Top 5 Wealth Killers in America!

Brian Preston
Top five wealth killers.

Bo Hanson
Brian, I am so excited about this because there are so many things out there that don't want you to be successful, that want to work against you, living your best financial life. And so our hope is that if we can bring them to your attention, make you aware of them, hopefully, you will not fall prey to these wealth killers. Yeah, we've talked about often that building wealth is surprisingly simple, but it is far from easy. And today we're going to kind of COVID some of these key things that have made getting wealthy a little bit harder. So let's jump into the first one, and this one is not a surprise to anyone.

And you're going to see this, but. Oh, yeah, no, that's, that's for sure true inflation. Inflation can be a huge wealth killer. We're going to talk about why, but before we do that, we ought to set some groundwork. Like why right now, Brian, is it so significant talking about inflation?

Brian Preston
Well, we just came out of a high inflationary period, and I think that there's always, it's a little shock and awe after you live through an inflationary period. I'm old enough that I actually made it through the seventies, early eighties, and here we are, this. And I'm like, whoa. It is just like I recalled, and in the frustration of, you kind of recall what things cost beforehand, but now you see new prices, and then there's a small section, a part of your brain that's like, it's going to go back. It's going to go back.

But then, because you've lived through it, you recognize. Nope. There's a good chance that a lot of what we experience is here to stay. Yeah. When you look at this, if we look at inflation, and this is data from the Federal Reserve from 2005 all the way until now, you can see that year over year, it kind of hovers around that, like three to 4% range.

Bo Hanson
But here, over the past few years, it got as high as 9%. And even though it has settled back down now to year over year, it's only up about 3% or so. When you think about that 9% run up that we saw, we are still paying for that. That's one of the reasons why it's such a significant killer, because prices go up, but it does not mean that they necessarily come right back down. Yeah.

Brian Preston
And we've, look, we've done so many inflation slides in the past where we say, okay, what did things cost in 19, 1980? What do they cost in 2015? What's really wild about this is we did what things cost then versus what they cost now. But we just went to 2020. Yeah, it was only a few years ago.

Bo Hanson
If you think about like a gallon of gas, the prices for a gallon of gasoline in 2020, $2.17. Compare that now to $3.36 national average. That's a 55% increase in just a matter of four years. If you look at the gallons of milk, it went from $2.96 in 2020 to now, $3.83, a 29% increase. And then if you look at one dozen eggs, it goes from $1.51 in 2020 to now, a 99% increase in $2024 to $3 for a dozen of eggs.

Just because inflation's come down. Prices have not come down. Commiserately well, but this is just covering just cost of living. Things that, you know, for basic consumption, food, gas. But it's worse than that.

Brian Preston
It's actually some of your big expenses, like housing, like vehicles, they've also been impacted by this inflation. Yeah. The stuff that we spend a lot of money on, we're having to spend a lot more money on. The first one you mentioned, Brian, was houses. When we look at home affordability now, we look.

Bo Hanson
We went and pulled this from 2014 until now, and you can see that when you think about the percentage of household income that is required to pay for housing on average in America, it usually was right around 25%. That's one of the reasons we have our 25% housing rule. And yet, as we came through COVID. As we came through the pandemic, the turn of the pandemic up in 2021, 2022, you can see now that the share of income required for housing is up above 40%. If you have 40% of your money going towards housing, it does not leave a whole lot for everything else.

Brian Preston
Well, and I think that's why it is hard to discuss this, is because when we give our 25% guidance, people think we've lost connection with the reality. And you can see in the not too distant past, it was actually pretty normalized to have housing at 25%. And I even feel it when I talk to people and I'm giving this guidance. It hurts to kind of share some of these guidelines that historically have been great, but right now, they are seeming somewhat disconnected just because housing is running for us. So before we wallow in just all the bad news, let's talk about how can we actually do this better.

Bo Hanson
Yeah. The first thing is have financial guardrails in place to ensure you're not spending more than you can afford. If we're talking about housing specifically. There are some things that we want you to think through before you buy a house. We actually have an entire hub out there.

You can go check out@moneyguide.com resources. But here are house buying rules. Before you buy a house, can you say pretty clearly, I'm going to be in this house for at least five to seven years? Do I have a down payment saved up? If it's a first time home, do I have at least three to 5% saved up?

