The Bender Continues
Everyday bros talking about how life goes!
The Bender Continues
The Passion Project FT. Joey Casolaro
Unlock the secrets to financial empowerment with Joey Casolaro, an Associate Advisor at Highland Financial Advisors LLC, as he shares practical insights and strategies designed to elevate your financial journey. Discover why budgeting isn't about limiting yourself, but rather a crucial tool for gaining control over your cash flow and setting the groundwork for a stable financial future. Joey walks us through the essential steps for building a robust financial foundation, including the critical role of establishing an emergency fund to buffer against life's uncertainties.
Tackle the thorny issue of debt with confidence as Joey provides a roadmap for managing overspending and prioritizing debt repayment. Learn how to navigate the complexities of high-interest credit card debt and student loans, with actionable advice on structuring debt repayment to minimize interest and stress. Gain insights into managing multiple debts and the importance of understanding your debt-to-income ratio as a measure of financial health and risk assessment.
Explore the path to wealth-building with Joey's expert advice on strategic investments and effective cash flow management. From high-yield savings accounts to the nuances of tax-advantaged retirement accounts, understand the steps to making your money work for you. Get clarity on the often-confusing world of insurance, with a focus on why term life insurance tends to be a more suitable option for most individuals. Tune in to equip yourself with the knowledge and tools necessary for a successful financial journey, no matter your starting point.
Welcome to the Bender Continues podcast Introducing our guest for today's episode of the Passion Project. Under the Financial Pillar, we have Joey Casalera. Joey is an Associate.
Ryan Selimos:Advisor at Highland.
Jonny Strahl:Financial Advisors LLC. He is a graduate from the University of South Florida and received a certified financial planner designation Go Bulls. With five years of experience as an associate wealth advisor, joey and his firm serve high net worth families and individuals to reach their financial goals personalized financial planning, tax planning and overall investment management. Welcome.
Ryan Selimos:Joey. Today we're going to discuss avoiding financial mistakes. Joey brings a lot of knowledge to the table, but where we think he is the most relatable and impactful in today's discussion is the fact that he is at the beginning of his own financial journey. Everyone has to start somewhere, but not everyone has to be confused on how to start. So tune in to receive key insights to get your financial journey off the ground or to the next level.
James LaGamma:All right, joey, thanks for joining us today. Welcome to the Bender Continues. We're really excited to have you. Yeah, thanks for having me. Yeah, we're really excited about today's discussion, feeling like I'm a young person in my now 30 era. People that are younger usually often face a bunch of financial challenges due to inexperiences, lack of education or one of my problems, impulsive behavior. So, to kick us off, we broke this down to where the first topic is going to be the basics. A lot of people they go through schooling and stuff but they don't really get taught the basics of financial wealth and health and just trying to build for their lifetime. And one of the very first things that kind of kicked off here is with budgeting. There's plenty of different budgeting methodologies out there, but we're curious to kind of hear what you think is some of the best that work.
Joey Casolaro:But we're curious to kind of hear what you think is some of the best that work. Yeah, and I am so happy with budgeting to start off this conversation, because it really is the most important concept when it comes to financial planning. Knowing what your income and expenses are is so important. It doesn't matter if you have $10 to your name or $10 million. You have to know that, and so the best method that I think when it comes to knowing your budget is the one that you could stick with, and I know it sounds cliche, but I like to use the analogy. If you're setting up a workout plan, you have all the sets you're going to do, all the reps every day, what you're going to do, but then after three days, you don't follow the plan. What was the whole point? So it's the plan you can stick with.
Joey Casolaro:I'm a big proponent of keeping things simple, and so what I do personally, and what I recommend everyone do, is you go through your cash flow. I don't like to use the word budget because budget sounds you know you're limiting yourself to spending somewhere. It sounds scary when you say cash flow, it's all what it sounds like. You're going to go through. What are your income sources, whether it's through work, bonuses, commission. Then you're going to go through, you know, write down the annual number or the monthly number, and then you're going to go through expenses. So start off with your personal expenses. You know, dining out, groceries, your phone bill, go through all those categories and you can go online and find different types of cash flow sheets out there that have all the categories.
Joey Casolaro:Then you go over your home expenses. You know if you have a mortgage, if you pay rent, what's that look like, what's the monthly cost, any car expenses and things like that, any, any contributions you're making to any savings accounts or investment accounts, and then what you're going to be left with at the bottom is either a surplus or a deficit. So you're going to see, based on your income expenses, do I have money left over at the end of each month? If you do, that's great. Now you can decide where that money goes. But if it's a negative number, meaning that you have a shortfall every month, you know, okay, I need to cut back somewhere because I can't be operating at a shortfall or else I'm going to accumulate debt. So going through that cash flow and figuring out where you are in a surplus or deficit. I think is the best methodology to track your expenses.
James LaGamma:That's good. That's good. It kind of reminds me of when I was going through some medical stuff. They told me track your blood pressure and see where you're up and downs and all that kind of stuff, and it's a similar concept. You got to track all of your ins and outs, your credits and debits essentially money coming in, money coming out and in order to figure out where do you actually stand, to start at square one to now go.
James LaGamma:Okay, this is where I want to go from here, and one of those things that, once you find out when you have that surplus and what to do with your money, some people try to say you should save an X amount. So, to be fair, I don't even know. Do people even still save money these days? I know I do. I feel like I am more of an old soul when it comes to how I handle my money. I don't put it under a mattress, but I still try to save a healthy amount of money. But when it comes to trying to save, or what strategies you should have when trying to save, what do you think is the best advice, especially for people that are struggling?
Joey Casolaro:Yeah, Another two great questions. The first question do people still save money? The answer is yes and no. It really depends, and what I've seen is that people that have an emergency fund set in place which an emergency fund, as a general rule of thumb, should be six to 12 months of your living expenses, which you'll figure out by doing your cash flow but those are People that have that in place usually are able to save.
