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welcome to the best interest podcast
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where we believe Benjamin Franklin's
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advice that an investment in knowledge
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pays the best interest both in finances
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and in your life every episode teaches
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you personal finance and investing in
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simple terms now here's your host Jesse
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Kramer hello everybody and welcome to
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episode
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6060 of the best interest podcast my
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name is Jesse crank
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got a cool episode for you today we have
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on a pretty famous guest his name is
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Nick mauli Nick is uh a writer an author
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probably one of the biggest personal
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finance authors on the internet right
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now Nick writes a lot about data-backed
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topics his blog is called of dollars and
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data and so he focuses a lot on the
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numbers but he does a really good job of
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mixing the numbers with uh some of the
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personal sides of personal finance some
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of the psychological sides of personal
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finance and before we get to Nick we're
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going to talk about a topic today that
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really intrigues me it's something I
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write about and talk about a lot it's
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the idea of false proxies and
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specifically false proxies that deceive
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your finances a false proxy is it's a
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misleading indicator something that
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maybe doesn't align with a desired
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outcome that you thought it originally
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did a quick and easy example might be um
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engine sound being a false proxy for
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vehicle speed while a sports car is both
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loud and Fast we've all seen junky beat
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up cars that are incredibly loud but
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slow Seth Goden is a very famous writer
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and Seth Goden writes quote we need
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proxies you're not allowed to read the
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book before you buy it or taste the
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ketchup before you leave the store we
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rely on labels and cultural cues to give
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us a hint about what to expect we do
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judge a book and a condiment by its
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cover all the time end quote
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proxies like the proxies that Goden was
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talking about the cover of a book the
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label on ketchup proxies are shortcuts
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and when accurate proxies are not only
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useful but they're really vital proxies
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save us time they save us effort they
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save brain space helping us attain
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desired results with just a fraction of
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the exertion but false proxies can lead
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us down dangerous paths like I was
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saying before a false proxy is a a
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misleading or inaccurate indicator of
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achievement or progress or Talent you
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know it could be uh some sort of metric
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or Benchmark it could be a societal
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standard that doesn't really align with
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the true purpose or desired outcome that
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we're seeking now very famously there's
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a really cool false proxy story that
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that some of you are probably familiar
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with it's the story of Moneyball right
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so back in the 90s Billy Bean and Paul
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De podesta they had an epiphany as they
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were trying to guide the baseball team
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the Oakland Athletics they really
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realized Billy Bean and Paul deep
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podesta realized that baseball talent
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and traditional Talent analysis it was
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full of these false proxies relying way
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too heavily on subjective judgments and
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outdated statistics and and they
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realized a few simple logical truths the
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first one baseball games are won by
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scoring more runs than the opponent does
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then the second one the most important
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onfield metrics therefore are those that
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are most likely to add runs for your
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team or reduce runs for the other team
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and some traditional baseball metrics
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were were highly valued in terms of the
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way that teams were paying players to
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play for them despite having very little
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impact on scoring runs or preventing the
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other team from scoring runs so those
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right there those were false proxies it
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was a shortcut that everyone else was
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using because they thought that it led
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to more wins when really the Oakland A's
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the Moneyball guys realized these are
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bad statistics They Don't Really lead to
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more wins these so-called false proxies
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incorrectly indicated the ability to win
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games but other more overlooked
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statistics that were barely valued ended
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up being very highly correlated to
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scoring runs and therefore very highly
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correlated to winning games so what the
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Moneyball guys did was they avoided the
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false proxies they let other people
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chase those players
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and instead they focused their money on
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obtaining cheap players who actually led
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to them scoring more runs and and
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winning more games a very simple example
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of this is batting average batting
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average in baseball has some correlation
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to scoring runs but as Baseball fans
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know a walk is equally as good as a
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single it's exactly the same outcome but
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walks are ignored by batting average
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they're simply not included in a
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player's batting average so so batting
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average isn't the greatest proxy for
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offensive Talent especially when
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compared to the far superior statistic
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that's called on base percentage which
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does include
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walks so Billy Bean and Paul De podesta
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they built a baseball team the Oakland
