Latest / The Personal Finance Club Show / Tax Loss Harvesting, Permanent Life Insurance, and LLC Real Estate Hack | Ep 3

Transcript

Tax Loss Harvesting, Permanent Life Insurance, and LLC Real Estate Hack | Ep 3 · The Personal Finance Club Show

0:17
Welcome back to the Personal Finance Club show.
0:20
Hi, Jen. Hi, Jeremy.
0:22
This is so exciting. This is our third episode and we
0:26
started before the first episode making these segments and we
0:30
were kind of discussing what we wanted the show to be like.
0:33
And in these discussions, I often found us, you know, each
0:35
bringing up our own experiences. Oh, what we like from the show,
0:38
what we don't like from the show, things like that.
0:40
And I found, and I, I think you probably agree with this, that
0:44
when we had these discussions, our experiences did not overlap
0:48
very much, like basically not at all.
0:50
And our, our speeds are separate.
0:53
Our like our awareness of pop culture is very separate.
0:56
I feel like we just kind of live in these like despite both
0:58
living in Southern California, not very far from each other, we
1:01
kind of live in these separate worlds.
1:03
Was that your experience? Yes, I think specifically when
1:06
it comes to the Internet, we're on very different sides of the
1:09
Internet. Although I was offended when you
1:11
asked me if I knew who Conan O'Brien was.
1:13
I hope he's not one of your people.
1:15
But like I, I was like, I know at least who Conan O'Brien was
1:18
and what I asked you at one point who Keke Palmer was and
1:21
you didn't know. And I was like, wait a minute,
1:22
we got to explore this a little bit more.
1:24
Well, exactly. And so I was like, I don't know
1:26
where like the, you know, the the difference of this.
1:28
Yeah, different internets we live on or the different feeds
1:31
we live on where those borders. And so, you know, Conan, I don't
1:34
know Kiki. And so I thought what we could
1:36
do is we could show each other three each mystery photos.
1:40
And so I picked three people who are like 2 of them are my
1:43
celebrity crushes and one of them is a person who I actually
1:47
mentioned her name to you and you didn't know.
1:50
And so I want to, I'm going to show you the pictures.
1:53
Well, I'm going to show you the pictures and you, you have to,
1:55
I'm not going to tell you genders or anything.
1:57
And you have to decide, do you know this person?
1:59
What are they famous for? And then same for me.
2:02
Do you want to go first one? Yeah, you look at my first
2:05
celebrity, so you look at the first photo.
2:07
I'm going to look at So we have these in a folder.
2:10
Jeremy Mystery person one. Alright, I'm clicking.
2:13
And describe what you're seeing. I'm scared, OK, It's, it's a
2:17
it's a white man in a suit without a tie.
2:20
He's. Do you recognize this person?
2:22
I don't recognize this person. I'm like, OK, are you giving me
2:28
any clues or no? I I guess a clue is I
2:31
specifically chose photos of these people who were they're
2:34
not in their element. Oh, I gave you some context in
2:38
mine. That's not fair, no.
2:40
I just want to see if you know their faces.
2:42
I don't because it. OK well we'll see who wins but
2:45
I'll. The first thing is, this is one
2:48
of my 3 celebrity crushes. OK.
2:52
I'm straight, by the way. It's a very it's a heterosexual
2:55
crush. OK.
2:57
Are you going to tell me, are you going to give me any clues
2:59
or what's the, what's the T Well.
3:00
OK, you don't know. I don't think I'll tell you you.
3:03
You do not know Celebrity Jeopardy champion Ken Jennings.
3:08
Who it? Is Ken.
3:09
I do know him. I know Ken Jennings.
3:13
I was like, why does he look kind of familiar?
3:15
OK, yeah, I do know him. Darn.
3:17
But who's topping Alex Trebek? Well, he he famously won 74
3:21
episodes of Jeopardy back in the early 2000s and now has taken
3:25
over for Alex Trebek as the host of Jeopardy like, since like a
3:28
year ago or something. I'm kicking myself because I
3:30
actually do know who he is, but I just didn't recognize him.
3:33
Adam, yeah, of course, if you put him on the Jeopardy stage.
3:36
Right. If I if you saw him that
3:37
Jeopardy study, you would have known, of course.
3:39
OK. That's I'll give you like 50%
3:41
credit for that one. You know, you know, you know
3:43
him. I know who he is, but yeah, I
3:44
can't. His face.
3:45
Darn. OK, you're.
3:47
Going to put on my first. 1. Jen's first mystery person #1
3:51
All right, this is 3 people here they're.
3:54
OK, yeah, this one. I want you to tell me who the
3:57
person in the middle is, but I'm curious if you know the other
4:01
two people. So the guy they're, yeah,
4:04
they're three young black people, all men.
4:07
I think the person in the middle has, like long dreads.
4:11
On the right is Kevin the famous, like the most famous
4:15
comic in the world. I'm drawing a rank in his last
4:17
name. I'll give you that, Kevin Hart.
4:19
Kevin Hart. Yeah, Yeah, of course I know
4:20
Kevin Hart. He's been in like all the movies
4:23
I like. If I were to venture a Gus on
4:26
the other two, I have no clue. They look like streamers or
4:28
something based on how they're sitting.
4:30
The guy in the middle, like, I don't know, is he a rapper?
4:33
Is he like Lil Wayne or something?
4:34
I don't. I do not know.
4:36
And for and to, for the people listening, I did give you
4:39
context. They're in gamer chairs, like
4:41
they're kind of just hanging out.
4:42
So I didn't put people totally out there.
4:44
There's no context for Kevin, Kevin Hart, right?
4:46
Like well. Once I tell you stage, once I
4:49
tell you who he is, it'll give you a little bit more context,
4:51
but OK, so do you want to know you?
4:53
You kind of made a guess, which isn't like the craziest answer.
4:56
He's not Lil Wayne, but Lil Wayne is has locks and he is a
5:00
young black man or youngish. OK, I'll.
