Modern Divorce - The Do-Over For A Better You

Who's minding your money after divorce?

August 25, 2022 Attorney Billie Tarascio Season 5 Episode 5
Who's minding your money after divorce?
Modern Divorce - The Do-Over For A Better You
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Modern Divorce - The Do-Over For A Better You
Who's minding your money after divorce?
Aug 25, 2022 Season 5 Episode 5
Attorney Billie Tarascio

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So you've split the assets and now you've got some cash to manage. Maybe it came from a house that got sold in the divorce and you got half, or you have the rights to half of your ex's retirement account: Now what? Who do you trust? Where should you put it?

When it comes to money, you don't want to make any big mistakes when you're trying to grow your cash stash after a big split.

In this episode of the Modern Divorce podcast, host Billie Tarascio brings in her brother Michael Tarascio, a certified financial planner, who shares his insider opinion on what to be careful of, how to suss out trustworthy sources, and how to educate yourself on investments and life insurance from LEGIT sources. Be sure to listen to the whole episode because you'll be listening in on little brother telling big sister how it all works, and it's hilarious.

Show Notes Transcript

Send us a Text Message.

So you've split the assets and now you've got some cash to manage. Maybe it came from a house that got sold in the divorce and you got half, or you have the rights to half of your ex's retirement account: Now what? Who do you trust? Where should you put it?

When it comes to money, you don't want to make any big mistakes when you're trying to grow your cash stash after a big split.

In this episode of the Modern Divorce podcast, host Billie Tarascio brings in her brother Michael Tarascio, a certified financial planner, who shares his insider opinion on what to be careful of, how to suss out trustworthy sources, and how to educate yourself on investments and life insurance from LEGIT sources. Be sure to listen to the whole episode because you'll be listening in on little brother telling big sister how it all works, and it's hilarious.

[00:00:00] Billie Tarascio: Hello, and welcome to another episode of the Modern Divorce podcast. I am your host, Billie Tarascio today is a super exciting episode because I am joined by one of my favorite humans on this entire planet. My younger brother, Michael Tarascio, Michael, welcome to the show. 

[00:00:48] Michael Tarascio: Ah, thank you so much.

Just, uh, yeah, I wanted to do this for a while, so it's great to be here. Thank you. Thanks for setting it up. 

[00:00:56] Billie Tarascio: Absolutely. So Michael has been in finance [00:01:00] for more than a decade, but he has recently relocated to Phoenix and now is making his services much more available to people in my neck of the woods. And he's already talked to a few of my clients and it seemed like now was a good time to bring him on the show.

And so we can talk about all things, crazy finance and Divorce. So Michael, welcome to the show. 

[00:01:23] Michael Tarascio: Excellent. Great. Yeah. Thanks again for having me, you know, as you, as you stated, we, uh, we just set up shop here. We set up a satellite office in Scottsdale and we're in a spot here in Gilbert and it's just been really exceptional to be here.

[00:01:36] Billie Tarascio: So yeah. Happy to be here. The other thing, uh, that's really cool about Michael, since he's my brother, he is gonna start joining us for pro bono day offering free financial advice during those pro bono days. So keep that in mind as well. You might see that in our upcoming advertisements for pro bono day, there's one coming up here in August and then the next one will be in October.

So make sure and, and look [00:02:00] out for that. But without further ado, Michael interest rates are going crazy. My clients are in a position where they have to sell their homes, or they're wondering, should I sell my home now? Should I wait? What about the interest rates? What are your, what, what are you telling your clients about that?

[00:02:21] Michael Tarascio: well, yeah, so there's, there's a lot happening there. And when you throw in a massive life event, like a Divorce, you know, you, you may or may not have the freedom to hold off or try to read the tea leaves of what the federal reserve is doing. Let's assume for example, that you, you do have that freedom to hold off.

What should you do with rising interest rates? Well, you know, as you know, heading into this year, we saw. A lot of uncertainty coming out of a booming year in 2021. If you had money invested in the market in 2021, [00:03:00] you were smiling on December 31st, you were up 28% and doing great heading into to January.

Uh, There was just, there was a lot of, a lot of fear and we had these massive global events happening, like, uh, Russia, invading Ukraine, which created so much uncertainty. And you had inflation and removing the politics from it. The, the reality is that there was so much money pumped into our economy over the last 20 months, 24 months, um, prices of goods and services were just screaming.

So you had these two big, really like scary things happening. And if you had money in a 401k, you saw your 401k just drop. And it was really scary and, and concerning for a lot of people. As a result, our central bank, the federal reserve said, listen, our number one priority is to, is to stop this inflation more than.