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A's by identifying and then ignoring
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baseball's false proxies Michael Lewis
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famously wrote about their story in
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Moneyball and quite literally changed
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Sports and the business world to a large
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extent forever leaders in all arenas are
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opening their eyes to Prior false
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proxies correcting them and then
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ultimately finding more efficient
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solutions to their problems personal
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finance and investing are one such Arena
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so here are some of the most common
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false proxies that I see and then the
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true proxy needed to correct the old
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misconceptions the first one salary
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equals wealth now there's a certain
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correlation between salary and wealth
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because after all earning more salary
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can can only help your journey to
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improved wealth but one of the most
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common false proxies I see is drawing an
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equivalency between salary and wealth
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show me two families one earns
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$300,000 and spends all
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$300,000 the other family earns far less
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maybe only
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$150,000 but also spends less they only
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spend $100,000 per year saving the other
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50 the first family will never be
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wealthy they earn 300,000 and they spend
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300,000 but for the second family wealth
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is inevitable despite only being on half
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the salary and the reason why is because
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they they save $50,000 per year wealth
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is not solely determined by how much you
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earn but more importantly by how much
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you spend regardless of a high salary if
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someone consistently spends beyond their
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means they won't be able to accumulate
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significant wealth or as friend of the
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blog Morgan hell writes Wealth is what
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you don't
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see all right here's the second false
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proxy what is your retirement number
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you've probably seen commercials like
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this how much money do you need to
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retire at age 55 is it $1 million $2
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million who knows well how about this
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question if you're age 40 how much
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retirement money should you have saved
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is it 2x your salary or 4X your wife's
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salary is it is it a million dollars by
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age 40 I can almost guarantee you've
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seen proxies like this for retirement
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numbers lots of firms share their
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numbers like this these generic rules of
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thumb that are supposed to apply to
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millions of people at the same time but
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I believe that these numbers are almost
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always misleading false proxies they're
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a bit like a batting average in baseball
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it's not that they're a terrible proxy
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but they ignore Vital Information
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because how can we possibly lump all 60y
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olds into the same bucket and suggest
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that for them eight times their starting
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salary is the perfect savings amount to
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have it's way too one size fits all and
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similarly how can we suggest that the 4%
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rule or the 3.5% rule or whatever it is
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is the proper withdrawal rate for all
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people the 4% rule is largely a false
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proxy or at least a bad proxy in the
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place of proper true Financial Planning
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and there are a couple reasons why the
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first one most people misunderstand and
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misuse the 4% rule it's far more nuanced
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than the way that the average person
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online tres to use it and the second
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reason why the 4% rule is just as likely
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to quadruple your retirement Nest Egg as
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it is to lose a single Dollar in other
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words it is way too conservative in most
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cases but in a very small number of
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cases the 4% Ru actually fails so in
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some cases way too conservative in most
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cases way too conservative but in some
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cases it's actually too aggressive
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flexibility in other words has to be a
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vital part of insurance uring the 4%
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Rule's success you need to be willing to
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actually break the 4% rule in order to
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use it correctly or at least to use it
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optimally take for example a typical
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public school teacher I help out a bunch
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of them at work at my wealth management
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firm and in New York a teacher
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approaching retirement likely earns
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something like $70 to $90,000 in salary
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if a particular teachers total monthly
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bills are say $5,000 per month or
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$60,000 per year then the 4% rule
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dictates this teacher needs $1.5 million
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saved in order to safely retire $1.5
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million that's a lot of saving on an
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$80,000 teacher's salary but we are
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missing something vitally important here
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what about social security for example a
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teacher working a full career will
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likely retire with $2,000 to $2,500 in
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monthly Social Security payments and we
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can't forget pensions at least here in
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New York New York State teachers at full
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retirement they earn 60% % of their
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salary as a pension in perpetuity so in
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this particular scenario that's another
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$3500 to $4,500 per month combined our
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teachers fixed income Social Security
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plus pension is in the range of 5,500 to
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$7,000 per month easily covering their
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monthly retirement spending needs of
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only $5,000 per month conceivably they
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could retire with Z saved and simply
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live off that fixed income I'd probably
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conservative ly nudge them towards some
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sort of retirement savings but that
