5: Dealing with Death – A Financial Discussion with CFP Neal Frankle

This is the Bigger Pockets podcast show five, and today we're going to talk about death.

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Hey, everyone, this is Josh Dworkin, founder of BiggerPockets.com here with my co host, Brandon Turner. Hey, Brandon. Hello, Josh.

How are you today?

I'm doing great. Yourself?

Oh, I can't complain.

Excellent, excellent. Well, like you, I'm very excited about today's guest, but before we get there, this is show five of the BiggerPockets podcast, and you can review your show notes@biggerpockets.com.

Today we're going to talk about something that a lot of people don't really like to talk about. Death. This seems dark and depressing, but this might be the most important lesson that we've covered yet on the podcast.

Why?

Well, sometimes this podcast is going to be about flipping subject to lease options, might be about commercial real estate, might be about how to be a good landlord. Each of these topics are important, but they actually don't apply to everybody who's listening. However, the one thing that we do all have in common is death. The show is not about you and me. This is about our spouses, our kids, and our family. I mean, it's such an important topic. Don't you agree, Brandon?

I do. And it's something that, you know, as a young guy, I don't actually pay that much attention to because, yeah, I'm gonna live forever, right?

I mean, yeah, yeah.

Hey, yeah. Nothing can happen to me. And that's definitely the way, like, I mean, I might not outwardly say that, except for here on a podcast in front of thousands of people, but, I mean, that's how I live my life, is that, you know, I. I wrote a post the other day about girl, I don't want to grow old. And I was making fun of people who drive 15 miles an hour under the speed limit. But the fact, I mean, I drive too fast because, you know, I'm invincible and that, you know, that will catch up to me someday. So I think this is going to be a great. A great podcast because of that.

Absolutely. Well, you know, it's funny, I actually, the way I live my life comes from the discussion of death. One of My best friends back in high school.

He used to tell me he had his big piece of profound advice, which is probably one of the most important things I've ever heard, was you want to live your life like you're on your deathbed. And what does that mean? Well, to me, it means I want to live my life like I want to live for those people who are going to be around me and surrounding me when I'm dying. So, you know, I'm old, I'm sick. Hopefully that's when I go. And not just from some car accident or some angry Biggerpockets fan or something, but, you know, when you're dying, you're on your deathbed and you're surrounded by people. And who are those people that you're surrounded by, Brendan?

Typically, your wife or your husband, if you're a lady, Your kids, Those kind of things, I assume.

So it's going to be the people who are closest to you, Correct? Right. So the way that he explained it to me and the way I really see it is you want to live your life for those people, you want to live it for your closest friends, you want to live it for your family, you want to live it for those people who are going to really be there in the end.

And.

And you want to be able to say, hey, listen, I did well by myself. I did well for you, and I lived a really good life.

So that's the philosophy I take, and that's behind everything I do with my business with bigger pockets and with my life in general. That's why I can't go and rip people off. That's why it's not Biggerpockets. Isn't this upsell. Yeah. Destination. It's because I couldn't look at my family while I'm about to kick the bucket and say, hey, I did good by you. I whored myself out, but I did really good by you. And so, you know, that's. That's the philosophy I have. I'm sure everybody's got their own. Anyway, the bottom line is, you know, death is one of these things that, you know, it's. It's a topic we don't talk about. It's a topic we're afraid of, but it's a topic that anyone in business has to. Absolutely has to plan for, and that's why this show is just so important.

You know, one of my biggest fears.

In life, this is just kind of.

Unrelated maybe, but my biggest fear in life, above almost everything, is being buried alive. I mean, when I was A kid that freaked me out more than anything else. You know, they used to put. I once heard a story that they once tied rope to people's legs in their coffins that were buried, you know, six feet down. And they. The rope went up through the ground to a bell that was above the graveyard. So that way, if a person was accidentally buried alive, they would, you know, the bell would start ringing in the middle of the cemetery.

So that's. That's. That would be nuts.

That would be nuts.

Not just the time, but, you know, imagine one day you're working at the cemetery, and all of a sudden one of the time to run.

