Why $250k is Halfway to $1 Million

Summary

Money Guy Show – "Why $250k is Halfway to $1 Million"

Hosts: Bo Hanson, Ruby ("Rebe")
Date: October 8, 2025

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Episode Overview

In this episode, Bo Hanson and Ruby (“Rebe”) debunk the common misconception that $500,000 is the halfway point to $1 million, revealing why—in the world of investing—$250,000 is actually the true halfway mark. Through the lens of compounding interest and wealth-building milestones, they break down practical strategies to accelerate financial growth, answer nuanced audience questions on cash management, debt, Coast FI, and more. The tone is approachable, enthusiastic, and packed with "aha" moments for anyone on their journey to financial independence.

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Key Discussion Points & Insights

1. The Math Behind "Halfway to $1 Million"

[00:13 – 03:20]

• Misconception: Most people think halfway to $1 million is $500,000. In standard math, that’s correct, but not when compounding is considered.

• The Reality: Due to the exponential growth from compounding returns, reaching $250,000 is (in time and effort) the "halfway point"—the journey from $250k to $1M is as fast as the journey from $0 to $250k.

  Bo Hanson:

  "When it comes to money, halfway to $1 million happens a little bit before then. $250,000 is actually halfway to $1 million." [01:32]

• Example Calculation:

  • Save $833/month at 8%:

    • 13.8 years to reach $250k
    • Then, 13.8 more years to hit $1M

  • The first $250k takes as much time as the next $750k because compounding accelerates.

    Ruby:

    "The power of compounding interest is working in your favor, and, and it’s making your money work harder than you do." [02:43]

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2. The Snowball Effect of Wealth Building

[03:20 – 07:14]

• Same Behavior, Different Results: Early on, savings feel slow (“snail’s pace”), but the compounding snowball gets dramatically bigger.
• Tracking Net Worth: As investments grow, the annual gain from growth often surpasses annual contributions.
• Savings Rates Impact Timeframes:

  • $500/month = 33 years to $1M (8% return), $209k is halfway (in time)

  • $1,000/month = 25.5 years, $266k halfway point

  • $2,000/month = 18 years, $325k halfway

  • $4,000/month = just over a decade, halfway at $384k

    Bo Hanson:

    "The bigger the numbers get, the bigger the numbers get. And what’s great... your behavior didn’t change. You did the exact same thing day one that you did all the way nearly 27 years out into the future." [03:20]

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3. The Magic of Starting Small and Increasing Savings

[07:14 – 07:50]

• Emphasis on starting small—$50/month can grow as your capacity grows.

• Many Money Guy listeners ("financial mutants") ramp up their savings as their careers progress.

  Bo Hanson:

  "It becomes mind-blowing. And so we talk about compound interest. We talk about how your dollars can grow. It really is crazy." [06:55]

• Teaching children about the long-term rewards of saving and investing (plant analogy) underscores the importance of patience.

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4. Anyone Can Benefit From Compound Interest

[07:50 – 08:30]

• Flexibility: Your journey is personal—change your rate and adjust as life happens. The principle of compounding holds for everyone, regardless of speed.

  Ruby:

  "Anybody can do this, which is the beautiful thing about it." [07:14]

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5. Practical Q&A Highlights

a) How Much Is Too Much Cash?

(Question from Matt Yu) [09:23 – 16:23]

• Couple expecting their first baby, saving 27% of income, holding a 6-month emergency fund plus $100k in sinking funds.

• Bo's advice: Evaluate what the sinking fund is for (future big expenses?), consider opportunity cost of holding so much cash.

• Wealth multiplier: At age 30, every $1 invested could be worth $23 at 65.

• Don't let excess cash stagnate—either deploy extra into investments monthly, or at the very least, use high-yield savings/money market funds.

  Bo Hanson:

  "While you are keeping this money liquid, while you’re keeping it dry powder, while you’re planning for this sinking, there is some real opportunity cost that’s taking place." [12:26]

  Bo's actionable tip:

  "Rather than even giving you a lump sum, let’s just increase how much you’re investing on a monthly basis... you’ll be amazed at how through time you will buy down that sinking fund." [15:08]

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b) Including Military Pensions in Your Savings Rate

(Josh D) [17:14 – 23:06]

• Saving 15% while in the military, 7 years from pension; asks if pension counts toward savings rate ("FU-ish").

• Bo's take: Pension counting is fine because it's likely and federal; for non-pension people, 25%+ savings is typical.

• Warning against being a "miser": Don’t miss out on family and life moments by being too frugal.

• Projection tools: Use "3D glasses" (dream, down-to-earth, doo-doo) for scenario planning.

  Bo Hanson:

  "Being a miser can cost you a lot of stuff, right? Because there are... these kids are only young for a little bit." [19:40]

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c) Emergency Funds: Where to Keep Them

(Got a Tumblr) [25:20 – 30:18]

• Should it always be high-yield savings? Or money market mutual funds as rates drop?

• Bo recommends:

  1. Always keep emergency funds liquid and accessible.
  2. Annually check if there’s a better yielding option.
  3. Avoid too-frequent switching (annoying for tax forms, intro teaser rates).

• Don’t let cash just sit idle if high-yield or money market options pay more.

  Bo Hanson:

  "Should your emergency fund always be in a readily available liquid cash or cash equivalent? The answer to that would be yes..." [25:44]

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d) Coast FI: When Can I Just Coast?

(Kyle S) [30:31 – 36:22]

• Couple age 27 and 29, $180k saved, want to coast to $5M.

• Bo's answer: Coast FI is fine—but assumptions must be very conservative. Life changes. Don’t just focus on the “dream” outcome, account for downside risk.

• Run numbers: past success doesn’t guarantee future results if life circumstances change.

  Bo Hanson:

  "The further out your timeline is, the more impact even small variables can have." [34:34]

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e) Mistakes Between $500k and $2M

(Sparinator) [38:42 – 46:52]

• Three main pitfalls:

  1. Overcomplicating: Switching strategies that got you there for new "sexy" investments.
  2. Lifestyle Creep: Spending increases as you get richer, cutting into savings.
  3. Ignoring Complexity: As assets grow, so do financial "unknown unknowns"—not seeking professional advice as life/business gets complex.

  Bo Hanson:

  “Complexity begins to find you later on in life… a second set of eyes on whatever that thing may be… am I optimized?” [43:18 & 45:01]

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f) Emergency Fund Intensity

(Leandra Jo) [47:23 – 53:24]

• Just finished paying off high-interest debt; how hard to attack emergency fund savings?

• Bo: Attack it like you’re running from a bear—the goal is to never fall back into high-interest debt again.

  Bo Hanson:

  "As much as you have, as much as you can give it. Because you are literally running away from step three as fast as you can." [48:00]

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g) Prioritizing Paying Off Student Loans at 6%

(Eric) [55:37 – 61:40]

• Q: Why pay off 6% loans if S&P 500 returns 8%+ on average?

• Bo’s nuanced answer:

  • The "wealth multiplier" shrinks as you age—opportunity cost of investing vs. paying loans down lessens over time.
  • Above 6% student loan interest in your 30s? It’s smart to prioritize paying them down. Not necessarily with all spare cash, but aggressive payments make sense.
  • "Personal finance is personal"; consider your own circumstances, but follow the Money Guy payoff interest benchmarks.

  Bo Hanson:

  “We say it might make sense to prioritize paying off your student loans. What that means is that your student loans are kind of hanging out somewhere near that step three... you may want to begin thinking through, okay, I don’t need to just make the minimums.” [60:37]

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Notable Quotes & Memorable Moments

• On Compound Interest:
  "It really does kind of become addicting." – Bo Hanson [03:03]

• On Wealth Multipliers for Young Investors:
  "At age 30, it’s a 23 wealth multiplier. Well, while you are keeping this money liquid... there is some real opportunity cost that’s taking place." – Bo Hanson [11:41]

• On Lifestyle Creep:
  "Be mindful. Again, don’t mishear me. Lifestyle creep is not bad... so long as your savings behavior follows." – Bo Hanson [41:02]

• Encouragement for Those Just Reaching Zero Debt:
  “Most Americans out there can’t even get to zero. And getting to zero is just kind of like getting to the start... behaviorally, it deserves applause and recognition.” – Bo Hanson [53:53]

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Upcoming Content & Special Announcements

• Next Week’s Special Guest:

  • Humphrey Yang joins the show (Tuesday, 10am Central).
  • Live Q&A—with an invitation to submit questions for Humphrey.

