Show Notes

Average Net Worth By Age

Average Net Worth By Age

Age

Average net worth

4% Rule

Under 35

$76,300

$3,052.00

35–44

$436,200

$17,448.00

45–54

$833,200

$33,328.00

55–64

$1,175,900

$47,036.00

65–74

$1,217,700

$48,708.00

75+

977,600

$39,104.00

• Monthly budget is key - need to free up $$ to be able to live below your means.

  1. Consider a side gig - temporarily to help you get out of debt

     1. Drive for uber, make arts and crafts, shop for instacart, do doordash.  Do something that will generate a little extra money if you’re unable to come up with extra money within your monthly budget.

Here's how the Debt Snowball works:

1.    List Your Debts: Begin by making a comprehensive list of all your debts, including credit cards, personal loans, student loans, and any other outstanding balances. Arrange them from the smallest balance to the largest.

2.    Minimum Payments: Continue making minimum payments on all your debts to avoid penalties and late fees.

3.    Focus on the Smallest Debt: Allocate any extra money or funds you can towards the smallest debt on your list while maintaining minimum payments on the others.

4.    Pay Off Smallest Debt: Once you've paid off the smallest debt, celebrate this accomplishment! The key to the Debt Snowball method is the psychological boost you get from achieving these small victories.

5.    Roll Over Payments: Now that the smallest debt is paid off, take the money you were using to pay it off and add it to the minimum payment of the next smallest debt on your list.

6.    Repeat and Build Momentum: Continue this process, "snowballing" your payments from one debt to the next as each one is paid off. As you progress, your ability to pay off larger debts increases, creating a momentum that keeps you motivated throughout the debt repayment journey.

The Debt Snowball method emphasizes the importance of behavior and motivation in paying

off debt. While it may not be the most mathematically optimal strategy in terms

of interest savings (compared to the Debt Avalanche method), its psychological

benefits can be highly effective in helping individuals stay committed and focused on their debt repayment goals.

Here's how the Debt Avalanche works:

1.    List Your Debts: Start by making a list of all your debts, including credit cards, personal loans, student loans, and any other outstanding balances. Arrange them from the highest interest rate to the lowest.

2.    Minimum Payments: As with any debt repayment plan, continue making minimum payments on all your debts to avoid penalties and late fees.

3.    Focus on the Highest Interest Debt: Allocate any extra money or funds you can towards the debt with the highest interest rate while maintaining minimum payments on the others.

4.    Pay Off Highest Interest Debt: Once you've paid off the debt with the highest interest rate, take the money you were using to pay it off and add it to the minimum payment of the next debt on your list with the next highest interest rate.

5.    Repeat and Save on Interest: Continue this process, "avalanching" your payments from one debt to the next based on their interest rates. By targeting the high-interest debts first, you reduce the overall amount of interest you'll pay over time.

The Debt Avalanche method is based on the idea that paying off high-interest debts first will save you more money in the long run compared to other repayment methods. While it may not provide the immediate psychological wins of the Debt Snowball, it can be an efficient approach for those who are more focused on minimizing interest costs and want to pay off their debts as quickly and cost-effectively as possible.

Ultimately,

the choice between the Debt Snowball and the Debt Avalanche depends on an

individual's financial personality, motivation style, and specific debt

situation. Both methods have their merits, and the most important aspect is to

choose a strategy that aligns with your preferences and keeps you committed to achieving debt freedom.

https://clark.com/cell-phones/sim-card-swapping/ 

Should you buy a house with today’s interest rates, or is it better to just wait?

What is the current rate: Somewhere between 7.2 and 7.9% depending on if you go VA, conventional or FHA

What is the historical 30 year rate?

• 7.75% - as of right now we sit at 7.25% as of this recording

First off - Let’s talk about why rates are higher

• Inflation

• Federal reserve raising rates to cool buying and help strengthen the dollar

• When rates go up, it's more expensive to borrow and people are incentivized to save because savings rates increase.

If you are thinking of buying a house, you are probably well aware that interest rates have a direct correlation with how much home you can afford.

• A 500,000 loan at a 3.25 interest rate - which you could get about a year ago would be a $2,175 P&I Payment

• A 500,000 loan at a 7.25 interest rate is $3,411 = 1,200 more for the same priced house per month.

So with a $1,200 difference on a 500k house - what are the pros and cons to buying now?

Pros:

• If you can afford the house and the payment fits with your monthly budget, it allows you to purchase a home at today’s prices

  • Prices could go up or down - but real estate tends to increase in price by at least the rate of inflation on an annual basis.

• You get to start paying down the loan immediately

  • If you wait - you are paying someone else’s principle payment for them.

• If you plan on staying the home a long time - even if values decrease in the short term, it likely won’t matter by the time you go to sell.

• We have a supply of housing problem still in the USA. 

• If interest rates decrease - you can always refinance and pay less of a monthly payment.

Cons:

• You are locking in a “high” rate relative to what rates have looked like in the last few years. 

  • Can’t predict if rates will go up or down.

• Property values are up in many parts of the country.  

  • Nobody can predict where property values in the future

  • Loans are not where they were in 08 and 09 when banks were loaning people money with “stated” income and interest only loans. 

• People feel like we could be sliding into a recession which could decrease housing prices

  • This is speculation

So would we buy a house right now if we were in the market - or would we wait?

• Solid credit score  = 720 or more

• You have a monthly budget and you’re living and giving on less than you make

• You have money in an emergency fund - for maintenance costs

• Your debt is manageable

• You have the money for a down payment.

• You’re steady in your career and relationship

• You know what you want

Then it’s probably time to go ahead and buy that house!

What type of investor are you?

• Co-host- someone who is managing someone else’s property and is taking a management fee.  Management fees are typically between 25-35% and you manage marketing, guest communication, cleaners, maintenance, etc….

  • Great way to have a side hustle that is super flexible in nature.  Generally when a property is automated, it only takes 2-4 hours a week to manage the property. 

• Rental Arbitrage- Rent from a landlord and sublease on Airbnb to guests.  

  • Downsides are - landlord can terminate lease and Upfront cost of furnishing without guarantee of long term lease

• Buy and Hold - buying a house/condo/apt and renting it out on Airbnb.  Capture the long term appreciation and the short term cash flow.

General: 

• Invest in a training program.  This is truly a business - learn from someone who has already done it.  It may cost you $1k to $2k to buy into a coaching program, but it’s 100% worth it.  It will dramatically expedite the learning process. 

• Make sure the local county and city allow short term rentals

• Avoid HOA’s if possible as they could ban STR’s.

• Look for unique homes

Evaluating an investment property: 

• Have an investment analysis spreadsheet - can get these from others for free online

  • With this spreadsheet, it will take an all encompassing view of all the expenses you need to think about when operating a short term rental.

    • Will include mortgage, set up costs, down payment, monthly maintenance, utilities, trash, TV, Internet, HOA, Landscaping, etc…

• Air DNA, STR insights, Data Rabu 

  • These are tools that scrape the data from Airbnb/VRBO and forecast how current and active STR’s are doing that are on the market.  This can help you get a gauge on what is possible from a revenue standpoint.

  • Help to forecast how much a home can make on Airbnb

• Cash on cash return: 

  • Using an investment analysis spreadsheet, calculate your cash on cash return - this is the number of years it will take to get your money invested back.  Typically - 25% or better is a good cash on cash return.  That would mean you would get all your money back on the investment within 4 years, and then from there you’re just making profit. 

Loans for short term rentals: 

• Second home loan - typically can put as little as 10% down. Has to be occupied by the owner for some portion of the year

• Investment Loans: DSCR - Underwrite the property based upon the projected rental income of the property.

Furnishing:

• If you’re buying an unfurnished property - remember how much it will cost to furnish the property.  A good gauge is about 20-25.00 per sq ft to furnish. 

• Time to furnish: If no renovation is necessary - small properties take ~2 weeks to furnish and set up.  Larger properties take about a month to furnish and set up.

• Out source your furnishing - consider hiring someone to help you furnish

  • STR design and set up facebook groups

• Design is KEY to a short term rental

  • People want to stay at unique places

  • Have an X-Factor

    • Hot Tub, Game Room, Instagram wall, Fire Pit Area, etc….

    • Something that will make you stand out from everyone else in a market

• Use a smart-lock on your short term rental that will integrate with your property management software.

Build out your listing

• Emphasize your amenities

• Hire a professional photographer

• Integrate a dynamic pricing tool - Price labs will help you automate your prices for every single day of the month and will take into account demand on every specific day in your area and adjust pricing accordingly. 

• Integrate a PMS software to automate guest communication

  • Set up templates for guest communication

  • Set proper expectations and boundaries/rules for guests

What Airbnb and short term rental investing is not:

• Get rich quick

• Something that doesn’t require a lot of work

• Something that’s passive in nature.

Before getting into Airbnb Investing:

• Ensure you have good cash reserves

• You can handle the unexpected 

Money Hack of the Week: Turo

• Turo is the Airbnb for car rentals

• Not only is it most of the time cheaper

• It’s also easier

• Deal with P2P instead of a big monster company that makes you wait in line for sometimes hours to rent a car.

• Pro tip: rent only from All-star hosts

Main Topic

What is Airbnb?

• A way to share your home or a space within your home with people traveling through.  

• Airbnb started as a room sharing thing and has morphed into a major industry

• People who want more privacy or have bigger groups than a hotel can reasonably host tend to gravitate toward Airbnb

• Airbnb revenue in 2021 was $6 Billion dollars

• This is a new industry and it’s growing rapidly

Technology

• Schlage Lock - Wifi enabled Lock

• Hospitable - Property Management Software

• Price Labs - To maximize revenue through dynamic demand pricing

• Ring Camera - To keep eyes and ears on the property

• Multiple Platforms - Airbnb & VRBO

Build Your Dream Team: Self management can happen from a-far. 

• Find a cleaner who specializes in short term rental cleaning

  • Not bad to have a backup cleaner or at least a short list of people who you could call if your primary cleaner falls through for some reason.

  • Smaller the team the better- you want to be able to communicate directly with your cleaners

• Find a group of handymen - have multiple on call if something goes wrong

Who is Airbnb investing right for?

• Someone who is looking to diversify into real estate

• Someone who is looking for additional cash flow on a monthly basis

• Someone who’s looking to accelerate their path to financial freedom.

Core principles we live by:

1. Live on less than you make

   1. This sounds simple enough, but so many people do not do this.  All of the other things we talk about don’t matter if you’re not following this #1 step.  You MUST free up cash flow by living on less than you make or you will NEVER be able to get ahead.

   2. Tips on how to achieve this:

      1. Keep Housing costs <25% of your income.  Don’t think you can do this? If you’re young -think about house hacking.  Buy a small house, rent out one or two of the rooms, get your expenses as LOW as possible, especially in your early years.

      2. Keep auto expenses as low as possible - Average american spends almost 9,000 per year on automobile expenses.  This is $750 per month.  Get a cheaper, but reliable car.  Take the extra money and put it to work for yourself. 

      3. These are the two largest expenses in people’s budgets.  Keep the overall costs of these two things low and make sure your I.R.’s on both are as low as they can be. 

2. Get rid of any high interest debt.  Anything higher than 5-6% - get rid of it from your life.  If it’s low interest rate debt - keep it and pay as agreed on it.

3. Automate your savings

   1. Invest at least 10% of your income.. After you have your emergency fund locked down and high interest debt is paid off.

      1. Make this automatic by 401k deferral or automatic deduction on recurring basis to your roth or other tax advantaged account.

   2. Short term savings - automate these in an account like Ally/Capital one 360.  Can automate 

   3. By living on less than you make.  You should free up some cash flow to be able to invest some of that income each and every paycheck.  

   4. The more income you save, the greater flexibility you have.

4. Invest in low cost mutual funds and ETF’s OR Buy assets that will make you money.

Episode # 5 gives you our favorite ETF’s

1. Pay attention to fees when investing - you don’t get what you pay for when it comes to fees and investing.

2. Want to spend money on other things besides just using excess money to invest?  Consider buying assets that offer passive income potential

   1. Examples include: Real Estate investing or businesses

5. Track your spending

   1. Budgeting tools: YNAB, Mint.com

6. Know your net worth

   1. Episode # 1 - net worth tracker, Mint.com.  

   2. Make sure you’re tracking your net worth on at least a monthly basis.  This is important for helping you to track your progress and to ensure you’re accomplishing your goals 

7. Set big goals so you know if you’re on track - episode 13

Money Hack of the Week:

Look at your 401k, your old IRA’s, and investment accounts - figure out what funds you’re invested in and look up their expense ratios.  If you are in high-fee funds inside of your 401K, change to investment options that are low fee.  

How do you do this?  Go to your 401k or IRA online, look at the positions, you will see a symbol - usually 3 to 5 letters long, pop that into google, look at the expense ratio.  What’s high? Anything over .25% is pretty high.  Some of you may be looking at expense ratios of around 1% which is entirely too high.

