Yah, even this “20/3/8 rule” enables folks who do not actually NEED to borrow money for a car, to do so. The only rational time to take out a car loan is for that first fulltime job IF you do not already have a car and require one. All subsequent cars should be cash purchases. If you can truly afford the car payments, you can afford to instead save those payments up and… pay cash. The “interest rate arbitragers” will debate, but freedom from debt-slavery is a wonderful thing. And when you sharpen the pencil, even the “arbitragers” might not be making the real, incremental incremental arbitrage money they think they are, after taxes, hassles, upside down equity stress, etc…
@M22Research This isn't necessarily true. Unpredictable things happen. You could have totaled your last car unexpectedly. Or, the current model you want will be discontinued. Or, you have a chance to get much lower than MSRP now because you know about some incentives, but you don't know about future ones. A tariff may be coming into effect that will increase the cost soon. Some wouldn't consider the latter reasons, but it's worth looking into for a big purchase you want to keep for the long-term. I like the 20/3/8 rule because it's easily integrated into your current situation, and doesn't assume "financial mutants" are stupid.
When auto loan rates go down to 2-3% again, I don’t see a problem with financing a car you intended to keep. For the same reasons, you invest instead of paying off a low interest mortgage 🤷🏽♂️
It was SO SO COOL meeting yall in Dallas. You look, sound, and act in same amazing way in person as you do on video. Some say you should never meet your heroes, but you proved that point wrong.
I was gonna do 20/3/8 but instead I paid in cash for half the price that I was gonna get for twice the miles I was gonna get. Very happy to not be in debt for a car and I love it
If you can break it with over 20, less than 3, or less than 8, the money guys certainly aren’t going to complain. Unfortunately people usually break it in the other direction. Especially for new or nearly new vehicles.
I purchased my car in spring of 2023. I was prepared to pay cash, but qualified for a 0% interest loan for 3 years. Took the money and put it in a HYSA. Math says this is the correct move. Can always payoff for no fee if needed.
Cash out your 457? Never.... You lose the growth over time, the doubling every 7 years. Suck it up, take the mortgage and if it is over 5% then accelerate the payments, and if it is under 5% then sit on the mortgage and invest the rest for your future. That house will not double every 7 years.
Why over 5%? I have been debating about our mortgage over that but the math says our money will grow and multiply better if we invest in the stock market which is what we are doing.
@@mpjsac8951 Because some people need a number and also cant do the math. We did not pay off our 2.4% mortgage in the 19 years that we owned the house. The rest went into investing and I still slept well at night. Even when the investment gains in a year were more than the mortgage, I still held the mortgage. I was pulling a 9% advantage with the investments when holding the 2.4% mortgage.
Giving before saving? That doesn't seem right. Wouldn't it be better to save first and establish a good financial foundation before you start giving money away?
I am really trying hard to buy a car for my dad, his old Chevy Silverado died last week with 300K miles on it.. and it’s so hard to find something that’s actually good and reliable for a good price😢 I wanted it to be a Toyota so I know he won’t have any issues but it’s almost like everything it’s more than 10K now, even a 10 years old Corolla…
Yeah... Cars suck. Sounds like the used market is correcting right now, but if you need a car yesterday its probably not correct quickly enough to be helpful.
Look into salvaged cars! This is tricky as you’d want a trusted dealer and preferably a car that wasn’t hit near the engine (t-bone, rear end, etc). But the car itself is typically quite good and low mileage, its just considered totaled due to the cost of repair being higher than what the insurance wants to pay. So they auction it off instead
Strongly disagree about a business vehicle. 20/3/8 is personal finance. Only you and your CFO understand how much money the vehicle is projected to help you earn. What if a more expensive vehicle will directly increase efficiency and productivity yet breaks the 20/3/8 rule? If you’ve properly assessed the risk and cost, but it will increase revenue, the vehicle is worth buying. It’s a capital expenditure, not a personal purchase. What if you’re a moving company and need a bigger truck to take on more profitable jobs? More space, more or larger items being moved, longer hours being billed for. It’s just not measured with the same ruler. No one can know without really digging into it.
Yes, its okay to break the rule (same as every other rule). We aren't robots lol. There is a give and take and just make sure you understand that. I had to do 0/5/8 and do not regret it at all. I have a great life plan set up and feel secured in my decisions. (23 years old)
Doesn’t matter - never early cash out a retirement account unless it is truly an emergency with no alternative solution. We were patient until we had 20% down. And that was back in the days when PMI (for less than 20%) was inexpensive!
