Huge Tax Bills at Vanguard: What Retirement Savers Need to Know
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Welcome to the Stay Wealthy Podcast with Taylor Schulte. I'm your host, Jeremy Schneider, filling in for Taylor for five weeks from the end of June to the beginning of July.

Today, I will be diving into the controversy surrounding the Vanguard Target Date Index Fund tax bill debacle of 2021 that is actually still ongoing. Maybe you heard about it, but specifically, I'm going to share what happened to these Vanguard Target Date Funds at the end of last year to trigger potentially huge tax bills for some investors, why it actually happened. It

if it's going to happen again this year, and what to do about it. And I'm also going to answer two questions from listeners. So if you're ready for a deep dive into Vanguard's target date funds, the tax implications, and best practices moving forward, today's episode is for you. For all the links and resources mentioned in today's episode, head over to youstaywealthy.com slash 159. ♪

All right, let's start from the beginning. Vanguard's target date funds. What is a target date fund? Taylor has talked about this on the show before. I'm sure a lot of listeners to the show already know. But for some basic background, it's basically a mutual fund that contains a handful of mutual funds inside. It's a fund of funds that is designed to be balanced across segments.

U.S. stock market index funds, international stock market index funds, and bond funds. And it doesn't actually need to be index funds. There are target date funds that are actively managed. Vanguard's version is all index funds. These funds are

are designed to be balanced automatically, and they also reallocate as you age. So if you are a young person in your 20s and you have like a 50-year investing timeframe, they're going to be about 90% stocks. But if you're a person around retirement age, like 65, they're going to be more closer to a 50-50 portfolio of stocks and bonds. And if you're in your late 70s, they're going to be more like 80% bonds and 20% stocks.

And it does a nice asset allocation. So you don't need to rebalance your portfolio. You can just buy one fund. Inside of that fund is everything you need. It goes on to ZH. It's like a one and done.

combo package deal of all of your mutual funds you need. So I actually really love target date funds. But something very weird and unusual happened to the Vanguard target date funds back in December. If you own one of these on December 29, 2021, you would have probably noticed that your target date fund dropped in value by between 10 and 15%.

And this was an otherwise unremarkable day in the market. The market was basically flat that day, but all of these Vanguard target date funds dropped their share price drop by over 10%, which would normally be a catastrophic headline day in the market, but it was a quiet day in the market.

So what happened there? Well, what really happened is the underlying funds didn't lose any value. If you looked at all the underlying funds, the Vanguard Total U.S. Stock Market Fund, the International Stock Market Index Fund, and the Bond Fund, they're all flat. Only the fund of funds, the combination fund of this Target 8 fund, dropped by 10% to 15%. So what actually happened comes down to dividends and share price.

And the relations between those. When you are an investor, your gains are based on the gain in the share price, which is what we watch every day when we see the S&P 500 or the Dow Jones go up and down. We're always watching the share price. But investors also get dividends. And normally, dividends are relatively small relative to the change in the share price. Right now, the total stock market is paying out a little bit less than 2% per year in dividends. And so if those are paid out quarterly, you might get like half a percent, a quarter dividend.

for owning, you know, an index fund, which like you don't really even notice. And if it's reinvested, it's just kind of as part of the deal. But what happened on this day is these Vanguard target dates funds paid out a dividend or a distribution of at least 10 to 15% of their share price. And so investors didn't actually lose money on that day. What happened is they just got paid this massive dividend. And then the share price drops to basically pay for that.

And that's the relationship between dividends and share price in all funds. And so whenever a fund pays out a dividend, it's actually instantly on that day reflected in the share price. Usually it's so small, like I said, half percent people don't really notice. But if it's 15% and the share price plummets, you definitely notice. And let me give an example of why this doesn't actually cost the investor money as a baseline. So let's say you own 100 shares of stock.

ABC, this fictional stock called ABC. And the share price is $10 a share. 100 shares times $10 a share is $1,000. The value of your investment is $1,000. Now let's say that stock pays out a $1 per share dividend. In order to pay that dividend, it needs to come up with the cash out of that fund. The share price drops by $1.

So now what happens is you still own your 100 shares, but instead of them being worth $10 a share, they're worth $9 a share, which is $900. But you got a dollar per share dividends, which is $100 cash. So you have $900 in share value plus $100 cash equals $1,000. So that's what happened with these target date funds. They basically just paid some of the cash off the top, but you as an investor still had the same amount of money.

