Show Notes – Episode 85
Jesse starts by sharing two of his blog posts in today’s monologue.
The first post, “The Answers are Here, But…”, expands on William Gibson’s quote, “The future is already here. It’s just not evenly distributed, yet.” Jesse draws a connection between Gibson’s quote and the distribution of financial literacy, explaining that The Best Interest is part of the distribution effort. Of course, there are those who distribute bad, or even dangerous information, leading into the second half of the monologue, “How to Avoid Frauds and Ponzi Schemes”. Jesse offers 3 ways we can avoid being taken for a ride.
Today’s guest, Rachael Camp, is a Certified Financial Planner (CFP) specializing in helping solo business owners, offering services with her own business, Camp Wealth, and educating people through YouTube, her blog, social media, and more.
Their discussion centers around recognizing scams and debunking myths circulated on social media, calling out fearmongers, and offering helpful insight into the financial tools available to solopreneurs.
Importantly, Rachael notes what an LLC is, why an entrepreneur may – or may not – want to register one, and who they should consult before making that decision.
Key Takeaways:
- How to find the answers you’re looking for.
- Keeping a lookout for scams – and finding people who’ll help you watch!
- Social media and the myths perpetuated thereon.
- What is a stock option?
- What is a solopreneur? And what financial tools are at their disposal?
- Should you register as a corporation? What kind?
Key Timestamps:
- (01:20) Jesse’s Monologue: The Answers Are Out There
- (06:47) Avoiding Financial Frauds and Ponzi Schemes
- (21:41) Introducing Rachel Camp: Solopreneur Wealth Builder
- (23:11) Debunking Financial Myths with Rachel Camp
- (30:30) The Reality of Social Media Investment Strategies
- (31:17) Understanding Options: A Primer
- (33:52 Exploring Options Trading Strategies
- (36:54) Critiquing Robert Kiyosaki’s Financial Advice
- (43:50) The Rise of Solopreneurs
- (46:31) Business Structures and Tax Considerations
- (51:04) Debunking Tax Hacks and Financial Myths
- (54:39) The Importance of Financial Literacy and Caution
- (1:00:41) Conclusion and Final Thoughts
Key Topics Discussed:
The Best Interest, Jesse Cramer, Rochester New York, financial planner, financial advisor, wealth management, retirement planning, tax planning, personal finance, solopreneurs, LLCs, business structures, incorporation, Robert Kiyosaki
Mentions:
Website: https://www.rachaelcampwealth.com/
LinkedIn: https://www.linkedin.com/in/camprachael/
Mentions:
https://awealthofcommonsense.com/2023/06/the-evolution-of-financial-advice/
https://www.youtube.com/@CampWealth/videos
Transcript – Episode 85
[00:00:00] Jesse: Welcome to the Best Interest Podcast, where we believe Benjamin Franklin’s advice that an investment in knowledge pays the best interest, both in finances and in your life. Every episode teaches you personal finance and investing in simple terms. Now here’s your host, Jesse Cramer.
Hello and welcome to episode 85 of the Best Interest Podcast.
My name is Jesse Cramer. Later in today’s episode, Rachel Camp will be joining me. To talk through some of the funny and scary and meticulous financial advice that can be found on the world wide web, on the internet. Rachel is a CFP who specializes in working with solo business owners, so we talk a little bit about that too.
But first, let’s do a customary review of the week. This one comes from Apple Podcasts. It’s a five star review from Absolute Cat who says, best podcast on investing, personal finance with lots of variety. Jesse’s podcast is great and really pulls together information from so many great sources. There’s so much variety that keeps the show exciting and fun.
If you hadn’t had a chance, be sure to check out his blog as well. Kat, thank you for the kind words for the review and the five star rating. And if you shoot me an email, katjesseatbestinterest. blog, I’ll be sure to send you a super soft best interest t shirt. Before we get to Rachel Camp today and some of the zany, wacky world of financial advice that’s out there on the internet, I want to start with a few articles from the best interest blog that are on a pretty similar topic.
And the first one. is this idea that the answers are all out there, they just aren’t necessarily evenly distributed. And it comes from a fantastic quote, uh, ascribed to the sci fi writer William Gibson, who wrote, the future is already here, it’s just not evenly distributed yet. Now, what exactly did he mean?
Well, The seeds of the internet were planted in the 1940s and the 1950s, they sprouted in the 60s and 70s, the world wide web bloomed in 1993, and that opened the door for most people on earth to adopt the internet over these past 30 years. But you could argue that the internet is actually 70 years old, it just took a while for distribution to even out.
Now, the ubiquitous technologies of 2030 or 2050 or 2100 out in the future, those seeds are likely being planted today and they’re growing today, but they’re just seeds and they’re local seeds at that. I recently heard comedian Jimmy Carr say, We’ve solved the energy crisis already. The problem is, the solution is confined to nuclear submarines right now.
Well, he might be right, and if so, we need those seeds to float around the world, either above or below water, and solve more global problems. Gibson’s quote is brilliant, and there’s a wonderful corollary for personal finance and investing. The answers are here, they’re just not evenly distributed yet. The stuff you learned in school, history, chemistry, that the mitochondria is the powerhouse of the cell, that stuff has been known for hundreds of years.
Those basics are solved. Now granted, there are still unresearched frontiers in many sciences where new knowledge occurs. Math and physics and biology aren’t entirely solved, per se. But personal finance and investing, they pretty much are solved. Pretty darn close to it. The answers are certainly out there.
Track your spending. Spend less than you earn and invest the difference. Diversify. Think long term. Et cetera, et cetera. I’m not creating much new research here at The Best Interest, either on the blog or on the podcast. I’m sharing known ideas in hopefully engaging, entertaining, simple ways. I’m wrapping them in quirky metaphors and publishing nifty charts about those ideas.
But I’m not inventing ideas. Personal finance and investing are solved. Those solutions, though, are far from being evenly distributed. And that’s why I write and why I podcast. And I think that’s why 8, 000 plus of you subscribe to my weekly email. It’s why the podcast continues to grow. There’s far too much noise in the personal finance and investing space, and it frequently drowns out the real answers.
I try really hard to share signal to fight that noise. The answers are known and I’m trying to distribute them more evenly. That’s hopefully my value add here. I’m not creating new ideas, but I’m starting with the whole world of both good and bad ideas and then distilling that down into useful, very good ideas for you guys.
And with that idea, there are a few big takeaways for you to walk away today with. The first one, the ideas are known, but not necessarily to you and me. I read and listen to tons of finance and investing content because I’m still learning myself. There are lots of known answers out there that I simply haven’t crossed paths with yet, but I want to.
And I hope when I find a really good idea, to bring that idea to you. The second idea, or the second big takeaway today, I should say, is all about conversations at the edges. You could argue that finance and investing aren’t entirely solved, especially if you said that new ideas are being discussed out at the edges.
For example, do alternative assets belong in a diversified retirement portfolio? Some people say yes, and some people say no. Not everyone agrees with one another, and there are exciting conversations, sometimes arguments, that are occurring in that particular corner of the investing world. I spend some of my time in those corners, and when appropriate, I write or speak or share links about what is happening in those corners.
