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Why Financial Flexibility Matters with Alejandra Borge · Financial Futures: A Measured Wealth Podcast

• 0:03
  SPEAKER_02: Are you positioned for opportunity?
• 0:05
  SPEAKER_02: Stay with us as we explore the forgotten ASCII class.
• 0:08
  SPEAKER_02: Flexibility.
• 0:12
  SPEAKER_00: The information and opinions presented in this podcast, including the views of guests not affiliated with measured wealth, is for general informational and educational purposes only.
• 0:21
  SPEAKER_00: It should not be considered investment, tax, or legal advice.
• 0:24
  SPEAKER_00: Any references to specific securities, products, or services do not constitute a recommendation or endorsement.
• 0:31
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 0:34
  SPEAKER_00: Past performance is not indicative of future results.
• 0:37
  SPEAKER_00: Listeners should consult their own financial professionals before making any financial decisions.
• 0:41
  SPEAKER_00: Measured Wealth Private Client Group is registered with the Securities and Exchange Commission.
• 0:46
  SPEAKER_00: This registration does not imply a certain level of skill or training.
• 0:50
  SPEAKER_00: This particular episode discusses securities-backed lending.
• 0:54
  SPEAKER_00: Securities-backed lending involves risk and is not appropriate for all investors.
• 0:59
  SPEAKER_00: If the value of pledged securities declines, the borrower may be required to deposit additional collateral, repay part or all of the loan, or sell securities, potentially at an unfavorable time.
• 1:10
  SPEAKER_00: Interest rates and loan terms can change, and borrowing costs may exceed investment returns.
• 1:16
  SPEAKER_00: Tax consequences vary, and clients should consult their tax advisor.
• 1:23
  SPEAKER_01: Welcome to Financial Futures, a Measured Wealth podcast powered by the team at Measured Wealth in beautiful Portsmouth, New Hampshire.
• 1:31
  SPEAKER_01: Each episode, we're bringing you fresh insights on retirement, investing, and everything you need to take control of your financial future.
• 1:39
  SPEAKER_01: Whether you're preparing for retirement or already living it, we're here to help you make informed choices with confidence.
• 2:09
  SPEAKER_02: So, Alejandra, welcome back.
• 2:11
  SPEAKER_03: Hey George, thank you for having me today.
• 2:14
  SPEAKER_02: All right.
• 2:15
  SPEAKER_02: We got an interesting uh podcast today.
• 2:17
  SPEAKER_02: Looking forward to it.
• 2:19
  SPEAKER_02: Uh and when you first came around with the idea of flexibility, uh, at first I really wasn't sure what what you meant, and uh, but then it struck a chord, and and you know, I I can apply this to my own situation, and I hope all of our listeners today think about their own situation, you know, based on what we talk about.
• 2:35
  SPEAKER_02: But first, tell us a little bit about your practice down in South Florida.
• 2:38
  SPEAKER_02: Uh, who are the type of clients you're serving?
• 2:40
  SPEAKER_02: And yeah, we'd love to hear.
• 2:42
  SPEAKER_03: Yeah, George, of course.
• 2:43
  SPEAKER_03: So being me being in the South Florida region, and I do focus on Hispanics in the US, and I have a pool of international clients as well, mostly being, you know, um Hispanic families, business owners, professionals, um, mainly in like the 30s to mid-50s age range.
• 3:00
  SPEAKER_03: Okay, great.
• 3:01
  SPEAKER_02: Tell us what mistakes do you see people making today?
• 3:04
  SPEAKER_03: I can vouch for the clients I have and the people I speak to down here, but honestly, they're doing exactly what everyone told them to do, which is maxing out their 401k, buying real estate, building equity, paying down debt, and somehow they still feel financially trapped.
• 3:18
  SPEAKER_03: And why?
• 3:18
  SPEAKER_03: Because nobody has taught them about liquidity, and also because they're resorting to AI for absolutely everything.
• 3:25
  SPEAKER_02: Let's uh let's elaborate on liquidity.
• 3:27
  SPEAKER_02: What does that mean for our for our listeners?
• 3:29
  SPEAKER_03: Yes.
• 3:29
  SPEAKER_03: I mean, think about all the milestones that happened between the ages of 30 and 50.
