Financial Advisors React to Money Advice with Humphrey Yang

0:01I'm not giving up.

0:03Brian Preston:I am selling the building. The final season of FX is the bear. The restaurant is flooded. Everything's either going to be okay. Or not.

0:18Humphrey Yang:We are outgunned and we are outmanned. We have each other. FX is the bear. The final season. All episodes now streaming on Disney+. So good, so good, so good. New summer arrivals are at Nordstrom Rack stores now. Get ready to save big with up to 60 % off brands like Rag & Bone, Levi's, Adidas, and Free People. Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. The content team's been busy putting together new Reacts, but does it matter what it is?

1:00Humphrey Yang:Because we got Humphrey Young!

1:04Brian Preston:I am so excited about this. Humphrey, we are stoked that you're here. We're stoked that we get to do some React content with you. Are you ready? I'm stoked, as they say here in Tennessee. I love it. All right, let's dive right in. And anywhere else. I guess they say stoked everywhere. Let's say I make a million dollars a year. My goal is to get rid of 930 ,000 of it.

1:26Humphrey Yang:What? Why? So that I could be in a 12 % tax bracket, because I understand that it's a net worth game, not how much money you make. I don't want to be in the top tax bracket. I want to make a little bit over$70 ,000 a year on paper, right? So my goal is this. My goal is to increase my net worth and reduce the amount of money that I have to pay in taxes. This is a life lesson for y 'all, all right? They're not teaching y 'all this in school. All of you NFL players, all of you rappers is out here throwing a money phone, but you don't know about money. Let me break it down for you, big dog. You make a million dollars a year.

1:54Your goal is to get rid of$930 ,000 of it. How do you do that? You then invest in things. The government incentivizes business owners, real estate holders, et cetera, to invest in themselves. Well, why would I do that? Because what it does is it reduces the amount of money I have paying taxes because I can write that off as a business expense. The cars that I need to use, the flights that I have to take in order to be able to help my business, to do research, to go and look at prospects, opportunity. Humphrey, thoughts. immediate thoughts.

2:20Brian Preston:Okay. Immediate thought was like, at first I was like, oh man, this is kind of crazy. We're going to talk about, you know, marginal tax bracket or, you know, progressive tax rates here and how you shouldn't make more than$70 ,000 to lower your tax burden. But then he got into the more of the write-offs and the business deductions. And I kind of liked that part. He was close. He was nibbling around the edges. He did a shock and awe.

2:39Humphrey Yang:Great content creation because he actually went with a huge headline of you. If you make a million bucks, you got to get rid of$930 ,000. He threw out the little bit that you only want to pay taxes at that lower. That was a throwaway. Owning stuff is where it's at. Unfortunately, for people who don't come from money and you see people just building up cash and other things, they never get ahead because you have to create money that works harder than you can. And ultimately, that's what he was talking about. Investing the money, trying to get rid of. If you make a million dollars, figure out how you minimize the taxes, but then get as much of that money working for you in the background by owning stuff that can work so you don't have to work.

3:16Brian Preston:But I want to be clear. I feel like he oversimplified it a touch. If you are someone who makes a million dollars and you want to get rid of$930 ,000 of that and you go buy an asset for$930 ,000, that means that you now only have$70 ,000 to live off of because you have sent that money somewhere else. So it doesn't quite work out exactly the way he described, but conceptually, theoretically, that is something that you can do with your dollars to reduce your taxable income so long as you're doing it in the right way. Yeah. I kind of read it as like, you can't take it too literally like maybe that's what he is like meaning behind the content was but if you did take it literally it is a bad idea it's not gonna work it's hard to do things repeat it over and

3:55Humphrey Yang:over if you if you found like a piece of real estate or something it's not like there's a bunch of it laying around you have to and the other thing i didn't like what he said it's like

4:03Brian Preston:not everyone can write off their car that's right yeah don't just assume that you can do that that's right yeah exactly a lot of bad advice out there about people saying no i write off my clothes i I write off my haircuts. I write off that. Everything is deductible. Do mortgage fraud. Brian, everything is deductible. Everything is deductible. Until you get caught. Oh, there you go. Until you get caught. Renting is absolutely not a waste of money. No matter what anyone tells you, statistically speaking right now, it is much cheaper to rent in 80 to 90 % of America right now. The problem is people don't understand that when you own a home, you don't just have the mortgage.

4:36You're going to have home insurance, property taxes. You're going to have maintenance. You're going to have repairs. All of these additional expenses on top. When you rent, you have rent, utilities, renter's insurance, which is like 10, 15 bucks a month, and that's it. Now, the reason why people still push for a house is because people don't automate their savings. So they're saving all this money on all those housing expenses. They don't see it when they rent. It's invisible. They're saving so much, they don't realize it. And they're not doing anything productive with that money to save. So a home, it can be a good investment.

