This 401(k) Trend is ABSOLUTELY DEVASTATING (And Getting Worse)

There's a trend with 401ks that is going to be devastating for many many not mutants but the folks for one case if they're not careful. I am so excited. That's gotta run on and say this. I was on the edge of my seat. I was waiting for the end of it. I am so excited to talk about this though because I think this is something that we can improve and something that we can change and something that we can make you guys aware of because it is no secret. We love 401ks for many financial mutants out there. It is one of the most powerful wealth building tools that you have in your financial tool built and yet there are some people in our opinion that are screwing it up and may not even realize. Well I think it looks like you've got a secret why do we love 401ks is that these things first free money from your employer. Anytime somebody is going to just prime the pump and give you free money you got to get in there and get that. They are also automatic for the people meaning if you are trying to actually make the good habits as easy as possible there's not many things that are more automated than setting up getting a 401k. I also love all the tax benefits. Now that you can do Roth with your 401k I think it is greater than 80 plus percent of employer plans now offer Roth contributions. There's just so many things to get excited about and then to find out that people are just cutting the knees out right from this wealth building opportunity just makes me sad. Well most people, most millionaires that reach millionaire status actually do so inside of the 401k account. It is the first account that gets them into the two comma club and according to Fidelity right now there are 665,000 Americans that are 401k millionaires. That's up from 537,000 at the end of 2024 and up from 422,000 at the end of 2023. So things are moving in the right direction 401ks are getting bigger and one of the reasons they're getting bigger is because they are such amazing tools and vehicles and yet there is this like alarming and frightening statistic that exists and it's so funny because Vinyl just said this inside the chat. He goes hey this doesn't apply to any of the people in here. This doesn't apply to us. Why are you guys talking about this if this doesn't apply to financial mutants and I'm actually of the opinion, I think this probably does apply to financial mutants because this statistic would not be true if a lot of people, maybe it's not in the big, gravitas way but we know that right now Brian for every single dollar that flows into a 401k, 40 cents of that comes out as a premature withdrawal on average. To help Vinyl out, I mean look I'm of the age, I don't think they do this anymore. After school specials, I mean if there was ever anything going on in society, they would put on these after school specials like it was a PSA on all the so you could avoid the eating disorders or make sure you're not playing with matches and other things like that. So it is important for financial mutants to understand because I think even financial mutants fall into this trap is that if you get into moments to where you're trying to cut the corner off because we just reacted to a bunch of content this morning and people were using home equity lines to pay for cars, people were using 401k loans to buy boats for the Virgin Islands, just silly, silly stuff. So I think it's important to yes, to cover these things not only also so you guys can be the ambassadors because I guarantee you every one of you guys has friends and family that are falling into this trap and it's on you. You can only tell reach so many people. That's right. I'm counting on my financial mutants to also use some of these stats and the data points to make sure that people are avoiding these traps. And we're going to talk about one specifically, but I just think in general we've seen this with our clients and by the way our clients are like cream of the crop type folks who've had some financial success, made good decisions and even they have fallen into the trap early in their career where they change jobs and all of a sudden that $20,000 they had in their 401k. Oh well I changed jobs. Well now I can just, oh instead of rolling it over I'll just distribute that. Well when you distribute that you pay ordinary income tax and you pay a penalty on that and I think that happens over and over and over again. But there is an alarming statistic taking place that is happening that I think is it's become too easy of a release valve to activate. Right now 6% of workers in 401k plans, this is according to Vanguard, took a hardship up withdrawal last year. So 6% of folks have this special provision where even though you're not supposed to be able to pull out money from a 401k while you're participating in it, there's a little carve out that says in case of emergency you can do this and I think too many people are doing it. But in context matters because you're like well okay 6% tell me historically what does this mean is that, because this is back to why are we doing a PSA on this, why are we doing the after school special is because this is an alarming trend that every year for the last 6 years has gone up. I mean just to give you guys some context guys pre-pandemic this was like 2%. Now here we are at 6% and it's gone up every year for the last 6%. I think there is too many people out there in the public world who are looking at this piggy bank of a 401k and they're basically robbing their future self of the opportunity. So we got to make sure we let people know, be careful and leave in some of the tax legislation. I think about some of the tax bills that have come out have made it way too easy and I understand they're very noble in the way they're doing the narrative on this but still at the end of the day this will create the ripple effect that you'll have less money in the future if you're not careful. And look you've heard us harp on this before you know that we really dislike 401k loans. These hardship withdrawals are even more devastating because what ends up happening with these is you actually are taking the money at you know the you can think of about a 401k loan you're kind of like putting your soldiers on the sidelines your players in the sidelines with a hardship withdrawal you're actually taking them out of the game all together and it is a costlier option over the long term because Brown we talk all the time about the wealth multiplier and we use it as sort of this educational tool. We say that for every $1 a 20 year old invest it can turn into $88 by the time that they retire it's such a valuable idea of thinking about that money growing but when you flip it around and you think about the alternate of that for someone who pulls a dollar out of their 401k think about how that magnifies on the negative side. Well you don't need to have to we've done the math for you we went and looked this up is that the average or median hardship withdrawal in 2025 was around $1900 to put that in perspective for a 30 year old they're basically taking $44,000 from their retirement for that $1900. Think about that was this 1900 I'm trying to think about something that costs $1900 maybe it's a vacation I go maybe it's a plane ticket maybe so worth was that thing was that singular cost worth $44,000 for a 25 year old it's close to $84,000 for the 20 year old so this is for the cast of stranger things you know started out with little kids but they stretch this out so long they're all 20 years old when it comes out $168,000 you can see how the impact of this is is you want to keep your army of dollar bills working so we're like okay that's enough we've lamented we've shared the trouble how do people protect themselves so you financial mutants if you're not following this trap how can you share with your friends and family so they don't follow the trap let's avoid the desperate decisions and the first thing you do is be proactive not reactive we love emergency reserves. I want to be clear you know I think you mentioned this but if we didn't