This Real Estate Nightmare Could Derail Their Financial Freedom

17:03It's back to Bo's do-do plan. And it's easy. I think if you've gone through the first seven steps of the financial order of operations, you can carry the months, You can be very picky about who you get in there as a tenant because you're probably going to have that tenant for five, seven years. And it's mailbox money at that point. But as you guys are quickly seeing, it takes a while. You need margin to get that right person in there. And then what scares me is that we've got less than 10 months of coverage because not having a tenant in there, not having anybody in there. If all of a sudden, you know, a toilet started dripping, all of a sudden we have a$10 ,000 repair.

17:37that really puts you guys in a tough pickle of a situation. Y 'all are so young. Your wealth multiplier, if you've ever gone to moneyguy.com slash resources, every dollar that you guys put into long-term investments has huge impacts at your age that you can imagine if we're gutting the savings because we're having to carry this, it's going to hurt you in the long term. We all are revisionist and y 'all are type A, you're trying to get it all in. You're going to do okay on this. No matter what, I think you'll eventually, either start cashflow in this, you'll get a tenant in there, or you'll just decide, okay, I'll cut loose and I'll take that equity.

18:14And you'll look out and you'll be like, okay, we ended up making money on this transaction. What I'm always trying to educate people on is this is why you have to be patient and do it in the right order is that I don't want people to have that revisionist history where you think this actually turned out okay when potentially all of the opportunity costs of this, the thousands of dollars that didn't get invested, it can have a bigger drag on your future than you might realize. You guys are doing so well. I want to figure out how we get you in the right place. Because another thing that I wanted to ask about, where are y 'all at with like family planning and other things like that?

18:46Because that's got to come into y 'all's decision matrix as well, I would think at this point too. Okay, I'll go. I don't want to answer it for you. That is one of our short-term goals. That's something that we want to start planning for. That's something that we both really care a lot about. And we have been, we always said when we first got married, We said, let's be married for five years. I don't know why that was the magic number. And then we'll think about having a family. We're curious about what that would look like and especially planning financially for that. Like that's a big change in your life, but also in your finances.

19:18So that is one of our near-term goals is that we would like to start. Especially when you think about like that. And then in the same time, how do we keep our savings rate? Or how do we like - And what's income coming in? Cause they'll probably have an income on that, an impact on that.

19:30Brian Preston:As you guys have thought about starting a family and what that looks like, what's that future look like for you guys? We've had a lot of conversation and our mentality always comes back to, I'm just not sure. There's the, what if one of us goes part-time and what if we hire childcare? One thing we both feel strongly about is not putting our kids in daycare. That's just a decision we don't feel comfortable doing ourselves. So whether that is someone goes part-time, someone comes home full-time, maybe you do something more creative, like just an in-home nanny. We felt fine about that too. I always comes back to, I feel like we just don't know what we don't know.

20:08I think one of the most feasible things that we've talked about is one of us going part-time from the job. And I work remote too, so it's pretty flexible. Yes. Your hybrid public accounting, not quite as flexible. Yeah. And also Hannah, she's the driver too. She's more of that type A person. So I think for you, it's hard to think about, okay, scaling back and maybe not working as much, even though you'd be doing something way more valuable too. Trying to flush all that out is kind of where we're at.

20:32Brian Preston:If I'm hearing you say this, it sounds like you guys are open to a lot of different scenarios because you just threw out there both working, one working part-time, one not working at all. It doesn't seem to me that it's been clear who would be the person to change career trajectory. Have you guys had that conversation around who it would be and how that would look? You can correct me if I'm wrong. It probably would be me. The reason I say that is because I work significantly more hours. So it just makes sense from a practical standpoint for me to also be able to cut back on hours. I think that wouldn't be sustainable when we had a family.

