How High-Income Earners Can Legally Reduce Their Tax Bill by 25 - 50%

Speaker A: Networking and Marketing Made simple is for you the coach, consultant or service professional that has a product, service or message that you truly believe in. Please join Scott Aaron each week as he'll take you on a behind the scenes look at real world LinkedIn tactics, LinkedIn strategies and LinkedIn updates to get what you have in front of many more people. Thanks for spending time with him and let's get started.

Speaker B: Foreign so, Ethan, grateful to have you on the podcast today and very excited about our conversation. And I know a lot of what we're going to be talking about is your company, Exponential Freedom and the firm that you have. But before we talk about all the amazing things that you're doing in the arena, working with CPAs, tax attorneys, financial advisors, etc. I always like to go back before we actually go forward. So if you could rewind your own business journey, tape and press stop at a particular moment that you really feel acted as the jumping off point for you that led you to creating Exponential freedom and working with all the people that you're working with. What did that moment look like for you?

Speaker A: Yeah.

Speaker C: Thank you again. And before I answer that, Scott, thank you for all the things that you're posting on your podcast. Uh, last night I was listening to a couple of them and I called up a couple of my buddies and said, you've got to listen to this LinkedIn stuff. I mean, he knows what he's talking about. So I'm shooting it over. We're all writing down ideas. I got my notebook here of all these ideas that you're sharing that were.

Speaker B: Thank you.

Speaker C: Implementing into our business. So I appreciate you and everything that you guys do.

Speaker B: Appreciate that.

Speaker C: You know, um, what we found, uh, I used to be a traditional financial advisor where we were putting people's money into mutual funds, stocks, m index funds, the traditional things that a person could do, um, regarding financial advising. And it's great. But what I found is if, if you're, if you're looking for financial advice, typically the first person you're going to is a financial advisor and they're going to put you again in those mutual funds and stocks. And there's not really a, uh, competitive advantage. Everyone is buying the same funds, the same things. So when I was talking to these clients, they're saying, well, what makes you better than the guy across the street at Charles Schwab, Morgan Stanley, Raymond J. And I didn't quite have that answer. I was saying things like, well, we could help you dollar cost average. We are watching the news 24 7. So when you don't realize something's happening. We do. Uh, so that. That was our competitive advantage at the time, but it really wasn't that appealing because it's what everybody else is doing. And at. And then if you think about this, you could still buy the S&P 500 and probably have the same return as someone who's going to put it into a managed portfolio. And that advisor is charging that client 1%. So really, you're making about the same return at the end of the day, except you have a nice, fun and friendly person to speak to. So then we took our time. We said. And we called up people and we said, what is the actual need that people have? What is it like, why. Why are they not very, uh, happy with their financial advisors? Why are they not happy out there? And what, what is it? Oh, what we found is if we could solve the problem of taxes, then people would be more interested to talk to us. So we pivoted and we said, let's just get out of financial advising. Let's move into tax planning for our clients. And now we have, you know, spoke to thousands of people and help them reduce their tax bill. So it was more of a need, because it was more fun to save people on money and then take that money, we could save them and invest it, than to just, here's what you got, and let's just have a good conversation at once a year and review your portfolio. And that's about all the financial advisors. I've seen the majority. Some are better than others have done.

Speaker B: So I like where the conversation is going. You know, my wife and I believe in investing as much as we can with what we have now to create continued growth and wealth into the future. Because I think you're probably seeing this on your end. You know, the baby boomers are in a very precarious arena of their life. Whereas, you know, my parents are boomers. Uh, and, you know, my mom, uh, just got, you know, let go from her job about two months ago that she was at for about 11 years. She's going to be 73 in August, and she's looking for a new job. She doesn't, you know, have the monetary means to fully retire right now. Um, my father, same thing. You know, he's still in the fitness industry, still a personal trainer, still, you know, works, uh, five, six hours a day probably. Um, and, you know, my wife and I, you know, I started my investment journey with my financial advisor. I still had the same advisor, uh, when I was 25 years old. And I'll be 47, uh, at the time that we're recording this in a couple of weeks. So I've been with him for about 22 years. So he's seen my entire journey of the different aspects and components of my life. And I always try to tell people and remind them that it doesn't matter how much you start with when you save, just start saving. Because there's a great book called the Compound Effect by Darren Hardy, and it's more for entrepreneurs, but the concept is small. Daily actions and habits over time create long term goals and long term results. And I always correlate that to investing. You, uh, know you make small deposits, whether it's $100 a month or $500 a month, you compound that over 10 or 15 years, you're going to have sizable investments set aside. So here's my question before we get into the meat of the episode. There's a lot of people that feel they need to be at a certain income bracket to be able to start investing. Now, my investment journey prior to hiring a financial advisor. I don't know if, uh, you remember this company. It, uh, was a company called ING Direct. Do you, do you remember ING Direct?

