How to Build a Vacation Fund That Pays You For Life + (Money Q&A)

Transcript:

On this episode of the Personal Finance podcast, How to build a vacation Fund What's up everybody?

And welcome to the Personal Finance podcast. I'm your host, Andrew, founder of Master money.co. And today on the Personal Finance podcast, we're going to be diving into how to build a vacation fund that pays you for life plus money Q&A.

Now if you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter. And don't forget to follow us on Apple podcast, Spotify, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five star rating and review on Apple podcast, Spotify or your favorite podcast player.

Cannot thank you guys enough for leaving those five star ratings and reviews. Now today we are going to be diving into how to build a vacation fund that pays you for life. And in this episode, we're also going to dive into a bunch of your questions in this episode of Money Q&A.

But I want to kind of put on my mad scientist outfit on today because I love thinking through unique ways for you to save and invest your dollars. And we recently did this on an episode talking about paying cash for cars and people loved it. We had so many different people sending us an e-mail saying I never thought about it this way before.

This is a really cool. Can you do more episodes just like this? And so I wanted to talk through ways that you can pay for specific things by building up a portfolio and then utilizing that portfolio to actually pay for your liabilities or things that really are just going to be paid for in cash otherwise.

And so I'm really, really excited to think through exactly how you can do this because this is a really, really powerful methodology that is going to allow you to pay cash for all of your vacations. But the goal here is to build a portfolio where you can draw on that portfolio for vacations, for life.

And this is specifically earmarked for vacations. Now, you can do this for all kinds of different things. But in this episode, we're going to be talking about how to utilize it for vacations because this is something that I am going to be doing. This is something I'm going to be building up is a vacation port portfolio so I can utilize it for experiences and things that I want to do throughout life.

Now, the first thing I want you to do is I want you to figure out how much you spend on vacations per year or how much you want to spend on vacations per year. You got to figure out what your target number is first. And what we want to do is once we figure out what that number is, then we can decide, OK, well how much extra do we normally put aside for vacations and how can we take those dollars and put them towards investments instead?

So let's say for example that you put $500 per month towards vacations. Well, instead of putting it in your high yield savings account for your vacation fund, we are going to think about and consider putting this into a brokerage account. We're going to try to grow this over time so that we can grow this into a portfolio that will actually make makes sense for our vacation.

So this is part of the whole plan. This is part of the whole idea. I just want you to understand the direction that we are going in with this so that we can look at how we can take these vacations. Now, a good time to do this for a lot of you out there is if you are young, maybe you're in college, maybe you're in your 20s, maybe you're in your 30s and you have young kids.

A good time to do this is when you don't plan on taking these massive lavish vacations over time. Whereas, you know, hey, I'm going to be working right now. I'm focused on my career or I have young kids and a young family. I'm not going to be going to on a bunch of flights or trips or I am going to be, you know, in a season of life right now where I probably will not be traveling all over the place.

Instead, I plan on traveling a lot, maybe in my late 30s, late 40s, somewhere around there. And I want to be able to start to take some of these vacations. This would be a good time to do this. Also, if you are in your 40s or 50s and you're thinking about taking a lot more vacations when you're retired. Just developing an earmarked vacation fund as part of your investments can be a really cool way for you to build a portfolio that is just for vacations that you don't feel guilty about spending those dollars and spending that money.

Now, sure, I would not sacrifice, you know, putting money in a retirement account that you're you're marking for that. But what I would do is if you do have extra dollars that you're putting towards vacations, you can think about doing something like this. So we want to pick the monthly number. How much extra do we have available to actually put towards this? Now, I want to be real here.

Not everyone has extra money to put aside towards vacations. And so if you don't, don't worry about it. As time goes on, I just want you to think about this and understand this concept. When I didn't have enough money to put it set aside for vacations, I used to dream about stuff like this. But those dreams turned into motivation and that motivation turned into reality once I was ready to get after it.

So I don't want you to just turn this off because you don't have extra dollars on hand. Instead, I want you to think about how can I do this? How can I actually make this happen? All right, next we want to open a taxable brokerage account. Now, in the taxable brokerage account, you could do this in a number of different places. I will link my favorites down below in the show notes.

Vanguard, Fidelity, Sofi, there's so many out there, public, there's so many out there that you could do this with. I will link my favorites up down below in the show notes so that you can check that out. But you can just use a regular brokerage account, not your 401K because you can't access those funds, not your Roth IRA because you can only withdraw the money that you contributed.

We want to make sure that we can also reap the benefits of this early and often. So we want to have additional flexibility. So a taxable brokerage is what I like to use an earmark for this because I think it's something that you can really get some cool stuff going with, right? Three, I want you to do something simple with each contribution.

So once you have the brokerage account open, we want to auto invest the set amount that we started with in step one into this account. So if it's $500 per month, we want to send $500 per month automatically into this brokerage account. If you already have a taxable brokerage account open, that is a OK.

What I like to do with stuff like this is I just earmark it with a specific fund. So if you're like, hey, I don't want to open another brokerage account just to do this. No, you don't have to. What you can do is let's say for example, you invest in VOO as your core holding inside of a taxable brokerage account and you just want to invest in another S&P 500 index fund.

