Listen Money Matters - Free your inner financial badass. This is not your father's boring personal finance show.

Today we answer five awesome questions from you about LLCs, winning the lottery, budgeting an irregular income, Roth rollovers, and buying quality. We get a lot of questions from listeners, and sometimes they are so good, we want to share them with everyone. Today we picked five questions we thought everyone would like an answer to. Question One Hi guys, Love listening to your podcast and you guys have helped me so much and given me so many great new ideas. In fact, I’m writing to you about one of them. I remember you said that when buying a rental property, to buy it as an LLC. My question is, do I set up a new LLC for each new rental property? If my goal is to own 10, do I then have 10 LLCs? Sincerely, Entrepreneur Jane in the making A purist might use individual LLCs, but that can be a lot of aggravation and cost. Instead, we use the $250,000 threshold. If you have a single property valued at that or higher, it should have its own LLC. If you have two properties, one valued at $100,000 and the other at $150,000, they could be under a single LLC. Owning rental property under an LLC insulates your personal assets from risk. There are also lots of everyday tax benefits to having an LLC! Question Two Hey guys, Huge fan of the podcast. Wednesday is the CT Powerball up to $1.3 billion (Jan 2016). If you won what would you do with it all?  James Andrew and Thomas both agree that they don’t want money they haven’t earned so they would give the money away to charity and use it to fund research. And they may be onto something. Lottery winners don’t tend to live happily ever after having responsibly invested their winnings. They often end up back where they were before they won or even worse off. Question Three Hi LMM, My question is about budgeting without a regular paycheck. Our income is seasonal (fishing in Alaska and self-employment), and we don’t really know how much we are going to make until it’s made, how should I modify the budgeting tools to work with this and how best to make that money last all year? Thanks, Mary When your income is seasonal, you need to make your budget based on a longer time scale than is traditional. Most people can budget month by month but for you, budgeting for a year makes more sense. Take a look at how much you have made for the past five years and get an average. Let’s use $50,000. Take that amount and divide it by 12. That gives you a number for a montly budget. You have $4,166 to spend each month. If your income varies wildly, one month you make $10,000 and the next $500, it doesn’t matter. You still spend the same $4,166. It may help to put up spending firewalls for yourself. Everything over a specific dollar amount (set by you) gets put on a 30-day list. At the end of 30 days, if you still want it, you can buy it. Chances are though; you won’t even remember that you wanted whatever you put on the list. Another good firewall is to lock up some money in a six month CD. You’re making a little more than you would get with a savings account and the money is harder to get to. You can withdraw it early, but you will pay a penalty. Question Four Hi Andrew and Thomas, I have been listening to your show now for almost a year. It has really helped me get on an even better page when it comes to my personal finances. I am 25, and I am in a long-term relationship and working on managing our finances. I had a financial adviser through a friend with an internship at a firm a few years ago.

There is a lot of misinformation about the 10,000-hour rule theory of self-improvement, and it turns out now all 10,000 hours are the same. We delve into the truth behind the 10,000-hour rule and show you how to become great at anything. The 10,000-hour rule is not really about the number of hours you put into something; it’s about deliberate practice. If you want to become great at anything, it matters more how you practice than how much you practice. What is the 10,000-Hour Rule? The 10,000-hour rule has been a topic of scientific research since the 1970’s but it came into the mainstream when Malcolm Gladwell wrote about it in his book Outliers. The rule is based on research into the abilities of top performers in various fields like mathematics, chess, tennis, swimming, and music. The research shows that for the overwhelming majority of experts who reach the top of their fields (for instance, chess grandmasters or great composers) have spent a minimum of ten years acquiring and honing their skills. The few who are exceptions to this rule are found to hit their expert status in year eight or nine of their careers—not far short of the average. So being a prodigy with a “gawd given” talent is just a myth. 10,000 hours works out to be around 20 hours per week for ten years. Ten years is a long time but 20 hours a week isn’t so bad especially when you consider the average American watches five hours of television a day. Deliberate Practice The problem with the popularity of this 10,000 hours idea is that it’s often misunderstood as “any 10,000 hours” spent on your skill or craft. But not all practice is the same: there’s a big difference between mindless repetition and what scientists call deliberate practice. A fascinating exception to the 10,000-hour rule is Magnus Carlsen, the youngest chess player ever to reach a number one world ranking. Carlsen played computer chess to amass a huge amount of deliberate practice in a short period of time—so, although it seems as if his talent is innate because he reached expert level at such a young age, what he really did was accelerate his learning process by focusing on the right type of practice all the time and by getting constant feedback.  “ Perhaps the greatest difference between deliberate practice and simple repetition is this: feedback. Anyone who has mastered the art of deliberate practice—whether they are an athlete like Ben Hogan or a writer like Ben Franklin—has developed methods for receiving continual feedback on their performance.” Part of the reason deliberate practice is so important is that it helps us to encode information about what we’re learning more carefully. Research has found that one of the significant differences between highly skilled experts and amateurs is how well information about their field is categorized in their brains. Top-level experts can access relevant information faster and more reliably, due to spending time in highly-engaged, deliberate practice of their craft. 3 Types of  Deliberate Practice Thomas recently wrote an article detailing how to learn any new skill quickly. He breaks down deliberate practice into three stages. The Cognitive Stage: This is the first step when learning a new skill. You’re practicing and making mistakes. The Associative Stage: You’ve had enough practice to see where you are making mistakes and to correct them. It’s at this stage that getting the quality feedback we spoke about earlier is important if you want your skill level to progress. Autonomous Stage: When you reach this stage, you can almost perform the skill on auto-pilot. You aren’t a master yet and maybe you never will be but you have become competen...

