Money Guy Show: "Triple-Leverage Cowboy Is Playing With FIRE | Making a Millionaire"

Release Date: March 17, 2025
Hosts: Brian Preston and Bo Hanson
Guest: Phil, a 34-year-old Registered Nurse and Realtor from Columbus, Ohio

Introduction

In this compelling episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into the intricate financial journey of Phil, a 34-year-old Registered Nurse and Realtor from Columbus, Ohio. Titled "Triple-Leverage Cowboy Is Playing With FIRE | Making a Millionaire," the episode explores Phil's aggressive investment strategies, his pursuit of Financial Independence, Retire Early (FIRE), and the potential pitfalls of his high-leverage approach.

Guest Introduction

Bo Hanson [02:06]:
"Brian, I am so excited because on this show we get to talk to millionaires and millionaires in the making and today is no different. I'm so excited we get to sit down with Phil today. Phil, thanks so much for being with us."

Phil introduces himself as a Registered Nurse and a budding Realtor. At 34, he has already amassed a net worth nearing $800,000, with approximately $550,000 in liquid assets. Phil currently owns a condo and a duplex, leveraging his real estate holdings to build wealth.

Phil [02:25]:
"I'm a registered nurse out in Columbus, Ohio. I'm 34 years old. I like to play sports. I'm a big soccer guy. I'm a big Buckeye fan. Baseball, basketball."

Phil's Financial Journey

Phil's passion for personal finance ignited at a young age, influenced by classic board games and inspirational stories.

Phil [03:18]:
"Yeah. So I think the story actually starts when I was a little kid. I used to play Monopoly all the time... every birthday, my grandma would give me 20 bucks or whatever, right. So I'd put that in the bank. And then me and my dad, we'd come home and I'd see the statement. And I had earned a whopping 49 cents on quarterly."

A pivotal moment occurred in sixth grade when his teacher shared a story about a classmate who invested in stocks instead of typical childhood toys, sparking Phil's early interest in investing.

Phil [04:16]:
"She told me about how when she was a young girl... there was this boy named Tommy Fitzgerald who instead of getting basketballs or race cars or anything like that, he got stocks. And she then said, he's probably laughing all the way to the bank right now because I'm sure he's a mega, mega millionaire."

This narrative instilled in Phil the belief that disciplined investing could lead to substantial wealth accumulation.

As a college sophomore, Phil made a bold investment move by allocating his savings into Apple and Verizon stocks, anticipating the synergistic merger of top-tier cell phone manufacturers and providers. This early venture yielded a 30-40% return within his first year, cementing his enthusiasm for investing.

Phil [05:05]:
"So I took every penny that I had... I put it two thirds of it in Apple and one third in Verizon... I had like a 30, 40% return in that first year. And, well, that just got me hooked."

Current Financial Situation

Phil's aggressive investment strategies have significantly contributed to his current financial standing. However, his approach raises concerns about sustainability and risk management.

Bo Hanson [01:57]:
"Welcome to Making a Millionaire. This is where we help financial mutants to make small decisions to build their great big beautiful tomorrow."

Phil's net worth statement reveals a robust financial profile:

• Total Net Worth: Approximately $800,000
• Liquid Assets: Around $550,000
• Real Estate Holdings: Owns a condo and a duplex
• Debt: Possesses a Home Equity Line of Credit (HELOC) and margin loans

Bo Hanson [03:05] & Bryan Preston [03:06]:
"Little house hacking. Love it."

Phil's real estate ventures, particularly house hacking—living in one unit of a duplex while renting out the other—demonstrate his practical application of wealth-building strategies. However, Phil employs significant leverage through a HELOC and margin loans, which magnifies both his investment potential and financial risk.

Discussion on Risks and Concerns

The hosts express apprehension regarding Phil's high-leverage approach, highlighting the absence of adequate emergency funds and insurance protections.

Bo Hanson [18:14]:
"Because surely, like, obviously, if disability. You've got tons of disability insurance, right?"

Phil [18:17]:
"I don't."

Phil acknowledges the gaps in his financial safety nets, particularly the lack of disability insurance, which is critical given his reliance on income from nursing and the potential volatility of his investment portfolios.

Bryan Preston [19:54]:
"Phil... You will find you might even be in a situation that you have zero control over. And it doesn't matter how hard you work, how good your network is, is... bad things happen to good people."

The discussion emphasizes the vulnerability inherent in Phil's financial structure, where high leverage and minimal liquidity expose him to significant risks during economic downturns or personal emergencies.

Bo Hanson [20:51]:
"So you know all this stuff, you're a student of the game, but yet you, you see the shiny object and you couldn't avoid."

Hosts' Advice and Triage

Recognizing the precarious nature of Phil's financial setup, the hosts outline a series of actionable steps to mitigate risk and stabilize his financial foundation.

Bo Hanson [38:12]:
"There is a superpower to be a maximizer, to have resources when everybody else is dying."

Bryan Preston [56:37]:
"But I did want to make sure that everybody know we covered all that because you have a lot of other things we needed to cover before we hit that."

The hosts recommend focusing on the following priorities:

1. Risk Management:

   • Disability Insurance: Protect Phil's income in case of unforeseen circumstances.
   • Umbrella Insurance: Safeguard his substantial assets against potential liabilities.

2. Debt Reduction:

   • HELOC and Margin Loans: Given their high-interest rates (HELOC at 8.3% and margin loans at 6.75%), prioritizing their repayment is crucial to reduce financial strain.