• Financial Mutant Survey Show:

  • Deep-dive on habits and stats from the Money Guy audience coming soon.
  • “Mind-blowing” results teased.

• Other Fun Moments:

  • Banter about missing “Money Guy Tumblers.”
  • Light-hearted fan suggestions for dream collaborators (Dolly Parton, Warren Buffett, Chapel Roan).

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Timeline of Key Segments

| Timestamp | Topic | |-------------|------------------------------------------------------| | 00:13 | Why $250k is halfway to $1 million | | 01:53 | Compounding explained using monthly savings example | | 03:20 | The snowball/behavior stays constant, wealth grows | | 05:08 | Savings rate impact on reaching $1M | | 09:23 | Q&A: Too much cash? Opportunity cost ([Matt Yu]) | | 17:14 | Q&A: Counting military pension ([Josh D]) | | 25:20 | Q&A: Emergency fund best locations ([Got a Tumblr]) | | 30:31 | Q&A: Coast FI: smart or misguided? ([Kyle S]) | | 38:42 | Q&A: Mistakes from $500k–$2M ([Sparinator]) | | 47:23 | Q&A: Emergency fund intensity ([Leandra Jo]) | | 55:37 | Q&A: Student loan payoff vs. investing ([Eric]) | | 54:55 | Next week: Humphrey Yang episode announcement |

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Tone & Style

• The episode delivers technical financial insights with a friendly, encouraging, and often humorous tone.
• Hosts share plenty of personal anecdotes, metaphors (snowballs, running from a bear), and focus on celebrating every milestone, not just the end goal.

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Summary Takeaways

• $250k is the real “halfway” to $1M due to compounding: Start early, and small—the growth will accelerate with time.
• Consistency beats complexity: The behaviors that get you your first $100k or $250k are also the ones that will get you to $1M+.
• Check your strategy as you grow: As wealth and life get more complex, revisit your plan, avoid overcomplicating your investments, and occasionally level up with professional advice.
• Personalize but don’t rationalize: Rules of thumb help, but adapt them wisely to your circumstance.
• Celebrate all wins, big and small: Getting to zero debt, fully funding an emergency fund, or making your first investment are all huge steps forward.

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Next episode: Don’t miss Humphrey Yang live with Money Guy! Submit your questions and join the community conversation.

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Transcript

[Bo Hanson]

Foreign.

[Ruby (Rebe)]

No, it's not bad. Math 250k is indeed halfway to $1 million.

[Bo Hanson]

Ruby, I am so excited to talk about this because math. And we love math here at the money guy show. And I am super stoked about this because whenever you kind of get into the numbers, start playing with them, there are some fascinating things that happen. Now, you know this.

[Ruby (Rebe)]

I.

[Bo Hanson]

Right now, for the past year, my wife and I have been homeschooling the kids.

[Ruby (Rebe)]

You have.

[Bo Hanson]

And do you know what every Friday morning is?

[Ruby (Rebe)]

Math class. Right?

[Bo Hanson]

Every Friday morning is muffins and math with dad. And it's awesome. And you have young kids, too, right? And so as you start kind of like having these conversations with your boys, you're gonna be like, hey, bud, what's two plus two? And he's gonna say four, hopefully. Right. Hopefully you're gonna get to teach him, like, how the math works. And then you're gonna say, okay, bud, you're doing awesome. What's half of 10?

[Ruby (Rebe)]

5.

[Bo Hanson]

She's so nervous because I'm ready to home here. And we're going to keep working on this. And so with my daughters, we're working on multiplication, and we're getting into money and doing that kind of stuff. Now what are you going to say, Ribi, one day when your son gets there, or when my daughters and I get there and I'm like, all right, sweetheart, what's half of 1 million?

[Ruby (Rebe)]

What I hope they say is 500,000.

[Bo Hanson]

To which I would say, yes, baby, that's. That's true. But when it comes to money, when it comes to Money, halfway to 1 million happens a little bit before then. $250,000 is actually halfway to 1 million. They're going to say, dad, what do you mean? That's. That math doesn't math.

[Ruby (Rebe)]

Right.

[Bo Hanson]

And then what do I get to explain?

[Ruby (Rebe)]

Then you get to explain to them one of my favorite things that I have learned from you, Brian, which is the power of comp. Interest. So when I was in mid-20s and met you guys, which is too long ago, first of all, can I just say, this is the concept that took someone who had the basics down and truly changed my mind and really blew my mind, if you will. So the power of compounding interest is if you take just $833.33 per month annually. Exactly. With a rate of return of 8% annually, that only takes you 13.8 years to get to $250,000, which we're saying is halfway to 1 million. And here is why. After you get past that 250k. That first 250k, it takes the same amount of time, 13.8 more years to get to 1 million. If that money is invested, the power of compounding interest is working in your favor, and, and it's making your money work harder than you do. And so, thankfully, I felt like I was a little late, but by mid to late 20s, I was on board and I was getting to benefit from the power of compounding interest and get on this path. And so that is something I love about the money guy show. It's one of our core principles. And so indeed, 250k is halfway to 1 million.

[Bo Hanson]

What, what I love about this is that the bigger the numbers get, get, the bigger the numbers get. And what's great, exactly, when you think about this, your behavior didn't change. You did the exact Same thing day one that you did all the way nearly 27 years out into the future. But what's great is when you do that same behavior, it takes you a long time, and it feels like in the early stages, you're moving slow, you're moving at a snail's pace. But as that snowball begins to roll down the mountain, it gets bigger and bigger and bigger and more effective and more effective and more effective. And so when you actually get to start seeing this, when you begin tracking your annual net worth statement, you say, okay, last year I saved $10,000. I got 10,000. But then you get to the next year, like, okay, I saved another 10,000, I have 20,000. But I actually have a little bit of growth on there. I've got like 21,000, $22,000. And you see that start to happen and that start to compound. It really does kind of become addicting. And what I think is awesome is this illustration we laid out shows what if you don't change the behavior. But what's beautiful about finances and what's beautiful about your financial journey is that your behavior can impact the speed at which you move. So we laid out for you, okay, what's it look like if I just save $10,000 a year? Well, how fast you get to a million changes based on how you want to save. So if you're someone, maybe you can't save the full $833 every single month, but maybe you can save $500 a month. If you can do that, it's going to take you about 33 years to get to $1 million. If we assume an 8% annual rate of return. Well, if you're doing that when you're on that path, by the time that Your portfolio hits $209,000, you have covered half the time it takes to make it to a million.

[Ruby (Rebe)]

Yep.

[Bo Hanson]

That means that you will make $800,000 on your portfolio in the same amount of time it took you to get to 200. If you can save $1,000 a month, it takes you about 25 and a half years to get there. Your halfway point is $266,000. $2,000 a month takes 18 years. Your halfway point is 325,000. If you can save $4,000 a month. This is what's crazy. It only takes a little over a decade to get to $1 million. So your halfway point happens at 384 thousand. What I think is great about saving, and this is what we see time and time and time again from our financial mutants, is that, okay, I may start, and I may only get to start doing $50 a month, but I do that for a season and then I can increase that to 100, and then 100 becomes 200 and 200 becomes 500 and 500 becomes a thousand. Brian and I talk about, we remember, both of us individually when we finally entered like the, the one comma a month savings club. When you say 1,000 bucks a month, it's a milestone. It was mind blowing, right? And then you get to where, okay, maybe I can save 2,000, maybe I can save three. And you begin to see how much of an impact that increased in save, increase in savings has in your financial life. It becomes mind blowing. And so we talk about compound interest. We talk about how your dollars can grow. It really is crazy. And my kids have not gotten on. They haven't got caught on this just yet. But I'm so excited to because when it does take hold, when I finally get my oldest daughter to recognize, wait, wait, I can take some money. And rather than spend it, I can just put a little bit of aside. And if I put it aside, that money can make money and it can actually grow. While I'm sleeping right now in homeschool science class, they're both growing these little plants. And so every day they go out and it's wild. Cause, like, they'll like, they're kind of competing. They're like, oh, look, there's a speck, there's a leaf.

[Ruby (Rebe)]

There's a. I have a leaf.

[Bo Hanson]

And what's. So I don't. If they're getting this excited about watching plants grow, that makes me very, very excited about getting excited about what Happens when compound interest begins to take hold. Mind blowing.

