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If your goal is to become financially independent of a young age, this is a very controversial thing to say.

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You probably don't want to go buy a house.

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Because people typically buy a house that can't possibly afford.

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The bank wants you to do that because that's how they make the most money.

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So you're putting your capital into that house and now it's not going to be earning things, it's going to be sitting idly.

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And people say, well, you know, I can buy this house because my mortgage is the same as my rent.

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Well, yeah, but your mortgage is just the starting point.

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What comes to mind if I want to be financially wealthy?

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Okay, so we've got a lot to go through.

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J.O. Collins is a renowned financial expert known for his bulk, the simple path to wealth.

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He's teaching millions a straightforward and realistic avenue for achieving wealth so that anyone can have financial security.

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What is this simple path to wealth?

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So first of all, avoid debt because you can never be financially independent if you're carrying around debt.

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Next, live on less than you earn.

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The problem is away our cultures taught us to think about money.

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Is solely in terms of what can you buy with it?

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But the more must-have you have in your life, the less likely you are to become wealthy than the final one invests the surplus.

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So stocks are the single, most effective, strongest wealth building tool that's ever been created.

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But the biggest pushback I get is from people who say, well, that's great.

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I mean, if you got a big income 100, 200, 300, 300 a year, then yeah, the simple path to wealth work for you.

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That's not the truth. For instance, a friend of mine, he was making a million dollars a year.

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And he was broke because people of large incomes are much more likely to be drawn into the competing with the judges.

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Whereas the people who make less money probably don't have those same social pressures and are more readily able to do it.

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Let's talk about investing then.

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Where do you think we should be investing on money at this moment of time?

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Should I buy Bitcoin? Do I need a financial advisor?

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So my advice, and this is all different than the more common advice out there, would be...

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Just give me 30 seconds of your time.

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Two things I wanted to say. The first thing is a huge thank you for listening and tuning into the show week after week.

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Means the world to all of us. And this really is a dream that we absolutely never had and couldn't have imagined getting to this place.

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But secondly, it's a dream where we feel like we're only just getting started.

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And if you enjoy what we do here, please join the 24% of people that listen to this podcast regularly and follow us on this app.

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Here's a promise I'm going to make to you. I'm going to do everything in my power to make this show as good as I can now and into the future.

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We're going to deliver the guests that you want me to speak to and we're going to continue to keep doing all of the things you love about this show.

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Thank you.

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JL Collins.

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You wrote a book, a very iconic book that sold millions of copies called The Simple Path to Wealth. Why did you write this book?

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I actually, that book was an outgrowth of my blog. I started the blog to archive information I wanted my daughter to have available.

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Because if you get money right, your life is so much better. You have so many more options.

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And the world offers so much to people who have the resources with which to access it.

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And so little for those people who don't have the resources to access those things.

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And if you don't have it, life is just so much harder than it needs to be.

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When you think about the average person listening right now, what is what is some of the fundamental sort of misconceptions or misunderstandings or what would you call it?

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Black spots that they have as it relates to money, the things they walk around assuming about money that are incorrect, that you are maybe trying to get out of your daughter's mind.

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So there's a chapter in the book called How to Think About Money. And the fundamental way I think the vast majority of people think about money because this is what our culture has taught us the way our culture has taught us to think about money is solely in terms of what can you buy with it.

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So if you go to the average person, that lottery, for instance, is like a billion dollars at the moment, so people are buying lottery tickets.

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And if you interviewed people standing in line to buy lottery tickets and said, okay, if you win this million dollars, what are you going to do with it?

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Well, what you're typically going to hear is, well, I'm going to pay off my debts and I'm going to pay off my mortgage and I'm going to buy my parents a house and I'm going to buy myself a Lamborghini.

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I'm going to buy. I'm going to buy. I'm going to buy. That's the way most people think about money. And that's certainly one of the things that money is very good at it is a means of exchange.

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But the other thing your money can do for you is work for you. Your money can make you more money. So you can exchange your time and effort and labor to earn money. And that's what most of us do.

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But you can also divert some of the money you earn into investments into what I call buying your freedom. And now your money is working for you.

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So instead of just thinking about what your money can buy, you can start thinking about what can your money earn.

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You can buy your freedom. You can buy your freedom, your financial freedom.

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Why is that an important reframing of the role of money in your view? What does that do if I start thinking about it through that lens?

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Well, because as long as you are dependent on exchanging your effort, time and labor for money, you are beholden to whoever is willing to pay you to do that.

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That's a limit of freedom. It's a form of without being true dramatic, a form of slavery.

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If you are always living paycheck to paycheck to pay the mortgage or the rent or whatever, if on the other hand work is optional, you're a good example.

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And you've been a very successful guy. You're not doing this podcast because you need the money.

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If you were still stuck at a job that paid you a wage, you wouldn't have the option to do this because you'd have to devote all your time to that job so you could pay the mortgage, so you could pay the rent, so you could put food on the table.

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Money buys freedom. How does one get out of that situation?

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If I used to work in call centers, answering phones and selling people things, how does one in your view realistically get from that place where you are beholden to the paycheck?

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I'd spend my wage within the first week or so of the month, and then I'd just suffer for the next three weeks.

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In the UK, we have four week paying cycle. I think in the US it's two weeks typically, but I took a reckless road out of that life.

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When that gave me the liquidity to take the risk, it's some kind of insecurity and trauma.

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I didn't have a plan B because I wanted to validate myself or something.

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So I wonder if the skill or the thing that I was given that I'm most thankful for is some kind of chip on my shoulder.

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On the genuinely, because I think what would make you take a risk, like some of the risks that I took to leave the university to then be broken?

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I was driven by some kind of trauma.

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One of the things that I've observed and I think to the extent that I've had some success in my life, this is true,

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that successful people do tend to have trauma in their background.

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At least that's my observation. Now, I'm sure there are exceptions to that.

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But it does seem that people like us are striving to overcome those past traumas to have that chip on the shoulder to prove something.

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I've also met people who are very content to be completely lacking in ambition and to have enough, to have a comfortable life,

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and kind of do what they want to do, to have financial independence maybe.

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But they don't have this drive to be successful, to make a mark on the world.

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And they tend to have had better childhoods.

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And I think that that wasn't me that doesn't appear to be you, but I think there's a lot to be said for that.

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I mean, you have been in the book about talking about a parable of the monk in the minister.

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Can you tell me about that parable?

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Because it seems to somewhat relate to what we're saying here.

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I think very much so.

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And that's the reason I open the book with it.

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So the parable is there are these two boys who grew up together, their childhood friends.

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As frequently happens, they go their different directions in life as they become adults.

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And one becomes a very successful, powerful minister of the king.

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And the other becomes a humble monk and tattered robes with a begging bowl and what have you.

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And years later, they run into each other on the road.

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And they're getting reacquainted.

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And as they are, the minister of the king takes pity on his poverty-stricken friend and his tattered robes.

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And he says, you know, if you could learn to cater to the king, you wouldn't have to live on rice and beans.

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To which the monk replies, if you could learn to live on rice and beans, you wouldn't have to cater to the king.

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And for me, I've always been a little bit more towards the monk side.

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I'm not a very materialistic person and I'm comfortable and able to get along on very little.

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And I think there's something beautiful about needing less.

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I have, from my interviews, met people who are very wealthy, even actually off camera,

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who are very, very wealthy and appear to be happy.

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But I think it's safe to say that the richest people I know are amongst the least happy people I know.

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So if I think about the very top, the billionaires that I know, off camera, they are amongst the least happy, typically.

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Because I think whatever's taken them there is still haunting them while they're there.

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So it could be the chip on the shoulder, the insecurity, whatever happened to them that made them so driven and obsessed with validation and climbing is still haunting them now.

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But I do also, I do know people, like I say, that are very, very rich and that live remarkably content.

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And I think part of it is their relationship with the stuff.

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Like, I think it is possible to probably keep a little distance from the stuff.

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Yeah, and I, just speaking from my own journey, at a very young age up until the age of 25,

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I was convinced that buying a ranger of a sport was going to like really make me really happy.

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And the anti-climax, once I got those things, was like staggering.

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It was a complete mental.

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It was like someone had shaken my head.

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My reality distorted for a second because I thought this was meant to be it.

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And now I can still get things that I like.

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But I was saying to Willie the day that when I walked into my new house in LA,

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I pre-prep myself to know that it was going to have a zero impact on my happiness.

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And that meant that I actually enjoyed it weirdly.

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Great.

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It was actually super grateful because I pre-prep myself to have a healthier relationship with the thing.

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To bring the expectation down.

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Exactly.

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So there are a couple of things that play there.

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I think one is it's the journey that's really satisfying.

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The destination tends to be less so.

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And I think that's one of the problems with being very materialistic.

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Because, you know, if your definition of happiness is if I only owned this watch,

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if I only had this watch maker make me this intricate watch, then I would be happy.

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Well, I mean, maybe, but probably not.

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You're probably going to have that watching and look at it and say,

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well, that's really nice.

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Wow, that's good.

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And then, well, what's next?

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But if you enjoy the journey or, and I think you made a very wise decision,

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if you reset your expectations and say, you know, I'm going to have this nice house or this nice watch,

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but I don't expect it to make me happy.

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But it's going to be a nice thing to have in my life.

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And somebody once said, much riser than me, you know, money doesn't change who you are.

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It can magnify who you are.

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So if you're an unhappy person and you have lots of money, you will probably still be an unhappy person.

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If you're a happy person, I mean, one of the happy, in fact, the single happiest guy I know

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is life was the biggest financial disaster of anybody I personally know.

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And this guy is literally the happiest human being I ever met.

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Because he was happy before.

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Because he was happy before.

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And there's other things besides money that makes you happy money.

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And the reason that it was so important to me to teach my daughter this money gives you options.

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Right?

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Money allows you a lot brighter range of choices in life.

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But it doesn't necessarily make you happy.

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If it allows you to pursue an option that otherwise you couldn't pursue and that option makes you happy, that's a different thing.

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I think if I was listening to this and I was broke, like I used to be very broke, I would still a few wealth at all costs.

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Because I know I had this phrase the other day, which was, it is easier to get rich than it is to give up the idea that getting rich will make you happy.

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And I thought to myself, and if you hadn't got rich, you would always think 100%.

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Always wonder if that was, and you know, so much of the unhappiness or anxiety that I had when I was, you know, my early, early innings of my life in my career,

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came from looking down and seeing the bailiff letters or came from the credit card debt or how am I going to eat today,

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or you know, can't go out and see my friends, so much of my mind was occupied by my inability to have freedom.

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My lack of freedom, my need to get up at eight o'clock and walk for an hour and a half to a cool center was, you know, so what I managed to remove was that.

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I wouldn't say I added happiness, but I removed the unhappiness.

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That's a key point.

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Money doesn't necessarily make you happy, but the lack of money can be a terrible challenge, especially in the modern culture we've created.

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Okay, so if you have kids listening right now, please cover their ears because I'm going to say a swear word.

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Parents always message me and ask me to stop swearing.

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So you're going to say a swear word.

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A lot of people are obsessed with this idea of fuck you money.

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Let me just give you a definition.

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Sure.

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F you money refers to a financial situation where a person has enough money to live comfortably without needing to work,

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and it gives you the freedom to say F you to anyone or anything you don't want to tolerate such as a job or boss or a situation that doesn't align with your values.

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What does that mean to you?

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Yeah, so for me, so that's a good definition, but I would substitute in that definition financial independence.

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F you money for me is the money you accumulate on the way, right?

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So for instance, if you're a bodybuilder, you know, financial independence is when you're on the stage and you're winning, you're at the elite level.

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But along the way from the moment you start working out, you get a little bit stronger, a little bit stronger, a little bit stronger, right?

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Same thing financially.

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The moment you start setting aside money and investing it, you become a little bit financially stronger.

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And that builds over time.

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That in my mind is the F you money because long before you're financially independent, that money gives you enormous freedom.

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You might not be able to never work again, but if you need to, you could leave a toxic job knowing you could survive for months or even years, what you looked for the better job because you have that F you money.

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So it allows you to say F you in that case to an employer.

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And if your daughter turned around, what's her name? Jessica, Jessica, Jessica turns around to you and says, Dad, what is something I should not do with my money if I want to be wealthy?

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What is it, what are like the big, what is the first thing that comes to mind to as a no no if I want to be financially wealthy?

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The more common voice that I think you should avoid if your goal is to become financially independent a young age, you probably don't want to go buy a house.

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It's a very controversial thing to say. The reason you want buy houses because houses dramatically inflate by and large your cost of living.

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You know, you're you're putting your capital into that house and now it's not going to be earning thing. It's going to be sitting idly along with owning a house. You have the expenses of maintaining it paying the taxes on it blah blah blah.

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If you stay in a apartment that is just enough to meet your needs, which by the way is what my daughter has done continues to do, your cost will be lower. Explain that to me. Explain why my cost of living goes up if I buy a house.

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Sure, so people it doesn't have to, but people people typically buy the most house they can possibly afford. The industry drives them that way. If you go to real estate age and you say, I think I want to buy a house.

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First question they're going to ask you is how much do you make what you want to spend and then you go to the bank and you say, okay, I want to buy a house. How much will you lend me and those how much you make and then they'll come back with the large number of how much they're willing to lend you.

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If you follow those guidelines, you're going to wind up with a house that's going to be a burden. You are not buying it from a position of strength. You are stretching to buy it. You are borrowing the most money of banks willing to give you. You probably don't want to do that.

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You can, that's the bank wants you to do that because that's how they make the most money, but that's not the best thing for you to do. But that's what you get drawn into. And then when you buy that house, I don't know that I've ever known anybody, including me by the way, and I own houses most of my adult life, who's owned a house without doing renovations on it. So you've got those costs.

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You're going to furnish that house because you're probably buying more square footage than you were renting before. You're going to need new furniture or maybe you just want better furniture for your new house. Maybe new appliances landscaping taxes maintenance. I mean, the list is endless and people say, well, you know, I can buy this house and my mortgage is the same as my rent.

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Well, yeah, but your mortgage is just the starting point. You've got all these other expenses with the house and the other thing is they are variable expenses, variable expenses.

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Yeah, with your rent, you know, if you're renting an apartment, you're paying $2500 a month for your apartment, right? You know exactly what your housing costs are for the term you released.

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$500 a month. If you own a house, if your mortgage is $2500 a month, and then you need new roof, that's 20 grand.

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Or you need a new septic system, which by the way, I'm looking at having to put it in my cottage, you know, well, that's another 25 grand, right?

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And so, and you don't necessarily know when those things are going to come at you.

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It is a bit of a trap, isn't it? It's a trap, but I didn't realize this until I bought a house.

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Most people don't. Like I even sit here on this podcast doing this for a living and then I made this stupid mistake of buying a house.

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And I do think it was a stupid mistake because I will talk about opportunity costs in a second, but it was in hindsight, it was like a terrible decision.

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I spent all this money on this house. It was a house abroad. It was also like a holiday home, I guess. And every time I come, all I see is things that I need to change.

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Yeah, it's looking at the United States, for instance, if 20 years ago, 30 years ago, you bought a house in San Francisco.

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Well, you've done very, very well financially. If you bought a house in Detroit, not so much.

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So then the question becomes people will say, well, obviously you don't buy a house in Detroit, you buy a house in San Francisco.

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Well, I'm not an expert in real estate, but I am reading more and more commonly that San Francisco has a lot of very challenging problems at the moment.

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Detroit, on the other hand, where I was just visiting a couple of years ago, is enjoying a renaissance. Detroit's coming back.

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So who's to say in 20, 30 years, people won't be saying, if you bought in Detroit back in 2025, you were golden. If you bought San Francisco, you had not so much.

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Sometimes real estate buying a house can work out in a spectacular fashion. And that's the story as people tend to hear, but not always.

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And that's what I tend to see in the comments section when we talk about this issue of buying a house.

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I was just looking at the comments section, actually, and on a previous conversation where we talked about whether you should buy a house, someone said, I bought a house, and it's the best thing I ever did.

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It's launched my mindset in new directions. Remember that having your own space has profound psychological impacts and can be life changing for some of that don't live in a healthy environment.

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This psychological impact of buying a house.

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What that commenter just said is, is can be and for him, obviously, is absolutely true.

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I am not anti house. As I mentioned a moment ago, I owned houses most of my adult life.

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But I've never bought them because I thought they were an investment. I bought them because I thought they would enhance my life in a way I wanted it enhanced.

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They would make my life better. They are, in my view, an expensive indulgence. I have nothing against expensive indulgences. That's one of the reasons we accumulate money.

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I like some expensive and some I don't care about some I like. But that's what they are. And if you can easily afford it, then by all means, by the house.

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Looking at some stats here, it says home buying was once a solid investment due to rising property values and lower mortgage rates. However, for younger generations, this is no longer the case.

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Because of skyrocketing home prices. Since 1980, US home prices have increased by over 300% outpacing inflation and wage growth.

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In 2023, mortgage rates surged past 7% making monthly payments significantly higher than before. And medium wages have only risen by about 15%.

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Since the year 2000, while home prices have more than doubled, making a home ownership less affordable. And lastly, the cost of renting is often cheaper than buying, especially in cities where prices have outpaced wage growth, leading many younger people to choose renting for flexibility.

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This point of flexibility as well is what we don't talk about, which is the ability to go do something else in another country.

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And my brother said this to me when I was 20, my brother is very smart. He's a year older than me, financial genius and has a much different brain to mind.

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And I remember when I was 20, maybe 24, and I was talking about Dubai House. And he both told me it was the worst investment I could ever make.

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But he also told me to think about flexibility and my ability to get up and move. And I was, what do you mean? He said, well, listen, you're in a certain era of your career where you might be called by someone in San Francisco who offers you a great opportunity.

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And you might want to go next week. And actually, when I look at how my career transpired, that's exactly what happened. I was in Plymouth, and then I went to Manchester for business. Then I went to London for business. Then I went around the world to San Francisco, to New York for business.

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And I'm moving with the opportunity. And if I was anchored somewhere because a mortgage does.

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Yeah. And a mortgage does like psychologically anchor you. This is what people don't talk about. It creates a huge amount of guilt. If you then want to get up and go because you had you gone while I'm going to be paying double.

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I agree with everything you said. I agree with your brother flexibility, especially when you're young and your careers in a dynamic phase is not to be underrated for my daughter. I mean, she loves living in Savannah. They've been there for three years.

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But she has an adventure some soul. And you know, she said, I don't know. I mean, maybe at some point I want to go live in Europe or somewhere else. Well, if you have a house that complicates that decision.

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And even if you are fortunate enough to buy in a market where your values are rising, the cost associated with buying and selling houses are enormous.

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The real estate commission and the taxes and what have you. So getting in and out of a house is an expensive proposition.

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Getting in and out of apartment doesn't cost anything. I mean, maybe your security deposit, right. But that's it. That's that's very clean and simple. But if you're if you were to buy a house in Savannah and then to say, you know, I think I want to go live in in Portugal.

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Well, now you got to sell that house or maybe you have to rent it. Now you're a landlord. You're an accidental landlord, which was subject to my second part.

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You know, that's not optimal. I mean, if you set out to be a landlord, great. But if you become an accidental landlord, because you can't sell your house that you don't want to live in anymore, that's not so great. So flexibility is there's enormously important.

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Well, if I were to ask you, what is the simple path to wealth and you had to respond in a sentence? What would that sentence be?

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Avoid debt, live unless the new earn invests a surplus. Let's talk about debt then. Okay. Why did you say avoid debt?

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You can never be financially independent if you're carrying around debt. It's a ball and chain that you drag drag along, especially consumer debt. Now, to be clear, if you're in business and your business is is carrying debt as a is a function of of running the operation for one reason, other, that's kind of a different thing.

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But in terms of personal debt, if you're running a credit card debt, if you're leasing expensive cars or or borrowing money to buy expensive cars, or would have you possibly a mortgage.

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It's a slightly different category, but it has all the disadvantages we just talked about. Yeah, that's a ball and chain. It's it's like asking a swimmer to compete and and strap it away around their waist.

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It just as a possible sure, I guess it is, but it's a whole lot more difficult. So job one, if you have debt is to blow it out.

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I mean, blowing it out is a dream for many, but it's easier said than done, I guess.

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It simply means that you have to organize your life in such a fashion that you can divert some money to either buying your freedom investments, or if you have debt paying off that debt.

