We HATE This New Money Trend…

Summary

Podcast Summary: Money Guy Show – "We HATE This New Money Trend…"

Episode Information:

• Title: We HATE This New Money Trend…
• Host: Brian Preston and Bo Hanson
• Release Date: June 18, 2025
• Description: Hosts Brian Preston and Bo Hanson delve into modern financial trends, offering insights and strategies to help listeners make informed decisions about their wealth-building journeys.

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Introduction to the Trending Financial Concern

Timestamp: [00:34] – [04:02]

The episode kicks off with Brian Preston and Bo Hanson expressing their strong disapproval of a burgeoning financial trend that they find detrimental to consumers—Buy Now, Pay Later (BNPL) services, specifically spotlighting Klarna and its new debit card offering.

• Brian Preston: "That's what you're talking about? Buy now, pay later." ([01:20])
• Bo Hanson: Highlights the ease and dangers of BNPL, comparing it to traditional credit cards but deeming it more "sinister."

Dangers of Buy Now, Pay Later

Timestamp: [04:02] – [07:29]

The hosts delve into the multifaceted dangers of BNPL schemes:

1. Encouragement of Overspending:

   • Brian Preston: "Buy Now pay later has become so easy and so convenient that it has now exacerbated the problem of consumers believing they can afford more than they actually can." ([02:27])
   • Statistics: Nearly half of BNPL users report financial problems, with 24% overspending and 16% missing payments.

2. Impact on Young Consumers:

   • Bo Hanson: Emphasizes that the average BNPL debt is around $3,800, predominantly affecting young individuals (Gen Z), impeding their financial starting blocks. ([04:32])

3. Long-Term Financial Consequences:

   • Brian Preston: Highlights that 72% of BNPL users see a drop in their credit scores, complicating future financial endeavors like obtaining mortgages. ([05:59])

Key Takeaways and Strategies to Avoid BNPL Traps

Timestamp: [07:29] – [09:49]

The hosts provide actionable advice to listeners to steer clear of BNPL pitfalls:

1. Maintain Financial Discipline:

   • Bo Hanson: "Buy Now, Pay Later is a gut punch to your discipline muscle. Don't fall into that trap." ([06:58])

2. Intentional Spending:

   • Brian Preston: Advocates for deliberate purchasing decisions, ensuring that expenses align with personal financial goals rather than opting for easy installment payments. ([07:29])

3. Understanding Time Value of Money:

   • Bo Hanson: Encourages young listeners to recognize the compound growth of their money, emphasizing that BNPL can erode long-term financial potential. ([08:15])

4. Utilize Wealth-Building Tools:

   • Bo Hanson: Recommends leveraging resources like the Wealth Multiplier on moneyguy.com to comprehend the true value of saving early. ([08:15])

Interactive Segment: Listener Questions and Discussions

Timestamp: [10:29] – [58:04]

The episode transitions into an interactive Q&A session, where Brian and Bo address various listener questions, offering personalized financial advice. Key discussions include:

1. Emotional Manipulation Through Free Samples:

   • Listener Poll: Majority do not feel obligated to purchase after taking free samples.
   • Brian Preston: Encourages understanding personal biases to resist consumption traps. ([19:04])

2. Managing Multiple Financial Goals:

   • Listener Austin's Question ([12:11] – [17:57]): Balancing paying off student loans, saving for an engagement ring, and investing.
   • Brian Preston: Advises prioritizing goals based on personal values and long-term financial plans, suggesting that 5.5% student loan interest may not merit accelerated repayment over other investments. ([14:48])

3. Investment Decisions with Inherited Assets:

   • Listener JL421's Question ([44:47] – [49:49]): Considering using an inherited Roth IRA for emergency funds.
   • Brian Preston: Recommends against liquidating Roth IRAs for short-term needs, emphasizing the importance of tax-free growth and advising building emergency funds through other disciplined means. ([47:03])

4. Mortgage Management for Young Homeowners:

   • Listener Mitch M's Question ([52:05] – [57:09]): Managing a $172k mortgage at 7.37% while saving 25% in retirement accounts.
   • Brian Preston: Suggests exploring mortgage refinancing or modification options to lower interest rates before considering additional mortgage payments, stressing the importance of maintaining an emergency fund. ([55:43])

5. Encouraging Responsible Spending in Retired Parents:

   • Listener Unpopular Advocate's Question ([57:46] – [62:07]): Helping a retired father with significant net worth but limited spending.
   • Brian Preston: Advises understanding the underlying reasons for reluctance to spend and ensuring that financial advice respects the father's lifestyle choices, possibly involving third-party financial counseling. ([58:04])

Conclusion and Final Thoughts

Timestamp: [62:07] – End

Brian and Bo wrap up the episode by reiterating the importance of financial discipline, informed decision-making, and utilizing available resources to avoid modern financial traps like BNPL. They encourage listeners to engage with their content, ask questions, and utilize the tools available on moneyguy.com to enhance their financial literacy and confidence.

Notable Quotes:

• Brian Preston: "Buy Now, Pay Later is supposed to make your life easier, but it's really just a primrose path to destruction and failure." ([07:29])
• Bo Hanson: "You're billionaires of time, which is the most valuable resource. Don't let innovations that make consumption easier derail your financial journey." ([08:15])

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Resources Mentioned:

• Website: moneyguy.com
• Courses: "Know Your Number" available on learn.moneyguy.com
• Special Offers: Stamps.com sponsorship with a special offer for Money Guy Show listeners.

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Disclaimer: The Money Guy Show is hosted by Brian Preston and Bo Hanson, partners with Abound Wealth Management. The content provided is for informational purposes only and does not constitute financial, tax, investment, or legal advice. All investments involve risk, including the potential loss of principal.

Transcript

[Brian Preston]

What is dadication?

[Bo Hanson]

The thing that drives me every day as a dad is Dariona. We call him Dae Dae for short. Every day he's hungry for something, whether it's attention, affection, knowledge. And there's this huge responsibility in making sure that when he's no longer under my wing that he's a good person. I want him to be able to sit back one day and go, we worked together. We did a good job.

[Brian Preston]

That's dadication. Find out [e-mail] brought to you by the U.S. department of Health and Human Services and the Ad Council.

[Unknown Speaker 1]

Boy, oh boy, there is a money trend that we absolutely hate.

[Brian Preston]

Brent, I am so excited to talk about this because I feel like we are going to do the world a service right now because this is, frankly gross. And I'm so glad that we can draw attention to it and put, like, a giant flashing beware, do not fall into this trap sign on today's show.

[Unknown Speaker 1]

So without much adobo, what trend are we talking about?

[Brian Preston]

So, Klarna, who a lot of you may recognize, if you've ever gone out to buy something and it says, hey, okay, you want to pay for this thing? How about instead of paying for all of it today, like you originally planning on doing, why don't you spread this out and this $19 purchase you can pay for in the next six months at a five bucks.

[Unknown Speaker 1]

Buy now, pay later.

[Brian Preston]

That's what you're talking about? Buy now, pay later. So Klarna, the company that's not notably known for that, has now introduced a debit card that allows people to now make that consumption decision on the spot.

[Unknown Speaker 1]

Now, I had. We had a team member not to be named, said, guys, this slide, this sounds a lot like a credit card, but it's more sinister than a credit card. Explain why we have issues with this.

[Brian Preston]

Yeah, so the way a credit card works is obviously, you know, you swipe, and if you carry a balance month over month, you incur an interest charge. An interest charge on credit cards can be greater than 20%, but when it comes to buy now, pay later, it's so enticing. It's that siren song because there are no interest charges. If I buy something for $100, rather than paying $100 today, I can just pay $25 in each month over the next four months, and there is no interest. So the financial mutant in you would naturally say, oh, well, this. This is great. I have to take advantage of it. Time value of money would suggest that this is something I should be doing. But unfortunately that is not.

