PODCAST EPISODE 199 – A Cure For Retirement: The Wealth Coordination Account

EPISODE SUMMARY

Believe it or not, “retirement” doesn’t mean the game is over, even if it looks like you have enough points on the scoreboard. Paul and Cory break down why retirement isn’t good terminology, what a good definition of an asset is, and what the true cure is for “retirement”.

WHAT WAS COVERED

  • 00:00 – Show starts.
  • 00:35 – Paul welcomes listeners.
  • 1:30 – Discussing the concept of retirement.
  • 3:50 – The centerpiece building financial independence.
  • 6:30 – What is your definition of an asset?
  • 9:50 – When your assets have profitability.
  • 13:10 – The cure to “retirement”.
  • 14:05 – Final thoughts.
  • 16:12 – Show ends, thank you for listening.

TWEETABLES

LINKS

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Sound Financial Group’s Website for a Financial Inquiry Call – Info@sfgwa.com (Inquiry in the subject)

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Sound Financial Group on LinkedIn

Paul Adams on LinkedIn

Cory Shepherd on LinkedIn

Cape Not Required (Cory’s Book)

Sound Financial Advice (Paul’s Book)

Clockwork: Design Your Business to Run Itself

Mike Michalowicz’s Book – Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

Loserthink: How Untrained Brains Are Ruining America

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MUSIC CREDITS

Contains a sample of “King” by Zayde Wølf courtesy of Lyric House.

Full Episode Transcription


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Paul 0:01

Welcome to your business your wealth. We’re your hosts, Paul Adams and Corey Shepard teach founders and entrepreneurs how to build wealth beyond their business balance sheets.


Hello, and welcome to your business, your wealth. My name is Paul Adams, founder and CEO of sound Financial Group. I’m joined by Corey Shepherd, President, partner, and the man you want your corner when it comes to battling all things financial. Cory, so glad you could be here.


Cory 0:52

And me as well, where I’m excited for this episode. You know, it’s a topic that we’ve talked about with almost every one of our clients. Well, every one of our one of our clients, and a lot of folks have seen videos that mentioned what we do in this area in the past, but it’s something that, you know, in the midst of uncertainty about the stock market, or politics or any of those things, it’s a strategy that you have 100% control over, which is why I’m really, really excited. And I love the title that you came up with for this one. Paul, I’ll let you say it aloud in case anyone missed it. But


Paul 1:32

a cure for retirement. Yeah, the wealth coordination account. Now let’s, let’s talk a little bit about that word retirement. Because every financial institution says we need to be retirement planning, we’d save for retirement, we need to do this for retirement net for retirement. But here’s the major problem. If we go back to the early 1900s. And we just look especially in the our founding of our country, in the 1700s in the 1800s all your American history classes, the word retire meant something different than the way we talked about it today. It meant to put something up on the shelf out of use, it had reached the end of its usable lifespan. And that was the case when you had to retire an old plow. You’ve retired an old suit you retired old shoes, you retired horse. Yeah, yeah, that was usually bad news for the


Cory 2:21

horse. Right?


Paul 2:24

Exactly right. And, and you might say, I’m going to retire to the den for the evening with my scotch, but it meant you are no longer going to be of any use. And it wasn’t till the advent of social security in the 1930s. When we start to say, now we’re going to retire people. Now we know a lot of you listening are entrepreneurs and business owners. And for a great deal of us. We’d love what we do every day the concept of retirement, that we would one day put ourselves out of use, that we’d get super good in our industry, we would get well known. We build large networks of help produce accomplishments, perhaps other people have never accomplished in our industries. Also that one day, we can not do it anymore. No wonder the term retirement doesn’t resonate with people. So we’re going to take you on the simple path of building what we refer to as definite financial independence, for the sake of funding your work optional lifestyle. So want to build definite financial independence, to fund your work optional lifestyle, meaning you may continue to work to earn a living, or you may not, but it becomes your option. Whereas for many people, even people with very high incomes, people making 1,000,005 $2 million a year, they don’t have the financial autonomy they desire, because they don’t have enough assets to yet feed that same need for monthly cash flow that they have that’s currently being fed by their income. Cory, do you want to kick us off on the introduction to the centrepiece of building financial independence?


