X% of Americans Don't Have $1,000!

Summary

Money Guy Show: X% of Americans Don't Have $1,000!
Release Date: March 10, 2025
Hosts: Brian Preston and Bo Hansen

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I. Introduction: Addressing a Critical Financial Shortfall

In the March 10, 2025 episode of the Money Guy Show, hosts Brian Preston and Bo Hansen tackle a pressing financial concern: the alarming statistic that a significant percentage of Americans lack a $1,000 emergency fund. This episode delves deep into the implications of this shortfall and offers actionable strategies to help listeners build their savings effectively.

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II. The Alarming Statistics: A Nation Unprepared

Bo Hansen opens the discussion by expressing optimism about improving the dire savings statistics. He states, “I really believe deep down in the fiber of my being that we can improve this” (00:43). Despite this optimism, Brian Preston presents a stark reality: according to Bankrate, approximately 60% of Americans struggle to come up with $1,000 for emergencies (01:36).

Bo reflects on previous data trends, noting a slight decrease from 60% to around 56-57% post-pandemic, suggesting some progress. However, recent surveys indicate a regression, with 59% of Americans again unable to secure $1,000 (02:03). This regression underscores the persistent challenge in financial preparedness among the populace.

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III. Strategies to Build the Essential $1,000 Emergency Fund

Recognizing the gravity of the situation, Brian and Bo shift focus to practical solutions aimed at helping listeners bridge the savings gap.

A. Auditing Subscriptions

Bo emphasizes the importance of reviewing and auditing all personal subscriptions. He uses the example of cutting cable and replacing it with multiple streaming services, highlighting how hidden costs can drain finances (03:30). Brian adds a practical tip: leveraging credit card benefits to access subscriptions at reduced or no cost, such as using an Amex credit card to obtain a free Walmart Plus subscription (04:07).

Notable Quote:
Bo Hansen: “If you are going to participate in [subscriptions], find the best ways to do it. One, cut down on the ones that you don't need and two, if there are less expensive ways or hacks, make sure to.” (04:23)

B. Meal Prep and Affordable Grocery Shopping

Brian introduces the concept of meal prepping and shopping at more affordable grocery stores as effective ways to save money. He references his own book, Millionaire Mission, discussing the "$200 a month challenge" and the benefits of conducting a pantry audit to prevent unnecessary purchases (03:30 & 05:43).

C. Pantry Audits to Prevent Overbuying

The hosts share personal anecdotes about the consequences of not conducting pantry audits, such as overstocking condiments while neglecting essentials like mayonnaise. This practice ensures that grocery spending aligns with actual needs, reducing waste and conserving funds (05:43).

D. Tracking Expenses and No-Spend Challenges

Bo advocates for meticulous expense tracking and introduces creative methods like the "no-spend challenge." This involves restricting discretionary spending for a set period (e.g., from Monday to Friday) to accumulate funds for an emergency reserve (06:22).

Notable Quote:
Bo Hansen: “Maybe you should try something creative like a no spend challenge... to see if we can get that thousand dollars built up.” (06:22)

E. The Importance of Budgeting

Brian acknowledges his personal aversion to budgeting but underscores its necessity in gaining financial control. He emphasizes living below one's means as a foundational principle for financial independence (06:44).

Notable Quote:
Brian Preston: “If you're not disciplined living on less than you make, you'll never have the opportunity to own your financial life.” (06:44)

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IV. Emphasizing Financial Discipline and Long-Term Planning

Bo and Brian stress that initial financial discipline paves the way for long-term financial freedom. By adopting small, consistent changes in spending habits, individuals can master their finances and focus on pursuing their passions rather than merely surviving financially.

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V. Listener Q&A: Navigating Complex Financial Scenarios

The second half of the episode features a Q&A segment where listeners pose personal financial dilemmas. The hosts provide tailored advice, incorporating their financial order of operations framework.

A. Building a House with Variable Income (10:51)

Listener Question (Foolish Mortal):
Considering building a house in the fall, with plans that a spouse might reduce work hours upon having children, what income should be used for the 25% gross income rule for housing costs?

Hosts' Response:
Bo outlines the importance of adhering to the 25% rule to prevent financial strain from high housing costs, especially when future income might decrease. He recommends using the reduced income estimate to ensure affordability. Brian adds the significance of scenario planning through the "3D Plan"—Dream, Down-to-earth, and Doo-doo plans—to account for various potential futures.

Notable Quote:
Bo Hansen: “When it comes to your housing costs, you need them not to exceed 25% of your monthly gross income...” (11:24)

B. Prioritizing Mega Backdoor Roth After 401k Match (17:23)

Listener Question (Alec M.):
Is it advisable to prioritize Mega Backdoor Roth contributions after maximizing the 401k match, especially when behind in the after-tax bucket and aiming for FIRE (Financial Independence, Retire Early)?

Hosts' Response:
Brian and Bo explain that Mega Backdoor Roth is a later-stage financial strategy and should not supersede foundational steps like securing the employer match. They advise that maintaining a balanced approach aligned with one's financial goals and current stage is crucial.