Now let's take that a step further and say you don't want the cash. You're not planning on selling 10%. You want to keep all the investment. So you would do what's called reinvesting. You take that cash, you take the cash in that dividend or distribution and reinvest, buy more shares of the same thing. So with that $100 and the new share price of $9 per share, you can actually buy 11.1 shares of

of the stock. So then you'd end up with 111.1 shares of the stock total, the 100 you originally had, plus the 11.1 you can buy from this distribution that just came out. 111.1 shares at $9 a share equals $1,000. So you're basically right where you started. You own more shares, they're worth less per share, but you still have $1,000 invested in this exact same stock or fund. So that's the basic math, which is it didn't cost investors any money. But it

something did happen. Well, two things really happened that affect taxes. And taxes are the big name of the game here. The first thing is when that distribution pays out, by law, you have to pay tax on it that year. So if you owned $1,000 of this fund,

And in a normal year, it doesn't pay any distribution, you don't owe any tax on it. You know, even if it's growing in value, you have an unrealized gain if it goes up in value, but you actually owe the tax in that calendar year. But in this calendar year, or last calendar year 2021, when the Vanguard fund paid out this 10%, suddenly, everyone's got to pay tax on 10% of the value of their fund if it's in a taxable account.

And so in my example of owning $1,000 worth of it, if you get the $100 dividend or the $100 distribution, you owe tax on $100 for the calendar year of 2021.

But something else happens too, which is when you reinvest that, you take, let's go back to when we bought these $1,000. I know this is, bear with me. I think it's like worth just kind of breaking this down because this goes to the core of how these funds actually work. But when you bought this $1,000 of the stock or the fund, let's say you only paid $500 for it. That was what you originally bought for. You held it for, let's say, seven years. It's doubled in value, which is great. Now it's worth $1,000. And so the value of your investment is $1,000, but your cost basis is $500.

That means you have an unrealized gain of $500. Then when this dividend paid out, the $100 came off the top, off the share price, and then you bought back into it. Your basis went from $500 to $600 because that $100 was all spent on the $9 share price. And so your unrealized gain went from $500 to $400.

All that's to say is it basically shifted around some taxes. You have to pay some taxes this year, but you'll pay less in taxes in the future because you already paid them on the gains this year. That's essentially what happened here.

And by the way, it pissed off a lot of investors because if you were just merely holding index funds, which are generally very tax efficient and think you're doing everything right, and then you get a tax form from Vanguard and say, you owe tax on 10% of your investment or more. And by the way, this happened to me. I actually do hold over $100,000 of a Vanguard target date fund in a taxable brokerage account. So this actually happened to me personally. And sure enough, I got a tax...

form from Vanguard that says I have to pay tax on like $12,000 of gains last year, even though I didn't make any trades on it last year. Okay, so why did this happen? And all these gains, you know, we talked about dividends and dividends are usually paid out of profits from a company in our taxable that year. This distribution that was paid out in cash was actually a long term capital gain.

And a long-term capital gain is when something inside of the fund itself sells that has been held for over a year. And then that gain that's realized inside of the fund has to, again, by law, be passed on to the individual investors to pay the tax bill on it. Because the US government has decided that they don't want to let this, you know, unrealized gain keep accruing inside of these funds indefinitely. That's not true in every country, by the way. If you're investing in the UK, they have this thing called

accumulating mutual funds, where they just keep accumulating and accumulating and reinvesting internally and never pay tax on the dividends while you're holding them. But that's not the case in the US. So anyway, if you look at the 2021 long term capital gains distributions for the 2050 Vanguard target date fund, for example, there are two cents a share, very, very small, meaningless, a few pennies on your taxes, whatever.

But if you look at 2021, the next year, it jumped from $0.02 a share to $4.83 a share, which is, again, about 10% of the share price. That's a 263 times increase. So something crazy happened. And when this happened, I have about half a million followers across the

couple of social media platforms. I actually love Targetate Index Funds. I talk about it all the time. And I own one, like I said, and I had my followers, my community kind of blowing me up being like, yo, what happened? And so I actually called Vanguard that day or the next day and said, why did long-term capital gains go up 463 times this year over the last year? And basically,

They gave me a BS line. They just said this like textbook line. Well, there's internal trades or their funds perform well or blah, blah, blah. And of course, I mean, all that is technically why funds generally pay out dividends. But that's not what happened this year. Something weird happened.

And at the time, I actually made a YouTube video about it. And I went back and watched it to prepare for this podcast. And I made a guess that there was some big, massive exodus of some big company inside of the fund where they had to sell a bunch of the shares. And then that company ditched. And then that tax bill was then passed on to all the individual investors. And I was basically very, very close. But now we know exactly what happened and why it happened. And to explain why this happened...