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original $1.5 million savings goal
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detailed by the 4% rule that's
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ridiculous in this particular scenario
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and we haven't even touched on important
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questions like how much will healthc
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care cost during retirement what if
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there's a market crash right after you
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retire what assumptions are you using
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for market returns uh will you have any
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dependence relying on you to support
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them how will your spending change as
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you age how flexible will you be as your
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Market performance changes the 4% rule
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doesn't really ask any of those kind of
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questions the 4% rule therefore is a
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false proxy is it a useful tool to get
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started sure it's useful but it's a
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false proxy for full financial planning
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that's what's needed for True retirement
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analysis Okay the third proxy third
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false proxy that short-term results are
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an indicator of long-term results it's
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one of the oldest tropes in the
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investing world that short-term success
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is somehow an indicator of long-term
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success but short-term success is a it's
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a null proxy at best and it's a false
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proxy at worst for short-term success to
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lead to long-term success we need
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repeatability that's the key word here
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repeatability we need many consecutive
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short terms to create one longterm and
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that kind of repeatability it happens
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out there in the world it happens when
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skill exists repeatability is a Hallmark
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of skill but in study after study the
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results of active investment choices are
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shown to express more luck than skill
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short-term investing results are in
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other words a false proxy for long-term
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investing results if you're curious we
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dive into that in detail in uh episode
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56 of the best interest
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podcast the fourth false proxy that
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confidence equals knowledge on a recent
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episode of my other podcast the trusted
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partner podcast John told
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us yeah you know uh I have a I have a
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section of the book about experts and I
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go through not just investing but a
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another number of different areas where
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a person's ability to forecast or
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predict the future is inversely related
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with their confidence in their forecast
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so it's this Paradox where the people
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you want to hear that will have a
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forecast are the ones that won't give
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you one because they're not
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confident confid confidence is routinely
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used as a proxy for knowledge for for
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correctness but in terms of investing
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predictions confidence is usually
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inversely correlated to correctness
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confidence is a false proxy for
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correctness the smartest people in the
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room instead say I'm not really sure I'm
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not that confident that's why I'm
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diversifying that's why I'm hedging my
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bets being smart enough to say I don't
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know is infinitely better than being
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overconfident and losing millions of
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while you do so that's a hard pill for
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many people to
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swallow and the fifth false proxy that I
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see all the time is that complexity
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equals
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superiority I see too many people
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thinking that complexity in finance must
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be a signal of superiority the more
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complicated an idea the better that idea
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must be and that's simply false
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complexity is a false proxy for
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superiority in fact if you're looking
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for a proxy for superiority I'd argue
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that simplicity is one of the best
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proxies there's no secret sauce in
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finance there's no secret sauce in
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investing simpler usually means cheaper
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and cheaper is better take iida ebit T
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da which every kindergartener out there
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knows stands for earnings before
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interest tax depreciation and
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amortization kidding about the
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kindergarten joke you kind of have to be
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in the finance or business world to have
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heard of iida in the first place let
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alone to know what it stands for well it
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stands for again earnings
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before interest tax depreciation and
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amortization it's a earnings metric that
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businesses use now ibaa has been a a hot
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metric used by stock analysts all over
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the world for I don't know 10 15 20
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years but what do Charlie Munger and
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Warren Buffett the kings of simple
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investing think about iida how anybody
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can turn that into something they use as
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a metric that the talks about earnings
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is beyond me Charlie yeah I think you
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would understand any president
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presentation using the word eida if
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every time you saw that word you just
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substituted the phrase
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earnings I knew he'd do it sooner or
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later
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[Applause]
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folks and the he made it through the
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morning but never all day most of the
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time complexity is just don't
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let false proxies stunt your personal
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finance growth invest in knowledge
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instead
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[Music]
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[Applause]
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[Music]
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all right and now we're going to bring
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on Nick muli as promised Nick is a data
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scientist a writer and a personal
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finance expert he's the creator of of
