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A Guide for the DIY Investor | Measure Twice Money - E64

January 29, 2024 / 53:53

This episode covers personal finance frustrations, the phrase "it depends," and features guest Cody Garrett, a financial planner focused on DIY investors.

Host Jesse Kramer discusses the common frustration with the phrase "it depends" in personal finance, emphasizing that financial advice should be tailored to individual circumstances. He highlights the importance of understanding personal goals and financial situations before making decisions.

Cody Garrett joins the conversation to share his journey from being a professional musician to a financial planner. He discusses his passion for helping families achieve financial independence and the significance of personalized financial education.

The episode also touches on the complexities of tax planning, the importance of asking the right questions when seeking financial help, and the value of having a financial plan that adapts over time.

Listeners are encouraged to think critically about their financial decisions and consider the long-term implications of their choices, reinforcing that financial planning is a personal journey.

TL;DR

Jesse Kramer and Cody Garrett discuss personal finance frustrations and the importance of tailored financial advice.

Video

00:00:01
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
00:10:45
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
00:11:52
plan that perfectly accounts for 1.3
00:11:55
nonillion unique outcomes but you can
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understand the broad Strokes of your
00:12:00
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
00:12:11
expertise and experience these are your
00:12:14
tools to overcome new challenges on the
00:12:16
Fly My Hope here at the best interest is
00:12:18
that I'm equipping you guys with some of
00:12:20
this expertise and experience you can
00:12:23
make the best plan that you possibly can
00:12:25
which includes some judgment calls based
00:12:27
on today's fact
00:12:29
but you can also know full well that
00:12:31
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
00:12:39
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
00:13:01
but you do need a starting point that
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works for you today and then you do need
00:13:06
the expertise the experience and the
00:13:07
flexibility to adjust to uncertainty
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because uncertainty is certain to arise
00:13:13
in the future it depends will always be
00:13:16
a frustrating answer but it shouldn't
00:13:19
paralyze you it shouldn't paralyze this
00:13:22
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
00:13:29
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
00:14:19
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
00:14:42
could talk us through the progression of
00:14:44
Cody Garrett haircuts over the past
00:14:46
decade oh haircuts so growing up I was
00:14:49
like a dumb and dumber style like the
00:14:51
bull haircut like you could literally
00:14:52
put a bowl and it was like super blonde
00:14:55
like it was like I just laid out in the
00:14:56
sun all day yeah growing up as a little
00:14:58
kid I was like the perfect bow haircut
00:15:01
very blonde I remember actually going
00:15:03
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
content there today and we're adding
00:51:33
more every month that includes live
00:51:35
calls where we look at we review real
00:51:37
financial documents together in real
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
00:53:27
and review the podcast wherever you
00:53:29
listen this helps others find the show
00:53:31
and invest in knowledge themselves and
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

Episode Highlights

  • Cody Garrett Joins the Podcast
    Cody Garrett, an advice-only financial planner, shares insights on financial independence.
    @ 00m 29s
    January 29, 2024
  • The Most Frustrating Phrase in Personal Finance
    Jesse discusses the phrase 'it depends' and its significance in financial advice.
    “Good financial advice depends on who you’re talking about.”
    @ 03m 01s
    January 29, 2024
  • The Journey from Music to Finance
    Cody Garrett reflects on his transition from a professional musician to a financial expert.
    “Five years ago, I didn’t know what an IRA was and now I teach over a thousand financial advisers.”
    @ 17m 47s
    January 29, 2024
  • Transitioning Careers
    From a full-time musician to a financial planner, Cody shares his journey and insights.
    “I want to help people align their quantitative goals with what actually mattered to them.”
    @ 21m 20s
    January 29, 2024
  • The Power of Teaching
    Cody discusses how teaching others solidified his own understanding of finance.
    “The best way to learn is to teach.”
    @ 23m 17s
    January 29, 2024
  • Advice Only Financial Planning
    Cody explains the concept of advice-only financial planning and its benefits.
    “Advice only means I provide personalized financial education to help families make their own decisions.”
    @ 27m 27s
    January 29, 2024
  • Understanding 401(k) Decisions
    Navigating the complexities of 401(k) enrollment and contributions can be daunting for new employees.
    “I don’t know if I should sign up for the 401K.”
    @ 35m 37s
    January 29, 2024
  • The Traditional vs. Roth Dilemma
    Many people make retirement contribution decisions based on current fears rather than future needs.
    “Most people are making the wrong decision between traditional and Roth.”
    @ 37m 21s
    January 29, 2024
  • 529 Plans: A Balanced Approach
    Consider splitting education savings between a 529 plan and a taxable brokerage account for flexibility.
    “I prefer to split education savings between a 529 and a taxable brokerage account.”
    @ 48m 05s
    January 29, 2024
  • Creating a Financial Plan
    Learn how to create your own comprehensive financial plan as a family.
    @ 52m 24s
    January 29, 2024
  • Best Interest Podcast
    Tune in for educational and entertaining discussions about personal finance.
    @ 53m 41s
    January 29, 2024

Episode Quotes

Key Moments

  • Cody Garrett Introduction00:29
  • Listener Shoutout00:49
  • It Depends01:54
  • Thriving vs. Starving20:06
  • Tax Planning Basics35:19
  • Retirement Contributions35:57
  • 529 Plan Insights46:40
  • Podcast Support53:31

Words per Minute Over Time

Vibes Breakdown

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