Speaker 1: Hello, and welcome to Jazz After Dark. It is jazz wealth. After Dark. Nice, right? Usually I record these videos late at night, and tonight is no exception. However, I am a little bit grumpy because I asked the missus, I need an old-fashioned, you know, I need, what can we do there? We use some Buffalo Trace, and this is what I got. I don't know if that looks like an old-fashioned to you, but I see no orange. I taste nothing on the rim. I see no maraschino cherry. I'm disappointed. Anyways, I will enjoy that for sure, and certainly be sleeping on a couch tonight, but for those of you that are not sleeping on a couch and are interested in learning, this one is going to be for those of you that, you know, you struggle a little bit when it comes to the financial planning. Not necessarily retirement tonight. It turns out we have $17 trillion in debt out there, and that was the latest report that has come out. That's a lot, and so if you're focused on debt, we tend to forget other areas. We tend to try to find that holy grail of budgeting or, you know, arranging our finances, and then the tax question comes in, and then it's like, oh darn it, I didn't save enough for retirement. How much am I supposed to save? So, I kind of wanted to start at the top level and give you like an order of operations, right? How can we just simplify the whole thing? And in my opinion, this is one of the rare times that I'll give you my opinion, and I'm not saying this because we're financial advisors. I just think that you have to focus on the thing that's most distant in the future first, and then work your way back. Because if you start saying, well, I'm going to pay off this debt by the end of the year, great, right? There's nothing wrong with that, but at what sacrifice to things that were down the road? You were going to start a business, maybe have another child, eventually retire, travel plans, things like that that you had. Well, what are we doing that impacts that? So, we just really quickly get our minds all weirded out because it becomes overwhelming and we don't know what to do. So, let's just go step by step, right? We'll just cover a couple of them here tonight. First of all, if you're thinking about getting into organizing your finances or budgeting or planning for something, great, you've already taken the right step. But we want to start way out in the future. Number one, because it's the furthest in the future. Number two, because it's the easiest to adjust and will need to be adjusted. And number three, it's going to change. The tax laws change, the opportunities change. There wasn't always a Roth IRA. And so, people found that out. They passed the law and were like, yeah, that works for me. So, things will change, guarantee, especially if you're young. Now, step number one, in my opinion, involves no action. All it is, is just throwing a bunch of stuff against the wall. It is coming up with that very distant in the future, you know, sort of retirement plan or a lot of kids like to focus on the fire movement. OK, well, it's probably down the road at some point. How are we going to get there? We're not going to do anything just yet. We're just going to plan for that. So, there's no action on your part. So, before everybody says, all right, you got to pay off your debt first. I probably agree with you. But let's at least figure out what that stuff is. It helps us ask some other questions. And here's how we do that. So, if you're a client here of Jazz, you've seen this. This is our planner that I love working with clients on this. But notice how this person's 40 years old. And of course, this is a sample. It's Louis Armstrong. And they want to retire at 60. OK, that opens up some doors for personal finance planning. They expect to live to 90. OK, that opens some other doors as well. They've already saved $175,000 and some returns and salary is all baked in here. So, already, just by laying this out, I can start saying, well, OK, good, decent salary there. I presume they're married. I don't have that information just yet. They have a match in their 401k of 5%. OK, we can come back to that. They're not doing any additional savings. OK, there's probably some debt that they're focused on because we're short. We're not going to have enough to retire early or even retire. So, it's like, OK, they're probably paying off some debt. So, we can talk about that. And they're expecting to live on, what is that? About two thirds of their current salary. And then to get the rest of it, or a big chunk of it from Social Security, meaning they've got $75,000 in total that they want. And of that, $48,000 will come from Social Security or whatever the reason is that they put this number in there. Probably Social Security because I see this starts at $67,000. If it was a pension or something else or royalties or whatever, you'd be surprised how people have other income in retirement or leading up to it. Well, then I'd probably see an earlier date, right? Also, let me go back to this real quick. Other retirement assets, meaning they may downsize their house. They're expecting an inheritance. They're going to close out a 529 because all the kids went to school and they helped them move the rest to the Roth and then the rest of it that comes into their pocket after a penalty or something. You get what I'm saying? There's a lot of moving parts. But by doing that, number one, you get to see what you're shooting for is not going to work. Why? And inevitably what I'll hear is, well, this got this debt or I just bought this house. I'm a little strapped