Inside the One Big Beautiful Bill Act
by SGL Financial
Our 2 Cents – Episode #219
Inside the One Big Beautiful Bill Act
Our 2 Cents is back! In this episode, we’re breaking down key tax provisions inside the “One Big Beautiful Bill Act,” diving into the latest on new tariffs, and answering a special listener question from one of our very own clients. Tune in now using the link below!
- One Big Beautiful Bill Act (OBBBA):
- With the Big Beautiful Bill officially passed, the Lewits are here to walk you through what it means for your finances.
- New Tariffs:
- Trump unveils a new wave of tariffs. Find out which countries are affected.
- Listener Question:
- “What should I be aware of when buying or thinking of buying a second home? — Colin, SGL Client
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Podcast Transcript
Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, Building Wealth for Life. Steve Lewit is the President of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Well, hello, everybody. Welcome back to Our 2 Cents. You’ve got Gabriel Lewit here with you, you’ve got Steven Lewit here with you, you’ve got the team. We are welcoming you back from hopefully a wonderful July 4th holiday week.
Steve Lewit: Yeah, it was great. Did you watch the fireworks where you were?
Gabriel Lewit: Where I was? Yeah. We didn’t have a podcast last week because I was out of town. I was in North Carolina.
Steve Lewit: North Carolina.
Gabriel Lewit: Outside of Wilmington, to be specific. But then, we were actually at I think it was some kind of AAA minor league, or really, really minor league, I don’t know. It looked like a high school stadium, honestly. It was a baseball game and they had fireworks afterwards on July 4th. I will kid you not, they were probably some of the best fireworks I’ve ever seen in my lifetime.
Steve Lewit: Cool.
Gabriel Lewit: It went on for about 20 minutes.
Steve Lewit: Wow. Wow.
Gabriel Lewit: It just kept going.
Steve Lewit: Wow. Wow.
Gabriel Lewit: Kept going, kept going. Literally at one point I’m like, “This has got to be the finale, right?” Then it went on for 10 more minutes.
Steve Lewit: It kept going, right. Kids loved it, right?
Gabriel Lewit: Well actually, the kids were even like, “Are these over yet?” They just kept on going. I’ve never seen anything like it. Yes, very good fireworks. How about you?
Steve Lewit: Yeah. I saw Deerfield fireworks from a distance.
Gabriel Lewit: You saw them?
Steve Lewit: Saw them. I saw them. Then I went to Northbrook to see theirs. It was terrific.
Gabriel Lewit: Awesome.
Steve Lewit: Just terrific stuff. Except I was disappointed, Northbrook did not have any music. I like music with the fireworks.
Gabriel Lewit: You like the music?
Steve Lewit: Yeah, listening.
Gabriel Lewit: Yeah, mine had music, all sorts of American-themed songs. Sometimes I like the non-music ones.
Steve Lewit: Yeah.
Gabriel Lewit: Yeah, hit or miss.
Steve Lewit: Yeah, I still miss the fireworks at the racetrack.
Gabriel Lewit: Those were nice.
Steve Lewit: Which were the best ever.
Gabriel Lewit: Yeah, no more racetrack here.
Steve Lewit: Yeah, no more.
Gabriel Lewit: I will give them a pass if they put the Bear’s stadium there, otherwise I’m going to be very upset.
Steve Lewit: Well, guess what, they’re still talking about it.
Gabriel Lewit: They are.
Steve Lewit: I thought that was a dead deal, but it’s not.
Gabriel Lewit: It may never, ever get finished, but it’s not dead.
Steve Lewit: Right. It’ll breathe its way into existence.
Gabriel Lewit: Well, we’ve got of course a lot to talk about here for you today.
Steve Lewit: Big, Beautiful Bill.
Gabriel Lewit: The One Big Beautiful Bill has been passed by the House.
Steve Lewit: Yes.
Gabriel Lewit: It went to the House, then to the Senate, then back to the House.
Steve Lewit: Yes.
Gabriel Lewit: Has it been signed yet by Trump?
Steve Lewit: You know, that’s a good question. I haven’t seen … He does a signing ceremony.
Gabriel Lewit: I think he-
Steve Lewit: I haven’t seen that yet.
Gabriel Lewit: I think he might have. We’ll confirm that in a second while we’re talking here. As a quick recap, what have we talked about in the past? The past couple of episodes, we talked a little bit about financial literacy tests in the past.