I think it’s interesting to know, I think it’s useful to know, especially the more and more serious you get about this stuff, and therefore, I think it’s useful for you all to know. The last takeaway is about the last frontier, and that’s in quotes. Now Ben Carlson, who’s a terrific blogger and podcaster in his own right, Has some great thoughts and he wrote a great post this last summer that we will link in the show notes about the evolution of financial advice.
And one of the main points from Ben’s thought process is that behavior is and always will be the final frontier. Behavior will always be the final frontier. In other words, what he’s saying is that the math of finance and investing is more or less solved, but the human brain will forever be an enigma.
Creating content about investor psychology, about money habits, that kind of stuff, it will always be essential and valuable. If you agree and find the best interest helpful, all I can ask is that you share my work with others in your life to distribute these answers more evenly. The blog is still growing, the podcast is growing like crazy, the weekly newsletter is now up above 8, 000 subscribers.
It’s awesome. It’s fantastic. I can’t thank you guys enough. And I’ll keep working as long as it’s helpful to you. The best signal that I receive is that this project continues to grow and that many of you reach out with kind words, with questions, with suggestions, and I greatly appreciate all of that. So let’s continue to invest in knowledge together.
And now switching gears a little bit to continue on the theme of bad financial advice or crazy things that are out there and signal and noise. I want to read to you from an article I wrote last summer. And the article’s called, How to Avoid Frauds and Ponzi Schemes. Because just a short drive down the New York throughway from my home of Rochester, a couple different interesting Ponzi schemes occurred, or at least started to unravel, last summer.
Now Hamilton, New York, it’s a cute upstate town best known as the home of Colgate University, but it’s also the longtime home of a guy named Bert Marshall, who ostensibly earned his living as a tax preparer. And an insurance agent and also a local landlord and some sort of real estate investor, but he’s now under investigation for owing 90 million to nearly 1, 000 individual investors.
Does Marshall have that money? No, he doesn’t. He has at most 21 million in assets, although more recent news and more recent court appearances have shown he actually might have less than 10 million in assets. Now, where’s the money? Who knows? No one really knows where the money is. His investors are screwed.
And they will likely only receive at most 25 percent back of their original investment. Some new reports are actually saying they’re going to receive less than 10 cents on the dollar back. Now, and it begs the question, why would they invest with Marshall in the first place? And what exactly were these investments?
Well, I’ll tell you why. The investments were all real estate based, right? Give Marshall your money and he will go and buy real estate. He will manage that real estate. He will collect rents and you will receive the proceeds. But the reason why they invested in him is because he promised them guaranteed 8 percent returns.
Guaranteed. Well, that’s scary stuff. And we’ll come back to this idea in a minute. But for now, we’re going to drive a little bit northwest from Hamilton to another small upstate town, Hannibal, New York. I grew up five miles west of Hannibal in a little town called Red Creek, played baseball and basketball against Hannibal athletes my entire childhood.
And unfortunately, Hannibal is in the news for bad financial reasons too. A recent state audit revealed that the former treasurer of the Hannibal Volunteer Fire Department stole 850, 000 between 2016 and 2022, possibly more significant funds before that period. That’s taxpayer’s money. And as the truth unraveled around him, the treasurer walked into the woods and he committed suicide.
It’s nasty stuff all the way around, but it begs some important questions. Namely, how do we as individual investors avoid Ponzi schemes and other types of common financial frauds? Well, the first pro tip up front, if you guys don’t have two factor authentication on as many of your online accounts as possible, You need to change that immediately.
At work, I run a podcast called the Trusted Partner Podcast, where we interview experts in the world of wealth management, financial planning, investment management. And we actually hosted Gary Rossi, who’s the head of cybersecurity at Fidelity, Gary’s number one piece of advice to individual investors.
It’s not complex at all. It’s amazingly simple. In fact, it’s to ensure that you have two factor authentication on all of your online accounts. It’s that simple. So as far as avoiding frauds go, or avoiding any sort of like hack cyber security type thing. Two factor authentication all the way. Now, when it comes back to some of these more old school schemes and frauds like Ponzi scheme, one of the biggest tips that I can offer you all is to make sure that you have independent third parties.
That is vital. In both the Hamilton Ponzi scheme and in the Hannibal Fire Department fraud, A neutral third party would have prevented the frauds in the first place. In Hamilton, which was the, the 90 million real estate related fraud, a third party custodian would have allowed these investors to see their account values without any interference or any interaction with Burt Marshall, the fraudster.
This is vital. Bernie Madoff, for example, did not use a third party custodian. The only way for investors to see their account data was to say, you know, Hey Bernie, could you send me a statement please? It makes fraud way too easy because all Madoff had to do, or all Marshall had to do in Hamilton, is fudge the numbers and send the investors a document that essentially has lies in it.
As a counterexample, right, any fiduciary wealth management firm out there, and I’m using my own firm as an example, they’re required by law, by federal law, by the SEC, to work with a third party custodian. We personally work with Schwab and with Fidelity. As such, all of my clients, they receive statements from Schwab or Fidelity that are independent of any information or any statements that I give them.
I can’t meddle with Schwab’s or Fidelity’s statements. The clients don’t need to go through me to get those statements. That’s how it should be. If there’s ever a discrepancy between what they receive in their statements and what I tell them, I hope my clients will reach out to me and say, Jesse, what gives here?
Now, at the Hannibal Fire Department, the third party should have been an independent auditor. For years, the department treasurer there, the fire department’s treasurer, was allowed singular access to the books. He reviewed things with the department’s accountant, but they were friends too, and thus the accountant didn’t apply the same level of professional scrutiny as he did with his other clients, and that’s a quote.
Another screaming red flag was that the fire department was also required to have an independent financial audit every year because its budget was over 400, 000, but it never did so. There was no third party. There was no one who was independent of the fire department. Everyone was friends, and thus, a crime, a fraud against taxpayers slipped under the cracks for years.
The lesson here, make sure that there are third parties, independent third parties involved whenever necessary. The second pro tip to avoid these kind of schemes and frauds is to do your research and to understand what is going on. Before investing in any opportunity, we should be conducting extensive research, right?
And investment and knowledge pays the best interest. Look for information online, check reviews, verify the legitimacy of the business or the investment opportunity. Be cautious of deals that promise unusually high returns with little or no risk. There is an intrinsic relationship between risk and reward.
It’s something we’ve talked about here many times before. And any investment that violates that relationship, it should be viewed cautiously. If you have an investment that promises a huge amount of reward with a very little low amount of risk, something is fundamentally wrong there, or at least there’s something to be very suspicious about.
And it requires you, it begs of you to do more research and to make sure you really understand what’s going on before you put your money into that kind of investment. Make sure you fully understand the business model of or the economics that underlie the investment. If the details seem vague or if the details just seem overly complicated, it’s time for caution.
Last and perhaps most interesting, we need to know what these schemes often look like. And I’m going to walk you through a few different common types of schemes right now. Just to describe them in brief and inform you of what these schemes look like just so that you can be on the lookout. So first Ponzi schemes.
