Chapter 1: What is discussed at the start of this section?
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The call is free, and some say the advice is worth exactly what you pay for it. John is on the line in San Antonio. Hey, John, how are you? Hey, I'm doing good, Dave.
How are you?
Better than I deserve. What's up?
Good answer. Not much, man. I was just calling in to get some advice, Dave. Dealing with a situation with my wife that involved some financial dishonesty. So just looking for some advice on a plan on how to move forward with our situation.
Wow. Okay. What happened?
yeah so just to give you a little context my wife and i have been together on and off since high school um we had our first son when i was 20 32 now we separated for about five years got back together we just got married about a year ago and we just welcomed our second baby boy in january and up until recently I mean, things have been great.
I think our relationship has been stronger than it's ever been. But I just uncovered a financial situation where she wasn't really being too honest with me. What are you talking about? What are you talking about?
You uncovered what?
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Chapter 2: What financial dishonesty issues are being addressed?
The old one was taken by one of his friends to a shop. And that was the last time we saw it. I thought it was sitting at a shop the whole time. But OK. And then up till that point, up till that point.
How long ago was that?
Oh man, that happened like back in February, March of last year. So about a year ago. Okay. And you guys never had, you've never had combined finances.
Yeah.
No, we haven't. So the whole reason I was pressing on that original car is because I was trying to align our finances to start investing, right? Our house is paid off. We're in a really good situation. I'm trying to open up some college funds for our kids, which I've already done. So she's never been honest with me about finances ever since we're married. I've been pushing on it.
And I just kind of had to find out the ugly truth.
So here's the deal. There's two problems. One is you're not aligned on the money, obviously. But the most important problem that you guys have to work through is lying.
Right.
And so, you know, she has broken trust and now it's hard to trust her on anything.
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Chapter 3: How can trust be rebuilt in a relationship after financial lies?
Um, but she lives in an area where she has supports and, but not, they won't, it's not medical, like medical, it's like resources that, you know, will take her into the community, things like that. Do you have that by you or no? No, that's why she's where she is because there's nothing else here.
When she moved there, all of this, you knew all of this. What was the plan then to take care of her?
No, we didn't.
No, she was in a great place when she moved. Oh, so the medical has occurred since then, but the medical is not the special. Okay.
I understand.
So you think the medical is chronic and ongoing?
It's going to be, yeah. We're kind of in the middle of figuring it out, and I think that
Yeah, I guess you're moving there, aren't you?
Yeah, I really need to. I have my other daughter who's in college, and I don't know if I sell. I do have equity, about $200,000 in equity.
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Chapter 4: What steps should be taken to achieve financial transparency?
And you don't have any debt.
Probably. No debt.
Because you've got $300,000 in investments, I hope, and $135,000 income and no debt, and you're 22, and you're in computer science as a software engineer. Way to go. Great start, dude. Thank you. What's your question?
So my question is, you know, I'm kind of on third base, but I didn't exactly hit a triple to get here. I mean, I worked hard. I went to a good school. I worked my ass off to get a good job.
You may be close to second base, but yeah, okay.
Yeah. What are you trying to do? Fair enough. So my thing I'm trying to do is I'm trying to reduce how much I spend, even though I'm already saving a lot of my income. I can't help but feel like the guilt of lifestyle creep is hitting me.
Yeah, good for you. That's a good observation for a 22-year-old. That's very smart.
Yeah, yeah. Well, hey, I see your stuff on YouTube, and it hit me. I was like, I can't let this get to me. So I'm saving about 35% to 40% of my gross income.
Okay, when you're developing a piece of software, you lay out a plan, a flow chart, right? Correct. And you begin with the end in mind. You don't make it up as you go. You have to go back and do some edits because unexpected things happen, and you have to rewrite a portion of the code. But you begin with the end in mind, and you lay out a game plan. So that's all you do with a budget.
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Chapter 5: What strategies can I use to cut my gas budget?
Well, I was thinking like, so right now I have to budget about $500 a month for gas because I commute for work. You know, if I were to get, say, something more fuel efficient, you know, I can maybe cut that in half or... But it might be that I'm just trying too hard, you know, I'm trying to move stuff around.