Steve Lewit: We did that before we left for the 4th, yeah.
Gabriel Lewit: We did, we aced the tests. But many people in the country did not.
Steve Lewit: That’s correct.
Gabriel Lewit: Hopefully you found that a little bit interesting. We did talk a little bit about online advice, finfluencers in the past. Making sure you don’t listen to your financial retirement advice from TikTok, quite frankly.
Steve Lewit: Yes. Be careful, yeah.
Gabriel Lewit: Okay. Then we talked about that before, mind over money, and how mental and behavioral things impact your finances. We’ve covered a lot of ground. Today we’re going to circle back to a little bit more data, factual-oriented information about the One Big Beautiful Bill.
Steve Lewit: Well, most people don’t know what’s in it really.
Gabriel Lewit: Well, there’s a lot in it.
Steve Lewit: Because where are they getting their information from?
Gabriel Lewit: Well, there’s a lot in it.
Steve Lewit: Tremendous amount.
Gabriel Lewit: We’re going to try to unpack some of the most applicable things for you as a retirement or financial investor. We’re not going to talk about some of the Alaskan fishing benefits. There’s what, 1000 pages? I forget how many pages are in this bill.
Steve Lewit: It’s huge.
Gabriel Lewit: Yeah, there’s a lot of benefits.
Steve Lewit: Again, folks, whatever we say is not politically motivated. It’s just data-driven about our thoughts about the future and what might happen.
Gabriel Lewit: Correct, yeah. We’re here to report the facts.
Steve Lewit: I think it’s real important to keep letting you know that.
Gabriel Lewit: Yeah. Very important, it’s going to impact everybody. It doesn’t matter your political leaning. You’ve got to know what’s in this thing. It’s going to impact your taxes and your tax preparation so you’ve got to be aware of these things. It will impact your financial planning, especially again, on the tax side. Lots in here for us to unpack and that’s what we’re going to start off with here today.
Steve Lewit: I’ve got my valise, my travel bag’s open, and I’m ready to unpack.
Gabriel Lewit: Okay.
Steve Lewit: That’s a word, valise, do you know that word? Have you ever heard it?
Gabriel Lewit: You’re over my head here on this one.
Steve Lewit: Valise is an ancient word that we used to call a travel bag. What are you doing to me?
Gabriel Lewit: You’ve got to speak into the microphone.
Steve Lewit: Well, I’m looking at my team here. Yeah. Can you hear me now?
Gabriel Lewit: Yeah, we can hear you now.
Steve Lewit: Look up valise.
Gabriel Lewit: We don’t need to. Police?
Steve Lewit: Valise.
Gabriel Lewit: All right. Let’s talk about the One Big Beautiful Bill, can we?
Steve Lewit: Sure.
Gabriel Lewit: Okay. Instead of vocabulary lessons for us here this morning. Because there’s a lot here, I want to make sure we get through it all. Is that okay with you?
Steve Lewit: We take all my fun out, but that’s fine.
Gabriel Lewit: You want to just say what it is?
Steve Lewit: No. I’m passing on. Everybody that we’re talking to knows what a valise is.
Gabriel Lewit: I’m sure nobody does, but that’s okay.
Steve Lewit: Somebody write in and confirm.
Gabriel Lewit: All right. Well, let me talk about this very high level. A lot of the bill here is being talked about the tax savings that it’s going to create. How is it creating tax savings? Well, let me back up. There was a Tax Cuts and Jobs Act of 2017 I think that first enacted the Trump tax cuts way back when. Those tax cuts were set to expire and revert back to much higher tax brackets at the end of 2025, this year.
Steve Lewit: That’s correct, yeah.
Gabriel Lewit: The first thing that the new tax cuts did in the Trump’s One Big Beautiful Bill is it’s just extending those brackets.
Steve Lewit: Yeah.
Gabriel Lewit: It’s not new tax cuts over the current per se tax brackets, it’s extending those.
Steve Lewit: It’s saying what we passed way back that you’ve gotten used to over the years is staying.
Gabriel Lewit: Yes. The Tax Cuts and Jobs Act rates and brackets are now permanent, other than being set to expire in 2025. I think this is important because a lot of people think they’re going to save even more money on taxes over what they were saving this year.
