Are You Making This Massive Mistake With Your Cash?

[00:05] >> [laughter] >> Are you making this massive mistake with your cash? Couldn't have planned that. >> But, I am so excited because I think a lot of people are indeed making this

[00:18] mistake and they shouldn't be. And I think a lot of times when folks fall into a bad behavior, they often don't get caught in the bad okay, it's okay, it's okay. What ends up happening is it's okay until it's not.

[00:33] And I think what we're talking about today, a lot of people are in that this is the part that's going to keep you from making desperate decisions. It's that margin or layer of protection. But, yeah, we're

[00:46] finding out that most Americans are not respecting this. You know, recently came out, Bankrate released their emergency savings report and there's some really >> Yeah, this first one I think was maybe the most frightening. Did you know that

[01:00] right now 29% of Americans, almost one in three Americans, have more credit card debt, more balance that they are carrying from a month-over-month basis than they actually have in emergency savings. I

[01:15] Brian, about how, you know, the thousand bucks I This is one of the most frightening I think we've shared because I could not imagine constantly living in >> Well, and we're in a trend where it seems to be getting worse. If you look

[01:28] at the fact that and this is another thing that came out of this report is is 75% of Americans reporting having less emergency reserves than they did this time last year or none at all. And I think a lot of people are right there on

[01:41] that razor-thin margin of basically doing all the desperate decisions, using showed to me is that people are using credit cards as their emergency reserves >> Well, and what's really interesting is this says that the emergency reserves

[01:56] has actually been decreasing. If you think about it, just the nature of inflation, what inflation is is that the cost of goods, cost of services increases through time, thereby our burn rate likely increases through time. That

[02:09] would suggest that our emergency fund should actually increase through time. And yet, most Americans are moving in the wrong direction. Rather than their emergency reserves increasing, their emergency reserves are actually

[02:23] decreasing. That means that they get it wrong. And so, one of the things that this stuff, we come across this, we begin asking, "Okay, why? What what was the reason? What was the purpose? Why is this happening?" Uh and they actually

[02:37] had a chart and the question that Bankrate asked was, "Which of the following did you use your emergency fund for in the past year?" And I >> I was actually happy that they put this question in there is cuz when I see

[02:52] decreasing data, I'm always like, "Well, what what changed? Why is it so?" Good question in there. And there were two of these that we wanted to highlight that these that we wanted to highlight that we think are A-okay is 51% actually had

[03:05] unplanned emergency expenses. Well, hey, that's what the money was there for. >> an emergency fund exists. >> one was they were paying down some debt. the financial order of operations, you notice that step three, high interest

[03:18] debt, is definitely before you fully funding your emergency fund. We're A-okay if that's what you got stuck in. We're even there's some gray zone areas, too. I think we put these as orange. >> Yeah, I think I think you mentioned high

[03:32] interest debt. That's the thing it has to be cuz what what this says is this is not specifically say that people were using their emergency fund to pay down high interest debt. They just said pay down debt. And that can be okay if it is

[03:45] a step three thing. But, if you're using your emergency fund and you're paying off student loans, you're paying off auto loans that fit inside of 23A, you're paying off a a low interest rate mortgage, there's a chance that you're

[04:00] you, when it comes to your debt, not all debt is created equal. Some debt should but other debt should actually fall into step nine, the low interest debt part of the food. So, if you're someone in your 20s and you have student loans that are

[04:16] below 6%, perhaps it does not make sense to pay those off aggressively. If you're in your 30s, that's 5% and your 40s, the number drops to 4%. If you're someone followed 23A, you've done what you're supposed to do there, even if it has a

[04:31] higher rate, even if you're a 20-year-old and you have an 8 or 9% auto rate, but it fits inside of 23A, perhaps it does not make sense to pay that off emergency fund. For your 30s, it drops to 9%, 40s, it drops to 8%. And then

[04:46] credit cards are never okay. You should never carry a balance on a credit card, even if it's 0%, you should be paying it off. So, if you do have emergency dollars sitting there, but you also have credit card debt that is rolling over

[05:00] month over month, that would be an acceptable place, an acceptable reason to actually use the emergency fund to satisfy that debt. >> So, now let's look at where are the places people are using their emergency

[05:13] fund that we have issue with. And the first one I thought was, you know, monthly bills, day-to-day expenses. That's that's kind of that's that's more of lifestyle or showing that you're not living on less than you make, you're not

[05:26] financial life. >> Yeah, I think if you are doing that and your day-to-day, month-to-month, week-to-week expenses are coming out of your emergency fund, what that suggests is that you were likely living beyond

[05:40] your means. You're not living at your means. You're allowing your past self that saved up to subsidize the life that the things you want to immediately do is recalibrate. Okay, why am I spending

[05:54] money this way? Where is the money going? Is there a way that I can get my monthly bills or my day-to-day expenses down as low as possible so that I can then be inside my means, not beyond my means. And then if you move on to the

[06:09] next category, now this one, look, we I think it's noble, but remember, you always put on your oxygen mask before you put on for your kids, you put on for airplane, they want you protecting yourself first and that's when we see

[06:23] people helping a family friend or member. It's noble, but man, if you're already in a dire situation for yourself, it could be pretty dangerous. >> discretionary shopping, that's definitely no-no. How about vacation?

[06:37] [snorts] to build a vacation, that's not really a vacation. You're just building up a problem for yourself in the future. And then discretionary expe- means. What is that What is discretionary experience?

