Financial Advisors React to Money Advice on TikTok & YouTube

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0:49Bo Hanson:So go build your dream team today with Indeed. Get a$75 sponsored job credit at Indeed.com slash podcast. Terms and conditions apply.

0:58Brian Preston:The content team has been busy. They've been out there raking through TikTok, YouTube, harvesting the best videos they could find for us to share with you guys.

1:07Bo Hanson:Everyone, I am so excited about this because we never know what the internet has in store for us. Let's see what the content team has done today. Controversial things I do. Hey, it's Emily. According to real comments I've gotten, wearing nice brands like Patagonia or North Face, people seem to think that being frugal means being cheap or that you can't own nice things, but it's about being mindful of what you buy. And personally, I enjoy having a high quality coat when I live in the rainy, windy, and cold Pacific Northwest. People also ask why I hire a nanny once a week because frugality isn't about deprivation and not being able to enjoy luxuries that add value to your life.

1:45Bo Hanson:I budget for a nanny because I value being able to have time for myself to focus on my passion projects and it's within our means. Another comment that caught me off guard was buying clearance and how by me taking advantage of clearance I could be taking away from someone else who really needs it. And while I understand their sentiment having wealth doesn't disqualify you for using smart money habits still. Being frugal and shopping clearance and saving money is exactly how we got here in the first place and I'm always mindful of how much I take that way I'm not hoarding everything and I leave some for others.

2:18Bo Hanson:And similarly participating in my local buy nothing group. This comes down again to that sentiment of taking from others who really need it. I give far more than I request or take in those buy nothing groups and sometimes I use them just to borrow something instead of having to buy it. I never try to claim essentials like diapers or food because I know that would better serve other families but for non-essentials or things that I've gone unclaimed then I will ask to be considered. I didn't see anything wrong here And I love what Emily said was, hey, the decisions and the behaviors that we did that got us to where we are.

2:50Bo Hanson:By the way, if you want to see where they are, we actually had her and Kenji on Making a Millionaire. It was super, super fun. They're in a fantastic spot. I think there's nothing wrong. Even if you've had some success, even though your financial situation might look differently today than it did 10 years ago, it's still OK to make wise, sound financial decisions.

3:08Brian Preston:Emily, don't let them haters get you down. Look, there are just trolls out there under all kind of bridges. The thing that got me there was buying stuff on clearance is bad. You realize all you're protecting is that stuff from ending up in the trash. If you don't buy that muffin on clearance, it doesn't mean somebody doesn't get to eat the muffin. And by the way, it's probably better if I eat the muffin than somebody who can't because it's not like this is good for you. All it's doing is keeping it out of the landfill. I see nothing wrong with that. Don't let the haters get you down.

3:37Bo Hanson:If buying on clearance is wrong, I don't want to be right. I keep my food outside just so I can save extra money. So I'd like to come to the home. This is my mother-in-law. I can save money on cooking this actually at home. So what I'm doing here is I am a chicken soup. He's like a home depot. Salmon. So I can get it going and cook everything right for my family. Now it's time for the most important part about all of this. You're gonna have to clean your fish. A lot of people don't really like to clean their meats before they actually cook them. But I have my stuff here. Now we wait. I know it may not work for most, but it works for me.

4:10Bo Hanson:and I'm able to save money, so I'm fine with that.

4:13Brian Preston:In earlier days of this React, Beau, you and I had some of these, this TLC cheapskate show and I kept saying, this is all orchestrated. This is fake. They went into a home that had just been closed. I've caught on already. I love to see that there's somebody out there in the public that was so annoyed with how just choreographed that series was that he went to like Home Depot, Walmart. I don't know where he filmed that at.

4:38Bo Hanson:I like to come to the Home Depot. to the Home Depot. He's at the Home Depot. There are times where we can take frugality or being quote unquote a cheapskate too far. Now, obviously this was comedy. This was a farce. But in reality, we see people do this. We see people cut corners, like not replacing the tires on their automobile or not providing daily or basic essentials that they need in their home. Don't let yourself be that kind of person. There's nothing wrong with being frugal. There's nothing wrong with being responsible. But don't be penny wise and pound foolish when it comes to making those decisions.

5:14Bo Hanson:What do you think is the best investment vehicle for a middle class American that is risk adverse?