Sounds like a lot more considerations going on there. If it is money that isn't needed for retirement, and it prevents a house payment, and retirement is happening soon, and income is raising in retirement... Probably wouldn't hurt? But there's probably more to consider with the bigger picture.
@@M22Research we have 20% down, it would be to pay cash for all to avoid a 7% interest rate loan on the rest. More to explain than you tube will allow. 😂
@@Pointschaser1 are you confident you can catch up and invest enough to rebuild the account, after you’ve cashed out to reach the same retirement endpoint where you currently are? Pensions are wonderful. Big retirement account balances give options, like retiring early, heirs, and donations. (BTW, our SS + modest pension more than cover our expensive, leaving the retirement accounts “as a backup” and for periodic big spends like a new roof, cars, etc… but a tiny mortgage balance. That backup cushion is a huge comfort.)
So basically keeping 400k in mutual funds is better than buying a 400k house in cash because it gives me more options? So maybe one should put the regular 20% down and keep the other 320k in investments
The only proper response when someone says i dont have anyone to give my money too is...." i volunteer as tribute" lol. Seriously though thinking about your legacy is such a big decision
I don't follow this! I have a 5-year, 1.99% rate and I will pay it for the entire 5 years. It's 2% of our take home and we're investing 30% minimum over our entire portfolio. Additionally, our mortgage (2.25%) is 6% of our take home. Heck, our investments are 4x what we pay in car and mortgage payments. While it's a good rule of thumb, we all make decisions that fit our situation. There's no "doodoo" risk in our lives.
@@randombandit362 Exactly! It's like our mortgage, we could pay it off today if we were forced too. However, it makes no sense to pay off a 2.25% and 1.99% loan when I'm earning 5% sitting there. Admittedly, I don't carry much cash. I have about $10k sitting in my brokerage but the rest is 100% invested. That same $10k has been sitting there for years, we've never needed it.
“The Cybertruck, the Model S and X are still luxury vehicles”…. “Just because you can, doesn’t mention you should”…. Haha, he proclaims as the Tesla Cybertruck model peers over his shoulder from the selves on the set wall!
That's good, just don't forget to factor the inital depreciation of buying a new car. All that means is you need to keep the car longer than you'd like to cover that difference, so for instance if you plan on selling the car in 4 years, you may need to keep it for 6 or 7 years instead to recoup that loss
Yes, a CPA here... we always assess the APR of a car before just paying cash. We got a Toyota Highlander (prior year model, but new) for cheaper than a 1 year used and got 0% APR because it was during the time when Prius's had runaway brake stories and they needed inventory gone. We buy most things in cash, but it if is something you would have bought in cash and they are offering 3% or lower, you really have to do mental gymnastics to not take a loan lower than prevailing rates and below the risk free rate.
@CyrusMurphy opportunity cost. They have the cash to pay it off but are trying to arbitrage the difference. With that they have to also factor in depreciation on top of it. I agree it should be paid off in cash but that's not what the poster is doing
![Lp. Сердце Вселенной #60 РОЖДЕНИЕ ЛОЛОЛОШКИ [Финал] • Майнкрафт](http://i.ytimg.com/vi/YoR0pAV9FVQ/mqdefault.jpg)
Sure it's ok to break 20/3/8, just pay cash.
Exactly!
Yah, even this “20/3/8 rule” enables folks who do not actually NEED to borrow money for a car, to do so. The only rational time to take out a car loan is for that first fulltime job IF you do not already have a car and require one. All subsequent cars should be cash purchases. If you can truly afford the car payments, you can afford to instead save those payments up and… pay cash.
The “interest rate arbitragers” will debate, but freedom from debt-slavery is a wonderful thing. And when you sharpen the pencil, even the “arbitragers” might not be making the real, incremental incremental arbitrage money they think they are, after taxes, hassles, upside down equity stress, etc…
@M22Research This isn't necessarily true. Unpredictable things happen. You could have totaled your last car unexpectedly. Or, the current model you want will be discontinued. Or, you have a chance to get much lower than MSRP now because you know about some incentives, but you don't know about future ones. A tariff may be coming into effect that will increase the cost soon.
Some wouldn't consider the latter reasons, but it's worth looking into for a big purchase you want to keep for the long-term. I like the 20/3/8 rule because it's easily integrated into your current situation, and doesn't assume "financial mutants" are stupid.
1000% better
When auto loan rates go down to 2-3% again, I don’t see a problem with financing a car you intended to keep. For the same reasons, you invest instead of paying off a low interest mortgage 🤷🏽♂️
It was SO SO COOL meeting yall in Dallas. You look, sound, and act in same amazing way in person as you do on video. Some say you should never meet your heroes, but you proved that point wrong.