[06:51] >> that's entertainment, concerts, those sorts of things. >> That's that's yellow, right? You only live once, go take advantage of that. I whatever, but who cares? I'm telling you, discretionary experiences seems

[07:04] masquerade that I've got to live for the moment. fund for these type of things, what you're doing is you're actually taking advantage of your past self that saved up to subsidize the life that you're

[07:20] things you want to immediately do is recalibrate. So, what's the better way? about this? Well, first you have to recognize why the emergency fund even exists. If you are underfunded, you know, we say all the time, we want you

[07:35] expenses in a fully funded emergency fund. If you're underfunded, what that then does is it opens you up to future financial risk. Maybe you're that person to keep one month of expenses in my emergency fund. And I'm not going to

[07:49] and I'm going to do this and all these other things." And then something happens. The car breaks down, you have the medical expense, you have the job loss. Well, now all of a sudden, this optimized machine that you were trying

[08:02] to operate in your financial life gets thrown off kilter and now the only solution, the only recourse you have is to start swiping, to start racking up to start swiping, to start racking up debt. It really opens you up to serious

[08:14] >> Well, and also I want to say, don't go too far in the other direction, either. have that nice layer of protection by having an emergency fund, but don't go too far with it. I mean, all the time when we're doing episodes of making a

[08:27] financial mutants that are creating sinking funds for the craziest things, like, you know, paying their annual 11 dollars for auto >> registration fees or things like that where you go so far and you add it up

[08:41] the three to six months of cash reserves, but then you have a whole 'nother year of cash just with these sinking funds. Be mindful that you can because that may If that's keeping you from loading up your 401k or loading up

[08:56] your Roth IRA, you might be doing it wrong in the wrong direction. Yeah, and then I think one of the best ways that you can protect yourself is you have to know your own numbers. Are you at the place where you actually understand what

[09:11] your burn rate is? Far too often I'll see somebody uh I'll have a prospect know, 30,000 dollars in cash." I'm like, "Okay, great. How'd you arrive at that number?" Well, okay, well, I you know, I

[09:23] when I set up my emergency fund, I was spending 5,000 dollars a month and for well, how good are you spending right now? Like, what's it cost to live the I'm like, "Oh, 8,000 bucks a month." I'm like, "Whoa!"

[09:36] Just cuz the emergency fund used to satisfy the person you were in your 20s or in your 30s, doesn't mean it's the right amount to satisfy the person you are now in your 30s, 40s, and 50s. And so, make sure that you are keeping an

[09:49] eye on what your actual burn rate is so you know where your true lifestyle make sure you have an emergency fund in place. And then uh the last thing we'll a two-step process. What do I mean by that?

[10:02] financial order of operations dedicated to emergency reserves. Step number one, highest deductible covered. This keeps you from just the emergencies, the bad things from a healthcare, from your auto, you get in a car accident,

[10:16] homeowners, we got you covered with your highest deductible covered. And then free money from your employer, you pay off the high interest debt. We want you to have that three to six months of cash reserves. That's what it's going to help

[10:29] you live your best life and sleep peacefully at night. I love, Brian, that we get to sit in this position that we get to share this kind of information that. You know what else we love? We love when you subscribe. When you click

[10:44] the subscribe button so that we know that you are out there, that you are we're not going to load up tons of content and blow up your feed every time subscribing this channel, it is going to be brand new content, stuff you've not

[10:59] seen, stuff you've not watched. So if you've not subscribed, please do that right now so that we know you're out there. Uh and what we like to do every Brian, is we like to answer questions. That's exactly right.

[11:11] >> We like to load you guys up cuz we really do believe that there's a better way to do money. So what happens is if this is your first time, we have the team out in the wings right now collecting your questions. Make sure you

[11:23] have something you want us to weigh in on, you want to get our take on, you just want our thoughts on it, we would love to load you up. So with that, throw it over to you. We're going to kick it off with a emergency fund

[11:38] question from Heather F since that's what we're talking about this morning. It says, "Good morning. What is the typical time frame of building an emergency fund? My husband and I have been stuck on this step for two to three

[11:50] years. We've had emergencies and it's taking forever to get to step five." Very real question. What advice or motivation or thoughts do you have for I know, Brian, as I've as I've experienced this in my life and as I've

[12:05] also kind of walked through with clients or other young people, often, right? Like a lot of times it takes some time to get there. But the great thing about the emergency fund is

[12:17] it, once you've got that three to six "Okay, I've done it. Now I can focus on the other stuff." And so what's the appropriate time frame or the right time frame?

[12:30] Whatever you can do. I I don't want to suggest that oh yeah okay, you got to inside of three months cuz that may not be the case for you. But I also don't build it up over the next five or six years." Cuz in reality, if it's taking

[12:44] you a long time to build the emergency fund, there is an opportunity cost that you're missing out on having those dollars working. So one of the things uh people is when it comes to making financial decisions, really you have two

[12:57] levers that you get to pull. You can either increase your income or you can decrease your expenses. Well, doing either one of those will help you create additional margin in your life to build up that emergency fund. So I would argue

[13:10] and look, emergencies happen. Unknown unknowns come your way. Things that we unknowns come your way. Things that we did not plan for come to fruition. to use it and then rebuild it and use it

[13:22] and rebuild it, that's okay. Figure out how you can build it as quickly as question, I can tell there's some frustration because they've had some emergencies. I want to reframe this in a little different way is that Heather, I

[13:36] that if you had didn't have this emergency fund that keeps getting used for emergencies, how bad would your credit card debt be? How many bad things would you be now have just hanging over your shoulders if

[13:50] money? I think it's actually it's done exactly what it's supposed to do. It's frustrating to you cuz you're just stuck in in in in step four, but you you want to move on to the wealth building side of step five and six and beyond. But

[14:04] actually had the margin, didn't have to make any desperate decisions because now will, there will be some daylight that comes your way where all of a sudden now

[14:16] maybe you go [snorts] three months, six months, nine months where the sky's not falling anymore, you start catching traction, you start building assets, to do with your next dollar with the financial order of operations. But I

[14:29] it's supposed to do so that you're poised to take the next step to build wealth instead of just scrambling and always feeling in this state of being in Americans are struggling with because they don't have that layer of

[14:44] >> [snorts] >> Heather F, thanks so much for the just the conversation about where you are in the FOO. That's great. Can I say two two interesting things? You ready for this? Yep. One, there's a lot of

[14:57] about you, right? They say, "Hey, is Brian okay? He sounds like he may be thing. I think you should address that. Second thing, a lot of people out there are saying, "I kind of like this Brian voice." They're like, "Could Brian bring

[15:11] >> Let's let's see if we can do something here to show some value with this voice. Okay. Elvaro. Elvaro. >> [laughter]

[15:27] 33, it hit a little differently when that bass dropped in. So people are going to go figure >> go figure it out right now. I gave them enough clues. That's hilarious. Um the reality is is I felt much worse

[15:39] I feel pretty good today. >> But you're not sick. >> Tell them you're not sick. No, I was under the weather. "Hey, you might want to keep a little space for me today."

