He’s Working 60 Hours a Week to Retire Early… Is It Worth It?

17:51Money Guy Show Hosts:So you said one of the things you want to do is like enjoy your 20s before you have kids. Do you feel like you guys are doing that now? Like, are you enjoying the things that you're doing right now? Or do you feel like, we're pretty nose to the grindstone. Every single weekend we're laying pavers and then I'm working three jobs. I think we're easing up this year. Last year was very strict about saving up money. We got to get the house. That's the goal in mind. We got the house and now we're like, okay, we got to finish the house. But now that the house is about to be done, now I'm like, okay, maybe we can start doing more trips.

18:20And like, we already have a couple of trips planned this year. Awesome. So that's kind of where it's going. Like all our money was going to the house. House is done. Now Oh, it's going to finishing the house. Almost done. So now we can start kind of living more.

18:33Money Guy Show Hosts:So what are some of the trips you have planned? We're going to be going to Japan next year for my brother's graduation trip. It'll be like a big trip with our families. And then I think we want to go to Mexico sometime this year. We'll go visit my family. My family is in Mexico, so we'll be going maybe two times this year. And then like a friend's bachelorette trip in Utah next month. So that's more things that in the past we would have been like, oh, maybe, maybe not. I don't know. And now it's like, yeah, we have some money to spend. Let's go have fun. Let's just do it. And are these, like the Japan trip, Mexico, Utah, are these things that we have sinking funds for?

19:09Money Guy Show Hosts:Or are we just like, oh, we can do this out of cash flow? We have sinking funds for. That's part of the, one of the buckets in the 25 grand. So you said there were eight buckets in there, right? Yes. Did I hear correctly that one of the buckets was registration for the automobiles? Is it very expensive to register automobiles in California? Not really because our cars are so old. But since it is an annual expense, I think I put like$11.36 every month into the bucket. We put it there because all of those buckets are in a high-yield sinking fund. So they are making money if we put them all together in that sinking fund.

19:45So it's just somewhere to pull money from. So we don't have to stress about it like, oh, we got to add it to the monthly budget. No, it's already in a sinking fund. Like that's our logic behind that. What are your fight about? Do you all... Ready to soundtrack your summer? With Red Bull Summer All Day Play, you choose a playlist that fits your summer vibe the best. Are you a festival fanatic, a deep end DJ, a road dog, or a trail mixer? Just add a song to your chosen playlist and put your summer on track. Red Bull Summer All Day Play. Red Bull gives you wings. Visit redbull.com slash brightsummer ahead to learn more.

20:19See you this summer.

20:47Money Guy Show Hosts:Marvel Television's Wonder Man. All eight episodes now streaming. Only on Disney+. Fight? Not really. Yeah, we do fight. What's the issues that you'll fight about? What are we eating tonight? Where do you want to go? Let me go and tell you that one doesn't change. Not really huge fights. I think we're still in the honeymoon phase. So we're still trying to figure each other out. What makes each other mad. Luckily we haven't hit that wall yet. What have you figured out so far? What do you think that you do that drives our nuts? I think a lot of the impulsive purchases sometimes. Hold on, you're the impulsive purchaser?

21:26I'm the impulsive purchaser, yeah.

21:28Money Guy Show Hosts:I just heard that we're budgeting$11. But it's also impulsive. Okay, we just had this earlier this year. We went to Vegas. We stayed at an Airbnb that had a water softener. He loved that water softener so much. The next week, he paid$1 ,800 to get one installed on our house. That's the impulsive bias he does. Yeah, so I'll— And I guess we do clash on that. I'm like, do you really need to buy that? Because he'll make the big impulsive purchases. I'll go into the nursery and buy a little plant. You don't know what the definition of impulsive purchase is, don't you? I mean, water softener? This is what we think.

21:59Yeah. It is golf clubs. It's like, you know, exotic sports car without talking. I mean, he bought an appliance for the house. I mean, it's—this is—oh.

22:11Money Guy Show Hosts:Was it the fact that y 'all didn't have a conversation about it? or was it the fact that he just experienced it, wanted it? No, because we had had that conversation. We said we were going to do it. From the time we got the house, we realized, oh, it has really hard water. Like, we should save up for it. And it was like a save up for it in the future. Maybe after we're done with the backyard, we'll do it. But after that trip, within a week, it was installed. That was the, oh, wow, okay, I guess we rushed that. Yeah, we always talk about big decisions like that. But it's like how long do we wait before we actually make the decision?

