Timing Matters With All Things In Finance

Hey, it's Mark Podolski, the Land Geek with your favorite niche real estate website, www.thelandgeek.com. and today's guest I'm really excited about. We haven't had a financial planner in a while and before we talk to our guests, I just want to let everyone know that Scott Todd is going to take a little vacay today. So it's just gonna be me and hopefully that's gonna be okay. Go on the Facebook group and certainly you can go to the official Land Geek motivation wealth creation group and sing his praises or complain, whatever, but we'll get Scott back on the next podcast. Speaking of, today's podcast is sponsored by Land Geek Flight School Training. Learn more, just go to landgeek.com training. Today's guest is Mark Willis from Lake Growth Financial Planning. Mark Willis, if you're not familiar with him, is the co host of the not your average financial podcast. He shares his strategies for investing in real estate, paying for college without going broke and creating an income in retirement you won't outlive. He's also a certified financial planner and a two time number one best selling author and the owner of Lloyd Growth Financial Services based in the Windy City, Chicago, Illinois. He specializes in building custom tailored financial strategies that are unknown to typical stock jockeys, attorneys or other financial gurus. Mark Willis, thanks so much. How are you?

My goodness, Mark, that is an awesome intro. I appreciate it. I don't know who you're talking about, but that's amazing. If you could read that every time I get out of bed in the morning, boy, every day would be awesome. You have a great way of introducing. Thank you. It's a pleasure to be on your show.

Yeah, yeah, not a problem. And Mark, if you like, I can just call you every morning. Yeah, I can do like a robocall.

That's right on, man. You'd be my favorite robocall all day.

Yeah, yeah, not a problem, not a problem. So let's just kind of start with just why on earth of all the things to be in life, what made you want to be a certified financial planner?

Yeah, you ask a great question. Only because the context of when I got in. So timing matters with all things and finances, but your career, when you get into a particular career, it kind of matters when you get in. So my wife and I, we graduated from our three private school degrees between us in the midst of 2008, the Great Recession, you know, so we graduated with six figures in student loan debt with no plan and not exactly employable in the midst of the Great Recession. So, you know, sort of like a crazy time to be getting into financial planning. And I worked for a CPA at the time, and during that process, I got to listen to a lot of her phone calls with clients who, honestly, Mark, a lot of the conversations went something like this, hey, I'm sorry, Mrs. Client or Mr. Client. You know, I know you're 62 years old and you're really looking forward to that golf course in your golden years, but I'm sorry, I just lost you half your life savings. You have to go back and work another 20 plus years. You know, I just lost you half your money. Your 401k just became a 201k. That's sort of how a lot of the conversations went. And much to my surprise, it was all built on the stuff that we all were taught, or at least I was classically taught to believe would save us. The white knight of Wall street would come in and rescue us through thick and through thin. Like, just hold on, right? Just don't look at your 401k. That was sort of the general mainstream education I got. And then as a cfp, they sort of back that whole philosophy that really just buy term and invest the rest. Buy it and hold your mutual funds for life and just hope and pray. And I guess I sort of felt like I was becoming a financial professional in the midst of a war, and I was dropped right into the front lines at the start of the Great Recession. So that was a very intriguing, very scary time to be getting into this industry. But I'm glad I did, I guess, if only because I wouldn't have wanted to be on my CPA's side of the equation where I had to make calls and do what she did. That just would feel terrible to me. You know, to lose a client's money, even a little bit, seemed unacceptable. So anyway, that's sort of how I stumbled across this crazy industry, and we've had a lot of fun ever since.

Wow. So what is some of the worst advice you see or hear given in financial planning?

You know, I'd say the four most dangerous words in your financial vocabulary is do it for me. Do it for me. Yeah. If you let somebody else completely just run with whatever you've given them and you aren't watching it and invested and following and engaged. It's your money. No one should care more about your money than you do. I don't care if it's hedge funds or raw land or contracts or stocks or bonds. It should be something that you're aware of, what's going on, it's your money. No one's gonna care more about it than you do. So that's one of the biggest mistakes I see is people are working toward a financial future that they have no control over and no idea what's going on in their portfolio. That's what I guess maybe the biggest risk or the biggest problem. And as far as traditional financial planning and financial advice, Mark, I'd say some of the biggest problems are really told quite a few just outright lies about what's actually going on in our 401ks IRAs, paper assets. I'll just quote a quick study that I like to watch. Each year there's a third party research firm called Dalbar. Dalbar Inc. Has this yearly study they put out that actually tracks the real results of investors. Mutual fund investors, bond funds, equities, index funds, ETFs. They're wanting to see what's the true actual result of people who are participating in the stock market. You know, generally their overall goal of the study. And over the last 20 years, okay, over the last 20 years they've experienced a 3.88% return. Is the, the real return of average investors in equity stocks? If they're all in on stocks, yeah.

