Everyone has rules of thumb they live by when it comes to money, but are yours helping you or holding you back? In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, shares the first 10 of his 20 guiding money principles that influence how he makes financial decisions for himself, his family, and his clients.
Show Highlights:
• Why an emergency fund should cover 3-6 months of expenses, not income.
• How your spending and giving habits reveal what truly matters to you.
• The two most reliable paths to wealth: starting a business or saving early and often.
• Key rules of thumb on saving rates, home affordability, and retirement withdrawal strategies.
• How a “legacy bucket” can help retirees balance growth, generosity, and peace of mind.
• What just $150 a month could mean for your child’s future college costs.
Whether you’re just starting out, in the middle of your career, or already retired, these principles can serve as a foundation to help you make wiser money choices and think long term.
If you enjoyed today’s episode, be sure to share it with a friend or family member!
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. You’re listening to Retire in Texas, where building wealth comes with clarity, purpose, and peace. And we’re guided by 1 Timothy [6:17] through 19. I just really want to help you grow your net worth without losing your grounding along the way.
And if that’s what you’re after, then you’re definitely at the right place. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. I’m going to split this podcast into two segments. The first will feature ten principles that guide me in my money decision making.
And then the second iteration or the next episode will be another ten. So total of 20. And I’ve been thinking deeply about the principles that guide me in a lot of the business and financial decisions that I make, and I’m trying to curate them, and I feel like I’ve got a good 20 here that I really want to share with you, but I know I’m missing some.
So, I’ll continue to think about this over the next several weeks. And if there’s some I need to add and I’ll do another iteration of this, but really want to have you challenge me even. Hey, I agree or disagree with that principle. And then challenge yourself. Is that a principle that I should start taking a little bit more seriously and integrating into my rhythm of money because we, you know, we discount the heuristics and rules of thumb that influence our lives.
There’s a new commercial that keeps popping up. Maybe it’s because of what I watch. It’s a lot of the, you know, financial news networks and the first thing that comes out of the speaker’s mouth in this commercial is, hey, you only live once, eat the cookie. I don’t know if you’ve heard this before, but to me, it’s like they’re just dripping on you.
They’re just dripping on you. And before you know it, I promise you I’ve seen this a thousand times. People will start saying that you only live once. You only live once. It’s so crazy how we just pick up on these rules of thumb and heuristics. And I guess we’re so easily manipulated in adopting these, that we abandon even core principles that have been timeless through the Word of God.
A lot of what I’m going to share with you are not scriptural, but I do have elements of my faith that I’ll weave throughout it but so let’s jump into this. And I don’t have this ranked, so I could do a top ten countdown, but I don’t have them ranked. So, the first one is an emergency fund should be no more than 3 to 6 times your monthly expenses.
This gets confusing because a lot of people think it’s 3 to 6 times your monthly income. There’s a significant difference between the two, or at least there should be – your taxes, your retirement contributions. You have health insurance. So, it’s your monthly expenses. And why does that even exist? Why 3 to 6 months and why times your monthly expenses?
Well, if you have an emergency, like your car breaks down, or your refrigerator goes out, those can usually be absorbed somehow, even though the average American right now can’t afford a $400 emergency. I know many people in the audience that I’m listening to can, but 3 to 6 months is important because if you become very sick, this is where you’re going to need that emergency fund.
In good planning, you’re also going to have a disability policy, whether it’s with your group or individually. It’s really important that you have one, because actually the probability of becoming disabled is higher than if you died. Now, of course, people who are retired, this doesn’t necessarily apply to but on disability coverage, there’s a 90-day elimination period, 90 days before they start kicking in and paying you, I’ve processed these before, not only is it 90 days, but then there’s like a little month lag.
So, it could be 3 to 6 months before you actually get paid from your disability insurance policy. You need this bucket of money to weather that. So, 3 to 6 months if you are a single, like a single mom, then you’re going to need closer to six months. I even know that’s challenging, but you don’t have another paycheck to fall back on, so you’re going to need to squirrel away about six months if there’s two earners, maybe three months is fine.
