Triple-Leverage Cowboy Is Playing With FIRE | Making a Millionaire

Summary

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

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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.

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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."

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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."

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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.

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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."

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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?"

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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.

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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.

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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."

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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.

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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.

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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.

Transcript

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[Bo Hanson]

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[Phil]

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[Phil]

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[Phil]

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[Phil]

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[Bo Hanson]

Phil told us he treats money like a game.

[Phil]

I used to play Monopoly all the time. Okay, no joke. Four, five, six, seven hours a day. I love the game.

[Bo Hanson]

Looking at his money, it seems like his favorite game is Risk. That is a daunting effort and that's.

[Bryan Preston]

You know, it's a lot of work for non benefits.

[Bo Hanson]

I'm going to a puff margin loan. I'll take a puff. Credit cards. I'm going to take a puff. You're 34 years old worth almost a million dollars. Why? He has a high net worth but is he too much of a high roller? Yeah, you're hitting these quick hits and it's working and you're not gotten burned on it yet. Might you be at the stage of your financial journey where it's time to calm down? I'm going to say. Well, I'm going to say grow up.

[Bryan Preston]

Welcome to Making a Millionaire. This is where we help financial mut to make small decisions to build their great big beautiful tomorrow.

[Bo Hanson]

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]

Thanks for having me guys.

[Bo Hanson]

So the audience doesn't know you. They haven't met you yet. Give us. Who are you? Where are you from? What do you do? Give us the quick like, high level biography.

[Phil]

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. You? Oh, I. Oh, baby. Bulldogs in the playoffs.

[Bo Hanson]

We got a bunch of Buckeyes here.

[Bryan Preston]

We got a lot of the Ohio states.

[Bo Hanson]

That's right. That's right.

[Phil]

I'm also a realtor. Kind of got that license about 12 months ago. Haven't done so much with it yet, but potentially that could be a side gig and. Or a tool for me to use in building my wealth through rental real estate. I currently have a condo and a duplex. I live in the one side and rent out the other.

[Bryan Preston]

Little house. Hacking.

[Bo Hanson]

Love it.

[Phil]

Yep.

[Bo Hanson]

Obviously you watch the money guy show you're into personal financial content. How did you like. Have you always liked personal finance? It's a new thing. What's your money story in terms of where you started and where you are today?

[Phil]

Yeah. So I think the story actually starts when I was a little kid. I used to play Monopoly all the time. Okay. Sega Genesis. Monopoly.

[Bo Hanson]

Yeah.

[Phil]

And I used to play like, no joke, four, five, six, seven hours a day. I love the game. Right. And 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.

[Bo Hanson]

But that was money that wasn't there before.

[Phil]

Right? Exactly, exactly. So I'm like, wait a minute, what is. What's this? Right. So that kind of got me super excited. And then in the sixth grade in Mrs. Spencer's math class, kind of like your Mr. Morrow moment.

[Bo Hanson]

Shout out to Mrs. Spencer.

[Phil]

Yeah. @ Chapman elementary, she told me about how when she was a young girl, instead or she would get dolls and, you know, things like that. As a kid, however, there was this boy named Tommy Fitzgerald or whatever his name was, who instead of getting basketballs or race cars or anything like that, he got stocks.

[Bo Hanson]

Oh, wow.

[Phil]

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. And that immediately kind of triggered the initial. Okay, so if you own stocks, you become a millionaire.

[Bo Hanson]

Love it. It's a connection. That's great.

[Phil]

Right? Fast forward a little bit farther. I thoroughly enjoyed the Stock market and stuff like that. But I didn't really understand how it worked. So when the iPhone had come out, I'm like, holy crap, this thing is really cool. And this thing's going to change the world. And then when the next iPhone came out, I believe the iPhone 3, my older brother, who's a huge Apple nerd, he had bought it and I played with it, and it was just such an upgrade from the first phone to the second phone that I was just like, all right, this thing, this thing's going to change the world. So I took every penny that I had. I was approximately a sophomore in college.

[Bo Hanson]

So that makes you what, like 1920s? 1920.

[Bryan Preston]

I was about to say 20.

[Phil]

Yeah. And I took every penny and I had and I put it two thirds of it in Apple and one third in Verizon.

[Bo Hanson]

Oh, wow.

[Phil]

Because at that point, because of that, because of the.

[Bo Hanson]

Just the phone experience.

[Phil]

Right. And you had to have singular wireless now to get the iPhone. So I thought it was only a matter of time before the best cell phone merged with the best cell phone provider. And I thought, all right, well, if I can kind of get ahead of that, then that would be great.

[Bo Hanson]

That's unbelievably insightful for a 19 year old to have that sort of field vision.

[Phil]

Well, and shout out to all the young people out there. I think that trends can, like, young people have an insight in trends sooner than perhaps us older folk. So, yeah, I mean, I got lucky. It also was in 2010, so I had the tailwinds of the market recovery supporting me. Yep. But this was certainly back in the day where $10 per trade to get in and out. So, yeah, I just dropped everything I had into Apple and Verizon. And fortunately for me, I think I had like a 30, 40% return in that first year. And, well, that just got me hooked.

[Bo Hanson]

So give me some context. You said 19, 20, you'd put every. Every penny you had. Like, what's every pen you have? Like, literally, like, I emptied out everything.

[Phil]

To be fair, I did keep $500 on the side.

[Bryan Preston]

Oh, well, you got three grand.

[Phil]

Five.

[Bryan Preston]

Okay.

[Phil]

I had 55. So in high school, my parents, and I'm happy that they did this, but I had to work throughout high school to build up funds for college.

[Bo Hanson]

Okay.

[Phil]

So I had to pay for the first semester of college.

[Bryan Preston]

And where did you work in high school?

[Phil]

Combination of golf courses, restaurants, Abercrombie and Fitch, just kind of anywhere.

[Bo Hanson]

So for us millennials, that's such a flex to say I worked At Abercrombie rally. That's such a flex.

[Bryan Preston]

Also, I want to know what was your childhood? Did you grow up? Would you consider your parents having money or not having money? Square in the middle class, what was childhood like?

[Phil]

Sure. So I probably grew up in a average, an above average, but I guess B plus neighborhood, if you will. And my dad worked. My mom was a stay at home mom to kind of give a little bit of background information on them. My mom was born and raised in Copenhagen. My dad was on a post. My dad's an attorney, so he was on a post law school trip to Europe. And my mom was a bartender. And that's how they met.

[Bryan Preston]

Wow, what a story.

[Phil]

And then three months later, you know, he proposed over the phone, she flew over and got married. Yeah. So that's how Phil came along.

[Bo Hanson]

All right, so at 19 or 20, you said, I'm gonna put all this stuff in the apple. And it turns out really, really well for you. Right. So you, you learned at early age, hey, I can work and I can go. I got to put myself through college. Okay, fast forward. We're going to look at your net worth statement in a second to see kind of like where you are today. But walk us through that decision that you made at 19 to 20 to invest everything. And then now that you've gotten into the working world, you've been working for over a decade now, how have you approached making financial decisions? Like how. What's, what's your financial wherewithal? How do you decide what to do with your money and where to put your money? And ultimately what are you working towards? Like, now that you are in the working world, what are the goals that you're actually trying to move towards?

[Phil]

Sure. I would say initially, when I first threw everything in, I just thought, holy crap, this, this product is going to revolutionize the world. Sure, right. I was, I was lucky, but I was also right. And then from that point on, I was just kind of addicted to investing. So I continued working in college. I was both a chemistry lab assistant and to help kind of bolster my academic career. And I also worked at Hyde Park. It's a steakhouse. It's kind of the creme de la creme restaurants in Columbus. And that paid really well. So I was constantly trying to see, well, what job title can I get that's going to increase the size of my shovel? Sure, right. So that way I had more money I can dump in. Dump in for what purpose?

[Bo Hanson]

More money to dump in. Why? For what reason?

[Phil]

I was just so Enamored with how all of this works, read all the blogs, learned about the rule of 72. And so with that, roughly speaking, with the S and P averaging 10 to 11% a year, inflation is roughly 3% a year, roughly speaking, the purchasing power of your dollar doubles every 10 years, roughly speaking. And so when I was 2021, I just did the math real quick. I said, okay, well eventually I'm going to be, ideally I'm going to live to 100. Right?

[Bo Hanson]

Okay.

[Phil]

And so somebody's got to take care of that 90 year old Phil, right? Why not be me? Because let's be real here, everybody I know alive today will not be alive by the time, right? So I got to take care of myself. And so I recognized that using the rule of 72, every dollar I could invest today would have the purchasing power of 128, if my memory is correct. And so I was just like, holy crap, if I can work one day today, that's kind of like working 128 days as a 90 year old.

[Bo Hanson]

I love that.

[Phil]

And if I can save $100 today, that's 128 times 100. What is that, 12,800? Yeah, for that. If I can save $1,000 and so forth and so forth. So then I recognized if I can save a year's worth of income, that's 128 years. So like that, that compounding exponential growth really was just like enlightening and exciting. So initially it was not a goal.

[Bo Hanson]

Other than I've recognized this thing that works, this thing that happens.

[Phil]

Yes. And so if I can save one month today, you know, there's 12 months in a year, 10 years and a decade. Quick math, that's 120 months. Right? So if I can work one, if I can work and save one month's worth of income as a 20 year old, that is literally going to pay for an entire decade of my 90s.

[Bo Hanson]

I love it.

