Transcripts Including Tag: 2ndgenfi

Description: Tax Optimization :: Roth IRA for minors

These are the transcripts that include the tag 2ndgenfi.

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024R: The Friday Roundup Brad Barrett Yeah and one of the most gratifying parts of this podcast generally is that people are reaching out to their friends and family and trying to inform them about FI and we have just we keep getting a lot of feedback about this. And Austin is a perfect example of where it man if you could start at 22. So he followed up with me and he found Mr. Money Mustache a 22 years old and now he's 25 and making six figures and is on the path to find 10 years. I mean that is that's just remarkable. Hopefully he's telling his friends about it and I know we actually just got one of the best iTunes reviews we've ever gotten. And it was from teaching my way to FI and I just want to read the end of this because because it talks about this second generation fire and this is now the second teacher who's written into us to say that that they're teaching their kids this after hearing it on choose FI and hearing how how simple this can be to explain. People are really going out of their way to explain it to kids in this case who I mean they can set these kids up for life. If they if they really internalize these lessons and just make better choices so I just want to read this real quick. And it's he said one quick story to end with I want Brad and Jonathan to know that my wife and I are both teachers. The reason this is important is because they changed part of my teaching for the last six weeks of this school year and hopefully for the rest of my career I truly believe if I was taught these things meaning FI early on my life could be so different right now. So it took hours to build the classroom currency for my fifth grade students. They are learning about budgeting with rent for their desks and cubbies along with fines for any classroom mistakes. They earn a salary for doing their classroom jobs and homework. And I also open up a bank where they can invest in an index stock and make compounding interest each day to see the power of investing. I work in a very high poverty school and if this one change in my teaching can reach and change one of my students future it is worth all the effort. The moral of the story is I would not even have thought of this if it wasn't for Jonathan always mentioning second generation fire. Thank you for the wonderful and life changing show and keep on bringing this content each week. And you too will change thousands of people's lives. All the best Derek. That is just incredible.
024R: The Friday Roundup Jonathan Mendonsa Absolutely. And the cool thing is we don't have to go out and find these people. They've already found us and they're willing to share just like me and you want to share everything that we've learned. They want to share what they've learned. And then our entire audience can benefit from this not just for themselves but for second generation fire. And you know that's who I get passionate about you have now an entire group this this massive awesome motivated FI community that's figured this thing out. Different aspects of this thing they want to share it. And this is a place where you can learn about it and then you can decide is that something I want to do. Wow I really do want to do that how can I get started. And this is just going to continue to grow and we can figure this thing out as a group as a crowdsourced group we can figure this thing out and build all these different models for people that are in different places that want to pursue FI and get there as quick as possible. But go down these different avenues based on their own particular life situation and skills.
025: Wealthy Accountant Brad Barrett So Keith let let's set up a scenario here and we didn't actually clue you into this before about it but I'm curious if we could talk through this so hypothetically or not so hypothetically Jonathan I are starting a business right. We're starting choose FI. Talk us through it as as an accountant because there are plenty of people out there listening to this who are thinking about starting a business who have just started a year or whatever it may be where would you start to your business entity structure things to think about. Jonathan has talked before him you know like how do you get your kids involved. So potentially they can earn some income and you can dump it in a Roth IRA or how do you get your spouse involved. You know etc etc and I love to hear just some some real high level thoughts on that. You know if you think that's a valid thing to talk about.
025: Wealthy Accountant Keith - the Wealthy Accountant Those are powerful tools. Here's what I would look at if it's if it's day one of a business. I'm going to ask some questions that are going to help me start the process. My first thing is I'm probably going to ask you to be an LLC but I'm not going to ask you to be an S-Corp until after the fact when it makes sense. So it's your first day on the job you're starting ChooseFI. Things are starting out to be quite honest you probably have a default in your LLC to a partnership. And if you say you want your wife involved a spouse involved that's fairly easy to do as long as they are really actively involved and get a paycheck. They can use all of the retirement accounts that you would ever run through the business. There's an economic reason which it's easy to get. In most cases for your wife to come along on business trips I think that that's a very doable thing as well. The kids are a little different story. Now if you're a sole proprietor or if you're a farmer or any any of these basically single owner businesses no entity structure if your kids are minors you can pay them and there's no worry about lica tax. But if you have an entity that rule changes because you're not the one paying then the entity is you can still pay them. But there can still be issues with Fika taxes and that kind of thing involved in it. So it gets. So yes you can do it where they can put money into a Roth though it may not be as completely tax free as you would like it to be.