5:03
Give you that. In the maybe that's the
5:06
ballpark, but maybe the city or something.
5:08
So this is you want me to tell you?
5:10
Yeah, tell me. This is Kai Sanat.
5:13
He's a streamer who has 19.6 million followers on Twitch.
5:21
I think you showed you showed me every switch switch stream with
5:24
over 20 million followers. I would be able to name zero,
5:26
maybe one of them. Well, and I don't actually
5:29
follow his career too intensely. However, at the time of this
5:33
recording, he's on day, I believe 25 of a 30 day, 24 hour
5:37
live stream. And celebrities are coming in
5:40
and out like Kevin Hart, like Mariah Carey, like Kalani, like
5:44
Marlon Wayne. So he's kind of huge, like
5:47
people are just coming through to just hang out in this like
5:50
really crazy thing where he's streaming his entire life, like
5:53
having sleepovers on camera, you know what I mean?
5:56
Yeah, that's something I feel like would be in my like sphere,
5:58
like my Internet sphere, but it's it's not for some reason.
6:01
And I feel like my next, my next mystery person is kind of like
6:06
that with like, not a person I'm like this massive fan of, but
6:10
like just somehow shows up in my feed for various reasons.
6:14
OK, so yeah. And, and who's the other person?
6:17
Just out of curiosity. Drewski is just a famous.
6:19
No wonder if there's any crossover in your listeners, but
6:22
Drewski is a famous. He's basically an Internet
6:25
personality who's really hilarious and has lots of skits
6:29
across platforms. He was like helping host the BT
6:33
Awards this past year. Like he's major and he has so
6:36
many followers and such a huge fan base.
6:38
But I was curious if you would like at all have come across him
6:42
and it? Seems like, yeah, you know, he
6:44
wasn't looking right at the camera with that photo.
6:46
And so like, maybe I would recognize his skits, but I
6:48
didn't have his face. Yeah, OK, I'll send you
6:50
something. Go for a person too.
6:51
I'm clicking on #2 for you. Yeah, I'm nervous.
6:56
It's a girl at a football stadium.
6:59
She's blonde. So you're you're, you took them
7:02
out of context. So this is not necessarily
7:03
related to football or you can't tell me.
7:05
This one is kind of in context, like there's there's a big clue,
7:10
but. OK, so is she relate?
7:11
Is she married to a football player?
7:13
Not quite, but she's married to an athlete or no, she's dating
7:17
an athlete or something, I guess.
7:18
I don't know. Dating an athlete?
7:21
I don't know these girls think I better with athletes names.
7:26
I mean I have no idea. I've definitely never seen this
7:27
person before in my life. Celebrity crash.
7:30
She's pretty. I will say this is this is the
7:33
name who I mentioned when we were hanging out at the.
7:35
Oh, and I already forgot it. Literally yesterday or the day
7:37
before you told me this name. I already forgot it.
7:40
No context. All right, I'll tell you.
7:42
This is LSU gymnast Livi Dunn. And you might be saying, why is
7:48
it like, you know, there are dozens or 100 of Division One
7:52
colleges and so many Olympic sports.
7:55
So why is this one one gymnast from this one college?
7:59
Why is she notable? Well, when you look at like the
8:01
list of highest paid athletes in the country, she's like always
8:05
in the top few because apparently people think she's
8:08
extremely good looking. And so she just has these like
8:10
she's like a massive Internet hot person and she's and then
8:15
she married or she's dating the like the best baseball player,
8:18
like the number one draft pick in the in the MLB draft is her
8:21
boyfriend who went to LSU. And so they're this like Slub,
8:25
this notable celebrity couple. And like his name's Paul Skeens.
8:29
He's like the best pitcher, the number one draft pick, pitcher
8:32
guy. And I mean, I don't even I don't
8:34
even follow baseball. So I don't even really know that
8:35
because of her, to be honest. But like, I don't follow her
8:38
because I like see her stuff in my feed.
8:39
But I see like sports shows who mentioned her?
8:42
They're like, Oh, the best paid athletes, Tiger Woods and Livi
8:45
Dunn. And they're like she's like a
8:46
kind of like a joke because she's like, she's not being paid
8:49
well because she's an athlete. She's just like a college gym.
8:52
So she's graduated or whatever. I don't know.
8:53
So yeah. So she's in front of an LSU
8:55
stadium. She went to LSU.
8:56
So that was kind of the hint. But but yeah, she's not in her
8:58
gymnast outfit. I'm over 2.
9:00
OK, you click on my second one. I'm scared too.
9:04
Yeah, we'll see. Hold up a second.
9:05
Let me see. I know this person.
9:08
I gave you too much context. I'm mad but it's OK.
9:11
I would have known without the basketball, but yeah, this is
9:13
like a very attractive young black woman with a pink
9:16
basketball sitting in front of a pink wall, like taking some sort
9:19
of Photoshop. And it's a It's Angel Reese, the
9:23
WNBA superstar who is famously in little spats and feuds with I
9:29
I Angel Reese comes up in my feet a lot.
9:31
People are like, you know, saying she's great.
9:33
She's not great. She's I don't know.
9:34
She's like a very polarizing WNAWNBA is very much in my in my
9:40
feed too. For some reason.
9:41
I just feel like just for the same reason Livy done is just
9:43
because it's like very trending in sports lately.
9:46
But yeah. OK, so sports, female sports is
9:49
our crossover right now. So I almost put Asia Wilson, but
9:54
I didn't know if you would know her.
9:56
I wanted to celebrate her just getting MVP, the WNBA this year.
9:59
But I was like, I feel like that's a little bit of a
10:01
stretch. Would you have known Asia
10:02
Wilson? I doubt it.
10:04
Yeah Dang, I don't want to make it too hard.
10:07
I also what you would have known anyway.
10:08
But yeah, Angel Reese shout out. I tried to get her Reebok.