 Whenever you hear people talk about buying a home, they insist you need a 20% down payment. But there are ways around that. We will show you how to buy a house without putting 20% down. There are some good reasons to put 20% down when you buy a house. But that isn’t realistic for everyone, and it’s not only rich people who deserve to own a home. If you are dreaming of buying a house but can’t come up with 20% down, there are programs that can help.   Getting on the Ladder Millenials are not buying homes at the age or rate their parents did. And it’s no mystery why.  Even though the labor market has shown some signs of improvement, the financial situation for millennials remains pretty grim. Americans owed $1.3 trillion in student loans by the end of 2016, and millennials alone give over roughly a fifth of their salaries to loan payments, according to Citizens Bank. That’s thousands of dollars each year that cannot go toward a down payment on a home. A fifth of your salary is 20%, and 20% is what we are always told we need for a down payment. Why 20%? Why do you need a 20% down payment and do you really? Some lenders are reluctant to make loans to people who don’t have a 20% down payment. They got burned when the housing bubble burst in 2008 when they were handing out mortgages like opioid prescriptions to people who couldn’t afford 10% down nevermind 20%, and they don’t want to get burned again. A bigger down payment means a smaller monthly payment and paying less interest over the life of the loan so putting 20% down saves you money in the long run. And in the short run too because if you don’t have at least a 20% down payment, you will have to pay PMI. PMI is private mortgage insurance. It’s additional insurance that lenders require homeowners to pay when they have less than 20% to put down. PMI typically costs from 0.5%-1% of the entire mortgage amount on a yearly basis. All of the numbers we use in this episode are based on a $150,000 home (you can’t double the numbers for a $300,000 home because some numbers are a percentage). So for our home, PMI would be $750-$1,500. You can ask your lender to remove PMI when the mortgage has been paid down to 80% of your home’s original appraisal value and when the mortgage balance is down to 78%, the lender is required to remove PMI. The Efficiency of Your Dollar So you can see that it makes the most financial sense to put down 20% to buy a house. That is the most efficient use of your dollars. What did you eat for dinner last night? Was it rice and beans and water? If it was anything else, you did not spend your food dollars as efficiently as you could. Humans are not always entirely efficient or even often efficient. Sometimes we want a steak and a glass of wine for dinner instead of rice and beans and water. And some people want to buy a house for a variety of reasons, they want to practice the drums without disturbing the neighbors, they want to buy a duplex and rent out the other half to generate passive income, they want a backyard for the children or pets to play in, and for another variety of reasons, they can’t come up with 20% down.

Tax day is coming up fast, and you want to to take advantages of as many tax deductions as you can. You know the typical write-offs, but we found 28 tax deductions you didn’t know you could write off. These are tax deductions that most people will be eligible for. If you have a business, you can check out the episode we did on LLCs and S Corps. Before We Dive In We are going to list a ton of ways to save money on your taxes but it’s important to understand just how much you can save. For every $1,000 you deduct, you save your tax rate. If you’re taxed at 15%, you save $150 for every $1,000 you deduct. If you’re taxed at 30%, you save $300 for every $1,000 you deduct. So this is not small change we’re talking about. Andrew and Laura use deductions extensively and want all of us to do the same. But some of us will stand to benefit more than others. If your household makes less than $80,000, you will see a significant impact if you take advantage of the incentives we outline. They’re Incentives None of us likes paying taxes, and everyone agrees that the tax code is too complicated. But as Tom Wheelwright explains in his book Tax-Free Wealth, taxes are not meant as a show of our civic commitment but as a series of incentives set by the government to encourage citizens to do things that grow the economy. And if you look at things that are deductions, buying a home, having a kid, and starting a business, you can see what the government wants us to do to bolster the economy. Don’t Be Lazy The lazy way of filing taxes is to use standard deductions. This is what 2/3 of filers do. For 2017, that amount is $6,350 for single filers and $12,700 for married couples who file jointly. You may be able to deduct more than those amounts by taking itemized deductions. All you need to do is figure out if by doing so, your deductions would be higher than $6,350 or $12,700. A Good Problem To Have Many tax deductions have a phase-out meaning if you make over $X they become less impactful, and when you make over $X they can’t be used any longer. An excellent example of a phase-out tax deduction is passive income generated by rental properties. They phase out to 50% less impactful for a married couple who make more than $100,000 and phase out entirely after earning $150,000. Must Use Deductions These are deductions everyone eligible must take advantage of. 1. Standard Tax Deduction If you did the math and didn’t have enough itemized deductions to get you above $6,350 for singles and $12,700 for marrieds, you can take the standard tax deduction. If you are filing as head of household, you can deduct $9,350. 2. Reinvested Dividends Do you have a Betterment account? Do you sometimes get a notice that they have reinvested dividends for you? Each of those reinvestments increases your tax basis in the fund. That lowers your amount of taxable capital gains when you eventually sell your shares. When you finally do sell, don’t neglect to include the reinvested dividends in your cost basis, which you subtract from the gains from the sale to determine your gain, you are overpaying your taxes. 3. Child Care Credit When you use childcare while at work (not for date night, sorry!) you can take a tax deduction between 20-35% of those costs. If your company allows you to use pre-tax money for child care costs, that may be a better option than taking the deduction though. Suppose you are eligible for a 20% credit but are taxed at 25%. In that case,

