses and so do sort of these three plans. What's the dream plan? If it goes like the brochure, what's the down to earth plan? Like our highest probability outcome. And then what's the doo doo plan? I imagine that 3 months vacancy was not the dream plan.

[Bo Hanson]

And y' all did it. Y' all did a lot of improvements on it too. You put like 16, 17 grand into the improvements, right?

[Luke]

Yep.

[Brian Preston]

So it wasn't the dream plan. It sounded like maybe it's not the down to earth plan plan. Give us some context. Have you guys figured out like how far does the doo doo plan go? Like, what are you said you have some more tactics. What are what levers are you pulling to try to like ease this cash flow burden right now?

[Luke]

Probably spending less like our own personal.

[Brian Preston]

So you've had to bever down the hatches to make sure you can cover two mortgages.

[Luke]

Yeah. So that. That has helped sustain us a little bit because we're it's not like every month that mortgage is coming out of our savings. Now we are obviously much more lean were when we had that 100k sit in the high yield savings account. We felt really good then.

[Hannah]

Yeah.

[Luke]

But it has been a little bit. Okay, let's pull back some of our personal spending, try to support that mortgage with our income coming in each month.

[Brian Preston]

You said you've changed some of your tactics, your marketing. Have y' all lowered what you're asking in terms of rental rates?

[Luke]

Yeah, yeah. And then because also the thought was too, you know, we do have some boots on the ground there with family members, but we've also been learning a little bit more about how we could self manage the property and do that in a professional way. And then also that will cut out some of the property management fees that would eat into our cash flow.

[Brian Preston]

Do you have like your bottom line number? Like we know that this is the cost to carry the mortgage, this is principal, interest, taxes, all that stuff plus maintenance. And we believe we're going to be able to get rent to at least break even. Or are you going to have to settle for a rental rate that's below market where it's actually going to be a cash outflow for you guys?

[Luke]

No, I think right now we're still, we're still cash flowing a little bit. Okay, so right now the rent is 1550. I think if we went down to, to 1450. That's where you're saying you're basically breaking even.

[Brian Preston]

Got it.

[Luke]

You're not saving for maintenance or repairs or anything like that. But with the mortgage and the, you know, property taxes and insurance, you'd be breaking even. Initially that was our thought. We were like, well, we're okay breaking even because we know long term it will appreciate. And then, you know, maybe the next turn you could raise the rent. But then I think we had to drop the rent initially more than we thought. So now it's been a fun little activity of trying to say, okay, so.

[Brian Preston]

You guys want to go. It seems like you guys have a great attitude. Like I'm not, I'm not feeling, feeling like a ton of like nervousness and anxiety from you guys. Is that an accurate read or are y' all just really good at hiding it?

[Hannah]

I don't think we're naturally anxious people. I think we kind of went in with the mentality of like, what if this was worst case scenario and you lost everything? That would suck. But I think we both felt like we were young enough to take on a risk. If it really did go bottom up, it would still be okay.

[Brian Preston]

And I imagine you could still again do plan scenario. You could probably just relist the house and sell it. You got into a really bad spot.

[Luke]

Yeah, we had it comped again after the repairs and it was at 190.

[Brian Preston]

Okay, so you've got some built in equity already. That's great.

[Bo Hanson]

If your carry is around fifteen hundred dollars a month. And you guys, it sounds like you're just cash flowing it to a large degree or that fifteen hundred dollar cost, has that impacted your savings and investment rate as well? I mean totally full disclosure, we love real estate. Yeah, we're big real estate people too. But the thing I often caution people about looking at this passive income brochure versus the reality of it is that a lot of times you've got to have enough liquidity underneath you in case the brochure doesn't work out. It's back to Bo's doo doo plan. It's easy. I think if you've gone through the first seven steps of the financial order of operations, you can carry the months. You can be very picky about who you get in there as a tenant because you're probably going to have that tenant for five, seven years and they're going it's mailbox money at that point. But as you guys are quickly seeing, it takes a while. You need margin to get that right person in there. And then what scares me is that we've got less than 10 months of coverage because not having a tenant in there, not having anybody in there, if all of a sudden, you know, a toilet started dripping, all of a sudden we have a $10,000 repair. That really puts you guys in a tough pickle of a situation. Y' all are so young. Your wealth multiplier. If you've ever gone to moneyguy.com resources, every dollar that you guys put into long term investments has huge impacts at your age that you can imagine. If we're gutting the savings because we're having to carry this, it's going to hurt you in the long term. We all are revisionists and you all are type A. You're trying to get it all in. You're going to do okay on this no matter what. I think you'll eventually either start cash flow in this, you'll get a tenant in there, or you'll just decide, okay, I'll cut loose and I'll take that equity and you'll look out and you'll be like, okay, we ended up making money on this Transaction. What I'm always trying to educate people on is this is why you have to be patient and do it in the right order is that I don't want people to have that revisionist history where you think this actually turned out okay. When potentially all of the opportunity costs of this, the thousands of dollars that didn't get invested, it can have a bigger drag on your future than you might realize. You guys are doing so well. I want to figure out how we get you in the right place. Because another thing that I wanted to ask about. Where are y' all at with like family planning and other things like that? Because that's gotta come into Yalls decision matrix as well, I would think at this point too.

