Rich Girl Roundup: What Do I Do Financially in My 30s?

Transcript

Katie: Theoretically, at 40, you are earning more money than potentially at 22, so you should theoretically have an easier time. I will die on this hill.

Welcome back, Rich People, to the Rich Girl Roundup weekly discussion of The Money with Katie Show. I am your host, as always, Katie Gatti Tassin. And every Monday, Henah and I dig into an interesting money question. But before we do, here's a quick message from the sponsors of this segment.

All right, before we get into it today, we actually wanted to do a little follow-up from last week's episode about tax refunds to share some listener feedback that we just thought was interesting and pretty valuable. And you know what, Henah, we probably should have known that trying to cover a granular tax topic in this fun and conversational format was bound to introduce some plot holes. But fortunately...

Henah: Who would've thought?

Katie: We've got accountants in the audience and other people that think about taxes. So y'all weighed in, and there are basically three primary areas where we heard feedback that I want to run through.

Henah: Yeah, I think this feedback is important. If you don't care as much about last week's episode and the feedback we have, I would say you can also skip to around the seven-minute mark in the episode and get started from there. Okay, Katie, let's get into it. What was the first piece of feedback?

Katie: So, the first piece of feedback. This was from an accountant named Kaylee. And this was in response to my aside about S corps and why I was advised by my accountant not to do one, given our situation. So, Kaylee and I went back and forth a little bit and she did affirm my choice given our circumstances, but she said a few things about S corps that I thought were just important for anyone that is maybe considering one. So, quote, "Most CPAs make the argument that you'll save 15.3% on taxes, which is the self-employment tax. However, that only holds true usually if you are filing single and your business is your only income." End quote.

So she pointed out that since my husband and I both get W-2s, although it could be the case if you only had one W-2 in a married filing jointly situation that that covers our Social Security obligation, which is a large portion of that 15.3% self-employment tax. So our savings from doing an S corp would basically drop to just the Medicare obligation, which is roughly 3%, and she noted, I thought this was really interesting, "You should not become an S corp in New York City specifically." She was like, if you ever move to New York, New York City that is, not the state. Do not become an S corp. She didn't say why, but I thought it was an...

Henah: I was going to ask.

Katie: Interesting piece of feedback that, all that to say if you are listening and you are interested, I would definitely work with a professional because it sounds like there are so many things that go into determining whether or not this is a good decision or not for your business and your tax structure, your filing for your business. So I would work with a pro, but it was kind of fun to talk to her about all these different ins and outs.

Henah: Yeah, that's really interesting. I would love to know why the New York City piece is...after working there for so many years. The next piece of feedback came from someone named Bree, which I really appreciated because I think this was a question that I was also alluding to, which she said, her family loves periodically checking the IRS calculator throughout the year because they experience a lot of fluctuations and volatility. And so they'll typically check in June and then again in the fall, in September, October, and then they can adjust their withholdings as needed, and then they compare to put money aside ahead of time if they also need, which was the similar situation that I was in where I was trying to check throughout the year. So I think that is a good call-out for people who might be on a stricter budget or really need to plan more for tax planning when that time comes.

Katie: Yeah, and she had mentioned that it's not necessarily in the end of the year where she would actually change anything, because at that point there's so few pay periods left to really make a big difference. Particularly if you are on a tighter budget, you don't have that much coming in, you probably don't want more of it being withheld. But she did mention that it helps them think ahead. So okay, now we have more time to be putting this money aside because we are expecting that in April we're going to have to pay a bill of X dollars, and so it kind of gave them an extra few months. So yeah, to Henah's point, thought that was interesting, because in my life, I'm always like, ah, that's probably overkill. Why would you keep checking? But it's a really good use case for doing so, so we wanted to include it.

And finally, this was an interesting one. I just thought I was like, whoa, what a mind f. This is from a listener named Jose, and he writes, "You can also get a tax break if you're single, but only if you are a rich single taxpayer." So, we made a joke on the show about how the United States is the only country where you get financial benefits from being married. Married filing jointly tax breaks, and he pointed out that, we went back and forth a little about it, there's this funky nuance wherein if both members of a couple earn $578,125 or more, so $1,156,250 together, but where the income is coming from each person equally or at a point above $578k, the married filing jointly tax burden is actually higher than if they were single.

