Basic Truths About Wealth with Adam Van Wie

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Adam Van Wie  00:00

I think one of the classic examples is if you want to be wealthy, you have to cut out your Starbucks habit. It’s just it’s an oversimplification of a much larger problem. And the reality is no one ever got rich by quitting Starbucks.

Joey Loss  00:30

Adam Van Wie welcome to the podcast.

Adam Van Wie  00:32

Thank you. It’s great to be here. Joy.

Joey Loss  00:33

To add on when I was thinking about people I need to have on the podcast, your name came to mind pretty quickly. We’ve been good friends through the FPA for several years now. For listeners, the FBI is the Financial Planning Association, Adam and I spent several years serving on the executive board in greater Jacksonville together. And I just know he’s very passionate about financial planning, very passionate about the investing process. And I thought, what better place to start then then having a conversation about some truths about financial planning?

Adam Van Wie  01:02

Yeah, well, again, I appreciate being here. We did have some good years there on the board. It seems like ages ago, although it was just a few years ago, probably right before COVID that I that I transitioned off. They only let you serve five years. So I was I was limited out.

Joey Loss  01:17

Yeah. And I think COVID made the last three years for like 10. Yeah, that makes

Adam Van Wie  01:21

sense. Emily, it was that was tough times for all sorts of national organizations like that. And the FPA was in that group as well. Just really tough times to keep members and keep people engaged. It was it was a tough, tough run. It

Joey Loss  01:36

sure was. So tell us a little bit about you and how you got into financial planning. And when that happened, sure.

Adam Van Wie  01:44

I was your classic career changer. I did not work in financial planning before, about 10 years ago when I made the transition. But the transition was a lengthy one, I was actually working in the construction materials industry of all things I, I started there in finance, and I had transitioned over into sales. And I had a great job. It was really I enjoyed my job for a long time. But then 2008 hit, and I kind of got stuck in the same job for for more than five years. And I was getting a little bored. So I started looking around my dad had gotten into financial planning as a second career as well. And when I got out of MBA school, I actually had thought about going into this profession. So I interviewed and it was with American Express back in the day. And I was just so turned off by the whole process. It just sounded like call your friends and sell them this stuff. And I did not want any part of that. So I saw I pivoted on going a different direction. But when this opportunity came up and seeing my my father do well in the industry and and really enjoy it, it seems so different than what I had interviewed for originally. And so I went to him and said, Hey, I’m thinking about making this and making this transition. And he was very excited about it. But he said, Look, you have to get your CFP first. So I started studying nights and weekends. And eventually I passed the test. And then I waited to get my next bonus, and the next day I quit.

Joey Loss  03:15

And so what was it about financial planning that made you fall in love with it? It had always

Adam Van Wie  03:19

intrigued me, I really liked the idea of helping people. I really liked the idea of taking my life experience of managing my own finances. And I’ve always enjoyed doing my own my own side of things. And so it just kind of naturally was a fit for me to help other people do the same thing that I was doing in my own life.

Joey Loss  03:42

Yeah, I can relate to that. When I first started down the financial path in college, I was doing corporate finance, and I thought that was going to be the coolest thing ever. And the math just got boring. When there’s no stories involved. It’s just you’re just a cog in the machine. And the machine doesn’t care about you, and doesn’t have journeys or anything of its own. And so once I kind of ended up at a pizza party for the FDA, which attracted me with free dinner, I found out about financial planning, just realizing that people’s stories were going to make all the problem solving in the math and the process interesting. Forever. I did I fell in love.

Adam Van Wie  04:17

Yeah, I totally agree. It once you once you get in and you realize how in depth you get to work with people. And really, I mean, and to some degree, change their lives and not with everyone but with some people you have a real meaningful effect on their outcome being their retirement or whatever that might be. And you feel good about it. And it’s not a feeling that you have working in the corporate world very often anyway, for sure.

Joey Loss  04:47

For sure, and so so what I thought we could talk about today, I thought we’ve each been in the business for a while and we’ve seen a lot of different stories, a lot of different problems, a lot of different wins for different clients. And I thought maybe we should explore some general truths about financial planning and what generally sets people up for success? And what generally sets people up for almost absolute failure?

Adam Van Wie  05:12

Sure, that’s a great topic.

Joey Loss  05:14

The first one I have here is money is just a tool, not the objective wealth planning. Do you agree or disagree?

