Ron and Jake Rich with Capstone Wealth Advisors

Rick Ripma: 0:00

Welcome to Indy's Real Estate Gurus. I'm Rick Ripma, your hard working mortgage guy, and I've been in real estate and mortgages for over 34 years, I've helped over 5300 folks finance their homes, my team, and I believe in custom tailored loans, not the one size fits all approach. We believe there is the right mortgage for you. And we are the team to deliver it. And today, I'm really excited. This is a special show with some, some people I've known for a long time. Do you know how long we have known each other?

Unknown: 0:27

I think the kids were What about seven years old? Right? I

Rick Ripma: 0:30

think so. Yeah.

Jake Rich: 0:32

Can cause to be between eight years. Yeah. And I would not

Rick Ripma: 0:35

say you still look the same as you did back then either you don't.

Jake Rich: 0:40

But I could change. But your dad

Rick Ripma: 0:41

and I look exactly, yeah, we haven't changed

Unknown: 0:44

a bit, no hair, then no hair now.

Rick Ripma: 0:48

And it's Ron and Jake rich. And you guys are financial planners, and your company is called Capstone Wealth Advisors. Alright, perfect. And if somebody has any financial planning needs, what is the best way to get a hold of

Ron Rich: 1:00

you today, you know, just give us a call 317-577-8233. And quite frankly, all of our initial consults are at no cost. And we'll be happy to look through your financial information, we can give you some ideas, great. And if we think it's good idea to work together, we can make that decision mutually.

Rick Ripma: 1:17

That's awesome. And, you know, really what we want to do today, for the most part, I think, is really, I've had a lot of real estate agents who have told me they really would like to have hear from a financial planner who, who can help them understand, you know, what's available to them. And as you said, there's so many things to sell from, and this is, I guess, really any self employed, but specifically real estate agents. There's so many things that they that complicate what they do. And and so I think that's going to be the very best thing we can do. So I want to start with a question I had from from an agent. And it's one of those questions that it's it's it just all of them kind of amazed me because they're they do such complicated things. But this one, this agent said, you know, I don't even know how to buy a stock. How does somebody go about? And it's probably is more complicated than just going to buy a stock because you got to know what to buy and all that. So Ron, how does somebody go about doing that? Yeah, there's

Unknown: 2:16

a couple of ways to do it. If you want to buy individual securities, then you go to a company like Schwab and and online with your computer, this is really straightforward stuff, you can register a set up an account and quite frankly, in a matter of minutes, be prepared to buy a stock or a bond. If you want to buy a diversified portfolio, then maybe you go to somebody like Vanguard, and again, within just a few minutes, you can have an account registration and be investing for as little as 1500 bucks.

Rick Ripma: 2:42

But But what if you want? Like, I think it makes a lot of sense to have somebody who can actually guide you. So you're not, I mean, obviously, if you only only have enough money to buy a stock, you don't have a lot. And I don't even think you can't I mean, where I buy, you have to buy stocks at the time, because you buy less than 100.

Unknown: 3:01

You can but you're gonna buy a lot cheaper if you're buying and equal blocks of 100. There's no question about that. Okay, so I

Rick Ripma: 3:07

didn't know. So to get to get a, like, I think people need to go, especially real estate agents, they're in a business where they have to plan for taxes, they have to plan for their retirement, there's so many things they have to do they need somebody who actually can walk them through that. And is that something you guys do? Yeah,

Unknown: 3:27

so a certified financial planners, you know, we're not the two brightest guys in the world. But we do have a lot of experience at what we do. And you know, knowing how to avoid mistakes is probably as critical as knowing what to do because it's just far easier. I would rather avoid a problem than to solve a problem. Wreck takes less time, less money. So we just help people leverage their time and their expertise. And we lend them that. And that's what we do for a living. It's, you know, they know what they're doing in their own field. We know what we're doing. And you know, you're at a disadvantage if you're trying to play the other guy's game.

Rick Ripma: 3:59

And and how long have you been a financial planner,

Unknown: 4:03

I started out my life as a certified public accountant. And in 1993, I became a certified financial planner. And so I've been doing this for the last 30 years.

Rick Ripma: 4:13

So you've been doing this for 30 years. Plus you were a you were a CPA.

Unknown: 4:18

I am a reformed CPA, Rick, I used to do tax work and audit work and things. And then I got smart one day and said, I need to do something. It's more fun. Yeah. I like helping people.

Rick Ripma: 4:28

Yeah. And then Jake, how did how did you end up getting into business?

Jake Rich: 4:33

Yeah, so I did a couple of things. After school, I got a little bit of management experience. I got a little bit of sales experience. And at the time, I was just kind of working with a commodity product, we'll call it and I really just wanted to help people. And so I've been around him my entire life, shockingly, really live the whole sky. But so I knew what he did. And I told him I didn't want to work for him. So I went I worked for Merrill Lynch. Okay, kind of experience what that was like. And then I got to a point where, again, there's a little bit more of a product background there. So I wanted to give more advice. And so I started working with him. And 2020, I guess, three and a half years?

Rick Ripma: 5:15

Well, I can tell you, I don't think there's anything more valuable to, to a young person or really anybody than to have a great mentor. And you have a great mentor.

Jake Rich: 5:25

You said it, not me. I know. Now, he's been terrific. He's been. It's been fabulous to learn from and experience and, again, obviously a little biased, but I think he does a pretty good job. Yeah.

Rick Ripma: 5:35

Well, I've talked to many of your clients. And I can tell you, he does a great job. And it's it's a, it matters. We talked to a lot of real estate agents that are successful because of the team they ended up on because of the mentorship they were able to get and I'm sure there's there's mentorship both ways. I'll bet you this is just did I know how I am. And your dad and I are about the same age that you mentor him and some things because there's things that we don't understand. Is that correct?

