00:00:01
welcome to the best interest podcast
00:00:04
where we believe Benjamin Franklin's
00:00:06
advice that an investment in knowledge
00:00:08
pays the best interest both in finances
00:00:11
and in your life every episode teaches
00:00:13
you personal finance and investing in
00:00:16
simple terms now here's your host Jesse
00:00:21
Kramer hello and welcome to episode 70
00:00:24
of the best interest podcast my name is
00:00:26
Jesse Kramer later in today's episode
00:00:28
we're going to be welcoming Jeremy
00:00:30
Schneider on to the podcast Jeremy is
00:00:32
the founder of personal finance club
00:00:35
which if you're on Instagram and you
00:00:36
follow any Finance accounts you probably
00:00:39
follow Jeremy he's got close to 600,000
00:00:41
followers he's an awesome voice in the
00:00:43
space and it really is a terrific
00:00:45
conversation but before we bring on
00:00:47
Jeremy we'll go through a review of the
00:00:48
week and then I'll do a little bit of
00:00:50
monologuing at you so first review of
00:00:53
the week baggin wrote in and said JC
00:00:58
accessible easy to follow guidance and a
00:01:00
voice like butter five stars Baggins
00:01:03
thank you so much for the kind words if
00:01:05
you're listening to this Baggins shoot
00:01:07
me an email Jesse bestter interest. blog
00:01:10
we'll get you hooked up with some cool
00:01:11
bestest swag now in today's conversation
00:01:15
with Jeremy we talk about a few
00:01:16
different personal finance topics
00:01:18
investing home ownership some mistakes
00:01:21
we've made in the personal finance space
00:01:23
so I thought I'd go over a couple ideas
00:01:26
upfront along those topics the first one
00:01:28
is from an article I wrote in August of
00:01:30
2023 and it's called why' I buy a home
00:01:34
with a 6.5% mortgage you see after a
00:01:37
newsl that I wrote reader of the blog
00:01:39
Nick wrote into me and he said congrats
00:01:42
on the new house I'd definitely be
00:01:44
interested in seeing an interest rate
00:01:45
thought process article I feel like I
00:01:48
lucked out when I did and if I had been
00:01:50
a year later I'd probably still be
00:01:52
renting somewhere Nick is alluding to
00:01:54
the fact that he bought a house in 2022
00:01:56
at a lower interest rate so Nick here's
00:01:59
an answer for for you uh over the past
00:02:01
18 months mortgage rates have shot up
00:02:03
from
00:02:04
2.25% to 3% that was for 15 and 30-year
00:02:08
mortgages up to 6 and a half seven now
00:02:11
even 8% for some 30-year mortgages and
00:02:14
while home prices have slightly
00:02:16
decreased in recent months the national
00:02:18
average is still far higher than it was
00:02:21
three years ago the upshot of those two
00:02:23
facts is a double gut punch to housing
00:02:26
affordability real quick example a
00:02:28
320,000 000 30-year mortgage at 3% that
00:02:33
costs
00:02:34
$1,349 per month again that it's
00:02:38
$320,000 30-year mortgage 3% cost about
00:02:41
1350 a month that same home would now
00:02:45
likely require a $400,000 mortgage at 7
00:02:48
or 8% if we just use 7% because that's
00:02:51
the number I used when I wrote this
00:02:52
article that cost 2660 per month
00:02:56
literally doubling the monthly mortgage
00:02:59
bill so with that being the case why did
00:03:02
my wife and I choose to buy a new house
00:03:04
with a 6.5% mortgage right now isn't
00:03:07
that you know a terrible personal
00:03:09
finance move my first response and my
00:03:12
most important one your house is a
00:03:14
dwelling meant to meet your family's
00:03:16
needs it's not an investment a stock
00:03:19
index fund that's an investment a
00:03:22
treasury bond that's an investment a
00:03:24
home however is a lifestyle Choice same
00:03:27
as the clothes you wear or the car you
00:03:29
buy I mean sure it's a huge lifestyle
00:03:31
Choice don't get me wrong and the cost
00:03:33
of a home cannot be understated but it's
00:03:36
not an investment now don't get me wrong
00:03:38
I would love if our home appreciated in
00:03:41
value I plan on caring for it deeply
00:03:43
because it's a huge outlay of money but
00:03:46
that doesn't necessarily make it an
00:03:48
investment an investment returns a cash
00:03:50
flow to you just like a bonds interest
00:03:52
payments or like a stocks dividend
00:03:54
payments what cash flow exactly does
00:03:57
your primary home produce and let's look
00:03:59
at total cost of home ownership TCO I'm
00:04:02
talking about mortgage interest taxes
00:04:05
Insurance maintenance everything the
00:04:07
real inflation adjusted return on
00:04:10
residential real estate over the past
00:04:12
100 years is
00:04:14
0.5% per year yuck stocks stocks are
00:04:19
6.9% per year bonds are 2.3% per year a
00:04:24
house to me at least it feels more like
00:04:26
a hard to upkeep asset it's not an
00:04:29
investment so what did I think about
00:04:32
instead if home isn't an investment then
00:04:34
then how did I Ponder this home buying
00:04:36
decision how did I accept a 6.5%
00:04:39
interest rate when it was only 3.0% just
00:04:42
a few years ago well let's go through
00:04:44
some of the facts first we loved the
00:04:47
house that's first and foremost it's a
00:04:49
terrific house and the former owners
00:04:51
they went many extra miles to take care
00:04:53
of it and to track their maintenance
00:04:54
record over time that's huge I felt
00:04:57
confident I was buying a great home
00:05:00
second faced with the math in front of
00:05:02
us sales price and interest rate there
00:05:04
are two questions you could ask the
00:05:07
first question will this deal get better
00:05:09
in the future and the second question is
00:05:11
this deal affordable for us today to me
00:05:15
the first question is irrelevant this
00:05:18
particular house won't be available in
00:05:19
the future unless we're oddly lucky so
00:05:22
instead only the second question matters
00:05:25
is this deal affordable for us today if
00:05:28
the answer is yes then move ahead with
00:05:30
your decision-making process the third
00:05:32
reason life does not wait for interest
00:05:34
rates Kelly and I we reached a point in
00:05:36
life where we needed to graduate from
00:05:38
the starter home we were in now if I had
00:05:40
a guarantee that rates would drop in
00:05:43
2024 maybe we would have waited but we
00:05:46
don't have that guarantee and if they do
00:05:48
drop we can refinance our current loan
00:05:50
to our benefit fourth there are fewer
00:05:53
home buyers right now the 6 7 8%
00:05:56
mortgage rates have forced many buyers
00:05:58
to search lower in the market it might
00:06:01
even be forcing them out of the market
00:06:02
altogether that sucks but selfishly it
00:06:06
did work in our favor the fifth reason
00:06:08
the crazy housing market also affected
00:06:11
the sale of our old house that old house
00:06:13
the starter home I just referenced a
00:06:15
minute ago it more than doubled in value
00:06:18
in just the past 5 years that certainly
00:06:20
eases my pain as a buyer for sure and
00:06:23
the sixth reason our salaries Kelly and
00:06:26
my our salaries they're growing if can
00:06:29
afford the fixed mortgage payment today
00:06:31
I feel confident it'll only get easier
00:06:33
to come in the future that's the benefit
00:06:36
of fixed payment loans now life doesn't
00:06:39
always wait for you and you can't always
00:06:41
wait for life either some investors
00:06:43
start their 401K Savings in the late 90s
00:06:46
and then they immediately got crushed by
00:06:48
the dot bubble and then again by the
00:06:50
great financial crisis but looking back
00:06:52
on it today investing those initial
00:06:54
dollars was still a very smart move I
00:06:57
think our housing purchase will work out
00:06:59
much better than those investors poor
00:07:01
timing but the example is worth
00:07:03
considering what if this house never
00:07:05
appreciates $1 and what if we can never
00:07:07
refinance our mortgage even in that bad
00:07:10
scenario we still have a home we can
00:07:13
afford while hitting our other financial
00:07:15
goals the home meets my family's needs
00:07:18
my 401k my Roth IRA they are still well
00:07:21
funded and I don't need my home to be an
00:07:25
investment too now later in the episode
00:07:27
Jeremy is going to walk us through is
00:07:29
seven sins of investing and that made me
00:07:32
think back to an article I wrote in 2021
00:07:35
seven of my money mistakes and the
00:07:38
lessons learned so let's go through them
00:07:40
one by one money mistake number one not
00:07:43
renting my fun I once heard radio host
00:07:46
Colin coward say that you should buy
00:07:49
normal life but you should rent your fun
00:07:51
it makes sense to buy healthy groceries
00:07:53
to buy comfortable shoes to buy a
00:07:55
reliable car you need those things every
00:07:57
day in your life life in that way is a
00:08:00
constant but fun things in life they
00:08:03
might be seasonal or weekend only does
00:08:05
it make sense to buy a snowmobile that
00:08:07
you'll only use eight weekends a year
00:08:10
well maybe it might fall high on your
00:08:12
bodal passion graph that we talked about
00:08:14
on episode 68 doesn't make sense to buy
00:08:17
a boat back when I was an engineer some
00:08:19
of my co-workers they sailed every
00:08:21
weekend during the summer they plan
00:08:23
sailing vacations on Lake Ontario they
00:08:25
love sailing a full purchase of a boat
00:08:27
made sense for them but for the of us
00:08:29
renting a boat or renting a snowmobile
00:08:32
makes better Financial sense it's too
00:08:34
easy to overspend on a shiny object
00:08:36
you'll underuse now I've discovered a
00:08:39