Or if I'm upgrading or changing to a second home, have I saved up 20% down? And have I done the math to figure out that even with interest rates where they are right now, is my total housing cost gonna be less than 25% of my gross income? If I can answer those questions affirmatively, then there's a good chance I'm gonna be able to get into a house that I can afford that won't derail my finances. I want to tell everybody who's watching this is, you see this and you're like, man, but they just showed that slide where affordability is running away from me. And I think a lot of people, especially if you originally, like, say you were in the market for a house in 2020, 2021, but you felt like it completely ran from you because of inflation, you still have some trauma where you're thinking this thing is still running away from you.

Brian Preston
But I want to. I want to caution you from getting stuck in the mindset thinking that housing is going to continue to go up 1015 20% per year. That is highly, highly unusual. We came through that inflationary period where, yes, from 2020 to 2023, that houses did go up between 40% to 60%, depending upon which market. But that does not mean that that will continue on.

I think housing. I'm not saying it's going down, but I'm just saying that it's more likely going to do what inflation is doing, which is more in line with three to 4% per year. So don't feel like you're being squeezed into making a panicked, desperate decision to the detriment of your financial future, because I'm not saying that houses are going down, but I do think that there will be something that creates an opportunity to get you through this, but so don't get in a hurry. And it's not just housing where you need to have that guardrail in place. You want to make sure across the other big things you spend money on, like automobiles, you also have guardrails.

Bo Hanson
That's why we have our 23 eight rule. When it comes time to buy a car, whether you're buying new or used, we want you to put 20% down. We don't want you to finance for any more than three years or 36 months, and we don't want the total of all of your auto payments to exceed 8% of your gross income. If you can stay within those thresholds, stay within those guardrails, there's a good chance you're going to prevent yourself from getting into an automobile that you can't afford. Two other small caveats.

If you buy a luxury car, you need to be able to pay it off in one year. And you want to make sure that what you have going out in a car payment is less than what you have going out in monthly investments. If that's not the case, there's a really good chance that you're doing it wrong. I also want to encourage people to think outside the box, especially with this housing market. Yeah, one of the big things I'm thinking that a lot of people, if you're having trouble with affordability, there's always house hacking.

Brian Preston
You know, whether that means taking on roommates or you buy a house that allows you to rent out a portion of it. There are thinking outside of the box opportunities where maybe you can work your way through this unique marketplace. Now, again, we're talking about how to not let inflation be a wealth killer for you. One of the things that's true when it comes to buying large assets is that reversion to the mean is a thing. We've seen this in the automobile marketplace.

Bo Hanson
Prices on new and used cars are not as high as they were a couple of years ago. They've started to come back down a touch. And while this hasn't happened en masse on housing yet, there's a chance that it could happen. So make sure that you're paying attention. If right now, making these decisions, purchasing these types of large assets that don't make sense for you financially, perhaps waiting for things to mean revert isn't the worst solution, at least in this unique time that we're in.

Brian Preston
But bo, I want to make sure we're clear, because I think when we say reversion to the mean, does that mean we think the housing is going to go, prices are going to go down? Not necessarily, no. I think what it could mean, and you kind of were alluding this, be patient. You know, maybe your opportunity is going to come from the fact that you're going to make more money. There's going to be some increases in wages.

If you have high inflation that's caused the higher housing, it also means there might be this higher inflation might and cause your wages to go up a little bit faster or even interest rates to come down. Now, interest rates coming down would help out with affordability. Don't feel like you have to force this. Like I said, time is not necessarily working against you like it was in 21 and 2022. I would rather this be a measure twice, cut once, instead of making a desperate decision where you're house rich, life poor, and to the detriment of your future financial self.

Bo Hanson
So inflation is one of the wealth killers we want you to be aware of. But some of inflation is a little bit outside of our control, especially on the consumer non discretionary goods that we have to buy. This next one, I do think is in our control, and I think it can be even more detrimental of a wealth killer than inflation and its comparison. Yeah, you know, this is one of those things. I don't know if it's because I'm of a certain age, a certain generation, but I know, and for a company that we build clients, we build relationships off social media.

Brian Preston
It does make me sad that social media does lead people to base things off of comparison. Meaning what is out there on Instagram? What? It's out there on Facebook. And I don't necessarily think that that is a great thing for us humans in general.

