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If your goal is to become financially independent at a young age, this is a very controversial thing to say, you
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probably don't want to go buy a house because people typically buy a house they can't possibly afford. The bank
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wants you to do that cuz that's how they make the most money. So, you're putting
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your capital into that house and now it's not going to be earning thing. It's
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going to be sitting idally. And people say, "Well, you know, I can buy this
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house cuz my mortgage is the same as my rent." Well, yeah, but your mortgage is
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just the starting point. So, what comes to mind if I want to be financially wealthy?
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>> Okay, so we've got a lot to go through. >> J Collins is a renowned financial expert
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known for his book, The Simple Path to Wealth. >> He's teaching millions a straightforward
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and realistic avenue for achieving wealth >> so that anyone can have financial
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security. >> What is the simple path to wealth? >> So, first of all, avoid debt because you
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can never be financially independent if you're carrying around debt. Next, live
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on less than you earn. But the problem is the way our culture has taught us to think about money is solely in terms of
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what can you buy with it. But the more musthaves you have in your life, the less likely you are to become wealthy.
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And then the final one, invest the surplus. So stocks are the single most effective, strongest wealth building
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tool that's ever been created. But the biggest push back I get is from people
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who say, "Well, that's great. I mean, if you got a big income, 100, 200, $300,000
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a year, then yeah, the simple path to wealth will work for you." That's not
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the truth. For instance, a friend of mine and he was making a million dollars a year and he was broke because people
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have large incomes are much more likely to be drawn into the competing with the Joneses, whereas the people who make
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less money probably don't have those same social pressures and are more readily able to do it. So,
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>> let's talk about investing then. Where do you think we should be investing our
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money at this moment of time? Should I buy Bitcoin? Do I need a financial adviser? So, my advice, and this is a
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little different than the more common advice out there, would be >> this has always blown my mind a little
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bit. 53% of you that listen to this show regularly haven't yet subscribed to the
00:01:57
show. So, could I ask you for a favor before we start? If you like the show and you like what we do here and you
00:02:02
want to support us, the free simple way that you can do just that is by hitting the subscribe button. And my commitment
00:02:07
to you is if you do that, then I'll do everything in my power, me and my team,
00:02:10
to make sure that this show is better for you every single week. We'll listen
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to your feedback. We'll find the guest that you want me to speak to and we'll
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continue to do what we do. Thank you so much. JL Collins, you wrote a book, a very iconic book
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that sold millions of copies called The Simple Path to Wealth. Why did you write
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this book? >> I actually that book was an outgrowth of my blog. I started the blog to archive
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information I wanted my daughter to have available because if you get money right, your life is so much better. You
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have so many more options. And the world offers so much to people who have the resources with which to access it and so
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little for those people who don't have the resources to access those things.
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And and if you don't have it, it life is just so much harder than it than it
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needs to be. >> When you think about the average person listening right now, what is what are
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some of the fundamental sort of misconceptions or misunderstandings or what would you call it? Black spots that
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they have as it relates to money, the things they walk around assuming about money that are incorrect
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>> that that you were maybe trying to get out of your daughter's mind.
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>> Right? So there's a chapter in the book called how to think about money. And the
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fundamental way I think the vast majority of people think about money because this is what our culture has
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taught us. The way our culture has taught us to think about money is solely in terms of what can you buy with it. So
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if you go to the average person that lottery for instance is like a billion dollars at the moment. So people are
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buying lottery tickets. And if you interviewed people standing in line to buy lottery tickets and said, "Okay, if
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you win this million dollar, what are you going to do with it?" Well, what you're typically going to hear is,
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"Well, I'm going to pay off my debts and I'm going to pay off my mortgage and I'm
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going to buy my parents a house and I'm going to buy myself a Lamborghini. I'm
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going to buy I'm going to buy I'm going to buy." That's the way most people
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think about money. And that's certainly one of the things that money is very
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good at. It is a means of exchange. But the other thing your money can do for you is work for you. Your money can
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make you more money. So you can exchange your time and effort and labor to earn money. And that's what most of us do.
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But you can also divert some of the money you earn into investments into what I call buying your freedom. And now
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your money is working for you. So instead of just thinking about what your money can buy, you can start thinking
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about what can your money earn. >> You can buy your freedom. >> You can buy your freedom, your financial
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freedom. >> Why is that an important refraraming of the role of money in your view? What
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does that do if I start thinking about it through that lens? Well, because as long as you are dependent on exchanging
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your effort, time, and labor for money, you are beholden to whoever is willing to pay you to do that. That's a limit of
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freedom. It's a it's a form of, without being too dramatic, a form of slavery.
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If you are always living paycheck to paycheck to pay the mortgage or the rent or whatever, if on the other hand, work
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is optional, you're a good example. and you've been a very successful guy.
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You're not doing this podcast because you need the money. If you were still stuck at a job that paid you a wage, you
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wouldn't have the option to do this because you'd have to devote all your
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time to that job so you could pay the mortgage, so you could pay the rent, so you could put food on the table. Money
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buys freedom. >> How does one get out of that situation? you know, if I I used to work in call
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centers um answering phones and selling people things. >> How does one in your view realistically
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get from that place where you are kind of beholden to the paycheck? And I was I'd spend my wage within the first week
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or so of the month and then I'd just suffer for the next 3 weeks. In the UK,
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we have like a four week paying cycle. I think in the US it's 2 weeks typically,
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but I took a I think a reckless road out of that life. The thing that gave me the
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proclivity to take the risk is like some kind of insecurity and trauma where like
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I couldn't I didn't have a plan B because I wanted to be I wanted to like
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validate myself or something. And so I wonder if the the skill or the thing that I was given that I'm most thankful
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for is like some kind of chip on my shoulder, >> some kind of drama. >> Yeah. But but on genuinely because I
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think like what would make you take a risk like some of the risks that I took to leave university to then like be be
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broke and I was like, well, I just I was driven I was dragged by some kind of trauma.
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>> Right? One of the things that I've observed, and I think to the extent that
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I've had some success in my life, this is true, that successful people do tend
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to have trauma in their background. At least that's my observation. Now, I'm
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sure there are exceptions to that, but it does seem that people like us are striving to overcome
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those past traumas, to have that chip on the shoulder, to prove something. I've also met people who are very
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content to be completely lacking in ambition and to have enough to have a comfortable
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life and kind of do what they want to do to have financial independence maybe but
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they don't have this drive to be successful to to make a mark on on the world and they tend to have had better
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childhoods and and uh and I think that there is that wasn't me. That doesn't
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appear to be you. But I think there's a lot to be said for for that, right? >> You I mean you open the book about
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talking about a parable of the monk >> and the minister >> and the minister.
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>> Yeah. >> Can you uh tell me about that parable because it seems to somewhat relate to
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what we're seeing here. I think >> very very much so and that's the reason
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I open the book with it. So the parable is there are these uh two boys who grew up together. their childhood friends. As
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frequently happens, they go their different directions in life as they become adults. And one becomes a very
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successful, powerful minister to the king, and the other becomes a humble monk in tattered robes with a begging
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bowl and what have you. And years later, they run into each other on the road. And they're getting reacquainted.
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And as they are, the minister, the king, takes pity on on his povertystricken friend and his tattered robes. And he
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says, 'You know, if you could learn to cater to the king, you wouldn't have to
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live on rice and beans. To which the monk replies, if you could learn to live on rice and beans,
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you wouldn't have to cater to the king. And for me, I've always been a little
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bit more towards the monk side. I'm uh I'm not a very materialistic person, and
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I'm comfortable and able to get along on on very little. And I think there's
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something beautiful about needing less. >> I have from my interviews met people who
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are very wealthy, even actually off camera, >> who are very, very wealthy and appear to
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be happy. Yes. >> But I think I I think it's safe to say that the richest people I know are
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amongst the least happy people I know. So if I think about the very top, the billionaires that I know off camera,
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>> they are amongst the least happy typically. >> Mhm. Um because I think whatever's taken
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them there is still haunting them while they're there. So it could be the chip
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on the shoulder, the insecurity, whatever happened to them that made them so driven and obsessed with validation
00:10:04
and climbing is still haunting them now. But I do also I do know people like I say that are very very rich and that
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live remarkably content lives. And I think part of it is their relationship with the stuff. Like I think it is
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possible >> and they probably keep it at arms length, right? They're a little psychic
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distance from the stuff. >> Yeah. And I just speaking from my own journey at a very young age up until the
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age of 25, I was convinced that buying a Range Rover Sport was going to like really make me really happy. And um the
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anti-limax once I I got those things was was like it was staggering. It was a complete
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>> mental it was like someone had shaken my head. My reality distorted for a second
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because I thought this was meant to be it. >> And now I can still get things that I
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like. But um I was saying to Will the other day that when I walked into my new house in LA um I had pre-repped myself
00:10:53
to know that it was going to have zero impact on my happiness and that meant that I actually enjoyed it weirdly.
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>> Right. >> Like I was actually super grateful because I'd pre-repped myself to have a
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healthier relationship with the thing >> to bring the expectation down. >> Exactly.
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>> So there are a couple things at play there. I think one is it's the journey
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that's really satisfying. >> The destination tends to be less so. And I think that's one of the problems with
00:11:16
being very materialistic because you know if your definition of happiness is if I only owned this watch, right? If I
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only had this watch maker make me this intricate watch, then I would be happy. Well, I mean maybe, but probably not.
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You're probably going to have that watch. You're going to look at it and
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say, "That's really nice. Wow, that's good." And it'll and then well, what's
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next? But if you enjoy the journey or and I think you made a very wise decision if you reset your expectations
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and say, you know, I'm going to have this nice house or this nice watch, but
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I don't expect it to make me happy, but it's going to be a nice thing to have in
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in my life. >> And somebody once said much wiser than me, you know, money doesn't change who
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you are. It it can magnify who you are. So if you're an unhappy person and you're have lots of money, you will
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probably still be an unhappy person. >> Mhm. >> Uh if you're a happy person, I mean, one
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of the happy, in fact, the single happiest guy I know. His life was the biggest financial disaster of anybody I
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personally know. And this guy's he's the literally the happiest human being I've
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ever met. >> Cuz he was happy before. >> Because he was happy before. And there's
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other things besides money that makes you happy. Money. And the reason that I I it was so important to me to teach my
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daughter this, money gives you options, right? Money allows you a lot wider range of choices in life,
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but it doesn't necessarily make you happy, right? If it allows you to pursue
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an option that otherwise you couldn't pursue and that option makes you happy, that's a
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different thing. I think if I was listening to this and I was broke, like I used to be very broke, I would still
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pursue wealth at all costs because I know I heard this phrase the other day which was it is easier to get rich than
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it is to give up the idea that getting rich will make you happy. And I I thought to myself,
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>> and if you haven't got rich, you would always think >> 100%. You'd always wonder if that was
00:13:25
And you know what? So much of the unhappiness or anxiety that I had when I was, you know, in my early early innings
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of my life, my career came from looking down and seeing the baiff letters or came from the credit card debt or how am
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I going to eat today or, you know, can't go out and see my friends. So much of my
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mind was occupied by my inability to have freedom, >> right? my lack of freedom, my need to
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get up at 8:00 and walk for an hour and a half to a call center was, you know, so what I managed to remove was that I
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wouldn't say I I added happiness, but I removed the unhappiness. >> Well, and that's a that's a key point.
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You know, money doesn't necessarily make you happy, but the lack of money. >> Oh, yeah.
00:14:05
>> Can be terrible challenge, especially in this modern culture we've created.
00:14:10
>> Okay. So, if you have kids listening right now, please cover their ears cuz
00:14:13
I'm going to say a swear word. Parents always message me and ask me to stop swearing. going to say well um a lot of
00:14:19
people are obsessed with this idea of [ __ ] you money >> right >> let me just give you a definition so fu
00:14:24
money refers to a financial situation where a person has enough money to live comfortably without needing to work and
00:14:28
it gives you the freedom to say f you to anyone or anything you don't want to
00:14:33
tolerate such as a job a boss or a situation that doesn't align with your values what does that mean to you
00:14:40
>> yeah so for me so that's a good definition but I would substitute in
00:14:44
that definition financial independence FU money for me is the money you accumulate on the way, right? So, for
00:14:52
instance, if you're a bodybuilder, you know, financial independence is when you're on the stage and you're winning,
00:14:59
you're at the elite level. But along the way, from the moment you start working
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out, you get a little bit stronger, a little bit stronger, a little bit stronger, right? Same thing financially.
00:15:09
The moment you start setting aside money and investing it, you become a little bit financially stronger. And that
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builds over time. That in my mind is the FU money because long before you're
00:15:22
financially independent, that money gives you enormous freedom. You might not be able to never work again, but if
00:15:31
you need to, you could leave a toxic job knowing you could survive for months or
00:15:37
even years while you looked for the better job because you have that FU money. So it allows you to say f you in
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that case to an employer. >> And if your daughter daughter turned around, what's her name?
00:15:48
>> Jessica. >> Jessica. If Jessica turns around to you and says, "Dad, what are what is
00:15:53
something I should not do with my money if I um want to be wealthy? What is what are like the big what is
00:16:02
the first thing that comes to mind to as a no no if I want to be financially wealthy?"
00:16:07
The mo more common advice that I think you should avoid if your goal is to become financially independent at a
00:16:13
young age. You probably don't want to go buy a house. That's a very controversial thing to
00:16:19
say. The reason you want buy a house is because houses dramatically inflate by and large your cost of living. You know,
00:16:28
you're you're putting your capital into that house and now it's not going to be
00:16:31
earning thing. can be sitting idally along with owning a house. You have the expenses of maintaining it, paying the
00:16:38
taxes on it, blah blah blah. If you stay in a apartment that is just enough to meet your needs, which by the way is
00:16:47
what my daughter has done and continues to do, your costs will be lower. >> Explain that to me. Explain why my cost
00:16:55
of living goes up if I buy a house. >> Sure. So people, it doesn't have to, but
00:16:59
people people typically buy the most house they can possibly afford. The industry drives them that way. If you go
00:17:06
to a real estate agent, you say, "I think I'm I want to buy a house." Right?
00:17:10
First question they're going to ask you is, "How much do you make? How much do
00:17:13
you want to spend?" You know, and and then you go to the bank and you say, "Okay, I want to buy a house. How much
00:17:18
will you lend me?" And they'll say, "Well, how much you make?" And then
00:17:20
they'll come back with the large number of how much they're willing to lend you.