second category of fun objects those
00:08:42
that are only fun due to confounding
00:08:44
factors now what do I mean by that well
00:08:46
let's look at a hot tub is a hot tub fun
00:08:49
or is a hot tub fun when you're hot
00:08:52
tubbing with other people that's the
00:08:54
lesson I learned and that's the money
00:08:56
mistake I made because of it it's a
00:08:57
story I've written about on the best
00:08:59
interest before I bought a hot tub it's
00:09:02
nice especially on cold winter nights
00:09:05
but my rationale for buying the hot tub
00:09:07
was hot tubs are great they're so much
00:09:09
fun we checked the record and that
00:09:11
rationale was determined to be false hot
00:09:14
tubs aren't great hanging out with other
00:09:16
people is great and when it happens to
00:09:18
be in a hot tub that too is great oops I
00:09:22
made the mistake I could scratch my hot
00:09:24
tub itch with probably a few trips a
00:09:26
year to some Airbnb with a hot tub the
00:09:28
rest the time I could just try hanging
00:09:31
out with my friends more often now
00:09:33
thankfully I didn't have to borrow money
00:09:35
to buy the hot tub but still it was an
00:09:37
impulsive purchase it didn't mesh with
00:09:39
my financial goals the hot tub is nice
00:09:42
but buying my fund rather than renting
00:09:44
it was a money mistake mistake number
00:09:46
two decreasing spending or increasing
00:09:49
income in this world of credit card debt
00:09:52
and budgets and dwindling emergency
00:09:53
funds it makes sense to spend less
00:09:56
that's the easiest way to save money we
00:09:57
can enact it today hey we can make a
00:09:59
change today just choosing to spend less
00:10:02
but is it the most consequential
00:10:04
Improvement no it's not over the long
00:10:06
run you'll be much better off making
00:10:08
efforts to increase your income so let's
00:10:10
do some quick math to see why Sadi makes
00:10:13
$50,000 per year of that she saves
00:10:16
$10,000 the other $40,000 goes towards
00:10:19
bills in other words she's spending
00:10:21
$3,300 a month if stie needed $500 extra
00:10:25
this month she could cut her $3,300
00:10:28
monthly budget down to $2,800 scrimp and
00:10:31
save if she needed an extra $1,000 this
00:10:33
month she might be able to cut another
00:10:36
500 out of the budget down to 2,300 but
00:10:38
do you see where this is headed at some
00:10:40
point stie can't cut any more fat from
00:10:42
her budget she's limited by her survival
00:10:45
needs frugality and cost cutting have
00:10:48
lower limits they are bounded but
00:10:50
increasing your income technically
00:10:52
speaking is unbounded the upper limit
00:10:54
doesn't exist now in reality we're not
00:10:57
all going to be billionaires
00:10:59
we will all hit our personal income
00:11:02
ceiling but Sadie can make a plan to
00:11:04
increase her salary she can look for
00:11:06
promotions within her company she might
00:11:08
be able to switch jobs leverage a raise
00:11:10
that way making more money is possible
00:11:12
for many people in many professions now
00:11:15
my first few years of personal finance
00:11:17
mistakes I focused on reducing expenses
00:11:20
and it worked it worked great but
00:11:21
eventually I hit a lower limit then I
00:11:24
looked for ways to increase my income
00:11:26
the results were fast and fantastic I
00:11:29
found a new job I negotiated my salary
00:11:31
higher than offered and I secured the
00:11:33
easiest 30% raise of my life cutting
00:11:36
spending is fine you should start there
00:11:38
it's okay but it's a money mistake to
00:11:40
neglect ways to increase your income my
00:11:43
third money mistake listening to Mr
00:11:45
market now I read a lot of information
00:11:48
about personal finance and investing
00:11:49
I've done so for years and there has
00:11:51
always been someone calling for a crash
00:11:54
or a burst bubble or a bare Market we as
00:11:56
humans we are risk averse overdeveloped
00:11:59
monkeys fear is normal but we should try
00:12:01
to delineate between irrational
00:12:03
reactions to fear and rational reactions
00:12:06
to facts Benjamin Graham's famous
00:12:09
example of Mr Market personifies this
00:12:11
irrational fear if you're not familiar
00:12:14
with Mr Market he's someone who gets
00:12:16
really scared when the market is scared
00:12:18
and someone who gets really excited when
00:12:20
the market is excited and he ends up
00:12:22
making poor investment decisions because
00:12:23
of that when I was new to investing I
00:12:26
listened to Mr market and that was a
00:12:28
money mistake I allowed my investing
00:12:31
choices to be controlled by irrational
00:12:33
fears as a result I didn't max out my
00:12:36
investing accounts I estimate now that I
00:12:39
underinvested by maybe $20,000 in 2014
00:12:42
and 2015 that's an opportunity I'll
00:12:45
never get back fast forward to today
00:12:47
that $220,000 mistake is probably worth
00:12:50
$40,000 if I keep going to the year 2040
00:12:54
that mistake is likely to surpass
00:12:56
$100,000 in value now there's no use
00:12:59
crying over spilled milk it doesn't keep
00:13:00
me up at night I've learned my lesson
00:13:03
and I won't make that mistake again and
00:13:04
I hope that you'll learn from my mistake
00:13:06
too money mistake number four caring
00:13:09
about the Joneses we've all heard it
00:13:11
before keeping up with the Joneses
00:13:12
buying nice things simply because your
00:13:14
peers the Joneses have those nice things
00:13:17
but the Joneses might be broke it's easy
00:13:20
to forget that fact the Joneses might be
00:13:22
stretching and stressing their budget to
00:13:24
a near Breaking Point are you sure you
00:13:26
want to keep up with that I worked at
00:13:28
software company it was my first job out
00:13:30
of college they hired tons of 22y olds
00:13:33
just like me and I immediately noticed
00:13:35
that some of my peers had really nice
00:13:37
stuff they were driving $50,000 cars
00:13:40
they were whining and dining most nights
00:13:42
they were planning CrossCountry trips on
00:13:44
a whim what's that $1,000 for a
00:13:46
roundtrip flight no problem I know that
00:13:50
Pang of Envy I wanted those things too
00:13:52
how were my peers ostensibly on a
00:13:55
similar salary as me living these lavish
00:13:57
lives they're are two obvious answers
00:14:00
one they had different budgets and
00:14:02
different priorities two they had an
00:14:04
alternate source of income number one
00:14:07
will always be true everywhere you look
00:14:09
in life people will spend differently
00:14:10
than you my colleagues they made
00:14:12
conscious choices to spend on really
00:14:14
nice stuff I put my money to different
00:14:17
uses it's neither good nor bad it's just
00:14:19
different every person spends
00:14:20
differently and as for reason number two
00:14:22
them having alternate sources of income
00:14:25
that's something I have zero control
00:14:26
over some people are born on third pace
00:14:29
other people are born in a ditch it's
00:14:31
not fair it's just luck or the lack of
00:14:33
luck it's something I've written and
00:14:34
spoken about before but to be clear I
00:14:37
certainly shouldn't feel bad that some
00:14:39
people are luckier than me I'm very
00:14:40
lucky in my own life now once I'd
00:14:43
convinced myself of these truths my
00:14:45
money mistake became obvious let the
00:14:47
Joneses do their own thing they're on
00:14:49
their own path I have my own path on to
00:14:53
money mistake number five hunting mice
00:14:55
not gazel why don't Lions hunt mice I
00:14:58
mean I mean what chance does Mickey
00:14:59
Mouse have against The Lion King Lions
00:15:02
could hunt mice in Spades but the energy
00:15:04
gained from that small Mouse isn't worth
00:15:07
the Lion's effort the lion is better off
00:15:09
Hunting gazel we can and should apply a
00:15:12
similar thought process in our financial
00:15:14
lives it applies to time management it
00:15:16
makes sense at work and it makes sense
00:15:18
in personal finance don't hunt the field
00:15:21
mice in your money life it's a common
00:15:23
money mistake my favorite example is
00:15:25
this classic oh well I'll just drive
00:15:27
across town to fill up my gas tank gas
00:15:29
is 10 cents cheaper at that gas station
00:15:32
that is quintessential Mouse hunting
00:15:34
driving 5 miles which has a cost over 10
00:15:37
minutes which your time does have value
00:15:40
in order to save say 10 cents a gallon
00:15:42
times 15 Gallons just to save a150
00:15:45
driving five miles over 10 minutes to
00:15:48
save a150 you're spending both in time
00:15:51
and money way more than you're saving
00:15:54
I'm not saying don't go after free money
00:15:56
I would certainly pick up $3 if it was
00:15:58
was lying on the sidewalk in front of me
00:16:00
that's because sidewalk money costs Me 2
00:16:02
seconds of time and one Bend of my back
00:16:05
but the gas savings has a real cost to
00:16:08
it and that cost completely negates the
00:16:10
benefit the $150 gas savings is not free
00:16:14
to ignore that fact is a money mistake
00:16:16
it's the same reason Lions don't hunt
00:16:18
mice some easy prey simply aren't worth
00:16:21
the effort money mistake number six
00:16:23
servant or Master various philosophers
00:16:26
are attributed with saying money is is a
00:16:28
great servant but a terrible Master it's
00:16:31
certainly a lesson that I've learned the
00:16:32
hard way and continue to learn both
00:16:34
through normal life and through the best
00:16:36
interest and now through work at a
00:16:38
wealth management firm money is a tool
00:16:40
nothing more nothing less tools help us
00:16:43