If you’re not familiar, a Ponzi scheme is a fraudulent investment scam that promises high returns with little risk to investors. But instead of generating profits through some sort of legitimate business activities, the scheme uses funds from new investors to pay returns to the earlier investors. As long as the early or the older investors remain relatively content and they don’t want to pull their money out, the scheme will continue to grow.
But eventually, some sort of event will occur, not if, but when, it will occur where too many investors want to access their money. And without sufficient new money entering the scheme, The whole fraud collapses. So that is a Ponzi scheme. Next, we’re going to describe affinity frauds. Most Ponzi schemes actually grow as affinity frauds.
And an affinity fraud, and the focus, right, the keyword there is affinity, is a type of scam where fraudsters exploit trust. They exploit trust within a specific group or community, such as a religious group, an ethnic group, or professional circles, to deceive individuals into investing money. For example, something we talked about today, Hey, everyone else in this cute, cozy town, Hamilton, New York, they’re all trusting me.
You should trust me too. That’s an affinity scheme. People like us are doing things like this. It’s very common, and it’s used, affinity is used in good ways in a lot of this world, right? Tribalism, so to speak, doesn’t have to be a bad thing, it can be a good thing. People like us do things like this. I suppose many of you listening to The Best Interest right now, I mean, we have many things in common.
And there are reasons why you trust me, because you say, Oh, I’m in a circle of like minded people with Jesse, and we trust Jesse. But, we need to be careful, and I would encourage you to be careful of me, right? Do your due diligence against me. Because we don’t want to blindly give our trust to someone unless there’s real evidence there that they’re providing some sort of good in the world.
Affinity frauds combine two powerful effects described in Robert Cialdini’s best selling book Influence. The first effect is social proof. If they’re all doing it, I should do it too. It’s a very common human trait. And then the second powerful effect is the authority effect. If a person is well liked, if they’re trusted, if they are a smart, upstanding member of the community, Well, then of course I should trust them.
And in this case, in Hamilton, New York, the fraudster, Marshall, he was a longtime business person. He ran a successful tax preparation business. He ran a successful insurance business. A ton of people knew him. A ton of people were already investing with him. And the scheme, the fraud grew that way. It was word of mouth used in the most negative, fraudulent way possible.
Okay, the next type of scheme after Ponzi schemes and affinity frauds. The very well known, the very common pyramid scheme. Pyramid scheme, it’s similar to a Ponzi scheme, but it relies on recruiting new members rather than investing new money. Be cautious if you’re asked to recruit others to earn money for yourself.
So right, a very common pyramid scheme might be, um, one where you are selling some sort of product, and of course if you sell product, you do well for yourself, but you get even more money if you recruit other people to sell that product. Tch. And then if those people recruit other people to sell that product.
And next thing you know, you have this hierarchy that, when you draw it out on a piece of paper, resembles a pyramid of a few people at the top and many, many people down below. And a lot of the money moves up that pyramid. The next thing to be wary of is any sort of guarantee, right? Any investment with a guarantee should be eyed suspiciously, especially if it promises a large return.
The Hamilton New York scheme, for example, it promised an 8 percent return. at a time when the U. S. government, the bond yields were only at 2%. So how can this investment have four times the return of the U. S. government with the same exact level of risk? All I’m saying is that it’s worth suspicion. And I think if you really look under the hood at any sort of guaranteed investment, you’ll find that they aren’t as guaranteed as maybe they’re being marketed.
The next thing to keep your eye out for are pressure tactics. While high pressure sales pitches are not illegal, fraudsters often use high pressure tactics to rush you into making a decision without giving you time to think or do your own due diligence. You should be skeptical of anyone who insists that you must act immediately.
It takes time to build genuine wealth, right? It takes effort. It takes consistent financial planning. Be wary of any sort of schemes that promise quick and easy riches. Another thing to keep in mind, just a great question to run by anyone’s offering you any sort of investment is the question, Are you a fiduciary?
It’s not guaranteed to get you positive results, but it’s probably gonna push you in the right direction if you ask someone, Are you a fiduciary? When Jason Zweig wrote the 19 questions that you should ask a financial advisor, a great article from the Wall Street Journal a few years ago, his most important question was, Are you a fiduciary?
And will you state that in writing? A fiduciary is legally obligated to work in your best interests. Many financial professionals are not fiduciaries, and working with them means that they might put their own financial interests above yours, or at the very least, there will be competing financial interests, which doesn’t always ensure that you’re going to get the best advice for you.
Now, it is worth taking that a small step further, and depending on how much financial content you listen to, you might be aware of this. Even that question alone is no longer truly sufficient. Are you a fiduciary? It does tend to weed out some of the chaff, right? It does tend to separate some of the signal from the noise.
But more and more, there are fiduciaries who have many different views. Let me put it that way. Ten fiduciaries in a room. Yes, they are all fiduciaries in one way, shape, or form. You could put all of your financial puzzle pieces out on the table and say, hey, put together a financial plan for me. Tell me what you think is best.
And you’re going to get a pretty wide range of results. A pretty wide range of advice. Is some of it bad? Is some of it good? Well, I suppose that’s in the eye of the beholder. I think you’re certainly going to get some advice that I personally would disagree with and that’s kind of interesting. For example, there are a couple of fiduciaries who I know, they’re CFPs, so as a CFP they have to uphold the fiduciary standard and they push annuities on almost all of their clients.
Okay, to me, that’s a bit of an issue. I don’t quite see how that works. So all I’m saying to you listening is yes, you should be asking people who offer you investments, are you a fiduciary? That should be one of the questions you ask. But even then, there need to be more questions that can’t be the one and only question because it does separate a lot of the wheat from the chaff.
It doesn’t guarantee that you’re getting the best result that you can get. Of course, none of us want to be taken in by a fraud. Hopefully, these kind of tips and tricks might help you out, might help a few of you out. And if you do come across a potential fraud or Ponzi scheme, report it to your local law enforcement or financial regulatory agency.
Reporting these kind of activities can help protect not only you, but others from falling victim to a scam. We can help each other out. Here’s a quick ad, and then we’ll get back to the show. Every week, I send a quick free email to thousands of readers that shares three simple things. One, my new articles and podcasts.
Two, the best financial content of the week from all over the internet. And three, a financial chart that explains some important concept in the news that week. It’s a great primer to boost your financial know how.
[00:21:14] Justin: Ah, but Jesse, I don’t want another email.
[00:21:16] Jesse: Well, this might not be for you. But I do hear you, which is why I make it very short, sweet, and full of only the essentials.
A whopping 66 percent of subscribers read my email at least once a month. They’re enjoying it, and maybe you will too. You can subscribe for free. On the homepage at best interest dot blog. Again, that’s a free no strings attached subscription at best interest dot blog. And now Rachel camp is going to be joining us on the podcast.
Rachel is the founder of camp wealth. She’s a CFP camp. Wealth is her solo financial planning practice. And she’s a graduate of the Indiana university Kelly school of business with a degree in finance. Hey, my wife, Kelly also graduated from the Kelly school of business. And Rachel, as you’ll hear, specializes in working with solopreneurs.
