Why This Money Advice Has EXPIRED

[00:02] fridge, this money advice might have been good at one point, but now it's time to pour it down the drain. >> Bro, I am so excited because today we wisdom that people traditionally considered to be true, and we're going

[00:17] case anymore. >> I'm Brian, he's Bo, and we're financial advisors here to make sure you aren't working off of expired advice. With working off of expired advice. With that, let's jump right in.

[00:35] piece of advice that we think is expired, I think this is going to get a little bit uh get us in a little bit of hot water, and that is the advice that you need a college degree. Look,

[00:50] >> this might on surface seem spicy, but we got the numbers. We are actually showing up with the receipts. Without a doubt, education is a ladder of opportunity. You crawl up this, become a better version of yourself, but somewhere along

[01:04] the way, we have turned the goodwill of education into something that is just >> And if you need proof, here's the receipts. >> Look at this. In 1978, the cost of 1 year of college was

[01:19] $2,142. At that time, minimum wage was $2.65 an hour. So, if you just took the cost of college divided by the minimum wage, it would take you about 808 hours, or about 16 hours a week working part-time

[01:37] to be able to pay your way through school. That's what it looked like back in 1978. But, if we fast forward to today, the average cost of 1 year of university is $22,178.

[01:54] which is $7.25. Now, it would take you 3,059 hours or 59 hours a week just to be able to pay your

[02:06] the same. >> Yeah, I mean, cuz look, in the first one is there where all the the movies and stuff where you're working the part-time job, you're you're going to college part-time, and then you still got a

[02:18] >> Yep. >> Um the second one not even close to being in reality when you have to work 60 hours a week and and that doesn't even include school, doesn't include

[02:31] anything else you get to do with with memory making. It's just a bad deal. And if you a lot of you probably watch this and go, well, that's just inflation has been bad. Well, guys, let us go ahead and pull the curtain open on this. This

[02:44] is you look at this go, yeah, college has gone up. No, no, look at what this slide is actually showing you. This graph is saying the annual cost of graph is saying the annual cost of college inflation adjusted. Meaning that

[02:56] if it was just keeping up with inflation, this line would actually be >> We went above and beyond. Cost of college has gone up way beyond what >> Yeah, for those of you out there who are listening, back in the early 1970s, the

[03:09] cost in real dollars of a public four-year college was just under about four-year college was just under about $10,000 a year. Now, inflation adjusted, even after accounting for normal increases in inflation, the price has

[03:22] gone up in real dollars to almost $25,000 last 50 years. And if you think that's bad for public institutions, private

[03:36] colleges is even worse. They went from a real dollar cost of about $20,000 per real dollar cost of about $20,000 per year up to over $50,000 per year. It's not just inflation, it's causing the cost of college to increase.

[03:50] know, you're like when when did these guys start hating education? We love education and I want to make sure everybody knows that look, I even attribute a lot of my success to I got an accounting degree in college that

[04:03] gave me the fundamentals understanding of speaking the language of business and I couldn't have done that without going to college and getting that education. >> But if you're going to college without understanding what you're there for and

[04:17] what your return on investment is going to be on this degree, then you are the product that is being sold to and being taken advantage of and if you want proof of this, let us also share with you we survey our millionaire clients and we

[04:30] say, "Hey, do you actually work in your field of study?" Meaning you went to college and this or you got training after high school and do you work in that? We found out from our clients 76% of them work in their same field of

[04:43] study. If you compare and contrast that now to the typical American, check this out. It's almost the inverse. Only 27% of Americans work in their field of study. Guys, you're being sold a product that you're not beginning with the end

[04:57] >> And what's what stinks now is that it's so expensive, that becomes a cost that you almost can't overcome. If you're going to college to get a degree that throwing money down the drain. So we want you to begin with the end in mind

[05:12] by one, figuring out what degree will actually align with the vocation that want you to follow the first year financing rule. When it comes to paying for higher education, we do not want the total amount of debt that you accumulate

[05:25] to be more than what you anticipate your first year starting salary to be. So if degree and that degree is going to start you with a salary of $60,000 per year, you need to make sure that you keep your total student loan debt below $60,000 a

[05:40] starting to think, "Hey, like get a college degree in the past, that meant I immediately was going to have a high-paying job, that's just not what now, you you you you look at the research from the Federal Reserve, 42%

[05:55] of recent college graduates are underemployed. I mean, I actually my not uncommon for people now to come out with degrees and then go back and work >> Go back to the jobs they could have had while they were in college, even before

[06:08] poo-poo this and we're going to say that college degrees are not required. We want to go a step beyond and say, "Okay, well, what are some vocations you can still get a job and build financial independence without a college degree?"

