155: Stop Guessing Where Your Money Goes: The 9 Step Financial Order of Operations

The Money Question Everyone Asks

Jessica 0:00

People always ask Brandon, should they pay off debt while investing? Should they pay off their student loans before they pay off their house? Should they build their emergency fund before investing? The truth is, there is an order of operations, and in today's episode, we are going to help you stop guessing where your next dollar goes and put it in the right order. Stay tuned.

SPEAKER_00 0:20

Sugar Daddy Podcast, yo. Learn how to make them pockets grow. Fun mental freedoms where we grow. Smart investments, money flow.

Jessica 0:31

Welcome back to the Sugar Daddy Podcast, where we help you build a clear financial plan so you can feel confident and in control of your money. Hey, babe, what are we talking about today?

Brandon 0:42

Today we are talking about the financial order of operations.

Jessica 0:47

Foo? Yes, and it's not an acronym.

Brandon 0:50

Yes, and it's not a term that I coined. Um, it's a process that a lot of financial advisors use with their clients. However, the term financial order of operations, you know, the foo, comes from an actual podcast that I have been watching for a few years now called The Money Guy Show with two um financial advisors, Brian Breston and Bo Hanson. And I think they did a great job of one creating an acronym for the title of the operation that's very easy to memorize, and also a very clear outline as far as the steps go, as far as the order that you should follow when tackling various aspects of your financial planning.

Jessica 1:22

So it's like PEMDAS for your money.

Brandon 1:25

That's exactly what it is. Do you remember?

Jessica 1:28

Please excuse my dear Aunt Sally.

Brandon 1:30

Did you really just ask me if

Why Order Beats Random Money Moves

Brandon 1:31

I remember that? As in a mind of a a math professor?

Jessica 1:33

Yes. Okay, true, true. But like that's immediately where my mind goes when anybody says like order of operations. It's like these are the steps that you need to follow. And it's such a good conversation because I mean, we can be out at dinner or an event. And as soon as people find out that you're a financial advisor, they start asking you questions. Well, should I do this before I do this? Or should how do you feel about paying off your home?

Brandon 1:54

Or normally they don't even ask before I should do this. They said, should I do this?

Jessica 1:57

Or they say should I?

Brandon 1:58

Should I do this? And then my next one is it depends.

Jessica 2:01

I'm gonna get that like like tattooed just across my neck. It depends.

Brandon 2:06

As it always does, because like because once again, like we know we're getting into that, there is a clear order that you probably should follow when it comes to financial planning. And when you go outside of that order, it doesn't mean that you're not going to eventually accomplish your goal. It's just that it might take you longer, you might make more errors. And that's the same way with, for example, with math, like with PIMDOS. If you don't do it correctly, you're not going to get the right answer.

Jessica 2:28

You're not going to get it right. Well, and I will say there are times where you have shared stories about, you know, how you because we we do this a lot, right? Like we talk about our jobs and our work in the sense of, well, what are we doing and like what's working, what's not, and how, you know, what would how would how would you do this differently? Because my brain and Brandon's brain are very different. So he does um often like bounce ideas off of me. And, you know, never with any specifics, never with any names, et cetera. But um, I do know that a few times you've now mentioned that you will go into a meeting with like a very clear agenda, like here's what we need to get done, boom, boom, boom. And the client is like, actually, I want to do this, or actually, this is top of mind. And again, we know that money is so emotional. So I'm sure it's really difficult to, you know, say, all right, well, we can address that. But actually, you know, like, like you said, like none of this matters if you don't have life insurance, right? Like none of this matters if you don't do X. And so I'm really excited to get into this because I know it's something that you feel very strongly about and has come up for your clients. Cause we as non-money people, we're like, you hear something, you see something, you read something, and then that is the thing that becomes top of mind.

Brandon 3:43

Yeah. The hard part is that you want the person to be engaged.

Jessica 3:47

Yeah.

Brandon 3:47

And the best way to engage somebody, especially at the beginning of building a relationship, is talking about what is top of mind to them. Because if I start speaking about other things that, you know, from my professional experience that I know are more important right now for you to do, but you don't know that, and I'm not addressing the specific topics, then there's going to be a disconnect there. Yeah. So it really is hard to address, you know, what is top of mind to you, but then also pull you in and make you understand, like, hey, I 100% hear you. However, there is a proper order that we should be going in in order to accomplish the goals that you want to accomplish.