10:11
She just released a shoe sold out completely.
10:14
So. Really.
10:15
Yeah, sold out within my powers. Yeah, I.
10:17
Love it. I mean the whole like, Caitlin,
10:18
Clark, Angel, Reese thing, like, you know, stadiums are filling
10:22
up broadcast. A couple WNBA games here in LA,
10:25
the Sparks stink so I can't see anymore because they're not in
10:28
the playoffs. But.
10:30
Yeah, I'm, I'm a huge fan of it. It's just people always complain
10:33
about like WNBA players not getting paid enough and you
10:35
know, a lot of it just viewership and, you know, tennis
10:38
is kind of pretty much on par women versus men and like things
10:41
lots like Serena and and like all the great female tennis
10:44
players. And now, you know, this maybe is
10:47
the start of bringing it closer to parody.
10:49
So good for good for moon sports.
10:52
OK, darns. OK, so you got one all right.
10:54
So I'm clicking on three now. Three, yeah.
10:58
I just got to get one. Please.
11:00
I already know. I don't know.
11:03
This is a white man I believe, with disheveled hair.
11:08
He looks like he could be a comedian or an actor.
11:12
He looks a little goofy. It was very hard to find
11:14
pictures of this person without contextual clues because he's
11:18
just never somewhere without the context.
11:20
The closest person, I feel like I know what this person looks
11:23
like though so I don't think it's him, is the guy that like
11:26
hosts Catfish Neve. He kind of looks.
11:29
Like that, OK. Yeah, a little bit, but.
11:32
Yeah, I think we should be required to guess names if we
11:33
don't know. I guess Lil Wayne on that one.
11:35
I was wrong. Yeah, no, you're not right.
11:39
This is a rock climbing mega superstar Alex Honnold.
11:44
Rock climbing superstar is. Too you don't know Alex handled
11:48
disqualified. That's Alex handled is a
11:51
massive, massive celebrity. Did you hear the the Oscar
11:55
winning movie Free Solo from a couple years ago?
11:58
No. Well.
12:00
Wait, maybe the the people that climb the like side of mountains
12:03
without any like apparatus in case if they fall they just die?
12:07
Yeah. That's him.
12:09
I did hear about that. I didn't hear, but I.
12:11
Didn't see it. That's this guy.
12:12
So he's like, he's like the world's preeminent free soloist.
12:16
He climbed Mount or El Cap, which is in Yosemite, which is
12:20
like this 3000 foot or something rock face that just looks like
12:25
glass to me. And he just climbs up 3000 feet
12:28
and, and, and he's one of my celebrity crushes because he's
12:30
like, he's so cool. He's just down to earth.
12:32
He like, you know, despite the job he does, but he you know,
12:35
he'll say things like he's like everyone's like what you do is
12:38
super risky. He's like, well, it's not really
12:39
risky. There's two, there's two factors
12:41
of risk. There's like likelihood of fall
12:44
and there's the stakes that happen if you fall.
12:46
He's like the stakes are very high.
12:47
Admittedly, if I fall, I'll be a bag of meat, you know, just
12:51
exploding on the ground. He's like, but to me, you know,
12:53
for me, this is like walking down the sidewalk.
12:55
I I only do things that are that easy when I'm not using a rope
12:59
because of his skill set. So yeah.
13:02
Wow. But those are two of my
13:03
celebrity. Those are two of my celebrity
13:05
crushes, Alex Honnold and Ken Jennings.
13:09
OK, gotcha. All right.
13:12
You're gonna do my last one. I'm very curious.
13:15
I'm not. Maybe I made mine too easy.
13:17
But let's see if you know. All right, this is a black woman
13:20
wearing a big gold chain and a like a top hat or a bowler hat
13:25
that's kind of crooked. It's like a, you know, it looks
13:28
like some sort of professional portrait in front of a white
13:30
background. I do not know this person.
13:34
She looks like a she looks like a comedian to me.
13:40
But also like knowing you, I think that like these people, I
13:42
mean, Angel Reese wasn't but like you haven't done a musician
13:45
yet, so I assume maybe it's a musician.
13:47
The big chain looks like it might be rap related.
13:51
I don't know her maybe I know her.
13:53
Like I feel like if you say her name, I might know her and then
13:56
I'm like, oh, it doesn't look like her in this photo or
13:58
something. I think you would know her name.
14:01
Like, I don't think it's Missy Elliott, but like, maybe it's
14:04
like in that you're going to, I said it's not right.
14:06
You're going to get roasted so bad for that.
14:08
That's. Crazy, I said.
14:09
It's not Missy Elliott, see, and and I'm putting myself out there
14:12
saying a name. No, I, I, I I respect that.
14:15
Yeah. OK.
14:16
So I don't know who is it. It's Erykah Badu.
14:20
OK, do you know who that is? Yeah, yeah, she's a singer.
14:24
I would probably know some of her songs.
14:26
I'm horrible at music. You really don't know music,
14:29
which is I could have done all three.
14:30
I was like, that's not fair because we've talked about music
14:32
before and you don't know anything.
14:33
You can, yeah. And these were all black people.
14:35
You can show me, like white musicians.
14:37
I would know except for Taylor Swift like who I do.
14:39
Well, I wasn't gonna do Taylor or Beyoncé.
14:41
That's not fair. I.
14:42
Shouldn't have done, Angel. Apparently, but Erykah Badu is
14:46
one of the most prolific songwriters of our time.
14:48
Poet, activist, just prophetess. She's been famous for about like
14:54
30 plus years so. Oh yeah, 100.
14:58
And the fact that it spans to the 90s is probably why I know
15:00
her name at all. And I just, I'm horrible at
15:03
music. I don't know any musicians.
15:04
It's not it's not my thing. OK, Sounds.
15:08
Fun. Collectively, we're one for six,
15:10
right? Yeah.
15:13
Yeah. You didn't know.