21:05What planning, have y 'all done the doo-doo planning on like rental property, family planning? What have y 'all done so far so that I can make sure we kind of know where we are as we start showing you some of the things we have been doing behind the scenes? I think for, so the doo-doo plan for like for the rental, for instance. Well, everything, because this is all, by the way, your financial life is all interconnected. You know, it's not one decision doesn't do just one thing. They all kind of work together. Right, right. And so I think that's for us where it gets a little bit murky because you add in the variables of a rental property and trying to save and then planning for having a family.

21:37And that's where, I don't know if this is right or wrong. That's kind of why we're here. But like, you know, the brokerage account, right? Where we've got money in there. I'm like, well, if things do go really south, we can liquidate things there. Obviously you're kind of pulling out of that. There's opportunity costs there. But maybe as a fail-safe. Did y 'all actually do a plan though? Or is this just, y 'all felt like everything had worked so well, it'll just work out? Just work out. Okay. Okay. That's what I just - That's okay. By the way, that's okay. Y 'all have done great. Y 'all have done great.

22:06It's just that I was just curious to know how much went into the process. So now we can kind of figure out and triage you guys. You can yell at us. No, we're not going to yell. We're not that type of show.

22:18Brian Preston:Because you said a lot of things like you didn't use the word it depends, but you said, hey, there's a lot of different options and we're unsure and it's a little murky I think is the word to use. And what we want to do is maybe apply some clarity to the murkiness. Give us an idea from a lifestyle standpoint. what's your current burn rate? Like how much does it cost you guys to live the life that you want to at this present day? So I think if it was more fixed expenses, it would probably be five to six K. Okay. And that's, that's dropping out, like saving for a trip or maybe, you know, other things that we're, we like to do.

22:47Brian Preston:You guys right now are both, you make about the same income, right? So two income family, there's no kids yet. So you would be one of those couples that we would say could probably from an emergency reserve standpoint, fall into that like three months of living expense category. That's probably somewhere between$15 ,000 to$18 ,000 in an emergency fund. And that doesn't include the rental. We're going to talk about that in a moment. I was about to say, there's a big asterisk on top of this. And so right now we see that you have about$13 ,000 in savings and you're also having to like cover this rental.

23:18Brian Preston:So where would you guys say you are in the financial order of operations? I want to say five. I want to say step five. You want to say five. I think we're probably at four. Yeah. We've been talking about that a lot more. Here's what's really wonderful. Again, we can kind of see this in that worst statement. We say, I think we're here, but we're here. A lot of people think the financial order of operations is kind of this straight line. And we always talk about on the show, like, hey, it's not exactly a straight line. We thought it'd be really interesting to show you guys. We actually tracked your financial order of operations to see where you guys are.

23:49Brian Preston:And you can see starting in 2020, all right, you graduate college and you get married, right? And we kind of go on this thing and we start saving, we get to emergency funds and then our career progresses and we get into step five, we're doing Roths and HSAs, but then we want to save up for a house. And so we kind of go back to emergency reserves and then we buy the home and we go up and then the home does really, really well. And it creates some advanced opportunities for us to do some other stuff. and we go up and then we come back down. That's okay. Financial order of operations is not a straight line.

24:21Brian Preston:But when I think about where you guys are right now, present day, I would say you are hard in step four and you're also in step four. And I think that step four is likely going to change for you, right? Because we just said right now with no kids, you guys earning the level of income that you're earning, your mercy fund should be 15 to$18 ,000. If you end up like backing down where one of you is the primary income earner, or maybe there's only one income earner. Well, now you become one of those families who it potentially should be like six months of living expenses. And that doesn't even factor in the fact that you do have this rental.

24:58Brian Preston:Because we are proponents that once you get into step seven and step eight, and once you start having other types of assets like rental properties, you have your emergency fund for living expenses, but then you also have your reserve fund for that sort of thing. So when we thought about sort of a cash layout for you guys right now today, your cash, if we're going to have three months of living, it'd be$15 ,000 plus the three months of real estate vacancy. Cause we think that would be like a true reserve for like rental folks. You should probably be at$20 ,000 based on where you are today. So we have about an$8 ,000 shortfall.

