July 30, 2025 • 56 mins
When my 15-year-old godson Luka started peppering me with financial questions at a family gathering, I knew we had the makings of something special. What followed was an authentic, unfiltered conversation that captures the financial curiosity of today's teens and provides straightforward guidance that listeners of any age can apply to their own financial journeys.
Luka, already thinking beyond his years, arrives with thoughtful questions about building wealth from a young age. We explore the fundamentals of good money habits – from the simple yet powerful act of budgeting to the surprisingly effective "20% rule" for saving. You'll hear how small actions like mental math at fast food restaurants can build financial awareness, and why getting a job as a teenager creates lasting financial discipline.
The conversation takes fascinating turns through investment basics, with clear explanations of the S&P 500, diversification strategies, and the crucial differences between Roth and traditional IRAs. I share personal stories from my own investment journey, including the revelation that "if I started investing at 15, I would have been ahead of where I am now" – a powerful testament to the advantage young investors have through compound interest.
Perhaps most valuable are the reality checks. When Luka asks about real estate investing, I pull back the curtain on my own experiences – from barely breaking even on property flips to dealing with tenant nightmares including a police raid for marijuana distribution. These candid stories illustrate that wealth-building isn't always as simple as internet gurus might suggest.
Whether you're a teenager just beginning to think about money, a parent looking for ways to discuss finances with your children, or someone at any life stage wanting straightforward financial guidance, this conversation offers accessible wisdom without the jargon. Listen in, and take away practical strategies to strengthen your financial foundation today.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Those are good money habits and I can assure you that
not every 15-year-old has theability to compute the math that
correctly.
Speaker 2 (00:10):
Welcome to Real Talk with Life After Grief, chris,
where we talk about relevantissues as it relates to
individuals in grief as theynavigate finances, and the
advisors who help them.
We help clients in griefnavigate financial matters.
Speaker 1 (00:43):
Hello and welcome back to another episode of Real
Talk with Life After Grief,chris, on this episode, I have a
superstar.
I didn't say that about hisbrother, but he is a superstar.
So this is Luca.
He is the sibling, the youngersibling, to Maddox, and he is
(01:04):
also my godson, or you could saymy nephew.
Those are interchangeable.
So Luca, at a family gathering,was harassing me about financial
questions and was just pickingmy brain about financial stuff.
So got the wheels going and Iwas like, hey, why don't I use
(01:28):
the harassment that I wasfeeling and ask him to be on a
podcast?
He's laughing at me to be on apodcast and allow him to ask
questions.
And then I expanded that to hisbrother and his sister's going
to be on too.
So, luca, this is about you, myfriend.
All right, so I'm not sayingyour last name on purpose here.
(01:52):
As I said to your mama as anagreement, I don't want to
violate your privacy, and sotell us a little bit about
yourself.
What you do.
You have a job, are you the manof the house?
Speaker 3 (02:08):
Tell us a little bit about yourself.
What you do?
You have a job.
Are you the man of the house?
Tell us a little bit aboutyourself.
I'm 15 years old.
I'm going to my sophomore yearwith my brother going to the
Naval Academy.
I am earning that title of theman of the house that is correct
and I am starting to realizethat money is more of a
prominent part of my life andnot just something I can ask mom
(02:29):
and dad for me to spot.
Speaker 1 (02:32):
That is correct.
I would agree with you.
Luca is going to be the man ofthe house, regardless of his dad
.
That also resides in the house,but we've come to that
conclusion that Luca is going tobe the man of the house.
So, with that being said, lucahas developed a series of good
questions that he's going to askme and, luca, I'm gonna let you
fire away, buddy All right.
Speaker 3 (02:52):
So my first question is what is the best thing I can
do as a teen to start myfinancial journey?
Get a job, Get a job.
Speaker 1 (03:03):
So I say that facetiously, but one of the best
things that you can do honestlyoutside of earning money is to
have good money habits, and thisis something that I talked to
your brother about is to have abudget.
So do you have an allowance ormoney that you get from anybody
on a regular basis?
Speaker 3 (03:24):
Not really.
I just ask either my mom or mydad to put money on my green
light whenever I'm going outwith friends, and I'll get a
specific amount in there.
Speaker 1 (03:34):
Okay, so green life, that everyone doesn't know that
it's basically it's a card thatyou can put money into and you
can give it to anybody,specifically for teens.
So you have, what is it like adebit card, luca?
Speaker 3 (03:48):
Yes, a debit card.
Speaker 1 (03:49):
Yep, so it's a debit card.
So if you had to track the lastthree months, how much money do
you think that you've asked momor dad to put on your green
light?
Zero, okay.
Speaker 3 (04:04):
I've been paying.
I pay with cash most of thetime.
Speaker 1 (04:07):
Okay, let me rephrase that.
So how much have you gottenfrom mom or dad in the last
three months, the last three?
Speaker 3 (04:15):
months to spend Yep, just me like with my friends.
Yes, correct, I would say about$60.
Speaker 1 (04:26):
Okay, so $60 in the last three months, so about $20
a month.
Is that quick math?
Is that about accurate Give ortake?
Okay, have you gotten any moneyfrom anywhere else?
No, okay, so I'm going to usethat $60.
And that's the reason I wasasking questions.
So I was trying to get afoundation.
(04:47):
So when you were out and aboutwith your friends and you got
the twenty dollars per month,did you use all that twenty
dollars every time you went out?
Speaker 3 (04:57):
every time I went out .
No, my friends and I usuallytake turns on paying.
Speaker 1 (05:03):
Okay.
So it sounds like at one pointyou went out and you got $20
from your mom and dad and didn'tspend it.
Is that accurate, okay?
So what I'm backing in is to abudget.
So anyone on the planet thathas any money should have a
(05:24):
budget, and a budget is verysimple.
So you took in 60 bucks, right,and so you didn't spend $60,
which is a great habit, is agreat money habit in advance.
So the habit is to spend lessthan you make or you bring in.
Okay, so in that instance andI'm putting the cart before the
(05:46):
horse but in that instance nowyou have let's just say you have
20 bucks that's left over fromthat 60, and you can do
something with that $20.
And before we got on the call,luca talked about having
investments.
His dad has done some thingsfor him.
You could have taken that $20and you could put that into your
account.
And there is another rule infinance it's called the rule of
(06:09):
72.
About every seven years yourmoney doubles, so that $20 that
you saved in seven years andagain it's invested, obviously
when I use that rule of 72, andthere's some returns that are
behind that.
But in general and I use thatrule of 72, and there's some
returns that are behind that,but in general.
So in seven years you are 15now and in seven years you'll be
(06:29):
22.
So compounding that $20 wouldturn into $40, with you not
having to do anything but havinginvested properly.
That's what you can do now inregards to having a good money
habit, and so it's justbudgeting your money accordingly
.
And when you go out, this isanother good money habit that I
(06:51):
use, even with my boys.
So if you go out, and let's saythat you go, where do you guys
hang out?
Speaker 3 (07:01):
We normally go to like fast food places.
Speaker 1 (07:04):
Okay, what's your go-to for fast food?
Speaker 3 (07:07):
Normally do.
A make a bell run is what welike to call it.
Speaker 1 (07:10):
Okay.
Speaker 3 (07:12):
All right.
Speaker 1 (07:13):
Yep, I make a make bell, okay.
So a good money habit for youand this is this goes beyond the
budget is when you are going onyour Mac bell run and you have
your $20 is to always know inyour head and be able to compute
how much money you are gettingback without having to use a
(07:34):
calculator.
Speaker 3 (07:36):
And I say that what does?
Speaker 1 (07:37):
that mean?
That means if your bill at TacoBell I'm going to make this
very easy math If your bill atTaco Bell is $5.50, I'm going to
put you on the spot.
Okay, and you give them a $10bill, how much are you supposed
to get back?
Four festive, okay.
So that's a good money habit.
(07:58):
So when the math increases, ifit's $8 and if your bill is
$8.57, how much are you supposedto get back $1.50.
$8.57 is the bill, so how muchare you supposed to get back
$1.43.
Yes, those are good moneyhabits and I can assure you that
(08:20):
not every 15-year-old has theability to compute the math that
correctly.
Speaker 3 (08:33):
Because what happens?
Yeah, I have my 20 bucks, maybeeven 40 dollars, and my
spending habit is how much?
How much food can I get withthis 40 dollars?
Okay, which is obviouslyprobably not the best spending
habit?
Speaker 1 (08:42):
yeah, because if you're looking to have a good
money habit now, if you have 40bucks and you're out and about,
it's going to be hard for you tospend 40 bucks at Burger King
by yourself and Taco Bell.
That's a lot of food, and sowhat I would look at if I were
you.
And another good money habit isto be conservative.
(09:03):
So if you have 40 bucks, whatcan I buy with $20?
Or what can I buy with $30?
Cut off portion of what you arespending and I like to use the
rule of you're trying to savemoney.
Save about 20%.
So 20% of your 40 bucks is what$8.
That's correct.
So I would siphon off eightdollars at least eight dollars
(09:27):
to put in your pocket and thenknow that is not going to go
anywhere and it's not going togo towards spending anything
else.
So I'm sure your parentswouldn't mind that you're taking
advantage of the money thatthey're that they are giving you
for good use.
So those are some good moneyhabits.
I could get more detail into thebudget For you.
(09:50):
I think the easiest thing rightnow is anytime you get a set
amount of money, I would siphonoff a portion of that and I
would use 20% as a benchmark,anything north of 20%, because
that gets you in the habit ofwhen you start working and you
have a job where you can putmoney away for your retirement
(10:11):
or whatever, you already knowthat 20% is an amount that
you're going to be putting awayand it compounds very quickly,
very quickly, especially at yourage.
If I started investing at 15, Iwould have been ahead of where
I am now.
I only started investing, Ithink, when I was probably
started in college.
(10:31):
That's a very good question.
Did I answer all of it?
Yes, okay, what's your nextquestion?
Speaker 3 (10:39):
Talking about that.
Investing brings me into mynext two questions.
Okay, Investing brings me intomy next two questions.
I have an investment accountthrough an app called Fidelity
and my dad set it up for me.
It feeds $20 into theinvestment account directly from
my bank account every month.
$20, $20.
He keeps talking about how it'sup because we put the money in
(11:04):
S&P 500.
And I'm like, okay, that's good.
Should we take it out?
Why don't you take it out?
But he always seems to say justto let it ride out and I wanted
to ask if you agree with thisand why.
Speaker 1 (11:17):
Okay.
So what I'm going to say firstoff is and I generally have to
give you this disclosure thatany time that you're seeking
advice, you should seek theadvice of a professional.
Okay, and I'm going to throwyour dad under the bus here.
So what I would advise you todo yes, go to your dad.
Your dad has obviously asked me, but throwing him under the bus
(11:39):
.
So my recommendation would bego to a professional through
your dad and with your dad inturn, he will come to me and ask
questions, but I do have to saythat I'm saying it jokingly,
but I do have to say that.
And a professional, I'm talkingabout a certified financial
planner.
Basically, I had to go and get,go through a lot of schooling
to get this designation forfinance.
(12:00):
So, beyond that, the S&P 500,the nuts and bolts of what your
question is.