Cory 3:59

Sure. So as Paul shares his screen, we have here to start off our example a household with a 400,000 annual income. So nice round numbers. See, you can easily scale that up or down to wherever you find yourself. And they’ve got that wealth coordination account. Down below now, the wealth coordination account has a few jobs. Number one, it’s the first financial commitment that you want to make every month. And it’s, you know, it’s saying instead of making things like the other bills or the spending that you’re going to do the first decision point for your household. Pay into your freedom first, spend money on your future freedom first, and then make everything else work out after that. Now this


Paul 4:51

couple, I just gotta say, Cory, that’s so brilliant. Because so often people think of money I set aside is some kind of sacrifice, right, as opposed to something to be celebrated about the future that we’re building.


Cory 5:08

And that’s, and that’s probably why Americans as a whole, from year to year, we sometimes have a negative savings rate, meaning spending more money going to death. And then we’re making, because too many people don’t see that as a joyful activity as buying something really cool with that with that money. And it’s funny, the more that someone connects to that, that putting this money into a wealth coordination account is buying future freedom, surprise, surprise tends to happen a lot more and a lot faster. So this family is putting 80,000 a year or 20% of their gross income into their wealth coordination account. Now that 20% is an important number, because some families may need to put more than that in depending on what their goals are, how quickly they want to get to financial freedom, how much their lifestyle spending is relative to their income. But we’ve rarely seen it work out for anyone putting in less than 20% is a great, a great starting point. And the purpose of that account, once that money’s in there is to use that money to buy assets or receive proceeds back from from the assets that you already have. Paul, do you want to talk about some more specifics of the wealth coordination account and what an asset is?


Paul 6:29

Totally, I think that’s one thing that we’ve noticed a bunch if we were holding a large live event right now, and all of you were in the audience, and we gave all of you just a piece of paper, and said, write down your definition of an asset. If there were 1000 of you listening right now, this moment, who all filled out that paper and handed it back up. And then Cory and I went through every single definition, we probably have as many different definitions of an asset as we had people in the audience


Cory 6:59

1001 out of 1000 people. Yeah, that’s right.


Paul 7:02

One guy wrote down two, and they weren’t the same. So we define an asset is anything that puts money in your pocket now, or has the ability to put money in your pocket in the future without changing your lifestyle. So what are the things that qualifies an asset under this definition? Well, some kind of simple things really. One is we have our $80,000 going into year, and we might be able to buy a vacation home. Now notice, I didn’t say primary residence. And it’s because a primary residence is not an asset, it would under our definition, because it would require a move, to go to a new location, to then be able to harvest the proceeds out of that house. That’s a lifestyle change. But a vacation home, we could use it a couple weeks a year with our family and have it rented out as a vacation rental the rest of the time. It’s not a secondary residence, we don’t have one of our cars in the garage, or our clothes sitting in the closet, when you’re moving in there like a vacation rental and we can sell that and not have a change in lifestyle because we can go back and rent in the same neighborhood or maybe even the same house even after selling it. Certain kinds of collectibles qualify as an asset. You know, we have a client with one of those special 1960 Corvettes. And that Corvette is an asset sitting in his garage. He ensures it he maintains it, it appreciates in value. But it’s important if he becomes a member of the Corvette club,


Cory 8:33

right? He goes on as a Corvette or coffee. His whole lifestyle is Corvettes. Yeah,


Paul 8:37

yep, then, then that is no longer an asset unless he has two of them. One that he could sell without changing his lifestyle. So it kind of gives you a sense for what that lifestyle versus asset looks like. Of course, other types of real estate could qualify as an asset. Certain types of life insurance can qualify as an asset, we have some episodes on that you can go back and reference mutual funds, business ownership and some of the other traditional retirement vehicles all count as assets, all the classics. But what a lot of people don’t think about is just investing back in your human capital. That might be you going to getting an advanced degree that’s going to increase your earning capacity. It might be you going and working with folks like influence ecology that has a business study and transactional ism. You may have heard some of their founders interviewed on the show. You can invest in something like that increase your human capital in the marketplace as an asset, which all too often is not talked about, as investing back in yourself, certainly not by the financial community, because they don’t make any money on managing the assets you put into you. Right. So our first part that Cory told us about, add money, make it the first financial decision every month. Second is we buy assets and third those assets are going to have some kind of profitability, and we need to have a place that that money goes back to this is key because otherwise money gets lost in the sauce of life. You go out there and you sell something, we’ve all had a little bit of a windfall. Where does it go? Cory? Right in the checking account. And we inevitably will look at our spouse kind of feel a little more flush. And like, hey, we’ve been thinking about going to Hawaii, we’ve been thinking about buying you a car. And some of that money gets lost in the sauce of life. It’s okay that we make spending decisions with our assets proceeds, but we need to make sure it’s a clear and conscious decision, not one that just sort of happens, the background, slowly eroding our ability to build wealth, you’re ready. Now,


