Women in the Arena
Women in the Arena is the celebration of everyday women living extraordinary lives in plain sight. We seek to inspire, encourage and challenge you to reach for the great heights you're made for.
Women in the Arena
Money Matters Made Simple with Stephanie Carchia
Dive into the world of financial literacy as we chat with Stephanie Carchia, a financial advisor-turned-real estate agent who shares invaluable insights on managing money effectively. In this engaging episode, we explore how financial conversations are often sidelined and the impact they have, especially on women's confidence in their financial decisions. Stephanie discusses her transformative journey from the hedge fund industry to helping individuals navigate their financial futures, emphasizing accessibility and demystifying money.
You will discover the importance of conducting annual financial reviews, understanding the necessity of having legal documents in place, and the critical role of life insurance. We decode the intimidating aspects of money management into digestible pieces that empower individuals to take charge. Stephanie encourages everyone to challenge their fears and build awareness about financial health.
With practical tips and motivational advice, this episode equips you to transform your relationship with money. Tune in to learn the first steps you can take to start managing your finances better. Don't forget to join the conversation by sharing your financial goals and experiences! You can seize control of your financial future starting today!
sc@screalestategrp.cpm
@stephsellssocal
Welcome in everyone and thank you so much for joining me again this week. This week, we're going to talk about some amazing and necessary topics. We're going to talk about the approachability and the necessity of money. My guest this week is Stephanie Karsha, and she is an amazing, accomplished financial advisor turned real estate agent. Stephanie is dedicated to empowering individuals, specifically women, with the knowledge and tools they need to take control of their financial futures. She's driven with a passion for spreading financial literacy and she takes practical approach to building wealth and making complex topics simple and relatable for everyone, and today she's going to give us a mini masterclass on navigating these intricacies of money management and real estate. It is my pleasure and my honor to introduce to you Stephanie. Stephanie, thank you for being here and welcome to the show. Thank you so much for having me.
Speaker 2:It's a real honor.
Speaker 1:Stephanie, I am really excited for you to be here. We've talked about money a couple of different times, but not quite in this manner. Money is still intimidating for people. It still feels like it's out of reach, it's not approachable and for some reason that always seems to hit women particularly hard. But give us a background as to what drew you into the industry of money and why it is your passion.
Speaker 2:Yeah, absolutely, and I think you hit the nail on the head. Even the most educated people doctors, lawyers finances are just not as approachable for them, it's just a concept that they kind of want to stay away from. But getting back to my background, so I grew up right outside of New York City. When I graduated college, the thing to do was work at a hedge fund. So that is what I did, and it was 2008. So got a quick life lesson there, what I did, and it was 2008. So got a quick life lesson there.
Speaker 2:And then you know, going through the hedge fund industry, it's very you're working with institutions, not individuals, so it's very cold and more transaction based, and it just didn't sit well with my soul. I didn't know why, but it just didn't feel like the right fit. And so I had a couple different jobs in that arena and then I ultimately landed as a financial advisor, and that was working directly with individuals, helping them save for retirement, purchase homes, pay for kids' college education, and that just really felt so much more fulfilling to me. And I did that for about six or seven years after my initial seven years in the hedge fund world. And then, when COVID hit, I just said. You know, I don't want to sit in an office anymore and the market really became susceptible to every little tweet and that was so hard for me to try to explain to clients.
Speaker 2:You know, this is a viable company but because someone tweeted about it, it's down today, and so I kind of just thought about what made sense, given, just you know, my family's history in real estate and my experience in finance, and so I came to become a real estate agent and it's very similar to the role I was playing as a financial advisor, where I get to help individuals in such a crucial point in their lives.
Speaker 2:And it's even more personal than the financial advisory, because when you have real estate transactions it's usually around someone passing away, someone getting married, someone having a child, you know, downsizing for whatever reason, maybe they're empty nesters or they lost their job. So it really is focused around people's most important life events and it's just such an honor for me to be able to navigate them and, you know, especially having this background, which is a little more unique for someone in real estate to have, and so through that process I become sort of their overall advisor, not just their real estate advisor, because once you purchase real estate and you want to, you know, make sure it's in a trust, and then you have the correct life insurance to cover the mortgage should something happen. There's all these different things, and I'll stop there, because I could go on and on, but that's how we got here.
Speaker 1:And what you have found through this different kind of journey is that you have engaged with women that are at a crossroads in their lives, Sometimes that they are a lot of times they're on their own for whatever reason. They've been divorced, They've been widowed and they're at this point where they have not managed money before, For whatever reason. They have not managed money before that their husband took care of all the money and that could be, and people always assume that that is the older generation and you're like no, no, no, no, no. That is a falsehood. These are women that are of all ages, all educations, of all accomplishments. There is no discrimination in what type of women don't handle their own money.
