The Wealth Operating System for Commission Earners (Agents & Lenders)

0:00I totally understand or willing to walk on the beach and do yoga by myself. You're probably not going to be on the right off your yoga mat call now. You might be able to pay for a yoga mat from your health savings account, the self-directed. Ooh, Check the show to see if that's valid. Mike Wazowski Every time on your profits verse, I think Mike Wazowski, who's not the author from From Monsters and just like the book that I want to write called called How to Bust Your Ass and make a lot of money, that's not going to crush it on the Internet, right? This is not going to sell tons and tons of copy. I used to think about lanes of revenue. What business can you stand alongside your current business that you already have the customers for? Welcome back to the Be Wealthy podcast with Bret Tanner. It is episode 0005. Oh, we've come so far. We've done all of the things, but today I am very excited to talk about how to be wealthy as a self-employed person. This is something I spent the last 15 years or more of my life figuring out and I would normally cold do a podcast like this. It would actually be a five month long episode if I was to cover all of the stuff that's totally stupid and doesn't work. And I've tried all those things. I can save everyone the five and half months and bring you absolutely everything. I'm going to try to do this right. It's 60 Minutes or less and bring you things you need to know. As a business owner, Where's the opportunity? What are you overlooking and how can your business become one of the largest vehicles and building wealth? And I think this is the misunderstanding. A lot of people get in business. They want control their schedule, they want control of their calendar.

1:36And there's lots of incredible things for being your own business owner. But one of the biggest is the tax side, because the government incentivizes businesses, right? They need all of us to go out in the world. Why? Why does it work that way? Why would the government give different incentive incentives to business owners versus employees? Well, the the government cannot go solve the energy to make us more energy independent. And they don't have they have the money, they don't the resources and the execution instead. Right. They've got to incentivize the public or the business to go do that. Right. So there's incentives around energy. There's incentives around in certain types of investments, like if you the most specific example, right, in the in the world of electric vehicles for the first so many vehicles that are sold, they get a 7500 credit per car, Well, that's going to cause more consumers to buy the car. There's also incentives for the car companies to go make electric vehicles or some even mandates around. I mean, they have to have. But so the government going to create incentives. So think of the tax code as nothing more than incentives that you could choose to participate in if you wanted to. So with that, let's jump into today's episode, which is all about leveraging your business and how to become wealthy as a self-employed business owner. Again, as we go through it, we're always going to think through the four variables to wealth. Number one, how much time do you have to invest your money? How much money are you starting with? How much money you put away every month and the return your investments get? That's all there is to wealth. There's four variables and they're always at play and they're always the ones you're working off of as you want to increase your wealth.

3:12And we always start here with how do we, as a self-employed business owner, the easiest way to become wealthy is the simplest, which you're all going understand and say, Of course bread increase your income. But how specifically do I go from being a business owner to increasing my income? Well, again, we're back to skills, right? The first skill you have to maximize is how to drive your revenue up. How do we sell more goods and services? How do we sell more things and make more money? Until your company is hitting $1,000,000 in revenue? A You should be focused entirely on building your sales skills or your sales people's sales skills, your job not servicing the revenue you have as fast as you possibly can. You need operations person, someone who's handling the revenue you already have. Once you get a contract signed, they're taking that and delivering your product or service. And as the owner, you're focused entirely that product needs to be incredible. You've built it already. You need to focus on getting more sales, more customers and developing it. There's a number of great books we've talked about in other episodes. Go reread The Ultimate Sales Machine by Chet Holmes. It's a great book. Will drop out a link to that in the show notes, but increasing your income. So once you've looked at that, right, is there another untapped area? Is there a business next to yours that would allow you to create more revenue? I'll give an example. So I'm in the residential retail business and there's a number of businesses inside of that that you could choose to participate in.

4:39So the first one logically for me was, hey, every time I get a a closing between a buyer and seller, we've got to close that deal with a title company. So made a lot of sense for me to go out and actually buy the title company. We disclose all that to our buyers and sellers. It allows me every time I get a closing right instead of I, I can work with my buyer or seller to use whatever title company makes the most sense for them. And provided all the rates are the same, they're probably going to go with the one that offers the best service and that's the most efficient, which is going to be the one that I have because I'm able to do different things because I own it. I'm able to make it have a mobile notary come to them and all the different things that you can do when you own your own business to cater the service to your clients. But it allows me to capture another piece of the revenue. Another example would be we're in the insurance business, so when someone closes the transaction, I want to make sure that they're number one, that they have the right amount of insurance coverage on their home. And number two, are they paying the best possible price that matters? Well, if I have insurance company, I can actually make sure that that's happening. And again, my customers are getting the best value. And in doing so, I'm still winning in that. And you can go all of the way down the line. I could step down to the next logical thing could be you could enter into the mortgage business or you could go into it. There's all kinds of there's a there's actually a business around setting up services where you put turn on their utilities and Internet and pest control and all of those things. There's a way to make an affiliate for your own those businesses as far as you want to go, that's called vertical integration. So what other services could you offer your customer that would add value them and add additional revenue to your business? So becoming wealthy in your business, how can you think about it? And I used to think about lanes of revenue.

