Episode 162: Saving For Your Kids Future with Mary Lyons.

Speaker A: Foreign. Welcome to the Girl Gang podcast. Your weekly dose, uh, of friendship, real business advice, and no guarantee. I'm your host, Amanda Smith, the no business coach and CEO and founder of Dallas Girl Gang. I'm glad you're here. This week we are sponsored by ThirdLove. So let me just tell you how amazing it feels to finally have a bra that fits me the way it's supposed to. Uh, raise your hand unless you're driving while you're listening to this, if you have one boob that's bigger than the other. Not me. Just kidding. Yes, me. Uh, so it's really hard for me to find a bra that just fits. Fits perfectly, like it's never going to happen. But when I try. And I've tried the T shirt bra by ThirdLove before, but I did the quiz wrong and my body has changed since then. Uh, I think it was like three, four years ago. So took the quiz on their website and what I did was, and I do this with most bras these days because of the boob situation. I order a couple different sizes that are really close in in size. Plus, the good thing about ThirdLove is they offer half sizes and cups all the way to, like, f G All this, like, real, you know, really expansive sizing. And so I tried a couple of different ones on, finally found the one that fits perfect. And all I got to do is cinch up the strap on one side to, um, you know, accommodate, if you will. And here's what I've noticed. Um, the side of the underwire is not supposed to poke you in, you know, into your skin. And the straps are not supposed to always slip all the time. So this is what a good bra feels like. Um, so their 247 classic t shirt bra is literally so soft, makes your boobs look great. It's just, it's like the staple you need in your bra and underwear drawer. Right, we know. We know exactly the drawer. Um, they have a perfect fit promise. So they, they say if you love your fit, guaranteed. But if not, exchanges and returns are free for 60 days. That's, like, still very, uh, uncommon, uh, for brands to always offer free returns. My husband bought something and had to ship it back. And they were going to charge him eight more dollars just to ship it back, but he already paid for shipping. So, you know, here, uh, is what you're going to do. I would highly suggest go on their website, third love.com/girlgang I R L G A N G and take their quiz on your style fit. They have Expert fit stylists to help you. And then when you're ready at checkout. Thirdlove.com Girl Gang Put the code Girl Gang20 in a little promo code slot and get you 20% off. That's going to save you way more than just shipping. Okay? Plus, they have really good shipping perks. Thirdlove.com girlgang Use the code girlgang20 at, uh, checkout. Hello and welcome. Good morning. We're going to go live with our exclusive financial partner at Benchmark Income, Mary Lyons, the Wealth Woman. And today we're going to be talking about how to save and build wealth for, for your kids. Saving money for when you have kids. When you have kids and send them to college. So stick around. We're going to jump into this topic. Um, and you guys can follow Mary at, uh, the Wealth Woman. They also have a podcast on all things financial. Um, Mary is brilliant and so, so incredible. Um, she is helping so many families, individuals, business owners with their finances, um, and helping people build wealth, find less stress and all those things. Um, so today, again, we're going to be talking about building wealth and really saving and, um, helping set your kids up for the future. Um, I would love to hear as we go, if you have questions, you can drop questions here, um, so that we can circle back to them. And then, of course, uh, Mary will ask answer some questions at the end. All. Ah, right.

Speaker B: It'll go through sometimes. It just takes a minute.

Speaker A: Thanks for joining you guys. It's good to see you guys. Thank you. If you joined us for our anniversary party on, on May 12th as well. It was super fun, um, to get to meet a lot of you in person for the first time in a long time.

Speaker B: Hello. Hi. How are you?

Speaker A: Good. Oh, uh, let me turn my volume up. All right. Hello. Hello. It feels like Friday, but it's not quite.

Speaker B: It's not, not quite there. Not quite there.

Speaker A: Um, all right, well, I gave a little intro of, um, uh, what we're going to be talking about today, but do you want to introduce yourself for those who have not heard from you before?

