Grow Your Money Faster With These Wealth Accelerators

0:00Brian Preston:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

0:45Brian Preston:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Do you ever wish you could build wealth faster? Today, we're going to show you how. Brian, I am so excited because today we're talking about wealth accelerators that can speed up your wealth building journey. And stick around to the end because we'll cover some advanced ways to grow your money even faster. So I'm Brian, he's Beau, and this is The Money Guy Show, where two financial advisors help you modify your money with financial nitrous oxide.

1:21So you can Tokyo Drift your way to wealth. I said that. And with that, let's launch.

1:33Brian Preston:So, Brian, today we're talking about wealth accelerators. And when we say accelerator, we mean anything that can help you grow your money faster without gambling, speculating, or skipping steps. And as we've thought about how to lay this content out, they really fall into three general categories. There are things that can provide more fuel. There are things that can provide less drag. And there are things that can create better systems. Yeah, if we're putting some color in this, more fuel, those that help you generate more money to invest. Talking about drag, these help you stop losing money and the momentum you're hopefully building.

2:07And then, of course, on the system side, these are to help you navigate money decisions to stay on the course long enough to truly build wealth.

2:15Brian Preston:All right, so let's start with the first one, Brian. Let's talk about the accelerators you can do that can provide more fuel. These are things that you want to maximize and that you want to increase. And the first one I think is no surprise. If you've been listening to our content for any amount of time, increase your savings rate. Yeah, by the way, we lean in heavily on discipline on you've got to live on less than you make. If you can't do this, you're never going to be on the journey to building wealth. Your savings rate is likely the number one metric that determines and defines how quickly you can build wealth.

2:51Brian Preston:And if you want to see this in real time, if you want to really understand what this looks like, check out our compound interest calculator. So let's say that you're earning$100 ,000 a year, and your goal is to save 10 % of your income. If you divide that out monthly, that comes out to $833.33. If you could invest that amount for a 30-year period, and let's just say that on average, you earn a 10 % rate of return, do you realize at the end of that period, you would end up with over$1.8 million. And you would reach the$1 million mark after 25 years of investing. Now, that is just assuming that you save 10%.

3:30Brian Preston:Imagine now, what if you would save 25 % of your income? That would come out to a little under$2 ,100 a month. If you did that same savings over a 30-year time horizon, again, still earning a 10 % rate of return, you would end up with$4.7 million. Now, look, there's a lot of people that say a million dollars isn't much money. I disagree with them, by the way. But 4.7, I mean, that's the type of money. We're talking about the level of wealth where even if you're using conservative withdrawal rates, you're doing tremendous things in retirement. So I want you to think about this. Increasing your savings rate from 10 % to 25 % allowed you to cross the$1 million mark eight years earlier.

4:20Brian Preston:Because you increased your savings rate, your army dollar bills is growing faster and faster and faster. So your savings rate is by far one of the biggest impactors you can have to your financial wealth building. So we want to encourage you, go out to moneyguy.com slash resources, try out our compound interest calculator. And while you're saving, we want you to shoot for a 25 % savings rate. Why do we say 25 %? Well, the truth is, Brian, a lot of people don't start their savings journey super early. Yeah, we know from our own research is that the typical American doesn't even start saving and investing until they're 30 years of age.

4:57And then if you start saving and investing at 30 years of age, even at our healthy 25 % savings rate and investment rate, you're more than likely not gonna have independence until you're age 60. So that's why we have such an aggressive savings rate. if you want to personally know what your savings rate should be, we'd once again encourage you, go try out our free resources. Go to moneyguy.com slash resources. We have the option for you to see exactly what you need to be saving for the future to live your best life.

5:26Brian Preston:All right. So you're sold and you want to start saving more. You want to increase your savings rate, but how do you do it? You can't always just save more. You have to be able to pay the bills and meet your expenses. So what's the next accelerator that you should tap into? Well, we want you to maximize your margin. Yeah, a lot of people, I've already kind of, I've given a little bit of a prelude on this, is I said, you have to live on less than you make if you're ever going to build wealth. The problem is most Americans, they never reach that margin. If you look at this, 57 % of Americans are living literally paycheck to paycheck.

6:03Brian Preston:And as you imagine, the less margin that you have, the less difference in what you have coming in and what you have going out, the less money you have to move towards other financial goals. So when it comes to creating margin, there are really only two levers that you can ever pull. You can either figure out how do I make more money, increase my income, or how do I spend less money, decrease my expenses? So we're going to come back to the spending less money, but right now let's first focus on earning more money. Yeah, your income is likely your greatest wealth building tool. How big your shovel is dictates how much margin you can create.