So the S&P 500, it is a broadbasket of stocks that invest in
the top or, excuse me, I shouldsay, the largest 500 companies
in the US, and I'm just going togive you an example, because
sometimes some of thesecompanies, they could possibly
(12:22):
float in and out of the S&P 500,depending on their size or
whatever transpires within themarketplace.
Coke, everybody knows Coke,that would be an example of one
that could possibly be in theS&P 500.
Pepsi are basically investingin those 500 stocks and
(12:48):
typically over time there's noguarantee those go up.
So the advice that your dad isgiving you with regard to riding
it out, you at your age canafford to take on more risk than
an old guy at your dad's age.
Okay, normally his risk wouldbe lower, but that's not always
the case.
It's age-based and then whatyour appetite is and a myriad of
(13:12):
other factors.
So his advice is to ride it out.
And what I would also slantthat, as long as it's
diversified and that's what Iencourage my clients to do is we
have a very methodic approachto when we invest for them and
it's based on a lot ofinformation that they give me.
My advice because we've done alot of planning underneath that
(13:37):
is to look at the long term.
So you don't need that moneycurrently and let's just say
that S&P 500 was properlydiversified with some other
things.
So I wouldn't necessarily makethe recommendation for one of my
clients to go 100% into the S&P500, again because there's
(13:59):
other metrics you don't have.
You're not paying for a housepayment, you're not paying for a
car payment, You're not payingfor insurance, so the money that
you go, that is going in, canbe very you can take a lot of
risk on it.
And so I understand where yourdad is coming from and he's just
saying leave it in there andjust let it ride.
And so historically, withoutgetting into numbers, the S&P
(14:23):
500 is just grown over historyand again, there's been down
years, but overall it's grownthroughout history.
And so that's why he's sayingjust to leave it and to ride it
out.
When you get older and when youhave other things that are
drawing on your income and youdon't have the luxury of just
(14:49):
letting it sit there and ride itout, and maybe you're starting
to plan, then I would look atreally divers&P 500, you're not
diversified, I can tell you that.
The other thing too.
So say that the S&P 500 drawsdown one year and I'm just going
(15:11):
to give you a number.
So it draws down 10%.
So you put in 20 bucks a month.
Right, that's what you put in amonth, 20 bucks a month.
Okay.
So 20 bucks a month times 12months, how much do you put in?
240.
$240 a year.
So you put in the $240 in oneyear and you have the market
(15:35):
retracts by 10%.
So what is that $240 worth now?
Speaker 3 (15:41):
If 10% is deducted, that is correct 216?
.
Speaker 1 (15:48):
I think you're pretty close.
We'll roll with that number.
Yep, okay and so.
Yeah, now I have $216 in thataccount from that particular
calendar year because it's drawndown.
That is the danger in being notdiversified.
So I'm going to give yousomething that's a little bit
counter to that.
So say that $240, now you splitit and you only have $120 that's
(16:12):
invested in the S&P 500 and itdraws down 10%.
So let's just make it an evennumber Very easy.
So say that now you have $100of the $120.
Okay, the other portion isinvested in what I would
(16:33):
consider fixed income andsomething that's a little bit
safer than securities calendaryear because of the way that the
market worked out.
That other $120 that you haveof the $240 is invested in a
manner to where you're gaininginterest or you're getting more
(16:56):
dividends, and it's notnecessarily losing money, it's
just getting you, or it's notnecessarily gaining money but
it's getting you interest.
And if it got you 4% intereston that money and you only lost
$20, but now you're 4% up on the$120, now you're able to offset
(17:17):
that drawdown on the $120.
I see you shaking your head andunderstanding how that now makes
sense and why you diversify andyou typically don't want to put
your eggs, all your eggs in onebasket, taking more risks
though the way that you're doingit if in one calendar year that
bumps to 20%.
(17:38):
So now you lost 10% on the 240in one year and it went down to
216 using your math, and thenthe next year it went up 20%.
So now your net loss over atwo-year period is not a net
(17:58):
loss, it's a net gain of I said,20%, so it's a net gain of 10%.
So again, that's why I advisespeaking to a professional,
because that's what I do forfolks is I monitor that risk and
over time we want to make surethat they're getting what they
need out of the account and I,as a financial professional, I
(18:21):
can't have my clients take unduerisk.
One, they would fire me.
Two, it's not what's in thebest interest of what they're
doing.
All make sense.
Yes, I see you have a seriousface on now.
Speaker 3 (18:37):
Oh, this you gotta lock in when you're talking
about money, all right, whichdid I answer your questions
there?
Speaker 1 (18:44):
Yes, okay, what's your next question?
Speaker 3 (18:48):
My next question would be I understand the
process of investing money, okay, but I don't understand when
you take that money out.
Or do you take it out all atonce?
Do you take just a little bitout?
How does it become profit?
Speaker 1 (19:06):
Okay.
So you've asked a couple ofquestions.
I think probably withoutknowing that you've asked a
couple of questions.
I'm going to start from thebeginning.
So how to invest a schedule andwhat should that look like, and
then I'll back into.
When you take money out, whatdoes the profit?
And I'm going to add in taxesand then just correct me if I
(19:29):
miss anything.
So when you're investing, theideal way to invest is on a
schedule.
And so you're familiar with the401k.
You've heard of 401k, yes, okay, so a 401k.
When you're working for I'mgoing to use Taco Bell, or you
go to McDonald's or Burger King,those employees have the
ability to invest in a 401k andit's on a schedule.
(19:52):
They get paid every two weeksand they pull money out of their
paycheck and invest into their401k the way that they set it up
, and to their 401k the way thatthey set it up.
And it is virtually impossibleto time the market, to see when
the market is gonna go up orit's gonna retract or anything
like that, and my education hasled me to the best opportunity
(20:13):
for an investor is to investover a period of time and invest
on a schedule.
If you invest every two weeks.
If the market is down, youinvest when it's a low point.
If it's up, then you'reinvested at a high point, but
you take advantage of the lowpoints at a regular basis when
you invest on a schedule, and sothat's number one.
So you don't wait to try totime when the market is
(20:36):
retracting, because if you dothat and I'm on a schedule and
I'm investing every two weeks ifthe market doesn't retract for
six months or a year, you've nowlost out on six months or a
year of investing, beinginvested in the market and
taking advantage of those bumps,or taking advantage of what I
talked about getting somedividends and some money.
(20:59):
That's just out there, becauseyou're in the game, so to speak.
The next part that you had askedis when you take it out.
There's really no good answeras to when you take it out.
You take it out when you needit, and you can shift money
around into a differentinvestment if you feel that, or
you're guided that your moneyneeds to be shifted into
(21:23):
something that more aligns withyour needs, and so when you do
take money out, if it is abovewhere you paid for it, then
you're generally going to paytaxes, and the taxes are.
They're called short-term gainsand long-term gains.
So basically, short-term gainsis basically anything under a
(21:43):
year.
If you buy Coke and you buy itat $100 and it goes up to $120,
you're going to pay what'scalled short-term gains, and
short-term gains is yourordinary.
It's called your ordinaryincome level.
Basically I'm not going to gettoo tax heavy here, but it's
basically at your ordinaryincome level.
And so the IRS likes it whenyou hold it longer term.
(22:06):
And so if you hold it longerterm, they give you favorable
tax treatment.
And it gets a little bit moreconvoluted if you try to take
money out of a retirementaccount, because they're going
to not only tax you at ordinaryincome but they're also going to
penalize you.
Some reasons why you would takemoney out of an investment If
you were looking to buy a house,if you're looking to purchase a
(22:28):
car or something like that, orit's a large purchase that you
need, or there's an emergencythat happens.
So I'll tell you what I use.
Your dad jokes with me that Ibought this truck last year and
so he has other things to sayabout my truck.
I use my what I call after-taxaccount.
It's not anything that isqualified with the IRS.
(22:49):
I utilize that to make largepurchases or to help in those
large purchases, and so thatmoney sits on the sideline and
I'm just investing over time andthere's no real need for it.
But you need a vehicle, and sowhere am I going to draw that
(23:09):
money from?
It's not a situation wherethere's an emergency and I have
to suddenly pull that out, andI'm going to add that to don't
let me forget about an emergencyfund, and I put money aside and
I constantly invest it when Ido have a need or a large
purchase that I can draw moneyfrom that, and that money just
sits in an account and it'sdiversified and it just grows
(23:30):
until I need it.
And so, car, we had to dosomething with the house.
As far as plumbing, airconditioner, I can think about,
but large ticket items that'sgenerally what I invest those
funds for.
So does that answer yourquestions about investing?
Speaker 3 (23:51):
It does.
Thank you Taking it out whennecessary.
Speaker 1 (23:54):
That's correct.
Yes, also, the temptation is ifthe market is not going the way
that you want is, if the marketis not going the way that you
want, the temptation is to pullit out, and I usually advise
against doing that, because youdon't know when to put it back
in.
You've taken all this time andenergy to invest it and invest
it, and then emotions getinvolved and you get scared, and
(24:17):
it's natural, and you just wantto pull it out because you're
scared of the unknown.
And that's again what I do.
I come back and say we haveinvested this properly, we know
that this is going to happen.
It doesn't feel good.
When you in theory lose moneythat you invested, but invested
properly, and it's over a periodof time, then that loss is only
(24:38):
that particular calendar yearand then the other years it
should look like you are goingup in the account Emergency fund
.
We didn't talk about that.
I'm gonna volunteer thisinformation.
So I always advise having anemergency fund At your age.
It's a good money habit.
But an emergency fund normallywould be for someone that is in
(24:59):
their income, earning years andthey have other responsibilities
, how Car, and if you lost yourjob, you need to pull money from
one of those source to be ableto keep yourself afloat.
So of the $20, excuse me the20% that I had recommended
siphoning off for you, it's notgoing to necessarily make a
(25:19):
difference, but I just throw itout there that you should think
about an emergency fund too.
But again, you don't have anyexpenses.
Generally, an emergency fundwould cover six to 12 months,
depending if you were married ornot, of expenses if you were to
lose your job or somethingcatastrophic happens.
Speaker 3 (25:38):
Do most people have an emergency fund, or is that
just something that you adviseto people, because most people
that don't have it end up in nota good position?
Speaker 1 (25:49):
Yeah.
So I'm going to be careful notto assume, but what I know in
the research that I've done isthat most people don't have an
emergency fund set up aside.
I advise that because I've seena lot of stuff that's happened,
and there's a lot of stuffthat's uncontrollable.
I've had clients that have hadto go out on leave from their
(26:10):
job, and when they go out onleave they don't receive the
same income that they had before, and whether that leave a
disability or something of thatnature so their expenses are at
a level and it may be onlytemporary.
Now they need to pull money tokeep where their expenses are,
and so if you have an emergencyfund, you're able to do that for
(26:33):
a short period of time.
But if you don't, now you'regoing to have to get in a
situation to where you're goingto have to borrow that money so
you're able to support yourself.
So I'm going to give you a reallife situation when Aunt
Anne-Marie and I were expectingEli and his brother, and so
(26:54):
Anne-Marie had to go out on ashort-term medical leave because
of the complications of losingChristopher, and so she couldn't
work for several months and shehad to stop working earlier
than we had anticipated.
And so in that situationbecause we had an emergency fund
(27:17):
and not expecting her to stopworking so quickly we had
anticipated and planned for it.
