Are You Paying WAY Too Much for a House?

Seth
Seth's question is up next. It says, we hope to buy a home. Even following the methods that we talk about on the show, like 20% down or about 25% of our gross income, it still feels like we're paying way too much. Yeah. How can we have peace that we won't be house poor?

Brian Preston
Yeah. And I think this echoes a lot of people's feelings right now. So I'd, you know, let's help them think through this. Let's first acknowledge that it's hard, and you're not alone. Real estate, I mean, you can look at all the affordability indicators, and it is.

Beau Henderson
Maybe it's not an all time low on the affordability, but relatively, it is still, it's hard to buy a home, and it's really, really hard for first time home buyers right now so that you are not unique in feeling this way. But your question was, how can I have peace? Well, you already noted that one of the things you've done is if you listen to the content we released on this, by the way, if you're thinking about buying a house, we have an entire home buying checklist that you can go check out. We have a whole home buying hub with calculators you can play with. Go to moneyguide.com resources and check all of those things out that will walk you through.

Okay. If I am knowing that my timeline is right, meaning I know I'm going to be in this house for at least five to seven years, it's going to be a long term decision, and I know that I'm putting down an appropriate down payment. It doesn't have to be 20%, but maybe I'm only putting down three to 5% because this is my first time home and I know that my housing is going to be less than 25% of my gross income, the question you ask is, how can I have peace even though I still feel like I'm paying a high price or overpaying a large. The way that you have peace is knowing that you're following the benchmarks that are going to keep you from being in the situation where your life goes into the ditch. If you were to flip that and all of a sudden now your housing is 45% of your gross income, or you're uncertain and you might have to move within two years, that's when you can get yourself in trouble.

But you can have peace knowing that, okay, if we can afford this, and we're following the metrics that the guys say we should follow, okay, I've done what I'm supposed to do. I'm gonna. I say hold my nose. You're not really gonna hold your nose because buying a home is a wonderful thing, but it always feel wonderful, especially not in this housing market. Doing those things are how you set yourself up to have peace with such a large and frankly, scary financial decision.

Brian Preston
I wanna give you kinda the nuts and bolts of what immediately popped in my mind. And then maybe even share and experience. Share. Um, the first thing, and beau kind of talked about this, I think time is your friend on. So the longer you can know that you will live in this house, the easier it kind of mellows out the extremes of what's happened, what we just came through, because with houses going up 40% to 60% because of that inflationary period.

Yeah, I can see the shock and awe that's probably going through you mentally right now that you. Because, you know, it's. It's recent enough that you remember what you could have probably bought some of these houses. Or when you look at the purchase history on the house, you're the houses you're considering to buy, and you see what people bought these houses for in 2015 or 2016, you want to throw up. So I completely get that.

So the way you combat that, the longer your timeline, if you know you're going to be in this house for ten years, it helps on a lot of that to mellow it out. The second part is that non financial stuff matters, too. So if you've got, like, a growing family and you got school age kids, and maybe it's the school system or it's something, or you want to make sure you get your kids into this community, or you want to be near your church or some other thing in the community that gets you excited and will give you those benefits that are outside the money part of it, that's going to also help you feel better about this moment in time and making such a big transaction. Here's the experience. Share I have is that when every house I had bought, I had bought two previous primary residence for myself in Georgia.

The first one was like 100. And I know these numbers. I'm old, so give me a little grace. I'm not Warren Buffett buying houses for $60,000, because that's the story you always hear. But I am old enough that my first house was like $190,000.

My second house was right around $400,000. But then when I moved to Williamson county up here, I had a little shock and awe, because, remember, I moved up here, I had a daughter who had some special needs, special learning needs that she needed to address. And I had my oldest daughter who needed a good public school system and those things. It was hard to get all of the above. And we started doing a little research.

And this place kind of checked all the boxes specifically with that school. But when I saw the sticker shock of what houses cost in Williamson county kind of blew my mind. I was like, are you sure this thing's not out in California? I mean, because it felt like it's like Brentwood, Tennessee, probably. The housing prices are very similar to Brentwood, California, and a lot ways.

And I remember right after we bought our house up here, after closing for a week to two weeks, I really did have not buyers or Morse, but it was just that I had. What have I done? This gut feeling. Cause I knew I was on the line for a closest seven figure loan now for that moment in time. And that, that haunted me for a long period of time.