If that’s the case - I want you to look at your plan and the investments offered.  Some good options may be: s&p 500 fund, target retirement fund, etc… 

What’s a good expense ratio? Below .10%

This 1 change can literally save you tens of thousands of dollars by retirement. If you have listened to our old podcasts - we have found that the higher the fee the fund doesn’t necessarily get you more money in retirement.  It often costs you money in retirement. 

If you’re someone who invests 15k annually in your 401k, a 1 % difference in expense ratio between investment options can mean a 400k difference when you get to retirement (over 30 years) 

Main Topic

We’re talking recession now - It doesn’t really matter what news source you turn on right now - everyone is talking about whether or not we’re in a recession.

Here are the latest worries:

• Gas prices

• Interest rates are rising

• Housing costs rising 

• Housing affordability is a problem

• Food costs through the roof

• Inflation at 40 year highs

• Crypto currency has taken a dive

• Slowing growth 

• War in ukraine 

• Supply chain issues

• COVID is still an issue impacting global markets - today wuhan just shut down 

So, how do we invest if we’re in a recession?

• Don’t panic sell

  • Selling now is the worst possible thing you can do.  You’re essentially buying high and selling low.  

  • If you’re a long term investor - you need to take a longer view of things.

• Do nothing - Did you know that fidelity just did an audit of their customer base and found that the best investors (from a return standpoint) were either dead or inactive accounts.  Meaning - you won’t beat the market. 

• Make sure your portfolio is well diversified and balanced

  • If you invest in multiple funds - are your allocations still where you want them to be?  If not, sell some of something and buy more of another to get your ratios back in order.

• Buy more of the assets that are now on sale

  • Warren Buffet says be greedy when others are fearful

• Don’t chase individual sectors or stocks that look “cheap”

  • Pelosi’s husband (NVDA), etc…

  • Some things will go down 50% + Just b/c you believe they’re a good deal doesn’t necessarily mean they are.  Try to stick with broadly diversified assets. 

• Millionaires are made during recessions

  • Many of the worlds most popular businesses are formed in a recession - names like Microsoft, AirBNB, GE, NetFlix, and Disney

When is the turn coming?

• Nobody knows, but the stock market is a leading market indicator.  It looks forward months into the future, so it can be nearly impossible to time when the market will rebound.

Overall, in all 14 bear markets since 1945, the S&P 500 fell by an average of 32% and took an average of 12 months to find a bottom, while fully recouping those losses within an average of 23 months. 

https://www.investopedia.com/a-history-of-bear-markets-4582652 - Bull vs Bear Market Chart

Ashley wrote a question for the pod and we thought it was important enough to make a whole show out of this topic.  

Question is: My employer is going to be allowing us to invest in digital assets including Bitcoin within my 401k coming soon.  Is it a good idea to be investing in bitcoin within my 401k?

Earlier this year-  in May - Fidelity announced that they would be allowing bitcoin as an investment option in employer sponsored 401k’s. 

About 23,000 employers currently use Fidelity for their 401k administrator, so it’s likely this will impact you soon if it hasn’t already by the time you have heard this.

Fidelity will allow retirement investors to allocate up to a maximum of 20% of their investments into Bitcoin. But before you get too excited, understand that Bitcoin won’t be showing up on your 401(k) plan’s investment menu immediately. Fidelity is still building its digital asset platform, which should become available in plans later this year. Employers will have to approve crypto investments inside the plans they provide to their workforce. And because of their fiduciary duty— placing the needs of plan participants above all else—companies may be reluctant to provide immediate access. Many will likely take a wait-and-see attitude before making a move to offer crypto as part of their retirement plans.

Pro’s:

• Digital assets - including bitcoin have done well over the last 10 years.  

• You may have a little bit of FOMO with these assets and they have done well.  

• This would give you exposure to an asset class that could possibly out-perform stocks in the short or long term.

Con’s:

• These digital assets have no real long-term track record.  

• Many of these digital assets could go to zero

• The system itself has not been tested - What happens if crypto platforms go bankrupt?

• Back in 2014 - Mt Gox - which was the coin base of today went bankrupt. It caused the price of bitcoin to plummet.  

• Terra Luna went to 0 and was supposed to be a “stable coin”

• Coin Flex - major exchange halted withdrawals due to “extreme volatility”

• Celsius - froze customer accounts - Under investigation currently. 

• Crypto lender babel finance freezes all withdrawals from customers 

• Liquidity could be an issue at a point in the future

• In a May Quarterly filing - Coin base stated that in the event of their bankruptcy - 

• it’s entirely possible that the digital assets the customers own may not actually belong to its customers. 

• Crypto markets are not FDIC insured

• Digital Assets that have no utility are only worth what someone else will pay for them.

What are we doing with our money? We are associating $0 to digital asset/bitcoin/crypto into my retirement portfolio Instead focusing on:

• Businesses that produce goods/services for a profit

• Businesses that are paid in cold hard US American dollars or foreign currencies

• Businesses that can be valued based upon the profit or expected profit they will be generating in the future

• Businesses that generate dividend income and growth through share price appreciation

• No need to have the added risk.  If you’re insistent that we’re wrong and that digital assets/bitcoin is the next big thing - take a very small percentage of your overall portfolio and devote to it.

• BUT - Don’t try to time things- pick what you like, and systematically buy it, when it’s up, when it’s down, etc… Treat it just like you would a mutual fund.

Money Hack of the Week: Spray and forget

What is house hacking?

• House hacking is a real estate strategy that can help you live for free or close to free - dramatically decreasing your monthly expenses

• Great way to start investing career - whether that be in real estate or not

• Premise is simple - you buy a multi-unit property… could be a duplex or triplex (meaning 2 or 3 separate entrances to the property) - Live in 1 and rent out the other 1 or 2 units.

How to rent out the other units:

• Long term tenant lease 

• Short term rentals - think Air BNB and VRBO

Ways to house hack:

• Buy a duplex, triplex, fourplex, etc…

• Buy a house with an ADU - Accessory dwelling unit - an ADU is a non-attached dwelling on the same property as the primary house. 

• Can rent it just as you would a duplex or triplex. 

• Rent out a single room in your existing home

House hacking as an investment strategy: 

• Can house hack and buy a new house every 1-2 years

• Why 1 year: Can buy a new house every single year and qualify for low down payment as it’s your primary residence, and then simply move after a year and turn all the units into rentals. 

• Why 2 years?  You could sell the property and pay no capital gains tax on any earnings as long as you have lived in the property for 2 of the last 5 years.

• This strategy will dramatically decrease the amount of time it takes to build wealth. 

Why house hack?

• Allows you to live for a dramatically reduced cost in most cases. 

• Allows you to sometimes make income while someone else is paying for you to live.

• Take the excess cash flow from house hacking and reinvest into other ventures such as more real estate or stocks

• Fastest way to build wealth - your house is generally your largest expense and it’s not even close

Who is house hacking for?

• Single people

• Married couples with or without kids

• Could really be anyone

• People that don’t mind sharing common space in certain circumstances

• People that feel like they can’t afford a monthly payment for a house even though they may qualify for a house.  

Money Hack of the Week: Nest or SMART thermostat - learns your habits - saves on energy bills.  Knows when you’re away, knows when you come home.

Tracking your financial health

What do I mean when I say financial health?  

• I think of financial health as a measure of how well we’re doing with our money

• IT’S NOT: Our credit score, how well we pay our bills, etc…

• IT IS: How much money do we have in our wallets and what type of assets do we have.

• Put most simply - financial health generally equates to: how is our net worth looking and ARE we tracking our net worth?

Why tracking net worth is SO important:

• It tracks exactly what you owe on all your debts

• It shows you quickly how much equity you have in property

• And IT CAN show you in real time what your investments are worth

Lance and I have a Google Spreadsheet - it tracks:

• Retirement accounts

• Brokerage accounts

• 529 accounts

• Our mortgages

• Our home values

• Checking/Savings

• Using google sheets, you can actually track in real time the value of your investments.  So we track all of the following on this spreadsheet:

• We add up all the assets and subtract out all of the liabilities

• At the bottom of the sheet - on ANY GIVEN day, we can see exactly what our net worth is.  

• Record your net worth on a monthly basis.

You will be amazed at how this makes you look at money from a different perspective.  It shifts your mindset.  You start seeing how things impact your net worth.  For example: You go buy a nice car - you now get to depreciate the value of that car. You put money into investments, you will see how that money grows. Your real estate investments - you will see gains in value when your tenants are paying down the value of the house while the house appreciates in value.

Going back to episode # 1

We provided a copy of the net worth spreadsheet we use.  You can download it here .  There are 2 tabs to the spreadsheet:

• 1st is to track all of your assets and liabilities

• 2nd is to track your net worth from month to month

If you ever wonder if you’re on the right track this is the best way to figure it out. Start tracking net worth and you will find out if you’re going forwards or backwards.

Money Hack of the week: Rakuten - Google chrome extension 

• Get cash back when you shop

• If you go to a website where there is cash back,

• It will give you a pop-up letting you know to sign in through their link…

• Get cash back on things you would have purchased anyway. 

FIRE-  Stands for financial independence, retire early.  The FIRE retirement movement takes direct aim at the conventional retirement age of 65 and the industry that has grown up to encourage people to plan for it.

Typically people that embrace this movement are looking to retire in their 30s and 40’s

The way people avoid the 65 y/o retirement:

• Saving between 50% and 70% of their income

• Finding a business they can start that’s not 100% passive, but it’s something they enjoy doing

How can anyone ever save 50% of their income or more?

• Early in your career you cover your expenses, as you get raises,

• just act like you never did, never change your lifestyle…. Delay gratification. 

Idea is to build up a massive bucket of money in investments that you can eventually draw down when you enter retirement. Apply the 4% rule to this. So if you know you need 50,000 to live off, you can essentially take that number and multiply by 25 to get your FIRE number.  25x of 50k is 1.25M. 

Where do people doing the FIRE movement typically invest?

• Low cost index funds / ETF’s 

• Real Estate 

• Businesses 

The FIRE movement isn’t for everyone

• Some people don’t mind working - they are busy bodies

• Some people don’t make a large enough income to even think about doing FIRE

• Some people LOVE their jobs and it’s a part of their identity

• It’s OK to live a typical lifestyle and keep working.  FIRE just gives you freedom

Headline of the week: Food prices are on the rise, but you can still save money on groceries. Here are 5 ways how.

Kids & Money: 

Research has shown that money saving habits and attitudes have likely been formed by the age of 7

Start with the basics:

• Connection between money and work - Phase 1

• Money comes from investments - Phase 2

• Pre-School is around the time that children can start to grasp what money is and when it’s used

• Can take children to the store - show them that you’re paying with cash/card and that you’re using your money to buy things.  Even if you’re using a credit card, you can show them the receipt for the money you paid. 

• Teach them about savings

• Most of the time they’re going to be using money to buy things, but it’s also important to instill the idea of saving for things at an early age

• Get a piggy bank or a give/save/spend jar.

• Savings should be short term in nature to start with so they can understand that delaying gratification can get them something they want in relatively short order. As they get older- savings can be for longer term things and you can start to introduce the idea of retirement and long term savings 

Allowance VS commission 

• Create opportunities for kids to earn money

• Consider starting a list of chores and giving allowance if they accomplish those chores. 

• A lot of people do the allowance in the amount of their ages (per week)

• If kids ask for additional money, know that it comes with a price.

• Some also consider having a list of chores that provide no allowance, and then a list of chores that come with an allowance.

• Help kids learn healthy spending habits. 

• App called Green Light / Fam Zoo - helps kids with budgeting.  Give them an allowance and make them stick with it.   Allows kids and parents to do a schedule for chores and approve that chores have been complete.  Comes with a debit card that money is loaded onto. Gives parents insight into their children’s spending habits in real time. 

• Show kids the value of giving

• Help children plan out the money they have in their giving jars

• What things are important to them?  What organizations would they like to support and why?

• Teach kids how money can grow

• Set up custodial investment accounts for kids - this can start when they’re in elementary school.  You can sit down with them, set up the account, and make the first investment.

• Periodically check in with them and show them how their money is growing over time.

• Model good financial behavior

• If you want your children to have good financial habits, they need to see you making good financial habits. 

• Tell them what you’re doing and why you’re doing it to save money.  This should be a part of everyday life.

Headline of the week: Social Security cash reserves could be cut to 1.35 Trillion in 8 years

What is social security: Program signed into law by FDR back in 1935 and is a sort of social welfare program.  It provides cash payments to people who are in any one of three categories:

1. Retired individuals and some family members

2. Disabled individuals and some family members

3. Survivors (aged widow(er)s, aged surviving divorced spouses, disabled widow(er)s, disabled surviving divorced spouses, paternal and maternal orphans, and widow(er)s caring for minor or disabled children)

How is it funded?  Payroll taxes fund social security.  You will actually see a line item on your paycheck for social security taxes that are removed from your paycheck. 