6:17What business can you stand alongside your current business that you already have the customers for any time you can start a business where to the customers, the likelihood of it succeeding, the likelihood of hitting additional profit is extremely high. If you already have those customers in your core business. Next, The way to become wealthy in your self-employed business is you've got to understand profit. There's an amazing book on the subject called Profit First. I don't know. That's one of those books that you actually need to read. The title says it all. You don't need to go set up five elaborate bank accounts only to be more confused Then when you started, I used to to bring up this book and talk about it some more training events and it's one of those books. There's a couple of them that I really loved until I started teaching, but people were applying the methodology of the book wrong. And so in the book Profit first, I think it's Mike Michalowicz. I don't know how you see that Mike Michalowicz Going to call and maybe he was in that. What's the guy what's the Disney or with think Michael Dyleski. Mike Wazowski Every time I your profits first I think Mike Wazowski, who's not the author from from Monsters Inc but so the book profits first is the idea is you're going to pay yourself the profit you want first of your every month. If you're making $10,000 in gross revenue and you're making $3,000 in profit, their argument is you take the $3,000 in profit first and then you're going to move the rest of the money in these different accounts.

7:43Spoiler alert, What's going to happen is you're not going to have enough money to pay all of the bills of the business. And what's going to happen if you're not operating on a 30% margin, which would be the 3000, you'll have to cut certain expenses. So it's a way of gamifying the game of business. A much easier way is just to actually understand the numbers that drive business of which there's only three. And you wouldn't need to have the five bank accounts and make it very confusing. Now, I won't sell as many books, right, Just like the book that I want to write called called How to Bust Your Ass and Make a Lot of Money. That's not going to crush it on the Internet, right? It's just not going to sell tons and tons of copies. So in your business, we need to understand mechanics, profit loss, margin expense, cost of goods sold. It's easiest way in the world to think about it. There's 100% of the amount available in your business makes $100,000. If you want to make a 30% profit margin, you that is $30,000. The amount left over is $70,000. 70% of that. You've got two main light items. They're going to affect your business. You've got cost of goods sold. What are the costs associated with selling it? So in the real estate residential retail business, we are all belong to a brokerage. I'm with Keller Williams, so every time I sell a home, a portion of my commission until it's capped will get paid to Keller Williams in my local office. And some goes out to the international a remaining portion of that is going to go to pay my people. And what's left over right is known as my gross profit. So cost of goods sold. Or think of it this way, your cost of goods sold or kind of all the money that comes out before you have the money to actually operate your business on.

9:13Next, you've got your expenses. These are rent employees, toilet paper, Internet, all the various things that go through to run your business in Hawaii through toilet paper in their quality makes sense, but all the things run your business are the expenses. So that's 70% in the residential retail world. I try to have 40% of that goes to my people and the remaining 30% is expenses. So a 30% profit, 40% to my people, 30% expenses and things and stuff. And so to do that, I've got to have a great P.A. So if you're watching this and you're a business owner and you're playing the game of business, I would ask you a question on a scale of 1 to 10, one being what is the PNL, ten being? I know every margin I could run acquisition costs out and I know every single number that drives my business. Where are you at in that journey? When I started mine, I knew that more money in my account at the end of the month than when I started. I was winning less money, I was losing and I would adjust all my expenses accordingly. I can tell you that is not running a business. That is absolutely not what you should be doing. You need to actually understand business. And so when you go start a new marketing channel as an example and you're investing in it, if I'm if I'm guessing $10,000 this month in marketing or in my business, the residential retail business, that likely will not create a sale next month, almost impossible. So if I do that for six months at that point of sales, but that channel's probably not yet profitable. It's starting to get into there, but it's going to take about six months before the chance to see that. So what have other ways to look at it? But I've got to understand, if I invest that $10,000, why did my margin go down or because I don't yet have revenue coming in from it.