[Ruby (Rebe)]

Oh, for sure. Because, yeah, compound interest is there for really anybody. Like, anybody can do this, which is the beautiful thing about it. And I loved how you laid out. You kind of get to decide based on your personal circumstances how fast or slow you want to go. And no matter what you can and are able to contribute, there's a benefit and there's growth there for you. And then, like Beau said, I think it's easy to, like, extrapolate out these numbers, like, okay, 500amonth for 33 years, but, like, that might change. And that's kind of the beauty of it. You get to kind of be the driver there and keep it growing, keep going.

[Bo Hanson]

If your mind was blown and you thought, man, this is crazy. We have a great show that just came out for you called 10 top 10 mind blowing money Stats, that similar type of stuff. Hey, how can $250,000 be halfway to a million? It's a great show. If you've not checked that out, make sure you do it. Because we love that we get to put this information together. We get to curate these shows, we get to come up with these ideas, share these concepts. But in addition to that, we love that you guys have questions that there are things that you want us to weigh in on. So if you have a question right now that's burning in your mind, let it come from your mind into your fingertips, down into your keyboard and get.

[Ruby (Rebe)]

It in the chat.

[Bo Hanson]

Because right now we have the team out in the wings collecting your questions, because we really do believe that there is a better way to do money, and we want to be the mechanism that shows you that better way. So with that, Ruby, creative director Ribby sitting in the big seat today, co host Ruby.

[Ruby (Rebe)]

Yes.

[Bo Hanson]

I'm going to throw it not very far over to you.

[Ruby (Rebe)]

I've got some questions queued up. And as a little extra motivation to get your question in the chat, it is a money guy Tumblr day. Let's go answer your question right here on the show. You get a Tumblr and I'm realizing we are being terrible Tumblr models today, guys. We both have production team.

[Bo Hanson]

No. Nobody put some tumblers on the table for us. I went.

[Ruby (Rebe)]

I didn't think of that until just this moment.

[Bo Hanson]

I went, koozie, nothing.

[Ruby (Rebe)]

We'll change that.

[Bo Hanson]

Maybe we won't, but look at that.

[Ruby (Rebe)]

We love a good.

[Bo Hanson]

I can see where they are. They just dec. They decided not to put them on camera to. Oh, my God.

[Ruby (Rebe)]

I think we Decided not to drink out.

[Bo Hanson]

Look at that.

[Ruby (Rebe)]

There you go.

[Bo Hanson]

Magic Tumblr.

[Ruby (Rebe)]

Funny guy, Tumblr day. Amazing. All right, we're going to kick it off with Matt Yu's question. He says, my wife, 28, and I, 32, will be welcoming our first child in early January, which is exciting. We love that we have a savings rate of 27% and are holding 6 months, a 6 month emergency fund plus 100k in sinking funds. How much is too much cash in the messy middle? Can I just say, first of all, as someone who has had some children done the emergency fund thing, this is like a dream scenario.

[Bo Hanson]

I mean, holy, because we like to.

[Ruby (Rebe)]

Say there's not a perfect time in your financial life. Like, having children is not a step in the foot. That is a life decision. That is an exciting thing. But then, you know, then we always talk about, like, oh, how can you prepare financially? You're prepared. So I just want to congratulate you on that one, first of all. But I do want to hear your perspective. Bo, this is a lot of cash.

[Bo Hanson]

There's a lot of cash.

[Ruby (Rebe)]

There's a lot of good things going on. But how should they think about this?

[Bo Hanson]

Yeah. One question I'd have for you, Matt, is, man, $100,000 sinking fund. What exactly is it that we are sinking for? Like, is this a sinking fund for like another house, another. I mean, oftentimes we think about sinking funds. And for those of you that aren't familiar, a sinking fund is just this idea that I have this future expense coming up and so I want to begin pre funding it right now. So now, man, I'm going to need to replace the tires on my car and that's going to be $2,000. I'm going to start a sinking fund and save towards that. Or I might have an H Vac repair coming and that's going to be $8,000. I'm going to create a sinking fund to hear that you have a $100,000 sinking fund, that's a big old boat that you're planning on not letting sink. And so I would ask the question, why is that there? Because one of the things that you already have in place is you already of living expenses in place. Now, I don't know what your monthly burn rate is, but I would imagine if you have a $100,000 sinking fund, I bet your six month emergency fund is probably pretty big too and pretty substantial. Now, I love having cash and I love having liquidity. Now, especially like having liquidity going into like unknown circumstances. And having kids is truly an unknown circumstance. There's a lot of stuff, a lot of life that changes. So I'm not going to fight you for having a little bit of excessive liquidity there. However, here's what I want you to do. I want you to go to moneyguy.com resources and I want you to play with our wealth multiplier. And I want you to see for a 28 year old and for a 32 year old, what each one of your dollars could multiply into by the time that you get to age 65. And what you're going to see is like, I had this number memorized for a 30 year old, which is right in the middle of you guys. It's 23 times. Every $1 that you save at age 30 can turn into $23 by the time that you get to age 65. And so while you're keeping this liquidity, while you're keeping this powder money there. Oh, look at this wealth multiplier. That's beautiful. For a 30 year old, it's a 23 wealth multiplier. Well, while you are keeping this money liquid, while you're keeping it dry powder, while you're planning for this sinking, there is some real opportunity cost that's taking place. So here are some questions that I would ask you. If you were sitting across from me and we were kind of analyzing this. I'd say, okay, what's your current savings rate look like? Like, are you saving 25% of your gross?

[Ruby (Rebe)]

27%.

[Bo Hanson]

27%. Okay, great. What's the rest of your portfolio look like? Like, are you someone who's been saving and you have a 800-900 million dollars portfolio? And so $100,000 sinking fund isn't that. Or do you have $150,000 saved up investments, but you only have 100, you have $100,000 sinking fund. I would begin to think, man, there's some major opportunity costs from that money sitting there. So I'd answer the question, what's the sinking fund for? Is that prudent? And let me say another thing that I see people doing all the time. They will have multiple sinking funds, right? They'll be like, I got a sinking fund for the new car, I got a sinking fund for the H Vac, My roof might go out. I got a sinking fund for that. My kid might need braces that I'm about to have in like 14 years. So I would have a sinking fund for. And you just, you realize I've got like nine different Sinking funds. We've done this a few times on making a millionaire. The probability of all of those things happening all at once is a relatively low probability thing. So you can think of your sinking fund as multipurpose. Like, I have a sinking fund and it might be for the tires, or it might be for the H vac, or it might be. But I don't have to have each one of them separately, like chiseled out inside there because if you do it that way a lot, you're going to end up with a ton of, of cash. So the answer to your quote, I think the ultimate quote is the ultimate question, how much cash is to how.

[Ruby (Rebe)]

Much cash in the messy middle?

[Bo Hanson]

The answer is, it depends. You'll have to decide for yourself. But some of the things I would think there was everything I laid out. What's the sinking fund for, why I'm holding it there? What's the rest of my portfolio? And is that money going to be best utilized sitting there for the unknown unknowns? Or am I in a position where maybe my sinking fund should only be 40,000, $50,000? And if I am there. But you are someone who's super risk averse. I literally just had this conversation with an advisor in my office before we went live. She has a client and she's like, hey, this client has some, like, apprehension. She has a bunch of excess cash and she wants to put it to work. And I'm trying to counsel her there. I'm like, hey, you know what? Do this. Tell her, don't put the excess cash to work all at once today. Rather than even giving you a lump sum, let's just increase how much you're investing on a monthly basis. And so maybe, Matt, for you, maybe I don't know what your monthly savings is, but let's just say that right now you start doing $10,000 every month into your taxable brokerage account, assuming that you're in step seven of the financial order of operations. And you just let that start happening. And you'll be amazed at how through time you will buy down that sinking fund. And once you get to the point that you're comfortable, 40,000, 50,000, whatever that number is, you can stop there, turn, turn off, or bring back down the monthly contribution and you will have gotten all that money to work, working for you.

[Ruby (Rebe)]

I think that was some good guidance. Matt, you. Thank you for the question. Congratulations on the new baby. And we hope that helps you think through what you might be doing with that cash.

