How To Actually Make Money Sports Betting (Here’s the Math)

20:52Brian Preston:Right. I alluded to this last week. I know we got to answer questions and we're going to, but it just bothers me so much. And I was, I was literally, I was at the lake this weekend with some, with, uh, with another family. It was an awesome time. And we were just talking, I was like, it's such a travesty that someone starts out with this like noble idea that, Hey, I'm going to go, there's a, you know, Hey, there's this app that advertises and it's for young people. Great. I'm going to download it and I can start investing and it's all this. And I log in, I can see my Roth IRA and my taxable brokerage account, maybe my 401k.

21:22Brian Preston:And then right there on the margin on the other side, Hey, place a sports bet or Hey, look at, look at a prediction market. And I just think that that is so, so, so dangerous that we're allowing it to just creep in right there. That's a huge disappointment. It really, really bothers me. It really, really worries me. And I hope, I hope that we can, um, get in front of this so that we don't have an entire generation of young folks that are like, man, I blew it. Yeah. I would love to hear more from you guys, either in the chat here and the comments in the money verse discord server, just what your peers are doing, what you guys have seen happening with a sports betting and whether or not this is like showing up in your life practically.

22:05I would love to hear that because there's a lot. Obviously, we shared it today. There's a lot of data and we are pretty passionate about it. We just we don't want the next generation to fall prey to the wrong ideas and lose out on building wealth. But with that, let us know what you think. But for now, we are going to dive into your questions. Are you ready?

22:24Brian Preston:I love that we get to sit here every Tuesday at 10 a.m. and load you guys up. We get to answer the questions that you have and you care about. So if you have a question, make sure you get it in the chat right now so we can do that. One of the questions I see keep coming through is, oh, Bo was at the lake. I wonder if he was swimming. Yeah, I was. I was swimming all over the lake, guys. I was treading water. I don't know if you know this. I can tread water for a really long time. I'm a really good swimmer. Just not that long. No, no, it's a really long time. And it was a great time. And I'd encourage you, if you're not out there in the moneyverse, if you're not out there on socials, You should be because we've got a lot of fun, interesting, cool stuff coming your way.

23:04Brian Preston:But the only way you're going to know about it is if you are subscribed, if you're in the moneyverse, if you follow us on socials, that's the way that we're going to make sure the fun stuff stays in front of you. But yeah, I'm super proud of my wife. We were wake surfing. She got up. First time she got up. She rode the wave for a while. It was awesome. That's fun. Super fun. I love it. All right. We're going to start off with a question from Calmcat9032. Is it okay to put your emergency fund in a cash equivalent bond ETF like ESCOV? It feels like a waste to have it sitting in a savings account, even if it's a high yield savings account.

23:47I live in a state that doesn't tax it. What would you say to Calmcat?

23:51Brian Preston:So we get this question all the time. Hey, what? I know I got to have cash. I know I got to have conserved investments, but man, I just, I don't want to hold cash. What if I did something just a little bit more, just a little bit more? Well, for those of you who don't know, bonds, conceptually, what is a bond? A bond is where you let some entity borrow money. I'm either going to let the federal government borrow money, or I'm going to let a corporation borrow money. I'm going to let a municipality borrow money. And this is the way that works. I'm going to let you borrow$10 ,000 from me. in exchange for that, you're going to pay me some stated rate of interest on some sort of cycle, most oftentimes twice a year.

24:31Brian Preston:And then at the end of maturity, I'm going to get back my$10 ,000 that I borrowed you. Conceptually, that's the way that bonds work. Well, one of the problems is, is that between the time that you buy the bond and the time that the bond matures, the actual value of that bond will change. And most often, depending on the type of the bond, it changes with interest rates. And the way it works is when interest rates go, it's like a seesaw. If you guys can see this, when interest rates go up, the value of bonds that you have go down. When interest rates go down, the value of bonds that you hold go up.

25:05Brian Preston:Well, the problem is if you're holding bonds or you're holding cash because you want it there when the you know what hits the fan, you want to make sure that it's there when you need it the most. The problem is if you start getting really cute with your emergency fund, you start investing in things that have the ability or potential or propensity to lose value, you're kind of losing the plot. So I am not a fan. I'm not a proponent for holding bonds inside of my emergency fund or holding anything that can lose principal. What I want to hold is I want to hold cash and cash equivalents, meaning I know that money is going to be there for me, whether interest rates go up, interest go down, whether we're in a bull market, bear market, whether we go into recession, no matter what, when the worst of the worst happens, and oftentimes these bad things happen all at once.

