The Uncomfortable Truth About the SpaceX IPO

22:11Elon is a unique personality is because a lot of people, why do people not become billionaires? Go with me on this. A lot of times when people get a, build a company and it turns into a hundred million dollars, they go, Hey, I've won the dream. I've done it. And they go, you know, lived their best life or whatever, but there's a unique breed of people that the money just doesn't matter. It's more about what the, there's something else that's going on that's driving. And obviously Elon is this person. He sleeps in these factories. He's not buying the yachts. He's not doing the other stuff. He's got a history of creating, doing incredible things for capital.

22:50I think he's playing only for the scoreboard and the changes that he's creating in the world. And I think that that's a unique personality that is pretty exciting. But you can be excited about SpaceX and still say, I'm going to wait to see what happens with this price. And that's where I was going with my transparency. I'm probably going to own some SpaceX, but it won't be at the IPO.

23:14Brian Preston:That's right. Because I'm going to, this is not, and I think that's a good point to make, is this is not your only chance to buy it. This is just the first public offering of these shares. And what's going to be crazy, this all happens, what, Friday, right? Yep. Guess what's going to happen next week? Every day, SpaceX is going to trade. Now, look, I think a lot of people, and I think this is important for us to share with people, you're probably going to feel really good about yourself initially because of the scarcity, the oversubscription. This thing could pop. I mean, you could see it go from 1.75.

23:49We could get as crazy as$3 trillion of valuation. Does that mean it's really worth$3 trillion to you? Probably not. Because remember also, whoever's offering you this IPO, they don't want you to sell. There's even penalties to you that you won't be able to invest in other IPOs in the future if you flip this thing. They don't want you to flip it. They want you to buy and hold this for a period of time. And then that's the other thing is you have to know there's also distortions with IPOs is that once the insiders can sell their shares, they've been waiting for 10 years to get out of this stuff.

24:21So they're going to go sell their shares and that's going to create crazy price distortions as well. So this will not be an easy ride. Even if you feel like a million bucks after day one or day two, more than likely there's going to be a lot of price volatility in the coming weeks.

24:37Brian Preston:Yeah. You need to recognize that as exciting as this is, as much hype as this is, as many zeros are behind the dollars, there are a lot of risks involved that revolve around an initial public offering in the early trading of a stock and what that means. Because maybe you're someone who says, hey, I didn't reach out to my broker. I don't know that I'm going to get allocated shares, or maybe my accounts aren't at a broker that's allocating IPO shares. But as soon as trading opens, on day one, I'm going to go buy those shares, I would think long and hurt about, okay, how does this fit into my overall investment strategy?

25:15Brian Preston:And how aggressive am I being with my allocation? Is this a small speculative thing that represents less than 5 % of my total holdings? Or am I just going out there and gambling on the hype? And you need to understand that just because a lot of people can be excited about it, a lot of people can be very, very excited about very, very poor investments. And really, really great companies can trade at really, really poor prices. So you have to make the assessment, when does it make sense for me to participate in this if I'm going to? and does it make sense in my overall financial situation? You heard me earlier say that Fidelity dropped their$500 ,000 down to$2 ,000.

25:56Close to 30 % of this offering is going out to retail investors. That's going to create some crazy distortions in and of itself. It's probably going to get a lot of people to jump in early, but then they also, they're going to be like that flip rule. They're going to be like, I don't care. I want my money. So you're going to see some crazy distortions because you've got people in the marketplace. And the other thing is we often say on individual stocks in general, you don't want it to be more than 5 % of your total net worth. It's just too much risk to tie so much into one company. And that's what – so Bo and I were talking about this.

26:30If somebody is – if your total investable assets are less than$100 ,000, if you even took me at my rule all the way up, you're going to buy$5 ,000 of this? Is that – I don't know. It starts getting to what are we doing? And it leads to my final point on what I want to think about this. This should be vacation money, not eating money.

26:54Brian Preston:That's right. And I think a lot of people are getting so caught up in just the momentum of the discussion that they're losing the touch or the reality of it. When it comes to your personal finance, when it comes to building wealth, if you can, or to the largest extent that you can, don't make emotional decisions. Don't let yourself fall into the emotion. You know, Warren Buffett has made it so popular that fear and greed exist when it comes to investing, but we always want to be so careful that we are never too fearful nor too greedy when it comes to what we do. So how do we approach it? How do we think through it?

27:29Brian Preston:Well, one of the best ways that we think you can remove emotions from your financial decision-making is to follow the financial order of operation. Brian, can you know the thing up for me? We have a nine-step process to help you figure out what you should do with your next dollar. And I would argue that if you're not well into the FU, if you're way past step five, into step six, into step seven, maybe initial public offering, shares, and participating in speculative stocks, that may not be where you should be in your financial journey. So if you want to go check out your free copy, go to moneyguy.com slash resources.