Yeah, that would freak me out. So, yeah, a huge fear of mine. But, you know, as I get older and have a little bit more assets and things to my name, you know, my. You know, one of my newer fears is, you know, what happens if I go to my wife? Like, what. How is she going to go on? And not just emotionally, but how is she going to go on with the rest of her life with the business? Will everything fall apart? And again, when you. When you talk to me about this podcast about having our guest on today, I thought the terrific idea. Just because I'm. Yeah, I don't know what to do about that. I have never covered that. And, you know, this is going to be an actionable podcast. That's what BiggerPockets is all about. And so I'm looking forward to it.

Absolutely. Absolutely. So I'll make sure next time you and I go to the beach that we won't bury you up to your head.

Yes.

Thank you.

Yeah, I'll start to shake and get scared and. Yeah, you don't want to see that. You don't want to see me in a bathing suit anyway. So we'll avoid the beach.

Yes. Yes. The Sasquatch in a bathing suit.

Yes. There you go.

Frightening sight.

Yeah, there you go.

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All right man, well let's get to this.

All right, well why don't you introduce us to our guest today, Josh?

With us to talk about death is our good friend Neil Frankel. Neil is a certified financial planner with 25 plus years of experience.

Neil's actually got a really, really just amazing story. It's somewhat tragic, but he's really overcome that and it's fantastic. He's a great guy.

Neil teaches people how to plan for their financial future and he blogs@wealthpilgrim.com He's one of the top guys in the financial blogging space. He's incredible. He's got great advice. He's very responsive. So if you hit him up at Wealth Pilgrim, he'll be there to take your answers. But without further suspense or anything else. Welcome, Neil.

Thanks a lot. Great to be here. I appreciate the opportunity.

We're very happy to have you, man. Very, very happy. As I mentioned in your intro there, you've got somewhat of a.

Story here. You overcame huge diversity. Maybe you could tell us about your upbringing and how that led you to become who you are today.

Okay. Well, unfortunately.

By the time I was out of high school, both of my parents had passed away. My mom died when I was 15, and then my dad was in an airplane crash two years later. So they were in their 40s. We were four children. They didn't do any planning whatsoever. No trusts, no will. My dad, by accident, by accident, in fact, he was doing a real estate deal. So we had to have a little bit of life insurance to make sure that he could perform. And he made one premium payment on life insurance. The deal didn't go through, but the life insurance did. And because of that, we were able to go to college. But the family was basically decimated because neither parent did anything to plan for the unexpected.

Yeah. Wow. Well, you know, unfortunately, that is something that I probably say and I'm sure you probably know some statistics on a good number of people do not plan. Do you have any data on that, by chance?

Yeah, actually I do. Something to the tune of. I have a chart here on my site. Something to the tune of. About 80% of the people don't do any planning. At least 80% just eye boiling. It could be higher than that. No trusts. They might have a little life insurance here or there, but a comprehensive plan. Very few people do it.

Wow. Well, what does that tell us about our education system? Financial education is not a priority, is it?

I don't know if it's a function of education. It might be a part of that, but I think more of it is what willingness to just put the big boy pants on, grow up, do what's required. People just want to do it. They know what they got to do.

Absolutely. No, I got you. We'll get into some of that stuff later on. The big thing, the reason I wanted to have Neil on the show. Neil and I attended a conference. It was a bloggers conference of financial bloggers. And we had this incredible, incredible discussion with a bunch of really, really sharp guys about death. It sounds morbid, but the conversation just really got me excited because I realized that I had not done any Planning for my own death and sitting and thinking about it, it gets me a little freaked out. In fact, it gets me a lot freaked out. I've got wife, I've got kids, and to think, oh, gosh, someday something's going to happen to me. But the folks listening to this show, they're business people. And whether or not they're business people or they just work for somebody else, I thought it'd be really important that we get into planning for death. Neil, let's talk a little bit about that discussion. One of the things that really sparked my interest was planning your business for your death. So what happens? Are you ready today? Is your business ready today in the event that you kick the bucket?

That is a phenomenal question. And it's actually, in my view, really powerful. Even if you think you're never going to die, because let's face it, most people really don't get that someday they're going to be gone. They know it intellectually. They don't really get it in their. In their heart. But the reason that I think that's a great question is because.

