Debt CRISIS Could Ruin This Teacher’s Financial Future

Introduction: Eric at a Crossroads (0:00)

Bo: Wait a second—uh-oh—wait a second—uh-oh—Eric is at a crossroads. He wants to build wealth but big debt is holding him back. Can he right the ship before it sinks?

Brian: You said you’re—I thought you said you’re on step three—

Eric: I am—

Brian: But you said you’re doing your HSA—

Eric: Yeah—

Welcome to Making a Millionaire (0:25)

Brian: Welcome money family—it’s Brian—it’s Bo—here with another episode of Making a Millionaire. Remember—this is where we take financial mutants that are either millionaires or millionaires in the making and help them find their Great Big Beautiful Tomorrow.

Bo: We are so excited that we get to sit down with Eric today and walk through his financial life. Eric—thanks so much for hanging out with us.

Eric: Well thanks for having me here and I’m so excited to be here with you guys.

Brian: Right—awesome man. Well for the folks who don’t know—will you give them a little bit of background—who are you—where did you come from—what’s your story?

Eric: So I’m Eric—I’m the director of bands at Bartlett High School in Bartlett, Illinois. My students wanted me to say—go Hawks! I’ve been a band director for 17 years and—I’ve been trying to make sure that I’m on the road to becoming a millionaire or at least be financially stable to where it’s no longer a worry.

Brian: I love it. What—what—what’s your instrument of choice?

Eric: So I started off on trombone and now if I could go back and do it again I’d do French horn—so I’m a French horn kind of guy.

Brian: I am curious because you know Megan here who’s on staff—she comes from kind of a similar background—she plays a bunch of instruments. So you play all—all the band instruments?

Eric: Yeah—so all the brass is really my main component but woodwinds—I could play those—clarinet is probably my worst—everything else good

Money History and Background (1:52)

Bo: So obviously—you know—we’re here talking about personal finances. Tell us about your history with money—what was personal finance or what was money like growing up for you and then how’s that changed into adulthood and sort of where are you right now?

Eric: So growing up I’m one of six kids—so I come from a large family. We weren’t poor by any means but we come from humble beginnings—right. And we lived in a great neighborhood and we would always see all the neighborhood kids with their families go on vacations and we never really went on vacations. But we always played baseball—we always played basketball and our dad was our coach. We didn’t really talk about money too much—right. We never got allowance like some of the other neighborhood kids did. As you can imagine being a—you know—one of six kids—there was not much margin laying around—right. So—money—we never really talked about it. But as I got older—like in high school—I realized—hey—you know—my parents have got to be sacrificing for us—right. And that stuck with me going through college and now that I’m an adult—I’m starting to see my shortcomings in finance education and saying—okay—how can I get better. Now that didn’t really happen until about the last year and a half ago when I stumbled across this show on YouTube. When I took a close look at my financials and actually wrote stuff down and looked at and was like—wow—I’ve—I’ve got some work to do—right. Because I don’t want to be in a situation where I can’t afford the things I want to do or so that I—I—you know—can’t do a Great Big Beautiful Tomorrow like you say. So I want to make sure I can do the steps to get me to that point.

Bo: I love it. So you started taking it seriously like a year and a half ago. And when you think about—financial goals that you have—obviously something—you know—some light went off in your mind that said—hey I want to—whatever I’ve been doing I want to change that. For what outcome—what’s the goal or what are the goals you’re working towards?

Eric: So I would love to have a great retirement where maybe I have a lake house. I love being on a boat—right. So I—coming from a family that didn’t vacation a lot—I like to be the place where everyone goes to vacation—right. I love it. So I’m a single guy without any kids but I have—eight nieces and nephews and I’m—I’m the fun uncle that they all want to hang out with. So—I want to have a spot where we can go every summer or—you know—go on trips and do stuff like that. And I’m looking at it going—I don’t want to sacrifice retirement for that—right. I want to be able to—I guess—retire early. I’m going to do 33 years of public education and two years of sick leave to get me full pension benefits. And I’ll be 55—turning 56 at the end of that school year. But if I want to do that I want to make sure I have the appropriate funds to—to live the lifestyle I want.

The Pension Mindset (4:30)

Bo: So—you know—obviously being an educator—having access to a pension—has that impacted or changed the way you’ve thought about and approach building towards financial independence?

Eric: Yeah—so I hear from tons of teachers like—oh your pension is going to be fine—you’re going to have just enough on your pension—enough on your pension. And that may be true for some people if they’re married and their spouse has—you know—other investments. I do think my pension will be enough but I don’t want to have to just rely on it. I want to make sure that I’m taking care of myself too. So when I’m trying to think of my retirement plan—I’m—the pension for me is kind of on the back burner—although it is a pretty nice pension.

Brian: Sure. Well it is one of those things—I think a pension is great for covering the—the basics or the retirement needs. But you just—you just laid out some—some pretty cool goals—you know—the lake house and then I know when we were doing some—some show prep for today you even had some numbers that kind of popped up. Is there a dollar amount that you’re kind of hoping that will fulfill that house and other things?

Eric: Yeah—I think everyone growing up wants to be a millionaire—right. We all grew up watching Regis—the one who told us—right. And—I think when I was telling—Megan in our interview—man—the two commas—you know—the Two Comma Club—that’d be cool to have that. And I think there’s a notion that—public school teachers can’t do that or maybe they’re—you know—they don’t get paid enough to do that. And I want to show all the viewers that—yeah—it is possible through what we learned through The Money Guy Show.

Brian: Yeah—and it really is—those small decisions can add on top of and build and compound and it really creates some amazing things. Well Eric that’s awesome. Now I do have a big question for you—you know—I’ve got two things here—we’ve got the Financial Order of Operations—my book Millionaire Mission—where do you think you are in the Financial Order of Operations?

Eric: So right now I’m on step three. So I’m getting rid of some debt. Like I said—I stumbled across this show a year and a half ago—and I had some—I don’t know if they were bad decisions—it was just what life kind of dealt my way and I had to deal with those payments. So right now I have a—a car loan that I’m working on—I have about $16,000 left on that. Okay. And I have a private loan that I took out to pay off credit card—so now I’m—I’m no longer using a credit card—or if I am I’m paying it off each month. Sure.