25:52Brian Preston:It's not like they happen in isolation. I want to know that my emergency fund is there. Because the last thing that I want to have happen is, oh man, something went real squirrely with the economy. Market tanks, interest rates shoot up, value of bonds goes down. And all of a sudden, that cash that I needed, because I was holding it there, trying to get some extra yield, trying to get some extra growth has now lost value. And the cash I needed the most, I now have to sell at a depressed value. I don't think that's the place there you want to be. And in reality, the juice just isn't worth the squeeze.

26:24Brian Preston:I don't have S-Gov in front of me, but I don't know how much that yield is, but I know right now that like high yield savings accounts or even money market mutual funds are paying like three and a half percent. That's pretty decent on like safe money. Am I trying to go out there and put money at risk to go from three and a half to maybe four? Is that really worth it? I would argue not so much. Get to step four, build up your emergency fund, let it sit there, and let all the other money you have working for you grow. I personally do not get cute with my emergency cash. Yeah, well said. I think this is such a classic financial mutant question because you're thinking about money differently in a good way, but it is one place it's easy to get tripped up.

27:04And I think everybody working on the show gets it. Like everybody wants to have that good return and we get why cash is kind of unsexy sometimes or can feel that way, but it's actually one of the most important pieces to your financial plan. So well said, Beau. And thank you to CalmCat9032 for the question. If you would like a Tumblr, Oh, today's Tumblr day. Look at this. It's a Tumblr day. Just email winner at moneyguy.com, CalmCat9032.

27:29Brian Preston:I see some people asking about, you know, about Brian being here. Have we, did we put on, well, it was in the newsletter. Did we put anywhere? did we post on social that he was out traveling gallivanting and stuff? Just on the newsletter, email newsletter. So if you're not on the newsletter, you should be because there were some crazy pictures, some awesome stuff. There was a picture of a what did you say? It was a bald eagle holding a money guy. That was hilarious. Oh, there it is. And we had a Tumblr in the wild. We had a Tumblr in the wild. So if you're not on our email list, make sure you are.

28:05Brian Preston:But Brian, He is actually traveling home today. He was trying to get it where he could be home for the live stream. He'll be home later today. He's going to be back in the saddle. We have missed him. It's not the same without him here. It's not the same without him. But rest assured, he's not gone anywhere. He's just been out traveling, seeing the world. Living his life. Getting held by bald eagles. Living that step nine life. Step nine life. A really food completion life. That's right. He's a food success story. We love it. We love to see it. All right. This episode is brought to you by Google Chrome.

28:33You 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. 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+.

28:58Saying how you feel out loud is terrifying, But that's what Hinge's new free audiobook, No Ordinary Love, is all about. It's a collection of real love stories about five couples that met on Hinge. The stories are written and read by Tembi Dinton Hurst, Nicola Dinan, Curtis Garner, Raven Smith, and Rufy Thorpe. I, Hunter Harris, wrote and read the foreword. The audiobook's out now. Give it a listen. JTIL Swag says, Is it okay to be miserly for three years prior to having a baby? We are trying to hit 35 % savings rate prior to a baby in hopefully three years because we know our savings rate will be sub 20 % afterwards.

29:43It depends.

29:44Brian Preston:This is an interesting question. Is it okay? Hot take, and Brian's not here to fight me on this. Yeah, is it okay to be miserly in seasons? Sure. Yeah. But you also want to like think through, okay, what am I sacrificing? What am I giving up? You know, what, what decisions am I making that are going to have downstream consequences? I'll give you a great example. Uh, when I was a younger single man, um, I didn't like buying groceries. I didn't want to spend a ton of money. It wasn't something I got a lot of utility out of and Publix. Uh, if you've been with this for any point in time, you know, this story, Publix would have buy one, get one cereals.

30:20Brian Preston:And so what I would do is to save money. I'd go get 14 boxes of cereal on Sunday, buy one, get one. So I'd pay for seven. I'd have 14 total. And I just eat that every meal. I'd eat it for breakfast. I'd eat it for lunch and I'd eat it for dinner. And that was a great way to save money. I did not spend a ton, but look, cereal is not super healthy food. I mean, no offense out there to the cereal companies that are huge fans, but it's not like high quality food. It's not whole food. It's not, you know, rich in protein. Let me put it this way. We did a social video of you with some cereal. Somebody said, I can't believe Bo got so jacked by eating cereal.

30:58And I'm like, you didn't.

31:00Brian Preston:I didn't. I didn't. Just to be frank, like there is a, there could be a downstream. Yeah. Like that was not a healthy, that was not a healthy way to live. That was not a healthy decision that I was making, but for that season, allow me to max up my Roth IRA and save. And so that's okay. So if you're planning for a baby, which is amazing, congratulations, you want to do that. And you and your spouse on the same page, hey, we're willing to sacrifice. We're willing to not travel, willing to not do this, we're not do that, so that we can enter into this season and phase of life feeling more comfortable.

