Wealth from Wisdom

Buy or Lease? Financial Planning for Everyday Life

October 05, 2019
Wealth from Wisdom
Buy or Lease? Financial Planning for Everyday Life
Chapters
Wealth from Wisdom
Buy or Lease? Financial Planning for Everyday Life
Oct 05, 2019
Carson Wealth

Should I buy, lease or rent? It’s a question that comes up quite often. Will we really be able to re-sell that car in 10 years? What if the housing market collapses? What if my rent goes up? Is a second home a good investment?

We all need a place to live and transportation, so inevitably we run into mortgages and car loans and resale value. But deciding what’s the best financial decision often depends on your personal situation.

On this episode of Wealth from Wisdom we’re going to discuss some practical financial planning decisions when it comes to leasing versus buying. Whether it’s your primary residence, a vacation home, a third car, your first boat, or even the tools you use regularly, saving and protecting your money in these decisions is more complex than it seems on the surface. 



Show Notes Transcript

Should I buy, lease or rent? It’s a question that comes up quite often. Will we really be able to re-sell that car in 10 years? What if the housing market collapses? What if my rent goes up? Is a second home a good investment?

We all need a place to live and transportation, so inevitably we run into mortgages and car loans and resale value. But deciding what’s the best financial decision often depends on your personal situation.

On this episode of Wealth from Wisdom we’re going to discuss some practical financial planning decisions when it comes to leasing versus buying. Whether it’s your primary residence, a vacation home, a third car, your first boat, or even the tools you use regularly, saving and protecting your money in these decisions is more complex than it seems on the surface. 



Speaker 1:
0:00
Okay, and here's the legal mumbo jumbo. The opinions voiced in wealth from wisdom with rod Carson for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CWM, LLC and sec registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time records $10 billion in social security benefits go unclaimed every single year. The federal reserve announced that they will raise interest rates by 250,000 rocket cost of healthcare and retirement could now run 350,000 you've worked hard and saved for retirement. That's great, but it's what you do with that money that really matters. Welcome to wealth from wisdom with Carson wealth. Carson wealth is a Barron's hall of fame advisor and recognized by Forbes magazine as one of America's top wealth advisors and they're right here in Omaha. This is where you can count on straightforward and objective advice that can help you make the most out of every dollar you've saved for retirement. Welcome to wealth from wisdom with Carson wealth. Hey,
Speaker 3:
1:14
should I buy, should I lease or should I rent? This is often a question that comes up to many of us as we go throughout our lives and are we really going to be able to resell that home, that car or any other type of thing that we crossed this tri pronged decision of by lease around. I hope [inaudible] a word. I'm not sure, but I just made it up anyways. Right, Aaron? I think you're pretty good at making those up. Sometimes there's their own vocabulary and or dictionary. Hey, I'm Paul West. You're listening to wealth from wisdom. My cohost today is the one and only Aaron Woods. So Aaron, welcome back to the show. Thanks for having me. As always. Yeah, she's the head of a financial planning here for the Carson group. And today we're gonna talk about some of these life decisions that when you work with an advisor and planner, are they really helping you?
Speaker 3:
2:00
You know, you may say, Hey, should I buy or should I lease? What so many of them do is base their recommendation on their personal decision. But that doesn't mean it's the right decision for you. Like many of us make that mistake in our life. And I welcome. I said, we want to talk about those real world things that are happening. Um, many people, um, you know, here's what it is. We fall in love with a home, right? If you want to buy a home, what do you fall in love with? Curb appeal. Kitchen. Yeah. And then a memories. Yeah. Memories are the memories you're going to build. I think about when I bought a car and we had to choose between two SUVs and one had a lot more, um, room in the back of the vehicle than the other, or if the trunk space, right?
Speaker 3:
2:43
Is that what you call it? Yeah. Yeah. All right. I don't want to make up another word there. So are urban words. So as we talk about this though, the sales person did a wonderful job. Hey Paul, can't you picture taken your wife, your three kids? And on a road trip driving out to Colorado, you got your bags packed, you get your coolers, you made some lunch to stop on the highway at a park and do those things. That was fantastic on his part. Yeah. Because we realize that we make emotional based decisions. So we spent all the time doing that and then we get to the financial side of it. Is it better to buy or lease? We often make that decision in moments or hyper seconds versus spending the time to talk through it or think through what's best. So what I thought we could do today, Erin, is help our listeners think through this in a more rational way and talk about what some may be the pros and cons are to buying to renting. And I know is you helped build out financial planning. Often the greatest asset people have is the value of their real estate and how they, um, think about it, how they invest in it, and ultimately how it is you think about it, where you spend the majority of your life.
Speaker 4:
3:56
Yeah. It absolutely is. And you know, the home is such an interesting thing as people start trying to find that home. It's the same thing there. They're visualizing, you know, what is our life going to be like here? Do the kids have a playground in the backyard? Uh, and so as you start looking at the visualizing and the emotions of it, we frequently forget to start with numbers before we get to that stage. And then people go out and find this dream home and maybe it doesn't really align with their longterm goals or what they can actually afford.