My social security website - https://www.ssa.gov/myaccount/ 

• Excellent resource to utilize when evaluating your social security and how much you can expect to earn.

• Free to set up an account

• Look up your personalized statement

• Personalized monthly retirement benefit by age of when you take social security 62-70

• Medicare eligibility 

• Disability benefits/ Survivor benefits

Important Things to Know about Your Social Security Benefits 

• Social Security benefits are not intended to be your only source of retirement income.

• You may need other savings, investments, pensions, or retirement accounts to make sure you have enough money when you retire. 

• You need at least 10 years of work (40 credits) to qualify for retirement benefits.

• The amount of your benefit is based on your highest 35 years of earnings.

• If you have fewer than 35 years of earnings, years without work count as 0 and may reduce your benefit amount. 

• Social security uses cost of living adjustments so your benefits will keep up with inflation. 

• The age you claim benefits will affect the benefit amount for your surviving spouse. 

• If you get retirement or disability benefits, your spouse and children also may qualify for benefits. 

• If you are divorced and were married for 10 years, you may be able to claim

• benefits on your ex spouse's record. If your divorced spouse receives

• benefits on your record, that does not affect your or your current spouse's benefit amounts. 

• When you apply for either retirement or spousal benefits, you may be required to apply for both benefits

Link for the rolling 8 year s&p 500 averages

TIPS information:

Can buy TIPS from:

• Treasurydirect.com - not our preferred method (harder to keep track of them)

• Mutual fund - just search for TIPS mutual fund. 

Yield is typically paid out once annually. Also a bit more liquid in nature as they’re ETF’s/Mutual funds:

• Vanguard: VIPSX - .20 expense ratio 

• Schwab: SCHP - .05% expense ratio - favorite

• Fidelity: FIPDX - .05% expense ratio - favorite

Headline of the week: Half of Americans with retirement accounts have taken an early withdrawal

What is inflation? The decline of purchasing power of a currency over time. 

So as an example, the way the government measures this is by effectively tracking the cost of certain common everyday items.  

• Currently: Inflation is at about 7% in our economy right now.  

• Economists claim that some of this is transitory (meaning not permanent).

• They claim some of this has to do with supply chain issues which will eventually subside

Money supply and its impact on inflation:

• Fed “printed” money by buying government securities to the tune of trillions of dollars.  

• That money is in essence injected into the economy.

• As more money is pumped into the system - it effectively decreases buying power

Housing shortage:

• Between Oct 2020 and Oct 2021 - the average price of a house went up by 18%

• This could be because we’re in a housing shortage in certain areas 

• According to the national association of realtors: 

  • In New York and New Jersey - 1 new housing permit is issued for every 11 new jobs

  • Pittsburgh: 1 permit for every 11 jobs

  • Philadelphia: 1 permit for every 4 jobs

  • Maryland: 1 permit for every 3 jobs

  • Charleston SC - 1 permit for every 2 jobs

• Comes back to simple supply and demand. 

• If there isn’t enough supply for something and demand far exceeds supply, that’s going to inevitably push prices higher. 

 What could actually help slow inflation up a bit:

• Higher Interest Rates

• Make homes more expensive via mortgage payments

• Businesses don’t have the access to cheap money to invest into their business

How do we protect ourselves from inflation?

• Invest

• Stocks, bonds, mutual funds, ETF’s

• Real estate

• Businesses that produce returns at a greater rate than inflation 

• Stay invested - Don’t panic!

Rich Dad Poor Dad - Written by Robert Kiyosaki 

Book is about Robert’s 2 fathers growing up - and how they taught him to think about money.

• Real (poor) dad - was a teacher

• Father of his best friend (rich dad) 

Lots of background to this story - but there are some key takeaways (6) from the book that we feel are super important:

The rich don’t work for money: The Poor and middle class work for money.  The rich have money to work for them.

What is meant by this?  

• Rich buy assets that generate income for them.

• Stocks

• Real Estate

• Businesses

• These assets generate money for them - sometimes actively, sometimes passively.  

• Rich people will dedicate their time and energy to acquiring as many assets as they can -

• so that their money is working for them.  Eventually their money works for them, they don’t work for money. 

Why teach financial literacy (Cash flow of rich vs poor)

• Cash flow of poor/middle class

• Work at job - money goes towards expenses

• Expenses: taxes, food, rent/mortgage, clothes, fun, transportation

Cash flow of a rich person

• Assets that they own generate income

• Takeaway: You need to buy assets that generate income ASAP to get ahead. 

• Those can be businesses, stocks, real estate, etc…. 

Mind your own business

•  People confuse their profession with their business

• Their business is not where they work, it has to do with what’s in their asset column. 

• These are things generating income:

• Businesses that don’t require my presence

• Stocks

• Bonds

• Mutual funds/etfs

• Income generating real estate

• Notes

• Royalties from intellectual property such as music/patents

• Anything else that has value and produces income and appreciates and has a ready market.  

• Another interesting concept in the “mind your own business” chapter is that robert says most people should not start their own business.  THey should work a job and mind their business.  And when they start putting money into their business - don’t take any money out… let it compound upon itself.  That’s how the rich get richer. 

The rich invent money

• Forced appreciation - rehab a property - goes up by more than the cost of the rehab - flip or keep - still a gain on paper

• Buying things below market value (wholesaling) 

• Seeing opportunities others do not - maybe something is being marketed in one way that could be used in another

• Takeaway: Keep your eyes open to things and try to think differently than the average person. 

• Is there something you can do differently to get more out of something? 

• How can money possibly be invented?

Work to learn - don’t work for money 

• Single most powerful asset we all have is our mind.  

• There are opportunities in front of us every single day -

• you just need to seize the opportunity and have the courage to do so.  

• Many people who ARE financially literate will still not succeed financially. 

• Generally this is because of fear, cynicism, laziness, bad habits, or arrogance. 

“The rich focus on their asset columns while everyone else focuses on their income statements.”

Headline of the week:

https://www.marketwatch.com/story/should-i-buy-a-bitcoin-etf-heres-what-some-pros-say-you-should-consider-11634839325?mod=article_inline

How to protect yourself from the unexpected

The topic from this show actually came from a listener (John) who sent us over an article.  Came from CNBC - Headline is just 39% of Americans could pay for a 1,000 emergency expense.  

The 61% mentioned in this article that CANNOT cover a 1,000 emergency expense are using credit or a personal loan to cover unexpected expenses. 

People that cannot come up with 1,000 on short notice for an unforeseen expense likely have:

• More stress in their life - the stress of knowing they have nothing to fall back on

• Their life needs to be perfect… can’t have anything go wrong

Some “emergency expenses” 

• Car repairs / new tires

• Pet emergency

• Major healthcare expense 

• Home repair

• Dental expense 

• Unexpected travel - death in the family

• Losing a cell phone

• Traffic accident

Best way to protect yourself is by having an emergency fund.

Financial playbook - episode 3 and 4 - we talk about having a 3-6 month emergency fund (3-6 months of expenses)

• That can sound daunting…..  

• Dave Ramsey says 1,000 - don’t love this

If you’re the type of person who cannot come up with 1,000 to cover an unforeseen expense, here is the number one tip on how to get started with an emergency fund:

• Decrease your expenses

  • Find somewhere cheaper to live

  • Drive a different car

  • Decrease unnecessary spending 

• Automate your savings

  • Ever heard the saying “pay yourself first”?

  • What is meant by this is actually paying yourself (investing, saving, etc…) before you pay your bills.

  • In this case - take the money you need to save or invest - right when you get paid, and transfer it out of your bank account and into your investing account or in this case - your online savings account.

• Automatic savings can truly be automatic.

  • I have an Ally Savings account.

  • You can set up recurring transfers each week for savings accounts.

  • I’ve spoken about this in other podcasts, but I get pretty granular with this, I have automatic savings set up for car repairs, Christmas, vacations, home repairs… you name it, I have a savings account for it!

Discussion around real estate investing versus mutual fund/index fund investing.

Recap of index fund / ETF investing:

• Opening an account with Schwab/Fidleity/Vanguard

• Investing in low cost ETF’s/mutual funds

• Own a piece of many different companies

• Completely passive - you invest and you don’t have to manage anything at all.

• On average, you earn roughly 10% per year on the money.

• Set it and forget it.

Let’s look at the three primary ways you can make money in real estate:

1. Cash Flow

• When you buy an investment property - you’re likely going to put some money down to acquire it.

• That money doesn’t really impact your net worth statement.  You’re essentially just trading cash for equity in the property.

• Assuming you take a loan, you will have a payment amount that includes the debt service (paying down the loan) + taxes

• Now let’s say you buy a house, your monthly mortgage with taxes included is $1,500.

• Let’s say you’re able to rent that home for $2,400 per month.  Your cash flow is $900 per month.  That’s income that you’re generating from the property.

  • Understand that there are other expenses that can occur with maintenance items, etc…. But you get the point…. You CAN generate income through cash flow by owning property.

    2. Appreciation

• Appreciation happens when the value of a house goes up over time.  We know that on average most homes go up in value about the same amount as inflation, but in some markets and in some years the average home price can rise by much more than the rate of inflation.

• It’s estimated that the value of a home went up around 15% or so in the past year.

• Appreciation is obviously on the whole home amount, regardless of your loan amount or what you owe… and this can be huge.

• Can’t realize all of the appreciation until you sell.

    3. Equity

• Over time, the renter(s) are paying down your loan.  You are thus reducing the loan amount over time and increasing equity in the property.

• Increases your net worth on paper, but not money in your pocket until you either refinance or sell.

Other things you must consider when buying real estate

1. Not a passive investment

2. Must maintain/update the property.

3. Must deal with tenant issues.  Calls at night/holidays/weekends solving problems the client has.

4. Risk - What if you can’t get a renter, what if the estimates you prepared for STR cash flow are wrong, what if you need cash and the market is down and nobody is buying properties.  Are you putting yourself in a bad position financially?

Quick example:

• Let’s say you have 100k to invest.

• Lance invests in an ETF all 100k. At the end of 30 years he has $1.75M assuming a 10% interest rate return over the 30 year period.

• Scott buys a short term rental property for $450,000 in a vacation area.  Puts 90,000 down and another 10,000 into furnishing the property.

• He manages the property himself and cash flows 15,000 in profit annually from the property (very realistic).  His cash flow increases by 3% annually.

• At the end of 30 years:

  • Property is worth ~1.35M (assuming a 3.7% increase in value annually)

  • His mortgage is paid off

  • Cash Flow over 30 years is ~700k

  • Total earned: 2.05M (300k more than passive investing)

  • What did I give up in that example?? Time!

  • Consider Liquidity as well - Index funds are more liquid than Real Estate 

Take Risks!

Continuing on with our Winning Mindsets series.  Today we’re going to be discussing risk taking as it pertains to you and your personal finance journey, your career, and even relationships.

Headline of the Week:  Invest in Music- Share in the royalties  - Republic

Winning Mindsets: Risk Taking

Life is short—yet many of us spend time wondering what we should do with our lives, rather than actually going out there and trying. As hockey legend Wayne Gretzky once said, “You miss 100 percent of the shots you don’t take.” It’s important to actually strike out and follow your heart—even if the odds do not seem to be in your favor. That’s the beauty of life. We never know what can happen unless we take a chance. Here are five reasons why taking risks is important and why you should do more of it!

1. Generate New Possibilities - Horizon changes by stepping out

2. You Will Always Gain - Even through failure, maybe even especially through failure, we learn more lessons perhaps than when we succeed.

3. Inaction Leads Nowhere - If you do nothing, then you can expect nothing to happen.

4. Overcome Fears - Fears of failure, what others might think, disappointment, hurt, financial loss, exposure to vulnerability or emotional stress.

5. Model a Good Example - What would you want your children or your friends or your family to think, or what kind of risks would you hope that others might take?  Inspire others.

The One Thing Risk-Takers Have in Common?   Confidence

Failure might turn us into better people, but that doesn’t make it any less difficult to take risks. It turns out that building confidence can help in overcoming the fear of risk-taking.

Headline of the week: Will You Really Need Long-Term Care? The Odds Are Higher Than You Might Think

Why everyone needs a will - A will is what is used to decide where assets transfer to in the event that you pass away….. As the old adage goes, you can’t take them with you! 

AARP study finds that 6 in 10 adults DO NOT have a will 

Many people think only rich people need a will, but that’s simply not true…. It does so much more.  If you own a home or have any assets to your name or have a child - you should have a will. 

A will allows you to:

Decide who inherits which assets and when they should receive them. 

Decide who will manage your estate as executor and/or trustee. 

Select a guardian for your minor child. 

Provide instructions for any business you may have owned or sale of a business you owned

There are two types of property that pass on in the eyes of the law:

Non-Probate Property - this is property that has a beneficiary designation

(meaning you have named someone to get it before you passed on). 

