Real Personal Finance

Scott and James discuss the tradeoffs between investing in real estate and the stock market.

Listener Question

My wife and I just purchased our first home (30-yr fixed, low interest rate, strong housing market in suburbs of a major city). As we start a family, we realize we'll likely need a larger home in 5-8 years. Should we plan to purchase a second, larger home, while maintaining our current home as a rental property (which I assume requires less risky investments today), OR invest more aggressively today and plan to sell our current home when we upgrade (have only one house, no rental). Hoping you can provide a framework to help think through potential returns/tradeoffs of each scenario. For example, how to compare the return on a rental property (appreciation of property value and eventual sale) vs returns if the same money was invested in the market. Also, imagine there is tradeoffs between liquidity of owning a rental vs investing in market.
Our home is worth between $650-700k, interest rate 2.6%. Unclear what rent we could expect, maybe around $3k/month.

Planning Points Discussed

• Retirement Planning
• Utilizing Time Efficiently
• Capital Appreciation
• Purchasing Power
• Other issues (IRAs, Inflation, Financial Goals, etc.)

Timestamps:

3:07 - Liquidity For a Purchase

6:27 - Multiple Mortgages

9:55 - Tax-Writeoffs

12:05 - Home Prices

16:17 - Comparing Stock Market v. Real Estate

18:22 - Net Worth

21:08 - Desire For Simplicity

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James

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Scott

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Scott and James discuss if you should cancel your existing whole life policy and buy term life insurance.

Listener Question

I have listened to your episodes about life insurance and whether or not it’s advisable to purchase a whole life policy. However, I’d be curious to hear what you think about a whole life policy that I bought about 5 years ago. It costs me a fixed $100/ month for a $100,000 policy.

I am 36 years old, single and have no children. I would like to have a family one day, but I’m not sure it makes sense to continue with a whole life policy at this time. Would it make more sense for me to continue with this policy given that it is not hurting my financially, or would it be better to collect the cash value ($6,500) to contribute it to the small amount of remaining debt that I have and get a term life policy that will likely be much less expensive? If I do get a term life policy, how much would you recommend that I purchase?

Planning Points Discussed

• Retirement Planning
• Utilizing Time Efficiently
• Capital Appreciation
• Purchasing Power
• Other issues (IRAs, Inflation, Financial Goals, etc.)

Timestamps:

3:57 - What is Whole Life Insurance?

5:28 - When Do You Need Life Insurance?

9:30 - Term Life Insurance Benefits

11:32 - Growth Rates

13:47 - Why We Own Insurance

15:29 - Tax Planning

16:43 - Aligning Your Financial Goals

LET'S CONNECT!

James

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Scott

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Scott and James discuss how to best diversify a concentrated stock holding.
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Listener Question:

How do I exit a concentrated stock position?
I’m an employee at a large tech company and I’ve vested RSUs over the last 4 years. Some of my stock has appreciated 4x since I was granted it. My non-company stock brokerage account value is around $700k, and on top of that my vested company stock (APPL) is worth $250k at the moment. I expect to continue to accumulate more company stock through ESPP and RSU grants over time. My current gross income is around $325k ($200k salary + $125k annual RSU stock grants). I would like to take action to diversify this position into other equities (equity index funds). The reason I would like to diversify is to reduce my portfolio risk. Having just seen some other companies like Meta take a 70% stock hit, it feels like a responsible action to take. As I’ve heard in your podcast, I should not have too much of my net worth in one stock, and the only free lunch is diversification. I can sell all $250,000 vested shares tomorrow, but then I believe I would get hit with a large tax bill for all of the gains, which seems like it could be a burden. I am thinking I could start by selling the shares that I’ve held for over a year to make sure to get the long-term gains tax rate instead of the short term tax rate. And then next year, I could sell the stock I got this year, etc. I am thinking of starting a DAF in the next couple years and gifting $10k of appreciated stock to charity (apple does 2:1 promotions where they match up to $10k, meaning I could initiate the DAF with $30k), but the rest I would like to re-invest in a more diverse way to meet my short and long-term financial goals.

Planning Points Discussed

• Utilizing Time Efficiently
• Capital Appreciation
• Purchasing Power
• Other issues (IRAs, Inflation, Financial Goals, etc.)

Timestamps:

2:30 - We're on YouTube HERE!

5:58 - Tax Consequences

9:16 - Stock Vesting

13:45 - Minimize Your Taxes

16:56 - Best Stocks

25:30 - Aligning Your Financial Goals

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James

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Scott

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