XYZ's of Money - Lesson 5: Bullet-Proof Wealth

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these people so passionately. Okay everyone, we are set and we are going to get started with another edition of the XYZs of Money. Today is lesson number 5, How to Bulletproof Your Wealth. So we welcome all of you that are on Zoom. And for those of you that are joining us on Facebook Live, we welcome you as well. Good to be with you today. We're talking about bulletproofing your wealth. And, and so we do have a winner. And I, I don't have it yet. But we're going to post it on my Instagram. Okay, so for those of you that did enter your, your homework to win a $25 gift card, because We, we buy stocks, not stuff. That'll go on my Instagram today. So you can check there, Alan_Akina, to see who the winner is. OK, now I want to spend a little bit of time on why, why, why do we do this? Why are you working so hard? Why are we working so hard and doing all these things, putting time into learning, putting time into work, saving money, budgeting, projecting? Why do we do this? Well, I would say for you, if you're like me, the number one reason is because we work hard to provide for our families. That's what we do. And you see my daughter, my daughter Keeley, she's beautiful 12-year-old girl. You know, I love all my kids. I'm sure you love all your kids. And that's why we do what we do. And because we do that, we need to be just as smart and protect that stuff that we are building. Because number 2, it's actually kind of hard to build wealth. It takes a certain skill set and knowledge and commitment to do— to building wealth. It's not for everybody. It's for those that want to put in that time focusing on those areas. Can it be done? Absolutely. All people from all different walks of life have achieved it, but it takes a certain discipline to get there. And it's the same discipline that I see you putting out there because of you showing up and the things that you are doing. And so We need to be just as smart to protect it. Why? Because there's chances of lawsuits, there's taxes that can erode away at our hard-earned wealth, which reduces its earning ability or the ability to grow. Taxes can do that, so we got to be smart there. And then we don't want to lose any of our assets, you know, things that we built. up for. We don't want to lose it because of certain things that we could have done. Might have not been as hard, but we could have done to protect it. So these are key things that you need to remember, and there's more reasons why we should do this. This is just the main ones that I felt like I wanted to share with you and put on the screen. But again, there's, there's more there. Now let's, let's start by talking about your HAYAT number and what Lesson 5 is going to do Is bring together all of the previous 4 lessons. So if you remember Lesson 1, right, we talked about building the ultimate retirement. We need to start with your HEIA number. You remember what HEIA is? And every time I say HEIA, my daughter Kiani has one of her best friends is named HEIA. But HEIA in our, in our example here means your happily ever after number. What is this number? This is your monthly retirement income that comes from assets. And you can include your Social Security if you want to include that in there, because that is going to be coming into your pocket. But what is your assets going to pay you on a monthly basis during your retirement years? And the reason I say break it down to a monthly number is because that's more realistic of where we are. And And how we live our life for the most part, but you can do your annual number. But what is that number? If you haven't set that yet, you've got to do that. I'm gonna have that as part of your homework today. Okay, because that's what we're going to protect is those assets that are producing the income to cover the HEIA number. And I hope that makes sense. Now, the first step, probably the first and most easiest thing to to do to protect and bulletproof your wealth is using insurance, right? Insurance is simple to set up. It gives you that extra layer of protection. And almost all wealthy people that I know use a tremendous amount of insurance. Okay, here are the major ones to consider. Number 1 is your auto. Look at your auto. A lot of times we're trying to get the cheapest coverage and minimize this, but when you have wealth and you have assets, a simple car accident could turn into a lawsuit that without certain things in place like good insurance, it gives those people that want to do that an opening to your personal wealth. So in this case, you want to be able to max out your auto insurance to cover yourself well in case those things happen. You never know, they could. And so talk to your auto insurance provider, and you can even shop this around to see if you are properly covered and if there's any holes in your plan, your insurance plan. Okay? And again, that's relative to where you are today with regards to your wealth, your assets, your financial life. Okay? And so if you're just getting started out, you don't have much to protect, and cash flow is more important right now, Then yeah, try to lower your insurance, your auto payment bill. But as you build wealth, those are areas that you want to be able to max out. Same with number 2, homeowner's insurance. We want to be able to get proper homeowner's insurance, of course, to protect the house, right? In