The Personal Finance Podcast - The Stairway to Wealth 3.0! (The Step-by-Step Order For Your Money)

Episode Date: December 13, 2023

In this episode of the Personal Finance Podcast, we're going to be talking about the stairway to wealth version 3. 0, the step by step order on how to allocate your money. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Listen to Planet Money wherever you get your podcasts. Visit MasterClass.com/PERSONALFINANCE and get one free annual membership when you give one annual membership this holiday season.  Links Mentioned in This Episode:  Use the Ladder Method to Make Investing Simpler The Stairway to Wealth (Where to Put Your Money In Order!) The Stairway to Wealth 2.0 (The Order You Should Put Your Money in!) 10 Incredible Benefits of a Taxable Brokerage Account! Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm your host, Andrew founder of MasterMuddy.com. And today on the personal finance podcast, we're going to be talking about the stairway to wealth version 3.0. And this is the step-by-step order on how to allocate your money. If you guys have any questions, make sure you hit us up on Instagram, TikTok, Twitter, at Master Money Co, and follow us on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast on it. If you want to help out the show and you get value out of this show, consider leaving a five-star rating and review on Apple Podcasts, Spotify,

or whatever your favorite podcast player is. Now, today, we are going to be going through my favorite episode that we do, the Stairway to Wealth 3.0. And the Stairway to Wealth 3.0 is the step-by-step order that we always talk about on how to allocate your money. That's why it's called the stairway to wealth, because it is the step-by-step order. And this is the exact order that I followed to go from paycheck to paycheck all the way up to building wealth and financial independence and all of the different milestones that I looked to achieve. The stairway to wealth is the way that I did this. Now, very early on, when I was living paycheck to paycheck, there's a number of different people out there that had orders of operations that I looked into. I was interested. I was

interested in and it was helping me learn how to build generational wealth. And I put these into practice and these significantly helped me over time. So the first one is obviously Dave Ramsey and his baby steps. Now his baby steps are a staple for a lot of people who are looking to get out of debt. They had an influence on me very early on to try to get out of debt. And for a lot of people, they may think Dave Ramsey and I don't agree. In fact, on a lot of things we do agree. And I think we have the same goals for most people, which is to help them achieve their financial goals with their money to give them hope with their money, to teach them how to build wealth. I think we have the same end goal for everyone.

So that is the first one. Number two is Ramit Sati, and Remit Sati has something called the personal finance ladder. And you can find this in his book. I will teach you to be rich. It's also on his website. We're going to link all of these down below so you can check these out too. So you can see some of the sources that I utilized to make all of this happen. And Remit has the personal finance ladder.

It is absolutely amazing. The third one is the money guys. And they have something called the Financial Order of Operations. And the financial order of operations is a personal finance staple for a lot of people. And it's an amazing way to learn the order of operations on how it allocate your dollars. And so I want to pay homage to some of these folks that had a big influence on us in the Stairway to Wealth. And I appreciate each and every single one of those folks.

So I'm going to link up all of those down below so you can check those out as well and utilize those as references. I think they're great references to have available to you. Now, when we go through the Stairway to Wealth this time, you can download a PDF copy with all of the different things we're going to be talking about today. There's actually a lot of extra nuggets this time around from the 2.0 version to the 3.0 version. So you can download all of that at mastermoney.com slash resources.

That's going to give you access to the PDF version so that you can check that out. And then we're going to go through this. So what has changed in the stairway to wealth from the 2.0 version to the 3.0 version. The first one is something called flights. And what flights are is they are sections of the stairway to wealth that I want you to stay focused on at one time.