15:15
I know I'm so mad about Ken because I was like, he does look
15:17
familiar, but outside of like he was wearing a suit jacket.
15:20
So I almost, I I don't know, I I just haven't watched Jeopardy
15:25
since, since my boy Alex, man. Yeah, not really.
15:28
You know, I've seen a couple. Episodes in there Ken Jennings
15:31
is kind of this like, you know, people in the jeopardy world
15:34
obviously are think he's massive but.
15:36
I know and I I cried when Alex Trebek died.
15:39
I was so sad. I love him, but yeah, OK, we'll
15:44
have to do this again. This is fun.
15:46
This one's fun. Maybe we can improve upon our
15:48
score. All right, so what's next?
15:50
Let's get into the show. We have to get into our
15:52
regularly scheduled programming with.
16:00
Explain it like I'm 5. All right, explain like I'm 5.
16:03
The world of finance is complicated.
16:05
We're going to break down these really scary, complex sounding
16:08
terms. More simply, what do we have
16:11
today, Jen? Yes, you recently made a post on
16:15
Instagram about tax loss harvesting, something that I
16:19
personally had never heard of, so your infographic helped me a
16:23
little bit. I got a pretty good
16:24
understanding from what you posted, but can you explain it
16:28
like I'm 5? Oh man, every time you say 5,
16:31
I'm like, this is going to be hard for a 5 year old who's
16:33
still like learning numbers, but I'm going to do my best.
16:35
The you know, the reason I posted about this is because a
16:38
lot of people hear this term tax loss harvesting because it's
16:42
used in marketing for investments.
16:45
So you might go to a robo advisor that says we do tax loss
16:50
harvesting, magically creating better returns.
16:53
Or you might go to, you know, Fidelity reached out to me
16:55
personally and try to sell me this thing that says, hey,
16:58
because of tax loss harvesting, we're going to make you more
17:00
money. And in my opinion, to start
17:03
with, like those marketing claims are greatly exaggerated
17:07
to the point of maybe not being true at all.
17:09
And So what is tax loss harvesting?
17:12
Here's the simple explanation. When you buy something, let's
17:17
tell you buy a bar of gold for $1000 and then you let's say it
17:21
goes up in value to $3000 and you sell it, you have had a gain
17:26
of $2000. That's what that's called a
17:29
capital gain. Capitalist stuff like a bar of
17:32
gold and it gains and that stuff goes up in value.
17:35
If I buy a bar of gold for 1000 and sell it for 3000, I have a
17:39
capital gain of $2000. The government taxes you on
17:44
capital gains at the end of the year when you file your taxes,
17:47
you have to submit a tax form saying all of the gains you've
17:49
had. If you're literally selling bars
17:52
of gold, like on the black market or something like that,
17:54
you might need to just like honestly report it more.
17:57
Typically you have a brokerage account like Vanguard, Fidelity,
18:00
or Schwab that gives you a tax form reporting how many capital
18:04
gains you had this year. And so like if I go report I had
18:07
$2000 in capital gains, the government's going to tax me at
18:10
a capital gains tax rate which is typically 15% for a lot of
18:15
people. So 15% of $2000 is what, 300
18:18
bucks? And so of my $2000 gain, I have
18:21
to send $300 to the federal government and I get to keep the
18:24
other 1700 plus of course the principal.
18:27
That first $1000 I put in. So I bought a bar of gold for
18:30
1000, sold it for 3000. After taxes, I walk away with
18:34
2700 because I paid the 15%. I just the gain.
18:38
That's a taxable gain. A taxable loss is the opposite.
18:42
So let's say I also bought a bar of silver for $1000.
18:47
And let's say in this very hypothetical example, silver
18:50
went down to 1 cent and I and, and now it's only worth 1 cent.
18:54
I have this gain of $2000 and if I want to mitigate my tax on
18:59
that, I could harvest. I'm making the air quotes.
19:02
If you're listening, I could harvest the loss on my silver,
19:05
which is down about $1000, right?
19:08
And to harvest that, I sell it. So I go sell my silver for a
19:12
penny. This is not how precious metals
19:14
go up and down in value, by the way.
19:16
It's just an example. I could sell my silver for a
19:19
penny. Then in addition to my gain of
19:23
of 2000, I have a loss of 1000 added up.
19:26
That's a net gain of only 1000. That means instead of paying
19:29
$300 in taxes, I would pay only $150.00 in tax.
19:34
So basically by selling the silver, I've locked in that
19:39
loss. I've harvested the loss and now
19:41
I pay less on the gains. That's what tax loss harvesting
19:45
is. That's that's the entire thing.
19:47
It's selling stuff at a loss to mitigate the taxes of your
19:51
gains. That is what's tax loss
19:53
harvesting is. And all the strategies that are
19:57
discussed on top of that are basically of like, you know,
20:00
riffing on that. So it's like, OK, if you own 6
20:03
stocks and four up and two are down, you could sell 2 for a
20:07
minute and then buy them back and then push forward that, you
20:10
know, that gain for another day or whatever.
20:12
That's what it is. And so people there, there's a
20:16
little caveat here, which is when you sell, like if I sell my
20:18
bar of gold for a penny and then I go right back to the market
20:22
and buy a bar of gold for a penny.
20:25
The government says, hey, hey, not so fast.
20:27
We don't want you doing the tax loss harvesting just
20:29
performatively. We want you to actually sell the
20:31
thing and stick to it. And so if you buy back the same
20:35
thing or a or a sufficiently similar thing, there's like
20:39
phrasing with the IRS laws that say this, then it doesn't count.
20:42
It's called a wash sale, which means you basically can't count
20:45
your loss. It's not just something to be
20:47
aware of. And so all the strategies people
20:49
talk about about tax loss harvesting are basically saying,
20:52
OK, instead of just buying one index fund, you could by like
20:55
100 different stocks and then kind of harvest all the losses
21:00
every year, thus offsetting some of the gains that's kicking the
21:03
can of paying the tax on those gains down the road.
