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Speaker 1: Welcome to Hod of Money. I'm Joel and I am Matt,

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Speaker 1: and today we're talking about how investing is risky, but

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Speaker 1: you should do it anyway. With Jesse Kramer. Yeah, we're

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Speaker 1: joined today by our friend Jesse Kramer from the Best

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Speaker 1: Interest and at his core, Jesse is a financial educator,

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Speaker 1: and he also doesn't shy away from any of the

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Speaker 1: technical or any of the financial details, which is one

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Speaker 1: of the reasons why we're really excited to have him

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Speaker 1: on today. He's going to provide all the investing answers

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Speaker 1: here for us, and so he loves personal finance so much.

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Speaker 1: He quit a pretty lucrative job. He quit a lucrative

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Speaker 1: field that he was in in order to join a

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Speaker 1: fiduciary fee only wealth management firm. And so we hope

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Speaker 1: to get to a ton of different top today, like

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Speaker 1: whether you should be contributing to a five twenty nine

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Speaker 1: account or not, maybe how much risk we should be

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Speaker 1: willing to take when it comes to our investments, how

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Speaker 1: much of our investments are di wiable, Maybe even how

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Speaker 1: much we should be depending on social security because that

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Speaker 1: doesn't seem like it's going to pan out well for

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Speaker 1: most of the country. But I'll have to be said, Jesse,

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Speaker 1: thank you so much for joining us today on the podcast.

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Speaker 2: Matt Joel, it is an honor to be here. Thank

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Speaker 2: you for that very very kind introduction. And yeah, all

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Speaker 2: those topics you laid out there sound really fun to

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Speaker 2: talk about.

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Speaker 1: Why I'm here, Yeah, a lot to cover. And I

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Speaker 1: don't know, Matt, you might have been a little harsh

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Speaker 1: on social security there. So we see we get to

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Speaker 1: Jesse's TV. Yeah, yeah, exactly. Only time will tell, well, Jesse, Yeah,

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Speaker 1: first question we ask everyone who comes on the podcast

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Speaker 1: is what do you like to suplore? John, Because obviously

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Speaker 1: you doing the smart thing. You're saving and investing for

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Speaker 1: your future, but you got to spend a little bit

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Speaker 1: of money in the here and now. What's that thing

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Speaker 1: you like to prioritize? Totally?

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Speaker 2: You gotta have fun. You gotta have fun. I'd say, Well,

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Speaker 2: my wife and I, you know, we definitely combine five nances.

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Speaker 2: So as a couple, we love a nice meal out.

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Speaker 2: Who doesn't, And we love a nice trip some traveling.

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Speaker 2: On the personal side, though, I like racket sports a lot,

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Speaker 2: and so I'm not afraid to drop more money than

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Speaker 2: the average person on a new racket or good shoes,

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Speaker 2: new equipment, something like that.

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Speaker 1: Okay, sos Andre Agassi of New York, does this also

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Speaker 1: include what's it? Pickleball? So does this also include a

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Speaker 1: fancy paddle?

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Speaker 2: It's funny, So I've played a tiny I actually really

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Speaker 2: haven't gotten too pickleball the way that many other racket

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Speaker 2: players have. I still play a lot of squash, which

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Speaker 2: is kind of like racketball. Inside. I'm here in Rochester,

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Speaker 2: New York, and you have to have a winter activity,

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Speaker 2: so mine is really squash. And then I'm getting into

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Speaker 2: tennis and this random sport that's really not national, but

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Speaker 2: it's kind of like pickleball, I suppose, which is called

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Speaker 2: platform tennis or paddle tennis, but depending on who you ask.

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Speaker 2: So I've gotten into that a little bit too, very fun.

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Speaker 1: So did you start playing squash, because I'll say I've

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Speaker 1: played a decent amount of squad college, which makes it

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Speaker 1: sound like I went to some like Ivy League store

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Speaker 1: or something like that. Ye see you at the squash courts,

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Speaker 1: but I just took it as a class, not a

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Speaker 1: questioning polo in your history too, mass Yeah, Formula one racing.

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Speaker 1: That was a big sport at my college where I

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Speaker 1: went to.

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Speaker 2: Let me ask, Hi, Matt, do you use summer as

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Speaker 2: a noun or as a Now that is a I

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Speaker 2: did get into squash in college. It's a long story,

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Speaker 2: but the short answer is the college coach at the

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Speaker 2: University of Rochester was looking for a few walk ons

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Speaker 2: to round out the roster. I was an athlete. I

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Speaker 2: played basketball and baseball growing up. I had friends on

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Speaker 2: the squash team and they're like, hey, man, just come

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Speaker 2: out and try to see if you can get one

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Speaker 2: of these walk on spots. And I did, and it

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Speaker 2: exposed me to some really, really good players. I was

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Speaker 2: never one of them, but I kind of was this

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Speaker 2: gym rat that fought my way onto the team. And yeah,

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Speaker 2: I mean U of R. For a while we had

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Speaker 2: a very good team. I think in twenty fifteen or

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Speaker 2: twenty sixteen we finished second in the country. We lost

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Speaker 2: to Yale IVY League. There you go, lost a Yale

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Speaker 2: in the national finally, so I was surrounded by some

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Speaker 2: really good, world class players.

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Speaker 1: Cool.

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Speaker 2: It's hard not to get a little bit better yourself

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Speaker 2: when you're playing with people who are that good.

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Speaker 1: Were you able to parlay that walk on into a scholarship?

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Speaker 1: At any point in time.

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Speaker 2: No, no, I got no financial benefit which a German whatsoever.

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Speaker 2: But but I tell you what it was. It was

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Speaker 2: great at I got to meet cool people from all over.

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Speaker 2: I got to be part of the local kind of

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Speaker 2: uh more citizens community here in Rochester and have met

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Speaker 2: a ton of good people, including someone who ultimately referred

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Speaker 2: me to my now boss.

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Speaker 1: Right.

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Speaker 2: That networking happened through squash, So it's just a great

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Speaker 2: little lesson and the people you meet and the connections

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Speaker 2: you make and the potential long term benefits you can

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Speaker 2: you can get from that absolutely.

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Speaker 1: And plus that's how you met the Winklevoss twins.

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Speaker 2: Correct, that's yeah, that is how I got introduced to

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Speaker 2: dose coin.

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Speaker 1: Well, hey, it's exactly right. On another personal note, you

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Speaker 1: just had a baby, a baby a couple months ago,

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Speaker 1: so congrats there. But I'm curious if, like, has that

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Speaker 1: shifted any of your money or any of your financial beliefs

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Speaker 1: at all, Like, like, have you had any paradigm shifts

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Speaker 1: since welcoming Mave to the world.

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Speaker 2: Yeah, little baby Mave, she's about ten weeks old. Thank

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Speaker 2: you guys, and it has I mean, introducing a new

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Speaker 2: child in your family does expose depending on the person,

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Speaker 2: but a lot of different shifts, and it can go

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Speaker 2: back to before the baby arrived, and my wife and

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Speaker 2: I were having conversations about, you know, let's earmark our

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Speaker 2: dollars and what do we need to think about this year,

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Speaker 2: whether it's something like, hey, we're only on a bronze

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Speaker 2: healthcare plan, so how much money do we need to

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Speaker 2: set aside for the actual cost of childbirth to how

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Speaker 2: will our monthly finances change in terms of you know,

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Speaker 2: diapers aren't cheap as you guys know, or even something

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Speaker 2: little like you know, like many babies, there's a little

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Speaker 2: hiccup here or there, and may've had to have a

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Speaker 2: little small procedure early on in her life. And it

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Speaker 2: was interesting just sitting there and when we heard about

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Speaker 2: what the cost of it would be to us, how

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Speaker 2: it was basically like a saying no was a non starter.

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Speaker 2: I suppose it's a negative. The idea was we were

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Speaker 2: going to say yes, yeah, like right, you have to

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Speaker 2: say yes, you know, it's for the health of the child.

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Speaker 2: And then but you do have to realize after the

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Speaker 2: fact you kind of have to go back and be like, oh,

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Speaker 2: we need to rearrange the budget. Now we need to

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Speaker 2: figure out how this is going to fit in because

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Speaker 2: this has to happen, and it means that you have

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Speaker 2: to shift other priorities in your in your personal finances.

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Speaker 1: For sure, that's a good point. Yeah, I was relaying

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Speaker 1: this to Matt this past weekend. We had an orthodontia emergency.

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Speaker 1: My daughter bid it on a skateboard, and it was like,

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Speaker 1: we're fortunate, fortunate, fortunate, but like, yeah, I was told

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Speaker 1: telling them Matt, like if the if the orthodonist had

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Speaker 1: said in that moment, hey man, I'll come in, but

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Speaker 1: it's gonna be five thousand bucks, I would have been like, done,

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Speaker 1: let's go, like I'll pay, I'll rearrange everything, I'll figure

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Speaker 1: it out. And that's that's true. Like when you become

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Speaker 1: a parent, it's important to understand that that's going to

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Speaker 1: be the reality, and then you're gonna have to potentially

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Speaker 1: you have to make some forward looking changes. But then

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Speaker 1: also you might have to if something unexpected comes along,

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Speaker 1: you might have to rearrange a budget like you, like

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Speaker 1: you mentioned, I'm curious too, Jesse. You write about five

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Speaker 1: twenty nine plans, they hit a little differently when you're

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Speaker 1: saving for a baby that's actually on the scene. Are

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Speaker 1: they overrated or underrated? And have you started saving for

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Speaker 1: Mave's higher education yet?

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Speaker 2: Yeah, I opened I opened her five to twenty nine

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Speaker 2: plan three weeks ago.

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Speaker 1: Nice, it's like a ride a passage.

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Speaker 3: Yeah, of course Jess was holding that like right, It's

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Speaker 3: like he's probably looking forward to that more is versificate

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Speaker 3: and then opening the five twenty nine.

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Speaker 2: I remember her first laugh, I remember her first words,

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Speaker 2: and I remember when I opened her five twenty nine. Yeah,

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Speaker 2: and I know, I think a couple of weeks ago

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Speaker 2: was the first automated payment, automated contribution into that five

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Speaker 2: to twenty nine plans. So yeah, it's it's real, it's happening.

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Speaker 2: But back to your question, are five twenty nine plans

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Speaker 2: overrated underrated? I don't know. Maybe they're they're rated about

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Speaker 2: the right way. But the one the one thing that

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Speaker 2: I do have a pretty strong opinion about when it

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Speaker 2: comes to five twenty nine plan is I think the

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Speaker 2: smart financial planning thought process needs to be for a

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Speaker 2: parent to assume that some of their planned gift to

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Speaker 2: their children is going to come from a five to

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Speaker 2: twenty nine, but not all of their planned gift the

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Speaker 2: reason being is that of the one of the bad outcomes,

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Speaker 2: or one of the outcomes that I'd want an individual

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Speaker 2: to avoid is the outcome where the kids are all

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Speaker 2: the way through college and there's really no more outlays

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Speaker 2: of money when it comes to education in the family's future,

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Speaker 2: and yet the family still has a significant amount of

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Speaker 2: money left over in a five to twenty nine. That's

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Speaker 2: something I want to avoid. I'd much rather have a

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Speaker 2: family say, yeah, we spent every single last dollar out

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Speaker 2: of our five twenty nine, and then we needed to

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Speaker 2: supplement it a little bit more with a taxable account.

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Speaker 2: I think that's a much better outcome.

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Speaker 1: You're hedging your bets by sinking some of that money

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Speaker 1: in a tax bile brokerage.

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Speaker 2: Exactly right. You're hedging your bets. You're giving yourself some

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Speaker 2: flexibility along the way should you need to for some

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Speaker 2: reason or another and emergency strikes you actually want to

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Speaker 2: tap into that college saving money. By having a little

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Speaker 2: bit on the side in a taxable brokerage. Boom, You've

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Speaker 2: just given yourself that bit of liquidity.

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Speaker 3: Uh.

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Speaker 2: And then depending on the reasons for depending on the

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Speaker 2: reasons for a child not utilizing all their five twenty

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Speaker 2: nine dollars. There can be taxes and penalties associated with

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Speaker 2: trying to claw that that money back out.

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Speaker 1: Yeah, well, and you can always just have another.

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Speaker 3: Baby, because then did you get past that point? If

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Speaker 3: that's a smart money movie, maybe that's the tailback and

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Speaker 3: the dog.

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Speaker 1: But don't ask me.

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Speaker 2: I've got four kids, Jesse.

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Speaker 1: We've hung out with you a fair number of times.

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Speaker 1: But actually, like, I don't know your I don't think

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Speaker 1: I know your money origin story, and so how did

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Speaker 1: you become obsessed with You're not obsessed with money, but

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Speaker 1: more like financial education because I didn't mention the best Interest.

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Speaker 1: It's a blog, it's a podcast, it's a newsletter. That's

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Speaker 1: that's a podcast. That's why Jesse's for media. That's why

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Speaker 1: he sounds so great technically over there. But it's a

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Speaker 1: merched line as well. I've actually got a best interest shirt,

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Speaker 1: yes you know, yeah, but yeah, how did you get

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Speaker 1: into teaching others about personal finance? Jesse?

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Speaker 2: Just so we could the merch line is exactly one

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Speaker 2: T shirt, of which I think I printed seventy five

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Speaker 2: of them, so it's not it's not really a merch line. Yeah, well, no,

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Speaker 2: great question. How did I get involved with this stuff

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Speaker 2: in the first place. I mean, depending on how far

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Speaker 2: back you want to go. I suppose I've always been

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Speaker 2: a little bit of a savor, a little bit of

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Speaker 2: I'm actually reading a biography of Warren Buffett right now

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Speaker 2: by Roger Lowenstein. Awesome book. If you're a Buffet fan

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Speaker 2: out there. It's really good and fun and entertaining, and

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Speaker 2: it talks about how Buffet growing up and even in

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Speaker 2: his career when he's like this early kind of thirties

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Speaker 2: forties investor, he didn't necessarily want to be rich for

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Speaker 2: the sake of being like It's not like he wanted

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Speaker 2: to spend money on huge things. He just thought of

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Speaker 2: saving money and growing his accounts as an interesting game

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Speaker 2: and a game that he loves to play, and a

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Speaker 2: game where when he saw the number go up, it

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Speaker 2: made him feel good, and so he kept playing it.