case of flood or fire or theft or whatever it is. But in case of lawsuits from accidents or other things, right? And what this does, it puts up a shield or another layer of protection where people that are trying to sue you because they fell and slipped on your front porch, even though it wasn't your fault, it happens all the time. And so having insurance protects you. So it says, okay, you know what? The attorney said, let's just go after the insurance and we'll deal with that instead of going after their personal side. Then number 3 is what we call umbrella insurance, or another term for it is called liability insurance. This insurance sits on top of your homeowners, on top of your auto insurance, okay? And it fills the gap. If there's something that's needed above that, it fills the gap. So for example, let's say you got into a car accident, okay? Or one of your kids got into a car accident and someone got badly injured. and they came after you and your auto insurance only covered up to a certain amount. Well, if the lawsuit is for more than that, then that's when an umbrella insurance policy would kick in to fill the gap over and above. So let's say you had $300,000 coverage for medical and expenses on auto and they maxed out on that and it became $600,000. Well, the umbrella insurance would then kick in to cover those things. Now, most people don't have umbrella or liability insurance, but I think it's one of the most effective things you can have to have peace of mind and the extra coverage. And it's not a significant cost. It's actually pretty affordable to have the liability insurance. And you can even check with your homeowners or your auto insurance provider to see if they offer that or go to another broker. There's tons of companies that offer umbrella. If you own a business, again, having proper business insurance coverage is crucial, crucial for your business. Life insurance. Gosh, we talked about this quite a bit, but has things changed in your life? Have you had more kids or you have more debt now because you've been buying more properties, you're building up your assets, right? And so when you're in the building stage, right? We're acquiring assets. So there's a lot of money going out in down payments and rehab costs and other things. So all this money flowing out without much flowing in yet, right? Because it's a long-term building game. So during this time, we're carrying high debt. We have— during the building wealth building phase, high debt, cash flow's tight, right? And if anything ever happened to your family, the last thing we want to do is leave them with a tremendous debt burden. And with the loss of income, you know, those are things that we don't want to do. And so having proper life insurance coverage is again a crucial part of bulletproofing your wealth. And then the last thing on there is not insurance, but I kind of put it in the insurance bucket. You'll see today I'm putting things in buckets. And the reason for that is because in a lot of families, you know, a refrigerator goes out or You gotta replace all your car tires, a couple grand here, you know, 3 grand, 5 grand, that could put a monkey wrench in people's financial plans. And so having that rainy day plan in place protects you from having to do other certain things to dig your way out of it. So again, it's sort of an insurance against something breaking or going bad and you gotta cover that, okay? So insurance, number one, very, very good thing to start with. And so take a screenshot this as we go into the 2nd bucket today, which is called estate plans or estate planning. This is another way to bulletproof your wealth and protect your family. And so the cornerstone of an estate plan will start with a simple will and a living trust. Now, again, I'm not an investment advisor, not a tax planner, I'm not an attorney. And so I'm not an expert in this, I just know enough To, to be able to help you to get going in the right direction and try to make it simple for you to understand. But the cornerstone of an estate plan is your will and trust, and they serve different purposes. Okay, so the one purpose that I think I'm going to just spend some time on your will is if you have kids like me that are underage, under 18. This is the one that really stuck out to me is like, so let's say something happened to you and your spouse, right? You're traveling, went on a trip. Something dramatic happens and we both pass. Who gets the kids, right? The baby, the teenager kids that you have, like, where are they going to go? Guess what happens there? The courts have some say in that, the probate court, and of course family, right? Family will come in, they'll fight, and you— I mean, you've probably seen it before, just causes a huge mess. But through a will, you can dictate where the kids will go. Okay, and there's other things that it does. Now, the trust basically does the same thing but for your assets. It's— so it's you speaking from the grave, saying, okay, I want this to go here, this is going to go to this charitable organization, or the kids are going to do this with this. And it's, it's you passing on your wishes of your estate, right? Your assets, the things that you have have developed over your lifetime to go to the right place where you want to go. And what this does collectively, together with the living will and trust, is avoids probate, which is the courts getting involved, helping you, you know, to decide