Brian: And how much is on that private loan?

Eric: That private loan has $26,000 on it.

Bo: And what’s the interest rate on those two loans?

Eric: So the car is 4.99%—okay—and the private loan is 13.09%.

Bo: Yeah—I think—what—what’s—we get that reaction—that’s problem—I’m guessing that’s less than what it was on the credit cards—right.

Eric: Right.

Brian: And yet still—13.09%—that’s pretty—that’s pretty hefty—right.

How the Debt Happened (7:17)

Bo: Walk us through because obviously you said you had some credit card debt. What—what got you there—was there something that took place or was it spending out of control—how did you get to the place where you are right now?

Eric: Sure. So when I purchased my townhouse—everything looked great and then you lived there for a year and a half and then—oh no—the sump pump goes out—there’s $2,500—the water heater goes out—there’s $2,000. And then I had the big one was I had my second floor toilet was—leaking. And I thought—oh I just got to replace the toilet. Well no—I had black mold underneath and then it leaked to the downstairs laundry room. So I had to redo the laundry room floor and the bathroom—so that was about $18,000 in home repair. And then the washer and dryer broke—new refrigerator—I mean it just kept coming and coming. And if I was at step four where I had that emergency fund—I don’t think I’d be in the situation I’m at now. Now I’m not going to say that there wasn’t any lifestyle stuff—I love—you know—I like going out with my friends once or twice a month. Sure. But that—I don’t think that was the main cause—right. It’s not the latte effect—right. It was the bigger purchases. And it’s—I think life just threw those curveballs my way and I’m just dealing with them best I can right now.

Bo: So when you think through—you said you bought this condo—did you have an emergency fund in place and like—because what I didn’t hear you say is—oh I bought this crazy expensive car and I went on all these trips and I sort of lost my mind. It sounds like you made what sounds like a responsible decision to buy a home and then even making a good decision landed you maybe in not a fantastic financial spot—right.

Eric: Right. So I had about $30,000 saved up in the bank before purchasing the home. A lot of that went towards down payment and I probably put too much down on a down payment—right—you know—listening to some other people say—hey you got to put down close to 20%. You know—if I would have backed that off closer to—you know—5%—I don’t know if I’d be in the situation I am—you’d have a little bit more margin for the emergency fund—

Brian: Well you cut it too close to the bone—really. Because you threw everything at the—at the mortgage and then when all the—because that’s the thing about home ownership—we love home ownership—but it is amazing how all of a sudden—hot water heater—sump pump—as you said—or—and—and the worst thing that can happen—in college I did plumbing—and one of the worst things you can have on a leak is if it’s just a subtle leak. Because if you don’t know that the subtle leak is happening—that’s where the black mold and all the stuff—it’s much better if it just floods your bathroom—you repair it—you dry it up—you put some fans on it—dehumidify—you’re okay. Done this before. Well but I just feel for Eric because you can just sense that you didn’t know and—and in some little leak that probably just seems so innocent turned into this catastrophic—because that’s where when you were going through $2,000 here—$2,500—$18,000—one of these is not like the other. And it’s probably the thing—if you looked at them you said—yeah that little leak from the—the—the commode is not that big of a deal—but that’s truthfully where the big problems can occur—those little things.

Net Worth Statement Review (10:11)

Bo: So for folks out there that maybe don’t know you as well as we know you now—we thought it’d be interesting kind of just walk through a net worth statement for you—kind of look at where you are presently. And what you can see is right now where we have your total net worth—that is we have your cash—your liquid savings—just over about $6,000. Just first very first question—is that 6 months of living—3 to 6 months of living expenses?

Eric: No—it is not.

Bo: No—it’s not. Okay. So we’re still lean even after all this.

Eric: Yeah.

Bo: All right. You obviously have some investment accounts—you have about $50,000 in your 403(b)—that’s great. You have about $2,700 in an HSA. And then you are going to have access to a pension but it sounds like even if you were to leave—you have some value to that pension if you were to roll it over presently—right?

Eric: So if I exited the education field now—I think I would get back the percentage of my contributions which is about $90,000. But the pension is pretty nice. So I’m Tier One—so in Illinois we’ve done—we have two tiers. So Tier One is anyone who started teaching before 2011. And what they do is they take your four highest grossing years out of your last 10—they add that together—they average them—and then you get 75% of that.

Brian: Oh wow.

Eric: So it is nice—it is—it’s very nice. Now that’s why we have to—we went to a two-tier system—too good—right—too expensive—right. And—you know—I work in a nice school district—I work in the second largest school district in Illinois behind Chicago Public Schools. And—I’ve taken—you know—I got my master’s—I took extra classes that also I put on the credit card—so I can move around that pay scale. But—I maxed out the pay scale when I was 37. Okay. And in most teaching or most schools you can’t do that until you get all the way over and then every year you slowly go down. We put it into where if you took more classes you could move down quicker. Okay. So I have a max contract and our union bargained for—if you’re on that max contract for a year—we’ll get 403(b) matching up to 5%.

Brian: That—my next question—you even get matching on the 403(b).

Eric: Now that’s not pretty—that’s pretty uncommon for school teachers across the board. So—I am getting my employer match so I do—you know—meet step two—which is great.

Bo: Sure. So you’re at max salary. The other things because you said the way they look at it’s the highest four years over the last 10—are the things that you can do to impact your pay—being band director—are there other ways your compensation comes in besides just salary?

Eric: So I do a bunch of extracurricular band stuff after school—so—you know—whether it’s marching band—pep band—jazz band—all these things. And I get stipends for those. And my yearly stipends for all those—this year I believe is about $23,000 in addition to the max contract. With—with TRS which is the Teacher Retirement System—it’s—it’s $117,000 and then they take out the 9% from that for—the contributions for—

Bo: So you’re at like almost $150,000—right—around $150,000 of comp as an educator—

Eric: Right.

