Financial Advisors React to Jaw Dropping Money Clips

0:00Brian Preston:Drop. Let's dive right in. I put, I think,$1 ,300 into a coin called Peanut. So do you know when they killed that squirrel? I don't know if you saw that. Yes, yes. Peanut the squirrel. So I'm like, Peanut, this makes sense. This might go up. And I sold it like for a loss. I put that$1 ,300 in. I sold it for$600. A week later, Binance added that coin as a tradable asset. It went from$50 million market cap to$2 billion. And I just posted this on Twitter today. My Peanut holdings right now would be worth$42 million. Hindsight is always 20-20 when it comes to investing. I don't know that this guy specifically would have watched his peanut holding run all the way up to$42 million.

0:37Does that count as one of those poop coins? I think the word you're searching for is... I actually expect my money to work for me. I'm not hoping to get lucky. I think some people go with that saying, it's better to be lucky than to be good. I'm leaning more towards the good and consistent than I am to just being lucky and hoping that Lady Luck smiles on me. I love that.

0:57Brian Preston:Hey, now I don't know if they're gonna leave this in there, but I'm just gonna throw it out there. How would you invest$1 million? Would you put it all into the S &P 500 or would you use it as a down payment on a property? Depends on where you are. S &P 500. S &P 500 or buying into a franchise? S &P 500. S &P 500 or buying a business that already makes money? Buying a business that already makes money. Depends on how much money it makes. Business or investing it across 20 startups? Buying a business because when you have one business and you're investing in it, you actually control all the risk in it and you can actually operate that business.

1:33Brian Preston:Buying a business or Bitcoin? Buying a business. Buying a business or multifamily real estate? Multifamily for one important reason. Because when you buy a single family real estate, you're buying real estate. But when you're buying multifamily, you're actually getting two things. You're getting the real estate and you're getting a business that works together. So in this case, you're not only getting a business, but you're also getting real estate. So it's a two for one. You know, I don't disagree with a ton of what he said, although some of those are much easier to do than others. He said, you know, okay, if you had a million dollars, how would you do this?

2:02Brian Preston:A lot of times, if you want to go invest in like multifamily real estate and you have a million dollars to operate with, there's likely you're going to have a whole lot of debt. Whereas if you take that million dollars and you put it in the S &P 500, you don't have any debt. So those were not exactly apples to apples comparisons throughout that entire flowchart. Well, good on him. He gave, because those were binary answers, you know, this or that. I'm here to tell you, life is not like that. For the majority of people out there who are not in the step eight of financial order of operations, the S &P is going to be your friend.

2:34Everybody loves to do the math of what levered debt will do for you because exponentially your money can grow. You put down a small amount of money and then because it's all leveraged up, you're going to make 10, 20 % because of the levered debt. The problem is when you're using other people's money to pay that debt and then they quit paying you the rent, all of a sudden you find out that levered debt can get really expensive really quick.

2:59Brian Preston:Did you know that nearly 50 % of parents go into debt to take their kids to Disney? The average parent spends$6 ,000 on their Disney trip. Things like flights, park tickets, food, hotels, all of these things are really expensive when you go to Disney. But by going into debt, you're putting your family at a huge financial risk. So instead of going into debt, save up in cash, but there are also really great ways that you can travel hack so that you can reduce those costs significantly when you go. The most important thing when you go on a family vacation is the time with the family. It's not the expense of the trip.

3:33It's actually how strong are the memories? How good are the things that you're doing as a family to build that deepness of the relationship?

3:41Brian Preston:We just spent$6 ,000 of high interest debt. Just for a little Roy Wally entertainment. The moose says you're closed. I say you're open. Spending$6 ,000 for a Disney trip, but you actually put that on a credit card and you're paying punitive interest rates on that, that one trip that you thought only cost you$6 ,000, very likely could cost you$7 ,000,$8 ,000, $9 ,000 by the time that you get it paid off. And don't skip out on the ounce of preparation, the difference a week or two can make on when you go, because then maybe you don't have to buy all the premium stuff like the lightning lanes and the other things.

4:16If you go when the crowd calendar is low, it's going to be cheaper and more than likely there's going to be many more discounts that are going to lower that price for you.

