The System to Pay Cash For Cars (and NEVER Have a Payment Again!)

23:29Now, this is a very cool concept because we're going to use the 4 % rule. It's basically a mini fund that you are developing for yourself to pay for cars. Now, one of the things you'll start to learn about me if you're new to this podcast is I think about weird, unique money ideas like this all the time. I spend a lot of time playing with compound interest calculators. Sometimes on a Friday night, I get a little crazy and I play on my compound interest calculator for maybe over an hour just seeing some of the stuff I could do with it. And so in reality, what I'm saying here is that there is some cool, unique, and really, really fun ideas of how to save for these cars.

24:05So when you buy a car, what you're going to do is you're going to spend from this fund. So let's say you're going to build up this fund over time. And once you spend from the fund, then you immediately begin to rebuild it again. The fund is never finished. It's just a work in progress over time. And so for most people, let's say you want to spend$90 ,000 every decade. What that means is that you can start to draw on this fund if you wanted to at a 4 % rate of return. And so a 4 % withdrawal rate on a yearly basis is about$9 ,000 per year. And so if you had$225 ,000 invested, you could draw on this at$9 ,000 per year.

24:39Now, for many of you out there, you're going to be saying$225 ,000. How the heck am I ever going to get there? Time. It just takes a little bit of time and takes investing small amounts of money over time can grow to very large amounts of money. If you feel as though you're in the wealth accelerator phase, meaning you're in the phase where you have some extra cash on hand, you're hitting your retirement goals, you're hitting your investment goals, you can do stuff like this. You can do unique things like building up a mini portfolio that allows you to withdraw for depreciating assets. I love that idea.

25:09Why? Because then your assets are paying for your vehicles instead of you just putting cash towards it the entire time. And so you can draw down on an S &P 500 index fund or draw down on whatever you want, a total stock market index fund, or maybe it's a portfolio of a couple of different things. Maybe you want to build up a dividend portfolio like an SCHD, and you want to draw on that and see how much you would need in cash flow to get to$9 ,000 per year. These are all really cool ways that you can have enough cash on hand where your assets are paying for your liabilities. And the point in time where you get where your assets are paying for your liabilities is really, really powerful.

25:43Another cool way to do this is with real estate. If you have cash flowing real estate, you can also develop something where you have a portfolio of real estate that pays for your liabilities. That's what Robert Kiyosaki talks about in Rich Dad, Poor Dad in the Cash Flow Quadrant. Now, Robert Kiyosaki has a lot of other differences of opinion from me, but when it comes to some of this stuff, it is a really cool idea. And many people are going to say they can't do it. Many people are going to say this is impossible. Many people are going to say, I'll never be able to do this. I don't make enough money.

26:11Listen, I don't ever want to hear those words from you because I know that you can do this. It just takes small amounts of money. Invested over time can grow to very large amounts of money. So if you have a little bit of extra capital on hand, start to mess with a couple of compound interest calculators. Figure out how much you can draw down for 4%. Maybe you're single and you only need to draw down$20 ,000 every decade because that's all you need for a vehicle. Then it's going to be a lot less for you. it's going to be significantly less for you than someone who needs$220 ,000 for two$45 ,000 vehicles.

26:43If you have a two-vehicle household, it's going to cost you more than someone who has a single-vehicle household. So this is what I want you to understand is that you could build up a mini portfolio that allows you to draw down, okay? So the steps for that one is to build up the fund, invest in a diversified portfolio, and figure out how much you can draw down every year, and then use the amount that you can draw down towards your vehicle purchase. The portfolio is going to stay the same, and you don't have to worry as much for some of these vehicles. If you've ever felt like your bank is working against you instead of for you, you're not alone.

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30:24Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Now, the third one is instead of just using it as a fund that you're going to draw down on all the time, the third option is to have a car investing account. So you feel comfortable with volatility. you're comfortable with the market moving up and down, and you're okay with the way that this could go, okay? So what you would do is open something like a taxable brokerage account wherever you like to open your taxable brokerage account.

