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Summary:
Are you saving for retirement? 💰While it can seem daunting and like it’s far away, it is critically important to get started as early as possible. Joshua Winterswyk, from RPA Wealth Management, talks all about saving and investing. He breaks down the options for self-employed individuals and how to have a long-term mindset around money. He also shares a holistic approach to managing your risk and assets.
Topics on this episode:
Why save/invest?
What is wealth management?
How do I stay focused on the long term?
Main take away: Whether it’s a little or a lot, saving money will help you financially prosper when you are ready to hang up your dog walking shoes!
About our guest:
Joshua had planned to study medicine—until a high school economics course changed his mind. That course ignited a passion for personal finance that propelled him to earn degrees in business and finance. After graduating from CSUSB, he launched his career in finance at Citibank—but soon realized it wasn’t quite what he wanted. Though he appreciated the wide-ranging experience the job provided, he wanted to help people more comprehensively than his work allowed. That’s when his mentor and RPA’s founder, Brent Pasqua, reached out to him.
Today, Joshua helps clients achieve their goals by offering the comprehensive financial planning he had long envisioned. As an advisor, he helps meet the financial and investment needs of clients, including retirement planning, budgeting, and insurance analysis. He loves the process of putting a plan together that his clients can easily understand and deepened the impact he can have. Joshua attained his CERTIFIED FINANCIAL PLANNER™ designation.
Joshua lives in Upland, CA with his wife, Brooke, their son Cruz, and their dogs, Memphis, and Mila. A lover of all thing’s sports, he is a Los Angeles Football Club season ticket holder and a member of the American Outlaws, the supporters club for the U.S. men’s national soccer team. When he’s not cheering on his favorite teams, he and his wife enjoy days in L.A. with Cruz, Memphis, and Mila and trying out new restaurants, breweries, and wineries.
FUN FACTS
Enjoys the global diversification of his pups, an American Boston terrier and French bulldog.
Loves the variability of a dance floor, especially when 80’s are playing.
Goes all in for soccer and is an American Outlaw and LAFC season ticketholder.
Podcast Disclosure
Advisory services offered through RPA Wealth Management, a registered investment advisor. Content provided for informational purposes only. It should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell securities. A professional financial advisor should be consulted before implementing any investment strategy.
Links:
Email: jwinterswyk@rpawealth.com
Website: https://rpawealth.com/joshua-winterswyk/
The podcast: https://rpawealth.com/podcast/
Give us a call! (636) 364-8260
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
investment, financial planning, investing, building, important, plan, risk, people, financial advisor, account, retirement, income, stocks, investor, years, financial, wealth, money, invest, pet
SPEAKERS
Meghan, Collin, Joshua W.
Meghan 00:10
Hello, I'm Meghan. I'm Collin. And this is Pet Sitter confessional and open and honest discussion about life as a pet sitter brought to
Collin 00:17
you by time to bet, and at perennials are you saving for retirement? While it can seem daunting, and like it's really far away, it's actually critically important to get started as early as possible. Joshua winters White from rpa, Wealth Management, talks all about saving and investing, he breaks down the options for self employed individuals and how to have a long term mindset around money. He also shares a holistic approach to managing your risk and assets. Now, because we are going to be talking about money and investing I do have a disclosure here, though read out. advisory services are offered through RP a wealth management a registered investment advisor content provided for informational purposes only. It should not be construed as an offer to buy or sell or a solicitation of an offer to buy or sell securities, a professional financial advisor should be consulted before implementing any investment strategy. Now, let's get started.
Joshua W. 01:14
Yeah, absolutely. Thank you for having me on the show, excited to talk about getting started for retirement. So again, my name is Joshua, winter spike, and I am a Certified Financial Planner. And I work for a financial planning company called RPA Wealth Management in Southern California. I'm also one of the CFP professionals on the retirement plan playbook podcast,
Collin 01:37
I wanted to talk about a little bit about what financial planning is. So for you kind of in that world, what does financial planning mean?
Joshua W. 01:44
That's a great question. So financial planning is really the process of creating a plan for a particular goal or your future in your financial life. So a lot of people correlate financial planning with just investments, like what type of stock mutual fund or retirement account I need. But there's also a lot of questions that go with picking investments, which is what type of tax implication does it have? What's the best for me and my family? At my income level? I'm planning to purchase a home, what is the affordability that I have? So all of those questions that come with financial life, are part of that financial planning process of building for your future?