What's happening for a lot of people is they're like, well, do I jump to this step? Do I jump to this step? Flights will actually help keep you organized. So you can take of flights of stairs. That's where that came from. So we have flights where it's going to package together steps so that you can follow those steps in that order. We also have something called the Foundation Checklist. And the Foundation Checklist is going to be a checklist that is going to allow you to kind of get set up right away. And so you can start going through some of these flight steps. So the Foundation Checklist will be things that we'll talk about here in one second. and we'll show you exactly how that works. I'm also going to talk about when you can buy a house on the stairway to wealth. That's one big question that a lot of people have is, when can I buy a house

when it comes to going through this process? And we're also going to be talking more about real estate investing and when you can utilize real estate investing as part of your investment plan over this time frame. So lots of changes and additions. Most of these are additions to the stairway to wealth. And like I said, every single year, we'll be making this better and better and better for you guys as questions come in and we want to streamline this process so that you have this available to you as well. So this is one of our favorite episodes every single year. So about further ado, let's dive in to the stairway to wealth 3.0. All right. So the first flight in the stairway to wealth, this is the difference maker. One big difference that we're going to have is called

the foundation. And this is here to protect your wealth. And with this foundation, what we are going to be doing is talking through some new things in the stairway to wealth that's just going to help you go through each and every step so you don't have to think twice about anything. And the first thing that we're going to have available to you on the foundation is the step one inside of the foundation is going to be the foundation checklist. Now, the foundation checklist is going to be brand new. And this is going to show you how to set up your wealth to start protecting it right away so you can get set up and be successful with your money. So first of all, we're going to talk about insurances and which insurances you need to have in place, which ones are

nice to have. And then the insurances that I think that you need to avoid in most situations. So you'll see those on that checklist. So there's three foundational insurances that I think you always need. That's health insurance. That's auto insurance. And that's home insurance. Then there are insurances out there that you may need to have. It depends on your financial situation. So this is term life insurance. This is disability insurance. This is renter insurance, pet insurance. We have a bunch of others on a list that's going to help you with that foundation in that checklist. And then the insurance is I don't think you need, which is like IULs, whole life, all of those different pieces are for 99.9% of people, they do not need those insurances. And for most situations,

I believe they are a rip-off. So that's the first piece is insurance on the foundation checklist. Then we're going to talk about budgeting. So there is the reverse budget, which is one of my favorite ways to automate your budget, meaning that this comes from Warren Buffett talking about pay yourself first, then spend what is left over. That's exactly what the reverse budget does. So every single time you get paid, instead of spending money first and then saving what is left over, you're going to save first and then spend what is left over. And this is a really, really powerful way to allocate your dollars without having to use the word budget, without having to go into spreadsheets, you don't have to do all these extra things.

Instead, you just follow that reverse budget. And then in addition, if you are living paycheck to paycheck and you are a person who is struggling to get by every single month, then for a couple of months, you may need to do something like a line by line item budget. What I mean by that is get out a spreadsheet or use a tool like YNAB, which is one of my favorite tools, or use some other budgeting app that's out there like Monarch Money. And there's a bunch of different other tools out there that are going to allow you to use this line by line on a budget until you can get control of your money. Because that is how you optimize your dollars is having that budget in place.

And a lot of people think of budgets as being restrictive. They're absolutely not restricted. They're actually freeing because you can allocate your dollars towards the things that you actually value. you. And this is life changing once you realize how this works. The budget is what changed my financial life when I was living paycheck to paycheck. That is why it is on this foundation checklist. You need to figure out which one you want to use. I am fine with you using either one of those two. And so when you see some of this, we're going to talk about automation in a second. But when you automate your money,

the reverse budget is amazing for money automation. Because that's the next thing on the checklist is learning how to automate your money. Now, we have a course that's going to be coming out about automating your money, teaching you exactly how to automate your money fully from automating your bills to automating how you spend your money to automating all of your investments to automating your savings goals. If you have multiple savings goals out there, you can automate this entire process so your willpower doesn't have to get in the way. Money automation is the way to build wealth without having to lift a finger. And I love this process. That's one thing we'll be teaching you. And we have it on this foundation checklist on some of the things that you need to consider doing.

