(audience applauding) What happens when you don't pay your taxes? I mean, you can go to jail, but like if you don't pay them for like, if you don't pay enough taxes, you get a penalty, like a fine. They also kind of can charge interest, right? So I'm actually not a tax professional.

I'm actually like not that good at taxes, but I am good at seeing a great investment opportunity and here is one I've got for you. What if I told you, you could not pay taxes on some of your money and literally not pay those taxes for decades and not only will you not pay a penalty, you will also not be charged interest.

It's like an interest-free loan from the federal government. When's it due? I don't know. Sometime in your distant, distant future. Sounds like a really sexy, sexy idea, right? Exciting. Do y'all wanna hear what this is? I'm gonna give it to you. A 401k. What? Yes, it's called a 401k.

That's what's happening. You put a dollar in there, you don't pay taxes on that dollar and then you pay back your taxes decades later. No penalty. So you're using the government's money. That money would have come out of your pocket. So it's in your pocket now. You get to invest that in stocks and bonds and then you pay it back later.

Whoa. So we have this thing, this deferred taxation bucket and the guy that created this bucket literally names it after a line in the tax code and we wonder why these things are not more popular. So what we're gonna do today is we're gonna get super excited about these buckets because here's what's going on.

I told you already, we gotta figure out how much to save for our future, right? We've got to. This is kind of a non-negotiable. We've got to get our savings rate right but where people get hung up is they don't know where to put that money. So that's what we're gonna do here is we are going to do the tax-efficient waterfall and figure out exactly, once you have that pile of money figured out, allocate it to the different buckets that are gonna give you the most bang for your bucket.

Okay, here it is. So we're gonna go one by one through each of these. So if you remember the previous example where we, I think, had to put aside $22,500, I think was our amount. You've done your calculation. You take your gross pay, you multiply it, in your case, by 5%.

Maybe yours is 10%, maybe yours is 20%. So just take your calculator out and then do the math and there's your dollar amount that you need to allocate to your different buckets. And here's what I've done for you. I've just prioritized your buckets, okay? So for the most part, they are prioritized by how much tax efficiency that I just described to you, the phenomenon, why tax efficiency is such a big deal.

But there's also a few other elements that are at play. So Kyle here asked me a great question at the break. Raise your hand, Kyle. And he said something I kind of overlooked. He said, what if I have a retirement plan and they match into my retirement plan? Does the company's dollars factor into my savings rate?

So let's say you have 100% match up to 5%. You put in 5%, the company puts in 5%. Does that mean you're saving 10? And the answer is actually not in my equation. In my equation, it is only factoring in how much you are putting in. Because there's two important things happening when you save.

First of all, you're actually putting physical dollars for your future. But actually more importantly, you're lowering your lifestyle by that amount. Your ability to stop working on your own terms one day is can you keep your lifestyle going, right? And so if you're bringing down your lifestyle, then the chances are higher that the amount of money you have is going to last longer funding the lifestyle that you have.

So that's why I do not include a company match in that percentage. Now there are exceptions. I mean, there are some pretty crazy matches out there, in which case you can maybe put some of that into your savings rate. But for the most part, I say just make that gravy.

Make it gravy. Also, do y'all know what vesting is? I mean, a lot of people leave their jobs after two years. And many of these employer plans, you're not even vested for six years. So whatever the company is putting in, you don't even take it anyway. So company employer matches are really tricky.

And so I say go for them, but don't include them in your core savings rate calculation. Okay, so what we're gonna do is we're gonna go through these buckets. Do y'all understand what I'm saying here? When we are allocating your pile of money into a hierarchy of where you're gonna get the most advantages to that money, not talking about investments themselves, but the actual structure of the bucket.

Are we all on the same page here? Okay, let's go through the buckets. This is a resource slide so you can know if you're making these calculations, if you wanna work on it over the course of this weekend. I'll be around if you wanna have me look at 'em.