Notable Quote:
Bo Hansen: “Mega backdoor Roth... comes much later in the financial order of operations.” (19:38)

C. Converting a Home to a Rental and Roth Maxing (26:10)

Listener Question (Joshi J.):
After converting a first home into a profitable rental property, is it out of order to maximize Roth contributions?

Hosts' Response:
Bo reassures Joshi J. that diverging from the prescribed order is acceptable based on individual circumstances. He emphasizes leveraging the positive cash flow from the rental to catch up on Roth contributions and recommends using available resources to identify and fill any financial gaps.

Notable Quote:
Bo Hansen: “What we love to see... you have a lot of free capital and free liquidity. I would take a look at the financial order of operations and see where you have holes.” (26:32)

D. Managing HSA Funds When Changing Health Insurance (31:52)

Listener Question (Matthew M.):
What happens to an HSA fund if one leaves their company's health insurance to join a spouse's plan upon having a baby?

Hosts' Response:
Bo explains that HSA funds remain yours regardless of employment changes. If switching to a non-HSA-eligible plan, contributions to the HSA cease, but existing funds can still be used for medical expenses or continue to grow tax-free. He shares a personal anecdote to illustrate the flexibility and benefits of maintaining an HSA.

Notable Quote:
Bo Hansen: “You can leave your HSA where it is. If you change health plans to one that's not HSA-eligible, you can still use the funds but cannot make new contributions.” (33:01)

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VI. Conclusion: Empowering Listeners with Financial Knowledge

Wrapping up the episode, Brian and Bo reinforce the importance of financial literacy and proactive planning. They encourage listeners to engage with their resources, such as visiting MoneyGuy.com for tools like the home affordability calculator and the "Know Your Number" course. Additionally, they invite listeners to participate in future shows by submitting questions and sharing their financial stories.

Final Remarks:
Bo emphasizes the uniqueness of each individual's financial journey, advocating for flexible yet structured approaches to building wealth. Brian highlights the value of transparency and community engagement, ensuring that the Money Guy Show remains a trusted resource for financial empowerment.

Notable Quote:
Bo Hansen: “No two paths and journeys are the same. The financial order of operations is a probabilistic path to success, but it’s adaptable based on your unique circumstances.” (26:32)

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Resources Mentioned:

• MoneyGuy.com Resources:

  • Home Affordability Calculator
  • Know Your Number Course
  • Free Financial Order of Operations Guide

• Courses and Books:

  • Millionaire Mission by Brian Preston
  • Financial Order of Operations

• Upcoming Episodes:

  • Future Q&A sessions addressing listener questions
  • Episodes focusing on specific financial strategies and personal stories

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By addressing both the statistical concerns and providing tangible strategies, the Money Guy Show equips its audience with the knowledge and tools necessary to achieve greater financial stability and confidence. Whether it's through managing subscriptions, optimizing grocery spending, or navigating complex financial decisions, Brian Preston and Bo Hansen offer a comprehensive guide to overcoming financial hurdles.

Transcript

[Brian Preston]

This episode is brought to you by Lifelock. It's tax season, and we're all a bit tired of numbers, but here's one.

[Bo Hansen]

You need to $16.5 billion.

[Brian Preston]

That's how much the IRS flagged for possible identity fraud last year. Now here's a good number. 100 million. That's how many data points Lifelock monitors every second. If your identity is stolen, they'll fix it, guaranteed. Save up to 40% your first [e-mail] podcast terms apply. It's that time of year where Bankrate reminds us of the horrible stat of how many people can come up with a thousand bucks.

[Bo Hansen]

Brian, I am so excited to talk about this because I really believe deep down in the fiber of my being that we can improve this. And I think that every single time we turn on the cameras, every time we do this, we are helping change this statistic a little bit, even if the numbers don't necessarily substantiate that.

[Brian Preston]

I love the optimism because, you know, we're always glass half full optimistic. But if you just take a stroll down memory lane and actually look at the historical data, guys, I mean, if we were setting a bus schedule, you would probably have great customer service ratings on how consistent you are. That bus is always coming in on time. Because if you, you can set a clock to the fact that Americans, according to Bankrate, it's right around 60% of people have trouble coming up with $1,000.

[Bo Hansen]

Now, we thought that coming out of the pandemic, like coming out of 2020, 2021, we saw the numbers decreasing, right? Like it was 60% and then it went down to 56%, 57%. And we thought maybe the general public is catching on. They're saying, you know what, having an emergency fund makes sense, making sure that I can cover a dis, But I don't know that that's what has been reflected in this most recent year.

[Brian Preston]

I do want to set the stage because this has happened twice now as we show this data. This is kind of like a golf score. Lower is better because that means people can actually come up with the money. So if we are in 2024, the number was 56%. We're shooting for this number to go below 56%.

[Bo Hansen]

And yet when Bankrate did this survey last year, they found out that 59% of Americans, it's back up to almost at 60, could not come up with $1,000 for an emergency. And that's a devastating place to be because there are all kinds of unknown unknowns that can come our way. And in the today's day and age, it's just not hard to have a thousand dollar emergency happen to you.