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If you follow those guidelines, you're going to wind up with a house that's
00:17:29
going to be a burden. You are not buying it from a position of strength. You are
00:17:33
stretching to buy it. You are borrowing the most money a bank's willing to give
00:17:36
you. You probably don't want to do that. I mean, you can, that's the bank wants
00:17:41
you to do that cuz that's how they make the most money, but that's not the best
00:17:44
thing for you to do. But that's what you get drawn into. And then when you buy
00:17:48
that house, I don't know that I've ever known anybody, including me, by the way,
00:17:52
and I've owned houses most of my adult life, who's owned a house without doing
00:17:56
renovations on it. So, you've got those costs. You're going to furnish that
00:18:00
house cuz you're probably buying more square footage than you were renting before. You're going to need new
00:18:05
furniture, or maybe you just want better furniture for your new house, maybe new
00:18:09
appliances, landscaping, taxes, maintenance. I mean, the the list is endless. And people say, "Well, you
00:18:16
know, I can buy this house, and my mortgage is the same as my rent." Well, yeah, but your mortgage is just
00:18:25
the starting point. You've got all these other expenses with the house. And the
00:18:28
other thing is they are variable expenses. >> Variable expenses. >> Yeah. With your rent, you know, if if
00:18:34
you're renting an apartment, you're paying $2,500 a month for your apartment, right? you know exactly what
00:18:39
your housing costs are for the term of your lease, right? $500 a month. If you own a house, maybe your mortgage is
00:18:47
$2,500 a month. And then you need a new roof. That's 20 grand. Or you need a new
00:18:53
septic system, which by the way, I'm looking at having to put it in my cottage, you know. Well, that's another
00:18:59
25 grand, right? And so, and you don't necessarily know when those things are
00:19:03
going to come at you. >> It is a bit of a trap, isn't it? It's a trap that um I didn't realize this until
00:19:09
I bought a house and most people don't >> like I even sit here on this podcast
00:19:12
doing this for a living and then I I made this stupid mistake of buying a house and I do think it was a stupid
00:19:18
mistake because I we'll talk about opportunity cost in a second but I was in hindsight it was like a terrible
00:19:23
decision. I spent all this money on this house. It was a house abroad. It was also like a holiday home I guess
00:19:30
>> and every time I come all I see is things that I need to change. >> Yeah. It's looking at the United States
00:19:36
for instance, if 20 years ago, 30 years ago, you'd bought a house in San Francisco,
00:19:42
well, you've done very, very well financially. If you bought a house in Detroit,
00:19:47
not so much. So then the question becomes, and people will say, well, obviously you don't buy a house in
00:19:52
Detroit, you buy a house in San Francisco. Well, I'm not an expert in real estate, but I am reading more and
00:19:59
more commonly that San Francisco is has a lot of very challenging problems at the moment. Detroit, on the other hand,
00:20:06
where I was just visiting a couple of years ago, is enjoying a renaissance. Detroit's coming back. So, who's to say
00:20:14
in 20, 30 years, people won't be saying, "If you bought in Detroit back in 2025,
00:20:20
you were golden." And if you bought San Francisco, yeah, not so much. Sometimes
00:20:25
real estate, buying a house can work out in a spectacular fashion. And that's the
00:20:31
stories people tend to hear, but not always. >> And that's what I tend to see in the
00:20:34
comment section when we talk about this issue of buying a house. I was just looking at the comment section actually.
00:20:39
And on a previous conversation where we talked about whether you should buy a house, someone said, "I bought a house
00:20:45
and it's the best thing I ever did." Right? It's launched my mindset in new
00:20:48
directions. Remember that having your own space has profound psychological impacts and can be life-changing for
00:20:55
some of that don't live in a healthy environment. The psychological impact of
00:21:01
buying a house. >> What that commenter just said is is can be and for him obviously it's absolutely
00:21:08
true. I am not anti- house. As I mentioned a moment ago, I've owned houses most of my
00:21:14
adult life, but I've never bought them because I thought they were an investment. I bought them because I
00:21:20
thought they would enhance my life in a way I wanted it enhanced. They would make my life better. They are in my view
00:21:28
an expensive indulgence. I have nothing against expensive indulgences. That's
00:21:33
one of the reasons we accumulate money, right? I like some expensive and some I don't care about, some I like. Um, but
00:21:41
that's what they are. And if you can easily afford it, then by all means buy
00:21:46
the house. Looking at some stats here, it says home buying was once a solid investment due to rising property values
00:21:51
and lower mortgage rates. However, for younger generations, this is no longer the case because of skyrocketing home
00:21:57
prices. Since 1980, US home prices have increased by over 300%, outpacing inflation and wage growth. In 2023,
00:22:06
mortgage rates surged past 7%, making monthly payments significantly higher than before. And medium wages have only
00:22:12
risen by about 15% since year the year 2000. While home prices have more than doubled, making home ownership less
00:22:21
affordable. And lastly, the cost of renting is often cheaper than buying, especially in cities where prices have
00:22:26
outpaced wage growth, leading many younger people to choose renting for flexibility. This point of flexibility
00:22:31
as well is one we don't talk about. >> Right. >> Which is the ability to go do something
00:22:35
else in another country. >> Exactly. >> And my brother said this to me when I
00:22:38
was 20. My brother's very smart. He's a year older than me, a financial genius,
00:22:42
and has a much different brain to mine. And I remember when I was 20, maybe 24 and I was talking about do I buy a house
00:22:50
and he both told me it was the worst investment I could ever make. But he also told me to think about flexibility
00:22:56
and my ability to get up and move. >> Yes. >> And I was what do you mean? And he said,
00:23:00
"Well, listen, you're in a certain era of your career where you might be called by someone in San
00:23:08
Francisco who offers you a great opportunity and you might want to go next week." And actually when I look at
00:23:13
how my career transpired, that's exactly what happened. I was in Plymouth and
00:23:18
then I went to Manchester for business. Then I went to London for business. Then
00:23:21
I went around the world to San Francisco to New York for business. And I'm I'm
00:23:26
moving with the opportunity. And if I was anchored somewhere because a mortgage does
00:23:31
>> dragging that along. >> Yeah. And a mortgage does like psychologically anchor you. This is what
00:23:35
people don't talk about. It creates a huge amount of guilt if you then want to
00:23:40
get up and go because you in your head you're going, "Well, I'm going to be
00:23:42
paying double." >> Well, so I agree with everything you said. I agree I I agree with your
00:23:49
brother. Flexibility, especially when you're young and your career is in a dynamic phase, it is not to be
00:23:57
underrated. For my daughter, I mean, she loves living in Savannah. They've been
00:24:01
there for 3 years, but she has an adventuresome soul. And you know, she said, "I don't know. I mean, maybe at
00:24:09
some point I'll want to go live in Europe or somewhere else." Well, if you
00:24:14
have a house, that complicates that decision. And even if you are fortunate enough to buy in a market where your
00:24:22
values are rising, the cost associated with buying and selling of houses are enormous. the, you know, the real estate
00:24:30
commission and the taxes and what have you. So, getting in and out of a house is an expensive proposition. Getting in
00:24:38
and out of apartment doesn't cost anything. I mean, maybe your security deposit rate, but that's it. That's
00:24:43
that's very clean and simple, but if you're if you were to buy a house in
00:24:48
Savannah and then just say, you know, I think I want to go live in in Portugal, well, now you got to sell that house. Or
00:24:56
maybe you have to rent it. Now you're a landlord. You're an accidental r
00:25:00
landlord, which was subject to my second book. You know, that's not optimal. I
00:25:06
mean, if you set out to be a landlord, great. But if you become an accidental landlord because you can't sell your
00:25:12
house that you don't want to live in anymore, that's not so great. So flexibility is is enormously important.
00:25:20
If I if I were to ask you, what is the simple path to wealth? and you had to respond in a sentence, what would that
00:25:28
sentence be? >> Avoid debt. Live on less than you earn. Invest a surplus. >> So, let's talk about debt then.
00:25:35
>> Okay. >> Why did you say avoid debt? >> You can never be financially independent
00:25:39
if you're carrying around debt. It's a ball and chain that you drag drag
00:25:44
along, especially consumer debt. Now, to be clear, if you're in business and your
00:25:49
business is is carrying debt as a as a function of of running the operation for one reason or another, that's kind of a
00:25:59
different thing. But in terms of personal debt, uh if you're running up credit card debt, if you're leasing
00:26:06
expensive cars or or borrowing money to buy expensive cars or what have you, possibly a mortgage is in a slightly
00:26:14
different category, but it has all the disadvantages we just talked about. Yeah, debt's a ball and chain. It's it's
00:26:20
like asking a swimmer to compete and and strapping a weight around their waist. Uh it just is it possible? Well, sure. I
00:26:29
guess it is, but it's a whole lot a whole lot more difficult. So, job one if
00:26:33
you have debt is to blow it out. >> And I mean, blowing it out is a dream for many, but it's uh easier said than
00:26:40
done. I guess >> it simply means that you have to organize your life in such a fashion
00:26:46
that you can divert some money to either buying your freedom investments or if you have debt paying off that debt. You
00:26:56
just you have to do that. And people say, "Well, I can't do that. You know, I
00:27:00
I need to have this. I the you know, I need to have the these the two least luxury cars and we need to live in this
00:27:07
neighborhood and we need to send the kids to these schools. We need to and I call that the tyranny of the must-haves.
00:27:13
The more musthaves you have in your life, the less likely you are to become financially independent." Now, that's
00:27:20
your choice. That's an individual's choice. It may very well be that those
00:27:25
things are more important to you than buying your freedom. And it's your money. It's not for me to tell anybody
00:27:33
how they should spend their money or what's important to me or what's important to them. For me, there was
00:27:39
nothing I could spend my money on that was more important than my freedom. Which is why from the beginning, I
00:27:44
diverted half of my income to buying that thing. Was never deprivation. Right? Most people say, "Oh, that's this
00:27:52
is a path of deprivation. I can't spend my money." Well, not for me. I, you
00:27:57
know, I spent every dime that ever came my way. It's just that I spent half of
00:28:02
those dimes on the thing that I wanted to own the most, which was my freedom. And you own that by owning assets. So, I
00:28:12
wasn't I wasn't depriving myself any more than if somebody said, you know,
00:28:18
I'm looking at buying a a Mercedes or a Volkswagen, right? If I'm buy the
00:28:24
Mercedes, I'm in this big fancy car and people will be impressed. If I buy the
00:28:29
Volkswagen, yeah, I'm in this more modest car, but then I've got a whole
00:28:33
bunch of money left over that I can spend on a wardrobe or going out to dinner or a more expensive apartment.
00:28:39
It's just a matter of choosing where you spend your money on. Right? So, one of
00:28:44
the choices and I I do I am under no illusion that most people who read my book will actually follow the simple
00:28:52
path cuz I I think there's just way too much cultural influence to spend your
00:28:58
money elsewhere. But at least the people who read the book and listen to this interview will be aware that there is
00:29:06
something else they could buy with their money. and that's their personal freedom
00:29:11
and you do that by assets and there was nothing more important to me nothing I wanted more so it was not deprivation at
00:29:19
all >> I amum I reflect back on where I used to be in my life and if I'd
00:29:25
heard this conversation then I really really struggled with um saving money because saving spending money was so
00:29:33
closely linked to my sense of self and my self-esteem >> a lot of people feel that way I've
00:29:38
shared this story before, but when I I was working in those call centers at uh which one, Swinton Swinton's car
00:29:44
insurance where I used to work, I would get my paycheck and it might be I don't
00:29:47
know, £1,500 or £2,000, whatever. And like on my way home on payday, I'd go buy a 60-in TV and I'd put it in the
00:29:56
house and then I'd try and see if I had enough money to buy a PlayStation >> and then about a week later when I
00:30:01
realized that I was broke, I would sell both. And I look at that behavior as such absolute like
00:30:07
>> it's objectively like crazy behavior like repeated videos but it shows the extent to which I got a
00:30:14
dopamine hit from having a nice thing and I was trapped in that cycle of like >> buy the nice thing dopamine hit feel
00:30:20
validated feel like I'm a successful person and then have to sell it a week later.
00:30:24
>> Yeah. So, I really have a huge amount of empathy for people that are stuck in
00:30:28
this spending for self-esteem cycle. And they hear these, you know, they hear people like me and you talk about these
00:30:35
things now and it feels easier said than done. >> That to me seems kind of insane. And and
00:30:45
you know, one of the things that somebody pointed out one time is if you're driving around in a Ferrari, you
00:30:51
know, maybe you're thinking to yourself, if you're bought the Ferrari because you
00:30:55
want to impress people, everybody's looking at me and they're thinking, "Wow, what a cool guy that is driving
00:31:01
driving that Ferrari." No, that's not what they're thinking. They're looking at you in that Ferrari.
00:31:06
And what they're thinking is, "Wow, I would look cool if I was driving that
00:31:10
Ferrari." They're not thinking about you at all. it doesn't it you're making no
00:31:15
impact on on what their opinion of you is. >> So on this point of debt, I did have
00:31:20
some people contact me that were childhood friends of mine recently and asked um asked me for advice on getting
00:31:25
out of debt. >> Mhm. >> And one particular friend said that he had $40,000
00:31:30
worth of debt and asked me for advice on it. And I I really I'm not an expert in
00:31:35
this so I kind of hesitated to give any advice. >> But the advice I'm hearing from you is
00:31:40
essentially you have to make a concession. You have to pull back your spending and get things back under
00:31:45
control. You have to I know sell your house. >> So, here's some good news. So, you're
00:31:49
carrying to your friend. He's carrying $40,000 in debt, right? My advice would
00:31:54
be, and this is a little different than the more common advice out there, but I would look at all my debts and I would
00:32:01
pick the one that was charging me the highest interest rate and I would I'd pay the minimums on all the others and I
00:32:07
would focus on paying that one down as fast as I could because that's the biggest return on my investment. And
00:32:13
when that one was gone, I'd go to the second until I worked my way through. It's going to be hard. And the more
00:32:21
quickly you do it, the harder it's going to be cuz you're going to have to make
00:32:24
more dramatic adjustments to your life. That's the bad news. Here's the good
00:32:29
news is once you are out of debt, if you do this, you've developed a wonderful
00:32:34
discipline of living on less than you earn and diverting the excess to something else that you want more. In
00:32:40
this case, to something else you want more is being out of debt. If you continue with that discipline,
00:32:46
you now have the cash flow to begin building those assets and becoming wealthy. You've already developed that
00:32:52
lifestyle and that discipline. So that's the one ray of sunshine, if you will, in
00:32:57
in the process of getting out of debt. >> Okay. Play devil's advocate with me then
00:33:02
on this one. >> Sure. >> So when I was 18, 19 years old, my strategy I was well aware that I'd
00:33:06
[ __ ] up my financial situation. Like I was it was plainly clear that I'd figured out what a credit score was and
00:33:11
I realized that I destroyed mine. I also had these letters that these fail letters and and I had I had
00:33:19
mounting issues. I was avoiding finances, bills, envelopes, you name it. I just thought if I don't look at it, it
00:33:27
doesn't exist, >> which I know a lot of people do because when I was writing a previous book that
00:33:32
I wrote, I looked into some of the stats about humans ability to avoid. Mhm. >> Whether it's health situations, if a
00:33:38
friend of yours gets a bad diagnosis, I was reading a study that said some people are more likely to not go get
00:33:43
checked >> even if their friends had a because they just want to avoid it.
