EP. 167: Making Achievable Goals

[00:00:26] Good afternoon. This is Gabriel Shahin, certified financial planner and your host More Knowledge, more Wealth here on every weekend, talking about all important topics of personal Nance.

[00:00:49] Our goal is to give you the knowledge you need to increase your wealth. Now to the listener, you can always reach out to myself or, and one of our colleagues here at Falcon Wealth authentic. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird, or visit our website@falconwealthplanning.com.

[00:01:11] That's falcon wp.com. For sure. Now I'm a principal of Falcon Wealth Planning. We are a fee only, not fee-based folks, but fee only registered investment advisory firm. We are independent. We help all topics of personal finance folks give us a call. We would love to help. We go over where you are today, how retirement looks like, talk about taxes, investments, and insurance estate planning, folks, you name it.

[00:01:35] Anything that involves a dollar sign, we would love to be able to help with that and we are helping all across the country. Folks. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird. Would love to help put a personal assessment. For you at no cost. Now folks do want to go over a few things with you because as we go towards the end of the year, it's always important to get goals in mind.

[00:02:03] And I really think people that differentiate the goals and dreams is people who make those goals and put 'em on paper making achievable. Cuz by doing that, you're able to achieve the dreams that you are looking for, assuming it's reasonable. Unless you want to castle by the beach, that costs 50 million, right?

[00:02:20] That obviously is out of a majority of us and our dreams, uh, and goals. But I think taking a look at really the end goal is financial stability. And really when you take a piece of what retirement looks like and what you want that to be, most people obviously. Want to enhance their lifestyle. People don't want to have a reduced lifestyle, but a majority of us would at least like to maintain our lifestyle.

[00:02:48] So taking a look at where you are today, it's extremely important to put a plan together. And a lot of that has to do with saving towards retirement, even if you have a pension. Folks, I've seen this a lot where, especially people that worked at Ford and GM where their pension had to get bailed out through an annuity company and they only got two thirds of it on top of that, and so, Taking a look at your situation is crucial, and that is why I want to give you some advice to make sure you are maxing out your retirement accounts at work.

[00:03:18] And if it's not at your work, you should look to save roughly 15% into a retirement account or a regular brokerage account if those are maxed or not available to you. A lot of people say it's difficult though to save that money, and I get it right. It feels like we're in a recession right now. Prices are high.

[00:03:36] Interest rates are high. I feel sorry for those looking for buying a property, even though they've come down a little bit. Interest rates are now higher than before, so it's even harder and more expensive. To buy property. With that being said, so what does that mean for you? Well, I think taking a look at what's available to you, so let's say like a majority of us and we are working for a company and they offer 401k.

[00:04:01] Now first and foremost, if they offer an employer match where the company is saying, listen, you put in 3%, 4%, 5%, and I'll match you 4% of your salary. Hey, You make $50,000 a year, they'll give you a free $2,000 as long as you save $2,500 in some situations in in that specific example. Now if you make a hundred thousand, they'll give you a free 3000, 4,000 or more on an annual basis.

[00:04:31] So take advantage of that. You know why? Cuz if you have to save 3% to get 3%, that's a hundred percent rate of return instantly. So take advantage of that. Now some of you are saying, well, it's hard for me to say, well, let me tell you this, okay. One of the best recommendations that I've given in my career is when somebody gets a raise.

[00:04:53] Now, when somebody gets a raised, you don't have that money. You're not using, using that money, and if that raise takes effect next paycheck or next year in January, whatever the case is, which you could do. Right then and there before you ever get the money, you think to yourself, if your raise is, let's just say $2,000, well, how about you take half of that, raise $1,000 and put it into your 401k?

[00:05:18] So depending on your income, if you make a hundred thousand dollars a year increase your four contribution by 1%, right? That's $1,000. That's what you should be doing. There is no excuse cuz you don't have that money now. And there will always be excuse for overspending and saying, you know, you need that money now.

