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A big thing is people that want to plan for their kids.
Yeah, whether it's college savings, whether it's when they want to they put life insurance on their kids. You know, there's there's a variety of different ways that people can save money for their kids.
Right.
So somebody's coming to your office and they just got married and they have a baby on the way, right, talk talk through the process that you would educate them as far as the different ways that they can actually set their children up.
I mean, like you said, there's a lot of ways, because there'll be just a newborn baby, right, Well, probably wouldn't start entertaining the conversation of putting them on payroll, right.
Yeah, talk about more. I'll come on the back end and talk about that partuct that might.
Be an audit audit red flag.
Yeah, but I think one of the ways that you can always obviously set up a custodial accounts in the beginning.
What that means is right, it's kind of joint ownership.
You can control it intil the kid reaches a certain age, and so deciding what do you want to do for the kids.
So do you want the kid to go to college? Right?
Do you want to say able to buy their first property at a certain age. I like to start with the end in mind, with the target, and then from there we can figure out the best investment vehicles are the best options. One of the things would definitely be
opening up a custodial broker's account. Another thing would be also getting a life insurance policy on them as well, because insurance is based off agent health and when you do design it the right way, there are ways where you can have something called high early cash value, or you can have ten pays or twenty pays and while your commissioned as an agent. If you get compensated that way,
it goes down. That is the best thing for the client. Right, Those are two fundamental things that I would do because I mean at that age, right, being able to get a policy and getting a custodial account.
And people don't realize the number one.
Thing in investing that you have you have it to your advantage is time. Right, So being able to get that started, you know, literally from day one, is a super advantage for sure.
About five twenty nine, I'm not against five twenty nine. I mean there's some tax benefits from it, but they just became sexy again.
Yeah, they did because you can convert them to now.
Yeah, so I'm not against I think five twenty nine are great vehicles. I just like to optimize for flexibility. I think that we just live in a very different environment. I think when I was in school, when I was in college, and that you hear things like, oh, that's not a professional, that's not a career, and people might not be going to college in the same way that they are now with the advent of certain technology.
But I'm not against them. I think they could be you could turn.
To it yeah, so just because I want to just consto it before you jump outmah agmah preferential, or because like you said, you're thinking of the end in mind, and there's different levels of control you can have right at eighteen, Yeah, controls over.
So what's your think?
I think if you're passing down the methodology, right, that's that's that's a big We didn't talk a lot about it, right, but like a big part of all of this is as you're doing, as you're setting this stuff up, like you don't want to just do what you do, what you're you didn't have for your kids. You want to educate them so they have the methodology and the mindset
on why you did it right. And so for me, I think, even though you're giving up control at eighteen, if you did what you were supposed to do in terms of like advising them at every step, especially once you were able to put them on payroll, Hey, this is why we're doing it.
This is what we're going to use the money for. I could have just given you the money.
But the reason why we're putting you on payrohch I'll let you expound upon reason why we're putting you on payrolls because this is what it means for our business. And this is tax tax free income to you. And now we can invest into the rock Diray and now to stick your thunder.
But you leave something on the both for me, bro, So I think it's for me.
It's about the education, right, I mean, control is control is great, but at the end of the day, like I was mentioned, I was talking to this lady on the plane who has adult children, and she was just like, your kids are gonna be your kid. You can only do so much, so much right in my opinion, You know, when the first eighteen years of life, if you did what you were supposed to do, they're gonna take what they're supposed to take and they gonna do what they
want to do. So I'm personally I don't need control, at least me personally beyond.
The age of eighteen.
Yeah, And one of my favorite strategies that I don't think enough people utilize is hiring their kids into their business. What most people do is they make money, they pay taxes on that money, and then they pay their kids, which is okay, it's a good start, but I think it's a better way to do it. You make money first,
then you hire your kids into your business. And when you do this, you're able to pay each of your kid I'm sure I'll have to hurt this before up to fourteen thousand, six hundred dollars each per child, and your business receives the fourteen thousand dollars tax deduction as if you pay anybody else. And your kids can receive this fourteen thousand, six hundred dollars tax free because the standard deduction wipes out their income. They don't have to
file a tax return. You don't have to send number to TA ninety nine, you have to send in W two. None of that. They get that fourteen thousand dollars tax free. And then if I were you, they don't, I would take seven thousand of that fourteen thousand and put it into a roth Ira for them because they probably need
all the money right now. And if you do this from when your kids of age, I recommend, don't you know you can start hiring your kids and your business at their eighty seven because that's when they can actually do work, you know, answer the phones, clean up the office stuff like that. If you do this from when your kids at age seven to when your kids at age seventeen. That's the cut off or hiring your kids
into your business. They will have about one hundred and thirty one hundred and forty thousand dollars of tax free money in their wroth.