This property DOES NOT have to be passed through the courts. 

Your loved ones can get access to this property pretty much immediately upon your passing.

Probate Property - Assets without a beneficiary designation. 

These items must pass through a court proceeding before they can be transferred to their new owners. 

Essentially THE STATE decides what happens with your assets,

who takes care of your minor children, and who takes care of your estate. 

How do you get a will set up? 

Use a low cost software - for non-complicated situations

LegalZoom.com

Quicken WillMaker Plus

Fabric.com - Free

FreeWill.com - Free

TrustandWill.com

Hire an attorney who does wills estates and trusts - for more complicated situations

(I.E. You have a business, you have lots of assets, or you don’t have the confidence that how you build it out with a software is entirely accurate. 

How to Make Your Will Legally Binding

If you decide to go the DIY route with a software program that we mentioned, you will need to follow a few steps to make your will legally binding:

Find two disinterested witnesses to verify that you are of sound mind at the time of signing.

Could be co workers, but can’t be people that are named in the will or would be

directly/indirectly benefiting from the will itself.  Have them sign an affidavit

of attesting witnesses.  Have a notary authorize the affidavit. 

Sign your will.

Store the will in a safe place.

Contact the executor of the will and another person to tell them where the will is stored.

At this time, the only states where you wouldn’t have to go through this process include

Indiana, Nevada, Arizona and Florida as they recognize a digital will as legally binding. 

Headline of the week: Treasury Secretary Janet Yellen to discuss stablecoins with regulators next week

Dave Ramsey discussion 

• This isn’t us trashing Dave Ramsey

• Dave has helped LITERALLY MILLIONS of people get out of debt

• His teachings have helped people get control of their finances

• Lance and I both enjoy listening to Dave on occasion

Math vs. Psychology - Dave is a big believer in psychology over math when it comes to personal finance.  He believes that people don’t have as much self control as maybe we like to think we do.  There are things that we will mention later where we will say - well this is a better use of the money…. But that takes discipline….  Dave tends to think people have poor discipline.  

Dave Ramsey discussion: His primary principles broken into baby steps:

• Save $1,000 in an emergency fund

• Why not more-  what if you lose your job? 3-6 mo emergency fund seems like a more safe plan. 

• $1,000 doesn’t even cover a month's worth of expenses for most people.

Pay off all debt besides the house

• What about low interest car debt? 

• What about low interest rate debt in general? 

• Things with below 4-5% interest seem like they should take a back seat to the rest of this….

Save 3-6 Months of expenses in an emergency fund.

Save 15% of your income for retirement.

• Doesn’t specify where to save, how to save, etc… 

• Is 15% enough to meet your goals? 

Save for college for your children

Pay off home early 

• Would recommend never paying off low interest debt like a home early. 

• Would much rather see you invest the money you would put toward the extra principle payments on the house. 

• This can DRAMATICALLY increase your net worth faster and more significantly than paying toward low interest debt.

• Build wealth and give

Dave-isms 

• Dave hates credit cards

• Says you should never use them

• We like using credit cards as a payment system. 

• Take advantage of 2% in rewards on ALL spending.  Can even use this as an investment mechanism -

• Fidelity VISA has 2% cash back to a fidelity investment account. 

• Credit cards are a powerful tool everyone should take advantage of

Dave believes you should never buy rental property when taking a loan. 

• He thinks you should pay for it outright.

• Dave was using some risky loan types to finance his loans -they were not 30 year fixed rate loans where the payment remains constant over 30 years.  

If you can find a property that cash flows well - in a good area with a great renter pool, real estate can be a powerful way to grow your net worth - even faster than stock market investing - if you have the time to dedicate to it.  Dave’s stance on no debt real estate investing is quite frankly out of touch. Do your homework and if the numbers work and you are ready to be a landlord - go for it!  

Dave says to not contribute to your employer 401k plan (even when there is a match you may be missing) if you still have debt. He is adamant about eliminating debt as quickly as possible - but the employer match money is higher return more often than not than any credit card interest rate. 

Dave loves touting his ELP’s - Endorsed Local Providers/ Smart Vestor Pros 

• These are high fee financial advisors.  People that are often charging 1% or more to manage your money.

• Some of these ELP’s and even Dave himself recommends front end load funds

• Funds that can charge 3-6% of your investments as an upfront fee for investing

• His rationale is that you only pay this  up front rather than getting hit with a fee on an ongoing basis.

• We know that there are no expense ratio mutual funds through Fidelity called Zero Funds where your ongoing expenses are 0. 

• We also know that the types of mutual funds and ETF’s we recommend it would be many DECADES if to make up this difference in fee.  

Dave prefers paying off lowest balance debt first rather than debt w/ the highest interest rate.

Take away: Dave Ramsey is a great resource from all of us to learn from. 

His advice has worked for millions of people - but remember, it’s just advice... and we don't necessarily agree with all of it!

Headline of the week: Robinhood: The $30 Billion Dollar Cockroach of Fintech 

Steps to the home buying process:

1. Are you sure you need to buy a home in the first place?

• Things to consider: Will you be able to stay in the home for 5-7 years minimum?

• Is your job stable or do you feel like you could possibly move companies/locations in short order?  

• Are you married or single?  If you’re married, it may make more sense to buy as there is someone else tying you down a bit to a single location.

2. Determine how much house you want to afford.

• Notice we didn’t say how much house you CAN afford 

• The lender will pre-approve you for a loan of up 30% of your income.  

• We believe it’s a better idea for you to work up a budget and determine how much you’re comfortable paying on a  monthly basis to back into the amount of home you can afford.  

3. Save up 20% to put down on the home / Get credit score above 750

• Down payment money:  We recommend 20% so you can avoid PMI.  Save this money in an online savings account (Ally etc..)

• Use credit karma.com to look at your credit score and see where it’s at.  Get your credit score over 750 ASAP to qualify for the best possible rate on a loan.  

• If you have a low credit score - pull all three copies of your credit report for free from annualcreditreport.com - find out what’s causing you issues and if the items they’re reporting are incorrect- dispute them with the credit bureau. 

4. Get pre-approved for your loan 

• We recommend going to multiple credit unions - applying for a 30 year fixed rate loan for the amount of money that fits into your budget.

• You can apply for as many home loans as you want during a 14 day period and it only counts as one inquiry on your credit profile.

• Don’t make any purchases once you’re pre-approved as it could hurt your ability to close on the loan.

5. Start looking at homes online / drive neighborhoods to see which ones you like.

• Great tools for this include Zillow, Redfin, Realtor.com

• Start identifying the neighborhoods you want to be in.

• Use a tool like Zillow to identify recently sold listings to get an idea of comps and how much you can expect to spend.

6. Hire a real estate agent

• Recommend finding a local expert. When driving through neighborhoods - see who’s selling a lot of the houses.  

• Develop a small list of realtors that do business in the neighborhoods you’re looking in. 

7. Put in a contract on the home you want to purchase.

• Use your real estate agent to help you negotiate the best possible offer.

• This is where real estate agents should be able to earn their commission - use their expertise of the neighborhood to help you get the best deal. 

8. Lock in your interest rate with the lender

• They may ask you to pay points for a better rate.

• In general - it’s best to not pay any points - take the lowest rate with no points.

9. Hire a home inspector / Get an appraisal 

• Hire an ASHI (American Society of Home Inspectors) certified home inspector.  Expect to pay between $300 - $400 for the inspection

• Be present for the home inspection. 

• If you have a home inspection clause in your contract- ask the buyer to fix the items from the home inspection.

• Appraisal: ensures that the home you’re buying is actually worth what you’re paying for it.  Usually around a $300-$400 expense.

10. Lock in home insurance & Close the deal

• Tips for finding insurance: Don’t just shop based upon price.  Really evaluate the company as well.  JD power and Consumer reports rate home insurance companies.

•  Two companies always at the top of the list: Amica & USAA

• A day or two before closing -you will get a final closing sheet from the lender- look this over and be familiar with it.  Ask questions if you have them. 

Headline of the week: Are you a millionaire next door?

Delaying gratification - Forgoing SOMETHING now - for a future reward (often far better).

Too much delayed gratification can be a bad thing:

Delayed Gratification and everyday purchases:

• Powerful tool in life to learn EARLY to teach yourself impulse control. 

• As children we are hardwired to have instant gratification. 

• As we get older we’re able to rationalize risk vs reward and the value of delaying gratification.  

Are we born with the ability to delay gratification? Most likely not. 

Start small - maybe if you eat lunch out 4 times during the week, cut it back to 3 - invest the difference.  Here are some tips:

• Tip No.1 –  Focus on your goals. Reminding yourself of the goals you are

saving for is a great way to improve your willpower. By visualizing achieving your goals, you will find it easier to stick to saving.

• Tip No.2 –  Surround yourself with people with willpower. As social animals,

we are heavily affected by others around us. If you hang out with people with

poor self-control, you are setting a low bar for yourself. On the other hand, if you

surround yourself with people who are also working towards bigger goals, you will find it easier to say no to temptations. 

• Tip No.3 –  Research shows that healthy eating, sufficient sleep, and exercise can improve your ability to delay gratification. 

Assuming you’re retiring at 65.  Average rate of return is 10% 

Every $1 you forgo becomes this much at 65 years old:

20 year old: $1 becomes $72

25 year old: $1 becomes $45

30 year old: $1 becomes $28

35 year old: $1 becomes $17

40 year old: $1 becomes $11

45 year old: $1 becomes $7

Small decisions now can make a LARGE impact later when it comes to savings. 

That $10 pizza that you buy when you’re 20 years old could be worth $720 if you instead invested the money.

Don’t overdo it.  You still have to live.  Figure out what is important to you and what’s not - spend money on the things that are most important to you.

Don’t be a hermit and save every dollar you have.  You will be miserable.

Balance saving with the things that are most important to you.

Headline of the week: The time is now for action on social security

Credit Freeze 

• The best way to protect your financial information from criminals. 

• It 100% prevents others from accessing your credit information. 

• It also 100% locks down anyone from opening credit in your name.

• A credit freeze has to be implemented with each of the three credit bureaus (Transunion, Equifax, and Experian).  

• The credit freeze is governed by the federal government and the three credit bureaus have to allow for this procedure under federal law

How it works

• You go to each of the three credit bureaus websites and request a freeze. 

• The process usually takes about 5 minutes or so to set up with each Bureau.

• Once all three bureaus are frozen, you no longer have to worry about someone opening credit in your name.

• PIN/CODE: Some of the bureaus may assign a PIN number or a Code to be able to thaw your file. 

• PLEASE PLEASE PLEASE make sure to save this PIN number somewhere safe

• I even recommend saving in your email archives somewhere so you can access it if you’re not at home. 

• When YOU want to get a loan or be able to have someone pull your credit for a legitimate reason -

• the bank or lender WILL NOT be able to access your credit profile until you temporarily thaw your credit report. 

• I typically ask the lender which bureau they use, and then just go thaw that credit report at the bureau's website

• To Thaw: similar process to doing a freeze, just go to the credit bureau website, fill in the information they have requested and/or login to your account and tell the credit bureau how long you want your file to be thawed. 

• The credit freeze and thaw process is pretty much immediate.  Typically takes effect within about 5 minutes. 

What to do BEFORE you freeze your credit

• Sign up for a free credit monitoring service like Credit Karma or Credit Sesame. 

• These two companies will send you notifications when a new credit account is opened or if there is any suspicious activity.

• Both companies will send you credit card offers through their website or by email.  You can opt out of this stuff, but this is how they make money.

Process for freezing credit 

Each Credit Bureau has a dedicated page on their website that will help you with credit freeze and thawing

• Experian: Once at their website, select “Add Security Freeze”

• Transunion : Once at their website - select “Add a freeze”

• Equifax: Once at their website - select “Place a freeze”

• *Please remember to save your code/PIN if they provide one.

On This show we talk about HSA’s and how they can be used as a useful tool in your financial planning picture. 

We also talk about what we call the HSA HACK for early retirement or to supplement your retirement income.

Headline of the week: Inflation speeds up in April as consumer prices leap 4.2%, fastest since 2008

What is an HSA?

• An HSA is a health savings account that allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. 

• Think of it as a bucket of money that’s there to pay for anything from a medical standpoint. 

• Instead of paying out of pocket for anything your health insurance plan doesn’t cover, you can utilize the HSA account to do so.

• If you don’t use the money in a given year, it runs over into the next year AND stays with you if you change up employers or take a new job.

How do you qualify for an HSA account?

• Not everyone can contribute to an HSA account.  You must have a high deductible health plan in order to qualify for an HSA account.  

• A high deductible health plan is a plan that only covers preventative services before the deductible is paid. 

• So this is a plan that has a deductible of at LEAST 1,400 annually for a single individual and 2,800 for a family.  The deductibles can be much higher than this.

