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welcome to the best interest podcast
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where we believe Benjamin Franklin's
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advice that an investment in knowledge
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pays the best interest both in finances
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and in your life every episode teaches
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you personal finance and investing in
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simple terms now here's your host Jesse
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Kramer hello and welcome to episode 64
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of the best interest podcast my name is
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Jesse Kramer later on in today's episode
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Cody Garrett will be joining me Cody
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Garrett is an advice only financial
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planner passionate about helping
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families refine their path to financial
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Independence especially as DIY investors
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but before Cody joins us I'm going to
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talk about what I think is the most
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frustrating phrase in personal finance
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and before that I actually want to give
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a shout out to our review of the week on
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Apple podcasts Savannah banana 6842
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wrote in and said I originally found you
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several years ago on a financial
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subreddit giving advice to people in the
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comments and from there I subscribed to
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your newsletter finally all this time
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later I've subscribed to your podcast
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and I can't believe it's taken me so
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long to do so you've continued to put
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out such accurate helpful info and give
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off such a genuine caring demeanor the
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effort you put into your work truly
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shows and I can't express how much I
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appreciate it thank you Jesse thank you
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Savannah banana for those exceedingly
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kind words if you're hearing this send
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me an email Jesse best interest. blog
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and we'll get you hooked up with some
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sort of nice best interest gift thank
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you Savannah banana now after that okay
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let's go on let's chat about what I
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think is the most frustrating phrase in
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personal
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[Music]
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finance perhaps no personal finance
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phrase is more frequently uttered and
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draws more eye rolls than the phrase it
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depends
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ideal personal finance is dependent on
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the individual it's being applied to as
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Carl Richards says personal finance is
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more personal than Finance 99% of
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general advice including the the advice
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that I talk about here on the best
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interest podcast or what I write about
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on the best interest blog 99% of general
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advice it should be couched with the
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phrase it depends for example should you
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budget and track every single dollar you
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spend it depends do you need that level
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of detail to rein in your spending
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should you put 10% of your income into
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your 401k this depends on tons of
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factors we need to know many more
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details about your big four your assets
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your debts your income and your spending
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not to mention your unique goals your
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desired outcomes it depends I understand
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it's a frustrating answer but should we
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avoid using that answer no way we we
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have to use the answer it depends it
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would be irresponsible not to Good
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Financial advice depends on who you're
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talking
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about now one big question I'm answering
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every day is the question do I need
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professional financial help it depends
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anyone who answers that question
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differently or answers it in black and
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white terms they're either ignorant
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deceptive or both and then if you do
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need professional financial help what
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kind there are dozens of different
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Services different products different
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business models different definitions of
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professional financial help or financial
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services so I'll start with a personal
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anecdote now I'm a pretty big nerd for
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investing for financial planning for
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personal finance so I was never an ideal
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candidate for needing to hire a
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professional I enjoyed the hour spent to
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kind of become this DIY expert you know
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here a case in point I enjoyed writing
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the 200 plus articles on the blog
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recording these 60 plus podcasts pretty
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much just for the fun of it and because
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I was learning that on my own I never
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really needed to reach out to a
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professional for their help but not all
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people fall in that boat and and the
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thing is not even all diyers fall in the
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same boat many diyers seek out
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professional help as a safety net saying
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to themselves either one I want a
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professional to double check my math or
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two I need a trusted adviser as a backup
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for my family in case I get hit by a bus
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I hear that second one a lot at work
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they'll say Jesse no offense to you I'm
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I'm comfortable with investing I'm
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pretty comfortable with my financial
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plan but I'm getting to this point in
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life where I'm really busy my spouse
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doesn't really understand the stuff like
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I do my kids certainly don't understand
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the stuff like I do and I trust you
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Jesse I trust the firm that you're
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working for so I am going to hire you