00:33:47
>> Um, and then with national finances, I was reading a study that said we're
00:33:50
incurring billions and billions and billions and billions of debt as a society just because we don't look at
00:33:54
our bank balance. We don't open envelopes. So, I know I'm not the only one.
00:33:59
>> No, not at all. >> My strategy was my This is such a dumb. >> I'm not sure I want to hear this.
00:34:06
Well, go ahead. >> Honestly, and this sounds like crazy talk, but it's just the truth. In my
00:34:10
head, my strategy was >> I'm going to get so rich that I outpace this debt
00:34:15
>> and then I'll deal with it later. >> My strategy was if I can just get really
00:34:19
rich, which is kind of the inverse of what you're advising, >> then this debt won't be a problem.
00:34:26
>> At 18 or 19 years old, you don't know the world. You are guessing, >> right?
00:34:31
>> And I was guessing that I could earn my way out of it. The probability says I
00:34:35
was wrong. >> The probability says that I was like delusional or some or just like I
00:34:40
watched too many rap videos or something, >> right? >> Um, so objectively that is a reckless
00:34:46
choice. Even if even if it's true and it ends up being true for you, you end up
00:34:50
being what it's still a bad choice because probability is stacked against you.
00:34:55
>> Well, that's true. And but you just made a critical point in that you can make a
00:35:00
bad choice where things work out well for you. >> Yeah, exactly. It's a bad choice.
00:35:05
>> So, a great example of that is investing in Bitcoin, right? I'm not I'm not a
00:35:10
proponent of investing in Bitcoin. Certainly, for those people who bought Bitcoin 10, 15 years ago, they've done
00:35:17
extraordinarily well. They got lucky. Lots of speculations don't work out that well. So if you are
00:35:25
speculating then you it might work out extraordinarily well for you but it's
00:35:32
you're taking some pretty heavy risks in doing that right it's same thing with a
00:35:37
lottery ticket I mean the chances of winning the lottery are infantestimally small but people buy lots and lots of
00:35:43
lottery tickets somebody somebody does win it but that's probably not a good
00:35:48
way to spend your money >> Bitcoin >> you're not a fan of Bitcoin No. And I'm
00:35:55
not I'm not opposed to Bitcoin existing in the world. Uh but for me, it's a speculation and
00:36:02
I'm not a speculator. >> When you say spec, give me some color because I'm sure there's some people who
00:36:07
are listening now that are either thinking about Bitcoin or have invested in Bitcoin.
00:36:11
>> I mean, if you want to speculate that Bitcoin, so I I would recommend against
00:36:16
it. So, and people and they might push back and say, "Well, but JL, you know,
00:36:21
you were recommending against against it 10 years ago, which I was, and you you've been wrong. I mean, absolutely
00:36:28
wrong. It's been great 10 years. It's blown. It's done far better than the S&P
00:36:32
500." Well, that's true. If you'd had a crystal ball, if I'd known that 10 years
00:36:39
ago, yeah, well, I would have been in Bitcoin, right? We don't have crystal balls. So the question isn't how is
00:36:45
Bitcoin done in the last 10 years. It's how how is it going to do in the next 10
00:36:49
years. I don't know the answer to that. But that's the question. Is it worth
00:36:55
$100,000 a coin now? Is it going to continue to grow at that pace that you regret that you missed over the last 10
00:37:04
years? That's the question you have to ask yourself. But I could say its success is evidence
00:37:12
that it's serving some kind of utility for some people somewhere. Its success
00:37:18
means that there is demand for it by very nature that the price has increased so crazily over the last 15 years.
00:37:24
>> Yeah. That and that's an argument that people make and there's a lot of debate
00:37:28
around that, right? is, you know, what is the function that it has or that it's
00:37:35
going to develop? And you might well be right. I don't I don't know the answer
00:37:39
to that question. It's not currently at least a currency because it's way too
00:37:44
volatile to serve as a currency unless you're doing illegal things that make it more attractive than the
00:37:51
volatility makes it unattractive. So that's not necessarily good for society,
00:37:55
but but so it can't function as a currency. So, right now it's just a speculation. Is it going to grow into
00:38:03
something that's more functional? Well, you know, listening to one of the other
00:38:08
interviews you you you did, that woman absolutely believes that that's what's happening. And they Kathy
00:38:17
Wood, so that's why she's in Bitcoin. And she may be right, but she's
00:38:22
speculating. And again, I have nothing against speculating as long as you understand, as I'm sure she does, that
00:38:29
that's what you're doing. >> You'd prefer investing. >> I prefer to have an engine creating
00:38:35
wealth behind where I put my money. >> I had um a text message from a really
00:38:38
good friend of mine who my audience will know because they've been on the show
00:38:41
before as a guest and uh they're very well known in the UK. Um they text me and said, "Please, can I ask you a
00:38:46
question? If you had mortgages and you had a lump sum of money, thinking about the future of AI, potential market
00:38:55
crashes, would you pay off chunks of the mortgage or would you invest? My feeling
00:39:01
is that stocks aren't really safe. Am I being paranoid? >> Well, there that's there are a couple
00:39:06
questions embedded in that. So, the first question is would I pay off a mortgage? And the second question is are
00:39:13
stocks safe? Right? So the mortgage one first to me is is pretty easy. It kind of depends on your interest rate.
00:39:22
>> What is an interest rate? >> So an interest rate is what you pay to
00:39:25
borrow money. So when you when you get a mortgage, you're borrowing money, right?
00:39:29
You're borrowing it from a bank or a financial institution and they they want to be paid for
00:39:35
letting you use their money. And three three and a half% or less, that's really
00:39:42
cheap money. I would hold on to that. I I would be in no hurry to pay that off. On the other side, if you have a
00:39:50
mortgage rate that's say 6% or higher, well, when you pay off that mortgage,
00:39:56
essentially you're locking in a guaranteed return of that interest rate, right? So, if you pay off an 8%
00:40:04
mortgage, you've locked in an 8% return on that money effectively. And then to
00:40:09
finish the thought is if your interest rates between those those two like three and a half percent to five and a half
00:40:16
six percent then I would say it would depend whether you pay it off or not is what makes you emotionally more
00:40:22
comfortable and there's value in being emotionally comfortable. So if you are
00:40:26
comfortable carrying the debt you might say well I think I can do better in the stock market so I'm going to carry it.
00:40:32
If emotionally like me you just would rather not have any debt at all than you then you blow it off. Maybe we could use
00:40:38
the coins as a an example of what an interest rate is. >> Sure. Let's say I'm sitting on this pile
00:40:44
of gold and you want to borrow some of my gold. I'm happy to loan you, Stephen,
00:40:50
these 10 very valuable old pieces. But I don't like you well enough to just let
00:40:55
you borrow them for free. I want to be paid. I want to get a reward back for that. So, when you
00:41:02
return these gold pieces to me in a year, you're going to return 11 gold pieces to me. You're going to pay me
00:41:08
10%. Cuz an extra gold piece is 10% of these 10, right? Make sense? >> Yeah.
00:41:15
>> That's what interest is. >> So, I if I say, "Okay, I'm going to buy
00:41:18
a house, >> right? You're going to take you're going to take those 10 gold pieces. Go ahead
00:41:21
and take them." >> So, I'm buying a house that costs 10 gold pieces, right? Right. So, I'm going
00:41:26
to accept your 10% interest rate. >> Okay. Am I paying 10% a year on the to
00:41:34
on the total >> on the balance? So, the way a mortgage works is in the let's say it's a 30-year
00:41:39
mortgage, you're going to be sp giving me a certain amount of money every month, right? That's your mortgage
00:41:45
payment. And in the beginning, most of that payment is going to be interest to me. And a very tiny sliver of it will be
00:41:53
paying down the principal part of the 10 gold pieces that you bought or that you
00:41:58
Yeah. that you borrowed. A very tiny sliver. And then over the course of 30 years that ratio changes as you pay down
00:42:06
the debt and less and less of it is interest payments and more and more of it is paying down the principal until at
00:42:14
the end of 30 years you've paid all the principal and you've paid me a fairly
00:42:18
enormous amount of money in debt over that or in uh interest over that 30 years.
00:42:23
>> And how do I get a good interest rate? How do I get a very very low interest
00:42:26
rate? And what is a low interest rate >> on a mortgage? >> Yeah. So the only way you can get a So
00:42:32
first of all, you're going to pay basically whatever the current interest rates are.
00:42:36
>> Who sets the current interest rates? >> So the Fed sets an overall interest
00:42:41
rate. You've heard the Fed will raise or lower interest rates and that will influence what lenders like bank and
00:42:48
mortgage companies will charge. It doesn't require them to do a certain level, but it will influence up or down
00:42:55
how much they're going to expect in return for their money. The Fed is a government.
00:42:59
>> Yeah, the Fed is a government agent partially because the the Fed is anticipating inflation
00:43:06
by how they set interest rates. So if I'm lending you money and I'm worried
00:43:11
about inflation, if I lend you my 10 gold pieces and say I want 11 back in a year, 10%. But inflation is 15%. Well,
00:43:21
I've just made a very, very bad deal. So if I think inflation is going to be 15%,
00:43:26
I'm going to want two gold pieces back and maybe or you know, so I so I'm I'm
00:43:32
making a profit above and beyond inflation. So going back to your question, how do you get a good mortgage
00:43:38
rate? Well, you shop around to various lenders at the time you want the mortgage and see, you know, who's
00:43:44
offering what? And there'll be some variation within a eighth of a percent or a quarter of a percent or something,
00:43:50
but for the most part, they're all going to be very tightly put together because
00:43:54
they're looking at the overall projection of what inflation's going to be, what they can charge, what the cost
00:44:01
of money is, what they can charge in interest, and then competitively what they what they have to do to get your
00:44:06
business. So, there's not going to be a lot of variation. you're not going to
00:44:10
get a a significantly better interest rate than somebody else, but if you shop around, you can probably do a little bit
00:44:17
better. And interest rates have been fluctuating quite a lot over the last 20 odd years. In the early 2000s, interest
00:44:23
rates in the US were relatively high, peaking at almost 7% in 2006 due to efforts to curb
00:44:30
inflation. And then after the financial crisis, um they dropped a little bit. Um, and I was looking here. Post 2008,
00:44:37
central banks around the world adopted ultra low interest rates to revive economies. US rates were slashed to near
00:44:44
0% by 2008 and remained there for nearly a decade. >> Right. >> Damn. Um, COVID 19 pandemic uh interest
00:44:54
rates led to another record in cuts globally with the US Fed lowering interest rates to 0% to 0.25% to combat
00:45:03
economic disruption. So, does this mean I should really be waiting for a time when the interest rates are really
00:45:08
really low if I want to buy a house? >> Well, not necessarily because you never
00:45:12
know when that's going to happen. I mean, some some people have said predicting what the stock market is
00:45:18
going to do is very very difficult. Predicting where interest rates are going to go even more so. So I think if
00:45:25
you're going to if you're going to buy a house then again you buy it based on
00:45:29
whether you can easily afford it, whether it meets your needs at a given time and you deal with the interest
00:45:34
rates you have to deal with. And of course they'll be part of the equation in terms of how much you can afford
00:45:39
because the interest rate on your mortgage is going to have a lot to do with how much you have to pay every
00:45:43
month >> and it's quite high at the moment. Interest rates >> high compared to what? So the fir you
00:45:49
know right now mortgage rates are 6% 7% somewhere in there. The first mortgage I
00:45:54
took out was 18%. >> 18%. That would have been in 1979 because in the 1970s we had really high
00:46:04
inflation. And when you have high inflation, you have high interest rates, right? So to me, I hear a 6% mortgage
00:46:12
rate and it's doesn't sound bad to me, but for people who grew up where mortgage rates were 2 and a half, 3%.
00:46:21
Well, yeah, I mean, it's huge. It depends on your perspective. >> And the other half of the lady's
00:46:26
question who sent me that text message was around is investing in stocks safe right now? and she did sort of preface
00:46:32
it by saying the questions in the context of AI all of this disruption that's going on in the world people are
00:46:38
going to lose their jobs etc et like is it safe to invest in stocks right now >> so depends on your time horizon so
00:46:46
stocks are are the single most effective strongest wealth building tool that's ever been created but they
00:46:56
are also very very volatile so when she says are stocks safe to invest in right now.
00:47:03
What I hear is very shortterm thinking and stocks are never safe to invest in for the short term because they're
00:47:12
volatile at any given moment. They can take a deep plunge and that's a perfectly natural part of the process.
00:47:18
People get all create especially if you watch the news they people go insane and
00:47:24
panicked. But crashes and pullbacks in the stock market are perfectly natural part of the process. They are very very
00:47:31
difficult if not impossible to predict when they're going to happen. But that's
00:47:35
the reason you never want to invest in stocks for money that you're going to need in the new near
00:47:41
term. If you zoom out for longer periods of time, which is I re is what I recommend, stocks are stunningly
00:47:51
reliable. I mean, there are very few times over the course of 10 years where stocks have not given you a good return.
00:47:58
and you go out 20 years and I I mean it's very rare. So if you look long-term
00:48:04
stocks are extremely safe and extremely powerful in building in building wealth,
00:48:09
but they are very volatile along the way. So you have to be willing and able to endure that volatility. If you're
00:48:17
going to panic and sell when the market drops, not if because the market will drop. It's a perfectly natural part of
00:48:24
the process. If you're going to panic and sell when that happens, you do not
00:48:28
want to invest in stocks because they will leave you bleeding on the side of the road. Following my advice will leave
00:48:34
you bleeding on the side of the road if you panic and sell. It's 100% dependent
00:48:40
on tying yourself to the mass during the storm and ignoring the volatility and continuing to invest into it because now
00:48:50
you're actually accumulating shares on sale because prices are down because the
00:48:56
storm never lasts. It always blows over and the sunshine comes back out and prosperity returns. You're talking here
00:49:05
about the emotional side of investing, which >> which is critical. >> Yeah.