[Hannah]

Okay, I'll go. That is. That is one of our short term goals. That's something that we want to start planning for. That's something that we both really care a lot about. And we have been. We always said when we first got married we said let's be married for five years. I don't know why. That was the magic number. And then we'll think about having a family. We're curious about what that would look like. And especially planning financially for that. Like that's a big change in your life but also in your finances.

[Brian Preston]

Yeah.

[Hannah]

So that is one of our near term goals is that we would like to start.

[Luke]

Especially when you think about like that and then at the same time how do we keep our savings rate or.

[Bo Hanson]

How do we like and what's income coming in? Because they'll probably have an income on that. Impact on that.

[Brian Preston]

As you guys have thought about starting a family and what that looks like, what's that future look like for you guys?

[Hannah]

We've had a lot of conversation and we. Our mentality always comes back to. I'm just not sure there's the what if one of us goes part time and what if we hire childcare? One thing we both feel strongly about is not putting our kids in daycare. That's just a decision we don't feel comfortable doing ourselves. So whether that is someone goes part time, someone comes home full time, maybe do something more creative like just an in home nanny. We felt fine about that too. It always comes back to I feel like we just don't know what we don't know. I think one of the most feasible things that we've talked about is one of us going part time.

[Luke]

Got it from the job and I work remote too. So it's pretty flexible.

[Hannah]

Yes.

[Luke]

You're hybrid public accounting. Not quite as Flexible.

[Hannah]

Yeah.

[Luke]

And also Hannah's. She's the driver, too. She's more of that type of person. So I think for you, it's hard to think about, okay, scaling back and maybe not working as much, even though you'd be doing something way more valuable, too. Trying to flush all that out is kind of where we're at.

[Brian Preston]

If I'm hearing you say this, it sounds like you guys are open to a lot of different scenarios because you just threw out there. Both working, one working part time, one not working at all. It doesn't seem to me that it's been clear who would be the person to change career trajectory. Have you guys had that conversation around who it would be and how that would look?

[Hannah]

You can correct me if I'm wrong. It probably would be me. The reason I say that is because I work significantly more hours. So it just makes sense from a practical standpoint for me to also be able to cut back on hours. I think that wouldn't be sustainable.

[Bo Hanson]

When we had a family, what planning have you all done? The doo doo planning on, like, rental property, family planning. What have you all done so far? So I can make sure we kind of know where we are as we start showing you some of the things we have been doing behind the scenes, I think for.

[Luke]

So the doo doo plan for, like, for the rental, for everything.

[Bo Hanson]

Because this is all. By the way, your financial life is all interconnected. You know, it's not one decision doesn't do just one thing. They all kind of work together.

[Luke]

Right? Right. And so I think that's. For us, where it gets a little bit murky is because you add in the variables of a rental property and trying to save and then planning for having a family, and that's where I don't know if this is right or wrong. That's kind of why we're here. But, like, you know the brokerage account, right, where we've got money in there? I'm like, well, if things do go really south, we can liquidate things there. Obviously, you're kind of pulling out of that. There's opportunity costs there. But maybe as a fail.

[Bo Hanson]

Did y' all actually do a plan, though? Or is this just. Y' all felt like everything had worked so well? It'll just work out.

[Luke]

Just work out. Okay.

[Bo Hanson]

Okay. That's what I just.

[Brian Preston]

That's okay, by the way. That's okay.

[Bo Hanson]

Y' all have done great. I mean, look, y' all have done great. It's just that I was just curious to know how much went into the process. So now we can kind of figure out and triage you guys.

[Luke]

You can yell at us.

[Bo Hanson]

Well, no, we're not that type of.

