Q&A: Your Pressing Finance and Investing Questions Answered

My name is Brian Scribonia, and on this episode of the Common Sense Financial Podcast. This cycle is exactly why so many entrepreneurs never feel they have any extra money. They're always reinvesting. Now, that's not necessarily a bad thing. Investing in your business is critical, but if your goal is to create financial stability, you have to know your numbers and take control of your cash flow.

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 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.

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. Today we're doing something a little bit different. Instead of diving deep into a single topic, I'm actually going to take some time here and answer some of your questions because I receive a lot of messages and I get a lot of questions and honestly just can't get to them all just due to time restraints. So I thought it would be good to gather some of the most often asked questions and answer them right here on the show. So let's just jump right in and start tackling your questions. The first question is from Kevin in Florida. He asked, you talk a lot about passive income. How do you do this and is this an annuity? When I talk about passive income, I'm not referring to just one strategy like using an annuity. Annuities can certainly be a part of an income plan, but they're just one tool among many different products. The real key to passive income is creating multiple diversified income streams that aren't dependent on just stock market performance that can be volatile at times, or even just a single annuity that doesn't allow a lot of Flexibility. Most people invest in publicly traded stocks and mutual funds. But what I find is that the private markets offer opportunities for more stable and predictable income streams. That includes things like private lending, where capital is loaned to businesses or real estate developers in exchange for a fixed income. There's also private equity, which involves ownership in businesses that generate long term cash flow. Real estate is another great option, whether that's direct ownership of rental properties, syndications, or alternative REIT structures that generate consistent income. Hedge funds and managed futures can also slide in there, where you provide professional strategies that aim to generate returns while reducing exposure to stock market fluctuations. Another key piece of the equation is owning cash flow producing assets. Real estate is one of the most well known, providing both stable rental income and long term appreciation. But there are also alternative fixed income investments that offer higher yields without the same interest rate sensitivity as traditional bonds, structure notes, for instance. And private debt investments can also create income from alternative strategies. Now, annuities absolutely have a place in an income strategy. They can provide guaranteed lifetime income, similar to what a pension plan does for people. And people have relied on those for years. But they're not the only solution. Passive income isn't just about buying a product. It's about designing a strategy that reduces risk, increases cash flow and provides a long term financial strategy. A well structured plan includes multiple income streams that work synergistically, not just a single stream. Now, when it comes to entrepreneurs, the conversation shifts a bit too often. Business owners chase multiple ventures thinking they're diversifying. But what they're really doing is spreading themselves too thin. This leads to burnout and underperformance. Instead, the much smarter approach is to focus on a single core business model and create multiple forms of income from that business. For example, a lawn care business might add lawn treatments, fall cleanups, snow removal. Instead of launching a completely unrelated venture, a restaurant owner might expand into catering, private events or even selling packaged sauces. Instead of opening a separate retail store, a consultant might develop online courses, group coaching programs, or licensing opportunities. Instead of trying to build an entirely different business. This approach allows entrepreneurs to increase their income potential while maintaining focus and efficiency. The key really is to expand within your expertise rather than chasing unrelated revenue streams. So whether it's investing for passive income or scaling a business, the principle is the same. You diversify smartly, maintain control the best that you can, and keep your money working for you. Next question is from Brian in Arizona. He asked, I have always kept a lot of cash and was wondering how much money I should keep in savings. I have always heard three to six months of income, but I am way past that and I'm beginning to think I'm not being smart with my money. Now that's a great question, and honestly, it's one I hear a lot. The problem with the idea of saving is that it's way too vague. It doesn't seem specify what the money is for, which makes it hard to determine the best place to keep it. So instead of thinking in terms of just saving money, I prefer to think about storing money with a purpose and that purpose determines the best place to put it. Most people who ask this question are really referring to what I would call an emergency fund, a chunk of cash sitting in a bank account just in case something unexpected happens. But here's the issue that I have with that most true emergencies if when you think about it, what are they? Car accident? Home damage? Health issue? They're all covered by insurance. And if you have a deductible to cover, that's one thing. But keeping a massive amount of cash sitting idle for an undefined what if scenario doesn't make much sense to me. If you need money in a pinch, a credit line or a credit card can bridge the gap temporarily giving you time to access money from a source to get some liquidity and then you just turn around and pay that credit line off. So the real question is how much should you keep in the bank? My suggestion, and this is very loose, but my suggestion is around $10,000 in cash. That's not a hard number, but it's a good estimate because that covers most short term needs without having too much money sitting in an account earning very little to no growth. And even if you kept significantly more in a bank, most banks limit daily withdrawals anyway. So the idea of needing a huge emergency fund just sitting there is a bit flawed. The real focus should be on where the rest of your money is stored. Instead of following the tradition advice of keeping three to six months of savings in a low yielding account, I focus on building wealth while maintaining access to the capital. It's an entirely different paradigm. A specially designed whole life insurance policy, what I call bill banking I've talked about repetitively on the podcast, is a much better place to store cash