22:39That can be a point of conflict sometimes.

22:41Money Guy Show Hosts:So how did y 'all how did y 'all run like in that specific one? How where was the communication on how long you're gonna wait? Like you said, hey, we're doing it now. Hey, they're here to hook it up I basically said we started shopping. We're like, all right, we could we could do this We have enough we have half the money in the sinking fund We had our thinking of house improvement. So that's money that we are allocating to improving the house So he's like hey, we already have 2500 in here like the Water softener is gonna be about that much like should we just do it? and I'm like, really? Like, go get quotes, go get like the best people, like check on every single person that's coming into our house, background, whatever, make sure they're certified and he's like, oh yeah, I found our neighbor, he works as a plumber, he does great work and he'll charge us 25.

23:25Yeah, and then we just cash flowed the rest because luckily we have quite a bit of discretionary money after the end of each month. We just lower the amount we're putting in the sinking funds and then we just apply it to whatever we want.

23:37Money Guy Show Hosts:All right, so impulsive purchases is what you think drives her nuts. What do you think that you do that drives him nuts? I do a lot of little purchases, but, like, for, again, hobbies. Like, we live near Disneyland, so I like to go there a lot. You're a seasoned ticket holder, I'm assuming, though, right? No, not this year. I used to be when I was single. It's really expensive. Like, their tickets are, like,$1 ,600 for a pass holder. But how many times are you going? Well, this year we've gone three times. Okay, well, okay. Yeah. You're right on the line. My impulsive buy is like, I'll see the little trinket or the little pins or the little things, and I like to buy those collectibles.

24:16Right now, like as of this year, I like getting into plants because now that we have a house, I'm trying to decorate it and little plant things, and now I'm buying like pots and soil and how to repot the plants, and I'm learning all this, and he's like seeing that like another plant. Like, where are we going to put this? Yeah, it's starting to look like rainforest cafe in our living room. So that's kind of the biggest, like,

24:37Money Guy Show Hosts:Is it the spending or the clutter that is the issue? I think both. Like I am cluttered. Like upstairs, we see our office and you see his desk completely neat and perfectly good. And my office, since I don't really work there, I work at an office. My desk is just a mess. So that's really a big sticking point in our relationship. It's more just the, I say it's more the clutter. It's never an issue of can we afford it? Because we know we always can. It's just like, do you need another one? That kind of thing, you know? Because he's very, like, I like things. I like, I have a lot of clothes. I have shoes.

25:10I see a purse I like. Let's buy it. But he's like, I don't need another shirt. I don't need shoes. Like, he has the same three pairs of. I just need a water softener.

25:17Money Guy Show Hosts:Yeah. I don't need shoes. Yeah, he has the same three pairs of shoes since college. Like, I don't think you've bought shoes since you've been out of college. Nope. But he doesn't need that stuff. And for me, I like the little knickknacks, the shoes, the purse. So far, I mean, y 'all are like the ideal star students. I mean, so I'm trying to figure out, you came on making a millionaire. Do you know, because I actually read in the notes, you want to be a millionaire by the time you're 30. Is there a why to that? Is there a why to it? No, that was just like, okay, that'd be cool to hit this number.

25:50But after I applied, after I submitted that question, I started running the numbers. I realized, okay, that's not going to happen. Unless we were saving like 80 % of our income. So I've kind of gotten away from that. Okay. I know it might not happen when I'm 30, which is fine. I don't plan on retiring when I'm 30. I'm just getting started in my career. But our end goal, we'd like to actually be like work optional around like 50 to 55. Okay. So that's where a lot of our, I guess, questions come from. We want to know if we're on the right track to do that based on our current investing and savings rate.

26:27Okay. And the unfortunate thing is there's not a lot of people around us that we can kind of talk to. The people we can talk to are in similar financial situations, are a lot older. And then the people my age are still trying to figure out what alcohol we're buying this weekend. That kind of thing. So we're more like we don't know where we're at. We don't know if we're behind the curve, on the curve. Okay. That kind of thing.