Ira.
Not to mention you, they've been learning from you as a boss for the last ten years. So not only are you teaching them, are you paying them for the work, but you're teaching them entrepren neural skills at the same time. So I think this is a great way to save money or taxes of your business, pass down tax free wealth to your kids and help them get a head
start on entrepreneurship at the same time. And I think that more people should take advantage of, you know, hiring their kids and their business and giving them the ropes the supervaluble.
At seventeen, they're probably going to make the biggest financial decision other than buying the house, which is am I going to school?
Yeah?
And now you get your own money to make that decision. True now because you can go to school on my time for one hundred thousand but no, no, you got one hundred and twenty thousand dollars. You can use that for college or what I'll plan to do for my kids. I would say like this, this is the c capital you need for your business. We don't need to go find outside funding or find investors. You have one hundred thousand dollars to put towards that business idea. I'll be
the CFO of the company. I'll help you to puy the money into your business. But I want my kids to have options on what they want to do. Instead, happened to take the traditional route.
So what's the conversion that you can find twenty nine to a row?
Oh yeah, so with the five to twenty nine plan, the problem that I used to have with it is that that money needs to be used for college or you or you have to pay taxes on the earnings from that money. And let's face it, you know, eighteen years from now, like college might be less of a thing than it already is today.
And so if they.
Don't want to go to college, then you have to now pay taxes on that money. But the rule is today you can convert I believe us up to thirty six thousand dollars of five twenty nine money into a wroth ira and not have to pay any taxes on there. So like if your kids at eighteen say, hey, I don't want to go to college, you can convert that money to a wroth Ira and they can continue to grow tax free, which is a huge flexibility option for
kids now. So now five twenty nine, planers like, hey, if you don't want to go if you don't want to go to college, I can either change the name to another child, or I can convert it to a wroth Ira and they could continue growing tax free forever, which is pretty big.
Yeah.
And so this is I mean amazing information. One of the things that people always ask us about is asset allocation, right, and so in order to do these things, to have these strategies, they have to know how to spend, how to say where they put. So what is the recommended percentages? I guess case the case, but just an overarching theme of what asset allocation will look like.
Yeah, even just even just even cash flow personal finance every Yeah, So I mean, just to your point, depend on how much money you make, do think you need to be paying yourself fifty percent of that for like for general expenses. But the average person, I would say, let's keep your necessities right, You're you're housing your cars, all that stuff, builds utilities, but ideally around fifty but no more than sixty percent, right, Like between that fifty
to sixty percent range is pretty decent. Then fifteen to twenty percent of your money for like you you know you you're you're once right, being able to travel, dining out, entertainment like those things that could be very variable, right, And then another fifteen to twenty percent for allocated for investing. Now as your income increases, right, we want those percentages to flip.
Right.
So for example, like you know, they said the average retirement age is sixty five, but when you really the math, the reason why the average retirement age of sixty five is because the average person makes fifty thousand dollars in the United States, right, meaning they did everything right, they can maybe allocate ten percent towards investing in saving, which means that's gonna take them thirty plus years accumulate a million dollar nest egg. But if you make one hundred thousand dollars,
you've doubled your income. And if you just doubled your savings rate from ten percent to twenty percent, now you can put away four times more money.
Right, So I think one of the.
Keys is as your income increases, strategically increasing your savings rate. Because here's the thing, even if your lifestyle does increase as you make more money, as long as you've increase your savings rate, you're always guaranteeing and banking banking in the fact that I'm now going to increase my investing as well. But to start out, I think those are great percentages. But as your income increases, I think you know, of anything above six figures, I would try to get that.
I would try to get those necessities down to like closer to fifty percent, maybe even less, and then continue to increase the saving and investing allocation so that you can just get to your target faster. Because retirement has nothing to do with age. It has everything to do with assets. It's a number. You don't have to be sixty five, right, It's like, oh, I got a target, now this is the number. How can I get there
as fast as possible? You get there as fast as possible while being a good steward over your finances.
How do we get tricked into thinking that sixty five is like now I want to do whatever I want to do in life, like you know, like my knees barely work like like, So we always tell our clients, like, retirement is not an age.
It is a number.
The faster we get you there, the faster you can like do whatever you want. So it's about more, you know, financial freedom than it is about retirement, because it's just like, how when at what point do I have enough money when my investments can pay me out to live my lifestyle. And at that number, if you want to stop working, stop working. But I just think that we as a people, as a coach, you need to get away from that
sixty five and now I can live my life. Life is meant to You're meant to do more than that.
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