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guys because I need a backup in case
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something happens to me so does a young
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couple say just starting out do they
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need professional help it depends
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sometimes the answer is yes frequently
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the answer is no instead they just need
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some basic recommendations like measure
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your money start using a budget or start
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saving and investing as soon as you can
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because your early years matter a lot
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pay yourself first set aside some money
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every single month for saving and
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investing and when you do so keep your
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costs low that's a big reason why index
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funds are so popular low costs and they
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give you the market average return which
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is actually a pretty great return and if
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you hold them for the long run they are
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your friend now some people don't need
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professional help some people
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desperately need professional help I
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have an example from from my
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professional career where a a staunch
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and stubborn diyer was making six figure
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mistakes that's $100,000 plus mistakes
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because they'd been told in their life
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oh you don't need professional help they
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could have spent $10,000 to save
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$100,000 and they would have saved a lot
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of their time as well but someone in
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their life who was kind of this forever
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DIY cultist LED them astray they stepped
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over dollars to pinch pennies all right
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guys it depends some people need
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professional help some people don't and
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of course if you do seek professional
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help you need to make sure you're asking
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those professionals the right questions
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I'm going to throw a link in the show
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notes it's from the blog and it's the 12
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essential questions that I would suggest
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you ask any Financial professional
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before you start to work with them you
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need to do your uh homework and and do
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your due diligence and make sure you're
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working with someone who can truly help
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you out and has your best interests in
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mind now quick little sidebar here why
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is it depends such a frustrating phrase
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right why do we seek certainty in the
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first place especially in personal
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finance why do we want black and white
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answers now in a 2015 article in the
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Harvard Business Review Two Gentlemen
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Zachary tormala and Derek Rucker they
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wrote an article about certainty and how
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it shapes our behavior and I thought it
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was really really good so here's a a
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minute long quote from that article
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certainty profoundly shapes our Behavior
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the more certain we are in a belief
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regardless of its objective correctness
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the more durable it will be and the
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greater influence it will have on what
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we do across dozens of studies spanning
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more than two decades consumer and
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social psychologists have shown that
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people who are certain of their beliefs
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are more likely to buy buy sooner and
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spend more they're more likely to sign
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petitions and to vote they're more
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willing to express their opinions
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endorse products advocate for causes and
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try to persuade others to adopt their
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views they're better able to withstand
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attacks on their own beliefs and more
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inclined to challenge opponents in short
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certainty is the Catalyst that turns
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attitudes into action bringing beliefs
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to life and imbuing them with meaning
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and
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consequence all right guys people speak
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in and then seek out black and white
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certainty because it gives them the
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confidence to act it drives Behavior you
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and I we we know it in our heart we've
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been in these situations before where we
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look at an expert and we say just tell
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me what to do give me some certainty
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show me that you're sure and then I'm
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going to be able to act once you give me
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that certainty so the question that I'm
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thinking bringing it back to personal
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finance is how can we deliver Financial
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certainty
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in a world of it depends and quick hint
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if you're thinking that the answer is
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annuities that is certainly not the
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answer the answer is financial planning
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a good financial plan delivers a little
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bit of certainty especially certainty in
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the short term but more importantly it
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delivers the confidence that long-term
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uncertainty is okay building a 20-year
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financial plan it might involve hundreds
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of different decision points Roth or
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traditional expensive or cheap get alone
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or don't get alone most of those
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decision points have some sort of it
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depends Clause attached to them the
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financial planning decision tree
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therefore it spirals out of control
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pretty quickly I mean just imagine if
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you have 100 binary decisions 100 yes or
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no left or right decisions that leads to
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two raised to the 100th power unique
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different paths through the decision
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tree and if you do the math which I I