[Unknown Speaker 1]

But it sounds too good to be true. And without a doubt, it is. Bo, let's walk through what are some of the dangers of Buy Now Pay later and then adding a debit card on top of that. This could be a recipe.

[Brian Preston]

Yeah. So some of the dangers, number one, is it encourages overspending. The idea, and we say this all the time, that so often consumers fall into this trap of man, I can afford anything at just 100 bucks a month, or I can afford anything so long as I can afford the payment. Well, Buy Now Pay later has become so easy and so convenient that has now exacerbated that problem that I can have a thousand different payments every month for stuff that I bought in the past. So it naturally causes us to consume more and more and more.

[Unknown Speaker 1]

And by the way, don't take our word for the fact that it encourages overspending. There's actually some stats on this. Look at this. Nearly half of Buy Now Pay later users report at least one financial problem.

[Brian Preston]

And there are some financial problems specifically related to this. Think about this. 24% of these users say that they overspent. Like 24% of buy now, hey, I overspent. How about this? 16% of buy now Pay later users missed a payment. You know, when Buy Now Pay later falls apart. Brian falls apart when you miss a pay.

[Unknown Speaker 1]

Yeah, that's when all these and all the other stuff kicks in.

[Brian Preston]

That's exactly right. And 15% said they regretted a purchase because Buy Now Pay later was a thing that was available to them that was there. It caused them to make a purchase that perhaps they otherwise would not have made. So this is just not encouraging the right behavior.

[Unknown Speaker 1]

So if you ask, as we actually pulled, the average Buy Now Pay letter debt is around $3,800. And that, you know, a lot of people say when you compare that to all the other debts out there, that doesn't sound so large. It's until you consider this next fact is that the majority of people that are using this are super young people. So if you lay over the fact that this is young people that are running up this type of debt, how are you ever going to get out of the starting gates if you're already starting behind?

[Brian Preston]

Yeah, it's young people and those that are in the most dire financial circumstances that are taking advantages. The most vulnerable people are the ones that end up using these services. And, and we know that 66% of Gen Z ers, Gen Z folks that use Buy Now Pay later end up encountering Issues end up having a negative outcome with this. And you just like when you start out on your financial journey, this world is hard enough to navigate just getting out of the starting blocks. And when you allow yourself to fall prey to one of these consumerism traps, it just makes the journey that much harder right from the get go.

[Unknown Speaker 1]

Well, and you think that this isn't one and done. 60% of buy now Pay later are actually doing it running multiple loans and they're averaging nine and a half loans per year.

[Brian Preston]

It's unbelievable. So that was so that way, what ends up happening is that you buy a thing and you have the payment. You buy another thing and you have a payment. You buy another thing, you have a payment. The more you end up trying to take advantage, the further out on the risk spectrum you go to end up falling in a bad spot. And that's been what some of the fallout has been. According to Fox Business 1 in 5 borrowers, so 20% of folks that are using Buy Now Pay later actually ended up incurring late fees or interest. So this thing that was supposed to be amazing, that was supposed to be this awesome tool actually caused the consumption that you were doing to be more expensive anyways.

[Unknown Speaker 1]

Well, and here's the thing, it's a death by a thousand paper cuts if you think about the fact that it's eroding your long term potential. Because check out this stat, 72% of borrowers saw their credit score drop. Now how do you think? Because if we already know this is young people, when you go get that first mortgage, I already told you guys the mistakes I made. Because when you're getting that first mortgage, it's not like you've had enough credit history that your, your credit rating is so high that they give you the best and greatest right out of the gates.

[Brian Preston]

Nope.

[Unknown Speaker 1]

Typically I remember I blew up my first mortgage because I did a 10 to 15% discount at a furniture store.

[Brian Preston]

Yeah.

[Unknown Speaker 1]

You got the cash flow because then you have the, because you have all these inquiries on your credit. Other things, this is a problem right as you're starting out for that purpose. And then here's what I think we ought to close out with some key takeaways. And I'll start us off. Bo, the big thing I hate about this is that it is a punch in the gut to discipline.

[Brian Preston]

That's right.

[Unknown Speaker 1]

We tell you all the time that the first ingredient to wealth building is your ability to live on less than you make and exercising, building up that discipline muscle. Well, if you are going to take this consumption trap, because that's what this is. You're not even going ahead and working on the muscle. You're taking the train to easytown or perceived Easytown becauseand that's what debt and buy now, pay later is a false mirage. That is a gut punch to your discipline muscle and you just can't fall into that trap.

[Brian Preston]

Yeah, so don't fall into the trap. And then the other thing is when it comes to consuming, because we're not anti consumption, we're not anti spending money, we're not anti buying things. But when you do that, we want you to be very intentional. If you want to buy something that costs $500, we want your mind to think through, okay, this is a purchase I actually want to make and I'm willing to part with 500 of my hard earned dollars to buy this. Not oh, I'm going to take the easy one and I'm just going to pay $100 a month over the next five months. We want you to only spend money on the things that it makes sense for you to spend money on. And if it feels a little painful, that's okay. That's the way that it's supposed to feel, especially early on in your journey.

[Unknown Speaker 1]

And that leads to this, this point is that I've told you guys, especially for young people, you are billionaires of time, which is the most valuable resource. But you are in the beginning at that component where you're trading your time for wages. And you know that that sacrifice is hopefully so you can build something for the future. And if you understand that value of your business, billions of seconds of time, you will spend money differently because you are on a clock that is going faster than you realize that it will start working against you. If you don't turn compounding interest for you, it's going to be working against you. And that's why please go to moneyguy.com resources check out our wealth multiplier because this thing there's a reason we have koozies and other things that say for a 20 year old who discovers the value of their time, every dollar has the potential to become $88 at retirement. But this is a cruel, cruel world because at 30 that same dollar has potential become 23. Still amazing. A 23 times multiple. Believe me, 40 year olds are jealous of that with their 7 time multiple. People in their 50s and beyond. When you get below $3 or 3 times multiple, you quickly realize you will spend differently, you will save and invest differently. If you just understand what your time and Your money is worth. Don't fall into these innovations that supposedly make your consumption life easier, but really are just a primrose path to destruction and failure.

[Brian Preston]

I love it. I think I am. I'm so excited that we get to talk about this kind of stuff, that we get to share these things. I mean, this is obviously a consumption thing. There are all kinds of traps out there that you need to make sure you're staying aware of so that you don't fall into them, so that you don't get derailed, off your financial path. And one of the ways we love helping make sure you don't get derailed is we want to answer your questions. We want to speak to the things that you care about. So right now we have the team out in the wings collecting your questions. So if you have something you want to get our take on, want us to weigh in on, make sure you get your question in the chat right now. So with that, creative director Ribi, I'm going to throw it over to you.

[Unknown Speaker 2]

Yeah, we're actually going to kick this off with a question to you watching and listening. If you're in the YouTube live chat right now. You know, we just conducted a poll that said if you take a free sample at the grocery store, do you feel obligated to buy? And in case you were wondering, yes, this is based on a real life conversation we had to get to.

[Unknown Speaker 1]

I see where this thing has already run a file. Oh, we were talking about samples at like ice cream shops at, at the mall. When you're, you know, when the guy's handing out chicken at the mall to try to get you to come to the store. Grocery store. We, we went with the lowest.

[Brian Preston]

Hey, you know what?

[Unknown Speaker 2]

Any free sample anywhere.

[Brian Preston]

You know what?

[Unknown Speaker 1]

Bias in the way.

[Brian Preston]

No, hey, we're gonna. Here's what we're gonna do. We're gonna. This is gonna be a little teaser. We're gonna give. I'd like Content team. I'd like a new poll. When you receive a free. Let's go mall food court.

[Unknown Speaker 1]

Yeah, that's the best one.

