Five Awesome Questions From You

five-questions-april-2018

Today we answer five awesome questions from you about LLCs, winning the lottery, budgeting an irregular income, Roth rollovers, and buying quality.

We get a lot of questions from listeners, and sometimes they are so good, we want to share them with everyone. Today we picked five questions we thought everyone would like an answer to.

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Question One

Hi guys,

Love listening to your podcast and you guys have helped me so much and given me so many great new ideas. In fact, I’m writing to you about one of them. I remember you said that when buying a rental property, to buy it as an LLC. My question is, do I set up a new LLC for each new rental property? If my goal is to own 10, do I then have 10 LLCs?

Sincerely,
Entrepreneur Jane in the making

A purist might use individual LLCs, but that can be a lot of aggravation and cost. Instead, we use the $250,000 threshold. If you have a single property valued at that or higher, it should have its own LLC. If you have two properties, one valued at $100,000 and the other at $150,000, they could be under a single LLC.

Owning rental property under an LLC insulates your personal assets from risk. There are also lots of everyday tax benefits to having an LLC!

Question Two

Hey guys,

Huge fan of the podcast. Wednesday is the CT Powerball up to $1.3 billion (Jan 2016). If you won what would you do with it all?

 James

Andrew and Thomas both agree that they don’t want money they haven’t earned so they would give the money away to charity and use it to fund research.

I figure you have the same chance of winning the lottery whether you play or not.

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And they may be onto something. Lottery winners don’t tend to live happily ever after having responsibly invested their winnings. They often end up back where they were before they won or even worse off.

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Question Three

Hi LMM,

My question is about budgeting without a regular paycheck. Our income is seasonal (fishing in Alaska and self-employment), and we don’t really know how much we are going to make until it’s made, how should I modify the budgeting tools to work with this and how best to make that money last all year?

Thanks,

Mary

When your income is seasonal, you need to make your budget based on a longer time scale than is traditional. Most people can budget month by month but for you, budgeting for a year makes more sense.

Take a look at how much you have made for the past five years and get an average. Let’s use $50,000. Take that amount and divide it by 12. That gives you a number for a montly budget. You have $4,166 to spend each month.

If your income varies wildly, one month you make $10,000 and the next $500, it doesn’t matter. You still spend the same $4,166.

It may help to put up spending firewalls for yourself. Everything over a specific dollar amount (set by you) gets put on a 30-day list. At the end of 30 days, if you still want it, you can buy it. Chances are though; you won’t even remember that you wanted whatever you put on the list.

Another good firewall is to lock up some money in a six month CD. You’re making a little more than you would get with a savings account and the money is harder to get to. You can withdraw it early, but you will pay a penalty.

Question Four

Hi Andrew and Thomas,

I have been listening to your show now for almost a year. It has really helped me get on an even better page when it comes to my personal finances.

I am 25, and I am in a long-term relationship and working on managing our finances. I had a financial adviser through a friend with an internship at a firm a few years ago. And I turned my girlfriend on to him so now he has been managing both our Roth’s and we also have whole life insurance policies.

I think that I’m at the point of managing our finances without his help. Now I’m not sure what I should do next. He has our Roth accounts through American Funds, do I just create my own account and roll it over? What do I do about the Life insurance? The expense of the insurance doesn’t make it worth it to cancel. I fell sort of trapped.

Really could use your advice.

Thomas

Whole life insurance is for old people. It’s expensive too. For a young, healthy person, term life insurance is cheaper and more appropriate. And when you buy life insurance through Health IQ, you get a price based on your health habits. The healthier you are, the lower the cost.

Policy Genius can explain all the various types of insurance in a way that ordinary people can understand.

It doesn’t sound like you have a personal relationship with the financial advisor. Be sure you have all of the logins to your accounts, remove his access, and close the accounts. If he contacts you wanting to know why simply tell him that you have decided to take control of your own finances.

You can roll the Roth over with Betterment or Vanguard. 

Question Five

Hi guys,

Do you have a list of certain items/products we should invest in? From recent podcast, I recall you saying purchase quality clothing could save you in the long run rather than purchasing from H&M. You also said quality mattress. Any other items? 

Erica

You want to spend enough money to get quality on the things that you use every day, things you really enjoy, and your health.

A mattress is a good example because we spend so much time in bed. Shoes are a good example but only if they are the kind of shoes you wear a lot. Runners who run everyday need good running shoes. Can you count on one hand the number of times you wear dress shoes in a year?  You can cheap out on those.

If you have a hobby that you enjoy like cycling or playing an instrument, it’s worthwhile to spend money on a good bike or guitar. If you depend on your computer to make a living, spend money on a good one.

Spend money on experiences rather than things. Doing so has been proven to provide greater happiness. Stop buying clothes and start traveling instead.

And for goodness sake, spend money on your health. Eat nice, fresh food, if the only way you will exercise is by joining a gym that offers specific classes, join the gym and if you don’t feel right, see a doctor.

Buy it for Life is a great place to research how to get quality at a good price.

Thanks, Everyone!

We love reading your emails and answering your questions. Keep sending them in, and we will pick out five awesome questions for a future episode.

Show Notes

Dog Fish Head 60 Minute IPA: A continuously hopped IPA.

LMM Toolbox: All of the best stuff we use to manage our money.

 

 

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