[Bryan Preston]

Do you see what you just did? I love this because we talk about the wealth multiplier all the time. And anybody in the audience should go to moneyguy.com resources and you can play around with our tool. You can download it. I love you said something that I think just brings it back to what we talk about all the time. I make the statement and Bo even has the koozie a dollar invested for that 21 year old. 20 to 21 year old to make that thing legal is going to have the opportunity to turn into $88. I love what you just said. There though, if you change this, and I want everybody to listen, one month or just say one week's worth of work, if it's invested, it could provide for a 20 to 21 year old, 88 weeks of time. You start thinking about that, it's literally to your point, that's years. And that's a pretty remarkable thing. At a young age you kind of caught that concept. I mean, that really is an amazing thing. But I want to pull you back on what was the money, why? Because right now I just hear what your explanation is, why not make more? But it feels like it's all over the place. It started off with this pure message that a little bit of time would get me lots of time in the future. But I don't know that we stayed on point with that. So can you kind of bring in.

[Phil]

What was the why it was if I could get more, I could buy my time back is essentially what it was in a nutshell.

[Bo Hanson]

So are you like a fire proponent? Is that the thing where you're going?

[Phil]

I would say a recovering fire enthusiast.

[Bo Hanson]

Recovering fire. I like that.

[Phil]

And so, and the reason why recovering and not still like, you know, balls to the wall, you know, full speed ahead is one day I would like to have kids. And I think one of the important things of having children is, you know, setting an example. And it's going to be really hard to set an example, the importance of work and contribution to society and helping others if I'm just kicking back, sipping my ties all the time, you know, so part of me is recognized that I should probably be doing some form of work when I have children around because somebody has to set that example, right? That being said, because of all my previous hard work, discipline, saving, investing, it's kind of bought in me options today. Whether it's taking time off today to come down and speak with you fine gentlemen, or investing in perhaps more aggressive investment options, or stepping down from a full time nurse position to what we call in the industry prn, which is basically as needed. So during the pandemic, obviously it wasn't the funnest time to be working in the healthcare industry. Extremely long story short, the industry as a whole, a lot of people left. So labor shortages were created. And so the institution that I work at created this policy where if you worked above your contracted hours, you'd get over triple time.

[Bo Hanson]

Oh, wow. And so not time and a half, triple time.

[Phil]

Correct. 300. Yeah. So I kind of viewed this as an opportunity because I had, you know, a decent stash of Cash underneath my belt. And I felt comfortable because I understood how insurance works and things of that nature. I was just like, all right, well, instead of working full time, I demand to be demoted. So now I'm only required to work 16 hours a month. And then everything above is no longer triple time. It's now like 2.1.

[Bo Hanson]

Okay.

[Phil]

But still.

[Bo Hanson]

Still amazing, right? So you're required to work 16 hours a month on average. How. How many months? How many hours a month do you work on average?

[Phil]

Well, I've become a little spoiled. And so, to be honest, I probably am doing closer to 24 hours a week.

[Bo Hanson]

Oh, wow.

[Phil]

So, you know, typical full time work is 40.

[Bo Hanson]

Yeah.

[Phil]

However, at the same time, even though I'm only doing 24 hours a week on average, roughly speaking, as a nurse, I have taken the time to build up my real estate license, and I'm in the process of building that business up a little bit. And my thought process was I have this exclusive access to literally a thousand nurses and doctors. I'm in what's called the float pool. So I bop around different units throughout the hospital. I kind of recognize, wait a minute. I have this opportunity where I have exclusive rights from a real estate agent's perspective. I have access to a thousand nurses and doctors who, trust me, who have been in the COVID trenches with me. And so I've kind of been building that up a little bit. So I have gotten a little spoiled. I have taken my foot off the gas a little bit. And.

[Bo Hanson]

Yeah, so you said something interesting. You said, hey, I've got. I've made a lot of. I've done a lot of hard work leading up to this point. And now at the age of 34, I've got some flexibility and options. So if you're okay with it, let's look at your. Your net worth statement. You kind of sent that to us, said, hey, let's dive in. And I think it's interesting so that we can give our audience an idea of sort of where you're at on your financial journey. And what we can see is right now, your total net worth is just under about $800,000 at 34 years old. That is wild, right? Like, that's unbelievable. And then when we just look at the liquid wealth that you have, it's about $550,000, which, again, for a 34 year old, is insane. So by all metrics, on the top level, you're absolutely crushing it. But when we got this, there was something that we noticed, and I think you must have Forgotten to send us some statements.

[Bryan Preston]

Well, I have a question.

[Phil]

Sure.

[Bryan Preston]

Phil. Do you like to skinny dip? I do, actually, because when I saw this, I don't know if you know, the saying is that, you know, we have a favorite investor, Uncle Warren. Yeah, Uncle Warren. He talks about when the tide rolls out, you can see who's swimming naked.

[Bo Hanson]

Yeah.

[Bryan Preston]

Your cash now, and you can tell us what each of these accounts, but it's not going to take us long to go through it. Your cash is at $2,615. And for some reason, you need three accounts for $2,615. Your lowest account, that checking account with $8 in it. What is the purpose of that account?

[Phil]

So I have a HELOC and I have my primary checking account. The HELOC is with a different bank account. So it's literally just a middle account for me to transfer funds from my HELOC to the middle of.

[Bo Hanson]

Just a conduit for money to pass through.

[Phil]

Correct.

[Bryan Preston]

But why is cash so low?

[Phil]

I'm a maximalist optimizer. Just efficiency. And as far as assessing my employment risk, to be honest, there's a labor shortage right now. And at any time, I kind of view my job as an asset. And with that, I feel that I can pivot. If, for whatever reason, I'm having difficulty getting hours at the hospital that I work at, there's other hospitals in the area that I can pick up work at. It's almost like I can shift whenever I want. I understand there's also the risk of disability and injury and things of that nature, which I do have risk exposed to.

[Bo Hanson]

Because surely, like, obviously, if disability. You've got tons of disability insurance, right?

[Phil]

I don't.

[Bo Hanson]

Oh, so you have no cash reserve. I just want you to understand you have no cash reserves. Also no disability insurance. So you just said that if. If your job and the flexibility of that is maybe your most valuable asset, because flexible exists, you have not done anything to like, insure against what that goes away.

[Bryan Preston]

But I want to make sure everybody has context. That this might be a false sense of security even on your career side is because when you were in. I know the team when they were kind of talking to you off camera about things, you have what you call dry spells, and then you have wet spells or whatever. With access, these traveling nurses have kind of slowed down. Sometimes you have periods where you have trouble getting hours during that period. Yeah, I worry because, you know, hospitals are highly competitive and there's the CFOs for hospitals are, you know, looking for Angles and edges. And if some by chance they watch making a millionaire and they realize, holy cow, we were paying three times for anybody who had over sure there's an opportunity to squeeze the inefficiency out of their pay structure. I'm worried. Do you have any fears that that or is that just you move or go? What do you do?

[Phil]

I think I believe in my work ethic, I believe in my competencies, I believe in my. I believe in myself. Sure. And so if, even if I can't get a job for whatever reason in a nursing role, which I don't think is the case, but even if that is the case, I do have my real estate, real estate agent license that I can kind of rev up that engine.

[Bryan Preston]

I want to make sure we bring this back because this is something bad things happen to good people.

[Phil]

Sure.

[Bryan Preston]

And 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. You said one. Which could be a car accident, a disability. It's, that's why in step one of the financial order of operations highest deductible covered is because we're trying to ensure away the catastrophic things that could derail you to make desperate decisions. Then we go to step four. After we get through two and three, we'll come back to that. But step four is the three to six months and that's to get you out of, out of the catastrophic and then have just extended periods of time. And I'm just worried because in a minute we're going to talk about. You love to dance with leverage. And I don't know if you've, you know, because Uncle Warren used to love sitting next to another great investor, Charlie Munger. And Munger talked about the three Ls that will ruin a person.

[Phil]

Ladies, liquor and leverage.

[Bo Hanson]

Exactly.

[Bryan Preston]

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. And look, I have no problem with leverage. I mean the building we're in, which is beautiful, has my mortgage on it. You know, I've always used mortgages on my house. You know, I'm not an anti debt person, but I do worry when chaos occurs, you got to assume the worst. Access to cash is not the same as having cash. And when you hit catastrophic, when it rains, it pours and you lose your job, your real estate's down 50% like mine was back in the Great Recession. And then your financial assets are down 40%. You quickly realize what you took for granted, which is your hard work, your access to cash. You start drowning. And that's the part that scares me. Now you're kind of, I feel like you've structured this as boom or bust, is that you're making great money. But if bad things happen, instead of if you think about if you're on a sinking ship and when economies go bad, we're all on that sinking ship. A person with cash gets to climb up a few decks and not be the first ones underwater. You're going to be, you're, you're in steerage. You're in steerage for sure. You're down there, you're down there. It goes underwater and you drown in bigger pockets. Get to come in and get the best deal. The lifeboats come and save them.

[Phil]

So one of the reasons why I came to talk to you guys is. I agree. And that fire enthusiast mentality is also part of the shift. When I was younger, you know, you think you're invincible and all that other stuff. And even though I don't have kids yet or anything along those lines, I can already sense my risk tolerance kind of coming down a little bit. Great.

[Bo Hanson]

Happens with age. That's a good thing.