Steve Lewit: Well, some people will, but not-
Gabriel Lewit: Some people might for different reasons.
Steve Lewit: But not based on that.
Gabriel Lewit: But the biggest way you’re going to save money on taxes is by not having to pay more had the old tax brackets sunsetted.
Steve Lewit: That is correct.
Gabriel Lewit: Yeah. I think that’s interesting because you may or may not be surprised then when you don’t see a huge increase in the amount of refunds or other things you’re going to get next year.
Now, there are going to be some changes to the standard deduction. It is increased from 15,750 single and now to 31,500 joint here in 2025. Sorry, increased to those two levels.
Steve Lewit: Yeah.
Gabriel Lewit: Now, this is an interesting one. There’s going to be a new $6000 senior bonus deduction for older senior adults, we’ll get to that in a second. Now, this is what people are talking about as the way that … Well, the phrasing is, “Oh, I don’t have to pay taxes on my Social Security anymore,” is what people think the bill has said.
Steve Lewit: That’s correct.
Gabriel Lewit: That is not correct though.
Steve Lewit: That is not correct, yeah.
Gabriel Lewit: That is correct what people are thinking.
Steve Lewit: It’s correct what they’re saying, but they’re incorrect what they’re thinking.
Gabriel Lewit: There is no changes directly to the way Social Security is being taxed. What is changing is seniors up to a certain income level are going to be eligible for a new $6000 senior bonus deduction. What the White House analysts and the policy analysts have assessed is that for a very large percentage of people who live predominantly on Social Security or only on Social Security, that will reduce their taxes to zero.
What’s interesting, what a lot of people may not already know is if you only lived on Social Security before, you weren’t-
Steve Lewit: You weren’t taxed anyway.
Gabriel Lewit: You weren’t paying anything on your taxes. You were already at a 0% tax rate.
Steve Lewit: Correct.
Gabriel Lewit: Now, this gets into some of the mechanics of how Social Security is taxed, which how much tax you pay on your Social Security is dependent on how much non-Social Security income you may otherwise receive.
Steve Lewit: Plus, half of the Social Security.
Gabriel Lewit: Yeah, there’s a whole formula for it.
Steve Lewit: There’s a formula, yeah.
Gabriel Lewit: But if you have no other income outside of Social Security, then none of your Social Security is going to be taxed.
Steve Lewit: You’re not paying taxes.
Gabriel Lewit: This additional $6000 senior deduction will definitely help some people that predominantly live off of Social Security, but are also taking other sources of income, and for many will result in their Social Security no longer being taxed.
Steve Lewit: Yeah, I think it’s a great thing to have because there’s a sliver of people, there’s a population that will absolutely benefit from that.
Gabriel Lewit: Yeah. Now, that senior bonus phases out at $75,000 of income and will end, believe it or not, in 2028. It’s not permanent.
Steve Lewit: Right.
Gabriel Lewit: It’s not like the rest of the brackets. This is important to know. It’s a three-year rental. You’ll save some money in taxes over those three years, but that is set to then expire in 2028. And if you’re a higher income earner, it’s going to have no impact on you either way.
Steve Lewit: Yeah, folks. As we go through this bill, if you’re looking for logic in it, it’s really hard to find because a lot of tax laws are not logical.
Gabriel Lewit: Yeah. Well, hopefully that makes sense. Certainly, if you have questions on it, you can call us and email us and ask us, and we’re happy to send you all sorts of data and information on this.
This won’t be super relevant to most people. There’s some AMT, alternative minimum tax exemptions that are made permanent. Most people do not need to worry about AMT, so we’re going to skip that.
The Child Tax Credit has increased to $2200 per child and will be indexed to inflation.
Steve Lewit: Nice. Yeah.
Gabriel Lewit: A little bit extra back from a credit, that’s great. People will get some extra money back, so that will help with increasing refunds.
Steve Lewit: Yeah.
Gabriel Lewit: Now, this is a big one for many higher earners, for many of you, our clients, the SLT, state and local taxes deduction cap raised to $40,000 with gradual increases until 2029, and then reverts in 2030. This is up from the current very restrictive cap for many people with SLT, state and local taxes, of $10,000.
Steve Lewit: Yes. If you have big interest, like mortgage interest or other interest, this is really going to help you.
Gabriel Lewit: If you live in Illinois, which many of you, our listeners do, we have very high property taxes. This will benefit you potentially in a big way.