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Speaker 2: And when I read that, I kind of could relate

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Speaker 2: to that a little bit of just growing up and

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Speaker 2: having my summer jobs or earning an allowance and enjoying

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Speaker 2: being able to look at my bank account and say, oh,

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Speaker 2: bank account's going up. That's cool. And I can look

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Speaker 2: at my bank account as a bit of a measuring stick,

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Speaker 2: or I can look at my accounts in general as

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Speaker 2: a bit of a measuring stick, not against other people

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Speaker 2: at all, but just against my past self and say, wow,

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Speaker 2: over the last year, over the last five years, over

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Speaker 2: the last ten years, I've accomplished these things. So then

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Speaker 2: fast forward to my first job out of college. I'm

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Speaker 2: twenty three, twenty four years old. I've got some student

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Speaker 2: loan debt, I've got a car loan, I'm paying all

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Speaker 2: my bills, I'm earning a reasonable salary. My dad told

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Speaker 2: me I should contribute in a four toh one k.

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Speaker 2: I'm not really sure why at the time, and the

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Speaker 2: whole idea is like I had all these things I

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Speaker 2: could have been spending my money on. Oh yeah, and

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Speaker 2: for the first time in my life, I had enough

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Speaker 2: of a paycheck to actually buy cool stuff, you know,

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Speaker 2: to have that craft beer equivalent, as you guys would say.

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Speaker 2: And it's like, how do I balance all these different

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Speaker 2: competing needs for the same dollars. So that's where I

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Speaker 2: did a lot of self study. I started learning. I

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Speaker 2: found the FI community, I found podcast blogs, personal finance books.

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Speaker 2: Everything I consumed a ton and by the time I

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Speaker 2: was in my mid to late twenties, I became enough

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Speaker 2: of an armchair expert to at least help out my friends,

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Speaker 2: help out some colleagues. They encouraged me to turn my

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Speaker 2: emails into some sort of article to share online. I

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Speaker 2: decided to start a blog. Don't really know why, but

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Speaker 2: I did. I started The Best Interest just as a

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Speaker 2: place to share the work that I was already doing

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Speaker 2: for people in my life. And the Best Interest has

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Speaker 2: grown eventually I started a podcast. It's still very much grassroots,

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Speaker 2: listener and reader focused. A lot of my content is

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Speaker 2: just Hey, a listener sent in this question. It's a

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Speaker 2: really good question. Let's write about it, Let's talk about it.

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Speaker 2: And that's It's been five and a half years now

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Speaker 2: of running The Best Interest, and it was cool enough

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Speaker 2: that I switched careers over it.

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Speaker 1: Well, speaking of being able to make a living doing

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Speaker 1: what it is that we do, I mean, when you

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Speaker 1: switched from what seemed like probably a very stable sort

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Speaker 1: of career. I'm curious, maybe this is a two part question.

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Speaker 1: I'm curious what considerations came into your mind, Like what

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Speaker 1: were your pros and cons I guess of starting kind

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Speaker 1: of going out on your own and doing something like

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Speaker 1: what you're doing now with the best interest, but then

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Speaker 1: also if you have found it to be incredibly worthwhile,

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Speaker 1: and if you would, I guess recommend it for other

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Speaker 1: folks who might be considering something similar.

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Speaker 2: Yeah, oh, powerful question especially, I mean they're both really

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Speaker 2: good questions. And if I forget part two, you might

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Speaker 2: have to remind me. But I'll tackle part one first,

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Speaker 2: which is it was really it was scary, and like

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Speaker 2: I definitely spent a lot of time thinking through the

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Speaker 2: pros and cons. And I remember I had a conversation

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Speaker 2: with a college buddy of mine who This buddy he

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Speaker 2: had two degrees in biomedical engineering, but right from the

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Speaker 2: start including I think his master's is from Johns Hopkins,

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Speaker 2: like amazing school, and he could have gone to work

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Speaker 2: for any sort of biomedical engineering firm probably in the country,

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Speaker 2: and would have had an excellent paycheck from day one.

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Speaker 2: But instead he started his own business, took on all

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Speaker 2: that risk, and and really just said I'm an entrepreneur

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Speaker 2: and I want to take this this bigger risk and

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Speaker 2: kind of go for broken that way. And I remember

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Speaker 2: asking him, like, how did you have the the you know, kahonees,

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Speaker 2: Can I say that here?

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Speaker 1: Ha?

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Speaker 2: Ha, how'd you have the kahone.

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Speaker 1: Go?

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Speaker 2: How'd you have the fortitude to do that? And one

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Speaker 2: thing he said, He's like, you know, man, I was

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Speaker 2: looking at it, and I said, what's the worst case scenario?

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Speaker 2: And the worst case scenario is this thing crashes and

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Speaker 2: burns in a year or two or three or maybe

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Speaker 2: even five, and I'm left with this failed entrepreneurial journey

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Speaker 2: that was pretty cool but ultimately failed. And I still

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Speaker 2: have two degrees in biomedical engineering and I and so

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Speaker 2: basically he said he might lose a little bit of

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Speaker 2: his future salary, but he could go get any job

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Speaker 2: in his field that he wanted. And his resume actually

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Speaker 2: was pretty cool because he had this really interesting entrepreneurial

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Speaker 2: company on it. Whereas if it goes well, man, the

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Speaker 2: sky's the limit for him, right if it goes well.

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Speaker 2: So he just said he looked at it that way.

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Speaker 2: He looked at it probabilistically, and he said, even if

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Speaker 2: it fail, I'm not in that bad of a scenario.

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Speaker 2: And I kind of looked at my transition the same way.

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Speaker 2: And I recently spoke with on a different podcast all

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Speaker 2: about leading the corporate culture and had shared the same story,

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Speaker 2: which was my worst case scenario. Guys, it's been two

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Speaker 2: and a half years, even more than two and a

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Speaker 2: half years since I switched, and if for some reason

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Speaker 2: this doesn't work out, I have two degrees in mechanical engineering,

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Speaker 2: I have seven years experience at an aerospace engineering firm.

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Speaker 2: I could probably go back and get a job back

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Speaker 2: in my old industry. I wouldn't be my favorite thing,

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Speaker 2: but it's certainly not the end of the world. And

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Speaker 2: if that's the downside risk, then that's pretty good.

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Speaker 1: And if I remember correctly, when you were making that transition,

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Speaker 1: it was a it was a downstep in terms of

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Speaker 1: salary from your aerospace engineering firm to working in finance

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Speaker 1: full time. So it's not like you were like, oh,

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Speaker 1: let me go over here so I juice my paycheck

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Speaker 1: in a significant way. Do you have advice for other

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Speaker 1: people who are maybe working in a lucrative position but

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Speaker 1: they kind of dream of doing something else with their

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Speaker 1: nine to five hours. That's such a big part of

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Speaker 1: our lives and if they say, listen, it's not about

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Speaker 1: finding the perfect job, but I would love to find

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Speaker 1: something that maybe I feel more aligned with every day,

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Speaker 1: even if it means making less money. I don't know.

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Speaker 1: Do you have any advice for those folks.

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Speaker 2: Your memory sharpest attack? Can I say that your memory

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Speaker 2: spot on, spot on, It hasn't deteriorated too much yet

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Speaker 2: give it time? No, I hope I learned this weekend

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Speaker 2: actually that maybe this is common knowledge, but just the

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Speaker 2: correlation between sleep and long term brain health. So hey,

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Speaker 2: get that sleep in guys, right.

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Speaker 1: Will be fine?

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Speaker 2: Your brain so important. But no, yes, I do have

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Speaker 2: some advice or at least some of the thought process

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Speaker 2: that I went through. And it really does come back

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Speaker 2: to a kind of a financial planning thought process of

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Speaker 2: how much money am I earning? How much money am

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Speaker 2: I spending? Is my new salary going to be enough

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Speaker 2: to support my current lifestyle? If not? How much time

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Speaker 2: am I going to give myself to start earning more money.

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Speaker 2: I mean, one thing, for what it's worth that made

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Speaker 2: me feel better about my transition that I do think

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Speaker 2: is worth understanding for other people is, you know, the

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Speaker 2: engineering field has a relatively flat pay structure, meaning, you know,

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Speaker 2: unless you're going to go into engineering sales or you

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Speaker 2: want to be an executive or like upper level management

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Speaker 2: of some sort, your total career earnings are pretty well

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Speaker 2: defined and capped. It's certainly enough to live a wonderful

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Speaker 2: lifestyle off of, but by no means are you going

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Speaker 2: to be, you know, doubling your salary in a year

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Speaker 2: as an engineer, that kind of thing. Whereas, Okay, my

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Speaker 2: career over here, I have a salary, but part of

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Speaker 2: my compensation is based on am I working with happy clients?

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Speaker 2: And are my clients coming back to me for more

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Speaker 2: advice year after year? And so the idea is I

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Speaker 2: can take my destiny into my own hands a little bit,

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Speaker 2: and my salary on the upside isn't quite as capped.

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Speaker 2: And I liked that. I said, you know what, I'm

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Speaker 2: willing to take a bit of a pay cut for

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Speaker 2: something that I think I'm going to enjoy every single day.

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Speaker 2: And obviously that's a huge part you guys alluded to

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Speaker 2: that I'm going to enjoy this work every single day,

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Speaker 2: which I have now for almost three year. And if

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Speaker 2: I'm doing it well and if my clients are happy

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Speaker 2: with the job I'm doing and they keep coming back,

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Speaker 2: I actually think my income potential is pretty high, higher

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Speaker 2: than it would be as an engineer. So again, yes,

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Speaker 2: all those things went into play. We could also go

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Speaker 2: into details about, you know, how's your four to one

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Speaker 2: K or retirement account benefit going to change? How does

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Speaker 2: your health insurance benefit change? Does it affect other members

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Speaker 2: of your family? Like, there are definitely some nuances when

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Speaker 2: it comes to the total benefits package that I think

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Speaker 2: someone should dive into those details.

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Speaker 1: Yeah, we talk about total compensation, and when you're considering

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Speaker 1: a job, it's it's not I think people focus ninety

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Speaker 1: five percent of the time on the headline salary, but

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Speaker 1: there are all of these other things, these metrics, the

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Speaker 1: four to one K match, what is the healthcare benefits

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Speaker 1: of Like sometimes the employer will pay basically all of

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Speaker 1: your healthcare costs for your copase, right, and so that's

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Speaker 1: hugely significant. Yeah, how did you think through maybe those

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Speaker 1: secondary items as you were transitioning?

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Speaker 2: Yeah, I mean I just kind of asked for all

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Speaker 2: the details up front, did my best to do an

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Speaker 2: ap apples to apples, and as you alluded to, like,

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Speaker 2: I looked at it from a total compensation point of view,

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Speaker 2: where sure, I guess the four to one K dollars

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Speaker 2: technically aren't liquid today, and like some of those things

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Speaker 2: are worth considering. But rather than get into all the

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Speaker 2: nitty gritty details. The idea is, let me try to

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Speaker 2: put a dollar sign next to each one of these benefits,

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Speaker 2: whether it's salary, healthcare, HSA four to one K all

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Speaker 2: of them, and just look at the sum total versus

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Speaker 2: the sum total and right up front pay cut. Not ideal,

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Speaker 2: certainly not ideal. But then you kind of have to

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Speaker 2: use some call it creative math or some subjective math

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Speaker 2: and say, what's the long what's the long term potential here?

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Speaker 1: Yeah?

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Speaker 2: And do I In my case, one of the questions

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Speaker 2: I asked myself was do I believe in myself enough

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Speaker 2: that I really can hit this long term potential? And

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Speaker 2: it's very cliche to say, you know, bet on yourself

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Speaker 2: or invest in yourself for those kind of things, but

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Speaker 2: there is some of that. There has to be some

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Speaker 2: of that if we want to, you know, succeed in

436
00:19:57,359 --> 00:20:00,680
Speaker 2: what is ultimately a pretty competitive economic and ivironment out there.

437
00:20:00,680 --> 00:20:01,719
Speaker 2: And I said, you know what, I'm going to take

438
00:20:01,720 --> 00:20:04,199
Speaker 2: a chance. And if like I alluded to before, it

439
00:20:04,280 --> 00:20:07,080
Speaker 2: helped having that safety net underneath me, which was if

440
00:20:07,080 --> 00:20:09,600
Speaker 2: it all doesn't work out, I do believe I could

441
00:20:09,640 --> 00:20:11,480
Speaker 2: go back and get a job in my old industry

442
00:20:11,480 --> 00:20:13,920
Speaker 2: that I'd be content with. So I think that's pretty

443
00:20:13,920 --> 00:20:15,760
Speaker 2: important too. I'm a big safety net person.

444
00:20:15,840 --> 00:20:18,320
Speaker 1: Yeah, analyzing that risk potential has a lot to do

445
00:20:18,359 --> 00:20:20,520
Speaker 1: with whether or not we take those big leaps when

446
00:20:20,520 --> 00:20:22,240
Speaker 1: it comes to our career. But speaking of risk, we're

447
00:20:22,240 --> 00:20:24,920
Speaker 1: actually going to talk about risk and how that applies

448
00:20:24,960 --> 00:20:27,440
Speaker 1: to our investments. We'll get to that and more right

449
00:20:27,480 --> 00:20:37,160
Speaker 1: after this. I we're back from the break, we're still

450
00:20:37,200 --> 00:20:41,000
Speaker 1: talking about investing being risky. Actually, that's specifically want to

451
00:20:41,119 --> 00:20:44,639
Speaker 1: get into now, Jesse. You talk about investing in particular.

452
00:20:44,720 --> 00:20:46,680
Speaker 1: This is a subject you is near and dear to

453
00:20:46,720 --> 00:20:48,959
Speaker 1: your heart. You write about a lot, and you're typically

454
00:20:48,960 --> 00:20:50,840
Speaker 1: not writing about investing so that you can be as

455
00:20:50,960 --> 00:20:53,840
Speaker 1: rich as Warren Buffett, who you alluded to earlier, but

456
00:20:53,880 --> 00:20:57,040
Speaker 1: really so that you can kind of grow in financial security.

457
00:20:57,119 --> 00:20:58,600
Speaker 1: And I don't know. One of the things you wrote

458
00:20:58,600 --> 00:21:02,280
Speaker 1: about recently, you run about how risk is inevitable when

459
00:21:02,280 --> 00:21:05,960
Speaker 1: we're talking about investing, but also how not investing is

460
00:21:06,000 --> 00:21:09,120
Speaker 1: the biggest risk of all. And I think you said

461
00:21:09,119 --> 00:21:11,679
Speaker 1: that people need the willingness, the ability, and they have

462
00:21:11,720 --> 00:21:13,240
Speaker 1: to have the need to take on risk. Can you

463
00:21:13,280 --> 00:21:15,720
Speaker 1: walk us through kind of how people can and should

464
00:21:15,800 --> 00:21:18,760
Speaker 1: determine their risk tolerance when they're thinking about what sort

465
00:21:18,760 --> 00:21:19,560
Speaker 1: of investments start.