what goes where. And of course, with the courts getting involved, there's fees that they will charge, so it eats away at your estate. And then, you know, family. Being able to dictate, well, this is what mom or this is what dad really wanted. And so they put this in their will or their trust. And so we need to respect their wishes. And so it makes things a lot easier. Now, also part of your estate plan besides just the will and trust is the power of attorney, being able to make, execute transactions or do certain things on your behalf. If you are not capable of doing it, right? You may not be in a state where you could sign off on things or make decisions. So your power of attorney gives your trustee, or whoever that is, the ability to make decisions on behalf of you. Okay, then there are the healthcare directives. Which is basically the same thing like a power of attorney, but for your health decisions. So, you know, you might say, well, in my healthcare directive, if I am in this state, do not revive me, or this or that. It's your wishes, and that could be followed by your family and the medical professionals that they're dealing with. Okay, there's beneficiary, you know, designations, other things that we talked about earlier. And then the last thing is, for those of you that have a more complex estate, you have more wealth and, you know, multiple millions of dollars worth of things, you probably want to consult with a capable estate planning attorney to help you with advanced techniques using different kinds of trusts— irrevocable living trust, revocable living trust, you know, family trust. There's multiple things that you could do. to minimize problems and taxes when you pass assets on. Okay, so again, this reduces costs, taxes, headaches with family by having a proper estate plan done. And again, it should be done by a competent attorney for those things. All right, next bucket I want to talk about is your healthcare plan. Again, I'm not a healthcare expert. But there's a couple of things that I wanted to bring to your attention with regards to healthcare, which is long-term care insurance. Now there's so many different things out there, like you should get it and start considering after you're 50 or after 60, or get it when you're in your 30s. It's still— it's cheaper, and you never know what will happen to you. And this is, you know, what puts most people out of work is something with their health, and the healthcare, the long-term care health insurance would come into play. The other thing you want to consider is in your retirement, healthcare costs probably will be the biggest expense that you have next to maybe travel if you're traveling quite a bit. And so understanding what's going to take place in your retirement years with your health insurance is crucial. So I'm going to suggest here is— I don't know a lot about this area— is speaking to a professional in this area or getting referrals and asking questions, okay? Especially as you are nearing retirement, talk to your employer, talk to other experts in this area to make sure that you have this area of your life covered, okay? Healthcare will be a big deal as we get older and move down the road in life, okay? Next bucket is what we call limited liability companies, or LLCs. You've probably heard of an LLC. Why did I put this in its own bucket? Well, because an LLC is one of the best forms and tools that you can use to protect your assets. Okay, so it's like a like another entity that you have that you can put assets in that will give it exactly what it says on the screen, limited liability. Okay, so let's say you have a business, right? You set up a business and you form an LLC around that. So it's, you know, Alan Akina LLC, right? Or Or Aaron Fernandez. I see Aaron Fernandez LLC. You take this LLC and it's going to be managed by either a manager or member of the LLC, and it's going to be operated based on your operating declaration, right? So you say what this is, the LLC is for. So let's say Alan Akina LLC is for the management of this rental property, right? And your operating agreement, you write in there, you can write whatever it is. I have, I have LLCs that just have one paragraph, and we have LLCs that have 10 pages of what the operating agreement was going to look like. And in there you say, okay, this LLC is limited only to the amount that was invested in the LLC. So let's say you started the company with $5,000. Well, It is limited to that $5,000 and nothing else. So it provides some form of protection, assuming that you operated your LLC properly. Now, the reason why I put this up there is because it's simple to get started. It's not a huge cost. There are costs associated with it, but not a huge cost. And there is a lot of flexibility with it. You can use it for business, you can use it for real estate, you can use it for holding assets. And I have a ton of LLCs that I use for all of those areas. Okay, so again, LLCs is another bucket to consider in your bulletproofing system for your wealth. All right. Next bucket, and feel free as we go along to ask questions in, in the chat box. And for those of you that are on On Facebook. I'm gonna pull it up here so you can ask questions on, on Facebook as well. Okay, so we'll have, we'll have this live on Facebook. So I have my assistant watch for any questions. Okay, so can you watch for any questions please on Facebook? But yeah, go ahead and ask any questions. I