[15:52] it's a it's a it's a a lagging indicator. It's not actually on the these things work. It takes a little bit to get all the stuff out of the system. What a nerdy joke. I love that. >> be just fine. Do we have cold medicine

[16:05] >> No, I actually know for the sacrifice of the show, I wanted to make sure all the the the supplements I take to make this but I actually avoided the cold medicine so that I could give you all the best

[16:20] version of myself. >> Brian is here today. I like it. >> [snorts] >> It says, "I started a new job and can't roll over my Roth 401k contributions from my previous employer's plan, which

[16:34] is the majority of my retirement savings. What should I do with those savings. What should I do with those dollars if I want to retire at 55?" All slowly to make sure I've got it. I've got a new job and I can't roll over my

[16:47] Roth 401k from my employer. Why? What should I do with those dollars if I want to retire at 55? Well, a lot of times we tell people when you when it comes time to roll over an

[16:59] options. If you've not seen our flowchart, we have an amazing flowchart. You can go to moneyguy.com/resources and download it, what to do with an old 401k. And one of the things we often talk about is hey, be real careful if

[17:12] you're going to roll over a 401k into an IRA rollover cuz if you're someone who's carrying out something like a backdoor Roth conversion and now you have IRA assets, you have now muddied the waters where you have to worry about the pro

[17:25] rata ruling and run into some issues. >> But Tracy's was a little bit different. Hers was asking about Well, it's Roth. She's got Roth 401k dollars. They're not >> So one of the questions that I would have is what is it or why are you under

[17:40] the impression you're unable to roll those dollars over? Uh perhaps what you could do is go open up a Roth IRA at any of the custodians you like, the Fidelitys, the Vanguards, the Charles Schwabs, wherever you want. You can roll

[17:53] those Roth 401k dollars over into your Roth IRA. It's a completely tax-free generate any taxes or anything like that. And then you get to control what you invest in and what you do with the money and where it's at. Now, one other

[18:07] thing that could be happening, Brian, and I wonder if this is the case. Uh perhaps she looked or he or she looked at their account and they noticed there were some like non-vested dollars. And hey, I can't roll it over cuz I

[18:21] Now, it'd be really interesting for that to be the Roth portion. That means that employer money into Roth at some point. But often times when we leave a 401k, we might not have access to all of those dollars. Some of those dollars might be

[18:36] unvested if it's some sort of matching or some sort of profit sharing. And you in there and I'll have those dollars when I retire." That money's not your never going to be your money unless you go back. So even if you roll out and you

[18:49] dollars, those are going to be forfeited anyway. So don't let that be something that is inhibiting you or dollars over. >> Well, I think Tracy, definitely go take

[19:02] legitimately have made it to where you just basically answer questions and follow the flowchart because you're going to quickly decide, hey, maybe your your old Roth 401k was spectacular and you just want to leave it there. Nothing

[19:15] go through the work and make sure it's really a good plan. Or you can twice, cut once, make sure your employer you're sure they don't take rollovers cuz the majority of plans do take rollovers. I would want to confirm that.

[19:30] And if that's not the case and you don't like your old employer's 401k cuz maybe account fees and other things, then yeah, you can I find it hard to believe that you couldn't then go set up a rollover Roth, you know, IRA that you

[19:44] transfer the money in. It's not even really a rollover. You just a Roth IRA. there and do a trustee to trustee transfer. Somebody said may- maybe the issue is the new employer won't accept roll in. That could be that could

[19:58] certainly be a thing. But that's why you can open up a Roth IRA and then you have be mindful of, if you do have two different sources inside your current 401k. Say you have your Roth dollars but then you also have employer money,

[20:11] pre-tax money. Don't just like carte blanche roll all of the assets into Roth taxable event across the employer dollars. Often times when you want to roll those dollars over you have two checks issued or two ACHs sent. All the

[20:26] pre-tax money to a pre-tax rollover, all the Roth money to a Roth rollover. So that way you don't have any unintended or unplanned for tax consequences. >> Where you can roll your Roth portion to an IRA, a Roth IRA. You can do your

[20:40] pre-tax to your new 401k at your existing employer and that way you keep separated. >> That's That's exactly where I was going with. Lost spring there. How many song

[20:52] >> We didn't even try this game but we're doing pretty [snorts] good at it so far. Great. Is anybody keeping score? Well, [laughter] I think I'm at two. Okay. Okay. This isn't a team sport.

[21:06] It's Bo against Brian apparently. Well, Tracy T, thank you for the here and talking personal finance with us today on the show. Ridge Boys? Uh somebody called it Oak Ridge Preston.

[21:18] So yeah, we got some folks out there. They [snorts] were out there. was [laughter] going to say I don't think that voice works for that song. I knew that one. That's three by the way. Oh, man. Well, hey, we're going to do a

[21:31] couple more questions and then we are going to try a brand new segment of the show today. So be sure to stick around for that. But in the meantime get your questions in the chat cuz we're still going to be answering several more

[21:43] throughout the duration of the episode. All right, next one is from Bent Can 14. It says, are sinking funds included in the savings rate? I have 401ks, Roth

[21:56] IRA, and sinking funds. But it feels [snorts] like I'm doing something wrong if I include them in my savings rate just to spend those dollars later. What just to spend those dollars later. What say you?