• 3:33
  SPEAKER_03: In a roughly 20-year period, people are getting married, having kids, starting businesses, buying homes, buying investment properties, unfortunately, getting divorced, helping parents, funding colleges, changing careers.
• 3:46
  SPEAKER_03: And this is where life gets most expensive.
• 3:48
  SPEAKER_03: I mean, retirement is a one goal in the financial planning process as we've seen, but life has 50 goals before retirement.
• 3:56
  SPEAKER_03: And why aren't we not planning for those?
• 3:58
  SPEAKER_03: You need flexibility when life is happening.
• 4:00
  SPEAKER_03: So what are we doing to change that?
• 4:02
  SPEAKER_02: Absolutely.
• 4:02
  SPEAKER_02: I can attest to that myself and agree with you 100%.
• 4:06
  SPEAKER_02: Um, earlier you mentioned that you work with Hispanic families.
• 4:09
  SPEAKER_02: Do you also see some patterns there as well?
• 4:12
  SPEAKER_03: Yes, absolutely.
• 4:13
  SPEAKER_03: Me being a Hispanic myself and you know, our upbringings, we grew up hearing buy real estate, buy gold, save cash under the mattress.
• 4:20
  SPEAKER_03: Or now, you know, the new innovative aspect is save it in CDs, stay away from Wall Street, you're gonna lose everything.
• 4:27
  SPEAKER_03: And I think that's how wealth was preserved in Latin America and kind of still is.
• 4:31
  SPEAKER_03: And honestly, it's worked for many families, but the problem is that today's economy is totally different.
• 4:37
  SPEAKER_03: There's a lot more tools, investment, uh vehicles that we can we can resort to.
• 4:41
  SPEAKER_03: People are becoming more financially educated and more financially curious to build their own wealth.
• 4:46
  SPEAKER_03: And we've talked about this and bounced ideas off while we're in the office.
• 4:50
  SPEAKER_03: Is a lot of families are house rich, equity rich, so fixated on net worth, right?
• 4:56
  SPEAKER_03: But net worth, go ahead.
• 4:58
  SPEAKER_02: I was gonna say, give us an example of someone being equity rich.
• 5:02
  SPEAKER_02: What does that look like?
• 5:03
  SPEAKER_03: Okay, yeah, yeah, like take your average family, not not going too extreme here, but you know, primary residence, give it two million bucks, you know, rental property, 500, and then you have your 401k, which is like, I don't know, give it another million bucks.
• 5:17
  SPEAKER_03: Um, you probably have a mi a net worth of like three to four million, but the cash available you have for tomorrow is I don't know, 20k.
• 5:25
  SPEAKER_03: Well, that becomes a problem because the net worth pays for your obituary.
• 5:30
  SPEAKER_03: Yes, it does, but liquidity pays for your opportunities today.
• 5:33
  SPEAKER_03: Where's the flexibility in life now?
• 5:35
  SPEAKER_02: Well, it doesn't seem so bad to be uh to be house rich or equity rich.
• 5:40
  SPEAKER_02: Uh am I hearing that you're anti-real estate?
• 5:44
  SPEAKER_03: Oh no, no, no, no, not at all.
• 5:46
  SPEAKER_03: I do like real estate.
• 5:47
  SPEAKER_03: I mean, we that's the first investment vehicle we all hear um that we should invest in, right?
• 5:52
  SPEAKER_03: Um, and many of my clients have made fortunes in real estate.
• 5:56
  SPEAKER_03: And I don't think that's the real issue here.
• 5:58
  SPEAKER_03: I think the issue is concentration.
• 6:00
  SPEAKER_03: The c and by concentration I mean you get a client that this is a call I get all the time is hey, I found another property I want to buy for my portfolio.
• 6:08
  SPEAKER_03: And I'm like, how much cash reserves do you have to buy it?
• 6:11
  SPEAKER_03: Oh, I need your help.
• 6:12
  SPEAKER_03: What can I do?
• 6:13
  SPEAKER_03: And it's me, you know, fixing the puzzle here.
• 6:15
  SPEAKER_03: Like, oh wait, I need your help too.
• 6:17
  SPEAKER_03: Like, why are you keep on like investing in stuff that are illiquid?
• 6:22
  SPEAKER_03: I you know, let's let's do something different.