So in that instance, two single people both earning that amount would pay $192,970 in taxes each, while the married couple would end up paying $193,407 each. So I just thought that was a really fun little quirk, where two exceedingly high earners may want to be aware of that, and at that point you're probably working with an accountant anyway, so it's obviously not going to make or break the bank, but I kind of was just of the mind that you always, under all circumstances are going to get a tax break if you're married, and that's clearly not the case for the 0.1%.

Henah: When I make a million dollars with my husband, we'll take this into account.

Katie: See, you say that so jokingly, but this is part of...

Henah: It can happen.

Katie: This is part of the mental rewiring we always talk about. Henah is not talking about these things as though they would never happen.

Henah: Manifest it.

Katie: Expansive mindsets, people. All right, well, before we move on to the Roundup, this week's upcoming main episode is about investing in private companies and startups. So I'm a total noob when it comes to this stuff, it was very fun to dig into my first angel investment, and we have three guests for this one, so it's going to be a really interesting conversation. Okay, Henah, onto the Roundup. How are we today?

Henah: I'm good. When we think about expansive thinking, I was thinking about how the Mega Millions reset recently and so I decided, oh, I'll go buy a ticket because that's when the fewest people are buying them. So I actually, I think I theoretically have a higher chance now than when it was at billions.

Katie: Amazing. If you won, how much would you give me?

Henah: We answered this question on the original Roundup a couple of weeks ago.

Katie: Yes, but I've never asked you how much of your billions you would give me. As just like a pal, just a buddy.

Henah: Do you want to know something? I actually had the thought that I was, I don't know that I would quit my job. I think that I would quit in the W-2 sense, but I think I would just privately invest in you and just keep us working together.

Katie: Aw! Oh my gosh.

Henah: I would be very bored very quickly if I didn't have something.

Katie: Agreed. You know what you could do is you could buy Money with Katie from Morning Brew and you could be the CEO, you could be my boss.

Henah: That was a real thought that entered my mind, and I don't even have to win the whole jackpot to do that.

Katie: Let's go! Pick a winner, please.

Henah: I only need to win $20 million to be able to live out my life the way I want and do that investment.

Katie: Only $20? Girl, aim higher.

Henah: When I said this before...

Katie: I know.

Henah: You said what return is normal?

Katie: What is the quote from Succession? Where's it's like, "$5 million is a nightmare." They're talking about, I guess Greg getting some money from the family and only wanting $5 million, and Tom was like, "$5 million is a nightmare, Greg, you can't do anything with 5 million." I was like, oh my god, I'm so broke.

Henah: Let me learn that for myself, man. If you want to give me $5 million.

Katie: I know. Let me take $5 million for a spin. Okay, so this week's question came from Erica J. "What do I do in my thirties financially? There is a wealth, ha, of info for what I should have done in my twenties, but what about this decade? Do I keep investing? What do I do?"

Henah: I just know that Katie's going to be like, "Well, Henah, I'm only 28, so I'll let you start this question."

Katie: How old are you again?

Henah: I'm not answering this.

Katie: Okay, well, you can start. You can start. Because you're so old and wise.

Henah: There are some words I would use on you right now if we weren't on the recording.

Katie: Except people complain when we swear and we can't afford negative reviews.

Henah: It's true, I haven't won the millions yet. It's really true that nobody tells you what to do when you're in your thirties, but it really reminded me of the sandwich generation that we talked about in the recent episode about when you're in your thirties, you're approaching the age where you might be taking care of your own children while also having to maybe start taking care of your parents or even your grandparents. To me, it seemed like there was no real workaround on how to optimize for all of those things and make all of those things possible, unless you were actively saving for those situations like childcare or eldercare or hoping that your loved ones have set up policies for themselves. So, my question to you would be, for people who got their financial life together in their twenties, what do you recommend now?