[22:10] episode is that somebody was telling me that their burn rate was like $10,000 a grand of that is going into sinking funds. You're not really spending that. >> Right. So your burn rate is not $10,000

[22:23] a month. So I don't It depends on the end this year, then yeah, that's not a savings rate. If it's for something like a house down payment, I mean or something like that,

[22:38] we say savings rate, can I be Let me give you the clarifying thing. It's the 25% that with the 20 to 25% depending on how old you are, is really army of dollar bills that's going to work for you in the in the future for

[22:53] are going to be used in the next three to five years and never going to get invested to be part of your army of dollar bills for retirement, then no, I >> Yeah, I I would say that pretty hard line. I do not count sinking funds in my

[23:08] something like saving up for the down payment on a mortgage, that's incredibly novel noble but I can't What I can't say is I'm saving 25% and it's going into my down payment for my mortgage. I think what you're doing is you're saving some

[23:23] number less for financial independence. Maybe it's 5, 10, 15%. The rest of the money is going for this like prepaid expense that you have coming. But when it comes to 25% we want that to be for future financial independence. Sinking

[23:37] funds is more paying for intermediate term goals or short term goals. It does That doesn't mean that they're bad. Doesn't mean that they're wrong. Doesn't means you should do them with the understanding of Okay, this is causing

[23:51] me if it drops me below a 25% savings rate for the future, I'm now living in for what I should be saving for financial independence. I want to get the dollars. I want to have them there and I want to get back to 25% going to

[24:05] my future self as quickly as possible. And that's totally okay. That happens. That's part of the journey. But I want to give the corrective advice that we see people all the time that they use cuz sinking funds are just a component

[24:19] of helping you be disciplined to build the margin in your life so you live on less than you make. But a lot of times they get that that good habit and the good feeling you get from doing that good habit, it kind of gets too good. It

[24:31] too big. And it over it overwhelms your step four emergency reserves. So we find out that people have not only six months of emergency emergency funds but they sinking funds. You know, like, well, wait a minute, isn't that part of your

[24:44] yeah, well, I guess I'm double counting. And we're like, well, yeah, you've got wait you've you've taken a good thing and turned it into foolish behavior in the fact that you built up this emergency cash way too big. And the

[24:57] corrective action is then we say, okay, why don't we take some of those sinking funds that should be part of just your emergency fund and let's actually deploy them into the financial order of operations like into your Roth IRA or

[25:09] other things. There there is a way to correct this that actually does create army of dollars and wealth for the future. But you got to go through the effort of figuring out how much of this is supposed to be just emergency funds.

[25:21] Yeah, a lot of people are asking, well, yeah, well, hold on, wait wait. So towards the 25%? Isn't that a thing you have to we're we're saying if you don't have a fully funded emergency fund and you're

[25:33] past step one, two, three, it should be all hands on deck to fund well, I'm going to save 25% towards my emergency fund and then I'm going to go spend all the rest until I get that No, you should aggressively save as much as

[25:46] you can as fast as you can as hard as you can to get the emergency fund built up. And then once you've done that, that's where the 25% starts. Okay, now and I'm working towards 25%, I've got the emergency fund built. Now I'm going

[25:58] to look at Roth IRA for me, Roth IRA for my spouse, HSA, 401k contributions, after-tax brokerage account. Those are where the 25% happen. Your emergency fund is something that should be like a uh-oh, I got to get that in place. 25%

[26:13] doesn't factor in. That's as as much as you can possibly save to get there as quickly as you possibly can. Assuming you're past one, two, three.

[26:26] acted like you just did a You got squeezed on the um I know. Like throw this in there real fast. This is not rapid fire. Um well, Bent Can 14, thank you for the question. Appreciate you being here.

[26:39] Next one I am interested to see what you say. Uh it's a 23/8 car question from James L. I need to buy a box truck for my next job. Should this follow 23/8? Do

[26:51] I make the eight part follow my current income or projected income with the new job? Thank you. I think it's more of a 3D glasses situation than it is 23/8 thinking. >> assets are completely different. 23/8 is

[27:07] designed for your personal car and and and really we're trying to just keep your ego ego in check with what you can actually afford. A business is a completely different thing because you just you have to make

[27:19] business but you have to make sure you can truly fund it and that's why when I say put on my 3D glasses or your 3D glasses, it's, you know, do the dream Since you do a a five to seven year spreadsheet with the dream plan of what

[27:33] to look like, do the down to earth plan and then don't forget to do the do-do plan of how bad and then put this in there and see if it works and see if this actually makes you more efficient and more profitable and it's good for

[27:46] it's you're you're using the wrong metric on this. Yeah, and and when it comes to like business expenses and spending, businesses and personal finance are different but often times the

[27:58] um principles that we apply to our personal finances, if they were also pretty good for you, right? When you analyze this, think about it. truck and depending on the size of the business and what you have, paying cash

[28:13] is wonderful. Like if you can pay cash and buy that equipment outright, it's a fantastic thing to be able to do. But if that's not possible, then one of the if I have to take on debt to go satisfy this, what's the appropriate amount to

[28:27] take appropriate amount of debt to take on and how does that cash flow affect little bit different than just, okay, what's what am I doing for my personal finances cuz I don't know how long this box truck may last. If box trucks for

[28:39] you last 10 years, then that's a great thing. If you have to replace these cuz years, well, then it's a different metric you're going to use to figure out what's the appropriate way to fund that expense. So you

[28:52] principles to business but business >> I think you make a good point is you don't want to people get themselves in trouble sometimes. You're going to be able to

[29:05] take accelerated depreciation and get a huge deduction when you in the year that you buy this box truck. You just need to make sure that your financing aligns to because what you don't want to do is what Bo is saying is that you you

[29:18] finance this thing over six or seven years but yet you ride it so hard that it's basically worthless in three years. You realize what you've just created is a bunch of negative equity that hurts you. So it is your friend. Nothing wrong

[29:31] with using a little leverage but make sure that it matches up nicely. I prefer the the shorter the day the the use of leverage the better in the in the in the leverage the better in the in the in the health of the business in the long term.