Bo Hanson
Yeah. There have been a number of studies conducted over the last decade that suggest that those who spend more time on social media have significantly higher levels of depression. So not only is it affecting your financial life, it's affecting your mental health, which can affect all the other facets of your life. So you have to really pay attention to this because it can affect you mentally and emotionally, but it can also affect you financially. Let's talk about some of the ways that specifically, it's a wealth killer to your finances.

Brian Preston
Yeah, I was talking about this in our content meeting for years back. This is pre 2008 people when they were pushing people, thinking real estate, never lost value, never went down there. Like, just buy and stretch and buy as much house as you possibly afford. You won't even be the poorest person on your street. If you could buy the smallest house on the nicest street, that is going to be a wealth hack.

And I always like, no, do not do that. Because I knew about this comparison thing. Because if you hear the saying that we are the five people we hang out with the most, and if you are the person that is the poorest among all your friends, peers, neighbors, I'm telling you, it's going to have an impact on you. You'd much rather be the comfortable one or hang out with people not only who push you, but also, but just you feel comfortable in your own skin. And that will keep you from letting that comparison be the thief of all your future joy.

Bo Hanson
I think one reality that you can rest on is that there will always be someone that has more money than you, and there will always be someone that has less money than you. And you need to recognize and figure out how you can live in that tension. Just because so and so has the nicer car, has the bigger house, or goes on the nicer vacation does not necessarily mean that's what makes the most sense for you right now in this part of your financial journey. And the more you can recognize that, the more likely you are not to fall into this comparison trap. So, bo, let me ask you, how can you do it better?

Brian Preston
I know you've got a unique perspective on this. Yeah. So the first thing I said is get off the sauce, right? Like, this isn't really interesting. When now, for me personally, I don't think it was comparison, but I have gotten off of social media.

Bo Hanson
I'm not on Facebook anymore. I'm not on Instagram, and I'm not suggesting that those are bad things necessarily. But here's what I have noticed now that I'm not on it. I didn't like them because I was wasting time. Like, you know, you just sit there and you death scroll and you're like, man, where'd that 20 minutes go?

I think that's bad. But what I have noticed is I'm also not paying attention to, oh, what's so and so got going on? What's the car so and so draws? What's the vacation? So it's, oh, okay, what's the home renovation?

It's the highlight reel. And one of the things that I recognize is by getting that out from in front of me, I just don't think about it as much. What I really think about is, okay, who are the people that I'm doing life with? What are the things they actually have going on in their lives? Not the person that I went to high school with 20 years ago and I haven't seen in 20 years.

Why do I care about the new car that they got? It doesn't matter. And so I think if you are someone who struggles with this, perhaps finding ways that you can limit yourself and get off of those types of social media, maybe you'll prevent yourself again, from falling into that trap. And another thing I like, because this ties into the education side of things, is if you're trying to figure out how you can do it better, is actually educating yourself on what wealthy people actually spend their money on. Because I think, you know, look, we live in a consumption society.

Brian Preston
Their entire industry is trying to say, hey, you look younger, you'll look sexier, you will feel better about yourself if you'll just give us a few bucks and buy this product. I made a joke because I was doing some research and I went and looked at advertisements for like corvettes, okay? And if you go watch going YouTube, I challenge you. Go try to pull up whatever commercials are being put out by General Motors on Corvettes. And you're going to notice everybody who drives the car is young.

They're looking like they're having a great time and they're, and they're somewhat attractive. And then you go and you peel behind the curtain and you look and see what the average purchase age for a Corvette is and it's greater than 60. It's not the young attraction. And that was the joke I was telling the content team is. I was like, look, nobody who's actually the general demographic that buys this car is actually in the commercial.

So I would, I would highly encourage you, do not be susceptible to what the consumption purveyors are pushing out there. Actually know what wealthy people spend money on. Because there is this premise, and there's actually a lot of research that's found that lower income Americans spend a greater portion of their income on visible goods like watches, jewelry, clothing. And we even did, and we could totally do it again, where we could show Jay Z, we could show Zuckerberg, we could show all the Bill Gates, all the disheveled billionaires who it seems like the richer they get, the poorer they dress. It's just some realities to that.

So don't fall into that consumption trap. So I think one of the things that you can do is you can build a community around yourself that cares more about your net worth and your balance sheet and your savings rate than cares about what car you have in your driveway. And you may say, well, guys, I don't talk to people about money. That's kind of a taboo subject. I would encourage you.