Speaker B: Yeah, I'd love to. So, and I'm gonna fix my camera here. It's like, all wonky on my desk. Um, I'm Mary Lyons, the Wealth Woman. Uh, I've been an advisor for over a decade. I don't like saying how long it's been. It makes me feel old. I used to wish I was older for the professional credibility. And now I'm like, no, I'm not going to tell you even if you ask. Um, but I, I, uh, very much believe in teaching people a different way to look at money because I think most people take a pretty conventional approach to their money. And because of that they end up with a very conventional life. And when you look at things, uh, with an unconventional perspective, it's amazing what different things you can accomplish. So that's a, that's a quick intro to me.

Speaker A: Love it. M. So we're going to talk about helping save for your kids futures today. I love it. I, um, think lots of people are either having kids, you know, um, maybe they already have young kids. I know my parents is very timely. My parents just graduated the last of the three siblings. My brother is the youngest. He just graduated from Baylor.

Speaker B: They get a nice raise right now.

Speaker A: We're all done.

Speaker B: We are all done.

Speaker A: And it's been what, 10 years of putting kids through college or whatever? It's been probably more actually. Um, so that's a big endeavor. Like three kids and. Yeah, I mean, state schools, private, private schools. Like it was not easy. I mean, you know, I had loans and so, um, actually we probably all have loans. Um, but you know, they, they paid for most of everything. Um, but yeah, not on easy fees. So let's dive in.

Speaker B: Yeah. So I actually think that for most people when they're thinking about paying for their kids college, they're really making an either or choice. Right. Either I can pay for my kids to go to college or I can put this money away for my own retirement. And they think that they have to pick between the two. And the reality is that you don't. And I think that's a surprise to most people. But I also think the way people traditionally save for college is maybe not the best way to do it. And so as an advisor, when people want to talk about saving for kids college, the first thing that everybody asked me about is a 529 plan. And I'll be real honest, I don't do a 529 plan for my kids because I don't think the math makes sense. Right.

Speaker A: Uh, for those who don't know what is that?

Speaker B: I have no idea what that is. Yeah. So 529 is a special account that's created specifically for the purpose of paying for education, which is why people come in and ask about it. Because when they start looking for how should I be saving for college? That's one of the first things that, that pops up. And the way that works is you would put your money into the account and it's going to grow tax free as long as the money is used for education purposes. And that education could include private school tuition for elementary school through 12th grade. Um, or it could be college education as well. But there's restrictions on what you can use the money for. And if you pull the money out to use it for any purpose that is not strictly education, you're going to pay a 10% penalty plus ordinary income tax on the growth on that account. So you're, you're restricted. So one of the things that I actually don't like about that as a plan is what happens if my kids decide they don't want to go to college?

Speaker A: Yeah, for sure, for sure.

