5 Numbers You Should Know That Most Americans Don’t
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- Опубліковано 9 вер 2024
- 5 Numbers You Should Know That Most Americans Don’t
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Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.
0:00 Bo is so excited
0:54 1: Your savings rate
8:55 2: Your credit score
18:20 3: Your tax rates
23:10 4: Your net worth
28:18 5: Your number
Bo normally never gets excited so I am so excited for this particular video!
@@NephilimatorThere was a time, around a decade ago, when Bo was not excited about episodes.
It was a dark day. A very dark day 😢
@@alextemus😂😂😂
If Bo ain't excited, I ain't watching.
Me too
time to binge!
📠
😂😂yep me too😂
More and more people might face a tough time in retirement. Low-paying jobs, inflation, and high rents make it hard to save. Now, middle-class Americans find it tough to own a home too, leaving them without a place to retire.
The increasing prices have impacted my plan to retire at 62, work part-time, and save for the future. I'm concerned about whether those who navigated the 2008 financial crisis had an easier time than I am currently experiencing. The combination of stock market volatility and a decrease in income is causing anxiety about whether I'll have sufficient funds for retirement.
This is precisely why I like having a portfolio coach guide my day-to-day market decisions: with their extensive knowledge of going long and short at the same time, using risk for its asymmetrical upside and laying it off as a hedge against the inevitable downward turns, their skillset makes it nearly impossible for them to underperform. I've been utilizing a portfolio coach for more than two years, and I've made over $800,000.
How can I reach this person?
‘’Aileen Gertrude Tippy’’ is her name. She is regarded as a genius in her area and works for Empower Financial Services. She’s quite known in her field, look-her up.
I checked Aileen up out of curiosity and i must say i am impressed by her Credentials. i emailed her already, waiting on her response.
You should know what your debt profile is alongside your saving to investing ratio. I'm saving and investing around 40 percent of my income. I have a high paying engineering job, and I live upstate NYC. since covid 19 my expenses dropped. I have zero debt on a 7 figure portfolio, low rent and car paid off. So i can just save. feel lucky and grateful my fiduciary came into play.
Truly It's all about using assets with compound interest to amass riches
I’ve actually been looking into the market lately, the news I’ve been seeing hasn’t been so encouraging. who do you use as your fiduciary ?
@@lidijatana7894 Dianne Sarah Olson' is her name. In her area, people consider her to be a genius. Look her up; she's well regarded in her field.
@@soveinaaraceli I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip
@@lidijatana7894deez nuts
Nice haircut Bo! He thought we wouldn’t notice, but we did! 🤣
My first thought too!
He was def excited about it
One day, Bo will open the show, "Brian, I'm indifferent about this topic..."
April 1st!
Surprised one of them wasn’t your monthly expenses.
Your monthly expenses, as a share of income, is 1-savings rate, so they kind of did cover it - they just focused on the goal side of it.
Your burn rate wasn't mentioned? Feel like that's a pretty big one to know.
Next year… “6 Numbers you should know” 😉- thanks for watching and the comment 👍
Fixed expenses?
Credit Karma does NOT give your FICO scores, it gives your Vantage score which NO lender uses.
My FICO 8 is 821, my Vantage 3.0 is 835. I guess if your under 780, it might matter, but for those over 800, it just doesn't matter, as far as loan rates go.
@@brianmorton8169I have no credit score. I haven’t borrowed money for years.
33:00 "The gap to feel". Little Freudian slip there, Bo? 😂😂😂
How can people giving sh*ty financial advice have thousands, if not millions of likes...and REAL professional...FREE...AWESOME!!! Content only has less than one thousand!?!?!?!?! Crazy world we live in! Thanks guys! :)
Financial mutant strategy is request credit limit increases on all your cards as often as possible. Once you have limits >$100,000 across your cards, your utilization will be effectively nothing with typical household spending, almost guaranteeing you a 800+ score.
