This video from The Money Guy Show provides a comprehensive guide to financial planning across different age groups, focusing on the 20s, 30s, and 40s. For people in their 20s, the emphasis is on building a strong financial foundation by managing cash flow, avoiding bad debt, and starting to invest early. The 30s are described as the "messy middle" where increasing savings rates, being mindful of lifestyle creep, and making career decisions are crucial. Finally, the 40s are seen as the "top of the mountain," a time to enjoy financial success from earlier efforts, but also a period to define personal financial goals and consider more advanced planning.
Key Takeaways
1
For those in their 20s, it's crucial to establish basic financial habits like spending less than you earn, avoiding credit card debt, and automating savings.
2
In your 20s, prioritize covering insurance deductibles and building an emergency fund to protect against unforeseen financial setbacks.
3
Time is your biggest asset in your 20s for investing, as even small amounts saved early can grow exponentially due to compounding.
4
In your 30s, as income increases, ensure your savings rate keeps pace, aiming for a 25% savings rate of your gross income.
5
Beware of lifestyle creep in your 30s, especially with big purchases like cars and homes, which can derail financial progress.
6
The 30s are a critical time to assess if your current job is a "career" that contributes to long-term financial goals, as making a career transition becomes harder later in life.
7
In your 30s, it's essential to have sufficient life and disability insurance, especially if others depend on your income.
8
By your 30s, a fully funded emergency fund (three to six months of living expenses) should be a non-negotiable.
9
If you have children in your 30s, creating a will is crucial to ensure guardianships and asset distribution are handled according to your wishes.
10
In your 40s, it's important to define your 'why' for financial decisions and avoid continuously moving financial goalposts.
No matching segments found
0:00
financial planning 101.
0:03
it's brian preston the money guy
0:07
brian i am super excited about today's
0:09
show because this allows us to do a
0:10
little bit of flexing uh one of the
0:12
things that we have to do when
0:15
we go to financial planner school right
0:17
when you become a financial advisor when
0:19
you study for the exams is you have to
0:20
learn
0:21
about some
0:23
basics of financial planning right we
0:25
learned it in the context of the
0:27
financial planning pyramid right like
0:29
how the different parts of financial
0:30
planning stack on one another was you
0:32
and i were talking we said you know it's
0:34
sort of different
0:35
how you approach the pyramid and the
0:37
basics and the thought process around
0:39
each of those subject matters
0:41
at each age and stage so why don't we
0:43
kind of run through what we dubbed
0:45
financial planning 101
0:47
at each age and stage and range of life
0:49
but i don't know why when you said
0:52
financial planning school i had visions
0:53
of the north pole with tim allen as the
0:56
santa claus and we're running around
0:58
maybe it was a buddy the elf we're doing
0:59
that with tim allen i've like brought
1:02
every christmas movie out there
1:04
together for its own mashup um i i think
1:06
that what i like about this show is that
1:08
there's so much of financial twitter
1:11
um because that's what that's the spaces
1:12
i'm hanging out where they will give
1:15
really good simple information like
1:17
spend less than you make
1:19
control debt automate your investments
1:22
you know every bit of that is
1:23
foundational knowledge
1:25
but i think it auto we're financial
1:27
mutants we need to go beyond that and
1:29
that's what i like is that how do we go
1:31
beyond basic how do we get you guys with
1:34
the right
1:35
mutant mindset to really take it to the
1:37
next level yep love it so let's let's
1:40
jump right in let's go into the 20s i
1:42
mean i want to talk about building that
1:43
base up
1:44
uh there's a lot going on in this decade
1:47
because you've got to build the
1:49
foundational knowledge this is i know
1:51
when i graduated college
1:54
that's when i discovered that
1:55
millionaire next door book the wealthy
1:56
barber and it just lit a fire in my
2:00
brain on on starting to say but there is
2:02
so much i i worry about
2:04
anybody who's in their 20s now is
2:06
because it is also the greatest time to
2:08
be alive to be an investor to be a saver
2:10
but it's also the scariest in the fact
2:12
that there's just so much information
2:15
how do you how do you kind of curate it
2:17
and bring it back
2:18
um and and there's also some emotional
2:21
stuff that's just to say not only is
2:22
there this like vat of information about
2:24
it i know when uh i hear this all the
2:26
time from young folks or folks that are
2:27
just graduating i didn't learn personal
2:29
finance i didn't have that class in
2:30
college didn't have that class in school
2:32
so there's tons of information tons of
2:34
knowledge to be had but there are so
2:35
many distractions for those in the 20s
2:37
this is our first i mean i guess college
2:39
was our first like taste of freedom but
2:41
this is our first like taste of like
2:42
real adulthood adult adulthood and
2:44
there's a lot of things that can like
2:45
get us off track and send us in
2:47
different directions
2:48
so we think if you have some of this
2:50
foundational knowledge built it can help
2:52
keep you in line so let's let's talk
2:54
about this how do we do it and i like i
2:56
want you if you're a 20-something how do
2:59
you automate this process let's make it
3:01
automatic for the people let's talk
3:03
about the financial planning pyramid so
3:04
if we think about this pyramid and sort
3:06
of the base that we have to think
3:08
through number one is cash flow right
3:10
money coming in money going out and so
3:12
when it comes to things to think about
3:14
in your 20s number one is obviously very
3:16
basic
3:17
spend less than you make learn how to
3:20
live on
3:21
less than the income that you have
3:23
coming in if you can just figure out
3:25
that one thing we call it deferred
3:27
gratification we need to figure out that
3:28
one thing you're already going to put
3:30
yourself worlds ahead of your peers yeah
3:33
and think about it in terms of don't a
3:35
lot of people i think they just wait to
3:36
see what's left over at the end of the
3:37
month
3:38
no you need to be very proactive in your
3:41
cash flow planning to where you're
3:43
actually paying yourself first that's
3:45
back to that automatic wealth creation
3:48
by going ahead and creating a system
3:50
dollar cost average every month have
3:52
money going into your investments so
3:54
that you don't let this just whatever is
3:56
left over is what i invest that's not
3:57
gonna work number two and you hear us
3:59
preach this one all the time understand
4:02
the dangers of debt now we are not here
4:03
at the money guy show anti-debt or
4:06
against all debt but we do recognize
4:08
that it is a tool that can be incredibly
4:10
useful in your financial toolbox tool
4:13
box but it can also be incredibly
4:15
dangerous and i worry that a lot of
4:17
folks in their 20s use it carelessly and
4:20
use it haphazardly well but i want to be
4:22
careful because um you know you look at
4:24
uga football
4:26
there's a danger there's a danger of
4:28
some of the coaches when you look back
4:29
through the history they were known as
4:31
players coaches meaning they didn't
4:33
squeeze to get the they were too
4:35
friendly with their with their players
4:36
they didn't get the best out of
4:38
everybody you kind of want to go with
4:40
that field general where you know you
4:43
like your coach but you want to make
4:44
sure that you got a little bit of fear
4:46
there and that's why i do think that at
4:48
this stage if you're not scared of your
4:51
debt that's why we always talk about
4:52
treat it like it's a chainsaw if you're
4:55
using debt and you're not scared you're
4:57
probably using it wrong and that falls
4:59
on the credit cards because i think in
5:00
your 20s
5:01
that is the big big risk is because you
5:04
look at this as a bridge i'll just take
5:06
the credit card debt it will bridge me
5:08
until i make more money and then i'll
5:10
pay myself back the problem is no it's a
5:12
siren song you'll get trapped you'll get
5:14
behind and you'll look back in that one
5:17
bad mistake if you can't pay it off
5:19
monthly don't even use it and this one
5:21
this last one i think in today's society
5:24
in
5:25
today's culture
5:26
this is one that's interesting spend
5:28
what is left after saving you said this
5:30
brian automate your savings learn how to
5:33
do that early and then live on the cheap
5:36
i think the 20s is probably the only
5:38
time in your life where it's okay
5:41
to live incredibly cheaply to really
5:43
pinch pennies to really i mean i i don't
5:45
mind this is not the greatest like
5:47
health thing but youthful cover lines
5:49
when i was in my 20s like i don't know
5:50
that i had the best diet i was going to
5:52
like publix and i was buying the you
5:54
know the two for one cereals and i was