[Phil]

I think so. So this isn't the only time I've used leverage to kind of help get to where I'm at as an example before. So my initial degree is biology with a minor of economics. Graduated circa 2013. I knew at some point I was going to actually. Let me take a step back. This might be interesting. So 2013, I graduated. I got my first job as a chemical, Inside chemical sales rep. I absolutely hated that job. Big mistake was staying in that job for a year. Because I thought, well, you know, you're supposed to stay in your first job for a year. I was super unhappy. The pay was not great. I, in my opinion, got somewhat taken advantage of, but neither here nor there. So with all of my extra time, I recognize, wait a minute, I can bust my butt at work and maybe make an extra hundred dollars. Or with my free time at work, I can study taxes and study tax credits and things of that nature. If you're not going to pay me well, I might as well use my time to better understand how to maximize.

[Bo Hanson]

I'll pay less tax.

[Phil]

Right? How to maximize. Right. Full disclosure, I did get fired from that job. But I don't regret, I don't regret how it all went down. I already had another job lined up by the time I got fired. At that point Three months into that job, I recognized, wait a minute, this, this life that I've currently built is not for me. So I'm going to go to grad school at some point. So I started saving and investing, saving and investing, saving and investing. And I recognized, wait a minute, not only do you have personal exemptions and standard deductions, back when those were two things, but you'd also get tuition tax credits. And so I recognized, wait a minute, if I had traditional assets, I did an accelerated nursing program. So you get an entire bachelor's in one year. It was brutal. Like I said, my work ethic. So you get an entire bachelor's degree in 13 months. And I recognize, all right, there's no way I'm going to actually be able to earn an income during that time period. So instead what I did was I loaded up traditional assets leading up to nursing school. So then in nursing school, during that 12 month period where I wasn't really making any income, I converted, I can't remember the exact figure, somewhere between 30 and $40,000 of traditional assets into Roth.

[Bo Hanson]

Like, okay, great.

[Phil]

With the idea that, all right, between the tax credits, personal exemptions, standard deductions.

[Bo Hanson]

Still a low tax bracket.

[Phil]

Exactly. It was zero. But with that, instead of paying for my nursing degree, I took out student loans. So I recognized, wait a minute, there's potential arbitrage here where it's like, all right, not only am I going to save money in the tax conversion, you could also make an argument that I was, in a way, leveraging, in a way leveraging student loans to be further invested into the market. So that was, I would say, like the first time that I used leverage to kind of amplify investing. The second time, I would say, is during the pandemic. Right. Once again, obviously, I'm pretty certain I've got a good employment security going into a health crisis. Right. So when the stock market initially crashed in March, April, I had opened up credit cards and the 0% APR and. Right, right.

[Bo Hanson]

Where is it going?

[Phil]

And so at that time, I had just closed on my duplex about three or four months prior. It needed some renovations. I had the cash. But rather than use the cash to pay for the renovations, I opened up the 0% APR credit cards for. And I maxed those out. And 18 months later, like cash advance.

[Bo Hanson]

Larry, use that for the, for the, for the renovation.

[Phil]

That way I could further maximize my investment. Fortunately, once again, I did get lucky in the sense that the stock market recovered healthily. And so after that 18 month period, I Sold the assets, took out money from the brokerage account, and then paid off the credit cards. So that's probably the second time.

[Bryan Preston]

Can I ask you a question?

[Phil]

Go ahead.

[Bryan Preston]

Are you a gambler personality? Do you actually get. Because you're gamifier. I mean, you definitely gamify systems where you do your wages the way you've done looking for these arbitrage situations. But I'm just trying to figure out if this is strategy or if this is an emotional high too. It's not a dopamine hit.

[Phil]

I hate gambling. For me, it's a game that I'm going to lose.

[Bryan Preston]

Okay.

[Phil]

With strategizing, investing, I don't feel that way. But with gambling, the house always wins. Right?

[Bryan Preston]

But is it. But answer this because you understand the statistical side that the house always wins, but is there some dopamine side of this that you're doing it? Probably a little bit because.

[Phil]

Maybe a little bit because, you know.

[Bryan Preston]

You'Ve said it several times. You knew you were taking a risk, but you won. And, and I'm just, I'm just trying to get to the, the root cause here. And we'll get back to foo in a minute. But it's. You see where I'm building.

[Bo Hanson]

Well, it's just interesting to me. You said something earlier. You said, when you come to Apple, you said, hey, I was, I was lucky, but I was right. And it's just interesting. These are all like very aggressive strategies that you've done. I took out a heloc, I maxed out these credit cards. You're familiar with, like the concept of Russian roulette, not actually planning the concept of it. No one ever gets through five rounds of Russian roulette and says, holy cow, I won five times. Let me try for the six. Let's. Let me try for this. And that's what it's so interesting. We've already said you have a net worth of almost $800,000. At 34, you have $550,000 of liquid. It's going to be hard for you to screw your financial situation up. And yet it seems like you keep putting yourself out there to where screw up could be possible. And so the question I would have for you, okay, you said, I'm a maximalist and I want to max. You're at a stage of your financial journey where it might not just be about how much money do I make or how much do I compound or how much do I st. How much do I actually get to keep over the long term? I cannot disagree With a lot of the things you've done have worked out incredibly well for you thus far. So you have this huge head start. You've essentially rounded third. All you got to do is get from third to home. But you got to be careful taking too many risk between third and home, or else you sacrifice the whole thing. You put at risk this entire beautiful thing that you've built. And the question I would have for you is why?

[Bryan Preston]

Well, I want to bring it. He talked about his fascination and love of rule of 72. That is the most pure basic thing of letting your money work. You even gave the reference of the S&P 500. You work for an employer now, this blows my mind is that you put in 10%, they force you to put in 10%. In the 401A, they put in 11%.

[Phil]

Yep.

[Bryan Preston]

And you don't even have to pay Social Security because they're opted out of Social Security because of their structure. So that's an amazing thing. And that's why when I look at the tax deferred side, you can see why that number is big.

[Bo Hanson]

Right.

[Bryan Preston]

I mean, to close to 200, 2000. And then I look at. And we'll get to it in a minute. Your real estate, you have you house hacked, which is one of the most basic things. You buy something, let somebody pay half your rent. That's a de risk type of way of doing it. Those things are your biggest wins on this net worth statement. And they didn't require you to do all individual stocks. We'll get into options contracts. It's like a who's who of what the hot dot is at the moment. But yet the original part, and this gets back to Beau's question, was rule of 72s and P500, but you never did that stuff. You've gone, you see this and then you go, here, give us go back to what Bo was asking.

[Phil]

If you can remind me.

[Bo Hanson]

So my question is, you've had all of this success thus far and you say, hey, my risk tolerance is changing and I think maybe I want to have a family one day. And I recognize that I am, for 34 years old, far ahead of the game.

[Phil]

Yeah.

[Bo Hanson]

Some of the stuff that we're going to say is, okay, hey, your maximums, but you only got, you know, $2,600 of cash.

[Phil]

Sure.

[Bo Hanson]

Perhaps that even though you do have job security, even though you have what is the opportunity cost that actually exists for you to have? Okay. I'll even concede you're a nurse, so you are highly Employable. And you're going to be incredibly fluid in terms of where you can plug in, even just keeping three months of liquid expenses, of living expenses in cash. Plus, you do have. We haven't talked about real estate. We'll talk about that in a second. You do have some additional exposure through real estate, which would substantiate probably having some cash there. And you've already said, hey, I think I might want to do more real estate. Well, if you're going to do that, you are not currently positioned in the place as someone that would say, hey, yeah, going into more real estate would be without having that cash there. And so my ultimate question for you is, why not? I get maximizing.

[Phil]

I honestly think it is. It comes down to maximizing. Right. The idea of fire, the kind of. The purpose is to kind of get to the finish line as fast as possible. And initially part of the initial conversation was a recovering financial enthusiast. Right. And so I think I've recognized that with that goal of hitting the financial independence as fast as possible, it is exposing me to extra risk. And I certainly. Even though we've talked about some home runs that I've. Financial home runs that I've hit, I've certainly struck out a couple times, too. Yeah, sure. So I think ultimately, this mindset of just grind, grind, grind, sprint, sprint, sprint has kind of gotten me to a level of, all right, well, there's risk, and obviously a substantial amount of assets are at risk. So for me, it was. The reason why I don't have cash reserves is because I do have some brokerage accounts that I could tap into. I read the book. Right, right, right. And I get that. And I get that. And that's why, even as somebody who I would consider myself a financial mutant, I hope that I would get that title bestowed.

[Bo Hanson]

We're trying to figure it out. We're trying to figure out what variation.

[Bryan Preston]

We see that we're like in the mine, and we see something that glimmers, but it seems to be covered up with something that's a clear picture. So I'm trying to figure out how we. Because I will tell you. Let me give you the good news before we bring this back to the Russian roulette, because Bo was spot on with that example. I think for somebody. You answered something that I thought was pretty interesting. A few seconds ago. I asked you if you were a gambler, and you said no, you actually. You look at yourself as a maximizer of this, and it's not a dopamine or an emotional thing that you're trying to get. I think that people and I talked about this in the book, is that anybody who understands risk and risk tolerance, but also understands how you build up a nice balance of cash that is like a superpower because you're in. Boom or bust is just part of our system. With real estate, with a lot of these speculative investments, you will see moments where things go up or things go down. The smart play. And think about Warren Buffett. Why whenever we get into economic downturns, do people start looking at the private jet landing, you know, the airplane numbers. They come to different places because they're seeing is Uncle Warren go bail out the next company that's about to go broke. There is a superpower to be a maximizer, to have resources when everybody else is dying. And right now you're on the front end of drowning underwater because you have no liquidity. I would think a person who's a maximizer, especially when you think about how often do bear markets happen?

[Phil]

Every decade, two out of eight or two out of 10 years and you've.