So, it does vary for families. And then when you’re retired, it’s not as critical because you should have structured life in such a way that you’re not depending necessarily on your income. But having 3 to 6 months is still important, because if you do have a God forbid an Alzheimer’s situation or some chronic care need, there are a lot of out-of-pocket medical expenses to be considered in those situations.
So, but it’s very particular for those that are retired. Okay. I better move faster because I’ve got ten. At this pace, it’s going to take me about an hour to finish this. So let me move a little faster here. Number two, we pay attention to what we pay for. Staying in the health care conversation, we’re cash pay.
I mentioned this in a previous podcast. My family and I we’re cash pay using the Christian sharing programs that work real well. And oftentimes we ask questions, how much is this service for? We even had, we probably saved this system. I’m airquoting here, the system, you know, $5,000. Because in the midst of dealing with this medical issue, at one point in time we were advised to go to an emergency room.
And then when we discussed it with the doctor that we’re cash pay, we quickly shifted to a non-emergency room. It didn’t really make a difference to us, but it was real quick to see how we will just in the medical system, waste money and a part of it is the system and a part of it is the consumer not asking questions because we don’t pay for our health care in a lot of cases, so we don’t care.
That’s just how life works. In fact, we had a financial advice service that we were giving away for free, and it was work and research, and we spent a lot of time on it. We started charging for this service, and not because it needed to be a revenue source. That wasn’t it. It was because we know people pay attention to what they pay for.
And so, if we’re giving out financial advice for free, they don’t pay attention to it. But if we give it to them in such a way that it’s reasonable in its cost structure, people will pay attention to the details and frankly, very likely implement the recommended ideas. So, the second principle is you pay attention to what you pay for.
The third one is and I’m kind of vacillating here because I don’t have this Scripture down, because this one is a Scripture one is, giving reflects your heart. This is a tough one. Because if I were to look at your banking transactions, your debit card transactions, or your credit card transactions or the checks you write, I would be able to tell what’s really important to you.
I know you might say, well, if you look at my time that reflects and I get the time. The time is also a kind of the litmus test of what’s important to you. But your money is also because the Scripture says, I think this is Matthew [6:24]. You can love the one or hate the other. You can be devoted to one or despise the other. But man cannot serve both God and money.
So, there is this competition for your heart, and it’s reflected in your money. And if you love the gospel and you love Jesus and you want to make disciples of all nation, I should see that reflected somewhere in your financial statements, not judging you.
It’s just this is pretty I think it’s just judging ourselves. I understand the circumstances. I get that but your giving and your money, just your money in general. It reflects your heart. Okay. Four, the best way to be rich. And I use air quotes. “Rich”. We can unpack that later, is to start a business or save early and often.
Or I guess both really. So, the best way to accumulate wealth or to be rich, I’m using that facetiously, is to start a business or to save early, and then, if you do both, that’s even better. I think I first heard this from Suze Orman. I don’t recall exactly. And I remember thinking, okay, my objective in life wasn’t to be rich, it was just not to be poor.
I just thought, I just didn’t want to be poor. I just knew the challenges of not having money and what it did to a family. And it was hard. And so, I didn’t want to be poor. So, I listen to people like Suze Orman. She said, start a business or save early and often. I thought, well, why not do both?
But it’s kind of actually hard to do both. I work with a lot of business owners and all of us, and I would put myself in that category, are saying, you know, I need a catch up because you know, my early 5 or 10 years, I was putting everything back in the business. And so, I need to catch up on my investing and kind of diversifying my net worth.
So it’s I say that because it’s hard to save early and often and start a business, but both of them and if you’ve been around a little while and you look around you and you’re like, okay, who are the people that seem to be comfortable financially, you’re going to find out that they either started a business or they saved early and often and sometimes saving.
Get some fuel. If you work for a company like Valero or, H-e-b, I guess maybe not H-e-b, but some companies that help really put some fuel behind it by matching the 401k, that’s big. Be sure to take advantage of that match. And then maybe like stock options things like that helped put fuel behind it.