025: Wealthy Accountant Jonathan Mendonsa So cool. All right let's talk about two other fun scenarios. Let's talk about let's talk about kids man. Let's talk about having a small business and kids. What does that look like.
025R: Friday Roundup Case Study Part 4 Jonathan Mendonsa So I don't really even know what I don't know that's the problem right. That's what that's the beauty of this show you don't know what you don't know until you do. And then you can go do more research then you know what to google. Right. But there are some things that I think would be a lot of fun to cover. And one of those would be when do you decide to actually go ahead and get an accountant. I think that is a very valid question to answer. How do employ your kids if you're a sole proprietorship. So what that would look like one of the things I think is going to be really cool for second generation fire is everybody considers getting a side hustle. I do not mean a side hustle that is going to make hundreds of thousands or millions of dollars if it does great and I'm happy for you. But I think that there's value to considering a side hustle even if it only makes $10000 a year $5000 a year. I think there's value there both because it gives you an education that you won't get in school. I think it's value there because it gives your kids an education they won't get in school. And I think there's value there because it gives you a way to help your children fund a Roth IRA from the age of six years old. And if we can figure out what that picture actually looks like I think that you'll be able to take that and use it in your own lives very easily so I don't care what that is. I don't care if it's stuffing envelopes. If it's mowing lawns if it's doing surveys online if it's creating a blog if it's creating a product you can go as far with that or as high level with that as you want. But if we can flush that out and create some ideas maybe with Alan with pop up business school and come up with some ideas for a side hustle. And then if we can figure out how to get those to Keith to help us flesh out how we can get that child's Roth IRA account funded from the age of six. The whole time they're grown up and they're maxing out that Roth IRA that is going to be such a powerful tool so I think those are the two pieces of the puzzle that I'd really like to see connected over the next six months to a year. What do you think Brad.
025R: Friday Roundup Case Study Part 4 Jonathan Mendonsa So let's go and have a conversation. This is a second generation fire conversation and one of the things that we would like to do occasionally going forward as a segment is to highlight a career that really sets you up for a nice easy FI path. And this week we want to talk about nursing. This has come up over and over again from different guests and from our audience members who think they've really figured something out and it's worth just taking a second or two to go over some of these ideas with you because even if you're in a specific career and you're already set on your choice and you're not going to change it. I'm in the same place I've I'm past that point. Second generation fire is looking to their mentors their parents and you are positioned to help guide them towards these choices. And if FI is a reality for your family it's reality for you and it's a reality for your kids. Certainly a career that sets you up for the fast track to that is a conversation we need to have. So let's talk about nursing Brad.
025R: Friday Roundup Case Study Part 4 Jonathan Mendonsa You don't know what you don't know until you do. And I think Mark probably has a better handle on how this federal student loan programs work than either of us do at this point. Now in a perfect world we would like to set up our families to already have all the money ready for second generation fire. And there may be a play here and then I don't know how it works frankly I'm going to be honest I don't know how this would work to hack the FAFSA. And part of that may be sheltering some of your money from the FAFSA by parking it inside of a vehicle like Mark is describing. We just got the conversation started today and I don't think that this puts a period on it rather it would just open it up and we're figuring out where it goes and we'll be able to put this together. The other half of that is if you are already in the federal loan program or you already have it. I think Mark is the one that could really help us game this thing out and show you what your options are for squirming your way out of it down the road.