• 6:24
  SPEAKER_03: Like, what happens if you don't have any cash reserves to pay for the property?
• 6:28
  SPEAKER_03: I mean, we've encountered one of the biggest risks as liquidity, right?
• 6:32
  SPEAKER_03: So, what can we do to fix it?
• 6:34
  SPEAKER_03: And that's the main idea here.
• 6:36
  SPEAKER_03: So it requires a lot of financial education to kind of like switch the mindset.
• 6:41
  SPEAKER_02: Yeah, and you know, as financial advisors, we always stress the importance of having a cash reserve.
• 6:46
  SPEAKER_02: But a cash reserve might be something where you have at least six months or six to twelve months available cash in the occasion event happen.
• 6:55
  SPEAKER_02: But what we're also really talking about here is is having something beyond that cash reserve to create that flexibility.
• 7:03
  SPEAKER_02: So you've said before that separate investment accounts or you know, brokerage accounts don't get enough attention.
• 7:11
  SPEAKER_02: Explain why.
• 7:12
  SPEAKER_03: Yeah, I mean, I see an advisor account isn't just an investment account, it's more of an opportunity account.
• 7:18
  SPEAKER_03: I mean, and most people see it as just buying stocks and bonds and you know, buying an ETF and call it a day, but I see it as an opportunity to do a lot more than just buying stocks and bonds.
• 7:29
  SPEAKER_03: You know, you can you can leverage your investment accounts and continue growing your wealth from there.
• 7:34
  SPEAKER_03: Um, and it's a lot of the communications I've had with clients that you know that will have been able to continue growing their wealth because of this, right?
• 7:40
  SPEAKER_03: And most people think debt is bad, but sophisticated investors understand the difference between bad debt and how I see it is strategic debt, right?
• 7:48
  SPEAKER_03: And there's a lot of benefits, right?
• 7:50
  SPEAKER_03: Just because you don't see the tax deduction there, it doesn't become lucrative for the average investor.
• 7:56
  SPEAKER_03: But these are flexible tools available for everyone.
• 7:59
  SPEAKER_03: It's just that we don't have the education to you know open an account and just grow my wealth from there.
• 8:05
  SPEAKER_02: Okay, you hit on a couple of interesting points, one of them being debt, which we're gonna come back to in just a moment.
• 8:11
  SPEAKER_02: But let's suppose someone creates that separate investment account.
• 8:15
  SPEAKER_02: You know, how should they think about funding an account like that?
• 8:19
  SPEAKER_02: You know, what are some options?
• 8:21
  SPEAKER_02: Maybe they, you know, kind of give us some guidance.
• 8:23
  SPEAKER_02: Uh give us some some information around that.
• 8:26
  SPEAKER_03: Well, yeah, you can you I mean, any real estate proceeds or proceeds from sales of investments, inheritance, you can also fund the account.
• 8:34
  SPEAKER_03: Even just playing out periodic um contributions to the account would suffice for you to grow that liquidity stash.
• 8:41
  SPEAKER_03: And I know you mentioned cash reserves, but cash reserves would be for more of an emergency on your day-to-day you know living.
• 8:48
  SPEAKER_03: Um, how I see this is you're building wealth, right?
• 8:52
  SPEAKER_03: You're creating this investment account to go in tandem with all the other assets you're you're thinking of owning or you're thinking of growing.
• 9:00
  SPEAKER_02: It really gives you options.
• 9:01
  SPEAKER_02: Um and even if you didn't use the money, just kept continuing to build it, it adds another layer of tax efficiency in retirement because a lot of people will have you know a pre-tax retirement account, they might have a Roth retirement account, and having a separate taxable retirement account, you know, adds more to their options for withdrawals and retirement.
• 9:26
  SPEAKER_02: But, you know, one of the main advantages we're talking about today is having that flexibility before retirement.
• 9:31
  SPEAKER_02: You know, what are some of the other opportunities that someone might run into?
• 9:35
  SPEAKER_02: Maybe they want to buy a uh uh a piece of uh real estate or or an investment property or maybe a second home uh vacation property.
• 9:44
  SPEAKER_02: It's kind of hard to do that without that substantial side funds, right?
• 9:49
  SPEAKER_03: Right, right.
• 9:50
  SPEAKER_03: And I think I know this is controversial, but I love this.
