Financial Planning Beyond the Basics

Speaker 1 – 00:00
Welcome to EWA’s FinLit podcast. EWA is a fee only RIA based out of Pittsburgh, Pennsylvania. We hope all listeners
of this podcast will beneft as we deep dive into complex fnancial topics that we will make simplifed for you. And
we hope that this really serves as a catalyst so that you can make the best fnancial planning decisions for your
family and also save time.
Speaker 2 – 00:28
Today we’re going to be doing something a little bit different and kind of discussing some non traditional questions
that our clients have for us. So let’s see here. So when most people, as you guys know, when most people think of
wealth advisors or fnancial planners, they kind of imagine somebody that’s managing an investment portfolio or
analyzing a tax situation or reviewing insurance coverages. Right? But while this is all very important, obviously we
think that the real value goes far beyond the spreadsheets and the software and those traditional questions. A true
advisor helps people leverage their money, fnd balance, and really design their dream life. And we also believe that
this is especially true for people in the higher tax brackets, high assets, high income. So what are we talking about?
Speaker 2 – 01:19
These questions go beyond the traditional questions of when can I retire, Can I send my kids to college, how can I
pay less in taxes? These are more deep, these are deeper, more personal and typically just much more nuanced
questions, as you guys know. So today we’re going to review a few of those and discuss kind of our approach and
how we and best. The best wealth advisors out there can help clients kind of get to that place where they’re just
designing their dream life. So let’s get started. So frst question here. So I’m getting ready to sell my business for
eight fgures or more. What do I need to do?
Speaker 2 – 01:59
What are the frst steps that I need to, what I should do in order to protect my family and make sure that we can hold
off the tax man for a bit and just make sure that we’re kind of living the life again, the life that brings fulfllment. That
is the life that we want to design. So what are some kind of the frst steps that I would want to do as I’m getting
ready to sell the business and then immediately after the business is sold. Any thoughts?
Speaker 1 – 02:24
Yeah, I think so. There’s like there’s the tactical, like analytical part of this and then there’s the like the life planning
part of this. So I would say from a business owner that has that big of a buyout that most likely it’s been a lot of
blood, sweat and tears it’s been a lot of time and it’s been a lot. It’s probably a deep sense of the identity of how that
business owner and their family may be involved in this as well and very used to it. So I think the frst question is just
like designing, the frst exercise would be designing how you’re going to spend your time post business. So if you’re
sleeping 8 hours, working 10 and have 6 hours free, now you have 16 hours free after that business is sold, how are
you going to spend that time?
Speaker 1 – 03:07
Because a lot of people I think sell the business out of stress without planning and then they become more stressed
after because then it’s like, well now my entire identity and my purpose is gone. What do I do? So I think the life
planning stage of selling it proactively to turn the next chapter as far as, you know, how you’re going to spend time
with your family or what’s that next steps is going to be I think the most important decision making, you know, part
of that process. And then from analytical standpoint there’s lots of ramifcations but we’d be looking at, you know,
how to minimize taxes both from a business sale. So is it a, you know, S corporation how much can we get capital
gain treatment versus income treatment? Does it make sense?
Speaker 1 – 03:52
Like if we have like a 5 year heads up, are we eligible for QSBs? Should we convert to a C Corp and get you know, 10x
or if there’s a limit of you can get capital gain tax free and typically you’re going to pay higher tax rates along the way
but then you can get a good portion of that tax free on the back end if you qualify. So that could be a whole podcast
in itself how to qualify for USBs. But then I think long term, if your lifestyle. The other surprising part I think of a, if it’s
a family owned business is there’s probably a lot of lifestyle built into business expenses that a lot of people aren’t
honest about.
Speaker 1 – 04:35
So someone says, you know, if their business is profting, just say like 2 or 3 million dollars a year and they’re the
100% owner and they come to me and they say or our expenses are 20amonth. That may be true, but you may have
your cars, a lot of business, entertainment, meal, a lot of stuff run through the business. It may be closer to
40,000amonth. And I was, were, Chris and I were actually sitting down with a, a business owner actually Two
examples. One, we had initially like modeled his like fnancial independence off of 10,000amonth. And literally fve
years later his business has exploded so much. He’s doing so well that he was spending 60,000amonth. And
relatively speaking, you know, that was still a pretty small portion of the proft, the take home.