Um, being concerned with unemployment, we don't like [00:04:00] inflation. It's, it's a tax on most Americans who aren't wealthy, so we're gonna do what we can do to fight inflation. So they raised interest rates, the se, uh, the fed funds rate as it, as it as it's called. So that has a big impact on borrowing money to buy a home or, you know, what you pay on your credit card or borrowing money to go to school.

And it also really, really hurt, um, stock values. So for the first six months of this year, again, if you had a 401k, you know, those values dropped by a significant amount, any, I mean, 18 20, 20 1%, depending on how you were invested. It was, um, it was scary the first half of this year. 

[00:04:40] Billie Tarascio: Well, the, the worst part of is I know just enough about finance to be dangerous, but, um, the worst part about that is you see people panic and then take their money out when it's worth like less. It's like, yeah. It's like essentially, instead of [00:05:00] going and buying your, your clothes that are on sale, you're gonna go buy your clothes when they're marked up.

[00:05:08] Michael Tarascio: Right, right. Yeah. Yeah. And that's, you know, that's, that's unfortunate and that, um, The reality of that is that human psychology and strange behavioral tendencies factor in oftentimes for the negative for a lot of investors. And if you can think back to oh eight and oh nine, just massive panic and people thought, well, shoot, I better just preserve what I have now.

So I'm gonna sell, even though they may have already lost 20% or 30%, the problem with that is that. Nobody's ever outsmarted the market. And when you're trying to time it and get out at just the right time and get right back in at the right time, it's not gonna work. It's just, it's just not gonna work.

So mm-hmm if you have a longer term horizon writing it out, or even being aggressive [00:06:00] enough to go buy some stocks when they're on sale, mm-hmm is usually the right play. 

[00:06:06] Billie Tarascio: Okay, I'm gonna run a couple scenarios by you. Let's say I got a client who, um, got bought out in the Divorce. Uh, let's say I represent a husband and, um, his wife kept the house and she refinanced and she bought him out.

So he's got, let's say he's got $250,000 in cash. He's trying to decide what do I do with my $250,000 in cash? He knows he wants to buy a house. Eventually, he's not sure. When does he keep that money in the bank? Does he put it in the market? What does he do with the $250,000? 

[00:06:39] Michael Tarascio: Yeah. Excellent. Well, good for him for having $250,000.

That's really great. And then the other thing that I think you said probably maybe the most important thing is. What he wants to do. I mean, he he's in the driver's seat. So what do you want to do? And you said he indicated he wanted to buy a house, right? 

[00:06:55] Billie Tarascio: Mm-hmm mm-hmm yeah. He wants to buy a house.

Eventually he knows. He knows he is gonna need a new house, but he's [00:07:00] deciding do I rent for a couple years? Do I buy right now? What do I do with the money? And what do I do with all of this uncertainty around me? 

[00:07:07] Michael Tarascio: Yeah. Yeah. Great question. We have this conversation a lot with a lot of people because there's a lot of factors that go into it.

Like you're timing and, you know, just because market timing, isn't a good idea. It doesn't mean you should bear your head in the sand. You should pay attention to what's happening. So if you're guy, um, didn't need that cash for 18 months, 24 months. I would definitely not just keep it in cash in a bank account that pays 0.01%.

There are. Some places he could store his cash that would pay him, uh, a modest interest rate without taking on all the risk of say buying stocks. And maybe that's a wise place for him to be, um, owning bonds. For example, a bond fund may be fine even going online and looking at like a high [00:08:00] yield savings account is fine.

[00:08:01] Billie Tarascio: Um, I like IBOs a lot, but you can only buy $10,000 in one year. So he could, he could do something where he's not taking on all the risk, but he's still getting some return 2% or 3% or more while he's waiting to decide on a big investment, which might be real estate. The other side of this is if he has a sights set on buying a property.

[00:08:26] Michael Tarascio: and he's gonna borrow money for that. Well, you've gotta go to a lender for that. And the lender may give you 80% or 90% of the cost of the property. So that means they're putting up all the risks. So they're gonna, they're gonna want some skin in the game and you don't wanna risk that principle or that down payment.

So you don't, you know, you don't want to put it all in a, in a really risky asset class that could losing value and then you can't buy your house, which is what you wanted to do. 

[00:08:51] Billie Tarascio: So. You're saying don't put the money in the market, even though you're buying at a discount right [00:09:00] now, today because the market's down.

So you're, you're buying your clothes on sale today. Don't do that because if you, you know, find the house of your dreams on any given day that sale may have gone down versus up. 