Joey Casolaro:People that don't have an emergency fund usually are not able to save and accumulate debt, and the reason for that is because they'll have a sudden expense come up. Let's say they own a house and their water is in the grates that's now money. That's say, they own a house and they're water-duty rates that's now money that they need to go pay for that they don't have. So they're going to use a credit card the next month. Let's say they have kids. Kids want to go to daycare, school or whatever they get, to shop money for that. Then something happens to the car it's another expense, and their debt just starts to snowball. And it's nothing that they did wrong. It's just that these expenses came out of nowhere and they didn't have the emergency fund. So when it comes to time to saving money they can't. Now they're in this debt trap People that had that emergency fund they rolled a, dish out the money for that and stay on track every month with those contributions to those investment accounts that they're dealing with saving accounts.
Joey Casolaro:So, yes, people still save money. If they have an emergency fund, usually they are able to. If they don't, usually people don't save money. And then the second part of your question was what's the best strategy to do that? And it really comes down to I like to use a bucket approach. So if you think about your paycheck at work, when you get your paycheck, what's the first thing that gets taken out of your paycheck? Taxes, Exactly, Uncle Sam needs his taxes. There's nothing you can do about that.
Ryan Selimos:Fucking Uncle Sam.
James LaGamma:Uncle Sam.
Joey Casolaro:He's a pain in the you know what, but he's got to do what he's got to do.
Ryan Selimos:Ass, you can say ass.
Joey Casolaro:Okay. So taxes come out. So after that comes out, what you want to do is then pay all of your fixed expenses. So those are expenses that you have to pay. Those are, for example, your mortgage If you own a house or rent your apartment your grocery bills. Those are your needs. You have to pay those.
Joey Casolaro:Then what you want to do before you spend money on your wants which are discretionary expenses, things like restaurants, going out to dinner before you do that, you want to pay yourself first, and what that means is you're going to start allocating money towards savings and investments with paying on your goals, and how I like to look at that is. First thing you want to do is get that emergency fund in place. If you don't have it, get that three to six months of expenses more. If you want, put that in a high-yield savings account, which right now they're paying 45% interest 45% of interest. There's no fees usually and that's a safe place to put your money. Then think about any goals you have in the next one to two years. Those goals in the short term you want to start putting money towards in a savings account as well. Or you can use a treasury bill, or you make a loan to the government or a CD, or you make a loan to the bank, but you want to put money where it's safe and the reason for that is any short term money that you have coming up for, any goals let's say you want to go on a vacation next year Any short-term money that you have coming up or any goals let's say you want to go on a vacation next year or you want to buy a wedding ring next year.
Joey Casolaro:Your biggest risk with short-term money is that it won't be the same value when you need it, so it's called volatility risk. So figure out what your short-term goals are. Start putting money towards those buckets, thinking five years plus. You want to put that money in the markets because your biggest risk in the long-term money is inflation, losing your purchasing power. So any long-term money you want to put that and you want to invest in the market because you have the time to withstand any ups and downs in the market.
Joey Casolaro:Once you've had that money allocated, you pay yourself first with those buckets. Then you can spend what's left over on discretionary expenses like dining out and things like that.
James LaGamma:That's good advice. I've actually tried to put that into my own financial strategy and when you pay yourself first, it doesn't feel like you don't feel that money coming out all the time. It's not like the same thing as when you're doing your discretionary spending, you buy something. It's very it does feel like okay, well, this is my normal strategy, this is my normal state. I'm only working with the X amount of money. You get very comfortable understanding that.
James LaGamma:That's where you're at, but not all the time does comfortability actually work out for you, because things come up or changes in your life. You accumulate more debt, you have other things come up, like you said, they need to pay for. But also there's one of the things that we're dealing with right now and that's inflation. Dealing with right now and that's inflation. Um, I feel like it's probably a not so much talked about strategy to reevaluate frequently where your uh your cash flow essentially or I can't remember what you call it not budgeting, don't want to use the, the bad word cash flow, you're right, but do you, yeah, do you uh advise people to kind of reevaluate or have like situations when you think, when you say that they should be reevaluating, when they're starting to feel like, okay, maybe I'm a little bit more constrained so that they don't go down that path of getting into the debt trap.
Joey Casolaro:Definitely, and the best thing to do for that is look at your credit card expenses from the past couple months. You'll be able to see where you're spending your money and see okay, this month I went a little overboard on maybe going out with friends and drinking. This month I went a little overboard on food, and it's okay. Just reevaluate, reassess and say okay, I'm going to pull back a little bit here and start to make a better decision with my money going forward.
James LaGamma:Yeah, that's smart, definitely looking at those credit card expenses, kind of seeing where you're actually spending your money and you're just discretionarily spending, and then from there you can kind of have to look at yourself in the mirror and determine whether or not you're actually living within your means. Do you have any advice for people that kind of struggle? It just seems like they just continue to spend and spend and it's just not really working out for them.
Joey Casolaro:Yeah, I mean you have two options If you're spending too much. It's either decrease your spending or increase your income. So if you don't want to decrease your spending, then you better figure out Kenny likes that. Yeah, you better figure out a side hustle.
Kenny Massa:I like the later.
Joey Casolaro:So you know, and one thing to mention is, you know there's no right or wrong cash flow of where you should be spending your money. Everyone is. You know there's no right or wrong cash flow. Where you should be spending your money, everyone's cash flow is gonna look different. For instance, you know my cash flow if you looked at mine, my expenses, I'm spending three gym memberships right now paintboards, because I just like working out once for jiu-jitsu. I do in another gym just for the sauna.
Joey Casolaro:See, the brother pula might be crazy, okay, but for me I get joy out of that, so I think it's worth it. But then if you look at my other expenses, for instance, like dining out, I only eat out twice a week, so that's where I cut back to make up for that. So you want to spend money where you find the most joy and happiness and value, but you also don't want to go overboard. So see, you know, if you're spending more money in one area, see where you can cut back where you're not getting as much joy out of. Maybe that's subscriptions, maybe that's, you know, a membership you're not using. Just reevaluate and then you can see, you know, there'll be a way to increase your expenses.