30:57You invest in something like low-cost index funds, and then you consider only moving money to cash when you're about two years from replacing your vehicle. So it's gonna be similar to option two, but it's gonna be different in the way that you do this because you don't have to invest as much upfront. You don't have to get it as large as maybe number two. And this has the highest expected return, but you accept that if the market is down by like 30 % for example, you wait a year or two or you just pay cash for a less expensive vehicle. And so that's the way that you could look at this and it's a trade-off there.

31:27You could get a really nice vehicle if the market's doing well and if the market's not doing well, then you would get a less expensive vehicle. But there's a couple of rules that I would personally adopt if I went with this strategy. I would not buy a new car until the current one is truly becoming expensive or unreliable. Meaning that when you do a strategy like this, try to stretch it as long as you possibly can. If your car is then truly becoming unreliable, that's when you make the next move. That's when you decide, okay, I know within the next year or so, I need to move some of this into cash because I know within the next year or so, I am gonna have to buy a new vehicle.

31:57Number two is never buy more car just because your income increased. So just because you got a raise and you feel as though I deserve a brand new car doesn't mean you need a new car. If your car is working perfectly fine and you want to follow some of the stuff we're talking about here, hey, if you're a car person and you like to spend money on cars, that's a different story. But if you're not a car person and you feel as though, you know, you just want to upgrade a car so you have nicer leather seats or, you know, you got a nicer dashboard or whatever else, you should see the dash on my truck.

32:23My screen is like this big. It is the smallest screen you will ever see. Everybody makes fun of me. It still has a backup camera, which is cool, but you cannot hardly see anything on that screen. Number three is if you do finance, it needs to be a really low interest rate and then your portfolio needs to be paying those payments. meaning that if you decide to finance and you feel as though there's a delta or a gap, your portfolio starts to pay those payments which is something that you can start to average out or figure out, hey, exactly where that's gonna land. But if you got a 0 % interest rate and you feel as though you wanna keep those dollars invested and you want the portfolio to make those payments, just set it up on auto pay from your portfolio where your portfolio is gonna sell X amount of dollars every single month and then that portfolio pays and then the rest of it stays invested.

33:06Could be a cool idea too. And so there's cool things that you can do with this. I love thinking about this stuff and running the numbers on this stuff. Okay. Now, what I would not do is save the exact purchase price and then stop. Continue on, get a little further along so that your, you know, your portfolio can grow and realize that cars are recurring expense. Because if you get these portfolios large enough, if you do decide to invest a portion of it, I would, again, I wouldn't invest all of it because the market dips. Then you have to make a choice, especially when you need a vehicle to buy a cheaper vehicle.

33:35But if the market is doing well, then maybe you can buy a nicer vehicle. So you got to really be careful on this. Keep a portion in cash if you need a vehicle and then a portion invested. That could be the way that you think about this and building a portfolio in the way that makes a lot of sense for someone who's going to use the funds within the next couple of years. Every time you're two years out, though, I would move a portion of it to cash, especially the portion that you need so that you have it available just in case the market dips. Now, cars, because they're a recurring expense, because there's other expenses associated with them, that's where you want to make sure that you also have enough in this portfolio to help you pay for some of those expenses.

34:10Because then all of a sudden, this thing's growing and it's paying for your expenses, making sure that you never have a car payment again. And all of a sudden you have this portfolio in place that can truly help you long-term. And I think it's a really cool way to pay for depreciating assets like cars. And what you're going to realize is as time goes on, you're probably going to be able to upgrade to nicer cars and nicer cars and nicer cars while paying cash for them, which is so incredibly powerful. And so this is what I love. So a couple of things that I would note and a couple of steps that I would take if you do want to pay cash for cars is the first step is never let your car payment disappear.

34:43Instead, put it towards what you are, your goal or maybe your goal is to have, you know, three years of cash on hand to buy a car. In addition, then the back half is going to be the rest of it's going to go towards investment so it can grow over time and have it in play. But put it in a high yield savings account if you're going to have it in cash so you can get at least a three to four percent rate of return and you can beat out inflation. Again, cars go up with inflation as well. So you want to make sure you're at least trying to outpace inflation with this cash, okay? Number two, only replace cars when the cost per year becomes unreasonable.