[Bo Hanson]

And one other thing, Matt, make sure that cash is not sitting idle. One of the things that breaks my heart so much is when I'll have a, a potential client or prospective client reach out and they'll kind of walk me through their situation. I'll be like, they'll say, hey, I've got 100,000 in cash. I'm like, okay, great. Where's that sitting? Oh, well, let's just set my, you know, I have it in my checking account. I'm like, oh, do you recognize. Even though interest rates have come down, we recently saw production. You can still get 3 to 4% on your cash and high yield savings accounts or money market mutual funds. So if you are going to keep cash for an emergency fund, for a sinking fund, for whatever that may be, make sure it's at least earning something because right now rates are too good to not be taking advantage of. So make sure you're doing that.

[Ruby (Rebe)]

That's good stuff. Matt, if you would like a money guy Tumblr, just email winner moneyguy.com we'd love to say thank you for asking your question today.

[Bo Hanson]

Are you gonna, are you gonna tell them the thing? Are we, Are we telling them Matt, the thing? Are we not? Are we telling them the thing? He said tell him. Do you want to tell them?

[Ruby (Rebe)]

I would love to tell them. So next week we have something really fun happening.

[Bo Hanson]

Hold on, hold on. But let's see if you can get we have someone hanging out with us thing.

[Ruby (Rebe)]

Yeah, it's a collab.

[Bo Hanson]

Do we know how to do we know how to do chat?

[Ruby (Rebe)]

Oh yeah. Can we do a poll?

[Bo Hanson]

How can we do a poll?

[Ruby (Rebe)]

We get a poll up. Yeah. Who? Well then we have to pick. I want to know who you guys.

[Bo Hanson]

I just say in the comments. Is going to hang out with us next. Who would you love to see?

[Ruby (Rebe)]

Would you like to see collab with us? I'm having a feeling you guys will guess, but we will see. Do you want to do a question?

[Bo Hanson]

Yeah, we'll see. We'll see if anybody gets it.

[Ruby (Rebe)]

All right. Josh d. Says, I'm 36, married with four young kids.

[Bo Hanson]

Nice.

[Ruby (Rebe)]

I've been a miser the past two years. This is a confession. We consistently saved 15% in seven years. I will retire from the military is including the pension value in my current savings rate. Fu ish. And you know, we get on people sometimes we've got the nine step framework of the foo and sometimes people get a little cute with it. Right. We call it foo ish. So what would you say to Josh.

[Bo Hanson]

D. Yeah, so one of the things that's really, really interesting about military pensions that's different from some other ways that pensions are, are, are set up, is that you might actually be able to access or likely to be able to access that when you retire. Meaning you don't have to wait to receive your military pension at some specific future age, like 65 or so on. You get to draw that when you actually retire from service. And so your ultimate question is, hey, we've been saving 15%, seven years I'm going to retire. Is including the pension value my current savings fu. Ish? I don't think so. I think that including that in there is okay. Because if you're seven years, you're, you're, you're past the point. You're over halfway there to where it's going to be a high probability that you're going to receive this pension. And it's a federally funded pension. It's not like it's a company that's going to go out of business or go into like underfunded status. So you can rest assured that it's a high likelihood that those pension dollars are going to be there. So whereas the normal person who doesn't have access to a pension, who doesn't have a guaranteed income stream coming in, they may need to be saving 25%. Hearing that you're at 15% sounds great. Now here's what I don't love hearing, Josh, that you've been a miser and 36. For young kids, being a miser can cost out, cost you a lot of stuff, right? Because there are, and I'm recognizing this all too soon right now. At my age, my kids, these kids are only young for a little bit, right? And I'm like, I'm looking back at these like I have, I have my two and a half year old and look, if my wife is listening, she'll start crying. I don't remember my 10 year old as a 2 1/2 year old. Like, it, like it just, it blinks and it went by and I'm looking at this little. And I'm, and I'm trying to like, remember what it was like, but I just remember being so like, oh, life was crazy and busy and all this stuff a decade ago. I don't want you to be making financial decisions that cause you to miss out on the sweetness that is this messy middle stage of life.

[Ruby (Rebe)]

Now, that doesn't mean he's only gonna be that excited to just go get an ice cream for so long.

[Bo Hanson]

That's right.

[Ruby (Rebe)]

I Think about that with my sister too.

[Bo Hanson]

I'm like, that's exactly right.

[Ruby (Rebe)]

It's gonna all go away.

[Bo Hanson]

So my kid calls it, I mean daddy. I mean daddy, I mean, and I'm, and like I'm never gonna tell him the right way to say it. Uh, and so I, I, I hear that you've been miserly. I don't love that. So one of the things I'd want you to do, and especially since you're a military member who's going to enter likely two different retirements, at least a lot of my folks, a lot of my friends that served, they'll retire from the military and then they'll go to like career 2.0 or what, or like next thing 2.0. So you're kind of planning for like these suit two pseudo retirements, one that's going to happen seven years from now, and then probably one that's going to be the fourth retirement where you fully decide to leave the workforce. I'd begin now to do some projections and I would use the 3D glasses. Hey, what's the dream plan? What's the down to earth plan? What's the doo doo plan? And I would say, okay, Based on saving 15% right now every year out until I get to military, and then when I retire from the military and I will start receiving my pension, what will I do for my next vocation? What do I estimate my savings to be? And then when do I want to fully retire? Am I going to do that at age 50? So am I going to have just a very short 2.0 career? Am I going to go to 55, 60? And you can begin once you've done that, determining, okay, what is my actual number and what savings rate is required to allow me to be able to get there. Because having a pension and this is a great, it's a great thing for anyone to do. Now look, this math isn't perfect, so I'm just going to, don't, don't lambast me in the comments saying this, right? But here's if you're, if you're a person who's going to get a pension, and again, I can't, I cannot express how not perfect this math is.

[Ruby (Rebe)]

So it's just an example.

[Bo Hanson]

I said that enough. Take your pension benefit, let's say it's a thousand dollars a month. I'm making up a number. Go, you did $12,000 a year and just divide that by 0.04. So just kind of dividing by a 4% withdrawal rate while it's not a perfect representation. You can kind of think of that pension as a lump sum of dollars representing that value. So, like, you know, whatever your pension is divided by a 4% sustainable long term withdrawal rate, you got to think about your portfolio having that chunk there that will let you know, man, okay, if I've got that size portfolio creating that size income, how big does the other piece of my portfolio need to be able to supplement that so I can live the life that I want to live on my terms, the way I that I want to live. And I think if you start doing that work right now, being seven years away from first retirement, you're going to set yourself up to be able to make decisions that allow you to not only have a great big beautiful tomorrow, but also have a great big beautiful today. That's something we don't talk about enough. We want you to enjoy every phase and every season of life. And even though the messy middle is messy and crazy and hairy and hard, it can still, it can still be wonderful.

[Ruby (Rebe)]

Yep, it's a balance. If Brian was here, he would tell you to at least bedazzle your basic.

[Bo Hanson]

That's right. That's exactly.

[Ruby (Rebe)]

Make the memories now, cuz like Bo said, they. You will not always have this moment.

[Bo Hanson]

I mean. Oh, it's my bad. That's my. That's my dude.

[Ruby (Rebe)]

That's so cute. Well, Josh, that was a great question. Thank you for asking it. And we hope that helps you think through your question and how you're spending your money and your time with your family. If you would like a money guy Tumblr, just email winner moneyguy.com and we will hook you up. All right. You guys are very fun. These guesses of who is coming to collab with us next week were great. Some of my favorites were Warren Buffett and Chapel Roan.

[Bo Hanson]

What? Those two seem. Those two seem different.

[Ruby (Rebe)]

I like the contrast. Someone said Dolly Parton. Brian would love that one.

[Bo Hanson]

We would.

[Ruby (Rebe)]

I would love that one. Hey, since she's.

[Bo Hanson]

Since he's.

[Ruby (Rebe)]

Let's just put that out.

[Bo Hanson]

Since he's not here, I want to go and speed this into the ether.

[Ruby (Rebe)]

Yes.

[Bo Hanson]

If you one Dolly, if you're a fan, we love you so much.

[Ruby (Rebe)]

We love you, Dolly.

[Bo Hanson]

But if you're someone who's connected, we would love to have her come on and do some collaboration. So if you happen to be the inroad to Dolly, we'd love to be a resource.

[Ruby (Rebe)]

All that to say it is not one of those three that I mentioned. So drum roll. Please.

[Bo Hanson]

But almost. But. But just as. Just as amazing.