right now. You know, something's going on or my business is just getting off the ground or it's slowing down a little. I've heard it all. Can you tell? I've just given you all kinds of different things there. So what that allows me to do is go, okay, you're right now not going to be able to retire at 60. Don't stress about it. We're not going to say that's the end of the thing. We could actually change it to 65 real quick. Oh, I'm sorry. You can't see. But if I change that number to 65, voila, you look amazing. Right? So that's just a change of five years. We don't necessarily want that, but you see how quickly we can make it look good. That was one little change there. The other thing we can do is look up social security. Is it really 48,000? Is that you and your spouse? Probably is that the real number? What's going on there? Are you definitely going to get that? But look at all the questions we just asked by playing, really not doing anything. No money has changed hands in terms of putting more in your 401k or save 25% of your income. We've got the thought there. I promise you that plan, whoever did that, uh, probably has some debt or they want to pay their house off early. They think that's the idea. Maybe they just got a car and they hate the fact that they're paying a higher interest rate. Now we back up and we say, okay, what are the three most important things to you? Five most important things to you. Three stresses that bother you. Things that you wish you didn't do before. Now we can come back to this and go, remember that retirement was a little sketchy. We have to address that, but we don't have to put any money in there yet. Oh, Dustin, I've got this debt. Great. Don't add more to your retirement. You're already saving more than enough to get the match. And in fact, as I look at this, we may even want to temporarily back that down, right? They're saving 13% of this salary and it's still not doing the trick. They're getting a 5% match. So we may want to say back that down for a minute. We'll come back to this next year. But that, I mean, imagine that you, let's say 10% of their salary or $12,000 between the two of them. Could that be going towards something else that pays down things ahead of time? Right? So that's number one is just, let's do the longterm stuff first. Not because, um, we expect to nail that down, but because it, think of the questions it just answered, right? Case in point, uh, everything we just talked about. The, uh, second thing that you do from here, so we've got that kind of working or stewing. We both know where you stand. The second thing we're going to do is look at your personal finances like a corporation does. You ever looked at the earnings of, well, pick somebody more simple. Uh, and I don't mean to belittle you here, but, uh, pick like Adobe. Don't pick Apple. You know what I mean? If you look at a balance sheet, uh, pick an Airbnb, don't pick a Tesla, right? There's so many moving parts on Tesla. They've got federal credits. They're still selling off and whoa, what is happening there? Uh, but Airbnb, it's kind of like, you know, we, we rent the house or somebody rents it out. We collect a little fee and we hope they rent it out a lot, you know? So it's a little bit more simple to understand, but we're going to look at things in terms of your assets and your liabilities. Everybody's got something there or most of us do. And the reason we're doing that is liabilities or debt is not always paid off by income that's coming in there. I've shared this with you on the jazz after dark before. There are so many cool things you can do using your assets to pay off your liabilities or pay down your liabilities. So if we look at it as a balance sheet, then the end result is just to save money first. It's not that we want to pay this credit card off. And then of course that interest rate's higher. And so then, well, then the next one we'll pay off with the money from this one and that one, sort of like that legal pyramid scheme for your debt, right? We just keep taking the money and paying down the next debt. What if in the meantime, we could reduce the total cost of that debt while you're paying it off? I don't know that that's an answer, but what if that were the case? This is where people fall into that infinite banking, you know, those really expensive policies that just drive me nuts because nobody's ever happy with them. Don't do that. You don't have to do that. Do you think that Adobe or Apple or Airbnb is sitting around strategizing things like that? No. And that's because they're a company, not an individual. So I get that. But if we look at your assets and your liabilities and we say, well, wow, of the 175,000 that this Louis Armstrong had already saved, we have a hundred in a brokerage account. Why? What's going on there? I was going to do this or that or buy a house or it was just extra savings and I had no debt, but then I grew up and I acquired more stuff and lifestyle creep and I couldn't save any more over there and I was just paying off debt. Do you think we just take that money and pay off the debt? Probably not, but you probably answered yes. What are you doing with a hundred thousand dollars in savings? If you have this debt, you should be using that money. What if there were another way to do it? And I'm not like insinuating there's a magic pill here. I'm just saying, is that the right answer? So sometimes it's like playing psychiatrist. You're just asking questions and listening for that person to say, I don't lose sleep at night with my 6% car loan. Doesn't bother me. All