Young Couple Saving for Future Family Over Themselves | Making a Millionaire

Summary

Podcast Summary: Money Guy Show – "Young Couple Saving for Future Family Over Themselves | Making a Millionaire"

Release Date: June 9, 2025

Hosts: Brian Preston and Bo Hanson

---

Introduction

In this episode of the Money Guy Show, hosts Brian Preston and Bo Hanson engage with a young couple, Daniel and Lindsey, who exemplify prudent financial planning at an early age. The discussion centers around their strategies for saving, investing, and preparing for future family goals while managing significant life changes within a short timeframe.

---

Couple's Background and Current Situation

[00:30]
Lindsey shares their journey:
"We purchased a home, thinking that we would probably stay in Pennsylvania for the long term. But job changes, life throws curveballs."
Daniel adds,
"We got married, bought a house, changed jobs, and moved to another part of the country, all within a 12-month period."

[01:03]
Daniel and Lindsey introduce themselves as 25-year-olds from Boston with stable professions—Lindsey as an apparel designer in activewear and Daniel as a structural engineer.

---

Net Worth and Financial Snapshot

[02:10]
Brian Preston highlights their impressive financial standing:
"At 25 years old, you guys have a net worth of almost $241,000."
Key financial components include:

• Cash and Cash Equivalents: Approximately $64,000 saved, divided into an emergency fund and sinking funds.
• Investments:
  • Health Savings Accounts (HSAs): Daniel has $4,700; Lindsey has over $3,000.
  • Roth IRAs: Daniel at nearly $24,000; Lindsey at almost $14,000.
  • 401(k)s: Daniel with just over $6,000; Lindsey nearly $15,000.
• Primary Residence: Purchased for $350,000 with a mortgage balance of $240,000 at 5.875% interest.
• Additional Savings: $400 monthly contributions to a 529 plan for their prospective child, "Timmy."

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Current Savings and Investment Strategies

[02:53]
Daniel explains their savings structure:
"The emergency fund is the kind of three months to six months of cash just to have on hand... The sinking funds is a big combination of things, from a fund to buy a car to saving for house maintenance."
This approach ensures they are prepared for both predictable and unexpected expenses.

[09:37]
When discussing their position in the financial order of operations, Daniel states:
"We're probably on step five... but we've also jumped ahead a little bit and are doing some of step eight and nine."
This indicates their advanced financial planning beyond standard stages.

---

Challenges and Short-Term Goals

[13:10]
Daniel expresses concern over short-term goals, primarily funding future children's education and the flexibility to potentially move to one income:
"The biggest things are the college for kids... and going down to one income to have flexibility when we have kids."

[14:44]
Lindsey adds,
"If we go down to one income, someone working part-time or tightening the budget could make it more realistic."
They recognize the need to adjust their financial strategies to accommodate potential life changes.

---

Hosts' Analysis and Recommendations

[22:27]
Bo Hanson emphasizes the importance of maximizing Roth IRA contributions:
"You have way too much cash... not maximizing some of these investment goals that should be prioritized earlier."
He points out the missed opportunity for significant tax-free growth by not fully funding their Roth IRAs.

[23:07]
Brian Preston critiques their current allocation:
"You're putting extra money towards your mortgage and five to nine... that does not go into my savings rate. If we were to improve upon this..."
The hosts suggest reallocating funds to prioritize retirement accounts over prepaying the mortgage and contributing to the 529 plan prematurely.

[25:46]
Brains proposes strategies to make their Pennsylvania rental property cash flow neutral:

1. Increase Rent Over Time:
   "Does the lease have automatic rent adjustments?"
2. Refinance the Mortgage:
   "What if you could drop your mortgage payment from $1,666 to $1,066 by refinancing?"
3. Mortgage Recasting:
   Leveraging additional payments to reduce monthly obligations without altering the loan term or interest rate.

[33:18]
Bo Hanson recommends comprehensive planning for future life events: "Put on your 3D glasses... create the dream plan, the down-to-earth plan, and the doo-doo plan."
This involves preparing for both ideal and adverse scenarios to ensure financial resilience.

[40:18]
Brian Preston presents a five-year projection emphasizing the impact of optimizing their savings strategy:

• 401(k)s could grow from $6,300 to $36,000 (Daniel) and $15,000 to $76,000 (Lindsey).
• Roth IRAs could increase from $23,000 to $78,000 (Daniel) and $14,000 to $63,000 (Lindsey).
• HSAs could expand from $8,000 to $64,000.
• Net Worth could rise from $240,000 to $616,000.

---

Conclusion and Key Takeaways

[44:25]
Daniel reflects,
"I like hearing about short-term financial planning... it’s comforting to see that this is possible."
The couple gains clarity on how adjusting their financial priorities can significantly enhance their near-term financial stability and flexibility.

[54:02]
Lindsey expresses appreciation for the actionable insights:
"Thank you, Bo."
Bo encourages them to maintain their disciplined approach while allowing for greater flexibility and less cash-heavy allocations.

---

Final Thoughts

Daniel and Lindsey demonstrate that even at 25, with thoughtful planning and disciplined saving, it's possible to build substantial wealth and prepare effectively for future family and financial goals. The hosts provide valuable guidance on optimizing savings strategies, prioritizing retirement accounts, and ensuring flexibility to adapt to life's inevitable changes.

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Notable Quotes:

• Lindsey [00:30]: "We purchased a home, thinking that we would probably stay in Pennsylvania for the long term. But job changes, life throws curveballs."

• Brian Preston [02:10]: "At 25 years old, you guys have a net worth of almost $241,000."

• Bo Hanson [22:27]: "You have way too much cash... not maximizing some of these investment goals that should be prioritized earlier."

• Bo Hanson [33:18]: "Put on your 3D glasses... create the dream plan, the down-to-earth plan, and the doo-doo plan."

• Daniel [44:25]: "I like hearing about short-term financial planning... it’s comforting to see that this is possible."

---

This episode serves as an insightful guide for young professionals navigating early financial decisions, emphasizing the balance between saving for the future and maintaining flexibility to accommodate life's unpredictable changes.

Transcript

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[Lindsey]

So we purchased a home, thinking that we would probably stay in Pennsylvania for the long term. But job changes, life throws curveballs.

[Bryan Preston]

You got married, you bought a house, changed jobs, and you moved to another part of the country. All inside of a 12 month year.

[Bo Hanson]

It's a trend here.

[Bryan Preston]

Yeah, you guys have already said, hey, the thing that we're not struggling with is age 65. We're struggling with the near term. As you guys think about this, how do you want the next five years to look?

[Daniel]

My name's Daniel.

[Lindsey]

My Name's Lindsey. We're 25 years old and we live in Boston.

[Daniel]

Welcome to making a millionaire.

[Lindsey]

We're originally from Pennsylvania. We both grew up about an hour inside Philly, then met in college in Philadelphia, got married a year later, bought a house in pa and then I got a new job and Daniel had to ride along with me up to Boston.

[Bo Hanson]

Tell us what each of you do for a living. Brag a little bit about yourself.

[Lindsey]

I'm an apparel designer doing activewear.

[Daniel]

Yeah. And I'm a structural engineer. Aren't those cool jobs?