[06:24] independence without a college degree?" Look at these top jobs that do not controller, median salary almost $150,000 a year. Commercial pilot, $123,000. Nuclear power reactor operator, $122,000. Elevator installer,

[06:40] $109,000, so on and so forth. Now, two of these do require an associate's degree, but by and large, these jobs do not require a four-year degree. So, just because you want to get a good job, just because you

[06:53] want to have a high income, does not mean that you have to go to college to be able to achieve that. >> Look, we love education when it actually boosts your future earning potential. But, there is a cost when you go to

[07:05] college and the fact that you know that instead of going out there and working letting your army of dollar bills start to build up at an even earlier age, we thought it would be be very empowering for people to see

[07:21] what is that opportunity cost. We talk about the wealth multiplier all the time on what it's worth for a 20-year-old because we know 88 times over. >> But, you realize for an 18-year-old, a wealth multiplier is close to 108.

[07:34] >> So, there that's why, guys, we're not picking on education saying that you shouldn't go to college. We are saying that you man oh man, you better take an active role in your life towards education to make sure that you're

[07:50] investment. Is the value you're receiving connecting with what you're hopefully make you better? >> And if it is not, then we would say the

[08:02] degree is expired. All right, Brian, let's go that we believe is expired. And it's this idea that all I need to do is save

[08:14] 10% for the future. We think it's expired that 10% is enough to save for >> I came out of school in the mid-90s, um the two most popular books on kind of personal finance at that time was one was saying 10% and the other one was

[08:29] saying 15%. I'm here to tell you I think that we have we have moved into a world now where there's more opportunity than ever, but there's also things working the responsibility falls on your shoulders.

[08:43] >> And look, we've actually done the math. If you go to moneyguy.com/resources, much should you save? And it what it does show is that 10% is appropriate for some people. If you are someone who starts saving very early, 20, 21, 23, 24

[09:01] years old, and you're planning on a normal retirement age, you're not going to retire until age 60 or 65, then yeah, 10% might be enough, and it might be the ticket to get you there. However, we know that most Americans don't fall into

[09:15] that category. We know that the average American doesn't actually begin saving and investing until they get to age 30. >> Yeah, and we've done the math on this, and then if you actually if you've put yourself in the situation and you said,

[09:29] "Hey, what if I just saved 10%?" You know, what you'll find is for a person who does start saving and investing at age 25 years of age, that's going to generate a little over $3 million.

[09:42] >> Yeah, if you had a $50,000 starting salary at 25, just saving that 10% is And that $3 million number, we believe, will replace almost 80% of your

[09:54] >> That's pretty good. But, we've already shared the typical American doesn't even start saving and investing until they're 30 years of age. When you run the numbers for a 30-year-old, now it's generating $1.9

[10:08] inflation in today's dollars, that's only going to have a replacement ratio of about 48% of your income. That's that's decent, but man-o-man, it's not enough to probably provide enough

[10:21] retirement. >> if you wait until age 35 to begin saving only going to be able to accumulate about $1.2 million. And again, based on

[10:33] a $50,000 starting salary, that would only replace about 31% of your pre-retirement income. So, obviously, if you're waiting till later and later ages, 10% might not cut it. And so, we

[10:46] It's, okay, if 10% doesn't do it, what would your savings rate need to be if your goal were to replace 80% of your pre-retirement income? So, for the 25-year-old, it's right there at 11%. So, 10% works if you're 25 years old.