And then lastly, is getting your account set up. So, There are foundational accounts that I think everybody should have when it comes to building wealth. And this is obviously, A, a checking account, two, a high yield savings account, which is going to hold things like your emergency fund or your cash buffer. It's also going to hold your savings goals if you have multiple savings goals. And in addition, you're going to need either an HSA or a Roth IRA. You're going to need a pre-tax account, something like a 401K, 457, an IRA. We'll talk about all of these in a second. And then you also need, you know, a taxable brokerage account if you're looking to do that.

So we'll talk about how to diversify those in a second, but getting these accounts set up is really, really powerful so that you can automate this entire process. So that's the foundation checklist, is making sure that you have some of these things available within this foundation so that as you move forward, you're going to be able to become successful with your money. You have the foundation checklist set up,

and then we can make sure that we are taking action on some of these. So that's the foundation checklist. You can check out this foundation checklist more so in the stairway to wealth printable. I'm going to have it in there for you so that you can get access to that you can reference it as you go through this process. And I'm really excited to add that in there for you guys so that we can have more stuff available for you that brings you value. That's our entire goal of this podcast is to bring you as much value as possible. That's why we're putting that in there.

Now, step two on this flight. So flight one is the foundation. Step one is the foundation checklist. Step two is the cash buffer. This is not your emergency fund. It is not your emergency fund whatsoever. What the cash buffer is is a way, you to protect yourself when you start your journey building wealth. Now, Dave Ramsey and his

baby steps says to save $1,000 for that emergency. But we found that the average emergency, when we look at studies out there, it's over $2,000. It's like $2,400 is the average emergency. So we got to make sure that we have more money in there than just that $1,000 emergency, because if something is greater than that, then we need more money in there. So I like the idea of having double the amount of an emergency fund at least in there. So at least having $4,000, and this will raise every single year probably. But at least, having $4,000 in there so that you can ensure that you'll have enough money in that cash buffer to take care of any emergencies that come up. So $4 to $5,000 is a great starting point.

You can cover things like deductibles, things like that if you have to with that amount of money for most situations, unless you have a really high deductible health plan. And that would be something to consider to maybe have more in that cash buffer there. So that is one big thing you can have there as well. You can think of this as a mini emergency fund and it'll take care of any problems as you start to get to some of these foundational things where you can make sure that you have that many emergency fund available to you. And for most people, as they start to build wealth and they feel like they're falling behind, the reason why they fall behind is they don't have cash on hand for emergencies. They don't have cash on hand to make sure that they can protect their wealth as they are trying

to take advantage of some of these things. So make sure that you have that cash buffer in place so that once you get going here on some of these next steps, then you'll be able to accomplish those steps without interruption whatsoever. That's going to stop interruptions from happening. life is going to happen, and so you need to protect yourself against life if your car breaks down or anything else along those lines, making sure that does not happen. Now, step three in this flight is to get your 401k match from your employer. Now, why do you want to get your 401k match from your employer? Because this is a 100% rate of return on your money. So if you go out there and your employer offers what is called an employer match, this is 100% free money. This is when your employer

offers, if you contribute to your 401k or 457 or 403, be any of those types of things, it you contribute to this, then they will match it 100% or sometimes it's 50%, but it's still completely free money for you to make that contribution, which is why this is ahead of some of these other steps, because this is the highest rate of return that you can absolutely get. Now, say, for example, someone out there said, hey, if you can be $100, I will immediately give you $200 back. You would most likely say yes, right? Well, that is exactly what happens with the 401k match. When you do that match, your employer is matching that money for you. So you got to make sure, obviously, there's vesting schedules, things like that, that you have to take into consideration. But in a lot of situations,

you can get a 100% rate match. So here's how powerful this 401k match is. Say, for example, someone made $100,000 per year, and their employer matched 3%. And they did this for 30 years at an 8% rate of return, which is a conservative return based on the market values as of late. So after 30 years, they would have contributed $90,000 and their employer would have contributed $90,000. And their employer's contribution alone over that 30 years because that 8% rate of return would grow to $352,000. And so would yours. So that means that you would have $704,275.25 in 29 cents over the course of 30 years just by getting that employer match.