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mean there's no real reason to do it you
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know it's going to be a big number it
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turns out that it's about 1.3 nonillion
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different paths that's way bigger than
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trillions or quadrillions that's non
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Millions so for most of us facing down
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something like 1.3 nonillion different
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options it is purely a shackle it's
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analysis paralysis how could we ever
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possibly find any sort of certainty when
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we're faced with that many different
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options but I don't see it that way and
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and yes the complexity of personal
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finance and financial planning is a
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challenge but thankfully through you
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know my my years of of self-study and
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now professional study I see it maybe
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more in the way that Lewis and Clark and
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sacka JIA viewed their Adventure into
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the unknown of Western North America and
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hopefully through this little story I
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I'm going to encourage you guys to do
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the same so I would just want you to
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think about what Lewis and Clark and
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sacka jaia were thinking as they began
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their Adventure outside of St Louis
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and if you're unfamiliar with the
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historical story The the long story
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short is they were tasked with exploring
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the Western us which as far as Europeans
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were concerned was completely unmapped
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now Native Americans of course had been
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living there and played a vital role in
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this adventure but it was you know hey
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Lewis and Clark go put together a party
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of people and find the Pacific Ocean and
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tell us how you got there and map it all
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out so when they started I would argue
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that 9 99% of the fine details that lay
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before them were a total mystery but the
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broad Strokes were vaguely understood
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they had a direction and they had a goal
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and that's pretty important they were
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also well equipped they had supplies
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they had expertise and they had
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experience they were prepared to face
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new challenges on the Fly they knew even
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as they took their first step that their
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plan was surely to change they knew that
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their plan wasn't perfect how could it
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be perfect they were tackling the
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unknown but nevertheless they began with
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a plan in mind it was the best plan they
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could muster based on the known facts at
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the start and once that plan was in
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place they took their first step they
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didn't permit uncertainty to paralyze
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them and that fact alone is hugely
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underrated now financial planning is no
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different it's maybe just a little bit
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less rugged you cannot have a financial
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plan that perfectly accounts for 1.3
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nonillion unique outcomes but you can
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understand the broad Strokes of your
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financial future while knowing that the
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fine details will change over time you
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can start out with a direction and you
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can start out with financial goals you
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can equip yourself with financial
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expertise and experience these are your
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tools to overcome new challenges on the
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Fly My Hope here at the best interest is
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that I'm equipping you guys with some of
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this expertise and experience you can
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make the best plan that you possibly can
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which includes some judgment calls based
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on today's fact
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but you can also know full well that
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your plan will change over time because
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you know today's plan won't be perfect
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you're tackling an unknown future how
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can today's plan be perfect and then
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once you've created today's best plan
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you can take your first step and start
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to enact the plan eventually changing it
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over time as more facts and more
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information come to light you don't need
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certainty for billions trillions non
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millions of scenario it depends is okay
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but you do need a starting point that
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works for you today and then you do need
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the expertise the experience and the
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flexibility to adjust to uncertainty
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because uncertainty is certain to arise
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in the future it depends will always be
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a frustrating answer but it shouldn't
00:13:19
paralyze you it shouldn't paralyze this
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financial Adventure that awaits before
00:13:24
you here's a quick ad and then we'll get
00:13:27
back to the show did you know my written
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Blog the best interest was nominated for
00:13:32
2022 personal finance blog of the year
00:13:34
and it's been highlighted in the Wall
00:13:36
Street Journal yahu finance and on CNBC
00:13:39
I love writing especially when that
00:13:41
writing is to share financial education
00:13:43
and I usually write one or two articles
00:13:45
per week you can read them all at
00:13:48
bestter interest. blog again the web
00:13:50
address is bestter interest. blog check
00:13:54
it
00:13:55
out so with that let's bring on Cody
00:13:58
Garrett again Cody is an advice only
00:14:00
financial planner passionate about
00:14:02
helping families refine their path to
00:14:04
financial Independence he's the founder
00:14:06
of measure twice Financial through which
00:14:08
Cody works with clients but he's also
00:14:10
the voice behind measure twice money
00:14:12
measure twice money is Cody's social
00:14:14
media accounts it's some video-based
00:14:16
Financial education and most recently
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Cody launched a podcast of his own that
00:14:21
helps both DIY investors and helps a lot
00:14:24
of other financial planners uh with
00:14:26
their continuing education
00:14:32
Cody thank you for joining us on the
00:14:34
best interest podcast let's start with a
00:14:37
fun question your website it shows a a
00:14:40
clean cut buttoned up Cody but maybe you
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could talk us through the progression of
00:14:44
Cody Garrett haircuts over the past
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decade oh haircuts so growing up I was
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like a dumb and dumber style like the