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You just you have to do that and people say, well, I can't do that, you know, I need to have this and the more, you know, I need to have these the two least luxury cars and we need to live in this neighborhood.

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And we need to send the kids to these schools, we need to and I call that the tyranny of the must have the more must have you have in your life, the less likely you are to become financially independent.

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Now that's your choice. That's an individual's choice. It may very well be that those things are more important to you than buying your freedom.

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And it's your money. It's not for me to tell anybody while they should spend their money or what's important to me or what's important to them for me.

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There was nothing I could spend my money on that was more important than my freedom, which is why from the beginning I diverted half of my income to buying that thing was never deprivation.

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Most people say, well, that's this is a path of deprivation. I can't spend my money.

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Well, not for me, you know, I spent every dime that ever came my way. It's just that I spent half of those dimes on the thing that I wanted to own the most, which was my freedom and you own that by owning assets.

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So I wasn't I wasn't depriving myself any more than if somebody said, you know, I'm looking at buying a Mercedes or a Volkswagen, right? If I'm by the Mercedes, I'm in this big fancy car and people will be impressed.

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If I buy the Volkswagen, yeah, I'm in this more modest car, but then I've got a whole bunch of money left over that I can spend on a wardrobe or going out to dinner or more expensive.

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It's just a matter of choosing where you spend your money on, right?

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So one of the choices is that I do I am under no illusion that most people who read my book will actually follow the simple path because I think there's just way too much cultural influence to spend your money elsewhere.

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But at least the people who read the book and listen to this interview will be aware that there is something else they could buy with their money and that's their personal freedom and you do that by assets.

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And there was nothing more important to me, nothing I wanted more. So it was not deprivation at all.

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I am I reflect back on where I used to be in my life. And if I had heard this conversation then I really, really struggled with saving money because saving spending money was so closely linked to my sense of self and my self esteem.

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A lot of people feel that way. I've shared this story before, but when I was working in those call centers at which one, Swinton, Swinton's car insurance where I used to work, I would get my paycheck and it might be, I don't know, 1,500 pounds or 2,000 pounds, whatever.

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And like on my way home on payday, I'd go buy a 60 inch TV and I'd put it in the house and then I'd try and see if I had enough money to buy a PlayStation.

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And then about a week later, when I realized that I was broke, I would sell both. And I look at that behavior as such, absolutely like, it's objectively like crazy behavior.

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Like repeated. But it shows the extent to which I got a dopamine hit from having a nice thing and I was trapped in that cycle of like by the nice thing dopamine hit feel validated feel like I'm a successful person and then have to sell it a week later.

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So I really have a huge amount of empathy for people that are stuck in this spending for self esteem cycle. And they hear these, you know, they hear people let me and you talk about these things now.

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And it feels easier said than done.

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That to me seems kind of insane and and one of the things that somebody pointed out one time is if you're driving around in a Ferrari, you know, maybe you're thinking to yourself if you're bought the Ferrari because you want to impress people.

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Everybody's looking at me and they're thinking, wow, what a cool guy that is driving driving that Ferrari. No, that's not what they're thinking.

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They're looking at you in that Ferrari and what they're thinking is, wow, I would look cool if I was driving that Ferrari. They're not thinking about you at all. It doesn't, you're making no impact on what their opinion of you is.

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So on this point of debt, I did have some people contact me that were childhood friends mine recently and asked, asked me for advice on getting out of debt.

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And one particular friend said that he had $40,000 worth of debt and asked me for advice on it. And I really, I'm not an expert in this, so I kind of hesitated to give any advice.

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But the advice I'm hearing from you is essentially you have to make a concession, you have to pull back your spending and get things back under control.

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So you have to, and I sell you house. So here's some good news. So you're carried to your friend, he's carrying $40,000 in debt, right?

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My advice would be, and this is a little different than the more common advice out there, but I would look at all my debts and I would take the one that was charging me the highest interest rate.

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And I would, I'd pay the minimums on all the others and I would focus on paying that one down as fast as I could because that's the biggest return on my investment.

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And when that one was going, I'd go to the second until I worked my way through. It's going to be hard.

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And the more quickly you do it, the harder it's going to be because you're going to have to make more dramatic adjustments to your life. That's bad news.

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Here's a good news is once you are out of debt, if you do this, you've developed a wonderful discipline of living on less than you earn and diverting the excess to something else that you want more.

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In this case, to something else you want more is being out of debt. If you continue with that discipline, you now have the cash flow to begin building those assets and becoming wealthy.

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You've already developed that lifestyle with that discipline. So that's the one ray of sunshine, if you will, in the process of getting out of debt.

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Okay. Play devil's advocate with me then on this one. So when I was 18, 19 years old, my strategy, I was well aware that I'd fucked up my financial situation.

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Like I was painly clear that I figured out what a credit score was and I realized that I destroyed mine. I also had these letters.

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And I had mounting issues. I was avoiding finances, bills, envelopes, you name it. I just thought, if I don't look at it, it doesn't exist.

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Which I know a lot of people do because when I was writing a previous book that I wrote, I looked into some of the stats about human's ability to avoid, whether it's health situations,

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if a friend of yours gets a bad diagnosis, I was reading a study that said, some people are more likely to not go get checked, even if their friends had it, because they just want to avoid it.

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And then with national finances, I was reading a study that said, we're incurring billions and billions and billions and billions of debt as a society just because we don't look at our bank balance.

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We don't have open envelopes. So I know I'm not the only one. My strategy was, this is such a dumb structure.

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Honestly, and this sounds like crazy talk, but it's just the truth in my head. My strategy was, I'm going to get so rich that I outpace this debt, and then I'll deal with it later.

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My strategy was, if I can just get really rich, which is kind of the inverse of what you're advertising, then this that won't be a problem.

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At 18 or 19 years old, you don't know the world. You are guessing. And I was guessing that I could earn my way out of it. The probability says I was wrong.

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The probability says that I was like, delusional or something, or just like, I watched too many rap videos or something.

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So objectively, that is a reckless choice, even if it's true, and it ends up being true for you, it's still a bad choice because probability is stacked against you.

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Well, that's true. But you just made a critical point in that you can make a bad choice where things work out well for you.

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Yeah, exactly. So the bad choice. So a great example of that is investing in Bitcoin, right? I'm not a proponent of investing in Bitcoin.

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Certainly, for those people who bought Bitcoin 10, 15 years ago, they've done extraordinarily well. They got lucky.

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Lots of speculations don't work out that well. So if you are speculating, then you might work out extraordinarily well for you.

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But you're taking some pretty heavy risks in doing that. It's same thing with a lottery ticket. I mean, the chances of winning the lottery are infinitesimally small.

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But people buy lots and lots of lottery tickets. Somebody does win it. But that's probably not a good way to spend your money.

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Bitcoin. You know the five Bitcoin. No. And I'm not opposed to Bitcoin existing in the world.

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But for me, it's a speculation. And I'm not a speculator.

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When you say spec, give me some color because I'm sure there's some people who are listening now that are either thinking about Bitcoin or if invested in Bitcoin.

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I mean, if you want to speculate the Bitcoin. So I would recommend against it. So people and they might push back and say, well, but JL, you know, you were recommending against against 10 years ago, which I was.

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And you've been wrong. I mean, absolutely wrong. It's been great 10 years. It's done far better than the S&P 500. Well, that's true.

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If you had a crystal ball, if I had known that 10 years ago, yeah, why would have been in Bitcoin, right? We don't have crystal balls.

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So the question isn't how has Bitcoin done in the last 10 years. It's how I was going to do in the next 10 years. I don't know the answer to that.

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But that's the question. Is it worth a hundred thousand dollars of coin now? Is it going to continue to grow at that pace that you regret that you missed over the last 10 years?

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That's the question you have to ask yourself.

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But I could say it's success is evidence that it's serving some kind of utility for some people somewhere.

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It's success means that there is demand for it by very nature that the prices increase so quite crazily over the last 15 years.

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Yeah, and that's an argument that people make and there's a lot of debate around that, right?

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Is, you know, what is the function that it has or that it's going to develop?

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And you might well be right. I don't know the answer to that question. It's not currently at least a currency because it's way too volatile to serve as currency.

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Unless you're doing illegal things that make it more attractive than the volatility makes it unattractive.

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So that's not necessarily good for society. But so it can't function as a currency.

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So right now it's just a speculation. Is it going to grow into something that's more functional?

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Listening to one of the other interviews you did, that woman absolutely believes that that's what's happening.

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And they Kathy would so that's why she's in Bitcoin. And she may be right, but she's speculating.

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And again, I have nothing to get speculating as long as you understand as I'm sure she does that that's what you're doing.

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You'd prefer investing. I prefer to have an engine creating wealth behind where I bought my money.

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I had a text message from a really good friend of mine who my audience will know because they've been on the show before as a guest and they're very well known in the UK.

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They texted me and said, please can I ask you a question? If you had mortgages and you had a lump sum of money thinking about the future of AI potential market crashes,

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would you pay off chunks of the mortgage or would you invest? My feeling is that stocks aren't really safe. Am I being paranoid?

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Well, there are a couple of questions embedded in that. So the first question is, when I pay off a mortgage and the second question is our stocks safe.

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So the mortgage one first to me is pretty easy. It kind of depends on your interest rate. What is an interest rate?

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So an interest rate is what you pay to borrow money. So when you get a mortgage, you're borrowing money. You're borrowing it from a bank or a financial institution.

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And they want to be paid for letting you use their money and three three and a half percent or less. That's really cheap money.

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I would hold on to that. I would be in no hurry to pay that off.

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On the other side, if you have a mortgage rate that's say 6% or higher, well, when you pay off that mortgage, essentially you're locking in a guaranteed return of that interest rate.

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So if you pay off an 8% mortgage, you've locked in an 8% return on that money effectively.

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And then to finish the thought is if your interest rates between those two, like three and a half percent, five and a half, six percent, then I would say it would depend on what you paid off or not is what makes you emotionally more comfortable.

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And there's value in being emotionally comfortable. So if you are comfortable carrying the debt, you might say, well, I think I can do better in the stock market.

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So I'm going to carry it. If emotionally, like me, you just would rather not have any debt at all than you then you blow it off.

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You could use the Queen as an example of what an interest rate is.

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Sure.

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Let's say I'm sitting on this pile of gold and you want to borrow some of my gold.

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I'm happy to loan you, Stephen, these 10 very valuable pieces, but I don't like you well enough to just let you borrow them for free.

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I want to be paid. I want to get a reward back for that.

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So when you return these gold pieces to me in a year, you're going to return 11 gold pieces to me.

330
00:41:20.000 --> 00:41:27.000
You're going to pay me 10% because an extra gold piece is 10% of these 10, right? Make sense?

331
00:41:27.000 --> 00:41:28.000
Yeah.

332
00:41:28.000 --> 00:41:29.000
That's what interest is.

333
00:41:29.000 --> 00:41:31.000
So if I say, okay, well, I'm going to buy a house.

334
00:41:31.000 --> 00:41:35.000
Right. You're going to take, you're going to take those 10 gold pieces. Go ahead and make them.

335
00:41:35.000 --> 00:41:38.000
So I'm buying a house that costs 10 gold pieces, right?

336
00:41:38.000 --> 00:41:41.000
So I'm going to accept your 10% interest rate.

337
00:41:41.000 --> 00:41:42.000
Okay.

338
00:41:42.000 --> 00:41:47.000
Am I paying 10% a year on the total?

339
00:41:47.000 --> 00:41:48.000
On the balance.

340
00:41:48.000 --> 00:41:57.000
So the way a mortgage works is in the, let's say it's a 30-year mortgage, you're going to be giving me a certain amount of money every month, right?

341
00:41:57.000 --> 00:41:59.000
That's your mortgage payment.

342
00:41:59.000 --> 00:42:04.000
And in the beginning, most of that payment is going to be interest to me.

343
00:42:04.000 --> 00:42:13.000
And a very tiny sliver of it will be paying down the principal part of the 10 gold pieces that you bought or that you, yeah, that you borrowed.

344
00:42:13.000 --> 00:42:14.000
A very tiny sliver.

345
00:42:14.000 --> 00:42:20.000
And then over the course of 30 years, that ratio changes as you pay down the debt.

346
00:42:20.000 --> 00:42:23.000
And less and less of it is interest payments.

347
00:42:23.000 --> 00:42:30.000
And more and more of it is paying down the principal until at the end of 30 years you paid all the principal.

348
00:42:30.000 --> 00:42:36.000
And you've paid me a fairly enormous amount of money in debt over that, or in interest over that 30 years.

349
00:42:36.000 --> 00:42:39.000
And how do I get good interest rate? How do I get a very, very low interest rate?

350
00:42:39.000 --> 00:42:41.000
And what is the low interest rate?

351
00:42:41.000 --> 00:42:42.000
On a mortgage, yeah.

352
00:42:42.000 --> 00:42:45.000
So the only way you can get a look.

353
00:42:45.000 --> 00:42:49.000
So first of all, you're going to pay basically whatever the current interest rates are.

354
00:42:49.000 --> 00:42:51.000
He sets the current interest rates.

355
00:42:51.000 --> 00:42:54.000
So the Fed sets an overall interest rate.

356
00:42:54.000 --> 00:42:57.000
You've heard the Fed will raise their lower interest rates.

357
00:42:57.000 --> 00:43:03.000
And that will influence what lenders like bank and mortgage companies will chart.

358
00:43:03.000 --> 00:43:11.000
It doesn't require them to do a certain level, but it will influence up or down how much they're going to expect in return for their money.

359
00:43:12.000 --> 00:43:21.000
The Fed is a government agent, partially because the Fed is anticipating inflation by how they set interest rates.

360
00:43:21.000 --> 00:43:32.000
So if I'm lending you money and I'm worried about inflation, if I lend you my 10 gold pieces and say I want 11 back in a year, 10%.

361
00:43:32.000 --> 00:43:36.000
But inflation is 15%. Well, I've just made a very, very bad deal.

362
00:43:37.000 --> 00:43:42.000
So if I think inflation is going to be 15%, I'm going to want two gold pieces back.

363
00:43:42.000 --> 00:43:48.000
And so I'm making a profit above and beyond inflation.

364
00:43:48.000 --> 00:43:51.000
So going back to your question, how do you get a good mortgage rate?

365
00:43:51.000 --> 00:43:58.000
Well, you shop around to various lenders at the time you want the mortgage and see who's offering one.

366
00:43:58.000 --> 00:44:03.000
And there'll be some variation within a eighth of a percent or a quarter of a percent or something.

367
00:44:03.000 --> 00:44:16.000
But for the most part, they're all going to be very tightly put together because they're looking at the overall projection of what inflation is going to be, what they can charge with the cost of money is, what they can charge an interest.

368
00:44:16.000 --> 00:44:20.000
And then competitively what they have to do to get your business.

369
00:44:20.000 --> 00:44:28.000
So there's not going to be a lot of variation. You're not going to get a significantly better interest rate than somebody else.

370
00:44:28.000 --> 00:44:31.000
But if you shop around, you can probably do a little bit better.

371
00:44:31.000 --> 00:44:35.000
And interest rates have been fluctuating quite a lot over the last 20 odd years.

372
00:44:35.000 --> 00:44:44.000
In the early 2000s, interest rates in the US were relatively high, peaking at almost 7% in 2006 due to efforts to curb inflation.

373
00:44:44.000 --> 00:44:48.000
And then after the financial crisis, they dropped a little bit.

374
00:44:48.000 --> 00:44:55.000
And was looking here post 2008 central banks around the world adopted ultra low interest rates to revive economies.

375
00:44:55.000 --> 00:45:02.000
US rates were slashed to near 0% by 2008 and remained there for nearly a decade.

376
00:45:02.000 --> 00:45:04.000
Right. Damn.

377
00:45:04.000 --> 00:45:17.000
COVID-19 pandemic interest rates led to another record in cuts globally with the US Fed lowering interest rates to 0% to 0.25% to combat economic disruption.

378
00:45:17.000 --> 00:45:23.000
So does this mean I should really be waiting for a time when the interest rates are really, really low if I want to buy a house?

379
00:45:23.000 --> 00:45:27.000
Well, that necessarily because you never know when that's going to happen.

380
00:45:27.000 --> 00:45:36.000
I mean, some people have said predicting what the stock market is going to do is very, very difficult predicting where interest rates are going to go even more so.

381
00:45:36.000 --> 00:45:45.000
So I think if you're going to buy a house, then again, you buy it based on whether you can easily afford it, whether it meets your needs at a given time.

382
00:45:45.000 --> 00:45:48.000
And you deal with the interest rate you have to deal with.

383
00:45:48.000 --> 00:45:56.000
And of course, they'll be part of the equation in terms of how much you can afford because the interest rate on your mortgage is going to have a lot to do with how much you have to pay every month.

384
00:45:56.000 --> 00:45:59.000
And it's quite high at the moment interest rates.

385
00:45:59.000 --> 00:46:05.000
High compared to what? So the fruit right now mortgage rates are 6% 7% somewhere there.

386
00:46:05.000 --> 00:46:17.000
The first mortgage I took out was 18% 18% that would have been in 1979 because in the 1970s we had really high inflation.

387
00:46:17.000 --> 00:46:21.000
And when you have high inflation, you have high interest rates.

388
00:46:21.000 --> 00:46:27.000
So to me, I hear a 6% mortgage rate and it's done something bad to me.

389
00:46:27.000 --> 00:46:34.000
But for people who grew up where mortgage rates were 2.5%, 3%.

390
00:46:34.000 --> 00:46:37.000
Yeah, I mean, it's huge. It depends on your perspective.

391
00:46:37.000 --> 00:46:44.000
And the other half of the ladies question who sent me that text message was around is investing in stocks safe right now.

392
00:46:44.000 --> 00:46:51.000
And she did sort of preface it by saying the questions in the context of AI, all of this disruption that's going on in the world.

393
00:46:51.000 --> 00:46:53.000
People are going to lose their jobs, etc.

394
00:46:53.000 --> 00:46:55.000
Is it safe to invest in stocks right now?

395
00:46:55.000 --> 00:46:58.000
So depends on your time horizon.

396
00:46:58.000 --> 00:47:08.000
So stocks are the single most effective strongest wealth building tool that's ever been created.

397
00:47:08.000 --> 00:47:11.000
But they are also very, very volatile.

398
00:47:11.000 --> 00:47:19.000
So when she says they're stock safe to invest in right now, what I hear is very short term thinking.

399
00:47:19.000 --> 00:47:25.000
And stocks are never safe to invest in for the short term because they're volatile.

400
00:47:25.000 --> 00:47:31.000
At any given moment, they can take a deep plunge and that's a perfectly natural part of the process.

401
00:47:31.000 --> 00:47:37.000
People get all crazy, especially if you watch the news that people go insane and panic,

402
00:47:37.000 --> 00:47:42.000
but crashes and pullbacks in the stock market are perfectly natural part of the process.

403
00:47:42.000 --> 00:47:46.000
They are very, very difficult if not impossible to predict when they're going to happen.

404
00:47:47.000 --> 00:47:55.000
But that's the reason you never want to invest in stocks for money that you're going to need in the near term.

405
00:47:55.000 --> 00:48:02.000
If you zoom out for longer periods of time, which is what I recommend,

406
00:48:02.000 --> 00:48:05.000
stocks are stunningly reliable.

407
00:48:05.000 --> 00:48:11.000
I mean, there are very few times over the course of 10 years where stocks have not given you a good return.

408
00:48:11.000 --> 00:48:13.000
And you've got 20 years.

409
00:48:14.000 --> 00:48:21.000
So if you look a long term, stocks are extremely safe and extremely powerful in building wealth,

410
00:48:21.000 --> 00:48:24.000
but they are very volatile on the way.

411
00:48:24.000 --> 00:48:29.000
So you have to be willing and able to endure that volatility.

412
00:48:29.000 --> 00:48:35.000
If you're going to panic and sell when the market drops, not if because the market will drop.

413
00:48:35.000 --> 00:48:37.000
It's a perfectly natural part of the process.

414
00:48:38.000 --> 00:48:42.000
If you're going to panic and sell when that happens, you do not want to invest in stocks,

415
00:48:42.000 --> 00:48:45.000
because they will leave you bleeding on the side of the road.

416
00:48:45.000 --> 00:48:51.000
Following my advice, we'll leave you bleeding on the side of the road if you panic and sell.