This is powerful, powerful stuff that we're talking about here, making sure that you get that employer match. If you had a 4% match, it would be $938,000. At a 5% match, it would be $1,173,3,322. And I have heard people tell me, I have a very good friend who gets a 6% match at his company, $1,4008,000 if you had a 6% match. And you took advantage of that. You made $100,000 per year.

You can see the power in doing this and taking advantage of these small steps alone where you can have a big chunk of money in retirement just by taking advantage of this stuff. So making sure that you take your first step in investing with your employer match, if they offer it, is very powerful. If they don't offer it, you just jump to the next step. And any of these, if you've already completed these steps or they just do not pertain to you, you can jump to the next step. So that is very, very powerful. You cannot afford to not take advantage of that employer match. Now, the next step in this flight is high interest debt. We want to make sure

that we get rid of high interest debt. It is one of the biggest wealth killers that are out there. We need to take advantage of this and reduce high interest debt. So for most people, this is things like credit card debt. If you are in credit card debt, you want to get rid of that as fast as possibly can because that is an absolute wealth killer. It will stall your path to wealth if you have credit card. debt. The longer you hold on to that credit card debt and that balance, the more that it's going to compound against you. So you definitely want to make sure that you are getting rid of that credit card debt as fast as you possibly can. We have also seen a significant rise in things like personal loan. So if you have a high interest personal loan, then you need to make sure that

you are getting rid of that as well. So we classify high interest debt as any debt above a 6% interest rate. We want you to get rid of as fast as you possibly can. The average interest rate right now on credit cards is 20.65% at the time I'm recording this. So this is something where you definitely want to make sure you are reducing that liability as much as possible. This can also be student loans. If your student loans are higher than 6%. This can be a lot of different things. Auto loans out there. If your auto loans are higher than 6%, I just heard somebody on a podcast the other day say their auto loan was 22%. That is a major, major problem. So you really need to make sure that you are reducing this high interest debt. This is a pants on fire financial emergency. You

need to put out that fire as fast as you possibly can because it is really restricting your wealth building ability by having this high interest debt. Now, if you go to mastermoney.com slash debt course, we have a free debt course for you guys, teaching you how to get out of debt step by step. So if you want to learn how to do that, you can absolutely do that. We make that course completely free. I don't want to church anybody who's in debt. That course is completely free. Would love it if you're in debt to take that course so you learn how to do it. It takes about an hour or so to complete. So it's great for folks who are wanting to get out of debt. Now we have our cash buffer in place. And so now we move on to the next step. And the next step that we have here is because the cash buffer in place,

that is protecting us as we get through some of these items. Now we go to the emergency fund. Now, the emergency fund is a very, very important step and it is the foundation of making sure that you get your money right and you protect your money. An emergency fund does a number of different things. Number one, it protects you against life surprises. You're car breaks down, you're going to have the money just there. You have an issue with your house. You're going to have the money just there in cash. You have something happened in medical emergency, for example. You're going to have the money just there. And there's power in having the money just there. You reduce your stress. You reduce your anxiety surrounding money if you have the money

just there. I remember when I was just getting by and I had a transmission break in one of my cars, but I already had my emergency fund saved up and I was not stressed whatsoever because I had that emergency fund there. I just paid for the repair. It was $2,500, paid for the repair, and it was completely stress free. Imagine a life where you do not have to stress about money. That is what the emergency fund does. That is what it allows you to do is to protect your wealth, and it's going to protect your wealth significantly over time. So when it comes to how much you need to have in your emergency fund, it's going to be very powerful as well. We'll talk about that here in a second. But not only does it protect you against life surprises, it also protects you from something

a job loss. And so if you lose your job, you're going to have the money there available for you to get by until you find another job. In addition, it also protects you from things you don't want to do. Like maybe you get a boss that absolutely is ruining your mental health. Well, guess what? You got an emergency fund there. You can take advantage of that emergency fund. You can step away from that job and go find another job that is more beneficial, more fulfilling to you. So the emergency fund has so many different awesome opportunities. If you get a job offer across country, you've got the money just there to be able to pay for that move where you can make more money and take advantage of that job offer across the country. There are so many different amazing things that you can do with this emergency