But we didn't anticipate itwhen it happened and so we
didn't have to borrow to keepthings afloat.
We just looked at the emergencyfund to offset where we may
have had a shortfall.
Then in that situation, itprevents us from borrowing and
(27:38):
going into debt.
Speaker 3 (27:40):
That's very smart.
I think my dad has brought thatup a few times and I definitely
like that.
Speaker 1 (27:45):
One of the things that you had asked in regards to
what are good money habits nowand what can you do, and I was
half joking and I said get a job.
But I was half joking becausethere are ways that you can earn
income now as a 15-year-old,getting ready to drive in less
than a year by yourself.
So I actually taught a class tosome middle school students
(28:11):
probably about a year ago, ayear and a half ago, and they
asked me the exact same questionwhat can I do now for good
money habits?
And this group of middle schoolstudents were not as fortunate,
I guess I could say, luca, asyou and I, and so I was real
with them in regards to some ofthe things that they can do now
and I'll extend this to you andI'll extend this to your two
(28:34):
cousins that do get paid by me,and so some of the things that I
encouraged them to do is tostart making your own money, and
you can do that a myriad ofways, and in their situation it
may not have been feasible forthem to go to their mom and dad
to ask for money or to do a jobfor them.
(28:56):
So we looked outside of thescope of what they could do.
And so I said many of you havesiblings or you have cousins and
you could babysit.
That's one thing that you coulddo.
The other thing that you coulddo you could go and do something
for your neighbors.
Maybe you'd mow the grass,maybe you could do someone's
(29:19):
hair.
I'm not expecting you to dothat, luca, but it's just being
outside of the box.
And so I'm an entrepreneur andI've had to think outside of the
box and how to make money for along time, and innately,
because of my life experiences,I've been very good with money,
but I've also been able to makemoney.
So I'm going to extend that toEli and Gideon.
(29:41):
They work for me on a regularbasis, and so we have an
arrangement to where they dothings for me and then they get
paid.
One of the things that I hate todo is I hate having to shred
any paper.
It's very tedious for me, theshredder is low to the ground,
(30:03):
and so it would take me an hourand a half to just shred stuff
stuff we get in the mail or whathave you.
And so what do I do with them?
And they came up with this.
They said we'll take it offyour hands if you pay us for it
Said that's a great arrangementbecause something I don't want
to do and I will pay you for it,gladly pay you for it.
So I pay them in 15 minuteincrements and I think I pay him
(30:26):
$2 every 15 minutes.
And whenever I need shreddingdone and it's pretty often they
say take it off your hands,daddy, and let's have our
agreement the $2 every 15minutes and the shredding Luca
honestly takes between the twoof them it takes about an hour
and a half.
Oh, wow.
So it's a lot of shredding.
(30:48):
So it's things like that to beable to get creative.
And so now they have money, andI'm going to extend this.
So now they have their money.
So if they got $2 every 15minutes in an hour and a half,
how much money would that be?
Each one of them?
Luca, 12 each, 12 each, okay.
(31:08):
And so they get $24, right, apiece.
So now they have decisions to dowith their own money and,
because they're a product of me,they take a portion of their
money and they put it into theirsavings account and they put a
portion into their wallet.
And remember when we talkedabout at the beginning of the
(31:29):
podcast.
If you have $40, you get fromyour parents and you're going
out to eat, know that you onlyhave $30 as opposed to that $40.
So what they do one of the goodmoney habits that they do is if
they get that $12, they're notputting that $12 into their
wallet.
They are putting a portion ofthat money in their wallet and
(31:52):
it was almost like they onlymade $6 and the other portion
goes into their savings account.
They're conscious of doing that.
So they have those good moneyhabits already and it's not
something that I have to doabove and beyond for them.
It's not like I'm giving themmoney.
They're doing a job and theyunderstand I'm working for this
money.
That's one of the things thatyou can do now and I'm sure Sean
(32:15):
would be happy to pay you.
Speaker 3 (32:17):
Yeah, I'm sure he will too.
Speaker 1 (32:19):
He used to offer me stuff around the house, but I
think if I offered first, hewould for sure let me do it for
some money.
Now you have done something toincrease your own monetary
(32:40):
amount.
That would be a great moneyhabit to have now, and then you
can start directing.
Okay, I'm now up to, let's justsay, 60 bucks a month and now
I'm directing what's going intomy investment account, and now
you have a little bit moreownership and it means something
more to you, because it'ssomething that you have earned
versus it was just given to you,and it just means more to you.
(33:04):
So make sense, yes, sir.
So what other questions do youhave for me?
Have any others come up?
So we just started chattingagain.
Speaker 3 (33:14):
Yeah, just so far as to.
I am going to be turned 16 soonand I will start driving, do?
Speaker 1 (33:33):
you have any recommendations of an easy job
that I can drive to and stilllike balance out my schoolwork
and practice, or whatever?
One that comes to mind that Iknow a lot of teenagers take
advantage of is Publix.
I hear that a lot.
That is probably the one thatcomes to mind.
I think back to my first joband I would not want anybody to
have my first job.
Your dad and I shared the samefirst job.
First job was a job that madeyou appreciate your education
(33:55):
and it made you never want tolook back and do what we had to
do.
But I think that's an element ofanyone that starts working at
an early age, because you startout.
Let's just say that you startworking at Publix and I don't
know what they pay per hour, butthey pay you based on where you
are in life and you have whenyou turn 16, you will have
(34:19):
completed your freshman year andpart of your sophomore year,
and so imagine and this was whatthe advice that I got imagine
having to do that job and havingto raise a family.
How hard that would be Ifyou're getting paid.
Let's just say 15 bucks an hour.
(34:40):
I don't know what they pay, but$15 an hour.
There's 2080 hours in a workingyear.
Times 15, I'm just doing somemath so that's $31,000.
That's not going to go a longway to raise a family or to
support a household.
So now those numbers start toreally make sense because at the
(35:03):
time your dad and I startedworking at 16, we were making
the same amount of money thatgrown men were making, but they
were having to support theirfamilies amount of money that
grown men were making, but theywere having to support their
families.
And so that made a hugedifference for us, because this
money is good for a couple of16-year-olds, but I can't
imagine having to support achild on that.
(35:25):
And our money it wasn't thatgreat.
It was enough money for wecould buy gas, we could go hang
out on the weekends, we couldbuy clothes and that was pretty
much it.
I saved a good portion of that,but I couldn't imagine having
to support a family on that.
When you start working and youstart earning your own money, it
(35:47):
really starts to make moresense because you have that
experience.
What else do you have aroundwhen you turn 16, other than
possibly a good job that youcould get?
Speaker 3 (35:55):
Do any other investment or bank accounts open
up, because I know you have to?
Speaker 1 (36:04):
hit a specific age for certain ones, not
necessarily at 16.
Can you open up your ownbecause you're a minor, until
you turn 18?
So there's strict laws andregulations around protecting
minors in particular.
So what I remember from mybanking days is that you're
going to have to be 18, but yourparents can open up an account.
(36:25):
They just have to be somehowlinked to it.
Most likely, you know there'llbe the guardian of the account,
so to speak, but you can act onthe account depending on the
bank, as if you were the onlyone on the account.
They just have oversight on theaccount.
So there's nothing that I wouldreally change, because the bank
account that you have it'seither a checking account,
(36:47):
savings account, money marketaccount, but they do the same
thing for you, whether you havea parent on it or not.
Speaker 3 (36:57):
It's just your access and your ability to do things,
gotcha, and I just want tobacktrack from when we were
talking to the S&P 500.
I wanted to ask you what a RothIRA is there's no backtracking.
Speaker 1 (37:05):
There's no backtracking here.
Speaker 3 (37:07):
So I just wanted to bounce off of what we were
saying.
Go ahead with your question.
What is a?
Speaker 1 (37:12):
Roth IRA.
Go ahead with your question.
What is a Roth IRA?
Okay, a Roth IRA is an IRA thatyou put in after-tax money.
So there's a traditional IRAand then there's a Roth IRA.
So I'm going to try to breakthis down.
Your brother had the samequestion.
So when I go to work and I make$1,000, the government takes a
(37:34):
portion of that.
Let's just say they take 20% ofthat.
Okay, and so now I only have$800.
And so I can put that moneyinto a Roth IRA, and there's
rules and regulations in regardsto how much you can put in and
there's some other things.
But I'm just using this mathfor the explanation.
You can put this money into aRoth IRA.
(38:02):
The money grows and it growsuntil you're able to take it out
.
And take it out is deemed bythe IRS and you can take it out,
Essentially Not having to paytaxes on it anymore, because
you've already paid taxes on iton the front end.
So say that $800 grows to$1,600.
So in the Roth IRA, you cantake that money out and you're
(38:27):
not necessarily taxed on itbecause you've already been
taxed on the money.
So that's the benefit of theRoth, as you've already been
taxed on the money.
So that's the benefit of theRoth.
A traditional IRA instead ofthat same $1,000, you get the
tax break at the beginningbecause you put that money in to
the traditional IRA and itgrows tax deferred until you
(38:52):
take the money out.
You're taxed on the time whenyou take the money out.
So the major difference betweenthe two is where you get taxed.
Traditional, you get taxed whenyou take the money out because
you're not paying taxes.
You're getting actually a taxbreak when you're putting the
(39:12):
money in.
It reduces your ordinary incomedepending on where your income
level is and a lot of otherstuff garnered by the IRS.
But a Roth IRA it grows andwhen you take the money out
you're not having to pay on thatmoney tax-wise at the other end
.
Does that make?
Speaker 3 (39:29):
sense.
Yeah, so is that like a savingsaccount, or what's the
difference between that and asavings account?
Speaker 1 (39:35):
The difference between that and the savings
account.
A savings account, you can takemoney out whenever you want to,
and an IRA, you cannot do that.
So an IRA excuse me, yeah, anIRA.
The Internal Revenue Servicegarners when you can take money
out of it and if you take it outat the wrong time, they're
(39:56):
going to penalize you.
There'll be a 10% penalty.
So that's the difference.
You can't take the money out.
You cannot use it as a savingsaccount.
You can't just go in andwithdraw it like the money in
your savings account.
Speaker 3 (40:15):
Okay, that makes sense.
Speaker 1 (40:16):
Yes, so yeah, those are very good questions.
Speaker 3 (40:21):
Yeah, my dad has me set up on a Roth IRA.
I'm pretty sure already you canstart pretty young, right?
Speaker 1 (40:27):
Yes, you can start very young for a Roth IRA.
Yep, what can you do now tostart good money habits?
Oh, you're asking me thequestion now.
Speaker 3 (40:37):
Yes, I am.
Oh, what can I do?
Get a job?
Okay, I could use the 80-20rule.
That's correct.
Save 20% of whenever I'm goingout and of my spending money
that I earn.
I could ask around the house orthe neighborhood to find ways
to get money and, again, savesome of that man you should be
(41:01):
teaching this stuff, right yeah.
Speaker 1 (41:04):
So what kind of student are you in school?
Speaker 3 (41:08):
I would like to say I'm a pretty prolific student.
Speaker 1 (41:12):
Yeah, what does prolific mean?
Yeah, I'll honor all honors, appretty prolific student.
Speaker 3 (41:14):
Yeah, what does prolific mean?
Yeah, all honors, ap is justall that good stuff.