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dollars and data a personal finance and
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investing blog one of the best on the
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internet I may say and uh Nick is also
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the Chief Operating Officer of RIT Holtz
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wealth management Nick is also the
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author of the book just keep buying one
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of the most popular and influential
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personal finance books and investing
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books published in the last few years
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all right Nick thanks for sitting down
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with us on the best interest podcast you
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know Nick in your book just keep buying
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I wanted to start with this quote it's
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something you wrote you said those who
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know do those that understand teach so
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you're right now one of the one of the
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biggest personal finance teachers
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probably on Earth if we really look at
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it so can you walk us through your
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Journey from at one point when you knew
00:16:31
nothing about this stuff to now where
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you have this deep understanding and
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you're teaching all of
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us yeah so when I graduated college you
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know I just like most other people who
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like when you graduate high school
00:16:43
graduate college start entering the
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workforce you know I didn't never took a
00:16:47
personal finance class I never had any
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idea of what to do next like I knew
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certain things about like investing like
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okay I know I need to do like a Roth IRA
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like I KN I'd heard these words and
00:16:58
stuff but didn't really understand any
00:16:59
and trust me I went to very good schools
00:17:01
that wasn't the issue it was just like
00:17:03
we never got exposed to it and we we
00:17:05
never really taught it so I had to
00:17:06
really kind of teach myself a lot of
00:17:08
stuff and I think that's what a lot of
00:17:09
people end up doing that's why they're
00:17:10
listening to podcasts like this that's
00:17:12
why they're out there consuming content
00:17:13
because if we had already learned this
00:17:15
like no one's learning like how to do
00:17:16
long division there's no like the long
00:17:17
division podcast because that was taught
00:17:19
to us right we don't have to sit around
00:17:21
and like how do how do you do it what do
00:17:23
you mean carry the one like that no one
00:17:25
does that because we know that right
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it's taught to us so I think one of the
00:17:28
things for me is just it was a learning
00:17:30
process and so for me A lot of times I
00:17:31
just was trying to learn a lot of stuff
00:17:33
early on and I had all these ideas but I
00:17:35
didn't have an outlet for them yet and
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then finally I realized in like late
00:17:39
2016 I'm like you know what maybe I
00:17:40
should start writing about this and
00:17:41
we'll see kind of where it goes and
00:17:43
there's all these different ideas I had
00:17:45
and you know I got better over time like
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even my early writing is just definitely
00:17:48
not as good as the stuff I'm putting out
00:17:50
now and so just kind of going through
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that process of like thinking through
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what are my core ideas what are the core
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tenants I believe and how are those
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changing over time and just spending a
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lot of time I think a lot of it too is
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just questioning I was told for example
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you know you should max out your 401K
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that's just what I was just told
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everyone says it it was almost just
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that's the lay of the land and so like
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as soon as I heard this I believed it
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too and then one day I said you know
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maybe like is this actually worth it
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let's run the numbers let's and like
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depending on what assumptions it can be
00:18:15
it cannot be and so I think that's the
00:18:16
type of stuff I try to do is say let's
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go back to like first principles in
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terms of like what is actually true and
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let's let's analyze those questions and
00:18:24
those topics and then go from there so
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that's my goal and I think even the
00:18:28
stuff I put in the book one day some of
00:18:29
that will be outdated won't be good
00:18:31
anymore because data changes people
00:18:33
change we get more research and and that
00:18:35
affects things so that's the idea here
00:18:36
is like you know I'm trying my best but
00:18:38
like if the information changes I have
00:18:40
to change my mind you know right right
00:18:42
one thing you do really well I I try to
00:18:45
do it my hope is that others in our
00:18:47
position try to do it too is I mean the
00:18:49
rules of thumb usually are pretty good
00:18:53
but there's always an exception and and
00:18:55
the more you understand where that rule
00:18:57
of thumb came from the more uh you're
00:19:00
equipped to to understand if the
00:19:02
exception applies to you and I find
00:19:04
that's one of my biggest struggles
00:19:06
sometimes when it comes to either
00:19:07
writing podcasting working with clients
00:19:09
whatever it may be is taking someone who
00:19:11
has this preconceived notion of a rule
00:19:13
of thumb and then saying actually you
00:19:16
might be the exception and here's why do
00:19:18
you find that I mean it comes across in
00:19:20
your writing I feel like yeah I mean
00:19:23
that's a lot of a lot of the stuff
00:19:25
especially arguments on the internet
00:19:26
you're going to get arguments on Twitter
00:19:27
are because of this stuff it's because
00:19:30
you'll say something like most people
00:19:32
with portfolios are over Saving right
00:19:34
and I think that's generally true most
00:19:35
people reading my blog stuff like that
00:19:37
are probably over saving relative
00:19:39
they'll be like well 40% of Americans
00:19:40
don't even have a portfolio I'm like
00:19:41
well I said people with portfolios but
00:19:43
that that doesn't get that gets missed
00:19:45
right gets kind of glossed over right
00:19:46
and so like yes there's 40% of Americans
00:19:48
that don't really save money right it's
00:19:50
a it's a rough calculus you look at it
00:19:51
it's not great but those people
00:19:54
generally are probably not reading my
00:19:55
blog they're not my audience I'm not
00:19:57
saying that we we shouldn't try to do
00:19:58
things to help them but that's a very
00:19:59
different conversation than talking
00:20:01
about the whole you know this idea of
00:20:03
die with zero this idea of you know
00:20:04
maybe we're spending maybe we're saving
00:20:06
too much maybe we should spend more and
00:20:07
like try to live our the best life now
00:20:09
like there's like these trade-offs that
00:20:10
people aren't talking about and I think
00:20:12
bringing these things up these topics
00:20:14
you know which Bill Perkins done a great
00:20:15
job with um and just kind of expanding
00:20:17
on them I think is is useful because the
00:20:19
the we always hear a retirement crisis
00:20:21
you're not going to have enough money
00:20:22
you're going to run out of money no one
00:20:23
ever says your wealth's going to grow
00:20:25
more than you could ever imagine no one
00:20:26
ever brings that up but statistically
00:20:28
for those that actually have portfolio
00:20:30
saving doing well that's the more likely
00:20:32
outcome at least based on history let's
00:20:34
let's dive into that a little bit more I
00:20:36
I can tell Nick in preparation for this
00:20:38
interview I've listened to a few other
00:20:40
podcasts you've done I can tell you're a
00:20:42
fan of Bill Perkins die with zero I
00:20:44
haven't talked about it too much so
00:20:46
maybe we can start with just really a
00:20:47
quick synopsis of that book but then
00:20:50
also I know you have some awesome data
00:20:52
that supports Bill Perkins thought
00:20:55
process as far as portfolios continuing
00:20:57
to grow throughout retirement so maybe
00:20:59
we can segue into that topic too yeah so
00:21:03
Bill Perkins main idea and I don't I'm
00:21:05
trying my best to summarize this is like
00:21:07
most people at least who are saving a
00:21:09
lot of money you're probably over saving
00:21:11
and you end up dying with a lot of money
00:21:13
you actually look and you look at the
00:21:14
data of you know people in their 60s and
00:21:16
I I put this in the book I can't
00:21:17
remember the exact figures now it's like
00:21:18
someone in their 60s the average um
00:21:20
bequest or how much they leave behind is
00:21:22
like $250,000 in their 70s it's like 300
00:21:25
and their 80s it's like 350 it just goes
00:21:27
up it's basically you see it increasing
00:21:29
right and so what that I mean tells me
00:21:32
at least is like people are dying with
00:21:33
all this extra money that they didn't
00:21:35
you saying oh give it to my kids but
00:21:36
like by the time your quote kids get it
00:21:38
if you're 80 your kids might be in their
00:21:39
60s might be like late 50s like it would
00:21:41
probably been better to give them not
00:21:43