Speaker 2:Or they're just single and maybe they're not.
Speaker 2:You know they're busy and they're accomplished in their careers and they're just not addressing it and you know when they would come to us sometimes, especially, you know I don't want to generalize, but it happened where you know it'd be myself and a male counterpart in the meetings and they're really using all kinds of financial jargon and the women don't want to ask questions. There's some sort of shame around it which there, just there shouldn't be right. These are basic financial concepts that we should all understand, and if you don't understand something, just like anything else you're, you're paying for a service. You should be able to ask questions and feel comfortable and understand it. But for some reason it was more common that women just didn't, you know, didn't want to ask the questions, or sometimes they would even call me a day later and say, hey, did I understand this correctly? And when I started noticing that was really when I just felt, you know, I have to start getting out there and getting this information out there to as many people as I thought, especially women as possibly I can.
Speaker 1:So where do we start? And you used when you and I first met, you said I want to make this accessible, I want to make this easy and I want to lower the intimidation bar. Because this is so important to me? Because all women should know how to manage their money. They should know how to invest their money and know that it's never too late to start, Even if they are in their 50s, their 60s does not matter, it's never too late to start and it's never too early to start. Everybody should know how to manage their money and what the science of money is. So we are ready. I've got pen and paper ready to go. Let's start and go slow. Let's make it easy and digestible and give us into bite-sized pieces.
Speaker 2:Okay, well, first of all, you are spot on that. You're never too young, that's for sure, even if you can get children into this, it's great to do but also never too old as well. But in terms of a place to start, it's really just awareness, right. Whether you're single and you're just not really looking at your bills, you're just like, oh, there's money in the account, there's more than I need to pay the rent and other things this week, so it's cool, right, and there's some money in my retirement account. I don't know if that's going to grow to be enough of what I really need or not, but it's there. Or if you're in a partnership and maybe one partner is taking care of the finances, that's completely fine, but you need to be aware. So, first thing is you know you want to have an accounting of where all the accounts are, just so that you can check in there and then have a plan and you know again whether you're with yourself or with your partner. Sit down at least annually.
Speaker 2:Now some people will probably tell you oh, you should be doing it weekly or monthly. Sure, that's the ideal, but's the ideal. But the idea here is not for perfection. It's progress If you weren't doing it at all before. Annually is 150% better, right? So just being aware of your spending, of what your debts are, of what kind of assets you have and when I say assets, anything that is of value, right. Most importantly, it would probably be your home, for most people, maybe your car, but that's something that really kind of goes down over time.
Speaker 2:But if you have investment accounts, just having an accounting of how much you have and then you know again, taking into account your spending goals and where you want to be in the future, right. So you're getting by right now, but how much do you need to retire? Right, and so these things you know. Ideally, you would sit down with a financial planner, and a good financial planner will probably cost about $1,200.
Speaker 2:And I'm sure so many people will say I don't have that kind of money, but this is your financial future. I tell people all the time go, look at your Postmates bill for the last six months or your Amazon bill for the last six months. I'm sure you could find $1,200 that you could have used to sit down with a financial planner and get all this done Right. So if you can do that, that's ideal. But at least just having a baseline and understanding where you are and an accounting of all your accounts and how much you're spending is certainly the first place to start all your accounts and how much you're spending is certainly the first place to start.
Speaker 1:So, as a baseline, as we're gathering information, let's pretend that we've never done this before. Like I said, we're going to start slow Gathering accounts, gathering your bank accounts, as far as paperwork is concerned. Gather your bank accounts. Gather your 401k paperwork maybe. Sure, yeah, any retirement accounts, retirement accounts If you get stock shares, some companies, if you get to work for a company and they offer you stock that you get to buy stock at a discount or whatever the case may be. Or they maybe they gift you stock, whatever it is. Gather that paperwork. So, maybe get that paperwork and then your credit card bills or your, if you have a car loan or student loan or that kind of stuff. Gather all that stuff together and put it in a pile and maybe have your computer with a spreadsheet or, if you do it, old school, on a yellow pad, whatever it is. Gather it all, sit down at the kitchen table and go over it all together, all at the same time. Am I tracking?
Speaker 2:Yes, you are. So I would say there's a few major categories and they encompass pretty much everything you just said. So one is your income how much are you bringing in every year? Two is your expenses. Now, that's just you know. From whatever your housing costs, are your any of your daily spending costs? And then also you know, like you said, your liabilities, any car payments and anything like that. So that's the second column, income and expenses, and then beyond that is going to be again your assets. And your assets are things like your checking account, your retirement account, if you have any other investment accounts, and then, as I was mentioning before, like your real assets, like your home.
Speaker 1:Okay, so annually, that's a good start. Yes, so once you get comfortable with that, maybe quarterly, bump that up to quarterly maybe.