Kenny Massa:Let's lean into that for another couple minutes. If you just look at the example of what you just gave, which is you only have two options, which is either to cut back a little bit more or to increase your top line and increase income, which will then allow you to be able to manage your expenses more effectively, because basically, you'll have more money, but let's say you're spending at a faster rate than you're bringing in. I guess the most simplified term that everyone most commonly hears is that would be called as debt. Right, because it's money that you owe for. It could be anything. It could be debt in a loan, it could be debt in owing credit card bills or debt in student loans. I mean, there are so many different forms of debt. But when you look at debt, you hear sometimes that there's good debt, there's bad debt. Let's consider overspending as bad debt. In whatever it is, most likely it's credit card debt. But how?
Joey Casolaro:do you manage getting out of debt as a whole? You manage getting out of debt by not getting in debt. Yeah, that's a simple answer. I know that's not always possible. It ought to be one way.
James LaGamma:Who's the guy that hates debt that's always ranting about just pay off all your debt immediately.
Joey Casolaro:Dave Ramsey, ramsey yeah.
James LaGamma:Ramsey yeah, that's good.
Joey Casolaro:That's good. But yeah, no, debt is a tricky situation because, like I said before, no one wants to get into debt. But if you find yourself in that situation where you don't have an emergency fund and expenses are coming out of nowhere, there's nothing you can do. So you really have to take a look and say okay, if you're in debt, look at your cashflow. Where can I cut back on expenses, get that cashflow to a positive surplus and then start paying down that debt. And when I'm talking about debt, I want to be specific.
Joey Casolaro:The worst debt you can have is credit card debt because of how high the rates are. Those rates are north of 20%. So people always ask I have $20,000 of credit card debt. I want to start investing. Should I start investing first? And the answer is no. You should start paying down that debt as fast as you can, because if your interest rate on that debt is 20%, by paying that off, that's a 20% return you're getting. If someone tells you in the stock market if they can get you a 20% return every year run, because it's not possible. So you're better paying off that debt and getting rid of that, because that snowball effect of that 20% is just going to keep compounding year after year, and compounding is crazy. It would be a great thing if it's on your side with investing, but if it's on the other side with debt, it really can destroy you and you get stuck in the trap. So really try to pay that debt as fast as you can.
Kenny Massa:And that was my second question If you had, just from a basic level, $1,000 in debt and you were prioritizing where you were budgeting finances and where you were spending money and you had an excess or you had a surplus of, let's say, $300 or $400, do you choose to prioritize paying that debt or putting some into savings or in an investment portfolio, based off of your recommendation just a few seconds ago? It would be to prioritize the debt because of the largest, basically, form of interest rate that you're paying within, and we're assuming it's credit card debt, not something smaller, but in most cases and in many cases, it's credit card debt, and is that the most common thing that you see? Credit card debt is what's holding people back.
Joey Casolaro:Credit card debt one. And then number two is everyone knows student loans.
Ryan Selimos:That was my next question. I'm surprised you said that credit card debt was worse than student loans, because I feel like you're going to find yourself in a lot of conversations about that, especially with the younger clientele, potentially. What's the mindset there Is the general mindset not really worrying about it with the hopes it gets paid off Because that's out there. It feels like it's dangerous when we start talking about that. But you came out and said credit card debt. So that was at least surprising for me. So I'm interested in your take on the comparison between the two. Not surprising, it's one and two. I just thought it would be flipped.
Joey Casolaro:personally, yeah, I think it's because the rate on student loans is much lower than credit card debt. That's why it's not that big of an issue. But yeah, many people have stopped making payments to their student loans because of that possible plan where they might get it all wiped out. Who knows if that's going to happen? And also, you know the government's doing those deferments where they're having you stop paying, you don't have to pay anymore for a certain amount of time. That's been going on. So you know there's different types of debt. If you have student loans that are private loans, the interest rates are much higher than, let's say, you've got a federal loan. So, loans, the interest rates are much higher than, let's say, you've got a federal loan. So if that's the case, you definitely want to start paying off those loans and maybe pay less towards the federal loans because it's a lower rate. But again, definitely student loans is a huge part of that as well.
Kenny Massa:So I have another question on top of that. If you have multiple forms of debt let's say you have three different credit cards that you owe $500 a piece to. You have student loans that you have to pay off If you're trying to pay off debt and this is how I've looked at it but if you're trying to pay off debt and choose which one, how I've looked at this in the past personally, from my perspective is I would pay the minimum on all four of those pieces of debt right, so that you're not accruing any type of credit issues or anything of that nature. But then you take any surplus that you have and you put it on the highest interest rate loan or interest rate form of debt, so that you're paying off the higher interest rate ones, correct? Would that be the best?
Joey Casolaro:approach. Personally, I would agree that is the best approach. However, some people may feel like they're not making any progress when they're paying towards all four debts at once and they're seeing the balances go down very slow. They can get discouraged. So another recommendation that I think Dave Ramsey recommends is paying off the lowest debt first, so you can actually see the improvement. You're making reverse but from a financial standpoint I think the best is paying off the higher interest interesting what about um, I know, not every loan is the same.
James LaGamma:What about trying to chip away at your like loan term? Essentially so like trying to also focus on loading on a longer-term debt vehicle that you may have? Your student loan is usually up at 15 years, but then your mortgage is 30. And mortgage is your front-loaded, your interest rate payments. So if you pay higher earlier, you actually don't have, you don't pay as much a lump sum over time of the term of the loan. Is that part of the strategy too, when you're considering how to load, how to load up all these different? Because you're trying to pay it on principle? That's the goal.
James LaGamma:So then, interest can't get levied on the principle right.
Joey Casolaro:Yes, it really depends on the rate of that loan. Some people will ask does it make sense to make extra payments towards my mortgage? If your mortgage rate is north of 70%, then yeah, it might make sense because you can't get that in the market on an annual basis. But if your mortgage rate you got lucky, you got it when it was back to 2%, 3% then it may make sense to not make anything in this case in mortgage. So it really depends. You get a higher return on the bond the cost of debt.
