Grow Your Money Faster With These Wealth Accelerators

[00:01] how. >> And Brian, I am so excited because today that can speed up your wealth-building journey. And stick around to the end because we'll cover some advanced ways to grow your money even faster.

[00:16] >> So I'm Brian, he's Bo, and this is The Money Guy Show where two financial advisors help you modify your money with financial nitrous oxide so you can Tokyo drift your way to wealth. I said that. And with that, let's launch.

[00:37] wealth accelerators. And when we say accelerator, we mean anything that can help you grow your money faster without gambling, speculating, or skipping steps. And as we thought about how to lay this content out, they really fall

[00:51] into three general categories. There are things that can provide more fuel, there are things that can provide less drag, and there are things that can create on this, more fuel, those that help you

[01:04] generate more money to invest. Talking about drag, these help you stop losing money and the momentum you're hopefully building. And then of course, on the system side, these are to help you navigate money decisions to stay on the

[01:16] wealth. >> All right, so let's start with the first one, Brian. Let's talk about the accelerators you can do that can provide more fuel. These are things that you want to maximize and that you want to

[01:28] increase. And the first one I think is no surprise if you've been listening to our content for any amount of time, increase your savings rate. >> Yeah, by the way, we we lean in heavily on discipline on you've got to live on

[01:42] less than you make. If you can't do this, you're never going to be on the journey to building wealth. >> Your savings rate is likely the number one metric that determines and defines how quickly you can build wealth. And if

[01:54] If want to see this in real time, if you want to really understand what this looks like, check out our compound interest calculator. So, let's [clears throat] say that you're earning $100,000 a year and your goal is to save

[02:06] 10% of your income. If you divide that out monthly, that comes out to $833.33. If you could invest that amount for a 30-year period, and let's just say that on average you earn a 10% rate of return, do you realize that at the end

[02:21] of that period you would end up with over 1. 8 million dollars. And you would reach the $1 million dollar mark after 25 years of investing. Now, that is just

[02:33] assuming that you save 10%. Imagine now, what if you would save 25% of your income? That would come out to a little under $2,100 a month. If you did that same savings over a 30-year time horizon, again,

[02:49] still earning a 10% rate of return, you would end up with 4.7 >> Now, look, there's a lot of people that say a million dollars isn't much money. I disagree with them, by the way. But

[03:03] I mean, that's the type of money we're talking about the level of wealth where withdrawal rates, you're doing tremendous things in retirement. Increasing your savings rate from 10% to 25% allowed you to cross the $1 million

[03:21] dollar mark eight years earlier. Because you increased your savings rate, your army of dollar bills is growing faster and faster and faster. So, your savings rate is by far one of the biggest impactors you can have to your financial

[03:34] >> So, we want to encourage you go out to moneyguy.com/resources, calculator. >> And while you're saving, we want you to shoot for a 25% savings rate. Why do we say 25%? Well,

[03:49] the truth is, Brian, a lot of people don't start their savings journey super >> Yeah, we we've known from our own research is that the typical American doesn't even start saving and investing until they're 30 years of age. And then

[04:01] if you start saving and investing at 30 years of age, even at our healthy 25% more than likely not going to have independence until you're age 60. So,

[04:13] aggressive savings rate. If you want to personally know what your savings rate should be, we'd once again encourage you to go try out our free resources. Go to We have the option for you to see exactly what you need to be saving for

[04:28] right, so you're sold and you want to your savings rate, but how do you do it? You can't always just save more. You have to be able to pay the bills and meet your expenses. So, what's the next

[04:43] accelerator that you should you should tap into? Well, we want you to maximize >> Yeah, a lot of people have already kind of I've given a little bit of a prelude on this is I said you have to live on less than you make. Um if you're ever

[04:58] going to build wealth. The problem is most Americans, they never reach that margin. If you look at this, 57% of Americans are living literally >> And as you imagine, the less margin that you have, the less difference in what

[05:11] you have coming in and what you have going out, the less money you have to move towards other financial goals. So, when it comes to creating margin, there really only two levers that you can ever pull. You can either figure out how do I

[05:25] make more money, increase my income, or how do I spend less money, decrease my >> So, we're going to come back to the spending less money, but right now let's spending less money, but right now let's focus first focus on earning more money.