Well, you can do something like an SP or whatever other S&P 500 index fund you like to invest in as an earmarked differentiator. That way you can have this ETF and you know, all the money going towards that ETF is just going to be the ETF for your vacation fund.

Because in reality, if you are buying the ETFs and you know if you're buying ETFs, right, they're just mirroring the index. So that's all you're really looking for is one that mirrors the index, that has low cost, that doesn't have a high turnover ratio, those types of things. And so when we think about what we are going to be investing in, that is the way I look at it as I just earmark specific funds, 4 specific goals, and that's basically like having savings buckets.

When it comes to a taxable brokerage account, it's very simple because there's seven or so S&P 500 ETFs, for example, that are pretty comparable across the board. Now there's some bad S&P 500 ETFs, so you want to watch out for those, but there's a ton of comparable ones. Now if you want our index fund and ETF CHEAT SHEET, by the way, we will also link that up down below in the show notes.

So make sure that you check that out if you were looking for that. So that's the thing that we want to do is we want to make this simple with every deposit. We want it to be automatically invested with every deposit to make this easy. Now this is where the key comes in for the 1st 10 years, we want to make sure that we are really getting this money compounding.

And if you can do this on top of your regular vacation saving, that's great. But we really want to try to not touch this for a little while. And so many of you out there are like, well, this is my vacation money. How am I going to take a vacation? Well, this is where the travel hacking comes in. And I think for many of you out there, if you're in a seasonal life or you're not going to take a ton of vacations while you're thinking about this, you can do travel hacking that will cover the majority of your costs for any vacations that you take coming up.

So how does travel hacking work? You put all of your bills that can go on a credit card on a specific card that is for travel rewards. We link, I'll link my favorites up down below as well. So we got a lot of links to the show notes today, but we will link our favorites up down below so that you can check it out. But there's a bunch of them out there from a Chase Sapphire Reserve.

The Amex Platinum is what I'm using right now. There's the Capital One Venture X, There's tons of different cords out there that are absolutely wonderful. The Chase Sapphire is my favorite or the Capital One Venture are my 2 favorites to start with as travel cards because they have flexible points. You can move them to travel partners. But essentially what you're trying to do is you're trying to invest your dollars that would go towards vacation and you're trying to travel hack with the rest.

And so once you start the travel hack and you put every single bill on this credit card, then you pay it off in full every single month. I personally like to pay it off in full every single week. It keeps me on top of my money and it allows me to make sure that I am not just getting out of whack when it comes to my credit card.

So I'm very particular about this. I want them paid off every single week so that I am just on top of everything. I cannot stand having a credit card balance. It drives me up a wall. And in fact, if I spend a lot on a credit card in a given week, like for example, we had to host a party for my daughter this last week.

So we put about $1000 on a on a credit card or actually $1500 or so on a credit card. And it just drives me crazy that that balance is even on there. I want to pay it off and that's probably just a psychological thing and probably something I need to work on. But in reality that is something I love to pay them off every single week 'cause I do not like when they get out of whack.

Then you can use the points and miles for hotels, you can use them for airlines, you can even use them for rental cars, although I don't think your dollars go as far on rental cars. And this, we just had a master class inside Master Money Academy going through exactly how to travel hack, Travel hacking 101. We had a full one hour master class teaching people how to do this because I think it's a really, really important thing that you need to understand and you need to note when it comes to being able to build out this portfolio, OK?

So what's gonna happen here is over the course of the next 10 years, you will see that this will start to grow. You start to put these dollars in your portfolio begins to grow. And then you can decide, OK, once I am here, let's say you put $500 per month over the course of a decade, Well, if it grew at an 8% rate of return, you are sitting near at nearly $92,000 by year 10.

And if you put $250 per month in there, you're sitting with about $46,000. And with $1000 a month, you already have $183,000. A $1000 a month can actually get you a really nice vacation portfolio. But obviously this is a huge luxury. Not everybody can do this. I'm going to say this over and over again, don't get upset, don't get mad.

I know everybody can't do this. I'm just showing you different for an example so you can see the power of compound interest. Now what you want to do is you want to keep the balance growing while it pays you. So if you get to the point in time where you realize, OK, I've got $100,000 over the course of a decade in this account, and I only spend $4000 per year in vacations, guess what?

You can start drawing on that thing at $4000 per year and trying to preserve that capital. But let's say you need $8000 per year where you're going to need to continue to allow that portfolio to grow 'cause we're using the 4% rule on figuring out how much we can withdraw here, OK? So when we think about this, the 4% rule is actually somewhat conservative.

It is a somewhat conservative way to figure out how much you can spend every single year. And if you continue to contribute to your vacation fund every single year with your 203 hundred, 500 a $1000 per month and let it grow and then you pull and draw down in that portfolio.

You're going to see that this thing is going to pretty much grow over time and have a big, big difference for you long term. Where then all of a sudden you don't have to contribute it to it anymore. Once you hit your goal. And you can start to draw on this portfolio because at a certain point in time here, you're going to reach a point where this is going to cover your entire trip and it's going to cover a yearly trip.