[Brian Preston]

A sample. Like if you walk to the mall food court and the guy says, hey, would you like to try some teriyaki chicken? Or would you like to try whatever? And you take that. Have you now engaged in a social contract where you feel obligated to now purchase said good said food, we're gonna put that poll out there. We want to get your take and we want to know what the financial mutant community thinks about that. And while we're Waiting for the results to flow in. I guess we can answer a question.

[Unknown Speaker 2]

All right, great. We will go to the first question and then we will come back to this riveting research that we are conducting.

[Unknown Speaker 1]

Why do y' all think they offer these samples? Guys, it's. It's an emotional manipulation.

[Brian Preston]

Look, I. I understand. I understand. There's. Let's get to the question.

[Unknown Speaker 2]

Okay. Pause.

[Unknown Speaker 1]

Audiences. Go.

[Unknown Speaker 2]

Come back with some more research. We're gonna kick it off with a question from Austin the boss. It says, hi, guys. I am 20 years old, in college, and on step three of the foo. I am currently paying for school, saving for an engagement ring and honeymoon, and paying on a 3800 unsubsidized student loan at 5.5%. While I know this doesn't follow step three, I want to have no debt of mine when I graduate so we can save and invest 25% or more when we are married. Thoughts? P.S. i'm getting my employer match from an internship, which I feel like is.

[Brian Preston]

That's pretty boring.

[Unknown Speaker 2]

Yeah, that's great.

[Brian Preston]

Eligible for long term retirement benefits as an intern is pretty awesome. Well, here's. Here's how I'd like to start. My response to us is that money is nothing more than a tool that allows you to accomplish the things that you want to accomplish. You. You set the goals, and then you deploy your dollars to help you achieve those goals. So what I don't want to do is sit here and tell you, hey, if you have a goal to be completely debt free, that's wrong. You should not do that. If that's one of your goals and you need to be like, okay, hey, that's my goal, and if that's my number one priority, then I would structure my financial life in order to pursue that number one priority. So when you ask what we think about it, my response to you is, we think that your goals for yourself should take precedence and take priority. Now, one of the questions we get asked and one of the conversations we want to have is, all right, what other goals do you have? Because I just heard, hey, I'm saving for an engagement ring, and, hey, I'm saving for a honeymoon, and I have to get through school. And I imagine one of the things you want to do is, you know, get a place together once you're married and maybe think about home and all of these other things. And so then if the question becomes, okay, I have all of these goals, and I'm trying to figure out what's the most efficient use of my dollars to begin moving towards those goals. I would argue as for you, with student loans at five and a half percent in my mind that does not count for a 20 year old that does not count as high interest debt. So I would argue that is not a step three thing as it relates to the student loans. In my mind in your situation you that's more of a step nine thing. So I think there are other places your dollars could go. There would be a better use. With the caveat if being debt free is your top priority, then that has to then then that is your prerogative. Even if it's a little bit less efficient than what I would suggest.

[Unknown Speaker 1]

No, I think you, I wrote down some other notes and I'm going to get into those. But I immediately said is he really in step three? When somebody who is under 30 years of age has a student loan that's less than 6%.

[Brian Preston]

Yep.

[Unknown Speaker 1]

I don't know that I completely agree with that. Now I think it's very noble to want to pay off the debt as fast as possible. But you got, you got to triage all the life other things that you got going on because I'll just go ahead and tell you, I don't know, I'm old. So things were, maybe things are different now than they were back. And I was in school back in the 90s and the fact that I was dating my now wife of close to 30 years in college and she had to make some hard decisions on where her career was going to go and she was going to have to move and other things. And we had been dating for over a year and it wasn't an ultimatum but I've definitely felt the crux of her thing was is what are we doing here? You know, I need to know. So for real or not, in my eyes that meant hey, in my triage of life I need to figure out how I can buy an engagement ring and lock this all down. I mean because you can imagine, I don't know the relationship you have with this individual and it sounds like it's serious if you're thinking about honeymoons and engagement rings. But you say hey, we're going to, maybe this is the modern way, let's just put off putting married because I'm going to pay off all this debt. Maybe that's the way it works, I don't know. But in my eyes I needed to lock things down in the relationship because in the priority of life it's just like there are certain things I think financial mutants and I already see it in the way you ask this question financially, financial mutants and achievers of life or trying to go through life checklists as fast as possible. And I would tell you sometimes you need to slow down and make sure the big decisions are right. That spouse decision is a major one.

[Brian Preston]

You don't believe me?

[Unknown Speaker 1]

Go look at the bitterness of the comments that will probably come up from people who've unfortunately made bad decisions and will now share that stuff with anybody who will listen on how marriage is a horrible institution. All these, they got burned. And that's why I said, measure twice, cut once on that big decision. Measure twice, cut once on where you're going to live, what you're going to do for a living. You know, all these things come into play. But I think sometimes achievers are like, let's go, let's get married, let's go buy the house, let's go start. You know, they just boom, boom, boom, boom. All this on top when you're like, whoa, let's get the life parameter stuff first down. And then. Because this other stuff will start falling into shape much better. And that's why I think that, you know, evaluate the relationship if that's the most important thing you need to be doing. There's nothing wrong with saving up because that's going to happen all throughout life, is you have things that will temporarily cause your attention to focus your next dollar on that and then you quickly get back to trying to build the financial order of operations as fast and efficiently as possible. But life is going to happen. It's just a fact.

[Brian Preston]

Dare. And dare I say, look, I don't, I don't want to, like, give you. I don't want to, like, go too easy. But you're 20 years. You're already way ahead of the. Just the fact that you're even analyzing in a session where I'm at, in the financial order of operations as a College student at 20 years old.

[Unknown Speaker 1]

Yeah.

[Brian Preston]

Oh, you're. You're in a great.

[Unknown Speaker 1]

Time's over.

[Brian Preston]

It's amazing.

[Unknown Speaker 2]

That is great. Austheboss, thank you for being here. Thank you for your question. We appreciate it. Okay, now back to the free samples. We have some more information to share.

[Unknown Speaker 1]

By the way, I feel like whoever wrote the first sample question, I was not attacking them. We don't get into the content.

[Brian Preston]

No, no.

[Unknown Speaker 1]

But I just saw the question. I just wanted to clear.

[Brian Preston]

Well, you know what?

[Unknown Speaker 1]

Moment of clarification.

[Unknown Speaker 2]

Let me read the new question.

[Brian Preston]

It may be, and it may be valuable even for you to share the results of the Old poll, the new poll. So we can see.

[Unknown Speaker 1]

I can tell by Bo's snickering that I'm gonna get pummeled. And so that's why probably my reaction was the way.

[Unknown Speaker 2]

Let's go with the newest question. First, it's if you get a free sample at the mall, do you feel obligated to buy? How many people do you think said no?

[Unknown Speaker 1]

You guys, heartless.

[Unknown Speaker 2]

It's 91% said no. They do not feel obligated to buy.

[Brian Preston]

The samples are there for just us to enjoy. It adds to the ambiance of the experience. No social contract entered.

[Unknown Speaker 2]

How much of a. Well, I'll just tell you, at the grocery store, there was a slight difference, but 95% said no. An even higher percentage said no. They do not feel obligated when taking a sample.

[Unknown Speaker 1]

We're talking about this. I told you guys. The reason I don't do a lot of the grocery store samples is because I think I just have a face where they all just want to just tell me their life story. So it's just that there's a cost.

[Unknown Speaker 2]

Also to a social.

[Brian Preston]

But it's interesting. So again, being the true financial mutant.

[Unknown Speaker 1]

That you are, you said nobody ever tries to talk to you.

[Brian Preston]

I thought this was wonderful.

[Unknown Speaker 1]

Maybe I'm just old enough that they're like, yeah, this. This guy's old enough. They'll want to hear my life story.