25:31Brian Preston:So like immediate goal, like before we even like do the family planning stuff is how do we get from 12 to$13 ,000 of cash to like$20 ,000 of cash. When I ask you that question, what's your immediate response? Like, how would you guys do that? I think that is what our conversations have been focused around. Like that rings true to what we were thinking too, is that we're kind of hemorrhaging cash here and we need to build our reserves back up for some type of worst case scenario. So right now, what that's looked like for us is tightening up more of our spending, discretionary spending than we have, I would say.

26:05Rice and beans, baby. We could do it if we needed to. But I think that is hard too, because again, going back to this, maybe almost shiny object syndrome where we have a lot going on at once is what we do have in our primary house where there's things that we want to do to that too and fix it up. And so trying to figure out where is the best place for those dollars to go.

26:24Brian Preston:I love it. So what you've laid out for us is that there are multiple goals in conflict. The only short-term goal you said for us was, hey, we want to start a family, right? Like that's a short-term goal. But you just threw out another one. Hey, we'd like to improve our current home. and then I imagine there's some long-term goals in there as well, like financial independence. What are some of the long-term goals that you guys have? Class it up with Crocs. You know back to school is coming in fast, so why wait to find your new fave footwear? Step into a local Crocs store and step into your new look.

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27:40Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. That's for sure the financial independence, one of them. That's I think where we initially, that was probably the biggest driver for us getting into real estate for better or for worse is thinking about being able to take back some of the hours that we work in our AA2 jobs by just dipping our toe into real estate. I think we're not stressed about the property right now because I do still see it as whatever happens, like you said, we still could just relist this property and make money. And we could probably go back to where we were before we purchased this rental property.

28:16There's some bigger things going on here. How many kids have y 'all talked about? Give me a range. Two to three. So here's what I'm worried about.

28:24Brian Preston:Part three, two to three. Here's what I'm worried about. Y 'all have a deficit here. And what I'm worried y 'all are about to say is, is we'll just go have to button down the hatches and work even more. So we're going to defer this decision as a family on when we get to start growing the family. And as the sentimental guy here, I'm just like, I don't, is that what y 'all want to do? Or is that what you now feel like you have to do all because we made this decision of the rental property? And let me tell you, most financial mutants who are wired like you guys with this type of a person, you're not going to leave the planet broke.

28:57So you have to start asking yourself, am I making some decision right now that is going to sideline my 50-year-old version, thinking about kids, potential grandkids, that I'm going to be ticked off at myself, that I bought this rental property that caused me to push things off for 18 to 24 months, and now I had to make completely different decisions than what my ideal was. that stuff hurts me because money is just a tool. And I know we all get caught up in the brochure of let's maximize, let's get to millionaire status and let our money work for us as fast as possible. But if we make a decision that locks us into this rut, that now we don't get to live our best life of what we daydream about is what our future life looks like.

29:41I would almost say, can we get a reset here? I mean, because y 'all are so far ahead of the curve, but yet we're locked or potentially we'll go through the numbers with you. I just wanted to kind of raise the temperature a little bit because this is hitting me. I'm like, they're going to start getting squeezed. The time is going to be your element. You'll have so much ahead of you, but I can already just start seeing we're going to have to make some tough decisions that impact so much. That's the rub, right? We're both kind of that type A personality. But I think when it comes to family, that's such a big thing for both of us that I would almost, maybe I put my rose colored glasses back on and just say, nah, let's just figure it out.

30:15You know, we can go from there. Maybe, you know, our cash isn't where we need it. So you're saying you grip and rip and just start a family and not worry about how the money is going to come. That's right. Well, and that's a choice. How does that make you feel? That's not really what you think. I could do it. Okay. Well, I feel like we should plan a little bit, though. I agree. Okay. I'm not saying don't plan. And I'm just, you know, I'm with you, Brian. I don't want to delay our family because we feel like we have to get to this number. But also, I don't want, it's not just the delay in the family.