[11:01] want to replace 80% of your pre-retirement income by the time you get to 65, your savings rate needs to be 17%. For the 35-year-old, where most average Americans fall when they start saving, you actually would need to save

[11:15] 27% starting at age 35 in order to have a normal retirement at age 65 that replaces 80% of your pre-retirement >> Look, our goal for you when you discover our content is hopefully it's early, but

[11:30] because we always talk about this concept concept concept of wealth multiplier. And that's why you know, for a 20-year-old the wealth multiplier is 88 times over for 30-year-old it's 23 for 40-year-old it's seven. You see the

[11:44] the the steep decline so that earlier you can start and I want you to load it might actually be able to change what your savings rate is over and throughout your career. We've actually experienced

[11:57] millionaire. >> Yeah, we had Danielle on the show and Coast FIRE thing. I want to have a really really high savings rate early on and by doing that I'm going to give myself an opportunity, the flexibility

[12:11] to decrease my savings rate later on. That's okay. It's okay to be dynamic, be in control of that decision. You don't want to be that person that starts at 10% saying, 'Oh, I'll save more later.' And then you get to later and

[12:25] now you got to save 30, 40, 50% just to get to your financial goals. If you can get to your financial goals. If you can start early and often and do it right, it's a whole lot easier than if you wait until later and try to make up for lost

[12:37] >> Because of all the data we just shared as well as the ever-changing financial world and landscape that we live in, we think a 10% savings and investment rate >> All right, Brian. Next piece of advice that we think is expired. Now this one

[12:53] because I was kind of raised on this advice, Brian. This was like this was ingrained in me at a very early age and it's the idea that when it comes time to it's the idea that when it comes time to buy a car, you should only buy used

[13:07] >> Now this one I I think this is a a recent trend that we've noticed is that slightly used cars, especially slightly used cars of specific brands that hold

[13:19] their value well. And then why do they hold their value well? It's because these are the brands that typically people want to own because they're reliable, they're good transportation to get you to your JOB. And that's why

[13:32] get you to your JOB. And that's why you're seeing lightly used cars are only you know $5,778 slight discount. >> Yeah, this was an analysis done by

[13:45] >> Yeah, this was an analysis done by iSeeCars over 1.6 million new and lightly used cars. So, this was a large population of automobiles they found and they found that based on that cost savings, it was only about a 12-year

[13:58] discount. And we know that 3-year-old used vehicles, vehicles that have been driven for the last three three years, have actually reached an all-time near-record-high average price of $31,000. So, lightly used vehicles

[14:14] aren't all that much less expensive than brand new vehicles and moderately used vehicles, 3 years old, have actually gotten more expensive than they've ever been [clears throat] before. So, the automobile climate is changing a ton.

[14:26] >> Well, I think it's you know, we said that that's 12% but for some other models out there, think about Toyotas, it can be as low as less than 5%. And and look, don't just take our word for it. I think about Clark Howard.

[14:39] Here's what his quote. He says, "If you can buy that 3-year-old vehicle for a third less than what a new one would be, then go ahead and buy the 3-year-old used vehicle. On the other hand, if the gap is less than that,

[14:54] that would push you more towards buying a new one." are going to be in this situation, what are some of the advantages of buying a new car? Why might you do this? Well, obviously, new car,

[15:08] lower mileage if it's brand new and there's no unknown history. You don't know who was the previous owner and how bad did they treat the car and how rough was it. You know exactly that you were the first person that's going to own and

[15:20] >> Well, come on. We we all know you had somebody you rode in the car with that when I was 16, we used to do these things called neutral drops where you put the car in neutral, rev it up, and then slam it into drive. You can imagine

[15:32] this might be entertaining for a 16-year-old, not great for the longevity of the vehicle. The other thing is, think about all the people Once again, behaviors, somebody who gets at an intersection and just balls out as soon

[15:46] as the light turns green over and over again. This stuff is tough on a vehicle. If you lease get a newer vehicle, you more than likely won't have some of these hidden behaviors that are going to take away the longevity of this vehicle.