[29:47] think through it not just as a vehicle decision, but also as a business decision. So, thanks for the answer, guys. Can I throw Can I throw another are just hitting me. Great. >> Um far too often I see people who have

[30:00] like this unbelievable metric when it comes to their personal finances. Like, And it's almost like they lose out on the business side cuz there's these guys of, "Oh, it's deductible." >> I was thinking [laughter] the exact same

[30:13] friends who their personal balance sheet looks fine. When I look at their you Why do you have all these lines of credit? Why do you have all this debt? It It's It's interesting how it's disconnected. Yeah, there's like a

[30:26] >> what's funny is I'll watch somebody who's cheap with their personal life, but then they'll say, "But I can spend $110,000 on this piece of equipment business." And I'm like, "Yeah, but you you realize

[30:39] essentially if you say the taxes are 30%. You're still having to come up with these 70 cents on the dollar. So, if you overspend $50,000, overspend $50,000, and you multiply 50,000 * 70%, you can

[30:54] say you still pulled $35,000 out of your future back pocket. >> And and not even taking into account the carry costs and all the other things that go into it. So, don't let the Just like we say, don't let the tax tell wag

[31:06] the dog. You know, don't let the deductibility of something make you make bad decisions. You Realize every dollar should be viewed as a dollar bill in just if you have that visual, you'll think about things differently.

[31:20] >> great add-on. >> Thanks, Rafe. No, it is a good one >> man. It's so nuts. >> I mean, I've had I've had friends and [laughter] I'm going to go buy an airplane Oh, cuz so that I can cuz I can

[31:33] rent it back to a flight school, and I can take all this practically be free." And I'm like, "Huh, I bet there's many business owners or so many people that that want to be business They like

[31:46] course. Ooh, let me go get some deductions. Being able to deduct expenses is It's like It's a feature. It's not the main thing. Like, it's it's thing that you can do for realistic expenses, but some people just lose

[32:01] their minds. Oh, I can deduct. I can And they get themselves in a world of hurt with very little liquidity and a whole lot of debt. And that's just That's not always think in the long term is that if I'm going to be successful for the long

[32:13] term, there's going to be probably 2 years out of every decade that it's just And you should if especially as a small business owner, you should be naturally double scared. Is that I've got to position myself in a way that when the

[32:27] position myself in a way that when the bad times happen, I haven't been so willy-nilly with my decisions that I put myself in a really desperate bad moment that's where failure occurs, and that's where you get yourself out of in a hole

[32:41] you can't get out of. Yep. Very good stuff. Thanks, y'all. Um okay, it is time to introduce our newest segment to add to Ask the Money Guy show. It is called From the Wings. The content team from the Wings has put

[32:56] together a list of current or recent headlines for Brian and Bo to react to and By the way, they they did not share any of these with us, so I have no idea

[33:08] what they're going to say. You know, I current events is not my strong suit. Oh, yeah. They're all Well, you'll see. Anyway. >> took that into account that you're you're barely [laughter] literate.

[33:20] I'm just kidding. By the way, Bo's a CFA. He's actually very literate. I can neither read nor swim. Oh, my god. No, you definitely can read. No, I never take away from your IQ.

[33:32] You're You're extremely You just don't choose to By the way, Bo's leaving for the beach soon. Literally, yep. And I asked him I trip?" What was your answer? And he says, "I'll just sit there and watch the

[33:45] says, "I'll just sit there and watch the ocean go in and out." And I can't wait. >> It's going to be wonderful. Just raw >> Um maybe I'll take a a a copy of Millionaire Mission with me. Maybe I'll

[33:57] >> that book. I have read that book. You've read that book. You've edited that book. >> All right. Well, let's dive into some headlines. So, you tell us first of all, is this news or is it noise and we shouldn't pay attention? And then give

[34:11] to it. Are you ready? >> No timer. Just like our thoughts. >> [snorts] >> More relaxed segment. We'll see how it >> Bo, you can go first. The first headline says,

[34:23] about this. SEC approves plan to remove day trading SEC approves plan to remove day trading limit for small investors. Um SEC approves plan to remove day trading.

[34:38] Well, that just sounds bad, right? Uh One, I am not a huge fan of day trading. I don't think there's a lot of success more like gambling. And when I read this headline, it says SEC approves plan to

[34:50] remove the limit for small investors. I mean, if you're a small investor, uh we're going to raise how much you can trade on a daily basis if I'm saying. Now, I want to be clear.

[35:03] >> First. >> That's the first thing. And then your was correct. >> Uh >> For for for our purposes, noise. I was trying to explain it, but for our

[35:15] >> No, I don't think that's noise. >> What What I imagine is when it called probably not talking about retail investors. It's probably talking about small institutions. It would be my guess in terms of that, but either way, it's I

[35:28] think it's noise to our audience. I mean, I think it's noise because if plot. Mhm. >> So, I would I would not do it. Now, I don't know the merits of this. I haven't read this article, so but it

[35:41] protections out there to keep people from themselves, but um I'm going to tell you a financial mutant is not day trading. It's a By the way, not only is it a fool's errand, but also you'll create a big burden for yourself when

[35:54] you do taxes. Um and it's just I just don't I don't think it's that momentum play is not as effective as people think it is. And down at the poker table, if you don't know who the fish is at the

[36:06] table, then you're the you're the fish. >> Mhm. It's the same way with trading. when you go with these brokerage companies, you realize a lot of the big fish are paying for access to those investors

[36:21] because they can they can play on the other side of it and make more money. All right. Next one, is this news or noise? Stock market notches one of its fastest turnarounds in years from Yahoo Finance. Ooh, I got a thought.