10:50So get a way to test certain things, know if they're working on a come back. So you got to understand the basics. So it start with getting a pencil and every item on that's yours and it's what's called a chart of accounts. It's where all the expenses, you know, fit in. And if you drop into the shownotes, if you click link below, we'll give you a basic chart of accounts for most businesses that will work and you can add additional items if you have something unique to it. But your your bookkeeper should fill it into the chart of accounts that makes sense to you. In other words, your pencil should not be something that you're only doing for the purpose to give to your CPA at the end of the year. Your palms should be a living, breathing document that you're looking at every single month and using it as a tool that allows you to make better business decisions in your company. It is absolutely a tool you should be using, and if you're not using your pencil, that tool, you've got to understand it. And so you're marketing a certain amount of expenses. You should do every month. And again, the residential retail business, it is very hard to get your total expenses to 30% of the revenue. It's very hard to do every single month. We look at it and we'll be at 31.4. Well, what does that mean? I've got to look at removing 1.4% or my margins going to go down. Right. I've got to get better at operating the company. There is a certain amount of money it needs to make. If you think about it a different way. I want to like every time I put a dollar into my business, I want to get the dollar back and then I want to make an extra $0.30 or that that's actually your margin.

12:16And it's why when you hear people say the best investment, the best investment you can make is in your own company, because overwhelmingly investments are not going to pay anywhere near 30%, especially when if you love your business and you believe in your skills and your ability, you're investing that money, betting on you, which should be the ultimate investment. So next, where would I go if I want to be wealthy? I've said it before. Education, education, education. We're only one new tactic or one new relationship away from a radical breakthrough in your business. You're likely not going to get that sitting behind your desk. You've got to get out there and find people that are either in the same journey as you or that one level above where you're at. So go figure out that mastermind. If you're if you're at the dentist, if you're the surgeon, if you're the property manager, if you're the you know, whatever the case is, you're the apartment. I'm the multifamily builder. There is a group for people like you find the tribe, it's the highest level and go get in there. Next, I would study leadership. Once your business is soon as you get to the place where you're hiring employees, you've got to work on your leadership skills, your ability to connect with others, to lead them, to have performance management, to have formal and informal leadership. All of those tactics and strategies become critical the minute you got people to your organization. If you're just starting one of the books, I love, it's either the ultimate assistant or the perfect assistant by Michael Hyatt.

13:46We will drop that book in the show notes. Absolutely. If you're it's your first assistant or you've recently, you know, you're newer in the first few years of having a personal assistant or someone in a support role helping you get more things done, that book will be completely enlightening. Michael Hyatt wrote the definitive book on the ultimate, The Ultimate Perfect Assistant or Call will let me know here in a minute what that book is. You're world class assistant. You're world class. So close your world class assistant, Michael Hyatt. The other book is Leading at a Higher Level by Ken Blanchard. That book, both links are in the show notes. Those are the guides that if you read those too, you'll understand a lot of the fundamental things of leadership. The other book that I absolutely loves, the Four Disciplines of Execution by Covey, we recently had a lot of our partners come in, our our be wealthy network. We actually power real estate agents across the country. We give them tools and resources and help them build out an investment model to really, you know, no pun intended to be wealthy. We had them come in and I taught that book, The four Disciplines of Execution get the second edition, will drop a link to the actual book. It's an older book, but they did a new edition of it that will help you understand running projects, how to lead through others and how to get results from other people. At the end of the day, your business, once it goes beyond you, you're going to have to learn how do you take other people and how do you get them to be as effective as you are in given roles and ideally more effective than you? Because. Right. Think about as the business owner, you're in charge of sales, marketing operation, customer service, profitability, all these different areas where the person you're hiring for a specific role can far outperform what you can do because they've got a focused effort on a very specific set of tasks, so leadership becomes a part of it.

15:33Next slide. Go down to once your business is making significant money and it's where you're paying significant taxes. So when you get to the end of the end of the year and you get your tax bill in the first couple of years when you're like poor, before that happens, when you're trending into it, you need to start thinking about your tax plan, right? What is your tax strategy? Do you have a plan? You should actually have a start of the year end of the year checklist, things that you're thinking about that are unique to you that you're going to build over the course of your career? Every we just as we're filming this is in the first part of January. And I just did my first of the year checklist. I did all the things that I set up every single year from opening, you know, funding my health savings account, which I choose to self direct. There's a way you can self direct that will cover that here in a minute. I set up, I pay, you know, my kids payroll. I fund my whole life insurance policy. I once my kids are paid, they can fund their ROS. There's all these things we do at the start of the year as a part of my annual check in process. And I'm going through all those things, right? So I'll kind of start in no specific order here. But if I was at Zero employees, I had it and I'm paying taxes. Your business is performing. You're looking for places to invest. I would highly recommend if you do not yet have employees, but you're in business for yourself. Set up a solo 401k. It's something you can set up until you have employees and you can go out and you, number one, those could be it would be an after or before tax. So you can set up a traditional or Roth.