5:04It's almost like a forced savings vehicle. Building equity, all this is going into the home. And then, of course, when you retire, your housing costs will be substantially less. There's a lot in that video.

5:12Brian Preston:I actually love that. I think that was great and well laid. I think so many people assume that you have to own a home in order to be financially successful. I don't buy that. Yeah, I would agree. I currently rent right now and I haven't really considered buying a home just yet just because I don't want the hidden costs of owning property. I do not necessarily agree with what he said. People, just because their rent, their savings are going up. I don't actually necessarily agree with that, but I'd like to hear your take.

5:39Humphrey Yang:Well, look, the facts actually show that they don't because the Federal Reserve releases what net worth information is going on for typical American. And pretty much only thing that's going up is people's home equity. It's the forced savings. They're not actually building financial assets. Now, with that said, I think that I would take, because you're watching financial content, use the difference. It is okay because it is cheaper to rent right now. Don't feel pressure if you're in your 20s, early 30s that you have to own to be part of the American dream. You just need to make sure you use the extra margin, the discipline to actually put financial assets together.

6:15Humphrey Yang:And I will say, I'll go counter to this. I do think there does come a point and it's when you're in that messy middle, you're growing a family, that there are some benefits to home ownership that are beyond the economics and the mathematics of it, you know, for community, kids and all the other things that then, but you have to be so financially stable that it all kind of coexists and it's copacetic. And that's the thing where, so there's a balance there. When you're young, don't put pressure on yourself. I think when I see 26 year olds, they're like, I need to be, stop my savings right now so I can come up with a house down.

6:46Humphrey Yang:Wah, don't put that pressure on yourself. Wait until life intersects with the need and then you can make it happen.

6:52Brian Preston:And if you are someone who's thinking about buying, we have tons of great resources out there. You can go to moneyguide.com slash resources. We have a home buying checklist. We have a home affordability calculator. later. For most folks, when they decide to buy a home, if they decide to buy a home, it's the most expensive thing they will ever spend money on. So if you're in that position, it does intersect with what your need is. Make sure you're making that decision well. I do want to also say, even though I am a renter, the case for home ownership is always like, oh, if you're renting, you're throwing your money away.

7:20Brian Preston:But it also assumes that the renter will also invest that money, which, as you said, sometimes they don't invest that money. So you want to make sure if you are renting that you are actually taking that difference and actually doing something with it or else you're not making the best use of your opportunity. And I agree. It's not throwing your money away at all. It's actually buying yourself flexibility. When you go commit to a mortgage for 30 years, you're saying, I am removing flexibility from my life for 30 years or until I sell this piece of property. With your rent, you're only committing to six months, one year, two years, whatever that is at a time.

7:50Brian Preston:You are buying flexibility to allow you to do the things you want to do in the future. Yep. The worst financial advice that I've seen is when someone tells you to cut out your gym membership. Agreed. Do not cut out your gym membership. Use your gym membership. Get into better shape. I think we can move on from this one. That's the best financial advice I've ever seen, obviously.

8:10Humphrey Yang:What piece of advice? Can I give some good advice, though? Be careful recording content while you're riding on a bicycle. Did he have a crowded street? Did he have a helmet on?

8:18Brian Preston:He didn't have a helmet on. No, he didn't have a helmet on either.

8:20Humphrey Yang:There's a lot of things going on there from the risk-adjusted side. I was like, I love content creation, but let's do this in a safe, effective way. And he's probably used to riding the bike in the gym because he's not cutting it out. A lot less risk there.

8:32Brian Preston:So yeah, gym membership is a good investment. And if you're investing in your health, you're going to live longer. And hopefully you can make more money because you're living longer or perhaps you're just in a better health as well.

8:41Humphrey Yang:Everybody talks about the latte effect or the gym membership. It's really your housing and it's your car payments and other debts you've taken on. Focus on those big things. Now, look, in the beginning, you will want to make sure you're focused on the discipline of those small paper cut type decisions that you're making can't eat away any margin that you have to actually put assets to work. But there's a balance there that we want to kind of give you that financial mutant mindset so that you can kind of know what's the right things to spend money on versus what's the right ways. So every dollar has a purpose and a why so nothing gets wasted.

9:14What piece of advice do I give my kids over and over and over again about money? Don't spend it. Save it. Invest it. Let it compound. That's the gift the market gives you. Take 15 % of all your paychecks, all your side hustle, any cash granny gives you, and put it in the market. Just let it compound. If you make$68 ,000 a year, the average salary, and you do this your entire life, just 15 % of your paycheck, you'll end up a millionaire at retirement at 65. Best piece of advice I can give anybody. Don't buy stuff you don't need. Invest it instead. But on.

9:45Humphrey Yang:I mean, Mr. Wonderful nailed it, yeah. Time is money, man. That's the thing is if you're a 20-something and you're jealous because you look at people who are in their 30s and 40s and you're like, man, they had it easier than me. It's better. They are jealous of you because you are a billionaire of time. And once you understand the value of your time and compounding growth, what's the eight wonder of the world? You will quit being jealous and you just need to put that margin to work. I don't care if it's$50 a month. Little makes huge impacts.