fund, why it's so important to have it in cash. Now, where do you keep this thing? You're going to keep it in something like a high yield savings account. That is my number one place to keep it. You don't want to be investing this money. Why don't you want to be investing this money? Even though it would grow faster? Because if you invest these dollars and say, for example, we have a recession. Well, in a recession, the market's going to cut this money in half. So now you have this money invested and say, for example, you have $50,000 invested, and all of a sudden it gets cut down to $25,000 of money invested. But what also happens a lot in recessions?

Well, people lose their job. They get laid off. So the last thing you want to happen is your emergency fund to get cut in half and you get laid off. The risk is way too high. This money needs to stay in cash. And right now, at the time I'm recording this, cash is valuable. Cash is at a 5% rate of return to high yield savings account. So cash is not trash right now.

So you need to keep this money in something like a high yield savings account so that you can it. Now, for most people, I think you need six months in your emergency fund. I don't think three months is enough. Why do I not think three months is enough? Because say, for example, you go out there, you lose your job. And if you lose your job, you have one month of time where you're trying to search and look for another job online and you're sending in your resumes and you're starting to send that resume in. Then you have another month or two where you're going through sending in more resumes, you're going through interviews, you're going through different rounds. And then you have another month or two where you're starting. You have another month or two where

maybe you're going through another set of interviews and still searching for that job, well, all of a sudden, your money has run out if you have three months of emergency fund. So you need, I believe, to have six months emergency fund, especially if you have a family, if you have kids or if you have another spouse who depends on your income, you definitely need to have that six-month emergency fund is very, very important. The only people that can get away with a three-month emergency fund are folks who are in careers that maybe it is just so easy to find a job. It's not even funny.

So if you're in that situation, maybe you can get by with three months. But I just prefer six months. there's more security. If you are self-employed, I prefer nine months or longer, if you're self-employed, just so that you have that runway available to you. And then if you're completely retired, I prefer at least 24 to 36 months is the amount I like to have in my emergency fund. So that's kind of how I set it up and thinking about your financial situation. For most people, if you're questioning it, just do six months. Now, another big question that we get when we talk about this is, when can you buy a house when it comes to the stairway to wealth? And I am okay with you buying a house

after you get these done. If you have that emergency fund set up, you have that six-month fully funded emergency fund, then I am okay with you looking into getting a house. Now, how much house can you buy? We like the 20-33 rule, 20% down, 30% or less of your income should be spent on your mortgage payment every single month and no more than three times your earnings every single year spent on the purchase price of that house. The 3x rule there at the end comes from the millionaire next door, which is a fantastic book if you have not checked that out. But I am okay with you after this level. If you want to buy a house, you're okay. I'm fine with you buying a house at this level as long as it is affordable to you in your financial situation. And you run the numbers

on total cost of ownership. And we are working on putting together a spreadsheet for you guys for total cost of ownership. It may even be out by the time this episode airs. And so when we put that spreadsheet together, this will give you the option to run the numbers to make sure buy versus rent makes sense for you. Really, really excited about that. We'll have an episode talking about it when that comes out. So that is full. Flight one. Flight one is this is the foundation here. This is the foundation of making sure that you get all of these steps in order. So first one, you're going to go through the foundation checklist. Then you're going to go get that cash buffer going. Then you're going to get your employer match if it's available to you. If it's not, skip that step and go to high interest debt. And then as high interest debt gets paid down, then you're going to build out that emergency fund once you get rid of that high interest debt that is killing your wealth. So these are the foundational steps in Flight One. And this is exactly where I want you to be focusing on flight. one, if you're in this phase, I want to make sure that you are focusing in this area first before you move on to the next phase, which is growing your wealth. So let's go to Flight

