Defining A Diversified Portfolio - Replay

My name is Brian Scribonia and on this episode of the Common Sense Financial Podcast, Ideally you want to position assets to have a tax free passive income to live on, have the ability to spend money with uninterrupted growth while simultaneously investing long term. And the time to do this is now because the more money you accumulate, the more difficult it becomes to reallocate those assets as I'm describing. And to do this you will need to have an open mind because many people's way of thinking relates solely to long term growth. This requires a new way of thinking.

Well, hey everybody and thank you for listening and joining us today. We hope that this podcast can provide you with some insights to help you grow and get closer to your goals this year. But before we get started, be sure to subscribe to this podcast. That way you'll be notified about new content and you'll be able to listen to Brian tackle a variety of different topics so you can subscribe on Apple Podcasts, Spotify, Stitcher, Soundcloud, pretty much anywhere that podcast is can be found and all the links to subscribe as well as past episodes are available on the website@Brian Scribonia.com so thanks again for tuning in and let's get started.

Opportunities are still there. The attempt at passing down wealth from generation to generation. Consider the outcome, not just popular opinion.

And the whole teaching there is about preparedness and being ready.

There's a difference between what's real and what's true. You're listening to the Common Sense Financial Podcast. I'm your host, Brian Scribonia. Thanks for tuning in and let's get into today's topic. I started my business 31 years ago on March 19, 1993, and over the years I estimate that I have sat in on over 20,000 client meetings. And as you can imagine, I've seen a lot of things and I've seen what works and what doesn't work. The goal of nearly every client over those years is the desire to make money, to grow money, and of course, use the money that they have. It suggests that we all, at some level, want the same thing. We want to grow money and we want to use our money. It's not difficult to understand, but it can be somewhat difficult to accomplish without a plan for each area of focus. Far too many people I speak with have a belief system that is rooted strictly on growing money, which at some level makes sense. We want our money to grow, but this singular focus leaves out the idea of using money. How we grow money is not the same as how we use or spend money. Growing money and using money requires different approaches and a different way of thinking, a different way of looking at performance. And with that, I find that many people spend money wrong. Now, I'm not talking about what people spend money on. That doesn't really matter to me. What matters is what the source of the income being spent is. Let me explain it this way. If you earn a dollar and spend it, it's gone forever. If you earn a dollar, invest it for income, you potentially have income for life. Does it make sense to spend the money you earn or spend the money your investments earn? In other words, is your money regenerating? If someone wants to grow their wealth over time, they should find ways to hang on to as much money as possible. It is the difference of having a headwind versus having a tailwind. You want to think in terms of creating income from your assets that you can spend. Thinking like this enables your assets to grow, while having the ability to spend it is uninterrupted, compounding growth. If you spend money, this isn't possible. If you spend money, it's gone. So here's the problem I see every day in my business when I'm talking with people. People tend to think in terms of rates of return, relying on the next best investment to deliver and meet expectations about growth. But what's often overlooked is how much money is actually growing. If money is spent, we are depleting resources and it creates the need to take on more risk on what's left to grow wealth. I'm not saying we shouldn't invest. Don't misunderstand what I'm saying here. Investing in businesses, either directly or indirectly, is certainly a path to long term wealth. What we are discussing is bringing awareness about the paradigm being used for how money is spent. If you want to make money, you need to get a job or start a business. You have to do one or the other, unless you're living off someone else's money. If you want to grow money, it makes sense to invest in businesses either directly or indirectly. Directly by owning the business, or indirectly by investing in someone else's business via private placements or the stock market. If you want to use money to spend on big ticket expenses, use other people's money when possible via home equity or life insurance loans. By using life insurance or home equity loans, you're using leverage to access cash while your money continues to grow. If you want to use money for generating income to spend, it's a good idea to use income generating Assets such as real estate rentals, income annuities, or income focused private placement investments. Look, unless you have an abundance of money that is far greater than what is needed, you really have to critically think about how to position your assets. An investment portfolio in a