Episode 2 – Brokerage Accounts 4 Your Best Life

With stocks on sale and inflation going on, now is the time to put extra cash to use with a brokerage account. I share how I opened my first one as a robo advisor at age 26, and now at 31, I share why I shifted to a self managed account. 

🦄 Ready to embody your millionaire self? Book a call to learn more about 1:1 money coaching: calendly.com/travelercharly/clarity

Episode 2 – Brokerage Accounts 4 Your Best Life

Podcast Transcript Below

Hello everybody. Welcome to the Unicorn Millionaire Podcast. I’m your host, Charly Stoever a non-binary Latinx money coach, helping my first gen clients become millionaires. I’m a formerly undocumented Mexican American and currently digital nomad traveling all over the world. Super excited to have you here along with me on my journey.

I talk about personal finance, money, mindset, twerking, unicorns, rainbows, you name it. We’re here, we’re queer, and we are going to build wealth for ourselves and our communities.

Hey y’all, how’s it going right now? As I’m recording this it is Friday.

Today my body is very sore because yesterday I went running for the first time in seven weeks. So long story short, seven weeks ago when I was still living in Playa del Carmen getting ready to leave, my knees went out, out of nowhere. And I think it’s a combination of stress, but also the fact that I would run on the beach barefoot.

I did that for about a year and a half, and so I woke up one day and I was barely able to walk. And as somebody who lives alone, that freaked me out because I couldn’t get anybody to help me do stuff. So I saw a bunch of specialists, orthopedists, and he looked at the x-rays and said, your ligaments have just been torn from the movement of running on the beach.

So don’t run barefoot on the beach. Especially on the loose, more difficult part of the sand. Okay. As a Virgo, I like a challenge. Not only would I run on the beach, but I would also run in the most difficult part with all of the loose sand so that I could feel like I did something today. Such a freaking Virgo. Always gotta prove something and do the most, but hey, it is what it is.

So today I wanted to talk to y’all about brokerage accounts. What the fuck are brokerage accounts? I work with a lot of first gen BIPOC, Latinx, Black, LBTQ clients who are the first to make the most money in their families. And I’m basically here to be that queer, from out of town that comes in and lets them know what’s good, tells them what to do with their finances, what investment vehicles to, to invest in and take advantage of all this extra cash that you have that you might want to put to work in better ways than it is.

So brokerage accounts, I like to see them as the actual high yield savings accounts with a caveat. Okay, so in brokerage accounts, basically you wanna be investing money once you’ve built up your emergency fund. So building up your emergency fund is the priority before doing any kind of investing.

And an emergency fund shouldn’t just be an arbitrary number where you feel like you’ll be good. Cuz some people will randomly come up with, with numbers saying, oh, when I’m at $5k, or $10K or $20K, that’s my emergency fund and I’ll be good. But the problem with that is our brains are funny and we like to assign comfort to different levels of money.

But once we reach those levels of money, we realize we’re still traumatized from money trauma from our past. We gotta clean and really get down to, to the math, the money math. So we should be able to calculate, okay, what does my emergency fund actually look like if I were to lose my job, for example, or go through rough times, cuz a lot of my clients are also entrepreneurs too.

I should have at least six to 12 months of expenses lined up, ready to go in case something happens. So I say that because some people will put way too much cash in their emergency funds because they think that savings where it’s at, and we watch our parents have a scarcity mindset and be afraid of money and have negative conversations and have arguments about money. And money conversations, at least for me growing up, were never positive ever at all, period.

That’s what I’m here to do as a money coach. I’ve unlearned that and my clients are unlearning that. We come in and we talk about money objectively. It is what it is. I’m not here to judge you and say, oh, you have this much, you’re a bad person. Which is kind of the fear that is associated with money in the first place.

We think we’ll be judged, or we judge ourselves for not having enough or sometimes having too much. I’ve had clients who’ve inherited tens of thousands of dollars and they feel shame around that, and they don’t feel like they want to tell anybody or that they don’t deserve it because I’ve had that happen to me once too, so I get where they’re coming from.