Unknown: 6:06

Oh, some of the technology stuff, I simply don't touch the computer anymore. i Let Jacob deal with that. And he does a great job. You know, in his case, he stepped in to an established firm, my business partners, a CPA, a CFP, our other business partner, who is our office administrator, just a terribly talented person. So Jacobs had the exposure to working with some really successful, high quality people. And he's absorbed it all. Yeah.

Rick Ripma: 6:30

And that makes it I think that makes a huge difference. It just three and a half years can be like 1520 years, if you have the right people to work with.

Jake Rich: 6:40

I worked for Merrill Lynch for probably just under three years, or just over isn't that timeframe. And I would say I've I've worn a kind of a hockey puck style or hockey stick style growth with what they do at caps are what we get perfect.

Rick Ripma: 6:54

Well, that's let's get into more of the financial planning. So Rana How can someone manage their cash flow effectively, to optimize their savings and investments? Now, I'm going to start

Unknown: 7:05

with some pretty basic stuff, because I think you need a great foundation. And the first thing is, you need to have life and wealth goals. You know, where what is it you're trying to do? Where is it you're trying to go? And having a clear understanding of that is the first step. The second thing, and this isn't very sexy, but have a budget, outline where you need to spend money, what are your commitments, so that you know how money needs to be allocated. And third, you got to have some kind of a cash flow monitoring system. Like I said, this is kind of boring stuff. But without that foundation, you're going to make a lot of mistakes with that foundation, you're going to avoid them.

Rick Ripma: 7:39

Yeah, it may sound boring, but long term, it changes your life.

Unknown: 7:46

People who have written life and wealth goals have a much higher probability of success than those who don't. People who have a budget spend less frivolously than those who don't. So if you want to be successful, do those two things, and you're on the right road?

Rick Ripma: 8:01

Yeah, it's not all about what you make. In fact, a lot of it's about what you keep absolutely most stuff. It's about what you keep. And that isn't always the easiest thing to do. So a budget makes sense. So So is that one of the things you help people with is getting a budget put in place so that

Jake Rich: 8:17

so it's a good question, the budget comes back to to a personal level and being very stringent on how you track that we can help implement that or set it up for you, but the tracking of it and we have a system that allows you to aggregate a lot of your accounts is able to do it automatically. But if you're just using a Excel document, that's a great place to start as well. Just

Unknown: 8:39

you know, some people are just really inclined to follow that advice and do it others you have to make it simple. A lot of banks now credit unions, we have one where you just like Chuck Jake mentioned, you go in and you plug in all your accounts, your credit card, your bank statements, it all aggregates and populates in there. It makes it really easy. And you can even use that same kind of a tool and create a budget.

Rick Ripma: 8:59

Yeah, I've noticed they have that and it seems like everybody's got it in it's really it's really easy to use. It is for something that's really like you said boring and and really not a lot of fun to set up. Usually.

Jake Rich: 9:13

We've joked if you want to really get heated in a marriage just talk about a budget. It's great way to get a divorce.

Rick Ripma: 9:19

Yeah. Yeah, money is not the number one reason people end up in divorce is probably not money. It's the lack of

Unknown: 9:28

it's actually the communication about money. I mean, there's 50% of all marriages end in divorce. And if you ask overwhelmingly what the problem is, it's communication. Then you ask the next question communication about what the answer is overwhelmingly money. If you can talk about money in a marriage, you'll probably solve most your problems.

Rick Ripma: 9:45

But isn't it weird how we're kind of taught not to talk about me you probably you are a money person. So I'm sure Jake heard money all the time. Totally different than most people who never hear anything. Well,

Unknown: 9:55

think about it. Rick, as you grew up. What class did you ever have that taught you about money? Not not grade school, not high school, not college. No. I mean, that's just not a subject that is. And again, I think we fail as a society for not educating people about money. Most people simply don't understand money.

Rick Ripma: 10:11

Yeah. And it's important. That's the problem. That's very important. Yeah, I just think it's really, it's one of those things that I think is vital to learn. Now, there's, there's, again, a tremendous amount of self employed people who who listen to the podcast, and specifically the real estate agents. And they have, you know, these retirement issues. So how do they go about it? First of all, they should get a hold of you. Right. But what are you going to do for somebody? How are you going to help somebody get set up so that down the road they can retire from from their, from their business? Yeah, Jake, you

Unknown: 10:48

want to talk about some of the retirement plan options that are available to self employed people?

Jake Rich: 10:52

Yeah. So you can, in general, just anybody can set up a traditional IRA or Roth IRA. And Ron had mentioned a couple places earlier, that can help you with that, even your bank. But beyond that, as a self employed person, you may actually set up a business entity. And through that entity, you may be able to set up a simple IRA, or a solo 401 K that would go above and beyond those just kind of Traditional and Roth IRAs. And it, it really is customized to that person, and what type of interview setup to decide, what is my savings options? What are my limits to that contribution. And with an inconsistent income, you really want to avoid setting up something that has a mandatory contribution? Because I mean, month to month, you may not be able to make that mandatory even year to year. And So Ron, why don't you talk about some of the facility. So

Unknown: 11:47

Jacob mentioned that we think self employed people, especially people in real estate, you might have a great quarter, and then nothing the next quarter, I mean, and yet to have a great year? Yes. So having flexibility, the ability to not make a contribution, that's really key. And some plans have mandatory contributions that can really create some cashflow problems. Later on, when your careers more mature and things, you probably don't need as much flexibility. But that's a question that we would have. You know, one thing is, if you want to contribute to a plan, you don't necessarily have to do it early in the year, you have all the way till the date, you file your return to make that plan contribution, which was an extension that could be all the way to September 15 of the year, following the year. So you can buy yourself some time. But again, I look at people who have inconsistent cash flows, you really need flexibility. And again, what is your income tax bracket? Do you want a tax deduction now? Or do you want to tax free income later? Those are really important decisions. That's the kind of thing we help people walk through because one size does not fit all right. And that key is what fits you now, maybe down the road, we do a different decision. But let's keep flexibility in mind early on.