Adam Van Wie  05:25

That’s a that’s a tricky one. I could argue that either way, I think it is a tool. But it is also the ultimate goal. If you don’t have money, you’re going to have a very hard time being retired without an income. So obviously, it plays a great important role in financial planning and wealth management and all of the things that we are focused on. However, I think that if it’s the only thing you’re focused on, you’re probably doing your clients a disservice. Because there’s so much more to life than than just the money side. But to me, it’s the most important thing to your clients, it most likely isn’t. And that’s why they came to you, your your goal is to help them navigate their own feelings about money, how they view money, and funnel that into a financial plan that helps them achieve their goals. I

Joey Loss  06:16

totally agree. I totally agree, I think it’s so hard to land on either side. I mean, the truth is, like you said, Without money, you’re gonna have a bad time, it doesn’t really matter what your life goals are, you know, we need this. This is like the fuel on which we live. And at the same time, if all we care about is the fuel, we’re also going to have a bad time, because there’s never going to be enough. It’s

Adam Van Wie  06:37

like, if you choose a career based on what’s the highest paying job, you’re going to be miserable. There’s no doubt about it. But if you choose a career based on something you’re passionate about, and it leads to, to wealth, or to income, or whatever that looks like, you’re also going to be happy. And that is the road that we try and plan for for our clients that combo. It’s it’s sometimes it’s a delicate balance, but you really do need to focus on client satisfaction, not with you, but with their own lives and client wealth. When

Joey Loss  07:11

people imagine a first conversation with a financial planner, it’s probably a lot different than what they experienced when they talk with you for the first time. And that, you know, they come in talking about money, but but where you end up is much broader.

Adam Van Wie  07:26

Absolutely. There’s no doubt about it. I think I think people are shocked when we start talking about their family. And their I mean, people are surprised when we talk about tax planning and things like that. That’s that’s one of the biggest things that people hope that they get. But they’re almost certain that they’re not going to get it on the first conversation.

Joey Loss  07:45

Yeah, absolutely. And it’s so the truth is, it’s so hard to plan, when there’s not kind of an understanding of the architecture of these things. I mean, maybe if you’re just pushing products or something like that, you only really need to know a little bit to try and sell it. But if you really want to do comprehensive planning the way I know, your firm, does it, you got to know what’s really going on. Because there’s so many levers in life that can influence what the right financial decisions look like, and what the right investment allocation looks like.

Adam Van Wie  08:15

Absolutely. And I think that kind of leads me to another another assumption that people make, I just wanted to bring it up what was on the top of my mind, but they always assume I’m gonna say no to anything. So they sometimes they’ll lie to me. Sometimes they’ll just go and do it anyway. Or just the they they’re almost afraid to run purchases by me because I think I’m gonna say no, when I feel like I say yes, more than I say, No.

Joey Loss  08:42

That’s so funny. You bring that up, I had that happened just last week, a client couple called, and they’re like, Hey, you’re gonna be mad at us. And I’m thinking, okay, there’s 100 Different things that this can be. Tell me what’s going on. And they’re like we made we made an offer on a house in North Carolina vacation house, we’re very excited. And I said, Why would I be upset about that? And then, you know, we kind of dug into it. And I was like, You guys have positioned yourself greatly for this. We didn’t talk about it specifically. But clearly, it’s important to you, and it’s all there. And then so then we just focus on, you know, what’s the best way to execute? What’s the right downpayment? What’s the right, you know, we go from there. But that’s so funny. People do call and think that we’re like the Boogeyman.

Adam Van Wie  09:22

Yeah, definitely. And then you’ve missed an opportunity to have a discussion about what the right way to go about something is, in your case, that wasn’t that didn’t happen because they’re still financing and all the next steps on a property but sometimes when it’s like a purchase, like a car or a major purchase, it really would make sense to talk to your financial planner before you do it. And it’s not that they’re always going to shoot you down. So I just hope people don’t think that

Joey Loss  09:52

yeah, and at the end of the day, our job is CFO, we’re not CEO, you know that each client you know, we don’t make the calls We just We just tried to help you do it the best way possible and tell you what, what we think the impact is going to be, you know, if there’s any pain, what that might look like,

Adam Van Wie  10:07

I always tell clients, I’m not here to make decisions for you. That’s not my job. I’m here to lay out all the options, and tell you what those look like and tell you how that affects your long term plan. And there, then you make the decision that’s up to you. I am not, I am not your life coach. I am your financial planner, who gives you hopefully great advice that you listen to. But that doesn’t always happen either. Absolutely.

Joey Loss  10:33

So kind of related to that. When you get over the need to impress others of spending, building wealth gets a lot easier. Oh, yeah.