[00:09:15] Michael Tarascio: It's true. Yeah. And, and so this is where this is a lot of art and not science mm-hmm because ultimately nobody, nobody can predict the future.

You just can't, you can take all the info that, you know, and make the, and, and make your best judgment, but you, you can't predict the future. So, um, maybe a story and then I'll tell you what I would do. Mm-hmm so we've got one client. A young guy up in Seattle who works for a tech company and he's done really, really well for himself.

And a lot of his net worth is tied up in company stock mm-hmm and he had plans to leave Seattle, cuz it's expensive and go buy a home in the Midwest, cuz that's where he's from. And he was all set to, to do that at the beginning of the year. But he. Kept he didn't sell out of [00:10:00] his company stock and his company stock just took a huge hit.

So his ability to leave and go put a big down payment, um, down for a house was impacted and he couldn't do it. So he had to push out his goal because his down payment was tied up in a risky asset. So that didn't pan out well for him. Um, conversely, you know, I shared with you. We just came here to Gilbert and I like owning.

I like owning real estate. Um, I knew when we came here, I didn't want to jump in cuz I didn't know the areas and all that. So I, I knew I wanted to rent for about a year and the timing of all, this was really, really interesting. We had, uh, sold our house and uh, you know, like a lot of folks who sold in the first part of this year did, did real well with it.

So we had a good amount of cash, just kind of sitting there. And I wanted to sit in a bank account earning 0.08%. I would like to buy a house in maybe a [00:11:00] year or so. So that's kind of an aggressive timeframe. Well, I did choose to put that money to work. I wanted to do that. So we did a deep dive. We did a lot of research into some really, really excellent, remarkable, really the world's best companies.

And the timing was fortunate enough where the, the value, as we just talked about the first half of this year, the value of these stocks had dropped significantly mm-hmm . So I, I took that risk that in that in a year, the value of these stocks are gonna be, are gonna be more than they are when I, when I bought in early July and so far, so good, but that's a risk that I'm taking on because it could be that inside of a year.

They're not, who knows, maybe there's another. We just don't know, but I'm, 

[00:11:43] Billie Tarascio: you're okay with that, on that risk you're okay. You're okay. Deciding I think the benefits outweigh the costs and let's say it doesn't in a year. Maybe I'll I'll change the timing of my home purchase or whatever. 

[00:11:53] Michael Tarascio: Right. That's the nature of taking on risk.

You've gotta be okay with, with the downside, but if it, if it pans out in your [00:12:00] favor then, okay. Coming out ahead. 

[00:12:02] Billie Tarascio: Right? The other thing you, you could do, I don't know if you ever advise people to do that, but you know, if we go to somebody in that situation, It's it's probably reasonable. You can figure out what type of price range you wanna buy your house in what type of down payment you need.

And you could split your money into money. I need for my down payment versus money. I don't. 

[00:12:23] Michael Tarascio: Right. 

Yeah. Yeah, absolutely. And, and maybe some of that money that, you know, you'll need for a down payment, um, you can. Put it into an asset class. That again, isn't taking on a huge amount of risk, but is so it's not gonna lose value.

It, it won't depreciate and you know, maybe it'll grow at two or 3%. I, I think that's a really, really prudent, reasonable step to take. Let's take another example. Um, many, many clients end up getting, uh, their 401ks split. 

Mm. Yeah. Yeah. 

[00:12:58] Billie Tarascio: And when [00:13:00] that happens, The money, the retirement accounts get split. So let's say that husband works for Boeing and let's say there's $800,000 in the 401k.

[00:13:12] Michael Tarascio: It gets split. Wife has 400 husband has 400. Um, does wife need to choose where to invest that money? Or should she leave it in the Boeing? 401k? Yeah, that's a great, great question. So that is the technical term is, uh, it's a Quadro qu qualified domestic relations order. And that's the only exception to the ERISA law that allows for you to distribute or disperse funds from a qualified account, like a 401k and not incur a 10% penalty. So in that case, the spouse. Who then received $400,000 from the 401k that was held in her husband's name? Um, she can, [00:14:00] she can roll that over, roll over the assets as if they were her own. So if she has her own 401k, if the plan allows it, she can roll that into her 401k.

Uh, if she has an IRA, she can roll that into her IRA. And then your question is what should she do with it? Well, you know, uh, Depends on how it's invested. If it were all held in Boeing stock, for example, our advice would be well, okay, let's diversify because diversification is your friend here. Um, but, but that money would be hers to invest.