31:33Brian Preston:That's totally okay. And by the way, it's totally okay also if your savings rate drops after you have a kid. We call that the messy middle. It's a reality for a lot of folks. So long as you keep doing something, you keep that ball moving forward on your financial life. Yeah, I think it's okay. But what's great about being miserly is there are still amazing ways that you can bedazzle your basic life. Because what I don't want you to do is, I don't know how old you are. Let's say that you're 24 to 27 is this next three years. You're only going to be 24 to 27 one time ever in your whole entire life.

32:05Brian Preston:And I don't necessarily want you to miss out on those things. So are there ways you can still do things that you love and still create memories and still enjoy that season, even if you're being miserly. You know, when we were there and I was doing cereal and my girlfriend at the time who became my fiance is now my wife. When she would come, I'd take her out for a nice Olive Garden dinner. I saved all that money, you know, on that cereal so that we could go to Olive Garden. That was our date night and it was great and that was okay. So find ways where you can do that. Find ways where you can still bedazzle your basic life and not totally sacrifice because you don't want to look back and have regrets.

32:46Brian Preston:You don't look back and say, man, I wish I had not done that thing, or I wish I had not given up that thing just for some future thing because none of us are guaranteed tomorrow. So it's a balance between how do I enjoy the present and have the things that I want now while also saving for and building for the future. Well, do you think This may be Brian on my shoulder as well, but the word miserly is an interesting one. Yeah. Because I'm wondering if miserly has a negative connotation to it. I think to me, it means you are sacrificing something important potentially. Yep. Right? Like maybe you and your spouse aren't actually aligned and one of you feels like you are missing out on valuable time, just the two of you, things like that.

33:33Like, I think you have to be really aligned with your spouse on that. And I think you have to be really clear on what matters because I think being frugal or cutting way back or going through seasons or kind of challenging yourself to spend less, that is all a natural and very positive and very common part of the financial journey for everybody who makes, who follows the food, right? When you're trying to hit a goal. But I think that if, I think that being frugal or challenging yourself to a season of low spending. I think those are two different things. Those are two different things than being miserly.

34:06That's what I would maybe argue here. Like I would make sure you're reframing that and are truly on the same page and are truly still focusing on what matters, not just a hypothetical savings rate and a hypothetical timeline, because it is true too, that like you're giving us all these timelines and you just don't, you don't really know how things will change over three years or how things will turn up too. So I just, I think everything Bo said was right on, but that the word difference I felt like was worth noting. That was what I thought, um, even just from my own personal experience, but great question.

34:41Brian Preston:I did not know how much, uh, how many comments the Olive Garden comment was going to get. Yes. Unlimited salad and breadsticks used to be. Yeah. Honestly, that's true. I remember that as well. It was the jam at one time for sure. All right. J till swag. one thing we can do that will be free to you is send you a tumblr. Look at that. That's how you bedazzle. You show up for a live stream, you get free stuff. You can just email winner at moneyguy.com if you'd like to cash in on that. All right. One thing I do need to say is we will be doing rapid fire today, even though Brian's not here. Are you answering or just me?

35:19I think just you.

35:20Brian Preston:How long do I have? Same amount of time. 15 seconds? So I expect impeccable answers in these 30 seconds. So I get 30 seconds? You get 30 seconds. maybe I'll add in it's not even really a challenge y 'all should ask some hard questions because 30 seconds I've got that I expect full impeccable answers but if you want to be part of the rapid fire segment for Mr. Bohanson just put your questions in the live stream chat right now if you're watching live and make sure you put RF at the beginning so we know it's for the rapid fire segment so get on that the team will be in the wings gathering that up for that segment soon but in the meantime Gruber T23 has a question It says, hi, Money Guy team.

35:58When do you know if Roth conversions are right for you? My goal is to retire in the next 10 years by age 45. Concerned about getting bridge accounts high enough to make it to 59 and a half.

36:14Brian Preston:So, man, okay. So when do you know if Roth conversions are right for you? one of the questions I'd want to know is if you're going to have to count on your Roth. So one of the strategies for being able to retire early is doing these Roth conversion ladders where I convert, you know, I got to make sure that the Roth dollar is there for at least five years, but I create this cycle where I convert to begin building basis in my Roth. And then when I get there, I can pull the base basis out, the money that I've put in or the money that I've converted tax-free, penalty-free. I can't access the earnings yet, but I can do that.

