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A Wiser Retirement®
304. Under the Radar: Wealth Strategies for the Quietly Rich
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In this episode of A Wiser Retirement® Podcast, Casey Smith and William Medcalf, CFP® dive into what it really means to be “quietly rich” and how smart habits, not flashy spending lay the foundation for financial independence.
Related Podcast Episodes:
- Ep 73: Leave a Legacy of Generosity
- Ep 260: 10 Financial Habits That Lead to Long Term Success
Related YouTube Videos:
- Pitfalls of Living Rich but Not Building Wealth
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Introduction to Quiet Wealth Building
Speaker 1Frugality may not be the right word, but it's almost more of an intentional saving and an intentional attention to live below your means. Kind of a general recommendation would be to save 10 to 25% of your income. I mean, that's a wide range there, but if you're doing that, that pays off a lot in the long run, right pays off a lot in the long run.
Speaker 2Right? Welcome to Wise Retirement Podcast. Are you curious about how to grow and protect wealth without living a flashy lifestyle? I'm Casey Smith. Today I'm joined with William Medcalf. Each week, we bring you practical advice on retirement, investing and planning your financial future. Don't forget to subscribe to the podcast wherever you're listening. Let's get started, hey.
Speaker 3William.
Speaker 2Hey, how are you Doing good?
Speaker 3Yeah.
Speaker 2So everybody here has different nicknames. Some people don't have nicknames yet. I call William Mr Dependable because he's a superhero. Oh, I don't know about that. I can count on William to research anything. That's going to be accurate and I can trust it. I appreciate that. Welcome back to the podcast, Mr Dependable. I'm glad to be back.
Speaker 1You know who's not dependable. No Chat GPT.
Speaker 2Really.
Speaker 1Why is that?
Speaker 2About four or five days ago I got in my car and it said coolant level low. Scolding could happen. I have a bmw so it uses like weird words sometimes and I was like what, how's the coolant low? This is a 23 model, like I should. I. I buy these things. I don't have to deal with this, you know right right and uh, I I had to be somewhere.
Speaker 2So I was like you know what? We schooled the engine, we schooled the engine, I gotta be here. And then, after I was taking my daughter somewhere, so after I dropped her, I went immediately to like an auto parts store.
Speaker 3Of course, bmw has to have their own coolant they can't use common people coolant no, so I had to had to figure that out.
Speaker 2Um, and then the message went away. I was like, oh, okay, well, maybe it was just a fluke computer.
Speaker 2Computer malfunction thing, and so then I went. Um, I went a few more days and then this morning, of course, I decided to be ambitious. Uh, I was up this morning, I'm gonna go work out, use elliptical, do all the right things that a middle-aged man should be doing right, and what do you know? Coolant level low message. And I'm like all right, well, I've been carrying this special uh, bmw blessed coolant around, oh nice. So I was like well, engine's cold, so this is the time to do it. Yeah, don't know where to put it in, like I'm looking at it like the car, and like there's, there's very few places that this thing could go.
Speaker 2Yeah, but two look like it could be it, and I'm pretty sure you don't want to put cool in the wrong one, right.
Speaker 1They don't want us common people working on our own cars. No like that, no so.
Speaker 2So I uh, instead of opening up the glove box and getting the manual out, which has a lot of words, right?
Speaker 1yeah, can't chat, gpt, that I was like I'm just gonna chat gpt.
Speaker 2I told what to model it was, what year it was made, um, and I said where's the coolest? Give me a diagram of where the coolant is.
Speaker 1Right, I put this coolant in, yeah.
Speaker 2And it told me, and I went there and there was nothing that looked like that. Uh and I actually went to YouTube and I saw what chat GPT was referencing Right, and I was like, well, that's not even my model, like it was a 5 series, but it wasn't like the m550.
Speaker 2Yeah, so very slight difference, I guess I don't know um, I don't know my bmws to tell you which model, sure, where they put the antifreeze, so, um, so anyway, I I said I don't have a translucent reservoir. And then it said, oh right, it's black. Well, the whole thing's black, everything in there was black, right. So I was like, ah, forget it. So I just opened up the manual. I'll start reading the manual. Well, come to find out. There's two reservoirs there's an overfill reservoir and then there's the main reservoir, and you get to put it into the main reservoir.
Speaker 2So, uh, supposedly with this error code. Yeah, and you know what BMW made it really simple for me If I just pushed manual on the screen.
Speaker 3The manual is built into the car.
Speaker 4It tells you exactly what to do yeah, that's.
Speaker 1that would be a good place to start. Probably. I figured that out.