you know one of the some of the top reasons cited for why people pull out these hardship withdrawals is not for the plane tickets of the travel they say hey it's for avoiding foreclosure and eviction or perhaps medical expenses or something along those lines even when the unknown unknowns come your way if you're doing the right things you can do exactly what Brian said you can stave off that desperation by being proactive and thinking about things like man you know what if I do have an appropriately funded emergency reserve if I have three to six months of my needed living expenses in liquid cash when that not when that foreclosure notice comes that's a little too aggressive but when that medical thing comes or when the job loss happens or when the fill in the blank thing takes place I don't have to go to my 401 count I have to go to my retirement accounts I have cash right there able to protect me when I need it the most. Yeah I mean I know financial mutants following the trap thinking that cash is trash but I'm telling you guys you can turn emergency situations into just inconveniences if you do emergency reserve so a lot of you we always say three to six months you know it's by the way step one of the financial order of operations is going to be highest deductible covered step four of the financial order of operations it's fully fine that three to six months if you're trying to figure out my three months my six months we actually try to make that easy for you it all depends upon how easy is it for you to replace a job how many people are counting on this money you can understand obviously if you have highly marketable it's only you in your household that you have to worry about you have access to other you know break glass like Roth IRAs I think maybe three months works for you but if you're you know the single family income if you're you know you have a difficult to replace job if you have a mortgage or really high fixed cost probably closer to six months so make sure you're paying attention to those things so you can really avoid exactly what we started this thing to close the loop those desperate decisions that make huge mistakes. Another thing we want you thinking of while things are good while things feel comfortable while you're in an okay spot be aware of lifestyle inflation now not all lifestyle inflation is bad you know lifestyle creep gets this real negative thing we want your lifestyle to increase over time we want your 30s to look better than your 20s and your 40s to look better than your 30s that is an okay thing so long when you do it inside the parameters while we have rules like 238 for buying a car if you buy a car inside of 238 or if you buy a house inside of 3525 you're going to prevent yourself from having such a big lifestyle that when something comes your way when an unknown unknown happens now you don't have to start reaching for the crazy stuff and I've started going into your 401k to get that you did not lifestyle your way out of financial security and don't get the financial order of operations out of order that's right you know what happens this is a for all the dads out there i'm going to turn this into the greatest dad joke cover if you do the financial order of operations out of order it just doesn't sound the same as food so let's make sure we get the financial order of operations done in the right order you too can go download your own copy go to money god comm slash resources we've done the heavy lift for you this thing is all terrain all weather it will tell you exactly what to do with your next dollar i love sometimes we just need a reminder you guys out there oh this is this isn't uh you're not talking to us we're financial means that we totally get that but we love that we get to sit here and be that voice of reason constantly reminding you that's a better way to do money if you want to be someone who is constantly reminded and you're not subscribed to the channel make sure you subscribe right now so you can know when we have fresh new content coming out because on this channel there is only fresh new content coming out every time you get a notification you can know it's something you have not seen before which we are so so so excited about so there's even new stuff to the pop off about so is are we going to introduce that today are we going to we're going to pop off first oh i'm sorry yes i was i love the worst secret i love in the world i mean i think we're talking about the same thing are you talking about a new free thing that's up on the website absolutely absolutely no so this one calling all members of the messy middle this one is for you right now on money guy dot com slash resources there is a brand new to the public resource called the parents guide to raising financial mutants so this is going to help you really find a lot of the things that we talk about here and there right all in one place all about parenting what it's all what you need to know about things like being financially prepared to have a child wealth building strategies and account types for kids tax credits how to teach your kids about money and more so go check that out it's free money guy dot com slash resources and i'm going to just be completely honest with you it's a very robust free resource it's like 15 pages of content it's all beautifully designed really easy to navigate we really just wanted this to be a great place to point parents and members of the messy middle or anyone who thinks they're about to enter that type of stage of life this is for you so that's brand new free on the website money guy dot com can i tell you sort of a real world thing that happened to me last week you can't is awesome i was i was in a van with seven other entrepreneurs down by the river no it's not down with the river with seven other entrepreneurs and i was i was in the back and i'm checking my emails and an email comes in and it's our our parenting guide i was like it just released and so i just kind of mentioned hey guys i just released this and somebody was like hey i've been meaning to ask you and they asked me some question about kids and getting them excited and custodial ross and they were like but hey i just i'm trying to figure out how to connect it how to make it i'm like well one let me give you a copy of this parent guide and two let me show you this and literally on the van there was the there was the guy driving the guy in shotgun then everyone else just kind of crowded around me i pulled out my phone and i went to money guy dot com slash resources and pulled out our wealth multiplier and i started saying okay how was your kid all right 13 you said your kid's got some birthday how much money did your kid for let me show you what that $4000 your 13 year old can turn into i was like you know it's even cooler i'm gonna go to our compound interest calculator you said your kid he's cutting grass right now how much he makes for 20 bucks let me show you what happens if he saves and i and you should their eyes were just like this big if you have people in your life that you want to get excited about personal finance that you want to show them and see the light bulb go off that is exactly what our tools on the website were for and it's not they're not just lipstick i actually did this in real time with real human beings and it was awesome so shout out to you for living the perfect like example money guy scenario how you should use these resources no joke in a visual though a bow like an adult church camp like they're all in this they're all in this band ride down to every time a semi-rise by they're like trying to get the semi to blow the horn you know i just it cracks me up i had all kind of visuals going off there that's fantastic what type of vehicle was it it was a big uh it was like a big like touring van you know what i mean we're like you got it's like i guess probably 12 seats but in the back you can put all the storage stuff so is this like a hospitality type van where you know how you know seats and TV up front it was nicer than the band we took on retreat once it was nicer