36:50Brian Preston:Well, one of the questions I want to know is if you're going to retire at 45, you got to bridge the gap from 45 to 59 and a half, not knowing what your living expenses are, how much money will you have in a bridge account in your Roth? Because if you're saying the bridge account isn't going to be enough to get me there, I'm going to have to start doing these Roth conversions. By the way, when you convert to Roth, you're going to start burning the bridge account a little bit to pay the taxes unless you can cashflow it. So I'm going to be Roth converting, burning my bridge account down. I'm going to deplete my bridge account.

37:19Brian Preston:And then I'm gonna start depleting the Roth. Well, then once you get to 59 and a half, my question is, well, how big is your pre-tax account? And how big is your Roth account? Because just because you have enough to get you from 45 to 59 and a half does not suggest and substantiate that you have enough to get you from 59 and a half all the way till the end of life. Are you going to be able to actually be a true financial independence. This was a problem we saw with Danielle on making a millionaire. She had this idea that she was going to coast fire and all right, I want to get to this number and you're not talking about coast fire, but I think the same thing applies.

37:54Brian Preston:I want to get to this number. And if I get to this number here, it's going to get me to here, then I'll be good. And her math was right in that scenario, but she did not have a big enough pot to last her from the final checkpoint for her all the way to the end of her life. She had not saved enough. She, had not done the math correctly, in our opinion. So I'd want to know, do you actually have a big enough pot that's going to allow you to retire at 45? Most of the folks that we see, and this is not like gospel, this isn't set in stone, but most of the folks that we see are able to use that taxable account to build a bridge.

38:28Brian Preston:Very few folks that we interact in real life only have the ability to do the Roth conversion ladder, to live off the assets from 45 or from whatever age they retire 259 and a half. So I would go revisit my assumptions, retest my strategy and see, is this really going to last for, you know, from 45 when I retire all the way out to 85 or 95, whenever I want to assume my life expectancy is. Because we did a show, me and you did a show last week about, hey, what happens if the 30-year retirement actually turns into a 40-year, actually turns into a 50-year? So how do you know if Roth conversions are right for you?

39:07Brian Preston:Well, there's a ton of, you look at your tax rate, you figure out is the cost of converting not gonna be cumbersome to my ability to build wealth? But I don't even think it's a like, is Roth converting right for me? I don't even think that's the first question. I think the first question is, is retiring early right for me? Am I in this situation? Is my income high enough? Is my savings rate high enough? Is my pot big enough that I actually can retire early? And do I have enough juice in my system to get me from 45 all the way to 59 and a half. Yeah, one thing you could play with is our know your number calculator over at moneyguy.com slash resources.

39:43Granted, this is a kind of back of the napkin math tool, but it'll give you a good starting point, a good idea of how close you can get to some of these goals, how some of the variables will change your outcome. And then honestly, what Bo was just describing was a lot more complex, a lot more personal, a lot more advanced than I think we can fully dig into on the show. because it's so customized. And that's exactly what they do for clients every day at Abound Wealth. So if that sounds like you, if you have enough of these problems and a big enough nest egg to where these decisions matter a lot, that's exactly what we specialize in.

40:22And just we are there if you ever want to start the conversation or just explore it. Go to moneyguy.com and click on the Become a Client button.

40:28Brian Preston:Love that. All right, we're going to do another question and then probably start digging into Rapid Fire if the team is ready, but let's go to Jesse's question. For someone in step nine of the Foo and on track for retirement, what are your favorite ways to bedazzle your basic life? We recently hired a house cleaner. Love it. Oh, that's one of Bo's favorites. Any other suggestions? I'm going to throw this out there. If you're on step nine, there's a chance you may not have to bedazzle basic anymore. That's what I was thinking too. I was like, if you're doing those things, uh, in, in, when I was bedazzling my basic life, it was kind of early on when I was trying to get to the 25, when I was trying to get to the savings rate that made sense for me.

41:11Brian Preston:But then once we were able to get there and kind of build up a foundation and build up a base and move into sort of a different place, it wasn't so much about bedazzling our basic life. It was like, Hey, is it okay for us to allow our lifestyle to improve and increase because all the time, lifestyle creep gets such a bad rap. In reality, most of us want lifestyle creep. Most of us want our 40s to look better than our 30s and our 30s to look better than our 20s and so on and so forth. And so there's nothing wrong with your standard of living increasing through time. So there are things that make a ton of sense that when you get to that point, you can start increasing your lifestyle and that's okay.