Collin 02:24
So really taking a lot more holistic approach of looking at where you are right now. And using, you know, looking at the financial aspect and going now, how do I move forward? Or how do I actually reach these goals? Yeah,
Joshua W. 02:36
absolutely. And, you know, as it became a lot more popular last, I'd say 1520 years, because really planning for your future became more of your responsibility, especially if you're a small business owner, like I know, a lot of your audience is. So, you know, let's say 1520 years ago, even pensions were around a lot more a lot of people, you know, worked for the same employer for 3540 years. And the employer basically kind of built their future through a pension plan or something like that. So the more that those have gone away, just because of the financial climate, and they're just very expensive, more people, you know, actually, rotating jobs more frequently are becoming small business owners and working for themselves. All of that financial planning is now the responsibility of the individual and not necessarily the company you work for. So financial planning has just become a lot more popular,
Collin 03:29
yet another hat that we get to wear and things we have to worry about. But it's super important, right? Because we don't want to look up and 2030 years and go, I don't I don't have a plan at this point.
Joshua W. 03:39
Yeah, no, not at all. And you like great point with like, 2030 years time is your best friend. When you're starting this journey. I mean, the earlier you start, the better it's going to be for you.
Collin 03:50
Right? So just add the things that you consider with financial planning. What role does something like insurance play in a financial plan?
Joshua W. 03:58
Insurance is very important. And the reason why I say that is because building wealth is the first thing that kind of comes to mind when we're talking about financial planning. But insurance is just equally as important of protecting your wealth. So a lot of people take the really good steps of getting started building wealth. And as that grows, whether it's through the advancements of jobs, business just takes off, we get married, we're combining incomes, we for kind of forget to really look at the insurances and increase the limits on the insurances or the policy amounts to be relative to the amount of wealth you've built. So you know, this can go 510 1520 years without ever reviewing insurance policies. And it can be actually pretty detrimental to your financial plan if you didn't plan appropriately in regards to insurance.
Collin 04:52
So yeah, it's about looking at the protections which you have in place and then like also assessing how much risk are you willing to take on Sure, assessing risk is a big part of the at the individual level as you look at this financial plan,
Joshua W. 05:06
yes, absolutely assessing risk is a big part. Because again, you don't want to lose everything you've built as far as like your hard work your time to an unfortunate event. And insurance can be that protector. And it can help alleviate a lot of that risk that we can't calculate, you know, it isn't something that we can control. So implementing a solution to kind of combat, the uncontrollable is advisable, especially if building wealth is important to
Collin 05:37
when you talk about doing a review and looking at this stuff, how often should we be going back and looking at our plans or looking at our current financial state?
Joshua W. 05:47
I mean, financial plans, I would say you need to be looking at probably anywhere from quarterly to even semi annually. insurance policies, what we like to recommend is every year, just because things change, right, even laws change regarding insurance, and investments and taxes. So I'd say the more often you review, it, probably the better. Sometimes there is no change, though you might not see any change or recommendation that comes with the review. But I think that the more often that you review it, the better.
Collin 06:17
You're at, you're staying on top of things you stay on, and you catch those things that change in your life. If you got married that quarter, if you had a kid that quarter, if you took on another car, or you like you said you want to start having and looking towards purchasing a home like that all that stuff changes pretty quickly. And if you have no idea what else is going on? You're not making a sound financial decision at that point.
Joshua W. 06:38
Sure. And I can give an example of that. Let's just even talk about life insurance. I mean, let's say your income increases. One general rule of thumb for life insurance is a multiplier of your income. So you know, you say you make 50,000 a year now you're making 100,000 a year, that should be a trigger event that says we should now be reviewing the insurance policies as well, because there was a financial change.
Collin 07:02
We talked about the different aspects here of protecting our, our wealth and our finances, and then the building of the wealth. When it comes to building things and building the wealth for us. What options do we have as small business owners that that maybe we're not familiar with? Or are different than somebody who is a typical w two employee for another company?
Joshua W. 07:24
That's a great question. So my, take it back to w two employees pretty simple. A lot of times the employer is going to start a plan for you. But as a self employed individual, you do have a couple of different options. But I'd like to kind of take a step back if you don't mind first, and really establishing as we're building wealth, making sure we have an adequate emergency savings account. I can't really stress how important that is. Just with the the comfortability of investing starting a financial plan with every prospect friend family member that asked me about, you know, starting a financial plan, it starts with an emergency savings account. And I just can't stress enough that how important that is. And typically, we you know, suggest anywhere from three to 12 months of living expenses to be in a cash emergency savings account for those short term unexpected.
Collin 08:19
Sure. And I know that amount can be kind of mind blowing, when people think that we have 12 months of living expenses just sitting there. But But what are the benefits of that, like what that we can have, when we have that kind of cash sitting around that's sitting around, right? But it's there locked away for us what, why is having that emergency fund so important and critical. Because
Joshua W. 08:47
as you take the next step to, let's say, building wealth or investing, it's going to give you that cushion for any short term emergency that might arise that is an unexpected expense, even give me an example of just a short term income loss within the household, or just a injury, right? We, you'd like to snowboard and you get hurt. And now there's a loss of income because you're self employed. This is gonna get you through those times of the short term need, potentially a short term disability unexpected, even if it's for, you know, a roof on a house. But then that way, as you take the next step to building an investment plan, you're not having to dip into those investments to actually cover any short term emergencies. So that makes us more comfortable with investing because we know our short term emergencies are covered.
