Strategies to Retain Wealth: Mastering Tax Loopholes & Smart Investing

0:00This is an iHeart Podcast. Guaranteed Human. Hey, Ernest, what's up? One thing we always say on this show is you've got to be intentional with your money. Because it's not just about how much you make. It's about how you manage what you spend. Exactly. That's why tools like Kloner are interesting. It gives you flexibility when you're making purchases. When you're checking out, you can decide how you want to pay. Whether that's paying right away or spreading payments over time, depending on what works for you. Everything's organized in Klarna app, so you can track your spending in one place. And when you shop through the app, you can find deals and earn cash back with participating partners.

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2:42So what are some strategies to make sure that people actually retain some of the money they're making? because we know, depending on what state you live in, taxes are going to cut that at least 40%. So what are some strategies that entrepreneurs could use to make sure, or loopholes that they can use to make sure that they keep as much of the asset as possible? How much time you got? Let's do it, man. I'm writing my notes now. Start with the tax strategy, and then I'll talk about how we advise more investment. 1 ,000%. So let's say you have a million dollars in, let's say you make a million dollars in your business.

3:16I'm going to try to help you right off that whole million dollars. So one of the first things you can do is you can set up a retirement plan like a solo 401k. And that will allow you to put up to$69 ,000 into your retirement account as a business owner. And then IRS will also give you a$69 ,000 tax deduction for doing so. So you're going to tax deduction for today for you investing for yourself in the future. Another strategy that we can take advantage of is setting up something called a private family Foundation. Now, these are key because it's a foundation that you set up, but you can give the money to your heirs and your family.

3:49So we can set up a private family foundation and we can put up to 30 % of our AGI, our income, into this private family foundation. So if I make a million dollars in income, I can put$300 ,000 in my private family foundation and IRS is going to give me a$300 ,000 tax deduction. So now I'm at$370 ,000 deducted. Yeah. So the private family foundation, that's a charity? Yeah, it's a charity that you set up for you and your family. So you can put this$300 ,000 in this private family foundation, and you can use it for scholarships for your kids, scholarships for your grandkids to go to college. You don't have to disperse this to anybody else outside of who you want to.

4:24So it doesn't have to go to a 501c3. It can go to your family, which makes it so powerful. And you only have to disperse 5 % a year. but what's what's key about this is that disbursement can be paying somebody to manage the private family foundation so you can hire your own family member to run the foundation for you pay them a salary and and that's all the money you have to distribute per year until you're ready to use the money later so it's really like you're putting this money into the foundation for your family and you don't have to disperse it in until you want to but now your kids and your grandkids have a college fund and now you don't have to use any of your money for it.

5:00So now we have about 370 ,000. The next thing I would recommend you do is you purchase a real estate property because with real estate, we get something called depreciation. And with the proper cost state study, you are able to write off 30 % of the value of the property that you purchase it. So if we purchase a half a million dollar property at 30 % with the cost state study, That's another$150 ,000 write-off that you can get. And you just got an investment property. So now you're cash flowing from the investment property and you are lowering your taxes at the same time. So now we're about a half a million dollars.

5:36We can take advantage of buying vehicles for our business, which this year you're able to deduct 60 % of the vehicle sticker price if it weighs over 6 ,000 pounds. So if we buy a Sprinter for our business to take our clients out to lunch or whatever, that's another$60 ,000 right there and there are some more strategies but I don't want to take a ball and you have a nice sprinter we saw it in that moment yeah yeah yeah for sure that was so these are just some base level strategy and I think the last thing I would give people which is very key is something called the Augusta rule I don't know why more people aren't talking about it It's huge.

6:20So with the Augusta rule, you are legally, legally able to rent out your primary home to your business for up to 14 days a year. Right. And your business pays you rent and you don't have to recognize the rental income on your taxes. And if you're smart, you will you do this around times that your city is popping. So right now we're in New York and the UN is here. So we're talking about how hotel rates are$3 ,000 a night. So if you decided to rent out your home to your business right now, you can look at the rent rates there quadruple right now. So now you can charge your business$2 ,000 a night to rent out your home for 14 days a year.

7:01That's$28 ,000. Your business will get a$28 ,000 tax deduction and you will receive that$28 ,000 tax free. These are literally strategies the IRS gives us to lower our taxes, but it's on us to learn the strategies of the game so that we can win the game. Big facts. And then we think about, like, actually how the money is invested, right? When you're invested in a brokerage account or investment account, right? I know, shout out to Ian, like, he has a strategy called two tech, two index, right? And in the financial services industry, right, we have this concept just called core satellite investing, right?

7:34But how does that apply? how does that work to somebody who wants to invest and maybe be able to outpace the market a little bit? So the way I articulate it is like, I call it the Burger King investment strategy, right? So McDonald's spends millions of dollars a year trying to figure out where they want to put the next McDonald's. We all know McDonald's is also in the real estate business. So they're trying to figure out where is the best place to put it. All Burger King does, right, conceptually is put it in proximity to McDonald's. And the reason why I say that that's a great way to approach investing is because it's okay to be a copycat if you copy the right cat.

8:02So when you think about Charles Schwab, TD, TD, when I TD Ameritrade, they got acquired, Fidelity, right? These big investment institutions, Vanguard, they have analysts that, and they spend millions and millions of dollars a year trying to figure out like what should be going in these funds, right? You go to Vanguard.com, look up VOO, all you got to do is click the buy button, right? And if you just did just that on the first trading day of the year, you're up 21%, right? So that's the first piece, right? It's like, okay, cool. I copied the right cap. But then when I looked inside of what was inside of these funds, right?

8:29I look at an index fund just like a mall, right? You go to any popular city, your favorite mall is going to have hundreds of stores, right? And at any given time, some store is going to be more popular, some store is going to be less popular, right? But the mall itself is never going to close down, right? So when you buy an index fund or ETF, you get to basically buy that mall. But when you look inside of it, let's say that Apple is one of the stores inside of the mall, right? We know that Apple is probably going to be one of the dominant stores in that particular mall. Same thing with this index fund or ETF.

8:55So what I did, I was like, okay, well, what if I had $10 ,000 to invest. And of the 10 ,000, maybe 7 ,000, I'm buying this index fund or this ETF. But with 30 % of my portfolio, I'm identifying winners that might have a higher potential to outpace the broader diversified portfolio. Because these index funds have 500 different companies in them. Obviously, some of them are underperforming, some of them might eventually get replaced. So how can I identify some ones that might have the ability to outperform the the Googles, the NVIDIAs, et cetera, have 30 % of my portfolio in technology companies or companies I believe are going to outpace it.

9:30And that's how our clients are able to outpace the market really every year. It's a very simple strategy. And so it's kind of similar to what Ian talks about, but all you do is you're looking at a globally diversified ETF or index fund and then identifying what are the companies that have the highest probability to outpace some of the returns. And combining that strategy has allowed our clients to do really well. Hey, Ernest, what's going on? We always talk about using tools that help you stay in control of your money. Cloner is one of those tools. It gives you flexibility to decide how you want to pay for your purchases, whether that's paying now or spreading payments over time.

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12:30This is an iHeart Podcast. Guaranteed human.