However she liked. So, you know, the, the next step would be to look at her own path as an investor. And if that money is in a retirement account, how old is she? Can she afford to be, you know, really, really aggressive, um, We submit that even, even if somebody's older, even if somebody's in their fifties or maybe even early sixties, uh, it's not a bad idea to take on risk and to have exposure to equities or stocks.

Uh, we caution against being overly [00:15:00] conservative and taking that 400,000 for example, and maybe putting 70% of it in bonds. People are living longer these days and it can be a real risk to, um, outlive your money. If you don't. Uh, have enough exposure to equity so you can grow the money and, um, not outlive your money.

[00:15:21] Billie Tarascio: It's just a, a massive ask for most people because you know, husband and wife who were invested in the Boeing 401k, that that money is managed by somebody else. Yeah, right. That somebody else has decided where to put that money. They might have checked a box that said what their retirement age is or what their general risk is, but they're not looking at, or making the decisions about where to put the money.

And so after the Divorce, when you are now, when that is now on you, that can be really, um, paralyzing for people. 

[00:15:53] Michael Tarascio: It's a good word. Yeah. Probab and, and you've seen it more than I have, but it's probably very apt [00:16:00] paralyzing. Mm-hmm because now this, this newly separated individual, the Divorce individual is tasked with something Gargan and hugely important.

Hey, go read this manual in a foreign language and do your best to understand it. Oh, and there's gonna be a lot of sharks who don't have your best interest at heart. Um, who, who, who may want you to do something with it that may not be best for you? Yeah, that's scary. And that's real. It, it really is. 

[00:16:27] Billie Tarascio: How do you suggest people vet potential advisors?

[00:16:33] Michael Tarascio: Yeah, that's a really good, really good question. So. Um, so admittedly I'm biased toward a particular toward a particular business model, but the bias is rooted in years and years of study and objectivity. So number one, steer clear of what's called a broker dealer. A broker dealer is somebody who's like the old school stock broker.[00:17:00] 

Who you might find at your banker at an Edward Jones, for example, they're gonna receive commissions when they sell you a product that newly divorced gal with $400,000, probably doesn't need to go buy a product and pay a bunch of commissions. What she should look for first is somebody who's a CFP professional, a CFP professional is.

Sufficiently trained more than a broker dealer to have a discussion with her about estate planning, retirement planning, tax reduction, strategies, budgeting we're trained as planners. Also the standard of care that we owe that gal, even though she doesn't know us. Is to do what's what's best for her.

We're legally obligated to do what's best for her. So she should go look for a CFP professional. You can go to the CFP board, you could go to another resource like X, Y planning network. You can find somebody in your area. You can find [00:18:00] somebody who's practice aligns with your interest Divorce. Say for example, a business owner, for example.

And then you really should just carve out time to have conversations with like three or four folks. There are a handful of set questions that she would want to ask people. How do you get paid? What would our work look like together? Can you gimme an example of somebody in my life circumstance who you've helped before?

How have you helped them? Could I interview one of your clients? Mm-hmm would you be comfortable with that? Who do you jive with? Who do you, who do you ultimately trust at the end of the day and do your best to, to move forward with that person. 

[00:18:36] Billie Tarascio: I'm envisioning when you say broker dealer, the Wolf on wall street, um, movie where I think it's Leonardo DiCaprio, right?

[00:18:44] Michael Tarascio: It's Leo. 

[00:18:44] Billie Tarascio: Yeah, he's in a room and he's, he's calling up people and he's making sales and like this dude, I think he was homeless before or something like that. I haven't seen it a long time. Yeah. He had zero qualifications except for, he could be a really great bullshitter. 

[00:18:58] Michael Tarascio: Oh. So we can swear on this.

Thanks. You [00:19:00] should have told me that earlier, but yeah. Um, yeah. So watch out for those in, in my opinion, 97, 98, maybe a hundred percent of. Retail investors, people who aren't accredited investors, people who are independently wealthy, they would benefit significantly more from working with a CFP professional.

Who's a fiduciary than the Wolf of wall street guy. And if you, so that movie Wolf of wall street, uh, I think it's boiler room. I was gonna say rounders, but boiler room came out of like, did you see it? I dunno, like, oh one or 2000. So that's what it is. It's these stock brokers and they're silver tongue smooth talking sales guys, and they'll call up an unsuspecting person and create extreme fear and discomfort.

And I, this is the only way that you can reach your goal or impress your wife or, or meet your retirement goals. You gotta buy this stock. Well, bullshit. You don't that you, you don't need to do that. So hang up the phone and run away. Find a planner. [00:20:00] Who's comprehensive. Who's a, who's a fiduciary. 

[00:20:03] Billie Tarascio: Okay. So you've said fiduciary couple, couple times.