417
00:48:51.000 --> 00:49:00.000
It's 100% dependent on tying yourself to the mass during the storm and ignoring the volatility

418
00:49:00.000 --> 00:49:06.000
and continuing to invest into it, because now you're actually accumulating shares on sale,

419
00:49:06.000 --> 00:49:11.000
because prices are down, because the storm never lasts.

420
00:49:11.000 --> 00:49:18.000
It always blows over, and the sunshine comes back out and prosperity returns.

421
00:49:18.000 --> 00:49:22.000
You're talking here about the emotional side of investing, which is critical.

422
00:49:22.000 --> 00:49:28.000
If you can't control your emotions, you're going to be selling at the wrong time and buying at the wrong time.

423
00:49:28.000 --> 00:49:30.000
This is such a huge part of it that people don't talk about enough.

424
00:49:30.000 --> 00:49:33.000
They talk about tactics, strategies, what to invest in, etc.

425
00:49:33.000 --> 00:49:40.000
But they don't talk about the emotional side, which is really like arguably an even bigger element of this,

426
00:49:40.000 --> 00:49:47.000
because if you think about even how the brain is set up and what drives us most, it's fear, it's emotion.

427
00:49:47.000 --> 00:49:48.000
We're in greed.

428
00:49:48.000 --> 00:49:52.000
And when the prices drop, we've all got a story.

429
00:49:53.000 --> 00:49:54.000
So many people are listening.

430
00:49:54.000 --> 00:49:55.000
I remember my first investment.

431
00:49:55.000 --> 00:49:59.000
I put £10,000 into Facebook stock a long, long, long, long time ago.

432
00:49:59.000 --> 00:50:01.000
And then it went down and I sold.

433
00:50:01.000 --> 00:50:03.000
And I thought, I'm never investing again.

434
00:50:03.000 --> 00:50:06.000
And if I just left it.

435
00:50:06.000 --> 00:50:08.000
God, that would be worth so much money.

436
00:50:08.000 --> 00:50:10.000
It would probably be worth six figures now.

437
00:50:10.000 --> 00:50:11.000
Right.

438
00:50:11.000 --> 00:50:14.000
But no one had ever taught me about the emotional side.

439
00:50:14.000 --> 00:50:17.000
And actually part of the reason I sold it was because I needed that money.

440
00:50:17.000 --> 00:50:18.000
So there's two things.

441
00:50:19.000 --> 00:50:21.000
One is the emotional side of selling it.

442
00:50:21.000 --> 00:50:25.000
The other thing is investing money that is not for the long term.

443
00:50:25.000 --> 00:50:31.000
Because you turned out you should never invest in money in the stock market that is you're not willing to commit for decades.

444
00:50:31.000 --> 00:50:36.000
This is a long term horizon because that's what allows you to weather the storms.

445
00:50:36.000 --> 00:50:40.000
If you're saving for a house, for instance, well, you probably don't want to be in the stock market.

446
00:50:40.000 --> 00:50:43.000
The best investor I've ever met is my girlfriend.

447
00:50:43.000 --> 00:50:45.000
Because she loses the password.

448
00:50:46.000 --> 00:50:48.000
To be investing happen.

449
00:50:48.000 --> 00:50:51.000
Honestly, every like two years, like a big dream.

450
00:50:51.000 --> 00:50:54.000
It was like you bought loads of that index fund or Bitcoin or whatever it is.

451
00:50:54.000 --> 00:50:56.000
I was like, do you know the price of it?

452
00:50:56.000 --> 00:50:58.000
And she's like, no, I forgot.

453
00:50:58.000 --> 00:50:59.000
I've gotten the password to the app.

454
00:50:59.000 --> 00:51:02.000
And we always like log back in once every two years and looking at it.

455
00:51:02.000 --> 00:51:03.000
I'm like, oh, my God, baby, rich.

456
00:51:03.000 --> 00:51:04.000
And she's like, oh, okay.

457
00:51:04.000 --> 00:51:06.000
And then she loses the password again.

458
00:51:06.000 --> 00:51:07.000
She forgets it.

459
00:51:07.000 --> 00:51:10.000
This is an incredibly important point you just touched on.

460
00:51:10.000 --> 00:51:16.000
So Jack Bogle, the guy who created retail index funds that we can invest in now,

461
00:51:16.000 --> 00:51:19.000
created the Vanguard Group in 1975.

462
00:51:19.000 --> 00:51:24.000
Bogle once said, you know, invest in the S&P 500.

463
00:51:24.000 --> 00:51:27.000
And don't even open your statements when they come.

464
00:51:27.000 --> 00:51:28.000
Just let them stay.

465
00:51:28.000 --> 00:51:31.000
Don't even open them for 20 years.

466
00:51:31.000 --> 00:51:37.000
And then open the final one and have a cardiologist standing by because you will be stunned

467
00:51:37.000 --> 00:51:41.000
at the level of wealth that you've accumulated.

468
00:51:41.000 --> 00:51:46.000
One of the things that I wrote this book for my daughter, right?

469
00:51:46.000 --> 00:51:48.000
My daughter is, sounds like she's kind of like your girlfriend.

470
00:51:48.000 --> 00:51:54.000
She's very smart, but she has zero interest in this financial stuff.

471
00:51:54.000 --> 00:52:00.000
That is a superpower because unlike me and maybe a lot of people listening to us

472
00:52:00.000 --> 00:52:05.000
who are interested in this stuff and who are watching the market all the time,

473
00:52:05.000 --> 00:52:10.000
she and your girlfriend are never going to be tempted to panic when the market drops

474
00:52:10.000 --> 00:52:13.000
because they're not going to notice the market dropped, right?

475
00:52:13.000 --> 00:52:15.000
Because they don't care.

476
00:52:15.000 --> 00:52:21.000
And the less you tinker with your investments, Charlie Munger, who was Warren Buffett's partner,

477
00:52:21.000 --> 00:52:26.000
once said, the worst thing you can do as an investor is get in the way of compounding.

478
00:52:26.000 --> 00:52:31.000
And that means dancing into the market, trying to sell and buy back in and what have you.

479
00:52:31.000 --> 00:52:33.000
Just let the compounding run.

480
00:52:33.000 --> 00:52:39.000
I get so many people who read my work and they say, wow, JL, I really get it.

481
00:52:39.000 --> 00:52:41.000
And it's wonderful and you're absolutely right about everything.

482
00:52:41.000 --> 00:52:47.000
But if we just did this one little thing differently, it would be even better.

483
00:52:47.000 --> 00:52:51.000
And they are, I've come to think of them as the tinkerers, right?

484
00:52:51.000 --> 00:52:52.000
Are they men?

485
00:52:52.000 --> 00:52:54.000
I think a lot of them are men.

486
00:52:54.000 --> 00:53:00.000
I think women are a little less inclined to tinker because men put their masculinity on the line

487
00:53:00.000 --> 00:53:02.000
and doing these things.

488
00:53:02.000 --> 00:53:04.000
And that's not useful.

489
00:53:04.000 --> 00:53:07.000
I asked the question about men and women because I got some stats here.

490
00:53:07.000 --> 00:53:13.000
Actually from Vanguard, that says men are 70% more likely to invest in high-risk assets

491
00:53:13.000 --> 00:53:17.000
like individual stocks versus safer assets than women.

492
00:53:17.000 --> 00:53:23.000
Men's portfolio are 50% more volatile, which leads to higher potential returns

493
00:53:23.000 --> 00:53:25.000
but also huge, greater losses.

494
00:53:25.000 --> 00:53:30.000
As it relates to men again, despite having higher risk-taking, men underperform women

495
00:53:30.000 --> 00:53:38.000
in long-term returns annually due to over-trading tinkering and timing mistakes tinkering.

496
00:53:38.000 --> 00:53:43.000
And men trade 45% more often than women, resulting in more fees

497
00:53:43.000 --> 00:53:46.000
because every time they make a trade they pay a fee and lower gains

498
00:53:46.000 --> 00:53:49.000
that's according to Berkshire Hathaway.

499
00:53:49.000 --> 00:53:51.000
The summary here is that men take more risks.

500
00:53:51.000 --> 00:53:56.000
But in the long-term tend to earn less because of frequent mistakes and emotional trading

501
00:53:56.000 --> 00:54:00.000
whereas women are more cautious and their approach tends to yield better returns.

502
00:54:00.000 --> 00:54:02.000
Do you know what we've learned here?

503
00:54:02.000 --> 00:54:03.000
Yeah.

504
00:54:03.000 --> 00:54:05.000
I have a very strong feminine side.

505
00:54:05.000 --> 00:54:07.000
Well, yeah.

506
00:54:07.000 --> 00:54:08.000
Oh gosh, yeah, down.

507
00:54:08.000 --> 00:54:11.000
Protecting your business's data is a lot scarier than people admit.

508
00:54:11.000 --> 00:54:16.000
You've got the usual protections, backup, security, but underneath there's this uncomfortable truth

509
00:54:17.000 --> 00:54:22.000
that your entire operation depends on systems that are updating, syncing, and changing data every second.

510
00:54:22.000 --> 00:54:25.000
Someone doesn't have to hack you to bring everything crashing down.

511
00:54:25.000 --> 00:54:29.000
All it takes is one corrupted file, one workflow that fires in the wrong direction,

512
00:54:29.000 --> 00:54:33.000
one automation that overrides the wrong thing, or an AI agent drifting, of course.

513
00:54:33.000 --> 00:54:38.000
And certainly your business is offline, your team is stuck, and you're in damage control mode.

514
00:54:38.000 --> 00:54:41.000
That's why so many organizations use our sponsor, Rubric.

515
00:54:41.000 --> 00:54:43.000
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516
00:54:43.000 --> 00:54:47.000
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517
00:54:47.000 --> 00:54:53.000
Wherever that data lives, cloud, sass, or on-prem, whether you have ransomware, an internal mistake,

518
00:54:53.000 --> 00:54:56.000
or an outage, with Rubric, you can bring your business straight back.

519
00:54:56.000 --> 00:55:02.000
And with the newly launched Rubric agent cloud, companies get visibility into what their AI agent

520
00:55:02.000 --> 00:55:03.000
are actually doing.

521
00:55:03.000 --> 00:55:07.000
So they can set Godrails and reverse them if they go off track.

522
00:55:07.000 --> 00:55:10.000
Rubric lets you move fast without putting your business at risk.

523
00:55:10.000 --> 00:55:13.000
To learn more, head to Rubric.com.

524
00:55:13.000 --> 00:55:15.000
You talked about compounding.

525
00:55:15.000 --> 00:55:19.000
You talked about how one should maybe not open the envelope that has their statements in it.

526
00:55:19.000 --> 00:55:21.000
Well, that's Jack Bogels said that, but I agree with it, yeah.

527
00:55:21.000 --> 00:55:23.000
I don't have to explain the graph.

528
00:55:23.000 --> 00:55:25.000
I've just passed you if you didn't know what that is.

529
00:55:25.000 --> 00:55:29.000
On the bottom, the red line is 11%.

530
00:55:29.000 --> 00:55:30.000
Returns.

531
00:55:30.000 --> 00:55:36.000
So the blue line that's running fairly flat is the contributions to this hypothetical investment.

532
00:55:36.000 --> 00:55:41.000
And the red line is the value that how it grows.

533
00:55:41.000 --> 00:55:46.000
And what's striking, and this is what's striking about compounding in general,

534
00:55:46.000 --> 00:55:52.000
is that the two track each other almost exactly for a surprisingly long time.

535
00:55:52.000 --> 00:55:54.000
And then they begin to diverge.

536
00:55:54.000 --> 00:56:03.000
And then the compounding makes the value of the investment skyrocketed hockey sticks.

537
00:56:03.000 --> 00:56:06.000
And I didn't know you were going to show this to me.

538
00:56:06.000 --> 00:56:10.000
But what's interesting to me about this is I used to do these Chautauquois.

539
00:56:10.000 --> 00:56:15.000
They were events where we'd take a small group of people to some cool place in the world hanging out.

540
00:56:15.000 --> 00:56:17.000
And there were people who followed my work.

541
00:56:17.000 --> 00:56:20.000
And I would have one-on-one sessions with them.

542
00:56:20.000 --> 00:56:24.000
And we'd talk about whatever they wanted, but mostly it was their finances.

543
00:56:24.000 --> 00:56:31.000
And very commonly, these people would lay out their investments, their finances.

544
00:56:31.000 --> 00:56:36.000
And they would ask them, I financially independent.

545
00:56:36.000 --> 00:56:39.000
And there's a very simple mathematical formula about that.

546
00:56:39.000 --> 00:56:41.000
How much did you spend?

547
00:56:41.000 --> 00:56:43.000
I spent $100,000 a year.

548
00:56:43.000 --> 00:56:44.000
Okay.

549
00:56:44.000 --> 00:56:47.000
If you take the 4% guideline, what's then withdrawal?

550
00:56:47.000 --> 00:56:54.000
So the guy named Bill Bengin came up with the idea that you could safely withdraw 4% of your portfolio.

551
00:56:54.000 --> 00:56:59.000
And it would continue to survive over time.

552
00:56:59.000 --> 00:57:05.000
And it would, so you could pull that out without depleting the portfolio.

553
00:57:05.000 --> 00:57:08.000
There was a woman who came to one of our Chautauquois. She was a banker.

554
00:57:08.000 --> 00:57:12.000
So obviously, knows her way around basic math.

555
00:57:12.000 --> 00:57:13.000
Right?

556
00:57:13.000 --> 00:57:19.000
She was, at the end of Chautauquois, she was going to take a new job starting that Monday.

557
00:57:19.000 --> 00:57:21.000
It was going to pay her $1 million a year.

558
00:57:21.000 --> 00:57:27.000
And we were going over our finances and she said, you know, I've got $5 million invested.

559
00:57:27.000 --> 00:57:28.000
Okay.

560
00:57:28.000 --> 00:57:30.000
Are my financially independent?

561
00:57:30.000 --> 00:57:33.000
Well, I can't answer that question until I know how much you're spending.

562
00:57:33.000 --> 00:57:36.000
So I'm spending $100,000 a year.

563
00:57:36.000 --> 00:57:37.000
Okay.

564
00:57:37.000 --> 00:57:46.000
Well, $100,000 a year, if you multiply it by 25, you get $2.5 million.

565
00:57:46.000 --> 00:57:50.000
4% of $2.5 million is $100,000.

566
00:57:50.000 --> 00:57:52.000
Right? So that's how that math works.

567
00:57:52.000 --> 00:57:57.000
So if you need $1,000 to live on, you need $2.5 million invested.

568
00:57:57.000 --> 00:57:58.000
Makes sense?

569
00:57:58.000 --> 00:57:59.000
Yeah.

570
00:57:59.000 --> 00:58:00.000
Okay. So you can look at it either way.

571
00:58:00.000 --> 00:58:02.000
You can say, I've got $2.5 million.

572
00:58:02.000 --> 00:58:09.000
If I take 4% of that a year, that's $100,000, or I'm spending $100,000, how much do I need?

573
00:58:09.000 --> 00:58:12.000
You multiply that by 25, $2.5.

574
00:58:12.000 --> 00:58:20.000
So just to make sure I'm clear, if I look at my investment portfolio and I have $100 in that,

575
00:58:20.000 --> 00:58:26.000
if I can live, are you saying that if I live on $4, which is 4% of my investment portfolio,

576
00:58:26.000 --> 00:58:28.000
then I'm financially independent.

577
00:58:28.000 --> 00:58:29.000
Right.

578
00:58:29.000 --> 00:58:30.000
That's a good now.

579
00:58:30.000 --> 00:58:31.000
It's a good guideline.

580
00:58:31.000 --> 00:58:39.000
I mean, there's lots of variations, but this is a guideline that's financial advisor Bill Bengan came up with.

581
00:58:39.000 --> 00:58:42.000
And then there was a thing called the Trinity Study, which was done.

582
00:58:42.000 --> 00:58:47.000
I want to say in the 90s, they've looked at a lot of these scenarios and basically verified that

583
00:58:47.000 --> 00:58:50.000
this was a very good baseline.

584
00:58:50.000 --> 00:58:58.000
So 4% is, I don't like the word rule because that implies that it's hard and fast, but it's a great guideline.

585
00:58:58.000 --> 00:59:04.000
If you want to have an idea of whether or not you're financially independent or not, this is a good guideline.

586
00:59:04.000 --> 00:59:09.000
So anyway, this woman says she's spending $100,000 a year and she's got $5 million.

587
00:59:09.000 --> 00:59:13.000
She wants to know, am I financially independent?

588
00:59:13.000 --> 00:59:16.000
And I said times two.

589
00:59:16.000 --> 00:59:21.000
I mean, you have twice as much money as you need given your level of spending.

590
00:59:21.000 --> 00:59:28.000
So the question that I always had going back to this little chart is how, and I would get this question a whole lot, Stephen.

591
00:59:28.000 --> 00:59:36.000
You know, they show me their numbers and they would very clearly be financially independent on that based on that math we just discussed.

592
00:59:36.000 --> 00:59:40.000
And these were smart people who can easily do basic arithmetic.

593
00:59:40.000 --> 00:59:45.000
How is it that they're asking me this question?

594
00:59:45.000 --> 00:59:49.000
And suddenly a dawn on me, this is how?

595
00:59:49.000 --> 00:59:54.000
Because compounding is a hockey stick.

596
00:59:54.000 --> 01:00:01.000
It goes along and kind of doesn't appear to be happening and then it slowly starts to happen and all of a sudden it's way up here.

597
01:00:01.000 --> 01:00:06.000
It happens so quickly and so stunningly, they can't quite believe it.

598
01:00:06.000 --> 01:00:10.000
It turned out it's not that they couldn't do the basic math.

599
01:00:10.000 --> 01:00:13.000
They certainly could do the basic math.

600
01:00:13.000 --> 01:00:18.000
What it was is they couldn't quite believe what the math was telling them.

601
01:00:18.000 --> 01:00:23.000
And they wanted me to, it's like, you see what's on that wall over there?

602
01:00:23.000 --> 01:00:27.000
I mean, are you seeing what I'm seeing?

603
01:00:27.000 --> 01:00:29.000
Because I can't quite believe that I'm seeing that.

604
01:00:29.000 --> 01:00:33.000
I need you to confirm that, yeah, you're seeing the same thing I'm seeing.

605
01:00:33.000 --> 01:00:44.000
And in this example, all it is is someone has, you know, they started with zero and they've paid in a small contribution every year to their investment.

606
01:00:44.000 --> 01:00:49.000
The investment is getting 11% return a year and suddenly the thing goes,

607
01:00:49.000 --> 01:00:58.000
I think that was one of the most pivotal moments in my life where I went online five, six years ago and looked at a compounding interest calculator.

608
01:00:58.000 --> 01:01:00.000
It's stunning. It's it is stunning.

609
01:01:00.000 --> 01:01:02.000
Absolutely stunning.

610
01:01:02.000 --> 01:01:13.000
And it shows that if you just leave your money in a place where it's getting this kind of return over time,

611
01:01:13.000 --> 01:01:15.000
everything seems to take care of itself.

612
01:01:15.000 --> 01:01:30.000
So let me let me close the circle in a sense on on that subject because one of the things that I think it's over looked with my book is this is the simple path to wealth,

613
01:01:30.000 --> 01:01:35.000
which means if you follow it, you will become wealthy, right?

614
01:01:35.000 --> 01:01:44.000
So we go back to, you know, buying those things that people maybe want to buy, whether it's the fancy car or the house.

615
01:01:44.000 --> 01:01:52.000
Well, once you become wealthy, you can not only buy those things, but you're buying them from a position of power, right?

616
01:01:52.000 --> 01:01:54.000
You can easily afford them.

617
01:01:54.000 --> 01:02:00.000
You become financially independent, which means that your investments are throwing off more money than you're spending.

618
01:02:00.000 --> 01:02:08.000
My wife and I are basically pretty naturally frugal people and that's one of the ways I expose that we got to where we are.

619
01:02:08.000 --> 01:02:14.000
But that doesn't necessarily serve us at the level of wealth we have now.

620
01:02:14.000 --> 01:02:18.000
And so we still have this tendency to say, oh, we're thinking about getting this stuff.

621
01:02:18.000 --> 01:02:19.000
How much does it cost?

622
01:02:19.000 --> 01:02:21.000
And we really want to spend that money.

623
01:02:21.000 --> 01:02:26.000
And depending on who it is, either she'll turn to me or I'll turn her and say, the matter is free.

624
01:02:26.000 --> 01:02:27.000
Everything's free.