28:05Brian Preston:You can download your free copy of the Financial Order of Operations today. 27 minutes. I was hoping we did this in less than 20. Oh, he said, oh, 10 minutes. We're going to do 10 minutes. Goodness gracious. I am so, all of our Q &A fans, I mean, we'll get to some questions, but man, oh, man, did this, it just, it's all over the place, and we've had so many people. I mean, I haven't talked to a single person in the last week that didn't usually ask me about SpaceX. I felt like we should cover this. And I love that we get to sit in this spot and do it. I love that we can speak to things that are culturally significant, significant, that are economically significant, and really that are significant in your financial life.

28:42Brian Preston:That's why every single Tuesday at 10 a.m., we sit in these chairs to answer your questions because we believe that there's a better way to do money and we want to load you up. So if you have a question, you want to get our take, you want us to weigh in on something in your life, we have the team out in the wings right now collecting your questions. Make sure you get them in there. So with that, Creative Director Reby, I'm finally going to throw it over to you. Wonderful. Yeah, we've got some questions queued up. Keep them coming. Feel free to drop them in the chat. But first, I do have an announcement or really an invitation for you if you would like.

29:16Have you ever wondered what actually goes on behind the scenes of Making the Money Guy show? Be careful what you ask.

29:23Brian Preston:Imagine if they could have seen behind the scenes this morning. Imagine what that would have been like. I mean, I'm assuming you can tell because you just watched the first half of the show or listened. but the energy was good and exciting and spicy today, and I like it. I like it. But, yeah, if you want to know all about those details, if you have questions, if you've wondered things about the team, about what Brian and Bo are really like, then I want to invite you to join us in the Moneyverse tomorrow at 3 p.m. Central because I will be hosting an Ask Me Anything, and I will be hanging out here in the studio with the team, and I just wanted to invite you.

29:59The Moneyverse is our Discord server. Just go to moneyguy.com slash moneyverse to join for free. And we'd love to see you there. It'll just be fun. We're going to have a channel set up to chat about questions, about the content of the show, about behind the scenes, and just, I don't know, get to know you in the moneyverse.

30:16Brian Preston:So you're going to allow them to ask you anything about the show, about the behind the scenes, about us, about... She knows too much. All right, I was about to say, you know way too much. Way too much. It'll be fun, though. That's tomorrow at 3 p.m. Central Time. So check it out. All right. With that, let's dive into some questions. The first one is from Jakester2003. Hey, Jake. It says, how should you evaluate salary versus equity with private company job offers? I have a job offer, and you get to pick how much of the total comp you want in cash versus equity. What do you think? Now, this is a really hard one.

30:56Brian Preston:Yeah. It's actually a little bit easier. or maybe it's a lot bit easier. If you are someone who is compensated, where a big chunk of your income comes in terms of salary and wages that you receive, but you work for a publicly traded company, it's really easy to understand, okay, well, if I'm going to get awarded this many RSUs or this many options or this many performance units, you can put a market value in that because they're publicly traded. Every single day, you know what they're worth. With private companies, it's a little bit different. How do I really know the valuation of a private company and how do I assess that?

31:30Brian Preston:And it's a hard thing. We have a lot of clients who bump up into that. I think, Jake, the first thing that I would encourage you to do is ask for the most recent valuations of the company stock over the past couple of years. Some private stocks are valued quarterly. Some are valued twice a year. Some are only valued annually. What I would want to know is, historically, how has this private stock performed? Is this a stock where every year it's got a 5%, 7%, 10%, 12 % increase in value? Or is this something that's kind of flatlined or has it gone down in value? So that way you can understand, at least with some sort of like reasonable idea, what do I really believe that the trajectory of this company is going to be?

32:11Brian Preston:That's the first question I would ask. Second question I would ask is what does liquidity look like? If I decide to take this job and I leave or I want to cash out shares or I want to redeem shares or whatever that may be, what's the actual process for doing that? Meaning, are these actual shares that have real economic value to me, either today or sometime in the next few years, or are these shares that just show up as like phantom equity in the event that there is some liquidity in the future and I'll have a piece of that? There's not a right or wrong answer to either one of those, but you really want to understand and know what it is you're getting into.

32:47I wrote some questions.

32:49Brian Preston:No, we're here for the answers. They ask the questions. No, this will give context because we would do people wrong if we didn't share what we're on the front row of of seeing people create from these type of opportunities. Yep. So the first question I'm going to ask you is, do you truly believe in this company? Do you think this company is really creating something that's going to be very profitable, changing the world and creating opportunity for years to come? Now, look, you should know, just because you believe doesn't mean it's true. I don't know, my voice just cracked. You get real emotional about it.