Collin 09:39
Again, going back to that risk and making sure we can cover those because another thing you know, it's as simple things like being able to afford an unexpected medical bill right, we're out walking dogs we fall and we crack our wrist or we fracture an elbow or something like that. And now all of a sudden that's a medical bill that we've got to cover instead of being stressed about that dipping into credit cards or going into debt. to cover that we can use our medical insurance that we have, because we've got that covered. And we can cover above and beyond that with this, with this emergency fund that we can go and put into that. And we can keep again, like you said, we have peace of mind at that point to go and take some of these bigger risks. So with the with that emergency fund, that is just cash, right, that's just sitting in a boring, humdrum savings account. I'm not doing anything fancy with that. No,
Joshua W. 10:23
it's just sitting in cash, you can, you know, look at other options for cashiers online savings accounts that have a little bit higher yields out there. But yes, it's still not exciting. It's still just a boring cash account.
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Collin 10:58
If you are looking for new petsitting software in the new year, give time to pet a try listeners of our show can save 50% off your first three months by visiting time to pet.com/confessional. So let's say we've got that three to 12 months, we've assessed our risk, and we've got that sitting there and we're ready to start investing as a business owner, what where do I start looking for my options? Sure.
Joshua W. 11:21
Well, the first you can look at is just a regular brokerage account. This is like a savings account, but you're allowed to actually invest in this brokerage account. Now these you can fund this account with after tax dollars. And what that means is that the money that's going into this account has already been taxed. So really the only thing tax within this account is going to be the actual earnings you get from investing. So really, the difference as I start to talk about a few of these different accounts is going to be taxed. So the first one, just a regular brokerage account, this is just a regular investment account that you can put money in, you can take money out without any sort of surrender fee or regulation behind it. It's just made mainly tax. That's the concern. Now that is an account that can be tied to a retirement goal, it could just be for a future goal that you have and 510 15 years I want to buy a boat. It's not necessarily titled as retirement, it's just that basic investment account. Now, as you look into different types of investment accounts, there are ones that are specific for retirement, a lot of times we talk about 401k. So those are actually plans that are sponsored by an employer. But there's also IRAs, that's an individual retirement account, and Roth IRAs. And those are going to be a lot more simple for someone like who's just starting or a self employed individual to start investing for the retirement that actually have some retirement tax benefits.
Collin 12:50
Well, you keep bringing taxes up. I know that's a big, major part of managing our tax burden. How do I know if something's a good decision to invest in pre tax dollars or not? And how do I how do I make that judgment call for myself? Or what kind of questions do you like to see people answer when it comes to tax now, tax later?
Joshua W. 13:09
Sure. Well, assessing what your tax burden is now and projecting what your potential tax burden later is, is probably the best way to formulate that. But generally, I will just say, a Roth IRA pre tax or post or Roth IRA pros, pro tax, post tax, or an IRA pre tax, both are great vehicles, I don't want to say that one's better than the other, you know, I'll just go out there and bank blanketly say that you really want to just start the process, right? You want to start investing. So they both have great benefits. It's really what seems also more attractive to you. And what's more comfortable to you, would you rather get the tax benefit now? Or your do? Would you like to get the tax benefit later? That's really the question.
Collin 13:53
Right? So look at kind of looking at where where's my income right now? And what tax level am I at? And then what what income level do I expect to be retiring at? And what is my tax burden then? And kind of weighing those benefits?
Joshua W. 14:04
Yeah, absolutely. And for a lot of people while you're working, your tax burden is higher while you're working, but it's potentially going to be in retirement. So in that scenario, you know, pre tax account like an IRA would would be more beneficial, just generally speaking.
Collin 14:20
Now, something that I've seen thrown out there a couple times, as in heard about is something called a SEP for self employed people. What how does that factor into this mixture?
Joshua W. 14:33
So a SEP is a great vehicle as well. It is also a pre taxed retirement account. And this allows self employed individuals to actually contribute more than a basic IRA account. It's actually potentially up to 25% of your net earnings from your self employment income. So right now, if we're looking at just an IRA, you're allowed to put 60 $1,000 A year into an IRA account. And if you're over 50, you get an extra $1,000 Catch up to be able to put into there. But potentially with a SEP IRA, depending on where your income from your self employment business is, you're up to, you're able to put up to 25% of that, those earnings into the account each year. So it's a way to actually accelerate your contributions into the retirement account, because you are a self employed individual.