Now, I have since created a plan, you guys know, I think, just to give you guys an update, I think I'm less than $50,000. I'm now, I've now told myself I'm gonna have it all paid off by the book tour. Okay. Or the book things that are coming out. But I'm so sorry, Larry.

But anyway, I will have it paid off in an upcoming date. But I'm just telling you, time heals all wounds. Your income will go up, assuming you're doing well things. I screw everything. It's fine.

I keep. You ought to see how I am with Christmas. When it comes to. When it comes to a home. I'm going to say this for a use asset.

Beau Henderson
Oh, man. I'm going to say this, but Brian, if this is dumb, just tell me. Bo, don't say that. It's okay to. It's okay to overpay, meaning it's not okay to overpay for home.

But if you don't get the absolute number one best deal and you move out seven to ten years, and you made all this money. Cause you've done that before, right? Like, you bought a house, like, in one of your homes, you didn't actually make money on the home, right? Like, it wasn't something where, like, it blew up in value. No, look, I left Georgia just before housing prices went to the roof.

Brian Preston
So I didn't make a ton of money. But that's. You are hitting on the non financial stuff matters. And that's, that's the thing. I had a big life event, and that's what I meant non financial stuff matters that caused us to go take on more debt.

But time has made that better. And now it seems like a joke. I mean. Cause you see what houses are trading for now, and you're like, well, what was I so worried about? But it is one of those things.

Time is going to make it better, but know that it's okay. Misery loves come. I mean, it's okay to get comfort in knowing that others have also had this buyer's remorse is a pretty standardized thing when you're making big financial transactions. So you just have to know the coping skills of knowing that this will get better over time. As long as you've made the right decisions, that you'll be in the area long enough and that you're getting enough other benefits.

Value benefits. Because, remember, cost is what you pay. Value is what you receive. So are all those value elements of community. Good place for your kids and all that stuff, man, that stuff can be pretty priceless in what it's worth to you and your family.

Beau Henderson
Love it. Great. Thanks for the question, Seth. Hope that helps. I'm so sorry.

Seth
I'm not even mad. The chat's loving it, though. Nothing else to see. Nothing to see here. Nothing else.

Brian Preston
I don't mind playing the goofball. Cause I am goofy then other times. Oh, my gosh. So there are. There's not playing, but there's like, okay, goofball.

Beau Henderson
And then there's like, uh oh, goofball. I was like, no, this is literally bronze and goofball. I'm so sorry. I love it. All right, we do have another question ready.

Does this one get. Did we do a post on this one or no? A little bit. Maybe we'll put, like, a chicken squawking over that or something. You know, we'll be like a sound effect or something.

I don't know. Nate's got it. Nate's a professional. He's got it. He's got it.

Seth
All right, John's question is up next. It says a Roth conversion plan. I don't have one. Should I wait until I retire in order to lower my tax rate or do it now? I'm currently 61 years old and plan on retiring at 67.

Beau Henderson
I don't exactly know the question you're asking, John, so I'm just gonna kind of start talking. And I think, well, I think. I think I understand it up. And then you put all the meat on it. You can imagine when you're 61 years of age.

Brian Preston
Probably a lot of his peer group are starting to retire, and he's probably also started watching a lot of financial content. And what is the first thing, because we've even, we do it all the time, too, is that we talk about, for retirees, one of the big benefit value adds, I think, as financial advisors we offer is we come up with Ross Roth conversion strategies. And he's like, I hear about this thing. What is this thing? I think that's what.

But that's, that's the buzzword he's heard. Probably he might be watching content or he's hearing other peers and his, in his group of influence, they're talking about it. And he's like, you know, do I need to be doing this? You know, and so that's why, you know, I'll say what a roth conversion is and then I'll let you give the decision matrix of what, how you bring it all together. A Roth conversion is where, look, it's not uncommon, especially for someone who's 61, because there was a long period of time before Roth assets and other things where 401K is traditionally, you get a tax deduction when you fund it.

And then, but when you pull it out in the future, it's going to be taxed at ordinary income taxes. And also, think about this. The government actually has a mandated retirement required minimum distributions depend upon how old you are. For most people, it's going to be 75 years of age. But they force you to start pulling that money out.