[00:05:35] You have to train yourself to save and look towards the future. It's actually healthier for you. There are studies showing if you are saving money towards a goal and a future, you have something more. A lot of us have a lot to live for, but you have something even more to live for knowing that you have had delayed gratification and save that money for a future use, in this case like retirement, that can make a lot of sense.

[00:06:01] For you now, if you're just joining us, this is Gabriel Shahin, certified Financial Planner, your host of More Knowledge, more Wealth here on every weekend, talking about all important talks of personal finance, and we are talking about now about setting those goals for next year. And the first example is just, Saving what you don't have.

[00:06:18] Now, you may be thinking, well, you're, you'll still get that extra thousand dollars a year. If you saved half of it that thousand dollars into your 4k, you'll actually still make more than just a thousand. Why you ask? Because you'll get, the payroll company will calculate the tax savings of saving into a.

[00:06:36] Traditional 401K account. Now, if you saved into a Roth a thousand dollars, yes, you get no tax benefits for that, but it now grows tax free for the rest of your life. So it also may make sense for you to save in a Roth 401k versus a traditional 401k. But my point, if you put into a traditional 401k, let's say a thousand dollars, your paycheck throughout the year is not reduced by a thousand dollars.

[00:06:58] It might only be reduced by. $300, 400, $500. Why? Because it calculates the tax benefits from saving it to that account, which is even more of a reason to save at least half of what you put in to the 401k. This is such a simple way to do it, folks. I've been making this recommendation really since I've been in the industry almost.

[00:07:22] I started making this recommendation in 2003 in savings accounts just to build those cash reserves. So let me continue. This leads to the second piece of it, and that is setting a savings plan where you should have at least. Three months of cash preserves as much as nine months, depending on your job and your, if you are commission based or if you're self-employed.

[00:07:43] So you need to save a set amount. Let's just say you sell cars, well, maybe a hundred dollars a car you set aside and put towards a savings account. And so you need cash reserves to survive just in case, God forbid something happens. So you have to do that, whether it's on a per paycheck, paycheck, uh, basis, or on a monthly basis.

[00:08:03] However you get paid, you need to put a piece to the side, because guess what? You put that to the side. You ignore it. You save it for when you need it. You spend second, save first, spend second. And the priority should be that 401K account. Priority number two is that savings account. It is so important to do that.

[00:08:25] Now, typically I would say don't save into the retirement account until you have your cash reserves. Unless they're given free money through the employer match, that's when you should be doing this four first. Maybe you're not saving 10, 20% in there. Maybe you're saving first at 3% or whatever it may be to get that free employer match.

[00:08:45] Second one, or the third one is, is just setting just a goal in general. And I'll give you a goal that people have often, and that is buying a house. Maybe you have a house, let's say a second house, whether it's for investment or leisure purposes like vacation. The point of doing that is knowing that you'll need roughly 20% down payment to do so.

[00:09:03] So if you are looking for a house, let's just say for $300,000, 500,000, whatever it may be, taking 20% of that. So that's $60,000. You have to think to yourself, how long will it take you to save that $60,000? Well, it depends on how much you make. So you just extrapolate that out by, let's just say you have a goal in two to five years, how much would you have to save?

[00:09:28] Let's just say that's a thousand a month. You would have to save to hit that in that five year period? Well, you have to have a savings plan. If you get paid twice a month, now that's 500 a month that you put aside. Sometimes you have to do that gratification. That delayed gratification. Let me give you an example.

[00:09:44] Not buying that Starbucks every morning. That could really add up that $5, assuming it's still $5, it might be more than $5 now, but putting that off every week, that's $25 every month right there. That's $125. You get what I'm saying? Something so simple, you can do not going out that extra one or two times a week.

[00:10:04] So these are ways that you can save money to achieve that goal. It's all delayed gratification, but by having that on paper, That's where this comes into play. And if you need help with these numbers, right, because I do this every day, this makes it's easy for me. But if something like this makes sense for you, whether it's for a first home purchase, whether it's for a vacation home, whether it's to retire early, whatever it is, folks give us a call.