Speaker B: I mean, maybe, you know, if my first kid decides they don't want to go to college, I can actually transfer that account to any relative. So I could use it for myself if I wanted to go to grad school. Or, or I could transfer it to my second kid and then he could use it. But I just don't like any type of account where the government gets to tell me how and when I can access my money. I just, I don't like those kinds of restrictions. So, you know, then I think about, okay, if you are doing that, the reason you would do it is because you can typically get market participation and a nice, healthy rate of return. But when you think about what we're really doing, we're saving up money and we're giving up lifestyle in the meantime, and then we're taking that money and we're giving it to whatever college our kid goes to, and then our kid ends up with a college degree, but all that money is gone forever. It's just, you don't, you don't get that back. Um, and so you work so hard to build it, only to give it away, and you feel like, okay, well, this works because I'm doing the right thing by my kid. And. But there's a different way to think about this that could create a totally different result. And so I think kind of what we talked about, I'll share what I'm doing with my kids just so that people can see it. So I actually decided when my kids were born to open a whole life insurance account on them that I was going to fund for the purpose of liquidity and internal rate of return rather than death benefit, because that's not the priority for me when I'm thinking about what I'm trying to do for my kids. Um, and so I put the money into the account and it is going to grow at a guaranteed Rate plus I get a dividend. Well, the particular type of contract that I'm funding is what's called um, a non direct recognition whole life insurance policy. And that's the technical name in case anybody wants to go Google it. Right. But then I have funded it specifically for liquidity so that there's more money going to cash and I am minimizing the, the cost structure on the insurance contract. And so what, what I end up doing at this point is I'm just building a cash reserve that I'm going to borrow against. And the reason the non direct recognition part of this is so key is that some insurance policies are going to penalize the return on your money if you borrow the money for any reason. And then other insurance contracts, the non direct recognition, they don't penalize your returns. So I want to know that I keep the same return and I have use of the money. So what we're doing right now is actually my daughter is 10, um, and what I have told her is that when she's 12 years old we're going to buy an income producing property for her. So that could be um, like a short term vacation rental or that could be a long term rental where someone's going to actually live there for a prolonged period of time or some other type of investment that's going to produce cash flow. And you would think that a 10 year old would just really not be interested in that. But I'm going to tell you, my daughter is on realtor.com checking out where, oh yeah, vacation rentals all over the country right now. She's obsessed with Hawaii. Um, and I keep saying, okay, I understand that you like condos in Hawaii, but do you see a condo in Destin is more profitable that, that could be a better, a better place to start. And so it's fascinating because what'll happen is if she ends up, if we do this, and this is the intent, and if we end up borrowing against the policy to put a down payment on this rental property, the profit from the rental property will then pay back any money that we borrowed and create an income stream which is then going to continue funding this account for her. And so if she does that, and I'll use, uh, I have a client who just did this, they put about $50,000 down. Their profit on a beach house is about 36,000 a year. So they recover what they put down pretty quickly and after that they have an income stream. Well, that may not completely pay for college, but the beauty of doing something like that is that you keep the original asset that you funded. Right. This is your golden goose. Don't give your golden goose away. Just use the eggs to pay for college. And so my hope is that between now and the time she graduates from college, that she ends up with three rental properties. Because if you kind of follow that math, every two to three years, she can acquire a new rental property. Well, heck, by the time she graduates from college, she gets the original asset that we built. Or I can keep it, right. If I'm feeling like I need that for myself. Right. She has the original asset. She'll have the real estate. She has the income stream from the real estate and the college degree. So now instead of having just the college degree, I've got a whole lot more benefit for that. And I don't have to really deal with anything other than making sure that I'm getting the right vacation rental, because I can have a property manager manage everything. And then the income stream is passive. Right? And so then she's in a position where if she wants to use her degree, great. But if she wants to do what you've done, Amanda, she can start a business, right? Because she'll actually have an easier time than you or I had, because she'll have the income stream already coming in, and so she'll be in a position by the time she graduates that she can literally do whatever she wants with her life. And to me, that's the whole purpose of what we're really trying to do. As a parent, it's about this sort of obligation to do right by your kid. I can't imagine it being better for her in the other situation. Right. One is very traditional and it feels easy, and that's probably what our neighbors are doing. The other is just looking at things in a totally different way. But because of that, you end up with a totally different outcome.

Speaker A: Yeah, absolutely. Um, so in that process, I'm sure people might be wondering, like, you know, is this actually possible for me? You know, you know, maybe. I'm thinking about, okay, what if there is a single mom? Like, single income family with multiple kids or things like that? So I think some people probably. I mean, there's so many misconceptions and so many myths that you are breaking down and your approach to everything, um, what would you say to those people? And then another question that I personally would have is finding the rental. Rental property, sure. But as a business owner, I'm thinking, how do you ensure that you're always going to make money on that property? You have to market the property, you have to pick a good spot, all of those things. You can't just buy a property and know it's always going to get booked. Right. Because then you may go under.

Speaker B: Yeah, there's risk there. Yeah, yeah, sure.

Speaker A: So let's talk about the first, you know, the first question of what if there's like a different family structure situation.