• Typical HDHP have much lower premiums on a monthly basis, so the reason HSA’s even exist is to basically help you supplement the money you need to come out of pocket to pay for medical expenses. 

• As of Dec 31, 2020 - there is now an estimated 82 billion dollars held in over 30 million health savings accounts. 

What is a qualified medical expense?

https://www.hsabank.com/hsabank/learning-center/irs-qualified-medical-expenses

How much can you contribute to an HSA account?

• In 2021 - you can contribute 3,600 for employee only and 7,200 for a family insurance policy. 

• If you’re 55 or older they have catch up contributions of an additional 1,000 on top of those two amounts. 

• Often employers will fund some of the HSA contribution - but total can’t exceed $3,600/$7,200

Investing inside of an HSA

• HSA’s allow you to INVEST inside of them.  They can be used like a brokerage account or 401k or Roth IRA.  

• Just like a 401k at work - they have investment options you can choose inside of an HSA. 

• We obviously recommend choosing a fund with LOW FEES that is broadly diversified, like an S&P 500 fund or a broad market mutual fund or ETF.  

• The goal here is to make sure you don’t have thousands of dollars sitting in the savings portion of an HSA.

Reimbursement

• You are permitted to reimburse yourself for qualified medical expenses from an

• HSA account as long as the expenses are incurred after the HSA was established.

• There is no time limit on when you have to reimburse yourself. 

• Account holders are required to retain documentation for their qualified medical expenses.

• If you fail to retain documentation it could cause the IRS to rule that withdrawals

• were not for qualified medical expenses and it cause the IRS to make you pay penalties on the withdrawal. 

Little known secret of an HSA

No time limit on when you have to reimburse yourself - so you can let the money grow in the account, take advantage of compounding, and then reimburse yourself later on (or in retirement).  Just make sure to keep accurate records of the transactions and when you reimbursed yourself - we recommend a google sheet so you don’t lose it if you lose your computer hard drive.  Pay for your expenses out of pocket - not out of HSA- use this as a retirement tool - when you need money in retirement, “reimburse yourself” at that time!  Tax free.  Keep receipts

Bottom line: We LOVE HSA accounts - triple tax advantaged accounts:

• Tax advantage putting the money into the account

• Money grows tax free

• Money is spent tax free for qualified medical expenses

Headline of the week: Robinhood trader may face $800,000 tax bill

A bear market is when a stock market index experiences a decline in prices of at least 20%.  As we know from previous episodes, an index is basically just a bunch of stocks that make up a broad range of the American economy (think s&p 500). 

Understanding Bear Markets:

• Stock prices are made up of cash flow, future expectations, and profits from companies.

• As growth decreases - expectations tend to go down on future returns, thus decrease stock prices.

• Typical causes for growth to be expected to decrease is when we have high unemployment,

• lower disposable income, decreased productivity, which leads to a decrease in business’ profits. 

Studying prior bear markets:

• The last bear market was in March of 2020 - when we first were locked down due to Coronavirus. 

• In March of 2020, the S&P 500 was down 26.9% from its highs earlier in the month, the DOW was down more than 22%, and the NASDAQ was down over 26% in just a single month.

• 2007-2009 - great recession - led by the housing bubble - S&P 500 was down 50.9% from it’s highs 

• 2000-2002 - Dot Com bubble - S&P 500 tumbled by 44.7% over the course of 2 years

• Great depression - 1929 - S&P 500 down 83.4% at it’s lows.   The bear market lasted almost 3 full years.  

Important notes from bear markets:

• Stock market declines can often happen before a recession gets underway. 

• Typically the bear markets are short lived - most of the time if you look 2, 3, or 4 years out, you’re generally approaching all time highs

What should we take away from bear markets:

• Stocks will recover

• Use it as an opportunity to BUY - buy high, sell low

• If you are lucky enough to still be employed - stay the course - tune out the noise

• This too shall pass”

Do we think a bear market could happen today?

• It’s certainly possible - but nobody really knows.

• Average price/earnings ratio in the stock market is generally in the 18-19 range.

• What this means: stocks are trading (their value) is roughly 18 to 19 times what they’re earning in a given year. 

• So if a company is earning 1 billion in profit.  The company value is about 18 to 19 billion dollars.

• Currently - the P/E ratio of the S&P 500 is about 41.  Obviously, history shows us that stocks - from a historical sense are overvalued.

• Does that mean you should sell?  NO - at the end of the day, we could have said stocks

• were overvalued at 20 times earnings, 25 times earnings, 30x earnings - yet - here we are at 40x earnings  -

• you would have a missed a huge bull run had you sold.

Headline of the week: Bitcoin IRA: Clients Invested over $100M into interest earning program in just 30 days. 

The problem with the general rules of thumb for retirement savings: 

• They don’t take into account the amount of time left until you retire.

• Someone who doesn’t start saving for retirement until they’re 50 is going to have to save a heck of a lot more per pay period than someone who starts saving at 25

• They don’t take into account how your personal situation and what you want your retirement to look like.

Factors that determine how much you need to save for retirement:

• When (ideally) do you want to be able to retire?  An actual date.

• What do you want your lifestyle to look like in retirement?

• Do you want it to be similar to what you have now?

• Do you want it to be lesser or more?

• Some people may want to vacation and spend MORE money in retirement than they

• did in their working years.  Other people may not need as much in retirement as they had during their working years.

Ultimately need to know 3 things:

1. When will you retire

2. How much will you need in your first year of retirement?

3. How much do you currently have saved for retirement?

Once we have those three things, we can reverse engineer exactly how much it will take to be able to comfortably retire on your timeline. 

We have built out a calculator that you can use to see if you’re on track for retirement. 

LINK TO FREEDOM QUOTIENT CALCULATOR

On this calculator you can enter:

• Value of your current investment portfolio

• Expected retirement date

• How much you want to be able to spend in retirement (year 1 - in today’s dollars)

• And How much you contribute on an annual basis

Based on these inputs - it will calculate a future value of your retirement savings 

You can then compare what the future value of your investments will be to how much it says you will need to be able to retire.

Some important calculations are being done in the background:

• We’re converting the amount of money you want to spend in today’s dollars into future dollars. (accounting for inflation)

• We know that the price of groceries is going to go up when you retire in 15 years, so there is a calculation for inflation that is happening - essentially converting today's dollars into inflation adjusted dollars. 

• We’re applying the 4% rule to what you want to be able to spend in retirement.  We talked about this in a previous episode - but the best way to ensure you never run out of money is to draw down only 4% of what you have in retirement money.

• We’re subtracting the amount of money you have already saved from the amount you need in order to retire. 

• We assume that you will earn 8% on your investments.

• Historically - stock market has averaged around 10% annually.

• Also assumes that you’re not getting any Social Security income or pension income

• So - if you’re getting either of those two things- subtract that from the amount you say you will need in year 1 of retirement.

Headline of the week: The IRS wants to know all about your Bitcoin holdings — and this court summons is a reminder

**Not official legal or tax advice, this is for entertainment purposes only -

please contact your own CPA for legal/tax advice that’s specific to your situation**

These are simply ideas and questions to get you thinking about your personal situation. 

Topics we discussed:

Stimulus

Who qualifies

150/160 for 2021 (stimulus) and additional refundable child tax credits

What does it mean for tax credits to be refundable?

Change in leadership - new laws regarding taxes - what are some of the biggest changes?

Changes to the child tax credit

Changes to child and dependent care credit

Unemployment income changes

Student loan forgiveness changes

How to reduce MAGI for tax purposes - (Traditional 401k, HSA, etc..) 

Traditional IRA

Traditional 401K

HSA account

Biggest mistakes people make when it comes to filing their taxes

2020 versus 2021 - Other major changes

On this podcast we do a deep dive on what is the S&P 500 and how it works. 

Headline of the week: IRS postpones April 15 U.S. tax deadline to May 17

What is the S&P 500? A weighted market index that measures the stock performance of the 500 largest US companies on the stock exchanges within the United States.  The S&P 500 also includes EVERY component of the Dow Jones Industrial Average (which is made up of 30 companies). 

Why “weighted” - The larger the company, the more of a percentage that they make up of the index.  For example - the 10 largest companies make up 27.5% of the market capitalization of the index.  The 10 largest cap companies within the S&P are currently: Apple, Microsoft, Amazon, Facebook, Alphabet (google), Tesla, Berkshire (Buffet), JP Morgan, and J&J.  

The smaller the company, the less they make up in market capitalization of the index.

Strict selection criteria when determining which companies make up the index:

Market cap must exceed 8.2 Billion (price per share x number of shares outstanding) - overall value of the company as determined by the market

Trading volume of at least 250k shares in the 6 months leading up to the evaluation date -

Ensures people can get in and out of the stock and the index funds will be able to buy and sell them as they need to  Must be listed on the NYSE or NASDAQ

Company must be form the USA

An index committee ultimately determines if the company should be included in the S&P 500. 

Why does investing S&P 500 make sense:

• S&P makes up a huge portion of American Capitalism.

• The companies that make up this index are companies that you and I use every day. 

• We can’t live without a lot of their products

• These companies are on the larger side - so they have withstood the test of time

• All of them are profitable or will become profitable in the near future.

• The biggest reason to invest in an index like the S&P is because of the diversification it provides to your overall portfolio.

• As we have talked about - hard to pick winners/losers and beat the index

• Investing in the S&P is essentially owning the index - you get small pieces of a large number of companies 

https://www.slickcharts.com/sp500

Some argue that you don’t need international in your portfolio if you purchase the S&P 500-  This is because of the companies in the index - only 72% of their revenue is actually from the united states, the rest of their revenue comes from international sales. 

Sectors that make up the S&P 500: 

• IT: 27.5%

• Health Care: 14.6%

• Consumer Discretionary: 10.8%

• Communication Services: 10.8%

• Financials: 10.1%

• Industrials: 8%

• Consumer Staples: 7%

• Real Estate: 3%

• Utilities: 3%

• Materials: 3% 

Return of the S&P 500

• Average annual compound growth rate of the S&P 500 index since 1926,

• including dividends, has been 9.8% and 6% after inflation.  

• 70% of all years tracked by S&P were years where the index went up in value year over year.

How to buy into the S&P 500?

• Best way to buy into the S&P - by buying a mutual fund that tracks the S&P500

• Mutual funds: If you’re buying a mutual fund you take a set amount of money -

• put that into your order screen and at the end of the trading day, you will get as many shares of that mutual fund as that money buys.

• Favorite S&P 500 mutual funds:

• Fidelity 500 - Index fund: FXAIX: , expense ratio of .015% … minimum investment of $0

• Schwab S&P 500 index fund: expense ratio of .02% … minimum investment of $0

• Vanguard 500 index fund investor shares: VFINX: 367.39…. Minimum investment of $3,000

• VOO - Vanguard ETF

Who invests in the S&P 500?

• Nearly all of your retirement funds at work invest within the S&P 500 as it’s made investing easier. 

• There are currently over $4 trillion in assets currently investing in index funds, much of that is in s&p 500 index funds.  

• Actively managed (someone actively picking stocks within a mutual fund) now make up ~$3.5 trillion in assets.  

• This trend is likely to continue where the amount of money going into active funds decrease and the amount of money going into index funds increases as people see that they can’t beat the market and just instead invest in low cost index funds like the S&P 500.

• Warren Buffett: most famous investor ever says, “most investors are better off with a simpler approach that’s still very effective: invest in index funds.”

Would we recommend this over a total stock market index fund?

• Generally a total stock market index fund may give you access to the S&P 500 index AND other indexes - maybe like the russell 2000 - which gives you exposure to smaller cap companies - but it’s really personal preference ... Like splitting hairs

• Most important thing: get the money into A LOW COST FUND and get the money working for you… don’t stress out about what fund it is - S&P, broad market index fund… just get the money working in your favor!

Headline of the week:

More than 1 in 3 cryptocurrency investors know little to nothing about it, survey finds.

 Websites mentioned during the podcast:

https://www.policygenius.com/ 

Insurance Overview

What’s the point of having insurance in the first place?  It’s to protect your nest egg.  Protect the assets you own from various things happening.  You don’t want to over insure, but you do want to ensure you have coverage for things that have at least a decent probability of happening. 

Types of insurance we like:

Auto Insurance: This is obviously the law that you have to have this, but it’s also just smart to have.  The average insurance claim is nearly 5,000… and nobody wants to have to come out of pocket with that type of money in the event of an accident.  

Homeowners and Renters Insurance -  Normally flood and earthquake insurance is not included as part of a homeowners/renters policy - so make sure to ask about it. 

Health Insurance - Save $ by doing a high deductible health plan and a Health Savings Account (where you can invest the money in your HSA)

Long Term Disability Insurance: According to the Social Security Administration, just over one in four of today’s 20-year-olds will become disabled before reaching age 67. A 35-year-old has a 50 percent chance of becoming disabled for a 90-day period or longer before age 65. About 30 percent of Americans ages 35-65 will suffer a disability lasting at least 90 days during their working careers. About one in seven people ages 35-65 can expect to become disabled for five years or longer.