We have to talk about the two share classes of each target date fund. For example, Vanguard offers two 2050 target date funds. The first one is designed for consumers. For example, there's a 2050 fund with a ticker symbol VFIFX, which has a 0.015% expense ratio and a minimum investment of $1,000.

It's just your normal target date fund. If you open up a Roth IRA with Vanguard or you open up a brokerage account with Vanguard, you can go and type in VFIFX and buy the 2050 fund, have a great diversified balanced fund ready to go. But if you are like Starbucks or some massive corporation who uses Vanguard as the 401k provider, instead of paying the 0.15% expense ratio, you can use the fund VTRLX, which is the institutional class VTRLX.

of the Vanguard 2050 fund. The expense ratio is 0.09%. So it's six basis points lower. It's a little bit cheaper. But the minimum as of 2020 was instead of $1,000, the minimum investment was $100 million. So this is not a fund a normal person or any person really would ever invest in. It's only for institutions like, you know,

you know starbucks or hospital networks or whatever that has you know hundreds of millions of dollars of investments across all their employees 401ks and so that minimum was 100 million dollars

And then what happened in 2021 is Vanguard basically announced they were lowering their fees. They're dropping their target date fund fee from 0.015% to 0.008%. So they're dropping at seven basis points, which is great. That's kind of Vanguard's thing, lower fees, they're continuing to lower fees. But they also lowered the minimum investment on their institutional class. They lowered it from $100 million to

to $5 million, still a very big number that generally most individuals would never buy. But now maybe small and medium businesses could use this too with the lower expense ratio. And in my opinion, when Vanguard did this, they basically f***ed up.

And they didn't really think through this side effect of lowering the minimum on the institutional class. Because what happened is every institution who had between $5 million and $100 million

before was not eligible for the institutional class, like the bulk discount. But when they made this change, they were all became eligible. And I suspect there are some like vanguard sales reps who called their small and medium business customers and said, Hey, great news, you guys, we just lower the minimum on this institutional class, you can now move your money from this one to the other one. And all the institutional, you know, small businesses,

raised their hands up and said, hooray, we get to save a few basis points on the expense ratio for all of our employees. That's great. And what happened was $6 billion left the investor share class and went to the institutional share class. There was a stampede for the exit from the slightly higher expense ratio to the slightly lower expense ratio.

And then what happened to cover, you know, basically Vanguard had to like withdraw all the money from the investor share class, transferred over to the institutional share class. And to get that money out, they had to sell the underlying funds to the tune of $6 billion. Then at the end of the year, when they're doing their taxes, they're like, oh, we had $6 billion of gains. And that needs to get bylaw and get past time to the investors. And that's why we saw this 10% increase

in the share price and that share price drop. And so that's what happened. It's basically because of the drop in the

the minimum of the institutional share class. Crazy. If you look at the flow of funds chart, you can look this up on Morningstar and see how much money is going into this Vanguard target date fund. Every year, there's like half a billion dollars flowing into this fund just as normal people are more likely to use target date funds and index funds and put more money in every year. And then in 2021, just every month, there's just like flying out, like just massive, massive money leaving.

All right, so what's the impact of this? First of all, it's very important to note that if you are holding a target date fund in any flavor of tax advantage account, I'm talking 401k, IRA, 403b, 457, TSP, probably not because I don't use Vanguard, but any tax advantage account, Roth, traditional, whatever, this whole episode, and sorry, I made you wait until like 16 minutes to tell you this, but like this whole episode,

has zero impact on you because that distribution and hopefully reinvestment, I mean, I guess it has zero impact as long as you have dividend reinvestment turned on.

doesn't create a tax implication because in tax advantage accounts distributions aren't taxed the year they happen in the roth flavor of all these accounts they're never taxed so it simply doesn't matter and in traditional flavors of these counts they're never taxed until you actually withdraw the money so it doesn't matter so on any sort of tax advantage account this has zero impact

If you hold one of these funds in a taxable account, like a regular old brokerage account, like I do, then it does have a tax impact for you. This April, which was, I'm filming this in May or recording this, and you're probably listening to it in, I think, late June, early July or something. You hopefully have already seen this and already paid that tax bill. And so you basically had to pony up the money for this 10 to 15% distribution on your target date fund if it was in a taxable account.