5:56
eating that for a lot of meals i'm not
5:58
recommending that as like your nutrition
6:00
plan but man it was pretty awesome
6:02
having those extra dollars to be able to
6:03
put into my roth ira i'd like to say
6:05
we're not recommending captain crunch
6:07
every meal that is definitely not a
6:08
recipe honey nut cheerios that's the
6:10
healthy one but i do want you to
6:11
bedazzle the basics there's no reason
6:14
that you can't still enjoy your life but
6:17
do it in a very cost effective way and
6:19
the reason we're so
6:21
focused on the discipline the deferred
6:23
gratification is because there's
6:24
exponential echoes meaning that whatever
6:27
you do in your 20s
6:29
will just have tremendous exponential
6:31
growth opportunities in the long term so
6:34
it is if your car payment is 250 a month
6:38
versus 700 a month and you get to take
6:40
that difference and actually throw it
6:42
into investments i'm telling you your 50
6:45
year old self will give you the
6:46
sloppiest hug you've ever seen because
6:48
they'll be so happy
6:50
that they'll leave you know tear stains
6:52
on you as as you back away from the hug
6:55
but it is one of those things focus on
6:57
that great big beautiful tomorrow it
6:59
doesn't happen without taking small
7:01
little steps while you're in your 20s
7:04
and bo this leads to i want to talk
7:06
about risk management because we're
7:08
talking about how to get the cash flow
7:10
right but we do have to make sure that a
7:13
little thing that should be a setback
7:15
doesn't throw you into desperation and
7:17
chaos that's exactly right if you've
7:18
been listening to the show for any
7:20
amount of time you know that we love the
7:22
financial order of operations it's a
7:24
nine step tried and true process
7:27
to get you through the financial
7:29
decisions you have to make well step
7:30
number one in the foo
7:32
is to have your deductibles covered that
7:34
means your health insurance deductible
7:35
your auto deductible your home
7:37
deductible so that if something happens
7:39
if that unknown tuesday event takes
7:42
place you at least have money to keep
7:44
yourself out of the ditch and you may
7:45
say oh well that doesn't seem like a big
7:48
hurdle that doesn't seem like a huge
7:49
threshold to get over
7:51
we know that right now
7:53
56 of americans have less than a
7:56
thousand dollars in savings i mean if
7:57
some uh-oh came along they couldn't come
8:00
up with a thousand bucks without going
8:02
into debt so this shows us that if all
8:04
you have done is covered your
8:05
deductibles you are likely doing better
8:08
than 56 of the other folks in this
8:10
country historically this number is
8:11
close to 60 we look at this number every
8:14
year and i think the only reason it's at
8:16
56
8:17
is probably post pandemic there was um
8:19
you know money that it had been paid out
8:21
and so forth i wouldn't be shocked to
8:23
see this number go right back to 60
8:25
don't be don't be that i mean that's a
8:27
step one of financial abundance when we
8:29
go through our levels of wealth is just
8:31
having enough money to where you can
8:33
cover the deductibles covered so you
8:36
guys and by the way i feel like it's
8:37
cruel if we don't talk if we talk about
8:39
the foo and we don't say
8:40
moneyguy.com resources if you two want
8:43
to download what the nine steps are if
8:45
you want to go to learn.moneyguy.com we
8:47
actually have a deeper dive course that
8:49
you can go check out but another thing
8:51
when you're in your 20s you're healthy
8:53
yep so a lot of people i think you feel
8:55
bulletproof
8:56
health insurance is expensive it's
8:59
boring a lot of 20 year olds don't even
9:01
feel like they need it but we want
9:03
people to have health insurance i get so
9:05
sad when i see someone say hey you know
9:07
i'm about to get 26 i've been on mom and
9:09
dad's health insurance but i'm about to
9:11
age out of that
9:13
uh and you know i'm just i don't
9:15
that extra 200 a month 300 whatever it
9:18
is i'm just going to avoid i don't go to
9:19
the doctor i don't need it the problem
9:22
is the reason that we have insurance is
9:24
to cover those things that we don't know
9:26
those o's that we're not prepared for
9:28
you don't want to be in this situation
9:30
when you're 27 28 29 years old where you
9:32
get in that car accident or you have
9:34
that accident at the gym or whatever the
9:36
thing is that puts you in the hospital
9:39
and you are literally
9:41
flying naked because you have no
9:43
coverage don't do that make sure you
9:45
have the right types of insurance in
9:47
place well we also know a lot of
9:48
bankruptcies are caused by absolutely
9:50
medical type things that happen and you
9:52
don't want to have a an oopsy or a bad
9:55
thing just like you describe
9:57
really side rail you to where even if
10:00
you file bankruptcy you're still it's
10:01
going to take
10:02
close to a decade seven to ten years to
10:05
get back to to ground zero where you
10:07
even have the ability to do normal
10:08
things like mortgages and so forth
10:10
it's just not worth the risk have health
10:13
insurance we also listed have property
10:15
insurance um what we're talking about
10:16
here a lot of you probably do rent i
10:19
mean and look even though you're not in
10:21
charge of the grounds
10:23
you are in charge of everything that's
10:25
inside the wall so renters insurance
10:27
should not even be overlooked if you're
10:29
in your 20s
10:31
it's too cheap to protect yourself from
10:33
the big oopsies that totally derail and
10:36
side rail your financial life and then
10:38
the other thing in your 20s you're going
10:39
to be thinking about is you want to be
10:41
building your emergency reserves again
10:43
you might not fully have step number
10:45
four of the foo maxed out you might not
10:47
have that full three to six but you
10:49
ought to be working towards that once
10:50
you've got the deductibles covered then
10:51
you want to make sure that you have
10:53
somewhere between three to six months of
10:56
your living expenses in cash on the
10:58
sidelines again in case something
11:00
happens job loss medical emergency
11:02
whatever you can cover those unknown
11:05
circumstances that might happen so we've
11:08
kind of covered cash flow we've covered
11:10
risk management let's talk about how the
11:11
the sexy stuff that actually creates
11:13
wealth and that's investing putting that
11:15
army of dollar bills to work here's the
11:17
first thing i need 20 somethings to know
11:20
you recognize you're a billionaire of
11:22
time yep i mean that is the biggest part
11:24
when i talk about the three components
11:26
of wealth creation we have discipline
11:28
that's your focus that's that deferred
11:30
gratification that creates margin um
11:33
that allows you to invest money you know
11:36
cash flow is always needed and then that
11:38
third component is the most important
11:40
component which is time and since you
11:42
when you're in your 20s you are a
11:44
billionaire of seconds and minutes it is
11:47
crazy for you not to maximize the
11:49
exponential growth opportunity and this
11:52
is just how powerful that time can be
11:54
you've heard us say it all the time on
11:56
every show that we have brian keeps a
11:58
koozie right there that says this one
12:00
dollar can turn into 88 there's this
12:03
concept that for someone who's 20 and
12:06
they put one dollar to work over the 21
12:09
for the beer drink if you're a beer
12:10
drinker you've got to be 21 retire at 66
12:12
but if you're just a 20 year old working
12:14
one dollar can turn into 88
12:16
by the time that you get to age 65. at
12:20
the early parts of your career your
12:22
dollars are more powerful than they will
12:24
be at any other time in your working
12:26
life so the sooner you can figure this
12:28
out the earlier you can start saving
12:30
saving
12:30
the better off you will be if you want
12:32
to know what your multiplier is based on
12:35
your age go to moneyguy.com resource so
12:38
we have this wealth multiplier you can
12:39
see it on the screen and it shows that
12:42
at 20 it's 88 but by the time you get to
12:44
25 it drops down to 44. still super
12:47
powerful but the earlier you figured out
12:49
the better off you will be for the long
12:50
term yeah a lot of people if you're
12:52
brand new because look you all wonder we
12:54
cover these concepts 50 of you are brand
12:57
new to the money guy channel and i want
12:59
to tell you you're saying how tell me
13:01
how do i do this let's go get me this
13:02
type of multiplier in the beginning
13:05
there's nothing wrong with index target
13:07
retirement funds where you basically
13:09
have to answer two questions how much
13:10
can i save when do i need it they will
13:13
do all the heavy lifting of the asset
13:15
allocation dealing you know get being
13:17
very aggressive while you're young
13:19
getting more conservative as you're
13:20
older now look you will outgrow this at
13:23
some point but it's that great big
13:25
beautiful tomorrow moment where you're
13:26
super successful you need a financial
13:28
planner but in the beginning an index
13:30
target retirement fund that doesn't have