build but you also probably know some
00:16:46
people who classify as tools and you
00:16:48
don't want them to be your master Jokes
00:16:50
Aside there's a slippery slope toward
00:16:52
letting money control you I'm being
00:16:54
transparent here on the best interest
00:16:56
I'm in a healthy money situation and I
00:16:57
have been for a few years but I still
00:16:59
stress out periodically without fail
00:17:02
that stress is due to my letting money
00:17:04
become more Master than tool perhaps my
00:17:07
favorite articles to write are the ones
00:17:09
that involve the psychology of money
00:17:11
stuff like the Fulfillment curve and
00:17:13
bodal spending that we talked about on
00:17:15
episode 68 there's a pattern in my work
00:17:18
that same pattern is born out with other
00:17:20
Financial podcasters and writers discuss
00:17:22
the psychology of money namely we all
00:17:25
ask the same question how do we optimize
00:17:27
money at as a tool and minimize its role
00:17:30
as a master and money mistake number
00:17:32
seven no budget no clue for many years I
00:17:35
operated without a budget it's true and
00:17:38
yes now I'm a budgeting fiend but there
00:17:40
was a time when I had zero clue where my
00:17:42
money was going and that no surprise was
00:17:45
a massive money mistake I'd check my
00:17:47
bank accounts occasionally I knew
00:17:49
roughly what I spent on groceries and
00:17:51
gas but I couldn't tell you for sure and
00:17:53
I certainly couldn't have found any good
00:17:55
ways to improve my finances it's funny
00:17:57
because of my lack of knowledge I can't
00:17:59
even tell you the opportunities that I
00:18:01
missed that's scary in and of itself
00:18:04
I've mentioned before that every
00:18:06
personal finance expert I know they
00:18:08
budget or track in some way they all
00:18:11
monitor their spending or they all track
00:18:14
their spending in some way nobody does
00:18:17
nothing uh you don't have to be a
00:18:18
budgeting Zealot like me but you can't
00:18:21
do nothing when it comes to budgeting
00:18:23
those are my seven money mistakes and
00:18:26
Lessons Learned I'm excited to share
00:18:28
with you Jeremy's seven sins of
00:18:31
investing here's a quick ad and then
00:18:33
we'll get back to the show did you know
00:18:35
my written Blog the best interest was
00:18:37
nominated for 2022 personal finance blog
00:18:40
of the year and it's been highlighted in
00:18:42
the Wall Street Journal yahooo finance
00:18:44
and on CNBC I love writing especially
00:18:47
when that writing is to share financial
00:18:49
education and I usually write one or two
00:18:51
articles per week you can read them all
00:18:54
at bestter interest. blog again the web
00:18:57
address is bestter interest. blog check
00:19:00
it out so that let's bring on Jeremy
00:19:03
Schneider Jeremy is the voice behind
00:19:05
personal finance Club a community of
00:19:07
champions of the individual investor
00:19:10
dedicated to Bringing accessible
00:19:11
Financial education to all personal
00:19:14
finance Club believes Financial
00:19:15
education improves lives and it should
00:19:17
be taught in school you might have seen
00:19:19
Jeremy and personal finance Club on
00:19:21
Instagram where he posts eye-catching
00:19:23
Financial Graphics to almost 600,000
00:19:27
followers
00:19:35
all right Jeremy thanks for joining us
00:19:36
on the best interest podcast I thought
00:19:38
we could start with an important
00:19:40
question what was your costume for
00:19:42
Halloween hi Jesse this year's Halloween
00:19:45
costume was I was a house I wore an
00:19:48
entire Children's Playhouse and then I
00:19:51
made a Zillow listing of the house I was
00:19:54
wearing and I animated the Zill listing
00:19:57
so it had like like a odometer style
00:19:59
spinning of the price and interest rate
00:20:03
and monthly expenses and things like
00:20:04
that and so it's meant to be a very
00:20:06
spooky costume trying to buy a modest
00:20:09
starter home in today's housing market
00:20:11
it's such a creative costume if folks
00:20:13
want to check it out it's on uh Jeremy's
00:20:16
Instagram page personal finance Club
00:20:18
there will be links to that in the show
00:20:19
notes of course and I think Jeremy
00:20:21
having followed you for a while this is
00:20:23
a continuation of a trend of some pretty
00:20:26
cool Halloween costumes what have some
00:20:28
of your past costumes I've always liked
00:20:31
the idea of being something topical so
00:20:33
in my 20s I'd always try to be something
00:20:36
that was like in the news or whatever
00:20:37
and then then in my mid-30s I went as a
00:20:42
CVS receipt this was before any sort of
00:20:45
public Persona any before I had like an
00:20:47
Instagram account or anything and I went
00:20:50
to my I had a job with the time went to
00:20:52
my work on Halloween we had like a
00:20:55
costume contest and everyone saw me in
00:20:57
this 13 foot tall CVS seat and they like
00:21:00
egged me on to like walk into a CVS
00:21:03
wearing it as a joke and so I did and I
00:21:06
was like I need to I need to film it so
00:21:08
I can prove to my co-workers that I
00:21:10
actually did it and then I came home and
00:21:12
watched the the film and I was like this
00:21:14
is kind of funny like maybe I'll post
00:21:16
this to Reddit and so I like upload I
00:21:18
like quickly edit it down from like you
00:21:20
know 10 minutes of video to like three
00:21:21
minutes or something because it you know
00:21:23
was a little bit boring just when I'm
00:21:25
walking and stuff I posted to YouTube
00:21:27
and like shared it on Reddit and then
00:21:30
with like I got like eight or 10 up
00:21:31
votes I was like I was like okay like
00:21:33
that's pretty good for the first hour so
00:21:35
I go to bed then I wake up in the
00:21:37
morning and my phone is like smoking
00:21:38
because it's like every news station
00:21:41
Good Morning America like you know all
00:21:43
the all the sharing sites like all these
00:21:46
people wanted to buy the rights it was I
00:21:47
was getting like 100,000 views an hour
00:21:49
on YouTube I was like it was my very
00:21:52
first taste of going viral and it you
00:21:53
know went really viral so yeah CVS
00:21:56
receipt I was also a credit card reader
00:21:59
one year like a working credit card
00:22:00
reader where people could put the chip
00:22:01
in or tap or swipe I know you know
00:22:03
approve or deny I was it working gas
00:22:06
pump where you could I had like a I was
00:22:08
like wearing a gas pump and you could
00:22:10
use the pump to pour yourself beer and
00:22:11
it it like the numbers would go up I
00:22:13
think those are the the funnier ones
00:22:15
that's awesome and I think your your
00:22:17
creativity in Halloween costumes it also
00:22:20
shows itself when it comes to the cool
00:22:22
posts that you're putting up on Personal
00:22:24
Finance Club I think anyone who's been
00:22:26
there they're interesting varied topics
00:22:29
around the personal finance space and
00:22:32
yet I know that personal finance Club
00:22:34
was founded on two essential rules so if
00:22:37
you could let's break down those rules
00:22:39
one at a time what is the First
00:22:41
Essential rule of personal finance Club
00:22:43
all right when I started personal
00:22:44
finance Club I saw that if everyone read
00:22:49
two or three books on Personal Finance
00:22:51
then I would not even bother doing this
00:22:54
because we'd all kind of be on the same
00:22:55
page but what we hear about in pop
00:22:58
culture and media and advertising isn't
00:23:01
the truth about how to build wealth and
00:23:03
so I made it very very simple two rules
00:23:04
of Building Wealth rule number one is to
00:23:07
live below your means spend less money
00:23:10
than you make no matter how much money
00:23:12
you make if you spend all your money
00:23:14
you're broke so if you make half million
00:23:15
dollars a year and you spend half
00:23:17
million dollars a year a lot of people
00:23:19
would think that they're balling but in
00:23:21
reality there's a word for that it's
00:23:22
called broke you have zero dollars left
00:23:24
at the end of the year but if you make
00:23:26
$60,000 a year and you spend ,000 and a
00:23:28
lot of people make 40,000 and live their
00:23:30
life like that so if you make 60 and you
00:23:32
spend 40 That's $20,000 a year that you
00:23:35
are not spending if you save and invest
00:23:39
that over the course of your career
00:23:41
you're easily a multi-millionaire and
00:23:43
that leads us to the second rule and you
00:23:45
did I'm sorry just to separate first
00:23:47
rule live below your means and the
00:23:48
second rule was the second rule I didn't
00:23:50
say yet is invest early and often and
00:23:52
right they are kind of like Partners one
00:23:54
is spending less than you make and the
00:23:56
other is investing the difference like
00:23:58
they kind of go hand inand it's hard to
00:23:59
talk about one without talking about the
00:24:01
other because you can't invest without
00:24:03
saving and you can't save you can save
00:24:05
without investing but that doesn't meet
00:24:07
the goal of Building Wealth and so yeah
00:24:09
invest early and often and you know I
00:24:11
think that the frugality world is
00:24:14
constantly under attack
00:24:16
by you know materialism and and
00:24:19
advertising and debt and keeping up with
00:24:23
the Joneses the investing world I think
00:24:25
is constantly bombarded with messages of
00:24:28
gambling and speculation you know
00:24:30
options and crypto and Futures and pork
00:24:33
bellies and you know and so I think
00:24:35
people who hear about Investing For the
00:24:36