[36:36] I mean, these are all noise. I I saw this one as it came across, and it's because, you know, with all the geopolitical stuff going on, it's like It's like, "Kabush. Kabush. Kabush. Kabush." You know,

[36:48] on with the straight. And if it's an open, is it closed? You know, what did the president say? It's all noise. Just, you know, know where you are in the financial order of operations, and I think you will be A-okay. It's okay to

[37:00] pay attention to this stuff. Um just because like I said, when the market's down 20%, I want you to know, hey, what do I do to maximize this moment? And we hit all-time highs, that's also it's good to know what's going on in this

[37:14] moment, but this is still noise to me. News. >> in one-to-fight territory? Let's hear what you say. Uh I think this is news. I think you should pay attention to this uh because it is a reminder to us how

[37:28] quickly the market can turn. How quickly something can shift, and all of a sudden things are scary scary scary scary, and there's a rapid turnaround. I think you that should tell you is, "Oh, man, if I'm one of those people who gets real

[37:40] going to I'm going to sit on the sidelines, and I'm going to wait for back in when things feel a little more comfortable.'" It doesn't often happen that way. It often happens in a V-shape. It hits the bottom, and it bounces right

[37:54] back up. I think you should pay attention to this that 2 3 weeks ago the headlines were terrible and scary and horrifying, and now they're oh, turnaround. Things are great. You want to be careful being on the sidelines

[38:08] when that happens. So, I'd say, pay attention, remind yourself when things are bad, they could just as quickly become good as they became bad. >> And ABB. Always be buying, baby. >> Boom. All right. Good good takes. You

[38:22] there. I like it. >> It's fine. I think he said that just to >> [laughter] >> He's about to go on vacation, so he into me a little bit. All right. Next one says, uh tell me, is

[38:36] it news or noise? Why adjustable rate mortgages are making I I think that's I think you could use >> [snorts] >> a lot of times, you know, look,

[38:49] Americans, we always lock ourselves into to 15-year 30 primarily 30-year mortgages, but a lot of times, people, you know, we found out in our most recent housing show, people flip houses every 12 years. That's the considered

[39:02] the long term, but a lot of people, like if you know you work for a company years. >> Mhm. Um understand what those financial products cuz you might be paying a premium for

[39:14] the benefit out of. >> Mhm. So, paying attention to what's rates is important. >> There was a There was a long time. I probably a decade or so where adjustable rate mortgages just didn't make a whole

[39:27] lot of sense. Fixed rates on 15s and 30s were so low. If If you were getting an adjustable, you were kind of just being foolish by not locking that in. That's a >> Now that rates have come high, and adjustable rates are somewhat

[39:41] attractive, assuming that you're in the right position, right circumstance, you understand what you're doing, an adjustable rate mortgage could indeed to know what the risk is. With adjustable rate mortgage, whenever that

[39:57] 5171101, whatever that is, whenever that ends, know what you're going to do and when you're going to do it and how you're going to do it or what you're going to do before you get to that place, but we

[40:10] always want to know about what products are available and what tools we might be can determine if it makes sense to use those or not. adjustable rate, go ahead and do the the work of reading the fine print to see

[40:22] what is your exposure when the rate adjust at the end because sometimes it's you're like, okay, if I get stuck and I'm in this area longer than I thought, that it can only go up this much each >> increase in the adjustment

[40:36] >> as big of a risk, but then other times you're like, holy cow, that's a that's a risk that I probably I better either make sure I'm not here any longer or you know, or be very cautious about using this product. Go ahead and read the fine

[40:48] print on that so you know what's happening at the end of this term just >> Yep. Good discussion. All right, overall newsworthy. All right.

[41:01] I don't think you're ready. Uh I need to know, is this news or is it noise? The world's oldest octopus fossil

[41:13] isn't an octopus after all, scientists say. know afterwards, we're going to find out which team member put this in there so >> from the wings. >> I I want to know what is it? Is this

[41:27] was not If it's not an octopus >> quote from the article. It says, this has too many teeth, so it can't be an octopus. And that's how we realized that the world's oldest octopus is actually a

[41:39] fossil >> what it is. I give this news because now when you go to your weekend dinner party or you're hanging out with your relatives or your buddies, you can be like, you know what? That oldest octopus

[41:51] did you hear? It's kind of like Pluto. It's not a planet anymore. >> No, that's bad. Ain't Pluto back? It came back, right? I mean, these are the most intriguing person at your dinner party.

[42:03] Octopi have teeth? I didn't actually know that they had teeth. Are they are >> Not as many as this fossil had, apparently. I Now you know. Now you know. You can't say you loved this livestream

[42:16] bet you that was not on anybody's bingo card. [laughter] put in the comments if you already knew that or if that if that came across your newsfeed cuz you you're in the right place. Has been from the wings. If you

[42:30] have a headline, article, something happening that's related to personal to react to in this segment in the future, drop it in the comments of this we will check it out. >> I I think I like this segment because it

[42:45] encourage because we have so much volatility going on. Um not that I'm trying to influence our team, but y'all should sometimes like Yahoo, they give me notifications like the sky is falling and I'm like, are you freaking kidding

[42:58] half a percent, but they have this crazy scary headline. I think those would be useful to kind of cuz every now and then I tweet with if and say, look, this is why you have to be careful with you letting your head

[43:11] >> last time you tweeted? I mean, it's probably been a year or two, you know. doing this over 20 years, you you you you know, it all runs together. Do you >> he was researching that. >> Octopuses don't actually have teeth,

[43:24] They have what? >> Beaks. Like a duck like a bird. Our chat said it, I Googled it, it's a thing. They beaks. I was this many minutes old when I

[43:37] >> So here's what I I'm sitting here thinking, I I eat calamari, which is squid, right? Mhm. But then octopus, I eat its tentacles cuz if you go to fancy restaurants, they actually serve you like an octopus tentacle. I just think