• 9:54
  SPEAKER_03: You can borrow against your investments, um, you can pledge your brokerage account, use securities line um line of credit, and keep your portfolio invested.
• 10:03
  SPEAKER_03: So this assumes your portfolio keeps growing while you pay interest on the loan.
• 10:07
  SPEAKER_03: But I should also note that as we know, markets can decline, and there's no guarantee your investment return will exceed your borrowing cost.
• 10:16
  SPEAKER_03: It isn't a guaranteed win, and it isn't appropriate for every investor, of course.
• 10:21
  SPEAKER_03: However, when it is a strategy that is deemed appropriate, then you maintain the flexibility and potentially preserve tax efficiency in the account.
• 10:28
  SPEAKER_03: And that's what we really want.
• 10:30
  SPEAKER_03: We want to create a system around building wealth, not take every financial decision unanimously.
• 10:36
  SPEAKER_03: So just you know, on a not on a one-off.
• 10:40
  SPEAKER_03: We want to make sure that there's a system working and there's like a waterfall of decisions being taken into account, and that you know, they all flow together.
• 10:49
  SPEAKER_02: Uh Alejandra, give us an example of someone borrowing from their investments.
• 10:54
  SPEAKER_03: Yeah, I mean, one thing I do want to point out here, and it is important I do so, is that this isn't appropriate for everyone.
• 11:00
  SPEAKER_03: Uh, borrowing can increase your risk depending on how much risk you're taking.
• 11:04
  SPEAKER_03: The markets can decline, and that's something that we we know.
• 11:08
  SPEAKER_03: Interest rates do matter at a time of taking into consideration this strategy.
• 11:13
  SPEAKER_03: And please, this you know, there's proper planning that goes into this prior to just saying, yeah, this is my solution.
• 11:20
  SPEAKER_03: So for the right investor, this can be a valuable tool.
• 11:23
  SPEAKER_03: Now, I'll give you a hypothetical example for illustration purposes, of course.
• 11:28
  SPEAKER_03: And it isn't a recommendation for any particular listener's situation.
• 11:33
  SPEAKER_03: So let's say a client needs, for example,$300,000 to purchase a property.
• 11:39
  SPEAKER_03: Option A, you sell your investments in the stock market and you pay capital gains taxes on it, right?
• 11:44
  SPEAKER_03: Two, you shrink your portfolio and you lose your future growth.
• 11:48
  SPEAKER_03: But here I give you option B.
• 11:50
  SPEAKER_03: You pledge your brokerage account, you use securities backed lines of credit, you keep your portfolio invested and it's grown with the market.
• 11:58
  SPEAKER_03: And then you preserve tax efficiency and you maintain the flexibility so you can continue investing in real estate or whatever you want to invest in, and then you keep your invested portfolio liquid in the stock market.
• 12:09
  SPEAKER_02: Yeah, and I'll just add to that too, because this works out really well when someone is selling a home and purchasing a new one.
• 12:20
  SPEAKER_02: So let's say they have a sizable amount in their in their uh investment account, they they borrow from it to pay for the new home, but they don't want to wait until their existing home sells.
• 12:33
  SPEAKER_02: So once their existing home sells, they can pay off the proceeds of the line of credit.
• 12:38
  SPEAKER_02: So a couple of interesting points too that you mentioned about the markets could decline.
• 12:42
  SPEAKER_02: Uh so what happens in that situation if the if you have a line of credit out there and the market does decline?
• 12:49
  SPEAKER_02: We're not going to go, you know, too too detailed into uh borrowing from the account, but let's say the markets did decline and you have a you know you have an outstanding loan against your your investments, what could possibly happen?
• 13:03
  SPEAKER_03: Well, yeah, these lines of credit kind of function the same way as a regular conventional loan does with the loan to value, the LTV.
• 13:11
  SPEAKER_03: So the market declining means that the LTV can be adjusted for the market decline.
• 13:17
  SPEAKER_03: So what we want to do is if you have access to let's say, I don't know, a million dollars worth of the of the line of credit, we don't want to use it up into its entirety because we want to leave a little cushion for error when the market declines.
• 13:30
  SPEAKER_03: So that's kind of where the advice comes in.