41:52Brian Preston:And I'd argue that doesn't have to be the bedazz. Now you can still bedazzle. There's a lot of people that are, um, you know, there are some things that no matter how wealthy you are or how successful you get, my, my opinion is there's always those things that are going to just stick in your craw. Like here's mine. I don't, I don't buy drinks at restaurant. Cocktails is fine. Right. But like, like a, like a sweet tea or a Pepsi or a Coke or like whatever. I don't buy that at restaurant. I can't, I just can't get over the facts. Not Mr. Bo Hanson. 235 for what it's bad for you, but two, I just, and so my kids are like, dad, can we get a drink?

42:26Brian Preston:And I'm like, no, you can't get a drink. We drink water. That's what we do. It's what a Hanson does. And so, uh, I just, I don't think I'll ever get past that. And that's okay. It's okay to hold on to those kinds of things, but there are things that I have let go of. Uh, hiring a house cleaner is a great one, right? Like if, If that's my wife and I, we made the decision a number of years ago for her to stay home and for me to me to not stay home. To do this. To do this. Right. And for me, if you if you were like to compare the two, I'm the one who probably is a little bit more, you know. Things being orderly and neat matter a little bit more to me.

43:06Brian Preston:That's just kind of like my nature or whatever. And so we got to this point where like I would come home and I'd be like, babe. And she'd be like, babe. And I'd be like, babe. And she'd be like, I got all these kids. I'm doing it. And I'm like, all right, I get it. And so like, hey, it really, I'd love for that to be put together. And like, I don't want us to spend our time on the weekends doing that kind of stuff, like scrubbing toilets and that kind of stuff. That just wasn't something that we wanted to do when we were in the financial situation. So we outsourced that. It removed a lot of friction from our marriage.

43:37Brian Preston:me being upset at something not being the way that I wanted and her being like, are you kidding me? I've got, I'm literally momming all day long. That's my number one thing. And these kids are wild. Uh, that's okay. Uh, lawn maintenance. I'm like, I didn't, I went, when I was a little kid, I wasn't like allergic to stuff. That wasn't a thing. I, you know, I just like ran around barefoot. But now if I go like start trimming my hedges, I break out in hives and I can't breathe and start coughing. I have someone else like do, do my, do my lawn and that kind of stuff. I think those are great things to outsource, especially if you're like, hey, if I'm working all week and I want to be home all weekends, I want to be able to play and I want to be able to swim.

44:15Brian Preston:I don't be able to do soccer, all that kind of stuff. I don't want to spend three hours cutting the grass and edging. Now, some people love that. And if you love it and it's your passion, don't outsource the things that you love. But if it's things you don't love and you have the ability to outsource, I mean, it allows you to open up to do something else. That's great. I got a buddy, man, he's super successful here in town, really close friend of mine, changes his oil every time. And one time he was doing it. And like, as he was changing it, a big wind gust started blowing and he just dumped oil all over his beautiful driveway.

44:45Brian Preston:And I was like, see, that's why I don't do it. And he's like, ah, it'll be fine. I'll clean it up. And I'm like, I'm just, I'm not going to do that. But for him, he gets utility out of it, doesn't outsource it. He does it. For me, I would rather not do those kinds of things. So you have to ask yourself, what are the things that you value? What are the things that it makes sense for you to spend money on? and as Ramit would say, spend lavishly on those things, but don't waste your money on the things that don't matter. Don't think just because someone else does something, it means that you need to do that something.

45:12Brian Preston:Just because some other family goes to Disney, if Disney's not your thing, don't feel like you have to go to Disney. You go do something else somewhere else, that's totally okay. Figure out what it is that you want to do with your money and use it to do those things because money's nothing more than a tool that allows us to accomplish our goals, not that allows us to accomplish other people's goals. Bedazzling your basic life. This isn't so much a bone to pick with you and Brian, cause you're right. Hot take disagreement. It's not actually that hot of a take. Maybe it is. I don't know. You're about to know.

45:46I think sometimes I like that you talked about outsourcing right there. Cause sometimes we talk about bedazzle your basic life and we automatically start to talk about travel and vacation and trips. And that's totally valid because that's something that a lot of people want to do and really value. I'm kind of like I love doing stuff here like that's how I bedazzle my basic life like things like it's about to be fall we love taking our kids to like the pumpkin patch love that and buying the stupid overpriced pumpkin letting them pick one out absolutely like stuff things like that that are truly bedazzling but are like way less expensive than a trip to Disney that are just as like memorable and wonderful and so like if there's little like traditions you can do like that.

46:27Or like you said, things that are going to lower friction in your household. I love that kind of bedazzling your basic life. So I just wanted to throw that out there.

46:34Brian Preston:You make such a great point. There are some people who they love travel and they love experiencing the world. And we do too. Don't mishear me there. But my wife and I talked a long time, like, man, we spend every single day in our home. Like we spend every single day. I want our home to be nice. Like I want us to have things and conveniences and doodads at the house that we love. And so rather than like going on nine trips a year and all that kind of, well, Hey, we're gonna do this thing to the house and we're going to have this improvement. We're going to do this again. It's knowing what matters to you and using your financial, using your financial success as a mechanism to move towards that thing, whatever it is.