Speaker 2:That's absolutely ideal, because what you want to do in your annual meeting with yourself or with your partner is establish okay, did I spend more than I earned this year? That's a problem. How can we course correct that? Right, so now you've set that goal for yourself, but how do you go through the whole? Next year you might get off the track again. Right, so to be able to sit down quarterly and say, ok, in this quarter I actually, you know, spent less than I earned, we're in good shape. How can I replicate that for the following quarter and just keep kind of checking in with yourself or your partner?
Speaker 1:So how do you fix that kind of stuff?
Speaker 2:Just as a practical example, say, like I've overspent, how do you fix that? Where do you identify the problem and how do you fix those problems? Money is one of the online tools. Maybe even your American Express bill will kind of categorize. You know where your expenses are and then you're going to see. You know which ones are the largest and do they need to be the largest? Right Again, it's you know if you're ordering out at Postmates too much, you know, maybe it's like, hey, this quarter we're going to make an effort to eat in more, right, and so sometimes it's adjustments for small expenses that really add up over time.
Speaker 2:Or maybe there's large expenses like, hey, you know, the car insurance seems to have gone up quite a bit in the last few years. Can we go and call around and see if we can get a better quote from somebody else, and maybe you can take a couple hundred dollars off of your monthly expenses, right? Or even just all the subscription services. I think we talked about this and we were laughing about it. You probably have subscription services that you're not using, that you're not even aware of, that. You have anymore Canceling those can easily get you a hundred dollars plus a month, right, and that's $1,200 a year right there.
Speaker 1:Well, just as a side note, when Stephanie and I met I went huh, I wonder how much I'm spending. I took a day, went through my account and I went what's that? Well, what's that? I went through and looked at all these subscriptions and they're small. They're small that you just don't even notice and I canceled probably oh my gosh, like $75 a month of things that I didn't even use, but they're so small that you don't even pay attention to them. But that $75 a month adds up over a year, which then adds up over time. But that's something I don't have to spend Exactly.
Speaker 1:And it was because Stephanie was like well, how much are you spending on subscriptions? I'm like I don't really know. So that was a life lesson. It was easy, it was a piece of cake. It took some time, it took an afternoon to go through and look at it and I was like but I'm not using that. I don't even know what that is. And it's easy to sign up for this stuff because they do that on purpose. They make it easy Absolutely, and then you forget about it.
Speaker 2:Yep, and to our original point, you are a very successful, accomplished, organized woman, but it was just escaping you because you're busy.
Speaker 1:Yes, I am no shame. Yeah, super busy and I had forgotten about it Forgotten, and it wasn't until you said something that I went. I don't know.
Speaker 2:Exactly so, even you know. Obviously that may not, you know, change you into a millionaire overnight, but these small changes are, you know again, progress, not perfection. Every little bit helps.
Speaker 1:So I'm doing that. This is, this is progress. These are progress, forward steps. We're doing good. What's next on our checklist?
Speaker 2:Yep. So once you sort of have that financial picture down, you also really want to make sure you have all of your legal documents in place. This one I cannot stress enough, because everyone thinks they don't need it. Everyone thinks they're going to live forever. Or I don't have kids, or I'm a single person, or I don't own real estate. I don't need a will, I don't need a healthcare directive, which is the complete wrong attitude to have.
Speaker 2:Okay, First of all, just even if you are a single person and you have no children and you don't own any property, if you are over 18, HIPAA laws do not allow anybody else access to your medical records. So if a college student or a single person in their 30s is in the hospital and their parents need to understand what's going on or make a medical decision, if you don't have a document in place that gives them the power to do that, they might not be able to do that, which is I just got chills saying that because it's the scariest thing and it's so easy to do. Again, there's I think it's Rocket Lawyer. They have easy templates because you don't have a complicated situation. You don't have to pay thousands of dollars to get these documents in place.
Speaker 2:And the same thing goes for your financials, right? If you're in the hospital and incapacitated? You know your parents don't have access to your financials. You know, if you're? I mean, this is extreme situation, right? If you're in a coma for months and you own a home and no one's paying your mortgage and all these different things. This is something that people just don't think about and it's so super easy to do.
Speaker 1:This is stuff that we don't want to think about. I don't want to think about this stuff. I really don't, but I will tell you that there are circumstances that happen, as I shared with you before. Our kids are out of the house. They are in their mid-20s now, but my husband and I are in our early 50s. We're young empty nesters, but we have now watched. I watched my best friend lose her mom this year and then my husband just lost his mom and we've just we've watched the paperwork that is involved. That happens and we're like we don't want to put our kids through the paperwork.
Speaker 2:Yep, when they're grieving, you know, yes, when they're grieving, the worst time.