025R: Friday Roundup Case Study Part 4 Jonathan Mendonsa So the overarching theme here is that we want to figure out the student loan situation. One we wanted to know once you already have em which describes most of first generation fire. How to get rid of them as quickly and efficiently as possible. The second half of this conversation is how to avoid them altogether. And that's my second generation fire conversation and that's where you guys can help us because many of you did figure that out you figured out something that I didn't figure out until much later. And you've perfected something that maybe I'm not even aware of. And Brad's not even aware of. So this second voicemail is from Bryce and he has some amazing information to contribute to this particular conversation. Ready for this Brad.
025R: Friday Roundup Case Study Part 4 Jonathan Mendonsa And I think I even have an extra piece to add to this. Looking back now when I was at the point where I was in school and it was time to apply for scholarships I think it was already too late. At that point because I hadn't done anything so suddenly I decided oh I need to start looking at scholarships. But at that point it is too late. Right you need to have documented. And again it goes back to our conversation with career hacking and ESI. It is all about accomplishments and so if you know that if you have someone model for you and you know I have this three year window going into the time where I need to start applying for these scholarships I need to have some accomplishments I need to have something that I can talk about I need to have something that I can write about. And you start setting up this three year track before you start applying for them. With that construct in mind this problem gets a lot easier and I don't know. I think there is really something there. And one of the ways that I've found that helps me to organize my thoughts is through a blog and whatever that looks like for you getting in the habit of thinking about your life in terms of accomplishments albeit small ones. Right. I volunteer at the library. I did this I did that. I was able to contribute to my community in these different ways not that you do it all on day one or you do it on one weekend you just do what ESI said you essentially apply the networking principles to your high school years and to your formative years and your parent helps you set that up because this is a second generation fire conversation. They know what it needs to look like. So they tee you up for those activities you're guaranteed to win this game. So next guys we're going to go ahead take a couple of minutes and we're going to talk about Paul's case study something you guys are really enjoying this. And I know that because you've asked me when is the next part coming. You guys are stalling. And yeah and maybe a little bit of something there but we're excited to go ahead and go through Paul's Excel sheet now and talk a little bit about a few of his expenses and how we can view those in terms of his working career now and what those might be after his working career is over. So Brad I have Paul's Excel sheet pulled up in front of me and you got it in front of you as well.
026R: The Friday Roundup Paul Case Study Final Wrap Brad Barrett Yeah it's awesome. And that's a great way to put it the protege of second generation fire. Yeah she is. She's really rocking around on every aspect. I love the living at home the community college. I mean the AP classes it's just it's hitting on every aspect of college hacking. And so yeah I mean kudos to Paul and the whole family over there.
026R: The Friday Roundup Paul Case Study Final Wrap Jonathan Mendonsa How amazing is that. Like this guy is firing on all cylinders and you know we didn't coordinate this like when we did that little highlight on nursing the other week that was not with this in mind and when we talked about these ideas for these different approaches to hack college that was not with Paul's answers in mind he's just he's just rocking and rolling. And Paul you have an entire community of people that are who are invested in your daughter's success with this we are genuinely excited that you're just taking these ideas and she's implimenting them. She is literally the protege right now of second generation fire. How cool is that Brad.
027R: Friday Roundup Jonathan Mendonsa The other half of this is just the impact of teachers and people's lives so millionaire educator was one of our first guest is one that we're super excited that he actually has offered to also come on and be a part of our team and be an in-house expert really helping us handle case studies dealing to some degree with pensions but also mostly with the 457. He has a lot of experience dealing with the situations that teachers face and those scenarios he's also really good at GEO arbitrage especially inside the United States so he's going to be an in-house expert helping us really navigate some of these lanes that are maybe outside of Brad and my comfort zone. And he also is in a unique position to help us with second generation fire. As a teacher but also as a parent that is trying to pass this stuff along to his kid and perfectly timed as we were about to do this. We actually got a message from one of millionaire educators former students. I think he's an 18 year old out of Georgia and he's interested in pursuing this path for him and his buddy. Can you imagine the power of soaking up this idea in your teens what that means for you. Even if you are in your teens you're a first generation fire baby. That is incredible. The timeline that you have now you have these ideas locked up before you lose that decade of your 20s you're just going to crush this game. So Brad tell us a little bit more about that message you got from Austin.