17:00My recommendation would be to set it up max it out. I believe the amounts are around 69,000 as of 2024 that you could put in per person of your spouse works in the business. They don't count as an employee. That can be another 69,000 once that money's in there. So that's where $138,000 for both of you, you could turn around. So you got a deduction because it's a traditional you're going to get to deduct that and pay tax on what's left. What I would prefer to do would be to turn around and put all of that into a Roth account. So you got a deduction simultaneously. You basically gave that back. But now what we have is we get $138,000 in a Roth account. Others tax implications. You got to get with your CPA and make sure that you understand the taxes here. But you've now got $138,000 that all of the gains, all of the gains until you pull it out right at 57 over 59 in the House, call you check and see when you can first take a distribution from a Roth. It's like it's 59 and a half, but you don't have to take it then. See, all of those gains, though, are tax free. So you need to go to the be wealthy calculator and take a look at if I'm investing money and I've got a 30 year horizon, what is the cost that I'm going to pay on all of this amount when I pull it out? And would I rather pay the tax today, pay tax on the seed? Are you going to pay tax on the harvest when it's a when it's millions and millions of dollars later. So a solar for when you convert to Roth and then I would absolutely set that up to be self-directed. We love love, love, Horizon trust. I love them.

18:31Why? Because of their customer service. A lot of the custodians are out there. You're kind of on your own on a do it yourself project Horizon. You can reach out, talk to a real person who can talk specifically to your situation. So once they're if you go beyond that, the next opportunity would be at some point you have employees, you could freeze that policy or kill it, and now you've got those funds you continue to carry on in your Roth. You could look at I want the things I've looked at as a cash balance plan. I found a way to put a cash balance plan where I've got to put the money in for my employees. And one of ones, the ones that want to opt in and which they should if they're at the place that this makes sense for them. And but a large portion of that's going to go to the highly compensated people or the older that they are, it's the way they do this actuarial, not an actuarial table. It's called a safe harbor. So they go through and kind of run this analysis on who your employees are, their ages and their compensation. And it basically it tells you out of this 100% of the money, here's how it's all going to get allocated. As the business owner, you're going to get typically about 80 to 90% of that structured correctly depending on your age, your compensation and the age and composition of your people. But 80, 90% of that could go into a cash balance plan that could be self-directed. Now, this is one of those I'm going to get a tax deduction today, but I'm going to grow this over time. I will have to pay taxes on the way out. The reason I'm doing it is I'm not paying taxes. I go I can it's tax efficient while I'm growing this account. Another option is we talked about that a health savings account. So the the numbers for 2024, it's 80 $300 for a family. You do have to have a high deductible insurance to do this.

20:12Most policies will qualify. We need to make sure that yours does. It's $4,150 a single person. That is a check. You should write from your business into a specific count called a health savings account that you were allowed to. Number one, you can pay for medical things and there's a whole list of those. We'll have a link for you in the show notes of all the things that your health savings account can pay for. You can also self direct this account. So I don't have a tremendous amount of medical bills today, but I know as I get older that is a reality that will occur. And so what I want to do is put money in there and it all grows tax free. So if I can grow that, put in a small amount of money today, grow it to a large sum of money, and then as I pull it out to pay for it, I pay no tax. That makes a lot of sense to me and it's an investment in my future. It's one of those things my my 70 year old Brett Cole is going to be grateful for the 43 year old Brett or Rose, really the 37 year old Brett to set up a health savings account and self-directed it. The next option up would be I think about my kids education. I don't love 529 plans because they force me to invest in mutual funds or predetermined investment in the stock market that I don't personally believe in. And so I love the Coverdell. You can put up to $2,000 a year per kid. There are some income limitations, and so you may have to find a way to do it or someone else might put that in there for your kids and maybe you reimburse them.

21:33You got a way to do that. But once you get the $2,000 per kid in there, you could self-directed that and again, use this same strategy that the Coverdale it's it's like 529. It can be used for education we'll put a link in the show notes for all the types of educational things you can use. It's pretty broad. It's not just standard, you know, state school or university or private school. There's things you can be super private, high school, there's lots of different things. You can go there. And so again, I'm going to have expenses for my kids to go out. Would their place that money today try to get an outsized return betting in the things where I have an unfair advantage and then use those funds later as opposed to paying the tax today inside of your business? Right. When you look at inside of the business or their personal expenses, one of the exercise is I would have you do is take all of your personal expenses, go and download to excel if you'd like a chase or one of the major credit cards, most will allow you to get those into Excel. And I would sort it by the largest personal expenses you have and sit down with your CPA and ask the question, Is there a way legally that some of these are actually business expenses or what activities when I need to change or what do I need to do differently so that this would be a valid expense in my business? There's some things like that are on the edge, right? As an example would be, I know some CPAs would say, Can you write off playing golf every Friday at a men's league? And I think some CPAs would say no. And I'm sure many of you can come in the comments and I've had another video like this where I got blasted online.