One important note is that you're not necessarily paying more tax total. You're just paying some of the tax and some of the gain sooner. And so maybe if you were planning to hold this target date fund for 20 years and you're 10 years into that, you would have to pay it this year instead of 20 years from now. Also, like I mentioned, when those distributions are paid out,

They're reinvested at the current share price, moving your tax basis up. So less taxes will be owed in the future. So that's why you pay more taxes now because it's distribution, but less taxes in the future because you now have a higher tax basis. All things equal, you don't actually pay more taxes, but it does actually create a little bit of what's called a tax drag because you

And when you get into the taxes, there's like a million caveats because it depends. Did you actually reinvest every dollar? And were you able to pay the tax bill from your income? Is your tax rate going to be higher in the future or lower in the future? Theoretically, this could actually help your tax situation. If you're in a very, very low tax bracket now, and when you eventually want to sell this fund, you're in a very, very high tax bracket, this could be considered what's called tax gain harvesting, where you realize some of the

gain on taxes to take advantage of your low tax right now, then when you're in the higher tax rate later, you don't pay as much taxes. That's not really typical. You know, we kind of assume equal tax rates, especially on things like capital gains. But who knows, like if you're super rich in the future and have high income, maybe this helped you.

But if we assume equal tax rates now and later, and you have to assume a bunch of other things like how long you're holding it for, when this happened in the tenure of your holding, things like that. I ran some simulators, some analyses, and I looked at like a 20-year timeframe where this happened 10 years in. And under those circumstances with equal tax rates, this represented a 0.07% drag on your total income.

eventual after-tax value, which is pretty small. In fact, it's exactly how much Vanguard just lowered their expense ratio by. And so if you consider that to be like a typical average case scenario, then, you know, you kind of have to shrug your shoulders and be like, well, that was weird, but Vanguard made up for the low expense ratio. If you look at like the worst

Kind of reasonable case scenario where you're in a very high tax bracket, you hold for a very long period of time. And this happens to you right at the beginning of your investing, which is kind of the worst time for it to happen where you pay this big tax bill and then that tax drag impacts you for longer. The worst case scenario without getting absurd and saying you have like a 90% tax rate or something is about 0.22% per year.

So it's significant, you know, like 0.22% per year, like that's higher than the entire expense ratio. That's, you know, almost what a robo advisor might charge you or something like that in terms of their fee. So it's not good. But again, that's kind of the extreme scenario. So that's the tax effect it has, again, only in taxable accounts. And only if you're holding this Vanguard targeted fund. And by the way, you know, this happened to Vanguard, this

could happen to a Fidelity or Schwab, a target date fund. It happens more to actively managed funds that are always having these big turnovers. But this was kind of more of a shock because index funds are traditionally considered to be very tax efficient because they're not really selling much each year. They're just kind of holding the same stocks each year in and out. All right. So what should you do about this? Given that this weird thing happened to the Vanguard thing and maybe hit you with a big tax bill, I still like target date index funds.

They're super simple. It's one fund that gives you everything. They automatically rebalance for you. They automatically reallocate for you. It's kind of hard to mess them up. And I think they represent pretty close to optimal investing. When people start getting more tricky than a target date fund, in my opinion, it always looks a lot more like speculation rather than optimal investing.

One alternative, if you don't like the idea of potentially being non-tax optimal, would be to do a three-fund portfolio. So instead of buying the single target aid fund, you could basically just buy the underlying funds, like buy a U.S. stock market index fund, an international stock market index fund, and a bond index fund.

If you do that, then you're on the hook for rebalancing. Like let's say US has a terrible year, international is a great year. You might want to sell some of your international and buy some of your US to stay on your target asset allocation. You're also on the hook for reallocating. So let's say you're young 90% stocks and then you're into your 40s, 50s, 60s.

best practices, you're slowly reallocating towards bonds. So when you're 65, 70, retirement age and beyond, you don't want to be in a 90% stock portfolio because if COVID-2026 happens or something, the market drops by 80%, you don't want to see 80% of your portfolio disappear or even 50 or 30%, right? But one interesting thing about a three-fund portfolio like that is if you do the rebalancing and if you do the reallocating,

There's tax implications to that too. Because like, let's say international had a great year and US had a terrible year. When you sell some of your international and buy some US, you're taxed on those international gains, right? And so that represents a little bit of this, you know, tax thing.

bill due in the year and potentially a tax drag. And when you reallocate, let's say you're currently 90% stock and you want to move to 80% stock, when you sell some of your stock to buy some bonds, that is going to trigger that tax bill and that capital gains. And so what do they say? The two certainties in life are death and taxes. There's no fully beating the tax band here unless you can somehow get everything into like a Roth IRA or Roth 401k. So you're still on the hook for that. It's just different.