Speaker 1 – 05:23
But it’s still, it’s very important to be honest about the lifestyle infation as your business goes up and get a good
temperature gauge. And then the other thing, we could do a whole podcast on this. I’m realizing the other thing I
would really look at is an estate planning technique. You know, does it make sense before the business is sold to
have, transfer some of the shares into, you know, an irrevocable trust, or if you’re married, a spousal life access trust
where you know, you get the benefts. You set up to one on you, one on the wife. You have to look out for the
reciprocal trust doctrine, but you get the benefts of having access of the money where you’re living.
Speaker 1 – 05:58
But then also if you have a really big sale, a really big estate, the money that stays in there will pass to your kids
outside of the federal limits. So if you’re above this federal limits, that money that you put in there ahead of time
could say, you know, you could save that 40% estate tax from a federal perspective. On the back end, there’s lots of, I
think from business owner, why I love working with business owners is there’s two really important paths you have to
go into detail on. There’s the life planning part of it and then there’s the actual how do we maximize dollars, minimize
taxes, and get the most out of your blood, sweat and tears.
Speaker 2 – 06:36
Maybe a follow up to that would be regarding the trust setup and the structure of those, how complex do they need
to be? Do I need, do I need a very sophisticated hierarchy and all these trusts or is it relatively simple? Again,
generally? What would you kind of recommend there?
Speaker 1 – 06:50
Yeah, I’d say, you know, for most people, if you’re selling your business for, let’s just call it like under 25 million, it can
be, you know, if you’re married, happy married, happily married, kids, it can be pretty simple. Like have a revocable
trust, which is going to be the holding spot where most of your assets fow. That can turn into an irrevocable trust
when you pass as far as like how your kids access it. But that’s going to be really important to avoid probate, to have
privacy, to have, you know, kind of like a some governing laws if your kid, especially if your kids are young and you
die young, making sure the money is actually helping them, not enabling them a lot of factors into that and then. But
the revocable trust isn’t going to do anything from an estate tax perspective.
Speaker 1 – 07:34
It’s just, you know, it’s going to accomplish a lot of good things. But then you know, an irrevocable trust is what we
would set up but for under 25 million. Probably looking at like two spousal life access trusts, one per spouse and
then a revocable trust. Although it is complex, I mean it’s pretty simple. And the pros in our opinion if you have a big
business sale are going to far outweigh the any cons such as like the setup fees, etc. But the maintenance on them.
We just need to fle tax returns every year and work with a team that’s able to do that and understand that and then
manage the tax liability as the trust is growing outside of your estate.
Speaker 2 – 08:13
Yeah, you mentioned the kid situation. What if, you know, what if I’ve got three kids or they’re all college age or
younger and you mentioned helping, not enabling any things to think about there, you know, as I’m going through.
Speaker 1 – 08:25
This process, a million things to think about. Yeah, I mean it’s honestly there’s the statistics are of the statistics. A lot
of people, you know, avoid these money conversations. They hide what they have from their kids and then you know,
there’s a reason that you know, suddenly they pass the money, owes their kids. It can do a lot more harm than good
unless you’ve had these very proactive educational passing your values, passing your philosophy, making sure that
they’re motivated regardless. And that’s a very hard thing to do because money can defnitely change you if you
inherited at a young age.
Speaker 1 – 09:00
And I don’t have like a here’s the solution today but it’s going to be a case by case basis and usually it’s a lot of
proactive discussions that can lead to the best result of educating the kids, involving the kids and keeping the kids
accountable to be useful in society, have a purpose and regardless of how much money their parents give them still
live their best life from if that money didn’t exist standpoint.
Speaker 2 – 09:31
Any thoughts Chris, Anything to add?
Speaker 3 – 09:34
Pretty comprehensive. I think you nailed I just talked way too much.
Speaker 1 – 09:38
Next question goes to you, Chris.
Speaker 2 – 09:39
Okay, yeah, let’s do it maybe in a similar vein. So let’s kind of continue the story. I’ve sold my business. Now it’s 20,
30, 40 years later, we have, me and my family will have more, we have more money than we’ll ever spend and we’re
thinking about setting up a charitable foundation. Any thoughts on what are the frst steps to do that and things to
think about, Some of the pros, some of the cons, and ultimately let’s say my primary goal is to establish a legacy for
my family. So any thoughts there?