And since it's taxed at ordinary income tax rates, those are the highest tax rates that you can pay on money. You can quickly see why you have all this money from all your employer match, as well as all your deductible contributions. You've got to figure out, is there a proactive way that you can pull this money out and maybe a more tax effective way so that you just don't wait and procrastinate and then you pay the highest rates. That's exactly right. And so at 61, if you're still working, the problem is, John, you still have earned income.

Beau Henderson
So if you were in, if in your working years, you were in a high income environment, if you were to start a Roth conversion strategy now, as it's traditionally defined, you start pulling pretax assets and 401K assets and converting to Roth, there's a really good chance you're going to be converting at a higher tax rate than you will be in when you retire. So one of the things we often counsel retirees to do is wait until your tax rate drops, and then when your tax rate drops, then we can start playing the tax rate game. We can figure out, okay, what bracket do we want to maximize? When are you going to start drawing Social Security? How much of your Social Security do you want to be taxed?

How do we keep an eye on the Irma threshold so you don't get a Medicare surcharge? There's a lot of things that have to go into that thought process, but it usually happens after someone retires when their income falls. Now, maybe what you're saying is, hey, I'm 61, I'm still working. I just don't have any Roth assets yet. Maybe what you're actually talking about is, should I think about beginning to build Roth assets?

Well, if you're someone who's in a high income bracket and you've not been doing it previously, but now you're able to do it, backdoor Roth conversions could very much likely make sense for you if your accounts are structured well. Because even if you're going to work from 61 to 65 and you're just doing backdoors for you, and if you're married, your spouse, and you do that for the next four years, that can still be a large sum of money that can accumulate and continue to grow tax free forever until you start doing these other conversions. You can see that at 61, there's a lot of stuff to begin thinking through as you begin to approach retirement, because, frankly, a lot of interesting stuff happens in your sixties. And then a lot of interesting stuff. Frankly, a lot of interesting stuff happens every decade.

But especially as you're moving into a very unique transition from being in the workforce to being out of the workforce, there are a lot of things to think about. There are a lot of boxes to check. There are a lot of strategies you want to make sure you keep an eye on. This may, in fact, be the time when you say, hey, I can do all the research, I can listen to all the YouTube channels, I can read all the books. But man, I really wish I had a copilot.

I wish I had someone who could walk alongside me and not just give me the general advice, not just explain what the concept is, but can bring it down and say, hey, John, this is what makes sense for you. This is a strategy that would be optimized for what you are hoping to accomplish. If you find yourself in that position, I would encourage you think about hiring a professional. And if you're going to hire a professional, we have a great resource on the website moneyguide.com resources. It's questions to ask a financial advisor to know, is this someone who's going to actually be able to help me navigate the financial future that I want to actually navigate.

So ask them these questions, and if you don't know where to start, we would love for you to fulfill the abundance cycle. Go out. Go to moneyguy.com or aboundwealth.com. Comma. Check out the work with us.

This is the exact type of work that we do here at the firm to help people figure out, hey, I'm approaching retirement is a Roth conversion strategy, right. For me, it's a great question for a professional to answer. What I love about what you just shared, I think about there's an influencer out there who's a perma hater of advisors because he wants you to buy his thing. He'd rather you buy his stuff. But he showed his age a little bit.

Brian Preston
And also the fact that he doesn't really know what we do because he said, one of the problem with financial advisors is that they charge higher fees because people have more money later on for older clients. And I was like, tell me you don't know what financial advisors do without telling me you don't know what financial advisors do, because I always tell you, the older you get, the more complicated. A lot of this stuff I tell you all the time. Take all of our free stuff. Please go to moneyguy.com.

Resources. Accelerate your journey, especially if you're young and beginning the process. But I don't. You don't have to. Eventually, complexity will just find you.

And that's what we see it. I mean, we had a call last week for a client that just turned 65, looking at all the Medicare issues, all the supplemental coverages and trying to navigate that. And we had that phone call, and you could just see and they're like, holy cow, I had no idea. All these different elements on even choosing which Medicare premium or coverage to take on this, I'm like, yeah, this is what we do. And I think that's the, the big thing for John to recognize is that there will be more of these things coming.

You've only had one retirement, the one that you're living. There's somebody out there, like an advisor, who's done hundreds of these things and can help you optimize your path because it happens every year. All that Irma analysis, all the Social Security taxability, all the looking at tax rates and looking at the distributions that you're getting from your portfolio. That stuff happens every year. This is not like you do it once and then you're like, okay, I'm good and I'm done.