[00:10:25] We are offering a free financial assessment where we can give you one to two hours, one to two meetings of our time at no cost folks, and we help all across the country. Our phone number is nine six three. 25 26. That's 8 5 5 96. Falcon like the Bird. We can help put a personal assessment for you customized to help answer the questions that you have and to achieve the goals that you need.

[00:10:54] So take advantage as soon as you can. Now, other examples that I see that we'll probably probably talk more about in the next segment is something as simple as a remodel budget or just a budget in general. Talking about, uh, your balance goals, what you should have for balances in the account. I'll give you examples of those.

[00:11:12] Uh, we already talked about real estate down payment. But really then after that I'll talk about the priority and what you should do, especially of those, especially in Southern California. But those people who want to have multiple real estate properties, uh, a lot of them were raised to have real property.

[00:11:26] And I get that and it makes sense for some of you. But let me explain some the, the negative side of owning real estate that people sometimes are not aware of. And I've seen some really good, smart. Honest people that lost everything for what happened in 2008. And so I wanna explain to you how you should prepare yourself just in case you decide to get into real estate investments.

[00:11:47] Because the issue with real estate investments is it's one of the few investments that could cost you money. There's liability behind it. It's not a straight easy situation. So we're gonna talk about a few things after the break, but stay with us. Look forward to serving you. This is Gabriel Shahin, certified financial Planner, your host of More Knowledge, more Wealth.

[00:12:09] That's on every weekend. We're going over all important topics of personal. Finance. We're going over retirement planning, making sure you're prepared for retirement, social security and strategies, real estate taxes, avoiding them now and in the future, investments, reducing fees, commissions, and so on.

[00:12:24] Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have office all across Southern California, including the Inland Empire. Give us a call to take advantage. It's a $500 offer. Our phone number is eight five five nine six. 6 3 25 26. That's 8 5 5 96.

[00:12:43] Falcon like the Bird, or visit our website, falcon wealth planning.com. That's falcon wp.com for short. Enjoy the show. We look forward to serving. You am five 90 the answer.

[00:12:59] Welcome back folks. This is Gabriel Shahin, certified financial planner and your host More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Today I was going to talk to you about just the classic year end or early year plans, just save money. We talked about saving into a re, uh, 401k, a retirement account that you may have at work or outside of work, and just continually to max that out.

[00:13:22] And a lot of you sometimes struggle to do this. Now, my comment of doing it when you get a raise is of course, that you never have that money. So I know everybody struggles, folks, that's what we do. The money goes in and out, goes from one hand to the other, just. Instantly you can't. It feels like you don't even feel it.

[00:13:40] And so by being able to put money away and earmark for retirement is absolutely crucial for you because that gives you that goal and that security in the future. Some people take that for granted. All we have is social security and we have issues with social security. There's multiple reports saying that that will run out by 2020, or excuse me, by 2032 and 2033, they'll only be able to pay out 75% of it.

[00:14:05] People talk about pensions. Well, pensions have their issues too. They're significantly underfunded nationwide. Only a few pension plans are actually on target. So what I'm here to talk about is you taking in control, you being in control. Worst case scenario with my recommendations is you have more money.

[00:14:23] You get what I'm saying? It's kind of a good problem to have. So we talked a little bit about just if you have a house and you having and setting up budgets. So I think having an allocation every year. Of whatever it may be. Let's say 1% of your home value, if your home is worth 500,000, put off 5,000. If your home is worth 700,000, you put 7,000 and allocating that to the home.

[00:14:47] I think that's important because people have issues that sneak up on them, and those issues are yes. Things that happen to the house, to the car, whatever it may be. You have to calculate everything, and my recommendation is taking advantage of these credit cards that give you a summary at the end of the year of where you're spending your money.