35:12Meaning that a lot of people replace their cars too early. They feel like it's unreliable because they had to replace some brake pads or they had to replace a timing belt or they had to replace maybe even part of the engine or their oil was leaking. So they're like, ah, this is becoming reliable. But a lot of times it is cheaper just to fix it and not have the payment. Because if you fix it, then all of a sudden, it's going to last another three, four or five years. Well, that is money well spent. I don't care if you have to replace the engine for six grand, but you don't have a car payment for the next four years.

35:43That's a really good trade-off because a$700 car payment is going to add up to six grand really, really quickly. And so this is one of those things that many people don't realize that it's pretty cost-effective to fix vehicles unless it becomes really unreliable. If you're worried about safety for you or your children, Please do not ever jeopardize that for a vehicle. But what I do want you to do is just be prudent and be mindful that you can fix things. Find a good local mechanic who can help you through these problems, who you know is honest, who you feel as though is honest. For example, my local mechanic where I live, I have developed a relationship with them.

36:17They are honest. They are awesome. And they have been someone who has, sometimes I'll take it in there and say, hey, something feels wrong with this. They're like, there's nothing wrong. You just got to, and they just fix something really quick for me. And then they give it back to me. That's what you want to do. You want to build this relationship with this mechanic long-term so that you feel as though you both are working together. That is what I love to do at least. And if you can't find one in your local area, maybe ask some friends or some family. See if they have any recommendations for you.

36:41Okay? Three, if you want to pay cash for cars, make your next vehicle the one you pay cash for if you haven't done so already. Work on paying off your current payment. And I'm not saying make extra payments toward it. What I am saying though is making sure you're hitting your investment goals first. But as you start to progress, and if it is a high interest debt, then make sure that you get rid of it. Also, don't let lifestyle inflation creep into your car budget. Let's say you're making$75 ,000 per year when you start this process. Then you start making$100 ,000, then$150 ,000. And you feel as though, oh, maybe I should just upgrade my vehicle to the brand new BMW or the brand new Mercedes.

37:14I'm making more money now. I mean, if you want to and you're a car person, fine. But if it doesn't bring you a lot of value and you feel as though that new car smell is going to wear off within a year, it's not worth it. Okay. Next thing is keep the fund invested. If it's years away, if you're 10 years away from buying your next car, well, at least for the next five years, consider investing those dollars because you have a long time horizon there. And so that's going to allow you to really make sure that you're getting the maximum growth on some of this money. And the last thing is make financing kind of like your last resort.

37:45It's the last thing you want to do. Now, many dealers are going to try to talk you out of financing. Many dealers are going to try to talk you out of ever doing that because they make less money when it comes to this. But try to make financing your last resort or maybe a very small portion of the vehicle purchase. Hey, you can get pretty close to paying for cash and maybe financing a very small portion and this will still work. Why? Because maybe you only put a one-year loan on it and then all of a sudden after a year, you're working towards this goal again. And so this is the cool thing about having the ability to be able to pay cash for cars or a big chunk of it is that you don't have to worry about these debt payments anymore long term.

38:19And if interest rates are like they are right now and you're coming back with 7.5%, 8 % interest rates on a lot of car loans, probably better off paying cash than taking on an 8 % loan. That's a pretty high loan. You're going to be paying a lot more for that vehicle than someone else. You're not paying interest when you pay cash. And so you are saving more money long term. So if you do have to finance this, how would you finance this and how would you think about this? Well, our car buying rule is the 24-12-10 rule. Okay. Here's how it works. 20 % down. Now, why would you put 20 % down on a vehicle?

38:52The reason for this is that if you buy a brand new vehicle or even a slightly used vehicle and you drive it off the lot, it is going to have a depreciation hit right off the bat. Well, if you total that vehicle within the first couple of years, you're going to be underwater. Meaning if you bought a $50 ,000 vehicle and it depreciated 20 % when you drove off the lot, now it's only worth$40 ,000, but you get into an accident and you owe$48 ,000 in that vehicle, that means you are still going to owe$8 ,000 if you total that car. So you have two options. You either put 20 % down or you get gap insurance, but gap insurance is pretty expensive and not something I would want to do long-term if I didn't have to.

