Maximizing Wealth: Strategies for Financial Success

Paying off debt should not exceed 35% of total income; 25% should be saved for retirement, then invest wisely.

### The Best Financial Strategies After Becoming Debt-Free
* 💸 " When I hear someone is in a position where **40% of their income is going to be freed up**, that sounds amazing...but what I hear in the back of my mind is, 'Man, I got into a situation where my **debt load was pretty aggressive**'.
* 📉  Avoid letting your **total debt load exceed 35% of your total income** to maintain a **healthy financial position**.
* 🎯  Determine whether you are **behind, ahead of, or right on track** with your financial goals by using the resources at learn.money.com.
* 💰  Accumulating wealth is generally more efficient than paying off low-interest debt, especially for **young individuals**.
* 📘  In "Millionaire Mission," Brian shares some of his financial regrets, including **not maxing out his Roth IRA contributions in his 20s**.
* 🛡️ " Being completely debt-free is a '**stay wealthy**' behavior because it **reduces risk in your life**.
* ⏳  Time is the most powerful resource when it comes to building wealth, so it's crucial to **start investing and letting your money grow over time**.

[Music]: Okay, Zachary's question is up next. He says, My wife and I have 40% of our income freed up when we become debt-free in October, which is so exciting. So he says, We plan to save 25% of our income for retirement, but how would you use that extra 15% of income afterwards? Okay, I got to think about this. 40% of income freed up when they pay off their debt. That must be going toward debt right now. Okay, yeah. So, what I just want to... I want to pause there. Now, Zachary, this is not a cautionary tale for you, but this is a cautionary tale for everyone else. When I hear someone is in a position where 40% of their income is going to be freed up, that sounds amazing and that's going to be awesome once you get there, but what I hear in the back of my mind is, Man, I got into a situation where my debt load was pretty aggressive. It was eating up 4...

40% of my money. 40% of my income. It's the reason why we have all the rules of thumb that we talk about when it comes to housing expenses. You don't want to be more than 25% of your gross income. When it comes to car payments, that want to be 8%. Then when you add up all the debt that you service, when you add up your car loans, your auto loans, your housing student loans, everything, you don't want your debt service to cross over that 35% mark of your total income. So when I hear that you're at 40%, I'm like, oh, okay, we weren't in a great spot. But now that so the cautionary tale is try if you can at the stage of life DET not to let your total debt load exceed 35%. So now the question is, okay, when we get this paid off and it's in the near future, yeah, in October, in October when we get this paid off within the year, we're gonna, we need, we need to

do something with this capital. And so what they say was the first thing they're going to do, um, invest 25%. Re just like you guys would say, what do they do with it now? Did Zachary give us his age? Well, I've got some thoughts on this. Is that first of all, 'cause I mean the easy answer is, is that you look at the financial water of operations, go to money.com resources. I know a lot of people go immediately default and say, hey, he's probably, it's step eight, so he can start doing whatever the heck he wants to do with his money. And that is true if he first asks himself this question because I took this a little different way. I love the thought that you were thinking about he had a lot of debt, but I've also seen a lot of people out there that become debt Crusaders. I wonder that too. They get so excited, maybe they paid off two credit card debts, off student loan debt, and they, they, they get so excited with paying off debt because there's a lot of people in the

financial space that really focus on this whole debt thing. Yeah, um, even when debt has had historically low interest rates. Be you know in the in the years past. I just want to make sure that you're not still behind the curve because that 40% because it's somebody who paid off their low interest interest mortgage super early. I'm talking about somebody who's in their 30s, maybe even early 40s, and they're like man, I rocked this thing. Now I've got 40% of my income. I want I want you. We have two illustrations. We have I want you to go to money.com resource. We have what will 25% do for you on savings rate 30 years old. They said they are debt Crusaders. Yeah. So they're debt Crusaders. So you need to see what 25% because now you need to know are you behind the curve, ahead of the curve, or right on the curve. Now look, paying off debt is incredible, but I got to tell you all your peers the

financial mutant versions of yourself who weren't debt Crusaders. They were saving and investing, and we're doing a show right after this. It's going to show the power of that person that was saving and investing from the age of 20 to 30 versus the person that saved and invested from 30 to 65, and you're going to be shocked to see what the 20 to 30y Old had the opportunity because their money is just worth so much. So you need to go to learn.money.com to look at the know your number course that we have to figure out how far behind you are because maybe you have to now. Fortunately at 30 years of age, 25 % is probably going to still do a lot for you, but there are other people that are going to be debt Crusaders who might be a little later to the party, and that 25% might now need to be 30% or 35% because you find that you're a little behind the curve on where your assets, your army.

of dollar bills should be so you have to answer that question. Are you behind? Are you ahead of the schedule? Assuming that you're ahead of schedule and you being 30 is going to give you a lot of Grace, you then can get to step eight of prepaid future expenses or abundant goals whereas. Beyond saving and investing 25%, you can start, you know, making decisions. This is where you save for the kids, if you know, education, if you want to become a real estate entrepreneur, if you want to buy the nicer car or live in a little bit nicer house, um, or even be a debt Crusader. That's where I would tell my financial mutants. If you want to be a debt Crusader, um, and you're in your 20s or 30s, I love it being a step eight activity because then you're not walking away from what your money that wealth multiply effect that it's so powerful while you're young. Love it. Can I'm just thr one thing out there. This is more just me and you lamenting for a moment.