No, every year this is going to be a project process that needs to occur. So there's a lot of heavy lifting, and then it's good that if you can get somebody to help you through that process, so it protects you from what you don't know. Yep. All right, John, thank you for the question. I hope that helps.

Seth
And we're glad you're here. Thanks for being on the show today. Okay, Tyler, h's question is up next. It says, at what point is term life insurance necessary versus optional? Should you get more as you age?

My wife and I are in our twenties with no dependents and we save 25% of our income, so it seems unnecessary. But I think this is a good question of, like, when should you be thinking about this? Because it's something that we talk about on the show. Let me, let me give some overview because I know you just, this is you in some ways. And you've had always had lots of life insurance, but you've even made more.

Beau Henderson
A lot more now. So, Tyler, this is thing. And look, we sometimes I think people think that, like, we're fee only financial advisors, we don't sell life insurance. So a lot of people say, well, these guys just don't like life insurance because they just don't sell a lot. No, just the opposite, actually.

Brian Preston
We recommend a lot of life insurance to people who will come and listen. And we even own millions upon millions of dollars of life insurance. Myself, it is all term life insurance. And here's what I would tell you on. Should you, when do you know when you should have life insurance?

Is, is if your premature death would cause a lot of havoc and stress and put somebody in a heck of a pickle if you passed away early. Now, you said, Tyler, y'all don't have kids, twenties, no dependence. No, no. No dependence. But you do have a spouse.

And so you, if you're both successful and you're doing well, you're not really adding stress. However, you go by that first house. Now all of a sudden, if you pass away, because maybe you'll need both of your incomes to afford at this house because housing has gone crazy. You can see how maybe now having a life insurance policy to at least cover the mortgage on the house and maybe even a little bit of money to give you the time to recover, to mourn, because maybe you're not going to be the most productive version of yourself while you're working. That would make sense.

But then it's a whole nother equation once you start adding kids. And I look at Bo now, because, Bo, you've had. Y'all have got three children. Got a gaggle of them. Yeah.

Beau Henderson
Yeah. You got, you got a whole brood. Like you said, you're no longer doing man to man coverage anymore. We've moved to zone. So it's walk through what you guys have done.

Yeah, no, I love what you just said, Brian. You know, when my wife and I, when we first got married, we made the decision she was working. I was working. Yeah, we don't really need life insurance now. Life insurance agents will tell you, and this is not, this is not like, this is not like a backhanded comment.

Cause I love life insurance agents. I used to, like, kind of live and live. You actually sold life insurance? Yeah, I used to sell life insurance. They'll say, hey, you ought to go ahead and get life insurance while you're young.

And you can guarantee insurability. And while there is truth in that, but in reality, if you're going to play the probability game, you're going to be just as insurable at age 28 as you are at age 22. I mean, there are certainly things that could happen, and I don't want to discount those, but those are the exceptions. They're not the rule. And so if you're someone who's young, in your twenties, you're probably not assuming.

No, like, crazy health stuff happens. You're not going to run into this area where you're likely to be uninsurable. So, like, when me and my wife first got married, we didn't have life insurance. When I bought my first policy was when we actually moved out of state. And I said, all right, if I'm going to pull my wife away from her family, her social structure, all this stuff, we're going to move from Georgia to Tennessee, and we're going to commit to, like, buying a home, and we're going to do that stuff together.

I want to make sure that if something happens to me, she's covered to where, financially, she can decide. I either want to keep the whole house or go back to Georgia or whatever. So that was, like, decision number one for us. Well, then we had a baby, and I was like, holy cow. Now I got college.

I've got man. And, you know, at the time, I was a higher income earner, but my wife was still working, and she was not as high of an income earner. So I was like, man, if something happens to me, my baby girl, she needs to be taken care of. So I got some more life insurance. Well, then we had the second kid.

Well, when we had the second kid, we're like, all right. Well, for our family, it makes sense for my wife to step away from the workforce, so she's gonna stay home. And then it was like, oh, okay, now there's a lot of human beings depending on me. So then I got some more life insurance. Well, then life continued to move along and everything was good, and I had plenty of insurance.

And we've been saving and the portfolio's building and we have all the business and all the assholes. But then we had this other kid, and I'm like, holy cow, that's. He's not gonna be out of the house for 20 more years, man. All those policies I bought 10, 12, 15 years ago, maybe they're kind of coming up on their term. Maybe I need to think about just resetting my term because some of my kids are halfway out of the house, but some of my kids are just starting out.