21:07
But like it comes with a bunch of caveats.
21:09
It only, it only works if certain things are true, like
21:11
you have gains that you need to offset if you're in a high tax
21:15
bracket and you expect to be a low tax bracket later.
21:17
Like there's all these like caveats to it.
21:19
And so the net result for me is like, generally, don't worry
21:22
about it. It's good to know that it
21:24
exists. And if you do have a large gain,
21:26
like let's say you sell a house or we sell a bunch of stock and
21:29
have a huge gain, like you have some company stock and you sell
21:32
and then you also have some like crappy stocks out there at a
21:35
loss. You might consider selling them
21:37
this year and buying something else back or waiting the 30 days
21:40
and buying it back just to mitigate your taxes.
21:42
But beyond that, I wouldn't say this is something that like
21:44
everyone should be doing all the time just because there's maybe
21:48
a strategy out there because it doesn't necessarily work for
21:50
everyone. So there it is.
21:52
Five year olds. I'm sure all the five year olds
21:54
are glued to their their to their YouTube right now learning
21:58
about this. On the edge of their seat for
21:59
sure. Yeah, I did like that.
22:01
Sticks like I'm 5. That was good.
22:02
I I mean from your post I got the gist of it.
22:05
It just to me, honestly didn't seem worth it.
22:07
It seems like trying to get another way to try and gain game
22:10
the system. So for me, that's kind of what I
22:12
took away from it. Just, you know.
22:15
Almost always, the more complex thing is worse for people almost
22:18
always. And as humans we like to
22:21
introduce complexity because it seems like you're making moves,
22:25
It seems like you're doing stuff.
22:26
And so if people who have a very simple strategy, while it's
22:30
optimal and will do better than almost all investors, we have
22:33
this like impulse, this urge to introduce complexity.
22:37
And this is like a very fancy sounding type of complexity we
22:40
could introduce, but it probably won't, probably won't leave you
22:43
better off. And so I say, hey, buy some
22:45
index funds, leave them in your account, let them sit there for
22:47
years. That's how you, you know,
22:49
optimize your wealth. Period.
22:52
Thank you. OK.
22:53
Should we go on to our next segment?
22:55
Let's do it money. Money.
22:59
Can I ask a dumb one now? Are you asking a dumb person?
23:04
Are you asking a dumb question? I think maybe every episode the
23:06
answer could could alter. Change Our inbox is really
23:10
heating up. I'm getting lots at podcast at
23:12
personalfinanceclub.com. Some people y'all are wiling
23:15
out. There's too many.
23:16
Questions. Are you serious?
23:17
We're getting emails there. Yes.
23:20
That's amazing. Who are people listening to
23:22
this? I didn't know we were recording.
23:24
I can't. I've been talking to a Pringles
23:26
box this entire time. A.
23:28
Pringles tube, I'm vetting the inbox.
23:31
Some people are asking like 12 questions for you, Mom, like
23:33
maybe we need to set up an office hour.
23:36
But yeah, it's great. I am very happy that people are
23:38
not only listening, but asking questions.
23:40
And they're good questions. And this one I plucked because
23:44
not only was it one of our first questions, but it's something
23:46
that you talk about a lot. It's from either Bridget or
23:50
Brigitte and she asks. I purchased life insurance about
23:54
five years ago and don't want to lose the money I have already
23:57
invested. Why is this investment strategy
24:00
bad? I'm maxing out my 4O1K Roth IRA
24:03
and I'm investing money into my Vanguard account monthly.
24:07
I have no children but this was sold as an additional
24:10
investment. Ave. if it is as bad like I
24:13
think she wants to say, is it as bad like you've mentioned on
24:15
your Instagram? What do I do?
24:18
Yeah, so just for the record, I don't love talking about life
24:22
insurance. I don't really like talking
24:24
about it at all. And the reason I do is because
24:28
it's one of the most predatorily sold products I've ever seen of
24:34
anything. It really feels like there are
24:36
just these very dishonest, disingenuous people pushing
24:42
these very, very fake narratives about why, about why people
24:45
should be investing in life insurance.
24:47
And you know, Bridget's in an incredible shape by the way,
24:51
she's maxing out a four O 1K, She's maxed out her Roth IRA.
24:53
She's investing money into what I believe she means is like a
24:56
taxable Vanguard brokerage account.
24:58
Like Bridget's crushing it. She's going to be a multi
25:00
millionaire. She's going to have an
25:02
incredibly successful financial life, whatever she does with his
25:04
life insurance policy. But what I often see is 25 year
25:09
old school teachers who don't have an investment to their
25:12
name, who are being sold annuities or life insurance or
25:17
Iuls or a variable life insurance, a whole life
25:20
insurance basically because the first person they ever came
25:23
across in the financial services industry only makes money by
25:27
selling these very expensive life insurance policies.
25:30
And then exactly as Bridget said, it was sold to me as an
25:35
investment. Like what she said there is
25:37
illegal life insurance agents aren't allowed to sell these
25:39
things as investments, but they almost exclusively do.
25:43
And that's why I talk about it because it's basically, in my
25:49
opinion, a scam being operated in broad daylight, being pushed
25:53
on these young people who don't understand what they're buying
25:56
to their devastating financial outcome.
25:59
Just for some scale. You know, I bought one of these
26:02
life insurance policies a while back and I did the math.
26:05
I read there's a 90 page policy. I read all 90 pages.
26:08
I very dutifully put every single detail of the policy into
26:12
a spreadsheet, put like an actual investment in the
26:14
spreadsheet, compare it side by side.
26:15
The insurance policy I bought over the course of 40 years
26:18
would have grown to $320,000. That's, and you know, to be
26:22
fair, that's kind of like an optimistic scenario because
26:24
these policies can lapse if you missed payments.