Steve Lewit: Absolutely.
Gabriel Lewit: Along with high mortgage rates, you might be able to now itemize is really what this means. If you can deduct your mortgage interest, if you can deduct your property taxes, and these can now exceed $10,000 all the way up to $40,000, there’s now a really good chance you could itemize.
Let me put this a different way. With the $10,000 cap, let’s say you had $20,000 a year in property taxes, which some of our clients do. Or even if you had $15,000, and then you had $5000 of mortgage interest. You might have had $20,000, $25,000 that you could have potentially used towards itemizing, but instead you were capped at 10. There was then no way, with all the other ways that you might itemize, that you would get over the standard deduction of $31,500. So 95% of people were just taking what’s called the standard deduction, and thus there was no write-offs of any kind for your mortgage interest and for your high property taxes.
Steve Lewit: Yes. It was really a negative for the higher income earners and the higher real estate owners that pay a lot of interest and couldn’t deduct it.
Gabriel Lewit: Yeah. Now, it’s not directly in this article and I’m still wrapping my arms around all the provisions. I believe there is an income level limit as well, where this won’t apply for you. I think it was $400,000.
Steve Lewit: I believe it’s four, 400 or 450, somewhere-
Gabriel Lewit: If you’re a high-income earner, you might also have some challenges there with the new SALT deduction cap. It’ll benefit more what you’d call middle, medium-high income earners, as opposed to ultra-high income earners.
Steve Lewit: Yes, yes, yes.
Gabriel Lewit: Okay, moving on. Tip income deduction of up to $25,000 a year for workers earning under 150,000 also ends in 2028. That’s what Trump had mentioned when he said, “No taxes on tips.”
Steve Lewit: Yeah, I think there’s a limit on that, too. Isn’t it $75,000?
Gabriel Lewit: I think it’s 150,000.
Steve Lewit: In tips?
Gabriel Lewit: Well, for workers earning under 150,000.
Steve Lewit: Yeah, but I thought I read on tips themselves; there was a limit of 75 somewhere. You tippers, we’re checking to see what that means. Where did I read that?
Gabriel Lewit: Let’s see. There’s a lot in here.
Steve Lewit: Yeah, we’re going through 1000 pages here.
Gabriel Lewit: We’re speed reading here. Okay.
Steve Lewit: We’re speed reading everything. This is so interesting.
Gabriel Lewit: Well, maybe we’ll stumble back across that, okay? But yes, guys, for those out there, or you out there that are living predominantly on tips. Now, I believe it has to be cash tips, not credit card tips.
Steve Lewit: Oh, really?
Gabriel Lewit: What’s ironic about that is most people with cash tips don’t-
Steve Lewit: Don’t report them anyway.
Gabriel Lewit: … report the cash tips.
Steve Lewit: Yeah. I didn’t read that. That’s kind of silly.
Gabriel Lewit: What I think is funny, well, a little funny. I was reading some online message boards about this and some of the salty, I think curmudgeon people out there were like, “Well, I guess that means I can reduce my tip amount because you would get …” it’s like, “Come on, dude.”
Steve Lewit: Oh, please.
Gabriel Lewit: It’s trying to benefit people. Oh, man. Don’t do that. I like the fact … Most people working on tips could use some benefits. But yeah, if it’s only on cash tips that you’re not going to report anyways, yeah. Who knows?
Steve Lewit: Don’t do it, folks.
Gabriel Lewit: Okay. Now, other things here. There are some additional business tax incentives, a variety of those to try to incentivize domestic job creation. The Green Energy Tax Credits have been reduced including for EVs. I think they’ve been slashed or almost eliminated. Elon Musk was not too happy about that.
Steve Lewit: Yeah, those got slashed, yes.
Gabriel Lewit: Okay. There’s also, I believe there was stuff in there slashing clean energy credits. Again, not getting political at all here.
Steve Lewit: Buying electric cars, that got cut.
Gabriel Lewit: But big incentives for coal was being added back in.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Lots of changes in here. Again, the biggest thing about all of this though is that they agreed in the bill to increase the debt ceiling by $5 trillion. Look, folks, tax cuts are not free. Again, the nonpartisan fiscal projections from offices that calculate these things, way back even with the Trump Cuts and Jobs Act 2017, projected that this was going to cost a lot of money to give these big tax breaks. Everyone loves tax breaks.