Kenny Massa:Yeah, yeah, and there's definitely forms of debt that I would say is good debt compared to bad debt and things like that. There are forms that leverage debt and things of that nature, contrary to what Dave Ramsey believes. But yeah, I mean, how do you evaluate your debt threshold?
Joey Casolaro:So there's a rule of thumb they use. It's if you take your total monthly debt payments and then times it by your gross monthly income, or divide it, I should say, by your gross monthly income. So you have your total monthly debt payments divided by your total gross monthly income. Times that by 100. If it's less than 30%, that's usually low risk. 30% to 43% is moderate and anything above 43% is high risk. But that's just a general rule of thumb. Of course really depends on the situation.
Kenny Massa:Got it and I was actually just looking at this because we've been going through the home purchasing. Basically, they evaluate your debt-to-equity ratio, which is the similar aspect here. That's what mortgage companies or I would say probably anybody that's doing anything on a large form of lending would evaluate right your debt-to-equity, which would be your likeliness of being able to repay that loan exactly that's equity, that's income or yeah, that's income.
Jonny Strahl:Sorry, same thing yeah hey, joey, you you mentioned obviously just the basics of of budgeting, right, and you mentioned something. Let's just keep it simple. Um, I know we've talked mentioned something. Let's just keep it simple. I know we've talked about debt. So let's just say, hypothetically, we're living in our means, the way we're budgeting. We're not in a place maybe where we're paying off debt ideally. I'm just curious, like with the various ways we can invest the simplicity sometimes of going on your phone and being able to invest in the market. Where do you start and what's the steps just to grow in wealth if you're someone who is 21 years old, or maybe someone who's 50 years old?
Joey Casolaro:Another great question. It was back to the cash flow. You know you're at that surplus. It's like I got this money, what do I do with it now? And the best thing you could do is give each dollar a job.
Joey Casolaro:So let's say you already have your emergency fund set up. You don't got to worry about that. Goals will have coming up and you're going to start putting money towards those, allocating those dollars towards a high-yield savings account or a low-risk investment for short-term and then any long-term goals you're going to put in the stock market. And the best thing you can do is set up automatic reoccurring contributions. That way you don't have to think about it. It gets directly deducted from your paycheck, straight to those accounts and then what you're left over after that is what you're left over for your discretionary expenses and you don't have to think about it. And it makes it really simple to start building wealth because there's no thought involved. The money is automatically going to those accounts and it's growing over time.
Joey Casolaro:You also want to make sure that when you do begin investing, that you're cognizant of what investment fees you're paying Any investment funds you buy. If you buy a fund which is a basket of companies in a wrapper, let's call it a basket. There's something called an expense ratio. So you want to make sure that expense ratio is on the low end, which I'd say on the low end is below 0.50%. Anything above that is a little high and you want to be constant of the fees you're paying for those investments. But setting up the automatic recurring contributions to those investment accounts and saving accounts is the best step to start growing your wealth.
Jonny Strahl:I love that and that's that's really good. I love that. That's really good feedback ideas. I guess would you suggest one or the other. When it comes to just investing, Would you prioritize, maybe focusing on one area versus maybe another? Just curious.
Joey Casolaro:When you say area, do you mean like short-term versus long-term?
Joey Casolaro:Yeah, short-term versus long-term and just types of investments give or take. Yeah For short-term versus long-term. Obviously something's coming up in the short-term. That's the main focus. So you got to start putting money towards that Long-term, which is five plus years. I would definitely take advantage of any retirement accounts you have through work, which is usually called a 401k or a 403b. At the minimum, you want to be putting enough in to where you receive the full match. So usually companies will offer an incentive that if you put an X amount they'll match it and that's free money. So I would make sure at the minimum you're doing that to get that free money and then allocating the extra surplus to that short-term bucket.
Jonny Strahl:I love that. So when do you feel, or do you feel, a person should seek out a wealth management firm? And what age would that look like?
Joey Casolaro:Yeah. So it really depends on the complexity of your situation. If you're someone that just graduated college, maybe just got a job and starting to build their wealth, you may not need a full wealth management firm to do that. You know you can watch videos online and kind of just start putting money towards, you know, investments and savings yourself. Once you start making some more income, your situation gets more complex. Let's say you have stock offers to work. That's a great example.
Joey Casolaro:If you're a business owner, that's when you really want to talk with a firm, because they can really help with tax planning, investment management, retirement planning and help you start to protect those assets. So for age-wise, there really is no age on it. It just really depends on if you need the help, then definitely go get it. And you know there's different sources out there you can go to. Vanguard is a very low cost fund provider and they provide help at a very low cost fee. So if you're just starting out, I would recommend looking at Vanguard.
Joey Casolaro:Another good one is there's something called XY Planning Network, which is a group that is only fee-only advisors. So when you work with an advisor there's two different ways they can get paid. They can either get paid through commission or through a fee, and I personally think that working with an advisor that only charges a flat fee or fee on the assets instead of a commission is a better way to go, because they're not going to recommend you buy something just for a commission, because they don't make a commission off of it. So you want to be sure that whoever you work with you understand how they're compensated and that xy playing network is only fee-only advisors, so you'll know that they get charged a flat fee, no commission. And you also want to make sure that whoever you work with is a fiduciary, which that just means that they have to act in the best interest of the client at all times.
Joey Casolaro:If not, they could be sued. Some advisors don't have to do that at times. They have to do what's suitable for the client. They don't have to act in the best interest, which means that if there's two funds that they want to recommend to someone fund A and fund B and fund A pays the advisor a certain commission higher than fund B, but both are suitable for the client, they can recommend fund A just because they get that higher commission. So whoever you work with understand how they're getting paid and have them put in writing that they are a fiduciary at all times when they work with you.
Jonny Strahl:No, it's great, that's really good. It's really good intel, especially when it comes to just picking and choosing it and really evaluating where and what makes the most sense. Just to be clear, you know we have a lot of millennials and Gen Zs who tune into this. You know podcast. I just want to make it clear Sports betting is not a type of investment, right, johnny? You stole my point, great point.
Joey Casolaro:It depends how well you're doing. If you're doing good, that's good to know.