027R: Friday Roundup Jonathan Mendonsa But now I want to go ahead and pivot into my second generation fire moment here and today this is also going to be a millionaire educator focus he is working with his son to help instill these values and these concepts into his son's mind at this younger age. And he shared with us his thoughts on how to go about doing this. Hang on a second Brad will get this teed up.
027R: Friday Roundup Millionaire Educator Hello Brad and Jonathan this is Ed mills of the millionaire educator. I have three quick tips for second generation fire. These three things that I've done recently my son has a mutual fund account at Vanguard and I tried a number of things getting turned on that I would match his birthday money if he got 10 bucks I'd put that in his account. Nothing really seemed to get his juices going on that so I went and did this. I changed his capital gains and dividends and made them they're not reinvested automatically into the fund I have them sent to his youth savings account at USAA. And then twice a year he and I sit down at the computer and we pull up his account and we see what he earned from his mutual fund. Last June he got $45. And this past December he earned $55. Well $100. Not a lot but to an 11 year old kid it's a ton of money. And then after we were done checking it I said OK we're going to buy some more mutual funds with this. So I just log into the vanguard account and I purchased them since I have this mutual fund account and savings account linked. It's very easy to do. And of course I throw some more money on top of it to round it up. And he seemed a little more interested in mutual funds and investing by showing that he actually gets some dividends and capital gains what he earns feels more real that way. Another thing I did this past year is I opened up a personal capital account just for him. And so he can see all these accounts college money mutual funds bank accounts and I got to tell you he's got a lot more money at 11th than I had. And that seemed to get him interest a little more. And the most recent thing I've done is I opened up a youth checking account for him at USAA this past spring and his debit card came last week and he was very interested in getting the debit card. So what we did last week is we went to a local supermarket and I taught him how to use an ATM and he learned how to do that put in his Pin and things that we all take for granted it was a big deal to him. He loved it. And then we went and got a pack of gum and went through the check out and he took out his debit card again and he only paid for his gum also $10 out from his bank account. And he liked that. And he's really thrilled to have his own debit card so those are three things I've done that seem to stimulate a little bit of interest. I would say of those three the most powerful one thus far has been the capital gains and dividends. Let him see that stream of income hitting his savings account. It felt real I have to admitt he did want to take it and go spend it. And that's not part of the deal. All right guys thanks a lot. Hope this helps someone out there.
027R: Friday Roundup Jonathan Mendonsa So there are hundreds of thousands of parents in the FI community that are trying to figure out how to communicate this message to their kids in a way that is compelling and addictive and doesn't take Miss SSC beating them over the head with a stick for months at a time years at a time. In order to get it through and if you can turn this into a game it works for me. If we can somehow turn this into a game for our kids that they feel like they're winning as well and they get it it makes sense. That's going to be a different approach right. You're going to need to put on a different set of levers and millionaire educators right there with us. He's figured out for himself he's figured out first family but how do you ensure that it translates to the next generation. That's the conversation that we're going to continue to have. And there's some great tips there on how to pass that along to your kids. I love what he's doing.
027R: Friday Roundup Brad Barrett Yeah I'm always looking to test new things that all that work and is as he mentioned. Everything is not going to work on every single kid. So you have to really figure out what resonates with your children. So as Jonathan mentioned there are many of us out here with different ideas different hacks. We'd love to hear them so post them in the Facebook group what are you doing to educate your children financially and make that second generation fire a reality.
030R: The Side Hustle Crowdsourced Case Study Jonathan Mendonsa And it gives us an opportunity to explore all the financial stuff that goes along with creating a side hustle just in the states creating the solo 401k versus the SEP IRA looking at tax code as it affects the entrepreneur. And then along with that looking at the problem a little differently looking at unconventional answers to very typical problems the story is chills down my spine. Awesome right that we get a chance to build continuity start with a baseline and we get to incorporate all these concepts as they apply. And then I think that along the way as usual I will find a way to incorporate my second gen FI pitch into this conversation how to get your kids involved. And I'm working on Edmund Tee to set up this method to the Edness segment because he has taken everything he creates businesses around optimizing his entire tax schedule. It's incredible and he gets his family involved and he starts businesses depending on the stage of life that his kids are in it's really it'll blow your mind. And so as we can weave all these really cool ideas into this conversation there's so much to learn every single step of the way. It's very inspiring to me. And Brad even though I very much doubt that we're going to pick you for our case I promise you'll get to be a part of it.