Steve Lewit: Which is why the administration pushed for cuts in other areas, like a lot of support programs, a lot of regulatory programs.
Gabriel Lewit: Well, the whole DOGE administration trying to reduce expenses in other areas. But it does appear, at least on the surface, guys, that this is likely to continue to increase the debt ceiling. There are potential ripple effects and ramifications of that. We just saw earlier this year, I think we talked about it briefly, there was a downgrade, a small downgrade to the US credit rating.
Steve Lewit: Yes.
Gabriel Lewit: Because partly the super high national debt levels that we have.
Steve Lewit: And the increasing rate of it.
Gabriel Lewit: And the increasing rate of it. If that continues there, again, could be ripple effects, most worryingly on the US credit rating-
Steve Lewit: Yes.
Gabriel Lewit: … if that debt continues to pile on more and more.
Steve Lewit: Well, the problem … I don’t want to get into a lecture on the national debt, but the problem is the interest on the debt keeps going up and that you have to pay.
By the way, I did find tip income deduction up to $25,000.
Gabriel Lewit: Where did you get that there?
Steve Lewit: I got that on-
Gabriel Lewit: Oh, I put that one off to the side. Hold on one second.
Steve Lewit: Clearnomics. This is a good piece, too.
Gabriel Lewit: Yeah.
Steve Lewit: Halfway down the page, tip income up to 25,000 for workers earning under 150,000.
Gabriel Lewit: Okay, yeah. I think you might be correct. Halfway down.
Steve Lewit: Thank God, once I’m correct.
Gabriel Lewit: Oh, I see what you’re saying. Yeah, up to $25,000 of reportable cash tips.
Steve Lewit: Right.
Gabriel Lewit: But only if you’re earning less than the $150,000 either way.
Steve Lewit: Exactly, exactly.
Gabriel Lewit: Yes, yes, yes. Okay. Well, isn’t that all interesting? This one won’t apply to many of you. The estate tax exemption permanently increased to 15 million for an individual and 30 million per couple, up from 13.99 million per person. That essentially added another million per person on top of that.
Steve Lewit: That gets adjusted for inflation as well.
Gabriel Lewit: Yeah.
Steve Lewit: That’s not a fixed number, very important.
Gabriel Lewit: Yeah. Look, how does this all impact you? That’s the question. I had that from a client just yesterday. “How does this impact my portfolio,” is one of those questions.
Well, Steve, Mr. Lewit, does this have a direct right now impact on your investment portfolio?
Steve Lewit: Well, the stock market says no.
Gabriel Lewit: Right now, market is still up.
Steve Lewit: The stock market is absolutely ignoring all of the data that’s coming out that says it should be concerned.
Gabriel Lewit: Well, quite-
Steve Lewit: That’s the way that market works.
Gabriel Lewit: Look, I have a lot of conservative clients, I have a lot of liberal clients. I have clients of all stripes and sizes. But the belief is that if these things can stimulate the economy, that the economy can keep trucking along, and jobs are good, and businesses invest, and so on and so forth, the market can keep going up.
Steve Lewit: Yes.
Gabriel Lewit: So far, it is still going up.
Steve Lewit: Yeah, it’s responding in a way that denies or belies some of the economic-
Gabriel Lewit: The fundamentals, right?
Steve Lewit: The fundamentals, right.
Gabriel Lewit: Of price earnings ratios.
Steve Lewit: Fundamentally, you would say the addition of $3.4 trillion to the national debt should be concerning and people should be more conservative, maybe sell now, flee to safety, and that’s not happening.
Gabriel Lewit: Well, there has been some changes in the bond market. Slight negative reaction to the bill. But the stock market has still crept up.
Steve Lewit: Oh, yes. It reached a new high, when was it, yesterday or the day before?
Gabriel Lewit: Yeah, yeah. It’s pretty much at all-time highs right now. We will touch briefly upon tariffs here just for a second, because there was some updates on the tariff side. Now, that had nothing to do with the OBBB, the One Big Beautiful Bill, but it is an important relevant update for you about the markets and the economy.