39:29Instead, I'd rather put the money and roll that money right into the vehicle instead of just paying some frivolous insurance where I'll never get that money back, okay? So 20 % down, that's the reason why. I've talked to people who have done this. They have bought new cars, Three weeks later when they bought the new car, they get into an accident. It's their fault. They total their car. And that's where that 20 % came from. Okay? Four years or less is the second number. So four is four years or less on your car note. Meaning that if you are going to buy a car, you want to never, ever have a loan longer than four years.

40:00And four years is being generous. I would like it even shorter than that. But four years is where most people probably need to land in today's day and age. If you go for six years because you want to stretch it out, you want to make extra payments, You better have some discipline to pay that off. I don't really want you doing that. I'd rather you just committing to the four years so that you have the discipline already in place and you are paying off that vehicle in four years or less. Okay. That leaves you room for six, seven, and eight years to be able to have years with no car payments where you can either build up cash reserves or invest the difference.

40:30And so that gives you the opportunity to build wealth with these depreciating assets. That's why we have it four years or less. The next number is 12. Now, 12 means that you want to spend 12 % or less on car payments and car maintenance combined. So for most people, targeting about 7 % or less on your car payments, 7 % or less on your income on car payments, and 5 % or less on maintenance is the key. Now, why did I put these together and lump them together? Well, the reason for this is because many people go out and they buy a luxury car and try to stretch that luxury car out, not realizing the maintenance every single year is thousands and thousands of dollars.

41:04I did this with a car company that rhymes with Schmercedes. I got myself a Schmercedes. And when I did that, all of a sudden I realized and got to the first oil change. It was$3 ,000 a year. And I said, whoa. And then I had to get some new tires and it was$500 a tire. And now it's probably a lot more than that. It's probably$800 a tire now. I had to get new brake pads and it cost me$3 ,000 instead of$800 like on my F-150. And so all the maintenance costs are going to rise. And many people don't realize that when you buy a car that has high maintenance like this, it can really, really catch you by surprise if you're not prepped for it.

41:40So this is why we talk about 5 % or less on maintenance costs. Now, if you're like, I don't know what the maintenance is annually on this specific vehicle, go to somewhere like Claude or ChatGPT or whatever your AI tool of choice is and type in, hey, I'm thinking about buying this vehicle. I want to know what the maintenance costs are all the way down to the penny. please give me a deep dive of what the maintenance would be over the course of the next 12 years. And it can do a full breakdown of what it believes the average maintenance would be. Then you want to add 10 % or 20 % to that because that is how you make sure that you are protected when it comes to this maintenance, okay?

42:15But car payments need to be 7 % or less. That's going to make sure that you don't try to stretch these payments because between four years and 7 % or less of your income means that you're not stretching the payments out to make it fit. And it means that when you do have 7 % or less, you're actually buying a car that you can afford. I'd rather you spend those dollars other places that are going to help you tremendously. If you want to get to a 20 % savings rate and make sure that you are buying your financial freedom, this is the kind of stuff you got to do, okay? And the last number is 10. 10 stands for driving the car for 10 years or longer, okay?

42:47Every time I say this, people come back and say, you can't drive cars for 10 years or longer. My friend, if you believe that in your head, and you believe that you can't drive a car for 10 years or longer, you have a broke mindset. Just because your experience tells you for some reason, whatever happens, that you can't drive a car for 10 years or longer, you got to make sure that you flip the script on that. Because I have driven many cars for 10 years or longer. And guess what I do? I just fix the problems. So if a problem arises and I got a leaky oil pan, I fix the leaky oil pan. What happens then?

43:23I pay$2 ,500 for a leaky oil pan, but then all of a sudden I have no car payments for the rest of the year. That's a really good trade-off. And then the next year I have to replace all the brake pads and maybe get some brand new tires, but it's cost me$2 ,000 and I don't have car payments for the rest of the year. The next year I have to replace something big like the engine. It costs me$6 ,000, but I don't have car payments for the rest of the year. The next year, because I replaced all these bigger things, then I'm a-okay and all I got to do is standard oil changes, maybe replace some windshield wipers, maybe replace a couple of things inside the car, but it's not as big of a deal, so I spent$1 ,000 on car repairs the next year.