Katie: Well, it's a great question, and I went down that same vein when I was noodling on it, because there's this notion that you should have life more or less figured out by the time you're in your thirties. And oh, your twenties are for being free-spirited, and by the time the clock strikes midnight on your 30th birthday, you better have a minivan, a mortgage, a real-person job. You better know what direction you're going in. I know, I certainly feel that way sometimes. So I think financially the thirties are a bit of an interesting decade because it is statistically, as you mentioned, it's the one where you're most likely to have a few major things happening. Buying your first home, having your first kid, or if you had a child in your twenties, they might be at that daycare age and that's obviously quite expensive.

Henah: And you said people changing their jobs too is most likely to happen in there.

Katie: I think that's at the tail end of your thirties, yes. It's like you're most likely to make a career change. So it can be a very tumultuous decade and I don't think it really fits squarely into any one box, though that is why to me, it's a bit hard to square with the stereotypical notions of what each decade is like. How are you supposed to go from your carefree twenties and you're spending everything you earn on international travel and you're living in a New York City walkup to suddenly flipping a switch and you're now financially prepared to buy a house and have a kid? It's like, what? It's unrealistic. The answer is you're not. Those two stereotypes, those two puzzle pieces do not fit together perfectly if these things are supposed to start happening when you're 30 or 31. There's got to be more of a glide path here.

And so to me, what you're supposed to do in your thirties probably comes down to building on what you did in your twenties. So some people in their twenties in low cost of living areas or who have family money, let's be real, or have really high paying jobs or maybe even all three, they might be buying homes, having kids, such that their thirties are actually more about maintaining the status quo and saving for retirement. A lot of the big stuff is now behind you; you might be now in the phase where the kids are in elementary school and you have college on the horizon, in the distance, but you're not trying to do so many of the big things all at once.

Whereas some people in their thirties have not begun saving for anything yet. And while I wouldn't say there's really a rush to buy a home, I don't think someone should feel like they have to do that in their thirties. Kids are a bit of another story in the sense that there is an inherent biological limit—not to medically generalize, not a doctor—but it's not something you can really put off. So I think that those were some of the things that first came to mind to me is, it feels like a time when prioritization becomes more important. And I think with how long people are living and working today, I think you can think about your twenties and thirties almost as just one continuous period for sorting out your financial priorities.

Henah: Hell yeah. I'm going to call it my "young era."

Katie: There you go.

Henah: Except my "young with some money era". My twenties was the "you got no money era."

Katie: Young with some money. Yeah, so whether or not you do want to buy a home and therefore need to prioritize saving for it. Whether or not you want to become a parent and therefore need to prioritize it. Whether you want to retire early or not and adjusting. So obviously it's not as easy as being like, yep, want to do all three, okay, magically now the money's there, but I think the answers to those questions are probably actually more impactful than your chronological age itself.

Henah: Yeah, that makes sense. I wrote in my notes about you want to think about the long-term goals and where you might want to pivot, whether it's that career trajectory or it's about maybe you don't want to biologically have them and adopting is what you want...whatever that is. One of the things that I also wrote was, you've been dotting all your i's and crossing all your t's with your finances; this might be a good time to revisit your FI number and your progress over the last couple of years and decide if this is the decade when things can really start to snowball, things can really pick up momentum.

I know we've talked about this. The data shows those first 10, 15 years are really when the biggest chunks of progress can really be made. So I would say that, and then just piggybacking off of figuring out your life priorities. We just did that episode on eldercare, and I don't feel like it's too early in your thirties to really reevaluate your needs, whether it's estate plans or insurance or wills or whatever because, as I have learned, in your thirties, you could just pull your neck bending down to pick up something, or literally getting out of a car.

Katie: Henah is Kaiser's favorite customer.

Henah: I think so, but it's never too early, I feel like, to just start reevaluating all of those things as your health progresses.

Katie: Can I add another thing on that too?

Henah: Yeah.

