Josh Tirado: [00:00:00] welcome to the making smart decisions podcast. I am your host, Josh Tirado. And for today, we're going to be discussing the concept of: I already have a broker. I already have an advisor. I already have a financial coach. I'm all set. Congratulations. Truth be told [00:01:00] more than half of my current clients said to me, oh, I already work with someone when they came to me. Okay. I appreciate that. If you come to me and we work together later in life, chances are you have some. Now that's a broad category. Some people refer to the person that sold the life insurance 20 years ago, or the person that set the Roth IRA 15 years ago, and some mutual funds they never heard from, again, as their person, some people have a broker who calls them. Maybe they have a little bit of money invested, or they're doing some fun stock picks, but they have somebody, perhaps it's a brother-in-law who's in the business and, or a sister-in-law, they run ideas. They have our questions, pass them from. If you are successful and ever reached a certain age, chances are, you've worked with some financial professional in some capacity, someone referred you in, you met somebody, somebody and you have someone, you have an advisor, you have a broker, you have someone who does something like along those lines. But what I always find interesting is the [00:02:00] clients first, and they tell me. But we're having a discussion already about what they're doing. So there must be something lacking, or some question in the back of their mind sums for interests that they're willing to talk to me about it. Maybe they think they're missing out. Perhaps their grass is always greener, people. Maybe they just want to be well-educated to make the smartest decisions they can, and that's all well and good, but know that a vast majority of people who work with advisers already came from someone else who had an advisor. You either needed something more from that relationship. And you wanted someone who was a trustworthy advisor, who did planning with you, who had a holistic approach, who put together all your needs. I heard someone a long time ago. Their favorite phrase was. We help clients crystallize their objectives. And that's a great way of putting it, allowing people to understand where am I am going from, where I am, how do I get there? And I am then putting that together. It's not the. I have this great investment. It might be a great investment, but it's a great free view. Does it help you accomplish your goals [00:03:00], or is it better for Susie down the street to help her reach her goals? Is it a great investment, but it's designed for someone who's 30, and you're 60, or someone who's 80. And you're 52. It would be best if you had something specific for you. So people come to me and say, Hey, I've worked with somebody, but maybe we don't have an ongoing relationship. Perhaps they were a commissioned person. They were a salesperson, or I haven't spoken to them in a while, and they're looking for something more. That's why we worked together. Also, maybe you've worked with an advisor for a long time. That person has retired. That person has passed. You disagreed, or you just felt you needed a different. You're comfortable working with an advisor. You see the benefits. You want to find someone or a company to work with that fits in better with your set of values, your personality, and that you can work with. There's a financial magazine for my industry, they've started a section an article in the front of the magazine every month. And it discusses my life as a., And they [00:04:00] interview different clients, advisors, and different walks of life, all over the country and the people that relay their experiences. Sadly, the majority of the articles that people are relaying a negative experience may have positive returns on the investments with the people. Still, the relationship and the service weren't there. Something happened. And most of these stories involve those people saying, I know I need a professional. Still, I needed to move to a different professional. So they were the right fit. That happens time and time again. So if you already have somebody that's terrific, if they are not providing for all of your needs and you think there might be, and this isn't being worried about, the grass is always greener. This is seriously. I think I could be doing something better or having a better experience. I know I should talk to somebody. I should have spoken with me now. I have my specialties. If you're not a good fit, I'll refer you to somebody else if you are. Terrific. We'll talk through that. Every client starts with a 20-minute meeting where we discuss what they're looking to get off the relationship and what my company offers, [00:05:00] and we call it the right fit meeting. Cause we're looking to see, are we a good fit? Should we move on together, or are we not? That's very important that meeting is like the equivalent of the dating stage, where you figure out if the two you're a good fit and whether you should pursue a relationship or not. So just because you have a broker or an advisor or somebody, that's awesome, but make sure it's the right relationship for you, that you're getting the most out of it that you possibly can. Thank you, and go forth and make some smart decisions.…

Josh Tirado: [00:00:00] Welcome to the making smart decisions podcast. I'm your host, Josh Toronto, and today's title. I'm going to affectionately call when life smacks you in the face. I did a podcast a long time ago, where I referenced a quote from Mike Tyson about being punched in the [00:01:00] face. But this is a little different. This is more about you're minding your business on a mundane Tuesday afternoon, and all of a sudden, something major in your life happens. Are you prepared? Are you ready? This was brought to mind. I was on a call with a client this morning. She mentioned that her husband, also a client of mine, had been in a car accident not doing anything reckless, literally sitting stopped at a stop sign, other person driving incredibly fast through a residential area, being careless blows her stop sign, loses control of the vehicle, T-bones my client. And now. Several days in the hospital, several weeks later, several surgeries has a couple of months of rehab ahead of him. He will be okay. Thank God. He will be okay. But several months of recovery needed to get a wheelchair, need to outfit his house. Again, as I said, he didn't see that after several surgeries and a long road, several months of recovery, and several months more to leave back to a hundred percent. He was going to the store it happened he [00:02:00] has a job with flexible time. They are very understanding. They're working around it. These clients well-prepared. They have savings through the job. They have good health insurance, and things will be okay. But their life has been majorly impacted for the next several months. And we both know him getting T-boned like that. Yes, he had several broken bones and torn things and multiple surgeries, but it could have been much, much worse. So that just really affected me this morning and brought to light how quickly life can change in the blink of an eye. This is not some avail attempt to encourage you to buy more insurance. This is just a fact of life. Do you have savings? Do you have insurance? Do you have a plan? Do you have yours? Do you have a healthcare power of attorney? You have your wishes drawn out if you are incapacitated. What do you want to have happened? If things go south and something terrible happens to you and you pass, [00:03:00] what do you want to happen at your funeral? COVID is brought to light when you start hearing more and more about people that have passed away, not just from COVID, but I'm telling you. The famous people that young and old to make the headlines, right? Because they're famous people for one reason or another, you hear about the passing. And so many times you hear, wow, that person was still so young. And a lot of times young people ignore the need to put together the will and their final wishes and that sort of thing. But it's necessary. So if you take a little time and it's not. It's not, but it's more affordable than you think. If you take the time to address that, and you take the time to work as a professional to draft that, and you work with a professional like myself to make sure your finances are in order in case something happens. We can't protect against everything. It's life happens, but we can still protect against many things and prepare and hedge our bets and be in a good position. Should something happen? Devastating things happen all the time [00:04:00], and everyone thinks, oh, it never happens to me right up until it does. So this may sound a little more somber. I want to get the energy up a little bit, but be aware of things that happen. And this is just a quick little reminder. Do your annual physical with your doctor. You shouldn't have to pay for it. Most insurance covers. And you get some blood work done. You see your doctor. A lot of people are like; I want to know what's wrong with me. When I say many people, I'm referring to actual family members that I know that say things like that, but you should know if there's something wrong so you can correct it. You can amend it. You can cut off the past. Take your health seriously. Take your finances seriously. And in doing that, think about this. You take care of the finances. You're working on your health. Even if you're not perfect, you're working on it. You take her to the finances. You take care of the legal side. It should help you sleep better. That is your permission to have fun, enjoy [00:05:00] your life. Go do fun things and not be so worried about, oh, what could happen? Cause if something happens, you've done at least, you've done everything you possibly can. And then go live your life. It's an excellent permission slip, and you're doing the right thing. And it, and thinking about this too, if something happens to you and people I've heard this from clients, I'm not worried about it because if something happens to me, I'm dead, and that's a hundred percent true. But if there's anyone that you love or care for in your life, those people are left behind in dealing with it. So realistically, you're doing it for them. And the other thing is what if something negative happens to you, but you don't die. You're now alive, and you're currently dealing with it. So some of you and your loved ones are dealing with it. I know this is heavy stuff but plan to take your precautions and then live your life without that fear and go forth and enjoy. But random Tuesday afternoon, bad stuff can happen. be [00:06:00] prepared. Shameless plug. As you know, we do the podcast, and I'm here to help with a lot of that. I can refer other professionals to you. They can help with a lot of that. You can talk to your family and friends. See if you had a positive response with somebody, and they can probably refer you to somebody that can help with these different topics. But seek it out, make it a priority. Please don't wait until January 1st or January 2nd to say, oh, it's a new year. I'm going to take care of these items. Now start it now because it can take a while to get these items set up with how slowly things are moving in a post-pandemic world. So start it now. So we can be done by the first of the year. It can be done in January but take the first steps. That's my public service announcement for today. Please be. Thanks, go forth and make some smart decisions.…