So I made the decision, hey, I'm still relatively young, I'm still pretty healthy. Why don't I think about going ahead and getting more life insurance to get the insurability? But I can also, at this stage, go ahead and reset the term. The point that I'm making for you, Tyler, is all along this. It's not like a decision you make one time point in time and you never revisit it.

It's a decision that you make and then you constantly kind of revisit as you have different life events happen. The fact that you're twenties with no dependence, you're both saving, you're both working, you're both earning. Maybe it's not absolutely necessary that you have life insurance in place as your life circumstances change. Then you try to get life insurance that makes sense for that stage of life, and then you make sure that you continue to grow as your lifestyle or as your circumstances grow as well. Not to prolong the question too long, but I think that the reason we like terms is because the goal is, look, when you're young and starting a family and stuff, you might not have a lot of assets, but you have income and other things, and you need to replace that.

Brian Preston
If something happens to you, unfortunately, prematurely. When you get older, like, you know, getting my age and beyond and beyond. I'm quickly approaching where I don't really need life insurance anymore because I can self insure. If something happens to me, my wife is going to be completely fine. Just with our financial assets that we've built up over the last three, three decades.

That's the goal, is that the. The need for the assets or for assets or income to be recovered because you died prematurely will go away in the long term. Because hopefully in the background, that's why you also. We like term is because its cost is so low. You're just buying the cost of the insurance to replace, and it leaves a lot of margin for you to be building assets in the background.

A lot of times when I see permanent insurance pitched out there, it's eating all of the pie, meaning that it's not only the cost of the insurance, it's also all of your potential lifestyle, as well as investment purchases that you could be making to self insure in the future. If you're paying a $10,000 a year annual premium on your life insurance versus $600, very different, then you can see how there's a lot of life in that $9,400 difference between those two numbers. Um, so. So that that goes into it. Um, we're pro insurance, but check it.

There's nothing wrong with making this decision piecemeal, kind of building that quilt of life insurance. But I would just challenge you every time, because you. When you make that decision, like when you buy the 20 year term, when you have your first child, that's not to say after you've had the third child, that you might say, you know what? Premium rates have actually gone down. I'm in healthier shape than I was when I got the first policy.

Why don't we see if we can consolidate and get, you know, more insurance, reset the term. And by the way, don't cancel old insurance until the new insurance is actually in place. That's another tip that I'll just share with you. But great question, Tyler. Awesome, Tyler, thanks for being here.

Seth
I hope that helps you think through life insurance. Next up is a question from Daniel. It says, I had a great match instructor, but very. I have a great match instructor, but very limited investment options. Wait, are you talking about four?

Brian Preston
It sounds like you're saying a match instructor. Is that like a dating match and structure? We can match and structure. I was like, is this a dating service? I have a great match instructor.

Match and structure. Okay. Yes. So I believe he's talking about his 401k. Okay.

Seth
So it says, I have a great match and structure for my 401K, but very limited investment options. As a 28 year old, should I go low cost s and p 500 index fund or high fee target date fund? Let me give you the disclaimer, Daniel, because that's. We have a culture of compliance here, we cannot give you any specific investment advice. So without knowing your personal circumstances or situation, we can't tell you which investment option would be best for you.

Beau Henderson
However, we can talk about instances in which we've seen really good matching, really good structure, not the greatest investment options, or maybe not options that make the most sense. How do you navigate that, Brian? Like, what do you think about when the options are, maybe there are few options, or maybe they're not great options. How do you look at the whole pile and say, okay, well, that's the least stinky pile? Daniel's already doing some of those early steps on that I love.

Brian Preston
Maybe it's my CPA background, but whenever I can pull out a t chart where I'm going to put the pros on the left and the cons on the, on the right, it's an exciting thing. And you've already started doing that, Daniel, because you've already got in the pro column that, hey, this thing's got a good match. It's got a strong structure that's good. But over on the con, you got limited investment choices. And what you're quickly going to realize, by the way, if you're putting weight to these decision things, the match, if there's a good match, well, I even built it into my plan of the financial order of operations.