First Time think that it's an impossibly
00:24:40
complex space that you need to be
00:24:42
working for Goldman sacks on Wall Street
00:24:44
to even entertain getting into but the
00:24:47
reality is it's it's actually pretty
00:24:49
simple and done well and the the real
00:24:52
key isn't being some brilliant Trader
00:24:55
who can you know pick stocks the key is
00:24:57
is just investing early and off and
00:24:59
putting that money away chunking away
00:25:00
into something simple like an index fund
00:25:02
or real estate then just leaving alone
00:25:04
for years yeah something you mentioned a
00:25:06
couple times there Jeremy the
00:25:08
advertising marketing selling it's
00:25:11
something I've I've written about and
00:25:12
talked about before here I think the
00:25:14
average person might not even be aware
00:25:16
of how much advertising has an influence
00:25:19
in their lives and is you know slowly
00:25:21
but surely poking and prodding them into
00:25:23
making oftentimes purchasing decisions
00:25:26
that in the long run are regrettable all
00:25:29
the stuff that we surrounded by that
00:25:31
stuff used to be money and that money
00:25:33
used to be time yeah and thinking
00:25:35
through that lens is is pretty powerful
00:25:37
in the personal finance space you're
00:25:39
right it you know in this capitalistic
00:25:41
World we're so accustomed to constantly
00:25:43
being be arted I think we take for
00:25:46
granted how impressionable we all are
00:25:49
you know and I see it from both sides
00:25:51
because I am a business owner who knows
00:25:52
that if I'm not pushing my message out
00:25:55
we will never make any sales right but
00:25:57
on the flip side as a consumer I'm
00:26:00
always wanting stuff you know and
00:26:03
because these brands are always pushing
00:26:05
their stuff on me and it starts to se
00:26:06
seep into your subconscious and you know
00:26:08
it's weird we live in this like very
00:26:10
modern society where we live in homes
00:26:12
and have cell phones but our our bodies
00:26:15
are like the result of you know millions
00:26:17
of years of evolution I guess that gets
00:26:19
a little bit political depending view
00:26:21
but you know I think everyone agrees it
00:26:23
didn't always wasn't always like this it
00:26:25
wasn't always like an advertising world
00:26:26
it was like
00:26:28
hm if I know where food is I'm more
00:26:31
likely to survive and so humans kind of
00:26:34
adapted to say okay if someone knows
00:26:35
where food is someone know someone knows
00:26:36
are Waters and so being impressionable
00:26:39
and and like acting on these things
00:26:42
helped our civilization or helped our
00:26:46
individual survival likelihood but then
00:26:50
it's almost like turned up to 15 when
00:26:53
it's no longer about survival and it's
00:26:55
just about new cars and new apps and and
00:26:59
in the worst case like video games like
00:27:02
these these like little endorphin boosts
00:27:05
whenever you spend money and it just
00:27:07
like was meant for like humans
00:27:09
communicating for survival has now been
00:27:12
basically coopted by companies just
00:27:15
using that same instinct to to make
00:27:17
money for themselves yeah unfortunately
00:27:20
our our brains are getting hacked
00:27:22
against us quite quite often but we can
00:27:25
we can move on to some more cheery
00:27:26
topics because there are plenty of
00:27:28
cheery topics to talk about maybe we can
00:27:30
get back to the second of personal
00:27:31
finance clubs essential rules invest
00:27:34
early and often now maybe our listeners
00:27:37
are familiar with the math but
00:27:39
especially when it comes to investing
00:27:40
early can you walk us through whether
00:27:42
it's with a hard example or simply just
00:27:44
there some general rules why investing
00:27:47
early is so important I'll start by
00:27:50
saying you're not too late sometimes
00:27:52
when I say invest early some people get
00:27:55
the opposite message which is I missed
00:27:57
it I love L had someone message me once
00:27:58
and say Jeremy is it too late for me to
00:28:01
get started I'm afraid I miss the boat I
00:28:03
was like how old are you and they said
00:28:04
23 and I wanted to like reach through my
00:28:07
phone and grab them by the neck and just
00:28:09
choke them to death and shake them and
00:28:10
say you're know two you're little baby
00:28:13
and so but but it just illustrates the
00:28:15
point much like everyone thinks that
00:28:17
they miss the boat and like the Chinese
00:28:19
proverb says the best time to plant a
00:28:21
tree was 20 years ago but the second
00:28:23
best time is today and while we can't
00:28:26
have all bought crypto at 10 cents of
00:28:29
Bitcoin or bought Apple in 1984 you know
00:28:33
it's important to think about what is
00:28:34
the world going to look like in 20 years
00:28:37
and how much you will have wished you
00:28:38
started now right I'm 43 and I talked to
00:28:41
43 like oh it's too late I'm 43 miss
00:28:43
about I'm like 63 year old version of
00:28:46
you who's going to want to like be
00:28:48
wealthy and retire they're going to be
00:28:50
wishing 43-year-old version was like
00:28:52
investing early at 43 and often right
00:28:56
and so you know to answer your question
00:28:58
about examples if you put there there's
00:29:00
been no 40-year period in the history of
00:29:03
the stock market where 250 bucks a month
00:29:06
doesn't turn into over a million dollars
00:29:09
the worst it's ever been is 1.2 million
00:29:11
average is about two million and the
00:29:13
best is about three million so basically
00:29:15
there's been every 40-year period no
00:29:17
matter when it is the worst time the
00:29:19
best time no matter when it is if you
00:29:21
can save 250 bucks a month it turns into
00:29:23
between1 and $3 million you know it's
00:29:25
obviously a big range but at least a
00:29:27
million not it's amazing and and for
00:29:28
anyone who's curious I just had to pull
00:29:30
up Google Chrome that is
00:29:32
$120,000 worth of contributions 250 a
00:29:35
month for 40 years it's only 120 of
00:29:38
contributions but it gets you to a
00:29:40
million in total because of the
00:29:42
investment return so you're like at
00:29:44
least 10 Xing your money right and not
00:29:46
only you're 10 Xing your money but you
00:29:48
also have demonstrated saving along the
00:29:50
way 12,000 bucks is a lot of money a lot
00:29:52
more than a lot more money than a lot of
00:29:54
people have because they didn't even
00:29:56
save the money right so if you can save
00:29:58
it and get your 12 120 then invest along
00:30:00
the way and get your Millions but you
00:30:02
know if you do instead of 250 a month
00:30:04
you do 250 a year for 10 years you're
00:30:08
going to have I think about 3,000 bucks
00:30:10
it's dramatically worse and so you know
00:30:13
that's why early and often both count
00:30:15
right don't do a few hundred bucks once
00:30:17
a year it's not going to be enough but
00:30:20
if you do a few hundred bucks every
00:30:22
month for many many many years then
00:30:25
you're going to be dramatically better
00:30:26
off and I don't harp too much on the
00:30:28
math like where would you be after 30
00:30:29
years after 20 years you know you'd be
00:30:31
in great shape and also once you start
00:30:34
and you start to see the traction it
00:30:37
usually accelerates and so your first
00:30:39
year of investing is kind of a boring
00:30:42
very
00:30:43
unfulfilling year where you're like okay
00:30:45
doing my 250 bucks 250 a month not much
00:30:48
is happening but you know in the second
00:30:50
year you're like oh okay the money's
00:30:52
making money and you're like oh I got a
00:30:53
raise I could put some more into it and
00:30:55
so I think starting early and often will
00:30:59
cause you to see progress and when you
00:31:01
see progress you'll cause you to
00:31:03
accelerate and then that 40-year
00:31:04
timeline could become 35 could become 30
00:31:07
could be become 20 and you'll be able to
00:31:10
not only retire retire early become
00:31:11
wealthy and some people don't to wait
00:31:14
that long but I don't know of a faster
00:31:15
way to do it if I did I would be doing
00:31:17
it and everyone who tries to get rich
00:31:19
quick that I've ever seen stays broke
00:31:21
forever so I I'd go for the early and
00:31:24
often strategy and not only what you
00:31:27
just outlined is it true for me in that
00:31:30
started early and often I got hooked on
00:31:32
it I wanted to learn more or or wanted
00:31:34
to see my accounts grow more and then
00:31:36
then it kind of pushed me to keep going
00:31:38
but I think the second aspect that was
00:31:40
true for me potentially true for you
00:31:42
Jeremy and it's true for some readers
00:31:44
and listeners I've spoken with is once
00:31:46
you hit a point where maybe you have a
00:31:48
thousand or 2,000 or $10,000 it's
00:31:51
different for every person but you kind
00:31:52
of realize you've got this pretty
00:31:54
significant pot of money over on the
00:31:56
side that you don't necessarily
00:31:59
understand how or why it's growing and
00:32:01
it influences you to start researching
00:32:03
to start learning to start following
00:32:06
personal finance Club listening to
00:32:07
podcasts whatever it may be reading some
00:32:09
books but that really gets the snowball
00:32:12
growing over time for a lot of us say
00:32:14
it's through our 401ks we start working
00:32:16
at 22 we're putting away a few percent
00:32:19
our employer matching we wake up at 25
00:32:22
we've got 10 grand in there that we
00:32:24
don't really understand like why is it
00:32:26
there how' it get there and how is it