[43:51] it's interesting cuz this is all still part of the food supply. That is interesting. Interesting. Um Yeah, by the way, we're probably >> did say uh quote, "Doesn't matter because I'm not going in the ocean, Bo,

[44:05] >> [laughter] >> That's true. That's true. Uh what I think is wild is um I was I was at soccer practice uh cuz this is at soccer practice and I started getting my phone started buzzing and I was

[44:19] moneyverse. And this was like 7:00 p.m. at night. It wasn't like a live and Hey, what and I was like, you know what? I'm going to dive right in. And it was wild. Even at 7:00 p.m. on a Wednesday night, this was last week, we still get

[44:33] not checked If you've not checked out the moneyverse, moneyguy.com/moneyverse, it is like a 24/7 livestream where not only do you get to interact with us and yes, Brian is in there. There's a whole thread about

[44:47] thing, I'm kind of playing the part of just I've been nervous to post. >> Why? I don't know. I'm just new, I'm think >> think that you're lurking and they're

[45:00] you're posting under a pseudonym. >> see me. I haven't posted anything. got to listen. A lot of people think that you have a So like there's some folks in there like penguin or Mr. Sky or panda or all these

[45:16] folks, they think that you are that person pretending not to be you. And I had to tell them it's not No, I haven't been lurking. I haven't been posting. So if you If you've not checked out the moneyverse,

[45:31] There's also unbelievable celebrating milestones. I've lurked the most in in the celebrations. I think it's really cool. >> It's awesome. Um I just feel weird about jumping in on some of that stuff.

[45:44] Y'all need to educate me. You never know. >> Maybe hold my hand as we do it. >> [laughter] Well, you want to answer some more personal finance questions right now? I

[45:56] All right, we got >> say, can I say one more thing about the moneyverse? >> Of course. So my my daughter, she like a 2 weeks ago or something like that. It's a big deal.

[46:08] >> And um and he he heard that we had like this Reddit thread. I guess with the youngsters, this Reddit stuff is legit. moneyverse was and it was like, whoa. Do

[46:20] Reddit or Discord? Discord, I'm sorry. >> Discord, yeah. No, but our Reddit thread >> Whatever moneyverse is on Discord. >> That's right. Yep. I showed him cuz I'm a lurker, so I have the app. So I showed him the thing and they were

[46:34] their their mind was like It's It's literally like So for the youngsters, >> And what's great is there's [laughter] there's always people out there. Like somebody's thoughts, you want to celebrate something, you just want to

[46:46] I just paid off my car. I can't tell my family and friends cuz it seemed like I was bragging." You can come tell the moneyverse and we love to celebrate with you, we love to be excited for you. It's a cool thing. So if you've not checked

[46:58] I'll It's awesome. moneyguy.com/moneyverse. >> There was some bench press content in there this past week, which was awesome. It's cool. By the way, that's this stuff

[47:11] just surrounds Bo. We had a we had a we did recorded a making a millionaire and max? >> [laughter] Always. All right, speaking of questions,

[47:23] Brandon S has one for you. It says, "My company matches 6% and offers both 401k company matches 6% and offers both 401k and Roth 401k. I'm currently doing 12% in the 401k and 3% in Roth 401k. Is there a guideline on what I should

[47:39] contribute to more? Should it be a 50/50 split?" >> [clears throat] >> can you let us know your household One, I love hearing that you're getting the full match. It says, "My company

[47:55] matches six." And so I'm assuming that if you're putting in 15% total, you're number one, Brian, will you hold that thing up for me? You are hitting step number two. You're getting the full employer match. You're

[48:07] question you have to figure out is, okay, if I'm going to put more in my 401k, should I do Roth or should I do pre-tax? And in our opinion, it probably most likely depends on what your tax situation looks like. Yeah, this is but

[48:21] majority of time. I don't want to say always. It's nothing This isn't bad, but it's not maximization cuz typically once we threshold that you're a high income, high tax situation,

[48:36] you would do 100% into traditional. Um if you're one of these people that's young and you're in a low tax situation and you want to maximize the the the tax-free growth of the Roth accounts, you'd be 100% on the Roth side of

[48:48] things. So that's why if you if you go deeper into our content, you'll see we're typically instead of dabbling in having feet in both sides of this, you need to to squarely do the exercise of figure out where you are from in with

[49:01] the tax system and where you are the savings and compounding growth and make the decision, are you Roth where you get tax-free growth over the long term or are you traditional, you know, where you take the tax deduction now, but you get

[49:15] pull it out in the future, you pay in ordinary income tax rates on it and you tax arbitrage situation in retirement because maybe when I'm no longer have my because maybe when I'm no longer have my earned income in my total income, my

[49:30] and I'm once again back in a low tax rate and I can do an arbitrage in the future to take advantage of the lower tax rate in retirement. >> Well, Brandon S, thank you for the question. Appreciate you being here.

[49:45] Next one's from Sherry. It says, "I'm on track for Coast FI. Should I put continued savings in a brokerage account or in a Roth IRA because I can always access my contributions if I need the money?" What

[49:58] >> This is a good question. I mean, I'm going to give off the cuff. Mhm. By the looking at the three bucket strategy of Roth accounts, which are tax-free growth, tax-deferred, which, you know,

[50:10] tax-deferred, and then you pay ordinary income tax, or after-tax, Roth is always my favorite child. Mhm. Because they have a huge legacy component to them. I love that you get to stick it to the man

[50:23] and potentially grow a seven-figure tax-free account. There's just a lot of benefit, and once again, she is exactly right. You can pull the basis out. whole account out after enough time. Yeah. If you're on track for Coast FI,

[50:36] so the idea of Coast FI is I'm going to save, save, save, save. I'm going to to just let that pot of money coast until I get to full financial have grown to be enough. Well, I'm going to argue if you're