00:14:51
bull haircut like you could literally
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put a bowl and it was like super blonde
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like it was like I just laid out in the
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sun all day yeah growing up as a little
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kid I was like the perfect bow haircut
00:15:01
very blonde I remember actually going
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with my uncle to a barber one time and
00:15:05
the barber specialized in military
00:15:07
haircuts it was like the fastest haircut
00:15:09
of all time I think the entire haircut
00:15:11
was like 15 seconds long I we'll just
00:15:13
get like a number five everywhere type
00:15:14
of thing yeah so I had like kind of the
00:15:17
cool buzz cut then Middle School I don't
00:15:19
know if you remember this but back in
00:15:20
the day like jelling just the front the
00:15:22
two inches in the front of the hair up
00:15:24
so not all the spiked but just like the
00:15:26
kind like the cck in the front yeah huge
00:15:29
style I had that like the front of the
00:15:30
hair jelled and then I lived in Houston
00:15:33
Texas and I I specifically remember that
00:15:35
there's a shuttle crash that the shuttle
00:15:37
crash
00:15:38
and yeah and my soccer coach was
00:15:41
actually one of the one of the
00:15:42
astronauts on that flight so that's a
00:15:44
very a deep transition there but I want
00:15:46
to say that but I remember specifically
00:15:48
that after that happened I went from
00:15:50
like the gel in the front to Spiked All
00:15:52
the whole hair spiked gel wise and then
00:15:54
I got to a point of understanding money
00:15:56
and I realized that gel is expensive no
00:15:58
I'm just kidding but I I effectively I
00:16:00
didn't like the I hate it when it like
00:16:02
Houston where I live Texas is very humid
00:16:05
so muggy like the gel would always be
00:16:07
like getting on your hands and gross I
00:16:09
was like um like really from the end of
00:16:12
high school all the way to now it's two
00:16:14
on the sides I go like maybe like once
00:16:16
every six weeks I do like the $10 cut
00:16:19
and then I get like setting up my hair
00:16:21
for the day is taking a shower just
00:16:22
swiping it to one side and I'm done but
00:16:24
I think one thing you're alluding to
00:16:26
about this is I was a music director for
00:16:28
a Broadway show a few years ago it was a
00:16:31
night with Janice Joplin and I was the
00:16:32
music director and Janice Joplin was
00:16:35
this like hardcore like rock singer back
00:16:37
in like your 6070s and the band was
00:16:40
actually on stage for the whole musical
00:16:41
for the whole show they didn't allow me
00:16:43
to shave for like two months before we
00:16:45
actually started the show and they also
00:16:48
had me wear a wig for 32 shows in one
00:16:50
month so I wore like a it look like a
00:16:53
lot of people picture yeah a lot of
00:16:55
people who see the picture assume that
00:16:57
it was either real or was doing Jesus
00:16:59
Christ Superstar none of those was true
00:17:01
yeah I I sing backup not main lead so I
00:17:03
was Janice Joplin's keyboardist on stage
00:17:06
I did 31 shows in one month plus working
00:17:08
full-time 40 hours a week so that was a
00:17:11
brutal month but I got it done and I got
00:17:12
paid so it was good so you walked us
00:17:15
through the progression of Cody Garrett
00:17:18
haircuts over time now I'm wondering
00:17:19
maybe you can walk us through the
00:17:21
progression of Cody Garrett from a
00:17:23
financial view over time because as we
00:17:26
sit here today I'm not the only one who
00:17:29
views you as a an absolute Financial
00:17:31
expert in many ways you're an expert to
00:17:33
The Experts because you're doing a lot
00:17:35
of teaching of other financial planners
00:17:38
but I also know that it wasn't too long
00:17:40
ago Cody that you weren't really
00:17:42
familiar with finances at all so walk us
00:17:44
through that timeline yeah so summarize
00:17:47
it in one sentence it was five years ago
00:17:49
I didn't know what an IRA was and now I
00:17:51
teach over a thousand financial advisers
00:17:53
so you're like how did that happen so I
00:17:56
was actually a professional musician for
00:17:57
10 years mentioning the musical stuff I
00:17:59
was a music director I worked full-time
00:18:01
at a church as a worship director I
00:18:03
played on the records I recorded in the
00:18:05
studio I arranged music I was an
00:18:07
orchestrator I have two degrees in music
00:18:09
One in music theory classical side and
00:18:10
one in contemporary piano performance so
00:18:13
I went for music to money effectively
00:18:15
back in 2018 by working hard in terms of
00:18:18
money sorry in terms of music I was
00:18:20
working 8 to five 5 to8 8 to 12 pretty
00:18:23
much every day doing gigs wedding gigs
00:18:24
Broadway gigs on top of working
00:18:26
full-time and I was married in 2015
00:18:28
I said hey like this is not sustainable
00:18:30
long term in terms of relationships you
00:18:32
know I didn't have any issues in my
00:18:33
relationship and my marriage but I knew
00:18:35
that effectively my new metric of
00:18:37
success had nothing to do with the
00:18:38
amount of albums I played on or the
00:18:40
amount of gigs I played or how much
00:18:41
money I made it was hey can I create a
00:18:44
life where I'm work eating dinner with
00:18:45
my wife every night for dinner so I I
00:18:48
said okay what would it look like in
00:18:49
terms of my career to eat dinner with my
00:18:51
wife every night and that meant changing
00:18:53
my at least my full-time job so I
00:18:55
actually at that point I was a music for
00:18:58
10 years and when your only source of
00:19:00
income is variable you have fixed
00:19:02
expenses and variable income if you
00:19:05
don't learn how to become an adult
00:19:07
financially you don't last 10 years as a
00:19:09
musician so as a musician I I just try
00:19:11
to learn as much personal finance stuff
00:19:13
as I could from various like podcasts
00:19:15
you go to library get books um so really
00:19:17
like a DIY investor from the beginning
00:19:20
right even before Investments actually
00:19:21
started just I was probably I was making
00:19:23
more than I spent rather than spending
00:19:25
less than I make which sounds like the
00:19:27
same phrase but it's from a different
00:19:28
perspective I was focused on earning
00:19:30
income rather than reducing expenses but
00:19:33
uh at the same time I had a I lived in
00:19:35
an apartment a garage apartment my my
00:19:37
rent was 500 bucks a month including
00:19:38
utilities I stayed there as long as I
00:19:40
could so I always made more than I I
00:19:42
always made more than I I spent with
00:19:45
that said I learned a lot about personal
00:19:47
finance and by the time I thought about
00:19:48
transitioning out of professional music
00:19:50
full-time I said okay what else am I
00:19:52
good at what else do I know and I knew
00:19:54
personal finance like I feel like I
00:19:55
could at least tell people how I did it
00:19:57
I didn't know all the stuff out there
00:19:59
but I can at least tell other people how
00:20:01
how I've gotten to this place of paying
00:20:02
off student loans and things like that
00:20:04
as a musician full-time musician and
00:20:06
there's a lot of mindset around starving
00:20:08
musicians versus thriving musicians I I
00:20:10
definitely consider myself a thriving
00:20:11
musician but still act like I'm starving
00:20:13
in terms of like I'll take free food
00:20:14
anywhere there's free food but with that
00:20:17
said I I took that knowledge and I said
00:20:19
okay what could I do in personal finance
00:20:21
I actually talked with my mom on the
00:20:22
phone one day and she said what have you
00:20:24
been up to and I said I've become almost
00:20:25
obsessed with personal finance I'm the
00:20:27
type of person and when I learn about a
00:20:29
new subject I'm passionate about I read
00:20:31
every book I listen to every podcast
00:20:32
like I go 100% into it I've done that
00:20:34
with chess jiujitsu all sorts of
00:20:37
learning now I'm really into
00:20:38
motivational interviewing and like
00:20:40
counseling and psychology like I'm just
00:20:41
going deep but she said hey well if
00:20:43
you're really into money stuff you
00:20:45
should talk to our friend Joe family
00:20:46
friend Joe I think he knows a little bit
00:20:48
about this stuff I reach out to Joe Joe
00:20:50
is a a certified financial planner a cfp
00:20:52
professional and he said hey if you want
00:20:54
to really drink out of the fire hose and
00:20:56
learn a lot about Finance for regardless
00:20:58
of if you change careers or not if you
00:21:00
just want to become more knowledgeable
00:21:02
about financial stuff enroll in a cfp
00:21:04
education program which as you know is
00:21:06
drinking out of the fire hose like
00:21:07
totally that's going all in yeah so
00:21:10
about two months into doing that as a
00:21:12
professional musician I enrolled in the
00:21:13
Rice University cfp course within two
00:21:16
classes I like this is what I want to do
00:21:18
I want to help people the way I Define
00:21:20
financial planning is building a bridge
00:21:22
between a family's comprehensive
00:21:24
Financial ecosystem like all the
00:21:25
quantitative stuff building a bridge
00:21:28
between that and their unique values and
00:21:30
desired outcomes as a family so once I
00:21:32
understood that that there's a
00:21:34
possibility to help people align their
00:21:36
quantitative like the dollar signs with
00:21:38
what actually mattered to them as a
00:21:39
family I was like that sounds awesome I
00:21:41
want to do that all day long so I
00:21:42
listened to two hours of podcast at two
00:21:45
times speed every day for over a year I
00:21:47
got my first job at an independent fee
00:21:50
only financial planning firm and then
00:21:52
two years later I launched my own firm
00:21:54
specifically serving people like me the
00:21:55
DIY investors on the path to early reti
00:21:58
reement and then now I mean again that
00:22:00
was I launched my own firm in 2020 2021
00:22:05
so again we're only two years later and
00:22:07
here I am kind of still doing the same
00:22:08
thing not actually accepting financial
00:22:10
planning clients at this point and now I
00:22:12
have two other businesses focused on
00:22:14
educating really focus on the future
00:22:16