But that compounding is very real okay. Number five principle, automatic investing is ideal in today’s distracted world. There’s a book, called Automatic Millionaire. I don’t remember the author somewhere, I’m looking around in my bookshelf. I don’t see it off the top, but, yeah, it’s, you don’t have to read it. It just tells you if you just set up things and automatically you become a millionaire.
It’s crazy. It’s absolutely true. I’ve seen it over the years. I’ve seen people with, like 65, $75,000 incomes just put it on autopilot. They’re investing both their 401k and then outside, maybe their Roths and they become millionaires. Now, I know, I know, millionaire isn’t as much as it used to be, but still, people who have, you know, tight income profiles I’ve seen become millionaires just by saving over time.
It is absolutely insane. I’ve seen it, 401ks do an incredible job because they take it out. You don’t even see it. So that’s nice. But automatic drafts work too, just set it up to where it’s automatically coming out of your bank account to transfer each month. Do that. It’s just crazy. You wake up in 5 or 10 years and you’ve accumulated a ton of money.
I’ve seen it over and over and over and over again. You don’t have to be smart, you know, you just have, almost have to be ignorant to a certain degree. I just know I need to save. Where it goes is another question. But these automatic millionaires, they are outperforming in terms of net worth. Those people that are day trading, that are getting cute with their money, it’s just about saving.
And if you can do it through a 401k, it’s awesome. If you do automatic drafts, it’s even better. Or both. There’s also something in 401ks now, this was a regulatory change recently that has automatic escalations where the money automatically, that you’re putting in, increases each year. So that’s one way to build wealth in a very distracted world.
Okay. Number six, your home payment should be no more than 25% of your take home pay. Your home payment should be no more than 25% of your take home pay. This includes your mortgage payment, interest and principal, along with property taxes. I’m trying to think if I have anything else in there, your property taxes is the main one.
So, insurance, principal, property taxes, all that payment. Some people separate it out. They don’t escrow, but that should be no more than 25% of your take home pay. Every time I’ve seen that money, that ratio get out of whack. People are struggling to do things in life, whether it’s, go on vacations or save for their kids.
College is just not enough margin in life. So that has to be less than 25% of your take home pay, that home payment. Okay. Number seven, similar to what we talked about before, but ideally you’re saving about 15% of your gross income. This is again, if you’re pre-retirement I’ll talk to you post-retirements just a second. But if you’re pre-retirement, what we call the accumulation phase in our nerdy network of financial people.
You should be saving about 15% of your gross income. It’s a pretty decent rule of thumb. And now obviously if you’re 55, it’s different than if you’re 20. But it’s pretty darn close almost every time I’ve run numbers. I remember Financial Planning Association came out with this detailed article, and they come out all the time, that it should be around 16.67.
And I was like, well, okay, that’s fine. But Dave Ramsey has often said 15% and because of my nature, I want to try to, you know, assess if that’s reasonable. And sure enough, that self-proclaimed hick from Tennessee is pretty darn right, despite all the academic nerds having to formulate this 16.67 percent.
Dave says 15%, and it’s pretty darn close. So really, if you’re accumulation, in the accumulation phase, you need to be saving 15%, especially if you’re younger, because the profile of Social Security will be materially different for those that are younger, those that are in their, you know, 55 plus. I don’t see any material changes to Social Security immediately.
But those that are younger, you are going to need to save 15% of your gross income for retirement, absolutely hundred percent. Okay. Number eight, now this is for those that are retired. Your withdrawal rate of your investments needs to be about 4% of your total portfolio. So, if you’re taking money out, let’s say you got your Social Security.
I’m not counting that. But if you’re taking money out of your investments, that needs to be about 4%. It’s called a withdrawal rate of about 4%. Lots of different studies on this. It comes out, I mean, I don’t know, maybe every three months I see a study on this and, I don’t, I wouldn’t attest to have read all the studies, but I’ve read a handful, more than a handful of them, and there’s not a huge variability.