Speaker 2It's like, oh wow, the car actually just tells me where I'm supposed to put it, and so, yeah, I lost 20 minutes of my elliptical time today. But hey, you know, the antifreeze is in the coolant, and if you have an M550, it's on the top right side toward the driver.
Speaker 1That's where it is Good to know BMW tips out there for anybody listening.
Speaker 2I know it's funny, I know it was funny as I was. In the manual it says you may have to occasionally add fluid. Right, this is crazy. Yeah, you know I mean I don't want to digress into cars and my car show, but but everyone was laughing at me because when I was, I was at a sports event and I got backed into. I had bought brand new tires. Yeah, I, my car got backed into and it had to go to get a new door. Right, so it was in the shop. They couldn't get the new door. The whole tariff thing had started. Oh, there's a lot of confusion over you know I was paying for nothing, but you know how much this door really going to cost now, Right, and it sat there for what? About a month before all the parts came, maybe a little bit more. Well, the tires just sat. No one was driving the car, obviously. Yeah, Well, the tires went out around.
Speaker 1Yeah.
Speaker 2So when I picked up the car, the car had all these vibrations. Yeah, I was like why does it have all these vibrations? It's like oh, we're going to have to give you new tires. Those tires aren't designed to sit. So now, if I go out of town for like two weeks, I have to like, call somebody to go over to my house to drive my car.
Speaker 1Just drive the car like a foot. Yeah, yeah, yeah, that's crazy.
Speaker 2I know I'm inching toward a Toyota Corolla every single day, yeah.
Speaker 1I drive a 4Runner.
Speaker 2It's a workforce and I've never had a problem finding where to put anything in the engine. So I know it's crazy.
Speaker 1That's my recommendation.
Speaker 2So I think Toyotas would resonate with this topic today actually.
Speaker 1Yeah, that's true, that's a good segue, All right.
Speaker 2So let's talk about you know, I tell my children all the time they go to a school with a lot of wealthy families, or I will say rich families and I say, guys, there's a difference between rich and wealthy. Yes, Rich people make a lot of money and they spend a lot of money. They have flashy cars, flashy houses. Wealthy people are probably driving the Toyota Corollas living in normal housing. Nice house, but normal housing.
Speaker 1Yeah.
Speaker 2Right Below their means Right, and there's super, super wealthy people who can look rich and be wealthy at the same time.
Speaker 1Right, you can have a Learjet and be living under your means and it seems like every one of your neighbors is one of those people.
Speaker 2Right and everybody you know is one of those people, right, but that's like the very, very, very, very top percentile of people. So I don't want to steal from your thunder, so let's, sure, let's. Why don't you go ahead and start by defining what is quietly rich? Mean, yeah, and why do you want to be quietly rich? Why would I be loudly rich?
Speaker 1There's a lot of reasons for that, and I mean, it depends on every person. So, but you know, quietly, rich is just. You know, like you were describing the millionaire next door. So that was a book that was written about 25 years ago and I think that term five years ago.
Speaker 2Yeah, what really is popular and old and old.
Speaker 1Yeah, that's I'm. Yeah, I don't want to say yeah, yeah, you're not old.
Speaker 1No, um, that term was really popularized by that book and, um, basically what they were talking about in the book is you know your wealth accumulation relative to you know how much money you make, and so they had a little equation in there and they had, like these different categories of like. You know you're an under accumulator of wealth, based on your income and your savings, or you know they call it a prodigious accumulator of wealth, like hyper accumulator, or you're an average accumulator.
Speaker 1So that's where that term comes from. But really, what we're talking about today is just kind of the principles that we see with clients who are, you know, we. We call our clients kind of the millionaire next door. A lot of them are, um, you know, and these are people that have just done a really good job building their wealth because of their good habits and um. So that's the crux of what we're going to talk about.
Speaker 2All right, um, what are some of the quality traits that you see in people like this?
Speaker 1Yeah, so I mean, frugality may not be the right word, but it's almost more of an intentional saving and an intentional, you know, attention to live below your means. You know, kind of a general recommendation would be to save 10 or 10 to 25 percent of your income. I mean that's a wide range there, but if you're doing that, that's going to be that that pays off a lot in the long run, right? Um, you know so, knowing what you're saving as a you know uh, percentage of your income is important. So, um, being able to set those milestones for yourself is something that's really good to do.
Speaker 1Um, you know being intentional with your financial decisions, especially, you know, if you're buying a vacation home or a boat or you know a plane or something like that. You know making sure that those kind of align with your overall goals and they're not just going out and purchasing them on a whim. Um, and you talk about this a lot actually, but you know, having a mission statement that aligns with your goals kind of helps you keep those you know spending items and big financial decisions in line with your goals. So you have this stated purpose of, like, what is your wealth trying to accomplish?