Moneyguy.com resources step number two, if there's a great match from your employer, where they're offering you 50 50% guaranteed rate of return on a $0.50 for every dollar that you put in, or maybe it's as good as a dollar for dollar, or a hundred percent guaranteed rate of return that when you next to match, you put a check mark, you put another check mark, you put another check mark, because that one is worth like a lot. And that's going to push the, put its thumb on the scale heavily. But then when you get down to the, what do you actually do with this money? It's not uncommon because you said you have an index fund that's really good. He said, should I do low cost s and P or he said, high cost target retirement fund.

Yeah, but I'm just giving an experience here. It's not uncommon that we get a client who comes in and we look at their 401K, we go, man, this must have been a golf buddy who set this up, because this 401K has a great match. But, man, these investment choices are horrible. And we'll sometimes say, well, what is good in there? Let's triage and try to figure out what?

Actually, we love in here. And you'll be like, oh, they have a good bond fund in here. We'll use that bond fund because we need fixed income. This person's in their fifties. But for you, Daniel, if you're young and you've triaged it and you look at it and you go, hey, well, at least they have a low cost index fund.

Now, you know, we like, and this shows me, you listen to our content. We do like target retirement funds, but we like index target retirement funds because index target retirement funds do all the great things that index funds do. They're low cost, they're very tax efficient. Not that you have to worry about that in a 401K as much, but it's just, it's a good thing all around. But when you have a loaded up target retirement, which maybe its fees are higher than 70 basis points, I was.

Beau Henderson
Going to say it all depends on, it's sort of relativity, right? Because he may be looking at his index fund a bit. Oh, that's. .01 well, then there's just target retirement fund. It's 0.4.

Yeah, that seems a lot higher than 0.1. But that wouldn't be like a crazy expense ratio for a target retirement fund. So it's, you know what I mean? If it's like a 1% or a seven, that would be expensive. So some of it's got to be a relative assessment.

Brian Preston
You've got to assess it. And then, look, if there is a huge difference between these, like say the target retirement is greater than 1% and then the index fund is practically free, then obviously you've got to love the one you're with and maximize the opportunity. But just make sure, and this is something, don't compartmentalize every section of your financial life. You need to look at all of your financial assets together because that's where you can maybe figure out if there's a tax location game that you can be playing with. This in addition to the asset allocation that you're putting into your four hundred.

Beau Henderson
One k. I just love target retirement. Funds because index target retirement funds. Yep. Love target retirement solutions because it removes the opportunity for me to screw up the behavior.

Right? Like the thing that at 28, what I really want to focus on is my savings rate. What am I saving? What am I saving? What am I saving?

What am I saving? What am I saving? In 2022, if you own the s and P 500 fund, maybe you're totally locked in. You're like, hey, I'm not going to sell. I'm not going to freak out.

I'm not going to go try to jump around, and that's going to be great. But if you can reframe and think, hey, I got this target retirement fund, and that's just going to like, I know it's going to do what it's supposed to do and it's going to shoot for this target. I can focus on my savings rate until it makes sense for me to focus on the bigger allocation. That's the reason why we often talk about those over indices. But I will say something that shocked me.

Brian Preston
We've done content on this. I would encourage, and this is something Daniel ought to do too, is go out and look at the biggest provider of index, target retirement funds. Like, I'm talking about. Fidelity, Vanguard, Charles Schwab. Go look at the asset allocation of their different offerings, the ones that are 30 years out, the ones that are 15 years out, the ones that are right now for retirees, there is a broad difference between those providers.

So you need to do the same thing, Daniel. Go pull those three big providers, but then also lay it right next to what yours are. And I've been shocked. And then make sure that that matches what your goals are because there has been quite a bit of spread between, like how much bonds some of these target retirement funds have versus equities. You need to make sure do your don't.

You don't get to skip due diligence. Just like you don't skip leg day, you don't skip due diligence to make sure the asset allocation reflects what you actually think is important. Love it. Great. All right, Daniel, thanks for the question.

Seth
Appreciate you being here. The next question is from Ellen M. Hello. It says, me and my husband work for a ministry that does not offer any retirement benefits. No 401k, no match.

We are in our thirties and we don't have anything in retirement yet. Should we change jobs? And can I be honest? That last part of the question, like, whoa, it got me. Cause these are people who are trying to do something good.

But I think that there are plenty of people who find themselves in a situation where they don't have that 401k or that match. What are the options? What should they do? Well, let's be very clear. You can save for retirement without having access to retirement plans, right?