[Bryan Preston]

Had a good run. It's back to the Russian roulette period, is that you pull the hammer and then somehow it's just not. You're not paying the price and you're like, let's keep going. Even though you know the stats, do you think that means that there's a lot of opportunity for real estate in the next three to five years or do you think it's going to take a little time for that huge spike in price appreciation?

[Phil]

A reversion to the beam?

[Bryan Preston]

Yeah.

[Phil]

Right.

[Bryan Preston]

But even good markets like Ohio are still potential opportunities. If you have assets, sure. If you're naked, it potentially could pull you under.

[Phil]

Yeah. And that's. And so the last, just to kind of fill the audience in, the last time I went kind of crazy with leverage is during like September of 22 to January of 23. I used my HELOC and I pulled out approximately 100 grand and I pull the chamber and I and I DCA'd over a four month span. 25 grand in each month at worst.

[Bo Hanson]

I love the EDC. Hey, I smoke cigarettes, but they have filters on them. You know what I mean? So it's healthy. It's a better way of doing it.

[Phil]

Oh, Phil, that 100 went down to 89. But to use some YouTube stock, you know, I diamond handed, I hodled, I held on and you know, those investments have done really well.

[Bo Hanson]

Sure.

[Phil]

And so now I'm kind of in a position where I have approximately 125 grand of gains. I agree that I'm taking too much risk and that I need to kind of tone it down. But it's one of those things where how do I unwind that in the most tax efficient way we are going to get there.

[Bo Hanson]

And what's interesting is you're talking about something that's like four steps down the road and we're still.

[Phil]

Fair enough, fair enough.

[Bo Hanson]

We're still trying to get to the very first step down there. Because you said something a second ago. He said, oh, well, look, I don't have a ton of liquidity, but I got this brokerage account and I can tap into this brokerage account. But when we look at your net worth statement, I see another thing on there that says margin loan.

[Phil]

Yes, sir.

[Bo Hanson]

So you have a brokerage account, you have liquid assets, but it sounds like perhaps those liquid assets are also encumbered. Right?

[Phil]

Yeah.

[Bo Hanson]

So, okay, so let's walk down this thing. Right. And just throw out some of the names that exist in your brokerage account. Some of the stocks that you hold.

[Phil]

Predominantly Tesla, Nvidia and Phase, Apple, Microsoft, Google. I know there's a concentration.

[Bo Hanson]

So these are all companies that are not subject to like wild volatility. Right? These are, these are companies that are pretty standard. They don't have these huge swings. So in the event that Brian's talking about this like Great Recession type thing, maybe there's real estate softness, maybe there's job market softness, but there could be technology softness. And we see this. Do you know the way that like margin loans operate?

[Bryan Preston]

Right.

[Bo Hanson]

Like, right. Like you. If it goes so in the time when you might very well need liquidity the most, when the world is. We're not even talking about like opportunistic liquidity, just like. Oh, liquidity at the time when you might need it the very most, might be the time when what you thought was there in this brokerage account that tied. That totals $240,000 across all three of them.

[Phil]

Yes.

[Bo Hanson]

What you thought was there because you have this loan outstanding on it could very well not even be there, not be available and accessible to you.

[Phil]

Right.

[Bo Hanson]

So in that event, even the thing that you said, okay, it's not really emergency fund, but it's kind of emergency fund that disappears too.

[Phil]

Sure.

[Bo Hanson]

And again, the question I come back to is you're 34 years old, worth almost a million dollars. Why? Yeah, like you won. You've not won, but you're like on your way to winning.

[Phil]

Yeah.

[Bo Hanson]

And so when I think about being a maximizer and having opportunities. It's so funny. Warren, man, we're giving. Warren. Warren, if you're listening, shout out to you for getting us. You know, he used to have this idea that what I'm going to do is I'm looking for opportunities where I can just go pick up butts off the ground. I'm going to take one quick puff. One quick puff. One quick puff. And he recognized that, man, that is a. That is a daunting effort. And that's, you know, it's a lot.

[Bryan Preston]

Of work for not much benefit.

[Bo Hanson]

I'm going to take a puff. Margin loan. I'm going to take a puff. Credit cards. I'm going to take a puff. And then Charlie came along and Charlie said, hey, instead of finding that, why don't you find opportunities that you can sit around and smoke for a while that you can savor over the long term? You were just setting yourself up right now that, yeah, you're hitting these quick hits and it's working and you're not gotten burned on it yet, but you've done that and you've got here. Does it make sense to continue doing that or might you be at the stage of your financial journey where it's time to calm down? I'm going to say, well, I'm going to say grow up, grow up from.

[Bryan Preston]

The games or get more focused. I mean, I think about when I think of wealthy people that we work with and you've heard this before. This will not be new. A lot of secret to wealth is find something you're good at or that you and you can replicate that most of the public can't do and do it as much as you can and a lot. And when I look at your. When I was trying to prepare. If you want to know our dynamics. Bo is game time ready? Allen Iverson. And then I am like, oh my God, lose sleep, overstudy. And I got tired. When I was looking at your statements, I was like, I can't figure out what the heck Phil is doing here because there's individual stocks here, there's options contracts. I didn't. I mean, it was just all over the place. And that was. That made me really tired. And I didn't see a dynamic thread where I knew what you were doing. And that's why when we wrote, when I, when I started putting together the financial order of operations as we did, that it was to go through so you can build your foundation and know what you're doing financially. And I don't even mind sharing like step Two, you know, an interesting thing. You said you're currently working around 24 hours, but you even conceded, hey, 40 hours is the normal work week.

[Phil]

Sure.

[Bryan Preston]

So step two is maximize, you know, your employer match. You're leaving 40% of your work capacity kind of on the table. Now, I know you're gamifying this in a way, but what is that opportunity cost worth? Because we already see that's one of your biggest assets that you already have with a very small savings rate.

[Bo Hanson]

Again, what I'm trying to figure out now is the why. Because, like, we can look at your situation and we can triage the situation. We can say, hey, here's some things that we would change. Here's okay, you've got this margin loan. Here's how I think about that. Okay, you've got this home equity line outstanding. Here's how I thought about that. We haven't even talked about the hard money loan. We haven't talked about all the different things. And we can triage that. But before we can start talking about, hey, here's what we would do to change, we do need to understand the why.

[Phil]

Yeah.

[Bo Hanson]

And it sounds like what I'm hearing you say is I want to be able to be in a position in the future where I can have a family, provide for my family, potentially might have to even provide assistance to other family members in my life. What's interesting is if your financial life is just a house of cars that's built that is working and it's still standing, but it's unstable, does that really put you in the best position to be able to accomplish all those things, or is your why? I just want to see how aggressive I can be. Do you know what I mean? That's what I'm really trying to dive into.

[Bryan Preston]

That's a great question.

[Phil]

So I feel like initially it was how aggressive I could be. It was one of those situations where when I was probably younger, I was just so excited about the rule of 72. So if I can get the highest rate of return, understandably that with risk comes reward or with reward comes risk, that I would kind of just go all, all in. I spent a lot of time and energy into becoming a nurse. Right. And I really do. There's definitely parts of the job that I really do enjoy. Part of me is definitely thinking of a transition at some point in the future, whether it's sooner or later. So one of the reasons why I wanted to kind of amass a high level of wealth is so I can change positions. Do I like What I do? Yes. Am I burning out? Yes, sure. So that's one potential reason why I'm hyper aggressive is to kind of get out.

[Bo Hanson]

You said your goal was to amass a high level of wealth. In your mind, what's a high level of wealth?

[Phil]

Originally it was a million dollars. And the reason for that, hey, you.

[Bo Hanson]

Know, you're real close. You're real close. You know what I mean? You're real close.

[Phil]

And the reason for that, why a million? Well, first, it's obviously a nice round number.

[Bo Hanson]

Sure, it's cool.

[Phil]

And as you make mention in your book, there's studies that suggest that 70,000, 75,000 is the necessary income to. To provide baseline living expenses. Correct. So I thought, all right, well, going back to the S and p, providing roughly 10 to 11% inflation, roughly doing 3%, 70 to $75,000, you would need about a million invested. Right.

[Bo Hanson]

So that's how market makes 10% every year. You got a 7% withdrawal rate. That math holds, correct? Not the way that it works, but. Okay, cool, cool, cool, cool.

[Phil]

So there's obviously the ups and downs and all that stuff, but that's why I was aiming for a million.

[Bo Hanson]

Sure.

[Phil]

Nice round number. 70 to 75,000. That was not to suggest that I was going to necessarily retire.

[Bo Hanson]

It's just the goal you're trying to hit. Got it.

[Phil]

Correct.

[Bo Hanson]

You just said, I've had this goal to amass a high level of wealth. High level. What I can't figure out is your goal, your number was a million, and you were rapidly on your way there. Why has the goal not shifted to be. Man, I've almost hit that thing that I was gonna do. My goal now is to not lose a massive level of wealth because that's where you are. I'm not gonna fault you on all the things that you've done leading up here, although I would not recommend you do them. They've worked out, and that's amazing. And that's wonderful. That's awesome. It's no different than someone who works for Tesla before Tesla becomes Tesla. That's an awesome opportunity you've been given. What I can't figure out is when you look at your situation, how are you not? Because when I looked at it, I got scared. And we're both super aggressive when we look at this. We're like, oh, my goodness, man, he's done so well. Why is he still so at risk? Especially hearing that you want to move into the stage of life where you have a family and have kids and, like, you Said, man, my job is like, I consider it one of my greatest assets. Hey, but you know what? I kind of want to leave this job. I kind of want to leave this thing. That's my greatest asset. You have so much risk inherent in everything that you're doing. What I can't figure out is why the mindset has not shifted.

