The Money Guys Gave Us Advice… Here’s What We’re Changing

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2:27Mindy Jensen:Carl and I were recently super lucky to record with The Money Guy Show. That episode released on Tuesday. Today, Carl and I are back to recap our biggest takeaways and how we plan to implement them in our portfolio and in our lives.

2:49Mindy Jensen:Hello, hello, hello, and welcome to the BiggerPocketsMoney podcast. My name is Mindy Jensen, and with me as always is my husband, Carl, but today he is in the hot seat as my co-host. Thank you so much for joining me, sweetheart. Ooh, thank you for having me. I'm kind of scared. You said in the hot seat. I thought you were going to go easy on me, but apparently not. No, this is the hard-hitting journalism that our listeners have come to expect. Okay, I'm done. Bye. So Brian Preston and Bo Hansen are the hosts of The Money Guy Show. They're both CFPs, and Brian is also a CPA, and Bo is also a CFA.

3:24Mindy Jensen:And what this means is they know a lot about investing and taxes, and we really needed to hear that. We didn't just get some random financial podcast host advice. We got, we know what we're talking about. This is our actual job advice from these guys, which is kind of nice. Did you see what I did to Scott and I? Yes. So I'm going to throw the hard hitting question back at you. A couple of days, and this didn't have anything to do with this podcast recording with the Money Guy show, but I asked you, do you feel rich? Do you remember me asking that and what your answer was? Yeah, I remember you.

4:00Mindy Jensen:We were sitting at the lunch table and you're like, do you feel rich? I'm like, no, why would I feel rich? And I actually have been listening to a lot of Colin Hay recently. He's the lead singer of Men at Work, and they're on tour. So I'm like, oh, I'm going to listen to Colin Hay. He's got this song called Waiting for My Real Life to Begin. And there's this line in there that says, when I woke up today, suddenly nothing happened. And this question, do you feel rich? Well, no, I'm waiting for my real life to begin. And this is my real life right now. What am I waiting for? I don't know about you, but I did get some resolution to this question after we talked to the money guy.

4:41Is it the money guys? Because there's two of them. I don't know.

4:43Mindy Jensen:There's two of them, but it's the money guy show. We should have asked them that question. Where was our hard hitting questions back then? The money guy. Two becomes one. But we'll save that resolution for the end. But to go back a second, I would have answered the same as you. And that would be, no, I do not feel rich. You did answer the same as me. I threw it back at you. Yeah. And that's what a lot of people say when asked this question, no matter how much money they have, but we'll save that for a little bit later. Yeah. So Carl, I have talked to the money guys before, but this was your first time.

5:12Mindy Jensen:What were you thinking going into the recording? I was just a little. And by that, I mean, absolutely terrified. We have a very weird portfolio and we've taken some extreme risk. And these people, I would guess, tend to be more conservative. So yes, I was absolutely terrified. What surprises did you have from their suggestions? Because I, Like you, I thought they were going to be like, wow, your allocation is terrible and you're awful for having it. And even though I knew they wouldn't say that, I didn't want them to be like, you have to change everything. My biggest surprise was their biggest financial recommendation.

5:46We have little to no cash in our portfolio, and I knew they would tell us to increase that, but they told us to increase it by a lot or suggested. I don't think they could directly give us advice, but their suggestion was to go big on that front, which we have not. We don't even have bonds. I barely even know what a bond is.

6:02Mindy Jensen:We have bonds. I have bonds in my portfolio, my golden ratio portfolio that Frank Vasquez helped me set up. I want to say I have like$500 or$1 ,000 in bonds. Okay. So we're not completely bond-free, sweetheart. I have gold bond in the medicine cabinet upstairs to decrease my friction with a bike seat, if you know what I mean. That was my biggest surprise, too. And I had been thinking maybe we were a little light on cash. I posted on Long Angle a couple of days before we went down to record the podcast with them. And I was asking, how much cash do you hold? And Tad Fallows, one of the founders of Long Angle, said, oh, according to our annual member survey, people typically hold about 5 % in cash.

6:45Mindy Jensen:And I was like, oh, I forgot about that annual member survey. I need to go back and read that. That's pretty fascinating. And I invite you to read it too. But we don't have 5 % in cash. When they flashed that slide up on the TV screen, they're like, here's your portfolio and here's what you have in cash. And quick math is like 0.7 percent, not 7 percent, 0.7 percent in cash. And that looked kind of foolish when they popped that slide up. And I've since spent that on our house build. So now it's even less. That'd be 0 percent. A little bit more. Yay, you're winning. When I was the community manager for BiggerPockets, I was in their forums all day long, and people would always ask, how much cash do you have?

7:29Mindy Jensen:And there was a lot of responses along a similar vein. I hold as little cash as I possibly can because I want my money working for me. And one of the things that Bo and Brian told us is, you've already won. So you don't need your money out there working for you, generating more dollars. You need more of a buffer. And while I think we were both on the same page with we need to have more cash, them telling us to put 5 % in cash seemed like a lot because then they showed us what that 5 % number is and that is a lot. But what was really interesting is they were pointing out how we're thinking about money in terms of years in spending.