Bo: All right—okay. So you got a big shovel—so that means we should be able to get into a good spot—right.

Eric: And that’s why I do feel—you know—yes I do got to—you know—focus on what I have—the debts I have—and I am keeping pretty tight margins because I do want to get rid of this debt. Because I do think once I get out of step three—step four and five are going to fly—because—you said—I got the big shovel—right. I can—I can do a couple steps at the same time or really load up the savings so that I can invest on a Roth. And then I already got the HSA—for open enrollment now—I’m doing $50 per paycheck starting in January.

Bo: Wait a second—uh-oh—wait a second—uh-oh—You said you’re—I thought you said you’re on step three—

Eric: I am—but you said you’re doing your HSA—

Bo: Yeah—

Brian: Okay—all right—all right—all right—

Finishing the Net Worth Review (13:57)

Bo: Let’s finish going through your net worth because I want you to just put a pin in there because—that’s an interesting thing right there. Hey—I’m in step three but I’m kind of doing a step five sort of—we’re going to find those—even more—have students—yeah—there might be some stuff there. So we can see—you have a feeling—you have your primary home valued at $364,000 and you have your automobile—valued at $14,000. That’s the asset side of the equation. When we think about the debts—your liabilities—you do have the personal loan which it looks like—about $27,000 when you sent us over the records on that. Car loan at $16,000. Now immediately my Spidey sense goes off a little bit—you got a car—yeah—worth $14,000 that you owe $16,000 on. Yeah. So that’s a problem that we might need to think—you’re like everybody else in America except for the financial mutants—we got to get you on the right side of that. And then you have a mortgage—in your mortgage currently you owe—$225,000. But it’s a—it’s a great rate—it’s 3.25%—so there’s a lot of people out there listening to this that are probably very very jealous of that—right. So when we look at it—you said you’re in your late 30s—right. You have a total net worth of about $260,000—which is fantastic. But I do think there are some things there that I think we can improve upon.

Eric: Yeah.

Current Financial Plan (15:12)

Bo: Now you said you found us and you kind of got serious about this a year and a half ago. So walk us through kind of what has your plan been. You said—I’ve got these debts—I’ve got this stuff that I want to take care of—and—out—how have you been approaching that? And you said you’re putting money in an HSA—walk us through your financial plan currently.

Eric: So right now—and this is a perfect time that I’m here with you guys because between now and May is when I get all my stipend checks. So—I’ll get about—between now and May I clear about $16,000 from there. So—my biggest thing is taking all that—the stipend money—and lowering the debt as much as I can. Okay. Right. Every paycheck I put $250 into my savings account—direct deposit.

Bo: Yeah—I’m sorry—I want to make sure I understand this. Now when I asked you where you were in the FOO—you said I’m in step three—right. But you have $250 going to a savings account. And what is that savings account paying you?

Eric: Well I’m in a brick and mortar because it’s—saving for a new AC and heating—so it’s probably like less than 1%—less than—

Bo: Remind me again the interest rate on the personal loan—

Eric: 13.09%.

Bo: Okay—just want to make sure I’m understanding. Okay. Just make sure I’ve got—all right. So all right—I’ve got $250 going into a savings account. All right—keep going.

Eric: And then I—I’m getting my 403(b) match—so that’s—I’m doing $275 per paycheck. Awesome—great. And then starting in January I’ll do $50—per paycheck into the HSA—so right now it’s $25. The reason why I bumped it up is because—we did get—we get raises in September when the school year starts. So I was like—I felt with the margins I had I could bump that side up because I do feel I’m behind on the investment part. And I feel that no matter what time—I use—I think I can get rid of this debt within probably the calendar year—well not this calendar year but 2025. And then if I’m really tight with it and—I just want to be able to take off after that in 2026.

The Current Plan Breakdown (17:07)

Brian: So I’m glad Bo asked you what your plan was. I know that I said we have producers behind the scenes that are kind of going through and—and doing some pre-planning so we kind of know lay of the land before you come on the show. And we actually have what we wrote down from those phone calls on what your current plan is. And as you can see—we currently have that you are doing the 5% for the 403(b) employer match—that’s a step two—love it. Yeah—that’s great. And then we—we—this is—you’re kind of echoing what we had already heard—number two is you’re building an emergency fund—you’re adding to it at $250 a month—sounds like step four to me—just throwing that out there—come to it—we’ll get—we’ll clarify this even more. And then number three is you’re investing in a health savings account—doing $100 a month—step five to me. That—it—now you said that’s a little different because you said it’s $50—but I think in our pre-planning it somehow it was—it was understood—

Eric: So it’s $50 per paycheck—so—$100 a month.

Brian: Okay—I just want to clarify. And then here’s one we hadn’t even uncovered—we were talking about but supposedly number four is you’re also doing $100 a month into your Roth IRA.

Eric: So the plan was to start that in January.

Brian: Okay. So before you get the debt paid off—before you get out of step three—what step is the Roth—that’s five—that’s number five. Okay. We’ll come back—we’ll come back. I’m just—I’m just putting a little—little—little bookmark there. Number five—we’re going to—you’re going to continue to make minimum debt payments—so you’re paying just what they—the—whatever the amortization is. And by the way—how long is that car loan that you have—when—when you bought—I know—I want to hear because I know what they’re selling out there—so I want to hear what you got sold.

Eric: So it was 66 months.

Brian: 66 months—that’s not the worst—84 are the ones that really make me make my hair stand up on my arm.

Eric: I bought it at the beginning of 2022 where there was still—the—chain—supply issues. And—you know—I bought the used car and it was a 2019 and it cost more than what I could buy a new car for almost now. But the car I had was an ’08—it was just unsafe to drive and it was—yeah.