Bo Hanson
I got two places for you. Go check out. Because financial mutants love to gravitate and surround themselves with other financial mutants. And one of the things I love seeing is when I was on Facebook and I went and saw our Facebook page. I love seeing the interactions of people saying, hey, I'm thinking about making this decision, or, hey, I just hit this savings rate, or, hey, I just hit this milestone and everybody can kind of cheer for those good decisions.

We have that exact same thing going out on our Reddit page. It is an entire community of folks who think like we do and talk about the things that actually matter when it comes to wealth building, not the stuff that you see on social media. That really doesn't matter when it comes to living your best tomorrow. And then the last thing I'll say to close this out is kind of to build some wisdom on knowing what makes you happy. We do a show on the five levels of wealth.

Brian Preston
And when you get to level five, abundance, it's really knowing who you are, what you value, and what spends your time and brings you purpose. And when I say, like, know who you are, how do you feel comfortable in your own skin? I mean, that's one of the things with all these things whispering, you're telling you good decisions, bad decisions, and how to live your best life. If you would actually, in the stillness, in the quietness, try to figure out what do you actually get value out of, what brings you happiness. I think that's an exercise that more americans could benefit from, because then it's going to let you, when the next person or next industry tries to push on you consumption, you'll be like, no, that's not actually what brings me happiness.

That's moving the goalpost. That's probably going to push me into debt. That's not going to be a decision that actually brings me to where I want to be financially and in life. Well, I love it, Brian. Cause comparison is like a behavioral thing that can be a wealth killer.

Bo Hanson
But there's another behavior that we can perpetrate that can be a wealth killer, and it can be huge, and it can be wildly expensive. And it's procrastination. Oh, man. This is, this is one for all the things that I procrastinate in life. I'm glad financially, you never did.

Brian Preston
I didn't because, and it's worth reviewing. The three ingredients to wealth creation are discipline, meaning you live on less than you make. If you can do that, that actually will generate the second ingredient, which is money. That's the margin that if when you have money, you can actually start investing in your army of dollar bills. And that leads to step the third ingredient, which is time.

If you can actually put that money to work by investing for a long enough period of time, magical, exponential things will start happening to your wealth. Bill, but here's the problem. This is why procrastination is such a wealth killer. It significantly decreases the power of time. If we just said that of the three ingredients, it's one of the important ones.

Bo Hanson
It's the one that can have the most impact. When you procrastinate, when you wait, when you put things off for tomorrow, you are literally taking all the power out of that agreement. We actually have a case study to show you that this is true. So we said, Brian, let's look at four individuals, right? We have one individual in her twenties, another in the thirties, another in the forties, another in the fifties.

And we said each of them is going to save $10,000 per year for the decade that they represent. So Tia, in her twenties is going to save 10,000 from 20 to 29. Thackery in the thirties is going to save 10,000 each year from 30 to 39, Faye from 40 to 49, and Fannie from 50 to 59. They're all going to invest the exact same amount of money. They're all going to invest exactly $100,000 for that decade.

But when you actually look at what happens, what their terminal portfolio values are worth at retirement, it's amazing, because when you play this out, after all of them invested $100,000, Tia, who started early, who only say for ten years, from 20 to 29, her $100,000 turned into almost $2.6 million, assuming an 8% rate of return. You compare that to Fannie, though, who waited until her fifties and she still saved the same hundred thousand dollars, but did it from age 50 to 59, instead of having 2.6 million, she ends up with only 237,000. It is a wide contrast between when you get started and how powerful your dollars can be. I think this is that siren song that a lot of people, even in our millionaire study, when we send out our survey every year to our clients who are millionaires, even though these are successful seven figure people, when we ask them, what are your biggest regrets? I didn't start early enough.

Brian Preston
Even successful people say I didn't start early enough. And I think it's because the falseness of when you're in your early twenties, you don't make a lot of money. And you're like, well, I don't make money yet. I'll wait until my thirties because I'll probably get a few promotions. I'll just barely make it by with this.

And why this is so deceiving is that, yes, you don't have money, but do you realize what $50, $100, $200 a month could do for you in the long term. Don't miss out on the exponential opportunity. And we'll also show you why there's a brain trap that you might be falling into where your mindset is thinking this is the way money works. But when you actually run the numbers, it's completely different and you are minimizing what your opportunity is. I would say that procrastination is one of the biggest barriers to building wealth because of exactly what you said.