Um, do you all have malpractice insurance? 

[00:20:11] Michael Tarascio: We have, um, E&O policies, errors, and omissions. So if we make an error, um, or even if we're, if someone thinks that we're negligent, it's that policy that in theory is supposed to, uh, defend us in a lawsuit. 

[00:20:26] Billie Tarascio: Okay, great. So, I have come across humans in real life who have experienced a Ponzi scheme, which, you know, we thought was.

Let me, you know, briefly a Ponzi scheme is, you know, you sell a product to Michael, um, and then you give that money or pretend to give that money to Sue. And then you gotta sell this an imaginary product to somebody else to pay Michael that's a Ponzi scheme. Have I, have I gotten that? 

[00:20:54] Michael Tarascio: Yeah. Yeah, definitely.

I'm I'm gonna go sell you on this fabulous new investment and it's just the [00:21:00] best opportunity. So I'm gonna take your money and I'm gonna do that to like, you know, 10, 2000 other people and, um, really I'm just pissing it away and I'm, it's all fake buying. 

[00:21:09] Billie Tarascio: Yeah. There's no investments. It's all fake. Yeah.

It's a scheme where you just taking money from this person to pretending it to give here. Okay. So does your E&O insurance cover that type of.

[00:21:21] Michael Tarascio: I'd have to go read the policy. I doubt it. I mean, that's nefarious behavior and I'm sure they would not pay out if I were sued for a Ponzi scheme. If, if, if I engaged in that, you know, duplicitous, uh, deceitful behavior pro probably not. 

[00:21:35] Billie Tarascio: That's interesting because I think if, if I, as a lawyer, I think if I, as a lawyer screwed up somebody's case because I had committed fraud, I think the malpractice.

[00:21:46] Michael Tarascio: Really 

[00:21:47] Billie Tarascio: insurance would pay out. And I, and I, and I was left wondering like why all these people, you know, in the Ponzi schemes are left with nothing. Don't these professionals have insurance.

[00:21:57] Michael Tarascio: Yeah. I, I dunno. I mean, I imagine [00:22:00] if they are. If their legal entity is what's called a registered investment advisor and they're registered at the sec level or at the state level. Um, yeah, they're, they're absolutely gonna have errors and omissions insurance and probably other policies as well. Um, but under those types of scenes, would the, would the insurance policy.

Cover the action and pay out the, uh, pay out the customers who were left holding the bag. 

[00:22:26] Billie Tarascio: Mm-hmm maybe not.

[00:22:28] Michael Tarascio: Maybe not. 

[00:22:29] Billie Tarascio: Okay. So, so, and this, the reason I bring it up is this part of an interview, determining what people should be asking, because, um, you know, clients are, they're interviewing people. You, there are people out there who are saying, you have to buy this.

It's actually really risky. You know, they might be claiming it's not, should we be looking at people's insurance to determine whether or not if they are selling smoke, you still get paid.

[00:22:57] Michael Tarascio: Yeah. Yeah. That's a great, that's a really, really great [00:23:00] question. Should you be looking at somebody's insurance policy?

Definitely. Definitely. Because you, you want to know if they not, even if they're duplicitous, but if they just make a mistake that costs you a lot of money. Right. And you're entitled to damages. Right. Do they have an insurance policy to pay out? Yeah. One of the other areas that you'd wanna look as an investor is you can go to.

I believe it's broker and it's through FINRA and it's a giant record of complaints that are lodged against broker dealers and investment advisors like me. So you absolutely want to go do your, do your research and see have other investors, leveled complaints. And how are those complaints resolved?

Was this advisor found to be negligent and at fault. And did he or his firm have to pay out because of mistakes that were made. That should be a pretty big red flag, especially if there's a large record there. 

[00:23:56] Billie Tarascio: Will you say that website again? Because I've never heard of this? I think [00:24:00] it's super important.

[00:24:02] Michael Tarascio: Yes. Uh, broker, 

[00:24:05] Billie Tarascio: broker 

[00:24:07] Michael Tarascio: Sorry, broker 

[00:24:10] Billie Tarascio: Okay. And last question. What does it mean to be a fiduciary? 

[00:24:15] Michael Tarascio: Yeah. Good question. So to be a fiduciary is, um, it's a particular standard of care that you're obligated to give your clients and people in this space, people who, your gal, who got a Divorce with $400,000 may who she may interview, they're not all held to the same standard of care.

This standard of care means that at all times, When I'm giving financial advice, I'm obligated to give advice that's in your best interest ahead of my own interest ahead of the interest of my firm or anyone else it's important because it's the highest level of care that can be afforded to an investor from an investment advisor.