13:33
commissions and the three biggest
13:34
providers are like the vanguards the
13:36
fidelity investments the charles
13:38
schwab's they're going to be able to
13:40
hook you up focus on how much you can
13:42
save more than where the money goes
13:45
because savings rate is so much more
13:47
important than the the mix of things
13:50
when you're starting out all right so
13:51
now as we're working up in the pyramid
13:53
we get to more complex items and one of
13:55
the items that gets a little more
13:56
complex is tax planning
13:58
it's so funny with where i sit right now
14:00
i look back to my 20 year old self and
14:02
i'm kind of envious of what tax planning
14:05
was like for me back then i used to
14:07
think and you said this too brian man i
14:08
can't wait till it's complicated i can't
14:10
wait till i have k1s and schedule cs and
14:13
schedules and all these different things
14:15
in your 20s don't try to make your taxes
14:18
any more complicated than they have to
14:20
be i miss the time brian when i could
14:22
take on like april the 14th i could
14:25
spend about 20 minutes going through my
14:26
tax return and just get it done very
14:28
very quickly that will change so don't
14:31
try to complicate your tax life it's
14:34
okay early on if it's fairly simple yeah
14:37
i mean i think for most people this is
14:39
when you're in your 20s more than likely
14:41
you're doing your taxes in the
14:42
februaries because you're just taking
14:44
your w-2 you want to get that you want
14:46
to get that
14:47
money you know coming in
14:49
so so yeah don't go chasing complex it
14:51
will find you with further success it
14:55
will come
14:56
you can use tools like turbo tax we even
14:59
threw out um the the referral because i
15:01
know what you volunteered with uga
15:04
um and this is everywhere vita is a
15:07
not-for-profit organization that helps
15:09
people in the community prepare their
15:10
taxes we remember we even have um some
15:13
clients that volunteer that is their
15:15
retirement as they retire they they
15:17
retire into this is one of their
15:19
community involvement things i think
15:21
that's outstanding because we all know
15:22
financial mutants get this stuff if
15:24
you're curious and it's a free service
15:25
it's vol volunteer income tax assistance
15:28
you can go look up vita it's a really
15:30
really great program not a bad thing to
15:33
think about if you have a very simple
15:35
tax situation all right well then we
15:37
have estate planning now i don't know
15:38
about you brian in my 20s estate
15:40
planning was not something that was like
15:41
top of mind i just wasn't i wasn't
15:43
thinking about my mortality there and i
15:45
wasn't thinking there really there was a
15:47
lot of work for me to do there so one of
15:50
the things we said that just sort of a
15:51
basic thing is make sure beneficiaries
15:53
are updated on your account so if you
15:54
have a roth ira make sure you have a
15:57
beneficiary added to that if you have
15:58
your 401k that you are contributing to
16:01
make sure that you have beneficiaries
16:03
listed on that account so that in the
16:05
unbelievable event that something did
16:06
happen to you your assets would pass to
16:08
the people that you want your assets to
16:10
pass um estate planning if you have
16:12
because there are com you know things
16:14
that complicate life you know obviously
16:15
if you have children and other things
16:17
make sure
16:18
your estate plan you still would
16:19
probably want a will or something we had
16:21
a whole discussion is this a napkin
16:23
estate plan is this bowler plate i think
16:26
in the beginning the biggest thing is
16:28
make sure those big risks like hey who's
16:31
going to take care of the kids and you
16:33
know and how my assets are going to pass
16:35
just make sure you are giving a little
16:37
thought to that it's probably not going
16:38
to be super complex in your 20s but it
16:40
still deserves
16:43
your attention so that no mistakes are
16:45
made just in case all right brian so we
16:46
talked about the 20s the 20s is this
16:48
decade uh where we are building the base
16:51
we're doing our foundational knowledge
16:53
well then we get into our thirties and
16:56
we no matter how many times we try to
16:57
change the name of this we don't change
16:59
you i don't know why you try
17:01
coming up with creative things but this
17:02
is so true it it is in fact and i'm
17:05
living this so very truly
17:07
30s is the messy middle it's what this
17:09
is this is like you throw the arrow you
17:11
throw the dart and it hits the bullseye
17:14
and now you're upset that it's on the
17:16
left side of the bull's eye versus i
17:18
mean when we call it the messy middle i
17:20
think that this is actually comforting
17:22
because i think it is hopefully
17:24
every one of you who are in your 30s and
17:26
you're like man i made it through my 20s
17:29
i'm in my 30s i thought this would be
17:31
feeling easier right now but it's just
17:33
not because you're super busy at work
17:35
you know if you got a significant other
17:37
you're trying to figure out the whole
17:38
family thing and then add on there this
17:40
whole craziness with the real estate
17:42
market and that first home purchase
17:45
it is perfectly okay that this is called
17:47
the messy middle because i think that
17:48
that should hopefully
17:50
give you some comfort that this is
17:52
you're in the right season of life all
17:55
right so let's talk about the financial
17:57
planning pyramids or the basics in your
17:58
30s now it's likely that your cash flow
18:01
has changed you're likely making more
18:03
money
18:04
whether it be through wages income side
18:07
hustles bonuses than you did in your 20s
18:10
so one of the things you want to make
18:12
sure you do is that your savings rate
18:14
follows suit i see this all the time
18:15
with my friends brian i'm like hey start
18:17
saving in your 20s 500 a month and max
18:20
out that roth ira and they start doing
18:22
it well they get some promotions and
18:23
their job search circumstances change
18:26
and their 30s i'm like hey man how are
18:27
you doing oh roth is doing great still
18:29
doing 500 a month and i'm like no dude
18:32
you got to like as your income goes up
18:34
so too does the amount that you are
18:36
saving that's why we talk about that 25
18:39
savings rate that you ought to be
18:40
shooting for if your income increases so
18:43
too should the dollars that are going
18:45
into your army of dollar bills yeah i
18:47
mean it's a big part i have a lot of
18:49
grace for my 20-somethings because i
18:51
know you come from you know pretty much
18:54
zero and you're building this thing up
18:55
so to say 25 of your gross income is
18:58
hard in your 20s in your 30s you've got
19:00
to be reaching completion on completion
19:03
on reaching that goal um and this a big
19:05
part of this lifestyle creep
19:08
and this is the thing look you make a
19:10
mistake on we hear about the latte
19:12
factor and all these things where people
19:14
are buying coffee that's not really what
19:16
we're seeing the problems the problems
19:18
we see for 30-somethings is how big is
19:20
that car and that car payment how big is
19:22
your mortgage and that mortgage payment
19:24
because instead of hundred dollars a
19:26
month mistakes here we see thousands of
19:28
dollars a month of mistakes that just
19:30
are being spent on these on the cost of
19:33
just staying alive and looking good
19:36
versus building that great big beautiful
19:38
tomorrow in the future yeah there's some
19:39
really interesting statistics that
19:41
daniel pulled for this on us we we know
19:42
that right now the average age of a
19:45
first time home buyer is 34 years old
19:48
that's kind of remarkable because
19:50
in our experience both of us bought our
19:51
first home before age 34. what i think
19:55
is really even more remarkable i think
19:56
it's probably one of the reasons that
19:58
this age has increased over time
20:01
is that the median home price in this
20:02
country right now is 408
20:06
dollars that is an increase of over 24
20:10
since pre-pandemics since the beginning
20:13
of 2020
20:14
it is remarkable how much more expensive
20:17
houses have become and because of that
20:19
it's pushing that large decision that a
20:22
lot of us will make in our lives out
20:24
into the decade of the 30s right there
20:26
in the square in the middle of the messy
20:28
middle yeah i'm going to tr i'm biting
20:31
my tongue because this is one of those
20:32
things between the student loan crisis
20:35
as well as now the home prices for
20:37
first-time homebuyers we've got a
20:39
problem that's why um
20:41
yeah i'll bite my tongue because we're
20:42
not a political show but we definitely
20:45
we need more younger people in
20:47
government are involved with it i think
20:49
the time for the 80 year olds that are
20:51
running um all policies we ought to re
20:54
really rethink it because i don't think
20:55
that's a bullet because it's both sides
20:57
but it is definitely
20:58
we have an issue here that we need to
21:01
make sure and but hang out there we're
21:03
it's going we're going to get through
21:04