00:32:27
growing how is it fluctuating $500 or
00:32:30
,000 a month with the stock market let
00:32:32
me read John Bogle let me read Burton
00:32:34
Mel or more likely in today's social
00:32:37
media age let me pull up Instagram see
00:32:40
the big personal finance accounts found
00:32:42
someone when you know find someone like
00:32:44
Jeremy yeah I think a lot about lately
00:32:47
about static friction I learned in high
00:32:49
school if you have like a block sitting
00:32:52
on the ground and you push it it takes
00:32:54
more Force to Move It from zero to
00:32:58
nonzero speed than it takes to keep
00:33:01
moving it correct I think what you just
00:33:03
described kind of just I know so many
00:33:05
people who just don't have that first
00:33:07
thousand or two or 10,000 whatever it is
00:33:09
and they're like I don't understand it I
00:33:12
don't want to mess it up I don't want to
00:33:13
lose my money and those are all totally
00:33:16
valid and reasonable feelings because
00:33:17
it's a Scary World out there but if you
00:33:20
go take like 100 bucks and you open up
00:33:23
you do the worst possible thing and open
00:33:25
up a Robin Hood account and buy random
00:33:27
stock or something you know not that
00:33:28
that's bad it's just not what I would
00:33:30
consider optimal but then it like wets
00:33:32
your beak a little bit you're like okay
00:33:34
I see what's going on you're like yeah
00:33:36
and then you not only do you see some
00:33:38
progress and it motivates you to put
00:33:40
more in but you you you're motivated to
00:33:43
to learn a little bit about about it too
00:33:44
and then then you can start really
00:33:46
accelerating as you invest more
00:33:48
optimally and put more money and then we
00:33:50
start to build some real wealth so if
00:33:52
someone was was learning and and let's
00:33:54
say someone's got the the stock side of
00:33:57
their investing future down they're
00:33:58
starting to learn they're comfortable
00:34:00
there maybe they reach a point in their
00:34:03
late 20s early 30s and now they're
00:34:05
thinking about something that a lot of
00:34:07
us at that age group are thinking about
00:34:08
renting versus buying home affordability
00:34:11
I was looking at your your Instagram
00:34:12
recently Jeremy and and I saw some posts
00:34:14
on home affordability renting versus
00:34:17
buying those kind of questions what's
00:34:19
your audience saying right now about the
00:34:21
American real estate market right now
00:34:24
it's a rough time to buy a house I think
00:34:27
it's there hasn't been a worse time to
00:34:29
buy relative to renting in you know like
00:34:32
20 years or something just because rates
00:34:35
are high prices are high Supply is low
00:34:40
that's going to leave you in a very high
00:34:42
payment environment that said I think
00:34:45
this rent versus Dubai bait always kind
00:34:48
of evokes this competitive nature in
00:34:50
humans like they're trying to solve it
00:34:53
and make the right decision and get it
00:34:56
right and
00:34:57
and they heard about someone who bought
00:34:59
a home in Silicon Valley in the 80s for
00:35:02
$400 and now it's worth 6 million and
00:35:04
they like they need to do that too and
00:35:07
and the reality is that's not generally
00:35:09
what your primary residence is all about
00:35:12
your primary residence cost you money
00:35:14
almost always even when you count for
00:35:17
the growth of the value of a home
00:35:19
because there is mortgage interest and
00:35:21
property tax and maintenance and
00:35:23
insurance and realtor fees and
00:35:26
potentially h and utilities and all
00:35:28
these costs and so your primary home is
00:35:30
going to cost you money and so that it's
00:35:33
not about cleverly buying the right
00:35:35
house that it's going to make you rich
00:35:36
it's about minimizing the price of your
00:35:39
h house and then rent versus Buy has a
00:35:41
lot less to do with magically getting
00:35:43
the formula correct to become which and
00:35:45
has a lot more to do with just kind of
00:35:47
what's right in the moment for you if
00:35:48
you're not going to live there for more
00:35:49
than five years it almost never makes
00:35:51
sense to buy if you are going to live
00:35:53
there for more than five years then you
00:35:55
know kind of decide do you want to be a
00:35:57
homeowner and do all the maintenance
00:35:58
yourself or do you want to be a renter
00:35:59
and have the flexibility there's and
00:36:01
either way it's not like this financial
00:36:03
decision that makes or breaks people
00:36:04
it's more about kind of lifestyle and
00:36:07
what's missed in the rent versus buy
00:36:09
debate is just the expensive versus
00:36:11
modest debate you know whatever you do
00:36:14
rent rent or buy if you do it modestly
00:36:16
and have excess money to be investing
00:36:19
either in stocks or in investment real
00:36:21
estate that's other people's real estate
00:36:23
that's going to you know pay you income
00:36:25
your primary home doesn't pay income but
00:36:27
investment in real estate does then
00:36:29
you're going to be better off so people
00:36:32
you know it's a very close to home
00:36:34
literally subject for all of us because
00:36:36
it is our home and and people make these
00:36:40
massive decisions and feel very
00:36:42
emotionally tied to feeling like like
00:36:45
they didn't screw up or whatever but the
00:36:47
reality is just just live more modestly
00:36:49
live below your means invest early and
00:36:51
often don't worry too much about run
00:36:52
versus buy if you're doing it modestly
00:36:54
and and then Focus Focus those dollars
00:36:57
on investing if you expect your primary
00:37:00
home to have a 7 to 10% annual return
00:37:03
like the stock market does you will be
00:37:05
sorely disappointed or you'll have to do
00:37:08
Creative Accounting to make that work I
00:37:10
think you're exactly right the studies
00:37:12
maybe that's not the right word or at
00:37:13
least the the analysis perhaps is a
00:37:15
better word that I've seen before Jeremy
00:37:17
where people try to calculate their
00:37:20
return on investment for their Primary
00:37:22
Home the more accurate they are the
00:37:25
lower the return becomes totally and and
00:37:27
the ones that I've seen before where
00:37:28
people try to claim this five or six or
00:37:31
eight% return when you actually open up
00:37:33
the hood and see the numbers involve you
00:37:35
realize they're not accounting for all
00:37:38
of those frictional costs that you just
00:37:40
went through because there's a lot of
00:37:41
them a lot of frictional costs involved
00:37:44
and some of them you can pretend to wish
00:37:46
away or or you can just honestly forget
00:37:47
about them but owning a home is is
00:37:50
expensive and at least for me and
00:37:52
something I encourage readers and
00:37:53
listeners of the best interest to think
00:37:55
about is it's a family decision first
00:37:58
meaning you know it's not an investing
00:38:00
decision you can think about it as a
00:38:01
personal finance decision can we afford
00:38:04
this doesn't make sense but ultimately
00:38:06
you're putting a roof over your and your
00:38:07
family's head and and that's the point
00:38:10
of owning a home or renting in the first
00:38:12
place is this the right living space for
00:38:14
for my
00:38:15
family here's a quick ad and then we'll
00:38:18
get back to the show serious question
00:38:21
why do podcasters constantly ask for
00:38:23
ratings and reviews yes they do help
00:38:25
highlight our shows to new listeners
00:38:27
they help strangers find us on Apple
00:38:29
podcast and Spotify it's totally true
00:38:31
and a good reason to ask for ratings and
00:38:33
reviews but I have something more
00:38:35
important at least more important to me
00:38:38
I want to know if you like this stuff I
00:38:40
want to know if you like my podcast
00:38:42
episodes my monologues my guests the
00:38:44
information I share with you and the
00:38:45
stories I tell I want to improve and
00:38:47
make your listening more enjoyable in
00:38:49
the process so yeah I would love to read
00:38:52
your reviews and sure if you throw a
00:38:54
rating in there too that's great if you
00:38:56
like what I'm doing please share it with
00:38:58
me it's such a great feeling to read
00:39:00
your feedback I'd love to read your
00:39:02
review or see a rating on Apple podcast
00:39:05
or Spotify thank you I saw a really cool
00:39:08
post of yours it caught my eye because
00:39:10
you called it the seven sins of
00:39:13
investing what are those sins Jeremy the
00:39:16
seven sins of investing so I've been
00:39:18
helping people learn about investing for
00:39:20
a long time and it's really simple as
00:39:23
core spend lesson you make invest Buy
00:39:26
and Hold index funds for a long period
00:39:27
of time but I always see people making
00:39:29
these seven mistakes and let's go
00:39:31
through them quickly SIN number one is
00:39:33
holding cash in a retirement account and
00:39:37
I I made a post once that said my
00:39:38
nightmares are fueled by by Young
00:39:41
investors holding cash in retirement
00:39:42
accounts because it's this insanely
00:39:45
common and insanely devastating mistake
00:39:48
which is you open up a Roth IRA you put
00:39:50
a bunch of money in you like put your
00:39:52
hands over your head say I have a Roth
00:39:54
IRA I put money in I've done it I win
00:39:56
and a few years go by and you look in
00:39:58
your Roth IRA and you put in $5,000 you
00:40:00
check it again and it's there's like $52
00:40:03
in there and you're like what's this I
00:40:05
thought this was supposed to grow and