Term Life Insurance: If you have someone who DEPENDS on your income - consider getting term life insurance.  It’s very cheap if you’re in good health.  If you have an increasing net worth year over year (not living paycheck to paycheck).... Consider that when purchasing . You may not need a 30 year policy. 

Long Term Care insurance: This protects your retirement savings from the expenses of long term care (assisted living/nursing home care).  This really is the number one threat to your retirement nest egg that you may have built up over the years. Try to purchase long term care insurance in your late 50’s early 60’s.

Umbrella Insurance: Extra layer of insurance - usually for high net worth individuals (500k +) that provides an extra layer of insurance on top of your home/auto policies.  Can help if you’re in a multiple vehicle accident and are at fault, medical bills, property damage, etc.  It kicks in if you get sued for more than one of your insurance policies covers.  It’s also VERY cheap insurance (usually just a couple hundred dollars per year for the first million in coverage).  Coverage is sold by the millions.

Things you don’t need insurance on:

Rental Car Insurance (often covered by your primary policy or credit card you book with)

Private Mortgage Insurance - This is to insure the LENDER in the event that you default.  You can avoid this by putting 20% down on your house.

Extended Warranties on cars, appliances and electronics - Often hard to use them, have high deductibles

Life Insurance for Children

Universal Life - We’re not a fan of Universal life.  High fees, can do much better elsewhere. 

Whole life insurance - People think this type of insurance sounds like a good deal as you get a lifetime of coverage and there is an interest bearing savings account built in, but the premium is often significantly higher than a term insurance product and there tend to be much more lucrative bets on the savings side.  A better alternative would be to buy term insurance and invest the difference in premium between the term and whole life policy in a low cost index fund or etf.  

Identity theft Insurance  - Instead do a Credit freeze

Consider this alternative if ever thinking about buying insurance on something that is on the above list: Self insure - Open an ally bank or online bank account - take the amount of the premium and pay it to yourself.  Label the account with the thing you’re insuring.  If it breaks and you need a new one, you have the money - or most of the money there for you to purchase.  You will often find that you never use the insurance or you will end up saving way more than the amount of the replacement item you were thinking of insuring in the first place.

What is an NFT?

• NFT stands for non-fungible token - which is a special type of cryptographic token which represents something specific and unique.

• Using blockchain technology, NFT’s designate an official copy of digital media, which can then be sold by artists, musicians, or sports entities to make money on content.

• What does it mean to be non-fungible?  Non-fungible means it’s specific and unique.  

• Examples non-fungible assets:

  • House, painting, trademark

  • Tokens designate that it’s something digital in nature that’s traded with the blockchain technology - like how bitcoin operates.

Examples of NFT’s:

NBA Top Shot- Partnership w/ Dapper labs to make digital trading cards or “moments” -

short highlight videos that you can own pieces of.  Each moment is serialized and some are more rare to own than others.

“Packs” sell for as low as $9 

100’s of thousands of people line up for packs

Currently - people who get a “pack” are making 10-15x their money per pack

This won’t last forever- but it could be a good short term speculative investment opportunity.

Supply will eventually increase enough to meet demand - which will likely drive prices lower.  We don’t know when the supply will match the demand - it clearly has not yet as it’s estimated that each pack of top shots are worth 10-20x what you pay for them.  These are collectibles - just in a digital format, and they’re on fire right now.

NBA Top shot has generated over 230M in revenue so far. They just went live in mid-2020.

Crypto Punks - Collection of 10,000 unique characters with proof of ownership on the Ethereum Blockchain.  No two are exactly alike. These digital pictures (32 bit) are selling for tens of thousands, if not hundreds of thousands of dollars.  This whole thing sounds to me like it’s out of hand.

Twitter- Jack Dorsey - is selling his first ever twitter tweet for over 2.5M as an NFT

Digital Art - Artists can now sell their art online in a digital format… and people are buying it!

Concert/Sporting Event Tickets 

Useful utility - eliminates fraud in second hand ticket sales

Allows for owners to actually know who’s at a game vs. who they sold their tickets to

Allows for venues to capture revenue they wouldn’t

normally get in the second hand market (they get a cut of every secondary transaction)

Nike - Crypto Kicks

Louis Vuitton - Using NFT’s as a way of tracking provenance of luxury goods

MLB, NFL, NHL, MLS - All watching and will be jumping into this SOON 

Security of NFT’s

Previously did an episode on bitcoin -

we said we didn’t like it as an investment.  But the underlying technology of the blockchain we did like.  

NFT’s run on this same technology - blockchain technology. 

Blockchain technology is a series of interconnected computers that all have a general ledger. 

Transactions are recorded on multiple computers, thus verifying the authenticity of the assets it’s tracking. 

NFT’s as investments

Bull case for NFT’s in the short term:

• Specific to NBA Top Shot

• Other NFT’s are speculative. 

• Top Shot gives you the ability to put down small sums of money in hopes of hitting big - sort of like a lottery ticket, but with a whole lot less risk and not the millions in upside.

Case for NFT’s in the long term:

• It’s hard to make an investment case to have NFT’s as part of your overall portfolio in the long term.

• It’s entirely possible this is a short term fad that will go away as quickly as they came to prominence. 

• If you want to have a very SMALL part of your portfolio in NFT’s -

• that’s fine, but just know they have a great amount of both upside and downside.  

• Keep the NFT’s at less than 5% of your overall portfolio so they can’t hurt you too badly. 

What are good investments? 

• Low cost mutual funds and etf’s - episode 5 has our favorites

Headline of the week: How the coronavirus, the internet and tons of money unexpectedly fueled sports cards' biggest boom

How much it costs for college:

• The average cost of attendance for a student living on campus at a public 4-year in-state institution is $25,864 per year, or $103,456 over 4 years.

• Out-of-state students pay $43,721 per year or $174,885 over 4 years; traditional private university students pay $53,949 per year or $215,796 over 4 years
  
  

Community College

• Huge savings over 1st two years, bachelor's degree 

• The average annual tuition for in-district community college attendance is about $4,00 in 2020

Avg student debt: 30,062 coming out of college

Sit down with your kids and let them know what school costs in real dollars in their budget once they graduate.  Go through a budget with them and show them how that student loan payment is going to impact the money they have available to spend. 

Always consider in state schools over out of state schools.  Generally about a 60-70% savings by staying in the state.

**SAVE FOR YOUR RETIREMENT BEFORE YOUR CHILD’S COLLEGE IN A 529** CAN’T GET A LOAN ON YOUR RETIREMENT, BUT CAN GET A LOAN FOR COLLEGE.

How to save for college: 529’s

What is a 529? Tax advantaged account that allows you to save for a child’s college. 

Money can be used for tuition and expenses as well as room and board. 

Tax deferred money going into account in many cases.  

Check your state laws.  Some states allow for a tax break on a certain amount of contributions per year.  

Money is tax free if spent on eligible college expenses - room/board/tuition/textbooks 

How to start a 529 - Each state has state sponsored 529 plans. 

Clark Howard has THE BEST 529 plan guide we have seen online.  We would recommend checking the 529’s

he’s rated on his website to see if he likes them (deans list or honor roll).  If he doesn’t, the highest rated plan in the country is the Utah Plan.  Has super low fees. 

Link to 529 plan guide on Clark’s website: https://clark.com/education/clarks-529-plan-guide/

What investments to do within a 529 - Age based portfolio.  Pick the year closest to childs expected college start date.  Money gets invested based upon how many years until you need it.  Find the funds with the lowest expense ratios just like you do when investing for yourself

Start saving BEFORE you have kids - change beneficiary

Money leftover? study abroad… make sure to do your research on this as certain expenses are qualified and others are not - so look up the specific rules for your state’s plan.  Can pull the money out with penalty - tax plus 10% penalty.  Can also transfer to another child. 

-529 Money can also be used for private school - new law

The Tax Cuts and Jobs Act, which was signed into law in December 2017, allows families to use 529 plans to pay for up to $10,000 in tuition expenses at elementary or secondary public, private schools. The changes became effective January 1, 2018.

Ways to get scholarships

Fastweb - great scholarship search engine. 

Can be overwhelming, but search for scholarships LOCALLY.  

Look up your state representatives (house/senate) and look up their websites.

Most of them have a certain amount of scholarship dollars available to

spend each year.  Make sure you know of these.  They often give nearly everyone who applies at least something. 

If you do need a loan

-Fill out fafsa at studentaid.gov 

-Attempt to get a subsidized stafford student loan

-Anything you can’t get subsidized, get an unsubsidized stafford student loan

Subsidized means that the government is paying the interest while you’re in school, for 6 months after you graduate, and during periods of deferment 

-Stafford loans are government backed loans.  Stay away from PRIVATE student loans as you don’t get many of the same protections as you get with a government backed loan.  Also interest rates are typically higher 

-Pay off loan w/ highest interest rate first

Headline of the week: How A 1% Investment Fee Can Wreck Your Retirement

Why you cannot beat the market

Last few shows we have talked about Gamestop, AMC, Blackberry, Bitcoin.  A bunch of different assets that people have hopped into in hopes of striking it rich.

Things you have to get right when “trading the market”

Time the buy right - need to find a stock that’s undervalued - purchase at the right time

Time the sell right - How do you know when we have reached the top?  

How are you going to determine that it’s time to buy more when you’re down 20% in a week on something?  

It’s probably a safe bet that you won’t be able to beat the market.

It’s probably a SAFE assumption that over time, you won’t be able to outperform a financial professional….. BUT …. Can they beat the market??

What is an active fund? These are funds that are MANAGED by financial professionals who pick and choose what stocks to buy, when to buy, and what to sell.

What is a passive fund? A passive fund is a fund that tracks an index (think s&p 500 - tracking 500 largest US equities) and the fund just  buys and holds for the most part all of the companies within the fund.  It doesn’t try to pick winners and losers, it just owns a little bit of everything.

What does better?  The active funds where the advisors are buying and selling or the passive fund who just buys and holds? 

Morningstar's Active/Passive Barometer August 2020 

The Morningstar Active/Passive Barometer is a semiannual report that measures the performance of U.S. active funds against passive peers. The Active/Passive Barometer spans nearly 4,400 unique funds that account for approximately $13.1 trillion in assets, or about 66% of the U.S. fund market. 

The Active/Passive Barometer measures active managers’ success in several unique ways:

 It evaluates active funds against passive funds. In this way, the “benchmark” reflects the actual, net-of-fees performance of passive funds

It considers how the average dollar invested in various types of active funds has fared versus the average dollar in the passive composite. 

The Active/Passive Barometer is a useful measuring stick that helps investors figure out the odds of succeeding with active funds in different areas.

Summary from the report: In general, actively managed funds have failed to survive and beat their benchmarks,

especially over longer time horizons; only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020

If there's one near-certainty in investing, it is "you get what you don't pay for," as the Vanguard's late founder Jack Bogle said.

If the pros can’t pick the winners and losers better than the index - why do you think you can?

Remember - keeping fees low is key to investment returns

Buying and holding index funds is the way to build wealth over long periods of time.

We know this doesn’t sound as fun as buying the latest and greatest HOT stock, but it’s a more sure way to achieve your goals.

Headline of the week:

 Here’s a budget breakdown of a couple that makes $500,000 a year and still feels average

What is a Credit Score?

Credit Scores help lenders to make decisions about risk as it relates to how YOU handle YOUR money.  Scores can range from 300 - 850 on the FICO scale. 

This show is not intended to make you obsess about your credit score, it’s more to educate you, so you don’t make a huge mistake as it relates to your credit.

Some common myths about credit scores:

• Having less credit accounts is a good thing for your credit score

• If you have a lot of money you will have a good credit score

• Each person only has 1 credit score

• Closing a credit card or line of credit will improve your credit score

• If I pay down my debt faster - it will improve my credit score. 

Things that actually impact your credit score:

• Payment History - Have you paid your past credit accounts on time? 35% - To maximize this - make all of your payments on time.

• Accounts Owned / Utilization rate - How much of your available credit are you using? 30%.  To maximize this portion of your score - use 10% or less of your open credit lines.

• Length of credit history - How long have you been using credit?  15% -  To maximize this - 7-9 years plus is what they want to see.

• Types of credit history (10%) - What is your mix of credit (mortgages, credit cards, student loans, retail credit (store specific cards), etc.. Showing lenders that you can handle different types of loans (installment -mortgage or student loan and revolving - credit cards) can also improve your score. 

• New Credit - (10%) - How much of your credit is new?  The higher % of your credit that is new - the lower this portion of your score goes. 