Speaker C: I've heard of them, yeah.

Speaker B: So ING Direct came about in the early 2000s. Um, so I remember I was in the fitness industry prior with my father. And there was a gentleman that, a friend of mine, Matt Newman, um, shout out to him, he's been on the podcast before. But anyway, he was working for ING when they first came out onto the scene. And he's like, listen, he goes, you should try this new website, you know, it's called ING Direct. Um, you create your own wealth portfolio. You can create your own IRA with them and you just connect it to your bank account, you can make deposits. And that was kind of like my first experience with investing. So my question to you, Ethan, is the people that are listening to this, that are watching this, that I don't care how young or how old they are. Number one, do you agree that it's never too late to start saving? And the second question to that is, I, I just, or more statement wise, why do you feel people put themselves into this camp of, well, you know, I don't make enough as other people do, where they can start investing, so I'm just gonna wait. And they end up waiting too long and they never start investing in the first place.

Speaker C: I think when I go back to my financial advisor days, my number one, I think, and even in probably in any coaching as well, if you just think of any professional coaches out there, the number one value to your clients, they may not realize it was the ability to encourage them to keep up a monthly form of investing, uh, on some sort of systematic basis. That right there, the encouragement to get with a client, to tell them to invest, produces a lot more money over time than if they were to do that on their own. Because you've got someone looking over your shoulders, shoulders to hold you accountable to it. So to your point, I definitely believe that if you start, it doesn't matter if it's a dollar a day, if it's a few thousand bucks a month, do something, because something is better than nothing.

Speaker B: I, uh, mean, I could not agree more. So let's talk about the transition you made from being an active person in the finance industry, you know, helping people, and then moving over to the firm that you have now. Exponential freedom. Prior to going down that path. Is there a lesson or skill set that you learned in your time being a financial advisor that you found so impactful that you've carried it with you into all the work that you're doing now with the clients that you serve in your firm? Exponential freedom.

Speaker C: We still do financial advising, uh, because we find that's important. Um, and I can give you a kind of a concept, if you will, something interesting to think through. What we find is people were just doing it out of order. So a lot of times when people, they get all excited because they want to take a dollar and go try to find that next exciting thing, that's just going to make them, um, thousands of dollars of return or percentage return, which doesn't typically happen unless you get lucky because you bought Bitcoin years ago or something of that nature. They usually go to a financial advisor first. And that financial advisor is going to say, let's take your money and put it into a portfolio. And perhaps that advisor is going to get you an extra 1 or 2% more than the market returns. Perhaps if they do, then you've got a portfolio that's going to. Compoundingly, it makes sense to have that financial advisor because you're making more than what the market does. And compoundingly, over time, you have, um, way more than the market will produce you with that extra 1% or 2% return. But what we found is more, um, powerful is instead of going to the financial advisor first, meet a tax expert before you go to them, because if you can, let's say, wipe out 25 to 100% of your tax bill every year, let's say you're making 400k, your tax bill is 100,000 because you live in California. Well if you just freed up 100% of your tax bill every year by keeping 100 bucks, $100,000 extra in your pocket, that's a one, uh, hundred percent return on tax savings. So you now you have a hundred thousand dollars freed up to send to your financial advisor. You can do a lot more money or do a lot more with more money than if you had none at all at the start. So the order that we find is find a CPA that's going to help you or uh, maybe a tax attorney or CPA that actually knows tax strategy to save you on money. Step one. Then with step two, you find locations you can move the money into that grows tax free. So you get an additional 15, 20% ROI by wiping out your capital gains. Then you bring in your financial strategist who can help you invest your money to figure out what actually is the strategy on how to grow the money. And is it going to be stocks, mutual funds, private equity, private credit? How are you going to make money with the money that we just found? So, so find the money first, find tax free ways to grow it and then you can go to your financial advisor who's going to grow it. That's the order. Just don't go out of order. And what you'll find is you'll double your net worth in three years doing that than if you do the traditional route of saving your money after tax and then investing versus finding the money, saving taxes and then investing where the ordinary person's doubling the net worth in like every seven years. So it's just an extreme, more rapid approach to growing your wealth.