If you can make your business run without you, then your business becomes all the more powerful and profitable.

No, absolutely. Absolutely. One of the things that we really delved into was having a plan. I know for me, we talked because a lot of us run web companies. We do want this to apply for those folks who've got a real estate business and other businesses. But what I realized was, God forbid something happened to me.

Does my wife know how to run my business? Does she have the plans? Does she know where the important paperwork is? Let's get into that a little bit. Maybe you can talk about what does somebody need to do? What kind of things do they need to have prepared, particularly for their business, for some kind of transition?

Okay. So I think there's two or three parts of it. And it's funny because after we're done, I'm going to be talking to my lawyer specifically about my transition plan. So it's timely. The first thing is to ask yourself, okay, what happens if I can't come in tomorrow? If I'm gone? How does the business run?

Your. Your spouse has to have all the documents. So what I've done, Josh, is I've actually recorded myself on video.

Showing my wife where. On the. On the C drive of our computer where all the documents are. So I just got a. Like a video. Like a screen recorder. Yeah. And it shows her exactly where the files are. And then I also tell her what these files do and what to do. So it's. I've written out a plan, but I've also got an audio plan for her.

That's a great idea. That's a great idea. So you've got this thing. I mean, I hate to be morbid, but is it literally like, hey, honey, if you're watching this, I'm dead. This is what you need to do? I mean, is that kind of how it goes?

Well, I don't say that, but it's pretty obvious that that's the. You know, I just say, here's what you do. I don't go into that part of it, but.

It'S been wonderful. Thank you, Peter. No, none of that. It's very factual stuff.

If you're listening to this and watching this video, you're probably smiling because you're the reason I'm dead.

Hey. Okay, so you put together these videos. You've got the written documents and what's included in those written documents.

And again, I'm talking specifically about for your business.

Okay, well, in my particular business.

You.

Have to have licenses, and I have arrangements with, in my case, custodian, which is TD Ameritrade, and then I've got the state of California. So there's like three or four different legal requirements that have to be met to continue the business. And then also to. I've also appointed a broker to sell the business in case. So I've already set that all up. But there's got to be things that she does to actually execute the plan. So I explained to her what should happen and who's going to do what and what she needs to do to make that legally possible. So, you know, in every business it's different. You've got to just really take maybe interview a lawyer for your own business and say, okay, what's required to keep this thing going?

Okay, okay.

And we'll bring this thing back to real estate for everybody in a bit. But I think a lot of these issues are relevant to anybody who might be listening. So before we do that, let's kind of keep digging into this thing. I look at my business, for example. I say, okay, well, on the day to day, there are certain things that need to be done.

For me, I know that I would need to plot some kind of chart of here's what you do every day. And I guess this again would apply for real estate or non real estate. Here's the day to day stuff. Here's the week to week, maybe here's the month to month. Here's where the paperwork is, here's how to find stuff. But you had talked about.

Planning for selling the business, and I think that's a really, really good point.

How do you do that? I mean, how do you prepare? Presumably a lot of people don't really think, what happens if I die to the business? Do I sell the business? Do I keep running it? Well, I can't run it. I'm dead. Does my spouse run it? So, you know, finding that next person. Get into that a little bit.

Okay, well, first of all, you know, again, specific to your own business, you know, my wife is not a financial planner, so my clients are not going to hire her. They're going to go. So that's number one. So what I've done is, number one, contracted with a company that specializes in succession planning for financial advisors. And the second thing I do, which is more applicable for your listeners, is to network with people, local business people, and say, look, if I go, I have a dry cleaning business. You're a dry cleaner. Let's set up a reciprocal arrangement where if something happens to you, I'll buy your practice or your business and so forth. So you got to look around.

No, that's a really good idea. I wonder if you could do that. You know, the same thing with real estate. You know, if I go, you know, I've got a good friend who invests. He has about the same amount of properties as I do. And we've kind of talked about that. You know, if one of us dies, you know, we. We hope the other person will come in and at least settle the. The problems, you know, so our wives who are grieving won't have to, because we have that kind of inside information already on how real estate works. And so, yeah, that makes a lot of sense to me.