Speaker 1:It is such a mess. The paperwork is a disaster. Yep, if it's not planned for ahead of time. We're actually putting things in place well ahead of time so that the paperwork is dealt with, so they don't have to worry about that. This is actually a gift for them. Yes, exactly, so they don't have to worry about it. It's taken care of. They don't have to deal with this for, hopefully, decades, but it's one less thing that they're going to need to deal with and it's the only way I can think of is that it's a gift for them in the future.
Speaker 2:You're absolutely right. And not only the paperwork, but if you have to run all of that through the probate courts I don't know about other states, but California takes 5%. If you own a million dollar home, they take $50,000 just to push the paperwork through the court system, and that's even if you have a will. So my number one recommendation again, if you go to a state attorney or if you even go on one of these websites, they're going to tell you all the different documents that you need. We talked about the healthcare, power of attorney for finances and everything, and then there's something called a living trust. So certainly anyone who owns real estate or has children everything should be in a trust, because that skirts around the probate courts. It happens instantly. You don't have to go through the court system, which is one. It takes time, it's paperwork and they take so much of the assets that are left over, which is just. These people worked hard. They want this to go to their heirs, not to the court system, not to the county.
Speaker 1:Wow, so California takes 5% right off the top.
Speaker 2:Yep, wow, I wonder how much I think it costs like maybe $2,000, $3,000, to get a very basic estate planning package with all these documents together. You do that one time, you know, and the only time you'd ever have to change it is if you you know you had more children and you want to put them in, or whatever the case is, but they don't charge you that same charge to edit it, you know, in the future. So for a couple thousand dollars you're saving tens, if not hundreds of thousands of dollars.
Speaker 1:Wow, I wonder how much it varies from state to state. Probably a lot, I'm sure, yes, I mean, and with the values of homes, how much they have risen from state to state. I'm in Arizona and the cost of our houses have risen so much, even over the last four years. I don't know what that would cost. I don't know what the state of Arizona takes, but it's probably a lot With the cost of our houses, as much as they have risen over the last four years. 5% is a lot of money to take off the top Exactly.
Speaker 2:Yeah, and one other tidbit on that note if you really haven't done the documents yet, the best thing that you can at least do, especially as a couple, but even as a single person for any of your, if you have your retirement accounts, you have a designated beneficiary, but for something like a checking account or even just a regular investment account with stocks in it, you can designate a beneficiary. It's called a transfer on death account, and so at least that, I believe, can also skirt around the system. It gets transferred directly to the beneficiary rather than having to go through everything.
Speaker 1:Good to know. Good to know. I did not know that that was also the same for stocks.
Speaker 2:Yes, it's a different. They call it like an individual stock account. This is a an individual TOD transfer on death. So you can do that in any sort of like Fidelity or E-Trade kind of thing.
Speaker 1:OK, so on our checklist, we have at least an annual financial review with your, with yourself and or your partner. We have your documents, get your paperwork and in in alignment, which means um, your, your directive, you need a directive. You need a health directive, guys, even if you're, even if you're 19, you need one, especially if you're don't live near your parents, you need one. And you need some paperwork if you own property, so your heirs can know what to do and not have to have all of that burden on top of them. Okay, all right, I'm on the checklist. Sounds like a lot, but if you chip at it a little bit at a time, it probably isn't that much correct Exactly.
Speaker 2:And a lot of this stuff again is sort of a one and done, set it and forget it, and unless you have a major change in your life circumstances, you don't have to go back and amend these things frequently.
Speaker 1:Okay, all right. What's next on our list? Next is life insurance.
Speaker 2:Life insurance, yes. Now again, everyone thinks you know they're never going to pass away and they don't need it. And there's two types of life insurance. There's whole life insurance, which covers you for your whole life, and then there's term life insurance, which just covers you for a term. Term life insurance is obviously a lot less expensive because they're insuring you for a much shorter period of time, right, and you really probably can't get a life insurance policy when you're older because they won't insure you. You know, from 60 to 80. They're like no, you're probably going to go soon, so we're not insuring you, right.
Speaker 2:But going back to, especially if you own real estate and you own it with a partner, and even if you don't have children, but especially if you have children, if you have two incomes, the chances are if something were to happen to one of those partners, the other person might not be able to carry the weight of that mortgage for the rest of those children's lives, right? And the last thing you want, if a child loses a parent, to displace them from their home or, you know, worry about paying for their college or literally anything in their daily lives, right? And so what you want to do is get a term life insurance policy that would essentially be enough to supplement that person's income for the next call it you know 20 years, right From when they're born to then they're 18, 20, but leave the nest right To be able to you know supplement that income should something happen to one of you.
Speaker 1:But whole life insurance is that covers them for their whole life? Is that something you pay for all the time? Is it you pay for one at one time? I mean, how does that work?