just want to just sort of Wrap up with the LLCs. So the LLC, there's many different things you can do with this. You can have an LLC that owns another LLC. You can have an LLC that's a partner in an LLC. For tax purposes, there's not a lot of tax benefits from because it's what we call a pass-through entity. So Can you turn that down? So what that means is the profits from your LLC or any losses will pass through to your personal tax forms unless you have an LLC elected to be taxed as an S corp, and you can change, you know, change your tax situation there. But again, this is general information about LLCs. I'm not an attorney, so go see a good attorney for that. Now, another bucket that can help you bulletproof your wealth is what we call diversification. So having your assets spread across at least these 3 major asset categories, right? This helps you to protect against different things going on in the economy, like what we're facing today, like one of the craziest things, a pandemic, right? So the 3 asset categories— you hear me talk about this all the time— real estate, Which falls into 2 main buckets: cash flow, which, which are rental properties, real estate that brings in monthly income, or cash now. These are flips. Okay, those are 2 strategies that you can incorporate into your real estate portfolio. Next is paper. So paper assets includes the IRAs— Roth, traditional— your business, your SEP IRA. Even just having a general trading account, you can have like an E-Trade, or like some of you are using Robinhood or Stockpile like I do, and those are paper assets. I would suggest for paper assets you have it diversified as well, not just all in one stock or just a couple stocks. You may want to have some mutual funds and, and things of that sort to, to lower the liability again on that. All right. And then the last is your business assets. So some of you out there may be business owners. Congratulations, you know, control that business, grow it. Some of you, you know, may be in the gig economy. You might be, you know, freelancing or doing certain things. Some of you I see are instructors, so you have your own, you know, financial coaching business. So the business part of the diversification really helps out in a couple ways. Number one, it brings in more income. More cash flow, right? You can generate cash flow faster through a business than you can through stocks or real estate. And so that business income helps you to not spend it but buy more assets. So you can take profits from your business to buy more real estate or buy more stocks and mutual funds. Okay, the other thing it does, it gives you tax advantages. So you better, you better write things off on your taxes. Okay. So I, again, I'm a huge believer in, in having these assets really spread out across all 3 categories. Why? Hmm. Like the pandemic, right? So you look at the pandemic right now, when the pandemic hit, the Stock market crashed. Stock market crashed, but, you know, now it's rebounding. So the stock market rebounded a bit, but, you know, people stopped going to the office, but they still need a place to rent. Okay, so if there's a real estate crash— so says, what happens if the real estate crash? What will happen to your investments? Well, real estate goes up and down just like anything else, but if you buy it right, And you hold on to it and you pay it down, if you're not overleveraged, meaning you don't have much debt on it and you use like 101 to help you pay down that debt, then it's not going to be that much of a burden. But the problem comes is when there's a crash and people are overleveraged, they have too much debt. That's when the problems come in. Okay. And there's issues. And so That's why I suggest having assets in business, paper, and real estate as a way to be able to diversify, because some businesses, when this recession hit, the pandemic hit, business was great. Like One One Financial, we have grown more in this last little bit than we did last year or the year before. And so some businesses are sort of recession-proof. Some real estate like, you know, family, single-family rentals or apartments might be somewhat recession-proof because people still need a place to live. And so again, having true diversification is huge, okay? Hope that answered your question, Maeva. Now I'm gonna go to Zoom. Jenna said, where do we get an LLC? So if you want to do it properly, you can go to an attorney in your state, or there's online resources to get an LLC set up. Okay, so just message me, DM me, Jenna, on Instagram would probably be the best. I can kind of point you in the right direction. Charmaine said, do you recommend having more than one LLC if you already have one for your business? Yeah, so If you have one for your business, that's great. Then I would have one for your real estate. And so you can have— and we've done this in the past with real estate. And then I— so we would have one LLC for each property. And then sometimes we've had one LLC for multiple properties. It really depends on how much work you want to do. But again, it limits the liability to whatever is in that LLC, that entity. So you can, you can put a business in there, or in this case you can put, you know, your real estate in there and sort of protect it that way. So there's multiple strategies, but just depends on how you want to work. So great questions, Jana, Charmaine, and Maeva. We're going to move on to what I call the number