True Wealth: Recent Episodes
David Littlejohn
Weekly podcast relating to educating the public on finance and true wealth. Podcast will be released weekly on Wednesdays.
Run. Jump. Swim. Yellow. Penguins. Hot dogs. Somehow, it all connects to your money. You’ll just have to listen to find out how.
Some investing ideas get repeated so often that they become accepted as fact, even when the market is far more complicated. In this episode, we challenge the assumptions investors rarely stop to examine, look at what may really be driving today’s market, and explain why the biggest risks and opportunities are often found beneath the obvious story.
We all have an invisible financial scoreboard. Today we’re asking who built it, and whether you’re playing the right game.
“Almost bought it. Almost sold it. Almost started it.”
Funny how one little word can change your financial future. Today we’re talking about why “almost” may be the most expensive word you’ll ever say.
Feeling behind financially? You might be doing better than you realize. In this episode, we look at the overlooked signs that you are quietly building wealth. Are you paying down debt, owning appreciating assets, improving cash flow, gaining stability, and making choices that compound over time? Sometimes wealth does not feel like luxury, so what are the signs things might be going better than you thought?
“This time is different.” It’s one of the most common, and potentially dangerous phrases in investing. Every generation believes the rules have changed as new technology emerges and yesterday’s impossible becomes today’s normal. In this episode, we explore why history keeps rhyming, how our definition of “normal” quietly shifts over time, and why recognizing those changes may be far more valuable than trying to predict the future.
History is full of confident predictions that never happened. From market crashes to economic booms, the future has a way of surprising everyone.
In this episode, we explore why uncertainty isn’t something to fear, how investors can think differently about the unknown, and what lessons history teaches us about preparing for whatever comes next.
Tempted by the latest IPO hype? It’s easy to get caught up in the excitement, but history shows that excitement often leads to significant risks for the unprepared. In this video, we break down the mechanics of IPOs to help you see past the marketing, analyze how institutions approach these debuts, and identify the patterns that drive volatility for retail investors.
From buying on hype to selling during market declines, investors often face challenges that have little to do with stock selection and everything to do with behavior. Join us as we discuss ten common investing mistakes and the habits that may help investors stay focused on their long term goals.
The world has changed dramatically in just five years. We have moved from cheap money and low zero interest rates to inflation, higher borrowing costs, AI disruption, and growing geopolitical uncertainty. Today, we explore what these changes mean for families and businesses, while exploring potential investment impacts.
AI was supposed to replace human labor, cut costs, and supercharge productivity… But what happens if the math stops making sense? This week Dave and Matt dive into the exploding cost of AI infrastructure, massive energy demand, billion dollar data centers, and growing questions about whether companies are actually seeing returns on all this spending.
From expensive AI queries to rising chip costs and signs that some companies may be slowing or re-evaluating parts of their AI spending. Is artificial intelligence becoming too expensive to scale the way investors imagined? Or are we still in the early innings of a technological revolution bigger than the internet itself?
This is not investment advice, just a conversation about technology, markets, and the rapidly changing world around us.
Bond yield’s hot. Are portfolios droppin’? Treasury rates up, But inflation keeps rockin’. Stocks are up, Bond prices floppin’. Some want safety, But purchasing power’s stoppin’.
The AI revolution is underway… but will you even recognize this world in 5 years? Will you even recognize the stock market? Today we explore the massive changes quietly unfolding beneath the surface, why speculation and investing walk a dangerously thin line, and the opportunities and risks most people still are not paying attention to.
This week we dive into the GameStop & eBay style market chaos, & how a major acquisition like this could reshape the future of retail & online marketplaces. We also explore the race toward quantum computing & why some believe it could completely transform cybersecurity, AI, banking, & the global economy faster than most people realize.
An off the cuff look at the forces shaping markets and the global landscape. We connect economic trends, policy shifts, and investor behavior to explore what could lie ahead.
Death is not the only risk: poor planning is. We walk through what happens to your money, your spouse, and your legacy when you pass and how a proper plan can help put everything on autopilot.
The Boring Path to a Million DollarsA lot of people spend their whole lives looking for the clever way to build wealth — the hot stock, the timing play, the business idea that finally works. Meanwhile, the couple next door just put fifty bucks a month into a retirement account when they were twenty-two and quietly became millionaires.
On last week’s True Wealth Show, Matt Dickson and I worked our way down a list of ways to actually build wealth in America — ranking each one from easiest to hardest. The top of the list wasn’t glamorous. The top of the list was almost embarrassing in how simple it was.
The easy pathsThese all scored high on “this actually works” and low on “this is hard”:
Start early. Keep going. A small, regular contribution to a broad market investment over fifty or sixty years becomes a genuinely large number. Matt set up an account for his son Micah when he was born — a thousand dollars, then fifty a month. Not because it was a lot, but because time was the thing doing the heavy lifting. Compound interest doesn’t care about your feelings, your timing, or your cleverness. It just wants years.
Get a job that matches your retirement contributions. If you put in a dollar and your employer puts in a dollar, you just made a 100% return the moment the money hit the account. This is free money, and people skip it all the time. A lot of them skip it because they “can’t afford to contribute.” But think about the math for a second: if you contributed enough to get the match and then withdrew all of it tomorrow and paid every possible early-withdrawal penalty, you’d still have more money than you started with. The free money is worth more than the penalty. Take the match.
Spend less than you make, and invest the difference. The number-one rule of financial success, and the one people most often fight. Not because they don’t know it — everyone knows it. But because lifestyle creep is a quiet, relentless force, and most raises turn into more spending instead of more savings.
Stay out of high-interest consumer debt. This one is the flip side of the compound-interest story. The same math that works for you over decades in an index fund works against you every month on a credit card. If you’re paying 24% on a balance while your investments earn 10%, you’re running up the down escalator.
Why “easy” doesn’t mean “common”Here’s the thing about the easy paths: the reason they work is that they compound over decades. And the reason people don’t take them is that they compound over decades.
Most people want the result in a timeframe that matches their attention span. Compound interest works on a timeframe that matches a career.
Matt’s wife started saving at eighteen, putting 10–15% of her paycheck into a retirement account from her very first job. No clever moves. No timing. Just consistent contributions from age eighteen through the rest of her life. She’s doing great. There is no magic to this — the magic is that she started early and never quit.
The harder paths exist tooWe did make it through a long list of harder paths — side hustles, real estate, small business ownership, rental properties, franchising, commercial development. They can all work. They’re just harder, and they require different combinations of capital, skill, risk tolerance, and discretionary time.
The pattern we kept seeing: as you move up the difficulty scale, the paths become more dependent on you — your skills, your timing, your ability to manage risk and stay disciplined. The easy paths, by contrast, mostly require you to get out of your own way and let time do its work.
That’s not a small insight. Most people aren’t going to become venture-backed founders, professional athletes, or franchise magnates. But almost anyone who earns a paycheck can start early, capture a match, spend less than they make, and avoid predatory debt.
What we actually do with thisWhen someone walks into Littlejohn Financial Services and says “I want to build wealth,” we’re not looking for the clever play. We’re looking at where they are, where they want to go, and whether the simple math can get them there. Usually it can. Sometimes it takes longer than they’d hoped. Rarely does it take more cleverness than they have.
Want to hear the full ranking — including the lightning round where we argued about real estate, sales careers, and whether “pick rich parents” should count? Listen to the full episode on littlejohnfs.com.
If you’re wondering how the simple math applies to your situation specifically — that’s what we help people with. No pressure. Reach out when you’re ready.
David and Matt rank different ways people try to become millionaires, discussing the tradeoffs of risk, effort, and difficulties along the way.
Justin and Emma discuss retirement timelines, planning considerations, and where people often go wrong.
David, Justin, and Emma discuss how various taxes work and how different tax treatments can shape financial outcomes.
David and Derek cover a fun new holiday, sports betting, and how platforms like prediction markets are changing the way people view outcomes.
David and Emma discuss investing strategy, market patience, and why successful investing often looks more like farming than hunting.
How do markets actually react to war? We dive into history to uncover surprising trends and economic truths that challenge everything you think about investing.
Starting from scratch? Worried you’ve waited too long? We answer common financial planning questions to help you pivot from uncertainty to a solid long-term plan.
Stop overpaying for hidden fees. We expose advisory costs and the “order of operation” for wealth to help you break the cycle of reactive spending. Tune in!
Retirement used to follow a simple script. Work, save, retire, relax. So why does it feel more complicated now, even for people who did everything right?
In this episode, we break down what changed, from disappearing pensions to rising healthcare costs and shifting tax rules, and why understanding the new rules matters more than ever.
Markets don’t always send clear messages. Sometimes prices rise while warning signs flash elsewhere, leaving investors unsure what actually matters. In this episode, we talk through why different parts of the market can move in opposite directions, how competing signals develop, and what it usually means when traditional relationships stop lining up. We explore how to think clearly when headlines conflict, emotions run high, and the market itself seems undecided.
You don’t need to be reckless to end up behind financially. Small habits can compound just as fast as bad decisions. We break down how to assess where you are right now and the micro changes that can quietly transform your financial future.
Are you overly cautious and delay enjoyment, or do you take on more risk than you can handle? We talk about how hard it is to find balance, why money decisions often feel emotional instead of logical, and why so many people feel stressed no matter which side they fall on. The goal of the conversation was not to give advice, but to acknowledge the reality people are living in and why money often feels heavier than it should.
Geopolitical change abroad and growing support for stimulus style policies at home are converging. This episode explores what is happening in Iran why tariffs and redistribution are back in the conversation and how markets typically respond when monetary and fiscal lines begin to blur.
"Former Venezuelan leader Nicolás Maduro was captured in a dramatic military operation that has raised more questions than answers. Was it about oil? Drug trafficking? Political power? Or something even deeper? Let’s break down the theories and what just happened."
A big picture conversation about money, purpose, and planning and how the perspective we have at Christmas can impact financial decisions year round.
Learn how to spot and stop today’s most common phishing and scam tactics—from fake emails and texts to phone calls and deepfakes—so you can protect your money with confidence, not fear.
The stock market has lived through many bubbles, but knowing when one will actually burst is nearly impossible. In this episode we explain what defines a bubble, why staying invested usually wins over fear, and how small portfolio adjustments can help while big emotional moves can hurt.
Believe it or not, interesting discussions about interest rates do exist! When rates move, they can shake up everything from homebuying to saving for the future, making them far more exciting and impactful than most people think.
Last-minute financial planning simplified! Your hosts, two expert advisors, tackle year-end tax tips, retirement contribution deadlines, and smart spending moves you can still make.
From misunderstanding risk, to stock overconcentration and crippling cash balances… your financial plan could have hidden dangers. We’ll show you some places to look.
Unemployment is rising, wage growth has stalled, and consumer debt is exploding. At the same time AI is reshaping the job market. This episode breaks down what is happening, why so many Americans feel financially squeezed, and what you can do to stay ahead in a rapidly changing world.
It’s not about how much money you have: it’s about how well you understand it.
Here are the five questions that separate people who retire confidently from those who just retire hopefully.
Are you chasing financial extremes? We break down the difference between high-stakes gambling and hyper-frugal penny-pinching, and show you the strategic middle path to a disciplined, long-term financial plan.
Between talk of insurance, trusts, and risk management, we somehow ended up debating espresso machines and tacos versus burritos. Tune in for a fun and fast paced conversation about protecting what matters and keeping the caffeine flowing while you do it.
We break down the truth about investing for everyday people. Some get ahead by being smart, some by being lucky, and some are just still figuring it out. From lottery-ticket logic to quiet wealth builders, this episode shows where you land on the Pyramid of Investing Greatness and how to move up without needing a finance degree.
On this episode of True Wealth, we’re tackling the powerful connection between faith and finance. We’ll dive into what biblical stewardship truly means and how you can apply these principles to your everyday financial decisions—from tithing and giving to saving and spending.
Everyone talks about the dream of running your own business but few mention the challenges that come with it. In this episode we dig into the highs, lows, and lessons from entrepreneurship, what it takes, what to expect, and how to navigate the journey.
Markets move in strange ways that often spark whispers of conspiracy. Are these just coincidences or signs of something deeper? We explore the stories, the patterns, and the possibilities that keep investors guessing.
Getting good financial advice can make or break your future. But how do you know if you’re working with the right person? In this episode, we’ll expose the red flags you need to look out for in a financial advisor. Whether you’re considering a new partnership or want to double-check your current one, we’ll help you spot the signs that it’s time to find a better fit.
In this episode of True Wealth, David and Justin make investing less intimidating. They break down core concepts you need to know, including dividends, how the S&P 500 works, and the simple truth behind valuing your assets. Get ready to build your financial confidence and enjoy the process.
The best offense in investing is often a strong defense. Short term slumps and seasons of underperformance may feel discouraging, but they are rarely the whole story. Maybe what matters is not who’s ahead today, but who’s still standing decades from now. When you anchor your strategy in discipline and patience, the short run becomes noise and the long run becomes your greatest advantage.
Fantasy football meets finance—Justin & Matt share strategies, avoid one-hit wonders, build depth, and reveal Boom or Bust picks for the season.
5% yields had some of us feeling like kings, but that yield has trickled lower and the party might be ending soon. This episode unpacks what’s coming, how it’ll impact your savings, and why people who always seem to win are already making moves.
Retirees often fear the stock market, but the real danger might be the IRS. This episode breaks down how RMDs can trigger surprise taxes, hike Medicare premiums, and hit your Social Security—and what you can do to stay ahead of it.
This week we unpack robo-advisors, DIY investing pitfalls, and why human insight can still be your best financial asset. Sometimes cheap comes with hidden costs—know what you’re really paying for.
New tax reform is here—and it’s introducing some powerful deductions. From “Senior Bonus” write-offs to new breaks for tip and overtime income, the 2025 rules could mean big savings… if you plan ahead. We’ll break down what’s changing, who it impacts, and why timing is everything.
Ever feel the pressure to look rich just to get a date? This True Wealth episode unpacks how modern dating pushes young people to fake it 'til they make it, financially speaking. Tune in to learn how to build real wealth and stop stressing about flexing for the 'gram.
Today, Dave and Matt are pulling back the curtain on one of the most iconic myths in modern life: the American Dream. Is it a real opportunity—or just a marketing campaign in red, white, and blue? They’ll explore what the American Dream actually means today, why so many people feel like they're just pretending to live it, and how much of it is driven by debt, pressure, and perfectly filtered social media posts.Along the way, they’ll ask the hard questions: Is homeownership still the dream? Is financial freedom possible without burnout or a trust fund? And who gets to decide what success really looks like?If you’ve ever felt like you’re checking the boxes but still coming up short, this episode is for you.
Inflation’s not gone. Growth is slowing. Markets are booming. The Fed’s stuck in the middle of it all. In this episode, we break down why monetary policy feels confusing right now, what Powell’s really trying to do, and why the economy can feel strong and fragile at the same time. Tune in to get the clarity you need to understand what’s happening under the hood.
Missiles are flying, headlines are heating up, and global tensions are rising. But panic is not a strategy. In this episode, we break down what is really happening with Israel, Iran, Ukraine, China, and Taiwan. More importantly, we look at how smart investors are reading the tea leaves, spotting opportunity, and staying calm while others overreact. The world may feel on edge, but your portfolio does not have to be.
Some questions reveal wisdom. Others expose nonsense. A few just make things weird. We've collected the ones that separate the steady hands from the sales pitch. If you've ever wondered who to trust with your future, this is where it gets interesting. Listen as David & Matt talk about the questions to ask & NOT ask!
Your dollars are quietly bleeding value, and if you’re standing still, you could be falling behind. In this episode, we show you how to build and protect wealth in a high-rate, high-inflation world. One track for young investors. One for near-retirees with everything on the line. Each move is designed to outpace inflation, avoid taxes, and take advantage of opportunity.
AI isn't coming: it's already here, and it's rewriting the rules of business and investing. From job disruption to new investment frontiers, we break down how artificial intelligence is reshaping the market landscape in real time.
Lets explore powerful tax strategies real estate investors need to understand. Whether you're looking to defer capital gains or roll property into a REIT, knowing when and how to use these tools could save you thousands.
In this episode, we dive into the challenges of achieving a “soft landing” in the economy and explore what history can teach us about market downturns. Our conversation unpacks how investor psychology influences market behavior and why discipline and long-term planning matter—especially during uncertain times. We’ll also offer thoughtful questions to help guide sound financial decisions. This isn’t a forecast, but a grounded discussion rooted in historical context and financial fundamentals.
Most people don’t realize they’re already on one of four paths to becoming a millionaire—but they’re walking it blind. This week on True Wealth, we expose the four real-world wealth engines Americans are using today—from corporate careers and real estate deals to index investing and side hustles—and the silent mistake that quietly derails most along the way. If you’ve ever wondered whether you’re truly building wealth or just spinning your wheels, this episode will make you stop and think. Because the truth is: the strategy isn’t what sets you back—it’s how you execute it. Ready to find out which path you’re really on?
Welcome to The Unwritten Resume, a refreshingly honest, thought-provoking show that dives into the real résumé you're building every day — the invisibleone. Most of what we chase isn’t what we really want. Strip it all down, and what’s left? That’s where your real wealth begins!
Learn how to build a retirement portfolio designed to withstand market crashes—not avoid them. Smart structure, steady income, and strategies to keep you standing when others fall.
Building wealth is a skill—but staying wealthy is a discipline. It’s not just about managing money; it’s about managing you. Success brings distractions: lifestyle creep, status chasing, and the slow drift from who you were when you started. Without a clear definition of “enough,” it’s easy to chase everything and feel fulfilled by nothing. True wealth isn’t just what you’ve earned—it’s how well your money reflects your values, your purpose, and your identity. The real goal? To grow your net worth without losing yourself in the process. Listen for the full breakdown.
Tariffs are back—and so is the battle for economic control. We break down what’s really happening with China, why Vietnam is under pressure, and how this trade war could reshape the markets, manufacturing, and America’s future.
Some people seem to attract wealth effortlessly—while others struggle despite hard work. But is success really about luck, or is there a way to manufacture it? The truth is, the wealthiest individuals don’t just stumble into fortune—they create the conditions for it to happen. From strategic risk-taking to positioning themselves for the right opportunities, they know how to stack the odds in their favor. In our latest podcast, we break down the mindset, habits, and financial strategies that can help you stop waiting for luck—and start engineering it. Listen to discover how you can make fortune work for you.
True wealth isn’t just about accumulation—it’s about alignment. Too often, we chase financial success only to find ourselves exhausted, unfulfilled, and wondering what it was all for. But what if money wasn’t the goal, but the tool? In this conversation, we’re redefining prosperity—shifting from a mindset of endless hustle to one of purposeful growth. How do you use money to build a life that’s whole, not just full? It’s time to give your wealth a mission, your growth a purpose, and your success a deeper meaning.
In today’s episode, we unpack the lesser-known concepts that can quietly shape your investment success. From the upside of working within limitations to the risks of ignoring survivor bias, we’re taking you beyond the headlines. We’ll also reveal why your network and second-level thinking could be just as critical as your portfolio choices. Listen now for a conversation designed to broaden your approach to building wealth.
The Dow just plunged 900 points, recession fears are back, and tariffs are hitting everything from groceries to gas and even your next iPhone. Meanwhile, hedge funds just dumped $4 trillion in stocks—so is this just a shake-up or the start of something bigger? Listen as we break down what’s happening, why it matters, and what smart investors should be doing right now.
With tariffs now in force, investors must decide: adapt or risk falling behind. Will this policy shift be a short-lived negotiation tactic or a long-term economic realignment? Markets, industries, and portfolios will feel the impact—some thriving, others struggling. The key question: Are you prepared for what’s next?
With higher IRS contribution limits in 2025, many investors wonder if maxing out their 401(k) or IRA is the best move. While it offers tax benefits and long-term growth, it can also limit financial flexibility and create unexpected risks. Before committing, here’s what you need to know to make the smartest choice for your future.
Retirement can be both exciting and a little daunting. The more informed you are, the more confidence and peace of mind you'll have as you transition into this new chapter. Let’s explore some key factors to consider as you prepare to leave the workforce.
With national debt soaring and voters pushing for change, is the new administration steering the government like a corporation? We break down the talk of a sovereign wealth fund, the proposed Gaza takeover, and what it could mean for investors.
Just because we can’t practice law doesn’t mean we don’t care about it. So we brough in guest attorney Derek Simmons to discuss the in’s and out’s of corporate entities. Why might you need one? Which one is right for you? What are common mistakes? All that, plus the usual shenanigans that happen each week. Take a listen.
Deep Seek is shaking up the markets, leaving investors wondering—is this an overreaction or a real threat to American tech? While speculation runs wild, there’s a bigger takeaway: How should we respond when volatility hits? This lesson extends beyond just one news cycle.
Lets break down the ripple effects of President Trump’s latest executive orders and their potential impact on the stock market. From energy deregulation to AI investments and trade tariffs, we’ll explore how these sweeping policy changes could shape key industries, influence investor sentiment, and create opportunities, or risks, for your portfolio.
IRAs are a cornerstone of wealth-building, but how do they really work? From Traditional to Roth and everything in between, we’re breaking down your options and strategies. Don’t miss this essential episode—it’s time to take control of your financial future!
What happens when the top 10 biggest US stocks make up 30% of the index? How do we set goals that make investing make sense? With a new year bringing new innovation, let’s make more informed decisions.
Plausible or complete nonsense? Let’s break down some of the most popular conspiracy theories to assess whether they could have any chance of being true. Why does this matter? What if understanding these theories could help us gain an edge on potential market effects?
Turn holiday cheer into financial success! 🎄 Discover 12 simple yet powerful money tips to start 2025 on the right foot. Don’t miss these actionable strategies to help grow your wealth and secure your financial future!
Finances don’t have to be complicated—in fact, they’re as straightforward as basic math! In this episode, we dive into the fundamentals of managing your money, cutting through the noise and demystifying the process. Learn how sticking to the basics can set you on the path to financial success, without overthinking or overcomplicating things.
Ready to wrap up 2024 with a bang? We’re keeping it light and fun as we dive into year-end financial tips you don’t want to miss. From why setting up a family trust could be the ultimate holiday gift to quirky traditions that could spark your financial goals for 2025, we’re sharing practical advice with a playful twist.
Join us as we cover:
🎄 Year-end financial checklists
🎁 Why now might be the perfect time to set up a family trust
🎉 Quirky financial traditions to kick off the new year
💡 Tips for setting achievable money resolutions
Like, subscribe, and comment with your own financial traditions or resolutions—we’d love to hear them!
True wealth goes beyond money. Explore how relationships, resource management, and faith build a meaningful and fulfilling life.
How do all of the new changes Trump plans to unveil possibly affect the market? Lets start speculating and see if we can find areas where the market might be headed.
True Wealth explores the balance between health, wealth, and personal growth. Get actionable advice to maintain peak wellness, optimize long-term finances, and align your life with purpose. Perfect for achievers seeking more than money—they want a fulfilling, balanced life.
Explore how a Republican-led presidency, House, and Senate could reshape markets, from manufacturing to tech and energy. Discover key insights into tariffs, immigration policy shifts, market valuations, and fiscal changes under unified GOP control.
AI is transforming the world of investing, bringing new capabilities to individual investors, advisors, and institutions alike. Listen as David & Justin explore the promise & pitfalls of AI powered investing.
Let’s talk about this trending acronym “FIRE” and how you can better understand the principals and work towards making financial freedom a reality. Unlock the key concepts towards building a brighter tomorrow.
Stupid mistakes can be costly. If you don’t want to learn the hard way, tune in and hear about the dumb financial mistakes people make that can harm their future. From poor planning to emotional decisions, this series covers what NOT to do with your money!
Explore how shifts in U.S. oil policies shape investor strategies and the broader economic outlook. Learn about the effects of regulatory changes, global market dynamics, and evolving energy trends on oil prices and profitability. Understand how these factors influence the stability and direction of the U.S. energy sector and the economy at large.
In this episode, David and Justin discuss the different financial challenges each generation faces. Whether we’re talking about culture, politics, or economics, the reality is that we all face different headwinds. You may be a Baby Boomer trying to reach (and survive) retirement, a Gen X’er with kids still at home, a Millenial trying to get traction in this expensive world, or Gen Z’er wondering if there will be anything left for you. Let’s be real – there are some big hurdles to clear. We talk about what each generation is facing – why it matters – and what to do about it. The interesting twist? The solutions for each generation may have a lot in common.
When it comes to risk, is this the only question to ask yourself? Some people believe in only taking as much risk as they are comfortable with, but is this the solution? The answer might be more complicated than you think.
Let’s explore the unseen systems affecting low-income families, the shrinking middle class, and even the wealthy. From government dependence and inflation as hidden taxation to financial traps and wealth extraction schemes, we’ll explore how economic policies may be engineered to control and divide us. This is more than just an economic conversation—it’s a look into the deeper, hidden forces shaping the financial futures of all Americans.
As the world appears to be escalating in tension and the financial health of major countries like China are in question, what happens after the election is over? We know the world is watching, what could happen next? Lets talk about possible scenarios and what it could mean for the market.
Let’s explore proposed policies from both Kamala Harris and Donald Trump. Are these promises genuine blueprints for their presidency, or are they just campaign rhetoric designed to win votes? We’ll break down healthcare, tax policies, and more, examining the details behind the bold claims and how policy changes could affect the markets. Tune in as we attempt to separate truth from fiction and help you decide: are these plans just for show, or could changes be on the horizon?
Discover the strange and surprising money habits that many people have, which could be quietly draining their wealth. From avoiding employer retirement matches to chasing past performance, learn how to avoid common financial misconceptions and start building wealth more effectively today. Explore these unusual financial behaviors and get tips on optimizing your money management strategies for better results.
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Transcript:
(00:07) all right let’s not waste any time getting into today on this the greatest Tuesday you’ve had all week welcome to the true wealth radio show Dave Littlejohn in studio today with me Matt Dickson. Matt yes we say this every time have we got a show for you this one will be fun though I think this one’s funny actually it’s fun and funny and I actually like the idea of it um you know when I was think about radio show prep today I had some ideas in mind and I read through some of the thoughts that I had and I’m
(00:38) like gosh you know it sounds like something we’ve done before how about something new something fresh something yeah fresh and the funny thing is none of it’s new but it’s a new take it’s fresh it’s fresh we’ll go with fresh we’ll go with fresh I had uh I spent like a whole bunch of time just I’ve been on the road for like 6 hours in the out of the last 24 right and so lot of podcast time and um those of you that know me I listen to podcasts at like a little past 2x speeds like 2.3 2. so
(01:08) it’s like listening to Chipmunks but you get stuff faster that way and uh that doesn’t wear you out like you’re on a road trip instead of just listening to some music and relaxing you’re like two times the speed give me the PO like just cramming your brain full of information uh no keeps me going I like it wow most people would be like at the end of the car drive you know just hopping out of the vehicle my mind is fried you know the gears have been cranking too fast I do have to switch topics so that I don’t
(01:37) get fried what do you switch between uh I was so I’m reading one I forget the author but I’m listening right so was listening to a book called uh the 46 immutable Laws of Power so that’s an interesting one um it could be used for nefarious purposes I don’t ADV that how many books do you get through in a year uh I don’t know is it a lot is it more than five yes more than 10 yes wow okay so yeah I go through books I didn’t realize you were such a a big like book person so books and then I do a lot of
(02:10) podcasting or I do a lot of topical search do you ever like read the book or is it all audio books I do a lot of so I’m a fairly auditory learner uh but I do a lot of audio I definitely read books too really yeah H yeah it’s a different kind of Engagement um my issue is like when I read I tend to read kind of slower than I want to because I tend to say the words in my head see I’m the opposite I hate audio books can’t stand them but I’m curious have they like started to use AI to do the audio books
(02:43) or are they still paying people to like sit there and read them and record it mostly it’s people who actually read them they have actual narrators and so and the narrator does make a difference if there’s I’m just waiting for like the series exist there’s AI out there I mean they’ve been for a long time some better than others but it’s sort of robotic readers uh the Cadence can be a little awkward at times you’re like that wasn’t really what it’s supposed to sound like yeah but but not on I’ve not had like
(03:13) books that I’ve purchased and had them narrated in a poor way yeah so or well I should say I’ve had poor narrators but I haven’t had them like a computer narration that I paid for that I can tell anyway usually it says oh read by so and so so yeah anyway I I do I like digesting information I get into like I go down rabbit holes for topics to do deep like what probably fairly deep research for some or others they’re like I don’t know what you’re talking about uh and it can be goofy stuff like I’ve
(03:42) learned a lot about ultra light backpacking gear cuz at one point that became a thing for me cuz I like to backpack but I have sleep apnea so I have to carry a cpap with me and so that’s like just dead weight right out of the gate so then you get really clever about how to reduce weight in all kinds of other ways to just make it more tolerable so instead of packing your food you catch your food all sorts of little no we don’t do that usually we pack the food Matt’s a better Hunter I’m more of a gatherer I guess yikes uh could
(04:15) probably there’d be some fishing opportunities there you go that by the way if you really want to know the way to Matt’s heart fishing it’s fishing not fish just so you know yeah Matt doesn’t eat the fish just you I do like tuna though yeah that’s new oh yeah I love tuna like the fresh stuff off the dock tuna Burgers cut it up into little tiny cubes smash it together so good okay well there you go that’s the one fish I’ll eat all the other ones you I I usually have them as tuna melts but you
(04:47) know tuna burger however you want to call it I’m good I’m good with that so look let’s talk about so Matt you we’re not really talking about my um weird uh habits of podcast and reading at 2x plus speeds it’s um yeah the show’s more about like what are some of those bizarre spending habits that people have or just bizarre ways that people handle money and then maybe kind of some of those misconceptions around how money works or just you know yeah here’s another thing I would like to phrase this as it comes
(05:18) out of Behavioral Finance like unbeknownst to Matt but he did this right um behavioral Finance is a study of how people make financial decisions and one of the things that is really fascinating is the concept that we will make normal decisions that are wrong okay so it’s normal to do it but it’s the but the information leads you to the wrong yeah the wrong the wrong outcome if you or the wrong decision but it’s still typical right so like normal meaning it’s common it’s typical but it’s wrong okay U I’ll I’ll give an
(05:55) example out of the gates not on your list right but as an example if you go to a casino and you play around a blackjack and immediately win and let’s say you you know you bet 20 bucks and now you got 40 bucks and so what people will say is oh is it going back to that theory of like this is The house’s money like it’s not mine oh it’s not mine I can bet this one now because if I lose it it’s just the House’s money yeah you go that’s a totally normal way to think it’s totally wrong that is your money
(06:26) now and it’s a whole new set of odds and you’re sitting down and that hand is independent of the other hands and the odds are recalculated and recalibrated that point but people don’t do that in their minds they say whatever rationalization they can conjure to say well I came here to do this and I’m doing it right it’s a I had an entertainment budget and I’m going to stay here for this amount of time until until it’s gone right and by the way casinos count on this right they count
(06:54) on Gambler Behavior which is that most people will continue to double down until they’re gone right right and so as the expression goes casinos aren’t built by winners I had some self-control I was at a casino two weeks ago and I made enough money to leave with like I don’t know 20 bucks and the pay for my like $45 steak dinner so I made like 65 bucks and I’m like you know what I’m good with that I’m walking away I’ve had enough luck I’m going to lose this at some point so I walked away with my $20 and a
(07:26) steak in my belly he says this and then goes and bets on the padr or something yeah no seriously all right but this is not the show about gambling that’s an illustration though about how that’s a normal thing to do but it’s wrong to think it’s the House’s money it’s yours right and so but but we all do that that’s normal so I think there’s there’s a number of things that we can talk about here what are some of the things like I’m not trying to hijack Matt did a lot of good show prep here I’m trying to
(07:56) like how do I hand the reins back over to you be like Matt what do we need to talk about mhm well I mean I can give you some examples of some things that I think people do isn’t you know that might walk and talk like a good idea but maybe it’s not right I’m listening one of the things I’ve seen is people will come in and say hey you know I’ve got multiple investment accounts and I’m you know really reducing my Risk by having all these different accounts and then you start looking at the accounts and you’re
(08:24) like did you realize almost all of your Holdings are exactly the same so it’s really not that different as if you just had one account invested in the exact same thing well or here’s the same I see people that will have one account but they’ll buy several things that are statistically the same thing right they’ll buy five different mutual funds that are 85% common Holdings right oh there’s a bunch of overlap in here so you’re really not any more Diversified you just bought multiple ticker symbols
(08:55) that own the same stuff inside of them right yeah so that is always funny to me that that is funny to me it’s that that misconception of diversification you know a lot of people don’t get what diversification is really about yeah right I mean diversification requires what it really is is a quest for multiple Investments with low cross correlation right like your house is probably not super highly correlated to the S&P 500 right and correlation is how closely linked is something so if one investment goes up does the other one go
(09:28) up at the same time for the same reason if so they’re highly correlated so you’re not getting a lot of benefit to diversification I always say like Home Depot and lows are really similar stores and so they they move in lock step with each other a lot they’re not the same store so there are subtle differences but they have a lot of the same influencing factors right so you’re not getting a tremendous amount of diversification benefit by owning those two stores there’s some right but you’re
(09:56) not getting nearly the benefit of if you invested in say I’m not this isn’t recommendation right but like Home Depot and Microsoft right they’re really different companies they have some things that are overlapping but there’s much lower correlation between Microsoft and Home Depot than between Home Depot and Lowe’s okay so good example what else you got um one of them this is where we might kind of stray from Dave Ramsey’s approach but it’s that all debt is bad right and some people live and
(10:25) die by that it’s like I can’t have any debt it’s it’s it’s the worst thing ever and it’s like and I talked to someone recently they had a 0% loan on like a heating and cooling system or something it was financed for like four years and they were freaking out about it and I’m like it’s at 0% like it’s not costing you anything to borrow that money why is that such a bad deal like you can use low interest debt to your benefit and it’s not always bad it’s yeah we could have kind of a beh
(10:59) behavioral conversation around that but here’s my my key takeaway Dave Ramsey is not wrong in that he has this expression when he says look if you play with snakes long enough you’re going to get bit and well that’s true but it it’s also sort of kind of built on a improper conflation that like dead is immediately a snake right um if you have clumsy Behavior or you dance with too much debt yeah I mean if well bad yeah the that is within the bad behavior concept right if you have too much debt or if you don’t pay
(11:35) something off then you yeah you pay interest it dings you for it right if you can’t stay organized I think the larger problem is that the Dave Ramsey crowd he starts often times with people that they’ve already blown it right I’m racked up all this credit card debt it was terrible idea now what and you’re having to retrain from away from terrible decisions and it’s kind of like you can’t say to a recovering alcoholic it’s okay just drink in moderation yeah right it’s like no it’s all or nothing
(12:04) right like that’s it you you there’s no middle ground to this and that’s sort of the way debt gets treated in that scenario with the Dave Ramsey crowd is like if you cannot be trusted with debt then don’t have debt right right I mean I can say this with lots of stuff by the way not just debt my favorite example is Firearms right if you cannot be trusted with a firearm you’re dangerous none you get none right okay but we have a right for a reason right I’m actually a big Second Amendment guy and so I’m like
(12:34) look if you can be trusted with them that’s totally fine it’s that know thyself thing right like if you know that you’re bad with money don’t load up on debt if you know you’re bad with money just don’t have any money no that’s not what we’re saying no get better at it develop skills okay yeah so okay so yeah I mean that’s that’s true like that this idea of painting all Deb is instantaneously evil um and yet you know saying Oh but you can have a mortgage on your house mhm why is that
(13:04) different well it’s asset backed right right that’s the primary thing is loans that are backed by assets versus loans that are unsecured okay so they are not all created equal in your HB back example H it that’s kind of a weird one because it it’s 0% but it is not it is consumer back right they they’re not going to take back your HVAC if you don’t pay in the tradition sense maybe they could try to but like it’d be kind of weird right they may put a lean on other property something like that so in
(13:36) that case I always suggest have the money to pay it off you just don’t need to yeah the other one that I think um is a good one is for the people that just like to hoard money like to keep it under your mattress type of people that’s another one where I’m like pause on this for a sec pause on this idea cuz I think this is worth unpacking like why is money in the mattress kind of an issue but I’m looking at the time we’re running a little long we so let’s we’ll grab a break we’re going to come back
(14:04) and Matt is going to talk about mattresses yes and money to all right soft and everything in between where could we go wrong with this one we’ll find out stick around I’m Dave Littlejohn Matt Dickson you got true wealth on news radio 939 FM and 1240 kqen all right gang welcome back to the true wealth radio show I’m C studio today is Matt Dickson and you can catch up by grabbing the podcast DAV you’ve been listening to too much stuff on two times the speed and now you’re like I’m going to try talking that fast so we can cram
(14:34) more information we got to get it all in there let’s go man besides people can listen faster you can hear faster than you can speak so you got to get it out there cuz their mind’s going to wander if we don’t crank if you want to hear David in two times the speed you can catch our podcast tomorrow right go to Little John fs.
(14:49) com look under the educate tab Matt talk to me about mattresses well per you know on my end I really like a memory foam mattress some people like to me about money in the mattress oh money in okay well some people really actually you know still do that method where it’s like I’m just going to stockpile my cash I’m going to hide it from people I’m going to yeah I mean it could literally be cash in a safe it could be you know cookie jar sock drawer whatever I do I’m going to say this Aster I do like having a
(15:20) certain amount of cash always on hand and the reason for that is if I see something that’s a crazy good deal and it’s like I need four grand I want to be able to just grab that money and go buy it without having to worry about is my bank open it’s funny you know we have different thought processes around this I keep cash around because I might need to pay a babysitter yeah you’re like I’m not using that money to buy another boat I’m just paying the babysitter I’m not getting another boat right I’m going to
(15:49) have friends with boats well you know I also look at it like what if there’s a gun that someone’s selling and it’s a Sunday evening I guess that’s true it’s not the same friend with a boat versus friend with a gun like yeah you you got to have that cash on hand you never know what type of opportunity this is definitely a rural community when you’re like you know somebody might just be selling a gun yeah seriously although I chuckle about that I did end up with a a great utilitarian Browning shotgun that
(16:17) has been uh the word utilitarian and Browning should never be used in the same sense well in this case it is right it’s just a it’s a great like you know pump action simple you know it’s a finely crafted tool David yes put that in a gun safe with a dehumidifier keep it well oiled it’s going to hold its value yes and that’s actually what happens so glad we had this talk okay um back to the mattress conversation so why is this such a like why do you think it’s a bad idea because number one you can lose it
(16:49) a lot easier you could lose it in a fire you could lose it in a theft like there’s a lot of Steal mattresses huh well funny story in Europe there was a guy who literally put his entire life savings in his mattress like he was sleeping on the money sleeping on it okay and so the guy dies and he had been dead in the place for a while and they came in and they pitched the mattress they pitched him and then The Heirs come in to look at belongings they find the note hey my entire life savings is in the mattress it was over a million
(17:28) dollars of physical cash stuffed in a mattress and that mattress went to the dump and the money was never found and the funny thing about it is where does the liability lie in the person who can’t talk anymore well it’s one of those that that’s exactly where the lawyer mindset goes is well did somebody have permission to throw the mattress away well yeah and who gave them permission because was that an authorized or was did somebody just improperly dispose of property and yeah uh which means all this means to me
(18:02) is a couple things one better treasure map or mattress come on like not a fire safe something simple here’s another thing to think about purchasing power right inflation as of late has been really bad that was my best Trump voice for you it’s been really bad it’s been horrible inflation is taking our country it’s destroying it we need to get it back and and and it was at that point that this clip went viral you’re welcome for that I need to I got to figure out a better one I would I would try to do
(18:40) like Jordan Peterson or something and I would just butcher it so I’m like you know moving on so so if inflation’s bad and your money’s just sitting there doing nothing you’re sliding backwards your $100,000 might now only be able to purchase $90,000 worth of stuff whereas if you would have at least had it in some high yield savings or high yield money market account making 5% well if inflation’s 5% you made 5% this is lar you broke even this is my funny thing it kind of rings truer in our area right I
(19:17) mean see somebody watching or listening to this in another area is going to be like you serious man but uh the idea of what do you keep in your safe this is where gold and guns actually preserve value better than money in the mattress yeah okay uh and they in theory have a more they’re more tradable at the end of the world right so if you’re truly a prepper those are better assets for Preppers I think I might be more of a prepper than yeah the gun hoarding thing’s a problem it is I’m just going to say it
(19:51) come on there’s um you know you you only have so many places to strategically leave ammunitions in event of a like Red Dawn or something I don’t even know what we would call it I have an ammunition hoarding problem too especially if it’s on sale like I just got another what was it 500 rounds ordered this is a little like trying to say fireworks are an investment the ammo is an investment if you watched the price you can’t trade it I mean you can sell it later so gosh there was guys that were buying
(20:24) literally we so far off script right just you guys know no by by all means carry on I think our listeners actually care I I like this is I’ve never really done this before but like you know I’ve had the crazy idea of could you like what would be the legality around creating a Munitions and Firearms trust that had fractional ownership so that you could essentially invest in the asset class with specificity right right because historically speaking it’s really gone up right if you and if you don’t believe me here’s the interesting
(20:58) thing watch this election cycle and watch some of these like I don’t normally make a whole lot of predictions um but here’s the thing if you see um a Harris presidency look for gun prices to Skyrocket if you see a trump presidency gun prices should remain stable or possibly decline mhm yeah right and and if you the the answer is simple right if people believe there’s a threat that guns will be removed then will go into hoarder mode and start buying them up as quick as possible so real I’ve watched
(21:34) that happen so many times it’s it’s a it’s a one of those things that’s sort of politically linked and it’s so it’s difficult to handicap because right now polling data is difficult to be to rely upon mhm right so that’s why it’s kind of interesting as well what factors would contribute to these things I’m not saying to go make bets on firearm stocks I’m just saying there’s an interesting piece of data to watch and this is probably what this probably what’s going
(22:02) to play out not investment advice okay glad we had that talk um so Bottom Line cast under the mattress we think that there are other ways to store value in tangible goods yeah and uh that might protect you better against inflation than cash which does not protect against inflation yeah I mean can you really blame people though you’re taught to put your pennies in a piggy bank and just let it sit there so yeah that’s there’s so much going on in there but all right here’s another bizarre one for you
(22:35) though okay listen I’m listening this might not be a misconception this is more kind of just bizarre but people that buy the extended warranty okay rarely does that really work out in your favor I saw like a stat that uh the average consumer spends about 10 to 15% of the products value on that extended warranty and they’re almost never used mhm so you’re just paying more for the product M so that’s one way to kind of save some money buy that ex right uh I’m just not uh and it’s interesting because the we could have a
(23:13) whole long conversation about insurance and the concept that underlies it in the first place right like Insurance should be renting protection for risk that you’re not otherwise willing to absorb you realize you accidentally just went into the second idea that I had for bizarre spending habits and it was literally over insurance and I’m like just go with the risk and if you have to spend $30 again and well and how many times do you forget you even have an extended warranty all the times you’re like yeah no I’m the worst about that
(24:12) stuff that’s why I don’t do it right you’re going to buy an extended warranty be prepared to have to get a Sharpie out and write on it I have an extended warranty for this product it’s yeah you better have like a file of warranties and it better be really well organized so you can well how many times do you go to use the warranty and it’s like well under these conditions and this and that and this and that and you’re like gosh darn it I don’t even qualify for the warranty that I bought yeah and that
(24:36) that that is the hard thing about these Insurance scenarios in the first place right is that they just there’s a lot of caveats and gotchas and here’s a simple explanation for why the insurance company is not interested in losing money either no right so they’re going to make sure that if they’re ensuring a claim they’re specific about how you know and so that’s that’s just part but yeah I think that people often times they just and they use insurance for the wrong reasons like insurance is a
(25:07) lottery ticket right I don’t know how many times I’ve seen people that have uh life insurance and they’re retired and I go well what’s it for and they go well um because when I die my kids are going to get it and I’m like so do you need it it’s like no they paid for everything they’re just keeping it around well I paid for it so long I don’t want to let go right and it’s like well you know it’s going to be gone in five more years right the term expires like what are you paying
(25:35) for this for it’s a lottery ticket now if you die that’s what it is because your use case for the insurance it’s supposed to be either income replacement or it provides for State liquidity right if you owe estate taxes like what are we doing here I love that you use the word Lottery because that also happened to be the next lead in you did it two times in a row David how is this possible are you cheating uh honest you can be honest about this I’m going to honestly do this I’m going to say we need to take our break cuz
(26:07) we’re running into Chad long all right and then when we come back first Matt had to talk about mattresses now we’re going to make him talk about the lottery not to be played for investment purposes as I understand it stick around we’ll be right back I’m Dave Little John and at Dixon you got true wealth on news radio 939 FM and 1240 KQ that’s funny no that was just a I think I used lottery for something else earlier today we were filming a video and I was like you know you need to do this and this and this and this and this
(26:35) or just win the lottery but one of them was like how do you make your kids Rich well win the lottery and give it to them so why would you do that no no just you know long term put put the money in put a little bit in over a long period of time and it’ll work out that’s funny why are people so convinced that we need to be able to like get rich instantly so could you like answer me that question like why and well I know the answer cuz that would be better right right cuz then I’d have it now but you wouldn’t
(27:00) have developed any of the skills that are required to like make the money and then hang on to it like every time almost every time lottery winners get a bunch of money and then they just blow it because they have no skills whatsoever to manage these things and it was never like earned right just like same thing with inheritance right if you get a bunch of money and you’ve never learned how to manage it or build it what do you do you squander it and you’re like now I don’t have a bunch of money anymore so golly goodness
(27:31) this just a mini rant to put on the you know we don’t even you know we record this stuff and I don’t even know does anybody watch it we get like four views I mean they people listen CU they tell us does this part go on it can yeah if we talk about it they’ll leave it in there if it’s if it’s something fascinating it’s like sure why not well everything we say is fascinating Okay I uh I I’m not so convinced that that’s true I will say this your scripting is working out just fine on
(28:04) the show yeah although I think we have four segments and we’re a whole segment behind at this point are we wait we’re not in the are we oh yeah we this is our second break so I guess we have this segment and one more break so you have to talk about lottery tickets and all of segment three I got that I believe in you we’re good yeah I mean if you guys have noticed Matt is systematically taking over because he is I think well I know he’s younger we’re pretty sure he’s smarter he seems more
(28:40) motivated except in the morning and the evening and at lunch time other than that he’s super motivated yep I have Windows I’ve got about or if there’s like an opportunity to go fishing it’s like hey can we get this stuff done I’m fishing I did wake up at 5:00 in the morning to go fishing the other day see I I don’t know what gets you out of bed at 5:00 in the morning besides fishing nothing maybe an airline flight to go fishing like hey got to fly to Hawaii so you go deep sea fishing for two I was so
(29:14) mad that I had to wake up at 3:00 in the morning or whatever it was to catch a flight I’m like no one should be awake at this time it’s so weird I can wake up at 6:30 and just drag just just can’t hard even move but if I wake up at 5: in the morning to go fishing I’m like gliding on Ice it’s like I’m like I don’t get it I envy brain how excited you get around it the brain response is wild it’s like heroin no all right welcome back to the Tre well show where you got to catch the
(29:53) podcast you or probably the video probably breaking David behind the scenes behind the SC well yes cuz Matt is um ludicrous wild all we know about Matt is that he is he doesn’t want to wake up in the morning but if it’s for fishing he doesn’t have any trouble with that nope nope it’s true my wife doesn’t understand it I don’t even understand I don’t understand it you know there’s like these coaching environments when they say well what gets you out of bed in the morning and I’m like
(30:25) necessity right like really no like no no my bed is really like I’m warm and comfortable and I’m like oh I’ve finally reached you know this peace status so usually it’s like what why do you get up necessity there’s something about when you get up well before dark right and you’ve got that quiet time you’re driving to the river then you get in the boat it’s still dark it’s perfectly quiet you might hear a bird or two you motor up you get to your spot you start fishing in the dark and you get to just
(30:53) gradually watch the light come into the day there’s something about that whereas you wake up and it’s already light outside and you’re just like I don’t know try it that’s all I can recommend so this is where we would differ where what I would be doing would probably be like up as the sun is ju before the Sun is up and I would want to like paddle out in the ocean and go surfing or something like that that could be fun too yeah I think it might be the intermittent fasting as well cuz if I
(31:22) get up at 5 and I go fish until 8 well I haven’t eaten anything and your body’s up earlier and I don’t know it just gives you more energy I think that could be it too well Mysteries to be solved on another radio show going need you to talk to me about lottery ticket lottery tickets Matt yeah they’re lottery tickets are an investment right well if you’re a good Gambler maybe they are but you never never say that it literally says it on the ticket not to be played for investment purposes no that’s that’s one that I’ve never
(32:01) understood I’ve never played Powerball bought a lottery ticket any of it I’m like I mean I’ve played before because the novelty of the possibility even though it’s effectively zero but you at least realize that it’s not going to happen oh yeah no I mean it’s it’s a zero it’s literally like a you’d be it’s like voting so that you complain like if you’re conservative in Oregon and you and you vote and like you’re going to lose and then but if you don’t vote you
(32:29) don’t get to complain right you’re just buying a right to complain same thing with terrible attitude right you got to vote you got to vote well think about it this way say you invest $20 a week in into the lottery right um I’m looking at a stat here that that could be worth about $56,000 in 30 years if you got a flatline return of 7% that’s insane how much money you’re just sort of flushing away you just Flushed Away a brand new pickup truck yeah just because you wanted to have a hope and a prayer
(33:04) something of course over 30 years that pickup truck probably going to be $1.7 million you’re not kidding the way they going go in the last six years pickup truck prices have doubled yeah legitimately it’s just like are you kidding me yeah okay but we’ve got a lot more to cover David so other other normal things that are not good that are that are wrong like they it’s the wrong decision but it’s normal let’s talk about maybe some like kind of misguided investment type strategies
(33:36) that people have okay um so this one’s kind of a weird one kind of throwing I’m so guilty of this and then I’m like no do you hoard gift cards not on purpose not on purpose no but um I actually have one sitting on top of my fireplace mantle it’s one of those prepaid visas I don’t know if there’s anything on it and I never want to go use it because I’m afraid that it’s going to bounce it a zero and but there’s probably money on it right and so if you look at the stats about three billion in gift cards think
(34:07) about this for a second right billion Starbucks is a bank because what are you doing or Dutch Brothers right oh I bought a gift card I gave them money in advance they’re not paying me interest for it and they have an immediate margin because you know that the product that they have is going to cost them less than what they sell it to you for m mhm so what a brilliant idea right let’s just collect the money from you in advance and you could Finance us so they’re just kind of like little Banks yep or maybe big Banks
(34:38) honestly Starbucks is huge right well if three billion goes unredeemed like how much of that is Starbucks because I feel like Starbucks is like one of the heaviest hitters with the gift cards like yeah give this to someone you love surely they love Starbucks this is kind of where like my Amazon gift cards they don’t go unredeemed cuz they just go into the hot and when it’s time I just have like the credits until they’re gone I am a sucker for Amazon the same way that you’re a sucker for Costco I’m the
(35:07) same way with Amazon oh well I’m guilty Costco is my favorite store I’ve even said it publicly that doesn’t make it my favorite store you must like the adventure right like you like the adventure of like what am I going to find in this store I like the adventure of I don’t have to move it just shows up at my house I didn’t even yeah I I you know I am a girl Dad I’m the only mail in the house sometimes you just need to go into a bulk store where there’s coolers and batteries yeah it’s like I
(35:37) mean like there’s tires that are taller than me and I’m like oh yes this is what I needed right it’s like you just need that sometimes oh my God and I can also pick up you know like dinner so yeah you can save a lot of money if you’re smart yeah you can also waste a lot of money if you’re not right like I bought 5 lbs of Las but I’m only going to eat one of it and pitch the rest in the garbage money we uh I can’t tell you how much um like spinach doesn’t get consumed cuz well it’s the same as 5 lbs of spinach
(36:10) is the same as one pound in the grocery store create like a Costco sharing program yeah I’m GNA buy the spinach and I’ll trade you for those socks that you’re you bought a 100 pack of socks thank I really like socks oh my gosh okay man deep we again give cards and all right oh this one’s so easy it doesn’t even take a long time though run run it down so what do you got people that don’t invest for the free money from their employer in a retirement plan if your if your company AES offers a
(36:43) match to your retirement plan you should take it right mathematically you should take it because consider this for a moment if I put 2% in and they match me 2% I now have 4% I doubled my return right yep if I cashed out and paid the penalties I’d still have more money than I started it’s crazy right so you’re like you you just got to do it right get the match it’s free money yeah okay so we’re not discussing that anymore just figure it out and if you can’t figure it out oh man your life’s going to be
(37:16) really hard because like really you passed up on free mhm I mean free to you right the employer’s paying for it but free to you and you walked away from that oh man I can’t help you here’s another good one for you hit me chasing past performance I got an example I’m going to ride an example into this one okay I had someone recently who was like all right I’m going to make a huge investment and I’m going to just buy Nvidia stock because it’s making money and I’m like have you seen what it
(37:46) already did right like you’ve already 35% off peak yeah yeah and I’m like H like you really want to jump in after it’s already had its run and a lot of people do that they just look at what performance well last year and then they go buy that thing and it’s like you want you want another true story yeah please so this really happened um I had in a former life before this firm so this is U more than 14 years ago okay but uh in a former life I had somebody come in that wanted to invest and they were
(38:17) retired and they were looking for a retirement income stream and they brought to me a real estate investment trust mutual fund that they wanted me to purchase for the them because it had annualized returns of over 17% and they calculated their retirement income stream based on those returns no I I I will tell you I did refuse them as a client and said I don’t believe that this is a realistic expectation it was I was a lot younger it was hard to do right but I remember just saying I I it’s not that I can’t do it for you I
(38:53) won’t do it for you I think it’s malpractice the year was 2007 ooh o that tells us the ending so you can skip that point yeah and so I don’t know how that played out because they sort of disgruntled the left and said I’m fine I’ll find somebody else to do it for me and I said very well but it won’t be here you know investors who tend to chase that past performance statistically really don’t actually do that great they tend to Trail like one to 2% lower average returns than the people who just there’s been a lot of
(39:24) long-term studies about that too return chasing doesn’t work it’s interesting because there’s some short term studies that suggest that Trends tend to persist for a little while but but looking in the rearview mirror uh so if you can find the current performer it tends to do okay but I’m not suggesting you should chase that because the the the current winner is next season’s loser I got one more good one for you D do you yeah is it do we should we wait until the next segment I think we should because we’re gonna