Solopreneurs, they face kind of unique financial challenges in the combination of their personal financial planning, their family financial planning, but also their business’s financial planning and tax situation. And so Rachel focuses on personalized and early planning to help her clients become financially independent.
Rachel also has grown her practice immensely through social media. And whether it’s on YouTube or LinkedIn or Twitter, Rachel puts out a lot of useful tips and tricks and she puts out some really fun videos, including some content where she debunks a lot of the most common scams or frauds or just bad advice that can be found on the internet.
And we focus on that today. So without further ado, here is Rachel Camp.
Rachel, thanks for joining us today. And as I alluded to in your intro, which you haven’t heard yet, you are a CFP, you’re a fiduciary advisor, and you’ve been using online content, social media content, YouTube videos as a big part of your business. And just because you’re spreading very valuable education that people want to hear more of.
And I saw a recent, I think it was a YouTube video that you put out that had some very fun, unique financial advice that you as a CFP decided to give some commentary on. So I thought maybe we could review some of that today. Maybe the place to start with is those people on the internet who claim that 401ks are a scam.
What exactly is the logic or the false logic behind this idea and why and or who is pushing this bad idea?
[00:23:38] Rachel: With every decision, if somebody’s selling something to you, I’m always a fan of trying to figure out the incentive, right? So if somebody is telling me something that goes so strongly against traditional financial advice, it should send up a flag to say, why is this person saying this to me?
So not surprisingly, there is a group that is consistently calling the 401k a scam. Now I’ve seen other people do it as well. But they, there’s always some incentive. It’s because if you don’t put your money in the 401k, well, they have an option for where you can put your money and it’s a much better option and that’s what they want to sell to you.
So Jesse, I’m sure you see this as well, but it is often insurance sales people that we are seeing say the 401k is a scam because again, if you don’t put your money in the 401k, you can redirect those funds elsewhere. We can get into exactly what they’re saying as far as You know, tax efficiency with what they are selling versus the 401k.
I often see the 401k big tax bomb argument quite a bit, where they’re saying if you have a million in a 401k, you don’t really have a million because, you know, you’ve got to pay something like 30 percent to taxes on it, so really you have 700k. And they’re using this very weird scenario where somebody is pulling out a million from their 401k all at once, which I have never seen happen.
It’s a terrible strategy. I’ve never seen an advisor recommend that. But it’s starting with just that strategy alone is just completely illogical. And that’s just one example of, of something that they say that doesn’t make sense.
[00:25:16] Jesse: So I like where you started. It reminded me of a great Charlie Munger quote, Show me the incentives and I’ll show you the outcomes.
And the idea there is that if someone is selling, say, a whole life insurance or an indexed universal life insurance policy or strategy, which comes with a really, really, really big commission for that salesperson, well, all of a sudden they’re going to be incentivized to say many different things that could possibly lead to the sale.
Even if the thing that they’re saying isn’t exactly truthful or honest. And I think that’s some of what we see. And, and it’s too bad. Cause I actually think. Maybe this isn’t true for everyone out there, but some of the insurance salespeople who I’ve seen, say, on TikTok, like one of the videos I saw you use, they tend to be either younger or newer to the industry.
And a lot of times they’ve been through training where someone higher up in their company has told them, No, no, what you’re doing is good. What you’re doing is right. What you’re doing is beneficial to people, and 401Ks really are evil. And so yes, they build these straw men, as you were describing that one scenario of pulling a million dollars out all at once, and therefore putting yourself in one of the highest federal tax brackets.
Something that would almost never be advised by a real CFP in a real situation. That’s a straw man scenario, right? You’re building up some fake scenario then just to punch it down. I know, I know one of the other arguments that’s made has to do with taxes and has to, has to do with life insurance and the lack of taxes on a whole life insurance policy, but maybe we can just quickly sidebar into term life, whole life,
Sure.
Your personal thoughts on if one is more beneficial than the other. I know I have my thoughts, but I won’t, I won’t try to bias you there. And then, right, is there any sort of like hidden tax strategy that has some, some big benefit from life insurance?
[00:26:55] Rachel: Yeah, I find the tax efficiency argument really funny because, Jesse, I don’t know if you’ve ever seen these policies, but I used to work exclusively with retirees.
So I actually had, at times, people come in and they had a whole life policy that had been enforced for 30 years. So it’s amazing because I actually got to see what this policy did and if it lived up to all of the initial claims. And inevitably, the clients were always frustrated because it did not. The returns on it were awful.
And that’s one of the problems is that it’s sold as a investment product rather than insurance, which is what it is. And so when we looked at the returns of these policies that had been enforced, They were terrible. And adding tax efficiency to that, I always like to say, well, a zero dollar or zero percent return is actually super tax efficient, but you wouldn’t want that, would you?
So I am happy to pay higher or more taxes on something if the return is going to be better. Tax efficiency is just one part of it. The common saying is, don’t let the tax tail wag the investing dog. So yes, tax efficiency, we need to look at, and they have a point that there is a tax efficient component with it, but I don’t think it’s worth it when we consider the overall returns, the expenses with this product just doesn’t make sense most of the time.
Now, at my first job, I actually used to work with ultra, ultra high net worth families. And so there were times where we used permanent life insurance for estate planning purposes. It is a way to pass on money in a tax efficient manner. Can certainly make sense. But for the vast majority of people, this strategy does not apply to them.
[00:28:40] Jesse: And I love that you pointed that out because that’s a sales tactic that I see used. where someone will say, this insurance strategy is used by the ultra rich. And they’re kind of right. If you’re flirting with that, what’s that? The state tax limit right now is around 26, 27 million dollars at the federal level as a married couple.
If you’re flirting with that total level of wealth and you’re planning on handing down assets to your children, there can be strategies in which some sort of permanent life insurance policy actually provides a benefit to you. So yeah, in that way, the ultra rich are using it. But if you’re under that limit, which 99.
9 percent of us are, well, okay, you don’t qualify, basically, right? You don’t need that kind of benefit. As we’ve talked about on the Best Interest Podcast before, just about every scenario merits, at the very least, starting with term life insurance. You probably shouldn’t mix your insurance and your investment products all in one.
There’s no need for that. Speaking of investment products, Rachel, what about my new options trading strategy that returns 5 percent per week? I mean, can you sign up for my course or do you want to learn how to trade options? What is going on with all these people on social media who are trading options and somehow obtaining ridiculous amount of investment return?
[00:29:54] Rachel: Yeah, what happens when they say, Here’s my course, you can do it too, is that they’re making more money on you than they are on their options strategy. That’s the simplest way to put it. But yeah, no, anytime I see these, these trading strategies, and you know, we can go into what options trading is, there’s so many different strategies there.
And there’s a lot of complexity. And that’s kind of what they hide behind, right, of how complex it is. And That they can explain it to you and how to, how to make it work. I saw a statistic, I meant to dive into it, but I saw one the other day that said only 5 percent of option traders actually make money.