One time I randomly inherited $20,000, which I never thought I would inherit, so I got all up in my feels about, oh, I don’t deserve this. But at the end of the day, those thoughts, even serve on our wealth building journey, how does thinking we don’t deserve the privilege of inheriting money? Help us build wealth, not just for ourselves, but for our communities.

If we’re stuck for months or years in that guilt, that’s not helping anyone at all. So that’s the first step that we need to move past, is acknowledging the guilt and the money trauma and basically the bad beliefs that aren’t helping. Become our millionaire selves and start rewiring the pathways in our brain.

So that’s where the work lies. So with brokerage accounts, like I mentioned, you wanna have that emergency fund, you wanna have debt paid off or a debt payoff plan, which is something I’ve also seen with first gen clients. Even making six figures, they’ll still have $50,000 in credit card and student loan debt, which in my opinion, Biden’s not gonna forgive it all.

He just keeps deferring the student loan interest payments, hoping probably that the next administration will deal with it. It’s just a band aid on a systemic problem. Education should be free in this country, but that’s another TED talk. So you wanna have a debt payoff plan. And I’ve also helped clients, uh, who have, who feel more excited about investing and growing their money.

Something that I’ve noticed is that those same clients still feel guilty about having credit card debt. So it’s my job as a coach to make you aware of all the different areas of your finances that need work. And I’m not here to waste time judging anybody. We’re out here to get down to business, have that credit card debt payoff plan, and it’s as simple as I’ve walked clients through a credit card debt payoff for the first time in their lives.

We do that together online via Zoom screen share. And we come up with specific monthly payment numbers and we switch numbers around. We say, okay, if you have $5,000 in debt and you make $700 monthly payments, it’s going to take you, what, three years to pay that off. And if you do that, you’ll pay about, I don’t know, $2,000 in interest.

I’m definitely throwing these numbers out of my ass. They’re not real, but it’s just to give you an idea, because we associate so much emotion to money and numbers, and then we get scared and then we don’t look at the calculators and say, oh, I’ll just pay it off later when I get the money. And it’s just a vicious cycle that’s not helping you or your community at all.

So it’s not really about you, At the end of the day, it’s about how your actions are helping yourself and your community. So that’s, those are patterns that I’ve broken within myself and that we’re breaking on our wealth building journey that I help clients with is confront all of the areas and help come up with that payoff plan.

So then once you have that debt payoff plan, you invest in retirement accounts, you know what your 401K is invested in, which is something that I’ve helped clients. We look at the 401ks and we wanna understand exactly what we’re invested in within our 401ks or uh, other 403bs. Some clients in the public sector as well too.

We wanna know exactly what you’re investing in, cuz one time I had a client who was about 30 years old, and we looked at her 401k and it was basically invested in cash. And she thought she had taken one of those surveys. You know when you start a job and it asks you, okay, what’s your risk tolerance? When are you trying to retire?

And she thought that she filled that out correctly. But some way, somehow, you know, when you get lost in this, this finance white men jargon, you get lost. And, and yeah, the 401k was just invested in cash as flat lining, losing value to inflation. So that was a red flag. If you’re 30 years old and trying to retire when you’re 60, 70, you definitely wanna be invested in anything other than cash, cuz cash is losing value to inflation.

This is not only why we invest to outpace inflation, but because inflation, if you have like a surplus of money, it’s losing money every single day, which we don’t talk about enough, but we aren’t today.

So all of these little things matter. You wanna have your emergency fund, a debt payoff plan at least while still leveraging credit card rewards and not hoarding points and paying yourself back with them and capitalizing off intro bonus offers so you can get those bougie bottomless mimosas at those airport lounges.

I love my Chase Sapphire Reserve. It’s one of the many credit cards that I have that I pay off monthly on time. On the business side, I still do have business credit card debt because it’s very different from personal. My business credit card, I can write off the credit card interest, so I end up paying less in taxes for that.

And I also wanna keep money in my business bank account so that I can pay myself so that I live and not become resentful of my business. Cuz last year I remember not having a payment schedule. I was just, it was a wild west. I was investing a bunch of my personal money into my business and saying return.