Jake Rich: 12:58

When you mentioned the budget earlier, we talked about the budget. If you have that flexibility, maybe you built it into the budget, maybe some months, you make the contribution and other months you don't but flexibility. And again, starting with that life and wealth goals, building that budget out even kind of tells you what you can contribute. Yeah,

Rick Ripma: 13:16

I have to say, I've been in sales my entire life. I've been a commission on everything I've ever done. And it was one of the that is one of the hardest things that you had to work through. And part of why it didn't work with anybody forever. Because I didn't have a consistent income, I'd have huge income, then I'd have nothing, then I'd have huge and I was very young, I couldn't find anything where I could have the flexibility. So I had to end up doing it myself until I found somebody who gave me that flex. And I

Unknown: 13:45

think the real challenge is managing your cash flow. So we've had for many, many years, an oral surgeon who has made really good money, you would think someone making 800 $900 million a year wouldn't have cashflow problems, well, quarterly estimated payments, but think about how they fall, January, April and June, the bulk of it comes in the first six months of the year. So what else is going on during that time? Well, you got to make your profit sharing contribution. And so it was always a challenge to help them manage their cash flow because they had these big outflows that would occur. And they'd always be weighted in the first six months of the year, second, six months of the year, they thought they were fat and healthy. You get to that next six months again, and it's a challenge to meet the cash flow. It's the same thing for anyone who's self employed that has an inconsistent income. You just got to think through, you might have money in the bank, but is it yours, right or is it the IRS? Is it yours? Or is it that mandatory profit sharing contribution? And so separating sometimes out these pieces of money into different accounts can really be helpful. It's a simple solution, but it works.

Rick Ripma: 14:49

And I would say that if if it's the IRS has money, you better make sure you keep it for the IRS.

Unknown: 14:55

We could ask Hunter Biden about that he has some experience missing some of those payments.

Rick Ripma: 15:00

But I do I think it's I really like knowing that you guys do this because I think that's exactly what a real estate agent needs. They need somebody who understands the inconsistent income, so that they can do their financial planning to, to set up for retirement, but not just for retirement, they gotta set up for paying their taxes.

Unknown: 15:19

You know, Rick, we think a cash flow monitoring system is absolutely essential for success again, is it boring? Yeah. But is it necessary? You bet.

Rick Ripma: 15:28

Yeah, we I'm your CPA. So I mean, it's got to be more exciting than that. I should say that, should I? You were thinking, I, you were thinking and I could see it in your eyes. So what how do you how does someone balance their short term and long term? financial situation? Yeah,

Jake Rich: 15:49

I think it really comes down to setting up one putting it down on paper. And understanding what the trade off is, how do I cheat because a lot of people retirement, it's a really long time away for someone like myself. So when I think about retirement, well, there are things I want to do along the way. So how do I set myself up with those goals, and still not impact that so it's this big balance and using separate accounts, to fund those things. And it doesn't have to be anything fancy, it just be a separate savings account, separate money market account, you know, short term goal, quarterly estimated taxes, long term goal, funding my retirement for the year, I mean, that's only a year, but it's still a different opinion. And so you really need to have those different buckets set up, especially with inconsistent cash flow.

Unknown: 16:35

And you know, first things first is a good expression to remember. When you start out and you got some cash flow, there's a tendency, especially for younger people, I'm not being critical here, to want to jump into investing in equities, build your emergency cash fund, first, that pool of money, that when you have that slow month, you can rely on that pool of money, if you got to take a vacation, or if you got to buy a new car. It doesn't impact the other things you're doing. And so I think the real key is when you you're early on, have that account where you build up your cash reserves, I think six to nine months of living expenses. And a cash reserve account is absolutely essential. It's kind of like the oil in your engine. You don't think about the oil very much, you might have a really neat car. Notice you got all kinds of car related things in here. But no engine is going to perform well without oil. No, they don't. And no financial plan works well. Without cash. It is the lubricant that makes everything else work really smoothly,

Jake Rich: 17:30

I think something that might fit well with your real estate audiences. You got to save up for downpayment of your home. Right? Right. So you set that money aside, that's kind of the same idea. You have to have that cash to be able to do what you're trying to accomplish long term. Yeah, I

Rick Ripma: 17:46

find it very interesting. I interviewed a guy and I don't remember what his name, but he wrote a book called The three cups or something like that. And it was for kids. And he was teaching teaching parents and the kids how to say when you're young, and you had money, and you put it into three cups, and you're talking about exactly the same thing, which is such a great thing to teach your kids because then they can carry it on through their entire life. I mean, it's phenomenal. We

Unknown: 18:13

talked about this earlier, when when this guy and his siblings were really young, I put them on what's called the envelope system. And I gave them an amount of money at the start of every month, not because they did chores, the chores were because you lived in the house, right? You didn't get paid for that. I didn't get paid for doing dishes or mowing the grass and neither today, but we'd give them some money and we divide it up into three envelopes. Want to give you an envelope, one long term savings envelope and want to spend it. And then we gave them the flexibility to use the money. And the idea was not to make mistakes, let them learn from the mistakes. The day I knew this stuff was working at his older brother at Kohl's and we're looking at a pair of tennis shoes. And his brothers is back in the day brings me a pair of tennis shoes. They're 60 bucks a lot of money. Yeah. And I said well, that's great. I said dad's prepared to spend 30. So if you want to use your money, and make up the difference, you can have these shoes. He looks at me for a minute and turns walks away. Five minutes later he comes back. He says, Dad, I really liked these 2995 Yeah, that's it. That's what I knew this stuff was working. But again, that's a it's a really simple system. But separate accounts is just a continuation of something simple. That works.