5:20Brian Preston:An inflation index bond. Which is index fund? Tips. Treasury inflation protected securities because it will guarantee you a real return. And I don't think that you should be speculating in the markets because there's a zero sum game and you'll probably be the loser. It's not a zero-sum game.

5:42Bo Hanson:So if you can get ready to celebrate next year the 250th anniversary of this country, are you optimistic about our future or is the debt problem so concerning to you you're not optimistic about our future?

5:51Brian Preston:I think it's a time horizon. We're going to go, I think we can deal with this. I think it comes down to how we are with each other, but we will go through this and we'll get to the other side.

6:06Bo Hanson:What was the original question the interviewer asked him?

6:08Brian Preston:I think that's what I was going to say. This whole thing, because index funds would have been the answer, but he said for a risk-adverse investor. And because of the balance, that's why when he went into tips, I mean, technically, that's not a bad answer because he said what's the middle-class family that doesn't want essentially any risk. Well, that's the thing. With any investing, if you're going to get a risk premium or a return that's greater, large enough beyond inflation and so forth, there's going to be some form of risk involved with it. And that's why I think that a diversified portfolio, but a diversified portfolio still, especially if you're starting in younger years, that leans heavily into index funds, say total market return or S &P 500, that's going to serve you well in the long term.

6:52Bo Hanson:Yeah, I think a risk-averse investor might even like a closer-dated target retirement index fund because then you're going to get diversification, but you're not just going to have fixed income exposure. You're also going to have equity exposure. So I think maybe that was a little misleading. And I like Ray Dalio, but I don't know that I love that answer.

7:08Brian Preston:Well, an index target retirement fund, because I can see as soon as you say target retirement fund, everybody's like, oh, no, he's talking about those fees are too high. No, not it. Go look at what Fidelity, Vanguard, Charles Schwab are doing out there in the index target retirement space. The last thing you're going to complain about is the fees.

7:23Bo Hanson:Can you afford a$300 ,000 home if you make$75 ,000 a year? Well, let's go through the numbers. If you buy a$300 ,000 home, let's say you put down a 3 % down payment plus 3 % of closing cost is going to be$18 ,000 cash up front. Then you get a 7 % interest rate would put your principal and interest payment at$1 ,936 plus 550 a month for taxes and insurances bringing you to a grand total of$2 ,486 a month. Now let's look and see what you can qualify for. Lenders typically going to use about a 40 % debt to income ratio, meaning that you would have a$30 ,000 allowance divided by 12, putting you at$2 ,500 a month.

7:57Bo Hanson:So you barely qualify by 14 bucks, but you do qualify. That's if you have no debt. Now here's the next step, can you afford it? Because if you make$75 ,000 a year, your take-home pay after taxes, 401k, and health insurance is going to sit around 4 ,300. So this 2486 payment would take up 57 % of your take-home pay. So make sure you sit down with your lender and your family to make sure you can qualify and comfortably afford the payment so you don't end up house poor. Based on his numbers, he came up with 40 % of gross income. You know that our rule when it comes to buying a house is we want you to follow 3, 5, 25.

8:31Bo Hanson:And he almost got us there, at least 3 % down, but you don't have to do more than 3 % down. You want to make sure you can stay in the home for at least five years. And then you don't want the total housing cost to be more than 25 % of your gross income. So in this scenario, they're at 40 % of gross. I would argue this is a little more house than this person would be able to afford.

8:52Brian Preston:Yeah, and that's why he even got, because he even did net of taxes, I should say, and it was 57%. you are life, you're life poor and house rich at that point. And that's the fear you have to have. Now, what I would challenge on this is that somebody who's making$75 ,000, I'd love to know what their income trajectory is going to be for the next three years. Because I know in my own career, you hit$75 ,000, maybe the next year it's$84 ,000,$85 ,000. Next year, it's close to$100 ,000. You know, if you're on an upward income trajectory and you're in a good field like public accounting, engineering, other things, you're probably going to be able to stretch things and be okay.

9:30Brian Preston:But I still like the idea of having some grounding and that's where 3-5-25 really can help you. But also understand that even having good solid rules like that, your situation is going to be very specific. That's why we always say personal finance is very personal.

9:47Bo Hanson:Kayak gets my flight, hotel, and rental car right. So I can tune out travel advice that's just plain wrong. Bro, Skycoin, way better than points.