I plan on breaking it with the 100/0/0 rule
I figure you can break it by increasing the first number. Then it’s a no brainier improvement
This is the way
This is the only correct answer.
I bet it’s gonna be some average lame car 😂
@@MooMoo69556 i hope sarcasm
I am soooo excited! Got my two copies of Millionaire Mission yesterday and am now reading. The other copy I'm giving to my son.
Still don't have my preorder 😢
@@coletrain9173 I did not do the pre-order. Ordered from Amazon and got them 3 days later.
What does Brian say in the book?
I was gonna do 20/3/8 but instead I paid in cash for half the price that I was gonna get for twice the miles I was gonna get. Very happy to not be in debt for a car and I love it
If you can break it with over 20, less than 3, or less than 8, the money guys certainly aren’t going to complain. Unfortunately people usually break it in the other direction. Especially for new or nearly new vehicles.
I purchased my car in spring of 2023. I was prepared to pay cash, but qualified for a 0% interest loan for 3 years. Took the money and put it in a HYSA. Math says this is the correct move. Can always payoff for no fee if needed.
Hush, your logic is not welcome here. Let's stick to a made-up rule.
@@Rew123pretty sure they would say take the loan
@@amansawhney3318 Why don't you ask them? Get their thoughts on a 10% down car loan over 5 years with a 0% interest rate.
Ideal situation for sure, like you got a car and got paid for it.
With the custodial Roth IRA, will that be used for her college or for her eventual retirement? What are the details on the custodial roth?
Anyone else watch Bo's face while Brian is talking? I love how much he is amused by "bowling point".
Never.
Just change it to
20% interest rate
3% down
8 years to pay off
Cash out your 457? Never.... You lose the growth over time, the doubling every 7 years. Suck it up, take the mortgage and if it is over 5% then accelerate the payments, and if it is under 5% then sit on the mortgage and invest the rest for your future. That house will not double every 7 years.
Why over 5%? I have been debating about our mortgage over that but the math says our money will grow and multiply better if we invest in the stock market which is what we are doing.
@mpjsac8951 you answered your question, btw. Investment arbitrage is the answer. 5% is their threshold.
@@mpjsac8951 Because some people need a number and also cant do the math. We did not pay off our 2.4% mortgage in the 19 years that we owned the house. The rest went into investing and I still slept well at night. Even when the investment gains in a year were more than the mortgage, I still held the mortgage. I was pulling a 9% advantage with the investments when holding the 2.4% mortgage.
Giving before saving? That doesn't seem right. Wouldn't it be better to save first and establish a good financial foundation before you start giving money away?
I did 33/1.5/10, but its for an RV so im no longer paying rent and dumping that into it.
Rent was almost 50% of my income before
Have you done a show focused on custodial Roth's?
I am really trying hard to buy a car for my dad, his old Chevy Silverado died last week with 300K miles on it.. and it’s so hard to find something that’s actually good and reliable for a good price😢 I wanted it to be a Toyota so I know he won’t have any issues but it’s almost like everything it’s more than 10K now, even a 10 years old Corolla…
Yeah... Cars suck.
Sounds like the used market is correcting right now, but if you need a car yesterday its probably not correct quickly enough to be helpful.
Look into salvaged cars! This is tricky as you’d want a trusted dealer and preferably a car that wasn’t hit near the engine (t-bone, rear end, etc). But the car itself is typically quite good and low mileage, its just considered totaled due to the cost of repair being higher than what the insurance wants to pay. So they auction it off instead
Maybe a 1st gen Tundra?
@@saraashkir5793 I will look into this. Thanks!
@@AlexDavidson12 I thought about that an old Tundra but he doesn’t need a truck anymore, also those are going to be pretty high mileage.
Will you all becoming to Detroit area at all?
Strongly disagree about a business vehicle. 20/3/8 is personal finance. Only you and your CFO understand how much money the vehicle is projected to help you earn. What if a more expensive vehicle will directly increase efficiency and productivity yet breaks the 20/3/8 rule? If you’ve properly assessed the risk and cost, but it will increase revenue, the vehicle is worth buying. It’s a capital expenditure, not a personal purchase. What if you’re a moving company and need a bigger truck to take on more profitable jobs? More space, more or larger items being moved, longer hours being billed for. It’s just not measured with the same ruler. No one can know without really digging into it.