because it grows tax free. It does have some liquidity and continues compounding even when you borrow against it. A brokerage account is another good option for liquidity. It allows you to have better growth potential than a bank and also provides the liquidity that you're looking for. The real problem is that most people are Following a broken strategy, they put money into a savings account where it earns almost nothing, or they lock it away in a retirement account where it's inaccessible without penalties and taxes. Neither of these is an ideal way to maintain both liquidity and wealth building. Instead, my approach is to build wealth first while ensuring I have access to cash along the way. That means keeping a reasonable amount and liquid cash for immediate needs, but ultimately making sure my money is working for me, not just sitting there collecting dust. This way of thinking is how financially successful people tend to approach liquidity. It's not about hoarding cash in a bank account, but about positioning money in the right places so you always have access to cash while it's still growing. Here's another question from Jean right here in St. Louis. She asked I'm a 64 year old entrepreneur. I have more than enough money, I think, to live the rest of my life comfortably. I have friends who are retiring and have asked when I'm going to join them. This is not something I think about and was wondering if this is common with people you speak with. I appreciate sharing your experience. Okay, so your question is very common, especially among successful entrepreneurs who love what they do and aren't interested in traditional retirement. I hear from people all the time who are financially secure, but they're not necessarily looking for an exit. They're looking for continued purpose and achievement. Retirement, as it's traditionally defined, is a societal construct that has shifted over time. Historically, work was intertwined with life until physical limitations made it impossible. Today, many see retirement as a destination, one of relaxation and leisure. But for those who are purpose driven, the idea of simply stopping work feels unnatural. I addressed this very topic in a past episode about the evolution of retirement and how societal expectations have shifted. Some people dream of the freedom to sleep in and have no obligations, and that's fine. But I find that many high achievers, especially entrepreneurs, don't find that very appealing. In fact, many find the prospect of fully retirement unsettling. For those who genuinely enjoy their work, money isn't the primary motivator. It's simply a byproduct of doing what they love. The real driver is the experience, the challenge, the impact of what they do. I often hear people say they want to travel or volunteer, which can be fulfilling, but without a true sense of purpose, even those activities can start to feel empty over time. If you're someone who still has value to bring to the world, there's no reason to force retirement just because it's what other people expect. Healthy people are Living longer and spending 30 or 40 years without a meaningful pursuit can feel like a long, drawn out finish line rather than an exciting next chapter. I'd encourage you to think beyond the traditional definitions of retirement and instead focus on what gives you energy and fulfillment. If that's continuing to work, then why stop? If it's shifting into a new phase of contribution, then lean into that. The key is design a life that aligns with your personal vision, not someone else's expectations. Next question is from Darrell here. Darrell in Texas. Not here because I don't live in Texas, but Darrell in Texas. He asked I have a mortgage on my home and enough money in my investments to pay it off. I grew up in a household that taught debt is never good and it bothers me to have this mortgage. I have heard you say that you should not pay off the mortgage and would like to hear your reasons for this. Recommendations okay, Obviously this is a very common mindset. We hear it all the time that people should be paying off their home and it kind of gets categorized with debt. But before I dive into this explanation of my position on that, it's important to understand where my beliefs around debt is derived from. First of all, I believe there's two types of debt. There's investment debt and there's consumption debt, and understanding the difference is critical to making a smart financial decision here. Second of all, we must be clear on what the goal we have is. What is our goal for the money? Is it to build wealth? When we're working and making money, are we trying to build wealth and achieve financial freedom? Or is our focus to pay off a mortgage? You really can't have it both ways. Investment debt is used to acquire assets that have the potential to grow in value or generate an income. Financing a rental property allows you to leverage other people's money while the property appreciates and produces cash flow. And this type of debt, when managed properly, can actually accelerate wealth building because you're multiplying your assets and achieving something you're unable to achieve without the debt. Then there's the consumption debt. This is used to purchase things that do not appreciate and do not generate income. Things like flat screen TVs and automobiles. These items depreciate the moment they are purchased. This type of debt robs you of wealth because you're paying for something that is losing value instead of increasing growing your assets. So the key takeaway is that in my opinion, that not all debt is bad, but it must be used strategically. If debt is being used to acquire an appreciating asset that builds wealth, it could be a powerful tool. If it is being used to fund a lifestyle to consume just buy things that decline in value, it can quickly become a financial trap. So many people argue that a home is not an investment because it isn't generating revenue from rents, and I do agree with this sentiment. However, it's important to understand that this is often a large asset, and it's important to know how it impacts your overall financial picture. Here's the primary consideration, and this is worth writing down. A home appreciates in value regardless of whether or not it has a mortgage, which means eliminating the mortgage does not increase the home's value. It simply changes how you hold your assets and can actually result in reducing your wealth. Let's take an example. Suppose you own a home worth $400,000 with a $200,000 mortgage, and you also have $200,000 in an investment account. So if you take the home in the investment account, you have $600,000 in assets that are appreciating. Now. If you take that $200,000 from your investment account to pay off the mortgage, you no longer have that money growing for you. Your total assets have dropped from 600,000 to 400,000. Converting your investment into home equity, which I consider a dead equity.