one problem. Okay, the number one problem when it comes to protecting our wealth. And just building our wealth in general. And you may be shocked to see what this number one problem is. And I hope you aren't offended, but I got to tell you the truth. The number one problem for protecting your wealth is this: is you. I'm not saying that in a negative way or derogatory way. It's just that for most of us, and I'm speaking from experience, for me, I was the problem in my own financial life, in my own head, right? Is in my own head. I didn't believe in myself. And when you start thinking these negative thoughts, it really affects you from doing what you are ultimately destined to do, which is build wealth and have a happy, happily ever after life with your family. But we get in the way. We find ways to, to block ourselves. It's, it's our mental state. It's, it's not getting educated enough to understand things, to make decisions. And ultimately, it's not taking action. That's what it all comes down to. Now that most of you are starting to learn, really comes down to Am I going to do this or not? Am I going to take action or am I going to just let it sit and not do anything? So my challenge here is to overcome yourself. Get out of our own way and free yourself from yourself. Put more into yourself. Invest in yourself. One of the greatest investors our world has ever seen. He's like the 3rd wealthiest person in the world. His name is Warren Buffett, and he has a famous quote that says, the best investment you can make is in yourself. And I believe that as we start to grow and invest in ourselves and our knowledge, we will continue to be able to expand and open up. And I'm going to share with you a bonus here in just a little bit that will help you to do this, to help you to overcome Come yourself and do the same thing and help to help your kids to be able to do that as well. So remember that we're the number one problem. Now I got a question from KO. What is the benefit of having an LLC for each property versus one LLC for all properties? One LLC for each property. contains the liability to just that property. So let's say you have 5 houses, okay, and they're all over the place. Each house has— each property has its own LLC. Whatever happens with this LLC most likely will not penetrate and go to the next LLC. But if you have all 5 in one, then they sort of mix and mingle between all. So if something happens here, They see, you know, at this house, right, the tenant slips, cracks their head, or whatever happens. They see who the owner is. Well, it's this LLC. And by the way, the LLC has all these other properties in its ownership. So now it exposes the additional properties to the issue that happened on this one. So that's different. And it is, it is powerful, but some people just don't want to do the paperwork and the hassle of, you know, filing for all those LLCs. So. Now with that, okay, I, I'm gonna, I'm gonna sort of wind things down and I'll come back and answer any questions you have because I don't have another broadcast to do. So I'll stay and answer some of these questions. But this topic right here Is designed to help you to think about some of these areas that we may be weak in, these different buckets. Maybe are we weak in insurance? Are we weak on the estate planning side? Are we weak on the LLCs or the healthcare side? Do I not have my HIN number? You know, so this lesson was designed to get you thinking, open up those thought processes, and then get us to take action. So I want to give you your homework. Okay. Here's your homework assignment. There's several things I want you to do. Number one, if you haven't done this yet, get your HAYA number. So you need 2 things for your HAYA number. You need a target retirement date. What is the month and year that you plan on retiring, or even if it's a ways away, the year that you want to retire? And secondly, what is the monthly income you want to have from your assets, those 3 different assets? That's going to provide— you can include your Social Security if you want, if you have an idea of what you want, because that's cash flow to you. So those are the 2 things. If you've done it already, great job, you can skip that. But if you haven't, start there so we have something that we're fighting for. We're protecting this. Okay. Second thing I want you to do is review your insurance. So talk to your agent and maybe shop it around to see how you are doing on your auto. Your homeowners, your liability or the umbrella. If you don't have it, inquire about the liability insurance. It's a good thing. And, you know, talk to them based on your assets. They'll give you a recommendation about, you know, if you get $1 million in liability insurance, it's gonna cost you, you know, $30 a month or whatever, or $2 million is gonna do this and it's gonna cover you. So they can give you ideas, okay? Look at your life insurance. Your health insurance. Okay, go through each of those policies and figure out if you need to make adjustments there. Okay, the next piece of your, your homework after insurance is your estate plan. Look at your estate plan. Do you have a will? Do you have a trust? Do you have, you know, your healthcare directive, power of attorney? Look, take a— take an honest inventory of where you're at. Okay. And then lastly, look at your, your, your healthcare. Okay, see if you need anything with regards to healthcare, long-term care insurance, you