23:01However, if my networking group is literally passing referrals back and forth and handling business and I can document that, I go to this group and I generate $135,000 in revenue from that group, I feel confident that my CPA and the IRS. Right. Would agree that is a necessary expense in the course of business. I'm actually making money now. If you join a tennis class and it's a solo thing and you've never made any money from that, I totally understand and are willing to walk on the beach and do yoga by myself, you're probably not going to be on the right off your yoga mat call now. You might be able to pay for the yoga mat from your health savings account, the self-directed. Ooh, check the shownotes to see if that's valid, but you may not be able to write off the actual yoga through your business. So look at those personal expenses. What would need to be true so that this expense is valid. There's a great one of the best books to get you thinking about tax deductions is Tom Will writes, Tax Free Wealth, the second edition. He also wrote, If you want to be more on the tax side, win Win Wealth Strategies is his newest book. But it gives you it doesn't. It tells you some strategies, but it more tells you how to think about deductions. Think about the tax code is a playbook in something you can utilize more to get more, to get more deductions out of your business. Next thing I look at inside of any business is see if your business qualifies as a specialized trade or business. And the question you want to ask your CPA is, are you maximizing 199? Are you maximizing it? Everyone will likely be getting it, but it may make sense to increase your payroll, which provide you other opportunities, whether in your it could be in your solo for one K or your cash balance plan.

24:44As your payroll goes up, you can likely fund these things at a higher level. So are you maximizing 199 A There's a ton of math to it. We'll drop a link that'll show you more info and you can walk in your CPA and make sure that math is working out as a function of your net profit and the amount of payroll you have in your business. But if you're a specialized trade or business like we are as real estate agents, you can get a 20% deduction on your net, on your income, provided that certain wage limitations are met. It's a ton of math. It's super nerdy. Just go to there. Make sure your CPA doesn't just say you're doing it because everyone's probably doing it. But are you maximizing it to the to the maximum extent that you can? The next is my favorite called the Agusta Rule. One of my favorite stories is which Cole already knows where he's going. We teach the Agusta rule, and one of our attendees said, Brad, the Augusta rule does not work. If you are not living in Agusta, which is unbelievable. And I was like that very few offenses of the CPA, a firable offense that is 100% fire your CPA, get rid of them because they are a moron. You it is absolutely not has nothing do with Augusta. So the Augusta rule is Section 280A of the IRS tax code. Again, we'll drop a link for you there. You can read it right on the IRS website. Here's how it works. All these guys and girls that live near the Masters golf tournament, Augusta wanted to rent out their homes. They want to rent them out 14 days per year at tournaments coming in there. And I want to pay no tax on the money that I receive as rent. Awesome. Would we all love to have pockets of money that we don't pay?

26:15Well, they lobbied for it and they got it passed into the tax code. It's Section 280A. So what it says is you could rent out your home to your business for business purposes up to 14 days per year. The business gets an expense, so they get a deduction that applies at your normal tax rates. And as an individual you receive that income. You pay no tax on it. The way this needs to work is you would go out and find a hotel that's reflective of your home. And if you're going have a meeting, let's say you're going to go to a hotel and I need a 20 by 40 room, I need a projector or something. I could have slides on and have a meeting here. I'm going to need food and beverage minimum throughout the day. We're going to have different presentations, 20 microphones or whatever we need, and we're going to bid from that hotel. Once I've got that bid and let's say it's $3,000, $3,000 per time, I could do that if I had meetings at my home. Now there's going to be real meetings you're having. They've got an agenda, they've got a purpose, They're necessary business meetings that you would be having somewhere else, and instead you're having them in your home, which is a bigger facility. It offers more more options, more amenities in your standard hotel. So if you did that to be $3,000 per time, up to 14 days per year gives you a $42,000 deduction, that business would pay that to you. You have even signed a lease and document and get with your CPA on the exact process they want you to follow here. But if you're in the max tax bracket, just the federal portion of 37%, that would save you $15,000 per year, not one year, but all of the years that you do this. And so it works on your primary residence.

27:53It works on a second home that does not have other rental income. Again, if you rent it one day as an Airbnb, which again, if you haven't watched our video on Airbnb, I can tell you that I'm Anton. I'm still looking for the person that's crushing it. It's actually one of proven and Shiller tax returns. If you are that person who's crushing on Airbnb, reach out to us and be wealthy. Brett, we'd love to hear from you. And if you can document and prove that you're absolutely crushing it, meaning you would show your penal and tax returns, we might hire you to come in and actually teach some of our people. So I put that out there many times. Call we have yet to have the person take us up on it. Everyone is crushing it, yet they get real quiet when you ask them to see their tax return. I know why that is, but so the Guster rule, your second home, you could do another 14 days provided that you're not running it and you are having the meetings. They're completely valid deduction, something that you're likely already doing but not taking advantage of it. Next, let's look at entity structure. Are you taxed as the right entity? A lot of people watching this, you're going to be an asked corp and SE corp's are so overused and I didn't really understand the negative parts. The positive are you get to avoid some some self-employment payroll issues you can on the you're going to pay yourself a W-2 a reasonable wage and then any of the dividends you take out, you don't have the self-employment tax due, which is why a lot of people do. That makes a lot of sense. Here's where it goes bad. You do not want to own hard assets inside of a sub s corp. You can, but when you move them outside of it, it triggers a taxable event. Super nerdy. Bottom line is make sure you got the right entity for the right purpose and you're going to buy a bunch of single-family rentals.