33:27Doesn't mean it's true, because I've dealt with a lot of executives in Atlanta back with Lucent Technologies. You don't even know who that is anymore, but that's how old I am, is that these things were trading, changing the world, and the company still can go to zero. So even though you believe you might go to zero, and that leads to my second question is, where are you in your journey? We actually have some clients that, Beau, you know who I'm thinking about is one of them. When he was in his, I think he was in his 20s. So this is why this will be, the context will make sense. He got to make this exact decision with a very well-known public company that we all are very aware for our entertainment now, where he pretty much loaded it up.

34:05He said, look, I'm young. I don't require much to live. I'm going to throw as much as I can into the equity side of this and buy these shares at these discounts that my employer is offering me, and it created multiple seven-figure opportunity for this individual in the long term. But did you hear the context? They were in their 20s. If this all went to crud, they could start over, and yes, it would hurt, and they would lose some of their multiplier opportunity. The opportunity cost would be there, but it wasn't catastrophic because they still had their big shovel, their knowledge source. They could go get another job.

34:43That's different than somebody who gets this opportunity when you've got a spouse, you've got children, you've got a big mortgage. I think you just have to look at what your risk, you have to understand the risk versus reward, and you have to act accordingly. So if you're at the beginning of your journey and you can throw it against the wall, you can probably break some of our rules and see if this sticks if you truly believe. But if you've got the whole family, this is the whole risk that goes on with entrepreneurship as well. and you have to just kind of really hone in on where you at in the situation.

35:16And I'd also, look, there's nothing wrong with doing the 3D glasses even to this type of scenario. And if you don't know what the 3D glasses are, is run the scenarios, your dream plan of, holy cow, we're going to be rich. This company really is going to change the world. I'm going to make a lot of money off of this. Or you can do the down to earth is maybe it doesn't go as well as you think. So you need to act accordingly and balance out what that looks like over the next five to 10 years. And then don't skip the doo-doo plan. which is, holy cow, this company I work for goes to crap. Not only did I lose my job, but I also lost all the money I invested in it.

35:48How is that going to play out?

35:50Brian Preston:And I'll give a little bit more context just because we happen to know Jake, right? So Jake is, you know, family. I'm not going to say middle-aged, but, yeah, you know, it's around that. And he said, hey, this is a four-year-old company. It's Series A, which means it's early on in its funding cycle. And these are stock options. That's what is being awarded. So what's great about that is that there is an option for you to participate in the upside, but it's not like there's a big capital outflow. So I would imagine that what's probably going to happen is if you were to sign on with this company, they're going to give you some sort of bonus today based in options that you're going to have the option at some point in the future to be able to buy and participate.

36:29Brian Preston:It is a little bit, I'm going to say lower risk in terms of, well, it depends on how much they're trading off the salary you're going to make for the options, but you really want to measure what do I think this company is going to do? It's a four-year-old company. What do I think the prospects for this company are? And based on the valuation it's at right now, am I in a place where if I wanted to exercise these options and I wanted to turn them into actual stock at some point in the future, whether I did that cashless or whether I actually held the stock and exercised it, do I have the financial means to do that?

37:02Brian Preston:Is that something meaningful that I could do and I'm in the right place in the financial order of operations? that it makes sense for me and my family presently. Anything you add to that? No, I think we're good. Thanks for the question, Jakester. Look, 45 is not really middle-aged. I feel like that's really in the young age. He did say, oh, well, that's fair, Bo. That's not, it's not middle-aged. Do with that what you will. I think everybody's young. The older I get, the younger everybody else is. Young at heart. All right. We've got another question queued up from Leah. It says, what are the guidelines for buying a vacation home?

37:41I'm on step eight, 32 years old with a 220K income and 450K retirement savings. We have two young kids. A lake home is a dream of ours, but it feels like we'll never be able to justify the splurge. So what do you think? When is it okay? It's okay if it's not now, but when would it be okay?

38:02Brian Preston:Well, can I lament for a second? You can. Because I kind of get this. I just want to, like, here's what Leah's thinking. I'm 32. We have two young kids. If we're going to buy the lake house, man, we should have the lake house while the kids are young and they can enjoy it. And we can go do the boat and we can pull them on the tubes and we can do, and I get that. And I think a lot of people in the messy middle fall in that category. I don't want to wait to be able to do the things. I want to be able to do the things now so I can create memories for my kids and allow them to do that. And I love hearing that you're 32 years old.

38:35you have a great income, you have a great amount of savings built up.

38:39Brian Preston:The question I would ask is, okay, why the vacation home? A few different metrics. Is the vacation home you're going to buy something that's like a drive away? Is it like this lake house is like an hour away? Or are you buying a lake house that's going to be like two states away? How often will you be able to use it? Are you in the place? Do you have the cash flow in your budget to be able to pay for the carry cost of having that? Or if lake house or lake living is something you really want to do, have you priced out? What would it be like if we just spent a lot of time at the lake during the summers or during the, you know, whatever the time you want to go is?

