True Riches Financial Planning

Actively trying to "beat the market" is a losing proposition on the whole.

There are a finite amount of returns to be had in markets, so by definition, 1 active manager's "excess return" is another active manager's "lost return". And the headwinds of actively trading like fees, trading costs, and taxes make it even more unappealing of a proposition.

Not to mention there's no guarantee that outperforming in the past will mean outperforming in the future. Only about 20% of publicly-traded managers who outperformed the previous 5 years end up outperforming again the next 5 years.

Capitalism is a wealth-creating machine for those who are willing to play, but the pursuit of active management comes with minimal to no guarantees.

DISCLAIMER: These posts are intended to serve solely as general financial education and not personalized advice. Before considering acting on anything you see in these posts, first consult with your tax, legal or investment advisor.

"𝘛𝘩𝘦 𝘴𝘵𝘰𝘤𝘬 𝘮𝘢𝘳𝘬𝘦𝘵 𝘪𝘴 𝘵𝘰𝘰 𝘳𝘪𝘴𝘬𝘺 𝘧𝘰𝘳 𝘮𝘦. 𝘐 𝘭𝘪𝘬𝘦 𝘵𝘰 𝘬𝘦𝘦𝘱 𝘮𝘺 𝘮𝘰𝘯𝘦𝘺 𝘴𝘢𝘧𝘦 𝘪𝘯 𝘤𝘢𝘴𝘩, 𝘊𝘋'𝘴, 𝘰𝘳 𝘨𝘶𝘢𝘳𝘢𝘯𝘵𝘦𝘦𝘥-𝘢𝘯𝘯𝘶𝘪𝘵𝘪𝘦𝘴."

I hear some version of this all the time, and quite honestly, I understand where it comes from. If you lived through 2008 or watched your 401(k) drop in 2022, keeping your money somewhere it can't go down often feels like the prudent thing to do. A lot of us were raised to think about money this way too [maybe you had a grandparent who kept everything in CDs and was proud to never have "lost" a dollar].

But there's an idea I don't hear talked about nearly enough, even within my own industry: 𝐧𝐨 𝐦𝐚𝐭𝐭𝐞𝐫 𝐰𝐡𝐚𝐭 𝐲𝐨𝐮 𝐝𝐨 𝐰𝐢𝐭𝐡 𝐲𝐨𝐮𝐫 𝐦𝐨𝐧𝐞𝐲, 𝐭𝐡𝐞𝐫𝐞 𝐢𝐬 𝐚 𝐫𝐢𝐬𝐤 𝐢𝐧𝐯𝐨𝐥𝐯𝐞𝐝.

This post walks through the main risks every investor faces, what history shows about the trade-off between these risks, and 𝐰̲𝐡̲𝐲̲ ̲𝐭̲𝐡̲𝐞̲ ̲𝐛̲𝐞̲𝐭̲𝐭̲𝐞̲𝐫̲ ̲𝐪̲𝐮̲𝐞̲𝐬̲𝐭̲𝐢̲𝐨̲𝐧̲ ̲𝐢̲𝐬̲ ̲𝐰̲𝐡̲𝐢̲𝐜̲𝐡̲ ̲𝐮̲𝐧̲𝐢̲𝐪̲𝐮̲𝐞̲ ̲𝐫̲𝐢̲𝐬̲𝐤̲ ̲𝐢̲𝐬̲ ̲𝐦̲𝐨̲𝐬̲𝐭̲ ̲𝐩̲𝐫̲𝐞̲𝐬̲𝐞̲𝐧̲𝐭̲ ̲𝐢̲𝐧̲ ̲𝐘̲𝐎̲𝐔̲𝐑̲ ̲𝐥̲𝐢̲𝐟̲𝐞̲.

𝑹𝒆𝒂𝒅 𝒐𝒖𝒓 𝒍𝒂𝒕𝒆𝒔𝒕 𝒂𝒓𝒕𝒊𝒄𝒍𝒆 𝒉𝒆𝒓𝒆: https://vist.ly/5kb3v

There's no "hack" to becoming wealthy. Just like getting in shape takes consistent & sustained habits of exercise, nutrition, intentional recovery, and sleep -- so it is with personal finances.

If you're looking for the "quick fix pill" to make you rich, none exists.

