The Truth About Retirement Planning in Your 20s

[00:00] So, we purchased a home thinking that we

[00:01] would probably stay in Pennsylvania for

[00:03] the long term, but job changes, life

[00:05] throws curveballs. You got married, you

[00:08] bought a house, change jobs, and you

[00:10] moved to another part of the country.

[00:11] All inside of a 12 years

[00:13] a thing that we're not struggling with

[00:16] is age 65. We're struggling with a

[00:17] near-term. As you guys think about this,

[00:19] how do you want the next 5 years to

[00:21] look?

[00:23] [Music]

[00:27] My name is Daniel. My name's Lindsay.

[00:29] We're 25 years old and we live in

[00:31] Boston. Welcome to Making a Millionaire.

[00:33] We're originally from Pennsylvania. We

[00:34] both grew up about an hour outside

[00:37] Philly. Then met in college in

[00:38] Philadelphia, got married a year later,

[00:41] bought a house in PA, and then I got a

[00:44] new job and Daniel had to ride along

[00:47] with me up to Boston. Tell us what each

[00:49] of you do for a living. Brag a little

[00:50] bit about yourself. I'm an apparel

[00:52] designer doing active wear. Yeah. And

[00:54] I'm a structural engineer. Aren't those

[00:56] cool jobs? You know, when I hear like

[00:58] apparel, athletic wear, athleisure, that

[01:00] gets me super excited. I love it. That's

[01:03] awesome. And so, it sounds like it was

[01:05] you had a job change and that job

[01:07] changed. What took you from Pennsylvania

[01:09] to Boston? How how long had you guys

[01:12] been married before that happened? About

[01:13] a year when that happened. So, you got

[01:16] married, uh, you bought a house, you

[01:18] changed jobs, and you moved to another

[01:20] part of the country, all inside of a 12.

[01:22] Starting to notice a trend here. Wow.

[01:24] You guys might be on the achievement

[01:27] track. Do y'all feel like are y'all

[01:29] running mental checklist of all the

[01:31] things that you're trying to to check

[01:33] off? Feel like we try not to. We we we

[01:35] might both have that tendency a little

[01:36] bit uh to lean that way, but um but

[01:39] don't want to be completely governed by

[01:40] that. Okay. Well, you guys have done a

[01:42] fantastic job because you you've already

[01:43] mentioned that you're 25 years old and

[01:45] you were so kind that you shared with us

[01:47] a net worth statement of where you guys

[01:48] are today and we thought it'd be helpful

[01:50] to kind of look at that to level set to

[01:52] kind of give people an idea of where you

[01:54] are presently today and then we're going

[01:55] to talk about okay well if we know where

[01:56] are today where do we want to go what

[01:58] are some of the things you guys are

[01:59] thinking through and you can see here

[02:01] you guys have done a fantastic job by 25

[02:04] years old I think a lot of people would

[02:06] look at this and be pretty envious of

[02:07] your situation right now in cash and

[02:10] cash equivalent Once you have about

[02:12] $64,000 saved up, h how did you guys

[02:15] come up with that? Cuz look, let's you

[02:16] have an emergency fund and then there's

[02:18] another thing called syncing fund. Walk

[02:20] us through what's the thought process

[02:22] between those two different buckets.

[02:23] Yeah, so the emergency fund is the kind

[02:25] of three months to six months of cash

[02:27] just to have on hand uh that we would

[02:28] just kind of keep no matter where we're

[02:31] at. And then the the syncing funds is a

[02:33] big combination of things. It's

[02:34] everything from a fund to buy a car in

[02:36] the future. Um, to other things we're

[02:39] saving up for, maintenance on our house,

[02:41] things like that. Haircuts. Haircuts. No

[02:44] haircuts.

[02:45] That's my hair. So that's not in the not

[02:47] in the budget. Your haircut. Your

[02:49] haircuts go into the sinking fun. It is

[02:52] It is a lot of things in there. Um, and

[02:53] then it's also actually just some other

[02:55] money that is now kind of in CDs. It's

[02:57] for a future house purchase. um some

[02:59] things that we don't have invested right

[03:01] now just because the time horizon might

[03:03] be a little shorter but um is above and

[03:05] beyond even the syncing funds. Now you

[03:07] say future house purchase you already

[03:09] own a home correct can you kind of walk

[03:11] us through that? So, we purchased a home

[03:12] thinking that we would probably stay in

[03:14] Pennsylvania for the long term, but you

[03:16] know, with job changes, life throws

[03:18] curveballs. So, we're thinking that we

[03:21] don't know exactly where we want to end

[03:22] up long term. It could be back near

[03:25] family in PA. It could be somewhere

[03:26] else. Even within Pennsylvania, our

[03:29] families are split between different

[03:30] towns. And so, we're just not positive

[03:33] where we might want to end up in the

[03:34] future. if the home that we bought would

[03:36] be a place that's big enough for the

[03:38] family that we want to grow into, things

[03:40] like that that we just anticipate could

[03:42] be a purchase in the future. What was

[03:44] the reasoning behind or how did you guys

[03:46] decide, okay, we're not going to sell

[03:47] the house and move, we're going to keep

[03:48] it. How'd that go down? Many

[03:50] conversations, many Yeah. lots of advice

[03:53] from family and friends, realtors,

[03:55] different people like that. We

[03:56] ultimately decided that since we had

[03:58] bought it so recently, we didn't want to

[04:00] have to go through closing costs and

[04:02] finding a buyer so quickly. And it just

[04:05] really worked out that we had friends

[04:06] who were looking for an apartment to

[04:08] rent and they were willing to rent from

[04:10] us. So we heard advice that, you know,

[04:12] having reliable renters who would be

[04:15] taking care of our home would help it to

[04:17] be an asset that could continue to grow.

[04:19] Are they still interested in staying in

[04:20] the house or is there a time certain

[04:22] that they want to move out? I said the

[04:24] next year they're planning on staying,

[04:25] but we haven't discussed long-term plans

[04:27] with them. And I'll just add also part

[04:29] of the decision to keep the house was

[04:30] looking into some things like capital

[04:32] gains tax and knowing that like we would

[04:33] have had to pay that for owning it for

[04:35] such a short time and yeah just some of

[04:37] the other money considerations. We had

[04:38] just done some renovations pretty much

[04:39] right when we moved in so we had sunk

[04:41] some money into it. Again we we really

[04:42] thought we were probably going to be

[04:44] there for a while um and life led us a

[04:46] different way but uh so that was part of

[04:47] the decision as well. Do you feel like

[04:49] you have that figured out the are you

[04:51] still trying to figure out what do we do

[04:52] with this house like or is it do you

[04:55] guys have a plan in place like okay I

[04:56] want to know anything else about that?

[04:57] We we feel okay with where it's at right

[05:00] now but we feel like we need some sort

[05:02] of plan moving into the future. Uh

[05:04] partially still because of capital gains

[05:05] taxes. I've looked into rules about like

[05:07] how long you have to live there in a

[05:09] certain period of time and some things

[05:10] like that that might make a difference

[05:11] of like should we move back for a time

[05:14] um and live in that house for a little

[05:15] longer, something like that. It

[05:16] obviously depends on what what life

[05:18] brings as well and there's so much

[05:19] unknown in the next few years. Um but we

[05:22] do and and we still question sometimes

[05:24] whether we should have kept it. Uh there

[05:25] have definitely been times where that's

[05:26] been like a big question mark. So we we

[05:28] still go back and forth. We don't feel

[05:30] totally settled. You both kind of looked

[05:31] at each other when you said there's been

[05:32] time. Did something happen? Was there a

[05:33] thing that made you question whether it

[05:35] was the right was the right choice? The

[05:37] day after we moved out of our house and

[05:39] then our friends moved into it, there

[05:41] was a big leak in the basement bathroom

[05:44] and there was like a nine grand

[05:46] replacement to replace a piece of the

[05:49] sewage pipe that was going out to the

[05:50] street. So, we were wondering like where

[05:53] was this issue when we lived there and

[05:54] had the right insurance coverage and

[05:56] everything. So, so literally your

[05:58] friends move in, you guys move out,

[06:00] you're out of state now and all of a

[06:01] sudden this leak happens. The joys of

[06:03] being a landlord, right? People talk all

[06:05] the time about like, "Oh, I'm going to

[06:07] have a rental property. I'm going to

[06:08] have someone else pay the mortgage. This

[06:09] beautiful thing, but sometimes like

[06:11] unknown unknown things happen, right?"

