The Personal Finance Podcast - How W-2 Earners Can Save More Money On Taxes with Rachael Camp, CFP

Episode Date: September 4, 2023

In this episode of the Personal Finance Podcast, we're gonna talk about how USW-2 earners can save more on taxes with Rachel Camp. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Factor 75: Head to factormeals.com/pfp50 and use code pfp50 to get 50% off your first box. These are amazingly easy and nutritious meals. Delete Me: Go to joindeleteme.com/PFP and use promo code PFP you’ll be able to save 20% off your DeleteMe subscription! Protect yourself online! Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Monarch Money: Get an extended 30 day free trial at monarchmoney/pfp .  Relevant Episode:  The Back Door Roth IRA (How High Earners Can Get Money Into a Roth IRA!) Connect with Rachael Camp: Twitter Linkedin Website All Street Academy Course Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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What's up everybody and welcome to the personal finance podcast. I'm your host, Andrew, founder of mastermoney.com. And today on the personal finance podcast, we're going to be talking about how you can save more money on taxes at W2 to earner with Rachel Camp. If you guys have any questions, make sure you hit us up on Instagram or TikTok at Maxx. Master Money Co. And follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast on it. If you want to help out the show, leave a five-star rating and review on Apple Podcasts, Spotify, or whatever your favorite podcast player is.

Now, today, I am really, really excited to talk to Rachel Camp. And Rachel has been someone I have been following for the last few months on Twitter, and she has some incredible stuff that she talks about. But she also has a very down-to-earth approach on money. Today, we're going to be talking about a number of different categories. And first, we're going to go into Rachel's story and she has a really cool backstory. Then we're going to go into tax efficient investing. And we want to think about tax efficiency, which investments we want to be looking at, how long do we

want to be holding our investments? In addition, which accounts should we be actually allocating some of these investments into? Should it be in a Roth IRA, should be in a 401k, a taxable brokerage account, all those different things. Then we're going to be talking about how W2 earners can save more money on tax. taxes. And we go into a bunch of different ways that W2 earners can save more money on taxes. And Rachel is also a CFP, a certified financial planner. And we're going to go into when people should hire a financial advisor. So this is an action-packed episode. And it's got a lot of items that you can

take action on. And so I am so excited for you guys to hear this one. So without further ado, let's welcome Rachel to the Personal Finance Podcast. So Rachel, welcome to the Personal Finance podcast. Thank you. I'm so excited to be here, Andrew. We are really excited to have you because I have been following you on Twitter for the last couple of months and you have a really down-to-earth approach to money. And I really love your approach on how you talk about various things from investments to taxes to all these different things. So I am really excited to have you on today. But first, before we dive into some of the topics that I want to talk about today, can you tell me more about your story and how you became a CFP? Yeah, of course. So it's funny because my dad is a

TFP, and he has been one for over 30 years. But that actually didn't have too much of an impact on me, surprisingly. Instead, when I went to college, pretty much anything in business was just the last thing on my mind. And I did end up stumbling into taking some finance and accounting courses and then realizing that this is what I should be doing. Not only was I really good at it, but it was just something I loved doing. So after I graduated, I did go into wealth management right away. So I went to work for a huge corporation in Chicago where we worked with ultra high net worth individuals and families. And I was doing the operations for the team. So I wasn't in the advisor role yet. But at this time, I was becoming really kind of obsessed with my own personal finances. So I was getting really

into the fire movement and tracking my savings rates and my expenses and all of that, honestly, just really obsessively. And understanding that I did want to be a financial advisor, but I did not take on that rule right away. I didn't go into the development programs for financial advisors for a lot of reasons. Those programs are very sink or swim. They will chew up, spit you out if you don't perform, like instantly. So instead, my idea was to just find the opportunity to learn, learn from the best team that I could find. So that's what I did in working with this team. It was very sophisticated, especially with the client health that we worked with. Now, one thing you'll find really quickly if you love personal finance and then you want to become an advisor is that it can be

a little bit of a disappointment because of the stereotype with advisors that are really salesy or pushy or maybe even a little money hungry. And the reality is that like for many of these rules, it does kind of force you into that position because again, it's a very sink or swim role. If you're not bringing in assets, if you're not bringing in clients, you just won't survive. So it can be disappointing to somebody who truly loves financial planning and then realizing that these people are spending all of their times selling and prospecting. So that was difficult and I was constantly trying to think of the way that I could enter into the financial advisor role without doing all of that. So like I mentioned earlier, my dad is ACFP. So during the pandemic, I ended up leaving that firm

and partnering up with him to kind of break into that, the financial advisor role. So I adopted his client base. He worked with retirees. So I started prospecting. expecting there in marketing to retirees and actually grew up my own client base really quickly. And of course, it was helpful that he had some things in place. So I think that really set the foundation for me to be able to just jump right in. But there was always this nagging that I really wanted to work with millennials, always just nagging in the back of my mind. And again, just being really obsessed with the financial planning,

especially my own personal finances. So selfishly, I wanted to work with people who were kind of in the same position that I was in. That's just naturally where my interest was. So at that time, I started Camp Wealth and I started posting on Twitter and just kind of seeing where it would go and seeing some of my advisor friends that were doing that, we're having some success with it. So I told myself, I'll do this for one year and just see how it goes on Twitter, see if I can kind of get that client base that I want.