[Bryan Preston]

Cool jobs. You know, when I hear like apparel, athletic wear, athletes, that gets me super excited. I love it. That's awesome. And so it sounds like it was, you had a job change and that job change, what took you from Pennsylvania to Boston? How long had you guys been married before that happened?

[Lindsey]

About a year when that happened.

[Bryan Preston]

So you got married, you bought a house, you changed jobs, and you moved to another part of the country, all inside of a 12 year old starting.

[Bo Hanson]

It's a trend here. Wow. You guys might be on the achievement tr Are y' all running mental checklist of all the things that you're trying to check off.

[Daniel]

I feel like we try not to. We, we might both have that tendency a little bit to lean that way, but. But don't want to be completely governed by that.

[Bryan Preston]

Okay, well, you guys have done a fantastic job because you said you've already mentioned that you're 25 years old and you were so kind that you shared with us a net worth statement of where you guys are today. And we thought it'd be helpful to kind of look at that, the level set to kind of give people an idea of where you are presently today. And then we're going to talk about, okay, well, if we know where we are today, where do we want to go? What are some of the things you guys are thinking through? And you can see here, you guys have done a fantastic job by 25 years old. I think a lot of people would look at this and be pretty envious of your situation right now in cash and cash equivalents, you have about $64,000 saved up. How did you guys come up with that? Because let's. You have an emergency fund. And then there's another thing called sinking fund. Walk us through. What's the thought process between those two different buckets?

[Daniel]

Yeah, so the emergency fund is the kind of three months to six months of cash just to have on hand that we would just kind of no matter where we're at. And then the. The sinking funds is a big combination of things. It's everything from a fund to buy a car in the future to other things we're saving up for maintenance on our house. Things like that.

[Bo Hanson]

Haircuts.

[Daniel]

Haircuts.

[Lindsey]

No haircuts. No, I'm not in the.

[Bo Hanson]

Haircuts. Go into the sinking fund.

[Daniel]

It is. It is a lot of things in there. And then it's also actually just some other money that is now kind of in CDs. It's for a future house purchase. Some things that we don't have invested right now just because the time horizon might be a little shorter, but is above and beyond even the sinking funds.

[Bryan Preston]

Now you say future house purchase. You already own a home. Correct. Can you kind of walk us through that?

[Lindsey]

So we purchase a home thinking that we would probably stay in Pennsylvania for the long term. But, you know, job changes, life throws curveballs. So we're thinking that we don't know exactly where we want to end up long term. It could be back near family in pa. It could be somewhere else, even within Pennsylvania. Our families are split between different towns. And so we're just not positive where we might want to end up in the future. If the home that we bought would be a place that's big enough for the family that we want to grow into, things like that that we just anticipate could be a purchase in the future.

[Bryan Preston]

What was the reasoning behind or how did you guys decide, okay, we're not going to sell the house and move, we're going to keep it. How'd that go down?

[Lindsey]

Many conversations. Many.

[Bryan Preston]

Yeah.

[Lindsey]

Lots of advice from family and friends, realtors, different people like that. We ultimately decided that since we had bought it so recently, we didn't want to have to go through closing costs and finding a buyer so quickly. And it just really worked out that we had friends who were looking for an apartment to rent and they were willing to rent from us. So we heard advice that, you know, having reliable renters who would be taking care of our home would help it to be an asset that could continue to grow.

[Bo Hanson]

Are they still interested in staying in the house or is there a time certain that they want to move out?

[Lindsey]

As of the next year, they're planning on staying, but we haven't discussed long term plans with them.

[Daniel]

And I'll just add, also, part of the decision to keep the house was looking into some things like capital gains tax and knowing that, like, we would have had to pay that for owning it for such a short time. And yeah, just some of the other money considerations. We had just done some renovations pretty much right when we moved in, so we had sunk some money into it again, we really thought we were probably going to be there for a while and life led us a different way. But so that was part of the decision as well.

[Bryan Preston]

Do you feel like you have that figured out? The. Are you still trying to figure out what do we do with this house? Like, or is it. Do you guys have a plan in place? Like, okay, we don't know anything else about that.

[Daniel]

We, we feel okay with where it's at right now, but we feel like we need some sort of plan moving into the future, partially still because of capital gains taxes. I've looked into rules about like, how long you have to live there in a certain period of time, and some things like that that might make a difference of like, should we move back for a time and live in that house for a little longer? Something like that? It obviously depends on what, what life brings as well. And there's so much unknown in the next few years, but we do. And we still question sometimes whether we should have kept it. There have definitely been times where that's been like a big question mark. So we still go back and forth. We don't feel totally settled.

[Bryan Preston]

You both kind of looked at each other when you said there's been times. Did something happen? Was there a thing that made you question whether keeping it was the right choice?

[Lindsey]

The day after we moved out of our house and then our friends moved into it, there was a big Leak in the basement bathroom and there was like a nine grand replacement to replace a piece of the sewage pipe that was going out to the street. So we were wondering like, where was this issue when we lived there and had the right insurance coverage and everything? So.

[Bryan Preston]

So literally your friends move in, you guys move out, you're out of state now, and all of a sudden this leak happens. The joys of being a landlord, right?

[Lindsey]

Yeah.

[Bryan Preston]

You hear this talk all the time about like, oh, I'm going to have a rental property and I'm going to have someone else pay the mortgage, this beautiful thing. But sometimes like unknown, unknown things happen. Right. Out of curiosity, how'd you pay for the league, the 9,000, because you were able to do that, did you have to go into debt or did you guys.

[Daniel]

Yeah, we had plenty of cash at that point in our emergency fund. And honestly some like finance was shuffling a little bit. So it was kind of like even after we paid that nine grand, we still had our full emergency fund and just kind of then got things set from there.

[Bo Hanson]

Something you keep saying, I just wanted to get a little clarification on is the capital gains. Now if y' all lived in this house for a period of time, even if you move for another job, and y' all definitely moved far enough away that there's a proration of the tax free gain. Did y' all look into that rule at all to see how that would apply to you?

[Daniel]

No, I guess it was my understanding I didn't look a ton into this, but I thought that it was something about like you have to live there for two of the last five years in order to not pay capital gains. But I didn't know anything about it.

[Bo Hanson]

But there is, there is a little asterisk.

[Daniel]

Okay.

[Bo Hanson]

That if something, because the government's somewhat reasonable, that if you have to move for a job and they have a distance test, they have these things you have to go through the checklist on. But for a lot of times you can then take the. For a married couple, it's $500,000. And depending upon how many months you lived in it, you could prorate the gain. And more likely y' all wouldn't have had that much of a gain if you had any. After all the transaction costs. I only bring this up is because you said something that intrigued me is because when I was doing the research for the show, I was like, I wonder if they'd be willing to go move back into the place for a month or two because your biggest hang up is going to you have to live in it two of the last five years. And I don't know, you've only been moved away for a year, so you're still within the five year window. But you could, you could definitely do some planning and work with your tax professional. We're not giving professional tax advice. But I just know that there's a, some, some avenues or some angles that you might actually qualify for more if you just needed another way to even think about the decision. Now we're not saying to sell it though, because if you have great tenants and the place is appreciating, I mean, that might not be the perfect answer. But I just wanted you to know all the variables so you knew exactly what you were dealing with.