impact of financial planning and
00:22:18
education right which is at least from
00:22:21
my point of view Cody having followed
00:22:22
you on social media having met you
00:22:25
basically two years ago right now and
00:22:27
first that's when I was first aware of
00:22:28
you I think that probably is the biggest
00:22:31
impact you're making like it's amazing
00:22:33
the fact that you started your own
00:22:34
business that your book of clients is
00:22:36
full up but now I think your influence
00:22:39
is really spreading because of all the
00:22:41
education you're bringing to other
00:22:42
planners to to other advisers and really
00:22:44
in our community but Cody I'm just
00:22:47
curious was there a specific Turning
00:22:48
Point somewhere in those hours of
00:22:51
podcasts or maybe as you you sat there
00:22:52
at Rice University and looked around
00:22:54
where you said to yourself like hey I'm
00:22:57
just as knowledgeable and certainly as
00:22:59
as dedicated as anyone out there and I
00:23:02
want to share this because it would have
00:23:04
been very easy for you to say well lots
00:23:05
of people are cfps and and I'm pretty
00:23:07
new to this maybe I shouldn't put myself
00:23:09
out there and teach but you really dove
00:23:11
in head first and made a name for
00:23:13
yourself as as an educator the biggest
00:23:15
concept I learned and I tell everybody
00:23:17
this is there are two concepts or two
00:23:19
ways I say this which is the best way to
00:23:22
learn is to teach and when you teach you
00:23:24
learn twice when going through that cfp
00:23:26
education program
00:23:28
I realized like the best way that I
00:23:30
actually remembered what I was learning
00:23:31
is by teaching it to somebody else
00:23:33
whether or not they care to learn it so
00:23:35
I'd get home my wife Marissa would be
00:23:37
like hey how was your class I was like
00:23:38
it was great we learned about Roth
00:23:39
conversions this is what a Roth
00:23:41
conversion is and this is how it works
00:23:42
blah blah so again she had the grace and
00:23:44
compassion to just sit there and let me
00:23:45
tell her and what I realized though does
00:23:47
she now have a cfp too though because of
00:23:49
you no she doesn't no she doesn't yeah
00:23:51
like through me through me yeah I'll
00:23:53
just like she can borrow my cfp card
00:23:54
anytime so same thing with class so my
00:23:56
classmates when I realized is the first
00:23:59
day the first like month of the cfp
00:24:01
class I had this imposter syndrome about
00:24:03
like most of the other people in the
00:24:04
class have been working in the industry
00:24:05
for years already but it was cool to me
00:24:08
that they were asking questions I knew
00:24:10
the answer to right so they were so the
00:24:13
people who had a background in Insurance
00:24:14
were asking questions about the
00:24:16
difference between a Roth IRA and a Roth
00:24:17
401k and I was like oh I like I actually
00:24:19
I know the difference between those
00:24:20
things cool so over time I realized that
00:24:23
everybody in there was had strengths in
00:24:25
some areas and weaknesses in others and
00:24:28
what I would do is in class I I just got
00:24:30
to the point of like I I wasn't scared
00:24:32
to ask questions that's a big part of it
00:24:34
I think anybody on the path becoming not
00:24:36
just financially literal financially
00:24:38
literate but also just like going beyond
00:24:40
the basics as I call it right it comes
00:24:42
to a place of getting to a place of
00:24:43
saying I know what I don't know or I
00:24:46
don't know what I don't know or I know
00:24:48
just enough to know what I don't know
00:24:49
now I always say anytime you feel like
00:24:51
you know it all walk into a library you
00:24:53
look around you're like wow there's so
00:24:55
much I don't know so I started asking
00:24:57
question questions to the professors
00:24:59
asking questions to my fellow classmates
00:25:00
and over time was funny they they ended
00:25:02
up all wanting me in their study groups
00:25:04
they're like Cody can you join our study
00:25:05
group because I also think that as a
00:25:08
professional musician I came into the
00:25:10
industry as like a dry sponge whereas
00:25:12
the the others who came into the cfp
00:25:14
program they were wet sponges that had
00:25:16
to like be like all the stuff they had
00:25:17
learned in the past had to be kind of
00:25:18
rung out and like relearn everything
00:25:20
because when you're learning for the cfp
00:25:22
education and exam you have to actually
00:25:24
like unlearn the stuff so I came in as a
00:25:27
dry sponge like being able to soak up
00:25:28
all the stuff I really needed to know to
00:25:30
be successful in this industry from the
00:25:32
beginning on the financial planning side
00:25:34
so a lot of the other people in the
00:25:35
class wanted to learn for me so I got to
00:25:37
the place where even now I have
00:25:40
conversations that over a hundred other
00:25:42
financial planners a year I teach over a
00:25:43
thousand financial planners now and it's
00:25:45
just because I know that the more I
00:25:47
teach others I really tighten the screw
00:25:49
of knowledge in my own mind that's
00:25:51
awesome and and I've talked about here
00:25:53
on the best interest before my parents
00:25:55
were both teachers and I I have a love
00:25:58
for education and I and I think a big
00:26:00
reason of why I do this uh here on the
00:26:03
best interest why change careers from
00:26:05
engineering to a to a fee only advising
00:26:08
model is because of that desire for
00:26:11
education I I think education is great I
00:26:13
love teaching I love getting up in front
00:26:15
of a room of people I've never really
00:26:17
experimented with some of the digital
00:26:19
courses and like digital teaching but
00:26:21
put me up in live in front of a room of
00:26:23
10 or 20 or 100 people there to learn
00:26:27
and just it lights my fire but I'm I'm
00:26:30
curious now Cody so you've been doing
00:26:33
this Fe only financial planning or I
00:26:35
should say advice only financial
00:26:36
planning and maybe we could actually
00:26:38
just pause there for a second before I
00:26:39
get to my next question the average
00:26:42
listener probably doesn't know what
00:26:45
advice only means so can you dive into
00:26:48
that for us yeah think about the the
00:26:51
phrase itself the term itself or the
00:26:53
label advice only you know the word only
00:26:56
sounds limiting for for a minute true
00:26:59
advice is really what it's about so
00:27:01
imagine for a minute Justin do you have
00:27:02
any you have any siblings I have two
00:27:05
older brothers awesome two older
00:27:07
brothers right so let's say that you
00:27:09
came to like an older brother and said
00:27:10
hey like do you have any advice on what
00:27:11
I should do with my investments you'd
00:27:14
expect them to tell you to give you
00:27:16
recommendations you wouldn't expect them
00:27:17
to do it for you you wouldn't expect
00:27:19
them to be like oh well transfer your
00:27:20
money to me and I'll manage it for you
00:27:22
right so think about the same way like
00:27:24
advice only means I provide personalized
00:27:27
Financial education to help families
00:27:30
make their own well-informed decisions
00:27:32
and what that means is I provide advice
00:27:34
for a flat fee but I don't sell any
00:27:37
insurance or investment products and I
00:27:39
don't have the obligation right or even
00:27:42
the option to manage client investment
00:27:44
so I don't manage any investment
00:27:46
accounts all I do is provide
00:27:48
personalized education and advice and
00:27:50
then it's up not just up to them but
00:27:53
even more importantly the these are DIY
00:27:55
investors you call them like
00:27:56
do-it-yourself investors but just
00:27:58
because you're do it yourself doesn't
00:27:59
mean you have to do it alone so for
00:28:01
example I provide Financial advice to
00:28:04
people and then we I actually screen
00:28:06
share with them and show them how to
00:28:07
implement their own trades so they'll
00:28:09
show me their Fidelity account and I'll
00:28:11
show them hey here's how I review cost
00:28:13
basis information you know your
00:28:14
unrealized realized capital gains and
00:28:16
losses but effectively I'm I'm providing
00:28:19
that really personalized education
00:28:21
understanding really everything in their
00:28:22
number everything in their life with a
00:28:23
number on it so now that I understand
00:28:25
everything in their life with a number
00:28:26
on it and understand their qualitative
00:28:28
values desired outcomes now I can teach
00:28:30
them how to be successful in managing
00:28:32
their own money moving forward even
00:28:34
without my help it's similar to teaching
00:28:36
a man to fish or teaching a woman to
00:28:37
fish rather than just handing them the
00:28:39
fish or doing the fishing for them so
00:28:42
that actually brings up kind of my next
00:28:44
question Cody and and maybe the answer
00:28:46
is it depends and we can kind of talk
00:28:48
about the Nuance of the question itself
00:28:50
but are there any topics that really
00:28:54
come to mind that live in this
00:28:56
transition zone that that I'm about to
00:28:58
Define and the transition zone is
00:29:00
between you know over here is all the
00:29:02
financial stuff that everybody can or
00:29:05
should be doing on their own versus on
00:29:08
the other side here are some stuff
00:29:10
that's pretty complex and and it's maybe
00:29:12
punishing if you mess it up or screw it
00:29:14
up and therefore you ought to reach out
00:29:16
and consult some sort of say cfp
00:29:19
professional yeah the big one is nearly
00:29:22
every movement of money involves a tax
00:29:23
consequence or specific exclusion from
00:29:26
that consequence so I would say don't
00:29:28
try to do tax Planning by yourself what
00:29:31
I mean by tax planning a lot of us are
00:29:32
thinking tax preparation when they hear
00:29:34
this they're like well I don't file my
00:29:35
own tax returns or or I might use Turbo
00:29:37
Tax or something like that like y tax
00:29:39
preparation looks backward at the
00:29:41
previous year right right at the
00:29:43
previous year specifically tax planning
00:29:44
looks ahead and it's not just looking
00:29:46
ahead at this next year but it's looking
00:29:47
ahead not just through the end of your
00:29:49
life but the multiple Generations ahead
00:29:51
so I think tax planning is one of those
00:29:53
things where again most financial
00:29:55