Collin 15:29
So is that the only thing I need to qualify to open up a SEP is just prove that I am self employed.
Joshua W. 15:35
Yes, and there's just a simple form you would need to fill out it's a gov IRS mandated form that you will sign up for and then any real bank or brokerage would be able to open that SEP IRA up for you. So still pretty simple. I don't want to discourage anyone like, you know, we have to fill out a form for this, it isn't, you know, too complicated. Just with a quick Google search, I'm sure you could figure that out on your own. And any bank or investment, custodian would be able to open up that second step as long as we can, you know, prove that you are self employed. And it is a way that you can contribute more than a traditional IRA.
Collin 16:11
Sure, you've used a word describing both IRAs, Roth brokerage and SEPs account, you've been calling them the vehicles for investment. Why is that?
Joshua W. 16:21
Because they are just the vehicle, really, it's not the engine, from the vehicle. All of these accounts can be invested any way you like. So there's not a particular investment choice tied to these types of accounts. That's just what they are. They're just the type of account that they are. So you're able to actually with any one of these accounts, get to choose the type of engine or investment that's actually going to go into these vehicles that's going to power, the potential interest or earnings or growth within them.
Collin 16:54
Right. So again, we can invest in other things, and then kind of put them underneath this umbrella of this type of account that we're actually investing in. And that's, as you were saying, where the tax considerations where the contribution limits come into play and what we're able to do. Yep, absolutely. Right, well, so when it comes to actually the engines, the engines of our investments, I, two big ones that come to mind are things like mutual funds, and individual stocks, walk us through kind of the difference between those and why we would choose one or over the other.
Joshua W. 17:26
Sure. So individual stocks, we're just owning one company. So you own one share, you can buy multiple shares of one particular company, and let's just take apple, for example, they make iPhones, and we can go out into the public market and buy their shock stock, and you can become a shareholder of that individual company. Now owning individual stocks, though, are a more aggressive strategy. Again, you're you're not diversified. And I'm sure we'll kind of talk about that even further. But you can see that there's risk just within one organization, you can even buy a few different stocks. But still, the risk is high, when we're talking about owning individual stocks. Now, what a mutual fund does is an actually a pool of money from many investors that invest in multiple securities or multiple stocks. So you know, we just hear even what we do at RPI wealth management, we buy mutual funds that will own over 10,000 different stocks. So you can see it's diversifying some of that risk than just owning a few or trying to pick a few winners. So mutual fund is just a consumer or, you know, consumer investor way to get more exposure and more diversified, without having to go into the market and purchase 10,000 stocks individually was consumed kind of probably intimidating. For a new investor,
Collin 18:51
well keep keeping track of those, like you said, it is pretty intimidating. But again, if you invest in individual stocks, and you put $1, in that you own $1 of that stock. If you put $1 in a mutual fund, they take that and they divide that out, given the proportions that make up that mutual fund into those individual ones. So like you said, you get access, you get exposure to a lot of different things, it's a great way to get to see kind of dip your toe in the water again, all about what risk are you able to take at your different life stages. So when it comes to something like a new earner or a new investor, should we be looking at more or less risky places or that just at an individual level, what we're willing to take on?
Joshua W. 19:29
I think, you know, you can still be aggressive and owning a mutual fund, like we're talking about a pool of money, they can still be pretty aggressive. So again, you know, owning an individual stock takes that aggressiveness even further. But it doesn't necessarily mean that if we're going to own a mutual fund that we're not aggressive, right, because there can be more moderate or even conservative styles of mutual funds. I think yes, it is individual. I'll take it back to financial planning mill will probably do that a couple of times within this podcast, but Actually knowing where you want to be right setting those goals of what is this money actually being invested for, that should really be dictating the type of investments you're choosing. So before we go out into the market and say, Okay, well, let's go buy an individual stock, or let's go buy a mutual fund. Like, really, what is this money I'm putting in here for what is the time horizon? ask myself, what is the risk tolerance that I have? And then one important word that I like to use is risk capacity is like, how much can I actually even afford to lose? And that's a big part of like, you know, this developing an investment strategy is, can I even afford to lose this money? And once we kind of answer those questions that will help better guide you to choosing the investment vehicles?
Collin 20:46
Well, that's a really good point, if we are kind of late to the game, if we're 40s 50s. In our 60s, we don't have a lot of risk capacity, I can't stand to lose 20 30% of my investments, because I don't have that time that we keep coming back to I don't have time to recoup those. If the market dips. Now, if I'm younger, I might have a little bit more risk capacity, I might not want that risk capacity, just at the personal level. So you may be more conservative with that. But again, looking at those that those mutual funds and going okay, is this an aggressive one? Is this an aggressive one? How are they going to fit my style? And how I would actually want this to work?