Speaker 2Right, you know what is your purpose. Wake up every morning. What are you trying to do? What are you excited about? What are your guidelines? No-transcript, you know, you, you, you see that Porsche 911 and it's really cool.
Speaker 1Yeah.
Speaker 2Right, but but even if you could pay cash for it, is it, is it $350,000 car part of your family? Mission statement.
Speaker 1Yeah.
Speaker 2Right, Um, and maybe that's your hobby. We have we have clients with that have the way nicer cars than certainly what? I drive but they don't have club memberships, they don't have, they don't have other things.
Speaker 1And that? Does that align with what you're trying to do? Right, right, right, they have one child, yeah.
Speaker 2They have a lot of disposable income in the end, right. So that's our hobby, that's what they do, and that brings them joy, and that's fine. Yeah, but there with wealth managers who can't get enough, like it's the best of everything.
Speaker 1Yes, right.
Speaker 2And they're the ones that typically are are just spending a lot of money and there's like no end in sight.
Speaker 3Right.
Speaker 2And at some point they'll just be. You know they probably won't be living off just social security, but it'll be pretty close to that.
Speaker 1Yeah, yeah, right, if they're not careful and they don't have options theme in today's episode as well, or the worst one is can I afford the payment?
Speaker 2That mentality is not good. It's like can I afford this payment? I'm not saying it's horrible to have a payment. Sometimes I have to have payments because I want my money in my business and I want to grow my business, if I can grow the value of my business by $2 million, then I'm better off having that car payment.
Speaker 1But it's still not ideal's it's.
Speaker 2it's still not ideal, right.
Speaker 1Right, and it has to be. You have to take that into consideration in the you know grand scheme of things. It can't just be one thing. It's like oh, I can afford this payment, therefore I can go get this really expensive car or whatever it is. You know what I mean. So that's kind of jumping into the next one.
Speaker 1That's, you know know, limiting debt, not eliminating all debt, yeah, um, but being strategic about where you use debt and is it going to be something that helps you create wealth or aligns with your goals I call it uh building from a rock solid foundation yes like if you're going to build for the future yeah everybody wants to get quick, get rich quick, so they they.
Speaker 2Occasionally people will come in and say things like well I want to buy rental homes. I want to do this, I want to do that Right, and you're looking at these. Well, you got 22,000 of credit card debt. You got a personal loan 10,000,. You got two car loans student loans, student loans. And now we want to be good build a real estate empire Like this is not how this works, Like. You have to change your mindset at the beginning. You need to read a book like millionaire next door.
Speaker 1Yeah, get your house in order.
Speaker 2Let's make sure you're saving enough for retirement. You don't want to. You want to be house poor. Um, there's all kinds of things you got to do at the front end before you can start building wealth in different ways.
Speaker 1Absolutely. Yeah, um, and that's kind of flowing into. The next thing we had here is, you know, automating savings and focusing on long-term goals. You know, and going back to the mission statement, I think that that just does a good job of of putting longer term goals in focus, because it's just so easy to get sucked into the day to day and taking a step back and saying you know, you may have a general inclination or or understanding of what you're trying to do, but it's still, you know, good to take a step back and say you know, what do I want this to look like in 50 years?
Speaker 1or you know 40 years or you know whatever. You know time horizon you want to look at Um, but just understanding that and then making sure your decisions are actually aligning with what you want and beginning with the end in mind is is another way to put that.
Speaker 2Yeah, I think um you know, maxing out your 401k plan is just a beginning. Yeah, you know you max. You get to the point where you have enough money that you can put the maximum into a retirement account for husband and wife if they're both working. Uh, and then after that, where do extra dollars go?
Speaker 2Because you can max out a 401k plan and you can max out social security, but for high net worth families, that's not enough. You're going to have to do some more, and a lot of times it's wrapped up in business valuations and things of that nature. But you have to um, uh, if we're talking to a young person, um you're not gonna be able to achieve those things, and that's normal.
Speaker 1So, you have to start somewhere, so start that automated savings program right, right, and you can save um in an automated fashion to you know your bank account and other things like that as well. So obviously we want you to do the 401k and get the get the match. But you know, if you have excess savings or maybe you want to squirrel money away from yourself, so that you're not, you're not spending it just because it's in the account.
Speaker 2Then that's another way to start that.
Speaker 1That's what I do.
