Watch This If You Want To Build Wealth

20:14Because look, if you're already funding things, you're automatic for the people. You've got all your expenses, You've got all your savings in an automated fashion. At OLLI, we've got wellness down to a science. From PMS to pregnancy to menopause,

20:27Brian Preston:our women's wellness line offers science-backed support for every stage. No judgment, no shame, none of the stigma. Just supplements designed to meet you wherever you're at. OLLI, choose science over shame. Find support at a retailer near you or on OLLI.com. That's O-L-L-Y.com. tomorrow morning is knocking stock your fridge now how about a creamy mocha frappuccino drink or a sweet vanilla smooth caramel maybe or white chocolate mocha whichever you choose delicious coffee awaits find starbucks frappuccino drinks wherever you buy your groceries now is when we can think about the kids because you know just like when you get on the airplane they say hey put on your oxygen mask before you put it on the kids you've taken care of yourself It's A-OK to fund the kids' college goals.

21:14It's A-OK to drive the nicer car. It's A-OK to go and get into rental real estate. It's A-OK to renovate. This is the time to really focus on what do you want to do with your money and how do you live your best life?

21:28Brian Preston:All right, so we've paid for our future financial self. Now we've begun funding our goals that are pre-financial independence. Now we get into step nine. We get into the very end of the financial order of operations. And this is more about de-risking and figuring out what do you want your life to ultimately look like. And remember, in step three, we had satisfied all of the high interest debt that exists in our balance sheet, but now we truly want to be financially independent of all obligations. And this is where, if you so choose, you can start knocking out that low interest debt. Yeah, and look, I don't mind sharing is that for most of you, even if you're part of the FIRE movement, I don't want you doing this until you're saving and investing at least 25 % of your income, especially if you're between the ages of 30 to 45.

22:13Now, for those of you who are 45 and beyond, it's exactly what Bo said. There is a de-risking element that can come. And I think there's a time and a place. And that's what I found in my own life. You know, I've shared it with you guys. I've been very transparent. I had a mortgage at two and a half percent. But when this thing got down where it was like 60,$70 ,000, I started looking, I was like, Like, yes, I love that interest rate, but man, would it be nice at my age beyond 50 to just have this paid for so that I don't have to worry about the monthly cashflow. I actually know I own this house and I've de-risked one more thing in my life.

22:51It's A-OK. There's a time and a place. There's the make wealth phase. There's the maintain wealth. And then there's the multiply wealth. That's why when you're in the make wealth under 45 years of age, focus on the army of dollars. Now, if you're way ahead of the curve, I'm A-OK with you, of course, paying off debt. We don't love having debt, but I just want to make sure you do it in the right time or place. If you're in the maintain wealth, that's probably from 45 all the way up to financial independence age. That's when you're kind of in that gray zone and you have to look at your goals and see if you should pay it off.

23:19And then multiply for sure. When you've won the game, you don't need to run up the scoreboard. Let's pay off even the low interest debt because we want you to own your life. Obligations, which is what debt is, works against financial independence.

23:34Brian Preston:All right, we've laid out for you the roadmap, nine steps of exactly what you should do with your next dollar. Now, let's shift and talk about the rules. And fortunately for you, we've been doing this long enough that both in our own wealth building journeys and what we've seen across the thousands of clients that we get to serve at Abound Wealth, we have some pretty solid, hard and fast rules about the way you should think about navigating your financial life and making your financial decisions. The first one, let's talk about financing the DeLorean. Look, some of us, when we go and get into the workforce, we don't have the money to pay cash for vehicles.

24:10Cash is obviously the preferred way to pay for a depreciating asset like vehicles. But every now and then, you're like I was when I was in my early 20s. I needed the J-O-B to start my wealth building journey. So I had to go buy reliable transportation. That's why we came up with 23.8. This is for somebody who needs to have reliable transportation. That's why it's not luxury vehicles. So we want you to put down 20%. We don't want you to finance longer than three years. That's what's going to keep your wallet honest with your ego because you're not going to let somebody say, hey, well, if you finance this for eight years, we can get your monthly payment down.

24:48No, we're not doing anything longer than three years. And we're making sure that our payments don't exceed 8 % of our gross income. This way, you can ensure also that your savings and investment rate is exceeding what your car payment is.