[Ruby (Rebe)]

Oh, yeah. As all three of those, for sure. Those were just the ones that kind of made me chuckle. But we are super excited to have Humphrey Yang on the show next week. We are recording some fun content behind the scenes, but since he's going to be here on a Tuesday, we were like, humphrey, you got to come on live with us. It's going to be so fun.

[Bo Hanson]

We're going to do it live. And you guys know the way the live show works. You get to ask us questions and we get to answer. So that means that next week Humphrey is also going to be answering questions live with us.

[Ruby (Rebe)]

Absolutely.

[Bo Hanson]

So go ahead and start thinking about and be specific. And to be like, hey, this question is for Humphrey to stump him because I'm not going to stop Brian and Bo, but it's going to be no.

[Ruby (Rebe)]

We have really enjoyed Humphrey's content. We got to meet him in person at a conference and have interacted with him. So we're really excited to officially be joining forces and making some hopefully really awesome content for you guys.

[Bo Hanson]

Super hype.

[Ruby (Rebe)]

So be here next Tuesday, 10am Central. Humphrey Yang will be here. It'll be awesome. All right, we're going to go to a question from Got a Tumblr and shout out to you because after we answer this question, you will have a Tumblr.

[Bo Hanson]

I have a Tumblr.

[Ruby (Rebe)]

It says, hey, money guy, should emergency funds always be in high yield savings accounts with interest rates reducing? Is there a balance of where to keep between high yield and a money market?

[Bo Hanson]

Okay, yeah.

[Ruby (Rebe)]

So. So I think we're talking less versus more risk and also less versus more rate of return. What would you say?

[Bo Hanson]

So we've done a show, a show on this in the past when rates first started like trickling up before they hit the peak. Kind of walking through the different ways that you can hold a cash. So I'm going to answer your question this. We got to. Should your emergency fund always be in a readily available liquid cash or cash equivalent? The answer to that would be yes. What a lot of people don't realize is there are a number of different things that satisfy that right? You can have a savings account at a brick and mortar. You can have a high yield savings account that can be at a brick and mortar or, or even like an online institution. You can have a money market account at one of those institutions or you can have like a money market mutual fund that you hold inside a brokerage account. And what's really interesting is which one of those that pays the highest rate will not always be the same. There were times in the not too distant past where the absolute best rate you can go out there again was in a high yield savings account. You go open up an account at. I'm not going to give them free endorsements, but they're the names you've heard of. They would have like really attractive high yield accounts. You could go to Bankrate.com and you could kind of sort by, you know, yield and all this kind of stuff. And so a high yield account made tons of sense. But then we got into this rate environment where rates went higher and higher and higher and all of a sudden money market mutual funds became a lot more attractive. So if you wanted to go have the highest yield, you'd go buy like a money market mutual fund. As rates begin to drop, money market mutual funds will probably drop more quickly than high yield saves account. So we fully anticipate it will happen again. So high yield savings account will probably be the one you want to hold in or a money market account will probably be the one you want to hold your cash. And what I would encourage you to do, and this is why doing a net worth statement every single year is such a great. It's like annual physicals. You know what I mean? Like you go to your annual physical like checkup, you think like things are good, but you go to the annual physical and they're like, hey, you should check on this and this and this. You're like, man, I wouldn't have been thinking about. I'm glad that it's like top of top of mind, front and center. That's what your annual net worth statement can do. And if you, if you want a free resource that you can use this year in 2025, you can go to moneyguy.com resources and download our free template. Or if you want to use the exact same template that I use that Brian uses, that Rebe uses, that the vast majority of our team here uses. You can go to learn learn.moneyguy.com and download our net worth tool, which has a whole dashboard there. I'm off on a tangent here. Sorry, Brian.

[Ruby (Rebe)]

Brian's thing. What are you doing?

[Bo Hanson]

Where I'm going with this is that one of the things you do is when you put that on there every year I always mentally ask myself, okay, this is how much having cash I've got it in this high yield money market fund or in my highest hands account, is that still the best payer or is that something I should Revisit. Okay, you know what? Okay, what's Ally paying? What's capital one pay what's. And I don't want to move them all the time, but at least annually I want to check to make sure that I'm at least getting the a nearly competitive rate with whatever the going rate is out there. So to answer your question, got Tumblr. It does not have to always be in one specific type of account. You can change where it's at, but I'd be cautious. A few things I would not change a ton because it's super annoying to have to like open a bunch of accounts and really?

[Ruby (Rebe)]

Yeah.

[Bo Hanson]

There's also tax reporting required in these accounts. So it's gonna be super annoying if you Open this account 6 months ago and but then you moved it somewhere else, but then you forgot about that account. You get this tax reporting form and you forget to put on your tax return and you get a letter from the irs. You're like ah, I forgot about that. That's a super annoying thing. And be careful when you're shopping rates for bait and switch type tactics. This happened to me because I'm super competitive and I wanted to beat Brian. So this is like 15 years ago.

[Ruby (Rebe)]

Let that be a lesson.

[Bo Hanson]

Yeah, right. Pride cometh. Before the fall he went and got a high yield account. When high he was playing the best with like a well known name everyone's heard of. And I went to Bankrate.com and there was this other one that was just right above it. Well for not a well known name that a lot of now people had heard of. And I was like I'm going to do that one so that can beat him. And I did it. And literally three months later they dropped the rate. It was an intro teaser rate. Absolutely ridiculous. So be be aware that rates can move quickly. You don't want to do it a ton but you do want to make sure that you're an advocate for every dollar in your army. Dollar bills.

[Ruby (Rebe)]

Yeah, no, good stuff. Got a Tumblr. Thank you for the question and we would love to make your username a reality. Just email winneroneyguy.com and we will send you a MoneyGuy Tumblr.

[Bo Hanson]

Love it.

[Ruby (Rebe)]

All right, Kyle S. Is up next. He says hey money guys, I'd like your thoughts on Coast Phi. My wife and I, age 27 and 29 have about 180k in retirement accounts total and a target of 5 million at retirement. So doing some really great things. Can you please define Coast Phi as well for Those of us who are new to. I guess I'm not. I'm not new to the concept, but just thinking of people who may be, and then answer Kyle's question.

[Bo Hanson]

So coast fi. So most people, they start out in their working career, and they begin saving. And their idea is, for the average person, you graduate from college around 20 to 23, or maybe you don't go to college, you get out of high school, like 18, you start saving, and you save for your entire working career until you get out to, like, age 65. And then you retire. And hopefully what you've done is you've built up a pot of assets that's large enough that your money can provide for your needs for the rest of your life. Right. It can work harder than you can with your brain, your back, and your hands. That's like the traditional financial independence journey story. Well, there are some people that say, hey, you know what I want to do early on in my career? I want to really, like, jack up my savings because I've got this high income. I'm in this unique vocation, and I'm going to save really, really aggressively early on so that I can build my assets to a certain level that if all I do is let those assets sit and I'm going to make up a number from age 35, and I just let those assets I saved up until 35 grow from 35 to 60, 65, I can let them just coast all the way to retirement. And so long as I can provide for my living expenses, I can make less money in my working years. I don't have to save as much. I can be a little bit more conservative. Right? It's the idea. I'm going to save up how much I need. I'm gonna let it coast into retirement, and I can just cover my living expenses, and that's fine. A lot. A lot of people do that. A lot of people, like, think. Think through that. So your question, Kyle, is, Hey, 27, 29, I've got $180,000 saved up. What are our thoughts on Coastfi? Here is my thought. And this will seem shameless, but it's not. What I want you to do, Kyle, is I want you to subscribe right now to the channel. I want you to just click on the button to subscribe right now. Because we recorded last week, two weeks ago, it all blends together. We just recorded an episode of Making a Millionaire. And this was the exact problem. Not say problem. It wasn't a problem. This was the exact planning opportunity that we Navigated through. We had this couple and their desire was coastifying. Hey, we have this plan and we've been working really, really, really hard and we are five years away and we just want to kind of test. And it was great. And they had done. I'm not going to give away what they did. They had done one thing really, really well, right. There was an obstacle that they had to overcome. And it was the obstacle getting to the. Getting to the first, like little clip. They had solved that problem. What they had forgotten though, was that there's another obstacle at the end of the plan. And that obstacle goes from 60 all the way to the rest of your life or whenever you're going to actually, truly retire. All the way the rest of your life. And they were so focused on the short term goal that they had lost sight of the long term goal. So when it comes to coast fly, I think it's great. I love it. I think it's a fine idea if that's something you want to pursue. But the further out your timeline is, the more impact even small variables can have. So, like a little change that you're not aware of. And this is what I know at my age for 27 and 29, one, to have $180,000 saved is insane. Like you're crushing it. We say that by 30 you ought to have one times your annual salary saved up. And I don't know what you guys make, but 180 grand, pretty stinking good. So you're in a great spot. But there's a lot of life that's going to happen in your 30s. Amen.