than the van we took on retreat but it wasn't like you know it just it just gets you from a long ago it's like a box truck we basically just told everybody bring your own folding chair and jump in you did you were like don't pack too much there's only so much for the parenting guide is awesome i i am so excited because do you recognize how much we can change the world if we begin by changing the kids the next generation what's so funny is as i was explaining this to all the people there was this guy why is this why why don't they teach you this in elementary school what are they teaching this in high school why don't you graduate college knowing if i would have known all this back then man we have an awesome opportunity to be able to do that i hope that we change the future financial mutants of the world gets me super stoked agreed agreed and with that we are going to dive into answering your questions so drop them in the chat if you have a personal finance question we're going to kick it off with michael he says i bought a car with 268 before becoming a financial mutant i am two years into the loan term should i count it as a learning experience and keep the car or adjust and sell according to the rules tricky question but great one financial triage is what's going to happen what if you're finding money guy and you've already made some mistakes you're kind of trying to back into where you start in the food and in the car buying rules now i want to i want to figure this out so i'm going to kind of reverse in just near some math here so you said you bought a car with 268 so 20 you put down greater than 20% okay i love that the eight based on the six-year amortization you did the eight was a fancy car right like that now now here's what i don't know how close to the eight was it because he didn't you know it could this could have only represented two or three percent of his gross pay he just knows that it's not more than eight which i like the very first thing that i would do is i would recalculate how much i'm paying on the car if i were going to get it inside that 36 month time frame so he said what you're two years into the long term what would i have to do how would i have to change my situation to have this car paid off in the next year so that way i did it inside of 36 months and am i able to do that without going above and beyond the eight percent of monthly gross income now if the answer that's no then i want to start thinking through okay well how much to owe on this what's the interest rate should i potentially pay more on it so that i can have it paid off in one month maybe i have a merchant reserves or cash somewhere else i don't know that you have to like sell the car now you may and that may be something but i don't want you to just default that the only two options are keep this bad decision going and rock and roll with it or sell it i think there's probably somewhere in the middle that could potentially make sense i mean yeah if you don't course correct now you're you're basically dragging this bad decision on for another four years and it's the the time lost that drives me crazy on this is because if you go look at our wealth multiplier especially did he did he share michael share his age with us i don't think but i don't have but it is i'm assuming because this sounds like an early decision that wealth multiplier is definitely impacted in four years is too long so self-correct ASAP and if you know that's one of those things i'll give you a little grace that if you look at this and go man i don't think i can correct this in 12 months but maybe i can't in 14 but if you look at it and go no it's going to take every bit that i would i just there's no extra money in my budget to get this thing back under 238 then you might have bought too much car and i know both said we don't want you to sell that's not your first default but i don't want you to default if you go through the actual exercise and do the math and triage your situation and this is what's keeping you from funding a Roth IRA and actually building your army of dollar bills then yeah sometimes you have to do some tough love and remember part of the hedonic treadmill when you have good decisions you're supposed to spread those out as much as possible so you get all you know you squeeze every ounce of goodness and enjoyment and dopamine hits when you're when you're buying like new cars new houses and those type of things but when you're dealing facing bad things in life like you made a lot of consumption decisions then i would tell you cut cut just cut it off you know just because you'll get back to your base level happiness that much sooner if you make the hard decisions earlier and often so that you don't just string along the bad hardships that you'll have getting your financial life in order michael thank you for the question all right something bow let's go be kind of a fun little game to play oh wow that we'll see that was not thought through that was not thought through it i feel like we have a countdown you know what i got i got i got i got some i got you bro we might be it's a final countdown to see how long that battery power he might be going digital to analog you know i can love this look i have a college daughter i can't say that much longer because she's graduating in may you're not having a like an adult like a fully adult you know we we still i get notifications like when her her her battery on her phone is like at five percent really you know and then and then i will you know we anybody who's got teenage kids you know you'll you'll know what i'm talking about what apps we're talking about but um and and whenever we're in content meetings with reby she is guilty of all so whenever it just happens to me from i am the opposite i am like fully charged you know it's just like i'm not worried about battery life you know we'll just go buy a new product before we worry about the whole battery life but today you know we're running we're in the final countdown so you try three percent what you drive battery powered automobile right how low will you let that like you like when i when i was going out with my grandparents my grandpa never let it let it get below half a tank if it was half a tank he was about to run out of gas we'd always fill up at half a tank how you do that with uh with the test no what i do is you know i'll charge it up to 80 percent and then that will last like three or four days i'll when it gets down to like 35 percent 40 percent i'll plug it in at night and then it's back to 80 percent good for another three or four days what's the lowest you've ever let it get actually you were in the car with me when we went to kentucky i went to kentucky and they were supposed to have been a destination charger at the hotel and we pulled up to the destination charger there were destination chargers there but when we plugged them in the car they had zero power to them you know they had they had cut the power to these things so they were not working so we did our speech in kentucky at marie state and then we set a prayer and i think it got down to it was one or two percent you know it was scary we have another a fellow friend content creator here in town they actually broke down the side of the road in his uh remember that remember that story i don't know if that's called breaking down but yes he ran out of charge he ran out of juice on the side of the road that's as as broke down as you can get in an electric car you guys are funny we made it well and there was what was the name of that restaurant we ate it the restaurant it was a rip off of waffle house but it was oh the american diner isn't that what it was it was pretty all the american diner that was all out of this world instead of you having to choose between grits and hash browns they just give it all to you it was an and it was an ore it was and you get both i think you also got sausage and bacon they did it was like everything it was so good all right we're gonna go on to the next question it's from og laminated foo i think we've got a charger for brian so nobody