(39:53) we’re gonna hit pretty heavy when we come back from this break all right then we’ll do this we we’ll grab the break all right when we come back Matt’s got one more good one yeah heavy hitter heavy hitter stick around we’ll be right back I’m Dave Little J and Matt Dixon yeah true wealth on news radio 939 FM and 1240 kqen yeah is this the point where we make that pathetic plea like if you would just subscribe and send it to friends we can propagate this message which is what if you could do Financial
(40:26) still have some fun doing it and here’s the crazy thing what if it fit Under the Umbrella of stewardship which is actually like the big deal for us in all of this it’s like how can you do this we have these shirts that we say ethical capitalist on them right and when people ask like Matt what’s an ethical capitalist is that actually a question yeah how would you define ethical capitalist I think it’s wanting a free market but not such a free market that it goes out of control and people do such greedy things if they slit each
(40:56) other’s throats yeah I I would say uh ethical capitalists are when both parties benefit from the deal yeah right like like a like a fair exchange of mutual benefit is ethical capitalism right it’s not gouging the other person where they feel like they’re you know you know the transaction is that kind of hold their their nose or because they don’t have a better alternative you know no no you it’s a like both people feel like they’re in a better spot because of it that’s that’s where you
(41:24) want to be yeah all right hey gang welcome back to the home stretch of the true well show I’m in the studio with Matt Dixon and we are covering what you had a big example you guys got to grab the podcast to figure out like the rest of the context here big example of misguided savings and investment strategy yep here’s one that this is was this performance chasing or is this a whole new thing well this is kind of like diving in almost to like you’re planning you’re you’re like doing financial planning for yourself right
(41:54) okay yeah so you’re like planning out your future and this is this is a sad one but I bet you’ve seen it someone overestimates their future inheritance they’re like you know what I don’t got to take care of things today because yeah parents are real well off and I’m going to be just fine and then guess what they spent it all or there wasn’t as much there as you think and then you wind up banking on it and it’s not there or maybe you just weren’t that great of a person and they just said we’re going
(42:30) to donate it to this charity over here because we like that idea better than giving it to you ouch I I will say that fortunately that’s not been a common theme with folks in our practice that does make sense though right if you consider for a moment the people that come to financial professionals there there’s there’s broad sweeping generalizations here but folks that come early if usually they’re developing their own plan and so they’re not counting on an inheritance per se or if they are there’s a lot more information
(43:01) and they’re being strategic about how they plan for it right right now there is a group of people that shows up to financial planners at the 11th hour and hopes for a Hail Mary savior right like hey I’m retiring in two weeks this is what I got can you make sure I can do this and then you ask that question do you got an inheritance because yeah and you’re like I mean sometimes the answer is simply well no or or people that will show up and say say well aren’t you like a stock broker can you make me a whole
(43:30) bunch of money with this and it’s like they’ve got you know a modest sum and they really expect very outrageous returns like you know 50% annualized returns or something and I’m like yeah no no I can’t you I saw this guy on the Internet it’s like well maybe you need to talk to them but we can’t do it right right which is funny because if you’re watching this on the internet you’re like yeah know some other guy on the internet can promise you impossible returns that’s not our Jam yeah they’re
(43:55) probably trying to sell you something yeah I mean how many times have you seen that like hey follow me I know I had I made 30% last year and I’m going to show you how to do it and you’re red flag yeah yeah I mean boy there’s so much that that’s the story for we should chalk that up as as a future show right which is the whole like when the why things don’t always scale like why Warren Buffett can’t make 100% returns every year anymore right but they used to and there’s actually some rational
(44:23) reasons for why and Warren Buffett plays a lot more defense than he does offense it’s not just that it’s a scale game when you’re investing billions you can’t like a tiny like you pick a100 million doll company can triple in value it doesn’t move the needle so they don’t spend any time on on those really small Investments anymore that leaves opportunities for other investors to do really good investigative work to discover those things but they’re just not going to be on the radar of
(44:48) institutional managers yeah so anyway we digress so um one of those overestimating future inheritance is a problem here’s a fun funny one um I’m going to let you describe it but it it actually does kind of it it irritates me that we have this All or Nothing culture about this one are you talking about credit cards I am yeah I mean here’s the thing I’ve never once not paid my credit card bill in full right and I might have set up to autopay like it literally pulls from the bank and just pays it I get so much cash
(45:24) back if the main place I’m shopping is Amazon and I have an Amazon credit card I get 5% back and then I get like one or 2% back on gas so it’s like why not use it I’ve paid for almost all of my family’s airline tickets with just a credit card with with the credit card points for the last three or four years when we take vacations see there’s a there’s a reason to have it but it goes back to once again you know if you’re going to shoot yourself in the foot because you’re not going to be able to
(45:51) manage it don’t have it but it doesn’t mean that they’re horrible there there’s other stuff people don’t think about that come with credit cards too like here’s one of my favorites I have a business card and if I pay the cell phone bill with that card it includes handset Insurance here’s a weird one for you you ready for a weird one yes when I went to buy a vehicle one time I have a really high credit card limit and I had a bunch of cash ready to do the down payment but I looked at that and I said
(46:23) wait a minute why don’t I do the down payment on the credit card and get get all those points and the pay off the card and I did it and I racked up so many points that month and I’m like sweet so and really that’s kind of a failure on the dealership’s part because they should be willing to just work with you to not pay the transaction fee but if they’re not willing to work with you nope they weren’t may as well do it yep so stick it to them um here’s one more for you before we run out of time so
(46:51) this is one I’m going to admit to it I’m guilty of many are there’s so many examples of this obsess over small savings like oh I can save $3 on that item instead of that item and I’ll spend 20 30 minutes looking like oh which one is it and then it’s like you probably I do this on Amazon sometimes you go down the rabbit hole of comparison y here’s where it really gets people gas right I drive across town to save 3 cents on gasoline and I have a 20-gallon tank and you go that was 60 Cent Savings and you
(47:26) use that in gas to get there you want to know something I’m going to throw my wife under the bus for a moment because she’s probably not listening and it’s okay it’s so funny did you know she can’t tell you what the price of gas is she doesn’t even look she just pulls in and fills up I’m like you kill me like you got to look you got to like know what place there’s a threshold it’s a dollar a gallon or something on a 30 gallon tank you’re like well that’s lunch now seriously it adds up if you I
(47:57) mean it’s funny because you you talk about being fee conscious and then not paying attention to the gas thing but but it’s it’s the time is her theory is the cost of gas is what it is whether it’s $3 a gallon $4 a gallon or $2 a gallon I’m going to buy it anyway pulling get what you need and get on with your day yeah well I if it’s faster right my theory is if it can give me an excuse to be at Costco oh there you go now I get gas but since I’m here oh my gosh anyway it’s funny
(48:34) because here’s another way to phrase this right sometimes we we walk over a dollar to pick up a dime right and we miss we miscalculate because we fail to calculate our time in the equation and that’s a lot of what it is is that the gas prices are often times nominal compared to the value of your time that whole theory of you know step over a dollar to pick up a dime how many times do we see that with like just even getting an advisor you’re like I don’t want to pay the advisory fee and then you end up doing some sort of huge
(49:02) mistake with your estate that costs you 100 Grand or something and it’s like you would have been better off to have paid the $80 a month to have the adviser or whatever right I I I think that having um I I I really I believe that having good mentors and good advisers is really really key because mistake avoidance is often far cheaper than the cost to have these other people in your lives well if you want to see see some potential ways to avoid mistakes give us a call 541 375 898 or go to the website at littlejohnfs.com
(49:36) that’s it initial consults are always free we just want to get to know you better so if you don’t have somebody give us a call if you do have somebody give them a call until next time I’m Dave Littlejohn and Matt Dickson you’ve been listening to True well on news radio 939 FM and 1240 KQEN
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Transcript:
(00:08) all right welcome to the true wealth radio show I’m your host Dave Littlejohn in studio today with me Matt Dickson and this is of course the greatest Tuesday you’ve had all week are you ready stoked to be here um and so we have a delightfully Loosely scripted show today yeah but I think this may be one of the topics that is of highest interest to our listeners perhaps ever in the history of topics I was going to go as far as to say David do you realize this might be the best show we ever do without a script it’s possible it’s just
(00:44) the best show that’s ever happened ever yep have we oversold it yet no we’re we’re under selling it yeah yeah let’s go for it look we got to thinking about what is something that we could talk about that would be really useful for investors right in general and you know we talk about all kinds of stuff the the reality is right now Market’s really difficult to handicap you don’t know which way it’s headed everyone trying to figure it out and if someone knew well they’d be a billionaire right so that’s
(01:14) the the the first issue here markets tough to handicap then we talked about the news cycle and yeah it’s just a bunch of everybody should hate everybody else per the usual there so then we got to thinking well how could we provide some value to our listeners yeah okay and uh we we started asking the question so you know there’s a bunch of things that we take for granted as Financial professionals because we assume people know stuff that they don’t actually know maybe yeah it may be that and so we
(01:47) thought about it so well what if we were to do a show that was really built to say what is available to investors at various stages of investment from like your brand I knew you’ve never done this I don’t even know how it works all the way up to hey we’ve got a lot going on here where should I be headed with this right and so I think today what we’re going to do is attempt to help investors figure out where am I and what is available to me I want to say what options are available to me but when I
(02:22) say options option is an actual type of investment we kind of touch on like what helping people identify what they need so that they know like not only what’s available but what do I kind of need given my circumstance no I mean like why would we be that useful that seem like all right maybe he not asking too much yeah and I you know the TR the tricky part we can’t give personalized investment advice there’s a bunch of liability associated with that but what we can do is talk about the broader circumstance and what I want our
(02:52) listeners to be able to do today like just think about where you’re at and and maybe it’s not just for you maybe this is something that you can help uh somebody else right so maybe you’re already an investor maybe you’re a parent or a grandparent but you want to help a kid or a grandkid get started and you’re thinking well how do we do that okay so I’m going to start out with the very most basic here uh let’s talk about what are the most common Investments that people buy and and then because the
(03:20) show’s going to kind of orbit around those a little bit okay today we’re not really talking about real estate a whole lot okay I think that that’s certainly a worthy invest but I don’t want to talk about the Exotic you’re talking more like what do people actually go out of their way to invest in that’s not like well I have to own a home because I need someplace to sleep you’re talking like actually going out to invest and I’m also talking about what might you own inside of a retirement plan so there are
(03:48) some things that we could talk about and I’m just going to sort of glance over them right we’re not going to talk about investing inside of life insurance policies today nope too weird okay we’re not going to talk about buying art today we’re not going to talk about collectible items like maybe you want to buy classic cars and you know fix them up and flip them okay that these are all real things by the way but that’s not the the flex today if you will right okay so what I want to talk about first
(04:17) and foremost is some of the the standard things so stocks and bonds mhm first of all we’re get to take what are they and then we can talk about how does somebody buy them okay so first can you tell me what is a stock and what is a bond so a stock is where you are going out and you are buying a share or two or three or four or five however many you want but you’re actually getting a partial ownership in that company that you are buying that stock in so it gives you the ability to vote as a shareholder in the
(04:52) company so if you own one share you get one vote because you’re a part owner right if there’s a million shares outstanding you own one millionth of the company sometimes stocks are referred to as equities mhm because just like the equity is the portion of a home when you’re when you you have a mortgage the part that belongs to you is the equity the part that you’re still paying for that’s the mortgage but the equity is the ownership stake right and then you asked the question kind of what is a
(05:22) bond well on the flip side you could go get a bond where you are in essence loaning your money out to uh you know it could be the government if it’s a treasuries or you could be getting a bond through a corporation where you’re letting that Corporation borrow your money for a certain period of time and then they’re going to pay you some interest to borrow that money and then they’re going to return it to you at a specified date in the future right so very simply stocks are ownership y bonds are loans y
(05:57) there’s terminology around both of them but we don’t want to over complicate this today here’s there is a challenge right like if you wanted to go out I’m just going to try to pull up the price of something like real time here so I’m looking at the price of um Microsoft okay we talk about Microsoft how much do you think a share of Microsoft is will cost you to purchase oh man I’m going to guess it somewhere around $230 that’s over 400 is it up that yeah yeah $414 And1 as of today’s close I noticed that
(06:29) Intel today you could buy a share of that for around $20 right a little over 20 bucks for a share of Intel and this is relevant right because if you and we’re going to talk about how the marketplace is changing and there’s more and more options for investors today than there have been in a long time perhaps the most options I’ve ever seen in my career for investors right I’ve been doing this for 25ish years now right and so we’re seeing tremendous access okay it used to be if you didn’t
(06:57) have you need $414 to buy one share Microsoft well if you only had $100 you can’t own Microsoft right okay so it used to be if you wanted to own Microsoft you could buy it through a mutual fund can you tell me about mutual funds for a second yeah it’s kind of a fancy way of saying this mutual fund group is going to go buy a bunch of different stocks from a bunch of different companies and then they’re going to value that basket of Holdings and let you buy shares of that batch of Holdings at a certain price so
(07:35) you might be able to buy one share of the mutual fund and that mutual fund owns you know 500,000 shares of Microsoft 200,000 shares of apple and so you’re getting exposure to it but in fractional little tiny pieces yeah it’s think of it as sharing in a pot of Investments with other investors so a company is formed that investment company’s purpose is to pool investor monies together and then manage them to build a shared portfolio amongst everybody that’s contributed and so everybody gets proportion and ownership
(08:08) to what they’ve contributed and when money wants to go into the fund you give it to the company and then they put it to work when you want to take money out you go back to the company and redeem it from them and they will cash you out through either the new money coming in from new buyers or from the uh shares bought or sold in the fund right but they’re going to manage this influx or outflux of investors and their money and invested on behalf of the group okay there’s a cost associated with doing
(08:36) that okay but but that’s how you would access things is through a mutual fund that is still a perfectly viable thing to do to this day that is available right um we’ve seen some Evolution we other instruments have arrived now things like exchange traded funds they have similarities to mutual funds and they have some differences they trade on an exchange so you don’t necessarily have to go back to the fund company that created the Fund in order to make contributions or distributions right you may be able to Simply sell the unit on
(09:06) an exchange and another investor will buy the unit directly from you and then you take the money and you go do what you need to do okay so an exchange traded fund is Diversified like a mutual fund is it’s a whole portfolio but it trades like an individual stock might trade now I mean that could be kind of cool especially because here’s one thing to think about the mutual fund it’s got they analyze the value of that once a day whereas in an ETF you could sell that and have it execute almost instantly yeah the the the downside of a
(09:43) mutual fund is that because there’s money coming and going all the time they only let you in or out at the end of the day so they wait for all of the trades to settle and then they kind of balance them out and the final pricing is what you get and it’s a little blind you won’t know the price until after the market is closed so you submit your order and you wait and see what the final price is going to be that would really suck if the market melted down at the end of the day and then it sells it for you at the end once they total the
(10:08) value and you’re like gosh dang it I was hoping to get a little bit more right and so there that is one of the dangers is that there’s a certain amount of uh blind uh investing it’s it’s nominal typically but nevertheless it’s there so uh where do people go to buy these things okay there’s kind of three primary places if you want to buy a stock uh it’s pretty old fashioned but you used to be able to go to the company itself and you could buy shares directly and purchase them or what’s through
(10:36) known as register and transfer so there’s a companies out there that track the ownership of shares in various companies okay you could go to a fund company and buy them through a mutual fund or you can now go to various brokerage organizations and what they do is they create an account that is capable of holding things where they’re tracking the ownership okay and and a brokerage account is probably the most common one that you see from financial institutions mutual funds you often get directly but you may own a brokerage
(11:14) account and not realize it it’s just kind of non-traditional it’s not a brokerage account like You’ think of it’s a holding account or a custodial account and it’s in your 401k right or perhaps you have a government pension or something they hold mutual funds and those mutual funds FS being held in that account well that’s the custodian is who’s holding these various mutual funds and that’s how you get your proportion and ownership and everything interestingly enough you don’t get voting rights in
(11:40) stocks through a mutual fund the fund company votes on your behalf right so you get representative ownership but you don’t get the same you can’t have you get the same voting benefits so um so let’s not get lost on the weeds of the really hypers specifics of investing what we we’re trying to say is investors can get started at smaller Levels by buying into mutual funds or buying lower share prices but there’s also another way to do it and it’s through brokerage accounts and the question is is it with
(12:14) help or do it yourself and there’s a pretty big development that’s happened in the last few years that we need to talk about and you know what it is I would love to know of course and so with our listeners but you have to wait until after this break stick around we’ll be right back I’m Dave Little John and mad Dix got true wealth on news radio 939 FM at 1240 kqen hey welcome back to the true wealth radio show I’m your host Dave Littlejohn in studio today with me Matt Dickson we are answering the question
(12:42) today uh or attempting to answer the question um how does investor gets started and if you already started what are the options that uh are are available to you and it’s really geared a little bit more towards the DIY investor today um if you want to catch up on it grab our podcast right so at our website at Little John fs.
(13:02) com and you look under the educate Tab and you can catch this podcast I’ll post tomorrow so this question David like where do you start right you asked that and I want to ask you a question would you say that you’ve kind of noticed a trend where the DIY investor like that’s become a more popular thing in recent times because from my seat I look at it and I’m like I I witnessed Robin Hood as an example um really kind of blow up and become this really big thing during Co where a lot of people that had never
(13:34) touched investments before were like hey there’s this thing where I can go trade and it’s not going to cost me anything I’m going to go do it and so they got their covid stimulus money and they started everyone was a Trader overnight right um it was kind of this revolution um do you kind of still see that as like a a trend where people are kind of trying to do it themselves more I love this question because uh there’s some things embedded in it I can’t answer the question I’m just going to come right
(14:03) like I don’t know how to answer it but I love the way you’re asking the question because it makes me want to ask sort of another one which is um I can tell you what I think just because something is loud does that make it true yeah right because I think sometimes what we hear like the loud voice is everybody’s doing Robin Hood now but I don’t know that that makes it true I think it makes it newsworthy I think a lot of people were I think it was like one of those fads right like you see things swing into popularity
(14:35) where it’s like well Stanley Cups right like everyone wanted a Stanley Cup for the holiday season are is everyone still buying them or was that just kind of a trend that was here and gone yeah I I don’t know the answer but let’s get back to the original question um you may have seen a I think you did see a real surgeon popularity um we saw account statistics for how many accounts Robin Hood was opening I didn’t see as many statistics for how much how many assets were being managed by Robin Hood were
(15:04) assets going out or they coming in because here’s the thing we were talking at the last segment about how people could buy mutual funds but we didn’t talk about this sort of emerging Trend right now where you can you can access like if Microsoft’s a $400 plus dollar stock today M but you could buy a fraction of a share of Microsoft now through certain trading platforms Robin Hood was a great example you don’t have to buy a whole share of Microsoft anymore right you can buy a fraction of a share you don’t get to vote but it
(15:34) sort of still looks a lot like a mutual fund you didn’t get to vote there either but Robin Hood would allow you to buy a fraction of a share and what made Robin Hood really interesting is I don’t think there was a trading cost for it no there wasn’t right and if you ask like well how do they do that well whatever cash is in the account that’s staying in their banking system and it’s being lent out they’re making money on the spread on their cash but it’s very interesting that I think they were selling orders
(16:00) too well they were selling order flow which is the data they were selling information to hedge funds so that the hedge funds could see where the money was moving in their system right right I think Citadel was one of the big ones that was involved in that at the time U I think so anyway try not to you know you almost think that would be legal like in a way like you think like somehow that that should be because it seems like it to me because I mean it’s probably disclosed somewhere in the operating paperwork and people just
(16:25) clicked yes to open the account and didn’t look at it um it’s sort of like hey if you want to use your Apple phone right your iPhone look at the 20 pages of disclosure yeah cuz you read every word of it right yeah I mean you’re just like well I want to use the phone so I have to deal with this because it’s an all or nothing right like either you accept it and use the phone you don’t accept it and you don’t use the phone it’s like oh that’s interesting that I bought the phone and then there’s these terms that
(16:53) if I want to keep using it without it becoming a paper weight I must accept them right so uh but I think we see that in lots of places my larger point is put all the other things aside if you could buy a fraction of you could buy $5 of Microsoft mhm well then now the investment size isn’t the barrier to entry right so you could open an account at Robin Hood with I don’t know $50 $0000 and start trading stocks and I think a lot of people did that and a lot of people did it with uh low low risk and they could take big bets and if they
(17:32) could figure out how to make something work they would do so there was even a few times where there were glitches in the system and people were able to do things like buy massive options where you weren’t supposed to they were like leveraging up 100 to one and the thing is if they were wrong what was Robin Hood going to do well your account’s at zero well you need to bring us $100,000 and they go yeah let me know how that works out yeah right they could afford to just be structurally bankrupt and there was no way to collect but if they
(18:00) were right they got the money so they could take huge bets well the problem was when Robin Hood was accurate and people were jumping in and starting to trade options and with leverage mhm there was stories of people who went in there and lost so much money money they didn’t even have and then when it was you know like hey you got to pay this up people were killing themselves like that was a headline news article like uneducated investors jumping into Robin Hood making bad errors and suicides like that was a thing and it was sad yeah
(18:39) well I wasn’t going to go that dark today hey uh but yeah the and incidentally that is a a separate aside for why you might want to still have a pro in your corner is that you know you go out there into the weeds yeah self-inflicted wounds are the worst ones and that’s the most common thing that uh impedes an investor right the number one thing that makes an investor lose money is bad decisions and we’re not talking about we picked the wrong stock it’s like well we picked the stock but we couldn’t be patient or we got and and so
(19:13) you know we sold with terrible timing we got scared and bailed at the bottom we got greedy and bought at the top I was going to say greed over fundamental investing right like you you lose your track you get greedy yeah and so that’s just that’s a huge issue is that the emotional swings are too much and so you know a lot of people really fail out like that’s why trading is so so difficult to do uh they’ve done some studies and essentially you’re better off being a sociopath to trade right
(19:40) like really disassociated with emotion you don’t get the same ups and downs when you see losses and gains that a typical human response would even the best investor has that issue where it’s like but I really like this company or this is something I’m like fond of so I kind of tend to gravitate towards that area that’s the thing it’s um you know you need a pretty disassociated emotional response it’s fancy way of saying like your going kill you so yeah uh but anyway back to what can
(20:10) you do right Robin Hood’s an option now you really can’t get started at low dollar figures you can start with 50 bucks you don’t have to put 50 bucks a month in it used to be that with mutual funds you could say well if you do like $25 a month and set up a consistent automatic payment every month they’ let you stay in it they’d let you in right and so they’d set up a you know what they call call an automatic reinvestment program right so that would or systematic investment program right so
(20:34) that would mean you’d keep put money in you could do that um now you’ve got all these other options so um I want to talk a little bit about the spread of options just getting started right mutual funds are one of them right brokerage accounts like Robin Hood with fractional trading are one of them there’s a there’s another one out there called Robo advisors okay and this you can kind of get it in a similar fashion through mutual funds as well but it’s the idea that for small figures you can buy into
(21:00) an entire Investment Portfolio right you see this in retirement plans all the time with what’s known as Target date funds oh yeah right I mean essentially these are pre-built strategies and they’re fully Diversified and they’re they’re risk managed so that uh they they hit a risk Target um a Target date fund as that fund gets closer to its Target date will automatically shift to become more conservative as it gets uh closer and closer to its maturity date a Target risk strategy will Target a specific
(21:32) investment objective on a risk basis so oh it’s aggressive investment it’s going to stay aggressive and it’s going to make modifications but stay in that aggressive category right uh and so the and the robo advisor is is like well we’ll go buy the the mutual funds and automatically reinvest for you and keep them sort of in in Balance those are really expanded there’s a whole bunch of them out there I was just trying to Force AI to tell me how many do-it-yourself brokerage accounts were out there and it just
(22:04) didn’t want to give me a number no right and it’s like well you know there’s like five or six of them here and said no there how many are there dozens well how many dozens um I don’t know somewhere between 24 and 60 like you’re kidding right like so name 24 gets to 12 but you better name me 12 more gets to there name me 12 more it kept going right kept laying into it this is that thing I talked about on a prior episode AI wants to conserve energy it can do it but at what cost and so I think there’s some
(22:35) sort of out now this is just Matt conspiracy the Matt conspiracy but I think there’s some sort of algorithm where when you put in a request for information it’s able to say to itself okay how much energy is it going to take for me to process this and then if it’s over a certain threshold it kind of like dumbs down the answer where it’s like well like you said I can give you 24 it says I’ll give you enough and see if you go away right but the reality is you could use the same energy consumption
(23:06) that it’s going to take to power a house for a day to give me the answer but that’s expensive and so you’re filtering me out I am I’m just laughing cuz so what you’re saying is AI is like a lazy teenager it totally is it’s like do your homework all right here you go no no do your homework fine hey teenager go run five miles I’m going to run five steps and say I’m tired yeah I’m going to go around the corner and see if you watch yeah that’s AI for you all right so um let’s talk about
(23:40) next I mean I relate to where we’re at we’ve talked about you know mutual funds the way in we’ve talked about a little bit about exchange traded funds but that’s not the purpose Today’s Show yeah kind of talk to me a little bit about I we’ve we’ve detailed a little bit of the option set that’s out there but kind of like how does someone look at their own situation and say well maybe maybe I kind of gravitate towards this situation given where I’m at is there like kind of
(24:03) a general broad spectrum of like kind of being able to know where you kind of fit in inside of these different products there kind of is right um I I feel like we could break that apart let’s let’s let’s do this we’re at the point we should probably grab our next break okay when we come back I want to talk about hey let’s paint a picture where you might be and what some of the decisions are that go into selecting the right options that all right stick around we’ll be right back I’m Dave Littlejohn
(24:31) and Matt Dickson got true wealth on news radio 939 FM and 1240 kqen come on Matt you can do it crank it up Crank It Up We’re just joking about it the end of the day and it’s like man I should have had a bigger lunch or something maybe I had too big of a lunch maybe too big yeah you have a whole big bowl of chili and you’re you’re bound to be lethargic oh jeez well I hope to yeah take your time with that chili this is a small room okay hey G we’re uh we’re talking about how or where what what stage uh
(25:04) might an investor be at and trying to I guess we’re really talking to the DIY investor today and what’s available to you at different levels and when you’re just getting started we’ve covered the idea that you know there’s mutual funds and so forth but I want to talk about the nuts nuts and bolts for a minute the things that I wish somebody had explained to me early on like how do I actually buy this thing if I want to own something I don’t even know how to buy it right okay so I’m going to use an
(25:29) example that’s not a recommendation but it’s just a familiar name Vanguard okay if you wanted to buy an S&P 500 index for example Vanguard has both mutual funds and I think they also have an exchange traded fund that will mimic the index right so what you would be able to do is go to vanguard’s web page and again I’m not saying do this but I’m saying this is how you would do it you go to their web page you open an account with them and then you’re going to select what it is that you want to buy
(26:03) to put in that account and then they’re going to connect and you’re going to have to put money in you’re going to have to send money to Vanguard and they’re going to take that money and exchange it for share units in your account so they’re going to put money in the account and then you’re going to take that money and they’re going to buy the mutual fund and then you’re going to get a statement that says I now have an account that has this money in it right and this much of my index that I
(26:28) purchased and then there’s a lot of options from there right and and the thing is they have a huge menu Vanguard has dozens and dozens of different mutual funds and so it’s a huge menu to choose from if you didn’t like Vanguard you could do the same thing by going to Fidelity different company and you’d be opening an account with Fidelity in order to buy these things and so the idea is you’re opening an account with the mutual fund company and then you’re buying whatever is on their menu of
(26:57) options right if you want mutual funds from different companies you have one of two options open accounts with each different place and then you have a whole bunch of different accounts or you open One account that’s a brokerage account and that’s like a holding tank and then you use that brokerage account to then buy from all of the other mutual funds and then you can get one account that can hold things from Fidelity it can hold things from Vanguard it can hold things from all over the place and if you’re going to do that so that’s
(27:28) sort of what Robin Hood is Robin Hood is a brokerage account or a custodian that allows you to use their system to go and buy different things so you open an account with Robin Hood you put money in the account and they do that by linking to your bank and just sweeping money out and it’s like a digital transfer you know click click money arrives in the account and then that money is used to purchase things right okay and the things are described by they all have their own sort of nickname or their symbol when you’re buying it so how much
(27:57) how many shares how many dollars what’s the symbol I’m looking for and all these different places have tutorials for how to do this but that’s mechanically what you do you open an account you fund the account you use those funds to buy the assets that you want to own you can open different types of accounts and that’s how the taxes are going to be treated if it’s a retirement plan if it’s a non-retirement plan and so forth um where you open E account there’s lots of different places to
(28:26) choose from right we’ve talked about Robin Hood we’ve talked now they have brokerage environment Schwab has brokerage environment um etrade a merit trade if that’s I don’t think they’re around anymore I think they got bought by Schwab so I guess one of the questions that someone might have that’s listening is am I having to pay them for this like if I go and open the account and and buy the funds am I having to pay for it or you know should I be paying someone at all it it depends right there
(28:56) there may be fees associated with the account there can be transaction fees okay right when you buy or sell something you can be charged a fee for that not that so there what type of fees are there how could those be paid so you could you could literally be forced to pay something just because you bought into it or because you sold it um what are some other fees that you might come into like if you own a mutual fund that might have a fee just to be in the fund right and so you could pay fees there as well well mutual funds have an OP
(29:28) operating cost right so you don’t really see that it’s debited out of your return right you know if you put $100 in right but you’re still technically paying it you’re just not seeing the money yeah just try not to confuse our listener because you’re not going to see somewhere on your statement oh here’s the fee I paid my mutual fund what you’re going to see is oh when I go to redeem this thing they’re going to take their fee out of it and then give me whatever the dollar figure is afterwards
(29:53) so it’s going to be sort of a an invisible transaction to me but I did pay them well in different mutual funds have different fee structures it could be a front loaded one where you pay a bunch of money up front to get into it one time um well there’s commission structures Associated and so forth and again I I think that our investors are we’re pretty smart you know you you got to know that if you’re going to buy something there may be transaction fees Associated there could be commissions Associated even
(30:19) without a broker just so you’re aware uh you know without without a person associated you could still have fees buying things digitally right there can be they’re they’re called ticket charges right it’s not a commission because commission is a percentage of a transaction right so oh $100 and a 4% commission I have $96 of investment after commission but a ticket charge could be I pay a dollar every time I make a trade right okay well then it doesn’t matter if I spend $10 on the trade or $100 on the trade it cost me a
(30:49) dollar right okay that’s a ticket charge um other times it’s a per share charge uh I think interactive brokers at one time I don’t know what it is now but at one time it used to be half cent per share with um $1 minimum right right so I bought 250 shares then that was going to be a $25 trade right or do25 trade sorry I had to do math well in some places now are charging like a flat monthly fee right in order to have an account with them that it could be I don’t I don’t know I don’t know what
(31:21) they’re but the the usually there there are there can be annual account fees just for keeping the account open and this kind of covers post poage and stuff which is a legal requirement to send you documentation of everything um there can be account closing fees if you close things there can be fees for moving money around right especially if you’re doing it by wire wire transfer fees um can be can be there could be fees for certain assets you buy maybe you’re purchasing a bond Bond may have a different fee than buying a stock or a
(31:48) mutual fund right so you you do need to be aware of the fee schedule associated with the various custodians they are not all created equal NOP okay and so while the concept right hey what’s a car okay well a car has four wheels and you know two to four doors and it’s are you leasing the car well but but we know a car is not a truck mhm okay and we know well what’s the difference between so we know a car is not a truck but then well what’s the difference between a Chevy and a Ford and a Toyota ah which kind of
(32:18) car what features are you getting or not getting right is it a sports car or is it a sedan right and then you know oh well an SUV is not a truck or a car oh good point they’re not all the same no they have similar features like some of the chassis is similar and they do s similar things and then there’s differences mhm and as investors you need to pay attention to those differences right so do you want to talk a little bit then about like how it’s maybe different self-directed where you’re doing it yourself versus where
(32:49) you’re hiring someone else to do it um I suppose we have to now that you set the table that way I mean what do you mean why don’t you since since you brought this up why don’t you share with our listeners um conceptually right I mean it’s the I think the chassis yeah kind of not all that dissimilar between DIY and having somebody else do it but what are some of the things you’re thinking of well I mean when you’re doing it yourself part of what you’re having to do is some research right like
(33:18) or at least you should be I in my opinion you’re not just going to go and blind and say well I’m just going to click a bunch of buttons and buy a random set of things so you kind of having to spend your time figuring out you’re talking about deciding what to purchase yeah there’s a decision factor that goes into it right and I think that stacks on top of the original point of make sure that you’ve got you understand that like what are the costs associated with the chassis you select M right what
(33:45) what custodian or what brokerage firm are you going to use and now you’re talking about and then how are you going to decide what to buy and you’re well the DIY person is now responsible for figuring that out and you might be completely competent in this you know what you’re doing you know it is that you want and you are maybe you’re younger and you’re like hey I’m going to be in this for a long period of time I don’t really feel like I need someone I know what I want and so you’re perfectly
(34:12) fine to just go do that on your own whereas it could be different if you’re maybe say closer to retirement and maybe you are unfamiliar with what these Investments do how they operate and you don’t have the time to figure out what is actually going on with these Investments and there’s just a lot of complexity to your landscape someone who’s just starting out if you’ve got you know $5,000 and you’re going to plan to put $50 a month into something maybe you don’t need someone to you know do
(34:47) the planning portion of your you know your whole picture but maybe you do it really varies so yes I mean when we talk about why DIY versus why have somebody else it’s the the the question comes down to like there’s a lot of things you’re going to be responsible for if it’s DIY um let’s do this I’m looking at the clock let’s grab our last break when we come back what I want to do for everybody is kind of layout here’s some here’s the options here’s the pros here’s the cons of what
(35:31) you’re using but yeah let’s let’s take this last break we’ll stick around we’ll be right back I’m Dave Little John and Matt Dixon you got true wealth on news radio 939 FM at 1240 kqen all right gang welcome back to the true wealth show we got the home stretch here and um we’re talking to the break a little bit about how do we bring this home for everybody that’s been listening today and like really make sense of it and Matt I think you brought up a great point in the last segment where where you know we’re
(35:59) talking about the complexities of n complexity makes it sound really hard right but there’s just there’s variables in picking a custodial environment like if you’re going to if you’re going to do this yourself you got to figure out where am I going to invest and there’s a bunch in the decisions there people are trying to figure out what do I do how do I know what the right option is and that’s that’s just one layer right the next layer that you I think again you laid it out it’s like then you got to go
(36:24) do it yeah and there’s all this stuff involved and and so uh when I think about like like what is the stuff that do-it-yourself or has to be able to or they have to be able to is like what’s the stuff they’re going to be responsible for right and so like you know you talked about there’s research right right um there’s deadlines you have to maintain it too yeah like sometimes I mean some people just set it and forget it but I mean what if you made a new contribution and it wasn’t automatically
(36:57) set up to reinvest and you just and I actually saw that recently with someone they had put for 9 years straight they put all of their money into a retirement account but they never set the investment up and for 9 years it sat in cash it did nothing it was completely uninvested man I saw that months ago yeah nine years I think that is probably the number what was the thing I said at the beginning right what’s the number one thing that impacts investors self-inflicted wounds self-inflicted wounds yeah and that’s one of them and
(37:30) you could see the look on their face they were mortified yeah N9 years they had over $100,000 in that account what if they had just bought an index or like invested in a bond fund like what could they have instead of $100,000 well 9 years it arguably should be double what it was yeah so it was a $100,000 mistake right and this person was 30 something years old yeah and it’s not unrecoverable that’s not the point the but the point is ouch the point is ouch here’s the thing right mistakes are possible
(38:03) professionals make mistakes too but the probability drops I think the issue that I get to and we’re allowed to say this right I’m just going to come right out with it like we’re advocates for working with Pros we are Pros we better be right we better be advocating for that if I’m sit there going like go do it yourself look you can do it yourself will you the question is could you be in business for 12 years if you were completely horrible and made those similar mistakes over and over again no because word of mouth is
(38:32) going to be like hey that guy sucks right and it’s true we we’re in too small a town if you made too many mistakes I mean the word’s going to get out that’s yeah I think that’s kind of the bigger point right like yeah and I think maybe that’s something to consider too all well sure and and again it’s the the issue is not whether or not a financial Pro can pick better Investments than you that that’s the misnomers like somebody thinks well if I go to a pro they should be able to sort
(39:00) of trade and make me gazillions of dollars like no you’re you’re going at this for the wrong reason maybe that advisor is going to keep you from making huge errors that cost you it’s that it’s tax efficiency it’s actually following through and getting things done that’s a huge one right if you don’t get the follow through from your uh adviser that’s a problem right that’s part of what you’re hiring them for so I think those are huge I mean when you were talking about research Matt I mean that
(39:25) often falls under the phraseology of doe deal with right you know what what reason do you have for buying or selling something is there a reason right I mean Beyond just like I don’t know I used the force it felt like the right thing to do well here’s one just kind of example I KN I knew someone that wanted to be an investor but the only thing they were interested in was really really speculative Investments where it’s like oh I heard this thing from this guy that’s a friend of a cousin it’s really
(39:55) going to take off I know it and I’m going to put 10,00 000 at this and so they over concentrated into something they really actually didn’t know a whole lot about and it was just purely a speculation and they kept doing that time and time again and they’re like I’m an investor I’m an investor and I’m like no you’re a Speculator and you’re trying to win the lottery right and there’s a lot of people that have that Lottery mindset that are involved in the stock market I’m not sure where the the
(40:23) reputation that if you go to a stock broker they’re going to just gamble I hear that word way too often oh it’s just gambling it’s just gambling and I’m like well if you’re just making all of your decisions based on some speculation maybe you are a gambler but I don’t think that’s really how these you know bigger firms work where it’s like hey we have liability in this too right like I don’t think people get that well and let’s consider gamble for I mean it’s gambled the same way like if you plant a
(40:54) garden and you put zucchini in the ground right it’s a gamble that you won’t get zucchini next year I mean something could happen and famine or whatever but it’s a pretty good bet that you’re going to get zucchini if you do the things that grow zucchini mhm right I mean it’s it’s not like you plant zucchini and you’re going to get you know tacos right like it’s going to be what you put in there so this idea that the cause and effect are not linked and it’s all just a gamble um I sometimes
(41:25) think that’s actually an excuse that people make it’s like I’m not doing it and I just want to rationalize why I’m not going to do it mhm um they’re scared of it or they don’t know enough so they just default or it’s just you know there somebody’s unhappy about something so you just need to throw some rocks at it it’s we’ve all like I said everybody’s made mistakes that’s how you learn but uh it doesn’t mean that investing is gambling right any more so than like
(41:53) well the US economy is gambling right well you know we print money and you know we make stuff up policy-wise all the time and see how it works out okay then life is a big gamble yeah if you make the definition broad enough we’re all gambling I guess yeah but it feels pretty disingenuous no I mean you could make that silly argument for anything I have to I’m getting in my car to drive to work today oh you’re really gambling there’s a lot of car accidents it’s like but I got to get to work that’s it right
(42:20) like I got to make money to have a retirement account so that I can live when I’m old is it really gambling it’s it I’ll call them calculated risks but I still continue to say the probabilities are in your favor and that’s why we keep doing it yeah uh so it’s back to like if you won’t do this yourself like I I actually love when if somebody will do it themselves like then do it m right we like to do it I mean that’s literally we chose a career around it CU we enjoy it uh so it’s not like you can’t do it
(42:50) yourself but you have to you need to do it goes back to your car wash Theory do you wash your car uh not enough because you don’t want to do it but will you take your car through a car wash yeah I will yeah I will and so and you know on occasion I will wash my car because I it really needs to be done well right and it’s like it’s just not going to happen any other way unless I pay to have it detailed or something like that there are times when we trade our time and our money yep and and I think this is no different so you know anyway
(43:25) we’re getting to the tail end of this of our time today what are key takeaways Matt like what would you tell a a startup investor right now if you could just give him a high level there’s a lot of different investment options out there probably more than ever before and if you know what it is that you want and you have a plan in place and you’re competent go ahead and do it right there’s a lot of cheap ways to do it um for the person that doesn’t have the time maybe they have the knowledge but
(43:54) they don’t have the time it’s okay to reach out to someone and bring in someone to help you out or if you’re scared of it but you know hey I want to be an investor and I need help or there’s a lot of moving Parts in my life I need a second opinion it’s okay to reach out to someone yeah I have something that’s kind of exciting too um if we are now it’s not official yet but I think we’re we’re looking at rolling out a new program under our roof that’s going to be useful for the startup
(44:25) investor so what I encourage you is keep track of our website if you got more questions how can they reach us man yeah you can give us a call or a text at 541 375 898 or just go to the website and chat us uh little joh fs.com right so just reach out if you’re just getting started I got some different options that are uh becoming available but for now we’re out of time so until next time I’m Dave Little John and Matt Dixon and you’ve been listening to True well on news radio 939 FM and 124 40 KQEN
With rising costs, high interest rates and expensive housing, how do we adapt and become successful given these difficult times? Let’s talk about ways to bolster our financial and physical health.
In this episode, you will learn the following:
- Benefits of saving more than the traditional 10-15% of your income to achieve greater financial independence and flexibility.
- Why delaying Social Security benefits could significantly boost your retirement funds.
- How planning for financial self sufficiency can mitigate fears about the future of Social Security.
- The distinction between good and bad debt.
- Practical advice on avoiding common pitfalls like credit card misuse.
- Effective methods such as negotiating lower interest rates and using Dave Ramsey’s snowball effect to tackle high interest debt.
- Why it’s important to reduce access to credit once debts are paid off to avoid falling back into the debt trap.
- Insights into leveraging the financial system to your advantage with disciplined money management.
- Power of compound interest and how responsibly using debt can benefit small business owners.
- Concept of “living large on less” by making thoughtful choices and maintaining the things you own to reduce replacement costs.
- Distinguishing between wants and needs, evaluating high cost items, and finding cost effective ways to enjoy life without overspending.
- Importance of incorporating generosity into your financial plan.
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TRANSCRIPT
00:00:00 How much time did you spend over those five years oiling and taking care of them to go buy an $80 pair of shoes?
00:00:00 Yeah.
00:00:00 I don’t know. But which in my wife is the exact opposite for shoes. I bought her shoes. I don’t have a problem buying my wife shoes because I bought her shoes that are just 10 year old shoes that look brand new.
00:00:00 Oh, yeah.
00:00:00 I’m horrible on shoes. So I never buy shoes. My wife buys me shoes. But I won’t buy them because either, just a tool, they’re just going on your feet. And then when they wear out, as long as they don’t look horrible.
00:00:00 All right, everybody. Welcome to the True Wealth Radio Show. Today, I am your host, Matt Dickson, and with me in studio.
00:00:51 Justin Bruggeman.
00:00:52 And we’ve got an action packed show for you guys today where we are talking kind of about the flow of money through your life. And we’ve got a lot for you today where we’re going to be kind of talking about, you know, kind of different phases of life, spending, saving and how that all kind of ties together. And we might even throw cool couple statistics at you that you didn’t know. So Justin, do you kind of want to start the show off today kind of talking about maybe, like ways that we can kind of rethink building wealth? Like we have some preconceived notions. How might we kind of be able to branch out away from those preconceived notions and maybe adopt, kind of a different way of looking at things? Because times are changing, right? Like inflation is here and what rules applied to us maybe five years ago or 10 years ago maybe aren’t the same rules that we’re playing by today because things are different and people are going through unique, kind of new situations. Like I know when I was kind of getting ready for the show today, one of the things that I looked at was just home ownership statistics, right? And if you look at like, millennials versus Gen X at the same age, kind of in that 25 to 34 years old, what is the rate of home ownership? Millennials are at 43% where Gen X was at 51%.
00:02:18 Right.
00:02:19 So that’s an 8% reduction in people owning homes, you know, and that’s pretty big when you start to think about it, almost one out of every 10 people that might have had a home now doesn’t. Right. And so that’s a change, right? Like houses have become more expensive, harder to get into a house. So things have really changed. And so I want us to keep that in mind as we start thinking about, kind of that need to reshape the way that we’re spending or that we’re saving. Talk to me a little bit about, kind of what’s on your mind as far as kind of ways that we can rethink this whole thing.
00:02:58 Yeah, a little bit of it is, we kind of have the general like numbers is, you know, save 10 to 15% for retirement.
00:03:04 Right.
00:03:05 But we don’t really ever talk about is why not more, if it makes sense.
00:03:11 Right. Like if you can actually do it, why stop at 10 percent?
00:03:15 Right.
00:03:15 Okay. I like that.
00:03:17 And so, and then it’s not a matter of, you know, if I maintain this path, am I going to make it? But if I accelerate the path, it can change your options.
00:03:26 Right. I think the key behind what you’re talking about right there is a little bit of just financial independence. Right. Because as it sits now, a lot of people are paycheck to paycheck. We’ve seen lifestyle inflation happen, that’s a real thing. And so as there’s this constant social pressure for us to have more or do more things or spend more money, we’re almost talking about bucking the trend and saying, well, do you really need to live paycheck to paycheck or can you make some adjustments and go from maybe saving 10% to 20% or more and actually putting money away so that you can have cash on hand for when a good opportunity comes along.
00:04:09 Well, if you look at it, even most common, what you would see is people are going to work till full retirement age of 67, collect social security. Most of them typically have some sort of retirement in place, some 401(k)s or an IRA, which, and then based on the statistics that you pulled out, what was the–
00:04:32 Yeah, only like, 36% of Americans–
00:04:36 Are saving for retirement.
00:04:37 Or not resaving for retirement at all. Yeah. So 36% of you, oh, you know, almost four out of every 10 are not saving for their retirement, which–
00:04:47 Typically what you’ll see is people will work. They will put money into their 401(k) and get the match. They will pay into social security, whether they like it or not.
00:04:56 Right.
00:04:57 And then when they retire, that’s what they have. And so then even creeping up to the 10% of savings for retirement or more than that shifts your options to, maybe I don’t work until 67, but maybe I can stop working and I can delay social security until 67 if that makes sense.
00:05:16 Right. And sometimes delaying social security a little bit can really dramatically impact how much money that you get when you’re in retirement, especially if you’re on more of a fixed income. And you know, you hear some people say, oh, I think social security is going away. I’m just gonna, the minute I’m able to get it, I’m just gonna jump in there and take it. What do you have to say to that person?
00:05:42 Then don’t plan for it to be there.
00:05:44 Right? Yeah.
00:05:45 I mean, I’m not gonna–
00:05:46 Like just consider it fluff and then actually save to a point, to where you can self-fund your retirement the entire way.
00:05:54 Exactly.
00:05:55 Yeah, I think that’s actually reasonable. Like a reasonable way to look at this thing.
00:06:01 Yeah, because you, it, just nobody’s ever came back and been like, and I wish I saved more and started earlier. It’s always I should have, I should have.
00:06:10 Right.
00:06:11 Well, if you can do it, then do it because then just expands your options. And then it’s more even being, maybe it’s not in retirement. Maybe it’s an after tax accounts and things like that to maybe purchase real estate and generate more income. And maybe that income replaces your time between, you know, retirement and full retirement age. And that just produces more income and it’s an appreciating asset. So saving more is going to give you options. Having cash available is going to give you more options than people that don’t.
00:06:46 Yeah. And one of the things, I mean, we just talked about it a little bit earlier when you talked about how, you know, homeownership numbers have changed. Right. And I start thinking about… rethinking this wealth building strategy and it brings me back to real estate a little bit from the standpoint that we are seeing less and less home ownership. But traditionally, real estate has been a store of value, especially if you’re making your residence better, like you’re improving it. And I’ve experienced this personally. I bought at a decent time, and housing prices have gone up and now there’s this store of value in my house where if I go to sell it, I’m going to realize a gain, right? And so I think that’s, another kind of cornerstone of the conversation is saying, I know that home ownership is harder to get into now. Interest rates are high, but we also need to think about long term is renting your best strategy. Right? Because you’re giving that money away every month and trade for the place that you’re in. But are you storing any value back into your own pocket?
00:08:04 Right.
00:08:04 And so–
00:08:05 It’s harder now.
00:08:06 It is.
00:08:06 I mean, you go back. Don’t quote me on this at all, but the numbers are somewhere there. 70, 80 years ago, you had average incomes, you know, roughly 10, 11 thousand dollars. Home prices were about double that. They’re about twenty two thousand dollars.
00:08:23 So–
00:08:23 Then you fast forward now, say average income, let’s call it $80,000. It’s now triple income just to purchase a home.
00:08:34 Right. That’s–
00:08:35 Which is harder. It’s almost built to where it’s harder to build wealth in the real estate because the barrier to entry is high.
00:08:44 Yeah, it is getting harder. And so I think maybe one of the things that we should talk about coming up is, kind of some ways that people can be more successful in, you know, saving so that they can afford that house or they can afford whatever that next big thing is. And one of the things that comes to my mind, right, is debt management. How are you managing that debt load? Because a lot of people, they get overwhelmed by it, and then they don’t take care of it. And then that really hinders them from buying a house or from saving or from, you know, just letting their future kind of blossom. And so a big conversation piece that I think we need to talk about is debt management, because not all debt is bad, right? Like there can be good uses for debt, but you got to be smart about it. So I want to talk about some practical ways that we can be, you know, vigilant.
00:09:50 The majority of people, they use credit cards, use it for instant gratification. I’m going to go on this vacation I can’t afford. I’m going to go buy this vehicle I can’t afford. And then it straps you into where you could have been saving this money and paying cash. You’re now spending more money to get to the same point. It’s just you’re getting there faster.
00:10:16 Right.
00:10:16 But you’re paying more money.
00:10:17 True. So I know this might be a little bit of an early break. But Justin, here’s what I want to do. I’ve got a couple different strategies from the person who’s dealing with credit card debt, but I don’t want to jump the gun and just run away with it because there’s a lot of really good content here. So let’s go ahead and take our first profit break, right? Let those commercials come in. But when we get back, we’re going to talk about some ways that you can really dial in your savings, maybe reduce some of that debt and then get ahead. So that and more when we get back from our profit break. You guys are listening to the True Wealth Radio Show. I’m Matt Dickson.
00:11:01 I’m Justin Bruggeman.
00:11:02 And we’ll be right back.
00:11:05 All right, everybody, welcome back to the True Wealth Radio Show, where we have been talking a little bit about how you might rethink the whole wealth building experience because things are a little bit different today than they were just a few years ago. Justin, I wanted to cut to an early break because we need to talk a little bit about debt management and there’s a lot surrounding us, right? So the first thing that kind of comes to my mind is the fact that most Americans, so on average, have about six grand in credit card debt.
00:11:42 Yeah.
00:11:42 Okay. And that to me, I’m looking at that number, right? I’m thinking to myself, that’s actually not insurmountable. Right? Like if you make some lifestyle adjustments, six grand can get paid off faster than you might think. It might seem like a lot, right? Especially if we’re kind of paycheck to paycheck. But we talked about, you know, working on saving more practical ways that you can adjust things. And so I look at this and say, if you’re going to attack that credit card debt, that can get you onto the next phase of saying, let’s save more. And there’s another interesting thing that I didn’t really know. Did you know that about 20% of people who asked for a lower credit card interest rate got one?
00:12:34 I did not know.
00:12:35 I didn’t know.
00:12:36 I’ve never even heard of such a thing.
00:12:37 Right, just call up and start negotiating your interest rate. That seems wild to me, but it might be worth it, right? Because if you’re getting hit with 30 percent interest on $6,000 and you can just call and negotiate that interest rate down to say 20, that could be a really big deal for getting yourself out of the hole a little bit faster.
00:12:59 And I think it even comes down to what the debt is. Everything has been moved to, like mobile apps and things like that, which a lot of them, it’s just going to map out and you’re going to have the minimum payment because that’s what you owe. You make minimum payments on credit cards, it’s going to take years.
00:13:18 And some people don’t understand that.
00:13:19 Yeah.
00:13:20 And so yeah, if you’re going to do the minimum payment, you’re always going to have that credit card debt. And, you know, I’ve actually talked to people recently who have told me stories like, hey, I’ve got twenty thousand dollars in savings and I’ve got this ten thousand dollar credit card bill that I keep paying the minimum on.
00:13:37 Right.
00:13:37 And I’m like, maybe you need to look at just paying the credit card off so that you can grow your savings faster because if you’re, you know, accepting that only $50 a month as an example is going to the principal and 150 is going to interest, you’re kind of burning that $150 every month where you don’t have to. And so I think ratcheting down on debt and really attacking it aggressively is something that a lot of people kind of just get lazy at.
00:14:08 Yeah. And there’s a couple, kind of ways to attack it. The most common one is, you know, Dave Ramsey, the snowball thing.
00:14:16 Sure.
00:14:17 If you have multiple cards, you eliminate the lowest or the smallest amount, one first and then you use that money plus the minimum payment on the next one and you keep growing and growing.
00:14:30 Right. And there’s exceptions to it too, right? Because like say you have a, say you finance something that was $200 at 1%. But you’ve financed $10,000 at 12%.
00:14:44 Right.
00:14:45 Who cares about that small one, as long as you’re not defaulting on it. Let’s attack the one that’s really dinging you.
00:14:56 Most of the time when people get into the trouble, it’s because they’re irresponsible with the credit cards.
00:15:03 Right.
00:15:03 And so it’s a way to, you know, you’re shrinking down the amount of credit cards you have because if people had access to it, they’ll access your entire credit.
00:15:12 So you’re saying if you have four credit cards and you pay off one of them and you feel good about it, maybe it’s okay to shred that card and be done.
00:15:21 Or put it in the glove box or something. So you’re not easily accessing it. Because that’s what’ll happen, is even somebody will sell a car or something like that and we’ll eliminate a whole credit card. And then they’ll turn around and charge on the credit card.
00:15:36 Yeah. I mean, the reality is, we talked about this before, budgeting, how important that is. I mean, you’re one and a half times more likely to save money every month if you’re budgeting someone who’s not. And so just actually looking at the finances, looking at the budget and saying, kind of where, can we be and trying your best to stick to that, just that alone is gonna cause you to save more money.