Speaker B: Why do you feel this is not being taught in the education system? Because for me, and I know you can probably agree with this, there's, and I'm not downplaying, you know, I'm a dad, so you know, my son's in middle school so I understand, you know, there's things that he has to learn. But I feel, and he, he's already started investing. Um, he, he, his aunt, um, is, uh, has been in banking for a number of years. So they opened up a custodial account for him. So he actually, you know, the family community cumulatively gave him some money to start investing in, you know, playing in the stock market. Um, why do you feel that it's not being taught enough as we grow up in the education system? Because, uh, I feel personally most individuals would be more well equipped graduating high school Moving into college, understanding about how to create wealth, understanding how to invest, because as you know, when we graduate high school and we go off to college now we're moving not into the understanding of how to create wealth, we're actually understanding what it means to be in debt, you know, and I, it, I graduated college in 2002 and I finished paying off my student loans in 2013. Took me 11 years after I graduated to pay off my student loans. And that was a big learning lesson for me that uh, I wish I would have learned much earlier. But also I was never taught to invest or what it meant. Do you feel there should be more, I would say front facing education as we grow up in high school, understanding about how to create wealth, how to invest, stocks, all those things.

Speaker C: Yeah, it's interesting concept. The colleges uh, are definitely billion dollar companies and a lot of times probably have the best marketing out there because they are convincing a lot of people to go into debt to then um, go to college and hopefully they're getting some sort of degree that's going to be worth, worth um, going in debt for. And so there's thoughts and opinions on that one. But to answer your question, why is it not being taught in school? I don't know. Perhaps if you're doing what everyone's doing, you're going to have average results. The people teaching in college may just not have the financial knowledge or the ability to teach it. So in my opinion they probably need to. The government would, could spend some money to bring in experts who are doing it on a daily basis as electives to come in and teach students. Maybe they just need experts to come in and help with the education system if there's certain skills that are deemed more valuable to learn than others. And I think finance is probably besides God and family, it's going to be one of the most important things, uh, to learn and study because if you can't pay your bills, you can't eat, you can't pay your rent, it's very important and oftentimes your life is more happy and a little bit less stressful if you manage your money properly.

Speaker B: So I like to talk about differentiating factors in business. If someone was to ask you, Ethan, what is one of your big differentiating factors in how you operate, how you work with clients, strategies or things that you truly believe in that make you stand out from other people in your space, what would you say is your greatest differentiating factor that people need to know?

Speaker C: I would say first, there is not a single person that we've haven't been able to help every single person, if you follow the laws correctly, have the ability to do what Jeff Bezos does. Elon Musk and pay no tax. I mean I think if you've ever googled them before and say how much do they pay in tax? And they're famous for certain years of not of paying, um, little to no taxes because they have a team of advisors around them. Uh, and that's what we've discovered. And that's really what took me to the next level of income myself too, was I gathered a team of experts. And you want to surround yourself with the following people, at least in finance, you know, a financial advisor, tax attorney, cpa, maybe a business consultant, an estate planner, maybe an additional lawyer. If you've got those people in your corner now, you have a lot of smart people that can guide you with their knowledge and perspectives. But the most important thing is put them all together in the same room. Because if your financial advisors says go ahead and sell your stock, but he didn't talk to your CPA and your CPA says well, that's going to cause a bunch of taxes, that just was the incorrect move. So you need to have them all in the same room discussing what is the best for you. And that's what we differentiate ourselves here, is we're a family office. So people come to us with questions and ideas and say, I want to figure out this. And we say perfect. No job is too hard for us. We're going to go back and give us three business days and we'll come back with a solution to make that work. And if we don't know, we're going to call people all over the country and that's how we do it. And um, for the most part, anyone can get their taxes down to zero if they do it properly. Um, but at least 25, you can at least knock it down 25 to