Rick Ripma: 19:24

Yes. It's funny how kids are my kids did the same thing. When it was their money. Yeah, I don't need that so much when it's not their money. Yeah, I want the I want this one. Yeah, voices have consequences. Yes, they do. So if somebody is interested, they want to talk with you guys about financial planning. Jake, how do they get ahold of you? What's the best way?

Jake Rich: 19:42

Easiest way is just give us a phone call 317-577-8233 Teresa will probably answer the phone and she'll be able to book an appointment that way and again, that that first consultation is completely free. And we'll just kind of review kind of where you're at and talking kind of general Are these and if we may be able to provide some value. And Teresa's great

Unknown: 20:02

job. Yeah. And you know, Rick, when someone comes in with the first time we asked him bring tax turns, we asked him to bring investment statements, ask and bring a copy of their wills and estate plan. If they have other things, they've got questions about, bring it in, we're going to review all that. And again, we'll go through it. And we won't make any recommendations to someone who's not a client. But we will let them know where we think there's areas that they need to have some help. And, and so we'll give them a laundry list what we call Financial Action checklist. And it's like, if you're our client, these are the things we're going to go through.

Rick Ripma: 20:31

Okay, so you actually, first the first step is just to meet with you, no obligation, bring this stuff, you can go through it, and then help them kind of get an idea of what what should be done.

Jake Rich: 20:41

It's kind of like a doctor, if you go to a doctor, you fill out kind of a questionnaire and give a little bit of your medical history, that's really so the doctor can be up to speed and speak to you specifically. That's why we asked for those documents. Otherwise, we're just kind of guessing we don't, we don't know your financial situation. And so we'd like to get the document, that way we can talk to you on a real personal level, we prepare that Financial Action checklist, and we can have a conversation about what may fit and may not.

Unknown: 21:06

And a rookie probably appreciate this, it's really uncomfortable for some people to share their financial information. So first thing is anything we talked about with clients strictly confidential, we have a fiduciary obligation to protect their privacy. But again, we need to have that information. So we understand where you are. And not only that, but this process allows that potential client to get to know us a little bit. They need to develop some confidence that we actually know what we're talking about, and that they're comfortable working with us. And if you can't establish those two things, you need to move on and find somebody you have comfort with. And you think they they're up to speed enough to help you. This is a long term relationship. That's why we hope we hope to be the last financial advisor someone ever hires. That's our goal.

Rick Ripma: 21:46

Yeah, well, but it should be shouldn't be a long term. And I think real estate agents understand that because their process is a fairly long process for most people that you buy a house, it takes 30 days to close, but it takes, you know, got to sell it all these other homes, and there's just a lot of time, your process makes that one look like a day. Because you're you're you really you, you really need time is what it takes to build the wealth that most people are hoping to build. And so they have to spend a lot of time with you. And they have to have faith and trust. I agree. And I think I mean, obviously I think you guys, people should see that it's pretty obvious. So what about tax strategies? And because real estate agents and self employed people just have so much in the tax and tax liabilities? And so how do they how do they plan that and then maximize their after tax income?

Unknown: 22:45

Yeah, that's a great question. Sometimes, you know, we walk self employed people through questions like should you have a legal entity, an S corporation, or a limited liability corporation? Should you just be a Schedule C self employed, and there's section of the code, for example, code section 199. A, hereby refers to qualified business income QB is properly structured, someone might be able to exclude 20% of their income from taxation right off the top, wow, this is a really important thing to know about. If you're self employed, there are some limitations to that. But again, you want to make sure that if you're potentially going to be qualified, you get it. Second of all, then comes into or back to retirement plans. Those contributions can be pre tax, but hippuric. Here's the question is a pre tax contribution better than an after tax or so called Roth contribution. That's why we asked for the tax return. We don't want an estimate, we want to know what somebody's incremental tax rate is today, and also have some idea of what it's going to be in the future. Many people might be better off for going that tax deduction. So what I'm trying to say is don't let the tax tail wag the dog. Taxes are very important. But what's really important is not just taxes today, taxes overtime, because if you don't pay it in tax, and all what the law requires you to do is pay the legal minimum, get to the legal minimum. You know, that's that's just smart. Now, avoiding taxes is a crime. But getting down to the legal minimum is just smart business. And that's what we try to help people do. If you don't pay tax, you can keep it. Yeah.

Rick Ripma: 24:19

And I think I think it's important for people to know, at least in my mind, is I have a personal trainer, and while I'm working out, I mean, sometimes I look kind of stupid here I am six for big guy and I got to you know, I got like two, five. Okay. He even started me today on just the bar. All right, just the bar. And I there's all these people around, but he keeps telling me there's no judgment here. Right? You got to start where you are and everybody's in a different place. And I think financial, the financial is the same way. Some people may be, I don't want to show them what I got. I don't want to show them because I You know, they haven't done well, they haven't done a great job at it. So they may be a little leery of that. Define that, and they shouldn't be, but I'm sure it's

Unknown: 25:10

the case. You know, I'll go back to our oral surgeon clients who we worked with for a number of years. And quite frankly, that gentleman just retired in May. They started out heavily in debt. Second, married situation, support obligations. I mean, you name it, they had a challenge, zero savings. They just retired with over $3 million. That took time to do that, yes, but they stayed with it over a long period. It's like training, you don't go from the beginning of the week to Friday, and you're fit. It takes months, it takes years to make those changes. And, you know, just good financial habits will get you there, Jacob, on this tax question, can you talk a little bit about a self employed person getting down to the end of the year might need a new car or planning to buy one in the next year? What's the advantage here?