Now, if you want to start to take bigger and bigger vacations, continuing those contributions while drawing on it can be something that you do. If you want to take smaller vacations until your kids get to like being teenagers, for example, then you can start to slowly begin to draw on it once they get older or pay cash and let it compound for a little longer, and then you can take even bigger trips later on down the line.

The cool thing is there's so many different parameters around here. Now, one thing you can also do is add guardrails. And so guardrails are just, you know, if the market's up, you can actually spend more and you can actually pull more money out. When it comes to taking your vacation when the market's down, you just don't take as big a vacation that year.

Maybe you take a smaller vacation or go local or whatever else. But this is going to allow you to also spend more in this portfolio. So I want to give you a couple different examples of how this can happen because I think there's some cool things that you can do here. OK? So we're going to do a monthly contribution of $500 a month, OK, $6000 per year that you're putting in this account.

So over the course of ten years, you're gonna have $92,000 in that portfolio. And it by year 11, you can start to draw down $4000 per year from this portfolio if you wanted to. So here's the cool thing. OK, I wanna show you how this works. So let's say for example, that you decide you're gonna continually keep investing, that you're gonna continue to keep putting money into that account, OK?

So by year 11, you can start to draw down about $3600 in year 11. By year 15, you're going to be able to draw down about $4300 per year. OK, by year 25, now you're drawing $6300 per year.

By year 35, you're now drawing down $9300 per year. And by year 40, you're drawing down about $11,300 per year. Now this is a simple example of if you're withdrawing earlier, that's what's going to happen. But let's say, for example, you wanted to wait a little longer 'cause I just want to show you this example again.

I'm just mad scientist in here. You don't have to do this if you don't want to. I am doing this for fun 'cause I think this stuff is really cool to do. But let's say for example, you wait 15 years before you start to grab any contributions. Well, if you waited 15 years, by year 16 you can already draw $7000 per year for vacations.

Like, imagine if we thought about this for a second and all of a sudden you're drawing 7000 a year for vacations by year 25. In that example, you could draw $10,000 for vacations and you're going to actually hit your $12,000 goal by year 31. And then by year 40, you can draw $17,000 per year for vacations.

It's pretty cool, I think. And I think in reality, you know, there's a lot of different examples of how you can do this, like if you bumped up contributions, for example, and you change the contributions to let's do $1000 per month just to show you what is capable here, and you waited 15 years before you started to withdraw on this.

You could withdraw $13,000 per year by year 16. By year 25, let's say you could withdraw $20,000 per year if you put $1000 per month in there. Wild stuff. It really is wild stuff. And I think this is kind of the cool thing about what is happening here is that you can do some really cool stuff with this.

Now let's say you're a really high earner and you're like, I love travel and in fact, I am really good at points and miles. We have a lot of people listening who are good at points and miles and I want to bump this up to 2000 bucks. I'm just going to show you maximum. Let's go maximum level to see what happens here. Well, if you do that and you bumped it up to 2000 bucks, by year 16 you would already be able to withdraw $27,000 per year, which is absolutely wild if you waited for 15 years before you actually withdraw.

What if you waited only 10 years, but you put $2000 per year in there? You'd be able to withdraw $14,000 by year 11:00 every single year. And then by year 25, you'd be able to withdraw $25,000 per year for vacations. Now, again, I get it.

It's a lot of money to be putting in the vacation fund every single year. I know most people cannot do that. And so if we go down to $100 per month, let's see some cool stuff that happens here. So by $100 per month. And let's say the points and miles phase just lasted while you had, you know, before you had kids maybe.

And then by the time your kids, you know, were, were starting to get a little older, then you started to take some vacations. Well, if you waited 18 years, you can start to withdraw $2000 per year for vacations. If you put $100 per month alone, so just $100 per month, you can still build out a vacation fund that allows you to take a $2000 vacation per year over the course of the next two decades.

And I just think that's a really cool thing. I think it's a really cool thing to show that, hey, maybe I start my vacation fund with a small amount of money. Maybe it's $50.00 a month, maybe it's $100 per month. And as I start to make more money, I can start to add more to this fund. And then all of the sudden, this fund is going to be, you know, growing over time and I'm going to be able to take some pretty cool trips just by building out this portfolio and drawing it down.

The cool thing is you'll be able to draw on it for and preserve it long term. Once you're ready to stop, once the amount that you can pull down every single year is enough for you, you can stop. You don't have to keep contributing to that account. You can then stop and start to draw on that portfolio and it'll continue to preserve over time.

And then you're done. You're done at that point in time where you don't have to worry about it anymore. Again, this is a luxury. This is something that not everybody can do, but I wanted to, I put on my mad scientist hat today to show you exactly some of the cool things that you can do with some of these funds so that you can see just the power of being creative with your finances.

There's a power in in having a creative mind when it comes to setting up some of these things. And even if you have small amounts of money, you're young and you want to travel later on in the line, it's just a cool idea to do this. Now if you were going to use the money within the next three to five years, I would not invest money for a vacation. All we're talking about here is long term.

If you're going 10 plus years and you want to build out this portfolio, it's a really cool thing. Or the other thing you could do with this is let's say you have a big dream vacation. You want to take your whole family to Ireland because that's where your family roots are. You want to take your whole family to Africa or you want to take your whole family to China.