Speaker 2Yeah, I do the same thing I have to put it somewhere where I kind of forget it's there, yeah.
Speaker 1And I, I have a rent like a recurring transfer to obviously 401k but then to the high yield savings and then something that goes to a brokerage account as well. So you kind of I kind of spread things out a little bit.
Speaker 2I like nice things. I have this extra resource. I could hire four more people. Yeah, we could grow at 60% instead of 30%. Yeah. And then Alexa's like let's look at our long-term plan and we make decisions based off that. And then Alexa's like you're crazy. If you do that, I quit, yeah, so yeah, planning is important.
Speaker 1So, you know, going back to kind of the foundational piece, you know saving is important more than having a strategy at first. So what I mean by that is you have to be saving and putting yourself in that position for strategy to matter Right. And you know, most of our clients or people that are listening to this probably are already doing that. But I do think it's important to note because, you know, having a, you know, really sexy investment strategy doesn't really matter if you're not actually putting dollars in there. And I think a lot of people want to get rich quick and so you know they're looking to, you know, circumvent that piece of it, which is you need to be saving.
Core Traits of the Quietly Rich
Speaker 1That's the bottom line. Um, and ultimately, what we want is for you to have options. Um, you know, building, building margin is how I describe it. You know between what you're you're bringing home every month and then what you're spending every month, that cushion allows you to. You know if you need to search for a new job or you maybe you lose your job you know, to search for a new job or you maybe you lose your job.
Speaker 1You know you're not gonna. You know not have, you know um, resources to take. You know, take care of your basic needs and things like that. Give you options. Yeah, that's the bottom line. Um, you know we want you saving, even if you feel like you don't have enough to save. You know if, if you're in that position, then really you should be focused on increasing your income and doing everything you can in that regard. So I won't spend much time there.
Speaker 2So, moving into strategies, yeah, so there's some people you can't, just can't help, and we're not talking to any of our podcast listeners because they're mostly clients and people learning about us, but typically what happens is it's the brother or sister, or maybe a child or niece or nephew, and I had to have one of these conversations, even in my own family recently, where I basically said you're a well-educated person.
Speaker 2They're going through a divorce and I said you're going to get through this fine, this would be the game plan. This is how you can keep the house. But then I said you're a to get through this fine, this would be the game plan, this is how you can keep the house. But then I said you're a well-educated person, You're working below your education level. You should have done these things by now at your age and you should be making twice what you make. Didn't want to hear that.
Speaker 2Didn't want to hear that at all, but that's the honest truth, so I'm not going to like help bail you out on this side, if you don't but you also have to hear the truth, right, and, and so for a lot of people, you have to tell them the truth.
Speaker 2It's like you're not living up to your full potential, right, right, and some things are hard. Everything's hard. Success is hard. It takes a long time. It took a long time to build this firm here. This is my lifestyle. Now is not how I started it out 25 years ago. So you have to put in the work and the people that I talk to that I give free advice to you do it too, and some of the consultations only about one in 10 come back and say, okay, I'm willing to do that.
Speaker 2Uh, thanks for helping me out. I'm trying to. I'm gonna go figure this out.
Speaker 3Uh, it's because it's hard work and it's just much easier to do the wrong thing.
Speaker 1Yeah, yeah, well, and yeah, and you can't help those people.
Speaker 2Those people have decided that they don't want to put forth the effort. So therefore why should we put forth the effort Right? It's family members that then support them.
Speaker 1You know and you can help them where they are. But yeah, you know that that has to align with the expectations too because, sometimes people have, they're in a situation like that and they have these expectations that are way out of line with, like reality. Yeah, and you, you have to step in and kind of give them a harsh not harsh, but tough love, right you, but tough love, right you know. A reality check, you know. And that's.
Speaker 2this is a land of opportunity, but for those who want it given to them, this is not a land of free handouts. Right, you should have been a born of Saudi descent.
Speaker 1Yeah.
Speaker 2And lived in Saudi Arabia. I think those are handouts, right? I think so, yeah.
Speaker 3It's all. It's all.
Speaker 2Expats there's hats that work there because they can't work or something. It looks bad or whatever.
Speaker 3But yeah, this is the land of opportunity.
Speaker 2We came here in a boat, we cut down trees, we did stuff Right and there's some softness out there.
Speaker 3So fight the softness, yeah for sure.
Speaker 4Quick check-in. Have you thought about the legacy you'll leave behind? Download 7 Steps to leave a financial legacy. A free guide from Wiser Wealth Management to learn more. It's not just about wealth, it's about leaving a lasting impact. Go to wiserinvestorcom forward slash guides to download your free guide today. Now let's jump back into the episode.