At this 4%. I saw some good stuff with American Funds a while back that showed 5 or 6%. Saw one the other day that showed 3%. So, I’m still leaning on the 4% rule, with understanding that if you model things out on your own personal financial outlook, you know, we use the Money Guide Pro and Monte Carlo simulation.
If you model things out and you push up to that 5%, I think there’s opportunity to do that, depending on your strategy. I mean, depending on, you know, your life expectancy and your needs. And do you want to leave an inheritance, all that other stuff. So, you can absolutely, go to your advisor and say, I know Darryl said 4%, but I want to do a little bit more.
I think you can vary from that depending on your unique situation, but 4% is a good rule of thumb. Let’s say if you make 6 to 8%, that means your money is still growing to a certain degree. And keeping up with inflation. Okay. Number nine, I love developing, this is for retirees, too, developing this legacy bucket of money.
So, it’s a bucket of money that you set aside in an account that you’ve identified that you want to leave to the next generation. This is the legacy bucket. So, you could there’s a book out that’s real popular right now, you could die with zero. But maybe you have that legacy bucket be the one thing that you leave to the next generation.
So, your strategy, your financial strategy would be, I’m going to spend everything but this legacy bucket. I love that legacy bucket when you’re retired. Why? Because it gives you a little bit of an opportunity to add risk to your entire portfolio, because this money is not designed for you to need immediately. This is designed for you to leave in 20 or 30 years.
If you’re 65, and even if you’re 75, there’s still a ten-year time horizon on this. Because the money, a lot of people think, oh, you know, your risk tolerance needs to go down because you’re 65. No, it’s all about the time horizon of this money. So, the legacy bucket gives you this permission slip to be a little bit more aggressive.
And you need that permission slip. It really is healthy for you in retirement because a lot of your money may be boring. And I don’t want you to get this false feeling of you’re not being a good steward of your money. If you have a little bit of that risk in your life, you have a point of reference and say, okay, I am being a good steward.
It’s just understanding how everything works together. So, love the legacy bucket, not only from a strategic perspective, but there’s some behavioral finance considerations as well. Okay. Landing the plane, number ten. You need to save $150 per month per child as soon as they get a Social Security card. This is for college planning. So, right when your kid gets a Social Security card, you should start saving $150 a month minimum.
$150 a month. Generally, again, you got different geographies. Handful of factors. You know, college inflation factors, certainly different. But saving $150 a month will pay for just generally. Again, that’s assuming some returns. You assuming the rate of return on your money and college inflation rate will generally get an opportunity for you to pay for just state school, just tuition, just state school and just tuition.
That doesn’t include room and board or private school. But I think that’s a good floor for most families. Now if you want to save more, cool. If you want to throw in some bonuses or some grandparents money. I think setting up a 529 account, allowing you to throw in money along your journey of life whenever you get a little extra, throw some money in there.
I think that’s smart. You want to do that, but $150 a month should be the minimum when you’re saving for your kid’s college, right? When they get a Social Security card. Alright, that’s the top ten principles, I’m glad to share with you. Let me count down again, not count down. Let me repeat them. Number one, an emergency fund should be no more than 3 to 6 times your monthly expenses.
Number two, we pay attention to what we pay for. Number three, your money reflects your heart. I said giving reflects your heart. Both the money and giving reflect your heart. Number four, the best way to accumulate wealth is to start a business or save early and often. Number five, automatic investing is ideal in today’s distracted world.
Number six, your home payment should be no more than 25% of your take home pay. Number seven ideally, you’re saving 15% of your gross income. Number eight ideally, your withdrawal rate on your portfolio is 4%. Number nine, developing a legacy bucket gives you permission to add risk. And number ten, save $150 per month when your child gets his or her Social Security card.
Lots to unpack. Thanks for hanging with me and thanks for listening to Retire in Texas. Stay grounded, live generously, and remember you think different when you think long term. Have a great day.
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