It goes without saying this doesn't mean you spend any more. You just have a massive limit you don't touch.
Interesting. I imagine for a lot of people who don't have the behavior side of the equation worked out, that this would be a bad idea and cause increased spending, but in theory I suppose it makes sense. Also, if you have the right behavior already established, chances are your credit score is already good enough to not need to use this "hack" but it could be a way to get a slightly better interest rate on a car/house. Thanks for the tip
Agreed. I do this once a year or so or if I get a raise. Have zero use for the increased limit, but it makes my utilization even lower than it already is… 0-
This can quickly backfire. Banks have a tendency to get scared when the economy slows down. Those banks can decide you have too much access to debt and lower those card limits. You can go from 10% utilization to 50% from them lowering or closing limits. Then your score drops then other banks see you in trouble then they do the same.
@@silverfresh this is counter intuitive. Increasing your credit limit does not mean you have to increase your utilization. Say you owe $5K and have $20K in credit limit... your utilization is 25%. If you owe $5K and you have asked to continually increase your credit score and now it is $100K, then your utilization is 5%. The banks then freak out and cut your credit limit in half to $50K, well now you jumped to 10%, but you are still better off than the person who never increased and is at $5K/$20K.
You don't really need that high of a limit, it's easy to chill in the 835 zone with a significantly lower limit even if you use your cards to purchase everything
What percent of gross income do you recommend strictly going towards retirement funds, not including employer match? Thank you for the clarification on savings rate.
@@brownwhale5518actually, they answered it in the order of operations. It is 25 percent. That doesn't make sense to me though because in this video they said total savings should be 25%. So what should I go by? The financial order of operations which says 25% should go to retirement or this video which says a total of 25% should go towards all savings.
@@ryankiel4895 and concerning a company match I think they’ll tend to encourage you to 25% without considering the company match.
I think the goal is to max out 401k which for me is 23k so that percentage would depend on what you make.
Even with the 75k case study, and I understand this was simplified- but no standard deduction was taken out of this. Most people have a much lower effective tax rate than they think they have. Last tax season I would say the average person usually paid 11 or 12% effective rate- although this is just from my perception after filing many 1040s, I didn't compile any data.
I cannot recall if I've ever heard the explanation that employer match shouldn't count in one's savings rate if you are above 100k income -- anyone remember the details on that and can share?
I’d like to hear about people in the messy middle in their 40’s like myself. Where my older parents at? 😂
Its insane how many people do know know what their effective tax rate is or even how our progressive tax system works.
2:07 Why don’t count employer match if you make more than $200,000 for the household?
Cybertruck toy car on your shelf. Oh god!! Just a reminder it's not a truck. It's a large junk battery wrapped in scrap metal
Banger of an episode! Thank you for the breakdown
Question here for anyone who knows the answer:
If I make 75k like you show, I will pay federally $11,553. Does that amount include the flat tax rates for Social Security and Medicare that add up to 7.65% tax or is that in addition to the SS and Medicare 7.65%? Is my actual next dollar getting taxed at 22% or 29.65%? and when the money guys talk about marginal tax rates are they just talking about local+state+federal or the actual marginal rate (if that 7.65% isn't already included)?
No. The 11.5k is just your federal income tax. If you include fica, futa, suta, etc you’ll see the tax rate is closer to 25%
A good credit score not only helps you with lowering loan cost by getting lowest interest rate available, it can also help you with lowered insurance cost. Sad, but true, Insurance companies use credit scores to judge if you are a responsible (low risk) person for them to insure.
19:55 most people effective tax rate is 10-15% higher than marginal tax rate.
Effective tax rate includes: fica, futa, suta, state income tax, sales tax, use tax, fuel tax, etc.
For their topic of whether to make pre or post-tax saving only the federal and state income tax rates matter.