Adam Van Wie  10:43

Oh, yeah, that’s such a, that’s so true. I think my client base would be an ideal example of that. Most of my clients, you would not know that they had money of any kind. And some of them have a great deal of money. Some of them have a moderate amount. Some have are building still building their wealth, but none of them drive fancy cars. And none of them have showy lives and go out to dinner every night. It’s just not for the average person with a with a either low to high income. And then I cut out the top, I don’t know 1%. Because that’s a whole different ballgame. But for the average person, you can’t live that lifestyle that you see on Instagram and also achieve your financial goals. It’s just not possible.

Joey Loss  11:31

Yeah, unless you’re one of the unicorns that sells the lifestyle on Instagram, and gets paid for

Adam Van Wie  11:37

living it or borrowing it from someone else. Putting it on the internet, right,

Joey Loss  11:41

running it running a jet that’s on a runway somewhere and taking pictures like it’s yours.

Adam Van Wie  11:47

Exactly. Yeah. And wearing someone else’s $40,000 Watch for a couple of pictures and then giving it back to him. I mean, yeah, that but it’s just not, you just can’t do one and achieve. You just can’t do it. It doesn’t make sense. I think the rise of social media. I worry about the next generation. I think all people say that, but because that is it’s so in your face all the time. And when we were growing up, maybe you caught a episode of lifestyles of the rich and famous or something, and you saw a glimpse of it, but it wasn’t in your face. 24/7. And now it is.

Joey Loss  12:24

Yeah, yeah, there was no Doom scrolling. No, as they call it, nothing

Adam Van Wie  12:28

like that. It wasn’t that just not accessible at all, to even see how, how the top 1% lived.

Joey Loss  12:35

Right. And, and so on that note, one of the things that I’ve been surprised by in financial planning, you know, when I started out studying for the test did the exam and all that, I was sure that my job was to just crunch numbers, and that when I find these perfect answers, everybody’s just going to do what I say. And everybody’s going to be better, you know, just totally naive to the fact that there’s this human element that’s stronger than the financial element. And, and over time, I’ve learned that most of the job is actually kind of helping people, you know, reflecting back to people what they said matters to them. And helping them realize, you know, this decision that we’re talking about right now, where does that stack up? Like how related to the things that you said, are your core, your core values that are most important to you? How related is this decision to that? I thought that, that just tied in kind of with the car decisions, I think people especially I’ve noticed when people go through a hard period in life, like consumerism just kind of rises, adds have a little bit more power and the desire to buy like a big car, like, you know, get the $80,000 truck, which is awesome. You know, everybody kind of wants that. But is that really gonna make you happy two weeks after you buy it? Is it still just gonna feel like you’re driving to work?

Adam Van Wie  13:45

Yeah, I don’t think you need to dig too far. Just look at the data from COVID. And you’ll see where that rise and consumerism came out of a stressful time. I mean, the retail sales numbers alone, well, I think prove that theory pretty strongly. But you’re absolutely right, the that buying buying a major purchase, I think more often than not leads to regret, and wishing you hadn’t done it and wishing you could go back in time. So I think that’s where we play such a big role and talking through that those kinds of decisions before they happen. And thinking maybe you would be happy with a used $40,000 truck instead of a brand new $80,000 truck. And I think those kinds of conversations are really valuable. It’s got nothing to do with really well I guess a little bit with crunching the numbers. But sometimes decisions like that are so obvious. You don’t even need to crunch the numbers. Do you really want a $1,200 a month payment? Or are you going to be happier with a little bit less truck and a $600 a month payment? It’s pretty simple math. Right?

Joey Loss  14:52

Right. And I find a lot of times when when a client calls, like we were saying earlier, sometimes people don’t call they just tell you after and you’re like well that’s Dun and that’s fine. You know, as long as the big picture looks fine, I have no commentary at all. But I find when people call and ask, they want me to be the bad guy. They want to call if they just wanted to do it.

Adam Van Wie  15:13

Yeah, yeah, there’s, there’s those calls. And then there’s the, hey, I did this, that was smart, right. And they’re just looking for affirmation of the decision that’s already been made. And I’ll tell you, I’m not always going to just give them that. And so sometimes you have to be the bad guy, even when they don’t want you to be the bad guy. And those are inherently tougher conversations, then, when they’ve done something, and it does, it doesn’t even make a dent in their plan, the ones where they actually do something that they shouldn’t have done, those are difficult conversations, they are

Joey Loss  15:47

definitely difficult, especially because a lot of times those involve the need to generate cash, like immediately. And that gives us no ability to be tax smart about where the cash is coming from, you know, there’s just such an advantage to even a six month runway, for a big expense, no doubt about it.