Speaker 3:
4:25
Yeah. So I'm going to share some statistics with you. So there were 5.3 4 million existing homes sold in 2018 what was that number? 5.3 4 million existing homes were sold and there were also 667,000 newly constructed homes sold in 2018 according to the us census Bureau. Let me think about that. So here's another thing I think about all the people who sell in homes. I think there's a lot more people who sell homes than sell life insurance or sell financial services products that aren't fiduciaries. I know we are. So we're different. We're definitely in the minority there. Um, but here's the interesting thing, and this came from the associate of real estate. A licensed law office officials are relo for short. It didn't even know that existed. Well it does. And so they think there are about 2 million active real estate licensees in the United States. 2 million.
Speaker 3:
5:20
Yeah, 2 million. Um, there's actually 86,000 real estate brokerage firms operating in the United States. In the national association of realtors. There's actually 1.38 3 million members as of July 20, 19. So at 68% of your realtors are licensed as sales agents. 20% hold of brokerage or license and 14% hold broker associate licenses. That's a mouthful. That is, think of all those people. Now think of all the air quote experts that are out there to help you. But I used a word in there for reason broker. When I think about real estate agent, and there's many good ones. So I don't want to them to be offended by his statements here is, but are they, are they truly out for what's in your best interest or are they truly only caring about selling the home? Well, and let's look at how they get paid. And so they get a percentage of, of the selling value.
Speaker 3:
6:20
So whether you are the person on the buying side as an agent or the selling side, both people end up getting a cut of what that, that total prices. So truthfully, the higher the price, the better it is for them that they actually get paid more. Yeah. So I love statistics. So let's just keep this going here for a moment. So the average real estate experience of all realtors is eight years. That doesn't surprise me at all. The median tenure at their firm four years. Wow. Yeah. But what people switch firms frequently for a better deal. Um, and then they also, uh, you know, get in the business and maybe don't succeed. So they get out of the business and they get in at peaks. I mean, I saw this a lot the last time we had, you know, a bubble and the real estate, all of a sudden there was a huge influx of people who were getting their real estate licenses and selling well because the prices were going through the roof.
Speaker 3:
7:10
And so they, you know, ran into the market at that time, market corrects and most of them got out. Yep. So a few more demographic pieces of information as you're thinking about buying and selling and what it looks like. So 67% of all realtors are female. Okay. All right. The median age of realtors is 52 so here's something I didn't know. This is fascinating to me. So when I think about realtors, you often, and it makes sense to me now, you see the people that advertise on TV or they're on billboards or they have their stuff around, they have this stuff in your neighborhoods. It's probably a location bias, right? Based on who sells near you or, um, but don't most of us have the bias that they make a lot of money? Oh, absolutely. I would say that. Yeah, I do. Um, so this is fascinating to me.
Speaker 3:
7:56
So the actual median gross income in 2018 was $41,800. Now that's the meeting. Obviously there's one's way, way above that, but probably proves to you that a lot of people are in the profession, um, because they got licensed, but it's just not full time for them or it's not. And so I say it's not, is the average work hour per week was 35 hours. And I've worked with quite a few agents over the years and uh, some of them were before the last boom. Uh, so I knew what their normal salary was and they did double, uh, when prices got really high. And then, you know, the last few years it's been the same thing. I've seen some people doing really well there. There's lots of houses to be sold. Yeah. So I love it when people come to us and ask us the question, should I buy or should I rent?
Speaker 3:
8:40
Um, should I buy or I lease. So let's talk about that. And some of the pros and cons are you're Aaron. Again, that's the whole point of wealth, while from wisdom is this, we want to help all of our listeners and especially, um, you know, w w get specific when you get financial here for the organization, but for many people is trying to figure out how much money should I put down. And the banks will often set a, a hard rule for you. Of course, you know, many of them think about 20%. However, uh, I'm helping with a family, with a transaction in California currently in, you know, they've been requested to put 40% down. And as you know, in California, you can't really buy much yeah. Under $1 million that has any form of space. So what advice are you seeing from a financial planning perspective, Aaron?
Speaker 3:
9:26
What should people be doing to think about how much money to put down? Yeah, so in general, most individuals are looking at the 20%, but there are some, they're varying, uh, programs out there. Uh, you know, there's some first time home buyers, uh, you have some other types of financing where they can get much lower, but when you do that, you're going to have to pay an extra premium to get you to that 20%. So anytime you're under that 20%, you're gonna have to pay the extra premium to get you to that 20%. Uh, but you know, the 20% is really that place where you start getting better rates, you start getting the lower payment overall and the lower rate is, is the biggest piece. Yup. It is. And I mean, I think put down what you're comfortable with. Um, and I would actually tell people, um, a lot of people like, well, I hate debt and I hear that all the time.