[06:14] Uh, out of curiosity, how did you how'd

[06:16] you pay for the how'd you pay for the

[06:17] league, the 9,000 because you were able

[06:18] to do that? Did you have to go into debt

[06:20] or did you guys Yeah, we had plenty of

[06:22] cash at that point um in our emergency

[06:24] fund and and honestly, it some like

[06:26] finance was shuffling a little bit. So,

[06:28] it was kind of like even after we paid

[06:30] that nine grand, we still had our full

[06:31] emergency fund and just kind of then got

[06:32] things set from there. Something you

[06:34] keep saying I just wanted to get a

[06:35] little clarification on is the capital

[06:37] gains. Now, if y'all lived in this house

[06:39] for a period of time, even if you moved

[06:42] for another job and and y'all definitely

[06:44] moved far enough away that that there's

[06:47] a proration of the the the tax-free

[06:50] gain, did y'all look into that rule at

[06:51] all to see how that would apply apply to

[06:53] you? Uh, no. I guess it was my

[06:55] understanding. I I didn't look a ton

[06:57] into this, but I I thought that it was

[06:58] something about like two you have to

[06:59] live there for two of the last five

[07:01] years in order to not pay capital gains,

[07:02] but I didn't know anything about it. But

[07:03] there is there is a little asterric,

[07:05] okay, that if something because the

[07:07] government's somewhat reasonable that if

[07:08] you have to move for a job and they and

[07:11] you they have a distance test, they have

[07:13] these things you have to go through the

[07:14] checklist on. But for a lot of times,

[07:16] you can then take the for a married

[07:18] couple, it's $500,000 and depending upon

[07:21] how many months you lived in it, you

[07:22] could prrate the gain. And more than

[07:24] likely, y'all wouldn't have had that

[07:26] much of a gain if you had any after all

[07:27] the transaction costs. I only bring this

[07:29] up is because you said something that

[07:31] intrigued me is because when I was doing

[07:33] the research for the show, I was like, I

[07:34] wonder if they'd be willing to go move

[07:36] back into the place for a month or two

[07:38] because your biggest hangup is going to

[07:41] be you have to live in it two of the

[07:43] last five years. And I don't know, y'all

[07:45] only been moved away for a year, so

[07:47] you're still within the the 5year

[07:48] window. But you could you could

[07:50] definitely do some planning and work

[07:52] with your tax professional. We're not

[07:54] giving t professional tax advice, but I

[07:56] just know that there's a some some

[07:58] avenues or um some angles that you might

[08:01] actually qualify for more if you just

[08:03] needed another way to even think about

[08:06] the decision. Now, we're not saying sell

[08:07] it though because if you have great

[08:08] tenants and the place is appreciating, I

[08:11] mean, that might not be the perfect

[08:12] answer, but I just wanted you to know

[08:14] all the variables so you knew exactly

[08:15] what you were dealing with. And it

[08:17] sounds like there's some question

[08:18] around. Okay, how should we think about

[08:19] the house? But before we dive into that,

[08:22] I want to keep going through the net

[08:23] worth statement because that was I think

[08:24] we just stopped at cash. I think that's

[08:26] all we got. Uh when we look at your

[08:28] investments, you guys have done a great

[08:29] job of building up liquid investments at

[08:31] such an early age. You both have health

[08:33] savings accounts. Uh Daniel, yours has

[08:35] about $4,700 in it. Lindsay, yours has a

[08:37] little over 3,000. You both have Roth

[08:40] IAS. Daniel, yours is at almost 24,000.

[08:43] Lindsay, yours is at almost 14,000. And

[08:45] you both have 401ks. Daniel, yours is at

[08:47] a little over 6,000 and Lindsay, yours

[08:49] is almost 15,000. So when I see, okay,

[08:52] I've got HSAs, I've got Roth IAS, I've

[08:54] got 401ks, I've got cash. Where are you

[08:57] in the financial order of operation?

[08:59] First of all, are you familiar with the

[09:01] financial order of operations? This the

[09:02] thing that you've heard of, right? It's

[09:03] this ninestep process of what to do with

[09:06] your next dollar. We've literally

[09:07] written the book. If we were to ask you

[09:10] the question, where do you guys think

[09:11] you are in the financial order of

[09:13] operations? What answer would you give

[09:14] us? Uh, I would say that we're probably

[09:16] on step five. We we got very close to

[09:19] maxing out our our Roth IAS and HSAs

[09:21] this past year, but not not quite there.

[09:23] Um, although and I'm sure this will come

[09:25] up, we we've also jumped ahead a little

[09:27] bit and are doing some of step eight and

[09:28] some of step nine. Okay, at the same

[09:30] time, we're just kind of like bingo card

[09:32] in financial order, right? Well, this is

[09:34] the thing. I mean, I I I was when I

[09:36] looked at y'all's net worth, I was like,

[09:38] I'm so I'm just curious. So, when I look

[09:42] at the financial order of operations and

[09:44] then I look at your net worth statement

[09:46] and I ask you guys, did you max out your

[09:48] Roth IAS last year? Not quite. Not

[09:50] quite. Okay. So, first you're like,

[09:53] Brian, why are you being hard on them?

[09:55] And then I find out that there is a 529.

[09:58] If you look in the upper right hand

[09:59] corner on on there, how many children do

[10:01] y'all have? How old they are? How old

[10:03] are your kids? We have no zero. No kids.

[10:06] What are we doing? I mean, seriously,

[10:08] what are we doing? I mean this my

[10:10] favorite investment account is taxfree.

[10:13] Y'all are 25 years old. Every dollar you

[10:17] put to work is going to be

[10:19] multiplied 40 plus 40 times over. How in

[10:23] the world do we not max out the the Roth

[10:26] IRA? And then somebody I don't know

[10:28] y'all can tell on each other. One of you

[10:30] said, you know, I got a great idea. We

[10:32] don't have any kids yet, but why don't

[10:34] we go ahead and set up a 529. How did

[10:36] this even come to be? Well, we

[10:38] affectionately have a future child that

[10:40] we call Timmy. And Timmy is

[10:41] representative of just our future

[10:43] children that we want to support in

[10:46] college. And so Timmy, you already

[10:48] started kind of exist. Okay. Awesome.

[10:52] That's that's uh that's a that's a

[10:55] thing. That's an idea. Okay. We're we're

[10:57] obviously going to want to come back to

[10:59] this and really p hone in on how do you

[11:03] avoid the Roth

[11:05] maximization for Timmy when what do you

[11:09] do when the first child's actually a

[11:11] daughter? Is it still Timmy? No. No. No.

[11:14] No. Uh okay. So, we're gonna we'll come

[11:17] back to that. So, you've kind of bounced

[11:18] around. You have your primary home. Uh

[11:19] you said you just bought it a couple

[11:21] years ago. It's worth about $350,000

[11:23] presently. You have the 529 for Timmy

[11:26] that we just uncovered. And then you do

[11:28] have a mortgage on the home. Do the air

[11:30] quot sorry for it's not actually it's

[11:33] not it's not a real Timmy just yet. Uh

[11:36] and then you have the mortgage you owe

[11:37] about 240,000. The rate on that is about

[11:41] 5875%. So when we add all this up at 25

[11:44] years old you guys have a net worth of

[11:46] almost

[11:49] $241,000. I mean that that is reason.

[11:54] I mean, that's pretty impressive. I

[11:55] mean, you you have to feel pretty good

[11:57] about that. And do you guys recognize

[11:58] how unique that is? I mean, a lot of 25

[12:00] year olds are nowhere near. So,

[12:02] obviously, you're doing something right.

[12:04] You're making some decisions very very

[12:06] well. And you obviously have a really

[12:08] healthy income. Total household income

[12:09] for you guys is about

[12:11] $175,000. So, that's amazing. So, it's

[12:14] not like, uhoh, you guys are are not on

[12:17] the right course. It's okay. When you

[12:18] think about the course that you're on,

[12:20] are you on the best course? Are you on

[12:22] the course that you ultimately want to

[12:24] be moving on? So, can I just add

[12:26] something real quick? I just want to say

[12:27] like part of that how we've gotten to

[12:29] this point is we've been very lucky and

[12:30] like very blessed by family members who

[12:31] have helped us out along the way with

[12:33] everything from college to wedding to

[12:35] house purchase. So, really, we've we've

[12:37] been very blessed in order to be at the

[12:39] place we're at now. One of the things

[12:40] that kind of gives us concern and pause

[12:42] is what about the short-term goals? What

[12:43] about the things that happen between now

[12:45] and retirement? I'd love to just hear

[12:46] from you guys. You mentioned some of

[12:48] them. You mentioned going down to one

[12:50] income potentially. Uh we've

[12:52] exhaustively talked about Timmy thus

[12:54] far. What are some of the other like

[12:56] short-term goals that you have or what

[12:57] are some of the things that give you

[12:59] guys pause or anxiety or things you

[13:00] think might be difficult for you to

[13:03] achieve in the short to intermediate

[13:04] term? I think the biggest things are the

[13:07] uh college for kids that not that's not

[13:09] super short term obviously um and still

[13:11] theoretical but at least 18 years at

[13:14] least 18 years from where we have to ask

[13:18] did either one of y'all go to get any

[13:20] scholarships when you went to

[13:22] college I imagine your children just

[13:24] with the way y'all are wired as parents

[13:26] and stuff I bet they're going to do all

[13:28] right too the the other part of it that

[13:30] I think is more shorter term is the

[13:32] going down to one income so it just to

[13:34] have that flexibility when we have kids.