00:16:02 Right.
00:16:03 So that is a big deal. So I like that. So you mentioned one of the things was using, like, a snowball effect to kind of reduce your debt load. What are some other things that you can kind of think like along the line of debt?
00:16:19 The one that mentally has me is I would mentally want to pay off the most expensive one first.
00:16:25 Okay.
00:16:26 So–
00:16:26 Like get rid of your largest payment first.
00:16:28 No, your largest, whatever’s costing you the most in interest. So say you have a 28% credit card, a 20% credit card, you know, a 9%. Mentally, my mind wants to go, okay, pay the one that’s costing me the most money. Because if the interest is higher, you know, your payment is doing less.
00:16:49 Okay.
00:16:50 And so that’s another kind of, but that’s also don’t, if you pay it off, don’t rack up the other ones.
00:16:58 Hmm. Like, yeah, so basically some people can make the mistake of being so aggressive towards one that they let the other ones take up a big bill. And then you’re right, kind of back in the same spot that you started.
00:17:13 And even like, I think how you operate is you put a lot of things on credit cards and you pay it off every month.
00:17:18 Right. And that’s just something where I’m like, no matter what happens. You know, I’m going to figure out a way at the end of the month to take care of that bill, because I want the points. And I know that I’m going to spend the money regardless. And I’m not someone who you, like, abuses the credit card. I’m going to spend the same on a credit card as I would on a debit card or if I had cash. And so I just look at it. And I think that’s another thing, because I mean, look at what the theme of the show was, you know, kind of changing the way you think about money, because times are different. I’ve always got like $100 a month coming in at Amazon. Easily, if not more than that. And so if I’m letting my credit card give me $1,500 of free money every month, and I’ve never once paid a dime of interest on it, I’m like, I’m beating the system. And if you can beat the system, do it. There’s a lot of ways to, where you can use the system in your favor if you’re being, you know, really cautious and also savvy about it.
00:18:22 And if you don’t have the discipline to do it, and you still want to be putting things on credit cards and pay it every month, go change your limit. So say it’s, go get a card and say, I only want a $3,000 limit or whatever it is.
00:18:39 Yeah, and it doesn’t have to just be credit cards. There’s so many other ways that you can save. I know for you, one of the things you love, your coupons when you go to get your oil changed, you don’t ever pay full price for an oil change. And you’ve got your 40 or 50% off coupon, you go in there and you get it cheaper. And some people don’t do that. They just don’t.
00:19:00 It’s just cheaper than me doing it myself.
00:19:02 Right?
00:19:02 That I can find a way to do it.
00:19:04 Yeah. And so, and for me, I love couponing before I go grocery shopping. Because, and I actually, like my wife, yeah, she’ll clip like three coupons and then buy everything that she needed for the month. And I’m like, when I go in there, I only buy the stuff that’s on sale because I can’t pay full price for it. And I’d rather go to the other store. Now, am I actually saving money? I don’t know. But it sure feels like it because, you know, when I go in there and I get a hundred dollars worth of groceries for 40 or 50 dollars, that’s to me a pretty big win. So there are ways if you want to be savvy, you can be savvy and change. Because think about it. You only have so much income every month.
00:19:45 Yeah.
00:19:47 It’s gotta be spread out over a lot of different places. And for every dollar you save, that’s another dollar you can spend somewhere else.
00:19:55 And there’s a lot of unexpected expenses that happen. So having an established emergency fund. So that way, when you have your budget, you know, a car, new tires, doesn’t blow up your entire budget, you have that extra side.
00:20:13 I’m thinking about getting into pet insurance for my own household. Man, vet bills. That’s one that I had to deal with recently, right? Like a really large unexpected vet bill. And it was one of those things where you’re never, like wanting to spend that type of money, but the animal is part of the family. Right. And so I’m glad that I had a rating day savings fund because that type of thing, you don’t want it to go on the credit card and stay there.
00:20:48 Yeah.
00:20:48 Right. And so I think that’s a big one, is looking at, are you properly insured? Do you have health insurance? Because if something happens and you get really, really sick and you’re in the hospital for a couple of weeks and you didn’t have the savings and you didn’t have the health insurance. And a lot of people, right, they get complacent with their job, for example. They don’t really love their job, but they go and do their job and the job isn’t paying them what they need to be paid and it’s not giving them the health insurance that they need and they just continue on when it’s like, hey, you know, you’re capable of doing more or doing something that you actually enjoy more, where there’s more benefits. So I think it’s really important for people to look at that and say, things have gotten more expensive, am I properly insured? Am I, you know, do I have a good savings fund on the side? There’s a lot of different things that you can do to put yourself in a better situation.
00:21:47 Well, I think it’d be this way too, is, we preach about it all the time, the benefit of compound interest, you know, starting early for, you know, and often, in a long time. That’s how credit card companies make money. It’s just the reverse.
00:22:02 Oh. Yeah.
00:22:03 So if you’re extending things out longer and paying a higher interest rate, the amount you’re going to pay goes up drastically.
00:22:12 Right. Yeah, no, that’s true. But, you know, for the small business owner out there, right, like we’ve been kind of just dinging debt and saying about all the horrible things that can surround it. But there’s also ways to leverage debt for good. Right. Like if you’re a small business owner and you can take out a loan and that loan is going to expand your business to where now your revenue is up 200 percent. Okay, well maybe that loan was actually worth it because it’s bringing more money in for you every month.
00:22:48 Sometimes you have to spend money to make money.
00:22:50 Right, and so I’m not saying never spend any money, but be smart about how you do it. That’s really the underlying thing.
00:22:57 We’re not even saying don’t ever go into debt.
00:22:59 No. No.
00:23:01 Being responsible, debt ownership is still fun.
00:23:04 Right. Yeah.
00:23:05 And in discipline.
00:23:07 This is a question I always like to ask. Is the debt that you’re taking on a liability or is it an asset, right? Now, odds are if you bought a vehicle, probably more of a liability. It’s depreciating. There’s maintenance costs, but you got to have it. Right. So that’s one where it’s like, even though it’s not an asset and it’s more of a liability, it’s a needed liability because that liability gets you to your job and allows you to make the income that you need in order to have stuff, right? And so that’s one where it’s like you really got to weigh it though because you’ll see someone go buy a toy on credit and be like, oh, but you know, this is just my lifestyle. I’m like, well, that’s where we need to actually kind of reconsider.
00:24:00 And if you want it bad enough, you’ll justify the reasoning for buying it. You’ll just switch it to a way that it makes sense.
00:24:06 And if you want it bad enough, you’ll save for it. That’s the reality. Like, I think the days of like, pay for it in cash, like we’ve gotten away from that mindset. We’re the, we’re this generation of just put it on the credit, forget about it, let’s deal with the monthly payment.
00:24:25 Right.
00:24:25 And so I like the old school kind of mentality of let’s pay cash. So, all right. Well, Justin, other thoughts on debt before we kind of move along?
00:24:43 It can be done.
00:24:44 Yeah.
00:24:45 And if it’s something you’re struggling with, either ask for help or just budget yourself and force yourself to do it.
00:24:53 Don’t be afraid of automating some things too. That’s one thing where I look at this and I’m like, how many people fall behind on their payments because they simply forgot that they had a payment due? And then they’re like, oh gosh darn it, interest is owed. And then it’s like continually forgetting about stuff. There are so many ways to automate stuff these days, right? Like whether it’s, put a reminder in your calendar, so auto pay, there are so many different ways that you can make it to where it’s not a mistake.
00:25:27 And you can say, I think most bank accounts anymore, it’ll auto save. So maybe a certain amount of money that comes in and goes transfers to savings.
00:25:36 Right.
00:25:37 There’s millions of tools out there, but if you’re not going to, putting the effort to do it.
00:25:43 Right.
00:25:44 Then you’re gonna keep going down the same hole.
00:25:46 Exactly, exactly. Okay, well enough about debt. Justin, let’s take another profit break. And when we get back, we’re gonna kinda talk a little bit about kinda designing your lifestyle so that you do have some of that financial freedom and what that really looks like. So you guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN. We will be right back. Stay tuned.
00:26:12 All right, everybody. Welcome back to the True Wealth Radio Show. I’m your host today, Matt Dickson.
00:26:18 And Justin Bruggeman.
00:26:19 And we have been talking about changing up your lifestyle to meet the kind of needs of today’s economy and all the other stuff that’s going on where everything might feel overwhelming, but we’ve got some practical ways to maybe help you out, help you navigate to where things don’t seem maybe so frightening or so scary. We talked a little bit in the first half of the show about, kind of rethinking how, do you build wealth and tackling debt, we talked about that a little bit. But on the second half of the show, I really wanna talk about Justin, designing that lifestyle so that you’re successful. And one of the main areas that I kinda wanna talk about is living large on less. There’s a lot that goes into that. Do you kind of want to talk a little bit about what that means to you?
00:27:13 It’s the want versus the need for me. It’s, do you need the brand new vehicle? Do you need the brand new shoes? Do you need the popular cup?
00:27:23 Right. Because sometimes we actually just kind of, I think we turn off. How much does that actually cost me compared to something else? Right. Like here’s this SUV. It’s 40,000. And it’s got all these cool things like the sunroof and the leather seats. Here’s this other SUV and it’s got the cloth seats and no sunroof and it’s $7,000 less. It’s like, how long would it take you to save $7,000? And is the sunroof and the seat difference really, really worth it? That is part of it. But I look at it from almost a different lens. So when I think of this whole concept of living large on less, that kind of takes my mind into this, the space of maintaining the things that we own, right? Because some people, they are just hard on stuff, right? And they’re always replacing. And the cost to replace something that could have been maintained a little bit better is really expensive, right? Like, and you’re probably thinking, yeah, okay, I’ll change the oil in my car more or whatever the case is, right. But I’m talking about even down to the small things that you wouldn’t even think about, like shoes. Pick on my wife for a moment. I’ll get her a brand new pair of shoes. And like a week later, they’re thrashed, right? Like they’ve been in the mud, like they have been abused. And I’m like, geez, that was a brand new pair of shoes. And, but I’m like, super meticulous. I’ll think about what, am I about to go do? Like, oh, I’m about to go paint. I’m going to wear my worst pair of shoes or I’m going to go mow the grass. Can’t get green stains on the shoes. And so like I’ll have a pair of shoes that’ll last eight, nine years.
00:29:12 Yeah.
00:29:12 Right. Because I have a lot of pairs of shoes, unfortunately, and I’m super, super nice to them and I’ll clean them off when I’m done with them. So like a pair of Romeos for me, oh, those will last five, six years. Easy. But I also oil them. I have a special little beeswax where I like, treat the leather every year. And then some people, they get them muddy, they throw them in the corner and then the leather cracks and they’re done in six months. So if you’re a little neurotic, because I see Justin over there laughing, like, oh, you’re a psychopath, Matt. But if you’re really taking care of your stuff, then your stuff can last a long time.
00:29:53 I do agree with you. If you take care of this stuff, it’ll last long.
00:29:57 Right. And then you know–
00:29:58 I can argue some of that.
00:29:59 Yeah.
00:29:59 For sure, the Romeos. I’m like, well, how much time did you spend over those five years oiling and taking care of them to go buy an $80 pair of shoes?
00:30:09 Yeah.
00:30:10 I don’t know. But which in my life is the exact opposite of her shoes. I bought her shoes. I don’t have a problem buying my wife’s shoes because I bought her shoes that are just 10 year old shoes that look brand new.
00:30:21 Oh, yeah.
00:30:23 I’m horrible on shoes. So I never buy shoes. My wife buys me shoes, but I won’t buy them because either, just a tool. They’re just going on your feet. And then when they wear out, as long as they don’t look horrible, then they’re fine. But I’m the same way kind of, with vehicles are ones, it’s hard for me because I can’t justify a new vehicle purchase, a brand new one. I just can’t mentally wrap my head around it just because, not only the cost of them, but how much they depreciate in value.
00:30:52 See. And I’m the opposite of you because I love a new vehicle, because I hate maintaining vehicles. I hate having to pay for new spark plugs or engine rebuild. And I’m like, well, I’m gonna either pay the payment every month or I’m gonna pay it on the used rig to keep it running. And so I’m like, well, if I feel like I got a good deal on a new rig, like I got it at a pretty good discount off the lot, I’m like, ah. I’ll use it for a while and either sell it or keep it until it blows. So, but I get where you’re coming from.
00:31:30 That’s how I–
00:31:31 There is depreciation when you drive.
00:31:32 That’s how I am differently, like going and buying a brand new SUV because just where our kids are at in life.
00:31:38 Yeah.
00:31:39 I probably don’t need an SUV seven years from now.
00:31:42 Right.
00:31:42 So it’s hard for me to go and spend that much money and have it because I don’t plan on having it that long.
00:31:48 Mm-hmm.
00:31:48 But I could justify going and buying a brand new pickup, even though they’re more expensive.
00:31:53 Because you’re going to use it your entire life.
00:31:54 But I’ll have it 20 plus years.
00:31:56 Yeah. It makes a difference.
00:31:58 That’s a weird, it’s a mine screw on.
00:32:01 Yeah.
00:32:02 It’s hard to purchase things because, and also to me, it’s cars or tools.
00:32:06 Right.
00:32:06 You know, I drive a little Honda back and forth.
00:32:07 Oh, I’m the same way. It is totally a tool.
00:32:10 It’s 40 miles a gallon, it’s great, and it runs. Yeah. It’s not pretty.
00:32:14 And it really depends on the situation you’re in. There was a timeframe where we were down to two rigs. One of them wasn’t super reliable. We could have bought a new rig, but an opportunity came up for a used vehicle that was being sold at such a low price. Even if the motor blew up, it wasn’t gonna harm us, right? And so I’m like, let’s buy this really cheap vehicle and let’s plan to have you drive it two or three years until we get something else. We actually made money on the vehicle. We bought it at such a cheap price. We drove it for like three years and sold it from more than what we bought it for. And… but then a kid comes along. We needed a reliable vehicle. We live in Oregon where it’s icy and the weather can be horrible. And I’m like, Hey, I don’t want you and my six month old baby at the time to be stranded alongside the road in the middle of the winter. And I’m six by six. I can’t even drive your car with a power seat in the back. So it’s like, yeah, we got to get something. And at that point, COVID, right? Like COVID is a thing. Used cars were selling for what a new car was worth. So I looked at it and I’m like, well, at least if I buy the new one with an unlimited mileage warranty, yeah, I’ll take that and just make the maintenance someone else’s problem. It really, really depends. I think the key point here is, be really tactical and smart about the decisions that you make, really stop and think about it. Some people are very, very impulsive. They see something, they’re like, yup, doing it. And I’m like, how long did you want that thing for? I wanted it for a full five days and then I got it. I’m like, hmm.
00:33:58 The biggest way to save some money, if you can do it, which my family has a very hard day with this, prepping what you’re gonna eat for.
00:34:09 That will save you so much money.
00:34:11 It’s insane.
00:34:12 Yeah. Like if there’s an actual menu.
00:34:15 Yep, our family is not really built like that because it’s all, impulse on what we kind of want now.
00:34:21 Right.
00:34:21 And so then instead of one trip to the store on say a Sunday, it’s four trips to the store during the week.
00:34:27 And then you see that one thing while you’re just shopping for your three items and you’re like, well, of course we need that. It happened to my wife the other day. She bought a thing of milk. I had two new ones in the fridge. It’s like, whoa, but she was there for a couple things and she just thought we needed milk. And so, no, it’s a real thing.
00:34:45 And you brought up the living large unless the–
00:34:51 That whole concept of like, there’s a whole substitution.
00:34:54 The vacation part. You know, the European vacation versus the cruise.
00:34:59 Mm-hmm.
00:35:00 You know, it may be a… turn to $15,000 vacation into a five.
00:35:06 Right. Yeah, just figuring it because here’s the reality. Like I look at the whole vacation thing and I think a lot of people do it for their Instagram account, right? Like well, I’m going to go on this crazy expensive vacation to this crazy exotic place or whatever. It’s like, well, because they think that they can or they think that they should or whatever the case may be. The reality is, what are you doing on vacation? You’re spending quality time with someone that you love most of the time.
00:35:35 Most of the time.
00:35:36 Most of the time.
00:35:36 Or money. One or the other.
00:35:38 Yeah. So I look at this and I’m like, find a vacation that you can afford because the last thing that you really want to do is just go spend a bunch of money that you didn’t have for five days in paradise and then come back to reality. And it’s like, gosh darn it, what did I do? So there are ways to have cheaper vacations. Get some good friends and split the cost of the Airbnb, that’s one of my favorite ones, right? Like my friends are listening, they know exactly what I’m talking about. It’s like, hey, get a group of people. One time we went over to Bend Sunriver, it was a super expensive place. It was super nice. But we had like four couples. It was a four bedroom place. We all split it. And it was very cheap. And we got to live the life of luxury for a weekend. So like, figure out the ways to make it work. I’m not saying you gotta like go, live under a rock and not do anything with your life. Go live it up, especially, you know, while you’ve got your health, while you’ve got the ability to do it. But just do it in a smart way. Be savvy. Look for ways to save.
00:36:47 Even though I mean, I know we kind of complain and tell people to save more and save more, and economically the last couple years.
00:36:54 Yeah.
00:36:56 It’s made it, hardest, it’s probably ever better.
00:36:58 Yeah.
00:37:00 And those people that were the avid savers prior are the ones that aren’t feeling the pain that everybody else is feeling.
00:37:09 Right. Yeah, you know, one that we had on this list to talk about was kind of taking care of your health a little bit too. And, you know, getting those regular health screenings, being physically fit, exercising. That’s a big piece of it too, right? Like you want to go experience all these things and do all these things and make your money work for you. You’ve got to be in good enough shape to make your money work for you. And that’s what I struggle with. I hate going to the doctor. I hate getting my blood work done. I will refuse it, refuse it, refuse it. And so this is gonna sound definitely a little hypocritical, but if you can go in there and get a health screening, it might not be a bad thing because if you catch something early or you get out in front of your health, I had a family member who went in, got some blood work done early, 30 years old, pre-diabetic, right? And so cut a bunch of sugar out, getting ahead of the thing. If you can do it, it’s a good option. So.
00:38:16 Health is, can be the same thing with finances. If you don’t take care of it early and often.
00:38:22 Right. That’s true.
00:38:24 It can cause more damage later.
00:38:27 Right. And be more expensive.
00:38:28 Yes.
00:38:29 All right. Let’s do this. Let’s take our last profit break. And when we get back, we’re going to talk about the little sneaky thing that isn’t talked about enough. How do we share that wealth? Right? Because build it, build it, build it. Let’s figure out ways to use it and use it in a good way. That more, when we get back, you guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN.
00:38:56 Alright, everybody, welcome back to the True Wealth Radio Show. We’re in the homestretch where we are going through all the stuff that you need to know in today’s modern financial landscape. Justin, thanks for joining me today. It’s going to be tough. We’ve kind of talked about just ways that you can get through it today and be more successful given all the challenges that we’re facing. Talk to me a little bit about this last segment, right? Where it’s like, we’ve really talked about getting out of debt. We’ve talked about saving more or saving in a better, more efficient, smart way. How do we get to a point, to where we’re sharing that wealth or we’re being kind of generous and what are some ways that we can do that?
00:39:46 So we spend an hour talking about how to stop spending money.
00:39:50 Now we’re gonna–
00:39:50 Now we’re gonna talk about how to give it away.
00:39:53 Yeah.
00:39:53 That makes perfect sense. That’s pretty crazy. You know, the biggest one, I guess, even that we deal with that has a drastic impact is just charitable giving.
00:40:05 Yeah. And one thing that comes to mind when I think about giving, especially if you’re invested in the stock market, right? Because that’s kind of the core of our business, right? We’re investors. We’re investing money into either some real estate stuff, so the stock market, bonds, fixed income, whatever that is, we’re investors. And by nature, our default, I think, is to stay invested, keep saving, keep plotting along, but there comes a time where it’s okay to start handing assets over or blessing others, right? And one of the things that we talk about, that I feel like people don’t just inherently know, they ask, is it a good time for me to give money away? And I look at, and I just had this conversation with someone recently. I’m like, hey, your account is way up, right? The markets have been very generous. You are invested well. You have a really, really large gain over the last few years. It might be an okay time for you to go ahead and do that gifting that you have been wanting to do for a really long time, because your accounts have doubled, right? Like they’re way up. Go ahead and give to that son or daughter or whoever it is that you had in mind. Maybe it’s an okay time. And then, you know, when the markets are down on the contrary, maybe that’s a good time to just ratchet down, save more, put more into investments because, you know, things are kind of rough and beat up. And then when things get better, you look at it as gifting.
00:41:49 Yeah, that’s a matter of trying to keep it within the budget and budgeting for it.
00:41:55 Right.
00:41:56 And if it’s of an importance to you, then you should do it but do it responsibly.
00:42:02 Right, like if you gift to the point to where you’re homeless, that might be ill-advised, right? I know that’s a radical example, but some people will literally kind of just ruin their own financial state trying to be generous when there wasn’t an ability to. And so I think that’s part of the planning too. It’s like, what can you do? Because sometimes you can give way more than you thought. Right? Or you hadn’t thought about what happens when I die and then it’s time to pay estate taxes. I could have, gave this stuff away earlier and then skipped my estate having to pay a bunch of taxes. So it’s a really, really big conversation. And if you need someone to talk to, we are available, right? And we might not be able to help you invest. That’s okay. But we at least want to kind of point you in the right direction and get you to a place where you’re better than when you called us originally. I can’t tell you how many times that happens. I answer a phone call, I know for a fact that there’s no way that we ever do business, you know, but that’s okay, I’m gonna help you out because I just want to, so.
00:43:17 Doing the right thing comes back around tenfold.
00:43:19 It does.
00:43:20 It always does.
00:43:21 It really does, and if you need help, you can always just shoot us an email at info@littlejohnfs.com. You can text us or call us at 541-375-0898. There are a lot of ways to get a hold of us. You can just go to our website and chat with us.
00:43:40 And there’s a lot of tools that are available there that can answer some questions.
00:43:44 Yeah, if you can answer the question yourself off of all the tools on the website, good on ya. That’s awesome, we like to hear that. If it’s something where you really need to speak to someone, we’re not scary people. You can call us and we’re not going to be high pressure sales. Like you’re not going to get that pitch, right? Like we’re just here to help in ways that we can. And if we can’t help, that’s okay too. So–
00:44:08 It does happen.
00:44:09 Oh yeah, it happens. Because we’re really not cut out for everyone, right? Like the industry has changed. If you’ve got $5,000 to invest, we’re probably pretty expensive. Right? Like there is, it’s just a lot. So we’re going to point you in the right direction, hopefully get you the tools that you need. And we stand here, we want to help you guys out. So I think the summary of today’s show is really just let’s figure out a way to be better stewards of our money.
00:44:43 Yep.
00:44:44 And we know that times are hard. But that’s why people are out there to help. So maybe we’re that person. Justin, we’re running kind of long on time here. So 541-375-0898. Little John Financial here to help you guys out if you need it. Until next week, I’m Matt Dickson.
00:45:02 And Justin Bruggeman.
00:45:03 You guys are listening to 93.9 FM and 1240 KQEN.
Using a tax deferred retirement account can be a great idea, but have you considered taxes when you go to retire? Could your required minimum distributions actually drive you into a higher tax bracket? This is the show you can’t afford to miss.
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Looking for Personal Financial Advice? – Learn More Here
Let’s examine how the stock market has been affected by presidential elections. We’ll analyze past patterns, talk about how the market has responded to various political administrations, and provide helpful investing advice. Discover why it’s critical for investors to prioritize market fundamentals over political preconceptions.
In this episode, you will learn the following:
- How emotional reactions, particularly fear and stress, can cloud judgment and lead to hasty financial decisions.
- Importance of maintaining emotional detachment in high stress professions like investing, drawing parallels to the medical field’s rule against operating on family members.
- The benefits of training and preparedness in managing market uncertainties.
- How political debates and election outcomes can influence stock market perceptions and behaviors.
- Historical patterns and common misconceptions about the impact of political outcomes on market performance.
- Interplay between advancing technology, increasing energy demands and the market implications of different energy sources.
- Environmental impact, cost effectiveness and potential of nuclear and renewable energy sources in the current financial landscape.
- How money supply, government expenditures and political regimes influence market trends and behavior.
- Historical spending patterns under different political regimes and their effects on market growth with a focus on large cap stocks linked to AI and sector specific volatility.
- Psychology behind smart investment choices, emphasizing the need for self awareness and logical decision making over emotional responses.
- Market dynamics during election years reflecting on historical patterns and understanding sector specific volatility.
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Explore the implications of the recent Trump assassination attempt on the financial markets. Lets unpack immediate market reactions and analyze potential long-term impacts if Trump secures the presidency. Discover which sectors might thrive and which could face challenges under his leadership. Tune in for expert insights and strategic advice to navigate this complex economic landscape.
Episode Highlights:
- How the stock market reacted with notable increases to the assassination attempt of Donald Trump.
- Reviewing how the markets initially reacted during the assassination attempts of Ronald Reagan and JFK
- The assassination of JFK led to more significant market turmoil with the Dow dropping 2.9%
- Companies in the coal and oil sectors saw stock increases following Vance’s alignment with Trump.
- Foreign direct investment in the U.S. was reported to slow down by 15% immediately following the assassination attempt.
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Looking for Personal Financial Advice? – Learn More Here
There are many layers of a financial plan: the real question is, do you need one? Ignorance is not bliss: learn about ways you can start planning for your future today.
Episode Highlights:
- The critical benefits of starting financial planning early in life, particularly in your twenties or thirties, to ensure a stable financial future.
- Evaluation of the current financial landscape, including income, expenses and future goals, to create a comprehensive plan.
- How to establish and balance short term and long term financial objectives to maintain motivation and track progress.
- Examples of practical goals such as building an emergency fund, paying off debt, or saving for significant life events.
- Assessing your personal risk tolerance to choose appropriate investment options, whether conservative or aggressive.
- Aligning investment strategies with your risk appetite to optimize financial growth and security.
- Key considerations for retirement planning, including projecting retirement income needs and planning for healthcare costs and longevity.
- Being realistic and transparent about your financial situation to avoid underestimating expenses.
- Benefits of diversifying your investment portfolio across various assets such as stocks, bonds, and real estate to manage risk and enhance returns.
- Strategic allocation of assets based on time horizons and financial goals.
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TRANSCRIPT
00:00:00 Significant time on getting this thing really crafted. And then they drop a bomb on me at the end of it. And they’re like, I got $200,000 of gold too. And I’m like, that would have been nice to know at the beginning.
00:00:00 That’s great information.
00:00:00 Yeah, because that completely changes the entire picture here. And you were super stressed out this whole time about your financial plan. And you’re willing to actually spend on some of that gold that you have, well that changes everything. And now that lifestyle that you wanted is very doable.
00:00:40 What’s going on, everybody? This is Matt Dickson. And with me in studio today for the True Wealth Radio Show is.
00:00:46 Justin Bruggeman.
00:00:48 Justin. Wow. This is what? Three part series now.
00:00:52 Three weeks in a row.
00:00:53 Yeah. So we are on a roll. We’ve been going over a lot of really good material and we’ve got more of that good material for you today. Justin, talk to me a little bit about what’s on the agenda for today’s show. What can listeners kind of expect?
00:01:08 Yeah, we’re going to talk about what, well, the pros of having a financial plan and what is included in a financial plan?
00:01:19 I think that’s a really important thing for us to talk about because a lot of the times when I’m fielding a phone call from someone who is just inquiring to the firm, you know, they have a lot of questions and they don’t necessarily know how to ask those because they don’t really know what it is they’re looking for, because they don’t really know what goes into a retirement plan. And so you get a lot of comments like, I have some assets in my retirement account and I’ve got some savings, but I’m six years away from where I think I might be able to retire, but I don’t know if I can retire. Can I retire? I need answers to these questions. So I think this is a really good show because people don’t know what they can expect.
00:02:04 Right.
00:02:05 So talk to me a little bit about some of the things that kind of go into a financial plan or kind of that comprehensive wealth management. What does that really look like, Justin?
00:02:15 Right, and so I guess to start off, what is a financial plan? So we’re even gonna go to the actual definition because it can be interpreted a lot of different ways, but the process of assessing the current financial situation and future goals and how to achieve them.
00:02:35 I think that’s a big one, the future goals part, because a lot of the time, you know, people are just looking at, what do I have and is that good enough? But they’re not looking at what, is it that I actually want to achieve, not what, is it that I feel like I just have to achieve.
00:02:50 And the best part about financial planning is, one, it’s subjective, and two, it is different for every person. There’s not a cookie cutter, you know, just save this amount and that’ll, you know, you’ll be fine, which yeah, there’s a dollar amount that probably is fine. But I mean, you have differences in clients. Some clients are spending $15,000 a month in retirement and others are spending three.
00:03:17 Right. So looking at where you at currently versus where do you want to be in the future and trying to run some projections based on those numbers.
00:03:26 And also adding things into it that can break a plan. Or, you know, a death is a big one that can really break a plan. But a good plan should have, you know, stated insurance coverages for situations like that. But to kind of start out with how, what’s all incorporated inside of a financial plan is the first part is what is your income and what are your expenses?
00:03:55 And are they expected to, you know, have a big change in the next couple years, because maybe you are pretty confident you’re coming up on a significant raise.
00:04:05 Right.
00:04:06 You know, and if you omit that from your plan, that could really change the dynamic of the conversation.
00:04:14 And it can change, like, maybe how much savings it is to get to where you want to even be. You could be in this job searching where you’re kind of bouncing around some jobs, kind of finding the… what you want to do for the rest of your life scenario.
00:04:29 Well, and I want to bring up something that just kind of hit my brain. One of the things that I’ve noticed is a lot of times people wait until the 11th hour and they’re like, all right, I’m ready for my financial plan. And I’m like, if you had only come in five years ago, we could have crafted things to look so much differently today because there’s not very many levers that we can pull. You’ve kind of backed yourself into a corner. And now we only have so many option sets.
00:04:58 Yeah, because you shift the time horizon a lot.
00:05:01 Right.
00:05:02 And so–
00:05:02 Because as an example, what if you wanted to retire early? Maybe you should have saved a little bit into a savings account, a joint account, some brokerage account where you have access to money that’s outside of a retirement account.
00:05:15 Exactly.
00:05:15 So I think getting into the financial planning piece a little bit maybe earlier than you naturally think that you should. It might really benefit you.
00:05:25 And it could even be as typically they’ll say, you know, you should review your financial plan every single year.
00:05:31 Right.
00:05:32 But… So say you’re in your early 20s or, you know, even early 30s at that point is maybe it doesn’t need to be looked at every year. Maybe it’s every three years, every five years.
00:05:44 Yeah, it doesn’t have to be every single year.
00:05:48 Or, you know, a quick update, you know, not a lot of changes. But even starting at that young is, I mean, maybe you get married, maybe you have children, and children shift the planning.
00:05:59 Yeah.
00:06:01 Maybe you’re saving to buy your first home, maybe you’re saving to buy your second home.
00:06:06 Well, a lot of the times, people don’t really know what they’re saving for, and it makes them a lot less likely to even save in the first place, because they, like, say it’s a married couple, right? Have you actually sat down face to face with your spouse and said, What is it that we want our lives to look like in five years? Because if you look at each other cross-eyed, like why would you even be saving in the first place? Because you don’t have a plan, right? So I think setting a financial goal is a really, really big piece.
00:06:37 Yes.
00:06:37 And you don’t have to start with anything exotic. For a lot of people, honestly, it’s as simple as, hey, we don’t have six months of our income saved up. We don’t have a nest egg.
00:06:50 Right.
00:06:50 So I can say, hey, maybe that’s a good spot to start or hey, you got behind on your credit cards. You’ve got credit card debt and you’re getting hammered at 30% interest. Pick that and make that the goal, but at least have a goal. And I think that’s where a lot of people fall short. They don’t have short-term goals. They don’t have long-term goals. And so where’s the money going and what’s it doing? There’s not really, like a use case or a purpose for those assets.
00:07:18 Because there’s a lot of baby steps involved in it.
00:07:22 Yeah.
00:07:23 I mean, it may not be as, you know, if you’re swimming in some debt and you don’t have an established emergency fund, you don’t need a financial plan. You need to accomplish those goals first, then graduate to the planning aspect because it’s also you run the risk of too much information where people will just, being like paralysis, I guess is, you just do nothing.
00:07:49 Yep.
00:07:50 And so establishing those goals are very important, but when it starts with the income, the expenses, any assets you have versus the liabilities you have to get your net worth.
00:08:00 Well, and I’ll challenge the person that already has the net worth, right? Because how many times have you run into the person and they have a lot of assets or they have a considerable estate, and then they walk in and they’re like, I’m just saving, I’m going hard at it and they’re doing wonderful, right? Like they’re knocking it out of the park. But then when you ask them, well, why did you save all this money?
00:08:22 Right.
00:08:23 They look at you cross-eyed and they’re like, well, I don’t know. And I don’t know what I’m gonna do with it. And I don’t know when I wanna retire. And they don’t, they’ve never thought about it. They just put their nose in the grindstone and they just hammer, hammer, hammer. And then they never stopped to smell the roses along the way or do any of the fun stuff or, you know, they don’t know what it’s for.
00:08:42 Yeah.
00:08:43 And then you can wind up 75, 80 years old one day and you’re like, you know, you’ve really slowed down and you’re like, well, gosh darn it. I wish I would have done something back when I was 65 or 60 years old, but time flies by. And if we don’t stop to analyze this stuff, it’ll go by in a hurry.
00:09:03 Well, what is the most common thing you hear when, you know, even, we have clients come in and we’re doing, you know, planning is I should have, came in earlier.
00:09:12 Oh yeah.
00:09:12 Should have started earlier.
00:09:14 Yeah.
00:09:14 Because it’s harder to play catch up.
00:09:17 Right. And if they had just like, contributed an extra $200 a month.
00:09:22 Yeah. I can make a drastic difference.
00:09:24 Right. Or, you know, maybe they had, way, oh, I mean, this sounds kind of weird. Maybe they almost over contributed to their retirement accounts and they have no, like, money on hand.
00:09:38 Yeah.
00:09:38 And so it’s all wrapped up into something that they can’t touch.
00:09:41 Yeah, they can go–
00:09:42 Without penalties or something. So there’s so many different little tiny areas or like little rabbit trails that you can go down and you end up in kind of a bad spot and you’re like, well, I just didn’t know. And that whole ignorance is bliss, doesn’t really apply to your finances. Ignorance is not bliss.
00:10:02 And what I’ve noticed that works the best and I think is the most important is scheduling the… those goals.
00:10:09 Yeah.
00:10:09 And stating what they are in, short term and long term.
00:10:12 Right.
00:10:12 Because if your only goal is, I want to have $2 million in retirement assets when I’m 65, that’s great. And that’ll get you there, but you’re missing everything else in between where, you know, maybe it is, I don’t have a home. So you didn’t save the way you’re supposed to do, supposed, should have, you know, when you’re renting for 30 years, when that money could have been used to–
00:10:38 Some of that money. Some of that money.
00:10:39 Asset that’s appreciating.
00:10:41 Yeah.
00:10:43 And then having the balance of short and long term is, well, have some within one year goal.
00:10:49 Yep.
00:10:49 Have two year, five year, 10 year goals and then have a retirement.
00:10:53 Well, and I hate to say it, but a lot of people look at this and they’re like, I just talked to this one guy this one time and he said to kind of do this. And so I do it. I’m like, do you know what you’re in? Right? Like, do you know what type of retirement account you even have? And is that beneficial for your unique tax situation? Right. Because maybe you don’t need the tax savings today. So maybe the Roth could be a better option for you. Or maybe you’re in a really, really high tax bracket today and you need some tax savings. And so–
00:11:28 And you don’t even necessarily have to be in a really high tax.
00:11:31 You don’t.
00:11:31 But it just means you may have cash sitting on the sidelines, and you’re eligible to be contributing to something that will save you taxes.
00:11:40 Maybe you have a small business and you’re kind of jamming your future self by not letting that business make some contributions on your behalf. There’s so many different ways that you can. like screw it up in a small way.
00:11:55 Yes. And you didn’t realize it.
00:11:56 No, you didn’t know that you were doing it, but it’s because you never took the time to talk to someone. So in the event you do want to talk to someone and you need someone, you know, we’re around, this is kind of what we do. Like littlejohnfs.com, you can look us up. You can even text the office line, I believe. So you know, if you want to shoot us a text message and say, hey, I need some help on retirement planning, you can do that too. The phone number to text is 541-375-0898. Like how I plugged that in.
00:12:31 I do. I’d appreciate that, Matt. And also, I mean, even if it’s, even if it can be not retirement plan.
00:12:39 Yeah.
00:12:39 It can be anything that’s money related.
00:12:45 And there’s so many different options based on how much risk tolerance you have. Right. Like if you’re a super aggressive investor versus a really conservative investment investor, there’s so many options out there. And most people don’t know what those options are, you talk to someone, right? It’s not as intimidating, I think, as you would assume that it is.
00:13:08 Right.
00:13:09 I can’t tell you how many times I’ve had someone call. They’re not a good fit for what we’re doing, but I’ve been able to have a 40-minute conversation with them on the phone. I’m not charging them for that, and I’m just giving them all the information that they need in order to go make the right move for them. And then sometimes people call thinking that they don’t need our services at all and they just have a question and then we get to talking and they’re like, whoa, like that’s kind of above what I’m comfortable doing. Do you mind just doing it for us? And I’m like, yeah, we probably can. So it just depends on your situation.
00:13:44 And the majority of people are more than capable of figuring all this out. But do they want to spend the time?
00:13:50 Well, do they have the time to do it?
00:13:51 Or have the time? Yeah. And sometimes that’s just the case, I don’t want.
00:13:55 I don’t have, I know how to spray. I know how to spray for bugs around my house.
00:14:00 Right.
00:14:01 But guess what? I don’t have the time to do it. And so I pay someone to make sure the ants aren’t in my house because the cost of me having to hear my wife complain about ants in the house is not worth it to me, I would rather pay the $30 a month to have someone do it. And so I farm that out. And a lot of people decide, hey, I don’t have the time to watch the stock market. I don’t have the time to, you know, be in the loop on this stuff. I’m just going to farm that out. And that’s okay.
00:14:33 Yeah. And so establishing the short term and the long term goals is extremely important because if you just have long term goals, you never, you don’t know if you accomplish them, really, till the end.
00:14:44 Okay. So, Justin, here’s what I want to do. I want to talk a little bit more about retirement planning and what goes into it.
00:14:50 Okay.
00:14:51 But I think we need to take an obscene profit break.
00:14:53 Perfect.
00:14:54 So, let’s go ahead and take that break. And then when we get back, we’re going to talk a little bit more about retirement plans and all that other fun stuff. You guys are listening to 93.9 FM and 1240 KQEN and the True Wealth Show will be right back.
00:15:12 Alright everybody, welcome back to the True Wealth Radio Show where myself, Matt Dickson and?
00:15:20 Justin Bruggeman.
00:15:21 Are bringing you everything that you need to know about retirement plans. And do you need one? Is it time for one? What actually goes into one? Well, all that and more. So hopefully you caught the first part of the podcast. If you did not, you can always go check that out. It’s going to be on our website, littlejohnfs.com. Justin, where did we leave off and where the heck are we going?
00:15:45 Yeah, well, we got through which number one, assessing your current financial situation, number two is setting the financial goals and number three that we’re kind of getting into right now is the retirement planning aspect of it.
00:16:00 Okay.
00:16:01 Which, and then this is one, is there’s always a rule of thumb, you know, you save enough money to try to replace between 70 and 90% of your pre-retirement income. It changes for everybody.
00:16:13 Well, and I think it also, correct me if I’m wrong, but I look at this and I’m like, it’s also kind of an estimate because, inflation, right?
00:16:22 Yeah.
00:16:24 They’re going to claim inflation was, blank percentage last year. And I’m going to just say, I don’t believe it because I feel like it was more than whatever you’re going to claim that it was. And so if you get a lot of years of back to back inflation, maybe you need more than that 70 percent or 80 percent or whatever they’re recommending.
00:16:44 People are probably feeling that about now.
00:16:46 Right. Like I feel bad for you if you just retired and then you’re in your first little wave of retirement and you’re having to pull extra because inflation’s hitting you pretty hard. Like we’re all feeling that.
00:16:57 Yeah, the hardest things that I’ve noticed to really project out was one, inflation. I mean, you can use historical averages. Two is, healthcare costs.
00:17:08 Or how long you plan to live.
00:17:10 And longevity is another one.
00:17:12 That’s a huge one.
00:17:12 It’s a huge one.
00:17:13 Right, like the difference of you living to age 75 versus 95, like that changes the picture dramatically. I just went through this a couple times, these last couple of weeks with people where we’re looking at the numbers and they wanna retire early. And then I’m like, okay, well, what if you lived to 95 instead of 100? It made a difference, right? Those last five years, especially as things continue to get more expensive. And that’s why you gotta take the retirement plan with a grain of salt, I feel like, because there are so many things that you have to assume in order to make a financial plan.
00:17:54 Yeah, I mean, you plan for the alternatives as you can plan for higher inflation. You know, the what if scenarios, what if inflation is higher?
00:18:04 Well.
00:18:04 What if tax rates change? Because trying to estimate taxes 30 years down the road.
00:18:09 Well, and this is why I like what you say, right? Like, plan like, worst case scenario.
00:18:14 Yep.
00:18:14 Don’t try and justify your whole retirement plan on a best case scenario, because what if you have five years of a down market?
00:18:24 Yep.
00:18:25 Or what if we actually have World War III and it takes six or seven years for us to get through that? And your retirement accounts aren’t what they were yesterday. There’s so many different things that play a factor in this. And I think that erring on the side of caution a little bit, it can be a good thing.
00:18:43 Yeah, and you can even kind of put guardrails around it and putting it as, alright this is if things go extremely well.
00:18:50 Right.
00:18:51 This is, you know, your cap of kind of, what you should take on a monthly basis and then you have, the other end is this is bad.
00:18:59 And this is why–
00:19:00 This is your low point.
00:19:01 Wouldn’t you say it’s really important to be looking like, especially in retirement, it’s really important to look at this thing on a yearly basis because if you have, for example, a bad year in the markets, maybe you’re drawing a little bit less out of your accounts. Or on the flip side of that, if you have a really, really good year, maybe you go ahead. Yeah, you actually take that trip to Europe that you really want to take.
00:19:29 Right.
00:19:29 You don’t take the trip necessarily on the year where things are down, but maybe you take the trip on a year that’s good. And so being flexible, I think in retirement is a really big piece.
00:19:40 And I even like for people, try to do the plan to retire a little bit earlier than you even expect. And because that is if things go great, yeah, maybe it’ll work. But then if you’re just planning for that one point and you don’t get there, then you can just be mortified and just defeated. And so that’s never a good thing either. So it’s like I want to retire at 50, 55 would be great, but if I have to 60, 65. Yeah.
00:20:13 Why not? And what about, you know, there’s also the potential sometimes for, even though you have officially retired, maybe you do some part-time job that you love and it’s your passion and it keeps you active out in the community. It makes you a little bit of income and then you’re not stressing that retirement account as much or maybe you’re not depending on that social security as much as you were before. That can be an alternative too. And so depending on your unique circumstances and what you’re willing to do or what you want your life to look like, it can make a big difference because some people, you know, what you want your life to look like, they’re like, hey, I just want a garden. I just want to stay home. I don’t want to travel. I just want to hang out at the garden. I want to have my grandkids over. And it’s simple. It’s cheap. And that’s what they want. But some people are not content with that. They want to travel. And so that lifestyle cost, that kind of goes back, I think, to what we talked about, you know, at the first part of the show was setting some goals and really being honest with yourself. Because if you go in and you make this financial plan, but you’re not being honest with yourself, if you come in and you’re like, I’m going to spend $3,000 a month, that’s easy. But you’re not being truthful. Your actual spending is like $5,000 a month. Well, your financial plan might not pencil how you hoped it would. So being realistic with yourself is a very big piece of that.
00:21:40 Being realistic and transparent because if you plan for something and you’re, you know, like what you just said is, I want three, but I need five. And you plan for three.
00:21:51 Yeah.
00:21:52 You’re gonna be in a world of hurt.
00:21:53 Well, you just mentioned it again, transparency. I did a financial plan for someone and we got to the end of this thing and we had spent some, you know, significant time on getting this thing really crafted and then they dropped a bomb on me at the end of it and they’re like, I got, you know, two hundred thousand dollars of gold too. And I’m like, That would have been nice to know.
00:22:15 That’s great information.
00:22:16 Yeah, because that completely changes the entire picture here and you were super stressed out this whole time about, you know, your financial plan and you’re willing to actually spend on some of that gold that you have, well, that changes everything. And now that lifestyle that you wanted is very doable.
00:22:35 And most commonly what I’ve run into and I’ve seen is, which this is being, very generic saying, somebody retires at 65.
00:22:47 Okay.
00:22:47 If you retire at 65, typically you have about 12 years, of where you actually are spending more money. You know, you’re traveling, you’re spending time with the grandkids. Typically, when people get in their late 70s, early 80s, they don’t tend to do as much.
00:23:06 Right.
00:23:07 So maybe the need in your 80s isn’t the same as the need in your 60s.
00:23:12 True.
00:23:12 And so you can account for that. And that can change. And some of it is some people say, well, I can’t retire. Well, you can, whether you should or not is a different story.
00:23:25 Absolutely.
00:23:25 And it’s a matter of adjusting the numbers to be realistic because it might… things change. And if you’re, especially on a fixed income and retirement, if you have to put a new roof on your home, that can change it quick.
00:23:39 Right, so it can benefit you to plan for those.
00:23:43 A new vehicle.
00:23:44 Yeah.
00:23:44 It can change, especially even without, especially if you’re a new car buyer. Another $40,000, $50,000 cars now. That can change the expenses in retirement tremendously.
00:23:56 Yeah, and I think one of the other big pieces too, especially as you’re getting older, is looking at what, is it that I actually want my estate to do over a long period of time? Do I have heirs? What do I want them to get, if anything? And then who gets what? And that can really actually shift the dynamic of how you handle those assets. And sometimes, especially, like if you live in Oregon and it’s not a real super tax friendly state for, you know, when you pass away.
00:24:30 Estate taxes, yeah.
00:24:30 Yeah, estate taxes and stuff, you know, maybe that kind of changes the narrative where if you have a large estate, maybe you’re looking at something like gifting some assets away or being strategic with how you set things up so that the tax implication is less and the errors get more.
00:24:51 And it could be as much as moving your primary residence out of state.
00:24:56 We’ve seen that. We’ve seen it save people a considerable amount of money.
00:24:59 Yeah, and then another important one, especially with retirement planning, is choosing the right accounts.
00:25:06 Oh, it’s huge.
00:25:08 When does pre-tax investment, you know, make sense versus post-tax investments. Like the difference between traditional IRA or Roth IRA or some 401(k)s have Roth options. Whether that makes sense now or not, or maybe it saves money to convert later.
00:25:28 Sure, it makes a difference.
00:25:30 So we can really drastically change the type of accounts. And again, like there’s no magic number. It’s different for everybody, but figure out what that number is you need in retirement on a monthly basis, and then you can plan around that. And you gotta throw in some curve balls in there too.
00:25:48 But Justin, I have some more curve balls actually that I wanna talk about now that you mention it. But before we get to those, do you mind if I take it, I’m seeing profit break.
00:26:00 No.
00:26:00 Okay. All right, everybody. Welcome back to the True Wealth Radio Show where Justin and I are covering retirement plans and we’re super stoked to give you all the stuff that you need to know. Well, maybe not all of it, but how about a lot of it?
00:26:16 Some of it.
00:26:16 Some of it. Okay. Because there’s a lot that goes into a retirement plan and everyone does it a little bit differently, right? Like, no two plans are probably identical to each other.
00:26:28 No.
00:26:29 And we kind of talked about maybe some of the key points that goes into building one. But Justin, when we were heading into the break there, we were starting to get into talking a little bit about kind of the strategy portion of this thing, you know, looking at your risk and how often do we need to kind of go over things? Do you want to kind of continue talking about that a little bit for us?
00:26:56 Yeah, so the investments, well, it also depends on what the goals are. So, I mean, time horizon is a big thing with regards to investment strategy.
00:27:09 Yeah.
00:27:10 So depending on what those goals are and what your time horizon is, it may shift how much risk you’re willing to take, because I mean, if you have a 30 year time horizon where you don’t even have access, like in a retirement plan, you may be more risky with those assets–
00:27:30 Yeah.
00:27:31 Than saving up to purchase a home.
00:27:33 Okay.
00:27:35 And so it can drastically shift, but your people have, typically a risk tolerance, how much risk they are willing to take. And it does not necessarily mean that that is for every single account. It’s for the blend of everything to kind of stay within a risk tolerance.
00:27:54 Okay.
00:27:55 Depending.
00:27:55 Yeah.
00:27:57 And then, you know, asset allocation, you know, diversifying assets, you know, having some stocks and bonds and maybe some real estate involved can be preferred, I guess, with that would be the way.
00:28:10 Yeah, if you have the ability to have assets strung out over different areas. It just… it goes back to that comment I think I made earlier about all the different levers that you can pull. It’s like, well, if you have a bunch of money in your retirement account, but you’re 45 years old.
00:28:25 Right.
00:28:26 And you need a hundred grand because whatever. If you had maybe a rental property that you had equity in and you’re like, I have to get to this money and I didn’t expect to have to spend a hundred thousand dollars. Okay, I’m going to let this piece of real estate go and now I have access to the money that I needed. And then you didn’t have to deal with the penalties around that retirement account that you had. So like you said, it’s really beneficial to, if you can have money in different places so that you can, you know, be a little bit more liquid and on your feet.
00:29:03 Yeah, and then there’s people that are, you know, they like to have a lot of the money and, you know, stocks, bonds, those assets, and then there’s other people that really like their money in real estate because, and they may be over concentrated in real estate, but that’s what they know.
00:29:20 Sure.
00:29:21 And there’s nothing wrong with that at all. It’s just understanding that the risks that come along with either one.
00:29:30 Yeah.
00:29:32 And access, a lot of time when people want to retire early can be problematic because of the 59 and a half rule for IRAs where you can’t access the money without penalty. Some 401(k)s have different rules in them that if you’re 55 and retired, you have access. But for the majority of it, as a blanket statement, I guess you could say, 59 and a half is kind of the ballpark to be able to access retirement funds. And so retiring earlier than that takes strategy.
00:30:02 Right. And here’s the thing I think a lot of people don’t think about is what if you’re not going to be taking your Social Security until, I mean, maybe even take it early. You take it at 62.
00:30:14 Yeah.
00:30:15 What are you going to do for the… roughly those two years in between where you don’t have social security paying you?
00:30:22 And you’re no longer contributing to social security too.
00:30:25 Exactly.
00:30:25 Which can change the numbers a little bit too.
00:30:28 And sometimes people really need to wait till full retirement age in order to start drawing on their social security because they are really dependent on the income. Right. Like some people, it doesn’t matter. They’re like, hey, I’ve got all these pensions over here. That’s enough income to meet my needs, to pay the bills. And then the other stuff is the fluff. But not all people are like that. Sometimes you are income dependent and that’s why it’s really important to look at the whole thing and say, wait a minute, let’s be tactical about how we do this.
00:30:59 Right, and longevity is another one with social security, is a big difference.
00:31:04 Yeah, like your health is shot. It’s like, well, maybe it’s okay to take it early.
00:31:09 Yeah.
00:31:09 But–
00:31:10 As it may make sense.
00:31:11 Maybe everyone in your family has lived to 110 and you’re like, well, maybe let’s delay this till 70. I don’t know. But I think you’re right. The strategy there is really important. One thing that I look at and say is also really important is insurance, right? Because now does everyone need it? And that’s not what I’m saying, but I’m saying in certain circumstances, insurance plays a huge role. Especially health insurance. This one we don’t talk about a whole lot. But man, if you end up in the hospital and you’ve got a million dollar bill and you didn’t have health insurance, I mean, it’s possible that you end up medically bankrupt, right?
00:31:56 Oh no, I have a million dollar child with medical events and I am thankful for insurance.
00:32:03 And yours is an example of one of those things where it’s like, you were being careful. It was a fluke accident, right? Like you weren’t, you were on a four-wheeler, but you were just putting, around in the yard and something out of the blue happens. And then it’s a million dollar medical bill, but you had the insurance. And so look, you’re not medically bankrupt. Congratulations.
00:32:24 And now I get to never complain about the cost of insurance, but–
00:32:27 Right.
00:32:27 That’s a whole nother scenario.
00:32:28 Yeah. But health insurance is just one piece of the mix. You also got to look at life insurance, right? I look at this personally, and I look at my own situation, and I’m like, okay, I know what our bills are. I know I have a child, and I just know my family dynamic. And I’m like, if something happens to me, and I’m out of the equation, that’s a really big income hit for my wife, and that completely would change the way that she’s able to raise our child. And I look at that and I’m like, I need to have adequate life insurance because in the event that something happens to me, I wanna make sure that not only is my wife taken care of, but my kid is taken care of, and not just taken care of, but I want her to be able to mourn me being gone. I don’t want her to have to go to work, right? I want her to be able to just stay home, be a mom, raise the child and not have to worry about money. So I’m willing to pay that extra amount to make sure that she’s taken care of, that the kid is taken care of. And it doesn’t have to be forever, right? Like he needs to just be able to be old enough to be out of the house. So realistically, he needs to be, you know, they both need to be kind of covered and taken care of until he’s 18 or 20 years old and he’s out kind of doing his thing. You know, maybe she wants to go back to work or do something, or maybe she wants to go back to work even sooner. I just want her to have the flexibility to do whatever she feels like is best and not have to let money make the decision for her.
00:34:13 I mean, me and you, we both have life insurance.
00:34:16 Yeah.
00:34:17 It’s not enough life insurance for my wife to be financially set for the rest of her life. That’s not the point of it. The point of it is, you know, pay off, you know, debts and things we have and then give her the ability to live and take care of the children.