[Brian Preston]

But you, you recognize that you feel to thine own self be true. You feel that if you take a sample that you are now entering into a social contract where you feel this obligation to buy. So because of that, you actually abstain from the samples of the food court unless you are going to buy. Because you know that that's like. So I think that that's at least what you're not saying is, hey, I just go hog wild, and I take all the samples, and I just end up buying a bunch of meals. You say no. You say no to the samples. And I think that's a great example of knowing what your own unique biases are to make sure that you're being a protector.

[Unknown Speaker 2]

Funny as this all has been, I do respect that.

[Unknown Speaker 1]

Well, I feel like. Because people are like, what do they do with these content meetings? The reason this came up is because I made the statement, it's a hot take, cold take. I never get these things right. But it was the take that I feel like this falls all these new modern trends of conveniences. The buy now, pay later that's supposed to make your life easier. The door Dashes of the world and all these other things. I think that they're a trap. Very similar to samples and other things. Is that you. It's a slippery road when you start doing. I know that those things don't all. They're not congruent and they don't all fit into the puzzle. But the point. That's what this came up. And then you guys, when I made the point that this falls under the same kind of umbrella as samples, you're.

[Brian Preston]

Like, oh, you had this until that's.

[Unknown Speaker 1]

How this all came about.

[Unknown Speaker 2]

Yeah, we don't see that. But.

[Unknown Speaker 1]

But I do. That's why I don't doordash. I don't do any of that stuff now. I've bought. You know, because look, if you have somebody in the hospital, you know, and you're at the hospital and you want to give a gift card so somebody can have meals brought in, that's. That's a completely different thing then. But for like I've been where she doesn't cut my hair anymore. But I was, but I had a person who was cutting my hair and they were, they were door dashing in like steaks from this nice restaurant down the street. And I was like, what are they doing? You know, I was just like what. What in the world are we doing here? It just. I don't know.

[Brian Preston]

But you know what we are doing for you guys? We are sampling great financial content. That's what this is every Single Tuesday at 10:00am so if you feel like, Brian, that you've entered into social contract where you ought to offer some remuneration for all of this free content, would you please subscribe? That's all the payment that we asked. Well, that's all that we want if you subscribe so that we know you are out there. Look at that tie in.

[Unknown Speaker 1]

Yeah, but, but I will, I'm honest. Part of the reason we want you just to take all of our free stuff, our free samples is because when you become so successful and your life gets complicated beyond the simple decisions of, you know, living on less than you make and basic things like that, I do want you to come back. I mean even, even the design of this, I want you to give us a shot. Remember who planted the seeds of knowledge, come back to us and fulfill the abundance cycle. See, it all is interconnected in how we design this thing.

[Brian Preston]

I love it.

[Unknown Speaker 2]

Money guy.com click on become a client if you want to do that. Okay, we do have some more financial questions to get to. So we're going to Go to John B. Next. It says, hey money guy team. My wife and I both 29 and on step 67 of the food.

[Unknown Speaker 1]

Wow.

[Unknown Speaker 2]

Have 100k saved for a down payment. If we use it all, we would be under 25% on housing. If we used 50k, that would put us right at 25% of their gross income being spent on housing. Would you invest the difference or put it towards the down payment for cash flow flexibility? We have 450k invested between Roth precious pre tax and brokerage and we're looking to do fine. Which is financially financial independence or next endeavor around 55. Thanks.

[Brian Preston]

So John B. This is a, this is a great question. I don't know if you're new here, so this answer, if you are new here, you may not have heard this yet, but if you've been here for a while, you've probably heard this one.

[Unknown Speaker 1]

Starts with a D. It starts with.

[Brian Preston]

A D. It depends. It depends very much on your unique circumstances. Now I love that you laid some stuff out for us. Hey, we're 29, we have $450,000 saved up and we have a desire to be part of the financial independence next endeavor movement. We want to have options in life sooner than we might have them otherwise. Well, that gives me some like hints, that gives me some clues about how to think about this. But I think a lot of people are faced with this problem. I could put more money down on the mortgage and that's going to cause my payment to be less. Or I could put less money down, it's going to cause my payment to be more and then I can deploy those dollars elsewhere. I think what you have to do in order to decide what is the optimal decision for you is you have to begin with the end in mind. Have you gone through the exercise of doing something like knowing your number and if you, if you don't know what that means or you have no context there, context, you can go to learn.moneyguy.com and check out the know your number course where basically you define okay, if we know we want to be part of the fine movement and let's say that our number is one and a half million by the time we hit 45, making that up. But let's say that's our number. Okay? Based on where we are today and based on our current savings rate, would it be necessary for us to take that $50,000 and deploy that to move towards that ultimate financial independence goal or are we already going to be on track to do that? And if we Just get our mortgage payment lower and we're able to save the difference. Are we still going to be on track? So you have to do a few derivatives of the calculation to determine what's the best use of those dollars given your unique specific goals.

[Unknown Speaker 1]

I love this because this proves the point. You know the whole purpose of step seven is a reason when I was writing Millionaire Mission I considered this the most improved chapter and I was really proud of it afterwards because I think I finally I stuck the landing on really the heart of what's going on at step seven. You just kind of laid it out in your own way too. Bo is that begin with the end in mind is that step seven is when you have hit hyper accumulation, meaning you are saving and investing 25% towards the future. But now instead of it just being all tax motivated and optimizing from that standpoint, you're thinking about man, how will I actually use this money in the long term? And you've given us enough breadcrumbs because you have two things that are in conflict with each other right now is that you have, you have a large down payment that can go towards the mortgage. It's great that you saved up that much money. You have an extra cash reserves there. But what's in conflict is the how big your mortgage is versus this fine goal of the next endeavor of retiring having financial independence at an early age. Those things are somewhat in conflict. And that's perfectly fine by the way because that's what I love. Because step seven flows right into step eight which is abundance goals. And part of the reason we wrote with the foo abundance goals or prepaid future expenses that once you get to 25% and you are fulfilled filling because you did the exercises in step seven you can spend and save that money however you see fit. That's why it's the first stop where you can if you want a nicer car, you want to get into you know, funding the kids college, you want to get into residential rental property, you know, Bob's your uncle, do what you want because it's, it's the opportunity to go that direction. So I think you're in the perfect place in step seven and eight. Do the homework though. That's why you are in step seven of the fact that you got to find out are you ahead of the curve, behind the curve? You're definitely ahead of the curve. But the problem you have to worry about is that you're ahead of the curve with a very ambitious goal. So that changes the mathematics of 25%. In a lot of cases, if you think you're leaving the workforce at age 50, it might require you to save 30, 35%. You just got to do that math on that before we can say, yeah, go use those resources on the house. Now if you do the math and you say you're so far ahead of the curve if you choose, because it makes you sleep better and it's just more fulfilling to pay down the, or put down a bigger house down payment so you have less of a mortgage, knock it out. I mean, that's the thing. I've had so many content creators that they, they do the Dave stuff where they, they just become debt crusaders and they tell me they prepaid that and they paid off their house when they were 32 years old. And I always say, hey, look, before I pick on you about, you know, not understand difference between making wealth versus maintaining wealth, you know, when you're in the make wealth phase of your life, is that, were you already doing 25% towards like your, your work retirement and your Roth IRA? Oh yeah, I was doing, I was like, well, I'm never going to pick on somebody who has done the hard work of getting 25%. What you do from there. I would be. It's not right because that's the part of the, it depends and you have to know yourself and what brings you value. What I get upset about is when people do things like do a huge mortgage down payment and they never even thought about, hey, do I need to be funding a Roth ira? Do I need to be. You're not skipping those steps. It's just you need to make sure you fulfill that step completely. And I think you'll be in a great place.