625
01:02:27.000 --> 01:02:30.000
And that's a very liberating way to look at things.

626
01:02:30.000 --> 01:02:34.000
So that's where the simple path ultimately will get you.

627
01:02:34.000 --> 01:02:38.000
That's what I bought all those years ago.

628
01:02:39.000 --> 01:02:44.000
One of the thoughts that I had, which I do think is somewhat logical, was my brother and me are very different people.

629
01:02:44.000 --> 01:02:47.000
So he was very, very frugal and I was reckless.

630
01:02:47.000 --> 01:02:53.000
And one of the ways that I self justified my recklessness was, well, you know, you've got to enjoy life.

631
01:02:53.000 --> 01:02:55.000
And I'm only young once.

632
01:02:55.000 --> 01:03:03.000
So I'm only going to get the opportunity to do some of these things that are part of being young once, going to a nightclub and buying champagne and partying.

633
01:03:03.000 --> 01:03:09.000
So I thought, yeah, I could save and save and save and save and I could get to 70, 80 years old and have all this money.

634
01:03:09.000 --> 01:03:12.000
But what is the point if I haven't enjoyed myself?

635
01:03:12.000 --> 01:03:18.000
I think it is a mistake to think that you need to spend money to be happy to enjoy yourself.

636
01:03:18.000 --> 01:03:27.000
And the other thing I will say is that it's a lot more useful having money at this age than it would have been in my 20s.

637
01:03:27.000 --> 01:03:35.000
Because money buys comfort among other things and comfort becomes much more important to you as you age.

638
01:03:35.000 --> 01:03:40.000
They did a study where they put people in a brain imaging scanner.

639
01:03:40.000 --> 01:03:43.000
And they asked them to think about themselves.

640
01:03:43.000 --> 01:03:46.000
Then they asked them to think about themselves in a couple of years.

641
01:03:46.000 --> 01:03:49.000
Then they asked them to think about themselves in 10 years time and they looked at the brain.

642
01:03:49.000 --> 01:03:56.000
And then they did another study where they got the same people to think about a celebrity.

643
01:03:56.000 --> 01:03:59.000
That they didn't know. I think it was Matt Damon or someone famous like that.

644
01:03:59.000 --> 01:04:07.000
And what the study proved was that we think about ourselves in 10 years time in the same way that we think about Matt Damon.

645
01:04:07.000 --> 01:04:13.000
The further away the time horizon, the more it becomes a total stranger.

646
01:04:13.000 --> 01:04:19.000
And so I was writing recently for a chapter in my upcoming book about this idea that our future self is a stranger to the brain.

647
01:04:19.000 --> 01:04:23.000
Thinking about me when I'm 60 is like thinking about Matt Damon.

648
01:04:23.000 --> 01:04:28.000
I don't know if I can go. So why do I care? Why do I care about protecting him?

649
01:04:28.000 --> 01:04:36.000
I think this kind of speaks to what we were saying there is young people and even me as a young person kind of didn't really give a fuck about 60 year old me.

650
01:04:36.000 --> 01:04:45.000
It's so far away that I don't really care about protecting his interest. I almost think that's a different person. He can figure that out.

651
01:04:45.000 --> 01:04:57.000
How old are you now? I'm 75. So you have the wisdom of hindsight. So you can tell me as a 33 year old what it's like to be 33 and 75.

652
01:04:57.000 --> 01:05:06.000
When I was 33, I didn't think about me at older age at all. I mean, never crossed my mind to do such a thing.

653
01:05:06.000 --> 01:05:18.000
So I was not doing what I was doing for the benefit of 75 year old jail. I was doing it for the benefit of 25 year old jail, 30 year old jail.

654
01:05:18.000 --> 01:05:35.000
Remember going back to a early part of our conversation, what my definition of a few money is the money that you're accumulating before that gets you ultimately to being financially independent, which is when you no longer need to trade your labor for money.

655
01:05:35.000 --> 01:05:52.000
Right? Your money is doing all that. I wanted that right now. So when I was 25, I'd save the princely sum of $5,000, which justice for inflation to be about $25,000, $30,000 today.

656
01:05:52.000 --> 01:06:11.000
And I wanted to go back back around Europe. I put that meant putting my job, which I kind of liked. But the fact that I had that money gave me the financial strength to go in and negotiate that deal.

657
01:06:11.000 --> 01:06:21.000
If I was living paycheck to paycheck, I wouldn't have had that. I was far from being fully financially independent. So I wasn't doing this for 75 year old jail.

658
01:06:21.000 --> 01:06:37.000
I was doing this right now for 25 year old jail. And it's just like when you work out and clearly you do, right? You don't go to the gym thinking, at least I'm making presumption here, I'm doing this for 75 year old Stephen.

659
01:06:37.000 --> 01:06:49.000
You're doing this because you want to be stronger tomorrow than you are today for 33 year old Stephen. So that's my way of thinking about it. I never did this for future me.

660
01:06:49.000 --> 01:06:57.000
Maybe some people do and that's probably not a bad exercise. That's probably a bit of wisdom in that. I wasn't that smart.

661
01:06:57.000 --> 01:07:00.000
So you would you would save $5,000 a year?

662
01:07:00.000 --> 01:07:08.000
Well, in those days, so my first professional job paid me $10,000 a year. And I saved $5,000. Yeah, I saved half of it.

663
01:07:08.000 --> 01:07:17.000
Going back to this point of compounding and how important it is to start investing in things that will offer you compounding returns.

664
01:07:17.000 --> 01:07:29.000
If you started investing $500 per month and you got an annual return of 8% because you're investing in some of the things that we'll talk about in a second.

665
01:07:29.000 --> 01:07:39.000
In 35 years, you will be a millionaire. You'll have more than a million dollars. You'll have 1.04, 3 million dollars.

666
01:07:39.000 --> 01:07:50.000
Over those 35 years, you would have invested about $200,000, but you would have made $850,000 from the interest over that period of time.

667
01:07:50.000 --> 01:08:03.000
Well, just to be clear, if I had not necessarily the interest but the growth is that 11% is not interest. It's gross. Some of it might be dividends in the case of which is a form of interest you think of.

668
01:08:03.000 --> 01:08:08.000
But it's not just to be technically correct.

669
01:08:08.000 --> 01:08:26.000
Which is interesting. When I was born, if my parents had put $500 a month away in an investment that we'll talk about now, by the age I am now, I would have roughly been a millionaire just from then putting $500 a month away.

670
01:08:26.000 --> 01:08:41.000
It's pretty crazy. But that's the power of compounding. I mean, it's very gratifying to me that twice a year I'm a guest lecturer or a friend of mine who's a professor at University of Colorado and Boulder.

671
01:08:41.000 --> 01:08:49.000
And it's always fun to talk to her students because they're exceedingly bright. They ask great questions and it's just stimulating for me.

672
01:08:49.000 --> 01:08:58.000
But I think about these young people. I mean, these are 18, 19, 20-year-olds. We're thinking about doing this stuff at that age.

673
01:08:58.000 --> 01:09:10.000
And the remarkable amount of time that they have for this compounding to work for them. It's just incredible. They are going to be so much better off than if not.

674
01:09:11.000 --> 01:09:19.000
So let me throw out a tip for you if and when you ever have kids and for anybody who's listening as young children.

675
01:09:19.000 --> 01:09:31.000
You know, as your kids start to grow and hopefully they get our time jobs, right? They start whether it's shoveling snow or busing tables at a local restaurant or whatever it is.

676
01:09:31.000 --> 01:09:45.000
And they start earning some income. Well, you can take that income and up to I think it's $7,000 is the limit now. Put that in a Roth IRA, which will never be taxed.

677
01:09:45.000 --> 01:09:57.000
It will grow tax-free forever. And they're going to be by definition because they're making almost no money and they're not paying any income tax so you don't need any deduction from that.

678
01:09:57.000 --> 01:10:03.000
And it doesn't have to be their money. So let's say your kid makes $3,000 in the course of a year.

679
01:10:03.000 --> 01:10:17.000
You can take $3,000 and fund a Roth IRA for them. Imagine just if they never added anything other than that. You do that until they get out of college or whatever.

680
01:10:17.000 --> 01:10:27.000
You know, that baseline is going to grow tax-free for an extended period of time. That's one of the great keys to wealth building is just time.

681
01:10:27.000 --> 01:10:32.000
And is that advice that you still believe in that people should be saving 50% of their income?

682
01:10:32.000 --> 01:10:42.000
Yeah, I think it's a good rule of thumb. It gets you to financial independence and a pretty reasonable depending on what the market does and say a 10 to 15 year time period.

683
01:10:42.000 --> 01:10:50.000
The pushback that you might anticipate is when people say that's impossible. Nobody can save 50% of their money. That's silly.

684
01:10:50.000 --> 01:11:00.000
And I'm sorry, but I did it and now at this point I've known countless people have done it. So you may choose not to do it, but it's certainly possible.

685
01:11:00.000 --> 01:11:12.000
Let's say you're earning $40,000 a year, which is the low end, the average median amount. Let's say $3,000 a month.

686
01:11:12.000 --> 01:11:17.000
So you're earning $3,000 a month. You're then going to pay tax on that.

687
01:11:17.000 --> 01:11:23.000
This is what my math says here. It says very little tax would be would be paid after all of your taxes.

688
01:11:23.000 --> 01:11:30.000
And so you're still you've still got roughly $3,000 a month, but $2,900, which you would take home.

689
01:11:30.000 --> 01:11:37.000
So I would need to save 1,400 of that, which means my total expenses need to be 1,400 a month.

690
01:11:37.000 --> 01:11:45.000
So first thing I need to do is live somewhere very, very affordable, depending where I live, what city I live in.

691
01:11:45.000 --> 01:11:50.000
Then I need to basically radically reduce my expenditure to be able to save 50% a month.

692
01:11:50.000 --> 01:11:56.000
And I guess the question is most people would assume they wouldn't like that lifestyle.

693
01:11:56.000 --> 01:12:01.000
They wouldn't like to prepare their own lunches every day. They wouldn't like to not have a Starbucks coffee.

694
01:12:01.000 --> 01:12:06.000
They wouldn't like to live in a small shoe box and probably socialize a lot less.

695
01:12:06.000 --> 01:12:11.000
So I guess that's the key rebuttal is I guess. Yeah, it's possible.

696
01:12:11.000 --> 01:12:21.000
There's a chapter that talks about this with an even lower because when I was writing the book, I think I used a $25,000 annual income.

697
01:12:21.000 --> 01:12:25.000
So the math works, is it easy? No.

698
01:12:25.000 --> 01:12:29.000
But it goes back to fundamentally what is it that you want?

699
01:12:29.000 --> 01:12:34.000
You said, well, I may not like that. I said, I may want to have lattes and all these other things.

700
01:12:34.000 --> 01:12:37.000
Well, that's your money, that's your prerogative.

701
01:12:37.000 --> 01:12:42.000
But time is going to happen regardless of what you do.

702
01:12:42.000 --> 01:12:49.000
And if you say instead of having those things now, I'm going to spend my money on buying my freedom,

703
01:12:49.000 --> 01:12:54.000
you will get to the point where everything is free, including those lattes.

704
01:12:54.000 --> 01:12:57.000
So let's talk about investing then.

705
01:12:57.000 --> 01:13:05.000
We have two buckets here on the table for an allergy around tax-advantaged investing.

706
01:13:05.000 --> 01:13:08.000
I'm going to take your lead on this.

707
01:13:08.000 --> 01:13:14.000
Okay, so if you dump that bucket in there, I'll dump this bucket in here.

708
01:13:14.000 --> 01:13:19.000
Okay.

709
01:13:19.000 --> 01:13:24.000
The idea is that, and I'm going to speak in terms of the United States,

710
01:13:24.000 --> 01:13:37.000
the government provides savings vehicles that are tax-advantaged to encourage people to acquire money for their old age, right?

711
01:13:37.000 --> 01:13:42.000
So in the United States, there's things called 401k or 403b.

712
01:13:42.000 --> 01:13:51.000
These are employer-related plans where you can divert part of your income and the government specifies how much you can divert.

713
01:13:51.000 --> 01:13:58.000
And they won't tax you on that. And you put it into an investment bucket, into an investment account of some sort.

714
01:13:58.000 --> 01:14:01.000
You get to choose how you want to invest it.

715
01:14:01.000 --> 01:14:08.000
But that would be the bucket. And that means that if you had, however much money this represents,

716
01:14:08.000 --> 01:14:14.000
went into your 401k or your IRA, which is something you would do on your own privately,

717
01:14:14.000 --> 01:14:17.000
which is also tax-advantaged, right?

718
01:14:17.000 --> 01:14:22.000
So in the example that you've just handed me, they're saying,

719
01:14:22.000 --> 01:14:29.000
that this would represent $20,750, which is before tax and with a match.

720
01:14:29.000 --> 01:14:34.000
So 401k's companies will frequently match part of your contribution.

721
01:14:34.000 --> 01:14:39.000
So you say, I'm going to do 5%, they might say, okay, we're going to match the first 2%, or whatever,

722
01:14:39.000 --> 01:14:43.000
which you should always take advantage of, because that's free money.

723
01:14:43.000 --> 01:14:48.000
So this is not taxed immediately, and you invest this money.

724
01:14:48.000 --> 01:14:53.000
Let's see, you invested in a total stock market index fund, which would be my recommendation.

725
01:14:53.000 --> 01:14:57.000
So you get to invest all this money in your total stock market index fund.

726
01:14:57.000 --> 01:15:02.000
If instead you do it, after you pay taxes on the same amount of money,

727
01:15:02.000 --> 01:15:09.000
well, by the time you pay taxes, you're going to have about half of what it was before, which is $10,340,

728
01:15:09.000 --> 01:15:15.000
which is what represented in here roughly half the number of gold coins.

729
01:15:15.000 --> 01:15:21.000
Now, both of these things grow at the same rate, because we've invested them in the same thing, right?

730
01:15:21.000 --> 01:15:24.000
So they're making 11% a year, whatever it is.

731
01:15:24.000 --> 01:15:31.000
So this is obviously going to grow into a much bigger pile at the end of 30 years, or 40 years, or whatever it is, than this is,

732
01:15:31.000 --> 01:15:34.000
because you're starting with a bigger pile.

733
01:15:34.000 --> 01:15:39.000
So that's the advantage of deferring taxes.

734
01:15:39.000 --> 01:15:50.000
Now, the thing that people tend not to think about or talk about that's incredibly important is that it is not avoiding taxes.

735
01:15:50.000 --> 01:15:57.000
It is deferring taxes, which means that ultimately the government is going to want their money.

736
01:15:57.000 --> 01:15:59.000
They're going to want their cut.

737
01:15:59.000 --> 01:16:13.000
And typically, that happens, I think, in the United States the age is 73 or something, when you're required to begin taking money out of these accounts, it's called an RMD, a required minimum distribution.

738
01:16:13.000 --> 01:16:26.000
So if you haven't started withdrawing money from these accounts, by then the government will require you to begin on a schedule based on your life expectancy to start pulling that money out.

739
01:16:26.000 --> 01:16:32.000
Because they figure they've waited long enough, and now they want their cut.

740
01:16:32.000 --> 01:16:36.000
So it's not tax-free, it's tax-deferred.

741
01:16:36.000 --> 01:16:38.000
Important thing to understand.

742
01:16:38.000 --> 01:16:52.000
If you start taking this money out before a certain age, and if memory serves me, it's 59.5 in the US, then you will pay tax on it, as you do whenever you withdraw the money, and also a penalty.

743
01:16:52.000 --> 01:17:05.000
So they want you to keep it in at least until you're 59.5, but they want you to start taking it out at some point in this case, I think, when you're 72 or 73 or somewhere.

744
01:17:05.000 --> 01:17:08.000
And that's when they collect their money.

745
01:17:08.000 --> 01:17:14.000
So you say, well, okay, if that's the case, then what am I doing here? Because I got to pay the taxes eventually anyway.

746
01:17:14.000 --> 01:17:21.000
And mathematically, if your tax rate is the same, it doesn't matter if your tax deferred or not.

747
01:17:21.000 --> 01:17:26.000
The end result of amount of money that you have will be exactly the same.

748
01:17:26.000 --> 01:17:38.000
The speculation is, and it's true in the vast majority of cases, that when you retire, and you start living on this money, you start pulling it out, you will be in a lower tax bracket.

749
01:17:38.000 --> 01:17:45.000
So you will have to pay some taxes, but you won't have to pay as much as when you were working and you were in a higher tax bracket.

750
01:17:45.000 --> 01:17:47.000
So that's the gamble you're taking.

751
01:17:47.000 --> 01:17:53.000
Now, looking at me personally as an example, this didn't work out for me.

752
01:17:53.000 --> 01:17:58.000
So I did IRAs and 401Ks when I was working in my corporate career.

753
01:17:58.000 --> 01:18:01.000
I would decide to fare amount of money in them.

754
01:18:01.000 --> 01:18:10.000
Now as it turns out, I'm in a higher tax bracket than I have ever been in, because of the success of the activities that I do today.

755
01:18:10.000 --> 01:18:13.000
I had no idea that that was going to happen.

756
01:18:13.000 --> 01:18:17.000
And now I'm at that age where I have to take RMDs.

757
01:18:17.000 --> 01:18:24.000
So RMDs are coming out at a higher tax rate for me than when I, than the tax benefit I got deferring it.

758
01:18:24.000 --> 01:18:33.000
But that's unusual. Most people will benefit from doing this because in their retirement, they won't have an income or their income will be very modest.

759
01:18:33.000 --> 01:18:38.000
And their tax rate will be equally modest to no work out very nicely for them.

760
01:18:38.000 --> 01:18:42.000
But that's basically how that works. Does that make sense?

761
01:18:42.000 --> 01:18:43.000
It does. Yes.

762
01:18:43.000 --> 01:18:54.000
And to try and summarize it in a way that I fully understand, check I understand, is every month when I'm paid, I have an opportunity before that money comes to me to invest some of it.

763
01:18:54.000 --> 01:19:01.000
And around the world, whether it's Japan, Switzerland, India, South Korea, Germany, Australia, UK, Canada, there's always some kind of system to do this.

764
01:19:01.000 --> 01:19:07.000
Yeah. So I can say, OK, I'm going to get paid $1,000 this month.

765
01:19:07.000 --> 01:19:12.000
I'm going to put $100 of that before I even get it into one of these investment accounts.

766
01:19:12.000 --> 01:19:15.000
It's not going to be taxed until...

767
01:19:15.000 --> 01:19:18.000
And your employer might match part of it or all of it.

768
01:19:18.000 --> 01:19:23.000
Yeah. So my employer might also add $100 to it or part of it.

769
01:19:23.000 --> 01:19:25.000
That's going to compound over time.

770
01:19:25.000 --> 01:19:29.000
I can take it out whenever I want, but if I take it out early, I get a penalty.

771
01:19:29.000 --> 01:19:32.000
And you pay tax. And I pay tax.

772
01:19:32.000 --> 01:19:41.000
But assuming that I'm not going to be earning as much as I do now when I'm older, when I take it out at 65 years old, I'm still going to pay tax, but a low rate of tax.

773
01:19:41.000 --> 01:19:46.000
There's no penalty at that point, but presumably you'll be able to lower tax rate rate.

774
01:19:46.000 --> 01:19:49.000
So it really only works if you're at a lower tax rate when you're older.

775
01:19:49.000 --> 01:19:50.000
Exactly.

776
01:19:50.000 --> 01:19:57.000
So most people work and then they retire at a certain age, and that income from their job goes away.

777
01:19:57.000 --> 01:20:01.000
So by definition, they're in a much lower tax bracket.

778
01:20:01.000 --> 01:20:04.000
So for the vast majority of people, this works out very nicely.

779
01:20:04.000 --> 01:20:06.000
And you talk about...

780
01:20:06.000 --> 01:20:10.000
You know, because people will still have to make a decision what they want to invest in.

781
01:20:10.000 --> 01:20:12.000
Right.

782
01:20:12.000 --> 01:20:15.000
Where do you think we should be investing on money at this moment of time?

783
01:20:16.000 --> 01:20:20.000
What should they be putting their money into with everything you see happening in the world?

784
01:20:20.000 --> 01:20:21.000
Yeah.

785
01:20:21.000 --> 01:20:24.000
You said not Bitcoin, but what should we put in?