43:57The next year after that, I spent another two. You see how this works where it's a lot less than making car payments? So long-term, if you replace stuff, if you get stuff fixed that would cause this to be unreliable, to make it more reliable, well then all of the sudden, you are really not spending as much as you think you are in comparison to an$800 per month car payment. The average person right now is spending over$900 per month on car payments. Let that sink in for a second because that is a lot of money every single month. And I don't think there are many repairs out there on vehicles that are going to cost you more than$11 ,000 per year.

44:32And so you got to be really cautious about what you say with your words and what you believe and who you listen to. Because many times, and even when it comes to me, you do the math. Don't just listen to what I say. You go do the math. because in reality, most people don't want to believe it because they want the new car. Most people don't want to believe it because they want the brand new vehicle with the new car smell so they could show it off to their friends and show them how well they're doing. Isn't that the reality of what we're doing here? We're trying to show our friends how well we're doing because we got this nice new whip.

45:05Let's ghost ride the whip down the parking lot. I might be aging myself as a millennial with that one. Shout out E40. But in reality, we want to make sure that we are doing the right things and we are listening to the right people. There's going to be a lot of people that come out and say, no, you should lease a vehicle. Why? Oh, your business should lease a vehicle. You should do all these different loopholes to make sure you got the perfect loophole.

45:28Listen, what are we doing here? You got to be cautious when it comes to these appreciating assets because they can pull you down and pull you deeper into a hole that you are already in and they can cause you to stay there. They can cause you to have to be chained to your desk for another five years throughout your life because you made the wrong choices with cars. I want you to have freedom when it comes to buying vehicles, which is why we are talking about this, which is why I'm trying to motivate you to look at this and think through this. And so for me specifically, I've come to the point in time where I'm trying to avoid car payments at all costs.

46:01I'm trying to avoid any payments for depreciating assets. If I want to go out and buy a boat, for example, which is something I may want to do one day, I've decided, I live in Florida, I've decided I probably want to buy a boat one day and I'm trying to decide, should I rent one? Should I buy one? a boat club? And I've gone back and forth. It's going to be cheaper to join a boat club or just rent boats. But there is something about just getting on your boat whenever you're ready to go and shoot out. And so because of that, I'm trying to make that choice. But I'm actively saving as if I'm going to buy it.

46:29But I'm investing those dollars because I don't care if the market dips. If I have to wait three more years to buy this depreciating asset, I'll continue renting until that portfolio regains its value. So for things like that, that's where I'm investing my dollars. But for something where you're going to need a vehicle to get it to point A to point B, you want to be a little more cautious about that. Maybe it's a couple years of cash where you know you have enough cash on hand to buy the lowest version of what you would ever want to drive. And then the rest of it gets invested so you can buy the fancy car if you want to buy it.

46:54I want you to buy the fancy car if you want to buy it. I want you to enjoy your money. I want you to enjoy your life. But you just got to be cautious when you think about this. So that's my plan. That's what I'm going to be doing when it comes to paying cash for cars going forward, is I'm going to take a portion of every single dollar that comes in, and I'm going to be saving it for cars. What I'm doing is I have like a depreciating asset portfolio that I opened. And when I do it, I am going to be putting it personally into probably S &P 500 index funds or QQQM and or something else that, you know, in the future.

47:27So, for example, my boat fund, I'm putting in QQQM. Right now it's in QQQM. And the way I'm compartmentalizing this is I say, okay, I know the boat fund is in QQQM in this depreciating asset portfolio, but for something like my car, I'm going to put it into VOO. And that way it's in VOO. And while it's in VOO, I know that's compartmentalized for the vehicle. And so that, you know, buying different funds is how I'm just kind of using this as a sinking fund without having to open a bunch of different accounts. And so that's the way I'm thinking about it. SPYM is another one that I'm using for other things.

47:56So like there's just a bunch of different things that you could put in your portfolio. You can do an IVV, SPYG. You can do SPYV. There's a bunch of different options out there. By the way, we have an index fund and ETF cheat sheet, by the way. If you go to mastermoney.co slash resources, you can get it there. We also have a car buying calculator. If you want to run the 24-12-10 rule, we have a car buying calculator at mastermoney.co slash resources. I always forget to plug those, but we have those available as well. Now, let's get into a couple of your questions. All right, so we have two great questions here.