[Brian Preston]

I just want to add one little small caveat and I'm certain that you've already thought about this. I want to make sure the $100,000 you have saved for the down payment is a separate compartmentalized bucket of money. Because what I don't want you to do is, is if you do decide, hey, I am going to put this in the mortgage to get my mortgage payment down. You can't take your emergency fund down to the quick because when it comes to buying a house, there are other costs that are going to be associated with that. So we, a lot of home buyers want to get the down payment as high as they can, not recognizing that that liquidity, that cash you have post home purchase is incredibly valuable. So I'm hoping the a hundred thousand is above and beyond your fully funded emergency fund and if that's the case, I think you have the flexibility to make the decision accordingly.

[Unknown Speaker 2]

That's great. John B. Thank you for the question. I hope that helps you think through this exciting financial decision.

[Unknown Speaker 1]

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[Brian Preston]

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[Unknown Speaker 1]

It's a great service. You can automatically see your cheapest and fastest shipping options from different carriers. And the best part is it's super flexible. All you need is a computer and a printer. They even send you a free scale.

[Brian Preston]

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[Unknown Speaker 1]

Get a four week trial, free postage and a digital scale at stamps.com moneyguy thanks to stamps.com for sponsoring the show.

[Unknown Speaker 2]

Mike D has a question for you guys. My wife and I are on step seven of the foo and have used a zero based budget for our 10 years of marriage. What triggers do you consider to determine when it's time to switch from budget to cash management? From a budget to a cash management plan.

[Brian Preston]

Brian, I hear you talk about this all the time because this is one of the things I think even brought a little bit about it in Millionaire Mission. Do you remember there being like a moment in time when it happened? You're like, all right, it's Tuesday, I'm budgeting up. Today's Wednesday. I'm cash flow managing. Managing.

[Unknown Speaker 1]

No, I think it's an evolution. I mean there's a lot of things that evolve in your life financially. Is that like I was a tightwad, now I'm not a tight wad. I mean I think budgeting in turn into a cash management plan. It's more about you've got to put in the reps because I don't want to. I don't want to. I don't want to make this sound too easy. You have to put in the reps of knowing where your money's going first before you get the easy way out of saying cash management. Cash management is the muscle memory and the dividend of being a well worn path of discipline in the past. So if you do budgeting and you get to a point where automatic for the people you're saving and investing what you need to to reach your goals, it seems to me, because I've seen it in relationships, it's crazy for you to hyper focus on where every dollar goes to your spouse. It creates some weird dynamics in the relationship and other things. But that doesn't mean you get to skip the budgeting because you don't want to have the conflict of where your money went. I'm just saying there should be a reward for a good discipline and a life well lived that you eventually graduate to the next phase of the evolution. So that's how it happened for me. So if you find out that you've had continued success, you know that step seven is the perfect place because that's where you're actually doing the exercise of thinking not only how am I saving and investing in a tax favored way, but I'm thinking about how I'm actually going to use, use this money when it comes to retirement. And if you've done that homework and you realize, hey, we're going to be set if we just set these autopilot, you know, make the good habits as easy as possible and the bad habits that much harder. If you're already doing that stuff naturally, if you hyper focus on the details, on the focus on the miners, you might be creating more dynamics. It's, it's really the, the hassle factor gets to a point that it creates weird, weird, weird things in your relationship.

[Brian Preston]

Yeah, it's, I think it's a function really of muscle memory. I'm not a great golfer. I'm not even really a very good golfer, but I've played with some great golfers and it's wild. A really good golfer can go out there, grab a club and when they swing it's just going to be pure contact and the ball is going to fly. Great. Then I have to think about it. It's just part of the muscle memory. They've done it so many times, they just have it down. I think that budgeting versus cash flow management's kind of the same way. I don't have to think about how much is going categorically in each bucket. Like if I were to ask you, Brian, do you know what you spent eating out last month or do you know what you spend at the grocery store? No, it's just no idea. It's not something that I'm able to track and put my wrap my head around anymore where there was a point in time in my life where I could have told you to. The dollar, hey, this is how much was on groceries and this is how much was. Once you kind of get past the fact of knowing, okay, I know that I'm not overspending. I know that I'm funding all of the savings vehicles in the way that I'm supposed to be funding them. It does not matter if, you know, my eating out budget was $100 this month and it's $200 next month. That becomes inconsequential relative to the financial plan that I have in place. Once you start to recognize that you have that level of muscle memory developed around the way that you spend and consume, I think that's the indication that you're now ready to move on to a cash management plan.

[Unknown Speaker 1]

Yeah. I mean, it should be a reward. Do the work and be rewarded for the hard work. And by the way, Mike D. License Deal was a very formative album for me, so thank you for.

[Brian Preston]

It was wild. I could not. I was listening to thing and Mike D. I was like, he's. He's going to mention the Beastie Boys. He's going to. And he. And I was like, oh, my gosh. He didn't. But he saved it till the end.

[Unknown Speaker 2]

He hung on to that. Well, Mike D, truly, thank you for being here for your question.

[Brian Preston]

Ruby, can I share something with you?

[Unknown Speaker 2]

You may.

[Brian Preston]

You know, I. I do not like bullying. I'm. I'm, like, very much against it.

[Unknown Speaker 2]

I'm glad to hear it.

[Brian Preston]

I'm very much.

[Unknown Speaker 1]

Does that mean you're about to bully me?

[Brian Preston]

No, no, no, no. I'm. I'm actually a victim in. This is what.

[Unknown Speaker 2]

I'm so.

[Brian Preston]

Oh, I'm parched right now. I have no coffee left. I've drank all my coffee and I would love.

[Unknown Speaker 1]

Would you like me to pop it?

[Brian Preston]

I would love to be able to open my beverage to have a drink, but I'm nervous because I've now been chasing.

[Unknown Speaker 1]

I'm a giver. I'm a giver.

[Brian Preston]

So if we could just pause the record.

[Unknown Speaker 2]

There it is.

[Unknown Speaker 1]

Look. I'll be the nourishment you need in the desert.

[Brian Preston]

Thank you. I. I believe that this was much better than me casually pulling off the side and while Ryan was talking.

[Unknown Speaker 2]

Yes.

[Brian Preston]

So thank you very much for that.

[Unknown Speaker 2]

That was very.

[Unknown Speaker 1]

Where did the bullying come in?

[Brian Preston]

You bullied me into not even wanting to drink now because I can't open.

[Unknown Speaker 1]

My own good manners.

[Brian Preston]

You're the bully.

[Unknown Speaker 2]

It turns Out.

[Unknown Speaker 1]

Brian, Good manners is bullying in the handsome.

[Unknown Speaker 2]

What if it was just, you know, constructive criticism?

[Brian Preston]

Well, it was that.

[Unknown Speaker 2]

All right, Emoney has a question. Would being ahead on retirement ever justify spending more than 25% of your gross income on housing? We are 28, but we have three times our annual income in retirement already. How would you think about this?

[Unknown Speaker 1]

But. But you wouldn't. Yeah, you just put down more money.

[Brian Preston]

That's a great.

[Unknown Speaker 1]

I mean. Cause it's not. I mean, if you do you realize. Cause part of this, when we create rules and things, you realize your biggest risk with success is that your spending gets to be so big and so far from the social safety net that when you retire, your money just doesn't go as far as you thought it would. And so I have no problem with. People live the baller life. But just make sure you're not faking it. I mean, because it's so much better to be rich than to look rich. And if I see that all of a sudden your housing is more than 25% of your income and you didn't make that up with a much larger down payment, it feels like you're faking it until you make it.

[Brian Preston]

Yeah, I think the language you use is, hey, I'm. So we say I'm ahead of the curve. Was that the language?

[Unknown Speaker 2]

He's ahead on retirement.