Speaker B: Yeah. So I think in any situation you have to save. Right. Whether you're doing a 529, whether you're taking out student loans and then you're going to pay the student loans, all those things affect cash flow. So the first step is to save up a big enough cushion that you can actually do something like this. And it doesn't have to be a half million dollar property where you're coming up with 50 grand to put it down. It could be that you're buying a condo somewhere and you really only need to come up with 20. Right. Uh, and then there's different loan programs too. So depending on whether you own your home or whether you're renting, you have different programs that are available to you. So um, when I, when I think about that piece, you don't have to start with some crazy big property. It could be something that's substantially less expensive. I have some clients that have a bunch of uh, condos in Destin. The average price of their condo has been between 200 and 250. And so if they're coming up with a 10% down payment, that's much more approachable. And they're cash flow positive on most of their properties anywhere from 20 to 30 grand a year. So. So it's not like you have to jump into a crazy big expensive house. But I think the first step is making sure that you're saving. And I think sometimes even having these conversations, it doesn't have to be a vacation rental. There are other things that you can do besides real estate. Real estate is just approachable because you're building an asset and you don't have to have any kind of qualifications to invest in it. So there are certain cash flow producing investments where I might have to be an accredited investor, which means my household income is 300,000 year or I have a million of net worth. Well, that eliminates a whole bunch of the population and is actually helping us. Right. But real estate doesn't have those kinds of requirements. And so I use that a lot when I'm talking about concept because it is approachable, um, and you have a hard asset, which I love, especially in times of volatility but when you think about what should happen, you should never, like if all I have is the $25,000, I shouldn't go buy real estate with that $25,000. Because you're right, if somebody doesn't rent the property or if there's expenses I wasn't expecting that can derail the entire plan. The reason that my daughter gets to go do this is because we're building in enough cushion first that we know we can actually do this. And she could pay the rent out of what we have accumulated for six months to a year before we hit a point where. And we better sell this thing because it's really not working. But I think any time you're doing an investment, you need to have a cushion in place in the event that there is volatility. Because we see that in the market right now. If you're expecting to be taking income out of any asset right now, that's kind of a scary thing to happen. And so I think really it's just about starting where you can start. And the first step is you have to save money. And it's interesting because sometimes I have conversations with people and I ask them, well, how much can you save? And the answer is, well, I'm really like living right up to my budget right now. It's hard for me to save. And then I talked to him m six months later and like they just bought a house and their rent went from 1500 to 2500. I'm like, where did that extra thousand dollars come from? Because you told me you couldn't save. So some of it is, um, and it may not be that big of a jump, right? It may be a couple hundred. But I think some of it is about identifying your priorities and what's really important to you. Because if you have the ability to save up the money you own and control it, you do the down payment on the house. You're the one managing the house at the end of this. If you've paid for their college and you, you're the one who holds on to the three rental properties that you've built over an 18 year time period, right? That's not, that's not a super aggressive state schedule. Um, but if you're holding on to all of that, then you're the one with the six figure income. They get to start on their own, right? But they have the college degree. So I mean, the, the situation that I'm talking about where I want my daughter to have all of this is because I'm already taking Care of my piece.

Speaker A: Right.

Speaker B: But if I'm looking at this as a way to take care of my piece and her piece, then I just do exactly the same thing. But I retain ownership of the assets until I decide it's to time. Time to give them to her, which may not be until I die. She's like, what?

Speaker A: Yeah, um, do you want to touch on, um, kind of what we were talking about, like the risk involved in like finding a property and making sure it's going to be profitable month over month for semi at least. Like I say long term, but like you're saying, you know, for a year or so. Like if you don't see your turning much, if you're just breaking even, like, or you're going under, you may need to get out of that property. Right.