00:34:31 You don’t want her to have to worry about a mortgage or a car payment or any of that stuff. Yeah.
00:34:37 And there’s a lot of… life insurance is great in a lot of different ways and it can do a lot of cool things. Is even having, you know, you can use life insurance for business reasons, is so, say, you know, you’re a partner in a company and one of the owner… owners passes away.
00:34:59 Right.
00:35:00 You can have a policy on them to be able to, say, purchase the rest of the company to own it outright.
00:35:05 Right.
00:35:06 And then differences in, like pensions with survivorship benefits, the difference in the pension may be cheaper to just go buy a 20 year term policy.
00:35:18 Yeah.
00:35:18 To cover if something happens to you, because if you’re [live], it’s you, it’s still going to pay. So, and then there’s just kind of math and figuring out if that cost makes sense. So it… life insurance is awesome.
00:35:31 Yeah.
00:35:31 And it can be used in a lot of different ways strategically.
00:35:35 Yeah.
00:35:35 Because there is, no blankets, like everybody needs a 20 year term policy when they hit 20 years old.
00:35:40 No.
00:35:42 That’s not necessarily true.
00:35:44 Well, and what, I mean, here’s the other thing to think about, too. Maybe you don’t have a wife and a kid. Maybe it’s just you. And you’re like, you know what? No one’s really depending on this income. I don’t need the life insurance. Or maybe you don’t have anyone that’s dependent on you. But in the event that you die, you want to leave something behind to someone that you love.
00:36:07 Or maybe it’s, you have enough assets where there’s no need.
00:36:11 That’s true too. Yeah, you’re sitting on $10 million. Maybe you don’t need a half a million dollar life insurance policy.
00:36:19 So there’s a lot of really great things life insurance can do. It’s not necessarily for everybody, but it’s unique in the things that it can do.
00:36:28 Yeah. You know, okay, so we’ve kind of talked about, you know, going back over this, we’ve talked about setting some goals and we’ve talked about knowing your… what your unique financial situation is. We’ve talked about kind of planning, getting in and doing that maybe a little bit earlier than you thought. We’ve talked a little bit about investment strategy and insurance. I kind of want to transition us over into, you know, you’re at that point where, you know, maybe you’re approaching retirement really quickly and you’re ready to start, or even, you’re even ready to start pulling some of those assets out of a retirement plan. I wanna talk about taxes, right? And everyone’s probably listening to this and saying, I don’t wanna talk about taxes. Yeah. Well, let’s talk about maybe how you can pay less in taxes. But we’ve gotta take it, I’m seeing profit breaks. So when we get back, Justin, I’m gonna ask you to talk to our listeners about how, can they be savvy and pay less in taxes? Are you ready for that?
00:37:33 I’m ready.
00:37:33 Okay, this is the True Wealth Radio Show. You’re listening to 93.9 FM or 1240 AM on KQEN, we’ll be right back.
00:37:41 Justin, we’re back on the air and we’re wrapping up an awesome segment on everything you need to know about a financial plan or a retirement plan. And when we left off, I gave you a little bit of a cliffhanger saying, hey, talk to me about tax planning. How do–
00:38:01 Taxes.
00:38:02 Yeah, taxes, our favorite subject. Talk to me about maybe, like how you can navigate that in a smart way.
00:38:12 Well, it’ll really depend on what assets are available and what type of accounts that they are in.
00:38:19 Yeah. If you only have one account in social security, we probably can’t get super exotic.
00:38:25 Yeah, probably. Maybe, depending. But even so we’re just, this is blanket, like assuming, you know, somebody has a Roth IRA, a 401(k) and some after-tax assets.
00:38:39 Right.
00:38:40 So it can be a strategy of, in retirement, especially so, say, you retire early, where there’s no income, you’re not taking social security. There’s no pension. You just have this gap years.
00:38:51 Okay.
00:38:53 That can be a potential is all right. It is. I have no income.
00:38:57 Yeah.
00:38:57 That’s when you can start pulling a lot, some, out of IRAs.
00:39:01 Right.
00:39:02 Traditional IRAs or 401(k). Sorry, not necessarily Roth IRA because that’s going to be tight.
00:39:07 I thought you were going to start talking about Roth conversions.
00:39:09 No.
00:39:09 And I’m like–
00:39:10 Maybe.
00:39:11 Yeah.
00:39:12 But depending on if it’s necessary or not, because maybe your income needs aren’t that high and you just want to drive down your 401(k) assets and then you can use the tax-free stuff later. It’s very unique for every single person. Roth conversions are great too in that same scenario. Whereas I have no income. Let’s take a distribution, we’ll convert it to Roth, pay the taxes on it, as long as you wait five years, it’s all tax free.
00:39:45 Right, and the growth of that money. Yeah, and that’s the big one, right? Like say you managed to get $100,000 out of, you know, your traditional account, whereas it grows, so does the amount that you gotta pay taxes on. But if you get it over into that Roth and then you can let that thing grow over the next 10 years or something and then you get to access all of it without paying taxes well, if you wanted to buy the beach house and you know, all you had was your traditional account, if you got to pull $300,000 out in order to make that purchase happen, well, that’s gonna suck because you’re gonna lose a lot of it to taxes. But if it was over there plunked in the Roth and growing over there, maybe you go pull it out of that account where you’re not gonna drive up your income for the year.
00:40:34 Right.
00:40:34 So there’s a lot of different things that you can do. And I think that’s one of the reasons why you actually pay your financial advisor.
00:40:42 Yeah.
00:40:43 Right? Like everyone gets hung up on this fee. Well, I’m paying this guy 1.2% or I’m paying this guy 1% or whatever that fee is, right? And then it’s like, well, did the guy that was charging you 1% do any planning for you at all, or did he just say, I’m gonna manage your assets? Well, was it worth the 0.2% that you’re paying extra to the other guy in order to set you up to where you’re saving thousands of dollars on potential taxes?
00:41:11 Right.
00:41:11 Right, and so I think that’s also one of the things I look at when I try and evaluate, is this person worth it? Because sometimes they’re not, but sometimes they are, and it really depends on what, is it that they’re offering you and what is it that you’re looking for.
00:41:25 And especially, with not understanding how the taxes can implicate things.
00:41:33 Yeah, you don’t know.
00:41:34 [It won’t] change. It may be a thirty thousand dollar savings in taxes.
00:41:39 Or maybe your estate was in bad order. And because you didn’t have a trust and everything was set up or not set up at all, maybe you were going to pay the state an extra hundred thousand dollars in state taxes just because you were never pushed or prompt to take care of your estate. So there’s a million different ways that you can, you know, pay more than you necessarily should in either taxes or whatever, penalties. There’s a bunch of ways that you can kind of go down the wrong path.
00:42:12 Estate planning is another big one. And even the most important part of an estate plan to me.
00:42:19 To you personally, yeah.
00:42:21 Is updating beneficiaries.
00:42:24 Right.
00:42:26 Because that can change and it can cause a mess.
00:42:30 It can.
00:42:31 And so you don’t want… you can update your beneficiaries at any time. So if you’re not sure, please go and check.
00:42:39 Yeah.
00:42:40 Because, you know, things happen, families change, the dynamics of family change, and you want things to go where you want them to go.
00:42:49 Yeah. That’s just a big piece of the thing is making sure that, you know, your estate is honored the way that you want it to be honored. And there are ways that you can set things up to where you just… you feel good about how you’ve done it and what the plan is. And it takes a lot of stress off of people when they know that things are in order. So there’s that. For me, you just mentioned that a big thing for you is making sure beneficiaries are in line. I look at this and I also say, one of the big things for me is going back ever so often and looking at what the plan is, right? And then saying, are we in alignment with what the plan really is, right? Because sometimes people… they get older and their plans change or something happens in their life. And you need to be able to adjust your goals and your strategy and review things and say, my risk is lower today than it was five years ago. Or the market has really slid down and I’ve got cash on the side, I want to be more aggressive because I want to try and buy this thing cheap. And so I think meeting with your advisor and talking and establishing a plan and reviewing that at least every year is a really good way to make sure that everyone’s on the same page and that you’re in the right spot.
00:44:22 And then another one that’s kind of important, which is going back to risk tolerance, is just because you’re retired, doesn’t necessarily mean your risk tolerance should drop tremendously.
00:44:35 Right. Because what if you have so much that you’re never going to run out of money and you want to be very… while I’m dropping the word, you want to be very liberal with your giving to others, right? You want to bless other people. So, you can afford to take a little more risk.
00:44:57 Even more of that is too, is, say you live into your 90s, you still have a 30-year time horizon.
00:45:04 That’s a long time.
00:45:05 Even in–
00:45:06 That’s a lot of market cycles.
00:45:07 And even in the economic conditions we’re in right now, when you have inflation going crazy, and you’re not able to capture some of that upside with what’s going on. You can find yourself going backwards.
00:45:23 Right.
00:45:24 Even though you’re spending the same amount of money, everything’s gotten so much more expensive. You may need to take more. Your risk tolerance may be higher to capture the upside parts of it to be able to ride you to 90 and 100.
00:45:40 Mm hmm. That’s true. Okay, well, Justin, I hate to break it to you, but we’re out of time. So.
How can you achieve financial and emotional peace while thriving in today’s challenging economic landscape? Discover strategies for adopting a minimalist lifestyle, prioritizing mental health, smart financial management, and investing in personal growth. Lets talk about balancing your life, accumulating wealth, maintaining a high quality of living, and building long-term happiness.
Episode Highlights:
- Three crucial stages of financial growth: accumulation, maintenance, and distribution.
- How simplifying one’s lifestyle can lead to financial success.
- The pitfalls of lifestyle inflation and the necessity of maintaining a robust emergency fund.
- Useful tools and apps for tracking spending and managing finances.
- How individual goals and lifestyles impact retirement strategies.
- Challenges millennials face in the workforce. (longer hours, relatively lower income, and high turnover rates)
- Balancing work-life and personal life to avoid burnout and achieve financial goals.
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TRANSCRIPT
00:00:00 Adopting this minimalist lifestyle. You know, of course it starts with creating the budget and not going outside. Because to get to the accumulation phase, you have to have a base. Otherwise, you just never get there. You’re just chasing this accumulation phase. And so, you know, even if you’re doing the right things, you know, saving 10 to 15% requirements, saving 10%, but then you have a bunch of outstanding debt. You’re not really accumulate. You’re almost taking back.
00:00:40 What’s going on, everybody? This is Matt Dickson and with me in studio today…
00:00:45 Justin Bruggeman.
00:00:47 All right, guys, we have got an awesome show for you today. We are going to be talking about some really important stuff. And I think inside of the show, we’ve got something for every single listener, no matter what your age, no matter what, you know, your financial situation. We’ve got something here that you probably want to hear. Justin, thanks for joining us today.
00:01:07 Or we don’t want.
00:01:09 Yeah, or maybe you don’t want to hear it. But kind of the the thing I want to talk about today is. You know, we’re in. I didn’t know this. I’ll be honest, but. Millennials, right? There’s a lot of conversation around millennials. They are making up an extremely large portion of the workforce right now. In fact, millennials are making up. I think by the year 2025, they estimate 75% of the workforce. Yeah, the global workforce is not just in the US. And I didn’t realize that it was that large. In fact, back in 2016, millennials became the largest generation in the labor force. And that’s quite an, I mean, eight years ago? Yeah. And if you would have asked me, I would not have guessed that at all. And so one of the things, you know, when I think about millennials, I’m thinking about how they’re in this accumulation phase, right? Right. Where they’re working hard to try and make their way in life. And how’s that going for them versus maybe some other generations in the past? But then the second part being, you know, once you actually accumulate some wealth, how do you kind of maintain a lifestyle? And so what are some of those kind of challenges inside of that accumulation phase? And more than just that, it’s looking at how do we balance the work life, the home life, the personal life, right? Because we always want to talk about how do we accumulate wealth? Well, you know, I think that it’s something where, you know, we got to look at this and say there’s more to it than just building wealth.
00:03:00 Right?
00:03:02 It’s taking care of yourself along the way because it’s really easy to get burning. Let’s just jump right into this thing and kind of start talking about, you know, we’ve always got this drive for more. And I was watching an old Western just the other night and it introed with, you know, I forget the quote, but it was something to be effective. Every man’s just looking to put more gold in its wagon. Right. And I kind of think about it from the standpoint of, well, you can keep doing that. You can keep piling gold in the wagon, but you pile too much in there and the weight of it might start to break the axis. Right. Like there can be something almost too much. So how do you find a balance where you’re not doing so much outside of, you know, living that you kind of lose sight of where it is that you’re going in and are you enjoying the ride along?
00:04:01 Almost your output. Weighing more than your input.
00:04:05 Yeah.
00:04:05 So are you just putting too much time?
00:04:07 Yeah. Do you got any kind of recommendations for the listeners? Well, you know, hearing this and saying, yeah, maybe I do feel burnout or how do I accumulate? Let’s just talk about some ways that people can no matter how old they are, whether they’re millennial or not, how can they be kind of in that sweet spot?
00:04:27 Well, to go back just a little bit, because you brought up the accumulation. So there’s there’s few phases you go through in life, especially working life, that’s the accumulation phase is building. Well, that’s what it is. And you’re accumulating assets and you’re growing. And then it goes kind of into a maintenance and then a maintenance phase. And then more of a distribution or income reducing phase. So we are talking about, you know, the millennials and making up that much of the workforce. And they are very much still accumulate. Which I’m curious with that number is so many millennials are working is because if you go back far enough, single income household was more common.
00:05:19 True.
00:05:20 Then too. And then with the inflationary environment and how expensive things have got now most common and it’s two income households. And so that could be a bit of the shift of why it’s or people are just wanting to live more extravagant lifestyles than in the past.
00:05:40 Yeah. Yeah. I mean, I think trying to keep up with a certain image or a certain lifestyle is definitely driving part of that. I know when you look at it, this is kind of weird, but millennials and Gen Z, they’re working more than any other generation ever had. Right. This is what studies are showing. And they’re also, you know, making a disproportionately, you know, less income on a relative scale when you adjust inflation into the mix and everything else. So, you know, they’re working longer, harder hours, but it’s not really reaping the benefits. And that’s what I really want to talk about. It’s like, okay, well, we get it. The cars are stacked against you. You know, you’re having to work more and for less. But how do you overcome that? And how do you make the most of the opportunities that you have?
00:06:37 Because the reality is, we can go through a ton of different steps, right? Like I can just read off of a page and say, 67% of young professionals are feeling pressure to build wealth, and it’s leading to burnout. Burnout isn’t an all-time high. There’s a mental health crisis going on. There’s so many different issues at play here. But how is, how do you kind of overcome that?
00:07:05 Yeah. And it’s a difference too, just because also the millennial generation changed and the Gen Z, I think generation, they change jobs.
00:07:13 They do.
00:07:15 I mean, it wasn’t even, I mean, you could go to the work at the mill for 40 years around here. That was a common.
00:07265 Yeah. I can’t tell you how many people I’ve met in this area. Yeah. I just worked with it. Paid a really good living wage and they didn’t need to go find another job because all of their needs were met. You’re right. Turnover. Do you know what’s costing annually? Like over 30 billion dollars to the U.S. economy, just millennials and their job turnover, because it costs money to replace people and retrain people 30 billion dollars. And that’s a lot.
00:07:57 That is.
00:07:57 And you start looking at this and the stats aren’t good. There was a huge survey done and 44% of millennials said that they were more likely to be engaged with their work and their manager if they were just, you know, regularly meet with their boss and have some communication. But we’ve seen those numbers slump. It’s down to like 20% where millennials are meeting with their managers on it on a basis. So they’re showing up to work, they’re not getting any direct line of communication with their boss, they’re feeling unsatisfied. There’s turnover, it’s costing the economy a lot of money. And as a result, they’re changing jobs more often than any other generation before them. So turnover is huge, they’re dissatisfied, they’re making less. And there, this is the one statistic that it’s going to stick when it comes to millennials, hear this one and really let this set in.
00:09:0 Millennials are 40, less than 40% are defined as thriving in any aspect of their wealthy, whether it’s mentally, physically, like how they’re doing at work millennials are just getting crushed as far as their wellbeing is concerned and things are contributing to that, like they’re overworking themselves, right? You mean we already look the stat where it’s like, hey, millennials are really rapidly trying their hardest to improve their net worth and to grow, you know, their portfolio. It’s a struggle. So they’re they’re working long hours. They’ve got in that comes at a price, right? Like your health. You’re going to have increased stress levels, you’re not going to be sleeping as much. Your personal relationships, that’s going to get a strain on it too.
00:09:54 And I think that we’ve seen that people have really kind of like, shut the door on personal relationships in a big way. So those deep relationships, we’ve seen that really start and, you know, some of that’s here, too, right? You can really distract yourself with social media or Netflix or whatever it is. You can kind of get into a hole, shut the world out. And unfortunately, we’re seeing that in a mental health crisis.
00:10:27 And it’s a little bit can be is. They just didn’t have time to develop a good habit. I mean, it maybe it wasn’t as typical as, you know, saving 10 to 15 percent, you know, for retirement, saving another 10 percent just for savings. And they just kind of jump out where everything is so expensive. They never really got the accumulation phase to start the accumulation phase.
00:10:54 No, that does make sense. I was, I saw something where it was talking about how millennials were forced to into the workforce kind of prematurely to kind of like, you know, help save for college or whatever the case may be. So a lot of people started working when they were 16 or 17 years old. You know, say that same person 37 today, like that 37 year old’s already been in the workforce for 20 years. That’s a really long time to be in the workforce for someone that young compared to prior generation. And so we’re seeing burnout happen a lot earlier in life.
00:11:30 And that’s a little bit of, you’re just not, you’re putting in the effort. And generally the wealth should help itself. I mean, if you’re spending less than you make, you have all these habits that, you know, you’re saving 20% of your income, whether it be retirement or savings, but they’re just finding out that it’s not enough.
00:11:51 Right. And it’s not doable because of inflation.
00:11:54 Right. Just to stand the standard of living, of, you know, getting out of even the house, say 18, 19 years old or after college and going to rent. You can’t find renting at a really an affordable. Right. No, you can’t. And then even your, and because usually that phase is all right. You’re renting in a cheaper amount. You’re saving up, you know, for a down payment on a home. And now it’s harder to get to that point. And people are just structurally just adding more debt quicker without having the habits in place. I’ll say.
00:12:31 No, you’re right. And I think you touched on something that’s really important. It is recommended that you save about 20 percent of your income every month. Right. And whether that be a retirement, you know, probably some of that going into retirement accounts or just personal savings. I think that’s a really good first tip, you know, to start the day out with, go ahead and start saving some money and just adjust your lifestyle to where that savings fits within your means. So whatever you got to do, make that work. You know, give it a try and see if you can do it. Because if you can, that might be a really good first step. Justin, let’s take a break. And when we come back, let’s actually talk about that. How can millennials find both financial and emotional peace? How can they thrive when times are hard? That more when we get back. So this is 93.9 FM 1240 KQEN. You guys are listening to True Wealth Radio.
00:13:28 All right, everybody, welcome back from the break. You guys are listening to the True Wealth radio show. I’ve got Justin Bruggeman in studio with me today, and we are talking about kind of how you can save, but also kind of your mental state, right? And not going..
00:13:46 Trying to do both.
00:13:47 Yeah. How do you not go off the rails? And we were talking about how hard for the break, we were talking about how hard it is, especially for millennials who are making up the bulk during the workforce right now. How can they get ahead while also maintain a quality of lifestyle? And let’s jump back into that, just and when we left off, you know, you’re kind of talking about, you know. Healthy saving habits a little bit. Yeah, I think that’s–
00:14:13 Establishing the habits.
00:14:14 Yeah. And then I wanted to add that, right. One of the things that I think is really important is kind of adopting this mental life stuff, right? So, you know, you look at someone like Warren Buffett, this guy still lives in his hometown, he still eats at McDonald’s, the guy is not extravagant. Like you live well, well below his means. And he has his whole life. And I think that that’s something that we can kind of learn from too, where it’s like, Hey, you know, let’s get back to maybe prioritizing the essentials and not necessarily, well, I want this, so I’m going to make sure to go get it. If you can, if you can focus more on what you want and deny and, you know, delay a little bit of gratification, I think that’s a really big deal because 60% of millennials are earning six figures or wait, so I messed that one up of the millennials that are earning six figures, 60% are living paycheck to paycheck because of lifestyle inflation. So I look at that and I say, well, you’re probably not living. I think you’re probably pushing.
00:15:28 Most yeah, most like, yeah. I mean, it’s, you know, adopting this minimalist lifestyle, of course it starts with creating the budget and not going outside. Right. As to get to the accumulation case, you have to have a date. Otherwise, you just never get there. You’re just chasing this accumulation. And so, you know, even if you’re doing the right things and, you know, saving 10 to 15 percent retirement, saving 10 percent, but then you have a bunch of outstanding debt. You’re not really accumulate. You’re almost skating back.
00:16:05 Right. And I can’t tell you how many times I’ve seen someone who, you know, they’re telling me about their financial picture and they might have, you know, I don’t know, even have $150,000 in their retirement account, but they don’t have $1,000 in their savings account, because they are living paycheck to paycheck. So it is really important to have three to six months of money set aside where it’s like, well, if I’m making $5,000 a month, maybe I should have $15,000 or something on hand, maybe a little bit more where it’s like, well, my roof started leaking and I didn’t realize that I need a new roof. It’s okay. I’ve got $5,000 ready to go fix that problem so that you’re not having to put it on a credit card or not having to pull a key lock on your house. It happens way more often than you would think. And so I think you’re right, Justin. It’s a really big deal to have.
00:17:03 Well, if we’re being realistic, even, you know, most common ways be like, you know, start saving 1000 then have like $5,000, you know, just in case. Five thousand isn’t the same as a was even five years.
00:17:18 No.
00:17:19 And so having a real look at what these costs are, I mean, like you and set up a roof on your home.
00:17:25 Yeah. Five, six thousand dollars easy.
00:17:28 That’s probably what it used. You know.
00:17:30 Yeah. I don’t know.
00:17:31 Close to the 10th now.
00:17:31 Probably. Yeah. It wouldn’t surprise me at all.
00:17:35 And even repairs on your vehicles, they’re just more expensive. And they were.
00:17:40 Have more cash. And so like you said, start picking numbers, pick anything that you, that you can actually accomplish and do it right. Get some money in your savings. One other tip that I’ve got is simplifying and decluttering your house, your living space, right? Because I mean, the studies show it that a clutter free environment significantly reduces stress and it improves your overall well being. If you’re always tripping over garbage. Or if you don’t have space to get something done, but there’s junk in the way you’re going to be on edge and you’re going to be just here. And so in it, don’t try and do a whole house. Right. Like if you–
00:18:24 Start small.
00:18:25 No, seriously, like–
00:18:26 Babies.
00:18:26 Yeah. And baby steps. If your entire life is just cluttered with garbage, say, I’m going to pick this one room and I’m going to make it great and then move on to the next one. But if you can declutter and simplify your life, you’ll probably find out that you had three of one item that you probably don’t need three of. You can sell it and get down to one. And it’s going to even with vehicles, right? Like this is one where I’m guilty. I probably have too many vehicles and I sit there and I pay insurance on the truck I don’t drive. And I pay to have it maintained when I don’t really use it. If you don’t really need it or you don’t use it, probably okay. Go ahead and just like.
00:19:12 Otherwise, you’ll justify the reason to keep. I was. I mean, if you really are going to go to this whole, you know, minimalist ice other. But if you’ve gotten to a point where that’s what you need to do. That’s right. And then build back up the way that makes sense.
00:19:28 Yeah. So get rid of your garbage, maybe own less stuff.
00:19:32 And maybe garbage isn’t the word.
00:19:34 Well…
00:19:35 Get rid of the stuff you don’t want.
00:19:36 Yeah, because I mean, I actually don’t know if you’ve watched this show, but that show about Hoarders, right? I love it. And I don’t know why, because the whole time I’m watching it, I feel bad. But it inspires me to clean a little bit. But, you know, these people, they look at this stuff and they say, well, I actually need it and I feel better with it until they get rid of it. You can just like you said, you can justify having it, but that doesn’t mean it’s a good reason to have it So, you know, incorporate, you know, kind of going through and doing some spring cleaning and other healthy practices, right? Like, you know, working out or doing some sort of exercise where you’re giving your physical body, you know, a little boost because that’s also really gonna affect, I think other habits in your life, even like savings and all that other stuff that we’re trying to be better at. If you’re not well mentally, it can be harder to execute on the other end.
00:20:40 Yeah. Absolutely. And it’s just a matter of even like what you said, it’s starting with one room and then moving, accomplishing a task, accomplishing something and actually finishing it. Cause if you’re trying to do say a whole house, you’re not, you’re never going to because by the time you get, you know, all the way around, you’re just starting over.
00:21:00 Yeah. My wife is horrible about this. I think it’s like a slight, you know, case of ADHD or something, but she’ll squirrel and go into something else. And so she’ll be like washing something and then she sees something else. And she’s like, oh, well, I need to deal with that, too. And then I look, I’m like, you have like five messes and you’re trying to clean. And I’m like, you got to just pick one, stick to it and get that done and then move on.
00:21:26 You’ll find you get a lot of things done, but nothing.
00:21:29 Exactly.
00:21:31 Which is, yeah, it’s…
00:21:32 Do you struggle with this?
00:21:35 All the time?
00:21:35 Yeah. So that’s. But you know, if you know, I mean, you know that you have this problem. Do you ever like actually force yourself to just do one thing? Okay, does have you find like, did you find that that makes you more effective at getting something?
00:21:50 Yeah. 100. Well done. Well, yeah, I mean, I can do a lot of things. Okay.
00:21:56 You know what I found interesting? You know, I was obviously out sick the other day. Didn’t come into the office but I was working from home and at home, I decided I was going to work on the couch and I had my laptop and I had my one screen in front of me. Right. And so I was doing something that typically I would use three screens for. I actually got way more work done with just one screen. But I think the trick there was when you have all the things, right, all the screens in front of you. It’s easier to get distracted because, you know, you’re running all these different tabs and you’ve got all these different screens. You can find yourself being less productive. So pick something and focus on it.
00:22:48 Right.
00:22:42 Pick a dollar amount that you’re going to save every month. Quit worrying about all the other stuff. Focus on that. Pick something, accomplish it. You’re going to feel better and move on to the next thing because you’ve got some…
00:22:57 Yeah. And it’s the check in the box because there’s a lot of that are even box check. So if you naturally are not a very good saver every week, say, and just that’s picking them.
00:23:10 And it goes the other way too. If you’re naturally like a workaholic, right. And you like just cannot break out of that cycle of the 50 hours a week, you know, just force yourself to block some time off on your calendar and take those days off. Like force yourself to have that, that work life balance where you’re going to set some boundaries, whether it’s, and it doesn’t have to be just at work. It can be at home too, or with your hobbies. Some people are the opposite. They’re like, I’ve got this hobby, whether it’s fishing or golfing, whatever it is. And you get so deep into it, you’re blocking out the other stuff and you actually kind of slide backwards on that self care. So you need to find kind of that happy medium where you’re flexible with work, you’re flexible at home, and you’re not super rigid because it’s really, really easy to get into kind of some bed.
00:24:09 So maintaining the balance of spending time with your family and working. And that’s where you do get a lot of your. You know, urge to do more, you know, the times you spend with your family and then doing the things that you enjoy doing around otherwise. We were.
00:24:30 No, I see that all the time. People are like, you know, you know, I’m not doing so well. And, you know, if you look at balance sheet balance sheet, fine. You start drilling down to the real root of the problem is what you just said. They’re not doing what they actually like because they feel like they have this obligation to go put more gold in the wagon. And that’s not necessarily what it’s all about. So Justin, I’m going to take us into a commercial. But I’m doing this for a reason. I’ve got some stuff I really want to talk about. It’s going to take me a while. I want to talk about ways that you can kind of grow personally and how you can grow your career. But I don’t want to jump into it. I want to take a profit break. So when we get back, we’re going to talk about this. This is the True Wealth Radio Show. This is Matt Dickson.
00:25:23 And Justin Bruggeman.
00:25:24 You guys are listening to 93.9 FM and 1240 KQEN. All right, everybody, welcome back. We are halfway through the True Wealth Radio Show today where we’re throwing a lot at you. So make sure to buckle those seat belts because we’re really going through a ton with you today. And I think Justin, you’ve got something good for us here. We’re talking about millennials and how they’re burnt out, but we’re trying to inspire a little bit of hope here and talk about ways that we can grow and ways that we can develop and do better, even when times are tough hard. So talk to me a little bit about that. What’s on your mind?
00:26:06 Yeah, what they would consider is well, starting with the budget.
00:26:09 Yeah, we talked about that.
00:26:12 That’s a great is a realistic one. Prioritized savings minimizes expensive unnecessary expenses.
00:26:20 Yeah, we talked about kind of decluttering your life, making sure that you’re not just bogged down in a bunch of junk, getting some exercise. Talk about that a little bit.
00:26:30 And especially when it doesn’t necessarily mean need to be a patent paper. They have a lot of apps out there that help you but…
00:26:38 Yeah, I think like one of them I’ve heard of, I don’t know if it’s good or not. But men’s, I think, kind of tracks them in, you know, after expenses, I think I heard of like you need a budget.
00:26:50 That one I never heard of.
00:26:53 It was like, why in a year? There’s a bunch of them. Just Google it. They’re out there.
00:26:56 Yeah. And there’s plenty. A lot of them are free. I mean, a lot of times you don’t need the extra stuff.
00:27:00 Do you ever use the Credit Karma app?
00:27:02 Yes.
00:27:04 Credit score and some of the stuff is going on.
00:27:06 I think Matt actually links that.
00:27:09 I don’t know. For me personally, a bank with Chase and I look at their spending app, right? Where they…
00:27:56 It breaks down.
00:27:17 That actually helped me a bunch. Because I’m like, well, well, well, we’re spending this much on food. And I’m like, what are like our waste? And oh, wait, we’re spending that much on Amazon. I didn’t realize that we spent as much as we do on Amazon, but it makes sense. I mean, granted, we literally buy all of the stuff for the house on Amazon. It just shows up, but it allowed me to find some subscriptions and some stuff we weren’t using and I cleaned some stuff up. I think we’re saving like 800 bucks a month or something crazy just by ratcheting a few things down and saying, wait a minute, you know, we’re paying for like, you know, TV subscription we don’t watch. And so you start eliminating some of that stuff and be a little bit more mindful and it’s like, you can really save another thousand dollars a lot of the time if you’re being really super watchful. So some of those apps and some of those spending trackers, they’re a conversation starter. I’ll say that.
00:28:19 Yeah. And the big, even we’ve been talking about millennials and them not really getting to the accumulation phase the way that they need. Right. It’s mainly because of that.
00:28:29 Oh, yeah. That’s sky high right now.
00:28:32 Yeah. I mean, the average millennial has 20 almost $28,000 of non mortgage debt.
00:28:39 I mean, we were. I’m going to just say we were sold. Go to college. Don’t worry about it. Right. Like, just borrow the money. You got to do it. This is the way like that’s what we were sold. And a lot of people did it. Not everyone did, sure, but a lot of people did that. And then they came out of college and then there was this huge awakening of like, well, now what? We have the degree. What’s it good for? And for I think maybe, you know, I don’t know, 75, 80 percent of the the workforce. Yeah, I mean, sure, it might have helped a little bit. Might open a couple of doors. But it yeah.
00:29:18 But did it really open the door as much as you thought it would? Like I looked at it, right. It’s like, well, if I’ve got a degree, everyone’s going to want. And it doesn’t really matter what it’s like that. I’m just going to be a hot commodity, but here’s the problem. If everyone has the degree, does it even matter? I mean, sure. If you’re going to be a doctor, you got to like do the thing, right? I wanted to be a teacher. I had to have the teaching degree. It got me in the door, but anymore I look at this and I’m like, you know what really is going to move the meter? Do you have a strong professional network? And do you know the right people? Do people like you? If no one likes you and you don’t know anybody like good luck.
00:30:03 It’s harder to find work, though.
00:30:04 Yeah, it is.
00:30:05 Unless you’re the base.
00:30:06 Yeah. Or you have some skill that no one else has. But you need to be likable. Right. You need to just kind of naturally have a good head on your shoulders. And can you communicate? If you can communicate really well with people and you have some skills, like I’m not going to throw the skills part out of it because if you don’t have any skills, well, you’re going to probably do unskilled labor, but you’ve got some skills. You’re a people person. You can communicate. Well, I don’t know that you need the degree as much as you think that you do. And that’s coming from someone who was a teacher for you. So there’s my two cents, not that it’s worth anything, but no.
00:30:50 Coming back to the debt management.
00:30:51 Yeah, go back to–
00:30:52 Going on your…
00:30:52 Sorry, I had to go on it.
00:30:54 Your red.
00:30:54 Yeah.
00:30:55 At college education. You know, it’s you found yourself in debt and you’re trying to get, you know, the space to be human. There’s ways. Of doing or getting rid of the debt quicker, whether it be, you know, a snowball effect or paying off the highest interest for which by snowball effect is pretty much paying off the smallest one first and then moving that payment to the next one. And it grows, grows, grows your payments with large. You know, sometimes considering, you know, consolidation loans and things like that will make sense, especially in the times now with interest rates, kind of where they are, especially, you know, credit card debt is the highest it’s been in a long time.
00:31:44 Credit card debt is the–
00:31:46 The amount of debt and what it costs is hot. And so if there’s ways to consolidate and lower, not necessarily lower your payment, but lower your interest and keep them the same payment, you can get out of that a lot quicker. And but it takes being extremely disciplined and not adding more debt to it. It’s really easy to make $5,000 debt payment, but it’s also really easy to rack up $5,000 more debt.
00:31:12 Here’s another interesting one. I want your take on this, Justin. This is something I saw. I’m not going to try and steal this and be original. Not my thought, but I saw someone say once that, you know, the person who is trapped in kind of like financial mediocrity or just, you know, in the sludge of just getting through the motion, they care about their credit score, but the person who is looking into the future and building wealth and doing things kind of in a better way. They’re looking at their assets and what are they doing with their money in that regard? They’re building assets and they’re monitoring that side. They’re not looking at the credit score as much as they’re looking at, you know, what am I actually doing with my stuff? They’re not living their life to build a credit score. They’re building their life to build assets. And so I think that’s another one too, because not all debt is bad, right? Some debt is good debt. Like you went out and you bought a house, you got a loan to do it. And, you know, you turned around and you sold it four years later for. The $100,000 profit. Well, that was probably good debt. You had a place to live in bank carried, you know, the liability of all that money being out there and–
00:33:32 It costs you a little bit of money. Yeah. The interest and things like that.
00:33:26 So not all that is bad day. It’s good debt can be good. And I think that’s where, I mean, Dave Ramsey will just go on thing. You just, you got to pay every single thing off. And it’s like, well, if your car’s financed at 1.9% and you’ve got $40,000 sitting in the bank making five and a half percent, should you really pull all of the five and a half percent out? We’ll pay off the thing making or the, you know, costing me 1.9. Maybe not all that debt is bad.
00:34:08 Well, it’s the irresponsible person trolling. That can be good. You know, in ways and even the easiest example is it can buy you time. But if it. It can harm you, too, because if you get way to end that where you’re now being ran by payments instead of using the debt to leverage something else.
00:34:33 Yeah, I think we talked about that on a show recently where we were talking about, you know, the ultra high net worth people who, you know, they they finance literally everything to the point where a couple things go wrong and then they’re way out in front of their skis. And they’re like, well, I’ve got three mortgage payments, and I was making a million dollars a year, but now it’s 750 and I can’t cover that one. And then that goes into foreclosure and I took key lock on this other one and then the dominoes start to talk. And so, yeah, it’s a really big deal to be super, super savvy with your debt. And if you don’t know what to do, you know, maybe you talk to someone who is, you know, more experienced in the area than you are, or offer some, you know, additional insight to where you can make more.
00:35:28 Which where I mean, the credit score does matter because it makes consolidation and things like that.
00:35:34 Yeah, I’m not going to discount it because if you’ve got a good credit score and you can go loan money at 2% instead of 8%. Now, yeah, it does matter, but you can’t make every single decision based on this hundred percent credit score. You know, oh, gosh, I can’t take this loan. It’s going to drop the score 20 points. You know, it’s like, whoa, whoa, whoa. We got to look a little bit further down the line.
00:35:58 So talk to me a little bit more about, you know, we were talking, start this segment on personal growth, developing your career. Do you want to maybe talk about like, I mean, I know we talked about networking, but maybe kind of continuing your education or continuing your learning, building that maybe.
00:36:20 Yeah, I mean, there’s always benefits to increasing your skills. I mean, so when I’m looking at continuing education, I look at the book because we have.
00:36:27 Yeah, we do. Right.
00:36:30 Which is we try to pick things that are the most interesting as possible. You know, when you have 25 hours of work a year. But just increasing your skills. There’s a lot of what’s now online. You can get you can do any.
00:36:47 Yeah, you can go get certifications, different accreditation a lot. It’s more accessible, right? Like in back of the day, you have to show up to the, you know brick building with your textbook and your–
00:37:01 Night college, things like that.
00:37:02 Yeah, stuff like that. Now you can just log in, you know, what the video play in the background. You can read a text online. You can do a lot of stuff and build your resume up where, you know, you can sell yourself a lot easier or get enough knowledge where you’re like, hey, do you want to hire me? And someone says, yeah, or you can start finding some.
00:37:28 Finding something, doing something you enjoy that makes a huge difference.
00:37:32 That’s really something I did want to talk about. You kind of forgot even.
00:37:38 Because if you don’t really enjoy it, you’re not going to spend 30, 40 years doing. And that is, you know, could be one of the most important things. You may not be there yet, but get right wherever whatever you need to do to get to doing the things that you want to do, which I mean, there’s no perfect. Right.
00:38:01 Because if you spend 10 years perfecting a skill that you hate. Like we talked about the cost of turnover being over 30 billion dollars. The U.S. economy was your personal cost of turnover where you have to completely rebuild yourself and kind of start at the bottom and work your way up. So like you just said, just do something you enjoy. So let’s talk more about that when we get back from break, doing stuff that you enjoy.
and how that might kind of transition you over instead of you’re in this accumulation phase. How do we get into that spot where we’re maintaining or being generous? So that and more when we get back is Mack Dickson.
00:38:42 And Justin Bruggeman.
00:38:43 You guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN. All right, Justin, I’m getting tired. We’ve gone through so much. We’re talking about how do you accumulate How do you kind of transition over from that accumulation phase? How are you balancing your home life, your work life? Just take the microphone and talk to me a little bit. What do you got?
00:39:12 We’ve been, I guess, more complaining, I guess.
00:39:14 Well, we did do our fair share of that. But let’s talk about the..
00:39:17 Accumulation phase is, you know, establishing a budget, getting to where your savings needs are, where they need to be, your funding, retirement and then what? And then this is a transition to the maintenance. You’ve got the habits that you think you. And you continue doing those and then you grow your wealth in different ways, depending how people do that. It’s different for every person. How much you need to save is different for every person.
00:39:51 Right. Because I mean, I know the deli will go out and say something like you need to kind of have 10 to 12 times your final salary and ready to retire. But I look at that and I’m like, man, that’s a really blanketed statement. That doesn’t necessarily rain true because what if, you know, your dream in retirement was you wanted to travel Europe and the rest of the world until you die, you might need a lot more money than just 10 to 12 times your annual salary. And so, like you just said, this is a really custom, think some people they walk in and they’re like, Matt, I want to retire. And I’m like, well, what do you want to do? And they’re like, I just want to have a garden and not go anywhere. I’m tired of going places. Just want a garden. I’m like, well, let’s look at the numbers. Like you have way more than you’ll probably ever need. Right.
00:40:42 And so it’s very, very unique to what it is that you want. What are your expenses like? Is your house paid off? You know, do you have three different accounts that you can pull from? That’s where I really think the value of a financial plan that’s really tailored to that specific person really comes in.
00:41:00 Because it could be, you know, it is a kind of a blanket state, you know, 10 times, you know, your final salary, maybe you have real estate.
00:41:10 Or maybe your final salary was greatly reduced compared to where your other salary was for the most of your career, because you took on a job where you’re doing something you like, you’re not really even doing it for the money. So that’s just kind of bogus.
00:41:23 And there are times when people have pension, you know, between pension, social security, some real estate, they may not need a million dollars. Yeah, no, it just may not make sense. It might not be for their lifestyle. So they’re just accumulating more to, you know, maybe there’s a plan for it. It’s paying. You know, giving it to heirs.
00:41:49 Well, and here’s the other thing that people don’t think about. They’re 50 years old and they’re starting to stare down the barrel of retirement. And they look at this thing and they’re like, oh yeah, I really need this much. Then here’s what I’ve noticed. They get the 60, right? And then they come back and they’re like, so what I wanted to do at 50 is much different than what I now want to do at 60, which can be much different than what they want to do at 70. So being able to be objective with yourself. What are you really going to do when you retire? What are you really going to need that can actually shock people because you might not need as much.
00:42:31 And reality of it is, it’s depending on your lifestyle, longevity. There’s a lot of different things. Like statements are great. I mean, to be honest, you have 10 times your income in retirement. You’re probably okay. Unless you’re planning on living in very extravagant.
00:42:53 Yeah, unless you want to live to 120 and drink 300 dollars.
00:42:56 Exactly.
00:42:57 Wine every night. What makes you not?
00:42:59 When the average life expectancy is mid 70s. Yeah, I have high mid 70s.
00:43:03 Yeah, I think it’s like 76..
00:43:05 76, 78… 78 women, 76 men. And so, you know, accumulating all this. But then not use it either. Is it good?
00:43:17 And that’s why I find it so funny when people fret over, when do I take my social security? Right. And they try and like predict this thing down to the penny. And I’m like, hey, man, you don’t know when you’re going to die. Do you? No. Well, then we’re just giving you the best estimate based on, you know, how healthy are you today? What’s your family history look like? You know, what are your needs? You know, you need to retire early because you’re helpful. Okay, maybe we should take social security early or well, you really need every dollar you can get in retirement. The kind of strap let’s go in and delay it. There’s a lot of a lot of areas.
00:43:56 When can you and when should you? It’s a very, very different conversation.
00:44:01 It’s an uncomfortable one. Sometimes I don’t know.
00:44:03 Sometimes a very uncomfortable.
00:44:06 But you know what? That’s why we’re here. We live for that uncomfortable conversation because it doesn’t bother us. Right. Like we’ve had that conversation so many times that we’re really actually, at least for me, it’s really not that uncomfortable.
00:44:19 No, and it’s it’s even more interesting that as time goes by, change.
00:44:26 Right. And you know, it’s really weird. I say the bulk majority of the time, people are actually really surprised and they’re like, wow, I actually didn’t think that I could retire. I can’t. And then they feel great. It’s rarely actually the other way around where it’s like, all right, I’m ready to retire. And then, you know, you’re like, pump the brakes. You can’t, you know, I think it definitely errs more on the side of, you know what? Yeah, you’re probably okay. And even if they’re not, you kind of figure out ways to say, well, I know you wanted to spend 4000 months in retirement. Maybe we can whittle that down to 3200 minutes, a completely different picture. And then, you know, you just work with. Yeah.
00:45:11 And it’s just the difference to this. The Baby Boomer and Gen X generation are better savers.
00:45:19 They are. Justin, we’re running out of time. So give me a phone number and email or whatever. How do they get a hold of it?
00:45:26 541-375-0898 or visit our website at littlejohnfs.com.
00:45:33 All right. Well, thanks for sticking around and listening to the True Wealth Radio show. This is Matt Dickson.
00:45:38 And Justin Bruggeman.
00:45:38 You guys catch us next week. We’ll be back here Tuesday or have a great rest of your week.
Let’s discuss how retirement plans can provide tax benefits and serve as a retention tool for employees. We’ll also explore the role of financial advisors in helping entrepreneurs optimize benefit packages and the importance of understanding the scope of their services. Discover how Littlejohn Financial’s unique approach sets them apart in the industry, with a focus on providing compassionate guidance and personalized solutions tailored specifically for entrepreneurs.
Episode Highlights:
- Understanding the importance of planning for family businesses
- Leveraging retirement plans for tax benefits and employee retention
- Navigating the differences between fiduciary and suitability obligations
- Evaluating investment performance in context and the impact of managed products
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TRANSCRIPT
00:00:00 They do some common things in their business, but then a lot of things are not common, right? So, everybody’s kind of running their own business within a business. And so you don’t get the consistency of result by going from player to player. Some practitioners are really good and some are less so.
00:00:23 All right, it is that time of the week. It is your favorite Tuesday of How to All Week, and it is time for the True Wealth Radio Show. I’m your host, Dave Littlejohn, in studio with me today.
00:00:34 Matt Dickson.
00:00:35 Okay, Matt.
00:00:35 Yes.
00:00:37 Thank you for doing the prep work for the show today by not letting me see the prep work for the show today.
00:00:43 I know, I only printed one copy, so it’s like. Maybe it’s the interview Dave show.
00:00:48 It’s the, let’s see how well Dave does on his toes day. Should be fun.
00:00:54 I’ll walk you through it. How about that?
00:00:57 I love it. What is the theme that’s developing today?
00:01:04 I think a lot of people kind of have questions around, you know, what maybe does a financial advisor even do, right? We know they deal with money in some fashion or another. But more than just that, it’s talking, I think today, about business owners or people that have a company or an entrepreneur of some sort. Look at this and they’re like, how do I invest outside of my business? Most of the time, you know, people that have a business and are good at running a business, they know that landscape really well. But they might not know maybe some ways that they can save on taxes or you know, invest in ways that allow the business to continue to grow, but also to put some potential money in their own pocket and employees pockets. So I want to talk a little bit today to business owners and people who are even thinking about starting a business in the future.
00:01:57 So, business owners and entrepreneurs. And what I heard sneaking between the lines of everything you just said was some people want to invest a lot of people, the business is their investment. But what if you could reposition some money out of the IRS’s account and back into your own?
00:02:20 Yeah. Especially, yeah. I mean, talking about what are some of the benefits of maybe opening a retirement account. We could kind of start there in really generic language and say, is a retirement plan a good idea? And—
00:02:32 Yes. Okay, next question.
00:02:34 So could you talk to me maybe about some of the choices that are out there for someone who does have their own business and how those work.
00:02:43 Yes, I feel like just for those listening to kind of help out though a little bit, first consider, you know, maybe you’re not a business owner. This probably is still interesting to you in that, if you understand how the business made a decision, it may help you as an employee to kind of figure out like why are they doing this? What’s in it for me?
00:03:06 I think we should talk about the flip side of this. If you’re the employee and you’re being offered this menu to choose from like, hey, I’m allowed to open this type of retirement account. That doesn’t necessarily mean you can’t open another type of retirement account on your own.
00:03:21 So again, backdrop for everybody here, because I don’t assume that everybody knows what we’re talking about yet, right? The challenge of living in the financial world is that we do this all the time. And I know you guys listening, not everybody does this all the time. Right? So if you own a business, one of the things that now the state of Oregon pushes this to, right? They’re saying we want to help people save. Right? And so they’re encouraging businesses to open up or in certain cases, requiring businesses to create retirement plans. Okay. Which is kind of a weird thing. It doesn’t mean that the employer has to contribute to them.
00:03:57 But it means that the employer is expected to create an environment where they exist. That’s Oregon law, but I don’t know what, if you’re listening in a different state, it may be different where you’re at. But the point is, for entrepreneurs, first of all, a lot of the time we’re trying to figure out ways to save on taxes. A lot of people don’t understand that one of the things a business can do is create a benefit package for its employees, and you’re able to expense that from the business.
00:04:26 So it can be a retention tool for good employees. So creating benefits is a business expense, but it’s also sort of an investment in your employees as an entrepreneur, right? And now if you’re the employee, you’re like, huh, I guess maybe the boss is trying to keep me around by putting some things in place that are good for employees. Right? And the number one thing that we most often hear about is what?
00:04:56 Like an IRA of some sort?
00:04:57 I think it’s probably health insurance. I think that’s what most people think of when they think of business benefits. They think of health insurance and maybe retirement plans. But small businesses in particular oftentimes don’t offer health insurance because it is really expensive and doesn’t scale particularly well. So, if you have a business that’s got a couple hundred employees, there’s a lot of revenue running through that business because it’s employing a lot of people.
00:05:23 But the small mom and pop shop that’s got maybe 2 to 10 employees, that can be very expensive for a small business. So it’s not uncommon for those not to be offered. It’s much more common to see retirement plans offered in small businesses and certainly in bigger businesses. So with that as a backdrop, let me ask you the question, Matt. Why might a business owner want, besides the employee retention concept, why might they want a retirement plan?
00:05:52 I mean, they might want to be able. I mean, say, you know, the owner of the business is getting hammered on taxes, right? They’re just paying a ton. They have a lot of income. They might want to defer some of those taxes in order to not have to pay so much to the government in a given year.
00:06:14 It’s true. We talk a little bit about taxes on this program, but not a ton.
00:06:18 No.
00:06:19 Right? And that comes down to the fact that we’re not legally tax advisers, but we can still talk about what taxes do and how they operate, right? Taxes are a progressive thing. The more you earn, the higher your income tax goes. Okay? So, essentially, the retirement plan, if you will, is a way to shift money and expense it out of the business and put it into some kind of retirement vehicle that defers taxes.
00:06:50 If it’s not a Roth, right? If we’re talking about like regular retirement accounts, traditional IRAs, or 401Ks, they’re really the one that we’re kind of thinking of, but there’s other types of retirement plans, but they walk and talk similar to 401Ks. The idea is that the business can then expense out and rather than taking the income and paying taxes on it, you could put that income into a retirement plan and you don’t pay the taxes until later. Why is that a big deal?
00:07:21 Well, it’s a big deal because you’re saving for your future self while also getting a little bit of a tax break today.
00:07:28 You’re saving on the taxes now that money that’s not, that didn’t go away to taxes can now grow, right? So it’s part of the investment too. You’re not having to invest with what’s left after the taxes. You get the whole thing before the taxes and then you get to let that grow over time and as it grows, you don’t pay taxes on the growth, right? So you’re not experiencing capital gains, you’re not paying dividend taxes or any of those things as you’re accumulating. When do you pay the tax?
00:07:59 In retirement, when you go to pull the money out.
00:08:03 Right, and we assume retirement.
00:08:05 I mean, you could pull it early.
00:08:09 And what happens if you pull it too soon?
00:08:11 Well, depending on what type of account, most of the time there’s a 10% tax penalty.
00:08:16 Or more.
00:08:17 Or more. There’s ways that it can go higher than that. But then you also pay that as income. So if you had $70,000 of income for the year, but then you pulled $30,000 out of that retirement account, ooh, now you have $100,000 of income for the year and you paid the 10% penalty or higher on the 30.
00:08:36 Right, on the withdrawal. So there are some gotchas to it, but the benefit would be, especially if you’re working today and you have a bunch of income, Right? That you have more money, or a higher tax rate now, and then later on in the future, you expect a lower tax rate.
00:08:57 Me too.
00:08:59 So the lower tax rate in the future is what we’re literally trying to shift things toward.
00:09:06 I love you too, Amber.
00:09:07 Hi, Amber. We have a visitor in studio. Oh yes, we’re live.
00:09:15 That was awesome.
00:09:18 So now you know, right? So at any rate, you know, back to the train of thought, right? The whole purpose is like, hey, if I’m in a high tax bracket a day, but in my retirement, I’m not going to be earning as much and things are paid for. And I don’t have to take all of my money out all at once. I can shift money into a lower tax bracket in the future. So I’m getting several benefits at once, right? Lowering my immediate tax rate, increasing the amount that I’m saving and growing into the future, and I’m pushing into the future in a lower tax rate.
00:09:47 Well, and here’s something that that business owner might not be thinking about. Here’s a couple of things. One, it might not cost you as much as you think to have employees be part of that plan, right? So say you set it up to where they’re getting 3% of their pay. It might not cost you as much as you think.
00:10:06 Number one, you could potentially have it set up to where they’re not eligible, for that retirement plan for a certain period of time. So, before they even start getting contributions, well, you know, they’ve got to wait a little bit. So, that might incentivize that person to also stay there longer and be with the company. Less turnover potentially.
00:10:28 Sometimes golden handcuffs are a useful thing.
00:10:32 Wow, yeah. But, and you know, you don’t have to have a business full of employees, right? If you have your own business and it’s a business of one, there’s still options out there for you, even if you’re the only person in the business.
00:10:48 So that’s an interesting one, because a lot of people don’t realize that as the business owner, you get to wear two hats. You’re the employe-er and the employee, right? I think most folks that work for somebody else, they’re used to wearing the employee hat. And so, they’re sort of presented with the terms as to what they’re going to get, right? You know, here’s the types of benefits that we have or don’t have. Here’s the pay structure that you have. Here’s sort of what the assigned work is and this is how we get it done. And there’s a structure to that employment. The employer though, they have to figure out what is the right structure. Right. What can the business bear? What does it need? How does it, you know, how is it going to utilize this tool? Oftentimes it’s driven by the needs of the business owner, but not exclusively. And especially the larger the business, the more that it’s driven by the needs of the employees.
00:11:41 And there’s different types of retirement plans out there too. So one might not be the perfect fit, but then you explore another option and you’re like, hey, this one sounds like it really might work for me. There’s so many different options anymore.
00:11:54 Exactly. And there’s so many more nuances to the benefits too. For the sake of not boring our listeners to death. Here’s here’s kind of the key takeaway. Businesses can expense business benefits and those benefits because they’re being expensed becomes more tax-efficient and you then have opportunities to work with this is what a lot of financial planners are working with. A lot of financial consultants. Even insurance folks what they’re trying to do is try to reposition money within the business to be more tax efficient.
00:12:32 Can you kind of talk about what that tax efficiency looks like? Like how, like, so yeah, they’re giving some money to employees to their retirement account. How does that really affect their taxes? Do we want to get into the weeds on that?
00:12:45 So let’s discuss after this important profit break. Stick around, we’ll be right back. I’m Dave Littlejohn.
00:12:53 And Matt Dickson.
00:12:54 And you got True Wealth on News Radio, 90.3 FM at 1240 KQEN.
00:12:59 Hey, welcome back to the True Wealth Radio Show. I’m your host, Dave Littlejohn in studio with-
00:13:03 Matt Dickson.