Jake Rich: 25:54

So if you have a legal entity, you, you know, you can expense things, deductions. And so from a tax perspective, if you get to the end of the year, you need a new car, use that car, for business and for personal. But what if you buy it the last week of the year, and you only use it for business? Well, there's a potential that you can write off that entire car, as a business expense in that tax year, and you only own it for a week. So again, maybe you had a really good year, you got a big tax bill, you're looking for something to do to minimize that. Maybe buy some equipment, maybe buy a new car. And so there's a lot of options there. When you're a business owner, we use the the phrase, pigs get fat Hogs get slaughtered. So you got to be a little cautious of it. But it's okay to look at some of these expenses in these deductions and say, What can I legally do? And then kind of work.

Unknown: 26:50

And Rick, we're not saying go buy things you don't need. But let's say you were going to buy that car in June of the following year. And you just had a really big year, under code section 179. Again, consult with your CPA, we're not giving tax advice here. But it's possible that you could expense that entire car, some people at the end of the year and save yourself a boatload of money or at least defer. Yeah, that income

Jake Rich: 27:14

mean, how much paper is involved in getting a mortgage? Maybe you need a new printer? Right? I mean, there's there's a lot of options on paper

Rick Ripma: 27:21

anymore. Ink Sure, sure.

Unknown: 27:25

Pick up on that stuff worth more than gold. And I

Rick Ripma: 27:28

see. Now, at the end of the year, I think it was last year, I had stocks at a dropped. So I sold them at the end of the year. And then I bought them back at the beginning of the year. And somebody told me to do that. Is that is that a wise thing to do? Jake.

Jake Rich: 27:45

So it really depends, you got to execute it correctly. So inside certain accounts, so an after tax investment account, you can do what's called loss harvesting. And so you can offset ordinary income up to$3,000 In that year, and then you can carry forward anything beyond that. So let's say you harvest $10,000 in losses, you can use 3000 Next year, and the year after that until that 10,000 is gone. And to your point, you had to wait a specific amount of time, so 31 days to repurchase a similar stock, but I'll use the example. Let's say you sold Coke, and you bought Pepsi. That's okay. You don't have to necessarily wait those 31 days. But if you sell coke and you want to buy Coca Cola again, you got to wait that period.

Unknown: 28:34

And this gets really complicated because let's say you sold it in your personal taxable account, you harvested the loss, but you turned right around in your IRA and you bought coke. You just voided the deductibility of that loss, because that's part of the wash sale rules. You you can't let your spouse buy it, you can't go buy it, you got to stay out of that stock for 31 days. But like Jake said, buy a stock index buy a similar stock in a similar industry. And you might still have exposure.

Jake Rich: 29:00

And the other piece is if it pays a dividend, you gotta be careful when that dividend hits, because that can void it as well. And so every quarter if you're close enough, you might want to wait. Yeah,

Rick Ripma: 29:10

it sounds to me like what you're saying is, is when you do something like that you should talk to somebody knows what they're talking about.

Unknown: 29:15

I think it's good advice.

Rick Ripma: 29:17

So somebody wants to talk to somebody, just like

Unknown: 29:19

when I want a mortgage. I pick up the phone I call you I don't assume I know what I'm doing knows what

Rick Ripma: 29:23

they're talking about. How do they get ahold of you? What's the best way to get ahold of you, Jake?

Jake Rich: 29:28

Yeah, so you should give us a call. 317-577-8233? No, Jake, what's your email? And if you want to email me, my email is Jay. Rich. So J ri ch at Capstone wa ca P. S, T o ne. W a.com. Okay, perfect.

Rick Ripma: 29:48

And that's Jake's the best way to get a hold up because Jake is more available than Ron. Well, correct. We'll

Jake Rich: 29:54

just say I'm more responsive. I think that's the nice way to say it.

Unknown: 29:57

I'm out of the office on a regular basis. Yeah. I have some open air obligations.

Rick Ripma: 30:02

Yeah, I understand that you do. I heard I heard you have a lot some

Jake Rich: 30:05

interesting way to describe golf open air.

Rick Ripma: 30:09

That's what he enjoys that. Listen, he's earned it. If he played like, I play, I don't play anymore. But if he did, he would not enjoy. It would be torture for him. Okay, but it's he must be good at it. It's getting better get better. So so how do I invest and and try to build my wealth by Max or by minimizing my risk not maximizing my risk minimizing my risk?

Jake Rich: 30:34

Yeah. Why don't Why don't you go ahead? Yeah, you know,

Unknown: 30:37

the first thing is have a diversified portfolio of investments. Last year was an exception. But typically when stocks go down bonds do fine. Vice versa. Last year, stocks and bonds went down the bonds primarily as a result of the Federal Reserve's hiking interest rates. But you don't want to put all your eggs in one basket. And all you have to do is think about companies like Enron, I mean, these are horror stories. But take GE, which for years was a member of the Dow, GE went through a period of time where they lost a lot of value. And that was a blue chip stable company. We have clients that have concentrated portfolios and things. And there's just an element of risk, with no real upside on that risk. And so if we're not getting paid for risk, we'd like to see our clients mitigate the risk. So I think the main thing is just start with a diversified basket of securities, good quality mutual funds, ETFs, that's the easiest way to accomplish that. And then over time, you know, just continue to invest incrementally over a long period of time, we call it getting rich, slow. It works. All you have to you know, you don't think about it that$250 a month, $1,000 a month, build up to it and just continue to do the same thing over and over again, over an extended period of time, you're probably going to be doing just quite well.

Jake Rich: 31:55

And one thing to say about that, too, is if you can automate some of those things, I mean, think of Netflix, they built a business off this, you you sign up one time, and they just bill you every month and how many people forget about it, or they just keep paying Oh, it's only X number of dollars. So if you can set aside and kind of systematically do it, whether it's from a paycheck, or real estate agents, accruing it into a different account, where you don't see it, you don't think about it, it'll really help because you don't, they'll start to live off what you see.