Bo Hanson
You just said, excuses are never ending. There will always be an excuse of why you can't do it today and tomorrow's better. And I'm going to wait. And I'm going to wait. And I'm going to wait.

And I'm going to wait. Those excuses will never go away. So just recognize them for what they are, excuses. And figure out how you can start making decisions today to move you towards your great big beautiful tomorrow. So let's talk about Brian.

How can we do this better? How can we combat and fight against inflation? Well, I just alluded to that there's a mindset problem. I think a lot of us, when we think of what we can accomplish or what the money can become, we think too linearly. We think in the terms of that my $500 is going to turn into eventually $1,000, then 1500, then 2000, 2500.

Brian Preston
But you're just going up in small step increments what we have found. And this is the thing that I think shocks people when I say, look, if you start in your twenties or thirties, you're going to be surprised when you reach retirement that 80% to 95% of your entire account value will not be what you put in. It will actually be the growth of what your assets could have become. So check this out. If we actually apply, not linear, but the exponential of what happens with compounding interest.

Bo Hanson
Yeah, it's amazing. If you think about a 20 year old, they think linearly. Okay, $500 at 20, maybe that turns into 2500 by 60. That's linear thinking. However, if you think exponentially, you think about someone who can earn 10% rate of return that compounds on their money through time.

That 20 year old, that puts that $500 to work at 20, it doesn't just turn into 2500, it turns into almost $27,000 by the time you get to 60. It is very different. When you recognize how powerful time can be and how compounding interest actually works and you get excited about it, it will be a huge ally on your wealth building journey. You know, this is something. Just do a little bit.

Brian Preston
I don't care. Just do something. Just do it a little bit. Goes a long way. And if you want to make yourself, your life, financial life, as easy as possible, don't wait until tomorrow.

Do it right now. And look, your future self will. Thank you. We say this all the time, Brian. Wasting time is way more expensive than wasting money.

Bo Hanson
So if you are someone who's falling into their procrastination trap, don't let it be a wealth killer for you, and I'll close out. One final thing we always say, try to make the good habits as easy as possible and make the bad habits as hard. One of the things you do is automate this process. You know, one of my favorite things, and I think I've made so many people, I could. I could.

Brian Preston
All my hands, all my fingers, all my toes, I could tell you different clients that every time we met, I always be like, hey, talk to me about cash flow. Talk to me about your cash holdings. But why don't we increase your monthly investments by $400 a month? Or why don't we invest? Man, you are building up a lot of cash.

Why don't we increase your dollar cost averaging every month up another thousand dollars? And, you know, they always, like, a few months later, they call me. But I don't even really miss it. I don't miss it. But then here's the part.

I've been doing this long enough, 20 years in the future, and then you are 15 years in the future, and you talk, and they're like, how in the heck did my portfolio get to be multiple seven figures? And I'm sitting there chuckling to myself, because I'm like, always be buying. I automated that process. I asked for a little bit dollop more from you every year as you got pay raises. And without you even noticing it, the silent, patient work of building wealth was happening on an automatic for the people fashion.

Bo Hanson
It's amazing. So, okay, Brian, we talked about some behaviors that can be wealth killers. We've talked about some, like, macroeconomic things that can be wealth killers. Now, let's talk about a tool. And I use that term very specifically, a dangerous tool.

A tool that can be a wealth killer if not used correctly. And that tool's debt. Yeah, we all know debt is a four letter word. Four letter word. It is definitely dangerous.

Brian Preston
But I would be fibbing if I didn't tell you I used debt. I mean, I think about it. I graduated college, well intentioned, my first public accounting job. But I couldn't afford to. I needed a new car, or needed a new car.

To me, it was a used car. I had to go borrow money on it. That's what. Where do you think 23 eight came out of? I tried every rule that I've tried to create for you guys.

I've thought about my own personal journey towards wealth. And I said, which moments do I need a little bit of help from financial instruments? And which ones do I need to gut it out through determination? And I realized, hey, at the beginning of my journey, where the only thing I had that was a wealth builder was my aptitude and ability to go give a little bit of my time and labor for wages. The most important thing I do was get to work in a reliable, safe fashion.