Well, if you wanted to do that and it's going to cost you $50,000, but you want to do it in the next decade or so before your aging parents, you know, pass away or something along those lines. This is exactly how you do it. You build out a portfolio, start to invest in there and you watch it grow and let compound interest help you get there.

Let it help you get there. Now, again, there's risks having money in the market. If the market tanks at any point in time, you know, you got sequence of returns risks, you got all these different things in place. So don't think the market just goes up and to the right forever. But this is one of those things that you just want to weigh out about the risks, the pros, the cons.

There's a lot of things here, but it is really, really cool what you can do with a vacation fund like this. All right, perfect. Now let's jump in to some of your questions. All right, the first question is from Daniel. Daniel says thank you for all you do. I make 100 to 120 KA year.

I'm 44. I have $135,000 in my Roth 4O1K, no debt other than my mortgage and $32,000 in a high yield savings account. I'm working 60 plus hours a week to make ends meet and I want to invest in real estate but I feel like I need to get rid of my mortgage first.

Should I pull $80,000 from my 4 O 1K and use the rest of my savings to pay it off? Or is there a better path? Right Step 1. Daniel is first of all, thank you so much for the kind words and you are doing great right now. I think I want you to hear you clearly before anything else that you were in a really strong position.

You're 44, you have 0 consumer debt, you have $135,000 in a raw 4 O 1K and $32,000 in cash. A lot of people would love to trade places with you and where you are right now. The first thing I would say though, is I want to protect you from pulling money from your 4O1K.

Charlie Munger, who is Warren Buffett's business partner, has this quote. And this quote is a very powerful quote to to understand and to think through when when it comes to every single decision that you have. Never interrupt compound interest unnecessarily. The last thing that you want to do is pull money out of your 4O1K to pay off something like a mortgage.

A mortgage in my opinion is one of those debts that I am OK with you having. It's one of the only debts that I'm really OK with you having in terms of of having this in place. Why? It's backed by something that most people value and they know what the value is. At least you know the range of what that value is.

But in addition, usually mortgages have low enough interest rates where it isn't high interest debt. If it becomes high interest debt, then at some point in time you we can refinance down the line. Now sure, rates can go up and rates can go down. And so we want to make sure that we are cautious about this.

But in reality you can refinance at some point in time when rates drop. OK, that's the black and white version of this. I want you to understand this. This four O 1K is going to be a big portion of how you want to think about retirement. It's going to be what helps you in retirement. And typically for most people, we want to make sure that we are keeping those dollars invested.

Because even if it double S every 10 years, let's say you got a 7% rate of return and you double this about every 10 years, you can have a really good portfolio of around $500,000 by the time you turn to age 65. So I really think I wouldn't worry about that. Now you said that you need to get rid of your mortgage before you can invest in real estate.

You don't need to get rid of your mortgage before you invest in real estate. You can also invest in real estate and have a mortgage on hand. And in fact, you can utilize the cash flow from those mortgages or those homes that you are purchasing and you can either buy more houses and or you can utilize it to pay off your mortgage. If it bothers you. To me though, it sounds like the mortgage bothers you and if it does bother you, you can have a pay down plan that you put into place, but you wanna make sure that you're hitting those retirement goals first.

You wanna make sure that you were on track with your retirement number before you just throw extra dollars at a mortgage because you can't live off a mortgage. A mortgage doesn't produce cash flow for you. And so in reality, you gotta make sure you get your portfolio up as well. So your all your assets are not in one specific thing, which is your home.

And that's a big key I think for a lot of people out there is understanding that if you put too much of your net worth in your home, it's going to be very difficult to retire when it's time. Sure, your net worth may even be high. You may have $1,000,000 net worth and you can consider yourself as a millionaire. But if you don't have that money invested into a cash producing asset, things like stocks, ETFs, index funds, real estate, those are the types of things that actually help you retire because they produce enough income to allow you to retire.

So there's two separate things that we're talking about here. And This is why I talk about a home is truly a lifestyle choice. It is a lifestyle choice that allows you to do some cool things and it is going to help you build your net worth up, but it's not something you can draw on in retirement.

I just want to make sure everybody hears me on this because it's really, really important to note that we live in a country that believes that real estate is king. You've made it in the USA. If you own a home, you got a home, you got a yard, you got a family, you got a dog in the backyard and that's when you've made it in the USA.

No, you need to run the buy verse rent calculation and you need to understand that more important on this list is going to to be investing for retirement and making sure you're taking care of your freedom number. That's the key for many folks out there. So really good question here. So Daniel, if I was in your shoes, I would not pull from the 401K whatsoever.

I would do what I did when I first started real estate. There's a couple options you have. One is you can partner with someone who has cash and you could be the sweat equity partner and you are 5050 partners or maybe they're 6040 to get them to use their cash or even 7030 to wet your whistle in real estate.

This is going to be your education. This first deal is going to be your education. And so you want to learn, OK, how do I buy a home? How do I go out there and renovate this house? How do I get tenants in this home? How do I make sure I'm doing the right things when it comes to this? This is what how I started. I didn't put any money the deal and I got a cash partner to come in so that I could then be able to learn how to invest in real estate.