00:13:04 And if you were just joining us, you have missed out on the first incredibly important segment for business owners and entrepreneurs. Which is, you know, sort of step one of understanding how businesses can expense certain benefits to the benefit of the employer and employee. So grab our podcast.
00:13:23 Do it.
00:13:24 So go to littlejohnfs.com and you can catch the podcast. Subscribe to the YouTube channel and you get it in little bits and pieces because that’s how we do it, right? And it’s also a great chance, if you have questions or things that you would like us to answer live, then it’s a great source of content for us is what is it that you would like to hear about? And so send us an email, info@littlejohnfs.com and we can uncover some more fun.
00:13:50 Matt, I understand today, a lot of what we’re trying to do, it’s helped folks kind of understand, like, why do I necessarily work with a financial advisor, and what are some of the things? And so we start with this entrepreneur concept of, advisors help custom design. That’s one of the things we do as planners. We work with entrepreneurs to help them design benefit packages in some cases and optimize them for their business.
00:14:14 That’s a big piece. Some other stuff that I kind of wanted us to chat about too. And you just mentioned it. What is it that a financial advisor can do or bring to the table? And what are some of those circumstances where it’s like, maybe at this juncture, I should seek out some help? Because when you hear financial advisor, that doesn’t mean a whole lot, right? Inherently.
00:14:36 Maybe before we jump down that path, I’m gonna Shanghai it for a second and ask you a couple of questions. There’s a lot of folks out there that refer to themselves as financial consultant, financial advisor. What do you think goes into this? Like, there’s this spectrum. What, who are the people that are calling themselves financial advisors? What do you need to know?
00:14:58 I think that’s one of the problems in the industry right now, right? Like a lot of people might kind of claim that they’re a financial advisor, but you don’t really know what service set that they’re offering. Maybe someone just manages assets. So they sit there and they say, oh, you want to invest? All right, we can do that. Hand some money over and I’m gonna just do stuff with it.
00:15:18 And you’re like, okay. Well, maybe that person wants more, right? Like maybe they have an estate, so they have a house and retirement accounts and a pension and social security. And they’ve got a lot of different pieces going on, and they’re like, I need to know how all of these work with each other, and how do I manage this whole thing, not just manage this money?
00:15:41 So let me sum this up for you in a word. Scope. Okay, no, not the mouthwash. I mean, scope like, what is the spectrum of services that an advisor is offering? Because I think you just correctly identified in there sort of a question that people should ask is, what does my financial advisor do? And what am I looking for them to do?
00:16:06 Exactly. It’s a really loaded question, right? Because I heard an advertisement on the radio the other day, and, you know, it was a bank talking about how they’re a fiduciary. And if you want them to actually take authority over your assets when you pass, they can step in and actually become the trustee for your trust. Which that’s a whole different scope of management. So there’s so many different avenues that a financial advisor or a fiduciary can take, which is just a fancy way of saying, an advisor who is legally obligated to work in the best interest of the client. Which I think that’s important, right? Because not everyone carries that standard. They can do things that are in the best interest of them.
00:16:59 I’ll be careful with that one, right? And just because I do want to defend the profession at large here, right? Fiduciary is a legal standard, okay? And so when you’re working with fiduciaries, there’s a legal obligation to put the client’s best interest first. Now, when you talk about financial advisors that maybe don’t have a legal obligation to be a fiduciary, many still act as if they are. And so, they are still attempting to operate in the best interest of their customer. The question is whether or not they have the legal obligation to, because there is a difference in terms of the standard of care associated, right? Do you have a fiduciary obligation or do you have a suitability obligation? That’s actually, they sound similar, but they’re not the same thing.
00:17:49 Can you talk about that a little bit?
00:17:51 Well, suitability means that it’s acceptable for the client, right? The example that this is always in extreme, right? But let’s say that you had two scenarios that were otherwise identical, but one pays a commission to a financial professional, the other one does not. And the long-term difference is that the commissionable product has higher internal fees.
00:18:14 You would expect over time that those higher internal fees would erode the customer’s performance experience. And so when given the ability to sell a lower fee structure or the higher fee structure, both would be suitable for the customer and that neither is going to harm them. One would be considered more suitable from a fiduciary perspective, but they’re not obligated to select the more suitable, they’re obligated to select the suitable one, which can mean that there are times that there could be financial incentives that would otherwise, perhaps cloud the judgment of the financial professional.
00:18:53 I think it’s important that you talk about this though, right?
00:18:55 Oh, you should, right? And I’m also really quick to defend, just because somebody operates under a suitability standard doesn’t mean they are not choosing what they believe genuinely to be in the best interest of their client. I think that the lion’s share of practitioners are trying to serve their clients well. I just don’t think all of them are. That’s the problem with any industry, right? Is that it only takes a handful of bad actors to tarnish the reputation of an entire industry.
00:19:25 And that’s why the regulations these days are so tight and so stringent.
00:19:35 So yeah, I think these are questions that people should ask. So what is my financial advisor? What is the scope of the engagement? What can I expect? I’m really convinced that the industry is not pinned down what expectations are. It’s really ambiguous. There’s sort of a minimum expectation that we have to give them statements. There’s certain reporting that has to happen. But in terms of how businesses operate, there’s a tremendous amount of difference from business to business in terms of how they engage with their customers.
00:20:03 I’m going to interview you for a second. So you said that there’s a lot of variation in this field. What are, you know, you set this company up and you’ve designed it to be and feel a certain way. What really, maybe not separates, but what are some things that you kind of think are unique to Little John Financial that might be maybe, I know this is going to sound like you’re bragging on air for a second, but kind of sets you apart where you feel like you might differentiate yourself from a more generic company that is just gonna manage the finances.
00:20:36 Sure, well, maybe to answer that, and you know, I get bashful about this stuff, right? We’ve been doing this radio show for a long time, and we try not to turn it into a sales pitch, right? My take on this has always been that good education for our listeners is exactly that, and if the needs of our customer aligns with what we offer, then it’s a good fit.
00:20:59 But I just wanna help teach people to do this because I’m convinced you can do this yourself. It’s just a lot of people don’t, won’t, can’t, there’s lots of reasons for it. So then you need somebody that you can trust. So with that as the backdrop, right? Then why was this firm created?
00:21:17 First was because having operated in some other firms, I found that there were a lot of internal rules that were designed to protect the business more so than the customer. And I just felt like that was a little bit misaligned. Second, I find that a lot of other firms are designed to accumulate lots of representatives of the firm, but all of those representatives, they do some common things in their business, but then a lot of things are not common, right? So everybody’s kind of running their own business within a business. And so you don’t get the consistency of result.
00:21:52 But by going from player to player. Some practitioners are really good and some are less so. And so I think, what I was shooting for with our firm, with Little John Financial was a more consistent experience for the customer. And the biggie for me was I didn’t want internal competition for customers. Okay. I felt like that was a disservice to the client was to create a your client, my client environment where people were competing for the same customer.
00:22:24 So we built a team practice. And I think that was a huge differentiator in philosophy that says, well, whenever a customer calls, they are who we exist to serve. So that was just the first and foremost is, well, let’s know who our customer is. Let’s know what brings the register for us. Next it was, let’s make sure that we, as closely as we can align our incentives so that we win because our customer wins, right? As opposed to we win regardless of whether or not our customer wins. That didn’t seem like the right alignment.
00:23:01 So that’s why we are, primarily, when it comes to our asset management, we’re a fee only firm. Can’t say we’re fee only because we have an insurance branch as well that can offer insurance to customers. We don’t do it a whole lot, but it’s available. And because that’s a regulated product, there’s a commission structure to it.
00:23:18 We can’t really strip that out in many cases. So, we can’t say that we’re fee only because if we do insurance and you do a handful of contracts a year, then, you know, it means that we’re in conflict with that. So we are fee based. But our asset management, when we say fee only. Think of it this way, right? We charge a percentage of the total account that we’re managing for our customer.
00:23:45 And rather than having a transactional expense associated, so whenever we buy or sell something, we get a commission for it, it doesn’t, we don’t get it in any kind of compensation for buying and selling.
00:23:55 And a lot of, would you say there’s still, you know, definitely a handful of firms out there that operate that way?
00:24:01 It still exists because a lot of mutual funds are still built that way. They’re designed to pay some kind of commission structure. And then there’s a residual fee that’s paid sort of in later months or years.
00:24:14 Back to the firm that.
00:24:17 Essentially to the representative, it’s to service accounts, right? So there’s a reduced fee on the back end that comes back. It’s called a CDSC or a contingent. Well, the contingent of sales charges, a sale penalty if you get out early. But they have what they call 12B1 fees. 12B1 fees are those residual fees that are collected out of the operating expense of the fund and they’re paid to the-
00:24:39 And you’re saying that’s not something that Little John really-
00:24:42 We don’t charge trail fees on anything because we’re not buying with commissions, right? We’re buying it wholesale. We do charge a fee for service, but that’s to stay aligned, right? And here’s, let’s just kind of use easy math. These are not necessarily real numbers, but he let’s just use your easy math. Let’s say a client has half a million dollars that we’re managing for them. And just to keep the math easy, let’s say that we charge 1% per year.
00:25:08 So 1% of a half a million dollars, it’s $5,000. If we can grow the account to a million dollars, then we would win with the customer. They have twice as much money. We’re getting paid twice as much too now because we have 1% of a million dollars instead of half a million dollars. So our interests are aligned. If the account shrinks, you don’t wanna stop paying. This is a really hard one, by the way.
00:25:35 People think, well, why don’t I only pay, if they’re making me money. Okay, this is actually a super important question. I’m looking at the clock. I want all of you guys listening to stick around for the answer to this question, which is, should I pay my advisor when the markets are going down? Very important answer to that might surprise you. I’ll tell you right after this break. Stick around, I’m Dave Littlejohn.
00:26:02 And Matt Dickson.
00:26:02 And you got True Wealth on News Radio, 93.9 FM and 1240 KQEN.
00:26:07 All right, welcome back to the True Wealth Radio Show. Dave Littlejohn in studio with-
00:26:12 Matt Dickson.
00:26:12 And I promised we would answer a really interesting question. You should catch the podcast if you’re just joining us today. We’re talking a little bit about fee structure. We’re specifically talking about what makes Littlejohn Financial a little bit different, which I don’t normally talk about because I’m not too into, like, major promo of our firm. I get it-
00:26:33 So I don’t even think it’s a promo. I think it’s just informing people, hey, you know, we might be a little bit different than the next guy. And you need to know that because we might not be the right fit for you. But then again, maybe it is perfect.
00:26:46 And by the way, there are other fee based or feel the advisors around. So we’re not it. Right? But we have our way of doing things and we like it, but nevertheless.
00:26:58 And if you don’t like it, kick rocks now.
00:27:01 And find somebody you do like, you know, that’s how that goes, and kick rocks. All right, why, the question, very loaded question is, in a fee only or a fee-based asset management scenario where you’re getting a percentage, like I said, the advisor is charging a percentage of the assets they’re managing.
00:27:22 It is often asked to me, why should I, as a customer, pay the advisor if the account is going down? Right? I understand that the account makes money. We both profit because you know, hey, I made money, so you should make money too. But if I’m losing money, a lot of people say then shouldn’t you be losing money? And what I would suggest is the advisor is being paid less. So they feel the impact. The business is very aware of this impact. But what could potentially go wrong if you only paid your advisor when you made profits?
00:28:00 Well, I’ll ask this question. Wouldn’t the advisor just wanna take on more and more risk? Because if you’re not getting paid when you’re losing, wouldn’t you just wanna ratchet up the risk and try and get super high returns?
00:28:13 And I don’t know, like want or not, but wouldn’t that be the incentive, right? Because you’re like, well, look, if I guess wrong and you don’t make money, okay, I don’t make money anyway, but if I guess right and you make some money I get paid right so you kind of, disincentivize risk management.
00:28:33 It’s like telling a baseball player in the major leagues, you know. Basically, you’re only gonna get paid if you hit home runs. Well, he’s gonna swing like crazy every time he steps up to the plate, he’s gonna only he’s gonna swing it almost everything.
00:28:47 If it could be a home run ball man as well. Because if there’s no penalty, it’s like, look, it’d be different if you’re going to get paid for home runs. But you’re not, you know, and you’ll get paid for base hits too. Like, it’s kind of what those things are-
00:29:02 You lose your entire paycheck if it’s a walk.
00:29:05 I was going to say like, you don’t get paid if you strike out. That would be the better one. Right? A walk actually still gets you on base. That’s playing it smart. Right? But if you. What’s the difference? You only get paid to make home runs or you don’t get paid if you strike out. There’s a difference. One of them is gonna be more defensive in nature. They’re gonna go for high percentage shots. And that’s the thing about investing. It’s like a lot of folks, you know, there’s different philosophies. Like, well, look, I’m gonna take 20 bets and one of them is gonna be a home run and it’s gonna make up for the 19 losers. We don’t prescribe to that theory, just so you guys are aware.
00:29:40 It is about long-term diversification value and there’s a lot of risk management strategies associated. And you know why? Easy answer. Like, why should you manage risk? Because sometimes clients need to take money out and you don’t want your account to be way down when you need to access money.
00:30:00 That is so true.
00:30:03 Sometimes you need the money and so if you are-
00:30:05 Wouldn’t you rather take money out when the markets are up?
00:30:09 I mean, for sure. You definitely don’t want to wait until, like, you know, the most recent example, like 2019 going into 2020, March of 2020, markets fall like 30 something percent in weeks, right? Two, three weeks, everything just collapses. What if you had to move and you had to take a big withdrawal from your investment accounts once you get 30% less purchasing power at that moment?
00:30:34 Well, and I think I’m glad you brought this up because I actually hear this question all the time. People like, is it a good time for me to take some money? And I do often say, hey, let’s take a look at, you know, where is the account? And oh my goodness, you’re up $50,000 this year. Go ahead and take $20,000 out.
00:30:52 Unless you like have 500 million and be like, well, you’re barely making anything, right? Remember, numbers should always have context. That’s another one that I would tell you. If you have any financial advisors out there, it’s like make sure the numbers have context because there’s three kinds of lies in the world, right? There’s lies, damn lies, and statistics.
00:31:14 You’re not wrong. I’ve seen that, you know, where someone’s like, hey, you know, I’m down $100,000. And it’s like you have a $3 million account. Like that’s a normal couple months.
00:31:23 We call that Tuesday. It’s just, it’s a percentage-wise, it’s not significant to the total volume of the account. It’s like, you know, if the diving board is six inches long, you know, it doesn’t move much. But when it’s 60 feet long, a one degree move, translates to a big fluctuation on the end of that board, right? And that’s what big accounts look like, is they just, it’s bigger moves.
00:31:46 And then it’s always funny too, and that person’s like, well, you know, my account’s up 12%, but the S&P is up 13. And it’s like, it’s a 1% difference, but-
00:31:59 Well, it does add up over time, but this again is one of those, the idea that-
00:32:04 Well, it’s when people aren’t measuring the same way each time. It’s like, oh, I’m looking at this loss. Well, that’s half a percent. And then they go, and then they change it and then they start looking at percentages when it’s time to evaluate performance instead of dollar amounts. You’re up $1 million this year. Well, I really wanted to be up 1.1. And it’s like, I-
00:32:25 It’s the tyranny of absolute versus relative return, right? Like on an absolute basis, here’s the dollars that I gained or lost. On a percentage basis or relative basis, I’m up this much or I’m this percentage or that percentage or down that percentage.
00:32:37 Well, it all is based on when you’re measuring it too. I was looking at some performance numbers today and it absolutely blew me away. I changed the calendar dates by like 20 something days. And the percent return on this one thing I was looking at went from like seven to ten. And I’m like, so if you had measured, you know, 20 days into the cycle past, when it started, your numbers wouldn’t look that great, but you add the last couple weeks of that in there and it’s like, now it looks awesome. So you can really manipulate the numbers by changing the dates. And that’s the thing.
00:33:13It’s, it’s hard to do also. Like I don’t see performance reporting done this way. I’ve worked in some softwares that does this a little bit, but it’s interesting if you were to take a rolling average return in an account. We do this a lot in the advisory landscape. When you’re doing investment research, you might say, well, I wanna see a 200-day moving average of the price of a stock. And what you’re doing is just saying, well, here’s the average price for the last 200 days. And tomorrow, I’m gonna take the oldest day off and I’m at the new day in, and I’m gonna take a new average.
00:33:44 And I’m going to plot that over time. And it sort of smooths out the ups and the downs. And so a 200 day price average, you can see, well, here’s the current price compared to the last 200 days. We call that a 200 day moving average or maybe a 50 day moving average or a 10 day moving average. But it’s a way to get a sense of how is the stock moving, not moment to moment, but over a period of time. But you don’t see people measure their performance that way very often.
00:34:11 They typically look at a calendar year and say, well, show me January 1 to December 31 and show me that snapshot. And that’s how I decide if it’s working or not. That’s largely what the mutual fund industry does. And it’s where a term called window dressing comes from.
00:34:25 Tell me about window dressing.
00:34:26 Window dressing is essentially trying to set the system up so that the numbers look good for a calendar basis. And so you see shuffling things around late November, early December to try to position, so that, a mutual fund number looks good at the end.
00:34:46 So you’re saying like, as an example, maybe a mutual fund manager is in November and they’re way above the target where they wanted to hit for the year. They’re like-
00:34:55 Or to get a bonus perhaps. Maybe they are there are bonus against how they perform against a benchmark.
00:34:59 And so if they’re crushing the benchmark, they could in theory, basically, you know, if the agreements of the mutual fund allow for it, they could reposition assets around to lower their risk exposure and try and lock in that gain.
00:35:16 They could potentially. Or here’s another one. Let’s suppose that they’re not going to hit their bonuses.
00:35:22 They take on more risk?
00:35:23 Well, they don’t necessarily, but they can do things like they can distribute a bunch of their adverse capital gains just to get it out of the way. Right? Because, there’s an interesting thing about the way mutual funds operate where they can choose when they declare their capital gains or losses, right? So they don’t declare a loss. They’re never gonna make a loss.
00:35:42 Oh, so you’re saying if they’re gonna end up missing it?
00:35:43 They’ll just say, I’m gonna just, yeah, I’m gonna miss anyway, then let’s get this toxic stuff off the books to set up a better next year.
00:35:50 Oh, so they might liquidate it.
00:35:51 It’s possible. It’s possible that something like that could happen. You’d have to look at the prospectus. But if you’ve got a whole bunch of embedded capital gains, and you’re not going to hit stuff anyway, then you just rip the band aid off and set yourself up so that the next year can look better. It’s potential out there.
00:36:11 And then maybe even re-buy it if it’s a position that they still like.
00:36:14 Sure, they could potentially change their basis and do tax management within the fund. It doesn’t happen often. I don’t think this is an abused scenario, but it’s not impossible. And so, those are just elements that happen when you’re in a managed product like that. It’s that a capital gain distribution could occur and it’s outside of your ability to control the timing.
00:36:38 And that’s not to say that all managed products are bad. Right?
00:36:40 No, no, we’re not. It’s just a feature of management. There’s other features of managed product that are kind of handy. Like you could, you know, you have your own capital gain of when you buy or sell it, but they may never distribute a gain to you. So you could have some tax efficiency because they’re taking in new cash. And so they’re rebalancing their portfolio with the new cash from new investors. Which means that you may actually experience increased tax efficiency in some scenarios.
00:37:03 Oh, double-edged sword.
00:37:05 So it can work out nicely in that respect. But all of this to get back to the idea that when you’re, well, I think I kind of even lost some of the original idea. We just started going down the mutual fund path so much. Oh, the moving average, that’s really what it came down to. It’s like, well, if you’re looking at how well your returns are, I think you’re better off saying, well, here was my January to January, February to February, March to March, April to April, and then take a look at how that evolves over time.
00:37:36 That gives you a sense of how stable your portfolio is and what your actual rolling return looks like. And again, not common to do. Most people just take a 12 month snapshot of what they were doing previously and maybe a three year snapshot and kind of go, well, here’s the trend and here’s how we’re looking.
00:37:52 You know one thing we didn’t do? We didn’t talk to our listeners kind of some of the stuff that we do internally that might be different than other places. We promised it.
00:38:07 All right. So Matt’s gonna tell us more after our last break.
00:38:13 All right.
00:38:13 Okay. Stick around. If you wanna know what Mace, like these guys on the radio, they got an investment firm. I’m kinda curious.
00:38:21 What do they do?
00:38:22 What do they do and how are they different? Just a little bit more when we come back. Stick around, I’m Dave Littlejohn.
00:38:26 And Matt Dickson.
00:38:27 And you got True Wealth? Yeah, we’ll do that. News Radio, 93.9 FM at 1240 KQEN.
00:38:34 And we are back. Welcome back to the True Wealth Radio Show. Dave Littlejohn in studio with.
00:38:39 Matt Dickson.
00:38:40 Matt, what did you, you promised our listeners. Okay, lay it on me.
00:38:47 Okay, so, when we left off at the break, we were talking about what are some ways that Little John financial kind of specializes in? What are some of those avenues where it’s like, that’s kind of an area where they’re really comfortable and familiar with. And so-
00:39:02 Diet sodas.
00:39:05 Unfortunately. But I won’t drink them. I can’t. I can’t do it. I love my real sugar Pepsis, as David will know. But no. Okay, getting back on track. So, David, do you want to start us off? Just give me one short little thing where, cause I’m actually, I’m gonna throw you on the spot. What’s something that you think we do well?
00:39:27 Something I think that we do well. I think we’re pretty high touch with our customers. Like we don’t even have a phone tree. Like if you call, you either get a person or you get a voicemail that like we all get harassed by and you get called back usually within moments. So you almost always get a live person to answer the phone and we don’t do phone tree on purpose.
00:39:50 I don’t even know that that is a good one. That’s not really where my brain was at. More of like some of the areas where it’s like when we’re doing business, it’s like, hey, that’s something or that’s a person that we tend to help. Right? So like, I’m looking at this and saying-
00:40:06 Matt, what’s the answer you’re looking for?
00:40:08 Okay, I’ll give you one. I’m gonna give you one and see if you can keep this going.
00:40:11 He’s trying to lead the way to something going, well, go ahead, just go for it.
00:40:15 Okay, so I think one of the areas where I think we do well, you have a spouse that’s passed away, right? And you didn’t really know maybe kind of how everything was invested. It just wasn’t your area of expertise. I think we do inherently a pretty good job of bringing that person in and saying, hey, you know, we don’t want to talk over you. We want to be able to get you kind of up to snuff with what it is that we do why we do it. And does that make sense for your journey?
00:40:46 Because sometimes it doesn’t and it’s like hey, this isn’t a good fit. But I think we do a good job communicating and coming up with ideas of how to help that person who has gone through a tragedy. Need to plan, need someone that they feel comfortable with and kind of walking that person through what the next steps are.
00:41:04 Sadly, I think you’re right. And sad only because when folks are going through challenging times like that, I think a lot of it just comes down to, again, it’s pretty personal. And our culture is not big mega business right now. It’s very personable. And so because we try to know all of our customers really well.
00:41:24 Like by name. It’s like you’re not just a number. We know who you are.
00:41:28 And so, I mean, it’s interesting too, because not everybody qualifies to be a client.
00:41:33 No.
00:41:34 Right? And that’s not because we’re trying to be uppity about things. It’s because the people that we’ve made commitments to, our first obligation is to them. So before we take on new obligations, we have to make sure we can meet the existing obligations. But yeah, I mean, we spend a great deal of time. I think there’s a compassionate side to us, but there’s also a lot of education. So people will come in and they don’t have a good knowledge base. And so we try to build that knowledge base up so they can be confident in what we’re doing. And then we work together on it.
00:42:03 I mean, speaking about the education piece, the other area I think, you know, we kind of dive into a little bit is for the person who has maybe multiple income sources and is getting close to retirement. And they’re trying to look at all the different pieces of the puzzle and say, how do they all fit together? And they need someone that can analyze what are all the different pieces that I’ve got going on in my life.
00:42:28 And then what is the plan moving forward? Can I retire right now? Where should I start accessing money from in retirement? A lot of people don’t know. They have maybe five or six different areas where they could access money, but they don’t know what the most tax efficient way to access money is. And so they show up and they say, hey, walk me through this.
00:42:50 I would say that is, it goes into strategic planning. These are terms that get tossed around a lot, but strategic plans, you need a strategy to be efficient. And so the idea is, well, let’s look at all the moving parts that you’re working with and then let’s figure out an optimized way to deal with them, right? And that’s just highly personal. You can’t kind of give that advice on the radio because everybody’s circumstance is unique and their needs are unique. But the idea would be that you sync up by understanding what they’re working with and what their goals are.
00:43:23 And then developing a strategy to optimize what they’re trying to do. So, and it generically falls under the term planning, right? But planning is pretty nondescript. So that’s my frustration. Our industry, because of regulation, waters a lot of terms down. What are we really trying to do for our customers? Look, you work really hard to scratch together what you have over a lifetime. Let’s not screw this up. So let’s not unnecessarily give it to the government.
00:43:52 Let’s not, like, mischaracterize the way we manage our taxes and overpay where we don’t need to. I think I just said the same thing twice. Let’s not, I guess, be frivolous and accidentally make an unforced error that costs us. That’s one of the things that we see a lot. And so there’s just a lot of things that come down to efficiency. And in the Plan B stuff, right?
00:44:18 You know, hey, we got to make sure that we got. If it’s not going to me, where does it go? And how do we do that stuff the right way? So I just think that there’s so much. I mean, at the end of the day, it’s funny, but the money management, that is secondary to the planning for us. It’s the thing that wags the dog at the end of the day. But if you have a lousy plan, you know, you blow up a whole lot of money in a hurry. So you got to start with the good fundamentals. I think that’s just where we’re at.
00:44:49 Well, there was so much more on the list, David, but I don’t know that we’ve got time for it.
00:44:53 No, we got like 18 seconds or something. So let’s just leave it at this. How do folks reach us if they have any?
00:45:02 It’s super easy to go to littlejohnfinancial.com. So, littlejohnfs.com and chat us, give us a call. We’re easy to find.
00:45:12 It’s true, all the best. So give us a chat when you can. And also, you know, consults are free. So if we can help or we can get your point in the right direction, that’s what we want to do. But we’re out of time for now. So until next time, I’m Dave Littlejohn.
00:45:24 And Matt Dickson.
00:45:25 You’ve been listening to True Wealth on News Radio 93.9 FM at 1240 KQEN.
In this episode, we delve into the real stories of celebrities who went from riches to rags and explore the common financial mistakes that led to their downfall. Learn how to avoid lifestyle inflation, poor investment decisions, and inadequate financial planning to protect and grow your wealth. Tune in for essential tips and strategies to help secure your financial future and prevent common pitfalls.
Episode Highlights:
- How lifestyle inflation can erode your financial stability.
- Insights into practical strategies for maintaining and growing your wealth after the accumulation phase.
- The importance of not overspending and questioning traditional guidelines for housing expenses.
- Common financial mistakes that high income earners make, especially in terms of tax traps and how to avoid these pitfalls and seize beneficial opportunities to protect your wealth.
- Tax traps that can erode your wealth.
- How to manage taxes effectively and avoid costly mistakes.
- Risks associated with overleveraging– borrowing too much to fund your lifestyle or investments– and how it can lead to financial instability.
- Significance of diversifying your investments to avoid being over-concentrated in a single asset class or stock.
- Tips on how to adjust your financial goals and savings strategies to account for inflation and this includes practical advice like increasing your retirement contributions when you get a raise.
Transcript
00:00:00 I mean, maybe you’re not in the accumulation phase of, you know, retirement is, right? You’re, this is more towards, you know, trying to get money out of my estate. I don’t want to pay more taxes than I have to, especially in Oregon, because Oregon is expensive. Right. So taking those steps, and I can’t remember where I read that like 75% of people don’t even have a will.
00:00:00 What’s going on, everybody? This is Matt Dickson and this is The True Wealth Radio Show. Today, I’ve got a… awesome guest speaker in the house.
00:00:41 If I still consider it a guest?
00:00:42 Yeah, because you’re not here enough, Justin.
00:00:45 This is Justin Bruggeman.
00:00:46 Yep, so one of the other advisors at the firm that just so happened to make it onto the radio show today and probably actually will over the next maybe week or two.
00:00:55 For the next couple of weeks.
00:00:56 Yeah, we’re running this thing and we’re super excited to do it. Justin, I wanna just pick your brain today. I noticed a trend. When we run this radio show, we’re often talking about how do you acquire wealth and what are some of the tactics in order to be able to generate more income or save more money. And so I’m kind of curious to see the opposite of that. So after you’ve already kind of gained your wealth, right? After you’ve already gone through that accumulation phase and you’ve got the money that you’re looking to get, maybe you’ve become wealthy, how do you preserve that wealth and not squander it? And it’s funny because I was talking about this earlier when I was kind of drafting the show up and I was talking to the ladies at the office. And I, they asked, you know, what are you going to do for a show today? And I was talking about, how can, you know, we stay rich instead of squandering our wealth.
00:02:04 Right.
00:02:05 And they’re like, oh, well, that’s simple. You know, just don’t spend a lot of money. And I think that’s everyone’s kind of knee jerk reaction, right? It’s like, well, just don’t blow it all. But–
00:02:15 Just spend less than you make.
00:02:16 Right. But I think there’s a lot more to it than that. Right. Like that’s the easy answer and that is part of it. Right. But I think there’s a lot more than just, don’t blow it because I mean you look at a lot of these pro athletes and all of these people that, you know, start a business and do really well and they grow their net worth oftentimes they fail.
00:02:39 Right.
00:02:39 And so I want to talk a little bit today about what are some ways that you can preserve the wealth and not squander it? Do you kind of want to head this show off and give us maybe a starting point as to some ideas that maybe you have on ways that we can preserve our wealth?
00:03:01 It’s almost not even, it’s maintaining wealth and the stepping stones to growing, to where you really want to be long-term. I mean, even take this, your first home purchase that isn’t necessarily intended to be your home forever. It’s a stepping stone to get to where you want to be or where you’re most comfortable and where you can within your budget.
00:03:29 Okay.
00:03:31 And then what we’ve kind of talked about kind of prepping for this is the inflation and the lifestyle.
00:03:39 I mean, just speaking about what you just mentioned, your first house, you know, we kind of together looked at this and said, you know, do the old rules of, you know, what was it, 30 to 40% of–
00:03:53 Yeah, 33 to 36%.
00:03:56 Yeah, of your income being able to go to housing.
00:03:58 Right.
00:03:59 And you and I, I think, are kind of questioning that right now and saying, does that still apply? Because, you know, inflation has really run up the cost of your utilities, your food, all of the other things that are out there that are, you know, requiring you to open up that checkbook. And I think that this is something where, you know, maybe you can’t afford quite as much house.
00:04:20 Right.
00:04:21 And we ran the numbers a couple different ways. And just rough numbers said, you know, how much can you actually afford for, kind of generic numbers? I think we came up with like, for, you know, about one hundred and fifty thousand of income. You can afford about a three hundred and fifty thousand dollar house at today’s interest rates.
00:04:38 Right.
00:04:39 And that’s, like especially where we live. Right. And where we’re at in Oregon, that doesn’t buy you a ton of house anymore.
00:04:45 Right.
00:04:46 It would have, five or six years ago, but today, it might be a little bit different of a story.
00:04:52 And even with the upgrading that people did when it was more affordable, which in stretching it to the end of that, the high 30 mark of 30% of your income goes to housing, when you buy more house, repairs are more.
00:05:12 It’s true.
00:05:13 The growth on a 1200 square foot house is very different than a rough on a 3500 square foot.
00:05:20 And I think that’s a good lead into one of the things I wanted to talk about today, which was this concept of lifestyle inflation, right? And it ties into living beyond your means, because that’s what I really want to hammer. How is it that people that have a high net worth that maybe make a lot of money every year aren’t doing well financially? Because we just assume, oh, you make a million dollars a year of income, surely you’re doing well. Maybe that’s not the case. And I think one of those errors that people make is, they… as their income goes up, they kind of inflate their lifestyle to the point to where it matches that income.
00:06:01 Right.
00:06:01 And then they become vulnerable. And I saw a really interesting statistic on this. And it was reported that 60% of high-income earners, so people making over $100,000 a year, are living paycheck to paycheck due to lifestyle inflation.
00:06:18 Right.
00:06:19 Right? Like you’re not–
00:06:21 That’s crazy.
00:06:22 Yeah. You’re not buying that cheap bottle of wine. You’re buying the $200 bottle of wine. And so, maybe you went from having a pair of Levi’s to a pair of designer jeans. It’s easy to have that lifestyle creep where what was a $4,000 a month credit card bill is $6,000.
00:06:42 Right.
00:06:43 And even though you’re making a lot of money, you’re spending it all.
00:06:45 Yeah. And it’s just not… Especially when the economy is changing the way it is and everything is fluctuating, the way it has is maybe your income goes up, but it doesn’t mean you adjust your lifestyle just because it goes up.
00:07:02 Right.
00:07:03 Because at that point in time, like the adjustment might have been two years ago, but then inflation has caught up quickly where it got way expensive, really quick.
00:07:15 Right. Like things, a lot of stuff cost 20% more than it did.
00:07:18 Right.
00:07:19 And so, yeah, you might have got a 20% raise over the last three or four years, but that doesn’t necessarily mean anything right now.
00:07:28 Exactly.
00:07:28 You could be living the exact same lifestyle that you were. And I think that’s the trap is people want to have a little bit, maybe more of a glamorous lifestyle. And so, they are thinking, hey, I’m making more, let’s go spend more or let’s go treat ourselves to that brand new camp trailer that we want, not realizing that inflation is kind of stabbing you in the back.
00:07:52 Right.
00:07:52 So.
00:07:53 Well, and it never… the adjustment never is, so say you get a 20% increase in wages over the so-called last two years.
00:07:59 Sure.
00:08:01 At the, right now, you’ve adjusted your lifestyle to that new point instead of–
00:08:09 Waiting for inflation.
00:08:10 Even though there’s a 20%, maybe let’s try to adjust our lifestyle by 10%. And then you have the 10% of access to survive during these situations where stuff is more expensive.
00:08:24 And here’s one, here’s a tip, right? We can throw this out there. Now, we can’t give specific advice. This is more generalized as a concept. But, you know, maybe if you were doing 8% into your retirement account and you get a pretty good raise. Maybe you consider going from something like 8% to 10% and then paying your future self, right? And so those are kind of the things that I want to talk about today, kind of tips to preserving your wealth and making sure that your future self is in a good spot and you’re not really kind of stealing from yourself.
00:08:59 And a lot of times what a lot of 401(k)s will have is the option to increase your percentage each year automatically.
00:09:07 Oh.
00:09:08 So… and I’ve seen it. I don’t know how common it is, but I’ve seen it multiple times where that’s a great way to do it is all right, you’re just getting started up.
00:09:17 Sure.
00:09:18 Put it at 6 percent. Five years down the road, you’re at 11.
00:09:22 Then you’re doing a lot. Yeah.
00:09:23 And you’re not even noticing it because, that one percent difference, you’re probably not going to notice as a net result on your paycheck, because that’s coming before all the taxes, Social Security, everything.
00:09:35 Here’s one I want to talk about, Justin. We talked about lifestyle inflation. This is one I’ve actually seen recently, more often than I would like to admit for various people. Over-leverage. And what does that really mean? Do you want to talk about it or do you want me to talk about it? Because I’ve personally seen this for a lot of people recently. This is kind of a big whoopsie. Do you want to kind of chat about what you–
00:10:04 You know, the underlying concept of it is you’re just… We’ve even talked about this with the mortgages. Your lifestyle changes, so you adjust your lifestyle to the new numbers and then inflation creeps up or some event happens where it shifts it and now you’ve created too much say debt to fund your lifestyle where anything changes. You’re actually skating.
00:10:33 The domino effect, kind of. Yeah. It’s like, well, you know, things were going really good and then I bought this one thing that I thought was an investment and I did it with leverage, borrowing someone else’s money. But then when it’s time to pay the extra, you know, fees or the extra dues or whatever that is, if there’s any type of hiccup along the way, you can find yourself strapped for cash and unable to make a payment or having to borrow more money in order to make that payment. It’s a really dangerous venture when rates are higher than they historically have been over the last five or six years.
00:11:13 And even the cost of debt with interest rates has gone up.
00:11:16 Oh, it has.
00:11:17 I mean, if you’re running credit card debt, you know, monthly, you might have been seeing, you know, let’s call it 22% interest a few years ago. Now it’s probably 27, 28.
00:11:31 Yeah, and you know, high rates, that’s one thing to think about. I’ve also seen, you know, people over-concentrated, whether that be, oh, my entire portfolio is in real estate or maybe I own just one single stock or a fourth of my net worth is in one single stock. When you concentrate really heavily, that can be an issue too, just because you don’t have as, kind of, you know, as many buckets of money to pull from or different areas to go get money when you need it. And so that can be an issue too. But all right, Justin, I think we’re running long on this segment. So let’s do this. Let’s take a quick profit break. And when we get back, we’re going to talk about some more ways that the wealthy people out there can somehow become poor by making bad mistakes.
00:12:23 This is Matt Dickson.
00:12:24 And Justin Bruggeman.
00:12:25 You guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN. All right, everybody, we’re not wasting any time getting back on the air. This is Matt Dickson.
00:12:35 And Justin Bruggeman.
00:12:36 And you guys are listening to the True Wealth Radio Show where today we are bringing you some awesome content on how you can preserve your wealth. Justin, in the first segment, we talked about some financial pitfalls for those high income earners. I wanna keep it going actually. I wanna stretch this out into the next segment because there’s so many different ways that you can slip up, make a mistake or just, you know, kind of be ignorant to some of the things that are out there for you.
00:13:05 Right.
00:13:06 Lead it off.
00:13:07 I want to talk about taxes.
00:13:08 That’s a big one. That’s one that’s kind of overlooked. Maybe kind of start us off talking about, you know, ways that, you know, when you’ve got some wealth, you can be tax savvy so that you’re not just handing over an unnecessary amount of money.
00:13:25 It might not even be that you’re handing it over so that you don’t realize that these events cause taxes.
00:13:34 Right.
00:13:34 And then you get a tax bill and you’re like, whoops, what do I do now? Like selling a property and just not understanding that–
00:13:44 There could have been a big gain there that you didn’t realize.
00:13:47 Right. Yeah. And so which, nobody wants to mess with the IRS.
00:13:51 No.
00:13:52 I don’t. Nobody I’ve heard of does. And so trying to get, getting all the information because most of the time if you’re either inheriting money or came across money in some way or form or just making a lot more now.
00:14:07 Making a lot more or maybe you’re making money and accidentally not setting aside all the money that you need to. I know someone who, they started a business, they were doing really, really well. They were making a ton of money in their very first year. They weren’t setting aside quarterly taxes and the IRS at the end of the year was like, um, you should have been handing over–
00:14:34 30% of us should have went somewhere.
00:14:36 Yeah. And they didn’t have enough to pay their taxes. And so they, I think they took a HELOC on their house. Right. And so there was a huge disaster that could have been avoided had they been working, you know, with a good professional to make sure that they were on track in making adjustments to their income to where they were saving some of that back for taxes.
00:15:05 And it’s just being proactive about taxes instead of reactive. Understanding what you’re getting into when you get into it so you can plan for it.
00:15:14 Right. And if you’re making a lot more money, your tax bracket could go pretty high, but there are a couple ways that you can effectively lower, you know, how much you’re going to pay in taxes as a percentage. It’s low hanging fruit, right? You could potentially be contributing to a retirement account that deducts how much income you had for the year, because you are putting that in an account that says, hey, I’m going to pay these taxes later, like a traditional IRA or maybe a company 401(k) plan. There’s a lot of different options that are out there. You just got to be savvy enough to know what they are. And if you don’t know, that’s why we exist. Right.
00:16:00 Right. And ask the questions, because if you have tax deferred accounts and then pre-tax accounts as well, and you’re paying too much taxes, there’s limits on 401(k) contributions, but they are pretty high.
00:16:15 Right.
00:16:16 So if you want to shelter more income now, because this is your high income years, and then maybe you mean, maybe when you’re getting closer to retirement is, doing some of these things to prepare now because you’re gonna have less taxes later if your income is falling.
00:16:32 Right. Or maybe you are really passionate about a certain charity, right? And so you’re looking at this and you’re saying, you know, I’ve felt convicted to donate to this multiple times. Maybe this is a good year because you have a ton of income and you can make a charitable donation that could help you out as well. So there’s a lot of different tax planning strategies out there. And I don’t think we have time enough today to cover them all. This could be a CS after class moment.
00:17:02 Right.
00:17:02 Right? So you can always give us a call, 541-375-0898. We can talk about this type of things and walk you through it. That’s one of the reasons why we exist, to help our customers and out with this type of stuff. So.
00:17:17 Right.
00:17:19 What else do you got for me, Justin?
00:17:20 I mean, another one that can fall into the taxes, just ignoring estate planning.
00:17:24 Okay. Yeah. Like if you’re just saying I’m going to put the blinders on and not even look at my estate, just let it, let the chips fall where they may.
00:17:32 Well, I mean, to an extent, it’s not your problem if you’re not here anymore.
00:17:36 Right.
00:17:37 But it can be a burden on–
00:17:40 The heirs.
00:17:41 The heirs.
00:17:42 Okay.
00:17:43 You know, you’re setting up, get out of there, your spouse. And understanding just the rules and exemptions that you get as a spouse, and then how you can give the money away if that’s part of your plan. I mean, maybe you’re not in the accumulation phase of retirement, this is more towards trying to get money out of my estate, I don’t wanna pay more taxes than I have to, especially in Oregon, because Oregon’s expensive.
00:18:13 Right.
00:18:14 So taking those steps, and I can’t remember where I read that 75% of people don’t even have a will.
00:18:23 Yeah, I think in the US, it’s about 60% don’t have a will and even fewer had any estate plan at all.
00:18:34 Right.
00:18:34 Right. And so we look at this and you’re right, people aren’t, they’re not taking care of this stuff. That’s spooky to me. Especially because–
00:18:44 On probate to divide it the way.
00:18:46 Right, and the probate–
00:18:47 The laws kind of say.
00:18:49 Probate courts have gotten more expensive, right? And the cost hasn’t really gone down. So we look at this and it’s like, you got to think about your heirs because one of the big concepts that we like to talk about is that, generational wealth, right? Like, how do we set it up to where we’re making good decisions for the people that are going to follow us and we’re trying to leave a legacy for? And part of that is being responsible enough to say, do I need a will or do I need a trust because depending on how large your estate is and how things are set up, you could potentially, you know, be costing your estate when you die and your spouse dies, you know, thousands and thousands and thousands of dollars–
00:19:33 When it could have been gift to [the worker].
00:19:34 Because it could have been structured properly and it wasn’t. So we don’t like to see that. And that’s one of the things that I think we do a really good job of internally. This is me bragging about our firm for a second. But I think one of the things we do well is we’re looking at the whole picture, not just what you have today. When we’re saying, how do we not only preserve it for you, the best that we can, but also try and preserve this for your heirs.
00:20:02 Exactly. Yeah.
00:20:03 It’s a big deal.
00:20:04 And it’s a big one, is just because to highlight is, if you have… If there has been a recent passing or anything like that, update beneficiaries. Because that is a bad one when it doesn’t get updated.
00:20:16 Like maybe giving your ex-wife a bunch of assets that you didn’t realize you–
00:20:21 It has happened and I’ve seen it happen.
00:20:23 Have you really?
00:20:24 Yes. And that’s never a fun conversation because just update that stuff. Yeah.
00:20:30 I think [in the way]–
00:20:31 Well, truly there’s ways around it, but that can get pretty expensive, too.
00:20:34 Yeah. Yeah. You know, another one that really isn’t utilized, I think, nearly enough is gifting. Because sometimes your estate can get quite large. Right. And when, especially in a state like Oregon, where there are sizable state tax.
00:20:54 Lower exemptions,
00:20:55 Right. Yeah. And lower exemption amounts. You know, you say you’ve got a household estate that’s a five million dollar estate. And you, in Oregon, even if you have your trust set up properly and you pass away, the state’s gonna come here in Oregon, they’re gonna come knocking and wanting some taxes, right? And so, I think a big piece of that is saying, hey, we need to be able to gift stuff away now potentially because what if you don’t need the stuff anymore? You’re 95 years old and you’ve got stuff and you don’t need it. Go ahead and give it away and then lower the value of your estate so that when this comes time for the heirs to pay the taxes, they don’t have to give as much of it away.
00:21:49 Right.
00:21:49 And so that’s a big one.
00:21:50 And it’s a big topic even just now because at the lower exemptions in Oregon, a million as a million per person, two million per couple, your estate might have not been that high four years ago.
00:22:04 I mean, it’s true.
00:22:05 And it has creeped. I mean, say you had a, you know, call it a $750,000 home. Maybe it’s worth $1.2 now. And then you start adding everything else up and then you’re above this exemption now and maybe you don’t want to be.
00:22:20 You know, I’m glad, yeah, I’m glad you brought that up because I’ve seen a lot of people come into the office thinking that they might not have a ton of stuff until you start filling out, you know, some some paperwork and some forms and you’re looking at everything and you’re like, wait a minute, I’ve got three million dollars of assets and they had no clue.
00:22:43 It’s like when you move.
00:22:45 You find all this stuff. Yeah.
00:22:46 You realize how much just crap you’ve accumulated over the years and then you move and you’re like, why? Or you’re like, do I have this? Or it’s like, oh, there it is. Haven’t seen it for, you know, 10 years.
00:22:59 Yeah.
00:23:00 I’m so afraid to move. I don’t want to do it. But–
00:23:02 Well, when we moved, it took me like a year and a half to refine everything because it’s in different places and it’s horrible. But no, you make a good point. You just might not realize all the things that you’ve got and the places that they’re in. Oftentimes, we just look at our bank accounts and we see a number and we’re like, well, that’s our value. And not necessarily the case.
00:23:29 And it’s even understanding. I mean, you’re putting money in your 401(k) and things like that every single month. Check it. Check and read what it does, because there might be even some matching contributions you’re missing. It may be invested in some way that just auto enrolled you in, and that’s not where you’re at.
00:23:50 Right.
00:23:51 This lifestyle. So it’s good to just have a… It doesn’t mean every single month you need to go crazy, but once, twice a year, pull it up, take a look at it and see if there’s adjustments. They may even have recommendations.
00:24:07 One of the other things, we’ve talked a lot about estate planning today, poor investment decisions. That’s another thing that comes to mind. We don’t have to spend a ton of time on this because I know we need to take a break here soon. But chasing high returns, I’ve seen people do this, right. They… their net worth is pretty substantial and then they get greedy. It’s weird, it’s like this effect, like, well, I’ve got this much money, why don’t we try and get to here? And it’s just that casino effect almost in your life.
00:24:39 It’s the power of more.
00:24:40 Yeah, the power of more.
00:24:41 Because I got, I need something more to chase.
00:24:44 Yeah. And so people start investing in things like maybe a risky startup. Here’s a fun fact for you on that. 50% of startups fail within the first five years. Risky. I mean, there’s a lot of potential for a huge return. But markets are volatile. You need to know the risks that are involved there.
00:25:07 It doesn’t even mean that you can’t invest in it or you shouldn’t. But it just needs to be of proportion that makes sense.
00:25:13 Right.
00:25:14 You’re just talking about, you know, the max, you know, 36 percent on your income should be to mortgage. Well, that’s what puts… it’s a roof over your head.
00:25:24 Yes.
00:25:25 It’s an asset. It’s probably accumulating in value.
00:25:29 Probably don’t put 36% of your net worth into a startup. Right, yeah.
00:25:34 And so then it’s a shift, and you carve out five, 10% of your portfolio, which can include real estate investments, [retirement]. And sure, have some fun with it.
00:25:46 Sure, it’s not crazy to take a small holding in that compared to your overall net worth, but the other thing that people do is they get emotional. Right.
00:25:54 Yeah.
00:25:55 The markets are down 20 percent. And then you start telling yourself it’s the end of the world. And we’ve got to sell and reduce everything. And then you don’t time the market correctly. You don’t get back in at the right time. And you do that maybe a couple, two or three times where you’re in and you’re out at the wrong time. And it’s like, well, you just lost half your money, maybe.
00:26:14 Right.
00:26:14 You know, and so emotional investing, not good. Panic selling, not good. But Justin, I know it’s time for us to take a break. So we’ve got a ton more to throw at you guys, but we got to take an unseen profit break. So this is Matt Dickson.
00:26:31 I’m Justin Bruggeman.
00:26:32 You guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN. We will be right back.
00:26:39 All right, everybody. Welcome back to the True Wealth Radio Show where with me in studio is…
00:26:47 Justin Bruggeman.
00:26:48 Awesome, Justin. Thanks for joining the show today. I’m pretty excited about everything that we’ve talked about so far.
00:26:54 You’re welcome.
00:26:55 Yeah. You’re doing a great job. You’re crushing it. You know, if you haven’t caught the first half of this radio show, you really should. Go ahead and head to our website tomorrow. It’ll be available, littlejohnfs.com and check out the podcast. We’ve got a lot of cool stuff on our website actually. Whether it’s, you know, some investment calculators, all sorts of stuff. I mean, there’s a plethora of information on there. So feel free to check out all those free tools and all the old shows that we’ve got piled up on there. We have so much content. So if you have questions about stuff or you’re really looking to educate yourself, my goodness, there’s so much on there. Today, Justin, we’re talking about how wealthy people cannot screw up, right? We want to retain wealth, we wanna preserve it. And we’re talking about some of the common mistakes. And when we left off at the break, we were talking about one of those pitfalls is poor investment decisions. And we kind of blew through it. I think we maybe need to take a little bit more time there. We talked about that whole concept of chasing high returns, right?
00:28:11 Yep.
00:28:12 With that, one of the things I don’t think we really talked about is, and I’ve seen this before, people say, I want a ton of return, but I am unwilling to have any risk involved in my investments.
00:28:26 Right.
00:28:26 And then I’m like, what fairy tale land do you live in?
00:28:29 Me, too.
00:28:30 Right? If that existed, everyone would just park their money there. So there is this trade off of risk reward. If you take no risk, your reward inherently should be a little bit lower. That whole free lunch thing, like that only exists when the government’s printing their money, right? Like, and even then we’re starting to–
00:28:52 It’s existed recently.
00:28:54 We’re starting to pay the price even for that.
00:28:55 Free for now.
00:28:56 Yeah, free for now. The government thinks it’s free and they’re like, oh, we got the printing press. So, kidding back to home base here though. Chasing high returns, it’s a dangerous place to play in, especially if you’re not diversified well. And we talked about that a little bit earlier too. And some people can really think that they’re diversified, right? I own 20 different stocks, but you start looking at the portfolio and you’re like–
00:29:26 They’re all in the same sector.
00:29:28 Do you realize that 50% of your stocks are all oil companies? Well, I worked in the oil field and I really like these companies and I’m like, that’s cool and all. But what happens if there’s some regulations that get passed and oil goes to $30 a barrel and stays there for the next five years? You know what I mean? Like you’ve really, you know, potentially limited yourself. So diversification is a big one. I know we talk about that. It’s pretty generic.
00:30:00 Just understanding what you’re investing in, especially if you’re doing it by yourself, that’s great and that’s fine. But understand what you’re doing. Because you might not find all the answers off the Reddit board or whatever news source you’re looking for because you can switch it to different news and it’ll probably say the opposite.
00:30:22 It’s a dangerous place to be because we tend to want to believe in the stuff that we use personally.
00:30:29 Right.
00:30:29 Or that, like we find to be interesting, right? So if you’re a huge gun collector, you might wanna just sit there and buy Ruger stock all day long. That doesn’t make it a great investment.
00:30:40 And that’s not an investment advice, by the way.
00:30:42 No, you might be a hardcore vegan and you think that Beyond Meat is like the best investment ever. It doesn’t mean that it is, right? And we tend to have biases in investing where we want to buy the thing that we believe in or that we use. And we just have to be cognizant of that and know that that is influencing the decision.
00:31:08 And everybody has biases.
00:31:10 They do.
00:31:11 You’re just going to have to understand them and understand your shortfalls.
00:31:16 Right. Because, I mean, have you ever heard someone say, don’t buy Disney stock for me because they’re an ultra woke company and I don’t want to own them? Right. Yeah. We’ve all, I’ve heard that. But does that necessarily mean that Disney is a bad investment?
00:31:30 Right.
00:31:30 Right. I mean, and I get morally like opposing to things, but it doesn’t make it in nature a bad investment. It might be a good investment. Who knows? But we have prejudice in our decision making. And we can’t let that cloud-making smart financial decisions.
00:31:51 And if you, if it is going to, again, a portion [size].
00:31:56 Yes.
00:31:57 Carve out a portion size and do it for a while and try it.
00:32:02 Yeah.
00:32:02 Because then you might realize, I don’t want to do this anymore. Or you’re going to realize, all right, let’s try something else. And then you keep trying and then maybe it works out. Maybe it doesn’t.
00:32:13 All right. So we’ve talked about poor investment decisions, but I want to transition this over into some fun stuff, right? I want to talk about, so maybe some celebrities that are out there that you can think of that have made some poor decisions financially. And I started looking into this and it’s crazy what happens to people when they stumble into large portions of money.
00:32:44 Right.
00:32:45 Just because you have a lot of money doesn’t necessarily mean that you’re actually wealthy. You can absolutely derail the train. And one of the first people that comes to mind for me, Johnny Depp. Johnny Depp, let’s talk about him a little bit.
00:33:01 Well, here, let’s quote him first.
00:33:03 Yeah.
00:33:05 Money doesn’t change anybody. Money reveals them. I’m still exactly the guy that used to pump gas.
00:33:12 That’s powerful to me. That’s really powerful. Because it’s like, just because you have a bunch of money doesn’t, it doesn’t change who you are necessarily, right? Like it didn’t make him financially savvy, right?
00:33:27 No.
00:33:27 The guy that was pumping gas, got a… acting job, things blew up real rapidly, millions and millions of dollars. Like, I mean, he said it himself. It didn’t change him at all. It just revealed who his true self is. He’s extravagant.
00:33:40 Right.