Speaker 2:Sure, so in both scenarios you pay a monthly premium, or maybe you can set it up to be semi-annually, quarterly, whatever it is, but you will pay for it on an ongoing basis in both cases. But for whole life insurance it actually becomes more of an investment account. But what happens there is insurance companies are businesses too, so what they're going to do is they're going to take your money and they're going to invest it and they're gonna maybe earn 7% and guarantee you 4%. So if you are someone who has a hard time saving, this can be a good sort of forced savings mechanism. And then you have this extra bucket of cash down the road, should you ever need it, because you can also, down the road, cash it out before you pass away. You're not going to get the full value. Maybe it'll give you 70% of you know what you've contributed, plus the earnings or something like that, and at some point it can start paying the premiums itself through dividends that you earn. So if you can manage to save $100 a month on your own and invest it and not touch it, that's a much better scenario, because you get to keep all the earnings that you get. But if you can't, the whole life is not a bad scenario and then, should something God forbid happen to you in these years, you do have that policy.
Speaker 2:Sometimes people like to take out small ones to just cover the cost of their funerals. Sometimes they like to do it for very wealthy. People use it as a strategy because they know they're going to have to pay tons of estate taxes and and they don't want that taken out of their you know, their children's inheritance. So they have a separate policy just to cover the taxes that will have to be paid. So all the money that they did have can go to their children. So there's various different ways to use the whole life insurance, but generally it's not something I would recommend to the masses. Term life insurance is really the thing that you want, just to make sure that your family and their home are protected in the event of your passing.
Speaker 1:And this is something that you can do even outside of your employer as well, because some employers will offer life insurance to their employees, but you can also get this outside of your employer too, correct? Yes?
Speaker 2:because usually what the coverage that they're offering is probably not that great or not that large of an amount. So you definitely want to make sure, like maybe it's, you know, $60,000. But you know again, if you're an earner of $100,000 a year for, again, 18 years of your children's life, you need a large policy. So usually what they're giving you you're going to be very underinsured. You want to have another policy outside of it and you know any insurer, like a state farm or whomever you know. It's pretty easy to get and, again, the term life insurance premiums are pretty reasonable for, you know, with the value that you're getting.
Speaker 1:Okay. So, what's next on our?
Speaker 2:checklist. Now let's talk about investments, right? So when you are sitting down and you're looking at what you have and you're thinking about, you know what you need in the future. It really should be goal oriented. What are your short-term goals? You know, maybe it's purchasing a home, so you're saving for a down payment. What are your medium-term goals? Hey, we need to pay for college, you know, in 10 years. And then your long term goals, which is most likely retirement, or maybe you, you know, want to buy a vacation home or something like that, right? So those are the buckets that you should be thinking about.
Speaker 2:And that's what we call risk buckets, right? Because anything that's short term you want to be taking very little risk on because you need it immediately. If you haven't invested in the stock market, that can go up and down drastically, not money that you want in the stock market. Medium term, you can have some conservative and then some in the stock market and then you get the mix there. And then your retirement, especially if you're on the younger side retirement's 30 years away you can be pretty aggressive with that bucket. So we like to think about it in risk buckets.
Speaker 2:Also tax buckets, which I think most people understand the risk buckets Tax buckets are things that people don't talk about. So if you are contributing to your 401k most people do that on a pre-tax basis you get the deduction from your income right now Everybody loves that and then the idea is long-term you will pay taxes on it when you go to withdraw it. Well, again, you know we all live pretty expensive lives and I think there's a common misconception that it goes down in retirement. But if you're healthy in retirement now, you're not working. You have all the time in the world to travel or go out to eat. You're spending money, right. So you probably need $100,000 a year, maybe more, right? And so if you're paying taxes, that's a high amount.
Speaker 2:Everything that you take out of your retirement accounts is just like if you were earning that in your job, right. So if you're earning $100,000, how much you get taxed in your job today is how much you'd get taxed then if you go to take it out. So you want to have diversification there as well. So you want to have some money that's just your savings that you've put in a regular investment account. That's after tax money, or there's something called a Roth 401k and a Roth IRA, which is you pay the taxes now and then it grows completely tax-free and when you go to take it out in retirement you don't pay taxes Huge benefit. However, you want to do that when you're younger, because the taxes that you take out now call it 30% that's a large chunk, right? So you want to have time to invest that to not only make back that 30% but then earn a lot more on it so let's see.
Speaker 1:I want to make sure that I understand this correctly. So if you're investing, do you have to have a lot of money to invest?
Speaker 2:you do not you can invest with very little money. There's so many different um platforms now where you can, you know, buy a fraction of a share or a fraction of a piece of real estate, or you know, to buy some. There's stocks that are five, $10, right, so you don't have to have a lot of money. But the it's really about the time.