[Brian Preston]

Show because you said a lot of things, like you didn't use the word it depends. But you said, hey, there's a lot of different options and we're unsure. And it's a little murky, I think is the word they use. And what we want to do is maybe apply some clarity to the murkiness. Give us an idea from a lifestyle standpoint. What's your current burn rate? Like, how much does it cost you guys to live the life that you want to at this present day?

[Luke]

So I think if it was more fixed expenses, it would probably be 5 to 6K. Okay. And that's. That's dropping out, like, saving for a trip or maybe, you know, other things that we're. We like to do.

[Brian Preston]

You guys right now are both. You make about the same income, right? So two income, family. There's no kids yet. So you would be one of those couples that we would say could probably, from an emergency reserve standpoint, fall into that, like, three months of living expense category. That's probably somewhere between 15 to $18,000 in an emergency fund. And that doesn't include the rental. We're going to talk about that.

[Bo Hanson]

I was about to say there's a big asterisk sitting on top of this.

[Brian Preston]

And so right now we see that you have about $13,000 in savings, and you're also having to, like, cover this rental. So where would you guys say you are in the financial order of operations?

[Luke]

I want to say five. I want to say step five.

[Brian Preston]

You want to.

[Luke]

I think we're probably a four.

[Hannah]

Yeah.

[Bo Hanson]

Public accounting guy.

[Brian Preston]

Here's what's really wonderful. Again, we can kind of see this. In that worst statement, we say how? I think we're here. We're here. A lot of people think the financial order of operations is kind of this straight line. And we always talk about on the show, like, hey, it's not exactly a straight line. We thought it'd be really interesting to show you guys. We actually tracked your financial order of operations to see where you guys are. And you can see starting in 2020, all right, you graduate college and you get married, right? And we kind of go on this thing and we start saving. We get to emergency funds, and then our career progresses and we get into step five. We're doing Ross and HSAs, but then we want to save up for a house, and so we kind of go back to emergency reserves. And then we buy the home, we go up and then the home does really, really well. And it creates some advanced opportunities for us to do some other stuff. We go up and then we come back down. That's okay. Financial order of operations is not a straight line. But when I think about where you guys are right now, present day, I would say you are hard in step four and you're also in step four. And I think that step four is likely going to change for you. Right, because we just said right now with no kids, you guys earning the level of income that you're earning, your mercy fund should be 15 to $18,000. If you end up like backing down where one of you is the primary income earner, or maybe there's only one income earner, well, now you become one of those families who it potentially should be like six months of living expenses. And that doesn't even factor in the fact that you do have this rental. Because we are proponents that once you get into step seven and step eight and once you start having other types of assets like rental properties, you have your emergency fund for living expenses, but then you also have your reserve fund for that sort of thing. So when we thought about sort of a cash layout for you guys right now, today, your cash, if we're going to have three months of living, it'd be 15,000 plus the three months of real estate vacancy. Because we think that would be like a true reserve for like rental folks. You should probably be at $20,000 based on where you are today. So we have about an $8,000 shortfall. So like immediate goal, like before we even like do the family planning stuff is how do we get from 12 to $13,000 of cash to like $20,000 of cash? When I ask you that question, what's your immediate response? Like, how would you guys do that?

[Hannah]

I think that is what our con focused around. Like that rings true to what we were thinking too, is that we're kind of hemorrhaging cash here and we need to build our reserves back up for some type of worst case scenario. So right now what that's looked like for us is tightening up more of our spending, discretionary spending than we have. I would say rice and beans, baby, we could do it if we needed to.

[Luke]

But I think that is hard too because again, going back to this maybe almost shiny object syndrome, where we have a lot of going on at once is what we do have then our primary house, where there's things that we want to do to that too fix it up. And so trying to figure out where is the best place for those dollars to go.

[Brian Preston]

I love it. So what you've laid out for us is that there are multiple goals in conflict. The only short term goal you said for us was, hey, we want to start a family, right? Like that's a short term goal. But you just threw out another one. Hey, we'd like to improve our current home. And then I imagine there's some long term goals in there as well, like financial independence. Like what are some of the long term goals that you guys have?

[Hannah]

That's for sure. The financial independence one of them. That's I think where we initially that was probably the biggest driver for us getting into real estate, for better or for worse, is thinking about being able to take back some of the hours that we work in our W2 jobs by just dipping our toe into real estate. I think we're not at stressed about the property right now because I do still see it as whatever happens, like you said, we still could just relist this property and make money and we could probably go back to where we were before we purchased this rental property.