Look, is there more to say about this? Yes. Is there more to unpack? Yes. Are we going to send out more on this with letters? Yes. We’re going to do a midyear market update for our clients. We’re going to talk a little bit more about this then, amongst other things. Yes, this is a storyline to pay attention to. We did verify that Trump did sign it. Sorry, I should have known that right out of the gate. Yeah, this is officially in force, and these are things you need to prepare for and expect on your taxes. There are actually quite a few other minor, more smaller nuanced provisions, so make sure you check with us as your tax preparers or your own tax preparer, or your finance advisor, or us if you have questions on how all of this works.
Steve Lewit: You know, folks, this is a good year really to do some midyear tax planning. Most folks wait until April 14th to do tax planning. This would be the year to come on in to talk to our staff, our CPA staff, or your own CPA and say, “Hey, based on all of these, am I withholding the right amounts, the things that I can do? Where do I stand on the SALT deductions?” Just get an idea of planning taxes before now and the end of the year, because there are things and strategies that you can employ which is going to put some more money in your pocket.
Gabriel Lewit: Oh, I forgot one last thing.
Steve Lewit: Oh, no. Oh, no.
Gabriel Lewit: The Trump Child Savings Accounts.
Steve Lewit: Oh, yes.
Gabriel Lewit: Yeah, we talked briefly about that. That’s a real … That’s now in force as well.
Steve Lewit: Yeah.
Gabriel Lewit: If you’re having a baby I think this year, does it go backwards at all here? Well, you’re going to get a free $1000.
Steve Lewit: Yes, but maybe.
Gabriel Lewit: Yeah. Children born in 2025 through 2028. That’s called the Trump Account. A one-time deposit of $1000. We’ll probably talk more about these as we learn a little bit more about them. We did talk that there are a lot of rules about them.
Steve Lewit: Yes.
Gabriel Lewit: But yeah, hey, if you have a kid this year, free 1000 bucks, one-time.
Steve Lewit: If you’re not planning to have one, have one.
Gabriel Lewit: Just for $1000?
Steve Lewit: For 1000 bucks.
Gabriel Lewit: I think the last I saw-
Steve Lewit: Have one quickly.
Gabriel Lewit: … the lifetime cost for a child is a million dollars, or something like that. It’s not going to go too far.
Steve Lewit: How many months? Well, we have to have quick incubation periods.
Gabriel Lewit: Oh, man. Okay. What’s the follow-up on that? If you have questions, call us, 847-499-3330. Or email us, info@sglfinancial.com. We’re here to help you with any questions on that, or learning how it works, or impacts you, we’re here to assist. Give us a call anytime. Again, 847-499-3330.
Now, just a quick, small sidebar on tariffs. We haven’t forgotten about tariffs. They’re still a very big storyline on the year. Now, Trump had a deadline I believe of yesterday where he was supposed to make deals with, well, pretty much every country in the world on tariffs. I believe he’s extended those now through August 1st, and his administration sent out a whole bunch of letters to 14 countries. Japan, South Korea, Malaysia, South Africa, Myanmar, Laos, Indonesia, Bangladesh, Thailand, Cambodia, Serbia, Bosnia, and a few others.
Steve Lewit: Why isn’t Brazil on there?
Gabriel Lewit: Well, Brazil was just a new thing announced this morning.
Steve Lewit: Yeah.
Gabriel Lewit: Where he’s going to impose 40% tariffs on Brazil.
Steve Lewit: 50, 50.
Gabriel Lewit: Or 50%, because of something to do with an investigation on their old president. Yeah, that’s the newest update in the tariff war. Again, it seems to be these moving goalposts, it keeps shifting and changing. I haven’t heard a tremendous amount of progress on new deals yet that I’m aware of. We’ll continue to monitor the situation on those.
But again, folks, keep in mind, the real impact of tariffs have yet to really materialize because a lot of companies front-loaded their purchases in the supply chain before the tariffs took effect so there still could be some lingering storm clouds related to tariffs that could come back and bite us here in Q3 and Q4.
Steve Lewit: Yeah, absolutely. Look, the tariffs on copper were just raised. That’s going to absolutely get transmitted to the consumer at some point in time. We haven’t seen the inflation yet from the tariffs. Maybe we won’t.
Gabriel Lewit: Yeah.
Steve Lewit: It’s possible that they’ll work differently than we all anticipate. But right now, I agree with you, that between now and the end of the year, we’ll get a much better idea on whether this is going to have a big effect, or little effect, or no effect at all.