For me, what am I doing? I've actually struggled with this question myself. I don't love the idea of having extra tax drag. The rebalancing stuff doesn't really bother me because I like this stuff. I know how to do it. But as of now, I've left my target date fund in there. I still have the $100,000 in my target date fund inside of my Vanguard account. I think I'm going to do that. I think that it's just not worth it to deal with all that other stuff. And it's pretty unlikely this is going to happen to Vanguard again, knowing what they know now.

Whatever you choose, the important thing to also note is that this isn't a huge deal. The huge deal is what I call following the two rules.

of Personal Finance Club to build wealth. Rule number one is spend less money than you make, live below your means. And rule number two is invest early and often, invest the difference. If you're doing those things and you put it all into a target date fund, you'll do great. If you do those two things and you put it all into a three fund portfolio, you'll do great. If you don't do those two things and you spend all your money and never invest anything, you'll be broke. And so, you know,

Those of you listeners who are now 24 minutes into the Stay Wealthy podcast with me drawing on about this targeted index fund situation, you guys are like superstar aficionado, love the academics of this. And so I'm sure you're going to consider this. But remember the big picture. This doesn't really matter that much. Okay.

Will this happen again next year? Well, after this year, first of all, I don't think Vanguard is going to make this mistake again. But what might happen is just consumer sentiment, knowing that it could happen, could cause a mass exodus of consumers who are wanting to cash out of this thing, which would cause Vanguard to need to sell and kind of like create a ripple effect of this whole thing. And in fact, if you look at the flow into and out of the fund that like Morningstar and YCharts provides and some other sites, you can see that

in a normal year, it's positive. And 2021, there's actually negative 6 billion. And in

January, March and April, it was positive, you know, several dozens of millions. But in February of 2022, which might be reflecting January behavior, I'm not sure. But early in 2022, there was a minus $1 billion flow of funds out of these target date funds, which I can virtually guarantee was just this reactionary effect by consumer investors who don't want

this fund in their taxable account. And there's like Wall Street Journal articles and a whole bunch of articles that say these aren't appropriate on a taxable account, which I think is like a little bit of an oversimplification because like there's pros and cons to it, of course, but there wasn't a negative fund. But if you look year to date, year to date, the flow into the target date funds was at least the 2050 fund, which is the example I'm using in this episode, is actually at plus $87 million. And I think, you know, I think that

The fallout from this has already happened. And when we go through the rest of 2022, money will continue to flow into these funds. And we probably won't see this type of huge tax bill happen again in 2022. But if you're worried about it, you can sell and get out with your new higher basis and all that good stuff.

One other little fun fact as we wrap up about this Vanguard target date fund situation is there's actually a lawsuit currently pending in Pennsylvania courts filed by three investors who saw these huge tax bills and basically are accusing Vanguard of breaching their fiduciary duty by

by causing this tax bill to hit their investors. And I think they kind of have a point, which is Vanguard kind of messed up by like lowering the minimum investment on their institutional class, having this unintended side effect. And then basically,

basically leaving all their consumer investors out to dry to hook up their small and medium business investors, right? I read about that. It just seemed like the latest news I could find out is that it's happening and I haven't heard about the outcome. And so who knows if you own these funds, I wouldn't be that surprised if you got one of those little class action lawsuit envelopes in the mail one of these days. And so maybe I will, maybe I can give you guys an update. Personally, I think it was an honest mistake by Vanguard. I don't think that they were like,

trying to dick over their consumer investors. I just think they were someone in a boardroom had a great idea to lower minimums and lower expense ratios. And no one remembered to speak up about what was maybe in hindsight, a pretty obvious side effect. But that's what happened. But who knows, maybe some class action lawyers can cash in and, you know,

you know, we will continue to cheer our capitalistic economy. All right, that's it. That is the deep dive into the Vanguard Targeted Fund. If you listen to the whole thing, by the way, like way to go. That was like kind of like a pretty niche little thing, but still super interesting. And I think it has implications about how mutual funds

share price and dividends interact with each other in general and how index funds work. And so way to go. All right. That is it for target date funds. Now let's go to our questions from the listeners. Our first question comes from Katie from Maui. If you make dividends from your brokerage account, do you have to claim those on your taxes if you just reinvest them?