Speaker B: So, yeah, yeah, I think that, um, I think it's really important to understand what you're getting into and how you're going to get out of it at any point in time. And then there are rules for knowing whether or not it's a really, really good investment. Uh, I definitely have clients that look at buying a second home and then they'll rent it out to supplement the mortgage and the hope that they just cover the note. That's not the type of purchase that I would go for if I'm looking for the income stream. With the income stream, the math is more important, I think, than the property itself. And there are rules for that. So, um, good resources, if you're interested in the vacation rental side of things, um, would be like Air DNA co. So it's not dot com, it's dot co. Um, but if you looked for that, if you searched for that, you'd see a bunch of their competitors would come up too. But, um, alt the rooms is another one. Um, there's some new ones out that I haven't had a chance to look at yet. But basically what those groups are doing is they're pulling down all the data from VRBO and Air DNA. And so you can see average rental prices and you can see occupancy rates for any given zip code or city or depending on what you're looking at. And so you have to be careful because some of those add in the cleaning fee and some of them strip it out. So you've got to. That's very material in terms of profitability.

Speaker A: Yes. Uh, not going in your pocket.

Speaker B: Yeah, exactly. If you think there's an extra hundred dollars a night that's going to change your math versus if you know that's A pass through that's different. So the kind of basic rule of thumb if you are going the vacation rental route, um, which is where I see the highest margins if you're looking at single family properties right now is that uh, you should be able to cover your principal and interest. That's your mortgage payment, your insurance, your taxes, the utilities and any other expenses, uh, associated with the Property in a 7 to 10 day time period each month. So that if your property is only rented for a week to 10 days out of a 30 day month, um, you're at least breaking even. And then if you, if you can break even at that point the occupancy rate for that area becomes very important. If you're at a 60% occupancy rate, you know that um, you're going to end up covering your expenses and then all the leftovers is money in your profit in your, in your pocket. And the thing I didn't mention for expenses is you need to be able to cover property management as well. Unless you want to be fielding phone calls, you know, at 9 o' clock at night on a Friday because somebody can't figure out how to push.

Speaker A: Unlock the door. Unlock the door. Yeah, exactly, yeah.

Speaker B: Um, and so when you bake that in, if you know you can cover all the expenses in a week to 10 days, you're, you're really hedging your bets on that one. And so especially if it's somewhere cyclical like Cedar Creek Lake around the corner from us, uh, um, in the winter it's going to be slow but you're, you look at the occupancy rates during the winter months and if you're in that I can cover my bills in a week, you're probably fine. And then in the summer the likelihood is that your occupancy rate is going to be closer to 90%. Right. But it's 60 over the year. And so some of it is making sure you have that data. But all those sites will give you month by month what happened historically. And most of them have the information from 2020 on. And so I think you know, looking for an area that has high occupancy rates, high rental rates, maybe a lower cost for what you're buying and the ability to hit those breakevens is key. And if you're doing long term rentals because may that appeals to you more because you aren't, you know, you're only having to deal with a phone call you could self manage only like if they break the toilet or something. Yeah. Then What I would say is the two things that were most impactful for me with long term rental is that if cash flow is the objective, and for me, that's always the objective. The rule of thumb, um, is that whatever price you're paying for to buy the house, you can get 1% of that in rent, Rent every month. And I'll tell you in DFW that is almost impossible right now unless you're out, like, way in the burbs. Um, but that's kind of the math for that cash flow to make sure that you really have a profitable investment on the long term rental side. And with long term rentals, another thing that's really important to do is actually like, do a background check and pull, um, credit. Because there is a very strong correlation between people with high credit take care of the property. Right. And then the lower credit scores tend to want, um, more from their landlord. And, and in my experience, the times that I had problems with tenants, uh, it was, there was a correlation. It's the same actually with car insurance. I don't know if you knew that, but if you have.

Speaker A: No, that totally makes sense.

Speaker B: Your car insurance is cheaper. Right. And so I think just kind of understanding that is helpful. And then I would say really surround yourself with other people who are doing that. And if you're looking at your friends saying, none of my friends are doing this, then you need to start looking and asking, do you know anyone who does this?

Speaker A: Add to the full.