Speaker 2:In the market, compounding is a beautiful thing, so I hope everybody knows you know the S&P 500. If you don't, it's the 500 largest or most lucrative companies in that are in the country right now and it's it's a fund that you can buy into. So I had a chart on my desk when I was in finance and it was something like if you put $10,000 into the S&P 500 in, I think like 1938 or something in the 30s I'm not going to get the date right but and then you let that grow and never touched it and just reinvested any dividends that those stocks paid out in 2016, that $10,000 turned into $46 million without touching it, just putting it in and leaving it there. So you don't need a lot of money as long as you start doing it early and you just let it grow.
Speaker 1:So you just need a little nest egg and just leave it alone and be smart about it, correct?
Speaker 2:Yes, it's more about yes, you want to invest wisely, but also you want to be spending wisely because that's how you can add to your investments. And again, starting early. And it's a self-fulfilling prophecy it grows on its own.
Speaker 1:And, again, starting early. And it's just, it's a self-fulfilling prophecy. It grows on its own. And you also mentioned about taxes, because taxes are complicated. Taxes are really complicated and they change depending on the tax code. Yeah, because they they can fluctuate and change, and they can change every six, eight years depending, and so you need to keep an eye on those as well and be really on top of that, because what benefited you the last tax code may hurt you this tax code.
Speaker 2:That is correct and this is why I do think professionals do come in handy for whatever their fee might be, especially as a financial advisor. That was one of my biggest value adds. I would tell people sure, I can invest your money in the stock market, but so can you right? It's really about how do I save you on taxes and so, and well, myself, in combination with the CPA I'm not a CPA, I was not a CPA but that's a huge value add for these types of service providers that they can really look at your specific situation, because you know I can give you certain tips.
Speaker 2:Yes, if you own property, you get deductions for that and things. But everybody's circumstances are different depending on if you own your own business or if you're, you know, a W-2 employee. There's various different things that you know you could get benefits from. But it really it's based on your personal situation. But by and large, with taxes, any deductions that you get, you have to lose the money. There's no like secret that you're just you know somehow work the tax code and you just get out of paying taxes. If you get deductions, it's because you spent money somewhere else, right, but maybe you're spending it in an asset that's growing and earning for you, right? So you'd rather put it there and get the tax deduction than just pay the taxes and give it to the government, and then that money is not working for you right, which is why real estate is it is a great investment. There's a lot of different tax benefits for owning real estate.
Speaker 1:I mean it's, there's a lot of different tax benefits for owning real estate. I mean you have to pay somewhere. You might as well pay yourself. Exactly, no one gets out of this free.
Speaker 2:Yes, you might as well find a way to pay you 100%. I completely agree. I do want to get into real estate and all those benefits. But one other thing on the topic of just thinking about your goals Now, if you're not going to go to a financial planner, the best way to think about your retirement goal is the 5% rule. So 5% rule says whatever sum of money that you have when you hit retirement, you can withdraw 5% of that per year to live on. And if your money is invested, you can assume the money will continue to grow. And essentially, by continuing to withdraw the 5%, you're just withdrawing the earnings part of it and you're maintaining the original balance.
Speaker 2:So let's say you retire with a million dollars that's $50,000 a year that you can take out every single year and just feel good about You're going to still have that million dollars there, because right now and this is something too that's a great tip you can get 5% in a savings account or in a CD, right, that's? It's a risk-free asset. You're not putting it in the market, it can't fluctuate, it's cash and it's earning you 5%. Now, that may not go on forever. There was times when you couldn't earn anything on your cash. Not so long ago, but particularly right now, you can earn 5% on just cash, so you can feel good about that. So if you can't afford to live on $50,000 a year on retirement, maybe you need 100, then you need $2 million. So how can you get there? Starting now, how do you save that amount of money? Okay, and again, you want to consider that 2 million. If it's all in a 401k, then it's not 2 million, it's less, because you're going to pay the taxes, right? That's humbling, exactly, exactly Now. So I don't want to overwhelm anybody because they're going to. You know, if you're in your fifties and you're like I have $500,000, how am I going to get to 2 million in just a couple of years? This is why I love real estate as an investment, because in real estate, you can use leverage, and when I say leverage, I mean debt. People think debt is a bad thing, it's a scary thing. It is a tool. All of the richest people in the world have tons and tons of debt because, whatever they're paying on the interest, they're earning more on whatever they purchased, and so they're making money in the long run. Let's say, you're paying 7% but you're earning 10%. You're still getting that 3% extra right, and that's money you didn't have. So, for example, when people think about should I rent or should I own Again, I'm gonna use big numbers.