00:40:06
what what happened is when you put money
00:40:08
into a retirement account or any
00:40:10
investment account it's just cash
00:40:12
sitting there you have to take a second
00:40:14
step which is to actually take that cash
00:40:16
cash and purchase something with it like
00:40:19
an index fund and so if you ever look
00:40:21
inside of your investment accounts and
00:40:22
you see any words like cash sweep core
00:40:26
default money market anything that and
00:40:29
there's it is a little bit confusing
00:40:31
because they can use a bunch of
00:40:32
different words to mean the same thing
00:40:34
but anything that sounds like cash if
00:40:36
you see any amount of money sitting
00:40:38
there over like a dollar then you should
00:40:41
be investing that you should take that
00:40:42
money and go buy your fund so that's s
00:40:43
number one s number two is picking
00:40:46
individual stocks actually I don't know
00:40:48
if this one kind of pains me because I
00:40:50
think choosing individual stocks has a
00:40:53
benefit which is it it's enticing it's
00:40:55
encourages people into get people
00:40:57
involved right and it's it's relatable
00:41:00
oh Home Depot I go there all the time I
00:41:02
should buy stock in their company it's
00:41:04
almost a little bit nostalgic like
00:41:05
that's what our grandparents did they
00:41:07
owned they owned 10 shares of Sears robu
00:41:10
and they you know they sold it 50 years
00:41:12
later I I consider to be a sin because
00:41:15
it basically opens you up to risk of
00:41:17
these companies going into business
00:41:19
without higher expected returns since we
00:41:21
can't know ahead of time which stocks
00:41:23
going to do better when you're picking
00:41:24
individual stocks you're adding risk
00:41:27
without getting higher expected returns
00:41:28
and that's a bad deal in investing
00:41:31
what's your take on individual stocks
00:41:33
yeah it's it's similar I think for the
00:41:35
average person you are exposing yourself
00:41:37
to more errors than you would ever
00:41:40
expose yourself to if you are owning an
00:41:42
index fund quite simply do I think that
00:41:45
if you want to have a little bit of fun
00:41:47
and you want to take 1% of your money
00:41:50
and buy Burk your hathway because you
00:41:51
like Warren Buffett I get it I'm not
00:41:53
going to tell you that that's the
00:41:54
optimal investing decision but I I can
00:41:57
understand that but I think the the
00:41:59
average scenarios that you and I hear
00:42:00
Jeremy are the ones where people say
00:42:02
yeah I've got a diversified portfolio
00:42:04
I'm onethird Apple onethird Tesla
00:42:06
onethird Nvidia all huge US tech
00:42:10
companies corre they're all very similar
00:42:12
that's the scary scenario and it's also
00:42:14
a little scary I see on your Instagram
00:42:16
post for this in number two one of the
00:42:18
companies that you highlight out of
00:42:20
maybe 10 is my beloved Kodak here in
00:42:22
Rochester New York poor Kodak it used to
00:42:25
be the life blood of our community
00:42:26
had 80,000 local employees out of a city
00:42:30
I mean the population of Rochester is
00:42:32
250 in the city itself 250,000 about a
00:42:35
million when you do the whole metro area
00:42:37
so if you think of a million local
00:42:38
citizens 880,000 of them worked at Kodak
00:42:42
in about 1990 that's 30 years ago today
00:42:45
it's 1500 wow so in 30 years Kodak went
00:42:49
from 80,000 employees to 1500 and the
00:42:51
businesses you know essentially went out
00:42:53
of business stock owners who they held
00:42:55
the whole time lost all of their money
00:42:57
right that is one of the risks you run
00:42:59
owning an individual stock and if we
00:43:03
took ourselves back to like 1995 or
00:43:04
something you would have every reason to
00:43:06
think Kodak would continue to crush it
00:43:08
for decades to come people have been
00:43:10
taking more photos every single year
00:43:12
photos are become becoming cheaper
00:43:14
population's growing you could make like
00:43:16
50 arguments why Kodak was going to
00:43:18
continue growing but the unexpected
00:43:20
thing happens right digital photography
00:43:22
comes out Kodak doesn't adapt whatever
00:43:24
and if you look at the biggest comp of
00:43:26
the 990s we might see names like IBM
00:43:29
Sears General Motors General Electric
00:43:32
and you know these all didn't go as
00:43:34
poorly as Kodak did but they're not not
00:43:36
in the top 10 anymore right right and so
00:43:38
when you're picking individual stocks
00:43:40
based on how they've done in fact this
00:43:42
leads us very nicely into SIN number
00:43:44
three SIN number three is don't chase
00:43:47
past performance or I guess the sin
00:43:49
would be chasing past performance
00:43:51
because if you looked at codak stock in
00:43:53
1995 and said oh my gosh this stock has
00:43:55
been crushing it for 15 years I want the
00:43:58
stock that crushes it oned by codc when
00:44:01
you look backwards and buy what just did
00:44:03
well you're missing what's about to do
00:44:05
well and so today you could make a
00:44:07
similar argument the biggest companies
00:44:09
in the US Apple Amazon Google Facebook
00:44:12
Microsoft Tesla you know these are
00:44:15
superstars today but if we fast forward
00:44:17
20 years are they going to still all be
00:44:19
in the top 10 I can almost guarantee
00:44:21
that they all won't be in this top 10
00:44:23
maybe one or two will we don't know the
00:44:25
future but when you're just looking at
00:44:26
what just recently did well you're
00:44:28
missing out on that new startup you're
00:44:30
missing out on you know the 90s we were
00:44:32
buying codec but we weren't buying
00:44:34
Netflix or something you know the the
00:44:35
unexpected thing that's going to do
00:44:37
really well and so don't buy your
00:44:39
Investments based on what did well in
00:44:41
the past bu broad index funds based on
00:44:45
what we'll do well what we you know to
00:44:47
guarantee ourselves that we're going to
00:44:48
own whatever happens to do well going
00:44:50
forward and I I agree with what you said
00:44:52
earlier by the way which is yeah I I
00:44:54
actually have a 10% rule with 90% of
00:44:56
your portfolio Buy and Hold index funds
00:44:58
but with 10% go nuts if you want to buy
00:45:01
individual stocks you want to buy some
00:45:03
crypto you want to buy some ETFs
00:45:07
whatever go for it and I when I say ETFs
00:45:09
I mean you know like actively manag or
00:45:11
narrow sector ETFs you know ETFs are
00:45:13
fantastic to buy for their low cost and
00:45:16
Broad nature of the uh the index on
00:45:18
versions but yeah don't don't be
00:45:20
speculating with your whole portfolio
00:45:21
because if you're constantly buying what
00:45:23
just did well you're going to miss
00:45:24
what's about to do well yeah J John
00:45:26
Bogle famously said actually not
00:45:28
famously said I think it's one of his
00:45:29
lesser known quotes but there's an
00:45:31
excellent speech essay he did about it
00:45:34
the quote is the iron rule of investing
00:45:37
is reversion to the mean it always rears
00:45:39
its head reversion to the mean that
00:45:41
which is high will eventually come back
00:45:42
to average that which is low will
00:45:44
eventually come back to average and he's
00:45:46
essentially restating your sin number
00:45:48
three there Jeremy what is sin number
00:45:50
four yeah on that reversion of the mean
00:45:53
right now everyone hates International
00:45:55
stocks everyone's like how you buy
00:45:56
interal S&P 500 tech stocks that's the
00:45:59
way like those are that's was doing
00:46:00
great but I'm like you know it's really
00:46:03
hard for me to push this narrative it's
00:46:04
not popular but personally with my money
00:46:07
I have like 35 to 40% of my portfolio in
00:46:10
non US stocks and yeah they've done
00:46:12
poorly the last 10 years but is is the
00:46:15
next 10 years going to look like the
00:46:16
last 10 probably not and like you said
00:46:18
reversion of the mean I don't you know
00:46:20
it's hard to give you a very compelling
00:46:23
argument that like the US Market's not
00:46:24
going to do well International markets
00:46:25
are going to do well but I kind of think
00:46:28
maybe International markets are
00:46:29
underpriced maybe there's a little bit
00:46:30
too much speculation built into the US
00:46:32
tech tech stocks and fast forward 10
00:46:35
years oh International markets have been
00:46:36
averaging 12% a year while us has been
00:46:38
averaging seven suddenly I look pretty
00:46:41
smart for buying International all right
00:46:43
sorry I'm longwinded I love talking
00:46:46
about investing so number four is timing
00:46:49
the market everyone kind of just like
00:46:52
what I was talking about everyone loves
00:46:53
to guess what's about to happen and
00:46:56
right now is no better example in fact
00:46:58
2023 is a great example which is at the
00:46:59
beginning of 2023 you could find endless
00:47:02
headlines about the gloom and doom
00:47:05
coming to the economy inflation
00:47:08
recession the Market's crashing we had a
00:47:10
bad 2022 blah blah you know meanwhile
00:47:13
the Market's up I think like 16% or
00:47:15
something this year and so people were
00:47:18
moving their money to cash like oo High
00:47:20
old savings accounts are paying 4% I'm
00:47:22
going to get my 4% if you put your mind
00:47:24
into a high old savings account in 2020
00:47:25
three and got 4% and it's not the year's
00:47:28
not even over so maybe you're at like 3%
00:47:29
so far you missed you underperformed the
00:47:32
market to date by like 14% like
00:47:35