What’s a measly 1%? It’s a lot in terms of fees. We will show you the impact of fees in the long term. Fees can eat into your investments more than you realize and the impact of those fees in the long term can devastate your retirement savings. Active Managing Loses You’re paying your money manager for his or her expertise, right? They know all the secrets and tricks to picking the right stocks and making the right investments. They know things you will never understand. Well, they don’t. According to the analysis, 99 percent of actively managed US equity funds sold in Europe have failed to beat the S&P 500 over the past 10 years, while only two in every 100 global equity funds have outperformed the S&P Global 1200 since 2006. Almost 97 percent of emerging market funds have underperformed. But what about all the markets ups and downs? You need someone with expertise to make sure you don’t lose all of your money when the market is volatile. You don’t. Andrew did the math. If you had invested $10,000 in 1990 in the S&P 500 and just let it ride until 2017, you would end up with $137,000, an average return of 11.3% per year. Those 28 years included two of the worst recessions in our lifetimes, 2001 and 2008. The total return in that time was 1,058%! You made $127,000. The only way you would have lost money would have been if you had sold. That’s how you get rich. It’s not sexy and exciting, but it works. What’s So Scary About 1%? Okay, well what if in that scenario you were paying a 1% management fee? One percent is tiny; it’s nothing! It’s a single penny on each dollar. But just as exponential growth is the reason we invest, exponential growth is the reason we avoid high fees. In our above scenario, at 1% we would have paid $11,000 in fees. You’re not earning exponentially on the money you earn when fees are eating into it. With a 1% fee over that 28 years, we weren’t earning an 11.3% return. We only made $95,800. We lost 24%, nearly a damn quarter of our gains! If your advisor told you up front that his or her fee would be 24%, would you say yes? Of course not. But that is what you are saying yes to when you say yes to high fees. Preying on the Ignorant Advisors that charge high management fees are preying on the ignorance of many investors. Money and investing all seem so complicated, and they can be. So, of course, you need someone who knows what they are doing to help you. This is your money! You can’t gamble with it. And investing can be complicated, we make lots of things harder than they need to be. But investing doesn’t have to be cumbersome and you don’t need some specialized knowledge to make money in the stock market. It’s like cleaning my house. I don’t like doing it, so I pay someone else to do it for me. But cleaning my house isn’t hard or complicated. I could do it if I wanted to or had to. And if my cleaner were charging me 24% of my income to do it, of course, I would do it myself.  Handling your own money is the same. You might not like doing it but you can do it, and it will cost you less than paying someone else, way less.  But You Have This Whiz Kid Your advisor is different, wears expensive clothes, has a fancy office, drives a swanky car. They must be doing something right; surely they are worth whatever management fee they are charging. Well, there is one way to find out. Ask to see their portfolio and the returns. If they are outperforming the index and have been for some time, you have found the golden ticket. But trust us, they aren’t, and you haven’t. But I Like My Guy or Gal You have been with your advisor for years and so have several members of your fami...

