Ep 254 | Bulletproofing Your Wealth

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Let's get into it. Today I want to talk a little bit about wealth and finance, building our futures, and I want to talk about how we should be bulletproofing our wealth as we progress in our careers, in our life. When you start out, right, when you come out of college, or maybe you didn't go to college, but you're early in your career, you are just, you know, scratching and clawing your way up, trying to catch a break here, catch a break there. And you have the ability because you're young and frankly, because you don't usually start with much, you have the ability to take a bit more risk. Oftentimes those risks, uh, blow up. You know, they, they don't create the reward that you desire. And sometimes those, those risks work out. No matter what though, over the course of time, as you begin to grow your, your wealth, as you start to accumulate more assets, more capital, more cash, the ability to invest or start up businesses, whatever it may be, as you continue to grow, as you develop that over time, your risk tolerance should decline. In other words, the risks that you're willing to take in, say, your 20s and 30s are usually a bit more aggressive than the risks you're willing to take in your 40s and 50s and beyond. If in fact you've established yourself and you're growing, I want to talk about the steps or the things you should be considering as you aim to bulletproof your wealth. As you grow your wealth, you start looking at different strategies to bulletproof, to lower the risk, lower the exposure, and make certain that you maintain, or maybe go back a little bit, but for the most part, maintain what you have, and it's only up, even in downtimes. What should you be thinking about? Number 1, I think you either need to consider diversifying, meaning spreading your investments across different asset classes. You know, maybe, you know, it's real estate and stocks and bonds and different commodities and businesses, whatever it may be, but you're diversified. Diversification can help mitigate risks. And if you're not diversifying, then you've got to be very, very committed to watching that basket where you've placed all your eggs. In other words, for example, if, if you are into real estate and you believe that that's your path, I'm not, I'm not saying you need to diversify. I know Warren Buffett wouldn't necessarily tell you to diversify, But Warren Buffett would tell you, if you're going to go all in on an asset class or two, then you've got to be committed to watching that asset class, watching that basket where all of your eggs are committed on a very frequent basis, right? You've got to be knowledgeable. That's not a set it or forget it. So you have the option. You either diversify or you commit significant energy to studying and watching that asset class that you're committed to. Next, Asset protection. As you grow your wealth and you must bulletproof your estate, asset protection is mandatory. You have to consider different legal structures like trusts, uh, like LLCs, uh, even certain offshore accounts that might help you shield your assets from potential lawsuits, whatever it may be. As you grow your wealth, or even prior to growing your wealth, you should really consider how you're going to protect these assets, right? As we all know, it may take 10, 15, 20 years to build. All it takes is one claim, one 5-minute mess up to bring all of that down if you don't have the proper protection, right? I had a personal experience with this a few years ago where I did find myself in a lawsuit. Uh, and, and fortunately, you know, everything worked out and I hadn't done anything wrong. But had they— had the court maybe said something different, um, I could have potentially been in a bind if I didn't have the proper protection around my assets. Fortunately, I did because I was educated by my mentor early on to do these things. Along these same lines of asset protection and different legal structures, I want you to make sure you have the proper insurance. You need adequate insurance coverage for your assets, for your health, for your life. For what other liabilities, uh, that, that you can potentially come up or have, right? You gotta have a safety net in case unexpected events like an accident or a lawsuit, as I just mentioned, or some other thing comes about. What should you be doing? You should be meeting with your insurance broker at least on an annual basis, and you should be saying to that person, am I properly covered? Do I have the right Auto coverage. And is it for the, for a large enough amount? Is my deductibles right? How about my homeowner's insurance? Right? So we want to dig into this. If life insurance is right for you, you need to be meeting with someone that's educated around this subject. So insurance, as you grow your wealth, is another way to bulletproof what it is you're creating. Next, I think about having an emergency fund. This is probably one of the first things you should set up. You should be establishing as you're bulletproofing your financial wealth. You need to have an emergency fund, which is really just a cash reserve that is equal to multiple months of living expenses. And the purpose here is that in the event something happens, something unexpected occurs, you