Favorite ways to monitor credit:

www.creditkarma.com - gives you 2 credit scores for free from Transunion and Equifax

-Also shows you what credit accounts you have open and is a good way to passively “monitor” your credit

For anyone who wants to see their full credit report go to www.annualcreditreport.com 

What to do if you find an error on your credit profile: 

• Contact the business who reported the error - ask them to remove it in writing

• Contact the credit bureau reporting the error and dispute the item on your credit report

• Follow up with the business reporting and the credit card company until it has been removed. 

Headline of the week: Reddit and Elon Musk sent GameStop stock soaring. Why AMC and BlackBerry are next

Bonds

• What is a bond? A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). 

• A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

Bonds are issued by governments and corporations when they want to raise money.

• By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year.

• Unlike stocks, bonds issued by companies give you no ownership rights. 

• So you don't necessarily benefit from the company's growth, but you won't see as much impact when the company isn't doing as well, either— as long as it still has the resources to stay current on its loans.

Bonds, then, give you 2 potential benefits when you hold them as part of your portfolio: 

• They give you a stream of income

• and they offset some of the volatility you might see from owning stocks.

Risks of bonds:

Although bonds are considered safe, there are pitfalls like interest rate risk—

one of the primary risks associated with the bond market.

Reinvestment risk means a bond or future cash flows

will need to be reinvested in a security with a lower yield.\

Callable bonds have provisions that allow the bond issuer to

purchase the bond back and retire the issue when interest rates fall.

Default risk occurs when the issuer can't pay

the interest or principal in a timely manner or at all.

Inflation risk occurs when the rate of price increases in the

economy deteriorates the returns associated with the bond.

Biggest risk of all that’s never mentioned??? 

Opportunity Cost! 

You could be selling yourself short of reaching your retirement goals by investing in bonds. 

They generally have lower rates of return and lower rates of return mean that it

can take longer to accomplish your goals and to be able to maintain your lifestyle in retirement. 

Episode 12-  4% rule - we talked about your likelihood of outliving your

money based upon portfolio allocation. 

What we found is that the higher the STOCK allocation the higher the

probability that your money will take 30, 40, 50, 60 years.   

Bonds are inherently risky due to the opportunity cost of missing out on higher yielding investments. 

Headline of the week: Comcast to impose home internet data cap of 1.2 TB in more than a dozen US States next year Check www.highspeedinternet.com to see what other options you have for broadband in your area. 

Websites mentioned during the podcast:

https://clark.com/credit/credit-freeze-and-thaw-guide/ 

Main Topic

As of this recording- Bitcoin has gone from 24k at Christmas to now almost 38k per coin. 

Everyone is wanting in on the action…. But before you hop in - let’s talk about what it is.

What is bitcoin? - A cryptocurrency that was invented in 2008 by someone going by the name of Satoshi Nakamoto.  

• Decentralized digital currency where there is no central bank where the

• currency can be sent from user to user on a peer to peer platform.  

• Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.

• Bitcoins are created as a reward for a process known as mining.

Bitcoin’s Usefulness:

• Bitcoin runs on blockchain technology. 

• This is a revolutionary technology that allows for a group of computers to independently verify millions of transactions.  

• The ledger is a very secure way to account for transactions as there are

• thousands of computers verifying transactions and verifying them. 

Bitcoin as an investment 

• Everyone wants to know - should they be INVESTING in bitcoin?

• Obviously it’s gone from 24k per coin to ~38k as of this recording.

• Well - let’s think about what we just said - what is bitcoin? 

• It’s a type of currency - and not a normal type of currency - it’s a crypto currency.

• Does Currency normally fluctuate in value this much? 

• No- when you go to buy a loaf of bread it’s pretty consistent in price. 

• Bitcoin is something that’s new - it’s exciting and SPECULATORS are driving the price of bitcoin higher. 

• While bitcoin has utility as a currency - it’s not really a true investment, or should not be seen as one. 

• Should you invest in bitcoin-  We would recommend not to as it has a lot of the signs of a bubble. 

Dangers of bitcoin

• No regulation: Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen.

• Fraud/Theft: Malware can steal your bitcoin.  Ever get a virus on your computer? 

• It’s possible you could be giving criminals the information they need to transfer crypto to another user. 

• With no laws/regulations in place- it can be tough to recover this. 

• There is no securities and exchange commission or protections in place to help you recover what you may have lost.

• No tangible way to value bitcoin: If you want to buy a stock - you can look at the income statement, balance sheet, 10k report, cash flow to come up with a value. 

• Bitcoin isn’t a productive asset in that it doesn’t produce anything. 

• It doesn’t provide a good or service.  It’s value is largely hinged on what someone else is willing to give you for it. 

• Right now -that’s a high number, but in 2 weeks, it could be a low number.

What do some of the greatest investors in US history say about Bitcoin?

• Carl Icahn: Bitcoin and other cryptocurrencies are 'ridiculous' — 'I wouldn't touch that stuff'

• Warren Buffet: Cryptocurrency has “no value”

• George Soros: “Bitcoin is not a currency because a currency is supposed to be a stable store of value and the currency that can fluctuate 25% in a day can’t be used for instance to pay wages because wages drop by 25% in a day.” “Cryptocurrency is a misnomer and is a typical bubble, which is always based on some kind of misunderstanding.” 

• Bill Gates: “As an asset class, you’re not producing anything and so you shouldn’t expect it to go up.

• It’s kind of a pure ‘greater fool theory’ type of investment,” 

If you listen to this and still want to invest - just don’t invest more than you would take to the casino and certainly don’t invest more than you would lose sleep over if it went to $0. 

Dollars and Hops goals sheet: 2021 Dollars and Hops Goals Sheet

Goal setting and tracking:

Why is this important?  

Many of us have big goals, but we don’t know how we’re going to accomplish them. 

Goals don’t just have to be financial in nature, they can be spiritual, intellectual, career oriented, family oriented, etc..  

The key is to think big and set goals for yourself EVERY year

Make this a FUN thing - do it with your spouse.  Your goals don’t have to be the same as your spouses, but each of you should have goals

Goals should be written on paper - ACTUAL paper

Big goals - can get their own sheet of paper 

Highlight milestones as you get closer to accomplishing your goals

You can do this with my net worth, my goals sheet in its entirety, and my retirement savings goals

Scott’s “Goal Night Ritual”

Night at end of year, bottle of wine, goals sheet

Do reflection of current year - What did we accomplish vs not accomplish on our goals sheet

Set goals for the next year.

Goal sheet should be visible every single day - near where you work. 

In your office so you see it every day and you know what’s driving you to do what you’re doing

Highlight your accomplishments as they happen

Websites mentioned during the podcast:

Headline: Here’s how much money Americans in their 50s have in their 401(k)s

Why do we say to fire your financial advisor?  

Well, oftentimes financial advisors are holding you back from achieving financial success faster. 

What do we mean by this?

• Financial advisors typically charge anywhere from 1-2% of AUM (Assets under management) to have you as a client.  

• In addition to the AUM fee you’re paying with your advisor - you also have to pay “hidden” fees for the investments they put you in. 

• Sometimes the advisors get a kick back from the funds they recommend or put their clients in.

• What do we mean by this? 

• If they put you in a mutual fund, that fund could charge an annual expense ratio anywhere from 0 to 1% or more.  

• They could be using front end load or back end load mutual funds

Explanation on front end and back end load mutual funds

• Front end load mutual funds are mutual funds that charge a fee upon investing in them.  

• Back end load mutual funds are mutual funds that charge a fee upon redeeming or selling the mutual fund. 

• Selling point is that they will have LESS ongoing fees than a traditional fund that may charge 1% or so. 

• Obviously we know at D&H - that you can buy no-load mutual funds/etf’s with no or extremely low fees.

• AVOID front end/back end load funds that some advisors recommend

• This can be a HUGE drag on your overall investment success.  

What should you do instead of hiring a financial advisor?

• Invest in broadly diversified low cost ETF’s and mutual funds. 

• We have a full episode of some of our favorites- check out episode 005

If you do want to have an advisor: 

Make sure to hire someone who is held to the fiduciary standard AND who is FEE only

What is a fiduciary?

Someone who is bound by law to put your interests ahead of their own interests

One would think anyone giving investment 

Who is a fiduciary: 

Any investment advisor who is registered with the SEC (Securities and Exchange Commission)

Who does not have to be a fiduciary? 

Insurance agents, stock brokers, and broker dealers - They only have to adhere to the “suitability standard” - which lacks teeth

Two types of financial planners: Fee only and Fee Based

Fee Based financial planners - Charge you a fee based upon assets under management. 

As your portfolio grows, so does the raw dollar amount that they’re being paid for their services.

This fee can often get out of control as you accumulate a large sum of money.

$2m portfolio becomes 20k in fees at 1% and 40k in fees at 2%

We would only recommend hiring a fee-only financial planner- someone who you pay on

an hourly basis for their time.  Check out NAPFA.com (national association for personal financial advisors) 

This is a database of FEE-ONLY financial planners.

This is only for someone who lacks the confidence to do it themselves -

but we believe STRONGLY that you can go at it alone. 

Websites mentioned on the podcast:

Headline: How to invest money based on advice from Warren Buffet

How to find a fee only financial planner: www.NAPFA.com

Clark Howard credit freeze guide: https://clark.com/credit/credit-freeze-and-thaw-guide/

Websites mentioned on the podcast:

From Fox Business: 5 Student Loan Refinancing mistakes to avoid 

Introduction to the 4% rule:

So you have worked hard, saved a bunch of money for retirement. 

How can you figure out who much you can spend without spending down all your money?

Obviously don’t want to spend too little - you earned it after all

You don’t want to spend too much as you don’t want to deplete it all.

This where the 4 percent rule comes in…..

What is the 4% rule and why is it important?

• The 4% rule is a rule of thumb for retirement spending. 

• If you spend only 4% of what you have in investment accounts, annually, when you start out in retirement, you will likely never run out of money.

• Add up all of your investment accounts and withdraw 4% in your first year of retirement. 

• You’re able to adjust for inflation each year.

• This rule was created by someone by the name of William Bill Bengen. 

• Made popular by the Trinity Study from 1998

• Bengen wanted to know how much you could safely withdraw in retirement without ever running out of money. 

• His final conclusion: you can safely withdraw 4% of your money in year one and increase by the rate of inflation every year.

Assumptions under the 4% rule: 

• It assumes you spend exactly 4% in year one and adjust for inflation in future years,

• so every year you spend more and more. 

• If you overspend or underspend it can change the likelihood that you run out of money or never run out of money.

• Inflation found here: https://www.usinflationcalculator.com/inflation/current-inflation-rates/

• It applies to a 50/50 portfolio. 50% bonds, 50% stocks. 

• As you adjust your stock to bond ratio - it can adjust the likelihood that your money will last longer. 

Example 

Reverse engineering the 4% rule: 

 Let’s say you’re not in retirement, but you want to use the 4% rule to figure out what your retirement number is. 

• Let’s say you expect you want to be able to Spend and Give $125,000 annually in retirement. 

• You expect social security to provide $3,000 per month in retirement. 

• How much do you need to save in investment accounts to be able to fund your retirement lifestyle?

• Annualize the social security and subtract it out of your annual spend. 

• =36,000 per year is being provided by social security, so you will only need 89,000 annually.

• Take your 89,000 / .04 = 2,225,000

Now, how can you tell if you’re on track to have 2,225,000? 

• Use a compound interest calculator.  

• Plug in your current investment account balance, annual contribution (plus 3% increase year over year), expected interest rate (we recommend 8.5%), and hit the calculate button.

• It will show you how much you’re on track to have when you’re looking to retire.

We encourage you to play around with the compound interest calculator to see if you’re on track! 

Websites mentioned during the podcast: 

Average new vehicle prices up 2% year over year in July 2020 according to KBB 

Average cost of a new car in 2020 is 20,000

Figure out how much you can spend per month on a car.

Cars as a percentage of your budget: 

• We believe that cars should not break your budget on a monthly basis. 

• A car is something that is a depreciating asset- meaning that every single month the value goes down and should be depreciated on your net worth statement.  

• Spend no more than 10% of your monthly budget on a car. 

• This means if your household income is 120,000 per year you bring home 10,000/month - don’t spend more than $1,000 per month on your car. 

• This is not a hard and fast rule.  Some of you may want to spend even less on a care and increase your savings. 

• That’s OK and we encourage that!  This is just a rule of thumb that we live by. 

How to buy a car:

• Figure out how much you can spend per month on a car.  Make a monthly budget and feel good about it. - Use a calculator

• Edmunds calculator is great for calculating how much to spend on a car.

• Equate that to a sticker price.  By using the calculator

• Secure financing at a credit union or bank (shop for the best possible rate between banks)

• Narrow down your search to 3-4 brands you like in the class vehicle you like that you can afford.  Test drive the cars.

• Check consumer reports for reliability - finalize your choice of car.

• Search online for the best deal - negotiate the price of the car FROM HOME.  Make the dealer include all fees - out the door price

• Once you finalize a price- get the car checked out by an independent mechanic

• Finalize the sale - have everything already agreed to before you go to the dealer to purchase. 