Speaker 1Yeah, so I mean going back to lifestyle or sorry strategies that we see with the quietly rich people. You know living below your means and avoiding lifestyle creep is a big component of this. So when you get that raise, instead of spending all of the raise, you know holding back and then scrolling more of that away.
Speaker 1That's another thing that we see um keeping wealth private. You know that's another thing. If that's part of your, your goal, you know maybe your family isn't as wealthy as you and you don't want to be viewed differently than them. I've seen that. Or you know family that maybe you don't trust to know that you're wealthy, kind of like what you're talking about.
Speaker 2You're not gonna be yeah, what I, what I've seen, is wealth tends you tend to separate from the family. Right, because what? What happens is they don't, they don't, people don't understand right and you think differently. They look at you differently and yeah, every you know, sometimes, um, everything's a conspiracy theory you know, you know I mean yeah it's like you know grandma, when she got abducted by the aliens. Uh, you know it's weird, weird stuff.
Speaker 2I mean, I had I had a relative one time. Uh asked me just as point blank fact uh, this is a distant relative uh, but point, point blank fact uh.
Speaker 3When you were an airline pilot.
Speaker 2How often did you guys do the chemtrails?
Speaker 1There's a button in the plane you push.
Speaker 2And the chemtrails is the whole conspiracy theory that commercial airliners are dumping things into the sky that reduce birth rates and control the population. It's just not true.
Speaker 2It's kind of silly, yeah, um, it's not, it's not not, not a real thing that there have been experiments with the government and and weather and patterns I mean, that's known and how they affect hurricanes or whatever. But um, but no, uh, delta airlines is not dumping. Yeah, it's called science and it's uh, the hot jet engine hitting the cool atmosphere as you go higher in an airplane it's cooler. I went to see Ethan up in Western Kentucky this last weekend. It's 92 degrees on the ground. When I got to my cruising altitude of 6,000 feet in the Cessna it was 62 degrees.
Speaker 3It was very pleasant yeah.
Speaker 2So it's, the same thing happens with the jet engine, except the air temperature gets into the below freezing, and so at that point that creates the condensation that you see in the sky. It's not delta dumping chemicals onto us, yeah, anyway. But so stuff like that happens because you tend to be more well-read, you tend to think about things.
Speaker 1It's a different mindset completely, it's just a whole different mindset Right.
Speaker 2And so that's why you you start separating yourself from from some of that, just naturally, because you're like, well then, that doesn't necessarily go together, right.
Speaker 1Right, and so that you know living a more quiet lifestyle will protect you from those dynamics. And then you know there's even things where you know with estate planning you can also kind of think, keep things private, like with trust and things like that as well.
Speaker 1Right, um, yeah, so asset protection is another thing that becomes important as your wealth builds and you know our clients were very um judicious with protecting assets once we have them. And so you know using trusts to protect assets from you know children or son or daughter-in-law. We may really like son or daughter-in-law, but we also may want to protect you know assets from divorce and keep that in the family longer term. You know using LLCs to protect you from lawsuits with rentals and businesses and things like that. We want to be set up um for success. We don't want, you know, one bad situation to derail all of this because they can.
Speaker 1They can sue you and in this litigious society right now, I mean we see it all the time. You know there's, you know, clients that have those types of issues going on and I mean it just happens a lot right now so yeah, funny story.
Speaker 2Um, so my daughter everybody knows that she's a, she's a great horse rider, she has three horses and she's like going through this little volatility girl thing at 17, and so you just never know what you're going to get every day, and so we? Um, she kept saying that she's not going to go to college, she's just going to go work on a farm somewhere, and I started thinking he's like, wait a minute, these horses are in her name, like when she's 18.
Speaker 4So I quickly formed an LLC.
Speaker 2I moved all the horses into the LLC. Now, if I die, they can become her horses, but right now they're my horses. Until we have uh. We have a well-established uh career path.
Speaker 1Right, yes, career path, long-term thinking, yeah, all of those things, yeah.
Speaker 2Right, yeah, and the name of the LLC is like her name, right, uh, but so so it looks good to her. Uh, but but the the operating agreement, uh, clearly has my name on this, yeah.
Speaker 1And she remember. Yeah, that's kind of a few years like protect people from themselves.
Speaker 2You can do things. You can do things to make sure that you're protecting um your loved ones and she'll be fine she's. She has a great level head. But just one day I was with all the you know when I leave the house. You know every teenager is like this I was like huh, I think I better not assume the best Right Another thing too is insurance. Yes, you know you think about the ways to lose your money. It could be something silly.