26:51Money Guy Show Hosts:So, all right, let's talk about this. If we think about work optional life around 50 to 55, all right, what does it look like? How much money do you need to be able to spend at age 50? So we would like to be at$120 ,000 after tax take home per year. How'd you come up with that? $10 ,000 a month. And then that's what I based off all my calculations on having about$3 million invested. But y 'all don't spend$10 ,000 a month. You spend currently somewhere between$5 ,000 to$6 ,000 a month if you take out the sinking funds. That's true. Yeah, that's based on the current with the sinking funds. We don't want to stop the sinking funds, I guess, even after we stop working, which is just how we're wired.

27:29Because it's just giant buckets. Giant buckets of money. Like, oh, if I have$10 ,000 on my entertainment fund, then, oh, I can plan a big trip with that money. I don't know. We just keep adding to those buckets every month. And as they grow, I can see the opportunity for more. Do you all ever worry about fatigue? Because, look, I actually resemble y 'all. My wife and I resemble y 'all a lot. But I will tell you, as you get in your 30s and 40s, you're not going to want to track every dollar forever. I mean, plus it creates weird dynamics once you start staying home with the kids. It could be some weirdness, but you probably might take over the finances even with the kids.

28:05It's just that I'm trying to make sure y 'all grow into the best version of yourselves. Do you think you'll always want to stay on such a tight budget system versus what we call kind of a manage money system to where you kind of automatically have the money going, but then if there's money left over, you go and live your best life? give me some thoughts on that I mean I've never really thought about any other life without spreadsheets I guess because since we were teenagers I love it

28:32Money Guy Show Hosts:I love a t-shirt that says I've never thought about life without spreadsheets oh that's amazing that's how we've been like in a way growing up like we've been I've been doing it since I was 18 you've probably been doing it since earlier just kind of like that's just the way of life like we've been like tracking our spending like I said before like I'm kind of in a mindset that I'm scared to not have money. So like the spreadsheet is like a security blanket. I'm like, I make sure there's money there. And oh yeah, we have$500 left at the end of the month. Cool. Like we can put that into like the brokerage account or like the more savings or even more entertainment.

29:06Like if that month we want to do something extra, oh, we have like$200 left at the end of the month. Let's just put it towards that. It's like a security that I've always like didn't grow up having. And now I see it like, oh, we have money left over at the end of the month. That's crazy.

29:19Money Guy Show Hosts:If the goal is work optional by 50-55, and you just said, hey, I want about$10 ,000 a month after tax,$120 ,000 a year in today's dollars to be able to spend. And if we're going to like have two kids exactly, and they're going to be exactly probably three years apart because we're going to plan this through. And we're going to drop from three jobs down to one job, drop from four incomes down to one income. Can you do that on$140 ,000? Like at$140 ,000, can you save 25 %? And if you save 25%, is that going to get you to this goal? We haven't actually run the numbers yet on that new income. Everything we've run is based on the now.

29:57I guess that's kind of our downfall because we're so focused on, like, what's happening tomorrow and right now. We're not thinking, like, one, two, three years in the future.

30:04Money Guy Show Hosts:So let me ask you this question. Let's say that we did the numbers for you. We ran it. We're like, hey, guys, it doesn't get there. Oh, man, it doesn't work out. So you're going to have to keep working three jobs until you're 50. How do you feel about that? Then that's what happens, I guess. I'll make the rules. I just follow them. What I'm trying to illumine here is that there's a lot of life, 23 and 26. There's a whole lot of life that's going to happen between now and the time that you guys turn 50, right? I mean, just job changes, family changes, unknown unknowns that you're just not even prepared for.

30:36Money Guy Show Hosts:I think so often we achievers and planners, we so desperately want to have the entire plan planned out. where what we say on the show all the time is that when you're early on, when you're starting out at the beginning, it's more like throwing horseshoes, right? You're not trying to be laser precise. You just wanna kind of get in the general direction. And we say get in the general direction. For most folks, if you can save 25%, and I'm gonna go ahead and tell you, even to your age, 25 %'s not even gonna be required to get there, you're gonna be in a great spot. But what I hear is like, or what I worry about is, if something were to deviate, if something were to throw you guys off of your plan right now, how would you handle that?

31:13The first thing we'd probably have to change is our lifestyle. Stop saving that much into the extra buckets. That's where most of our margin comes from. And I think that'd be the easiest thing to kind of trim down if something did affect it and we weren't able to bring as much money in.