Josh Tirado: [00:00:00] Welcome to the making smart decisions podcast. I'm your host, Josh Tirado. And for this episode, we are going to launch into some myth-busting. In media currently, it seems as though there is a plethora of misinformation, and it seems that being [00:01:00] first or having your topic be popular is more important than being correct. There are a lot of common myths out there surrounding finances, and I want to debunk several of them. My goal is to provide you with a little bit of background information on it. So you can make your own smart decision about whether it's a myth or whether it applies to you. So the first one is some advice that I, when new clients come in, that they've received from the HR department or that they've heard and it's maxed out your 401k. I hear that day in, and day out to me that's a myth. I don't think that's a right fit for everyone. To maximize your 401k, the total amount you can put in ends up being a significant amount of money, or it could be a significant percentage. My, this is a rule of thumb. My rule of thumb is to contribute enough to get the employer match. So maybe be very clear about this. Also, if there is no employer match or legally, there needs to be one, but it's minimal, not every year. You may have better options outside of a 401k,[00:02:00]. The main advantage of your 401k is to max out your employer match, not max out the 401k plan. I say that because if you put in a dollar and your employer matches it with a dollar, you immediately have a hundred percent return on your money without taking any risk. And there are also tax advantages to it. However, if your employer only matches say up to the. 3% or $3 that you're putting in, and they don't match above that. And you're putting in 9%, 12%, 15%, something really large. And they're only matching that first piece. The rest of it is still an address. But there may be other better options. Often the investment options inside your 401k plan are pretty limited as to what's in there. The fees can be high. They changed rules several years ago to make fee disclosure more prominent and make fee disclosure clearer. However, in many cases, you still don't get the complete picture unless you really dig into the numbers with all the fees are so your 401k. [00:03:00] It Can be more expensive than it needs to be. Your options can be limited. And the rules concerning 401k versus other types of investments are different. So depending on your situation, it could be advantageous because you can take a loan. It might not be advantageous because it's very locked up, and there might be. A vesting period before that money is all yours to take with you. So there's a lot of pros and cons here, but what I want to say is the maximum foreign case, not always the best option. You want to put it enough to get the employer match. So you get an immediate return on your money. And then, above that, take a serious look at, should I do a different IRA on my own and have control over it? Should I do a Roth IRA? Should I do a brokerage account, so it's not necessarily tied up until I reach age 59 and a half, and I could use the money sooner for something else? Maybe I have short and intermediate-term goals where this money doesn't have to go towards retirement, but instead, I have a goal that's coming up in the next two years, five years, ten years that I need to save for, to reach instead [00:04:00] than have it be tied up for. The tax advantages are significant, but they're tied to retirement. So what I'm saying is that whole max out your 401k, not always the best solution. The second myth I want to go over is that all debt is bad debt, and don't get me wrong. I have several clients who, at one point in their life were in substantial debt. And they managed to get it all paid off, and they're pretty successful. And sometimes, the debt is for education. Sometimes the debt was for launching a business. There are a million different reasons to have debt. It's not always credit card debt, or somebody made poor decisions. They might have a lot of debt. They worked very hard to get out of the debt, and now they're very debt-averse. They don't want to go back into debt. And they make that conscious decision. When I say, okay, you could leverage someday. Versus paying it all off and long-term, here are the numbers that work out better for you. If you did not pay all cash and were to use some debt, they understand that, and they're willing to forgo that to sleep soundly at night, [00:05:00] they don't want to have any debt. So they make that decision. Other people understand it and leverage debt. For instance, in a business, it's very hard in many cases to start a business without taking on some debt, or you start the business, but to grow and reach next. You need more money and often, rather than using your cash reserves, if you're lucky enough to have any borrowing some money, especially at very low-interest rates, is a much smarter decision where you keep your cash on hand for any needed. Some people call it dry powder. You can borrow the money and leverage it. And then you can also, on top of it, get tax advantages or write-offs for that debt. So leveraging that debt and what other people would many people referred to as OPM other people's. Utilizing that debt is a really smart choice. And in the end, we'll put you further ahead. There's, of course, bad debt. You don't want to run up credit cards at 20%, 25% interest, especially to buy consumer goods that you don't need. But all that's not bad. I recently got a new car used, but new to me on the used car, the [00:06:00] financing was right around 2% and made a lot more sense to me rather than buying the car to finance it at 2% interest and use my money for other things, invest it, grow the business. Do what have you that provides a return, same thing for a mortgage. Some people are blessed to put down a large amount of money to buy their house, or you can buy. And this market is so crazy. Sometimes that's what you have to do to win the bid, to get the house. If you do that, I still have as you take a mortgage out afterward, because when you can get a mortgage that is around 2% or 3% with positive tax implications on it, that's amazing. You can borrow the money at 2% or 3% and do something else with your cash, where it stays liquid. It remains available to you, and you can get a better return on it elsewhere. So paying off the house earlier, putting down a huge, down payment, long-term when you have your advisor run the next. You may be behind by doing that rather than putting down less and using your other money for other purposes. [00:07:00] So when I say all debt is bad, all that is not bad, you can finance a car, you can finance a house. Those you can finance your business. Those options can work out well. If you are one of those people, though, that needs. Be debt-free to be comfortable. Then we do that and work around it. Just know that in many cases, if you can deal with a bit of discomfort and go with some debt, it can benefit you. I have some older clients the house has paid off, but we'd looked at again. Each house like house mountain, home, insert, whatever home you, you think of where you'd want to spend some time. They're able to refinance their house and use some of those proceeds to buy the second property. And that property gives them a lot of joy and helps them achieve their goals of where they want to be and where they want to spend their time. That results in a mortgage. But they're trading off that mortgage, a very low-interest rate for an asset that will most likely appreciate, and they get to enjoy it for a lot of years. So it's a good trade-off. So all I'm going to [00:08:00] say is approach debt. All debt is not bad. There's another thing. A...…

Josh: This is Josh Tirado. And thank you for joining the Making Smart Decisions podcast. What is the true cost of pet ownership in 2021? let's dive into the dog dilemma. In some reasons studies, some data showed that the initial purchase of a dog in the United States is ranging anywhere from roughly $600 to $2,300. [00:01:58] It's also showing that annual care and maintenance of that dog is running between $600-$2300 a year. In fact, one survey shows that 40% of Americans are spending an excess of $3,000 a year on their dog, but in reality, they're budgeting a hundred dollars or less per month towards that same expense. Now, I love dogs. [00:02:23]I own two doodles, two Ozzy doodles, half Australian shepherd has standard poodle they're brother and sister. They're great. My kids love them. My wife and I love them. They bring a lot of joy to our family. I will say this though. They are designer doodles. They were not inexpensive to purchase. [00:02:41]And because of allergies in my family, I had to go with a dog similar to them. So adopting a dog will be searched and cannot find anything. So we had to go down that route. So let me just preface that with, I love my dogs. Buying a dog is not cheap. Giving the dog good food, good vet care is not cheap. [00:03:01] As a matter of fact, I have in many people do have health insurance on their dogs. And my pet insurance is now $68 a month. But if you'd look at the cost of something going wrong and incurring vet bills, those bills can be very expensive. So the pet insurance, I think is a useful hedge against that. [00:03:22] Between Christmas and New Year of 2020 more dogs were put up for adoption and were abandoned or turned into the shelter than any other time during the year. And that's true year over year, I think 2020, was worse because of the pandemic. [00:03:38] People are out of work. People cannot afford their animals. People's living situations are changing and they cannot afford it or are unable to take their dog with them. And they're putting their dog up for adoption or trying to give it away. But also when you look at that initial cost, if you're paying a couple hundred, a couple of thousand dollars to buy the dog and that same amount of money every year to maintain a healthy lifestyle for your dog, as well as the time commitment to having the animal in your life or multiple animals. [00:04:06] I think a lot of people quickly realize how expensive and what a commitment it is. And it is a true commitment. I just want to say, this is almost a cautionary tale, and I feel very badly that a number of people got dogs over the summer when it was cute and to get them in your outside and the puppy stage, and you come into the winter and suddenly the dogs inside a lot more. [00:04:25] And the dog is now at that age where they can tend to start chewing and be destructive. And a lot of people want to get rid of the dog. So for some, it's a cost issue for some, it's a personality issue. I just want to caution people going to 2021, and beyond to please seriously consider your family situation. [00:04:45] If you can have a dog if you should have a dog, and then also what breed and what is the right setup for the dog. Now, this can be applied to cats and other animals as well, but generally speaking. The dog is the more expensive of the common household pets, but please take a serious look at it, make sure it's a smart decision and a long-term decision that you can go with. [00:05:08] I know the animals bring a lot of love and joy to people, but if you can't keep your animal that love and joy are going to go, and isn't worth it because then you're going to be heartbroken and so will the animal. So let's make smart decisions looking forward when we are picking out a household pet and a new best friend.…