underperforming by 14% is devastating
00:47:38
and right and that's what timing the
00:47:40
market can do and so timing the market
00:47:41
is any sort of decision based on what
00:47:45
you think is going to happen or what is
00:47:47
happening move my money in move my money
00:47:48
out move to bonds move the stocks move
00:47:50
this move that and it's a really tough
00:47:53
pill for an investor to swallow that you
00:47:54
kind of need to ignore all that it seems
00:47:57
like and again I kind of go back to
00:47:58
human evolution we're designed as humans
00:48:00
to react to stimulus if we hear a twig
00:48:03
break break in the jungle a tiger might
00:48:06
be looming and we should run but if we
00:48:08
hear a scary stock headline we shouldn't
00:48:11
pull our money in fact like you said
00:48:13
probably the opposite you know as
00:48:14
everyone else is running out we should
00:48:16
probably be running in and so you kind
00:48:17
of have to ignore ignore don't try don't
00:48:19
time the market don't don't do something
00:48:22
just stand there another John Bogle
00:48:24
quote and another Shameless plug only
00:48:27
because I I literally published it this
00:48:28
morning an article about a terrific real
00:48:31
life stock lesson from just the last two
00:48:33
weeks that the real world stock market
00:48:36
provided us uh against trying to time
00:48:38
the market a lesson of just zoom out and
00:48:41
wait for things to happen simply because
00:48:43
the market was down something like 10%
00:48:46
from the end of July through the end of
00:48:48
October now down 10% in three months
00:48:50
doesn't feel good nobody's having fun
00:48:53
and it would be very human to say I'm
00:48:55
sick of this
00:48:56
I'm going to cross my fingers sell just
00:48:59
wait wait it out wait till the market
00:49:00
recovers before I put my money makes
00:49:03
perfect makes perfect sense on the face
00:49:05
of it and and little would that have
00:49:07
investor have known that the Federal
00:49:09
Reserve Jay Powell the chairman was
00:49:11
about to come out and say yeah we think
00:49:13
we're done with interest rate hikes and
00:49:16
the market popped for 6% in one week
00:49:19
well if you sat out that week because
00:49:21
you you were just sick of it missing 6%
00:49:24
is not as bad as the example that you
00:49:26
gave of of underperforming by 133% but
00:49:29
6% sucks if that's what you missed out
00:49:32
on right yeah if you're waiting for the
00:49:33
market to recover you will miss it you
00:49:36
know you have to you have to be
00:49:37
investing when it's down that's when you
00:49:39
want to be buying when it's down and you
00:49:40
know that's a great example what's the
00:49:43
number five Jeremy SIN number five is
00:49:44
paying high fees and you and I we live
00:49:48
in a world of financial educated people
00:49:51
but in in the real world if you walk
00:49:54
into any Town us say and ask people what
00:49:56
they're doing often times they are
00:49:59
investing via some sort of high fee
00:50:03
mutual fund or advisor or 401k or you
00:50:07
know and if you walk into like a strip
00:50:09
mall financial advisor anywhere in the
00:50:11
US they will put you into some real
00:50:14
crappy products with real high fees they
00:50:16
won't they won't fully or correctly
00:50:18
disclose any of that and it's very hard
00:50:20
for you to even know without kind of
00:50:22
really looking hard into where your
00:50:24
money is going and so just as an example
00:50:26
if you if you pay a 2% annual fee and
00:50:29
some advisor like that's that's really
00:50:30
high but I see 4% Annual fees I see five
00:50:33
and six% you know loads on purchases and
00:50:37
you know it's right very easy to find
00:50:39
people who are in this range of a 2%
00:50:41
annual fee a 2% annual fee over the
00:50:43
course of a 40-year investing career
00:50:45
Cuts your investment about in half so if
00:50:48
you would have had $2 million you'd have
00:50:49
$1 million just for that fee that you're
00:50:52
paying that adviser and a lot of people
00:50:54
will say I don't want to do my I want to
00:50:55
figure it out it's not worth a million
00:50:57
dollars to you you know like the few
00:51:00
hours it's going to take to open account
00:51:02
and put the money in yourself I mean I'm
00:51:04
not trying to dismiss the value of an
00:51:05
adviser but you should at least
00:51:08
understand the impact of the fees
00:51:09
because there may be no more valuable
00:51:12
three hours of your life financially
00:51:14
speaking than looking into your fees and
00:51:16
figureing out if you can minimize them
00:51:18
totally totally and and something I've
00:51:20
I've learned in my doing this Jeremy you
00:51:22
know the best interest working with
00:51:24
clients as well
00:51:26
there's such a wide range of quote
00:51:28
unquote advice and Advising and it
00:51:32
absolutely behooves anybody out there if
00:51:34
you're considering to getting
00:51:36
professional financial help know what
00:51:38
you're paying for and know what you're
00:51:40
paying because some of the cases I've
00:51:42
seen before you're talking about mutual
00:51:45
funds with one plus percent advisers
00:51:48
charging commissions to sell them
00:51:50
getting five to six% load fees upfront
00:51:53
and then what does the client get out of
00:51:55
of that a 30 minute phone call once a
00:51:57
year you're talking about from someone
00:51:59
whose incentive is to sell not to
00:52:01
provide advice corre correct correct so
00:52:04
you're talking if someone has a $500,000
00:52:06
account in that case they might be
00:52:08
paying $10,000 a year plus 5% anytime
00:52:12
they make any trades in exchange for 30
00:52:16
minutes of advice and talk about a raw
00:52:19
deal so I hear you there's some there's
00:52:21
some nasty stuff out there so everybody
00:52:24
know know what your fees are and know
00:52:26
what you're getting for them know see
00:52:28
see if it's worthwhile we've got to
00:52:30
think long term Jeremy and that brings
00:52:32
us to sin number six that's right SIN
00:52:34
number six is thinking short term we all
00:52:38
know people like this who are trying to
00:52:40
get rich quick or live for the weekend
00:52:43
or I just constantly hear from people
00:52:45
who are I I I give them this pitch I'm
00:52:47
like hey few hundred bucks a month spend
00:52:49
less than you make throw in next fun
00:52:51
leave it there don't touch it minimize
00:52:52
fees let it Let It Go they're like no
00:52:55
bro I want to be I want to be rich I
00:52:56
want I'm old I'm like you want to be
00:52:57
broke when you're old because you're
00:52:58
going to be and so I think you know
00:53:00
they're like no I'm going to you know
00:53:02
Dogecoin is the future or no I'm GNA put
00:53:05
it on Tesla or you know I L talked to
00:53:07
someone the other day who who had
00:53:11
$500,000 and didn't want to get rich the
00:53:14
slow way $500,000 you put an index fund
00:53:16
doubles every seven years you know s
00:53:19
years that's 1 million 14 years that's 2
00:53:22
million 21 years that's 4 million so 21
00:53:24
years they'd have four million bucks
00:53:27
that's insane right but instead they
00:53:30
bought some they chased P for
00:53:33
performance they pick stocks they
00:53:34
committed all the sins right they
00:53:35
committed every sin thought thought
00:53:38
short term how can I turn this 500,000
00:53:40
into a million in a year and that
00:53:42
500,000 became 100,000 they lost 80% of
00:53:45
the value and they asked me like how do
00:53:47
I get it back I'm like if I knew how to
00:53:48
5x money overnight I'd be doing that all
00:53:51
day right right like and you thought you
00:53:53
did and you learned the hard way that
00:53:54
you didn't because because you you do
00:53:55
with all your money if you want to
00:53:56
through 10% sure you know if they if
00:53:58
they took 10% 50,000 and turn that
00:54:01
50,000 to 5,000 then that would have
00:54:04
sucked but they'd still 450,000 growing
00:54:06
with the market over time don't try to
00:54:08
get rich quick and if you do keep it to
00:54:10
a you know very small portion of your
00:54:12
portfolio right and and that example
00:54:15
there 500,000 down to 100,000 based on
00:54:20
the fact that they were coming to you
00:54:21
with that story it sounds like they
00:54:23
suffered the permanent impairment of cap
00:54:25
which is something that Warren Buffett
00:54:27
would say is the number one biggest risk
00:54:30
that investors can face and and it's
00:54:32
something that investing in a
00:54:33
diversified Index Fund you completely
00:54:36
negate that risk save for one potential
00:54:39
exception if you invest in an index fund
00:54:41
and an asteroid hits the world and
00:54:44
destroys the global economy you have
00:54:46
permanently impaired your Capital that's
00:54:48
true short of that example that the
00:54:50
natural diversification of an index fund
00:54:52
will prevent that fate from occurring
00:54:55
and that's talk about a terrible fate I
00:54:57
mean going from 500,000 to 100,000
00:55:00
essentially your portfolio will be
00:55:01
limping for the rest of your life yeah
00:55:04
and yeah and then they asked me should I
00:55:06
keep doing this to to to win it back
00:55:08
it's almost like turns into into like
00:55:10
gamblers mentality which is I can just
00:55:13
win it back but we all know how that
00:55:15
turns out for gamblers they just lose
00:55:16
more they go into debt and then you have
00:55:18
to hit rock bomb like you know my advice
00:55:20
was like take your 100,000 throw in the
00:55:22
X fund you just you just spent $100,000
00:55:25
on education it was an expensive lesson