[16:01] >> Another reality related to new cars is that often times when you're buying a brand new automobile, you're going to have more attractive or better financing a used car. >> Well, I mean, I think a lot of people,

[16:13] once you realize how the game has changed, it's going to probably shock you to realize that your car dealership they don't make the money on selling you the car. If you look at the research out there, it shows that on average front

[16:25] end gross profit per vehicle is around $403. The average financing and insurance profits per vehicle are right under profits per vehicle are right under $2,000. You quickly see your dealership

[16:38] is more of a bank than it is a car sales location. So, you have to kind of can hopefully turn the system to your advantage. >> And so, they want you to finance. It's they're incentivized to do so. It's more

[16:51] to do it, we want you to do it the right way. If you are going to buy money to borrow money to buy a car, we want you to follow the 23/8 rule. That's 20% down. Don't finance it for any more than 36 months or 3 years. We don't want your

[17:06] total payments to exceed 8% of your monthly gross income. So, even if you are being encouraged, even being incentivized to finance the car, make responsible money guy way. >> And after you take advantage of our

[17:20] 23/8, also it's important to understand with a new car, one of the things I do like as a parent is the latest safety features and tech. So, you know, when your spouse is driving the car, you feel like the family's safer. But, it is

[17:33] interesting. I think Clark said it best. If your car doesn't lose a third of its value in those first few years, it might make sense to buy new. >> Yeah, and when you buy new, uh you obviously get the full manufacturer's

[17:47] warranty. You're going to have likely lower maintenance cost in the first few years of owning a vehicle than if you buy a car later on in its life cycle. buy a car later on in its life cycle. So, if you are in the market to buy an

[18:01] automobile and you begin pricing used cars or someone else has already paid for the depreciation plus new cars and you factor in all the advantages that new cars might have, you may be surprised to find that buying a new car

[18:15] actually makes more sense than buying a used car. Well, that advice might be >> Expired. >> All right, Brent. So, now the next piece of advice that we think is expired. Now, again, this is this is countercultural.

[18:28] I think a lot of people are going to struggle with this one, but we think that the idea that you need to budget every single month and watch every every single month and watch every single penny and do it forever, we think

[18:40] >> Now, now look, to be clear, there is definitely a season in life when you're just starting out where you'll need to be tracking every dollar you spend and a budget is going to be your friend. But, don't we know people that are kind

[18:54] of the that they've they've started creating success, they've been spouse. You look at this and be like, are they mutants or are they misers because they are tracking every dollar even though we already have our savings

[19:08] set up, we already have what we're going paying all of our main bills, what are we doing? Is this even worth it? It seems like it's creating more turmoil relationship. >> what you said, is it is it even worth

[19:21] it? Cuz we recognize that our time has some value associated with it. While maybe early on that time spent budgeting and tracking makes a lot of sense, it is not uncommon to rapidly grow out of that. I think the envelope system is a

[19:36] system is the idea that I'm going to envelope for each thing. Here's my envelope for groceries, here's my envelope for mortgage, home repairs, all these things. And it's a great tool for

[19:51] understanding exactly where every dollar is going. You almost if you're if you're physically doing actual envelopes, you can't screw it up. But in doing that, in you begin to understand that it is very very rigid, meaning once an envelope is

[20:06] empty, it's empty, and it is not sensitive to your time. It takes a lot of time to figure out, okay, which envelope does this expense come out of and how do I replenish that and where do I focus? It's not an easy thoughtless

[20:20] >> Well, I think that these are these are great systems for creating muscle memory, but if after you develop the talent and the skill set, going to do this forever. And if you're I am so sorry for you

[20:35] because what's funny is that before we even started doing making a millionaire, I have a a story where a marriage a person came to me that their marriage person came to me that their marriage was about to dissolve because he was

[20:48] being so rigid with every transaction his spouse made. She had to bring the receipts to him so he could make sure he he locked it into the system and it was started having financial success. We saw the exact same thing when we were doing

[21:04] making a millionaire where we had this couple that he was in all intents and purposes trying to do the right thing, but his wife was feeling so restricted definitely taking and making the relationship pay a price.