Josh: This is Josh Tirado, welcome to the Making Smart Decisions Podcast. Today's title is going to be Buyer Beware and is going to be a Storytime. When you picture this, we have changed the names, of the hypothetical clients to the Smiths and the other advisor. We'll call him John. Just imagine that we can peer in and see everything that is going on with that situation and what we can learn from this situation. [00:02:02]John had some very nice clients. They were friends, they're friends of the family for a number of years. They became clients. They were very happy clients. Then one day John is in his office and he gets a phone call from a new advisor. That's sitting with his clients of Smith's and they inform him that they are switching to this other advisor. [00:02:20]John's professional. John keeps his composure, handles the phone call, cause whatever information they need to help facilitate the transfer of the accounts. And then afterward, John follows up to see what is going on. Try to do a little quality control. Maybe you want to call it an exit interview and see how to see if he can further assist those clients. [00:02:39] During the phone call, the clients reveal that they are leaving because of the information given to them by the other advisor. Now here's where we need to start to learn a few things and we can glean some knowledge from this story. The other advisor told the clients that if there'd been another major market meltdown like there was an in 08', 09' and the market had gone down another 30 or 35%. [00:03:05] The client's money would not last long enough. They were new in retirement- a year, maybe two years in, and this advisor said, if the market goes down 30 to 35, we have another 08' or 09', you will not have enough money. You will outlive your money and your money will not last. The client got very scared and very concerned about that. [00:03:28] And was obviously very worried. The other advisor proceeded to recommend to put them into a product that would give them a guaranteed lifetime income that they could not outlive. However, later on, we come to find out that is a contract they're locked into now for life. And the amount of income they have is really not enough. [00:03:50] To support their needs and their goals now nevermind in the future, once you account for the cost of living and inflation increases. as John was speaking with him, he thought that was pretty interesting, but they were very scared because of what the advisor told them. And the advisor also told them that she had run their numbers and it looks at their situation and the investments they were in that they would definitely run out of money. [00:04:15] John inquired and said, Oh, okay. Did she provide you with a report? Could I see the report? I want to take a look at it, make sure the numbers going in there accurate. No, the other advisor never gave them a report. Never let them see the report, never give them a copy of it. John then says to his clients that is true. [00:04:31] If there was another Oh eight Oh nine. And if the market was down by 30 or 35%, you would not be able to recover from that. And you would run out of money. However only a third of your portfolio is actually in the market, not the entire thing. And out of that third, they had used investments that had saved the nets and safeguards in involved in place seem if the market started to drop, their investments would have some sort of protection or guarantees or moved into cash. [00:05:02] So there was no way the investments could go down 30 to 35%. So the client got more irritated, I believe at that. But John was just trying to explain to them, yes, it is true. If you lost a third of your portfolio, you would not have enough money, but only 30% of your money is in the market. And there are safeguards in place at the most you could lose is only 10 or 15% of that 30%. [00:05:24] So really you were in no danger of ever running out of money. The client did not like that. Did not heed that advice. Thanked John, for his input and said, they're going with the other advisor. They felt better about the other advisor and trust the other advisor more because he felt the other advisor was being more honest with the data. [00:05:46] Fast forward several months, John gets a call back from that client and says, Hey, I know there's still an account left with you. I need some cash. I want to close out the account. John happily obliges and asked why do you need the cash? The client says to John I've been unable to get ahold of our new advisor via phone or email for the past several months. [00:06:09] In fact, the only way I can get a response from the new adviser was to threaten to file a complaint with the state department of insurance. They are now very stuck. Is it this advisor? It turns out did not have the appropriate licensure. To do what they were doing to comment on what they're commenting on. [00:06:28] Never really ran the numbers, never provided a report, basically just operated out of fear to take advantage of the Smiths and the Smiths. And in a very sad, heartfelt moment said to John, we really should have spoken with you before jumping the gun and moving to the other advisor. We probably could have avoided all of this and have been in a better position than jumping at it. [00:06:53] But we were scared and we felt we needed to act. This is a sad situation because now they're contractually obligated to do some of the other things they're doing. And it's hard to unring that bell, yes, this is a hypothetical. But this happens. [00:07:09] This happens in every town and every city and every state across the country on a regular basis. And there are many laws out there to protect seniors and to protect investors. And they're adding more and more laws and rules all the time. But if people do not heed common sense and purely act on emotion, No amount of laws and disclosures are going to protect them because they will ignore them and move forward because you're driven by your emotion, especially fear. [00:07:41] So if anyone is considering making a drastic move, Please take a step back, take a breath, review, all sides. Talk to everyone. Again. Most professionals are very good people. If you're considering doing something else or leaving them or working with someone else, they're more than happy to work with you. You, give you the pros and cons and you know what, if they don't take the news while you're going someplace else and they become mean or belligerent, or they don't want to work through, they're not nice. [00:08:07] Then they're lost. You probably shouldn't have worked with them in the first place, but anyone who's a professional. , especially if they're licensed as I am and they're a fiduciary, they will listen to you. They will work with you and help you make a smart decision. So please buyer beware. [00:08:24] When it comes to making major moves with your money. The other thing I heard this acronym recently was called halt H A L T. And what it stood for was hungry, angry, lonely, or tired. You should never make any major life decision when you are hungry, angry, feeling lonely, or you're very tired, any major life decision, whether that is calling somebody up, who you perhaps should not reach out to, whether that's making a financial decision, whether that's going in and buying something off late-night television, whatever it is. [00:09:02] Make sure you are in a good mental place before you make any sort of life decision. And don't be motivated by spur of the moment and fear of something encouragin...…

Josh: This is Josh Tirado, and welcome to the Making Smart Decisions podcast. Today, we are going to touch on the most common traditional types of investments. That may sound very boring, but it is not. We will cover it quickly and you will be very well informed moving forward. [00:01:55] So when I say the four types of traditional investments, one is newer than the others, but we're talking stocks, bonds, mutual funds ETFs. Now I do understand there are other things. There's cash, there's gold. There can be real estate. There are precious metals, there's currency. There's a lot of things out there, but when clients come to me and I look over their portfolios of what they have before they've come to me, or they're asking me questions on investing, or they're doing some investing on their own. [00:02:21] What I see time and again, are stocks, bonds, mutual funds, ETFs. The reason being mutual funds are what is in everyone's 401k. And 403Bs. People like to buy mutual funds. It's easier. ETFs have become more popular year over year. Because they follow an index and they are usually a more cost-effective method of getting into investing than mutual funds. [00:02:48] And then you have traditional stocks and bonds where instead of painting with such a broad brush, covering an index, you can be very specific with individual stocks and bonds. So those four things are what I see. Day-in and day-out most often stocks, bonds, mutual funds ETFs. So let's start with the basic stock at its core. [00:03:06] You own a share of stock. You're owning a share or a piece of that company that you're investing in. And that is how you had company ownership. You bought a share of stock. Usually, you're buying multiple shares of stock. It's a company as well. Ideally, the company grows. People think the company's more valuable. [00:03:24] The perceived value of the company goes up. Your share of stock becomes worth more than what you paid for it. You bought it for $10 a share. The company does well and grows that share becomes more valuable because, from $10 to $20, that is a growth stock. There's also a value stock. That is where the company is giving a dividend. [00:03:43] So the company really might, and this usually falls into line with larger, more established companies. Not always, but often this company is doing very well. They're not trying to necessarily grow larger. They have a dominant share of the market throughout there, but they're doing well and they're continuing to try to grow their profits. [00:04:01] And they're passing that along in the form of the dividend. So every year for every share of stock you own, you might get 1%, 2%, 3%. The highest I usually see is four or five, but usually, three, three to 4% is a good dividend. So if you own a hundred dollars worth of stock and it's paying a 3% dividend, you will receive a check for $3. [00:04:23] You can take that money and run. You can reinvest it. And that 3% goes across whatever you own, whether you want a hundred dollars of that shit that stock a thousand dollars of that stock, a hundred thousand dollars that stock you're getting that 3% dividend. So you're making your money on your return by them. [00:04:38] Giving money to you in the form of a dividend, that's really how they're sharing their profits. Or do you have a stock that is going up because the company's value is going up and the value of your share is going up? So at its core, a stock is a piece of that company. Now, things have changed quite a bit in the economy and it is not always based on is this the best company making their product your stock is not necessarily directly tied to how the company is doing. Sometimes it's affected by the industry that the company is in, it's affected by the market cycle. What's popular right now. Is that a popular industry? Is it a popular company? Are they making a popular product or not? [00:05:18] Is it something in demand they're at different times of the year, different things are more in demand. So a lot of those outside forces now coming into play. Or it's not just the core of the company. It's the, it's what that company represents and how it fits into the greater economy. A bond. Is what they consider to be a debt instrument. [00:05:39] So basically the company needs to, or the government or whoever is issuing the bond, the raising money to accomplish