30:52It's also just hardship for the sake of just having hardship because we made one decision.

30:56Brian Preston:Sure. If you don't have to. The question that we had as we were sort of like triaging and assessing is the timing. While that's a wonderful goal to be able to create a family business where you're doing this real estate thing, is now, is this moment the time to begin going in that direction? And it may be, the answer may be grip and rip, but what we want to do is apply some real numbers to it. Because we just showed you right now, present day, we would argue have about an$8 ,000, $7 ,000,$8 ,000 shortfall in your emergency fund. But if you're going to make a decision around like, hey, we're going to decrease income where it really depends on one or the other of us to be the primary breadwinner, then you probably do need to expand your living expense emergency fund out to six months.

31:41Brian Preston:So just doing that takes us all the way out to$35 ,000. And we still have the real estate becomes even more risky, more aggressive when there's one income who's having to float that or a majority income. So right now, we would say that your emergency fund should be close to like$20 ,000. But realistically, if you're going to make an employment change based on family planning, your emergency fund should be closer to$40 ,000. I want you to kind of put that in your mind because we've actually done the work for you to say, hey, if you did decrease your income, what's it like if you're both working?

32:15Brian Preston:What's it like if one of you goes to part-time? What's it like if you go down to one income? And we want you guys to see the hard numbers that then determine, okay, yeah, we can make that work. We can do this. Does that sound fair? That's great. Awesome. Okay. So let's assume that we go through the scenario of you guys both working. And if you're both working, let's assume that your gross income is going to be$180 ,000 a year coming in. If we break that down into monthly income, it's going to be about$15 ,000 a month. Well, we think that with$15 ,000 a month, this is what your budget would likely look like.

32:45Brian Preston:We've already established your mortgage is going to be right around$2 ,900 a month. Once we think about taxes, it'll be factored in, that's going to be just a touch under$3 ,700 a month. And at this income, we really do believe that you can be saving and should be saving 25 % of your gross income. So that would be$3 ,750 a month. Now, if you're both working, that means that there are going to be some childcare costs. So we just said, okay, if we look at the national average for childcare, what would that be? And we came up with an estimate of about$1 ,200 a month. So if you add all of that up, that leaves about $3 ,400 left over for lifestyle, for doing the things you want to do the way that you want to do it.

33:27Brian Preston:Now, obviously you can, the remaining bucket and childcare bucket is kind of flexible. You can kind of combine those two. And it could go up if you're doing private nannies and other things like that, as you can imagine. This is more of a daycare. And that's what, so we're a little off already because y 'all were like, because I heard Hannah say, we do not want to do the daycare. So I'm always like, uh-oh, danger, danger. We might be off on our assumptions a little bit. Okay. So the question we have is, okay, you've got all the savings taken care of and you got the home taken care of. $3 ,400 a month discretionarily for, you know, diapers and eating out and doing that fun stuff and having the date nights, I imagine that seems fairly reasonable, fairly feasible.

34:08Brian Preston:You could make that work likely. And if you did this, it's wonderful because remember, you guys are here saving 25 % of your gross income. And if you just, let's assume that you do this for the rest of your working careers and you save that 25%, no pay raises, no increases, this sets you up for an amazing, great, big, beautiful tomorrow. You can see that at 27, you have 132 invested. You have that 25 % savings rate. We just assumed a 9 % rate of return for you guys because you are so young. Your portfolio grows to be like$18 million by the time that you get to 65. Now, obviously at 65, 18 million won't be the same as it is today, but we would say if you just want to assume a 4 % withdrawal rate, that would generate for you about about$20 ,000 a month to live off of in today's dollars,$242 ,000.

35:00We brought that back to present value because, I mean, when you see those big numbers, and by the way, do you see the magic from 55 to 65? This is why there was a part of me that said, don't show them the 65. Drop this thing because that requires, there's so much that has to happen for this to work. And you guys, this is almost fairytale land here because we know the savings rate is way below 25 % right now. But this is bringing it back. A lot of good stuff happens if this was what was working in the background.