[Brian Preston]

Well, let's, let's do better than that because I hate taking, I like turning bad news. Let's take these Lem definitely turn in, eliminate or find the silver lining. We wanted to kind of go ahead and equip you with. How do you come up with 1000 bucks? How do you make sure you're not in this bad situation? First of all, you're watching the money guy and likely you've subscribed to the money guy show that already. I'm just assuming that's the 41% moving.

[Bo Hansen]

In the right direction.

[Brian Preston]

But just because of statistical numbers and we're kind of good at math, not public math, is that you know people, you know people that need help with this. So we put together a list of some of the latest and greatest things that you can save money on.

[Bo Hansen]

Here's the first one. Maybe do a review or an audit of all the subscriptions that you're paying for. You know, back in the day we used to cut our cable so that it would save us money. But then we cut our cable and we replaced it with YouTube TV and then Hulu and then Paramount plus and then we have Netflix, then we have Amazon prime and then we have on and on and on and on.

[Brian Preston]

Taylor Sheridan. Who would have thought this guy was gonna make me go figure out a hack so I could get the Paramount? I didn't even know what Paramount network was.

[Bo Hansen]

Oh, you do now though.

[Brian Preston]

But here's a good. Let me go ahead and give you guys a clue. I found out that my Amex subscript, you know, my Amex credit card lets me get a free wall Walmart. Okay, but we're doing a live show. But you keep your, just keep your audio on. It's okay. Echo's good. But so Walmart plus where they're trying to compete with Amazon, you can get a free subscription of that through Amex.

[Bo Hansen]

So they're even reimbursement.

[Brian Preston]

And then if you have Walmart, you get Paramount free.

[Bo Hansen]

So if you are going to have subscriptions, if you are going to participate in that, and that is something that you find value and adds utility to your life, find the best ways to do it. One, cut down on the ones that you don't need and two, if there are less expensive ways or there are hacks around how to get it for a lower price, make sure to. That's one way to potentially come up with $1,000 we put on here, the.

[Brian Preston]

Content team put meal prep. Cheap meals shop at cheaper grocery stores. I wanted to steal some of the thunder that came from Millionaire Mission, because on page 42, I have the $200 a month challenge. And one of the things, because it's kind of an echo of what we did on the content here, is that I recommended doing a pantry audit. Do you know how many times now look at the house. Right now we're without mayonnaise and the whole family's ticked off because I bought a deli sandwich from Publix this and they didn't put enough mayonnaise on there. And then you needed some more mayonnaise. And they were like, can we get. And I went and opened the fridge and I was like, oh, I guess the pantry audit was too effective because we have no mayonnaise in the house. But there was a season where we had like two ketchups, three yellow mustards. And it's because you go to the grocery store, you know, you're cooking a meal and you just buy condiments. You buy other things without doing an audit. First of, why should I go buy more of this if there's already this stuff sitting in the pantry or in the fridge?

[Bo Hansen]

Yep. It's little decisions like that. Maybe it's just tracking your expenses if you're not watching where your dollars are going and being intentional that it's not going to be surprising that all of a sudden you find at the end of every pay period or end of every month, you're having a hard time just making the ends meet because money is running away from you. So maybe you should try something creative like a no spend challenge. Hey, here's what we're going to do. We're going to buy groceries on Monday, on Sunday, and then from Monday to Friday, we're not going to spend any money. No out to eats, no coffees, none of that, just for a season to see if we can get that thousand dollars built up so that we can begin moving along in the financial order of operations, building towards a fully funded emergency fund.

[Brian Preston]

Look, I hate budgeting and doing all that stuff, but you have to do it initially. If you're not disciplined living on less than you make, you'll never have the opportunity to own your financial life. So lean into these little things in the beginning so that you actually can truthfully be the master of your time that much sooner and work because you want to, not because you have to.

[Bo Hansen]

And Brian, you've already said this. One of the Things that you are already doing. One of the decisions that you've made to move you in the right direction of making sound financial decisions is just tuning in to this financial show, just listening on how you can do money better. And we want to make sure that we continue to equip you to be able to do that. And one of our favorite ways we get to do that is every Tuesday morning at 10am we want to load you up. Whatever financial questions you have, we want to speak to those so that you can indeed do money better. So right now, we have the team out in the wings collecting your questions. If there's something you want us to weigh in on, make sure you get it in the live chat right now. So with that, creative director Ribe, I'm gonna throw it over to you before.

[Brian Preston]

You jump into question.

[Bo Hansen]

I'm gonna throw it back to Brian.

[Brian Preston]

No, no, no. I wanna talk to Ribi.

[Ribi]

I wanna throw it back to Brian.

[Brian Preston]

I wanna talk to you. Enough you already. By the way, I'm on five hours of sleep. So this is you getting five hours of sleep, Brian, tonight.

[Bo Hansen]

That's a good.

[Ribi]

That's exciting.

[Bo Hansen]

Five.

[Brian Preston]

Five.

[Bo Hansen]

Brian's a good Brian.

[Brian Preston]

Spicy title. We got a lot of spicy comments over the. The foods changing last week.

[Ribi]

Oh, yes.