[Bryan Preston]

And it sounds like there's some question around. Okay, how should we think about the house? But before we dive into that, I want to keep going through the net worth statement because that was, I think we just stopped at cash. I think that's as far as we got. When we look at your investments, you guys have done a great job of building up liquid investments at such an early age. You both have health savings accounts. Daniel, yours has about $4,700 in it. Lindsey, yours has a little over 3,000. You both have Roth IRAs. Daniel, yours is at almost 24,000. Lindsey, yours is at almost 14,000. And you both have 401Ks. Daniel, yours is at a little over 6,000. And Lindsey, yours is almost 15,000. So when I see, okay, I've got HSAs, I've got Roth IRAs, I've got 401Ks, I've got cash. Where are you in the financial order of operation? First of all, are you familiar with the financial order of operations? This is the thing that you've heard of, right? It's this nine step process of what to do with your next dollar.

[Bo Hanson]

We've literally written the book.

[Bryan Preston]

If we were to ask you the question, where do you guys think you are in the financial order of operations? What answer would you give us?

[Daniel]

I would say that we're probably on step five step. We got very close to maxing out our Roth IRAs and HSAs this past year. But not, not quite there. Although, and I'm sure this will come up, we have also jumped ahead a little bit and are doing some of step eight and some of step nine.

[Bryan Preston]

Okay.

[Daniel]

At the same time, we're just kind.

[Bryan Preston]

Of like bingo card in financial order. Okay.

[Bo Hanson]

This is the thing. I mean, I was, when I looked at Yalls net worth, I was like, I'm So I'm just curious. So when I look at the financial order of operations, and then I look at your net worth statement, and I ask you guys, did you max out your Roth IRAs last year?

[Daniel]

Not quite.

[Bryan Preston]

Not quite.

[Bo Hanson]

Okay, so first you're like, Brian, why are you being hard on this? And then I find out that There is a 529. If you look in the upper right hand corner on there. How many children do you have or.

[Bryan Preston]

Describes how old they are. How old are your kids?

[Daniel]

We have no.

[Bryan Preston]

0.

[Bo Hanson]

What are we doing? I mean, seriously, what are we doing? I mean, my favorite investment account is tax free. Y' all are 25 years old. Every dollar you put to work is going to be multiplied 40 plus 40 times over. How in the world do we not max out the Roth ira? And then somebody, I don't know, y' all can tell on each other. One of you said, you know, I got a great idea. We don't have any kids yet, but why don't we go ahead and set up a 529? How did this even come to be?

[Lindsey]

Well, we affectionately have a future child that we call Timmy. And Timmy is representative of just our future children that we want to support in college.

[Bryan Preston]

And so, Timmy, you already started saying.

[Daniel]

That she kind of exists.

[Bryan Preston]

Okay, that's a thing. That's an idea.

[Bo Hanson]

Okay, we're obviously going to want to come back back to this and really hone in on how do you avoid the Roth maximization for Timmy? What are you gonna do with the first child's actually a daughter?

[Lindsey]

No, no, no, no.

[Bryan Preston]

Okay, so we're gonna. We'll come back to that. So you've kind of bounced on. You have your primary home. You said you just bought it a couple of years ago. It's worth about $350,000. Presently, you have the 529 for Timmy that we just uncovered. And then you do have a mortgage on the home.

[Bo Hanson]

Let me do the air qu.

[Lindsey]

Timmy.

[Bryan Preston]

Sorry, it's not actually. It's not a real Timmy. And then you have the mortgage. You owe about 240,000. The rate on that is about 5.875%. So when we add all this up, at 25 years old, you guys have a net worth of almost $241,000. I mean, that. That is recent brick flair.

[Bo Hanson]

I mean, that's pretty impressive. I mean, you have to feel pretty good about that.

[Bryan Preston]

Do you guys recognize how you unique.

[Bo Hanson]

That is.

[Bryan Preston]

I mean, a lot of 25 year olds are nowhere near. So obviously you're Doing something right. You're making some decisions very, very well, and you obviously have a really healthy income. Total household income for you guys is about $175,000. So that's amazing. So it's not like, oh, you guys are not on the right course. It's okay. When you think about the course that you're on, are you on the best course? Are you on the course that you ultimately want to be moving on?

[Daniel]

So can I just add something real quick? I just want to say, like, part of that, how we've gotten to this point is we've been very lucky and, like, very blessed by family members who have helped us out along the way with everything from college to wedding to house purchase. Sure. So really we've. We've been very blessed in order to be at the place we're at now.

[Bryan Preston]

One of the things that kind of gives us concern and pause is what about the short term goals? What about the things that happen between now and retirement? I'd love to just hear from you guys. You mentioned some of them. You mentioned going down to one income potentially. We've exhaustively talked about Timmy thus far. What are some of the other, like, short term goals that you have? Or what are some of the things that give you guys pause or anxiety or things you think might be difficult for you to achieve in the short to intermediate term?

[Daniel]

I think the biggest things are the college for kids. That's not super short term, obviously, and still theoretical, but at least 18 years.

[Bryan Preston]

At least 18 years from where we presently sit.

[Bo Hanson]

I have to ask, did either one of y' all go to get any scholarships when you went to college?

[Daniel]

Yeah. Yes.

[Bo Hanson]

Imagine your children just with the way y' all are wired as parents and stuff, I bet they're gonna do all right.

[Daniel]

The. The other part of it that I think is more shorter term is the going down to one income. So it just to have that flexibility when we have kids, we. We look at that season and think that kind of the biggest factor that will allow or not allow us to do that is the cost of housing and, like, what our mortgage payment would be or what our rent is. So kind of doing whatever we can right now to be reducing that amount in order to give us that flexibility when we get there. So that's part of the reason that we're like, we're putting some extra money towards our mortgage payment right now, which the idea for that is.

[Bo Hanson]

Fine.

[Bryan Preston]

Everything's fine. Everything's fine.

[Bo Hanson]

I know why both breathing in deep is because how hard if you needed that money that you're putting prepaying on this mortgage in an out of state rental property, how hard is it, do you think, to get that money back out?

[Bryan Preston]

Very pretty hard.

[Bo Hanson]

Oh, yeah. So if you're, if you're thinking this is going to be your margin or cushion to get you into one income, I think it, I guess the idea.

[Daniel]

Was that that money would then be used to, if we were moving into a new house, would be used as a down payment for a future house, which would then reduce the monthly cost on that house.

[Bo Hanson]

But what if you couldn't sell that house and you still needed to buy the house?

[Daniel]

I'm. I don't know that we, we probably.

[Bryan Preston]

Wouldn'T be buying another house in that place.

[Bo Hanson]

But you see the point, but I'm just saying is that because margin is going to be your friend with these big life decisions. And there might be a big better way to kind of structure that.