00:33:40 He wanted to live like there’s no tomorrow. And we see that in the way that this guy spent money. Justin, let me throw some numbers at you here. So this guy had a very extravagant lifestyle. In 2013, he came out publicly and said he was spending over $2 million per month on expenses. For the average listener, you’re like, man, I’ve got expenses of $4,000 a month or something. No, Johnny Depp, $2 million per month. How did he spend it? Justin, do you want to talk about that a little bit?
00:34:19 Wine, which that’s… we live in wine country.
00:34:22 We do.
00:34:22 $30,000 a month.
00:34:24 How do you… so I just want to pause right there because I’m looking at this number two and I’m like, how do you spend $30,000 a month on wine?
00:34:33 A thousand dollar a bottle of wine a day.
00:34:37 So Johnny must’ve been intoxicated more often than he, or he had a lot of friends to share that bottle with. But yeah, so that’s a replacement, right? Like where the normal person is spending $30 on a bottle of wine, he’s spending 3000. So this goes back to the very start of the show, lifestyle inflation, right? Like you’re making more money, your $30 bottle of wine is now a $3000 bottle of wine.
00:35:06 Right.
00:35:06 You gotta watch that red flag. Okay, what else? What else?
00:35:11 This one is my favorite because I haven’t decided if it’s bad or it’s good.
00:35:16 I think what you’re about to say is awesome because I know what’s coming.
00:35:20 It built a $3 million cannon.
00:35:22 Yeah.
00:35:23 To shoot–
00:35:24 His friend’s ashes.
00:35:25 Yeah.
00:35:25 Yeah. The guy was cremated. And he’s like, you know, I know your last wish was to have something extravagant for your kind of last hurrah here. And so what does Johnny Depp do? He hires a bunch of engineers to build like a 150 foot cannon or something. And he gets all of his friends together with all of his wine and they drink their $30,000 of wine for the night and shoot this guy up into the sky with like a couple hundred thousand dollars worth of fireworks.
00:35:56 It’s a great video.
00:35:58 Yeah. Go, find that on YouTube.
00:36:01 Along with 14 residents, 158 foot yacht, 12 storage facilities.
00:36:07 I know why on that one, by the way, the 12 storage facilities. He’s a hoarder of collectible things. So expensive guitars, artwork. The guy literally had 12 different storage facilities just to hold all of the stuff that had value to him. And 40 full-time employees. He needed round the clock 24/7 security, in his opinion.
00:36:32 He earned over $650 million in his career.
00:36:35 Yep. But it’s a–
00:36:38 He’s faced financial ruin.
00:36:39 Yeah. So the guy’s ruined. He made six hundred fifty million dollars. And well, the whole thing with Amber Heard didn’t help either. You look at the court costs on that one. What a disaster. So it goes back to his quote, “Money just reveals who you are. You’re still the same guy.” Right. Very, very interesting stuff to think about. Why are we even talking about it? Because it’s relevant. Right?
00:37:05 Yes.
00:37:05 You have to be smart enough to know, are you the type of person that intrinsically is bad with money? Because you can be bad with money and it doesn’t care if you make $100,000 a year or $100 million a year, if you’re bad with money, you’re going to screw it up, unless what? You learn to–
00:37:30 Understand your downfalls.
00:37:32 Understand. Yeah.
00:37:32 Don’t do it on your own.
00:37:33 Yeah, exactly. I think that’s where it comes back to. It can be really, really helpful to have someone in your corner saying, hey, this isn’t sustainable. You cannot continue on at this rate. Let’s make sure that you’re doing things that build or maintain your net worth so that you’re not sliding backwards and you end up in a bankruptcy court. Right. Like–
00:37:59 Yeah, we don’t want that.
00:38:01 No, we don’t. There are more examples.
00:38:04 There is, and there’s, good example. I remember I watched something that Eminem, it was after he had a couple of platinum albums that had already been released, made millions. And so we asked his manager or whatnot if he could buy a Rolex. And they’re like, yeah.
00:38:24 But that’s… see, that’s the other end of this. This is being smart with your money, right? Like you’re seeking counsel and–
00:38:32 Understanding he doesn’t… farming it out.
00:38:37 Exactly.
00:38:37 Getting somebody you trust to help guide him through those times.
00:38:40 All right. Well, Justin, let’s take a break. But when we get back, let’s talk about Mike Tyson. Are you ready for that?
00:38:46 There’s going to be a lot of talk about him shortly.
00:38:47 Oh, there will be. But let’s take a quick little profit break. You guys are listening to the True Wealth Radio Show on 93.9 FM and 1240 KQEN. We’ll be right back.
00:38:58 All right, everybody, we are back and we are talking here on the True Wealth Radio Show today about kind of losing your wealth because oftentimes, we’re talking about how do you gain it, but rarely do we talk about, how do you ruin the entire thing. So, Justin.
00:39:19 I think we’re going to hear a lot more of these stories with all the NIL stuff.
00:39:24 Oh, you know, I never actually thought about that. I mean–
00:39:28 And then 18, 19 year old kids, millions of dollars.
00:39:31 Yeah, it’s like, yeah.
00:39:34 It makes me nervous. Not for, not that I don’t necessarily think they shouldn’t be getting paid.
00:39:39 You know, it’s really crazy to me. It’s like, let’s go ahead and open the NIL stuff up and let’s pay these kids millions and millions of dollars to go to school and get their education and play a sport. But let’s not make it any, let’s not include any type of requirement where they have to take a financial literacy–
00:40:01 Right.
00:40:01 Course in order to get this NIL deal. Let’s just give it to them and watch them screw it up.
00:40:06 It always blows my mind with it because they just went, they just jumped two feet in. Like there’s no guardrails.
00:40:13 Nope.
00:40:14 There’s no anything. It’s like the wild, wild west. And then they expect it just to work out. And like, no.
00:40:20 At least in other sports, there’s a salary cap.
00:40:22 Right.
00:40:23 I would have been so much more thrilled to have the NCAA be like, all right, schools, you know, you’ve got a hundred… hundred million dollar budget for your football team. Go ahead and, you know, pay any of your athletes, whatever you want. So you want to blow–
00:40:36 At first, [in John] quarterback.
00:40:39 Or just say whatever, you know, go ahead and spend 90 million dollars to get your quarterback and you got 10 million for the rest of the team. Like you’re capped out at 100 million, provide proof of the funds or something. It’s like that would be way better off because here’s what it’s doing. If you ask me and granted, I don’t know enough about this to really speak on it, but I’m going to anyway.
00:41:02 I can’t. I have a microphone.
00:41:03 Yeah. You look at the actual financial picture of a lot of these major universities. It’s gotten to a point where the sport isn’t bringing in money, right? Like they’re finding all these donors and they’re spending every penny that they have to attract that athlete that’s going to win them the championship because that’s all they care about. We want to win that national championship and they’ll spend any amount of money to do it. And I look at this and I’m like, who is that harming? It’s harming the students and the education system because the schools aren’t focusing on the education, they’re focusing on the sports, because that’s where the money is and that’s where all of their donors are going to be happy. Are you winning titles? Right? And so I look at it and I’m like, we have to say, here’s the ceiling. Here’s where we’re going to cap this thing out at. Otherwise, where does it end?
00:42:01 I just wish it just had guardrails.
00:42:03 But yeah, that’s what I’m saying.
00:42:04 Start somewhere and then we can expand. Let’s see how it goes. ‘Cause it went from nothing to a lot.
00:42:10 To way too much.
00:42:11 And it should have been not well, you know.
00:42:13 Yeah.
00:42:14 Something to where it makes sense. And then, cause then now you’re having all the big shuffle of the TV times and stuff like that. You’re, you know, dissolving conferences.
00:42:24 Let’s go back to the whole point of college. It’s the education or it should be at least in my opinion. And I look at this and I’m like, if you’re in the transfer portal every single year, what type of education are you really getting when all you’re doing is bouncing from school to school, you’re getting upended. I don’t like it personally. But talking about athletes, while we’re on the subject, we just left off with Johnny Depp. And I really wanted to talk about, kind of, Mike Tyson’s career.
00:42:52 Yeah.
00:42:54 It’s crazy. This guy earned over $300 million when he was boxing, but he ended up facing bankruptcy because he’s spending a ton of money. He’s got legal issues, poor financial management, this guy ended up in a bad spot. Even though everything on, you know, you look at it, it’s like you got a pet tiger, dude. Like, obviously you gotta be doing pretty well, right? Not necessarily the case. This guy, did you ever see that house that he purchased, by the way?
00:43:25 No, I didn’t. The Mega Mansion one?
00:43:27 Yeah, the Mega Mansion. It was in Connecticut. This place was, 52 bedrooms, 21, no, 21 bedrooms, 25 bathrooms, it had a nightclub, an indoor pool, a hot tub, a recording studio, an indoor basketball court, a cinema room. And he just… he wanted the biggest, most flashy house he could purchase. And what I found funny in all of this, and go do the research if you want, but there have been so many people that have owned that house over the years, including names like 50 Cent, right? And all of the people for the most part that have owned this house have at one point gone bankrupt.
00:44:11 I think that house has the bankruptcy problem.
00:44:14 Well I look at this and I’m like well.
00:44:17 What’s the upkeep on it?
00:44:18 Right. That’s what this comes down to. You can go into something and just because you can afford the payment to, you know, buy it or whatever. And the rent on this place Justin, a hundred. I think they wanted, what was it? Like a hundred thousand dollars a month just rent because they couldn’t even get it to sell.
00:44:37 Right.
00:44:39 And when 50 Cent bought it, he bought it, actually from Mike Tyson. And in 2007, before the housing, you know, kind of bust, he had it listed for $18.5 million. He ended up selling it for $2.9 million.
00:44:58 Yeah.
00:44:59 And you can just follow the money trail. And it’s like, just because it’s the biggest house in Connecticut and it’s the most flashy thing out there doesn’t mean it’s a store of value.
00:45:10 Right.
00:45:11 Everyone who touched this thing for the most part, lost money and I think there’s this theory that floats around. Well, if I get enough money and I just buy the biggest, most expensive thing and I have the most flashy assets, somehow I’m gonna be rich.
00:45:28 Right.
00:45:30 But like you said, upkeep insurance costs.
00:45:33 Yeah.
00:45:33 There are so many hidden things that you don’t see that it can really catch up to you.
00:45:40 What’s the power bill on a 52-year-old mansion?
00:45:42 Well, maybe we’ll talk about that next week. Justin, we’re out of time. Thanks for sticking with us.
Ready to dive deeper into real estate investing? In part 2 of this series, we’ll cover important aspects you need to know about real estate investing to help you make smarter investment decisions.
Episode Highlights:
- How real estate investment can reshape your financial future and the importance of location in property investment.
- The impact of shifting urban boundaries post-COVID on real estate values and how the American dream is evolving due to rising homeownership costs.
- Strategies for negotiating real estate prices on, using Detroit as a case study to understand supply and demand dynamics.
- Motivations behind property transactions and debunking myths about landlords’ roles in rent hikes.
- Advanced techniques for scaling your real estate portfolio including refinancing, leveraging depreciation and using the 1031 exchange to defer capital gains taxes.
- Complexities and benefits of real estate trusts in estate planning and investment and how they can circumvent certain tax issues.
- Risks and rewards of high leverage real estate strategies, exemplified by Donald Trump’s approach and an outline of three paths to billionaire status in real estate.
- A comparison of different methods to evaluate property values such as cap rates and how to assess the attractiveness of a real estate investment compared to other financial alternatives.
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Looking for Personal Financial Advice? – Learn More Here
Today’s show provides quick, practical advice to help parents save for their child’s college tuition. Learn tips, strategies, and insights from experts to make college savings simple and effective. Start securing your child’s academic future now!
Episode Highlights:
- The often overlooked expenses of college education such as room and board and strategies for managing them.
- Non monetary benefits of a college education, including life lessons and independence.
- Importance of early financial planning for college and the diverse paths available post high school such as entering the workforce or further education.
- Strategic major selection and how personal readiness and life goals can influence education and career paths.
- Critical role of financial literacy in a successful future and how writing skills are important in explaining complex concepts.
- Insights into 529 plans and Roth IRAs including recent legislative enhancements and their impact on educational savings.
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Looking for Personal Financial Advice? – Learn More Here
TRANSCRIPT
00:00:00 Find something that you can be interested in and it will greatly increase your chances. What was I interested in? Marketing. So I ended up in the creative advertising channel, which was a journalism degree, not a business degree. Like the business advertising is all about numbers and media buying, which was like a giant yawn to me. Media buying, how interesting is that? Let’s go figure out where the target demographic lives and how much we have to pay to reach them. Yawn, right? But Super Bowl ads? Those were awesome. Right? Maybe you disagree, but I thought that was awesome. So that’s how my career path found me, or how my education path found me.
00:00:00 All right, that is the cue. We got our music playing, our favorite music said nobody ever. Welcome to the True Wealth Radio Show on this, the greatest Tuesday you’ve had all week. I’m your host, Dave Littlejohn. In studio with me today?
00:00:57 Matt Dickson.
00:00:58 And also a special guest. It’ll all make sense in a minute. Thank you for joining me.
00:01:03 Knut Torvik.
00:01:04 All right. So Knut, first of all, I’ve known you for a long time. You have, it’s, you have the advantage, something I don’t. You know what this is besides your striking good looks? That’s the word, it’s radio, right? You have kids that are in or nearly through the college system.
00:01:26 That is right. I have a daughter who’s just… will graduate from [U of O] now in about four weeks, and I have a daughter who’s gonna start in September.
00:01:36 Okay, so you’ve got one who’s about to finish, one who’s about to start. And I’m gonna be super selfish on the show today because this is my chance to ask, normally we’re like, we give a lot of advice on the show. That’s kind of the deal. But I’m gonna be asking Knut for advice today because here’s a guy that’s paved the road before me and we’re gonna be talking. So for everybody listening today, we’re getting close to graduation season. And so this… today is all about education. We’re gonna be talking about the cost of education, how we pay for education, what is the value of education, not necessarily the same as cost, or maybe we’re measuring it with different terms. And so I hope you’ll stick around and listen today because there’s a lot going on. But first, right out of the gate, Knut, now that you’ve launched one, or you’ve already launched one, you’re about to launch the next one, all right, is there anything that you would say, I learned, I did not expect this in the process? Or is something you learn that you’re, like everybody should watch out for this?
00:02:43 Well the biggest shock is the cost. We always talk about how expensive college is, but one thing I didn’t really consider was the cost of room and board, how expensive that is.
00:02:56 Okay.
00:02:57 And even if, you know, at the University of Oregon, the kids have to stay on call, on campus for the first year. She did that now, she’s moved out. And I had no idea how expensive housing was around there.
00:03:12 Right, just the either on or near campus housing options. Yeah, it’s definitely a premium.
00:03:20 And also how they force you to sign and lease that goes from September to September. Well, of course, she’s going to finish up in June and we still have to pay her lease for another two and a half months.
00:03:33 Oh, that’s delightful.
00:03:35 It is. Nice housing option. But basically it’s looking, glorified campus housing. It’s not that nice.
00:03:46 Now did she live on campus, like on campus housing itself for the freshman year?
00:03:52 She actually did. She actually lived for two years because the first year, she was there. She, you know, this was during the COVID and all that. She started in 2020.
00:04:01 Ah, okay.
00:04:02 And they were hardly ever, hardly any kids on campus. So my wife and I, we felt that the whole college experience is to live on campus in a dorm, eat in the lunchroom, and be surrounded with lots of kids. And so we actually made her live on campus also in her sophomore year. Just so she can get that experience.
00:04:24 Really soak it in.
00:04:26 Yeah, indeed.
00:04:27 Well, this will come up later too. I’m sure we’ll get a chance to talk about… Mark Twain has one of my favorite quotes of all time. He said, “Don’t let your schooling get in the way of your education.” I think there’s something to be said for, just listen to that closely, is the classroom education matters, but there’s more to certainly the university experience than just the classroom. So there’s a lot of growing up and a lot of learning that happens there. Let’s talk for a minute about… since this is something that’s also near and dear to my heart, because I want to try to address this for lots of different students. So for the high schooler that’s figuring out the next stage, you got a few options. I think that the primary courses are going to the workforce, and in the workforce, that’s pretty broad, lots of different types of work. Or there’s, go to some kind of university, some kind of, we’ll call it a junior college or a community college level or some kind of trade school. Can we think of others? Did I cover the spectrum on those?
00:05:39 I think that’s pretty good.
00:05:40 Okay. So Matt, is somebody that was a, you know, a recovering high school teacher.
00:05:45 Mm-hmm, right.
00:05:47 When you saw and did you teach, I mean, the high school, you had like all the years, right? So you had seniors and the whole mix.
00:05:53 Right, yeah, I started in the middle school, taught that for four years and then spent four years at high school teaching freshmen through seniors.
00:06:01 Okay, so as you see seniors and they are starting to launch, what were some of the things that you saw in seniors making decisions or maybe not making decisions and how they were trying to weigh those?
00:06:13 I think one of the biggest pieces is, no matter who you really are, you’re overwhelmed. This is a big next step, right? Most of the time you’re leaving town, you’re going to a new place, you’re doing an entirely new type of education system. This isn’t high school where everyone kinda holds your hand and walks you through it. You get to a university and you can kinda feel like you don’t have someone necessarily in your corner or in your back pocket. And so I think kids knew that. And so the one universal thing that I think I saw was everyone was just really nervous about that next step.
00:06:49 Yeah, well, and the next step, it’s an interesting one depending on where you are too because, I’m not sure everybody knows what the next step is. They just know that the last step was high school and that step’s over.
00:06:59 Right.
00:06:59 Now what?
00:07:00 Exactly.
00:07:01 Right.
00:07:02 They don’t really know what the future holds for them.
00:07:04 Yeah. Knut, how did your family decide on the university experience?
00:07:11 Well, you know, both of my wife and I are college graduates and we, it’s more than just you know, getting an education. It’s also about developing yourself as a human being. I’m not saying that if you go to a trade school, it’s a bad thing, but for us, it was never really an option. We never wanted that. And I’m sure we also influenced our daughters to think the same way. I think we sat down and told them that, you will go to college or else. It just happened.
00:07:45 Yeah, it just sort of implied in all the things that were going on. I’ll admit that there’s a bias to that in my household. It’s something that I am awakening to the concept though, of… and this is just for full disclosure, everybody listening, right? I do serve on the Board of Education for the community college here in town. So if you’re listening or watching on YouTube and it’s out of area, we have Umpqua Community College, right? It’s actually this cool community college, beautiful campus, lot of cool stuff going on. And I think my original impression of the college experience versus community college, it was that community college is where you went if you couldn’t go to the university.
That was what I thought as a high school student. I no longer think that. I actually think community college is a very viable option. It’s a great way to get missing credits that kind of puts you into the right timing for the college ecosystem if you can coordinate that. And so I’m a much bigger advocate, plus community college serves everybody, right? So it’s, I don’t want you to just think that this is a program exclusively about the high school kids that are about to graduate and figure out where to go. You may be looking for new career skills. You may be somewhere else trying to assess the value of education. That’s very relevant, right? So I think it’s very, very relevant that you consider what your local community college can offer if you need to develop skills that are needed in the workplace, right?
And also, I think because I’ve been on university campuses and I’ve been on the community campus at Umpqua, UCC. It’s… the experience on campus isn’t all that dissimilar, right? You know, you’re going to a dedicated place of education. You’ve got a campus where there’s not a lot of other things but education going on. It feels like that’s its dedicated purpose. The big deal though is there’s no on-campus housing. And I think there’s a, that is a really big differentiator in terms of the college experience. And very interestingly enough, something that UCC is starting to develop student housing now. So I think that the lines are getting blurred between the university experience and the community college experience in real time.
I think that’s very relevant for a lot of our seniors out there in high school because sometimes cost is a barrier. If you think about the cost of college, I think that’s something really important. I’d like to maybe spend a little more time on that, but I also think, I’m looking at the clock right now, and this might be a very, very appropriate place for us to take our first obscene profit break. So, why don’t we do that? When we come back, then we can talk about, well, speaking of obscene profits, how are these colleges, you know, how are we going to afford them? Or what education about them, what might that cost? But we got to take this break. So stick around, we’ll be right back.
All right, gang, welcome back to The True Wealth Radio Show. I’m your host, Dave Littlejohn, and in studio with me today is…
00:10:32 Matt Dickson.
00:10:33 And…
00:10:33 Knut Torvik.
00:10:34 Right, and a reminder, if you were just joining us, you can grab the podcast, we’ll also be streaming on YouTube later. But go to littlejohnfs.com and you can find it under the Educate section of the website or some resources for folks. And so if you just want to learn more about what we’re doing, you can check out their podcasts out. This one is, we’re talking about education today. And during the break, we started to kind of, down this path. Matt, I want to pick something up that you mentioned, right? And I promise we’re going to get to the concept of, cost of college. We said, you know, when we’re going, in the break, hey, let’s talk about cost. This was so relevant, Matt, that I just wanted to say it. Talking about what you said, you think the norm is.
00:11:15 Yeah, I think the norm for most people that are going into college, they might have parents who say to them, oh, well, okay, you wanna go in, we’ll try and help you out a little bit. And then a lot of parents, I think, are like, well, I don’t know, college, are you sure that’s kind of the route you wanna go? And so you’re not always necessarily met with a lot of optimism or it’s not always well received where you would think it might be.
00:11:43 Yeah, it’s hard for me to know what the norm is. I only know my own household and my experience. So I don’t know how, if a household says college is stupid, right? Like why would you do that? Or it’s, you know, college is just too expensive. It’s just not an option. I don’t really know what that looks like. I know in our household, it was something that early on, like when my kids were born, we started saving a little bit on the side to help them go to school.
00:12:10 It’s also about giving the kids an opportunity to spread the wings of it. You know, I think, you know, it’s not just the education. It’s also about, you know, moving away from home. For many kids, it’s the first time they are away from mom and dad. They get to experience that close to watch themselves. You have to clean your room. Mom and dad can’t do that anymore.
00:12:36 Not everybody does that, you know. Seats of college students, where’s the floor?
00:12:41 It’s an important life lesson. And I think that’s kind of, you know, when you’re 18, 19, those things are very important for you to experience and to develop and know how to handle.
00:12:53 Yeah, and I couldn’t agree more. I think that, I think there’s a lot of growth that happens when you start to get out from underneath your parents’ household. It’s a really critical time for folks because that launch, you’ve had, and it’s interesting, I had some clients yesterday, we had this comment about some folks end up duplicating what their parents did. And some folks do the exact opposite of what their parents did. The question is why? Right? And I’ve seen scenarios of parents that we would say, at least from the assessment of, hey, how was the financial success and how well did you navigate the landscape, right? They struggle with making what most people would say, common sense decisions, right? Like that’s a lot of bad decisions. It’s creating a lot of turmoil and hardship in your life. And the kid says, you know, I’m gonna do whatever that isn’t, right? They see it and they just know better. They don’t wanna do that. They said, that’s the example I will not follow. And then some people, that’s the example they follow. I don’t know what makes it go one way or the other?
00:13:58 I think it all just comes down to your personality type. And I’ve seen so many students over the years and you get an absolute mixed bag. You got the kid that’s coming from just immense poverty. They’ve never been read to, no one helped them with math. And you’re like, this kid, you know, you might have a preconceived notion. There’s just no chance. But they fight so hard and they’re so resilient and they put in so much effort that they overcome all of it and they go on to do great things. And then you see the opposite end of that spectrum too, where it’s like, you were handed everything, everything in the book, but you were lazy and you had no motivation and you squandered everything and you’re not going anywhere. And so it’s a very, very wide spectrum.
00:14:43 And here’s one thing that you can’t predict or even as a parent, how you can fix is the student’s motivation.
00:14:51 No, you can’t.
00:14:52 And it all depends, you know, that’s the same thing if you’re in a trade school, if you’re in college, if you’re in community college, it all depends. I just know for myself. And I was a total underachiever in high school. I did not do well there at all. I just… I had all the other interests. And I did really wake up, I always knew that I wanted to go to college, but I just didn’t really think through it, how I would do that. And I know that if I had started college immediately after high school, I would have failed miserably because I was just not motivated. So it took me a couple of years before I actually started college. I didn’t start college until I was, age 21.
00:15:35 So there’s an interesting one. Again, this is something that kind of came out of the break. You mentioned the idea of, should students coming out of high school, do you think that they should take a time gap before they go on? And I know that there’s a spectrum. I probably answered some should, some shouldn’t. How do you, I mean, I’m putting on a parent half a second. So how would you offer advice to somebody trying to make that decision?
00:16:03 Well, my oldest daughter, she wanted to go to college immediately. So she should… did. The youngest was accepted into college. And then she came to us and says, I think I need a gap year just to kind of collect myself after having gone through, you know, high school and all that. So she actually, over the last year, she hasn’t done, she’s just been taking a couple of classes that he used to see. She’s been working at a… at an office and just been playing. I mean, right now she’s in Denmark for God’s sakes. So.
00:16:38 Yeah. Well, when you say it that way, it sounds bad.
00:16:43 I think, and she also told us that, you know, for her to go… gone from high school to the university would not have been a successful thing. And we said, okay, you can do what you want.
00:16:57 Yeah, there’s this theory that if you have a break, the probability that you return to school, I don’t think it’s actually statistics. I’m kind of quoting the statistics that I don’t know, right? So, but anecdotally, yeah, the risk that you don’t get back in the system certainly increases if you get out of the system. I don’t know how well that aligns with the idea that some people get in when they’re not ready and then they just sort of squander an opportunity and they fail their way out. And then for them to go back, they start to rebuild a damaged transcript, if you will.
00:17:34 But I think it all depends on what is the student’s goals, do they have goals?
00:17:38 Sure.
00:17:39 And I think I knew that I always had a goal to do this. So even if I took a couple years break between high school and college, I was fine because I knew what I wanted to do.
00:17:53 Right.
00:17:53 I just wasn’t sure when I wanted to do it.
00:17:56 So I think that’s very important. So I’m gonna kind of, let’s frame this up if we can get some, like actual advice for our listeners and viewers. I have a theory about how to select a major, but before you can get to a major, I think you have to make that decision about, is education the next step for me? Right, and what type, but so.
00:18:14 Yeah.
00:18:15 So I think the first question is, do I want to go to the next level of education?
00:18:22 I think another question in there is, are you capable? Because let’s be realistic, some people are not cut out for college. They’re just not. That’s kind of a hard thing you have to–
00:18:34 Isn’t that a rough thing to say? Because my sense is that you want to believe, anybody can try hard enough. I don’t think we all get the same skills and I think that’s a good thing.
00:18:45 Right.
00:18:46 Right. And so I think I know what you’re saying. I don’t think this is a qualitative measurement of like, well, you’re a good or bad person because of whether or not you’re capable, you know, cut out for university. I think it’s more a question of like, you know, is this your wiring, your nature and what you want to do?
00:19:02 I mean, there’s some students that I had that their attention for reading lasted 15 to 20 seconds max. And it made them angry and they just hated just even looking at a book. I’m like, if you can’t be in a book for 20 seconds, college isn’t for you.
00:19:18 Right.
00:19:18 But I also think that some kids in high school or even before that, they’re not forced to make a plan, what they want to do with their lives. They’re just going to go along and don’t really have a plan for what they actually want to do. I think most kids, if they are forced at a fairly young age to decide what they want to do with their lives. That actually helps. And that’s it. I think this is in contrast to what most people here do, I think. But I think I knew very early on what I wanted to do. But I just didn’t know when I wanted to do it.
00:19:54 And so here’s the thing that’s really ironic about that. Just for this conversation, I did not. When I was really encouraged and sort of funneled into school at the next level. I was capable enough that I survived my own sort of bad behavior and discovery process before I got focused, but it wasn’t until about two years in and I’d done a little bit of academic damage. That’s a really nice way of saying I let my grades slide because I wasn’t focused on what I was doing. So I screwed around too much my first couple of years and then got some traction when I matured enough to start citing in, at what I was interested in. And so that gap here may have benefited me.
00:20:37 But you chose journalism, correct?
00:20:39 Well, you know–
00:20:40 Or marketing, or what?
00:20:41 Well, in a very backwards way, yes. I would say journalism kind of chose me. It’s not that I wanted journalism, but here’s, I’m gonna share this funny theory I have. Like this is the theory of how to select a major, which means we’re hopping over the question.
00:20:54 Is it, put them all on a wall and throw a dart?
00:20:57 No, no, no, it’s not that at all. It is, so when I was doing this, this is how long ago it was, you could get a physical course catalog. I think it’s harder to do that now, but what I did was I got a physical course catalog at where I went to school and I went to the University of North Carolina, okay? So go Heels. And I, you pull out a highlighter and you just start reading and any class that sounds interesting I’d highlight it, okay? And so I ended up with, you know, maybe 20, 25% of the classes seemed interesting enough. Yeah, I might go and learn that. That seems kind of novel. Some stuff seemed horrible, right? Like, why would I want to do that? That sounds like the worst thing ever. So highlight the things that made sense and then you put the thing down and walk away from it for two or three days. And then I came back and I opened it again and said, read this again and cross out anything on that list that doesn’t seem really interesting that I want to go to.
Not just like would be tolerable, but like I want to go to it. And my rule was really simple. Like if you were to follow this pathway and you crossed off everything, join the Peace Corps. Do something else. Take a gap year. Get out. You are not going to be focused. You’re going to be resentful that you’re there. You need to do something else besides waste your resources. Okay? But if there’s stuff left on that list, you cross-reference that list with the majors that are available. Okay, and whichever major has the most of those on it, that’s the one you select because you’ll have the highest probability of maintaining interest. And for most people, the first, your bachelor’s degree is either the thing you’ll get that validates that you can learn to an employer, or it opens the door to the next level of education. And you want the best grades possible, and you want your college experience to be able to keep doors open rather than close them.
And to me, the only way you could do that is you better like what you’re learning. Now, if you’re the kind of person that’s so disciplined that you could just slog through anything because you’re just full of nothing but piss and vinegar, and you’re going to do it, right? Fine. Just pick the major that’s hard and get through it. It’s something like, you want to go study organic chemistry because you just like pain. Do it. Some people probably love it, right? Like, they’re like organic chemistry is so interesting. It wasn’t for me. Right. But you follow my logic, right? It’s like, find something that you can be interested in and it will greatly increase your chances. So what was I interested in? Marketing. So I ended up in the creative advertising channel, which was a journalism degree, not a business degree. Like the business advertising is all about numbers and media buying, which was like a giant yawn to me.
Media buying, how interesting is that? Let’s go figure out where the target demographic lives and how much we have to pay to reach them. Yawn, right? But Super Bowl ads? Those were awesome, right? Maybe you disagree, but I thought that was awesome. So that’s how my career path found me, or how my education path found me. Chronically, numbers, right? They live in numbers. Just like, how do you think journalism and finance, how did that happen? Oh, I used the journalism way more than the finance, or way more than the, like, I can use a calculator all day long, but you gotta explain why it works to your customers. Journalism is super valuable in this field. It’s just counterintuitive. So we taught gap year, right? If you can’t select something, I just take a gap year or–
00:24:23 Well, it’s not for everybody, but for some it is.
00:24:25 Right. And so–
00:24:27 Some people need this structure in a university or an educational setting. All of these people are fine to use as a way to, you know, develop themselves.
00:24:39 Here’s a weird one for you. I’m going to set this up in the worst way possible too. I’m going to let engineers, now we’re gonna, we need to go to break, right? And I’m gonna tease everybody listening when we do this. All right, welcome back to the True Wealth Radio Show where I don’t even know we could talk about what we were talking about during the break.
00:24:56 All the stuff you missed, yeah.
00:24:59 So anyway, welcome back. I’m Dave Littlejohn. In studio today.
00:25:03 Matt Dickson.
00:25:04 Knut Torvik.
00:25:05 And we’re talking about education and I think it’s, we’ve talked a lot about the university system. I’ll admit from, as far as the trade schools go, I don’t know a ton about them, having not gone into them. I know that there is a pathway where you go and literally get trained and then you get into, like oftentimes an apprenticeship role and you start learning by doing.
00:25:27 I don’t know much about trade schools either, but I will tell you having done both community college and the university route. For me, the community college, like the degree of education, the rigor, like how hard is that? The community college, hands down, was a lot more difficult than the university setting.
00:25:45 That’s interesting to me.
00:25:46 It wasn’t even close, yeah. No, you even look at my GPA. I mean, granted, you know, it was high at both places, but to get A’s at the university, just fall off a log easy. Hardly had to do anything. But at the community college, and I went to UCC, it was tough. The teachers there really demanded a lot, and I put in a lot more hours on homework at the community college.
00:26:07 You know, I’ve also heard some people that have gone to some of the Ivy League schools, how easy it is to get good grades there.
00:26:13 Yeah.
00:26:14 Well, you know, there is a real theory about grade inflation.
00:26:17 Oh yeah.
00:26:18 The biggest thing is, well, you have these high hurdles of entry, but once you’ve cleared them, they wanna make sure that their reputation still looks good. And having not gone to an Ivy League school, I can only go through the rumors that I’ve heard that a lot of what is valuable is the network. You’re tapping into an incredible network that’s already connected in the system.
00:26:43 I think the big difference that I noticed was when you’re in the community college setting, you might have 20 kids in a class. The university, granted, there’s going to be probably more kids in your class, but the university really stressed, not necessarily, we’re going to make sure that you really know this and we’re going to weed you out. That really wasn’t the case. It was more of, let’s really get in depth with this material and have higher level conversations. And they’re really trying to extract it verbally and in writing a lot more than just A, B, C, or D.
00:27:17 But then it was also very interesting how many employers actually looked at your transcripts.
00:27:22 Exactly.
00:27:22 Oh, man.
00:27:23 Although I’ve actually, the best job I’ve ever had, my boss looked at my transcripts. You want to see where those A’s were coming from. Are they coming from accounting, or are they coming from jewelry making.
00:27:35 Right, right.
00:27:36 Well, generally, grades only… helps you get you to the next level.
00:27:43 It’s mainly for the scholarships, or like you said, the next level. It’s not necessarily as much.
00:27:47 Right, it’s opening doors. I will say that one of the things that… I’m speaking as an employer right now, it does matter to me somebody’s education, but I’m really looking for validation of competency in certain categories. The one that probably–
00:28:03 Mainly writing.
00:28:04 Yeah, that’s the one that surprises people. They say, why writing in numbers?
00:28:08 Yeah.
00:28:08 Right? Pfft. Yeah, and so I’ll ask you, Matt, because I lean on you on occasion. I have you proofread things. Why do you think writing would be one of those that I would recommend that everybody learn how to write?
00:28:21 Well, it, when you write, it’s a reflection of your competency, right? And it’s kind of blunt, but like if you cannot write and you can’t get your thoughts on paper, that person is inherently not gonna trust you as much when it comes to letting you make those higher level decisions. Writing is a reflection of how you’re thinking. And if there’s a disconnect.
00:28:41 That’s literally where I was waiting to see. Is he gonna say that? Cause I think writing is how you… it’s a reflection of thinking.
00:28:50 Absolutely.
00:28:51 But it also depends on what you end up doing. I was working as a financial analyst and I needed to understand what net present value was.
00:28:58 Oh, yeah, yeah.
00:29:00 To calculate the internal rate of return. Those are fairly technical things, but it’s something that you need to know how to do it. You also need to understand what it is.
00:29:09 Yeah. I think that those are actually similar to writing in that it’s a validation that you have a deep understanding of concepts and know how to apply them. That’s what I think of thinking as, is that you have an understanding of the topic and know how to apply things to it.
00:29:28 But also there are certain things that are not being taught in universities that should be taught. For instance, I had no idea how valuable a CPA license is. You might not end up working as a CPA for the rest of your life, but it’s a tremendous door opener.
00:29:50 Yeah, I honestly think there’s some things, this is just–
00:29:53 Nobody told me that.
00:29:54 Yeah, well, talk about, band standing on this program, right? As a financial guy, this is where I’ll get on my soapbox for minutes. I think we really do a disservice in this country educating about the financial system, right? It’s something that we have tried to do on this program a lot. One of the things that’s poorly understood by the population at large, and we all get touched by it, is taxes, right? I mean, you have this basic understanding that if I earn money, the government takes it. But a lot of people struggle with the idea of how tiered and graduated taxes work, the different types of taxes, the treatment of capital gains, the way passive income is different than active income. And then we name all these things after, tax code. So, oh, well, you need a 1099-INT for something. And they’re like, oh, my gosh, what does that mean? And so between not teaching a whole lot and then having terrible naming nomenclature, right? It just leaves people sort of terrified. And so what do you end up doing? You end up hiring people to help you because they are trained in it. And it just ends up, so it’s a tax on the tax, right?
00:31:04 It’s also amazing to see how few say, and I was a business major, how few business majors actually understand what is a true cash expense, which is an accounting expense.
00:31:14 Sure.
00:31:14 Is depreciation, is amortization a cash expense? No, it’s not.
00:31:19 No, no.
00:31:20 But of course, it originates in cash, but it’s not treated as cash on the income statement. And very few people understand that.
00:31:28 Yeah, well, the nuances of accounting, and of course, if you really wanna get into the weeds of it, starting to understand the difference between cash basis and accrual-based accounting. And while it does make sense, it’s the same reason that, like people, I have a theory about really big businesses, right? And education’s a really big business now, that all of these really big businesses have an aspect of banking to them, because there’s cash moving through these organizations. And so the cashflow and the tax treatment matters, because you need to manage both in order to keep the resources balanced, right? And so, of course, nonprofit institutions, they have the advantage of not worrying about taxes the same way that for-profit institutions do. But they still have to worry about how cash moves through the system and the timing of when it arrives and the sources of funding.
And most nonprofits are still tied to tax receipts. So they are connected. And I think that the general lack of education in the way that system works is a disadvantage to our citizenry. But I look at it and I say, and I’m not pointing a finger and assigning fault here when I say this, I know lots of teachers at high school or even college professor level, they don’t know this stuff either. How would we expect them to teach it? And that’s not an indictment, that’s just an acknowledgement of where we’re at in the system. I’m not saying you’re bad for that, I’m saying most people are like that because they didn’t get taught either. So I don’t know how people get the financial education. I had to seek it out with great intention, and I learned the hard way as an entrepreneur. Fortunately, my businesses were really small early on, and so the mistakes were less painful because they were small in scale, but the mistakes hurt, they’re expensive.
00:33:21 Well, and also, you know, just because you know anything in theory doesn’t mean that you have the practical skills to apply it. For example, you know, I was a finance major, I knew everything about forward contracts, options, you know, those kinds of things, currency hedging and whatnot. I still bought a huge option for US dollars versus the Norwegian Kroner back in 1989, a week or so before the Berlin Wall fell. And that option was a huge expense that I had to swallow.
00:33:52 Yeah. Well, I mean, now we’re going to get it. So all right. I’m going to stare at the camera. I know this is perfect. We need to take, like our last break. No, no, you set this up, right? Remember what I said. Sorry. So I need to hear the music, Dale. What you said, right? Early on, I said, don’t let your school get in the way of your education. Oh, you just talked about an education, didn’t you?
00:34:15 Yep.
00:34:16 And so let’s not all education takes place in the classroom. Stick around. We’re going to talk more when we come back.
All right, gang. Welcome back to the homestretch of The True Wealth Show. Dave Littlejohn. In studio today I’ve got…
00:34:28 Matt Dikson.
00:34:29 And also my good friend.
00:34:30 Knut Torvik.
00:34:32 We have been talking about the education show. We’ve wandered around a little bit. This last one is not all education takes place in the classroom. Knut was just sharing some stories about, I’ve had plenty of mistakes professionally that have been very costly. Unfortunately, none of them have completely wiped me out. I’ve had to learn the hard way for sure. I guess I want to bring it back to our students. Let’s talk a little bit about affordability. One of the things, how do you pay for college these days?
00:35:08 Some people would like to have the kids have a stake, so to speak, by not paying the whole thing. Some people will say, well, you have to take up loans for the whole tuition bill and room and board. And other people are in a fortunate position that they can start early and save until they get the kids to go to college. My wife and I, we started to save as soon as the kids were born. I think they were soon to have their social security numbers. I went and opened up a 529 Plan for both of them. Didn’t invest a huge amount of money. I think we started with like 25 bucks or 50 bucks a month, but over time. I’m sure you talked about the whole thing with the time value money, the rule of 72 and whatnot.
00:35:57 Yes, we have on this program before, sure.
00:36:00 Yeah, but all that stuff works.
00:36:03 Right, right.
00:36:04 Over time, because you have 18 years to do this.
00:36:09 You know, there’s a couple of interesting things that have recently shown up. They were born out of the Secure Act in 2022, also around 529s that have made them far more interesting than they were at any point. 529s have, for a little while, we almost kind of called them a myth, right? I mean, meaning it was a sort of smart aleck way as financial advisors to say, well, 529s are kind of obnoxious because they don’t really give you a significant tax savings to contribute to them. And while they grow tax deferred, a lot of them are, every state kind of has their own program. So each state gets one, because they’re municipally administered, right? So it’s at a state level. And–
00:36:55 I think it’s important to also look at what is the best plan out there? Because if you go to the Oregon plan, there’s a certain tax implications involved.
00:37:06 Right.
00:37:07 In my mind, the tax savings is worthless.
00:37:11 Yeah, it’s pretty negligible. So you have to look at the underlying performance.
00:37:15 To look at what’s the best plan out there.
00:37:18 I was going to say, I think, didn’t they change the law starting January 1 of this year, where you’re now eligible to, potentially eligible [and asterisk that], because there are some things that you have to meet in order to do that. But you can roll that 529 into a Roth IRA.
00:37:36 Yes.
00:37:36 That’s a big deal.
00:37:38 It’s a very interesting feature. So, and here’s why it’s so interesting. There’s been a season where I would have suggested to parents it may be better to fund a Roth IRA for your kid than it would be to fund a 529. Maybe, right? Again, we don’t give specific advice on the program. You need to see me after class for that. But the reason being that if a kid ends up, one, retirement plans typically don’t count against the kid’s eligibility for financial aid. So Roth IRAs are interesting because they live outside of that. Two, Roth IRAs are eligible to be used for first time home purchase or education. You will not pay the penalty on early withdrawals. Right?
00:38:24 Okay.
00:38:24 So they still grow tax deferred. You do have to pay tax on the growth that comes out if it’s being spent there, but it’s more flexible. And if it’s not used for college, if they have scholarships or they don’t use it all for school, they get to keep it. And it ends up being a, you know, tax-free retirement if they satisfy the five-year-old and wait until 59 and a half for withdrawals. So it’s a good deal.
00:38:44 But still, you know, 529s have some funky deals for them. They’re difficult to manage because you can only change your investment options. I think it’s twice a year.
00:38:53 Yeah, and you only get the menu available from the 529 provider.
00:38:58 What’s even on that menu?
00:38:59 It depends. Each state is different.
00:39:00 Okay.
00:39:01 Right? The states usually contract with mutual fund providers. And so that’s kind of how it works. Typically it’s going to be a kind of network of index funds or low cost mutual funds.
00:39:11 So we didn’t look at any other options than that 529. That was the vehicle we chose.
00:39:16 Yep.
00:39:16 But there were other things out there that probably could have been better, I don’t know.
00:39:20 Hard to say. I mean, just in the form of, what it’s worth, we selected 529s for our kids, right? And so this is a financial advisor. That’s what we chose to use for our family. The reason it’s kind of handy is because you can have multiple 529 plans and for, you know, earmark for each kid or you can have one 529 plan and then just change the beneficiary to the kid as they use it. And remember, the benefit of a 529 plan is it grows tax deferred, and if it’s spent on qualified education expenses, it’s tax free.
00:39:51 Including room and board.
00:39:52 Including room and board. Qualified education expenses, that’s the key on this. So you just have to make sure it’s qualified.
00:39:58 But I think the major lesson is that you start early and you just keep going.
00:40:04 Yes.
00:40:04 You don’t have to save a huge amount.
00:40:07 Right. But the wild part about the law change now too is if you save a bunch in there, and grandparents can use this as a estate planning tool because you can accelerate gifts, you can do like five years of gifting all at once, get that money out of your state, save potential estate taxes, get it into an environment where it can start growing early. You put 40, 50 grand into an account when the kid’s two years old, that grows a lot by the time they’re 18, or should if it’s invested properly, but you do that. Then that’s a pretty good chunk for that kid. Let’s say they don’t go to college. Well, now if that plan’s been in existence for more than 15 years, you can start to fund a Roth IRA from that plan. Right, so my understanding is up to the income limits for the person, but you can, that money can be rolled into an IRA. You do have to have income to match it, but that can be the source, right? So that’s pretty cool that you could get it out of a 529 plan. If it doesn’t go to education, it can be converted to Roth now. That didn’t exist before.
00:41:08 I also think it’s important to look at what’s the best plan out there. Forget about the state income tax benefits, because that’s really worthless. I think it’s–
00:41:18 Yeah, it’s just so nominal that it shouldn’t wag the dog.
00:41:21 No. So we always looked for what the best mutual plan family out there to provide a good return. So I think we really started out with Oregon plan. Actually when we started Texas, of course Texas doesn’t have an income tax so there’s really–
00:41:37 Not a lot of, yeah, advantage there.
00:41:40 When we came to Oregon, we opened up through the Oregoncollegesavings.com.
00:41:44 Yep.
00:41:45 And we’ve… I’ve found that plan very difficult to work with. We chose something else.
00:41:50 Well, they did, depending on when they changed a few years ago. Years ago, I think it was administered by MFS. And I think that, maybe that one still exists. But then the Oregon College Savings created, they changed vendors, right? So those contracts are not necessarily static. So there are a number of resources. You guys all have Google out there and you can do some homework.
00:42:11 I think there’s a good website out there called SavingforCollege.com.
00:42:14 SavingforCollege.com, yeah.
00:42:16 It gives you information on all the plans out there.
00:42:19 Yeah, it gives you the four or five cap rating. It’s not stars, it’s the little college cap.
00:42:25 So you can compare and contrast.
00:42:26 Yeah. They’re pretty interesting. They really are.
00:42:30 But still, I think the most important thing is that you are starting early and you keep doing it.
00:42:35 Yep, early and often that’s where you get the benefit of time and compound interest because it is tax deferred in these vehicles. And again, there are others out there for purposes of today. And I don’t think we have the time to really dig deep into all the funding mechanisms. But, you know, here’s some low hanging fruit as far as hacks go for you. One, retirement plans typically, not going to be included in your FAFSA form, right? That’s the Federal Financial Aid application. But they are going to look at parents’ income, even if your parents, not helping you pay for it, your parents are going to probably count against you. So this is where, if you’re in high school, there’s a bunch of dual enrollment programs that are coming on board right now. Ask your high school guidance counselor about whether or not they’re a community college dual enrollment programs. They cost you nothing and you get college credit. So if you can start to accumulate that, that’s direct savings should you go into college. And I see zero downside if you end up going to trade school or not going to college to have that credit and not use it is better than to not have the credit and have missed out when you could have.
00:43:37 Because you can still use it for trade school, can’t you?
00:43:40 If applicable, yes, I would suspect so. So anyway, check out dual enrollment, fantastic program. I have seen some early glimpses of some of the new material coming out too. It’s very cool. So excited to see Roseburg and a lot of the other Douglas County School Districts partnering with UCC to get that done. So look into it again, talk to your high school guidance counselor. Guys, I’m looking at the clock. We are, we’re out of time. So I’m just going to go, Knut, thanks for joining us today and pitching in.
00:44:11 Thanks for inviting me.
00:44:12 Absolutely. And Matt, thank you as always. How do they reach us if they’re trying to navigate the college financing and they just want to get some insight?
00:44:20 Give us a call or shoot us a text, 541-375-0898.
00:44:25 All right. You can also, make sure you can find us at info@littlejohnfs.com if you want to email. Just go to littlejohnfs.com. You can navigate through lots of ways to reach us. As always, you know, if you’re not gonna do it yourself, find somebody you like and trust. If you don’t have that somebody, give us a shout. But otherwise, we are out of here. So until next time, I’m Dave Littlejohn.
00:44:45 Matt Dickson.
00:44:46 Knut Torvik.
00:44:47 And you’ve been listening to True Wealth on News Radio, 93.9 FM and 1240 KQEN.
Let’s take a look at what goes into making real estate an investment. How do we evaluate price, timing and developing a healthy portfolio.
Episode Highlights:
- How investing personal labor into property improvements can significantly increase the value of real estate and lead to equity gains.
- Why real estate is often overlooked by financial advisors and how it can play a critical role in diversifying a financial portfolio, providing stability, and contributing to wealth management.
- The nuances of property valuation, market conditions, and the importance of understanding real estate investment from a business perspective.
- Capital gains tax exemptions for primary residences and the strategic financial choices involved in property investment such as the potential capital gains tax exemption when selling a primary residence.
- Journey towards real estate ownership, the responsibilities that come with being a landlord, and how state-specific laws can impact the landlord-tenant dynamic.
- Concept of making extra mortgage payments early on to reduce interest over time, leading to financial stability and freeing up funds for further investment opportunities.
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TRANSCRIPT
00:00:00 When you say sweat equity, what do you mean?
00:00:00 I’m talking about you’re willing to do some work to improve the house. You’re sweating it out, right? Like you’re the one swinging the hammer and chopping the wood. But if you have, if you’re at all handy and you can put some work into it, you might gain equity. So if you bought it for $100,000, maybe you put 20,000 into it and then you can turn around and sell it for 150, you have 120 into it and you sell it for 150, that’s a $30,000 gain. There’s your equity.
00:00:00 Alright, it is that time of week, the time where we complain about the music and then we get started with the True Wealth Radio show. I am your host Dave Littlejohn, joining me in studio today.
00:00:45 Matt Dickson.
00:00:46 And today we’re going to talk about all of the things that we don’t really do directly in our office.
00:00:52 Sure, but it’s going to be fun to talk about because why not?
00:00:55 It’s going to be fun to talk about it because why not? Actually, it is fun to talk about. It’s just interesting because so many financial advisors tend to steer away from this as a topic.
00:01:06 Why? Just because it’s outside, kind of their scope of knowledge like they just look.
00:01:11 Well, I disagree.
00:01:12 Really.
00:01:13 I think it’s because they don’t get paid.
00:01:14 There you go.
00:01:17 But I’m like, you know real estate, something you do somewhere else, the financial advisors not getting paid.
00:01:21 Well, the real estate agent, you know, they… that’s kind of their field a little bit. But they might not have, kind of, the intricacies.
00:01:29 Well, it’s something you don’t typically manage unless you’re a property manager, right? You don’t, once you buy the real estate, the management is, well, you got some taxes, but you got physical management of the property. That’s not what advisors do.
00:01:43 No.
00:01:44 Right. And the other thing is–
00:01:45 And if they’re getting you into real estate. It’s probably a proxy for real estate. You’re not really holding the asset directly.
00:01:51 I know. Here’s a soundbite for you. Consider the fact that, most advisors, the way they get paid is usually for assets under management and real estate is not typically under management.
00:02:01 Right.
00:02:01 Right. It’s outside the scope of. And so–
00:02:04 Less money to build on.
00:02:06 Exactly. And so I think that there’s a big financial undertone to this. Now, do I think that we should ignore that as advisors? Or I mean–
00:02:14 Well no, because, yeah, it’s its own thing and historically it’s done well.
00:02:19 Look, if to me, part of having a good stable, total financial picture includes, you know, there’s checking and savings, right. In the form of emergency reserves, you have real estate as part of that component, you have tax deferred investments as part of that, and then there may be specialty things that you’re particularly good at that we’re going to talk about, right? Maybe you’re really good at restoring classic cars or something, so you could find something, fix it up and sell it for a profit, right? So that’s a form of business, so that’s entrepreneurship, and so I think that financial advisors should be talking about the total financial picture, there are plenty of people that niche down and just say, well, we’re retirement advisors.
00:03:03 Well, I mean, you’re talking a little bit about, kind of, catering to the individual, right? You have a skill set in this area, go ahead and explore that and let that add to your portfolio in its own unique way.
00:03:14 Well, or maybe what I’m talking about from the profession is that some people are just more channelized, right? They just, they kind of stay in their lane. So the financial advisor that says, well, I really kind of do retirement plans and 401(k) rollovers. That’s just the business that we do. You know, okay, well, what about, you know, do you do insurance analysis for somebody? I’m not saying you have to buy the insurance, but do you make any financial planning type recommendations or tax management or anything like that? And that’s like, well, I mean, if it comes up, but mostly we just kind of manage the retirement plans. Okay. Then that’s a really specific niche, right? It’s a popular one, by the way, because it’s pretty straightforward. Hey, we can help you manage your IRAs and your 401(k)s and that’s how we get paid. At full disclosure, right? That’s something our office does all day long. A lot of clients that we help them with that.
00:03:59 Right, but this is the real estate show.
00:04:01 Exactly.
00:04:01 So tell me a little bit about–
00:04:02 Well, it’s the more show, right? Comprehensive planning, this is part of it.
00:04:07 Okay.
00:04:07 Right? And so, look, in full disclosure again, you’re listening to somebody that also has investment in real estate. Didn’t start that way, right? But as my portfolio grew over time–
00:04:19 It kind of naturally drifted a little bit into real estate.
00:04:21 Yeah, and so that’s why I say comprehensive and balanced because one thing about real estate that’s nice, is it’s less correlated to the stock market. They’re not non-correlated, right? They’re not totally independent of each other. Like strong economy tends to be good for both. But they’re less correlated because real estate tends to not be traded when, stock market is. And so you tend to have longer natural time horizons. And I’ll tell you what real estate does really cool.
00:04:48 It hides that up and down price movement or you don’t feel it so much. Like–
00:04:53 Well I was gonna say–
00:04:53 Because you look at your IRA balance all the time, right? And you’re like, oh my gosh, it’s up, you know, $5,000 today. And then the next day, it’s down 8,000.
00:05:04 Yeah. And then real estate definitely doesn’t incentivize actively tracking the price because there’s not a way to do it.
00:05:10 And plus it’s just kind of worth what someone is going to buy it. But that’s the same thing with the stock market.
00:05:16 Right.
00:05:16 Now a lot of people don’t get that.
00:05:17 Oh, look at that. You got to snuck into that.
00:05:19 Yeah. I walked into that one on accident.