Speaker 3:
10:12
Aaron and debt actually can be a vehicle. And right now, I mean, we're operating in such a low interest rate environment that, but here's what you have to think about. So if you're taking out a mortgage and you're going to take out a mortgage over 30 years and you're going to pay three and a half percent, and your fixed payment is, say, $4,000 a month, whatever the numbers, 3000 whatever, that number doesn't change for the next 30 years. It's locked in for inflation. If inflation is at two and a half percent. So it would tell you the value of that 30 years from now is easily half or a third of what that 4,000 a month is now. Correct. Isn't that a smart decision? You know, for most individuals it is. But now think about the other side. What about the people who change jobs? They're going to move their family changes or someone who really just doesn't like that lifestyle.
Speaker 3:
11:08
Uh, there are lots of people who would rather rent and they don't have to do the maintenance. They don't have to own the lawn mower. For most of us. Yes, it is a very smart decision, uh, because of that locked in cost. And we're going to stay there for a long time. But not everyone's life is like that. No, it's not. And I mean, I think when you're looking to buy, um, and thinking through that, uh, and being smart, we're so lucky right now we're fixed rates are that I remember are. So I bought my first home here in Omaha, uh, first quarter of 2000 and I felt like I had decent credit and I wanted a 30 year loan and I had to pay eight and a half percent. How's that filled today? Ouch. Today. Well, that was life. It was fine back then.
Speaker 3:
11:48
But if I asked our producer Meg and I said, Hey, on your new home, would you pay an eight and a half percent? She'd think I was from Mars. And she's saying, heck no. Uh, over there. So is things you have to look at? But if you're going to be a renter, there's a lot of things you're going to need to consider. When are you gonna move and how, how solid is your job, how tight is the contract and do you have just other debts are things you need to worry about. Um, renting is not a bad thing and especially boy Aaron, if you're new to an area you're moving, that's probably one of the best decisions we see people make all the time. So I mean as we think about this, and I want, I want to get in a lot of details, but I want to share with you, we have a free resource for all of our listeners. If you go to Carson wealth.com and you can just click on it, or if you want to put in Carson wealth.com/basics we have 12 tips for improving your financial wellbeing. And this includes reducing debt or making the right decisions about this. It's about what we're talking about here today, making the right decisions for your life. Hey, we're going to be back planned a moment from wealth, from wisdom.
Speaker 2:
12:49
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Speaker 3:
13:19
Welcome back to wealth and wisdom. This is Paul last cohost today is Aaron Wood. And we're talking about how your financial journey takes a lifetime and you have to think about the long term and one of the most important decisions you make about the longterm is buying or renting a home, buying or renting a car. And then what type of vehicles do you use? If you're doing a buying a home, do you do a 10 year mortgage of 15 or 30 is it fixed? Is it variable? Is it a balloon, is it FHA? All of those words and acronyms, they're all part of your financial destination. What you're doing and we have to help you think through what's best here. So when we were ending the last segment, we were talking about the pros and cons of renting a home. I'll give you an example. Um, this happens all the time by the way.
Speaker 3:
14:07
It happened personally to me, Erin. So back in 2007, uh, started a new life journey in with a new career and we were going to move to Florida. And so we went down there and we're looking at homes and you know, we were in the buy versus rent decision, right? So on one side of the ledger was, Hey, let's rent and let's figure out where we really want to live, what we want to do. And the other part was the, Oh my gosh, I don't want to move twice in the same city debate, right? Yes. And I would challenge everyone, um, learned from my almost major mistake. Uh, we didn't end up buying where you were renting down there, had a place to stay and made it easier. Uh, but we actually didn't end up moving, but I had a place to go work from down there and we just rented that property instead of staying at hotels.
Speaker 3:
14:59
But here, here's what would have happened. What happened in 2008 financial crisis. What happened? Home prices. Oh yeah. So great. Dramatically. Dramatically declined. So at some of the homes we were looking at to potentially buy, I looked at them again three years later. So in 2011, they had declined by 50% plus and value. Can you imagine that financial bloodbath I would've experienced because I wanted to do a void. I didn't really know where we wanted to live yet, but knew we needed, want to get down there. So if you think about this being buy versus rent, renting is okay. And you may say, Oh, it's expensive. I'm not building equity. But boy, it sure helps you avoid catastrophic mistakes. Where do you want to live? Um, or buying a home at the absolute wrong time in the real estate market.
Speaker 4:
15:52
Well, and I think our lives have changed a lot over the last couple of decades. You know, if you would've talked to your parents or grandparents and asked them how many times did they move and how many cities did they live in? A, it wasn't as common. It wasn't as easy for people to just to pick up and go and go to a new town. Now there are so many jobs that are online, they have flexible working. Uh, I mean, if I wanted to, I could work from home many days in a row and, and still get everything done. And so, you know, that ability for our lives to be much more flexible. Um, housing is one of those things that tends to work better in the long run. And unless you get super lucky and hit the market right, uh, but you know, it's just as probable that you're going to hit that downside.