[Phil]

I think it's in the process of shifting, which is one of the reasons why I wanted to talk with you.

[Bryan Preston]

I see paper gains, not wealth. And the difference is paper gains can go away tomorrow. You're just one bad economic downturn away from a lot of this net worth just disappearing versus wealth you get to keep. And that's what. It just bothers me. And I think I'm echoing really where BO is. And I got to get you from the extremes because right now everything you do seems to be on extremes. Like you work 80 hours a week or you pretty much don't work at all. That's an extreme there. Or you go tremendous risk or you don't really. Well, I don't know that you don't have an off button on the wrist so far, but you're constantly hanging out in the extremes on everything. And I think you're going to find you can do this while you're in warrior mode. And I think that, you know, a lot of us 34 is rapidly approaching. You take risk young and you win. You know, you keep repeating that entrepreneurs do this. Well, I don't know how you're going to get yourself out of it. You don't take some really hard steps.

[Phil]

Yeah. And so that's one of the big reasons why I wanted to talk with you guys was. I understand. Well, maybe not fully because clearly my mind is a little crazy, but I recognize that I'm definitely taking more risk than I probably should. And so with building a real estate side business, if you will, and I follow the stock market quite routinely, quite aggressively and stuff like that.

[Bryan Preston]

So do you think you can beat the market right now?

[Phil]

No, I have, but no.

[Bo Hanson]

Kinda, you.

[Phil]

Know, no, I think, I think, you know, broke clock is right twice, right?

[Bo Hanson]

Yeah, that's right.

[Phil]

Potentially the twice just happened to fall into my lap. Right.

[Bo Hanson]

So let's come back down. Let's talk about your shovel. Right. When it comes to resources that you have to work with. When we look at your funny. Obviously we've looked at the balance sheet. Balance sheet, crushing it, killing it on a normal month, you know, 80s to zeros. And you. I want to hear more about this real estate business that you're doing. Understand what's going on there?

[Phil]

Sure.

[Bo Hanson]

What. What is your monthly income that you have that you can use in terms of, like, funding goals and doing the things that you want to do?

[Phil]

I average about 110, 105 grand a year, and that is gross. So 10% of that I'm forced to contribute to a 401A.

[Bo Hanson]

So that's what, like 8,500? I'm doing that math in my head that come out about right somewhere on there. 8,500amonth.

[Phil]

Okay. As far as real estate, the rents. My mom was actually living in the condo, so we just moved her out of the condo. She's still in the process of moving, so as soon as that is, she was paying the mortgage, but kind of like not even the entire mortgage. I was helping her with about 150, 200 bucks a month.

[Bo Hanson]

Okay.

[Phil]

As far as the duplex that I'm living in.

[Bo Hanson]

So the condo is not currently generating income for you, but it will be.

[Phil]

My mom is still paying the mortgage, so. Extremely. Long story short, I was looking over my mom's finances, and her spending, to be honest, was kind of high. And I looked at her assets and stuff, and I basically ran the calculations, and I explained to her, hey, this is. You're gonna. This is gonna lead to a dead end sooner rather than later. We need to adjust. And to be fair to my mom, she definitely cut back her spending. One of the ways she cut back her spending was reducing her housing income. She was living in Chicago, paying $1,200 a month just in HOA fees.

[Bo Hanson]

Oh, wow.

[Phil]

Right? Oh, wow. Doormen. They're expensive. So we moved her from Chicago to Columbus, Ohio. The problem is she couldn't qualify for a mortgage. So we put the mortgage in my name. However, during that transaction, she was diagnosed with cancer, and we thought it was pancreatic cancer. So it's like being a nurse. I know what that means. Right. So I said, realistically, you got three to six months left. I still think we should move you to Ohio, because the health insurance she had in Chicago was garbage. Ohio State has one of the best shameless plug for osu, has one of the best cancer centers in the country, let alone the state. And by her moving, it allowed for her to cherry pick the insurance company so that way we could get her the best medical care. So at that point, it's like, well, you only have three or six, three to six months left, so does it really make sense for us to put the title and deed in your name? No, it didn't. Because why deal with litigation? That is unnecessary. So we put the mortgage, title and deed exclusively in my name.

[Bo Hanson]

So it's your condo.

[Phil]

Technically speaking, yes. It was her money used as the down payment. I have since given her that money back.

[Bo Hanson]

So now it literally is your condo.

[Phil]

Correct. Okay. Now obviously some appreciation and debt paid down is thanks to her. Right. And so I very much feel obligated in helping her, which is why right now, roughly speaking, I help her with 200 bucks a month in the future, roughly speaking, she's got about 10 years worth of spending money left before she runs out of money going back to what's a. Why Perhaps I feel like there's a.

[Bo Hanson]

Some responsibility there that you might have to bear in the future.

[Phil]

Correct.

[Bo Hanson]

Which is all the more reason why you need to really stable, healthy foundational footing.

[Bryan Preston]

You essentially have a dependent. Yes, in the long term, maybe not right now in the short term, but in the long term there is a dependent on the. On the horizon for you.

[Phil]

And I would encourage everybody listening to have those conversations with your parents because had I not had that conversation with my parent, the train known. The train. Right. I wouldn't have known. The train probably would have derailed much sooner. And there was a real possibility that right around today would have been the moment where she had run out of money.

[Bo Hanson]

So as it relates to the condo, is that going to be rental income for you or.

[Phil]

Yeah, so the way we're structuring that is roughly speaking, the mortgage is 1131amonth and HOAs are roughly 425. So like 1550 ish. I was going to rent it out for approximately 2 grand and then all that extra cash flow I was just going to shovel off to my mom as a way of supporting her now. But also realistically, I wouldn't have this asset if it wasn't for her. So I can benefit from the tax benefits, the write offs, or the tax benefits, the appreciation and the mortgage pay.

[Bo Hanson]

Down, but just not the cash flow.

[Phil]

Just not the cash flow. Okay, so I figured it was kind of a way for her to benefit in this situation.

[Bryan Preston]

You mentioned earlier she had a cancer scare. Obviously she made it well past the three to six months of the. So was it a bad diagnosis? Is she healthy? Give us the health update.

[Phil]

Yeah, so originally it was pancreatic cancer was the original diagnosis. We got her into Ohio State and they diagnosed her with what's called peripancreatic cancer. I could go medical if you guys.

[Bryan Preston]

Oh no, no, no.

[Phil]

But her prognosis is she's alive and well there. It's now six, over six years since the surgery. So she's alive and well.

[Bryan Preston]

So why did, why did y'all move her out of the condo though?

[Phil]

The HOA and mortgage for the condo is 1500. There is a low to moderate income housing program in Columbus that she was able to buy a house which was appraised for 330, for 149.

[Bo Hanson]

Oh, wow.

[Phil]

It's reducing her monthly housing expenditure by $500 just like that.

[Bo Hanson]

Okay.

[Phil]

Then with me giving her that extra $500, now her housing expenses are going from 1500 down to 500. So that was one of the biggest reasons why we moved her on top of the fact that she was given grant money and stuff like that to help purchase the property. So longer term. All right, sweet. We just got 25, $30,000 of free money down the road.

[Bo Hanson]

Sure.

[Phil]

And then thirdly, to be quite honest, that debt was weighing me down from a debt to income ratio because eventually one day I would like to buy more rental real estate. And so by having my mom live in the apart or in the condo, we weren't treating that money as rental income, but rather a gift from my mother. So that income was not being taxed because it was a gift. But that debt from a debt to income ratio was weighing me down. So I had no income to offset the debt. So for those three reasons, that was kind of the reason why we moved her. I mean, first and foremost it was we're going to reduce her housing expenses by $1,000 a month. Sure. Had we not done that, she'd probably run out of money in about four years. But because of that, it's now 10. And when I say that, it's whenever she retires.

[Bo Hanson]

Got it.

[Phil]

So that was first and foremost why we moved her out of the condo.

[Bo Hanson]

Okay.

[Phil]

Moving forward, we're going to rent it out for 2000. I'm going to give her the $500. So outside of maintenance and stuff like that, that's essentially going to be a.

[Bo Hanson]

Wash. No additional cash flow to you.

[Phil]

Correct. Got it. And then with the duplex right now I collect roughly 2250 and the mortgage is 1815 for the entire duplex.

[Bo Hanson]

That's what, 400 bucks a month coming in a free cash flow. Correct. What about maintenance and that kind of stuff?

[Phil]

Roughly, I would say about 600 maintenance or, excuse me, 300 per side. So about 600 to account for that. So if you. The mortgage is 1815, if my memory is correct, plus we'll call it 600. So 2415 is everything as far as the duplex is concerned, and the rents collected is roughly 2250. But also keep in mind that I. This is where I live. So, like, essentially, my housing expenses is 150 bucks or whatever that.

[Bo Hanson]

But it's not creating free cash flow for you right now.

[Phil]

Correct.

[Bo Hanson]

Got it. Okay. So you're. Your only income so far that we've gotten to is about $8,500 gross from nursing. You take out the 10%, maybe we're like 7,500 ish.

[Phil]

Right.

[Bryan Preston]

Well, that's not counting taxes, then.

[Bo Hanson]

That doesn't count. Yeah, so we're like, that's the only income we're at so far.

[Phil]

Yeah.

[Bo Hanson]

Okay. Keep going.

[Phil]

As far as real estate agency, to be honest, the only deal I've done right now is my mom's, so I'm.