To get "financially fit", you need to:

—Be in a caloric-deficit with your spending [spend less than you make]

—Exercise and grow your muscles by investing in businesses creating value

—Intentionally recover by having margin in your life so you don't burnout halfway along the journey

Direct Indexing** is over-hyped. Unless you are strongly charitably inclined, are in the 0% long-term capital gains bracket, or plan to die with the embedded gains, tax-loss harvesting is mostly just tax-deferral, not actual tax savings.

Notice I'm not saying direct-indexing has no use case; it does! But the use cases aren't as universal as they are pitched by the asset managers.

**Direct indexing is picking an index [like the S&P500] and buying a subset of the 500 stocks that comprise the S&P500 in very similar proportions that they are owned in the S&P500 rather than just buying 1 "S&P500 fund". Owning hundreds of companies individually means you can sell the ones that go down and let the ones that go up ride [subject to certain parameters set by the direct-indexing-manager]

DISCLAIMER: These posts are intended to serve solely as general financial education and not personalized advice. Before considering acting on anything you see in these posts, first consult with your tax, legal or investment advisor.

Here's a question every person should ask themselves when navigating personal finances 👇

"𝙒𝙝𝙖𝙩 𝙖𝙧𝙚 𝙮𝙤𝙪 𝙤𝙥𝙩𝙞𝙢𝙞𝙯𝙞𝙣𝙜 𝙛𝙤𝙧?"

Are you trying to optimize for maximum wealth accumulation?

Optimize for "just enough" income and wealth with less stress along the way?

Optimize for time efficiency?

Optimize for maximum generosity?

The answer to that question [should] dictate your HOW and what strategies/career/priorities take precedent

Talking to Your Kids About Money as a Christian — Using the Live | Give | Owe | Grow Framework

As a Christian parent, how do I teach my kids about money aside from just "telling them to save"? This blog post walks through a practical, biblical framework for the 4 uses of money (Live, Give, Owe, Grow) and a thoughtful, life-giving allocation between the 4 uses that scales from their first allowance all the way through their working career.

https://vist.ly/5iidz

Why I'm [typically] not a fan of converting a Primary Residence into a Rental:

1) After 3 years, you lose the $500k capital gain exclusion [assuming the property has appreciated since it was purchased]

1a) Renters often don't take care of your house the same way you would — so even if you meet the 3-year deadline, there's often a lot of time and costs to get the property in prime shape to sell for top dollar

2) The up-front and back-end costs of having renters is rarely taken into account, and the amount typically comes in higher than originally projected

3) Sacrificed liquidity — you have to take from other liquid assets for the down payment on your new home since you didn't roll the equity from your previous home into the new home

4) Depreciation recapture is a tax-deferral play for most households. To benefit on the tax-rate itself, you have to make over ~$450k in gross income [32% bracket]. Otherwise, the tax benefits you reaped from depreciating the property as a rental are paid back to the IRS when you sell the rental property

5) Once held past the original 3 years, it's mentally hard to sell because now you have to pay the full capital gains plus depreciation recapture [which can often kick you into a higher tax bracket because of the extra income in the year of sale]. And unlike other assets, you have to sell all or nothing of a rental; you can't just sell off the kitchen and guest bathroom. Deferring the tax via a 1031-exchange or similar introduces additional complexity many families don't want to deal with.

Rental real estate CAN be an attractive investment, but it's important to go in eyes wide open about the downsides of the approach too!

Liquidity may be the most underrated aspect of wealth-building.

Without it, your options and flexibility are so limited.

I recently met with a household who has 7-figure retirement accounts, but also has credit card debt at 25% interest. And while a 401k loan would be a strategic debt-restructuring move, you still have the have the cash flow to repay the 401k loan [which this household did not have].

Liquidity was what gave me the ability to step out and start my Christian financial planning practice.

Liquidity enables the family that is burnt out to take a sabbatical without it breaking their long term retirement plan.

Liquidity allows a growing family to go from dual-income to single-income, even if for a short few year period, their total outflows exceed what comes in.

Liquidity enables continual generosity even when you're cash-flow neutral [because you have assets to give from].

Liquidity enables the ability to do more efficient, strategic Roth conversions during market downturns or low-income tax years.

And the list goes on and on.

One of my clients calls their brokerage account their "SuperHero" account, and I'm coming to like that definition more and more as the years go on.

6 basic digital security measures every American adult should have in place 👇

A VPN, a credit freeze at all three bureaus, a password manager, authenticator-app 2FA, real-time card alerts, and how to spot phishing. Read more on each at my latest blog post:

https://vist.ly/5gv7n

"Simple, boring finances support a rich, exciting life"

🎤👇