3. Emergency Fund:

   • Target: Establish an emergency reserve of approximately $25,000 to cover three months of living expenses, ensuring financial stability during downturns or personal crises.

4. Investment Strategy Adjustment:

   • Portfolio Diversification: Shift from concentrated positions in individual stocks to diversified index funds to mitigate risk.
   • Leverage Caution: Avoid further leveraging through HELOCs or margin loans until existing debts are managed.

Bo Hanson [54:14]:
"You need to really stable, healthy foundational footing... This suggests, hey, you've won the game. You're at this fantastic point. How do we start deleveraging?"

Phil's Response and Future Steps

Phil acknowledges the validity of the hosts' concerns and expresses his intention to recalibrate his financial strategies.

Phil [32:33]:
"I think it's in the process of shifting, which is one of the reasons why I wanted to talk with you."

He admits that his aggressive tactics have been more about maximizing returns than prudent financial planning. However, recognizing the inherent risks, Phil is open to restructuring his approach to prioritize stability over rapid wealth accumulation.

Phil [34:48]:
"And so the last, just to kind of fill the audience in, the last time I went kind of crazy with leverage was during like September of 22 to January of 23."
Bo Hanson [40:42]:
"Can we look at the brokerage account real quick?"

Phil discusses his recent endeavors to reduce leverage by liquidating certain positions to offset existing debts, aiming to adopt a more balanced investment strategy.

Conclusion and Takeaways

The episode serves as an insightful case study on the fine balance between aggressive wealth-building strategies and the essential need for risk management and financial stability. Phil's journey underscores the importance of adhering to a structured financial plan, prioritizing debt reduction, and building robust safety nets to safeguard against unforeseen challenges.

Bo Hanson [83:16]:
"You're on the front end of drowning underwater because you have no liquidity. I think you're on a prime position... figure out, do you believe that? And are you going to start moving in the course that a big boy millionaire would start moving in?"

The hosts provide Phil with comprehensive "homework" to address his financial vulnerabilities:

1. Obtain Disability and Umbrella Insurance:

   • Essential protections to secure income and assets.

2. Establish an Adequate Emergency Fund:

   • Targeting $25,000 to cover living expenses and potential real estate responsibilities.

3. Debt Repayment Strategy:

   • Prioritize paying off high-interest debts (HELOC and margin loans) using tax-efficient methods like loss harvesting.

4. Investment Portfolio Rebalancing:

   • Shift focus towards diversified index funds, minimizing concentrated stock positions that heighten financial risk.

5. Maximize Tax-Advantaged Accounts:

   • Continue contributions to 401A, HSA, and Roth IRA to optimize tax benefits and long-term growth.

Phil's willingness to embrace the hosts' advice highlights a critical turning point in his financial narrative—from a "Triple-Leverage Cowboy" chasing FIRE to a more grounded, risk-aware investor.

Phil [83:42]:
"I think it's a crazy if you don't max out your Roth every year following the financial order of operations. I think you should max out your HSA as well."

By implementing these strategies, Phil aims to transition from high-risk maneuvers to a more sustainable wealth-building trajectory, ensuring his financial independence without compromising his stability.

Notable Quotes with Timestamps

• Phil [04:16]:
  "He's probably laughing all the way to the bank right now because I'm sure he's a mega, mega millionaire."

• Phil [05:05]:
  "I took every penny that I had... I had like a 30, 40% return in that first year. And, well, that just got me hooked."

• Phil [08:29]:
  "I recognized that using the rule of 72, every dollar I could invest today would have the purchasing power of 128."

• Bo Hanson [22:37]:
  "Happens with age. That's a good thing."

• Bryan Preston [56:37]:
  "You have to assume the worst. Access to cash is not the same as having cash."

• Phil [69:06]:
  "Okay, there we go."

Key Takeaways for Listeners

1. Structured Financial Planning is Crucial:
   Even with substantial net worth, high leverage without adequate safety nets can jeopardize financial stability.

2. Risk Management Should Precede Aggressive Investing:
   Ensuring protection through insurance and emergency funds is foundational before pursuing high-risk investment opportunities.

3. Diversification Mitigates Financial Risk:
   Relying heavily on individual stocks or concentrated investment positions increases vulnerability during market downturns.

4. Leverage Amplifies Both Gains and Losses:
   While leveraging can accelerate wealth accumulation, it also heightens the potential for significant financial setbacks.

5. Continuous Financial Education and Adaptation are Essential:
   Financial strategies should evolve with changing life circumstances, goals, and risk tolerances.

6. Seek Professional Guidance When Needed:
   Consulting with financial advisors can provide objective insights and strategies to optimize financial health.

Final Thoughts

Phil's journey is a testament to the allure of aggressive investment strategies and the FIRE movement. However, it also serves as a cautionary tale about the importance of balancing ambition with prudence. By adhering to the structured advice provided by Brian and Bo, Phil can realign his financial strategies to foster sustainable growth, ensuring his path to financial independence is both rewarding and secure.

For those inspired by Phil's story, remember the importance of building a solid financial foundation before venturing into high-risk investments. Prioritize risk management, diversify your investments, and continuously educate yourself to navigate the complex landscape of personal finance effectively.

Disclaimer: The information provided in this summary is based on the transcript of the podcast episode and is intended for informational purposes only. It does not constitute financial, investment, or legal advice. Always consult with a qualified professional before making financial decisions.