466
00:21:19,840 --> 00:21:23,280
Speaker 2: Yeah, yeah, thank you guys for reading those articles. I'm glad.

467
00:21:23,359 --> 00:21:26,320
Speaker 2: I'm glad you are. I'm glad you find them helpful. Willingness, need,

468
00:21:26,359 --> 00:21:29,560
Speaker 2: an ability. I think those words are technically part of

469
00:21:30,200 --> 00:21:32,959
Speaker 2: I want to say, the CFA, the Chartered Financial Analyst

470
00:21:33,040 --> 00:21:35,920
Speaker 2: curriculum or something along those lines. It's a very kind

471
00:21:35,920 --> 00:21:41,240
Speaker 2: of nuanced portfolio portfolio manager type thought process. But right,

472
00:21:41,320 --> 00:21:43,399
Speaker 2: I mean, you know, why do we invest in the

473
00:21:43,440 --> 00:21:46,800
Speaker 2: first place is ultimately the question, and different people will

474
00:21:46,800 --> 00:21:49,159
Speaker 2: have different answers, and the one that I like is to,

475
00:21:49,960 --> 00:21:53,120
Speaker 2: you know, to grow, to grow someone's wealth, to grow

476
00:21:53,160 --> 00:21:58,040
Speaker 2: someone's spending power faster than inflation without taking undue risk.

477
00:21:58,600 --> 00:22:00,879
Speaker 2: And so risk and reward are these two terms that

478
00:22:00,920 --> 00:22:04,000
Speaker 2: will use. They're very much tied at the hip. In fact,

479
00:22:04,040 --> 00:22:07,240
Speaker 2: they're so tight at the hip that if someone out

480
00:22:07,240 --> 00:22:09,879
Speaker 2: there ever finds an investment that has a very very

481
00:22:10,000 --> 00:22:13,080
Speaker 2: high reward with very low risk, well that's probably a

482
00:22:13,080 --> 00:22:15,360
Speaker 2: bit of a red flag, because right, that doesn't really

483
00:22:15,400 --> 00:22:19,199
Speaker 2: make sense. Risk and reward shouldn't be that disjointed in

484
00:22:19,280 --> 00:22:22,840
Speaker 2: that way. But Ultimately, let's go back to that need

485
00:22:23,000 --> 00:22:28,400
Speaker 2: ability and willingness. Willingness is the only one of this

486
00:22:28,600 --> 00:22:33,240
Speaker 2: trio that's pretty subjective, meaning it's up to the individual

487
00:22:33,320 --> 00:22:37,400
Speaker 2: and some of their their personal leanings. And I think

488
00:22:37,440 --> 00:22:39,760
Speaker 2: we all know people in our lives who are pretty

489
00:22:39,800 --> 00:22:42,320
Speaker 2: gung ho, who may be a little fast and loose

490
00:22:42,359 --> 00:22:44,320
Speaker 2: with their money, or who might you know, they might

491
00:22:44,359 --> 00:22:47,119
Speaker 2: look at, say an entrepreneurial and opening a small business,

492
00:22:47,160 --> 00:22:48,640
Speaker 2: and they say, I'm going for it. What could go wrong,

493
00:22:48,680 --> 00:22:50,480
Speaker 2: I'm gonna do it. I'm gonna put my money at stake.

494
00:22:50,600 --> 00:22:53,040
Speaker 2: It's going to happen. Okay. That's they might have a

495
00:22:53,080 --> 00:22:56,360
Speaker 2: little bit of a higher willingness to take on risk,

496
00:22:56,560 --> 00:22:58,919
Speaker 2: whereas other people, you know, here we are recording this

497
00:22:58,960 --> 00:23:02,320
Speaker 2: on August twentieth of twenty twenty four. Other people might

498
00:23:02,359 --> 00:23:04,280
Speaker 2: look at what the stock market did in the second

499
00:23:04,320 --> 00:23:06,439
Speaker 2: half of July and early August this year, which I

500
00:23:06,440 --> 00:23:08,360
Speaker 2: think pique to trough the s and p took maybe

501
00:23:08,400 --> 00:23:11,600
Speaker 2: an eight or nine percent dip, and they might look

502
00:23:11,640 --> 00:23:14,040
Speaker 2: at that change in their investing account and say, this

503
00:23:14,400 --> 00:23:19,000
Speaker 2: is messed up. I hate this. I can't stand that volatility. Well, okay,

504
00:23:19,040 --> 00:23:21,320
Speaker 2: that's someone who if if that's scaring them that badly,

505
00:23:21,880 --> 00:23:24,400
Speaker 2: they don't have that high of a willingness to take

506
00:23:24,440 --> 00:23:29,760
Speaker 2: on risk. So willingness is pretty personal in that in

507
00:23:29,800 --> 00:23:34,480
Speaker 2: that case, but need and ability, those two are much

508
00:23:34,560 --> 00:23:39,720
Speaker 2: more objective. So the need to take on risk really

509
00:23:39,760 --> 00:23:41,959
Speaker 2: you can think of it as the need to achieve

510
00:23:42,040 --> 00:23:45,360
Speaker 2: investing reward. And what I mean by that is when

511
00:23:45,359 --> 00:23:47,600
Speaker 2: someone has certain financial goals out in the future that

512
00:23:47,680 --> 00:23:50,880
Speaker 2: require a certain outlay of money and a future date,

513
00:23:51,280 --> 00:23:55,560
Speaker 2: they might have a true numerical need for their money

514
00:23:55,600 --> 00:23:59,679
Speaker 2: to grow over time. And you know it said, well,

515
00:23:59,680 --> 00:24:02,280
Speaker 2: if you to double your money in ten years, you

516
00:24:02,320 --> 00:24:04,879
Speaker 2: probably can't do that in a normal bank account. You

517
00:24:05,040 --> 00:24:08,879
Speaker 2: need to take on more risk than that. Ability to

518
00:24:08,920 --> 00:24:11,440
Speaker 2: take on risk, though, is similar in some ways. It's

519
00:24:11,480 --> 00:24:15,560
Speaker 2: also objective. But the ability to take on risk has

520
00:24:15,600 --> 00:24:18,560
Speaker 2: to do with one's I don't want to use the

521
00:24:18,600 --> 00:24:20,960
Speaker 2: word ability in the definition, but I can't think of

522
00:24:21,000 --> 00:24:23,760
Speaker 2: a good synonym right now, one's ability to recover from

523
00:24:23,800 --> 00:24:27,600
Speaker 2: a loss. So, for example, someone who's say young and

524
00:24:27,640 --> 00:24:30,119
Speaker 2: earning a good amount of money, well, their ability to

525
00:24:30,160 --> 00:24:32,399
Speaker 2: take on risk could be pretty high. Because if the

526
00:24:32,440 --> 00:24:35,159
Speaker 2: stock market took a thirty percent drop between now and

527
00:24:35,160 --> 00:24:37,440
Speaker 2: the end of the year, that person has the ability

528
00:24:37,520 --> 00:24:41,240
Speaker 2: to continue earning, to continue investing, and in the long run,

529
00:24:41,359 --> 00:24:44,800
Speaker 2: to recover and likely flourish from this current thirty percent

530
00:24:44,880 --> 00:24:47,600
Speaker 2: drop in the market. Whereas when someone's eighty years old

531
00:24:48,119 --> 00:24:50,560
Speaker 2: and every dollar in their account matters to them being

532
00:24:50,560 --> 00:24:53,280
Speaker 2: able to support their lifestyle for the rest of their life,

533
00:24:53,560 --> 00:24:56,280
Speaker 2: their ability to recover from a loss and therefore their

534
00:24:56,320 --> 00:24:59,560
Speaker 2: ability to take on risk is much much less. So

535
00:25:00,240 --> 00:25:03,480
Speaker 2: pause there, But that's how I think about need ability

536
00:25:03,640 --> 00:25:05,480
Speaker 2: and willingness to take on risk.

537
00:25:05,840 --> 00:25:08,760
Speaker 1: Yeah, well, to touch on I guess to drill down

538
00:25:08,760 --> 00:25:10,840
Speaker 1: a little bit on ability. Like you're talking about the

539
00:25:10,840 --> 00:25:13,280
Speaker 1: ability to recover. What do you say to folks who

540
00:25:13,560 --> 00:25:16,119
Speaker 1: are saying, Hey, all right, you're talking about investing. I

541
00:25:16,119 --> 00:25:19,360
Speaker 1: don't have the money. I don't have the additional income

542
00:25:19,480 --> 00:25:22,160
Speaker 1: in order to invest, Because in order to take that risk,

543
00:25:22,600 --> 00:25:26,000
Speaker 1: you have to have a level of margin in your life,

544
00:25:26,040 --> 00:25:28,200
Speaker 1: Like you have to have dollars beyond what it is

545
00:25:28,240 --> 00:25:30,199
Speaker 1: that you're spending every single month. Otherwise you don't have

546
00:25:30,240 --> 00:25:33,040
Speaker 1: money to invest. What would you say to those folks.

547
00:25:33,320 --> 00:25:36,320
Speaker 2: Yeah, the money that we put at risk via investments

548
00:25:37,040 --> 00:25:39,440
Speaker 2: is extra money in our lives in some way, shape

549
00:25:39,480 --> 00:25:41,679
Speaker 2: or form, or it's money in our lives. I suppose

550
00:25:41,680 --> 00:25:43,239
Speaker 2: another way of putting it is it's money in our

551
00:25:43,240 --> 00:25:45,280
Speaker 2: lives that we don't need to spend in the near

552
00:25:45,400 --> 00:25:48,360
Speaker 2: term at all. This goes back to something it's called

553
00:25:48,359 --> 00:25:51,120
Speaker 2: the goals based investing framework. You guys have probably heard

554
00:25:51,119 --> 00:25:53,000
Speaker 2: of it, probably maybe even had some experts on here

555
00:25:53,000 --> 00:25:54,960
Speaker 2: talking about it before, experts who know more about it

556
00:25:55,000 --> 00:25:57,399
Speaker 2: than I do. But it's something that I use in

557
00:25:57,440 --> 00:26:01,240
Speaker 2: my practice day to day, which is to say, what's

558
00:26:01,240 --> 00:26:03,720
Speaker 2: a person's goals, what are their financial goals in life?

559
00:26:03,760 --> 00:26:05,919
Speaker 2: And can we put a timeline and a dollar amount

560
00:26:06,000 --> 00:26:08,159
Speaker 2: next to those goals? And if someone has goals in

561
00:26:08,200 --> 00:26:10,360
Speaker 2: the next year, you know, hey, hey guys, I'm hoping

562
00:26:10,440 --> 00:26:12,760
Speaker 2: to buy my first house this fall. Well that money

563
00:26:12,760 --> 00:26:14,399
Speaker 2: should be in cash, right, that should be in the

564
00:26:14,400 --> 00:26:16,879
Speaker 2: bank account. That's not money that you can afford to

565
00:26:16,960 --> 00:26:19,760
Speaker 2: take extra risk with. There's just not enough time to

566
00:26:19,840 --> 00:26:23,240
Speaker 2: see that risk play out in your favor. Whereas when

567
00:26:23,240 --> 00:26:25,239
Speaker 2: someone's on the opposite end of the spectrum and they say, hey,

568
00:26:25,280 --> 00:26:26,960
Speaker 2: all this money is retirement money. I'm not going to

569
00:26:26,960 --> 00:26:29,560
Speaker 2: retire for another twenty years. Well, now all of a sudden,

570
00:26:29,640 --> 00:26:32,400
Speaker 2: we have some timeline and we have some extra capital

571
00:26:32,840 --> 00:26:36,439
Speaker 2: to work with to take on risk, you know, feeling

572
00:26:36,480 --> 00:26:38,800
Speaker 2: confident that over a long period of time, that risk

573
00:26:38,880 --> 00:26:40,320
Speaker 2: is going to pay off and we're going to see

574
00:26:40,359 --> 00:26:43,479
Speaker 2: some real investing reward for it. Now, when someone doesn't

575
00:26:43,520 --> 00:26:47,800
Speaker 2: have extra money to quote unquote play with, that brings

576
00:26:47,800 --> 00:26:49,879
Speaker 2: about a different conversation, which is there any way we

577
00:26:49,920 --> 00:26:52,120
Speaker 2: can change that, you know, can we dive into their

578
00:26:52,560 --> 00:26:55,520
Speaker 2: monthly budget, say, and is there actually some room for

579
00:26:55,640 --> 00:26:58,800
Speaker 2: leeway if they're willing to cut costs in a couple

580
00:26:58,800 --> 00:27:01,199
Speaker 2: other places. I know that's always the case, and it

581
00:27:01,359 --> 00:27:04,919
Speaker 2: leads to some hard conversations for people. But at the

582
00:27:05,000 --> 00:27:08,320
Speaker 2: end of the day, this is this funny combination in

583
00:27:08,359 --> 00:27:11,080
Speaker 2: the conversations we have where it's very personal and we

584
00:27:11,119 --> 00:27:13,320
Speaker 2: want to understand the person and the life circumstances that

585
00:27:13,320 --> 00:27:15,359
Speaker 2: they're going through. But also on the other side, we

586
00:27:15,400 --> 00:27:18,359
Speaker 2: have these numbers that don't necessarily lie, and it's about

587
00:27:18,400 --> 00:27:20,840
Speaker 2: finding that balance. And in some cases the numbers just

588
00:27:21,200 --> 00:27:24,560
Speaker 2: don't provide many opportunities for investing. And I think it's

589
00:27:24,600 --> 00:27:28,200
Speaker 2: important that we just be up for a forthright and

590
00:27:28,440 --> 00:27:30,919
Speaker 2: honest and straightforward and saying, hey, that the numbers just

591
00:27:30,920 --> 00:27:33,760
Speaker 2: don't really support you taking on much investing risk.