Yeah. Well, the nice thing about real estate, in my opinion, is that it's not as time sensitive as an ongoing retail business, you know, that needs daily attention. Real estate does need, you know, you can get a manager to do it, but you don't need to make buy, sell decisions on an hourly basis. So, yeah, a little bit more time.

Yeah, that's great. All right, so very cool, Neil. So what would you say then, you know, what other things should I be doing as a real estate investor to plan for my kind of, you know, eventual retirement followed by death, hopefully much later. So what should I be doing, you know, from your. From your opinion, you know, besides talking to my friend?

Well, in my opinion, the first thing you got to do is look at your estate plan because if at the time of your death, you have an. You have a taxable estate, by setting up proper trusts, you could take a huge chunk out of the estate tax and the transition, or you could create a world of problems for yourself. So the first step would be setting up the appropriate trusts. And then if you have multimillion dollars worth of, you know, real estate, then you might want to do a family limited partnership. And it gets. It gets complicated, but the first step is getting your trust and limited partnerships in place.

Can you talk a little bit about that? Neil, as somebody who, admittedly I know very little and I've been reading this stuff and studying a lot of it, real estate, I know very little about trusts. I know very little about inheritance and heirs and.

All this stuff.

I know nothing.

Okay, so school us. We're the listeners and we're here. I want to learn what is a trust? How does it work? How does it protect you? How does it protect your family?

The first thing is to name me as your beneficiary. That's the first rule in setting up the trust.

That was a given.

All right, so there's really two elements of a trust. Number one.

Is you need a mechanism by which stuff that you own gets transferred to someone else when you're dead. Okay? So if you do nothing, there's a mechanism for that. It's called probate, and it's a very bad concept. We could, we could, you know, I could talk about. I could do a lecture on that, but. Okay. The second way is joint tenants. And joint tenants is good because the stuff automatically depending on the state you're in. And also I want to, you know, just disclaimer. I'm not a lawyer and I don't want to give anyone legal advice, but I'm just going to give general concepts. Joint tenants has some nice benefits because when you die, all your assets that are in joint tenancy go to your survivor. There's problems because if you die and then your spouse gets everything, and assuming you're, you know, so then what happens when she dies or gets sick or something? So that's why the trust could be helpful. The trust is a mechanism by which assets are transferred.

Okay, so are both you and your spouse in the trust or. And your kids or how does that exactly work?

My spouse and I are. We're owners of the trust, and we're also beneficiaries of the trust, and we're also trustees of the trust. Now, if something happens to one of us, then we could name someone else as a trustee, but they're not an owner, so they get control of or they help control for our benefit, but they don't have ownership rights. And that's the big difference between a joint tenant and a trust. So the first part of it is it's a mechanism by which assets are transferred. But the second element is that depending on the size of your estate and the estate taxes at the time of your death, the trust could potentially help you save hundreds of thousands of dollars. Estate taxes, do you have a, like.

A minimum for what? You know, if a guy owns one single house, you know, one rental house, you know, should he be looking at getting a trust? Or is that something for, you know, the millionaires only?

Well, because I am a pessimist and a conservative and I, and my experience is, you know, all kidding aside, my experience is that you never know when you're going to die. And unfortunately I was a recipient of that. My parents had, they had a trust, even though they didn't have very much money, would have saved a lot of grief. So the trust also does a lot of things. Even if you have no money, it has health powers of attorney. It names. If you, for example, Brandon, have children and you want to name.

A guardian for your kids, the trust can help you do that. It doesn't hermetically do it, but it does a lot of other things. So I wouldn't wait to be a rich guy before I got a trust.

Can you talk about the difference between, for example.

You know, guy has one rental property and he's got say, you know, 50,000 in the bank. Say the property's worth 50 grand, 100 grand, it's a hundred thousand dollar property, 50,000 in the bank, he kicks the bucket. Versus his friend who has the exact same finances but puts that money, puts that in a trust. What's the difference? How does that work?

Okay, first of all.

Let'S say the guy dies without a trust, assuming that he had the property in joint tenants with his spouse and the money in joint tenants, then it goes to his spouse. If he's single and it's just in his name, then the lawyers have got to get involved, it's probated, and then the lawyers are going to eat it all up. Okay, Versus the other guy or woman, who, because we all know women are.