Adam Van Wie  16:03

Yeah, that’s where that Cash Flow Planning comes in. And tax planning comes in really, really strongly, especially if it’s near a year end. And you can divide it up into different years. And there’s a lot of different tricks that that people probably haven’t thought of around these things that we would we would probably go through that analysis.

Joey Loss  16:22

Absolutely. Morgan Housel says most financial disagreements, especially on Twitter, are just people with different time horizons talking over one another.

Adam Van Wie  16:33

That’s interesting. I think some are that, but I do think that there’s a lot of bad advice out there, especially on Twitter, and Tiktok, and Reddit, and all the and even on the more traditional, you know, radio and TV, different types of media. So some people have strongly held opinions that I think are terrible. I mean, they’re just not right. And they’re not afraid to get on Twitter and voice them. And it really has nothing to do with their time horizon so much that they just believe something that I believe is wrong now, am I right? I’m I’m not, I don’t think that I know everything. So there’s a possibility that we just disagree on on it. But there’s some, there’s some pretty strong opinions out there that I feel are just flat out wrong.

Joey Loss  17:25

I totally agree. The limit on a tweets character count is the perfect way for people to be forced to say something that’s just not true in a lot of scenarios. And we see so much. And the reality is if you want to build an audience on those places, that’s kind of what the game requires is for you to just say things that sound kind of cool, or kind of true. But the reality is, there’s probably 25 questions that need to be asked for each one reading that tweet. Before you could really know how much that applies to them.

Adam Van Wie  17:58

I think one of the classic examples is if you want to be wealthy, you have to cut out your Starbucks habit. It’s just it’s an oversimplification of a much larger problem. And the reality is no one ever got rich by quitting Starbucks. It just it’s it’s kind of ridiculous. You just hear it so much. But it can be indicative of somebody who, who spends too freely, and therefore, is overspending what they make that is the real problem. But to say you can you know, cut out lattes and get rich is just ridiculous, right?

Joey Loss  18:35

And the avocado toast. Yes.

Adam Van Wie  18:38

The classic millennial example of avocado toast. Yeah.

Joey Loss  18:44

So on that note, you can’t consistently outspend your income and build wealth at the same time.

Adam Van Wie  18:48

If there is a way I am not aware of. So

Joey Loss  18:53

have you ever gotten a call from someone who’s really interested in investing? And when you start to peel back the layers, you realize that there’s really not they’re not in a position to do the kind of investing they initially imagined? Yes, we

Adam Van Wie  19:05

get we’ve gotten those, I wouldn’t say frequently but a couple of year probably come in the office for suitability meetings and and we start getting into things and then they they usually have very altruistic ideas of what they want to do. You know, it’s, it’s either save for their kids college, or you know, give more to charity or something like that. And then you find out that they’re not even in a position to where they’ve, they may not have started putting money away in a 401k. And the fact is, you only get one chance to save for retirement. There are lots of ways to pay for college there. There’s plenty of time later in your life to give away what you’ve accumulated and be charitable. Not that I would ever discourage that but if you’re not covering your own expenses, then giving money away is probably Probably not the best idea. So we do get those a couple of times a year, I would say. And we usually try and lay it out for them in the nicest way possible and tell them that that’s not appropriate. Because you need to need to pay yourself first, and you need to take care of your own retirement, some people just refuse to believe that that is the case. And at that point, there’s just really not much that we can do

Joey Loss  20:28

seems to be a triggering event for me to get a call about 520 nines, someone has a child, they’re excited to start their family to being responsible, thoughtful parents, and I get a call and they want to set up a 529. Because they want to save for their their kids education. When we start looking at the overall picture, there’s no, there’s not aggressive saving, like you said to the 401k. There’s not a taxable account, a non retirement account where you know, something hits the fan, or they have some big project they want to do in five years, it’s important to the family’s enjoyment of life. There’s nowhere that building money for those kinds of things, which are coming up quicker. And so a lot of times that initial saving for college ends up being to a joint taxable account, or an individual taxable account. Because it just has more flexibility, and it’s building up their resilience to weather, the punches that life is gonna throw.

Adam Van Wie  21:18

That makes a lot of sense. I mean, if you if you can’t, if you can’t take care of yourself, how are you going to take care of your kid? And that’s that’s really what it comes down to? It is funny that you say the 529? Because I would say that 75% of the people that I was talking about, they come in looking to start saving for college, and then it turns out, they have no savings for themselves. Yeah.