And thankfully, it's gotten really, really well. And I've now started to work with that client base and attracted that client base. and I'm in that position now with my firm camp wealth that I can really grow it and do the financial planning that I really love and intended to do when I got into this role. And what I love about your story is kind of the mission that you had, you had a goal in place to kind of, you know, be different than some of the other financial advisors out there where I went through the same process. Actually, I had an internship in college where I interned at a firm and immediately realized all of a sudden that there was just so many different sales tactics

that they wanted you to go through and sell through like, you know, just high fee mutual funds, things like that. And so that part turned me off. But you figured out a way to kind of set this up where it also aligned with what your values were when it comes to personal finance and money, which I absolutely love that part about it. And I wish there was more people out there who would be doing this. And I think there are a lot of people that are up and coming that I've seen in your network and some of people around there who are actually trying to help people, you know, actually build wealth and create financial freedom, specifically younger folks like millennials. So I love that part about it. And I think it's really, really cool what you are doing.

And if people listening have not been following Rachel on Twitter, I highly recommend it. She has some great stuff out there. You have some amazing threads as well. And I think it's some really cool stuff that you're putting out there. And you and I genuinely align on, you know, tailoring our financial plan towards, you know, what our lifestyle goals are instead of actually just putting together a financial plan and just blindly trying to follow it. So can you kind of talk through how we can put together a financial plan to tailor it towards our lifestyle goals instead of just trying to throw something out there and hope it sticks on the wall. Yeah, this is huge to me because, again, this is something personally that I went through.

So I was somebody who, I guess you could say I had a scarcity mindset and sometimes they still do. And as far as income and net worth, like there was no limit to what I wanted them to be. I just wanted to increase my income, increase my net worth. And you can kind of get caught up in that when you become a little obsessive with your personal finances. But they really, I mean, those numbers have to mean something. And that was my issue is I had a high income goal, a high net worth goal and no idea why. Because the lifestyle I was leading and what I was happy with was just not that expensive. And so instead I decided to take a step back and just try to understand, okay, what do I want my life to look like and how much does that actually cost?

And of course, it costs a lot less than what I was actually saving for. So what I like to do is just kind of think about my ideal day and what does that look like. how much does that cost? Where do I live? What am I doing? And then my ideal year as well, because you do have to account for those irregular expenses. Like, how often do I want to go on vacation? What are some large expenses that could come up that I want to make sure that I can cover? And so just going through that exercise, and that's what I do with my clients as well, before we get into the numbers, is let's first define what your life looks like and what are you doing now that you enjoy that you want to do more of. And that's,

And then walking back and figuring out how much that costs. Because if you don't do that exercise, for many of us who are good with money, I put that in quotes, we will just get caught up in that never-ending cycle of just wanting more and more and not understanding why. And then, of course, many of us who get in that pattern, that money ends up just getting passed on and never spent. Exactly. And I think that is the perfect way to kind of think about it, is created around your lifestyle so that you have that available. Because most people just don't think about that.

And I think you really, really have to do that. Then you can get into the math and the numbers. And we talk about the numbers and number of different times here on this podcast as well. But I think there's just so many different things that you can do with that. And I love how you approach that because you really, really have to think about it this way. And one thing for a lot of people to note is that it is okay if the goalpost moves a little bit. You're going to tailor around your lifestyle. Maybe you start in your 20s and you're tailing it around your lifestyle.

The goalpost may move. Mine originally was I wanted to be lean five. And then eventually now I'm pursuing fat fire for a number of different reasons. but it just shifts over time. Lifestyles will shift and kind of the things that you want, and that is okay. Now, the hard part is getting the goalpost to stop moving. That's my biggest personal struggle. But at the same time, I think that's one really, really cool thing that you can do and have

available to you as well as how you set that up. Now, in this episode, I kind of want to go through tax efficiency because that's one big thing. I think CFPs really, really bring to the table is creating tax efficiency around investing. And one big question we get on this podcast at the time, and you are the perfect person to talk through this with us as well, is, you know, how W-2 earners can save more on taxes. So first, I want to kind of get into tax-efficient investing, and then we'll get into W-2 side as well. So the first thing to understand when it comes to tax-efficient investing is your investments are taxed in two categories. Can you kind of talk

about those two different categories and how they impact us as investors? Yeah, the first thing you have to understand is these two categories. One is ordinary income tax, and that's what your compensation, your salary, your wages, your bonuses, or tax tax tax. That's what most of us are familiar with when we talk about taxes, it's that federal income tax rates. The other one that's really important for investing and tax efficient investing is understanding capital gains tax. This is the tax that you pay for your investments when you have a profit or you sell it for gain. That's what you're paying is capital gains tax. And that can be further divided out into short-term and long-term capital gains tax, which I'm sure we're going to get into. But the important

part here is that you want long-term capital gains rate. Because if you want the better tax rates, it has to be a long-term capital gain. That means you held your investment for at least one year, and then you get those lower tax rates than your ordinary income tax. Exactly. And when it comes to long-term capital gains, that's one of the biggest factors we talk about here, too, is we are long-term investors. Most listeners here are long-term investors on this podcast, where short-term investors are going to pay a much higher rate. Can we talk through some of those rates, potentially? If you have short-term capital gains, what are some of the rates that potential investors could pay? And then what are some of the rates for long-term capital gains, just to show

the benefit and the pros and cons here? Yeah, so short-term capital gains, just tax at your ordinary income rate. So let's say you're in the 22% bracket and you sell an investment that you've held for less than one year, you're going to be paying 22% on that. Now, if you help you help, hold it for at least a year. And this is the rate that most investors are in. There's a good chance you'll be paying that long-term capital gains rate of 15%. So for some of us who, if you're low-income or if you retire early and you have those strategies for keeping your income low, you might be lucky enough to get in that 0% long-term capital gains rates. But most of us are in the 15% capital gains rates. And then if you're really high-income, then you're looking at 20%. So it's,