Speaker 1 – 10:08
Yeah, if you’re under 50 million, we’d probably say don’t set up a charitable foundation. There’s more simplistic, lower
cost, more time efcient ways to do it. So Chris, I mean, I’m sure you roll off your tongue. Donor advice funds, qcd,
give us a rundown of those.
Speaker 3 – 10:26
Yeah, I’d say the most common donor advised funds. That’s really, if you’re looking to donate to other nonprofts
though not really setting up your own. So like Matt said, unless you really high net worth, 50 and up, that’s when may
make sense to kind of start your own entity that’s its own charity. But a donor advised fund lets you get a big upfront
deduction in the year that you put the money into this fund and then you can disperse it, you know, throughout the
rest of your life. And even after you pass it can go to any 501c3, any nonproft, to whatever charity you want to help
with. So I think the frst thing would be like what? Identify your goals, what are you trying to, what are you passionate
about? What do you want to help?
Speaker 3 – 11:06
You know, what do you want to donate to? And then I’d say the donor advised one’s the most common. But you
mentioned QCDs too.
Speaker 1 – 11:15
You can throw 30% of your AGI and the donor advised funds, if you’re AGI, if you sold a business, let’s say is like 10
million one year, that’ll be a good year. You could, you know, throw in 3 million of appreciated stocks. If you put in
100 grand to a stock that’s now worth 3 million, there’s a huge 2.9 million dollar capital gain. We could throw that $3
million into a donor advised fund. We avoid that $2.9 million capital gain tax plus we get a full write off at the 37%
federal tax bracket of that money. So I mean effectively you’ve saved, just doing math here, like 59% of that gift you
saved in taxes because we avoided capital gains that you would have otherwise paid.
Speaker 1 – 11:58
And you got 37% write off and so once the money’s in the Donor Advice Fund, the reason we’re a big advocate of
this, you have ultimate control. I mean you can direct it all out that year, you could direct none of it out in the next 10
years and do big gifts like when you are ofcially retired, you could do, I mean it’s all yours. The only caveat is once
it’s in there, it has to be used for charity either while you’re living or when you die. But I think the other good thing
about a donor advised fund, especially when you’re in high net worth is people can relate to this. We have the fve
different charities, they’re probably going to get hammered from those fve charities, whether it’s emails, call
solicitations, you know they’re going to, now you’re asking to sponsor events.
Speaker 1 – 12:40
And so you know, you work your whole life to kind of build this autonomy and build this free time. And now you know,
you retire and suddenly it’s like you have a big house, you’re given a charity now it’s like you have a full time job
managing. The freedom that you build is now taken away like instantaneously because of what you think the good
life is. You have to handle these things with like, with artwork. So I think the Donor Advice Fund, one of the big things
is you know, sometimes like religious afliation, you tithe 10%. Maybe that’s not Anonymous. There’s accountability
in the church, probably many thoughts of that if you’re. And then there’s the you know, traditional giving in a charity
and maybe you want to do that anonymously. Well, donor advice fund allows you to do that.
Speaker 1 – 13:25
So I think there’s a lot of benefts from a tax perspective in a donor advised fund and a lot of benefts of fexibility.
Anonymous. We always, you know, I think the best status in the world is like you’re, you have wealth and you’re
anonymous. That’s like studies have shown that’s the happiest. Like the worst is like you’re famous and have no
money. That’s like the worst they said from a happiness standpoint. But yeah, if you’re high net worth, I think the
anonymous factor, the. And if you’re new to being a high net worth, I mean these are just hard lessons you learn or
you have to talk to peers that can mentor you. But we’ve seen it non stop. I mean the anonymous factor of that is
huge.
Speaker 1 – 14:04
But that going back to the charitable foundation, just to be clear, if you want to start your own charity, that’s different.
Like if you are really passionate about disabled kids or serving youth in underserved areas or whatever, that. That’s a
totally different discussion than like you directing no time but your money into a charity that can be operated donor
advice fund. But if you want to start your own charity, that would be a different discussion. I just wanted to clear
that. But sometimes you can do it. People set up a charitable foundation like a donor advised fund where you get
that tax and then you can direct it to different charities. But there’s a lot of rules. There’s distribution requirements,
there’s a lot of upkeep. Whereas a donor advised fund, it’s very simple.
Speaker 1 – 14:46
You can have an advisory team manage the whole process for you. So Chris, before we move on, tell us about the
QCDs.