Unknown: 32:22

Yeah. And Rick with real estate agents, I think, play into your strength. So what would be a natural for a real estate agent, buy a piece of real estate, right, and you know, manage that they're already in the business, they know the market. It's tough to win when you play somebody else's game. It's easy to win when you're playing your own game. And so I think for real estate agents, that's a natural thing to look at. Always plan your strengths. Stay away from your weaknesses. Yeah,

Jake Rich: 32:46

you got to make sure you know your risk as well, because someone like myself, who's got a long time till I retire has a different risk tolerance than absolute but he else they may be close to retire or having just retired. So how you structure and grow that wealth that it really matters on time to they

Rick Ripma: 33:01

should have a different risk.

Jake Rich: 33:04

Hopefully, if they've done things correctly, they got a different risk tolerance.

Rick Ripma: 33:08

Don't always it's funny, too. Because when I was first starting out, I was in car sales. And I just put, I think it was $200 a week. And maybe I was shocked at how fast it

Unknown: 33:20

grew. Listen to people who understand compound interest earn it and those that don't pay it.

Rick Ripma: 33:25

It was amazing. I mean, it really I mean, it was like I turned around, I was like, I got $5,000 I remember one. Wow. That was that was amazing to me. So it's it's it is it's really it really does matter. Do you guys do anything with insurance? Or can you talk about insurance and how it plays into a financial? Yeah,

Unknown: 33:45

we're a fee only investment advisory firm. So we do not sell products. We don't earn any commissions. We The only money we ever get paid as directly from our client to us. So we're we're fiduciaries in that sense. But yeah, we deal with a lot of insurance issues, right? Because risk management is foundational to having a financial plan. Like I said, having a cash reserve, it's foundational, that's the base, if you don't get the base, right? Nothing else is going to work on that pyramid. So for example, if you're a self employed person, like a realtor, you need to have a good quality disability income policy. You may be really healthy today. And it may be very different tomorrow. And so having that Long Term Disability Insurance is I think critical. Having liability insurance, umbrella liability. We live in a litigious society. And, you know, you might say, well, I've got you know, $500,000 in liability insurance as part of our auto and homeowners policy, getting a lawsuit isn't gonna go very far. Somebody who has that kind of exposure, they need $3 million dollars of Personal Umbrella liability. You need long term disability and you need cash reserves. That's a good start on an insurance program. Okay,

Jake Rich: 34:55

and depending on if you sell self employed or you have your own entities setup, you may be able to also get company long term disability policy, which is a little bit different than the individual. But they both have very good, very important pieces to your

Unknown: 35:08

Yeah. And along to piggyback on what Jake just said, having a legal entity like an S corp or a LLC, your assets, personal assets are protected, if it's work related, they might sue and take the things out of the business, but they're not going to come after your home. And so having that entity to protect some of your assets is also really key.

Rick Ripma: 35:29

And it matters. I read somewhere where, when you're young, you're much more likely to be disabled than to die. Absolutely. So it's really important.

Jake Rich: 35:40

We're not and a lot of people think about life insurance, but they don't think about that and you're 100% Spot on, the probability of you having a long term disability or even a short term challenges is far more likely than accidental death. At this point,

Unknown: 35:53

you know, the problem with a long term disability as you're still a consumer, at least if you've passed, you're no longer a consumer. So from a family perspective, you know, you've got a big problem, if you become disabled, you're the primary breadwinner.

Rick Ripma: 36:06

And I was reading, since 2021 5 million people over what they had expected became disabled. And like two and a half million, 3 million of them were working people. I mean, that just so it's a it's a it's a it's kind of a pandemic and a sort of that, you know, we're there's a lot of people having problems. So what and to that, so if there is an unexpected injury or or disability, how does, how does that impact the income.

Jake Rich: 36:38

So from an inconsistent cash flow perspective, especially having that cash reserve or that emergency fund set aside, is kind of the first place to go if you don't have long term disability policy. So that's obviously kind of check number one, but check number two is having those emergency reserves in case something happens, because I think there's a statistic and kind of pick and choose which one, but there's a majority of Americans who can't pay for a $500 unexpected bill per month. Really, just,

Rick Ripma: 37:08

I think I'd say 500

Jake Rich: 37:09

hours. And you kind of think about that in your mind minutes. That's not a lot of money. But if you if you don't have something set up, or you aren't thinking ahead about it, I can be really a game changer. We're not even talking about an unexpected, I can't work anymore, right? We're just talking about just a car payment,

Rick Ripma: 37:25

or Yeah, I can't fix my air conditioning. And it's 100 degrees outside. Absolutely. Yeah. That that. Now, they should have both short term and long term disability plans.

Unknown: 37:35

Yeah, again, you can you can cover self insure that short term disability, which those policies typically don't go out beyond six months, okay. So in our, in our world, we'd really prefer someone having that cash reserve, okay, as opposed to transferring that risk. But then make sure you solve the big problem. You know, the small problem is a short term disability, you go back to work and three months, the big problem is you haven't gone back to work and five years

Jake Rich: 37:59

on, yes, in some of those policies, though, right, um, that it's not even you went back to work in your industry, it's if you weren't back to work period. And so having that supplemental income really does help

Unknown: 38:12

it back to having an entity as opposed to being a sole proprietor, it is possible to have group insurance inside that entity, then you can structure whether you want your premiums to be tax deductible or not. If they're not tax deductible, your benefits are probably income tax free. If it is tax deductible, then your benefits are taxable. So it gives you a lot of choices in terms of how you structure things.

Rick Ripma: 38:33

So yeah, as always, you have to structure it correctly. Yeah. What's best get work with somebody who knows how to do that. Right? That seems like it. So what about is there? And I know you've talked about a little bit Rana, a trust or other estate planning strategies to protect assets?