Joey Loss  21:42

And it’s kind of tricky in Florida, especially because there’s not, you know, it depends state by state, but there’s not really a huge tax benefit to doing a 529 over the joint account, because we don’t have the state tax deduction. But it’s still helpful that federal tax deferment, but definitely

Adam Van Wie  21:58

if you start a 529, early enough over 1718 years, it can it can have a lot of tax free growth. So I mean, I know even for my own kids, I don’t put that much in it every month. And I’m kind of shocked how much it’s grown over the last 15 years.

Joey Loss  22:16

So related to that, what, why is the concept of time horizons so important to financial planning? Oh,

Adam Van Wie  22:23

man, I think time horizons is one of the basic truths of financial planning. If you have a five year time horizon, your entire outlook on the stock market changes. It’s very unlikely in any five year period that the stock market will end up down very unlikely, like in the 90 something percent chance so. But under that, there’s a pretty good likelihood that you’re that if your time horizon is three years, two years, one year is a very good chance that the stock market could be down by the time you need the money. So I think that that’s probably the biggest one for me, there’s many more breakpoints on time horizons that we could talk about. But the biggest one is that five years or less, you need to have money invested in a way that you can guarantee it won’t be worth 20% less when you need it. Rather than and people I don’t think people understand that there’s a lot of a lot of people think that the market, I don’t want to say just goes up but they it just doesn’t occur to them that they might need the money when the markets down. It’s it’s, it’s something that I see over and over the concept of that short time horizon and save money is something that I find myself explaining in the office quite a lot.

Joey Loss  23:41

Yeah. And I find it’s one of the intangibles of working with an advisor is when you set things up that way, and start to talk about what each pot of money is supposed to do. It makes good investor behavior so much easier. To the point where the client may not even realize how good of an investor they’re being by letting those heavily equity invested pots, you know, for later down the road that retirement pots recover during a bad market time because they know Adam helped them get that five year bucket ready. You know, they have plenty of cash to weather the storm, they just need to sit tight, and that just feels different. It does

Adam Van Wie  24:19

and there are certain people that grasp that concept pretty easily and then some who I have explained it 1015 times and they still every time I think they need their handheld through the process of of a pullback in the market. And that’s okay. I understand that everyone reacts to things differently and and you feel the pain of a loss much more than the euphoria of a gain. So it makes sense but some people just cannot it’s just not something that that they can register that that you have the separate buckets and they’re they’re all taken care of they they know it but they but every time Um, we see a downturn there, there will be a handful of your clients who you know, are going to call and have questions. So

Joey Loss  25:08

tell me about those buckets that you might traditionally see for like a mid to late accumulator,

Adam Van Wie  25:14

like someone close to retirement. Yeah. So

Joey Loss  25:16

when approaching retirement, what

Adam Van Wie  25:17

we’d like to do is make sure that planning wise cash flows are covered for five years, that’s that’s definitely our, our breakpoint, on on stocks, no stocks, so anything under that, we’re probably not going to put it in equity portfolio, it’ll be some sort of fixed income, whether that’s bonds or money market mutual fund or some other high yield savings accounts, then beyond that, we would love to have at least three buckets of money. And that would be your traditional IRA or 401. K, a Roth and then a brokerage account. And the reason we’d like to see all three is that it really helps with tax planning, in the those times leading up to retirement, and then in retirement, there’s, it’s really powerful to be able to choose where you pull your money from, when you’re when you don’t have an income anymore. And so, we talked about this recently, but people really underestimate the power of the brokerage account. And for me, it’s one of it’s such a great tool in retirement to be able to pull from that when you need to, with only the potential for a capital gain versus ordinary income, it really makes a huge difference to us.

Joey Loss  26:32

And for listeners who might not know why that tax piece matters so much. Can you break that down?

Adam Van Wie  26:36

Sure. Well, there’s a lot of reasons. But the the problem when you take money out of a traditional 401k is that every dollar is going to be taxed to you as ordinary income. ordinary income is sort of by default, the highest tax rate that you’re going to pay that year. So capital gains rates are always going to be lower than your ordinary income. And there are several breakpoints in the current tax code where you, you lose certain advantages for taxation. So there’s after the first couple of tax brackets, you you, you start to get capital gains tax, if you can keep it low enough, you actually can get those capital gains for free. There are certain things when you’re tax planning, that you are really, really important. And it’s not like there’s a graduated amount of money and you you gradually lose that over time, it is a hard dollar, that once you go over, boom, everything every all your capital gains are taxable. So it can be 1000s of dollars, that that that one extra dollar that you make in ordinary income costs you so it’s a it’s a pretty big deal when you’re doing tax planning to pay very careful attention to that. Absolutely.