Beau Henderson
Let's not assume that if I don't have 401k, that means I cannot save for the future. That's a false argument because there are certainly things that you can save all the time. We talk about, like tax strategy around here, we kind of like it's above, right? We have this saying at the firm, we said we never let the tax tail wag the investment dog. We don't let the small cherry on top influence what the main dessert is going to be.

Well, when it comes to your vocation, if you're in ministry and it's a job that you love and you're doing meaningful work and you're paid well and all these things, I certainly wouldn't consider changing jobs just because there's not a 401k or there's not a 403 b or there's not an option there. If anything, I might try to influence the nonprofit. Hey, could we have a 403 b? Even if you don't put money into it? Can we establish a 403 B where I can defer some of my salary, no match, and I just have the benefit?

Because you can do that really, really inexpensively. There's a lot of nonprofits that will make that available. Even though the funding won't fund the match, you still make it part of that. But even outside of that, I don't think I would ever change jobs solely and exclusively because of a single retirement benefit. I think it has to be more of a big picture idea, big picture thing.

In the worst case scenario, you're in your thirties, you're working for this ministry, you have income coming in. Maybe traditional iras are a solution for you. I mean, if you're w two, you can't do seps, you can't do that. But maybe you could do a deductible traditional IRA or Roth. Maybe you could do direct Roth Iras.

And then once you've exhausted those, maybe if you're in a high deductible plan, you can do an HSA. And then once you've done that, maybe then you can look at after tax accounts so you can still save for retirement and save for the future, even without having that retirement benefit in place. But the decision to change jobs, there should be a lot of other things that go into that decision. I've had the, we've worked with people who, missionaries, pastors. We've had a benefit of.

Brian Preston
I've even worked with, like, hospices, where they'll have a pastor on staff and things like that. So sometimes it might just be an education element, um, for you l and M, and the fact that, you know, your employer, just like Bo said, you go advocate for a 403 B. If you feel like that's just a bridge too far for them, that, you know, go look at what you can do for yourself between Roth IRAs or traditional IRAs and that type of stuff. But then also make sure you then bring in resources, because if there are tax benefits for people who are going into the, you know, working with a church there, there's parsonage allowances, there's other creative things that are part of the tax code for people who have made the decision to work for non taxable entities and so forth. So just you're going to have to do some research and then figure out and think about the fact of, okay, what do I think my employer I want to advocate for and, or the organization that you're partnering with.

What can I advocate for to maximize this opportunity that does the work that I feel led to do, but also kind of creates an opportunity so that when you, if you, if you do transition out of this, that you, you've created some type of future. Because I know, I have friends that have gone into the mission field and I know pastors and it is important that you know, because that stuff, it's hard work and it's just good that you are thinking about the future so that you have a landing when you, when you, you're still in that, but you, but you might serve in a different way in the future and you just want to make sure that you're, you're building up some assets outside of that. Love it. L and M. Hello.

Seth
Thanks for the question. I hope that helps as you think through that. All right, Robert's question is up next. It says, how do Brian and Beau feel about home renovations? Are there home renovation guidelines for financial mutants?

Brian Preston
Okay, I'll let you, I'll start two things because it popped into a question we had earlier today. There is, you need to go educate yourself on return on investment so that you know kind of what you're getting yourself into with any home renovation. Because some things, I mean, the common sense things like kitchens usually do well, master bathrooms do really well, and that you'll get a good return on investment. In the past, I always used to pick on swimming pools. You're pretty much $0.50 on the dollar is just washing away just from the fact that you're doing it.

But post COVID, I don't know that it's still the same metric that it was before. What was going on with swimming pools? Community specific stuff. It leads to my second point. That's the math homework.

The second part is, what is the benefit you, the non financial benefit you and your family will get out of something. One of the things that breaks my heart that I see people do. I'm always like, is that the right way to do things? Right before somebody sells their house, they will go and they'll renovate the. You know, they'll make the back patio.

They'll do the patio. They'll do the master bathroom. They'll do the kitchen, and then they sell the house and move out. And I'm like, if they'd have done that while they lived there, they might have gotten some benefit out of that. They got the.

Instead of having to do all this other stuff. So take into account what has the return on investment, but then also, what are the non financial benefits you'll get out of this project? Because if you have a happy spouse and your kids and all these other things, there's a lot of benefits to, you know, to you doing some of these things. If they really are the solution to some of the things you're. You're experiencing with your day to day life.