panic uh we will make sure he says fully charged and able to answer your questions but the uh question from og laminated foo says i love the name i'm a 24 year old college student preparing a speech for my classmates on financial literacy and the power of compound power of compound growth what message would you focus on to actually help change their futures speaking of changing the lives of the next generation bo what would you say uh okay is the number one thing that i would try to get across because whenever i give a speech or a talk i always want to think about when the audience leaves what are these small nuggets i want them to take i'll generally have like a big nugget that i want them to take and then a few little like small nuggets i want them to take in this particular case og uh the big nugget i would want them to take away at 24 years old is just do something you don't do everything right you don't do all the things right you ain't gonna get every decision perfect but if you can just start doing something the 24 year old that starts doing something even if it's not perfect is going to be way better off than the person who waits until 30 does everything perfect just because time matters that much so i would just get the idea across hey if it's 20 bucks a month 40 bucks a month 50 whatever the number is just start doing something to begin saving for the future i would remind them of the three ingredients to wealth there's your presentation is because you have to nobody builds wealth if you can't get component and ingredient number one discipline you have to live on less than you make if you can live on less than you make that creates margin which leads to having money which is ingredient number two and if you put that money to work with enough time the most valuable of your wealth building ingredients is that magical component of time especially for somebody in their 20s is because you realize that compounding interest and compounding growth really is the eighth wonder of the world and it's magical because your money can truly work harder than you can with your back your brains brain or in hand backs your brains in your hands you know but only bow has multiple brains that work as fast as his brain does mine i'm like we're working at like 40 30 percent and we're hoping that it's enough pulls through you guys are funny thank you o.g. laminate foo for the question and the username crisis averted by the way and remarkable remarkable by the way i thought it would show a charge sign but now i'm just seeing the number going up is like you know since coming to life that's good that's good i'm glad to hear it well hey before we dive into our next question submit your rapid fire questions drop them in the live chat put rf at the beginning of the question so we know that you want them to answer it in 30 seconds or less i do have a little twist for it today so we're going to try that so stay tuned we'll do a question that's probably why she was in the office rapid fire instead of sitting in that early content meeting she's in there what's the twist you'll find out when we start the rapid fire segment probably hammering in spikes it's just a little twist but i think you'll like it what would you do if she actually brought up the shot caller she's like hey we ordered this off it has been discussed i mean i'm the one put on the sunglasses last week in the in the the the mullet i feel like blind is down for you know what an adventure after after that show we both donned the mullet and the and and uh and the other accoutrements did we put that on socials matt was that out on social yeah so you know if you're not on social you're not subscribed you know list you miss out on all those little extra i will tell you our saturday newsletter has some great behind the scenes stuff oh it's all of our awesome financial content so i love that social media they put out the sexiest man alive with me in the mullet it is now the picture of one of my group threads oh yeah i go on i go on a golf trip once a year with all my neighbors from georgia and um i love that trip it's coming up in like a week and a half two weeks but um now i that's what they're they totally pick the memes are strong with our marketing team brun i love being a business owner but i think people underestimate how fast things move from i've got an idea to all right now we actually have to build this thing that's right the idea is the fun part but then you've got logistics operations marketing all the stuff that actually makes the business run and work and that part can really slow you down and it might even keep you from starting at all exactly which is while having the right tools and the right partner can make all the difference that's where Shopify comes in Shopify is the commerce platform behind 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hearing sign up for your one dollar per month trial at shopify.com slash money guy go to shopify.com slash money guy that's shopify.com slash money guy all right let's go to seth mcfooze question lots of good usernames today he says i'm starting a document for my wife with everything she will need to know if i pass like life insurance accounts etc any suggestions for how to structure this what should i include we're 30 years old in the messy middle with all caps i think you guys have a lot to say about this but it's funny but you and i just had a conversation about some of this yesterday um i'll tell you south one of the things that has been great for of course let me start off with level set foundational do a net worth statement net worth statement is going to be magical as a communication tool um because it also leaves behind the breadcrumbs of what you have now let's get into the nuts and bolts of how you get access beyond your your life if you just so needed to is we use a password manager my wife and i do and um i wanted to make sure she could get into all of our primary accounts if something should happen to me and the thing is everybody's now using you know two factor or multi-factor and and i she was like well how am i going to get into like think about your custodian or think about your bank what i have found both my bank and my primary custodian allowed me to add my wife's phone number in addition to my phone number as you know those those you know for for for security purposes so now if she was trying to to use the password manager to get into the account we've actually added that to where she is not going to be kicked out because she couldn't pass the the multi-factor yeah i don't have a ton to add to that because what are the exact same thing i do a net worth statement i want to list out all the stuff that we own all the assets all the liabilities i also put on there where they are so i don't just have like raw IRA i've got like fidelity raw IRA and i'll even put like the last four of the account number so if she's trying to shuffle through account statements or whatever i want her to have some sort of identifying information to be able to find okay this is where the checking you know and that's all about the institutions we use where do we bank where's our checking account where uh where our investment accounts life insurance where's the actual life insurance policy where's the digital record of that and then i also go through with her hey i get hit by a bus who are the first phone calls you're going to make right like that's just something i want her to know hey something happens to me number one very first phone call call brian all right once you call brian then i kind of work through the you know down that list and i think it's just more because i am the one who who who navigates the majority of our financial life and when we make decisions together but i'm kind of like the the implementer if you will i want her to know how she can get to and get access to everything that she's going to need and so i just put it on and it's actually all on the network statement and then all on the footnotes page so she has all that information in one place and then i go over like any uh you know we also