So that's why I needed car buying rules that allowed me to have parameters, the guidelines that would allow me to stay on the wealth building journey without getting distracted by debt. And too many people are chainsaw dangerous where they use debt just like they almost juggle with it. You know, they're like the performer in the circus, juggling chainsaws when they should be scared to death that this thing can remove limbs from their body, not just trees. Be very careful. So, okay, so let's talk about why is it a wealth killer?

Bo Hanson
It's simple mathematics. The more you spend to service debt, the more money you have going out the door to pay interest. The less money you have going to work for you, the more money you have going to pay for things that you've already previously bought, paying for prior consumption, the less money you have to go out and be building for the future. It's common math. So if you don't have a lot of debt that you have to service, if you're not losing money to interest, those are more dollars that can be going into your army of dollar bills.

Brian Preston
And then it's also time. I mean, cause think about it, if you say, hey, look, when I get that next pay raise, I know I'm running up credit card debt, but at least when I get that pay raise, I'll be able to pay off all this credit card debt and I'll start investing. And the good news is, because the pay raise, I'll invest twice as much. I won't do $100 a month, I'll do 200. But what you failed is instead of it being a year down the road, maybe it took you three years or four years, and maybe instead of that credit card debt being two to $3,000, it turned out to be $12,000.

So you not only you lost time, you lost the money. There's so many detrimental things happen when people take the bridge to nowhere by using debt. Wrong. Well, the other thing that's true, that is a reality inside the rule of debt is that some interest rates are actually punitive. I mean, we talk about debt that we don't.

Bo Hanson
You know, we don't love auto loans and we don't love student loans, but there are types of debt instruments out there that are literally punitive, that create holes that you almost cannot dig out. Well, and Daniel was sharing with me because we had a chart, and we'll put this on up there. Look at what's happened to credit card aprs. Daniel was so giddy to show this to me because in 2013, the average APR on a credit card was right around 12.9%, which is still super high for debt. That's still super high.

Brian Preston
Speaker zero. It's high because we count on a good rate of return from the s and P 500 is a year that it makes between eight to 12%. So to see that every year, credit cards back in 2013, we're charging 13%. But Daniel's like, do you see where credit card debt is now? And I was like, yeah, it's 23%.

And he goes, do you know why it's up? And I said, well, interest rates are up partially, but he was like, that's not really. It literally is the master plan of these financial institutions. They make more money the higher the interest rates. There is a disconnect.

Yes, interest rates are up right now, but they don't have to be up as high as they are at the moment. This thing is completely punitive. And unfortunately, anything that should be safeguarding you is just all on board because there's a lot of money that moves behind the scenes on this. Be careful. Don't fall into these consumption traps, because nobody's watching out for you besides yourself.

And then the education of knowing what not to do with your money. So then, as you think through this, like, why is debt a wealth killer? Well, again, behaviorally, using debt to finance your lifestyle is literally the exact opposite of delayed gratification. Of deferred gratification, we talk about all the time. You want to give up a little bit of today, a little bit of your wages today, a little bit of your income today, a little bit of your things that you want to do today so that you can have a better, more bright, more beautiful tomorrow.

Bo Hanson
That is deferred gratification. Well, when you use debt, you're actually accelerating gratification. Rather than deferring it to your future self, you're actually robbing your future self of those things. So it is behaviorally the exact opposite of what is required to start building wealth. So how do we do this better?

Brian Preston
Bo, we need to have some money. God, debt. Godliness. Absolutely. These are huge, and these are pretty straightforward.

Bo Hanson
We've talked about a lot of these. One for your biggest debt that most people have when it comes to your mortgage, you want to make sure that the total cost of your mortgage, the amount that it takes you to service your house every month, does not exceed 25% of your gross income. Also, with cars, as I told you, I used this when I first came out. 23. Eight.

Brian Preston
That's 20% down. Don't finance longer than three years, 8% of your gross income. And remember, it cannot be a luxury car. This needs to be, you need to be thinking Corolla, not Land cruiser. Make sure you get reliable transportation.

You want to keep that number as. Low as possible when it comes to student loans. If you want to make sure that you're remaining in the realm of responsibility, try to keep student loans below your expected first year salary. So if you think that in the vocation that you're studying for, your starting salary will be $50,000, try not to have student loans that exceed that. If you think that you'll have a starting salary of $75,000, try not to exceed that.