That's horrible.

I mean, so what is that? That's maybe a percent or two above inflation, maybe over that same period. That's according to Dalbar. Right. They don't have a dog in the fight. And that's during the last 10 years when we've had a massive bull market, the longest in human history. So what's going on?

That makes no sense to take all that risk and have that kind of a paltry return. Why is that?

I think a lot of people are quoted misinformation. You know, you could, you could look at your, you know, Google this or just search this or just read it in any magazine that the, the market goes up whatever 10% a year. Some people will quote you over the last hundred years. So how is it possible that real investors are getting something closer to three or three and a half or 4%? I guess the real problem comes down with the idea of averages, Mark. The truth is you could get an average return and still have no more money in your pocket. I'll give a quick example. Let's say you started your investing portfolio with 10 grand and you just put it into this brokerage account. And the brokerage account went up 100% this year. So 10,000 bucks, double it to 20,000 by the end of the first year. Now we're at the start of year two. Let's say that you do a negative return that year of 50%. You do a 2008 kind of drop right from 20 grand. You cut that money in half. You're back down to your original $10,000 after two years. Would it surprise you? Maybe not you, Mark, but maybe some of your listeners might be surprised to find out that you still averaged a return of 25%, even though you're ending up with the exact money you started with, a real return of zero, even though you have an average return of 25%. Rate of return. Well, you know, I think it's wrong to do this, but mutual funds are allowed to advertise an average rate of return, which means nothing in terms of purchasing or money in your portfolio.

So rate of return. There's rate of return, but then there's this other concept called rate of income. What's the difference and which is more important in your. In your eyes?

Yeah. So rate of return means nothing. It's really just a change of the value of your stock. You know, it's just a change in value up and down and up and down. It's worth nothing until you sell that stock and take that money either at a gain or a loss. So I believe the best thing you can do in your portfolio is find things that produce the best outcome that you're trying to achieve. For a lot of our clients, Mark, it's income. They're looking for ways to get passive. And I know this is what you really specialize in with your work in raw land is the idea of what's the income that we can generate off of this asset, whatever it might be. So, you know, if I look at the typical rule that most investment advisors will tell their clients, they'll say, hey, hey, Mr. Client, you need to take no more than 4% of your portfolio to make sure that you have a good chance of success and not outliving your money in your golden years. 4%. If anyone's ever heard of the 4% rule again, recent studies are coming out, including a guy from my alma mater, one of the professor's PhDs, Wade Pfau. Wade Pfau from the American College. He actually has done some more recent research and said that now we need to look closer at that 4% rule and give everybody the advice that it should be closer to 2.8% withdraw. So let's put some numbers around that. Let's say you're a 401k millionaire. Right. And you've got a million bucks in your 401k. Most good research is telling you that you shouldn't take more than about 28,000 bucks out of that 401k. 2.8%. That's pretty inefficient, to put it lightly. Right?

Yeah, that's not going to, that's going to not really move the needle in your life.

Yeah, well, 28 grand and that, that only gives you a, you know, nine out of 10 shot of not outliving your money. And that's taxable income too. So 28,000 bucks after taxes. What do you think that closer to like 19, 20, $21,000.

That's the 401k minority poverty line.

Yeah, that's a millionaire lifestyle, man. And that's. So I'm convinced that paper assets and the, and the, and the Wall Street Casino is really one of the most inefficient ways to generate an income. They're not, they're truly just not designed to create income. So you know, I guess my, when I was a kid, my parents would tell me not to play with toys unless they were designed to be played in a certain way. Now I totally don't always agree with that. Sometimes you gotta be creative and throw the spaghetti against the wall and see if it'll stick. Right. But when it comes to financial vehicles, you want to make sure that you're using it in the way it was designed. So, you know, stocks, bonds, mutual funds are not a income generating asset, at least not the most efficient way to generate an income. Maybe there's better ways. Maybe you know something about that, Mark?

Well, I definitely do and my listeners are all about that. But there are some people, unfortunately for, for those people that for whatever reason they. Let's just pick on a surgeon, right? They have solo economic dependency, but they have very high incomes. And for them to start working the land business, it's not going, they don't have time to do it right. So they want a more, even more passive vehicle, which would be okay. If I'm making, you know, 800,000 a year, I'm going to save 200,000 a year, whatever it is, pay my taxes, save 200,000 and I'm going to put it in this vehicle so that I am going to be able to eventually stop working at some point.