786
01:20:24.000 --> 01:20:29.000
I'm an advocate of investing in broad-based low-cost stock index funds.

787
01:20:29.000 --> 01:20:30.000
What is that?

788
01:20:30.000 --> 01:20:36.000
That is an example of that is VTSAX, which is Vanguard's total stock market index fund.

789
01:20:36.000 --> 01:20:42.000
It invests in virtually every publicly traded company in the United States of America.

790
01:20:42.000 --> 01:20:47.000
That's the number of those varies, but it's roughly 3600 companies.

791
01:20:47.000 --> 01:20:49.000
So you're basically investing in America?

792
01:20:49.000 --> 01:20:56.000
There are a lot of private companies that I'm not invested in, but I'm in every publicly traded company in the country.

793
01:20:56.000 --> 01:21:02.000
And that means everybody from the factory floor to the CEO is working to make me richer.

794
01:21:02.000 --> 01:21:09.000
Now, some of those companies are going to do extraordinarily well, and they're going to succeed dramatically.

795
01:21:09.000 --> 01:21:17.000
And because this fund, as most funds like it are, is cap weighted, and I'll explain that in a minute,

796
01:21:17.000 --> 01:21:21.000
the more successful the company is, the more of it I will own.

797
01:21:21.000 --> 01:21:29.000
So, cap weighted simply means that the larger the market capitalization of the company is.

798
01:21:29.000 --> 01:21:30.000
The valuation.

799
01:21:30.000 --> 01:21:32.000
The valuation, right?

800
01:21:32.000 --> 01:21:38.000
The market capital, the larger that is, the greater the percentage of the fund it will represent.

801
01:21:38.000 --> 01:21:50.000
So you may have heard people say that the top 10 companies in the S&P 500 have an outsized representation percentage wise of what they will.

802
01:21:50.000 --> 01:21:52.000
That's the reason it's cap weighted.

803
01:21:52.000 --> 01:21:56.000
So I benefit from that success, right?

804
01:21:56.000 --> 01:22:13.000
Now, if one of those companies falters and starts failing on their execution or a more aggressive, better organized competitor comes along and displaces them, then they will drift away.

805
01:22:13.000 --> 01:22:19.000
But I'm okay with that because whatever that new competitor is, I don't have to predict who it is.

806
01:22:19.000 --> 01:22:21.000
I will own them.

807
01:22:21.000 --> 01:22:25.000
And that's a process that I refer to as self cleansing.

808
01:22:25.000 --> 01:22:28.000
I'm very proud of that term that I coined.

809
01:22:28.000 --> 01:22:30.000
So a great example of that is Sears.

810
01:22:30.000 --> 01:22:34.000
When I was a kid, Sears, company you may not even be aware of.

811
01:22:34.000 --> 01:22:39.000
But Sears was the Walmart and Amazon of its time combined.

812
01:22:39.000 --> 01:22:45.000
But Sears, at the turn of the last century, the turn of the 1800s, looked around and said,

813
01:22:45.000 --> 01:22:48.000
you know, we have these brick and mortar stores.

814
01:22:48.000 --> 01:22:52.000
But there are all these people living out in rural areas who are never going to get to our brick and mortar stores.

815
01:22:52.000 --> 01:22:57.000
We could send them catalogs, just being in sound familiar.

816
01:22:57.000 --> 01:23:05.000
And then they could send us letters and money ordering things from our catalog that we could then ship to them.

817
01:23:05.000 --> 01:23:12.000
So they became Walmart with the brick and mortar stores and then Amazon of its time absolutely dominated for 100 years.

818
01:23:12.000 --> 01:23:25.000
If you had said to somebody when I was first investing in the 1970s, that Sears built the biggest building on the planet back in the 70s.

819
01:23:25.000 --> 01:23:28.000
What was then known as the Sears Tower in Chicago.

820
01:23:28.000 --> 01:23:31.000
If you had said Sears, its days are numbered.

821
01:23:31.000 --> 01:23:36.000
You would have been laughed at, but its days were numbered.

822
01:23:36.000 --> 01:23:40.000
Because leaner, more aggressive competitors came along and ate its lunch.

823
01:23:40.000 --> 01:23:43.000
Nobody could have predicted that, certainly not me.

824
01:23:43.000 --> 01:23:53.000
But I didn't have to if I owned the index, because then when Walmart came along and then later Amazon and Sears faded away, I owned those as well.

825
01:23:53.000 --> 01:23:55.000
That sets self-closing process.

826
01:23:55.000 --> 01:24:02.000
And just for anyone that really doesn't understand this at all, you're not actually having to do anything because that index fund is just automatically making the decisions.

827
01:24:02.000 --> 01:24:04.000
Exactly. I don't have to do anything.

828
01:24:04.000 --> 01:24:07.000
I just have to own it and I can own it forever.

829
01:24:07.000 --> 01:24:18.000
So if I went and I bought Sears stock as an example back in the day, well whenever you own an individual stock, you're going to be thinking about, OK, how long am I going to own this?

830
01:24:18.000 --> 01:24:24.000
And what is going to trigger my sale of this particular asset?

831
01:24:24.000 --> 01:24:29.000
And what I mean, what has to happen to it that would make me not want to own it anymore.

832
01:24:29.000 --> 01:24:33.000
And then if I want to get rid of it and I want something in the same space, what do I buy?

833
01:24:33.000 --> 01:24:35.000
Do I buy this new upstart Walmart?

834
01:24:35.000 --> 01:24:37.000
Do I buy this Amazon?

835
01:24:37.000 --> 01:24:41.000
The back in the 90s is run by this wacko guy Jeff Bezos who keeps saying,

836
01:24:41.000 --> 01:24:43.000
the profits don't matter, profits don't matter.

837
01:24:43.000 --> 01:24:47.000
What? Who invests in a CEO that says profits don't matter?

838
01:24:47.000 --> 01:24:48.000
I mean, that's nuts.

839
01:24:48.000 --> 01:24:53.000
But those are the kinds of things you have to be think about if you own individual stocks.

840
01:24:53.000 --> 01:24:56.000
I don't have to think about any of that owning the index.

841
01:24:56.000 --> 01:25:09.000
Because if Jeff Bezos turns out that his wackiness is brilliance, which it turns out it was, then he's going to rise to the top, which it turns out Amazon did.

842
01:25:09.000 --> 01:25:10.000
And I benefited from that.

843
01:25:10.000 --> 01:25:15.000
If it turns out it was just wackiness and would have just faded away as a lot of companies have.

844
01:25:15.000 --> 01:25:21.000
And better that wouldn't have mattered because whatever succeeds I will, I will own and benefit from.

845
01:25:21.000 --> 01:25:26.000
I was asking the research team beforehand.

846
01:25:26.000 --> 01:25:31.000
In the last 10 years, which index fund has performed the very, very best.

847
01:25:31.000 --> 01:25:38.000
And it said that the Nasdaq 100, which is very tech heavy,

848
01:25:38.000 --> 01:25:42.000
has performed at almost 20% a year for the last 10 years.

849
01:25:42.000 --> 01:25:47.000
And when I think about what's going on in the world at the moment and the advent of this new technology called AI,

850
01:25:47.000 --> 01:25:49.000
which is driving everything, it seems.

851
01:25:49.000 --> 01:25:54.000
And our lives are going to become way more technological with robots and automation and full self-driving.

852
01:25:54.000 --> 01:26:00.000
It appears to me like if there was ever a great time to be investing in an index fund,

853
01:26:00.000 --> 01:26:04.000
one should aim at the very tech heavy index funds like the Nasdaq 100.

854
01:26:04.000 --> 01:26:07.000
Is that logical thinking or is that?

855
01:26:07.000 --> 01:26:09.000
It's logical thinking.

856
01:26:09.000 --> 01:26:12.000
Yes, so first of all, it's logical thinking.

857
01:26:12.000 --> 01:26:17.000
And actually had you done that same analysis 10 years ago,

858
01:26:17.000 --> 01:26:21.000
you would have done better than VTSAX, right?

859
01:26:21.000 --> 01:26:25.000
Because technology has absolutely dominated for the last 10 years.

860
01:26:25.000 --> 01:26:30.000
It is a reasonable speculation that that will continue into the future.

861
01:26:30.000 --> 01:26:31.000
So why don't you start?

862
01:26:31.000 --> 01:26:32.000
For some period of time.

863
01:26:32.000 --> 01:26:38.000
Well, because the truth is that technology has not always dominated.

864
01:26:38.000 --> 01:26:40.000
We're not going to go backwards the whole way.

865
01:26:40.000 --> 01:26:43.000
Well, no, but the point is that it changes.

866
01:26:43.000 --> 01:26:46.000
So just like in my series example,

867
01:26:46.000 --> 01:26:49.000
Sears would have been at the top of the index for a long time

868
01:26:49.000 --> 01:26:52.000
and then it drifted away and got replaced.

869
01:26:52.000 --> 01:26:54.000
So that's an individual stock.

870
01:26:54.000 --> 01:27:00.000
Sectors of stocks have also done that over time, right?

871
01:27:00.000 --> 01:27:03.000
So right now the dominant sector is tech.

872
01:27:03.000 --> 01:27:05.000
Wasn't always the case.

873
01:27:05.000 --> 01:27:08.000
Might not always be the case in the future.

874
01:27:08.000 --> 01:27:11.000
I don't know because I can't see the future.

875
01:27:11.000 --> 01:27:17.000
I understand people who would say that clearly that's the best bet to go with tech.

876
01:27:17.000 --> 01:27:22.000
And your crystal ball is clearer than mine and you might very well be right.

877
01:27:22.000 --> 01:27:25.000
But I don't have a crystal ball.

878
01:27:25.000 --> 01:27:29.000
And I don't have to worry about that owning the total stock market

879
01:27:29.000 --> 01:27:32.000
because if you're right, I will still benefit very nicely.

880
01:27:32.000 --> 01:27:34.000
Thank you very much.

881
01:27:34.000 --> 01:27:39.000
If you're wrong, whatever replaces it, I will own.

882
01:27:39.000 --> 01:27:44.000
So you have an analogy you came up with that involves beer and a gloss.

883
01:27:44.000 --> 01:27:45.000
Right?

884
01:27:45.000 --> 01:27:47.000
Probably came up with a drinking beer.

885
01:27:47.000 --> 01:27:50.000
Well, show me the analogy.

886
01:27:50.000 --> 01:27:53.000
So thanks for that.

887
01:27:53.000 --> 01:27:54.000
Here we go.

888
01:27:54.000 --> 01:27:57.000
I was going to say thanks for not shaking up the camp.

889
01:27:57.000 --> 01:27:59.000
So beer, right?

890
01:27:59.000 --> 01:28:03.000
So I'm pouring it right down the middle so we get a nice thick head.

891
01:28:03.000 --> 01:28:06.000
That's even a little thicker than I hoped for.

892
01:28:06.000 --> 01:28:07.000
Okay.

893
01:28:07.000 --> 01:28:14.000
So imagine for a second right now we have a glass and we can see exactly how much foam there is

894
01:28:14.000 --> 01:28:17.000
and how much actual beer there is, right?

895
01:28:17.000 --> 01:28:24.000
But imagine this was that I poured it into this vessel instead where we couldn't see that.

896
01:28:24.000 --> 01:28:26.000
The analogy is the stock market.

897
01:28:26.000 --> 01:28:32.000
So when most people think of the stock market and when most people turn on CNBC,

898
01:28:32.000 --> 01:28:38.000
they turn on, you know, they look at the investment news and what have you.

899
01:28:38.000 --> 01:28:42.000
It's all this churning and trading, you know, what stocks are hot now,

900
01:28:42.000 --> 01:28:46.000
what stocks are rising, what stocks are falling, what's, you know, it's all this trading.

901
01:28:46.000 --> 01:28:49.000
That's not the simple path to wealth.

902
01:28:49.000 --> 01:28:52.000
That's the foam, right?

903
01:28:52.000 --> 01:28:59.000
So the value in a stock, whatever the stock is, what makes up the price of that stock

904
01:28:59.000 --> 01:29:01.000
is a combination of two things.

905
01:29:01.000 --> 01:29:05.000
It is the beer and it is the foam.

906
01:29:05.000 --> 01:29:11.000
And the problem is unlike that glass, it's in a vessel like this.

907
01:29:11.000 --> 01:29:17.000
So it's hard to see exactly how much beer there is as opposed to how much foam there is.

908
01:29:17.000 --> 01:29:20.000
And the beer is the value, the fame is the speculation.

909
01:29:20.000 --> 01:29:21.000
Exactly.

910
01:29:21.000 --> 01:29:26.000
The beer is the fundamental operating value of the company, right?

911
01:29:26.000 --> 01:29:31.000
The sales and the expenses and the money that's left over that you call profits, right?

912
01:29:31.000 --> 01:29:32.000
Yeah.

913
01:29:32.000 --> 01:29:33.000
So that's the beer.

914
01:29:33.000 --> 01:29:40.000
The foam is what the market determines that's worth at any given moment,

915
01:29:40.000 --> 01:29:46.000
based on emotion, based on hype and speculation and fear and greed.

916
01:29:46.000 --> 01:29:50.000
And so up here is the total value of the stock.

917
01:29:51.000 --> 01:29:52.000
Right, exactly.

918
01:29:52.000 --> 01:29:54.000
The total value of the stock.

919
01:29:54.000 --> 01:29:58.000
But this is all foam that can come and go very quickly, right?

920
01:29:58.000 --> 01:30:01.000
So let's think about Tesla, for example, right?

921
01:30:01.000 --> 01:30:05.000
Tesla has a lot of foam.

922
01:30:05.000 --> 01:30:11.000
Because a lot of people are speculating about the great things Tesla is going to do in the future.

923
01:30:11.000 --> 01:30:15.000
Robotic cars, humanoid robots, you know, all these kinds of things,

924
01:30:15.000 --> 01:30:17.000
which very many will come to pass.

925
01:30:17.000 --> 01:30:21.000
I mean, Elon Musk is a stunningly brilliant guy.

926
01:30:21.000 --> 01:30:23.000
So who knows?

927
01:30:23.000 --> 01:30:26.000
But that's the speculation, that's the foam.

928
01:30:26.000 --> 01:30:30.000
The underlying beer of Tesla, the actual operating company,

929
01:30:30.000 --> 01:30:33.000
does not justify the price of the stock.

930
01:30:33.000 --> 01:30:39.000
I mean, the pee ratio of Tesla, you can look it up as some huge number, right?

931
01:30:39.000 --> 01:30:43.000
So there's a lot of speculation, a lot of foam in Tesla.

932
01:30:44.000 --> 01:30:51.000
Now, if things go to plan, then that foam will become, as in our example,

933
01:30:51.000 --> 01:30:54.000
you notice the foam is dissipating or getting more and more beer.

934
01:30:54.000 --> 01:30:57.000
If things go to plan for Tesla, that's what will happen.

935
01:30:57.000 --> 01:31:01.000
The foam will eventually settle out into more and more beer.

936
01:31:01.000 --> 01:31:06.000
And Tesla will justify that high price and maybe then some.

937
01:31:06.000 --> 01:31:10.000
And I guess Warren Buffett's greatness, if I've interpreted his writing correctly

938
01:31:10.000 --> 01:31:13.000
why he was often considered as the greatest investor of all time,

939
01:31:13.000 --> 01:31:18.000
was he was able to pay for stocks where it was mainly beer.

940
01:31:18.000 --> 01:31:22.000
And he paid at the price of the beer, not for the foam.

941
01:31:22.000 --> 01:31:29.000
Or he looked for times where the sentiment was so negative that he was actually paying

942
01:31:29.000 --> 01:31:32.000
a little less than the price of the beer.

943
01:31:32.000 --> 01:31:36.000
Benjamin Graham, who wrote the intelligent investor,

944
01:31:36.000 --> 01:31:40.000
who was a mentor to Warren Buffett, basically said,

945
01:31:40.000 --> 01:31:45.000
what you should do is look for value companies and try to determine where the beer is.

946
01:31:45.000 --> 01:31:49.000
And then try to see if you can get a buying opportunity, watch it,

947
01:31:49.000 --> 01:31:54.000
where you can buy it for less than the actual value of the operation.

948
01:31:54.000 --> 01:31:55.000
That's ideal.

949
01:31:55.000 --> 01:31:59.000
And in those days, when there wasn't so much information freely available,

950
01:31:59.000 --> 01:32:01.000
that was probably a little easier to do.

951
01:32:01.000 --> 01:32:04.000
Well, Warren Buffett has said since then,

952
01:32:04.000 --> 01:32:08.000
and that's a great foundation if you're going to pick individual stocks.

953
01:32:08.000 --> 01:32:12.000
But what Warren Buffett has said since then is he learned,

954
01:32:12.000 --> 01:32:14.000
and I think, and you don't quote me on this,

955
01:32:14.000 --> 01:32:17.000
but I think it was Charlie Munger, who actually made this point to him,

956
01:32:17.000 --> 01:32:22.000
that it's going to be very, very hard in this day and age,

957
01:32:22.000 --> 01:32:26.000
even when they started back in the 60s to find companies

958
01:32:26.000 --> 01:32:31.000
where you can actually buy it for less than the actual beer value.

959
01:32:32.000 --> 01:32:34.000
So don't try to do that.

960
01:32:34.000 --> 01:32:39.000
Just try to find companies that you can pay a fair price for

961
01:32:39.000 --> 01:32:43.000
that have a lot of beer in the mix that are mostly beer.

962
01:32:43.000 --> 01:32:47.000
Because if you buy those companies, they are, by definition,

963
01:32:47.000 --> 01:32:52.000
very well-run companies, strong brands, big modes around them,

964
01:32:52.000 --> 01:32:54.000
which makes them hard to compete.

965
01:32:54.000 --> 01:32:58.000
I guess to do this, you're going to have to have a framework for valuing a company.

966
01:32:58.000 --> 01:32:59.000
Exactly.

967
01:32:59.000 --> 01:33:03.000
And you're going to have to have great discipline, which is hot.

968
01:33:03.000 --> 01:33:06.000
And that's what, you know, as Warren Buffett said,

969
01:33:06.000 --> 01:33:11.000
I was blessed with an ability to allocate capital effectively.

970
01:33:11.000 --> 01:33:14.000
And that's basically what he has done.

971
01:33:14.000 --> 01:33:20.000
He has capital and he has got the ability to look at different companies

972
01:33:20.000 --> 01:33:24.000
and say, have all the different companies I could allocate capital to.

973
01:33:24.000 --> 01:33:28.000
He's pretty skilled at picking the ones that are the best bets.

974
01:33:28.000 --> 01:33:30.000
One of the things that I really admired about Warren Buffett

975
01:33:30.000 --> 01:33:35.000
was his ability to do nothing, which is one of the key things

976
01:33:35.000 --> 01:33:38.000
because that goes back to Charlie Mungers thing

977
01:33:38.000 --> 01:33:40.000
don't get in the way of your compounding, right?

978
01:33:40.000 --> 01:33:42.000
And there has been recent times where I think we can all think of

979
01:33:42.000 --> 01:33:47.000
where using your beer analogy, something happens in the world

980
01:33:47.000 --> 01:33:53.000
and the true value of a company is higher than the selling price.

981
01:33:53.000 --> 01:33:57.000
If you go back to March 2020 during the market sell-off

982
01:33:57.000 --> 01:34:00.000
when the pandemic happened and everybody panicked,

983
01:34:00.000 --> 01:34:02.000
Amazon, for example, the stock briefly dropped

984
01:34:02.000 --> 01:34:06.000
below roughly to about $1,500 per share,

985
01:34:06.000 --> 01:34:10.000
well below it's intrinsic value because people were panicking.

986
01:34:10.000 --> 01:34:11.000
Right.

987
01:34:11.000 --> 01:34:15.000
And then it quickly rebounded again past $3,000 a share.

988
01:34:15.000 --> 01:34:19.000
So theoretically, if you had noticed that drop,

989
01:34:19.000 --> 01:34:22.000
you could have made a hundred percent return on your money.

990
01:34:22.000 --> 01:34:25.000
In my extension, the whole market did that.

991
01:34:25.000 --> 01:34:26.000
The whole market dropped down.

992
01:34:26.000 --> 01:34:27.000
Yeah.

993
01:34:27.000 --> 01:34:29.000
So you could have done that with your index fund.