[Bo Hanson]

Going to your only income. I mean, we're just getting out of brass. Your only income is nursing.

[Phil]

Correct.

[Bo Hanson]

Right. Now that's where the incomes come in. Okay.

[Phil]

Excluding the rents.

[Bryan Preston]

But.

[Bo Hanson]

But the rents are paying for the mortgage. They're all netting out. Money's flowing to Mom. So even though the rents are coming in, they're flowing out in terms of, like, cash flow to you, it's just the nursing income. Okay, what's it. What's your monthly burn rate? Like, how much does it take out the mortgages for the. For the duplex and the condo? Because we've already accounted for that.

[Phil]

Sure.

[Bo Hanson]

In terms of you to live the life that you want to live, doing the stuff that you do, going where you want to go, what is your monthly burn rate?

[Phil]

Roughly speaking, including the HELOC debt and the margin debt, roughly speaking, that's about 4 grand a month.

[Bryan Preston]

Okay, but what about with mortgages?

[Phil]

Add another three grand.

[Bryan Preston]

So seven grand a month.

[Phil]

Correct.

[Bryan Preston]

But does that math work?

[Bo Hanson]

Well, remember, we accounted for the income from the mortgages, so it netted out the mortgages. He's got income coming in there to zero those out. So from a true expense standpoint, he's at 7,000. But if you're going to add that to the expense. And you'd also have to add those to the income, the 75. So I was just trying to figure out. Because we're like, I'm trying to figure out your baseline living expense. Yeah, right. So if that's four grand, man, you just. I don't want to say. I don't want to say lean, but, you know, you've. After taxes, you've got what 65. You mean you got maybe 2 grand a month of for free cash flow after taxes?

[Phil]

2 to 2,500. Yeah. Also keep in mind that if I were to deleverage and DE risk the HELOC play, I'm paying about $1,000 a month between HELOC and margin and interest.

[Bo Hanson]

Oh, I know, we are very aware because. What's the HELOC rate?

[Phil]

8.3.

[Bo Hanson]

I don't know if you know this. That's a high interest rate. That's not.

[Phil]

What's the margin rate right now? 6.75.

[Bryan Preston]

I don't know.

[Bo Hanson]

If you know, then that's a pretty high interest. Right, That's. So that's what we're trying to figure out. Like it's, you know, it'd be different. You were. Again, I cannot give you enough compliments of how wonderful your financial situation is. But you're playing some like, yeah, you're playing some dangerous games. Sometimes when you win play dangerous games, you win dangerous prizes. And the thing that normally covers people, the thing that normally for people who like want to be aggressive and do crazy wild stuff is they have this like huge shelf or like, oh, if I screws up, I've got a big income right now. Your income is not significantly large relative to the wealth that you've built up so far. So.

[Bryan Preston]

Or expenses.

[Bo Hanson]

If something went wrong with your wealth, it's not like your income can make up the difference. Can. Which again to me suggests, hey, you've won the game. You're at this fantastic point. How do we start deleveraging? How do we start de risking? Because frankly, I hate seeing that you have a margin loan. I just can't figure out why you got that home equity line. I hate that you have that too. But you know, obviously there was a, you had, you did a thing. There's a reason behind that and there's resources that could satisfy that even though there's a tax impact to doing that. So I'm beginning to think through how do we like knock out some of that stuff to get you in a more shored up financial position opportunistically? What are some strategies that we could employ when we look at your brokerage account? Can we look at the brokerage account real quick? Because a lot of the positions have done incredibly well. You've got a bunch of really big gains on there. So anything that if you were to sell it to try to satisfy some of this, there's a bunch of like gains that you're going to take. So one of the Things I immediately want to figure out is are there any positions that you hold right now? Or if we were to look at your tax return on schedule D, do you have carry forward losses or embedded losses that we could potentially liquidate right now? Loss. Match that with gains to figure out how much capital we could, we could free up to apply to these other things. So first question. Do you have, outside of this brokerage account that we're looking at, do you have any other holdings that have like large embedded losses?

[Phil]

Yes.

[Bo Hanson]

Okay, tell me about that one.

[Phil]

So that is in a different brokerage account as it currently sits, I want to say it's roughly about minus 30k.

[Bo Hanson]

Okay. So it's like at $30,000 of losses that you can use. Right. And the total market value of that position is about $45,000, correct? Right. Is this a position that you love and are in love with and is amazing and all this?

[Phil]

You're gonna hate me for this one. So what had happened? The reason why.

[Bryan Preston]

All good stories start with that.

[Phil]

So what had happened was completely emptied. Like, I moved the hundred grand to the one brokerage account. Right. I then used margin to then pay off the heloc. So at one point I had zero HELOC and zero or excuse me, and everything. All the debt related to this investment play was in the margin only. Right. But then I did get greedy and I redeployed some of the capital from the helocopter. And what I was thinking of doing, which did backfire, was I would take the cash and I was selling puts. I believe I have to. I didn't quite think about this before coming on the show, so I'd have to rethink it. But yeah, something like selling.

[Bo Hanson]

You're employing some sort of option strategy against the position, Correct?

[Phil]

Correct.

[Bryan Preston]

While paying interest of what?

[Phil]

Correct.

[Bryan Preston]

8.3%.3% for the privilege.

[Phil]

Well, the, the rate of return I was getting was like 25%. So I viewed it as this arbitrage ability where the selling of the options annualized was like 25%. So I was paying 8.3%. And so I get to capture that margin or that that spread the arbitrage. The problem is, is the underlying stock did fall pretty hard as exhibit A. So that's, that's how I got in this.

[Bryan Preston]

Would you say that was like a cigar, but that you picked up off.

[Bo Hanson]

The ground in re. Off of it, on the other side of it.

[Bryan Preston]

Yeah.

[Bo Hanson]

All right. So in theory, we could. And by the way, this is not specific investment advice. This is Just some stuff that we're saying. I notice inside your financial situation. If I were looking this. Here's some stuff that I might think through.

[Phil]

Yep.

[Bo Hanson]

I could probably sell this position right now and it would free up for me $45,000 of capital. I didn't have. $31,000 of losses I can use. Correct. Do you know, on your tax return, do you have carry forward losses from like were you lost harvesting? Okay, great. Do we have any carry forward losses that are also available?

[Phil]

We do, but I don't know the number.

[Bo Hanson]

Is it about 11,000, you think that's about 11,000. So you have $11,000 of carry forward losses that you can also use. So now we're at 14, we're at $42,000 of losses that we can use. Have you triggered any, have you done any selling trading this year where you have your gains?

[Phil]

Yeah. So the way I started to unwind the HELOC play was I recognized, wait a minute, I'm probably a little too far out on the risk spectrum here. My markets are at all time highs. Not that I'm trying to time the market. You're going to kill me for that. I feel like I'm too. I feel like I'm over my skis a little bit. Right. I basically made a spreadsheet and I did an analysis. I guess what positions had the lowest gains. Right.

[Bo Hanson]

To free up the most capital at the lowest tax cost, Correct? That's correct. That's a great way to think about it.

[Phil]

And I took that cash and threw.

[Bo Hanson]

It at the heloc.

[Phil]

The HELOC in margin.

[Bo Hanson]

Awesome.

[Phil]

Right.

[Bo Hanson]

So we're going to call this $31,000 of gains. I'm just doing some rough math here to get us there. I'm going to call it 32 because I knew the math in my head better. So you got $42,000 of losses that you're able to use and now you've already triggered $32,000 of gains this year. That's going to net $10,000 of losses that you have left to use to capitalize on. Right.

[Bryan Preston]

And the balances changed on your net worth from what we had. Or is those pretty close to where they are?

[Phil]

You mean from when I sent.

[Bryan Preston]

Yeah, because you triggered some losses. I mean you triggered some gains already because that's where the all the money. Did it change the balance or is these most.

[Bo Hanson]

I think it's the small. The zero balance ones are the ones that triggered the gains.

[Bryan Preston]

But I'm just saying is the liability, the margin loan and the home equity, are those the actual balances still?

[Phil]

More or less, yes.

[Bryan Preston]

I post window dressing from this so far.

[Phil]

Right, right. So I took margin. I took margin. Oh, are you saying. Did I like, go.

[Bryan Preston]

Yeah, he's saying, was this money.

[Bo Hanson]

Did you use some of that capital to pay down the debts?

[Phil]

Yes, yes. So. So what we.

[Bryan Preston]

It's kind of like me, when I go to the doctor, I fast a lot longer than he tells me to because I'm hoping it's gonna make my cholesterol as a nurse.

[Phil]

Don't do that.

[Bryan Preston]

I'm wondering if these numbers are window dressed in their best version because you. You cleaned it up a little bit.

[Phil]

So. So, I mean, as we sit today, the HELOC is 29.9 or something like that. The margin is 105.5.

[Bryan Preston]

So it's gone up a little bit.

[Phil]

Once again, I was rotating money from the margin to the heloc. And I would say that I spend probably too much time listening to following the stock market and things of that nature. So one thing that I'm definitely interested in doing is kind of scaling back the amount of attention I'm giving the stock market because with that attention, I can then work more as a nurse. Right. And the stress of me being crazy is less stress for me. So that way I can absorb more stress from work.

[Bryan Preston]

Go back to that brokerage account I saw. Now, here's the thing. You hit a home run, but you hit a home run when you're playing seven and eight league baseball because you put. Where was it? 2,800? Yeah, I'm trying to find the Nvidia. You put $2,900 into Nvidia. I will say that it's worth 32,000. So you hit a home run, but you were in 7 and 8 league baseball because it doesn't really change your financial position. But the problem is that you get emotionally connected with those stocks to the point that it draws so much of your horsepower of your brain that it hurts.