Jonny Strahl:That could be your income, yeah, your main source of income joey, have you seen the articles around like the increasing amount of individuals that are actually leveraging investment sports betting versus the actual stock market?
Joey Casolaro:I have not, no, but I'll send you the article. I believe it. Yeah, I would love to read it, I believe it's scary, it's very addicting and you could fall into a bad article. I believe it. Yeah, I would love to read it. I believe it. It's scary, it's very addicting and you could fall into a bad trap.
Jonny Strahl:I believe it.
Ryan Selimos:Not to point out anybody, but we'll go ahead and flip the script over to Ryan. You remember at the beginning earlier, joey, it was like when you get that high rate of return run away from it in the stock market, johnny, that's you and I seeing that 12-legger, beautiful parlay, and it's just like this is going to hit for sure. Of course not. No. What I'm hearing from Joey is I'm hearing that you got to assign your money jobs. I did not hear sports betting on there.
Ryan Selimos:So, might have to reevaluate that. However, what I wish I had with sports betting was some insurance you know maybe some way to manage that risk.
Ryan Selimos:What I wish I had with sports betting was some insurance. You know, maybe some way to manage that risk. What these young people and their sports betting but really in general, joey, all seriousness, you know, maybe they're not thinking about their future. How should they be protecting their future? You know, how do you get into that conversation? How do you get into that mindset? Because, especially now, everything is now instantaneous. We're all focused on now, we're not looking at tomorrow. So what are those conversations like and, in your opinion, what's the best method that young people should be protecting their future?
Joey Casolaro:Yeah, and the first thing to make people aware of is what they are protected, because a lot of people don't know what they have to protect, and so what you have to understand is there's risks out there that can be protected through insurance, and the most common that everyone thinks of is life insurance, and I'll go into this one first, because this is probably the most common and most talked about. But life insurance is something that I believe you do not need if you do not have a spouse or kids, and some people think that life insurance is a great tool to use for investing, which is why they would recommend it to someone without a spouse and kids, and I don't think that's the case. I truly believe you only need life insurance if you have a spouse and kids, because you're protecting them. If you were to pass away and they needed that loss of income, you're providing them income. You were to pass away and they needed that loss of that loss of income, you're providing them income to support that need with hold.
Joey Casolaro:With life insurance, there's there's three things you're protecting. The first is the loss of income. Like I said, when the breadwinner passes away, you want to keep that income coming so they can afford their expenses. The second is any education cost that they may have the kids. You want to make sure that you have that covered. And then the third you want to be able to stay in the home. So the mortgage, any large liabilities you have you want to have that covered and through life insurance you can do that.
Joey Casolaro:Now when you buy life insurance, there's two types of main life insurance old life and term. Old life is exactly what it sounds like. It lasts your entire life term, lasts for a certain number of years. So if you know that life insurance is just to protect your loved ones, it's to protect the mortgage costs and it's to protect education costs, those things have a finite time, which means at some point your work is gonna be paid off. You want to cover it anymore. At some point kids are gonna be done with school once. Cover that and at some point you're gonna have enough assets to self-insure in retirement.
Joey Casolaro:So if you know that, why would you get something the last your whole life if you don't need it? Your whole life? Which is why I think the term insurance is much better and it is 100 times cheaper than what whole life is. So you're saving extra money by buying that. With that extra money, you can start throwing it into your savings account or investment accounts or start paying off debt With the whole life. You know it's much more expensive and it's just something that you really don't need Unless you have a lot of money. There's some estate planning techniques you can use with that, but that's really not really the case the majority of time.
Ryan Selimos:So I'd really recommend term insurance for anyone that needs it, that has spouse and kids love that well. I'd be honest, I never even thought about term insurance until right now.
James LaGamma:Just what's up, james can I just say a quick question. I had heard with life insurance there's the ability to kind of lend from it essentially. Is that something you even recommend, or should people even know about that?
Joey Casolaro:Yeah, Well, that's great. I should have brought that up. So with whole life, there's different routes. You can go down whole life. It gets very complex, Something called universal life and then variable life. With universal life you can change how much you're paying in premiums, which is the cost of the insurance, every year. You can change different parts of the policy. And with variable life, you can actually buy investments in the policy.
Joey Casolaro:But with whole life, in general what you're paying for is term insurance. You get part of term insurance in that whole life, which is the insurance part, and then you're also putting money towards something called the cash value. So that's money like a savings account you're putting into your life insurance that you can borrow when needed. The issue is those rates on that cash value part are very low less than 1% to 2% and those policies are very expensive. So I would stay away from getting a whole life and borrowing any types. If you do borrow from that whole life, also it reduces your death benefit, which is the amount that your beneficiary would receive. So it really is just a trap to go down. I would stay away.
James LaGamma:Okay, that's good advice.
Ryan Selimos:I like Joey. Joey's a straight shooter, hey here's what's necessary. Here's what you shooter. Hey, here's what's necessary, here's what you want. So let's stay in the necessary, the essentials, right? You've talked about life. We've talked about time. Are there any types of insurance out there for young investors that truly is essential, like, if you don't know about it, you need to know about it, you need to be looking into it.
Joey Casolaro:Yes, the number two insurance I would say is disability insurance, which a lot of people don't think of. But you know, if you're working and you get disabled and you can't go back to work, how are you going to afford your expenses? So disability insurance is a great way where you can transfer that risk to the insurance company and if you get disabled, they'll usually pay up to 60% of what you were earning and that can be a great way to supplement what you're making. And there's different types of disability insurance own-off, any-off. These are different types that, depending on how you're injured and what you do for work, will kick in. So make sure you're clear on that when you go through that.
Joey Casolaro:But I would say disability insurance is definitely something that anyone should have and it's very cheap as well at our age. Usually through work, your employer will offer it for free. You might even have it If you go through a statement. You'll see that they're giving you a benefit for that. And then, other than that, if you own a home, property and casualty insurance is a must. If you own a car, auto insurance is a must and if you're a business owner, eos insurance, air and emissions is a must protect yourself, I would say those are the most common.