something, whether it's growth, whether it's some sort of initiative with governments, municipalities that usually they're building a bridge, they're building roads with a company they're trying to expand. [00:05:57]They're running on a new product line, they're doing something. And instead of borrowing the money, they're raising the money. So you offer a bond. So you're giving the company money in exchange for shares of the bond. Now, again, it depends on what type of bond, but sometimes the value and the prices of the bonds fluctuate too, depending on how popular and how in-demand the bond from that company is. [00:06:16] So the value of your share of the bond can go up or down. But the basic reason you're buying a bond is to get the interest off the bond. Similar. To a dividend being paid to a stock interest, being paid to the bond, yearly basis. So when you buy the bond, you say, okay, I'm going to buy this bond. [00:06:35] And this bond is paying me 5%. So again, you want a hundred dollars. You're going to get a check for $5. Now bond interest is usually paid out quarterly, not annually like stock dividend is, but it's the same general concept. So stock. Piece of the company bond, you're essentially loaning money to the company in exchange for them promising to pay you interest. [00:06:57] The values can change on both. [00:06:59] A mutual fund is a collection of stocks or bonds or a mixture of both and sometimes cash and some other things. But generally speaking, mutual funds hold at least 30 to 50 individual stocks. Usually, more usually a couple of hundred individual stocks, usually at least a couple of hundred. [00:07:19]Individual different types of bonds. So collectively you are saying, okay, I don't have the money to buy all these different stocks or all these different bonds. But if I give my money to the mutual fund, my money is pooled with other investors. They have a big enough pot of money that they can go buy these different stocks, these different bonds. [00:07:36] And then they're being professionally managed. Many mutual funds are managed where they're buying or selling the stocks or bonds. Towards a common goal of either a certain risk level or a certain return. There are some mutual funds where they're very passive or they just buy and hold those stocks or bonds for a year. [00:07:53] And then at some point they might re rebalance it. Basically, you're collectively adding your money together to get broader exposure to stocks and bonds or some sort of custom portfolio within the mutual fund. That is why they're so popular inside 401k plans. There tend to be additional fees on the mutual fund because you have someone managing it and the day-to-day costs of buying it, as opposed to you just buying a stock or buying a bond and potentially paying a small commission to do that. [00:08:19] The mutual plan has an extra layer of fees, but you are receiving benefits for those fees. Now, this product ETF or exchange-traded fund came out a number of years ago. It's becoming more and more popular every year. The exchange-traded fund trades in real-time, every day, like it's a stock. There can be managed, but oftentimes there's little to no manage...…

Josh: This is Josh Tirado, and this is the making smart decisions podcast. Today, we are going to dive into ESG investing. So ESG investing stands for environmental, social, and governance investing. It refers to a class investing that is also often called sustainable investing. This is more of an umbrella term for investments to seek positive returns while having longterm positive impacts on society, the environment, or the performance of ethical businesses at the same time, oftentimes in the past, this was just called socially responsible investing. [00:02:13] A lot of times people see the term SRI or sustainable investing. In its early years, it was mostly focused on green companies and green energy companies back in the day. what that meant was while this was a worthwhile noble investment in a noble cause. The performance was not very good. [00:02:35] The problem is when you just want to focus on nothing but green companies, you are really narrowing your pool of investment companies, investment choices. So they tended to be smaller companies, startups, riskier companies because of their size and their relative youth in business. And also they're all focused on the same industry. [00:02:53] So you were really into this one niche. And if that niche didn't go well because of the current economic cycle or news, all of your green investments would suffer. [00:03:04]So it became a problem. And this was early on when I started trying to use these investments with my clients that cared about this was we had to put aside a certain pocket of their investments to say, okay, this is going to be more aggressive, and this is going to be focused on green. And we still are well-diversified with the rest of the portfolio. [00:03:25] That has evolved substantially over time. Things are just no longer just green investing. Now can have sustainable investing, which happens in a myriad of ways, not just energy. Okay. You can look at energy. You can look at forestry. You can look at waste management. There's a number of things. Also, this gave rise to [00:03:41]a level of investing that oftentimes had social moral or religious filters attached to it. So you're investing with certain principles from the Bible, certain principles from the Koran, or just things you didn't want to get into. There was a category of investments where they did not invest in anything that touched: [00:04:02] firearms, tobacco, alcohol gambling, and some cases even nuclear energy. So there are all these different filters and different ways of investing that you can do now to have your investments being in line with your core beliefs. Things have become easier over time. Things have become more diverse over time and the returns have become better. [00:04:23] But in general, this type of investing, let me just caution you, I've seen work best for some of my older clients who have more money or clients in general who have more money because oftentimes once you narrow the focus down. So tightly to your chosen area of sustainable or social or governance or whatever you want to do within the ESG world [00:04:50] you're limiting the scope of what you can invest in as far as different size companies, different types of companies. And it becomes very niche-focused. So when I see people doing this, even to this day, they're more concerned about, yes, I want to return, but I want to have a positive social impact, but it will not necessarily maximize the return on their money. [00:05:10] So we had to make sure they have enough money to accomplish their goals or enough of their money is invested aggressively enough or appropriately enough to get them the overall return they need. And then this is a piece of money. That is in line with their beliefs and makes them feel good. And we still try and get a return, but generally speaking, the return on investment in this category will trail. [00:05:32]Other investments and protect and potentially more, more traditional type investments. This will trail, this has been changing over time. It's going in the right direction, covering more and more investment options, more and more money managers or doing it. They're offering more ETFs based on this more mutual funds based on this. [00:05:48] So it is very interesting, but I think it's a very important decision and discussion to have. With your financial professional as to how this complained to your portfolio. I do not think that this should be your entire portfolio, and I don't want to rub anyone the wrong way, because I don't think you should invest going against your beliefs. [00:06:08] But at the end of the day, there very well may be a trade-off between your beliefs and the performance of the investments. And you just need to know that going in. And take proper precautions and do some proper planning around it. So it's a great niche of investing, but again, you have to be, you have to be careful, [00:06:25]…

Josh Tirado: I'm Josh Tirado. And you're listening to making smart decisions. [00:01:47]When choosing a financial advisor, there are many different ways that they can charge you today. We are going to go more in-depth and unpack the different options that are available out there, and which option is best for you. [00:01:58]I'm going to do three broad categories. There's a person who is paid on commission. There is a person who is what they call fee only. And the last option is an advisor that is fee-based. I'm going to save fee-based for last because I admittedly I am biased because I am fee-based. [00:02:18] And from a compliance standpoint, let me say right now, I don't know which one of these is right for you. they are very individual decisions, and each one of these options has different pros and cons. And you have to decide which one is right for you and your situation. [00:02:36]Let's start with, somebody gets paid via commission. They are a sales person inherently. There is nothing wrong with salespeople. The world does not go round unless things are sold, and people buy, but understand that person's responsibility first and foremost, lies to the company whose product they're selling. [00:02:55] secondarily; their responsibility lies with you. But first and foremost, they're a commissioned salesperson representing a certain company or a certain product or a family of products. [00:03:09] When you're doing your due diligence and looking to hire somebody, look on their website, but not just on the first page, dig down a little deeper. There's usually a lot of extra disclaimers around commission saying that they are a commission, and they are selling certain products. [00:03:24] Just know that certain things pay more than others. And the responsibility, first and foremost, is the company that they're representing, not to you as the consumer. Next is the complete opposite end of the spectrum and advisors that are fee only. This is often viewed as best for the client or taking the high road. [00:03:47] So some fee-only advisors. Charge a fee for giving advice; whether that be an hourly or annual retainer, they're purely giving advice. They're charging you a fee. They do not handle the investments in the insurance or anything in any way, shape, or form. Then there are fee-only advisors who charge a percentage of the assets that they manage for you. [00:04:11] Generally speaking, they have higher minimums because you need to bring over a certain level of assets for them to charge enough for it to be worth. their time as business personnel manage the assets. So fee-only can be a fee for the advice. It can be. I'm just charging a fee for the assets that I manage, or it could be both. [00:04:29] It could be a separate fee for advice. And if you need the asset management, they switch over and put that hat on. And there's a fee for the separate skills and time that goes into managing those assets. Most fee only people I've met are very proud of being feeling, so they do not handle anything. [00:04:47]that is commission-based whatsoever. It's purely a fee that is cut and dry. That is easily disclosed. And that is option number two. Now we're gonna go to option number three fee-based, which is what I personally am. And what I mentioned before, I'm biased towards. Over the past 20 plus years, I've come to the conclusion that I feel fee-based at this point in time is the best and offers the best outcome and the most options to my clients. [00:05:19] I am charging a fee for the financial plan for the retirement plan, for the advice and the 401k for the