994
01:34:29.000 --> 01:34:31.000
This is why if you panicked and sold,

995
01:34:31.000 --> 01:34:35.000
I say you owned Amazon or you owned VTSAX

996
01:34:35.000 --> 01:34:37.000
and you panicked and sold,

997
01:34:37.000 --> 01:34:41.000
you would have lost everything and then it recovered.

998
01:34:41.000 --> 01:34:43.000
So it works both ways.

999
01:34:43.000 --> 01:34:45.000
That's why I said earlier in our conversation,

1000
01:34:45.000 --> 01:34:50.000
you have to stay invested so that the dip doesn't matter.

1001
01:34:50.000 --> 01:34:53.000
And if anything, take advantage of the dip and buy more.

1002
01:34:53.000 --> 01:34:55.000
So you own Amazon, you see a dip.

1003
01:34:55.000 --> 01:34:57.000
You say, well, I still believe in the company.

1004
01:34:57.000 --> 01:35:00.000
I still think it's a good company and it's got a good future.

1005
01:35:00.000 --> 01:35:03.000
Or maybe you buy some more in the dip and you do still better.

1006
01:35:03.000 --> 01:35:06.000
But the important thing is you don't sell when it's down

1007
01:35:06.000 --> 01:35:09.000
because there's panic in the air.

1008
01:35:09.000 --> 01:35:11.000
And I think this speaks to a broad of sentiment

1009
01:35:11.000 --> 01:35:14.000
throughout this conversation which is to do whatever it's down to.

1010
01:35:14.000 --> 01:35:19.000
Warren Buffett's famous for saying be fearful when others agree

1011
01:35:19.000 --> 01:35:21.000
and greedy when others are fearful.

1012
01:35:21.000 --> 01:35:23.000
But generally, the sentiment on social media,

1013
01:35:23.000 --> 01:35:25.000
especially for younger generations and especially for men,

1014
01:35:25.000 --> 01:35:27.000
which is supported by the data,

1015
01:35:27.000 --> 01:35:31.000
is that the way to make money is by like trading crypto

1016
01:35:31.000 --> 01:35:34.000
or by, I mean, there's so many people that sell,

1017
01:35:34.000 --> 01:35:36.000
this is such a, we need to address this.

1018
01:35:36.000 --> 01:35:37.000
It's a platform.

1019
01:35:37.000 --> 01:35:39.000
It's a gambling, it's just gambling.

1020
01:35:39.000 --> 01:35:41.000
Yeah, it's a gambling platform.

1021
01:35:41.000 --> 01:35:44.000
So that's going, you know, people sometimes say to me,

1022
01:35:44.000 --> 01:35:47.000
I never invest in this time market, it's just gambling.

1023
01:35:47.000 --> 01:35:49.000
I say, well, you're half right.

1024
01:35:49.000 --> 01:35:51.000
Our foam is all dissipated.

1025
01:35:51.000 --> 01:35:53.000
But if there was still foam here, I would say yes.

1026
01:35:53.000 --> 01:35:57.000
If you're doing a short term and you're playing with the foam,

1027
01:35:57.000 --> 01:36:00.000
absolutely, there's no different than going to Las Vegas.

1028
01:36:00.000 --> 01:36:02.000
If you're investing for the beer,

1029
01:36:02.000 --> 01:36:04.000
it's an entirely different story

1030
01:36:04.000 --> 01:36:06.000
and you're investing for the long term.

1031
01:36:06.000 --> 01:36:09.000
And there's lots of young people that are being tempted

1032
01:36:09.000 --> 01:36:13.000
into buying a course that's going to help them learn how to trade.

1033
01:36:13.000 --> 01:36:15.000
That's great for the people selling the course.

1034
01:36:15.000 --> 01:36:21.000
There's such an incredible, like ira, obvious irony to the idea

1035
01:36:21.000 --> 01:36:25.000
that I have some secret about trading.

1036
01:36:25.000 --> 01:36:28.000
That's really going to make, you know,

1037
01:36:28.000 --> 01:36:30.000
that is capable of making one wealthy.

1038
01:36:30.000 --> 01:36:31.000
Right.

1039
01:36:31.000 --> 01:36:34.000
And I'm going to give it to you or even sell it to you.

1040
01:36:34.000 --> 01:36:35.000
Why would I need to if it worked?

1041
01:36:35.000 --> 01:36:36.000
Right.

1042
01:36:36.000 --> 01:36:38.000
Like, this is such an obvious question to me.

1043
01:36:38.000 --> 01:36:40.000
Like, why would I need to sell it if it worked?

1044
01:36:40.000 --> 01:36:43.000
It is the obvious question, I mean, you know.

1045
01:36:43.000 --> 01:36:44.000
And I feel sorry.

1046
01:36:44.000 --> 01:36:46.000
I have great empathy because the people that buy these things

1047
01:36:46.000 --> 01:36:48.000
are people that are desperate to get out of their financial situation

1048
01:36:48.000 --> 01:36:50.000
and they've run out of options.

1049
01:36:50.000 --> 01:36:52.000
And so it's very compelling to hear that there's some secret

1050
01:36:52.000 --> 01:36:54.000
that you can predict the stock market.

1051
01:36:54.000 --> 01:36:55.000
It's very compelling.

1052
01:36:55.000 --> 01:36:58.000
You know, in another interview, I said one time we were talking about

1053
01:36:58.000 --> 01:37:01.000
the same line of conversation we're having.

1054
01:37:01.000 --> 01:37:04.000
And I said, you know, I blame my mother.

1055
01:37:04.000 --> 01:37:09.000
I would be a lot richer if she hadn't instilled a conscience in me.

1056
01:37:09.000 --> 01:37:12.000
You know, she's cost me millions of dollars

1057
01:37:12.000 --> 01:37:13.000
in stealing this conscience.

1058
01:37:13.000 --> 01:37:16.000
I could have courses I could be in.

1059
01:37:16.000 --> 01:37:20.000
But no, I am saying that there is a path

1060
01:37:20.000 --> 01:37:23.000
that will give you great results.

1061
01:37:23.000 --> 01:37:27.000
And it's a pretty well proven path at this point.

1062
01:37:27.000 --> 01:37:30.000
So many of us are pursuing passive forms of income

1063
01:37:30.000 --> 01:37:33.000
and to build side businesses in order to help us cover our bills.

1064
01:37:33.000 --> 01:37:36.000
And that opportunity is here with our sponsor, Stan,

1065
01:37:36.000 --> 01:37:38.000
a business that I co-own.

1066
01:37:38.000 --> 01:37:41.000
It is the platform that can help you take full advantage

1067
01:37:41.000 --> 01:37:43.000
of your own financial situation.

1068
01:37:43.000 --> 01:37:45.000
Stan enables you to work for yourself.

1069
01:37:45.000 --> 01:37:48.000
It makes selling digital products, courses, memberships

1070
01:37:48.000 --> 01:37:51.000
and more simple products, more scalable and easier to do.

1071
01:37:51.000 --> 01:37:54.000
You can turn your ideas into income and get the support

1072
01:37:54.000 --> 01:37:56.000
to grow whatever you're building.

1073
01:37:56.000 --> 01:37:58.000
And we've just launched Dare to Dream.

1074
01:37:58.000 --> 01:38:00.000
It's for those who are ready to make the share

1075
01:38:00.000 --> 01:38:04.000
from thinking to building, from planning to actually doing the thing.

1076
01:38:04.000 --> 01:38:06.000
It's about seeing that dream in your head

1077
01:38:06.000 --> 01:38:08.000
and knowing exactly what it takes to bring it to life.

1078
01:38:08.000 --> 01:38:11.000
Enter to win $100,000 for your dream.

1079
01:38:11.000 --> 01:38:13.000
All you have to do is share what it is.

1080
01:38:13.000 --> 01:38:16.000
Learn more at daretodream.stan.store.

1081
01:38:16.000 --> 01:38:18.000
This is something that I've made for you.

1082
01:38:18.000 --> 01:38:21.000
I've realised that the Diaries here audience are strivers

1083
01:38:21.000 --> 01:38:23.000
whether it's in business or health.

1084
01:38:23.000 --> 01:38:25.000
We all have big goals that we want to accomplish.

1085
01:38:25.000 --> 01:38:27.000
And one of the things I've learnt is that

1086
01:38:27.000 --> 01:38:30.000
when you aim at the big, big, big goal,

1087
01:38:30.000 --> 01:38:33.000
it can feel incredibly psychologically uncomfortable

1088
01:38:33.000 --> 01:38:36.000
because it's kind of like being stood at the foot of Mount Everest

1089
01:38:36.000 --> 01:38:37.000
and looking upwards.

1090
01:38:37.000 --> 01:38:40.000
The way to accomplish your goals is by breaking them down

1091
01:38:40.000 --> 01:38:42.000
into tiny small steps.

1092
01:38:42.000 --> 01:38:44.000
And we call this an R team the 1%.

1093
01:38:44.000 --> 01:38:47.000
And actually this philosophy is highly responsible

1094
01:38:47.000 --> 01:38:48.000
for much of our success here.

1095
01:38:48.000 --> 01:38:51.000
So what we've done so that you at home can accomplish

1096
01:38:51.000 --> 01:38:55.000
any big goal that you have is we've made these 1% diaries.

1097
01:38:55.000 --> 01:38:58.000
And we've released these last year and they all sold out

1098
01:38:58.000 --> 01:39:01.000
so I asked my team over and over again to bring the diaries back

1099
01:39:01.000 --> 01:39:03.000
but also to introduce some new colours

1100
01:39:03.000 --> 01:39:05.000
and to make some minor tweaks to the diaries.

1101
01:39:05.000 --> 01:39:09.000
So now we have a better range for you.

1102
01:39:09.000 --> 01:39:12.000
So if you have a big goal in mind and you need a framework

1103
01:39:12.000 --> 01:39:14.000
and a process and some motivation

1104
01:39:14.000 --> 01:39:16.000
then I highly recommend you get one of these diaries

1105
01:39:16.000 --> 01:39:19.000
before they all sell out once again.

1106
01:39:19.000 --> 01:39:21.000
And you can get yours now at the diary.com

1107
01:39:21.000 --> 01:39:24.000
where you can get 20% off our Black Friday bundle.

1108
01:39:24.000 --> 01:39:27.000
And if you want the link, the link is in the description below.

1109
01:39:27.000 --> 01:39:30.000
Do I need a financial advisor?

1110
01:39:30.000 --> 01:39:33.000
Because a lot of people out listening now will be thinking,

1111
01:39:33.000 --> 01:39:35.000
yeah, I will figure out my money situation

1112
01:39:35.000 --> 01:39:37.000
when I have enough money to pay a financial advisor.

1113
01:39:37.000 --> 01:39:42.000
Yeah, I think my attitude is by the time you know enough

1114
01:39:42.000 --> 01:39:46.000
to choose a good financial advisor which is no easy task,

1115
01:39:46.000 --> 01:39:49.000
you probably know enough to do it on your own,

1116
01:39:49.000 --> 01:39:51.000
at least on the investing part.

1117
01:39:51.000 --> 01:39:55.000
Now, are there life kinds of decisions

1118
01:39:55.000 --> 01:39:58.000
where maybe advisors would be more useful?

1119
01:39:58.000 --> 01:40:01.000
But again, you have to be careful.

1120
01:40:01.000 --> 01:40:04.000
And you need to really educate yourself

1121
01:40:04.000 --> 01:40:07.000
as to how advisors get paid, for instance.

1122
01:40:07.000 --> 01:40:09.000
My attitude is by the way,

1123
01:40:09.000 --> 01:40:12.000
I'm colored by the fact that I hear so frequently

1124
01:40:12.000 --> 01:40:15.000
from my followers about bad experiences

1125
01:40:15.000 --> 01:40:17.000
with financial advisors.

1126
01:40:17.000 --> 01:40:19.000
So I have a negative opinion.

1127
01:40:19.000 --> 01:40:21.000
To be fair, I know there are good ones out there

1128
01:40:21.000 --> 01:40:23.000
and I'll do respect to those good ones.

1129
01:40:23.000 --> 01:40:26.000
But let's suppose you have a financial advisor

1130
01:40:26.000 --> 01:40:31.000
who gets paid based on the assets under management.

1131
01:40:31.000 --> 01:40:33.000
The amount that you've given them?

1132
01:40:33.000 --> 01:40:34.000
Exactly.

1133
01:40:34.000 --> 01:40:36.000
So maybe even it's 1%.

1134
01:40:36.000 --> 01:40:38.000
So you give them a million dollars

1135
01:40:38.000 --> 01:40:41.000
and they get 1% a year to manage that money for you.

1136
01:40:41.000 --> 01:40:43.000
Let's suppose you go to that advisor

1137
01:40:43.000 --> 01:40:46.000
and you say, you know, Stephen,

1138
01:40:46.000 --> 01:40:49.000
I've been thinking about paying off my mortgage.

1139
01:40:49.000 --> 01:40:52.000
I've got a half a million dollar mortgage on this house.

1140
01:40:52.000 --> 01:40:54.000
It's 6%.

1141
01:40:54.000 --> 01:40:55.000
Let's say it's 5%.

1142
01:40:55.000 --> 01:40:57.000
So in that middle range, it's 5%.

1143
01:40:57.000 --> 01:40:58.000
I'm thinking about paying off.

1144
01:40:58.000 --> 01:41:00.000
What do you think?

1145
01:41:00.000 --> 01:41:03.000
Well, now, Stephen has a bit of a lover

1146
01:41:03.000 --> 01:41:06.000
because he can certainly give you

1147
01:41:06.000 --> 01:41:09.000
the most accurate financial advice

1148
01:41:09.000 --> 01:41:13.000
he is capable of giving you and answering that question.

1149
01:41:13.000 --> 01:41:15.000
But if that leads him to say,

1150
01:41:15.000 --> 01:41:17.000
yes, pay off the mortgage,

1151
01:41:17.000 --> 01:41:22.000
he has just reduced his income by half.

1152
01:41:22.000 --> 01:41:24.000
Because when you pay off that mortgage,

1153
01:41:24.000 --> 01:41:27.000
half a million dollars is going to go out from his management

1154
01:41:27.000 --> 01:41:29.000
and bang off the mortgage company.

1155
01:41:29.000 --> 01:41:31.000
So you have just asked Stephen

1156
01:41:31.000 --> 01:41:33.000
to give you advice potentially

1157
01:41:33.000 --> 01:41:35.000
that is bad for Stephen.

1158
01:41:35.000 --> 01:41:41.000
Now, if Stephen's an honorable, capable, honest guy,

1159
01:41:41.000 --> 01:41:43.000
then maybe Stephen does that.

1160
01:41:43.000 --> 01:41:48.000
But let's suppose Stephen has two kids in college.

1161
01:41:48.000 --> 01:41:51.000
Let's suppose Stephen just bought a boat.

1162
01:41:51.000 --> 01:41:55.000
Let's suppose Stephen is going through a divorce.

1163
01:41:55.000 --> 01:41:57.000
Let's think about that.

1164
01:41:57.000 --> 01:42:00.000
And maybe Stephen is honest and capable

1165
01:42:00.000 --> 01:42:02.000
and decent as he ordinarily is

1166
01:42:02.000 --> 01:42:06.000
as financial pressures that might play a role.

1167
01:42:06.000 --> 01:42:09.000
Right? There is a conflict of interest frequently.

1168
01:42:09.000 --> 01:42:13.000
So you have to understand how your advice is being paid.

1169
01:42:13.000 --> 01:42:15.000
How does your portfolio look?

1170
01:42:15.000 --> 01:42:18.000
Where have you allocated your money in terms of percentages?

1171
01:42:18.000 --> 01:42:19.000
How much money do you have in real estate,

1172
01:42:19.000 --> 01:42:22.000
versus cash, versus index funds?

1173
01:42:22.000 --> 01:42:24.000
I don't even think about the real estate.

1174
01:42:24.000 --> 01:42:27.000
We have this cabin in Wisconsin on the lake

1175
01:42:27.000 --> 01:42:30.000
and then we have a condo in Florida.

1176
01:42:30.000 --> 01:42:32.000
They're both very modest,

1177
01:42:32.000 --> 01:42:34.000
so pretty small part of our net worth.

1178
01:42:34.000 --> 01:42:38.000
I like to buy things from a position of power.

1179
01:42:38.000 --> 01:42:44.000
My stocks, I'm probably about 80% in VTSAX,

1180
01:42:44.000 --> 01:42:47.000
the total stock market index fund,

1181
01:42:47.000 --> 01:42:52.000
and probably 15% in bonds,

1182
01:42:52.000 --> 01:42:54.000
a total bond market index fund,

1183
01:42:54.000 --> 01:42:57.000
and then the other 5% in money market fund.

1184
01:42:57.000 --> 01:43:01.000
I keep some money in the checking account to pay the bills.

1185
01:43:01.000 --> 01:43:04.000
And to break it down a little further for you,

1186
01:43:04.000 --> 01:43:07.000
my wife and I both have IRAs.

1187
01:43:07.000 --> 01:43:10.000
So there are four IRAs.

1188
01:43:10.000 --> 01:43:13.000
All four of them hold VTSAX.

1189
01:43:13.000 --> 01:43:15.000
We have taxable accounts,

1190
01:43:15.000 --> 01:43:17.000
and part of that is VTSAX.

1191
01:43:17.000 --> 01:43:19.000
Part of it is the bonds.

1192
01:43:19.000 --> 01:43:20.000
What is a bond?

1193
01:43:20.000 --> 01:43:26.000
A bond is money that you have lent to a company or to the government.

1194
01:43:26.000 --> 01:43:29.000
So when you buy a bond,

1195
01:43:29.000 --> 01:43:35.000
you are essentially lending money to a company or a government entity.

1196
01:43:35.000 --> 01:43:37.000
So they pay you interest.

1197
01:43:37.000 --> 01:43:44.000
So the companies and the government sell bonds of various maturities.

1198
01:43:44.000 --> 01:43:46.000
So they can be very sure,

1199
01:43:46.000 --> 01:43:50.000
like a money market fund is basically very short-term bonds,

1200
01:43:50.000 --> 01:43:52.000
like 30 days or less,

1201
01:43:52.000 --> 01:43:54.000
which makes it the equivalent of cash.

1202
01:43:54.000 --> 01:43:58.000
But you could buy a certificate of deposit as a kind of a bond.

1203
01:43:58.000 --> 01:44:02.000
So you could buy one of those for three months or six months or a year,

1204
01:44:02.000 --> 01:44:03.000
five years, ten years.

1205
01:44:03.000 --> 01:44:06.000
By U.S. Treasury is going out 30 years.

1206
01:44:06.000 --> 01:44:08.000
Why would I do that instead of buying the index fund?

1207
01:44:08.000 --> 01:44:10.000
So the index fund is stocks.

1208
01:44:10.000 --> 01:44:13.000
It's very stocks as we talked about.

1209
01:44:13.000 --> 01:44:17.000
Big growth engine, great long-term, very volatile.

1210
01:44:17.000 --> 01:44:20.000
So if you want something to smooth the ride,

1211
01:44:20.000 --> 01:44:23.000
bonds are not very good for long-term growth,

1212
01:44:23.000 --> 01:44:25.000
but they're not nearly as volatile.

1213
01:44:25.000 --> 01:44:26.000
Are they safe?

1214
01:44:26.000 --> 01:44:29.000
Short-term, yes, because they're less volatile.

1215
01:44:29.000 --> 01:44:32.000
Long-term, they tend to lose value to inflation.

1216
01:44:33.000 --> 01:44:36.000
Stocks, on the other hand, are riskier short-term

1217
01:44:36.000 --> 01:44:41.000
because of the volatility, but long-term, they outpace inflation.

1218
01:44:41.000 --> 01:44:43.000
And so they are safer long-term.

1219
01:44:43.000 --> 01:44:45.000
So it depends on your time horizon,

1220
01:44:45.000 --> 01:44:47.000
which is safer.

1221
01:44:47.000 --> 01:44:51.000
But traditionally, people think of bonds as being safer.

1222
01:44:51.000 --> 01:44:54.000
And really, the way you should hear that is less volatile.

1223
01:44:54.000 --> 01:44:57.000
And stocks being riskier,

1224
01:44:57.000 --> 01:44:59.000
you should hear that is more volatile.

1225
01:44:59.000 --> 01:45:02.000
So is it probably true to say that if we exclude your real estate,

1226
01:45:02.000 --> 01:45:06.000
70% of your assets are in stocks,

1227
01:45:06.000 --> 01:45:08.000
20% in bonds and 5% in cash?