Katie: Is that I love Chelsea Fagan's take on this where she'll talk about how, which I'm so guilty of this, and this is actually partially why I stopped drinking, is because I would get a hangover and it would last a week. So I'd be like, what is going on? Versus you're 19 years old and you're like, duh, I'm invincible. And she always jokes about how these jokes about when you're in your late twenties or early thirties, how you're decrepit and your body's falling apart and she has this amazing TikTok, maybe we can find it and try to link it. But she's like, no, dude, your thirties are amazing. That's when you're coming into your own, that's when you have more confidence potentially, but you've been an adult for a little bit. You probably are a little bit closer to knowing what you want, and she's like, "Stretch, babe." She's like, "Go for a walk."

And I worry so much that in our humor of being, "yeah, eldercare, cause you're in your thirties now," well, that is serious. That is true, and making sure your health insurance policies are up-to-date, these are all good ideas, but I also think it's like this is also such a positive time in your life and you're still so young, you probably want to think about it still as...

Henah: I guess what I'm saying is I'm not negating the young, I just think that there are a lot of things that happen in your early thirties. If you are going to have a child, your body will change in ways that it's never going to change back to. I have noticed significantly how my energy levels or my soreness or whatever have been impacted by getting older. And while there are so many benefits to aging, it's a gift to people to get older, I do think that to your point, I can't go out and day drink; that's just not a thing, it would take me four days to recover. So I do think we have to be realistic that some things in our lives are going to change physically. And there are some people I follow who are in the best shape of their life now at 40, which is not discounting how amazing it can be, but generally we kind of live in our teens and twenties as if we're invincible. And I think our thirties is when we start to realize, maybe not so much.

Katie: Maybe not. It's like, I slept weird and now I can't move.

Henah: Oh my god, you remember, I slept weird and then my neck had an issue for three weeks.

Katie: Oh yeah, you were taking meetings horizontally. You'd call in and your head would be...oh my god.

Henah: I had to go to the acupuncturist and I didn't even do anything.

Katie: So I also want to mention, too, that part of the reason I think these decades take on such a significance is because they're all back-stopping or rather leading up to the same endpoint, which is age 65 in the long-term financial planning that we're doing. So obviously if you're saving more at 25, then you have to do less work later, but it's not like that's necessary. You don't absolutely have to start then. In our recent save rate episode, we were talking about how the 35% to 40% save rate number is so powerful because even someone who starts at 40 could still retire on time with 40% save rate, which is high, but theoretically at 40 you are earning more money than potentially at 22. So you should theoretically have an easier time. 22. Tony Soprano.

Henah: Your favorite show.

Katie: I love The Sopranos. I will die on this hill. So I always add that as well as the fact that I think there's the economic model of consumption that's really interesting that basically says, there's no such thing as a flat save rate. And actually when you're in your twenties and thirties, they make a pretty compelling case for spending the money on setting your life up and investing in yourself and your life. And then, at the end of your thirties is when you're really looking 30 years down the line and starting to plan for that. So, two competing schools of thought, absolutely. And if you can afford to do both, do both.

But there is something a little self-defeating about someone who's like, oh, I have to save for retirement. And so they're not actually building a life in the here and now; they're not having a kid or buying a home or doing the things that they would like to do to set their life because like, oh, I'm so focused on making sure I have enough at 65. It's like, but you also have to build the life now, and I think the economic consumption model is quite interesting for that reason because it basically presumes that up until age 40, you're not saving anything, you're basically just plowing it into building a life.

Henah: And look, today there are a lot of factors that are against people up until their time at 40. So I think that that makes a lot of sense. I do want to bring it back to, all tactical things aside, you've said in episodes before is that your life is not a dress rehearsal, and I think that that speaks heavily to people who are so laser-focused on the future that they're not thinking about now. So if you're in your thirties where you're in a good spot, you're actively saving for the things you want to save for, don't forget to live a little.

Katie: And I saw this tweet last night that I just want to mention; it cracked me up. It was like, if you are dead set...

Henah: Is it called an X now?

Katie: Oh, a xeet.

Henah: A xeet?

Katie: Clown world. I saw a xeet that said...

Henah: I can't even hear you say it.

Katie: It sounds like yeet.