And I did my first couple deals this way. And I recommend anybody out there, if you can find a sweat equity or cash partner to do it. If you go to real estate meetups, you can find people who have cash who are just looking for hungry folks that are willing to work hard so that they can get their cash to work. That's the key that I would look for first.

If you don't have that option, then saving for a down payment in a separate high yield savings account is really, really helpful. That's what I did. I would put cash away every single month and I would put it in a high yield savings account and I would just earmark this for real estate until I had enough for a down payment. And then you put that money towards your down payment.

You go get a loan in the real estate and make sure it cash flows. You got to run the numbers, it's got a cash flow. But if you run the numbers and it cash flows, then you're in a good spot, you're in a good situation. And I think that is something where once you get that rolling, you have enough for the down payment, then you can buy your first property and then you do it again and then you do it again in the 1st 10 years.

It feels like you're grinding and maybe you have a couple of properties, but if you're doing it right and you run the numbers right and they start to cash flow, well, then you can cash out, refinance. And if you look into the Burr method, it's called buy, rent, rehab, refinance, repeat. That method allows you to buy real estate with one set of capital and you are able to buy a large number of houses as long as you don't make a mistake when you run the numbers.

So master during this time frame running the numbers on rental properties and running the numbers on local real estate. Don't pull the money from your 401K and continue to save towards your first real estate deal if that's your goal. If that's your big goal, continue to save towards that. I am more of an index funded ETF guy over real estate now.

I just don't think there's a lot of deals at like there used to be in the current market, at least at the time of recording this. But some people love real estate. And if you love it, go for it because I think it's, it's something that can build a tremendous amount of wealth. And we have had plenty of guests on the show who have built tons of wealth. A Brandon Turner, for example, was just on the podcast about last year and was a an episode that I absolutely loved.

And so, yeah, definitely check that out if you haven't already. And it's going to be one that I think it can be really helpful for a lot of people. Next question is actually from Spotify comments. So it's the last Death Star. You talked about the system to pay cash for cars and how strong not having payments can be for investing.

But where do you recommend buying cars for cash? I'm young and plan on buying a car for cash soon. Listen, I love this question and I love that you're young and thinking about this. So when I first started thinking about cash for cars and for most people listening right now, if you haven't heard our episode on paying cash for cars, it is one that we just recently did.

You can go back and check it out. We'll have the team link it up down below in the show notes so that you can check it out. But in that episode, we kind of dive deep into some of the pros and the cons of paying cash for cars. And then we go into if you got to finance a car, here's how you finance a car. So make sure you check it out if you haven't. But I'm going to dive into here, like some of the places where you can go and find the best deals for cash for cars 1 is you can buy from private parties.

There was a website back in the day and I don't think they do it anymore. I might have been off the Internet now but it was called the cash Car convert and this guy would pay cash for cars and he was all about talking about cash for cars. I think he just ran out of topics to talk about to be honest. But he would talk about paying cash for cars and his favorite way to find a deal was from individual buyers where he would go and find, you know, 1 owner owned vehicles and try to find really well maintained vehicles.

And he would go around there and he had all these tips and tricks for finding a cash car. So the best way is to find find it from the actual owner. So you can search Facebook marketplace or places like that, or even see if you can find, you know, websites that that list some of these individual owners. And what you want to look for is a couple of different things.

One, if you pull up to a car that someone has listed and it is all messy and dirty and you can tell that they were just not taken care of whatsoever, that is red flag number one. Now, sometimes you can find deals like that. I'm not saying you can't, but in reality, if it's well maintained, you know, they've most likely well maintained the vehicle or at least there's a chance they have.

It's not 100%. Every time you could get a lemon, you got to make sure you're careful. 2 is when you're looking at these vehicles, there's a, you know, you can go through a checklist of different things to look at and, and you can find those online. But I would also take it to the mechanic. And if you feel as though you're going to buy the car, take it to your local mechanic that you trust and say, Hey, I'm going to bring in a couple of cars to you.

I just want you to tell me if this is OK to buy and if everything looks OK because then you're getting a second opinion from a professional and you can feel confident and you can have them produce a report for you. And then you can go to the owner and say, Hey, here's some of the things that are wrong with this. Either negotiate the price down and or say can you fix these things before we make this deal?

So those are two things that you can do when you are working with some of those owners. Now for convenience, you can also go to like these no haggle lots. So like if you look at a Carfax or some of those places like that, those no haggle lots will show you the price. And it's not like you're going to be going back and forth. You know what that price is and you can start to save up in that way.

Another thing that you can do is credit unions have member only channels where they will have folks sell their vehicles or all sorts of different things. And so those credit union member only channels, you can ask if you do have bank at a local credit union, but just making sure you do the homework.

So a couple of things that you should do is you should run the VIN through a history to see how many accidents it's been in, all those different types of things. If you can get a Carfax on it, that's good too. I mean, sometimes Carfax misses things, but you can definitely do that. And then making sure you pay that mechanic the 100 or 150 bucks, that's the third thing I would definitely do to make sure that you catch those problems.

Because if they cannot catch those problems and you look through the car and realize there's a $4000 problem with the car, well, that's going to cost you a lot more. But then also just looking at the right types of cars is a big deal. So Toyota's, like the older Toyota's are really long lasting. The old Honda's are really long lasting.