Gabriel Lewit: No effect, yeah. Again, storyline, theme of the year, just giving you a little update on that.
Steve Lewit: Yeah.
Gabriel Lewit: Whew, pretty technical stuff so far today on today’s show.
Steve Lewit: Yeah. I’m going to have some cold water.
Gabriel Lewit: There you go.
Steve Lewit: There I go.
Gabriel Lewit: Yeah. He’s sipping away, folks. Just putting you on the spot.
Steve Lewit: I hope you couldn’t hear me slurp.
Gabriel Lewit: No. All right, to end our show here today for a few more minutes-
Steve Lewit: Wow, time went fast.
Gabriel Lewit: Well, it did, yes.
Steve Lewit: Wow.
Gabriel Lewit: We’ve got a listener question. This was from a client of ours that was in one of my recent meetings. Sometimes we get questions from email, sometimes we just take ones we have in meetings and we use those to talk about on the show. Colin was asking about, “What should he know about purchasing a second home?” A little vacation casa or casita. Somewhere where you can get away. What are the things one should know about this? He said, “You might want to talk about it on the show.” I said, “Sure thing. If you’re cool with that, I love using my client questions on the show.”
Steve Lewit: Sure, sure.
Gabriel Lewit: Yeah. Here was the question. “What should I be aware of?” We started talking about all the things that you need to think about. The first is how much can you afford?
Steve Lewit: The first thing that came to my mind was, “Okay, Colin, can you afford a second home?”
Gabriel Lewit: How much second home can you afford?
Steve Lewit: Are you buying in California or are you buying in rural Wisconsin?
Gabriel Lewit: Yeah. He had done some preliminary research on different areas and gave me a budget figure. But that’s really step number one. If you’re starting to think about this idea, “Well, what could I afford? Can I afford this?” Step number one is you start Zillowing, driving around if you prefer to areas you think you might want to have your second home. Are properties there a million dollars? Are they 250,000? Are they 500,000? You got to get a sense of what the real estate’s going to be in the area that you’re looking because then the question is, well, how are you going to pay for that? The first question is what can you afford? But to answer that, we got to know how are you going to pay for it? Are you going to pay it in cash?
Steve Lewit: You can afford, let’s say, $250,000. Well, where does that come from?
Gabriel Lewit: Or 350, yeah.
Steve Lewit: Or 350. Where does that come from?
Gabriel Lewit: Yeah. For most, unless you’re sitting on piles of cash, you may have the cashflow, meaning you’re going to take out a mortgage. Then you’ve got to figure out what is that mortgage going to cost me on top of all my other bills? And there’s typically still a down payment, 100,000, 150,000, 20%, whatever it is going to be. That you’ve got to figure out where is that money going to come from?
Steve Lewit: Yes.
Gabriel Lewit: Are there taxes on that withdrawal or is it sitting in my cash? Okay. Again, where are you going to live? What’s it going to look like? How are you going to pay for it? And then, how is this going to impact you in your long-term plan?
Steve Lewit: In terms of?
Gabriel Lewit: Your long-term financial plan.
Steve Lewit: Oh, financial plan, yes.
Gabriel Lewit: Yeah, in terms of that. Yeah.
Steve Lewit: Well, that’s part of can you afford it, wouldn’t it be?
Gabriel Lewit: Maybe.
Steve Lewit: If you spend 350,000 now but you’re going to run out of money when you’re 91.
Gabriel Lewit: Are you going to cut your retirement savings because you’re paying for this new mortgage? Are you going to not be able to have enough emergency wiggle room? Is your retirement still on track no matter what happens with this additional purchase?
Steve Lewit: Yeah, I think what you’re saying is, look, if you’re going to buy a second home, you really have to be rock solid confident that that home’s not going to become a burden to you. Otherwise … First of all, it will be a burden because now you have to take care of it, and you’ve got to watch over it.
Gabriel Lewit: Well, we’re going to get to that in a second, yeah.
Steve Lewit: We haven’t gotten to that yet. But you don’t want it to be a financial burden that every time you go there it’s like, “Can we afford this?” Or worried about it. “Did we make the right decision?” That’s what you don’t want to do.
Gabriel Lewit: Yeah. What I always suggest is the bigger the decision, and this would classify as a big decision, you model it out in your plan. You do version A with no house, version B with house.