[00:15:04] I think that's absolutely crucial for you by taking a look at that can really help answer the questions that you may have of where your money is going. But then you're also able to see all those one-off situations that happen. Well, guess what? They are not one-offs, obviously not. It consistently happens on an annual.

[00:15:22] Basis. So by taking that average, maybe the past three years worth average, hopefully you've had that credit card or debit card that's able to itemize that for you. That will be extremely helpful to know what you actually spent and by doing that factor in the cost on the home. And I think looking at your situation just in general as I'm reading these down, is that when you've tried to find.

[00:15:48] What is the priority of what you should do and where you should save? I would say this is, you should save outside of getting that emergency reserves, you should save, take advantage of your work sponsored plan. Why? Well, like I said earlier, it's because most plans out there offer an employer match that is free.

[00:16:06] Money to you take full advantage of. In addition to that, a 401K is actually protects you against bankruptcy. If you have an ERISA plan, you are protected to up to a million dollars. If or and lawsuits, you are protected from that. So that is another reason to take advantage of those plans. You are sheltering, legally sheltering that money where nobody can have access to it.

[00:16:28] Outside of that, once you do the 401k, you should look into. A Roth ira in addition to that, that is a great plan for you to take advantage of on the Roth account because it grows tax-free forever. It's just like saving into a brokerage account except you were saving into a Roth ira. Even if you think you make too much, there are backdoor mechanisms of saving Intuit and the benefit of a Roth ira.

[00:16:56] Depending if you just do the normal contribution is you can always take your principle out if you need it. It's the growth that you get penalized for if you take it out early. So, and what's early 59 and a half. And so a lot of people here are looking to save into retirement. And save into and buy real estate for the retirement instead of investment accounts.

[00:17:17] Now, let me explain to you some of the negativity of real estate. We already know the positivity of it. You can leverage by getting a mortgage on. Mortgage rates are pretty high right now. You can have a tenant that pays your mortgage down and you have positive profits as well. So, and you have a physical property as well, that's that you're able to see, touch, and feel.

[00:17:38] Okay. But let's talk about some of the negative. Sides of real estate. By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified Financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

[00:17:54] Today we are just talking about money savings. And goals. And here I'm talking about those who are saving to get a real estate property. And we're talking more about the second property, not so much your primary resident. So if you're looking to get a second property, take into consideration to get to that point, to be able to afford a second home, you wanna make sure you're first.

[00:18:16] Maxing out your 401ks. Now, let's say the max 401k is 20,500. It's gonna be 22,500, okay? If you're single, it's extremely important to max it out. If you're married, the goal should still be for both of you to max it out. Why is that you ask? Well, it's because if you are maxing out your 401k, let's just call it $20,000 a year, that's roughly 1800 a month.

[00:18:42] That you're saving into that 401k. In addition to that, I'd recommend you saving into a. Roth maxing that out, that's $6,000. Now, if you're over the age of 50, you can put up to 27 and thousand in a 401k and 7,000 in a Roth that goes up by $500. Next year it goes up by $2,000, or excuse me, by $3,000 for those who are over 50.

[00:19:03] So it's gonna be as much as 30,000 and $7,000. Now, why is that important? When you're looking to buy real estate, you wanna build as much cash as possible. Right to get, get that down payment. Gabriel, you're telling me to save an retirement account where I can't touch the money until I'm 59 and a half?

[00:19:19] Yes, that's exactly what I'm saying. And here is why. Because if you're able to save that 20,500 plus the 6,000 into the Roth four , that's a total of $26,500. That is over 2000 a month that you're saving. That's important because if your real estate property falls into duress, whether it's a fire, whether it's a earthquake, whether you have vacancies, whether, and by the way, if you have vacancies, you're on the hook for the mortgage payment still.

[00:19:51] You get what I'm saying? The reason it's important to do the 401k, The reason it's important to do the Roth is cuz you're able to turn that off if that happens. Well, what does that mean? What that means is you could stop contributing to the 401k Roth. Now you have freed up, roughly in this example, I'm giving $2,000 a month to continue to make those payments so you don't fall into a default mode.