Speaker 3:
16:31
Yup. Absolutely. And especially now we've been an upward moving market. I mean, if you just look at the stock market since 2009 and the growth, we've seen it at some point a, we're going to have some form of economic downturn. Uh, of course there's a lot of debate. Is that going to happen now with this pending potential impeachment and what's going on with that? So, Aaron, I want to ask you a political question. You weren't ready for that. Well, um, so one of my favorite phrases is you have to keep your politics out of your portfolio. Yeah. Right? Because how many times are you doing a financial plan with someone and someone has a political opinion. I don't care what side you sit on, but then they make financial decisions based on their political opinions and what it does to them financially. Well it does.
Speaker 4:
17:20
And that's not just our political beliefs. Like we've talked about this before, that's, that's a lot of our beliefs. We all have, um, our money scripts, our money, grams, and we all have these things that our neighbors told us. Um, but those beliefs, they, they eat into us. And if we're not careful, we, we do get hit by him hard.
Speaker 3:
17:36
Yeah, we do. Well, we all have beliefs, so, all right, we're going to do a trivia question here for you. Can I cheat? Ride you? You can if you want, but I don't know how fast you can Google search. So we'll test you. So Google search this for me. Speaking of politics and the markets, so let's compare, how about this? Let's compare the last two presidents since their inauguration until the end of September in their third year. Oh my. How would I ever know? All right, well, so the end of Trump's third years right now. Okay. Or into his third year. It's end of September versus Obama and taking into his third year. Yes. Okay. So who do you think had a better stock market return over that time period? Well, I'm going to say Obama. Why is that?
Speaker 4:
18:22
The market crashed so heavily at the beginning that that uptick, he had a will be a much higher gain.
Speaker 3:
18:30
Well, you're, you're partially correct. So let's just go, let's give you the right answer on the big clap for yes, you're correct. It is Obama. So most people think is Trump because of the recency effect of how the stock market's performed since 2019 the fact that he's a Republican, the fact of all those fiscal things that, again, go with this, but it actually over this same time period in both of our last two presidents duration from their inauguration into their third year in September, Obama's actual, the market had performed slightly better. And most people wouldn't realize that. So when they're like, Oh, things are so much better now or so much worse now than the other. The reality is, is the numbers are essentially the same as to this point. So Obama's time, they were up 14.8% from inauguration through nine 26 of their third year in the office, which is right now for Trump who's at 12.8 so a 2% difference over that nearly three year time period.
Speaker 3:
19:31
So what I tell everyone is, is to keep your politics out of your portfolio because your, your irrational bias, um, which you think is completely rational by the way, because it's your opinion doesn't mean it's going to help you be successful. Um, and so one of the things that I look at and as I think about is should we get a second home or not? So let's talk about that for a moment. Here on welfare. Wisdom is all right. You're fortunate enough, you've made good money, um, and now you want to get a second home. So now you have all these things to figure out what type of home do I want? Where, um, do I want a timeshare or should I get a camper? Should I get an RV? What's the choices and how do you help people, Erin, think through these choices.
Speaker 4:
20:19
There's a couple of things I always start with. What is the ultimate goal of whatever it is you're purchasing? If it's a second home, is it somewhere that you're planning on retiring too? Is this going to be your, your future forever home or is it someplace you're trying to make memories for the kids? And you know, again, life changes. So are your kids young? Are they going to grow up in high school? You're not going into the, in going there anymore? Uh, or is it going to be more of an adventure? I mean, uh, for us, as you know, I have a motor home. Uh, we had a camper and of the reasons we switched to a motor home is we wanted to take our kids on vacations that were much further than we could. And so we know it's not something that will be forever for us, but eventually our kids are going to get bigger and it's not going to make sense.
Speaker 4:
21:00
And so those first things is what is the ultimate goal of, of what we're trying to accomplish and how long is that going to be the goal. And then there's other pieces, uh, especially if you're looking at rental property, uh, you know, or a house that you're going to buy and rent out. Uh, are you going to have a management company? Are you expecting to make money off of it or is it purely for your enjoyment and to help cover the cost add. There are a lot of people who buy second homes and then, you know, they run them on HomeAway or Airbnb, those types of things. Uh, but then you have a maintenance company that you have to get involved or someone to help take care of it and cleaning people. Uh, and those can be very costly. And so it turns into a business versus a vacation time.
Speaker 4:
21:40
So speaking of that, so a lot of people, the rental rages still warm. I'm going to say it's hot. I'm going to say it's warm. The flipper mentality, we can think HGTV and it's 20 shows related to flipping houses. I'm not to give any of them certain credit, but what is, what's a, what's a good rule of thumb if I'm going to own a home and so I'm based in Nebraska, so let's go a lot of fields from Nebraska go to Arizona, pretty normal for their winter home. Um, but they want to rent it out. Like how much is that gonna cost them per year? I mean, how much to, how much should they have to pay these property management or other firms? Most of the time when I see this a truthfully, people aren't making lots of money off of this. Once you have a debt on it and you have a management company and you have maintenance and all those other things, um, most of the time they might make a little bit or they're just breaking even on it.