[Brian Preston]

Ahead on retirement. I'm like winning the race. In, in my opinion, the. The best way to screw up having a lead is kind of when you start showboating. Right. Like when you start showboating in the race. That's a really good way there. If you're already ahead of the curve and you're doing all the things that you're supposed to be doing and you're making the financial decisions that a financial mutant would need to make to have three times their annual income saved up by the. By the age of 28, I would argue. Why do you need to make the decision to go run afoul of the housing rule and go buy a house that's 30% of your gross income or 35% of your gross income? Because what if something changes? What if there's a reduction in force with one of your employers? Or what if something happens income wise? Or what if you want to make the decision to have a single income? If you're a dual income household, by making that aggressive decision, what you're doing is you're moving yourself further out on the risk spectrum for no reason. So I love that advice. Hey, if you want that bigger, nicer more expensive house. Just save up for a bigger down payment so that you can put enough down to get your mortgage, your housing costs inside of that 25%. I just don't see a reason to stretch.

[Unknown Speaker 1]

Well, I think, and there's an analogy here, you know, one of the things if you're looking for hobbies, people who get into private aviation, they usually buy themselves out of their hobby. And I think that successful people can buy themselves out of a comfortable retirement. And what I mean by that is, is like people get into private aviation, they buy a Cessna, they can afford the Cessna, they can afford the insurance on the Cessna, they're going to afford the, the burn rate of the fuel. Then they move into the cirrus a little bit more price point. But then all of a sudden they're getting into different brands that just the cost is more, the burn of the fuel is more, the insurance is more. And then you can't even get in private jets when you're getting into $5,000 an hour burn rate on, you know, on just the fuel.

[Brian Preston]

Yep.

[Unknown Speaker 1]

I mean it's things. This is what I see wealthy people do too. And this is why there is something valuable. Have you noticed the wealthier people get, the poorer sometimes they look go look at Rolexes and other things. You've quickly realized that a lot of people who buy these brands that the unwealthy perceive as great people who are wealthy just don't care about this stuff as more now as valuable. We live in a community where it's just like I was telling beautiful. I couldn't believe the price point of a brand new neighborhood by a. It's not even a custom home builder. It's a, it's a semi custom builder. And I was like, so there are people, either these people are in debt up to their eyes or there are enough people concentrating this area that they can afford to pay those millions of dollars. But that's a choice. And that's why I think that it needs to be a choice that you truly can afford. Not that you're leveraging up to your eyeballs so you take away your flexibility ability to take away your options and all the benefits of actually being a disciplined financial mutant who lets your money create more time and resources for you to do what you want, when you want, how you want with your money versus being indebted to that commitment just because you want to impress people who probably don't even care.

[Unknown Speaker 2]

I love that look at you guys being such a good check and balance because there is an undercurrent clearly he's a good saver. Maybe he has a big shovel. He could do a bigger down payment. It's looking like, like if we're reading.

[Brian Preston]

The harder way easier path was just have a bigger monthly payment. The harder path is a bigger down payment. That's the better path.

[Unknown Speaker 2]

Right? No. Good stuff. Thank you, Emoney, for the question. I hope that helps. I hope that gives you some good food for thought. All right, Walker K has a question Next. It says, my wife is planning to start med school in about three years. We're debating whether it's better to focus on contributing to a Roth IRA or. Or a 529 right now considering flexibility and tax benefits. Any suggestions or thoughts?

[Unknown Speaker 1]

That's like saying, I don't know, I don't know enough. Because you don't know the state tax benefits.

[Brian Preston]

I don't know the state tax benefits. I don't know how old you are. I don't know what your other savings has looked like. Right. Because I don't know what other options you have to fund to fund med school. Is this gonna be something you guys are going to cash flow? Are you gonna have to borrow money from this? Do you need to be able to save up in the 5:29 to a certain extent to be able to afford it over the next couple of years? There's just a lot of unknowns and I do not consider those to be equivalent things. And this is what I mean. Saving in a Roth ira, it's a step five type issue. It's a saving for your future self building towards financial independence. It's a retirement type savings. Saving for med school, even for yourself, is like a prepaid future expense expense you're going to incur at some point in the future. Now this is different than college for your kids because it's so near dated. So it's really a cash flow item. And so the decision that you're going to have to make between which one of those to fund is less about, okay, which accounts are more attractive and what are the tax benefits. It's more about which one of the accounts more aligns with the goals that we're trying to achieve. It's not comparing the apples to apples. You know, one account to another account is comparing, hey, does it make more sense for us to put money towards our future self or does it make more sense to put money towards an expense that we're going to have in the near term? And that's something where you'd have to know more about your overall financial situation to determine which of those would be the most efficient ways to tackle that.

[Unknown Speaker 1]

Here's the way to handle. Because I love how this dovetails perfectly into what you're saying, since this is a cash flow and just knowing where the future of your life is going. I look at this as a perfect opportunity to put on your 3D glasses. Because when you get into big life decisions, when we talk about 3D glasses, we're talking about if you're trying to start a business, if you're thinking about sending, you know, going to medical school and probably running up multiple, you know, six figures of student loan debt and beyond. These are all big choices that in the, the next one to five years will impact your life a great deal. So you ought to at least go into this with your eyes fully open. So here's what I mean when I say put on your 3D glasses. I want you to create three plans. You're going to have your dream plan. This is like your wife goes to medical school. Y' all are able, through lifestyle discipline, keep the borrowing costs as low as possible. She sticks the landing on not only getting a great savings city for the residency, but then when she gets out and gets into practice, she just crushes because she is, you know, it's in the city I want to live in. It's making more money than you ever thought. That's the dream. Now I want you to do the down to earth. Put in a few things where maybe, you know, it's going to be harder. You have to take on more debt than you figured for. You know, cost of living is more than you anticipated. Put in some roadblocks in there, but put in some wins as well. And then don't skip the third and most important part of the 3D glasses. Put in the do do plan. This is like, oh, my gosh, it just goes bad. You know, you run up debt, the job markets aren't as good. You don't get into the market. You don't, you know, she doesn't have as much opportunity as you had hoped. Are you going to survive and is it going to work out? And this is the reason this is so important is so it's so much easier to focus on the doo doo plan on paper than it is actually living to live it. That's right, because that's, that's what, you know, everybody has a plan until they get punched in the nose, you know, and that's the thing, is that I want you to at least have the plan so you can go ahead and Numb yourself to what? How bad things could be. So you can at least not be in that shock phase when things don't go perfect. You know, I think there's a lot of life decisions I've made where the 3D glasses has saved me. And I know I hate giving homework, answering a question with an intensive homework project, but man, this is your life and this is a big decision that it requires the extra work to make sure you stick the landing. That's great.

[Unknown Speaker 2]

Great. Well, Walker K, we really appreciate you being here and for asking the question. Next question is from JL421. I inherited a Roth IRA with no RMDs and 8 years left to empty it. It's invested and covers about 14 months of expenses for him. Would that fulfill foo step four emergency fund?

[Unknown Speaker 1]

No.

[Unknown Speaker 2]

And allow me to move on to steps five plus.

[Unknown Speaker 1]

No, no. Because it's access to cash. It's not actually a cash no. I'm sorry, next question.

[Brian Preston]

Yeah, I can go.

[Unknown Speaker 1]

Ahead and Just.

[Unknown Speaker 2]

Because he technically has the 14 months.

[Unknown Speaker 1]

No, he has access to the money.