What percentage do you have your kids give when they get money? And how do you go about that?
There are children that are savers and others that a spenders. It’s very hard to change their nature.
Yes, its okay to break the rule (same as every other rule). We aren't robots lol. There is a give and take and just make sure you understand that. I had to do 0/5/8 and do not regret it at all. I have a great life plan set up and feel secured in my decisions. (23 years old)
@moneyguy sorry I should have clarified we are getting pensions in 5 years. So the 457 is backup money
Doesn’t matter - never early cash out a retirement account unless it is truly an emergency with no alternative solution. We were patient until we had 20% down. And that was back in the days when PMI (for less than 20%) was inexpensive!
Sounds like a lot more considerations going on there. If it is money that isn't needed for retirement, and it prevents a house payment, and retirement is happening soon, and income is raising in retirement... Probably wouldn't hurt? But there's probably more to consider with the bigger picture.
@@M22Research we have 20% down, it would be to pay cash for all to avoid a 7% interest rate loan on the rest. More to explain than you tube will allow. 😂
7% interest is temporary (hopefully). Cashing out is permanent.
@@Pointschaser1 are you confident you can catch up and invest enough to rebuild the account, after you’ve cashed out to reach the same retirement endpoint where you currently are? Pensions are wonderful. Big retirement account balances give options, like retiring early, heirs, and donations. (BTW, our SS + modest pension more than cover our expensive, leaving the retirement accounts “as a backup” and for periodic big spends like a new roof, cars, etc… but a tiny mortgage balance. That backup cushion is a huge comfort.)
So basically keeping 400k in mutual funds is better than buying a 400k house in cash because it gives me more options? So maybe one should put the regular 20% down and keep the other 320k in investments
I think you missed the ordinary income taxes on those retirement account withdrawals (likely >30%)
The only proper response when someone says i dont have anyone to give my money too is...." i volunteer as tribute" lol. Seriously though thinking about your legacy is such a big decision
I don't follow this! I have a 5-year, 1.99% rate and I will pay it for the entire 5 years. It's 2% of our take home and we're investing 30% minimum over our entire portfolio. Additionally, our mortgage (2.25%) is 6% of our take home. Heck, our investments are 4x what we pay in car and mortgage payments.
While it's a good rule of thumb, we all make decisions that fit our situation. There's no "doodoo" risk in our lives.
Makes sense. If you can find a 2% rate on a auto loan, that's great, since auto loans are simple interest.
No doodoo plan, plus taking loans on depreciating assets… What could go wrong? 🤷♂️
I think the 8% portion of the rule matters a lot, so if you’re only paying 2% and investing more than the car payment is, sounds fine mathematically.
@@randombandit362 Exactly! It's like our mortgage, we could pay it off today if we were forced too. However, it makes no sense to pay off a 2.25% and 1.99% loan when I'm earning 5% sitting there. Admittedly, I don't carry much cash. I have about $10k sitting in my brokerage but the rest is 100% invested. That same $10k has been sitting there for years, we've never needed it.
Does he ever talk about the -100/12/100
A race to hit zero first. 😂😮😂
“The Cybertruck, the Model S and X are still luxury vehicles”…. “Just because you can, doesn’t mention you should”…. Haha, he proclaims as the Tesla Cybertruck model peers over his shoulder from the selves on the set wall!
I couldn't stand hearing about the student credit card 😬🫣
Just bought a Model Y, $0 down for 72 months at .99%. I have the cash to pay it off set aside in a CD at 5.25%.
That's good, just don't forget to factor the inital depreciation of buying a new car. All that means is you need to keep the car longer than you'd like to cover that difference, so for instance if you plan on selling the car in 4 years, you may need to keep it for 6 or 7 years instead to recoup that loss
Also, how’s your access to cash in the CD? If it’s a 5-year CD and the car catches fire in year 3, what happens then?
Yes, a CPA here... we always assess the APR of a car before just paying cash. We got a Toyota Highlander (prior year model, but new) for cheaper than a 1 year used and got 0% APR because it was during the time when Prius's had runaway brake stories and they needed inventory gone. We buy most things in cash, but it if is something you would have bought in cash and they are offering 3% or lower, you really have to do mental gymnastics to not take a loan lower than prevailing rates and below the risk free rate.
@@crashtestdummy1972What is the difference in depreciation if he pays cash? None. Why even bring this up
@CyrusMurphy opportunity cost. They have the cash to pay it off but are trying to arbitrage the difference. With that they have to also factor in depreciation on top of it. I agree it should be paid off in cash but that's not what the poster is doing