[13:35] We we look at that season and think that

[13:37] kind of the biggest factor that will

[13:39] allow or not allow us to do that is the

[13:41] cost of housing and like what our

[13:43] mortgage payment would be or what our

[13:44] rent is. Um so kind of doing whatever we

[13:47] can right now to be reducing that amount

[13:50] in order to give us that flexibility

[13:51] when we get there. So that's part of the

[13:53] reason that um we're like we're putting

[13:55] some extra money towards our mortgage

[13:56] payment right now, which the idea for

[13:58] that

[13:59] is uh Oh, no. It's totally fine.

[14:01] Everything's fine. Everything's fine. I

[14:03] know why Bo is breathing in deep is cuz

[14:05] how hard if you needed that money that

[14:08] you're putting prepaying on this

[14:09] mortgage in an out ofstate rental

[14:11] property. How hard is it do you think to

[14:13] get that money back out? Very pretty

[14:15] hard. Yeah. So if you're if you're

[14:16] thinking this is going to be your margin

[14:18] or cushion to get you into one income, I

[14:22] think it I guess the idea was that that

[14:24] money would then be used to if we were

[14:26] moving into a new house would be used as

[14:28] a down payment for a future house which

[14:29] would then reduce the monthly cost on

[14:31] that house. But what if you couldn't

[14:33] sell that house and you still needed to

[14:34] buy the house? I'm I don't know that we

[14:36] we

[14:39] probably but you see the point. But I'm

[14:41] just saying is that because margin is

[14:43] going to be your friend with these big

[14:44] life decisions and there might be a a

[14:46] better way to to kind of structure that.

[14:48] And what we want to do is we want to

[14:49] create a plan where you guys have the

[14:51] maximum amount of flexibility to be able

[14:52] to do the things that you ultimately

[14:54] want to do. And some of the decisions

[14:56] you make when you put funds into a

[14:58] specific thing like I'm going to prepay

[15:00] the mortgage or I'm going to put money

[15:02] into the 529 for the not yet established

[15:05] Timmy then those dollars become

[15:07] captivated there. And what we want to

[15:08] say is okay is there a better way for us

[15:10] to think about this? Is there a better

[15:11] way for us to kind of look at this? So

[15:14] let's talk a little bit about housing

[15:16] because we see we kind of keep coming

[15:17] back to that one uh for our audience so

[15:20] that they can kind of understand. walk

[15:21] us through right now when we think about

[15:24] your current mortgage payment, how much

[15:25] is your current mortgage payment and

[15:27] then how much rent do you have coming

[15:29] in? Uh, and then how much you're having

[15:30] to pay for rent in the place that you're

[15:32] renting now. So, we can kind of have

[15:33] those those numbers to level set. Those

[15:35] numbers are all pretty even. Our

[15:36] mortgage with the interest in taxes is

[15:38] about 2,300. Um, our the rent we're

[15:41] bringing in is 2150. Okay. And the rent

[15:44] we're paying is 2200. Awesome. So, yeah,

[15:47] they're all kind of in the same

[15:47] ballpark. Right around there. So, we are

[15:49] very close, it sounds like, on the

[15:52] Pennsylvania home to being cash flow

[15:54] neutral, right? It's a little little

[15:56] Now, are for these friends that are in

[15:58] there now, if they're listening, I'm

[15:59] sorry, friends, but I'm going to ask the

[16:00] question. Are they paying at market rent

[16:03] or is this a sweetheart deal? How how is

[16:05] that deal structured? It's it's at

[16:07] market. At market. Great. Okay. So,

[16:08] whenever I think about someone who has

[16:10] an out ofstate property, and it's an out

[16:12] ofstate property that they're not

[16:13] necessarily doing as an investment, per

[16:16] se, but they want it to be this thing

[16:18] that's sort of a contingency plan, if

[16:19] I'm if I'm describing that right. One of

[16:21] the things that we would love to see is,

[16:23] okay, is there a way to make it cash

[16:24] flow neutral so that it kind of is

[16:27] compartmentalized and sitting over here

[16:28] by itself rather than pulling from

[16:30] present- day consumption? Because right

[16:32] now when I think about your housing, it

[16:34] you're paying $2,200 in rent plus an

[16:37] outflow to cover the shortfall that the

[16:39] Pennsylvania house is generating. Would

[16:41] you agree with that assessment? Yes.

[16:43] Yeah. Y'all are reserving what is it

[16:44] 400? How much a month are you putting

[16:46] into repairs? Yeah, it's at least 300

[16:48] 350 maybe into that syncing fund. How

[16:50] many months have you had 350 $400 worth

[16:53] of repairs on the No, not zero. Right.

[16:56] That one single event. And that's why I

[16:58] think it is recency bias because I mean

[17:00] the houses look houses are great but

[17:02] they're also scary outside of your

[17:04] heating and air system, the sewer, and

[17:07] then your roof. A lot of I mean that's

[17:09] that's really your core systems. Y'all

[17:11] covered the sewer, it sounds like. How

[17:13] old is the the HVAC system on on on the

[17:16] on the house? Uh it doesn't have AC, but

[17:18] the heating system is on the older side.

[17:20] We know we're going to have to replace

[17:21] the boiler probably sometime in the next

[17:23] What does that cost? Do you know? Uh not

[17:24] really. No. Okay. Yeah. Several thousand

[17:27] is the number I have in my head, but

[17:28] that's rough. That's a pretty easy thing

[17:30] to figure out. Uh some quick quick AI or

[17:32] Google research or even just calling a

[17:33] local technician to ask them, hey, what

[17:35] would it cost to replace a boiler? And

[17:37] that way you at least know the number

[17:38] you're shooting for cuz it it seems to

[17:40] us we looked at because you were so it

[17:42] was so helpful that you sent us your

[17:43] scing fund breakdown. When it comes to

[17:44] cash management, we like for you to have

[17:46] an emergency fund that where you keep 3

[17:48] to six months of living expenses

[17:51] compartmentalized. And then some people

[17:52] like to use a syncing fund because they

[17:54] know they have short to intermediate

[17:56] term goals coming up. Hey, I know I'm

[17:57] going to have to replace the car or I

[17:59] know I'm going to have to have this

[18:00] vacation or I know I'm going to But it's

[18:02] interesting when we look at your syncing

[18:04] fund. There are a lot of different

[18:07] buckets here. Kind of walk us through

[18:09] these and how you guys are thinking

[18:10] about this excess cash. I get the

[18:12] haircut comment now.

[18:16] Yeah. So essentially this was a

[18:18] catch-all for all the expenses that

[18:20] aren't monthly expenses. Um so that's

[18:23] why something like haircut or clothing

[18:25] ended up its way on there. That's not

[18:26] sewing. Yeah. The sewing money. Um uh

[18:29] that that that's not something we can

[18:31] predictably uh allocate every month. So

[18:34] it just ends up in a scing fund where

[18:35] it's like a smaller amount that goes in

[18:36] there every month and we have it to like

[18:38] spend down. And then there's the bigger

[18:39] categories of um a future car down the

[18:41] road wanting to have money to for that.

[18:43] Um the car maintenance, same thing.

[18:46] just, you know, we get you get hit with

[18:48] several hundred dollars here and there,

[18:49] but not every month. Um, and then the

[18:51] house maintenance as well. Just thinking

[18:52] to have that for big expenses. Um, the

[18:55] the escrow is actually because we pay

[18:57] the taxes and insurance out of our

[18:59] pocket now. It's not part of our

[19:00] mortgage. So, that's why that's there.

[19:02] Um, but then yeah, the the smaller

[19:03] things are just kind of miscellaneous

[19:05] things sprinkled in there, I guess,

[19:07] allowing us to spend freely and I

[19:09] imagine this is sort of guilt relief,

[19:11] right? Hey, if we have this, so I don't

[19:12] feel guilty when we spend. Well, let me

[19:13] ask you a question. If I were to ask you

[19:15] what your monthly burn rate is based on

[19:16] your current because budgets are so

[19:18] unique to every every person every

[19:19] couple does it a little bit differently.

[19:21] So when I ask you guys what's your

[19:22] monthly burn rate what would your answer

[19:23] to that question be? 7327.