Brian: And for our audience—I—I don’t mind—everybody knows if you listen to our content long enough—we’re big fans of 20/3/8—put down 20%—don’t finance longer than 3 years—not 66 months—36 months. And then try to make sure that your payments don’t exceed 8% of your income. That’s just—you’re thinking Corolla—definitely not Land Cruiser. Now you’re a unique situation because we have to come to you where you are—we’re triaging your personal situation right now—in time. And so even though you’ve broken our 20/3/8—that doesn’t mean we just immediately go—oh my gosh—we have to just throw everything at that. We have to kind of take you where you are when you came to us and we’ll get into that in a little more detail and explain how we’re going to get you back onto the right path of being a financial mutant. And then number six is—you’re putting your stipends towards the car loan. Now explain what the—you know—when we were talking about that—is that mean you’re just thinking about—if you have extra after all these things that you might throw a little bit towards—

Eric: So when I think about my salary—I don’t even include my stipends—like gravy money coming—yeah—it’s like getting a bonus check—right. So when I get—I got paid today—so my next paycheck in two weeks will have my marching band stipend on it. Okay. Now that one I do—some Christmas gifts for nieces and nephews from—but then—you know—I’ll have about $3,500–$4,000 to then I could put onto either the—the private loan or the car.

Bo: Well—how would you walk me through the idea of putting it on the car loan as opposed to the personal loan? Because you said the car loan—if I have this right—is 4.99%—private loan 13.09%.

Eric: So I was thinking about the car loan because I could have it paid off in that 3 years of the 20/3/8. And I was like—okay—I could at least have it done in three years.

Brian: And I appreciate the respect—that means that you—you’ve listened to us—said—but this is why finance is personal—absolutely.

Eric: And then I was like—hey I can take that car payment each month and just put on that personal—a little bit of debt snowballing going on there—right. Pick the lowest balance first and then—you know—I’m glad I’m meeting now because—I said—I got all these stipends coming up—maybe I switch directions and put them on—on the—private loan and get that paid off and then put the—that payment on—so that’s—that’s kind of the—the crossroads where I’m at right now.

Bo: Got it. Well what I love is that you have a plan—right—some—some people they find themselves in the situation—they wake up and they’re like—oh man—I—I don’t like my current financial circumstance—oh well. You’ve actually—put something in place to move towards a goal. And—we actually illustrated—if you were to implement this the way that you’re going to pay off your debt—you’re going to have it all paid off by August of 2006—like—based on the—based on—August of 2026—flux capacitor—still firing. By August 2026—you’re going to have all of your debt paid off—which is wonderful. That’s inside of the next two years—it’s a great thing. But one of the things that we do—being able to design the Financial Order of Operations the way we did—is we—we recognize it is a—it is a—an idea and a strategy that hopefully allows you to optimize your dollars. That’s the reason we’ve designed it the way that we have. How would you feel if we told you that by changing a few little items—instead of having to wait till August of 2026 to have all of your debts paid off—what if you could have them all paid off by September of next year? I mean we’re talking about less than 12 months in the future—without having to—go get another job or make drastic—sell all your stuff decisions—just changing some of your strategy—I think—might be able to allow you to achieve this. Is that something you’d be interested in?

Eric: I would love that. Because what pains me the most is—those two payments are almost $1,000. And even though I put half of that into investments—what would that look—even after a year—those 13 months that I’m short of—

The Pain of 13% Interest (22:37)

Brian: I—I feel for you a little bit Eric and the fact that I can sense—you know—just instinctually that lucky number 13.09% interest that you’re paying—that’s—that’s—that’s—that’s—that’s a burden on you. But you’re in this incremental decision matrix of—you’re trying to figure out and you—you hear us talk about how powerful Roth IRAs are—how health savings accounts and the triple tax advantage. And you’re like—I want to get in there and get that goodness because I hear these—but yet in the background you’ve got this 13% that’s just pulling you the other way. And I can understand how and I—I see financial mutants do this stuff all the time on their journey where they will get distracted because they feel like they’re giving up something over here just and—whereas I want you—I want you to embrace the pain that you’re not getting to do the Roth IRA yet to use that as motivation to make you the better person in the future. Look—if you’ve read Millionaire Mission—I—I share—I have regrets that there were a few years I didn’t get to max out my Roth IRA and I wear that every year with regret that I’ll never fall into that trap again because it’s—it’s kind of the—the tail you drag around with you of—of decisions of the past. But how you’re going to now be a better person in the future. And I so—I don’t want you—I want you to get serious about this with this plan. That’s what this is. This is where we get laser focused on making sure we can get the debt—get that 13%—completely extinguished in your past. And then now you’ll be on this recovered path to where every month when you are hopefully creating an automated plan to—to walk towards inevitable wealth of funding the Roth—funding the HSA—even beyond that—we’re going to get into even loading up more stuff in the future—you’ll look back and go—man—yeah that—that short period of time that I had to be hyperfocused on it was worth it—versus just trying to do everything all at once—right. Because it—it’s just not optimized. And that’s—that’s not because—you know—that’s—we’re—part of what this book was almost titled—what to do with your next dollar. Now it doesn’t sound—Millionaire Mission sounds anything half as good as a Millionaire Mission. But from a standpoint of what to do with your next dollar is more appropriate. And that’s kind of why you have to be careful when you try to do all the steps instead of really getting laser focused on what to do with your next dollar. And the beautiful part is that here in your late 30s—you’re still young—you have a lot of time to be able to attack these goals in a very meaningful way.