Speaker 3 – 14:54
QCDs? So this is a way that you can donate money from a pre tax retirement account. Usually this comes up for
people later in life whenever they’re taking required minimum distributions. It’s age 73 now that you have to start
taking that money out. So instead of you personally taking that out, realizing the tax on that distribution, you can
direct it directly to a nonproft, a charity, they receive it tax free. You don’t pay any tax. It’s just a gift directly to the
church.
Speaker 1 – 15:23
That’s after 70 and a half. Even though the requirement of distributions have moved up, that’s rule still stayed at 70
and a half. Someone’s eligible for that.
Speaker 3 – 15:29
That’s correct.
Speaker 1 – 15:29
And what’s the limit now?
Speaker 3 – 15:30
$108,000 you can do that’s per spouse.
Speaker 1 – 15:33
So if you’re married you could do $216,000? Yep. Awesome.
Speaker 2 – 15:36
Yeah.
Speaker 1 – 15:36
So sometimes the really there’s a low hanging fruit that you can do that’s very tax efcient. You don’t need to, you
know, I think the natural inclination of being high net worth is you think you have to do something fancy. And a lot of
times, you know, simplicity is your friend. And I think the whole purpose, you know, of generating autonomy and
freedom and having is your time and I see it all the time, net worth. And you start getting like overly complicated with
strategies. And now suddenly when you could have gotten the same place with a lot more simpler strategies and
now suddenly you don’t have your time freedom anymore. So what’s the point?
Speaker 2 – 16:20
Yep. Okay, let’s switch gears a little bit. So similar situation, high net worth, high earner. But this time I’m a physician
and I’m really worried about potential malpractice lawsuit. At that point the legal system comes after my assets and
all Of a sudden my family is not protected. What can I do to protect against that scenario?
Speaker 1 – 16:48
Yeah, well it’s state by state. So you know, working with the legal team, working with the advisory team that has
access to a legal team based upon your state. But in generalities, if you look at the rules of most states will fully
protect qualifed accounts. So any money that you put in a 401 pension, an IRA, backdoor Roth IRA, things of that
nature are going to be fully protected. So the frst thing you can do as low hanging fruit is make sure you max out
your 401k back to a Roth IRA. Those avenues should be maxed out every year. Not just because of tax efciency, you
should do that. But also because as a physician, asset protection should be super important. Other again state by
state, usually 529 plans. So college education accounts are usually protected.
Speaker 1 – 17:33
And then a lot of states will protect cash value accumulation inside of life insurance contracts. Some annuities as
well. Not a huge fan of annuities but if you’re in a state that fully and you’re really at a high risk, that could be a way
just to shelter, you know, some money in a low, no commission, low cost like in. Not index. Annuity. Annuity that is
invested underlying in low cost like index funds. So would it be invested in mutual funds? Low cost mutual funds.
And then where you have to be careful is really your homestead exemption. That can be like in Texas, probably the
best place as a physician to own a home, very well protected. And then in some states it’s only, you know, it’s
capped. So the equity in your home is, would be subject. So ways around that.
Speaker 1 – 18:23
Some states recognize what’s called tenancy by entirety. Which means if you have instead of like a joint rights of
survivorship titling with a spouse. If you have a tenancy by entirety, what that does is if you’re one spouse is going to
come after for a malpractice or you know, car wreck or something, the other spouse isn’t involved, it’s going to be
protected. The other thing we’d recommend is umbrella coverage. Getting the max amount, you know, matched to
your net worth. Typically that caps out at 5 million. But the things that you have to, you know, be concerned about
would really be any non qualifed account. If you’re in a state that doesn’t recognize tenants in that entirety and
states that wouldn’t, you know, recognize the other things I discussed.
Speaker 1 – 19:05
But in generalities, put your money in the right places, have a, a robust, you know, umbrella coverage, maybe super
high Net worth. We set up, you know, something like family limited partnership. If you’re super high net worth, maybe
we’re setting up an llc. But typically if you’re doing the right planning and putting the right money in place of the
physician, you should be able to reach your goals in a more simplifed manner than that complex of a strategy. And
usually medical malpractice coverage is going to cover the on the job stuff if you have the right coverage in place.
But Chris, anything to add to that? No, I think it’s one thing that.
Speaker 3 – 19:48
Comes up every time somebody that we work with gets a new job. That’s one of the things that we always ask for is
what does the liability coverage look like with the new hospital or the new group that you’re at. Do you have tail
coverage or not? So just making sure before you start practicing that you have a good understanding of what’s
provided through the employer. And if you need to purchase anything additional on top of that to protect yourself.