use a password manager but also stuff like you know safes and that kind of stuff like i make sure she understands how do i get in there what do i need to know where the documents house all those parts and pieces yeah that's why if you want by the way if you're like oh my gosh i don't even know where to start with a network statement we have a free one if you go to money dot com slash resources we do have a free one and if you want the same one bow and i use if you're gonna learn dot money dot com we actually have a network tool um and and don't skip out on the footnote page because that's where you lay out all the life insurance the kids accounts and all the other things that the bow was covering and i even we have a section where i have the the you know people we work with you know that can be your life insurance agent it can be your property and cash insurance agent you can be cpa it can be your you know attorney that did all the estate documents for you that stuff is very helpful so that you're leaving behind um you know breadcrumbs and then always tell people if you this is more so if you got stuck with a situation where you just don't know what somebody had and they passed away tax returns are a great forensic tool to go figure out where all the financial resources and assets are as well but that's that's kind of when you're left holding the bag on something this is i'd rather you be proactive so you know you can get into the accounts you know what's going on and everybody has peace of mind another silly one and i just this happened this past year not only because you know i'm i'm helping out a client who unfortunately you know lost her spouse and one of the things that she's it's like we pay off all of our credit cards and i kind of knew like the ones that i used but i didn't know all the credit card like all the different companies i need to reach out to and stuff that was in his name and in the business name and so i just started kind of keeping an inventory hey just so you notice we heard this is all the stuff that we're attached to right like so again if something happens these are all the places you need to go to know to look for stuff did you do that under the liability like even if you're paying your credit cards off or did you put that under foot i didn't footnotes because i didn't want to like i didn't want to like clutter up my network plus you you're paying it off monthly that's right because i actually that's something i probably need to add to mine i don't have that on there and that's smart that is smart and yeah i agree it's not really a liability if you're not carrying with that that's word manager would hopefully help on that a little bit just because i've i've labeled stuff in the share file but but i just wanted to know like hey okay there's five credit cards yeah no those were great thoughts great questions seth mikfoo love that you're thinking through that and setting your household up for success we'll do one more question and then dive into rapid fire this question is from tumblr enthusiast so everyone is really uh going for the usernames today my wife and i both 27 are in step five let's go an escrow shortage made our new payment 33 percent of our gross income should we move on to step six or prepay principal to eliminate pm i and drop from 6.5 percent to 5.75 percent all right you gotta let me think about this one a little bit well let me why you're while you're thinking about there's another variable that's also going in because we've we've even talked there's several reasons housing's hard remember we even have a show coming up that we're going to be releasing to help people kind of know how to navigate this in this unique time but also because you're 27 and and it's not uncommon that people stretch things when they're at the beginning of the career because especially like a house um i'd ask you what's the opportunity that if you took three years of your upcoming income if you levelized out your income are you closer to 25 percent then meaning that because like i come from a you know public accounting background so my pay went from like apprenticeship where i was not making a lot of money and then i started getting big jumps when i got my certifications and other things i'd be curious if you have something in your career that's going to help minimize this because of upcoming income and then i'd ask for other things that might in the current situation mitigate the situation is like if you live in a high cost of living area but you have great public transportation and so you don't have the 8% that most people have on 238 going to a car loan that can help get you through give you a little grace on this as well but um i will tell you that if you go through that exercising you don't have it we got a bigger problem then yeah one at 6.5% or 5.75% either one of those i don't consider high interest debt that's not really part of the question i just want to throw that on there for a home i don't consider that to be high interest debt i am a little curious assuming that your mortgage payment was inside of 25 percent the escrow adjustment jumping it up 8% seems significant so i'd want to really dive into what was it that changed and perhaps your insurance got a whole lot more expensive and more expensive insurance caused the escrow underfunding so i may want to go shop my homeowner's insurance and say okay man what what happened why was that the case i did this for myself recently the last two years i went and shopped all my property and cash insurance and i was able to save thousands of dollars a year by shopping my insurance and as a result of that because my homeowner's was part of it when i got my escrow notice i got a refund check for over escrow and my payment went down so it's kind of a a nice thing if it went up because your property taxes went up a ton i'd ask okay is that right is that accurate is that reasonable is that something that i should appeal a lot of people don't realize this if you feel like you have received an inaccurate i don't want to say unfair that's the wrong word to use but an appraisal that does not match market you can actually appeal the property tax records say hey but this you said my house went up in value this for much i don't believe it did this is what the tax rate should be and i would try to dive into why it was such a significant increase year over year and then exactly what brian said if it's unlikely i'm gonna get any reprieve there and my income will not grow to the situation where it's affordable now i gotta begin to make some decisions yeah those were great thoughts um tumblr enthusiast thank you for the question all right we are going to dive into our rapid fire segment remember the rules are bone brian have a combined 30 seconds to answer your question and they cannot use the phrase it depends or any similar phrases or their time is cancelled both of our times are one of our times reby just ask him for the audience what we will make the statement that it is both of your times if one of you says it depends you lose the opportunity to answer reby i just want you to know i appreciate being your favorite i bet you do thanks brian thanks and add a twist if you can work in a dad joke into your answer goodness since brian started us off strong if you can do a pun a dad joke any kind of joke you get 10 points and whoever has the most points at the end of the round wins it's gonna be hard enough to do it in 30 seconds but now we gotta add humor into it i'm up for the challenge let's just see what happens all right and remember at the end we will let you have our maybe it does depend segment where you can you know bellie yeah what i want to explain whatever you need to say that you didn't get to say i will give you that all right ready to dive in i'll read the first question and then 30 seconds will be on the clock first question have you guys ever second guessed the order of the foo if so which step was it and why and if not why i mean mortgage debt has been the hardest thing recently just because when we saw interest rates go up to 7 percent