350,000 when they were 60 maybe you
00:21:46
could have given them a 100,000 when
00:21:47
they were 35 or 40 right and that could
00:21:49
have had a much bigger impact on their
00:21:51
lives and I've even asked people on
00:21:52
Twitter this I said would you rather
00:21:53
have this much money at age 30 or this
00:21:56
much at age 40 and I'm going to compound
00:21:58
at 8% per year and I've even done it
00:22:00
where I lower the amount early so I'm
00:22:01
like even if you got a 12% 10 15%
00:22:04
everyone wants the money earlier
00:22:05
everyone wants it earlier so we all want
00:22:07
the money earlier yet all of us are not
00:22:09
going to give the money earlier it's a
00:22:10
very weird scenario where're like oh no
00:22:12
I'm not going to give my kids when
00:22:14
they're 30 I'm not going to give them
00:22:15
100,000 no I'm gonna wait till I'm dead
00:22:16
and when they're you know 55 or 60 then
00:22:18
they'll get their 250 300,000 right or
00:22:20
whatever it is right and the the numbers
00:22:22
aren't what's important it's this idea
00:22:24
that there's all this wasted life energy
00:22:26
is what he calls it right was Life
00:22:28
Energy and I like and here's the funny
00:22:29
part I read that after I wrote just keep
00:22:31
buying so if I had actually read that
00:22:33
before I would have maybe Incorporated
00:22:34
those ideas and I think I had come to
00:22:37
that same conclusion in a different way
00:22:39
I'd never heard his philosophy I think
00:22:40
his a little extreme I don't think we
00:22:42
need to die with zero actually like I
00:22:43
think it's kind of risky however I think
00:22:46
he's directionally accurate I think
00:22:47
there's too many people who are on the
00:22:48
other side of it and and so getting back
00:22:51
towards like a die closer to zero or die
00:22:53
with like half of what you expected to
00:22:56
die with maybe that's like the better
00:22:57
way to go about it and one of my
00:22:59
favorite studies on this Michael kit e a
00:23:02
study 6040 portfolio using the 4% rule
00:23:05
standard thing like over a 30-year time
00:23:07
period right if you start with a
00:23:09
portfolio of a million dollars that the
00:23:10
portfolio Size Doesn't Matter but let's
00:23:11
just say you start with a portfolio of
00:23:12
$1 million after 30 years using a 6040
00:23:16
pulling 4% a year you're more likely to
00:23:19
have $4 million than to have less than a
00:23:21
million right you're more likely to have
00:23:23
quadrupled your balance than to be below
00:23:25
your starting balance right and that's
00:23:26
with you pulling money out and living 4%
00:23:28
a year adjusting for inflation all the
00:23:30
standard stuff right and so I think that
00:23:33
shows like oh my gosh like it's much
00:23:35
more likely that your portfolio is just
00:23:37
going to explode in value than it is
00:23:39
going to like go to zero right so and
00:23:42
people don't think about that and I
00:23:43
think it's something like five and seven
00:23:45
retirees are living on less than what
00:23:47
their portfolio is generating right of
00:23:49
those that have portfolios right so they
00:23:51
get this money or they or they get they
00:23:53
have a required minimum distribution
00:23:55
which they have to take out the
00:23:56
government says you have to take this
00:23:57
money and they don't spend it they end
00:23:59
up reinvesting it so many rmds are
00:24:01
reinvested and that's the crazy part
00:24:02
right or they just live off you know
00:24:04
even though you could use a 4% rule the
00:24:06
fact is most people don't use it most
00:24:08
people live off the income on their
00:24:09
portfolios plus Social Security that's
00:24:11
how it works I've looked at this and I I
00:24:13
actually found out most of this after I
00:24:15
even wrote the book too it's like as
00:24:16
I've kept digging into this you know and
00:24:19
it's like people just do very basic
00:24:21
things based on their income they live
00:24:22
their life based on their income so like
00:24:24
hey I'm getting 1,500 bucks a month from
00:24:25
Social Security and I'm going to get you
00:24:27
know let's say my investments make me on
00:24:28
average 1500 a month then I live off
00:24:30
three grand a month period they don't
00:24:31
say oh I'm going to pull out 4% plus
00:24:33
the, 1500 a month no they don't do that
00:24:35
they just say that's my income that's
00:24:37
what I live off and they live off that
00:24:38
and they just let the principal just
00:24:40
keep growing and they just keep living
00:24:41
off the income and generally if the
00:24:42
principal is growing their income is
00:24:44
going up over time right this is outside
00:24:46
of the cola adjustments for Social
00:24:47
Security Etc but that's the shocking
00:24:49
part and that's kind of the big
00:24:51
highlevel idea here of like what's
00:24:53
happening and I think it's going to
00:24:54
continue now of course those people that
00:24:55
only have social security don't have
00:24:58
that luxury but for a lot of people that
00:24:59
have portfolios you'd be surprised how
00:25:01
many are seeing their wealth just grow
00:25:03
beyond what they expected yeah I mean we
00:25:06
we both know I think many listeners know
00:25:08
or at least have heard of the concept
00:25:10
that it's hard to change from a net
00:25:12
saver to a net spender and that's
00:25:14
essentially what a lot of retirees have
00:25:16
to do they have to flip the switch at
00:25:18
some point and say I am G to start
00:25:20
drawing down on my principal and start
00:25:21
you know enjoying the fruits of my labor
00:25:23
over the last 40 years but what you've
00:25:26
just pointed out Nick is that most
00:25:27
people don't end up doing that they
00:25:29
don't actually draw on the principal
00:25:30
alone they only love off the the
00:25:32
interest or the dividends the income
00:25:34
that their portfolio produces one thing
00:25:36
that actually I I think I was inspired
00:25:38
just because I was listening to maybe
00:25:40
you on like the choose fi podcast
00:25:42
earlier this week I was going back to
00:25:44
that old episode and I actually thought
00:25:46
to myself I'm sure the data is readily
00:25:49
available if not available it should be
00:25:51
relatively easy to actually throw it
00:25:53
into a spreadsheet or Python and do it
00:25:55
but I would want to see how say like
00:25:57
that Michael Kit's study I would want to
00:26:00
divide the 4% rules historical results
00:26:03
into like
00:26:04
desiles because you know that okay the
00:26:07
4% rule it's successful something like
00:26:08
96 or 98% of the time in the historical
00:26:11
back test so two or 4% of people run out
00:26:14
of money and that's bad but then what
00:26:16
about the other 96% of people I mean we
00:26:19
know that the overwhelming majority of
00:26:21
those 96% of people die with more money
00:26:24
than they retired with right yeah yeah
00:26:28
so I don't exactly know what the numbers
00:26:29
are and it's not the number of people
00:26:32
that run out of money it's the number of
00:26:34
time frames where you run out of money
00:26:35
right so it's like if you started
00:26:37
retirement like 1928 or something and
00:26:40
then you went right into the Great
00:26:41
Depression and like there are certain
00:26:44
scenarios like that or you start
00:26:45
retiring think in like 1910 or something
00:26:47
and then by the time that the Great
00:26:48
Depression hits you're almost wiped out
00:26:50
like there are these weird scenarios I
00:26:52
can't remember exactly which ones but
00:26:53
that's how that type of stuff comes
00:26:55
about right it's usually like a very bad
00:26:57
scenario you going into that right so
00:26:59
that's where it happen so it would be
00:27:01
like a whole cohort of people would be
00:27:02
out at once it's not like one person so
00:27:04
that's where those percentages come from
00:27:06
but yeah I agree with you I don't know
00:27:08
where those desiles are and that's a
00:27:10
that's a great question I mean it's also
00:27:12
there's so many assumptions are you 6040
00:27:14
or you 8020 like what you know what your
00:27:16
treasury is going to pay in the future
00:27:17
there's a lot of stuff goes into that
00:27:18
but yeah I think you're right though in
00:27:19
the sense that you know You' be
00:27:21
surprised at how many people end up with
00:27:23
more than their principal bounds after
00:27:24
you know pulling 4% a year which you
00:27:26
know depending on the size you're could
00:27:27
be a decent chunk of money now let's go
00:27:30
back to your book for a second so just
00:27:31
keep buying was I'm actually before I
00:27:34
even get to my question was it the top
00:27:35
selling investing book or at least newly
00:27:37
published investing book in 2022 it had
00:27:39
to be close I don't know any I'm trying
00:27:41
to think of what other investing books
00:27:43
came out in 2022 like there were some
00:27:45
that I know of but like I don't know if
00:27:47
there was I mean technically like I I
00:27:49
was not the top selling investment book
00:27:51
in 2022 because there's old books that
00:27:53
have already that were released before
00:27:55
yeah Rich Dad Poor Dad colle money those
00:27:57
outs sold me easily but of new releases
00:28:00
I think it might have been I don't know
00:28:02
with certainty I can't think of another
00:28:04
book that came out but I mean there
00:28:05
weren't that many investing books that
00:28:07
came out like every year there's not too
00:28:08
many investing books that come out at
00:28:09
least that I know of because like
00:28:11
they're out maybe someone does it as
00:28:12
like a maybe it's very technical it's
00:28:14
very Niche like it's a very good book
00:28:16
but it's like it's not for a a
00:28:17
broad-based audience like mine was right
00:28:19
so that's something else to think about
00:28:20
as well it's like someone could put all
00:28:21
like the best technical analysis manual
00:28:24
and it sold a ton in like a very small
00:28:26
little sect and maybe that's a very good
00:28:27
book but we would never hear about it
00:28:29
because we're not really looking for
00:28:30
that so that's another thing to keep in
00:28:32
mind but yeah so it's done well so far I
00:28:34
I you know it's actually surprised me a
00:28:35
bit how well it's done and after writing
00:28:37
I'm like now there's so much stuff I'd
00:28:38
add to it right it's like there's got to
00:28:40
be a second addition at some point I
00:28:41
want to add so much to it especially all
00:28:43
the stuff I've learned and so I think
00:28:44
it's it's it's an ongoing
00:28:46
process coincidentally though I've heard
00:28:49
you talk about this it was released
00:28:51
during one of the worst years for
00:28:53
investors in in a while I mean the 6040
00:28:55
portfolio did not do well bonds had a
00:28:58
historically bad year and I saw some
00:29:00
critics I'm sure you saw some too who
00:29:02
said like oh just keep buying of course
00:29:05
it's released in a year it's it was a
00:29:07
sign of top it was a sign of ere
00:29:09
exuberance and
00:29:10
froth but can you explain to our
00:29:12
listeners why those critics actually
00:29:14
have the exact wrong conclusion about
00:29:17