[Bryan Preston]

And what we want to do is we want to create a plan where you guys have the maximum amount of flexibility to be able to do the things that you ultimately want to do. And some of the decisions you make when you put funds into a specific thing, like I'm going to prepay the mortgage, I'm going to put money into the 529 for the not yet established Timmy, then those dollars become captivated there. And what we want to say is, okay, is there a better way for us to think about this? Is there a better way for us to kind of look at this? So let's talk a little bit about housing because we seem, we kind of keep coming back to that one for our audience so that they can kind of understand. Walk us through right now. When we think about your current mortgage payment, how much is your current mortgage payment and then how much rent do you have coming in and then how much you having to pay for rent in the place that you're renting now? So we can kind of have those, those numbers to level set.

[Daniel]

Those numbers are all pretty even. Our mortgage with the interest and taxes is about 2,300 are. The rent we're bringing in is 2150.

[Bryan Preston]

Okay.

[Daniel]

And the rent we're paying is 2,200.

[Bryan Preston]

Awesome.

[Daniel]

So yeah, they're all kind of in the same ballpark right around there.

[Bryan Preston]

So we are very close. It sounds like on the Pennsylvania home to being cash flow neutral. Right. It's a little, little now are for these friends that are in there now, if they're listening. I'm sorry, friends, but I'm going to Ask the question, are they paying at market rent or is this a sweetheart deal? How's that deal structured?

[Daniel]

It's at market.

[Bryan Preston]

At market. Great. Okay. So whenever I think about someone who has an out of. And it's not a state property that they're not necessarily doing as an investment per se, but they want it to be this thing that's sort of a contingency plan. If I'm, if I'm describing that right, one of the things that we would love to see is, okay, is there a way to make it cash flow neutral so that it kind of is compartmentalized and sitting over here by itself rather than pulling from present day consumption? Because right now, when I think about your housing, you're paying $2,200 in rent plus an outflow to cover the shortfall that the Pennsylvania house is generating. Would you agree with that assessment?

[Lindsey]

Yes, Y.

[Bo Hanson]

You are reserving. Was it 400? How much a month are you putting into repairs?

[Daniel]

Yeah, it's at least 300, 350 maybe in that sinking fund.

[Bryan Preston]

How many months have you had? 350, $400 worth of repairs on the.

[Daniel]

Not.

[Lindsey]

Not zero.

[Bryan Preston]

Right. That one single event.

[Bo Hanson]

And that's why I think it is recency bias. Because I mean, houses, look, houses are great, but they're also scary. Outside of your heating and air system, the sewer and then your roof, a lot of, I mean that's, that's really. Your core systems. You've covered the sewer, it sounds like. How old is the H vac system on, on the, on the house doesn't.

[Daniel]

Have ac, but the heating system is on the older side. We know we're going to have to replace the boiler probably sometime in the next.

[Bo Hanson]

And what does that cost? Do you know?

[Daniel]

Not really. Okay, several thousand is the number I have in my head. But that's rough.

[Bryan Preston]

That's a pretty easy thing to figure out. Some quick, quick AI or Google research or even just calling a local technician to ask them, hey, what would it cost to replace a boiler? And that way you at least know the number you're shooting for. Because it seems to us, we looked at. Because you were so. It was so helpful that you sent us your sinking fund breakdown. When it comes to cash management, we'd like for you to have an emergency fund that. Where you keep three to six months of living expenses compartmentalized. And then some people like to use a sinking fund because they know they have short to intermediate term goals coming up. Hey, I know I'm going to have to replace the car. I know I'm going to have to have this vacation or I know I'm going to. But it's interesting when we look at your sinking fund, there are a lot of different buckets here. Kind of walk us through these and how you guys are thinking about this excess cash.

[Daniel]

I get the haircut comment now. Yeah. So essentially this was a catch all for all the expenses that aren't monthly expenses. So that's why something like haircut or clothing ended up its way on there.

[Bo Hanson]

That's sewing.

[Daniel]

Yeah. Money, that's not something we can predictably allocate every month. So it just ends up in a sinking fund where it's like a smaller amount that goes in there every month and we have it to like spend down. And then there's the bigger categories of a future car down the road wanting to have money for that. The car maintenance, same thing. Just, you know, we get, you get hit with several hundred dollars here and there, but not every month. And then the house maintenance as well. Just thinking to have that for big expenses. The, the escrow is actually because we pay the taxes and insurance out of our pocket now. It's not part of our mortgage, so that's why that's there. But then, yeah, the, the smaller things are just kind of miscellaneous things sprinkled.

[Lindsey]

In there, I guess, allowing us to spend freely.

[Bryan Preston]

And I imagine this is sort of guilt relief, right? Hey, so I don't feel guilty when we spend. Well, let me ask you a question. If I were to ask you what your monthly burn rate is based on your current. Because budgets are so unique to every, every person, every couple does it a little bit differently. So when I ask you guys, what's your monthly burn rate, what would your answer to that question be?

[Lindsey]

7,327.

[Bryan Preston]

But who's counting, right?

[Lindsey]

So, okay, study up.

[Bryan Preston]

So if our monthly burn is about 73, $7,500 a month, and we would say, okay, you're a two income household where you both earn about the same, you don't have any other dependents counting on you, you could reasonably argue that three months would be an appropriate emergency fund for you guys. In your mind, instead of thinking through all of these different, like sinking funds and contingencies for all these different things, what if we just increased the monthly cover to four months or five months and we know that what those additional months are going to do or cover some of these other costs? Because what it looks like is happening is you have a bunch of different contingencies that are likely not going to all happen at once. I mean, you've already said right now you have $8,700 in your rental maintenance budget and you're adding to that every.

[Bo Hanson]

Month, waiting for the sewer line to break again.

[Bryan Preston]

And you just had that happen, right?

[Bo Hanson]

Yeah.

[Bryan Preston]

So it seems to me that it might be practical or prudent instead of having three months of living expenses, you could have five months or six months of living expenses. Then you know what your true cash exposure is. Because what I worry about with you guys, and we see this with clients all the time, is that we compartmentalize this cash. What we end up doing is being way, way, way cash heavy, where instead of having our money actually working for us, doing the things to help us move our financial circumstance along, we're way overly conservative and we're way cash heavy. And I think for a 25 year old couple at your stage, you probably are a little bit more cash heavy than you have to be.

[Bo Hanson]

Especially when you didn't max out the Roth ira.

[Bryan Preston]

Especially when you did not. Because I missed out, the Roth IR.

[Bo Hanson]

Said it was only $1,000. But in, in my book, I detailed how I went back and calculated what every year that I didn't get like the full maximum Roth, it was only $10,000 total. But I calculated it out and it turns out to be the equivalent of close to $400,000 by the time I'm retired. So those little decisions of here and there, because it's tax free. So I'm going, I'm not going to let that go because I think that you'll have the cash. It's not like you had to, but you were in this squeeze of life to where you had to make this sacrifice. And the Roth was the thing that you just, out of your shaking hands, you just couldn't do it. Y' all actually had it sitting in your sewing, in your hair budget. Nobody's taking anything away from you. It's just that you have way too much cash. When you're not maximizing some of these investment goals that should be prioritized earlier.