But this year I just wanted it to hit different and know that at the end of the month I’m paying myself for all of the work that I’m doing, whether it’s posting on Instagram, responding to dms. We’re reporting this podcast. I love this and it’s a job, so paying yourself is important. I mentioned that part about the business credit card debt, to normalize that even money coaches can have debt as long as we’re being strategic about it and are able to justify why we’re in debt.

Corporations don’t say debt. They use leverage. Same word. Rich people don’t say debt. They say leverage. So millionaires take out mortgages. Millionaires borrow money. It’s not just something that stigmatize like the, oh, poor people need to borrow money. No millionaires and billionaires out here borrowing money as well.

So emergency funds debt payoff plan while being strategic about debt in the first place and investing in retirement. Your 40k, your IRA, your Roth IRA, and then comes the brokerage account for you to invest any leftover money. I had no idea what a brokerage account was until I was 26 and my friend helped me open up my very first Roth IRA ever and a brokerage account.

She was a financial advisor that helped me out and I didn’t understand what it meant, but she just showed me a chart of the stock market and was like, you’re not making a lot, but you just should start young with small amounts. So that’s what I ended up doing. Charly, from five years ago when I was 26, was trying to invest for 70 year old Charly.

Little did I know that 26 year old Charly, their investments were already benefit 31 year old Charly. Now my brokerage account had about $5,000 in it when I started. And I basically opened it through what’s called a Robo advisor. So my very first two investment accounts were through Robo Advisors, which it depends on who you open it with.

I opened mine with Charles Schwab and they had a minimum requirement of you have to put in $5,000.

So that’s basically like if you want them to manage your money for you, it’s not a person managing it. It’s basically a computer algorithm. You tell it, I want you to be aggressive and I’m trying to retire by the time I’m 65, and the computer basically does the work for you. So I relied on that when I didn’t understand what the heck investing was or anything about stock.

I let that sit there and do his thing. I would put in like 20 bucks here, a hundred bucks just to have my money grow and invest in the stock market. And I didn’t understand anything about the tax consequences of it too. So the difference between a brokerage account and a retirement account is the tax consequences.

The richer you get, the more you’re gonna have to pay attention to taxes. And I’m not saying paying taxes is. I get excited the more taxes I have to pay, because that means the more money I am making. So we shouldn’t be afraid of paying taxes, but there’s definitely ways that the white capitalist man has invented for us to be smarter and save money on taxes and be strategic about it instead of just trusting Turbo Tax to figure it out.

Which I’ve been there. So I remember, uh, when I was starting work as a stockbroker answering calls at the call center. People would call in and talk about brokerage account, this brokerage account that, and then I noticed how many casual millionaires there are in this country. Who some, yes, they had that rover advisor that I had, but there were other people there who were sitting on millions of dollars in what’s called self-managed.

Brokerage accounts. So they decided exactly what to invest in and I was like, wow, these people are so smart and skilled, they don’t need a robot to do it for them.

And I laugh now because probably about half those rich white people inherited those stocks. They probably don’t even understand why they were chosen or how they work, but they inherited them because somebody in their family died and they inherited that, and that’s seems like a taboo topic. I don’t see a lot of people talking about inheritances, but I do because I have the privilege of benefiting from them.

I was very smart because I understood how the stock market worked. When I got my inheritance, instead of buying a car or something that loses value over time, I kept my same spending habits. I kept working, uh, as a dog sitter on the side while being a stockbroker and I invested that shit. I remember even putting half my paycheck into my 401k because I had that extra cushion of cash on the side.

So I used the investment to keep the rent and upped my contribution for my 401k, cuz I had that large influx of cash. So I injected a ton of that cash into the stock market. Also to catch up for all the lost time I’d had in my twenties when I didn’t have a job with 401k. Really, I did this all at age 29 to just play catch up so that I could let 30, 40, 56 year old Charly reap the rewards of investing, and they all say all these things to normalize that we should be investing for the long term. So that’s how brokerage accounts can help us.

So the difference between brokerage account and retirement account. For example, in a retirement account, like a 401K or a Roth IRA, there’s maximum contribution limits every year they change.

For this year, you can only contribute up to $6,000 to your Roth. And that money grows tax free and grows, and grows and grows, which is great, so you don’t have to worry about taxes when you retire and take that money out. The 401k, at least at the time of this recording, the maximum contribution limit was $20,500.