Speaker 1 – 20:10
That’s a really good point. If you have a claims made policy, that means you would need a tail coverage. So it’s going
to cover you while you’re at the job. But once you leave, that’s gone. So you need a tail coverage to cover if you were
there three years to cover those back three years. If you have an occurrence type policy that covers you indefnitely
in the future. So during the three years plus after you leave. So the currents coverage is obviously the best type of
coverage. Much more expensive. Most hospitals will probably try to save premium dollars and purchase a claims
made policy. So you should be negotiating a tail coverage as part of your contract once you’re there for three years
or whatever the contract length is. And then also keep that negotiated as the contract rolls forward.
Speaker 1 – 20:50
And if not, just make sure you have the money set aside. Because depending on the type of physician you are, it
could be extremely expensive. Like for example, if you’re an ob, very expensive. Compared to like if you’re internal
medicine, it’s going to be expensive, but not nearly as much as if you’re delivering babies.
Speaker 2 – 21:06
Excellent. Thanks guys. Okay, so switching gears one more time. So scenario is I’m an executive at a Fortune 500
company. Not only do I work for the company, obviously, but I own a lot of the company stock. I’m continuously
getting paid via various options, equity options, et cetera. I’m starting to think I’m a bit overexposed to this company.
I don’t know exactly what it is, but it’s probably Half or more of my net worth is in this one company stock. So what
should I do? What’s my frst step here?
Speaker 1 – 21:38
Chris?
Speaker 3 – 21:39
Yeah, generally with situations like this, so much is tied, obviously your income, your benefts, everything’s tied to this
job for the most part. So a lot of people like to have that stock component. So you feel tied in even more to the
company. See that personally, as the company grows, your net worth growing too. But at some point it can, we can
go over that and we’re, you know, too much is concentrated. So a lot of times we’ll end up if it’s in that company
stock. If you have tax losses and like a personal brokerage account, you can use those to start to unwind that
concentrated position.
Speaker 3 – 22:18
But usually we’re looking at percentages of your total net worth trying to keep not just with a company stock, but any
position making sure that not too much of your portfolio is just dependent on just one company or one stock. So just
making sure that you’re not taking on too much risk with, you know, having too much of your net worth just tied to
one company.
Speaker 1 – 22:40
Yep. Yeah, I always run the plan with and without it. So, you know, if you have a Net worth of 5 million and 3 million is
in your company stock, what happens if it gets cut in half? What happens if it goes to zero? What happens if, you
know, a lot of this is derived from restricted stock units. Maybe half of them invested, half of them not. But it’s a little
bit more easier said done than just like sell it because you probably have a lot of there’s politics involved if you’re a
top executive in the C suite of a publicly trade company. And sometimes it looks bad, it doesn’t look like you’re
confdent in your company if you’re selling a huge portion of stock. So some companies will have requirements like
you need to hold 1x or 2x your compensation.
Speaker 1 – 23:20
But we defnitely recommend, we’re your advisor, not that we don’t care about your company. We hope it does well
because we hope you do well. But we’re representing you. So we’re going to be big advocates and making sure that
your fnancial plan is solidifed no matter what happens to that company. So we typically recommend keep that
company stock to less than 10% of your net worth and try to do that as tax efciently as possible. And also while it’s
getting unwound, a good strategy is putting it in a direct index portfolio. Because once you put like a, if it’s a tech
company, if you put that in the stock purchases, let’s say to mirror the S&P 500 index, to mirror the S&P fve piece
600 or 400 index, you know, we’re hitting all these asset classes.
Speaker 1 – 24:06
They’re going to be taken into consideration that you have such a heavy position in that sector. So it’s going to
actually make that position de risked if you have the rest of your investment selection working around that
concentrated stock and then as your tax loss harvesting, you can slowly, you know, sell, step up basis and do so tax
neutral as you, as you grow your wealth. So but that’s a probably the number one concern in executive faces
because you know, typically let’s say you’re making a base of 300, 400, maybe you have a cash bonus of you know,
maybe 2 or 300. Then you have RSUs at 400. So all in, you’re at like a million. Well, without those RSUs, without
those.