[Bryan Preston]

You guys laid out for us how you currently think about your saving. Like when we think about how we're deploying our paychecks every single month, you put together for us your saving strategy. And this is what it looks like now. Every month you have about $360 go into your HSAs, you have about almost $1,100 going into your 401ks because you have match and you're doing enough to get the maximum match available. You have about $900 a month going into your Roth IRA. So not maxing them out, but you still are contributing there. But then we have $400 a month going to the 529 that we've already established. Perhaps if we're following the financial order of operations, is a little out of whack. That's like a step eight when we haven't even fully done step five yet.

[Bo Hanson]

I thought about giving it a family feud. I just did not like it. Did not like it.

[Bryan Preston]

And then we have the home equity, which that's part of that is for the down. You have a down payment fund for a future house that you said you would own. You said you'd only buy the next house if you sold the current house. And if you sold the current house, you have equity in that house down payment, but you're also building another down payment fund to go on top.

[Bo Hanson]

And they're sending extra money like 4 or $500 a month towards the mortgage that's built into that.

[Bryan Preston]

And you're putting both of those. This is like an additional down payment fund, additional equity fund. And you know, it's not, it's not like your mortgage is super low interest, but it ain't exactly high interest. Right. So when we think about your savings rate, where you guys are, we would call it 16%, because we know that, you know, prepaying the mortgage as well as five to nine, that's like eight, nine. That does not go into my savings rate. If we were going to improve upon this, like if we were going to think about truly letting your dollars maximize their potential for you with every decision you make, we put together a different savings plan that we think could potentially make sense for you guys rather than on your HSAs, not max out. What if we did $713 every month to get those to fully max out 401ks leave those the same. Get the employer match that you're getting. But now get the Roth IRAs maxed out. Instead of $900 every month, have 1167 going across both of those and you'll max them out. Let's stop contributing to Timmy's 529, because we're going to have plenty of time for doing that. And instead of having an additional down payment fund and instead of having additional morning on the mortgage, let's cut that out. And so if we actually look at this and we think about the cash outflow, what this does is it frees up an additional $481 for you guys every month. And the question then becomes, okay, well, what do we do with that 481? How do we think about that? What's the best way for us to deploy that? We could obviously look at the financial order of operations and we could say, okay, we're maxing Roth and we're maxing hsa. And so the natural next step would be, let's just dump that into our 401k. But you've already expressed to us, hey, there's some anxiety we have around being able to fund some of these short term goals. And one of the short term goals, and I think you've said it a few times now, is, hey, what if we wanted to go to one income? What if we did want to start a family? What if we want to do that? What's that look like? Well, one of the things that we think would likely be necessary for you to go to one income is you have to figure out how to compartmentalize that Pennsylvania house over on its own. Right. So that way it's not actually pulling away from current living expenses from current cash flow. It kind of self sustaining. Because you already let us know that the rent you have coming in doesn't quite cover the mortgage, especially when you.

[Bo Hanson]

Take into account the maintenance budget.

[Bryan Preston]

That's right.

[Bo Hanson]

And other stuff.

[Bryan Preston]

So what we thought would be interesting is to walk you through a few different ways that we could think about making that cash flow neutral or maybe even cash flow positive. And as we were kind of spitballing this, we think there's really three ways we could potentially do this. The first is you can just increase rent over time. If the rent that you have coming in has a natural cost of living adjustment where it goes up by 3 or 4% annually, naturally that's going to move you into a place where it's going to become cash flow neutral, cash flow positive. So first question, does the lease that you have, your friends have automatic rent adjustments built into it?

[Lindsey]

No, we manually negotiated that with.

[Bryan Preston]

Okay, so is that something? Are they just one year at a time during that lease? Okay, great. Do you guys have any desire to do a longer term lease where it would be something where you rent to them for three years or five years, or is that too uncertain?

[Lindsey]

Still feels too uncertain? I think just with what we want to do.

[Bryan Preston]

Okay, so increasing rent is one solution. The next solution, and we all love this one, is you could potentially consider refinancing your mortgage. Right. We know that your mortgage right now was, what was it, 5.875.

[Bo Hanson]

Is that the number ideal Time to.

[Bryan Preston]

Refinance rates likely right now are not a whole lot lower, but that doesn't mean that rates might not go lower in the future. I mean, we know that historically interest rates kind of go up and down, down, and we're probably still sort of more towards the higher range right now. And we said, okay, well, what if rates did change? What if something happened economically to allow them to fall and you had the opportunity to refinance? Look at what happens to your payment. We know that right now if we just factor in your principal and interest, your current mortgage payment is $1,666 a month, and that's at 5.875%. Well, if you were to refinance now, and let's just say that 5% was the prevailing rate now. Well, just doing that, and continue to pay your mortgage on the same timeline. So not recasting it another 30 years would drop your payment from 1666 down to 1286. That's pretty exciting, right?

[Daniel]

Yeah.

[Bryan Preston]

But maybe rates don't fall just yet. Maybe it takes some time for rates to get down there. But in the future, and let's say five years, that's just sort of an arbitrary number that we're using. What if even in five years, you could potentially refinance? Well, obviously your mortgage will have continued to be paid down, but at that point in time, you could refinance to 5%, and your mortgage payment goes from 1,666 to a little under $1,100 a month. Well, if you have 2,100 coming in, your mortgage is only 1100. That's a pretty great spot to be in. The question you have to ask yourselves, okay, well, when are we thinking about wanting to start the family and go to one income and those sort of things? But here are some options you have. We also did the math on how it changes if you were to have a 4.5% refinance option. Now, the thing that is unfortunate about refinancing is we don't get to control when rates change. I mean, I think we're all hopeful that rates will come down to provide people who recently bought an opportunity. But it's not guaranteed. It's not something you can bank on. So we said, okay, well, what is something that you likely could influence? What is a strategy that you could potentially deploy to try to get the Pennsylvania house to be cash flow neutral? And one of the things we came in was potentially looking at some sort of mortgage recast. Now, do you guys know what A mortgage recast is not really awesome. Great, perfect. All right. So we put together sort of a theoretical example. You know, we borrow money and we pay on a mortgage over like a 30 year time period, right. And they calculate the beginning of the mortgage, what that mortgage payment's going to be in order for us to pay it off in 30 years. Well, a lot of times mortgage companies will say, hey, if you are building up and you get to a place where you want to make a capital infusion, you have some money on the side and you just want to pay down the principal, you can pay down the principal and keep paying your same mortgage and you'll just pay it off more quickly. Or one of the things that some mortgage companies will let you do is they will let you recast the mortgage where you put a big principal payment down and you ask them to recalculate what the mortgage payment would be to pay it over the same timeline. So you're not stretching it out, you're not changing your interest rate, you're just saying, hey, we put a big capital amount down, recalculate our payment. So you can see sort of graphically you are paying along the gold line. And let's say that 10 years in this example online, you had $50,000 that you could just pay on the mortgage. You asked them to recalculate your payment, you get a lower payment and pay it off in the same amount of time. Does that make sense?

[Daniel]

Yeah.

[Bryan Preston]

The margin between the two lines would be the interest that you ultimately save because you're paying it off and you're just asking to recalculate. So what we said for you guys is if we had this five year timeline and we had this $481 excess that you have right now, and you kept saving that towards cash building towards an amount to recast, you're looking at a scenario where potentially five years in the future, if this were to manifest, you could drop your mortgage payment from $1,666 down to $1,066 even if interest rates don't change.