Speaker B: Yeah, build that community. Right. And I think actually that building the community part, whether it's for your own personal wealth or because of the things you want to do for your kids, I think it's always good to have, um, people who can mentor you and then peers and people you can mentor. And so if you look around and there are a bunch of people that you can mentor and peers, but you don't have a financial mentor. I would say, like, set yourself out on a quest to find that person or people so that you can learn the things that they've done to kind of progress from where you are to that next step.

Speaker A: Absolutely, totally. Um, well, this is super helpful, I'm sure. Very interesting to so many people. Um, I'm going to direct everybody to you. If you guys want to ask her more questions about this, if something sparked your interest, go message Mary at the Wealth Woman. Um, and then where else can they connect with you guys?

Speaker B: You guys have a podcast.

Speaker A: There's so much more.

Speaker B: Yeah, so we have a podcast, it's called the Big Wealth Podcast. It's uh, it's me and then my partner Eric. Um, he's the investment specialist for our firm. And, um, he and I've been doing this for about a year and we have actually broken into the top 100 podcasts for business and finance with Apple and also for investing. So it's been kind of fun to get to see it grow. We've had more than 10,000 downloads. And, um, and I think there's some usable content. Um, and he's funny anyway, so it's fun to listen to. He's got lots of dad jokes. He'll keep you entertained. I go for inspiration. He goes for, like, the technical stuff and the humor. So it's. We have fun doing it. Um, but if there's a topic that you want to have covered on the podcast, definitely let us know. And then I'm on social media, whether it's Facebook or Instagram, um, and then even on LinkedIn, you can find me at the Wealth Woman. And I'm pretty good about responding to DMs. There is a person on the other end of it. It's me, it's you. For real. But we're pretty good about that. And if you have questions, we can definitely help.

Speaker A: Yeah, I love it. Oh, someone just dropped a question. If you.

Speaker B: About a custodial ira, unless you want

Speaker A: to message them or you can.

Speaker B: Yeah. So, uh, I can real high level touch base on this because I know we're, um, almost up on time. Uh, there, there are different ways that this can be approached. There's a Uniform Trust for Minors account. There's a couple of other ways of looking at this. A custodial IRA can be good too, but the custodial IRA, IRA and A529 and the UTMA or the UGMA, depending on which one you're looking at, you are still going to have the same issue where you put your money into the account and then the money gets used for something and then there's nothing there. Right. Whereas if you can figure out how to keep the growth on your money and then find things that produce income, the income can pay for whatever it is that you're trying to do and you get to preserve the compounding on the asset for the entirety of your life and hopefully the next generation. So some of this is about, do I just want to put my money into a bucket of and then give the bucket away and then I'm starting over and my kid is starting over, or do I want to fund something that has liquidity and access? So I can buy other assets that are then going to produce cash flow because then I end up with the compounding on my asset and the new asset that's producing the cash flow and the income. So regardless of the technicalities of the custodial account or the custodial Iraq, um, there's a whole bunch of different things like that. I think the real decision that you're making if we distill it into simplicity, is do I just want to put money in the bucket, never think about it and give it away? If that's the case. I hate to tell you this. You're never going to be rich, right? I mean, you might be comfortable, but you're not going to be wealthy. Wealthy rich. Right. But if you put the money into something and then acquire things that produce income, the net worth is going to take care of itself at the, at the. Over time. But you're never starting over and neither is the next generation. So if building wealth for yourself and the next generation is the key, you got to look at things differently.

Speaker A: Yeah. And I think that pretty much sums up exactly what you were talking about today.

Speaker B: Right. Um, conventional approach gives you a conventional life, unconventional approach. You can build totally different things.

Speaker A: Yeah. Well, Mary, thank you so much. And I'm sure you guys reach out to Mary if you have more questions that popped up. So unfold Lotus Underscore Arts. I don't know your name. Um, feel free to reach out to Mary, um, for more questions. But uh, thank you so much. I will get this downloaded and reposted to our feed. So if you just join, you can go back and watch and we'll see you guys later.

Speaker B: Thanks for spending your time with us. Good to see you guys.

Speaker A: Bye. Mhm. Sam,