25:04Brian Preston:And why does this rule exist? Well, right now, we know that the median single income in this country is$45 ,140, according to the Federal Reserve. The average price of a new car is$49 ,220. So if the average price of a new car is more than the average single income, that creates an environment where people can make unwise financial decisions. We don't want you to fall into that camp because frankly, when it comes to making purchases, for most people, an automobile is one of the most expensive things that you're going to spend money on. But it's not the most expensive. The most expensive thing that most people are going to spend money on in their lifetime is buying a home.

25:44Brian Preston:And I think a lot of people get themselves into trouble when it comes to homeownership. And that's why we even have a rule for how to buy a home. We want you to follow the 3-5-25 rule. And what this says is that when it comes to down payment, you don't have to put 20 % down. We're okay if you do a down payment as low as 3%. So long as you see yourself being in that home for at least five to seven years. And when you add up the total cost of your housing, the total cost does not exceed 25 % of your gross income. If you can stay inside the 25 % bounds and you know that you're gonna be there long-term, it's okay to have a smaller down payment.

26:20Brian Preston:This is gonna prevent you from being in that circumstance where all of a sudden you are house rich and life poor. And you may be asking, okay, well, how do I do the math? How can I know? We actually have a great resource for you. Go to moneyguy.com slash resources and check out our home buying calculator. You can put in your specific numbers, your specific variables, and figure out how much home can you actually afford to not get yourself out over your skis. Yeah, I love how that rule allows us on your first purchase to be so much more flexible. That was one of my biggest, because housing's not easy right now.

26:54So it's definitely a measure twice, cut once. I love that people, we give a little bit more flexibility. We didn't have to change for this crazy new world. We always had it because we have no hypocrisy policy. We didn't put down 20 % on our first houses. I did put down 20 % on all of the other homes I have purchased when I've upgraded. But on that first one, I only put down, I think I put it down around 5%. We want to pay it forward and let you know that's A-OK when you're trying to work through this. The same way, we also want you to think about education. Look, we live in a modern world now where education has all of this goodwill, but in some ways it can be a trap.

27:30If you don't go into college or any type of higher education with your eyes fully open, you might get sold a bad set of opportunities. You'll get sold a mirage that is just not tied to reality. So we've tried to come up with how do we take this thing that's very noble, like education, but ensure that you get the good side of it and not left holding the bag because institutions and others are not paying attention to what you should be paying for this noble thing to better yourself so you make more money, increase the size of your shovel. We came up with the first year financing rule. All this rule is so simple.

28:12Before you load up on student loan debt, I want you to ask yourself, what is the likelihood of what I will make in my first year salary? And then whatever that salary is for your chosen profession, I want you to not run up student loan debt beyond that. Now look, out there, if you're a doctor, attorney, there are some obviously asterisks, but for the majority of us that are going to school for that four to five years, I want you to use the first year financing rule to keep yourself out of long-term debt with education.

28:44Brian Preston:And I think what's so disheartening about student loans specifically is, did you know that right now, one in four, 24 % of adults that are responsible for student loan debt, whether it be their own or their child's, do not anticipate ever fully paying off their loans. We know that 14 % of all borrowers right now have a balance of greater than$50 ,000 in student loans. So you have this debt that you don't think you're ever going to pay off. What that ultimately means is that you have a belief you will never be able to be financially independent. We just do not subscribe to that. We think there is a better way to do money.

29:18Brian Preston:It's why we came up with the first year financing rule. So you don't become one of these horrible statistics. The next rule we want to go over is a lot of people come to us and say, hey, Brian, the stock market's at all time highs. You know, what should I be doing? And then there's, oh, Brian, I don't know if you saw it. The stock market's down into bear market status. It's down 20%. What should I be doing? Guys, here's the answer. Here's the rule that will guide you through all this. ABB, always be buying, baby. Guys, if you were just, if you're in the wealth building journey and you're not close to retirement, you're five years and beyond from retirement, I want you, no matter what's going on in the economy, if you're automatic for the people, if you've automated your investment policy and how you're doing things, you will be so protected by doing ABB because what it does is it takes the emotion.

30:10It's a system. Instead of you trying to, you know, see what the wind is blowing right now whether it's a good market, a bad market, a scary market, a frothy market, this is what's going to protect you.