35:33Brian Preston:So we would call this, again, if we're putting on our 3D glasses, this would kind of be the dream plan. You got tons of income coming in. You have enough discretionary. You can save at the rate you need to save. This would be the outcome. I want to flip the question around to you guys. How realistic is for you guys to start a family and both continue working full-time hours you're working right now. I'd say that's probably less likely. So while this might be the dream plan financially, it's probably a low probability outcome in reality. Correct. Based on the other short-term, because again, money is nothing more than a tool.

36:02Brian Preston:Based on the short-term goals that you guys have, this long-term goal has to be adjusted. I'm going to call this dream plan. So then we said, okay, what about like down to earth? Dream easy plan. Dream easy plan. What if we did, one of two things. What if one of you decided to go to part-time or one of you just has career trajectory that would allow your income to increase to where as a household, whether it's one of you bringing it in or both of you in some combination, brought in about$135 ,000 of income. Well, if that's the case, the monthly gross amount coming in would be$11 ,250. We already have said your mortgage is gonna be just over$2 ,900 a month.

36:41Brian Preston:On a lower income, the tax amount will go down. It'll be about$2 ,400 in taxes. We recognize there's a good chance you likely won't be able to save the full 25 % that we like, but we still think you should be able to save 20 % at this income level. So that'd be$2 ,250. Now, if only one of you is working, or perhaps one of you is working part-time, we do think the childcare costs would likely be lower. So$600 a month for childcare. So if you add all of that up and think about the gross income, that would leave about$3 ,000 a month for lifestyle, for doing the things that you want to do on your terms.

37:19Brian Preston:Give me some feedback. Does that seem reasonable? Just looking at that, I would say we'd probably need to make some changes. You'd have to cut back. Probably. You'd have to cut back. At least with our current spending and all the different categories. Agree. I want to remind you, this does not factor in the rental. The rental is another thing above because if you have to continue carrying that rental mortgage, I just want you to envision what happens to that remaining bucket and that childcare bucket. And again, this is not to be frightening. That's not our goal here. I think it should be frightening.

37:47Brian Preston:Brian wants to scare you. I just want to enlighten you because, okay, say you get a tenant in here and it's easy street and it's good times rock and roll, but then something changes in their life and a year from now they move out and then you have another vacancy. Just because you have a tenant today does not mean that you will have a tenant in the future, right? That tenant is only good as the lease that you have in place. And even then sometimes it's not quite that good. I'll even play it up even more. Or what if they're changing engines in the living room? I've had clients. People have heard me tell the stories.

38:14Or they get ticked off at you and they rip off all the cabinet doors. Or they do something. Because people do the craziest things. We had another making a millionaire. And they've actually done really good with real estate. But they talked about their very first one. They put a convicted felon in there. Because they were self-managing, didn't do any background checks. And they were like, man, oh, man. And we didn't realize what a just pill we were getting ourselves into by putting a convicted felon without knowing we put a convicted – because nobody goes willfully, let's go put a felon in our rental property.

38:49This is the part – I mean, like I said, I'll let Bo keep being Mr. Nice Guy. We'll be good cop, bad cop. But I'm like, I see$3 ,000 of flex and margin, and we got$1 ,500 that might just evaporate because of this rental property. What are we doing?

39:03Brian Preston:I just, it creates a risky exposure for you guys having that there, having to know that you would be on the hook for that if you can't get a tenant in there. If this works and this is the outcome and you're able to save 20 % of that income for the future, again, assuming that the rental stuff doesn't derail that, it's still a pretty exciting trajectory. You can see right now,$132 ,000 today. We're going to invest 20 % every year for your working life out to 65. You don't quite end up at that 18 million terminal number, but you end up at about 12.7. And in today's dollars, assuming a 4 % withdrawal rate that would generate for you about$166 ,000 in today's dollars.