31:28Money Guy Show Hosts:So if the goal is 50-55, talk to us about where your savings. You said 25 % savings, right? Walk us through kind of like your financial order of operations. Where's your savings going on a month-over-month basis right now? Yes. So I have 9 % going into my 401k. There's a 3 % match. I also have the Roth IRAs. Both of our Roth IRAs are getting maxed out every single year. And on top of that, we are putting$1 ,000 a month into a regular taxable brokerage account. Originally, we earmarked this as a pay off the house early when the balances meet up. But now we're starting to think it's going to be a bridge account because since our interest rate is super low, we'd rather just hang on to the mortgage like a little pet.

32:12Money Guy Show Hosts:It's like music to my ears. Yep. At least until you're over 45. Yeah. Because with the kids, there's going to be a lot of life. You want that margin just to make sure you're there. And I know you guys always say it's always good to have the ability to pay off the debt than to just pay it off. And then what retirement account for you? Through my job, I have a 457 account. I put in 250 bucks a paycheck into that, so 500 a month. and then I have a pension through my job because it's a state job. So I put 8 % into it through my paycheck, but then I get reimbursed 3%. So it's really putting 5 % out of my money.

32:51Money Guy Show Hosts:So they don't actually put the 3 % into your pension. They pay it back out to you? They pay it back to me, yeah. Put it back into my pension. Are you sure they're not putting more money also into the pension? I don't know and I don't think so. Because usually government pensions, like I know the government that I used to work with, we had our employees put in 8%, but when we were putting in 11%, the government was, because the mathematics worked out that we had to pre-fund a ton of the assets because people retire at 50, 55, and you got to guarantee that that money's there. Yeah. For my job, it's a very entry-level job.

33:23And it's also not like a permanent job. It's only for three years. So to my understanding, it's only, I put 8%, they refund me 3%. And then I'm sure as I get higher in the, I guess, the government. But no, but not really. Well, what's the vesting? Do you know on your pension? I have no idea. Okay, we probably want to find that out.

33:44Money Guy Show Hosts:On your 457, is that Roth contributions going in? Yes. Awesome. And then on your 401k, then 9 % off? But that is at my current employer. When I switch to the new job, it's going to switch over to a pension. Oh, okay. And then a 457 as well. Likely going to be saving the same amount though, probably 12%. You know what's great about those 457s? We don't actually know the difference between the 401k and the 401k. You retire at 50, 55. There's no early withdrawal penalties. Really? Okay. So it's going to be sweet. Oh, that is good. Yeah, it works out quite nicely with the old plan. We chose right because she had the option to do a 401k or a 457, and we kind of just rolled the dice and were like, choose one.

34:19Money Guy Show Hosts:Because it was the same. There's not matching. There's no matching or anything. Okay, yeah. Then, yeah, that's a great. Assuming the investment options are pretty good, that's a great way to choose. What questions do you have for us? What are some things that we could speak to or answer to be helpful for you guys? Since the profit sharing and the employer match at my current job goes into a pre-tax bucket for the 401k, as I'm leaving, should I take that money, pay the taxes on it right now, and then roll it into the Roth? Or should I leave it? Because I also don't want to break that pro rata rule because I expect our income to go over the$240 limit with the backdoor Roths.

34:57That kind of thing. I don't want to, I'm really unfamiliar with those types of rules and tax strategies and all that. So I want to make sure I'm doing it right.

35:04Money Guy Show Hosts:Well, the great news is right now you don't have to worry about backdoor Roths because the income is below the threshold where you can contribute directly. But if it does go up, you would want to perhaps keep that intact. One of the things you want to check with both your, or specifically with your 457 provider with a new plan is will they accept rollovers from other retirement plans? Most will, most will allow it. Some will have restrictions on there. But assuming that's the case, you can roll your 401k from your old employer into the 457 with a new employer, potentially. You'll have to verify that because there are some unique nuances and rules you'll want to check on.

35:36Money Guy Show Hosts:But that's something that you have some time to figure that out. Because there's also nothing wrong with leaving your 401k if your current company is with a really good provider, like a Vanguard or Fidelity or something like that. You can leave your 401k behind and still take advantage of the investment option there. You don't have to move it, don't have to roll it over. So that's something to potentially consider. On the Roth conversation, y 'all live in California, right? So you're in a relatively high income tax situation federally, and then you add to that the state piece. Because what's your state income tax that's your income?