The Money Guy Plan (25:04)

Bo: So when we think about—the Financial Order of Operations—obviously we have step one—deductibles covered—you’re there. Your deductible—I’m going to assume—is less than $6,000 on your highest deductible that you have. You’re also getting your maximum employer match—that’s wonderful—you’re going out—maxing that out—you’re getting that money. We don’t want to change anything there. But we do want to become laser focused on the high interest debt. We’ve already laid out—we have these two debts—the private loan and the auto loan. So this is what we think you ought to do when it comes to prioritizing—our plan—the Money Guy plan—versus the plan that you’re doing. The very first thing—once you get out of step two—we think it would make—we think it would make a ton of sense to pour everything at that personal loan. That 13.09% is literally working aggressively against you. So all the stipend money that comes in—all the money that you have going to an HSA—maybe not be going to an HSA—all the money going to a Roth—maybe not going to a Roth—so that we can aggressively and violently attack that personal loan. Then once we get step three done—we have to make sure then you get to the point that you no longer are at risk of getting back in that situation. You’ve already alluded to the reason that you had to run up credit card debt is that you did not have a fully funded emergency fund. Had that been there—it would have protected you. So once we get out of this high interest debt—let’s get you to the place to where the next time an unknown unknown happens—you’re okay—you’re covered—you’re prepared—you’re ready for it. And then we want to course correct the car. We’re going to talk a little bit about that—what that looks like. But—driving a car that is worth less than you owe is a dangerous proposition. If something were to happen today by no fault of your own and a driver hits you and your car is totaled—your insurance check may not cover the note that you have on it. And that is a problematic place to be in. And then we want to start talking about the fun stuff. Then we want to start talking about the exciting stuff. Once I get step four done—then I can start putting money in my HSA—then I can start putting money in my Roth. And then you get off to the races. Then you get to think about retirement—lake house—fill in the blank—all the fun stuff you want to do for the eight nieces and nephews.

Brian: Well now you notice that we have on there number four is retroactively fund the health savings account—the Roth IRA for 2025. You notice that does not say 2024—right. That’s on purpose—is because Roth IRAs and health savings accounts are kind of nice in the fact that they actually—they’re not a time machine but they do allow you to go fund these accounts up until April of the following year. So when we talk about retroactively funding those accounts—we’re really talking about by April of 2026. Because remember—you’re going to be so focused in 2025 on this debt and extinguishing that 13.09%—we’re not thinking about health savings account—we’re not thinking about Roth IRA—we’re thinking about 13.09% debt being gone. And then we’re going to come back later by April of 2026 to get that 2025.

How Does That Make You Feel? (27:46)

Bo: So—but let’s pause for a moment before we dive into some of the more specifics around the Money Guy plan. How’s that make you feel? I mean—we—we basically just told you—hey—shut down the HSA—shut down the Roth—and do something different than you have been doing.

Eric: I—you guys are professionals—right. And I’m a teacher. And I hope all teachers get treated like professionals. And we—when we teach students—we hope that what we’re teaching is taken to help improve them. And that’s how I feel. I wouldn’t have come on here if I was like—oh I wouldn’t want to listen. I absolutely—I want your advice—right. I want to make sure that I’m learning from two great people on how to maximize or optimize my finances. And yeah—now I’m looking at—I was scattered—I was all over the place. But—I didn’t—I didn’t know any better—right. And we’re—I’m really excited that—I mean those 13 months from August of ’26 to—you know—September ’25—that’s going to be huge. It’s going to be exciting—right.

Brian: And if you wonder how—how can it be almost a full year faster on the debt—I think that’s where we as Americans are way too comfortable with debt. I mean with how much credit card debt people have and—and—you know—and there’s even been some stuff going on in Washington where they’re calling in all these banks and they’re asking—what’s your profit margin and all these things—is because when banks are charging 20%–25%–26%—now I know you got this—you did a consolidation loan—you got it down to 13%—but still even at 13%—I mean we’re getting close to $4,000 a year of interest. And—and if you think about what that means as your time and the component of giving you access of what you even hope to make off of your army of dollar bills—we got to extinguish that because even though it might feel manageable and—and the banks are smart—they make those payments where they’re very digestible so you feel like—hey I’m not really hurting myself because I can make my monthly payment. Where they’re hurting you is that debt is at that interest rate that is just—it’s—it’s a—if you only hope to make 8% to 10% but yet you’re paying 13%—you’re not moving forward—you’re moving backwards.

The Detailed Plan (29:45)

Bo: So let’s look at a little bit more detail around the plan that we’re laying on around the Money Guy plan. So obviously we’re going to tackle the personal loan—everything that you have coming in—you said that between now and—end of May—end of May—you’re going to have about $16,000 of stipend money coming in. So we want to see any excess cash flow—what you’re putting in the HSA—what you’re putting in the Roth—as well as the stipends—throw at that personal loan. If you do that—then we believe that you can have that personal loan paid off by September of 2025. So that is—$26,000 of debt—extinguished inside of 12 months—which is awesome. And then I—what I want you to do—is I want you to build a fully funded emergency fund. And we’ve done the math and we know that it costs you about $6,000 a month to live the life that you want to live and cover your baseline living expenses—right—correct. Well because you’re a single individual—you have a pretty steady job—we think that three months is an appropriate emergency reserve for you. So if we take $6,000 a month times three months—your fully funded emergency fund should be about $18,000. Well once you have that private loan knocked out and all of that money that was being used in step three now gets shifted to step four—and then you have the additional stipend income coming in—we believe that you could have a full $18,000 emergency fund on top of the $6,000 you have right now by the end of next year. Wow. By December of 2025. Wow. That’d be crazy. Think about how different when you do your net worth statement next year versus this year—that looks—all of a sudden $26,000 of debt that was there is not there and $6,000 of cash is now turned into $18,000. It gets pretty exciting.

Brian: And then you’ll easily be able to fund whatever HVAC problem or anything else that’s coming your way. And that’s what—what I think is interesting from a behavioral standpoint is this is where it’s—it’s our human nature where we are trying to be optimizing of everything—is that you notice instead of—but you’re not really good at anything if you don’t really focus and practice and—and do something—you don’t actually ever become superior at anything. That’s why that laser focus is going to tackle the debt. You notice all we did in our plan was we took that laser beam focus off of the debt—the high interest debt—step three—moved it right over to step four and we attacked that emergency reserve to get you to those 6 months as fast as we could. And then we’re going to move on to that number three which is—Bo is exactly right—if you had a car accident today—it would be a problem. So we—even though—I said—triage—we want you 20/3/8—but it’s 4.99% and you have a lot bigger issues with 13% and other things that when we’re trying to figure out a hierarchy of where to focus—that’s why we’re—we’re going to bring that as number three after the cash reserves. Let’s just get it back to where you owe what the car is worth and throw just a few thousand at it so you’re not underwater.