Jessica 4:24

And here's why.

Brandon 4:25

Yeah, because like you're talking to me about something that's like step eight and you haven't done one through seven.

Jessica 4:30

Right, right. All right. Well, let's get, let's get into the foo, the the PEMDAS of money. Where do we

Step One Cover Your Deductibles

Jessica 4:38

start?

Brandon 4:38

So the first one is going to be, you know, having your deductibles covered. And this is also a conversation that kind of merges into your emergency fund. But the idea here is that, you know, your health insurance has a deductible. Yeah. Your car insurance has a deductible. So we want to start building some of that savings in your emergency fund so that you can reach those hit those deductibles if need be. So for example, say your car insurance has a $1,000 deductible and you're in a car accident. Yeah. You're responsible for the first thousand dollars of damage on that car, and then your insurance kicks in after that. So you do want to make sure that you have that saved up in a high yield savings account.

Jessica 5:12

Yeah. Oh, that okay. So I've I've never like thought about it like that, but that obviously makes sense because your home has a deductible, your cell phone has a deductible, you know, like any insurance you carry has like a deductible attached.

Brandon 5:23

So a certain amount of money you have to pay first before you before that insurance benefit kicks in.

Jessica 5:28

So would you recommend putting that into like a sitting down? Most people can probably not tell you what their deductibles are for things.

Brandon 5:35

You 100% need to look through that information.

Jessica 5:37

Yeah, looking through your policy and then maybe putting buckets in place. Like we always talk about ally for high yield savings. Again, all of your savings should be sitting in a high yield account so that you're getting something back for it. But then you could bucketize, you could literally have a bucket that says car insurance deductible or home insurance deductible, and then boom, it's in there.

Brandon 5:57

Yeah, because the overall saving bucket could be your you know your emergency fund, but then you can break down specifically in there maybe with a different buckets of what it's for.

Jessica 6:05

Yeah. But this is a begin.

Brandon 6:07

This is still a part of your emergency fund. It's just the beginning of your emergency fund.

Jessica 6:11

Well, I like that it it makes it more um it feels more attainable than like you need six to twelve months of your, you know, your bills saved. Because that for most people is a large number. But if it's like, oh, my car insurance deductible is $500. All right, like let me work on the $500. It makes it more adjustable.

Brandon 6:32

If you think about some of the emergencies that often happen to people that cause them to go into debt, uh car repairs is one of them. That's a big one because uh in the United States, you know, a lot of us still need cars to get around. Yes. And then a medical event where you gotta, you know, meet your deductible in certain aspects in order to have the uh additional insurance protection kick in.

Jessica 6:52

Yeah. Speaking of, not to go off on a tangent, but that is something that I miss about Europe. And even I've been traveling for work and one of our offices is in Hoboken. And Hoboken is so walkable, it's so cute. It's like a mini New York. And I'm like, man, I really would like to live somewhere where you can just go outside and walk to what you need.

Brandon 7:11

Yeah.

Jessica 7:12

I mean, one of my coworkers lives in Chicago, and she was saying to her son, like, yeah, we're gonna walk to Target later. And I was like, What? Like, you can walk to walk to Target. And she was like, Yeah, of course.

SPEAKER_02 7:22

That's like your dream.

Jessica 7:23

I know. Well, you know, we don't support Target like that anymore. But, you know, I'm just like, that's really cool. So sidebar. All right. So we are gonna make sure that we have our deductibles covered in a high yield savings account along with the rest of our emergency fund. But this is step one is knowing those deductibles and having that.

Brandon 7:40

Because additionally, what we're doing here is we're building the foundation because a lot of people want to start to focus on the things that grow and accelerate their wealth.

Jessica 7:47

Yeah, of course, because we all want to be retired. That's where we want to start.

Brandon 7:51

This basic foundation is the most overlooked and skip step. So we always want to start here. So following that, as far as having your deductibles met, step two is taking full advantage of an employer match for your retirement plan if you have

Step Two Capture The Employer Match

Brandon 8:06

that. So, for example, if you know you have a retirement, if you have a 401k plan or 403B where your employer is going to match, say 3%, 4%, 5%, you want to try to take full advantage of that because that is essentially free money.

Jessica 8:19

Right. Well, you always say it's free money, which I understand what you're saying, but it's part of your compensation package.

Brandon 8:27

I get it. Say you're contributing $100 and your employer is going to match it. That's $200 going in.