Joshua W. 21:23
Yeah, and, you know, actually quantifying to what, what is the expectation? You have to ask yourself, you know, what do I want from this investment choice and understanding, you know, even kind of how it performed in the past? And does that meet my expectation of how this is going to grow in the future?
Collin 21:40
Yeah, I know, when we set up our with a couple of different accounts, we have, we do have a retirement account it as a different investment strategy, I guess what the mutual funds we have in there, then the accounts that we have that we're investing for our kids college funds, because that's a much shorter time horizon than our long term retirement plans. And we don't need it to be really as aggressive because we're going to be dumping a lot more into that to get it there to where we want. So again, it's balancing everything out to meet your needs. Yeah, and I think you make a great point is,
Joshua W. 22:11
really, the money should be tied to the goal, right? We already kind of talked about that. It isn't all just one strategy or one philosophy, because, again, we we have different, you know, objectives for different pots of money, like you just explained. And that can really dictate the investment choices for us.
Collin 22:31
You said a word a little bit ago that I know is pretty big and financial planning and learning about retirement investing is diversify, to what is what is diversifying mean to me as an investor, I'll start by
Joshua W. 22:43
saying it doesn't mean get more complicated. A lot of times people take that over. And it means, you know, I'm gonna open up a bunch of different accounts, or I'm going to make it more complicated. That is not what diversification means. Diversification means we're diversifying against, you know, let's say one particular risk, right, we're spreading our investments out, so we're not subject to one variable. And we can do that simply now, with the investment landscape that's out there. It doesn't have to be expensive, it doesn't have to be complicated. And this means that we're spreading out our money through an array of different types of stocks, it could be bonds, even commodities, or real estate trusts are out there getting a little bit deeper into the investment kind of terminology. But again, taking that diversified approach will help actually, with limiting the downside, which is also an important piece, to growing your wealth. It's not just about growth, it's also limiting our losses. And diversification helps not only grow the assets, but also reducing the drawdown of your investment portfolio as well. So to give one more example of that, to a lot of people we see with investment portfolios, even when we meet with people is they might only be invested in the US we can actually diversify globally as well, when we're picking investment choices. So the US market isn't even the only market that we can invest in, we believe in also diversifying globally. So actually investing in companies outside of the US as
Collin 24:15
well. When it comes to that diversifying against risk, is there what what investment engines lie on that spectrum of low risk, like lowest of low risks, all the way up to the most high risk that we could get involved in?
Joshua W. 24:31
So really, when we're talking about low risk and investment portfolios, you're most likely talking about bonds. Bonds are not talked about as much as stocks. They're just not as exciting. They're like, you know, a few you watch a football game, there's offense and defense, and we really like offense. We like rootin for points, but maybe not so much defense. Some people like defense and some people love bonds. But that's basically how we kind of correlator an example of, of how bonds work. In the portfolio and they are slower going, they are more conservative. And then really stocks are going to be individual stocks are going to be on more of that aggressive spectrum. And when we're talking about the difference between those two in an investment portfolio,
Collin 25:13
I guess that comes into doing these quarterly and these these periodic assessments to go. Okay, how much has my risk changed? How much does my risk capacity change? And then what, what percentage really do I want? Or what I like to have in each of these buckets, depending on how things are going?
Joshua W. 25:31
Yeah, absolutely. And if things haven't changed, the only thing that changed is the news headline, then we, you know, we might not be in a position to be reactive and making changes to our plan or to our investment portfolios. That's really then not a reason to do so if we were planning appropriately.
Collin 25:49
Alright, well, I think that gets into another big topic is investing in discipline, I know that I can get a little twitchy finger on buying or selling based on the latest headlines, or based on the latest scare. How do we become better discipline at at this over overtime?
Joshua W. 26:08
I think the best way to do that is just trying to end being mindful of being emotionally consistent, right? We know that when we're developing a plan, we're trying to focus on things we can control, we're trying to be proactive. And, really, there's so many variables that can change the course of a plan or even through life. And we turn on the news. And a lot of times it's negative, and it's almost promoting us to be reactive, and kind of really tuning that out is the best strategy, right? tuning out even the noisy neighbor who made a bunch of money on Microsoft stock 30 years ago, like all of those things are just, you know, really trying to pull you away from the plan that you created. So leaning back on that plan, leaning back on what we've already talked about today, which is, you know, analyzing where you want to be your risk tolerance, your risk capacity, those are those things and that are going to really keep you on track and stay disciplined, because we don't want to be buying and selling like you explained, we want to be sticking to our investment choices, because we have found that that's going to be the best way to grow wealth. One thing that I will say about not being disciplined is you know, if you are trying to constantly buy and sell, you're having to be right twice each time you do that, right? You have to be right when you're selling a stock or a security. And then you also have to be right again, when you buy it for buy it back or buy it in the future. And it's just really difficult to do. We've seen it you know, it's less than 20% of the best investors in the world actually beat beat the market returns. So we we really are up against it. If we're trying to, you know, outguess the market or time the market and the statistics prove that, right?
