In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, tackles some of the most frequently asked financial questions he receives, covering topics that impact individuals and families alike. Darryl offers straightforward advice on everything from debt management strategies to understanding the potential tax implications of government proposals, providing listeners with practical steps to improve their financial outlook.
Darryl dives into each question, sharing resources, strategies, and unique perspectives on topics like paying for college, retirement preparation, and managing investments effectively. His thoughtful answers empower listeners to make informed decisions that align with their financial goals.
Key highlights of the episode include:
- Darryl recommends Going Mary as a resource for finding scholarships and navigating the competitive world of college funding.
- An explanation of the debt snowball method, focusing on paying off smaller debts first to build momentum and consistency.
- Insights on the potential effects of an unrealized gains tax on investors and how it might impact portfolio strategies.
- Examining the proposed $25,000 down payment assistance for first-time buyers, noting the benefits and potential drawbacks.
- Financial tips for military families preparing for retirement, emphasizing debt reduction, cash reserves, and the Survivor Benefit Plan.
For more resources and to connect with a financial advisor, visit http://www.PAXFinancialGroup.com. If you found this episode helpful, consider sharing it with a friend or family member!
Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXfinancialgroup.com for more information. I also want to encourage you as always to go to PAX Financial Group. Hit the Contact Us button.
You can chat with a financial advisor for 15 minutes. No obligation. They have the heart of a teacher and can see if it’s a good fit. Okay, so this one’s a Q&A show where I get questions every single day, frankly, about money. And so, I just grabbed five of them. Some were on social media, and some were just in, just the normal course of, being a money guy.
And friends ask questions. So I compiled them and I have five questions. And if you ever have questions that you want me to answer, I will be happy to do another Q&A show. Just to guide you in a non-threatening way. And you can keep it confidential. I will keep these confidential. But I have five questions.
So, let’s go through each one of those. The first one. What resource do you recommend for college scholarships? So, the one that I’ve used, I’ve recommended for years, and I’ve actually started using it because now I have a son in college. So, before I just recommended it, now I’ve actually used it and I played around with it before, but it really didn’t have much meaning.
But it’s called Going Mary. It’s used by students, parents, even school counselors. It’s got, it really has a nice user interface. The search engine on it is really easy to use. They’ll even tell you how long it takes to apply for a scholarship like this scholarship takes 30 minutes. This one takes four hours. How much work do you have to put into it?
It could be deadlines. There’s one I was on there the other day. There’s one called a Be Bold scholarships, $25,000. You know, you can save scholarships, you know, start working on it, save it, come back later. So, there’s it’s just a really nice interface. The scholarship world is a competitive world. So, you’re going to need to put in the work, and, but they’re out there.
They’re definitely out there and Going Mary seems to be a very good, platform for searching for scholarships for kids. Number two. Somebody asked me, do you have a debt snowball worksheet? So actually, when I was a financial advisor and I was working with a lot of people every single day, I developed one, but it was very customized because everyone’s situation is really unique.
And for those that don’t know, the debt snowball, the debt snowball is somewhat counterintuitive because you disregard the highest rate of your credit cards. Now, of course, this is a strategy to pay down debt, typically credit cards, but it could be student loans or automobile debt too, its total disregard for the interest rate. Rather, you focus on the smallest balance first, and then when you’ve completed that small balance, you roll over the payments you are making towards that small balance to the next smallest balance, and you continue doing that.
And it’s really rooted in, motivation and consistency because it’s, you know, it’s really not a math problem. It’s a matter of having that consistent motivation and that consistent behavior to pay down debt and doing the debt snowball. I’ve done it and really, it can get you across that finish line much faster. And it’s kind of a strange thing because I’m a math guy.
And it defies my finance studies, but it works. So, I do it. I recommend people do it. Oh, I say I’ve done it. And then the. But the question is, do you have one of those worksheets? No, I don’t have one anymore. Because they’re all online now. So, you can easily find one and do it yourself and find one that suits you.
There’s some that have robust Excel tools. You can even buy them for a dollar if you want to. Some of the more robust ones might cost a buck on Pinterest. And then, there’s plenty of just manual paper ones. But regardless, I think having a system that works for you is good. And like I said, it’s easy to do a search engine put, debt snowball worksheet and find one that’s makes sense for you and then stick with it.