Every time I talk about cars, there's all the, the car experts come out and start yelling at me. But you know, it is what it is. Some of the old reliable cars out there are just just kind of look for some of those two. I think those are great to to look further into and then honestly make sure you know what your budget is before you dive in.

But with cash, that's the beautiful thing about cash is that your budget's already set so you don't have to worry as much about it. And so I would definitely go through those steps 1st and making sure that you just have a checklist of all the things you want to look at or ask the dealer or the individual a bunch of questions so you know the background of the vehicle.

Then make sure you trust, but verify. So verify with the VIN number, go get the Carfax, go have the mechanic look at it. That's the steps you want to take with each one of these. If you start to see red flags, it's not worth it just to buy it. Even if you just like it emotionally. If you see a red flag, just walk away. And there will always be more cars.

There's so many cars for sale out there and move on. So that's one that I think is really, really important and I appreciate the question. If you have any other questions on that though, please let me know. All right, next, we're going to be diving into a scam of the week this week. And again, we do this segment because we want you guys to be aware of a lot of the scams that are going on, the financial scams that are going on around you, especially in the age of AI.

These scams are getting better and better and better. And the one this week I think is actually pretty interesting. And this is something that a friend who was in retail was actually telling me about that this is happening in retail a couple of different times. And so I want you guys to be aware of this. So this scam is called card draining.

Now, if you never heard of this before, this is where you can go and buy those prepaid Visa gift cards or those Mastercards, like a lot of people buy those for people's birthdays or your graduations where you can kind of fill up some of those prepaid gift cards that are sold at those open rack scores. Now there's a class action lawsuit actually going on right now against Visa and Income over their vanilla branded cards, alleging the packaging is too easy to tamper with.

So here's how the scam works so that you can understand what happens here, because sometimes you can buy these cards and people can steal all the money off those cards before you can even gift it to someone. Here's how they do it. So criminals will take unactivated gift cards right off the store shelf so they'll go and buy, you know, you could grab that stack.

A lot of times, like when I go to the store, for example, with my son, my 5 year old wants to grab the whole stack of gift cards and said, can I have these? I'm like, no man, put them back. So each time he's like trying to take them with with him 'cause he thinks they're like a free, free toy that he could bring with him. What they do though is they take a stack of these and they carefully go and open the packaging and they often use something like a heat gun where they can kind of get the packaging to come off and then they make sure they reseal it so it doesn't look disturbed.

But what they do is they record the card number, they record the CVV and sometimes lift and replace the scratch off security code on there so that you can't tell that they did this. Then they reseal it with package with fresh stickers and they put the card back on the rack. But the interesting thing is they put monitoring software inside of each of these cards so they can tell when you load the card and then they get all of your card information.

So when that card is loaded, they have the information and it's loaded and then they drain the full balance online within minutes. So they have these things that will alert them, they drain the full balance and then boom, all of your money is gone. So then you give it to someone. Someone goes and swipes the card and they say, man, they gave me a card with no balance on there.

But I don't want to tell them. I feel like that's awkward, you know, if you gift it to someone, I've had this happen to me before where I've gotten a gift card for, for example, for my birthday or something, you know, when I was younger and it had no money on it. And I was like, I'm not going to tell them. I feel, you know, bad about that. They probably with good intent, either loaded it, but this could have been what happened in in reality, and I think that's a crazy thing.

So how do you protect yourselves from this? OK, well, one is you inspect the packaging before buying, obviously, but look closely at it. Like don't just buy the first one that you see, especially when it's like wrapped in that that wrapping. If it's misaligned or stuck or it looks like it's open whatsoever, don't buy that one.

Buy gift cards from behind the counter instead is number 2, because if they are behind the counter, then you don't have to, you know, do the ones where it's in the aisle, like at Walmart or Target or wherever else you shop or you see all those different cards in the aisle there. That's another one. And make sure you're always keeping the receipts on these in the packaging.

That's the two things I think that are really important because if you keep the receipt and you keep the packaging and then you file disputes with with everyone, then you can try to get the money back. But this is the one thing this is happening more and more and more now it's becoming easier for the scammers to detect this. So if a gift card is hanging in the open rack, assume the numbers can only be stolen.

The other thing you can do is just make sure you do digital cards. Digital cards also are going to have some fingerprints on there. But if you do a digital gift card, that's going to help a lot more than than the physical one. I know you want them to open it. I get it, but that is one other thing that you could be doing when we are looking at some of this stuff.

So in reality, that is the scam of the week, which is in reality making sure that you have a financial protection plan. Now the number one thing I do to protect my finances is I make sure I have a service that removes my information from the Internet and that service is called DeleteMe Now what DeleteMe does is DeleteMe goes to these data brokers that are out there.

If you Google your name, you Google your address in quotations, or you Google even your phone number in quotations, all of a sudden you're going to see all these different websites with your information out there. And what happens is if people get a piece of your information, these bad guys, these scammers out there, if they get a piece of your information and they try to open a bank account in your name, or they try to open a credit card in your name or a student loan in your name, and they don't have the rest of your information, they can't do it.