[Bo Hanson]

There's some bigger things going on here. How many kids do have y' all talked about? Give me a range.

[Hannah]

Two to three.

[Luke]

Yeah.

[Bo Hanson]

So here's what I'm worried about.

[Brian Preston]

Hard three. Two to three. Did you see that happen?

[Bo Hanson]

Well, here's what I'm worried about. Y' all have a deficit here. And what I'm worried y' all are about to say is, is we'll just go have to button down the hatches and work even more. So we're going to defer this decision as a family on when we get to start growing the family. And as the sentimental guy here, I'm just like, I don't. Is that what you want to do or is that what you now feel like you have to do? All because we made this decision of the rental property. And let me tell you, most financial mutants who are wired like you guys with this type A personnel, you're not going to leave the planet broke. So you have to start asking yourself, am I making some decision right now that is going to sideline my 50 year old version? Thinking about kids, potential grandkids, that I'm going to be ticked off at myself that I bought this rental property that caused me to push things off for 18 to 24 months and now I had to make completely different decisions than what my ideal was. That stuff hurts me because money is just a tool, you know, And I know we all get Caught up in the brochure of let's maximize, let's get. Let's get to millionaire status and let our money work for us as fast as possible. But if we make a decision that locks us into this rut that now we don't get to live our best life of what we daydream about is what our future life looks like. I would almost say, can we get a reset here? I mean, because y' all are so far ahead of the curve, but yet we're locked. Or potentially we'll go through the numbers with you. I just wanted to kind of raise the temperature a little bit because this is hitting me. I'm like, they're gonna start getting squeezed. The time is going to be your element. You'll have so much ahead of you. But I can already just start seeing we're gonna have to make some tough decisions that impact so much.

[Luke]

That's the rub, right? We're both kind of that type A personality, but I think when it comes to family, that's such a big thing for both of us that I would almost, maybe I put my rose colored glasses back on and just say, nah, let's just figure it out. You know, we can go from there. Maybe, you know, our cash isn't where we need it to be.

[Bo Hanson]

So you. So you're saying you grip and rip and just start. Start a family and not worry about how the money's gonna come.

[Luke]

That's right.

[Brian Preston]

Well, and that's.

[Bo Hanson]

That's a choice too, Hannah.

[Brian Preston]

How's that make you feel?

[Hannah]

That's not really what you think.

[Luke]

I could do it.

[Hannah]

Okay. Well, I feel like we should plan a little bit, though.

[Luke]

I agree.

[Hannah]

Okay.

[Luke]

I'm not saying. I'm not saying don't plan. I'm just, you know, I'm with you, Brian. I don't want to delay our family because we feel like we have to get to this number.

[Bo Hanson]

But also, I don't want. It's not just the delay in the family. It's also just hardship for the sake of just having hardship. Because we made one decision. Sure, if you don't have to.

[Brian Preston]

The question that we had as we were sort of like triaging and assessing is the timing. While that's a wonderful goal to be able to create a family business where you're doing this real estate thing is now is this moment the time to begin going in that direction. And it may. It may be the answer may be grip and rip, but what we want to do is apply some real numbers to it because we just Showed you right now, present day, we would argue have about an 8,007, $8,000 shortfall in your emergency fund. But if you're going to make a decision around, like, hey, we're going to decrease income where it really depends on one or the other of us to be the primary breadwinner, then you probably do need to expand your living expense emergency fund out to six months. So just doing that takes us all the way out to $35,000. And we still have the real estate becomes even more risky, more aggressive when there's one income who's having to float that or a majority income. So right now we would say that your emergency fund should be close to like 20,000. But realistically, if you're going to make an employment change based on family planning, your emergency fund should be closer to 40 grand. I want you to kind of put that in your mind because we've actually done the work for you to say, hey, if you did decrease your income, what's it like if you're both working? What's it like if one of you goes to part time? What's it like if you go down to one income? And we want you guys to see the hard numbers that didn't determine, okay, yeah, we can make that work. We can do this. Does that sound fair?

[Luke]

That's great.

[Brian Preston]

Okay, so let's assume that we go through the scenario of you guys both working. And if you're both working, let's assume that your gross income is going to be $180,000 a year coming in. If we break that down into monthly income, it's going to be about $15,000 a month. Well, we think that with $15,000 a month, this is what your budget would likely look like. We've already established your mortgage is going to be right around 29amonth. Once we think about taxes, it'll be factored in. That's going to be just a touch under $3,700 a month. And at this income, we really do believe that you can be saving and should be saving 25% of your gross income. So that would be $3,750 a month. Now, if you're both working, that means that there are going to be some child care costs. So we just said, okay, if we look at the national average for child care, what would that be? And we came up with an estimate of about $1,200 a month. So if you add all of that up, that leaves about $3,400 left over for lifestyle, for doing the things you want to do the way that you want to do it. Now, obviously, you can. The remaining bucket and childcare bucket is kind of flexible. You can kind of combine those two.