[Phil]

And I will also say, to talk crap about myself for a second, I felt like a genius.

[Bo Hanson]

Of course, we always do. Right?

[Phil]

And what I will say is, I was. I still am a little bit. Which is why you guys need to kick my butt in shape. A little bit reluctant to sell some of these positions because, dang, I look good. Yeah, Right. And so by. By selling these positions to some extent, it's kind of me letting go of that was really, I don't know, wise is perhaps the best word. But that was a good Investment.

[Bo Hanson]

Let me. But, yes, agree. If I wrote you a check for $1,000 right now, and I'm like, hey, Phil, thanks for. Here's a check for $1,000. Which one of those stocks would you go buy today?

[Phil]

So you're saying, If I have $1,000.

[Bo Hanson]

I'll give you $1,000 in cash. Which one are you gonna go buy?

[Phil]

Q. Q. Q.

[Bo Hanson]

Okay. Cause so not Tesla, not Nvidia. But what I'm saying is you're making the point that, oh, well, if I sell this, it's like I'm saying that like I'm giving up on that great decision. You've already capitalized on making that great decision. Continuing to hold it today is making the effect affirmative assertion that at today's price, I would buy it. If you wouldn't take a thousand dollars and go buy Nvidia today, the question I'm gonna ask you is, okay, why are you holding Nvidia? Now, there might be a reason for tax implications or other things, but it's not about. Just because you bought it low and you've written it up here does not mean that continuing to hold it here reinforces your decision to buy low. You've already. You've already done that. You've already made that. So that's a. That is a flaw that stock investors have is, oh, I can't sell that one because I got it so right. If you got it so right, great. If you wouldn't rebuy it today, does it make sense to continue to hold it? Because what I see when I look at your situation is I got to figure out how I get two things done, in my opinion. How do I get rid of some of this gross debt that's hanging out at 8.3 and 6.75? And how do I build up the coffer so I have at least some semblance of an emergency fund right now? I'm going to give you, like, so much, like, leeway for you to be leaning. If your burn rate is $4,000 a month in living expenses, then we know that we have debt on the two real estate properties of another 4,000, roughly. I would love to see you have an emergency fund of $25,000, right? So that give you about three months at $8,000 burn. That's even way leaner than I want it to be. But $25,000, that's not buying more real estate. That's just like tomorrow when I'm thinking about top pros. How do I get $25,000 there and then how do I knock out these other debts? The way that you attack the HELOC in margins, 8.3, 6.75. You can do debt snowball, you can do debt avalanche, you can go either way.

[Phil]

Right.

[Bo Hanson]

But I just, in my opinion, you got to get rid of them. They're just not doing anything for you.

[Phil]

I agree.

[Bo Hanson]

And they are unnecessarily risk and you're literally just arbitrage or not. You are setting money on fire with the interest that you're paying on this.

[Bryan Preston]

What I'd like to do is because I love how we give homework, because I want Phil to be able to leave here with actual actionable items. And that's what when you bring up the financial order of operations we were doing, this is that, you know, we talked about. The cash is going to be both highest deductible, emergency reserves, employer match. You said it. You're leaving 40% of your work capacity on the table right now. That is going to go up automatically. Bo just laid out in step three, high interest debt. We're paying 8 point whatever, 6.8. I mean these are, these are high interest rates. I like the fact that we're first going to triage your situation. I'll use a medical term. You're going to triage it by trying to use and exploit that loss that you have and see how much can we pull off to pay it down just through the loss carry forward but so you don't trigger a bunch of taxes all at once and make this a worse situation. I love what Bo is doing. He's creating what is your cash flow spread to pay off the high interest rate. But then while you're also at that point, he is telling you because it really kind of one in four are somewhat related. Is your highest deductible covered and him giving you that streamlined or really thinned out three month because he went super low on what the amount is. That's the $25,000. Those are the two big homework things that stood out to me. I was like, it feels really serious about de risking this. Let's pay down this debt. Let's. Let's also try to get up cash reserves a little bit and I think that you'll feel better. And that's just the first step. This is like I said, triaging you to make sure you get to go on that healthy wing where you're currently working and not going to ICU just when we get the first downturn in the market. Because that's really what you're facing. You're on paper. We're trying to turn this to wealth.

[Bo Hanson]

And look, you're going to be more aggressive naturally. When someone. Gosh, this is a horrible medical analogy. When someone gives up smoking, most people can't do it cold turkey. They gotta do the gum or they gotta do a patch. If all you do is you go back like, hey, you know what I'm gonna get because have you been maxing out your Roth every year? Have you been doing that?

[Phil]

Yes. Up until like the last, like last year. I don't think I did.

[Bo Hanson]

You just hate tax free money.

[Phil]

Well, for me, to be honest, it was part of that. Fire enthusiast.

[Bryan Preston]

I like that you said, I don't think I did. We know you did it.

[Phil]

Okay, there we go. There we go. So did I in 22 as well?

[Bo Hanson]

I'm not sure if you did in 22 or not, but it was clear that you have not. It's not been a top priority for you to knock it out.

[Phil]

Correct. I will say that the hsa. I just became eligible for that.

[Bo Hanson]

Awesome.

[Phil]

So now I. Last year, I have contributed the maximum. This year I will contribute the max amount. And I'm going to continue to build up that HSA and have it invested, of course. So. But with my buckets and with a tilt for wanting to get into more real estate in the future, I've been focusing because 20%. Well, 22% of my income, nursing income, is forced into going in your 401A. Correct.

[Bo Hanson]

Great. Not going to fight you on that.

[Phil]

So I don't feel like I need to build up the traditional asset bucket any more than that. Is already being loved, not paying taxes.

[Bo Hanson]

I thought that was the thing that you said.

[Bryan Preston]

We're skipping steps, though, because if you go back, if you go back to the foo. Step five is the HSA and Roth IRA correct. You just said I didn't do it. We know we didn't do it in 2023. I want to pick on you on one other thing because you're a maximizer by your own words, but when I looked at your Roth statement, I did see this. For a person who was running. Was it three grand less than three grand of cash. Imagine my surprise when I see your Roth IRA has $43,000 of cash in it.

[Phil]

Yes. Yes.

[Bryan Preston]

So I was like, wait a minute.

[Phil]

What are we doing here? So what happened with that? Was I also.

[Bryan Preston]

How's that story start?

[Phil]

I hit another home run. Those that pos. That cash came from an Nvidia position I bought in 2016.

[Bryan Preston]

Okay.

[Phil]

So at that point, I don't know, 60 days ago, I had something like 175 grand or 150 grand of Nvidia. And I was just like, even for me, that level of was heavy. It was heavy. So I offloaded some of that.

[Bo Hanson]

That.

[Phil]

That 43 grand of Roth cash came from that.

[Bryan Preston]

So you've had a behavior of doing individual stocks, stock options, and you're saying you're on this reform path?

[Phil]

I will say the stock options is only for, like, the last year or two.

[Bryan Preston]

Don't mishear me. I'm not picking on you. I'm just trying to show a behavioral side is. I want to take you back to the rule of 72 that you said that's what brought you the passion, the love. Why not take that 43,000? Because you said even yourself, you got a little nervous having that concentrated position generates so much. What's wrong with, like, dollar cost averaging or even. You don't even have to dollar cost average. With that sum of money on there, you could have lump sum into an S&P 500 index, a total market index. Why just sit in cash for a few months? Well, it's because you're looking for the next opportunity.

[Phil]

It was. And so you're looking for that next cigar butt. Yeah. You know, you need some dry powder to mountain. So since that statement that I had sent you, that money has been deployed into what? Index funds.

[Bo Hanson]

Okay, awesome.

[Phil]

I'm trying here, guys. Work with me, Work with me. All right, so, yeah, I want to say it was mostly voo.

[Bo Hanson]

Okay, great.

[Phil]

And V, I, S, T, A, X, or something along those lines. Gotcha. But, yes, index funds is where I deployed all that. See, I'm trying to eat my own cooking, too.

[Bo Hanson]

See, I think there's so many other creative and interesting endeavors, and your mind is obviously, like, just a wonderful thing that I think that you can pursue. Like. Like, I don't even hate the idea of you doing real estate. I think real estate is something you're passionate about and potentially you want to shift your vocation in there. But if that's really something that's meaningful to you in a direction you really want to go, then you got to, like, cut out all of this other fluff. You got to shore up your financial situation. And frankly, what I think is you're in a prime position. I have to think about the stock market. That's where I was going to my nicotine patch thing. Okay, maybe you don't go buy S&P 500 by QQQ O. Whatever if you're going to be more aggressive, that's fine, but set it and forget it. Always be buying. Have your money going into your 401A and let it rock and roll. And then have your money going into your HSA and let it rock and roll. And have your money going to your Roth and let it rock and roll. If you're just doing those three things, the 22% in your 401A and then you do the 7,000 Roth, and then you do the individual max for the hsa. Okay, check that box. Well, then with your shovel, then you can start building up your cash and pursuing your next real estate opportunity because you've gotten that piece taken care of. And then you are legitimately at step seven, step eight of the financial order of operations, because you're saving 25% of your gross, you've covered your risk management, and you're still able to do all the things that you want to do without having to, like, rob Peter to pay Paul and move it from the margin into the HELOC and go do the options. It's just needless spinning your wheels when you've already gotten to a fantastic financial situation. If pursuing real estate is what you want to do, or shifting careers what you want to do, that should be where your focus is, not on all this other stuff. Because, frankly, this other stuff is easy. It will take care of itself if you just let the money work.