Speaker 2:This is California. A million dollar house is somewhat average, right, but you can tailor this down to your own circumstances. If you want to purchase a million dollar home, you probably have a $200,000 down payment, right, so you can purchase that home. And now let's say the real estate goes up by even let's use low numbers, conservative numbers 5%, which has been much better than that last few years. But if it goes up 5%, 5% on that million dollars is $50,000 of earnings for you. If you put $200,000 into the market and let's say you're earning 10%, which is an aggressive, probably unrealistic number and you're going to be taking on a lot of risks to do that 10% of 200,000 is 20,000. So you can make. You can earn less. You're earning 5% on the real estate, but because it's a million dollars that you otherwise wouldn't have if you didn't get to borrow that from the bank, now you get to use the bank's money to earn money for yourself. That's how you get to these higher numbers quicker.
Speaker 1:Because real estate is still how you build wealth. It's still where it's at. Even at these big high price points, even at these higher interest rates, it's still where it's at.
Speaker 2:Everybody needs shelter. That's never going away, right, just like I mean I hate to be morbid, but like funeral homes are a great business because they're never going away. Accounting firms great business You're always going to have to do your taxes. In a recession or not, you have to do your taxes right. Same thing with real estate. People are always going to need shelter and you know to be a landlord and to have somebody else paying for your work, you know you're borrowing money from the bank and a renter is paying for your mortgage. That's how people get rich. So I heard a statistic that the average millionaire has seven different streams of income. They can have all different types. Maybe they own a PR company, maybe they've got Bitcoin, whatever, they all own real estate.
Speaker 1:That's kind of universal Of some sort. It could be commercial, it could be residential, it could be something. Yeah, but they own property somehow some way. Yeah, you didn't say that they were debt free.
Speaker 2:Not at all. They're definitely not. Like I said, the richest people love debt, right? I think there was something Jay-Z and Beyonce bought, like the highest praise house in Malibu, right, they bought it cash to get themselves a good deal because they can, and then they refinanced and got a mortgage on it because they don't want $100 million of their cash that they could be utilizing somewhere else and making more money just sitting in this home. So now they've got the home that's earning on the bank's money and then they're using that cash that they had earning somewhere else.
Speaker 1:Probably investing it somewhere else, probably on some other real estate, probably.
Speaker 2:Wow.
Speaker 1:See, you promised some nuggets of wisdom and to make this easy, Is there anything else that we missed? I mean, you hit some really key areas of all the areas of our life and I'll admit that if we looked at this all at once I'd be overwhelmed. But you're not saying do this all at once. You're saying, Chuck, you know, make this list and attack it a little at a time, Exactly.
Speaker 2:Progress, not perfection. The last thing I would add is just, if you do have children, like I was saying earlier, getting them started younger is always better because you just get that time on your side. Like I was telling you about the, you know the over the 40 something years of the S&P 500, or I think it was 70 years. You know that account grew so much and so the earlier you can get your children started, the better, even if it's a small amount. And so I recommend and there's different schools of thought on this, but I recommend a 529 account, because if you do just a regular brokerage you know, investment account, savings account when they turn 18, they have access to that money and maybe you have a really responsible 18 year old who won't touch it and will save it for retirement. But most 18 year olds I know I didn't make the wisest decisions at that age. So the 529 account in some states you'll, even as a parent contributing to it, will get tax benefits for it, and they've changed, they've loosened the restrictions. It used to be just something to pay for college. Now you can pay starting from kindergarten all the way to college age education, and then, if they don't use it one, they can transfer it to a sibling, so you don't necessarily have to have it for multiple children if you didn't want to, but they can also turn it into a retirement account. If you know them or their siblings haven't used it all up for their education, by the time they're done with all their education it can turn into a retirement account.
Speaker 2:So that's one of the best things to do and in terms of investing that my best recommendation again would be this S&P 500 fund. It's some of the largest and most lucrative companies in this country. Investing doesn't have to be complicated, right? Warren Buffett? I don't know if everyone knows who he is. He is one of the most famous, most successful investors in the world investors in the world. His estate plan says when he passes away, 90% of his wealth that goes to his. The 100% goes to his wife, but 90% of her inherited wealth is going in the S&P 500 and the other 10% is going into cash. If it's good enough for Warren Buffett's wife, it's good enough for me.
Speaker 1:Yeah, and he still lives a very humble life. He still lives in the house that he grew up in.
Speaker 2:Yep Again, he's spending wisely and he's investing wisely. It's a combination of the two. You can't just do one without the other, right, Because you can save a bunch, but if it's not earning anything, it's not really working for you, it's not growing for you, but you can't really invest wisely if you don't have the savings. But just to be clear on that last point, the S&P 500 is a riskier investment, right. It does go up and down daily. So that is something I was referring to children and a long term goal there, or if it's your retirement, that's what you want. You know, just like I said, Warren has 10% in cash so she can use it to pay her day-to-day expenses and then the remainder goes into the riskier asset to be invested long-term. So I just wanted to make that clear. I'm not definitely. If you're looking to save for a down payment or a new car or something you don't want to put it in the S&P 500, that's going to go into that high yield savings account. That's, you know, hopefully paying you 5% these days.