advice on insurance, for the advice on whatever we do. And we always start with the plan because I don't know what to suggest to you as a course of action until we have a plan. [00:05:38] And that plan is the client's plan. That's your plan. You're telling me your goals, your dreams, what you want to accomplish. We are then taking them and backing into them. How can we achieve those financially? And then we discuss what the options are and the different strategies we can take. To achieve those goals. [00:05:57] And if those goals are achievable or if they have to be edited, but we are looking at your plan to achieve your goals. From there, we can look at what do we have to do strategy-wise to accomplish those goals and strategy-wise, what works best for you? What makes the most sense? What investments are right for you? [00:06:14] What insurance do you need in place to backstop your plan? What level of savings things do you need? What is the biggest? Threat factors that could derail your plan that we have to look at them and plan for whether that's 401k, social security investments, whatever it is we put together. [00:06:33] The plan first, you are paying a fee to get that plan. If one of the recommendations is that we should have some actively managed money, and you want me to manage the money then again, just like fee-only, there's a fee there to manage the money. There's a fee there to put together the plan. [00:06:52] Cause you're basically paying for the time and the set of skills to put all that together. But then I'm also still able to do commission-based products. Now I do not lead with commission-based products. I don't use them that often, but I feel that I would be doing a disservice to my clients if I completely excluded that set of investment options that are commission-based because. [00:07:16] There are some investments out there that the structure and they're normally insurance-based investments. The structure, those investments do not allow them to be fee only. They're set up to charge a commission. There is no way to waive the commission and to just charge a fee. In some cases, I can waive the commission. [00:07:37] However, the company that's providing that product does not change the cost to the end consumer. They just simply. Keep the commission instead of paying it to me, life insurance, for instance, and there's a commission on term care. [00:07:52] There's a commission. There are certain annuities that provide guaranteed income that you can outlive that are part of your liquidation strategy. To provide income and retirement. There are certain other investments that are set up as on a commission basis. Now some of them are now at a spot where they can be fee-based instead of commission-based and I'm gravitating towards that. [00:08:16] But there's a whole category of products out there that are structured for a commission, and there is no fee option. I don't want to exclude them and say that the clients do not have access to all these products because of their compensation. [00:08:30]it is disclosed in advance that if we do these certain products or I'm recommending these to you as part of your plan if you move forward with it, these certain products or these certain strategies, There's a commission that will be paid. And here's what the commission is versus the fee. So it is disclosed. [00:08:49]. And oftentimes, the reason we go with the commission versus the fee is the commission is a onetime payment. At the same time, the fee may be ongoing for five, 10, 15 years. And the fee option actually becomes more expensive over time than the commission option. That's also something that I'm very proud of. [00:09:07] The industry is working to correct where they're saying, okay, if you charge a fee, you can only charge a fee for a certain amount of time until it reaches what the commission option would ...…

Josh: This is Josh Tirado. And on this episode of making smart decisions, we are going to touch on umbrella insurance. So let me dive into the ever-exciting fun world of property and casualty insurance said no one ever. Auto insurance, homeowners, insurance, renter's insurance. These are things that are necessities. [00:01:54]And oftentimes people overlook umbrella insurance. So let me just quickly touch on this because this might actually be the coolest, most useful insurance item that you don't have or never heard of. Umbrella insurance, the reason I call it that is it's an umbrella of protection over you. [00:02:09] It's a personal liability insurance policy for protection. And this comes into play. Let's say someone is injured at your home. Let's say you're in a car accident, someone's injured and somebody wants to Sue you there. There are certain limits and they're very low limits on your homeowners on your auto policy. [00:02:27] And they're suing you personally. So this personal liability protection kicks in and covers you in case of an unfortunate incident that requires someone taking legal action against you. Now that being said, the reason I think underutilized is it provides a great value for $1 million of coverage. [00:02:46] Most companies charge under $300 for the year. oftentimes some around $200, you can get a million dollars of liability coverage for the year. And I think that is that's an outstanding value and many people do not have it. And I have this coverage. As a matter of fact, there was a period of time when I was recommending this to every one of my clients. [00:03:06] And it got to the point where my clients were so aggravated that their insurance person had not recommended this, that they came back to me and asked if I could sell it to them. I said, no, I don't do property and casualty, but it did lead to a thought where I did take on a partner. And we started a property and casualty insurance agency. [00:03:25]We started one week. We grew it and we sold it. So despite the fact that my, my practice as a financial advisor is what I enjoy the most. And that's why I've continued with it for 20 plus years. There was a period in time where I did have a partner and we also did insurance. So I'm pretty well versed in property and casualty. [00:03:44]And trust me on the umbrella thing. It is very useful. Here are the common triggers and the people that most likely should look into it. If you have children, especially if you have children and you have a pool or a trampoline, because if you have children and your children have friends and people are playing, oftentimes somebody can get hurt. [00:04:02] Trampoline just increases that risk and a pool, whether your children or not exponentially increases that risk. So if you have a pool, trampoline, or children, umbrella insurance is a very good idea. If you have teenage or early twenties drivers in your household. So someone who just got their license up to say the early to mid-twenties, who's driving and still lives at home, or is on your policy. [00:04:25] Very oftentimes there when leading causes of accidents and they're one of the leading causes of lawsuits stemming from those accidents, and this can help cover you and your household as well. Young drivers. Children a pool, a trampoline. And then lastly, I'm going to say a business owner depending on your business structure, you can have some liability protection and coverage there, but there's no law stopping people from attempting to Sue you personally, as well as professionally. [00:04:52] And having this coverage in place it is a really nice backstop that has a really nice safety net. So again, children, business owners, or just extra peace of mind for anybody out there for a very small amount for the year can provide a lot of coverage. So my recommendation is that most, if not all people at least look into getting umbrella coverage, if not securing it, because I think it's a real value, especially in this society today. [00:05:18] That is as litigious as we are.…

Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Toronto. And today, we're gonna touch on the importance of a financial advisor. If you're getting divorced now, this advice applies equally to both men and women, but in my 22 years of experience, I believe that men need to heed this advice even more. [00:01:25]So the divorce process is often awful and draining and takes too long. Whether that takes too long, the six months, or whether that takes too long is three years until everything is resolved. Whatever it is, it generally takes too long and feels way too long, and is draining at that point. You have many other things going on, and you may not be making the smartest decisions. [00:01:45] I'm talking about one for your current money and investments and to whatever's going to happen with assets being divided up through the divorce. I've personally worked with some people where there's a big discussion about what they're gonna do with the house. And it really came down to one person, loved the house, one of the house, the person didn't want it, which is great. [00:02:03]But the person that wants to stay in the house was like, okay, I where'd, I get the money from, to pay off the equity in the house to the other person. They thought they were gonna have to sell the house individually assets. I asked them. Do you really like the house? Their response was yes. I love the house. [00:02:16] I want to stay here. Bearing in mind that this is the man in the relationship, I showed him a way to use money from a different source to give the property the proper amount of equity. To his wife so she could get a different property. And he was able to maintain the house, and it was affordable. He was thrilled because he thought he had to sell the house and lose the house that he works so hard to remodel and get the way he wanted, and he loved it, and she did not, and she wanted to move on, and he thought he was gonna have to lose it. [00:02:43]He did not. I've also run into people that through the divorce, if I'm divorced, the decree said one partner or the other partner, a set amount of money. It never said where that money had to come from or what form it was in. And in talking to partner one, they just wanted to write a check from the first available thing to give it to partner, to make the whole thing go away. [00:02:59]But in hindsight, that would have cost them a lot of money in taxes and penalties and put them in an inferior position. So we were able to discuss, okay, here's where we should pull the money from. And we did it in a systematic, intelligent way. And it's saved partner, number one, quite a bit of money in taxes and potential penalties partner. [00:03:18] Number two, they got everything they were owed and in a timely fashion. And we're happy with getting the money, and partner one realized that if they'd done the way they were going to do it without first consulting with me, it would have cost them far more in taxes and penalties. And we were able to avoid that. [00:03:33]really. Work with a financial advisor. It could be that depending on the relationship, both parties may want to keep the same financial advisor, or you might want to find somebody else. I see pros and cons to both or the past several years of my clients. Some clients have gotten a divorce. [00:03:47]They both retained me. We had a relationship, though. Going back to the prior one case, 10 years, the other case, 15 years, we worked together before the divorce. And they both knew that no one knew the situations better than I did. And they both hired me separately. And we split up the relationship and the contract so that each in our separate contracts, I couldn't divulge Anthony on either side. [00:04:07]And I worked with both sides. I knew the kids. I knew the husband and