Maybe you are rich. Maybe you are poor. Maybe you have experienced being both at some point in your life. If you haven’t figured it out yet, being rich isn’t all about money. It’s about well-being, abundance, having time, success, and the right mindset. There are definitely social issues that contribute to poverty, however, rich vs poor mindsets can also drive wealth and success. There are many poor people with a rich mindset, financially poor due to circumstance. And there are many trust fund babies with a poor mindset. A simple shift in your mindset can point you in the right direction to becoming as wealthy as you want to be. Resourcefulness Rich mindset understands that the first goal is to gain a surplus of resources. Then, to use that surplus to accelerate things. Accelerate education. Accelerate a business. Accelerate the next generation. Poor mindset immediately sees a surplus as an opportunity for consumption and inflate lifestyle. Challenge Yourself: Create 30-day list. If you have to wait for your paycheck to buy something, it better be something you absolutely need. Think about where you can accelerate things, begin to build your personal advantage. Gaining Momentum Rich mindset seeks to spend their time, resources, and energy on work that continues to pay off long after the effort has been invested. Rich mindset is all about getting a flywheel spinning. Building momentum. Creating systems that continue to generate value on their own. Poor mindset is all about the short-term returns. Hours-for-dollars. Resources invested without an immediate return are resources wasted. Challenge Yourself: Investing is critical and you need to find space for it. Your 401k is a great start. Another area of focus is your personal productivity. Risk vs Reward Rich mindset is willing to invest resources with seemingly no reward right away. Not everything has a clear path to profitability. You have to take a chance and try. It’s about risk vs. reward.  Poor mindset’s immediate thought it, “What’s in it for me?”.  Why pay money to fly to that conference, pay for the hotel, and spend all the time when they’re not even paying you? Challenge Yourself: You need to be willing to take calculated risks because no reward worth discussing came without risk. Being uncomfortable is Important, it means you’re growing. Meaningful Relationships Rich mindset seeks to build relationships based on trust, liking, shared values, and mutual respect. People with the rich mindset help others and cultivate relationships with no expectation of anything in return. Poor mindset thinks “I scratch your back, you scratch mine”. Challenge Yourself: You’re the average of the 5 people you spend the most time with. Start making new friends who have a rich mindset. Go to a local meet up group and meet some people you can learn from. Be the dumbest person in the room. Make connections with smarter people and you’ll all win. Smarter people make smart people even more successful. Reputation Rich mindset understands that its reputation is everything, that trust and respect are earned slowly, through hard-fought, bloody effort – and that both can be lost in an instant. Poor mindset believes it can get away with compromising its reputation to make a quick buck. Challenge Yourself: Take the high road. Always consider the consequences of your actions/decisions. Luck Meets Opportunity Rich mindset knows that the world isn’t fair, and deals with reality swiftly, humbly, and practically. It knows the world owes it nothing,

Your whole life is online, and that leaves you vulnerable. You need to lock your stuff up! Don’t get hacked; 9 ways to improve your online security and protect your money. When we think of online security, we usually think about things like our bank accounts and other financial data. But there are so many other ways a hacker could destroy your life. And it’s easier than ever for them to do it, so it’s important to keep your information safe. Money Tips Of all the things that hackers could go after, our money is the scariest, so we need to be especially vigilant with our financial data. Online Purchases Use credit cards or PayPal when you’re shopping online, never a debit card. A credit card is the bank’s money, and if a hacker gets the number, you can just notify the credit card company, and they take it from there. You haven’t lost anything. But a hacked debit card is your money. You do have some protections. The FTC and Federal Reserve have rules to limit your loss to $50 provided you notify the bank within two business days after learning of fraud. But you could lose as much as $500 if you do not tell the card issuer within that time frame. These protections have their limits though. If you don’t report an unauthorized transfer that appears on your statement within 60 days after the statement goes out, you risk unlimited loss on transfers made after the 60-day period. That means you could lose all the money in your account plus your maximum overdraft line of credit. Even if you quickly notify the bank and they correct the situation, it can take a few days. A few days during which you will have no access to your bank account so you can’t pay bills from it or withdraw cash. While we should check our bank statements regularly, many of us don’t so by the time you notice a problem, it could be too late. I don’t check mine often, but luckily, I use Trim. This month, Trim sent me a Facebook message that my rent had been debited from my account twice. I was able to immediately remedy this, but if it weren’t for that notification, it could have been several days before I noticed. Turn On Purchase Notifications You can set up alerts on most credit and debit cards to send you notifications immediately after a purchase. You can set a threshold, any purchase over $X but you should really set it up for all purchases. It can get annoying but not as annoying as trying to clean up after a hack. And really, how many times a day are you using your cards? Monitor Your Credit You can get a free credit report from each of the three major reporting agencies every 12 months at through this link; it’s free. But you should really check your credit report about once a month. Credit Karma lets you do it whenever you want, for free. Many people think Credit Karma is just a place to get your credit score, but you can see your report there too. You want to look for any new accounts in your name that you did not open. Credit Karma even sends you an alert when this happens. When my landlord changed online rent payment companies, and I made an account with the new one, I got such an alert from Credit Karma. Traveling Foreign tourists can be an especially ripe target for pickpockets. Pickpockets aren’t sophisticated computer hackers, but if one of them gets your wallet, they could get access to a lot of sensitive information. If you’re afraid of your own shadow, you can carry a decoy wallet and toss that at any l...