[Bo Hanson]

And it could go up if you're doing private nannies, other things like that. As you can imagine, this is. This is more of a daycare. And that's what. So we're a little off already because y' all are like. Because I heard Hannah say we do not want to do the daycare. So I'm always like, danger, danger. We might be on our assumptions a little bit.

[Brian Preston]

Okay, so the question we have is, okay, you've got all the. All the savings taken care of, and you got the home taken care of. $3400 a month discretionarily for, you know, diapers and eating out and doing that fun stuff and having the date nights. I imagine that seems fairly reasonable, fairly feasible. You could. You could. You could make that work. Likely. And if you did this, it's wonderful, because, remember, you guys are here saving 25% of your gross income. And if you just. Let's assume that you do this for the rest of your working careers, and you save that 25%, no pay raises, no increases, this sets you up for an amazing, great, big, beautiful tomorrow. You can see that at 27, you have 132 invested. You have that 25% savings rate. We just assumed a 9% rate of return for you guys because you are so young, your portfolio grows to be like $18 million by the time that you get to 65. Now, obviously, at 65, 18 million won't the same as it is today. But we would say if you just want to assume a 4% withdrawal rate, that would generate for you about $20,000 a month to live off of in today's dollars, $242,000.

[Bo Hanson]

We brought that back to present value because, I mean, when you see those big numbers. And by the way, do you see the magic from 55 to 65? This is why there was a part of me that said, don't show them the 65, drop this thing, because that requires. There's so much that has to happen for this to work. And, you guys, this is almost fairytale land here, because we know the savings rate is way below 25% right now, but this is bringing it back. A lot of good stuff happens. If this was what was working in the background.

[Brian Preston]

So we would call this again, if we're putting on our 3D glasses, this would kind of be the dream plan. You got tons of income Coming in, you have enough discretionary, you can save at the rate you need to save. This would be the outcome. I want to flip the question around to you guys. How realistic is you for you guys to start a family and both continue working full time hours you're working right now?

[Luke]

I'd say that's probably less likely.

[Brian Preston]

So while this might be the dream plan, financially, it's probably a low probability outcome in reality based on the other short term because again, money is nothing more than a tool based on the short term goals that you guys have. This long term goal has to be adjusted. I'm going to call this dream plan. So then we said, okay, what about like down to earth dream easy plan, Dream easy plan. What if, what if we did one of two things. What if one of you decided to go to part time or one of you just has career trajectory that would allow your income to increase to where as a household, whether it's one of you bringing it in or both of you in some combination brought in about $135,000 of income? Well, if that's the case, the monthly gross amount coming in would be $11,250. We already have said your mortgage is going to be just over $2900 a month. On a lower income, the tax amount will go down, It'll be about $2,400 in taxes. We recognize there's a good chance you likely won't be able to save the full 25% that we like. But we still think you should be able to save 20% at this income level. So that'd be $2,250. Now, if only one of you is working, or if perhaps one of you is working part time, we do think the childcare costs would likely be lower. So. So $600 a month for childcare. So if you add all of that up and think about the gross income, that would leave about $3,000 a month for lifestyle for doing the things that you want to do on your terms. Give me some feedback. Does that seem reasonable?

[Luke]

Just looking at that, I would say we'd probably need to make some changes.

[Brian Preston]

You'd have to cut back probably.

[Luke]

At least with our current spending and all the different categories agree, I want.

[Brian Preston]

To remind you this does not factor in the rental. The rental is another thing above. And because you know, if you have to continue carrying that rental mortgage, I just want you to envision what happens to that remaining bucket and that childcare bucket. And again, this is not to be frightening. That's not. That's not our goal.

[Bo Hanson]

I think it should be frightening.

[Brian Preston]

Brian wants to scare you. I just want to enlighten you because. Okay, so you get a tenant in here and it's easy street and it's good times, rock and roll. But then something changes in their life and a year from now they move out and then you have another vacancy. Just because you have a tenant today does not mean that you will have a tenant in the future. Right. That tenant is only good as the lease that you have in place. And even then, sometimes it's not quite that good.