• 13:32
  SPEAKER_03: Well, not really advice, but where the proper planning comes into play.
• 13:36
  SPEAKER_02: Yeah.
• 13:37
  SPEAKER_02: So, Alejandro, those are excellent points.
• 13:40
  SPEAKER_02: What happens when people don't have liquidity?
• 13:43
  SPEAKER_03: When people don't have liquidity, it's funny enough to say everything becomes an emergency.
• 13:47
  SPEAKER_03: And that's when we start getting into debt.
• 13:49
  SPEAKER_03: For example, and what I mean by everything becomes an emergency is business opportunities somehow they all appear, your roof breaks, your parents get sick, um, layoffs occur, your child starts needing tuition, and then suddenly people are selling their assets in an emergency, taking penalties because they need the cash, using credit cards, and they're borrowing against their 401ks.
• 14:11
  SPEAKER_03: There's this quote that I really like.
• 14:13
  SPEAKER_03: It's and it says, Is financial stress rare um rarely comes from the lack of assets, it comes from the lack of access.
• 14:20
  SPEAKER_03: And that's kind of where this whole conversation comes into play.
• 14:24
  SPEAKER_03: It's not about you having net worth, it's about you having access and liquidity to take opportunities and to make the choices that you really want, to make sound financial decisions.
• 14:33
  SPEAKER_03: I know that sounds cliche, but that's really what we want in life: flexibility, freedom.
• 14:38
  SPEAKER_03: So, George, I think this conversation boils down to financial planning, is often skewed or geared towards retirement planning.
• 14:46
  SPEAKER_03: And we're trying to change the conversation here, right?
• 14:49
  SPEAKER_03: Because a lot of life happens before you turn 65, which is, you know, a retirement age keeps on growing growing with the year.
• 14:56
  SPEAKER_03: So we want to plan for now, in addition to planning for later.
• 15:00
  SPEAKER_03: But if we don't acquire and accumulate wealth now, how are we gonna have accessible wealth later on?
• 15:06
  SPEAKER_02: Agree, agree.
• 15:07
  SPEAKER_02: Well, Alejandra, this has been great.
• 15:10
  SPEAKER_02: Final question for you.
• 15:11
  SPEAKER_02: If someone listening remembers only one thing from today, what would it be?
• 15:15
  SPEAKER_03: Um, don't get fixated on what your net worth is.
• 15:18
  SPEAKER_03: Ask yourself how much flexibility do you have?
• 15:22
  SPEAKER_03: Um, yeah, it's about having options when life happens.
• 15:26
  SPEAKER_03: So the goal here is, and I'm gonna say one last mic drop for our audience is the goal isn't to die with the biggest portfolio.
• 15:36
  SPEAKER_03: The goal is to build life where where money gives you the choices today.
• 15:41
  SPEAKER_02: Oh, that's a great way to conclude today's podcast.
• 15:45
  SPEAKER_02: So uh for our listeners, if you're curious about how this fits into your financial plan, Alejandra, how can someone reach out to you?
• 15:53
  SPEAKER_03: Yeah, George, you can send me an email at um A is an apple B-O-R-G-E at measuredwealth.net.
• 16:00
  SPEAKER_03: Or if you resort to social media, you can also follow me on Miss Millones, M-I-S-S.milles, M-I-L-L-O-N-E-S, um, where I share some financial tips and tricks about financial planning and building your own wealth.
• 16:16
  SPEAKER_02: Awesome.
• 16:17
  SPEAKER_02: Alejandra from the Sunshine State, thank you again for joining me today.
• 16:22
  SPEAKER_02: And thanks everyone for tuning into Financial Futures, a Measured Wealth podcast.
• 16:26
  SPEAKER_02: If you enjoyed today's episode, be sure to follow or subscribe on your favorite podcast app so you never miss an update.
• 16:33
  SPEAKER_02: Want to learn learn more or get in touch?
• 16:35
  SPEAKER_02: Head over to measuredwealth.net where you'll find prior episodes, helpful financial planning guides, and more.
• 16:42
  SPEAKER_02: You can also call us at 603-431-1444, or email at info at measuredwealth.net.
• 16:51
  SPEAKER_02: That's info at measuredwealth.net.
• 16:53
  SPEAKER_02: Thanks again for listening, and remember the future will someday be the present.