00:55:28
but better than lose 100,000 and you
00:55:30
lost all better than going to debt
00:55:32
trying to win back right so it's it's a
00:55:34
tough build SL though right so our
00:55:35
listeners they're not going to commit
00:55:37
that sin they are going to be slow and
00:55:39
steady investors they're also not going
00:55:41
to commit SIN number seven which is it
00:55:44
is the most deadly sin maybe you know I
00:55:46
said one was maybe the worst but this
00:55:47
one's even worse than number one the
00:55:49
number seven is not investing early and
00:55:51
often I kind of gave you an example
00:55:53
earlier in the show where I said if you
00:55:55
invest 250 bucks a year for 10 years you
00:55:59
have like 3,000 bucks because you didn't
00:56:02
invest very often you only invested for
00:56:03
10 years that's enough but if you invest
00:56:05
250 bucks for 40 years you'll have never
00:56:09
done worse than a million dollars and so
00:56:11
everything else we talked about the fees
00:56:13
the performance the stock picking the
00:56:16
you know everything all the other sins
00:56:18
they are irrelevant if you're not
00:56:20
putting money in you know if you could
00:56:21
if you're the optimal perfect investor
00:56:24
every fee every every tax break
00:56:27
everything right and then you're putting
00:56:28
in a 100 bucks a year doesn't matter you
00:56:30
might as well not even do it almost you
00:56:31
know but if you are just a mediocre
00:56:34
investor and you're picking some random
00:56:36
stocks and some random mutual funds and
00:56:38
getting some random taxes on them but
00:56:40
you're putting in a thousand bucks a
00:56:41
month you're going to be extremely
00:56:43
wealthy and so I think some people get
00:56:45
so academic about it they forget what
00:56:47
matters most which is just how much
00:56:49
money put in that's how you get rich
00:56:51
awesome thank you Jeremy and now one
00:56:53
more thing I I did want to touch on
00:56:55
because we had a cool conversation when
00:56:56
we saw each other down in New Orleans
00:56:58
and this actually goes back to you know
00:57:00
earlier we were talking about the wide
00:57:03
spectrum of financial advice out there
00:57:05
professional Financial advice and on the
00:57:07
one end of the spectrum you have those
00:57:09
you know 4% fees that you are alluding
00:57:11
to where basically you get nothing for
00:57:14
that fee and it's just a raw deal for
00:57:16
the individual investor but on the other
00:57:18
end you have some pretty high quality
00:57:21
investment advice out there and that
00:57:23
leads me to the topic of nectar
00:57:25
why exactly am I asking you about a
00:57:27
wonderful citrus fruit well and it is it
00:57:30
Citrus I thought is it like a peach I
00:57:33
should probably learn what it is oh
00:57:35
you're totally right I was think I was
00:57:36
thinking Tangerine maybe you're right a
00:57:39
nectarine is similar to a peach yeah
00:57:41
Tangerine is like an orange and
00:57:42
nectarine is like a smooth Peach you're
00:57:45
exactly right and when we're talking
00:57:46
about advisors for the last four or five
00:57:48
years I've been doing personal allliance
00:57:49
Club people ask me how do I find a good
00:57:51
advisor and I'm like it's really hard
00:57:53
because if you walk into someone's
00:57:54
office
00:57:55
the ones that charge you what what's
00:57:57
called fee only they want to charge you
00:57:59
a percent of assets under management
00:58:00
they often have minimums of a quarter
00:58:02
million or half a million dollars even
00:58:05
even if you qualify for that their
00:58:06
incentive is to manage your money not to
00:58:09
provide advice if you don't qualify for
00:58:11
that you're in the world of the strip
00:58:12
mall financial advisor where they're
00:58:13
going to sell you crappy products and
00:58:15
that's not even the worst the worst is
00:58:16
really the the insurance sales insurance
00:58:18
right who GNA who are going to going to
00:58:20
parade their insurance products as
00:58:22
Investments and have rip your money even
00:58:25
worse and so you know what a lot of
00:58:27
really wise Financial or financial
00:58:30
experts say is to find an advice only
00:58:32
advisor that's someone you pay hourly or
00:58:35
based on the project you pay them just
00:58:37
for the advice they don't manage your
00:58:39
money they have no products to sell
00:58:40
they're just experts in their realm and
00:58:42
then they give you the advice and I
00:58:44
always hear kind of people like us
00:58:47
begging that drum advice only and and
00:58:49
find these types of hourly advisors and
00:58:51
then the next question out of the you
00:58:53
know typical Investor's mouth is is okay
00:58:55
where do I find them and my answer has
00:58:56
always been oh I have no idea where to
00:58:58
find them and for years I've thought
00:59:00
that because they're really hard to find
00:59:01
there're these great investment advisers
00:59:03
kind of scattered they're usually
00:59:05
independent they usually own their own
00:59:06
firms they have different pricing
00:59:08
different processes for finding them and
00:59:10
so I built nectarine we've been we've
00:59:12
been working out for the last year we
00:59:14
launched about two months ago and
00:59:15
basically we've scoured the country for
00:59:17
the best investment advisors and put
00:59:19
them into a consistent advice only
00:59:21
platform we can log in you choose your
00:59:23
state because investment devices based
00:59:25
on your state you see the advisor
00:59:27
serving your state you can review them
00:59:29
compare them and then you can check out
00:59:30
right on the app and there are no
00:59:33
products they never manage your money
00:59:34
there's no sales pitched there's no
00:59:36
strings attached there's no recurring
00:59:37
fees there's no nothing right now it's
00:59:39
150 bucks for one hour and you just get
00:59:42
to share a screen they can look at they
00:59:43
can put eyes in your investment accounts
00:59:45
they can see if you're holding cash they
00:59:46
can see if you're committing any of the
00:59:48
sins they can see what your fees are if
00:59:49
you're working with another adviser and
00:59:51
they have no incentive other than for to
00:59:53
be really happy and we have we have like
00:59:55
live availability and reviews built in
00:59:57
right to the site so you can go look at
00:59:58
the reviews you can look at the
00:59:59
availability and it's at hellon
01:00:01
nectar.com thank you for letting me plug
01:00:05
the site oh you're welcome we'll throw
01:00:06
that in the show notes Jeremy and I'm
01:00:08
curious so if someone out there can they
01:00:10
get anything from one hour what almost
01:00:12
amounts to like a little Financial
01:00:14
coaching session all the way up to I
01:00:16
want to buy 20 hours worth of the
01:00:18
service for this big holistic financial
01:00:21
plan right now the only service we offer
01:00:24
is one hour at a time we will expand
01:00:27
that in the future but we think there's
01:00:29
so much you can do in an hour and it's
01:00:31
so hard to find an hour that we wanted
01:00:33
to basically disrupt the space a little
01:00:35
bit with that first we'll probably have
01:00:37
a more complete financial plan product
01:00:39
later but we only want to do it in so
01:00:42
far as it's serving the customer the
01:00:44
best you can always buy multiple hours
01:00:45
if you want you can book more meetings
01:00:47
with your adviser if you want you know
01:00:48
it's not everything to everyone but it's
01:00:51
filling in a massive Gap I think for
01:00:53
people who just want to talk to an
01:00:54
expert without all the scary stuff
01:00:57
normally associated with financial
01:01:00
advice awesome well thanks for coming on
01:01:02
Jeremy now I know some people are
01:01:04
already Googling personal finance Club
01:01:06
if they're not familiar with you they'll
01:01:07
be able to find you that way because I
01:01:09
just tested it it works like a charm but
01:01:12
we'll throw links into the show notes
01:01:13
where can people find you yeah
01:01:15
thankfully Google still is uh is working
01:01:19
for personal finance Club but yeah if
01:01:20
you want to find me you can Google
01:01:22
personal finance Club most of the magic
01:01:24
on Instagram ersonal Finance club or if
01:01:27
you want to get one of those hourly
01:01:29
Financial advice sessions it is hello
01:01:32
nectar.com unfortunately if you Google
01:01:35
just nectarine right now you will find a
01:01:37
lot about the smooth Peach but if you
01:01:39
Google nectarine money or nectarine
01:01:41
Financial or nectarine advice or
01:01:42
anything like that the real sight will
01:01:43
come up awesome Jeremy Schneider of
01:01:46
personal finance Club thanks for coming
01:01:48
on the best interest podcast thank you
01:01:50
Jesse it was an
01:01:52
honor thanks for tuning in to this
01:01:54
episode of the best interest podcast if
01:01:57
you have a question for Jesse to answer
01:01:58
on a future episode send him an email at
01:02:01
Jesse bestter interest. blog again
01:02:04
that's Jesse at bestter interest. blog
01:02:08
did you enjoy the show subscribe rate
01:02:10
and review the podcast wherever you
01:02:12
listen this helps others find the show
01:02:14
and invest in knowledge themselves and
01:02:17
we really appreciate it we'll catch you
01:02:18
on the next episode of the best interest
01:02:23
podcast
01:02:25
the best interest podcast is a personal
01:02:27
podcast meant for education and
01:02:29
entertainment it should not be taken as
01:02:31
Financial advice and is not prescriptive
01:02:33
of your financial situation