30:22Brian Preston:All right. So you said frothy. I didn't mean to say frothy. It just kind of happens. One of the things we're walking through as we're walking through the roadmap, you may have noticed that there were two separate areas for debt. There was high interest debt and low interest debt. One of them happens very early on in the financial order of operations, step three, and one of them happens very late at number at step number nine at the very end. So the question becomes, how do I decide what is high interest debt. The way that we went about discerning what's high interest and low interest, we thought about, okay, what is our opportunity cost of money?

30:52Brian Preston:How hard can our dollars be working for us? And if they can work harder for us somewhere else, then maybe we should put them somewhere else. But if they can work the hardest for us paying off debt, maybe they should pay off debt. And we know that how hard our dollars can work for us changes based on how old we are. So we said, if you're someone in your 20s and you have student loans, and your student loans are below 6%, you probably shouldn't worry about prioritizing paying them off. Your money could likely work harder than that. But if they're above 6%, you may wanna prioritize them. In your 30s, the student loan number drops to 5%.

31:24Brian Preston:In your 40s, it drops to 4%. When it comes to car loans, we want you to always subscribe to 23.8. So even if you have very high interest car loans, it still needs to sit inside the confines of 23.8. And if you've done 23.8 and you're somewhere in your 20s, even if you do have a car loan that's below 10%, but maybe it's 8%, 9%, we don't love that interest rate. We know it's inside of 36 months of being gone. So we think it's okay, follow through 23.8 and satisfy that. In your 30s, the number drops to 9 % inside the 23.8 confines. In your 40s, it drops to 8%. And then when it comes to credit cards, no interest rate is acceptable for carrying a debt balance month over month.

32:07Brian Preston:Using a credit card is totally fine. We say the credit card use is okay, but you do not ever want to carry credit card debt. So if you have any interest rate at all on a credit card, even zero, pay it off month after month after month after month. The only caveat, but he knows what I'm going to say, on the car loans, that is so you can get to your J-O-B. If you're one of these people that's got a lot of cash in your checking account or your emergency reserves, paying cash for vehicles is still the preferred method for paying for car loans. The only reason we have the high interest rate is because we want you to be able to get to your J-O-B so you can start your wealth building journey.

32:48Brian Preston:All right, so we said that debt had two areas in the financial order of operations, but so too does cash. You may have noticed that highest deductible was a cash part of the financial order of operation. And then step four is a fully funded emergency reserve. Well, one of the questions that people ask is, okay, well, how do I know? Do I need three months of living expenses or do I need six months? Well, your unique circumstances will dictate. If you're someone who has high job security, maybe you're a dual income household, you have multiple income streams, you have a highly easy to replace job, or maybe you're single, no dependents, your lifestyle is flexible, you may be able to err on the side of three months.

33:27Brian Preston:But if it's going to be very hard for you to find new employment, or there are a lot of people depending on you or your single income household, then you might want to err on the side of a six-month emergency fund. It's your unique variables that will dictate this and make sure you revisit and review because this very much can change as you move through time. And then I'll cover the rule of how much should you save and invest for the future? Guys, we're all about investing 25 % for retirement. Now, look, we take some flack for this. There's even been people have created content saying that is too high.

33:59Now, I want to give you some caveats on this. If you make less than$200 ,000 as a couple or$100 ,000 as an individual, you get to count your employer match on that. For some of you, that can be five to 8 % right there coming from your employer. But for a lot of you others, if you're like, why do these numbers, when we say the 25%, we are talking about your employer plans, your IRAs, your health savings accounts, your pension contributions, your employers, money coming in and so forth. I've already covered some of those. But the problem that I think a lot of people don't realize is that we have a deferral problem on when people start saving.

34:34But not deferred gratification problem. That's right. We're good at enjoying the now, but if you look at the stats on when the typical American starts saving and investing for the future, it's 30 years of age. So then if you know that data and then you look at our how much should you save resource at moneyguy.com slash resources, you'll see that it ties in perfectly. You'll see if a person retiring at age 60 not figuring out the wonderful world of personal finance until they're 30 years of age, they need to save and invest somewhere between 24 to 26%. So that's why, guys, if you're listening to this at 30, get it, I mean, at 20, get excited.