that that was one of those things like that hurts a little bit but then bow and i had a conversation and i felt very comfortable but no we don't we don't consider mortgage debt even as higher debt because you can have the option for refinance we struggled a little bit early on how do you prioritize roth versus hsa are those different parts of the foo and we just said and i just put them all in the same bucket nicely done next question why is espp where was the dead joke i didn't have one so far you've done it i'm over oh now you're both at zero points here's the next question why is espp in step two wouldn't it be bad if the stock went down below 15 percent stop the 15 stock discount i can put 15 percent of my pay into this but it would block a lot of my other a lot of other of my savings what do you think why is espp in step two remember it's usually on a lot of these espp's it's the it's the lower of the beginning of the quarter the end of the quarter so if it went down 15 percent you'd probably be the beneficiary of the lower purchase price and then remember don't don't miss don't do oof that's not a very good dead joke too foo in the fact that we want you to have a process to where you're actually turning that money into other investments oh did i take it all i am so sorry i am so sorry i'm so sorry um team does he get credit for that dad joke did we get enough did we get the full dad yes we're getting not so bad can we get a bow with 30 seconds can we get 15 oh y'all are mean i was like wait what do you mean you're mean frog at the time i was like all right we're at 20 you're answering the first next week first so you take as much time as you want all right next question i am 25 years old and recently got married i have two times my income in life insurance through work but should i be looking for looking at a term policy as well oftentimes yes a good rule of thumb is that you should have 10 times your annual income in term life insurance coverage that's again that's a rule of thumb it's not like a hard fast rule but that's a good place to start so let me go ahead and give you a secret to marriage yes ma'am that was my dad joke that was it's bad we have to label your comedy i thought he was going to bring it back to life insurance but that did not happen uh zero points for that one but i really respect the effort thank you for playing along next question what is your favorite step of the foo and why i like step five i like the tax-free growth and i like when i wrote millionaire mission the armageddon reference at the beginning of the chapter um step seven do you know why step nine is afraid of step seven why because seven eight nine nicely done brain is amazing that is beautiful ten points oh that is brilliant all right next question this is why you're a cfa hi team i have access to both a 403 b and a 457 b after capturing my employer match how should i prioritize contributions how does the 457 b that has a Roth option change the three bucket strategy i would without saying the bad d word i would go 457 because you can get access to it before you know it doesn't have an early withdrawal age to it and oftentimes 403 b's also have Roth options so i'd want to see did my 457 and 454 303 b both have Roth options but holding them side by side i would air towards the 457 as well because you get access earlier we didn't get to put a dead joke and the only thing i would yeah that one i might need to put and say a little bit more all right we'll make a note next question do you see yourself ever signing up for a prediction market for entertainment purposes only of course the only way i had i had an associate show me the arbitrage that you can run on these things but then i found out how quick the providers jump in and limit your bets when they realize that you're running systems no prediction markets i just it's more like gambling it's i don't see it a whole lot different than like going to the casino and doing that sort of thing so that's something that you get utility out of and it's not causing you to go in a bad direction that's fine but it's fine but it's not for me nice to sink answers i was i was doing to have the time put a dead joke in there he was trying brian i feel like at the very end he's like two seconds what joke can i add all right next question what are your thoughts on investing 500 000 from a 401k fund in a private real estate fund i still have 1.5 million left in a 401k investing the 401k assets in a private real estate fund yes there's a lot of nuance there because when you're using qualified assets and you try to invest in private equity there are some unique things that take place the nuance you were i really should flag you for that no no personal finances personally you i mean we'll leave the porch light on for you he was basically like i don't know go to abound walk they'll talk you i love that all right next question if i want to buy a house in the next five years what's the best place to put the down payment and why well you know it's better to attract bees with honey never you just don't want to say this joke thing is not working out for me cash is king for expenses that are going to happen inside the next five years if you're 16 months in i think building up in liquid cash for known expenses is likely the the best decision why did chicken cross the road get the other side the dad jokes is killing me this is not what i wanted like when we brainstormed all the ways we can make this more fun i think you got dead jokes i'll at least you know look that i could get study up on before ten points for brian that's horrible i should not get those ten points you know what maybe next time we'll tighten up the rules all right last one if you have the full cost for a house should you put 20 down and invest the rest or pay in full and invest the would-be mortgage payment mathematically you will come out better investing the larger balance earlier because it has longer time to grow if you're just going to pay it in full and then invest the monthly payment you're going to have a lot it's going to be hard for that monthly payment to ever catch the lump sum that you invested if since i can't use the d word um if you're under 45 you know finance it if you're over 45 pay cash all right all right that concludes our it does not depend rapid fire segment we are honestly you guys came very close i probably should have flagged your dancing around it depends but i'm going to give you some grace today i don't know why just feeling like speaking of dancing you know how to make a clean-axe dance i do do you put a little bug you put a little buggy in it unfortunately that does not count towards your points because it was not in an answer i love because we didn't i feel like that was we did not have a lot i don't have a lot of dad jokes in me i really liked seeing you try though which was honestly seeing you try was probably my favorite i will say brian did win with 20 points yeah but that's okay i watched when i was on my last spring training old man trip with my buddies we watched some fighting at the end of the night you know i'm one of the channels and i watched this boxer the other guy was a better boxer but this guy understood the rules and he was just every time they lock up he was over they just you know barely tapping him on the face he ended up winning because he had so many his punch rate and his accurate you know an accuracy or percentage was higher i feel like that's all i did i was the guy who was every time we lock up i wasn't i wasn't really getting any shots in nobody thought i was funny but i was playing the game you did play the game and i appreciate that all right there were a couple that you said you wanted to come back to in our maybe it does depend segment question to bo you didn't get to answer so i will give you a chance it was about why are espp one of the way you must have passed out so uh yes espp's um don't all operate the same you said oh well what if the what if the stock goes down 15 percent of value a lot of folks will choose to invest in their espp they will take advantage