[Ruby (Rebe)]

Amen.

[Bo Hanson]

Amen. There's some life can't confirm. So whenever you plan for coast fire, you have these long dated things. You better make sure that your assumptions are sound. And in my opinion, you better make sure that your assumptions are pretty conservative. Like when we think about coastfi or fire or fine, we talk about these like 3Ds. We really do not spend a ton of time on the dream. The dream is great if it happens where we spend the majority of our time. And this is what we do for our clients. We spend a lot of time somewhere between doo doo and down to earth, right? Like, because if that's the risk that exists, we want to make sure that we cover the risks. And then if things turn out better than we anticipate, then that's great. It gives us more options, more flexibility, more choices down the road. But far too often people go into these scenarios only thinking about the dream, only thinking about, okay, I'm going to do this. It's going to be awesome if one thing changes. Oh, that. Thought we were going to have two kids, ended up with three kids. Or thought we were going to live in this part of the country, but had to move to this part of the country. Or thought this job was going to get us to the first benchmark. But oh, that job, whatever that thing may be, you just have to make sure that your assumptions are really, really tight in order to be able to execute. So we love coastfi. It does require a little bit more forethought, a little bit more planning, a little more strategy, then a normal retiree. Just, hey, if I can just save 25% of my gross, I don't have to think about a whole lot else. I can just put that to work and if I do it early enough, odds are I'm gonna get to write my ticket.

[Ruby (Rebe)]

Yeah, no, that was good stuff. Kyle, thank you for your question. If you would like a money guy Tumblr, we'd love to send you one. Just email winner moneyguy.com to cash in on that. All right, we've got it. You. You got something?

[Bo Hanson]

Well, somebody just said, I mean, this is a question. Hey, when is the survey result being released? Really soon, really soon.

[Ruby (Rebe)]

Honestly, I'm not gonna say the date just cause I forget off the top of my head. But it's coming. So be sure you're subscribed and I mean that. Cause you will see it when it comes out. And also, if you took the survey, we're going to be emailing you like a special announcement email. Like, hey, this thing that you helped us make is out in the world. So that's coming this month.

[Bo Hanson]

I don't want to, I don't want to oversell it. You know, that's not, that's not normally what I do. Mind blowing. Like when we actually got to see the results and look at the results.

[Ruby (Rebe)]

There were some like, I don't even know. There's a part of me that's like, was it surprising? But like it kind of was.

[Bo Hanson]

Well, it was like, okay, you know your kid. Yeah, yeah, I keep talking, man. I'm talking a lot of my kids today. You know when your kid does something awesome and you just like, you just like well up with pride and you're like, oh, look at that, look at that. That's the way I felt with the financial mutant survey. I was like, oh, they're doing it.

[Ruby (Rebe)]

It was amazing.

[Bo Hanson]

And so we can't wait to share that with you.

[Ruby (Rebe)]

Oh. So our production team is awesome. And they, they reminded me when it's coming out, it's.

[Bo Hanson]

Oh, well, don't tell them.

[Ruby (Rebe)]

No, no, no, subscribe.

[Bo Hanson]

Don't tell them. You gotta subscribe.

[Ruby (Rebe)]

Ah, that was very kind of you though, Caleb, but I'm gonna be like that. Okay, we do have some more questions. This next one is from Sparinator. It says we are at the halfway to financial independence stage. A net worth just under 900k and contributing around 80k a year. Y' all often say the first 100k and 250k are the hardest. What are the most common mistakes people make? Between 500k and 2 million. That slow compounding momentum. So it's true. They've got a lot of the hard part, or what we often talk about as the hard part down is there. Could they screw it up now? What would they. What do they need to be thinking of now at this stage?

[Bo Hanson]

I love it. I've got, I've got three things. You ready for this?

[Ruby (Rebe)]

I'm ready.

[Bo Hanson]

I'm writing myself notes so I don't forget the three things.

[Ruby (Rebe)]

That's great. That'd be sad if you got to number three and said, I don't know, blanked.

[Bo Hanson]

Yeah. So one, to be at the point where you have a $900,000 worth and you're saving $80,000 a year, that's fantastic. Like, for all intents and purposes, I don't think you said your age, killing it. Halfway to financial independence. That's awesome. And so you've done a lot of things really, really right. But what goes wrong? Where do we see people often fall off here? The first one I would say is they forget that I've done a lot of things right. People, all of a sudden, once you cross over that two comma mark, you start thinking, oh, yeah, yeah, yeah, or I need to do something more complicated. I need to do something more sophisticated, something more sexy, something more risky, something more not recognizing that the very thing that got you from 0 to 900,000, with the right savings rate and enough time, can be the same thing to get you from 900,000 to 9 million. Right. Like, you don't have to necessarily change behaviors. And far too often we see people, once they get into like the millionaire status, they want to start doing things like, okay, well, now I'm going to go buy all the real estate, or now I'm going to get into the private equity deal, or now I'm going to start investing in the startups, or now I'm going to start. And they start doing things that are different than the behavior that got them to where they are now. Don't mishear me. I'm not suggesting that there are things wrong with investing in real estate or participating in private equity, but there is a season and a reason for doing it. And if you're not in the season or don't have the reason, it's not something that you should necessarily do. And so far, too many people, like, fall into that. So that's number one. Number two is life starts getting a little bit easier. Life starts getting a little bit cushier. I'm saving. I'm saving $80,000 a year. I could probably afford that nicer car. True. I could probably afford to upgrade the house, maybe. True. You know what? We could probably go on the nicer vacations. And you know what'd be great? If we had the same house we could go to every year for vacation. Maybe I should get that second home. Maybe I should get that vacation home. And then all of a sudden, you begin making these decisions because you have had a level of success that your lifestyle starts to get bigger and bigger and bigger and bigger and bigger. And what you recognize is, man, I used to be able to live in such a way that I was able to go from 0 to 900,000 and crush it. But then I had some success. My income went up, my assets went up. But then all of a sudden, I let my lifestyle expand, and man, okay, I saved 80,000 last year, but, man, you remember, we did that one big trip. So maybe it's 70,000 this year. And no, oh, we got to do the private school because we moved into the neighborhood and we got. And so maybe I'm only going to save 50. And then it's this thing where lifestyle creep is a real thing. And what begins to happen is your lifestyle creeps up and the type of behavior and type of person you were that got you to the level of success begins to shrink because it gets crowded out by other stuff. So be mindful. Again, don't mishear me. Lifestyle creep is not bad. It's not inherently a bad thing. As our life expands, as our income increases, as our net worth increases, it's okay to enjoy that. It's okay to be living better today than you were last year or better this year than you were five years ago, so long as your savings behavior follows, so long as your lifestyle does not outpace your savings behavior. So lifestyle creep is the second place we see people falter. And then here's the third one. You've heard us say this a number of times in our opinion. With all the books, podcasts, blogs, articles, resources, YouTube channels, all the things out there. It's not incredibly difficult to self manage your financial life when you're first starting out for like zero to $500,000 of investable assets. There's so much information out there, there's so many different resources that you can do it yourself. And it's not all that complicated, right? If you want to know where to start or what to do with your next dollar, go to moneyguy.com resource and download your free copy the food. It's a nine step process to help you figure out what to do with your next dollar. And you can do that for a long time.

[Ruby (Rebe)]

I have to do that for Brian.