We could all use some extra money, and there are lots of ways to make it. We found the best money making ideas and smart ways to increase your income. At a certain point, you can’t save any more money; there just isn’t anything left to cut. And really, saving money is not nearly as impactful as making more. So whether you want to increase your income to pay off debt, save for a home, take a vacation, or retire early, we have ways to do it. Here are our favorite money making ideas. Your Career You are already spending a big chunk of your day at your job so you might as well get the most out of it you can. Fill The Voids People get hired to do certain things, but they don’t always do all of those things. Every job has parts that no one wants to do. Look around your workplace and identify those jobs, even better if they are things your boss doesn’t want to do, and start doing them. And don’t wait to be asked to do them, just dive in and do them. Doing the scut work is what makes you indispensable at a job. Know Your Worth You’ve been filling the voids, and nothing is happening. Everyone is grateful, but no one is promoting you or giving you a raise. It’s time to start looking for a new opportunity. In fact, you should always be looking for a new opportunity even if you are 100% happy with your current job. The average raise within a company is a measly 3%. The raise when you move to a new company is 15-20%. If you’re not sure how much you should be making you can check out sites like PayScale to find out. Linkedin is probably the best way to find a job or a recruiter who gets paid to get you a job. Negotiate Once you find that new job, you have to negotiate. Too many people just accept whatever is offered, afraid that if they dare to ask for more the potential employer will just revoke the offer and hire someone else. But they want you. You’ve made it to the point of being offered a salary because they want to hire you. If you’ve never been on the other side of a job search, it sucks. It’s a pain in the ass. It doesn’t suck as much as looking for a job, but it’s close. That means you are not some supplicant grateful for whatever you can get. No, you are in a strong position. The other side expects you to negotiate, that’s how this whole thing works. They give you an offer, you counter, and you go back and forth until both parties are happy. Time for a Change If you not only don’t like the job you are in but don’t like the industry you are in either, you can do something else. You might need to improve your skills or learn an entirely new set of skills, but you can do it. A listener who drove trucks for a living decided he wanted a change. He was tired of working such long hours, being away from home so much and just making average money. So he went to coding boot camp. Fast forward about two years and the guy is making four or five times what he was making driving trucks and doing something he never dreamed of doing. Now more than ever there are opportunities, often free opportunities to learn new skills that can put you on the path to an entirely new career. Americans watch five hours of television a day. If you don’t like where you are in your career, you can use those hours to learn something that will allow you to pivot.

We are a podcast about money, but even we believe there is something more valuable than money, and that thing is knowledge. Knowledge is power: why knowledge is more valuable than money. The most valuable thing in the world is knowledge. Everything else in our lives, money, health, things, love, they can all come and go. They can all be taken away from us. The one thing that no one can ever take from you once you have acquired it is knowledge. Rapid Demonetization Rapid demonetization is the ability of technology to take a product or service that was previously expensive and make it substantially cheaper, or potentially free. It means removing money from the equation. The $900,000 Smartphone There may be no better illustration of this than the smartphone. That little computer that nearly all of us own has replaced $900,000 worth of other applications. And all in just 34 years, nothing in the big picture of human history. Transportation We talked about the impact of automation on transportation in our The Future of Work episode. Car ownership has slowly but steadily been declining in the US. Automation is going to accelerate that rapidly. It’s estimated that soon using car services like Uber and Lyft will be five to ten times cheaper than owning a car. When you don’t own a car, you don’t have a car payment, and you don’t have to pay for things like car insurance, maintenance, gas, parking, and speeding tickets. Eventually, even the world’s poorest people will have robot chauffers. Food Despite the advent of avocado toast and kombucha, the cost of food has fallen thirteen-fold over the past one hundred years, a trend that will continue. A big part of food cost is the cost to transport it. When transportation is made cheaper through automation, it will further drive down food costs.   Energy Solar power is set to become a predominant energy source and will have far-reaching implications when it comes to things we can create and produce very cheaply. The sun hitting the surface of the earth generates 5,000 times more energy in a single hour than all of humanity uses in one year. Education You don’t have to spend four or more years and tens or hundreds of thousands of dollars to receive an education. You can learn practically anything for free or for minimal cost. This podcast is a perfect example. Hundreds of hours of episodes and hundreds of articles that can teach you everything from how to start investing to how to improve your credit score, all for free! Skillshare offers 19,000 online classes in subjects like business, photography, and branding. Treehouse will teach you to code. Khan Academy offers classes in math, economics, computer programming and animation and dozens of other subjects. It’s COL What does this mean? All of these things are part of what makes up the cost of living. When these things are so cheap they are virtually free, the cost to meet basic needs is negligible. So if you don’t need money, what do you need? Knowledge.