39:44Brian Preston:So that's, you know, doesn't factor in social security or any other income sources. That's just in the portfolio. That's kind of like living off of the interest idea. That seems okay, right? Like that would, that would likely work based on the lifestyle that you guys would be living, right? Right. Again, you said in order for this to be a reality, we'd have to trim some stuff and we'd really need everything to go right with the rental. If anything goes wrong with the rental, it kind of derails us. Yeah. Okay. So now let's look at the third scenario. And I wouldn't exactly call this the do-do scenario because that makes it sound like it's the worst outcome because I don't know which one is more likely between this third scenario and the 135 we just laid out.

40:23Brian Preston:But if you guys said, hey, we're going to start a family and we're just going to go to one income, right? And let's just assume that one income is right where it is today at$90 ,000 a year. So that's$7 ,500 a month that we're going to have in gross income coming in. We know that mortgage is still going to be$3 ,000. We know that taxes at this income will be just under$1 ,500 a month. We still want you saving. We still want you building for the future. So if we just have a 15 % savings rate, that's going to be a little over$1 ,100 a month. And when we factor all that in, That leaves just under$2 ,000 a month for everything else.

41:01Brian Preston:For eating out, groceries, utilities, date nights, and uh-ohs. Diapers. Any unknown. Well, diapers are not. I've heard those are expensive. Diapers are not. And unknown unknowns. When you see that number, how does that make you feel? That really is rice and beans. That feels very, yeah. It's less than that if you take the rent in there. If this were the reality, I want to show you one more piece of it, and then I want some reflection. If you were to do this, if you were to save this 15 % every year, you can see from now at 27 out to 65, the portfolio is still grossed over$8 million. But$8 million that far in the future, if we bring it back into today's dollars, would generate for you an income of about$109 ,000 a year that you could live off of.

41:49Brian Preston:Again, that's great, but it's different than the other scenarios that we've played out. So you'd have to figure out, okay, what kind of lifestyle is that creating? Is that creating the lifestyle that we want to see in financial independence? When we show you this and show you like, okay, the decisions you have have both implications today as well as like in the future, what do you take away from seeing those three different scenarios? Well, one, it's really helpful because it's clarity. I don't think that we had previously. It is a lot to factor in, I think. And it does at least highlight for me, I don't know if you would agree, but just when you do add other variables like a second mortgage.

42:23In our minds, we're like, yeah, we know this is a risk, but we'll figure it out. And then highlighting, okay, this is actually a risk. And this is what that risk looks like. And then how it could affect you. I agree. I think this is really helpful because when we were talking about our rental property, I never really considered the opportunity cost of pulling back on your other savings. I don't know why, but I didn't really think about that. So this is very helpful, especially that first slide, the rose colored glasses slide, what it could be if you continued with the right of, I think you said 25%.

42:52Brian Preston:25%, yeah. Is what that was. So I think this provides a lot of clarity, like you said. I think it's hard for me because I just personality-wise am more of that saver where it is, okay, like maybe it is better for us both to work. But then you get into the thing of like, well, are you sacrificing more family time just for the sake of a dollar bill, which I think we both agree, not the priority that we want to have. And so try to figure out what the balance is there. One of the things we say on the show all the time is that so often when we're young, we think that if we seek out complexity or more advanced strategies, there will be a better outcome from that.

43:30Brian Preston:And as we kind of like looked through your situation, we didn't really talk about the investments. We can talk about that as well. It seems like you guys are already positioned. You are super young and you are amazing income earners. Like you're doing everything fantastic. but you have now sought complexity and added some things into your financial life that's creating a stressor that does not have to be there. And so the question then becomes, okay, when we think about the goals that we want to achieve, what if we could achieve those goals in a much more simple fashion without having to put ourselves out there on the risk spectrum?

44:04Brian Preston:And again, don't miss here. We love real estate. Rental real estate's fantastic, but there is a time and a season and a place for it. And the question we had as we were looking through is, did you guys make that decision at the right time, given all of the other various goals that you have? It's a good question. Yeah, well, I mean, yeah, going back to the slides, I think that was super helpful. There is an opportunity cost that I think we didn't consider as much, especially since starting a family is one of our shorter term goals. I think that wasn't as thought out as maybe as it should have been.