0, 15, or 20. So what you have to do is compare what your ordinary income tax rate is versus your long-term capital gains rate to understand the tax savings. But just an example, somebody in the 22% rate would be in the 15% rate for long-term capital gains. Exactly. And that is the most important factors. I think most, the majority of Americans fall into that 15% range, like you said. And so most people just kind of kind of think through that process. I think if you're making somewhere, it's like over $450,000 a year or something like that. I can't remember the exact, number right now. But over that amount is where you're going to be in that 20% range. And the beautiful thing about this is, is still a much lower taxation than it would be on your income. So,

whereas if we're in the short term capital gains, we could be tax as high as, you know, 37%. I've seen some interesting stuff happening there too. But I think that is one where it shows the pro of long-term capital gains tax, whereas people who are day traders or things like that may have to pay that short-term capital gains tax. So the next big thing is actually choosing the right investments. and most people don't realize that some are more efficient than others when you have these investments set up. So can you kind of talk through the difference between efficient investments and maybe some inefficient investments? So yeah, there's some investments like you mentioned are just inherently more tax efficient. And we can talk about it in the concept of

stocks versus bonds or stocks versus reeds, things like that. Stocks tend to be more tax efficient because they shoot off qualified dividends if they pay dividends. And qualified dividends are tax at the preferential long-term capital gains rates. Whereas if you compare that to bonds, bonds shoot off interest as you go, and that is taxed as ordinary income. So when we're looking at stocks versus bonds, stocks tend to be more tax-efficient than bonds do. And one thing we have to mention here is this really only matters

when we're dealing with taxable accounts. So if we're putting this investment in retirement accounts, whether it's a 401K, which is pre-tax or Roth IRA, which is tax-free, the tax impact you really don't have to think about because you could trade all day long. And of course, would not recommend that. That'll have an impact on your performance, but it won't have an impact on your taxes. So when we're talking about the different investments, it's really important to understand where these investments are going. So stocks versus bonds, stocks are more tax efficient. If you have REITs, those are tax inefficient because they actually pay non-qualified dividends.

And then municipal bonds are an example of a tax-efficient bond investment, because you will escape federal tax rate and maybe state income tax too if you buy the municipal bond within your home state. So those can be tax-efficient as well. And then you can talk about active versus passive investing. And I know you're a fan of passive investing. So am I. And this is just one of many reasons why.

And that's because passive investing is more tax-efficient. efficient. When you're talking about active investing, whether you're the active investor and you're the person that's buying and selling stocks within your account, or there's a fund manager who's an active investor, if we're talking about like an actively managed mutual fund, and they are buying and selling stocks, this has a tax impact that you just can't ignore because it's the difference between those short-term capital gains rate versus the long-term capital gains rate. And if you're constantly turning over these stocks, then there's a good chance. chance you're constantly creating short-term capital gains. So you're missing out on preferential

tax treatment by not holding the investments long term. And that's just a discussion on the investments. We can also talk about the impact to performance as well. But I love to think about taxes because there's so many variables in investing that we cannot control. Taxes are one thing that we have some control over. So if you're ignoring the tax impact of being a short-term investor, then you're missing out on a lot of these performance enhancements that you can control, actually. I love that. And I love that you brought up the active first passive management because a big thing that you can look at when you look through some of these funds is that actively managed funds they are buying and trading securities all the time, which you're talking about there. And one metric that listeners can kind of look up is the turnover ratio.

And if you look at the turnover ratio on some of these funds, you'll be able to see how often they are buying and selling securities. And a turnover ratio below 50% is typically what I look for. where index funds usually have like a 4 to 5% turnover ratio. It's extremely, extremely low. And then you look at actively managed funds, and there are a lot of times 50% or above, which is really going to trigger more taxable events for you when you own these actively managed funds. So that's another big piece.

Like, that's one thing I always look at when I buy new funds. Now, when we put these investments together, we are buying some of these investments, we want to place them in the right accounts. And this is a big question that we get all the time is, which accounts should I have for which specific investments and or if I want to retire earlier, anything along those lines, is how do I structure my account specifically in my investment account? So what are some good options that people may want to consider or think about when they're structuring some of these investments in specific accounts? Yeah, so I alluded to this a little bit earlier,

but we have those, we have your taxable accounts. There's really three buckets that we look at. Taxable, that's just your regular brokerage accounts. You have your pre-tax. That's your traditional 401K, 403B, and then you have your tax-free account. That's your rough IRA, your HSA, everything that's just growing tax-free once it's in there. And so once you've decided on your asset allocation and what all you want to include, you now have to place the investments. And there is a tax-efficient way to do this. So like I mentioned, a taxable brokerage account, you're going to be paying taxes as you go. So you want investments in there that are more tax-efficient. Because if you're going to want to be paying taxes, let's pay the preferential tax rates here. So in a taxable brokerage account,

for example, you could put stocks in there because they have the qualified dividends, which is a preferential tax rate. You could put municipal bonds there. Bonds are part of your portfolio because they are more tax efficient than other types of bonds. And when we talk about the retirement account, so the pre-tax bucket and the tax-free bucket, here we want to put some of the more tax inefficient investments. Because like I'm mentioned earlier, we are not taxed as we go. And so there's no tax impact while these accounts are growing. They get to grow completely uninterrupted by taxes. But for the pre-tax account, for your traditional 401K, for your traditional 403B, I like to place things like bonds in here.