Joey Loss  27:47

That was such a good description. And that’s why when people hear the words cashflow planning, they think it’s our less aggressive way of saying budgeting if you’re looking at a financial planners website for the first time, but I think what it really gets into is what you just pointed to, which is when we understand generally what might be coming down the pike, we can do so many things that have nothing to do with a performance report return, that help improve the long term trajectory of wealth just by making these things less expensive. And the biggest expense that we pay across our lifetimes we’re talking about this last week in a meeting is your taxes. It’s bigger than your mortgage, it’s bigger than your car payments, even if you get the $80,000 truck. You know, so if you can be smart about how these expenses show up, you can really, really wag the dog in a good direction.

Adam Van Wie  28:38

Definitely. And yeah, in a car payment goes away after five to seven years your taxes are for life unless you get really destitute. But that’s that’s obviously the goal is to never have any of our clients get to that level. So yeah, taxes don’t go away, or

Joey Loss  28:53

they’re every year. One thing that’s not really on the agenda, but it feels like we’ve kind of organically gotten here. For listeners who might be on the younger side, and they know they want to save or they’re saving to their 401k. How do you make the right decision about pre tax versus Roth?

Adam Van Wie  29:13

Man, that’s a tough one. I mean, that we spend so much time in our office going over this. And I don’t know that there’s always a right answer and a wrong answer. Like I said, I like to have all three buckets in retirement. So if we can, if we can manage that we will. But in general, if you’re young, and you’re in a lower tax bracket, I mean, I think that’s a no brainer, you put money in a Roth, if you are sort of mid career and a very high earner and then a high tax bracket. I would say you’re probably going to be biased towards the traditional at that point because it’s much more likely that your taxes will be lower in retirement than they are at that point in your life. So the net value of that money is going to be greater by Putting in a traditional versus a Roth. But, man, so many people are right on that cusp of I make a moderate amount of money. And I would really like that tax deduction this year of a traditional, but maybe it makes more sense to do a Roth. And honestly, it’s it that’s a, it’s almost a judgment call. Because it’s based on so many factors that are out of your control, you don’t know what’s going to happen with the tax code in the future, you don’t know exactly what your earnings are going to look like in later in life and then into retirement. And so you’re really kind of your your, it almost defaults to what what do you think is going to be the best answer? And it’s really hard to prove, or it’s very easy to prove, if you if you have a bias, you can make it look good, one way or another depending on the assumptions you use

Joey Loss  30:53

100%. And yeah, I think that’s where, you know, there’s so many of these intersection points like that, in financial planning, where we think there’s gonna be a perfect math answer. But the reality is, we’re planning for future we can’t possibly predict perfectly. We can we have all kinds of tools that help us understand what it’s probably going to look like, and whether decision a is better than decision B long term. But as far as predicting exact impact of various tax decisions, we don’t know unless it’s a the kind of tax decision we were talking about earlier, where you’re figuring out where to get cash from, you know, we know we have 10 Different places we can get cash, we can figure out which one is going to be the most tax efficient. The things that are longer standing like the pre tax versus Roth decision. It really is kind of an art and a science to figure out. What’s probably the best for each case.

Adam Van Wie  31:41

Definitely, we’re kind of reminds me of the classic social security discussion, I can tell you exactly what the best decision about when to claim Social Security is if you tell me when you’re going to die. Because if you’re going to live to 95, well, then you should definitely wait till 70 To claim. But what if you’re going to die much sooner than that? What makes more sense, take the higher payout or take the payout for longer? Well, somewhere in your 80s. That is that breakeven point. But who nobody knows how long they’re going to live. They know what their longevity might be in a lot of cases. But even that is no guarantee that you’re going to make the right decision when it comes to claiming.

Joey Loss  32:25

Absolutely. For younger listeners, what are some of the common sticking points that you might imagine seeing as a financial planner, as far as gaps or oversights that are just common to young people?