The two most expensive things in life are taxes and interest, and we want to avoid both. One of the best ways to avoid taxes is by starting a business. Today we will discuss LLC vs S Corp and the amazing tax benefits of having a business. We want to illustrate the massive tax advantages allowed to small businesses and how utilizing these advantages can be as beneficial if not more so as compared to traditional retirement accounts. Also, they can be used in conjunction with retirement accounts for an added big advantage. Anyone Can Do It A long time ago we did an episode with Natali Morris about turning your family into a business. It inspired me to set up an LLC as LMM had advised me to do. Today we want to encourage many of you to start an LLC or S Corp to reap that tax advantages of doing so. If you have a hobby, you have a business. We did an entire series about starting a business that with just a few hours of work a week, will make you $1,000 a month within a year. And bringing in some extra money is far from the only incentive to start a small business. Uncle Sam Wants You To The US economy is driven by small businesses, and our tax law is set up to incentivize and reward business owners. Many of us knew that, but the numbers might surprise you. Almost 100% of US employment firms are made up of small businesses, 99.7%. There are 5.9 million firms with at least one employee and 3.6 million with fewer than five employees. There are less than 20,000 companies in the US that employ more than 500 people. LLC Benefits There are a few ways to make a business official so you can start reaping all those juicy tax benefits but an LLC, a limited liability corporation, is the simplest and the most flexible. Passthrough Taxes One of the most significant benefits of an LLC is that of pass-through taxes. LLC owners don’t have to file a corporate tax return. An owner simply reports their share of profit and loss on their individual tax return. This prevents double taxation, your business paying taxes and you paying taxes. In an LLC, the business doesn’t pay any taxes, only the owner. Legal Protections Once you have set up an LLC, you have created a separate legal entity. This protects you and your personal assets. The LLC is solely liable for its debts and obligations, the owner of the LLC is not. If the LLC were to be sued by a creditor, that creditor could only go after the LLC’s assets and not the owner’s. Your Life is Cheaper Having an LLC makes your expenses less expensive. A cell phone is an excellent example of this. A cell phone plan that costs  $100 a month is $100 a month if you run a business. If you are a W-2 employee working for the man, you are paying for that cell phone with post-tax money, so you actually need to earn $125 to cover that bill. Essentially, for every $1,000 in business-related expenses you’re paying $250 more as a W-2 employee than you would be if you started a business and set it up as an LLC. These expenses include everything it takes to run your business; your cell phone, internet, electricity, and if you’re LMM, beer! If your spouse is involved in the business, guess what? Date night dinners just got 50% cheaper so long as you spend part of the meal discussing business. You Win When You Lose What if your business isn’t making a profit? Your initial losses are still beneficial. LMM is an example. It took LMM about two years to declare a profit during which time Andrew wa...

LMM loves listener questions. If you’re wondering, other people are too and doing a five questions episodes allows us to reach more of you. Today we have five awesome questions from you. Today we will answer your five awesome questions about individual stocks, student loans, the 4% rule, You Need a Budget, and investing 101. 1. Hey LMM! I have a question about investing. I am using Betterment right now and hoping to start a Vanguard account soon. If I own VTI in Betterment and I own VTI in my Vanguard, is there any point to buying single stocks in Apple or Amazon or another company that is in the VTI fund since I already own those companies in my VTI funds? KaeLee There are some pros and cons to each. A good reason to own shares in a company outside of a fund is the possibility of more significant gains when that company has a good year. Say you have $1,000 in a fund, you might only have $50 of Apple within that fund. Then Apple has a big year, you only get the gains from that $50. If you had $1,000 of Apple outside the fund, you get the gains from that $1,000. Is there is a company that you feel strongly about? Go ahead and buy individual shares after doing your due diligence. A downside is that you when you have a fund through a company like Betterment, they do tax loss harvesting for you. We thoroughly explained tax loss harvesting here. Owning individual shares outside of Betterment can mean that you lose the benefits of tax loss harvesting. Owning individual shares might also cause you to obsess over how that company is doing, continually checking the news to see how the stock is doing. The opposite of our “set it and forget it” investing philosophy. 2. Hi Guys, I started listening to you guys about two weeks and was wondering if you can help me with my student loan dilemma. I have a 0% APR credit card and want to use it pay my student loan of $11,000. But Great Lakes who holds the loan won’t take a credit card payment. It has to be a debit card or secured credit card. I tried a company that refinances loans you mentioned in an add, but I didn’t graduate from the school I went to and didn’t qualify. Ricardo A 0% APR credit card can be great if you carry a balance on another card. It allows you to work on getting the balance paid off without paying interest. But read the fine print. Once the 0% APR period runs out, you could be paying a higher interest rate than you were on the original credit card. Be sure to pay the balance off in full before the APR goes up. The reason your student loan company won’t allow you to pay with a credit card may be that they don’t want to pay the processing fee. They also take more risk, when you pay from your bank account, that’s your money, and once you’ve made the payment, you can’t get the money back. A credit card company may have ways to claw back a payment. It also may have something to do with a great loophole some people have used to get around the rules about having student loans discharged in a bankruptcy. Some people were paying their loans with their credit cards and then declaring bankruptcy. Credit card debt can be discharged in bankruptcy, so this may be Great Lakes way of closing a loophole. Refinancing your student loans through Earnest  is a great option, but as you found out, not everyone with student loans is eligible for those companies. Look into refinancing through Citizens Bank. The average borrower saves $1,536 per year when the refinance with Citizens. 3. Hello!