39:13Brian Preston:I would really want to investigate what's the thing or what's the reason that I'm thinking about trying to own this second property. I'm a huge proponent. I know we have a little bit of a disagreement on this. I don't love second properties. I'm just, I think there's a lot of times if you actually measure the math, measure the math. That doesn't make any sense. If you actually do the math, you can enjoy and experience the thing that a second property can offer without having to do ownership and you just factor it as an expense and cost. Do you agree with that? You disagree with that? You want to fight about that?

39:46No, I mean, look, I'm going to give really clear context on this because I think that you're not wrong in the fact that even Dr. Stanley in his book, Stop Acting Rich, it's the book that came out after Millionaire Next Door. I love it because it really dispels a lot of the things that you think rich people do, and they don't really do it. And the reality is, from a context standpoint, most rich people don't have second homes, despite what Robin Leach told me as a child. So it is one of those things. But I'm also, no hypocrisy policy, I own a vacation home. And so I want to tell you the context that led me to, and will hopefully give you some clarity on this too.

40:26Vacation property is kind of a disaster in a lot of ways is because stuff can go wrong pretty remotely. And what saves me is I actually have a great person that goes and visits my property weekly to make sure that things aren't falling because I don't rent it out. I mean, it's just for our personal use.

40:46Brian Preston:Just a second home. And here's the reality of the situation. you're 32 years old. I would count on it. Hopefully your savings rate is beyond 25%. You said you're in step eight, so I'm assuming. But I want you, if you do the vacation home, your savings rate still has to be well beyond 25%. You need to be in the frothy phase of life to where you just have so much income and you have so much assets built up that you look at yourself and you look at the memory-making opportunity and you go, well, I can't take it with me. I mean, and I don't think most 32 year olds are there. It took me being in my fifties before I was like, okay, I'll give this to the family because this is just not going to move the needle whatsoever in the long-term success because I knew it was a horrible decision.

41:34And I met that, look, I leased a car for my wife. I'm in the horrible decision phase of my life because it just doesn't move the needle anymore.

41:43Brian Preston:What step of the foo are you in? Oh, the horrible decision. No, you get to the point that it's not about the math anymore. It's about, hey, what creates the happiness and all the other stuff that's beyond the mathematical parts of it. For a 32-year-old, that's going to be a pretty high bar to be beyond the math of the situation. So I'm not saying you can't do it. I'm just saying you have to be so frothy in your savings rate and the success and opportunity you have in your life that you can't take it with you. And that's a pretty hard thing for somebody at that age. I think it gets easier as you get in your 40s and even 50s.

42:17But I'm not going to tell you no, but it's just you need to measure twice, cut once on such a big life decision because it's not in the normal context of what people who are good with money do.

42:28Brian Preston:And it's so specialized because I'm thinking, Brown, we have a buddy of ours bought a lake house a couple of years ago, and he loves it, and it makes tons of sense for his family, and they go down there all the time, and it's only a few hours away. And then we have other folks who have asked us about buying lake house. They're like, hey, don't do it. It doesn't make sense. It's not where you are. I've got two or three friends that have bought lake houses. They were all hot and heavy on it for two years, and then something happens, and they haven't been to the lake house, and now they just go to do maintenance on it.

42:57That's right. And they end up trying to sell it, and it can be good for maybe an investment. But I don't even know if that's the case with how much of real estate run-up we've had in the last five years. You have to be careful. Are you the one that's going to buy this thing? and if you decide it doesn't work in five to seven years, if all the frothy gains were in the last five years, you might put a lot of money into this thing and not make a ton of money. It's back to if you're in the phase of life where you can't take it with you, it's okay that you lost a little money on this life adventure.

43:26But if you needed this money to be successful, then you probably shouldn't have bought it.

43:31Brian Preston:My family and I, I've got three young kids. We've kind of turned into like a lake family. We love going to the lake. We love it. Here's what we do. We get an Airbnb, a really nice lake house. And then we travel with friends who have a boat. You do those two things. It's the most cost-effective way to get to live the lake life. Step one, find a friend with a boat. Right? No, there's a lot of mistakes you hope your friends make. Well, Leah, thank you for the question. I hope that helps you think through the decision and everything that would go into it. Next question is from ReallyBoredMan. I hope he's not bored watching the show.