So 95 percent of the people are not making money. I need to still look into the validity of that, but it doesn’t surprise me. And so anytime I see people on social media talking about a strategy that they have that you can have access to if you buy their course, An immediate red flag should go up, because if they had this really effective strategy of making 5 percent a week, which is insane, that is a, a great return, they would not be sharing that with you.
They would be keeping that information to themselves. If anybody had a individual stock picking strategy that was beating the market or working really well. They would keep that to themselves or they would only give access to it to a certain amount of people and they would make money on that. They would not turn around and sell you a 300 course.
It just doesn’t make any sense.
[00:31:18] Jesse: I definitely want to come back to that idea, but let’s quickly just touch on for those uninitiated. What exactly an option is, right? I think most people know it has something to do with stocks, kind of, but what exactly is an option? And then, you know, what would one of these so called options trading strategies might look like?
[00:31:35] Rachel: Yeah, so an option is aptly named because it’s an option to buy something. So an option to buy a security. So rather than saying holding Apple stock, you could buy an option, a call option for the option to buy Apple stock. Now, that comes at a cost to buy the option, so you pay for that, and then you exercise the option if it is in the money, if it makes sense to do so.
So it can make sense because if you want to, if you have a hunch that Apple stock is just going to take off, then you might buy a call option and then gives you the option to buy Apple stock, say, at 85, but you think Apple stock’s going to be at. Now you’re making a much bigger profit because you’re buying in at a lower amount.
Compare that to the person who just owns Apple stock, sure you might not have that same upside potential. But imagine if Apple stock just increases by 5 and it’s not in the money for the person who bought the call option, then the option would expire on exercise, but you, as the person who owns Apple stock, would still hold it and have some profit.
So, I hope that makes sense. I know it’s a bit confusing, but that’s, the call option I think is one of the simplest ones to look at.
[00:32:56] Jesse: From what I remember of learning about puts and calls is, yeah, that idea that You want to give yourself the option to potentially buy or sell a security at some future date, and you’re kind of making a weighted bet.
You have to pay a little bit of a fee up front in order to secure that optionality for yourself, but then you’re making a little bit of a weighted bet on whether the price will go up or down in the future. And in some cases, and this is where again, for what it’s worth, I don’t use any options myself and none of our clients that I know of here use options.
Like we don’t recommend options strategies at all. But again, you can, you can almost think of it as some types of options are pretty aggressive. Other types are pretty conservative depending on if you’re buying or selling and if you think prices will go up and down. So in some cases it almost acts as leverage and you can really kind of like jumpstart your returns.
But in other cases it almost acts as like a bit of a hedge. where you can protect against some downside if the stock moves in a direction that’s against you. And so I suppose that maybe leads us into what some of these so called option strategies might look like. I mean, even if one of these salespeople were right in what they were selling, I mean, do you have any gut feel for what would be going on underneath the hood?
[00:34:04] Rachel: I like the point you made of using it as leverage. So the important idea here is that yes, it can enhance returns, but then it also enhances the downside. So there’s covered call strategies, there’s naked call strategies where you don’t actually own the underlying securities, there’s straddles, there’s a bunch of different ones.
But I think the important part is if you expose yourself to too much leverage in any capacity, you actually have the potential to completely lose it all. And it’s Reddit thread, somebody was asking about options strategies and how they work. And somebody was sharing that. He uses option strategies to make money, and he shared that he had a seven figure portfolio.
And the irony behind this was, somebody was saying, Wow, you have a seven figure portfolio. How did you get to that point? How does this work? And he said, Well, I started with a seven figure portfolio. I lost like 66 percent of it. But now I’ve recovered. I’ve gotten back up to that seven figure portfolio.
Whereas if this person had just invested in index funds, what he had started at would be much greater. Now he’s just gotten back up to that point. But I do think one of the issues is people look at this in a very short term timeframe. So like I earned 5 percent return this week. I don’t care what you earned on a week or a month or a year or two years.
I want to see a 10 year, at least time horizon for these strategies. Before it ever piques my interest, we can all get lucky in the short term. That is pure luck. But over the long term, that is skill.
[00:35:45] Jesse: Exactly. We haven’t even touched on the fees. Like, I know options trading usually just has a significantly higher fee than traditional investing in the stock itself or investing in an index fund itself.
And so not only do you have to be correct with your options trading, you have to be correct enough to overcome any fees that you’re paying. We talked about earlier how options can be kind of more aggressive than traditional investing or less aggressive. Assuming that in one of these 5 percent per week strategies, you’re being much more aggressive than typical or than traditional investors would be.
We have to remember this important axiom I think all investors do, which is Anytime you’re exposing yourself to upside, you have to be aware that you’re exposing yourself to some sort of equivalent downside. And it’s true all across the risk reward spectrum. It’s true for low risk treasury bonds, where yeah, there’s not much downside.
There’s also not much upside. It’s true for stocks where there’s more upside, there’s also more downside. And when you’re doing some sort of high risk options trading strategy that supposedly gets you 5 percent per week, you have to be aware there’s a deep, dark downside hiding underneath the surface that it might come get you.
Okay, Rachel, let’s talk about one of my absolute favorite people, tongue in cheek, on the Best Interest Podcast. Mr. Rich Dad, Poor Dad, Mr. Rich Wolf, Poor Sheep himself, Robert Kiyosaki. Are we all just money brainwashed as Robert Kiyosaki claims we are?
[00:37:12] Rachel: Apparently. I mean, he has some very strong opinions, right?
And not to say that there aren’t some important and good moments in Rich Dad, Poor Dad. There are some, some good tidbits in there. And I don’t know if he’s always been this way, but just lately, it seems that he is making some really aggressive bets on where the market is going. So there’s a huge market crash coming up.
He loves to say that constantly, or, you know, put everything in crypto. So he’s just starting to make really strong stances. Now, as far as being money brainwashed, and that we are taught to live a certain lifestyle, that we get a job, we, you know, contribute to our 401ks, we have the two and a half kids. I don’t know if I agree with this being a brainwashing strategy.
I think, again, we’re just, we live in a society and this is what the norm is. This is what we’ve seen our parents do. And I think there’s a lot of people out there that could take this traditional path and be just fine. And I think his argument is that if we take this traditional path, we are brainwashed.
I think many of us are aware that there’s other paths that we can take, and we can bet big on our careers, we can bet big on our investments. We have these other paths, but for some people, they don’t want to go down that path, and I think that’s fine. I agree that if you want to really build wealth young, Or, you know, start a company.
You do have to go against the norm. You do have to challenge a lot of, of what we’ve been taught. There’s a lot of outside of the box thinking that’s required if you’re really going to do something like disrupt an industry or be the next Zuckerberg or something like that. So I, I don’t think it’s totally wrong to say that we have to challenge conventional norms at times if that’s what we want to do.
But I also don’t think it’s accurate to say we’re brainwashed if we decide we just want to go the traditional route of the W 2 job and the 401k.
[00:39:12] Jesse: And that’s, you know, if he had said something like, I think too many people are spending beyond their means, I think too many people are keeping up with the Joneses.