6:43Brian Preston:So the bigger your shovel, the bigger your margin, the more margin, the more rapid you can accelerate your wealth building. This is one of those things where when people come to us, I say, what do you feel about education? What do you feel about going and getting some credential? I'm always like, look, if you can first do the cost of benefit ratio, see if you're going to get a return on the investment. But if you definitely can go back to school and increase your income without running up a bunch of debt and other things, go invest in yourself. There's very few investments that are better than you investing your ability to make more income.

7:14Brian Preston:And if you can't go out and add a new skill or a new credential or increase your education, maybe you can consider starting a side hustle, some sort of freelancing or consulting, some way to generate income on the side in addition to your day job. Because again, if the goal is to move one of the levers and increase income, perhaps spending some of your extra outside of work time generating income is a great solution. And Roz, you know, we just gave you a few examples on how to increase your income and or add more fuel. All these things can work together. That's right. You can side hustle. You can go investing your own education.

7:52There's all these things. We're just trying to help you increase your savings and investment rate so that you can increase how fast you're going to reach your financial goal.

8:02Brian Preston:Now, remember, these accelerators fall into three categories. There's more fuel, less drag, and then there's building better systems. We just talked about more fuel. Now let's talk about the next wealth accelerator, which is less drag. How do we minimize the things that slow us down on our wealth building journey? And one of the very first things that we want you to consider minimizing is minimizing your debt. Yeah, I feel like this is the first trap that most Americans fall into is that they, and we get it, you've been in school for a gazillion years, you start actually getting your first real adult job.

8:37You feel like you ought to be rewarded or celebrate that. So people go out there and they either run up credit card debt, they go out there and they get a car loan. You need to be scared of debt. If you're using debt and you're not scared of it, you are using it wrong. That's why we literally say debt is chainsaw dangerous.

8:56Brian Preston:Yeah, it can be napalm to your financial life. So much so that right now, according to Northwestern Mutual, 35 % of Americans, so one in three Americans, say they are carrying close to or at their highest level of debt that they have ever carried. Americans right now have a consumption problem because they are allowing their present day selves to borrow from their future selves and subsidize lifestyle today. If you're doing that right now, you're doing money wrong. If you fall into this debt trap, they charge such predatory rates on a lot of these types of debts. You'll never get ahead. So that's why we definitely want you to lean in, get serious about avoiding this high interest debt, especially if you can.

9:39Brian Preston:That's why, Brian, we hold the thing. We actually have the financial order of operations. It says if you do have high interest debt, it is step number three. So we want you to pay that off as quickly as you can. And once you get it paid off, we want you to avoid it at all costs. That's the consumption. That's the decisions that you make on a day-to-day basis. But we also, when it comes to buying the big things, when it comes to the large life decisions that you're gonna make, we want you to follow our money guy rules for buying big things like vehicles or homes. Yeah, I mean, the first one, cars.

10:11I told you, these are the traps that people fall into. I understand that a lot of you, your first wealth building opportunity is gonna be getting to your job reliably. And we wanna encourage that you have a car, not just a jalopy that you every morning you go out there and you have to do your little rain dance hoping this thing cranks up. We want you to have reliable transportation. And for a lot of you, if you don't have resources when you're starting out, you're probably gonna have to follow our 23.8. And what we say when we say 23.8, what we mean is you're gonna put down at least 20%. You're going to pay the car off within three years.

10:46That's gonna keep your wallet very sober so that you don't let your ego trying to get you to buy a car and fall into that trap of financing it for six years, seven years, and beyond. And then we don't want your gross monthly payments to exceed 8 % of your monthly income.

11:02Brian Preston:Now, there are two caveats. If you're buying a luxury car, you don't get to do 23-8. You got to pay a luxury car off in the same year that you bought it, inside of 12 months. And as a rule of thumb, your car payment should never exceed what you are investing on a monthly basis. If you have a thousand dollar car payment, but you're saving a hundred dollars a month for your future self, you are doing it wrong. So most Americans don't make the car decision well. They also don't make the house decision well. And it's gotten even more difficult as we've seen home prices increase and interest rates go up.