[Brian Preston]

Look, I just want to be a moment of transparency. We knew that this was like an April 1st type thing. And that's why I love that I came. I don't know if it was Nick or Megan. They did the dot, dot, dot and then wrote course is like the first part. They kind of finished the sentence that.

[Bo Hansen]

Was supposed to be the delivery.

[Brian Preston]

Yeah, it's. Look, we get it. We don't. Do we try to make clickable, not click bait. We saw your comments, but we just realized we're not changing. We're not. We're not going. Some of you guys, I think you thought we'd gone a whole different way.

[Bo Hansen]

What's it. We went to the darks. Isn't that does. We went on the dark side. Isn't that what they say in the Star wars world?

[Brian Preston]

Something like that.

[Bo Hansen]

Something like that.

[Brian Preston]

You know who said that? Bubba Fett.

[Bo Hansen]

Bubba Fett.

[Brian Preston]

No, I'm just kidding. That's a bo ism right there. Almost putting Star Trek terms into Star Wars. And then by the way, today. What is today, Ribi? What is something that's got us excited about today?

[Ribi]

Well, yes, if you missed it last week, Brian is totally right to bring this up. We had a title that said we're changing the foo. And while the nine steps are the same. We want to come clean the course, the food course, everything that's in it, how it's presented, it is completely brand new, it's updated, and it is launching today. You can go purchase it and start watching and reading today. So if you go to learn.moneyguy.com you'll see all the information on how to get your hands on that new food course. And if you've bought the food course in the past and gone through the old version, you will be granted the new one today. So you can watch for emails about that, or you can log into your old course with your username and password and you will see that show up at some point today. You may already have it. The team's working on that in the background. It'll happen today, so go check that out.

[Brian Preston]

Another thing, just being completely transparent. I felt like because we showed a before and after we did that in the show me, I felt like my belly was, practically speaking in the first one. So it's also fun to see the transformation of how much belly fat I've lost. And then the courses, well, it's just that, I mean, I was amazed. So this course is because the first course was good. I don't want to take anything away from it, but I gotta tell you, the content team bo you, I don't know if you were embellishing it, but it almost brought a tear to your eye that just to see we have reached a level of content creation and production value that this is kind of what we aspired to. Because, you know, the thing is, when you start building something, you get to a point, you make the best version of what you can do and then you hope that it reaches the goal. But something is better than nothing because this message is so strong, it needs to be out there. This one is the culmination. And it just, it really goes in places that excites me.

[Bo Hansen]

I agree completely.

[Ribi]

Love it. Well, on that note, we do have a list of questions piling up here on my screen, so we're going to kick it off with a question from Foolish Mortal.

[Bo Hansen]

I see what you did there.

[Ribi]

It says, good morning, Money guy team looking to build a house this fall. And I know you say 25% of your gross income as part of our housing rules. The trouble is, my wife will likely reduce her work at some point in the future when we have kids. What income should we use for that? 25%. It would be safest to use just my income, but we'd like a nicer house. Would saving up some money and then recasting before she reduces her income be a good strategy?

[Brian Preston]

I think this is a valid question now.

[Ribi]

Yeah, yeah, it's the right question to be asking.

[Bo Hansen]

It shows that you, you are a financial mutant of way you're thinking, because. Okay, let's. Let's get sort of back to the basics. Why do we suggest and why do we implement the rules that we do? And one of our rules when it comes to home buying, by the way, if you can go to moneyguy.com resource, we have a whole home buying checklist. We have a home affordability calculator. If you, like, foolish, are kind of in this area trying to make this decision. One of the things that we say is that when it comes to your housing costs, you need them not to exceed 25% of your monthly gross income. Why do we say that? Because we know that life is expensive. Because in addition to what you're paying for housing, you might have an auto payment or student loan payments. You got to pay for utilities, you got to pay for groceries, you got to have clothes, you got to have gas in the car, and this and this and this and this. And what happens is if you allow your housing costs to be too high, and all of a sudden now your housing costs are 35, 45, 50% of your gross income, well, you begin to recognize that you crowd everything out. Not only are you crowding out the things like necessities that you have to have, like gas bills, utilities, but then you also crowd out your ability to build for the future. You crowd out your ability to save in the way that you should be saving. So the rule is not there so that you can say, okay, here's what I do. I'm going to go buy the house right now, today, and it's going to satisfy 25%. I can check it. If you know for sure that your wife is going to take a step away and you know that the income is going to go down, you as a financial mute, need to think through, okay, when I'm in that moment, when I'm living that life, and that is my reality, what's our income going to be? And if we build this house and we take out this mortgage and we have this much flowing out to a mortgage every single month for the next 360 months, am I going to be happy that I made this decision? Or is it going to stress me out and cost me future financial goals that I may have? So when I hear this, Brian, I'm immediately thinking, I would do it off of the reduced income amount, not the present day income amount.

[Brian Preston]

Well, I've got. Because I want to give some life advice and then boil it back down to I always get nervous about saying any of the bullying words, but to some things, actionable things to do. The first thing I wrote down was children. Boy, children are a blessing. But do they make life more or less stressful, especially when they're babies? Bo, you have a little one in the house.

[Bo Hansen]

I'll take that one. Alex. What's more for 10 million?