[19:26] Uh but who's counting exactly right? So

[19:29] okay study up. So if our monthly burn is

[19:32] about 73 $7,500 a month and we would say

[19:36] okay you're a twoinome household where

[19:39] you both earn about the same. You don't

[19:41] have any other dependents counting on

[19:43] you. You could reasonably argue that

[19:45] three months would be an appropriate

[19:46] emergency fund for you guys. In your

[19:49] minds, instead of thinking through all

[19:51] of these different like syncing funds

[19:53] and contingencies for all these

[19:54] different things, what if we just

[19:56] increased the monthly cover to four

[19:59] months or five months? And we know that

[20:01] what those additional months are going

[20:02] to do are cover some of these other

[20:04] costs. Because what it looks like is

[20:05] happening is you have a bunch of

[20:07] different contingencies that are likely

[20:09] not going to all happen at once. I mean,

[20:11] you've already said right now you have

[20:13] $8,700 in your rental maintenance

[20:15] budget. You're adding to that every

[20:16] month, waiting for the sewer line to

[20:18] break again, and you just had that

[20:20] happen, right? Yeah. So, it seems to me

[20:22] that it might be practical or prudent.

[20:23] Instead of having three months of living

[20:25] expenses, you could have five months or

[20:27] six months of living expenses, then you

[20:28] know what your true cash exposure is.

[20:31] Because what I worry about with you

[20:32] guys, and we see this with clients all

[20:33] the time, is that we compartmentalize

[20:35] this cash and what we end up doing is

[20:37] being way, way, way cash heavy. where

[20:39] instead of having our money actually

[20:41] working for us, doing the things to help

[20:43] us move our financial circumstance

[20:45] along, we're way overly conservative and

[20:47] we're way cash heavy. And I think for a

[20:49] 25-year-old couple at your stage, you

[20:51] probably are a little bit more cash

[20:53] heavy than you have to be. Especially

[20:56] when you didn't max out the Roth IRA.

[20:57] Especially when you did

[20:59] not I know you said it was only $1,000.

[21:02] But in in my book, I detailed how I went

[21:05] back and calculated what every year that

[21:07] I didn't get like the full maximum Roth.

[21:10] Mhm. It was only $10,000 total, but I

[21:13] calculated it out and it turns out to be

[21:15] the equivalent of close to $400,000 by

[21:18] the time I'm retired. So those little

[21:20] decisions of here and there because it's

[21:22] taxfree. So, I'm going I'm not going to

[21:24] let that go because I think that y'all

[21:26] have the cash. It's not like you had to,

[21:29] you know, you were in the this squeeze

[21:30] of life to where you had to make this

[21:33] sacrifice and the wroth was the the

[21:34] thing that you just out of your shaking

[21:36] hands, you just couldn't do it. Y'all

[21:38] actually had it sitting in your sewing

[21:41] and your hair budget.

[21:46] Nobody's taking anything away from you.

[21:49] It's just it's just that that you have

[21:50] way too much cash when you're not

[21:52] maximizing some of these investment

[21:54] goals that that should come be

[21:56] prioritized earlier. You guys laid out

[21:58] for us how you currently think about

[21:59] your saving. Like when we think about

[22:01] how we're deploying our paychecks every

[22:03] single month, you put together for us

[22:04] your saving strategy. And this is what

[22:06] it looks like. Now, every month you have

[22:08] about uh $360 going into your HSAs. You

[22:11] have about almost $1,100 going into your

[22:14] 401ks because you have match and you're

[22:16] doing enough to get the maximum match

[22:18] available. You have about $900 a month

[22:20] going into your Roth IAS. So, not maxing

[22:23] them out, but you still are contributing

[22:25] there. But then we have $400 a month

[22:27] going to the 529 that we've already

[22:28] established perhaps if we're following

[22:30] the financial order of operations is a

[22:32] little out of whack. That's like a step

[22:34] eight when we haven't even fully done

[22:36] step five yet. I thought about giving it

[22:38] a family feud.

[22:40] I just did not like that. Did not like

[22:42] it. And then we have the home equity,

[22:44] which that's part of that is for the

[22:46] down. You have a down payment fund for a

[22:48] future house that you said you would

[22:50] only you said you'd only buy the next

[22:53] house if you sold the current house. And

[22:55] if you sold the current house, you have

[22:56] equity in that house for down payment,

[22:57] but you're also building another down

[22:59] payment fund to go on top. And they're

[23:01] sending extra money like $400 or $500 a

[23:04] month towards the mortgage. That's built

[23:06] into the house. And you're putting both

[23:07] of those. So, this is like an additional

[23:09] down payment fund, an additional equity

[23:10] fund, and you know, it's not it's not

[23:12] like your mortgage is super low

[23:14] interest, but it ain't exactly high

[23:15] interest, right? Um, so when we think

[23:17] about your savings rate where you guys

[23:19] are, we would call it 16%. Because we

[23:21] know that, you know, prepaying the

[23:23] mortgage as well as 529, that's like 8 N

[23:25] that does not go into my savings rate.

[23:27] If we were going to improve upon this,

[23:28] like if we were going to think about

[23:30] truly letting your dollars maximize

[23:33] their potential for you with every

[23:34] decision you make, we put together a

[23:36] different savings plan that we think

[23:37] could potentially make sense for you

[23:38] guys. Rather than on your HSAs, not

[23:41] maxing out, what if we did $713 every

[23:44] month to get those to fully max out?

[23:47] 401ks, leave those the same. Get the

[23:49] employer match that you're getting, but

[23:51] now get the Roth IAS maxed out. Instead

[23:53] of $900 every month, have

[23:56] 1,167 going across both of those and

[23:58] you'll max them out. Let's stop

[24:00] contributing to Timmy's 529 because

[24:02] we're going to have plenty of time for

[24:04] doing that. And instead of having an

[24:06] additional down payment fund and instead

[24:08] of having additional morning on the

[24:09] mortgage, let's cut that out. And so if

[24:12] we actually look at this and we think

[24:14] about the cash outflow, what this does

[24:17] is it frees up an additional

[24:19] $481 for you guys every month. And the

[24:22] question then becomes, okay, well, what

[24:24] do we do with that 481? How do we think

[24:26] about that? What's the best way for us

[24:28] to deploy that? We could obviously look

[24:30] at the financial order of operations and

[24:32] we could say, okay, we're maxing Roth

[24:34] and we're maxing HSA. And so, the

[24:36] natural next step would be, let's just

[24:37] dump that into our 401k. But you've

[24:40] already expressed to us, hey, there's

[24:41] some anxiety we have around being able

[24:44] to fund some of these short-term goals.

[24:45] And one of the short-term goals, and I

[24:47] think you've said it a few times now,

[24:48] is, hey, what if we wanted to go to one

[24:50] income? What if we did want to start a

[24:51] family? What if we want to do that?

[24:52] What's that look like? Well, one of the

[24:54] things that we think would likely be

[24:56] necessary for you to go to one income is

[24:58] you have to figure out how to

[25:00] compartmentalize that Pennsylvania house

[25:02] over on its own, right? So that way it's

[25:04] not actually pulling away from current

[25:06] living expenses from current cash flow.

[25:08] It kind of self- sustaining because you

[25:10] already let us know that the rent you

[25:12] have coming in doesn't quite cover the

[25:13] mortgage, especially when you take in

[25:15] account the maintenance budget and other

[25:16] stuff. So, uh, what we thought would be

[25:18] interesting is to walk you through a few

[25:20] different ways that we could think about

[25:21] making that cash flow neutral or maybe

[25:23] even cash flow positive. And as we were

[25:25] kind of spitballing this, we think

[25:26] there's really three ways we could

[25:28] potentially do this. The first is you

[25:29] can just increase rent over time. If the

[25:31] rent that you have coming in has a

[25:33] natural cost of living adjustment where

[25:35] it goes up by 3 or 4% annually,

[25:38] naturally, that's going to move you into

[25:39] a place where it's going to become cash

[25:41] flow neutral, cash flow positive. So,

[25:42] first question, does the lease that you

[25:44] have with your friends have automatic

[25:46] rent adjustments built into it? No, we

[25:48] manually negotiated that with Okay. So,

[25:51] is that something are they just one year

[25:52] at a time doing that lease? Okay, great.

[25:54] Do you guys have any desire to do a

[25:56] longer term lease where it would be

[25:58] something where you rent to them for 3

[26:00] years or 5 years or is that too

[26:02] uncertain still? Because it's too

[26:03] uncertain, I think, just with Yeah. what

[26:05] we want to do. Okay. So, increasing rent

[26:07] is one solution. The next solution, and

[26:09] we all love this one, is you could

[26:10] potentially consider refinancing your

[26:12] mortgage. Right? We know that your

[26:13] mortgage right now was what was it?