advisers actually still do not touch tax
00:29:57
planning
00:29:57
right if you're working with a financial
00:29:59
adviser and they don't look at your tax
00:30:00
returns there's a good chance they're
00:30:01
not doing tax planning right so we have
00:30:03
to understand where we are before
00:30:05
determining where to go and how to get
00:30:06
there so that means yes we do need to
00:30:07
understand what your tax situation has
00:30:09
looked like in the past what those
00:30:10
filings have looked like also looking at
00:30:13
your anticipated sources of income
00:30:15
taxable and non-taxable income for the
00:30:17
year and that's where we really get into
00:30:18
those like Roth conversion strategies we
00:30:20
look at donor advice funds like how can
00:30:22
we do tax optimized charitable giving so
00:30:24
these are things that you can learn on
00:30:25
your own but it's it's really easy to
00:30:27
learn what to do in the current year but
00:30:29
it's very hard to understand with an end
00:30:31
in mind Hey the things I'm doing today
00:30:33
how is that going to impact me and my
00:30:35
future family you what I call the
00:30:36
financial family tree in the future so I
00:30:39
think that what what you can do yourself
00:30:42
is definitely you can learn you can
00:30:43
learn the rules and the concepts but
00:30:45
it's very difficult to learn the
00:30:46
practical application in alignment with
00:30:48
what's important to you not other people
00:30:51
so a good example of this I moderate a
00:30:52
Facebook group with a lot of retirees in
00:30:54
it or even pre-retirees and people ask
00:30:56
questions such as should I contribute to
00:30:59
a traditional 401k or a Roth
00:31:01
401k and every comment is Roth
00:31:04
traditional traditional Roth and pretty
00:31:08
much every place by the way even even a
00:31:09
lot of the great content out there in
00:31:12
terms of quote unquote personal finance
00:31:14
typically you're being educated on what
00:31:17
they would do or what they would do
00:31:18
based on their own circumstance not what
00:31:20
not what you should do based on your
00:31:21
personal circumstance so I actually
00:31:23
trademark the phrase keep Finance
00:31:25
personal which affects
00:31:27
means you know we we all talk about
00:31:29
personal finance but we're typically
00:31:31
focused on the finance not the personal
00:31:33
side so I think if you want to take your
00:31:34
Finance to become really personal
00:31:37
finance I think it's good to walk have
00:31:39
somebody walk alongside you not as the
00:31:41
hero of the story but as the guide kind
00:31:42
of think about you know you're not
00:31:44
hiring somebody to be Luke Skywalker
00:31:45
like you are a Luke Skywalker and you're
00:31:47
GNA hire somebody to be Yoda a really
00:31:49
good visual of this a lot of people who
00:31:50
are new to the financial world you
00:31:53
understand what like a spotter in the
00:31:54
gym right imagine uh Jesse you ever do
00:31:56
the bench in the gym once or twice yeah
00:31:59
once or twice that's exactly how many
00:32:00
times I can do it yeah so think about a
00:32:02
spotter in the gym let's say that I'm
00:32:04
doing the bench press the spotter in the
00:32:05
gym like they aren't lifting the weights
00:32:07
for me but they are educating me on
00:32:10
proper form they might be challenging me
00:32:13
beyond my own limiting beliefs on how
00:32:14
many reps I could do but one thing they
00:32:17
are doing is they are keeping me from
00:32:19
dropping the weights on my face right
00:32:22
they they're a safety valve or safety
00:32:23
net I should say big saf think right so
00:32:26
think about a fin planner the same way
00:32:28
like yes like you can learn how to you
00:32:30
can learn how to create your own Fitness
00:32:31
routine and you can learn proper form by
00:32:33
watching YouTube and stuff but it's a
00:32:35
difference between you going to the gym
00:32:37
walking around and kind of looking at
00:32:38
all these different plates and figure
00:32:40
out like ah I guess I'll start with this
00:32:41
I guess I'll start with this versus
00:32:43
having like a
00:32:44
personalized coach that can say hey I
00:32:47
can actually see deficiencies and parts
00:32:49
of your body you're not even thinking
00:32:50
about right now you're thinking about
00:32:51
your biceps and your chest and I
00:32:53
actually see that you have issues with
00:32:55
uh you know movement in your your ankle
00:32:56
or your gate which is you're walking
00:32:58
right so it's really coming to somebody
00:33:00
and saying hey like do a full body scan
00:33:02
of your finances and say what am I
00:33:04
missing here so it doesn't mean you have
00:33:06
to hire somebody to do it for you or
00:33:08
that you have to commit to some ongoing
00:33:09
forever it's not a permanent decision
00:33:12
but I think it's worth most people just
00:33:13
getting like I I the name of my brand is
00:33:15
measure twice have somebody give you a
00:33:17
second opinion so that you can make sure
00:33:19
that your your personal decisions are
00:33:21
actually in alignment with your values
00:33:23
and what you'd actually desire to happen
00:33:24
in the
00:33:25
future yeah Co now it's funny because
00:33:28
with my clients I I tell my clients they
00:33:31
are Luke Skywalker and I say that you
00:33:34
said that you're their Yoda personally I
00:33:36
say that I'm Chewbacca I guess I'm just
00:33:37
a Chewbacca guy you just make the noises
00:33:40
yeah that was really good can you
00:33:42
actually can you actually say that
00:33:44
longer into the microphone so that we
00:33:45
can use it as our we can use it as our
00:33:47
our transition noise now whenever we
00:33:49
transition to like a little sound bite
00:33:50
on the best interest podcast Cody take
00:33:52
it
00:33:54
away go there's our true Bakka but that
00:33:57
that's that's really interesting I mean
00:33:58
taking a couple steps backwards there
00:34:00
tax planning tax planning is such a huge
00:34:04
uh and underrated topic or I should say
00:34:06
maybe overlooked is the better word than
00:34:08
underrated uh because I think the the
00:34:11
the sexy thing in any sort of financial
00:34:14
planning Financial advising whatever you
00:34:15
want to call it Investments everybody
00:34:18
always goes to like oh well Investments
00:34:20
that's how I'm going to make my money
00:34:22
which okay sure investing is a big part
00:34:25
of it and Investments are how your money
00:34:28
uh will grow over time but tax planning
00:34:31
is so Concrete in in many ways and
00:34:34
investing is is hard there's a big
00:34:36
question mark As to you don't
00:34:37
necessarily know how your investments
00:34:39
will grow uh you know diversification
00:34:41
helps as far as kind of minimizing some
00:34:44
of the risk over time but tax planning
00:34:47
is this concrete way that I think the
00:34:49
average person out there is completely
00:34:52
unaware of ways that they can save
00:34:54
significant money over time or if they
00:34:56
don't don't do proper tax planning will
00:34:58
end up just paying significantly more
00:35:01
taxes than they they really have to and
00:35:03
and we'll we'll see we'll tease this out
00:35:05
a little bit more Cody I mean tax
00:35:07
planning are there any specific things
00:35:09
maybe you can walk us through an example
00:35:11
it could be a real client or is this a
00:35:13
hypothetical client of I mean what
00:35:15
exactly is tax planning what are we
00:35:16
looking at here sure a big part of tax
00:35:19
planning is something that we can all
00:35:21
most of us can relate to is contributing
00:35:24
to a retirement plan and a lot of your
00:35:27
listeners you know 403b 401ks IRAs all
00:35:30
those things there's a big decision to
00:35:31
make right your first job you get you're
00:35:34
like hey I've haven't been unrolled in
00:35:35
this 401K you're like I don't know if I
00:35:37
should sign up for the 401K I don't know
00:35:38
if I could run that far but right this
00:35:41
401K FL yeah you got it Jess yeah you
00:35:43
got that you got the the joke there that
00:35:45
that's like that's like 250 miles man
00:35:47
yeah that's a lot of mes yeah so I'm not
00:35:48
signing up for the 401K it's too that's
00:35:50
a very long way to run but you do get
00:35:52
enrolled in like typically a workplace
00:35:54
retirement plan in one of your first
00:35:55
jobs you a 401k and and you have to fill
00:35:57
out the paperwork and you know now it's
00:35:59
online thankfully but it says do you
00:36:00
want to contribute to traditional or
00:36:02
Roth you're like what the heck and then
00:36:04
you learn a little bit traditional means
00:36:06
you know pre-tax contributions which
00:36:08
means that it's that income is excluded
00:36:11
excluded or deducted from your taxable
00:36:13
income for for the current year and then
00:36:15
Roth is you pay taxes in the current
00:36:17
year but when you can you know you
00:36:19
contribute you hope you know it grows
00:36:20
tax deferred and then you hope that in
00:36:22
the future you can take that money out
00:36:23
taxfree right but a lot of people get
00:36:25
focused they get really excited about
00:36:27
one side of the coin they get really
00:36:29
excited about the exclusion or deduction
00:36:31
from income or they get really excited
00:36:33
about this tax-free distribution and
00:36:35
retirement and there's a lot of content
00:36:38
really focused on one or the other one
00:36:40
is people are really like there's a fear
00:36:41
of taxes that a lot of people have are
00:36:43
more of a hatred of taxes and especially
00:36:45
depending on which side of I think
00:36:47
actually regardless of which side of
00:36:48
like the political fence you are like
00:36:50
most people don't like paying more taxes
00:36:52
than they should than they have to right
00:36:53
right but I say that most people are
00:36:56
making this decision based on the
00:36:58
current year most people are saying hey
00:37:01
I have a fear of future taxes right so
00:37:03
I'm going to do Roth and by the way like
00:37:05
even if they're thinking about the
00:37:06
future the fear is it's their current
00:37:08
fear right their current fear of taxes
00:37:10
and on on the flip side some people say
00:37:12
oh I'm gonna take advantage of this tax
00:37:13
deduction while I while I can I'm gonna
00:37:15
go ahead and do like traditional so I do
00:37:17
think I don't want to scare anybody here
00:37:19
but I think that a majority of people
00:37:21
are making the wrong decision between
00:37:23
traditional and Roth because it's