Now.

If you were talking to that person, they have a plethora of options. And we know just based on the beginning of our conversation that the typical conventional option is not going to get Them where they want to be. So what would you say to that? High earner?

Man, you're right. There are over 450. I tried to keep track of it as I went through my studies, and I've worked with other clients over the last decade. I've kept up with at least 450 different financial vehicles. Okay, so particular financial places to dump money. Now, you can combine those vehicles together, you know, like nitro and glycerin or peanut butter and jelly. You can combine those things together and. And make a strategy. So now we're talking about tens of thousands, if not millions of ways to put the money to work. And it can be overwhelming. I mean, this poor guy, he's just trying to be the best surgeon he can be, you know, in your example. And we could, you know, say that the same for the school teacher or for anybody else out there. What is it? What is it that I want my money to do for me? That's maybe the most important question anyone listening to this can ask themselves. What do I want my money to do for me? And it's a good question. Most of the time, we're doing stuff for our money, right? That's what a job is, right? Yeah. So let's take at least five minutes out of your very busy life and just ask yourself the question, what do I want my money to do for me? And it's a fun kind of creative brainstorming session you can have with yourself. In fact, if you're the type that likes to journal or whatever, you can grab a sheet of paper and write down. Not while you're driving, if you're listening to this on the road. But ask yourself the question, hey, if I was pope of money, you know, if I could wave a magic wand and create my own perfect financial vehicle, you know, if I could just, you know, decide for the sake of deciding that I want this perfect financial instrument to have all these certain characteristics, attributes, you know, qualities. What sort of things, characteristics, adjectives do I want that money to have? What would I want to be important for me? What do I want my money to do for me? So did this for myself. In fact, when we were just getting out of the, you know, the massive amount of student loan debt that we were in and really trying to find the best way to build a financial platform for our future, I started writing myself a little list. You know, I wanted things like access to cash, you know, young family, just getting started, need money for the stuff of life. The down payment on the house, paying off that debt hopefully buying the cars and so forth and investing and taking care of emergencies. I wanted something also that would give me some sort of predictable return. I wanted a actual real return that beat inflation. But that wasn't going to necessarily be a smoke and mirrors game like most of the mutual funds. I was reading about what you could keep going, you know, like tax advantages. I mean, can you think of anything else that you'd add to that list, Mark?

Well, I mean, yeah, absolutely. I think that tax advantages is, is a, is a big one. I think flexibility is the big one. So, so often you, you like, let's just pick on retirement plans, right? Like I've got like a, I have a QRP that has tons of flexibility. I can borrow from it. There's almost anything I can do with it. I have check writing privileges. But before I did that, I was stuck. I had a third party administrator. It was almost like this custodian was in charge of my money and you almost felt scared to mess with it. And I had almost no flexibility. And the fact that I was investing in ETFs, I thought, oh, this is an efficient strategy. But I wasn't getting outsized returns and it was not great.

It's true. Yeah, you're right. It's, it's funny that there's a third party administrator for your own money. Doesn't that tell you something about how, you know, whoever made that retirement vehicle, how they perceive you or me and being able to handle and manage our own money? If we need a third party, like a nanny, Right. You've got a three year old, you know, that, that could use some help. But I think as adults we should be able to do what we want with our own money. And you're right, flexibility is huge, especially for real estate ventures or other investment opportunities. You shouldn't have a prohibited transaction if it's going to be your own cash that you've saved up for. Right. I should be able to lose my money if it's going to be my right to do that. Right? So yeah, flexibility is huge. I want it privately owned. I want to be able to keep it off the radar of creditors. I don't want to get, you know, some, some predator or creditor attaching my, it's themselves to my estate or my, my net worth guarantees that the money's going to be there when I go to look for it. I mean, I can't really do over this whole retirement saving thing or this financial life that we're building. So I wanted some sort of predictable guarantee of the principal itself, all those things were kind of baked into my, my search and pursuit of finding these financial vehicles. I tried to start with function before putting labels on it. Right. I came to the CFP training and all of my work with my clients. Similar to all of us, you know, we're kind of raised to think that certain financial vehicles are bad investment, others are, you know, the white knight in shining armor, you know. But coming through, I guess you could call me a post recession planner, Mark, coming through that experience really told me that you really want to find the first principles. What's the first and most important thing that the money is doing when it goes into that QRP or that Roth IRA or that mutual fund or whatever. And anyway, so when we were really doing our own research, my wife and I found something. It was a dividend paying whole life insurance contract for us that met all of our requirements. That big list I just gave you, that was the particular financial vehicle that gave us kind of the juice that we wanted for our paying off our debts. We actually, we could talk about this if you want, Mark, but we use the whole life policy actually to buy back our debt from Sallie Mae and all the other creditors that we had. We even used it then to invest in some real estate and buy our cars and prepare for our tax free retirement. I mean the list goes on and on. But it was a modernized form of whole life insurance that really met all of my requirements for what I wanted my money to do for me.