the message just keep buying and and and
00:29:19
the smart long-term investing approaches
00:29:21
in just keep buying yeah I mean because
00:29:24
they didn't actually read the book they
00:29:25
just read the title and come up with
00:29:27
what they think everything is like oh
00:29:28
everything they think my assumption is
00:29:30
like the stock market goes up 8% a year
00:29:32
every year no matter what which is
00:29:34
obviously not true I discuss this at
00:29:35
length in the book why there's many bad
00:29:38
periods in stock market history I know
00:29:40
basically all of them even the
00:29:41
international markets I could just ring
00:29:42
them off if I have to and tell you but
00:29:44
like the point there isn't that like oh
00:29:46
markets always go up so you don't have
00:29:48
nothing to worry about no it's like
00:29:49
there are going to be very bad periods
00:29:51
there's going to be a bad decade you
00:29:52
know we could be in one possibly right
00:29:54
now who knows right but like there're
00:29:56
going to be a very long periods where
00:29:58
people are going to lose money it's
00:29:59
going to happen again I guarantee it I
00:30:01
don't know when but it will happen and
00:30:03
so just being prepared for that and just
00:30:05
saying like hey even over the Long Haul
00:30:06
even over fiveyear period 10 year 20
00:30:08
year periods you know you will start to
00:30:10
see you know things turn around I
00:30:11
hopefully at some point five years not
00:30:12
necessarily 10 years not even
00:30:13
necessarily but hopefully by 20 years we
00:30:15
start to see stuff turn around and the
00:30:17
other thing too is a lot of this is done
00:30:19
in snapshots every time people talk
00:30:21
about investing they're always looking
00:30:23
at a snapshot so if you look at like the
00:30:25
the big example is Japan 1989 you have a
00:30:27
CH of that you can be like look at this
00:30:28
thing it's been 30 years I mean with
00:30:30
dividends it's technically above its
00:30:32
high but without dividends like just the
00:30:33
index level is so below its high from 89
00:30:35
so you like wow that's over 30 years and
00:30:38
you would have lost money it's like not
00:30:39
technically true also that assumes you
00:30:41
invested all your money at one point in
00:30:42
time you didn't buy over time and so in
00:30:44
the book I actually show this someone
00:30:46
invested I just did like a dollar a day
00:30:47
into the Japanese stock market since
00:30:49
1980 so I even went a little bit before
00:30:50
the peak I didn't just start at the peak
00:30:52
that Technic would have made my argument
00:30:53
even better but even before the peak you
00:30:55
start that and you would see that like
00:30:57
that person technically right now has
00:30:59
made money I mean they haven't made a
00:31:01
lot of money but they've kind of kept
00:31:02
pace with inflation barely you know and
00:31:03
so one of the worst markets of all time
00:31:06
Japanese stock markets since 1989 and
00:31:08
yet you kept pace with inflation or
00:31:10
pretty close to it right and so that's
00:31:11
my counter it's like don't get me wrong
00:31:13
there's a ton of risk and yes there was
00:31:14
a a lot of better options but like even
00:31:15
in this nightmare scenario right you
00:31:18
still could have done okay and right and
00:31:19
the thing I'm preaching is
00:31:20
diversification I don't think anyone
00:31:22
should just be in one Equity market and
00:31:23
that's it I think you should have a
00:31:24
broad-based ownership and if you had
00:31:26
done that you would have obviously you
00:31:28
wouldn't be having the highs that we've
00:31:29
had in the US Stock Market because you
00:31:30
don't International stocks which haven't
00:31:31
done as well but you wouldn't have the
00:31:32
lows when things crash right so
00:31:35
something to keep in mind is like over
00:31:37
the Long Haul there is going to be you
00:31:38
know Peaks and valleys here but in a
00:31:40
bare Market is fine when you when the
00:31:42
stuff will come back eventually you know
00:31:44
it's a question of when and and and the
00:31:46
question is like is the world going to
00:31:48
keep producing value right is that is
00:31:50
that going to happen are you are you
00:31:52
long Humanity or not and I think I'm
00:31:54
long Humanity at some some portion of
00:31:56
humans are going to solve very difficult
00:31:57
problems is going to create value and so
00:31:59
that's the thing I try to focus
00:32:01
on and going back a couple sentences
00:32:04
you're focus on diversification Nick and
00:32:06
one thing I like that you talk a lot
00:32:08
about it's not just Geographic
00:32:10
diversification it is important you talk
00:32:12
about that you also talk about asset
00:32:14
level diversification meaning you know
00:32:15
stocks bonds Alternatives real estate
00:32:18
but you focus a lot I focus a lot and I
00:32:20
think any good investor focuses a lot on
00:32:22
maybe you could call it time
00:32:23
diversification or dollar cost averaging
00:32:26
and I think a big part of just keep
00:32:28
buying is this idea that UPS Downs good
00:32:31
news bad news you can continue dollar
00:32:34
cost averaging into the
00:32:35
market yeah you're buying over time and
00:32:38
as a result you aren't no one payment no
00:32:41
one investment is going to make or break
00:32:43
you basically and that's the idea and so
00:32:45
that's why I even say someone who's been
00:32:47
like I just ran this yesterday like
00:32:49
someone who's been investing a 100 bucks
00:32:51
a month since the beginning of 2022
00:32:53
right which is one of the worst markets
00:32:55
we've had in the last few decades as you
00:32:56
said so since the beginning of 2022 100
00:32:58
bucks a month right now you're up about
00:33:00
10% or you know $200 not not a lot of
00:33:03
money not going to lie but I mean you've
00:33:04
only put in you know what is it 18
00:33:06
months you put in 1,800 bucks and you
00:33:08
have around two grand right now that's
00:33:10
roughly how the math would work out so
00:33:12
that's I mean still something I'd rather
00:33:14
have that like you know it's not great
00:33:15
and on an inflation adjusted basis
00:33:17
you're up like maybe 3% I think so
00:33:19
you're not up 10 you're up only three
00:33:20
two or 3% so it's not great but like
00:33:23
considering how bad everything was like
00:33:25
I think it's a I'd put that as like a
00:33:27
pretty good win you know considering how
00:33:29
bad everything has been so I think
00:33:30
that's the thing to think about like
00:33:31
it's very easy like oh just keep buying
00:33:33
and like you can look at this as like oh
00:33:35
signs of the top and all that but at the
00:33:36
same time like that's not what this is
00:33:39
like this is a historical analysis based
00:33:41
on a lot of stuff I could have written
00:33:42
this book five years before I mean
00:33:43
assuming I had the data you know and all
00:33:45
that I would have written the same book
00:33:46
like the book would not have changed
00:33:47
right right only some pieces of the book
00:33:49
like that historical piece wouldn't
00:33:50
change just certain like as we get
00:33:52
research about human psychology and
00:33:53
stuff like that maybe how I approach
00:33:56
certain topics might change like certain
00:33:57
personal finance topics but the
00:33:58
investing part I think will not change
00:34:00
much if at all into the future I agree
00:34:03
with that too you reminded me when you
00:34:05
just mentioned the person who was
00:34:07
investing say $100 a month since the
00:34:09
beginning of
00:34:09
2022 I threw a chart and I think I wrote
00:34:12
a blog post about it I'll have to go
00:34:14
back and see but the very least I made a
00:34:15
chart recently that looked at someone
00:34:16
who did dollar cost average from 2003
00:34:20
until today 2008 till today a few
00:34:22
different dates in between until today
00:34:25
and granted someone who started
00:34:27
investing say in 2018 dollar cross
00:34:29
averaging $100 a month their annualized
00:34:32
performance as of today is maybe only
00:34:34
45% per year over the last five years so
00:34:38
not great but still beeding inflation
00:34:41
but then if I go back to 03 and I think
00:34:43
that's the lesson that I took away from
00:34:45
this if I look at someone who started
00:34:46
dollar crost averaging in 2003 as of you
00:34:50
know March 09 the bottom of the great
00:34:53
financial crisis their annualized
00:34:55
performance was about NE 15% per year oh
00:34:58
from there to the bottom from 03 to the
00:35:00
bottom yeah so six years and they're
00:35:02
sitting there like what am I doing wrong
00:35:04
I am down 14 or 15% per year yet if they
00:35:09
had continued dollar cost averaging till
00:35:10
today their total IR over the whole run
00:35:15
is about 8% per year which is what we'd
00:35:18
expect which is pretty good and so it's
00:35:20
just this powerful message of even if
00:35:22
you find yourself underwater today
00:35:24
because you kind of had bad luck and
00:35:26
when you started in in over the last
00:35:27
five years if you zoom out long enough
00:35:30
and if you continue doing this smart
00:35:32
long-term dollar cost averaging you're
00:35:34
going to end up in a pretty good place
00:35:36
yeah that is that assumes
00:35:37
diversification for the record if you
00:35:39
bought in a single stock and you're
00:35:41
hoping that thing's to turn around it
00:35:42
may but it may not so like this is a
00:35:45
broad-based diversified portfolio
00:35:47
especially index funds that are where
00:35:49
the companies are changing over time the
00:35:51
the top companies in 03 are very
00:35:52
different from the top companies today
00:35:54
so that's a 20-year period so just
00:35:55
thinking about like
00:35:57
and that naturally it's like a natural
00:35:59
you know creative destruction process
00:36:00
right some some companies are brought in
00:36:02
that are rising and the companies that
00:36:04
aren't doing well that are falling off
00:36:05
they get dropped out and that's a
00:36:06
natural thing that happens through
00:36:07
committee selection and standard and
00:36:09
pores Etc but we benefit from that as
00:36:11
investors we don't have to do any of
00:36:12
that research or anything we kind of
00:36:13
just free ride off of that and I think
00:36:15
for very cheap and I think that's wored
00:36:17
it so some people would say you need the
00:36:19
equal portfolio there's a lot of
00:36:20
different ways to do this and the
00:36:22
results will vary a little bit but we're
00:36:24
talking marginal differences over the
00:36:26
long run it's not like and equal weight
00:36:27
has outperformed a market cap weighted
00:36:30
portfolio by like 5% a year no it's it's
00:36:32
nothing like that there's certain
00:36:33
periods where outperformed certain
00:36:34
period are underperform so on net I
00:36:36
think it's mostly a wash and I don't try
00:36:38
to focus on those little things it's
00:36:39
just like own income producing assets
00:36:41
grow your income and focus on owning
00:36:43
income producing assets that's the the
00:36:45
main takeaway from the book and and my
00:36:48
the stuff I'm
00:36:49
arguing one quote that you have in the