26:26
There's like all sorts of things that they, they can change the
26:29
rules on you. There's all sorts of ways these
26:31
can go, of course. But like optimistically by the,
26:34
you know, the, the, the, the pitch that was going to be, it
26:37
would grow to $320,000 investment in an index fund, the
26:41
same exact index that this life insurance policy purportedly
26:44
tracks would grow to $1.8 million.
26:48
So while Bridget's asking, is it as bad as you said, it's like,
26:51
well, you might end up with $300,000.
26:53
You know, in the case of the one I bought, yours is different
26:55
because they're all different. They're very hard to like pin
26:57
down because they all have like different rules.
27:00
But you know, in the case of the one that I bought, I'm $1.5
27:04
million worse, worse off, right? And if I'm a 25 year old teacher
27:09
and this is where I'm putting my only investment to end up as a
27:13
65 year old teacher with $300,000 in the bank, you know,
27:17
you're a poor person. You're not, that's not going to
27:20
produce much income. You're not going to be able to
27:22
live long, like hopefully have a teacher pension, some Social
27:24
Security, a little bit of cash from this policy, maybe if it's
27:28
survived that long. Most of them don't.
27:30
But if you had an index fund, you'd have $1.8 million.
27:33
You could maybe have retired early.
27:34
It's like life changing, right? And so is it as bad as, as I
27:39
say, I'm like, yeah, that's what I think of it, right.
27:41
And so to go back to Bridget's question, what should I, what
27:44
should, is it as bad as you say? You know, I think it is because
27:48
long term you get up with dramatic less money.
27:51
In your case, though, you're, you're setting yourself up so
27:53
well with your 400K, your IE rate, you're investing money.
27:57
You know, does it hurt to have a life insurance policy?
27:59
Like maybe not, it's not going to be that dramatic difference.
28:02
Like not, it's not going to be the difference between retiring
28:04
and not retiring. I still think you'll be worse
28:05
off. So what do you do?
28:07
And, and, and by the way, she says it was sold as an
28:10
additional investment and she has no children, right?
28:11
So that just speaks to the insurance salesman mindset,
28:15
which is they're not looking to actually insure you, the purpose
28:19
of insurance. They're looking to misrepresent
28:21
this product as an investment and sell it to people who don't
28:24
need life insurance, which is what happens all the time.
28:28
And so she doesn't want to lose money.
28:29
And So what I say to that is, first of all, Bridget, there's a
28:31
sunk cost fallacy. The money you put into it is
28:35
already gone. It is what it is or it's not
28:37
gone. It's in the policy that's behind
28:39
you. What you what you care about is
28:41
what's the best decision is moving forward.
28:44
And there's a saying you don't want to throw good money against
28:46
bad. So I don't know the numbers, you
28:48
include them. But let's say you put $5000 in
28:50
this policy. Just because you don't want to
28:52
lose that 5000 doesn't mean you should put another 20,000 to the
28:55
policy, right? The 20,000 might be better off
28:58
invested in a real investment going forward, like just added
29:00
to your Vanguard account. That said, I don't know your
29:03
numbers. And so it's important to look,
29:04
you can go look and see, hey, what's the surrender charge?
29:07
How much can I get out? What's the real prospect of this
29:09
thing? Understand what is, what are the
29:11
fees going forward? What is the likelihood of
29:13
lapsing? What is the, what's going to
29:15
happen to the cost of insurance as it goes up?
29:17
I know nothing about your policy, so I don't know.
29:19
But it's worth taking a hard look at it and say, OK, from
29:21
this point going forward, can I get any money out?
29:24
Should I keep putting money in until the surrender charge
29:27
lapses? Is there money better spent
29:30
elsewhere? What's the real life insurance
29:32
benefit to me, if any? Do I have?
29:34
Do I need life insurance? If I do, do I need term life
29:36
insurance in place? And you know, all these
29:38
questions are a little bit hard, which is why I think it's really
29:40
important to talk to a flat fee financial advisor because flat
29:45
fee financial advisors don't sell products.
29:48
If you go talk to insurance salesman, the only way they can
29:52
make a living and the only way their brain operates is by
29:55
thinking about how they're going to sell you something so that
29:58
they can continue to raise their family.
30:00
You know, there I know no disrespect the hustle, but for
30:03
you from your perspective, you can't get an honest answer when
30:05
that incentives, but when when that incentive is in place.
30:09
But when you talk to a flat fee financial advisor like those on
30:13
Nectarine at hellonectarine.com, Full disclosure, this is a
30:17
company I started because I feel passionate about the business
30:20
model of financial advisors and how messed up it is for most
30:24
people. But yeah, you could go grab an
30:25
hour with a Nectarine advisor, show them your actual policy,
30:28
show them the incentive, show them your other, you know, the
30:30
rest of your financial world. And then, you know, they're not
30:32
insurance haters. They don't care.
30:34
They're they don't. They're not Vanguard haters,
30:37
they're not, they're not anything haters.
30:38
They're just want to do the best for you and they'll give you
30:40
their honest opinion without having to worry that they're
30:43
trying to make a Commission. So that's what I would do.
30:46
Boom, just like that. Bridget, I hope that answers
30:49
your question. Thank you for writing in.
30:52
Now the questions are going to start to flow and it's like
30:54
we're going to pick and choose. It's going to get.
30:56
This is exciting Episode 3. We got a lot of questions, but
30:59
keep bringing your questions in. What's the e-mail address?
31:02
Podcast at personalfinanceclub.com.
31:05
Nice. Boom.
31:06
OK, shall we move on? Let's do it.
31:10
OK. Our next segment is Scroll
31:16
Patrol. Scroll Patrol.
31:19
Amazing. I'm this one is short and sweet,
31:22
but I think, you know, you get a lot of juice out of it.
31:25
So go ahead and open that on up and let us know what you think.
31:28
It'd be a quick reaction, but let us know.
31:31
Let's see, I don't recognize the thumbnail so far.
31:42
OK, so it's one of those it's got no talking.