I think too many people are not saving enough for the long run, or maybe too many people are signing up for options trading classes and they’re looking for that short term win. We have all been money brainwashed. I’d be like, oh, that’s a reasonable point. That’s a reasonable point. But yeah, I think the one clip I saw of his had something to do with, right, everyone out there is the car, the house, the 401k, the nuclear family.
And we’ve all been brainwashed into thinking that this is the right path.
[00:39:48] Rachel: And it’s
[00:39:48] Jesse: like, well, there’s nothing objectively wrong with that path, and as you alluded to, Rachel, and I think it’s really important, and Robert Kiyosaki isn’t alone in this. He’s probably just the most visible, or one of the more visible people who falls into this particular camp that I’m about to describe.
Not a Rachel camp, by the way. Different kind of camp.
[00:40:06] Rachel: Thank you.
[00:40:06] Jesse: Different kind of camp. Gotta be clear with that. But it’s the camp of the kind of the fear mongering guru. He sells by fear. I mean, he is a salesman. He’s a terrific salesman. Give him credit for selling everything that he sells. But it’s that idea that if I can instill fear in you, if I can tickle that little, that deep down fear inside that your family isn’t as financially secure as you thought they were, I’ve got you in a state of kind of emotional intensity We’re now you’re ready to hear my pitch and now you’re ready to really buy in and as I see some of the stuff that Kiyosaki says or writes, if you look at his 10 or 15 year track record on calling stock market crashes, I Robert, like Earth to Robert, the stock market’s just about in his best of places it’s ever been in.
And every time he’s called for a crash in the last 15 years, he’s been fundamentally wrong. And yet he keeps on doing it, just because enough people out there are tuned into him and listening and are willing to buy it. Maybe they haven’t noticed what he’s done in the past. But yeah, I just, I think he sells on fear way too much.
[00:41:07] Rachel: The fear mongering really bothers me. And, you know, from somebody that posts on social media and I do want to create this personal brand, I understand that that is an option that I will never want to take, right? I prefer to inspire, to motivate, to have optimism, really. It’s the pessimism that I think that really bothers me, and I can laugh about it and laugh it off, but I, I’ve seen it impact my clients.
I’ve seen clients come in, especially when I worked with retirees, who were really afraid because they were seeing things that Robert Kiyosaki was saying, or anybody was saying that they were using fear to sell their own product. And that is, it’s frustrating. I think it’s a cheap hack to use in marketing and it’s immoral, frankly.
And so it’s so frustrating to see people use that, but it’s much more frustrating because I actually do see the impact on people who are influenced by it and who maybe don’t have the financial literacy or the background to understand why they shouldn’t listen to something like that. Again, it comes back to incentive, comes back to very important context.
We have to consider that when somebody is, is making this grand statement or calling for a big crash, is there a reason that they would benefit from me being afraid? That’s something we have to ask ourselves.
[00:42:28] Jesse: Totally. I just think about how often has Warren Buffett sat up there on the stage in Omaha and spent time driving fear into his investor audience before?
I mean, it’s like he doesn’t do it, right? We try to keep things above board here on the Best Interest Podcast. And listeners, if you have any feedback, if I’ve been fear mongering too much and you want to send that feedback, you can send it to jesse at bestinterest. blog. Maybe subject line, say, Kiyosaki’s not that bad.
And I’ll, I’ll read your email there. Here’s a quick ad, and then we’ll get back to the show. Every week I send a quick free email to thousands of readers that shares three simple things. One, my new articles and podcasts. Two, the best financial content of the week from all over the internet. And three, a financial chart that explains some important concept in the news that week.
It’s a great primer to boost your financial know how.
[00:43:19] Rachel: Ugh, but Jesse, I don’t want another email.
[00:43:22] Jesse: Well, this might not be for you, but I do hear you, which is why I make it very short, sweet, and full of only the essentials. A whopping 66 percent of subscribers read my email at least once a month. They’re enjoying it, and maybe you will too.
You can subscribe for free. On the homepage at best interest dot blog. Again, that’s a free no strings attached subscription at best interest dot blog. That was a lot of fun. And now I want to shift though into something that is maybe much more in your professional business forte because you spend a lot of time Working with and helping a pretty interesting niche group of clients, solo entrepreneurs, or people who own their own business, and maybe I’ll let you define it, I assume by the name, they’re the one and only employee, but maybe you can just start there, I mean, I assume.
What exactly is your typical client, the solo entrepreneur, and what are some of the problems that they’re facing?
[00:44:17] Rachel: Yeah, so, yeah, solo entrepreneur, solopreneur, whatever you want to call it, it’s a one person business. I lump in anybody who’s working with, like, a spouse in there, too, because I do see a lot of those clients or that profile, and I still consider them solopreneurs.
I, myself, am a solopreneur. I do have a 1099 employees, so I don’t, that does not exclude me, but I have such an interest in this, honestly, selfishly, because it’s what I am. And so I wanted to learn about how to optimize my own finances, my business, how to make sure that everything was really organized.
Because the surprising thing is, even if you’re just a one person business, there’s still a lot of complexity and administrative things that you have to deal with. Be sure that you’re on top of being a business owner is great. I’m a huge fan of it. I love it. And I love to see people doing it, but it’s really difficult and we can feel really overwhelmed, especially at the beginning when we don’t know what to do.
So being in the finance industry and experiencing this overwhelm, I knew that if I was experiencing this with the experience and the context that I have. That other people must be experiencing it even at a higher level. So I’m a huge fan of this shift in the digital age. There’s so many people now who can make money just from their phone.
They can find clients and build businesses just by educating their audience. And I love that. And we’re seeing this huge increase in solopreneurs. So I just want to help them. And from the finance side, the business side, just make it easier on them so they can spend time.
[00:45:52] Jesse: I’m glad you mentioned that because I was reading some statistics about how, essentially, one of the silver linings of COVID, one of the benefits was so many individuals ended up, they had maybe more free time than they expected, or maybe they were in a position of kind of job insecurity. They didn’t know where their next paycheck was coming from.
But for one reason or another, they started getting paid. a solo business. They started a side hustle and that that blossoms into something bigger. And so now there are so many more solopreneurs than there were before. And maybe one of the places to start is I would just think if I’m starting my own business, I know there’s this idea of business structure that have different implications.
And so is there a difference between, let me know if I’m phrasing the question wrong, Rachel, but an LLC, or an S corp, or a C corp, or a sole proprietorship, I mean, are these even different things to begin with, or where do you kind of guide some of your clients in that conversation?
[00:46:46] Rachel: Yeah, I prefer to look at it in the context of, okay, we have liability and let’s talk about that and protecting our personal assets.
And then we have tax, tax savings, tax structure. And there are, there are two different things that we can consider here. Now, if you start a solo business and you start collecting payments and, and They’re just writing checks in your name. By default, you are a sole proprietor. So the revenue, everything is going to flow through to your personal tax return.