44:04I hope we've changed this for him. That IPO show really got him. the question says hey brian and bo finally catching this live so he must not be that i know that you guys are big fans of term life insurance when do you know that you no longer need it is it when you hit coast fire and are still working or another time what do you think

44:26Brian Preston:um is it so okay let's think through this when you hit coast fire you have built your assets to a level that they will grow to be able to provide for you later in life when you decide to fully retire. It's the definition of co-safety. That's the way it works. The problem is what life insurance really protects you against is not the expenses that you will have in the future in retirement. It's the expenses that you incur today while you're living. When you have other people depending on you to go out and generate an income and provide for housing and shelter and food, that's when there's an insurable need on your life.

45:03Brian Preston:So even if you've attained Coast Fire and you've covered years 60 through 90 based on the assets you saved, you likely still need to have term life insurance in place to cover years, if you're 40 years old, 40 to 60 because those are the expenses you're incurring today that you need your current present day income to pay for. So it's not so much about net, it is about net worth, but it's more about if someone, if your income went away today, are there folks that would be put out or in a bad situation because that income is gone? And if that's true, spouse, kids, whatever it may be, then we would argue you have an insurable need on your life.

45:43Brian Preston:if you pass away and there's enough assets to provide for the well-being of those people that depend on you, then we would argue that you're self-insured. Most folks don't reach that level until significantly later in life. You said all the things. Have you reached the age of self-insurance, meaning that you have enough in assets today, not 10 years from now, not 20 years from now, but today, that if you left the earth prematurely, that you could cover all the debts, your heirs wouldn't need the money, they'd have all the income covered and all their expenses covered, then that's where we are.

46:18Now, here's a weird dynamic with that, though. I am on paper at that level, but I still am paying some of my annual fees on my term insurance because it's so daggum cheap. It's so cheap. I bought a 30-year policy when I was in my mid-30s, and so the premium for millions of dollars of coverage is just not that much money, that there's a kind of an arbitrage situation that I don't need the money to insure my family, but I kind of am now in the stage where the cost of the actual insurance, if you had to go get underwritten again, would be substantially higher than the premium that I'm actually paying for this term insurance.

46:58So there's a little bit of an arbitrage. Look, I don't want anybody to get excited if I pass away. No. But it is a financial decision that, okay, I can pay this thousand dollars here, but if I died prematurely, my family gets this three or four million dollars, then yeah, I probably from, it's not an investment, but just from the arbitrage opportunity, I should wait until that term resets before I actually do away with the policy.

47:23Brian Preston:Love that. Does that make sense? Makes perfect sense. Even though you might not need it, it's so cost effective. It's kind of crazy not to keep paying for it. Yeah, makes sense. Good thoughts. Good thoughts. Thank you for the question. Really bored man. Hopefully you're no longer bored. Alright, next question is from Kyle. She just said that so kindly. Well, do you want me to say it meanly? No, no, you're just so nice to everyone else. Thank you. Keep going. Shots fired. Are you buying the SpaceX IPO, Ruby? Um, no. Did you consider it? Is that wrong to say? I don't know if you know this, but I'm not much of a stock picker because I follow the Foo and the Money Guy show.

48:01Look at that, solid answer.

48:03Brian Preston:Brian, are you participating in the SpaceX IPO? Now, I will own some SpaceX, but it will not be at the IPO. Love that. Fair. But look, I'm also willing to say, because we're humans as well, because I still have a client that asked me to get them in on the Google IPO in 2004. Now, there's still clients, by the way. They like to remind you of that. They remind me. I will say I put a survey in the Moneyverse. Are you planning to buy SpaceX? And 70 % have said, no, I'm on the ABB train. look at that so they're with me love that just saying love that and we did have a few say no not yet or no i'm too early well and also there was some other no options this thing is going to be fun to watch but i can imagine if you actually put some shares into it and put some money in it's going to be an emotional roller coaster it's going to be wild you're going to feel you know euphoria on some days and then other days you're like oh my gosh i can't believe what's going on here it's a reminder i hang out with you too much i'm like why would i want to ride that emotional roller coaster when I don't have to.

49:07That's just me, though.

49:08Brian Preston:I didn't mention this, but there's also another behavioral thing that takes place. I didn't mention this in the show, but if you would have participated in NVIDIA's IPO and you would have still held on to those shares today, I think the return was like 593 ,000 % or something like that. You know what you're probably not going to do? You're probably not going to hold it all the way to 593 ,000%. Sometimes, write this in pencil because it's dumb, but I'm going to say it. Sometimes making a lot of money on a stock is a bad thing because you don't know when to exit. You don't know when to get out.

49:42Brian Preston:You don't know what's, or if you do exit and you do sell and you do get out, then you have all this remorse. Oh man, I can't believe I sold my NVIDIA when I was up a thousand percent. I could have been up 593 ,000%. If you are someone who's ABB and you're buying the index and you're rebalancing, you don't have to like concern yourself with that as much. You just focus on building your net worth, building your portfolio and removing a lot of that emotion from the equation. That's my two cents. Yeah, good two cents, good two cents. Let's go to Kyle's question next. It says, hey, Money Guy Show. My wife and I just had our first child.