[Bo Hanson]

But a lot of times we don't mean for this to happen, but complexity finds us. We just wake up, we're like, holy cow, when did my life get so complicated? And when did I get, when did I start getting faced with these decisions? Like, man, I used to just have my W2, but now I'm getting RSUs and I have this thing called an employee stock purchase plan. And okay, I had life insurance when my kids were little, but do I still need it now and how much? And holy cow, all right, when it was little, I said, I want this person to take care of my kids. But now my kid is like three or four years away from 18 and if I kick it, they're going to get all this money at 18. Is that really what I. And you just. Complexity begins to find you later on in life. And so one of the things I think a lot of people do, whether it's they get too busy or they're afraid of the cost, or they're afraid of being sold something, they don't recognize that taking the relationship to the next level, having a professional step in and give you a second set of eyes on whatever that thing may be, whether it be on your taxes, your investment strategy, your saving strategy, whatever that thing may be. Just because you let me most financial advice, I'm not gonna say most. I'm gonna talk about our firm for a moment. Everyone who comes to our firm has had some level of financial success, right? Like that. People who reach out. It's not like people come to us like, hey, I don't know what's going on with money. No. In order to even be reaching out, you've had to have some financial level success. So it's not that you're bad with money. It's not that you don't know what to do. It's not that you don't know how to handle it. You have had success and you've gotten to a point. But the question you begin to ask is, okay, am I optimized? Am I doing all the things that I should be doing? Am I doing them as effectively and efficiently as I could be doing? And so a lot of people, from 900 to 2 million, or I think 4 million, whatever your number was, there are some things you could begin looking at. Oh, man, I used to do Roth 401k, but man, maybe I should be doing pre tax 401k. Oh, I make too much for Roth IRAs. Hey, maybe I should be doing a backdoor Roth IRA. Hey, my 401k has after tax contributions. Maybe I should be taking advantage of those. A lot of those are optimization metrics that happen as you get into that stage. So just recognizing, am I at that place where one of three things is happening? One, the gravity of the financial decisions is so great, I feel nervous handling them on my own. Two, I don't know what I don't know. Life has gotten complex and I don't know how to answer all the questions that I need answers to, or three, I'm just too busy. Life has gotten so busy that the things I know I should be paying attention to end up getting pushed on the back burner. If one of those three things is happening for you, maybe all three of those, that might be the warning signal. Hey, I should maybe consider taking the relationship to the next level. I should consider reaching out to professional advisor to help me figure out where do I, how do I get from where I'm at today to where I want to be 5, 10, 15, 20 years in the future. And if you're at that place, I'll tell you two things. One, whether you're going to talk to us or not, we have a great tool. Go to moneyguy.com resources. We have a great tool that's it's like eight questions, 10 questions to ask your financial advisor and it'll kind of walk you through, hey, ask this to make sure the person you're working for is a great fit for you. That's the first thing. Second thing, if that does describe you, we would love you to give us a chance. We would love you consider taking the relationship to the next level so that we could be part of that team to help you get from where you are today to where you want to be in the future.

[Ruby (Rebe)]

Good stuff. Sparing. First of all, you get a money guy Tumblr. Since you asked your question and we answered it, just email winner moneyguy.com and then for Sparinator or anyone who relates to what Beau was just saying, remember, you can always go to moneyguy.com and click on become a client, and you'll just find a little more information about abound wealth and the form to fill out to get connected and just start exploring that. So that's always available for you if you Want [e-mail] Love it. All right, Leandra Jo is up next.

[Bo Hanson]

She asked a question last week.

[Ruby (Rebe)]

I know I've seen her before.

[Bo Hanson]

I recognize Leandra.

[Ruby (Rebe)]

Thank you.

[Bo Hanson]

Continuing to check in, she says, I'm.

[Ruby (Rebe)]

In the messy middle and will be done with foo step three this month.

[Bo Hanson]

Let's go. That's awesome.

[Ruby (Rebe)]

With what level of intensity should one be funding an emergency fund? She's about to get to step four, which is the emergency fund. And remember, you can go to moneyguy.com resources to get your free copy of the Nine Steps. So, Bo, talk about step four. Emergency reserves are very important. How much intensity should she be going for in this next phase?

[Bo Hanson]

See, this is what's so funny, because y' all recognize, like, all of us in the financial ecosystem, right? Like, all of us folks that do this, we all know each other, we all hang out, we're all friends. So when I hear a question like, at what level of intensity should I be doing this? I'm thinking, man, is there some, like, an animal? Is there like a safari animal out there that's, like, super fast?

[Ruby (Rebe)]

What animal would you say?

[Bo Hanson]

I think that's what she's looking for. So, you know, if you know that, if you know what animal that is, good for you. How quickly should I be doing that? Well, here's what is so great. Reboot. Hold the thing up for me again. This is our financial order of operations. Leandro Joe said, hey, I'm about to close out step three. Step three is high interest debt. This is stuff like high interest car loans, credit cards, which is what most people fall into, consumer loans, store credit, those sort of things. And what you recognize is that when you're in that step, money is working against you. We talk about all the time. We started the show out talking about compound interest and how it can be like the eighth one of the world. And it can be amazing. It's so powerful, it can even warp time. So much so that $250,000 is halfway to a Million. That's how powerful can be. But when you're in step three, it's working against you. Like it's, it's an active force against you. And when you begin to see the light at the end of that tunnel, when you get out of that, out of that forest or you get, you get out of that fire, that is high interest debt. You think to yourself, holy cow, I did it, I got out of it. And most people I know that have had that problem, they've gotten out of it. They say never again. Never. I got myself in that situation, I'm not going to let that happen to myself again. That right there is the exact reason why step four comes right after step three. Because what happens is for most people, they don't have enough money that if an emergency happened, they could go pull from resources to cover it. So they have to swipe, they put in a credit card and then it just happens and it happens and it happens. And the reason that it happens is because they didn't have that thing to keep their life out of the ditch. Well, step four, fully funded emergency fund now creates an environment where I know that no matter what happens, if I lose my job, if the car gets a flat tire, if the H vac goes out, if I have that medical thing I wasn't expecting, I know that I've got anywhere from three months to six months of my living expenses to keep me covered so that we, when that thing happens, I don't have to swipe, I can write a check, I don't have to go back into step three. Step four is there to keep me protected. So Leander, your question, how intensely or what level of intensity should I attack level four with Step four? As much as you have, as much as you can give it. Because you are literally running away from step three as fast as you can. You want that to be a distant thing. In your past, if you were running through the woods and a bear was chasing you and you came out of the woods, but the bear was still right there in the woods, how fast would you keep running through the parking lot? Just as fast. Just because you made it out of the woods doesn't mean that you're out of danger yet. You're slightly closer to being out of danger, but you got to keep going. So I would attack it with a level of intensity saying I'm going to do everything I can. And you know what? Maybe I can't get all six months right now, but I can get half a month. I can get half a month with my next paycheck. And then I can stack on the next. I get one month. And then I can do that and I can do. And. And then once you get to that three months, you can go, okay. And then once you define for yourself, okay, is it three months, six months? Where's my. Once I get there, now I can say, okay, I no longer have to worry about my old self catching up with me because I can take care of my current self because I have the emergency fund. Now I get to start taking care of my future self. And that's when I move into step five. That's when I get to start building for my financial future, building wealth for tomorrow. But you got to make sure that you cover today and you don't let yesterday come back to get you. So whole question, what level of intensity?

[Ruby (Rebe)]

Don't stop. That's like keep going.

[Bo Hanson]

Every aggressive animal.

[Ruby (Rebe)]

That's a great perspective that I don't feel like we always cover in the detail that you just so nicely did that. The emergency fund is truly to keep you from having to go back to step three.

[Bo Hanson]

That's. It's really important.

[Ruby (Rebe)]

That's a really big milestone.

[Bo Hanson]

If you don't have an emergency fund fund, your only option.

[Ruby (Rebe)]

Yeah.

[Bo Hanson]

Is step three is to credit card loan.

[Ruby (Rebe)]

Yeah, that's. I love that. So, Leandra Joe, really good question. I hope that we gave you some encouragement to keep going and feel motivated to not only keep yourself from step. Keep yourself from step three, but also to get to the exciting part of step five as quickly as you reasonably can.

[Bo Hanson]

And, and can we just pause for a moment chat? Because I just think we so often sell. I don't know if you've gone to our Reddit. If you go look at the money, guys. There's so many celebrations of people in Moss. I hit. I hit 250. I hit a million. And it's, it's an amazing forum for financial. And by the way, if y'. All, if y' all wonder if we look at it. Yes, we look at. I love going to check out what's going on. And it's so fun seeing people at those milestones. But I don't want us to sleep on the fact that getting out of step three is a huge milestone.

[Ruby (Rebe)]

Yep.

[Bo Hanson]

Most Americans out there can't even get to zero. And getting to zero is just kind of like getting to the start. Most people live in that negative. So, Leandra, I want to celebrate you. That is something worth celebrating. That's something worth being so proud of because you've done something a lot of folks are not able to do behaviorally. It deserves applause and recognition. Good for you.