Bo Hanson
And you're going to set yourself up to be able to pay those off on a reasonable timeline. And then remember, credit card use is okay, but credit card debt? No way. No way. If you're actually running up credit card debt, I would just encourage you.

Brian Preston
You're just not a credit card person. You need to go to the debit card route, or you just need to walk around with a big wad of cash in your pocket. But if you are running up, if you're not paying your credit cards off monthly, stay the heck away from credit cards. Now, when you think about all these different types of debt that you can accumulate, here's a really good rule of thumb to help make sure you're staying where you should be. You should be aim to keep the total debt payments below 36% of your gross income.

Bo Hanson
So if you have 25% that's going out towards housing or you're getting close to that, you only have a little bit of margin so that you can begin satisfying those student loans, or so that you can have that auto loaner so you can pay off that, whatever that debt is but under no circumstances should you go above 36% of you're getting into, like, danger will robinson territory. Make sure you're keeping an eye on that. And then we want to close out today's show with number five. The fifth biggest killer of wealth or why people don't become wealthy is fear. Yeah, it's unbelievable.

Brian Preston
They never even get out of the starting box. Yeah, we talk about all the time when it comes to investing or when it comes to building wealth, there's this double sided coin that you have to be aware of. There is fear and there is greed. And unfortunately, when it comes to killing wealth, I think far more people fall prey to being afraid of the unknown or afraid of what they don't understand, and they end up getting this place where they don't do anything at all, not recognizing how detrimental that can be to the world. Well, and look, I know there's going to be a group of you because there's, about 50% of our audience is brand new.

You're going to watch this show. Hopefully you'll get inspired and you're going to start saving and investing. But I want to go ahead and warn you, even in, I don't know if it's going to happen in year one. I don't know if it's going to happen in year two or three. The market is going to go through a period of volatility where it will lose 20% to 40% in a single year.

And you're going like, oh, my God, this can't be normal. This has got to be. These guys didn't mention anything about the volatility of what's happening. Do not let fear have you in that moment of. Because the news media is not going to be your friend either.

Because they love fear. Fear sells a heck of a lot of advertising time for them and pushes up the rates because your eyes, your ears, and you're fully engaged when you're fearful and scared and they take advantage of that, do not get sidetracked. Do not lose focus. Always be buying. Even when things are scary.

Don't let somebody scare you out of saving and investing for the future. I love what you said right there, Brian. Always be buying. It takes the decision making out of the process because why is fear a wealth killer? Because it causes analysis paralysis.

Bo Hanson
Well, what if the market goes down? Or what if we're at an all time high? Or what if this is the wrong index fund? Or what if I don't need to? Or what if, or what if, or what if, or what if you can put together a plan where you are always buying on a consistent basis.

It doesn't matter if the market goes up or down. If the market goes up, great. Those previous contributions are making money. If the market goes down, great. You're buying in at lower and lower and lower levels.

So if you can do that well, it will prevent you from falling into this, uh, this mindset where you do nothing because you're paralyzed with uncertainty. And if you come from a family that's never invested, I've often shared my own story. My parents idea of investing was buying CDs because they just didn't know how money worked. They didn't know how investing worked. It seemed very foreign to them.

Brian Preston
And what felt comfortable was buying something that's conservative. So if you don't understand or if you're fearful of losing, you can be too conservative. But here's something I need you to understand in the long term is, look at this. Is that what appears risky in the short term is actually the safe way to build wealth in the long term, stock market equity. So what in the short term feels safe is actually, and here's the second part.

What appears safe in the short term is actually risky in the long term. So what actually feels risky in the short term is the safe long term investment. What feels super safe when you're focusing on volatility and how much money you could lose could be the most dangerous thing you could, or risky thing you could be buying because inflation is eating it alive and your purchasing power is being diminished every second that you live in your comfort or bask in that comfort, don't fall into those traps. There's a balance there between risk tolerance, risk capacity, and understanding what builds wealth versus what keeps wealth. All right, so let's talk about what are the ways that we can do it better.

Bo Hanson
You've already alluded to this. Invest no matter what. Figure out how you can have an always be buying strategy. Abb. Abb, there's, there's a great quote by, by a famous fund manager, Peter lynch.

And he said far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves, meaning people waiting on the sideline, not investing, not taking action, not putting their money to work have lost tons of wealth versus those who said, you know what? I've got a plan in place. I'm going to always be buying. I'm going to drive through it, and there's a really good chance that when I come out on the other end, I'm going to be just fine. So here's what's going to help the money Guardians, a good case study.