of the 15 discount buy the stock they will immediately then go sell now that's going to be a short term capital gain you have to pay out ordinary income tax on the discount element plus on any gain that you that exists but even doing that you're coming out ahead because remember it was free money it was 15 percent you pay ordinary income tax on the 50 percent you're still net positive i do see if you have a plan where you have to hold the espp for a year you have to hold it for 18 months there could be some risk there and you have to kind of assess that on your own but if you have the ability to just liquidate automatically i'm not as concerned about the stock price because i know right off the jump i'm going to be in the black the the other one that was was a question number four i think is about 43 b and 457 b sometimes your employer will structure it to where the match will be associated with the 403 b and then the 457 is kind of an additional add-on plan so that's why if you have match free money from your employer get in there and get that free money and then you might want to consider switching over to the 457 but but that wasn't put into the the way the question was asked that's the it depends is because i don't want you to miss out on the the dollar for dollar match from the employer just so you get into the better better structure for early access of the 457 yeah good thoughts um we did have a couple at the end while we don't give specific investment advice there was a lot there that really did depend right the 20 percent down or invest with investing or put the full anything you want to say about that one yeah that one was hard okay so mathematically if i had a million dollar not a hundred thousand dollars to invest a day or you know 500 dollars to invest every month it's going to be really hard for that 500 a month to catch that hundred thousand dollars invested so mathematically that likely makes the most sense however if you're at the stage and season in life we do want to factor in risk and overall financial goals if you are near retirement towards the end of your accumulation journey you have this big portfolio already built up there's nothing wrong with paying cash for houses we have clients do this all the time they'll retire or think about relocating they'll sell a house and then we'll go to buy a house another place we don't say hey put 20 percent down and finance 80 percent invest that we send it out pay cash for the house but it's very much situationally dependent on where you are and what your ultimate financial goals are i mean if you visualize the journey to wealth building is that say from age 20 to 45 is the make wealth phase and then from 45 all the way to when you land the plane for retirement is the maintain wealth phase is the thing that people miss out on if somebody came into a windfall of a half a million dollars like this example laid out and you put it all into the house and then your behavior never started creating your army of dollar bills you didn't really make the wealth you you kind of went and bought a house and then how are you going to live off that money when you actually reach the retire and when you reach retirement is that you have to sell the house and a lot of people you don't we're trying to take away as many varibilities and things that that you have to make hard decisions when you get close to retirement because hopefully you're getting rewarded for the good decisions you made at a much younger age so that's why i like for a young person let's build your army's army of dollars you actually make the wealth it's not assured that so many americans never actually build the wealth now if you're getting this and you came into this 500 000 in your 50 years of age yeah let's let's de-risk this thing you're probably at a good place pay cash for it at that point because also the wealth multiplier is much lower the opportunity cost is so much lower from a risk standpoint that's the thing that drives me crazy is when i find out 30 year olds aren't funding their Roth IRAs aren't maxing out their 401k's but they pay cash for a house okay that's great but man oh man what look at what that could have become in the long term and you think that you've de-risked but the risks they're still a risk the risk is you never belt wealth that's right that's the thing that i think is never taken into account i understand what risk is and i and i but there's a balancing act on also making sure you build wealth in the background so your army of dollars and you can actually own your time that much sooner this is why i don't do good on rapid fire that was probably two and a half minutes that's all right on a 30 second question hey you answered the question and then last one that i had was the person with two million dollars in their 401k we definitely would that would depend i would want to custom look at your financial plan monnie carlo simulation look at all your goals and then tell you if and then i want to do the due diligence to find out private placements are created yeah i mean some of them are good some of them but a lot of them aren't you know they a lot of people are sold off the sexy sizzle of this is what rich people do i'd need to do some due diligence how much of the managing partners or the general partners of their money is in the deal how much of their mom's money is in the deal i there's all kind of questions i go into and what's the what's the the percentage cost that they're charging on annual operating there's all kind of things and then how does that fit into your own personal goals that's good stuff that's why you guys are so good at what you do i like it all right we do have time for at least one maybe two more questions so we're ready to dive in can i share one thing you can you know it's really hard about dad jokes my my kids and i or my family we want to see this is why bow had a head start on me he has books what that's what that's why i was going this uh we my family went on this vacation right just like us little state park it was awesome it was wonderful and we ate at cracker barrel because we're awesome and at cracker barrel there was a joke of dad books right there and my kids were like dad dad dad we want to get all these candy i'm like no candy but they're like dad we'll get this and i'm like all right we'll get the joke book and so we got it and i love a good joke i love dad jokes and they're fantastic my kids also love reading them and they don't listen to the show so this won't hurt their feelings they are horrible at delivery so do you know how bad it is like when they'll like read the joke and they'll say the punchline but they kind of say it wrong and then i connect the dot with the punchline was supposed to be and then i'm just sad because they missed a huge opportunity to deliver the joke we did this all the way from kentucky to tennessee um that part was just that part was for free that's what you're supposed to do they're practicing i know i know i did sound and flex your voice and believe me this is the mentorship i know that was what we're we're going to try again let's try again that was died i thought that was actually really good i mean i was impressed i was like oh not worthy that was really impressed with that because it fit within the financial order of operations too right it was good i mean bow only took one swing but it was it was a good hey i've done no tangents today can i can i give one tangent i wore this shirt on purpose because it is master's week i get very excited about master's week um so i don't know that was my tangent that's the shortest tangent you've ever gone on i'm excited for master's week you're allowed to say that i love that great all right let's go to another question guys we've got another good username it says what's up foo that's who's asking this question it says i'm sorry what was the username i missed that really what's up foo i just i the way she delivered it i was kind of she was she was what's up doc are you gonna coach me on my buddy no no you was awesome i was actually a fan okay let's get to