36:10I think it's like 14%. Probably not that high of your income. Because I think it's 13%, 14 % once you're over 60%. But I bet it's somewhere between 6 % to 10%. Okay. And then you're in the federal 22 % bracket right now. So, I mean, it's just, it would break my heart to watch 30 % just evaporate. Right. Just for the sake of turning it into Roth, when y 'all have the ability, exactly what Bo said, you can go ahead and fund Roth with your Roth IRAs every year because y 'all's income is not that high. And y 'all likely can choose Roth 457s. So that's one of the things we'll look at when you're trying to figure out Roth 401k or 401k versus 457.

36:53I'd love to know, do they offer Roth options on both of those? Because then if they have Roth 457, that would be pretty powerful too.

37:01Money Guy Show Hosts:On your side income, the income that comes from the church, how do they pay you? I'm a W-2 to the church, and the piano is self-employed. How much did you say you're going to be making through the teaching? 24 grand a year. It's about 2 ,000 a month. We have about, what, 10 students? Yes, 10 students. Awesome. So there's some fun stuff you can do in terms of like tax planning with that, given that it's self-employed income, given it's a side income. Do you think he'll have to start making estimated payments on 24 grand if his… You'll do your taxes. Are you getting refunds currently? No, we actually had to pay a lot last year because I filled out my W-4 wrong when we got married.

37:37I didn't do the extra withholding check, so we just paid like eight grand last year. But luckily we had the money. It wasn't an issue. So now it's just more like a, okay, lesson learned. And lesson learned, let's not do it again next year. It all depends. Is your income going up? I mean, do you count on, I know it sounds like you're going to make$40 ,000 more, but hopefully there's some family planning that comes into play. It all goes into, because a lot of times you just got to make sure you're paying greater than what you paid last year. And then once your income gets over a certain level, you got to pay greater than 110 % of last year.

38:11And if you were naturally getting pay raises and the withholding was naturally protecting you, then it's nothing wrong with you giving the government the money in April when you either file your extension or file your tax return because you wouldn't have any penalties. The big thing is we're trying to make sure if all of a sudden your income started going down or from other sources but you're making it up through the side hustles, yeah, you want to make estimated tax payments because the worst tax in the world is those penalties because it's just unforced errors. It's just giving away free money.

38:43So, a little planning, and it's gotten to the level. This is one of the things, because you all are doing so many things well, that even for like a financial planner, I would throw you all back in the water and say you're close. But, you know, you just basically need somebody to go through and do the math exercises with you. And, you know, and then make sure you're in the right path and wait until you add more complexity with success. But this is one of those areas where tax planning, I think that somebody could definitely add some value to the conversation.

39:15Money Guy Show Hosts:Then you said that you are changing jobs this year, right? Contributing 9 % to your 401k, but it's 9 % of the comp you've made so far this year, right? And then with this new job, you're going to be paying into a pension and have access to 457, correct? So a really unique thing this year you're going to want to make sure you think about is with this side income, there's even a potential where you could do a solo 401k and you could potentially, this year will be unique because you already contributed to a 401k, but in future years, you might be able to like make all of that income disappear because you can contribute to 457 through the government job and the 401k.

39:50Money Guy Show Hosts:Really, really exciting way to double dip on your retirement savings. Not that you guys necessarily need to be saving more. That is a completely legal loophole that we're sharing with you. In the way that you save, it's going to be a really good way to drive that income down super, super low because you're not participating in a 401k elsewhere. So this year, you want to make sure you're careful. You guys self-repair your taxes or you haven't accounted? We had someone do it for us. So this year, the question you want to ask, and we'll mention this as we kind of go through our planning, is you'll want to make sure that you don't put too much into the solo 401k that you over-contribute between what you did with your current employer and the new solo 401k.

40:25Money Guy Show Hosts:In those two, you're still capped at the$24 ,500. God, that got real nerdy real fast. There's some exciting things to do there. All right, what other questions do you have for us? One of the questions I have is, are we too cash heavy in the sinking funds? Because the likelihood of us using all that money at the same time is very low. And me looking at it, I know cash is not making much money. Just sitting in the high yield savings account, I can throw it into the S &P. Let me ask you, because this is where I catch the financial mutants who are fibbing on both sides of this thing. You said you want us to plan for$10 ,000 a month.

41:00Yep. What do you actually spend a month? We spend$5 ,000 a month. Like that's actual spending? Do you see how unique this is? That's only spending, yeah, bare bones, nothing else. So emergency reserves was, I mean, y 'all probably would be fine doing six months, you know, three to six months. I'd rather go a little conservative since you already have the cash. So if you think about that, you know, 30 grand. And you guys have over 50. So, I mean, yeah, you're probably, you're in a pretty good place with your cash.