[26:15] 5.875. Is that the number? Ideal time to

[26:17] refinance. Rates likely right now are

[26:20] not a whole lot lower, but that doesn't

[26:22] mean that rates might not go lower in

[26:25] the future. I mean, we know that

[26:26] historically interest rates kind of go

[26:28] up and down and we're probably still

[26:30] sort of more towards the higher range

[26:32] right now. And we said, okay, well, what

[26:34] if rates did change? What if something

[26:36] happened economically that allowed them

[26:38] to to fall and you had the opportunity

[26:39] to refinance? Look at what happens to

[26:41] your payment. We know that right now, if

[26:43] we just factor in your principal and

[26:45] interest, uh your current mortgage

[26:47] payment is

[26:48] $1,666 a month, and that's at

[26:51] 5.875%. Well, if you were to refinance

[26:54] now, and let's just say that 5% was the

[26:57] prevailing rate now. Well, just doing

[26:59] that and continuing to pay your mortgage

[27:01] on the same timeline. So, not recasting

[27:02] it another 30 years would drop your

[27:05] payment from 1666 down to 1286. Wow.

[27:08] That's pretty exciting, right? Yeah. But

[27:11] maybe rates don't fall just yet. Maybe

[27:13] it takes some time for rates to get down

[27:15] in there. But in the future, and let's

[27:16] say 5 years, that's just sort of an

[27:18] arbitrary number that we're using. What

[27:20] if even in 5 years, you could

[27:22] potentially refinance? Well, obviously

[27:23] your mortgage will have continued to be

[27:24] paid down, but at that point in time,

[27:27] you could refinance to 5% and your

[27:29] mortgage payment goes from

[27:31] $1,666 to a little under $1,100 a month.

[27:35] Well, if you have 21,00 coming in, your

[27:37] mortgage is only $1,100, that's a pretty

[27:39] great spot to be in. The question you

[27:41] have to ask yourself, okay, well, when

[27:42] are we thinking about wanting to start

[27:44] the family and go to one income and

[27:46] those sort of things, but here are some

[27:47] options you have. We also did the math

[27:49] on how it changes if you were to have a

[27:51] 4 and a.5% refinance option. Now, the

[27:54] thing that is unfortunate about

[27:56] refinancing is we don't get to control

[27:58] when rates change. I mean, I think we're

[28:00] all hopeful that rates will come down to

[28:03] provide people who recently bought an

[28:04] opportunity, but it's not guaranteed.

[28:06] It's not something you can bank on. So,

[28:08] we said, "Okay, well, what is something

[28:10] that you likely could influence? what is

[28:12] a strategy that you could potentially

[28:14] deploy to try to get the Pennsylvania

[28:16] house to be cash flow neutral? Uh, and

[28:19] one of the things we came in was

[28:20] potentially looking at some sort of

[28:21] mortgage recast. Now, do you guys know

[28:24] what a mortgage recast is? Not really.

[28:27] Awesome. Great. Perfect. All right. So,

[28:29] we put together sort of a theoretical

[28:30] example. You know, we we borrow money

[28:32] and we pay out a mortgage over like a

[28:34] 30-year time period, right? And they

[28:36] calculate at the beginning of the

[28:37] mortgage what that mortgage payment's

[28:38] going to be in order for us to pay it

[28:40] off in 30 years. Well, a lot of times

[28:42] mortgage companies will say, "Hey, if

[28:44] you are building up and you get to a

[28:47] place where you want to make a capital

[28:49] infusion, you have some money on the

[28:50] side and you just want to pay down the

[28:52] principal. You can pay down the

[28:53] principal and keep paying your same

[28:54] mortgage and you'll just pay it off more

[28:55] quickly." Or one of the things that some

[28:57] mortgage companies will let you do is

[28:58] they will let you recast the mortgage

[29:00] where you put a big principal payment

[29:02] down and you ask them to recalculate

[29:04] what the mortgage payment would be to

[29:06] pay it over the same timeline. So,

[29:07] you're not stretching it out. You're not

[29:09] changing your interest rate. You're just

[29:10] saying, "Hey, we put a big capital

[29:13] amount down. Recalculate our payment."

[29:15] So, you can see sort of graphically you

[29:17] were paying along the gold line and

[29:20] let's say that 10 years in this example

[29:22] on the line, you had $50,000 that you

[29:24] could just pay on the mortgage. You

[29:25] asked them to recalculate your payment.

[29:27] You get a lower payment and pay it off

[29:29] in the same amount of time. Does that

[29:30] make sense? Yeah. The margin between the

[29:32] two lines would be the interest that you

[29:33] ultimately save because you're paying it

[29:35] off and you're just asking to

[29:36] recalculate. So, what we said for you

[29:38] guys is if we had this five-year

[29:40] timeline and we had this

[29:42] $481 excess that you have right now and

[29:44] you kept saving that towards cash

[29:46] building towards an amount to recast,

[29:48] you're looking at a scenario where

[29:50] potentially 5 years in the future, if

[29:51] this were to manifest, you could drop

[29:54] your mortgage payment from

[29:57] $1,666 down to

[29:59] $1,666 even if interest rates don't

[30:01] change. Can you do that at any time when

[30:03] when you have money to put towards? very

[30:05] it's dependent upon the mortgage

[30:07] company. So, one of the pieces of

[30:08] homework we're going to give you is,

[30:09] hey, call your mortgage company and say,

[30:11] "Hey, I would like to think about a

[30:13] recast. Is this something you allow? Are

[30:14] there any costs associated? How do I go

[30:16] about doing it?" This is this is kind of

[30:18] related. We whenever we talk about

[30:20] refinance shows, the first thing I

[30:21] always tell people before you refinance

[30:24] your mortgage, call your lender and ask

[30:26] if they'll do what's called a rate

[30:27] modification. Because realize lenders,

[30:30] they've already they don't want to pay

[30:32] the friction cost either of going

[30:33] through the whole process of going

[30:35] through underwriting and everything

[30:36] else. So sometimes it's easier for them

[30:39] to keep an existing customer, especially

[30:40] a customer that pays their bill on time.

[30:43] So like a rate modification, there's

[30:45] typically a fee associated with that.

[30:46] And just like with a mortgage recasting,

[30:48] there likely would be a fee associated,

[30:52] just a few hundred. Sure. But that's why

[30:54] you wouldn't want to do it every You

[30:55] wouldn't want to call them, hey, it's me

[30:56] again. I just sent you another000 bucks.

[31:00] So, so it's going to be more of a

[31:02] deliberate and intentional transaction

[31:03] to where that's why 50,000 is what we

[31:06] use in the example is it's it would be

[31:08] something y'all are making a decision

[31:10] that you would like to have a little

[31:11] additional margin because you're living

[31:13] off one income and you had this excess

[31:15] cash and but you don't get better rates.

[31:18] How do we make the best of this

[31:19] situation? This was just an option that

[31:20] we thought we'd at least share with you.

[31:22] I honestly wish we had known about that.

[31:24] We, now looking back on this, this might

[31:26] have been a bad decision, but we did put

[31:28] a pretty big amount of money down on our

[31:30] our mortgage payment from a gift that we

[31:32] had gotten. Yeah. Um, probably last

[31:34] year, we put like $25,000 down on it.

[31:36] So, not knowing that this was an option

[31:38] maybe to to recast it when we did that.

[31:40] Well, so here's a wonderful thing. I

[31:41] would tell you call your mortgage

[31:42] company and say, "Hey, just last year we

[31:44] put a big amount down on this. Would it

[31:47] be possible to recast our payment?"

[31:48] Because even though you've already made

[31:49] the principal, now they may say no or

[31:51] they may say, "Oh, we would have had to

[31:53] have done that before you made the

[31:54] deposit." But there's a good chance they

[31:55] still could. The fact that you've

[31:57] already done that, you're already ahead

[31:58] of schedule. You've already paid that

[32:00] principal down. So, it's at least worth

[32:01] asking the conver asking the

[32:02] conversation. Uh the second best answer

[32:05] they can give you is no, right? Like

[32:07] that's the second. So, you might as well

[32:09] ask. And then what you do is you tell

[32:10] them, "Hey, mortgage company, rates are

[32:12] looking pretty good right now." I talked

[32:13] to another bank and they said that right

[32:14] now they would let me refi at my current

[32:16] rate. And I if you are not interested in

[32:19] the ratecast, I'll just move my mortgage

[32:21] over to someone else who's willing to

[32:22] do. Now, you want to make sure you

[32:23] actually have the leverage and somebody

[32:24] that's willing to do that. But that is a

[32:26] way that you can make your mortgage

[32:28] company fight to keep you as a client or

[32:30] as a customer instead of just telling

[32:32] you, "No, tough, we're not going to do

[32:34] that." Now, I loved that when we asked

[32:36] what your monthly burn rate was, it was

[32:39] 7,327.