[Lindsey]

Can you do that at any time? When you have money to put to.

[Bryan Preston]

Expensive, it's dependent upon the mortgage company. So one of the pieces going to give you is hey, call your mortgage company and say, hey, I would like to think about a recast. Is this something you allow? Are there any costs associated? How do I go about doing it?

[Bo Hanson]

This is, this is kind of related. Whenever we talk about refinance shows, the first thing I always tell people before you refinance your mortgage, call your lender, and ask if they'll do what's called a rate modification. Because realize lenders, they've already. They don't want to pay the friction cost either of going through the whole process of going through underwriting and everything else. So sometimes it's easier for them to keep an existing customer, especially a customer that pays their bill on time. So like a rate modification, there's typically a fee associated with that. And just like with a mortgage recasting, there very likely would be a fee associated just a few hundred dollars. But that's why you wouldn't want to do it every. You wouldn't want to call them, hey, it's me again. I just sent you another cash. So it's going to be more of a deliberate and intentional transaction to where that's why 50,000 is what we use in the example is it's. It would be something y' all are making a decision that you would like to have a little additional margin because you're living off one income and you had this excess cash and. But you don't get better rates. How do we make the best of the situation? This was just an option that we thought we'd at least share with you.

[Daniel]

I honestly wish we had known about that. We now, looking back on this, this might have been a bad decision, but we did put a pretty big amount of money down on our mortgage payment from a gift that we had gotten probably last year. We put like $25,000 down on it. So not knowing that this was an option, maybe to recast it when we did that.

[Bryan Preston]

Well, so here's a wonderful thing. I would say you call your mortgage company and say, hey, just last year we put a big amount down on this. Would it be possible to recast our payment? Because even though you've already made the principal, now they may say no, or they may say, oh, we would have had to have done that before you made the deposit. But there's a good chance they still could. The fact that you've already done that, you're already ahead of schedule, you've already paid that principal down. So it's at least worth asking the conversation. Asking the conversation. The second best answer they can give you is no.

[Bo Hanson]

Right?

[Bryan Preston]

Like that's the second. But so you might as well ask. And then what you do is you tell, hey, mortgage company rates are looking pretty good right now. I talked to another bank and they said that right now they would let me refi at my current rate. And I. If you are not interested in the recast, I'll just move my mortgage over to someone else who's willing to do. Now, you want to make sure you actually have the leverage and somebody that's willing to do that. But that is a way that you can make your mortgage company fight to keep you as a client or as a customer instead of just telling you, no, tough, we're not going to do that.

[Bo Hanson]

Now, I loved that when we asked what your monthly burn rate was, it was 7327. What did we say? The dual income goes down to one income, looks like, because I'd like to have some discussion on that, too.

[Bryan Preston]

Yeah. So we built you sort of two separate budgets. Well, we know that if you were to go down to one income, after we factor in taxes, we think that your gross income take home goes from 10,200 down to about $7,800. There are some changes we've already said we're going to make. If we're able to, like, recast the mortgage and get the mortgage a little bit cheaper, it goes from 1666 down to 1066. We've already argued that $400 maintenance on the rental may be a little aggressive. So what if we were to cut that down to like 200? So what we're calculating is if you were to go to one income right now, present day, you'd have about $7,800 of income, about $8,000 of outflow. You have negative cash flow about 250 bucks. And so then if you were to continue saving 10%, because remember, you said, I feel like it's not hard to think about saving for the future and saving for retirement, we wouldn't want you to cut that down completely. But if you were to still save 10% of the single income, you would be at about $1,000 deficit per month as it stands today. So the question we have for you is, okay, if you were going to go to one income today, is there $1,000 that you could either cut out of your budget or is there a way to create $1,000 of additional income right now?

[Bo Hanson]

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[Bryan Preston]

You know those money guy tumblers we give away during YouTube live streams? Stamps.com is a CR part of the shipping process. It helps us get those tumblers to their destinations all around the country.

[Bo Hanson]

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

[Bryan Preston]

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[Bo Hanson]

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[Bryan Preston]

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[Bo Hanson]

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[Bryan Preston]

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[Daniel]

About that if we do go down to one income, someone working part time a little bit or they're probably some areas of our budget we can tighten up a little bit too and some combination of those things. That sounds a lot more realistic than I would have thought not seeing the numbers.

[Bo Hanson]

Here's where I want to get into the coaching part is because right now I still feel like you're a little divided in your attention. It's just like we know that you're prepaying the mortgage. It sounds like you got a gift and you sent more to that mortgage. You're kind of being. You're playing the part of a debt crusader. And it feels good to pay down that mortgage debt. But I will tell you what I see coming up is this whole life decision on you guys doing the family planning, figuring out you're both successful. That's gonna be a lot of discussion to figure out which one of you. Or is it gonna be a hybrid where one of you works from home, but you still have to hire somebody to come help out on some services? So there's gonna be a discussion. And that's why whenever we have big life decisions, I tell everybody to put on their 3D glasses. And when I say that is that I want you to essentially, I've seen your spreadsheets. You'll have no problem. I was like, is this legitimately their spreadsheet? So you're gonna have no problem Putting on your 3D glasses is because I do want you to write out kind of a five year or whatever period of time y' all want to do your family planning with and create the dream plan. This is where everything works out beautifully. You all get pay raises. You know, you keep getting promoted, you're getting these huge bonuses. You know, you tell them you want to work from home, and you're going to have screaming kids in the background. They go, great, no problem.

[Bryan Preston]

That's quiet now, Timmy.

[Bo Hanson]

That's the. But I also want you to do the down to earth, meaning that maybe when you go talk to your employers or one of your careers is doing something that the other one's not, and you start making real determinations on what you think will happen for you from a cash flow. And then don't skip the doo doo plan. That's where you actually do another tab on your spreadsheet says, oh, my gosh, what if things don't go like we plan? And here's why I want you to do the doo doo plan. How many dues can I put in there? Is that you right now you're allocating so much cash to, like, debt and all these other things. If you did this exercise, you'd probably quickly realize, man, maybe what we need to do in this transition, not only, save for the roth, do the 401k and these things, because that's already getting us close to 20%, but maybe we could start building up an after tax account and then you could figure out, is that cash or should it be slightly invested? You know, you would know because you've done the three plans to kind of know when you would need cash flow. And then you get to control the access to it. Whereas right now, you have a lot of variables. You're very disciplined, but you don't control the access. Because that mortgage, that $25,000 you sent to a mortgage company, if you called them and said, hey, just kidding, we've decided we're going to have a baby next year, can I get the 25 grand back up? They're just not. They're going to make it very hard. It's hard. You have to refinance. It's not like they just send you the money back. And that's why I want to caution you build it into the plan so that you have maximum flexibility and you get to address this stuff head on and also control the access to it, because that also allows you. If you have lean months, do you know what gets you through lean months? Having extra cash and extra capital that you control. And that's. That's what's going to get you through this. Y' all. Y' all are so successful. But it's just these little nitpick things that I think would really improve your plan and also take down the stress level. Kids are already going to be stressful. This is going to give you all just maximum flexibility so that you hit that and you don't even feel. It doesn't even feel like a speed bump to you.