31:45
It's just this pretty girl holding a Amex something card
31:50
and says girl math is opening a brand new LLC for $200, then
31:56
applying for a $50,000 zero percent interest business
31:59
funding, then using it to invest in your first Airbnb property
32:03
for 10K, then paying off the funding with the profits from
32:08
the Airbnb. I don't know if that's girl
32:12
math. I don't know what kind of math
32:13
that is. So it's just, there's so much,
32:17
you know, this just speaks to like the, I think this is a
32:20
perfect scroll patrol because it's it's just like this word
32:23
salad of financial stuff scrammed into this like little
32:29
paragraph and purported to be this like nuanced tack that, you
32:35
know, this pretty girl with this credit card in a like jewelry
32:39
box is apparently getting rich from this like little paragraph
32:44
she wrote. And so let's break it down.
32:46
Opening the LLC for $200. And LLC is a limited liability
32:49
company and depends on the state you're in.
32:53
You have to file a form with the state and pay a small fee.
32:56
In California, it's actually more expensive.
32:57
It's like $800. In Michigan it was like 50
32:59
bucks, so I believe whatever state she's in, it might be 200
33:03
bucks. And then you have a business and
33:05
it's got a business name and you can open up a bank account in
33:07
that business. And to be fair, you might be
33:10
able to apply for a loan in that business.
33:12
Are you going to get a $50,000 loan with ALC open up a week ago
33:15
with 0 percentage straight? Not from anywhere I've ever
33:20
seen. I'm not aware of the existence
33:22
of that lender who just gives $50,000 to a empty LLC.
33:29
Maybe that's the girl math part. Maybe that's the delulu.
33:32
I mean, I don't know, I mean, you know, this whole girl math
33:35
trend, you know, I can't really speak to because I'm a tall
33:40
American rich white dude. So I don't try to stay in my
33:43
lane a little bit with my checking my privilege.
33:46
But you know, I, I, I do feel like maybe it's a little bit
33:49
dismissive of, you know, I mean, ideas like this, like this isn't
33:52
girl math. This is like craziness.
33:56
And so like, are you going to be able to walk in the bank with
33:58
this like LLC form that you filed last week and just having
34:01
to give you $50,000 at 0%? You know, I don't even know why
34:06
a bank would banks earn the money business of lending money
34:09
for a return. I don't know why they give you a
34:11
0% loan. Obviously there are like 0%
34:13
introductory rates on credit cards and auto loans sometimes,
34:18
but those aren't exchange for you like making purchases on the
34:21
card with which they make money from or buying a car which they
34:23
make money from. Just getting a a business loan
34:26
at 0% doesn't make any sense and using it to invest in your first
34:29
Airbnb property for 10 Ki don't know why it went from 50 to 10.
34:33
And I don't know how you're going to buy an entire property
34:36
for $10,000. I assume the implication is
34:40
you're going to go buy a property that costs hundreds of
34:42
thousands of dollars and use $10,000 as the down payment and
34:46
then pay off the loan. You know, like, it's just like,
34:49
it's like sifting through this like pile of wet newspaper and
34:55
that's been sitting like in your driveway for three weeks and
34:59
then trying to like find a page that makes sense.
35:01
And I'm like, you know, like, yeah, maybe, you know, you know,
35:04
buying investment real estate that's really good investment
35:08
real estate. And you put a lot of work into
35:10
and do the numbers and, and manage really well and, and
35:14
lease up and all that stuff could potentially be a good
35:17
investment. And that could potentially even
35:18
be a profitable investment, you know, having a rental, having a
35:21
vacation rental property. But what I'm looking at is, is
35:25
like almost like, should we have like a nonsense scale?
35:28
Maybe I should let's, let's introduce that a nonsense scale
35:31
where like 100% is like just pure and utter complete
35:34
nonsense. And then zero percent is like,
35:37
hey, this is actually like really solid information.
35:39
I would personally do this. This is like 94% nonsense.
35:45
Yeah. Yeah, it's funny.
35:47
In looking for videos like this I see a lot of comments that are
35:51
like teach me how DM ING you and it's really scary so I thought
35:55
I'd pop this one in there. Yeah, I mean, and, you know, for
35:59
transparency's sake, I started teaching personal finance back
36:04
in 2019 because I love it. It's just like my passion.
36:07
It's what I'd like just read about.
36:08
It's what I love. And in 2020, I did start selling
36:11
a course on the basics. And there's like no secrets in
36:14
the course. It's the everything that is like
36:17
the same thing that's available on this podcast, on the
36:19
Instagram, on the website. I was like, well, people keep
36:21
asking me for, you know, these how to videos.
36:24
I was like, I put them all together.
36:25
I'll sell it for like 50 bucks, see how it goes.
36:28
And that's basically what's been able to fund your and my salary
36:31
ever since. And when people hear I sell a
36:33
course, they're like, Oh, you scammer.
36:35
I was like, I don't blame you. Like if whoever made this post,
36:38
which I assume isn't this girl who's now I'm realizing holding
36:41
a credit card for some reason, when she talked about a a
36:43
business line of credit. But you know, if whoever made
36:47
this is selling a course on how to do this, I would be very
36:49
considered what's in that course.
36:50
If it's, if you're suggesting going and buying real estate
36:53
100% on debt and, you know, pushing this idea that there are
36:57
0% loans to do this with and that having an LLC is going to
37:00
magically make a difference somehow.
37:02
Like that's not, that's like 94% nonsense, right?
37:05
Like that's not something, you know, I would be selling it and
37:08
the course then based, you know, of course, that's being sold on
37:12
94% nonsense is basically a scam at that point.
37:15
So I don't, I don't really fault people and they like yell at me
37:18
for having a course. But you should go by the course.