right, well then we move on. You keep the debt. It's fine. But what if you had a hundred thousand dollars and I'm just now I'm just thinking outside the box here, but you have a hundred thousand dollars. What if your brokerage firm let you borrow against it for 6% or whatever? Let's say 6%. Okay, well that didn't change anything, Dustin. I had a 6% debt. I borrowed against that to then go pay off the same debt. It doesn't make much sense. But what if that money that was still in your brokerage account could yield more than 6% that's not taxable? If we could do that, right? Remember the video we did the other day, there's ETFs you can use where it's not taxable, the dividends that come to you, not taxable at all. So what if we said, okay, that dividend or that ETF pays, you know, 8%, right? Which is way low for some of these. And you're going to borrow for 6%, take that money and pay off your 6% debt, but you're going to make eight. So your net result is 2% positive. That's not taxable. It may not move the needle for you, but all we did was take your balance sheet and say, your debt is currently costing you this. Let's just make it cost nothing for a minute until we get our bearings straight and everything. And if you had to report that to shareholders, what would you report as a company? You would say we had debt that was costing us 6%. Now we have debt that's earning us 2% because it's a balance sheet trick, right? This happens all the time. This is not me just making stuff up. So that's a weird way to look at it, but it can be done. There's certainly nothing wrong with that. That's the second type of question. If you look at your money as a balance sheet, you're more likely to make better or more efficient decisions than just saying, I have this debt and this debt, and I only bring home this much money a month. I don't know what to do. All right. Was that true? Let's look, let's see everything as a whole. So number one, plan for way out in the future. And the key word there is plan. Don't do just yet. We don't know if you have the money. So we're planning for the future. That adds a lot of questions. We start asking questions and figuring out you, you will do this when you sit down and pick a calculator or something and do it. Step number two is, uh, don't just throw your debt on the table. Look at it as a balance sheet. Okay. I've got this much money coming in this much money going out, but the cost of that money and the growth of this money is, you know, two separate things. They have minds of their own. How can we pit things together and move the puzzle pieces around to make sure that if you're a person that says, I want to retire early. I want to live a financially free lifestyle. I want to be debt free. Um, okay, cool. Well, how do we get there the fastest? And the answer by the way, is of course to use the Dave Ramsey debt snowball or somebody else calls it an avalanche or, you know, we all get what they're saying Susie Orman with the way she talks. And so you go, okay, well that's fine. But what else can I do? There's gotta be something else. There has to be more that I can do. And I get a little geeky from there. Give it a shot, you know? Uh, so a little bit of rambling tonight, but I hope that's just the first level, right? To get you thinking about some really general things and not beat yourself up over all the moving parts. Had a client that had some debts. They didn't mind some of the debts, but they had some debts, uh, different forms of income, kind of interesting. And then they had some past due taxes. So they underpaid. I forget what happened, but they had an underpaid to some level and the interest built up and the government doesn't tell you right away. They wait, you know, a year and a half and they're like, ah, you owe us this money plus interest and a penalty. So he's working on that. He's, you know, we're moving things around. And all of a sudden we kind of hit on something and we're like, you know, dude, let's do it this way. Think about it. And we just sort of worked it out and talk through it. Happy to do that for you guys. Those of you that are not clients. And I appreciate all of you that have really thought about us or the giving us a chance to talk to me or talk to Eric. I mean, that's just awesome. Cause I realized you're watching a video. How do you know I'm really here? Like this is my house, but how do you know I'm in my house and I'm not like in the Bahamas or something. So I really appreciate the initial trust that you guys give us. Uh, remember that anyone that works with us, we don't actually have your money. You have your own account, Goldman Sachs, you're with them. We just manage it for you, right? We help make sure those changes take place. Um, and of course do all the planning and all this geeky thinkery that we tend to do. All right, I'm going to wrap it up there. We'll be back tomorrow and do this all over again. You, uh, enjoy the rest of your night. This is not a topic I get too excited about, by the way, as far as the budgeting and stuff. So you notice how I stay away from that. Um, it was this interesting cause it's not something I normally gravitate towards, but I just found like, okay, just simplify this, you know, I was talking to the wife and she's like, well, how do you take all of this and just communicate it in line by line? And I was like, okay, that's true. We have to go line by line. But let me know if it was a little off base, we'll get back to our regularly scheduled programming. You enjoy the rest of your night and, uh, see you tomorrow. Transcribed by https://otter.ai