Speaker 1 (41:19):
All right, I think I can tell by talking to you and
your articulate questions.
I'm going to read something foryou in regards to a Roth IRA.
So I'm going to give you somevery specific language, and I
just pulled this up.
So a Roth IRA or individualretirement account is a
retirement savings account thatallows you to contribute
(41:39):
after-tax dollars andpotentially withdraw them
tax-free, while you don'treceive an immediate tax break.
That's what we just talkedabout for your contributions.
Your investments can growtax-free and you can generally
withdraw them tax-free andpenalty-free after the age of 59
and a half and once the accounthas been open for five years
(42:00):
the 59 and a half and the fiveyears.
That's the rule that the IRSputs in place.
Speaker 3 (42:05):
Okay, so I have a question.
Speaker 1 (42:07):
It uses the link.
Speaker 3 (42:09):
What?
Yeah, go ahead.
It uses the question you cangenerally take it out tax-free.
What does that mean?
Speaker 1 (42:16):
You can't always take it out tax-free had not been
open for five years, and let'sjust say that you opened the
Roth IRA at age 59, and then youdecided to take the money out
(42:44):
at 60,.
There may be a gray area there,because there's a combination
of two things that you'reresponsible for doing there.
So anytime and I have to givethis disclaimer, anytime you are
dealing with a Roth IRA or atraditional IRA and you're
concerned with the taximplication, I would either seek
someone like myself, acertified financial planner in
combination with an accountant,just to make sure that you're
(43:06):
not stepping into a minefieldthere and you do something that
you can't recover from, becauseeveryone's situation is
individual and it could changedepending on someone's
individual situation.
Okay, got it.
Yes, sir, all right.
I asked you and you said youdidn't have any more questions,
but you had another question youhave another question so does
(43:27):
that apply to just a normal IRAas well?
Yeah, so a normal IRA.
You would have to take themoney out after 59 and a half to
receive favorable tax treatment.
And so a normal IRA, atraditional IRA?
It's just the opposite, becausewhen you start taking money out
of it, you are taxed at yourordinary income level.
(43:48):
Remember I talked aboutnormally in that situation where
it was a,000 and you're taxedon the front end 20%.
Well, a traditional IRA.
When you take the money out,you are now taxed at 20%,
whatever your tax level is.
Wait.
So why would somebody want todo that?
Why would someone want to do aRoth versus a traditional IRA?
(44:11):
No, I would or vice versa, yeah,vice versa you can argue both
sides of the coin, so atraditional IRA, no, or vice
versa, yeah, vice versa.
You can argue both sides of thecoin.
So a Roth IRA?
In theory, the account would begrowing exponentially and at
the end you wouldn't have to paytaxes on it, right?
In theory?
(44:32):
On a Roth IRA A traditional IRAyou would have to.
So in theory, you could argue tohave a traditional IRA because
your tax bracket is arguablygoing to be lower, a lot lower,
when you retire and the taxesare going to be minimal at that
(44:54):
time anyways.
Or you could have a Roth whereat that time you're not paying
any taxes.
So it's really again toanyone's individual situation
based on taxes.
Say that's probably the cruxAre you going to pay taxes at
the beginning or are you goingto pay taxes at the end?
So lots of folks that I speakto have personal views of either
(45:19):
or.
But when I get in the mix, Ihave to look at and say is it
better for you to take a taxbreak on the front end or take a
tax break later on down theroad?
Speaker 3 (45:30):
Okay, that makes a lot more sense when you explain
that.
Yes, you say that both savingaccounts grow exponentially.
How, both iras, yeah, like how,once you put money in, how does
that money make money for you?
Speaker 1 (45:44):
man, you're asking some really good questions.
So your ira could be investedin a whole bunch of stuff.
Okay, it could be simply asavings account, a high interest
savings account.
You could have your IRAinvested in the market.
You could even have your IRAact as a liaison to buy property
(46:05):
, and it's a little bit morecomplex.
But your IRA, it's totally aninvestment vehicle and you have
the ability to almost be able topurchase the investments that
you want, and it doesn'tnecessarily have to be a liquid
(46:27):
investment.
It could be a physical realestate.
There are some organizationsthat would allow you to do that.
So I could buy within my IRA.
With the right dynamics withthe IRS, I could go out and I
could purchase a home, and itwould be a rental property,
obviously.
But anything that is donewithin that rental property, it
(46:51):
all has to pass through the IRA.
If I buy it, I have to use themoney from the IRA.
If I service it, I have to usemoney from the IRA.
If I get income from it, thathas to go back into the IRA.
It's almost like your own bankand you have to do things like
that.
You can buy other things withinyour IRA, too, that are
(47:11):
considered investments.
The most common though yeah, themost common one is either to
have your savings accountsomething like that, something
that's FDIC insured by the bank,or you purchase something in
the market, so to speak, in theinvestment market.
Good questions, Thank you.
What else you got?
Speaker 3 (47:36):
My friend's parents.
They do well, but on the sidethey do real estate.
Okay, and they make a lot ofmoney doing real estate and I
always jokingly nag on myparents like why don't we do
that?
But it actually seems like agreat way to make extra money.
Speaker 1 (47:53):
Okay, so what's your question around that so?
Speaker 3 (47:56):
is it just?
I know it's not easy, but is itsomething that most people
could do on the side with alsohaving a full-time?
Speaker 1 (48:03):
job?
I'm going to say probably not.
I'm going to give you anotherpersonal example.
So you probably didn't knowthis about me, so or you may
have no part of it.
So when I started working forthe bank, it was Bank of America
back in 2000.
Fast forward a couple of years2003,.
Yeah, 2003,.
Anne-marie and I bought ourhouse.
(48:25):
I am generally a risk taker andI saw where the market was
headed and I decided to buy myfirst property, and I'll call it
36th street, okay.
And this property, in theory,was worth $40,000 and I bought
(48:49):
it for $20,000.
So that's a pretty good spread,right?
Yeah, pretty good spread.
It's worth 40 and I bought itfor 20.
That's great, yeah.
The reality is I was trying toflip this property and I bought
it with the money that I had inmy existing home the equity and
(49:12):
I had to sit on that propertyfor eight months and I had to
sit on it.
I didn't really have to doanything other than buy it and
just sure it up.
But the things that were sounknown within that dynamic were
if there's a home that you haveto insure and the insurance
company knows and understandsthat it's vacant, they're going
(49:34):
to charge you a lot more forinsurance, probably three or
four times the amount ofinsurance.
So say, your parents, on yourhome, the insurance on a yearly
basis is, let's just say, $2,000.
In the case of a vacant home itwould probably be close to
$8,000.
So now in that dynamic where Ibought it for 20 and my
(49:55):
insurance was I think it was twoor $3,000, unbeknownst to me
Okay, so now that spread startsto dwindle.
So now let's just say I'm at myend is $23,000.
Okay, then I'm having to dosome repairs.
There was a hurricane that camein and I had to go clean it.
(50:16):
There's some other stuff inthere that I had to do.
So say, I spent now anotherfive thousand dollars.
Let's just say let's just capit at 30, and so now my spread
is at 30 to 40, now only have10,000, and now I have to pay
taxes on it because it passesthe time where I need to pay
real estate taxes.
(50:36):
So the taxes I don't know saywe're another thousand bucks or
whatever it was 2000 bucks, andso now my spread is dwindling
more.
And then I finally findsomebody that's really willing
to buy it.
They're not willing to buy itat the price that I thought that
it was worth they're going tooffer me because it was in a bad
neighborhood, a very badneighborhood.
It was off Orange Blossom Trail.
(50:57):
And I think I sold that propertyand I'm just going off of
memory I think I sold it for$32,000.
And so I made $800 on thatproperty.
You know how much time andenergy and I put into that
property.
I put a lot of time and energy.
Yeah, so it's not as easy and Ihad a full-time job and so we
didn't have kids at the time.
(51:18):
I'm going to fast forward thatbecause I learned a lot from
that experience.
So I bought other propertiesand I managed those other
properties, but in doing that Irented them out.
I didn't go in the mindset ofbuying them and trying to flip
them, but having to rent themout.
I had to meet people before Iwent to work.
I had to meet people at lunchand I had to meet people after
(51:39):
work and then if something wentwrong with the property, it was
my responsibility and so I'm onthe hook for the mortgage and I
have to find somebody to rentthe property.
At the same time you can have aproperty manager to do that,
but they're going to take apiece of the pie and I'm all
about numbers and they generallytake about 10% of whatever the
(52:00):
rent is, which could be a lotRight.
Plus, they take generally likethe first month's rent or
whatever.
My point is.
It is not that easy becauseI've been a landlord and I've
done a lot of that stuff for avery long time and generally
what I say to folks, if they'regoing to venture into that that
(52:21):
they better be ready to hustle.
It's not just all cut and dryand it's not really that easy.
You can make some money,there's no doubt about that but
you have to be ready for theunexpected and there's a lot of
windy turns.
I'm going to give you anotherexample, since you asked this my
parents.
I think that Anne-Marie and Ibought my parents' home before
(52:42):
they were starting to dwindle inhealth, and I bought their home
for a myriad of reasons.
I needed a facility to be ableto fund them when they ran out
of money, able to fund them whenthey ran out of money.
So after they passed away, westill owned the house and the
home was underwater, and that'san investment.
It is 100% an investment.
(53:03):
And so then I rented the houseout.
And when I rented the home outthis is going to blow your mind
it was just some older collegestudents, probably in their late
20s, who had their parentsco-sign One of the college
students.
He got caught dealing marijuanalarge quantities of marijuana
(53:25):
and the police raided myparents' house A full-on raid
and they found $14,000 worth ofmarijuana in one of the rooms
there.
That's something that you can'tpredict and something that you
just have to be ready for, andso luckily, I had a real estate
(53:46):
attorney and then I had adefense attorney at my side.
My real estate attorney gave mesome very good advice, and my
defense attorney put me in asituation to where the house
wasn't seized.
So think about that you have ahouse that has a mortgage on it
and you're trying to get incomeon this house and the government
(54:07):
seizes it, and so now you stillhave a mortgage on a house that
gets no income, and what do youdo with that?
Now you still have a mortgageon a house that gets no income,
and what do you do with that?
So those stories and I got athousand other stories that are
real stories when you startrenting homes, I could tell you
stories where a tenantthreatened me.
I had to deal with that.
It's not as easy as sometimesit's put out to be.
There's a lot of work involved.
(54:29):
There can be a definitivemonetary benefit, but there is a
lot of work involved.
Does that answer your question?
Yeah, yeah, but no doubt therecan be money made in real estate
, just as there can be moneymade in lots of stuff that
you're doing in life, but youhave to be ready to work at it
(54:49):
Right and accept the lumps andthe bruises that come along the
way.
Any other questions?
Not unless you have a questionfor me.
No, I don't.
So to give you an idea, I'mwatching Luca right now and he
has his muscles out today.
Absolutely, it's the gun showtoday.
All right, luca, I appreciateyou.
Speaker 3 (55:11):
Thank you for having me.
Speaker 1 (55:13):
Yes, and I hope you learned a little bit today.
Speaker 3 (55:15):
I did I definitely learned a lot.
Speaker 1 (55:17):
Yes, so now you can go tell your dad some stories
that he may have not heard or hemay just have ignored me.