Smarter than men, 100%, I agree.

So if the woman has the trust set up, she passes away, her trustee would basically just divvy it up. It would probably take two or three weeks, maybe a month. It's all done. You know, it's Very simple, very easy.

Is there a tax implication on that? So you've got the property.

Are you now paying cap gains on death tax or any of that weird stuff?

The estate taxes? There are some benefits of having. It's going to get a lot more complicated than you probably want. But let's put it this way, depending on the size of someone's estate, it could save a lot of money in estate taxes. But for most of us it won't right now because we have an estate tax exclusion of $5 million.

Ah, very nice, very nice.

Drops back to a million, then the. See, basically the trust can allow you to double your estate tax benefit. Okay, so if you have an estate of worth 10 million, then the trust would basically help you avoid $10 million, you know, shield $10 million of assets. But if the estate tax drops to a million dollars, then the estate, then the trust could help you shield $2 million of tax free assets. Complicated. I would definitely recommend at this point that your people not take, you know, not make a decision based on what we're talking about, but make a decision to talk to a lawyer about this. If it sounds of interest.

I was going to say that, I was going to say, you know, this is a, this is a pretty heavy conversation. There's a lot of really important and.

Very detailed concepts. So, you know, definitely talk to your lawyer, definitely talk to a cfp. Don't go out there and try and figure this stuff out on your own. That's, that's kind of my disclaimer to your disclaimer. I know Brandon wanted to jump in with some stuff here.

Yeah, I'm just curious, Neil, I know this is a really general question, but if I wanted to set up a trust, what am I looking at to have a. I mean, does a lawyer do that or does a financial planner do it? And then also what is a general range that it's going to cost? I mean, is this a $5,000 thing or $100,000 thing or 20 bucks?

Oh, well, good question, Brandon.

I would not recommend that anyone do this with a cfp. Okay. I would recommend one of two things. A lawyer, if your situation is complicated or you just have more peace of mind that way. And okay, really important, make sure that the lawyer specializes in estate taxes. Estate trust, quick story.

I was friendly with a lawyer who knew nothing about estate taxes. And he would take people and charge double. He would take money, charge them 5,000 bucks. He would pay another lawyer $2,500 to do the trust and he would pocket 2,500. So it's a great way to waste a lot of money if you don't go directly to trust attorney. Now the other way to do it is you can use a service like legalzoom.com and I've done some reviews on places like that before and I think that Josh probably has to or may in the future.

Self service companies could be good as well, depending on the, you know, how complicated your situation is. But that could, you know, a company like LegalZoom, I don't know what they charge maybe 100 or 200 or $300 and a lawyer could charge between 7, you know, between 500 and 3,000 or 5,000 or 10,000, depending on if it's very complicated. And if you have a lot of real estate and or lots of beneficiaries and a second marriage and this and that, you really should talk to a lawyer in my view.

No, that's, that's good advice.

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So we covered cost, we covered kind of vaguely what it does. And it sounds to me like a trust is something that probably everybody wants to put together. You had mentioned earlier probate, and maybe we could talk a little bit about probate, what it is, how it works.

From the perspective of protecting yourself from your estate going into probate. And then I think we should actually tackle it from the other side. As an investor, there are lots of families and there are lots of people who unfortunately have to deal with probate.

How can you come in as an investor and help those families to dispose of the assets that they probably want to get rid of so they can get some cash on hand? So let's take it from both sides. Let's start with what is probate?

Okay, probate is the mechanism by which the state, the courts decide where your assets are going. If you have a will, you die testate, meaning the. Yeah, don't worry about that. It means that if.

It means that the court will take your will and interpret it. And that's going to take time and money and lawyers. If you die without a will, it's called you've died intestate, meaning you have no will. So the court will use the state laws and decide, you know, where your assets go. So basically it's a lengthy process. The courts are involved, the court makes decisions for you, lawyers are involved, takes a lot of time, a lot of money. And it's completely public and it's open to. It allows a lot of people to fight over your money. So for example, Elvis, when he died, his estate was worth 10 million.