[00:20:16] So you don't go into. A foreclosure mode where you're able to consistently make those payments without anybody being in the house to rent it. Now, you may not think that's possible whether you live in southern California or a very popular area because renters are desperate for homes. But in a recessionary people, uh, period, people figure it out.

[00:20:40] What do I mean by that? They bunk up with people. They don't have the luxury to just spend two, three, $4,000 a month on rent. So what that means for you is that you have to be aware that your property may be vacant for a long period of time. A a, and guess what? When it does, it costs you money. Even if you paid cash for it and you say you have no mortgage, there's property tax, there's insurance, there's repair, there's ongoing maintenance.

[00:21:03] Whether you have a pool, whether there's hoa, or whether there's landscaper, you still have to pay for ongoing maintenance. This happens folks, and when your home is vacant for a long period of time, sadly, you have people that look to vandalize the property or take advantage of the property. And so these are the things that have to be factored in.

[00:21:22] Why Before you want to go and buy multiple properties, you have, number one, you need positive cash flow. Number two, it's a fantastic idea to force yourself to have positive cash flow by creating a new expense. What's that new expense? Saving into that 401k and saving into that Roth account. Those are fantastic times that we would recommend.

[00:21:43] Where once you're doing those two things, and if you're married, I would double it up, right? If you're both saving 20,000 and both saving 6,000, that is $52,000 that you're saving towards that, and that way that gives you just security knowing that if bad things happen to the rental, you are still financially stable.

[00:22:02] Sadly, I don't see people do this and I see people struggle, but I see people taking credit card debts, home equity line of credits. These are not. Good things to go into. What you're looking for an investment. Can you imagine buying a stock and then having to go and do credit card debt to help the stock get out of bankruptcy?

[00:22:22] Essentially, that's what you're doing with this real estate. You're taking all the liability and for what you put in 20% down, let's say $60,000 for what deposited cash flow, 500 a month potentially. Well, what is the risk of vacancy? You might have to paint the house. You might have to do floors, you might have to do kitchen every 10 years, whatever the case is for what you've taken all the risk for, what, a five to 10% rate of return, folks, you can get that same rate of return in.

[00:22:53] The stock market. This is why the stock market continually is the number one asset class out there for investors. You look at the multi-billionaires out there, they made their money from stocks. You can only list a handful of people who are billionaires that made their money on real estate. Now folks, we're not saying you and I are billionaires, but all I'm suggesting is the number one way for wealth accumulation is stocks.

[00:23:17] And that's why you should take advantage of the 401k, max it out as much as as fast as possible, but take half of the raises that you are getting to ma. To put it in and max out your 401k over time. Rome wasn't built in one day and I recommend that you take advantage of saving as much as you can. And if you need help with this, if you wanna make sure that you can put a plan together, we will put an assessment for you of your situation, give you the answers.

[00:23:42] We won't withhold anything. We'll tell you exactly what you need to do. Folks, we help all across the country. Our headquarters is in Southern California. We would love to help. Our phone number is eight five five nine six three. 25, 26. That's 8 5 5 96. Falcon like the bird. We can help relate this show to your specific situation.

[00:24:04] Get the answers that you need, because listen, saving for retirement is one thing. Achieving financial goals is another. And taking care of you yourself, your family is also extremely important and you have to prioritize these things. But what you don't know, You don't know. And so there are certain ways, strategic ways that we can help.

[00:24:25] So take advantage and give us a call at your convenience. Folks, that was a fast, fast show. I want to thank you for tuning in with us. Feel free to reach out to myself or any one of our colleagues here at Falcon Wealth Planning. Our phone number is eight five five nine six three. 25 26. That's 8 5 5 96.

[00:24:43] Falcon like the Bird. We can help relate this show to your specific situation. Thank you for tuning in with us. We want to wish you a great week, a happy holidays. Have a fantastic weekend and God bless.