50:14We want to get ahead of the curve for college. In Wisconsin, the max tax deduction is$440 per month for a 529. Should I max this out? We are 30 and 28. We have 260K income and 180K saved. Well, look at that. They just answered because the income is incredible, by the way. Wow. That's pretty awesome. But I am surprised that the amount saved doesn't equal the income. So that means that we probably had a huge pay bump in the last year or two because it hasn't equalized yet to where your savings and investments are reaching. So I would put it back on you, Kyle. Are you saving and investing 25 % of your gross income?

51:01If you are, then above and beyond that, yes, you can get into step eight and you can start funding the 529. And it depends on how frothy your excess cash flow is from that 25 % savings to see if you get to max out. But I'm not going to prioritize the 529 over your own retirement savings for the future just because of a tax deduction, just because it's back to our saying, you got to put your oxygen mask on before you take care of the children.

51:29Brian Preston:Yeah. I'm going to echo what he said. You got to make sure you're at the right place, the financial order of operations. I want you to be saving 25 % for yourself, for your future before you save for the kids. But let's assume that you're there. You ask another question. A lot of people run in this. Hey, should I do the maximum that the state allows for me to get a tax deduction? Well,$440 a month, I'm going to round it down to$400 because I can do the math in my head. If you do$400 a month for 12 months out of the year, it's$4 ,800, right? That's good math. Yeah, it goes to$5 ,000. $5 ,000 a year.

52:03Brian Preston:If you start doing that when your child is brand new, like at a zero age baby,$5 ,000 a year growing for college is going to grow to a ton of money over the next 18 years. So I would even do the exercise of projecting out, okay, well, do we really need to save$440 a month? Or if we live in this state and it's likely our kid's gonna go to a state public school and whatever your thoughts on education are, for funding, 440 may be overly aggressive to save in that 529. You may arrive at the conclusion, hey, if we just saved 100 bucks a month or 200 bucks a month, that would fit the bill. I never want to let the tax tail wag the investment dog.

52:47Brian Preston:If it doesn't make sense to save that much in the 529, don't save that much in the 529. Figure out what you should be saving. Five grand for a brand new baby a year, that's going to add up to a lot. Yeah. And look, it's back to the equation of education is a lot of people are putting a question mark on it because of some of the student loan issues and all the other things that are going, like, what is the value disconnected from the return on investment that you're getting? I think a lot remains to be seen. I still think it's a good thing. I just had my oldest daughter graduate college, and the 529 was a blessing to us because the compounding growth worked out and built up a nice egg that covered three years of her college.

53:27Brian Preston:But you didn't save five grand a year starting from birth. No, I was doing$2 ,000 because that's what Georgia's benefit was back then. I was doing$2 ,000 a year. That's great. Good stuff. Thank you for the question, Kyle. We are going to go to Jack's question. This is a good one. It says, hey, Money Guy team, how do you enjoy the benefits of financial success without unintentionally raising entitled kids? Best question in the world, Jackman. Yes. What's your approach to instilling work ethic and gratitude while also enjoying your money? Let's discuss because I know you guys have thoughts on this one.

54:05Brian Preston:This is the number one conversation. This is the number one conversation my wife and I have around money and around finances. Our children are growing up in an environment that is very different than the environment that either one of us grew up in. Me specifically, I grew up in an environment where there was no excess. There was no frothiness. There was none of that kind of stuff. There wasn't like sound financial decision making. And so a lot of the reasons why I turned out the way that I did, I'd attribute to kind of seeing the other side of it, being on the wrong end of that equation. Well, those are a lot of the things that kind of made me want to work hard and do good in school and be successful and all these things.

54:50Brian Preston:Well, if my kids aren't going to face that same level of adversity that I faced, how do we make sure they still get those same skills and that same stuff? And it's a really, really hard thing. And so what we've tried to do with our kids is be very, very open with them about what we expect of them. My oldest, she's 11 now, she has a job. I say a job. She has a job in the neighborhood, which is awesome, but she's responsible for it. Every Thursday, she's got to go pull the trash cans out. Every Friday, she's got to go to all of her customers and pull them back in. And she gets the money, and we deposit in her bank account.

55:24Brian Preston:And last night, her bank statement came in. She made$5.52 in interest this year so far. Do you know how awesome it is to show an 11-year-old free money showing up in an interest-bearing account? I want them to understand, hey, we save, and we have a goal and we're moving towards this. But it's hard. And so I think what we have to, I'm sorry, I'm going long on this. One of the things that me and my wife have to do is we have to be careful not defaulting to convenience. For us right now, a toy break, something goes wrong, whatever, I can literally pull up my phone, I can order on Amazon, I can have it there between 4 a.m.