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All right. So we are now on Flight 2, which is growing your wealth. And when we get to Flight 2, this is where you're really going to start having fun with some of this stuff because we're going to be investing our dollars and learning how to build that generational wealth. This is where your money grows. This is where freedom comes from is flight to. There is something out there called the gap. And the gap is the difference between your income and your expenses. And what you do with that gap, the extra money that you have is going to tell you if you're

going to be wealthy or not. So taking that gap and putting it towards things that grow your money over time is how you build wealth. This is how you build that generational wealth. this is how you use money as a tool. So you want to make sure that you are investing those dollars. Once you have that foundation in place, you are financially secure with that foundation. Now we are going to start building up. And we are going to do this in flight to which is growing your wealth. So the first place that I like to look at this is the Roth level and the HSA level. So the first step is you can go HSA if you have a high deductible health plan, which is stands for health savings account.

And the HSA is really, really powerful because what this is is actually a triple 10. tax advantage account. Money goes in tax-free. You can invest the money inside the HSA and it can grow tax-free and you can pull the money out tax-free as long as you have what is called a qualified medical expense. And the IRS has a laundry list of what classifies as a qualified medical expense. So this is going to be incredibly helpful for you when it comes time because the power here is there is no time limit on when you can reimburse yourself for that qualified medical expense. So you can be 22 years old, break your leg, have a bunch of medical bills on that broken leg, and reimburse yourself at the age of 50 in your HSA and not have to pay taxes on that money.

So really, really powerful stuff here, but you've got to have a high deductible health plan to qualify for the HSA. Now, the other option are the Roth option. So there is a Roth IRA, and if your employer offers it, you can also look at something like a Roth 401k or a Roth 403B or a Roth 457. There's a bunch of different options out there. But at the Roth level, the Roth is a super powerful. A powerful account. And we're going to use this as an amazing example. So with a Roth 401K, what's going to happen there is if it's through your employer,

then the minimum limit that you can put in there every single year is $22,500 per year. And if you're over the age of 50, you have ketchup contributions that allow you to get up to $30,000 per year in a Roth. And then in a Roth IRA, you can put at the time recording this $6,500 per year. It's supposed to go up next year again. So you can have $6,500 into the Roth IRA and the catch-up contribution. is an additional $1,000, so $7,500 per year if you're over the age of 50. Now, the why the Roth is so powerful is because you put money in that's already been taxed. It's already been taxed out of your paycheck.

That money grows tax-free, and you can pull that money out tax-free come retirement. So when that happens, it's really powerful to have tax-free money in retirement because, A, it does not reduce your Social Security tax liability. But B, you don't have that required minimum distribution, so you don't have to worry about taxes ever again. You already paid the taxes up front on that Roth IRA when it comes to that money that's coming out of the Roth IRA. Now, that is one thing that I absolutely love about the Roth level.

And so the Roth is one of the first things that I was attacking when I started to invest my dollars. And I've been contributing to my Roth since my early 20s, making sure I get after it and get money into that Roth IRA. Very, very powerful account. And here's to show you how powerful this is if you maxed out your Roth IRA, just for example. So you put $6,500 per year in a Roth IRA. And you did this over the course of 30 years.

you'd have a little over a million dollars in that account if you got something like a 10% rate of return. And of that amount of money, about $800,000 of that money is going to be the growth of your money. So why is this powerful? Because your money grows tax-free inside of a Roth by a race. You'd have over $800,000 in completely tax-free money. So amazing account to allocate some of your dollars for. That's why I like to consider it for a lot of folks prior to contributing money to some of these other accounts that we're going to talk about here is I like the HSA and the Roth because of those tax benefits. And for a lot of people, you just want to take into consideration if you're a really, really, really high earner. Talk to your CPA, see if it's the best option for you because

step two in flight two might be the better option for you, which is to max out your pre-tax accounts. So once you get your Roth level done or your HSA or both, you can do both. If you get those done, then you come back to the pre-tax accounts. So this is your 401k, your 403B, your 457, your TSP, your traditional IRA. All of these are pre-tax accounts. And the way that they were, you're is that you don't pay taxes on money that you contribute. It comes directly out of your paycheck and or if you go into an IRA, you get a tax deduction. Then the money grows. And then when you pull the money out, you get taxed on that money later on down the line after the age of 59.5 is when you can pull the money out. And when you pull that money out, then you get tax on that money later on down