the question it says i'm 35 i have about 40 of my investable assets in an old employer 401k if i move it to my new 401k the money will be uninvested for about a week about a week don't like that how do you think about this yeah this happens sometimes sometimes when we move assets uh companies will require you to liquidate cut a check mail a check check gets deposited check gets reinvested and i have clients ask me hey i'm so nervous about time i'll mark i'm so nervous i'm so nervous at the end of the day it's a little bit of a coin toss because think about this what if you sell today and the market's up and over the next four days the market goes down and then you buy back in you basically got some free return you basically like accidentally time the market in the right way now it could also go the other way you could sell today and the market's low and then when you buy back in the market's high hopefully what you're hoping is that this does not happen in like a week of extreme volatility but by and large even if that did happen if you fast forward a year three years five years 10 years 20 years out into the future it probably will not have mattered those four days probably will not have made a significant difference so what's up through is i agree with bow exactly this is this is noise this is not something but now with that said here's what you can do to set your mind at ease i want you to completely you know research what what the actual process is so then you can actually create contact points like if you know okay i'm gonna have to place the trades to sell and then okay how many days before than now the money the check will be sent you can then follow up you can call back and say okay was the check cut on the day that you guys told okay was it sent and then you can expect then when it's supposed to arrive you can call to make sure that they're receiving custodian actually received it you can shepherd the process so that less stuff is likely to fall apart that's what we do that's one of the reasons that people are like aren't you worried ai's go take your job i'm like no have you seen how our admin team has to go shepherd transactions through i think that element and plus all the government regulations and other stuff that goes with it that part is going to be hard to just automate away that's great doesn't mean they won't add tracking there's definitely things that they could do but having somebody call go hey put my stuff to the front of the line is um is not going to go away and and and when in doubt always if you can try to transfer assets in kind a lot of times you can repaid what i want to do is i want you to move if i've got a 401k at fidelity i'm moving it to an ira rollover at fidelity oftentimes if the investment options in there publicly traded it's not like pulled vehicles they can do an in kind transfer while i owned s and p 500 over here i can move it over here it's just a much more efficient way to transfer whenever we bring on a new client and they have assets somewhere else we transfer everything in kind that we can so that we can do the tax analysis to determine okay what's the appropriate way to diversify to reallocate whatever understand the tax consequences but also minimizing that friction of actually being out of the market for any period of time so ask your provider if transferring assets in kind is an option that's great good stuff i think we have time for one more yeah let's do it one more let's do it this one is from home reno 238 and you will see why that is his username 238 for windows if windows will be 30 to 40k more than we would spend on a car and would last longer can we use the 238 rule i'm in step six and over 1.2 million dollars saved under 40 wow he really like i mean he is making his case here the 238 rule is normally for buying a car that you really just need for your family and you can't pay cash for so what do you think about doing that i mean i see but this is this is like you find out that you know apple and oranges are both fruit so you're like okay well since they're both fruit i'll use the same they're not they're not the same i mean it's you can't make a boring i'm trying to follow the analogy i'm trying to follow the analogy you can make an apple pie what i'm saying is is that just because the 30 to 40 thousand dollars is similar to the purchase price of a car right it's a different transaction even though looks like it you know it's they're both you know transactions about the same size but i love the you're essentially a financial mutant creating games or or systems to pay this off in a reasonable time you've built a 1.2 million dollars and you're under 40 years of age you do whatever you want on on paying for those those windows i mean that's perfectly fine especially if that's a communication tool with your significant other yeah i think that there's nothing wrong with financing home improvements especially that there's like energy improvements like windows and that sort of thing it's not like you're putting in a pool or something like that so i don't think it's crazy you can determine based on your own financial situation what's the appropriate way to finance that should i finance it over three years should i put 50 percent down how should i think about it nothing wrong with that but i love the idea of you doing the improvement and paying it off quickly as opposed to dragging it out over the course of the rest of your mortgage but don't expect to see a new slide on the money guy show with the 238 for windows you heard it here first it will not be an official rule for buying windows with leverage okay did i at least salvage the fruit no no i got it i got what you were saying you know reby help me i don't know if you heard it because i was kind of listening out i was listening with you this year and her with that year she's like you wouldn't you wouldn't say just because apples and oranges are fruit you can make an apple pie using oranges and like that i kind of got that yeah it's funny you say because marmalade is like my least favorite jelly and that's a southern thing that people always show up with marmalade i'm like why would you put this in ruin toast with marmalade wow toast no we eat biscuits around here brother not toast southern or are you what are you doing biscuits you stop up stuff i'm not putting i don't put i don't put jelly on my biscuits either because i'm using them to stop it up oh man well this has been fun this has been a great livestream just because we turned the cameras off today does not mean uh the fun or the personal finance talk stop just go to money guy dot com to see our full archive of content plus tons of free resources to help you continue the conversations a special shout out to our brand new parenting resource a guide to parenting for financial mutants money guy dot com slash resources where you can find that and more for free so be sure to check that out and we'll be back next Tuesday live at 10 a.m. central here on youtube and i want to thank the production team for helping me avoid crisis so i mean we got down to about two percent on the battery i'm happy to report we're sitting at 14 wow so well done team what a redemption guys just like we pulled this thing up we were flying it straight towards the the ground you can pull up your personal finances and live your best life with the financial order of operations i'm your host brian joined by mr bow money guy team out the money guy show is hosted by brian preston and bow hansen brian and bow are partners with a bound wealth management a bound wealth management is a registered investment advisory firm regulated by the securities and exchanged commission in accordance and compliance with the securities laws and regulations a bound wealth management does not render or offer to render personalized investment or tax advice through the money guy show the information provided is for informational purposes only may not be suitable for all investors and does not constitute financial tax investment or legal advice all investments involve a degree of risk including the