this and i still am very optimistic in
21:07
the long term that there will be
21:09
opportunities that come and so i think a
21:10
lot of people out there saying hey well
21:11
i can't control this housing thing this
21:13
is something that's happening against my
21:15
will i can't fight it
21:17
that very well may be true now however
21:19
there's another consumption decision
21:21
that we see a lot of people making and
21:23
this one very much is inside of most of
21:25
our controls and that's how we purchase
21:27
automobiles right now that we know when
21:29
it comes to buying a car the average
21:32
auto loan term for a car is 72 months i
21:35
know most people don't even keep their
21:37
cars for that long but they're having
21:38
loans for 72 months and one in three
21:40
folks right now who trade in their
21:42
vehicle
21:43
they're actually underwater on their
21:46
loans so they are trading in negative
21:49
equity you will never build wealth that
21:51
way you will never reach financial
21:53
independence if you just keep rolling it
21:56
in so i think in your 30s when you
21:57
actually have the money to be able to
21:59
qualify for these loans and you can get
22:01
into luxury cars you have to really
22:03
check yourself and say man am i doing
22:05
the things i'm supposed to be doing and
22:07
am i doing them in the right order or am
22:09
i getting things out of the way i mean
22:10
remember i said moneyguy.com
22:12
resources we have the free deliverable
22:15
of the nine steps of the financial order
22:17
of operations guys
22:19
the fancy cars that stuff doesn't happen
22:21
until you're on steps eight and nine i
22:24
mean there is nothing wrong if you you
22:26
realize 23 8 is what we talk about all
22:29
the time meaning that you're putting
22:30
down at least 20 percent and realize
22:33
this formula is grace field so that you
22:35
have a reliable car that will get you to
22:37
work because
22:39
working and building wealth by automated
22:41
investing is what's going to happen so
22:42
20 down
22:44
three years no more than three years on
22:47
the financing and no more than eight
22:49
percent of your gross income and we're
22:51
talking about
22:53
non-luxury brands if you want to get
22:55
into luxury type stuff it's got to be
22:56
same as cash i want you essentially
22:58
paying it off in the next few months
23:01
after you buy it and also do not fall in
23:04
the trap that your car payment is higher
23:07
than what your monthly investment is
23:09
because you are way backwards if you're
23:12
doing what both said you're doing 500 a
23:14
month to load up that roth ira and then
23:16
you have a 750 car payment no no no
23:20
that's not the order we want things we
23:21
want a 250 to 400 car payment and we
23:25
want 1200 a month going in that
23:27
investment let's get this thing let's
23:29
blow it out so that you do get that
23:31
great big beautiful tomorrow just
23:33
remember even in your 30s your dollars
23:35
are so powerful so don't miss out on
23:37
that don't squander that here's another
23:39
thing brian that i think we see all the
23:41
time in your third is you should
23:43
probably start answering this question
23:45
and you should know the answer this
23:46
question is what i'm doing right now a
23:48
job
23:49
or am i actually in my career is the
23:52
thing that i'm doing now something
23:54
that's building for when i get into my
23:56
late 30s 40s 50s or is this just a clock
23:59
in clock out and i'll find something
24:01
next year
24:02
the answer to that question matters and
24:04
can have a big impact on your overall
24:06
financial life yeah we even know i mean
24:08
we there's some data to this we love
24:10
throwing some data and and i even i
24:12
questioned daniel on this because he he
24:13
found 19
24:15
of americans are unhappy with their job
24:17
but i was like well wait a minute i need
24:18
to i need more information than just
24:20
telling me 19 because when i see that
24:23
dad i'm like 81
24:25
are happy that seems really high and it
24:27
is sad this pandemic i'm curious to see
24:29
what happens post pandemic with with
24:32
this research because a lot of our data
24:34
closed out in 2019 you know pre-pandemic
24:38
but we were on a positive trajectory
24:40
with career satisfaction because in
24:42
america we had gone from 41 to 55 of
24:46
americans were saying they were
24:48
satisfied with their job and and
24:51
somewhat on the happy spectrum that's a
24:54
positive thing i'm curious to see what
24:56
happened through the pandemic but um i
24:58
hope i'm an optimist that hopefully
25:00
things uh get back to a positive
25:02
trajectory on that would you agree with
25:04
this statement brian uh the 30s might be
25:06
the last stop where making a transition
25:09
making a shift is easy right like as you
25:12
get into your 40s and as life changes
25:14
and you have kids and you have older
25:15
kids you have more commitments if you're
25:17
stuck in a job that you just can't stand
25:19
and you're biting your fingernails on so
25:22
it gets a lot harder to do that the
25:25
longer you wait so in your 30s it really
25:27
might be value to a self-assessment
25:29
saying am i doing what i want to be
25:32
doing long-term now that doesn't mean
25:33
that you like love every absolute thing
25:35
about your job and you're it's just you
25:37
know you're skipping to work every day
25:39
but it is a realistic assessment of okay
25:41
this is something i want to commit to
25:43
for the next
25:44
10 15 20 years definitely focus on this
25:47
in your 30s because just naturally the
25:49
system um starts even though i know it's
25:51
illegal i mean having a being the the
25:54
child of a father that was displaced in
25:56
his mid-40s
25:59
it's tough you know it is tough when the
26:01
system closes out on you and says hey
26:03
we're going to you know
26:05
downsize or we're getting out of this
26:07
industry you go find something else to
26:09
do
26:10
you need to get yourself in that career
26:12
in your 30s so that you don't get that
26:15
that wake-up call in your 40s that could
26:17
really put you in some shaky financial
26:19
ground
26:20
and like i said i think it turned me
26:22
into who i am but it was definitely a
26:25
struggle growing up in a household where
26:27
essentially the carpet was ripped out
26:29
from underneath us all right let's talk
26:30
about uh risk management in our 30s um
26:35
likely at this age and stage you're
26:38
starting to have other human beings that
26:40
depend on you perhaps that's a spouse
26:42
perhaps that's kids perhaps that's aging
26:44
parents
26:45
you start to feel some pressure that man
26:47
if something happens to me
26:50
there are other folks that will be
26:52
affected by this if i get hit by that
26:55
bus and it takes me out that's gonna be
26:57
a problem for my family if i get
26:58
disabled and i can't go to work anymore
27:01
that's gonna be a problem so you need to
27:03
make sure that if there are folks
27:04
depending on you if your
27:07
livelihood affects the livelihood of
27:10
others you need to make sure that you
27:12
ensure against those types of risk the
27:14
two easiest ways to do that are life
27:16
insurance we love low cost term life
27:19
insurance and disability insurance which
27:21
we often see underinsured which is
27:23
actually a much higher probability thing
27:24
of happening than premature death
27:26
remember we said term life insurance so
27:28
if you if you got like
27:30
kids that you know or here you're
27:32
looking at typically the term when you
27:34
think you can self-insure afterwards so
27:36
that might be 20 years for for the kids
27:39
you know or 25 years even 30 years but
27:42
we're talking about term life insurance
27:44
not the permanent expense of whole life
27:47
that's a different purpose on that type
27:49
of stuff this is exactly what beau said
27:51
we want to make sure that if you're in
27:53
debt or you have to still haven't fully
27:55
funded all your retirement savings so
27:57
that your spouse or significant other
27:59
would be in a tough situation where the
28:01
kids are gonna be in a tough situation
28:03
it's too cheap too affordable to afford
28:06
to to just ensure that just make sure
28:08
you do that step because you might be
28:10
shocked it's a few hundred bucks a year
28:13
to to really make this this risk go away
28:16
all right and so we talked about in your
28:17
20s that you should be building towards
28:20
step four of the financial order of
28:22
operation you should be building your
28:23
emergency fund in your 30s that becomes
28:26
a non-negotiable you need to have
28:29
depending on what the right number for
28:30
you is three months or six months your
28:32
fully funded emergency fund again
28:34
because people are now depending on you
28:36
if something goes wrong it affects other
28:39
people so it becomes a non-negotiable at
28:41
this stage of your financial life yeah
28:43
when we do the financial order of
28:44
operations remember moneyguy.com
28:46
resources you too can download it step
28:49
one deductibles covered that's just so
28:51
you don't let um just something out of
28:53
the blue
28:54
side rail your entire financial life
28:57
when you get to step four of the