And his heirs got 3 million. Guess where the other 7 million went?

US government.

Lawyers.

Lawyers and, and courts. Right. So, you know, when John Wayne died, no one knew what the size of estate was.

Because he had a, he had a, he had a trust. So, so, so it's, it's private, it's quick, it's cheap. Probate is exactly the opposite of that.

Hey, so, so trust and wills, let's, you know, how do they work hand in hand? Because I think there might be a little bit of confusion. You want to have a will, obviously.

No, you don't. You don't.

Oh, you don't want to have a will.

Here's what you should have again, depending on the state and your situation. I'm not a lawyer, but he's not a lawyer.

Talk to your lawyer. Good one again.

Okay. So a trust sort of does the same job as a will. So you're better off to have a trust, all things being equal than a will. However, what people generally have is a will that in case you forgot to put something into the trust, then you have what's called a pour over will, which is if you forgot, then everything goes in. Everything that's left out of the trust goes into the trust via the will.

So would that be the ultimate setup that you would think people, our listeners, would want to have is have a trust and then have that pour over will? Is that the optimum?

Yes. Yes.

Okay. Okay. I've never heard of a pour over will.

This is fantastic. Great info. All right, so let's get back to probate then. So we know how probate is. It's public, it's open. What does that mean?

What does that mean to somebody who is an investor? I know a lot of investors market to the probate market. They send mailers out. It's kind of a grim thing. But unfortunately, people who pass away oftentimes leave assets and they don't know what to do. How can somebody who is an investor come in and help out?

Well, you know, A, I don't know a ton about this, but B, this proves the point. There's the reason that investors, some investors aggressively market to probate attorneys is because they know that the people who mistakenly went through probate are screwed and they're going to take advantage of that. That's where they're going to get a deal. So let's say an asset gets probated. Well, the family wants the money quick. They need to pay for legal fees, estate taxes, possibly they're in a tough situation.

How you would pursue that specifically, I don't know exactly. But I can tell you again, unfortunately, probates are public record. So you could find out about probate and contact the lawyers and the families and. And make yourself available as an investor.

Yeah, well, and there have been a bunch of articles. If you go to the BiggerPockets blog at biggerpockets.com renewsblog.

You could look up some articles on it. We'll actually put probably. We'll put some links into the show notes@biggerpockets.com show 5.

All right, so probate is.

It sounds like we don't want to end up in probate, that's for sure.

Absolutely not.

We also don't want to end up passing on without being prepared in other ways.

I think one of the things you and I have talked about, Neil, is on life insurance. So maybe we can kind of COVID that a little bit. Now, what is it? How does it work and why do we need it?

Oh, well, life insurance basically pays off a big lump sum case you die prematurely. And note to self, everybody dies prematurely. Yeah.

What is prematurely?

Yeah, I just say that to make everybody feel good.

But.

You die, you get a lump sum, and then the family should use that lump sum to invest it to generate the income to replace the income that you're no longer here to provide.

So you need it, Josh, if people depend on your income.

Right. Okay. And there's various kinds of life insurance. Correct. I know. There's term and then there's whole life. What's the difference?

One is good and one is evil.

Which means the evil.

The evil is whole life, in my opinion, for most people, not always, but 99% of the time. Now, if you're a life insurance agent, whole life is wonderful because you make a ton of commissions on it.

So keep it real.

Neal. I love it.

Okay. Most people, term insurance is far better. Far better. It's a whole lot cheaper. Gives you a lot more coverage for the same dollar.

Yeah. And it's amazingly cheap. It's much cheaper than you think. The term insurance is the way to go. Absolutely. I'm a big fan and I'm a big believer in it.

All right, so we've got term insurance. We're not going to get the whole life because we don't want to make the insurance sales guys rich. We want to take care of our families and do that. So how much term insurance should somebody get? So say I'm. I'm a real estate investor who's got 10, 20 properties bringing in income, maybe I work a 9 to 5 on top of that.

I guess we could come up with a million scenarios, but ultimately, what are people looking for in terms of how much they should purchase?

This is a really good question.

The way to do it is.

To really break it down. Josh.