41:31Money Guy Show Hosts:And tell me, okay, so sinking fund, we have vacations. Those are big expenses. New car, big expense. What were the other ones? That was two. There was eight of them. Yeah, like house maintenance and house improvement. Like house improvement. Like what's an example of a house improvement? Like the water softener is improvement. Like an$1 ,800 expense. And then so anything new that we want to add to the house that would probably increase the value, like landscaping, you know, and selling gutters, that kind of thing. That's improvement. fixing the stuff that's already there like a broken appliance or water here that's the maintenance um and we separate it like i don't know if that's like in our brain or in my mind like the buckets work like oh i have this much in this bucket this much in this bucket but like should we be combining on making our life easier or is that like helpful in my opinion yes but i want to be very careful not to impress our bias upon you guys because if what you're doing is working, there's something to be said for that.

42:27Money Guy Show Hosts:I would argue it's a little over complicated and over conservative because realistically, if you have$30 ,000 in an emergency fund, and that's truly an emergency fund, and you decide you want to go out and buy a water softener, and you're telling me you have thousands of dollars of discretionary income every single month left over after you've done all your spending, then I would argue that$1 ,800 could just kind of probably come out of that. That is not something that necessitates a sinking fund. Now, replacing an automobile, going on a big trip makes all the sense in the world. But these little things like $11 a month for annual car registration, perhaps we're majoring in the minors there.

43:09Money Guy Show Hosts:Again, I don't want to break your system because if it's working for you guys, and look, we're desperately trying to pull some conflict out and you guys don't have any yet. So I don't want to that suggests you got to change things. But in reality, you probably could simplify, probably could streamline, be a little more efficient. And when you add efficiency, generally, you tend to add effectiveness, which would prevent you from holding so much cash and maybe have some of that cash working for you. I see y 'all as having enough assets that we ought to definitely find out ahead of the curve, behind the curve, right where you're supposed to be.

43:39But then after that, y 'all need a financial enabler in your corner.

43:43Money Guy Show Hosts:If I could go back in time, life has turned out pretty good for me. But if I could go back in time and change one thing when I was in my 20s pre-kids, I'd have gone to more Tuesday night movies and I'd have gone to more coffee shops. And I'd have done more of that little stuff. I was so tight and so worried about saving every dollar and hitting every single thing that I assumed that that sort of thing was going to break the plan. When realistically, the behaviors that I had in place, the plan likely was not going to break. And I don't think that that's survivorship bias just because I made it to the other side.

44:09Money Guy Show Hosts:I do think realistically I could have not focused so much on being perfect so early. And it probably would allow me to do more of those things. But again, sounds like you guys are already doing a lot of that. I just want you to recognize that's something I'd go back. Well, and I would give you the guidance. Doing exercises as a couple, because y 'all are a little different in the fact that you said you have little things like the trinkets from Disney. Yeah. You know, you don't need a sinking fund. You just need to have a conversation. Is that we're just going to make sure that you get to do what brings you happiness without regret.

44:45And then the same thing for you, Skylar. Is that, you know, what are the things that there's like nerdy little gadgets? Because I'm a gadget person too. Or tools. Or tools. Like a play car. Let's just make sure.

44:56Money Guy Show Hosts:A play car? Like an extra car that I can like mess around with. Oh, like a project car. I thought he meant like an RC car. I was like, dude, go get one right now. He wants to get under the hood. Because I've never driven a manual car before. I've always wanted to learn. But I need to buy one in order to learn. Another one of your hobby goals is to get a pilot's license. Yeah, because our cars are old. That's also one of our big goals. Or she wants to upgrade a car. But we have a Honda Pilot. It's got$300 ,000 on it. And we also have a Prius. It's got$220 ,000 on it. And they've lasted this long because I take care of my cars.

45:29But eventually, we would like something new. And we're getting bored of the old, reliable cars. We want something new. But that's one of my impulse buys. I'd like, I want a Honda Fit, those little rally cars. And I want to modify it to be able to like drive in the desert, that kind of thing.