Thank you, Katie. I hope you're enjoying Hawaii. I'm very jealous that you're there. And what a topical question. And it must be topical because I chose the question, but she's asking, hey, wait a minute, if I didn't actually take that cash out and spend this big dividend or any dividend I get in my taxable brokerage account, and I have that setting turned on inside of my brokerage account that says automatically reinvest those dividends. So

you know, functionally, you're never even seeing cash at all. The dividend pays out, then instantly buys more shares. And again, affects the share price and number of shares you own. But in terms of you, the end investor, cash never enters your, you know, your hot little hand there. Do you still owe the tax on it?

And the answer is, yeah, you do. Unfortunately, you know, it's a nice feature offered by those brokerages to like keep the invested as much as possible to avoid any cash drag on your investment growth. But as far as the US government's concerned, that dividend was paid out. It's going to show up on your 1099 div that you get from your brokerage and you're going to have to

submit as part of your taxes. And if you don't, you are committing tax evasion or tax fraud of some sort. And so yeah, so this whole Vanguard thing we talked about, and in fact, any dividend you get inside of a taxable brokerage account, you owe taxes that year, even if you're reinvesting it. How sad.

Our next question comes from Connor from Narragansett, Rhode Island. I hope I pronounced that right, Connor. What's your question? What does wealthy mean to you? Obviously, someone that's worked in corporate America and sold a couple of businesses. I'm curious if you think today you're technically considering yourself wealthy. This is something I obviously have goals of becoming someday, both through index funds and through multifamily investment properties. But curious to hear your take.

Thank you, Connor. Well, we went from like a super technical nitty gritty episode to like a very cerebral question to end with. And this is the Stay Wealthy podcast. And Connor's asking, what does wealthy mean to me? And it's actually a really good question because I think a lot of us live our lives chasing more money. We think just over the next hill of wealth, thousands of happinesses. Like if you are broke and living paycheck to paycheck, you think, man, if I could just

have enough to know where, you know, get out of the paycheck to paycheck cycle and know that I've got groceries, like then I'll be happy. Then once you get there, you're like, oh man, if I could like just buy a small starter kind of, then I'd be happy. Then once you get there, you think, oh man, if I could just get a nicer car, then I'd be happy. And then once you get there, you know, wherever you are, there's always that next best level. If you're making half a million dollars a year and you've got two cars, two nice cars parked in a nice car garage, you think, oh man, if I could just be a member of that next country club or

get a place on the water or buy a vacation home or, you know, there's always a next level of wealth. And in my opinion, happiness is never around that next corner. And so to answer Connor's question, do I think I'm wealthy? And I think I would love to say, yes, I do. And, and the reason is because I am content. I think I have enough wealth.

I'm comfortable. I have a perfectly nice place. I drive a 2016 Mazda CX-5. It's perfectly fine. I have a two-bedroom condo here in beautiful, sunny San Diego. I think it's fine. And that's not to say I don't have ambition in life, but my ambitions are more about helping people out in the world and finding happiness for myself, not about chasing more stuff. You could look at the other extreme end of the spectrum and say, look, someone in Africa or any country who lives in poverty who

could have food and be food secure. They think that's wealthy, right? And so, you know, wealthy isn't about selling multiple companies. And I've only actually sold one company, but have started many companies and they've all been, you know, pretty successful. So I'm extraordinarily lucky, but you know, that's not what wealthy is. Wealthy is just about having enough and being, being content and being happy in life. And so,

And in your wealth building journey, wealth like financial wealth can certainly give you options and can allow you to do what you love all day like I do where I help people with money instead of having to slave away at a job I hate. But that alone doesn't buy happiness. And so when you are on your wealth building journey, I think it's important to remember that the next level of stuff is not going to make you happy. Happiness has got to come from deciding you have enough, having contentment, and then

you know, being happy with your relationships, the people around you, what you're doing with your time, what's your direction of life, ambition, all that stuff. And so, you know, money can only buy so much. And so great question, Connor. I love talking and thinking about stuff. And because I think at the end of the day,

As much as we love nerding about the academics, this is all about happiness, right? We're all trying to be happy and make our family happy and friends happy and things like that. And so if we lose sight of that and we just try to get more zeros in our bank account, we're probably going to not live a very happy life. And so part of money is really understanding why we're doing this. So thank you so much for the great question. That is all I have for you today.

For those links and resources mentioned in the show, head to youstaywealthy.com slash 159. Thank you as always for bearing with me while I fill in for Taylor. And I'll leave you with my two rules of building wealth. Rule number one is live below your means. And rule number two, invest early and often. See you next week.

This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services. ♪