What the f**k are stock options? Options are one of those personal finance concepts that can be intimidating if you aren’t familiar with it but when distilled down, is pretty straightforward. Our guest today, Kal Zurn, from Sharper Trades will break down what stock options are, how they work, what they are used for and why you should care. What Are Your Options? Put simply; stock options are a contract between two people. Think of them like making a bet on a football game, two people bet $20, one wins, and one loses. When dealing with options, one bettor is the buyer, and the other is the seller. What you’re betting on is the likelihood of a future event. A stock option gives the holder the right to buy or sell 100 shares of an underlying stock at a certain price, called the strike price, on or before the expiration date of the option. One option is equal to 100 shares. The holder is not obligated though to buy or sell the option. If the option isn’t executed before it expires, it’s worthless. Stock options are leveraged, that’s why they are cheaper than buying actual shares of stock. One share of stock X costs $100, but you can buy an option for $10. You don’t own the shares; you control them. The options have an expiration date, that’s why they’re cheaper than owning actual shares. Check out this video for a quick crash course on today’s topic. Learn the Lingo Strike Price: The strike price is the price at which the option holder can buy or sell the underlying security when exercising the option. Call Option: A call option contract gives the holder the right to buy 100 shares of stock at a specific price within a particular time period. Put Option: A put option contract gives the holder the right to sell 100 shares of stock at a specific price within a specific time period. Expiration: This is the final date an option can be traded. Most contracts are short-term, less than one year. Longer contracts are called LEAPS. How Does This Make Money? Options allow traders to hedge their stock positions. They allow investors to take a leveraged positions on a stock and hedge the risk of the full price of buying shares. An option buyer thinks the underlying stock will go up and the seller thinks it won’t. This is the two sides of the bet. The call option holder makes money when the strike price is less than the current market value of the underlying stock. The put option holder makes money when the strike price is higher than the current market value of that stock. If you bet right, you make money. Lock it In A good example of options in the real world is an airline buying oil options. Fuel costs are an airline’s most significant expense when oil prices rise, their profits go down. To hedge against high oil prices, airlines buy options, which gives them the right to buy oil in the future for a price that is agreed on today. If the price of oil goes higher than the agreed-upon price, the airline makes money; they won the bet. If it goes lower, they lose money; they lost the bet. But even if an airline is on the losing end of the bet, they were still able to budget their fuel costs because they had locked in the price. The airline may not make a profit, but they can control their losses. You’re Not an Airline Are stock options something you should jump into or are they just for big corporations? After all, options are betting on the future, and none of us can predict the future. When you buy shares of stock, you’re betting that the price will go higher one day. That’s the only thing you have to predict.

There is nothing more nerve-wracking than a job interview. All those questions and always the dreaded, “Where do you see yourself in five years?” Today we’ll have you navigate the minefield that is a job interview. As we have discussed in our future of work episode, the face of employment is changing. More than ever we need to be able to stand apart from the competition. One important way to do that is to improve your interview skills. Practice, Practice, Practice Practice makes perfect when it comes to just about anything, and that includes interviews. Interviewing isn’t a skill we normally practice, but it is an important skill if you’re looking to upgrade your job. A lot of what we’ve talked about this year is focused on preparing yourself your what will certainly only be a tougher job market in the future. The best way to practice your interviewing skills is to go on interviews, lots of them. But you want the stakes to be low until you’ve perfected your game. Apply for jobs that you aren’t particularly interested in but are still within your industry or the industry you want to get into. You can polish your skills without feeling the pressure you feel when you really want the job. Get Prepped Before an interview, you should do a crazy amount of research on the company you’re interviewing with. The more you know, the better you can tailor your resume, cover letter, interview answers, and questions. You can get a lot of the information you need from sites like Glassdoor and Vault. You can find out what the company’s climate is like, what the salaries are, and stuff you might not want to ask initially but is still essential to know like vacation policies and the benefits offered. Pitch It The first thing to get down pat is your elevator pitch. The goal here is to wow someone in just a few sentences. It should be no longer than about 30 seconds, use a timer when you practice. Andrew used to tell people he was a data nerd by day and a money nerd by night. That sort of pitch invites a person to ask you more questions about what you do and what you want to do. Most questions asked in an interview should be answered with a story. Come armed with stories about your triumphs and failures. Triumphs should not be framed as personal triumphs. They should be told as a triumph for your company. You designed a system that cut the time it takes to do X by one third. This saved the company $X in the first quarter alone. Failures might include having been fired from a job. How can you spin that? You took that failure as an opportunity to learn because you never wanted to put a company in the position of having to fire you again. It’s Your Interview Too During the interview process, you are not some supplicant lucky enough to get an audience with Luis XIV. If you are going to take this job, you are going to trade your time and expertise for financial compensation. As much as the interviewer is evaluating you, you are evaluating them and their company too. A job interview is very much like a first date, and desperation is the world’s worst perfume. You don’t want to come across as desperate because the person across the desk or dinner table will wonder what is wrong with you that you can’t find a job or a partner. Questions for the Interviewer Again, just like a first date, coming to a job interview and asking no questions shows that you don’t care about impressing this person. Bring a notepad with your questions and write down the answers. You should ask specific questions about the role you are applying for and the work y...