[21:19] down. It wore her down to the point where they were no longer on the same page. So, what is the better answer? What's the better solution? We think of sense early on, but as you develop that muscle memory, we want you to

[21:34] gradually what we call a cash management plan. And what exactly is a cash management plan? It is an intentional plan with more flexibility. You are trying to structure your financial life that so that the dollars are going into

[21:48] the places that you know you want them to go. You're having all your savings, stuff flowing out. And so now, it becomes much less important how much you're spending on eating out or much less important how much you're spending

[22:02] on personal care because you know you funded the things and funded the obligations that you're supposed to fund, and you can spend with more >> Well, let's let's go ahead and talk about what

[22:15] this Let me preview what the dream can be for you. If you've been a person life, what if the better plan was you had your savings and investment automatically set it up. It was automated. You also have

[22:30] all of your bills set up to where they're automatically paying. You know you're saving and investing 20 to 25%. You know that you're paying your bills. And then if you have leftover money, guess what, guys? Our system with a cash

[22:44] go and make memories. Live your best life. It allows you to live outside of strict budget categories because this is what the hard work in the beginning was supposed to do. You had the heavy discipline so that you could actually

[22:59] have some fruit and dividends later and not have the rigor. This is what the whole purpose of using money as a tool and understanding when to graduate to >> And and one just additional aside on budgeting, it is incredibly valuable,

[23:13] incredibly useful, and cash management incredibly valuable, incredibly useful. Don't as you've done it for a while, don't major the minor. So often you hear about the latte effect, the latte effect, the latte effect. And while yes,

[23:25] there is some truth to that, what we know is that for most folks, this is according to the US Bureau of Labor Statistics, housing and transportation categories consume 50% of the average household budget. So it's

[23:38] not the small latte decisions that are eating up most people's capital. It's what they decide to do with cars or transportation. So if you can make those big decisions right, if you can make those well, it's going to create

[23:52] flexibility in all the other areas of your life. >> Because of all we just shared about the big living expenses, that's what's showing how after you've developed the

[24:04] muscle memory, you don't have to budget every month, we're telling you monthly budgeting is expired. >> All right, Brian, this next one, this flies in the face of the American dream. Uh and I think that we're going to get I

[24:17] on this one as well, but we believe that the advice is expired or the idea is expired that you need, you must, you have to own a home in order to build

[24:29] >> think there's a trend on today's show is you have to understand the the intersection of the value you're paying for things versus the price that you're being sold them the these items at. We did it with education, we're going to do

[24:43] it now with housing. Is it when you go look at the research and look at the data, without a doubt, it's nice if you can own a home. And you know, for for for decades, this is the American dream. But then when you overlay the data that

[24:58] nationally mortgage payments are 38% more than average rents, you have to ask yourself am I getting value for the price I'm paying or am I being dragged into a system that's going to absorb all of my

[25:15] resources just so I can fit in this box of the American dream? recognize is that this is a product of our recent environment. If you look at the data going all the way back to 2010, the spread or disparity between the cost

[25:30] of mortgage, the cost of owning a home, and the cost of renting was not that great. But since we've seen since the pandemic, since 2020 and since the run-up in housing prices post pandemic, now the chasm between what it costs for

[25:46] the average mortgage payment across this country versus the average asking rent, there is a substantial difference. Where it used to be in the hundreds of dollars of difference, now it is almost into the multiple thousands of dollars of

[26:01] difference on a monthly basis. That makes the cost of owning a home previously. >> Bo said something there that is a key point. This is a recent development. Really in the last 5 years is when we've

[26:14] seen this huge run-up is cuz the price of homes have gone up and while the price of homes have gone up, the cost of interest on the interest rates have gone up as well and that is really directly driven the the affordability way down.

[26:28] Now this does not mean that this stays this way forever. There will more than likely things will adjust, but we can't cover all the details, but we did a and and y'all showed us by how popular this show was. We did a deep dive on how

[26:42] things have changed so you can do the analysis should you buy or rent in 2026? something that's on your decision matrix headline. So, we actually did a case

[26:56] Randy the renter. And we used all the same variables to determine like after 12 years, which is the average average amount of time a homeowner owns a home, how did their two financial situations differ? How were they similar and who

[27:12] came out on top? What we found is that over that 12-year period, Heather the over that 12-year period, Heather the homeowner spent over $454,000 homeowner spent over $454,000 while Randy only spent about $357,000.