00:49:09
>> If you if you can't control your emotions, you're you're going to be
00:49:13
selling at the wrong time and buying at the wrong time. >> So, this is such a huge part of it that
00:49:17
people don't talk about enough. They talk about tactics, strategies, what to
00:49:19
invest in, etc. But they don't talk about the emotional side, which is really like arguably a even bigger
00:49:26
element of this because if you think about even how the brain is set up and what drives us most, it's it's fear.
00:49:33
It's it's emotion. >> You're in greed. >> And when the when the prices drop, you
00:49:38
know, I mean, we've all got a story. So many people listening. I remember my
00:49:41
first ever investment. I put £10,000 into Facebook stock a long long long long time ago. And then it went down and
00:49:47
I sold. >> I thought, I'm never investing again. >> And if I just left it,
00:49:53
>> Yeah. >> Um, God, that would be worth so much money. It probably be worth six figures
00:49:57
now, >> right? >> But I I hadn't, no one had ever taught me about the emotional side. And
00:50:01
actually part of the reason I sold it was because I needed that money. >> So there's two things there. One is the
00:50:06
emotional side of selling it. The other thing is investing money that is not for
00:50:11
the long term cuz you turned out you should never invest in money in the stock market that is you're not willing
00:50:16
to commit for decades. This is a longterm horizon because that's what allows you to weather the storms. If
00:50:23
you're saving for a house for instance, well you probably don't want to be in
00:50:26
the stock market. The best investor I've ever met is my girlfriend. Uh because
00:50:30
she she loses the password to the investing app. And honestly, every like two years I go, "Babe, do you
00:50:37
remember?" I was like, "You bought loads of that index fund or Bitcoin or
00:50:41
whatever it is." >> I was like, "Do you know the price of it?" And she's like, "No, I forgot. I've
00:50:45
forgotten the password to the app." And we always like log back in once every
00:50:49
two years and look at it. I'm like, "Oh my god, babe. You're rich." And she's
00:50:51
like, "Oh, okay." And then she loses the password again. She forgets it. This is
00:50:55
an incredibly important point you just touched on. So Jack Bogle, the guy who created retail index funds that we can
00:51:02
invest in now, created the Vanguard Group in 1975. Bogle once said, you know, invest in the
00:51:10
S&P 500 and don't even open your statements when they come. Just let them
00:51:15
stay. Don't even open them for 20 years and then open the final one and have a
00:51:21
cardiologist standing by because you will be stunned at the level of wealth that you've accumulated. One of the
00:51:29
things that I wrote this this book for my daughter, right? My daughter is sounds like she's kind of like your
00:51:35
girlfriend. She's very smart, but she has zero interest in this financial stuff.
00:51:41
That is a superpower because unlike me and maybe a lot of people listening to us who are interested in this stuff and
00:51:49
who are watching the market all the time, she and your girlfriend are never going to be tempted to panic when the
00:51:56
market drops because they're not going to notice the market dropped, right? Because they're they don't they don't
00:52:01
care. And the less you tinker with your investments. Charlie Munger, who was Warren Buffett's
00:52:08
partner, once said, "The worst thing you can do as an investor is get in the way
00:52:11
of compounding, right? And that means dancing into the market trying to sell and buy back in and what have you. Just
00:52:19
let the compounding run." I get so many people who read my work and they say,
00:52:24
"Wow, JL, I I I really get it and it's wonderful and you're absolutely right
00:52:27
about everything, but if we just did this one little thing differently, it would be even better." And they are I've
00:52:35
come to think of them as the tinkerers, right? >> Are they men? >> They I think a lot of them are men. I
00:52:41
think I think women are a little less inclined to tinker because men put their masculinity on the line in doing these
00:52:48
things and that's not useful. >> I asked the question about men and women
00:52:53
because I got some stats here from actually from Vanguard that says men are 70% more likely to invest in high-risisk
00:53:00
assets like individual stocks versus safer assets than women. Men's portfolio
00:53:05
are 50% more volatile, which leads to higher potential returns, but also huge greater losses. As it relates to men,
00:53:13
again, despite having higher risk-taking, men underperform women in long-term returns annually due to
00:53:20
overtrading, tinkering, >> and timing mistakes, tinkering. And men trade 45% more often than women,
00:53:29
resulting in more fees because every time they make a trade, they pay a fee and lower gains. That's according to
00:53:34
Berkshire Hathaway. The summary here is that men take more risks, but in the long term tend to earn
00:53:40
less because of frequent mistakes and emotional trading, whereas women are more cautious and their approach tends
00:53:46
to yield better returns. >> So, you know what we've learned here? >> Yeah.
00:53:50
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00:55:00
>> You talked about compounding. You talked about how one should maybe not open the
00:55:04
envelope that has the state. >> That's Jack Bogle has said that, but I
00:55:07
agree with it. Yeah. >> I I don't have to explain the graph I've just passed you for you to know what
00:55:11
that is, right? >> On the bottom, the red line is 11% >> Mhm. returns. So the blue line that's
00:55:18
that's running fairly flat is the contributions to this hypothetical investment and the red line is the value
00:55:26
that that how it how it grows. And what's striking, and this is this is what's striking about compounding in
00:55:33
general, is that the two track each other almost exactly for a surprisingly long time, and then they begin to
00:55:41
diverge, and then the compounding makes the value of the investment skyrocket. It hockey sticks.
00:55:51
And I didn't know you were going to show this to me, but what's interesting to me
00:55:55
about this is I used to do these shitakas. They were events where we'd take a small group of people to some
00:56:00
cool place in the world and hang out. And there were people who followed my work and and I would have one-on-one
00:56:06
sessions with them and we talk about whatever they wanted, but mostly it was their finances. And very commonly these
00:56:14
people would lay out their their investments, their their finances, and and they would ask, "Am I financially
00:56:22
independent?" And that's a there's a very simple mathematical formula about
00:56:26
that. How much did you spend? I spend $100,000 a year. Okay. If you take the 4% guideline, what's that?
00:56:33
>> Withdrawal. So, a guy named Bill Ben came up with the idea that you could
00:56:39
safely withdraw 4% of your portfolio and it would continue to survive over time and it would so you could you could pull
00:56:48
that out without depleting the portfolio. There was a woman who came to one of our [ __ ] talk. She was a banker.
00:56:55
So obviously knows her way around basic math, right? She was at the end of Stuck
00:57:02
where she was going to take a new job starting that Monday was going to pay her a million dollars a year and we're
00:57:08
going over her finances and she said, you know, I've got $5 million invested.
00:57:14
Okay. Am I financially independent? Well, I can't answer that question until I know
00:57:19
how much are you spending. Said, well, I'm spending $100,000 a year. Okay. Well,
00:57:25
$100,000 a year, if you multiply it by 25, you get $2.5 million. 4% of 2 and a.5 million is 100,000,
00:57:37
right? So, that's how that math works. So, if you need 100,000 to live on, you
00:57:42
need 2.5 million invested. Make sense? >> Yeah. >> Okay. So, you can look at it either way.
00:57:47
You can say, I've got two and a half million. If I take 4% of that a year, that's 100,000. or I I I'm spending
00:57:55
100,000. How much do I need? You multiply that by 25 two and a half. >> So, just to make sure I'm clear,
00:58:02
>> if I look at my investment portfolio and I have $100 in there, >> if I can live, are you saying that if I
00:58:09
live on $4, which is 4% of my investment portfolio, then I'm financially independent.
00:58:15
>> Right. That's a good Now, it's a good guideline. I mean there's lots of
00:58:20
variations but this is a guy guideline this financial adviser Bill Benin came up with
00:58:26
u and then there was a thing called the Trinity study which was done I want to say in the '9s that looked at a lot of
00:58:31
these scenarios and basically verified that this was a very good baseline. Um, so 4% is I don't like the word rule
00:58:41
because that implies that it's hard and fast, but it's a great guideline. If you
00:58:46
want to have a have an idea of whether or not you're financially independent or
00:58:50
not, this is a good guideline. So anyway, this woman says she's spending $100,000 a year and she's got 5 million.
00:58:56
She wants to know, am I financially independent in financially independent? And I said, times two. I mean, you have
00:59:05
twice as much money as you need given your level of spending. So, the question that I always had going back to this
00:59:11
little chart is how and I would get this question a lot, Stephen. You know, they'd show me their numbers and they
00:59:19
would very clearly be financially independent on that based on that math we just discussed. And these were smart
00:59:25
people who can easily do basic arithmetic. Said, how how is it that they're asking me this this question?
00:59:32
And suddenly it dawned on me, this is how because compounding is a is a hockey stick. It goes along
00:59:42
and and kind of doesn't appear to be happening and then it's slowly starts to
00:59:46
happen and all of a sudden it's way up here. It happens so quickly and so stunningly they can't quite believe it.
00:59:54
It turned out is not that they couldn't do the basic math. They certainly could
00:59:58
do the basic math. What it was is they couldn't quite believe what the math was telling them
01:00:05
and they wanted me to. It's like you you see what's on that wall over there. I mean, are you seeing what I'm
01:00:13
seeing? Cuz I can't quite believe that I'm seeing that. I need you to confirm
01:00:17
that. Yeah, you're seeing the same thing I'm seeing. And in this example, all it
01:00:22
is is someone has, you know, they've started with zero >> and they've paid in a small contribution
01:00:29
every year to their investment. The investment is getting 11% return a year >> and suddenly the thing goes
01:00:37
>> I think that was one of the most pivotal moments in my life where I went online
01:00:40
>> five six years ago and looked at a compounding interest calculator. So >> it's stunning.
01:00:46
>> It's it is stunning. >> It is absolutely stunning. And it shows that if you just leave your
01:00:51
money in a place where it's getting this kind of return over time, everything seems to take care of itself.
01:01:02
>> So let me let me close the circle in a sense on on that subject because one of
01:01:10
the things that I think gets overlooked with my book is this is the simple path to wealth.
01:01:17
Which means if you follow it, you will become wealthy, right? So we go back to, you know, buying those things that
01:01:26
people maybe want to buy, whether it's the fancy car or the or the house. Well,
01:01:33
once you become wealthy, you can not only buy those things, but you're buying
01:01:37
them from a position of power, right? You can easily afford them. you become financially independent, which means
01:01:44
that your investments are throwing off more money than you're spending. My wife
01:01:48
and I are basically uh pretty naturally frugal people. And that's one of the
01:01:53
ways I suppose that we got to where we are. But that doesn't necess necessarily
01:01:58
serve us at the level of wealth now. And so we still have this tendency to say, "Oh, we're thinking about getting this
01:02:05
stuff. How much does it cost? And do we really want to spend that money?" And
01:02:09
depending on who it is, either she'll turn to me or I'll turn to her and say,
01:02:12
"Doesn't matter. It's free. Everything's free. It doesn't." And that's a very
01:02:16
liberating way to look at things. So that's where the simple path ultimately
01:02:20
will will get you. That's what I bought all those years ago. >> One of the thoughts that I had, which I
01:02:27
do think is somewhat illogical, was my brother and me are very different people. So he was very, very frugal and
01:02:33
I was reckless. And one of the ways that I self-justified my recklessness was, well, you know, you've got to enjoy
01:02:39
life. And I'm only young once, so I'm only going to get the opportunity to do
01:02:43
some of these things that are part of being young once, going to a nightclub and buying champagne and partying, you
01:02:50
know? So, I thought, yeah, I could save and save and save and save and I could get to, you know, 70, 80 years old and
01:02:55
have all this money, but what is the point if I haven't like enjoyed myself?
01:03:00
I think it is a mistake to think that you need to spend money to be happy, to enjoy yourself. And the other thing I
01:03:06
will say is that it's a lot more useful having money at this age than it would have been in my
01:03:14
20s because money buys comfort among other things and comfort becomes much more important
01:03:21
to you as you age. They did a study where they put people in a brain imaging scanner and they
01:03:28
asked them to think about themselves tomorrow. Then they asked them to think about themselves in a couple of years.
01:03:32
Then they asked them to think about themselves in 10 years time and they looked at the brain. And then they did
01:03:37
another study where they got the same people to think about a celebrity. >> Mhm.
01:03:43
>> That they didn't know. I think it was Matt Damon or someone famous like that.
01:03:46
And what the study proved was that we think about ourselves in 10 years time in the same way that we think about Matt
01:03:54
Damon. The further away the time horizon, the more it becomes a total stranger, right?
01:04:00
>> And so I was writing I was writing recently for a chapter in my upcoming
01:04:03
book about this idea that our future self is a stranger. To the brain, thinking about me when I'm 60
01:04:09
>> is like thinking about Matt Damon, right? >> I don't know a [ __ ] guy.
01:04:12
>> So why do I care? Why do I care about protecting him? And I think this kind of
01:04:17
speaks to what we were saying there is young people and even me as a young person kind of didn't really give a [ __ ]
01:04:22
about 60-year-old me, >> right? >> Like I I it's so far away that I I don't
01:04:27
really care about protecting his interest. I almost think that's a different person. He can figure that
01:04:32
out, >> right? >> And you know, you are How old are you now? >> I'm 75.
01:04:36
>> So you have the the wisdom of hindsight. So you can tell me as a 33y old what
01:04:41
it's like to be both 33 and 75. When I was 33, I didn't think about me at an older age at all. I mean, it
01:04:51
never crossed my mind to do such a thing. Right? So, I was not doing what I was doing for the benefit of 75year-old
01:04:59
JL. I was doing it for the benefit of 25-year-old JL, 30-year-old JL. Right? remember going back to an early part of
01:05:07
our conversation what my definition of FU money it's the money that you're accumulating
01:05:15
before that gets you ultimately to being financially independent which is when you no longer need to trade your labor
01:05:22
for money right your money is doing all that I wanted that right now so when I was 25
01:05:30
I'd saved the princely sum of $5,000 adjusted for inflation to be about 25 $30,000 today. U and I wanted to go back
01:05:42
around Europe, right? But that meant quitting my job, which I kind of liked. But the fact that I had that money gave
01:05:52
me the financial strength to go in and negotiate that deal. If I was living paycheck to paycheck, I wouldn't have
01:06:01
had that. I was far from being fully financially independent. So, I wasn't doing this for 75 year old JL. I was
01:06:09
doing this right now for 25 year old JL. And it's just like when you work out,
01:06:14
and clearly you do, right? You don't go to the gym thinking, at least I'm making
01:06:19
a presumption here, I'm doing this for 75year-old Steven. You're doing this
01:06:25
because you want to be stronger tomorrow than you are today. for 33 year olds even. So that's my way of thinking about
01:06:33
it. I I never did this for future me. Maybe some people do and that's probably
01:06:39
not a bad exercise. It's probably a bit of wisdom in that. I wasn't that smart.