[Bryan Preston]

You know, it's interesting. One of the things, a lot of times we'll show people a projection. Hey, if you do the things that we're recommending, this is what age 65 will look like for you. This is what financial independence. You guys have already said, hey, we're not. The thing that we're not struggling with is age 65. We're struggling with the near term. So we thought, man, wouldn't it be helpful if instead of showing them something, you know, 30 years, 40 years in the future, what if we showed them just five years in the future? If we think about where they are today and they were to implement some of these changes, if they were to make some of these adjustments, how might their situation look at the time when they're seriously considering going to one income or starting a family or making some of those changes? And so we actually did project that out for you. So we said, what if we assume that your investments over the next five years can grow at 8% annualized? That seems reasonable for a couple that's 25 years old. Let's assume the house that you currently own appreciates in value at the rate of inflation, about 3%. Let's assume that cash does the same about 3%. And then we're going to assume that your emergency reserve actually doesn't grow at all. We're just going to have it be finite same number, pick a number, stick to it. Well, when we look at where you are today and we lay it side by side with where you'll be, it's pretty exciting. You can see that just contributing the same amount to your 401ks that you're doing right now. Your 401k, Daniel, goes for a from 6,300 to almost 36,000. Lindsey, your 401k goes from 15,000 to almost 76,000. And this is just five years in the future. Daniel, your Roth goes from 23,000 to 78,000. Lindsey, your Roth goes from 14,000 to 63,000. Your HSAs go from about 8,000 to 64,000. So now your liquid portfolio, without necessarily putting tons of focus on that, without really throwing the kitchen sink at it, still, over the next five years, you're able to grow it from 66,000 up to $317,000 by the time that you guys get to 30 years of age.

[Bo Hanson]

Do y' all know when we do our net worth by age, we always say you should have an aspirational goal of having your net worth be one times your annual salary. Okay, but in 317,000, but we haven't gotten into net worth yet. I mean, if you look at all the assets, I mean y' all are, you will be three to four times what you're. It's amazing. It really is.

[Bryan Preston]

You can see that the Pennsylvania home goes from 350 to 400,000. The 529, we're going to stop contributing to it, but it's still going to grow. For little Timmy, it's going to be at almost 7,000. Where your cash. If we're going to do the recasting scenario and we're going to focus on that goal, you could grow that from 10,000 up to 43,000. And then we still have your emergency fund. That 54,000 stays intact. And your mortgage just paying it on the normal pace, is still going to go from 240,000 down to 204. So. So your net worth in a five year span, just by redirecting how you're pointing your dollars and optimizing your situation, you could go from $240,000 today to 616,000 five years from now and be primed and positioned to go to one income to move Back to Pennsylvania to.

[Bo Hanson]

Start, and you don't have to wait five years. Now this is the old man, my kids and my old everybody buckle up. My oldest is, you know, a junior in college. I wish we'd had more, and I wish we'd had them sooner because my wife and I were married close to six years before we had our first child. Money is good, making the planning for it. But y' all already kind of laid it out in your interview with us. You don't want. It's just a tool. It's not what. It's not the center of your life.

[Bryan Preston]

As you guys think about this, how do you want the next five years to look?

[Daniel]

I think the biggest thing is I. I like, hear a lot about retirement and retirement planning, and that's always kind of a big thing in the financial world, as it should be, like, for good reasons. But to kind of see these numbers laid out of looking at it and analyzing it for the short term is super helpful. It's not something that we've done a ton. It's not something I would have even known how to go about exactly. But it's comforting to see that, like, this is possible and having some different strategies to do that with the house, like recognizing that that payment is going to be one of the most critical things for us. But there are other ways to kind of figure that out rather than just how much money can we throw at it.

[Bryan Preston]

That's right.

[Daniel]

So that's. I think that really helps. And it seems like a simpler way to look at it.

[Bryan Preston]

And what I love is this is not. It's not still putting emphasis and power into the long term. You'll notice your assets are still building towards retirement. Your retirement portfolio is still growing. It is one of those things, though, that as life happens, it is a journey and you are on a path. And money is nothing more than a tool that allows us to accomplish the goals that we have. And if some of those goals are short term or intermediate term, then we ought to use our money accordingly. And so in this season of life, if that's the way that you guys need to prioritize, that's totally okay. You're. You're not going to have a 25% savings rate going towards financial independence and building towards retirement, but you still have something going there. You're still using the financial order of operation. You're still maxing your Roth, maxing your hsa so that even though you're not doing it necessarily by the book look, you're still moving towards that common Goal. And you're not sacrificing these years. They're gonna be so, so valuable in your long term wealth building journey. What about you? What do you think?

[Lindsey]

I think I just get a little bit deflated when I see the 529amount. And I'm just wondering kind of your thoughts about how we would go about getting that up to where we need to be when our kids are old enough to go to college.

[Bryan Preston]

So you would be so we, we tend to overestimate what we can do in the short term, but underestimate we can do in the long term term. In 18 years you can do a remarkable amount of saving. In 18 years you can do something crazy when it comes to saving for kids college. And you've actually lived this.

[Bo Hanson]

Yeah, I mean, like I said, my, my oldest is a junior in college. As soon as she was born, I started setting up doing quarterly 529 contributions.

[Bryan Preston]

And it wasn't a ton and it.

[Bo Hanson]

Was, I was just trying to maximize the tax savings in the state of Georgia at the time because they, they, they actually gave you a 6% off your taxes and it's paid all the way through her junior year. Now she got some scholarships just like your kids will. She got a scholarship that covered 60% of her tuition through achievement. So. But we've covered the rest of it. And then, yes, her senior year I'm going to have to come out of cash flow, but I think that's okay, you know, because realize y' all are looking at life through the eyes of 25 year olds. When your kids are, this level of success, that tuition is going to be like you're just paying it forward to children that you love. You're going to have plenty of resources to make that and you'll still feel well rewarded for starting that fund when they're born. Now look, you might already have the gap covered just because Timmy has already got a fund set up before Timmy's even on the planet yet. But, but I just tell you that's one of those worries that I think is going to fix itself. Be deliberate and active. But also know that your children will probably qualify for some scholarships. You're going to set up these automatic investment plans and the money will be there because that same discipline that's built you guys up to a quarter of a million dollars at 25 is going to be the same discipline. It's going to have college waiting for them and any other financial goals that y' all desire to conquer.

[Daniel]

We definitely need the perspective. So appreciate that so before I give.

[Bryan Preston]

You the homework, what questions do you have for us? What else can we answer that might be valuable for you guys?

[Daniel]

This is a bit of a miscellaneous question about budgeting, but it ties in with as we're setting that up for the future. We've had some tension about how to budget in terms of. Not between the two of us, I mean, but just between two.

[Bryan Preston]

I was like, oh, this is about to be good. We've had some tension, news to her.

[Daniel]

Between the idea of budgeting for what we see in a normal month. And that's kind of how we have our budget set up. Right now it's for two paychecks, which is we each get, we get paid bi weekly, so that's normally what we see. But that actually leaves two paychecks a year out of the budget. So there's this extra chunk of money and like this past year we used that to honestly most of it to put into our like end of the year HSA and 401ks or Roth IRAs to get them closer to the max. But it's just a question of should we be budgeting on the actual amount that we see. Like, like our annual income divided by 12 or what we see in a normal month, just those two paychecks.