people in the comments, they're like, oh, these guys, they just love that. Oh, they just love that. Actually, I'm the opposite. It's not true at all. But here's what I do love. I love math. I love optimization. I love efficiency. I love reaching goals in the most effective and efficient manner possible. And I just--my opinion, and also supported by the facts, is that for young folks, it's easier to do that by accumulating wealth than satisfying debt, especially low-interest debt. So we're not debt lovers. We just, you know, we recognize math. I think anybody who reads Millionaire Mission will see a lot of my regrets in here. And everybody, I've been very transparent about it. And I actually did the math within the book. But the last chapter of this book is actually what I do with my money specifically. So if you just want to be a person nosy and know what I do, it's going to be in the book. But I do share some regrets in the book. And one of them is that

there were a few years I didn't max out my Roth IRA in my 20s. Now, I had some unique things going on with starting a business, growing a family. So, I mean when you're, when you're, got a sinking ship, and you're trying to figure out where you're bailing out the water, you start throwing out really important stuff like Roth IRA contributions. Even in those, those, those dark moments. But I've actually nerdy enough that I've gone and figured out what my rate of return was for my actual assets I invested. This is not a, this is not pretend where I just grab 10 % out of the air and said hey that's what the Market's done historically. I actually calculated what my rate of return has been since I started investing applied that to the Roth IRA contributions that I did not make. That's, that opportunity cost loss and guys you'd be shocked if you want to know what the number is the numbers are big bad. It's bad now because I'm 50.

years of age. But it's even worse if you look at what I took for myself at retirement. So, and by the way, Zachary's going to be fine. I can already tell he's a financial mutant and he's doing great things. But I would not. It's the same reason my youngest daughter. She's like, Dad, why are you being so mean to me? I'm like, I'm not being mean to you. When I give you advice, it's going to make you better at doing things in the future. I'm just being a father. And that's what I feel like. I'm being an educator for the masses when I try to share with you. There's get wealthy behaviors and then there's stay wealthy behaviors. Without a doubt, being completely debt-free is a stay wealthy behavior because it's risk in your life. But there's a huge risk for all my 20 and 30-year-olds and 40-year-olds is you got to get wealthy. You know, just because you have the components of a good income and the

desire to save and invest. If you don't actually get the money in the investment accounts and actually let your army of dollar bills start growing and recruiting and growing, you know, building more and more on top of themselves, then you really missed out on the most powerful resource of the three ingredients. Remember, there's discipline, that's that deferred gratification that a lot of financial mutants have, that creates the margin that equals the money, the second ingredient, but the most powerful one is time. That's why if you go to money.com resources, look at our wealth multiplier tool and see what a dollar can do for you.

How Should We Allocate 15% of Our Newly Available Income?

Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

Subscribe today to stay up to date with our latest episodes, livestreams, and highlight videos: https://www.youtube.com/c/MoneyGuyShow?sub_confirmation=1

Are you ready to go beyond common sense when it comes to your money? Check out all the free resources The Money Guy Show provides: https://moneyguy.com/resources/



The Money Guy Show

Financial Advice for Using Freed Up Income After Paying Off Debt

Paying off debt will free up 40% of Zachary's income, with plans to save 25% for retirement.

Having 40% of income go towards debt is a cautionary tale, as financial guidelines recommend not exceeding 35% debt-to-income ratio.

It's important for Zachary to carefully consider how to allocate the extra 15% of income after becoming debt-free.

Investing 25% of income is a crucial first step in financial planning, especially for those focused on paying off debt.

It's important to consider the impact of low-interest debt and not fall behind in saving for the future.

Many people become "debt Crusaders," but it's essential to find a balance between debt repayment and saving for long-term financial security.

The Power of Saving and Investing at Different Ages

Saving and investing from 20 to 30 can have a significant impact due to the longer time for money to grow.

The amount needed to save may increase if you start later, to catch up with where your assets should be.

Starting at 30 allows for more flexibility in pursuing additional financial goals, such as real estate or entrepreneurship.

The Benefits of Accumulating Wealth for Young People

The speaker expresses a love for math, optimization, and efficiency in reaching goals, believing that accumulating wealth is easier than dealing with low-interest debt for young people.

He openly shares his regrets about not maximizing his Roth IRA contributions in his 20s, attributing it to prioritizing other financial responsibilities during that time.

The speaker emphasizes the significant opportunity cost loss of not maxing out his Roth IRA, highlighting the impact of this decision on his overall wealth at the age of 50.

The Importance of Wealth-Building Behaviors

Teaching wealth-building behaviors is crucial for financial success, especially for younger individuals.

Being debt-free is important for maintaining wealth, but actively building wealth through saving and investing is crucial, especially considering the power of time in growing money.