[Brian Preston]

So definitely the alligator is eating the more. If you're looking at greater than or less than. So it's definitely more. And you think about the other thing. When you're dealing with stressful situations or moments in life, big life changes. Margin can be the peace of mind that gives you flexibility, lets you then not have to make desperate decisions. So having controlling your fixed expenses becomes so much more important than going on the hope and the prayer that yes, we like nicer things, don't we all? And then hoping that life works out. And that's why my transition point is here's the first actionable thing to do. I would definitely put on your 3D glasses and do the 3 plan. The 3D plan meaning that you go put your dream plan. Maybe you know, your wife quits working, but you get a big promotion or you have some new income stream that comes your way. It's all hunky dory and everything works out beautifully. There's the down to earth plan. This is what you think happens. Your wife's income goes down, goes away or down for a period of time. Your income stays about the same, you deal with it and then have the doo doo plan. Don't skip the doo doo plan. You've got to play up the fact that maybe, you know, bad things happen all at once. It rains, it pours, maybe not only does your wife, you know, take some time away from working, but you also either get demotion or your income goes way down. Plan accordingly so you can kind of see what those scenarios are going to look like. And then here's the three things I quickly wrote down on the levers I think you can control. You can either save more right now, hyper focus on saving more so you can put down a larger down payment so that the 25% is still more functional. You can delay the decision until your finances catch up to where you can truly afford this. And some of these life events have settled in. And then the other thing is, is, and this is the one. This, this is the cold water one. I don't like this one, but I have to get you all three of them is you need to adjust your expectations. I mean, because I just don't want you. And that's why I like doing the 3D glasses plan is it gets let you look at all three of the scenarios across the spectrum and you kind of choose what works out best for your family.

[Bo Hansen]

I think it's great.

[Ribi]

Wonderful. Well, foolish mortal, thank you for that question. It was honestly a great question to be asking in your season of life. So thanks for being here.

[Brian Preston]

Can I have one more sidebar?

[Ribi]

If you must. Yes.

[Brian Preston]

I don't know if they can hear us. I have to be careful because the studio, you know, even though it's a great sound studio, the content, I mean the admin team can hear us right across the door.

[Ribi]

What are you going to say?

[Brian Preston]

We almost had a mutiny if we offered to do so. That's why I've realized we're going to have to figure out how we share whether we're doing Tumblrs or not. Because we went a little rogue last week and I thought it was all good fun.

[Bo Hansen]

Yeah, we got in trouble for it.

[Brian Preston]

We got in trouble.

[Ribi]

We had some inventory things going on behind the scenes.

[Brian Preston]

We're working on it.

[Ribi]

It's fine.

[Brian Preston]

It was one of those team meetings where it's like we're cutting out M and Ms. And we're doing this and even the tumblers came up in the team meeting. So I want y'all to know this reached us bringing that up. Made it all the way up into the team meeting last week. So we're working on it for you guys. So I apologize, we don't have tumblers this week to give away.

[Bo Hansen]

But you know, we do have great financial information. Always give away an abundance.

[Ribi]

Abundance.

[Brian Preston]

I like that. Optimist. Glass half full.

[Ribi]

Speaking of, we have a question from Alec. M. Up next. It says, does it ever make sense to prioritize Mega Backdoor Roth if available after the 401k match? If you're behind in your after tax bucket. I have the ability for a Roth 401k but prefer the flexibility. I want to pursue fire. What would you say to Alex?

[Brian Preston]

Oh, we'll see. I just gave a lot of context here.

[Bo Hansen]

Alec. We're okay. So we gotta. All right, you asked.

[Ribi]

You have to need some more information.

[Bo Hansen]

We gotta unwind it a little bit. So let me explain what Mega Backdoor Roth is really quickly. When you contribute to a 401, most people think there are only two ways to contribute. You can do pre tax contributions or you can do Roth contributions. There actually is a third way to contribute to a 401k called after tax contributions, which are available to some plans. You don't get a tax deduction. You put the money in the after tax bucket and then that money grows tax deferred. And when you go to pull it out, you pay taxes on the earnings, you don't pay tax on the contribution you put in. That's the after tax bucket. Well, some plans will allow you to convert those after tax dollars to Roth. Well, because they're after tax, it's completely tax free conversion. You can either do it in plan and it sits in the Roth bucket in your 401k or you can do a conversion and roll it out to a Roth ira. So it's a way to do some mega backdoor Roth. It's super, super exciting. If you think about like section 415 limits being at like $70,000 a year, a lot of folks can do 25, 30, $35,000 in this mega backdoor. So that's what the mega backdoor is. Now Alex said, is it ever okay to do the mega backdoor after the employer match? And I feel like what we just did, Brian, is we skipped from the very beginning of the financial report of operations all the way to the very end. Do you have, can you hold the, can you hold the thing up for me?

[Brian Preston]

Sorry, I'm five hours.

[Bo Hansen]

So employer match is a step two, Brian, that's like a free money thing. I don't think in any circumstance ever. Mega backdoor. He asked about after tax brokerage. It does not come in after step two. It comes in much later in the food.