28:58
financial order of operations which is
29:00
the true emergency reserves
29:02
guys we're counting on in your in your
29:04
30s that you kind of are trying to build
29:07
yourself that stable foundation for your
29:10
family
29:11
this is the point to make sure exactly
29:13
what beau said three to six months
29:15
depending upon how many working people
29:17
are in the household also how easy it is
29:20
for you to get a new job pay attention
29:22
to those factors and then here's the
29:24
last one this is just often over
29:26
overlooked umbrella insurance it is a
29:28
very low cost insurance that sits over
29:30
the rest of your financial life that
29:32
will protect you if you have assets or
29:34
if you have income or if you have income
29:36
potential umbrella insurance is
29:38
something that makes so much sense in so
29:40
many circumstances and yet time after
29:42
time we see folks who don't have it if
29:44
you're curious just call your property
29:46
and casually insurance agent tell them
29:48
you want about your net worth of
29:51
umbrella insurance rounded to the
29:52
nearest million most often so 1 million
29:54
2 million 3 million whatever the number
29:56
is and see how much it is you'll be
29:58
amazed it is very low cost affordable
30:00
insurance that you should likely have in
30:02
place let's talk about investing this is
30:04
the stuff that rubber meets the road on
30:06
actually building the wealth we want you
30:08
at 25
30:09
of your gross income we also you're
30:11
asking yourself probably in your 30s
30:13
since you are having kids you're like
30:15
when do we actually start saving for
30:17
college for the kiddos um i i think this
30:19
is a step eight moment meaning that this
30:21
is going to come after hyper
30:23
accumulation so after you've reached 25
30:26
of your gross income going to that great
30:28
big beautiful tomorrow
30:30
that's when you can start thinking about
30:32
the kids and then another thing that
30:33
likely happens in your 30s depending on
30:35
kind of where you are in your financial
30:37
life cycles you might actually graduate
30:39
past target retirement index funds you
30:41
know that we say all the time for those
30:43
in your 20s or those starting out we
30:45
love the automated nature of target
30:47
retirement index funds but when your
30:48
portfolio does hit that critical mass
30:51
400 500 600 000
30:54
it's likely that you could benefit from
30:56
a more specialized asset allocation how
30:59
you spread out your assets and an asset
31:01
location where you put your assets so in
31:04
your 30s if you do start to approach
31:06
those critical masses it's a time to
31:08
start having those conversations and
31:09
thinking through okay do i need to move
31:11
from general investment advice to very
31:13
specialized from my circumstance
31:16
investment advice and don't forget the
31:17
savings rate i mean you've i've said it
31:19
25 but savings rate and using index
31:23
target retirement funds while you're
31:24
building up to that critical mass that
31:26
beau just talked about is still going to
31:28
be the most important behavior and
31:30
factor that will lead to an indicator of
31:32
how successful you'll be all right brian
31:34
let's talk about tax planning uh often
31:36
times when we start out we're young we
31:38
hear roth roth roth roth roth the author
31:41
author all throughout the roth and
31:42
that's true because tax-free growth is
31:44
awesome however there are times when
31:47
pre-tax makes sense it makes sense to go
31:49
to the traditional side of your 401k if
31:51
you're in a higher income level in your
31:54
30s this often happens don't forget to
31:56
assess this every year maybe at open
31:58
enrollment or whenever think through
32:00
should i still be doing those roth
32:01
contributions or
32:03
might i benefit from going to pre-tax
32:05
contributions for the current year tax
32:06
savings i also think this is a point
32:08
where because look you're messy middle
32:10
you are having some career success you
32:13
got the kids in the house you know
32:15
you're trying you also you're reaching
32:17
probably that critical mass point over
32:20
500 600 000 of investable assets
32:23
nothing wrong with trying to bring in
32:25
outside help with you know financial
32:27
advisor somebody to help you protect
32:29
yourself from those blind spots or
32:31
maximize your potential
32:34
don't be scared to do that i think
32:35
that's a great planning opportunity all
32:37
right now on the estate planning front
32:40
if you have children you need a will i'm
32:43
going to say that again because it's
32:44
that important if you have children you
32:46
need a will one of the things we always
32:48
ask prospects is hey if something were
32:50
to happen to you guys who who would take
32:52
care of the kids and normally the spouse
32:53
just kind of do this number if you're if
32:55
you're living a lifetime you can't see
32:56
me but they kind of look at each other
32:57
and they're like well my brother no your
32:59
sister know what if it's difficult for
33:02
you to make the decision about what
33:04
happens to your kids
33:06
while you're here imagine how much more
33:08
difficult that will be if you are not
33:10
here that's why the estate documents
33:12
make so much sense you just have to have
33:14
them in place don't put it on the back
33:16
burner get it done so that you can speak
33:18
for yourself if you're not here to speak
33:21
for yourself and before you meet with
33:22
that attorney
33:24
go ahead because i do think this is
33:25
graduating beyond the bowler plate and
33:28
graduating beyond um even the the back
33:30
of the napkin as you call it bo
33:33
you need to know who do you want to be
33:35
the executor of your estate go ahead and
33:36
have these conversations the
33:38
guardianship for your children and then
33:40
any trustees that you're going to have
33:42
from those testamentary trusts that will
33:44
be built into your estate document go
33:46
ahead and have those conversations go
33:47
ahead and know who you want to talk
33:49
about with the attorney so that you can
33:52
go ahead and do your homework because
33:53
every bit of research is going to save
33:54
you money in preparation of those
33:56
expenses and then as family
33:58
circumstances change don't forget to
33:59
update beneficiaries again if you have a
34:02
new child born you want to update that
34:04
if someone in your life passes away you
34:05
want to update that make sure at least
34:07
every couple of years you're checking
34:09
the beneficiaries across all of your
34:10
accounts not just your iras housing
34:12
custodian but also your 401ks your life
34:15
insurance so on and so forth to make
34:17
sure
34:18
that what you want to happen is indeed
34:20
what's set up to happen uh when you pass
34:22
away um i want to transition into our
34:25
40s bro okay
34:27
we called this top of the mountain top
34:28
of the mountain that's i i think we're
34:30
positive
34:31
i think i think you guys got a hold of
34:33
this because i i talked about that it
34:35
could be um
34:36
you know top of the mountain is assuming
34:38
you've done it right positive
34:41
it could be bitter train opportunity
34:42
moment too because you we do hear
34:44
there's a lot of mid-life crisis
34:46
that occur in the 40s and and i want to
34:48
talk to that is that i think that if
34:50
you're on the positive side i know for
34:52
myself
34:53
um
34:54
if you've done it right you're more
34:55
sentimental in your 40s because you've
34:57
lived long enough now you can kind of
34:59
look back with that that fondness of
35:01
some of the things you did the journeys
35:03
you've had the experiences
35:05
um and it brings a a you know makes you
35:08
feel warm and fuzzy
35:10
it makes the the or you know hair on
35:11
your arm stand up but if you've done it
35:13
wrong
35:14
instead of it being kind of a
35:16
sentimental thing it could be kind of a
35:18
bitter moment where you're like oh man i
35:20
missed out on some really key
35:21
opportunities maybe i should have
35:23
started saving earlier maybe i should
35:25
have created more memories and enjoyed
35:27
my 30s a little bit more those type of
35:30
things build up i want to make sure
35:32
because this is the moment your 40s
35:34
you're still young i mean it look as
35:36
much as beau picks on me
35:38
40 year olds people in their 40s that
35:41
decade you are still very active you can
35:43
still do a lot of things but it is one
35:46
of those things if you're not on the
35:47
track of planning or really putting
35:49
thought towards this instead of having
35:51
10 000 ways to succeed your path gets
35:54
tightened up you better really be doing
35:56
that measure twice cut once moment to
35:59
make sure you are on the path of
36:00
abundance and creating success did you
36:02
just come up with i love that like when
36:04
you're in your 20s you have 10 000 past
36:06
the success when you get to your 40s
36:08
it's probably not 10 000 anymore yeah so
36:10
you've got it because that's what i love
36:11
there's so much grace and opportunity
36:13
and flexibility for money but it does
36:16
tighten up so you've got to get more and
36:18
more serious because it it's just it