Jessica 8:32

Yep. Yep.

Brandon 8:33

And that's a big accelerator in regards to getting more money into your retirement account so that compound interest can work on a larger balance.

Jessica 8:40

Yeah. One of my other coworkers I was talking to, um, he has like a, I don't know, like an early 20s child, and um, she started contributing to her 401k and then like called him shocked and was like, Oh my gosh, I already have over $2,000 in here and I haven't even done anything. Cause I think she's contributing like $20 a paycheck because he wants her to build the habit. And he's like, Exactly, because your employer match does the heavy lifting for you.

Brandon 9:06

And then also on top of that, the thing is too, is that if you're in a in a relationship, you both want to make sure that you're taking advantage of employer match if possible.

Jessica 9:13

Yeah.

Brandon 9:14

So it's not just one individual, you know, it's both of you guys looking at your retirement plans and saying, hey, like we have a match, let's go ahead and try to take full advantage of to get that free money.

Jessica 9:22

Well, yeah, because if you're getting 4%, I'm getting 4%. And we're I mean, again, it adds up, you know.

Brandon 9:28

It makes a huge difference.

Jessica 9:29

Yeah, absolutely.

Brandon 9:30

Because, you know, there's a huge difference for like people that work at I've I mean, I've seen where people work at companies where they have a 7% match as comparison to people who maybe have a 2% match. That's a big difference.

Jessica 9:39

Oh, yeah. Oh my gosh. I remember when I was job searching and I said I was like, I want to specifically find companies that have like six percent or more. I didn't end up getting that. But yeah, it makes a huge difference when you have a high 401k match. Yeah. Absolutely. All right. So we're gonna get our free money, we're gonna get our employer match. And our hopefully, if we're coupled, our partner's gonna do the same to help us accelerate. And then what do we do?

Step Three Kill High Interest Debt

Brandon 10:06

Now, stepping into step three is high interest debt. Now, specifically, we're looking at that credit card debt. You know, right now, you if you have credit card debts, you could be paying where anywhere from 20 to 25% interest rate and possibly even higher on that. So you that would be the third step, is where you want to one lay out all the different credit card debts that you have so that you know all the various balances and also the various interest rates on them. And you do want to put together a plan of tackling that debt as soon as possible. Because what ends up happening is that a lot of people are like, oh, you know, well, I want to invest. The investing part we're doing is that employer match because that's free money. But outside of that, if you're looking to invest an additional amount above the employer match, it might be better served to actually pay off your high interest credit card debt because it's really hard to out invest that, you know, 25%, 247% interest rate. Yeah, that's just going to eat into your money. You're gonna end up paying so much more money over time in interest.

Jessica 11:02

Yeah, absolutely. That that interest rate, the high interest, it adds up. So even if you're carrying a relatively small balance of a couple hundred dollars, if you're not paying it off in full, you're adding, I mean, it's literally compounding. Just like compound interest can be good when it's in investments, it can be bad, which is why people struggle so much to get out of credit card debt because you're just you're paying interest on the interest on the interest on the interest every single month.

Brandon 11:29

Yeah. And we're big advocates of having proper habits around using credit cards. And we understand that things happen, but this would be something that you wouldn't definitely want to focus on. And the thing is here too, is that if you're in a uh marriage or a relationship where you are combining finances, you also have to have that conversation about people like your debt versus my debt. But when you're married, it becomes our debt.

Jessica 11:49

Yeah.

Brandon 11:49

Regardless of how you want to look at it, it becomes our debt. So you do want to have that conversation and have a plan to tackle that.

Jessica 11:54

Yeah. And have that conversation early.

Brandon 11:56

Yeah. I mean, we had that conversation before we got married. Right. You know, so we knew, I mean, basically the only debts that we had coming into this scenario was student loan debt. And I think like I paid my, I had a very small balance, so I paid mine off shortly afterwards. And then we had to make a plan for justice. Yeah. But the idea here is that you are focusing on paying that down. And like I said, these are the first three steps, and this is the foundational stage.

Jessica 12:18

All right. So let's recap really quickly. So we're gonna make sure in step one that we know our deductibles for our home, for our car, for any of the things that are assets that we have deductibles for. And we're gonna take that money and put it into our high yield savings account. Then we're going to make sure that we're getting our employer match, and then we're going to tackle high interest debt.

Brandon 12:40

And now think about this like we're tackling three very key areas of financial planning. You're starting to build up emergency savings, you're starting to invest, and you also have a plan for paying down debt.