[05:38] >> Yeah, your income is likely your greatest wealth-building tool. How big your shovel is dictates how much margin you can create. So, the bigger your shovel, the bigger your margin, the more margin, the more rapid you can

[05:51] accelerate your wealth building journey. >> This is one of those things where when do you feel about education? What do you feel about going and getting some credential?" I'm always like, "Look, if you can first do the cost of benefit

[06:03] return on the investment. But, if you definitely can go back to school and increase your income without running up a bunch of debt and other things, go investments that are better than you investing your ability to make more

[06:18] income." >> And if if you can't go out and add a new skill or a new credential or increase your education, maybe consider starting a side hustle, some sort of freelancing or consulting, some way to generate

[06:31] income on the side in addition to your day job. Because again, if the goal is to move one of the levers and increase income, perhaps spending some of your extra outside of work time generating income is a great solution.

[06:44] you a few examples on how to increase your income and or add more fuel. All these things can work together. You can You can side hustle. You can go invest in your own education. You There's all these things. We're just trying to help

[06:58] you increase your savings and investment rate so that you can increase how fast goal. >> Now, remember, these accelerators fall into three categories. There's more fuel, less drag, and then there's

[07:12] building better systems. We just talked about more fuel. Now, let's talk about the next wealth accelerator, which is less drag. How do we minimize the things that slow us down on our wealth building journey? And one of the very first

[07:26] things that we want you to consider minimizing is minimizing your debt. >> Yeah, I feel like this is the first trap that most Americans fall into is that they Hey, we get it. You've been in school for a gazillion years. You You

[07:38] start actually getting your first real adult job. You feel like you ought to be rewarded or celebrate that. So, people go out there and they either run up credit card debt, they go out there and they get a car loan. You need to be

[07:51] scared of debt. If you're using debt and you're not scared of it, you are using it wrong. That's why we literally say debt is chainsaw dangerous. >> can be napalm to your financial life. So much so that right now, according to

[08:04] Northwestern Mutual, 35% of Americans, so one in three Americans say they are carrying close to or at their highest level of debt that they have ever carried. Americans right now have a consumption problem because

[08:19] they are allowing their present-day selves to borrow from their future selves and subsidize lifestyle today. If you're doing that right now, you're >> If you fall into this debt trap, they charge such predatory rates on a lot of

[08:34] ahead. So, that's why we definitely want avoiding this high interest debt, especially if you can. thing we actually have the financial order of operations. It says if you do

[08:48] number three. So, we want you to pay that off as quickly as you can. And once avoid it at all costs. That comes That's the consumption. That's the decisions

[09:00] that you make on a day-to-day basis. But, we also, when it comes to buying large life decisions that you're going to make, we want you to follow our Money Guy rules for buying big things like vehicles or homes.

[09:13] cars. I told you, these are the traps that people fall into. first wealth-building opportunity is going to be getting to your job reliably. And we want to encourage that you have a car, not just a jalopy that

[09:28] you have to do your little rain dance hoping this thing cranks up. We want you to have reliable transportation. And for a lot of you, if you don't have you're probably going to have to follow our 20 3 8. What we say when we say 20 3

[09:44] 8, what we mean is you're going to put down at least 20%. You're going to pay the car off within 3 years. That's going to keep your wallet very sober so that you don't let your ego trying to get you to buy a car and fall into that trap of

[09:57] financing it for 6 years, 7 years, and beyond. And then we don't want your gross monthly payments to exceed 8% of your monthly income. Now, there are two you don't get to do 23 8. You got to pay a luxury car off in the same year that

[10:14] you bought it, inside of 12 months. And as a rule of thumb, your car payment investing on a monthly basis. If you have a $1,000 car payment, but you're saving $100 a month for your future self, you are doing it wrong. So, most