Speaker 1 – 24:51
And by the way, you’re paying taxes on those vest, so you could be paying taxes along the way and then suddenly
end of your career the stock drops and now it’s cost you millions of dollars in taxes to have that stock and you’re not
getting anything back from it. So it’s, I think it’s really important. You have to at least like set aside an equivalent to
the tax liability you’re paying along the way because typically they’ll withhold that 24% bracket and then you have a
big surprise that should have been taxed at 37. So now you’re paying out of pocket for just the privilege of holding
that stock. Not saying it’s a bad thing, but these are just complications, good complications of, of being in, you know,
that kind of income bracket.
Speaker 1 – 25:31
But a very important, it could be a make or break in a fnancial plan because if you’re an executive and all you’re
doing is maxing out your 401k with the company match is capped, you know, just on that frst 20, 24, 345. But that’s
not gonna be enough. You know, if we run your plan, it’s probably going to be a third to half of the money you need
for retirement. So the stock or other savings that you do is going to be so important. I can’t tell you how many
executives that show a million dollars of income that feel completely broke because they can’t, they feel like they
can’t sell this stock. They feel like, okay, we should be able to afford all this, but they’re living their life off this base
salary and they’re feeling the pinch.
Speaker 1 – 26:15
And so typically what happens with these, a lot of these executives is they live, you know, a 20 or 30 year career with
unnecessary stress, lots of fnancial stress, probably too much time at the ofce, too little time with the kids, versus
if we made good decisions around, say, in the stock side, we could have much less fnancial stress, solidifed results
on the back end, and then, you know, less pressure at work because you’re solidifying your fnancial independence
so quickly as you go. If something happens, if you try to set boundaries with your work, it’s not going to be as
relevant. But we see this literally all the time. And it’s unfortunate how much is expected of executives. Time wise,
effort wise, and then also just like conviction wise to keep this company stock.
Speaker 1 – 27:03
But it defnitely gets in the way of sound fnancial planning.
Speaker 2 – 27:07
Yep, for sure. All right, let’s wrap up with one more. This one’s, while it’s somewhat typical, I know we see this all the
time, but it’s also fairly, it’s a nuanced question. So I would love to my family and I would love to buy a second home,
a vacation home somewhere. What are the biggest costs to look out for? What are some of the hidden costs? What
are the pros and cons of owning a second home? What are the biggest headaches at the end of the day? Sometimes
I think about this and talking with my spouse and we question if this is even something that we want to get into. So
what are some of the things to think about or maybe some things I’m not thinking about as we’re going through this
process of buying a vacation home.
Speaker 1 – 27:42
Yeah, I think that this is so individualized because we have clients that own two or three homes and absolutely love
it. And then we also have clients that own two or three homes and absolutely despise it. So I think from a fnancial
standpoint, you can look at it as far as, okay, are you going to rent the house out? If you’re going to rent the house
out when you’re not there, it’s probably better to own the home because, you know, you can Airbnb or long term
rentals or whatever, and you can cover, maybe cover the mortgage some years. You know, you may have big
expenses that repair expenses, maintenance expenses.
Speaker 1 – 28:21
If you’re going to rent it out, if you want to do that, if you’re not willing to do that, and you’re only there two months of
the year it’s gonna be, it’s gonna own you more than you own it because you know, when you’re not there, a house, it
has issues. And if you’re down, if it’s in Florida and you’re up here, it’s just going to be in the, it’s going to be taking up
space in your mind pretty much constantly. Unless you have it outsourced. And if you have it outsourced, you know,
it’s going to be pretty expensive. So in that case, you should probably rent, you know, drop a lot of wasted money on
a, on a rental house once a year for one or two months. But the peace of mind that comes along with that is going to
be huge.
Speaker 1 – 29:02
You don’t have to worry about the maintenance, you don’t have to worry. When you leave. But there’s downsides of
that. You can’t keep your stuff there. So it’s really a long pro and con list on both sides. So what we typically do is
we’ll go through a very detailed fact fnding mission of like, what you value most. What’s the purpose of this? Do you
like going to the same place every year? Do you not? Are you willing? Other people come in and touch your stuff or
not? And so we’ll run it purely from a fnancial perspective of how does your fnancial plan look like if you buy this or
if you rent this? And we’ll compare the two. And if you. Typically, if you’re thinking about buying a second house, you
probably can afford it either way.
Speaker 1 – 29:43
But I think much more of it comes down to how it’s going to affect your lifestyle, your time, and your peace of mind.
Those are the biggest factors. But a lot of times that we can use the analysis and the numbers as kind of like an aha.