29:27Probably an LLC. Taxes. A partnership is the best strategy, but think about how that's going to be owned. What LLC owns that? How does that link up to your trust? You need to make sure that the entities that you have are set up correctly. They're set up to maximize taxes and you understand that the current setup and when you're buying something new, you need an advisor like, Hey, I'm gonna start a new business. It's good to do x y widget factory. Where should it fit in my current structure? Next, we'll talk about paying your kids in Fort. So this year, 2024, you can pay your kids $14,600 and that money would come out of your business and into the family. Mainly go right into their checking account so you can pay your kids up to the standard exemption. There's a certain amount of money which we'll find out here in a minute. And you could pay your kids that amount of money would go. You would come from your business and you might you'll want to set up a family management company or a way that you can there's a way you can avoid the payroll taxes through a specific structure. And we'll give you a link on how to do that. Once that money's in there, they can now write. They need to actually be doing work for your business, so your kids must work there. We've got a list of a ton of jobs that they can do, which we'll give you a link to that. All of these different jobs your kids can do, your kids may already be working the business. We just need to document it, make sure the work makes sense for the compensation they're getting provided. They're doing a lot of work that's valuable that warrants it. You can pay them that $14,000 number. That money goes right in their account. Now that money's in there, they can pay for things like cheer football, horseback riding, all the personal stuff, all the stuff your kids do.

31:01You're kind of getting a write off on it because it's coming from their account. It also teacher responsibility. They can use their debit cards and pay for those things. Level two of this is now your kids can go out because they have earned income. They could set up their Roth retirement account and this is where it gets to be crazy. So I'm going to do I'm going to go to our be wealthy calculator and plug in some numbers here. But if you pay your kids, I started paying my little guy when he was seven years old. And so we're going to put it here. I did it to be 65 years old. He started with $6,000. We'll see. Funded as Roth, and he's going to put in $500 a month and he's going to get 12% interest. He's going to do that for the equivalent of was at 58 years. I'm just going to run it. I'll make it and even I'll just make it an even 60 years. So I went from seven years old to 67, started with $6,000. It's $500 per month he's going to put away. I'm going to do that until he turns 18. It's up to him to do it from there on. And if he gets 12% of his money, how much money is that call guessers online. Do you want to guess how much money it is? Do you crazy? Let's say $5 million. That is a great guess. And that would be it's only $500 a month. So I would see how you might guess $5 million. So here's the crazy part. It's because it's 60 years. It's $72,323,096. That's what that's when I set goal. So the total contribution is really 366,000. That's the amount of he would put in. But because of the time horizon, because it was that long, 72 million, this is the point where I want to look at my parents who will never see this because it's on YouTube.

32:40Maybe it was on Facebook. My mom would be the first like, but because it's on YouTube, they'll never see it. But guys, we should have had some financial tools. I wish you were a part of be wealthy. I wish this podcast existed when I was born in 1980 because what a gift. If I were. Add that if someone gave me 72 million call, it would have solved a lot of that tricky guesswork from that 0 to 72. But so getting your kids going now, the next part, the last part is the learning piece. Make sure if you're doing this, spend the time, educate them on the returns. What are they invested in? In the beginning, they're going to small dollars. So if you've got multiple kids, I've got three. I took all of their individual accounts combined using I work with my custodian and we'll give you a link to those. I combine them all into one. So now they've got $18,000 in a single LLC. They can invest alongside you in deals. So if I'm buying a home as an example for $100,000 and let's say they've got 18,000 in their self-directed Roth accounts combined, I could come in as an individual, I could come with my Roth, I could buy that. So they would be one of the 18% of the purchase price. They would literally read on the deed 18%. My kids LLC, 82%. Brett Tanner LLC, Roth LLC, or whatever it is, they can invest alongside me. The money's got to go in as a percentage, got to come back out as a same percentage. You cannot have prohibited transaction.