Car Loan Course Correction (32:33)

Bo: So here’s a little bit of homework you’re going to have to do once we get to that step—once we get to December of next year. You’re going to have to figure out—what’s my car actually worth—what is the Kelly Blue Book value or Edmunds or whatever service you want to use to determine what the value of your car is. And you’re going to continue paying the monthly payment you’ve been paying on it—so the loan will be paid down by that point in time. And you’re going to have to do some math on your own at that point in time—I owe this much and it is worth this much—how much do I need to then put down on the loan so that I’m at least at a level playing field. Okay. And then once you’ve done that at 4.99%—we’re okay if you continue for the remainder term of the loan because we’re inside of—I want to say it was 12 months—18 months—we had left before that loan to be paid off at that time. So get the car—right the ship—and then continue paying the normal monthly payment on the automobile. But you have to have the discipline before you do the Roth—the HSA—because you don’t want to be in that spot where you’re driving around just a giant—uh-oh—caution sign—dangerous thing. Get the automobile—right that ship—and then—then—then we can start talking about the fun stuff.

Brian: Well here’s what I liked about time we got to number four and it was one of those things kind of like a high five moment. Sometimes I go back and forth with my buddies—I don’t know if it’s better to be lucky or better to be good—right. You’re fortunately going to get to do both at the end when we get to fours. Because you’re going to be lucky—the timing couldn’t be better when you get to step—when—our number four—it’s not step four but it’s our number four is—because you just shared with us it’s between now and kind of the beginning of the year you get your biggest stipends come in. So in addition to what we’ve already covered—you’re going to have these cash flows come in. I think they’re going to make it where by the time you get that—that superpower of funding the previous year up until April of 2026—we’re going to have that money come in when it needs to be there. And you’re going to be able to catch up on that health savings account—that Roth—and really do some cool stuff for your wealth-building journey.

Why a Million? (34:34)

Bo: Now you said to us earlier—you have this goal—you want to be a—a millionaire. I want to ask—where did you come up—I mean obviously Two Comma Club—super cool—but does that mean something to you and—is a million the right number or—or what is the number—and have you done the math on this?

Eric: I—so I haven’t done the math on—I mean I’ve looked at it and I’ve tried to do—you know—8% and carried it out. I think it’s doable to get to that million but I’ve got to have to be focused on it. But the reason why I want to do it is—you know—there’s always—I guess—sibling rivalry—right—you know. And I’ve got—you got five of them in addition to you—there’s a lot of rivalry going on. A lot of rivalry going on. And it’s nice to—you know—kind of say—I—I think growing up was like—hey that’s the number that means you’re successful—right. You know—there are few things where it’s like—hey you make $100,000 a year—that—used to be the standard of like you’ve made it—right—success. And I think same thing with retirement—I feel like—hey that’s a million dollars is—I think what people used to think they needed. I don’t know if that’s the number now.

Brian: Let me ask this a different way because you—you—you paid us a compliment—I don’t even know if you meant to—but you were saying that you were throwing a lot of your stipend money into the car loan even though it was much lower interest rate than that—that other loan was—because you were trying to get on the right side of 20/3/8. So I’m going to give you credit that you obviously have been paying attention to our rules. What do you think we tell people their ideal savings and investment rate should be?

Eric: 25%.

Brian: 25%. Even—pause on that. So have you done any math to know what would 25% do for you? I mean we even have a great resource on our website—if you go to moneyguy.com/resources—we—we always say—what 25% can do for you—but really it is titled—what’s the official title—I screw it up every time—

Bo: Yeah—it’s what—what 25% can do—that’s what we call—we are horrible at this—the team—I’m surprised we haven’t just renamed it. But there is a great resource. And that’s where I didn’t know if—when you told us you want a million—I was like—I wonder if Eric has done any math on this to—to figure it out if this is 25%. But it sounds like it was just—a millionaire would be cool—so you just plucked it out of the sky and that’s where we landed.

Eric: And I think that’s part of it and—you know—I—I think the numbers I try to pick—because of the pension—I think by the time I retire my total earnings are going to be about $200,000. So 75% of that—I’m going to get clean—living—right—$150,000. And that—you know—by the way—that will be worth seven figures—I mean having a pension that can pay that for the rest of your life is worth multiple seven figures. And there’s—so I have to wait—I think till I’m 65—but then I’ll get a 16% increase on that and then 3% annually on that pension. So it will—you know—my plan is to—in case that pension is not there—I still want to be safe with my investments. Sure. But also if I have the pension—maybe I don’t have to touch investments until the government tells me I have to—right. So those are kind of—that’s kind of where I’m at. So I haven’t really run the numbers because I think I’ve fallen in the trap that a lot of teachers have—the pension’s going to be enough—the pension is going to be enough. And I do think with that amount of money coming in from a pension—you should probably be okay.

Running the Numbers (37:45)

Bo: Well you know who does like to run the numbers—we’re kind of nerdy—right. We love doing the numbers. We said—okay—well what if Eric does this and what if he decides to take some of these suggestions and he gets all this debt paid off and he gets step four knocked out and then he gets to the point where he can actually start building for the future. And we said—let’s make some assumptions here. What would it look like if at that point in time he got really serious about building up towards financial independence—what would he be able to do. And so this is what we said. Okay—we’re—we’re going to assume that in the interim between now and debt payoff—you’re only going to do step two and get the employer match. And then we said that once you get through step four—once you have that fully funded emergency fund—what’s it look like if you begin saving 25% of your gross income. For you—that’s going to be about $38,000 a year. Let me pause there for a moment. Does that sound—if you didn’t have debt payments—didn’t have this stuff flowing out—does that sound feasible and reasonable?