592
00:27:33,840 --> 00:27:37,679
Speaker 1: Right now. You wrote recently on the blog about the

593
00:27:37,720 --> 00:27:42,679
Speaker 1: crushing costs of conservative retirement planning. I'm curious what overly

594
00:27:42,720 --> 00:27:45,240
Speaker 1: conservative mistakes do you see people making and do you

595
00:27:45,280 --> 00:27:48,879
Speaker 1: see because I feel like, especially in recent years, we

596
00:27:48,960 --> 00:27:52,639
Speaker 1: see the opposite, right, the crushing costs of day trading

597
00:27:52,880 --> 00:27:56,240
Speaker 1: or of you know, putting a bunch of money in

598
00:27:56,280 --> 00:27:59,840
Speaker 1: the next super hyped crypto coin or whatever. What is

599
00:27:59,880 --> 00:28:02,359
Speaker 1: the But there's a there's certainly a downside from being

600
00:28:02,400 --> 00:28:03,600
Speaker 1: too conservative, too right.

601
00:28:03,680 --> 00:28:08,800
Speaker 2: Totally totally, And that's the examples that I see again,

602
00:28:08,880 --> 00:28:11,560
Speaker 2: if done poorly. The whole idea is that retirement planning

603
00:28:11,720 --> 00:28:14,399
Speaker 2: super smart. We all should be doing retirement planning, or

604
00:28:14,560 --> 00:28:16,760
Speaker 2: whatever our long term goals are, we should plan for that.

605
00:28:17,320 --> 00:28:21,320
Speaker 2: But if you're overly conservative, you can essentially stack different

606
00:28:21,440 --> 00:28:24,000
Speaker 2: levels of conservatism on top of each other. They have

607
00:28:24,200 --> 00:28:27,879
Speaker 2: a multiplicative effect or a compounding effect, and you end

608
00:28:27,960 --> 00:28:31,840
Speaker 2: up with a financial plan that is so much more

609
00:28:31,880 --> 00:28:35,160
Speaker 2: conservative in every single way than what you likely need.

610
00:28:36,080 --> 00:28:38,560
Speaker 2: And so like, let's go through a very very simple example.

611
00:28:39,480 --> 00:28:42,160
Speaker 2: So I'll ask you, guys, we'll we'll we'll turn the

612
00:28:42,160 --> 00:28:44,600
Speaker 2: tables here. I'm gonna host you guys are my guests,

613
00:28:44,640 --> 00:28:47,400
Speaker 2: And what would you, guys say, Whether it's one hundred

614
00:28:47,400 --> 00:28:49,200
Speaker 2: percent S and P five hundred or like one hundred

615
00:28:49,200 --> 00:28:52,080
Speaker 2: percent stocks, or maybe like a sixty forty like retirement

616
00:28:52,120 --> 00:28:55,760
Speaker 2: style portfolio, what would you expect the long term annual

617
00:28:55,840 --> 00:28:56,520
Speaker 2: return there to be?

618
00:28:56,640 --> 00:29:00,400
Speaker 1: Oh, I'm expecting fifty percent. That's why I I'm fully

619
00:29:00,400 --> 00:29:01,240
Speaker 1: invested in bitcoin.

620
00:29:01,440 --> 00:29:04,160
Speaker 2: That's a great answer, guys, that is a terrific answer. Now,

621
00:29:04,480 --> 00:29:06,600
Speaker 2: if you were to maybe put yourselves in the shoes

622
00:29:06,640 --> 00:29:09,520
Speaker 2: of retiree, what number would you assume?

623
00:29:09,560 --> 00:29:11,240
Speaker 1: Well, I'm going to say, Okay, for real, if I'm

624
00:29:11,240 --> 00:29:13,800
Speaker 1: one hundred percent invested in stocks, I'm expecting an average

625
00:29:13,800 --> 00:29:17,240
Speaker 1: annualized return of let's say ten percent over the decades.

626
00:29:17,640 --> 00:29:21,560
Speaker 1: If I'm a retiree, I'm probably expecting something like six

627
00:29:21,680 --> 00:29:23,680
Speaker 1: ish percent with a more balanced portfolio.

628
00:29:23,840 --> 00:29:27,320
Speaker 2: Yeah, okay, totally fair answer. Totally fair answer. Now, I

629
00:29:27,360 --> 00:29:31,080
Speaker 2: think when you actually look at sixty forty, I actually

630
00:29:31,080 --> 00:29:33,400
Speaker 2: think the actual numbers of six percent SoC forty percent

631
00:29:33,400 --> 00:29:36,320
Speaker 2: bond is more like eight percent. But I mean six

632
00:29:36,400 --> 00:29:39,160
Speaker 2: percent is fine. It's a little conservative. Though, But so

633
00:29:39,240 --> 00:29:41,240
Speaker 2: let's keep that in mind. We're going to use these numbers.

634
00:29:41,520 --> 00:29:44,040
Speaker 2: So I'm telling you right now that the average return

635
00:29:44,120 --> 00:29:46,440
Speaker 2: for sixty forty, we'll say, is an eight or nine percent,

636
00:29:46,960 --> 00:29:48,840
Speaker 2: but if we want to be conservative, we'll say six.

637
00:29:49,400 --> 00:29:52,080
Speaker 2: And now, how about inflation? What what do you guys

638
00:29:52,680 --> 00:29:56,080
Speaker 2: think that inflation is on an average on an annual basis?

639
00:29:56,480 --> 00:29:59,480
Speaker 1: I'd say two point nine percent today, but typically, right

640
00:29:59,520 --> 00:30:00,760
Speaker 1: the feshe for two percent.

641
00:30:00,880 --> 00:30:03,120
Speaker 2: Yeah, exactly right, So let's say two percent. But if

642
00:30:03,120 --> 00:30:06,320
Speaker 2: we're gonna be conservative, let's say four percent. Okay, let's

643
00:30:06,360 --> 00:30:08,000
Speaker 2: just say we're gonna be conservative here, so we're gonna

644
00:30:08,000 --> 00:30:11,920
Speaker 2: say four percent. So if we're using real numbers and

645
00:30:11,960 --> 00:30:15,560
Speaker 2: we say, well, what's someone someone's inflation adjusted return, The

646
00:30:15,640 --> 00:30:17,960
Speaker 2: real numbers say it's going to be the eight or

647
00:30:18,000 --> 00:30:20,800
Speaker 2: nine percent from a sixty to forty portfolio minus the

648
00:30:20,840 --> 00:30:23,600
Speaker 2: two percent inflation, So their real return is going to

649
00:30:23,600 --> 00:30:26,280
Speaker 2: be six or seven percent per year. But if we

650
00:30:26,360 --> 00:30:29,240
Speaker 2: use the conservative numbers that we just talked about, we're

651
00:30:29,240 --> 00:30:31,960
Speaker 2: gonna say, well, their nominal return is going to be six,

652
00:30:32,520 --> 00:30:35,160
Speaker 2: inflation is going to be four, their real return is

653
00:30:35,200 --> 00:30:37,800
Speaker 2: actually going to be two percent per year. So you

654
00:30:37,840 --> 00:30:41,080
Speaker 2: guys understand compound math. All the listeners understand compound math

655
00:30:41,280 --> 00:30:44,640
Speaker 2: enough to know that if I'm compounding seven percent per

656
00:30:44,680 --> 00:30:48,760
Speaker 2: year for twenty or thirty years versus two percent per

657
00:30:48,800 --> 00:30:51,840
Speaker 2: year for twenty or thirty years, that's gonna end up

658
00:30:51,840 --> 00:30:55,040
Speaker 2: being a huge difference in ending account values.

659
00:30:55,120 --> 00:30:55,320
Speaker 1: Right.

660
00:30:55,720 --> 00:30:58,160
Speaker 2: Well, what if we also add in tax rates? Well,

661
00:30:58,200 --> 00:31:00,320
Speaker 2: what are federal tax rates going to be to assume

662
00:31:00,360 --> 00:31:02,160
Speaker 2: they're the same as today or do we make them

663
00:31:02,240 --> 00:31:05,280
Speaker 2: much worse? Social Security, which I know you guys alluded

664
00:31:05,320 --> 00:31:07,920
Speaker 2: to before we can get into that. I know people

665
00:31:07,960 --> 00:31:11,640
Speaker 2: in the FI community especially who say, I don't want

666
00:31:11,680 --> 00:31:13,320
Speaker 2: us to think that social Security is going to be there.

667
00:31:13,360 --> 00:31:16,120
Speaker 2: It's a zero in my financial plan. I'm just assuming

668
00:31:16,160 --> 00:31:17,000
Speaker 2: it's not even there.

669
00:31:17,160 --> 00:31:18,920
Speaker 1: That's the conservative approach.

670
00:31:18,960 --> 00:31:22,760
Speaker 2: It's very conservative. It's very conservative, and I can understand it.

671
00:31:22,800 --> 00:31:25,040
Speaker 2: I'm happy to get into the details about why I

672
00:31:25,080 --> 00:31:27,560
Speaker 2: have some disagreement with that. But the whole idea is

673
00:31:27,600 --> 00:31:30,040
Speaker 2: if you stack these conservative assumptions on top of each other.

674
00:31:30,080 --> 00:31:31,959
Speaker 2: And what I did is I took what I consider

675
00:31:32,000 --> 00:31:36,520
Speaker 2: a very mundane real life example in my article on it,

676
00:31:36,520 --> 00:31:38,320
Speaker 2: I forget the exact details. I think it was someone

677
00:31:38,360 --> 00:31:40,920
Speaker 2: who's like fifty years old, they have a million dollars

678
00:31:40,960 --> 00:31:43,200
Speaker 2: and they want to spend fifty grand a year in retirement.

679
00:31:43,200 --> 00:31:45,360
Speaker 2: It's something like that. Just like, here's this fifty year

680
00:31:45,360 --> 00:31:48,200
Speaker 2: old couple. Here's a few details about them. If I'm

681
00:31:48,200 --> 00:31:51,080
Speaker 2: being really conservative versus if I'm just being what I

682
00:31:51,120 --> 00:31:54,200
Speaker 2: would consider normal, it could be like a fifteen to

683
00:31:54,320 --> 00:32:00,040
Speaker 2: twenty year difference in their expected retirement date. And that's really.

684
00:31:59,760 --> 00:32:03,160
Speaker 1: The long stinking time, totally, totally and ultimately like, that's

685
00:32:03,160 --> 00:32:05,280
Speaker 1: probably how we should be measuring these things too, right,

686
00:32:05,400 --> 00:32:07,960
Speaker 1: is well, how much of your time the one resource

687
00:32:08,000 --> 00:32:08,640
Speaker 1: you can't get back?

688
00:32:08,640 --> 00:32:10,440
Speaker 2: How much of your time is this assumption going to

689
00:32:10,480 --> 00:32:13,720
Speaker 2: cost you? And to me, that's the crushing cost of

690
00:32:13,760 --> 00:32:17,200
Speaker 2: being overly conservative, is you're gonna spend years that you

691
00:32:17,240 --> 00:32:17,960
Speaker 2: can't get back.

692
00:32:18,120 --> 00:32:21,800
Speaker 1: Yeah. Yeah, incredibly valuable years, whether it's like the remaining

693
00:32:21,840 --> 00:32:24,040
Speaker 1: years while your kids are at home or what have you.

694
00:32:24,120 --> 00:32:26,720
Speaker 1: But so I've got to think that the kind of

695
00:32:26,720 --> 00:32:28,640
Speaker 1: client tele the kind of folks that are coming to

696
00:32:28,720 --> 00:32:31,920
Speaker 1: talk to you, that's probably what you're seeing, right, It's

697
00:32:31,960 --> 00:32:35,080
Speaker 1: probably folks who have said, you know what, just let's

698
00:32:35,080 --> 00:32:37,760
Speaker 1: just play it safe. They're taking The more conservative approach

699
00:32:37,800 --> 00:32:40,520
Speaker 1: is that typically what's going on there is folks and

700
00:32:40,560 --> 00:32:43,120
Speaker 1: they almost need like permission from you to start spending

701
00:32:43,120 --> 00:32:45,440
Speaker 1: some of their money or perhaps to not maybe save

702
00:32:46,120 --> 00:32:47,320
Speaker 1: or invest as aggressively.

703
00:32:47,600 --> 00:32:50,920
Speaker 2: I mean, your instinct is right. More people are what

704
00:32:50,920 --> 00:32:52,560
Speaker 2: would you call them? I think that the phrase that

705
00:32:52,560 --> 00:32:54,960
Speaker 2: I've heard recently from I think Ben Carlson right was

706
00:32:55,120 --> 00:32:59,680
Speaker 2: tightwads versus spend thrifts. Tight rods don't spend enough, spend

707
00:32:59,680 --> 00:33:03,719
Speaker 2: thrift spend too easily. Most people that I speak with

708
00:33:03,760 --> 00:33:05,520
Speaker 2: tend to be on the titwat end of the spectrum

709
00:33:05,560 --> 00:33:08,200
Speaker 2: where they're looking for permission to spend, where they're very,

710
00:33:08,320 --> 00:33:11,360
Speaker 2: very concerned about their financial future, even though you know

711
00:33:11,400 --> 00:33:14,160
Speaker 2: it's like, hey guys, you know you could withdraw. What

712
00:33:14,360 --> 00:33:16,120
Speaker 2: you're telling me right now is that your withdrawal rate

713
00:33:16,240 --> 00:33:18,080
Speaker 2: is going to be one point five percent per year.

714
00:33:18,400 --> 00:33:20,920
Speaker 2: Let's talk about this thing called the four percent rule,

715
00:33:21,360 --> 00:33:23,920
Speaker 2: and I'll show you kind of how safe you actually are.

716
00:33:24,120 --> 00:33:26,120
Speaker 2: So right, people tend to be on that end of

717
00:33:26,160 --> 00:33:29,080
Speaker 2: the spectrum. But that said, some people come in with

718
00:33:29,800 --> 00:33:34,400
Speaker 2: very very concentrated portfolios thoughts about cryptocurrency or you know,

719
00:33:34,440 --> 00:33:37,520
Speaker 2: some people come in very aggressive, or simply come in

720
00:33:37,640 --> 00:33:41,040
Speaker 2: and they're spending way too much, way too soon, and

721
00:33:41,080 --> 00:33:43,720
Speaker 2: then we need to have the opposite end of the conversation.

722
00:33:43,800 --> 00:33:44,920
Speaker 2: So it's all over the map.

723
00:33:45,080 --> 00:33:47,400
Speaker 1: Yeah, is that what you typically see when when folks

724
00:33:47,400 --> 00:33:50,760
Speaker 1: are coming in and their portfolios are just way too aggressive?