[Bo Hanson]

I'll even play it up even more. What if they're changing engines in the living room? I've had clients and people have heard me tell the stories or they get ticked off at you and they rip off all the cabinet doors or they do something because people do the craziest things. We had another making a millionaire and they've actually done really good with real estate. But they talked about their very first one. They put a convicted felon in there because they're, because they were self managing, didn't do any background checks and they like, man, oh man, we didn't realize what a just pill we were getting ourselves into by putting a convicted felon without knowing what we put a convicted. Because nobody goes willfully, let's go put a felon in our rental property. This is the part I mean, like I said, I'll let Bo keep being Mr. Nice Guy. We'll be good cop, bad cop. But I'm like, I see 3,000 bucks of flex and margin and we got $1,500 that might just evaporate because of this rental property. What are we doing?

[Brian Preston]

I just, it creates a risky exposure for you guys. Having that there, having to, having to know that you would be on the hook for that. If you can't get a tenant in there, if this works and this is the outcome and you're able to save 20% of that income for the future, again, assuming that the rental stuff doesn't derail that, it's still a pretty exciting trajectory. You can see right now $132,000. Today we're going to invest 20% every year for your working life out to 65, you don't quite end up at that 18 million terminal number, but you end up at about 12.7. And in today's dollars, assuming a 4% withdrawal rate, that would generate for you about $166,000 in today's dollar. So that's, you know, doesn't factor in Social Security or Any other income sources that's just in the portfolio. That's kind of like living off of the interest idea. That seems okay, right? Like, that would. That would likely work based on the lifestyle that you guys would be living. Right. Again, you said in order for this to be a reality, we'd have to trim some stuff and we'd really need everything to go right with the rental. If anything goes wrong with the rental, it kind of derails us.

[Hannah]

Yeah.

[Brian Preston]

Okay, so now let's look at the third scenario. And I wouldn't exactly call this the do do scenario because that makes it sound like it's the worst outcome, because I don't know which one is more likely between this third scenario and the 135 we just laid out.

[Luke]

But.

[Brian Preston]

But if you guys said, hey, we're going to start a family and we're just going to go to one income. Right. And let's just assume that one income is right where it is today at $90,000 a year. So that's $7,500 a month that we're going to have in gross income coming in. We know that mortgage is still going to be $3,000. We know that taxes at this income will be just under fifteen hundred dollars a month. We still want you saving. We still want you building for the future. So if we just have a, so 15% savings rate, that's going to be a little over $1,100 a month. And when we factor all that in, that leaves just under $2,000 a month for everything else, for eating out, groceries, utilities, date nights and ohs. Diapers, Any unknown. Well, that's. Diapers are nuh.

[Luke]

I've heard those are expensive.

[Bo Hanson]

Diapers are nuh.

[Brian Preston]

And unknown unknowns. When you see that number, how does that make you feel?

[Hannah]

That really is rice and beans. That feels very.

[Bo Hanson]

Yeah, it's less than that. If you take the rent in there.

[Brian Preston]

If this were the reality, I want to show you one more piece of it and then I want some reflection. Right. If you were to do this, if you were to save this 15% every year, you can see from now at 27 out to 65, the portfolio still grossed over $8 million. But $8 million that far in the future, if we bring it back in, today's dollars would generate for you an income of about $109,000 a year that you could live off of again. That's great, but it's different than the other scenarios that we've played out. So you'd have to figure out, okay, what kind of lifestyle is that creating? Is that creating the lifestyle that we want to see in financial independence? When we show you this and show you like, okay, the decisions you have have both implications today as well as like in the future. What do you take away from seeing those three different scenarios?

[Luke]

Well, one, it's really helpful because it's clarity. I don't think that we had previously. It is a lot to factor in, I think and it does at least highlight for me. I don't know if you would agree, but just when you do add other variables like a second mortgage, in our minds we're like, yeah, we know this is a risk, but we'll figure it out. And then highlighting, okay, this is actually a risk and this is what that risk looks like and then how, how it could affect you.

[Hannah]

I agree. I think this is really helpful because when we were talking about a rental property, I never really considered the opportunity cost of, of pulling back on your other savings. I don't know why, but I didn't really think about that. So this is very helpful. Especially that first slide, the rose colored glasses slide. What it could be if you continued with the rate of. I think you said 25%. 25%, yep, is what that was. So I think this provides a lot of clarity. Like you said.