48:28The first one comes from Nick. So Nick says, long time listener here. Thanks for all the financial insight you give everyone. I'm 27 with$100 ,000 invested. Well, first of all, Nick, absolutely fantastic. 27 with your first 100K. That is absolutely amazing. I mean, you are going to see this accelerate pretty quickly, which I absolutely love. I have$40 ,000 in my Roth IRA and$60 ,000 in a brokerage. Fantastic. All in SWPPX and QQQM. QQQM, we just talked about that. Perfect. I have$75 ,000 in student loans at just under 6%, a six-month emergency fund. Wow, Nick's killing it. And earn$125 ,000 per year.

49:06I'm starting my Roth 401k next month with a 6 % match. Boy, oh boy, that's awesome. Should I keep investing or start paying down the student loans? I also need to save for an engagement ring in one to two years. Thanks again for all your tips. All right, so Nick, you are crushing it. First of all, you've got a great income coming in. you are really ahead of most people when it comes to how much you have invested. You have$100 ,000 invested. Having your first 100K is no easy feat. So I commend you for that. Absolutely amazing. You have a six-month emergency fund, which you are absolutely nailing this.

49:38So you are in a really strong financial position. And the fact that you're going to get married in two years and be in this strong a financial position is wonderful. It is incredible, in fact. And so what I would say here is you have$75 ,000 in student loans at a 6 % interest rate. Luckily, they're at a 6 % interest rate. It's not going to absolutely kill you when they are right on the line of high interest and low interest. And so here is the exact order if I was in your shoes of what I would do. Now, whenever we're answering these, we're always looking at these as if I was in your shoes, this is what I would do.

50:09Number one is I would make sure I'm hitting my investment goals first. You've already got this great head start. So what I would try to do is target Coast Fi and then after Coast Fi, then try to target some of the other things that you were looking at. So when you think about this, I would make sure I'm trying to hit my retirement number first. And so hitting those investment goals, making the minimum payments on the rest of the debt. So on the student loan, I'd be making that minimum payment. And so when you do this and you're investing, I'd grab obviously that 401k match at 6 % first. And then I would try to max out either that Roth 401k if that's the order that you're going in.

50:40If you're looking at the Roth, the Roth 401k is absolutely fantastic. It depends on your situation. And as your income starts to rise, just continue to think about this and consider, is the Roth the best option in a given year? Usually, that's the option I'd go with no matter how much I'm making because I like that tax-free growth. I think, in my personal opinion, this is just an opinion. I don't have a crystal ball. I don't know what's going to happen in the future. But in my opinion, I think taxes will be higher in the future. Because of the types of things that are happening with Social Security and Medicare and all of the baby boomer generation, I just think taxes are going to be higher.

51:12I just think they are. And so because of this, I just want you to be cautious when you think about that. And so that's why the Roth is great because if taxes are higher in the future, you already pay taxes on all your money and you don't have to worry about it anymore. The next thing I would do is once you start to really hit your investment goals, then I'd be saving for the ring because you want to have some time in place for this. You want to pay cash for the ring. And so this is going to be something that you can either put in a sinking fund into like a high yield savings account because it's two years out.

51:39But that will be the best way to go when it comes to that. Now, here's a pro tip. She's got to be okay with this if you're going to go this route. But here's a pro tip is not everybody wants to hear this, but I'm just going to give you my two cents on this and see if you can have a conversation about it. Lab-grown diamonds are the way to go. Now, when we think about lab-grown diamonds, they're significantly cheaper, but they are 100 % the makeup of a real diamond. It's just people feel as though a real diamond is more valuable Well, because it wasn't grown in a lab, but they are 100 % the exact chemical makeup of a real diamond.

52:17And they are significantly cheaper. So if you can get her to go lab grown diamonds, you got to have this conversation first, because if she doesn't want that, obviously, that's that's another thing. But if I were you, that's the route I'd go because it's significantly cheaper. A. B. It is better overall for the entire environment. We're not going to go into politics here, but we're not going to go into B. It's better overall for humanity, because obviously blood diamonds, that whole ordeal. And then C, the value of real diamonds keep dropping. And over the last couple of years, I have noticed the value of diamonds really dropping.