Jessica 12:50

Yeah.

Brandon 12:51

So that is the foundation, very foundational stages of everything that needs to be covered.

Jessica 12:55

All right. So once we have moved past the foundation stage, what is step four?

Step Four Build A Real Emergency Fund

Brandon 13:00

So now when we hit step four, we're starting to uh transition into the building phase. Okay. All right. So step four is we've already started putting some money away for our deductibles on our insurances, starting our emergency fund. Now we are actually focused on starting to build that emergency reserve. So we want to start to build up that emergency fund. And that like we've we had plenty of episodes talking about that. That could be your first step, you know, some for some people, three to six months worth of expenses. For other people, maybe six to twelve months worth of expenses. But the idea here is that you determine what works for your family or for you as an individual. And that's going to be based on, you know, a variety of things from, you know, are you married? Are you single? Do you have kids? How many people are dependent upon your income? Are you a single-income household, dual income, what industry you work in, all those things. But the idea here is that you determine how much you want to have in an emergency fund as far as expenses for each month. And then you make that a point to start setting up um contributions to your high-yield savings account to have that happen.

Jessica 13:57

Yeah. Okay. That makes sense. So we're going to expand that emergency reserve. What is step number five?

Brandon 14:03

Now,

Step Five Use Roth IRA And HSA

Brandon 14:04

step number five is going to be taking advantage of tax-qualified accounts, including a Roth IRA and an HSA. Now, with that being said, you know, if you make above a certain income, then you cannot contribute directly to a Roth IRA, but there are other ways for you to still take advantage of a Roth IRA, whether that be through a backdoor contribution or even if you're, you know, contributing to a Roth within your 401k plan.

SPEAKER_00 14:27

Yes.

Brandon 14:28

But the idea here is that you start to take advantage of a Roth IRA. And one of the reasons that it's beneficial is because you're able to put in money that you've already paid taxes on. While the money's in the account, it's growing tax deferred, which means that you're not paying taxes on it while it's growing. And then when you pull it out in retirement properly, you don't have to pay any taxes on the growth. So it's a huge benefit.

Jessica 14:48

Yes. I mean, who wants to pay more taxes?

Brandon 14:51

Nobody. Nobody. And so, like, you know, for 2026, for a Roth IRA, the maximum amount that you can contribute is $7,500 if you're under the age of 50.

Jessica 14:59

Okay. To get the tax advantage if you qualify based on your income.

Brandon 15:02

Correct. If you can do it direct. Well, there's no there's no immediate tax advantage, remember?

Jessica 15:09

Yes. Okay. Okay. And then the HSA is the triple tax advantage.

Brandon 15:13

And this is one of the ones where I stress to, especially younger individuals, to use this. Use this because this is one of the best, this is one of the best accounts possible. And most people don't utilize it because they do use it improperly. Because normally what they end up doing is that so an HSA stands for a health savings account. And it's one of the few triple advantaged accounts where the money that you put in you don't pay taxes on. While it's in there, you can actually invest it and it grows and you're not paying taxes on the growth. And then you can use it for uh qualified medical expenses and not have to actually pay taxes on it.

Jessica 15:46

Yeah.

Brandon 15:47

All right. So one of the things is though, is that normally what ends up happening is that you have young also before something to that, you have to have a high deductible health plan in order to have an HSA. And that's the main criteria. And often as you get older or you have a family, the high deductible health plans don't necessarily suit your needs. So while you're younger and you're single, utilizing a high deductible deductible health plan with an HSA is so beneficial because a lot of people, if they do have, they use it wrong. Because what they do is they contribute to it, but then they use the money in that given year to pay off medical expenses.

Jessica 16:22

Well, because that seems like the right thing to do.

Brandon 16:24

But here's a better way to do it. If you actually have the money and plan it. All right. So what you actually can do, there is no time limit to paying yourself back on the expenses from your health savings account. So for example, I could be contributing to a health savings account and I can have qualified medical expenses that I just simply pay for out of pocket. And in 10 years, if I still have those, if I have that documentation of paying that, I could pay myself back.

Jessica 16:52

Oh my gosh.

Brandon 16:54

But here's what I'm saying, though, is that you're contributing money each year. Now it's investing and growing.

Jessica 16:59

Yeah, yeah.

Brandon 16:59

But if you keep using it each year, you don't have money to invest in.