But if they Google your name or some of your information, all of a sudden they can buy it from these data brokers. And so to protect your finances, you need to get that information removed. I just got my report from DeleteMe and they remove moved my information from a ton of different websites and now I have it on none of the data broker sites that I do not want it on.

And I love they give me these reports pretty frequently and I love to look through them and see them and my wife has it as well and we go through her report every single time as well. And you can see all the places where you're getting your information removed and they continuously keep checking to make sure your information is removed. So this has saved me dozens and dozens of hours and even on their report they they tell you how many hours you've saved.

And so it's one of the best ways I spend my money every single year because I know it is really inexpensive for their plans, but they are removing that information and saving me tons and tons of hours. So if you go to joindeleteme.com/PFP 20, you will get 20% off DeleteMe just by utilizing that code.

So I highly recommend it. A financial protection plan is so important in the age of AI and in 2026. So make sure you remove your personal information. I've been using DeleteMe forever. Long time listeners know DeleteMe They've been a sponsor of this show for a very long time. So thank you guys and make sure you protect your finances online.

All right, the next question is great. So what is the best type of account that my wife and I can give our children when they're ready to buy their first home? Would it be a custodial account or just a standard high yield savings account? The goal would be to give it to them in their late 20s. So what an amazing gift this is and this is from an anonymous person, but what an amazing gift this is to set your kids up in their adult life.

Now, there is something that I believe that a lot of people should consider when it comes to their kids, where if you are going to give your kids an inheritance and you're going to hand them money down, 1 consideration to get to have is should you give it to them at the end of your life or should you give it to them even earlier when they can actually use it?

Look at the millennial generation right now and even look at the older Gen. Z generation right now. They're struggling. The cost of living is rising. Wages are not rising at the same pace as the cost of living. And if they got something that would allow them to buy a home or if they got something to allow them to buy a vehicle to get them from point A to point B, if they don't have the money to do so or they're taking on big car payments, that could be really beneficial for them during this time frame.

Now many people argue, OK, well let's wait it out and let's go ahead and give it to them later because that money will compound to more. Sure, that's completely fine. But in reality, this is a great consideration because if you do this now or you think about this now, that's a really wonderful gift to give your children and their family and the give them the ability to be able to do some really cool stuff.

So I love this question. And I think that this is something that many people should think through when they are starting to build out these creative ways with your finances. And we talked about something creative at the top of the show. This is another creative thing that you can do. So first, you want to start with your time horizon. So for you specifically, if your kids are younger right now, you have 1520, maybe even 25 years before you actually want to give them this money if it's their late 20s.

And so you want to understand a couple of different rules. If you do a custodial count, which is like a UGMA or a UTMA, depending on what state you live in, that money goes to your children when they turn age 18 or age 21. So it becomes their money when they turn that age.

And so because it doesn't have the flexibility for you to be able to say, no, no, no, don't spend it. I want you to keep it. And they go, they can go out and spend it on a brand new car. They can go out and spend it on, you know, a, a lavish vacation. They can go and spend it on a trip to Ibiza if they want to. And so you want to make sure that you have it in an account that you can control until it's time to give it to them.

And so a high yield savings count is an option. And it's an option that you could use, but you have a long time horizon. And because the time horizon is long, you can do something like invest those dollars and it will grow even more. And if you invest those dollars, you can do something like a taxable brokerage account. This is what I do for my kids is mine are all in a taxable brokerage account currently.

And this allows your money to grow, but it also gives flexibility. So what you do is you put it in your name and then you put your children as a beneficiary. If you have a trust, you can have the account of the trust name and have your children as the beneficiary inside the trust.

And so when you do this, that allows you to own the account and you can give it to them whenever you want. You don't have to worry about, you know, time frames or when they turn 18 or 21 or all those different things. The taxable brokerage account allows you to give it to them. And so that's a really, really cool thing that I think for many folks, they can consider this.

And then when it's time for them to get the money, you got things like gift tax exclusions and all sorts of different ways that you can do this in a very unique and structured way. And that could be something that that could be a really good right way to do this as well. But I would just simplify it. Taxable brokerage account invested over time when they are a couple years out, you can always just put this into a high yield savings account if you're worried about the market dipping or whatever else.

But you if you have a long time horizon, 10 plus years, that's the way I would go with this and that's the way I would consider it. So great question and thank you so much for sending it in. So the next question comes from Tyler. Tyler says I currently have about $64,500 in my IRA.

Do you think I'll become a millionaire? I'm averaging around a 16% rate of return and I'm maxing it out every single year. I'm currently 29 1/2 years old. Well, first of all, Tyler, awesome job being 29 1/2 and having $64,500 in your IRA. Let me give you the good news first. The good news is at $64,500.

So let's pull up a compound interest calculator and you can do that. We'll do this for kicks and giggles. If you go to mastermody.co/resources, we have one there that you can check out. And So what we're looking at here is you are 29 1/2 years old. Let's just put in 30 year. We'll put till 65, so let's just do till the age of 65.

You have $64,500 in this account and let's say you contributed $0.00 for the rest of the way. All right. If you contributed $0.00 the rest of the way and you got a 10% rate of return, you'd have $1.8 million inside this Roth IRA.