00:37:25
actually not really the traditional Roth
00:37:28
contribution decision is actually should
00:37:30
not really be based as much on where you
00:37:31
currently are they should be based on
00:37:33
where you're going to be in the future
00:37:35
and what I mean by that is at least
00:37:36
making an estimate ballpark Assumption
00:37:38
of what my future sources of of taxable
00:37:41
income and expenses are going to be
00:37:43
whenever I need this money so every time
00:37:45
somebody contributes to account this is
00:37:47
a good rule of thumb for you anytime you
00:37:49
contribute any money to any account ask
00:37:51
yourself or tell yourself every dollar
00:37:54
needs a job and a Ed by date what's the
00:37:57
purpose of this dollar and when do I
00:37:59
expect to use this money use this Dollar
00:38:02
in the future to support my desired
00:38:04
lifestyle so for an example most people
00:38:07
who are on the path to early retirement
00:38:09
which I I kind of say as you know before
00:38:11
59 and a half or before other
00:38:13
significant retirement income sources
00:38:14
like Social Security um again this is
00:38:17
very broad there's a lot of it depends
00:38:19
to this but a majority of them would be
00:38:21
better off making traditional
00:38:22
contributions right so excluding income
00:38:25
at their highest marginal tax rate while
00:38:26
working and then an early retirement
00:38:28
having a very low income floor like then
00:38:31
implementing those intentional Roth
00:38:33
conversions at like at a lower Marg so
00:38:36
the back just a quick thing here is that
00:38:38
yeah yeah you know excluding income at
00:38:40
the highest marginal rate and then in
00:38:41
retirement having a much lower effective
00:38:43
average tax rate in which you're
00:38:45
converting and distributing those those
00:38:46
dollars so you know that's a very
00:38:48
technical thing but that's one example
00:38:49
of yeah something that most people can
00:38:51
think about is hey should I contribute
00:38:52
pre-tax or Roth getting that one thing
00:38:55
right is kind of like the 80% that could
00:38:57
really put you on the path to maximizing
00:38:58
after tax wealth not just maximizing
00:39:01
wealth in general right so so to to go
00:39:04
into that example a little bit more and
00:39:05
apply some numbers to it you're working
00:39:07
with say a software engineer Silicon
00:39:09
Valley they're making $300,000 this year
00:39:13
but they only spend $100,000 per year
00:39:15
which is why they're on the path to fire
00:39:17
uh they want to retire early say at age
00:39:20
40 and when they are 40 they're going to
00:39:23
need that $100,000 in income from
00:39:25
somewhere to support their lifestyle
00:39:27
it's going to come from their
00:39:27
Investments and so what you're saying
00:39:29
Cody is if you're making 300 Grand this
00:39:31
year you're in a pretty high tax bracket
00:39:34
you want to save on taxes now because
00:39:36
later when you're only spending a 100
00:39:39
Grand from year your income is going to
00:39:40
be significantly lower and you don't
00:39:43
need to save on tax dollars when you're
00:39:44
in that lower income bracket in the
00:39:46
future yeah so if you plan taxes here in
00:39:49
2023 with that future in mind you're
00:39:52
going to make significantly better tax
00:39:55
decisions absolutely a really good
00:39:57
example I actually pulled up here
00:39:58
marginal versus effective tax rates yeah
00:40:01
let's say a really crazy example is
00:40:04
let's say somebody is in the 24%
00:40:06
marginal tax bracket which means um they
00:40:09
would have an adjusted gross income
00:40:11
married fining jointly here of about
00:40:14
$218,000 okay to have a 24% effective
00:40:17
tax bracket in retirement they'd have to
00:40:20
be Distributing
00:40:22
$599,000 from that account each year so
00:40:24
what are the chances of somebody who's
00:40:25
making2 ,000 while working Distributing
00:40:28
600,000 in retirement and with a big
00:40:31
assumption here is again I'm a big fan
00:40:33
of traditional contributions but that's
00:40:35
specifically because I'm working with
00:40:37
people who plan to retire early have
00:40:39
decades worth of you know smoothing out
00:40:41
their tax ride and also not having
00:40:43
signif other significant sources of
00:40:45
retirement income so that's just one
00:40:46
example of how again just measure twice
00:40:48
before making that important decision
00:40:50
but thankfully you can make that
00:40:51
decision annually it doesn't have to be
00:40:53
a permanent decision to go I have to go
00:40:55
traditional my whole life or have to go
00:40:56
go Roth like you can make that decision
00:40:57
on an annual basis but you need to be
00:40:59
thinking decades into the future before
00:41:01
making that decision yeah what what
00:41:02
about Cody when someone says hey Cody
00:41:05
this is great I know what the tax
00:41:06
brackets are this year in 2023 but I
00:41:08
have no idea what the tax brackets are
00:41:10
going to be in the future therefore my
00:41:13
default is simply to diversify between
00:41:16
traditional and rth maybe I'm going
00:41:18
traditional in my 401k and I'm going
00:41:20
Roth in my IRA what's your response to
00:41:23
to someone who says that so first of all
00:41:25
I I always
00:41:26
tell every client that I work with every
00:41:28
person I educate on personal finance
00:41:30
that always make decisions based on
00:41:31
what's currently known and within your
00:41:33
control so that means actually not
00:41:35
guessing what the future is going to say
00:41:38
that is actually the only thing that we
00:41:40
do know again this could change too
00:41:42
right is the sunset of the tax cuts and
00:41:44
jobs act right right January 2026 right
00:41:47
so all I know is yes marginal tax rates
00:41:49
are going up but there's there's a key
00:41:52
phrase here which is I'm not concerned
00:41:55
about the future tax rates I'm focused
00:41:58
on my future tax income an individual
00:42:02
right so even even if tax rates doubled
00:42:04
right now I'd actually still be better
00:42:05
off with my decision but again but I'm
00:42:08
not I'm not making the decision based on
00:42:09
the future I'm making decision based on
00:42:10
what's currently known within my control
00:42:13
one thing you mentioned there that's
00:42:14
really important is a general rule of
00:42:16
thumb again don't you know don't take
00:42:18
this as advice but generally if your
00:42:20
household has too much income to be able
00:42:23
to directly contribute to a Roth IRA
00:42:26
meaning that the only way you can
00:42:27
contribute to a Roth IRA is by doing the
00:42:29
backdoor Roth IRA yep then you most
00:42:32
likely are better off if you have access
00:42:36
to a 401k maxing out your traditional
00:42:38
401K not your raw 401K right so that
00:42:42
that signifies to me that you you have
00:42:44
probably a pretty high marginal tax rate
00:42:45
at that point so somebody who has who
00:42:48
makes too much money to contribute to a
00:42:49
Roth IRA directly should probably be
00:42:52
going traditional in their 401k and then
00:42:55
doing the back door Ro Ira so it's
00:42:58
almost like the IRS is giving you a hint
00:43:00
hey you make too much money to
00:43:01
contribute to a Roth IRA
00:43:03
directly most likely you should not be
00:43:05
contributing to a Roth 401k right and
00:43:08
and just to be clear to any listeners
00:43:10
out there they might be saying well Cody
00:43:12
if I'm making that much money you're
00:43:14
telling me to contribute to the
00:43:15
traditional 401K so I can save on tax
00:43:17
dollars why don't I also contribute to a
00:43:20
traditional IRA to save even more on tax
00:43:22
dollars it's because it's because
00:43:26
there's also income thresholds to be
00:43:28
able to deduct a traditional IRA
00:43:30
contribution which by the way those
00:43:32
income thresholds are actually even
00:43:33
lower than the thresholds to contribute
00:43:35
directly to a Roth IRA right they
00:43:38
couldn't contribute and deduct from
00:43:40
their traditional IRA anyway so their
00:43:42
only option unless right their only
00:43:44
option is to do the backdoor uh Roth IRA
00:43:48
that's the only Ira option that's
00:43:49
available to someone at that kind of
00:43:51
income level right I want to add a
00:43:53
little uh a little fun fun fact and
00:43:55
misconception here is that that you can
00:43:56
never make too much money to contribute
00:43:58
to a traditional
00:44:00
IRA correct but right whether or not you
00:44:03
can deduct that contribution so keep in
00:44:05
mind that you know if some people say I
00:44:06
can't contribute to a traditional IRA I
00:44:08
make too much money what that really
00:44:09
means is they make too much money to
00:44:11
deduct their contribution but they can
00:44:13
still make their contribution which is
00:44:14
how you do that backd door Roth we we
00:44:16
mentioned earlier right excellent
00:44:18
excellent technical stuff well I was
00:44:21
just gonna say I mean listen everybody
00:44:23
if you wanna if you want to hear Codi
00:44:25
just dive deep on SEC guidelines and IRS
00:44:28
tax codes we will be here all day
00:44:32
um here's a quick ad and then we'll get
00:44:34
back to the show one of the more common
00:44:36
questions I hear is Jesse what do you
00:44:39
like and use books blogs podcasts even
00:44:42
Banks and brokerage firms what are your
00:44:44
recommendations so to answer that
00:44:46
question I put together a web page you
00:44:49
can check it out at bestin interest.
00:44:51
blogrecommended
00:44:55
SL recommendations to check out how I'm
00:44:59
improving my financial
00:45:01
life all right Cody so we got a question
00:45:04
in from Twitter we'll give it a shot it
00:45:06
says my young children received a
00:45:09
six-figure gift from their
00:45:11
great-grandmother and their near
00:45:13
lifetime contribution limits on their
00:45:15
529s do I understand correctly that
00:45:18
their taxed investment accounts would be
00:45:20
assessed at our high marginal tax
00:45:22
bracket where should I put extra money
00:45:25
for my kids
00:45:27
I think what they're going at there is
00:45:29
the kitty tax which effectively is if
00:45:31
your children have too much unearned
00:45:33
income it can be taxed at a higher tax
00:45:34
rate but you know with dependence I
00:45:36
think what they're saying there is
00:45:37
they're worried that and it's actually
00:45:39
true you know after a certain point the
00:45:41
Investments really the investment income