Task rates are an aspect of the complex labour market, we need comprehensive reform
Reform should include measures to support entrepreneurship and small business growth
Tax breaks and streamlined regulations would make a huge difference for small business
As a parent, you can add your teen to an existing credit card as an authorized user. Shred the card, but they benefit from the parent's credit and length of credit.
Self-directed IRAs/401ks. I hear other UA-camrs push this (specifically self direct Roth accounts) for investing in alt assets and rental real estate. Is self-directed a structure folks should have? Or, should we stick to index/target retirement funds and ABB?
Depends. If the fees associated with the funds you are being forced to use by your administrator are high…then self directed is likely worth considering. But you’d still probably just want to direct it into another, more affordable index fund
I have done Solo401k and self directing. I bought a rental home. However the tax advantages were not as valuable and growth was slower than the stock market. I could say I could have been more creative. Hard money lending, investing in businesses, or other ways for higher return.
I still have a SoloK but will divest of the home when my current renters leave.
I see people pushing SD-IRAs to invest in RE (We invest in MF syndications.) I'm not a big fan, but this is the only money many have to invest.
WRT Trad IRA/401K, I question if it is a good idea to grow Cap Gain money and put it where it is later taxed at eared income rates. You loose the depreciation. And IRAs are subject to UDFI tax.
When you consider Roth IRA/401K, the income tax issue disappears, but Roth IRAs are still subject to UDFI.
UDFI taxes the gain in proportion to the leverage. And you usually learn about this after you have done it.
Depreciation value varies according to your status (RE Pro or not). The RE pro can offset regular income. I'm not so it allows you to offset passive gains and on a sale actually affect regular income (not pay tax now but likely pay tax later). You loose this when in IRAs/401K because there is no current tax.
If I wasn't clear, I'm not a fan, except for a Roth Solo 401K.
Please don't jump into RE until you understand the risks and how it works.
So for your example of someone making $75,000 at 20:27 - let’s say he’s living in a state with a 8% marginal income tax rate, along with the 22% marginal federal rate. Would you recommend he contribute to a traditional 401k/tsp instead of Roth, since both marginal rates added together is greater than 30%?
Do people include their investment income in calculating their savings rate? E.g., if you get $50K in dividends that you reinvest and $100K in salary and spend the net, if your savings rate 33% or 0%? Academic question for sure, but I was wondering.
No. Dividends do not create new money out of thin air. The value you receive in a dividend comes out of the value (cash reserves) of the business you own a stake in. No net value is created.
From a planning perspective, dividends and capital appreciation are the same thing. Not only that, but chasing dividends is usually a bad thing when you're still working because they're very tax inefficient if not held in tax advantaged accounts.
No. But not for the reason @just mentioned. He's arguing against dividends generally which people do all the time-especially in the reddit sub for dividends. You don't count it because those dividends are rolling into your compounding return of your investments. However, if you're using them as income, it's probably a different question. The goal of retirement savings is to replace your pre retirement income. For the most part, your dividends are going to be the same in retirement, so don't need to be "replaced". (They can be cut pretty famously by "widow and orphan" stocks like T did a few years back.)
@@Thenandagain no. You don't count it because dividends aren't free money. They're already part of the company you own a share in. If you own a share of GE you already own the value of the dividend they're going to give you in the future. The stock goes down by the dividend amount on the ex dividend date, effectively making it a net zero event. No value is created. That's why it's not useful for counting as part of your savings rate.
@@justthebrttrk I think you guys are essentially saying the same thing. You don't count it because the dividend comes out of the stock value. Which is why dividend stocks used for retirement savings are typically reinvested and are part of your compounding return. If you took them out and counted them as income then your return for that stock would be lower than you expected (again because the dividend comes from the value of the stock).
Either way I agree with you both that it shouldn't count. Great caveat/question though. I don't think the money guys have ever touched on this to my memory.
What are we? Excited! Where is the team? Out in the wings! (Not this time)
I am so excited about this!
Guess who’s excited?
Great heat map!