the line. So now, these income limits are going to be the same as the Roth 401Ks, $401,000, for the 401K, $403B, $457, all those. And then you can do a catch-up contribution of $7,500 if you're over the age of 50. And then for the traditional IRA, it's going to be the same as the Roth IRA with the income limits at $6,500 for under the age of 50 and then $7,500 if you're over the age of 50. So those are the contribution limits on those. Also on this level, brand new is real estate because this is the point in time when I was coming up where I started investing in real estate. And I would buy single family houses, small multi-family houses. So at this level, you can also do real estate. And this is one way,

if you are inclined to be a real estate investor, this is not for everybody. Real estate investing is not for everybody, but this is the time that you can absolutely do it, is at this level, especially if you want this to be a larger portion of your portfolio, or if you want to be a hybrid investor, what we call it, meaning you invest in the market in your retirement accounts and you invest in real estate, then from that standpoint, this is a great time to be doing that because real estate can truly accelerate your path to financial independence. I truly, truly believe that, and there are a number of factors that show that. And I have a number of factors that. And I have never made more money than I have in real estate when investing in real estate. So it's a very

powerful tool that allows you to accelerate your path to wealth. And at this level, we're talking about things like, you know, single family houses, small, multi-family, getting your start in real estate and making sure you understand this. Why is this at this level and maybe not a little earlier? Because real estate is a very expensive thing to invest in. And you have to have at least that emergency fund in place up front and have some investments in place so that you have money that's going to help back you up if anything happens in real estate. Because real estate is a scale game, meaning making sure you understand how to run the numbers. That's the number one thing you have to do when investing in real estate.

But then outside of that, making sure that you have protection plans in place when it comes to real estate because it can become very expensive if you do not know what you're doing. And trust me, when I had my first two properties early on, those first two properties were somewhat difficult to maintain that cash flow because if stuff came up, you don't have enough cash flow coming in to kind of cover all the expenses if you don't run the numbers, right? So that's why I focus so much on making sure I learned how to run the numbers correctly so that you can have that cash flow available, that free cash flow to take care of any other expenses that you have available.

So learning how to run the numbers is really powerful. We have an entire episode on how to run the numbers if you've never heard it. Make sure you check that out. We'll put that up in the show notes as well. So that is flight too is some of your investing things. Some of the things here that are going to grow your wealth that are going to allow you to get to the next level with your money, grow your wealth, be able to retire, find that financial independence number, and grow over.

work time. So really, really powerful stuff in flight two. Now, let's get to flight three, which is legacy wealth. All right. So flight three, we are going to be talking about legacy wealth in flight three. And so the first step of legacy wealth in flight three are things like wealth accelerators. And these are things that we talk about that are nice to have beyond some of your traditional retirement accounts, maybe some of your real estate investments if you're inclined to invest in real estate. And these wealth accelerators are things that can really significantly improve your chances of being really, really wealthy. So, some of these things, if you just want to be an investor in the market, you're not interested in

businesses or you're not interested in real estate, then first, I would look at something like a taxable brokerage account. Now, we've had a number of episodes on the power of a taxable brokerage account. And if you're looking to become financially independent, it is definitely something that you want to look into as well because it helps you bridge the gap when you retire early and have that flexibility available to you. So I love taxable brokerage accounts. I think they are absolutely amazing. And if you haven't heard our episode talking about that, we will link it up in the show notes below, since you can check that one out. It is one of my favorite types of accounts that are out there.

And that's just the standard brokerage account that you go and you open up at Fidelity or Vanguard, Charles Schwab, wherever else you want to open your account. You can go and do that and be able to have that taxable brokerage account and invest those dollars. In addition, though, one big thing is maybe doing something like different types of real estate deals. So maybe you are flipping houses, for example, and you're interested in different types of real estate deals like that, then you can do something like that.