35:14If you're listening to this at 40, you got to put a little bit more on your shoulders, but you're going to be okay. Just don't sleep on this information.

35:21Brian Preston:The sooner you can get your savings rate up, the more flexibility you're going to give yourself later in life. And what we ultimately want our dollars to do for us is give us flexibility later on. That's why we want you saving and investing 25%. All right, Brian, this next one, I've already alluded to this one. This one's gonna take no time at all. Credit card use, totally okay. If you're someone who wants to get rewards, you wanna have buyer protection, you wanna have extended warranties, you just like the convenience of it, all of those things are absolutely wonderful. We are perfectly fine with you using credit cards.

35:54Brian Preston:What we are not okay with is you carrying credit card debt. We say credit card debt, A-OK. Credit card debt, no way. Yep, we almost nailed that. That is right. We do not like you carrying credit card debt if you're someone who carries a balance month over month. That's because the way, here's the setup. I could have done this in about 20, 10 seconds. Credit card use is A-OK. Credit card rules, credit card debt, no way. That was horrible, but we'll let it roll anyway. No, no, let's do it again. Let's do it for a third time, see if we can get it in there. Credit card rules. Credit card debt, A-OK.

36:28Credit card... Did I say debt instead of use? Credit card rules. Credit card use, A-OK. Credit card debt, no way. Here we go.

36:39Brian Preston:Third time's charm. That was much smoother. All right. As we're talking about rules that you should follow, what I hope you've seen is that all of these are built around this idea that there's a better way to do money. And we think that the best way to do money is to follow the financial order of operations. It lets you understand and recognize, man, what should I do with my next dollar? And how do I know that my next dollar is going in the most effective and most efficient place possible? And if you can let the foo be your guide, you're going to find that the journey to building wealth, while it may not be easy, it's incredibly simple and it does not have to be more complicated than you make it.

37:17Yeah, I just wish we covered so much. I feel like I almost have Jerry Reed and Eastbound and Down blowing in my ear and we got to get some cords across the country. But that's where a lot of you, we've covered so much that a lot of you are like, well, what do I need to do? Because I feel like y 'all just threw a book at me. You threw an entire system as well as all these rules. What can I do if I want to start off? Guys, the first thing I'll do is go look at our resources. I want to invite you to go to moneygod.com slash resources. We literally have a website full of free tools, free downloads, all kinds of calculators.

37:56This thing is going to become your favorite site on your wealth building journey. Don't sleep on this opportunity. I want you to jump in. Take that value from us because you'll remember who planted those seeds of your simple financial life that created so much success.

38:11Brian Preston:Yeah, we want you to do money better. So if you're not subscribed, make sure to subscribe to the channel. We're always going to have brand new, fresh content coming your way. And make sure you go to the website, moneyguide.com. Check out all of our resources. We have a compound interest calculator. We have a tax guide. We have a net worth template. We have a home affordability checklist, a home affordability calculator. If you have a financial question, there's a good chance that we have a financial answer for you out at moneyguy.com. And when you have all the success, look, nobody ever talks about the negative of becoming wealthy, but there is a little bit of a negative.

38:44Your simple life will get complex. And don't worry, just because this is the first time you've ever gone through this, we've done this hundreds, now thousands of times. We'd love to help you on the journey, protect you from what you just don't know. And if you're interested in how do we get through this complex life once we've created so much success, that's where you can take the relationship to the next level. Fulfill the abundance cycle. Go to our website, moneyguy.com. Become a client. We'll leave the porch light on for you. This thing can work. We work with clients all across the country.

39:17I love that we get to keep paying it forward, giving you this value, helping you become successful. And then when you reach that level of success, you say, what do I do now? We'll be waiting for you. I'm your host, Brian. Mr. Bo, Money Guy team. Out.

39:33Brian Preston:The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through 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 all investments involve a degree of risk including the risk of loss close your eyes exhale feel your body relax and let go of whatever you're carrying today well i'm letting go of the worry that i wouldn't get my new contacts in time for this class.

40:21Brian Preston:I got them delivered free from 1-800-CONTACTS. Oh my gosh, they're so fast. And breathe. Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-CONTACTS.com today to save on your first order. 1-800-CONTACTS.