Another to contrast that you'd look at. [00:25:00] Um, the sec came out a couple of years ago and they tried to improve the standard of care that those broker dealer Wolf of wall street types were held to, which was simply a suitability standard. In other words, a recommendation I make must simply be suitable, which is just, you know, as wide as the Amazon in terms of what could become suitable mm-hmm

So they improved that and called the new standard, um, regulation, best interest. And it was clunky and it caused a lawsuit, uh, against the S E C. Um, but it basically said that, um, I've gotta be, I've gotta give advice that's in your best interest, but only at the moment in which I'm making a recommendation to buy something.

So I may take you on this sales journey and tell you why you need to buy this expensive life insurance policy. And maybe through the magic of manipulating words at the moment I make the recommendation, it's actually in your best interest. So I'm, I'm selling it to you and I'm I'm covered, but, um, [00:26:00] it's, it's lesser of a standard.

It's not the fiduciary duty and, uh, it's not what I would look for if I were an investor. 

[00:26:08] Billie Tarascio: I said that was the last question, but I lied because I wanna talk for a minute about life insurance. Sure. Life insurance seems to be the very first product. That financial advisors want to sell. And I never know if that's because it's just important to have insurance in place, or if there's some other reason why it's such a go to. 

[00:26:29] Michael Tarascio: I think we know why it's such a go to,

because, because, you know, if you drive by the home of the life insurance guy, who's done it for 30 years. Your jaw might drop and look at the six cars in his driveway because of what are called rips in the industry. They call those rip. You get a huge rip. When you sell a big, you sell a big, massive, it's so dumb, it's really dumb, but like that's what they call it.

So you'd sell a huge, expensive life insurance policy. [00:27:00] There's a whole lobby that I'm sure is gonna be extremely angry at this, but whatever it's accurate and those guys who sell. Are gonna get rips so that, so they'll get a big commission and it'll continue in perpetuity. As long as the owner of the policy continues to pay their premiums.

So my thought on life insurance for the vast majority of individuals is that life insurance. Should be life insurance, a benefit that is paid out tax free to the loved ones of an owner. Mm-hmm so that if you pass away, your loved ones, don't have an interruption in the income that they are depending on mm-hmm that's that's the point.

That's what it, that's what it should be. You investing as somebody who's working, who owns a company and saving for retirement and maybe wants to invest in other assets. Something that's separate. And a lot of those life insurance policies that the advisors you're talking about, who, who defer to that as a go-to as step number one, they, they try to sell these policies.

That's a [00:28:00] hybrid of both. They're called cash value, life insurance policies, like whole life or universal life or variable universal life expensive. Uh, Required to continue to pay the premium, which could be 2, 3, 4, $500 every single month. And it, it builds up a cash value, uh, which is kind of nice. And. A lot of these guys who are big into it, they say, well, okay, you can borrow against that cash value and you don't pay tax on that.

That's true because when you borrow against a cash value policy, that's a loan, that's not income. So you're not gonna pay income tax when you receive the proceeds from a, but what you're failing to recognize is that. It's very expensive. You owe the money back to the life insurance policy. And if you die, your death benefit is reduced by that amount.

And maybe more importantly, why are you borrowing from it? What is it that's happening in life that make that need, that, that puts you in a position where you need to borrow [00:29:00] from that? Are you trying to fund education for a child? Do you need to buy a car? Are you trying to fund a, a vacation for yourself?

Buy another home. Maybe we should look at, at, at other forms. Loans to fund some of these projects that you're interested in life. And then you can spend $25 a month on a million dollar term policy. Yeah. And take the rest of your 3, 4, 500 bucks a month that you would be spending on this policy and invested and save it in your retirement.

[00:29:27] Billie Tarascio: Sure. So generally speaking, your philosophy is separate the concepts. Get enough life insurance to cover what you need for life insurance. Look at investments separately as an entire separate class. Um, yeah, I think I got my life insurance on like, which is a, oh, love lemonade, lemonade. Do you like lemonade?

[00:29:48] Michael Tarascio: I use lemonade. Yeah, they're great. They're you really great. Use your friendly, uh, dashboard. It's it's awesome. I love it. 

[00:29:54] Billie Tarascio: So tell people what lemonade is. 

[00:29:57] Michael Tarascio: Well, I, I think it's, um, I, I [00:30:00] think it's a startup insurance, um, provider or broker. 

[00:30:04] Billie Tarascio: I think it's a platform where you can go get a quote.

[00:30:08] Michael Tarascio: Yeah. Right. 