Beau Henderson
And you have to figure out, like, so you asked specifically, how do we feel about home renovations? My thought is, for some people, they make sense. For some people, they don't make sense. And because of all of the things that Brian just said, some people say, hey, you know, I don't want to spend any money in this house. I want to go travel.

I want to go see the world. I want to do that. That's awesome. Some people say, hey, you know what? I don't need to go on these elaborate vacations.

I'm trying to make home like a vacation. I'm trying to make it the thing that I want to be and so I can spend every day in it. I think what you have to also do is, while you're factoring all that stuff in, you have to be true to yourself about how wise of a financial decision this is. For example, you said pool. You want to put a pool in the backyard, your kids might love it, and it might create so many memories, and it might be amazing.

But if you've not been saving and you've not been building towards retirement and you've not been establishing a solid foundation, and you make the decision, rather than doing that, I'm gonna do the pool. Like, again, I don't want you to sacrifice family memories, but I don't want you to also sacrifice your future well being for enjoyment today. That's the opposite of deferred gratification. But if you've done all the stuff and you recognize, okay, I've done the things I'm supposed to do. I've done the things I'm supposed to be doing.

I've been saving money. I'm adding, you know, I'm doing the right things. I'm going to make a consumption choice to improve the house so that it's more utilitarian for our family. I love that. I think that's great.

I think that's something that you should do so long as you do the research to make sure you're not adding dumb stuff that's just throwing money in the trash can. You just said something there that triggered him. If you're doing abundance goals, I'll tell you. Experience share. I knew, I heard of an employee that left a job and then when they went to the new job, they took a rollover.

Brian Preston
They basically distributed out their 401K, put a swimming pool in the backyard. And I always like, ooh gosh. Just made me cringe just thinking about it. Be honest with yourself. That's, that's what I wrote.

My note here is because you kind of need to know where you are in the financial order of operations. Because if you're pulling the Clark Griswold and taking money that you don't have to put a swimming pool in the backyard, and then when you get the, the jelly of the month instead, you know you're going, you're setting yourself up for a bad situation. So that's why if you know where you're on the financial order of operations, a swimming pool is probably a step eight. Prepaid future expenses or abundance goals, as we like to say. Because that way you've already built your financial foundation underneath you.

And this is a decision to optimize your personal as well as financial life. Whereas if you're going and taking a rollover or you left a job and you have a 401K that's orphaned out there, that's not the money that should put a swimming pool in your backyard or even update your kitchen because you're stealing from your future self and that's just not healthy. So make sure you're triaging and know exactly where you are in the financial order operations so that you can make that decision. Because that is completely different if you're not on stable financial ground versus somebody who says, you know what, I've been very diligent. I've been disciplined.

Now I think I'd like to enjoy my life more because here's something we've noticed. Housing prices gotten so bad here in. That'S where I was going, no, I'll. Let you, I'll let you share because I'll let you fill in the gaps is that it has gotten so expensive that people have realized maybe instead of going and taking on more mortgage debt, I could just do a home renovation project and make this house brilliant. That's what you guys are looking at.

Beau Henderson
And this goes both ways in different markets. And this market right now with where we've seen housing prices, a lot of folks have said, hey man, this house isn't perfect. Maybe it's too small or we don't have outdoor living or whatever the thing is, maybe we should go find a new home. Well, you start looking around and new homes are 40% 50% more than what you paid for your current home. You might say, man, I could probably just add an outdoor living space for a lot less than going out and buying a new home.

That's true today. We've also seen it the other way. Someone said, oh man, I want to do the swimming pool and I want to add the outdoor living and it's going to cost x amount of dollars. Well, have you looked to see what homes are for sale that already have those things that have already been built in? Perhaps rather than doing the renovation, it makes more sense to go look at home.

So you have to measure both of those to make sure you're making a wise decision based on the community in which you live and the market in which you are buying or renovating into. Measure twice, cut once. Don't skip the homework. The money guy show is hosted by Brian Preston. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission in accordance and compliance with the securities laws and regulations.

Seth
Abound wealth management does not render or offer to render personalized investment or tax advice through the money guy show. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.

Are You Paying WAY Too Much for a House?

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1. Introduction to Home Buying Challenges

2. Financial Strategies for Home Buyers

3. Non-Financial Considerations

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