00:45:43
the interest and dividend and capital
00:45:45
gain distributions within you know the
00:45:47
kids investment accounts can actually
00:45:49
like kind of effectively flow through
00:45:51
and be treated as if it's part of the
00:45:52
household tax return right
00:45:54
so parents rates basically right yeah
00:45:57
right so you you definitely want you
00:45:59
typically want to tax at the parents
00:46:00
rate rather than like those Kitty tax
00:46:02
like those really high tax rates so yeah
00:46:04
effectively you know those can flow
00:46:06
through kind of like as a household
00:46:08
again once your children are no longer
00:46:09
tax dependant and filing their own tax
00:46:11
return like they'll have that benefit of
00:46:13
be able to have their own standard
00:46:15
deductions and all those things yeah
00:46:17
including for the
00:46:19
Investments one thing that question
00:46:21
touched on actually is 529 plans Cody I
00:46:24
know that most listeners of the best
00:46:25
interest podcast most not all but
00:46:27
there's somewhere around your and my
00:46:29
ages maybe late 20s to 40 or so lots of
00:46:33
children involved in in people who are
00:46:35
those age and they have questions about
00:46:37
529 plans I mean just off the cuff 529
00:46:40
plans thumbs up thumbs down do you have
00:46:42
any interesting or unique thoughts on
00:46:43
them thumbs up but not for all education
00:46:46
so again my personal bias here is I've
00:46:49
seen a lot of people over fund 529s even
00:46:51
that that's a really great example you
00:46:53
talk about like they've maxed out the
00:46:54
529s I probably wouldn't want to like
00:46:57
overcontribute to a 529 what I mean by
00:46:59
there is that if if money is not used
00:47:01
for qualified education expenses there's
00:47:02
a penalty on that money so I I actually
00:47:05
take a my own bias I have a I actually
00:47:08
welcome we can put a a link in the
00:47:10
description to I actually have an
00:47:12
education savings calculator it's like
00:47:14
an Excel calculator that your users can
00:47:16
have fun with again like you know run
00:47:18
your own numbers use your own
00:47:19
assumptions have fun with it but
00:47:21
effectively um I prefer saving for
00:47:23
education to split your education
00:47:25
contributions typically half and half
00:47:27
between a 529 education savings plan and
00:47:30
a taxable brokerage account not owned by
00:47:32
the children but owned by the parents of
00:47:35
the children one thing to keep in mind
00:47:37
is that when you do try to let's say you
00:47:39
were to apply for financial aid right
00:47:42
the assets of the children the assets
00:47:44
owned by the kids up to 20% of that can
00:47:46
be used for the expected family
00:47:48
contribution it's only 5.64% can be used
00:47:52
of the parents assets so another trick
00:47:54
there would be like for the grandparents
00:47:56
to own the 529 and to the transfer
00:47:58
ownership and again that is like
00:48:00
sometimes that's like over optim getting
00:48:01
two in the weeds over optimizing so I I
00:48:03
would just tell people like I prefer to
00:48:05
split education savings between a 529
00:48:08
use the 529 because it does provide the
00:48:10
tax benefit for qualified education but
00:48:13
in terms of additional flexibility
00:48:15
especially we don't know how much
00:48:16
education is going to change in the next
00:48:18
20 years it could look exactly the same
00:48:19
hopefully not but hopefully it looks
00:48:21
different than it looks today but yeah I
00:48:23
would I would talk about hedging your
00:48:25
bet there right based on what I
00:48:27
currently know what's in my control is
00:48:28
that education is kind of changing a
00:48:31
shift like taking a shift and not every
00:48:33
institution is qualified and not all
00:48:35
educational experiences are through an
00:48:37
institution right like maybe maybe
00:48:39
paying for a tutor or paying for like
00:48:40
private classes somewhere that's not a
00:48:42
qualified institution but you could
00:48:43
still have money there for that child if
00:48:45
you had split your contributions between
00:48:47
a 529 plan and a taxable brokage account
00:48:50
owned by the parents for the benefit of
00:48:53
the child yeah uh Cody
00:48:56
something that you've reminded me of a
00:48:58
couple times in this conversation is a
00:49:00
recent article I wrote this this week
00:49:03
just about that phrase it depends so
00:49:05
much of what we're talking about it
00:49:07
depends on the individual it depends on
00:49:09
that the individual family that you're
00:49:11
working with and yeah 529 planning is
00:49:14
something that when I've talked about
00:49:16
before very similar to your thoughts
00:49:18
there which is sure maybe it's dependent
00:49:20
on the individual family but because you
00:49:23
really don't want to overfund
00:49:26
and some of the people who I've talked
00:49:27
to before are thankfully they're pretty
00:49:29
educated on it and they are concerned
00:49:31
about overfunding uh so right so head
00:49:34
your bets and split 50/50 between the
00:49:36
taxable brokerage and a 529 plan I like
00:49:38
that solution a lot I will also
00:49:41
challenge your listeners thinking about
00:49:42
education funding ask yourself how am
00:49:45
how am I going to invest in my child
00:49:48
financially before college and I'm not
00:49:50
just talking about private high school
00:49:51
private like education I'm talking about
00:49:54
what would it look like to go on a trip
00:49:56
to a foreign country as a family to get
00:49:59
like real life education not just
00:50:01
academic education so maybe rather than
00:50:04
overfunding that 529 maybe you you kind
00:50:07
of slow down the 529 contributions and
00:50:09
spend more money as a family having some
00:50:12
really um unique educational experiences
00:50:14
that aren't in in the classroom maybe
00:50:17
becoming a professional musician or
00:50:20
going to cfp school all good options
00:50:23
something like that something yeah a lot
00:50:25
of people are like I'm not letting my
00:50:26
kid become a musician but yeah it it can
00:50:28
work out I
00:50:30
promise Cody so you've got a lot of
00:50:32
things going on and I'm just curious
00:50:33
what is next on your your project list
00:50:36
or or what are you working on whether
00:50:38
it's within the financial Community or
00:50:40
not and then if people want to reach out
00:50:42
to you if they want to connect follow
00:50:44
your content maybe they want to learn
00:50:46
from you and take one of your courses
00:50:48
how how can people get a hold of you
00:50:50
yeah so I have three businesses measure
00:50:52
twice Financial is my my advice only ra
00:50:55
advice only financial planning firm
00:50:57
that's at full capacity not accepting
00:50:58
future client relationships if you are
00:51:00
looking for advice only planning it
00:51:02
wouldn't be with me sorry but um you
00:51:04
could go to
00:51:05
advicework domcom I have no conflict to
00:51:08
send people there I don't get paid or
00:51:09
anything for those referrals but it's a
00:51:10
good place to find advice only financial
00:51:12
planners the second business is measure
00:51:14
twice planners which is a is a way where
00:51:17
I provide comprehensive education to
00:51:20
financial advisers financial planners
00:51:22
really to go beyond the basics and learn
00:51:24
more ways that they can provide more
00:51:25
value to the families they serve as
00:51:26
financial advisers financial planners
00:51:28
there's over 25 hours of educational
00:51:31
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00:51:35
calls where we look at we review real
00:51:37
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00:51:38
time on video calls and we have a lot of
00:51:40
fun just learning from each other within
00:51:42
a very generous and transparent group of
00:51:44
advisers lastly if you are a non-
00:51:46
advisor and not interested in being a
00:51:48
financial adviser at some point measure
00:51:50
twice money is my third business measure
00:51:52
TWIC money.com that's where I provide
00:51:54
free comprehensive Financial education
00:51:57
resources you know I don't sell anything
00:51:58
there at this moment so it's and it's by
00:52:00
the way it's not the it's not the
00:52:02
articles on here's a little bit of
00:52:03
information and by the way if you want
00:52:05
more information sign up for this it's
00:52:07
just I give it all away I I believe that
00:52:09
generosity is giving to others without
00:52:11
expecting anything in return that's the
00:52:12
definition of kindness so measur twice
00:52:15
money.com in the future there is going
00:52:17
to be a comprehensive video course
00:52:19
called how to create a comprehensive
00:52:21
financial plan for consumers so teaching
00:52:24
you how to create your own comprehensive
00:52:25
financial plan as a family that's
00:52:27
probably coming in the next year so so
00:52:29
go ahead and if you want you could
00:52:30
subscribe to updates at measure twice
00:52:32
money.com social media I'm on Twitter
00:52:34
LinkedIn look up Cody Garrett cfp or
00:52:37
measure twice if you just type in Cody
00:52:39
measure twice into Google you'll find
00:52:40
all my different
00:52:42
platforms Cody thank you for coming on
00:52:45
the best interest podcast I'm so glad we
00:52:47
we coincidentally crossed paths two
00:52:49
years ago at fincon and it's been really
00:52:51
fun to to watch you grow from afar and
00:52:54
I'm excited to keep on learning from you
00:52:56
in the future ditto absolutely it was it
00:52:58
was great to meet you and I'm glad that
00:53:00
our our friendship continues all right W
00:53:03
and Yoda
00:53:08
[Music]
00:53:09
out thanks for tuning in to this episode
00:53:12
of the best interest podcast if you have
00:53:14
a question for Jesse to answer on a
00:53:16
future episode send him an email at
00:53:18
Jesse at bestter interest. blog again
00:53:21
that's Jesse at bestter interest. blog
00:53:25
did you enjoy the show subscribe rate
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listen this helps others find the show
00:53:31
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00:53:34
we really appreciate it we'll catch you
00:53:36
on the next episode of the best interest
00:53:39
[Music]
00:53:41
podcast the best interest podcast is a
00:53:43
personal podcast meant for education and
00:53:46
entertainment it should not be taken as
00:53:48
Financial advice and is not prescriptive
00:53:50
of your financial situation