[Brian Preston]

It's probably more of a step seven.

[Bo Hansen]

That's right. It's a much later thing. So the question is, should I ever do it right after employer match? I would argue there are other things that you ought to be doing after employer match. Now, once you kind of get through step five, Roth IRAs and HSAs and then you get to step six, maxing out your employer sponsored retirement plan and then you get to step seven. Now how does Alec decide, okay, should I do mega backdoor? Do I prioritize that or do I prioritize after? Because he said, hey, I feel like I'm behind in the after task. I feel like I'm behind in the task.

[Brian Preston]

He gave us both, he kind of, he pulled this thing tight from both sides in the fact that if you're behind but then you're also part of the fire movement. You're going to have to hyper focus. Did he say he was behind or are we making that part up?

[Bo Hansen]

He said he didn't say that because.

[Brian Preston]

The question is dropped off the screen.

[Bo Hansen]

He said if you're behind in the aftertaste, tax bucket.

[Brian Preston]

But after tax bucket, that makes more sense.

[Ribi]

Specifically.

[Brian Preston]

Yeah, okay. Because after tax bucket, the reason we like for anybody who's part of the fire movement or fine movement, the next endeavor is that you're probably going to need some type of bridge account that replaces some of that income that you're no longer getting with your earned income. And the easiest bucket out of the three buckets when we're talking about tax deferred, tax free or after tax that after tax bucket. So I can understand why somebody feels like, hey, I've got all these. And by the way, this is why this is a step seven element is because it's all these earlier ones are either to keep your life out of the financial ditch, avoid high interest debt, get the free money when you get to step six and then seven. A lot of this was tax advantage. It was driven by saving money on taxes so you could build for the future when you get to step seven, now you're saying, how do I need this money if I'm leaving the workforce early? I need to probably account for that. So I think, Alec, what I think about in your situation is if you know you're leaving the workforce early, you've got to start modeling what does that actually look like. So you can begin with the end in mind. And that's why if you go to learn.moneyguy.com we have the know your number you can actually and what's, what's cool about the know your number course is you can put in the different accounts, the different structures and you can see how much you're going to need to save and build for. You can change inflation rates, you can change investment return rates, play around with it and then you can quickly decide you can squeeze the balloon on different accounts because maybe it's a combination of both. Because I would love, I love where your mind's at because you're going to love Roth money over the long term because that tax free growth opportunity is priceless. There's a reason the government is restricting how much you can put into these accounts. So you'll definitely want to leverage and take advantage of that opportunity. But you still need that bridge account to get you to the normal retirement distribution ages, whether it's 55 for 401ks or 59 and a half. By the way, 55 for 401ks is only if you depart while you're working for that company. So you might be stuck at the 59 and a half completely unless you annuitize it or do some other, you know, planning structure. But you got to, I love where your mind's at, but you've got to do, there's, there's some work homework and these variables, like I said, they get there. It's like a fingerprint. It's going to be different for every person. I look at your structure, I look at your goals, I look at your desires. But hopefully I gave you enough of the elements so that you can start figuring out how to piece this together yourself.

[Bo Hansen]

I'm just gonna throw one other thing on there because we have some like wicked smart listeners and fans out there in the audience and you say, oh well, you could, no, you could do mega Backdoor and there's still a mechanism through which you can access those dollars prematurely. We did a great show and I'm gonna look riding team. I'm looking at you guys because I don't remember the name of it. We did a great show about like ways, like unconventional ways to retire early. That was not the name of it. If you search that on Google you will not find it. 3 Ways to Retire early.

[Brian Preston]

That's a much better title.

[Bo Hansen]

We walk through some of these unique strategies. If you are part of the fire move, might want to consider. So that's a really quick little YouTube or Google search that might also help you as you try to define. Okay, what makes the most sense for me. Last thing I'm going to throw in here, Alec, this is a great example of one of those times where you're navigating into some more complex waters. Okay. The decisions I'm making today will likely have long term impacts on how I retire and what fire looks like and when I leave the workforce and how I'm going to access those dollars. This is a prime example of when it might make sense to realistically take the relationship to the next level. You've only likely done this once. If you work with an advisor who's counseled folks in this same stage of life, there's a really good chance they've done this tens, if not hundreds of times. So it might be great to get a second set of eyes, a second opinion. So we would love for you to consider taking the relationship the next level if you're at the stage where that might make sense. For you.

[Brian Preston]

I'm done with that one. But I did have something else to say.

[Ribi]

I saw your. I was like, is he gonna say something?

[Brian Preston]

I know. I was thinking, I'm looking over at the writing team, you know, Making a Millionaire. I was sad because, by the way, hopefully we put your expectations. This is right now an every other week show. But, man, I was kind of like. I was like.

[Ribi]

I think you were the one who.

[Brian Preston]

Was critical of Making a Millionaire was.

[Ribi]

Out this Monday, too, about it only being every other week.