Speaker 4:
22:28
So that it really depends on if you're doing this as a business, getting all these other companies involved, especially if you have debt on it. Um, that debt piece is the biggest part of it. Uh, that becomes a question for me. It won't generate the type of profit someone's thinking if they're starting out with debt on it, unless they're doing all the management and maintenance themselves. Yeah. So a lot of people say, Oh, well, I'll go buy a, let's use an example of $400,000 home and, but I'm going to put $100,000 down and, or they'll put, yeah, 100,000 out and take a take out alone and all of a sudden they start cash flowing this and looking at, all right, well, I'm bringing in, uh, $2,000 a month, but it's costing me $1,800 a month. So then I'm making $200 a month, times 12, I'm making $2,400 a year.
Speaker 4:
23:17
Yup. And now, yes, worth the squeeze. Right? And now you have to pay taxes on it cause you're running it as a business. So that's where I said most of the time people are just breaking even. Um, most of the management companies that we see out there, um, there, there's a couple of different ways, but a lot of them just charged by a percentage of the value of the homes. Uh, so that becomes, you know, whether you're renting it or not, they're still charging you monthly for that maintenance. So you just mentioned something and I don't think all listeners are aware or think about this and hopefully they do it correctly, but there's rules related to the number of days
Speaker 3:
23:47
that you can rent something out, um, on what you need to or can't pay taxes. Can you just inform our listeners on that? Yes. So it's 14 days is the rules that you, you want to keep in mind. Uh, so if you're renting it out for 14 days or less, then you can just act like that didn't exist at all. Um, but once you start getting into the number of over that, then you have to start looking at how many days you live there, uh, and versus how many days you're renting it out. And so anything really, um, you know, that you're getting over that 14 days, which is pretty much nothing. Let's face it. That's two weeks. Yes. Oh, 52, it doesn't take much. Uh, and so that's really where you start to look at, okay, now this really has become, you know, a rental property versus a vacation home that we're just letting friends stay in.
Speaker 3:
24:34
Yeah. Um, and a lot of people go down that pathway and I would say, um, if you have friends and others in the neighborhood, great. That's gonna help, that's gonna make you feel better. Um, with all the VRB owes out there in the world and this new, of course, just platform and way to do it. Uh, it may not be the best thing for you. So when you're thinking about big purchases like this, uh, we, our, our passion is to help walk side by side with you and help you make the best decisions for both you and your family. If you want to talk about this with us, send us an email info@carsonwealthdotcomoryoucangotocarsonwealth.com for slash appointment. Click on connect with us and we'd be happy to talk to you. And Hey, we look forward to hearing
Speaker 2:
25:13
you're listening to wealth from wisdom. Any major decision in life is worth getting a second opinion and financial planning is no exception. Let's talk about how you could make your money go further in retirement than you ever thought possible. Call Carson wealth to schedule your free initial analysis now at eight eight eight four one nine 85, 13 do you have a lot of assets but are short on cash? Learn how you could leverage your assets to free up cash with Carson wealth by calling eight eight eight four one nine 85, 13 and now back to wealth from wisdom with Carson wealth.
Speaker 3:
25:47
You're listening to wealth. And wisdom. This is Paul Wes co-host today is Aaron Wood. We're talking about, you know, what, those things that matter the most enjoying your home, but part of enjoying your home is not second guessing your decision you made on should you buy versus your rent. Where should you locate? And, uh, if I rent it out to people, how do I actually do this most inexpensive, late fun fact for all of you? So nationally, about 65% of Americans own their homes. 65. So it makes sense, probably me. Here's another thing. First time buyers represent 33%. The median age of a first time buyer is, and he guesses 30. Oh, very close. Good. You're much better at this than Jim Caldwell. 32. Oh, the median age of repeat buyers is no idea. 55 almost double actually impresses me. I would have thought somewhere like 45 ish.
Speaker 3:
26:44
No. Oh. Well why would say people get through, people sell their home and want to move somewhere warmer, uh, or they couldn't afford to buy one until later. Of course, you can imagine, um, people who are a repeat buyer, their income is a third higher than first time buyers, uh, on how they approached it. So, uh, here's, here's an interesting, if we go back to 1991, the typical home purchase was 1900 square foot and size had three bedrooms and two bathrooms. And what happened then is among those who finance their homes, they typically finance 90% of the home price. And just think about how that continues to change because in today's world, what happens, where do most buyers find their homes? Where would you think real, real simple answer where, where would they find it? From a person online. Yes, correct. Google searching and seeing what realtor.com is out there looking at area.
Speaker 3:
27:43
So there, so the internet is 50%, 28%. Actually find them through an agent who know them or introducing them property. The rest is through a myriad of things. Friends homebuilders directly from the seller because they knew them. A yard sign or an open house sign caught their attention in neighborhood. Hey, I remember when I was looking for homes, the first home, you know, the internet wasn't as prevalent in this type of market. So we would drive to areas of the city, especially on a Sunday to see if somebody had open house signs or look for it. You know what, you don't do any more look in the newspaper. No. Right. You're the only person I know who still gets a newspaper. Oh, I'm not the only person. I'm just the old and wise one that does that. I still enjoy getting the newspaper, except it's on a Sunday morning and I see the story about my Nebraska Cornhuskers losing to Ohio state.