I know #2 ~ 845; #4 ~ 5 million; and #5 ~ 10 millions. If I have to guess, my saving rate is about 75%. Without any debt,we don’t spend much $. I really do not know what is our real tax rate because our investments generate about 3x of my w2 salary.
Anyone making over $273k jointly can't hit the 25% target with tax advantaged accounts since the max this year is $68.300 (2x401k +2xRoth IRA + max HSA). $68,300/25% = $273,200. We are at 18% not including our employer match (maxing out 401k, roth and HSA), but right at 25% including employer match. Where should we look to invest more to hit 25% not including employer match? Taxable brokerage? We are both in our mid 30s
If you have an ESPP or stock options etc that would work too, but yes any overflow would be in a taxable brokerage. And remember that 25% is a general guideline, you should run some numbers and find out how much you need to save to meet YOUR retirement goals (in terms of cash flow and timeline).
Question from “Out in the Wings” …
Im on the Brian Preston Plan… planning to retire at 50. Im a Government Employee with a Pension that will likely be 6 figures when I turn 50 in 14 years. My question is should I max out the Roth 457 or Traditional 457.
If your taxes/income will be higher in retirement, depending on how many retirement accounts you have to “replace” income, then do traditional. If you are going to be in a lower tax bracket in retirement, then do roth
I think Theryster77 has that backwards. If you’re in a higher tax bracket in retirement you want to maximize the Roth because withdrawals will be tax free and not added to your taxable income
@@theryster77other way around, but you have the right idea.
@@twoc400s5yes, mb. Fact checked around 22:00 in the vid
So i take it you’re a cop, possibly in California.
What does the 460,000 on the shelf represent? The number is different it seems in every video.
Subscriber count.
Why do you ignore any sort of deductions for the tax rate? You don't even acknowledge the standard deduction. Your 75k examples would be reduced $29,200 for a married couple. It would knock their marginal tax rate down to the 12% level. You should definitely mention how deductions work versus credits. I'm a little disappointed about the tax segment.
I mean it does say in the graphic that deductions and credits are not factored in so it's not like they're being misleading. They probably leave them out for simplicity's sake.
new thumbnail styles are a win! My $0.02
My number in today’s dollars is $1.5 million in my retirement accounts. Unfortunately by the time I get that much money in my investment accounts it will really be almost $2 million!
It’s Brian Preston the money guy 😊
I don’t understand why you wouldn’t open a credit card for a child before college. If it’s something that I open for them, don’t give it to them out of the gate but use it for groceries here or there and just pay it off in full.
What’s the downside with build that credit in earlier years?
Because you have to be 18 to open a credit card in the U.S. You can add your kid as an authorized user but this won't do any good for them if any lenders look at their credit PROFILE instead of their credit SCORE. Banks like Chase want you to have one year of your own credit card history before they approve you for a credit card (except the Freedom Rise which is their starter card, but they also want you to have NO history before approving you for this). Some other banks are the same way.
I'm not sure how being an Authorized User affects loans since credit score is important for loans from what I know, but there's also separate car and mortgage scores.
There's no real downside to having your kid as an authorized user since you can help them build good habits early on (like Bo said), as long as they know they're probably going to be treated as if they have no credit history once they turn 18.
If i had a good credit when iturned 18 id have 3 crotch rockets and a cadillac
I get my blood tested regularly to make sure that the spiro is nuking my t levels
Misnomer doesn’t mean what you think it means.
You meant misconception.
European here. We don’t have credit scores.
How does the [insert any] company know you're good for a car? Or appliance or anything you'd put on your credit card?
@@Moontani
Good question. I think that you need to put at least 5% down payment for a car and show last 3 salary sheets. When purchasing a home there’s an interview where you present a bunch of paperwork for the last 6 months.
Most people use debit cards and not credit ones.
YOU SHOULD ALWAYS calculate how much you are paying each year to a CFP, and then ask the CFP how many actual hours they actually do work on your account.