11:35Brian Preston:So if you want to make sure that you are staying inside the lines when it comes to buying a house, follow our 3-5-25 rule. That's it. On your first home, you'll have to put 3 % down. We want you to make sure that you're going to be in the home for at least five to seven years. And we don't want your total housing cost to exceed 25 % of your gross income. Now realize in future home purchases, meaning you go to upgrade because you have a growing family, we want you putting down 20 % on the second home. But we do have very, very approachable rules on that first home purchase because we understand in this crazy real estate marketplace, it is going to feel like the housing market's running for you.

12:13So we give you a lot of grace on that down payment. but don't feel like you have to force it. We've done shows on, is it better to rent versus own? Do your research, measure twice, cut once, because in a lot of American cities right now, it's actually cheaper to rent than it is to purchase because the person that's renting the house probably bought that house at about half of what you could buy that house for. And they also got interest rates that historically just are not around at this moment in time.

12:40Brian Preston:All right, so we're talking about how do we reduce drag, reduce friction in our financial life. We already said that we want to minimize the debt that we're incurring, but even further than that, we want you to minimize your expenses. Remember, we have two levers that we can pull when it comes to impacting our financial life. We can either make more money and increase our income, or we can spend less money and decrease our expenses. Well, decreasing our expenses is one of the things that we have the most control over. Yeah, this is why we love people to track their spending. A lot of you, when you're trying to build that muscle memory of how you handle money well, you actually have to do, nobody likes the budget, but I think you have to do it in the beginning so you can find out where things are leaking so you don't fall into financial traps.

13:27Brian Preston:Yeah, if you can find, like oftentimes we think about, okay, well, I'm gonna know where my rent is. I'm gonna know what my grocery bill is. I'm gonna know what my fill in the blank is. And that's fine and good. But as time goes on, as life gets more complicated, a lot of times when you're in the messy middle, you might recognize stuff just kind of sprouts up and things kind of happen. And all of a sudden you start having money falling out that you didn't even know was falling out. Man, I signed up for that Hulu subscription because I wanted to watch that one football game, but then that football game passed and I never canceled it.

13:57Brian Preston:Or man, I signed up for this thing so my kid could watch this PBS special and it was six bucks, but now they can't watch it anymore. And all of a sudden you have these money leaks that are just happening that you didn't even know were going on. So if you can start tracking, if you can start seeing those dollars leave, it's gonna allow you to start patching and plugging those holes. Well, I'll tell you, a lot of us even have mystery subscriptions. So go and audit your, you know, go look at your credit card statements, look at your monthly bank statements, see what the outgoing things are every month so you can figure out if there's ways that you can definitely plug up those leaks.

14:31And then also I want you, because what's interesting is we all in high school are so insecure and you get into adult life and you think, hey, I'm not going to be insecure anymore because I'm an adult now. And then you find out, wait, no, there's still a lot of peer pressure is that we have to feel like we have to keep up with the Joneses. And that's why I would really strongly encourage you, take an active role in your life. You can avoid lifestyle creep. You do not have to feel like you have to try to keep up with your peers to impress people who probably realistically don't care what you have going on.

15:03Brian Preston:A really good way to combat lifestyle creep is as you have bonuses or pay increases or pay raises, think about the 60-40 rule. It's okay when you get a raise or bonus. If 60 % of that money goes towards additional savings, additional financial order of operations, and then let 40 % go to lifestyle. If you do that, you are going to make sure that your lifestyle does not outpace your savings rate. If you can do that, you're going to keep yourself on the path towards financial independence. Another big thing that happens within less drag is we just talked about expenses, but don't sleep on the fact that taxes are a big part.

15:41So you've got to minimize your taxes as much as possible. It's important for us to share with you guys. We realize tax evasion is illegal. And there's a lot of people out there selling systems or other things that might get you in some hot water. But if you're smart about this, think like a financial mutant, tax avoidance is actually highly encouraged, meaning if you're following the letter of the law and doing things that are actually structured in the system, you're going to be A-OK and you'll actually be rewarded for this.

16:08Brian Preston:A number of accounts, even the way that they are established, are tax incentivized. You have health savings accounts and 401ks and Roth IRAs and 529s. All of these accounts help you minimize the taxes that you pay either today in the present year or in the case of HSAs and Roths in future years when you go to pull that money out. And so one of the questions you may be asked is, okay, well, based on my situation today, how do I know if pre-tax is more valuable for me or if Roth is more valuable for me? And again, we have a rule of thumb that can help you. If you add up your marginal federal rate and your marginal state rate, and it's below 25%, there's a really good chance that Roth contributions would be beneficial for you.