47:12Brian Preston:If that's not your jam, by all means, don't do that. I may be a little biased just because of my own, you know, things that I like, or like my kids are really little. So traveling isn't as easy, right? No, it's parenting in a different location with different obstacles. Which can be fun. Like I'm not trying to knock it, but just, yeah. Like I like that you can buy the expensive pumpkin or like if my husband's out and says, you want a coffee? I can just go. Yes. You know, that's bedazzling my basic life to me in this season. So I just, I don't know. I thought about that last week. I was like, we always talk about travel.

47:44Brian Preston:I'm throwing that out there sometime. Yeah. That's a great, that is a great point. All right. With that, first of all, that was Jesse's question. Thank you for the question. If you would like a MoneyGuy Tumblr, just email winner at moneyguy.com to cash in on your Tumblr, Jesse. We appreciate you being here. And without further ado, we're going to dive into our rapid-fire segment. This is our It Does Not Depend rapid-fire segment where Bo has a luxurious 30 seconds, honestly. That's a long time. To answer your personal finance questions, but he cannot say the phrase, it depends. Now, since he has a little extra time since he's not sharing with Brian, I expect there to be very good answers here.

48:22Brian Preston:No, like, follow-ups afterwards? I usually leave room for follow-ups, and we still will because we need to get the people the information, but I challenge you not to have any follow-ups. All right, I'll do my best. All right, let's see what we can do. All right, we'll put 30 seconds on the clock. Are you ready? I'm ready. First question. Hey, Money Guy team, I recently got a new job, and my old 401k was converted to a traditional IRA. Only about 5K in there after the fees, but I have a Roth IRA with about 10K. Should I transfer to Roth? If you transfer to Roth, it'll be taxable. That$5 ,000 will count as ordinary income.

49:01So look at your tax rate and say,

49:04Brian Preston:hey, do I want to pay, even if I'm in a 12 % bracket, do I want to pay 12 % of that 5 ,000 to convert it to Roth? Or would I rather just leave it in the traditional, let it continue to grow tax deferred and build my Roth assets elsewhere. Maybe I'm doing Roth 401k contributions. Maybe I'm doing Roth IRA contributions. Just because you can convert doesn't mean that you should or have to convert. Ooh, okay. That was good. That took up the whole 30 seconds. A little more complex. Next question. I'm on step six, but really like the idea of paying off my mortgage early. How foolish, quote unquote, is it to put 10 % of my income into a 10-year horizontal portfolio which I will then use to pay off the house.

49:48Brian Preston:I love that idea. What you just said is rather than paying the house off directly, I recognize there's probably an arbitrage. What I can go out and make in the market is likely higher than what I'm going to save an interest on my mortgage, especially if I'm one of those people that has a sub 4 % mortgage. So rather than pay it off quickly, I'm going to invest those dollars. I'm going to dollar cost average what I would be prepaying. I'll let those dollars grow and grow and grow and grow. What's likely going to happen is that you will have more in that after-tax account than your mortgage balance sooner than if you were to pay the mortgage directly.

50:17Brian Preston:You know what's better than being debt-free? I'm asking you. We'll never know. I set that question up perfectly. It's the ability to be debt-free. Nailed it. I'll finish it. Nailed it. Next up, my managed Roth IRA has expense ratios of 0.55%. Should I go to a self-directed one? value is what you get price is what you pay if you're paying 0.55 i want to know why is that fund so expensive there are a lot of really low cost index funds that are 0.015 like the s &p 500 index fund which is fantastic so are you getting something for that 55 perhaps you're working with an advisor who's adding value through tax planning or through uh long-term financial planning or whatever.

51:06Brian Preston:Why does it cost 0.55? Is that cost justified? All right. I want to come back to that one because he's, no, no, no, no, no, no. I just, people, because I'm going to get hit in the, I'm going to get hit in the comments for this because this is what he said. He said the expense ratio specifically. So what that tells me is this is likely a fun decision. So it's like an actively managed fund that costs 0.55%. That's a real hard sell for me. Like actively managed 0.55%, depending on what it's doing. Now, we have some funds at Abound that are more expensive than that inside the alternative sleeve or inside the other, some of the fixed income funds that we use.