Let'S say you wanted to die. Excuse me? You don't want to die, but if it happens, you want to pay off all your real estate. I'm just saying, depends on what you want to do. Let's say you want to pay off or just pay off your house or whatever. So let's say you own. You have a mortgage of 300,000. So that's, that's the base amount. Then you want to provide $100,000 of income for your family. Let's just say. All right, so rule of thumb, 5% return on your investment. You would need $2 million invested to generate $100,000 in income, and that's pre tax. So you would need $2 million life insurance. It's really rough, it's really broad, but you just work backwards on your income.

Okay. Okay. So working backwards is absolutely. It's something that you do as an investor regardless when you're kind of planning. I know Brandon and I, we've talked about that in terms of building up your portfolio and plotting. But it sounds like that's a great idea for this as well.

Yeah. One thing that, what I did for my life insurance. And Neil, I'd actually like to get your opinion on this. I got a policy a couple years ago, and the, the policy, it was a, it was a term life insurance. But then they gave me the ability to, I think every year I can up the amount that I have because as I buy more and more properties, I need more and more money. So kind of my theory was I would always have enough life insurance to cover paying off all the mortgages that I have. So if I were to die, at least my wife and she knows that she's to pay off everything that we own and then just hand it all over to property management or over to my, you know, my other investor friends. Is that your.

Conceptually, it's. You're in the right neighborhood, but there's a, so there's a. I want you to think, Brandon, of your life insurance needs sort of as a bell curve. So on the one hand, you will need more as your family grows and as your exposure grows. Agreed. Okay. Yep. But as your net worth grows and you pay off properties and you have more equity and you have less, you have more Passive income and your family, your kids get older, blah, blah, blah. You actually need less life insurance. Right?

Yeah, that makes sense.

Okay, so you have to first plot out what your life insurance needs are over the next 20, 30 years. And of course it's going to change. You have to make assumptions and you have to be able to build to buy more insurance and sometimes and then taper it down. So what I've done rather than do what you did, is I bought more policies in the beginning, but I bought them for different periods of time. So when I was 30, I bought a 30 year policy so it expires when I'm 60. And then I would buy different policies that would extend for different periods of time to tailor my life insurance needs or plan to my needs.

So you could buy multiple policies is what you're saying, Neal, not only can.

You, I recommend it.

Okay, so you could have one expire, like when your kid is graduating from college. Then one of them could expire because you no longer care about that extra, that money. Right.

Okay.

Right. That's great. That's great. So Neil, let's get into really quickly and then we're gonna have to get out of here.

Some overall ideas. You're a cfp, you're talking to an audience of actual investors and would be investors.

Give us some big, broad, sweeping advice that you can provide to us. Whether you're somebody just starting or somebody who's been around for a while. What are your best tips for cya? Covering your backside, making sure your family is ready to go financially. What do we need to do?

The first thing is to have enough liquidity and to be tracking your spending. Very important because people spend about 30% more than they think they spend. And if you just simply track it by virtue of tracking your spending, you'll see where your money's going, you'll be much more conscious of how you spend money and you'll be able to catapult your financial future, you know, your success.

So that's.

So track your spending. Number two, make sure you have a good emergency fund and enough life insurance because you don't know. And guess what? You really don't know. And if people are depending on you, do the responsible thing. Get enough life insurance, then from there on. I actually like Brandon's post. He wrote a post for me, gosh, a month or two ago and it was wonderful because it talks about looking at your life, building a plan, going backwards. What do you want it to look like? When do you want it to look like that? And then Investing accordingly and not getting caught up in this year or what President Obama saying now or what's going on in Congress. Have a plan and execute it and understand that it's a 20, 30 year plan and execute it. And then the fourth thing, which I'm not sure that Brandon mentions, but I always do, is to always have an accountability partner and a mentor to run your ideas off somebody else who has what you want.

That's a great idea. That's a great idea. How often should somebody be reviewing these plans?

At least once a year. Okay, at least once a year. And talking to your accountability partner once a month.

Interesting.

Really quick, the post that Neil talked about. We'll have in the show notes@biggerpockets.com show 5.