[10:29] Americans don't make the car decision well. They also don't make the house decision well. And it's gotten even more difficult as we've seen home prices increase and interest rates go up. So, if you want to make sure that you are

[10:41] staying inside the lines when it comes to buying a house, follow our 3 5 25 you'll have to put 3% down. We want you to make sure that you're going to be in the home for at least 5 to 7 years. And we don't want your total housing cost to

[10:55] exceed 25% of your gross income. Now, realize in upgrade because you have a growing family, we want you putting down 20% on the second home. But we do have very, very approachable rules on that first

[11:10] home purchase cuz we understand in this crazy real estate marketplace, it is running for you. So, we give you a lot of grace on that down payment. But don't feel like you have to force it. We've done shows on is it better to rent

[11:23] versus own. Do your research. Measure twice, cut once cuz in a lot of American cities right now, it's actually cheaper to rent than it is to purchase because the rent the person that's renting the house probably bought that house at

[11:36] that house for. And they also got interest rates that historically just are not around at this moment in time. All right, so we're talking about how do reduce drag, reduce friction in our financial life. We already said that we

[11:50] want to minimize the debt that we're incurring, but even further than that, we want you to minimize your expenses. Remember, we have two levers that we can pull comes to impacting our financial life. We can either make more money and

[12:03] increase our income, or we can spend less money and decrease our expenses. Well, decreasing our expenses is one of the things that we have the most control >> Yeah, this is why we love people to track their spending. A lot of you, when

[12:17] you're trying to build that muscle memory of how you handle money well, you budget, but I think you have to do it in the beginning so you can find out where things are leaking, so you don't fall

[12:29] >> Yeah, if you can find Like, often times to know where my rent is. I'm going to know what my grocery bill is. I'm going to know what my fill-in-the-blank is." And that's fine and good, but as time

[12:41] goes on, as life gets more complicated, a lot of times when you're in the messy middle, you might recognize stuff just kind of sprouts up and things kind of happen. And all of a sudden, you start having money falling out that you didn't

[12:54] signed up for that Hulu subscription cuz I wanted to watch that one football game, but then that football game passed and I never canceled it. Or man, my I watch this PBS special and it was six bucks, but now they can't watch it

[13:07] anymore. And all of a sudden, you have these money leaks that are just happening that you didn't even know were going on. So, if you can start tracking, if you can start seeing those dollars leave, it's going to allow you to start

[13:19] >> Well, I'll tell you, a lot of us even have mystery subscriptions. So, go and credit card statements, look at your monthly bank statements, see what the outgoing things are every month so you can figure out if there's ways that you

[13:33] can definitely plug up those leaks. And then also, I want you cuz what what's interesting is we all in high school are so insecure and you get into adult life and you think, "Hey, I'm not going to be insecure anymore um because I you know,

[13:46] out, wait, no, there's still a lot of like we have to keep up with the Joneses and that's why I would really strongly your life. You can avoid lifestyle

[13:59] have to try to keep up with your peers to impress people who probably going on. >> A really good way to combat lifestyle creep is as you have uh bonuses or pay increases or pay raises, think about the

[14:14] 60/40 rule. It's okay when you get a raise or bonus if 60% of that money goes financial order of operations, and then let 40% go to lifestyle. If you do that, you are going to make sure that your lifestyle does not outpace your savings

[14:31] rate. If you can do that, you're going to keep yourself on the path towards >> another big thing that happens within less drag is we just talked about expenses, but don't sleep on the fact that taxes are a big part. So you've got

[14:45] possible. It's important for us to share with you guys, we realize tax evasion is illegal. And there's a lot of people out there selling systems or other things but if you're if you're smart about this, think like a financial mutant, tax

[15:01] avoidance is actually highly encouraged. Meaning if you're following the letter of the law and doing things that are actually structured in the system, actually be rewarded for this. >> Yeah, and number of accounts, even the

[15:13] way that they are established, are tax incentivized. You have health savings accounts and 401(k)s and Roth IRAs and 529s. All of these accounts help you minimize the taxes that you pay either today in the present year or in the case