Speaker B: 50% now as we kind of are in this new AI technology world. It's, it's hard to ignore all the different shifts and changes in business right now. No matter what arena or stadium that you're playing in. Things have been changing and obviously things are going to continue to change within the arena that you're playing in being, you know, uh, tax consulting and mitigation services. What are some of the biggest changes that you're seeing in your space that not only you have to acknowledge, but other people in your arena need to acknowledge about where you see your industry going in the next 12 to 18 months?

Speaker C: Mhm. There's always changes in the tax code. It's always fun to see when there's a new president and what their incentives are. We know there's things like solar, certain solar credits that have been phasing out with the current administration. The big beautiful bill allows for more bonus depreciation than prior years. There's a lot more things and it has saved a lot of people on tax for sure. Um, so things are always changing and moving. It's important to have, um, at least what we have is a tax attorney in our team that's reading it all day, every day. And the ordinary person probably doesn't have that. So I'd recommend to speak to someone who, who isn't up to date with the codes. Um, but I'd say it's always moving, always changing. Um, for the most part, the things that we use for our clients have been around for decades, multiple decades. So it's not always, you don't really need to stay up to date with the new things. It's just follow what's always worked the proven path. Things that are not going to cause audits, things that are not going to create red flags with the irs. Implement those into your strategy because they're tried, proven and true. And you can sleep at night. We want you to be able to sleep at night when you do that. Um, but we always have changes and um, for the most part they're not going to affect you too much unless you have a specific business sector that's involved directly in that.

Speaker B: Now the, the one question I did have when we talk about high income earners, first, I want you to kind of uh, define in your mind, in your eyes what a high income earner is. And for that type of high income earner that's listening to this, the, the notion of what you guys help people in that monetary category legally reducing their tax bill between 25 to 100% like you talked about and the fact that a lot of CPAs aren't actually helping with this strategy. First, if you could define in your mind what a high income earner is and go through some of the basic strategies that you have with that person that comes to you and say, listen, I'm looking to reduce my taxes, how can I do so? But done in a legal and effective and efficient way.

Speaker C: Yeah, I love stating that part. What's funny is there, because there's no, there's never been a single person that we haven't been able to help or someone will come to us because uh, we never get the objection in sales and marketing you might find, well, I don't have the money to do your product, I don't have the time. Well, I never get objections. If I call up someone and say, Billy Bob told me I should connect with you, I'm able to save you money on taxes. I've never had a no. Um, the only thing that people care about when we find this industry is they want to know it's legal, ethical and we're not going to break the law. So our number one job as a firm is to build trust with people. And that's what we very hit um, upon when we work with them. And you asked about a couple tax strategies that we can do for people. Um, what's neat is the uh, tax strategies that we work with, Um, a lot of them have never been audited, never cause red flags. Uh, so we always like to emphasize those types of things. I'll give you one example that a lot of our clients have liked recently is Scott. You ever heard of something called energy credits before?

Speaker B: I've heard of the energy credits and the funny thing is we just got, I don't know how this is going to affect us, but we, you know, we, we had uh, the 5,000 pound car. So yeah, so we had one of those, um, recently sold it and we just got a full electric vehicle. So I know there were some changes to there. So. But I am familiar with the, the energy credits. Yes, but I mean m, some of my audience may not be. So you can enlighten them please.