1228
01:45:08.000 --> 01:45:11.000
Probably more 80, 15, 5.

1229
01:45:11.000 --> 01:45:14.000
80% stocks, 15 bonds in cash.

1230
01:45:14.000 --> 01:45:19.000
It's interesting because which would be considered very, very aggressive.

1231
01:45:19.000 --> 01:45:24.000
And I wouldn't necessarily recommend that for most people my age.

1232
01:45:24.000 --> 01:45:25.000
I thought it would be curious,

1233
01:45:25.000 --> 01:45:28.000
because we now have this new alien amongst us called AI.

1234
01:45:28.000 --> 01:45:29.000
I thought it would be curious.

1235
01:45:29.000 --> 01:45:32.000
If I went on Chatchy PT and I asked Chatchy PT the question,

1236
01:45:32.000 --> 01:45:36.000
I'm a normal person who earns $50,000 a year.

1237
01:45:36.000 --> 01:45:39.000
I want to be financially free in the future.

1238
01:45:39.000 --> 01:45:44.000
Give me a one-sentence answer based on all of the wisdom in the world

1239
01:45:44.000 --> 01:45:47.000
taken from every expert in investing ever.

1240
01:45:47.000 --> 01:45:50.000
I know what the right answer is.

1241
01:45:50.000 --> 01:45:51.000
I don't know what the answer is.

1242
01:45:51.000 --> 01:45:53.000
What do you think it's going to say?

1243
01:45:53.000 --> 01:45:54.000
Read the simple path of wealth.

1244
01:45:54.000 --> 01:45:56.000
I don't think that's what it's going to say, but that's the right answer.

1245
01:45:56.000 --> 01:45:59.000
And the simple path of wealth talks about three principles, right?

1246
01:45:59.000 --> 01:46:00.000
Right.

1247
01:46:00.000 --> 01:46:01.000
What are those two?

1248
01:46:01.000 --> 01:46:02.000
I'm going to check it against what it says.

1249
01:46:02.000 --> 01:46:03.000
Avoid debt.

1250
01:46:03.000 --> 01:46:04.000
Yeah.

1251
01:46:04.000 --> 01:46:06.000
Live unless the newer investor surplus.

1252
01:46:06.000 --> 01:46:11.000
It said, focus on saving and consistently invest in low cost,

1253
01:46:11.000 --> 01:46:14.000
broad-based index funds like the S&P 500,

1254
01:46:14.000 --> 01:46:18.000
while living below your means and allowing compounding to work over time.

1255
01:46:18.000 --> 01:46:20.000
I then asked another question.

1256
01:46:20.000 --> 01:46:22.000
How do I earn more?

1257
01:46:22.000 --> 01:46:24.000
I should sue them for mining my book.

1258
01:46:24.000 --> 01:46:27.000
You haven't probably did.

1259
01:46:27.000 --> 01:46:29.000
I said, how do I earn more?

1260
01:46:29.000 --> 01:46:30.000
What do you think?

1261
01:46:30.000 --> 01:46:33.000
If you thought, if your daughter came to you and said, earn more in a job?

1262
01:46:33.000 --> 01:46:35.000
I just asked a very broad question, which is,

1263
01:46:35.000 --> 01:46:37.000
and now, how do I earn more?

1264
01:46:37.000 --> 01:46:39.000
What's my question?

1265
01:46:39.000 --> 01:46:42.000
I would say develop your skills.

1266
01:46:42.000 --> 01:46:46.000
It said, to earn more, focus on developing high demand skills.

1267
01:46:46.000 --> 01:46:47.000
There you go.

1268
01:46:47.000 --> 01:46:49.000
Seek opportunities for career advancement.

1269
01:46:49.000 --> 01:46:52.000
Explorerside households are investing assets that generate passive income

1270
01:46:52.000 --> 01:46:54.000
like real estate or dividends.

1271
01:46:54.000 --> 01:46:58.000
But I really think there's a really important part there about

1272
01:46:58.000 --> 01:47:00.000
developing high demand skills.

1273
01:47:00.000 --> 01:47:02.000
What are those going to be in the future?

1274
01:47:02.000 --> 01:47:03.000
Yeah.

1275
01:47:03.000 --> 01:47:04.000
With AI.

1276
01:47:04.000 --> 01:47:08.000
Because programming, for instance, used to be a very high demand skill

1277
01:47:08.000 --> 01:47:12.000
and people said, learn how to program from what I understand in the age of AI.

1278
01:47:12.000 --> 01:47:14.000
That's not so much.

1279
01:47:14.000 --> 01:47:16.000
I even think about my own life.

1280
01:47:16.000 --> 01:47:19.000
18 years old, I started learning about social media.

1281
01:47:19.000 --> 01:47:23.000
I dropped out of university doing my business management degree after one lecture.

1282
01:47:23.000 --> 01:47:25.000
I started learning about social media because I was building a business

1283
01:47:25.000 --> 01:47:27.000
and social media and technology.

1284
01:47:27.000 --> 01:47:33.000
Although that first business failed, I was 19 years old in 2000

1285
01:47:33.000 --> 01:47:35.000
and what, 14 or something?

1286
01:47:35.000 --> 01:47:38.000
Really understood this thing called social media,

1287
01:47:38.000 --> 01:47:41.000
which led me to spend a year as a consultant flying around the world

1288
01:47:41.000 --> 01:47:43.000
to all these companies doing social media.

1289
01:47:43.000 --> 01:47:44.000
One of those companies turned around and said,

1290
01:47:44.000 --> 01:47:45.000
it's been so great.

1291
01:47:45.000 --> 01:47:46.000
Could you turn this into a company?

1292
01:47:46.000 --> 01:47:49.000
I said, no, I've been through the founder PTSD of starting a startup.

1293
01:47:49.000 --> 01:47:50.000
I don't want to do it.

1294
01:47:50.000 --> 01:47:51.000
Three months later, I said, yes.

1295
01:47:51.000 --> 01:47:53.000
Turn it into a company called social chain

1296
01:47:53.000 --> 01:47:55.000
and that changed my entire life.

1297
01:47:55.000 --> 01:47:56.000
That worked out well.

1298
01:47:56.000 --> 01:47:57.000
High demand skill.

1299
01:47:57.000 --> 01:48:00.000
I had, even though I failed, I had this high demand skill

1300
01:48:00.000 --> 01:48:03.000
that was honestly at the time paying me 70,000 pounds more.

1301
01:48:03.000 --> 01:48:06.000
You probably had it because you went through the process of failing.

1302
01:48:06.000 --> 01:48:07.000
Yes.

1303
01:48:07.000 --> 01:48:10.000
Failure is, you know, it used to be in some cultures

1304
01:48:10.000 --> 01:48:12.000
that if you failed once, that was it.

1305
01:48:12.000 --> 01:48:13.000
You're a pariah.

1306
01:48:13.000 --> 01:48:15.000
Nobody would even look at you anymore.

1307
01:48:15.000 --> 01:48:19.000
Failure in our culture is just a stepping step.

1308
01:48:19.000 --> 01:48:21.000
I've heard venture capitalists say

1309
01:48:21.000 --> 01:48:23.000
they won't even look at it out to really fund

1310
01:48:23.000 --> 01:48:25.000
if they haven't failed at least once.

1311
01:48:25.000 --> 01:48:28.000
The advice I give to my kids based on that is

1312
01:48:28.000 --> 01:48:30.000
I would ask if my kids came to me and said,

1313
01:48:30.000 --> 01:48:31.000
Dad, what should I go learn?

1314
01:48:31.000 --> 01:48:36.000
I would say, go and work for a startup.

1315
01:48:36.000 --> 01:48:40.000
I said startup because you're going to be very close to the CEO and founder

1316
01:48:40.000 --> 01:48:41.000
because there's going to be less desks.

1317
01:48:41.000 --> 01:48:43.000
So you're going to be closer to the proximity.

1318
01:48:43.000 --> 01:48:46.000
That is failing at the cutting edge.

1319
01:48:46.000 --> 01:48:49.000
So if it's AI, I'd say go up for an AI startup.

1320
01:48:49.000 --> 01:48:51.000
I probably not going to work out.

1321
01:48:51.000 --> 01:48:53.000
You're probably going to be the company

1322
01:48:53.000 --> 01:48:54.000
who you bust in a couple of months' time.

1323
01:48:54.000 --> 01:48:56.000
But you're going to be so close to the failure

1324
01:48:56.000 --> 01:48:58.000
you will learn so much.

1325
01:48:58.000 --> 01:48:59.000
Yes.

1326
01:48:59.000 --> 01:49:00.000
I wish somebody had given me that advice.

1327
01:49:00.000 --> 01:49:04.000
In a way, I guess around about way what I did

1328
01:49:04.000 --> 01:49:06.000
is I started a company that failed

1329
01:49:06.000 --> 01:49:09.000
at the very forefront of a wave coming into sure,

1330
01:49:09.000 --> 01:49:11.000
which meant that as I hit, you know,

1331
01:49:11.000 --> 01:49:14.000
as the wave crashed down and I was left there on my surfboard,

1332
01:49:14.000 --> 01:49:16.000
and I had this high demand set of skills

1333
01:49:16.000 --> 01:49:19.000
that people were like burying me for,

1334
01:49:19.000 --> 01:49:21.000
which set me myself up.

1335
01:49:21.000 --> 01:49:24.000
And frankly, the director of the CEO would not be successful

1336
01:49:24.000 --> 01:49:28.000
had I not spent the previous 10 years understanding

1337
01:49:28.000 --> 01:49:34.000
how social media, content creation, growth worked.

1338
01:49:34.000 --> 01:49:37.000
Is there a favourite story in this book, Abuse?

1339
01:49:37.000 --> 01:49:39.000
Oh, there's so many great ones.

1340
01:49:39.000 --> 01:49:43.000
So I've already looted to my favourite one,

1341
01:49:43.000 --> 01:49:45.000
which is my friend Tom.

1342
01:49:45.000 --> 01:49:48.000
You know, because he has, I mean, Tom was a guy

1343
01:49:48.000 --> 01:49:50.000
who got to the age of 62.

1344
01:49:50.000 --> 01:49:52.000
He'd been through multiple divorces.

1345
01:49:52.000 --> 01:49:55.000
He lost his house to foreclosure.

1346
01:49:55.000 --> 01:49:57.000
He lost his job.

1347
01:49:57.000 --> 01:49:58.000
He was broke.

1348
01:49:58.000 --> 01:50:02.000
He went bankrupt and yet his life has turned out pretty well.

1349
01:50:02.000 --> 01:50:04.000
He's an extraordinary happy guy.

1350
01:50:04.000 --> 01:50:07.000
That's my favourite story.

1351
01:50:08.000 --> 01:50:11.000
But the other reasons I like this book so much

1352
01:50:11.000 --> 01:50:13.000
and one of the reasons can't be I did it,

1353
01:50:13.000 --> 01:50:16.000
is if you read through it, you will find there are some stories

1354
01:50:16.000 --> 01:50:20.000
from people who were tech bros who made big incomes

1355
01:50:20.000 --> 01:50:23.000
and they read the simple path to wealth and applied

1356
01:50:23.000 --> 01:50:25.000
and they worked very well for them.

1357
01:50:25.000 --> 01:50:28.000
But there are many, many more stories of people

1358
01:50:28.000 --> 01:50:32.000
who have accomplished this from much more humble beginnings.

1359
01:50:32.000 --> 01:50:35.000
I mean, an example of have a very good friend of mine.

1360
01:50:35.000 --> 01:50:37.000
High school buddy.

1361
01:50:37.000 --> 01:50:40.000
I don't think he's ever made more than $40,000 a year.

1362
01:50:40.000 --> 01:50:42.000
He is financially independent

1363
01:50:42.000 --> 01:50:44.000
because he followed the basic principles

1364
01:50:44.000 --> 01:50:46.000
that I talk about in that book.

1365
01:50:46.000 --> 01:50:48.000
I have a different friend.

1366
01:50:48.000 --> 01:50:50.000
He was in the financial business.

1367
01:50:50.000 --> 01:50:53.000
He was living in Chicago and over lunch he told me

1368
01:50:53.000 --> 01:50:56.000
that his Christmas bonus had come in at $800,000.

1369
01:50:56.000 --> 01:51:00.000
That's back in the mid-90s when that was real money, right?

1370
01:51:00.000 --> 01:51:02.000
And he was already making, I don't know,

1371
01:51:02.000 --> 01:51:05.000
$100,000,000 a year, whatever it was, big income.

1372
01:51:05.000 --> 01:51:08.000
And he was broke.

1373
01:51:08.000 --> 01:51:11.000
And you see, most people listening to this thing

1374
01:51:11.000 --> 01:51:13.000
I said, what are you talking about?

1375
01:51:13.000 --> 01:51:15.000
The sky got a bonus, right?

1376
01:51:15.000 --> 01:51:18.000
People paid me $800,000 for your, it'd be done forever, right?

1377
01:51:18.000 --> 01:51:19.000
That'd be made out.

1378
01:51:19.000 --> 01:51:20.000
I'm good.

1379
01:51:20.000 --> 01:51:21.000
How can he be broke?

1380
01:51:21.000 --> 01:51:25.000
Well, when you listen to him talk about the house,

1381
01:51:25.000 --> 01:51:28.000
the cars, the schools,

1382
01:51:28.000 --> 01:51:29.000
and you start doing the math,

1383
01:51:29.000 --> 01:51:33.000
you realize that no, his income is not enough.

1384
01:51:33.000 --> 01:51:37.000
He's barely, barely making it.

1385
01:51:37.000 --> 01:51:39.000
So here's a guy with a big income

1386
01:51:39.000 --> 01:51:41.000
who is, unless he changes his ways,

1387
01:51:41.000 --> 01:51:43.000
is never going to be financial independent,

1388
01:51:43.000 --> 01:51:44.000
financial independent.

1389
01:51:44.000 --> 01:51:48.000
Here's my guy with a tiny income comparatively

1390
01:51:48.000 --> 01:51:50.000
who got there.

1391
01:51:50.000 --> 01:51:54.000
I've come to believe that a large income

1392
01:51:54.000 --> 01:51:58.000
actually can be an impediment to accomplishing it.

1393
01:51:58.000 --> 01:52:00.000
And my reasoning for this is that

1394
01:52:00.000 --> 01:52:02.000
I think people have a large income

1395
01:52:02.000 --> 01:52:04.000
are much more likely to be drawn

1396
01:52:04.000 --> 01:52:07.000
into the competing with the Joneses scenario

1397
01:52:07.000 --> 01:52:09.000
because they associate with other people

1398
01:52:09.000 --> 01:52:10.000
have large incomes.

1399
01:52:10.000 --> 01:52:12.000
And they're all driving a certain car,

1400
01:52:12.000 --> 01:52:14.000
living in a certain neighborhood,

1401
01:52:14.000 --> 01:52:16.000
sending their kids to certain schools.

1402
01:52:16.000 --> 01:52:18.000
And that probably becomes very hard

1403
01:52:18.000 --> 01:52:20.000
to disengage with.

1404
01:52:20.000 --> 01:52:24.000
And making it perhaps even less likely

1405
01:52:24.000 --> 01:52:26.000
that they are going to decide to spend a large portion

1406
01:52:26.000 --> 01:52:29.000
of their income on buying their freedom.

1407
01:52:29.000 --> 01:52:32.000
Whereas the people who make less money

1408
01:52:32.000 --> 01:52:34.000
probably don't have those same social pressures

1409
01:52:34.000 --> 01:52:37.000
and are more readily able to do it.

1410
01:52:37.000 --> 01:52:39.000
So starting from humble beginnings

1411
01:52:39.000 --> 01:52:40.000
is no obstacle.

1412
01:52:40.000 --> 01:52:43.000
And that was the point of doing pathfinders.

1413
01:52:43.000 --> 01:52:45.000
Interesting.

1414
01:52:45.000 --> 01:52:47.000
It does track that.

1415
01:52:47.000 --> 01:52:50.000
I think the Goldposts continue to move in different ways.

1416
01:52:50.000 --> 01:52:51.000
Yeah.

1417
01:52:51.000 --> 01:52:54.000
I guess you go from competing to the Joneses

1418
01:52:54.000 --> 01:52:57.000
to competing with the size of someone else's yacht,

1419
01:52:57.000 --> 01:53:00.000
which is all slippery slopes to bad places.

1420
01:53:00.000 --> 01:53:03.000
Or your own or your own demons.

1421
01:53:03.000 --> 01:53:05.000
As we talked about earlier, right?

1422
01:53:05.000 --> 01:53:07.000
Yeah, you mentioned a word in there as well.

1423
01:53:07.000 --> 01:53:09.000
You mentioned, I think you were talking about your friend Tom.

1424
01:53:09.000 --> 01:53:10.000
Tom had a divorce?

1425
01:53:10.000 --> 01:53:12.000
Multiple divorces, yeah.

1426
01:53:12.000 --> 01:53:15.000
Which is bad for your wealth.

1427
01:53:15.000 --> 01:53:17.000
Yeah, I didn't realize this

1428
01:53:17.000 --> 01:53:19.000
because I've never been through one before.

1429
01:53:19.000 --> 01:53:21.000
I spoke to James Sexton on the show

1430
01:53:21.000 --> 01:53:24.000
who's a divorce lawyer who had opened my eyes to it.

1431
01:53:24.000 --> 01:53:27.000
But actually, I had a private conversation

1432
01:53:27.000 --> 01:53:29.000
with a friend here in New York City.

1433
01:53:29.000 --> 01:53:32.000
I'd say a couple of months ago who's going through a divorce

1434
01:53:32.000 --> 01:53:35.000
and he sat me down and he talked to me

1435
01:53:35.000 --> 01:53:38.000
through the specific consequences of divorce

1436
01:53:38.000 --> 01:53:39.000
that he's going through.

1437
01:53:39.000 --> 01:53:41.000
He said to me, he's a very successful person.

1438
01:53:41.000 --> 01:53:44.000
I reckon he's probably worth 500 million, right?

1439
01:53:44.000 --> 01:53:47.000
He said, the divorce proceedings

1440
01:53:47.000 --> 01:53:50.000
have now dragged on for five or six years.

1441
01:53:50.000 --> 01:53:53.000
So I'm having to go and see lawyers all the time.

1442
01:53:53.000 --> 01:53:56.000
And he said to me as well that he is paying for her lawyer,

1443
01:53:56.000 --> 01:53:58.000
which I didn't really understand,

1444
01:53:58.000 --> 01:54:00.000
but he was like, no, I have to also cover her lawyer costs

1445
01:54:00.000 --> 01:54:03.000
because, you know, I'm the breadwinner.

1446
01:54:03.000 --> 01:54:05.000
She doesn't have money, so I'm covering her lawyer costs,

1447
01:54:05.000 --> 01:54:07.000
which is what I have to do.

1448
01:54:07.000 --> 01:54:09.000
And he said the law firm have gone

1449
01:54:09.000 --> 01:54:12.000
from being a very, very small practice in those six years.

1450
01:54:12.000 --> 01:54:14.000
Now they have a massive building

1451
01:54:14.000 --> 01:54:17.000
and he goes, I know it's my money.

1452
01:54:17.000 --> 01:54:19.000
He literally is like, I have paid for her lawyer.

1453
01:54:19.000 --> 01:54:21.000
And now they're doing really, really well.

1454
01:54:21.000 --> 01:54:23.000
And then milking this case, they're drawing it out.

1455
01:54:23.000 --> 01:54:25.000
Because they have no incentive to do this.

1456
01:54:25.000 --> 01:54:26.000
No incentive.

1457
01:54:26.000 --> 01:54:29.000
So he's like, I've spent tens of millions on her lawyer

1458
01:54:29.000 --> 01:54:31.000
who is basically dragging me.

1459
01:54:31.000 --> 01:54:33.000
And now they've got this massive building.

1460
01:54:33.000 --> 01:54:35.000
What else did he say to me?

1461
01:54:35.000 --> 01:54:39.000
He said, because some of my assets are subjective in value,

1462
01:54:39.000 --> 01:54:44.000
like my company, her lawyer is inflating the price of my assets

1463
01:54:44.000 --> 01:54:47.000
because she's going to get half whatever they can convince a judge.

1464
01:54:47.000 --> 01:54:48.000
My assets are worth.

1465
01:54:48.000 --> 01:54:51.000
So, you know, for example, his business might be worth 100 million.