Speaker 3:
28:33
But that's a whole different story. So let's get back to another part. We were talking about his home, so maybe we should go for a moment. I think another decision that so many people take for granted and make a gut call without really doing their homework is vehicle's. So think about your cars. Um, so do you buy or do you lease cars? Aaron? Me personally? You personally? Yes. So the car I have right now is my first ever lease. And I can't say that, uh, I will be getting another one. My intention is I'm just going to buy the lease out at the end. Uh, but you know, you're the third category. The buyer slash leaser and the leaser. Slash. Buyer. Yeah. So my husband is a leaser. He likes to get a new car every three years and you know, that's okay. Like for him, he doesn't drive a lot of miles.
Speaker 3:
29:22
Uh, he likes having the new features. He like, I know it's a truck. I don't really get the point of getting a truck, but that's his thing. Me, I don't like car shopping. I hate it. And so if I can get a vehicle and drive it, quite honestly, until the wheels fall off, I would be much more happy. And so for me, I drive a lot of miles. It definitely makes more sense for me to own a vehicle and keep it as long as I can. Yeah. Well, I mean, I think there's different ways to approach this. Again, nothing's right or wrong. I'm just asking you what you did, doesn't mean I'm saying, Hey, what Aaron Wood does was the best, there were owners of cars, but there really is, I'm looking at time duration. Um, so I am not buying vehicles that appreciate and value.
Speaker 3:
30:04
Yeah. I'm buying cars that differentiate, which is the super high majority of cars. So don't think you're going to buy a car unless it's a classic or very niche vehicle that it is, uh, going to help you out. So a pro of ownership for me is I don't have any mileage limits so I'm not worried about loading up the family truckster to head to Colorado. Correct. Um, but um, maintenance and repairs of course seem to happen 36 months plus one day after you get the vehicle. Um, I might not be able to resell it for what I want or just the wear and tear. The door dings. We have a, um, suburban, I'm telling you that suburban configuring out, if you park that in a grocery store, you might as well just guarantee yourself a cart or a another door is going to hit that thing that that is the issue with all big vehicles.
Speaker 3:
30:55
They are targets for sure. Yeah, they are. Um, but I mean again, I could potentially resell it. So let's talk about leasing and what are some of the pros and cons. So pro is, what'd you just say about your husband? He gets a new vehicle, right? Yeah. Are there any tax benefits to leasing? So when you do the least, you know, the taxes are already included in your lease payment. And so it's much simpler on the person. Do you know, they don't have to go down to the courthouse and write that big check. It's just part of your monthly payment. But the bigger thing for many people who lease that I would say is an important one, is looking at the features that are coming out and how fast they've been changing. And so if you're thinking about reselling a car and you look at what technology your car has today, what is that technology value going to be in, in five years, six years, seven years?
Speaker 3:
31:44
Uh, I'm going to guess it's not going to be that sought after at that time. And so the technology piece of the leasing, uh, is a big one. You're always getting the new one the best and the safety features and all those other things that come with it. It's amazing to me how rapidly that stuff changes. And I know I've talked about the show. I have twin 16 year olds, so of course they learn to drive earlier this year and then getting them a vehicle. Um, I really wasn't particularly, obviously safety was first, but second was of all the new gadgets, vehicles, technology. My only request was is that it has a rear view camera. I agree with that. I think I love the lane change protection, blind spot warning. All those things are great. But just backing up in a grocery store parking lot or in a school parking lot, the school, why call school parking lots or like bumper cars, you just have to be mentally prepared for that.
Speaker 3:
32:38
Uh, but that's like the technology. I think that is a huge benefit, um, to leasing. But what are some of our cons to leasing out there for people? The mileage is definitely a big one. You know, I wonder, most of, I'm limited at right now, twelve thousand twelve thousand center. The more I thought it was, even though I thought it was 10 to 12,000 so the 12,000 is a common one. And those are typically the ones you see the pricing for on TV, you know, one 99 for this lease. So anybody who's over that or wants additional features, those prices go up very quickly. And so you can get to a leasing cost that is almost as high as what a payment would be. Yeah. Well don't you also get into time issues? So what if you want to get out early? Does some of them have challenges with that?
Speaker 3:
33:21
Or as long as you rebuy back through them, they don't care. Well, there's actually two different ways to look at it. So if you're turning it back into the dealership, that's actually going to be a different, cause you have payments that are still due to that dealership, but you can turn in the car to another dealership and they can buy it from the first dealership. And so there are ways you can get out of them is no long as you're not underwater on them. Yeah. And so those are, these are complexities that all of us face is families. And a lot of time what happens is, is we're sitting outside having a cup of coffee. You're drinking, we're asking our neighbor Meg, what would she do? And she tells us what she did. So you're like, okay, that's going to be the right decision for me, but it's not.