[Bryan Preston]

I think the safest way is you budget on the base, like you budget on what you actually see. So if you know you're going to have X amount coming in this two weeks, you budget based on how much is going to flow out in that two weeks. Right? Do it over a month because it's a little bit easier to think about 12, but I would base it on that. And then what happens is, is as you have those additional paychecks that weren't accounted for them come in, that is where you can do some of the other miscellaneous stuff. Hey, I didn't quite get the Roth maxed out. I'll do that. Or hey now instead of having a sinking fund that I built every month, I've got this one extra paycheck that's going to be what we're going to go on our trip with or that's going to be how I'm going to fund this goal. Because if you can make life work on the base when that additional income comes in, it's just gravy. And you don't have to have any guilt about using that for the things you actually want to use it for.

[Bo Hanson]

I look at your expenses as like monthly things and then of course you've got your one offs like the Property taxes, but you're already putting that in a sink fund. But. But then when you think about saving for your retirement, you know, you're getting 26 pay periods. You think about that in the terms of the percentage and then what that turns out to be on an annual basis. So you can do both. Believe me, I've seen your spreadsheets. You are multifaceted, talented. So you can look at your expenses more on the, you know, what do we need to do monthly or quarterly, depending upon how these things hit. But then on the income meaning saving side of it, it. It's okay to think about it in those 26 pay periods and then plan accordingly as a percentage.

[Daniel]

Okay.

[Bryan Preston]

Does that help? Do you do everything on. We noticed you did everything on a spreadsheet. Any reason why you don't use some sort of software or some sort of tracking app?

[Daniel]

Biggest thing is I don't want to pay. We don't want to pay for ebay, guy. Brutal. I also enjoy doing it every month. And then it's something like we can talk about after I run through everything, like, how do we do this month? Where. Where should we adjust? And.

[Bryan Preston]

And do you find that you guys actually adjust? Like if you go over in a category budgeting, do you actually switch your behavior moving forward or you just say, oh, we went over and then you. On.

[Daniel]

It's a good question.

[Lindsey]

More mentally noted. I think.

[Daniel]

Yeah, we not. Yeah, I think that's a good point. We don't do anything super concrete.

[Bo Hanson]

More tracking than fully budgeted, probably.

[Bryan Preston]

Yeah, that's fair.

[Lindsey]

Yeah.

[Bryan Preston]

Well, it seems like you're doing okay.

[Bo Hanson]

I mean, I'm not gonna, I'm not gonna pick on you. I. I would even encourage. I think down the road you guys could graduate to what we call money management plan. The cash management is, Is. Is when. Because I don't like to budget anymore. I mean, once your income gets to a level and you can automatically set up where you. I call it for scarcity, where all the money's going in the places it's supposed to so that you know, you've checked the box, then what's left over you can spend with reckless abandonment, not feel guilty about it. Seriously. Because you, You've. That's what the whole force scarcity is, is if you ever feel like you've like you get a pay raise or something or you get a bonus, you can always allocate more towards the automatic bucket. But then what? You know that what's left is for. For or expanding lifestyle or going on trips and Making memories and doing all the cool stuff so you don't have regrets when you get to be older.

[Daniel]

As we're thinking about how our money is invested in those retirement accounts right now, we have most of it in target retirement funds or like index funds. I'm wondering, is that what you'd recommend? Is there a different way you'd allocate that, and how would that change moving forward?

[Bo Hanson]

I mean, I noticed, like, you're in the vanguard, I mean, way out there, and that's probably. It's done really well. So, I mean, I think in the beginning for sure, because what we like about index target retirement funds, and that's the key thing, is are they indexed, meaning super low cost. Yours is in Vanguard, and all you have to do is think about how much can I save and when do I need it? Because your savings rate is so much more powerful than really anything else. If I got into the minutiae of the asset allocation and they're doing all that for you automatically now, look, once y' all, y' all are going to get there really quick, probably about time you're 30, you guys are going to be getting close to that six to seven figure mark. Well, then, yeah, asset allocation starts making a lot more sense. But, but since these are retirement accounts, you can change asset allocations without tax impact, without any problem whatsoever. In those retirement accounts, we'd rather you.

[Bryan Preston]

Focus on the things that have the largest impact on your financial life, and that's going to be budgeting and where your dollars are going and how much you're saving and what bucket you're saving to efficiently. It's going to be way more valuable than trying to tweak the assets. The target retirement funds are going to be good enough to get you from where you are now to the next stage you ultimately want to be at.

[Daniel]

Okay.

[Bryan Preston]

All right, here's your homework. You ready?

[Daniel]

Yes.

[Bryan Preston]

First thing I wrote down is we got to fix the foo. You guys were kind of like going along and then you kind of like went scatter.

[Bo Hanson]

Foolish fooish. We want you to be in straight foo.

[Bryan Preston]

So what fixing the foo is going to mean? It's going to be maxing out your Roth IRA, it's going to be maxing out your HSA. It's going to probably mean cutting off the 529, and it's probably going to mean cutting off the prepaying on the mortgage and thinking about, okay, we're building those dollars towards some other common goal. Another thing that we want you to do is want you to call your mortgage company and ask them, hey, what options are available to us if we want to recast our payment? Is it something we can already do since we've made a large capital infusion, or is it something we can do in the future if we want to make an additional capital infusion? And what would that look like? What are the costs? The other thing, what you do is we want you to talk about your timeline. All right? We got this plan. We know what five years could look like. When do we actually think we want to do that? When do we want to go to One Income? When do we want to potentially move back to Pennsylvania? When do we want to start a family? What's that look like? And we want you to look at that through the 3D glasses. What's the dream plan? What's the down to earth plan? And then what's the doo doo plan? Doo doo doo plan. And then plan accordingly. And then the last thing I have on here is get excited that you are and are going to be able to continue building your great big beautiful tomorrow. You guys are in, thankfully, an amazing spot. And I think it's only going to keep getting sweeter and sweeter and sweeter and sweeter. Y' all are doing awesome.

[Lindsey]

Thank you.

[Bo Hanson]

This was a lot of fun because I saw so much potential. You're already crushing it. I just want to make sure you're taking in deep breaths, enjoy each phase of your life, which it sounds like you are. So. But just don't put so much pressure on yourself because a lot of this stuff is just going to build itself based upon your good discipline and your good decision making.

[Daniel]

Awesome. Thank you.

[Lindsey]

Thank you, Bo.

[Bo Hanson]

If others wanted to find out how they could also come on Making a Millionaire, what should they do?

[Bryan Preston]

That's right. If you would like to be on Making a Millionaire, you can go to moneyguy.com apply. Or if you want to check out all of our free resources, you can go to moneyguy.com resources.

[Bo Hanson]

Guys, I'm your host, Brian Press Preston. Mr. Bo Hanson. Money Got Team out.

[Bryan Preston]

Making a Millionaire is hosted by Bryan Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of Abound Wealth Management.