[32:42] What did we say the dual income goes

[32:44] down to one income looks like? because

[32:46] I' i'd like to have some discussion on

[32:47] that too. Yes. So, we built you uh sort

[32:49] of two separate budgets. Well, we know

[32:51] that if you were to go down to one

[32:53] income after we factor in taxes, we

[32:56] think that your gross income take-home

[32:58] goes from 10,200 down to about

[33:01] $7,800. There are some changes we've

[33:03] already said we're going to make. If

[33:04] we're able to like recast the mortgage

[33:06] and get the mortgage a little bit

[33:07] cheaper, it goes from666 down

[33:10] to,66. We've already argued that $400

[33:13] maintenance on the rental may be a

[33:14] little aggressive. So, what if we were

[33:15] to cut that down to like 200? So, what

[33:18] we're calculating is if you were to go

[33:19] to one income right now, present day,

[33:22] you'd have about $7,800 of income, about

[33:24] $8,000 of outflow, you have negative

[33:27] cash flow, about 250 bucks. And so then,

[33:30] if you were to continue saving 10%,

[33:32] because remember, you said, I feel like

[33:34] it's not hard to think about saving for

[33:36] the future and saving for retirement. We

[33:37] wouldn't want you to cut that down

[33:38] completely. But if you were to still

[33:40] save 10% of the single income, you would

[33:44] be at about $1,000 deficit per month as

[33:47] it stands today. So the question we have

[33:49] for you is, okay, if you were going to

[33:51] go to one income today, is there a

[33:53] $1,000 that you could either cut out of

[33:57] your budget or is there a way to create

[33:59] $1,000 of additional income right now?

[34:03] Probably. And that's something we've

[34:04] talked about that if we do go down to

[34:05] one income, someone working part-time a

[34:06] little bit or there are probably some

[34:08] areas of our budget we can tighten up a

[34:10] little bit too and some combination of

[34:11] those things. That that sounds a lot

[34:13] more realistic than I would have

[34:14] thought. Well, here's where I want to

[34:16] get into the coaching part is because

[34:19] right now I I still feel like you're a

[34:21] little divided in in your attention.

[34:24] It's just like we know that you're

[34:26] prepaying the mortgage. It sounds like

[34:28] you got a gift and you you sent more to

[34:29] that mortgage. you're kind of being

[34:31] you're playing the part of a debt

[34:32] crusader and and it feels good to pay

[34:34] down that that mortgage debt. But I will

[34:36] tell you what I see coming up is this

[34:38] whole life decision on you guys doing

[34:40] the family planning figuring out y'all

[34:42] are both successful. That's going to be

[34:44] a lot of discussion to figure out which

[34:45] one of you or is it going to be a hybrid

[34:47] where one of you works from home but you

[34:49] still have to hire somebody to come help

[34:51] out on some services. So there's going

[34:53] to be a discussion and that's why

[34:54] whenever we have big life decisions I

[34:57] tell everybody to put on their 3D

[34:58] glasses. And what I'm when I say that is

[35:00] that I want you to essentially and you

[35:02] I've seen your spreadsheets. You'll have

[35:04] no problem. I was like, is this

[35:06] legitimately their spreadsheet? So,

[35:08] you're gonna have no problem putting on

[35:09] your 3D glasses is because I do want you

[35:11] to write out kind of a fiveyear or

[35:13] whatever period of time y'all want to do

[35:15] your family planning with and and and

[35:18] create the dream plan. This is where

[35:20] everything works out beautifully. You

[35:22] all get payraises. You know, you keep

[35:24] getting promoted. You're getting these

[35:26] huge bonuses. you know, you tell them

[35:28] you want to work from home and you're

[35:29] going to have screaming kids in the

[35:31] background. They go, "Great, no problem.

[35:34] That's the that's the dream plan." But I

[35:37] also want you to do the down to earth.

[35:38] Meaning that maybe when you go talk to

[35:40] your employers or one of your careers is

[35:43] doing something that the other one's

[35:44] not, and you start making real

[35:46] determinations on what you think will

[35:48] happen for you from a cash flow. And

[35:50] then don't skip the doodoo plan. That's

[35:52] where you actually do another tab on

[35:54] your spreadsheet says, "Oh my gosh, what

[35:56] if things don't go like we plan?" And

[35:58] and here's why I want you to do do the

[36:00] doodoo plan. I don't how many dues can I

[36:02] put in there? Um is that you right now

[36:06] you're allocating so much cash to like

[36:08] debt and all these other things. If you

[36:10] did this exercise, you'd probably

[36:12] quickly realize, man, maybe what we need

[36:14] to do in this transition, not only save

[36:16] for the Roth, do the 401k and these

[36:18] things because that's already getting us

[36:19] close to 20%. But maybe we could start

[36:21] building up an aftert tax account. And

[36:24] then you could figure out is that cash

[36:25] or should it be slightly invested? You

[36:27] know, you you'd have you would know

[36:29] because you've done the three plans to

[36:31] kind of know when you would need cash

[36:33] flow. And then you get to control the

[36:35] access to it. Whereas right now, you

[36:38] have a lot of variables. You you're very

[36:40] disciplined, but you don't control the

[36:42] access because that mortgage that that

[36:44] $25,000 you sent to the mortgage

[36:46] company, if you called them and said,

[36:47] "Hey, just kidding. we've decided we're

[36:49] going to have a baby next year. Can um

[36:51] can I get the 25 grand back? They're

[36:54] just not they're going to make it very

[36:55] hard. It's hard to you have to

[36:56] refinance. It's not like they just send

[36:58] you the money back. And that's why I I

[37:00] want to caution you, build it into the

[37:03] plan so that you have maximum

[37:05] flexibility and you get to address this

[37:07] stuff headon and also control the access

[37:10] to it because that also allows you if

[37:12] you have lean months. Do you know what

[37:14] gets you through lean months? having

[37:16] extra cash and extra capital that you

[37:18] control. And that's that's what's going

[37:20] to get you through this. Y'all y'all are

[37:22] so successful, but it's just these

[37:24] little nitpick things that I think would

[37:26] really improve your plan and also take

[37:29] down the stress level. Kids are already

[37:30] going to be stressful. This is going to

[37:32] give you all just maximum flexibility so

[37:35] that you you you hit that and you don't

[37:36] even feel it doesn't even feel like a

[37:37] speed bump to you. You know, it's

[37:39] interesting. One of the things a lot of

[37:40] times we'll show people a projection.

[37:42] Hey, if you do the things that we're

[37:43] recommending, this is what age 65 will

[37:46] look like for you. This is what

[37:47] financial independence. You guys have

[37:49] already said, hey, we're not the thing

[37:50] that we're not struggling with is age

[37:52] 65. We're struggling with a near-term.

[37:54] So, we thought, man, wouldn't it be

[37:55] helpful if instead of showing them

[37:57] something, you know, 30 years, 40 years

[37:59] in the future, what if we showed them

[38:01] just 5 years in the future? If we think

[38:02] about where they are today and they were

[38:04] to implement some of these changes, if

[38:06] they were to make some of these

[38:07] adjustments, how might their situation

[38:09] look at the time when they're seriously

[38:11] considering going to one income or

[38:12] starting a family or making some of

[38:14] those changes? And so we actually did

[38:15] project that out for you. So we said,

[38:17] what if we assume that your investments

[38:19] over the next 5 years can grow at 8%

[38:21] annualized? That seems reasonable for a

[38:24] couple that's 25 years old. Let's assume

[38:26] that the house that you currently own

[38:27] appreciates in value at the rate of

[38:29] inflation about 3%. Let's assume that

[38:31] cash does the same about 3%. And then

[38:34] we're going to assume that your

[38:35] emergency reserve actually doesn't grow

[38:36] at all. We're just going to have it be

[38:37] finite. Same number. Pick a number.

[38:39] Stick to it. Well, when we look at where

[38:42] you are today and we lay it side by side

[38:43] with where you'll be, it's pretty

[38:45] exciting. You can see that just

[38:47] contributing the same amount to your

[38:48] 401ks that you're doing right now, your

[38:49] 401k, Daniel, goes from 6,300 to almost

[38:52] 36,000. Lindsay, your 401k goes from

[38:56] 15,000 to almost 76,000. Again, this is

[38:58] just five years in the future. Daniel,

[39:00] your Roth goes from 23,000 to 78,000.

[39:04] Lindsay, your Roth goes from 14,000 to

[39:07] 63,000. Your HSAs go from about 8,000 to

[39:11] 64,000. So now your liquid portfolio,

[39:14] without necessarily putting tons of

[39:16] focus on that, without really throwing

[39:18] the kitchen sink at it, still over the

[39:20] next 5 years, you're able to grow it

[39:21] from

[39:22] $66,000 up to

[39:25] $317,000 by the time that you guys get

[39:27] to 30 years of age. And do y'all know

[39:29] when we do our net worth by age, we

[39:31] always say you should have an

[39:32] aspirational goal of having your net

[39:34] worth beet one times your income annual

[39:39] salary. Yeah. But and

[39:42] and we haven't gotten into net worth

[39:44] yet. I mean, if you look at all the

[39:46] assets, I mean, y'all are you will be

[39:48] three to four times what you're amazing.