Why you should not take out more than a 36 month loan:

• Cars are depreciating assets

• You could get into a situation where you owe more than the car is worth.

• In this situation you would need gap insurance to cover the total loss of a car.

Leasing Cars:

Advantages to leasing a car

• You have a new or newer car - all the time.  Every 3 years you turn it in and get a new one.  

• Less maintenance issues to deal with

• Can “afford” a nicer car as you’re essentially just

• paying for depreciation rather than interest and principle.  

Disadvantages to leasing a car: 

• Leasing contracts do not change - even after an accident.

• So if you get in an accident and the insurance company gives you less than what you owe to the dealership, you’re out that money.

• Caps on time and distance.  Only a certain amount of miles and can only keep the car for a set period of time.

• No ownership of the car - but still responsible for repairs

• Never get to drive for free (can never “pay off” a lease) and drive for free

• Insurance cost is often higher when you lease

Websites mentioned during the podcast:

 Headline: They lived paycheck to paycheck before the pandemic. Then their worst nightmare came true.

Renting VS buying a house

When is renting a good thing?

• When you are unsure of your career and could have to move for a career.

• I.E. Military, people early in their careersSomeone who hasn’t yet “settled down.”

• If you’re someone who doesn’t like dealing with maintenance of a propertyIf you’re someone who likes having access

• to a lot of amenitiesIf you’re in a market with super high housing costs but low rent prices.

• If you don’t have adequate savings (emergency fund, retirement, etc..). 

• It may make sense to wait until you have your financial house in order. 

• Don’t rush into buying a home as there are expenses that come with it.

Advantages to renting:

• No maintenance costs or repair costs -These can often be ~1% of the cost of the house. 

• So if you own a 300,000 house, you’re looking at 3,000 in repair costs just to upkeep the property. 

• Just call up the landlord to get things fixed when they break.  No out of pocket to you

• Insurance costs are lower- you’re not insuring the house- just your belongings. 

• Renters insurance policies are cheap.

• You don’t “pay” real estate taxes  - all costs are built into your rent payment (exception is utilities).

• Have a better idea for budgeting purposes what it’s going to cost to live somewhere.

• No down payment- with a house - it’s 20%.  With renting - it’s often just a month’s rent which can be a substantial difference. 

• You don’t need that big down payment. 

• Flexibility on where you can live.  If you find a better place that’s chearper, you just pick up and move. 

• Don’t have to pay 6% to realtors to sell your place. 

Advantages to buying:

• You have a fixed housing expense for the next 30 years (or however long your mortgage is). 

• No landlord can raise your cost of living there. 

• We would argue that it’s not even “fixed”, it’s actually a depreciating cost over time due to inflation.  Your mortgage payment will stay the same, but the cost of anything you buy will go up over time. 

• Every single month when you make a payment to the mortgage company, you are building equity in that house. 

• So not all of that payment is a sunk cost like it is when you rent. It’s a form of forced savings.  

• You get to make the house your own and nobody can kick you out.

• Homeowners can take tax deductions on the interest they pay toward the house.

• They can also take tax deductions for certain energy improvements made to the house.

• If you tire of the house, you can rent it out and possibly turn it into a side hustle.  

Ways people make money when buying:

• Equity build up

• House appreciation (3% annually on average)

Main takeaway: Given that the money you’re putting into buying a house often either improves

the home and it’s value or equity - it’s generally a better idea to buy rather than rent. 

Buying almost always increases your net worth faster than renting (especially in a low interest rate environment).

Websites mentioned during the podcast: Headline of the week: Social Security Trust Fund Expected To Run Dry Three Years Earlier Than Estimated A Few Months Ago

Link to Investopedia guide on backdoor roth

Roth IRA / Compound Interest Notes:

Roth IRA Contribution limits: 

$6,000 per year / 7,000 for 50 and over

Who can invest in a Roth IRA? 

Single with Modified Adjusted Gross Income of 139,000 or less in 2020 

or

Married file jointly, your MAGI must be under $206,000.

Back Door Roth IRA* - A clever way to get around the income limits 

• Contribute to traditional or non-deductible IRA

• Convert the traditional or non-deductible IRA to a roth

• Will have to pay taxes on any earnings made between the time

• you contribute to the standard IRA and when you convert.

• Once the money is converted it becomes Roth money and all money within the account is not subject to tax in retirement. 

• *We recommend consulting with an accountant prior to doing a backdoor Roth IRA to account for any potential tax consequences. 

What is compound interest? 

The interest on your money calculated based on both the initial principal and the accumulated interest from previous periods.

What is the key to compound interest?  Time - So get started!  The longer the money is working for you, the more of an impact it can make in your life.  

Illustration of compound interest:

1 time contribution $20,000 - invest it in S&P 500 ETF… assumed 8.5% interest rate

After 10 years: 45k

After 20 years: 102k

After 30 years: 231k

After 35 years: 347k

 After 40 years: 522k

Websites Mentioned on the podcast:

Headline of the week: Trading activity climbs ahead of presidential election 

Compound interest calculator 

https://www.coachcarson.com/blog/

https://www.biggerpockets.com/ 

The Great Debate: Pay down low interest debt or invest for your future?

Example mentioned during the podcast: 

Let’s just say, you have a 500,000 mortgage at 3.25% interest, you just bought the house. 

Payment is $2,200 a month (P&I).  You have an extra $1,000 you were

thinking of putting toward the mortgage to pay it off early as you hate debt.

If you applied the extra 1,000 toward the mortgage.  You would reduce the mortgage from 30 years down to 17 years.

At the end of 17 years, you would own your house and you would have an asset worth 500,000. 

Other 13 years, you take the money you were putting toward the mortgage and invest it. 

3,200 invested over 13 years at 8.5% interest = 862,000

End of 30 years: 500,000 house + 862,000 investment account = $1,360,000 in assets 

Next example: If you paid as agreed on the mortgage (2,200) for 30 straight years and took the extra 1,000

you have and applied toward investing in an S&P 500 index fund and it averaged 8.5% per year,

you would have 1.5M in your investment account. 

End of 30 years: 500,000 house + 1.5M in your brokerage account. = $2,000,000 in assets 

You end up with 47% more money if you invest the extra $1k vs paying down the mortgage. 

This is because you were borrowing money at 3.5%, but you were investing your money at 8.5% interest. 

Websites mentioned during podcast:

Headline of the week: 3 Reasons the stock market will continue to rise no matter who wins the presidential election

Fidelity Rewards Visa Signature Card - Unlimited 2% cash back on all purchases if redeemed for investment savings

(Retirement, HSA, Brokerage, 529).  Buy those Fidelity Zero funds! No Annual fee

Citi Double Cash - 2% cash back.  1% as you buy, 1% as you pay.  No Caps, no annual fee

Chase Amazon Rewards Visa

Non Prime customers: 

3% on Amazon and Whole Foods, 2% on restaurants, gas and drug stores, 1% on all other purchases

Prime Customers: 

5% on Amazon and Whole Foods, 2% on restaurants, gas and drug stores, 1% on all other purchases

*No Annual Fee

*No Earnings Cap

*No Foreign Transaction fees

Target Red Card  

5% off on all Target in store and Online purchases

5% off at Starbucks

An additional 30 days to return items

Free shipping on most online orders

www.creditkarma.com - Track your credit score

www.annualcreditreport.com - Get your free credit report here once per year.

Only 45% of people pay off their cards in full every month

Our Favorite Index Funds: 

Schwab:

https://www.schwab.com/etfs/invest-in-etfs

SCHB: Schwab U.S. Broad Market ETF  - .03% expense ratio

SCHF: Schwab International Broad Equity ETF - .06% expense ratio

Target date funds (all .08% expense ratio): https://www.schwab.com/mutual-funds/mutual-fund-portfolio/target-funds

Vanguard:

VTI - Total Stock Market ETF  (tracks total US Stock Market)  0.03%

VUG - Vanguard Growth ETF  0.04%

VOO - Vanguard S&P 500 ETF 0.03%

Fidelity: 

Link to Fidelity Zero Funds

FNILX - Fidelity Zero - Large Cap fund (big companies)

FZIPX - Fidelity Zero - Small to Mid-Cap company (small/medium sized businesses)

FZROX - Fidelity Zero  - Total Stock market index

FZILX- Fidelity Zero - International Broad Market index fund 

Websites mentioned during the pod:

Choose FI - Episode 24 - Index fund investing 

Headline of the week: Robinhood Internal Probe Finds Hackers Hit Almost 2,000 Accounts

Compound interest calculator used for our example with David and Oscar

Continuation on our discussion about how we think you should prioritize your finances. 

Good framework as you work toward your financial goals.

Headline of the week: Less than 11% of people with federal student loans are paying during COVID 19

Dollars and Hops Financial Playbook

Step #1 - Establish and fund an emergency fund: 3-6 months of expenses

Step #2 - Pay off all high interest rate debt

Step #3 - Max out retirement accounts (401k’s & IRA’s)

Step #4 - Save for Children’s 529 (optional)

Step #5 - Build your wealth by investing in brokerage account

Websites mentioned during the podcast:

Clark Howard 529 plan guide: 

https://clark.com/education/clarks-529-plan-guide/

Action Step: Evaluate where you’re at in the financial playbook.  Set goals for yourself on where you plan to get to and when

Discussion about how we think you should prioritize your finances. 

Good framework as you work toward your financial goals

Headline of the week:Near-Zero Interest rates may be needed for up 3 years, says Dallas Fed’s Robert Kaplan

Introduction to the Dollars and Hops Financial Playbook

Step #1 - Establish and fund an emergency fund: 3-6 months of expenses

Step #2 - Pay off all high interest rate debt

Websites mentioned during the podcast:

https://www.bankrate.com/ - Great website to shop online savings rates

Debt Snowball explained - Click here

Debt Avalanche explained - Click here 

Action Step: Do you have an emergency fund?  If not, think about funding one.  Have you looked at your debt and decided how you’re going to tackle it? Consider using the debt avalanche or snowball to pay down your high interest debt as quickly as possible.

Headline of the week: Click here for article

What is a budget? Why is it important? 

Free tools to help you manage your budget:

Free Google Spreadsheet to track your monthly budget: 

https://docs.google.com/spreadsheets/d/13DrY7fq9jlQ5k1hMItNK97P0LGR5YjOaXLERjKpXaBA/edit?usp=sharing

Instructions for using free monthly budget spreadsheet: (Must have a google account)

• Click the link above - it will open the monthly budget spreadsheet

• Click the top left corner of the spreadsheet (to the left of column A and above Row 1) to select all.  Hold down control and press “C” to copy to clipboard

• Open a new google sheet from your personal account.  

• Sign into gmail account

• Click google apps button in the top right hand corner, select drive

• Select New in the top left, select sheet

• While in the new spreadsheet, click cell A1 and hold down control and press “V.” 

• The budget spreadsheet (and all of it’s formulas) will now be in your own spreadsheet. Be sure to rename the spreadsheet so it’s easily identifiable.

• Edit the sheet to include your personal budget items and use it to identify areas you can improve upon.  

• Track your budget on a monthly basis to ensure spending is under control.  End goal: drop as much money as possible to the bottom (leftover) to save and/or invest at the end of the month.

Other free tools for tracking your monthly budget:

• www.mint.com 

• www.personalcapital.com

Paid tools for tracking your monthly budget:

• https://www.youneedabudget.com/

• https://debitandcredit.app/ (In app purchases)

First ever episode!  Lance and Scott introduce themselves and cast a vision for the podcast: help coach, motivate, and provide financial education to help others achieve financial success. 

Content/Discussion:

• What is your net worth?

• Why you should track your net worth monthly.

• Using a google sheet and our net worth calculator to calculate your household net worth. (link below).

Action Step: 

Calculate and track your net worth using the net worth calculator

Useful Links mentioned on the podcast: 

Net worth Calculator: https://docs.google.com/spreadsheets/d/1Hmdbc16iXlGp-_1LBkvsVgUMxZE5r38scNE-tL4edeA/edit

Instructions for use: (Must have a google account)

• Click the link - it will open the net worth calculator in view only

• Click the top left corner of the spreadsheet (to the left of column A and above Row 1) to select all.  Hold down control and press “C” to copy to clipboard

• Open a new google sheet from your personal account.  

• Sign into gmail account

• Click google apps button in the top right hand corner, select drive

• Select New in the top left, select sheet

• While in the new spreadsheet, click cell A1 and hold down control and press “V.”  

• The net worth calculator (and all of it’s formulas) will now be in your own spreadsheet. Be sure to rename the spreadsheet so it’s easily identifiable.

• Edit the sheet to include your personal assets/liabilities to calculate your household net worth.  

• Track your net worth each month (we recommend setting a recurring reminder in your calendar on the last day of each month).

How to money podcast link:

https://podcasts.apple.com/us/podcast/how-to-money/id1337718773