Or if you're interested in doing larger real estate deals, is a great spot to do that because the risk obviously increases, but at the same time, if you are financially stable, you have that stabilization, you're working on some of those other retirement accounts, or you started in real estate and you have a know-how of how to invest in real estate, this is a great spot to look at maybe some larger deals of, you know, four doors or more. If you're looking for apartment buildings, maybe you're looking at some commercial investments. Those types of things are fantastic at this legacy wealth level. And those are things that are great to pass down to generational wealth as well. And then in addition, investing in

to, you know, boring businesses. We had Cody Sanchez on this podcast talking about how to invest in boring businesses. We had Walker Dibble here on the podcast talking about how to buy, then build businesses. All of these are fantastic options for you as you go through and learn more about how to build up generational wealth, get cash flow from some of these assets. I think it's a really, really powerful way to actually build up some of that wealth. So these are all different options that you have at the wealth accelerator level. We will do more episodes on wealth accelerators because they are very, very near and dear to my heart right now. That's a lot of where my capital is going currently is at the wealth accelerator level. So really, really excited for that.

And in addition, on the legacy wealth level, if you are, you know, you're happy with the progress that you're making with your 401k, your IRA, maybe you got a brokerage account, whatever else, then you can start funding future expenses. Now, future expenses here are things like your children's college. So your children's college are your 529 plans, for example. This is something that I want to make very, very clear. You want to make sure that you are following what is called the oxygen mask method. So you take care of your retirement first, then you can start helping out your children. What do I mean by that? What I mean by that is when a plane is going down, you take care of your oxygen mask first, then you go and help others. The same thing goes for your money. You take care of your retirement first,

then you go and you help out others. This is very important to understand. There are no loans for retirement, but there are loans for your kids to go to college, for example. So making sure you're taking care of your retirement first, then taking care of these future expenses is going to be really important. Also, investing for your children. We have a taxable brokerage system. We talk about investing for your kids. We have a Roth IRA system. We talk about investing for your kids. All of these different types of systems that we have in place, this is the time to do it is for these future expenses, this generational and legacy wealth phase here. And then, in addition, if you want to have big savings goals in the long run, maybe you have kids who want to get married, you want a wedding fund,

those types of things, or you want to save for extra retirement reserves. This is a great time to do that as well and have that available for you in these future expenses. So making sure you have that available. And then step three on flight three is making sure you take care of any low interest debt. And so with low interest debt, this would be eliminating any debt below that six percent interest rate and making sure that if you want to get rid of that, maybe you want to get rid of your mortgage, something like that. This would be a great spot to do it and optimize that money there because you can take advantage of that. So any debt below, you know, six, five percent is something where you want to do it on this low interest debt level. So that is the next

step there. And the last part of this version of the stairway to wealth. So listen, if you guys want to learn more about the stairway to wealth, make sure you are grabbing that PDF if you don't have it. And we will also, if you're on the newsletter, we'll be sending that PDF out on the newsletter when this episode airs so that you have that available to you. And so this is the step-by-step guide that's going to help you. And I want you to focus on some of these areas one at a time, which is why we created the flights. Let me know what questions you have about this. And we will even do a full Q&A on this to make sure that you will understand fully how the stairway to wealth works. Really, really excited for this and really excited for most of you to get started on this. If you've never heard of this before, if you didn't hear

version 2.0 or 1.0, this is going to be something that's amazing for you guys to take your steps, step by step, and learn exactly how this work. So make sure you grab that PDF. And thank you guys so much for listening this episode. And thank you for investing in yourself, because that's exactly what you're doing when you listen to this podcast is you are investing in yourself. So it is one of the most powerful things that you can do. It is the best way to spend your time and money. is investing in yourself. So thank you guys so much for doing that. I truly appreciate each and every single one of you. And if you're getting value of this show, share it with a family member, share it with a friend. And we will see you on the next episode.

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