Again, bonds shoot off that interest, bad tax rates. We want to put that in there. So we avoid that tax impact. You'd also put REITs in here, like I mentioned earlier, if REITs are part of your asset allocation because those pay non-qualified dividends. So again, a tax inefficient investment. So tax inefficient investment goes into a tax-efficient account. Now, your tax-free bucket, your Roth IRA, your HSA, this is also a tax-efficient account. But what I like to do in these accounts is put investments with the most growth potential. And again, that's because everything in this account is growing tax-free. So I'd rather not pay a tax on a huge gain. So if we're looking simply at stocks and bonds, I'd rather put stocks in a tax-free account

so that all of those gains won't have a tax impact may. I won't have to pay taxes on those gains as long as I meet the rules for taking money out of those accounts. So those are the different examples of how you can place investments in these different buckets. I do always like to emphasize, though, that asset allocation is much more important than asset placement. So if you're young, if you're just starting out, if you're in that asset accumulation phase and you don't have any bonds and you just have a 100% stock portfolio, then that might be what's best for you. You don't necessarily have to introduce bonds or reeds because you want to try to create some tax efficient portfolio. It's more important at that point to think about what's my optimal asset allocation rather than tax placement.

Exactly. Asset allocation is really the main, main factor, especially for folks in that accumulation phase. So that is perfect. I love some of those tips, and I love kind of thinking through how you can put together some of these investments inside of some of these tax efficient buckets. So I love that part as well. So I want to shift gear slightly here into how W2 earners can save more on taxes because I think one really big thing that we talk through on this podcast a lot is there's a lot of folks who have a nine to five, and they don't have as many options as, say, someone who is a business

owner on how they can save on taxes. And so there's a lot of really high earners that listen to this podcast. We're trying to figure out ways to save on taxes. addition to folks who just work a standard 9 to 5 who are making, you know, a standard average median wage. So this is one big thing that we also want to kind of go through on this episode. So one of my favorite tweets that you have is, and I'll link it up down in the show notes below, is how W2 earners can actually save more on taxes. So can we kind of talk through some of these ways that they could save on taxes, starting with maxing out your 401k or 403B?

Yeah. I mean, I really think, and if you spend any time on Twitter or social media, you might see that 401 case for some reason recently have gotten kind of a bad rap. And it just, it doesn't make sense to me because if you're somebody who is a high W2 earner, this is just one of the easiest ways to reduce your taxable income. If you're doing traditional 401k or traditional 403B contributions, because as you put that money in, it's a tax deferral strategy. So rather than paying money today when you're in that high tax bracket, you're thinking, in retirement, I will probably be in a lower tax record. So I would like to defer these taxes rather than pay them today, I'll choose to pay them later. So to me, it's just a really easy way to bring down some of

the tax impact in the current year and to defer those taxes to what is hopefully lower tax year in the future. Exactly. It is a very, very powerful way to be able to just save on taxes for every W2 earner. It is one of the best things to just go to upfront no matter what. Even if you can just get your employer match to start off. If you're just getting started, you're young and you're just getting started out, even if you can get that 401k match, all this stuff is really going to be beneficial for you in the long run. Now, the second one is one of my favorites overall. It's one we've had multiple entire episodes on, but I love talking about this one is the backdoor Roth IRA. Can you kind of talk through how that can save W2 earners on taxes? Yeah, this is more of a lifetime tax strategy.

So we can look at tax savings in the current year and decide on how we can bring tax. pack down today. And then we can say, how can we save taxes over your lifetime? And that's what we're doing when we're looking at Roth IRAs, because it does not reduce your income in the current year. But what it does is it gets money into a tax-free account. And from that point, moving forward, you won't have to pay taxes on that money. So I'm a big fan of the backdoor Roth IRA as well. It's just a way to get more money into retirement accounts. And of course, there's several things that you have to be careful here and pay attention to. This is one of those things that you do not want to get wrong. It's very important that you're not, you don't subject yourself to the pro rata

rule and this can get complex really quickly. But finding a qualified CPA who knows how to do this and knows how to file it correctly is really important here. But the message here is getting more money into a tax-free account will help you over your lifetime save on taxes. Exactly. It is a really, really powerful method. And for folks who want to retire earlier, or looking at financial independence, this is another really cool thing that you can utilize over that time frame. Along these same lines is the mega backdoor Roth IRA, which we have an entire episode coming out in the future that we're going to be talking about this on. But can you kind of go through this slightly too, just how people can actually utilize this in addition to some other

strategies that we talk about here. Yeah, this is another one that you have to make sure you do it correctly. So for your 401K, most employers will offer a pre-tax option. You're a traditional option, they will offer a Roth option, but some employers will have a third option for contributions, which is called after-tax. And what that means is you can actually defer or you can put more into your 401k on top of what you're doing with maxing out in the traditional and Roth bucket. And what you have to make sure when you're looking into a mega backdoor option is that first you have the after-tax contribution, which I want to clarify here is not Roth. This is different. than Roth. It is after-tax contribution. But then you want to make sure that you're able to transfer

those after-tax contributions to a Roth account in some form. So it'll either go to a Roth 401k with your employer or some employers will allow you to transfer it outside to a Roth IRA. But it's important that you have both. You have both the after-tax contribution ability, and then you have the ability to convert it to Roth. So it's a way that you can fill up your entire 401K contribution on top of that limit, which this year is 22,500. But the total contribution that you can put into a 401k between employer and between employee is 66,000 if you're under 50 years old for 2023. So you can actually fill up that amount to 66,000 as long as you're taking out employer

match and things like that through the mega backdoor raw. So I know that's a lot of different kind of complex topics. like you mentioned, I would listen to a really in-depth podcast episode or articles about this because it does get a little bit confusing. But the idea here, the core idea here, is getting a ton more money into a Roth bucket and then having that tax-free growth from that. Exactly. It allows you to just get a large, large amount into that Roth so you can have that tax-free growth, which I absolutely love. Now, the next one is one, if you are a charitably inclined person, this is something where you can really utilize some tax breaks when it comes to.