And you know, one thing you said, Neil, that I just wanted to point out a real life example of is you said track your expenses and what you're spending. And about, I don't know, probably three or four years ago, I sat down with my wife and we decided to kind of take our finances more seriously. And we looked and we figured out we were spending an extra, I think we were over $1,000 a month, that we had no idea where it was going. And yeah, so we sat down, we plopped, you know, plotted it all out, we created a budget, and nothing changed in our life after that. But all of a sudden we had an extra thousand dollars a month.

Exactly. Right.

Yeah. It was like magic. I mean, after that, I told every one of my friends, I mean, you got to do this. Like I was spending a thousand dollars a month.

I was.

And yeah, it's great advice.

We got him off the Starbucks.

Oh, no, not that.

Hey. All right, so we're running out of time here, so let's knock out a couple really, really quick questions. Neil, what is your favorite personal finance book?

My very favorite personal finance book is Money Academy for Couples, written by Neil Frankel.

How about your favorite personal finance book book not written by Neil Frankel?

Oh.

All right.

Well.

That'S a tough one. You know, Dave Ramsey wrote a book.

I forgot the name of it, but.

The Total Money Makeover.

Total Money Makeover, yeah.

That's the book did it for me.

Yeah. Okay, so that's great also, but the most important business book I ever read was the E. Myth by Gerber. Forgot his first name, but Michael Gerber, I think. Phenomenal. That changed my whole business life.

I think that's the fourth time on this podcast that we've had somebody say the same book, and I haven't read that one.

Well, Brandon.

What do you conclude from that, buddy?

Yeah, I'll pick that up this week.

There you go.

Thank you.

There you go. All right, Neil, let's talk about. What's your favorite hobby? What do you do for fun besides give me grief?

Well, believe it or not, I play drums.

And I've played in a few bands, and I've even toured a little bit all over the country once in a while. So I still. Even though I'm pre death, I still play rock.

That's awesome.

So are the Rolling Bones, man.

Yeah, that's cool. I play drums, too. I'm pretty terrible, but I enjoy it quite a bit.

And I'm a former terrible drummer as well.

Wow.

Okay, so we got a lot in common here.

Yeah. Shocking jam sometime.

All right, so the last question I have, Neil, this isn't my Ask everybody, and I'm going to tailor it a little bit specifically for you, but the question I have is, you know, in this industry, just financial in general, I guess, you know, a lot of people do really, really well, and a lot of people make a lot of money, and they end up retiring with a huge, you know, portfolio, and other people end up with nothing and end up going just kind of living off family and friends and the government until they die. So what's the one thing or, you know, one or two things? What sets people apart? The top performers from those who are just scraping by.

The three things that come to my mind are, number one, commitment.

Number two, a plan, and number three, execution. There's a saying in the Israeli army that goes, there is no such thing as impossible. There's only I don't want to do sounds better in Hebrew. But the reality is.

When I talk to people and they're successful, it's because not only did they have a plan and, you know, and they were committed to it, but they actually took action. Other people, they have excuses.

Yeah.

Look at yourself, Brandon. I mean, you've executed your plan. You're continuing to do so. Same thing with you, Josh. Look at what you've done. You know, bigger pockets didn't. Didn't fall into your lap. You had to work tirelessly, and you continue to do so. It's called commitment. It's execution. So that's what it's about. In America, I honestly believe you can do anything. You just got to do the work. It ain't going to fall in your pocket, even if you have bigger pockets.

Yeah.

That's great.

That's great, Neal. Thank you.

It's really my pleasure. Thanks. For having me on the show. Josh and Brandon, no problem, no problem.

Great having you. And that was our show today, everybody. I hope you enjoyed our discussion on Death and Near Death with Certified Financial Planner Neil Frankel. If you haven't yet left us a review, please, please do so. As of now, we're up to 65, 65. Five star reviews on iTunes. These reviews really help us rank better on itunes, help us get more people to see us. Also, subscribing to the show on itunes is really, really important. So please jump on itunes and make sure you click the subscribe button so that you can subscribe to the show again. Another way to that we can help get the word out about what we're doing here. You guys are really, really awesome. We appreciate the support.

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This is Joshua Dworkin signing off.

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