37:23
If you need to, the argument for it is like it's, you know, it's
37:25
a fraction of the cost of a single Community College credit
37:27
and you know, people who take it the, the average review is like
37:30
4.97 stars or something. We've had 20,000 people take it
37:34
and just like they all you know, what I hear is it's like life
37:38
changing. You know, the people who hate me
37:39
probably don't send in, you know, nasty messages because
37:43
they're probably very polite people.
37:44
But I feel really good about it. And it's got 100% money back
37:47
guarantee. If you don't like the course or
37:49
you just want to steal it, just e-mail us and we give you your
37:52
money back because we're not trying to like trick you into
37:54
buying some junk. We're trying to make you
37:55
millionaires. All righty.
37:57
It's time to move on to our last segment, Money, Money.
38:02
Jeremy had time today. We're in the comments section,
38:06
we're in the DMSI got a 7 month old.
38:09
I'm running two businesses. I still got time to go get into
38:13
some flame, some old fashioned flame wars on the Internet.
38:17
So what do we have today? OK, so you recently posted about
38:20
picking stocks. I believe the stock that you use
38:22
as an example was NVIDIA or one of the stocks you used and we
38:26
had a very lively comment section. 1 user commented.
38:30
I understand your point but you are invalidating people who
38:33
study the market and do research about the stock they are buying.
38:36
There's a lot you can do with the right mindset, analysis and
38:40
study. So, you know, to this commenter,
38:42
you know, I think buying and holding good stocks is a good
38:45
thing. You know, I think that's like on
38:47
the, on the, on the scale of nonsense, not nonsense, it's
38:50
only like 4% nonsense. It's like, you know, not, not
38:53
nonsense. It's like a good thing.
38:54
And, you know, there are very famous, very successful
38:57
investors like Warren Buffett who have done insanely well.
39:01
But, and so I don't want to invalidate those people.
39:06
I think buying and holding good stocks is a good thing.
39:09
But you know, the last sentence, there's a lot you can do with
39:12
the right mindset, analysis and study.
39:14
I think that is not true. I think that's false.
39:18
And the reason I think that's false is because when you look
39:20
at expert stock pickers who devote their life and their
39:26
careers to the right mindset, analysis and study over and over
39:31
and over and over, they lose to the index.
39:34
And what I mean by that is if you just bought all the stocks,
39:38
as crazy as it sounds, you'll do better than you know most likely
39:44
than picking just the stocks that you think are good stocks.
39:47
With that said, when you pick stocks, you're introducing
39:52
randomness and randomness often dresses up like for Halloween as
39:58
incredible skill. And so it's like the the stead
40:02
about casinos. Something like 94% of people who
40:05
walk into a casino are up at some point in the night, right?
40:11
They come in with 100 bucks and they're at 1:20 or something,
40:13
they're up some amount of money at some point at night.
40:15
But 90% of people? Leave a loser and those early
40:20
wins, can it tease you into thinking, oh, wait, I'm good at
40:24
this or wait, I got I got a system or I'm on a hot streak or
40:28
whatever. And so while I think most people
40:32
agree going to Vegas and trying to beat the casino is not a good
40:35
financial decision, stocks are the same way.
40:38
But stocks are even a little bit trickier because while you might
40:42
make 8% a year in stocks and say you're a winner, if the market
40:46
goes up 10%, you're actually losing by 2%.
40:50
And losing by 2% over time could erode half of your value.
40:53
And so you're not, it's not like a casino where you're risking
40:57
losing all your money. There's a more insidious loss
41:00
here, which is just a, an underperformance to the index.
41:04
And so to the stock pickers out there, I'd say, hey, great, I
41:07
love you, respect you. But looking at the research
41:11
study after study after study show stock figures don't beat
41:14
the market repeatedly and predictably over time, they
41:17
eventually lose to the market. And so if you want to do it, my
41:21
recommendation is the 9010 rule with 90% of your portfolio.
41:25
Buy and hold index funds, low fee, get the whole market,
41:28
guarantee yourself your fair share of all market growth.
41:32
Now with a 10%, then go nuts. And if you're, you know, if, if,
41:37
if like this commenter said, there's a lot you can do if
41:40
you're so good, if there's a lot you can do with that 10%, that
41:43
10% will grow well beyond your 90% and you'll still be
41:46
fabulously wealthy. If you're wrong and the, you
41:50
know, massive data on and research on the topic is right
41:53
and you're not going to be able to beat the market over time,
41:56
then at least you're 90% is going to kind of lock in the
41:59
market gains. And the 10% was like your Lotto
42:02
ticket, which may or may not pay off.
42:04
That's why I say. OK.
42:06
Yeah, this is definitely one of the hot button issues on the
42:09
personal finance club Instagram. So you get lots of comments
42:11
there. I posted about insurance
42:13
yesterday, so there's some really angry insurance people.
42:16
We might have to do another Jeremy at Time today for sure.
42:20
Next episode. Yes, OK.
42:22
And on that note, that's all the time that we have for you to
42:25
date on the Personal Finance Club show.
42:28
Thank you for coming and we hope to see you again next week.
42:30
And don't forget the 2 rules of Personal Finance Club.
42:33
Rule #1 Live below your means and rule #2 invest early and
42:37
often. See you next time.
42:39
The personal finance club show is produced by Jeremy Schneider
42:42
and Jed Mundia, music by Essa Balu and Homie.
42:45
Send your questions to podcast@personalfinanceclub.com.
42:49
The Personal Finance Club show is Co hosted by Jeremy Schneider
42:51
who is a co-owner of Nectarine and SEC Registered Investment
42:55
Advisor. The views expressed on this show
42:57
are those of the hosts and guests and do not necessarily
43:00
reflect the views of Nectarine. Please refer to
43:03
hellonectarine.com for all relevant disclosures.
43:06
This podcast is for informational and educational
43:08
purposes only and should not be construed as personalized
43:11
investment advice or a solicitation to buy or sell any
43:14
security. Listeners should consult their
43:17
own financial, legal or tax professionals for advice
43:19
specific to their situation.