34:01There's rules you have to follow, but it creates a really cool way for your family to start investing together. You're teaching about wealth at a young age and you could have different conversations every every month or every quarter. I make my kids run the returns on their Roth to see what they're actually making next to think about investing. Right. Where are the real estate investments you can make to grow your business? The best one is do you own your own building? If you don't own your own building, doesn't make sense. Do now offices a little soft is we are looking at 2024 are some employees are not coming back but depending on what type of office you're in, can you get a bargain? Right? Does the office market soften more in 2024? You could buy your building over time or rents will go up. One of the reasons I love buying the real estate that my companies occupy is it allows me to lock in my long term housing and then over a 20 or 30 year period over financing period, it all to me is paid off and now I'm just getting that as cash flow or I and I and usually if I sell the business or move, I always keep those buildings and rent them out to someone else. Additionally. Right. We've talked about depreciation costs SAG. If you qualify as a professional real estate investor, buying real estate becomes one of those tools that allows you to create more wealth buying real estate if you buy. And there are people that make millions of dollars every single year that pays zero income tax because they buy a lot of real estate. No, it's not because they're tricking the tax code. No, it's not because they're bad people. They're not the wealthy that are just scamming the system. No, they followed the IRS rules, but millions and millions of dollars worth of real estate and the depreciation from that they get to write off against their earned income. The government wants investors, you and me and all of us to provide housing for others.

35:40It's one of the things that they're focused on because they cannot solve affordable housing. So we buy, they incentivize us through depreciation and other incentives in real estate to do that. If you're going to get cost segregation or you're going to invest in real estate, you will need a cost segregation. It very every commercial building, nearly all of them utilize kiosks, every commercial building it. It's not that popular in residential. Wasn't until we started talking about about five or seven years ago, and the challenge was finding a great company that would do a cost segregation, that didn't charge a fortune to do it because they charge you $5,000 to do a cost segregation on a single family rental. Unless that rentals $1,000,000 rental, it's actually not going to make sense. Well, we went out and found a company that really they specialize in they specialize in single family rental cost segregation at a price that makes sense. It's our friends over at US Tax Advisors Group will give you a link directly to them in the show notes and you can reach out. They'll give you a free proposal. You go to them, you tell them your basis. There's a little bit of information they need. You can actually go back in time. So if you bought a rental property any time after October one of 2018 is when the tax law first changed around bonus depreciation and we're back down to 80%. I think it might be 60% this year, but there's still significant bonus depreciation if you bought a rental property after October one of 2018 and you qualify as a professional real estate investor, it would almost always make sense unless the purchase price was so low, like 20 or 30 grand that it would make sense.

37:15I would tell you, no matter what, go get a free proposal from our friends at U.S. Tax Advisors Group. Take that to your CPA again. You've paid nothing. Hey, if I went and did this, here's what it costs. What would the tax benefits be to me? And then make an informed decision for your unique situation alongside your CPA in nearly all the cases, I can tell you it does. We could give you hundreds of testimonials of people that come to one of our events and saved hundreds of thousands of dollars in taxes. It is one of the vehicles to help you create wealth is maximizing your tax bill and it's hard to beat bonus depreciation when you look at it that way. As an example, some buildings have much more depreciation than others as we sit here, as in 2020 for gas or you'll use car washes and gas stations have the majority of their property fits into a shorter time frame. So when you do a cost segregation instead of depreciating, the property is a residential house over 27 and a half years or as a commercial property over 39 and a half years, what's called straight line, the same amount of depreciation every year. You're accelerating it and they're breaking that house down into five year, ten year, 15 year. There's different property lengths of time. They're breaking down that building into, well, car washes and oil and lube stations fit into a much shorter time frame. So just to give you an example, if I went in, let's pretend that I had $720,000 in income in and that's what I was going to make in 2024 and I wouldn't bought $1,000,000 car wash. And let's assume that 90% of that purchase price was building and 10% was land.

38:48So 9000 is the purchase price of the building in 100,000 land. Again, it's a million our purchase price. We're going to figure out and work with your CPA which portion is building and land. The more portions building, the greater the cost. Segregation Early on, if that was the math, 80% of the current building price, the 900,000, which is $720,000, you could depreciate in year one, which means if I made seven $20,000 and I bought that million, our car wash kaboom. Cole I would pay zero zero tax in 2024, all because I chose to do that. Now, I don't wanna be in the car wash business per se. I'm not opposed to it. I want to buy the real estate lease it back on a triple net basis. The car wash. You can go to LoopNet and go find some of these. Let's even put a link call as an example of one they could see right on LoopNet is a car wash. Probably you will find ones like a 6% cap rate. That's pretty standard triple net. But it now again, it's a 6% cap rate. It's not a crazy return, but it's net net net, it's going to go up probably 2 to 3% annual increases. Hopefully there's 15 years left on a lease with a great, great, amazing tenant. And again, the taxes in those can make a lot of sense. There's a number of other things, whether it's if you've got a lot of capital gains, you could look at an opportunity zone. Maybe you sold some stock or some investments in your business and you've got a capital gain.