Speaker 2You had a bad day you look down and next thing you hit somebody and you cause a lot of damage and they sue you for $2 million.
Speaker 1Yeah, or somebody gets hurt on your property.
Speaker 2Maybe you've got, I don't know like.
Speaker 1ATVs or something and somebody gets hurt, like that's.
Speaker 2Yeah, we had a client um somebody. Teenagers are over the house and one of the girls. Would she slipped and fell or something?
Speaker 1I don't remember the weight on somebody's toe or something. Oh, that's right, she dropped a weight.
Speaker 2Yeah, or someone dropped a weight on her toe, something and the parents ended up suing yeah uh, so you want to have an umbrella that's probably equal to your net worth yeah just to be safe yeah, and that's something where, like you know, we have people that that save and they want.
Smart Wealth Protection Strategies
Speaker 1They're very frugal in nature and so they don't want to pay for the insurance. That's true In terms of bang for your buck umbrella insurance is probably the best out there. It's a couple hundred dollars a year.
Speaker 2That's a good point. Savers are really hard. It's hard to get them to go travel in retirement and it's really hard frequently and it's really hard to get them to pay for things like that. Another example would be someone that has a very large position in one company and the basis is really low and you can't selling. It is very tax painful.
Speaker 1Right, so you could.
Speaker 2You can do something else called writing a put you could buy insurance. So if it drops below a certain price then then you're protected, Right Right, we did this for another client after, like, the Lion Air crash at the 737 Max. I saw that on the news. I was like all right, that's number two in the Max.
Speaker 1Yeah.
Speaker 2We need to buy put. And then we did it. It was like 20 grand to cover the cost. But you know what A lesson? A year later, I think Boeing stock had fallen from 380 down to 120 or something like that. We sold it for 380. Yeah, so that protected it Right.
Speaker 1Yeah.
Speaker 2Uh where what I find in other clients who have single stocks um that are a large percentage like 10 plus percent.
Speaker 1Yeah, they won't spend the money to buy the put Right, or they're just afraid of paying the tax too. That's the other thing. Yes, that's the other option.
Speaker 2Alternative is like let's just pay the tax and uh, they, they don't like that either, cause that's costing them something, right, uh, but if, if you have a bad CEO, um, even the best companies can fall.
Speaker 1Yeah.
Speaker 2If it's, even if it's just 10, 15 years, and they make a rebound, that's your retirement, your good years of your retirement, right. So you have, you have to. Yeah, you can't be foolish. Um, so you have to find ways to protect your savings that you've built up. Now, market protection I don't know that you really need If you just have a large concentration in the S&P 500 and the market's volatile. That's why they try to sell you annuities and garbage like that, right. So I'd say you don't need market protection if you have enough cash reserves.
Speaker 1Yeah, which is?
Speaker 2what planning is about. Right, but yeah, yeah, sorry, I think I derailed, no, no, that was great, you know.
Speaker 1And then there are ways that we can be tax efficient, and you know that we're not. We're actually being tax efficient and saving the client money. So you know, if you're a charitably inclined person already, this isn't necessarily something that makes sense if you, you know, are not necessarily charitably inclined, but you can bunch donations for multiple years and into one year and then you know, do one large donation to something like a donor advised fund, and that you know that could be to cover the sale of a property.
Speaker 1There's a lot of different things that that could help with, but that's a. That's an example of a strategy with charity. Um, you know, we always look at Roth conversions. It's coming up to that time of year where it's tax planning season and, uh, roth conversions are ways we can save you money in the future. Um, looking at the benefit analysis for that, um, that's not a one size fits all thing, though that's a very specific thing we look at for each client who we're talking to.
Speaker 2Some of the worst articles I've ever seen on this or like in the AARP magazine. I don't know where they get these advisors to write this stuff, but it's horrible. Um, so yeah, this is not something advice you can give to masses. It's on each individual family.
Speaker 1Yeah. It takes real tax planning to do it Exactly, exactly, exactly, yeah, and a lot, of, a lot of brokers can't even give tax planning or they won't.
Speaker 2So no, no, no, if you're not like at Everett Jones or Merrill or Morgan. They can't do tax planning, so you're kind of stuck and you're. Unfortunately, your CPA probably doesn't do tax planning either.
Speaker 1Yeah, people don't understand that.
Speaker 2Yeah, you gotta be a really big client there for them to start doing real tax planning. But we do tax planning in house just because I can't trust the CPAs to actually understand the big picture and understand why we should be doing what we're doing Right. If you, if you corner your CPA, they have the skills to do it Absolutely. But I'm finding that the margins in their business are so small. They have to have a lot of clients, they have to move a lot of returns.