[15:29] of HSAs and Roth in future years when you go to pull that money out. And so, one of the questions you may be asked is, "Okay, well, based on my situation today, how do I know if pre-tax is more valuable for me or if Roth is more

[15:41] valuable for me?" And again, we have a rule of thumb that can help you. If you add up your marginal federal rate and your marginal state rate, and it's below 25% there's a really good chance that Roth contributions would be beneficial

[15:54] for you. Tax-free in the future is what you want to do. But, if you're a higher earner right now and you add up your marginal federal rate and your marginal state rate, and it's above 30% there's a really strong case to be made that maybe

[16:07] contributions because the current year tax benefit is so valuable that you is and we even there's a gray area there between 25% that it's kind of more going to be specific is specified on are you young?

[16:22] more of a Roth person's game cuz you have many more years for compounding growth. But, also where are you at in your asset level? Because even no matter what your tax rate is, somebody who's in the legacy building parts of things,

[16:35] assets. We've tried to give you tax efficiency pre-tax versus Roth, but there are a number of you that when it gets complicated, your simple life gets advisor might be able to help you navigate this even better. And then, if

[16:49] you're trying to minimize taxes, the more educated you can make yourself, the more powerful you can be. So, are you utilizing all the tax deductions and all the tax credits available to you? Maybe you're paying student loans. Are you

[17:01] interest that you're paying? Maybe you have children. Are there income thresholds that you fall under that would qualify you for tax credits you may not have gotten otherwise. If you can understand where those deductions

[17:14] are, where those credits are, and what you need to do to be eligible, that could literally be more money in your back pocket, less money going towards >> You know, one of my favorite tools that we use for turning a negative situation

[17:27] into a positive is tax loss harvesting. This is literally turning those lemons into lemonade. And the fact that what you'll do on this is if you will take losses, and then you'll you'll get a current tax deduction, and even if you

[17:40] can't once you you can't even use that current tax deduction cuz it's $3,000 a year, you get to carry forward into the future. And guys, I'm telling you, we use this all the time with our clients is where we can strategically

[17:53] lock in losses. So, when you hit those volatile times in the marketplace, that when then in future years, cuz realize about 80% of the time, you know, markets are good, but that 20%, that two out of 10 years, you're going to love that you

[18:06] use this tool to minimize your taxes not only right now, but also in the future. automatically, maybe that you don't think about. You ought to ask yourself a question, is there a way for me to do this in such a way that it might be more

[18:20] advantageous from a tax standpoint? For those that are charitably minded, there are incredibly efficient ways to either bunch charitable contributions or even potentially use highly appreciated securities to make those charitable

[18:33] contributions. Where now you're making taxes that you would otherwise have to taxes that you would otherwise have to pay disappear forever. Again, if you can educate yourself and know what tools and tactics are available to you, you can

[18:45] keep more money in your back pocket. >> I feel like we just covered more fuel, less drag. Those are kind of the basic things. But at some point, you have to actually get to what's the horsepower of this system. And and a lot of times,

[18:58] that's the system, you know, is what how powerful are these components that we want to kind of go through what are things that you can do that create a better system, better success, better opportunities for your future self.

[19:13] >> I think number one is automate your finances. The more things that you can automate, the less likely you are to screw it up. You want to make the good habits as easy as possible. You want to make the bad habits as hard as possible.

[19:26] So, are you doing things like setting up automatic payroll contributions into your employer-sponsored plan? Are you automatically funding your Roth IRA? Are into your taxable brokerage account? If you can set those things on autopilot,

[19:41] of the month there's enough money to fund them. You have already paid thing. Here's another thing, >> it's not only the good stuff that you debts and bills so that you don't you minimize, you know, payments and

[19:55] penalties and other things. If you can set these things up, this is what we too. If the money's already going out, it does a better job, once again, of what Bo said, making the good habits that much easier and the bad habits that

[20:08] time and a place of where it's going to be, you can't fall into traps that you >> Now, again, we're talking about putting better systems in place. And a lot of times people are doing good things with their finances. They're making the right