Collin 28:06
Well, it's keeping again, that time horizon in view to it's okay, well, maybe it went down 4% today, but over the last 10 years, it's gone up pretty consistently. And I've got 30 more years to sit on this and to kind of ride that out and just look at that average over time. And I know that really helps me whenever things start to dip or go down and goes, Okay, that's fine. Because I don't need that money right now that money is for 30 years, 40 years down the line. And that that's what I need to make maintain focus on.
Joshua W. 28:33
Yep, absolutely. And if you have that emergency savings, it's even making you feel more comfortable because you know that short term expenses are being taken care of. But time horizon is, you know, our best friend. And we know, we recover the market always has recovered.
Collin 28:47
Yeah. So we've talked a little bit about assessing our risk and risk capacity as an individual and some of the vehicles as a self employed person, the IRAs, the SEP, simple brokerage account. And we've also talked about some of the engines that we can use to fund this with mutual funds, bonds, or stocks. But when it comes to the business owner, what other things do we need to be considering when we're looking at this financial plan?
Joshua W. 29:15
Well, really having an idea of what your net overall net worth is, so building a balance sheet, listing out all of your assets, not just the investment portfolios, but understanding the value of your business or your time understanding the value of your home, and then also listing out all of your liabilities. A balance sheet is a very simple way to it's really a snapshot of your financial life. And that's really going to help you make better decisions going forward when you can actually see where you're at on an asset level, what your liabilities are, and how well is your net worth overall growing, you know, on a quarterly or annual basis without kind of that awareness. It's pretty difficult to track. You know, really how well you're doing the investment portfolio, for most people isn't the only asset that you have. So you know, that that's going to help us guide not only cashflow, but just help us make better decisions financially as we grow.
Collin 30:17
Yeah, well, like you said, cover those liabilities to and I think it is important that regardless of how much or how little you think you have to get that down in paper, because it's not the first time that's important that you write it down, right. I know, when Megan and I sat down 10 years ago, we were just newly married. And we did that we sat down and we said, this is everything that this is how much we're worth right now. And it was like, this is super depressing. I'm going to delete this page. But what was what was important was the second time we did that. And then the third time, we did that, then the fourth time, and you see this trajectory, and sure it goes up, it goes down. But we're looking at that trajectory and look at how we're doing, going, Oh, we just bought a house, we need to make sure our insurance is okay to cover our liabilities. Now we're Ooh, we just had another kid, we need to make sure our liabilities are covered a little bit different now. And it's just being aware and intentional about I think that's so important when it comes to this aspect is the intentionality of what we're doing. And being aware of what we're trying to do years down the line. It's such a
Joshua W. 31:17
key word is aware. I mean, just like you said, the consistency of continuing to be aware of where you're at where you're headed, because it can be a little bit frustrating when you actually write it down. Right. I think we've all been at that point, when we're just starting out that says, we might even have a negative net worth, let's just say we have student loans, right, we haven't really generated or built a lot of assets. So you know, but I think that there's a lot to be taken from it as well to see yourself grow, then it's motivating. And just that awareness will keep kind of that discipline keeping us consistent, right that we're talking about. So I think it's all a good thing to take those steps.
Collin 31:54
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Joshua W. 33:37
Sure, I think that the first step that you need to take is determining really how much income or how much expenses you need to live off of right now. And saying, you know, I'm actually going to calculate on a monthly basis, or even an annual basis of what I actually need to bring in to live the lifestyle that I want to live. Because really, that number is different for everybody, right? A million dollars might be perfect for one person, but someone with a more expensive lifestyle, that's not going to actually be the number for them. But one way that that just really simple that we calculate that I'll give you an example of this is we use what's called a 4% withdrawal rate from your investment portfolio to generate income. What I mean by that is, let's just take an investment portfolio that grew over someone's life and it grew to $2.5 million. And we know that the 4% withdrawal rate rule will generate $100,000 a year for about 25 years. So if you're looking for just a general simple equation, this example will tell you okay, well if I know I want $100,000 A year when I retire, what will I need my assets to grow to to generate that for me? We have that answer. That's 2.5 million. So You can use that rule however, it relates to your expenses and your life and what you want to make. But that's just a simple way to kind of calculate what you might need individually.