Ryan Selimos:You answered a part two to that question because, right, for those that do have careers right now, some of those are offered through your employers right Life disability. So your recommendations are on top of through your employer, correct? Just to keep it simple for the listeners.
Joey Casolaro:Yes, usually through your employer, through life insurance. They're only going to give you one times your salary, or $50,000, most common I've seen and when it comes to how much life insurance you need, you really got to have enough life insurance where you can pay off the mortgage, pay off what the kids' education expenses are going to be in the future and then have a lump sum available to draw from each year pay your actual expenses.
James LaGamma:So in most cases I don't even want to I don't even want to imagine what the future kids' education cost is going to be.
Ryan Selimos:Yeah, that's scary. Public school free baby.
James LaGamma:Didn't mean to cut you off there, joe, no problem.
Joey Casolaro:Most cases, most people have one, two to three million of insurance per person. But if you buy term, you could do something called a ladder approach, which I highly recommend. That's where you're buying a policy. Let's say you know that kids will be done with college in 10 years and the mortgage will be paid off in 20 years. Instead of buying one 20-year policy let's say $3 million to cover both of that, you buy a 10-year policy for a million to cover kids' college and then you buy, let's say, a $500,000 policy for 20 years to cover the mortgage. So that first policy is going to drop off when the kids are done with college. All you have left is the other policy for the mortgage, the much cheaper way to do it.
Ryan Selimos:Okay, all right, I like that. We've got one last question just because I said he's a fucking asshole. Uncle Sam, I'm not telling you. I'm not telling you to talk about tax evasion, right? I'm not saying that. I'm just saying what are some common tax mistakes or missteps that people do make that ends up biting them in the butt down the road Because TurboTax tell me what it is boom, whatever, right, there's probably a better way to go about that. So you know, what should the people, what should the listeners be?
Joey Casolaro:aware of when it comes to doing their taxes every favorite time of year. Yeah, the first would be if you do have stock investments or bond investments, you're investing in the markets make sure that you're not selling investments within one year. If you do that, you trigger something called short-term capital gains and you have to pay at a much higher tax rate than if you were to hold it for at least a year, which then you pay a long-term capital gains, which for most people is at 15%, compared to the short-term capital gains, which could be up to 37%. So definitely be aware of that. The second is if you're making a lot of money, make sure that you're taking advantage of tax-deferred accounts, and what that means is, if you have a 401k through work, any money you put into that account, you're getting a tax deduction for it. So let's say you're making $100,000 through work. If you put in $20,000 into that 401k, uncle Sam only sees you making $80,000. So that's $20,000 that you just threw in an investment account that wasn't taxed. Granted, you do have to pay taxes when that comes out in the future, which $59.5 is when you can start taking that out, but hopefully it'll be in a much lower tax bracket back in the future, it won't be as high. So definitely making sure you're taking advantage of tax-free accounts and then also taking advantage of tax-free accounts.
Joey Casolaro:So my favorite investment account is the Roth IRA. That's where any money you put in grows tax-free and when you take it out it's tax-free. So that could be huge. And right now the limit, I believe, changes every year. I believe it's $7,000 per person. If you're under $50,000, you can put it into the account and as long as your income is below a certain amount, you can contribute directly into that account. And then, once you put the money in the account, just know that you have to buy investments in it. Some people think you just put the money in the account and it grows. You just put the money in the account and it grows. No, it's just sitting in cash. You buy investments, but that's going to grow tax-free and then when you take it out in retirement you don't have to pay Uncle Sam $1 on that. That money was already taxed on your paycheck when you already put it in.
James LaGamma:But you do pay on the gains, correct?
Joey Casolaro:Nope, you pay no gains. It's all tax-free. That's why it's such a great account. That's why Uncle Sam actually limits you Once your income is too high. They actually don't let you contribute directly to that Roth IRA and there's a little tax loophole you can go around to actually still contribute to it once your income gets too high. On the backdoor contribution, I won't get into that right now, but there are ways around it.
Jonny Strahl:But yeah, hey Joey, that's really good. I'm curious, hey Joey, that's really good. I'm curious. Do you know? What is that income? What does that look like?
Joey Casolaro:I know if you're married it's $198,000, I believe, of modified adjusted gross income, and then if you're single I have to look it up it's probably between, if I had to guess, $130,000 around there.
Jonny Strahl:So if you're someone who is out of college in the workforce, you're making, let's just say, a couple of years out, starting at $100K. You're making $100K a year, bonuses, etc. If you're making under $100K for the next, or you're making $100K for the next 30 years, if you were to put $7,000 in your Roth IRA, you do 7,000 times 30, that's $210,000. Is that right? Yeah, yep, that is all tax-free, correct?
Joey Casolaro:That's all tax-free and you're not accounting the growth that it's going to have. So all tax-free, yeah, hmm, because that's something when do you there we go, going to have All tax-free. When do you Go ahead? I was going to say, once you're in retirement, you want to make sure that, if you plan correctly, you have money in the three different types of accounts. They are the tax deferred, which is the one where you get the tax deduction for putting it in, but then you've got to pay taxes when it comes out. You want money in the tax-free bucket, which is the Roth, what's tax-free. And then you want money in the taxable brokerage account. That's an account where you put money in whenever you want, take it out whenever you want.
Joey Casolaro:The only caveat is you have to pay taxes when you sell something at a gain and any interest or dividends is taxable to you in the year that it comes. But the benefit of having those three accounts in retirement is then you can start to pull from different accounts money and not push yourself into a higher tax bracket, because there are times where people come to us they have all their money in a tax deferred account. So now if their annual expenses for the year, let's say, are 120,000, they had to pull out 120,000 from that tax, deferred account, pay taxes in that 120,000, all of it. And then if they want to, you know, give their son a gift for 10,000, they put another 10,000. That's all taxable income for them. No-transcript.
James LaGamma:Awesome. So what would be the strategy on how to know when to use each one throughout your life cycle?