36:21
starts narrowing down and you better be
36:23
on the right side of it all right so
36:24
let's check out our financial planning
36:27
pyramid so first if we start the
36:28
baseline cash flow
36:30
you said something so interesting brian
36:33
your 40s was the first decade that you
36:35
did not feel broke yeah i even i even
36:38
put a number on it i think it was
36:39
between 41 and 42 years of age i
36:41
actually felt like i had money sure um
36:43
and i think i i tell people that that's
36:45
not a brag because i'm hoping that it's
36:47
actually a liberator because i want
36:49
everybody who's doing things right if
36:51
you're in your 20s if you're in your 30s
36:53
even late 30s to early 40s you might be
36:56
like when do i actually get to enjoy and
36:59
feel like this is not you know working
37:01
against me or i'm swimming upstream i do
37:03
think this is this is about the period
37:05
that happens because you're having some
37:06
success in your career
37:08
you've been doing automated investing
37:10
all the good habits you're getting the
37:12
fruits of this you've now also had 20
37:15
plus years of compounding growth there's
37:17
it's not it's no um you know
37:21
mistake or just tripping over it that
37:24
most millionaires actually reach it
37:25
around the 47 to 49 years of age because
37:28
they've had over 25 years of compounding
37:30
growth working for them at that point
37:32
love it so one of the things that you
37:33
can do in your 40s to help yourself is
37:36
to know your why and you may be thinking
37:38
why are you all putting this in cash
37:39
flow that doesn't seem like a cash flow
37:40
thing it very much is in your 40s you
37:43
start recognizing man my kids are
37:45
getting older i want to be creating
37:46
memories i want to be doing these types
37:48
of things with them maybe i don't want
37:50
to be working 90 hours a week anymore
37:53
maybe i'm not trying to get that next
37:54
promotion maybe i'm not hard charging to
37:57
try to do whatever the fill in the blank
37:59
is i know that this is the level of
38:02
success i want to achieve and i'm going
38:04
to be comfortable living in that place
38:06
and enjoying the here and now or i know
38:08
that i need to work a little bit harder
38:09
to get to whatever x is whatever y is
38:12
stop moving the goal post so often we
38:15
see people say man if i could just get
38:16
to this income then well then you get
38:19
not just this one and then this one and
38:20
then this one this one i talk about quit
38:22
moving the goal posts because it is one
38:24
of those things i mean if you've got the
38:25
kids are getting a little bit older
38:27
i'm always amazed that people they get
38:29
in their 40s they start having financial
38:31
success big incomes and then they go buy
38:34
the 5500 6 000 square foot house when
38:38
the kids are going to college in two
38:39
years you know and it's one of those
38:41
things where you quit moving the goal
38:43
post just because you can doesn't mean
38:44
you should i'd rather you focus on the
38:48
how you're going to spend your time what
38:50
are your hobbies what makes you happy
38:52
those are the things that you really
38:54
need to be spending time on not how you
38:56
can make yourself look cooler and expand
38:58
the lifestyle because i feel like that
39:00
is something that happens quit changing
39:02
the rules on yourself because if you
39:04
keep pushing things bigger and bigger
39:06
and bigger you're chasing happiness
39:08
that's not what's going to create the
39:10
happiness the happiness is going to come
39:12
from the activities the memories the
39:14
experiences so you need to put some
39:16
effort into what is the happiness factor
39:18
because it's not the stuff another thing
39:20
that i see that is kind of exciting from
39:22
a cash flow perspective in your 40s is
39:25
you can start getting a little advanced
39:26
and how you approach your cash flow
39:28
maybe you're someone who's terribly
39:29
minded and you've always given money to
39:31
a specific charity or given money to
39:33
your church and you're recognizing your
39:34
40. maybe there's a better way for me to
39:36
do this maybe i could do something like
39:38
use a charitable gift fund and i can
39:40
donate appreciated securities and with
39:42
what i was giving i can replenish my
39:44
taxable account it's just a more
39:46
efficient way to approach how you've
39:49
already been doing the things you've
39:50
been doing for the last
39:52
5 10 15 20 years just at this stage you
39:55
can probably uh take it up a notch you
39:57
can probably optimize you can level up
39:59
plus up do it slightly better slightly
40:01
more efficiently um risk management wise
40:04
i have two two things here and one's
40:06
kind of counter um i i want you to to
40:09
make sure you're exercising i mean
40:10
because this is one of those things
40:11
where i i do think
40:13
that if you if you're not using it you
40:15
do start to lose it if you get injured
40:17
it takes longer to to heal so so make
40:20
sure you're focusing on exercising what
40:23
you eat because this is that stage you
40:25
know i think we get away with a lot in
40:27
our 20s and 30s the 40s you need to be
40:29
much more deliberate about it and this
40:31
is also going to lead to you to to
40:33
thinking about
40:34
where are we at from a from a risk
40:36
standpoint of my life insurance because
40:39
the great news about your 40s is is that
40:41
two actuaries and the people measuring
40:44
risk you're still very healthy you're
40:46
young so you can go buy that new you can
40:49
reset that term life insurance for the
40:51
kids or whatever else i had a client
40:53
meeting yesterday and it was so cool
40:55
because we had re-shopped their
40:57
insurance right as they were that 39 to
40:59
40 years of age and now their kids are
41:01
getting close to graduating from from
41:03
high school going to college
41:06
because we're a few years in the future
41:08
and like we know we have plenty of life
41:10
insurance because while rates were low
41:12
we reset that term policy pay attention
41:15
to that stuff because it is still one of
41:17
those low-cost moments where you can
41:19
reassess your you know what you need
41:21
from life insurance disability and those
41:23
type of things of of protection i love i
41:25
love how just the word reassess because
41:27
that same exact thing happens when it
41:29
comes to
41:30
investing and 40s might be the type
41:33
where you need to hyper save if you're
41:35
behind because in your 40s
41:37
you need to know your number when you're
41:40
in your 20s and 30s it's okay to shoot
41:42
for a savings rate i want to be saving
41:43
20 25 i want to be saving we want to be
41:45
saved we want to be saving in your 40s
41:47
you want to be able to start refining
41:48
that goal what is my number what am i
41:51
trying to get to and am i on track to
41:53
get that in my head am i behind and if i
41:56
am behind what do i need to do to start
41:59
catching up you should be able to start
42:01
answering that question
42:03
when you get into your 40s decade this
42:04
is also you get to do some fun stuff
42:06
with your portfolios too because this is
42:08
where asset location you probably are
42:10
getting beyond the the index target
42:12
retirement funds where you can focus on
42:15
where exactly am i putting my money
42:18
um you can also expand your asset
42:20
allocation you know because those
42:22
targets those target retirement funds
42:24
they're great in the fact that they make
42:25
a lot of your decisions easy for you but
42:28
they are missing out on things like real
42:30
estate and other asset classes that
42:32
definitely probably have a place in your
42:34
overall asset allocation this is the
42:36
time to really focus on that and then
42:38
here's what you don't want to focus on
42:40
here for this don't outsmart yourself
42:42
don't think that just because what i did
42:43
in my 20s and my 30s got me here all of
42:46
a sudden have to figure out something
42:47
more complicated or more complex no you
42:50
can do the same things it's just with
42:52
bigger numbers and you can do it
42:53
slightly more efficiently you have more
42:55
tools in your tool belt but don't
42:57
outsmart yourself don't think you have
42:58
to start getting into private deals or
43:00
taking on leverage or doing crazy things
43:03
to continue doing what you've already
43:04
been doing for the last two decades i
43:06
think it shocks people when they find
43:08
out still the majority of my assets
43:10
index
43:11
funds about
43:12
investing assets they're still in index
43:14
funds they're not in these private deals
43:16
they locked me up for 12 years
43:19
you know is just pay attention there's
43:20
nothing wrong with being an index
43:23
investor
43:24
you just go probably a little more
43:26
sophisticated with how you structure
43:28
that in your portfolio all right now
43:30
when you get to tax planning uh this is
43:32
interesting because when you're in your
43:32
40s you've likely been doing your taxes
43:34
for almost 20 years now and you said
43:36
yeah i've gone 20 years i've never been
43:37
audited no one's ever come and talked to
43:39
me does this whole tax thing really