9:57Brian Preston:Never fly during a Scorpio full moon.

10:00Bo Hanson:Just tell the manager you'll sue. Instant room upgrade. Stop taking bad travel advice. Start comparing hundreds of sites with Kayak and get your trip right. Bad advice? You talking to me? Kayak. Got that right.

10:17Bo Hanson:Rinse knows that greatness takes time, but so does laundry. So Rinse will take your laundry and hand-deliver it to your door, expertly cleaned. And you can take the time pursuing your passions. Time once spent sorting and waiting, folding and queuing, now spent challenging and innovating and pushing your way to greatness. So pick up the Irish flute or those calligraphy pens or that daunting Beef Wellington recipe card and leave the laundry to us. Rinse. It's time to be great.

10:46Brian Preston:If you have$1, you can buy a bottle of water. If you have$10, you can buy a burger. If you have$100 you can buy a pair of shoes. If you have$10 ,000 - you can buy a luxury watch. If you have$100 ,000 you can buy a sports car. If you have$1 million you can buy a house. If you have$10 million you can buy a mansion. If you have$100 million you can buy a private island. If you have$10 billion you can buy every Formula 1 team. If you have$100 billion you can buy a small country. If you have$1 trillion, you can buy Amazon. If you have$1 quadrillion, you can buy the Earth. And if you have$1 sextillion, you might be able to buy a Starbucks coffee.

11:30Brian Preston:Okay. That was a big build up to get to that punchline.

11:33Bo Hanson:I was waiting for the payoff. I was like, where's it going? I was with you.

11:36Brian Preston:I was like, what a creative thing. Because from a content creation standpoint, I was very excited to see he was just moving the zeros each time and what he was using to show relative value for each of those changes. Well done. And we've watched it. We've responded to his content in the past.

11:51Bo Hanson:What he's suggesting here is that Starbucks as a cup of coffee is an expensive cup of coffee. What you spend your money on is subjective. What you want to make sure you're not doing is spending your money on things that you don't care about to impress people whose opinions don't matter. Rather, you should spend your money on the things that you care about that you find value in. So if buying a Starbucks coffee is something that you enjoy and you place value in, and it's not derailing your other financial goals, I think that's okay, even if it's possible to go out and spend a lot less on a different cup of coffee somewhere else.

12:25Brian Preston:Well, time and place. The latte effect is very important when you first start out in your journey. You should be watching where your money goes even on little things like coffee when you're starting out. By the time you get to level three of the five levels of wealth, which is security, you don't have to sweat the small stuff anymore. And that's what I'm telling you. Time or place, in the beginning, latte effect matters. As you make progress in your financial journey, you're going to be less and less like a tightwadded, and that's A-OK.

12:52Bo Hanson:Six ways to increase your life quality on a budget. Outdoor walks. They're free, they get you out of your own head, and they can take you to number five. I agree. The public library. Not only do you have free books and books at your disposal, You also have free classes to build your skills and free events to stay entertained. Almost as entertaining as number four, trying a new recipe. Cooking at home can be lame if you're not making anything fun. So check your TikToks and Instagrams for more recipes. Three, online workouts. If$200 at Club Pilates is not in your budget, then a free YouTube class is right there in the comfort of your own home.

13:21Bo Hanson:Two, calling up a friend. They'll appreciate it, you'll appreciate it, and no one's going to be lonely today. Number one, reading. It's a lot healthier than doom scrolling, so make sure to follow and then go find a book. Oh, man, you know what made that video better? if instead of pulling up one of Pat Flynn's books, he would have pulled up Millionaire Mission. If he'd have pulled that up and started reading, that would have been ideal. But I do love this. There are very inexpensive ways to find things that you enjoy doing that can increase your happiness without breaking the budget.

13:48Brian Preston:JC put so many Easter eggs in that little video. He had his Dave Ramsey mug. Did you see that? We got to work on seeing how we can get him into... Oh, Millionaire Mission! Holy cow! It's actually in the frame! Booyah! We made it. Thank you, Jason. That is awesome.

14:04Bo Hanson:We were two books over. It was too fast. It was too fast. Just gone over and got that one.

14:09Brian Preston:Look, I almost all train of thought because I saw Millionaire Mission. Golf clap.