725
00:33:50,840 --> 00:33:53,600
Speaker 1: Is it because they're invested with a singular company, maybe

726
00:33:53,640 --> 00:33:55,560
Speaker 1: in fact the company that they're employed by, Like where

727
00:33:55,560 --> 00:33:56,920
Speaker 1: they've got all their eggs in one basket.

728
00:33:57,200 --> 00:34:01,200
Speaker 2: That's certainly happens pretty often, especially today's day and age,

729
00:34:01,240 --> 00:34:06,920
Speaker 2: with tech companies, growth stocks, companies using RSUs or ISOs

730
00:34:07,000 --> 00:34:09,840
Speaker 2: or different kind of options as payment, where you'll have

731
00:34:09,880 --> 00:34:11,919
Speaker 2: someone and yeah, they'll they'll be a two million dollar

732
00:34:12,000 --> 00:34:14,480
Speaker 2: net worth and they're earning three hundred thousand dollars a

733
00:34:14,520 --> 00:34:17,879
Speaker 2: year from their employer, and of their two million dollar portfolio,

734
00:34:18,200 --> 00:34:21,840
Speaker 2: a million of it is employee or is stock options

735
00:34:21,880 --> 00:34:23,840
Speaker 2: or RSUs or something like that from the employer, And

736
00:34:23,880 --> 00:34:28,120
Speaker 2: so you have this real concentration. You know, again, I

737
00:34:28,160 --> 00:34:31,120
Speaker 2: don't it's not fear mongering. It's just storytelling, I suppose.

738
00:34:31,160 --> 00:34:34,200
Speaker 2: But basically one of the quintessential stories there is the

739
00:34:34,280 --> 00:34:37,760
Speaker 2: Enron story about so many en Round employees who just manned.

740
00:34:37,760 --> 00:34:41,120
Speaker 2: They were living life so good because their end round

741
00:34:41,160 --> 00:34:44,920
Speaker 2: salary was great, their prospects as far as they knew

742
00:34:44,920 --> 00:34:46,839
Speaker 2: in the company were great, just on the way up,

743
00:34:47,000 --> 00:34:48,920
Speaker 2: and they were getting stock options on top of that.

744
00:34:49,360 --> 00:34:52,640
Speaker 2: And when one tumbled the stock price and really the

745
00:34:52,640 --> 00:34:55,799
Speaker 2: whole company crumbled, it affected so many different parts of

746
00:34:55,840 --> 00:34:59,759
Speaker 2: their financial plan. And so yeah, for anyone listening who

747
00:34:59,760 --> 00:35:02,920
Speaker 2: feel like they're in that situation, long story short, the

748
00:35:02,960 --> 00:35:07,520
Speaker 2: best safest advice is try to de risk your stock

749
00:35:07,640 --> 00:35:10,839
Speaker 2: side as soon as possible and diversify. And you just

750
00:35:10,880 --> 00:35:13,120
Speaker 2: have to be you have to be willing to live

751
00:35:13,120 --> 00:35:15,400
Speaker 2: with the fact that you might be wrong and maybe

752
00:35:15,440 --> 00:35:18,560
Speaker 2: the stock will go to the moon, but you're taking

753
00:35:18,680 --> 00:35:23,279
Speaker 2: the smartest probabilistic bet you can by diversifying out of

754
00:35:23,360 --> 00:35:26,080
Speaker 2: the stock of the company that you work for into

755
00:35:26,239 --> 00:35:27,320
Speaker 2: a broader portfolio.

756
00:35:27,440 --> 00:35:31,680
Speaker 1: Yeah. I'm not necessarily interested in asking whether or not

757
00:35:31,880 --> 00:35:34,680
Speaker 1: you think advisors are worth the fee or not. I mean,

758
00:35:34,680 --> 00:35:38,040
Speaker 1: I feel like that debate has made it through. It's

759
00:35:38,040 --> 00:35:41,640
Speaker 1: the personal finance realm fairly often, and hopefully there's like

760
00:35:41,719 --> 00:35:44,560
Speaker 1: a happy medium understanding that many people have come to

761
00:35:45,000 --> 00:35:46,960
Speaker 1: on that one. But I am curious you wrote an

762
00:35:47,040 --> 00:35:50,600
Speaker 1: article recently about the financial issues that advisors help with

763
00:35:51,040 --> 00:35:53,319
Speaker 1: that tend to be dii wiable. So not everything an

764
00:35:53,360 --> 00:35:56,160
Speaker 1: advisor does can be done I don't think necessarily by

765
00:35:57,320 --> 00:36:00,160
Speaker 1: an individual from the comfort of their own couch. Can

766
00:36:00,160 --> 00:36:01,880
Speaker 1: you walk us through maybe some of those things that

767
00:36:02,000 --> 00:36:05,279
Speaker 1: are dii wiable that a financial advisor would typically lend

768
00:36:05,280 --> 00:36:05,680
Speaker 1: a hand with.

769
00:36:05,920 --> 00:36:08,799
Speaker 2: Yeah, totally. I think that especially for people who are

770
00:36:08,960 --> 00:36:11,839
Speaker 2: if you're listening right now, you have self selected that

771
00:36:11,880 --> 00:36:13,960
Speaker 2: you are going to go out and proactively listen to

772
00:36:13,960 --> 00:36:17,120
Speaker 2: a podcast about personal finance. And not everybody is in

773
00:36:17,200 --> 00:36:19,200
Speaker 2: our group, right, We are all in this group together

774
00:36:19,480 --> 00:36:21,920
Speaker 2: where we either like this stuff enough to be recording

775
00:36:21,960 --> 00:36:24,840
Speaker 2: podcasts and writing articles about it, or we like this

776
00:36:24,880 --> 00:36:27,680
Speaker 2: stuff enough at the very least to go read articles

777
00:36:27,880 --> 00:36:30,160
Speaker 2: and listen to podcasts about it. And if you're that

778
00:36:30,239 --> 00:36:32,160
Speaker 2: kind of person who really wants to kind of take

779
00:36:32,160 --> 00:36:34,879
Speaker 2: the bull by the horns and learn the stuff, then

780
00:36:35,080 --> 00:36:38,040
Speaker 2: a good example would be for all of our clients,

781
00:36:38,040 --> 00:36:39,680
Speaker 2: one thing that we want to do, so long as

782
00:36:39,719 --> 00:36:41,480
Speaker 2: they're willing to do it with us, is we want

783
00:36:41,520 --> 00:36:44,440
Speaker 2: to put together a net worth statement or a balance

784
00:36:44,440 --> 00:36:46,840
Speaker 2: sheet that lists out all of their assets and debts,

785
00:36:47,080 --> 00:36:48,960
Speaker 2: and we want to put together some sort of cash

786
00:36:48,960 --> 00:36:52,000
Speaker 2: flow diagram or cash flow statement that says, on a

787
00:36:52,000 --> 00:36:55,000
Speaker 2: monthly basis, here's what's coming in and here's what's going out.

788
00:36:55,360 --> 00:37:01,400
Speaker 2: Those four things assets, debt's, income, and ending. That's the

789
00:37:01,719 --> 00:37:06,440
Speaker 2: foundation of every financial plan period. And that's not rocket science,

790
00:37:06,640 --> 00:37:08,839
Speaker 2: right going back to the rocket science thing, that's just

791
00:37:08,840 --> 00:37:12,799
Speaker 2: something that any di di wire out there. That's just

792
00:37:12,840 --> 00:37:15,840
Speaker 2: something that any DI wire out there can and probably

793
00:37:15,840 --> 00:37:19,719
Speaker 2: should do. So it's just very very straightforward stuff like

794
00:37:19,760 --> 00:37:23,640
Speaker 2: that when it comes to making decisions in like you know,

795
00:37:24,000 --> 00:37:25,680
Speaker 2: how much should I put into my four oh one K.

796
00:37:26,360 --> 00:37:28,400
Speaker 2: Once it's in my four oh one K, how should

797
00:37:28,400 --> 00:37:31,200
Speaker 2: I invest it? There's some pretty low hanging fruit that

798
00:37:31,840 --> 00:37:34,080
Speaker 2: we certainly help all of our clients with. It's very

799
00:37:34,160 --> 00:37:38,440
Speaker 2: valuable help, but it's certainly not something that the average

800
00:37:38,480 --> 00:37:41,840
Speaker 2: DI wire can't do. As you guys alluded to, there's

801
00:37:41,880 --> 00:37:44,560
Speaker 2: some things in financial planning that I've been here for

802
00:37:44,600 --> 00:37:47,200
Speaker 2: three years and I don't even feel comfortable with it yet,

803
00:37:47,520 --> 00:37:50,040
Speaker 2: Like intricate stuff because you've got a lot of moving pieces.

804
00:37:50,080 --> 00:37:54,359
Speaker 2: You've got stock options, business ownership, estate planning, all these things,

805
00:37:54,440 --> 00:37:56,680
Speaker 2: and there's a reason why it takes a lot of

806
00:37:57,000 --> 00:38:00,600
Speaker 2: time and effort to pass a CFP exam. But yeah,

807
00:38:00,800 --> 00:38:02,919
Speaker 2: it doesn't mean that we don't worry about the low

808
00:38:02,960 --> 00:38:05,760
Speaker 2: hanging fruit with our clients, because that stuff's really important

809
00:38:05,760 --> 00:38:07,880
Speaker 2: too it, but it just means that you don't necessarily

810
00:38:07,960 --> 00:38:09,880
Speaker 2: need an advisor to help you with that.

811
00:38:10,120 --> 00:38:13,480
Speaker 1: Yeah, all right, Well, we talked about social security briefly.

812
00:38:13,480 --> 00:38:16,719
Speaker 1: We hinted at it at least, and how that's not

813
00:38:16,920 --> 00:38:20,399
Speaker 1: factoring that in at all into your retirement plans might

814
00:38:20,400 --> 00:38:22,680
Speaker 1: be an overly conservative approach. So what is the right

815
00:38:22,680 --> 00:38:26,080
Speaker 1: approach then, especially for the younger listeners out there, How

816
00:38:26,120 --> 00:38:28,359
Speaker 1: do I think of and conceive of social security in

817
00:38:28,400 --> 00:38:30,560
Speaker 1: my financial future. We'll talk about that and a little

818
00:38:30,600 --> 00:38:40,279
Speaker 1: bit more with Jesse right after this. All right, we

819
00:38:40,360 --> 00:38:43,160
Speaker 1: are back from the break talking with Jesse Kramer about

820
00:38:43,200 --> 00:38:46,280
Speaker 1: how we all need to be investing even though it's risky.

821
00:38:46,320 --> 00:38:49,759
Speaker 1: And Jesse, you know, speaking of risk and like something

822
00:38:49,800 --> 00:38:52,759
Speaker 1: that's inevitable is death, and I'm thinking about how, like

823
00:38:52,800 --> 00:38:56,879
Speaker 1: we started our conversation talking about how you having a daughter,

824
00:38:56,920 --> 00:39:00,080
Speaker 1: how that's kind of changed your perspective. One of the

825
00:39:00,160 --> 00:39:04,160
Speaker 1: best guys in personal finance and investing I'm thinking about

826
00:39:04,239 --> 00:39:08,439
Speaker 1: Jonathan Clemens with the Journal, but he maybe three months

827
00:39:08,480 --> 00:39:10,520
Speaker 1: ago or two months ago, he revealed that he's diagnosed

828
00:39:10,560 --> 00:39:14,879
Speaker 1: with a terminal brain tumor. And he's not like crazy old, right,

829
00:39:14,920 --> 00:39:17,279
Speaker 1: I think he's something like sixty one years old. It's

830
00:39:17,320 --> 00:39:21,960
Speaker 1: how it's been fascinating to see how he has changed,

831
00:39:22,000 --> 00:39:24,560
Speaker 1: how it is that he is like what he is

832
00:39:24,920 --> 00:39:28,200
Speaker 1: allotting his life to, right, because like he's got this, Hey,

833
00:39:28,400 --> 00:39:30,520
Speaker 1: this is the amount of time that you're looking at.

834
00:39:30,560 --> 00:39:32,719
Speaker 1: Because imagine, right, if we all knew exactly when we're

835
00:39:32,760 --> 00:39:35,200
Speaker 1: going to die, we could allot our dollars and we

836
00:39:35,239 --> 00:39:38,640
Speaker 1: could parse out our time in a way that makes

837
00:39:38,680 --> 00:39:40,719
Speaker 1: the most sense to us now. But most of us, like,

838
00:39:40,760 --> 00:39:44,360
Speaker 1: we don't have that knowledge. I'm curious, how does anyone, no, no,

839
00:39:45,000 --> 00:39:49,040
Speaker 1: unless you're in the unfortunate, even him, he doesn't totally know, right,

840
00:39:49,120 --> 00:39:52,680
Speaker 1: he has, like I guess, a rougher idea than we do. Sure,

841
00:39:52,800 --> 00:39:54,560
Speaker 1: but how does something like that, How do you think

842
00:39:54,560 --> 00:39:58,279
Speaker 1: that that understanding or the impending reality of our death,

843
00:39:58,280 --> 00:40:01,280
Speaker 1: how should that impact our financial habit? Do you think? Yeah?

844
00:40:01,360 --> 00:40:04,160
Speaker 2: I mean specifically when you brought up Jonathan, it's so

845
00:40:04,239 --> 00:40:07,840
Speaker 2: interesting I invited Jonathan on to the Best Interest podcast

846
00:40:07,880 --> 00:40:10,000
Speaker 2: back in May, and I think the episode might have

847
00:40:10,040 --> 00:40:13,040
Speaker 2: come out in early June. But on our episode, as

848
00:40:13,080 --> 00:40:15,600
Speaker 2: we're recording, he explained to me why he owns a

849
00:40:16,200 --> 00:40:21,040
Speaker 2: very simple type of fixed life term annuity, because he was,

850
00:40:21,200 --> 00:40:23,839
Speaker 2: you know, he's The idea is that if you lived

851
00:40:23,840 --> 00:40:26,239
Speaker 2: to being ninety or one hundred, the benefits of owning

852
00:40:26,239 --> 00:40:28,520
Speaker 2: an annuity get better and better. I'm still not really

853
00:40:28,560 --> 00:40:30,760
Speaker 2: pro annuity for what it's worth. I've talked about annuities

854
00:40:30,760 --> 00:40:33,080
Speaker 2: on my podcast, but if you do live for a

855
00:40:33,080 --> 00:40:35,640
Speaker 2: really long time, that's the one time when you might

856
00:40:35,680 --> 00:40:37,480
Speaker 2: want an annuity. And he was explaining that to me,

857
00:40:37,520 --> 00:40:39,080
Speaker 2: and I was like, okay, I get it. I get it.