Speaker 1:Yeah, that's. The benefit of interest rates rising is that your savings account yields also rose. I mean, that's the flip side to that. I mean, but you actually get a return on your interest on your savings accounts now, on your money markets account now. So there is a flip benefit to that. So it's not all bad news.
Speaker 2:Exactly so. It's actually better because here so when you could get a mortgage at two and a half percent but you were getting zero in your checking account, you're paying two and a half percent. If you can get a mortgage now at seven percent but you're getting five in your savings, you're only paying two percent. It's actually better, but people just don't. Again, it's not in people's awareness and it's not something to be shameful of. But now you know, if I can scream this from the rooftops and hopefully other people will do the same, get the message out there and there's no reason why we all can't be, you know, incredibly wealthy and living on our own private islands.
Speaker 1:It's not a zero sum game and what I and what I love about this. Because when I first spoke with Stephanie, I was like, okay, we all made all the mistakes in the world. She said there's no reason why you you could have made all the mistakes financial mistakes all in the world you couldn't start right now where you're at Correct. Course correct that, regardless of how old you are, how many mistakes you've made, you can course correct right now and have a fantastic financial future. All you got to do is course correct and make better decisions in the future and you can be fine, regardless of your age, what mistakes you've made, as long as you have a plan moving forward. That's it Exactly. That's why she's here. That's why she contacted me is because she says I just want to help and I want to raise awareness and I'm so glad you did.
Speaker 2:Thank you, I'm so glad I did too, and you know to your point about how this can all be overwhelming. I am going to provide a pretty detailed checklist of all the stuff that we reviewed, and maybe a few more nuggets in there, so we can make that available to the listeners and they can download it and so they have some sort of guide to follow to start this journey.
Speaker 1:And, stephanie, I'm so glad that you're doing that, making this easy and digestible and so that people won't be overwhelmed and that they can go. Yeah, I can do this. I can do this. This is possible for me, regardless of all my dumb mistakes in my Post-its bill you know my Postmates bill, not my Post-its bill, my Postmates bill and that I spend too much on Amazon or whatever the case may be. I can fix this. So, stephanie, if people want to get in touch with you, wanting to know more about you, talk to you about real estate, where would they connect with you?
Speaker 2:So lots of different ways. So you can go on my Instagram it's Steph sells SoCal. I'm sure we'll have this in the show notes, but it's Steph with a PH. Or my email is sc at sc real estate, grpcom. But yeah, so very easily accessible. And I am actually starting to offer a very limited number of financial coaching sessions, just to again, if someone's super overwhelmed and the checklist even seems overwhelming, I know it's easy to just you want someone there to just tell you you don't want to have to Google everything all the time, right, and there's so many options and you get nervous, and so I am opening up myself for some limited coaching sessions. So if you find yourself feeling like you need that and you don't want the full sort of financial planning scope of everything, I am available for that as well.
Speaker 1:I highly encourage you. Reach out to her. She is accessible, she is warm, she is a wealth of knowledge and, like I said, I learned something from her. Just talking to her for an hour, I save myself 75 bucks a month just from saying wait, how much am I spending on subscriptions? Reach out to her. She's wonderful. She will teach you so much and make all of this so much more less intimidating. So give it a shot. You've got nothing to lose and everything to gain. Stephanie, before I let you go, I want to give you an opportunity to leave one last nugget of knowledge with the guests without me interrupting, so show that the mic is yours guess, without me interrupting.
Speaker 2:So show that the mic is yours. Oh gosh one. There's so many nuggets, I think. Just don't be intimidated, Just start. You know, it's probably one of the hardest things to confront. It's like it really is, it's a true fear. Sometimes I don't even like opening the MX myself, you know. But just do it. It's a lot less scary than you think it is. But just start. Even one little step in the right direction is progress.
Speaker 1:Stephanie, thank you so much for being here. So thank you so much for putting together this checklist, making it easy and digestible and just lowering the bar on the intimidation. Thank you so much for doing this with me. I so appreciate it.
Speaker 2:Thank you so much for the opportunity and I will just give my legal disclaimer, because I definitely shared a lot of information today. So I am not an attorney, I am not a CPA or accountant. I am no longer a formal financial advisor or licensed with a financial institution. This is purely information sharing. Anybody can look this stuff up on the Internet. I'm just here to share it and make it, as you said, more digestible.
Speaker 1:She's just very passionate in making sure that we all have a fair shot at being millionaires and having our own island. Yeah, why not? And I want to once again thank all of you for listening and we'll see you again next time.