[Brian Preston]

The money's there. But I would argue if you. The reason I'm going slow here is because there's a lot of decisions. RMD rules have changed a lot over the past couple of years and the way that you have to navigate inherited assets is a little bit different. But one of the best types of assets to get to inherit are Roth IRAs. Because yes, there is this 10 year window in which you must deplete the account. But you know what that means. You get to let those dollars continue to grow tax free, tax free for the next 10 years or in this case for the next eight years. So if all you did was, okay, well I've got 14 months of expenses in there, I'm just going to liquidate that. And that's me cash in that Roth. You're like, you're, you're absolutely neutering how powerful that Roth IRA could be. I would argue no, you want those dollars invest. And if you're really thinking about, if you're at the stage in your financial journey where you don't just focus on asset allocation, how you spread out your assets, but also asset location, what types of investment you own, which type of accounts inside that inherited Roth IRA might be a great place to hold like high growth assets, S&P 500 index, international index, those kinds of things that have a lot of growth potential. Because then you're going to maximize that tax free benefit if you're putting it even in like cash or conservative holdings so that you can access it for an emergency fund. You're just taking the teeth out out of what that account can do for you. So I do not think it should be considered short term money by any stretch.

[Unknown Speaker 1]

But cash, you know, emergency reserves is such a valuable part of your financial life that it is two steps to the financial order of operations. It is highest deductible coverage step one, and emergency reserves, step four. So you have this, this money that's come come to you. You now need to figure out, how much money do I need to have if I was respecting the financial order of operations in emergency reserves. And then here's the next question you need to ask yourself, because you really don't want to touch the Roth. I mean, BO is spot on. This is powerful. But if it worse comes to worse and you have no more access to any other money, maybe that's a place you go and free up some cash to go ahead and fill up the emergency reserves. But if you do the exercise of saying, how much do I need? And then ask yourself this next question, here's the pivotal question. Is there some, because I know how valuable this Roth is, is there some discipline step I can take right now that if I triage this, that I can fix this over the next three to six months and then do it now? If you ask yourself that question and you're like, no, there's no way it took me two years to get my emergency reserves, then I think you have to make a hard decision and you have to probably take a portion of this inherited money to sure yourself up. But you ought to be so mad at yourself that you couldn't do this through side hustles or discipline, that you use this to be a motivation point to figure out how you fix this for the future because you left some on the table. There's a reason when I talk about my Roth follies, you can sense that $10,000 I missed out on. When I lay out the opportunity cost of the hundreds of thousands of dollars that it could have become, you'll see that that hurts. And that creates a motivation to do things better and be more efficient. I want you to kind of feel that same thing. JL421 is that this money can immediately be your, your fix. But that shouldn't be the first thing you do. You ought to first ask yourself, could I fix this myself so I can build these emergency reserves up maybe over the next three months, and if that's the case, then I get the best of both worlds.

[Brian Preston]

That's Right.

[Unknown Speaker 1]

And I get to keep my Roth money and have this legacy. Whoever I inherited this money for, they have to be just so pleased that the legacy going forward is going to be this tax free growth, this. This leg up this opportunity. But then if you also honor that by being super disciplined yourself or maybe taking on humping a little bit extra to get some. Some extra dollars by working harder, taking on an extra shift or something like that, then I think that that also. Can. Can. Can be a part of your solution.

[Unknown Speaker 2]

Quit it. Don't.

[Unknown Speaker 1]

Seriously, guys. Are y' all elementary school kids?

[Unknown Speaker 2]

Sorry, they were. They were.

[Unknown Speaker 1]

No, middle school kids. We'll say middle school kids.

[Brian Preston]

I. You lost. I held it together. That was you. Everything's. That was great.

[Unknown Speaker 1]

Before long, I'm just going to have to just recite things because. Because I can't just go off my vernacular.

[Brian Preston]

No, that was.

[Unknown Speaker 2]

I like it.

[Brian Preston]

That was.

[Unknown Speaker 2]

I like seeing what they're going to say next. It was a great answer, though.

[Brian Preston]

It was a great answer.

[Unknown Speaker 2]

JL421.

[Unknown Speaker 1]

Is it not now? Look, I get a lot of stuff wrong. Humping can be another term for getting out there and busting it. Right? Getting to work.

[Unknown Speaker 2]

Since you're.

[Unknown Speaker 1]

No y' all. I give up. I just give up. Y' all are a mess.

[Brian Preston]

Maybe. Maybe.

[Unknown Speaker 2]

I'm gonna go with no. Since you asked.

[Unknown Speaker 1]

There is. I'm telling you, that is. Y' all didn't grow up where I grew up.

[Unknown Speaker 2]

I did not. You're right.

[Brian Preston]

All right, let's just keep pumping. Let's go.

[Unknown Speaker 2]

Let's go. You're the worst. Okay.

[Unknown Speaker 1]

You are talking about bullying.

[Unknown Speaker 2]

Well, okay, can we bring it back to another problem? Personal finance question.

[Unknown Speaker 1]

I sure hope so. Dirty minded folks around here. All right, you know what?

[Brian Preston]

What's funny is people out there can't see that every other person in this room right now.

[Unknown Speaker 2]

Honestly, we didn't do too bad.

[Unknown Speaker 1]

But then we try to create a nurturing and work environment around here and you dirty minded folks. I just. We're gonna have to work on that.

[Unknown Speaker 2]

It's when the production team lost it that I couldn't.

[Unknown Speaker 1]

I. I know. That's what I hear all this in the background. I'm like, goodness gracious.

[Unknown Speaker 2]

All right, we do have some more good questions in here. So let's go to Mitch M. Oh, Mitch. Mitch. He says, Hi, guys. I'm 24 with a 172k mortgage at 7.37%. Where would you place this in the foo. Only other debt is my car at 2.9% and I'm saving 25% in my 401k and Roth IRA. I'm also currently working on my emergency fund. Thanks. So lots going on for Mitch. What do you think?

[Brian Preston]

I was ready to answer the first.

[Unknown Speaker 2]

Question in the food way to talk about it.

[Unknown Speaker 1]

Go ahead and tell him. Because we have mortgages. You notice when we talk about high interest loan mortgages are unique. Bo share how we think mortgages are unique.

[Brian Preston]

Well, here's a really interesting thing, Mitch. I don't know when you bought your house, but you have a prevailing interest rate of 7.37%.

[Unknown Speaker 1]

He bought it at the worst time.

[Brian Preston]

What the rates have actually come down a little bit right now. Like we're seeing right now we have clients that are buying for first time home purchasers buying and it's like six and a half percent. So it's, there has been some reprieve from these rates. And so one of the things I would encourage you to think on is okay, maybe this isn't high interest debt. This mortgage debt might not be high interest, especially for a 24 year old because there are going to be two options you're likely going to have at some point in the very near future. If interest rates continue to decrease, if they continue to move in a downward trajectory, then there's a really good chance you could refinance this mortgage potentially. And if you refinance the mortgage, even if you keep your payment the same, so you're paying it down on the same schedule but the interest rate goes down, you're going to apply more towards principal and it's going to be a win win where you're going to have less interest costs, you have the same cash flow. It's, it's a wonderful thing to be able to do. But there's actually a second thing and this one might be even more exciting to you. One of the things, and it may be a little early yet again depends on when you bought this is a lot of people don't realize one of the things you can ask your mortgage company to do is hey, is there an opportunity for me to have a rate adjustment? Is there an opportunity, a rate modification? A rate modification where rather than doing a true traditional refinance, I'm gonna pay a couple hundred bucks. There's not the same underwriting, not the same closing costs and I can get my rate modified from 7.37 down to like six and a half again. It's not, that's not a 2% mortgage, but it's moving it in the right direction. And because you have these options with mortgages that are possible to you, in my mind, for a 24 year old, I don't think that applying excess capital towards the mortgage is likely the most efficient mechanism. I think your dollars could likely be used better going in a different direction.