8:10Mindy Jensen:We have a whole year in spending, except you just said you spent it in like one day. So we're building a house. So we don't have a year of spending in cash. We have a year of our normal spending in cash maybe, but we're spending a whole lot more. Plus something I don't think we had considered, we have one daughter in school right now. And for the next two years, we will have one daughter in school. But in three years, we'll have two daughters in school for at least one year. And then after that, we'll have another at least three years of a daughter in college. So we've got some pretty hefty bills coming our way and a whopping 0.7 % in cash.

8:49Mindy Jensen:And I think we've always been thinking about our cash incorrectly. Are you saying that you're going to get another job to raise more cash for our family and to keep me in the ways to which I've been accustomed? So you want me to add to my two jobs while you sit around with your zero jobs? Oh, no, I've got a lot of jobs. I've got one very big job. What is that? I don't know. The house stuff, I'm managing that. It's a big job. Yeah, but what's the house going to be done? I don't know, like in a week? Yeah. So you want me to have then three jobs and you'll have zero jobs. I think I'm going to need some downtime after that job.

9:20I kid, I kid.

9:22Mindy Jensen:So what sort of timeline do you anticipate us increasing our cash? Because I don't think it's a good idea for us to do it all at once. That's going to be a pretty hefty tax bill. No, I see us doing that over the next five or six years. But one thing we could do to decrease some of the risk is we have some big investments in our self-directed 401ks, so we could potentially move to cash in those. Then we wouldn't have to pay capital gains, and then we could access that cash with 72T. Of course, that causes a whole other tax problem, because then we're paying ordinary income tax instead of capital gains, which we would pay if we sold from our post-tax brokerage.

10:03So yeah, it's a whole big can of snakes.

10:06Mindy Jensen:Yeah, it's not even a can of worms. It is a can of snakes. That brings up another point. Brian said, you have 85 % of your entire net worth in five stocks. And I was like, I didn't know it was 85%. I knew we were tech heavy. And then he said, and you have 70 % of your entire net worth in companies controlled by Elon Musk, who, without getting political, has had a bit of a volatile last couple of years. So I didn't realized it was 70%. Again, I knew it was a lot, but I never did the math to do 70%. And you said, well, it's not 70%. And I said, well, what about all those index funds? They hold some of our Elon stock too.

10:51Mindy Jensen:And you're like, oh, maybe it is 70%. I bet Brian was right. Yeah, he is closer to the truth. And we will work on diversifying that very soon. So what does very soon mean? So our biggest holding in that is SpaceX. It is still locked up. As soon as those lockup periods are over and we actually have access to it, we can reassess at that point. So in a couple of months. In a couple of months. Okay. And would you sell within the 401k? Because again, if you sell within a 401k, you're not realizing any gains that gets taxed. It all just happens in this magical account and then you can buy something else.

11:27Mindy Jensen:So you're reducing your exposure to the company without incurring taxes. Yes. So is that where you would go? Yeah, I think so. What about the post-tax account? One of the things I really liked is they pointed out that for normal people, selling your post-tax stocks could have the lowest taxable impact on you in the year that you sell. And that's nice, but they're not talking to normal people. They're talking to us. I still have income. The bulk of my income comes from real estate agent commissions. So it's a little unpredictable, but the last two years have been really good. And every year I get to June or July and I'm like, wow, I haven't really sold a lot of houses.

12:11Mindy Jensen:And then at the end of the year, I sell a ton of houses. But if we had no income, we could sell, what is the number? 96 ,500, 97 ,000? Yeah. Long-term capital gains are close to a hundred thousand for a married couple. So So yeah, we could realize$100 ,000 in long-term capital gains and not pay any taxes on it. Yeah, but that gets stacked on top of my income. So you see how I said my income? And that's why I don't want to work. I don't want to increase that problem. By me not working, it allows us to sell this tax-free. By you not working, it allows us to save money on taxes. You're such a giver.

12:44Yes, yes. I'm helping us.

12:47Mindy Jensen:But yeah, you stack that on top of my income, our income. I'll let you have some of that too. What's yours is mine. What's mine is yours. Yes, dear. It stacks on top of our income. So if I make$200 ,000 as a real estate agent, then we sell another$100 ,000, we have capped out the 0%. So any long-term capital gains that we have will be taxed at the 15 % bracket up until we max that out. I don't think we would max that out. No. But that's a good thing to consider. we need to sit down with a spreadsheet and just be like, okay, if we move this here and carry the nine and move this over here, then we can pay this kind of tax.

13:29Yes.

13:29Mindy Jensen:Because I do still think that selling some in our after-tax brokerage account would be a good idea. Yes. Which leads me to another thing that they suggested is having an annual income and tax audit that we do ourselves at the end of the year. Sure. Have you ever heard that suggestion from anybody in your life ever? I think so. Was it you? Yeah, it was me. I love that Bo and Brian are like, you should have this audit. And you're like, oh my goodness, that's a great idea. Meanwhile, five minutes before that, I was like, we should have this audit. And you're like, I don't know. I'm not sure if that's how it went down, but you're probably right.