… and that would be why most folks should have flat fee, on request Financial Advisor relationships!
Most folks’ retirement financials are pretty stable. They do not require regular monthly care and feeding other than when something changes in their life.
The Assets Under Management (AUM) fee model is a broken legacy of the “Investment Advisor” past. It is very easy to see why Financial Planners love AUM! It is a guaranteed income stream, with minimal ongoing cost once the initial plan is built.
AUM advisors should be embarrassed to accept $10,000-20,000+ (1% of $1-2 million under management) annual fees - every year - for the amount of value add they subsequently provide once the initial plan is in place and stable… for the typical client.
Another reason AUM advisors love, love, love AUM? They lock your investments into their third party fiduciary custodians, often not custodians who do direct retail clients. This is another anchor, making it more difficult for you to end the relationship.
You have a complex financial scenario, perhaps, but most folks do not have that kind of complexity… unless their advisor made it that way.
The hours that someone works for a given wage is pretty irrelevant. The more valuable metric to know is the VALUE that they are adding for their wages.
@@Stevo9403 OH OK, by that logic, then we will select a benchmark that the CFP has to outperform to cover their fee plus additional profit!
@@Stevo9403 BUT OH, wait let me guess, you don't want the CFP to be held to any benchmark!
@@Stevo9403 the point does illustrate the madness of AUM for most retirees. If a CFP is “providing value” when they build your initial plan, that is one thing, but for typical, uncomplicated retirees, paying the same $10-20K fee ($1-2mil assets) every year? For what typical value-add? Certainly far, far less value add vs. the initial year. But it is a beautiful forever stream for CFP’s.
❤❤❤
1. My savings rate is now 0%, retired this year at 55 and now only worry about my spending rate. Net worth is still increasing. Before retirement savings rate started around 10% in my early 20's to over 33% for the last 10 years before retirement.
2. Don't care about my credit score anymore...pay cash for everything, no debt. Last time I got a car loan about 6 years ago my score was near 840.
3. Do your own taxes, one benefit is it will piss you off about the government and you become a conservative, and you will know your tax rate...it's not that hard.
4. Tracked my net worth my whole life, hit the knee in the curve before 50, now it increases (or decreases) more than my final income or budget.
5. My number did change a bit as I got older but set my first number of $2.2 million in my early 20's, by the time I was 50 FI for me was around $3.5 million. Beat that by a significant amount because of the time horizon I gave myself and my naturally conservative nature...you hit that knee in the curve and it gets real easy.
Your credit score can impact the cost of your insurance.
@@M22Research Not my insurance company. I use USAA for both auto and home insurance. But even if they did I pay my bills early and carry no balance with large credit limits...not worried.
Threve?
I like the "student credit card?" The bill goes to the parents? Vive kids some spending money for school, pizza ect? And parents SEE what their kids are spending money on? Beer, bars ect?
Does this channel delete constructive (factual, truthful, and respectful) comments?
Why aren't they menting compounding
S.A.V.E. = Saving And inVEsting
How do I figure out my marginal tax rate? I live in Maine.
We do not count our primary residence in our net worth.
Why not?
I do my networth every month lol it's fun
I do mine quarterly. I feel like I see bigger changes that way.
48% savings rate at 22 >:) imma raise it by 1% each time I get a raise or promotion- trying to have a $100k net worth by 23 and $1m by 30
Very commendable, however don't forget to have a life...that's why we're here.
@@rarelycares8416 I do :p last weekend I went to Sound Haven, and to the lake the weekend before that, and I always travel to/from Colorado where my family is and go out to the bars there every weekend I’m there with my friends :)
Except won’t be doing that for the next 75 days since I just started 75 hard after that music festival last weekend 😅 no more alcohol lol
From a net worth perspective, the principal portion of your mortgage should be included in savings rate.
Disagree. You should not even count your home in your net worth.