[Brian Preston]

You guys, the first episode. Thank you. I mean, it has done very well. We were very pleased with it. And I think y'all could see that it's something special that we're doing with the people who take the opportunity to be as transparent as they are and come on our show. So I would love. Because we're trying to mix it up, we have our second episode. Is it okay if I preview that? The second episode, what their vocation is. Okay. I'm trying to make sure that after the camera cuts off, y'all go, what the heck are you doing, Brian? So we have a teacher who graciously came on and we were able to really help him out with a debt issue. That was really cool. So you guys can see that we're trying to mix it up. And one of the things I was thinking for the writing team, I would like to have a fire or fine, you know, type person on the show at some point. That would be a cool thing to kind of address some of the things that Alec just covered that. And so we are. And that's why, if you want to apply to being on Making Megan's Gonna Kill Me, because we've already had like a thousand people apply. But what. What's the.

[Bo Hansen]

What's the website, moneyguy.com apply if you're interested in potentially telling your story and having us kind of do a deep dive on your financial circumstance. It's a lot of fun. Oh, it's awesome.

[Brian Preston]

Now you. Now you'll get a million. I mean, a thousand and a half. I said a million and a half.

[Ribi]

Great. All right, next question. Ready for it?

[Bo Hansen]

Yes, ma'am.

[Ribi]

Joshi J. Says, I've recently converted my first home into a rental property. It is a highly cash positive endeavor, which is great, but I've never maxed out my Roth. But this will be the year. Did I do this out of order? What do you think?

[Bo Hansen]

Yes, but you don't know that's not. You don't know that. Here's what I think is interesting. And this is what I love about wealth building and building towards financial independence is that no two paths and journeys are the same. And that's what's awesome. There are a lot of financial folks out there who will tell you, hey, the only way to build wealth is to do this. And you have to pay this off in this time and you have to do this thing and this thing. We recognize that it's a little more fluid than that. What we tried to construct in the financial order of operations. Bravo, hold the thing up. What we tried to construct for you is a path that probabilistically will have the highest likelihood of successful outcome down the road. And so one of the things we love to see young people just starting out do is max out Roth IRAs and fund HSAs. It's why we put it in step five. But if you're in a situation where, okay, you bought this first house and you got into a house because that was a high level priority for you, and now you have decided that you're going to move into a new house and that house has turned into a rental property. That rental property is very positive in the cash flow. That's a wonderful thing. That's not something, oh, how dare you have gotten it out of order. But I would encourage you, now that you're at this stage, you probably have missed some opportunity. There probably are some years of Roth contributions you won't get back. So you can't go back in time and get those. What you can do is not miss this year, and as of right now, you can technically not miss last year. So if you've not been funding that bucket, now you have this, like, grotesquely positive cash flow coming to this rental property and you have tons of free capital and free liquidity. I would take a look at the financial order of operations. You can go to moneyguy.com resources and download your free copy. And I would say, okay, where am I? Where do I have holes and where do I need to go start to bolster this up so that I can make up for getting a little bit out of whack.

[Brian Preston]

I think you're just the bad cop.

[Bo Hansen]

That was such a good answer.

[Brian Preston]

It was a great answer. But here's I want to give Joshi J. Sounds like a rapper name, a little grace here in the fact that what if Joshi J bought a townhome with his significant other and, you know, and they thought they were going to be in this town home for the next five years before they had kids and then, you know, things happen and 18 months in pregnant, you know, like oh my gosh. Probably this this town home because of the stairs where the nursery is going to be and other things. It just doesn't line up. You've written a whole movie script for Josh. I've already helped Joshi J. I'm filling in gaps for him and now they realize you know what? But this house is appreciated because of the inflation post pandemic and I don't want to take advantage of the tax free growth this thing as he's already is fabulously from a cash flow or maybe he's just doing it for a moment in time. You know he's gonna take advantage of the cash flow for two or three years and then he's going to go take the tax free gain. I don't know. I'm writing this script in all kinds of ways. I don't need to but at the end of the day I always say you have to take people what they come. I mean when I financially do financial triage on somebody, I know there's mistakes I've made lots of mistakes I didn't all figure out. I've tried to give you the shortcut with the financial order of operations so you don't have to make the mistakes I've made. But I'm never going to be one that tries to club you over the head with the foo and tell you okay, you've made a horrible mistake. I'm going to try to now tell you from a triage standpoint how do we get you to your next best step. So I love the fact that maybe it is this is better to be lucky than good sometimes. Rental property is now lucrative on the cash flow is allowing you to max out your Roth get back on track. I mean I'm not going to fit. I'm not going. I've already done enough guesstimating on how you ended up here. But now I want you to maximize every dollar that comes into your army of dollar bills. And the financial order of operations is going to be really that God or that compass to help you make it there that much faster.

[Bo Hansen]

Love it. We said the exact same thing.

[Ribi]

Actually I was going to say two.

[Bo Hansen]

Different flavors but.

[Brian Preston]

Almost decided to attack me is how these chords Good cop, bad cop.

[Bo Hansen]

I'm such a good cop.

[Ribi]

You can be the judge of that. All right, Matthew M. Is up next. You good.

[Brian Preston]

I have one more thing to say. I dropped a pin but y'all the Super Bowl. Did y'all see.

[Ribi]

Where are we going?

[Brian Preston]

Did y'all see the commercial with the mustaches that were attacking stuff.