Collin 35:12
Yeah, I think it's really important, like you said, to start with what you need right now, right? And go, Okay, how would I cover this today and then also know that if these investments stay the way they're doing, you know, that 4% rule, I can take 4% out every single year, and that lasts me that, you know, 2025 years, if I continue to invest, and they continue to earn, I might be able to withdraw more. But all those are all questions again, that you you work on every single year to go how, how am I doing right now? What what things are going on? And what exactly again, what lifestyle do I want to be able to lead at that time, and that's gonna change, which means we're going to change the vehicles, which means we're going to change the engines with and that's all totally fine, too. And I think that was so important for for Megan and I to remember, if it's not totally set in stone, I can we can change this as our needs change. And that's really important to remember, because you know, somebody's listening to this thing going. I'm a 20 something, I'm single I live in apartment, I don't have any assets and liabilities, it just started my business. What are you talking about a million dollars? I don't that doesn't, that seems crazy to me, Well, maybe not right now. But you can change and move that as your income increases. And as your needs change, you can work towards that different goal. Yeah.
Joshua W. 36:18
And I think one, one thing that we use a lot in my office is financial planning is a process, not a product, right? continuously working on this is only going to lead to a better outcome. So in a lot of it is just getting started on really, I mean, you know, starting to grow that emergency savings and starting to invest some of these numbers might be, you know, bigger than we really think they need to be at this point. But like you said, continuing to work on it, we can get to those numbers that are our goals. But just starting is, I think the best advice out there.
Collin 36:54
It really is it no matter how much that is, again, when I just keep going back to just my own personal experience. When Megan and I started, we were in graduate school making, you know, peanuts in beans and rice, basically, there's all our income was, but we were trying our best to set some aside, I think some of those first initial times it was we're just gonna put $25 into this account. And we're gonna put $25 in the next time, and 25. And, and the reason we just needed to try and build that muscle of what that felt like to us and get used to that process. And that's so important. And then the other aspect is that the earlier that you start, the more of a friend something like compound interest is to you. And the earlier you get started, you can have that working for you as well. So that, you know, it may be 10 years of that, and then you're off to the races.
Joshua W. 37:41
Yeah, two things, you know, just kind of comments on on what you said, is creating good habits, right, that's what I hear is, and that's what's going to be pivotal to success is you have to create those good habits. There's no magic pill out there to build wealth, you know, it's going to take those those good habits. And if we don't start that early, you know, time is our best friend compounding interest is that idea of our money working for us. And the earlier you start that the more benefit it's going to pay time, you know, Warren Buffett is one of the greatest investors really in, you know, our history. But look at how much time he's been investing. I mean, he's been investing for over 50 years. And really, that's where his wealth generation, you know, took off was probably even on the backside of those 50 years, not necessarily even in the beginning. He started out just like us.
Collin 38:33
Right? Exactly. Everyone starts somewhere, including us right now. So we're looking at the world right now. We talked about discipline, and just getting started. But the world can seem like a scary place. And there's a lot going on right now. So is is okay, is it okay to start right now? Or should I wait?
Joshua W. 38:51
I think that every day you wait puts you behind, ominous, especially if we're building for the long term and your future. So Is now a good time. It's a great time. And just with the climate of everything that's going on the headlines, you turn on the news. I mean, there's just so many reasons and variables out there that are probably delaying us from from getting started. But I'll even quote what Warren Buffett, one of his best quotes is, be fearful when others are greedy, and be greedy when others are feeling fearful. And really, you know, to me, what that means is right now there is a lot of fear out there. Let's take advantage of the opportunities when others are fearful as an investor. I think it's a great quote for anyone kind of trying to find a reason to get started.
Collin 39:38
Again, yeah, exactly. Because we're looking at that time. We're trying to build those muscles. We know this is gonna be good for us. We do have we're just gonna have to pick and get started on some day. And we can't predict what's going to happen in the future. Like, I don't know what the news lines or headlines are going to be tomorrow. But I know what I need today, and that's where I need to start. Yeah, absolutely. Now all of this can seem overwhelming to to people and it's a lot to take into account and plan 3040 years down the road, is this something that we need a financial advisor, a financial planner for? Can we do this a good portion of this on our own,
Joshua W. 40:11
I give the example of working out, right, you can Google, go online and find some workout videos you can do, create your own workout plan, and build probably a pretty good plan to get in shape. Or you can also hire a personal trainer, or you can even you know, I'll use peloton and Cigna examples kind of like electronic personal trainers spend some more money to try to uncover even more value for whatever it is you're trying to accomplish. I think that that's the same with with financial planning and hiring a financial advisor, you can definitely do this on your own, it just depends on how much time you want to take to do the research and monitor all of that on your own and for your family. If that's not you, a financial advisor can uncover a ton of value. For your situation. I truly believe that there's just, you know, a lot of even just accountability to hiring a financial planner, we're talking about staying discipline, and advice. Financial Advisor will also help with that. And just having a think partner, but again, you know, I I know I'm a financial planner, but I do believe that if you are more of that DIY personality, you can do this on your own, it is not impossible. It's just if you need that extra help. I mean, that's what our services are created for right is to help people.