44:37And it's also you learn, right? because that is one of the things we've learned so much, even from the first few short months of having this property. Like we would do this different. We would do so many things different where like, I don't even want to say this, but like, what if we got another one? You know, that's where I know you guys are like, don't, don't bring that up. He hasn't been listening. I got hope on Hannah. Turn my mic off. Yeah. Yeah, here's where I would hope you guys go home from here. Because if y 'all are working with us, there's several things that I would do as a homework for you guys.

45:16And Bo's the official homework guy, but I'll play Uncle Brian here. I want y 'all to go home, and you didn't do it the first time. You didn't open up a spreadsheet, even though you have just rock star spreadsheet creator right here waiting in the wings. I would encourage y 'all to do the 3D glasses. legitimately do it now and take your current scenario with rental property, take into account, we'll get you all this stuff so y 'all can use this as baseline assumptions. And then I would have you run multiple scenarios and figure, and then take into account the family planning too, taking the non-money stuff, but what is going to be the fruitful life that y 'all want to lead.

45:56So you look at yourselves when you're in your forties, your fifties and sixties and beyond and go, man, well done. We knocked it out and did it the right way. The building blocks is right now for you guys to figure that out. And I would, look, I don't know the answer completely because I'd want to run this multiple scenarios, but I would hope that one of y 'all's scenarios is maybe we call one of these relatives that lives in the area who already has this propensity to be a rental estate investor and say, hey, y 'all want to buy us out? Or y 'all want to invest? I got a peach of a deal for you.

46:25I mean, there isn't a scenario. I'm just trying to figure out how we level set you guys from the planning perspective, it doesn't have to be. That's why the 3D Glasses plan of going through the three scenarios is going to give you the clarity to say, this is what we ought to do. Because if we were your financial planners, I would say, I would put that on you guys or we would do it together as a joint exercise so we could scenario plan it out to figure out what's the best path. Because the grip and rip, that's not going to work. Because it's just going to create, look, life is already hard. I mean, it's just a natural thing that there will be things that happen to you that you don't know that are coming your way, whether it's illness, whether it's accidents.

47:08There's just things that happen in life. So if you just grip and rip and don't plan, it just opens up a lot more turmoil and chaos. And I just know in relationships and everything, that stuff takes a toll over the long term. And I want you all to live your best life and be the happiest versions of yourselves. but you can't do the things with all the tools you have with the grip and rip mentality. I just don't think it works. It's not going to give you your best life. I think for us, because if you look at everything in a silo, it's like, well, all these things are good things, but then if you do them all at once at the wrong time, that's where you get into trouble.

47:48That's it. And I think that's even the rub that we're, even the past month we've been talking about, like, well, we do want to start a family and it would be fun to travel. Like when you have kids, well, we do have this rental property and we like the idea of building a rental business, but then you start thinking about where the money is going and there's less there. And then are you overexposed, right? So this came at a really good time too, just talking with you guys.

48:07Brian Preston:Before I give you your homework, what questions do you have for us? Anything that we didn't cover that you were hoping that we would cover or mention to you? Both our employer plans are Roth 401ks. And I know you guys talk a lot about Roth IRAs. Is that something that we should look at as opening a Roth IRA? Or is that redundant with having Roth 401ks? Well, you know, generally the way that we recommend, if you're going through the financial order of operations, you can look that step number two is your free employer match. We want you to participate in your 401ks up to the employer match or whatever that is for either one of your employers, at least go get that.

48:42Brian Preston:And if you're doing it on the Roth side, that makes a lot of sense. You guys are super young. You're not in a super high tax bracket. So I think Roth makes a ton of sense, but you could, instead of putting additional in there, like if the minimum requirement to get the match is 3%, but you're doing 6 % there. Rather than doing that, you could go open up a Roth IRA and begin saving to Roth IRA because it's going to be a little bit less expensive. You're going to have a wider opportunity in the entire investment universe, which I'm not entirely sure is a great thing for you guys, but it gives you a wider investment universe you can invest in.