43:41
matter maybe i can start being a little
43:43
more gray maybe i can be a little more
43:45
aggressive maybe i can start thinking
43:47
through
43:48
buying things and writing them off and
43:51
doing this and
43:52
i would caution you and you say this
43:54
best brian don't mess with the irs yeah
43:56
i mean i'm amazed when i watch you know
43:59
because you guys have me paying you know
44:01
dabbling into instagram and tick tock
44:04
and other things like that and some of
44:05
the advice i see
44:06
on just structure an llc and then start
44:09
running everything through it and it's
44:10
all deductible i'm like yeah it's all
44:12
deductible until you get caught
44:14
and then um then you're gonna quickly
44:15
realize hey the only group if you don't
44:18
pay your power bill they just cut your
44:20
lights off if you don't pay your taxes
44:22
they come and they take your stuff and
44:24
more than likely a few of the people
44:25
that come to take your stuff might have
44:26
a gun strapped to them because this is
44:29
the law this is the government they have
44:31
abilities and and features of
44:34
enforcement that you and i can't do
44:36
remember al capone was a mobster but he
44:40
went to jail for tax evasion so it's
44:42
just something to pay attention to don't
44:44
screw with the irs because i have seen
44:47
my background in public accounting
44:49
working in tax preparation for close to
44:51
two decades i have physically witnessed
44:54
grown men in their 40s crying because
44:58
they they went and represented
45:00
themselves before the irs the irs asked
45:02
them all kind of things there's just
45:04
mistakes that you don't want to put
45:05
yourself on that gray zone um to where
45:08
it derails your entire financial life so
45:10
then another thing that you can do as it
45:12
relates to tax planning is a little bit
45:14
goes a long way in your 40s if you start
45:17
thinking about tax planning from a
45:19
different perspective and less about
45:21
okay how much tax am i just saving this
45:23
year but how much tax can i save over my
45:26
entire financial life you'll be amazed
45:28
at how impactful that could be likely in
45:29
your 40s you're getting into the hyper
45:32
accumulation step seven of the financial
45:34
order of operations you can go check
45:36
that out at learn.moneyguy.com if you
45:38
want to know more about that
45:40
you are likely starting to think about
45:41
these different tax buckets maybe i
45:43
don't just need to focus on my asset
45:45
allocation how i spread my assets i
45:47
ought to also look at my asset location
45:49
what types of assets i'm holding in
45:52
which types of bucket because all of
45:54
those buckets are treated differently
45:56
from a tax perspective tax deferred
45:58
assets grow without paying any income
46:00
tax now you pay it when you pull the
46:02
money out so in those types of accounts
46:04
you want to hold investments to generate
46:06
ordinary income these are your bonds
46:07
your fixed income your more conservative
46:09
investments tax-free roth hsa assets are
46:13
likely going to grow tax-free if you use
46:16
them for qualified expenses in the
46:17
future that's where you want to hold
46:19
your high-flying growth assets the
46:21
things that you think have the highest
46:23
capital appreciation potential you want
46:25
to put those in your hsas and in your
46:27
roth accounts so that they grow and then
46:29
after tax this is your third bucket this
46:31
is that hyper accumulation bucket these
46:33
are assets with more favorable tax
46:35
treatment they have capital gain
46:36
opportunities or perhaps they have
46:38
qualified dividend distributions if you
46:40
can think about structuring your
46:42
portfolio to hold different types of
46:44
assets and different types of buckets
46:47
over the life of your portfolio you'll
46:50
be amazed at what a tax difference it
46:52
can make this is also bo because i love
46:54
the talking about the three buckets and
46:56
making sure you're maximizing the tax
46:58
location it is also you need to pay
47:00
attention to what marginal tax rate
47:02
you're in and so forth because this is
47:04
where you still are having that
47:05
discussion of figuring out am i pre-tax
47:08
traditional where i am taking that tax
47:10
deduction now or am i going to focus on
47:12
that tax-free roth that's in my employer
47:15
plan it really has a lot to do with
47:17
where your tax rates are and what your
47:19
long-term goals are pay attention to
47:21
that stuff all right now from an estate
47:22
planning standpoint in your 40s there's
47:24
a chance that your children are getting
47:26
older we see this all the time that
47:28
someone had their first baby or first
47:29
couple of babies and they wouldn't got
47:31
the estate plan done and it says you
47:32
know something happens to us this person
47:35
wants to you know going to take care of
47:36
the kids that's great when your kids
47:38
start getting to like 14 15 16 and your
47:41
financial empire's built up now you have
47:44
to start thinking about man if something
47:45
happened to us would my child at age 18
47:48
or age 21 or whatever
47:50
be okay inheriting hundreds of thousands
47:53
or maybe millions of dollars so there's
47:54
a chance your estate plan needs to be
47:57
updated based on the changing
47:59
circumstances of your financial life
48:01
don't just assume the one that you put
48:03
in place 10 years ago is still the one
48:05
that makes the most sense today yeah
48:08
that's great beau
48:09
um let's transition into 50 year olds
48:11
all right you know i resemble too much
48:14
of the 40s but i've got to be
48:15
transitioning to celebrate to get into
48:17
this point and it is
48:19
we titled this celebration or panic
48:22
because it is one of those things where
48:23
i want you to kind of vision plan and
48:24
think about what you expect
48:27
your retirement to be and this is not
48:29
daydreaming anymore this is but you
48:31
better be fine-tuning the plan i mean
48:33
this is this is beyond the daydreaming
48:35
because we're going to be talking about
48:37
hey are you taking on too much risk you
48:40
know to get the growth maybe you do need
48:41
to be having that decision to know what
48:43
does the asset allocation look like it
48:46
is also this is the decade i want you to
48:48
start feeling like you can and should be
48:51
debt-free
48:53
i want mortgages paid off i don't want
48:55
any credit card debt because truthfully
48:57
you should not have that even in your
48:58
20s and 30s but there shouldn't be
49:00
student loans there shouldn't be
49:02
mortgage yet you should have debt
49:03
freedom and also i don't want you
49:05
waiting until your 60s to build memories
49:08
i mean i'm always amazed at how many
49:11
people have this it's like they're
49:13
putting on the fridge a picture of
49:15
themselves when they're 65 don't wait
49:17
until then you need to be building
49:19
memories through all decades of your
49:20
life
49:21
make sure you're using that moment to
49:23
celebrate your successes hey look this
49:24
is likely going to be that time where
49:26
perhaps you want to make sure that you
49:28
have surgically planned for what
49:30
retirement's gonna look like this is a
49:32
great time to think about
49:33
hiring a professional taking the
49:35
relation to the next level getting
49:37
someone to come alongside you to help
49:39
refine that plan because some of the
49:41
stuff gets a little nuanced as you get
49:43
into your 50s so from a cash flow
49:45
perspective this is one thing that we
49:46
see so so so often is that your kids are
49:49
likely adults are almost adults have you
49:52
begun thinking through
49:54
are my little chickadees ready to
49:57
actually fly out of the nest am i going
49:59
to be able to get my kids
50:01
off of economic outpatient care or are
50:04
they still going to be a budgetary item
50:05
for me even well into adulthood yeah i
50:08
mean we see this trend i mean this was
50:10
one of the things listed in the
50:11
millionaire next door is an indicator of
50:13
success of becoming a millionaire you do
50:16
want your children that's why i would
50:17
focus on hey we we talked to a lot of
50:19
college kids when we were in athens a
50:21
few weeks back
50:23
help guide your children into good
50:26
majors so they don't have tons of
50:28
student loan debt and if they do they
50:29
can pay it off because they have good
50:31
careers coming their way try to get your
50:33
children to be independent it is so
50:35
important and i do want to focus on
50:38
because we want you to be debt free
50:41
get out of all debts at this point fully
50:43
own your life it is hard to say you're
50:46
financially independent when you have a
50:48
ton of encumbrances hanging out there
50:50
with debt you want to be completely debt
50:52
free from a risk management standpoint
50:55
there's a chance that in your 50s this
50:57
is likely where you want to start
50:58
looking at long-term care when you think
50:59
about your genealogy is it likely that
51:02
there will be some sort of end-of-life
51:04
care for you if that's the case then
51:06
long-term care is probably a good time
51:08
to start in your 50s is probably a good