45:45Money Guy Show Hosts:But that's not your daily driver. No, not my daily driver. So that's one of my impulses I've been thinking about for like two years. That's a wonderful sinking fun thing to build for, right? Another one he has, it's the pilot's license. He has been talking about getting a pilot's license since I can remember. So since I work in aviation, I'm always on site on the airports doing construction, doing the construction management. So I'm always talking to the tower or the pilots, and I always see those guys flying up in the sky. I'm like, that'd be so cool to do it. But in California, it's going to be$20 ,000 to$30 ,000 just to get a private pilot's license, and that's one of my other goals.

46:19But I don't know really where that fits into the FU. There's no pilot's license step. No, it is. I mean, it's because those are kind of abundance goals.

46:27Money Guy Show Hosts:Once you're saving 25%, everything else is fair game. Honda Fit rally cars, becoming a private pilot, all those things are fair game. Once you've checked the box and done what you need to do, they're not additional things you have to build into your budget. You get to spend freely. That's why we have the 25 % so that you can spend freely and not be concerned about it. See, I feel like now we're starting to get the real stuff out of here. You want to make sure that y 'all got the star student award first, you know, and put the gold star next to you before you now. and you don't have to be bashful.

46:58If it brings you joy, if it brings you happiness, it's okay to spend this money because that's the thing. Sometimes with us financial mutants, we're so tight with, and we're so good at saving and we're rewarded by building these nice net worth statements. It's okay for somebody to be in your ear going, do it, go enjoy yourself. You know, because I want you to live this life with so much excitement and zeal that when you get to be my age, you go, well done.

47:25Money Guy Show Hosts:Awesome. We're excited to get to work. We'll put together a plan and see what path are you guys on? And is that path the path you want to be on? Yeah. I have a feeling it's going to be. Yeah, it's going to be great. Awesome. Thank you guys so much. Thank you. No, thank you guys. Brian, what an awesome conversation with Skylar and Millette. And honestly, I don't know exactly what to say because, man, they're doing a lot of stuff. Really, really good. This one threw me a little bit because I came in thinking I was going to bring in some old man wisdom. Because I was like, look at these young financial mutants.

48:01There's no way they're doing everything right. Surely they're leaving something behind. Because I was like, it's not uncommon we see people who are so amped up about saving for the future that they're doing that at the expense also of building blossoming memories and enjoying today and so forth. So surprisingly, when Skyler and Malek came in here today, they're actually not only great at saving and building wealth, but they actually have been doing a very good job of making memories. I mean, even the fact when they came to Nashville, they had like a hit list that took out like the entire city in like a two-day period as well.

48:36Really impressive couple.

48:37Money Guy Show Hosts:Yeah, they're doing a lot of stuff right, but they still have some unknown things coming their way. And so I think when we broke down their savings strategy, where they're at currently right now, Skyler's putting 9 % in his 401Ks, getting a 3 % match. Millett's putting money into her 457 on the Roth side. They're both maxing out Roth IRAs. They have$1 ,000 a month going in the after-tax brokerage account. So when you look at their savings rate, they're currently saving more than 25%. So they are doing exactly what you want a financial mutant to be doing. And this doesn't even factor in Millett's pension.

49:16Money Guy Show Hosts:So like they're doing the hard work, even if there wasn't a pension there. The future looks pretty bright for them. When I think about where they sit right now, I'd argue even at the young ages of 23 and 26, they're kind of like in step eight. That's where they are in the financial order of operations. So let's actually, let's see if we can actually add some value to these overachievers. I was happy to see, well, at least happy to see we have an opportunity to have some value here. There's a unique thing with the fact that a 457 is on the table, plus enough side income to where a solo 401k could be really powerful.

49:51Money Guy Show Hosts:Yeah, it's really interesting. As he changes jobs, he's going to go from having access to a 401k to now a 457, and those exist in two different parts of the tax code. So one of the things he could potentially do with some of the side income he has coming in, I think he said it was like$33 ,000. Right now, it's all taxable. And so if you were to receive that income, pay tax on it as a self-employed sole proprietor, he's going to pay about$9 ,200 just in federal and state income taxes. But if he were to, in future years, be able to open up a solo 401k, he could still defer$24 ,500 into that solo 401k.

50:28Money Guy Show Hosts:Rather than showing$33 ,000 of taxable income, he's only going to show about$8 ,500. Just doing that, shifting that$24 ,500 into the 401k would save them almost$7 ,000 in taxes in total. So it's a great tax savings opportunity. Not that they necessarily need to be saving more, but it is an opportunity to save money in taxes. Now, there is one thing that we were talking about. He has to be careful this year because he's transitioning jobs this year. He was contributing to a 401k at his previous employer. So he's not going to be able to do a full 24-5 into a solo 401k. He's going to have to coordinate to make sure he doesn't run afoul of that salary deferral limit.