Unknown: 38:50

Yeah, so when it comes down to wills and estate planning, very important and often overlooked aspect, we have some people really bright, educated, talented, wealthy people walk in our office, and they do not have a will and estate plan. That's again, one of those foundational basic things. So I'm gonna have Jacob talk a little bit about beneficiary designations and title in a minute, but basically a will or a revocable living trust are simply dispositive devices. And all they do is transfer property that didn't pass by title or beneficiary. A revocable living trust is kind of a more modern version of a will. The one reason I encourage people to look at it is that A will is a public process. Rick, when you die or I die, and if we die with a will, that will is going to be published in probate court and becomes a public document. If you don't believe me, Google Jacqueline Kennedy Onassis will you can read it. It's a real public document. A revocable living trust is a private transfer of property. It is never published. No one ever knows where the assets went or how much was there. I don't like privacy. I like privacy for my clients. And I think it's worth an extra couple of bucks to out there. So Jacob, how does most property passed because it doesn't happen with a Will or Trust. Yeah.

Jake Rich: 40:05

So going back to the should I set up a Will or Trust, let's say you have a retirement account, traditional IRA, 401. K, you could name me as the beneficiary in that, in that trust and all, I'll never see a penny because it passes by beneficiary designation. So when you set that up, if you're married, you likely set up your spouse as the primary beneficiary goes directly to the spouse doesn't ever go to the will or the trust your home great example, if you're getting you're married, you own it and joint tenants joint trust Shriver ship, first person passes goes to the second one. It's at the second death, that if you name it in the title, or you title, it is in the name of the revocable living trust, it goes to that and then gets dispositive again,

Unknown: 40:48

private transfer once it gets into that trust. So

Jake Rich: 40:52

it really you got to look at the whole picture. Yes, you definitely need to have a will and estate plan set up, maybe you need a revocable living trust, but make sure they all communicate with your title, or beneficiary designations, bank accounts, same idea.

Unknown: 41:09

You don't need to be coordinated. And again, in addition to just the transfer of property rec, part of that will an estate plan package we call it a suite of documents is your healthcare directives. You need to name someone who's going to represent you, if you can't speak to yourself with your own medical needs, you need to name someone as your medical power of attorney. And you need to have, quite frankly, a living will. You know what, what happens if you're found in a persistent vegetative state, tough thing to be to happen. But it happens an awful lot of people. And you need to designate what procedures if anything, you want someone to perform at that point in time, you got to plan, you need to meet with a competent estate planning attorney, our role there is to help clients understand their options and get organized because I hope there's no attorneys listening, but attorneys or parking meters. And I don't mean that in a negative sense. But the longer you set, the bigger the bill. And so it's important to be really organized and efficient, have a plan. And we work with a number of estate planning attorneys that, you know, they know that we're going to get at least people organize their time is going to be a economize. And that bill is going to be a lot less.

Rick Ripma: 42:15

You're just like a real estate agent. You know, if if I need if I need some work done on my house, they're going to have people who can do that. Because they have to have those people to help their clients out. You're the same way your your your set up, and you're gonna help them all the way along. Because I think the way you've set it up is the best way where I pay you a fee, you're that means that you're there for me. Right? You don't get paid on anything you sell me or you're just there for me. So I pay you you give me good advice. I think that is myself. That's I think that's the best way to go about

Unknown: 42:47

we're required by law to tell our clients what's in their best interest, we cannot serve our own best interest or anybody else. We have one master and one alone.

Rick Ripma: 42:55

And, you know, on on that with us a little bit changed. But it's kind of near and dear to my heart because we deal a lot in debt with with debt with people. So how does somebody deal with their debt? And like, what's the best way to avoid financial problems with debt?

Jake Rich: 43:14

Well, if we go back to the start of the conversation, that budget, and really setting up that cash flow monitoring system, that's really the benefit and the starting point, because there's two types of people, there's people who understand compound interest and earn it. There's people who pay compound interest. So if you're spending on a credit card, and you don't have the ability to pay that off every month, you got to raise the question, should I be buying it? Now your audience is primarily real estate. So there's a lot of debt that comes with buying a home or a rental property, that's a little bit different. You're buying an asset that should appreciate in value in theory, or at least create cash flow, or at least create a rental income or so that's a little bit different. You still want to manage and not get too leveraged. But really the consumer debt is what you really want to be concerned about as you work through kind of some of these choices,

Unknown: 44:09

especially Rick of what you're requiring as something that's depreciating in value. We don't need every shiny object that we're attracted to. And far too often we see people use high interest credit cards to acquire these things. They don't pay them all. We've been doing quarterly meetings. And one of the consumers statistics we're very concerned about right now. Is the rise in credit card debt. Yes. And not only is it going up but it's they're paying interest at 21 28% interest. But once they max those out, what what do you do next? Car loan defaults have doubled in the last six to nine months. So we know that some of these consumers are struggling you on top of that. Payments for student loans are coming back online. So think about this consumer I've maxed out my cards, I'm paying high interest. I can't make my 700 ollar car payment. And by the way, my student that just came back online, that that consumer is going to have some fun albums. So, again, if you have a budget long term written goals, you're probably going to focus on those and avoid some of those mistakes. Those impulse buys or whatever they might be, is a Rolex watch a really neat thing. Yeah. Do you need to know, a time extra 9095 is going to work just fine. does the

Rick Ripma: 45:17

same thing. Keeps time? Yeah, yeah, smokin, like a financial planner. But I also think it's great advice. It's funny, because Ian is like he is he's very, very, very frugal. And his wife is very, very frugal. So they're, they're like, exactly what you talked about, they have done a really good job of setting themselves up so that they can, they don't have financial issues, you know, and it's so important to do that when you're young, I heard somebody say, you should really work on saving when you're in your 20s, because very few people ever save any money in their 20s.