51:42Brian Preston:International aren't really so much anymore, but there are some funds that tend to be a little bit more expensive, but they serve a very specific and unique purpose inside the portfolio. If that 0.55 % fund inside your Roth is really just a closet index fund, it's just an S &P fund, it's just a total market fund, but they're jacking the cost up, yeah, that probably doesn't make a whole lot of sense. But if it's a managed Roth and you have an advisor on it and that advisor is adding some sort of value, it's unclear. You said managed and then you said expense ratio. So both of those could be going on.

52:14Brian Preston:If you've got that expense ratio and it's managed, I just want to make sure you're getting what you're paying for. Is the value you're receiving more than the cost that you're paying? If it's just index funds, likely not. But if there's some other reason, maybe so. We'd have to come back to that one. Stop it. Stop. Okay, it's a rapid fire. I get it, guys. I mean, that was some, I liked the answer, and I had to let it happen because we need to know that, but that was the most egregious break of the rules I've ever seen. All I did was instead of waiting until the end to come back, I just came back in the middle.

52:45Brian Preston:That's all that was. I still got it inside 30 seconds. Oh, I need Brian back so we can get this back on the rails. I never thought I'd say that. Okay, let's see.

52:58All right, let's go to the next question.

53:01Brian Preston:I won't do that again. If you could only put away a modest amount of money for a child, would you recommend Trump account or 529 or a combo of both? If so, what split would you consider? Trump account, I want to go get the free money. In the 529, if I'm saving for college, I want to use that one because Trump accounts are fine. They're great for free money, But we are of the opinion presently there are other accounts that are better for building assets for kids. For college, 529s are great. For other types of costs like first car, first home, first whatever, UTMUs are great. The Trump accounts, I think, free money makes all the sense.

53:39Brian Preston:I would go elsewhere for the other accounts. All right. Next, is it worth participating in a 401k if there's no employer match? There are tons of benefits to 401ks outside of just a free employer match. Number one of which being tax savings, either today through pre-tax deferrals or in the future through Roth deferrals. So even if you're not getting the employer match, we still love employer-sponsored retirement accounts. But what happens is, what happens is, it may not be inside of step two where you begin doing that. You may skip step two, go get Roth HSA, and when you get to step six, that's when you come back to the employer-sponsored plan.

54:17Brian Preston:So it may happen later in the FU. Go to moneyguy.com slash resources to download your copy of the Financial Order of Operations. Next question. 20K emergency fund down from 30K. Should I sell from 95K taxable brokerage or cash flow for over one year to refill? Okay. 20K down from 30K. So I think he needs 30K. It's going to take one year to get there. Should he sell brokerage? what I need to know is, is 20K, how many months of expenses is that for you? If it's only one or two months of expenses, then it probably is prudent to sell out of the taxable brokerage account, even though it's going to trigger capital gains.

55:00Brian Preston:If it's three, four, five months of expenses, then perhaps you can just build up slowly over time and not incur that additional tax. Well said. Next question. Open a custodial Roth IRA for my 17-year-old working son now, or wait five months when he turns 18 to open his own. Okay. I love getting that money involved. And if you open a custodial account now while he is 17, you can be part of the process. Hey, let's put money in here. Hey, I'm going to match it. Hey, let's do this. Hey, let's build. That way you kind of, it's like having, you know, when you get your learner's permit, you have someone in the passenger seat with you and you drive and they're in the passenger seat.

55:39Brian Preston:Not a horrible idea because then when he turns 18, you step out of the car and now he can drive by himself. just know you have to do some additional paperwork. You're going to have to open two different accounts. It's going to change, but I don't think it's crazy to go and do it now and get that money rolling. Interesting. Next question, where would you guys recommend a sinking fund? Taxable brokerage account, money market, or elsewhere? All great solutions. A high-yield savings account is a great option. Where I personally keep my cash right now, both my emergency fund as well as any additional cash that I hold, is in a money market mutual fund, because right now it's paying like 3.47%.

56:16Brian Preston:You just want to have that cash sitting somewhere that stays liquid, readily available, that you can get to quickly and is earning something. Some rate of interest right now, somewhere close to three and a half, 4%. Any of those are acceptable solutions. Wonderful. All right, coming toward the end, we've got another question that says, I love her show. Thanks. Oh, thanks. But I make less than 40K. Is there a point when your income is just too low for the 30, 40, 50, and 60 goals at the end, 10 times my income is only 400K. Is this enough to retire? Well, if you're super young and you make lower than 40, one of the questions I'm going to have is, are you going to make lower than 40 forever, right?

56:53Brian Preston:We know that wages likely increase through time. So don't be discouraged. That's why early on, it's more about your savings rates than the metrics because personal finance is personal. We're giving you these milestones that you ought to hit. And even at 40K, if you do that, if you save and invest and save and invest and you start young enough, you'll be surprised that by 30, you'll probably have 40 grand saved up. And then by the time you get to 40, that 40 will probably turn into 120 grand. By the time you get to 50, you'll might... Guess we'll be coming back to that one. I pretty much got it all out.