[Bryan Preston]

We've given you the kind of. The instructions here is that in the short term, it's steps three and four. It's paying off these debts first, cleaning up, you know, through that loss, carry forward that you have, then get the emergency reserves up to 25%, then make sure you're doing the Roth IRA. And then. But once you get that, that debt paid off, I think you're gonna do it quicker because you're gonna go pick up more hours and get that more income with that shovel coming through. I think you clean this up probably within a year. I mean, I really think you could do it.

[Phil]

I was hoping to do it even faster.

[Bryan Preston]

I know, and I think you will. I think you're wired that way. But that's when you're gonna get to the point of step six where we're gonna say, okay, let's be honest about this 25% savings rate. Cause that's really what step six is all about, is getting you to 25%. And the only thing I do worry about you is that I always tell people if your income, household income, is less than $200,000. You get to count the employer match. So you currently. Technically you're part of that. But do you know the why on why I get to tell people that lifestyle creep? Well, it's. You're also close to the social safety net, you know, for people who don't make a ton of money. You know, you're going to get Social Security at some point in the future. So, you know, Medicare and all those things have some income derivative to it. So you personally don't have the social safety net. So you should feel some pressure that you need to go above a little bit because you don't have Social Security, you're not getting the quarter hours and building that up over the time. So I would love for this to be pushed towards and it's going to happen naturally with the Roth. And then maybe you even go say, let's hit a little bit more to the employer side of things. But that gets you to step seven, which is the hyper accumulation. How am I actually going to use this money? Everything that we were kind of alluding to. And you've already said Once you're at 25%, you'd love to get into real estate. I want you to do it where you're not faking it. You've been very. And by the way, house hacking is not faking it. I think that is completely noble. Good. We even have to carve out when we do real estate shows and say, look, I'm not picking on my house hackers because you were just exploiting a beautiful thing that happens in real estate. But with all these other. If you want to get into real estate, you know, buying residential rental or doing other things, you really do need to be at step eight of the financial order operations. And if I'd have asked you when you came in here today what step you're on, what would you have told me?

[Phil]

I know, I know. You guys are gonna already drill me on this one. I put eight, I believe.

[Bryan Preston]

Yeah. That's what you. I mean, when I was looking at your stuff originally, I was like, Phil hadn't left step one. I mean, talking about skipping some steps. I mean, because that cash blew me away.

[Phil]

Sure.

[Bryan Preston]

And that's the thing. You have so much potential, so much opportunity. But I just feel like somehow this was not for a maximizer. You're grossly inefficient with your risk analysis.

[Phil]

Yeah. And I agree. And that's why I'm here just to get slapped around a little bit as well.

[Bo Hanson]

Well, I don't know about what questions did we not answer? What are some things that you wanted to get our take on that we didn't speak to? Because I've got a. A long list of homework items that we can give to you. I mean, we even talk about. You said that one of your greatest assets is your job, is the fact that you have that. And yet if you were to leave here and drive back to the Ohio State University, go buckets and get in a car wreck and not be able to work, you said you don't have any disability insurance.

[Phil]

Correct.

[Bo Hanson]

What happens in that scenario?

[Phil]

Well, actually, this is a question perhaps for you, perhaps for an insurance agent, given that I'm only contracted to 16 hours a month, I don't know how they would insure my income if it would be based off of previous tax. Like I've been in this role where I've kind of. I've been in this role for two years. So I don't know if they would only insure up to what my contracted amount would be or what my historical incomes would be. But that is definitely one thing that I understand. I even before coming in here, I think I had mentioned in some of the documents I had sent over that I understand disability insurance is something I should pay attention to and umbrella insurance just to help mitigate. Those are two things that I would like to.

[Bo Hanson]

So let me speak to the first one. Disability insurance is something I would say that you absolutely have a need for based on the fact that if something were to happen and you could not create income, that creates a lot of problems. Your entire financial situation implodes upon itself if that happens, as to what income they would use, I would imagine now again, you'll want to talk to a real estate agent. I would not. Insurance agent. Don't talk to a real estate agen. I would imagine that you'd be able to use your earnings history, say, hey, this is the earnings that I have. And I can confirm for you that I've been earning this for at least 24 months and they'll be able to insure you up to that level. I would also check with both the institution that you work for as well as any nursing associations you may belong to, because a lot of times big groups will have group disability plans that you can become a part of whether it be subsidized or not subsidized. But you'll get more favorable rates on that buying in. It is not incredibly expensive and it's an easy risk to insure against. And it's something that frankly is probably even Even in your psyche. I mean, we think we know what your biggest risks are. But even you would acknowledge that's a big risk and that's just an easy one to check the box on. You make enough money, you can pay for it. So I would investigate what's available through the company, through the entity that I work for, and then what's available through any organization that I may belong to. And then umbrella insurance. You, you own a lot of assets, right? And obviously you have a lot of stuff that if you were to become liable in some situation, someone could very easily look at your life and say, hey, this is something I want to go attack. So it makes sense to protect those assets. And it's incredibly inexpensive. We generally recommend about your net worth equal about your net worth's worth of umbrella coverage. So you go look at $1 million policy, and it's going to be maybe 100 bucks a year. I mean, it is incredibly inexpensive. It sits as an umbrella on top of your homeowner duplex insurance, on top of your auto insurance. And again, it's just one of those things that at your stage of wealth building, there's no reason not to have it. That's as easy as a phone call to your insurance agent. Get in place, knock that out. So that was just not a difficult one at all.

[Bryan Preston]

And I don't want people to think we ignored some of your other debts out there because you did have, you know, you got the mortgage on the condo, you have a student loan debt. But when we were going through it, those were still somewhat what we consider low interest debt. I mean, because you, when you're on.

[Bo Hanson]

Fire, you don't worry about chapped lips. You know what I mean?

[Bryan Preston]

That's why. But I did want to make sure that everybody know we covered all that because that's more of a step nine. And you had a lot of other things we needed to cover before we hit that.

[Bo Hanson]

All right, let me, let me rattle off for you your homework. Okay? We went through a lot. And by the way, we cannot tell you enough. You're in a great spot. It just you. All right, you've won, you've won some scratch offs. Let's not roll it back in. Let's. Let's keep it rolling.

[Bryan Preston]

My ninth grade basketball coach, Coach Corley, used to say, if I'm not yelling at you, I've given up on you. So I just want you to know that.

[Bo Hanson]

So we need to look at some disability insurance. That's one thing you definitely need to look at. You need to Go look at umbrella insurance. We recommend roughly your net worth value of umbrella insurance. I would love to see your emergency fund get to $25,000. That roughly covers three months of living expenses plus some of the carry cost for the real estate properties that you own. I think you should really think about prioritizing paying off that home equity line. How do I get out of that? Prioritize paying off the margin loan. How do I pay off that? And then once you do that, don't ever use them again. You don't need them anymore.

[Phil]

Do you think I should just sell the assets from the brokerage to pay off the HELOC and margin?

[Bo Hanson]

I think you got to play the tax game. I do think you have some that are having very big embedded losses. We're close enough to the end of the year where you could even spread this over two tax years if you needed to. So you could sell a little bit this year, maximize all those losses and then when you get into January, sell some more and think about doing that. That's the way that I would consider approaching it if it was me. I think it's 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. Invest those dollars and then once you've done those things, then you can actually graduate to step six. I'm going to argue you're doing. If you'd max out roth, max out HSA and you got 22% going in, I'm going to say you're 25%, I think go to step seven and then start looking at some real estate. How do I build up cash to be able to do my next real.

[Bryan Preston]

You've got to go back to cash at some point because don't get into real estate unless you can go beyond six months. So remember we gave you three months in this triage situation. So you will need to double back on step one and four and get cash up. Because don't want to be little pockets. Little pockets get taken from big pockets and downturns.

[Phil]

And as a mistake, I will admit when I bought the duplex and part of that hard money loan that we haven't quite mentioned yet.

[Bo Hanson]

We talked about it.

[Phil]

No, sir. Was renovation. As a realtor, even though I'm still a baby realtor, I put too much down and I didn't leave myself enough liquidity.

[Bo Hanson]

So when you are, when you're worth $5 million one day, do you know how much that 50,000 in cash you ought to have is not going to have mattered.

[Phil]

Sure.

[Bo Hanson]

You know what I mean? That's, that's the trajectory that you're on. You need to think of it through that lens. Okay. Do I want to get to 5 million, it's okay if I carry this $50,000 cash, or do I want to not carry the cash and risk never actually getting to where I truly could go? That's the position that you're at the future's bride. You just got to figure out, do you believe that? And are you going to start moving in the course that a big that a big boy millionaire would start moving in?

[Phil]

Sure.

[Bryan Preston]

Phil, thank you so much for coming on Making a Millionaire. We've actually had an absolute blast.

[Bo Hanson]

If you would like to be on Making a Millionaire, you can go to moneyguide.com apply and if you want to know more about some of the stuff we talked about today, you can go to moneyguy.com resources and check out all of our free resources out on the website. Phil, thanks so much for hanging out with us today.

[Phil]

Thanks, guys. I really do appreciate it.

[Bryan Preston]

Guys, remember, there is an absolute better way to do money. Keep tuning in and we'll keep sharing the information. I'm your host, Brian Preston, joined by Mr. Bo Hanson. Money got team out.

[Bo Hanson]

Making a Millionaire is hosted by Bryan Preston and Bo Hanson. Brian and Beau 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 securities 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.