to that. And I truly believe that building wealth, one of the biggest things that we talk about here is when you build wealth, you definitely want to, one of my favorite things about building wealth is being able to give money away. So this is one I love to talk about too. And we haven't had an episode on this. So this would be great. Can you talk a little bit about donor advised funds? Yeah, I love donor advised funds. So it's a really flexible way to contribute to donate to charity and receive a tax benefit for doing so as well. So it's become more difficult to itemize instead of taking the standard deduction ever since that standard deduction was raised. But one way that we can save on taxes is to try to itemize an increase above the standard deduction. And if you're somebody who

is charitably inclined and you donate to charity already every single year, you might want to consider bunching donations into one year. So rather than donating in 2023 and 2024, maybe you bring that 2024 donation to 2023 and you do two donations in one year. year. The idea behind bunching is that we're trying to get above the standard deduction so that you can have that tax benefits. The great thing about a donor advice fund is that this is an account that you can set up to put these donations into, and you will immediately receive the tax benefit when you do that in the year that you do that. But you don't have to disperse it to the charity in that year. Once it's in the donor advice fund, it is an irrevocable gift of charity. You can't take it back out,

but you do have control over when it is actually sent to the charity. So if you like sending to charity every year and you don't want to send it all in one year, you don't have to. You just have to put it into the donor advice fund in one year. And then you can send it to the charity at whatever time frame you'd like. I love that idea of bunching them together, especially if you had a year, for example, where you just crushed it and your income is super, super high. You can kind of bunch two years together.

And then you hold it in that donor advice fund. You can give one year and year one. And then the next year in year two, after once it's in the year, that fund, but it'll just give you that tax break. So I love that idea of utilizing that. And there's some really, really cool stuff you can do with donor advised funds too. So really, really cool tool to be able to utilize. So the next one is real estate. And real estate is a great one for a lot of people who are interested in saving on taxes as well. Now, it's not for everyone. There's more activity you have to do to invest in real estate. But can you kind of talk through some of the tax benefits

that may come into play if you're interested in investing in real estate? Yeah. So obviously, being a business owner brings on a lot of tax benefits, but real estate is another thing that can bring on a lot of tax benefits. But you have to do it in the correct way, I should say, you can't just buy a rental property and then expect to get a ton of tax benefits from it. So there's one is the real estate professional status. The way that I typically see this is you have a working spouse who has got the nine to five regular W-2 job. And then you might have a non-working spouse who can qualify as a real estate professional because you do have to meet in our requirement to qualify, but that brings with it a lot of tax benefits. And then short-term

rentals as well can be another option that bring with it tax benefits. And with real estate, there's accelerated depreciation. That's what a lot of people get really excited about and taking certain losses from real estate. And again, this can get into the weeds and get complex really quickly. But to your point, it can be a great tax benefits, but it does require work. It is not true passive investing. There is an active component there. So you have to think about the tradeoff. How much am I willing to do and spend time on for this tax benefits? And if you do your research, you do your due diligence and you feel comfortable doing real estate investing, then you can move forward with it. But again, this is an example where I would bring on a CPA, a financial advisor maybe,

to kind of talk through and make sure that you're doing it in a way to receive the most tax benefit. Absolutely. It really truly is, to your point, it's just not for everyone, but you got to do the research and kind of go through the process because you can get yourself. It's a skilled investment. So if you got to understand kind of what you're doing as you go through this and make sure you weigh the pros and cons on that. The next one is the HSA and the FSA. And the HSA is obviously one of my favorite accounts. I call it the super retirement account a lot of times. but can we kind of talk through some of the tax benefits of both those accounts? Yeah, so saying HSA is, I think it might be my favorite account. It's definitely the one that I prioritize for myself. It has a triple tax benefit, potentially.

And what that means is money goes in tax-free. So when you contribute to an HSA, you do get that tax deduction in the year that you do that. And then money can grow tax-free. So what a lot of people don't understand, that if it makes sense for you, and if you can afford to do this, you can invest the funds. funds within your HSA. And again, you have to make sure you have the right provider and that they offer the right investments and things like that. But you can invest your funds. And then those gains, everything that's happening from the investments, will be tax-free. And then once you take money out

of the HSA, and this is where the third tax benefit comes in, it will be tax-free for qualified medical expenses. And qualified medical expenses cover a lot of huge range of things. So you just have to look into everything that it covers. The great thing about an HSA, the way that I use it, the way that a lot of my clients use it, is that I pay for everything out of pocket. So when I have health expenses, I don't take from my HSA. I leave my HSA alone and I let it grow with the investments. And instead, I pay for things out of pocket. But when I do that, I keep a receipt of what I'm paying for and I keep a record of everything that I'm paying for because there is no deadline for reimbursing yourself for qualified medical expenses. So if I have an expense this year, say,

have a $500 medical expense that I pay out of pocket, I will keep a record of that, keep a receipt of that. And then say in 10 years, I want to take money out of my HSA, I can actually reimburse myself for that medical expense that happened 10 years ago. So that's the way that it's currently interpreted, that there is no deadline with the HSA. So I like to use it in that way. And And the FSA can be a good account too. It's a flexible spending account. And again, just like an HSA, you receive a tax deduction for contributing to it. The downside of the FSA compared to the HSA is that it is a use it or lose it account.