This can kinda help you figure out how much can go into your buckets. Okay, so we wanna start with our first bucket, which is get your free money. Always go get your free money. So if the company is matching 100% up to 5%, get your free money, right? So at least put 5% of your money into that bucket.

We've seen some organizations that match 100% up to 10%. Some people put all of their money in this first bucket. How convenient, right? That's really setting people up for success, being able to do that. So always prioritize the buckets where you can get free money. That's usually gonna be in a 401(k), a 403(b), or if you work for a governmental entity, a 457 plan.

They all work essentially the same way. Okay, now let's pay off that student loan debt. If you work in public service and you have student loans, you should be writing a check for whatever amount the government tells you to write. We have had doctors who just kinda forget about this and they're like, oh, it's a low-interest student loan debt and then I go and see that they've got $300,000 in student loan debt.

They've been working for a hospital for 15 years and we go get $300,000 forgiven. They would have just kept on paying, kept on paying, kept on paying. So if you work in public service, so if you work for a governmental entity or you work for a non-profit hospital or non-profit, whatever your payment is, your next priority is to make that payment so that your loans get forgiven.

If you are not working for a non-profit entity and you have high-interest debt, credit card debt, again, a lot of student loan debt, I mean, there's some parent plus loans out there that are 9% plus, right? Let's just pay those things off. If I said to you, I have an investment and it's gonna have a 9% guaranteed rate of return after tax, would you believe me?

No, but this is literally like a government-guaranteed rate of return if you pay off that debt. So let's pay that debt off, right? It's amazing to me the number of people who both carry credit card debt that'll have 25% interest and aggressively save into a retirement plan, right? So let's pay off this debt.

Now, you might think the next bucket would be to go back to finish out what's left in your retirement plan 'cause you can put up to $23,000 into a retirement plan, more if you're over 50, but no, the next best retirement plan might be your health savings account. So if you have a high-deductible healthcare plan and it comes with an HSA, not to be confused with an FSA, a flexible spending account, if you have an HSA-eligible high-deductible healthcare plan and that was the best healthcare plan for you to choose that made the most sense to you, then I urge you to consider that this is one of your best retirement accounts that you will ever have.

So about 10 or 12 years ago, I saw these things come down because my husband and I couldn't afford health insurance. We both had small businesses. And so we heard about this thing called an HSA. And I was looking at that going, wait a minute, I can open this thing and I can invest it in stocks and bonds and I never have to spend it?

What's the catch here? So we started doing that and we have a sizable amount in this account because you can simply save into the maximum, invest it in stocks and bonds, and as long as you use it for health expenses, you will owe no taxes. Now, if you know the way an HSA works, it's very similar to an FSA.

You put money in and you get an immediate tax deduction. So think about what's happening here. You don't pay taxes on the way in. As long as you spend your money on health expenses, you don't pay taxes on the back end. If you grow the money in stocks and bonds, you don't pay any taxes.

You don't pay capital gains taxes. You don't pay taxes on the dividends or the interest. It's literally the only money that you will never pay taxes on aside from like your babysitting money in high school. This is an incredible opportunity. And some people say, "Well, what if I don't have health expenses in retirement?" Hmm, I wonder if you won't have any health expenses in retirement.

Sounds like a great problem to have. You can use it, we call it like a little stealth IRA. So you can essentially take the money out if you're not using it for health expenses after the age of 60, and you pay taxes on it just the way you would like a 401(k) or a 403(b).

So you just, whatever you take out, you pay income taxes on that amount. It is an incredible opportunity to save for retirement. So then the next bucket, going down the ladder, is you max out into your retirement plans. And there are some people that have the opportunity to invest in two retirement plans.

Like some people who work for hospitals, for instance, might have access to both a 403(b) and a 457, which essentially doubles the federal maximum for how much you can save. It is a great opportunity to save. What I love about, especially these retirement plans, is that they are so easy to use that people are more likely to save.

So I am always, I believe simple beats complex every single time. And you literally have a human that's standing in front of you saying, "How much would you like to put into this account? "How much would you like to put in this account?" And then it's done. And usually, even if you don't choose the investments, you are defaulted into, typically now, especially larger plans, a target date retirement fund.