[50:48] already on track for that, you've probably been saving really, really So, if what you're asking is, "Okay, while I'm in the coast phase, I just more." I agree with Brian. I love the idea of

[51:03] putting money in the Roth. Not because you can get access to your contributions tax-free and penalty-free before 59 and 1/2, but for the reason that it grows tax-free, and tax-free growth is really, really awesome. Now,

[51:17] you know you're going to exit the workforce early, and it's going to be and you're going to have to have access to dollars. While yes, you can access I don't know that that's the best choice because now, again, if you're pulling

[51:33] because now, again, if you're pulling out of your Roth at age 52, 53, 54, you are shortchanging those dollars 10, 20, maybe 30 years of tax-free growth. What I'd rather see you do is put money in the Roth, let that grow, let that be the

[51:47] money that you pull out much later in life after it's grown a ton, and also fund that after-tax account so that when you're at 52, 53, 55, whatever your number is, you can then begin to pull dollars out of that after-tax account,

[52:00] one, I don't think it's It's not either/or. I'd love for you to do both. This is not an or question. This is an and question. It's because we know for next endeavor,

[52:15] this is just the Coast version of FIRE. Yep. Is that most people to be part successful in the FIRE movement, you have to have a savings rate beyond 30%, and because people have savings rates sometimes 30, 40%, you're going to blow

[52:28] accounts. You're going to blow through what you can put into a 401k account, and that's why it's a perfect setup for people. That's why it's always step these things. Load up that after-tax account because that's going to be your

[52:41] bridge account for anybody who's retiring between 50 to 55, you're going assets because that's going to be the easy money to pull out of without you kind of losing sleep on the fact of, "Yeah, I could get access to my Roth

[52:55] basis." But man, oh man, is that an incredible legacy-building thing to let those Roth assets. That's why you love this child so much, this Roth account. This is typically the accounts you're going to fund first and then try to die

[53:10] with it so you can leave it to your heirs. That's right. That's exactly >> They like that question. Good question and great answer. Thanks so much for All right. Next question is from Touch Top Notch

[53:26] MUSA, I think. It says, >> give a plug? No, I don't think so. This is just a bunch of letters I was trying to make sense of as a username. But, um okay, the question is, "We're 30 with a

[53:39] newborn. I have a bit over one times saved. My wife has under 20 has 20k under one times. On FU Step 5, should we focus on

[53:51] catching her up or continue equal percent investing? I make about 30k more than her in salary." Th- This This is I already see the problem. Well, so it hit some of our milestones. One of the milestones, if you've not If you're not

[54:06] this before, we think that by the time you get to age 30, we want you to have one time your annual household income saved in investments, not net worth, but Well, if you're at one time on your end, and

[54:22] she's at almost one time on her end, what that means collectively is that y'all are at almost one time as a household. My opinion is, and I only say opinion because I don't want to like project my bias onto you, but when it

[54:37] hitting these milestones, I think rather than thinking about, "Okay, you need to one time, and then I'm going to get to three times by 40, then you're going to get three times." If we can think about it as a household, and think about total

[54:49] household income, then what we're able to do is when we approach the financial order of operations, we can save in the most efficient and effective manner possible cuz let's assume that you have access to a 401k, and she doesn't have

[55:03] access to a 401k. What does that mean that you should just not put a ton in your 401k, and she should just start doing after-tax? Maybe not. That's going out of whack. So, if you can think about it as a household, lay out all the

[55:17] income in front of you, then lay out all the accounts and vehicles you have at your disposal, then pick and choose, "Okay, which ones make the most sense for both of us collectively in the household to achieve those goals?"

[55:31] >> Look, when when I when I have a couple come to me, and a lot of times like go have complications, whether they have children from previous marriages, they go have assets that were built up because, you know, earlier in life, and

[55:45] or maybe they inherited some assets. There's complications out there that then just because of the legacy of what you've built already in the earlier parts of your life, separate assets makes complete sense, and we protect

[55:57] clients with that. However, I do think when two become one through marriage, set up a joint account, and the money coming into the household should be should be making collaborative joint

[56:12] decisions because, by the way, you just had the key point in there. What was it? your spouse? That already is going to create a strange power dynamic, and saying, "Well, I'm doing what I'm supposed to be doing, but

[56:27] yet she's underfunding what she should be doing, and by the way, I make $30,000 more a year than she does." Do you see the double whammy of the power structure you just created there where Is that Is that healthy?

[56:41] And I don't I don't think so. I mean, I know that Look, when we get in fights, you never talk about divorce. You also, in fights, we never talk about who makes what money because the power has to come out of who

[56:56] makes what in a relationship. Otherwise, this is just going to get worse and Um and I get it. I mean, we've had guests on, and I have bias. I don't even try to hide it. Is that um I I think two should become one, not

[57:10] just for the the marriage bed, but also for your checking account. >> Love that. Well, really good questions today, about. >> Wow. I [laughter] felt like boom.

[57:25] Where's that mic drop emoji? >> and we just threw that bad boy out up in my face. >> so confident. I was like, "And with we'll go with it. >> Let's wrap this thing up.

[57:39] >> Boom shakalaka. Boom shakalaka. But truly, let us know what we should include in our next From the Wings segment. Thank you so much for getting stream, even though we turn off the cameras

[57:52] moneyguy.com/resources is full of free stuff just for you all continue to have discussions and ask questions in the Money Verse at moneyguy.com/moneyverse. Guys, thanks for putting up with my

[58:06] Barry White voice today. Um hopefully, I don't even know how this this sounds through the through the microphone. See how it modulates. See if that bass is is

[58:18] is as good as I'm hoping. But we'll we'll play it out. Not only can you get entertained from what's going on with our voices, but also with the what our knowledge is on personal finance. I'm your host, Brian, joined by Mr. Bo Raby

[58:30] and the rest of the Money Guy crew. Money Guy out.