can cover your expenses. You can cover any sort of income disruptions. Early in my life, I shot to have 3 months of reserves. That was my first goal. I want to have 3 months of reserves. So if I was spending, say, $3,000 a month, on all of my expenses, I wanted to have $9,000 sitting in an account on the side, just in case. Now, as I progressed in my life, in my career, I went from 3 months to 6 months to 9 months to 12 months. And now I try to sit on about 12 months worth of, of cash, actually a little bit more than that. And the way I look at that is I have these dollars that are not, you know, getting the return maybe that I desire. but it, this is my emergency fund in the event something happened or I had to pivot or whatever. All of my expenses are covered for a year and I don't have to draw from any sort of investment or anything like that that might have tax consequences. So you need to establish what the cash reserve amount is right for you. At a minimum though, I would think you need 3 to 6 months just cash sitting there because you could make a pivot. You could figure some things out in 3 to 6 months. What, that's what you're really doing. You're just buying yourself some time. Some more advanced bulletproofing techniques: estate planning. You got to have an estate plan, and you want to get with an attorney, with your financial, you know, professional or advisor, whoever you're working with. Make sure that your assets, you know, ensure that your assets are being distributed according to your plans, according to your wishes, right? You also have to look to minimize tax implications. So in estate planning, as you create more wealth, as you have a, a nest egg, as you have accumulated some assets for that family, you need to make sure you have a plan in place for the estate that both protects the estate from liability, also minimizes the tax repercussions or implications for your heirs. Last couple of things that come to mind for me in terms of bulletproofing tax planning, as you get more, as you get further down the road, as you start to accumulate more wealth, as your income starts to go up, I think too many people spend too little time on tax planning. Taxes are your number one expense. Taxes are your number one expense, but we don't treat them oftentimes as though they're number one. They're almost an afterthought. You need to, as you grow your wealth, begin to optimize your tax strategies by taking advantage of different tax-deferred accounts or just different investment strategies that minimize taxes or different deductions or credits that are available to you. You've got to become a student of the tax game. If you're going to bulletproof your wealth. Last thing for me that I'm thinking around when it comes to bulletproofing wealth, I think about avoiding high-risk investments and avoiding high-risk people. Avoiding high-risk investments and avoiding high-risk people. High-risk investments that promise high returns, you know, could come with significant downside. At this stage of the game, I am— I do not have the same degree of risk tolerance that maybe I once had. Doesn't mean I don't take risks relative to, you know, what I'm comfortable in taking. But I'm just saying that as you accumulate more wealth, your job is to protect that wealth as well as continue to grow it. There's nothing wrong with growing that wealth of yours at a stable or even a, you know, high, you know, even higher return, right? I'm not saying you shouldn't maximize your return. I'm just saying swinging for the fences. With some sort of high-risk investment may not make as much sense as it once, as it once could have. Same goes with high-risk people. What do I mean when I say high-risk people? Uh, you have to more strongly, you know, consider your partners as you progress, right? You can't have a screwed up partnership. As the world gets bigger, as your financial world gets bigger, you have more exposure, more risk. So you've got to choose who you're hanging out with, specifically with who you're partnering with in business. You got to choose them more wisely than you ever have, right? You are a function or you are a component or a relationship, you know, with that individual and that individual, you know, mishap by that individual can have an adverse impact on you. So high-risk investments and high-risk people, I think you got to strive to avoid them. Remember though, when I'm talking about bulletproofing investment or bulletproofing your wealth, there is absolutely no one-size-fits-all approach. To how you protect your wealth and, and your, and your financial wellbeing. So you've got to go figure out your strategies to your individual circumstances. It all, you also have to take into account your long-term goals, the goals for your family and the tolerance for risk that you may have. We're all a little bit different. So the focusing question for you today, no matter where you're at on this wealth journey, what steps must you consider in order to protect, in order to bulletproof your wealth right now? What are some areas where you have some exposure that you have to take some action steps around today to minimize that exposure and get to a more stable, more stable footing? That's all I have for you today. The No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it. [MUSIC] [MUSIC]