Unknown: 45:56

Yeah, you know, the compounding over that period of time from your 20s to your 60s or 70s. It is stunning. There's all these examples where if you saved $10,000 a year for the first 10 years and never again, versus not saving anything at first 10 years, then you save$10,000 a year, for every year up to 60. The guy who started in his 20s, and never saved after his 30s has more money, because the compounding of the interest. So early, you know, time is your friend when it comes to investing. And the sooner you start, the better. We have an expression on the office, prospective client comes in, they have no or low debt. They've been maxing out their 401 K plans. They avoided all the frivolous things in life. We refer to them as the people who've already done the heavy lifting. Okay, they've done 90% of our job. We just have 10% lap. When you walk in, you got the debt, no savings and tight cash flow. It's tough. I mean, we have to question, what value can we add here other than going to the gotta get on a budget? Okay, yeah.

Rick Ripma: 46:56

But I bet you had a lot more than value than than that?

Unknown: 47:00

Well, like I said, it's it's a lot easier job when someone's done the heavy lifting.

Rick Ripma: 47:05

The other day, right. So one final question, what are some of the key financial metrics that someone should track to assess their success in their real estate business and maybe in their personal finance?

Unknown: 47:17

I think keeping track of your incremental tax rate is a very important metric, because it helps you answer the question, should I be contributing on a tax deductible basis, or after tax basis, and that question may be different year to year. So I think doing a year end tax projection and making that determination, that's an important key. But really over the long term, two things, your debt to asset ratio, in the growth of your net worth, if your net worth is growing, you're doing something right, that means you've got appreciating assets, you're saving and investing, you're not spending it all. And people are spending it all are going to have a really tough time meeting that metric.

Jake Rich: 47:56

One really important piece here and it kind of goes back to the debt question you just asked. You need to to the metric you want to is yourself, you don't want to have to keep up with the Joneses and benchmark yourself against someone else, they may be in a different situation, and that's okay. But when you monitor your own net worth, you will get your own debt ratio. That's really how you you can win in the long game.

Unknown: 48:21

And you know, investing in yourself, making sure that you're up to date, that you're on top of all the issues, you're going to bring more value to the table, you're going to, quite frankly, be a little more successful if you've done those things and reinvest in the business. And we don't think there's any secrets. You know, it's just a lot of hard work, staying up on things investing in yourself, and just using good common sense. Yeah,

Rick Ripma: 48:43

they're never secrets to the people who know, you guys know what to do. And I think that's, that's kind of the point because you're self employed, right? And for a long time, you completely understand a self employed, and you've, you've been in sales. So your income has been, you know, up and down and up and down and changes all the time. And it's very difficult to just continually, you know, put the same amount of money in when you especially when you're getting going, as you said, when you get older, and you've been doing a long time, that changes things, but it's, I just think people should call you, they should get a hold of you because you'll you're willing to help them out. Just meet with them and, and help them to get an idea of what they need to do.

Unknown: 49:24

And you know, Jacob use the doctor analogy earlier in the day. Not everybody likes what we have to tell them. We simply have to tell them what in our professional opinion needs to be done. Just like your doctor, you might walk into your doctor and they give you some really bad news. Rick, you need to hear the bad news so you can make the right decision that comes next. Right. Same thing for your personal finances if you're not getting it right. The sooner you stop and get on the right path, the better off you are even if you don't feel comfortable about it. It's going to work for the long term. Yep,

Rick Ripma: 49:53

sticking your head in the sand doesn't work.

Jake Rich: 49:55

Well. I mean, a lot of what we do is is help people not put estimate and actually take an action because a lot of what we've talked about, it's overwhelming. And we go back to the first question, how do I buy a stock? Well, if you don't know how to buy a stock, are you doing some of the other things and so, us helping you kind of get that plan in place and really hold, hold your hand for lack of a better term as you go through these things. That's how things get accomplished. Yeah,

Unknown: 50:21

we're kind of your financial accountability partner. You mentioned having a personal trainer earlier, for your financial trainer, we're going to help you get in good financial shape. It's not always fun, you got to do some work, and you got to stay with it over a period of time, you want to see some results

Rick Ripma: 50:35

you saw just like my personal trainer, he, he has one

Jake Rich: 50:39

himself, so

Unknown: 50:40

she is evil.

Rick Ripma: 50:43

So if somebody wants to get a hold of you, they understand that this might be a huge benefit to them may change their life. What's the best way to get a hold of you guys,

Jake Rich: 50:52

I think they should just call us 317-577-8233. If email is more your style, my email is probably the best Jay rich and that's Ric H at Capstone, WA CIP, s t o ne wa.com.

Unknown: 51:11

And you know, Rick, people who have never worked with a financial planner, we encourage them to have a chance to sit down and see what we do. And for those people who have one, they're not getting good service. And I'm sorry to say that's, that's the case for some people. You just want a second opinion. Come in, and we'll talk to you again, there's no obligation whatsoever. We're never going to try to talk somebody out of walking away from a relationship. Sometimes when we've sat down with people who are working with another advisor, we simply tell them, you're getting good advice. You need to follow it. The advice is not the problem, you've not followed it. You just need to stick with this person. They're trying to do the right things for you. And that can be really reassuring and make it easier to follow through.

Rick Ripma: 51:52

Yeah, I agree. I had the same thing with a CPA. I thought they were giving me bad advice. I went to another CPA and he goes, No, they're giving you great advice. I didn't like it. Just so you know, I didn't like the advice. But to get a hold of me in our I go to HardWorkingMortgageGuys.com That's HardWorkingMortgageGuys.com Or you can call 317-672-1938. That's 317-672-1938 38. And you can follow us for more indies real estate gurus. And Ron Jake, thanks so much for joining me. I appreciate I think what you've given that is phenomenal. I think this will really help a lot of people. We really do appreciate you joining us.

Unknown: 52:27

And Rick, we'd like to say thanks because you didn't make a big deal out of this. But you've helped a lot of our clients and and we love the fact we can call you we know they're gonna get good advice. And so we appreciate that what you guys do because you're good at

Rick Ripma: 52:40

I appreciate it. I appreciate it. Thanks so much.

Jake Rich: 52:43

Thank you very much erect.

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