So when I was telling him Allright, that's all I got for you,
all right, thank you guys.
Yes, you're welcome.
Speaker 2 (55:48):
And for the rest of the listeners this is one of the
other ones I'll probably haveanother couple of guests on and
or our firm.
Head on over to Life AfterGrief FP.
That is Life After Grief FP.
The FP is for financialplanning.
If you are an advisor lookingto emotionally and financially
work with your client in grief,or if you are a client looking
to get your advisor's head inthe game, head on over to
(56:11):
LifeAfterGriefConsultingcom.
That isLifeAfterGriefiefconsultingcom.
That islifeaftergriefconsultingcom.
Any related informationreferenced in this week's
podcast will be located here inthe podcast section.
Those are good money habits and I can assure you that
not every 15-year-old has theability to compute the math that
correctly.
Speaker 2 (00:10):
Welcome to Real Talk with Life After Grief, chris,
where we talk about relevantissues as it relates to
individuals in grief as theynavigate finances, and the
advisors who help them.
We help clients in griefnavigate financial matters.
Speaker 1 (00:43):
Hello and welcome back to another episode of Real
Talk with Life After Grief,chris, on this episode, I have a
superstar.
I didn't say that about hisbrother, but he is a superstar.
So this is Luca.
He is the sibling, the youngersibling, to Maddox, and he is
(01:04):
also my godson, or you could saymy nephew.
Those are interchangeable.
So Luca, at a family gathering,was harassing me about financial
questions and was just pickingmy brain about financial stuff.
So got the wheels going and Iwas like, hey, why don't I use
(01:28):
the harassment that I wasfeeling and ask him to be on a
podcast?
He's laughing at me to be on apodcast and allow him to ask
questions.
And then I expanded that to hisbrother and his sister's going
to be on too.
So, luca, this is about you, myfriend.
All right, so I'm not sayingyour last name on purpose here.
(01:52):
As I said to your mama as anagreement, I don't want to
violate your privacy, and sotell us a little bit about
yourself.
What you do.
You have a job, are you the manof the house?
Speaker 3 (02:08):
Tell us a little bit about yourself.
What you do?
You have a job.
Are you the man of the house?
Tell us a little bit aboutyourself.
I'm 15 years old.
I'm going to my sophomore yearwith my brother going to the
Naval Academy.
I am earning that title of theman of the house that is correct
and I am starting to realizethat money is more of a
prominent part of my life andnot just something I can ask mom
(02:29):
and dad for me to spot.
Speaker 1 (02:32):
That is correct.
I would agree with you.
Luca is going to be the man ofthe house, regardless of his dad
.
That also resides in the house,but we've come to that
conclusion that Luca is going tobe the man of the house.
So, with that being said, lucahas developed a series of good
questions that he's going to askme and, luca, I'm gonna let you
fire away, buddy All right.
Speaker 3 (02:52):
So my first question is what is the best thing I can
do as a teen to start myfinancial journey?
Get a job, Get a job.
Speaker 1 (03:03):
So I say that facetiously, but one of the best
things that you can do honestlyoutside of earning money is to
have good money habits, and thisis something that I talked to
your brother about is to have abudget.
So do you have an allowance ormoney that you get from anybody
on a regular basis?
Speaker 3 (03:24):
Not really.
I just ask either my mom or mydad to put money on my green
light whenever I'm going outwith friends, and I'll get a
specific amount in there.
Speaker 1 (03:34):
Okay, so green life, that everyone doesn't know that
it's basically it's a card thatyou can put money into and you
can give it to anybody,specifically for teens.
So you have, what is it like adebit card, luca?
Speaker 3 (03:48):
Yes, a debit card.
Speaker 1 (03:49):
Yep, so it's a debit card.
So if you had to track the lastthree months, how much money do
you think that you've asked momor dad to put on your green
light?
Zero, okay.
Speaker 3 (04:04):
I've been paying.
I pay with cash most of thetime.
Speaker 1 (04:07):
Okay, let me rephrase that.
So how much have you gottenfrom mom or dad in the last
three months, the last three?
Speaker 3 (04:15):
months to spend Yep, just me like with my friends.
Yes, correct, I would say about$60.
Speaker 1 (04:26):
Okay, so $60 in the last three months, so about $20
a month.
Is that quick math?
Is that about accurate Give ortake?
Okay, have you gotten any moneyfrom anywhere else?
No, okay, so I'm going to usethat $60.
And that's the reason I wasasking questions.
So I was trying to get afoundation.
(04:47):
So when you were out and aboutwith your friends and you got
the twenty dollars per month,did you use all that twenty
dollars every time you went out?
Speaker 3 (04:57):
every time I went out .
No, my friends and I usuallytake turns on paying.
Speaker 1 (05:03):
Okay.
So it sounds like at one pointyou went out and you got $20
from your mom and dad and didn'tspend it.
Is that accurate, okay?
So what I'm backing in is to abudget.
So anyone on the planet thathas any money should have a
(05:24):
budget, and a budget is verysimple.
So you took in 60 bucks, right,and so you didn't spend $60,
which is a great habit, is agreat money habit in advance.
So the habit is to spend lessthan you make or you bring in.
Okay, so in that instance andI'm putting the cart before the
(05:46):
horse but in that instance nowyou have let's just say you have
20 bucks that's left over fromthat 60, and you can do
something with that $20.
And before we got on the call,luca talked about having
investments.
His dad has done some thingsfor him.
You could have taken that $20and you could put that into your
account.
And there is another rule infinance it's called the rule of
(06:09):
72.
About every seven years yourmoney doubles, so that $20 that
you saved in seven years andagain it's invested, obviously
when I use that rule of 72, andthere's some returns that are
behind that.
But in general and I use thatrule of 72, and there's some
returns that are behind that,but in general.
So in seven years you are 15now and in seven years you'll be
(06:29):
22.
So compounding that $20 wouldturn into $40, with you not
having to do anything but havinginvested properly.
That's what you can do now inregards to having a good money
habit, and so it's justbudgeting your money accordingly
.
And when you go out, this isanother good money habit that I
(06:51):
use, even with my boys.
So if you go out, and let's saythat you go, where do you guys
hang out?
Speaker 3 (07:01):
We normally go to like fast food places.
Speaker 1 (07:04):
Okay, what's your go-to for fast food?
Speaker 3 (07:07):
Normally do.
A make a bell run is what welike to call it.
Speaker 1 (07:10):
Okay.
Speaker 3 (07:12):
All right.
Speaker 1 (07:13):
Yep, I make a make bell, okay.
So a good money habit for youand this is this goes beyond the
budget is when you are going onyour Mac bell run and you have
your $20 is to always know inyour head and be able to compute
how much money you are gettingback without having to use a
(07:34):
calculator.
Speaker 3 (07:36):
And I say that what does?
Speaker 1 (07:37):
that mean?
That means if your bill at TacoBell I'm going to make this
very easy math If your bill atTaco Bell is $5.50, I'm going to
put you on the spot.
Okay, and you give them a $10bill, how much are you supposed
to get back?
Four festive, okay.
So that's a good money habit.
(07:58):
So when the math increases, ifit's $8 and if your bill is
$8.57, how much are you supposedto get back $1.50.
$8.57 is the bill, so how muchare you supposed to get back
$1.43.
Yes, those are good moneyhabits and I can assure you that
(08:20):
not every 15-year-old has theability to compute the math that
correctly.
Speaker 3 (08:33):
Because what happens?
Yeah, I have my 20 bucks, maybeeven 40 dollars, and my
spending habit is how much?
How much food can I get withthis 40 dollars?
Okay, which is obviouslyprobably not the best spending
habit?
Speaker 1 (08:42):
yeah, because if you're looking to have a good
money habit now, if you have 40bucks and you're out and about,
it's going to be hard for you tospend 40 bucks at Burger King
by yourself and Taco Bell.
That's a lot of food, and sowhat I would look at if I were
you.
And another good money habit isto be conservative.
(09:03):
So if you have 40 bucks, whatcan I buy with $20?
Or what can I buy with $30?
Cut off portion of what you arespending and I like to use the
rule of you're trying to savemoney.
Save about 20%.
So 20% of your 40 bucks is what$8.
That's correct.
So I would siphon off eightdollars at least eight dollars
(09:27):
to put in your pocket and thenknow that is not going to go
anywhere and it's not going togo towards spending anything
else.
So I'm sure your parentswouldn't mind that you're taking
advantage of the money thatthey're that they are giving you
for good use.
So those are some good moneyhabits.
I could get more detail into thebudget For you.
(09:50):
I think the easiest thing rightnow is anytime you get a set
amount of money, I would siphonoff a portion of that and I
would use 20% as a benchmark,anything north of 20%, because
that gets you in the habit ofwhen you start working and you
have a job where you can putmoney away for your retirement
(10:11):
or whatever, you already knowthat 20% is an amount that
you're going to be putting awayand it compounds very quickly,
very quickly, especially at yourage.
If I started investing at 15, Iwould have been ahead of where
I am now.
I only started investing, Ithink, when I was probably
started in college.
(10:31):
That's a very good question.
Did I answer all of it?
Yes, okay, what's your nextquestion?
Speaker 3 (10:39):
Talking about that.
Investing brings me into mynext two questions.
Okay, Investing brings me intomy next two questions.
I have an investment accountthrough an app called Fidelity
and my dad set it up for me.
It feeds $20 into theinvestment account directly from
my bank account every month.
$20, $20.
He keeps talking about how it'sup because we put the money in
(11:04):
S&P 500.
And I'm like, okay, that's good.
Should we take it out?
Why don't you take it out?
But he always seems to say justto let it ride out and I wanted
to ask if you agree with thisand why.
Speaker 1 (11:17):
Okay.
So what I'm going to say firstoff is and I generally have to
give you this disclosure thatany time that you're seeking
advice, you should seek theadvice of a professional.
Okay, and I'm going to throwyour dad under the bus here.
So what I would advise you todo yes, go to your dad.
Your dad has obviously asked me, but throwing him under the bus
(11:39):
.
So my recommendation would bego to a professional through
your dad and with your dad inturn, he will come to me and ask
questions, but I do have to saythat I'm saying it jokingly,
but I do have to say that.
And a professional, I'm talkingabout a certified financial
planner.
Basically, I had to go and get,go through a lot of schooling
to get this designation forfinance.
(12:00):
So, beyond that, the S&P 500,the nuts and bolts of what your
question is.
So the S&P 500, it is a broadbasket of stocks that invest in
the top or, excuse me, I shouldsay, the largest 500 companies
in the US, and I'm just going togive you an example, because
sometimes some of thesecompanies, they could possibly
(12:22):
float in and out of the S&P 500,depending on their size or
whatever transpires within themarketplace.
Coke, everybody knows Coke,that would be an example of one
that could possibly be in theS&P 500.
Pepsi are basically investingin those 500 stocks and
(12:48):
typically over time there's noguarantee those go up.
So the advice that your dad isgiving you with regard to riding
it out, you at your age canafford to take on more risk than
an old guy at your dad's age.
Okay, normally his risk wouldbe lower, but that's not always
the case.
It's age-based and then whatyour appetite is and a myriad of
(13:12):
other factors.
So his advice is to ride it out.