Eric: Yeah—$38,000 a year—I think I could do that. Now does that—so the way our salary is or the—my compensation set up—that $117,000 or whatever—my—the—the salary is—they take 9% out of that. Is this in addition to the 9% or with the 9%—can he use it—

Brian: Well here’s the thing—you’re a single individual and you make over $100,000. I would tell you—I would prefer for you—because you’re well above the—the social safety net of Social Security—that I don’t want you counting that—that 9%. And truthfully—I mean that’s the rule—fortunately we’ve already set up. But you’re also going to see—if you want to have the dream that you’re dreaming of—having this lake house that the—the nieces and nephews are all coming and good time rock and roll—Uncle Eric is there for them—we got to do things differently. We got to live like financial mutants and actually—so we’re going—and I think with your shovel—you’ve done very well. And I—I think there’s probably even a future for you at the central office at some point—so we can even push—well if it’s last—we got to get that played—that education—we all know that if people don’t know—in education you got to get in the central office for a few of those years of the last four—I don’t know—to really push that thing—

Eric: On my job’s so great—I mean I don’t deal with—I don’t deal with any of the meetings or any of the problems—I just deal with the best kids—

Brian: Here’s—since your stipends do count towards the pension—we’re going to have you—you know—if they say—hey we need somebody that’s going to help out—you know—with the janitorial staff—somebody who’s going to help out with the football team this year—somebody to help—I don’t care if it’s—whatever program—you’re probably going to be volunteering for a few years just to get that stipend up a little bit more for the pension.

Bo: But again—we wanted to show you a conservative but realistic example. Said you’re going to save 25% of your gross income—$38,000 a year—and we assume no income increases. We’ve already said it seems likely that your income will increase between now and the time you retire. But if all you did was save $38,000 per year from the time you get step four done all the way until you retire—and we said you could earn an 8% rate of return on average over the long term over that working time period—we said—what could that turn into. Well we know that by the time you start—you’re going to be around $80,000—your 403(b) is around $50,000 or so right now—you’re going to have the employer match money going in and your money to get that going in. So by the time you start your journey—you’re going to be at about $80,000. But then once you’re able to attack building wealth with laser focus and extreme intensity—if you do that between ages 41 and ages 55—your investment portfolio could be worth over $1.2 million. Wow. That’s Two Comma Club plus some.

Eric: I love it.

Bo: Now we’re starting to talk about stuff—oh man—if I’m going to have a pension coming in that’s going to be $150,000 and I want to do something—buy a lake house—love on my nieces and nephews—live the life that I want to live the way that I want to live on my terms—there is no reason you should not be able to make that a reality.

Eric: Absolutely—that’s great. And just seeing that number—put a smile on my face. I mean that was great. I was like—okay—that’s fantastic. And—and that’s at 55—not at 65.

Bo: At 55—when I plan to retire—that’s great. So if you had another 10 years on top of that—it gets even more exciting. This would suggest that if you just applied a 4% withdrawal rate to that $1.2 million—that’s another $48,000 on top of whatever other income you could have coming in. You’re talking about a retirement lifestyle that really allows you to live life on your terms.

Brian: I do think it’s interesting because we’ve—we’re so nerdy—we actually ran this multiple ways. And Megan—when we—when Bo and I kind of had the—the brainstorming and she had come back to us and she goes—you realize there’s a path where I think if Eric took that laser focus—it’s going to get him out of debt and he just continued that behavior—this number actually ballooned well beyond $1.5 million. But what I told Megan—I told Bo—is that I often worry though—as—financial mutant discipline is definitely rewarded—however—there’s going to come a time you’re going to need to buy another car—that life is going to happen. We all need to be realistic. And that’s the beauty of the 25%—is because it’s hopefully going to free you to be able to live your best life too. Because you only going to have one decade in your 30s—one decade in your 40s. And you don’t want to live—there’s a fine line between being a miser versus being a financial mutant. And I think this goal is still extremely successful but it also lets you live life. And that—that’s—that’s a key thing that we—we always are trying to share with people is—don’t just make up a number because we see a lot of financial mutants that say—I want to have $3 million. And I’m like—why—what is that money going to do for you—what’s the purpose—what brings you happiness—are you enjoying this moment in time too. And that’s why I love that we get to have this discussion with you because we want you to have the best of both worlds. You’re going to have this great pension—you’re going to be able to save for this big dream goal—but you also going to have some—some margin there to live your best life too.

Eric: And I think that’s—that’s kind of thing I’m missing right now is—the margins and what I have right—and—you know—there are times where it’s like—you know—hey I can’t go out or I can’t do that. And—you know—I’m not—it doesn’t discourage me because I know I’m on the right path—I—I know I’ve got to take care of the things that my obligations—stuff like that. And it would be nice though to have that extra margin and not worry about—hey let’s go on a weekend trip somewhere—do that. And right now it’s—it’s—I’m just not able to.

Bo: That’s right. If you want something you’ve never had—you got to be willing to do something you’ve never done. And if you can live differently today—it allows you to then get to live very differently in the future. That’s the goal.

Questions About Retroactive Funding (44:16)

Bo: What other questions do you have for us?

Eric: So the biggest one I think we tackled was—how—how should I tackle the debt—right. And I think that was the—the biggest—the biggest thing. We—we covered—I guess I—I’m not confused but—how do we—how does the retro work for—the—the Roth and the HSA—I—I feel like those are the spots where I might fall in the cracks because I just don’t know how to do that type of stuff.

Bo: So one of the great things you can do—Brian mentioned this—is that when it comes to funding health savings accounts or funding Roth IRAs—even if you don’t get all the money in there by December 31st—you have all the way up until the tax filing deadline the next year. So let’s say that you get into—2026—and it’s between January and April—and you have some of your stipend money come in and you have $7,000 come in from your stipends. Well you could then make the choice to take that $7,000 from the stipends and put it into your Roth IRA for last year. So you’re just going to make a contribution—it’s going to ask you—what year are you contributing for—2026 or 2025. And you’re going to select 2025 and—boom—you funded it for last year. And then once you do that—then you want to set up your automatic monthly contributions to begin building for 2026.