Adam Van Wie  32:41

I think the most common question that we get in the office from our younger well clients and potential clients is it’s just, there’s so many competing priorities for your money, when you’re especially a young couple who’s just getting started out whether they’re married or not married, and planning on probably having kids. And that is just the most expensive time of your life, you’re looking at probably buying a house, you’re looking at just all these huge decisions that you’ve never had to make before prior to that, you’d probably rent it, you had one job, all you had to do is take care of yourself and life was easy. But now you’ve got someone else to care about. You’ve got a house to buy, you’ve got kids to plan for you’ve got college, you’ve got retirement, it, it’s really a compete, it’s a competition for your dollars. And that is, I think the most common problem that people expressed to us who are in that sort of 20s and early 30s in age range.

Joey Loss  33:46

And how does that parlay into the challenge of creating an investment policy for people like that?

Adam Van Wie  33:54

It is tricky. The usually what we do is encourage people to try and to try and do it all even if it’s just a little bit. Saving for retirement has to be a priority. Like I said, you only get one chance to do it. And you don’t want to start when you’re when you’re in your 50s and 60s, because you probably won’t achieve your goals. So you need to do that now. So pay yourself first. That’s it. That’s a huge priority, that that next thing is usually saving for a house once you get that emergency fund started. Do that in conjunction with saving for a house, because there’s a lot of studies around it. And it’s not for everyone buying a house. But for most people, it is one of the best financial decisions that can make it better than paying someone else’s mortgage. Although now things have been flipped on their head a little bit and there are many cities where it’s actually cheaper to rent than to buy a house. So that’s something that we’ve we haven’t really had to deal with a lot in the past Jacksonville has always been very favorable to homeowners. And so Hi. Um, so yeah, if it’s someone living in one of those cities right now, we might take a second look at that.

Joey Loss  35:06

One of the things I’ve noticed is with, with the younger clients, especially high earning clients who haven’t really made long term financial planning a priority, and they’re working with me for the first time, it can be a little frustrating when you’re looking at all these expenses, and we start talking about cash flow needs, and we start trying to figure out what’s a good investment policy to see that the account we opened together, I tell you up front, this is not going to outperform your 401 Ks, and it shouldn’t, we don’t really want that to building that foundation, that process can be a little bit frustrating for people who feel like you know, they’re taking a step in the right direction. And, and really, we’re doing the right thing by conservatively investing for that five year bucket that you’re talking about, because that’s what we’re at, you know, they’re building for the first time. A lot of these people have income of 250 to 600,000 for the household, but they don’t have a lot of assets if something goes wrong. And living expenses may be a reflection of their income. So we really need to build a war chest, just this morning, I got a request for $50,000 that we had worked on saving last year for a couple because life happens, and all of a sudden they needed it. And it was kind of a big discussion, do we go aggressive or not with it? And you just never know what the markets gonna do? Had there been a downturn at the beginning of the year, that 50,000 that they needed, there might have only been 42 or 40. And that wouldn’t have felt good. And you would have been mad at me for that. But that’s that’s kind of the bricks that need to be laid first. And yeah, I just think young people, the investment policy is so tricky. What’s What’s ironic is the investing process is not easier. But the general investment conversations are easier when people have more money, because we can so easily separate money for later and money for now. And it feels like progress is being made

Adam Van Wie  36:54

for sure. Yeah. And then there’s also the aspect that, that investing when you don’t have a lot of money is really boring. It’s just such a long, tedious process, and it takes forever to have any real money. So let’s say and I always use this example just because it’s so easy. If you get to $10,000 a savings and you have a good year 10% You really haven’t made very much money you made $1,000 It’s not exciting. Now you have 11, it’s just not exciting, you get to 100,000, even, and you made 10,000? Well, I have 110. It’s just not that exciting. But if you get to a million, and you have a 10% year, then you made 100 grand, now we’re getting into real money, but it takes so long to get to a million that people get frustrated because they’re seeing these numbers like, oh, I made 15%, that’s great, but then it doesn’t translate into a lot of dollars. And that and that can be that can be disheartening to a lot of young investors.

Joey Loss  37:54

It sure can. Yeah, and, and that’s where the especially in those early days, that’s where the tax planning, every little bit of extra cash flow we can create by being smart, is money that can be stowed away and added to that principle. So you’re getting to that 100,000 to that million faster. And, you know, the eighth wonder of the world compounding interest, as Warren Buffett says can do its thing. Yep.

Adam Van Wie  38:18

It’s, it’s almost like, I also tell young investors that it’s so it’s sort of like the global warming hockey stick chart, it goes on pretty much the same, just gradual increases, and then boom, all of a sudden, all of a sudden it hits and that compounding takes over and you’ve got a ton of money. But it’s 30 years, it’s 40 years. So it takes a long, long time.