40:10You could start your own opportunity zone fund. And then if you hold, if you make investments from that and hold those ten years, you would not pay tax if you sold them at that period of time. That's beyond what we can get into here in terms of a strategy. But there are tons of ways. And when you get the tax game, it's about where are you at Most of the things that are going involve you investing in things are spending money. So depending on where you're at in your growth and your net worth and your income and your savings might dictate some of the the options around taxes and what you do. But there are options. Everyone should have a tax plan, a strategy, and be thinking about how do I lower my costs? We have a couple questions that we reached out to our put in our Facebook group, our be Wealthy podcast dot com or B wealthy bread is the Facebook group and we're with you've got questions you can ask those and we will answer some of those live on the podcast here Episode 0005 call going very very strong. First question comes from Tom out of Cincinnati. Out of all the tax strategies, where would I start? First, I would start with the low hanging fruit. Where are the easiest ones? Augusta Rule If you're already having meetings, move those your home. If you've got the expense side of things, go look at your expenses. Are there things in your personal world or things you're spending money on that you could come up with the way with your CPA to make those or change those expenses? Can you change the facts, as Tom Wheelwright says in his book, to make that an expense? One example is just if you're vacationing somewhere, you're having a corporate retreat every what have you bought that property and you or you bought a business in that area, can you now expense some of those travel items as you go back and forth?

41:55The airline tickets, some of the meals, some of those things? Can you think differently about it? I would look at the Roth side of things. I would look if your don't yet have employees the solo for one K and converting it to Roth makes sense if you've got an old 401k converting in self directing, it makes sense from there. Then it becomes looking at your business and where is the best opportunity do you want to buy your building? Is that makes sense today it is. Where can you where can you go from there if you already own things? Maximizing that I would start with what are the easiest things that have the least cost? And then the goal being to build a system out of it. Can you build a system a start of the year, at end of the year checklist? So these are things that once you go figure out the strategy, work with your CPA, you put it in practice. Now with something, just repeat, just rinse and repeat and keep doing it every single year and you can keep adding to it over time. Got a list? There's probably 20 some things we do at the start of the year, 20 some things we do at the end of the year, and it's just a part it's all a function of things we've built over time and we're constantly adding, refining and making it better. Next question What would I do if I'm a solo real estate, solar roof or different? As long as you're a business owner, right? I would look at that 199 and make sure I'm maximizing that deduction because you're sitting already paying. I would go there, make sure that you're set up as the right entity. Right? Do you are you taxed right? Are you following the right structure? You do you have you know, are you filling out the annual reports?

43:22Do you have a PNL? Are you follow the right tax returns? Are you keeping the right records? Right. A lot of so much of the tax game, so much of the tax game comes from just clean records. Having documented clean financials so that you can actually go to someone and explain it. Now, keep in mind part of the tax game, right? There are certain things that your bank is going to look at negatively, certain things you look at positively. So depreciation, you take a huge loss. They have there certain things that are called ADD back. They're going to add back in that depreciation. Certain things are not. So if you write off anything you make no money is going be might make it hard for you to borrow. There was a time in my career where I potentially might have been able to write off more more things on my tax return, but I needed a higher income, so I didn't take the write offs because I needed a higher income to become more bankable. Today, that's that's not the case. And so I'm I want to take up as many write offs I possibly can. Another will be your car, Right. How are you looking at cars if you you can either have actual usage write the gas maintenance, all that stuff, or you could have mileage of fixed rate per mile. Is it? Depending on how much you drive, it may make sense to take one or the other, but having a strategy around your car purchase makes sense. If you're in the roofing business, you had a record setting year and your truck's about to break. It might make sense for you to buy a brand new truck because of it's over £6,000 you get to write off. You could run that entire purchase that year provided that trucks use entirely for business. So there are certain things you might want to look at at the end of the year if I'm having a better year at towards the end of the year, I want to look at how can I pull the next year's expenses forward.

44:59So towards the end of 2023, we look at what are the services and things and expenses we know we're going to have in 2024. Can we prepay those to take advantage of the loss in 2023 and lower our tax bill and then improve probably 24? And so then we'll deal with that problem. Then you're kind of in some ways kicking the tax can down the road into a different year. All right. COLAs are wrapping up here. I think we've given a ton of different ways to think about how you can maximize the wealth opportunity. We will break these down. If you've got additional questions or comments, please put those in the chat. It helps us know what topics to speak about in the future to go deeper. If you're thinking about a health savings account, if you got more medical bills, like there's a health reimbursement account, there are so many financial options and tools and strategies you've never heard of. If you've got questions on the ones we talked about, you want us to go deeper, please comment. We are doing this to open the eyes of folks and show how everyone can go out there and be wealthy. This was episode 0005. We'll be back here next week filming another episode. This is Be Welty with Brett Tanner. Episode 005. Go out, be wealthy, Crush it. Kill it. Boom.