00:36:51
book it's from Jeremy seagull who's you
00:36:53
know a legendary investing mind right
00:36:56
and the quote is is fear has a greater
00:36:58
grasp on human action than does the
00:37:00
impressive weight of historical evidence
00:37:03
so a very powerful quote but can you
00:37:06
kind of help us unpack that a little bit
00:37:08
Yeah fear is a greater grasp on human
00:37:11
action than does the impressive weight
00:37:12
of historical evidence and the whole
00:37:15
idea there is that you know now that we
00:37:17
have data and we can kind of see into
00:37:19
the past in a way and how things
00:37:21
performed in ways that we didn't we
00:37:23
couldn't really do like back in like the
00:37:24
20s and 30s we have a better
00:37:26
understanding of you know how markets
00:37:27
behave and human psychology hasn't
00:37:30
evolved all that much in the last few
00:37:32
hundred years if or even thousand years
00:37:34
probably maybe maybe in a thousand years
00:37:36
last few hundred definitely not much so
00:37:38
people are still going to be you know
00:37:39
you're going to feel fearful you're
00:37:41
going to get greedy you're going to you
00:37:43
know you're going to have all those
00:37:44
things because that hasn't evolved much
00:37:46
but the data and the evidence has has
00:37:48
moved very quickly right and so seeing
00:37:50
that difference and realizing like hey
00:37:52
you're going to feel afraid and that's
00:37:53
fine but like realizing that like
00:37:56
evidence and looking at what's happened
00:37:57
in history that's a better Guide to the
00:37:59
Future than your brain and and it's and
00:38:02
its evolutionary you know operating
00:38:04
procedure how how you stand your
00:38:05
standard operating procedure as a human
00:38:07
is not the best way is doesn't work as
00:38:09
an investor we weren't made to be
00:38:10
long-term investors we really were not
00:38:12
you know humans if you think about
00:38:14
nomadic tribes and things like that we
00:38:16
were looking maybe a year in advance
00:38:18
thinking about seasons and stuff like
00:38:19
that we weren't saying oh I wonder if
00:38:21
this corn was going to be 20 years from
00:38:23
now like when we were agriculture all
00:38:24
that that wasn't the thinking at time
00:38:26
and so it's a very different mindset
00:38:28
it's not something we evolved with so
00:38:30
you have to use other things like
00:38:32
evidence and data and saying hey I'm
00:38:34
probably going to be alive 20 30 years
00:38:36
from now which is not something that
00:38:37
necessarily would have been true of a
00:38:39
middle-aged human you know a thousand
00:38:41
5,000 10,000 years ago right so just
00:38:44
realizing that you know your brain is
00:38:45
not equipped to do this stuff it's not
00:38:47
really made for it at all so because of
00:38:49
that when you see oh Market's dropping
00:38:51
you start to get fearful you start to
00:38:52
want to sell you want to get out of it
00:38:53
and and I understand that I I think it's
00:38:56
very natural to feel that but you have
00:38:57
to kind of fight that urge with evidence
00:38:59
and so that's that's what the quote
00:39:00
represents and it's something that I
00:39:03
think you do a good job in your writing
00:39:04
Nick is I mean the blog of course is of
00:39:07
dollars and data everything you do tends
00:39:09
to be very datab backed and you present
00:39:11
lots of data in your writing yet it's
00:39:14
important and I think you recognize the
00:39:15
importance that you keep the human
00:39:17
readers in mind so I'm just curious do
00:39:20
you use any sort of like filters or
00:39:22
thought processes when you're writing to
00:39:24
make sure that the advice you give is
00:39:26
not only applicable and backed by data
00:39:29
but just executable by our sometimes
00:39:32
irrational human
00:39:33
Minds yeah so I try to actually look at
00:39:36
how much of an impact some of this has
00:39:38
so for example one of the big things
00:39:39
that people have issues with there's
00:39:41
this idea of you know lump suming an
00:39:42
investment let's say you just let's say
00:39:44
you sold your business or you got an
00:39:45
inheritance right let's say you got
00:39:46
$100,000 a good chunk of money right and
00:39:49
so you're like oh do I put this all into
00:39:50
the market now or do I slowly like
00:39:52
average it in over time right and so I'm
00:39:54
going to call that averaging in some
00:39:55
people call that dollar cost averaging
00:39:57
that is not the technical definition but
00:39:59
I don't want to get into that so let's
00:40:00
just say do you want to put it in now or
00:40:01
do you want to put it in over time those
00:40:02
are the two options right and most
00:40:04
people have a big problem with putting
00:40:06
it in now and because they think what if
00:40:07
the market crashes right so you know
00:40:10
over all historical time periods I've
00:40:12
tested this assume let's say you're
00:40:13
going to average in over a year right
00:40:15
you're going to put brok it into 12
00:40:16
equal payments do it over a year 80% of
00:40:19
the time it would have been better just
00:40:20
to put the money in right away and if
00:40:21
you had done that on average you made
00:40:23
about 5% more money than if you had
00:40:25
slowly gone in so I don't say Hey you
00:40:27
have to put the money in right away I
00:40:29
understand the fear I understand the
00:40:30
risk especially if it's like hey this is
00:40:31
all the money I have I don't want to
00:40:33
risk it and and possibly lose you know 5
00:40:35
10 percent you know by putting it in and
00:40:36
then the market crashes I get that but
00:40:39
just realize those are the trade-offs
00:40:40
you're making statistically you're
00:40:42
likely to lose 5% and you're saying what
00:40:44
do you mean you're not going to lose the
00:40:45
5 per you just don't get it because you
00:40:47
slowly waited in it's an opportunity
00:40:49
cost it's not a real cost that you bear
00:40:51
but it is a cost that exists so that's
00:40:53
one thing to keep in mind the second
00:40:55
thing is like like just think about that
00:40:57
tradeoff is that worth it for you if it
00:40:58
is you know then you're you're probably
00:41:01
going to lose 5% if not then put it in
00:41:03
now and so that's what I say I try to
00:41:05
show the data I try to present the human
00:41:06
side of it I can understand why people
00:41:09
might want to do something or not want
00:41:10
to do something and then I let you make
00:41:12
the decision right I can't make it for
00:41:13
you I don't know your psychology I don't
00:41:14
know all that funny thing actually I did
00:41:17
this analysis like a year ago mid 2022
00:41:19
and I was like yeah know you got a lumps
00:41:20
it got a lump sum right that's I always
00:41:21
say that and through now if you had lump
00:41:24
suum versus doing it broken up something
00:41:25
over you know payments from like July
00:41:27
2022 to June 2023 you would have been
00:41:31
down about 5% right so it's roughly like
00:41:33
it's just by Chance the historical
00:41:35
average like if you had lump summed last
00:41:37
year in July 2022 you'd be about five
00:41:39
have about 5% more money than someone
00:41:41
who just took that and just slowly
00:41:43
waited into the market so I guess it
00:41:45
would probably be a little less than
00:41:46
that maybe it was only like 4% maybe
00:41:48
three because of Treasury yields have
00:41:49
come up a little so if you were
00:41:50
investing that side cash would' be a
00:41:51
little bit lower than that but still
00:41:53
it's like it's pretty close to the
00:41:55
average and it's funny that that it fits
00:41:56
that model that I use and I'm just like
00:41:58
yep 5% a year do you want to take two
00:42:00
years to do it to average in the market
00:42:02
10% right three years 15 right you can
00:42:03
roughly that's roughly equivalent to how
00:42:06
much you're going to lose the longer you
00:42:07
take to get into the market but yeah
00:42:09
it's just tough it is it is but it's
00:42:12
important that we present the objective
00:42:14
facts it's important we present the data
00:42:16
and say Here's what the math says is the
00:42:18
best thing to do readers listeners
00:42:21
clients whoever how do you feel about
00:42:24
that because your other options which
00:42:25
are suboptimal here here's what the
00:42:28
other options are and and I found at
00:42:30
least in my experience that usually
00:42:32
presenting that full array of options
00:42:34
and like you just did Nick presenting
00:42:36
just how suboptimal some of the other
00:42:38
options might be you know is it is it a
00:42:40
minor difference or is it a significant
00:42:42
difference that's important too A lot of
00:42:44
people once you present that to them are
00:42:47
able to make the best decision for their
00:42:49
personal risk tolerance you know a lot
00:42:51
of people naturally want to hedge their
00:42:53
bets and they might say oh I just
00:42:54
inherited $100,000
00:42:56
well I'm going to take $50,000 and lump
00:42:59
Summit today because that's what Nick
00:43:00
muli told me to do then I'll take the
00:43:03
remaining $50,000 and split it over the
00:43:06
next six months just because that's
00:43:07
going to help me sleep at night so I I
00:43:10
think it is important that people should
00:43:12
understand the math Behind these
00:43:13
decisions yeah so in that example you
00:43:15
just gave I would be like that's
00:43:17
completely fine and let's just do the
00:43:18
math on it right so they're going to
00:43:20
take six let's say they did 100,000 they
00:43:22
broke it over 6 months right so the
00:43:23
expected underperformance in a typical
00:43:25
year would be about 2 and a half% right
00:43:27
because we that's our 5% a full year
00:43:29
doing half a year so 2 and a half per.
00:43:31
but now they just put 50,000 of that in
00:43:33
up front so now we've already half the
00:43:35
capital is invested so you only have to
00:43:37
look at the other you know 50,000 so
00:43:39
really that two and a half percent is
00:43:41
actually it's only on the 50,000 not on
00:43:43
the full hundred so now we're really on
00:43:44
the 100 we're only at 1.25% of expected
00:43:47
on performance so once we get through
00:43:48
that we're like it's a percentage Point
00:43:50
like it's not going to matter if that's
00:43:52
going to help you sleep at night lose
00:43:53
the percentage Point like that's what
00:43:54
I'll say to people especially six months
00:43:56
or I'm going to do it over three months
00:43:57
okay do it over three months it doesn't
00:43:58
really matter it doesn't make a
00:43:59
difference just like when people say
00:44:01
Nick should I like Max up my 401k
00:44:03
earlier in the year like what if I just
00:44:04
like put all my money like my first four
00:44:06
paychecks or five paychecks and like
00:44:07
wouldn't that be better like
00:44:08
statistically yes it would be better but
00:44:10
like how much of a difference does it
00:44:12
yield you over the course of a year like
00:44:14
it's a couple percentage points it's not
00:44:15
a lot and I'm not saying that those
00:44:17
don't matter like they can add up
00:44:18
especially if you do that every year for