[39:51] It really is. You can see that the

[39:52] Pennsylvania home goes from 350 to

[39:54] 400,000. the 529 we're gonna stop

[39:57] contributing to it but it's still gonna

[39:59] grow for little Timmy it's going to be

[40:01] at almost 7,000 where your cash if we're

[40:04] going to do the recasting scenario and

[40:06] we're going to focus on that goal you

[40:07] could grow that from 10,000 up to 43,000

[40:10] and then we still have your emergency

[40:11] fund that 54,000 stays intact and your

[40:14] mortgage just paying it on the normal

[40:16] pace is still going to go from 240,000

[40:18] out of 24. your net worth in a fiveyear

[40:21] span just by redirecting how you're

[40:24] pointing your dollars and optimizing

[40:26] your situation. You could go from

[40:29] $240,000 today to

[40:32] 616,000 five years from now and be

[40:35] primed and positioned to go to one

[40:38] income to move back to Pennsylvania to

[40:40] start. And you don't have to wait five

[40:42] years. I always No, this is the old man.

[40:44] My kids, my oldest. Everybody buckle up.

[40:48] But it is my my oldest is, you know, a

[40:50] junior in college. I wish we'd had more

[40:53] and I wish we'd had them sooner cuz my

[40:54] wife and I were married close to six

[40:56] years before we had our first child.

[40:57] Money is good making the planning for

[41:00] it. But y'all already kind of laid it

[41:02] out in your interview with us. You don't

[41:04] want it's just a tool. It's not what

[41:06] it's not the center of your life. As you

[41:08] guys think about this, how do you want

[41:10] the next five years to look? I think the

[41:12] biggest thing is I I like hear a lot

[41:14] about retirement and retirement planning

[41:16] and that's always kind of a big thing in

[41:17] the financial world as it should be like

[41:19] for for good reasons, but um to kind of

[41:22] see these numbers laid out of looking at

[41:24] it and analyzing it for the short term

[41:26] is super helpful. I it's not something

[41:27] that we've done a ton. It's not

[41:29] something I would have even known how to

[41:30] go about exactly, but it's it's

[41:32] comforting to see that like this is

[41:34] possible and having some different

[41:35] strategies to do that with the house

[41:36] like recognizing that that that payment

[41:38] is going to be one of the most critical

[41:39] things for us. But there are other ways

[41:41] to kind of figure that out rather than

[41:43] just how much money can we throw at it.

[41:46] So that's I think that really helps and

[41:48] it it seems like a simpler way to look

[41:49] at it. And what I love is this is not uh

[41:52] it's not still putting emphasis and

[41:54] power into the long term. You'll notice

[41:56] your assets are still building towards

[41:58] retirement. Your retirement portfolio is

[42:00] still growing. It is one of those things

[42:02] though that as life happens, it is a

[42:04] journey and you are on a path and money

[42:07] is nothing more than a tool that allows

[42:08] us to accomplish the goals that we have.

[42:10] And if some of those goals are

[42:12] short-term or intermediate term, then we

[42:13] ought to use our money accordingly. And

[42:15] so in this season of life, if that's the

[42:17] way that you guys need to prioritize,

[42:18] that's totally okay. You're you're not

[42:21] going to have a 25% savings rate going

[42:23] towards financial independence and

[42:24] building towards retirement, but you

[42:26] still have something going there. You're

[42:27] still using the financial order of

[42:28] operations. you're still maxing your

[42:29] Roth, maxing your HSA, so that even

[42:31] though you're not doing it necessarily

[42:33] by the book, you're still moving towards

[42:36] that common goal, and you're not

[42:37] sacrificing these years, they're going

[42:39] to be so so valuable in your long-term

[42:41] wealth buildinging journey. What about

[42:42] you? What do you think? I think I just

[42:44] get a little bit deflated when I see the

[42:46] 529 amount and I'm just wondering kind

[42:49] of your thoughts about how we would go

[42:50] about getting that up to where it would

[42:52] need to be when our kids are old enough

[42:54] to go to college. So you would be a So

[42:55] we we tend to um overestimate what we

[42:59] can do in the short term and

[43:00] underestimate what we can do in the long

[43:01] term. In 18 years you can do a

[43:05] remarkable amount of saving in 18 years.

[43:07] You can do something crazy when it comes

[43:09] to saving kids college. And you've

[43:11] actually lived this. Yeah. I mean like I

[43:13] said my my oldest is a junior in

[43:14] college. Soon as she was born I started

[43:17] setting up doing quarterly 529

[43:20] contributions. And it wasn't a ton and

[43:21] it I was just trying to maximize the tax

[43:23] savings in the state of Georgia at the

[43:25] time because they they they actually

[43:26] gave you 6% off your taxes. Um and it's

[43:31] paid all the way through her junior

[43:32] year. Now she got some scholarships just

[43:35] like your kids will. She got a

[43:36] scholarship that covered 60% of her

[43:38] tuition through achievement. Um so um

[43:41] but we've covered the rest of it. And

[43:43] then yes, the four her senior year I'm

[43:45] going to have to come out of cash flow.

[43:46] But I think that's okay, you know,

[43:47] because realize y'all are looking at

[43:49] life through the eyes of 25 year olds.

[43:51] When your kids are this level of

[43:54] success, that tuition is going to be

[43:57] like you're just paying it forward to to

[43:59] children that you love. You're going to

[44:01] have plenty of resources to make that

[44:03] and you'll still feel well rewarded for

[44:06] for the starting that fund when they're

[44:09] born. Not not now. Look, you might

[44:11] already have the gap covered just

[44:13] because Timmy's already got a fund set

[44:16] up before Timmy's even on the planet

[44:18] yet. But it's um but I I just tell you

[44:20] that's that's one of those worries that

[44:22] I think is going to fix itself. You

[44:23] know, be deliberate and active, but also

[44:26] know that your children will probably

[44:30] qualify for some scholarships. You're

[44:32] going to set up these automatic

[44:34] investment plans and the money will be

[44:36] there because that same discipline

[44:38] that's built you guys up to a quarter of

[44:39] a million dollars at 25 is going to be

[44:41] the same discipline that's going to have

[44:42] college waiting for them and any other

[44:44] financial goals that y'all desire to

[44:47] conquer. We definitely need the

[44:48] perspective. So, appreciate that. So,

[44:50] before I give you the homework, what

[44:52] questions do you have for us? What else

[44:53] can we answer that might be valuable for

[44:54] you guys? This is a bit of a

[44:55] miscellaneous question about budgeting,

[44:57] but it but it ties in with as we're

[44:58] setting that up for the future. We've

[45:00] had some tension about um how to budget

[45:03] in terms of not between the two of us, I

[45:05] mean, but just between two. I was like,

[45:06] "Oh, this is about to be good. We've

[45:08] had news to her." Um between the idea of

[45:12] budgeting for what we see in a normal

[45:14] month, and that's kind of how we have

[45:15] our budget set up right now. It's for

[45:17] two paychecks, which is we each get we

[45:19] get paid by weekly, so that's normally

[45:20] what we see, but that actually leaves

[45:22] two paychecks a year out of the budget.