And just like Rick was talking about, I mean, I run retirement plans, and I think one of the more common retirement plan lineups is now Vanguard, right? The Vanguard or Fidelity, passive target retirement date funds. So if you choose nothing, you will be put into a pretty appropriate investment.

In like five minutes, you could have this done. It's pretty easy, right? Next, you can max out IRA, Roth IRA, if you're over the income limit, you could do a backdoor Roth IRA. These are accounts you can just set up on your own. It has never been easier to open up your own IRA, Roth IRA, go to the federal maximum.

And literally, you can automate these contributions into these buckets. And then, typically, as long as you're using mutual funds, you can set it to auto-purchase. It is a really incredible, it's like setting up your own, you know, it's like simulating what's happening at work. You're just, you know, signing up for this thing.

You're automating the contributions, you're automating the investments. It becomes just as easy as your work retirement plans. And then, what's interesting is a lot of people, this is the last bucket. So, and especially for higher earners, this is the point at which you end up with the taxable brokerage account.

Now, a lot of folks are really scared, for some reason, about setting up a taxable brokerage account. But again, it has never been easier to open a Vanguard Fidelity Schwab account, just a regular old account. And you can set your, you know, if you get paid on the eighth of every month, you can have $500, $1,000 just auto-transferred into this bucket, into this account.

Purchase your three-fund portfolio that we've been discussing today. And it is that easy. Rebalance maybe once a year. Don't be afraid to go to this bucket. This is a great bucket, y'all. So, a lot of times what I see is people will tell me, like I was speaking to a doctor actually just yesterday.

He was like, "Oh, I max everything out. "I max everything out." Okay, so he maxes his 403(b) and his 457. I can tell you, I don't know his personal details, I don't know his income, but I can tell you he's under-saving. So, it sounds great, right? I'm maxing out, I'm maxing out.

But if those are the only two accounts he has, I can do some pretty quick math to know we're not ready for retirement. And so, that's why we can't be afraid of this taxable brokerage account, especially if you're a high earner. You've gotta get here. And I'm just telling you, it is not nearly as scary as you think.

Now, a lot of people ask, where does crypto fit in, right? I like really have to scratch that itch, okay? And I say don't, but then if you're gonna do it, do it this way. If you have gotten your savings rate into those prior buckets, and you just really hate spending money on yourself in the present, like my husband hates it, like it physically pains him.

So then, if that's the case, you know, you've got some extra money, this is where it can go. Venture capital, angel investing. A friend just invested in a sister's brother-in-law's barbecue joint, I don't know. Cattle ranch, we love cattle ranches, right? Like, we think we're Yellowstone Cowboys. Go buy one with your extra money.

Don't come, oh, don't, okay, don't go to Montana. Do, are a lot of people trying to move to Montana after that show? And I know how they do justice over there. (audience laughing) Okay, hey, come to Arkansas, everyone. Come to Arkansas. We've got five direct flights, folks. Okay, and then, if you've got, you know, one of those low-interest mortgages, pay off your house, that's fine.

Just pay it off, that's okay. But don't make your house the first thing you pay off. This is where I'm gonna talk to the women a second. We're just gonna sidebar over here. We really, really, really feel like we need to have perfect information. I get that. We have to be sure of things.

And all those other buckets feel very uncertain. So a lot of us say, well, I'll just pay off my house. Oh, there's a high-yield savings account. I'll put it all there. Ladies, we have to take risk. We have to. This is where we have to trust in the bucket system.

I want you to put that money in the bucket system. You can default yourself into one of those target date funds, and you can look at it once a year, but I want you to do it. I want you to do it. Pay off the house after all of this is done.

Okay, so, I have a question. What is our first bucket? Match, very good. Kyle, good job. Kyle, you're gonna get a copy of my book, well done. Well done. I did like the pay yourself first. That is my favorite thing to say. So I think we're actually a little ahead of time.

That's okay? No, we're done. (faintly speaking) you