[27:24] statements, Heather's was only worth about $166,000 because of the equity she built in her home. Randy, by renting and then investing the difference, was actually able to build up $30,000 more at almost

[27:39] a $200,000 net worth, and he still had a lower monthly payment in terms of his rent payment than Heather's mortgage. So, in this scenario, after 12 years, Randy was in a better position

[27:51] financially by renting than Heather was >> So, does that mean we're always against buying a home now? >> Not necessarily. Look, I just think it once again, you have to go through the

[28:03] exercise of what is the value of what you're getting for the price paid, and research. It's not you can't just go under the umbrella that buying homes is everyone. What we found in our research is some metro areas, there are wide gaps

[28:21] between the rent and home ownership. And in those areas, probably want to pay rent and then save in the background so you maybe when the market adjusts or when you retire and move to a different geographical location, you will be ready

[28:34] to capture that moment. But, other areas, you go find that there the rent versus home ownership is actually trading in a very narrow range. If that's the case, then that probably moves the needle closer, go ahead and

[28:46] >> If you're curious about what some of those areas are, the areas with the widest gaps, San Francisco, California, Bridgeport, Connecticut, New York, New York, San Jose, California, Los Angeles, California, Honolulu, Hawaii, Houston,

[29:00] Rhode Island, Boston, Massachusetts. These are all very high cost of living areas. In high cost of living areas, it may very well make sense to rent instead of buy. But, if you live somewhere with a narrower gap, somewhere like Phoenix,

[29:16] Arizona, Orlando, Florida, Columbia, South Carolina, Deltona, Florida, Cape Coral, Florida, Greensboro, North Carolina, Charlotte, North Carolina, one of those areas, then yeah, home ownership might make more sense than

[29:29] a reasonable price. So, you have to determine for yourself, am I at the stage where it makes sense for me to buy a home? We have a great moneyguy.com/resources, check out our home buying checklist. You

[29:43] calculator to determine if it makes sense. And then once you've determined financially, then you can say, "Okay, geographically, based on where I live

[29:55] and based on where I see myself over the next 5 to 7 years, is home ownership something that makes the most sense for me?" And if it's not, that's okay. We disaster. >> Because there's so many variables,

[30:09] geography, location, your personal situation, your earning potential, how much you've saved and invested. It's a very personal in personal finance decision. Because of that, we can no longer give universal advice that home

[30:24] ownership is necessary to build wealth. Because of that, it's expired. >> I hope what you've seen is that a lot of conventional financial wisdom can change and a lot of circumstances and variables can change. And that's why we love that

[30:37] we get to sit right here and do do we do by delivering sound financial information to you so that you can make informed decisions and that you can do >> Look, we try to load you up with all the free advice we can. Go to

[30:51] moneyguy.com/resources and I want you to focus on what you can control because the world is ever-evolving, ever-changing. We're sharing, but focus on what you can control and keep your life as simple as

[31:05] your army of dollar bills. But, I promise you if you do this because even with these hurdles we heard about cost of education's gone up. We've heard about the cost of housing's gone up, but I'm here to tell you it's still a great

[31:18] wealth-building time because in the background there is innovation, there's technology, there's great returns that are out there building in the background that you can take advantage of by just buying into index investing. And if you

[31:30] do all the things we're sharing, focus on what you can control, these simple decisions will create success. And when you create that success, all of a sudden you're going to find your life gets a little more complex, actually a lot more

[31:43] going to start thinking about once you have that million-dollar portfolio, what do I not know? What am I not maximizing from a tax planning? Do I have enough to retire? And that's when that complexity is going to bring you to the abundance

[31:58] cycle. You'll remember us. We planted these seeds. We shared with you the truth of how money works. We shared of the rules that have changed. And we're you and we're going to help you live your best financial life and on your

[32:11] time that much sooner. I'm your host Brian joined by Mr. Bo. Money Guy team Brian joined by Mr. Bo. Money Guy team out.