[00:30:09] Billie Tarascio: But they don't send you a bunch of quotes from unwell. I think they do actually, you get a bunch of different quotes from different people and it's just easy. They just make it easy and it was cheap. 

[00:30:17] Michael Tarascio: They do exactly. It's easy and cheap. So for the regular consumer, What else is there, right? I mean, yeah.

I'm big fan of big fan of lemonade. Yeah. Yeah. 

Oh, well, can, can we, can we stick with this for a little bit? Sure. The insurance stuff. Yes. I'm so glad that you brought it up. Uh, you know, it's

oh, there's just a lot of nefarious marketing going on. So you can go to TikTok and search for. Anything personal finance related and some of the, um, most popular clips and videos are they're life insurance, people, and so much of what I've seen over the last month on TikTok. That claims to be personal [00:31:00] financial advice about saving for retirement, real serious stuff that serious Americans who aren't wealthy are listening to.

So much of it is, is Wolf in sheep's clothing advice. From advisors who are trying these silver tongue sales folks who are trying to, to steer the conversation in a certain way so that you will ultimately arrive at their idea that a big fat, expensive life insurance policy is just gonna make your life superior.

Than what it was yesterday and it's dog shit, excuse the language. I just it's the worst. Michael worst. 

[00:31:35] Billie Tarascio: You need to make a TikTok and show the houses, show the houses of the life. Insurance sales people escalates and talk about how this is BS because, uh, I kind of knew it was BS. Like, 

[00:31:49] Michael Tarascio: cause you're not dumb.

[00:31:51] Billie Tarascio: Yeah. They've had enough people try to sell me this to know like Hmm. But yeah. So, uh, I'm glad we're talking about it [00:32:00] on the whole life or the cash value. Is it tax deductible? Is that part of the...

[00:32:07] Michael Tarascio: no, no. Like if you, as a consumer, you go buy your own. $750,000, whole life, life insurance, you don't get a tax deduction.

Uh, when you pay the monthly premium, that's something that you've purchased. That's yours. It's not, not tax deductible. 

[00:32:25] Billie Tarascio: So it's real shady, real shady. Everybody needs to know real shady. 

[00:32:29] Michael Tarascio: Yeah. Yeah. It was just so, you know, just as an example, there's one gal who is the wife. I believe of the author of. Rich dad, poor dad.

And she had a TikTok out there that was railing against saving in a 401k. And it's just like emotionally, I feel like it should be criminal because she's convincing these, you know, young, impressionable, new workers to forego [00:33:00] free money that can add up to tens or hundreds of thousands of dollars. If they follow her advice.

Just the worst, worst advice. 

[00:33:08] Billie Tarascio: Um, what is she advocating you do instead of taking free money? 

[00:33:13] Michael Tarascio: Well, I don't know because it's TikTok and it was condensed to 40 seconds, but I guess it had something to do with life insurance.

[00:33:23] Billie Tarascio: probably, it's probably back to the life insurance probably. Yeah. Yeah. There's so many decisions that people have to make and there's so much misinformation. And I feel like, um, figuring out who to trust. With money is one of the hardest decisions, especially for people who don't have their family that they can talk to.

[00:33:45] Michael Tarascio: Yeah, absolutely. Absolutely. And that, so that's, that's a real burden and it doesn't go, it's carried by a lot of people and it doesn't go away when you just bury your head in the sand. And I've seen a lot of folks do nothing [00:34:00] over, you know, a 20 year period and. They'll reach out when they're in their fifties retirements on the horizon and they have this question, like, I don't understand this world.

I don't know who to trust. I don't know who to talk to the best place to start if you're not a do it yourself or, and you don't have family to, to rely on, are, are those sources that I, that I mentioned earlier, uh, CFP board X, Y planning is a great place. Now look, you may run into somebody who's a jerk.

And maybe they've skirted through the education and the credentialing and they don't have your best interest. But, um, the reality is that's that burden isn't going away. And most folks who become CFP professionals who hold the fiduciary duty, they, they aren't jerks. They aren't looking to screw you up because if they wanted to, they probably work as a broker dealer or have a different standard of care.

But yeah, if you don't have family to rely on. You're not a do-it-yourselfer and you're really intimidated. That's that's probably the best place to start. 

[00:34:57] Billie Tarascio: The other thing I wanna say, I wanna just encourage [00:35:00] people is I know sometimes coming out of a Divorce, you can be completely overwhelmed. You've had to redo your whole life.

You've had to learn how to be a single parent. You've redone your job. Your whole world looks different, but when you can find some time to learn about personal finance, I think it is worth investing in because then you won't be so scared about being taken advantage of you'll know, something will go up and you'll be like, this is bullshit.