Joey Casolaro:That really only comes into account when you're withdrawing the assets in retirement. So that's when you'd want to look at your income and compare it to the different phase outs and thresholds. When you're our age. You really don't want to touch your retirement accounts. Those are meant to grow. The plus thing about the Roth IRA is any money you put in you can always take out free of penalty With the 401ks that if you took it out, would be a penalty and you would be hit with a. You're going to pay income on it. So you really don't want to touch the retirement accounts. You really just want to touch the taxable birth account, which that you have full control over putting money in and putting money out while you run your assets. That's awesome.
Ryan Selimos:Makes sense. Hey, jonathan, yeah, the, you know, joey didn't talk about this. I understand why Remember the jobs, but when we do hit that 12-legger parlay for big money, we will have to pay taxes on the winnings. Whenever that day comes. Hasn't happened yet, but just I want to add that in for our guy.
Kenny Massa:Until then, it's just all loss.
Ryan Selimos:Which I'm not getting a tax benefit for.
Jonny Strahl:Fucking idiots. If only you could claim your losses.
Ryan Selimos:Eh which I will add when we do get the 12-legger.
Jonny Strahl:You'll be our first call just to figure out how we can do this, we will.
Joey Casolaro:That sounds good to me. But also one other thing I'll throw in is with the taxable brokerage account that you have. If you do take a loss in that account, which means that you sold something while you were down, you can capture that loss and hold it and offset it with any gains you take. So if you took a $5,000 loss this year and next year you took a $5,000 gain, it's a loss. You don't pay any tax, capital gains, and you can also write off $3,000 of loss against your income each year.
Joey Casolaro:So losses aren't good but that's a benefit that you have with a loss.
Kenny Massa:Yeah, I mean there's ways for people to position that. I mean you've seen it at higher levels. Larger sums with people that are, I would say, large entrepreneurs or people that are famous. You've seen, at larger levels, people using those large losses to benefit them in some way, shape or form, and it most likely comes in a fashion where they have massive incomes that they have to kind of like segment from not paying as much tax as the next year.
James LaGamma:All right. So we talked about tax missteps, talked about insurance. We're talking about risk management, protecting ourselves, but the ultimate goal is to plan for building a prosperous future, right? Most people, I think the average lifespan is 70s, 80s. We all probably want to aspire to get to 100. I don't know. Some people feel some type of way about getting that old. They don't really want to get that old. But throughout your life, what are some of those financial milestones that people should be looking out for and continuously planning to build that future for longevity in financial health?
Joey Casolaro:Yes, when you're just starting out, you're not making a lot of income, most likely. So you want to just focus on what you can control, and that's establishing a cash flow and then getting that emergency fund in place. Once that's done, you want to start establishing good credit so that you can borrow when you need it in the future. So start using a credit card, make sure that you're paying it off every time, you're not accumulating debt, and then, if you do have debt, you want to make sure you're paying that off first. Once you're into your I'd say mid-20s, early 30s, you want to focus on putting money towards retirement, and I know it sounds like it's so far away, but the earlier you start, the less you have to put in, and that habit you just want to make set in stone right away. You start saving for retirement, and then, early 30s usually when people start having kids you want to start saving for their education expenses. You don't want to get blindsided with that, though. Especially with a couple kids, you know that's really a dent in the pocket. So start using, you know, education tools like 529 plans to save for college and things like that.
Joey Casolaro:If you you are married and have kids, life insurance. You want to have that If you're working disability insurance. You also want to have your estate documents in order, which is something we didn't talk about, and the most important thing is, with that, you want to have a guardian in place which is just God forbid. You pass away your spouse. Pass away, you assign someone that's going to take care of your kids and then after that, as you're getting older, you're just building up your wealth. You want to make sure that you're saving as much as you can.
Joey Casolaro:Your highest earning years are usually in your 40s and 50s, so you want to make sure that you're maximizing your savings there and then, when you retire, it really comes down. You worked all your life relying on your human capital, which is your ability to make money. Now you're at a point where you can transition from relying on your human capital to your investment capital, so you have enough assets to live off of. So, trying to go into that transition live off that money to be the next step. And there actually is a great book that I recommend called Decades and Decisions, that explains, in each decade of your life, what you should be thinking about. I forgot the author's name, but it's called Decades and Decisions. It's a good book on that.
James LaGamma:Cool, nice, nice. And some people they usually like to kind of work with a financial advisor to plan these future goals and stuff. Is there just any advice that you have for people when they're starting to work with a financial advisor to plan these future goals and stuff? Is there just any advice that you have for people when they're starting to engage with a financial advisor Like what, what things? I mean, obviously the financial advisor is there to try to help them find those goals. But any advice that you have for someone that's maybe starting out with that?
Joey Casolaro:Yeah, you want to work with a financial advisor that doesn't just do investments. That's kind of the old way where you're working with stockbroker, all you're doing investments. If you're working with an advisor, at the very minimum they should be doing investments, tax planning, retirement planning, cashflow and debt planning, insurance planning and estate planning at the minimum, and you should be able to come to them with any question you could think of Should I buy, should I lease? Can I afford to buy this house in the future? Things like that. Every day, I believe, humans make about 35,000 decisions, and where we are today is the culmination of all those decisions we've made in the past, whether good or bad. So having guidance on financial decisions early in your life can really set you up for the future. So I would make sure that you're asking as many questions as you can and ensure that they're doing more than just investment planning.
James LaGamma:Any good recommendations on finding a good financial advisor? Is it usually just word of mouth or Google?
Joey Casolaro:searches. Word of mouth is great. Also, xy planning network is a great resource for fee only planners. And then you want to make sure that they're a CFP that stands for Certified Financial Planner. That's about two years of coursework you have to go through before you take a six hour exam on all those topics like insurance, estate investments. So make sure they're a CFP and then make sure that you understand how they're compensated, that they're fiduciary and, yeah, I'd say that's a great place to start.
Ryan Selimos:Keep it simple. Guys Work with a financial advisor named Joey.