14:07Mindy Jensen:Yeah, that is exactly how it went down. What other surprises did you have from their suggestions? Okay, so this next one was really interesting because it just hit home this week, actually. Brian said, you should really try to teach your kids about money. And my thought when he said that was, we do that all the time. If you talk to our kids, they will say, mom and dad talk nonstop about this stuff. But then he said something else that was really interesting. He said, get them started with a Roth and start putting money into that so they can see the compound interest. And that's when their eyes will light up.

14:36To back up a second, we had actually told our kids that we were going to do that very thing. And our younger one was like, yeah, you know what? So I can't have the money now. I'm like, no, it's retirement. And she became much less interested after that.

14:47Mindy Jensen:Yeah, I hadn't clarified to her. I told her I would match her salary dollar for dollar. And she thought that meant to put in her pocket and just spend. I was like, no, that goes into your Roth IRA. Because I do think it's a little unfair to expect your 15, 16, 17-year-old kids to be putting money away for retirement. But then a real interesting thing happened. We came back from this podcast recording and she came up to us. she's like, Dad, guess how much money I made last week? And her eyes were all lit up. I'm like, I have no idea. 300 bucks. She's like, more. I'm like, 800 more. So it turns out she's got a job at Taco Bell now.

15:24And we don't get free food out of that, though. I don't know how that didn't work out in our favor. We can afford it. Anyway, she has a job at Taco Bell and she has all these side hustles babysitting. She's like, Dad, I made$1 ,000 last week. And she was so excited for that. so I could totally see what Brian said, like show them the value of compound money. Show that to them now. Put money in their Roth and then show them the statements or allow them to have access so they could see that money growing. When she said this, I'm like, Daphne, do you know what's even better than seeing your money grow like that?

15:55And she's like, what, Dad? I'm like, not having to work for it. When the money starts doing that by itself, that's even better. Just like me, I don't work and the money keeps getting bigger. That's why I don't work.

16:07Mindy Jensen:That's not quite why you don't work. One of the things that we do nonstop is talk at or to our children about money. We talk about specific stocks. We talk about index funds in general. And one of the things you had been talking about was NVIDIA. And Daphne said, oh, can I buy NVIDIA? Well, you can, but what's their stock price? Like$800 or something? $1 ,500? I don't know. You don't know? Oh, because you don't have that stock. That's like the one hot stock in recent years that you haven't purchased. But she wants to buy that. We can buy that for her in her Roth IRA. We can show her the value of purchasing these stocks that they've done research on.

16:51Mindy Jensen:She has, her research is just listening to us talk. And also buy index funds and show her how they're going up and going down, especially when one of them has an up day and the other one has a down day. Yeah, absolutely. They need to learn that stuff right now, not when they're 40 like we did. Yeah. Okay. When we were talking about this at the airport, we were running through a bunch of different things. You said something that I thought was really interesting. You said, I've never felt wealthy because we put a fence between us and the money. The money is for the future and the future is not now.

17:28Mindy Jensen:So therefore, it's not for us. It's just, it's down the road. It's down the road. We're generating income and we're spending this and then everything else is for the future. But the future is now. And we have been letting the tax tail wag the dog for our entire investing career. We've been prioritizing current year tax deductions and not thinking about RMDs. One of the things that I want our listeners to start thinking about, especially if they find themselves in a position where they have more than their FI number, I want them to start thinking about RMDs. Scott and I call this the middle-class trap where you've done everything right, you've been contributing for your retirement, but you've been doing everything right for a traditional age retirement.

18:16Mindy Jensen:If you want to retire early, you need some funds to bridge from your retirement date to the day that you can actually access those funds. But even more, if you have had success, and what if we had like 15 years of fairly up stock market? If you've been investing for a while, you might have quite a bit of momentum. And then you become 73 or 75. And all of a sudden, the government is like, oh, I want my money now. I want people to start thinking about RMDs. And you and I have 20 years before RMDs kick in, if they kick in at 73. Do they kick in at 73 or 75 for us? I thought it was 75, but I'm not sure.

18:55Mindy Jensen:Oh, well, then we have 22 years for me and 23 years for you before we start getting these RMDs. But if we don't do something about it now, we're going to be paying pretty hefty RMDs. And yeah, yeah, yeah, this is a great problem to have. But I'm a much better steward of my money than the government is. So I would much rather pay them less. And if the military had to have a bake sale to pay for all their bombs, I'd be okay. I think you told me once that you married me because I was younger and I'd be able to punt my RMDs. Do you remember that conversation? No, I was drunk. Okay. One thing about our lives is we spent so much time optimizing for not paying taxes and we lived frugal.

19:35So if you're a computer guy and make all right income and you can be frugal on top of that, you can put all your money into a 401k. We had a self-directed 401k and your company can match 25%. So we optimized so well and it feels a little bit weird. And this is all on me. You're much better adjusted than me. It feels weird to stop accumulating. And then the third thing is it feels even weirder to start taking that back out and paying the taxes on it. But it's just, yeah, it's the natural. It's a very nice problem to have.