wife. I knew what they wanted to accomplish, and we worked together, which helped make it more amicable, and everyone got what they needed. And we were able to work with both sides. Now, the attorneys, still two separate attorneys, got their fees. [00:04:22]And it still dragged on longer than it needed to. But when the rubber met the road of where money was coming from, what was going here, what was going there, we were able to work together, sorted out, and it worked very well. I spoke to the clients that have also divorced the same thing I worked with both sides. [00:04:35] And some of them were a couple of years removed from divorce now, and both sides continue to work with me. And it goes smoothly. If the divorce is much more contentious or much angrier, it doesn't hurt that one side. It's a different advisor, but I really think that both people should have some advice. [00:04:51] So it's handled properly. And honestly, especially when the divorce decree comes down from the court and says, X number of dollars needs to change hands. And it doesn't say where it's from. It gives us a great amount of planning to do to protect both parties. And oftentimes, to the divorce decree, we need to get X number of dollars in insurance. [00:05:08]Life insurance in place to support the divorce decree. At that point, we take a look at, okay, what sort of insurance do we already have? What sort of insurance do we have from work? And what are the most cost-effective options? If we have to add more in what type of insurance do we have to add to the portfolio to fulfill those obligations w we can set that up and make that happen as well, instead of the person who's trying to. [00:05:28]Shop around on their own online. We were able to do it in a much more systematic, intelligent, and cost-saving manner. The reason I want to focus on men is this isn't necessarily reflective of my client base. But nationally, the number I see is that oftentimes the man leads the financial discussions with the advisor. [00:05:47]when the divorce occurs, the wife will often get thrown adviser, but the men tend to circle the wagons and internalize and don't reach out to their advisor for help. And I think they really need to reach out to their advisor for help, or if they're advisory to someone who helps them manage some money or make some investments. [00:06:03] And I don't have a true relationship where they're meeting with the person several times a year and doing the planning. They need to start that you need to find someone who can do true planning and work with them to help them through that process. So men don't. If you're going through a divorce, please don't ignore that. [00:06:16]Take care of your own mental health and take care of your financial health. And consults and professionals. And anybody going through a divorce should have a professional. I see it where the men often neglect that aspect, and it's not good financially for anyone involved. So that's my 2 cents on the divorce.…

Josh Tirado: [00:00:20] Welcome to making smart decisions podcast. I'm your host, Josh Tirado, and today we are discussing a very fun topic. The topic of what do clients like the most? In a recent survey of my clients, the number one and number two items they liked the most and why one was the educational aspect. Where we take complex things, make them simple, actionable, relatable, and explain how this will benefit them or discuss those two or three options and let them make an educated decision on which route they want to take that they're most comfortable with. So the educational aspect was big. [00:01:37]The second component was constantly looking for something new to add value, whether it's an investment strategy, whether it's a product that's out there, whether it's a change of philosophy, whatever it is staying current. And I really think that's one of the main advantages of working with an advisor, and I'm biased, but working with a fee-based advisor. [00:01:54]Who is working off of a plan with you? Not just managing assets because we're having serious discussions. For my average client, three times a year, and we're going over different things. And each year, we try to bring some additional value. I might not have a brand new topic. Every three or four months. [00:02:07] We might not need one, but we're constantly searching for something. So one finding unique. Things that can add value to the client and then to being able to translate those unique opportunities or products to the client to make an informed decision. And I want to touch on the product side a little bit of it. [00:02:23]Because again, this comes up time and again, and I make this comment jokingly to many clients, but I often referenced the old golden rule. And I slight twist on it. So I would say, the golden rule. He who has the gold makes the rules. And I know that it's not the true golden rule, but it's very applicable while investing as your money grows. [00:02:41] And as you put more aside and reach different levels of wealth, more opportunities pop up. I can offer clients who have an account balance of over a hundred thousand dollars that I can't offer to someone with an account balance of 25,000. I can offer things to someone with an account balance over 500, over a million, or at different income levels. [00:02:58] There are different things out there. And everyone grows and gets access to these things eventually if the money keeps growing. But what I want to say that there are certain things that we can offer to most people, Almost everyone. It depends on your situation, but there's a lot of value out of things. [00:03:11] And I want to touch on a few of them very quickly. One of them is 401k management. The vast majority of people out there that are still working have a 401k. It doesn't apply to everybody. It's currently about a third of the client, a third of the companies out there offering 401ks, but it's growing dramatically every single month is the ability for the advisor. [00:03:28]Working with a money management firm to have a contract with the 401k company and your employer to be able to go in there and manage your 401k on your behalf. So if you have a self-directed option inside your 401k, which allows you to create a little brokerage account, that is the window we were allowed to use, and then we have a signed agreement. [00:03:45]what we do is we go in through that brokerage window. And we're then able to put new investments in your 401k and actively manage those investments. So it used to be that this was all on you. And in a lot of cases, it still is. Like I said, only about a third of the companies out there offer this, but for the ones that do it, it's a tremendous way to have more choice in your 401k and someone watching it for you in real-time. [00:04:06]for my clients have been using it over the past two years, results have been. Very good across the board. So I'm quite pleased with it, but either you have an advisor helping with the 401k or an advisor helped me with the 401k and can directly access the 401k through a money management firm. [00:04:21] And help you manage it. Now, when I say directly access it, we're not asking for a username. We're not asking for a password. We're not taking control. We're assigning all the appropriate forms as though you're opening up a brokerage account. That account is within your 401k, and we're using an amen money management company. [00:04:36]Just like we may be using a third-party money management firm to help manage some of your money outside of your 401k. We're using a similar firm to help manage it within your 401k. That's a great advantage. And another thing is alternative investments. Now you do need to have a minimum net worth and a minimum household income. [00:04:51]Either both or one of the other has to be even higher, but as long as you have, as long as you reach the minimums, you have access to alternative and investments. Now, so alternate investments are great. Some are not. Some have received a bad rap in recent years. Some have been a real advantage. [00:05:03]Two people, but they're often in things such as currency, real estate, several oil and gas partnerships. Sometimes I know a lot of those. Were used heavily in the eighties, and I had a lot of trouble. But there are several different things out there. Some of these alternative investments are restrictive because they're privately held. Some are in mutual fund form. [00:05:20] So they're very illiquid and publicly held. So there are a number, different ways to do it. But what I suggest is it's not the same old as some stocks have some bonds. Even at a more modest level of money invested, you can have access to stocks to bonds. Still, also if you're interested the real estate and some of the other alternative investments. New ones are coming out all the time now. It takes a while for them to get, be regulated, and be approved on different platforms to be sold or used in your portfolio. [00:05:44]But there's a lot of options out there, and new ones are coming to market all the time. Recent events or the past year with COVID and the economy, different things have really limited some of the alternate investments for folks. And some have just made the very liquid ones available and the illiquid ones not as available now. I don't want to paint anything with too broad of a brush. [00:06:02]Some of the liquid ones have many advantages and are great, but there's no one size fits all. Each thing is on a case-by-case basis, but the alternatives are great. So far, we've already touched on helping you manage your 401k, some alternative investments that are not as correlated to the rest of the market and get your returns from a different type of asset. [00:06:17]That's really great. I want to mention some, there are some annuity products out there, and they're becoming so popular. I think they'll eventually end up with their own asset—class their own category. Many people refer to them as buffered products, and essentially you have an annuity where you're still offered upside potential where you're tracking an index for the market. [00:06:33]But if the market goes down, the insurance company issuing the annuity has a clause in there where they will absorb the first certain percentage of loss. So if your account, a lot of them that I've used are, is 10%. So if the account goes down 10%, they absorbed the first 10% of loss over the first year. [00:06:49] there's a trade-off there. You're also not receiving a hundred percent of the index. So you're tracking the SME...…

Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Toronto. And today, we are discussing pensions. Is it a sheep, or is it the Wolf? Or is it just a Wolf in sheep's clothing? Let me jump into the pension thing here and try to delineate a little bit. [00:01:19] When I am talking about pensions. I am talking about pensions from companies, not from the government, and quasi I mostly pension from smaller branches of government. So not necessarily federal pensions, but maybe something along the lines of that, of a state pension. [00:01:35]The vast majority of people no longer have a pension 40 years ago, the vast majority of people. I had a pension, and that was a big push on retirement. Pensions became very expensive. They were hard to manage. They went away. The 1980s saw the rise of the 401k, and that really replaced the pension. [00:01:49] So it used to be that, Hey, I had a pension, the company put so much money aside. Maybe I contributed to it. Maybe I didn't, depending on what setup you had. And when you retired, you got a certain amount of money, which was guaranteed for all these years in your retirement. And it was awesome. And everyone worked towards their pension fund people for years joked about the gold watch, and I got a pension. [00:02:05]When I retired, the pension became hard to manage. It went away. And the onus of retirement transferred from the company you worked for over to you with the rise of the 401k. Because now you're consuming your money. You're getting a match from the company. But now you have to manage the investments that are in their project. [00:02:21] How much is going to be in there? So it's no longer the company during a pension taking care of you. It's you taking care of your own money? Pensions used to be far and wide, very accepted, very common pensions are not that anymore—several large companies over the past 10 years. [00:02:35]Have eliminated their pensions for people under a certain amount of time, say employees are there for less than five years, less than 10 years. And new hires, no pension people that have been there longer than that, the pension's there, but it's frozen. And then you have some older people that they know will be retiring out or taking a package in the next five years. [00:02:50]And their pensions remained fairly unchanged, but the companies had moved away from pensions. Let me discuss that for the few of you out there that still have pensions. Let me touch on that from a private company. Again, I see this left and right with my clients. The pensions are being frozen. [00:03:02]The pensions are going away. They might give you a lump sum, payout of some money towards your 401k, but then the pension is going away. So when I am doing retirement planning for my clients and have a pension, what is becoming increasingly popular as a stress test is. We don't count their pension at all. [00:03:17]It used to be that we would say, what if something happens? You don't get the projected pension cause it's 20 years out. And maybe the company doesn't do as well, or maybe they freeze it, and we would show them a reduced pension. My clients are savvy. [00:03:28]They're smart people. And not just smart because they choose to work with me. But because they are smart, savvy people. We're looking at the associated risks with the pension and the companies' health, they're working for. Even the healthiest companies are getting rid of them. [00:03:40] So we've actually started just eliminating the pension from their retirement planning projections. And we want to make sure that they can afford to retire on their own. And if they get the pension, great, it's gravy, but they're not relying on it. So I caution you if you are not doing. [00:03:54] a [00:03:54] Josh Tirado: [00:03:54] separate IRA or Roth IRA or 401k, and you're just relying on a pension. [00:03:59] And you're not within five years of retiring. That will probably not work out for you as well as you initially thought. That is the overwhelming trend in the United States today. So please be very careful again, we don't even consider their pension. If they're more than five years out from retirement or dramatically reduce the pension projection, the federal government will do everything in their power to stay. [00:04:20] And I'm jokingly saying, stay in business. But the government can raise taxes, collect more money and continue to govern the people, and make their pensions work. They make the pensions happen now—several government pensions of receiving the pension. You're not receiving social security, so you are not able to quote-unquote double dip there. [00:04:35] So please bear in mind that, Hey, if I'm getting this pension, you're not getting social security again. The pension there is more reliable, but we don't know how much you're going to receive from that pension, or could it be changed in the future? So please, once again, take a little control, take some more of the money into your own hands and do some other outside investing, just online, a pension. [00:04:53]Then we have this kind of strange hybrid scenario called smaller pensions where it's state-run. Some states have done a very good job of managing their pension fund. And the ones that pop into mind first are just the States that are managing the pension fund for teachers, police, firefighters, state workers, that sort of thing. [00:05:11] some other States have horribly mismanaged it and even passed rules where they were allowed to borrow money out of the pension plan, to cover expenses and nothing to do with the pension, with no requirement to pay it back and no requirement to pay themselves any interest. So now, not only is that money has not been returned to the pension plan. [00:05:25]But that money was not invested. Earning return for the pension plan during that same period of time. And now you have a woefully underfunded pension, which will result down the road in people receiving a reduced pension. Potentially, the States could even default. There are some States that when COVID hit, and they were running this so much economic, no grant, they had already been in economic trouble for the previous 10, 15, 20 plus years. [00:05:46] But COVID hitting amplified it to the point where there are some States considering, and they publicly announced this, the governors publicly announced it, that the States would consider bankruptcy as a way to restructure the debt and what the obligations of the state were. It would be interesting to see if those pensions were going to, depending on the bankruptcy court, if those pensions would be protected. [00:06:07] Or if they only had a fund the pension with some minimum amount of money or who knows what was going to happen. But all I know is that if I was relying on a pension and I plan to receive a pension from the state for my years of hard work, and that state was in such bad financial straits, it was considering going bankrupt. [00:06:25]And the pension fund is massively underfunded. I'm not going to feel too comfortable about that pension. And I know a lot of people that are working on getting their 25 years, so they can get out and get their pension, but there are talks repeatedly about what's going to happen with that pension. [00:06:38]I know some teachers in that position. I noticed some police officers in that position and some firefighters in that position. It's scary because, in many instances, they don't have separate money...…

Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Tirado, and today we're going to discuss sequence risk or sequence of return risk or something that sounds really boring and dumb and not useful to you. But in reality, it is actually a major major risk to your retirement and your investments. [00:01:26]That's what we're gonna jump into today. So let me give you the definition of what sequence risk is. According to Investopedia, sequence risk is the danger that the timing of withdrawals from your retirement account will have a negative impact on the overall rate of return available to the investor. [00:01:40] Let me boil that down for you. Timing is everything. When you pull your money out of your retirement accounts can affect how much it is their long-term. Now that makes sense to me, but in reality, it's just math. Okay. It's math. It's boring, but it can really affect you. Obviously, the stock market and your investments, whether it's stocks, bonds, real estate, what have you? It does not go up in a straight line. It can go up and go down. It can go sideways, different things. You can have several bad years in a row followed by several good. [00:02:11] You have several good years followed by several bad. You can have interspersed and in differing magnitudes. Whenever you hear people talk about the market, you often hear, Oh, over any 10 year period, the market has returned X or Oh. Since people start investing in the market, it has averaged this sort of return and gone up. [00:02:28] Yeah. That's an average. That is not what you're getting every year. It can be more. It can be less. I'm amazed that people jump in, and they're like, after so many years, Hey, the market's supposed to average this. I don't have that. I have this. It could be more, it could be less, but that's based on timing. And that's based on the sequence of returns within the investment. [00:02:47]Now that gets magnified. When you go to retire, and you're going to pull your money out. Let me take this a step further. In my world, you see many things to say, sequence risk sequence of return risk That sort of thing. When I do a financial plan for someone, and we're focused on the retirement and the withdrawal, there are two main things in this sort of realm that we stress test for one is called bad timing. [00:03:07] And I think bad timing is the most practical implementation of sequence risk. Bad timing says, statistically, the worst time to lose money. Or have poor returns is in the first two years of retirement because it's at that point that you have simultaneously stopped, contributing, started withdrawing. Now your seed money, which needs to grow like a snowball rolling downhill, has been reduced by less than optimal returns. [00:03:33] Okay. Maybe you were planning on 8%, you only got 4% of your planning on something positive, and you actually went down and lost money. So those first two years are imperative that you really protect them because you can't dig yourself into a hole there. After all, there's no more money coming in to fill in the hole, and that money needs to grow to protect you. [00:03:49] Long-term. One of the main things that we stress test against is bad timing, where we take a look at what you're invested in and the likelihood that you'll lose money. And, those first two years of retirement, when I say lose money, It's not guaranteed. Still, historically we can look at how the investments you're holding have fared in different years and how much on average they'll go down, and we can look at, okay, here's the likelihood that they will go down in this first two years. [00:04:11] And here's the percentage they could go down. One way you get rid of sequence risk or the bad timing risk is to diversify properly. Because rarely does everything go down or go up at the same time. So we start to reduce the overall amount of risk, and we properly diversify. And by doing that, we can dramatically reduce the chances that you will lose money in those first two years of retirement, which is the most important, but secondarily and almost as important is we run a Monte Carlo simulation. [00:04:40]When I say the chance of you making a certain amount of money for a certain number of years, you're not living your money, is based on this Monte Carlo simulation. What do you mean? The money? Carlos simulation in my world with planning takes a look at. [00:04:51]Not just your overall portfolio, not just the average you're holding, but it takes a look at the different types of stocks, the different types of bonds, the different types of real estate, whether it's large-cap, small company, international, whatever it is, it looks at all. And then it takes a look at historical what they've done as far as when they've gone up when they've gone down. [00:05:09]And what is the likelihood of that happening? And the Monte Carlo simulation runs a thousand plus sometimes depending on what you're running a couple of thousand different scenarios with different sequences of returns. So a lot of good returns in the beginning followed by bad, a lot of bad followed by good, and vice versa. [00:05:24] And it does it for every asset category that you're currently invested in. And then, we'll run a scenario showing that for all the asset categories that we plan on you being invested in. At the time of retirement, you will give you your probability of your money lasting and how much is in