[Ruby (Rebe)]

Oh, my gosh. For sure. And this is a very small but sincere token of our celebration. And thanks. Since we answered your question, you get a Money Guy Tumblr. If you did not get one last time, just email winner, moneyguy.com all right.

[Bo Hanson]

Ruby, I know a lot of people. Some people might not have been here at the very beginning. If not, you should go check it out. Because we talk about how math is awesome, but there's another thing you said that's happening next week that I think you ought to remind the people of.

[Ruby (Rebe)]

Another thing that we didn't talk about?

[Bo Hanson]

No, no. We talked about math at the beginning of the show. So you people don't know that. But there's another thing happening next week. We're doing a special thing, but there's people who come in midstream that may not have heard about this special thing we're doing.

[Ruby (Rebe)]

You're not wrong, and I would love to share Again, Humphrey Yang is coming. I know we've heard from many of you that you love Money Guy and you love Humphrey Yang and that we would be a great team to create some great content. And that is exactly what we are doing next Tuesday. And since he was here on a Tuesday, we were like, you got to come on the live stream with us. So 10am Central, which we're so appreciative that you join us here every week anyway. But next week is going to be to be particularly special because Humphrey is going to be a guest and we're going to chat with him about wealth building, but also answer your questions from the chat. So it'll be Brian, Bo, and Humphrey offering their wisdom and perspective for you. So that's going to be really fun.

[Bo Hanson]

I'm stoked.

[Ruby (Rebe)]

All right, let's do one more. Eric says, why do you say to pay off student loans at 6% in your 30s if the S&P returns at 8% after inflation? I'm struggling wanting to pay off the 13k debt at 6% that I have just put a spicy warning label on. This one.

[Bo Hanson]

Yeah, this one's spicy.

[Ruby (Rebe)]

But I thought he makes a good point that depending on the interest rate of certain types of debt, like student loans, they are working against you. And we do consider them a problem. So how do you think through that?

[Bo Hanson]

How? Let's. Let's see if we can put our production team to the test.

[Ruby (Rebe)]

Okay.

[Bo Hanson]

There's a slide that we use all the time. That talks about different types of debts that you have and at what interest rates. You should prioritize them. We'll see if they can get that pulled up. Because one of the things that's interesting is, in our opinion, not all debt is created the same. So we have different rules. Oh, my goodness. That's close. That. Look, production team, I'm going to give you a C plus forever. You got almost.

[Ruby (Rebe)]

They, like, took it down immediately. They were like, let me try again.

[Bo Hanson]

That was one of them. That's student loans. But there's one that has student loans and then has a column for auto loans and has credit card debt. And so all. Not all debt is created equally. And so let's start kind of at the beginning. Credit cards. That's like an. It's like a zero tolerance policy. We say here at the Money Guy, credit card use is okay. It's totally fine to use credit cards. If you listen to our survey show, we're going to tell you what percentage of financial mutants use credit cards. But we say credit card use. Okay, Credit card debt. No way. We'll also tell you what percentage of financial mutants carry credit card debt. By the way, it's not zero. So tune in to find out what that number is. So credit cards aren't great. Well, then we say, okay, auto loans. Well, we know that when it comes to buying autos, we want to subscribe to 23 8. 20% down. Don't finance for any more than three years or 36 months. And it can't be more than 8% of your. Of your gross income. All right? If you're inside of 23 8, then auto loans are going to have a priority. If your auto loan is over, you know, 10%, don't prioritize it in your 20s. If it's over 9%, prioritize in your 30s, so on and so forth. Well, then we come to student loans. And student loans is honestly, it's a hard one, right?

[Ruby (Rebe)]

It's the spiciest one.

[Bo Hanson]

It's a really, really hard one. And this is Eric's question. Hey, I got student loans that are. And did Eric say he's in his 30s, or is he just postulating so in their 20s thinking about the future?

[Ruby (Rebe)]

He made it sound like he's in his 30s.

[Bo Hanson]

Currently in his 30s. Okay. I got student loans that are 6%. Why would I prioritize paying them off if I know that the S and P can likely produce 9% annualized, depending on what time frame you look at? Well, the way that we came up with our like payoff metrics was based on the wealth multiplier. And for those of you that aren't familiar, the wealth multiplier is this idea that suggests that for a 20 year old, $1 can turn into $88 by the time they retire, but it decreases through time. So by the time you get to 30, that $88 now becomes $23. Well, a magical thing. I say magical, a disheartening thing happens in your 30s. You start your 30s with a 23 time multiplier, but by the time you get to 40, it drops down to 7. Now don't mishear me. 7 is still amazing and still awesome. But there is a reality that being able to turn $1 into 7 is different than being able to turn $1 into 23. So our dollars are becoming less and less and less valuable. Well, as we're thinking through these rules, what we're thinking is probably true about financial mutants is that in your 30s, oh my goodness, look at this.

[Ruby (Rebe)]

They found illustration.

[Bo Hanson]

They are not the fastest, but they are good.

[Ruby (Rebe)]

They're the most accurate.

[Bo Hanson]

They are good. Yeah. So we say that four student loans and you're, if you have them above 20, above 6% in your 20s, you should prioritize them above 5% in your 30s, you prioritize above 4% in your 40s. So if you have student loans at 6% in your 30s, we would agree with you, Eric, that you should prioritize. Now, this is not what I'm saying right now. This is one, because Brian's not here, I can say this. So lean in close. Student loans are, are really interesting. And a 31 year old is different than a 39 year old and we recognize that. Right? So you have to define inside of your financial life, inside of your financial plan, at what level you attack those goals. Because here's what we, here's what if you listen to our language very carefully, I never say something like this. If you are in your 30s and your student loans are above 5%, you should stop everything and pay off your student loans. It's not what we say. We are very specific in this. We say it might make sense to prioritize paying off your student loans. What that means is that your student loans are kind of hanging out somewhere near that step three. They might not be actually high interest debt depending on where you are in your 30s. But rather than you just making the minimum payment, you may want to begin thinking through, okay, I don't need to just make the minimums because now this interest is becoming more punitive than my dollars are going to be able to earn on the other side of the equation. Right. So I want to begin focusing more on it in my 30s at this rate. Same thing in 20. Same thing in your 40s. So this is, this is one of those areas where personal finance is extremely personal. Now, if you have student loans and they're above 6% and you are in your 30s, I don't think it's crazy for you to have a strategy to figure out how you knock those things out more quickly than you would have been knocking them out in your 20s. That's something that accelerates as you move through time. But you have to define for you what is the right strategy based on where you are in your financial life.

[Ruby (Rebe)]

Yeah, no, that was a good one because personal finance is personal. But yeah, like I just doing the minimum payments when you're in your 30s might not be the move. So you have to think about that. And that's why we have these benchmarks and rules to help you optimize. So good answer, Bo. I appreciate that.

[Bo Hanson]

Yes.

[Ruby (Rebe)]

All right, Remember, next week, 10am Central, Humphrey Yang is coming. And remember to subscribe not only to see when we are going live with Humphrey, but also to see see when the Financial Mutant survey show.

[Bo Hanson]

It's coming.

[Ruby (Rebe)]

It is a good one and really only the first of the Financial Mutant shows and it is a good one. So that's coming soon. Be sure to subscribe and watch your email. If you took the survey, we'll be letting you know when it's out. I'm very excited.

[Bo Hanson]

That's my line. That's what I say.

[Ruby (Rebe)]

I said very.

[Bo Hanson]

Oh, okay. She added a superlative. That's okay.

[Ruby (Rebe)]

You can say. So excited.

[Bo Hanson]

An adjective. Is that an adjective or. I don't know. Guys, we, we could not do this show without you guys. So thank you so much for showing up. Thank you guys so much for being on our socials. If you've not checked out tangent time.

[Ruby (Rebe)]

Why didn't we talk about tangent time?

[Bo Hanson]

If you haven't checked out tangent time or you don't know what tangent time is, stay tuned. It's on socials. See if you can go find it. We'll be talking more about that super fun, brand new thing that we started doing. We love that we get to do this. Thank you so much for letting us us be part of your financial journey. If you keep showing up, we'll keep showing up. I'm your host today, Bo Hanson, along with Rebe and the rest of the Money Guy Squad Money Guy Team out the Money Guy show is hosted by Brian 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.