51:10
time to start looking at that because
51:12
it's not going to be so cost prohibitive
51:14
in terms of waiting too late but you're
51:16
also not going to pay for it for 30
51:18
years likely before you need it so if
51:20
you're someone in that donut hole 50s is
51:23
probably where you want to start
51:24
thinking through that life insurance i
51:26
think this is one of those things where
51:27
you might be it's definitely worth
51:29
measuring you might be getting close to
51:31
self-insurance because i mean if you got
51:33
the kids out of the house they're out of
51:34
college they're in their own careers
51:36
you've got enough pot of money saved up
51:39
to where you're
51:40
fully financially independent you can
51:42
start looking at some of those term life
51:44
insurance policies to see if you're
51:45
truly own self and you know self insured
51:48
by the way even if you are don't just
51:50
throw away those term policies because a
51:52
lot of them realize you paid
51:54
premiums for years where you're probably
51:56
getting the cost of that insurance is
51:57
much higher than what the actual annual
51:59
premium is
52:01
look at that you might not want to just
52:03
throw them away you might want to go
52:04
ahead and let them finish out their term
52:06
before you just don't re-up and get more
52:09
life insurance but it is definitely
52:10
something where you should measure twice
52:12
cut once on determining how are you from
52:14
a risk management standpoint when it
52:16
comes to investing in your 50s your
52:19
retirement runway should really be
52:22
starting to take shape and not so much
52:23
that remember in your 20s and 30s you
52:25
were focused on your savings rate in
52:27
your 40s you needed to know your number
52:30
in your 50s is where you want to start
52:32
stress testing will this plan actually
52:34
work we've shown this to you before but
52:36
one of the ways we like to do this is
52:38
through a monte carlo analysis where we
52:39
have a number of different variables
52:41
saying what do we think our probability
52:43
success is if we retire this year if we
52:46
wait to take our pension until this year
52:47
if we start drawing some social security
52:49
here you want to make sure that you have
52:51
stress tested your plan early enough
52:54
that you give yourself some time to make
52:56
adjustments as needed if you need to
52:58
make adjustments so in your 50s this is
53:01
where you really want to start thinking
53:02
through do i have the right portfolio
53:05
and plan in place to provide for that
53:08
great big beautiful tomorrow that i've
53:10
been looking for waiting for um i think
53:12
this is this is a a take that i think a
53:15
lot of people would be like why is this
53:16
under investing
53:18
um i want you to not because we talk
53:20
about the financial stuff but you also
53:21
need to be figuring out and thinking
53:23
about what does your life look like from
53:25
an interest and hobbies
53:28
post work life because you know we've
53:31
done some interviews on what do happy
53:32
retirees look like they have a life
53:35
outside of work i think that that is so
53:37
you do need to make sure you know focus
53:39
on planning what hobbies what interests
53:41
you will have post retirement so that
53:44
you can go ahead and start investing in
53:46
that to make sure you know what the you
53:48
know what that moment and what that
53:50
happiness factor is for you when you're
53:52
in your early
53:53
20s 30s and 40s
53:55
you really start thinking about your
53:57
risk tolerance how much risk can i
53:59
handle how much do i feel comfortable
54:00
with as you get into your 50s and on
54:03
then you have to start thinking about
54:04
risk capacity how much risk should i be
54:07
taking do i have enough time to be able
54:09
to recover before i need these dollars
54:11
so in your 50s you need to take a long
54:12
hard look at both your diversification
54:15
and your asset location where where are
54:18
my assets put and when i retire when i
54:20
reach financial admits where are my
54:22
dollars going to come from because those
54:23
decisions are likely going to have a
54:25
long-term impact on the viability of
54:28
your plan um bo i want to talk about a
54:30
little bit
54:31
uh the we talked about risk reward
54:34
making sure you're not taking too much
54:35
risk you know especially because if
54:37
you've won the game but i do think it's
54:39
it's one of those things tax planning
54:41
wise
54:42
this is a lot of people especially if
54:44
you're part of that fire movement
54:45
because i think anybody who's retiring
54:47
early
54:48
that's 50 somethings
54:50
they really this is a pre primo
54:53
opportunity to where required minimum
54:55
distribution start at 72.
54:57
your earned income has gone completely
54:59
away because you've retired
55:01
roth conversions in your 50s is an
55:04
incredible planning opportunity and then
55:06
you want to know about some key dates
55:08
because a lot of big things happen in
55:10
your 50s the first one at age 50 you
55:13
become eligible for catch-up
55:14
contributions both on the ira as well as
55:16
the 401k side the government lets you
55:18
save a little bit extra at age 55
55:22
if you are retired uh if you stopped
55:25
working and you were employed with your
55:27
employer in the year that you turned 55
55:28
you can actually begin drawing from 401k
55:30
it's a little bit earlier than the
55:32
normal pre-tax deadline of 59 and a half
55:35
so if you are somebody who's thinking
55:36
about retiring in your 54th year you may
55:39
just want to think through it because
55:41
waiting that extra few months or extra
55:43
year might give you that little bit
55:45
extra be able to access the dollars
55:47
earlier than you might be able to
55:48
otherwise yeah and then i did i think 59
55:51
and a half obviously
55:52
that's right ras you know it's one of
55:54
those things yes there's some complex
55:55
annuitizing accounts where you can get
55:57
to it even earlier but these are the key
56:00
dates 50 55 and 59 and a half to pay
56:03
attention to when we when we are
56:05
considering things from a tax planning
56:07
um estate planning wise you know it's
56:09
more likely you're going to have
56:11
full wills that were drafted by an
56:14
attorney
56:15
you will need to be also very aware of
56:17
how do revocable trusts that work
56:19
outside of you know your wills um how to
56:23
you know because that's a revocable
56:24
trust a living trust these things and
56:27
your asset titan will become titling
56:29
will become so important as you are in
56:32
this level of success that you better be
56:34
very deliberate in making sure your
56:36
wishes and the most optimum structure is
56:39
paid attention to so you don't get
56:41
yourself in a big whoopsy situation one
56:43
of the things we see this happens so
56:45
often is when someone becomes a new
56:46
client of the firm of bound wealth
56:49
they'll come in and say hey let us
56:50
review your estate document so we'll
56:51
kind of go through a review and we'll
56:53
say okay we understand you know this to
56:55
be true and this to be true and this to
56:56
be true and this is true but
56:58
we noticed you know this said you're
57:00
supposed to have a revocable trust over
57:01
here but you got to join account and why
57:04
is it supposed to be that way and and
57:05
you have these trusts but you have
57:07
individuals as beneficiaries you want to
57:09
make sure that all the different pieces
57:11
of your financial plan of your financial
57:13
life are talking to one another you want
57:15
to make that your estate plan
57:17
is appropriately reflected inside of
57:19
your investment plan they need to work
57:22
together to be a nice cohesive strategic
57:25
long-term plan guys hopefully you've
57:27
seen there's lots of benefits to to the
57:29
financial planning pyramid and going
57:31
through and thinking about this it's a
57:33
lot more complex if you're going to do
57:36
it right than just spending less than
57:37
you make making sure you control dad
57:40
that's right and you know and last just
57:41
creating an automated plan there's gonna
57:43
be different things you want to do by
57:44
different decades make sure you're not
57:47
neglecting your financial life and
57:48
that's why we have the great we've put
57:51
lots of work we've road tested this
57:53
thing seen lots of people create success
57:55
financial order of operations if you
57:57
want the free downloads moneyguy.com
57:59
resources if you want to go ahead and
58:01
get a deeper dive to accelerate your
58:04
success go to learn.moneyguy.com we do
58:06
have courses as well as tools like our
58:09
net worth tool that will also help
58:11
accelerate that path pay attention to
58:13
these things and you can create success
58:15
for yourself um we love creating content
58:18
i'm your host brian preston mr bohansen
58:20
money guy team out
Start a conversation
Ask anything about Financial Planning 101 (By Age) - The Complete Guide to Winning Financially
100/100 free messages remaining
AI responses may be inaccurate. Verify important information.
Financial Planning 101 (By Age) - The Complete Guide to Winning Financially
The Money Guy Show