If you got a 9% rate of return, you would have 1.3. And this is contributing $0.00, by the way, a Coast Fire. And if you got an 8% rate of return, that is where you'd get down to 953. So depending on how much you contribute every month, let's say you put $500 per month in there and you did this over the course of that time frame, at an 8% rate of return, you'd have $2,000,000.

If you put an extra $500 per month at a 10% rate of return, you would have $3.5 million. So you're in a good spot, my friend. And I think this is something where the likelihood of you hitting $1,000,000 is great. Now, you said you're averaging a 16% rate of return. We've been in a really, really hot bull market over the course of the last couple of decades, which is awesome.

It's fantastic for us and I hope it keeps going for the next 30 years. But in reality, we can't use that as a a rate of return long term in terms of how we want to think about this. And we want to make sure we're conservative with our numbers. And if you want to be really conservative, you can get down to 6 to 7%.

If you want to be, you know, a little more aggressive, you can get the 10%. If you're planning your retirement, they'll always use something like 7% to be conservative and be safe with it. OK. But yes, I believe you will be. I think there is a good chance that you will be unless the market really has some bad, bad years over the course of the next couple of decades.

And if you're continuously contributing to this account, I think that you would cross the million mark, you know, in the 40s, fifties, somewhere in that range, depending on how much you're putting in. So really, really good stuff here. And I'm excited for you. I'm excited that you are doing this and you're in a really good spot for anybody out there who's in their early 20s or in your 20s.

This should motivate you because it shows that getting that those dollars invested, even if you're not with your first 100K in the IRA yet, you know that you got a really, really good path going forward. So I love it and thank you so much for sending in the question. All right, the next question is from Ben, and Ben has a wonderful one, says hi, Andrew, I just started listening to your show recently and I've loved every second of it.

I'm 18 and I'm about to start college paying less than $2000 a semester thanks to extensive scholarships. I'm majoring in accounting or finance and have already have a Roth IRA with about two grand in it. I would love to retire at 30. What steps and actions can I take over the next few years to reach that goal?

Well, Ben, I've got good news for you 'cause first of all, I want to direct you to an episode we did with my friend Cody Berman, who wrote the book Retire by 30. And in that episode, we go through the steps and some of the things that he did in that episode. So I highly recommend that you check that out. We will link it up down below in the show notes if you have not checked it out yet so that you can check it out.

But I would recognize two things. There's 2 battles here that you're going to be taking on #1 is you're going to have to have a really aggressive savings rate. You're going to have to be saving anywhere from 50 to 70% over the court when you start your career. And if you want to retire by 30, that is just the reality now.

People have done it over and over again. You can look at people like Mr. Money Mustache. You can look at people like Jacob Lundfisker. You can look at all the early retirement blogs out there that talk about retiring at 30. There's a ton of them out there. So that's one is you got to consider, you know how much you need to be saving and your savings rate definitely is going to need to be about 50% and could be even higher.

And the math really matters here. When you want to retire at 30, you're likely not going to be retiring with a lot of money on hand in terms of how much that you can spend every single year. And if you're OK with that, that's fine. But if you're not OK with that, you just want to make sure that you're thinking through that, especially if you want a family and things like that. You just want to be cautious about thinking about that, but you can definitely do it.

Another path to do this is with business, getting a really high income through business and or through your career and just stocking a bunch of that away over the course of the next decade. And you can get there pretty quickly if you have the discipline to live on little or or less, but understand it.

Again, your biggest wealth lever in that kind of a time frame is not investing. It's going to be your income, it's going to be your income. And then shoveling that income into investments over time. It's going to do with the heavy, the heavy work early. And if you pair that high income with a high savings rate and you decide to live on way less than you make, you can really get there pretty quickly.

So those are it's, it's actually very simple. It's living on less than you make investing the difference and making sure you understand kind of the amount that you should be saving every single month. So those are just some of the considerations that I would have when I was thinking about this, and I truly appreciate the question, but if you have any other questions on that, let me know.

But check out our episode with Cody 'cause he really maps this out and he's got a great book on it too called Retire by 30. Well, thank you so much everyone for sending in your questions. If you have a question, make sure you join the Master Money lose letter and send it in. Or if you want to ask me questions just like this, live every single week, Join Master Money Academy.

Master Money Academy is the community that we built that will take you step by step over the course of the next 12 months to completely transforming your finances. We do weekly coaching calls every single week. We have all of our courses in there. We have master classes in there. We have a community of people who are all working towards building wealth together.

These are the people that you can talk to about this stuff with. And so I'm really, really excited to have, and I want to invite you to join Master Money Academy. We get the seven day free trial down below. It's linked up down below in the show notes if you want to check it out and it is something we're come to a live event, come check out a bunch of our courses, come talk to me live if you want to, and we can get your questions answered.

If it's not for you, no worries whatsoever. But if it is, we'd love to have you inside of Master Money Academy. So can't wait to see you inside of there if you have not already joined. I truly appreciate every single one of you being here and I truly appreciate every single one of you listening to this podcast. If you're getting true value out of here, share this with a family member or friend.

Would love for them to learn more about how to build wealth because that's why we create this free content. It's for you guys to give you as much value as possible. This free content is for you so that you can really, really master your finances. Thank you so much again. I truly appreciate each and every single one of you and we will see you on the next episode.