01:06:44
>> So you would you would save $5,000 a year. >> Well, in those days, so my first
01:06:49
professional job paid me $10,000 a year and I saved 5,000. Yeah, I saved half of
01:06:54
it. Going back to this point of compounding and how how important it is to start investing in things that will
01:07:01
offer you compounding returns. >> If you started investing $500 per month and you got an annual return of 8%
01:07:12
because you're investing in some of the things that we'll talk about in a
01:07:14
second. >> In 35 years you will be a millionaire. You'll have more than a million dollars. You'll have
01:07:23
1.043 043 million >> over those 35 years you would have invested about $200,000 but you would
01:07:31
have made $850,000 from the interest over that period of time. >> Well, just to be clarified, not
01:07:38
necessarily the interest, but the growth cuz that 11% is not interest. It's it's
01:07:44
growth. Some of it might be uh dividends in the case of which is a kind of a form
01:07:48
of interest you can think of but it's not just just to be technically correct
01:07:54
right which is which is interesting. So if I was when I was born if my parents had put $500 a month away in a
01:08:04
investment that we'll talk about now >> by the by the age I am now I would have
01:08:09
roughly been a millionaire just from them putting $500 a month away from me. Right.
01:08:14
>> Pretty crazy. >> Yeah. But that's the power of compounding. I mean, the, you know, it's
01:08:19
it's very gratifying to me that twice a year I I'm a guest lecturer for a friend
01:08:24
of mine who's a professor at uh University of Colorado in Boulder. And it's always fun to talk to her students
01:08:31
because they're exceedingly bright. They ask great great questions and it's just
01:08:34
stimulating for me. But I think about these young people. I mean, these are 18, 19, 20 year olds who are thinking
01:08:42
about doing this stuff at that age. And the remarkable amount of time that they have for this compounding to work for
01:08:51
them, it's it's just incredible. They are going to be so much better off than
01:08:56
if not. Um, so let me throw out a tip for for you if and when you ever have kids and for anybody who's listening who
01:09:04
has has young children, you know, as your kids start to grow and hopefully they get part-time jobs, right? They
01:09:12
start whether it's shoveling snow or busting tables at a local restaurant or
01:09:17
whatever it is and they start earning some income. Well, you can take that income and up to I think it's $7,000 is
01:09:26
the limit now. Put that in a Roth IRA which will never be taxed. It will grow tax-free forever and they're going to be
01:09:37
by definition because they're making almost no money in in they're not paying
01:09:40
any income tax. So, you don't need any any deduction from that. And it doesn't
01:09:45
have to be their money. So, let's say your kid makes $3,000 during the course
01:09:49
of a year. you can take $3,000 and fund a Roth IRA for them. Imagine just if they never
01:09:58
added anything other than that, you know, you do that until they they get out of college or whatever. You know,
01:10:05
that baseline is going to grow tax-free for an extended period of time. That's
01:10:10
one of the great keys to wealth building is just time. And and is that advice that you still believe in that people
01:10:17
should be saving 50% of their income? >> Yeah, I think it's a good rule of thumb.
01:10:21
It gets you to financial independence in a pretty reasonable depending on what the market does in say a 10 to 15 year
01:10:29
time period. The push back that you might anticipate is from people who say that's impossible. Nobody can save 50%
01:10:34
of their money. Just that's that's that's silly. And I'm sorry, but I've
01:10:40
did it and I've now at this point I've known countless people who've done it.
01:10:43
So, it's certainly you may choose not to do it, but it's certainly possible.
01:10:48
>> Let's say you're earning $40,000 a year, which is the low end, >> the average medium. So, that would be
01:10:57
let's say $3,000 a month. >> Mhm. >> So, you're you're earning $3,000 a
01:11:02
month. You're then going to pay tax on that. This is what my my math says here.
01:11:05
It says very little tax would be would be paid after all of your taxes. And so you're still you've still got roughly
01:11:12
$3,000 a month, about 2,900 um which you you would take home. >> I so I would need to save 1,400 of that
01:11:21
which means my total expenses need to be 1,400 a month. So first thing I need to
01:11:25
do is live somewhere very very affordable >> depending where I live, you know, what
01:11:31
city I live in. >> Then I need to basically radically reduce my my expenditure, right,
01:11:36
>> to be able to save 50% a month. And I guess the question is most people
01:11:41
would assume they wouldn't like that lifestyle. They wouldn't like to prepare their own
01:11:45
lunches every day. They wouldn't like to not have a Starbucks coffee. They wouldn't like to live in a small small
01:11:50
shoe box and probably socialize a lot less. >> So I guess that's the key rebuttal is I
01:11:56
guess yeah, it's possible. There's a chapter that talks about this with an even lower uh because when I was
01:12:02
writing the book um I think I used a $25,000 annual income. So the math works is is
01:12:11
it easy? No. But it goes back to fundamentally what is it that you want? You said well
01:12:17
I may not want like that. I might want to have lattes and all these other things. Well it's your money. That's
01:12:23
your prerogative. But time is going to happen regardless of what you do. And if you say, "Instead
01:12:31
of having those things now, I'm going to spend my money on buying my freedom,"
01:12:36
you will get to the point where everything is free, including those lattes. >> So, let's talk about investing then.
01:12:44
>> Um, we have two buckets here on the table for an analogy >> around tax advantaged investing.
01:12:53
I'm going to take your lead on this. >> Okay. So, if you dump that bucket in
01:12:57
there, I'll dump this bucket in here. Okay. The idea is that and I'm going to speak
01:13:10
in terms of the United States. The government provides savings vehicles that are tax advantage
01:13:18
to encourage people to acquire money for their for their old age. Right? So in the United States there's things called
01:13:26
a 401k or 403b. Uh these are employer related plans where you can divert part of your income
01:13:35
and the government specifies how much you can divert and they won't tax you on
01:13:40
that and you put it into an investment bucket into an investment account of some sort. you get to choose how you
01:13:46
want to invest it, but that would be the bucket. And that means that if you had however much money this represents
01:13:54
uh went into your 401k or your IRA, which is something you would do on your own privately, which is also tax
01:14:02
advantaged, right? So, in the example that you've just handed me, they're
01:14:09
saying that this would represent $20,750, which is uh before tax and with a match.
01:14:16
So, 401ks companies will frequently match part of your contribution. So, you say, "I'm going to do 5%." And they
01:14:24
might say, "Okay, we're going to match the first 2% or whatever," which you
01:14:27
should always take advantage of because that's that's free money. So this is not
01:14:32
taxed immediately and you invest this money. Let's say you invest it in a total stock market index fund which
01:14:38
would be my recommendation. So you get to invest all this money in your total stock market index fund. If instead you
01:14:45
do it after you pay taxes on the same amount of money, well, by the time you pay taxes, you're going to have about
01:14:52
half of what it was before, which is $10,340, which is what represented in here roughly half the number of of gold
01:15:01
coins. Now, both of these things grow at the same rate because we've invested
01:15:06
them in the same thing, right? So, they're making 11% a year, whatever it is. So this is obviously going to grow
01:15:12
into a much bigger pile at the end of 30 years or 40 years or whatever it is than
01:15:18
this is because you're starting with a bigger pile. So that's the advantage of
01:15:24
deferring taxes. Now, the thing that people tend not to think about or talk about that's incredibly important is
01:15:34
that it is not avoiding taxes. It is deferring taxes. Which means that ultimately the government is going to
01:15:43
want their money. They're going to want their cut. And typically that happens, I
01:15:49
think in the United States the age is 73 or something when you're required to
01:15:54
begin taking money out of these accounts. It's called an RMD, a required minimum distribution.
01:16:01
So, if you haven't started withdrawing money from these accounts, by then the
01:16:06
government will require you to begin on a schedule based on your life expectancy
01:16:11
to start pulling that money out because they figure they've waited long enough
01:16:16
and now they want their cut. Okay? So, it's not tax-free, it's tax deferred.
01:16:23
Important thing to understand if you start taking this money out before a certain age and if memory serves me it's
01:16:30
59 and a half in the US then you will pay tax on it as you do whenever you withdraw the money and also a penalty
01:16:38
right so they want you to keep it in at least until you're 59 and a half but
01:16:44
they want you to start taking it out at some point in this case I think when you're 72 or 73 or something like and
01:16:52
That's when they collect their money. So you say, well, okay, if that's the case,
01:16:57
then what am I doing here? Because I got to pay the taxes eventually anyway. And
01:17:02
mathematically, if your tax rate is the same, it doesn't matter if you're tax
01:17:07
deferred or not. The end result of amount of money that you have will be exactly the same.
01:17:13
The speculation is, and it's true in the vast majority of cases, that when you
01:17:18
retire and you start living on this money, you start pulling it out, you will be in a lower tax bracket. So, you
01:17:25
will have to pay some taxes, but you won't have to pay as much as when you were working and you were in a higher
01:17:30
tax bracket. So, that's the gamble you're taking. Now, looking at me personally as an example, this didn't
01:17:38
work out for me. So, I did IAS and 401ks when I was working in my corporate career. Put aside a fair amount of money
01:17:47
in them. Now, as it turns out, I'm in a higher tax bracket than I have ever been
01:17:52
in because of the success of the activities that I do today. I had no idea that that was going to happen. And
01:18:01
now I'm at that age where I have to take RMDs. So RMDs are coming out at a higher
01:18:07
tax rate for me than when I than the tax benefit I got deferring it. But that's
01:18:12
unusual. Most people will benefit from doing this because in their retirement they won't have an income or their
01:18:18
income will be very modest and their tax rate will be equally modest and it will
01:18:23
work out very nicely for them. But that's basically how that works. Does that make sense?
01:18:29
>> It does. Yes. And and to try and summarize it um in a way that I fully understand to check I understand is
01:18:35
every month when I'm paid I have an opportunity before that money comes to me to invest some of it and around the
01:18:42
world whether it's Japan, Switzerland, India, South Korea, Germany, Australia,
01:18:45
UK, Canada, there's always some kind of system >> of this, right? >> Yeah. So I can say okay I'm going to get
01:18:50
paid $1,000 this month. I'm gonna put a $100 of that before I even get it into one of
01:18:58
these investment accounts. It's not going to be taxed until >> and your employer might match part of it
01:19:04
or all of it. >> Yeah. So, my employer might also add $100 to it or or part of it. That's
01:19:10
going to compound over time. I can take it out whenever I want, but if I take it
01:19:14
out early, I get a penalty. >> And you pay tax. >> And I pay tax. But assuming that I'm not
01:19:21
going to be earning as much as I do now when I'm older, when I take it out at 65
01:19:25
years old, I'm still going to pay tax, but a low rate of tax. >> There's no penalty at that point, but
01:19:30
and presumably you'll be at a lower tax rate, right? >> So it really only works if you're at a
01:19:35
lower tax rate when you're older. >> Exactly. So most people work and then
01:19:39
and then they retire at a certain age and that income from their job goes away. So by definition, they're in a
01:19:46
much lower tax bracket. So for the vast majority of people, this works out very nicely.
01:19:51
>> And you talk about, you know, because people will will still have to make a
01:19:56
decision what they want to invest in, >> right? >> Where do you think we should be
01:20:01
investing our money at this moment of time? The for the average person, what what should they be putting their money
01:20:05
into with everything you see happening in the world? >> Yeah. >> You said not Bitcoin, but what where
01:20:10
should we put it? >> I'm an advocate of investing in broad-based lowcost stock index funds.
01:20:16
>> What is that? That is an example of that is VTSAX which is Vanguard's total stock
01:20:22
market index fund. It invests in virtually every publicly traded company in the United States of America. That's
01:20:30
very the number of those varies, but it's roughly 3,600 companies. >> So you're basically investing in
01:20:35
America. >> There are a lot of private companies that I that I'm not invested in, but I'm
01:20:39
in every publicly traded company in in the country. And that means everybody from the factory floor to the CEO is
01:20:47
working to make me richer. Now, some of those companies are going to do extraordinarily well and they're going
01:20:54
to succeed dramatically. And because this fund, as most funds like it are, is cap weighted and I'll explain that in a
01:21:03
minute. The more successful the company is, the more of it I will own. So cap weighted simply means that the largest
01:21:12
larger the market capitalization of the company is >> the valuation >> the valuation right the market capital
01:21:20
the larger that is the greater the percentage of the fund it will represent. So, you may have heard people
01:21:26
say that the top 10 companies in the S&P 500 have an outsized representation
01:21:35
uh percentage- wise of what they well that's the reason it's it's cap
01:21:38
weighted. So, I benefit from that success. Right now, if one of those companies falters
01:21:46
and starts failing on their execution or a more aggressive, better organized competitor comes along and displaces
01:21:57
them, then they will drift away. But I'm okay with that because whatever that new
01:22:03
competitor is, I don't have to predict who it is. I will own them. And that's a
01:22:09
process that I refer to as self-cleansing. I'm very proud of that term that I that I coined. So, a great
01:22:15
example of that is Sears. When I was a kid, Sears, company you may not even be aware of, but Sears was the Walmart and
01:22:23
Amazon of its time combined, but Sears at the turn of the last century, the turn of the 1800s, looked around and
01:22:32
said, you know, we have these brickandmortar stores, but there are all these people living out in rural areas
01:22:37
who are never going to get to our brickandmortar stores. We could send them cataloges. Does this begin to sound
01:22:43
familiar? And then they could send us letters and money ordering things from our catalog that we could then ship to
01:22:51
them. So they became, you know, Walmart with the brick-andmortar stores and then
01:22:56
Amazon of his time absolutely dominated for 100 years. If you had said to somebody when I was first uh investing
01:23:04
in the 1970s that Sears Sears built the biggest building on the planet back in the '7s, what was then known as the
01:23:14
Sears Tower in Chicago. If you had said Sears its days are numbered, you would have been laughed at. But its days were
01:23:22
numbered because leaner, more aggressive competitors came along and ate its lunch. Nobody could have predicted that.
01:23:28
Certainly not me, but I didn't have to if I own the index because then when Walmart came along and then later Amazon
01:23:36
and Sears faded away, I own those as well. That's that self-cleansing process.