10:12Brian Preston:The one counter argument that I think people are going to have, Brian and Bo, is that a million dollars at the age of 65, let's say someone's 20 right now, won't be worth a million dollars purchasing power. But I also assume that the median wage will go up over time. So 15 % of whatever that wage is, is going to slowly go up as well and compound over time. So I like the 15 % adage that he has.

10:31Humphrey Yang:Once you hit a million, do you know how short of a period of time it is before that second million happens? Because the assets start growing upon themselves. That's the whole thing about compounding growth. So if you think a million isn't enough, how about two million? how about 5 million? I'm telling you, this thing picks up speed the bigger it is.

10:48Brian Preston:The bigger the numbers get, the bigger the numbers get. Don't spend money you don't have on things that you don't need to impress people whose opinions don't matter. I also know that you guys have a video on your channel titled, once you make your first million, the next four are really easy. So maybe that'll be the end screen of this video. You never know. You don't have to be an economist to know that the middle-class salary is now$100 ,000. In 2019,$400 ,000 to$50 ,000 would buy you a middle-class life. In 2024, it's 100 grand. Even if you look at my life, my wife and I bought a$400 ,000 home, which is the average home in America.

11:19We drive two Volkswagens, not BMWs. The payment total is$850. We do spend$1 ,000 a month on groceries. We eat healthy, whole foods. We make our coffee at home. We don't do Starbucks. We have a 401k, health insurance, car insurance, gas, cell phone. My wife does get her hair and nails done once a month. We go to date night every single Friday, but at like a local tavern or even Chili's for $100. And our bills, monthly bills, are$7 ,000 a month. no credit cards, no student loans, and we don't have children. I can't imagine when people tell me that their daycare is$2 ,500 and their student loan is$500.

11:51I'm like, that would make our monthly bills$10 ,000? What? So the reason we keep bringing this up is that we don't want to see a repeat in the next five years of it going to$150 ,000 or$200 ,000 for the middle class. We're watching the middle class just be pushed right out.

12:03Brian Preston:I think according to the Pew Research Center, it says that the current middle class is between two-thirds of the median income all the the way up to, I think, 1.66x what the median income is. So$100 ,000 does actually fall squarely right in the middle of that range. So I don't disagree with him. I do think bills are getting more expensive. Is 100K still worth 100K these days than when maybe we were growing up? I don't know. Well, I think life is definitely getting more expensive. The things that we do on a daily basis are costing more and more. That's why it's more important than ever to make sure you are an advocate for yourself.

12:36Brian Preston:Are you doing the things in your life to increase your skill set, to hopefully come up with other ways to increase the size of your shovel so that you can begin saving and investing so that whatever the cost of living becomes, 5, 10, 15, 20, 40 years from now, when you need to count on your army of dollar bills to provide for you, you're able to save now to be able to build towards that future point.

12:56Humphrey Yang:There's several things that jumped out to me. First of all, we all have a recency bias. I mean, we just came through a once every 30 year, probably inflationary period. You know, I've lived through now two of these because I was around in the 70s and early 80s when we had that huge pump in inflation. Now we just live through another one through the pandemic and post-pandemic. Don't assume that next year is going to be 10 % inflation like it was a few years ago. But that doesn't mean that you're not dealing with the ramifications. What I'm here to tell you is that as employers, we feel that pressure.

13:28Humphrey Yang:There is going to be some hopeful opportunities that your income is going to go up, but you need to do everything in your power to facilitate speeding that up. Grease the skids. Can you invest in yourself? Can you make yourself better so that you can get that income to go up? Because look, it's always going to get more expensive. That's the natural state of inflation and growth. It just is not going to be at this 8 % to 12 % that a lot of his assumptions were assuming. It's going to go back to more of probably likely a historical 3 % to 4%. But you still need to take the responsibility. Do what you can to increase your shovel, your income that much faster so you can outpace what's going on with inflation.

14:06Study. And play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College Deal. Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass Ultimate with a custom color Xbox wireless controller. Learn more at windows.com slash student offer. While supplies last, ends June 30th. Terms at aka.ms slash college PC. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more.

14:48Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.

15:05Humphrey Yang:Who is the cheapest guy in the NBA? And Dwayne Wade says LeBron James. That is so, so false. Falsely true. For him, it's like from the airport and going through customs to then getting to our hotel. Yeah, there's no, there's no data used at all. I'm not turning on data wrong, man. But I'm like, come on, bro. Like, seriously? I'm not buying no apps. I still got Pandora with commercials. What's his finance screen saying? A small leak can sink a great ship. You know, my uncles always taught me like, you know, if they give me a dollar, they'd be like, listen, nephew, go over and spend 35 cents of it and keep the other 65.