[Unknown Speaker 1]

So, Mitch, without a doubt, go out there and see if you can rate modified, do a mortgage modification, call the lender. If they don't do it, they're potentially. By the way, I have to amend what I said. I said you bought at the worst time. I meant the worst time for mortgage rates. That's for 7.4% is probably one of the worst I have seen. So I would definitely take your advice, call and see if there's a rate modification since rates potentially are, you know, a percent lower than where they were when he purchased. If that's not, go and price out and see where you are with refinancing to see what the options and the cost of that are. And then. But here's the thing. I'm gonna give you a little more grace than BO did. You said something really key. You said you were already beyond 25% with your Roth IRA with the 401K. To my eyes, that puts you in step eight, slash, even going towards step nine. If you're the type of person that peace of mind wise, you want to throw a little bit extra on the mortgage, I'm not going, I'm not going to fight you on that because you are in that phase because you've already done the hard work of saving and investing 25% and doing the Roth, doing the employer.

[Brian Preston]

You ready for this?

[Unknown Speaker 1]

Yeah.

[Brian Preston]

You ready for it? Can you bring the question back up for me real quick, team? He put a little nugget right there at the end and I was like, I wonder if you're going to see it.

[Unknown Speaker 1]

Oh, whoa, I didn't see that. Mitch, you buried the lead. Currently working on emergency fund.

[Unknown Speaker 2]

There it is.

[Brian Preston]

That's step four.

[Unknown Speaker 1]

That's. That's foolish.

[Brian Preston]

That's step four.

[Unknown Speaker 1]

Ish. Which is foolish because you've got to have emergency funds. So goodness gracious, you know, first thing you need to do is get an emergency.

[Brian Preston]

So that's why I would not prioritize paying off on the mortgage.

[Unknown Speaker 1]

I'm over here writing right modifications submit 1.4.

[Unknown Speaker 2]

Get emergency after the emergency fund. Maybe think about that.

[Unknown Speaker 1]

Yeah, he put that. He knew it too, because you put that at the very end.

[Brian Preston]

Well, because I think he even said he's doing his raw. He said only that it's 2.9. I'm saving 25% in 401k and Roth. If you're doing that before merge fund, you're already out of whack. Like emergency fund. You got to do that before you go to Roth, before you go to anything other than employer matching 401k. You're just, you're, you're living too far out on the risk spectrum needlessly. And you know when you swim, when you swim naked and the tide goes out. You know what I mean?

[Unknown Speaker 1]

That's right. Little naked.

[Unknown Speaker 2]

Yeah. His question was like this journey through the fu. And I didn't know where we were going to land. And it was like, oh, we're landing on emergency fund. You can't skip that. But we're glad you asked the question.

[Unknown Speaker 1]

You know, reading comprehension there. I didn't catch that last sentence.

[Unknown Speaker 2]

I got other information about the mortgage.

[Brian Preston]

That was already. That was always my least favorite part of test taking is like, they would. Oh yeah, they, they very like the one important thing right there at the end. But you like get so excited. I don't know. I don't know if you know this. Oh, no, I'm super excitable. I got really excited about the first part of the question. I'd always know.

[Unknown Speaker 1]

I used to. In math classes if you could give me like, I used to love doing the speed drills on multiplication tables. But then you get to the math problem where they. And it's so cruel how they do it. They give you like this three paragraphs with all these details. And then it's not one question from that. They'll ask you five questions off of this thing that you have to read. And I'm like, I don't want to do this. That's why I went into accounting where they do the exact same thing to you. So I didn't learn.

[Unknown Speaker 2]

If only life was.

[Unknown Speaker 1]

Give them, you know, what's 12 times 2? 15 times 15. I mean, life would be so much easier.

[Brian Preston]

So much easier.

[Unknown Speaker 2]

All right, let's do another question.

[Brian Preston]

Okay.

[Unknown Speaker 2]

From unpopular advocate. I have a father who is retired with a multiple seven figure net worth outside of his fully paid off house, but he still lives entirely off of Social Security. How can I help him be less afraid of spending?

[Brian Preston]

Well, and I want to be. I want to be clear here. One of the things that you need to verify unpopular is, is the reason your father only lives off of Social Security because he's afraid of spending otherwise. Because I think a lot of times we'll see people who are in a fantastic financial position and have the ability and propensity to increase their lifestyle. And we think to ourselves, oh my goodness, no, no, no, you, yeah, why don't you need to buy the nicer house or you need to drive the nicer car, you need to go on the fancier vacations. And what we need to recognize is oftentimes that is us imposing our biases on someone else. If your father says, hey, you know what, I got a pretty simple lifestyle. I live off Social Security, it covers all my bills, I do all the stuff that I want to do, then that's okay. Now if it is something because he has fear around not being able to pull money because he thinks he's going to run out, well, then I think some education and some stress testing and actually putting together a plan that shows where the guardrails are could be valuable. But encouraging non spenders to start spending just because they can spend a lot of time is just causing someone to fight against, against their nature.

[Unknown Speaker 1]

I'm going, I'm going to give you an angle that I think sometimes when, first of all, you have a conflict of interest because since you're a child, you have to be careful because they might feel that you're offering this as.

[Brian Preston]

A way to, as a way to.

[Unknown Speaker 1]

You know, take them on vacation or do something, loosen up those purse strings for grandkids. Education, I don't know. But you have to be careful that your good intention might be perceived in a different way. That's why I would give you advice. If you've ever talked to a parent, you've talked to anybody who's been married for multiple decades and you ask them, hey, have you ever gone and gotten counseling? And like, yeah, it's amazing how you can say the same thing. But when your spouse or your children hear it from a third party, they, it's like it took root versus when you said the exact same thing, it came off and it just went in one ear and out the other. This is one. At first, find out the why. If this is more about there is fear there. That could still be. You need somebody that could, you know, be an advocate on both sides to know if it's not fear. And you still think this, but maybe they just need more organization. There's some benefits. That's what I love about my job as a financial advisor is be if you, you guys have, I mean, I think Susie Orman has done good, but one of the bad things I think she did in the 90s is that she gave this perception that Financial advisors, because she'd have her speed drill where it'd be like, I want to go on vacation. No. You know, I want to buy a new house. No. I want to get a new car. No. I mean, she could have just cut out the speed drill altogether. Because mostly, I mean, I'll just say 97% of the advice was, no, don't do it. And so that's what I think. A lot of people have the perception that you hire a financial advisor and they're going to basically gut your decisions to say the default. No, I'm the exact opposite. I'm constantly trying to give you the balance of why you ought to maximize every moment and every decade of your life. And I think that sometimes that can be an advocate. It might be beneficial to come from a third party. So that way everybody feels represented and you don't have to put yourself in the uncomfortable thing. Because money, unfortunately, when it comes to family, I've seen some ugly stuff. And that's why you always have to be very careful. It's a slippery slope in marriages. It's a slippery slope in, you know, kids and adults, I mean, and children, adult children and their parents. It might be beneficial, since you've only done this once, to bring somebody who's done this hundreds, if not thousands of times to make sure, you know, you minimize all the carnage, relationship carnage that could potentially happen.

[Brian Preston]

Great.

[Unknown Speaker 2]

Great. Well, unpopular advocate, I thank you for being here and thank you for the question. We. We love answering your questions every Tuesday at 10am Central, right here on YouTube. And remember to go to moneyguy.com because we have tons of free stuff there for you. Calculators, downloads, including our archive of all of our episodes on tons of different topics. So moneyguy.com be sure to go check it out. We made it for use that when the cameras turn off, you can keep thinking about personal finance. Continuing to build that confidence so you can focus on what really matters. Cause that's what it's all about.

[Unknown Speaker 1]

That's exactly what it's about. True wealth is the freedom to focus on what matters to you. So make sure you're going out there, check out all that free stuff that we talked about. Take advantage of the resources. I'm your host, Brian Preston, Mr. Bo Hanson. Money Got Team oh. Andrebe MoneyGuy Team the MoneyGuy show is.

[Brian Preston]

Hosted by Bryan Preston and Bo Hanson. Brian and Bo are partners with 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 the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss.