Dying with Zero - Expert Edition Episode 20 (Classic Episode)
In this episode, we talk about leaving a legacy for your children they can benefit from throughout their life not just after you pass. We discuss:
Inheritance
College funding
Down payment assistance
Not sacrificing your own retirement to help your children
Check out the article referenced CEO: Why I'm giving my kids money now—and not in my will
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TRANSCRIPT:
[00:00:00] Naseema: All right, nurses on Fire. We are back with Lisa Peterson, our certified Financial Planner, and today we're going to talk about leaving a legacy for your family while you're still alive. Instead of waiting until you're, you know, waiting until you die and you pass on your money through a will or a trust though.
Hey Lisa. Hello. Hey. All right. So I thought that this was pretty interesting, and this came out of an article written, or a book actually, but it was, it was an article you posted, but the title of the book is called Die with Zero by Bill Perkins. And it's kind of a guide to basically giving your children.
Things that they can use to build their financial legacy while you're still alive. And there's a couple things that he talked about in the book that we'll dive into. But I think it's interesting for us because we're at different points in our lives where our children are. My children are really, really young.
Your children are, well, you have an older child and then one in high school. So high school, middle. High
[00:01:07] Lisa: school. What is he? His sophomore in high
[00:01:10] Naseema: school. Okay. Yeah. Yeah, yeah. He's in high school. Okay. I was thinking about the Lego video. So
[00:01:18] Lisa: he was famous at
[00:01:20] Naseema: nine. I know, I know, I know. So, okay, so Lisa, you have a an adult daughter and a son that's in high school while my kids are under six years old, and so they have a longer road before they do things.
I go to college or buy a house, but these are some immediate decisions for you. So I like to see kind of like where we both are and then the kind of the decisions that we're making. What we're leaving for our children. So can you talk about what you've done for your kids so far?
[00:01:52] Lisa: So, a couple things. My mom passed away in 2007.
And so when I, she had a trust that we had very carefully set up knowing that that time she was, had been sick with cancer. And so being able to designate money to go into the. College funds or education funds was something that we started at that time. Because my husband and I have always invested in real estate and looked at the money, like we knew we could get better return on our investment in our real estate projects.
It has not been a focus for us to save. In education funds in the way that traditionally people do. And I think that's a very conscious decision for each person. Like, you can make more money and make sure and have that money available to pay for college with your, with an investment or a side business or something like that.
Like it's worthwhile to think about. But anyways, we did that. It paid off. My daughter ended up getting having money from leftover from my mom to, to be able to help with her college education. So her a hundred thousand dollars education ended up between scholarships and other things costing us maybe $30,000.
And she graduated with no debt whatsoever. So that was great. But. What also we have been thinking about. So now she's in that place of, of, you know, being in a relationship and they're thinking about the future and we're already starting to figure out ways where we can be helping them now because, you know, even something as simple Naima as looking at a.
A trajectory of investments for these folks that are in their twenties or even in their teens when they start saving or they start investing. The payoff is so big for them over 30, 40, 50 years. So I think that's where my decisions come from, which is if I can help child even, you know, in their twenties or thirties, Do something with their money or get set up early and start that trajectory as soon as possible in saving, then that is going to pay off far more than me holding onto it, where it doesn't make as big of an impact as what it will for them because they're gonna have a longer timeframe.
So that's the mindset that I'm approaching all of this from. So if I can help my daughter buy a house or buy a duplex where, you know, We're buying the house together first time, and then they're renovating it or they're doing something to create equity in that house, and then that starts to grow and give them the ability to get into home ownership.
Like I'm all for it. So I'm looking for those sorts of opportunities in their twenties and thirties preferably something that they. Use sweat equity to build more value versus passive investing. Like me putting money into a stock account isn't all that exciting to me because it's like, that's great, she can save money, but if I can give her a bigger chunk and it can be something like for a home purchase or for a rental home purchase or something that's gonna appreciate over the long haul, that's just how I'm gonna be thinking.
Does
[00:05:08] Naseema: that make sense? Definitely. So the first thing that comes to mind though is like, well, how do you prepare for saving for those like big transactions, like to give her that lump sum of money. So where are you saving your money? Are you just keeping your money in a savings account designated for your daughter?
Are you putting that into a more like long-term investment account where you've put money aside or gradually put it in and then you know that by the set date you're taking it out? Like how did that look strategically for.
[00:05:35] Lisa: So our situation's very different than probably a lot of people's, because we tend to work on projects where when we sell a home, there's a big chunk of money that's coming in and preferably tax free because we've lived in that house and we're selling it, and maybe we're downsizing, but we're always looking at bigger chunks of money and having larger savings accounts like we.
Purposefully would in when you're in investing in real estate and you've got a lot of different projects going on, like for us, my safety zone is having at least a hundred thousand dollars in very liquid accounts available at any given point in time because we've got multiple properties, we've got a lot of things going on.