Jessica 17:04

Now obviously you would have to be very disciplined though to keep those records, right?

Brandon 17:09

Computer. Now it's much easier.

Jessica 17:12

You can do it onstead of now.

Brandon 17:13

I'm not talking about keeping physical receipts.

Jessica 17:15

Yeah, yeah.

Brandon 17:16

But that way, you know, you you're contributing each year and it's growing. And then in the future, you have that lump sum that was able to grow and you can maybe use some of the growth to pay off, pay yourself back for those expenses.

Jessica 17:26

Okay. All right. So yeah. So you have to really understand the account to take advantage of that triple tax portion.

Brandon 17:34

Yes. I probably gave up a little bit into the weeds with that one. But the idea here is that if you can contribute to your auth IRA and an HSA.

Jessica 17:42

Yeah.

Brandon 17:42

And also uh for this year, if you're um a single individual, the maximum you contribute to the HSA was 4,400 for uh 2026. And if you're a family, it's 8,750.

Jessica 17:52

And if you are a stay-at-home person, most likely stay-at-home mom, wife, then you could also contribute to a spousal IRA. Yes. Which I know you're very big on because just because you're not earning money for your labor doesn't mean you're not working, right? And any mom that's stay-at-home will tell you that. Like it is a job. You're doing like 12 different jobs in one day. So make sure that you have a spousal IRA that is being contributed to because you are contributing to the household and you should be also working towards your retirement.

Brandon 18:27

Yes. Awesome. And

Step Six Max Retirement And Raise Saving Rate

Brandon 18:29

so, like, we're now moving into step six, which is now you're starting to work on trying to max out your uh retirement accounts. So for me, I kind of maybe sometimes switch six and five. Okay. And the reason being is that if you have access to contribute Roth to a 401k plan, I like to make some things a little bit easier for people. So if you have access to Roth contributions within your 401k plan, then you don't have to worry one about the income limits for contributing to a Roth IRA. And so we can work on maxing out that 401k plan first before we open up an additional account.

Jessica 19:03

Okay.

Brandon 19:04

Now the HSA, we definitely want to do that, but the Roth IRA portion, sometimes I flip like if we're not maxing out the 401k plan first and you have the ability to contribute Roth, then we don't necessarily need to open up a Roth IRA.

Jessica 19:16

Okay. That that makes sense. Yeah.

Brandon 19:18

Yeah.

Jessica 19:18

And we have an entire episode on Roth versus pre-tax versus after tax because Roth and after tax are not the same thing.

Brandon 19:27

They are not the same. Yes.

Jessica 19:28

So there's yeah, there's so much nuance in in all of this, but we do our best to break it down. So go back and check that episode as well.

Brandon 19:36

Yeah. And the goal with maxing out your retirement plans is simply to have more money invested so that you're utilizing compound interest to grow. So the sooner you can become work optional or retire. And I can't stress enough that the younger you are, and the ability to do this at such a young age sets you so far ahead. You know, like when you start contributing to your retirement accounts in your 20s as compared to contributing in your 30s and your 40s, the money has so much more time to grow and it makes such a huge difference. So you actually have to use less money to have a larger balance.

Jessica 20:09

You contribute less, but it does more.

Brandon 20:11

Yeah. And the idea here is that kind of like a rule of- I wish I would have known that. Yeah. If I can go back in my 20s, there's a lot of things I would do differently. Yeah. But the idea here is that like you're kind of maybe shooting for, you know, 25% of your household income going towards investments.

Jessica 20:25

That is a lot of money. Or save 25%.

Brandon 20:28

It's a lot and it's so harder now, especially with currently where we are as far as our economy, with how much things cost. So I hear that. Like that's not missed on us because we're not contributing, you know, a total 25%. So we're in the same boat as you guys. But the idea is that you want to make incremental increases. So say you're not, you're not doing much. Okay, let me do my 5%, then 6%, 10%.

Jessica 20:50

Yeah.

Brandon 20:50

And make those incremental increases.

Jessica 20:52

And a call out, right? Because I know we've done separate episodes on your savings rate and how it's like the one number that's going to determine your financial future and things like that. But what you're contributing through your employer, like to get your employer match, is part of that number. Yes. So like let's say you're contributing four or five percent to your 401k, that is part of that 25%, right? So then maybe you can put another 5%, your spouse can put 5%, and then you're already sitting at 15, right? Which most Americans are not saving anything really. So anything that you can do is better than nothing, even if you're just increasing it 1% a year.