Brian Preston
Because let's talk about what your worst case scenario is that you start, you get energized by this show. You start watching and not only does right after you start investing, the market start losing money on you, but then it just sits down and goes sideways for a full six years straight while you've been buying. Now, look, if you will be a financial mutant and just completely implement, always be buying. You don't care what the news media is saying. You don't care that when you look at the chart that this thing was flat for six years or actually even went down right after you invested.

You're always be buying. And watch what happens when you make this good habit easy and the bad habit of losing focus and stopping the behavior. If you just will put yourself up for automatic success. Watch what happens. Yeah.

Bo Hanson
Think about this. In October of closed at 1565. Fast forward all the way to October of 2013. It closes at 1563. So you would argue it's a disaster.

It's a flat market for here nearly six years. But if you would have done what Brian said, and you would have been buying that entire time just doing $500 per month for that five and a half. Five and a half years, here's what you would have found. You would have invested $33,000 over that five and a half year period, and it would have turned into $46,327 as of April 2013. That's an annualized rate of return of 11.9%, almost 12% in a market that was nearly completely flat.

Brian Preston
So if you were looking at the previous page, we showed you that you put money in. If you just put in lump sum, you would have lost money and then gone sideways for six years. But, and this is what people don't realize. When you face volatile periods, buying into the volatility is actually a superpower. Because if you look at this chart over the same period of time.

Where's the sideways? It doesn't look sideways at all, because on those months that it was going down, you were buying more at lower prices. On those months that it was going just sideways, that's okay. You were buying more shares at those lower prices. And then what do you know?

When it actually started to recover, there was more money working for you. And then here's where it gets even better. When in doubt, zoom out. Because guess what? When you actually now take that investment, that perseverance exercise that you did for that six years, where you put dollar 500 a month, but then you even zoomed out for the future.

Look what the rest of the story is. It's amazing that $46,000 that you would have accumulated by 2013 if you did not invest another dollar. You just let it sit in the s and p 500 from 2013 all the way out till 2024. March of 2024, it will have turned into almost $187,000. Remember, that was $33,000 you invested turned into almost $187,000.

Bo Hanson
And all you did was stay consistent for a five and a half year period. If you can do little bit of work early on and give yourself time and stay consistent, the numbers get really, really exciting. The other thing I like is that these are always be buying is definitely a get wealthy behavior. But there is going to come a point where you need to make sure it's not only getting wealthy, it's staying wealthy. So as you reach that level of success, you might need to make sure you're balancing out not only the tolerance of risk that you have.

Brian Preston
Yeah, you're a cowboy, you're a cowgirl. You can handle all the ups and downs. Maybe you are true financial mutant. It doesn't bother you. But you will reach an age where you probably don't have the risk capacity or the time to wait for the recovery.

Because math is mean in a lot of ways. If you think about if you lose 20%, you only have to make 25% to get back to exactly where you were before the losses started. However, when you lose 50%, you now have to make 100% to get back to where you are. This gets worse if you even go below 50%. Don't fall into that trap thinking, you know what?

Trees grow to heaven. I'll just always just keep this behavior. It's okay. As you get successful, as you build wealth to moderate, diversify and make sure that you get to stay wealthy. At the end of the day, building wealth is surprisingly simple.

Bo Hanson
It's not an overly complicated process. However, there are wealth killers out there that you need to be aware of, that you need to make sure you stay mindful of so you understand how you don't fall prey to those wealth killers. And instead you have a financial mutant mindset to build that great big beautiful tomorrow. I hope you've enjoyed what you've heard today. Go to check us out.

Brian Preston
Moneyguy.com resources for all the free stuff. I'd be remiss if I didn't share. If you go to moneyguy.com millionairemission I have a brand new book that's coming out May 28. Love to encourage you to go on this journey. Here's the biggest takeaway.

You can either own your financial future or it's going to own you. You choose. I'm your host, Brian Preston. Bo Hanson money guy team out the. Money guy show is hosted by Brian Preston.

C
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. 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.

Top 5 Wealth Killers in America!

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1: Introduction to Wealth Killers

2: Inflation as a Wealth Killer

3: The Role of Social Media

4: Procrastination's Impact on Wealth

5: Managing Debt Wisely

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