Henah: Yes. Yes, it does.

Katie: I saw a yeet that said, if you are so focused on saving 80% of your income because you hate your job so much that you need to retire in 10 years flat, I have a suggestion for you: Get a different job. Where it was like, there is a bit of a solution here that is not necessarily, oh, I have to rob myself of all fun in the here and now. It is possible to get a job that you enjoy that can make this journey a little bit more enjoyable. I always really loved the FI/RE rhetoric and was very much in the camp of, I need to reach financial freedom before I'm allowed to experience any ounce of joy or happiness or freedom, because if I'm not financially independent, none of it matters.

And it really was through that process of doing work that I liked that I was like, oh, actually, that was not the only way. I want to be able to produce income for myself and build confidence in that skill and to be able to produce income doing work that I love, as opposed to let me just hoard and accumulate as much as possible as fast as possible. That way I'm bulletproof and never have to make income again.

Henah: I mean, you're kind of close to your FI number, I feel. And the funny thing is that you're like, so how much would you invest in Money with Katie for me to keep doing this if you win the lottery? I think you've really come full circle here of not having to hoard, but also being, what do I enjoy?

Katie: It's about, yeah, security. But I think, I was talking to Tara the other day, who is, I don't know that we've ever formally announced this, but we're doing a project with Tara Reed and she's the CEO of Apps Without Code, and we were talking on the phone about money and taking an income as an entrepreneur as she is, and she was like, "I feel your approach is very much, let me save and invest in safe ways as much as possible so that I can basically reach the amount of money I need to never have to work again quickly, and that will give me confidence." And I was like, "Yeah, that's pretty much it." And she goes, "See, I'm trying to develop confidence in myself that I can always create income. I can always generate opportunities. I can always create something of value."

And I was like, whoa, what an interesting reframe. Because it shifts from being, I gotta hurry, hurry, hurry to get all this behind me and to do it as fast as possible, versus I'm really realigning my own approach to life. So I think that there's something there as well in this conversation about, it's like, it doesn't necessarily even have to mean that you're at some certain benchmark, just that you are investing in your own growth such that your human capital (that's such a dystopian way to think about yourself, but it's kind of accurate), that that is probably the most valuable thing you have in your thirties, is your human capital and what you're capable of.

Henah: Yeah. I would probably side with you, which is where I'd rather have the nest egg set up so I have the freedom to do whatever, but I like the idea of thinking about your potential as the thing that you are nurturing for your thirties. That is when you usually typically have professional experience under your belt. You may not be in a C-suite position, but this is where you can really supercharge that if that's something that matters to you.

Katie: Yeah. Isn't there that list of people that didn't do the things that they're known for until they were in their late thirties, like Oprah?

Henah: Or fifties? Yeah.

Katie: Yeah. There are so many people that are world-famous today that didn't really get their start until their late thirties or later.

Henah: I actually want to ask you, based on that question, I know you and I have had conversations about the Forbes 30 under 30, I think Tara's actually been featured on...

Katie: She is, yeah.

Henah: ...30 under 30. Do you feel like this question or having this conversation reframes how you see that? Because you're going to be 29.

Katie: I'm running out of time to get on Forbes 30 under 30, everyone.

Henah: The whole point is that you're supposed to be, I don't care anymore because the thirties are...

Katie: Yeah. Equaniminmous or equanimity, man, I don't know, though. I would like to be on that list, but I'm a list lover, man. I've always been that way. I'm like, if there's an honor list, there's a list of 4.0 students, if there's a list of people doing cool things, I want to see my name on it. But that's a conversation for my therapist.

Henah: Oh, all right.

Katie: On that note...

Henah: Well, you're at the top of my haters list, so you get that one.

Katie: I am the president of the I Hate Henah Club.

Henah: Please, I said no more. She hates me so much.

Katie: All right, that's all for this week's Rich Girl Roundup. We will see you on Wednesday to talk about investing in startups. Bye.

Henah: Bye.

Rich Girl Roundup: What Do I Do Financially in My 30s?

Listen On

Recent Episodes