49:15Brian Preston:And it's completely portable. So if you change jobs or you can leave it at Vanguard or Fidelity So we love Roth IRAs. And that's probably the reason why we would say to start doing that. But if you didn't, and you just kept putting money in your Roth 401k, that's okay too. Because in our mind, you're still building the step five tax-free dollars. It's not like you're making a mistake by doing that. And I also want to remind you that even before you can begin moving in that path towards the Roth, like that wasn't even the right question to be asking. Cause we just showed you that right now, today, presently, you have a$7 ,000 to$8 ,000 shortfall on your emergency fund.

49:54Brian Preston:Priority number one shouldn't even be thinking about Roth 401k. You get the employer match, and then every other dollar should likely be going to build up that emergency fund to a present day value of$20 ,000. And then once you figure out what the work situation is going to look like for the two of you, even think about how do we get that to$40 ,000. This is not prescriptive. But again, if we look at the net worth statement, we know that right now the rental property you said is worth, you paid$150 ,000 for it. It's worth about$190 ,000. So your mortgage on it's about$120 ,000. Well, if you sell it, if you were to sell it right now for$190 ,000 and your mortgage is$120 ,000, you're walking away with a bunch of capital.

50:31Brian Preston:That capital you walk away from immediately solves your emergency fund issue, both today as well as, hey, if we went down to one income, we have enough to cover us that we don't have to change lifestyle. And then we can grip and rip and figured out as we go through that. And we've gotten rid of a$1 ,500 monthly burn that's no longer there. At 7.75 % interest. I know. Yeah, that hurts. That does hurt. Yeah. Here's your homework. The first thing I put is I wrote, get a tenant or figure out the rental, like figure out what the right decision, something has to happen with the rental. It cannot continue you on the way it is right now.

51:13Brian Preston:Without being too biased, we have a thought on what you should do, but getting a tenant is also a solution. I think your next piece of homework, you got to figure out how you get your emergency fund up to at least$20 ,000. Like that's where it should be based on your current spend with an eye towards recognizing if you are going to make an employment change, it should probably be closer to like$40 ,000. Now, if you did get rid of the rental, then you don't need those two, that bucket for the rental vacancy. So then your actual merchant fund might come back to like$35 ,000,$30 ,000. It does give you some reprieve on how much you need to keep in cash.

51:47Brian Preston:The other thing y 'all need to do is y 'all need to go do your 3D plan. Walk through, hey, based on our short-term goals of starting a family, based on our intermediate-term goals of having a real estate empire, and based on our long-term goals of financial independence, how do we prioritize these? And what's the most efficient mechanism to move towards those goals? And it's going to require figuring, okay, who's going to stay home? Who's going to back down hours? What's that going to look like? And on what timeline do we want to be? If that's something that we want to have happen in the next six months, we've got to make some very, very serious consumption or asset decisions today in order to put that in place.

52:26Brian Preston:Okay. That's great. Thank you. Thank you. Y 'all are awesome. Guys, it's been a blast. Bo, if somebody else wanted to come on Making a Millionaire, what do they need to do? If you'd like to be a guest on Making a Millionaire, you can go to moneyguy.com slash apply. Or if you want to check out any of our calculators or tools, you can go to moneyguy.com slash resources. Luke, it's been a pleasure. Hannah, you got a lot of work ahead of you, but I'm super excited for you. I'm your host, Brian, joined by Mr. Bo, Money Guy team. Out. Making a Millionaire is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners at Abound Wealth Management.

53:00Brian Preston:Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through making a millionaire. 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. All investments involve a degree of risk, including the risk of loss. The guests featured on Making a Millionaire are not clients of Abound Wealth Management at the time of recording.

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