52:50I even told my wife, we upgraded her engagement ring. And when we upgraded it, we upgraded her engagement ring at our 10 year anniversary. And when we upgraded it, she has a real diamond that I gave her, which is like a little over a carrot, I think. And then she got the lab-grown diamond as the upgraded ring. And she might not want me saying that, but I don't know if I, well, it's too late. And we upgraded with the lab-grown diamond and the value of the diamond, and I got a really nice diamond for her engagement ring. The value of the diamond that I proposed with continues to go down. And I'm like, well, you don't wear this anymore.

53:25Should we trade this in and or try to get the value out of it before diamonds really start to drop? And she wants to keep it for sentimental value, which I get, but at the same time, I'm thinking financially and I kind of want to trade it in. But anyways, that's a whole side note. Anyways, as we go through this, this is one of those things that you want to make sure that she's okay with that first. But yes, I would start saving for that ring. I would start to save for it now because lifestyle, especially something big like that, you want to make sure that you have that in play. Then when you have extra cash on hand after that, maybe you get a bonus.

53:54Maybe you get a tax return. Maybe you have extra cash that comes up at the end of every single month. Then you can start to put it towards these student loans. because if you can start to get chunks of these student loans paid down, maybe in bigger chunks, then you can get rid of it and get it out of your life. And what I would do is I would develop a plan that maybe by the time you turn age 35, you haven't paid off. That'll give you enough runway where you're still comfortable, you know, living your life, enjoying life, you know, saving up for this diamond, doing the things you actually want to do, saving up for your wedding that comes up after that, but also having the ability to be able to get these paid down with a plan over time.

54:26See, that gives you enough runway where you got, you know, eight years to pay off that$72 ,000. And that's a lot more manageable than it would be if you just tried to accelerate it really, really quickly. Now, if you're the type of person that is happy to just rip the bandaid off and pay them off quickly, and they bother you, they keep you up at night, then more power to you if you want to pay them off early. There's nothing wrong with that. You'll get a guaranteed 6 % rate of return. But I think you have higher priorities right now. And because you're doing so well with your investments, and you are disciplined, I can see that you're disciplined.

54:52This is the reason why I'm telling you to go this route. So again, Again, hit your investment goals and making sure you're hitting your retirement number goals. Then go out and, you know, get that employer match, max out the Roth, those types of things. Then start saving up for your engagement ring and then take that extra cash and throw it at student loans as the last thing that I would do. So really, really good stuff. And again, you are crushing it, Nick. Thank you so much for sending this question and feel free to send me any other questions that you guys may have. And again, as a reminder for everybody out there, join the Master Money newsletter and you can get your question answered on the show just like this.

55:25The next question we have is from Dan. So Dan says, love your videos. And when you leave a job, when does it make sense to roll your 401k into an IRA versus rolling it into your new employer's 401k plan? My financial advisor wants me to roll it into his IRA, but I've always done 401k rollovers at past jobs. My balance is a lot higher now, so the decision feels bigger. And you're right, Dan. This is a great question. And the decision is going to be bigger with the larger amount. Now, let's talk about the options that you have available to you. I'm going to give you the pros and cons of each option.

55:56Option one is to roll it into your new employer's 401k. That is typically not what I love to do, unless your new employer is at like a Vanguard or a Fidelity or a Schwab and you feel as though, hey, I love the investments that are in here. This is a low cost 401k. There's great stuff in here. It's the same stuff I would be investing in somewhere else. Then more power to you. If you want to keep it all in one spot, because you don't want to have to worry about it and you just want to have one login, I think that's completely fine. Two is to roll it into a rollover IRA. Now, this is personally what I did.

56:26I rolled it into a rollover IRA at Vanguard. And when I left my job, I left it there. And what this does is it gives you options. It gives you flexibility and it gives you freedom. So I roll it into Vanguard because that was the choice brokerage at the time that had the best possible funds that I went to invest in. Because when you do this, you get to choose the funds that you get to invest in. You get to choose the brokerage that you're gonna roll it over into. And sometimes, Dan, sometimes some of these brokerages will give you a match if you roll it over. So look and see if there's some matches out there.