All right. Number three, what are the implications of an unrealized gains tax if passed? So, I’m recording this the day after the election. And so, I think it was mainly, Kamala Harris proposal that she was supporting an unrealized gains tax. And so that’s not going to happen if under Trump. And it’s still worth talking about because I think it’s interesting and it has implications for a lot of us.
So again, what is a capital gain. Its growth on investment unrealized means that you haven’t sold that investment yet. So, there’s a tax embedded, that’s due when you sell it. So that’s unrealized gains in stocks and real estate have unrealized gains. And so, what billionaires typically do because they have billions of dollars of company stock or even a small business, for that matter, has unrealized gains in their business.
And so, billionaires have these, these massive amounts of gains in their stock. And then they want to buy a mansion in Florida. And so, their advisor says, well, instead of selling some of your stock and paying these capital gains, why don’t you borrow against it? And then you don’t have to pay any taxes, and we can figure out how to service the debt.
It’s strategic. It’s very possible. And you do the math and you’re like, wow, that’s pretty incredible. And I can save a lot of money. So, billionaires, that’s what they do is they have these large amounts of stock and then they borrow against it. And you know, it doesn’t surprise me. It makes sense. But obviously the government wants that money.
And so they can’t get it. Now what happens. Also, I got to tell you what PAX does. We’ve done this many times for clients. If you’ve got an investment portfolio with a bunch of unrealized gains and you’ve sold your home. All right, let me say it this way. You’ve found a home that you like, but you haven’t sold your home yet.
And you want to close on that home, so you don’t miss out on it. So, you call us up and say, hey, can you sell our portfolios? And that would generate a tax. What we do is we’ll borrow against it, buy the home that you want so you can get the deal. And then as soon as you sell your home you pay back.
So, we’ve used the strategy as well. So, it’s not just billionaires and it makes a ton of sense. But I really don’t think that’s a revenue source for a lot of the government. I think they’re really after these billionaires. So I think part of the question is, is that even constitutional? And, I think that would have been debated heavily, but here we are post-election, and I don’t think anybody really cares anymore.
But it’s very interesting for your benefit to know that that strategy can be used in certain situations for people who have money outside of their IRA that want to make a purchase, you can borrow against your portfolio. So, I think that’s interesting to know, too. Okay. Number four, does the 25,000-tax relief actually help a person who’s a first time buyer?
So, this was, again, a Kamala Harris proposal. It’s, day one of Trump or not exactly, but post-election. But I think it’s still, again, worth asking ourselves. We don’t know all the details of it. It was a promise without details, but it was routed from this down payment toward the Equity Act. And that bill was proposed to offer down payment assistance for qualified homebuyers who are socially or economically disadvantaged, namely, first generation homebuyers.
But in that bill, it was 20,000 or 10% of purchase price. So, she modified it to 25,000. When I was younger, maybe some of you guys would have really benefited from this. Like, this would have really helped me get that down payment I needed. I remember my first house I figured out a way to score like $3,000 for my first house, years ago.
And that was my down payment. And so, I would have really loved $25,000 assistance. And, I think that’s, you know, again, it’s how do you pay for this stuff? And then the big question was, I think a lot of us ask is this, do undocumented immigrants qualify for that? And so that was a big question that everyone was asking.
I think a lot of people had interest because houses are so expensive now for this next generation to get that down payment. Just enough. And so, everyone was interested in a solution that made sense. And I don’t think anybody was terribly pushing back. But there were some questions about will illegal immigrants, undocumented immigrants be able to get a down payment?
And that was a big question. The constitutionality, of course. And then, of course, the government debt, you know, are we just adding more to the government debt? And then finally, I think this one should have been, probably teased out a lot more. When you do some of these things, you’re getting people in homes that, frankly, will not be able to afford it.
They got the money to get the down payment, and the banks, some of the banks and some of the financial institutions out there, they will lend money to somebody because what they do is when they land, they just package it up and sell it off, and they made their fee. And so, they don’t really care about default rates so much.