Speaker 2Yeah, so that the margins in their business are so small, they have to have a lot of clients, they have to move a lot of returns, yeah, so they're not making money on the planning side, they're making money on the on the preparation, the preparation which is somewhat of a commodity Right, Really. Yeah, so they. They ought to be doing more planning to justify their, their cost, right, but that's not what happens.
Speaker 1Yeah, Um, you know, and then timing and uh, the location of where you're taking money in retirement is another important thing. Um we can be very tax efficient with that as well, just as and that's another thing pre-retirement to building different buckets. I think we talk about this a lot, but you know, having a taxable asset bucket and your pre-tax and then also Roth, those three um work really well in concert with one another in retirement, or we also. You know, it depends on the situation. Again, that's not a one size fits all thing.
Speaker 2Also I'll add to this list. We have clients that are living well below their means. So when the required minimum distributions come up between age 73 and 75, they're actually donating money from the RMD directly to their charity. When they do that, they get a full deduction. So if you donated you know $1,000 or $10,000, it's like that's not taxed anymore.
Speaker 1And it's like if you're going to put that in the offering plate out of your bank account it actually makes more sense to do it from the IRA Right, and it's the same thing to whatever organization you're donating to, but it's saving you on the tax side, correct, correct.
Speaker 2Yeah, I mean, let's talk about smart investing.
Speaker 1Yeah, I mean, this is just you know we've already touched on this a little. Yeah, Making sure you're diversified. That includes, you know, not having everything in a couple rental homes. So it's not just stock that we're talking about. You know, not having everything in a couple rental homes Um, so it's not just stock that we're talking about.
Speaker 1Um, you know real estate and business ownership, making sure that your liabilities are covered there, and you know, if you own a business, you know, like we mentioned earlier, having liability protection and insurance for those types of incidences. Um, you know, then, protecting yourself from yourself. If you're, if you know yourself to be a more nervous person in regard to the market, you know call your advisor or talk to an advisor. You know about the market and make sure that you have a good strategy in place to deal with those times of volatility and make sure you're not going to make a bad decision that could ruin your retirement. Shauna here talks about a client a long time ago that, during 2008,. You know they sold the cash. They got back in, they sold the cash again and they cut their portfolio size in half, and that's that's terrible.
Speaker 2We don't want. We don't want to see that happen, but that's what emotions can do. Emotional transactions, Exactly.
Speaker 1Exactly, um, you know, and then the last thing I have here is just to build an opportunity fund that's easily accessible in times of uncertainty or when you want to invest in something.
Tax Planning and Investment Approaches
Speaker 1Um and that's our advice to many clients once they've kind of started maxing out all the four one Ks and things like that, and then you know maybe there's this goal of a vacation home or an RV or something like that, you know, and they don't need it right this second, so they're saving for it in the future for when there's an opportunity that's presented. Um, so we love to see that. Um, you know legacy planning considerations, if that's important to you. Um, like I mentioned earlier, you can use trusts to transfer things privately, you know, to your descendants. And then you know you can also gift during your lifetime if you have a net worth that's approaching that estate tax exemption.
Speaker 2Yeah.
Speaker 1That's another strategy you can employ there. That's another strategy you can employ there. And then obviously you know a lot of our clients are doing a good job of this but teaching the next generation. You know where you can, because if you are going to leave For the young families out there, you really have to you have to start young.
Speaker 2I think people, just how they're built, are either savers or spenders. You can kind of come out of the womb that way.
Speaker 1Yeah.
Speaker 2But I will say that our young people that save the most, or most concerned about money, had parents who were careless. So how do you take parents that are careful? Uh, how do they teach that to the next generation? Because what's going to happen is you have a next generation. It's also careless because there's there were, you know, they created security and then they never had to worry about a dollar because their parents were good with money.
Speaker 2Right. So so you have to be able to teach that to the next generation. And it's, there's things out there like the green light card. If you have older adults, then I think it's. I think it's quiet times where you can sit down and say this is what I should have done differently. There's an age at which they will not listen, so you have to find that sweet spot.
Speaker 3I don't know where that is, yet I don't have kids that really would listen.
Speaker 2The youngest one, he doesn't need to, he's only 13. But right now they all seem to operate a self-preservation. I don't want to use my money, dad.
Speaker 1You can buy this for me it's just like don't spend my money, dad.