Speaker C: Yeah, there's so many programs you could do, it's unbelievable. So here, here's one example. Um, this one, typically if you're making about 2 80, 280,000 of household income, you can qualify for something like this. Because you asked me like, what is a high NET Worth individual? 300k and up is typically where a lot of the government strategies will um, we'll use come into play. So this one's a energy credit where you can first create an llc. Um, so you have to be at least a green card holder or if like an ah, H4 visa, um, at minimum, or a US citizen of course. So you create your LLC and once your LLC is created you go to the IRS and say my goal is to invest into um, energy deals. Um, they say perfect, what deals? And once they approve you, you're approved for credits. It's actually quite exciting. Then what the government's going to do is they're going to look at your last three years of taxes of everything that you paid um, so 2020, since we're in the year of 2026 as we speak right now, they would look at your 20, 23, 4 and 5 tax year. So let's give an example. Let's say you paid 100,000 in taxes the last three years. Well, in that case, they would say, okay, you paid 100k of federal taxes the last three years. We're going to approve you for a credit to refund all that back to you. So now you just open up your bank account and all of a sudden you see a $300,000 check arrived to you. Um, now when you get that $300,000 check, in that example, you are required to go invest that into the battery deal you told the government you would invest into. So you can't just go spend it. You know, had a client the other day says, hey, I'm going on a honeymoon, can I go ahead and take some out? Nope, you can't, because you promised the government you were going to invest it. That's why they gave you the credit to you. So you got the credit back to you. You're taking that money, you're putting it into the batteries. The battery deal that these, that, um, typically, that's the one that we're working with right now is batteries. And this is the cool part, the batteries have a value on them. Um, typically it's like two times the value of the credits that they give you. And you can use the depreciation of the batteries to wipe out 100% of this year's and maybe a portion of next year's taxes too. So the, basically what's happening here is the government's giving you the credit from the past three years of taxes to, to make an investment. And you can write the investment off on your tax bill. And therefore it's no money out of pocket. And you literally just wiped out 100% of your taxes. You freed up a hundred thousand dollars this year because let's say that's what your tax bill was. You take the 100k and now you've got some cash to go have fun with. Maybe you're going to go invest it in the private equity private credit, give it to your financial advisor. Uh, and that's how we multiply our net worth strategies like that one and that you can just take your net worth to the next level.

Speaker B: So as we start to wind down, if someone is interested in learning more about you and exponential freedom, just talk more deeply about the clients that you're best suited to work with, how they can learn more about you and Exponential Freedom and where they should go, either on social or online to find out more.

Speaker C: Yeah, we'd love for people to meet us. You can type it. You just go to our website, um, ww.the exponential freedom.com. don't forget the the. That's important to us. We thought it'd be fun just to have a the. And they're like the Ohio State. You guys heard of that? So www.the exponential freedom. There's an intake form on there. You can just connect with us there. And it's simple as that.

Speaker B: Amazing. So, before we wind down, um, first and foremost, thank you for being here, Ethan. And all the information that Ethan shared will be in the show notes, the description and the email that gets broadcasted out. So, Ethan, final question before we sign off today. What does success truly mean to you?

Speaker C: Success? I think if you're achieving what you truly want out of life, you're successful. The problem I think people have is they don't quite know what they want out of life. So figure that out. Figure out what you truly want. That's when you could be successful.

Speaker B: I love that. Well, Ethan, this has been, uh, very insightful and really appreciate all the work that you're doing and most importantly, how you're helping people not just save money, but earn more money with what they have. And thank you again for being here and continued success. And thank you again for everything that you're doing.

Speaker C: You too. Thank you, Scott.

Speaker B: So, again, all the information about Exponential Freedom and Ethan will be in the show notes, the description, and the email that gets broadcasted out. So, everyone, I hope you enjoyed today's episode, Love and Gratitude. And I'll talk to you next time.

Speaker A: Thank you so much for checking out today's episode. If you could please support this podcast by hopping over to Apple Podcasts, Google Podcasts, Spotify, or any place that you're listening to this and leave us a rating and review. Let us know what you loved most and what you'd like to hear more of. But also if you'd like to learn how to take your business to the next level, whether it's using LinkedIn or working directly with Scott and Nancy in their intimate group coaching programs, you can head over to thetimetogrow.com or scottaaron.net to learn more. Thank you again for your support, love and gratitude, and we'll see you next time.