[20:25] decisions, but oftentimes they're doing them out of order. They're not following that's why another system that you can implement is the financial order of >> You knew it was coming. As soon as you heard systems, you were like, there's

[20:40] definitely a better way to do money, and it's got to be the financial order of >> If you want to get your free copy, you can go to moneyguy.com/resources and download your free copy of the nine-step process to tell you what you

[20:55] >> I mean, that's what that's what I love about it is it really literally tells you what to do with your next dollar, no matter where you are. You could be a person just now starting out in your early 20s. You could be somebody who's

[21:08] somebody who's within 3 to 5 years of retirement. The financial order of operations is going to be your path so that you can maximize and be the best >> Now, another system that you can put in place is part system, but it's also part

[21:24] both you and I started doing very, very early on in our financial journeys. And that's tracking your net worth. Having an understanding, okay, where am I today? What are all the things that I own? What's all the money that I owe?

[21:38] And what's that net difference? And how has it changed over time? Because seeing your progress can be wonderful motivation to keep you moving forward >> Yeah, and this is what I like is it gives you milestones to celebrate. I

[21:52] mean, think about the first time you hit the two-comma club of being a millionaire. Think about it. We can even back it up before that if thinking about when your your army of dollars is actually making more money than you save

[22:05] is the first year that your army of dollars makes more than you made at work? I mean, this stuff These are These are magical milestones that will start showing up if you are tracking this and putting it into your net worth. I love

[22:20] celebrate. And if you want to know the actual tool that Bo and I use for ourselves, I'd encourage you to go to learn.moneyguy.com. You can actually see our net worth tool that we have that gives you a great dashboard so you can

[22:32] track how are you paying off debts? Are you How are your your three bucket classes? Are you on the journey to abundance where you actually your money is making more than you do? All these things are available to you just that

[22:46] about wealth accelerators. We've been talking about how do you have more fuel? have better systems? And we really covered things that pretty much apply to cover accelerators that don't involve gambling or speculating or taking on

[23:02] unnecessary risk. But, it would be disingenuous of us to not at least acknowledge there are some other wealth accelerators out there that exist. And these advanced accelerators cuz I'm going to contend these are not for

[23:16] everyone. The These are not things that This is not where you start. This is not where you start. This is not for the everyday person, but there are things that can be incredibly valuable from a wealth-building standpoint assuming

[23:30] >> So, let's go through these pretty quickly. The first one is real estate this is buying property that's going to generate It's going to be rental income. going to have all these tax benefits. What could go wrong with this? And it

[23:45] actually get to have both an income source and an appreciating asset. But, there's more to this. There's risk. What are the risks that a lot of people sleep like residential, you could have bad tenants. You could have vacancies. You

[24:00] could have repairs that you have to cover. You could buy at a very poor time from a market standpoint. And oftentimes you buy real estate, it's not super this thing, there's no guarantee you can get your money out of it very quickly.

[24:13] So, again, you want to make sure you have a sound financial foundation before you start eek eeking into illiquid investing like real estate. the financial order of operations. Another one that we actually are big

[24:28] fans of, we've talked about this, house hacking. Look, the If you think about the way bank underwriting works as well as incentives that the government gives us from a tax benefit, your primary residence is already one of the biggest

[24:40] wealth builders that most Americans have. You slap on top of that is that to help you pay for your primary residence. I'm talking about It could be renting out a a room in your house. It could be buying a duplex and you living

[24:53] in one half or a quadplex that you live in a quarter of it. All these things are opportunities where you get the benefits of a primary residence, but now you're also bringing in the the rental real estate side of it. This

[25:06] is a win-win type situation. >> more margin for you to now have money that you can save or you can invest or you can pay down debt, but it too is not without its risks. Those risks include tenant issues, especially if it's

[25:19] change. Uh if this is your primary residence, there's another human being living in that you have less privacy. Uh some local markets have rental restrictions where they won't allow this. You're still on the hook for

[25:33] tenant move out, you still have a vacancy problem. So, house hacking is a wonderful and useful tool, but it is not a free lunch and there are still risks >> Another advanced accelerator that we have a lot of experience and we see it

[25:46] all the time. You work for company gives you equity compensation. A lot of you they're going to offer you stock options, restricted stock units, employee stock purchase plan. And they here's the thing about a lot of these.