858
00:40:39,400 --> 00:40:41,439
Speaker 2: And it was either the next day or the two

859
00:40:41,480 --> 00:40:43,880
Speaker 2: days later is when he had his doctor's appointment because

860
00:40:43,880 --> 00:40:46,919
Speaker 2: he was losing his balance and he found out about

861
00:40:46,960 --> 00:40:49,799
Speaker 2: this this terminal diagnosis, and he shared that with me.

862
00:40:49,840 --> 00:40:52,480
Speaker 2: It's just a gut punch, a complete gut punch. But

863
00:40:53,440 --> 00:40:56,680
Speaker 2: you're right. I mean, he is providing so much interesting

864
00:40:56,719 --> 00:41:00,200
Speaker 2: perspective and sharing with the world his thought processes and

865
00:41:00,400 --> 00:41:02,120
Speaker 2: kind of how he's going through it and the things

866
00:41:02,120 --> 00:41:05,120
Speaker 2: he's changing, or sometimes the things he's not changing as

867
00:41:05,160 --> 00:41:08,040
Speaker 2: a result of his diagnosis. But yeah, I mean from

868
00:41:08,040 --> 00:41:10,120
Speaker 2: a financial planning point of view, there is this kind

869
00:41:10,120 --> 00:41:12,839
Speaker 2: of running joke in the in the industry, which is, yeah,

870
00:41:12,880 --> 00:41:14,840
Speaker 2: I mean, tell me when you're gonna die, and I

871
00:41:14,840 --> 00:41:18,600
Speaker 2: will put together the perfect financial plan for you. Okay, Well,

872
00:41:18,640 --> 00:41:20,960
Speaker 2: if we don't know when someone is going to pass away,

873
00:41:21,360 --> 00:41:23,680
Speaker 2: we have to be we have to be very willing

874
00:41:23,719 --> 00:41:26,240
Speaker 2: to accept the fact that financial plan won't be perfect,

875
00:41:26,360 --> 00:41:29,560
Speaker 2: it'll be ever evolving. And the analogy I like to use,

876
00:41:29,560 --> 00:41:31,560
Speaker 2: which hits with some people and it doesn't hit with others,

877
00:41:31,960 --> 00:41:35,480
Speaker 2: is now, Texas Hold'm poker is a reasonably popular game.

878
00:41:35,920 --> 00:41:38,239
Speaker 2: Many people understand at least the basics of it. So like,

879
00:41:38,400 --> 00:41:39,600
Speaker 2: can I ask you, guys, do you know what the

880
00:41:39,600 --> 00:41:42,000
Speaker 2: best hand? The best starting hand in Texas hold him

881
00:41:42,080 --> 00:41:43,280
Speaker 2: is pocket aces?

882
00:41:43,360 --> 00:41:45,319
Speaker 1: Right? No, I've got no clue. I've never been in

883
00:41:45,360 --> 00:41:46,080
Speaker 1: a poker.

884
00:41:45,840 --> 00:41:48,400
Speaker 2: Pock pocket asis. That's correct, it's pocket ices. So if

885
00:41:48,480 --> 00:41:51,359
Speaker 2: I deal you pocket aces, like you're gonna play right,

886
00:41:51,400 --> 00:41:53,359
Speaker 2: it's just the best hand. But does it mean you're going.

887
00:41:53,280 --> 00:41:55,760
Speaker 1: To start pushing people around early on in that hand? Exactly?

888
00:41:55,840 --> 00:41:57,560
Speaker 2: Exactly? But does it mean you're gonna win?

889
00:41:57,920 --> 00:41:59,720
Speaker 1: Of course not, depends on what happens with the flop.

890
00:42:00,000 --> 00:42:02,600
Speaker 2: Totally, totally. There's so many variables out of your control

891
00:42:02,680 --> 00:42:06,200
Speaker 2: in the future that it doesn't mean that you shouldn't play.

892
00:42:06,320 --> 00:42:08,640
Speaker 2: You should play. You should make the best decision right

893
00:42:08,640 --> 00:42:10,600
Speaker 2: now with the information you have and the information you

894
00:42:10,600 --> 00:42:12,920
Speaker 2: have as pocket ass you're gonna play, but you have

895
00:42:12,960 --> 00:42:14,640
Speaker 2: to be willing to accept the fact that at the

896
00:42:14,719 --> 00:42:16,480
Speaker 2: end of the hand you might look back and say, oh,

897
00:42:16,640 --> 00:42:18,880
Speaker 2: you know what, someone started with a pretty bad hand

898
00:42:19,120 --> 00:42:21,200
Speaker 2: and then they got lucky later and they beat me

899
00:42:21,719 --> 00:42:24,560
Speaker 2: at Financial planning is really the same way, at least

900
00:42:24,680 --> 00:42:26,560
Speaker 2: very similar in that way, which is, you make the

901
00:42:26,600 --> 00:42:30,640
Speaker 2: best decisions you can with the information available today, and

902
00:42:30,719 --> 00:42:33,680
Speaker 2: over time, as your information changes, as your life changes,

903
00:42:33,840 --> 00:42:36,000
Speaker 2: as what you know about your future changes, you make

904
00:42:36,040 --> 00:42:38,400
Speaker 2: some adjustments. You have to be willing to accept the

905
00:42:38,400 --> 00:42:40,400
Speaker 2: fact that the decisions you make today aren't going to

906
00:42:40,440 --> 00:42:42,560
Speaker 2: be perfect. There will be hiccups and bumps in the

907
00:42:42,600 --> 00:42:45,719
Speaker 2: road along the way. But again, it feels like kind

908
00:42:45,719 --> 00:42:48,640
Speaker 2: of engineering and nerdy to say, but all you're doing

909
00:42:48,680 --> 00:42:50,880
Speaker 2: is dealing with probabilities and you're trying to make the

910
00:42:50,920 --> 00:42:56,040
Speaker 2: best probabilistic problem solving decisions today that you can possibly make.

911
00:42:56,320 --> 00:42:58,960
Speaker 1: I like that too, because you're reorienting right over time

912
00:42:59,080 --> 00:43:02,840
Speaker 1: as things change, right, as the flop changes, your betting strategy,

913
00:43:02,840 --> 00:43:05,479
Speaker 1: how you're competing against your opponents, what you're thinking about

914
00:43:05,480 --> 00:43:08,600
Speaker 1: your hand changes. Because if I've got pocket aces and

915
00:43:08,640 --> 00:43:12,000
Speaker 1: then the flop comes out, you know, five seven nine,

916
00:43:12,239 --> 00:43:15,759
Speaker 1: then I'm like, I might still have a good hand,

917
00:43:15,800 --> 00:43:17,640
Speaker 1: but I might not because someone has pocket lives now

918
00:43:17,640 --> 00:43:21,880
Speaker 1: they've got trip fives, and I'm potentially losing us. Sorry

919
00:43:21,920 --> 00:43:24,880
Speaker 1: poker nerds Nerd. Well, So my question though, Jesse, So

920
00:43:24,920 --> 00:43:28,920
Speaker 1: this is assuming though, that making as much money as possible,

921
00:43:28,960 --> 00:43:31,840
Speaker 1: for instance, is sort of the goal. Right, So I

922
00:43:31,880 --> 00:43:33,560
Speaker 1: guess I guess that is what you're saying though, right,

923
00:43:33,560 --> 00:43:36,440
Speaker 1: You're because you're optimizing or thinking about everything. Yeah, well,

924
00:43:36,520 --> 00:43:38,279
Speaker 1: so I guess that that kind of gets to my question. Then,

925
00:43:38,400 --> 00:43:40,240
Speaker 1: how much do you think that there is a disconnect

926
00:43:40,280 --> 00:43:42,200
Speaker 1: between what it is that folks are doing with their

927
00:43:42,239 --> 00:43:46,560
Speaker 1: money today, those actions taken today versus the goals that

928
00:43:46,600 --> 00:43:49,040
Speaker 1: they have for tomorrow. The clients that you've talked with

929
00:43:49,080 --> 00:43:51,200
Speaker 1: and the folks that you've seen, and even just as

930
00:43:51,200 --> 00:43:54,120
Speaker 1: you've thought about this. Do you think that folks are

931
00:43:54,120 --> 00:43:57,399
Speaker 1: thinking long and hard enough about what it is that

932
00:43:57,440 --> 00:43:58,919
Speaker 1: they are wanting to get from life?

933
00:43:58,960 --> 00:44:01,280
Speaker 2: The short answer is no. I think the average person

934
00:44:01,280 --> 00:44:03,680
Speaker 2: probably isn't thinking enough, or at least long enough and

935
00:44:03,760 --> 00:44:07,640
Speaker 2: hard enough about that future version of themself. And I'm

936
00:44:07,640 --> 00:44:12,520
Speaker 2: going to borrow a really cool metaphor or analogy that

937
00:44:13,239 --> 00:44:15,880
Speaker 2: I heard from a gentleman named Phil Pearlman. Phil's awesome.

938
00:44:16,000 --> 00:44:16,200
Speaker 1: Phil.

939
00:44:16,239 --> 00:44:18,359
Speaker 2: If you're listening to this, you're a great guy. And

940
00:44:18,520 --> 00:44:20,919
Speaker 2: Phil's focus is mainly on health, but he's actually pretty

941
00:44:20,920 --> 00:44:24,320
Speaker 2: cool because he's a PhD I want to say psychologist,

942
00:44:24,360 --> 00:44:29,120
Speaker 2: not psychiatrist, psychologist who worked on Wall Street doing behavioral

943
00:44:29,160 --> 00:44:31,760
Speaker 2: finance stuff for like twenty years and then he retired

944
00:44:31,760 --> 00:44:34,040
Speaker 2: to focus more on health. And one thing he was

945
00:44:34,080 --> 00:44:37,760
Speaker 2: telling me about his health help that he provides people

946
00:44:38,280 --> 00:44:41,080
Speaker 2: is to realize that you know. Like so, Matt and

947
00:44:41,160 --> 00:44:43,719
Speaker 2: Joel again, I'll pose the question to you guys, And

948
00:44:43,760 --> 00:44:45,520
Speaker 2: it's a bit of a morbid question, but hey, we're

949
00:44:45,560 --> 00:44:47,560
Speaker 2: talking about life and death here at times, so it

950
00:44:47,680 --> 00:44:49,719
Speaker 2: comes into play. But the question I'm going to ask

951
00:44:49,760 --> 00:44:52,799
Speaker 2: you is, what is the probability that one year from

952
00:44:52,800 --> 00:44:56,640
Speaker 2: now on August twentieth, twenty twenty five, you guys are alive,

953
00:44:56,719 --> 00:44:57,320
Speaker 2: and well.

954
00:44:57,480 --> 00:45:01,320
Speaker 1: I'm gonna say, oh, gosh, probability's n eight point six percent.

955
00:45:01,360 --> 00:45:03,920
Speaker 1: I'd say, yeah, h ninety nine plus percent.

956
00:45:04,120 --> 00:45:06,600
Speaker 2: Yeah, I would agree with you. It's it's probably ninety

957
00:45:06,680 --> 00:45:09,920
Speaker 2: nine plus percent. And so I would say that, except

958
00:45:09,920 --> 00:45:14,040
Speaker 2: for a tiny sliver of probability, that that future version

959
00:45:14,080 --> 00:45:17,080
Speaker 2: of you one year from to now is real. That

960
00:45:17,200 --> 00:45:19,520
Speaker 2: is a real person. You haven't met them yet. They're

961
00:45:19,560 --> 00:45:21,520
Speaker 2: in some other part of the universe, so to speak,

962
00:45:21,560 --> 00:45:23,480
Speaker 2: you know, in some alternate university or whatever you want

963
00:45:23,520 --> 00:45:26,000
Speaker 2: to think about it, depending on your metaphysical point of view.

964
00:45:26,280 --> 00:45:29,400
Speaker 2: But that person is real except for some tiny sliver.

965
00:45:29,800 --> 00:45:31,440
Speaker 2: And I could go two or three or five or

966
00:45:31,480 --> 00:45:33,680
Speaker 2: ten years out, and granted the sliver gets a little

967
00:45:33,719 --> 00:45:36,040
Speaker 2: bit bigger each year. Ten years from now, maybe the

968
00:45:36,080 --> 00:45:38,560
Speaker 2: odds that you're not around is three percent or five percent.

969
00:45:38,600 --> 00:45:40,440
Speaker 2: It's sad to think about, but it's real to think about.

970
00:45:40,719 --> 00:45:43,840
Speaker 2: But most likely that future version of you is real,

971
00:45:44,560 --> 00:45:47,719
Speaker 2: just as real as the person sitting here today, and

972
00:45:47,760 --> 00:45:50,840
Speaker 2: it's important for us to realize that no pun intended

973
00:45:51,600 --> 00:45:55,560
Speaker 2: and make decisions accordingly. And I think the short term mindset,

974
00:45:55,600 --> 00:45:58,279
Speaker 2: whether it's diet and health like Phil talks about, or

975
00:45:58,280 --> 00:46:01,160
Speaker 2: whether it's personal finance that we're talking today, the short

976
00:46:01,239 --> 00:46:06,360
Speaker 2: term mindset often is that failure to realize that today's

977
00:46:06,360 --> 00:46:09,600
Speaker 2: decisions will have an impact on a very real version

978
00:46:09,640 --> 00:46:12,000
Speaker 2: of you in the future. And we'll focused a little

979
00:46:12,000 --> 00:46:14,040
Speaker 2: bit too much on the one hundred percent version of

980
00:46:14,120 --> 00:46:16,600
Speaker 2: us that's here today. Right, there's no sliver, we're here,

981
00:46:16,640 --> 00:46:19,640
Speaker 2: it's one hundred percent Reeal, we forget the fact that

982
00:46:19,640 --> 00:46:21,840
Speaker 2: that future version of you is ninety nine or ninety

983
00:46:21,880 --> 00:46:24,320
Speaker 2: six or ninety percent real, and they deserve to be

984
00:46:24,360 --> 00:46:27,319
Speaker 2: thought about as well. And I think that at least

985
00:46:27,360 --> 00:46:29,840
Speaker 2: for me, Granted maybe that metaphor doesn't work for everybody,

986
00:46:30,280 --> 00:46:33,200
Speaker 2: but for me that helps me realize, Okay, I need

987
00:46:33,239 --> 00:46:35,320
Speaker 2: to make some decisions today that are going to benefit

988
00:46:35,360 --> 00:46:37,160
Speaker 2: that person ten or twenty years from now.