Joey Loss  38:41

One last topic I want to touch on related to this is life insurance for young people. Now neither of us sell it. But we know it has a place. Can you talk a little bit about the importance of life insurance for young people and a little bit about why it might be super uninteresting to them.

Adam Van Wie  39:00

Yeah, it is super uninteresting, and but also super important, especially once you have other people that are are dependent on you and your income. And people think, Oh, I have to work, no big deal. But work plans aren’t enough because you can lose your job or you can quit your job. And that plan goes with it. And the problem with insurance is that once you need it, you can’t get it so you have to get it before you need it. Obviously with life insurance, you’re not going to get it once you you’re you’re dead. So just having that 30 year term in place as a young person is so important. And it’s so cheap. It’s it cost nothing. And it gives you the greatest peace of mind that if anything were to ever happen to you, your family is taken care of. So I am a huge proponent of getting those policies while you’re young even though the odds are you’ll never use it. But that peace of mind is is irreplaceable

Joey Loss  39:59

Absolutely. And just to paint a picture of how cheap it is, I’m always transparent about our, our financial stuff on the podcast. I think I pay $60 a month for a $2 million policy. And that gives me tremendous peace of mind. If I’m in a car accident or something, God forbid, happens that Elizabeth and Alice are going to be, at least the financial piece is less painful, right? There’s no, there’s no policy that replaces what people lose when someone passes away. But the financial component would be a huge stressor that pulls them away from what really matters in that moment. If it’s not there. There’s

Adam Van Wie  40:36

no doubt about it. It’s that and the loss of your lifetime of income to support your family, too. That’s a that’s a big deal. Your lifetime income is millions of dollars, most likely, and that’s gone. So replacing a portion of that so that your family stays comfortable is just so important.

Joey Loss  40:58

Well, Adam, it’s been a total pleasure having you here. I think we’ve covered a lot in a short period, I’m sure you’ll be on several times in the future. I know there’s a million topics we could dig into. But thank you so much for coming on. Is there any anything any final parting thoughts you want to share with listeners?

Adam Van Wie  41:13

Yeah, I think that a lot of times, younger people think I don’t have enough or I don’t make enough to see a financial planner. And that is just the furthest thing from the truth. I think there’s value in what we do for across all ages, and all income levels. And really, even if you don’t hire one, just going in to have that initial discussion can be, you can really learn a lot and make some important decisions based on the advice you get in that meeting. That will lead you to a point where your are going to need a financial planner in the future. But I think it’s important to like, like saving for retirement, I think it’s important to start early. And so the sooner you can get in and meet with someone like Joey, the better off you’ll be.

Joey Loss  42:05

Absolutely. And I think most of us I know, at least this is true for the two of us, but most of us in the independent space, really are in it to help people. And there’s plenty of times when I have an initial consultation or a suitability meeting. And I realized, you know, just for this particular situation, there’s not a ton of value I can provide, but I can point them in the direction of something that might move the needle a little bit for them. And that’s that’s time well spent for both of us. Yeah,

Adam Van Wie  42:29

that happens. That happens to us frequently. And I always try and give people who come in to meet with us something to take away that will improve their financial situation. So I don’t think anyone would ever come in and meet with us and say, Well, that was a tremendous waste of time. I think that I think you could leave with with at least something

Joey Loss  42:49

valuable. And so how can people connect with you if they want to follow up?

Adam Van Wie  42:53

Sure. The best way is through our website, it’s Van we financial.com unusual last name VA N wi E but yeah, we’re in Jacksonville Beach and you can book a meeting right on our website if you ever want to get in touch.

Joey Loss  43:06

As long as you’re around me Your last name is safe. The listeners are hanging out with the financial planners last name last. So hopefully they give some grace on that as well. Adam, it’s been a pleasure. Yeah,

Adam Van Wie  43:17

mine too. Thanks for having me on.

Joey Loss  43:24

Thanks for joining us. If you enjoyed this episode, be sure to subscribe to the show and share the episodes of friends or family that may find the conversation helpful or interesting. Show Notes and episode transcripts are available on my website at low financial.com/podcast I want to give a special thanks to Bo deletions for the music score and to the podcast man for producing the show. We’ll see you next time.

Disclaimer  43:48

The Wealth Unplugged podcast is sponsored by Flow Financial Joey’s Registered Investment Advisory offering Financial Planning and Investment Management services to clients across the United States. The opinions voiced in this material are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual security. To determine which investments may be appropriate for you. consult your financial advisor prior to investing. This information is not intended to be a substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.