56:00Brian Preston:and 8 a.m. tomorrow morning and not have to think about it. Crazy. With my kids, I don't know that's the right response, even though it's what's easy for us. I'll be like, hey, you broke that thing. You ran out of that thing. You ate all those snacks too fast. Whatever the thing may be, hey, we're not just going to buy more. We're not just going to replace that. We're going to wait or whatever. We have to be very intentional around how we don't operate at our convenience level, recognizing that our kids need to experience a little bit of the inconvenience. Let me give you some context. I think every parent who has money should be scared to death because the stat that consistently exists, both sides of it is that most millionaires are first generation, 80 % of them.

56:43Even our own research is around 75 % of our clients are first generation. We're both first generation millionaires. That means for that stat to be true, the stat that gets me is 70 % is gone by the kids of that first generation millionaire. 90 % is gone by the grandchildren. children, anybody who has resources or you're growing up with resources, you should be like, holy cow, maybe growing up with money can be just as scary as somebody who grows up in scarcity because they lose some of the mindset issues. So I'll give you the cliff notes. Experiences over stuff. I think it's don't give your kids everything.

57:25We can all think about, I know in my childhood, I can think of my friends that seemed like they had the latest GI Joes. They had every transformer. They even had the aircraft carrier for GI Joe, which, you know, no kid's supposed to have, you know, it's, it's all this stuff, you know, or, or, you know, even think back to when you get into high school and your, your friends that got the brand new Jeep or the fancy cars and everything, you know, like did the, did the parents do that for the kid or they do that for themselves? And, and by the way, I, I live in a very, We live in a very wealthy community.

57:58And I tell people ask me these questions and I tell them and they do the exact opposite. So I'm just like, whatever, you know, do what you want.

58:05Brian Preston:Do what you do. I'm just, this knowledge is just here to be shared. But it's, so I always say what I've done for my daughter, and I'm pretty pleased so far. Like I said, she just graduated college and I can already tell she's a hard worker. She values money. She's not a materialistic person. She's a good saver. She's a great saver. And here's what I did to kind of make that. We've had discussions probably from whenever I started noticing an aptitude or a curiosity. That's probably started when she was 13, 14 years old. I started talking to her very clearly about how money works to try to instill the skill set that I knew I didn't have.

58:40And I was like, man, if you can start creating mastery or building that$10 ,000 of knowledge and experience at a young age, this actually could turn into a benefit instead of a weight around their body that's going to weigh them down in the future. Also, I started, as soon as she started working, babysitting in the neighborhood and then eventually working in fast food because she worked at Chick-fil-A all through high school, I primed the pump. I said, hey, look, I'll open up a custodial Roth IRA and I'll do a dollar-for-dollar match into your custodial Roth IRA. I mean, her eyes lit up, and that account is big now.

59:14I think about that, and I'm so proud of her for doing that. And then it went on even to the first car, and this one was so tough, having money and my daughter getting close to 16. is because I knew, you know, I heard Dave Ramsey say it for years. I was like, you know what, I'm going to do this. I'm going to make my daughter pay for half of her first car. And that is so hard when you have money because in your brain you're like, well, if I buy her a new car, it'll have the latest and greatest, you know, the technology, all the safety. And that is a true thing because I wrecked my car when I was 16.

59:45Did you wrecking your first year of driving?

59:47Brian Preston:Yeah, I didn't wreck it, but, you know, the gas station I ran into a thing. So most 16-year-olds, when you're learning how to drive a car, you're worried they're going to run it into something. And so as a parent with resources, you're like, I'll go buy them the nicest car to make sure they're safe. But you have to be careful. There's a balance there on making sure that they have ownership. Because you also, let me tell you, we talk about hedonic treadmill. I don't want my child's best experiences in life to be while they were only in my household. And if you give your child, you pass them down their 5 Series BMW, what are they going to do when they graduate from college?

1:00:29What in the world does life look like on getting a little bit nicer and nicer? Are you just going to send them out into the world as the bougiest version of themselves right from Jump Street? These are the things that I would carry a lot of weight with coming from resources and trying to make sure you're creating good humans that want to work hard, who understand the value of a dollar and actually will put that to work so that they can hopefully turn into something bigger and better than what you started with versus that horrible stat of they blow it up either as your children 70 % or their grandchildren or your grandchildren 90 % likelihood.

1:01:10You've got to work against the grain.

1:01:12Brian Preston:Can I throw one thing out there? you so often tell that story about doing the dad match and the custodial Roth. And I love that. And I get asked this question all the time. And people are talking in the comments, you don't have to wait until they do a Roth IRA to do that. You can do a dad match inside or a mom or a parent match inside of like an up month, inside of a custodial account without having to like do the tax return filing and that sort of thing. So don't think you have to like do all the things at once. A lot of people ask me, oh, Bo, you know, your kids, my kids don't have custodial Roth IRAs.