Couple suggestions on how people can learn about basic finance. 

[00:35:36] Michael Tarascio: Yeah. Yeah, you're right. I mean, you know, and even taking a step back, I mean, I can't, I'm married 14 years. We had our 14th anniversary yesterday. Actually I watched his kids. They were amazing, which is the greatest kids we saw top gun. It was the best.

It was great. But like what you're talking about, I mean, I can't imagine facing that next Monday when life has been blown. and [00:36:00] I, I would imagine that like healthy eating and, and solid friendships and exercise are really important. But what you mentioned also is when the bandwidth permits some, some self-interested education on finance is gonna pay dividends.

[00:36:17] Billie Tarascio: Mm-hmm 

[00:36:17] Michael Tarascio: so, um, your money or your life is a really, really excellent, excellent book. It's not a, it's not a difficult read. Um, CNN money is a, is a really, really nice source because jargon is kind of eliminated and, and there's some simplistic concepts or complicated comp concepts that are, that are made simplistic.

Uh, but it really is as simple as like, if there's a topic in your mind that you're thinking about, that you don't know much about. Let's say somebody's heard the term, um, you know, balanced fund or value stock or growth stock. You don't know what it is. Just take the time. Do Google it Google.

What does value stock mean? What does a balanced fund or you [00:37:00] want to know about loans and buying a home? For example, just take the time to go and Google 30 year mortgage. Different loan programs. What, what does it mean when a loan is backed by the government versus not backed by the government? It's, that's what it takes.

It takes like turning off everything else and, and setting aside 15 minutes to go and do some research on a particular topic that's of interest to you. That's that's the best place to start to learn. 

[00:37:26] Billie Tarascio: Do you have any blogs that you really like? Anyone you follow? Like I know, I see Kramer, I think on apple news, but anybody that you like to follow Bloomberg news, is that a thing?


[00:37:39] Billie Tarascio: a thing. 

[00:37:40] Michael Tarascio: Yeah, no, it is. So, you know, I might be hesitant to recommend something like Bloomberg or barons or Kramer because it's, it's like, you know, maybe going from second grade to like freshman level, like it's it's high level. Finance doesn't need to be high level. We can all work a little harder to [00:38:00] get rid of the jargon and, and simplify things.

[00:38:02] Billie Tarascio: Mm-hmm 

[00:38:03] Michael Tarascio: um, I would, let me think on, on who some of those, um, well, some of those blog posts are that I think would be good for somebody who's just dipping their toe in. Yeah. 

[00:38:14] Billie Tarascio: There should be a, like a lemonade. If you haven't gone to lemonade, you need to go to lemonade. It's just, it's just great. It's just a great experience.

You're gonna love it. Yeah. It's kinda like, it's kinda like getting a mortgage through, um, quick. Which is also like a wonderful experience if you haven't done it, like it's just really, really simple. Yeah. 

[00:38:30] Michael Tarascio: Yeah. Very, very simple. Well, so now that I'm thinking about it, um, nerd wallet is a really, really great consumer friendly website that, that deals with any and all financial topics.

And it's very digestible. Um,, Motley fool. They're out of Alexandria, Virginia. Actually, these are great guys. Uh, Actually the owners know my sister-in-law's dad really well because he's from Alexandria. But, um, they also do a lot of financial planning stuff. That's [00:39:00] just simplistic, easy to digest, easy to comprehend.

Yeah. We go there. 

[00:39:04] Billie Tarascio: Motley, fool, nerd, wallet, everything I see by Motley fool is always sponsored content. 

[00:39:09] Michael Tarascio: Well, I mean, there are sales organizations, so they, they do wanna sell, 

[00:39:12] Billie Tarascio: but the information's legit. 

[00:39:14] Michael Tarascio: Oh, yeah. Oh yeah. Definitely. I, I, I trust the, uh, I trust the info that they produce. 

[00:39:19] Billie Tarascio: Good to know. Good to know.

I've wondered. Yeah. Okay. We are out of time for today, but it's been really fun to have you on the show. Michael. I hope that you all enjoy this show. Download it, rate it. If you wanna be a guest or, you know, anyone else who should be a guest, let me know. And also come see us at our next pro bono day. If you want some free financial advice from Michael.

Thanks for coming on. 

[00:39:42] Michael Tarascio: Gratitude. Thank you. This was really great. I, I really appreciate the chance to just come and speak about something I'm passionate about working for helping everyday average Americans, uh, who, who need help. So thank you so much. I really appreciate it. Thank you.