[Bo Hansen]

Pringles. The Pringles.

[Brian Preston]

I don't even know that. I was so, you know, traumatized by it. I didn't see what the product. Product was so good for you for giving Pringles that.

[Ribi]

Was it Pringles?

[Bo Hansen]

Was it Pringles are the chips in the can, right? I'm not.

[Ribi]

I don't know. I didn't.

[Brian Preston]

Yeah. The benefit of.

[Bo Hansen]

Yeah, it's like phone a Friend commercial, wasn't it? Is it Ron Swanson in that? The guy's name Ron Swanson. And I know Ron Swanson. They. Their mustaches.

[Brian Preston]

Look at you, knowing all the people. Different genres. For a guy who doesn't. Oh, money. We're not saying you guys are bad. Yeah. By the way, Pringles, if you look into a sponsorship shop, obviously BO will grow a mustache off and make me real strangely uncomfortable. But we'll hold up a can of Pringles for you.

[Ribi]

Okay.

[Bo Hansen]

Where were you going with that? Just. Oh, I saw a commercial that had mustache.

[Brian Preston]

Made me think of you in your 70s stash. The. That haunted me for weeks, and the audience loved it. I don't know what got more engagement. Actually, your mustache got a lot more.

[Bo Hansen]

Engagement than the members only got a lot, too, though. I love it.

[Brian Preston]

And by the way, it's. It's. It's a very, you know, it might be, you know, just like you have Republicans, Democrats, you know, stash. No stash. It's like there's a solid division there in the country. Very solid division.

[Bo Hansen]

Some people that very much did not like it and some people that very much liked it. So.

[Ribi]

Oh, my goodness.

[Brian Preston]

Some stash. Extremist, if you will.

[Ribi]

All right, well, maybe said, wait, how'd we get here?

[Brian Preston]

I don't know.

[Ribi]

I don't know how to transition out of that. So we're going to go to the next question. Matthew M. Does have a question for you. It says, what will happen to my HSA fund if I leave my company's health insurance and join my wife's once we have a baby? I know how much you guys love HSAs, so can you speak to this?

[Bo Hansen]

Okay. It's a great question. Let me tell you. Can I tell a personal story?

[Brian Preston]

Yeah. And then you tell us what the answer is, because that looks like a technical thing that Beau would know.

[Bo Hansen]

Oh, this is a super. This is not a hard one. So a lot of people think, oh, okay, well, I'm participating in this high deductible health plan. It makes me eligible for a health savings account. And so we're gonna fund the health savings account. But man, what if I change jobs? Do I have to also move the hsa? Or if I jump onto my spouse's, do I have to do that? No. A really interesting thing that happened in our life, you know, when my wife, back before we had kids, she was a schoolteacher and we took advantage of the high deductible health plan in the school system that she worked and she had HSA availability. So we started funding the HSA and that's how we funded it for our, you know, doing the family maximum whatever. Well, she ends up retiring and we end up implementing a health.

[Brian Preston]

And she's not really retired.

[Ribi]

Well, did you say she's retiring?

[Bo Hansen]

She retired. She had a great financial advisor. She did it earlier, part of the.

[Ribi]

Fine movement we've already seen.

[Brian Preston]

Like today, one of your cameras went off in the house and I was like, yeah, that doesn't look like retirement at all. That's right.

[Bo Hansen]

And so what happened is even though we had a high deductible plan here at Abound Wealth, I was still able to because we already had the HSA opened up, we already had the dollars invested. It was already sitting at Fidelity. And even though it just happens to be in my wife's name because it was part of her plan, we're able to fund that HSA account as a family. So you don't have to move it necessarily if you don't want to. You can leave your HSA where it is. Now. Here's what does happen though. If you have HSA dollars and when you go to jump ship and you go join another health plan and that health plan is not a high deductible plan. Just because you have that HSA account open and you have dollars in it does not mean that you can put more dollars into it. You can still use those dollars and you can still satisfy medical expenses with those dollars, but you cannot put more money in if you change plans and the new plan is no longer eligible for hsa. So it's a great opportunity for folks to let those dollars continue to grow. You can use them as like a pseudo retirement plan. You can be part of the was it 4% of Americans that are triple tax advantaging their HSAs. But just because you change jobs or move employers or whatever does not mean they have to do that. I'm going to say one other little brief aside.

[Brian Preston]

Well, I was going to ask one more clarifying question. Does the plan type of your health insurance? Because what if you have individual versus one or above that does have an impact on how much you can fund it.

[Bo Hansen]

Absolutely. You know, if you are eligible to make the individual contribution or the family contribution to the hsa. And that will depend on how you guys are covered and who's actually covered under the hide deduction.

[Brian Preston]

Because the way you the scenario, I just want to make sure for clarification, the reason your plan works is you were a family plan when she was and then now that you're still on a family plan, so it all works out.

[Bo Hansen]

That's exactly right.

[Brian Preston]

It's copacetic.

[Bo Hansen]

Yep. The Money Guy show is hosted by Brian Preston and Bo Hansen. 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, investment or legal advice. All investments involve a degree of risk, including the risk of loss.