1:01:47Brian Preston:We're going to get there one day when they get like real jobs that I'm not paying them or neighbors aren't paying them for. We'll do that. But I have told her once her savings account hits this dollar amount, we're going to start investing after that. And I'm going to match everything that she wants to invest. I'm going to match with her. Interrupt me to get her used to that. And I think you can do that. It doesn't have to be all the steps at once. You can ease into it with your kids. so that way it's a gradual learning experience over time. One thing I didn't put in, I gave the experience here, but I didn't say I kind of forced this.

1:02:18I think your kids should go work a cruddy job in high school. Go work fast food. Go do something that puts you out with the general public because you're going to realize how crazy the general public is. You're also going to realize, hey, maybe working with my brain is better than working with my back. And then it also creates some skill set that you learn how to deal with the general public. You learn how to manage money. you learn how to deal with bad bosses. There's a lot of benefit to your child. And I know you, a lot, I deal with a lot of my peers. I think they think it's beneath them for their kids to go work in these atmospheres.

1:02:51And I think that is a, if you, if you have that feeling, your kids can sense it and you say, no, hard work is good and is rewarded. Go out there and take that entry-level job so you can get experience and start the journey of learning to appreciate and understand the value of hard work.

1:03:08Brian Preston:This, what we do right now, this is my favorite job that I've ever had. My second favorite job that I've ever had, waiting tables at Chili's. If this all like folded up tomorrow, I'd probably go wait tables because it was awesome. And I took away so many skills from that. But my first semester at University of Georgia, I had a cousin who did real estate and stuff. I got to do construction for one summer in Georgia starting in August in the heat, I learned very quickly in that moment that I was going to go do really good at school and study finance and do financial planning because it was a wonderful experience to show me what I did not want, like a vocation I did not want to pursue.

1:03:48Brian Preston:I think the more experiences like that your kids can have and the earlier they can have them, the better it will be. Yeah, so don't, I just say that because I think a lot of parents say, well, my kid's job is school. And I'm like, well, that's good, but eventually they're going to need to work. So you might want to introduce it before they leave the household because if their first job is after they graduate college, be careful with that. I think that you ought to introduce them to this concept of work a little bit sooner than that. That's going to be controversial to some people. I don't think so.

1:04:17Brian Preston:I think it's controversial amongst people with resources. I think people who are poor, no, your kid's going to go work. This is something that I think people with money, this is part of the protecting your child at the expense of their future self. No, I did have, when I was in high school, it was either, you either, our thing was you were either an athlete or you had a job. As soon as, like once I got to college and my athletic career was over, they were like, hey, go get a job. You want my, go get a job. So then you got to figure out what works for your family. I knew you guys would not disappoint on that one.

1:04:56I feel bad. Today we have done nothing but filibuster answers. We did. We were long on the IPO discussion. I think what would we answer? Five questions? Shame on us.

1:05:07Brian Preston:We had a lot to say. A lot of good stuff. I thought it was good. You want to go for 30 more minutes and just look? Let's just keep going. You know I'm doing the mini show. That's the only reason you're saying that. 24 hours. Oh, man. Well, thank you for joining us on the stream. Just in case you didn't know, the conversation does not end here. We have actually released, I believe it's six free resources, brand new ones just in this calendar year so far. So if you have not checked those out yet, those are always there for you at moneyguy.com slash resources. Our most recent one was for the folks in the military, financial planning specifically for all of your unique considerations for military families.

1:05:46So go check that out if you haven't yet. And we'll be back here every Tuesday at 10 a.m. Central doing more of this, answering your financial questions, talking about what's going on in the financial world and what's on your mind. So thanks for being here. We've also been doing some collabs. Erin talks money. We had an ABLE account up deep dive into that that she's let us know has done really well. We were on Ice Coffee Hour recently. I know we've got more collabs coming up. This is a pretty exciting time. I would love for everybody, look, we talk about usually we're pitching the abundance cycle and stuff, but I do think go sign up to get on our newsletter list.

1:06:21Every Saturday, I kid you not, every Saturday, I read our own newsletter because the team here does such a good job. I can't wait to see how they're either roasting us or our unique content that they're putting in that newsletter. So don't sleep on that. I think you'll find most of the stuff that we share is either when we're doing job postings, big content releases, our newsletter. We're not out there selling our newsletter list. We're just trying to make sure we know who's out there and part of the family. So I'm your host, Brian, joined by Mr. Bo, Reby, and the rest of the content team. Money Guy, out.

1:06:55The 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 The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors and does not constitute financial, tax, investment, or legal advice.

1:07:27All investments involve a degree of risk, including the risk of loss.