Interesting. So you know, we're hearing a lot about this now. You know, I think that the real popular term is infinite banking. So but you've got a different term for it. It's bank on yourself. Walk us through that and why that is. Why is self banking better than traditional banking and what are the advantages of it and who would it not be for?

Yeah, yeah. All smart questions. So what is it again? It's not your father's whole life insurance, so I'll just say that up front. It's a modernized form of a 160 year old asset that's grown guaranteed every single year through, you know, market booms and busts. Okay, so it's an insurance contract. Just like when you get a contract for raw land or a piece of real estate, you're getting a contract and in fact the contract itself with the insurance company guarantees you will have more money this year than you had last year. Guarantees. Okay. And that money is going to guaranteed grow to your death benefit by the time you're, you know, age, maturity which these days, if you can believe it, Mark is 121 years old. And if you pass away before that, your family gets the full death benefit income tax free. So that's what most people hear when they hear life insurance. Oh, the money I give my family someday. This is different. This is sort of like rather than renting the life insurance like a term insurance policy might be, this is more like owning the contract on your own life, which gives you some equity, it gives you some accessible cash called cash value. That's the key really to the rest of the conversation because it's that cash value that you can use and operate like a financial management tool for everything else that's going on in your life. So the returns are going to be pretty conservative. Somewhere in the middle single digits, I'd say over the long term it's usually accessible. The cash is totally tax free, income tax free. If you design the properly designed policy there, and maybe most importantly for our conversation is when you access the money, if it's a bank on yourself, and specifically bank on yourself, and we can talk about the distinction there. If it's a bank on yourself design policy, the policy will continue to grow even on the capital you borrowed, as if you did not take a loan from the policy. So that gives your money the ability to kind of do two things at once. You know, you've invested in, you've taken the money out of the policy, you've invested in the raw land or whatever else you might decide to purchase, and the policy continues to grow uninterrupted. So what's that Charlie Munger quote? You know, the most important thing about your money is that it never stops compounding.

Right.

Well here's one example of how it can do that.

That's brilliant. That's brilliant. So who is this not for then?

Yeah, smart. So it's obviously life insurance. So I will say that you cannot be the insured just because you want to be. Sometimes health issues can keep you out of the game as the insured. But you can still be the owner of a contract on somebody else, like a business partner, a spouse or a child. But it's specifically not for someone who cannot save. Let's just be honest, it's still you putting your own money, your own capital into a system that you control. And that is that old fashioned idea of, you know, living on less than you make. So it still does mean saving, putting it somewhere, living within your means. So it's not for somebody who does not have two pennies to rub together. So to speak. I'd also caution people to look into this. If they're only interested in the rate of return of the policy itself, you're going to be disappointed because this is. It will be other cash equivalents markets, you know, if you're looking at this compared to, say, a CD or money market account, it'll do great. But if you're looking at this as compared to some of the incredible opportunities you show your clients with some of the returns that you offer, it's going to totally underwhelm and disappoint. It's not meant to be an alternative investment. It's really not an investment. You know, whole life insurance is really, again, it's sort of that nitro to your glycerin. Right, Right. You know, you, you put the whole life contract in force, you fund the policy, max out that thing, you know, just overfunding that whole life policy, flooding it with massive cash, supercharging its growth with how it was designed by the advisor, and then you've got all this dry powder, right, to go put it to work. When you find an opportunity, when you find an incredible opportunity to invest, and the point is, you use the policy almost like your opportunity fund of contingency cash. You invest in the deal, whatever it is, and when you're ready to sell that, you put it right back in your policy to use all over again.

Makes a lot of sense. So you've got the flexibility and you've also got the guarantee. So you're mitigating your risk. So you're going to get a return. So in exchange for. So you've got this risk return ratio. Right. So in exchange for taking very little risk, you're not going to get outsized returns. That being said, you're going to get that big piece of it that gives you that flexibility so that you can take that money to buy down debt or invest in something that could get you an outsized return like, oh, I don't know, raw land.

Yeah.

Averaging 300 to 1,000%.

Come on.

So that's. That is really great. I got a question for you. What does it mean to go upstream financially?