01:23:41
>> And just for anyone that really doesn't understand this at all, you're not
01:23:44
actually having to do anything because that index fund is just automatically making the decisions.
01:23:49
>> Exactly. I don't have to do anything. I just have to own it and I can own it
01:23:53
forever. So, if I went and I bought Sears stock as an example back in the day, well, whenever you own an
01:24:01
individual stock, you're going to be thinking about, okay, how long am I going to own this? And what is going to
01:24:07
trigger my sale of this particular asset? And what I mean, what has to happen to it that would make me not want
01:24:15
to own it anymore? And then, if I want to get rid of it and I want something in the same space, what do I buy? Do I buy
01:24:20
this new upstart Walmart? you know, do I buy this Amazon that back in the 90s is
01:24:25
run by this wacko guy, Jeff Bezos, who kept saying, "No, profits don't matter.
01:24:29
Profits don't matter." What who's who invests in a CEO that says profits don't
01:24:34
matter? I mean, that's nuts, right? But those are the kinds of things you have
01:24:37
to be have to be thinking about if you own individual stocks. I don't have to
01:24:41
think about any of that owning the index because if Jeff Bezos turns out that his
01:24:47
wackiness is brilliance, which it turns out it was, then he's going to rise to
01:24:53
the top, which it turns out Amazon did, and I benefited from that. If it turns out it was just wackiness, it would have
01:25:00
just faded away as a lot of companies have. But that wouldn't have mattered cuz whatever succeeds, I will I will own
01:25:07
and benefit from. I was asking um the research team beforehand >> in the last 10 years which index fund
01:25:16
has performed the very very best >> and it said that the NASDAQ 100 which is
01:25:23
very techheavy >> right >> has performed at almost 20% a year for the last 10 years and when I think about
01:25:30
what's going on in the world at the moment and the advent of this new technology called AI which is driving
01:25:35
everything it seems and our lives are going to become way more technological with robots bots and automation and full
01:25:40
self-driving. It appears to me like if there was ever a great time to be investing in an index fund, one should
01:25:47
aim at the very techheavy index funds like the NASDAQ 100. >> Mhm. >> Is that is is that logical thinking or
01:25:54
is that >> it's it's logical think? Yes. So first of all it's logical thinking and
01:25:59
actually had you done that same analysis 10 years ago you would have done better
01:26:05
than than uh VTSAX right because technology has absolutely dominated for the last 10 years it is a reasonable
01:26:13
speculation that that will continue into the future. >> So why don't you
01:26:18
>> for some period of time? >> Well because the truth is that technology has not always dominated.
01:26:25
We're not going to go backwards though, are we? >> Well, no, but the point is that that it
01:26:29
changes. So, just like in my Sears example, Sears would have been at the top of the index for a long time and
01:26:36
then it drifted away and got replaced. So, that's an individual stock. Sectors
01:26:42
of stocks have also done that over time, right? So, right now the dominant sector
01:26:49
is tech. Wasn't always the case. might not always be the case in the future. I
01:26:55
don't know cuz I can't see the future. I understand people who would say that
01:27:01
clearly that's the best bet to go with tech and your crystal ball is clearer
01:27:07
than mine and you might very well be right. But I don't have a crystal ball and I don't have to worry about that
01:27:15
owning the total stock market because if you're right, I will still benefit very
01:27:19
nicely. Thank you very much. If you're wrong, whatever replaces it, I will own.
01:27:26
>> So, you have an analogy you came up with that involves beer and a glass,
01:27:31
>> right? Probably came up with a drinking beer. We go ahead. >> Well, show me show me the analogy.
01:27:37
>> So, thanks for not Whoa. >> Oh, here we go. >> I was going to say, thanks for not
01:27:42
shaking up the can. >> So, beer, right? So, I'm pouring it right down the middle. So, we get a nice
01:27:49
thick head. That's even a little thicker than I hoped for. Okay. So, imagine for a second. Right now, we have
01:27:58
a glass and we can see exactly how much foam there is and how much actual beer there is, right? But imagine this was
01:28:06
that I poured it into this vessel instead where we couldn't see that. The analogy is the stock market. So,
01:28:13
when most people think of the stock market and when most people turn on uh CNBC, they turn on, you know, they look
01:28:22
at at at the investment news and what have you, it's all this churning and trading, you know, what stocks are hot
01:28:29
now, what stocks are rising, what stocks are falling, what's, you know, it's all
01:28:32
this trading. That's not the simple path to wealth. That's the foam, right? So
01:28:39
the value in a stock, whatever the stock is, what makes up the price of that stock is a combination of two things. It
01:28:48
is the beer and it is the foam. And the problem is unlike that glass, it's in a vessel like this. So it's hard
01:28:59
to see exactly how much beer there is as opposed to how much foam there is. >> And the beer is the value. The foam is
01:29:06
the speculation. >> Exactly. The beer is the fundamental operating value of the company, right?
01:29:13
The sales and the expenses and the money that's left over that you call profits,
01:29:18
right? >> Yeah. >> So that's the beer. The foam is what the market
01:29:23
determines that's worth at any given moment based on emotion, >> based and hype and speculation and fear
01:29:32
and greed. And so up here, right, is the total value of the stock, >> right? Exactly. The total value of the
01:29:40
stock. But this is all foam that can come and go very quickly, right? So let think about Tesla for an example, right?
01:29:48
Tesla has a lot of foam cuz a lot of people are speculating about the great things Tesla's going to do in the
01:29:57
future. robotic cars, humanoid robots, you know, all these kinds of things which very may well come to pass. I
01:30:04
mean, Elon Musk is a stunningly brilliant guy. So, who knows? But that's the speculation. That's the foam. The
01:30:14
underlying beer of Tesla, the actual operating company, does not justify the price of the stock. I mean, the the PE
01:30:22
ratio of Tesla, you can look it up, is some huge number, right? So there's a
01:30:28
lot of speculation, a lot of foam in Tesla. Now if things go to plan, then that foam will become as as in our
01:30:37
example, you notice the foam is dissipating. We're getting more and more beer. If things go to plan for Tesla,
01:30:42
that's what will happen. The foam will will eventually settle out into more and
01:30:46
more beer, and Tesla will justify that high price and maybe then some. And I guess Warren Buffett's greatness, if
01:30:55
I've interpreted his writing correctly, and why he was often considered as the
01:30:59
greatest investor of all time, was he was able to pay for stocks where it was mainly beer. And he paid at the price of
01:31:06
the beer, not for the foam. >> Or he he looked for times where the sentiment was so negative that he was
01:31:15
actually paying a little less than the price of the beer. Benjamin Graham who who wrote uh the intelligent investor
01:31:23
who was a mentor to Warren Buffett uh basically said what you should do is look for value companies and try to
01:31:30
determine where the beer is and then try to see if you can get a buying opportunity watch it where you can buy
01:31:37
it for less than the actual value of the operation. That's ideal. And in those
01:31:43
days when there wasn't so much information freely available that was probably a little easier to do. What
01:31:49
Warren Buffett has said since then and that's a great foundation if you're
01:31:53
going to pick individual stocks. But what Warren Buffett has said since then is he learned and I think and you don't
01:32:00
quote me on this but I think it was Charlie Munger who actually made this point to him that it's going to be very
01:32:07
very hard in this day and age even when they started back in the 60s to find companies where you can actually buy it
01:32:15
for less than the actual beer value. So don't try to do that. Just try to find
01:32:23
companies that you can pay a fair price for that have a lot of beer in the mix that are mostly beer. Because if you buy
01:32:32
those companies, they are by definition very well-run companies, strong brands, big moes around them, which makes them
01:32:41
hard to compete. >> I guess to do this, you're going to have to have a framework for valuing a
01:32:45
company. >> Exactly. And you're going to have to have great discipline,
01:32:49
>> which is >> Yeah. >> hard. And that's what you know as Warren
01:32:52
Buffett said I was blessed with an ability to allocate capital effectively and that's basically what he has done.
01:33:01
He's has capital and he is got the ability to look at different companies and say of all the different companies I
01:33:09
could allocate capital to he's pretty skilled at at picking the ones that are
01:33:14
are the best bets. One of the things that I really admired about Warren Buffett was his ability to do nothing,
01:33:21
>> which is one of the key things because that goes back to Charlie Munger's
01:33:25
thing, don't get in the way of your compounding, right? >> And there has been recent times where I
01:33:29
think we can all think of where using your beer analogy, something happens in the world and the true value
01:33:37
of a company is higher than the selling price. I.e. If you go back to March 2020 during the
01:33:43
the market selloff when the pandemic happened and everybody panicked, Amazon, for example, the stock briefly dropped
01:33:49
below roughly to about $1,500 per share. >> Mhm. >> Well below its intrinsic value um
01:33:56
because people were panicking, right? >> Uh and then it quickly rebounded again
01:34:00
past $3,000 a share. So theoretically, if you had noticed that drop, you could have made a
01:34:08
100% return on your money. Um, >> and by the extension, the whole market did that.
01:34:12
>> The whole market dropped, too. Yeah. >> So, you could have done that with your
01:34:15
index fund. This is why if you panicked and sold. >> Yeah. >> Let's say you owned Amazon or you owned
01:34:21
VTSAX and you panicked and sold, well, you would have you would have lost everything and then it it recovered. So,
01:34:29
it works both ways. That's why I said earlier in our conversation, you you have to stay invested so that the dip
01:34:36
doesn't matter. and if anything take advantage of the dip and buy more. So you own Amazon, you see it dip, you say,
01:34:43
"Well, I still believe in the company. I still think it's a good company and it's
01:34:46
got a good future." Or then maybe you buy some more in the dip and you do still better. But the important thing is
01:34:52
you don't sell when it's down because there's panic in the air. >> And I think this is um this speaks to a
01:34:58
broader sentiment throughout this conversation which is to do what others don't do. You know, and Warren Buffett's
01:35:03
famous for saying be fearful when others are greedy and greedy when others are fearful. But generally the sentiment on
01:35:10
social media, especially for younger generations and especially for men, which is supported by the data, is that
01:35:15
the way to make money is by like trading crypto or by right >> I mean there's so many people that sell
01:35:21
this is such a we need to address this. >> You know, it's a platform. >> It's a gambling. It's just gambling.
01:35:26
>> It's it's a gambling platform. And so that's going, you know, people sometimes
01:35:30
say to me, you know, I'd never invest in the stock market. It's just gambling. I
01:35:34
say, well, you're half right. Our foam is all dissipated. But if there were still foam here, I would say yes. If
01:35:40
you're doing it short-term and you're playing with the foam, absolutely is no
01:35:45
different than going to Las Vegas. If you're investing for the beer, it's an
01:35:49
entirely different story. And you're investing for the long term. And there's
01:35:54
lots of young people that are being tempted into buying a course that's going to help them learn how to trade.
01:36:00
>> That's great for the people selling the course. >> There's such an there's such an
01:36:04
incredible like ir obvious irony to the idea that I have some secret about trading that's really going to make, you
01:36:15
know, that is capable of making one wealthy, >> right? >> And I'm going to give it to you
01:36:20
>> or even sell it to you. >> Why would I need to if it worked, >> right? Like this is such an obvious
01:36:24
question to me. Like why would I need to sell it if it worked? >> It it is the obvious question. I mean,
01:36:30
you know, >> and I feel sorry. I have great empathy because the people that buy these things
01:36:33
are people that are desperate to get out of their financial situation and they run out of options and so it's very
01:36:37
compelling to hear that there's some secret that you can predict the stock market. It's very compelling.
01:36:42
>> You know, in another interview I I said one time we were talking about this same
01:36:47
line of conversation we're having and I said, you know, I blame my mother. I
01:36:52
would be a lot richer if she hadn't instilled a conscience in me. You know, she's cost me millions of dollars
01:36:59
instilling this conscience. I could have courses. I could be, you know, >> but no, I am saying that there is a path
01:37:08
that will give you great results and it's a pretty well proven path at this point.
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description below. Do I need a financial adviser? Cuz a lot of people out listening now
01:39:19
will be thinking, "Yeah, I will figure out my money situation when I have enough money to pay a financial
01:39:23
adviser." Yeah, I think uh my attitude is by the time you know enough to choose
01:39:30
a good financial advisor, which is no easy task, you probably know enough to do it on your own, at least on the
01:39:37
investing part. Now, there are life kinds of decisions where maybe advisors would be more useful, but again, you
01:39:47
have to be careful and and it takes you you need to really educate yourself as to how advisers get paid. For instance,
01:39:54
my attitudes, by the way, are colored by the fact that I I hear so frequently from my followers about bad experiences
01:40:02
with financial advisors. So, I have a negative opinion. To be fair, I know there are good ones out there, and all
01:40:08
due respect to those good ones, but let's suppose you have a financial advisor who gets paid based on the
01:40:16
assets under management, right? >> The amount of the amount that you've
01:40:20
given them. >> Exactly. Right. So, maybe it's 1%. So, you give them a million dollars and they
01:40:25
get 1% a year to manage that money for for you. Let's suppose you go to that
01:40:30
advisor and you say, "You know, Stephen, I've I've been thinking about paying off
01:40:35
my mortgage. I've got a half a million dollar mortgage on this house. It's 6%.
01:40:41
Let's say it's 5%. So, in that middle range, it's 5%. I'm thinking about
01:40:45
paying it off. What do you think?" Okay. Well, now Stephen has a bit of a dilemma
01:40:50
because he can certainly give you the most accurate financial advice he is capable
01:40:57
of giving you and answering that question. But if that leads him to say yes, pay
01:41:02
off the mortgage, he has just reduced his income by half because when you pay off that mortgage,
01:41:11
half a million dollars is going to go out from his management and paying off the mortgage company. So you have just
01:41:18
asked Steven to give you advice potentially that is bad for Steven. Now if Steven's a honorable, capable,
01:41:27
honest guy, then maybe Steven does that. But let's suppose Stephen has two kids
01:41:33
in college. Let's suppose Steven just bought a boat. Let's suppose Steven is going through a
01:41:40
divorce. Let's think about that. Maybe Steven, as honest and capable and and decent as he
01:41:49
ordinarily is, has financial pressures that might play a role, right? There is a conflict of interest frequently. So,
01:41:57
you have to understand how your advisor is being paid. >> How does your portfolio look? Where have
01:42:03
you allocated your money in terms of percentages? How much money do you have in real estate versus cash versus index
01:42:08
funds? >> Well, I don't even think about about the real estate. We have this cabin in
01:42:13
Wisconsin on the lake and then we have a condo in Florida. Um, they're both very
01:42:19
modest, so pretty small part of our net worth. I like to buy things from a position of power.