We hear a lot about the national debt, but many of us don’t really know what it is or how it works. Today we will have an apolitical discussion on how the national debt actually works. The national debt is big boogeyman during election years but how bad is it really and do you need to worry about it? What is the National Debt? The federal government takes in a certain amount of revenue and spends a certain amount of revenue. If it takes in more than it spends, there is a surplus. If it takes in less than it spends, there is a deficit. The amount of that deficit is the national debt. Who is to Blame? The president, any president, deserves neither as much blame they get when there is a deficit or as much credit as they get when there is a surplus. Our Constitution gives Congress the power to tax, spend, and pay or not pay the federal government’s debts.The president can propose a budget, but Congress has to pass it. If you want to see how much we’re spending and how much we’re bringing in, here it is.   Raise the Roof The debt ceiling is the amount of debt the federal government is allowed to carry. It is similar to the limit on your credit card. If your limit is $10,000, that’s all you can spend. There is a very significant difference though. You don’t get to set the limit on your credit card; the issuer decides that. You only get to choose how much of that $10,000 you’re going to spend. Congress in this scenario is both the issuer and the spender. They get to set the debt ceiling amount and spend the money. When the spending ceiling is reached, the Treasury Department can’t issue any more Treasury bills, notes or bonds. It can only pay bills when tax money comes in. But if there is one thing Congress loves, it’s loopholes. To prevent the US from defaulting on its debt, they can raise the debt ceiling. And they do. In 2008 and 2009, the ceiling was raised four times. It’s Not Like Your Debt While we all need to have a balanced budget because debt is bad for us, the same isn’t true for a nation’s budget. Deficits can be useful for a country’s economy. Deficit spending achieved by cutting taxes or by the purchase of goods and services by the government can help the economy.  “That is because much of the money that the government borrows and spends goes to the private sector. Private industry must then prepare to provide the various goods and services demanded by the government….In order to do this, these businesses must invest in new production facilities and greater productivity. This “crowding in” effect thus helps to mitigate any negative effects that public borrowing has on the private sector by indirectly encouraging more private investment and business growth.” How Much We Owe and To Whom You can see how much the national debt is at real time by watching the US National Debt Clock. The current number is $20.6 trillion. The national debt is divided into two categories, intragovernmental holdings, and public debt. Intragovernmental holdings is a fancy way of saying money the government owes to itself and represents about 30% of the national debt.

Our healthcare system is the worst in the developed world, but you can’t opt out of it. Because it affects us all, we’ll discuss the importance of understanding the US healthcare system. Our guest today is here to explain how consumers can take back some control of healthcare costs. David Vivero is co-founder and CEO at Amino a healthcare transparency company working to connect everyone to better, more affordable care. Transparent as Molasses The last word most of us would use to describe health care costs in the US is transparent. Healthcare is the only thing you buy without first knowing the price. Because there is no way to find out the price. And this is a big part of what drives the obscene cost of health care; What patients really need is timely, actionable and personalized information so they can shop for an MRI scan in the same way they would shop for a new car – by factoring in quality, cost and accessibility. Their informed choices would create a culture of competition across the diverse landscape of health-care providers, be they physicians, hospitals or pharmacies. Meet Amino Amino gives consumers the information that has been withheld from them. Amino compiles data that helps people estimate their healthcare costs and book appointments with experienced doctors. Amino’s data comes from nine billion insurance claims from nearly one million providers. Not only can consumers get pricing, but they can also get information on providers and facilities like how often they do a procedure and what their rate of post-op sepsis is. It also shows the standard range for this ratings and tells you if your doctor or facility are above or below the range. I made an account to try Amino out. You enter the procedure you need a price for, your location, and type of insurance. I got 126 matches in my area that do MRI’s. You can filter by distance, insurance, facility type, and hours. An abdominal MRI in my search ranges from $369-665. You can enter details about your insurance coverage, and Amino will give you an out of pocket estimate. You can also follow the Yelp link to see reviews of providers and facilities. Trillions with a T Americans spend $3.4 trillion a year on healthcare. Medical debt is the leading cause of bankruptcy in the US. So healthcare is absolutely a personal finance issue. For 20% of us, it’s our number one financial concern. You could do everything right, go to college, get a good job, have an emergency fund, pay your credit cards every month, even have health insurance and still be wiped out financially with one trip to the emergency room. You Better Shop Around Some of us compare prices on toilet paper so when it comes to something as expensive as healthcare, why do we just blindly accept the price we’re given? I’ll speak for myself and say that I had no idea shopping around was even an option. Now we know about Amino, so we don’t have that excuse. For some of us, it’s probably just laziness. I hate even calling to make a medical appointment so I’m not going to bother calling around to compare prices if I could even get the information by doing so. Part of it is fear and intimidation. If you need a medical procedure, it’s not because you feel great and everything is fine. It’s because something is wrong. It could be a little something like a stress fracture in your shin,