51:07Another great benefit of this is that because they are so young, adding flexibility in the system that they did want to leave the workforce early, that 457 is not going to have the early withdrawal penalties. That's right. So one more planning flexibility element that they'll have, not only with the tax savings of the solo 401k, but also just having easy early access to the 457s.

51:28Money Guy Show Hosts:And they've already, they let us know that, you know, they're both doing Roth contributions, which we think makes a ton of sense for them. we did a little bit of analysis. It looks like they're going to be in the 28 % total marginal tax bracket. And so they kind of fall in that gray area where they could do Roth or they could do pre-tax. It kind of depends on what their goals are. If they find the cash flow is a little tight, that might lend them towards doing pre-tax so that they free up monthly cash flow. But we do love at their ages loading up those Roth dollars. So it's a bit of a personal decision for them based on where they ultimately want to go.

52:02Yeah, they're in that gray zone where I'd still probably, just this is my personal opinion, probably lean more towards the Roth because I think they're going to have even bigger peak earning years in the future. And you're only in your 20s for so long where you can really lean in heavily on that compounding growth and that wealth multiplier.

52:19Money Guy Show Hosts:So we've already acknowledged they're doing a lot of stuff right. So what kind of path does this put them on? What sort of trajectory does it put them on? We just said if they continue saving at their current clip, which is a little under$44 ,000 a year, starting right now at an average age of 25. And they save 25 % of their gross income over the next 30, 40, 50 years. The numbers get really exciting. Again, at their age, we assumed a 9.5 % annualized rate of return. By the time that they get out to age 50, they have almost a$5.8 million portfolio. Wow. By 55, almost a$10 million portfolio. And then by 60, over$15.6 million.

53:01Money Guy Show Hosts:And even if you bring that back into today's dollars, they said they don't know exactly what their lifestyle needs are going to be, but they love like maybe$10 ,000 per month after tax. Based on what they're doing, they are well on their way to doing that, accomplishing that at some point between 50 and 55 years old. Now, but we know life has a sense of humor in the way that it throws curveballs. And, you know, we were kind of joking around about the life planning when children and other stuff. There is a chance that they could choose a path where Millette stays home. What would it do? Would it blow all this up or does it still look pretty rosy even if they did some family planning?

53:40Money Guy Show Hosts:Yeah, I think even if the side income were to go away and Millette were to stay home, I don't see a scenario where they don't save 25%. 25%. For this household, that is sort of a given. So even if the income dropped down to$140 ,000 a year and they were saving 25%, which is$35 ,000 a year, they're still in an unbelievable trajectory. Almost$5 million by 50, a little over$8 million by 55,$13 million by age 60. Again, if they're looking for that magical$10 ,000 after tax, it's probably still happening somewhere around that magical 55, if they can just keep the good decisions they've been making up to this point rolling forward, future's bright for them.

54:22So if you do it right early, you can do it light. You do it right, you do it light. See, that's what I think they, that is the big takeaway from today's show. Cause I know this is going to be one of those things where audiences go say, I'm like, man, where were the warts? You get away with a lot. When you start early and do it often, Lots of gracing. You're great, big, beautiful tomorrow.

54:43Money Guy Show Hosts:But we also don't know what could change, right? Kids, family, job circumstances. What I love is they've made the hard decisions to kind of put themselves a little bit ahead of the curve. Now, they got to finish the drill. But I think that because they're doing so well so early, they're going to be able to handle whatever life throws at them if they can continue to keep that mutant mindset moving forward. So if there's other financial mutants that want to come on Making a Millionaire, where do they need to go? Yeah, if you want to be a guest on Making a Millionaire, you can go to moneyguide.com slash apply.

55:10Money Guy Show Hosts:Or if you want to check out any of our free resources or tools, you can go to moneyguide.com slash resources. Skylar, Millette, you get a gold star. Did you hear that? You rocked this thing. Thank you so much for coming on. I'm your host, Brian, joined by Mr. Bo. Money Guy team, out. The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through Making a Millionaire.

55:47The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording. Their participation should not be considered a testimonial or endorsement of a bound wealth management.