4:24Brian Preston:So if a large iced coffee is$4.99, you would pay$4.99 plus tax? No, you would pay$5.75 plus tax. It's because the restaurants raise the menu prices to cover the fees which means the total you would pay would be six dollars and 15 cents no why would you think that's not enough you know it's because you still need to add the 4.99 service fee that's why which means the total you would pay would be 11.14 no what do you think that's still not enough you know it's because you still need to pay the 399 delivery fee you know it's because that's why which means the total you would pay would be 15 dollars and 13 cents no well you still need to add a tip okay that's the service say that you tipped four dollars then that means the total you would pay would be$19.13.

5:34Brian Preston:$19.13 for what? A large iced coffee. No. Why would you think it's a large warm coffee? Why can't I get an iced coffee? It's because you didn't pay the$1.99 priority fee. This is something we even added in our millionaire survey this year was, do you use DoorDash or Uber Eats? And was it like 66 % or 67 % don't? Don't use it at all. Look, I'm part of that percentage. Look, I get it if you get a gift card or you get some promotional thing, you might dabble in it. But I don't consider that really using it. That's kind of being a financial mutant for using a coupon or discount code. But this is my whole problem with this business concept.

6:19Sometimes we've seen people who've gone to like Chick-fil-A and have turned a$10 value meal into something that's$25,$30. Or if you're feeding the family, you can turn a$40 meal into$60,$70. It feels disconnected. And that's what I actually don't use those services. And I love to kind of present that because it's a lot of hands in the kitchen for a simple product that's already kind of an excess of life. And that's something you ought to really think about.

6:48Brian Preston:If you're going to make bad decisions, which in our opinion, you know, Uber Eats and that stuff's bad. At least make bad decisions rationally. Ordering an iced coffee as an Uber Eats, it is going to be melted. It is going to be watered down. It's not going to be cold anymore. Same thing, if you're trying to like Uber Eats or DoorDash ice cream, maybe that's not the wisest decision. So if you are going to spend a stupid amount of money way overpaying for something, at least make sure that you're doing that on something that somewhat makes sense to do. When can you financially move out to your own place?

7:19Brian Preston:So whether you live at home or you have roommates, use this test. You need to get four out of four. And if you do, you're ready to move out. Number one is that your rent should be less than 35 % of your take-home pay. So here's a table based on salaries. And you can see that if you make around$100 ,000 per year, the monthly rent that you can afford is around$23 ,27 per month. And that's based on your take-home pay. You'll get a roommate. This is so that you don't get stretched thin by renting a place that you can't comfortably afford. Number two, you have an emergency fund of at least three months because moving out is expensive.

7:49Brian Preston:You need the first and last month's rent plus deposit on top of that. So you need to make sure you have a cushion so that if you do move out, you aren't cash poor in case an emergency happens. Number three, you're still contributing to retirement even by moving to a new place and paying that new rent. And number four is that you have no high interest rate credit card debt or buy now pay later debts because those are wealth killers long term. So if you want to take on the burden of a new place with a higher rent, you want to make sure your debt is under control. Well, Humphrey, I agree. Almost exclusive.

8:17Brian Preston:The only thing I would change is you said that your housing costs should not exceed 35 % of your net pay. Well, net pay can be so fluctuable. It can fluctuate so much depending on like your benefits and depending on your 401k contributions, depending on your cafeteria plan stuff. So that's why we like saying, instead of doing 35 % of your net pay, do 25 % of your gross pay. So that way you really know, based on the income you have coming in, where you are threshold wise, but everything else, I agree fully. I was going to add a step five and six is step five, get roommates, and all this happens much faster.

8:51Sure. Step six was live at home for a month or two more so you can afford that purple leather recliner or the subwoofer. These are the things that went into my decision-making when I graduated college. I think I went back, lived at home for two or three months. For the subwoofer. It wasn't a purple leather, but it was definitely a chartreuse. It was some purplish, burgundy-purple color. Ugly. Dear God, what is that thing? But man, oh man, was I proud of that leather recliner. And it was paid for because I stayed at home just a little bit longer.

9:27Brian Preston:Why is investing in Pokemon cards seem to be what everyone is currently doing? It's because these little pieces of cardboard are currently crushing the stock market right now. If you look at the data over the past 20 years, the S &P 500 is currently up 421%, which gives it a very respectable rate of return of 8.79 % per year. However, compared to the world of collectibles, these are rookie numbers because if you look at baseball card, baseball cards is currently up 716%. What baseball cards? Basketball cards is currently up 1 ,174%. What basketball cards? And football cards, this is American football, is currently up 1 ,290%.