there. A lot of the free planning software that's out there takes a look at what average returns are and says to you, here's the number you need to have when you go to retire. [00:05:46]But that number is really a moving target because that number might be there on the day. You retire. But your life expectancy after you retire may be 30 years. So that number is one snapshot. One day, we need to take a look at what you are invested in overall, how much you need to pull out of there, what sources you're pulling it from. [00:06:02]And this sequence of return risk over five, 10, 20, 30 years. In fact, we look at the sequence of return risk. As to your proper asset allocation while you're still accumulating money leading up to retirement because in what order you get, your returns or losses in the market affect you even leading up to retirement. [00:06:19]It's amplified in retirement. But it's all-important. So when you deal with the professional, we'll stress test for bad timing at the beginning of retirement. We will run a Monte Carlo simulation to stress, test you for the sequence of return risk during your accumulation phase. And we'll rerun it for the projection when you retire in your withdrawal phase to make sure that money will last. [00:06:40] And then, on top of that, we still make sure that at the proposed end of your plan, there is still extra money there. There is still a buffer because you need more money. It would be best if you had that safety net when you're just trying to figure out a number or look at some free software to give you a number of some projections. [00:06:56]I have never seen it where it considers all of these different variables and stress tests it for you. And that's really what you get with the professional. And that's really important. So sequence risk sequence of return risk may sound really boring. But if you don't address it, it could be one of the number one detriments to you having a successful retirement. [00:07:13]…

Joe: Hello, and welcome to the show. My name is Joe Woolworth. I produce the making smart decisions podcast with Josh Tirado. I'm here today with Josh Tirado and David Morgan. The founders of the Amplify program that we are going to learn about today. [00:00:31] So let's get started, guys. Josh, tell me a little bit about Amplify. [00:00:35] Josh: So amplify as a program that we created, and our slogan is your immediate and sustainable giving strategy. [00:00:40] Joe: Great. So you guys are going to work with individuals to help nonprofits by helping individuals give more money to nonprofits, basically. [00:00:48] Josh: That is correct. Our end goal is to get more money to the nonprofits for today and in the future, hence our immediate and sustainable giving strategy. [00:00:57] Joe: how did you guys come up with this idea? [00:00:58] Like, what was the logic behind partnering up on this? [00:01:01] David: . I've been in the nonprofit space for a while, and one of the problems I think this solves is. Everyone's going after more followers, and it's really about quantity. And that can make you look good, but a lot of nonprofits have a problem getting to the depth, and connecting to givers is how they'd like. [00:01:18] And so I think this can do that. It offers a tool to say, yeah, we'd love for you to, for example, buy our coffee. But what if you can connect with us more deeply, even in a generational way. And so I think this removes an obstacle in being able to do that. [00:01:33] Joe: And David, you have experienced in the nonprofit world. [00:01:36] David: Yeah. Around 2013, my wife and I founded love abounds and just really briefly. So we do village development in Zambia that looks like clean water. Right now. We have two homes for abandoned children, and we have a women's empowerment project that teaches women to be entrepreneurs themselves by farming chickens. [00:01:55]That, and then. Also, really quick to Condi coffee is a coffee company that we started that funds all of that or helps fund all of that. So we've been in the space for a while, and we really enjoy it. I love entrepreneurship in all its forms, and I liked that you. [00:02:09] Joe: guys, obviously. Are passionate about people giving to nonprofits because it can make on people's, and now you're forming this amplify program to help people be better-equipped givers. [00:02:20] So tell me about the strategies on how you guys are going to help people amplify their giving. [00:02:29] Josh: So I'd like to touch on just two examples of two topics of two strategies we can use. And these strategies really came to light because, as David mentioned, he's been in this space or working. [00:02:38]As director of a nonprofit and working with nonprofits for a long period of time, I've been working with nonprofits and specifically several churches for the past 22 years to help with giving. And the same problem came up repeatedly; where there's some legacy giving where people wanted to give a family gift when someone passed away. However, all nonprofits need operating capital. [00:03:00] Now they need money. Now it helps them for their mission, not just necessarily in 20 or 30 years. Over the past 20 years, we see the same problems over and over again. And Dave and I thought you know what? There has to be a better way. And what if we came up with a formalized program to help the nonprofits and put together a nice structure for their giving. [00:03:18] And that's where we originally came up with amplify. So two examples I want to discuss one helps to amplify the current gifts. The other one helps to amplify future gifts, and there are several different planning strategies we can utilize. But here are two prevalent ones. The first one is called the donor-advised fund. [00:03:35] What this allows the person to do. This is the person donating the money. They can donate virtually an unlimited amount of money into a donor-advised fund. Now, the donor-advised fund sounds technical sounds nice. The platform I use, they have actually branded it as the giving fund. I think that's a more accurate description. [00:03:52] The donor can donate a virtually unlimited amount of money into the fund. And they receive a tax break on the entire amount that they contribute to the fund. Now, it says the fund, and it's not one mutual fund. It's actually set up as a brokerage account. They have control over managing and working with the professional to manage the brokerage account's investments and grow it. [00:04:13] And from there, they determine. Which qualified five Oh one C3 charities will receive some of that money. And if they're having a great year, they can donate more. If they're having a down year, they can donate less and donate to one charity. They can donate to multiple charities. You have total control over it, but the donor receives Benefits cause he had a huge tax break. [00:04:31] They can manage the money. And we also encouraged them to turn it into a legacy. Play, involve the children. If they're older, involved, the grandchildren, get them involved. So that way, they're getting in the habit of donating and enriches their souls. And it's a great family thing as well as the actual dollars. [00:04:48] And then when the original people pass away, they can even leave it to the family, and the family can continue to manage it and donate to the charities, and you can create a great legacy. But what's great is you're managing the money. You're growing the money, but you're giving it now. So you can see what's happening. [00:05:03] You can see the fruits of your labor and the fruits of your donations with the nonprofit and the nonprofit benefits because instead of waiting for the person to pass away to receive the gift, eventually, you're getting more money now. And if that person was going to donate a set amount of money, now they're getting a tax break on that money, which allows them to donate even more money if they want to kick in some of those tax savings and it's invested. [00:05:24] So that gift can really start to snowball year after year and create a perpetual gift. So the donor advice fund slash giving fund is a great strategy where everyone benefits now, instead of necessarily in the future, [00:05:37] David: from a non-profit perspective, I think many times, donors can feel like it's really risky to give a big gift. [00:05:46] And that makes sense. So what you want is somebody who has the expertise of having done this before the financial aspect, the estate planning aspect. To be able to say, yeah, you're in safe hands. This is what we can do in a very predictable way. It's not giving the non-profit a large some, and we're not sure what will happen with it. [00:06:07]I think nonprofits are really leaving a lot of money on the table just because. There's no program to guide and answer questions from this perspective. [00:06:18] Non-profits are just—overworked, underpaid. And I think what's daunting to them is doing a whole nother campaign to raise more money from the same people who usually give them money. So that's an obstacle they're trying to overcome. What's beautiful about this is we don't have to be a part of some giant campaign tha...…

Josh: Hi, I'm Josh Tirado. And on this episode of Making Smart Decisions Podcast, we are going to touch on the emergency fund. What is it in? Do you need one? Most financial advice starts with the basis of you should have an emergency fund. And a lot of people just view that as a savings type account and yes, you should absolutely have that it might seem pretty simple, but let's dive down into that a little bit deeper when it comes to the emergency fund, the old rule of thumb was you should have put aside three months worth of living expenses. [00:02:12] Not three months worth of your salary, the three months worth of your bills, and your living expenses to get you through something tough [00:02:19] Over time, what I tell my clients is that has evolved and I recommend a good starting point is three months' worth of living expenses. Ideally, you want to get up to about six months worth of living expenses. The reason being if you suffer a sickness or an injury or some other sort of serious issue, and you cannot work, studies show that most people are back to work within six months. If you could have six months' worth of living expenses, put aside most illnesses and injuries that you'll be able to recover from them within six months and get back to them. [00:02:51]So I think the emergency fund is important. I think you should shoot for three months' worth of living expenses, build up to six months worth of living expenses. And then depending on your situation, take it from there. More is not bad in that sort of situation. But also bear in mind. It doesn't just have to be sitting there in a savings account. [00:03:08] It could be invested in something very conservative, earning you more money than a savings account, and still be relatively liquid where we can get a transferred back into your bank account or into your hands within. 24 48, 36 hours. So if there really is an emergency, you can still have your hands on the money within a day or two. [00:03:29] It doesn't have to be where you need that money that day. So for many of my more conservative clients, when their emergency fund continues to grow, we will keep a portion of it in savings or checking as cash. And the rest of it, we do start to siphon it off into an investment account where they can earn something on it, and it is still. [00:03:48]Very accessible and relatively liquid. do think the emergency fund is a basis for very many people. I think you just start with that. And I think the three to six months of living expenses is also a good rule of thumb.…