And what I would also slantthat, as long as it's
diversified and that's what Iencourage my clients to do is we
have a very methodic approachto when we invest for them and
it's based on a lot ofinformation that they give me.
My advice because we've done alot of planning underneath that
(13:37):
is to look at the long term.
So you don't need that moneycurrently and let's just say
that S&P 500 was properlydiversified with some other
things.
So I wouldn't necessarily makethe recommendation for one of my
clients to go 100% into the S&P500, again because there's
(13:59):
other metrics you don't have.
You're not paying for a housepayment, you're not paying for a
car payment, You're not payingfor insurance, so the money that
you go, that is going in, canbe very you can take a lot of
risk on it.
And so I understand where yourdad is coming from and he's just
saying leave it in there andjust let it ride.
And so historically, withoutgetting into numbers, the S&P
(14:23):
500 is just grown over historyand again, there's been down
years, but overall it's grownthroughout history.
And so that's why he's sayingjust to leave it and to ride it
out.
When you get older and when youhave other things that are
drawing on your income and youdon't have the luxury of just
(14:49):
letting it sit there and ride itout, and maybe you're starting
to plan, then I would look atreally divers&P 500, you're not
diversified, I can tell you that.
The other thing too.
So say that the S&P 500 drawsdown one year and I'm just going
(15:11):
to give you a number.
So it draws down 10%.
So you put in 20 bucks a month.
Right, that's what you put in amonth, 20 bucks a month.
Okay.
So 20 bucks a month times 12months, how much do you put in?
240.
$240 a year.
So you put in the $240 in oneyear and you have the market
(15:35):
retracts by 10%.
So what is that $240 worth now?
Speaker 3 (15:41):
If 10% is deducted, that is correct 216?
.
Speaker 1 (15:48):
I think you're pretty close.
We'll roll with that number.
Yep, okay and so.
Yeah, now I have $216 in thataccount from that particular
calendar year because it's drawndown.
That is the danger in being notdiversified.
So I'm going to give yousomething that's a little bit
counter to that.
So say that $240, now you splitit and you only have $120 that's
(16:12):
invested in the S&P 500 and itdraws down 10%.
So let's just make it an evennumber Very easy.
So say that now you have $100of the $120.
Okay, the other portion isinvested in what I would
(16:33):
consider fixed income andsomething that's a little bit
safer than securities calendaryear because of the way that the
market worked out.
That other $120 that you haveof the $240 is invested in a
manner to where you're gaininginterest or you're getting more
(16:56):
dividends, and it's notnecessarily losing money, it's
just getting you, or it's notnecessarily gaining money but
it's getting you interest.
And if it got you 4% intereston that money and you only lost
$20, but now you're 4% up on the$120, now you're able to offset
(17:17):
that drawdown on the $120.
I see you shaking your head andunderstanding how that now makes
sense and why you diversify andyou typically don't want to put
your eggs, all your eggs in onebasket, taking more risks
though the way that you're doingit if in one calendar year that
bumps to 20%.
(17:38):
So now you lost 10% on the 240in one year and it went down to
216 using your math, and thenthe next year it went up 20%.
So now your net loss over atwo-year period is not a net
(17:58):
loss, it's a net gain of I said,20%, so it's a net gain of 10%.
So again, that's why I advisespeaking to a professional,
because that's what I do forfolks is I monitor that risk and
over time we want to make surethat they're getting what they
need out of the account and I,as a financial professional, I
(18:21):
can't have my clients take unduerisk.
One, they would fire me.
Two, it's not what's in thebest interest of what they're
doing.
All make sense.
Yes, I see you have a seriousface on now.
Speaker 3 (18:37):
Oh, this you gotta lock in when you're talking
about money, all right, whichdid I answer your questions
there?
Speaker 1 (18:44):
Yes, okay, what's your next question?
Speaker 3 (18:48):
My next question would be I understand the
process of investing money, okay, but I don't understand when
you take that money out.
Or do you take it out all atonce?
Do you take just a little bitout?
How does it become profit?
Speaker 1 (19:06):
Okay.
So you've asked a couple ofquestions.
I think probably withoutknowing that you've asked a
couple of questions.
I'm going to start from thebeginning.
So how to invest a schedule andwhat should that look like, and
then I'll back into.
When you take money out, whatdoes the profit?
And I'm going to add in taxesand then just correct me if I
(19:29):
miss anything.
So when you're investing, theideal way to invest is on a
schedule.
And so you're familiar with the401k.
You've heard of 401k, yes, okay, so a 401k.
When you're working for I'mgoing to use Taco Bell, or you
go to McDonald's or Burger King,those employees have the
ability to invest in a 401k andit's on a schedule.
(19:52):
They get paid every two weeksand they pull money out of their
paycheck and invest into their401k the way that they set it up
, and to their 401k the way thatthey set it up.
And it is virtually impossibleto time the market, to see when
the market is gonna go up orit's gonna retract or anything
like that, and my education hasled me to the best opportunity
(20:13):
for an investor is to investover a period of time and invest
on a schedule.
If you invest every two weeks.
If the market is down, youinvest when it's a low point.
If it's up, then you'reinvested at a high point, but
you take advantage of the lowpoints at a regular basis when
you invest on a schedule, and sothat's number one.
So you don't wait to try totime when the market is
(20:36):
retracting, because if you dothat and I'm on a schedule and
I'm investing every two weeks ifthe market doesn't retract for
six months or a year, you've nowlost out on six months or a
year of investing, beinginvested in the market and
taking advantage of those bumps,or taking advantage of what I
talked about getting somedividends and some money.
(20:59):
That's just out there, becauseyou're in the game, so to speak.
The next part that you had askedis when you take it out.
There's really no good answeras to when you take it out.
You take it out when you needit, and you can shift money
around into a differentinvestment if you feel that, or
you're guided that your moneyneeds to be shifted into
(21:23):
something that more aligns withyour needs, and so when you do
take money out, if it is abovewhere you paid for it, then
you're generally going to paytaxes, and the taxes are.
They're called short-term gainsand long-term gains.
So basically, short-term gainsis basically anything under a
(21:43):
year.
If you buy Coke and you buy itat $100 and it goes up to $120,
you're going to pay what'scalled short-term gains, and
short-term gains is yourordinary.
It's called your ordinaryincome level.
Basically I'm not going to gettoo tax heavy here, but it's
basically at your ordinaryincome level.
And so the IRS likes it whenyou hold it longer term.
(22:06):
And so if you hold it longerterm, they give you favorable
tax treatment.
And it gets a little bit moreconvoluted if you try to take
money out of a retirementaccount, because they're going
to not only tax you at ordinaryincome but they're also going to
penalize you.
Some reasons why you would takemoney out of an investment If
you were looking to buy a house,if you're looking to purchase a
(22:28):
car or something like that, orit's a large purchase that you
need, or there's an emergencythat happens.
So I'll tell you what I use.
Your dad jokes with me that Ibought this truck last year and
so he has other things to sayabout my truck.
I use my what I call after-taxaccount.
It's not anything that isqualified with the IRS.
(22:49):
I utilize that to make largepurchases or to help in those
large purchases, and so thatmoney sits on the sideline and
I'm just investing over time andthere's no real need for it.
But you need a vehicle, and sowhere am I going to draw that
(23:09):
money from?
It's not a situation wherethere's an emergency and I have
to suddenly pull that out, andI'm going to add that to don't
let me forget about an emergencyfund, and I put money aside and
I constantly invest it when Ido have a need or a large
purchase that I can draw moneyfrom that, and that money just
sits in an account and it'sdiversified and it just grows
(23:30):
until I need it.
And so, car, we had to dosomething with the house.
As far as plumbing, airconditioner, I can think about,
but large ticket items that'sgenerally what I invest those
funds for.
So does that answer yourquestions about investing?
Speaker 3 (23:51):
It does.
Thank you Taking it out whennecessary.
Speaker 1 (23:54):
That's correct.
Yes, also, the temptation is ifthe market is not going the way
that you want is, if the marketis not going the way that you
want, the temptation is to pullit out, and I usually advise
against doing that, because youdon't know when to put it back
in.
You've taken all this time andenergy to invest it and invest
it, and then emotions getinvolved and you get scared, and
(24:17):
it's natural, and you just wantto pull it out because you're
scared of the unknown.
And that's again what I do.
I come back and say we haveinvested this properly, we know
that this is going to happen.
It doesn't feel good.
When you in theory lose moneythat you invested, but invested
properly, and it's over a periodof time, then that loss is only
(24:38):
that particular calendar yearand then the other years it
should look like you are goingup in the account Emergency fund
.
We didn't talk about that.
I'm gonna volunteer thisinformation.
So I always advise having anemergency fund At your age.
It's a good money habit.
But an emergency fund normallywould be for someone that is in
(24:59):
their income, earning years andthey have other responsibilities
, how Car, and if you lost yourjob, you need to pull money from
one of those source to be ableto keep yourself afloat.
So of the $20, excuse me the20% that I had recommended
siphoning off for you, it's notgoing to necessarily make a
(25:19):
difference, but I just throw itout there that you should think
about an emergency fund too.
But again, you don't have anyexpenses.
Generally, an emergency fundwould cover six to 12 months,
depending if you were married ornot, of expenses if you were to
lose your job or somethingcatastrophic happens.
Speaker 3 (25:38):
Do most people have an emergency fund, or is that
just something that you adviseto people, because most people
that don't have it end up in nota good position?
Speaker 1 (25:49):
Yeah.
So I'm going to be careful notto assume, but what I know in
the research that I've done isthat most people don't have an
emergency fund set up aside.
I advise that because I've seena lot of stuff that's happened,
and there's a lot of stuffthat's uncontrollable.
I've had clients that have hadto go out on leave from their
(26:10):
job, and when they go out onleave they don't receive the
same income that they had before, and whether that leave a
disability or something of thatnature so their expenses are at
a level and it may be onlytemporary.
Now they need to pull money tokeep where their expenses are,
and so if you have an emergencyfund, you're able to do that for
(26:33):
a short period of time.
But if you don't, now you'regoing to have to get in a
situation to where you're goingto have to borrow that money so
you're able to support yourself.
So I'm going to give you a reallife situation when Aunt
Anne-Marie and I were expectingEli and his brother, and so
(26:54):
Anne-Marie had to go out on ashort-term medical leave because
of the complications of losingChristopher, and so she couldn't
work for several months and shehad to stop working earlier
than we had anticipated.
And so in that situationbecause we had an emergency fund
(27:17):
and not expecting her to stopworking so quickly we had
anticipated and planned for it.
But we didn't anticipate itwhen it happened and so we
didn't have to borrow to keepthings afloat.
We just looked at the emergencyfund to offset where we may
have had a shortfall.
Then in that situation, itprevents us from borrowing and
(27:38):
going into debt.
Speaker 3 (27:40):
That's very smart.
I think my dad has brought thatup a few times and I definitely
like that.
Speaker 1 (27:45):
One of the things that you had asked in regards to
what are good money habits nowand what can you do, and I was
half joking and I said get a job.
But I was half joking becausethere are ways that you can earn
income now as a 15-year-old,getting ready to drive in less
than a year by yourself.
So I actually taught a class tosome middle school students
(28:11):
probably about a year ago, ayear and a half ago, and they
asked me the exact same questionwhat can I do now for good
money habits?