know, ask your life insurance agent about that. Look at, you know, what— where you're going to be drawing your healthcare insurance from in retirement. These are all very serious things. So that's your homework. I'm not going to be there to drive you to get it done. This is— you're gonna have to be motivated to go do this, you know, on your own. But I want you to know I'm here as a resource for you. So message me. For those of you that don't have my number, my cell number, go ahead and message me on Insta. Follow me on Instagram, Alan_Akina, and then message me there. I can, you know, refer you to people as well that that I know and work with and that can help you get these things done, like LLCs or estate plans, insurance, stuff like that. I know a lot of people that can help you. I hope that these things that I shared with you were helpful over the last 5 weeks. I hope that you take action on what you've learned, because ultimately that's what it comes down to, is you. How How do you improve your financial life? My job is to be able to teach you, be a resource. My instructors are a resource. But again, we got to take it to that next level. We got to go make these things happen. Let's go do it. Let's not let fear, anxiety, ourselves, negative self-talk stop us from being able to do these things. Let's not do that. Let's make it happen for our families. And again, I'm going to do everything I can to help you. Do that. So I'm gonna answer a couple questions and then we'll wrap up. So Sean says, if you have a mortgage on the property, can you have the owner of the property and the LLC, but the mortgage to the individual? So if you have an LLC, you have to talk to your banker about— because the, the LLC needs to be on title if you have a mortgage. So Talk to your banker about the ways that you can do that. So there's certain things you have to do. Is timing on setting up an LLC— so Derek Aquino from Kauai— is timing on setting up an LLC for property critical? Do you need one as soon as you purchase a rental, or can you establish— You can establish anytime. It's not crucial. It's just you'll have that exposure to the liability before it goes through, right? So Typically, you want to start lining that up when you go to contract for that rental property. So as soon as you get it under contract, right, as soon as you contract, we got home inspections going on, we got financing going on, we're lining up the rehab, the construction crew, we're lining up rentals, property managers, we're doing marketing, all during that 30-day period of time that you have before you close. So there's a lot of things. As soon as you close that property, boom. LLCs going up so you can close within that LLC. So yeah, good question, Derek. Christine, what if I'm 60 plus? Where— what's the best way to start? Well, this is when you really need to start taking it serious, Christine, to get some estate plans in place for sure, right? The will, the trust, healthcare directives. power of attorneys and start figuring out what you want to do with those assets. And I mean, this is for anybody because, I mean, yeah, the older we get, the higher probability we have of moving on to heaven, which I know you'll be in heaven, Christine. But we don't— none of us know when we're going to go. So it's a good practice to have all these things ready to go. So, Yeah. So, you know, message me, Christine. I can point you in the right direction if You need some help and some guidance. Okay. If someone owns their house— Sandra, if someone owns their house, meaning the mortgage is paid off, is it wise to put into an LLC? So if it's your own home, typically depends on what state you have, but there are some protections, estate plans, protection already built into the laws of that state. So you'd have to check with them, but You know, I haven't really seen that happen much for homes, your own home that you put in LLC. But I mean, you could. I'm just saying that I haven't seen that much. But, but check with your state and an attorney there. That might be wise. As we wind this down, I hope this was beneficial to you. I hope your families are well. And please always keep, keep an eye on your finances. Make it a priority in your life. And when you do, great things will happen and things will start to go your way, right? Luck will start to happen for you. So go to YouTube and subscribe to the 101 Financial YouTube channel. So you go to 101 Financial in YouTube and hit the red button, subscribe. What this does is anytime my team uploads a new video, it'll notify— it'll just send you a ping. Okay, hey, lesson number 1 was uploaded. And add a direct link right to the video. Okay, and then every time they upload— so what we're uploading there is I have all 13 lessons from the ABCs of Money, which is very beneficial for adults and kids. They can rewatch it. Also, XYZs will be there, and then I do tips for KHON. And so those 1.5-minute tips are uploaded, so there's a constant stream of new information. And content that you can consume that is is simple and short and very very helpful. So go ahead and and subscribe to the One on One Financial YouTube channel and you'll be able to get all of that stuff. Okay, so thank you, Sigs. All lessons are taught. Great for everyone. Yeah, you guys are the best. You guys have been great to me. Thank you so much. I hope to see you on bonus lesson number six. God bless you all. Have a great rest of your week. Aloha.