57:25Which it just happens to be the end of that segment. Oh, look at that. So we are going to go ahead and come back to that. You did well.

57:31Brian Preston:Yeah, so what I'm saying is your income's likely gonna increase. But even if it doesn't, the math works out if you start early enough. Trying to get to multiples of income, even at lower incomes, if you can get your savings there, we'll be fine. But let's say that you don't. Let's say that you can't get there. Personal finance is personal. I don't know what your living expenses are, but I know if you have$40 ,000 and you're saving and you're building and you're getting that consistently, by the time you get to retirement, you'll have a pot of money that's been built up. You factor that in plus, you know, social security, plus maybe your spouse's social security.

58:04Brian Preston:we have clients and I really mean this. We have clients here to bound wealth, school teachers, administrators, whatever, never made over a hundred thousand dollars of household income, never crossed over. And yet they still were able to build seven figure portfolios. And because they have a seven figure portfolio and because they have a pension and because they have social security, they live fantastic financial lives. Not because they figured anything out, not because they had some magic thing that took place because they just started super early. They were educators and they were just very consistent.

58:38Brian Preston:Save and build, save and build, save and build, save and build, save and build. You can do it on low incomes. We actually have a show titled, I think it's titled, How to Build Wealth at Lower Incomes. And we actually walk through how should you think about that? What strategy should you have? And then, but I also don't want to like, um, minimize the fact if there, if there's a way means and mechanism for you to increase your income, having a bigger shovel does make building wealth a little bit easier because it allows you to save more. Notice I said, have it, having more income doesn't make you happier.

59:14Brian Preston:It doesn't make your life better. It just makes building wealth a little bit easier because you have a little bit more margin, three ingredients to wealth creation. Even at$40 ,000, you have discipline and you can create margin and you can apply that over time, you can build wealth. So if you can increase your income to where you have more margin and you can increase it at the same amount of time, you can build more wealth. It's totally possible. But don't let the milestones be discouragers. Let them be motivators and encouragers for you along your path. Personal finance is personal. And we do have some shows like that.

59:51We just released one where we do how to win financially based on your income. And so we go through different incomes. The very first one is 50 K. So it's a little different, but that gives you a good ballpark on some thoughts. If you're at that income and if you go to money guy.com and search how to build wealth at a low income, there's going to be some stuff that pops up some articles, some other videos we've done in the past that could help you continue this conversation as well. So thank you for the questions, but rapid fire, you did well overall. We only had one failure and one egregious break of the rule.

1:00:20So I'll take it.

1:00:21Brian Preston:Okay. All right. But a lot of good financial ideas and conversation was shared. And that is the main goal. So I can't be mad. I think we got through more rapid fire questions than we ever get through. So I'm going to take that as a record. I think I just broke a record. That's not true, but I'll just let you think that. Let you think that. I have the data. I know how many questions we do each week. Such a sick bird. I know. With that said, we are very excited to have Brian back, but it has been an honor to be here at the big desk with you today sharing financial information. And if you still want to talk about this after the camera shut off today, make sure you go to moneyguy.com slash resources to take advantage of all of our free calculators, tools, downloads that just continue these conversations on things like home buying, the financial order of operations, how to buy a car, how to educate your kids and parent around on wealth.

1:01:14Honestly, that's just scratching the surface. So go look at that. I would love for you to check that out because we made it for you.

1:01:21Brian Preston:Ruby, I think you've done awesome. I do miss Brian. I'm referring to back. Big guy, if you're out there watching, we are so excited for back here. Guys, we could not do this without you. We could not, if you didn't show up to listen, if you didn't go out to moneyguy.com and check out all the free tools and resources, we wouldn't be able to do this. We believe that there's a better way to do money. We're so thankful we get to be part of your journey in doing money better. As always, we're listening. We're in the subreddits. We're in the moneyverse. We are, check all the emails, read all the YouTube comments because we want to make this as valuable for you guys as possible.

1:02:01Brian Preston:Thank you. Thank you. Thank you for showing up. If you keep listening, we'll keep putting it out there. For Revy, for Brian, for the rest of the Money Guy team, I'm your host today, Bo Hansen, Money Guy team, out. The Money Guy Show is hosted by Brian Preston and Bo Hansen. 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 The Money Guy Show.

1:02:37The 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. You want to impress them on a first date, but also play it cool. So what do you do? I'm Rufy Thorpe, and I wrote and read a real love story about a hinged couple that navigated exactly that. Listen to the free audiobook now.