9:58Brian Preston:What football cards? Which is a rate of return of 14.22 % year over year. Where does Pokemon cards land in all of this? Well, Pokemon cards is currently up 3 ,261%. Pokemon cards is currently on a league of its own. That is a 20-year average rate of return of 21.42 % year over year. This is two and a half times better than the S &P 500. Will Pokemon cards continue to outpace the stock market, or was this just a 20-year fluke? This is just a lot of people running to where the attention is. Now, see, I'm frustrated because this was a math crime. There are lies, there's darn lies. Cuts words is illegal.

10:36Brian Preston:And then there are statistics and numbers and how you can manipulate them. And that's exactly what happened right here. Because what he did is he is taking, I don't know how he's coming up with the average across all American football cards, the average across all American basketball cards or baseball cards, but he's comparing that to a basket of goods in the S &P 500. If you were to go pick any of the individual stocks in the S &P 500, if you want to go look at Amazon over the last 20 years, Nvidia over the last 20 years, Tesla over the last 20 years, fill the blank on the company you want to choose, there's a really good chance that those companies likely would smoke the numbers here.

11:13Brian Preston:but it's not comparing apples to apples because if you were to just go buy right now a pack of Pokemon cards whatever that is$10 pack and you were to hold that singular$10 pack for the next 20 years I don't know that I believe you have gotten so lucky that one of the cards in your pack was so valuable that you recognize a 3 ,000 % rate of return in that however if you go buy the S &P 500, you will own the 500 largest companies, best performing companies, largest in market capitalization companies in this country. It's not opening a pack of stocks and hoping you get lucky with one of the stocks.

11:48I think you are making a solid point because he very well, you could have flipped the script on this instead of, instead of the S &P 500, you could have done Nvidia or Tesla or any of the high flyers and it would have completely crushed what happened to Pokemon. How high can your credit score be before it gets kind of weird? What? Weird.

12:07Brian Preston:You know, building a credit score, you're trying to build trust from another man so he can give you money. Yes, sir. Ooh, I got a high score. You trust me and give me a loan? I think you stay mids. Yeah. You don't go all with the sevens. I think you just stay around the 650s. What? I said 610. 610 max? Yeah, max. Because, like, at that point, bro, you're begging for a grown man to approve you. Yeah. Ooh, I got this loan. Thank you, sir. Ooh, you trust me that much? This is a joke. And you're repetitively going back because he's going to continue. So you really want to chase him through. And you want a better interest rate?

12:38Brian Preston:Like, come on, bro. Why do you want another man interested in you? The guy in the bottom right, what's his role as? I never understood that. That's what I'm saying. Never understood that. I never quite sat well with me. No, it's egregious. But building your credit score lets you know that every time the bank said, give me your money, you did it. You know, you banked over for the bank. Stand your ground. I have a double-digit credit score, and that lets everyone know. It's like that man takes what he wants. and he don't give it back. Yeah, I paid nobody back. I haven't been able to buy a car, a house, an apartment in years, but you know, I stand on my principles.

13:09Ten soles. Ten soles. Hopefully. Oh, that's good stuff.

13:14Brian Preston:Yeah, that's hilarious. That'll work. That'll work once. You can do that once. You can ask for some money and take it and say, hey, I'm not giving you this money back, but you won't get it the second time or the third time or the fourth time. Obviously, that's hilarious. And what people don't realize is A lot of people want to suggest that having a really high credit score is like an I love debt score. That is not the case. Having a really high credit score suggests I am responsible and understand how to use money as a tool and use it well to my benefit. I do not think I would propagate the information these guys are.

13:49It's also, by the way, it's not just for borrowing money anymore. It's also, hey, are you have to make a deposit when you set up your utilities? or is your property and casualty insurance going to be at the preferred rate because you seem like less of a risk? There's a lot of things that now go into credit score. And I'm here to tell you, if you just pay your bills and pay off your debt, exactly like we share in the financial order of operations, you're going to be in the high sevens, 800 range without even trying. It just happens naturally. So just respect the obligations you've set. Don't borrow outside of what your wallet or your purse can afford and you'll be A-OK.

14:24Brian Preston:There is a better way to do money. If you want to know how to do money better, you can go to moneyguy.com slash resources. Check out all of our resources, all of our archives, all of our tools out there to help you make better financial decisions. I think we chewed through the jaw-dropping videos, Bo. I'm your host, Brian. Join me by Mr. Bo. Money Guy. Out.