[25:59] Like think about an employee stock purchase plan that gives you a discount of like 15% and then it even does a price at either the lowest of the quarter. These are things that are so strong that you at least have to pay

[26:12] my situation. >> you may be wondering, okay, well how is actually have equity in your company, you're an owner. You sit alongside the So, if the company does well, if the equity increases, if the value of the

[26:27] stock goes up, it can oftentimes outpace your salary, outpace your pay raises, outpace your ability to save. So, there could be large opportunities down the road if it does well, but just like all the other advanced accelerators, it's

[26:41] not without risks. There could be tax surprises. You may have a huge bit of it vests at the end of the year. Well, all of a sudden, that now becomes a taxable event. Sometimes, if you're an insider or even if you're just

[26:55] not be able to sell the stock as quickly as you want. Or, you may have tons of concentration, not just of your human capital working for this company, but up in there as well. So, you want to make sure you recognize, "Okay, this is

[27:09] wonderful and it's a great opportunity, but how does it fit inside my entire >> Yeah, and you can see we're trying to give you the balanced perspective on different than what you're seeing with a lot of other social media channels, cuz

[27:21] the next one, leveraged investing. I feel like I can't help but watch my feed finance content coming through. And there's always somebody that's over and over again showing how you just you can take a little bit of a down payment and

[27:35] either, you know, go use options, you can use triple levered, you can do all kind of crazy things to really get leveraged investing to speed up my path. But, what are they not sharing? What are the benefits and what

[27:48] >> Well, what leveraged investing allows you to do is it allows you to invest more money with less capital. And then, it can magnify returns when things go well. But, in that same vein, just like levered investing can magnify returns on

[28:02] the upside, it can also magnify losses on the downside. And if you're doing something like borrowing against your portfolio to access capital then be able to invest, and then the market shifts, the stock

[28:15] of the sudden you might find yourself in a position where you do not have enough margin, so you get called. Meaning, you or you have to find some way to come up

[28:28] with capital to make the brokerage whole. So, it is a risky endeavor when >> Yeah, I mean, it can work. That's why every one of these that we're using as a advanced wealth accelerators are viable things you can use. It's just but pay

[28:42] they fit in. That's That's we're putting this at the end. This is not where you that you put in as a sweetener after you've had a little level of success. have something we know a little bit about, entrepreneurship.

[28:57] >> Yeah, this is a big one. This is starting, buying, building, owning a business. And this can be wonderful cuz not only can entrepreneurship help salary to increase, it can allow your profit to increase, but it can also

[29:12] become an actual asset in and of itself that provides you the opportunity to sell it down the road, and it creates wealth that is apart from just your labor executing and doing the job. >> Yeah, and look, this has risk as well.

[29:24] So, I mean, you if you look at what the SBA shares on failure rates of small businesses, it's a pretty high. There's also you're having to do the work, so there's high burnout. There's definitely tax complexity, irregular income, lack

[29:37] of benefits until you reach a level of success. And and I'm even willing to go a a little deeper on this is that the amount of people that come to us even with a level of success that haven't maximized their business structure,

[29:49] haven't maximized the retirement benefits and other things that are are are easy layups on lowering and minimizing the taxes. This is why I always tell people, guys, when you create success,

[30:01] your simple financial life is going to get so such to a level of complexity you say, I just don't know what I don't know anymore. And guys, that's when we're going to leave the front porch light on you. This is exactly what we help people

[30:13] do across the country is that we help successful people navigate their anything behind, so they don't have regrets. We can load you up with all the

[30:25] free advice in the world to try to get you motivated, plant those mustard seeds would encourage you go to moneyguy.com /resources if that's where you're at. success where you're starting to panic, you just don't know what you don't know,

[30:39] we'd really encourage you go consider becoming a client. I'm your host Brian, becoming a client. I'm your host Brian, joined by Mr. Bo. Money Guy team out.