16:51Brian Preston:Tax-free in the future is what you wanna do. 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. Spend 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. too. But if you're a higher earner right now and you add up your marginal federal rate and your marginal state rate and it's above 30%, there's a really strong case to be made that maybe you should consider pre-tax contributions because the current year tax benefit is so valuable that you don't want to miss out on it.

17:40Yeah, there's a gray area there between 25 and 30 % that it's kind of more going to be specified on, are you young? Because young is definitely going to be more of a Roth person's game because you have many more years for compounding growth, but also where are you at in your asset level? Because no matter what your tax rate is, somebody who's in the legacy building parts of things, they might want to think about Roth assets. We've tried to give you tax efficiency pre-tax versus Roth, but there are a number of you that when it gets complicated, your simple life gets complicated, that's when a financial advisor might be able to help you navigate this even better.

18:15Brian Preston:And then if you're trying to minimize taxes, the more educated you can make yourself, the more powerful you can be. So are you utilizing all the tax deductions and all the tax credits available to you? Maybe you're paying student loans. Are you remembering to track the student loan interest that you're paying in? Maybe you have children. Are there income thresholds that you fall under that would qualify you for tax credits you may not have gotten otherwise? If you can understand where those deductions are, where those credits are, and what you need to do to be eligible, that could literally be more money in your back pocket and less money going towards Uncle Sam.

18:49You know, one of my favorite tools that we use for turning a negative situation into a positive is tax loss harvesting. This is literally turning those lemons into lemonade. And the fact that what you'll do on this is if you will take losses and then you'll get a current tax deduction. And even if you can't, once you can't even use that current tax deduction because it's$3 ,000 a year, you get to carry forward into the future. Guys, I'm telling you, we use this all the time with our clients is where we can strategically lock in losses. So when you hit those volatile times in the marketplace that when then in future years, because realize about 80 % of the time, you know, markets are good, but that 20%, that two out of 10 years, you're going to love that you use this tool to minimize your taxes, not only right now, but also in the future.

19:37Brian Preston:And then even things that you do automatically, maybe that you don't think about, you ought to ask yourself a question. Is there a way for me to do this in such a way that might be more advantageous from a tax standpoint? For those that are charitably minded, there are incredibly efficient ways to either bunch charitable contributions or even potentially use highly appreciated securities to make those charitable contributions where now you're making taxes that you would otherwise have to pay disappear forever. Again, if you can educate yourself and know what tools and tactics are available to you, you can keep more money in your back pocket.

20:13I feel like we just covered more fuel, less drag. Those are kind of the basics things. But at some point, you have to actually get to what's the horsepower of this system. And a lot of times that's the system, you know, is what, how powerful are these components that you've been compiling? And that's where we want to kind of go through what are things that you can do that create a better system, better success, better opportunities for your future self?

20:39Brian Preston:I think number one is automate your finances. The more things that you can automate, the less likely you are to screw it up. You wanna make the good habits as easy as possible. You wanna make the bad habits as hard as possible. So are you doing things like setting up automatic payroll contributions into your employer-sponsored plan? Are you automatically funding your Roth IRA? Are you automatically having money going into your taxable brokerage account? And if you can set those things on autopilot, you don't have to make sure at the end of the month there's enough money to fund them. You have already paid yourself first in taking care of that thing.

21:13Here's the other thing. It's not only the good stuff that you can automate. You can also automate the debts and bills so that you don't, you minimize, you know, payments and penalties and other things. If you can set these things up, this is what we like to call our forced scarcity system too. If the money's already going out, it does a better job once again of what Bo said, making the good habits that much easier and the bad habits that much harder. If the money already has a time and a place of where it's gonna be, you can't fall into traps that you might've done just from a behavioral standpoint.

21:42Brian Preston:Now, again, we're talking about putting better systems in place. And a lot of times people are doing good things with their finances. They're making the right decisions, but oftentimes they're doing them out of order. They're not following the order that's the most efficient. And that's why another system that you can implement is the financial order of operations. Oh yeah, you knew it was coming. As soon as you heard systems, you're like, there's definitely a better way to do money. And it's gotta be the financial order of operations. If you want to get your free copy, you can go to moneyguide.com slash resources and download your free copy of the nine-step process to tell you what you should do with your next dollar.