traditional sense has inherent sequence of return risks that limits you to a safe withdrawal rate that I would argue is limited to around 2 to 3%. If money is lost in the market, it is an uphill race to recoup that loss to break even. And when you are taking money from the account, it is a headwind making it more difficult to get ahead and puts the longevity of those assets assets at risk. So if you can comfortably spend and live on, let's say 2 to 3% of your assets, then there is less of a quote unquote need to fully develop an asset strategy that maximizes the use of those assets. But even if you're in that position, I've yet to speak with Anyone in my 30 plus years in business who says they have plenty of money and doesn't want any more and doesn't have a desire to maximize what they have. So instead of thinking in terms of simply rates of return, I find that it's better to think in terms of how much passive income is being generated from your investments. Now, I think it's important to understand what I mean by passive income. If you have a house, for instance, it has a value, but you can't spend the house. In order to access the cash from that house, you must sell it. And that puts the cash in your hand. But selling the home removes that asset from from the assets you have working for you into the future. The value of the house was sold and spent. Passive income is turning that home into a rental property to maintain its value while receiving cash flow from the rent payments. The same is true with an investment. If you need cash from a stock, you must sell it to have cash in hand. There are better ways to generate income or to access money to spend other than the stock market. The stock market really is best used for growth, but is not the best option for income in my experience. The way you get started with this is to ask yourself a few questions. How much of your assets are tax free? For most people, this is the smallest bucket of money. This is an area we would need to focus on to move more of your assets from tax deferred to tax free. How much more could you spend if you remove the tax liabilities over time? Remember, retirement or financial freedom is defined by how much passive income you are generating Having a large portfolio balance in like a 401k or an IRA is wonderful, but unless you have income, you can't spend money and the more taxes you are liable for, the less you have to spend for yourself. As I mentioned, if you want to make money, you need to get a job or start a business. You have to do one or the other unless you're living off someone else's money. If you want to grow money, it makes sense to invest in businesses either directly or indirectly. Directly by owning a business, or indirectly by investing in someone else's business via private placements or the stock market. If you want to use money to spend on big ticket expenses, you use other people's money when possible via home equity or life insurance loans. Again, by using home equity or life insurance you are using leverage to access cash while your money continues to grow. And if you want to use money for generating income to spend, the best way to look at that is using income generated assets such as real estate rentals, income annuities or income focused private placement investments. With all of this, you want to layer in strategies to help minimize or even eliminate tax liabilities when you're able to. The bottom line is that ideally you want to position assets to have a tax free passive income to live on, have the ability to spend money with uninterrupted growth while simultaneously investing long term. And the time to do this is now because the more money you accumulate, the more difficult it becomes to reallocate those assets as I'm describing. And to do this, you will need to have an open mind about this because many people's way of thinking relates solely to long term growth. This requires a new way of thinking. You can take advantage of the resources on my websites to learn more. You have scriboniafinancial.com, scriboniawealth.com, brian scribonia.com and build banking that concludes today's podcast. I'm Brian Scribonia. Thank you for listening to the Common Sense Financial Podcast.

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Thanks for listening to today's show. If you liked what you heard, be sure to subscribe on YouTube and Spotify so that you can receive notifications when we release new episodes. I'm Brian Scribonia and this is the Common Sense Financial Podcast.

Well, thank you for listening to the Forbes top 10 rated common sense Financial Podcast. Before you go, I want to encourage you to jump over to Brian Scribonia.com to access the full archive of blogs and podcasts and if you want to be the first in line to get new content, you can sign up for free on the Brian Scribonia website as well. If you're not following Brian on all the social channels, we'd love to have you join in on the conversation. Instagram, Facebook, LinkedIn, Twitter. He's there. Lastly, if you've enjoyed listening to today's podcast, or if you have found value in any of our content, help spread the word by sharing our videos, podcasts and posts wherever you get them. We greatly appreciate it and are glad that you took the time to join us today.

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