Brandon 21:32

Yeah. And you see how, like, you know, we had the foundational steps, and then we have the steps that are kind of building on top of that foundation. And then now, you know, moving into step seven, now we're like you pretty much really have a lot of things. Like if you're already through steps one through six, you have your financial life in order. You're doing amazing things, and you're you should be seeing the fruits of your labor in regards to how your accounts are growing. Hopefully, you have some peace of mind in regards. To how your finances are being handled. But now we're taking it to that hyperaccumulation phase, going into the next three steps, seven through nine.

Step Seven Invest More With Brokerage

Brandon 22:07

And these are the ones that really build on that future idea of wealth becoming work optional as soon as possible. So starting out with some step seven is you've already started maxing. So for example, you've already maybe maxed out your retirement account as far as your 401k plan or 403B, whatever you may have. You have already also contributed the maximum amount to a Roth IRA. If I want to invest more money, what what what am I going to do now? Now you're going to open up an after-tax brokerage account.

Jessica 22:33

Okay.

Brandon 22:34

All right. And the nice thing with the after-tax brokerage account is that there are no limitations to how much you can contribute.

Jessica 22:40

Is there an is there is it literally just called an after-tax brokerage account?

Brandon 22:43

So it would be called, it would be called So if you're going to normally go online to open it, they normally refer to it as individual.

Jessica 22:49

Okay.

Brandon 22:50

So if you're an individual person opening up just for yourself, it's going to say individual brokerage. If you and your spouse want to open up one together because you can open up a joint one, it'll say joint brokerage account.

Jessica 23:00

Okay.

Brandon 23:01

But the reason I use the word after tax is because you are putting money into it after tax and there is no, you know, quote unquote tax benefit to the account. So your money you put in, it's already been taxed. While it's in the account growing, as long as you're not making any transactions that are a taxable transaction, then you're not paying taxes on it. But you will pay taxes on any transactions that trigger a tax event. So for example, say you bought a stock for $100 and the stock went up to $200 and then you sold it. You're going to pay taxes on that $100 growth. So there is no tax sheltering of it from that aspect.

Jessica 23:35

And then what happens like in retirement or do you don't have any, there's no this is not a retirement account.

Brandon 23:41

This count had doesn't have any of those same limitations. So it doesn't have limitations to how much you contribute and it doesn't have limitations to access. You can access it anytime you want to. However, you do need to be aware that, you know, as I said before, when you make certain transactions within the account, even if you don't withdraw the money. So for example, I could that same scenario that we just said where I bought a stock for $100, went to $200, and I sold it, and I have the $100 growth that I'm responsible for. Even if I don't withdraw the money out as cash in hand, I still have to pay taxes on that. You will have to it will become a $1099 that you file at the end of the year.

Jessica 24:12

Okay. So you need to be careful. Because I could, I'm my my wheels are turning and I could easily see some people being like, oh, I could just use that as my savings account, right?

Brandon 24:22

Yeah, I wouldn't, yeah, definitely.

Jessica 24:23

And then no, don't do that.

Brandon 24:25

No. Your savings account. Everybody's trying to maximize the data. But the savings, as I said before, the savings is a completely different bucket. A savings is not a growth bucket, so it shouldn't be invested.

Jessica 24:35

Okay. All right.

Brandon 24:36

But this is another way for you to, as I said before, the hyper accumulation where you're able to add more money to invest so that it can grow more.

Jessica 24:44

Okay. This would this be a good bucket for people who have some sort of a windfall or an inheritance or if those other things if those other things are taken care of, then 100%. Okay. Because I uh you were about to say it depends.

Brandon 24:58

I was because I was making sure that you're not going to be able to get her in the it depends jar. Making sure that you said that they have steps one through six.

Jessica 25:04

One through six is done, and then they get some sort of a windfall, and then this is where they could hyperaccumulate. Yes. Okay, cool. All right. After we start hyperaccumulating, then what do we do?

Step Eight Prepay Big Future Costs

Brandon 25:15

Um, so this is going to go into step eight, where uh the money guy show refers as prepaid future expenses. So a lot of people, you know, have come to me and say, like, hey, you know, should I start putting away money for my kids to go to college? Um and that's I mean, honestly, that's the number that's the biggest one. It's like, should I help my kids with this? Because a lot of us, I mean, we're even in the same boat where like sometimes, I'm not gonna lie, sometimes we've got to or go out of order in some aspects because we are contributing money to our kids' five two nine plans. And we did that before some of the other steps.