But I believe that if this was adopted, there would have been a we would have looked up in five years and realized that a lot of people got into homes that they couldn’t afford. And I’m not talking about just the mortgage ratio, because your mortgage should be, no more than 25% of your take home pay. But also as you know, as a homeowner, there’s all the other stuff.
There are the toilets breaking or, you know, doors, door handles messed up or shingles on roofs, whatever. Like, you know, a homeowner, there’s all kinds of stuff. So, I think what we would have seen ultimately is, is this could have been really problematic, if not really defined. And, but it’s not going to happen. So here we are.
Okay. Number five, this one has a little bit more background. My husband is retiring from the Navy in about 21 months after 28 years of active-duty service. We’re trying to pay off debts that we incurred after his dad, unfortunately passed back taxes and funeral expenses, etc. We inherited the home and farm that he lived in that my mother-in-law grew up in.
It’s been in the family since the late 1800s, late 1800s. Anyway, we’ve had a lot of unexpected items we had to pay for, including a new roof that had to be done before we could get a new insurance policy on it. So that went up hugely. We had to pay for his siblings for big items that they wanted that were not in the will.
Like a tractor, where maintain the farms and 72 acres, plus all the taxes. We will, as well as our own home and property and in Tennessee. So basically, two full households. So, what tips can you share to help us in a better financial situation before he retires, especially in the event that he doesn’t find a job right away?
On top of the fact that we have heard from many other spouses that the retirement pay VA benefits are all taking months before they kick in, we will have all the debts paid off within the next year, so that’s great. Okay, so first of all, thank you for your service. 28 years. Wow. So, thank you again, for serving our country.
It’s, we are a military city, and we all have, most of us have military members in our family. So, we appreciate all that you’ve done. So, thank you for that. I do recommend that before you retire, you pivot. What I basically mean is kind of practice retirement. A lot of us have our identity and our occupation.
So, kind of unwinding that and making sure it doesn’t hit us, that’s important. And so pivoting means I think I say, I think what I would suggest is, is practicing some other trades, occupations, hobbies, before and in any blank space there. What I love about this economy right now is that you can, you can really have a lifestyle business, and there’s a lot of different ways to do it.
So, find what you enjoy and find out a way that you can make money and solve problems and try it before. Maybe as a family, try it before you actually retire. And I think that’s always healthy is to kind of practice this thing. And if you make any money on that, which I hope you do, even if it’s just a couple grand or, you know, if it’s significant money, squirrel that away because you do need about six months to a year of cash reserves, ideally for retirement.
And I say that because it’s having that number of reserves is not typically as critical for somebody as a pension. Right. Because reserves are really important when your income could stop and if you have retired pay, your income is going to not going to stop. But it’s still helpful to have an adequate amount of cash.
And so maybe it’s not a year, but definitely six months times your expenses, decide to help transition because yeah, there can be a lag. And when you get those benefits, the benefits are very generous. I mean, they’re very generous. Retire pay is awesome. Tricare for life is awesome. Again, pay off those debts. If you have a TSP, thrift savings plan, you can’t access it till you’re 59.5.
But there are some provisions. Check with your financial advisor where you can get to it before it’s called a section 72 T, so that might be helpful if you have a TSP. So, check with your advisor on that. And then the other thing I’d recommend is when you get when you get your retirement, retire pay, make sure you get the SBP survivor benefit plan.
Some people buy life insurance. I don’t know if the math is working that well for that right now, but I want to make sure that if he were to pass away, that, the surviving spouse has that income and can maintain their standard of living. So, so that’s another thing. So, there’s a, there’s a handful of things to consider as you’re navigating this next chapter of life.
I’m excited for you guys. It’ll be here before you know it. It’ll be a new chapter with new challenges. But again, I’ve said this a thousand times. When you retire, you’re not necessarily retiring. Remember, retire by definition, is the disposal of an asset that’s no longer useful. And so, I would suggest to you, with the skills that you’ve developed over the 28 years of serving our country, you’re still useful to our country in many ways.
And whether that’s civil service or starting a lifestyle business, you still have worth. And so, I don’t want you to retire and be disposed of. I want you to pivot into this next chapter with a lot of enthusiasm, opportunity and hope. All right, that does this show for today it’s a Q&A show.
I hope it was helpful, intellectually stimulating. And as always, you think different when you think long term. Have a great day.
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