00:44:20
20 years but like it's one of these
00:44:22
things where like you're probably
00:44:23
stressing and overanalyzing something I
00:44:25
think all that time you're spending on
00:44:27
that you could go and start a side
00:44:28
hustle and you would make way more money
00:44:30
and make way more returns than like you
00:44:32
know if you're a billionaire that type
00:44:33
of decision matters if you're working
00:44:35
with like a a typical retail person the
00:44:37
amount of money you have that that
00:44:39
decision those percentage points don't
00:44:40
add up to enough money compared to what
00:44:42
you can do with your labor so that's
00:44:44
just what I try to keep in mind for most
00:44:46
normal people retail investors like
00:44:48
myself right what what there's a famous
00:44:50
idiom are saying about worrying too much
00:44:52
over pennies and missing out on dollars
00:44:55
y i I forget what it is but essentially
00:44:56
that's what we're saying here is that it
00:44:58
is very possible to fret way too much
00:45:01
about the little things and then just
00:45:03
you know you miss the forest for the
00:45:04
trees essentially yeah so Nick you
00:45:08
mentioned bequests earlier and then I
00:45:10
think on some other podcasts I've heard
00:45:13
you talking about that you like to work
00:45:14
out a lot you've mentioned some data
00:45:16
before I've heard in regards to an hour
00:45:18
of working out earlier in life is is
00:45:21
correlated to you know six or so hours
00:45:23
of longer life in the end and maybe
00:45:26
comes from like a Peter AA type so maybe
00:45:28
can you dive into a little bit about
00:45:29
this intersection of wealth and health
00:45:32
that that you sometimes write and talk
00:45:34
about yeah so I think there's actually
00:45:37
some research I found you know while I
00:45:39
was doing you know looking into the book
00:45:40
and everything and it showed that one of
00:45:43
the reasons why at least Americans overs
00:45:45
save I think why you don't really see
00:45:46
the same behavior in a lot of the rest
00:45:48
of the developed world is because our
00:45:50
Health Care system is so expensive and
00:45:52
so people are really worried about a
00:45:53
very adverse Health outcome that ends up
00:45:55
consuming most of their wealth and so
00:45:57
that is a legitimate push back and a
00:45:59
legitimate like hey Nick that's why I'm
00:46:01
over saving CU if something happens to
00:46:04
me and like all my money gets wiped out
00:46:06
I could die right in the US is one of
00:46:07
these things where like this could
00:46:08
happen or I could go into tons of
00:46:09
medical debt and it would really affect
00:46:11
my family that is a fair response and
00:46:13
that is the only response I've heard to
00:46:15
the that was anti- Diet was Zero that
00:46:17
makes sense to me my counter to it is
00:46:19
like okay you know how you how you
00:46:21
counteract that to the best of your
00:46:22
ability of course we can't stop
00:46:23
everything if you get some crazy brain
00:46:25
tumor like there's certain things that
00:46:27
we can't you know we can't control for
00:46:28
every variable but at least a lot of the
00:46:31
diseases that kill most of the people
00:46:33
here can be I'm not going to say you
00:46:35
can't prevent them but you can push them
00:46:37
off there is some data that you can push
00:46:39
them off for most people right and we're
00:46:41
talking about heart disease talking
00:46:42
about cancer we're talking about
00:46:43
neurogenerative stuff obviously there's
00:46:45
some genetic components there but like
00:46:46
for a lot of this stuff it's lifestyle
00:46:48
factors and so one of the things I talk
00:46:50
about like instead of saying oh I need
00:46:52
to save more money so I can have so I
00:46:54
worry about health outcome it's like no
00:46:56
instead of doing that try and focus more
00:46:58
on your health today and so I think what
00:47:00
the stuff that Peter a is doing his his
00:47:02
book actually just came out outlive
00:47:04
really good book I recommend it for
00:47:05
everyone bought it for all my friends
00:47:06
first time I've actually ever done that
00:47:07
I literally bought like 20 copies that's
00:47:09
aome because I think this is worth more
00:47:11
than just like monetary stuff like
00:47:13
getting rich and all that is very
00:47:14
superficial like living longer and
00:47:16
healthier especially living healthier I
00:47:17
think is more important and so the idea
00:47:20
is like every hour of exercise assuming
00:47:22
you do this and you keep this up over
00:47:24
your life and you actually look at how
00:47:25
much it expected you can extend your
00:47:27
life it's about every hour gets to about
00:47:28
six hours now that doesn't mean linearly
00:47:30
so I'm like oh if I work out four hours
00:47:33
a day I'll live forever live forever not
00:47:35
it's not how that works right but it's
00:47:36
this idea that like you know basically
00:47:38
all the time you spend working out isn't
00:47:40
just like lost time it's like oh you
00:47:41
work out just so like if I spend all
00:47:43
this time working out I have to spend
00:47:45
all my time working like all that extra
00:47:46
time I earn I'm just I'm doing it to
00:47:48
work out it's like self- sustaining
00:47:49
yourself but that's that's not what it
00:47:51
is at all you're actually gaining more
00:47:53
time because you're going to live longer
00:47:54
because you're healthier and so
00:47:56
exercise is like it's a huge thing I
00:47:58
promote and it's not something I talk
00:48:00
about a lot on the blog but given the
00:48:02
stuff I've learned from AA and just
00:48:03
reading a lot of other things on this
00:48:05
it's just a no-brainer to me it's like
00:48:07
how do we solve this problem of over
00:48:08
saving how do we solve this problem of I
00:48:10
didn't save enough money like I think my
00:48:11
argument for people now I used to say oh
00:48:13
I didn't save enough what should I do
00:48:14
it's like okay like work harder at cash
00:48:16
up contributions no my my advice now is
00:48:19
like start hitting the gym like start
00:48:21
really taking your Fitness to the next
00:48:23
level why you can by doing that your
00:48:26
health will be better for longer right
00:48:28
in in expectation and then you can work
00:48:30
more to make up for those savings you
00:48:32
didn't make when you so let's say you
00:48:33
just wasted your 20s you didn't save a
00:48:35
single Dollar in your 30s start working
00:48:37
out start getting your health right so
00:48:39
you can work in your 60s right instead
00:48:40
of saying oh I have to retire 65 because
00:48:42
I can't do it or maybe you can work even
00:48:44
into your 70s if you have to right not
00:48:46
saying this is ideal but you said you
00:48:48
know you need to catch up how do you do
00:48:49
it you have to build time that's the
00:48:50
only way to build more time to kind of
00:48:52
catch up and so that's the thing I try
00:48:54
and and focus on is tell people people
00:48:55
like hey look at your health and I think
00:48:57
health is a way to extend wealth in a in
00:49:00
a different way I'm not even talking
00:49:01
about like like the wealth of having a
00:49:03
good you know being healthy I'm talking
00:49:04
about like literal Financial wealth you
00:49:06
can do this by having good health so you
00:49:08
can keep working keep being productive
00:49:10
Etc right I think a lot of things build
00:49:12
off of that and you see a lot of people
00:49:13
who they work hard they make a lot of
00:49:15
money and then they don't have health
00:49:16
and they don't get chance to spend it
00:49:17
and it's just that's where the die with
00:49:18
zero there's a lot of these these topics
00:49:20
that are intersecting you start to see
00:49:22
how like if you focus on one you can
00:49:23
build on the others and so that's the
00:49:25
thing I want to kind of emphasize here
00:49:27
if if I could take one thing from your
00:49:28
readers like as much as making money oh
00:49:30
yes buy my book great whatever but like
00:49:32
really focus on your health and exercise
00:49:34
that's going to do more for you than
00:49:35
anything in the financial world I think
00:49:37
ever will so I I love it Nick after this
00:49:40
episode publishes we'll soon publish
00:49:42
another episode with Fritz Gilbert I
00:49:44
don't know if you're familiar with Fritz
00:49:45
he is he runs the retirement Manifesto
00:49:48
blog really nice guy he was recently on
00:49:50
a Morning Star podcast one of the top
00:49:53
three reasons for people having
00:49:55
unplanned retirements one has to do with
00:49:58
you know management pushes them out
00:49:59
early the other two are health related
00:50:02
one of them is simply people get
00:50:04
unhealthy people get sick and they can
00:50:06
no longer work and if you're so sick you
00:50:08
can no longer work that also probably
00:50:10
means you're so sick you can't play with
00:50:11
your grandkids you're so sick you can't
00:50:14
do all those fun traveling activities
00:50:16
you were hoping to do in retirement I
00:50:18
mean it's a pretty depressing long-term
00:50:21
outcome and just like you said some of
00:50:24
that might be un avoidable some of it
00:50:26
might just be a bad genetic Lottery but
00:50:29
a ton of it is environmental and it's
00:50:31
stuff that we can control for in our own
00:50:33
lives in our diets in our exercise
00:50:36
routines and so we'll take that away as
00:50:38
an awesome tip to focus on for the
00:50:40
future yeah I agree all right Nick so
00:50:43
everyone's GNA want to know how can they
00:50:45
find you how can they reach out where
00:50:46
they can they read you on a regular
00:50:48
basis and where can they find just keep
00:50:50
buying yeah so um you can find me at of
00:50:52
dolland dat.com you can sign up for my
00:50:54
newsletter
00:50:56
um on social you can find me at
00:50:57
twitter.com the dying social media site
00:51:00
if you sign up today please no it's
00:51:03
dollars and data that's on Twitter and
00:51:05
then on Instagram or threads I'm Nick
00:51:07
muli is my my name and you can find my
00:51:10
book Amazon wherever books are sold just
00:51:12
keep buying appreciate you having me on
00:51:14
Jesse really really appreciate the combo
00:51:15
hope hope was helpful for your your
00:51:16
listeners it was awesome thanks so much
00:51:18
Nick thank
00:51:20
[Music]
00:51:22
you thanks for tuning in to this episode
00:51:25
of the best interest podcast if you have
00:51:27
a question for Jesse to answer on a
00:51:29
future episode send him an email at
00:51:31
Jesse bestin interest. blog again that's
00:51:35
Jesse at bestter interest. blog did you
00:51:38
enjoy the show subscribe rate and review
00:51:40
the podcast wherever you listen this
00:51:43
helps others find the show and invest in
00:51:45
knowledge themselves and we really
00:51:47
appreciate it we'll catch you on the
00:51:49
next episode of the best interest
00:51:51
[Music]
00:51:54
podcast the best interest podcast is a
00:51:56
personal podcast meant for education and
00:51:58
entertainment it should not be taken as
00:52:01
Financial advice and is not prescriptive
00:52:03
of your financial
00:52:05
situation