Yeah. Well, it kind of goes to what you're doing, helping your audience do. So a lot of folks start at the, you know, the, the baseline tributaries of the delta where there's a lot of runoff. Right. You know, where you're just scratching together what you can to pay off the credit creditors in your life or just putting together a little bit of an emergency fund, let's say. Let's talk about going upstream. So maybe you started at that level and you're just barely eking by paycheck to paycheck, but then you start to. And maybe you're renting an apartment or something. Maybe one way upstream might be, well, maybe you buy a home and then maybe you get to a point where you feel like you can invest in other properties and you flip a property or something, or you get some, some other opportunity, maybe you get into rental real estate and then, heck, maybe you're tired of being a landlord so you move upstream again and you just become a mortgage service company, a private money lender or something like that to other investors. So that's just one pathway upstream. But the key is you want to continually getting, you want to continually have a bigger and broader mindset. Again, this all goes back to how you think, you know, if you, if you can see yourself moving upstream rather than just living sort of in the shallow pools of where you are today. And I think honestly, listening to podcasts like yours, Mark, is one great way to help expanding people's mindsets to knowing what's truly possible in their financial life. I guess one of the key things that I've learned with our clients, working with folks all over the country, is that it does come down to who controls the environment where your money lives. To use that upstream analogy again, you know, the fish is usually the last to notice that he's wet. You know, so most of us don't even know what environment our money is living in. We don't know that if our money is in a 401k or IRA and we have even a low 1% per year fee on that 401k or IRA over a 30 year period, according to the Department of Labor, a third of our life savings will go to the investment advisor who took no risk with your money, right? He gets a guaranteed paycheck while you take on all the risk. So that's one example of, or using a HELOC or a line of credit, you know, as a key part of your portfolio. That's. Once again, the banks are in control of the environment where your money lives. If you are using a line of credit as a source of capital for your investments, you know, a banker is a fellow, this is a Mark Twain quote. A banker is a fellow who will lend you his umbrella when the sun is shining, but wants it back as soon as it starts to rain. So that that quote sort of points to the control the banker keeps, right? So if you could become your own source of Financing. If you could roll that whole function of banking in house rather than outsourcing it to the mega banks down the street, you're going to win against your competing real estate investors every single time. So that's what it means to move upstream financially. It's step by step asking yourself, you know, how can I take more control over my financial future and not take unnecessary risk?

All right, well, Mark, this has been fascinating and I really appreciate the mentorship, but now we're going to ask you for your tip of the week. A website, a resource, a book, something actionable for the art of passive income listeners to improve their businesses, improve their lives. What have you got?

Wow. Right on. Well, it's so important again that you build up a ready access to capital. So here's my tip. Take a look at what you earned last year and take a look at what your net worth changed over the last 12 months. Did it go down or did it go up? If it went up, let's say you made a total of $100,000 pre tax. Okay, so you write that number down on a sheet of paper. Next. Maybe your net worth went up by $10,000. That means your volume of savings was 10%. 10%. I would suggest that it's not about the rate of return in your 401k or whatever investments you have. It's about the volume that you're able to set aside. What kind of volume of savings can you achieve? You know, back in the 40s it was 30% of our income. These days it's averaging about 5%. So what if you could bump up the volume of your savings just by 1% each year for the next 10 years and put it in things that you can access, control and enjoy and understand. So that's what I would recommend as a tip of the week. Increase that volume of savings by just 1% a year.

I love it. I love it. My tip of the week is learn more about this. Find out how you can give total control of your money. Start learning about how to bank on yourself. Get that rate of return, get that rate of income and get the flexibility, get out of debt, diversify your tax strategy, start investing in real estate with this model and just talk to Mark to learn more. And the best way to do that is go to lake growth.com lake growth.com.

And if I may, can I point your listeners to a website where they can actually hop on our calendars to meet with us and chat for a 15 minute strategy session?

Absolutely.

The website to go to is growmorewealth.com you made it nice and easy, you know.

Growmorewealth.com awesome. Awesome. Well, Mark Willis, this has been fascinating. Thank you so much. Are we good?

Rock and roll, man. Keep up the great work.

Thank you. I want to thank the listeners. I just want to remind you the only way, the only way I'm going to get the quality of guests like a Mark Willis from lakegrowth.com is if you do three little favors. You got to subscribe, you got a rate, you got to review the podcast. Send us a screenshot of that review to support@thelandgeek.com we are going to send you for free the $97 passive income launch kit. And we're also going to send you for free our whole tailing course which teaches you how to double your money 30 days or less to get that cash and start building up into the world of passive income. All right, Mark Willis, thanks again. And I want to tell the listeners, let freedom ring. Thanks, everybody.