That’s the default status. You don’t have to do anything to be a sole proprietor. Now, on the other hand, this is where, again, our good friend social media has maybe had a negative impact, is the LLC and not correctly understanding exactly what an LLC does and what it accomplishes. So you’ll see a lot of people on social media saying, All you need to do is open up an LLC and now you have all of these write offs that you can use.
It’s important to know that an LLC is a limited liability company. It is protecting your personal assets. It’s a liability decision. It’s not a tax savings decision. Now there’s the next step. There’s LLC escort, but just the LLC on its own is not actually going to save you on taxes. It’s just going to separate.
assets from your business assets, which is really important, but we have to make that decision thinking about liability, not tax savings. Now, after we get to a certain point of revenue, say, you know, the money is really coming in, we’re really profitable. Now we can start looking at tax savings and setting up a structure that makes sense from a tax savings perspective.
And again, we see social media all over the place saying, S Corp, elect S Corp, it’s going to save you a ton of money in your business. Potentially, that’s something that has to be made for each person to see if it makes sense. The S Corp, the basic idea behind it is now you’re going to start payroll, you’re going to start paying yourself a W 2 salary, and the other income is going to be seen as distributions.
That avoids that self employment tax, uh, the distribution side does. So that’s the idea is that we’re saving on tax because we’re pulling out some of the self employment tax. We’re not having to pay. Now, VS Corp, just to give kind of a warning here, it can make sense, but sometimes I see people elect it too quickly when maybe they don’t have the, the revenue built up yet for it to make sense because it is going to add some administrative burden, some costs.
Just some headaches, some return on hassle, and it could even negatively impact you if you’re maxing out a solo 401k. It could potentially bring down what you can put into your solo 401k. There’s QBI deductions, which is a whole nother topic. The main point with the S corp, and I don’t have a rule of thumb, like sometimes I see people say 100k profit and then go to the S corp.
Maybe. That could be a starting point, but I really do think each person needs to make this decision for themselves and understand what is coming when they elect S Corp what they are now going to have to do electing S Corp.
[00:49:54] Jesse: And is that the kind of decision, Rachel, where maybe you would suggest someone sit down with, let’s say someone has a team of professionals, let’s say they’re working with You know, you as a, as a CFP professional, they’re working with an accountant who’s a CPA.
Maybe they’re working with a corporate or a business attorney to help them with some of the legal side of things. Who amongst that professional team can help them with that decision or is it kind of everybody’s involved?
[00:50:17] Rachel: Yeah, it can. Everybody can have a say because each person is going to have their own unique perspective.
The attorney is going to think about asset protection and the liability. I see most of the time it’s myself, the CFP and the accountant discussing. The accountant I use quite a bit calls it an S analysis and basically we just run a scenario to see if it makes sense. from a tax standpoint. But if you have this team of professionals, it’s worth kind of bringing everybody in to be sure you are accounting for everything and that there’s no blind spots that we have.
That’s the value of the team.
[00:50:50] Jesse: Let’s transition to some of the tax things because you mentioned some tax considerations, obviously, and I know that you’ll hear, whether it’s, you know, whether you hear people chatting at the barbecue, or you see someone post about it on Facebook, or, there’s a lot of side conversations amongst, you know, the lay people, the civilians, people who maybe aren’t immersed in finance topics every day.
And they might say things like, Oh, yeah, I’m gonna, I’m gonna open up a little side hustle because, you know, everything I do becomes a write off. Or they’re gonna say something like, Oh, well, you have kids? Like, you should start a business. Just put your kids on payroll, because there’s XYZ benefits. I won’t go into this one, but this is a true one that thankfully has changed.
So my dad worked at a Miller Brewing facility here in upstate New York, and some of his colleagues would open a one person church. Because if you were the ordained minister of the church of House Cramer, you’re a church and you’re a nonprofit and then you don’t pay any taxes. Well, the IRS stamped that one out pretty quick.
But anyway, let’s go back to the question at hand, whether it’s everything is a write off or my kids are on payroll or these other kinds of hacks that you hear. I mean, are there any, what I would call legitimate or perfectly legal quote unquote hacks out there when it comes to opening up a small solo business and paying less taxes?
[00:52:02] Rachel: We first have to ask the question, is this a legitimate business? Are you, because the IRS does see things differently if you are making a profit, if it’s a business, if you have business activities versus is this just a hobby? And you can’t get that past the IRS. I wouldn’t try to get that past the IRS.
So we have to be making a profit and there’s rules around that as well. And then it’s not as simple as I’m going to open up an LLC and then get a credit card and just Putting things on my LLC credit card. That’s all write offs. That’s not the case at all. Every write off or business expense has to be a legitimate business expense.
You know, even for myself who has a business, I, I have to be very careful what I put on my credit card that is run through my company. It has to be a legitimate business expense. So that’s the first thing we have to figure out is, do I even have a business? And if you don’t, no, you can’t open up an LLC.
You can’t write random things off. But once you have a business, yes, write offs do become available to you. There are significant tax advantages to having a business. We get to write things off that the W 2 employee does not. So anything that is necessary and legitimate for the business, certainly run through your business that, that can be a write off.
Now, these hacks that we hear a lot about, like hiring my children, in one hand, yeah, it’s legitimate. And on the other hand, it’s not. For example, hiring your Three month old as a baby model for your financial planning business. is not legitimate. It doesn’t make any sense. In very few scenarios do I see a legitimate reason to put your child on the payroll if they are like under 12 years old.
I mean, really, they have to be older, they have to be able to work, and they have to be working. I do have clients who are solopreneurs who employ their children and their children all work. I’ve actually been able to see the work, so it’s very clear that they are all working, they are all old enough to be working.
We’re not just throwing them on payroll, saying that they work to get the tax savings. They have to work, and they have to be old enough for it to be reasonable. It has to be reasonable compensation as well. So it can’t be like, I paid my child who works an hour a week 50, 000 this year. That doesn’t make any sense.
So these hacks, there are tax strategies, and then there are hacks. And I wouldn’t say any of these are hacks, They are just legitimate business cases and uses if you are legitimately using these strategies. I wouldn’t try to get anything by the IRS. It’s just not worth it.
[00:54:40] Jesse: The crazy thing is, I think most of the, especially most of like those viral videos or viral insert your preferred social media here.
When you look at the person who’s espousing these ideas, hacks. It often is someone who has kind of no professional financial background. It’s not even like they’re a hobbyist. It’s almost like they heard this thing once for whatever reason they do have influence within the circle that they’re speaking to.
They heard about this good idea, and now they’re saying, don’t you know, you can just put your kid on payroll, have them push that wheelbarrow for an hour one weekend, pay them 7, 000 for it, which, oh, coincidentally is the amount that they can contribute to a Roth IRA, and now you have this, you know, quadruple tax advantage from having your kid on payroll, But having them under the standard deduction, you know, it just compounds.
I was going
[00:55:29] Rachel: to say, that’s the other one, the convenient standard deduction O’Malley.
[00:55:32] Jesse: And it’s like, well, to the, again, to the lay person. And a lot of what we’ve talked about here, Rachel, is the idea that some of these ideas, when presented the right way, when presented with a little bit of polish and a little bit of salesmanship, maybe a little fear mongering up front, or a little bit of, you might not believe it, but this is really true.