00:05:23 No, it’s super true, though. Like, in the end of the day, whatever you own that you’re trying to sell is only worth the buyer that is willing to buy it from you at the price that you guys can agree upon. That’s it. Right? And that’s all the things. Okay, I mean it’s always, involves a transaction like what makes stocks interesting is you got this huge marketplace where there’s tons of participants And so it’s, price discovery, is usually pretty easy.
00:05:47 Hey David, did you see in the news the other day that there was very few sellers of GameStop?
00:05:54 It–
00:05:55 Shot up like 86%.
00:05:58 Oh, no.
00:05:59 It’s back.
00:05:59 Memeing all over.
00:06:00 We are memeing all over again. The guy that started the Reddit board search came back into the light and started, you know, there was rumors that he was going to start.
00:06:11 I heard this about him. I don’t remember his handle.
00:06:14 And on the coattails, AMC followed. So you saw both the meme stocks regain traction. But I bring that up just to say, you know, what happens when you flood the market with tons and tons and tons of buyers and no one knows, selling? Well, it can shoot the price up a lot.
00:06:35 Right. Well, but that it’s funny because you’d think it’d be the opposite, right? You know, a bunch of buyers and sellers don’t drive the price up. But what drove it last time was that it really needed sellers and nobody would.
00:06:48 Right.
00:06:48 That’s what happened is just the brief history of GameStop that made it funny. A few years ago, somebody on a Reddit board sort of deduced that hedge funds had shorted GameStop. The problem was they shorted more stock than existed.
00:07:06 Right. So it’s different this time around. Everyone thinks it’s the same and all these news articles are more difficult.
00:07:12 But when you short more stock than exists and you have to go buy the stock back and somebody found out and they told everybody don’t sell it.
00:07:21 Right.
00:07:22 Do not sell because the more this price goes up, the more in trouble the short sellers are because they’re gonna have margin calls which just means that they borrowed money, they borrowed stock, and then the stock price moved against them. Because the short sell means you sell low and you buy it back even lower. You expect the price to go down. Price starts going up, then you go, you borrowed money to do this. You need to pay us back this money. And so where does the money come from? And they’re like, well, you have to close the short position and return the stock. But there wasn’t enough stock in existence to return it.
00:07:53 So they’re all buying it to repay.
00:07:56 Right, and nobody would sell. The price shoots up and then they have to pay exorbitant amounts to try to close this position or they got to find a loan somewhere else to close the position with. Well, all of this ended up in real controversy when a few key players, Robinhood being one of them, actually locked buyers out and only let people sell what they couldn’t buy. And they did it to the retail customer. And there was a big scuttlebutt about this and how damaging that was to the reputation of the firm. I thought they were, like Robinhood, maybe done over it. Well, everybody’s back and they’re doing it all over again.
00:08:28 Right.
00:08:28 Which just goes to show that the retail sector has short term memory.
00:08:33 Absolutely.
00:08:34 So we get off topic. Let’s get back to real estate here. So Matt, what are some of the things that you think our listeners are really interested in about real estate? And I have some ideas, but what do you think?
00:08:45 I don’t know if this is a super interesting point, but one of the things that I like to remind people of is real estate. It does matter how you buy and how you sell, timing, right? Like timing in real estate is a big deal. You can ask that to anyone going back to the 2008 housing crash. I hear so many people say that, you know, housing, just buy it and you’re gonna make money, right? I’ve heard that way too many times.
00:09:11 But perhaps if you have, like a 40 year time horizon.
00:09:13 Right, but a lot of people don’t think that way. They just think, well, if I can buy real estate, I’m guaranteed to make money.
00:09:20 All right.
00:09:20 And then I challenge people like you just said, think about the time horizon, you know, are you going to plan to just buy it and resell it in two years? Because that’s a pretty short time horizon and interest rates can really, really affect how real estate, you know, is moving. And–
00:09:34 So I’ve distilled this down to first and foremost, real estate is an asset, not just the purchase of a house.
00:09:40 Right. But it’s not just a guaranteed profit like so many people think that.
00:09:44 Yeah. Oh, yeah. That’s for sure.
00:09:46 That’s my greatest point.
00:09:48 Okay, so that’s one of the things here. Here’s where I think we ought to talk, for all of you out there listening. First, let’s talk a little bit about, and when I say I’m a fan of real estate, right, I think it’s an interesting one. I’m not making a recommendation when I say it, so I have to be careful about that the way we phrase stuff on the radio, right? But let’s just say, you know, for the sake of like, hey, you know why I’m a fan of real estate? And we want to kind of break this down a little bit on the show today. One, it’s got a unique tax treatment compared to a lot of assets.
00:10:15 True.
00:10:16 It has some things in common and some things less in common. So why is real estate sort of interesting from a tax perspective?
00:10:23 Well, can we depreciate?
00:10:25 Okay, so we’ll get there, right? But there’s some other elements to it, right? That it has utility value, okay? It’s something you can use, a use asset.
00:10:34 True.
00:10:34 And so that I think is interesting and that we wanna talk about that. And then three, it has income generation potential.
00:10:40 That was the one I was going to touch on. You can have, if you do it right, someone else can pay for it for you.
00:10:45 So really it all falls under, and this is very appropriate for any of you guys that listen to the show for any amount of time, kind of know that this is sort of a sweet spot for me. Running, real estate is kind of like buying a little business. Okay. It’s a simple business in some respects. It still has costs and headaches and so forth, but it’s interesting when we view real estate through the lens of not just buying a house, but are we buying a business? And if we’re doing that, we need to understand a little bit of like, how does it get valued? And then we talk about, well, where’s this coming from in the marketplace, right? So I think there’s a lot of cool features to real estate that people don’t necessarily know because it’s not taught anywhere in school. And it would be really useful for us to understand as investors. So why don’t we talk about that?
00:11:34 Do we want to talk about some of those keywords, stuff that you kind of need to understand before we even dive too deep into this?
00:11:42 Oh, I bet you we cover it as we go.
00:11:44 Okay.
00:11:44 But the first thing we got to do is get our first obscene profit break.
00:11:48 Let’s do it.
00:11:49 Coming back as soon as possible, just cut the music off.
00:11:51 Are you ready to talk about–
00:11:52 Yeah, welcome back.
00:11:53 Real estate and everything in between.
00:11:55 Yeah, welcome back to the True Wealth Show. Dave Littljohn and.
00:11:58 Matt Dickson.
00:11:59 Remember guys, you can grab this as a podcast if you are missing out on the fun. Today, we are gonna talk about real estate. Matt has an agenda.
00:12:07 I wanna stick to it. We got a lot of stuff to get to.
00:12:09 I am so bad at agenda on these things. I mean, we really do some prep on this stuff, but it’s also, I’m just a cowboy, it’s the worst.
00:12:18 Eh. Well, right off into the sunset.
00:12:21 Okay. All right. You’re on your own. That’s got this show on lockdown.
00:12:24 Right.
00:12:25 Hey, for a lot of you out there, we did want to talk about the concept of real estate as an investment. Now, before we do this, let me frame a couple things up. Let’s start with talking about real estate with the most familiar terms that I think our listeners are going to typically come across. Right? Your home. Okay. I don’t want to like, have the debate about like, is this or isn’t an investment. There’s authors out there that say, your home is not an investment. It’s the biggest liability you have. To which I go, hooey. Right? Like, no, I disagree with that.
00:12:57 You tell them off, David.
00:12:58 Right. But I do think that homes can be a significant distraction in many cases. And it’s tough to navigate because there are some risk elements. So we’re going to talk about a few components for homeowners today and why homeownership is a really interesting one that I do think it’s something that I would encourage most people to get into. Right. Now, there are scenarios when renting may be better than owning a home, especially if you’re not sort of long-term sticking around an area. Right? And there’s no hard and fast rule of this, but if I were to ask you to venture, I guess, Matt, how long do you think somebody should live in a home at a minimum before it’s like, well, if you’re not going to stay at least this long, you may want to rent it instead. It’s literally a guess. There’s no right or wrong answer.
00:13:48 Yeah, I mean, if you’re going to be in a place for less than five years, I’d say probably renting is okay.
00:13:53 Yeah, and I would say maybe three, but it depends on the market.
00:13:57 Yeah.
00:13:58 You know, you got to have enough appreciation just to cover all the cost it took to acquire something. However, right, what people forget is it’s oftentimes a store of value. Okay, now I don’t think of a house as an ATM.
00:14:11 Well, especially if you’re going to put a little bit of money into fixing it up. Right? If it’s in a decent location and it’s a little rough and you can just put some sweat equity into it.
00:14:21 Right. So first, I’m going to just ask you, can a bunch of our listeners know what we’re talking about? Some don’t.
00:14:27 Right.
00:14:28 Some people are going to watch this on YouTube. What, when you say sweat equity, what do you mean?
00:14:33 I’m talking about you’re willing to do some work to improve the house. You’re sweating it out. Right? Like you’re the one swinging the hammer and chopping the wood. But if you have, if you’re at all handy and you can put some work into it, you might gain equity. So if you bought it for $100,000, you, maybe you put 20,000 into it and then you can turn around and sell it for 150, you have 120 into it and you sell it for 150, that’s a $30,000 gain. There’s your equity.
00:15:00 Okay, so in this case–
00:15:01 But you don’t even have to sell it to have the equity.
00:15:03 Well, here’s a definition. We use the term equity all the time in the financial field, right? Especially in the investment landscape. Equity is often referred to, like stocks are often referred to as equities. Why?
00:15:16 They store value.
00:15:17 Well, they are a representative of ownership. Right. If you own one share of Apple as a company, you have equity in Apple. Like you have an ownership stake. So when you have a home that you’re purchasing and you have a mortgage on it, right, some of that home is owned by the bank.
00:15:35 Right.
00:15:36 Right. The percentage that you have paid for already, that’s the amount of ownership that’s yours. That’s your equity. And so sweat equity is the idea of say, if I can get a hold of something and then I can do improvements through my own labor, then I’m not paying somebody else for labor input. I’m the labor input. If that labor input improves the value and it goes up, I have improved my equity position. I made money off of my effort. So I got more ownership.
00:16:05 Some people, they don’t understand sweat equity though, and they just sweat. And go negative on the equity side.
00:16:12 Well, therein lies a huge issue, doesn’t it?
00:16:14 Yeah.
00:16:15 I think one of the number one errors that real estate investors, especially folks in like the rental space, or if you’re looking at short-term rentals like an Airbnb or a VRBO or whatever you want to call it, the short-term rental marketplace where people are just doing like weekends or a few nights at a time or a couple weeks here and there, is the issue of when people spend money on the property. Is it really an investment or is it an expense?
00:16:40 Mm-hmm.
00:16:41 Okay? Like, providing coffee pods to your tenants may actually be a good thing because that additional service helps keep it rented. Okay? But it’s not equity. Okay? That’s a business expense as part of trying to make the rental more attractive so it’s easier to rent or because you can charge a premium for the rent, because the service level is more of a VIP thing, whatever it is, right? More luxury. But it’s not equity in the property, it’s an investment in making the business more profitable. It’s important to understand the difference. Right?
00:17:18 Right. And then there’s always that one person that thinks that they’re a designer, paints their house a hideous shade of purple, and puts in shag carpet even though it’s 2024. And they think that they have a really cool design and that the house should be worth more, but it’s probably worth less.
00:17:34 Right. And so that would be an example of putting money into it that you will never get back out. You actually decreased the value.
00:17:41 We see that all too often.
00:17:43 Yeah. And one of the things is you have to understand the difference between personal utility and marketability.
00:17:50 Very different things.
00:17:51 Right. Personal utility would be the idea of, I want to have a hot tub inside my house somewhere. Like, okay, you can do that. But it may not make the property more valuable to somebody else who wants to buy it.
00:18:06 Especially when you put it smack dab in the middle of the living room.
00:18:09 Yes. So you put a hot tub in the living room and you forgo a traditional stove to put in place like a wood stove. And I’m like, okay, you’re just making life harder for somebody else to buy it from you because they’re going to probably undo that and do something more conventional. And so when you put money into really unconventional things, it’s possible you won’t get your money back.
00:18:31 I’m not kidding you. When we went to buy our house, the owner of the house was like, hey, before I sell it, I need to make some updates to it and renovate it a little bit before you buy it. And in the preview of the walk through the house, I’m looking at some of the materials, and I stopped him. I was like, you know, what did you exactly plan to do? He’s like, oh, well, you know, the spot here in the kitchen really needs some wood paneling and I’m like, we’ll pump the brakes. I’m like, let me do you a huge favor. Go ahead and return that to Home Depot, get the money that you were gonna spend into fixing this up, and I’ll just love it how it is. You can skip adding the wood paneling. He actually thought that that was something he needed to do to make it more desirable for me to buy it. I’m like, I’m gonna undo 90% of what you did.
00:19:23 Yeah.
00:19:23 Don’t waste your money. Just go ahead and sell it to me–
00:19:26 How it is. Yeah. And so therein is the critical, like, you know, are you doing something that’s only you want, or is it something lots of people want? Right. And there are other elements at play too, that you just have to recognize. Sometimes you’re doing things that are stylistic and they don’t actually improve the value. They don’t detract from it either, but you could spend a lot of money on designer things and nobody cares.
00:19:49 Right, because you think you’re gonna put $1,000 in and magically the house is gonna be worth 10,000 more.
00:19:54 Yeah, it’s to go, well, hey, we have white laminate or black laminate. It doesn’t matter if the person’s gonna tear it out and put in granite regardless. They don’t care about that feature.
00:20:04 No.
00:20:05 Okay, and so, yes, and it all gets back to how exactly, are you trying to build equity in a property. Now, let’s get off of the basics there and into kind of the next level of home ownership here. So we’ve now talked about the idea that you’re building equity and that’s the portion that you own. Okay.
00:20:24 What happens when you go to sell a place and there’s a bunch of equity in the package that you’ve put together?
00:20:32 So this is a great question. Home ownership so far in the current tax regime, and I say this because you never know.
00:20:39 It changes.
00:20:40 Well, I mean, if you’re watching this and this video is five years old. I say that because we’re going to, it’s being recorded. Right. So, or if you listen to this as a podcast from five years ago, I don’t know what the laws are like now. I know what they are today, which is 2024. Right. So what? May 14th of 2024 today, I’ve got dated the show officially. Yikes. But you have a certain amount of capital gain that you can have on a personal residence and the capital gain is profit, right? Above and beyond how much money you put into the property. Okay. Not how much you just paid for it.
00:21:13 Do you remember off the top of your head, like how much equity you can have in the house when you go to sell it without having to pay taxes on that equity?
00:21:20 Yeah, I’m a financial guy. That’s what I do.
00:21:22 Perfect. I’m setting you up. How much is that David?
00:21:25 $250,000 per person.
00:21:29 Oh, so if you’re married, now you have $500,000.
00:21:31 You have $500,000 if you’re married. So think of it like per tax unit, right? Now, if you have, if you’re two people and you have some kind of joint tenancy or tenancy in common and you’re going to share based on your proportion as long as it’s your primary residence.
00:21:46 But in most scenarios.
00:21:47 Most scenarios–
00:21:49 You buy a house for $200,000–
00:21:50 For a single, $500,000 for a family. And what it means is if you have profits that are within those parameters and you sell your property, you pay no capital gains.
00:22:03 You bought it for $200,000, you sold it for $700,000, that’s a $500,000 gain, you’re still at the very, you know, max part of that total.
00:22:11 At the top of that, how do you qualify?
00:22:13 You have to have lived in the house for, I believe, two out of the last five years.
00:22:18 Correct.
00:22:19 Hey, golden star.
00:22:20 Yep. It has to be your primary residence for two of the last five years.
00:22:24 But in the event that you bought it for $200,000 and then you sold it for a million–
00:22:29 Then you would have 500,000 of exemption and you’d have another $300,000 of profit. And assuming you’ve lived there for more than two years at this point, it’s a long-term capital gain, which is going to be federally taxed and potentially state taxed, depending on the state.
00:22:46 Is there any way that you can get out of paying taxes on that?
00:22:51 There is, not to my knowledge.
00:22:53 Okay.
00:22:53 There is not. Not for a personal residence. Now if you have rental properties, different story.
00:23:00 Okay.
00:23:01 Different story because there is something known as a 1031 exchange. Now, before we get there, we’ll come back to that. We’ll hunt around at that as a concept. It’s really important for investors. Let’s stick to the idea of primary residence here.
00:23:14 Okay.
00:23:15 Suppose that you move out of your house. You’ve lived in it for two years. You move out and you start renting it and it’s been two more years and you’re living somewhere else as your primary residence. Okay. You can still sell the house that’s a rental and potentially get that capital gains exemption because it was two of the last five years.
00:23:37 Right. That’s important to think about.
00:23:39 Now, it does change the dynamic a little bit because once it becomes a rental property, you now are treating it like a business. Businesses have expenses and depreciation and other elements. And so what I will caution you is before you just assume you can sell tax free that you want to find qualified tax advice to make sure you’re navigating this property. Because you do have kind of a commingled property here. But odds are very good that you’ll still be able to sell at a profit and not pay capital gains. Okay. The question is whether or not you started depreciating the property and you have some recapture. Okay. The recapture again, not a subject for this program. That’s a subject you should go, what is that? I don’t know what that is. Yeah, if you don’t know what that is, you better talk to somebody who does.
00:24:29 All right.
00:24:29 Okay. That’s how that goes. Right. So anyway, those are the basics, around homes. Now homes are also interesting to value. Okay. What’s the number one way that most people end up valuing a home?
00:24:43 Well, unfortunately, it’s probably they go on Zillow and take a look at what Zillow has.
00:24:47 And largely it’s going to be cost per square footage and comparable feature set in the houses around it. So you’re going to do a lot of comparison work and look for things that houses have in common and look at the feature sets in the houses. So it’s gonna be square footage, number of bathrooms. It’s gonna be the types of materials inside and they’re gonna come up with a ballpark price per square foot and lot size and location.
00:25:09 Actually, I take it back. That’s not how I think most people evaluate real estate.
00:25:13 Oh, good. How do they? This is about, I gotta hear this.
00:25:17 I think over the last three years, it’s mainly been a, well, I just saw that held house down the street sell for $350, and I want to sell, so heck, let’s make mine $380. That house sells, and the next guy’s like, well, if that sold for $380, I’m gonna sell for $400. That’s how it feels, right? Like, everyone just looks at the next guy and is like, well, I can make more because real estate’s hot, and so the next person just one-ups the next.
00:25:41 Yeah. You know, I wish that there was more, like, I wish I could say you’re wrong, but I don’t think you’re super wrong. I think it’s not the whole story. Right.
00:25:53 Well.
00:25:54 But I think there’s a huge component of that going on is folks just going–
00:25:58 Well–
00:25:59 You know what?
00:25:59 Here’s the thing.
00:26:00 Prices are higher. Let’s do this.
00:26:01 If the buyers keep showing up, it can continue.
00:26:04 Okay. Well, there’s an element underneath this. That’s a consideration.
00:26:08 Let’s talk about that.
00:26:09 Yes. We’re going to talk about why, does the price of homes keep going up, especially here in Oregon, and then we’ll talk about, how can we get a sense of what homes maybe should be worth? But we gotta take our next obscene profit break. All right gang, welcome back to the True Wealth Radio Show. I’m here. It’s Dave Littlejohn, on the studio with me today is.
00:26:27 Matt Dickson.
00:26:28 All right, so that’s as fast as I can talk. We’re gonna get back to real estate today. Remember you can grab the podcast if you’re just getting on board. We’re talking real estate today and we were talking about home ownership.
00:26:39 What have we shared? What have the key, like give me the key highlights so far so if people are just tuning in, they can be like, okay, I know what you’re talking about.
00:26:46 Well, I mean, the highlights we talked about, you know, what exactly is equity in a home, right? That’s the percentage of ownership. Talk about how your home is not a straight real estate investment. Okay. Now, everybody in theory needs a place to live, right? And so you can rent or you can buy. So in a sense, you are converting cash as a stored asset into something in your home, right? Like you’re holding equity in there. So like you’re going to put money in and store the value there. It should be somewhat hedged against inflation. So typically homes appreciated, at least the price of inflation. So it’s a good placeholder, and you need a place to be anyway. So like all of those have some utility value to it.
00:27:25 Right.
00:27:26 We talked about how investing in your home isn’t necessarily automatically an investment, right? That you really need to know the difference between an asset and a liability, or just a personal upgrade that you want that doesn’t add value to the home, it just adds to your use and pleasure, right? So there you go. And then we talked about the tax ramifications of home ownership when you go to sell. Your primary residence and the way that’s treated from a tax perspective, I’ll encourage you to grab a podcast if you want to get that sort of recycled. But somewhere between 250 and 500,000 of potential capital gains exemption, depending on how long you’ve lived there. But going forward, for a lot of folks, it’s not just about, great, so we own a home, but I want to figure out, please talk to me about rental property. That’s the big thing that so many people are saying, how do I get into a rental property because I want somebody else to help me pay for this thing. And, you know, like most of us, if you’re listening, you kind of remember like at some point you probably rented when you were first getting started and then you start acquiring properties and try to get them rented. And then we all heard the horror stories about, you know, how awful it is to be a landlord. But then we’ve all heard the stories about the people that made their fortunes in real estate. And so somewhere in between is probably, truth. I can tell you as somebody who’s been a landlord, I’ve had some pretty terrible experiences. We’ve had tenants that, you know, through negligence set fire to a place.
00:28:48 Right. You’ve been a landlord. This is interesting. You’ve been a landlord to both like the Airbnb type rental and also to the long term renters, right?
00:28:57 I’ve done long-term and short-term residential and they’re done commercial.
00:29:02 Okay, do you wanna kinda talk about some of the things that you’ve seen as maybe some pros or cons in all three of those different arenas?
00:29:09 Sure, sure, and it’s interesting, it’s a great question and let me just kinda clarify too. I’m gonna speak from my experience as a landlord, but not necessarily as a real estate professional.
00:29:22 Okay.
00:29:22 Like I’m not in the profession of real estate. Like we do investment management and so one of the things I tend to be pretty good at is valuing real estate, because I know how to use a lot of the same metrics that we apply in the investment marketplace toward real estate as an investment.
00:29:38 Yeah.
00:29:39 But the idiosyncrasies of, like contract law and that kind of stuff, I still have to work with other professionals to help pull this off, but let’s talk, high level. So, one of the lower maintenance things that you can have between commercial and residential. The interesting thing about residential, it’s usually easier to get into. Okay.
00:30:01 Okay.
00:30:02 But there are some dangers to it, right? So oftentimes you can get into a residential property. Maybe what you do is you use, you first buy it as your own home, right? So you can use certain government programs to use fairly low money down to get in and occupy and start building up some equity in a home. And then you may intentionally do a cash out refinance if you’ve built some equity up. Use that equity to go buy a new home and then keep the existing home that you have and turn it into a rental. It’s one of the most common pathways that people get into real estate ownership. And at that point, you’re probably in long-term real estate. Okay, so long-term tenants, which just means that you’re not talking about short-term contracts, you’re talking about actual leases, whether it’s month to month or a year at a time or something like that. But somebody’s gonna live in your house and you’re their landlord. Okay.
00:30:49 Okay.
00:30:50 The terms of the lease are going to determine how much they pay and some of the responsibilities. But generally speaking, the tenant has the responsibility to not, like destroy your place and to notify you if things are broken.
00:31:01 Right.
00:31:01 And the landlord has the responsibility of showing up and making sure the place stays livable and the things that are broken because they weren’t like abuse or negligence. You know, like the stove breaks and the tenant didn’t break it. It just sometimes stoves break. Okay. Landlord’s supposed to fix that. Right.
00:31:18 Right.
00:31:19 The roof is leaking. Landlords, supposed to fix that. The toilet backs up. Well, why did it back up? Well, it backed up because of misuse. Okay, well, there’s some issues here. But sometimes, like the tenant has some culpability, sometimes not. And so, but bottom line is you’re going to collect monthly rents.
00:31:40 Right.
00:31:40 You’re usually going to have some kind of security deposit. And that’s so that there’s a certain amount of contingency that if the tenant is destructive. You have a little bit of cost recovery when they leave. So the pros are once the tenants in, they’re a good tenant. It’s relatively low maintenance for you. It kind of just works. And you don’t have to do a whole lot of hands on other than the typical sort of maintenance that may come with the property, right?
00:32:03 Right.
00:32:04 You decide whether or not you have yard service or the tenants, going to do the yard, right? Trash service or not, those sorts of things. Lots of pros and cons, not the subject of this show, but relatively easy to collect the money. Some of the dangers, though, varies by state. We’re in Oregon, okay? Oregon tends to be very tenant–
00:32:22 Protected.
00:32:23 Favorable.
00:32:23 Yeah, favorable is the word.
00:32:25 And so the landlord tends to bear a lot of risk if the tenant becomes adversarial.
00:32:31 Right.
00:32:31 Right? Tenant refuses to pay. The eviction process is fairly long and drawn out. Tenant starts to destroy stuff. It’s pretty difficult to, you know, get people out of the way. So you can have some pretty expensive tenants if you get the wrong kind in there and it’s hard to get them out. And law enforcement in many cases, their hands are sort of tied by again, regressive laws that, and again, we’re talking to, you know what, I don’t even care. If somebody’s out there going, no landlord, screw everybody, like shut up. Like I’ll just say it, like I’m on hand, shut up. Because everybody that says, no, everybody buys everything up and makes everything expensive. It’s like, no, there’s a shortage to begin with.
00:33:14 Yeah.
00:33:15 Everybody’s looking for investment all over the place. Why don’t you take it up with your politicians, why it’s so doggone hard–
00:33:20 To build.
00:33:20 To cut through the red tape, to build at an affordable price point. Like, why don’t you take it up there instead of like, telling me how landlords are screwing the world over. There are bad landlords and you know what? Shame on them.
00:33:31 Right.
00:33:32 But there are terrible tenants out there too. And absolutely shame on them. Okay? If not everything is, you know, capitalist pigs screwing over the little guy.
00:33:40 Yeah.
00:33:40 Just shut up. If that’s your attitude, shut up. Don’t listen to this program and tell me how you’re trying to become a landlord and do it the right way. And how the whole system, like the system’s broken in lots of places. So there you go. I’m… totally ranted about it. Probably make YouTube.
00:33:55 Do you feel a little bit better now that you got it out though?
00:33:57 A little bit.
00:33:59 Get more out, David, I’m enjoying this. Let’s make this into a little bit of a therapy session.
00:34:04 Oh, boy. I think the frustration level, I wish landlords would own up to the parts they’re responsible for. Within reason, you call somebody at three in the morning because you got in a fight and broke the sink and you got a leak everywhere, or you don’t say anything and you flood the place, you have serious liability. You damage a place as a tenant and you don’t tell the landlord and you try to cover it up. That’s straight up negligence, right?
00:34:29 Yeah.
00:34:29 I mean, that may as well be treated as a crime. I mean, if my kid breaks something, like they get in trouble later, if they try to hide it, okay, they may be in trouble for telling me too, but it only gets worse when you hide it. And so like, they’re these basics of, like human decency and let’s start with that. Right. And landlords do not need to gouge people, but landlords are just as big a pickle as everybody else. Half the real estate out there in the market is uninvestable as a landlord. They’re completely uninvestable because the amount that you can actually charge someone in rent won’t be enough to cover the cost of the property.
00:35:04 It’s staggering if you actually run the numbers. Like, hey, here I am. I have some money. I want to invest it in real estate and make a little bit for my time. You start running the numbers, especially with housing costing what it costs today.
00:35:18 Right.
00:35:18 Like you’re saying, it is very, very difficult to make stuff pencil.
00:35:22 Yeah. And one of the ways that we try to do it is you see higher density stuff. And a lot of people are like, but I want a house. I don’t want to go, live in an apartment that’s got 20 units in a building. I know. And yet that’s the cheapest way you can build it is at scale, right? It’s cheaper for a builder to build 20 units at a time. 20 cookie cutter units is way cheaper than one custom unit.
00:35:43 Right.
00:35:43 So why all the custom homes go up? ‘Cause people will pay enough money for custom home that the builder can afford to do it.
00:35:50 Right.
00:35:50 We actually had, it’s been probably a year, year and a half ago, but I had a guest on the program named Barry Robinson, did a great job of breaking this out for us and talking about how expensive things have gotten and that the average builder couldn’t afford to build because of these cost issues. That’s a supply side issue of the availability and the ability to build more real estate. Why is the price so high, especially in Oregon? The demand is there. And it’s tough. And so that’s why I get back to, again, if your rent is like landlords are hosing everybody because they’re buying up properties, the demand is there either way, whether the landlord buys it or somebody else does. But it’s, also let’s stop assuming that a tenant is ready to buy. You need to be qualified. You can’t just say because I want something, a bank should trust me to loan me money.
00:36:37 What do you say to the person who’s kind of gotten through that space? They’re no longer a renter. They bought that custom house. They have a mortgage. Do you have any, like tips or tricks for the person who has taking on that–
00:36:49 I feel like you’re leading the witness. What do you want, Matt?
00:36:51 No, I’m just saying. You know, that was one of the questions that we had dialed up for today was, you know, what do you say to the person who has a mortgage? And they’re like, hey, you know, I want to maybe pay this off a little early, or I want to try and, you know, really leverage my money to the max. What do you say to the person who’s got the mortgage? And they’re trying to move forward and be better financially.
00:37:14 Okay. I like this question a lot. Okay. And knowing that we have limited time. So here’s what I want to do. We got to take our last break. So we’ll set that up. But I think there’s some things that our listeners can… like if you’re in home ownership and you’re like, how do I pay this off? So here’s the thing, whether you own a home or not, okay?
00:37:34 Are you going to give some wise words?
00:37:35 We’re going to talk a little bit about how mortgages work and how you can, it’s not that you can beat the system, but how you can do something about it to improve your position.
00:37:43 That’s what I want to hear.
00:37:44 Yes. So let’s do that when we come back. Hey, welcome back to the True Wealth Show, where Matt and I are just going off by the seats.
00:37:52 That better make it into a YouTube Short.
00:37:54 Yeah, we may end up having the off air stuff just shows up on YouTube for this session, because we’ve been kind of, I guess I’m schooled up.
00:38:02 Basically what we’re saying behind the scenes is, if you don’t like your situation, maybe you should try working a little bit harder, because we’re tired of everyone just saying, wave.
00:38:11 I’m gonna pause it for a second. It’s not just the work harder.
00:38:14 It’s smarter. Work smarter.
00:38:15 It’s not just the work smarter. Like you do need to make different choices. I agree that things are hard and things are expensive and that it’s mismanaged at a high level that’s produced lots of inflation. And there’s been a lot of things where, like decisions were made out of politics instead of what was best for people. And the net result was that we all pay more. I actually do think it’s harder for a young person today than it was 20, 30 years ago. Like I really do.
00:38:40 Yeah.
00:38:41 The cost of education, all these things, super high. Food and energy, super high. I’m not telling you that it’s not hard, but what I’m telling you is you can’t make some harmful decisions and blame everybody else for it.
00:38:54 Right.
00:38:55 Right. Like as you said, you can’t go put the Xbox on a credit card and then spend 10 hours a day gaming and then complain that you can’t hold a job down.
00:39:04 Mm-hmm.
00:39:04 Right? Because like, you know, you only got four hours a day of actual work time left.
00:39:09 Right.
00:39:09 Right. You still gotta sleep and eat and some other stuff. You can’t do those things and then complain like the world owes you.
00:39:15 I saw it all the time when I was a teacher. You’d witness it. The parent who was in poverty and they just, they couldn’t delay any gratification. The minute that they got some money, they’re like, well, I’m gonna spend it and at least have a little bit of fun since I can.
00:39:30 That is the single biggest determinant in financial success is your ability to delay your gratification.
00:39:35 One hundred percent.
00:39:35 I’ve been talking about all this other real estate stuff, but if you can’t delay gratification for 10 minutes, then you’re done. And yes, I’m being sarcastic, about 10 minutes for those of you who are literalists. But you better be able to delay gratification for real.
00:39:47 Yeah, and sometimes for years, because it’s not gonna just be fairies and pixie dust. You’re gonna have to grind and sweat it out.
00:39:55 I literally, for the first two years of my career, I paid to work to learn this craft. I worked nights so that I could afford my errors and omission insurance. making less than my insurance costs while I learned this profession.
00:40:08 But you were betting on yourself and you were betting that over time.
00:40:09 Yes, and this industry in the direction it was going.
00:40:12 Yeah.
00:40:12 So, all right, rah rah rah, it’s not about me. Let’s talk about real estate. Look, if I leave you guys with one last thought, so all you out there listening, Matt, you set the table.
00:40:21 Did I?
00:40:22 Right, it was, hey, if you own a house, you’re still paying out a mortgage, you’re trying to figure out what to do.
00:40:25 Yeah, that was the question.
00:40:26 So the number one thing is can you accelerate payments on your mortgage? Okay, now there are two schools of thought, we’re gonna take the straightforward. One is, keep as little equity in your home as possible so that you have that asset available to be invested elsewhere and be productive. That is a higher risk proposition. Because it puts your whole–
00:40:43 Yeah, and you better be really good at whatever it is you’re investing in.
00:40:48 So there are lots of reasons for it. We just aren’t gonna go into that. We’re gonna keep it straightforward, okay? Let’s say that your goal is to get your house paid off and then to take your discretionary income because you no longer have a mortgage and you’re gonna start buying other assets at that time. Hey, why does it help to start paying extra payments, even if they’re little, on your mortgage as soon as possible?
00:41:08 Well, if you can get rid of the high interest that you’re paying, like if you’re losing four, five, six, seven, $800 a month to interest, and you can whittle that down, that frees up money to where you can invest that back as a whole.
00:41:19 Here’s what happens in very simple terms, we tend to overcomplicate this and it’s not that complicated.
00:41:25 No.
00:41:25 If you borrow $300,000 to buy a house, you’re paying interest on $300,000.
00:41:31 Yep.
00:41:31 Your first payment pays almost only interest and you get a little bit of principal. So the next payment is a little bit less than the first principle-wise, or you owe a little bit less, so you still have the same payment, but the way they’ve calculated the mortgages, your payment stays the same, and then each month, as you gradually whittle down at your principal that’s owed, more of that payment gets applied to principal and less to interest because you’re starting to have a smaller loan value.
00:42:01 Right.
00:42:02 Right? It’s actually that simple. So, if you make extra payments that don’t go to interest, then what it does is it takes the lifetime average daily balance of your mortgage and lowers it, which means more of your standard payment goes toward interest, which means you’re accelerating the rate at which you lower your lifetime average daily balance of your principal and your loan. That’s really the issue. Just go listen to that part again. If you’re listening to this or watching YouTube–
00:42:34 I was actually gonna record.
00:42:35 Go do it again. Listen to what I said because your average daily loan balance drops faster when you can apply more principal early in your loan. And that lower average daily balance means you have to pay less interest. This is the same thing. There’s some programs out there advocating for accelerating mortgage payoff by using a home equity line and basically putting your whole paycheck in your home equity line and then gradually borrowing it back out. All they’re really trying to do in that scenario is lower your average daily balance. It’s just harder to execute than you think, right? Like there’s not a lot of programs that work very effectively to do that. But you know, the person with the whiteboard will explain it to you. It’s like, oh, look, it’s magic. No, lower average daily loan balance. So, accelerating payments does what? Gets into your principal faster.
00:43:22 Right.
00:43:23 You’re making more payments per month, like, oh, let’s just do two payments a month, and then like every three months, we make an extra payment, right? All that’s doing, chipping away at the principal sooner. Because you’re getting to those tweener payments, tweener meaning in between the normally scheduled payments when the interest gets charged, and you’re hammering down your daily average balance. That’s what you’re doing. Right. Okay. So that’s the magic of getting your house paid off faster. I cannot believe how fast today went. I thought we were going to talk about how we value rentals and how you analyze cash flows, depreciation, amortization.
00:43:54 We’ll turn it next time.
00:43:56 There’s so much more about real estate. I guess we’ll do another show.
00:43:58 Yeah, why not?
00:43:59 So, okay. Well, crazy enough, we are at the end of the day time-wise. So Matt, let’s kind of do what we always do. How do folks reach us if they’ve got more financial questions?
00:44:09 You can call us or text us at 541-375-0898 or go to the website at littlejohnfs, as in financial services, dot com.
00:44:19 Right, and do keep in mind, we talked about real estate today. We think real estate is a healthy part of a comprehensive investment strategy. That includes retirement planning, and it includes healthy estate management, includes risk management, all that stuff is in there. But today was the real estate shift.
00:44:37 I like it.
00:44:38 All right guys, well look, that’s the music, so you know what time it is. Once again, just want to say thanks for tuning in. Get more information at littlejohnfs.com or give us a call at 541-375-0898. Until next time, I’m Dave Littlejohn.
00:44:50 And I’m Matt Dickson.
00:44:51 And you’ve been listening to True Wealth on News Radio, 93.9 FM and 1240 KQEN.
Discover the nuances of inheriting money and how different types of assets can impact you. Join us as we explore the key aspects of inheritance and gifting that you need to know.
Episode Highlights:
- Tax planning strategies that can save your heirs a bundle in taxes, such as adding a pay on death beneficiary to a bank account to avoid probate.
- How to manage the complexities of inheriting retirement accounts.
- After-tax traditional IRA contribution that can lead to a backdoor Roth IRA strategy.
- The two main categories of Individual Retirement Accounts (IRAs)– Traditional and Roth– and the tax implications for beneficiaries.
- Strategic tax planning for managing large retirement accounts, including timing withdrawals to reduce tax liability and the concept of “bullying your tax rate” to fall within lower tax brackets.
- Common misconceptions about inheritance and capital gains taxes, explaining the ‘step up in basis’.
- Potential tax implications of adding children to property titles.
- When life insurance may be subject to taxes.
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TRANSCRIPT
00:00:00 So what I hear you saying is, if this is a problem you have, call Dave and Matt offline,
00:00:00 Yep.
00:00:00 Because almost nobody has this problem.
00:00:00 That is correct. And it’s a really interesting tax planning strategy. It’s also the front door into the back door Roth IRA strategy. Okay? So, why are you laughing?
00:00:00 That was funny. The front door to the back door. That was a little bit of a financial advisor kind of almost joke a little bit.
00:00:00 Yeah. Because we’re hilarious as financial advisors. So there you go.
00:00:36 All right, gang, it’s that time of the week. It’s the best Tuesday I’ve had all week. And this is the True Wealth Radio Show. And we’re excited to have you here today. Let me give you the rundown. It’s not just me, your host, Dave Littlejohn in studio today. I’ve also got with me.
00:00:49 Matt Dickson and someone special.
00:00:52 Derek Simmons, your favorite attorney.
00:00:54 He is our favorite attorney joining us today. As you guys know, we have Derek on often. Usually it is to talk about a combination of Kansas and Carolina basketball.
00:01:05 And I think that’s a reasonable topic. We’ve only got an hour today, so I’m gonna try to be brief.
00:01:10 Okay.
00:01:11 Kansas was pre-season number one and then flamed out in the round of 32 this year.
00:01:15 Right.
00:01:15 And that was disappointing. So now they’re pre-season number one again for next year.
00:01:21 Which just makes me question what pre-season number one means.
00:01:24 Nothing. That and $6 will get you coffee at Starbucks.
00:01:28 Very well. Yeah, I was gonna say Carolina went in as a number one seed and flamed out in, I think the round of 16. So nonetheless, they were out, and you know what? The ducks made it farther than I expected. So there you go. The Beavers were not in. So, although the ladies did real well. Right. I think they were, what? Final four. So, are close to it. Lead eight. They did great. So, anyhow, look, today we’re going to talk about all kinds of stuff. Cause that’s what we do. Some of it will be relevant to you, and some of it you wish will be relevant to you, right? Why? Because we wanna talk a little bit about what happens when you inherit stuff.
00:02:07 And the first task there is, pick your parents carefully.
00:02:12 Yes.
00:02:13 That is very helpful.
00:02:14 Yes, this is sort of like Derek and I have done estate planning like seminars together before, one of my favorites. You’re gonna get this from Derek on occasion, will be things like, Hey, if you don’t want to ever have to have a will or a trust document, what’s one of the things you could do?
00:02:32 Remind me.
00:02:32 Just be immortal.
00:02:34 That’s true. Immortality prevents the need for a will or a trust.
00:02:37 The other is if you hate your family. So those are two of my favorites. If you hate your family or you’re immortal, then by all means, you could skip the planning.
00:02:45 It works well.
00:02:47 Or if there are just no assets.
00:02:49 That actually is one of them, but that one was not so funny. The immortal wouldn’t, really caught me. I remember you said that the first time I just went, how am I supposed to follow that? So.
00:03:00 Well, and you know, a lot of people feel immortal for a certain period of their life.
00:03:05 Yeah.
00:03:05 They’re like, yeah, there’s no risk I’m gonna die. No risk. And then they hit about 45 and their back creaks at them. And then they go, all right, there’s a possible… possibility that I could die.
00:03:15 Right. And then the hill, as I say, gets steeper.
00:03:17 Yes.
00:03:18 So, well, today we’re gonna talk about the other side of this, right? We’ve often had times when we have had conversations about estate planning. Okay, because I like to take advantage when I’ve got Derek in studio because he’s a wealth of knowledge on this stuff. But today I want to talk about the other side of it. What happens if you’re getting stuff? Now we’ve teased about lottery winnings before. It’s, some things in common, but believe it or not, inheritance, a lot of you out there listening are either looking at how you might pass an inheritance on. But several or many people listening might get an inheritance. And so the question is, well, then what? Okay. And one of the, what’s one of the things that is similar to, between receiving an inheritance or winning the lottery.
00:04:05 Free money. It’s free money.
00:04:07 Yep.
00:04:07 Money that’s free.
00:04:09 Is that all of a sudden people will, it’s like a new resource in their life. So what do you do with it? Spend it. Right. And it can be gone in a hurry. So, but what compounds things in an inheritance environment is that there are certain things that you may inherit that you could really increase the tax bill dramatically on, but with a little bit of planning, you may save yourself a ton in taxes. I don’t think we have to spend the whole show on this, by the way, but I think it’s relevant because if you’re out there thinking, okay, so let me ask first the question of what are some things that people inherit?
00:04:48 You could inherit a parent’s IRA, so a retirement account.
00:04:52 That’s a hard one though. Let’s start with the easy stuff.
00:04:54 I agree. What’s an easy thing to inherit?
00:04:56 A bank account.
00:04:57 Bank account, piece of cake.
00:04:58 Yes, and you have to go through probate to get it if you have a will or no will.
00:05:02 Right.
00:05:03 But you just, it ends up being money.
00:05:05 Yeah, now what’s one very low cost thing you could do with a bank account that would help to mitigate or avoid probate?
00:05:13 You could, if you knew who you wanted to leave the money to, you could add them as a pay on death payee.
00:05:19 Correct, so oftentimes known as a transfer on death or a TOD.
00:05:24 And that way, they don’t have any, whoever you’re leaving the money to does not have any control over it until you actually die, but then it’s theirs without going through probate.
00:05:33 Derek, would you say that the probate process has changed much over the last five to 10 years?
00:05:38 I don’t know that the process itself has changed much. I know that it’s gotten really more expensive.
00:05:44 I’ve heard that.
00:05:44 Now, I don’t handle probates myself, but I’m hearing that probate can cost eight to $10,000 for one where people aren’t fighting.
00:05:53 Right, and this is in the state of Oregon, primarily what we’re talking about when we’re talking about probate. So depending on where you’re listening or watching this thing, your mileage may vary wherever you’re at. But yeah, and why is this so important?
00:06:07 Well, I mean, if you’re looking at the heirs, the people who are going to inherit things, if the cost of the trust is maybe, you know, less than that $10,000 mark in a probate court.
00:06:18 It might make sense to pay some to avoid probate.
00:06:20 Right.
00:06:21 Exactly. This is where we, yeah, we caught Matt on that one, right? Because he just dropped an Easter egg into his comment if you were paying attention, which is, you could get a trust, which is a form of pre-planning that’s designed to avoid probate, right? And it used to be that people think, oh, trusts, they’re so expensive. Why don’t I just have a will and then go into probate, but it may actually be cheaper to do a trust now with the rising cost of probate.
00:06:48 Yeah, the one good thing about probate is they charge you after you’re dead. But if you’re worried–
00:06:56 You don’t have to pay upfront.
00:06:57 You don’t have to, but if you’re worried about how much your heirs are going to inherit, then it’s gonna come out of their pocket. So then it’s come out either while you’re alive or it comes out after you’re dead. And then you kind of want the lower number at that point.
00:07:11 Exactly. And of course, since this was not supposed to be the probate show.
00:07:16 It wasn’t, we’re talking about inheritance.
00:07:18 Right.
00:07:18 So we did bank accounts.
00:07:20 Bank accounts. What are some other things that you could inherit? That–
00:07:24 Car. Truck, a vehicle.
00:07:26 Okay, vehicles. All right, so what happens if you inherit a vehicle?
00:07:30 Well, there is a title.
00:07:32 Or wait, that’s not what we meant.
00:07:35 Yes, you have to get your name on the title. And–
00:07:40 That is a probate thing.
00:07:42 Well, it can be, it can be. And I have not seen that the DMV in Oregon requires you to go through probate every time. Lots of times they’ll accept alternate mechanisms of proof that you’re the right person.
00:07:55 So perhaps a death certificate or something similar.
00:07:57 Yeah, so that’s a possibility.
00:07:59 Yeah, the issue is if the chain of custody is confusing, right, you may have a vehicle, let’s say you’re married, right? You have a vehicle in one person’s name. [DMV] may be more inclined to allow the spouse that was obvious to take, title. But if it’s a next generation, now it’s more ambiguous what the chain of custody would be.
00:08:21 They may wanna see a will, even if it’s not probated.
00:08:24 Right. And we’re not speaking for the DMV, by the way. And again, your mileage may vary, your DMV may vary. I don’t even know. So, shouldn’t.
00:08:32 So that’s, vehicle. Third one might be real estate.
00:08:36 Real estate, another titled asset.
00:08:38 Real estate is either going to go through probate to change the title from the dead person’s name to the people who are inheriting his name, or it can use a transfer on death mechanism to pass without going through probate, but it does make it a little bit hard to sell the property for about 18 months.
00:08:57 Yeah, and–
00:08:59 So then, but that’s what you usually do, is the kids who inherit, or whoever’s going to inherit, has a choice, I’m either gonna live in it or I’m gonna sell it, one or the other. And so what the inheritor intends to do with it makes a difference on what the owner does in the first place.
00:09:15 Okay, so we’ve covered real estate, we’ve covered personal property items, right? Well, I guess that’s really more like things with title, vehicles we’ve talked about. So what about personal property? Things that don’t have title associated.
00:09:31 Yeah, so those are technically supposed to go through probate.
00:09:35 Exactly.
00:09:35 And yet, and yet they often don’t.
00:09:38 Yeah, it’s one of those things that, it’s kind of hard to account for sometimes. And it’s one of the big challenges in it, especially in a contested environment, is, well, what happens when something just walks away in the process? How do you prove–
00:09:54 Probate.
00:09:54 There it went.
00:09:58 That can be one of those things people fight about.
00:09:59 Yeah, I can remember a story of family members and they said, well, what happened to the tractor, right? That sort of disappeared from the premise. Of course, tractors have titles associated with them. So that ultimately, you know, found its way to resolution and it was awkward because you can’t just leave and say, I have no idea what happened to it. Well, that’s funny because trying to register that thing, we discovered.
00:10:22 It’s in your garage.
00:10:24 Right, right, so. Who knew, right? So here’s, I think Matt, you asked one of the tricky ones right out of the gate, okay?
00:10:34 Yeah, and I did do a lot of talking upfront because I don’t know the answer to what happens to an IRA.
00:10:39 Right, well the good news is we do, but the first question I would ask Matt is, what kind of IRA, right? I mean, first of all, how many types of IRAs are there?
00:10:50 There’s so many. You have your traditional IRA, your Roth IRA, your simple IRA, your SEP IRA. There’s a lot of different types of IRAs.
00:10:57 Yep, and then there’s a lot of things that walk and talk like IRAs, but they’re not actually IRAs.
00:11:03 Mm-hmm.
00:11:04 Okay, so there are some things that they all have in common, right?
00:11:09 Right.
00:11:09 And so I think it’s probably worth us talking about some of the things they all have in common and then what are some of the differences are?
00:11:15 Well, the easy one is beneficiaries.
00:11:17 They do all have beneficiaries, okay? Which you can be a beneficiary to a will. Of course, there’s beneficiary pathways through probate. You could be a beneficiary in a trust that should be a pathway without probate. Or you could be a beneficiary in a retirement plan. What the heck does that mean?
00:11:39 As I understand it, this is money that can’t come to me all at once. Or maybe it could, but it sucks.
00:11:46 Yeah. So it can, but the question is, is that the smart move? So first let’s paint the picture. There’s two big buckets of IRA money, right?
00:11:57 This is an example.
00:11:58 Yeah. So you have Roth IRA money or traditional tax deferred type IRA money. Now that tax deferred–
00:12:07 There’s two IRAs, traditional IRA.
00:12:09 They’re different pathways. Right. Let’s think of it simply as, there’s a third hybrid, it’s the most obnoxious one, but let’s understand Roth and traditional first, okay? A traditional IRA, and this is gonna be like most of your employee or sponsored retirement plans.
00:12:26 The stuff you haven’t paid taxes on yet.
00:12:28 No taxes have come out.
00:12:30 Yeah, you earn the money and before it’s taxed, we pull it out, put it into an investment and it is allowed to grow tax deferred. And then in the future, you take the money out and when you take it out, you pay the taxes as income in the future. Okay. The other basket is the Roth basket, which is you earn money, you pay the taxes and then with what’s left after you’ve already paid your taxes, you invest it and then it grows tax deferred. And if you qualify, we’ve done other shows about this, right? There’s the five year rule and some really kind of weird stuff around it. But basically assuming the Roth is sort of the switches turned on and it’s acting like a real Roth with no gotchas. So after five years, most of the time. Then when you take the money out, after full retirement age, another important caveat, tax free, right? You paid all the taxes upfront, so no taxes on the back end. The other one, you don’t pay the taxes upfront, so you get taxed on the back end. And those are the two big baskets. Now, there’s a third one that throws everybody off.
00:13:36 Is this a smaller basket or multicolored or what?
00:13:39 So yes, smaller, multicolored. It’s kind of the way annuities work. This is the scenario where you make too much money to deduct an IRA contribution. So you make an after-tax, traditional IRA contribution, and then it grows tax-deferred, and when it comes out, some of the money was taxed and some wasn’t. And you actually have to track it to tell the IRS so that you can keep track of how much tax you have to pay on that.
00:14:17 So what I hear you saying is, if this is a problem you have, call Dave and Matt offline.
00:14:21 Yep.
00:14:22 Because almost nobody has this problem.
00:14:23 That is correct.
00:14:24 Okay.
00:14:25 It’s a really interesting tax planning strategy. It’s also the front door into the back door Roth IRA strategy. Okay. So, what are you laughing at?
00:14:35 That was funny. The front door to the back door.
00:14:38 Yeah.
00:14:39 That was a little bit of a financial advisor kind of, almost joke a little bit.
00:14:42 Yeah. ‘Cause we’re hilarious as financial advisors. So there you go. The traditional IRA is gonna be a lot like your 401(k). So it’s gonna be a lot like a 403(b) if you’re in the public sector or, even like the IAP program for PERS, any of these. You haven’t been taxed on the money yet. So somebody has it, they’re in retirement, they’re pulling it out, paying taxes as they go, and they croak, it’s a technical term.
00:15:12 Right, and now Dave, you inherit this IRA.
00:15:16 Right?
00:15:16 Mm-hmm.
00:15:17 So first of all, I’m curious how I knew them. Right.
00:15:21 Yeah.
00:15:21 There’s, and why does that matter? Because if you’re a spouse, then you’ve got different options than if you’re not.
00:15:30 Mm.
00:15:31 Right? Why does this matter? Like, first of all, a lot of people may be thinking, oh yeah, do I have that rich uncle in Zimbabwe that’s finally going to come through? Or if you’re married and you lose your spouse and they had a retirement plan in their name, well, you’re going to get some options. One of them is you can leave the money in their name and carry on until, the other is you can roll the money over into your own name. There’s pros and cons based on your age, right? As to why you would do one or the other. And again, I’m not gonna go super deep on the radio on this. I’m gonna tell you, this is where if you don’t understand the nuances, find a tax advisor or financial planner that can help you with this, right? And if you don’t know one, Matt will shamelessly give you our phone number.
00:16:23 Yeah, 541-375-0898.
00:16:26 Or.
00:16:26 You can even go to our website at littlejohnfs.com.
00:16:30 Right.
00:16:30 Because–
00:16:31 Everybody’s circumstances, you know, yes, you nail that. Thank you. Yeah. So, but that’s the, between spouses, you get some options because they’re, the law allows you an unlimited transfer of assets between spouses without a tax effect, which is nice, but what if it’s not your spouse. It’s a kid, you know, somebody else that you, but it’s a person, right? You give it to a charity. We don’t worry about that. Okay, that’s great. They’re gonna take the money. And if the charity doesn’t pay taxes, they’re not paying taxes on what they get. But let’s say you’ve got a kid that’s gonna inherit this. What are their options when they inherit? Under current tax rules.
00:17:11 You could open something called a beneficiary IRA and then transfer those funds into the beneficiary IRA.
00:17:18 That is correct. That’s one option. So let’s start with what’s probably the less than ideal option typically.
00:17:28 Pull all the money out. There was $500,000 in there. You pulled it all out because you wanted to go on a spending vendor.
00:17:33 Yeah, Matt, that was really gonna help my Walmart trip, man.
00:17:36 I know.
00:17:37 Anything else is gonna be less happy for my Walmart trip.
00:17:38 Right, so why are you gonna pull a Sheeky O’Neal and go to Walmart and drop $600,000?
00:17:43 So you’re gonna just, you’re gonna inherit a big chunk of money. And why do I say big? Because if you’re gonna inherit 500 bucks, it’s probably not that big a deal.
00:17:50 Right.
00:17:51 If you’re gonna inherit 500,000, or more even.
00:17:55 Right. If you took that–
00:17:56 What happens if you just cash the thing out and put it in your checking account?