Agree. Count it in your NET worth, but as it's not going to generate any income for you in retirement, you can't count it towards your savings rate.
@@MyWillbot savings rate = (income - expenses)/income =======>mortgage principal is not an expense
Debt reduction is a way to increase net worth. So if you think your home net value should be included in your net worth (home price minus mortgage ), then the principle payment is part of your Savings.
@@MyWillbotBy definition, net worth = all assets minus all liabilities. A house is a form of asset.
They need to mention living conservative living. For example not wasting money buying expensive coffees, meals, cars, not wasting money on impulse buying suxh things of body care products that are actually toxic ingredients in them. Basicly live as a minimalistic life style
Summertime! You can see the tan/sunburn on both of them 😂
Capital gains tax should never have been a thing. Income is income, whether you make it today or in a year, a $100 is still a $100. All sources of income should fall under income tax.
Bo should write a book too!
I wish they would have just co-authored it. Would’ve been more commercially smart too.
Once you're past the messy middle, and own a home you're going to stay in for the foreseeable future, and are buying cars with cash...
How useful is your credit score?
I'm 45 and am meeting all of the above, I haven't thought about my credit score iN a WHILE. It just doesn't seem to be relevant to this part of the journey.
It's likely more applicable to people that are going to move houses and continue to use car loans throughout their life. Probably about 80% of the population I would say. And that doesn't mean they are all irresponsible either, just living normal lives sometimes involves loans.
Credit score can impact the cost of insurance. (Some insurance companies will hide behind their own proprietary score… which is based upon the same factors as a Credit Score.)
@@M22Research good to know!
where do we submit questions?
Questions are only Tuesday mornings. I think this is recorded earlier and not live
During live streaming, there’s a chat where you submit questions
Come on now there is nothing wrong with eating bread, unless perhaps you are diabetic.
Eh, bread isn't great. Carbs spike insulin and maintaining high levels of insulin lead to insulin-resistance. And even for non-diabetics this can lead to various chronic illnesses
Well, I just learnt about importance of saving and investing, and 10-20% percent was going to be good, and now you tell me that even 25% saving will not going to work? I believe life is scam :) Work to save, and then just survive on your savings...
Age 22: 25% of your GROSS. EACH SUBSEQUENT YEAR add TWO percentage points. By age 47 it SHOULD be 75%!!!!!
😳 so at 47 say making 100k annually the person would be living off 25k a year like a pauper 😂
I pay off all but 1$. I was told and it seems to be true from my experience that if you pay it to 0 then they will not send an updated status to credit bureau. So in order to get reporting each month I leave on 1$
Complete myth and you are paying the base fee plus interest because you are carrying a balance. Anyone who pays off their cards each and every month can tell you that the status is reported to the credit bureaus consistently. If you want to know the FACTS about this, then contact the credit agencies directly , not get bogus info from broke people on the internet!
You may be confused by people saying nothing is reported when there has been no ACTIVITY on the card. Which means nothing has been charged so no balance is due so no payment due, but then it is just reported as zero balance. I guess if you don't use the card at all for a long period of time, maybe it looks like nothing is being reported? USING your cards and paying off the complete balance beach month (to zero) is the best way to maintain one's credit rating.
Actually, you just want to have any $ when the statement closes - then pay the statement/current balance. But you do not need it to carry over past the due date.
Typically, all credit cards (revolving debts) accounts will get reported to the credit bureaus once a month, even if the balance is zero. Home and auto loans will report once a month, with decreasing balances over time. When the balance of home or auto loan is paid off, then they will send to credit bureaus a final update of “account closed due to balance paid in full as agreed upon (or something similar)”. You want this statement to show up in your credit report. Take it from a guy who had 850 FICO in multiple occasions.
You need to pull your credit report to prove that’s simply not accurate. You can get free credit reports from each rating service once per year. There might be some creditors who are not very consistent in reporting - or simply are friendly to their customers for a single lapse, but by and large you’ll see they report.