Speaker 2Right, you can buy this for me, right? It's just like you know, don't spend my money. It's like, well, yeah, I don't that's good either, right, uh, but it it's. They all understand the importance of investing. I do see their, their betterment accounts, or their green light investment accounts, slowly increase, which is good, even if it's just a few dollars.
Speaker 1Yeah, they seem to get it yeah, I'm by no means an expert in that realm. My daughter is six weeks old, so I haven't had a conversation about that.
Speaker 2No allowance money yet no.
Speaker 1Um, but there's a good book called family wealth and the author's last name, I think, is Hughes. Yeah, that, that book is really good. You know, if that's something that you're interested in, um, basically he talks about he's an estate planning attorney and he talks about how, you know, the super wealthy um, you know, have these family meetings and they basically create a culture within their family of that Um and it's really hard for normal people to do that, Um, and he talks about that. But that book's really interesting, Um, if you know you're interested in reading something about.
Speaker 2What I loved out of that book was, um, the concept that you have. You know, you have a dad, you have adult children. Everyone's very successful, but everyone puts money into a common fund. Right Common fund is the family's bank.
Speaker 1Right.
Speaker 2You get a mortgage, you don't go to the bank, you go to that fund. Yeah, but you pay that fund back, Right Right, and I'm sure that you know somebody gets in trouble if you're not making your payments or whatever Right but the point is like that's how really wealthy people get more wealthy is because you have this central spot and that bank is now.
Speaker 1You're not having to go to a bank that's charging you interest. You're going to your family.
Speaker 2Well, there'll be a you have. There's an IRS number, but it's really low interest. Right, it's really low interest, right it's really low interest, yeah, so that concept's always neat to me, but you have to have a very. Everyone has to be successful and be on the same page, Exactly.
Speaker 1And that's the hard part. That's the hard part. Everybody's successful and then also on the same page, that's most of America is not going to be able to do that?
Speaker 2Yeah, and it takes. It takes a really strong person at the very top of the family, right, uh, and then you below that, yeah, so we have a couple one in particular that's kind of forming at our firm. I see that as being a possibility, but it's a little. It's a little ways out there. They have to build their enterprise first. So there's but there's, there's some opportunity. But I say, at a more normal situation, is just teaching your kids.
Speaker 1Yeah.
Speaker 2This is how this is how this works and this is what you need to do. You need to stay away from credit card debt. Stay away from, you know all the negative things.
Speaker 1Yeah, right, exactly.
Speaker 2So what are some action items we can take away from our conversation today?
Speaker 1I think, a good thing for people to do. We ask clients all the time, especially high earners, what do you actually make and what do you actually save? And most people don't actually know. So, calculating you know your true savings rate based off of what you're making, and then you know what you're saving, so you have an idea of how much you're actually saving as a percentage. I think that's a good thing. You know auditing your monthly expenses. You know where can you squirrel money away that maybe if it wasn't there that it wouldn't get spent, you wouldn't notice away. That maybe if it wasn't there that it wouldn't get spent, you wouldn't notice. Yeah, um, I think that's huge. Just kind of, you know money in the, you know coins in the couch or whatever. You know, um, you know what can you eliminate from your monthly expenses that you're really just not going to notice. Um, you know automating savings. Um, I think that's huge because you know you just take the behavioral side out of it. You take the I forgot to do this this month out of it, right, I think that's that's very important.
Speaker 1Not only that, but saving to different locations. You know saving to a bank account or you know brokerage account and then also your retirement accounts as well. Having a diversification in that is important. And then you know setting up a boring investment plan where you know you're invested, you're well diversified and it matches your age, risk tolerance and those things as well. You're not day trading with your entire savings. You know you're not putting it all in some new crypto. You know there's lots of alternative things that we like and we invest in, but you don't want it to be the mainstay of your portfolio.
Speaker 2Correct. Um, yeah, so yeah, wealth isn't about appearance. It's about freedom, control and security. I think that's probably the best way to wrap this up.
Speaker 1Absolutely.
Speaker 2Um and how it looks. You know All the people that you think of. They're doing great. I meet them all the time and they're not doing great. So focus and stay in your lane. Focus on you. Stay away from shiny objects, you'll be just fine. Thanks for listening to today's episode. If you're interested in learning more about Wiser Wealth Management, I want to schedule a consultation with one of our fiduciary financial advisors. You can do so by going to wiserinvestorcom or by clicking the link in the episode notes. See you guys next week.
Speaker 3Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review.
Speaker 3If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles or a basis to make any financial decisions. Wiser Wealth Management Incorporated or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners or similar interests. Investments involve risk and, unless otherwise stated or not guaranteed, be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.