And this group of middle schoolstudents were not as fortunate,
I guess I could say, luca, asyou and I, and so I was real
with them in regards to some ofthe things that they can do now
and I'll extend this to you andI'll extend this to your two
(28:34):
cousins that do get paid by me,and so some of the things that I
encouraged them to do is tostart making your own money, and
you can do that a myriad ofways, and in their situation it
may not have been feasible forthem to go to their mom and dad
to ask for money or to do a jobfor them.
(28:56):
So we looked outside of thescope of what they could do.
And so I said many of you havesiblings or you have cousins and
you could babysit.
That's one thing that you coulddo.
The other thing that you coulddo you could go and do something
for your neighbors.
Maybe you'd mow the grass,maybe you could do someone's
(29:19):
hair.
I'm not expecting you to dothat, luca, but it's just being
outside of the box.
And so I'm an entrepreneur andI've had to think outside of the
box and how to make money for along time, and innately,
because of my life experiences,I've been very good with money,
but I've also been able to makemoney.
So I'm going to extend that toEli and Gideon.
(29:41):
They work for me on a regularbasis, and so we have an
arrangement to where they dothings for me and then they get
paid.
One of the things that I hate todo is I hate having to shred
any paper.
It's very tedious for me, theshredder is low to the ground,
(30:03):
and so it would take me an hourand a half to just shred stuff
stuff we get in the mail or whathave you.
And so what do I do with them?
And they came up with this.
They said we'll take it offyour hands if you pay us for it
Said that's a great arrangementbecause something I don't want
to do and I will pay you for it,gladly pay you for it.
So I pay them in 15 minuteincrements and I think I pay him
(30:26):
$2 every 15 minutes.
And whenever I need shreddingdone and it's pretty often they
say take it off your hands,daddy, and let's have our
agreement the $2 every 15minutes and the shredding Luca
honestly takes between the twoof them it takes about an hour
and a half.
Oh, wow.
So it's a lot of shredding.
(30:48):
So it's things like that to beable to get creative.
And so now they have money, andI'm going to extend this.
So now they have their money.
So if they got $2 every 15minutes in an hour and a half,
how much money would that be?
Each one of them?
Luca, 12 each, 12 each, okay.
(31:08):
And so they get $24, right, apiece.
So now they have decisions to dowith their own money and,
because they're a product of me,they take a portion of their
money and they put it into theirsavings account and they put a
portion into their wallet.
And remember when we talkedabout at the beginning of the
(31:29):
podcast.
If you have $40, you get fromyour parents and you're going
out to eat, know that you onlyhave $30 as opposed to that $40.
So what they do one of the goodmoney habits that they do is if
they get that $12, they're notputting that $12 into their
wallet.
They are putting a portion ofthat money in their wallet and
(31:52):
it was almost like they onlymade $6 and the other portion
goes into their savings account.
They're conscious of doing that.
So they have those good moneyhabits already and it's not
something that I have to doabove and beyond for them.
It's not like I'm giving themmoney.
They're doing a job and theyunderstand I'm working for this
money.
That's one of the things thatyou can do now and I'm sure Sean
(32:15):
would be happy to pay you.
Speaker 3 (32:17):
Yeah, I'm sure he will too.
Speaker 1 (32:19):
He used to offer me stuff around the house, but I
think if I offered first, hewould for sure let me do it for
some money.
Now you have done something toincrease your own monetary
(32:40):
amount.
That would be a great moneyhabit to have now, and then you
can start directing.
Okay, I'm now up to, let's justsay, 60 bucks a month and now
I'm directing what's going intomy investment account, and now
you have a little bit moreownership and it means something
more to you, because it'ssomething that you have earned
versus it was just given to you,and it just means more to you.
(33:04):
So make sense, yes, sir.
So what other questions do youhave for me?
Have any others come up?
So we just started chattingagain.
Speaker 3 (33:14):
Yeah, just so far as to.
I am going to be turned 16 soonand I will start driving, do?
Speaker 1 (33:33):
you have any recommendations of an easy job
that I can drive to and stilllike balance out my schoolwork
and practice, or whatever?
One that comes to mind that Iknow a lot of teenagers take
advantage of is Publix.
I hear that a lot.
That is probably the one thatcomes to mind.
I think back to my first joband I would not want anybody to
have my first job.
Your dad and I shared the samefirst job.
First job was a job that madeyou appreciate your education
(33:55):
and it made you never want tolook back and do what we had to
do.
But I think that's an element ofanyone that starts working at
an early age, because you startout.
Let's just say that you startworking at Publix and I don't
know what they pay per hour, butthey pay you based on where you
are in life and you have whenyou turn 16, you will have
(34:19):
completed your freshman year andpart of your sophomore year,
and so imagine and this was whatthe advice that I got imagine
having to do that job and havingto raise a family.
How hard that would be Ifyou're getting paid.
Let's just say 15 bucks an hour.
(34:40):
I don't know what they pay, but$15 an hour.
There's 2080 hours in a workingyear.
Times 15, I'm just doing somemath so that's $31,000.
That's not going to go a longway to raise a family or to
support a household.
So now those numbers start toreally make sense because at the
(35:03):
time your dad and I startedworking at 16, we were making
the same amount of money thatgrown men were making, but they
were having to support theirfamilies amount of money that
grown men were making, but theywere having to support their
families.
And so that made a hugedifference for us, because this
money is good for a couple of16-year-olds, but I can't
imagine having to support achild on that.
(35:25):
And our money it wasn't thatgreat.
It was enough money for wecould buy gas, we could go hang
out on the weekends, we couldbuy clothes and that was pretty
much it.
I saved a good portion of that,but I couldn't imagine having
to support a family on that.
When you start working and youstart earning your own money, it
(35:47):
really starts to make moresense because you have that
experience.
What else do you have aroundwhen you turn 16, other than
possibly a good job that youcould get?
Speaker 3 (35:55):
Do any other investment or bank accounts open
up, because I know you have to?
Speaker 1 (36:04):
hit a specific age for certain ones, not
necessarily at 16.
Can you open up your ownbecause you're a minor, until
you turn 18?
So there's strict laws andregulations around protecting
minors in particular.
So what I remember from mybanking days is that you're
going to have to be 18, but yourparents can open up an account.
(36:25):
They just have to be somehowlinked to it.
Most likely, you know there'llbe the guardian of the account,
so to speak, but you can act onthe account depending on the
bank, as if you were the onlyone on the account.
They just have oversight on theaccount.
So there's nothing that I wouldreally change, because the bank
account that you have it'seither a checking account,
(36:47):
savings account, money marketaccount, but they do the same
thing for you, whether you havea parent on it or not.
Speaker 3 (36:57):
It's just your access and your ability to do things,
gotcha, and I just want tobacktrack from when we were
talking to the S&P 500.
I wanted to ask you what a RothIRA is there's no backtracking.
Speaker 1 (37:05):
There's no backtracking here.
Speaker 3 (37:07):
So I just wanted to bounce off of what we were
saying.
Go ahead with your question.
What is a?
Speaker 1 (37:12):
Roth IRA.
Go ahead with your question.
What is a Roth IRA?
Okay, a Roth IRA is an IRA thatyou put in after-tax money.
So there's a traditional IRAand then there's a Roth IRA.
So I'm going to try to breakthis down.
Your brother had the samequestion.
So when I go to work and I make$1,000, the government takes a
(37:34):
portion of that.
Let's just say they take 20% ofthat.
Okay, and so now I only have$800.
And so I can put that moneyinto a Roth IRA, and there's
rules and regulations in regardsto how much you can put in and
there's some other things.
But I'm just using this mathfor the explanation.
You can put this money into aRoth IRA.
(38:02):
The money grows and it growsuntil you're able to take it out
.
And take it out is deemed bythe IRS and you can take it out,
Essentially Not having to paytaxes on it anymore, because
you've already paid taxes on iton the front end.
So say that $800 grows to$1,600.
So in the Roth IRA, you cantake that money out and you're
(38:27):
not necessarily taxed on itbecause you've already been
taxed on the money.
So that's the benefit of theRoth, as you've already been
taxed on the money.
So that's the benefit of theRoth.
A traditional IRA instead ofthat same $1,000, you get the
tax break at the beginningbecause you put that money in to
the traditional IRA and itgrows tax deferred until you
(38:52):
take the money out.
You're taxed on the time whenyou take the money out.
So the major difference betweenthe two is where you get taxed.
Traditional, you get taxed whenyou take the money out because
you're not paying taxes.
You're getting actually a taxbreak when you're putting the
(39:12):
money in.
It reduces your ordinary incomedepending on where your income
level is and a lot of otherstuff garnered by the IRS.
But a Roth IRA it grows andwhen you take the money out
you're not having to pay on thatmoney tax-wise at the other end
.
Does that make?
Speaker 3 (39:29):
sense.
Yeah, so is that like a savingsaccount, or what's the
difference between that and asavings account?
Speaker 1 (39:35):
The difference between that and the savings
account.
A savings account, you can takemoney out whenever you want to,
and an IRA, you cannot do that.
So an IRA excuse me, yeah, anIRA.
The Internal Revenue Servicegarners when you can take money
out of it and if you take it outat the wrong time, they're
(39:56):
going to penalize you.
There'll be a 10% penalty.
So that's the difference.
You can't take the money out.
You cannot use it as a savingsaccount.
You can't just go in andwithdraw it like the money in
your savings account.
Speaker 3 (40:15):
Okay, that makes sense.
Speaker 1 (40:16):
Yes, so yeah, those are very good questions.
Speaker 3 (40:21):
Yeah, my dad has me set up on a Roth IRA.
I'm pretty sure already you canstart pretty young, right?
Speaker 1 (40:27):
Yes, you can start very young for a Roth IRA.
Yep, what can you do now tostart good money habits?
Oh, you're asking me thequestion now.
Speaker 3 (40:37):
Yes, I am.
Oh, what can I do?
Get a job?
Okay, I could use the 80-20rule.
That's correct.
Save 20% of whenever I'm goingout and of my spending money
that I earn.
I could ask around the house orthe neighborhood to find ways
to get money and, again, savesome of that man you should be
(41:01):
teaching this stuff, right yeah.
Speaker 1 (41:04):
So what kind of student are you in school?
Speaker 3 (41:08):
I would like to say I'm a pretty prolific student.
Speaker 1 (41:12):
Yeah, what does prolific mean?
Yeah, I'll honor all honors, appretty prolific student.
Speaker 3 (41:14):
Yeah, what does prolific mean?
Yeah, all honors, ap is justall that good stuff.
Speaker 1 (41:19):
All right, I think I can tell by talking to you and
your articulate questions.
I'm going to read something foryou in regards to a Roth IRA.
So I'm going to give you somevery specific language, and I
just pulled this up.
So a Roth IRA or individualretirement account is a
retirement savings account thatallows you to contribute
(41:39):
after-tax dollars andpotentially withdraw them
tax-free, while you don'treceive an immediate tax break.
That's what we just talkedabout for your contributions.
Your investments can growtax-free and you can generally
withdraw them tax-free andpenalty-free after the age of 59
and a half and once the accounthas been open for five years
(42:00):
the 59 and a half and the fiveyears.
That's the rule that the IRSputs in place.
Speaker 3 (42:05):
Okay, so I have a question.