Covid could hit wipe out our income. That's my comfort zone is about a hundred thousand dollars. Not invested in the stock market or anything like it's getting, you know, a high interest rate return. But that's the way we manage because we need big flows of cash. So then in this situation, We're, we know we've got that cushion, so I might take 30, $40,000 of that cushion and help them buy a home, for example, and I've got it available.
And then my goal would be how do I replenish that? Even if it involve like a cash out refinance on a property. Like I will do whatever it takes to make sure that I've got a pretty hefty chunk of money available. That's how we operate. But for ano another family, it may be that they don't, you know, buy and sell properties like we do.
So instead, what I would suggest is earmarking, you know, like, hey, you know, let's say you've got a child and you've already saved up for college, or you know how much you're gonna give 'em for college, and they're in that like 19, 20 range. Well, instead of focusing on college anymore, now all of a sudden that same money that you would've been saving, let's say it was $10,000 a year, All of a sudden goes into an account that's waiting for that moment when they're like, Hey, we wanna buy a house, and the only way we're gonna be able to do it is, you know, with your help, because it might take us 10 years if you don't help us do it.
You know, in my daughter, 2324, like. That'd be amazing for her to buy a house and she is willing to go live somewhere where it's less expensive. Like there's gotta be compromises. It can't be, we're gonna buy the most expensive house. It's like bootstrapping is the way that we're gonna be approaching it.
You know, where's their sweat equity opportunities? Like we're being very strategic in, in what we're buying and why we're buying it. And the fact that they're young and they don't have children and they can, you spend their weekends working on a house.
[00:08:17] Naseema: Yeah, I, I really like that, Lisa, and I think it's very helpful for people to see that that's where that money is coming from.
Because a lot of people just think, oh my God, like, how can I come up with 20, $30,000 to give my kids, or they take out loans to do, or, or, you know, different things. And yeah, it's super helpful to know that. Sounds like most of your assets are in real estate, and that's how you kind of build things.
So you can structure deals around big events, and that's one way to invest. You don't always have to invest in stocks or in, you know, there's multiple ways to invest, but the key is to invest with a plan. Right. And it sounds like you guys had a strategic plan. So for me, my kids are, you know, younger and.
School is important, but not knowing how that's going to look. I already have designated like that I'm gonna contribute a hundred thousand dollars to college and I've kind of calculated out for each of them and I've kind of calculated out how much that's gonna cost. So even like I plan on frontloading most of that money.
So if I frontload it now, frontload like $20,000 for, or $18,000 for my older one, like actually 18,000 for both of 'em because of the time difference and how much they mature. Like it'll usu it'll be around a hundred thousand dollars. Over the course of when they go to college. And so I'm comfortable putting that away.
But in the meantime what I'm also looking at is ways that, number one, they can start their retirement account early, because that's just money that if you could just sit and let it grow, even if you don't contribute to it, can be worth hundreds of thousands of dollars and, you know down the line.
And so I'm looking at that, but then also trying to teach them financial responsibility because. I mean, I'm building a whole platform around it. And so I feel like it's my responsibility at home first to teach my kids about money. Obviously they're too young right now, but teaching them ways like how so they can invest on their own and kind of hard to buy a house as a kid.
But I'm like thinking about. People like, I'm not sure if you follow YouTube platform. Our Ridge Journey, Umani Christina are they're originally from the San Francisco Bay area, but they live in, they actually retired at 39 in Portugal and then they have two girls that are middle school age and that their girls have like 30 thou have like save.
$20,000 in brokerage accounts just from their chore money. And so like kind of balance, like all those things and teaching them financial responsibility are some things that I'm looking at. First of all, your daughter graduated from college debt free
and. You have the ability, or you have built in the ability to be able to give her lump sum towards her down payment. These things are major legs up that a lot of people don't think they have the A capability to do. But I I, the way that you just structured how you're doing, it didn't take you like hoarding some big chunk of money.
Like you just strategically set up your deals so that you will have cash to do that as needed. And I feel like it's more tangible for people to understand that right now. And it, I really like just even help me envision how I can do that for my kids. But I think that that's how generational wealth is really built about the.
During the things that you can do for the things that you can do while they're alive. Right? Funding their college, making sure they get outta school debt free or whatever kind of ed education, they get out debt free. If they start, like I feel like I was, I'm so far behind just a lot of my colleagues because I came outta school with so much debt and so instead of working towards building my future and saving most of my money went to paying off.
In my prime years where the compound interest, the opportunity cost of me not investing or buying a house or doing other things, left me way behind somebody. And so that's what contributes to the wealth gap we see in society. And I'm committed to not having that happen for my kids. And so I think that
Excellent ways to ensure that that doesn't happen. Yeah. I think one thing
[00:12:46] Lisa: just to add, because I, I think there's sometimes what's not being said, and what I wanna be really clear about is that in no way, shape or form are we hurting our own retirement in how we're being able to help our daughter Yes.
And help our son. This is because we've been very, very careful and very wise about our decision. All the way along in how we structure things, but we're not going to have to help them at our expense. I think that's really messed up, and I think that people need to be really cognizant that that is, they do have the ability to make kids have the ability to make more money than someone in their forties or fifties, right?
Over the course of their life. Time, and if you're not able to take care of yourself in your retirement, then you've gotta be very careful about helping your children. So first you need to take care of yourself when they become adults. So, you know, that's one piece of it. But also that the more educated you become, the more you think about these things.
I think amazing things can happen by just being very diligent. And cognizant of what's
[00:13:52] Naseema: possible. Yeah. I thank you for saying that because I see that often, especially with nurses that I work with like, like work with at work as a nurse they are drawing down on their retirement funds to provide for their kids to buy cars.
To finance their education, to do all of these kind of things. And I'm just like, that's not a wise use of your money. And then what's gonna happen when you retire? You are even scared to retire because you know you don't have enough. And then you end up working until you're 70 and 80 to try to cover those expenses.
And your kids, like you said, have the earning potential like so. Always harp on, like not wanting my kids to have student loans, you know? But if they have to take student loans to get through school, for me to be able to make sure that I have funds to live off of and not have to depend on them later on, that's what they're gonna have to do.
But what I'm trying to do is both ends in the coin. I'm making sure that my retirement is set and their savings. So that they can be on their own independently. I can be on my own independently and they can, and that money can continue to pass down instead of, you know, being eaten up. Mm-hmm.
[00:15:10] Lisa: Totally. And you know, we also live really conservatively if we needed to go and live in a less expensive place because we would be able to, You know, retire with no debt.
Like, we would do all of those things because it's so important to us to have that freedom that we will make different choices. And I, I also just mentioned that because sometimes we, we have like a high expectation for what our life has to look like, and we have a high expectation for what our children's l life looks like.
And sometimes that's not actually really serving us. And that if we were a little more flexible in. What the quality of life, what really causes us to be happy. Like freedom to me has got a very, very high value, right? Way higher than living in a big house. Like if anything, the older you get, I'm like, smaller is better, but, but those are the sorts of things that may be involved in some of what we're talking about both for the kids mm-hmm.
As well as for ourselves. And so my kids, thankfully, We've just taught them to think this way. Like of all the things we've done, it's like it's not about stuff. It less is more. Like we have lived that and they've witnessed it, and so it makes life so much easier when you're not wrapped up in all this stuff.
Yeah.
[00:16:30] Naseema: And Lisa, I just like when you were saying that, I can't help but think, but to. Like understand people who have come from, you know, poverty or come from having to struggle their whole lives, and finally they are in a position to say, buy that big house, or buy these luxury cars. And it's not like, They're doing it from a place of ignorance.
It's like they're doing it because they've never had the opportunity to do it. And that's another side of the coin too, because also I feel like there's a lot of societal pressure for you to have those things. Because you're the one who made it right, and so you deserve it. And so giving people the freedom to understand that, you know, while those things are nice and while there is that draw there to do that, it might not be necessarily be the best choice if it's not serving you long term, if it's not making, ensuring that.
You know, you are able to fund all these different buckets that are gonna help you and your family for the future. And so, but I think that's just where the lack of financial education comes in. Just, just, you know, across the board is that We don't have these conversations enough. Mm-hmm. Yeah. Yeah.
And therefore we're not necessarily, we don't necessarily know how to plan or we have like all of these interests pulling us in different directions and so we kind of don't know how to turn until we kind of just go through our lives. Mm-hmm. And so I think being able to have conversations like this and kind of stepping back and saying, okay, so what do I want for.
What do I want for my children and how does that contribute to overall whatever your financial goals are? A lot of my audiences financial goals is breaking that. Generational poverty, breaking that cycle of poverty. So how are you doing that? And consciously making those decisions. And I think the things that you talked about, making sure that your kids don't have to rely on debt, making sure that you can help fund those big purchases that if made early on, can be significant as far as wealth building.
So I think these are all good tools and yeah, thank you for sharing that article cuz it really just made me think like, When I die, what am I leaving behind? Am I taking a whole bunch of money into the grave or are, is my money gonna go somewhere where it's being eaten up by courts and, and you know what I'm saying?
Like, so where, like thinking about like strategically having a plan for my money as my kids progress as I get older and knowing that I'm just not sitting on a whole bunch of money for the sake of sitting on a whole bunch of. Mm-hmm. Beautiful. Yeah. Well, thank you, Lisa. It's been a great conversation.
Thank you.
Hey there I’m Naseema
My dream is for everyone to know that financial independence is attainable with a little intentionality. Learn how I can help you finally break the cycle of living paycheck to paycheck.
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