So the HSA, it rolls over every year. If you leave your employer, you take your HSA with you, there's no losing it for not using it. The FSA, you have to use it by a deadline in order to still have the money. those funds. Otherwise, you completely lose access to those funds. Exactly. That's kind of the beautiful benefit of both those. The HSA is great, especially if you have a high deductible health plan. It is fantastic. Like you said, it's probably my favorite account too. And then when it comes to the FSA, it's a user or lose it thing. So if you can't have access to an HSA for some reason, maybe you don't have a high deductible health plan, then you can utilize some other options

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your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivatewealth.com. Now, the next one is a strategy that we talk about a lot here too, and it's one that I utilize is tax loss harvesting. And there's a bunch of different ways to do it. But can you kind of talk through how tax loss harvesting can help you save on taxes? Yeah.

So in 2022, this was a really popular topic because we were experiencing a down market. And one benefit of a down market is that you can take advantage of this tax loss harvesting opportunity. And what that means is, and this is what people get really confused about because they think you sell an investment and you're capturing and you're out of it and now you have this loss and you can't recover. The idea behind tax loss harvesting is selling the investment, capturing the loss. And again, let me clarify that the investment is out of loss. So you're selling it and you're capturing that loss. And then you're immediately taking those funds and investing back into a similar but different to hospital. be different, security. And the way that I look at this is typically I just want to make sure that's

in the same category, but it's tracking a different index. So, for example, if you have an S&P 500 fund, you cannot sell the S&P 500 fund and then immediately buy another S&P 500 fund. That would be a wash. It should track a different index. What you don't want to do is sell the investments and then stay on the sidelines. The idea is that you're still invested the entire time. You just want to take advantage of those losses. Because what the losses do is they can either offset other capital gains. So if you have another fund and it has a gain, you can use some of those losses to offset the gain. And there's no limit to that. The other way that you can use it, the way I use it, the way a lot of other people use it, is using some of those losses to offset your ordinary

income. Now, there is a limit to this right now is 3,000 that you can use to offset your ordinary income, but the great thing about it is that you don't lose these losses. So say you created 10,000 in losses from tax loss harvesting, you use 3,000 to offset your income. You don't lose that 7,000. That 7,000 will carry forward. And you can continue to use it in future years to offset ordinary income, or you can use it to offset gains in the future as well. Exactly. That is one of my favorite ways is to offset your actual income, too, is in utilizing that year in and year out is one, a really, really cool tool that W2 earners have that I think a lot of them don't really know exist. And there's ways that you can do this with, you know, Robo Advisors, things like that,

but I really, really like doing it, you know, with a strategic way instead of having it, you know, set up that way. So that's a perfect segue into the last one, which is 529 accounts. And 529 accounts are, you know, education accounts, obviously. And they are something where you can save a lot of money on taxes, especially if you are saving up for your kids or whatever for retirement. Obviously, though, what we talk about here on this podcast is you want to make sure you're taking carry your retirement first before contributing to some of these 529 accounts, especially when you are in the wealth accumulation phase. So can you kind of talk about how 529 accounts can save folks on taxes when they are W-2 earners? Yeah, a 529 is a little tricky because it can be a great

account if your children go to school or if you need to use it for education expenses. It's a little risky in that, you know, to receive the tax benefit in the future, you have to make sure that you're paying for qualified education expenses. So there is a risk of overfunding of 529. But to talk about the tax impact of it, it really varies widely based on your state and what they're offering you for the 529 tax deduction. So for example, I lived in Indiana before. The 529 deduction in Indiana was great. It was a 20% tax credit up to a certain amount. So tax credit is one of the best things you can have for your taxes, much better than a tax deduction. But most states do offer a state income tax deduction in the year that you contribute. And you just have to look

at what your state is offering. And if it makes sense, again, some states won't offer anything or won't offer a great benefit. So it might not be worth it. But once it's in the 529, again, those investments will grow tax-free. And then they'll come out tax-free for qualified education expenses. Like I alluded to earlier, there is that risk of overfunding a 529 and you have children or whoever you're funding this education for that end up not using it and not going to school. And now you're no longer receiving that tax benefit. So when we're talking about education, savings, I agree with you, Andrew, first and foremost, we have to make sure that we're saving for ourselves for retirement.

I always tell people there are no retirement loans. So that should be your priority. But then outside of that, you have to be careful. not to overfund a 529. And there are other accounts that might make more sense for education savings that allow you to save your children's education, but won't have that negative tax impact if they end up not going to college. Perfect. I think that's a perfect explanation on it because I think there are those tax benefits available to you there. And then obviously what you could do is also fund that account up to the $35,000 and then transferred over to your children's Roth, if that's

something that you want to do also if you're worried about that risk. But there's a number of other factors there, but it definitely is an account that you want to make sure that you're utilizing for those educational expenses. So I want to shift gears again here and kind of talk through when someone should hire a financial planner or a financial advisor. And one big thing that I've talked about in this podcast, longtime listeners know, is I'm not a huge fan of hiring advisors with a large asset under management, you know, 2% fee, 3% fee to handle your index funds or large stocks. But there are a lot of good reasons to actually hire a financial advisor, specifically to put together a financial plan. And there may be some other reasons as well that you can talk about.