030R: The Side Hustle Crowdsourced Case Study Jonathan Mendonsa And the second winner is Chris and Chris says making Monday's great again. Thank you Brad. Jonathan first of all every episode is awesome. I wake up early every Monday and take the long way to work so I can listen to as much of the show as possible. My favorite episode to date is Episode 9 about travel hacking until I listen to this episode. I thought I was doing well with credit card bonuses. Now I have actionable steps to improve my return on investment. I am looking forward to running the chase gauntlet. I also love your thoughts on second generation FI. My 16 year old daughter recently got her first job and opened a Roth IRA and bought her first share of VTI. Keep up the good work. Sincerely Chris. Thank you so much for sharing. The fire is spreading my friends and we'll see you next time. As we continue to go down the road less traveled. You've been listening to choose FI radio podcast where we help middle class America build wealth. One life hack at a time.
083: Second Generation FI Cody Berman Jonathan Mendonsa You know Brad I've been sitting on this idea for a while that you spent a lot of time saying you know is it the 4 percent rule or the 4 percent rule of thumb. I am willing to say like for the record for the second generation five percent or for the individual that has figured this thing out and is pursuing FI at the age of 20 or 25 years old. My thing is does it even matter. Like does the 4 percent rule matter at all because the same individual that has optimized all their life choices by this point 25 30 35 they're not just done they're not sitting on the couch they're optimizing and tweaking and figuring out cashflow situations. This is no longer. This doesn't resemble anything that we have been talking about in the traditional context of retirement or in the traditional context of the 4 percent rule. This is creating a lifestyle that excites you all along the way.
083: Second Generation FI Cody Berman Jonathan Mendonsa You're listening to Choose FI radio the blueprint for financial independence lives here. If you're looking to unlock the secrets to financial independence and really retirement you're in the right place Stay tuned and join a community of like minded getting off the hamster wheel and taking control of their lives in the pursuit of financial independence. Choose FI your home for financial independence online. All right guys today we are going to have a long awaited second generation fi conversation. And for those of you that have kind of been listening at the perimeters but haven't realized this is a huge focus of chooseF.I. and of our community is talking about and highlighting the power of capturing these ideas at a younger age. You know it's that what if I knew then what I know now and if it's too late for you to act on some of these principles how powerful would it be to show these to your kids and would if they were as inspired as you are now able to start taking action and to be honest with you in many cases the second generation fire population. These are the early adopters in many cases we tend to latch onto these concepts after we've already made a few big mistakes. But time is the most precious resource that you have and if you can find examples of people that have grabbed these concepts at an earlier age and adopted them and are crushing it due to that adoption then it is incredibly powerful not just for yourself to validate what you already feel but as you're sharing these ideas with your kids to really motivate them and inspire them to take action on these concepts.
083: Second Generation FI Cody Berman Brad Barrett Yeah Cody is a very impressive person. There's no doubt about it and I mean to be this far along. At 22 both in a monetary perspective and also to have this side hustle that he's created and really to have the mindset of fi right. I mean he has had that for years now going back to turning down that really high paying and prestigious investment banking job that almost invariably would have led to a very lucrative job after college. But he made the decision really from a fi and lifestyle perspective that that wasn't his path. So yeah I mean Cody certainly can speak to that second generation fire community that we're constantly talking about here. And yeah I think this is the first of many times we'll have Cody involved in the choose fi community. On the podcast I know he's thinking about blogging for us now. He has a lot to offer this community and yeah just absolutely thrilled that he got to share his story here.