Speaker 3:
33:59
So I would look at, part of the decision I make on owning versus leasing is not only how long am I going to own it, uh, but also how much can I afford and, um, does it make sense? Do I know anything about vehicles. So if it does have an issue where to get it fixed and where to not feel like I'm being taken advantage of if I am getting it fixed, cause that's one of my fears. You said yours is you don't want to hassle and deal with the car. I can't stand um, something's wrong and the check engine light comes on. Then I feel like, Oh boy, just you know, raise my credit card limit because every, every problem's going to happen at that standpoint. And one of the things I think many people overlook when it comes to car buying is all of the dealerships, especially right now, they, they rotate through.
Speaker 3:
34:46
But there's always this 0% financing, this 1.9% financing. So if you have good credit, it's highly likely that you can get a brand new car if you just time it right at 0% financing. Uh, and so that really is a huge money saver for people who are paying attention. Yup, absolutely. And you know, you're probably wondering why are we talking about this on wealth from wisdom? It's simple. These are the things that matter. It's the dollars and cents add up, but also for your mental peace of mind. I mean about this, Aaron runs our financial planning division here at Carson. I help families think through this. This is included in our service that you get to talk through these things and you're getting a fiduciary is advice on what is best for you based on your overall situation. So we've helped you put together some analysis. If you go to our website, Carson, wealth.com we have a guide called back to the basics, 12 tips for improving your financial wellbeing, which includes reducing your debt and increasing your overall net worth, Carson wealth.com for slash basics and you can learn more about, we're talking about here today on wealth from wisdom. Have you ever wondered how do other people get away with paying fewer taxes?
Speaker 2:
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Because then everyone else learn how you can save thousands of dollars in taxes by calling Carson wealth
Speaker 3:
35:59
at (888) 419-8513
Speaker 2:
36:03
social security risk, taxes and healthcare. This is where you can count on straightforward and objective advice. On the biggest challenges with investing for retirement. And now back to wealth from wisdom with Carson wealth. You're welcome back. We've
Speaker 3:
36:18
been talking about these fun things in life. Buying a car. It's fun. Unless you want to go to the dealership, then maybe you don't enjoy the fun but fun for me. But the fun getting in the car, the new car smell or driving a different vehicle, uh, the fun and dream that comes with buying that first home. I mean, I can remember when you walk in, you're so excited or selling that home and the memories that rush through or buying that second home or buying a, the cation property, all these invoke emotions in us, but really we need to think through the financial logistics of them. I'm not saying they're, they're irrevocable in nature, but they're a long lasting, that's for sure. And on wealth from wisdom today we've been talking about those fun things. Buying versus renting, uh, buying versus leasing. Um, and I think about, you know, here's another fun fact.
Speaker 3:
37:08
So in Manhattan, do you know parking spaces can cost you up to $200,000 per year? Oh my God. Imagine that sounds terrible. It is terrible. But it's life. I mean, here's why no one has cars are, yeah, explains traffic, public transit, uh, the ride share phenomenon. Um, but renting, leasing and buying is just one of these decisions, um, that we have to have happen. And so let's talk about, um, other vehicles or other toys. And so I bring this up because actually what we do here at the Carson group is we help people build a balance sheet, a short form, ballsy. So, so think about this way. We often put cash checking and savings in one category. We put taxable investments in there. So like a join account, you and your spouse have, um, trust accounts, uh, that we put tax deferred accounts. So your IRAs, your 401ks, we can put in tax free accounts like a Roth IRA, but then we list all of your other net worth items, your home, your vacation, home, your vehicles.
Speaker 3:
38:10
But then we can pull it on there like boats or jewelry or tools or all of those other things. And sometimes you need to make a decision on those, should you buy or lease those types of vehicles. So you're gonna is there any rationale or words of wisdom you would share and guidance here on? What about other air quote, big items that people are considering? You know, there are lots of big things people consider buying and so much of it again comes down to what is the usage going to be and how are we going to use them. Uh, for example, you know, buying a boat here, uh, we don't have all that many lakes. When I lived in Milwaukee, lots of people owned boats. They lived on lakes. And so their usage they could get out of 'em is way different than the usage we can get out of 'em here.
Speaker 3:
38:51
And so, uh, my friends and Milwaukee frequently owned and bought boats. Most of the people here, you know, if you can rent one or you know, someone else who has one good for you because the usage you're going to get out of them, it is a lot lower. Yeah, it is. It's, um, uh, I'm in the camp. I don't, uh, go boating very often. So I'd be in the camp of renting or finding a friend who has about the best kind. Right? Then you don't have to rent or buy. But I mean, let's talk about businesses. So my expertise is working with business owners and so we're often having to go through, um, the lease conversation. So farmers, uh, what do I lease? Do I lease equipment? Um, and all of these things if I'm construction, what about tools? I mean tools are a large cost.