[45:24] So there's this extra chunk of money and

[45:25] and like this past year we used that to

[45:27] honestly most of it to put into um our

[45:30] like end of the year HSA and 401ks to

[45:32] like or Roth IAS to get them closer to

[45:35] the max. Um so but it's just a question

[45:37] of should we be budgeting on the actual

[45:39] amount that we see like our annual

[45:41] income divided by 12 or what we see in a

[45:43] normal month just those two paychecks. I

[45:45] think the safest way is you budget on

[45:47] the base. Like you budget on what you

[45:49] actually see. So, if you know you're

[45:50] going to have x amount coming in this

[45:52] two weeks, you budget based on how much

[45:54] is going to flow out in that two weeks,

[45:55] right? Do it over a month because it's a

[45:56] little bit easier to think about 12. But

[45:58] I would base it on that. And then what

[45:59] happens is is as you have those

[46:01] additional paychecks that weren't

[46:02] accounted for come in. That is where you

[46:04] can do some of the other miscellaneous

[46:05] stuff. Hey, I didn't quite get the Roth

[46:07] maxed out. I'll do that. Or hey, now

[46:09] instead of having a scing fund that I

[46:10] built every month, I've got this one

[46:12] extra paycheck that's going to be what

[46:14] we're going to go on our trip with or

[46:15] that's going to be how I'm going to fund

[46:16] this goal. Because if you can make life

[46:19] work on the base, when that additional

[46:22] income comes in, it's just gravy. And

[46:23] you don't have to have any guilt about

[46:25] using that for the things you actually

[46:27] want to use it for. I look at your

[46:28] expenses as like monthly things. And

[46:30] then of course you've got your one-offs

[46:32] like the property taxes, but you're

[46:33] already putting that in a sync fund. But

[46:36] then when you think about saving for

[46:38] your retirement, you know, you're

[46:39] getting 26 pay periods. you you think

[46:43] about that in the terms of the

[46:44] percentage okay and then what that turns

[46:46] out to be on an annual basis so you can

[46:48] do both believe me I've seen your

[46:50] spreadsheets you are multiaceted

[46:52] talented is so you can look at your

[46:54] expenses more on the you know what do we

[46:56] need to do monthly or quarterly

[46:57] depending upon how these things hit but

[46:59] then on the income meaning ver saving

[47:02] side of it it's okay to think about it

[47:04] in those 26 pay periods and then plan

[47:06] accordingly as a percentage okay is that

[47:08] how do you do do you do everything on we

[47:10] noticed you did everything on a spread

[47:11] spreadsheet. Any reason why you don't

[47:13] use some sort of software or some sort

[47:15] of tracking app? Biggest thing is I

[47:16] don't want to pay we don't want to pay

[47:17] for anything. We're frugal. Frugal. I

[47:20] also enjoy doing it every month and then

[47:22] it's something like we can talk about

[47:23] after I run through everything like how

[47:24] do we do this month where where should

[47:26] we adjust and and do you find that you

[47:27] guys actually adjust like if you go over

[47:29] in a category budgeting do you actually

[47:31] switch your behavior moving forward or

[47:32] you just say oh we went over and then

[47:34] you move on? It's a good question. More

[47:35] mentally noted I think. Yeah, we not

[47:38] Yeah, I think that's a good point. We

[47:39] don't do anything super concrete. more

[47:41] tracking than fully budgeting probably.

[47:43] Yeah, that's fair. Yeah. Well, it seems

[47:45] like you're doing okay. I mean, I'm not

[47:46] I'm not going to pick on you. I I

[47:47] wouldn't even encourage I think down the

[47:49] road you guys could graduate to what we

[47:51] call money management plan. The cash

[47:52] management plan is is is when because I

[47:55] don't like to budget anymore. I mean,

[47:57] once your income gets to a level and you

[47:59] can automatically set up where you I

[48:01] call it force scarcity where all the

[48:04] money is going in the places it's

[48:05] supposed to so that you know you've

[48:06] checked the box. Then what's left over

[48:09] you can spend with reckless abandonment

[48:12] and not feel guilty about it. Seriously,

[48:14] because you you've that's what the whole

[48:15] force scarcity is is if you ever feel

[48:17] like you've like you get a pay raise or

[48:19] something or you get a bonus, you can

[48:21] always allocate more towards the

[48:23] automatic bucket. But then what you know

[48:26] what's left is for for expanding

[48:28] lifestyle or going on trips and making

[48:30] memories and doing all the cool stuff.

[48:32] So you don't have regrets when you get

[48:34] to be older. As we're thinking about how

[48:36] our money is invested in those

[48:38] retirement accounts, um right now we

[48:40] have most of it in target retirement

[48:42] funds or like index funds. I'm wondering

[48:44] is that what you'd recommend? Is there a

[48:46] different way you'd allocate that and

[48:47] how would that change moving forward?

[48:48] Yeah, I mean I noticed like you're in

[48:50] the vanguard. I mean way out there in

[48:52] the and that's probably it's done really

[48:54] well. So I mean I I think in the

[48:56] beginning for sure because what I we

[48:59] like about index target retirement funds

[49:01] and that's the key thing is are they

[49:02] index meaning super low cost? yours is

[49:04] in Vanguard and all you have to do is

[49:07] think about how much can I save and when

[49:09] do I need it because your savings rate

[49:11] is so much more powerful than really

[49:13] anything else if I got into the minutia

[49:15] of the asset allocation and they're

[49:17] doing all that for you automatically now

[49:19] look once y'all y'all are going to get

[49:21] there really quick probably about the

[49:23] time you're 30 sure you guys are going

[49:25] to be getting close to

[49:27] that six to seven figure mark well then

[49:29] yeah asset allocation starts making a

[49:31] lot more sense but but since these are

[49:33] retirement accounts. You can change

[49:35] asset allocations without tax impact,

[49:38] without any problem whatsoever in those

[49:40] retirement accounts. And we'd rather you

[49:41] focus on the things that have the

[49:42] largest impact on your financial life.

[49:44] And that's going to be budgeting and

[49:46] where your dollars are going and how

[49:47] much you're saving and what buckets

[49:48] you're saving to efficiently. It's going

[49:50] to be way more valuable than trying to

[49:52] tweak the assets. The target retirement

[49:54] funds are going to be good enough to get

[49:56] you from where you are now to the next

[49:58] stage you ultimately want to be at.

[49:59] Okay. All right. Here's your homework.

[50:01] You ready? Yes. All right. First thing I

[50:02] wrote down is we got to fix the foo. You

[50:04] guys were kind of like going along and

[50:06] then you kind of like went scatter

[50:08] foolish foolish. You know, we want you

[50:10] to be in straight foo. So, what fixing

[50:12] the food is going to mean is going to be

[50:13] maxing out your Roth IRA. It's going to

[50:15] be maxing out your HSA. It's going to

[50:17] probably mean cutting off the 529 and

[50:20] it's probably going to mean cutting off

[50:21] the prepaying on the mortgage and

[50:23] thinking about, okay, we're building

[50:24] those dollars towards some other common

[50:26] goal. Another thing that we want you to

[50:28] do is we want you to call your mortgage

[50:29] company and ask them, "Hey, what options

[50:31] are available to us if we want to recast

[50:33] our payment? Is it something we can

[50:35] already do since we've made a large

[50:38] capital infusion or is it something we

[50:39] can do in the future if we want to make

[50:40] an additional capital infusion? And what

[50:42] would that look like? What are the

[50:44] costs?" The other thing I want you to do

[50:46] is we want you to talk about your

[50:47] timeline. All right, we got this plan.

[50:48] We know what five years could look like.

[50:50] When do we actually think we want to do

[50:51] that? When do we want to go to one

[50:53] income? When do we want to potentially

[50:54] move back to Pennsylvania? When do we

[50:56] want to start a family? What's that look

[50:58] like? And we want you to look at that

[50:59] through the 3D glasses. What's the dream

[51:01] plan? What's the down to earth plan? And

[51:03] then what's the doodoo plan? And then

[51:05] plan and then plan accordingly. And then

[51:08] the last thing I have on here is get

[51:10] excited that you are and are going to be

[51:12] able to continue building your great big

[51:14] beautiful tomorrow. You guys are in

[51:16] thankfully an amazing spot and I think

[51:18] it's only going to keep getting sweeter

[51:20] and sweeter and sweeter and sweeter.

[51:21] Y'all are doing awesome. Thank you. This

[51:23] was a lot of fun because I saw so much

[51:25] potential. You're already crushing it. I

[51:27] just want to make sure you're taking in

[51:29] deep breaths. Enjoy each phase of your

[51:32] life, which it sounds like you are. So,

[51:33] but just don't put so much pressure on

[51:35] yourself because a lot of this stuff is

[51:36] just going to build itself based upon

[51:38] your good discipline and your good

[51:40] decision-m. Awesome. Thank you. Thank

[51:42] you, Bo. If others wanted to find out

[51:44] how they could also come on making a

[51:47] millionaire, what should they do? That's

[51:49] right. If you would like to be on Making

[51:50] a Millionaire, you can go to

[51:52] moneyguide.com/apply. Or if you want to

[51:54] check out all of our free resources, you

[51:56] can go to

[51:58] moneyguide.com/resources. Guys, I'm your

[51:59] host Brian Preston. Mr. Bo Hansen, Money

[52:02] Got Team out. Making a Millionaire is

[52:05] hosted by Brian Preston and Bo Hansen.

[52:08] Brian and Bo are partners at Abound

[52:10] Wealth Management. A bound wealth

[52:11] management is a registered investment

[52:13] advisory firm regulated by the

[52:14] Securities and Exchange Commission in

[52:16] accordance in compliance with the

[52:17] securities laws and regulations. A bound

[52:19] wealth management does not render or

[52:21] offer to render personalized investment

[52:23] or tax advice through making a

[52:25] millionaire. The information provided is

[52:26] forformational purposes only. May not be

[52:29] suitable for all investors and does not

[52:31] constitute financial tax investment or

[52:33] legal advice. All investments involve a

[52:35] degree of risk including the risk of

[52:37] loss. The guests featured on Making a

[52:39] Millionaire are not clients of Abound

[52:41] Wealth Management at the time of

[52:42] recording. Their participation should

[52:44] not be considered a testimonial or

[52:46] endorsement of Abound wealth management.