032: The Milestones of FI Jonathan Mendonsa To me the place that we need to spend a little bit extra I'm talking about is just a value of time. We keep coming back to it. That is essentially what we're trying to recapture. And Warren Buffett in a recent conference that was mentioned by one of our previous guests Mr. 5300 he was telling us that Warren Buffet was taking this Q&A session and this one fellow asked him about what books would you recommend Warren and Warren looked at him and and after maybe giving an answer he ultimately said the thing to me that is more valuable than my entire fortune. I would trade you my entire And right now give it to you. in order to be 25 years old again because you know time works for you. And if we can get this to second generation FI, if we can capture their imagination and make them realize that it's not having the car with the 30 inch rims. It's not mortgaging your future so you can have all the stuff. Time is what you're running out of if you can make a few right choices early on. Your story will write itself. The math works for you. And once you get on the compound interest rate your money will work for you.
032R: The Friday Roundup Jonathan Mendonsa Yes. We'll get there soon so let's see. So we've got the financial freedom clock was the one that I felt like we really did a disservice by not labeling as a milestone. And so I would say that that's one and then we say either F-you money or personal capital is too and the other one would be three. And then now we're looking for our fourth one which was half FI which basically means that you have half the money you need to reach financial independence. And as an extension or another cute way of looking at it either you or your spouse or partner if you're married one of you is now officially FI and the other cool thing to recognize when you get there is that just because you have half the money does not mean you're halfway there you're actually closer to two thirds of the way there. Because at this point your money is actually working for you. And that goes back to us talking about the power of time the power of getting this started early on in your journey making those right decisions as soon as possible. And the power of passing this on to the next generation as well capturing the imagination while you're young because if you make a few right choices early on it prevents you from having to make quite as many right choices later on.
032R: The Friday Roundup Jonathan Mendonsa And I want to come back and talk about just for a second about something we talked about last week when we kind of nailed profit centers and a victim of that conversation was gifts and cards. And Don pointed out to us. Maybe a nice medium for that. He says I only buy cards from the Dollar Tree for 50 cents each. It's crazy what they charge elsewhere. Even the stuff at Walmart isn't cheap. And then your brother Scott. He also made a post talking about a challenge that they do. They just basically go to the store and they actually give themself an award for picking out the craziest or the most absurd card and they don't even buy it. You just get an award for which one you would have gotten which is a nice little pivot on that. I thought that was hilarious. The other thing that was really cool is I'm not supposed to spend the money on someone and specifically someone pointed out that instead of spending money on a card they actually spent the money on the things to create the card. Now to me that's a completely different conversation and I didn't want to lump those in together because you're actually putting your time and your energy. That's an individual unique gift that you have used your creativity to make for someone that's powerful and you know spend three times as much money as you want on that that actually that's not a profit center. That is you putting your own creative talents and ability into someone and I just want I didn't want to lump those two together because I get that and that kind of also ties into the gifts. And Don said if you haven't I suggest reading the five love languages and he says I'm not going to try and summarize it. But some people are very gift based in the way that they show and receive love. And I think there are still ways to be aware of your spending and still do gifts rather than pouring tons of money into these occasions. But if your significant other is a gift person you may be heading down the wrong road and trying to eliminate gift giving entirely and we breezed through that and frankly we wanted to get that out there or just get the feedback on that. It's a conversation starter but I wanted to stress that I am not anti-gift and I don't think Brad is anti-gift what we really wanted to focus on was this sense of mandatory obligation to buy it for your 20 in-laws to buy it for all of your siblings and then not just their siblings but your second and third generation nieces and nephews and then your friends with their kids at turn 1 and 2 and 3 years old and the list never ends and that is specifically I think what was taking the heat of my ire if you will. And just talking to reeling that in every sense shape and form really analyzing why you're doing that. Let's now dial back in and talking about getting just a single gift for someone that shows that you care and love them and appreciate them. I am 100 percent for that. I've read that book. It's a phenomenal book. I'll link to it in the shownotes. I couldn't agree with what he said more. But I think that you can have those two conversations beside each other without saying that either of them is wrong and just look for the heart of what we are trying to get across.

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