Steve Lewit: Or with a less expensive house.
Gabriel Lewit: Or either one, yeah. But you got to see how does this impact you. Now, if you model this out and all the numbers check out, and everything looks great and there’s no impact on your retirement, and you’re comfortable with the monthly payment or the outlay, well, financially, sure. This might be something you can pull off.
Now, there’s one last financial aspect before we get to some of the other ones, which is have you really factored in property taxes, maintenance, alarm systems? If it’s a waterfront property, who’s maintaining the boat docks? All these other things. Traveling back and forth to go to this place, gas. All of a sudden, you’re multiplying all these budgeted expenses and we’ve really got to get a true sense of the cost of ownership of this additional property.
Steve Lewit: Yeah, it’s not that you’re just buying a house, you’re buying a house and all the financial strappings that come with the house. There are a lot of them.
Gabriel Lewit: Yeah. Well, the last part related to it is if things don’t work out or you find it’s too much of a pinch on your pocket, or whatever the case is, is it in a saleable area? If you go and buy this small, cheaper property in a non-name area because you’re really excited about it and it fits your budget, but then nobody else wants to buy it.
Steve Lewit: If you like swamps, you might be the only one that likes swamps and you won’t be able to sell the house.
Gabriel Lewit: Re-saleability, is that something? You might decide you don’t even use the place-
Steve Lewit: Enough.
Gabriel Lewit: … and you want to sell it, and then you find out you can’t sell it or you’re underwater. Well, I guess there’s a lot more about financial … Right now, property prices are high.
Steve Lewit: Yes, they are. Oh, yeah.
Gabriel Lewit: If the real estate market crashes out and you’re now underwater or take a bath on it because you sell it at a loss from where you bought it, are you okay with that?
Steve Lewit: Yeah. Folks, you would be surprised at how many clients we have that, well, they don’t buy second homes, but they move out of town, they move back because they’re not happy. They find when they get there, they’re not as happy as they thought they would be. It is a possibility.
Gabriel Lewit: Yeah. The last thing is are you really going to use it? This is a very common thing. People get a pool and then they don’t swim in it. People get a hot tub and then they don’t go in it. They do for a month.
Steve Lewit: How about timeshares?
Gabriel Lewit: Timeshares, right. Is this thing really close enough, are you really going to use it? I have a neighbor right next to me that has a lake house on Fox Lake or Fox River. He never uses the thing.
Steve Lewit: He never goes.
Gabriel Lewit: He just told me the other day, “I think I’m going to sell it, we don’t go there anymore. I don’t want to carry two mortgages, it’s kind of a pain.” This is only 40 minutes away, 35 minutes away.
Steve Lewit: Yeah, yeah.
Gabriel Lewit: If you have a five-hour drive, or a four-hour drive, or a flight to get, how much are you really going to use that property? Are you better off taking all that money and going on four or five really nice vacations a year?
Steve Lewit: Yeah. Before I buy, I would try renting and see what that life is like before I make a commitment to buy just to be sure that’s what you want to do.
Gabriel Lewit: Yeah. Now, Colin, I know we talked about a lot of these. Hopefully this was a helpful recap not just for you, but for anybody out there thinking about this. If we can help answer any more questions, there’s probably a few other considerations but those are the major ones, you can give us a call here, 847-499-3330. Or go to the website, sglfinancial.com, click contact us. You can always call us to schedule a complimentary check in call or introduction call. Or of course, if you’re already a client, we love speaking with you anytime you want.
Steve Lewit: Good job. You did that quickly.
Gabriel Lewit: All right.
Steve Lewit: I think you have an appointment right afterwards.
Gabriel Lewit: Well, I do. But we are at our time anyways.
Steve Lewit: You’re on. You’re on fire.
Gabriel Lewit: We try to stick to around 30 minutes for our show so you guys can plan for that on your commutes, or whatever. Yeah, we hope you are doing terrific. We hope you had a wonderful 4th of July with your friends and family. We hope you had a chance to relax. We’re thinking of you.
Steve Lewit: Yeah.
Gabriel Lewit: Thanks for tuning in to the show. We will see you on the next one.
Steve Lewit: Stay well, everybody. Bye now.
Gabriel Lewit: Bye-bye.
Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330. Or visit us on the website at sglfinancial.com. Be sure to subscribe to join us on next week’s episode.
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