Cory 10:37

some of you thinking about the just a couple of the thoughts and questions I know someone’s gonna have out there. Yes, your 4k IRA, the money is probably just staying right in there and circulating around, there’s nothing coming back. In and out. It’s some of these other accounts that are in a non retirement, kind of treat tax treatment that that, you know, mutual funds that might send some some dividends or have some capital gain, whether or not you sell the mutual fund that you you bought, we’re talking about all those kind of kind of things,


Paul 11:07

or just think about something that increases your cash flow. After you make about $134,000 a year you’re no longer paying social security on your income is that money getting captured somewhere wealth coordination account could do that you paid off a car loan freed up $450 a month, capture it to your wealth coordination account,


Cory 11:23

it makes you cancel one of those 1200 different monthly subscriptions for media that you don’t really need, make it a win and redirect that money back to the wealth coordination account.


Paul 11:34

Absolutely. And our cure to retirement actually comes when we get enough control over the income being produced by our assets, that it replaces what we’re spending as a household. So this couple very simple. They’re making $400,000 a year they’re setting aside $80,000 a year to assets. That means we don’t do that much match between taxes, consumption, vacations, house payments, whatever they got going on, it’s costing them $320,000 a year. And once their passive income is greater than 320, that’s when they’ve reached not retirement, but definite financial independence for the sake of funding a work optional lifestyle, because now they can do the following. They don’t need to quit and walk out of work that day, like the quintessential retirement that people talk about and get the gold watch or whatever else it looks like most of you are entrepreneurs listening to this, ain’t nobody giving you a gold watch anyhow, doesn’t matter how good your career goes, you’re the one that gives away gold watches not the other way around. So what you have the ability to do, now you’re still running your business, things are going well, but you have enough passive income to pay all of your bills, you can just save 100% of your earned income. Take all your future pay increases from the cash flow coming from your assets. Because if you’re setting aside, in this case, $400,000 a year, you’re going to notice some increase in your passive income over time. And that’s where you take your lifestyle increases. So you’re never again dependent on your ability to earn an income. So that’s what we want to leave you guys with today that the cure to quote unquote retirement is just building financial independence as a separate conversation from the offer, the help, the difference that you make in the world inside of your career. And it doesn’t matter if your business is one that cleans toilets across the city that you’re in, or you’re designing Space Age technology, it’s going to be in the next Mars rover. What matters is you don’t need to have building financial independence mean you’re no longer bringing value and you go get retired. Instead, you can bring all that value, but no longer have your autonomy, freedom spending ability, reliant on how things are going in your career or in your business. Corey, let’s get final thoughts. And then we’re going to let everybody go and get busily working on not retirement.


Cory 14:06

This is a deceptively simple strategy, so much so that from time to time, I would lose sight of the value that it brings. But time after time, clients would repeatedly tell us this was one of the most useful and effective structures that they’ve that they’ve learned from us in our in our planning, because it just brings everything into sharp focus and answers that simple question of how much am I putting towards the future? And is it is it enough?


Paul 14:33

And I think that that makes the point. Well, Cory, is that so often people don’t have a mark, they don’t have a target. They don’t know if you ask most people how much money will it take for you to reach financial independence? They do not answer that question. Because they’ve always thought about retirement like points on a board at a certain age. Well, we’re going to learn with this upcoming Super Bowl that you can’t be ahead enough points to just walk away at halftime, you have another half of the game to play even after you reach financial independence. We want for all of you to be in a position you no longer have to chase this word of retirement. That instead what you begin to pursue is building definite financial independence for the sake of funding your work optional lifestyle. That means you take control of your cash flow, you choose how much you’re going to put in to that wealth coordination account and your separate decision is what assets to purchase, all with the aim of putting you in a position that you have definite financial independence. And from me, Cory, and everyone else was sound Financial Group. We hope that this episode has been a contribution to you being able to design and build a good life.


Transcribed by https://otter.ai


Transcribed by https://otter.ai


 


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PRODUCTION CREDITS

Podcast production and show notes by Greater North Productions LLP

Recorded using Switcher Studio: sales@switcherstudio.com