The IRS has caps on all of these accounts because they don’t want everybody to be benefiting from them and not paying taxes. The IRS wants their taxes in different ways, but in order to incentivize people to invest in the stock market, that’s why they’ve designed these type of tax sheltered accounts that it’s historically, it’s middle class white people, upper class white people, male millionaires that know how these accounts work and use them to their advantage.

But the neat thing about brokerage accounts is that there’s no income limits, so to contribute for a Roth IRA, unless you do a backdoor Roth IRA, if you’re making somewhere in the six figure range, you’re actually making too much money, so you can’t contribute to a Roth IRA. You can still do an individual retirement account, an IRA, but with a brokerage account, it doesn’t matter.

You can be a millionaire and have a brokerage account and you can be making no money and have a brokerage.

What’s important to know is that in the brokerage account, every time you sell a stock that what’s called a trade is reported and sent to the IRS. So I remember when there was the game stop craze everybody and their mother tried opening up a retirement account and jumping in on that without understanding the tax consequences of buying and selling stock in a brokerage.

And it depends, you might be in a different tax bracket than me, so if I sell a stock and you sell a stock, we’re both be paying different tax rates. That’s something that’s important to know. I didn’t know anything about tax rates this or that until I worked as a stockbroker, and I had to start familiarizing myself with this.

Cuz before I used to just download TurboTax to tell me which forms to give you. I remember getting tax like crazy. I would always get a refund and trusting TurboTax to everything. And then once I worked in finance, I was like, oh, you can like Google your tax bracket. When I was a stockbroker, I was making like $40,000, so I was probably taxed in like the, I don’t know, 12 or 22% range and.

That tax bracket dictates how much taxes you’re gonna pay in your brokerage account. So personally, I use my brokerage account to have my money grow itself more than it would if it were just sitting in a high yield savings account. Cause high yield savings accounts to me are scams. You might get those cute emails that say, hey, we just raised your interest rate from 0.75 to 1%.

Yay. But I don’t care because inflation’s still at like 8%. You’re still losing value at 8%. But I don’t want people to say, oh, I don’t wanna have cash, then you should have cash. Cuz when the stock market crashes, you’ll be happy that you have cash to whether the storm and aren’t depending on the stock.

There’s a saying in Spanish that applies to the stock market that goes, everyone’s brave until the cockroach flies. Everybody thinks they’re risky and wants to just invest everything when the stock market crashes. Which it will continue to do cuz it’s a cycle cuz we’re in the capitalist machine and it’s engineered to do this. So rich people benefit while poor people are marginalized even more.

You really see who understands the system during the crashes and shit hits the fan. So that’s what we’re all about learning out here, to not be scared of the crashes and the recess. But to take advantage of them and understand that they’re gonna continue happening and taking an advantage of them and teaching our communities how to think the next time this happens or how to think when it happens.

So brokerage accounts can be a really great tool to have your money grow. When you’ve maxed out that emergency fund and you want your money to work for you in your sleep. So as an example, uh, that same brokerage account I opened when I was 26. I had like $5,000 in it, uh, last year when I hired my business coach.

It was gonna be the biggest expense I’ve ever paid for. And she was charging $3,000. I didn’t take that from my cash, I didn’t take that from my emergency fund. I knew I was gonna work with her. And so that night, in the afterhours market, like at six 7:00 PM when the stock market closes, you can still sell sock.

Uh, during the week I sold $3,000 of my Tesla. Then that stock took two days to convert to cash because it has to settle. And then I took that cash from selling my stock, and I used that to pay for my business coach. And then the next month I made $7,500 from my business thanks to that coach. So I say this to normalize that investing is not just in the stock market.

Investing is a steppingstone for us to start investing in. Are there things that bring us more joy? Which do you think I was happier investing in Elon Musk car company or a Latina woman business coach? Hell yeah. I was so excited to get rid of that Tesla stock and pay for somebody in my community. So, that’s how I see brokerage accounts.