Brian: Most of the portals—I mean—I—I don’t know who you do the investments with—but they make it pretty seamless and easy. I think it—it’s the fear of—we—is we often think this is going to be more complicated and then you get in there and you realize—oh—that was just a few drop-down screens. Yeah. And then you just had to toggle it between this and that. And—and you always—I mean that’s one of the things—we’re going to—after you leave here—I told you at the beginning this—and Bo shared it as well—we want you to come out on the other end being better than where you even came in—right. We’re going to give you a homework list so you can tackle these things. And you can always follow up with us and we’ve worked with a lot of custodians so we usually are pretty familiar with a lot of the platforms out there. And we—we can help you work with that too Eric.

Eric: And then is it the same with the HSA even though that’s tax-free or—is it—so if I’m going to put the max in for that year—does it—is that still—the triple tax advantage or is it—because it’s already—my dollars have been taxed or how does that work?

Bo: I guess—it shows up a little bit differently. So the way that you put money in your HSA right now—it comes out of your paycheck—right—it’s a salary deferral in there. That actually technically makes it quadruple tax advantage. Yeah. Because you’re saving the Medicare and the Social Security as well. But one of the things people don’t realize is—even if I’m not doing a salary deferral into my HSA—I can still write a check to my HSA provider and pay with it—with dollars that have already hit my checking account. So let’s say that through your salary deferrals you would only put $3,000 into your HSA—you could elect in the next year to write a check for whatever the max is minus that $3,000 and put it directly into your HSA—which is a pretty exciting thing that people don’t—they think if I don’t get in my paycheck—it’s got to be my 401(k)—I just missed out. It’s not the case with HSAs—which is pretty stinking exciting.

Brian: And the triple part is—you—you file this on your tax return. That’s where the savings on the deduction comes through—is that true up. I mean we do it for clients all the time when we’re reviewing their tax returns before they hit the file button is—we always say—because it’s not uncommon—people have employer plans and then we say—you realize you left this amount of the HSA unfunded—we really ought to pick that up—maximize it. You can make a contribution and it’s a great way to save money on taxes—it’s a great way to save for the future—take advantage of all those tax benefits—it’s a win.

Eric: Okay—all right.

Immediate Action Question (47:48)

Brian: You ready for your—oh you have another question—I got one—okay—go ahead.

Eric: So right now I have—since I got—today was payday—so now my savings account has $7,000 in it. Should I take—withdraw from—to my deductibles covered and then right away throw it on that personal loan debt? So—when I—when we’re done taping—go do it right now?

Bo: What’s your highest deductible when you look at homeowners deductible—auto—and health insurance—what’s your highest deductible?

Eric: So it’s—I—well it’s the wind damage on the house and that’s $2,500.

Bo: Okay—okay. So if that is your highest deductible—that would be—that’d be my low point. That would be my—and again remember the idea is—once we get out of this personal—then we’re going to get that emergency fund up as quickly as we can once we get out of the high interest debt. So I would make sure that I have that $2,500 in there. And then—you know—if you have the wind damage you’re covered—if you have to hit your health insurance deductible you’re covered—if you have an auto accident your deductible is covered. That’s why we choose the highest deductible first. But knock out that 13%—because that—it’s working—I said—you’re going backwards. It might not feel it in the way they—I said—they get you on—they make the payment very digestible—you don’t feel the quicksand as you’re slowly going deeper into it. Let’s get it extinguished as fast as possible.

Eric: I’m thinking between that and the stipends—I should have it done by the end of the school year.

Bo: I’m going to say it’s actually going to be even quicker because we didn’t even factor you in taking that down. So that’s going to be—something that allows you—again—if you get focused and intense—it’s going to be amazing what you can do.

The Homework (49:11)

Bo: All right Eric—you ready for the homework?

Eric: Absolutely.

Bo: Okay. Here’s what we’re going to do. We’re going to shut down the Roth IRA contributions because it’s not time for that yet. We’re also going to shut down the HSA contributions. We believe that those dollars could be better utilized somewhere else. We’re then going to—aggressively attack the personal loan. We want that 13.09% loan to be off of your balance sheet completely. Once we do that—then we’re going to start building up the emergency fund. Remember our goal for you is $18,000 or three months of living expenses. Once you hit that number—then we want you to right the car. You’re going to go see—what is my car worth and then how much do I owe on the automobile. I’ll make sure those numbers are at least equal. And then at that point—that’s when you get to build your Great Big Beautiful Tomorrow. And that’s what we want—right?

Eric: For sure. I mean I do.

Brian: I think I just think you’ll have a breath of fresh air when you know you don’t have the—the pressure of the debt. I mean because I—it—I think—I said—Americans are way too comfortable with debt. And that you will—once it’s just gone and you’re—you’re—you’re doing the financial mutant way where it’s—okay to use credit cards—use is okay—credit card debt is the no-way part. And that’s where I just don’t want you to have that weight of that interest working against you. We want you to get the full weight and power of compounding growth. And that—you can’t do that while you’re paying somebody else double-digit interest.

Eric: Well I appreciate you guys inviting me here. I learned a lot and—can’t wait to tackle this homework.

Brian: We can’t—we can’t wait to see your success. This is going to be outstanding.

Eric: I—I’m really excited for it—especially seeing that number on that screen—really just put a smile on my face. And—I’m excited to get to work. I—I think it’ll be great.

Closing Thoughts (50:37)

Brian: You being a teacher—you know—part of this—the whole reason we’re all in this room together is—I always had this just aspiration of education. And I love it when I get to hang out with other educators because this is what I always thought I was going to be a teacher too. And I love that you’ll get to pay it forward with your students. You’ll get to—our audience is going to see this—about it. It’s just a win-win. And education is going to lift everybody up to their better and higher version of themselves. It always does.

Bo: Eric—thank you so much for coming on Making a Millionaire. And if you would like to be on Making a Millionaire—we would encourage you—go to moneyguy.com/apply—or if you just want to figure out how you can do money better—go to moneyguy.com/resources and check out all of our free resources out on the web.

Brian: Guys—can you tell we have an absolute blast doing this type of content. I’m your host Brian Preston—joined by Mr. Bo Hansen—Money Guy Team out.