Jessica 25:47

Yeah. But but in small amounts. Like we're yeah. But the idea is considering thousands of dollars a month or anything.

Brandon 25:53

The idea here is that you want to wait to maybe step eight to do this because what ends up happening in most people when it's actual practice is that they're sacrificing tremendously in other areas. Yeah. So for example, oh, I want to make sure that my kid's taken care of, but they're not taking full advantage of their employer match.

Jessica 26:08

Let me, yeah, let me just say this. You if we're talking about college, your kid can take loans for college. You cannot take loans for retirement. Correct. And you will be a burden on your children if you prioritize them now and don't and deprioritize yourself. Because if you think that you putting your kids through college without a bill is your retirement plan, no ma'am, no sex.

Brandon 26:36

Yeah, that's a terrible idea.

Jessica 26:37

That is terrible. So make sure that you have your things in place. I mean, we talk about this all the time too, right? Like parents that don't have life insurance or long-term care policies or or all these other things. It's like if you would have taken care of it at the right time, now you wouldn't have to be living with us, you wouldn't have to be a caretaker where maybe you're stepping away from your career to take care of an aging parent that has dementia or Alzheimer's or whatever the situation is. These things can be pre-planned and prevented. Yeah. The financial portion can be prevented.

Brandon 27:09

Yeah, because I mean I've definitely sat down with people and realized that like I'm like, hey, like I I hear you, I understand that you have student loans, you don't want your kids to have to deal with that, but you're sacrificing tremendously on other areas where that money can be better allocated because the time frame of like you said before, like you can't borrow for retirement.

Jessica 27:28

No.

Brandon 27:29

So making sure like, you know, if you're not taking full advantage of your employer match, you probably shouldn't be putting money into a 529 plan at this moment.

Jessica 27:36

Yeah. And again, the order matters. I mean, we know plenty of people who are helping support their families, their parents, you know, financially in in small ways and large ways. And I actually think we should make that an episode because people have also asked you, you know, hey, I just am giving my mom money. And it's like you usually say, no, pay that bill.

SPEAKER_00 27:57

Yeah.

Jessica 27:58

You know, so that that we're gonna just table that one because there's a whole side conversation for that. But take care of yourself. Your kids are not your retirement plan.

Brandon 28:06

Yeah. And then moving into step nine, this is tackling the low interest debt

Step Nine Mortgage Payoff Versus Investing

Brandon 28:11

payments. So normally what we're thinking about here is uh mainly your mortgage. Yeah. It's gonna be the biggest one because often I've met people who are doing well financially and so they have excess at the end of the month. And I've seen a lot of people where, you know, they're young and they want to start paying additional amounts to their mortgage. And I'm like, I hear you from a psychological standpoint because a lot of people don't like the idea of debt, even if it's a mortgage and they have a low interest rate. They don't like the air code. They don't like the idea of it. And the hard part is that I have to balance out the psychological aspect of that with showing them the mathematical. Because, for example, we have friends of ours who refinance around the COVID time, and so they're sitting below 3% on a mortgage interest rate. Yeah, which is amazing. I would love to have that back.

Jessica 28:57

And I would never pay that off.

Brandon 28:59

I would personally, I would personally not be aggressive in tackling that. Right. Because the admit so let's just say, for example, you're paying an additional $10,000 a year to pay off your mortgage, you know? That $10,000 allocated to an investment account is going to far outgrow that 3% interest rate that you have your mortgage.

SPEAKER_00 29:21

Yeah.

Brandon 29:21

So it's like, you know, it's one of those things where when you're earlier phases, let's go ahead and start making sure we're maxing out all those other other buckets. Now, if you're maxing out all those other buckets on steps one through eight, then you have money left over. Okay. Maybe we can throw some extra payments at pay for paying down the mortgage quicker. But like you said here, yeah, people might be skipping step eight to go to step nine, where it's like, oh, I could I have extra money I could put in a 529 plan for my kid. You know, but the idea here is that you want to try to go in this order because I can tell you one thing. If you're going to follow this order, you're probably going to be good. You're probably not going to have any issues if you're properly, and obviously, life happens. We're going to have steps forward, two steps back, you know, stuff like that. But if you follow this as an an outline for the order that you should take in regards to what you're doing in your financial life, you should have a really good outcome.