01:42:26
My stocks, I'm probably about 80% in in VTSAX, total stock market index fund,
01:42:34
and probably 15% in bonds, a total bond market index fund, and then the other 5%
01:42:42
in money market fund. I keep some money in uh the checking account to pay the bills. And to break it down a little
01:42:50
further for you, my wife and I both have IAS. We have a regular IRA and a Roth IRA. So there are four IAS. All four of
01:42:59
them hold VTSAX. We have taxable accounts and part of that is VTSAX. Part of it is the bonds.
01:43:07
>> What is a bond? >> A bond is money that you have lent to a company or to the government. So when
01:43:16
you buy a bond, you are essentially lending money to a company or a government entity. So they pay you
01:43:24
interest. So you will they companies and the governments sell bonds of various maturities. So they can be very short
01:43:33
like a money market fund is basically very short-term bonds, you know, like 30 days or less, right? Which makes it the
01:43:40
equivalent of cash. But you could buy a a certificate of deposit is a kind of a bond. So you could buy one of those for
01:43:47
3 months or 6 months or a year, 5 years, 10 years, buy US treasuries going out 30
01:43:53
years. >> Why would I do that instead of buying the index fund? >> So the index fund is stocks. It's it's
01:43:58
very stocks as we talked about big growth engine, great long-term, very volatile. So if you want something to
01:44:05
smooth the ride, bonds are not very good for long-term growth, but they are not nearly as volatile.
01:44:12
>> Are they so they're safer? short-term, yes, because they're less volatile.
01:44:16
Long-term, they tend to lose value to inflation. Stocks, on the other hand, are riskier
01:44:23
short-term because of the volatility, but long-term they outpace inflation and so they are safer long term. So, it
01:44:30
depends on your time horizon is which is which is safer. But traditionally people
01:44:35
think of bonds as being safer and really the way you should hear that is less volatile and stocks being riskier.
01:44:44
You should hear that is more volatile. >> So is it broadly true to say that if we
01:44:48
exclude your real estate 70% of your assets are in stocks, 20% in bonds and 5% in cash?
01:44:55
>> Probably more 80 155. >> 80% stocks, 15 bonds cash. Okay. It's
01:45:02
interesting because um >> which would be considered very very aggressive and I wouldn't necessarily
01:45:08
recommend that for most people my age. >> I thought it would be curious cuz we now
01:45:13
have this new alien amongst us called AI. I thought it would be curious if I went on Chatt and I asked Chatt the
01:45:19
question. I'm a normal person who earns $50,000 a year. I want to be financially
01:45:25
free in the future. Give me a one-s sentence answer based on all of the wisdom in the world taken from every
01:45:33
expert in investing ever. >> Why? I know what the right answer is. I don't know what the answer.
01:45:39
>> What do you think it's going to say? >> Read the simple path of wealth. I don't
01:45:42
think that's what it's going to say, but that's the right answer. >> And the the simple path of wealth talks
01:45:45
about three principles, right? >> Right. >> What are those three? I'm going to check
01:45:48
it against what it says. >> Avoid debt. >> Yeah. >> Live on less than you earn. Invest the
01:45:52
surplus. It said, "Focus on saving and consistently invest in lowcost broad-based index funds like the S&P 500
01:46:01
while living below your means and allowing compounding to work over time." I then asked another question. How do I
01:46:08
earn more? >> I should sue them for mining my book. >> Yeah, they probably did.
01:46:14
I said, "How do I earn more?" What do you think? You know if you if you
01:46:17
thought if your daughter came to you and said >> earn more in a job or >> I just asked a very broad question which
01:46:22
is I now and now how do I earn more was my question. >> I would say develop develop your skills.
01:46:29
>> Okay. >> It said to earn more focus on developing high demand skills.
01:46:33
>> Oh there you go. >> Seek opportunities for career advancement. Explore side hustles or
01:46:37
invest in assets that generate passive income like real estate or dividends. But I really think that you know I
01:46:42
really think there's a really important part there about developing high demand
01:46:46
skills. >> What are those going to be in the future? >> Yeah. >> With AI because programming for instance
01:46:53
used to be a very high demand skill and people said learn how to program. Yeah. >> From what I understand in the age of AI.
01:46:59
Yeah. That's not so much. >> I even think about my own life. At 18 years old I started learning about
01:47:06
social media. I dropped out of university doing my business management degree after one lecture and I started
01:47:10
learning about social media because I was building a business in social media and technology and although that first
01:47:15
business failed I I was 19 years old in 201 what 14 or something really understood this thing called social
01:47:24
media which led me to spend a year as a consultant flying around the world to all these companies doing social media
01:47:30
one of those companies turned around and said it's been so great could you turn
01:47:32
this into a company I said no I've been through the founder PT of starting a 3
01:47:37
months later I said yes turned into a company called social chain and that changed my entire life
01:47:42
>> that worked out well >> high demand skill I had even though I failed I had this high demand skill that
01:47:48
was honestly at the time paying me £70,000 a month >> you probably had it because you went
01:47:52
through the process of failing >> yes >> failure is you know it used to be in
01:47:56
some cultures that if you failed once that was it you were a pariah nobody would even look at you anymore failure
01:48:03
in our culture is just a stepping stone I've heard venture capitalists say they
01:48:08
won't even look at an entrepreneur to fund if they haven't failed at least
01:48:11
once. >> The advice I'd now give to my kids based on that is I would ask if my kids came
01:48:16
to me and said, "Dad, what should I go learn?" I would say go and work for a startup. I said
01:48:23
startup because you're going to be very close to the CEO and founder because
01:48:27
there's going to be less desks. So, you're going to be closer to the proximity. That is failing at the
01:48:32
cutting edge. So if it's AI, I'd say go work for an AI startup. I I probably not
01:48:37
going to work out. You're probably going to be the company will be bust in a
01:48:40
couple of months time, but you're going to be so close to the failure. >> You will learn so much.
01:48:45
>> Yes. >> I wish somebody had given me that advice. >> And that's that's like in a way I guess
01:48:50
roundabout way. What I did is I started a company that failed at the very forefront of a wave coming into shore,
01:48:57
which meant that as I hit, you know, as the wave crashed down and I was left there on my surfboard, I now had this
01:49:02
high demand set of skills that people were like begging me for, which set myself up. And frankly,
01:49:09
>> the D of a CEO would not be successful had I not spent the previous 10 years
01:49:15
understanding how social media, content creation, growth worked. Is there a favorite story in this book
01:49:24
of yours? >> Well, there's so many great ones. So, >> share some.
01:49:28
>> I already I already alluded to my favorite one, which is my friend Tom.
01:49:32
You know, because he has I mean, Tom was a guy who got to the age of 62. He'd
01:49:38
been through multiple divorces. He lost his house to foreclosure. He lost his job. He was broke. He went bankrupt. And
01:49:47
yet, his life has turned out pretty well. He's an extraordinarily happy guy.
01:49:52
That's my favorite story. But the one of the reasons I like this book so much and
01:49:58
one of the reasons candidly I did it is if you read through it, you will find there are some stories from people who
01:50:05
were tech bros, right, who made big incomes and they read the simple path to wealth and applied and it worked very
01:50:11
well for them. But there are many, many more stories of people who have accomplished this from much more humble
01:50:18
beginnings. Give me an example of >> I have a very good friend of mine, high
01:50:22
school buddy. I don't think he's ever made more than $40,000 a year. He is
01:50:27
financially independent because he followed the basic principles that I talk about in that book. I have a
01:50:34
different friend and he was in the financial business. He was living in Chicago and over lunch he told me that
01:50:40
his Christmas bonus had come in at $800,000. That's back in the mid '90s when that
01:50:45
was real money, right? And he was already making, I don't know, a million dollars a year or whatever it
01:50:50
was, big income. And he was broke. And you see, most people listening this thing, I said, "What are you talking
01:50:59
about? This guy got a bonus for 8. People paid me $800,000 for a year. I'd be done forever, right? And that'd be my
01:51:06
nut. I'm good. How can he be broke?" Well, when you listen to him talk about
01:51:11
the house, the cars, the schools, and you start doing the math, you realize that no, his income is not enough. He's
01:51:21
barely barely making it. So, here's a guy with a big income who is, unless he
01:51:27
changes his ways, is never going to be financially independent. Financially independent. Here's my guy with a tiny
01:51:33
income comparatively who got there. I've come to believe that a large income
01:51:41
actually can be an impediment to accomplishing it. And my reasoning for this is that I think people who have a
01:51:48
large income are much more likely to be drawn into the competing with the Joneses scenario because they associate
01:51:55
with other people have large incomes and they're all driving a certain car, living in a certain neighborhood,
01:52:01
sending their kids to certain schools and that probably becomes very hard to disengage with and making it perhaps
01:52:09
even less likely that they are going to decide to spend a large portion of their
01:52:14
income on buying their freedom. Whereas the people who make less money probably don't have those same social pressures
01:52:21
and are more readily able to do it. So starting from humble beginnings is no obstacle and that's was the point of
01:52:29
doing Pathfinders. >> Interesting. >> It does track that. I think the
01:52:36
goalposts continue to move in different ways and >> yeah, >> I guess you go from competing to the
01:52:41
Joneses to competing with the size of someone else's yacht, which is all slippery slopes to bad places
01:52:47
>> or your own or your own demons as we talked about earlier, right? >> Yeah. You mentioned a word in there as
01:52:54
well. You mentioned I think you were talking about your friend Tom. Tom had a divorce.
01:52:57
>> Multiple divorces. Yeah. >> I >> which is bad for your wealth.
01:53:02
>> Yeah. I didn't real I didn't I didn't realize this cuz I've never been through
01:53:05
one before. Um I spoke to James Ston on the show who's a divorce lawyer who kind
01:53:10
of opened my eyes to it. But actually I had a private conversation with a friend
01:53:14
here in New York City, I'd say a couple of months ago who's going through a
01:53:18
divorce and he he sat me down and he talked me through the specific consequences of of divorce that he's
01:53:26
going through. >> He said to me, he's a very successful person. I reckon he's probably worth 500
01:53:30
million, right? He said the divorce proceedings have now dragged on for five or 6 years. So I'm I'm having to go and
01:53:39
see lawyers all the time. And he said to me as well that he is paying for her lawyer which I was I didn't really
01:53:45
understand. But he was like no I have to also cover her lawyer costs because you
01:53:49
know I'm the the bread winner so she doesn't have money so I'm covering her
01:53:52
lawyer costs which is what I have to do. And he said the law firm have gone from
01:53:56
being a very very small practice in those six years. Now they have a massive building and he goes, "I know it's my
01:54:03
money. I bought it. I bought it." >> He literally is like, "I have paid for
01:54:06
her lawyer and now they're doing really really well and they're milking this
01:54:09
this case. They're drawing it out because they have no incentive to this to this ending." Yeah.
01:54:14
>> So he's like, "I've spent tens of millions on her lawyer who is basically
01:54:17
dragging me. Um, and now they've got this massive building." What else did he
01:54:21
say to me? He said, "Because some of my assets are subjective in value, like my
01:54:27
company, her lawyer is inflating the price of my assets because she's going to get half of whatever they can
01:54:34
convince a judge my assets are worth." So he, you know, for example, his business might be worth 100 million, but
01:54:39
the lawyer is making the case to the judge that it's worth 500 million so that she gets 250 million. He also said
01:54:46
to me, >> which really isn't there, >> which really he doesn't have, right? And
01:54:49
then he was saying to me, he goes, you know, I bought this particular stock. >> So he is, I'm sorry to interrupt you,
01:54:53
but now he's forced to fight it. >> He's fighting. >> It's not like he could just say, okay,
01:54:57
she can have half. >> Yeah. >> Because this is a judgment that is going to create a a an
01:55:03
obligation on his part for assets that don't actually exist. >> So it's more than half.
01:55:08
>> She could end up taking 60 70. And the other thing he said to me, which was
01:55:12
quite sad, he was like, you know, I was one of the f He was one of the early investors in a big company that we all
01:55:16
know. and um he said to me, I bought that stock 15 20 years ago. It's actually quite emotional to him that he
01:55:23
was so early in back in the company and now he's forced to sell that. So he has
01:55:28
to liquidate investments he made 20 years ago because again she's entitled to half
01:55:33
>> and that'll be a huge tax hit. >> A huge tax hit, >> right? And I think some people don't
01:55:38
realize that wealthy people can get a loan against that stock without ever having to sell it.
01:55:47
>> So he's probably, if he's wrong, he's probably got a big loan against that
01:55:51
stock, >> right? >> Probably a 50% loan. So, just for anyone that doesn't understand this, because I
01:55:56
only understood this in the last couple years where where I started doing similar things, is if the stock is worth
01:56:00
a h 100red million, he can get 50 million tax-free from a bank just by keeping that stock there and really
01:56:06
never have to pay it back because it's such a great stock. Um, and it was also
01:56:12
just looking in his face and just seeing the stress and the toll of having to go
01:56:15
to court all the time and fight this thing for six or seven years that I thought, wow, we we give people
01:56:21
financial advice all the time about the best stocks to pick or invest in index funds. We don't talk enough about the
01:56:28
how divorce can just destroy your life. >> You know, you have to be so careful in
01:56:32
choosing your spouse. I've had push back on that and people say, "Well, then
01:56:37
you're choosing your spouse is not a financial decision. It's, you know, it's
01:56:40
emotional, it's romantic, it's well, yeah, it's all those things, but it you
01:56:44
better take finance into account for all the reasons that we're discussing." This
01:56:49
also, by the way, loops us back to an earlier part of our conversation where does money buy happiness? Does, you
01:56:55
know, being richer, is that always necessarily better? Well, this guy is more of a target because of
01:57:02
his wealth than he would be if he were. So, is his money really making him happier at this point in his life? Yeah,
01:57:08
probably not so much, you know. >> You know, and he's he's going to be fine
01:57:12
either way, like sure, you know, um which is a point worth saying of nuance, but also and the other point of nuance
01:57:18
worth saying is that >> he's going to be fine financially, but emotionally it's he's still going to go
01:57:23
and she's probably going through it too on the other side. >> Yeah. And the other point of nuance here
01:57:28
is that she did raise the four or five the the three or four kids >> while he was off building the business
01:57:37
for, you know, 20 odd years. So, one could argue that he wouldn't have that wealth without her being at home to look
01:57:43
after the kids and she'd made huge sacrifices to her own career, >> right?