Kenny Massa:Oh, you can do that one question I have which could be helpful for the viewers is if there's any recommended resources like books, websites, apps, programs or anything that you use or that you typically provide to anybody that you work with or that you speak with to help them become more educated in this space, whether it's about debt or any of the topics that we talked about investing in any sense, roth IRAs or general IRAs or anything of that nature.
Joey Casolaro:Yeah, so for books, I'm a big reader, so I read every personal finance books out there. I almost probably read it. Ones I like the most the richest man in Babylon is a great one to just explain how to live below your means. Another one is Psychology of Money by Morgan Housel. It takes more of approach of why people spend money, how they spend it and the psychology around. That, I think, is really helpful.
Joey Casolaro:Another book that I like has nothing to do with finances but leadership skills is Extreme Ownership by Jocko Willink. That is a very good book, just to be a leader. And then the E-Myth, revisited by Michael Gerber, is a great book on running a small business, working for a small business. I get to see what it takes and the pros and cons of it. So that's a really good book. And then I would say for building relationships, you know how to win friends and influence people by, I believe, is Dale Carnegie. It's a great book.
Joey Casolaro:And you know, the focus really should be for young people how to increase your wealth. That's going to make the biggest impact. People think, oh, you know, I'm going to stop buying Starbucks every day. Great book, james got it. Yep, in the middle of it. People think I'm going to stop spending money on Starbucks every day and it's going to help me, when in reality you've got to figure out how to increase that income. And reading books not just on personal finance but how to develop your skills, I think is the best way to do that finance. But how?
Kenny Massa:to develop your skills, I think is the best way to do that. Cool, yeah, I mean I think there's a lot of resources out there. Books are definitely. I've read a couple of those that you said. I think books are definitely a great resource. There's a lot of programs out there too, I think, for budgeting purposes. I know James probably uses like every single one of those budgeting. If you have an Excel template that's on the internet, james has used it.
James LaGamma:I built my own from scratch.
Joey Casolaro:I use Excel. I use Excel too. I like keeping it simple, so I use Excel.
Kenny Massa:James is good with that. That's why he's always tasked the budget I know every single dollar and cents I've made. And budgeted it accordingly.
Jonny Strahl:Yep.
Kenny Massa:You know. Other than that, I would say a template like that is actually a good resource or actionable step that you could take to move yourself forward. But are there any other steps that someone can implement today that can help them progress towards a better financial means, whether that be implementing a template into their life to help with budgeting purposes or start contributing to some type of program that's going to help create more of an investment portfolio at a small amount? What type of steps would you recommend someone take?
Joey Casolaro:today. Yeah, the first thing would be to create that cash flow. That's the first thing. And you know, use chat GBT as a resource. That is a great place to figure out. You know where can I get a cash flow from? Great, I don't know why Ryan's laughing so hard.
Ryan Selimos:How do you want to make money? Chat GBT. I use it all the time I mean if you're literally putting chat to.
Joey Casolaro:GBT create me a cash flow like spell spreadsheet. I'm sure it'll do it, you know. Use that to your advantage. Figure out where your money's going. If you're at a deficit, figure out where you cut back. If you're at a surplus, start to allocate that somewhere. If you're in credit card debt, start to tackle that first, get that emergency fund put together. Make sure you're taking advantage of your 401k through work, that you're getting the match, at least if you're already investing. Make sure that your fees are low. Make sure that you know what you're investing in. It's diversified if you don't already set up automatic contributions to your savings investment accounts. And if you have a family, start thinking about term life insurance, disability insurance, and just try to increase your income as much as you can. I would say those are the best steps you can take to start building wealth over time.
James LaGamma:Yeah, we can get this podcast to start building us some wealth, and we're on the right track here. Us some wealth, and we were on the right track here. Well, I think you just kind of summed up the whole discussion pretty well, actually. Anybody else have any other questions for Joey?
Kenny Massa:I don't have any questions, but I think this would be a fun topic to throw at everybody right off the cuff. If you were going to leave someone with one statement to think about, that engulfed like, I would say, a mindset shift or the way that they should think about how they should manage their finances or grow financially, what would that statement be? If you can just provide them with one statement and, joey, you might be the person to ask the first for this, because you're probably going to have a good one and then we're all going to just kind of come down from there, so we'll start off with you.
Joey Casolaro:That's a really good question and I've got to steal the quote from Jocko Willink. I would say discipline equals freedom.
Kenny Massa:Nice, I like it. I like it. It's heavy James. What about you?
James LaGamma:I don't know why this came to mind, but this is what Lydia and her team from a few companies back that she worked for. They just kept saying let's get that bread.
Kenny Massa:Yeah, I like that. I think mine would follow something like that, which would be focus on the top line. How I think of things is like you can expand your top line, but sky's the limit. But managing your finances can only go so low. I can only spend zero, right, and that's if I have completely nothing. But I can grow exponentially. So focus on the top line, ryan.
Ryan Selimos:Screw the Joneses. Stop worrying about keeping up with the Joneses. Run your own race right. Worry about your own finances, because everyone's journey is different. So screw the Joneses is what I'm going with.
Kenny Massa:I like it.
Jonny Strahl:Ryan, I thought you were going to go more like keep sports betting, or something like that.
Kenny Massa:Budget in the expense for betting.
Jonny Strahl:Hit those 12-leggers baby for betting. Hit those 12 legers baby. I'll go after with what you said, Joey. Just to kind of keep it relevant to some of the things you mentioned, I would just say prioritize your emergency savings first. Yeah, yeah, I think you heard that too, it's like that whole pay it yourself first.
Kenny Massa:That's like a big methodology as well, which is, I think, important. Cool, that's all I got. Hey, joey, thanks for joining us.
Jonny Strahl:Yeah we appreciate it. This was great, it was awesome.
Joey Casolaro:Yeah, I really appreciate it. I love what you guys are doing with the Passion Project. I'm definitely going to be a listener, so thank you.
Jonny Strahl:Thank you doing with the passion project I'm definitely gonna be a listener.
Kenny Massa:So thank you, thank you cool, all right, jolly well. Thank you so much for being with us today. We appreciate your two cents about how to manage your two cents and together the vendor continues.