Speaker 1 (42:07):
It uses the link.
Speaker 3 (42:09):
What?
Yeah, go ahead.
It uses the question you cangenerally take it out tax-free.
What does that mean?
Speaker 1 (42:16):
You can't always take it out tax-free had not been
open for five years, and let'sjust say that you opened the
Roth IRA at age 59, and then youdecided to take the money out
(42:44):
at 60,.
There may be a gray area there,because there's a combination
of two things that you'reresponsible for doing there.
So anytime and I have to givethis disclaimer, anytime you are
dealing with a Roth IRA or atraditional IRA and you're
concerned with the taximplication, I would either seek
someone like myself, acertified financial planner in
combination with an accountant,just to make sure that you're
(43:06):
not stepping into a minefieldthere and you do something that
you can't recover from, becauseeveryone's situation is
individual and it could changedepending on someone's
individual situation.
Okay, got it.
Yes, sir, all right.
I asked you and you said youdidn't have any more questions,
but you had another question youhave another question so does
(43:27):
that apply to just a normal IRAas well?
Yeah, so a normal IRA.
You would have to take themoney out after 59 and a half to
receive favorable tax treatment.
And so a normal IRA, atraditional IRA?
It's just the opposite, becausewhen you start taking money out
of it, you are taxed at yourordinary income level.
(43:48):
Remember I talked aboutnormally in that situation where
it was a,000 and you're taxedon the front end 20%.
Well, a traditional IRA.
When you take the money out,you are now taxed at 20%,
whatever your tax level is.
Wait.
So why would somebody want todo that?
Why would someone want to do aRoth versus a traditional IRA?
(44:11):
No, I would or vice versa, yeah,vice versa you can argue both
sides of the coin, so atraditional IRA, no, or vice
versa, yeah, vice versa.
You can argue both sides of thecoin.
So a Roth IRA?
In theory, the account would begrowing exponentially and at
the end you wouldn't have to paytaxes on it, right?
In theory?
(44:32):
On a Roth IRA A traditional IRAyou would have to.
So in theory, you could argue tohave a traditional IRA because
your tax bracket is arguablygoing to be lower, a lot lower,
when you retire and the taxesare going to be minimal at that
(44:54):
time anyways.
Or you could have a Roth whereat that time you're not paying
any taxes.
So it's really again toanyone's individual situation
based on taxes.
Say that's probably the cruxAre you going to pay taxes at
the beginning or are you goingto pay taxes at the end?
So lots of folks that I speakto have personal views of either
(45:19):
or.
But when I get in the mix, Ihave to look at and say is it
better for you to take a taxbreak on the front end or take a
tax break later on down theroad?
Speaker 3 (45:30):
Okay, that makes a lot more sense when you explain
that.
Yes, you say that both savingaccounts grow exponentially.
How, both iras, yeah, like how,once you put money in, how does
that money make money for you?
Speaker 1 (45:44):
man, you're asking some really good questions.
So your ira could be investedin a whole bunch of stuff.
Okay, it could be simply asavings account, a high interest
savings account.
You could have your IRAinvested in the market.
You could even have your IRAact as a liaison to buy property
(46:05):
, and it's a little bit morecomplex.
But your IRA, it's totally aninvestment vehicle and you have
the ability to almost be able topurchase the investments that
you want, and it doesn'tnecessarily have to be a liquid
(46:27):
investment.
It could be a physical realestate.
There are some organizationsthat would allow you to do that.
So I could buy within my IRA.
With the right dynamics withthe IRS, I could go out and I
could purchase a home, and itwould be a rental property,
obviously.
But anything that is donewithin that rental property, it
(46:51):
all has to pass through the IRA.
If I buy it, I have to use themoney from the IRA.
If I service it, I have to usemoney from the IRA.
If I get income from it, thathas to go back into the IRA.
It's almost like your own bankand you have to do things like
that.
You can buy other things withinyour IRA, too, that are
(47:11):
considered investments.
The most common though yeah, themost common one is either to
have your savings accountsomething like that, something
that's FDIC insured by the bank,or you purchase something in
the market, so to speak, in theinvestment market.
Good questions, Thank you.
What else you got?
Speaker 3 (47:36):
My friend's parents.
They do well, but on the sidethey do real estate.
Okay, and they make a lot ofmoney doing real estate and I
always jokingly nag on myparents like why don't we do
that?
But it actually seems like agreat way to make extra money.
Speaker 1 (47:53):
Okay, so what's your question around that so?
Speaker 3 (47:56):
is it just?
I know it's not easy, but is itsomething that most people
could do on the side with alsohaving a full-time?
Speaker 1 (48:03):
job?
I'm going to say probably not.
I'm going to give you anotherpersonal example.
So you probably didn't knowthis about me, so or you may
have no part of it.
So when I started working forthe bank, it was Bank of America
back in 2000.
Fast forward a couple of years2003,.
Yeah, 2003,.
Anne-marie and I bought ourhouse.
(48:25):
I am generally a risk taker andI saw where the market was
headed and I decided to buy myfirst property, and I'll call it
36th street, okay.
And this property, in theory,was worth $40,000 and I bought
(48:49):
it for $20,000.
So that's a pretty good spread,right?
Yeah, pretty good spread.
It's worth 40 and I bought itfor 20.
That's great, yeah.
The reality is I was trying toflip this property and I bought
it with the money that I had inmy existing home the equity and
(49:12):
I had to sit on that propertyfor eight months and I had to
sit on it.
I didn't really have to doanything other than buy it and
just sure it up.
But the things that were sounknown within that dynamic were
if there's a home that you haveto insure and the insurance
company knows and understandsthat it's vacant, they're going
(49:34):
to charge you a lot more forinsurance, probably three or
four times the amount ofinsurance.
So say, your parents, on yourhome, the insurance on a yearly
basis is, let's just say, $2,000.
In the case of a vacant home itwould probably be close to
$8,000.
So now in that dynamic where Ibought it for 20 and my
(49:55):
insurance was I think it was twoor $3,000, unbeknownst to me
Okay, so now that spread startsto dwindle.
So now let's just say I'm at myend is $23,000.
Okay, then I'm having to dosome repairs.
There was a hurricane that camein and I had to go clean it.
(50:16):
There's some other stuff inthere that I had to do.
So say, I spent now anotherfive thousand dollars.
Let's just say let's just capit at 30, and so now my spread
is at 30 to 40, now only have10,000, and now I have to pay
taxes on it because it passesthe time where I need to pay
real estate taxes.
(50:36):
So the taxes I don't know saywe're another thousand bucks or
whatever it was 2000 bucks, andso now my spread is dwindling
more.
And then I finally findsomebody that's really willing
to buy it.
They're not willing to buy itat the price that I thought that
it was worth they're going tooffer me because it was in a bad
neighborhood, a very badneighborhood.
It was off Orange Blossom Trail.
(50:57):
And I think I sold that propertyand I'm just going off of
memory I think I sold it for$32,000.
And so I made $800 on thatproperty.
You know how much time andenergy and I put into that
property.
I put a lot of time and energy.
Yeah, so it's not as easy and Ihad a full-time job and so we
didn't have kids at the time.
(51:18):
I'm going to fast forward thatbecause I learned a lot from
that experience.
So I bought other propertiesand I managed those other
properties, but in doing that Irented them out.
I didn't go in the mindset ofbuying them and trying to flip
them, but having to rent themout.
I had to meet people before Iwent to work.
I had to meet people at lunchand I had to meet people after
(51:39):
work and then if something wentwrong with the property, it was
my responsibility and so I'm onthe hook for the mortgage and I
have to find somebody to rentthe property.
At the same time you can have aproperty manager to do that,
but they're going to take apiece of the pie and I'm all
about numbers and they generallytake about 10% of whatever the
(52:00):
rent is, which could be a lotRight.
Plus, they take generally likethe first month's rent or
whatever.
My point is.
It is not that easy becauseI've been a landlord and I've
done a lot of that stuff for avery long time and generally
what I say to folks, if they'regoing to venture into that that
(52:21):
they better be ready to hustle.
It's not just all cut and dryand it's not really that easy.
You can make some money,there's no doubt about that but
you have to be ready for theunexpected and there's a lot of
windy turns.
I'm going to give you anotherexample, since you asked this my
parents.
I think that Anne-Marie and Ibought my parents' home before
(52:42):
they were starting to dwindle inhealth, and I bought their home
for a myriad of reasons.
I needed a facility to be ableto fund them when they ran out
of money, able to fund them whenthey ran out of money.
So after they passed away, westill owned the house and the
home was underwater, and that'san investment.
It is 100% an investment.
(53:03):
And so then I rented the houseout.
And when I rented the home outthis is going to blow your mind
it was just some older collegestudents, probably in their late
20s, who had their parentsco-sign One of the college
students.
He got caught dealing marijuanalarge quantities of marijuana
(53:25):
and the police raided myparents' house A full-on raid
and they found $14,000 worth ofmarijuana in one of the rooms
there.
That's something that you can'tpredict and something that you
just have to be ready for, andso luckily, I had a real estate
(53:46):
attorney and then I had adefense attorney at my side.
My real estate attorney gave mesome very good advice, and my
defense attorney put me in asituation to where the house
wasn't seized.
So think about that you have ahouse that has a mortgage on it
and you're trying to get incomeon this house and the government
(54:07):
seizes it, and so now you stillhave a mortgage on a house that
gets no income, and what do youdo with that?
Now you still have a mortgageon a house that gets no income,
and what do you do with that?
So those stories and I got athousand other stories that are
real stories when you startrenting homes, I could tell you
stories where a tenantthreatened me.
I had to deal with that.
It's not as easy as sometimesit's put out to be.
There's a lot of work involved.
(54:29):
There can be a definitivemonetary benefit, but there is a
lot of work involved.
Does that answer your question?
Yeah, yeah, but no doubt therecan be money made in real estate
, just as there can be moneymade in lots of stuff that
you're doing in life, but youhave to be ready to work at it
(54:49):
Right and accept the lumps andthe bruises that come along the
way.
Any other questions?
Not unless you have a questionfor me.
No, I don't.
So to give you an idea, I'mwatching Luca right now and he
has his muscles out today.
Absolutely, it's the gun showtoday.
All right, luca, I appreciateyou.
Speaker 3 (55:11):
Thank you for having me.
Speaker 1 (55:13):
Yes, and I hope you learned a little bit today.
Speaker 3 (55:15):
I did I definitely learned a lot.
Speaker 1 (55:17):
Yes, so now you can go tell your dad some stories
that he may have not heard or hemay just have ignored me.
So when I was telling him Allright, that's all I got for you,
all right, thank you guys.
Yes, you're welcome.
Speaker 2 (55:48):
And for the rest of the listeners this is one of the
other ones I'll probably haveanother couple of guests on and
or our firm.
Head on over to Life AfterGrief FP.
That is Life After Grief FP.
The FP is for financialplanning.
If you are an advisor lookingto emotionally and financially
work with your client in grief,or if you are a client looking
to get your advisor's head inthe game, head on over to
(56:11):
LifeAfterGriefConsultingcom.
That isLifeAfterGriefiefconsultingcom.
That islifeaftergriefconsultingcom.
Any related informationreferenced in this week's
podcast will be located here inthe podcast section.
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