If you say it to the, someone who doesn’t know better, they might think it’s true. And next thing you know, you have someone who’s walking down a risky path towards getting in trouble just with their investments overall, getting in trouble with the IRS. And so it just kind of shows the benefit of doing your research, pulling information from many different sources.
It’d be great if Rachel Kampf on social media is one of those choices, if the Best Interest blog and podcast is one of those sources. I think we both put out pretty good work, but just the idea that you can’t see everything that you believe out there on the internet.
[00:56:20] Rachel: Yeah. And, you know, I’m really grateful for the perspective that we have in working with clients Because I think if I was creating content with the experience, the knowledge that I have, I think I wouldn’t take some of these things too seriously and maybe I wouldn’t speak to them.
But the reality is, you know, I work with really successful, smart people and they still come to me with some of these strategies that I think are ridiculous, but how are they to know if they don’t have the backgrounds that we have? So as much as we can laugh about them and find them ridiculous ourselves.
This content is actually really dangerous and I think it’s worth it for people like us to speak out against it and to be really vocal about it because sometimes people will see me speak out against it and think, well, who’s really falling for that? And I do have the perspective that there are people who are falling for it because again, unless you have that financial background.
This stuff is really confusing and complex. And some of these people use that to their advantage to say, I know how complex the tax system is. I know that you’re afraid of running out of money. So I’m going to talk about these strategies to get your attention or to make you afraid enough. And it works because of the lack of information that’s out there.
So it frustrates me, but it also just motivates me to keep talking about it.
[00:57:39] Jesse: I have a great tidbit for you, Rachel, and for anyone listening. If anyone ever comes back to you and they’re like, well, Rachel, who’s falling for that? And this is a truism that once it was pointed out to me, I now see it everywhere.
And I was like, oh wow, that is kind of true. And the idea is that anytime you see a marketing strategy. that you’re at first dismissive of. And the one that comes to mind is say, like, I don’t know if you have this in your area or where you grew up or where you are now, Rachel, but the one auto dealer whose commercials are just like off the wall, zany, stupid, loud, like, do you have that car dealer, like listeners, you know who I’m talking about?
And so some of us might see that and just be so turned off by it. And we’re like, like, who would buy a car from that guy? But then you see the commercial again and again and again for years and you know, at a time. And the simple truth is, well, if they’re still doing it, it’s working on someone. So maybe it doesn’t work on you, and that’s fine, but it’s obviously working on someone, otherwise they would stop doing it.
And so when it comes to these social media videos of fear mongering tactics and just outright lies and straw men and just, and you, and someone says, well, Rachel, who’s falling for this video that you’re kind of poo pooing on, on your own YouTube? Well, somebody is because those videos are everywhere and they’re constant and they’re always there.
So I think it backs up what you’re saying, Rachel, which is that people are falling for this and I can attest to exactly what you said, which is. I get questions from real clients who will, sometimes it’s just as simple as like, they’ll send me an Instagram post or a link and they’ll just say, is this legit?
Which, okay, at least I’m glad they’re asking, but clearly it just got them thinking like, this seems like it might be real and it seems beneficial, but is it legit?
[00:59:16] Rachel: Yeah. And
[00:59:16] Jesse: I’m really glad they sent it to me because it’s, most of the time we know what the answer is, right? Yeah. Not really.
[00:59:22] Rachel: I have several clients.
who, because of, who found me on social media and because of, you know, our conversations, but also what I post on social media. I, I post a lot about, you know, be careful with whole life insurance, be careful with insurance agents. There’s a lot of red flags. And I have gotten emails. I got an email today from a client saying, I have an insurance agent.
They keep pestering me about whole life. And I immediately thought red flag and I wanted to run it by you. And it just, it makes me so happy because several times when clients will say this, they say that they actually use the language I use. They say red flag. And so I know when I’m saying that on social media, it actually is having an impact on people and I can see it in my clients.
And, uh, I can’t imagine, you know, maybe who else has read what I’ve said and has experienced that with an insurance agent. It put up a red flag. They hesitated. They maybe took a little bit more time just because we spoke out against it and just said, Hey, just be careful and proceed with caution here. And I have first hand experience of it working with my clients, which is just so exciting to me.
I
[01:00:27] Jesse: think we just found an episode title, Rachel. Red Flag Finance Stamps. That’d be a good one. Is there anything else on like the business or solopreneur? We’re just like, you know, I want to make sure that we shine the spotlight on you and get you to talk about, you know, that kind of ideal client just in case someone’s listening who would want to come work with you because I didn’t get to those bottom bullets of the retirement accounts or the insurance or the business succession planning.
But what are your thoughts?
[01:00:52] Rachel: I think initially, you know, organization is really important. Maybe some of the big mistakes I see is the intermingling of personal and business accounts. So just as soon as we can to make sure to get those separated, that’s going to help tremendously with organization. That’s a big mistake I see.
And then, yeah, soon after, once you are profitable, we can look at optimizing retirement accounts. I’m a huge fan of the solo 401k for a solopreneur. I think it always makes or almost always makes the most sense. There’s step IRAs, there’s simple IRAs, there’s several options out there, but I find not as many people know about the solo 401k.
So I encourage you to look into that. It’s becoming easier to use, easier to set up, you know, less costly, less administrative burden. So I love the solo 401k for solopreneurs. But yeah, initially, you know, the big thing is that that organization and making sure we’re separating out our business and our personal assets and accounts because there is a liability there and we want to make sure that we protect ourselves.
[01:01:56] Jesse: Awesome, Rachel. So whether someone listening right now is a solopreneur who wants to ask you some questions or maybe they’re worried they’re falling for a red flag finance scam and they want to check out some of your, your social media to make sure that they’re on the up and up. Where can people connect with you?
Find your content? I mean, where would you point someone to Rachel?
[01:02:15] Rachel: Yeah, so I am really active on Twitter at camp underscore wealth trying to get Jesse back on there But basically everywhere else Instagram YouTube you can find me at camp Well, and then my website is Rachel camp wealth calm So you just go there and go to my media and you’ll find everything I’ve put out there
[01:02:33] Jesse: awesome We will throw all those links and any other relevant links.
We’ve talked about today in the show notes At best interest underscore JC is still out there on Twitter. Once in a while, I get a message, but sorry, Rachel. I just had, I had to leave Twitter behind. I had to focus a little more on the other stuff, but thank you so much for stopping by The Best Interest Podcast.
[01:02:52] Rachel: Thanks, Jesse.
[01:02:55] Jesse: Thanks for tuning in to this episode of The Best Interest Podcast. If you have a question for Jesse to answer on a future episode, send him an email at jesse at bestinterest. blog. Again, that’s jesse at bestinterest. blog. Did you enjoy the show? Subscribe, rate, and review the podcast wherever you listen.
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The Best Interest Podcast is a personal podcast meant for education and entertainment. It should not be taken as financial advice and is not prescriptive of your financial situation.