I use them as a tool, but I also have cash on the side to pay my bills monthly. I’m not just like checking my stocks all the time to see if I can pay the bills, cuz I’ve also seen that working in finance, there were so many people who would call every single day and would freak out when the stock market dipped.

They pay their bills every month by selling stock. Sometimes it was popping, other times it was not. So that’s why it’s important to have still cash on the side. But once you have the emergency fund built up and you’re investing in retirement accounts and are paying off your debt, you can still invest in that vehicle.

That is the brokerage account, which you can open at Schwab, Vanguard, Fidelity. And it’s up to you if you wanna open up a robo advisor or do self-managed. After getting my license and becoming a stockbroker, I decided to close my robo advised accounts. I said I can pro. I remember calling and saying, I wanna close this.

I think I can do it better myself. And they were like, yeah, you’re probably right.

And another reason why I closed them was because even in the most aggressive portfolio, they’ll still have it invested in cash because these brokerage firms wanna cover their asses and still give you a cash cushion, which makes sense because they’re probably looking out for the people that, like I said, have no cash at all and wanna invest and just wild West it.

But for somebody like me who already has cash on the side that’s making slightly higher interest in a savings account than it would be sitting in a brokerage. It made sense for me to just close that robo advisor and invest myself. So I hope this helps you. I wanna normalize that we should be having that emergency fund built up and be able to justify the number in it.

Understand that cash is losing value to inflation every day. And we can also be investing and having a debt payoff plan. There’s no point to investing in what, having our money grow a buck over time. If we’re paying these credit card companies, hundreds of thousands of dollars in credit card interest, uh, a month. Credit card companies hate me, I pay my ish on time, and I get other people to pay their stuff on time, and I’m constantly referring people to credit cards that I believe.

The Amex Blue Cash preferred card, I just opened the Chase Freedom card cuz when you spend $500, you get $200 back. It’s just like free money right and left. As long as you’re being strategic and smart about it and doing that’s also helped me build my credit score over time too.

So a broker’s account is a great tool. I believe it’s essential for building wealth outside of cash or having a retirement. As well and going back to the topic of inheritance is when you do open one, it’s really important to have a beneficiary set up because if not, then if you have no family, the state is gonna take it.

If you have no beneficiary, your family’s gonna have to or loved ones. I, I don’t wanna say family loved ones cuz I’m on team chosen family out here due to family estrangement. I haven’t seen my biological nuclear family in years. So whoever you decide to leave your money to designate a beneficiary. I can’t tell you how many times working in finance, I saw people who didn’t designate a beneficiary and their family members had to pay so much in court to have access to their money and justify that it was, they were entitled to it, or people who just didn’t change their beneficiaries. So many peoples with their, their exes, ex, ex-wives, ex-husbands on their accounts, even after remarrying, they forgot to change the beneficiaries. Some people had their mistresses on as their beneficiaries.

Oh, yes. Oh yes. I’m spilling the tea.

So I hope this has helped you understand the importance of brokerage accounts. If you want to learn more, I invite you to join my masterclass on July 13th at 1:00 PM Eastern. I’m gonna put the link to a sign up for it. You’ll get an hour with me in a group. We’ve got access to Q&A. I’ll talk about my six month coaching program, and we’re gonna learn more about how brokerage accounts can help build wealth and help you achieve the short and the long term goals.

Because I want to break that myth that investing just means in retirement. And while, yes, ultimately my goal is to have my brokerage account still have money and investments in it by the time I retire. But if you have short term goals and investments you wanna make like business coaching and wanna sell $3,000 in Tesla stock now without consequences.

Just understanding taxes, that’s an option for you too. So I want you to be excited about, about using your money and putting it to work instead of feeling guilty about not doing enough with it. Because remember, when we sit in guilt of our money, that’s not helping ourselves or our communities too. Once we start learning, we start talking about this and normalizing money, conversations in positive ways with our loved ones.

And, and, and yeah, we just live better, more fulfilled lives when we’re less scared, more informed, and have money help us achieve our goals, which are definitely allowed to change. So yes, I’m looking forward to seeing you enroll in my masterclass. And if you’re interested in my six month coaching program, I am taking new clients.

So I will post the link in the show notes. All right, everybody. Have a beautiful day. Bye.

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