Speaker 3:
39:37
Restaurants do I lease all of the equipment inside of there? What about medical companies, hospitals, all of those things. There's all a whole new series of questions that people have to ask instead of just assuming needed to buy them. And especially, I would tell you, Aaron, as a small business owner, which I have been and you know, Carson, we were smaller and now work growing in size. Uh, it's actually really fun. We're building the new building at the moment. A lot of fun going in that we'll have to figure out where we put your office here soon. So all right. But I mean, as we're thinking through these decisions, I would tell you if you're a business owner, listening, leasing may be more expensive on a dollar point of view right now, but you're creating less risk for yourself. Correct. So sometimes it's about you as a small business owner, you forget your time is the most valuable asset you have.
Speaker 3:
40:30
So worrying about and contemplating buying and owning your furniture versus your copier equipment versus your, um, laptops. Again, they're all important decisions you have to make, but they're not ones that should consume you. And I was leaning towards leasing at the beginning because you don't know what direction your business is going and why spend your very important capital on things that for just a slight uptick could be least well, and there's so much of it that changes quickly. I mean, you said copiers, that's a perfect example of, you know, 10 years ago I'd good copier than an office would use is $10,000. And so if you're a person who owns a business and you're trying to figure out how you get one to 10 of these copiers, that's very pricey. And now you have maintenance, you got to figure out what it is. If you just lease them, you have a company who comes in and does the maintenance, they take care of updating all the toners and all of the cleaning of the copier.
Speaker 3:
41:28
I don't know, wheels or whatever in there. And so as a business owner, you just took a whole lot of weight off of you and your team and you're spreading that risk out over many, many months. And there's a lot of new things to do with renting. I mean, I'm getting dressed up by, you can actually rent dresses now, so go to prom or to go rent the runway. I'm sure. This name of company. Right? Alright. I'm getting lots of nods from females here, so I guess I'll learn that. So here's another one. I've got, um, high school children. I mean, we're running textbooks now. I mean, think about that. Uh, people rent parking spaces, people run out their cars. There's now, um, I know I used an app was called Touro, that you can go to a city instead of renting, you know, from the traditional Alamos and nationals and Avis is the world.
Speaker 3:
42:15
You can actually rent someone else's car. They do the same thing with campers. Do they really? Yes. What's it called? I have no camper row or just add an no on the end of it and you figure out what it is. But it's like we have all these decisions that we never thought about before. Um, and it's fun for me, you know, as I'm helping our families go through these decisions I had to last week, Aaron, these are very smart people. They've done well in life. Um, their business, you know, executives and they're calling me and our team here. So our financial planners and our trust professionals. I am looking at buying a home, what should I do? And if you sat and put them in the room, you would definitely say these people are the smartest people in the room. You know, when you go out and have a drink, you hear what they're doing for their businesses.
Speaker 3:
43:02
For their lives. But when push came to shove and they're looking at their own personal financial situation, what did they do? They called an expert. They called a financial planner. They called someone who could help them, not only rationalized decision, they made more importantly confirm their motive thinking and fine tune it so that they made the best decision for them. Besides just assuming. Yup. I what I tell everyone is, is um, don't let your ego get in the way on decisions like this. Well, and that shows the intelligence, the intelligence of being able to say, I don't know everything, but there are other people who are experts and I want to bring them into the circle to make sure we don't miss something. Yeah. Well, and if they have my short form balance sheet and understand my life's dreams and goals and when I want to retire or what I want to do in retirement, and it means boating in the Ozarks, uh, it means traveling to Arizona.
Speaker 3:
44:00
It means having a second home because I want my grandkids to come visit me and I want them all to be in the same room. What am I talking about? I'm not talking about making money, talking about memories, making memories of life. And that's what wealth is really all about, right? I mean, money can be a tool, but the wealth you get from your interactions in life and the memories created or what people talk about. And Aaron, that's why we talk about topics like this. That's why you and I talked about divorce a couple weeks ago. That's why we talk about financial planning. Uh, you can go watch CNBC all day long to decide what you want to do in investing. And by the way, we have an awesome investing team here. Then they is, you still have to guess right? Twice when to get in and when to get out of the markets.
Speaker 3:
44:45
But when you're making these singular decisions on rent versus buy, that decision has to be made now and you gotta make the best one. So if you want some help thinking through this, uh, we're offering a free consultation. Our team will help you answer your questions and explain your options for the future. You just go to Carson wealth.com. Click on, come in for an appointment, or if you'd rather just email us info@carsonwealth.com I think we're actually going to have techs capabilities here soon, so I'm looking forward to that. Hey Aaron, thanks so much for your help today. Hope everyone's got some good info at it and we'll talk to you soon. On wealth from wisdom
Speaker 5:
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risk, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of fame advisor Ron Carson.
Speaker 1:
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Okay. And here's the legal mumbo jumbo. The opinions voiced in wealth from wisdom with Ron Carson and for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consulted, qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk, including possible loss of principle, no strategy, issuers, success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CWM, LLC and sec registered investment advisor.
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