Collin 41:35
Yeah, and I think that time is such a big deal of his business as small business owners. We're doing a lot of other stuff, we're running the business, we're putting out fires, we're hiring, we're going doing visits, we're busy, very busy during the day. And sometimes the last thing I want to do is sit down and open up our portfolio and go, Okay, what do we do now? Like, that's exactly where I find joy in life. If this is one thing that you can offload, and not often, but you're still going to be intimately engaged with it again, that's the other thing about this, it's not like it's just going to disappear, you're still gonna have questions, you're still going to be a good financial adviser is going to loop you in and ask questions and see for updates and see how things go. So that you continually stay engaged with it, but maybe not worried about the day to day operations of it.
Joshua W. 42:19
Yeah, absolutely. And, again, that accountability, but it is, again, a relationship with more of a think partner than it is, you know, you handing this off to someone and them taking care of it for you. So
Collin 42:31
if we are interested in looking for a financial advisor, what things should we be looking for, that makes a good one for us. Really,
Joshua W. 42:38
I would kind of just start with, you know, the internet's just a great, really great tool to finding financial advisors. But there's a couple of different actual resources out there. There's the fee only network, we really believe that financial advisors who are fee only are the way to go. And really, what that means is that they're only compensated by the clients that they help. There's no other conflicts of interests regarding commission. So fi only networks a great place to start. And really, when you're interviewing, and you're doing your research for financial planners, or financial advisors, is finding someone that's really understanding your goals and your objectives. Like even before you go into that interview, write them down and see if they're really what they're summarizing for you through that meaning is the same thing that you had in your mind, even going into that meeting, you know, someone that's going to take the time to really understand where you want to go, is going, in my opinion going to give you that that best outcome, it's really just hard to give the best financial advice with without knowing what you want your future to look like.
Collin 43:47
Yeah, well, and again, knowing that this is someone that I'm going to possibly work with for the next 30 years, you got to like them. Exactly right. They're there for those questions. They're there for that feedback. And they're there for for those things, and those things that come up, and we're going to help guide you through that. So yeah, I also want to throw in at the end, you have to like the person to
Joshua W. 44:08
Absolutely, yes.
Collin 44:11
Josh, I want to thank you so much for coming on the show today and for walking us through what this process looks like to help us view and keep the long time horizons in mind. And to walk us through some of the jargon of what is accessible to us and what we can start doing today. And most importantly, like you'd said, Get started today if we haven't already and take a good look at this, but I know that this is a massive, massive topic, and there's a lot going on out there. So how can people get in touch, follow along, find the podcast and start getting off on a better financial footing today? Perfect.
Joshua W. 44:49
Yeah, we our podcast is called retirement plan playbook and you can download that wherever you get your podcasts and we also stream it on our website and our website is a great tool to kind of just learn more about us as well, websites WWW dot Rpa wealth.com. And on there we have a free ebook you can even download on that's retirement specific. And also, you can even schedule a complimentary consultation with us if you'd like to get to know us more as well. So our websites a great tool that will be also where you can stream the podcast. You can also download the podcast, wherever you download them. And I do encourage anyone who's interested to check out our podcasts. And we try to stay current with what's going on today. But then also really related to the individuals retirement plan. So definitely check us out.
Collin 45:38
Perfect. Thank you so much, Josh. I'll have links to those on the show notes and on the website as well. So people can click and start listening and start getting some of those questions answered for themselves. Again, this has been a lot of fun. I really appreciate it.
Joshua W. 45:50
Collin, thank you very much for for having me on. And glad I get to provide some insight on retirement. Thank you.
Collin Funkhouser 45:56
Have you gotten started in your retirement planning? Do you even know what your goals are? Because that is the very first thing that we need to do like Josh and I talked about setting those goals and understanding what is this money going to be used for? When we put a purpose behind it, we're better able to commit to that for the long term, and better able to partner with somebody to communicate what our goals and what our dreams and our hopes are, for the future and down the line and stick to it when times get hard. I know it can be kind of silly to think about what this and big numbers can scare us. But the best thing that you can do right now is to get started if you haven't, and if you have, maybe take a second or third look based on the plan that you have today, make sure that not only are you investing properly, but you have the protections through insurance and other things to make sure that you are covered in those events. As a small business owner, there are a lot of things on your plate. But we can retire in this business. And in this industry, it is possible what it takes is planning and understanding the powers of small numbers and a lot of time setting aside 50 or $100 a month is a great way to get started and start flexing those muscles so that when your business grows, you can put away more money and it becomes used to it becomes a habit because you're focused and you have that purpose driving you at every step of the way. We want to thank our sponsors time to pet and pet perennials for making today's show possible. And we really want to thank you so much for listening. It means an awful lot that you listen every week and we hope you have a wonderful rest of your weekend. We'll be back again soon.