So when is a really good time for someone to consider hiring a financial advisor or a financial planner when they are putting their finances together? Yeah, this is, you know, this is always a tricky question to answer because there are so many different scenarios that could happen that would warrant a discussion with a financial advisor. And I've seen, you know, being a financial advisor and being in the room with a lot of financial advisors, I've seen the impact that having that financial professional can have on somebody's finances just to talk through some of these decisions, make sure that there are things that we're covering all the bases. Because often what happens is people don't know what they don't know. And there

are a lot of blind spots. Personal finance is such a broad topic. And this is why it's so important to get a financial planner and not somebody who's just an investment manager. Because often, they go to a financial advisor. And the entire time, the advisor is just talking to them about investments and outperforming the market and things like that. And I like to think of that. And I like to think of that as like the dated old financial advisor, and I don't mean old as an age, but old as what it was previously. And I like to think that there's this new emergence of financial planners who really put an emphasis on financial planning and looking at your finances in a more holistic way and not just focusing on investment performance. I consider investment performance a very

small part of what I do. But there are other things that some people, because they're not experts just don't know about. So there's insurance. You have to think about so many people are under or uninsured. And that can be really risky to your finances. There's estate planning, of course, making sure that your assets go where you want them to go in case of death or premature death. There's investments, of course, there's retirement planning, there's education planning. There's so many of these other topics that many people don't realize that financial advisors do cover. So when you get to the point of thinking about these other topics or you're concerned that maybe you're not covering all the risks in your financial life, it might be worth a conversation

with a financial advisor. And it could be a one-time engagement, somebody that you hire for a few months. They put together a financial plan and they just kind of look at everything and you can go on with that. Or it could be somebody, if you really value somebody who you can talk to, you have a lot of different decisions that are popping up. And you just want someone there to talk through these tough decisions that could have a large impact on your finances and on your family.

Then you might want to hire a financial advisor for the long term. It's hard to say one specific scenario where it makes sense because there's so many different ways. But I think for many people, they kind of are aware of when they're at that point because they're doing good enough with their finances, but maybe they feel like they're not optimizing it or maybe they're concerned that there's things that are just not thinking about than an advisor could bring to their attention. I love that. I think that's the perfect answer because there's so many other factors about people's finances outside of the investing portion that really financial planners can help them with. And like you said, from estate planning all the way to insurance and then even

coming around towards taxes like we're talking about here, they can work with your CPA and really optimize your tax, which is your biggest bill. Most people don't realize how big of a bill that is. And so that investment alone is very worthwhile to have like a CFP. In addition to having a financial planner is going to be really, really beneficial there. So having a CPA in addition to having a financial planner is going to be really beneficial. So that's something that I think, you know, having that team available for you is really going to help you, especially on some of your biggest bills, taxation, making sure you have the right trust and or will in place, all that kind of stuff as well. So really, really great answer there. I think that's perfect. Now, I want to shift gears to a couple of different

questions that we love to ask some of our guests that some of these go deeper and then some of these are fun. So I love asking these questions. So what part of your worker life makes you come alive? Yeah, it's funny because I'm one of those people that my work is a large part of my identity, to be honest. It's just I've always been this way. I've loved to work. I've loved to, I want what I do to have an impact. And not everybody has to be this way. I just, I've recognized that I am this way and I've just embraced it. And I think that's why I've gone through so many iterations to get to this point, because I really want my work to be optimized and for it to be something that I wake up every day excited to do. and I do feel like I've gotten to that point because working with these clients and feeling like you do have a large impact and that's why I wanted to work with millennials because I felt like

when you work with retirees, you kind of, somebody comes in and it's like, well, I hope you did everything right over the past 30 years because then I can help you. But if not, I can't help you. So I wanted to move that point forward and talk to people that I could have a dramatic difference on their life and on their retirement because we have enough time to cover that. So now that I'm at an earlier stage of their life, that really, it does bring me alive because I can see the impact I'm having and I can see the relief that they feel for helping them think through this. And a lot of it is just that they never have to make another financial decision alone again. They have a partner. They have somebody who they can talk through

every financial decision. And that's always been my goal is just to really, that stress and take it off of their plate. A lot of people I work with are very intelligent, sophisticated, and I have amazing careers. And I really want them to be able to think about those things and not have to stress about these other things. So being able to take that off their plates for them has just been so rewarding. It's such a cool thing, what you can do over the course of someone's career,

because you can really create freedom for their lives. So I absolutely love that. That's got to be one of the most rewarding things out there. The second one is what is your biggest fear when it comes to money? Yeah, so this is funny. I often said I had, or maybe I still do at times, have a financial scarcity mindset. It's one of the reasons I think my kind of obsession with money is why I'm good at this job. And it's also brought a lot of awareness into the way that I think about money and then the way that I encounter this conversation with clients. To me, money often represented control in our life. So when I was younger, I saw relationships. And the way that I translated it was the person who, who has the money, who's making the money, they have the control. And of course, that's not the case in a healthy relationship, but that is the way that I translated it when I was young. And it did have an impact on me and the way that I viewed money in the career that I chose and the way