01:57:47
>> So, you know, there's balance. But I I just think with um James Ston said to me, even if you don't
01:57:53
get a prenup, there's still a prenup. You either use the government's prenup,
01:57:58
>> which is >> or you create your own, >> or you create your own. Either way,
01:58:01
there's a prenup. >> Absolutely. >> Do you want to let some judge decide
01:58:05
>> or do you want to be intentional before you get married with your partner about
01:58:09
how things will be split? >> And even when I think about my partner at the moment, and we're probably going
01:58:13
to get married soon. >> Congratulations. >> Thank you. I haven't proposed just yet,
01:58:17
but I'm working on it. Don't tell her that. >> We We just let the secret out.
01:58:20
>> She doesn't She doesn't WATCH THIS ANYWAY. >> Someone's going to do
01:58:24
>> Wait a second. But I'm on this time, so this is the one episode she's going to
01:58:28
watch. >> True. >> Well, I'm very fortunate as if this spring I will have been m married 44
01:58:33
years. >> Damn. >> And I I tell people I I married my wife out of the gate. Why wait? Do you have a
01:58:41
framework for choosing the person or for sustaining for 44 years? Cuz I'm what,
01:58:46
six, seven years in with my girlfriend, but you got 44 years in. >> Funny story about that is people used to
01:58:54
ask me, did you and Jane sit down and discuss money before make sure you were on the same page financially before you
01:59:00
got married? And I always used to say, you know, it's a great idea. You should
01:59:05
do that. But no, we never did that. I just I just got lucky. you know, we never talked about it, but as it
01:59:11
happens, we got married and we were very, very compatible financially, which we are, but just got lucky. Well, I told
01:59:18
that story in front of her one time and she leaned back in her chair and she said, "What are you talking about? On
01:59:25
our first date, you said to me, you need to be saving 50% of your income." You
01:59:30
said, "What do you mean we never talked about money?" I guess that's such a natural part of my
01:59:36
persona. I didn't even remember doing it. >> Interesting. >> My last question for you is about
01:59:42
regret. You said you're 75. >> I am. >> What are your biggest regrets?
01:59:48
>> So, I I think regrets are are tricky and and I will I'll answer your question
01:59:54
directly and it's a couple of things that or at least one thing that occurs to me that might be surprising.
02:00:00
The reason they're tricky is because there is an assumption like you re you regret doing A and you think if only I'd
02:00:07
done B, things would be better. But you don't know that that's true. But you
02:00:11
might say, "Boy, I regret starting that company that failed because it was a
02:00:15
failure." Well, yeah, but it led to something much bigger. You learned so much. Now maybe if you'd said instead of
02:00:23
starting that company that failed, maybe I took this highpaying job and and I worked my way up through the corporate
02:00:30
organization. And you'd be saying there, you know, you'd be sitting at some high
02:00:35
executive level in this corporation and looking back and saying, "Wow, am I glad
02:00:39
I didn't do that startup that failed, right?" And yet you're so much further
02:00:44
ahead now than if you So who knows? Who knows what choice you made that appears to be the wrong choice as to whether it
02:00:53
really was. Maybe it was exactly right. Maybe things would have turned out better, maybe they wouldn't. So, I'm
02:00:58
very hesitant to look back on. There are many things I can look back on and say,
02:01:02
"Gee, I do wonder what if I'd gone down the right path instead of the left path.
02:01:08
What would that have looked like?" But there's no guarantees it would look
02:01:12
better and my life has been pretty damn good. So, in that sense, I have no regrets.
02:01:17
Two regrets I do have, very personal regrets. I don't I've never shared these
02:01:22
publicly. When I was a kid, my father was a very handy guy. He loved building things, working on the house,
02:01:32
that kind of stuff. I was not that kind of kid. And I don't know, I was eight or 10 years old at one
02:01:39
point. And for my birthday or Christmas, I don't remember, he brought me a bought
02:01:45
me a jigsaw, which is a for people who don't know, it's a it's an electric saw.
02:01:51
It's got a little blade. It goes up and allows you to cut wood and very fine
02:01:55
kinds of patterns. Last thing in the world this kid wanted. And I let my dad know and he was crushed
02:02:06
because for him it was the best gift he could possibly think of to give to an eight or
02:02:13
10year-old or whatever it was. And so one of the regrets and I give myself some grace cuz I was very young and
02:02:21
reasonably you could expect that I didn't have the maturity to deal with it the way I would. But I I do regret
02:02:28
because I could see the pain in his face when I I kind of rejected that gift, right?
02:02:37
And maybe that taught me a good lesson in being more empathetic going forward. So again, do I really regret it? Well, I
02:02:44
regret that I hurt my father, but I learned something pretty valuable. >> And you've let you've remembered that
02:02:51
for 70 years. >> I've remembered that for 70 years. Yeah. Yeah. I've got similar stories of things
02:02:58
ways I reacted as a kid. >> I think most people do. >> You know, yeah, it sucks.
02:03:03
>> And then my second one, and this is even bigger. I was 24 when my dad died
02:03:09
and he died of emphyma and slow lingering death. He died in the hospital. And the night before he died, the day before
02:03:21
he died, I was visiting him and um he was sitting on the edge of the bed and he said to me, "Uh,
02:03:33
I'm going to die now. You know, I'm I'm going to die tonight." Turns out, of course, he was right. He
02:03:44
did. That was the night he died. And instead of recognizing that this was a moment where
02:03:55
he wanted to talk to his son about this this probably the most momentous event that any of us will ever face.
02:04:05
Right? Instead of recognizing that, I went to the typical trope of, "Oh, dad, don't don't talk like that. You
02:04:13
you're not going to die. you got a long way to go. You're going to be fine. I
02:04:17
went to all that [ __ ] instead of just recognizing whether he was right or wrong
02:04:26
that he was facing a momentous thing and he didn't want to hear don't don't think about that think more
02:04:36
positively. He he wanted to share with his son what he was facing. And I regret that I wasn't there for him
02:04:50
in that moment. But I regret that I didn't get to experience that with him in that moment.
02:04:58
So that's my biggest. >> I can still see it still in your face. That was 50 years ago.
02:05:14
>> Is there a reason why you think in that moment you didn't want to go in that direction with him?
02:05:22
>> Was it a matter of what I wanted? Cuz it's not like I considered I can either blow it off, which is what
02:05:29
I did, or embrace it and go there with him. I I didn't even think that way. It's not like
02:05:36
it's not like I made the wrong choice. I wasn't mature enough to recognize there
02:05:41
was a choice. I wasn't mature enough to recognize the real dynamic of what was happening.
02:05:49
>> And for that you deserve grace. >> Thank you. And I agree with that. But I
02:05:55
still regret it because how much better for both of us would it have been if I had recognized it? JL, we have a
02:06:05
closing tradition on this podcast where the last guest leaves a question for the
02:06:07
next. >> What is something that you think is true that you haven't yet been able to
02:06:14
validate? I think at at this point in my life, I'm I feel pretty comfortable
02:06:22
about what I think is true. Right? So, I'm not sure this answers the question,
02:06:29
but uh but a good example is I am pretty sure that there is no afterlife, right? I I have a high degree of
02:06:42
confidence to that. But of course, as the song once said, we never know by living and only our dying will tell. And
02:06:50
I am very curious about death. I am very curious as to what is on the other side, if anything.
02:07:02
So, in a perverse way, I guess I'm I am looking forward to my death, right? I I
02:07:09
don't want to get there too soon. I mean, I'm as long as I'm mentally and
02:07:12
physically capable, I'm happy to continue living. Thank you very much. But I do have a great curiosity about
02:07:18
death, and I'm almost 100% sure that when I'm dead, that's just it. It's
02:07:24
over. But I'm curious, and it'll be interesting if I die, and it's like,
02:07:30
whoops. You know, it's like, oh, there is a guy with a white beard and okay, I'll just show myself out. Thank
02:07:37
you very much. There was one last question I wanted to ask you which is kind of just about the
02:07:41
subject of happiness. Again at 75 years old you have a retrospective clarity that I don't yet have on what actually
02:07:46
mattered. What actually matters? >> Nothing. Nothing really matters ultimately.
02:07:57
>> Nothing. >> Yeah. I think that's kind of like asking what's the
02:08:03
meaning of life, right? And I don't think there is a meaning to life when you look at the scale of the
02:08:10
universe, the scale of the cosmos. The concept that we as individuals bear some meaning
02:08:22
seems to me to be silly. Human beings have been around for I don't know two 300,000 years depending on when you
02:08:30
define homo sapiens. I mean that's that's a infantestibly small smudge of
02:08:38
time in that has happened already and that will happen in the future even if humans
02:08:44
last for another few million years. It will be an infinitely tiny bit of time against this huge
02:08:52
cosmic universe and our individuality within that is infantessimally small and I think there's some great meaning
02:09:03
behind that seems to be to be the height of arrogance. So I think that if you go
02:09:08
through life and you treat people pretty well and you have a a pretty good good run of it, I think you've done well. I
02:09:19
don't but I don't think there's something profound in that. >> So So what is the point then? Is there a
02:09:26
point? Is that the real question? >> There is no point. I mean the the point
02:09:29
is we happen to be here and it can be a good fun ride. It can be a very difficult ride depending on what you
02:09:36
make of it and in some cases depending on your circumstances. There have certainly been people in history that
02:09:42
have born been born into circumstances that you know made it a a miserable existence
02:09:50
with no options out of it. I mean what's the meaning of that? You know, you and I
02:09:55
and the vast majority of people listening to us, probably I venture to say 100% of them have a lot more
02:10:02
autonomy over over how we can make our life. And will it have great meaning? No,
02:10:10
ultimately not. But it's the only life you have and you may as well make the
02:10:14
best of it. >> I actually listened to something last night by a guy called Lucas Jones who is
02:10:20
an actor. Um, he has some great books. He's also a poet as far as I'm aware.
02:10:24
I'll link his books below. Um, but he he made wrote this poem which I thought was
02:10:28
quite related to that that I'm just going to play for you cuz I think it's
02:10:31
kind of captures the essence as well of what you're saying. >> He starts by saying, "I saw God on the
02:10:35
train." >> Okay. >> Saw God on the train. >> A pretended I didn't. So, I sat far away
02:10:39
from the seat he was sitting in. And then he got up, I think probably to piss and he noticed me there and said, "All
02:10:45
right, what's this? What are you saying? You hiding from me?" I said, "Ah, mate,
02:10:49
nah, just a comfy seat." And he looked at me like I was a kid covered in chocolate surrounded by rappers saying,
02:10:54
"Don't know what happened." And he go, "It's coming then, mate. I've got a few
02:10:58
minutes. Tell me what's wrong, but don't [ __ ] around with it." And it shocked me
02:11:02
then that it fit in one sentence. I said, "Just think heaven's a stupid
02:11:06
incentive." Like what a [ __ ] life for a beautiful death. And those who are evil
02:11:11
can suddenly repent like a killer or not can live like a monster. Then right at the end say, "I'm sorry, dear God, sir."
02:11:17
And end up in heaven right there with my nana. She's doing some knitting. He's
02:11:21
waving a hammer. He's like, "Jesus god, what a horrible deal." And he goes,
02:11:24
"Yeah, it's [ __ ] I know how you feel." I'm like, "Mate, you're the one
02:11:28
spinning the wheel." And he goes, "Listen, I'll tell you a secret." All
02:11:31
that stuff, mate. I didn't speak it. Like the old joke says about liars and men. If God wrote the book, why are you
02:11:37
holding the pen? Now, the rules I wrote, I wrote on your heart. Truth I spoke, you've known from the start, be kind,
02:11:43
don't harm, isn't that hard. Heaven is just life if you're doing your part. You
02:11:47
want white clouds and endless skies. Uh, yeah. Look around. You don't have to
02:11:51
die. I know it probably brings you some pain to think of the dead as just dust in a grave. But humans can't comprehend
02:11:57
it when I say life is the cloud and death is the rain. And I got to my stop and felt kind of mad. Not sure he
02:12:05
answered the questions I had. Then I looked up and saw the sun rising. Said, "You're looking for heaven, but you're
02:12:12
the one hiding." >> LJ, thank you. Thank you for writing these incredible books that I highly
02:12:20
recommend anybody who is on their own journey to financial freedom and is looking for a free life, a financial
02:12:26
independence or just independence from one's own tormenting psychology should h
02:12:32
should uh should buy this book. The simple path to wealth has been an absolute smash hit for um understandable
02:12:39
reasons once you read it. Sold many millions of copies from what I understand, more than a million copies
02:12:43
at least. And I highly recommend everybody goes and starts with this book and then picks up Pathfinders. I'm going
02:12:49
to link both of these books below. And there is a third book, it's slightly smaller, called How I Lost Money in Real
02:12:53
Estate Before It Was Fashionable, A Cautionary Tale. Um, I'm going to link all of them below. And if anybody else
02:12:59
wants to find more of your work, is there anywhere else that they can get in contact with you, read your work that I
02:13:04
should recommend? So probably the easiest thing is the blog which is jlinsnh at uh or.com and uh you know you'll find
02:13:14
a lot of my writing. I don't write on the blog too much anymore but the material that's there is evergreen. It's
02:13:21
the source material for the books that you were kind enough to share. Uh the last book the how I lost money in real
02:13:27
estate is if somebody wants to have a laugh at my expense that's the book they
02:13:31
want to pick up. >> Thank you for doing so much of what you do. Um, I know what the comments are
02:13:34
going to say already. They're going to be people talking about how soothing your voice is, and I I happen to I
02:13:39
happen to agree. Thank you so much. >> My pleasure. Thank you for having me.
02:13:47
>> If there's anything we need, it is connection, especially in the world
02:13:51
we're living in today. And that is exactly why we created these conversation cards. Because on this
02:13:56
show, when I sit here with my guests and have those deep, intimate conversations,
02:14:00
this remarkable thing happens time and time again. We feel deeply connected to each other. At the end of every episode,
02:14:07
the guest I'm interviewing leaves a question for the next guest, and we've
02:14:10
turned them into these conversation cards, and we've added these twist cards
02:14:14
to make your conversations even more interesting. And there are so many more twists along the way with the
02:14:20
conversation cards. This is the brand new edition and for the first time ever, I've added to the pack this gold card,
02:14:25
which is an exclusive question from me. But I'm only putting the gold cards in
02:14:30
the first run of conversation cards. So get yours now before the limited edition
02:14:35
gold cards are all gone. Head to the link in the description below.