989
00:46:37,440 --> 00:46:41,000
Speaker 1: Less Yolo a little more future orientation. Talk about social

990
00:46:41,000 --> 00:46:43,719
Speaker 1: security for a second, Jesse, you've written extensively about social

991
00:46:43,760 --> 00:46:46,320
Speaker 1: security and the system seems to be in financial trouble.

992
00:46:46,360 --> 00:46:48,920
Speaker 1: There's is in financial trouble, and there's been a lot

993
00:46:48,960 --> 00:46:52,080
Speaker 1: of inks bill on that recently, But the truth is

994
00:46:52,200 --> 00:46:54,120
Speaker 1: too you can read those headlines and you can be

995
00:46:54,280 --> 00:46:57,480
Speaker 1: freaked out, especially if you're in your twenties, thirties, or forties,

996
00:46:57,480 --> 00:47:00,239
Speaker 1: and you might think, Yeah, like we talked about earlier, Yeah,

997
00:47:00,239 --> 00:47:02,680
Speaker 1: I'm just I'm just gonna assume that I'm not getting

998
00:47:02,719 --> 00:47:04,920
Speaker 1: anything from Social Security? Why would that be a mistake?

999
00:47:05,080 --> 00:47:07,400
Speaker 1: And how should people think about social Security and the

1000
00:47:07,440 --> 00:47:09,280
Speaker 1: role that it's going to play in their retirement.

1001
00:47:09,800 --> 00:47:11,920
Speaker 2: So depending on what article you've read and when you

1002
00:47:12,000 --> 00:47:14,920
Speaker 2: read it, odds are they put a certain year in

1003
00:47:14,960 --> 00:47:17,880
Speaker 2: that article. Maybe that year was in the mid twenty thirties.

1004
00:47:17,960 --> 00:47:20,000
Speaker 2: Have you guys seen these articles in that year?

1005
00:47:20,200 --> 00:47:21,560
Speaker 1: That's when the trust fund's running out?

1006
00:47:21,680 --> 00:47:25,040
Speaker 2: Right, exactly exactly, And that's pretty scary. Whoa social Security

1007
00:47:25,120 --> 00:47:27,520
Speaker 2: is going to run out of money in twenty thirty four.

1008
00:47:28,560 --> 00:47:31,640
Speaker 2: It's semi true, it's a half truth, but when we

1009
00:47:31,680 --> 00:47:34,000
Speaker 2: see the full truth, we realize, Okay, it's maybe not

1010
00:47:34,160 --> 00:47:36,400
Speaker 2: quite as dire. It's not good, let me put it

1011
00:47:36,440 --> 00:47:39,480
Speaker 2: that way. It's not good, but it's also not necessarily dire.

1012
00:47:40,080 --> 00:47:41,960
Speaker 2: So right now we're sitting here in twenty twenty four,

1013
00:47:42,880 --> 00:47:45,359
Speaker 2: and you and I and most people we know are

1014
00:47:45,400 --> 00:47:51,160
Speaker 2: contributing into the social Security system via payroll taxes. Right

1015
00:47:51,239 --> 00:47:56,040
Speaker 2: faika oasdi. These acronyms might mean something to you. We're

1016
00:47:56,080 --> 00:47:58,439
Speaker 2: putting money into the system, and at the same time,

1017
00:47:58,520 --> 00:48:01,239
Speaker 2: the Social Security Administration is basically they're sending checks out

1018
00:48:01,280 --> 00:48:05,120
Speaker 2: to all these retirees who are collecting Social Security. As

1019
00:48:05,120 --> 00:48:07,680
Speaker 2: we sit here today, the amount of checks that are

1020
00:48:07,680 --> 00:48:11,719
Speaker 2: going out are covered. About ninety percent of the checks

1021
00:48:11,719 --> 00:48:14,200
Speaker 2: that are going out are covered by the tax dollars

1022
00:48:14,200 --> 00:48:17,360
Speaker 2: that we are putting in, and that remaining ten percent

1023
00:48:17,400 --> 00:48:19,560
Speaker 2: of the checks that are going out, that money is

1024
00:48:19,600 --> 00:48:23,360
Speaker 2: being drawn from this so called trust fund. And over time,

1025
00:48:23,760 --> 00:48:25,440
Speaker 2: so here we are in twenty twenty four that that

1026
00:48:25,480 --> 00:48:28,360
Speaker 2: fraction is ninety ten. Over time that fraction is going

1027
00:48:28,440 --> 00:48:30,720
Speaker 2: to shift to like eighty five to fifteen and eventually

1028
00:48:30,760 --> 00:48:35,200
Speaker 2: eighty twenty. And based on actuarial projections, that trust fund

1029
00:48:35,280 --> 00:48:37,000
Speaker 2: is going to run out of money in about twenty

1030
00:48:37,040 --> 00:48:40,400
Speaker 2: thirty four, which means in twenty thirty four, of the

1031
00:48:40,440 --> 00:48:43,440
Speaker 2: money that's going out, or the money that's promised to

1032
00:48:43,520 --> 00:48:46,680
Speaker 2: retirees at that point, only about eighty percent of that

1033
00:48:46,760 --> 00:48:49,480
Speaker 2: money is going to be covered by payroll taxes. It's

1034
00:48:49,480 --> 00:48:52,960
Speaker 2: not zero, it's eighty percent. So in my opinion that

1035
00:48:53,000 --> 00:48:55,840
Speaker 2: the worst case scenario is that twenty thirty four comes around,

1036
00:48:56,120 --> 00:48:59,279
Speaker 2: nobody takes any action, the trust fund is gone, and

1037
00:48:59,360 --> 00:49:02,280
Speaker 2: yet we still all this money to people. Well, eighty

1038
00:49:02,320 --> 00:49:04,560
Speaker 2: percent of the money that is promised to them will

1039
00:49:04,600 --> 00:49:08,400
Speaker 2: be covered by that year's taxes. Social Security collections via taxes,

1040
00:49:08,480 --> 00:49:10,359
Speaker 2: same goes for twenty thirty five to twenty thirty six.

1041
00:49:10,640 --> 00:49:12,560
Speaker 2: So if I were to be ultra conservative in a

1042
00:49:12,560 --> 00:49:15,360
Speaker 2: financial plan right now, and I was worried about my

1043
00:49:15,440 --> 00:49:18,239
Speaker 2: Social Security income in twenty thirty four and beyond, I'd

1044
00:49:18,239 --> 00:49:20,960
Speaker 2: assume I'm only collecting eighty percent of what has promised me,

1045
00:49:21,120 --> 00:49:22,640
Speaker 2: not zero. Eighty percent.

1046
00:49:23,000 --> 00:49:25,800
Speaker 1: Yeah, and eighty percent of a guaranteed amount. Let's be honest,

1047
00:49:25,800 --> 00:49:28,759
Speaker 1: that's not that bad. Yeah, whatever the number shows when

1048
00:49:28,800 --> 00:49:31,239
Speaker 1: you log into my social Security dot gov, if you

1049
00:49:31,280 --> 00:49:33,440
Speaker 1: just factor in eighty percent of that, that could maybe

1050
00:49:33,440 --> 00:49:35,520
Speaker 1: bring a little bit of stress relief when it comes

1051
00:49:35,520 --> 00:49:37,920
Speaker 1: to how much you figure are factoring that you need

1052
00:49:37,960 --> 00:49:39,879
Speaker 1: to save for your own retirement. So when it comes

1053
00:49:39,920 --> 00:49:43,319
Speaker 1: to strategy, though, like the common advice to folks who

1054
00:49:43,360 --> 00:49:45,880
Speaker 1: are are nearing retirement is just to wait until you

1055
00:49:45,920 --> 00:49:49,840
Speaker 1: reach age seventy in order to maximize those monthly payments.

1056
00:49:50,239 --> 00:49:53,600
Speaker 1: But you actually recently wrote about why taking social Security early,

1057
00:49:53,640 --> 00:49:57,160
Speaker 1: perhaps at sixty two, how that could be a better option.

1058
00:49:57,200 --> 00:49:58,960
Speaker 1: Can you fill us in how might that work out?

1059
00:49:59,280 --> 00:50:02,319
Speaker 2: Yeah? So I had a reader right in and because

1060
00:50:02,480 --> 00:50:05,319
Speaker 2: I'd written maybe three or four articles in over a

1061
00:50:05,320 --> 00:50:07,200
Speaker 2: few months on social security, and I had a reader

1062
00:50:07,280 --> 00:50:09,080
Speaker 2: right in and say, hey, Jesse, you forgot about something

1063
00:50:09,120 --> 00:50:11,480
Speaker 2: which is kind of cool. The thing you forgot about

1064
00:50:11,520 --> 00:50:14,520
Speaker 2: is that you could start collecting social Security at sixty two.

1065
00:50:14,680 --> 00:50:18,160
Speaker 2: You could invest that early collection money, and as long

1066
00:50:18,200 --> 00:50:20,320
Speaker 2: as you just let it ride, you're actually going to

1067
00:50:20,400 --> 00:50:21,880
Speaker 2: end up better off for it than if you had

1068
00:50:21,880 --> 00:50:24,520
Speaker 2: waited till age seventy. I was like, oh, that's kind

1069
00:50:24,520 --> 00:50:26,640
Speaker 2: of intriguing. I hadn't really thought about it. Let's see

1070
00:50:26,640 --> 00:50:31,480
Speaker 2: what the math bears out. And this gentleman isn't quite right,

1071
00:50:31,560 --> 00:50:34,080
Speaker 2: but he also wasn't quite wrong. He was somewhere in between.

1072
00:50:34,320 --> 00:50:36,400
Speaker 2: And the reason why, and if this gets into some

1073
00:50:36,480 --> 00:50:41,080
Speaker 2: nerdy investing talk here, but if I invest, let me

1074
00:50:41,080 --> 00:50:43,800
Speaker 2: put it this way to you guys, if I invest

1075
00:50:43,800 --> 00:50:46,279
Speaker 2: money in the stock market versus I throw money into

1076
00:50:46,280 --> 00:50:49,439
Speaker 2: a savings account, is one going to give me more

1077
00:50:49,480 --> 00:50:52,480
Speaker 2: investment reward, but is also that one going to provide

1078
00:50:52,920 --> 00:50:56,879
Speaker 2: going to cause more investing risk? Yep, right, it is right.

1079
00:50:57,000 --> 00:50:59,120
Speaker 2: Putting money in the stock market over a long enough

1080
00:50:59,120 --> 00:51:00,799
Speaker 2: period of time, of course it's going to bring me

1081
00:51:00,840 --> 00:51:03,840
Speaker 2: more reward, but it's certainly not guaranteed. That lack of

1082
00:51:03,880 --> 00:51:06,680
Speaker 2: a guarantee we call that risk. So the stock market

1083
00:51:06,719 --> 00:51:09,840
Speaker 2: is more risky now when I go back to social Security.

1084
00:51:10,160 --> 00:51:13,720
Speaker 2: By delaying social Security till seventy and increasing the monthly

1085
00:51:13,760 --> 00:51:16,600
Speaker 2: amount that I'm collecting by every month that I delay,

1086
00:51:17,560 --> 00:51:20,360
Speaker 2: the federal government is guaranteeing me that I'm going to

1087
00:51:20,400 --> 00:51:23,840
Speaker 2: be collecting more money if I delay. That guarantee means something.

1088
00:51:23,840 --> 00:51:26,440
Speaker 2: It means that there's not much risk there. Whereas if

1089
00:51:26,480 --> 00:51:28,480
Speaker 2: I collect early and I put it in a sixty

1090
00:51:28,480 --> 00:51:31,040
Speaker 2: to forty portfolio or one hundred percent stock portfolio, well,

1091
00:51:31,040 --> 00:51:34,040
Speaker 2: I'm taking on more risk in order to achieve more reward.

1092
00:51:34,800 --> 00:51:39,480
Speaker 2: So ultimately, that was the conclusion of that gentleman's comment

1093
00:51:39,600 --> 00:51:41,480
Speaker 2: to my blog post, which he was kind of right,

1094
00:51:41,520 --> 00:51:43,040
Speaker 2: which is like, Yeah, if you want to start collecting

1095
00:51:43,080 --> 00:51:45,040
Speaker 2: at sixty two and you want to take on some

1096
00:51:45,160 --> 00:51:48,600
Speaker 2: real investing risk, you probably you might be able to

1097
00:51:48,719 --> 00:51:50,520
Speaker 2: It's not guaranteed, but you might be able to walk

1098
00:51:50,520 --> 00:51:52,680
Speaker 2: away with more money. The odds might even be in

1099
00:51:52,719 --> 00:51:56,439
Speaker 2: your favor. But for the average person who maybe they're

1100
00:51:56,440 --> 00:51:58,480
Speaker 2: a little risk averse, they're not familiar with the market,

1101
00:51:59,120 --> 00:52:01,040
Speaker 2: and really Soli's care ccurity is meant to be a

1102
00:52:01,440 --> 00:52:05,239
Speaker 2: guaranteed form of retirement income, you're playing with a little

1103
00:52:05,239 --> 00:52:08,120
Speaker 2: bit of fire and it's not something that I'd necessarily

1104
00:52:08,160 --> 00:52:10,840
Speaker 2: recommend for every person to do. It's kind of like

1105
00:52:10,880 --> 00:52:13,080
Speaker 2: a bit of a buyer beware or you know, proceed

1106
00:52:13,120 --> 00:52:15,520
Speaker 2: at your own peril type recommendation.