[Luke]

I think it's hard for me because I just personality wise am more of that saver where it is, okay, like maybe it is better for us to both to work but then you get into the thing of like, well, are you sacrificing more family time just for the sake of a dollar bill? Which I think we both agree, not the priority that we want to have. And so trying to figure out what the balance is there.

[Brian Preston]

One of the things we say on the show all the time is that so often when we're young, we think that if we seek out complexity or more advanced strategies, there will be a better outcome from that. And as we kind of like looked through your situation, we didn't really talk about the investments. We can talk about that as well. It seems like you guys are already positioned. You are super young and you are amazing income earners. Like you're doing everything fantastic, but you have now sought complexity and added some things into your financial life that's creating a stressor that does not have to be there. And so the question then becomes, okay, when we think about the goals that we want to achieve, what if we could achieve those goals in a much more simple fashion without having to put ourselves out there on the risk spectrum and Again, don't miss here. We love real estate rental. Real estate's fantastic, but there is a time and a season and a place for it. And the question we had as we were looking through is, did you guys make that decision at the right time, given all of the other various goals that you have?

[Luke]

It's a good question.

[Hannah]

Yeah. Well, I mean, yeah, going back to the slides, I think that was super helpful. There is an opportunity cost that I think we didn't consider as much, especially since starting a family is one of our shorter term goals. I think that wasn't as thought out as maybe as it should have been.

[Luke]

It's. And it's also, you learn, right? Because that is one of the things we've learned so much even from the first few short months of having this property. Like, we would do this different. We would do so many things different where, like, I don't even want to say this, but, like, what if we got another one? You know, that's where I know you guys are like, don't bring that up.

[Brian Preston]

He hasn't been listening. I'm kidding.

[Bo Hanson]

I got hope on. Hannah.

[Luke]

Turn my mic on.

[Bo Hanson]

Yeah, here's where I would hope you guys go home from here is because if y' all are, like working with us, there's several things that I would do as a homework for you guys. And Bo's the official homework guy, but I'm just. I'll play Uncle Brian here is, I want y' all to go home. And you didn't do it the first time. You didn't open up a spreadsheet, even though you have just, you know, rock star spreadsheet creator right here waiting in the wings. I would encourage y' all to do the 3D glasses legitimately. Do it now. And take your current scenario with rental property. Take into account, we'll get you all this stuff so y' all can use this as baseline assumptions. And then I would have you run multiple scenarios and figure and then take into account the family planning, too. Taking the non money stuff. But what is going to be the fruitful life that you all want to lead? So you look at yourselves when you're in your 40s, your 50s and 60s and beyond, and go, man, well done. We knocked it out and did it the right way. The building blocks is right now for you guys to figure that out. And I would. Look, I don't know the answer completely because I'd want to run this multiple scenarios, but I would hope that one of y' all scenarios is maybe we call one of These relatives that lives in the area who already has this propensity to be a real estate investor and say, hey, y' all want to buy us out or y' all want.

[Brian Preston]

To teach up a deal for us?

[Bo Hanson]

I mean, there's gotta. There isn't a scenario. I'm just trying to figure out how we level set you guys from the planning perspective. It doesn't have to be. Y' all could. Once you do the three. That's why the 3D glasses plan of going through the three scenarios is going to give you the clarity to say this is what we ought to do. Because if we were your financial planners, I would say I would put that on you guys. Or we would do it together as a joint exercise. So we could scenario plan it out to figure out what's the best path. Because the grip and rip, that's not going to work because it's just going to create. Look, life is already hard. I mean, it's just a natural thing that there will be things that happen to you that you don't know that are coming your way. Whether it's illness, accidents. There's just things that happen in life. So if you just grip and rip and don't plan, it just opens up a lot more turmoil and chaos. And I just know in relationships and everything, that stuff takes a toll over the long term. And I want you all to live your best life and be the happiest versions of yourselves. But you can't do the things with all the tools you have. With the grip and rip mentality. I just don't think it works. It's not going to give you your best life.

[Luke]

Life, I think for us, because in us, and if you look at everything in a silo, it's like, well, all these things are good things. But then it's, you know, if you do them all at once or at the wrong time, that's where you get into trouble.

[Brian Preston]

That's it.

[Luke]

And so I think that's even the rub that we're even the past month we've been talking about, like, well, we do want to start a family and it would be fun to travel, like when you have kids. Like, well, we do have this rental property and we like the idea of building a rental business. But then you start thinking about where the money is going and there's less there. And then, are you overexposed? Right. So this came at a really good time, too. Just talking with you guys.