Jessica 30:12

Yeah. And if you need somebody to hold your hand through all of these steps and then the

Tools Tips And How To Get Help

Jessica 30:17

things in between, because there are still things in between.

Brandon 30:20

This is just an an over like this is a high-level outline of things you should do. Now, obviously, there's tons of things in between that are going to be like in the gray area of these different phases you're going to need to have conversations about does it make sense for your specific situation on when to tackle them.

Jessica 30:35

But if you need help and hand holding and accountability and guidance, reach out to Brandon because again, this is what he does every single day. And then he can guide you through the in-between stages as well. But as a recap, we built our protection, right? We uh made sure that we have our savings, we're getting our match, we've we've got those basics in place. Then we went into the build phase and then we wanted to accelerate. So step one was get your deductibles covered. Step two, get your employer match. Step three, tackle your high interest debt. Step four is in the build phase, we're gonna amp up those emergency reserves in our high yield savings account. Step five, we're going to take advantage of an IRA and an HSA. Step six, we're gonna max out our retirement. And then we go into accelerate. So step seven is the hyperaccumulation phase. So this is where we're going beyond that 25% in all of our retirement accounts. And then we're gonna prepay for future expenses in step eight. And step nine, we are going to tackle anything that has low interest debt. So your mortgage, maybe student loans, things that fall probably at 8% or lower at this stage. Yeah. Did we miss anything, babe?

Brandon 31:52

No, and uh, I'm all for you guys finding as many different resources as possible to help you on your financial journey. So I highly recommend checking out the Money Guy Show. It is a great podcast as well, and they provide a lot of great information and break down a lot of complicated topics into very easy to understand language.

Jessica 32:08

Yeah. And, you know, we love Monarch. Um, we've talked about them on almost every episode for months and months, but this is an easy way to take a look at what your financial situation is. You bring in all of your accounts, you see what's coming in, what's going out. And you can have a money date really easily when you use Monarch. So if you're not having those money dates, this is a great place to start. Set 30 minutes aside, have everything plugged in, and then understand well, what are our deductibles, right? Like pull up your mortgage, uh, your insurance, pull up your car insurance, and actually take a look at those numbers because that is stuff you you set it and forget it.

SPEAKER_00 32:46

Yeah.

Jessica 32:46

Right. So unless you're one of those people proactively shopping for new insurance every two years, which you should be doing, but most people don't, us included.

Brandon 32:54

And the nice, and I want to kind of like, you know, not too far of a tangent, but once you start to get through these steps and you're getting towards the end, you can also go back and reassess some other things. So, for example, if you're already gone through steps one through nine, you might want to go back and reassess your car insurance, be like, hey, I have this nice emergency fund built up. Yeah, maybe you don't need maybe I don't need to pay that extra money on a monthly basis for a low deductible and I could increase my deductible because I'm it now quote unquote self-insuring a part of that.

Jessica 33:21

Yeah. I feel like that about our health insurance. I'm always like, no, stop taking it out of my paycheck. I will just put that money into an account, and then when I need it, I will use it because it's such a scam. But that's not what this episode is about. Um, all right, so take a look at the Money Guy show. Shout out to them for foo, yes, financial order of operations. Uh, of course, we will link our Monarch link so that you can get 50% off your first year. We also love allies so that you can start bucketizing those savings categories. So you can have one for deductible, you can have one for kids' camp, you can have one for the upcoming vacation and the home renovation and see everything really clearly. And as always, we will be here again next Wednesday. So share this episode with a friend and we will talk to you soon. Don't forget, Benjamin Franklin said, an investment in knowledge pays the best interest. You just got paid. Until next time.

SPEAKER_00 34:17

Sugar Daddy Podcast go. Learn how to make the pockets grow. Find news of freedoms by the week, bro. Smart investments, money flow.

Jessica 34:27

Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review, and share this episode with your friends, family, and extended network. Don't forget to connect with us on social media at the Sugar Daddy Podcast. You can also email us your questions you want us to answer for our past the sugar segments at thesugardaddypodcast at gmail.com or leave us a voicemail to our Instagram.

SPEAKER_02 34:56

Our content is intended to be used and must be used for informational purposes publicly. It's very important to do your own analysis before making any investment based upon your own personal circumstances. We should take independent money to advise from a likely professional and expose for independently research and verify any information you find in our podcast and which rely upon whether for the purpose of making an investment decision or otherwise.