00:17:59 Well, if you pulled that money out of a traditional IRA, that’s now $500,000 of income for the year.
00:18:06 And you’re gonna hit the highest tax bracket.
00:18:08 Okay, talk to me about this, because, I mean, obviously I’m leading the witness here, but I just want you guys to explain to our listeners. What do you mean?
00:18:15 Okay, well, there’s a graduated tax rate. If I only make $15,000 a year, I’m not gonna pay much taxes. If I make $500,000 a year, I am gonna make a much, pay a much higher percentage of those, of that. And I think I go from like the 0% bracket to the 28% federal bracket.
00:18:35 I think it’s 37 right now.
00:18:36 Holy smokes.
00:18:37 Yeah, it’s high.
00:18:37 And then tack on another, what? Nine, 10%.
00:18:40 Maybe–
00:18:40 Four or something.
00:18:41 9.8% in Oregon, I think at that level.
00:18:42 Okay, yeah.
00:18:43 At least, I mean, don’t quote me on this.
00:18:45 Right.
00:18:45 I’m just pulling off the top of my head.
00:18:46 It’s a lot. You could lose almost half of it, is what we’re trying to say.
00:18:48 Yep.
00:18:48 Whereas if I string it, if I string it out for longer and don’t take it all at once, then its smaller bite-sized chunks that keep me below the thresholds.
00:18:56 Yeah. I believe you have like 10 years to take that money out.
00:19:00 Correct, this is the key here. If you were to just take all the money at once, out of, as a beneficiary, just take a check, put it in a checking account, that’s accepting all of the money at once, and the IRS says, great, then all of the taxes that have been deferred showed up at the door with this inheritance, and you just said you’re gonna pay them all to me right now. So we’re going to take all that money and apply it, the tax bracket to it right now, and it’s gonna drive your taxes way up.
00:19:29 And that’s one of the interesting things about retirement accounts versus anything else you’re gonna inherit. Anything else you’re gonna inherit, you’re probably not gonna get it until after the taxes have been paid. But an IRA is gonna come with, a pre-tax IRA is gonna come with a tax obligation attached to it.
00:19:49 Right. This incidentally is also true for annuities. Okay, so an annuity has that similar issue, is that the money that the tax that’s been deferred, that deferral doesn’t disappear when you die. It gets inherited by the heir. So that’s the key. Now remember annuities just like that weird hybrid, some of it was taxed and some of it wasn’t. Some money is usually after tax and some of it is pre-taxed. So it’s a mix of what you’re gonna be taxed on, because some of it you already paid, the tax was already paid, okay? So it just depends on how the accounts were structured, but the IRS looks at it pretty simply. They get you on the way in or they get you on the way out, and they only tax stuff that hasn’t been taxed already. And let’s not talk about CECorps. And–
00:20:40 So in an IRA situation, if I’m going to inherit an IRA, is the general rule that I’m always gonna wanna string it out?
00:20:49 So not necessarily, but if it’s a big IRA, the general rule is that you’d probably wanna string it out. And you may not need to string it out for 10 years, okay?
00:20:59 Right.
00:20:59 That you have up to 10 years with which to determine when to take the distributions. This is a change by the way from years past. You used to have different circumstance, not worth discussing because that’s not the rules anymore. But today, up to 10 years to make these withdrawals. So.
00:21:18 Yeah, I mean, while we’re on the inheritance topic, do we want to talk about how gifting is kind of related to this whole piece?
00:21:27 So we will.
00:21:28 Yeah.
00:21:29 But let’s, I’d like for our listeners to kind of, let’s finish up this, this is a concept, because I think this is an important one that everybody latches onto. If you’re going to inherit this thing, you ask the question, Derek, do you want to take it all at once? I think.
00:21:42 Right.
00:21:43 And the answer is–
00:21:44 What?
00:21:45 It depends.
00:21:46 The thing I said was, don’t we always wanna string it out?
00:21:49 Right.
00:21:50 And then you said no.
00:21:51 And I said, the answer is it depends on dollar effective tax rate, right? If it’s a really big account, you probably wanna stretch it out because you don’t necessarily want to give way more away in taxes unless there’s a really good reason. Like you just have to, you know, get a hold of to purchase something else. So.
00:22:10 If I’m in a really high tax bracket today right now, but I know that I’m going to retire in a year or two, I might wait till I have low income earning years and then I might pull a bunch of it out.
00:22:20 Yeah. You, and the idea is, your, I use this term a lot, right? You want to bully your tax rate. Okay. I’m bullying your tax rate is kind of like, yeah, you go pushing around right? Oh, you, what, did you want a piece of this? No, no. What I’m going to do is I’m going to push you into the lowest tax environment I can. So I’m going to shift it around into different years, or I’m going to try to shift it into different types of assets that will change the way it gets taxed if possible. So that’s the idea when you’re planning, when you’re trying to be tax aware, is to try to find the areas where your tax exposure is going to be lower. And if you can’t make it lower, then you spread it out so that you’re not driving it even higher, because the way progressive tax codes work, the last dollar in is the most expensive to be taxed, right? We didn’t talk about, effective tax rate initially. We talked about, highest tax rate. Okay. So once you, you know, if you have a million dollars, you’re, you’ve finished in the highest tax bracket, but you didn’t start in the highest. So your blended rate is less than your maximum rate, but for each additional dollar you take in that maximum bracket, you’re moving your blended rate higher, right? Because it’s a more expensive tax for each additional dollar that you would draw. So that’s why we tend to stretch this stuff out.
00:23:39 So, big account, stretch it out, unless you can see into the future and you know that the tax rates are gonna double next year.
00:23:48 Correct. Yes, if you’re clairvoyant, you should make really good decisions.
00:23:52 You really, yeah, you already know the answer. We wouldn’t even have to tell you, you know the answer.
00:23:56 Yes, so in fact, if you know the answer, because you can predict the future, please call us. Wait. If you really think you know the answer, maybe you shouldn’t call us.
00:24:12 So Roth IRAs, as a reminder, the taxes were paid before the money got put into the retirement account. And then it grows tax-free. And then when can you take the money out?
00:24:24 Okay. So this is before you’re dead, right?
00:24:29 Yes. So before I’m dead, when can I take it out? And then after I’m dead, when can I?
00:24:33 Okay, so first it has to satisfy the five year rule. Okay. And that is tricky. If you were, the only reason we really care about the five year rule is if you have a Roth 401(k) and you’re rolling money over because every time you make a rollover or every time you do a conversion of a traditional IRA to Roth, you get a new five year window on that block of money and the five year window says once I’ve existed for five years as a Roth, the later features, right? You have the now feature of tax deferral, but the later feature is tax free. It activates the tax free nature, which means once you are beyond age, currently 59 and a half is what we consider full retirement age, after age 59 and a half, if you satisfy the five year rule, the Roth IRA distributions are tax free.
00:25:26 Okay. So that’s for me.
00:25:28 Yep.
00:25:29 If I put money in a Roth, I can take it out after 59 and a half assuming it’s been in there for five years and I’m in good shape.
00:25:35 Yeah.
00:25:35 All right, now what about my children?
00:25:37 Okay, the cool thing is if children inherit it, the same story is you got 10 years to take it out, but tax-free to heirs. So you could potentially still defer 10 more years of growth and allow that all to compound and then, yeah, we presume it will compound, but then at the end, 10 years, take it as a lump sum distribution and it’s still tax free.
00:26:07 That’s interesting. So if they take it out in year one after they inherited it and invest and reinvest it in something else, they’re gonna pay taxes on income from that. But if they leave it in there for 10 years, all the growth is tax deferred and they don’t pay it till they take it out. So it makes great sense if they don’t have a burning need for the money to leave it in there for the full 10 years.
00:26:30 Absolutely.
00:26:31 Interesting.
00:26:31 Yep. The Roth is, we oftentimes talk behind the scenes, it’s one of the most utilitarian tools in the financial planning tool bag. The Roth IRAs are just really cool. They’re great because there’s no required distributions, unlike traditional deferred accounts. So right now at age 73, oh, you haven’t taken any money out, the IRS says it is time. You will take some out and pay taxes or you will be penalized worse than the taxes. So they’re really serious, right? Not so with the Roth IRA because there is no tax when it comes out. So they’re in no hurry, right? And it, that benefit transitions to heirs and they get that 10 year window as well. So it’s a great tool. We encourage folks to try to have a basket because it’s also great. Here’s like, something that we think so. Okay. One of the things that’s really obnoxious is getting sick and not dying. Right, it’s super expensive. And while when you start getting into Medicare years, if you’ve got the appropriate Medicare supplements and everything else, you can have a lot of the medical components managed. The idea of needing some kind of continuum of care becomes more and more common. What am I really talking about here?
00:27:51 Assisted living.
00:27:52 Assisted living, long-term care event, right, where you have a medically qualifying long-term care event, maybe it’s not even medically qualified, maybe you just need assisted living. And you can buy long-term care insurance, where if you have certain qualifying events, it can be, you can use that. It’s quite expensive, right? You can buy certain forms of life insurance with accelerated death benefit associated, which is a way to sort of claw death benefit into the now, if you have certain qualifying events and use that, that’s kind of exotic. I think there are some similar annuities with features that have some riders that are around distributions for certain qualifying events. But what if you had simply a chunk of Roth IRA money that was available that could be pulled out that wasn’t taxable in the event that you needed it? And if you didn’t use it, it went to your heirs and it became a flex fund for you in retirement. So you’ve designed a retirement income between social security pensions, and other retirement plans, and this basket of Roth money is your flex pool. And that to me is the real story behind these things that we miss. And I’m talking now about the person surviving rather than the person’s inheriting. But if you inherit, might suggest that that Roth is a really powerful tool, and it can also enable you to continue funding your own Roth.
00:29:20 And you know that long-term care spot is one of those, we joke about immortality.
00:29:26 Right.
00:29:26 But even folks who are getting to be in their 60s or 70s don’t ever think about, well, actually, I do encounter some that think about it, but many people don’t think about the possibility that they lose their ability to live independently without dying.
00:29:42 Yeah. And it’s, the triggering events are their own scenario too. There’s usually six activities of daily living and I don’t remember all of them. There are things that you want to be able to do, you know, dress yourself, go to the bathroom on your own, feed yourself.
00:29:57 Change channels to watch Kansas basketball.
00:29:59 Exactly. So.
00:30:00 Critical.
00:30:01 There are a number of those and if you can’t do those, then you would, those are qualifying events, but think about like what do you do if you need help? And so there’s a lot of people that rely on family and other folks to do caregiving, but, and some people do buy long-term care insurance. It’s just become really cost prohibitive because insurance companies look at this and say, I have no idea how to price this thing because the cost of medical, is escalating so radically that we can’t really afford to stay in this business.
00:30:30 So our Roth IRA is our secret plan to pay for assisted living if we need it.
00:30:35 It’s certainly part of the utility. I mean, when we talk to folks right now.
00:30:39 It’s not, secret if you’re gonna tell people about it.
00:30:40 It’s not, but the idea of, hey, part of healthy and robust planning includes contingency planning. And that means, in my opinion, the best way that you can handle potential long-term care is self-insurance. What do I mean?
00:30:57 You mean having enough money that you don’t need insurance.
00:30:59 Exactly. Right? Like, why do you not typically need life insurance when you retire?
00:31:05 Because you don’t have any kids in the house that you gotta worry about supporting.
00:31:08 Yeah. What does life insurance do?
00:31:12 It buys you peace of mind that everyone’s gonna be taken care of. And if everyone’s gone and out of the house, who’s left to take care of?
00:31:19 Okay.
00:31:20 That’s true. Usually I hear from people who buy term insurance because they want to cover a specific thing. Like if I die, I want my kid’s college to be paid for.
00:31:30 Right.
00:31:31 I hear from other people who just buy insurance and are not thinking about it. And they keep paying and they keep paying it. And then eventually we talk about what it’s for. They don’t have anything that, what it’s for.
00:31:42 Here’s my take on what life insurance is for. It does one of two jobs, okay? And then there’s a third one that is hinky, right? The first one is it replaces income that people anticipated you earning. You were supposed to earn income that was gonna be able to pay for stuff, and now you can’t.
00:31:59 But you croaked, yes.
00:32:01 Right, and so we need to replace the income that was gonna come in by ensuring that ability for you to earn the income. And that’s the form of life insurance if you die and disability insurance if you don’t die. So that’s the two forms of insurance there. And life insurance is when we talk about the most because it’s the most permanent typically, or it’s the most obvious, right? Disability is one we don’t often associate as frequently, but you know if somebody dies, like that income’s definitely not returning. And we’ve seen and all heard the stories of the hardship of somebody left behind without life insurance.
00:32:36 I’m guessing the second one is gonna be estate taxes.
00:32:39 Exactly.
00:32:40 So if I die with a bunch of real estate, I don’t want my kids to have to sell it in order to pay the state of Oregon estate taxes. So that being the case, I would buy a policy that would spin off enough money to pay the taxes, and that way they can just inherit the property and not worry about the taxes.
00:32:58 Right. And the third one, which we are not gonna go deep into because it’s gonna just annoy me.
00:33:04 Are you sure you wanna tell them, Dave?
00:33:06 Yes, I’m sure.
00:33:07 Fine.
00:33:07 Yeah, it is… there are certain scenarios when you can build up cash value in life insurance and use it as a funding mechanism for specific purchase items.
00:33:21 Are you going to talk about, whole life?
00:33:23 No, I’m not. I mean, that is a feature that comes with whole life or universal or even variable universal life. But there are just so many gotchas in it and it’s such a long term commitment. And there are people out there that will sell it like this is a really amazing way to become your own bank and replace banks and all that. And my suggestion is that that is a pretty complex, really long term commitment. And so while it can academically on paper work out, I rarely see scenarios where it plays out the way it’s designed. So I’m just very careful about saying, sure, that’s a great solution. I think that’s a super, super nichey solution. And for most folks out there, I struggle to think it’s appropriate for their circumstance. So anyway, so there’s the three, okay? Now, here’s the question. What is the kind of stuff that you would most like to inherit?
00:34:17 Gold bullion.
00:34:18 Yes, it was just pretty good.
00:34:19 Or worse-
00:34:20 Is it because you just wanna swim in a big pool?
00:34:23 I did read about Scrooge McDuck as a child and I have to be candid, it had some appeal.
00:34:27 Right.
00:34:28 But I also would, I think small unmarked bills would be a fine thing to inherit, just a lot of them.
00:34:34 Yep.
00:34:35 Turns out small unmarked bills.
00:34:37 I am actually going to inherit small unmarked bills.
00:34:39 Yes.
00:34:40 Just not very many of them.
00:34:41 So the interesting thing, like inheriting cash tends to be pretty good. Right. Because there’s no tax associated with it for heirs.
00:34:51 Unless you want to go buy, like a $500,000 house with cash that’s unaccounted for and then every red flag, red flag.
00:34:58 Right. So let’s talk about, as an heir, what are the things, so one of the things I hear a lot, common mistake, people will say, well, great, now I’m gonna inherit this thing and I’m just gonna have to pay taxes on it. Is that so?
00:35:12 Well, no, it’s gonna be taxed before they inherit it.
00:35:16 Right, and it depends on which tax we’re talking about. I can only think of two taxes, really.
00:35:23 Estate tax.
00:35:25 Estate tax, which right, that’s the–
00:35:26 I have tax–
00:35:27 Depending on the state. What’s the other tax?
00:35:30 Capital gains?
00:35:32 Probably not. Probably.
00:35:35 You’re gonna get a step up in basis.
00:35:36 Correct. Probably it would be that IRA scenario we talked about earlier in the program.
00:35:40 Oh, deferred income.
00:35:41 It was deferred income, and you’ll have to pay deferred income tax. Otherwise, and you just said it, what do you mean by step up in basis?
00:35:50 So if I buy property for $100, and then later on I sell it for $1,000, that’s a capital gain.
00:35:58 Right.
00:35:58 And I get to deduct my basis from the gain, from the sale price. So now I’m paying tax on $900 of capital gain. But if I buy something for $100, leave it to my children, die and leave it to my children. And the very next day they sell it for $1,000, then my basis increases to the fair market value on the date of my death. So they pay zero taxes.
00:36:23 All right. Let me-
00:36:24 Did I make that over complicated?
00:36:25 Nope, nope, you actually did real well. I’m just gonna substitute one word for our listeners and see if this helps make sense. You are, your capital gain tax is on your profit.
00:36:37 Yes.
00:36:37 Okay, so if you bought for a hundred and sold for a thousand, you had 900 of profit. And that’s new money into your ecosystem. And the government says, we’re going to tax you on your profit. And they divide the profit into one of two categories, short term or long term. Now I’m not sure exactly why they do it, but I guess an easy way for me to remember it. If you’ve owned something for less than a year, then they consider that you’re buying it and selling it again, well then that’s your job. You’re just flipping through these things and so you got your day job, so they’re going to tax it as so it looks like income. It’s not an income tax because it was in fact a profit, but they’re gonna tax it that way and they’re gonna call that a short-term capital gain because you held it for less than a year. Longer than a year, they’re gonna call it long-term capital gain and they’re going to change the tax rate on it. And it’s gonna become lower and more favorable. It’s a really important thing to remember out there, by the way. But for people inheriting, your point is the profit basically gets erased because it’s like getting a reset to the current value the day they inherit.
00:37:42 That’s correct. And this is one of the things that comes up in lots of estate planning discussions is parents will say, what if I just add my children onto the title of my property?
00:37:53 Right.
00:37:54 But the problem is if you do that, it’s a transferred basis.
00:37:58 Yep.
00:37:59 So now when you die and the kids are the owners, they still only have $100 in. And if they sell it the next day for a thousand, they have $900 worth of profit.
00:38:08 Yep, so you lose that sort of, I called it a racing profit. It’s, I mean, it is effectively what it is, but it’s that step up in basis.
00:38:16 Right.
00:38:16 Right? So typically when you inherit property, you’ll get that step up in basis, okay? And the same is true, by the way, side note for how life insurance works. Typically speaking, life insurance is going to be inherited tax free. Okay. When wouldn’t it be tax free?
00:38:36 When wouldn’t life insurance be tax free? It’s going to be income tax free.
00:38:40 Right. It wouldn’t be tax free in the event that it was paid for with pre-tax money. Remember the weird thing where the IRS gets you on the way in or they get you on the way out? If, in most, now health insurance is a different animal, but life insurance is what we’re talking about. If you pay for life insurance with, like, let’s say you own a business and you say, oh, I’m gonna buy insurance on myself.
00:39:03 That’s the key, yeah.
00:39:05 And you pay for it and you write it off and then you die. The benefit now becomes taxable.
00:39:11 So this is why we tell people never deduct life insurance payments in a business if you’re both the payer and the beneficiary, it doesn’t work.
00:39:19 Correct. So you don’t want to have your death benefit sort of, take be, like goofed up.
00:39:28 That’s a good one.
00:39:29 So you pay for life insurance with after-tax money. Okay? Now, all of this, in the end of the day, if you were inheriting, there’s a couple things to keep in mind, right? One, hopefully, there’s emotions associated with this. I encourage everybody, take your time making decisions, especially if you’ve gone through a really emotionally traumatic experience, you don’t want to necessarily have your judgment clouded because of what’s going on, so.
00:39:56 We need a one week waiting period before Matt goes to Walmart.
00:39:59 Well, you’ll never find me in a Walmart, but most of Douglas County, you’ll find me.
00:40:03 Right. And so that’s the first thing though, is just be slow and deliberate. If you are emotional, I would encourage you to find somebody else that you can kind of run ideas by. This is where a financial professional can be really valuable. And then the other, I think, is if you’re going to inherit stuff is you take the time to understand the tax ramifications before you make those decisions. There’s the emotional side and then oftentimes we don’t know what we don’t know. If you’ve heard this program, like I said, get the podcast, send it to a friend because if you’ve got heirs out there, you want to make sure that you navigate this cautiously. On the last one, look, if you’re in the planning process and you are trying to set this up so your heirs are in good shape, you can call Derek.
00:40:52 Absolutely. 541-677-7185.
00:40:56 Okay. And if you are in the process of inheriting and you would like some help navigating, you can certainly call us. Yeah.
00:41:04 541-375-0898.
00:41:07 Okay. Us being, you know, Matt and Dave. I will also tell you that we will offer a free consult on any of this stuff. Our goal is to just get you in the right spot. If it ends up that you’re a good fit and we become, have a customer relationship together, awesome. But if not, that is okay. The purpose here, just like this program, we wanna make sure we get you put in the right spot so that things are working for you. And so our goal is simple. If you walk in the door, we want you to leave in a better spot than you got there. And if that means you’re working with us, wonderful. If not, we hope we’re pointing you in the right direction. So that is all. But I’m looking at the clock. Guys, can you believe it? We actually blew through the time.
00:41:45 Wow.
00:41:45 With only one more reference for Kansas basketball. Only time for one.
00:41:49 Exactly. Well, that’s the music. We got to run. So until next time, I’m Dave Littlejohn.
00:41:54 Matt Dickson.
00:41:54 Derek Simmons.
00:41:55 And you’ve been listening to True Wealth. Thanks for tuning in on News Radio at 93.9 FM and 1240 KQEN.
With inflation running hot and the middle class getting squeezed, how do we push through difficult times and overcome the financial adversity? Let’s explore the pain points and learn how we can be better investors.
Episode Highlights:
- The effects of productivity advancements on the job market, including the potential for fewer jobs and increased competition among workers.
- Insights into the performance of the markets, the validity of the “sell in May and go away” strategy and considerations around the 4% rule for retirement planning.
- Impact of unexpected financial elements such as surprise inheritances and forgotten assets on personal financial planning.
- How the federal minimum wage has not kept pace with inflation since its peak in 1968
- Disparity between productivity increases and hourly compensation since the 1970s.
- Importance of investing in assets over liabilities.
- Influence of inflation and government spending on asset prices.
- Challenges faced by the younger generation in asset accumulation.
In a time where everything costs more, taxes are a burden and wage growth might not feel adequate, how do we fight back? This episode breaks down practical ways the middle class can stretch the dollar and make smart money moves.
Episode Highlights:
- The potential investment value of firearms and ammunition, and the challenges the middle class faces in ascending to wealth.
- Impact of COVID-19 on global supply chains, the shift in manufacturing from China to other regions for resilience and national security, and the role of geopolitical tensions and media narratives on financial markets.
- Insights into economic cycles, the possibility of inflation or deflation, the role of the Federal Reserve and the complexity of managing government debt and interest rates.
- Strategies for wealth accumulation through asset allocation, the importance of investing in appreciating assets and balancing spending on life-enriching experiences with saving for financial growth.
- Principles of scarcity and leverage as they apply to economics, including the high market value of professional athletes due to their unique skills and limited supply and the strategic moves in industries such as semiconductor manufacturing.
- An understanding of how tax implications affect different income streams and the advantages of certain types of income such as long term capital gains, real estate and passive income over earned income.
Dive into the parallels between today’s AI hype and the late 90’s tech bubble. Discover similarities, differences, and valuable lessons for investors. Explore how historical trends can guide us in making smarter investment decisions amidst the current AI craze.
Episode Highlights:
- AI’s transformative potential, economic disruptions, and cybersecurity risks, balancing its benefits with potential drawbacks.
- The true cost of technology, particularly AI and its impact on the job market, including potential job losses.
- Energy usage and carbon footprint of AI platforms like ChatGPT, alongside the resource requirements of electric vehicles and AI technology.
- The adverse impacts of technology on social behavior, productivity, and the risk of dependency, prompting the necessity for a ‘tech detox.’
- The speed of market transactions, the shift to decimal stock prices, blockchain technology, and the environmental impact of AI and digital technology.
In this video, we’ll explore how different generations view and manage money based on their historical experiences. From The Silent Generation to Gen Z, we’ll discuss the unique perspectives each generation brings to money management.
In this episode, you will learn the following :
- Generational wealth dynamics are examined, exploring how historical events have influenced spending and saving patterns.
- Silent Generation is known for thriftiness due to experiences like the Great Depression and World War II.
- Baby Boomers, growing up in economic prosperity, inherited financial discipline from the Silent Generation.
- Generation X faces the challenge of supporting both aging parents and children, resulting in the highest spending on necessities.
- Millennials prioritize experiences over possessions and have been shaped by the Dotcom Bubble and the Great Recession leading to cautious investing.
- Generation Z exhibits entrepreneurial spirit and risk-taking but also faces unique financial challenges due to digitally-focused upbringing and recent global crises.
- The importance of adapting spending habits to the current economic landscape and preparing for the future, regardless of generational influences.
Curious about mutual funds? In this video, we dive deep into the structure of mutual funds to help you understand them better. So many options, but we’ve got you covered!
In this episode, you will learn the following :
- Owning a variety of mutual funds doesn’t guarantee proper diversification.
- Utilizing Individual Retirement Accounts (IRAs) and 401(k)s can significantly impact your financial future due to their tax advantages.
- Mutual funds are suitable for investors who are either starting or prefer not to manage their own stock portfolios.
- Target date funds automatically adjust investment strategies based on the investor’s age and proximity to retirement.
- Assessing mutual fund suitability requires understanding key investment metrics such as past performance, expense ratios, turnover ratio, manager tenure, alpha, beta and Sharpe Ratio.
- Be aware of the “phantom index” effect where mutual funds mimic an index fund but with higher fees.
- The R squared value is a statistical measure that reveals a fund’s alignment with its benchmark index and can be a tool to avoid paying high fees for index-like results.
- Risk drift occurs when certain assets grow and unintentionally increase the risk in your portfolio.
Are you struggling to make financial decisions? A financial coach can help you reach your financial goals and reduce financial stress. Find out if a financial coach is right for you in this video!
In this episode, you will learn the following :
- Human aspect of financial advising and the importance of personalized coaching.
- The transformative impact a financial mentor can have on an individual’s success.
- Significance of strategic advisory teams and the concept of having a personal ‘board of directors’ for different aspects of life.
- A holistic financial advice that encompasses taxes, legacy and trust planning is important.
- Value of tailoring a coach’s approach to the individual needs of clients for optimal growth.
- Role of third-party expertise in business and how it can contribute to monumental growth and avoidance of pitfalls.
- Building a strong professional network and being selective in choosing experts who can communicate effectively is necessary.
VIEW FULL EPISODES ON YOUTUBE!
Confused about which retirement account is best for you? In this video, we break
down the differences between Roth IRAs and Traditional IRAs, covering key details and
considerations to help you make the best decision for your financial future. Watch now to
become an expert on Roth vs Traditional IRAs!
In this episode, you will learn the following :
● Distinguishing between traditional and Roth IRAs, their tax implications and the
significance of rolling over these accounts.
● The IRA contribution rules, emphasizing that one must have earned income to
contribute.
● The importance of maximizing catch-up contributions for those over 50.
● The need to stay current with regulations that adjust for inflation and the changing
ages for required minimum distributions (RMDs).
● The significance of keeping track of non-deductible IRA contributions, which can affect
your tax situation upon withdrawal.
● The five-year rule for Roth IRAs, explaining that both contributions and conversions to a
Roth IRA must satisfy a five-year holding period to avoid penalties.
● The estate planning considerations.
● The unique benefits of Roth IRAs in estate planning.
VIEW FULL EPISODES ON YOUTUBE!
Have you checked to ensure your beneficiaries are up-to-date? Is your life insurance under the correct spouse? Should you consider gifting assets and cash, or allow heirs to inherit? Are your assets titled in the name of your trust? Do you need a trust, and how does it differ from a will? Is a Roth Conversion the right choice for me? What exactly is a backdoor Roth? Should I convert my home into a rental? Mistakes can be costly, so tune in now for tips, tricks, and everything in between.
In this episode, you will learn the following:
- Understanding how life insurance policies are included in the estate value is essential. If not managed correctly, life insurance can lead to taxable events.
- Trusts can help manage estate tax exposure but do not eliminate tax obligations. It’s essential to fund a trust by retitling assets.
- Common mistakes in financial planning can lead to significant tax bills and legal complications. There’s a need for accurate financial knowledge and the value of seeking professional advice to avoid errors.
- Strategic planning is necessary to manage estate taxes and preserve wealth within families.
- Demystification of the backdoor Roth IRA strategy which allows high earners to maximize their retirement savings despite income limits on traditional Roth IRAs.
- The critical role of precise knowledge and the benefits of having a professional financial advisor.
Discover the various methods and approaches to market analysis in this insightful video. Learn all about factor investing and how it can enhance your investment strategy. Dive deep into the world of investment evaluation and broaden your financial knowledge today!
In this episode, you will learn the following :
- The basics of factor-based investing and how it differs from asset class categorization.
- The relationship between risk and expected rates of return using personal credit as an analogy.
- The three-factor model which includes market capitalization, value versus growth investments and the book to market ratio.
- How different investment factors such as beta, value and quality impact the volatility and potential returns of a stock.
- The concept of the cost of capital, interest rates and their effects on consumers, businesses, and government spending.
- A comparison of how different sectors like technology and consumer staples deal with economic fluctuations.
- The importance of having a strategy to weather financial storms.
There seem to be two kinds of people in the world – spenders and savers. Spenders usually need to learn how to save. But when is the right time for savers to spend? If you’re never going to spend the money, what kind of impact could you have? David and Justin tackle this question and more in this episode of True Wealth.
In this episode, you will learn the following :
- The psychological barriers that prevent individuals from enjoying their finances.
- Financial industry’s emphasis on wealth accumulation over strategic spending.
- The balance between enhancing one’s lifestyle in retirement and planned giving to personal interests and charities.
- Strategies for managing retirement income, including safe withdrawal rates and the role of insurance.
- Financial implications of homeownership and the critical choice between self-insurance and the security of an annuity.
- Risk management in the golden years and considers the impact of deep-seated beliefs on financial behaviors.
In this era of escalating labor expenses, inflation, and real estate prices, how do you maintain healthy margins while expanding your business? As the True Wealth team welcomes a special guest to the show, tune in to hear from a prosperous local business owner.
As technology advances, what potential advantages and disadvantages might artificial intelligence have for the world? We must be alert and learn how to use this tool for good as the world evolves.
In this episode, you will learn the following :
- AI brings both efficiency and ethical challenges to various industries, especially automotive.
- The relationship between government regulation and industry innovation requires careful navigation.
- Over reliance on AI and algorithms can threaten our critical thinking and autonomy.
- The potential of AI to be used for harmful purposes such as deepfakes and manipulation is a serious concern.
- AI can be a powerful tool for enhancing productivity in areas like financial planning.
- Individuals are seeking ways to reclaim autonomy from technology’s pervasive influence, including reverting to simpler devices.
How efficient is the stock market? Should you put all your money in at once? There are a lot of theories floating around, so lets take a look at what these theories mean and how investors can benefit from educating themselves on the way markets operate.
What does preparedness in the face of natural disasters and potential system-wide challenges look like? Join Littlejohn Financial as they unveil a curated list of items crucial for turbulent times. Tune in to ensure you're equipped for any unforeseen circumstances.
While many advisors focus on downturns, we unveil crucial insights on how to capitalize on market highs. Tune in to learn actionable strategies and gain a competitive edge in handling a hot stock market.
With so many politicians on the naughty list this year, rumors are whirling about sightings of Santa opting to shovel coal as he flew over the capital this Christmas Eve. Bad actions often bring about unfavorable consequences: we need more accountability. Catch our top take aways from 2023 as we wrap up the year.
We examine the true extent of the nation's debt as it continues to rise. Is it possible to solve the issue? Things may appear slightly differently than you would think.
Although we are not in possession of a miraculous crystal ball that can see into the future, we may utilize technical and basic patterns to guide our decision-making. Don't pass up this fascinating viewpoint that you should hear.
Humor and catchy phrases make for easier ways to understand investing. You know you need a good laugh and a couple funny investment phrases, so tune in and laugh along with the True Wealth team as they run through a variety of ways to avoid mistakes and invest with confidence.
This show highlights 10 examples of financial mistakes. Learning from others blunders can save a lot of unnecessary pain, so tune in and learn how to leverage a little patience and control during high stress situations.
There are different ways to try and gauge your investment performance. Savvy investors should give their holdings a health check and reassess goals. Learn to identify some of the common mistakes of the impatient investor.
The news can trigger emotional responses that shift how we view the market. How does group psychology affect the market? What we do know is the lemming scrum is often bloody and one you want to avoid, so tune in and learn how discipline can help you avoid following others into a financial pitfall.
How did ESG investing start? What is it really about? Should you care as an investor? There might be more layers and complexity to the ESG investing trend than one might think.
Tune in to our latest podcast episode, where we dive deep into the world of investments and unravel the key factors that contribute to investment performance.
Fear is being spread by the news, advertisers and rising inflation. Many people are scared and wondering what to do to preserve their assets. Listen in as we break down the gold trade and help you to make better informed decisions.
Listen as the True Wealth team outlines nine distinct ways you might be able to avoid making an expensive financial error that might initially seem enticing.
Even savvy investors sometimes fail to grasp how concentration risk can stem from the phantom index and an eclipse market. The True Wealth team unveils how you can use metrics such as R^2, while also taking a look at what a Roth conversion is and who might benefit from one.
Even when markets are experiencing turmoil, you can often find opportunity. The Truth Wealth team breaks down a series of ways you can approach shaky markets to better navigate the storm and feel more confident as an investor.
What are the structural elements that are influencing the supply side of real estate? Tune in to hear what AmeriTitle's General Manager, Barry Robinson, has to say.
With crime on the rise and bedlam in the streets, inflation is fueled. The cost of crime carries throughout the system. The True Wealth team takes a dive into explaining bonds and how they are affected by rising rates and what it means for the investor.
What really goes into building a business that has decent odds of surviving? AI gave us it’s best formula, but the True Wealth team takes a deeper dive into laying the groundwork for giving entrepreneurs a leg-up in building a successful strategy.
What type of mindset does someone adopt to not only build wealth, but retain it? A lot of work goes into building a solid investment portfolio. Learn about some tricks you might be able to use to better understand investing and preserving wealth.
There is some good news to share despite the rising cost of mortgages and the rising rate of theft that is reducing business revenues. Listen in as Matt and Justin break down some of today's hottest topics.
As starter homes have all but vanished and expenses have gone through the roof, things look bleak: but the True Wealth team looks to uncover where the optimism and opportunity might exist during these troubling times.
Imports and exports have dramatically shifted in the aftermath of COVID lockdowns and a war in Ukraine. Investors should pay close attention as the trade routes are undergoing massive change.
We often wonder why a stock is priced the way it is: trying to answer that question may be more complex than you realize. Tune in to hear about ways analysts make decisions on whether it's time to buy or sell.
The title says it all. The True Wealth team reveals tips and tricks many individuals use to acquire first-generation wealth. The 'American dream' is still alive, so tune in to hear about ways you can leverage your time and resources.
Everyone loves to save money, but there are times when trying to cut costs gets expensive. Learn about how spending a little extra can potentially buy you a lot more.
We too often think of risk as a static measure. The reality is, risk is much more fluid than you might think. Learn about how to assess your personal risk and how you might change it depending on circumstances.
What does it really mean to have wealth? Too often we have the wrong perspective and don't see the big picture. Learn about how you can change your viewpoint to better understand what wealth truly means.
Many people in America are seeing a huge shift in their financial picture compared to a few years ago. Debt has increased, retirement contributions have slowed and our financial literacy has declined. It's time to fix that. Tune in to hear ways we can fix a growing problem.
Is your retirement plan working for you, or against you? There are a variety of different retirement vehicles in existence. Whether you are an employee or an employer, there are some key pieces you need to know in assessing if you are optimizing contributions to their fullest ability.
Discover the transformative power of artificial intelligence (AI) in today's dynamic markets and gain valuable insights into its implications for investors. Join us as we delve into the fascinating world of AI and explore what lies ahead in the near future.
Discover eight actionable strategies that will empower you to reach new heights and manifest triumph in every area. Tune in now and embark on a transformative journey toward achieving unparalleled success in your personal and professional endeavors. Don’t miss out on this invaluable resource for self-improvement and growth.
Discover the power of cash in your investment strategy! Explore the untapped potential of cash and its vital role in creating a successful investment portfolio. Join us as we delve into the various ways cash can contribute to your financial growth.
You must be intentional when working with the tax code. What is the difference between a CPA and a Financial Advisor? Tune in to find out how an advisor might be able to help you maximize the opportunities you have.
Yes, we are aware that the Federal Reserve affects interest rates, but there are other powerful forces at work as well. Discover some of the factors that may be influencing interest.
When the stock market investment landscape has changed and volatility has increased, what are some ways investors can turn a market full of lemons into lemonade? Strawberries and sugar of course! The real list might be longer than you think, so tune in.
Unpacking The Clues Hidden Beneath The Market
This week, David and Matthew explore the hints buried beneath the Market.
The Future of the US Dollar and Upcoming Deadlines
In this podcast, we discuss the potential future of the US dollar as the world’s reserve currency and the upcoming deadlines for April 18th. Our advisors weigh in on the implications and offer insights on what to expect.
Artificial Intelligence Implications: Concerns and Benefits for Investors and the Job Market
As Artificial Intelligence continues to evolve and gain more power, many people are wondering what jobs it will replace and what the potential benefits and concerns may be. We explore the implications of AI for investors and the job market. Join us as we dive into the possible benefits and challenges that come with this technology, as well as what it might mean for the future. Discover how these issues affect our economy and daily lives and explore potential solutions for a more fiscally responsible future.
Can Capitalism Overcome Fiscal Irresponsibility?
Join us as we delve into the failure of government in managing finances and the repercussions of overspending. We explore the role of capitalism in these situations and how it often prevails, even when the going gets tough. Discover how these issues affect our economy and daily lives and explore potential solutions for a more fiscally responsible future.
Banking on Risk: Analyzing the Credit Suisse Breakdown and UBS Buyout
We take a closer look at the recent breakdown of Credit Suisse and its subsequent buyout by UBS bank. We discuss the factors that led to the collapse, the risks involved in the investment, and how the acquisition impacts the banking industry as a whole. Along the way, we share insights into how investors can evaluate and manage risk when investing.
The Collapse of Silicon Valley Bank
How does a bank this big fail? The answer might be more simple than you think. Are we in for more turmoil and will the contagion spread? Tune in to find out the reasons behind the regional banking scare and what investors need to know moving forward.
The Cost of Capital
In a world where everything is costing more, lots of changes start to develop. Tune is as the team breaks down what you need to know about the economy, the markets and everything in between.
What is Financial Planning?
In this episode, we delve into the topic of financial planning and explore how to find the right financial planner for your needs. We discuss the common pitfalls of the financial industry, including salespeople pushing the latest investment trends without considering their clients’ true financial goals. We provide insights on what to expect from a financial planner and how to evaluate your own financial needs. Tune in to learn how to make informed decisions and take control of your financial future.
4 Ways To Help Fight Inflation
Tuesdays aren’t just for tacos. Matt and Justin reveal an acronym that will revolutionize what you think of the next time someone mentions, “Taco Tuesday”. We are serving up a platter of financial tricks, tips and everything in-between.
Positive Things About The Financial Industry
There are many wonderful and admirable aspects of the market. David and Matt discuss all the special and unique reasons why we are so passionate about investments and the financial industry.
Trends in the Market
David and Matt talk about how certain areas of the market can be popular for a season and less popular during others. As sectors rotate through and mean reversion plays its course, we learn about how the market adapts, changes and exploits opportunities.
The Big Mac Index
How do we measure inflation? Well, the cost of a Big Mac, obviously! All jokes aside, higher interest rates also provide opportunities for lending money with higher rates of return. David and Matt talk about the difference between how corporations and the US government differ in lending and what it might mean for you as an investor.
David and Derek discuss strategies to improve our decision-making on whether an item is worth purchasing. Contrary to common assumption, life isn’t entirely about saving; sometimes, spending money is perfectly OK. Discover some tips you can use to better gauge when it might be a suitable time to make a feel-good purchase.
Are you a DIY investor who needs a little guidance after 2022? Listen in to hear what David & Justin have to say.
Making mistakes is never fun. Tune in as David, Matt, and Justin break down 6 ways investors can help avoid making costly mistakes.
It is easy to become preoccupied with the day-to-day details of running a business. Today the crew covers all the important things you don’t want to forget.
As the new year approaches, David and Matt break down ways you can set yourself up for a better chance at finding success in achieving your financial goals.
No matter your age or dollar amount, David and Matt walk through ways you can improve your financial situation by being a savvy investor.
On this episode of the True Wealth show, David and Matt throw ‘feelings’ out the window and get down to business in addressing debt, the stock market and everything in-between. This is a no frills, no holds barred conversation you wont want to miss.
As investors, we need to approach the market with common sense and logic. If we stick to tried and true tactics, we can lessen the chance of making big mistakes. What are some ways to invest with confidence and intelligence? Tune in as Littlejohn Financial spells out what it takes to be a savvy investor.
As the markets move around and interest rates are in limbo, David and Matt look at all of the conflicting news articles and try to use data to make educated predictions as to what the likely outcomes are from here. Is now the time to buy equities, bonds or fixed income products? Though we might not know with certainty, the evidence suggests...
What do insurance companies have in common with the stock market? David and Matt break down how the risk metrics have changed and how the stock market has repriced risk.
David and Justin explain the significance of the election results and the new law, as well as what it means for investors like you.
The definition of insanity is to keep doing the same thing over and over again yet expecting a different result. David and Matt have a field day talking politics in the lead-up to the vote tally. How will the market react and what do these elections mean for investors?
The definition of insanity is to keep doing the same thing over and over again yet expecting a different result. David and Matt have a field day talking politics in the lead-up to the vote tally. How will the market react and what do these elections mean for investors?
David and Matt take a back seat to financial guru, Madison Littlejohn who gives us some pretty high level answers to our numerous financial questions. This high school freshman manages to rock and roll through the Q&A session. Learn some useful questions to spark financial conversations with your teenager on this unique broadcast.
David and Matt take a back seat to financial guru, Madison Littlejohn who gives us some pretty high level answers to our numerous financial questions. This high school freshman manages to rock and roll through the Q&A session. Learn some useful questions to spark financial conversations with your teenager on this unique broadcast.
Focusing on the upcoming midterm elections, David and Matt discuss how to enhance the voting process and how we can give the people more power while reducing it for large corporations and lobbyists.
David and Matt delve deeply into global economics to discuss how a predominantly globalist regime is driving the market and undermining the Federal Reserve's efforts to contain inflation.
Ok, we get it, the market has been stinking it up. Fear is in the air. But there is a silver lining: bad news has become good news! How so you ask? Well tune in as David, Matt and Derek talk about how if you hold the line, own the same amount of shares and are buying more while the market is low, you might wake up in the future and thank yourself for not making a bad mistake.
Ok, we get it, the market has been stinking it up. Fear is in the air. But there is a silver lining: bad news has become good news! How so you ask? Well tune in as David, Matt and Derek talk about how if you hold the line, own the same amount of shares and are buying more while the market is low, you might wake up in the future and thank yourself for not making a bad mistake.
Listen as David and Justin discuss the implications of the higher dollar and what it means.
There is a big elephant in the room: and it just so happens the elephant is hurting our chances at a soft economic landing. David gets right to the point as he breaks down the ugly truth about the Federal reserves battle to curve inflation. What or who is the elephant in the room? Tune in and find out!
It's extremely important spouses are on the same page with finances. Tune-in as Matt and Justin breakdown all the conversations you should consider having to make sure your money is working for you.
The markets felt some pain today, but patience always reigns supreme when investing. The real question is, can you be a trader and an investor? David and Matt talk about timelines, investment objectives and answer the big question of the day.
There are certain investment checkmarks we need to take care of before getting cute with our money. We need investment rules and less emotion driving decisions so we have a better gauge of performance.
Inflation has reached every corner of the economy. Even our beloved Pumpkin Spice Latte! David and Matt break down where inflation is coming from and what the fix might be to solve the issue.
Inflation has reached every corner of the economy. Even our beloved Pumpkin Spice Latte! David and Matt break down where inflation is coming from and what the fix might be to solve the issue.
David and Matt unpack packaged products and take a dive into the details of what really happens behind the scenes. How are fees calculated and what should you know about fees before investing?
In part two, Matt and Justin continue a discussion about all of the things available to someone looking for a comprehensive financial plan. We all know Investment Advisors can manage assets, but what else is available to you?
Have you ever wondered what financial advisors are capable of? Sure they focus on managing investments, but what else might they be able to do for you? Matt and Justin talk about the various stages of building a relationship with your advisor and what the journey might look like.
David and Matt have a conversation on unintentional bias in our financial decisions. We can be deceived by our preconceived notions. Learn how to improve your investment decisions by tuning in.
Should I open a retirement account or invest in real estate? How can I make the best possible use of the money I earn? This week David and Matt discuss the Federal Reserve and inflation while also breaking down how to examine your own financial status.
If a company is growing, sales are improving, and margins are healthy, yet the stock price took a tumble, where is the disconnect? David talks about his favorite store, and we get a lesson as to why valuations can fluctuate.
Are we already in a recession? We look at 10 indicators and wonder how much lower we can go? How long it will persist if it does as the economy experiences waves of expansion, peak, contraction, and trough before repeating the cycle. David offers some illuminating data that can make you rethink your assumptions. This is a nerdy episode that you must watch!
Is the market expected to rise or fall from here? Although we can't be certain, David starts a heated argument to demonstrate how each side can support their position. Is capitulation on the horizon? Where are we and where do we go from here? You definitely won't want to miss this episode.
How much lower can the market go? David and Matt discuss how retail investors fleeing the market can provide opportunities for institutional investors to drive prices higher and make a profit. Today we learn about ways you can avoid making costly mistakes.
Matt and Justin talk about the different stages of retirement. Even if you are years away from retirement, this is a show you won't want to miss. Find out ways you can better optimize your spending and have more fun in the later stages of life.
Inflation is the talk of the town. With all the buzz around rising costs, the question becomes, "How is inflation really measured?" Tune in as David and Matt break it down.
With purposeful planning, we may use our vision to develop long-term goals that are more likely to be met. Listen in as David and Matt discuss how to develop SMART goals that can enhance your financial future.
As you explore the internet and the computer system learns more about you, it may be possible for you to receive biased information. Today, David and Matt discuss how we should exercise caution when clinging to strong ideals.
How is it possible for a company's revenue and earnings to climb quarter after quarter and year after year while its stock price plummets? Listen in as David and Matt discuss how the market is sneezing and corporations are getting a cold.
With a title this mysterious, it would be a total spoiler alert to give you a description. You're just going to have to join in and listen to find out how good news can potentially have a negative impact on the market. Oh wait, I've already said too much.
2022 market corrections leave us scratching our heads as to what's next and where do we go from here. We take a trip down memory lane to look at three major market meltdowns and to analyze how long they lasted vs. how quickly they recovered. You might be surprised at the results. This is an episode you won't want to miss.
Successful investors avoid using their emotions, set good rules and have realistic expectations. They grade themselves, learn and improve. Listen in as David and Matt talk about the importance of using consistent measurements for downside and upside movements in the market.
A blood bath in the markets calls David and Matt to look at the Price to Earnings ratio and breakdown what is happening in the major indices. We look at the NASDAQ vs. the Dow and talk about how the difference in holdings and performance is an indicator of areas in which the market might be 'propped up.'
As mortgage rates skyrocket and the cost of capital rises, how long before bonds enter the conversation? Are we about to start seeing a structural shift in the market?
We all know the basics behind inflation and deflation, but what is stagflation and are we experiencing it right now? Let’s look at stagflation and what it might mean for the markets. Multiple decades ago, we saw stagflation. What happened then and what might happen now?
As technology blossoms and the metaverse adopts virtual reality, how does the face of business change? Do we start to see virtual conference rooms? One thing we know for sure is personal connection is more important than ever. Tune in to hear our different theories on how technology is rapidly changing and what is might mean for our future.
What are we talking about today? You guessed it, 401K's! Our super smart, super awesome guest Kent Smoothers steals the stage and details some of the dirty little secrets about 401k's that you need to know as investor.
Justin and Matt talk about multiple different ways we are biased in our investment strategies. By becoming aware of your weaknesses, you can make more rational decisions as an investor.
There’s no such thing as a free lunch. The Fed has printed money and added a lot of debt to its balance sheet. Now with rate hikes set to happen on March 16th, we talk about what’s next for the economy and how we as investors need to prepare.
With oil prices at near all-time highs and the Russian stock market melting down, David and Matt take a global look at what the market has priced in and where we might go from here.
David and Matt talk about the S&P, Vix and how close they have come to converging. With Russia and Ukraine in a war that is driving up fuel prices, do we see more inflation even with looming rate hikes? The word of the day is "backwardation," so tune in to see how they tie it all together.
Today we take a look at the current markets and how to use time-honored investment principles to avoid investors' mistakes.
How do stocks find their value and what should you pay for them? "Idiosyncrasy" is the word of the day, so bust out the dictionary and follow along as David and Matt take you on another financial literacy adventure.
Facebook and Netflix share prices plummet, CNN has lost its viewer base, GoFundMe and Spotify are under heat and Joe Rogan is offered a huge contract from Rumble. Matt thinks he sees a correlation between it all and David talks about how this theory might affect investments moving forward. This is an episode you won't want to miss.
David and Matt take a look at the jobs report that just came out and talk about what it means for the economy.
With the markets in turmoil, we should ask ourselves: what style of investor am I and if I have an advisor, does their style match mine?
David and Matt talk about correlation, allocation, diversification, and various other strategies to hedge risk such as dollar-cost averaging, shorting, using options, and even simple strategies like raising cash.
David and Matt give you their 2022 market predictions while also hypothesizing on events that could cause market fluctuations.
Listen in as we wrap up 2021. Derek makes up some ridiculous financial terms, while David and Matt try and define them. This really is an episode you can't miss.
Justin and Matt give you tips for success on how to make sure all generations in your family take the right steps towards financial well-being.
David and Matt give you a run-down of inflation by sector and what the Fed might do to try and slow it down. They also take a look at supply chain concerns and what this means for both the economy and you as the consumer.
David and Matt blast through a checklist of year-end tasks that can help make sure you're in good financial standing to start the new year.
The markets are volatile! Black Friday was rough, and today the markets took a dive. So what’s the deal? Tune in as David and Matt break it down.
How do you bridge that gap between the pit in your stomach where your heart is and what your brain is telling you when it comes to risk decisions.
Is the end of the world coming? Should you freak out and move all your money into gold? Tune in and find out how to ride the wave of uncertainty and avoid mistakes when the markets turn.
What does it take for David to lose sleep at night? How big is the Rivian IPO launch? Where are the markets headed and how do we screen for the winners and losers?
Today we put similar companies head-to-head and try and comprehend how companies like Tesla can justify their huge PE ratios and valuations.
David Littlejohn interviews Rabbi Daniel Lapin in today's episode. Rabbi Daniel Lapin, known world-wide as America’s Rabbi, is a noted rabbinic scholar, popular international speaker and best-selling author. He is one of America’s most eloquent speakers and his ability to extract life principles from the Bible and transmit them in an entertaining manner, thus improving peoples’ finances, family and community life has brought countless numbers of Jews and Christians closer to their respective faiths.
Today David is trying to ruffle your feathers! Why might you ask? Tune in to see how market bias might be at play.
To understand the plumbing of the market, you need to look at the technical data, the fundamental data, and the flow.
Investing shouldn't be gambling. Today we discuss ideas to manage the volatility in your portfolio.
Does the 2008 crash and China's recent real estate unraveling have anything in common? Today we explore potential problems with China's real estate and banking sectors.
What does the vaccine mandate mean for you personally? What does it mean for our economy and what should we be doing about it?
By getting a good handle on the basic fundamental building blocks of the financial system, you can then design for the outcome you're looking for.
Why you actually care about what is happening in Washington DC and the Federal Reserve banking system.
In this episode we discuss what's going on policy-wise and what that means for investors.
In this episode we discuss the shifts in the economy that we're currently seeing and what the future could look like.
We interviewed first-year Air Force Academy Cadet Alex Simmons about his first year at the academy.
Today we discussed that you need to understand risk to know how to recognize it and how to manage it. We also discussed anchoring bias.
What does advice cost? What's the value of advice? What's the price for not taking advice? We cover all this and more in today's episode.
Today we break down Dave Ramsey's baby steps and explore what happens when your budget breaks.
David and Katie talk about different ways we trade our time & what your time is worth. They explain how this correlates to the stock market.
Investing does involve speculation but speculation doesn't involve investing. Investing is not gambling. Tune in to find out what we're talking about.
In this episode we discuss budgets, financial planning and what you need to know to be successful.
What you should know for any time you find yourself getting a significant financial windfall. You can start your plan today by going to bit.ly/ljassetmap.
Today we dive into the weeds of real estate. How will the proposed tax changes affect you as a real estate investor?
In today's episode we discuss tax deadlines and what it's like to live a day in the life of a DIY investor.
In this episode we're discussing bad advice that people receive. Who do you get advice from, how do you know it's good advice, is the advice in their scope to give?
In this episode we discuss what you need to know about different IRAs with tax deadlines coming up.
In this episode we discuss what the difference is between your needs and your wants. You can do something, but should you?
In this episode, we discuss how to transform an idea into a business and the steps you need to take to get there.
In this episode we discuss the current GameStop situation and the mechanics of the market.
In this episode we discuss the financial hygiene list with David Littlejohn & Katie Shook.
In this episode we discuss psychology and investing with David Littlejohn and Katie Shook.
In this episode we discuss expectation management with Katie Shook, David Littlejohn and Derek Simmons of Simmons Law.
In this episode we discuss a healthy does of goal setting for 2021 and squash some rumors.
In this episode we discuss the Santa Clause rally, all you need to know about bitcoin, why an emergency fund is important and who has one.
In this episode we discuss why people measure their investment success by calendar year, how they should measure their success and the 4 pillars.
In this episode we discuss the scamming concept and benchmarking, how people gauge their investments.
What to do as investors and not traders - how to look at the market from the eyes of a pro.
In the moment of tragedy with Kobe Bryant, this is a reminder podcast of getting your house in order.
Check out David Littlejohn and Special Guest Attorney Derek Simmons discussing financial wisdom they wish kids would listen to.
David and Katie are discussing values and what you are paying for. Why is price the only question anyone is asking??
We are discussing how we receive advice, who we get it from and all about data fitting and confirmation bias.