I don't know if you're going to cut that budget in half. I mean, what are you driving? What kind of gas guzzler is this?
It's not really a gas guzzler. It's a Ford Edge. So it's an SUV. I mean, you know, right now our gas is about six bucks a gallon over here, you know. And then I do commute about 40 miles each way to work. So about 80 miles a day total.
Yeah, I mean, run out some actual miles per gallon and do that sixth grade math word problem thing. You remember that one? And if I had one that was, I mean, what are we going to buy that's going to have half of that?
Chapter 6: How can I effectively manage my family's financial support?
I don't know if you're going to get half of that. Right. Okay. I really don't. I mean, you know, if you could buy a car of exact the same value and cut your gas bill in half and you love the car, that's fine. Sure. But the actual $9,000 car is not killing you out of $27,000. You've got other issues there.
Yeah, for sure. Yeah. I mean, yeah, I was thinking like if I could sell it, you know, get something for like four, put, you know, move some of that, you know.
Yeah.
Are you married? Is it just you? Okay.
Chapter 7: What are the steps to rebuild trust after financial betrayal?
Just me.
Yeah. I don't think that's your problem. I think you're right. You're chasing the wrong thing. Instead, what I'd be looking for is extra income and other places I can cut in the budget. That's a good point.
I think there's easier ways to get the $250 back.
Yeah, because if your car was $20,000, I would have sold it already. But it's not that big a number in the ratio of the rest of your numbers to where it doesn't change your life. A lot of times we're talking to somebody, the car is killing them. And so selling the car changes their life. Murphy's Law means if something can go wrong, it will. And it usually happens when you're not prepared.
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Chapter 8: How can I prepare financially for future housing needs?
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All right, today's question comes from Andre in California. He says, I have a 401k that will be maxed out within the IRS limit before hitting the recommended 15% invested. Will that be enough or should I invest the remaining percentage in a brokerage account outside my work-sponsored 401k? So Andre is referring to Baby Step 4. In Baby Step 4, we tell folks that they need to be investing
15% of their gross income every month into a 401k. If they have a Roth 401k, even better. And so obviously this guy is a high income earner. The max this year is $24,500. So if you're able to do that, no problem. You're making over $160,000 a year. Unless you're over 50, then the limit goes up to $32,500, which means he'd be making... over 200, 215.
So yeah, I probably wouldn't go straight to a brokerage. I'd probably see if I could do some backdoor Roth IRAs first, one for you, one for your wife, if you're married. And then from there, if you have access to an HSA, I'd probably go there next and max that out. And then if you still have money, then I'd go to the brokerage account. That's the way I would do it.
Good, good advice. I like it. So, you know, if you did a backdoor Roth IRA, um, The way that works is you invest in an after-tax regular traditional IRA, not a pre-tax, an after-tax traditional IRA. And this year that's $7,500, okay? And you can do one for your wife and one for you. And then as soon as you make that investment, instantaneously you roll it to a Roth.
And you can do that regardless of income limit. So I did one. and I have done one every year for many, many years, and my wife every year. I do it in January, put $15,000 up, boom, boom, and here we go. Actually, I can do $8,000 because I'm old, $8,600 now, $8,600 this year. That's right. So I max them out, whatever I can put in there. That's the most you can do with a backdoor IRA.
If you want to get super fancy, you can do a brokerage account beyond that. I don't know what your income is. We don't have that, and we don't have your age, Andre. But let's say you're making $600,000 a year, and you're trying to keep the government's hands off of as much as you can. You could do a backdoor Roth IRA, and you can also do a mega 401k backdoor if your company has a Roth 401k.
Now, it doesn't even have to have a Roth. So what you can do is you can put up to $72,000 backdoor. into your 401k in a year. But anything over the 24-5 or the 32-5, or if you're over 60, it's 11-2 going on. Anything over those limits, you can go after tax 401k, a 401A it's called, And then immediately roll that to a Roth, just like the regular backdoor.
So that's called a mega Roth or mega backdoor. And so you could do even more. I don't know if I would fool with all of that. It's a lot to screw with every year. But the big thing is just make sure you're investing money. So, you know, if you max out your HSA, you did the regular individual IRAs and then you did brokerage beyond that, you'd be just fine.
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