Oh, I thought renting was a waste of money. It’s really. I’m gonna be. You’re telling me I’m in the same position
without the headache. Okay, no brainer. And I can go to a different place every year. Awesome. And some people are
like, no, we want to have that memory of going to the same place. We want to meet our neighbors, want to have. I
could literally probably list like 50 pros and 50 cons of both ways, but it’s really individualized and all humans are
different and have their preferences.
Speaker 1 – 30:20
I think it’s really important to understand your family specifc goals, your family specifc philosophies, educate you on
the pros and Cons fnancially and then have that really detailed conversation around the lifestyle. But Chris, what
else would you add? Because I know you have. We have at. We have like a main advisor assigned every client. I’m
thinking Chris probably has the most amount of clients that do have second homes. So you have a lot of hands on
experience with clients that have these.
Speaker 3 – 30:50
I think you nailed it with the peace of mind piece. Like it’s a vacation home. You want to go there to relax. And a lot of
times we hear like the opposite. It can be really stressful. Things like if you’re on the coast, things like hurricanes and
stuff like that like completely turns everything upside down and yeah I think just really knowing what you’re getting
into and are you going to be there enough for it to be worth it? Just all the fnancial stuff aside, is it a right move for
you and your family based on, you know, what you want it for, how much you’re going to use it, et cetera. But just
want to make sure that you’re going into it for the right reason.
Speaker 3 – 31:27
Wanting something that’s comfortable, something that you know you have peace at and then making sure that it
doesn’t turn into too much of a headache whenever you’re not there. You know, having. Usually it’s a signifcant piece
on your balance sheet. It’s a lot of your net worth. So making sure that it’s know a good decision and not losing sleep
over overnight over this.
Speaker 1 – 31:47
Absolutely.
Speaker 3 – 31:48
But.
Speaker 1 – 31:49
Absolutely. I think a lot of kind of a closing. A lot of people will. They’ll work so hard to create fnancial independence
and then they’ll still buy these houses and these different and then they’ll fnd themselves kind of as a. I love the
quote. I don’t agree with this like 100% but what you own ends up owning you. I think that quote is. Is super
important in the fact that if you have that awareness of don’t. If I want to own this and I don’t want it to control my
thought process and having that awareness that’s like when I get like a new car, I have so much peace of mind.
When I get that frst scratch, I’m like, I can stop caring. I don’t care now. Right. It’s got it. Whatever. We can move on
rather than trying to keep. And I’ve.
Speaker 1 – 32:32
That mindset has evolved and I think the secret for me is just having the perspective of seeing the stresses that so
many clients and thousands of meetings have experienced. But same thing for House is just having that Awareness
of what’s the best outcome. And how would I defne that? Do I defne that as most peace of mind, effectively
spending my time proactively what I enjoy versus reactively with what I maintenance and stuff I don’t want to deal
with. And a lot of times just that self awareness, the exercise and talking it out. And then also I think the numbers
shouldn’t drive the only decision, but they should be anchoring parts of avoiding bad decisions versus just saying, oh,
this is the best fnancial choice. I think that exercise is more let’s stress test this so the worst case, so your plan
stays on track.
Speaker 2 – 33:20
But yeah, that’s kind of theme of both this podcast. But also what we do as a frm is sure we run the numbers and
that will provide the foundation and it kind of can guide us. But at the end of the day, it’s about what’s going to
optimize for peace of mind, what’s going to provide balance in your life, what’s going to bring you the lifestyle that
you and your family want to live. So it’s just much more about the spreadsheets and much more about those. It’s
much more than just those traditional questions that most people think to ask an advisor.
Speaker 1 – 33:46
So no question.
Speaker 2 – 33:47
Yeah. Anything else to add, guys?
Speaker 1 – 33:49
No, that’s great. I think this is the favorite part of our job is, you know, obviously there’s the managing the wealth, the
taxes, there’s all these nerdy things, but not stopping there and making sure like all of that stuff is actually
supporting your life by design and making sure you live at your best life with no regrets. So that’s how we do this.
You got to have these deep conversations.
Speaker 2 – 34:10
So yeah, that’s what it’s all about.
Speaker 1 – 34:12
Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this is as benefcial and impactful
to as many people across the nation as possible. So hit the follow button, make sure to rate the podcast and please
share with any friends or family members that would also fnd this benefcial. Thank you very much.