56:58There may be some that'll give you a 1 % match. That could be worth it if it's a large enough amount. So look into rollover IRAs. Mine's at Vanguard personally. Charles Schwab has them. Fidelity has them. There's other places like SoFi that has them. I think SoFi is one to look into if you want to look at the 1 % match. There's others out there that probably have a 1 % match too. But it could be a good option for you if you want to just get that boost. I mean, if you have, you know, $500 ,000 invested into a 401k and you roll it over into a 1 % match location. That's an extra five grand that you could be getting.

57:28So really, really powerful stuff there. And then number three is to roll it into your advisor's IRA. Your advisor is saying that they want you to roll it over there because A, they make more money if you roll it over there. So I get why they're asking you to roll it over to them, but you have to make the decision. If I roll this over and then they're managing another 1 % or 2 % of my money. What is that going to look like? If it's a$500 ,000 balance, that's$5 ,000 per year that you're going to be giving up to an advisor or 1.5%, it's going to be$7 ,500 per year. Now, doesn't mean it's the wrong decision, but it's a big balance.

58:03It's a big difference. And if you look at the compound interest of that, then you could be looking at something where you're going to be investing it anyways, then maybe you make the choice of looking at the cost there. Is it worth$7 ,500 per year? Or if it's at 2%, it's$10 ,000 per year at$500 ,000. bucks. At a million bucks, it's$10 ,000 per year at 1%. It's$15 ,000 per year at 1.5%, and it's$20 ,000 per year at 2%. So the higher the number, the more expensive that it gets. And so when you look at this, it's a multi-million dollar decision if your advisor is charging AUM. Now, if they're not charging AUM and they're just helping you open an IRA up, or if their AUM is low, like for example, there's advisors out there that have a lower AUM than 1%, then it may be worth it if it's peace of mind for you and you just don't want to deal with it.

58:48But if it's something that you feel as though you could do it yourself or you kind of know what you're doing, at least with your 401k, your retirement accounts, then consider some of the other first two options. Again, mine was I rolled it over to Vanguard. That's the way I did it. If you like the options at your current employer, they can go that route. But if you are like, I don't know which one to do, just do a rollover IRA. And if you're like, I don't know which one to do, consider the rollover and do some research on that. That I think is the easiest path for most people. So really good question, Dan.

59:16I truly appreciate you sending this in. If you have any other questions on that, please let me know. And thank you so much. Listen, I truly appreciate each and every single one of you listening to this episode. And if you are getting value out of these episodes and you feel as though you want to go deeper with me and you want to go deeper with my team, we are going to be offering a couple of different things. One is we potentially will be doing some one-on-one coaching. And if you want to do some one-on-one coaching with me directly, just email me, andrew at mastermoney.co. Or if you feel as though you would do well with group support in a group setting, consider Master Money Academy.

59:53Master Money Academy is our community where I do weekly live coaching calls with you specifically, you in a group, you in the entire community, and you ask me questions and I answer your questions. And we have all of our courses in there. We do monthly meetings on a specific topic and you can ask your questions to the rest of the community as well. And Master Money Academy is something I am really, really proud of. And I'm really, really excited for you to experience if you haven't done so already. We're going to give you a seven-day free trial linked up down below that you can check out if you want to join Master Money Academy.

1:00:22There are tons of amazing wealth builders inside of Master Money Academy that are all working towards building up wealth. I'm really excited. If you want to join for seven days, check it out. See what's going on in there. Take a couple of courses. Join a couple of the coaching calls and see if it's right for you. Great. If it's not right for you, no hard feelings whatsoever. I just appreciate you checking it out and being here and being part of this community. Because one of the things that I want every single one of you to know again is that my goal is to bring you as much value as possible. I want us to create a million millionaires.

1:00:52I want you to be able to learn how to build wealth and change your financial tree for your family. And so because of that, we just want to make sure that we're helping as many people as we possibly can. So if you're interested in any of that whatsoever, reach out. Truly appreciate you. If you're getting value of the show, though, please leave a five-star rating and review. Those mean the world to me. I cannot thank you guys enough for leaving those five-star ratings and reviews. And if you want us to do episode on a specific topic or you got questions, feel free to email me and we will consider those options.

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