that I managed my own money. So I often had that fear of without money, I don't have control over my life. Now, it was to the extreme, but there is some truth to that. Money does bring about a certain sense of freedom. So if you're in a job that you don't like, having an emergency fund, having savings for six months means you have a lot more freedom than somebody that does not have that. So one of my largest fears is just not having that cushion, not having that savings that I can fall back on. And as a result, that's impacted the way that I managed my money, especially with starting a business. I really needed a comfortable savings that I could tap in. to if I needed to fall back on that. So the fears of mine has always just been, do I not have enough

to where if I needed to rely on this money, if I needed to get out of a situation, I wasn't happy and that I wouldn't be able to if I didn't have enough money. And I can relate to that completely because just the enough question is always resonating all the time with me. My goalpost moves all the time, like I was telling you, it's just one of those things where that is a major, major factor. So how do you plan to level up your finances this year? So it's funny. As far as, savings and investments and long term, I don't plan to level that up. This year, I am actually consciously choosing, this is something really hard for me, I'm consciously choosing to scale back on those investments so that I can invest more in the business and think long term with the business.

This has been a mindset shift that has been so difficult for me, especially somebody who was really into the fire movement, to shift money out of those retirement accounts and long-term investments and to shift it more into the present day and current investments, it feels like taking us stuff back to go forward for the long term. And it's a mindset shift that you have to realize that I am still investing. It's just a little bit harder to see right now, rather than putting that money into the stock market and seeing it do its thing. Now I'm putting it into myself, into the business,

with the expectation that over the long term, this will give me an even better return than anything else can. Exactly. Exactly. It's one of the most difficult things to do is to kind of reinvest in your business when you're so used to investing in like traditional index funds or whatever else you do in the market. It is so hard to take those dollars and kind of shift them over to things you cannot really tangibly see right away. But it is something that really, really can be a huge benefit in the long run. So if you could tell your younger self, one thing about money, what would it be? I think it would be to not give money so much power. And again, anybody who has that kind of financial scarcity mindset, a share. shift we have to go through is not holding money on a pedestal and not giving it too much power. It's something where you see somebody who has a really high savings rate and they're investing a ton of their money and you think to yourself that person is really good with money. And I've now come to realize that that is not necessarily the case, that that person can still

be bad with money if money is controlling their lives. So somebody who is in a ton of credit card debt and overspending, yeah, of course that person is bad with money. But so is the person. that is over-saving and has an irrational fear of never having enough, that is also not a healthy place to be with money. So it's always, of course, it's in the middle, it's in the balance. That's where we want to be with money, is to see it as a tool. It does not define me. It is not my identity. I am not my income. I'm not my net worth. And so I would just make sure that I tell myself to just not give money more power than it deserves because that's a trap I've fallen into a lot in my life. I love that thought process and I love your philosophy around money and how it

surrounds this because I think that's just one huge thing where early on I would follow like Mr. Money Mustache for example. That was a big thing that I was always like looking at. I was like, oh, maybe I should start biking to work and go into this whole process and realizing that I was just not enjoying life and I did had zero enjoyment. And so coming towards the middle, like you said, is more so a kind of a healthy relationship with money for most people. Obviously, it's very specific to each individual. But it's something where if you can come to terms with spending your money on the things that you actually value and then the rest of it, putting towards your freedom is going to be

something that can really, really give you a great balance. So I love that thought process. The last one is, what does wealth mean to you? Yeah. So I always want to make sure, again, I'm not giving money too much power. So I don't like to define wealth by a number or an income goal or net worth goal. instead, like we mentioned earlier, I like to define it by a lifestyle goal. So I tell myself, I'm wealthy if I can hit these things. I'm wealthy if I can maintain my relationships and have

strong relationships and make sure that I have time to show up for those relationships. I'm healthy if I can live in the city that I want to live in, which is I just recently moved to Denver. So that has kind of hit my wealthy goal here that I'm now able to afford to live here. So I consider myself wealthy to be able to do that. I'm wealthy if I can try. travel three to four times a year. That's something that's important to me. I'm wealthy if I can lead a active and healthy lifestyle and if I can eat healthy foods, all of those things. If I have those things in my life, then I consider myself wealthy. It is not a number in my bank account. It is not an income that I report on taxes. It's can I lead the lifestyle that I want to lead?

And if so, then I consider myself wealthy. I love that thought. And I love that answer because it's surrounding your entire philosophy that we would. talking about on this podcast. So that is absolutely perfect. Rachel, this has been absolutely amazing. Thank you so much for coming on. Where can people find out more about you, about Camp Wealth and everything else that you do? And then what is your kind of ideal client that you were looking for? Yeah. So Twitter, like you mentioned, that is where I am most active. So that's Camp underscore Wealth on Twitter. I have Instagram too at Camp Wealth. And then my website is Rachelcampwealth.com. Camp wealth was taken. So I had to throw my first name in there. Most people that I work with, like I mentioned,

are millennials, they're still in that asset accumulation phase. And I do work with a lot of high earners and solopreneurs. So a lot of my client base, they are very tax sensitive. And like you mentioned, I consider that to be one of the most valuable things that I do is tax planning. So that's most of who I work with today. Awesome. That's perfect. Well, Rachel, thank you so much for coming on. And we truly, truly appreciate it. Of course. Thanks, Andrew. It's great. Rosen lasagna, medium power. 15 minutes. Sounds like, Ojo time. Let's play. Feel the fun with Play-O-Joe, the online casino with all the latest slot and live casino games.

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