[Brian Preston]

Before I give you your homework, what questions do you have for us? Anything that we didn't cover that you were hoping that we would cover or.

[Luke]

Mention to you both our employer plans are Roth 401ks. And I know you guys talk a lot about Roth iras. Is that something that we should look at as opening a Roth IRA or is that redundant with having Roth 401ks?

[Brian Preston]

Well, you know, generally the way that we recommend, if you're going through the financial order of operations, you can look that step number two is, step number two is your free employer match. We want you to participate in your 401ks up to the employer match. So whatever that is for either one of your employers, at least go get that. And if you're doing it on the Roth side, that makes a lot of sense. You guys are super young, you're not in a super high tax bracket. So I think Roth makes a ton of sense. But you could instead of putting additional in there, like if the minimum requirement to get the match is 3% but you're doing 6% there, rather than doing that, you could go open up a Roth IRA and begin saving to Roth IRA because it's going to be a little bit less expensive. You're going to have a wider opportunity in the entire investment universe, which I'm not entirely sure is a great thing for you guys, but it gives you a wider, wider investment universe you can invest in and it's completely portable. So like if you change jobs or you scale, you can leave it at Vanguard or Fidelity or something. So we love Roth IRAs and that's probably the reason why we would say to start doing that. But if you didn't and you just kept putting money in your Roth 401k, that's okay too because in our mind you're still building the step five tax free dollars. It's not like you're making a mistake by doing that. And I also want to remind you that even before you can begin moving in that path towards the Roth, like that wasn't even the right question to be asking because we just showed you that right now, today, presently you have a 7 to $8,000 shortfall in your emergency fund. Yeah, like priority number one shouldn't even be thinking about Roth 401K. Roth like you get the employer match and then every other dollar should likely be going to build up that emergency fund to a present day value of 20,000. And then once you figure out what the work situation is going to look like for the two of you, even think about how do we get that to $40,000. This is not prescriptive, but again if we look at the net worth statement, we know that right now the rental property you said is worth, you paid 150,000 for it. It's worth about 190. So your mortgage on it's about 120. Well, if you sell it, if you were to sell it right now for 190 and your mortgage is 120, you're walking away with a bunch of capital. That capital you walk away from immediately solves your emergency fund issue both today as well as, hey, if we went down to one income, we have enough to cover us that we don't have to change lifestyle. And then we can grip and rip and figure it out as we go through that. And we've gotten rid of a $1,500.

[Bo Hanson]

Monthly burn that's no longer there at 7.75% interest.

[Hannah]

I know. Yeah, that hurts.

[Luke]

That does hurt.

[Hannah]

Yeah, for sure.

[Brian Preston]

Here's your homework. The first thing I put is I wrote get a tenant or figure out the rental. Like figure out what the right decision. Something has to happen with the rental. It cannot continue on the way it is right now. Without being too biased, we have a thought on what you should do. But getting a tenant is also a solution. I think your next piece of homework, you got to figure out how you get your emergency fund up to at least $20,000. Like that's where it should be based on your current spend with an eye towards recognizing if you are going to make an employment change. It should probably be closer to like $40,000. Now if you did get rid of the rental, then you don't need those two, that bucket for the rental vacancy. So then your actual merchant fund might come back to like 35, $30,000. It does give you some reprieve on how much you need to keep in cash. The other thing you'll need to do is you'll need to go do your 3D plan walk through. Hey, based on our short term goals of starting a family, based on our intermediate term goals of having a real estate empire, and based on our long term goals of financial independence, how do we prioritize these and what's the most efficient mechanism to move towards those goals? And it's going to require figuring okay, who's going to stay home, who's going to back down hours, what's that going to look like and on what timeline do we want to be? If that's something that we want to have happen in the next six months, we've got to make some very, very serious consumption or asset decisions. Today in order to put that in place.

[Hannah]

Okay, that's great.

[Bo Hanson]

Thank you. Thank you. Y' all are awesome guys. It's been a blast. Bo, if somebody else wanted to come on Making a Millionaire, what do they need to do?

[Brian Preston]

If you'd like to be a guest on Making a Millionaire, you can go to moneyguy.com or if you want to check out any of our calculators or tools, you can go to moneyguy.com resources.

[Bo Hanson]

Luke, it's been a pleasure. Hannah, you got a lot of work ahead of you, but I'm super excited for you. I'm your host, Brian, joined by Mr. Bo Moneyguy team out.

[Brian Preston]

Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the Security's laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. 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. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management. Schmidt.