1107
00:52:16,040 --> 00:52:18,760
Speaker 1: Yeah, it kind of. It reminds me of why folks

1108
00:52:18,800 --> 00:52:21,440
Speaker 1: who own their own home, even if they have a mortgage,

1109
00:52:21,480 --> 00:52:23,680
Speaker 1: why they tend to be wealthier, right, because it's a

1110
00:52:23,680 --> 00:52:26,319
Speaker 1: forced method of savings, and you don't have to do that,

1111
00:52:26,640 --> 00:52:29,000
Speaker 1: but you do have to stay disciplined enough to invest

1112
00:52:29,120 --> 00:52:31,399
Speaker 1: the difference over what it is that you would pay

1113
00:52:31,440 --> 00:52:33,160
Speaker 1: in rent, and not a lot of folks are doing

1114
00:52:33,160 --> 00:52:34,560
Speaker 1: that in the same way, not a lot of folks

1115
00:52:34,560 --> 00:52:36,360
Speaker 1: are going to have the discipline to take that money

1116
00:52:36,520 --> 00:52:39,160
Speaker 1: to invest it in to see potential outside returns. You

1117
00:52:39,200 --> 00:52:41,399
Speaker 1: also have to do that at a time when risk

1118
00:52:41,480 --> 00:52:43,400
Speaker 1: is harder to come by because of your ability to

1119
00:52:43,520 --> 00:52:46,160
Speaker 1: endure some of the downside potentials of that risk. Love it,

1120
00:52:46,280 --> 00:52:48,840
Speaker 1: love it, Jesse. Yeah, Hey, we appreciate you taking the

1121
00:52:48,880 --> 00:52:51,400
Speaker 1: time to chat with us today. Want you share with

1122
00:52:51,400 --> 00:52:54,719
Speaker 1: folks where they can learn more about you, read your writings,

1123
00:52:54,920 --> 00:52:56,279
Speaker 1: and listen to your podcast as well.

1124
00:52:56,360 --> 00:52:58,560
Speaker 2: Oh, thank you man, Joel. Thank you guys for letting

1125
00:52:58,600 --> 00:53:00,959
Speaker 2: me come on and share some thoughts to day. Yeah.

1126
00:53:01,000 --> 00:53:03,600
Speaker 2: If listeners want to check out my work, the easiest

1127
00:53:03,600 --> 00:53:06,520
Speaker 2: thing they can do is go to best Interest dot blog.

1128
00:53:06,680 --> 00:53:09,000
Speaker 2: That's not dot com, it's not dot net, it's not

1129
00:53:09,160 --> 00:53:13,640
Speaker 2: dot yeah, dot blog, best Interest dot blog, and you'll

1130
00:53:13,680 --> 00:53:16,000
Speaker 2: see my blog, You'll see my podcast there, and then

1131
00:53:16,040 --> 00:53:17,800
Speaker 2: you'll see a little sign up for him from my

1132
00:53:17,840 --> 00:53:20,879
Speaker 2: weekly newsletter. I send a weekly newsletter that shouts out

1133
00:53:20,920 --> 00:53:23,880
Speaker 2: other cool stuff I find around the internet. Some somehow

1134
00:53:23,960 --> 00:53:26,439
Speaker 2: to money podcasts make it on there, and it's also

1135
00:53:26,440 --> 00:53:28,840
Speaker 2: where I share my my most recent work, so people

1136
00:53:28,840 --> 00:53:30,800
Speaker 2: can rather than having to go to the website and

1137
00:53:30,840 --> 00:53:32,800
Speaker 2: find it, they can just subscribe to one spot and

1138
00:53:32,840 --> 00:53:33,640
Speaker 2: I'll send it to them.

1139
00:53:33,960 --> 00:53:36,759
Speaker 1: Nice Jesse, thanks for joining us, man, We really appreciate it.

1140
00:53:36,880 --> 00:53:37,960
Speaker 2: Awesome thank you guys.

1141
00:53:38,040 --> 00:53:40,120
Speaker 1: All Right, Matt, you got to love Jesse, one of

1142
00:53:40,120 --> 00:53:43,239
Speaker 1: the best in the business, talking about he's a stud,

1143
00:53:43,360 --> 00:53:45,080
Speaker 1: and I say, really is just kind of translating some

1144
00:53:45,120 --> 00:53:48,400
Speaker 1: of those nerdier personal finance concepts to what you know,

1145
00:53:48,440 --> 00:53:51,400
Speaker 1: people like you and I with lesser IQs can understand.

1146
00:53:51,440 --> 00:53:54,200
Speaker 1: So big thanks to Jesse for coming on the show.

1147
00:53:54,760 --> 00:53:58,279
Speaker 1: You calling me dumb, call you us dump. Well collectively,

1148
00:53:58,520 --> 00:54:00,960
Speaker 1: we're both smarter individually, right, I think so, but when

1149
00:54:01,000 --> 00:54:04,960
Speaker 1: we get together, we post together terrible decisions become total idiots. Yeah,

1150
00:54:05,440 --> 00:54:08,239
Speaker 1: were the was your big takeaway from this combo? Yeah? So,

1151
00:54:08,280 --> 00:54:09,799
Speaker 1: I think my big takeaway is going to be when

1152
00:54:09,800 --> 00:54:14,480
Speaker 1: we were discussing the crushing costs of an overly conservative

1153
00:54:14,560 --> 00:54:18,880
Speaker 1: portfolio within retirement, right, and he and Jesse was he

1154
00:54:18,920 --> 00:54:20,880
Speaker 1: was pointing to the fact that you take some of

1155
00:54:20,880 --> 00:54:23,719
Speaker 1: these more conservative stances when it comes to returns, when

1156
00:54:23,719 --> 00:54:27,120
Speaker 1: it comes to let's say, inflation, when it comes to

1157
00:54:27,400 --> 00:54:29,680
Speaker 1: life expectancy, and then you take all of those things

1158
00:54:29,719 --> 00:54:32,120
Speaker 1: and you add them up, that there is a compounding

1159
00:54:32,160 --> 00:54:35,799
Speaker 1: impact by having taken a more conservative approach, Right, And

1160
00:54:35,840 --> 00:54:38,440
Speaker 1: so I guess my takeaway is going to be to

1161
00:54:38,600 --> 00:54:40,439
Speaker 1: sort of take that idea and run with it, which

1162
00:54:40,480 --> 00:54:43,560
Speaker 1: is that I think when we have a natural tendency

1163
00:54:43,600 --> 00:54:46,040
Speaker 1: to be more aggressive in how it is that we

1164
00:54:46,120 --> 00:54:49,120
Speaker 1: view things, if we tend to be more overly optimistic,

1165
00:54:49,600 --> 00:54:51,319
Speaker 1: or if we tend to over the opposite, right, if

1166
00:54:51,320 --> 00:54:53,640
Speaker 1: we tend to be pessimistic, that we then take those

1167
00:54:53,680 --> 00:54:56,000
Speaker 1: principles and apply them to other areas of life, because

1168
00:54:56,000 --> 00:54:58,319
Speaker 1: that's just naturally how we see the world. And so

1169
00:54:58,600 --> 00:55:01,040
Speaker 1: I just think it's important to remember that when it

1170
00:55:01,080 --> 00:55:02,759
Speaker 1: comes to some of the different decisions that we're making,

1171
00:55:02,800 --> 00:55:05,320
Speaker 1: is that we we kind of have a set default

1172
00:55:05,840 --> 00:55:08,480
Speaker 1: of how we expect the future to unfold, and I

1173
00:55:08,480 --> 00:55:11,439
Speaker 1: think it takes a rare individual to approach that sort

1174
00:55:11,440 --> 00:55:16,400
Speaker 1: of long term outlook with balance. I guess this is

1175
00:55:16,400 --> 00:55:18,799
Speaker 1: probably not going to be nearly as optimistic as the

1176
00:55:18,840 --> 00:55:21,279
Speaker 1: most optimistic person might think it might be where they're

1177
00:55:21,320 --> 00:55:24,360
Speaker 1: looking at the entire world through you know, rose tinted glasses,

1178
00:55:24,400 --> 00:55:26,480
Speaker 1: But it's probably not gonna be as terrible as the

1179
00:55:26,480 --> 00:55:28,600
Speaker 1: most pessimistic person who's thinking the world's gonna end and

1180
00:55:28,640 --> 00:55:30,880
Speaker 1: the markets are going to crash and the dollar is

1181
00:55:30,880 --> 00:55:32,480
Speaker 1: not going to be valuable in the you know, like

1182
00:55:32,520 --> 00:55:34,719
Speaker 1: all you see what I'm saying, Like, but very few

1183
00:55:34,719 --> 00:55:38,840
Speaker 1: people land it doesn't sell, right, what shows is the

1184
00:55:39,560 --> 00:55:42,359
Speaker 1: perma bear or the hyper bowl And whereas like the

1185
00:55:42,400 --> 00:55:46,480
Speaker 1: normal everyday person just assuming regular returns over many, many decades,

1186
00:55:46,960 --> 00:55:49,920
Speaker 1: which is gonna pay out really nicely for your bottom line,

1187
00:55:50,239 --> 00:55:52,600
Speaker 1: that it is not as sexy and sure it's not

1188
00:55:52,640 --> 00:55:54,799
Speaker 1: gonna make that even aside from media. Right, But like

1189
00:55:54,840 --> 00:55:56,719
Speaker 1: I'm I think what you're saying is totally true. But

1190
00:55:56,760 --> 00:55:59,200
Speaker 1: even as individuals, I think it's just important to be

1191
00:55:59,239 --> 00:56:01,120
Speaker 1: aware that. I I think we all tend to have

1192
00:56:01,719 --> 00:56:04,040
Speaker 1: a proclivity to lean one way or the other and

1193
00:56:04,080 --> 00:56:05,600
Speaker 1: for us to be mindful of that. Yeah, And I

1194
00:56:06,080 --> 00:56:08,799
Speaker 1: think that's why, because of what the media portrays are,

1195
00:56:08,800 --> 00:56:10,840
Speaker 1: because of the people who get all the Twitter followers

1196
00:56:10,880 --> 00:56:13,800
Speaker 1: because they're extreme, we often end up adopting one of

1197
00:56:13,840 --> 00:56:17,240
Speaker 1: those extreme stances instead of a more middle of the road,

1198
00:56:17,800 --> 00:56:21,200
Speaker 1: historically based approach because that's what we hear more more of. Exactly. Yeah,

1199
00:56:21,200 --> 00:56:22,719
Speaker 1: there's extreme views all right. So I think my big

1200
00:56:22,800 --> 00:56:25,320
Speaker 1: takeaway was when Jesse was talking about switching jobs and

1201
00:56:25,360 --> 00:56:27,439
Speaker 1: he says he took the long term view, right, Yes,

1202
00:56:27,480 --> 00:56:30,879
Speaker 1: he was taking an immediate pay cut, but he was saying, well,

1203
00:56:30,960 --> 00:56:34,040
Speaker 1: I figured over time there was actually more potential upside.

1204
00:56:34,040 --> 00:56:36,000
Speaker 1: And I think a lot of people Matt would take

1205
00:56:36,040 --> 00:56:38,080
Speaker 1: that would say, you know what, I'm either going to

1206
00:56:38,120 --> 00:56:42,080
Speaker 1: stay put because I like keeping my paycheck. I don't

1207
00:56:42,080 --> 00:56:44,480
Speaker 1: want to see a salary reduction. But it was interesting

1208
00:56:44,480 --> 00:56:46,400
Speaker 1: to see the Jesse extrapolated and he said, actually, in

1209
00:56:46,400 --> 00:56:48,880
Speaker 1: this line of business, my pay is great now, but

1210
00:56:49,120 --> 00:56:52,120
Speaker 1: it looks like there's less opportunity for promotion, advancement, and

1211
00:56:52,320 --> 00:56:55,359
Speaker 1: increase in pay than if I go in this other direction. Yeah,

1212
00:56:55,360 --> 00:56:57,439
Speaker 1: it's going to be kind of an immediate little gut punch,

1213
00:56:57,520 --> 00:56:59,440
Speaker 1: but I can survive that because I'm smart with my money.

1214
00:57:00,160 --> 00:57:01,680
Speaker 1: Three years in now, I'm curious to see when he

1215
00:57:01,719 --> 00:57:03,680
Speaker 1: crosses that maybe threshold. But I think there's a good

1216
00:57:03,760 --> 00:57:05,560
Speaker 1: lesson for all of us in that. Yeah, let's get

1217
00:57:05,600 --> 00:57:07,960
Speaker 1: to the beer you and I enjoyed today. It's called

1218
00:57:08,120 --> 00:57:12,520
Speaker 1: When We Swung from rafters and Danced upon Bars. Of course,

1219
00:57:12,640 --> 00:57:15,400
Speaker 1: this is a beer by Burial Beer Company. What were

1220
00:57:15,440 --> 00:57:17,920
Speaker 1: your thoughts? Well, the can art looks like a Salvador

1221
00:57:17,960 --> 00:57:21,600
Speaker 1: Dolly painting. Yeah, pretty cool. Yeah, and Burial just continues

1222
00:57:21,640 --> 00:57:24,400
Speaker 1: to master the naming conventions Dolly mixed with a little

1223
00:57:24,400 --> 00:57:26,840
Speaker 1: bit of Esher. Yeah, but yeah, absolutely, I thought this

1224
00:57:26,920 --> 00:57:31,520
Speaker 1: beer was fascinating. It was incredibly nuanced. This was soft

1225
00:57:31,720 --> 00:57:35,720
Speaker 1: and velvety, but it also it was like not brash

1226
00:57:35,760 --> 00:57:37,360
Speaker 1: but beautiful. And I feel like a lot of hazy

1227
00:57:37,400 --> 00:57:41,080
Speaker 1: IPAs really are like sucker punches to the mouth. This

1228
00:57:41,120 --> 00:57:43,320
Speaker 1: one was not. It was, but it still had like

1229
00:57:43,360 --> 00:57:45,800
Speaker 1: a ton of flavor going on. It's amazing what you

1230
00:57:45,800 --> 00:57:49,400
Speaker 1: can do with different hops and burials, like they're the

1231
00:57:49,400 --> 00:57:52,160
Speaker 1: masters at hazy IPAs and just kind of and making

1232
00:57:52,160 --> 00:57:55,200
Speaker 1: them each unique and separate. Yeah, with this being a

1233
00:57:55,240 --> 00:57:58,400
Speaker 1: double tons of flavor, so like in my opinion, had

1234
00:57:58,480 --> 00:58:00,640
Speaker 1: tons of sweetness but tons of hops as well. You

1235
00:58:00,760 --> 00:58:02,800
Speaker 1: just packed a whole lot into this one. Glad you

1236
00:58:02,840 --> 00:58:05,120
Speaker 1: and I got to share it during our conversation today

1237
00:58:05,200 --> 00:58:07,600
Speaker 1: with Jesse Kramer. That's gonna be it. You can find

1238
00:58:07,640 --> 00:58:10,280
Speaker 1: our show notes up on the website at howtomoney dot

1239
00:58:10,280 --> 00:58:13,040
Speaker 1: com and buddy. Until next time, Best Friends Out, Best

1240
00:58:13,160 --> 00:58:14,120
Speaker 1: Friends Out.