1466
01:54:51.000 --> 01:54:55.000
But the lawyer is making the case of the judge that it's worth 500 million

1467
01:54:55.000 --> 01:54:57.000
so that she gets 250 million.

1468
01:54:57.000 --> 01:54:59.000
He also said to me, which really isn't there.

1469
01:54:59.000 --> 01:55:00.000
Which really he doesn't have.

1470
01:55:00.000 --> 01:55:02.000
And then he was saying to me, he goes, you know,

1471
01:55:02.000 --> 01:55:04.000
I bought this particular stock.

1472
01:55:04.000 --> 01:55:06.000
So he is, I've started in the right now.

1473
01:55:06.000 --> 01:55:07.000
He's forced to fight it.

1474
01:55:07.000 --> 01:55:08.000
He's fighting his dollar.

1475
01:55:08.000 --> 01:55:10.000
You can say, okay, she can have half.

1476
01:55:10.000 --> 01:55:11.000
Yeah.

1477
01:55:11.000 --> 01:55:18.000
Because this is a judgment that is going to create an obligation on his part

1478
01:55:18.000 --> 01:55:20.000
for assets that don't actually exist.

1479
01:55:20.000 --> 01:55:21.000
So it's more than half.

1480
01:55:21.000 --> 01:55:23.000
She could end up taking 60, 70, 70, 70.

1481
01:55:23.000 --> 01:55:25.000
And the other thing he said to me, which was quite sad.

1482
01:55:25.000 --> 01:55:28.000
He was like, you know, I was one of the first, he was one of the early investors

1483
01:55:28.000 --> 01:55:30.000
in a big company that we all know.

1484
01:55:30.000 --> 01:55:35.000
And he said to me, I bought that stock 15, 20 years ago.

1485
01:55:35.000 --> 01:55:38.000
It's actually quite emotional to him that he was so early in back in that company.

1486
01:55:38.000 --> 01:55:40.000
And now he's forced to sell that.

1487
01:55:40.000 --> 01:55:44.000
So he has to liquidate investments he made 20 years ago.

1488
01:55:44.000 --> 01:55:46.000
Because again, she's entitled to half.

1489
01:55:46.000 --> 01:55:48.000
And that'll be a huge tax hit.

1490
01:55:48.000 --> 01:55:49.000
A huge tax hit.

1491
01:55:49.000 --> 01:55:50.000
Right.

1492
01:55:50.000 --> 01:55:57.000
And I think some people don't realize that wealthy people can get a loan against that stock

1493
01:55:57.000 --> 01:55:59.000
without ever having to sell it.

1494
01:55:59.000 --> 01:56:00.000
Right.

1495
01:56:00.000 --> 01:56:05.000
So he's probably, if he's wrong, he's probably got a big loan against that stock.

1496
01:56:05.000 --> 01:56:06.000
Right.

1497
01:56:06.000 --> 01:56:07.000
Probably a 50% loan.

1498
01:56:07.000 --> 01:56:09.000
So just for anyone that doesn't understand this.

1499
01:56:09.000 --> 01:56:12.000
Because I only understood this in the last couple of years where I started doing similar things

1500
01:56:12.000 --> 01:56:17.000
is if the stock is worth 100 million, he can get 50 million tax free from a bank

1501
01:56:17.000 --> 01:56:19.000
just by keeping that stock there.

1502
01:56:19.000 --> 01:56:23.000
And I really never have to pay it back because it's such a great stock.

1503
01:56:23.000 --> 01:56:27.000
And it was also just looking in his face and just seeing the stress and the toll

1504
01:56:27.000 --> 01:56:31.000
of having to go to court all the time and fight this thing for six or seven years.

1505
01:56:31.000 --> 01:56:33.000
That I thought, wow.

1506
01:56:33.000 --> 01:56:38.000
We give people financial advice all the time about the best stocks to pay or invest in index funds.

1507
01:56:38.000 --> 01:56:43.000
We don't talk enough about how divorce can just destroy your life.

1508
01:56:43.000 --> 01:56:47.000
You have to be so careful in choosing your spouse.

1509
01:56:47.000 --> 01:56:49.000
I've had pushback on that.

1510
01:56:49.000 --> 01:56:52.000
People say, well, you're choosing your spouse is not a financial decision.

1511
01:56:52.000 --> 01:56:53.000
It's emotional.

1512
01:56:53.000 --> 01:56:54.000
It's romantic.

1513
01:56:54.000 --> 01:56:56.000
Well, yeah, it's all those things.

1514
01:56:56.000 --> 01:57:01.000
But you better take finance into account for all the reasons that we're discussing.

1515
01:57:01.000 --> 01:57:04.000
This also, by the way, loops is factor in early part of our conversation

1516
01:57:04.000 --> 01:57:12.000
where does money by happiness, is being richer, is that always necessarily better?

1517
01:57:12.000 --> 01:57:17.000
Well, this guy is more of a target because of his wealth than he would be if he were.

1518
01:57:17.000 --> 01:57:21.000
So is his money really making him happier at this point in his life?

1519
01:57:21.000 --> 01:57:23.000
Probably not so much.

1520
01:57:23.000 --> 01:57:26.000
You know, and he's going to be fine either way.

1521
01:57:26.000 --> 01:57:27.000
Like sure.

1522
01:57:27.000 --> 01:57:29.000
You know, which is a point.

1523
01:57:29.000 --> 01:57:32.000
I'm not saying of nuance, but also the other point of nuance worth saying is that.

1524
01:57:32.000 --> 01:57:36.000
These are going to be fine financially, but emotionally, you're still going to go.

1525
01:57:36.000 --> 01:57:39.000
And she's probably going through it too on the other side.

1526
01:57:39.000 --> 01:57:47.000
And the other point of nuance here is that she did raise the three or four kids

1527
01:57:47.000 --> 01:57:52.000
while he was off building the business for 20 or years.

1528
01:57:52.000 --> 01:57:56.000
So one could argue that he wouldn't have that wealth without her being at home to look after the kids

1529
01:57:56.000 --> 01:57:59.000
and she'd made huge sacrifices to her own career.

1530
01:57:59.000 --> 01:58:05.000
So, you know, it's balanced, but I just think with James Sexton said to me,

1531
01:58:05.000 --> 01:58:09.000
even if you don't get a prenup, they're still a prenup.

1532
01:58:09.000 --> 01:58:12.000
You either use the government's prenup, which is...

1533
01:58:12.000 --> 01:58:13.000
Or you create your own.

1534
01:58:13.000 --> 01:58:14.000
Or you create your own.

1535
01:58:14.000 --> 01:58:15.000
Either way, there's a prenup.

1536
01:58:15.000 --> 01:58:16.000
Absolutely.

1537
01:58:16.000 --> 01:58:18.000
Do you want to let some judge decide?

1538
01:58:18.000 --> 01:58:23.000
Or do you want to be intentional before you get married with your partner about how things will be split?

1539
01:58:24.000 --> 01:58:27.000
And even when I think about my partner at the moment and we're probably going to get married soon.

1540
01:58:27.000 --> 01:58:28.000
Congratulations.

1541
01:58:28.000 --> 01:58:29.000
Thank you.

1542
01:58:29.000 --> 01:58:31.000
I haven't proposed just yet, but I'm working on it.

1543
01:58:31.000 --> 01:58:32.000
That's out of that.

1544
01:58:32.000 --> 01:58:33.000
We just let the secret out.

1545
01:58:33.000 --> 01:58:35.000
She doesn't watch this anyway.

1546
01:58:35.000 --> 01:58:37.000
Someone's going to tell you that.

1547
01:58:37.000 --> 01:58:38.000
Wait a minute.

1548
01:58:38.000 --> 01:58:39.000
But I'm on this time.

1549
01:58:39.000 --> 01:58:41.000
This isn't one episode you should watch.

1550
01:58:41.000 --> 01:58:42.000
True.

1551
01:58:42.000 --> 01:58:47.000
Well, I'm very fortunate as of this spring, I will have been married 44 years.

1552
01:58:47.000 --> 01:58:52.000
And I tell people, I married my wife out of the gate.

1553
01:58:53.000 --> 01:58:59.000
Do you have a framework for choosing the person or for sustaining for 44 years?

1554
01:58:59.000 --> 01:59:01.000
Because I'm what, six, seven years in with my girlfriend.

1555
01:59:01.000 --> 01:59:03.000
But you've got 44 years in.

1556
01:59:03.000 --> 01:59:07.000
Funny story about that is people used to ask me,

1557
01:59:07.000 --> 01:59:14.000
did you and Jane sit down and discuss money before make sure you were on the same page financially before you got married?

1558
01:59:14.000 --> 01:59:17.000
And I always used to say, you know, it's a great idea.

1559
01:59:17.000 --> 01:59:18.000
You should do that.

1560
01:59:18.000 --> 01:59:20.000
But no, we never did that.

1561
01:59:20.000 --> 01:59:22.000
And I just got lucky.

1562
01:59:22.000 --> 01:59:24.000
You know, we never talked about it.

1563
01:59:24.000 --> 01:59:29.000
But as it happens, we got married and we were very, very compatible financially, which we are.

1564
01:59:29.000 --> 01:59:31.000
But just got lucky.

1565
01:59:31.000 --> 01:59:34.000
Well, I told that story in front of her one time.

1566
01:59:34.000 --> 01:59:37.000
And she went back to her chair and she said,

1567
01:59:37.000 --> 01:59:38.000
what are you talking about?

1568
01:59:38.000 --> 01:59:41.000
On our first date, you said to me,

1569
01:59:41.000 --> 01:59:44.000
you need to be saving 50% of your income.

1570
01:59:44.000 --> 01:59:47.000
You said, what do you mean we never talked about money?

1571
01:59:47.000 --> 01:59:49.000
I guess that's such a natural part of my persona.

1572
01:59:49.000 --> 01:59:51.000
I didn't even remember doing it.

1573
01:59:51.000 --> 01:59:53.000
Interesting.

1574
01:59:53.000 --> 01:59:56.000
My last question for you is about regret.

1575
01:59:56.000 --> 01:59:58.000
You said you're 75?

1576
01:59:58.000 --> 01:59:59.000
I am.

1577
01:59:59.000 --> 02:00:01.000
What are your biggest regrets?

1578
02:00:01.000 --> 02:00:04.000
So I think regrets are tricky.

1579
02:00:04.000 --> 02:00:08.000
And I will answer your question directly.

1580
02:00:08.000 --> 02:00:12.000
It's a couple of things or at least one thing that occurs to me that might be surprising.

1581
02:00:12.000 --> 02:00:18.000
But the reason they're tricky is because there is an assumption like you regret doing a

1582
02:00:18.000 --> 02:00:22.000
and you think if only I had done B, things would be better.

1583
02:00:22.000 --> 02:00:24.000
But you don't know that that's true.

1584
02:00:24.000 --> 02:00:28.000
You might say, boy, I regret starting that company that failed because it was a failure.

1585
02:00:28.000 --> 02:00:31.000
Well, yeah, but it led to something much bigger.

1586
02:00:31.000 --> 02:00:33.000
You learned so much.

1587
02:00:33.000 --> 02:00:38.000
Now, maybe if you said instead of starting that company that failed,

1588
02:00:38.000 --> 02:00:44.000
maybe I took this high-paying job and I worked my way up through the corporate organization.

1589
02:00:44.000 --> 02:00:50.000
And you'd be saying there, you'd be sitting at some high executive level in this corporation

1590
02:00:50.000 --> 02:00:55.000
and looking back and saying, well, am I glad I didn't do that start up that failed?

1591
02:00:55.000 --> 02:00:59.000
And yet, you're so much further ahead now than if you...

1592
02:00:59.000 --> 02:01:00.000
So who knows?

1593
02:01:00.000 --> 02:01:07.000
Who knows what choice you made that appears to be the wrong choice as to whether it really was.

1594
02:01:07.000 --> 02:01:10.000
Maybe it was exactly... maybe things would turn out better, maybe it wouldn't.

1595
02:01:10.000 --> 02:01:13.000
So I'm very hesitant to look back on...

1596
02:01:13.000 --> 02:01:19.000
There are many things I can look back on and say, gee, I do wonder what if I'd gone down the right path

1597
02:01:19.000 --> 02:01:23.000
and it's to the left path, what would that have looked like?

1598
02:01:23.000 --> 02:01:27.000
But there's no guarantees it would look better and my life has been pretty damn good.

1599
02:01:27.000 --> 02:01:30.000
So in that sense, I have no regrets.

1600
02:01:30.000 --> 02:01:33.000
Two regrets I do have, very personal regrets.

1601
02:01:33.000 --> 02:01:37.000
I've never shared these publicly.

1602
02:01:37.000 --> 02:01:43.000
When I was a kid, my father was a very handy guy.

1603
02:01:43.000 --> 02:01:47.000
He loved building things, working on the house, that kind of stuff.

1604
02:01:47.000 --> 02:01:49.000
I was not that kind of kid.

1605
02:01:49.000 --> 02:01:53.000
And I don't know, I was eight or ten years old at one point.

1606
02:01:53.000 --> 02:02:00.000
And for my birthday or Christmas, I don't remember, he bought me a jigsaw,

1607
02:02:00.000 --> 02:02:04.000
which is, for people who don't know, it's an electric saw.

1608
02:02:04.000 --> 02:02:10.000
It's got a little blade that goes up and allows you to cut wood in very fine kinds of patterns.

1609
02:02:10.000 --> 02:02:15.000
Last thing in the world, this kid wanted.

1610
02:02:15.000 --> 02:02:19.000
And I let my dad know, and he was crushed.

1611
02:02:19.000 --> 02:02:28.000
Because for him, it was the best gift he could possibly think of to give to an eight or ten-year-old or whatever it was.

1612
02:02:28.000 --> 02:02:32.000
And so one of the regrets, and I get myself some grace, because I was very young.

1613
02:02:32.000 --> 02:02:39.000
And reasonably, you could expect that I didn't have the maturity to deal with it the way I would.

1614
02:02:39.000 --> 02:02:49.000
But I do regret, because I could see the pain in his face when I kind of rejected that gift.

1615
02:02:49.000 --> 02:02:55.000
And maybe that taught me a good lesson in being more empathetic going forward.

1616
02:02:55.000 --> 02:02:59.000
Again, do I really regret it? Why regret that I heard my father?

1617
02:02:59.000 --> 02:03:03.000
But I learned something pretty valuable.

1618
02:03:03.000 --> 02:03:05.000
And you've let, you've remembered that for 70 years?

1619
02:03:05.000 --> 02:03:09.000
I've remembered that for 70 years, yeah.

1620
02:03:09.000 --> 02:03:12.000
Of course, similar stories of things, ways I reacted to it.

1621
02:03:12.000 --> 02:03:15.000
I think most people do.

1622
02:03:15.000 --> 02:03:22.000
And then my second one, and this is even bigger, I was 24 when my dad died.

1623
02:03:22.000 --> 02:03:30.000
And he died of emphysema and slow lingering death when he died in the hospital.

1624
02:03:30.000 --> 02:03:36.000
And the night before he died, the day before he died, I was visiting him.

1625
02:03:36.000 --> 02:03:42.000
And he was sitting on the edge of the bed.

1626
02:03:42.000 --> 02:03:49.000
And he said to me, I'm going to die now.

1627
02:03:49.000 --> 02:03:55.000
You know, I'm going to die tonight.

1628
02:03:55.000 --> 02:03:57.000
Turns out, of course, he was right.

1629
02:03:57.000 --> 02:04:01.000
He did. That was the night he died.

1630
02:04:01.000 --> 02:04:12.000
And instead of recognizing that this was a moment where he wanted to talk to his son about this,

1631
02:04:12.000 --> 02:04:19.000
probably the most momentous event that any of us will ever face.

1632
02:04:19.000 --> 02:04:26.000
Instead of recognizing that, I went to the typical trope of, oh, dad, don't talk like that.

1633
02:04:26.000 --> 02:04:29.000
You're not going to die. You've got a long way to go.

1634
02:04:29.000 --> 02:04:32.000
You're going to be fine. I went to all that bullshit.

1635
02:04:32.000 --> 02:04:39.000
Instead of just recognizing whether he was right or wrong,

1636
02:04:39.000 --> 02:04:44.000
that he was facing a momentous thing.

1637
02:04:44.000 --> 02:04:50.000
And he didn't want to hear, don't think about that. Think more positively.

1638
02:04:50.000 --> 02:04:59.000
He wanted to share with his son what he was facing.

1639
02:04:59.000 --> 02:05:05.000
And I regret that I wasn't there for him in that moment.

1640
02:05:05.000 --> 02:05:11.000
But I regret that I didn't get to experience that with him in that moment.

1641
02:05:11.000 --> 02:05:16.000
So that's my biggest.

1642
02:05:16.000 --> 02:05:22.000
I can still see it sitting your face.

1643
02:05:22.000 --> 02:05:27.000
That was 50 years ago.

1644
02:05:27.000 --> 02:05:34.000
Is there a reason why you think in that moment you didn't want to go in that direction with him?

1645
02:05:34.000 --> 02:05:41.000
It wasn't a matter of what I wanted because it's not like I considered I can either blow it off,

1646
02:05:41.000 --> 02:05:45.000
which is what I did, or embrace it and go there with him.

1647
02:05:45.000 --> 02:05:51.000
I didn't even think that way. It's not like I made the wrong choice.

1648
02:05:51.000 --> 02:05:55.000
I wasn't mature enough to recognize there was a choice.

1649
02:05:55.000 --> 02:06:01.000
I wasn't mature enough to recognize the real dynamic of what was happening.

1650
02:06:01.000 --> 02:06:04.000
And for that, you deserve grace.

1651
02:06:04.000 --> 02:06:07.000
Thank you. And I agree with that.

1652
02:06:07.000 --> 02:06:17.000
But I still regret it because how much better for both of us would it have been if I had recognized it?

1653
02:06:17.000 --> 02:06:21.000
Jane, we have a closing tradition on this podcast where the last guest leaves a question for the next.

1654
02:06:22.000 --> 02:06:28.000
What is something that you think is true that you haven't yet been able to validate?

1655
02:06:28.000 --> 02:06:38.000
I think at this point in my life, I feel pretty comfortable about what I think is true.

1656
02:06:39.000 --> 02:06:51.000
I'm not sure this answers the question, but a good example is I am pretty sure that there is no afterlife.

1657
02:06:51.000 --> 02:06:56.000
I have a high degree of confidence to that.

1658
02:06:56.000 --> 02:07:02.000
But of course, as a song once said, when never know by living in an old air, Diane will tell.

1659
02:07:02.000 --> 02:07:07.000
And I am very curious about death.

1660
02:07:07.000 --> 02:07:14.000
I am very curious as to what is on the other side of anything.

1661
02:07:14.000 --> 02:07:21.000
So in a perverse way, I guess, I am looking forward to my death.

1662
02:07:21.000 --> 02:07:23.000
I don't want to get there too soon.

1663
02:07:23.000 --> 02:07:28.000
As long as I am mentally and physically capable, I'm happy to continue living.

1664
02:07:29.000 --> 02:07:32.000
But I do have a great curiosity about death.

1665
02:07:32.000 --> 02:07:36.000
And I'm almost 100% sure that when I'm dead, that's just it.

1666
02:07:36.000 --> 02:07:38.000
It's over.

1667
02:07:38.000 --> 02:07:39.000
But I'm curious.

1668
02:07:39.000 --> 02:07:43.000
And it'll be interesting if I die and it's like, whoops.

1669
02:07:43.000 --> 02:07:48.000
You know, there is a guy with a white beard.

1670
02:07:48.000 --> 02:07:50.000
Okay, I'll just show myself out.

1671
02:07:50.000 --> 02:07:52.000
Thank you very much.

1672
02:07:52.000 --> 02:07:55.000
There was one last question I wanted to ask you, which is kind of just about this subjective happiness.

1673
02:07:55.000 --> 02:08:01.000
Again, at 75 years old, you have a retrospective clarity that I don't have on what actually mattered.

1674
02:08:01.000 --> 02:08:03.000
What actually matters?

1675
02:08:03.000 --> 02:08:05.000
Nothing.

1676
02:08:07.000 --> 02:08:10.000
Nothing really matters ultimately.

1677
02:08:10.000 --> 02:08:11.000
Nothing?

1678
02:08:11.000 --> 02:08:12.000
Yeah.

1679
02:08:12.000 --> 02:08:18.000
I think that's kind of like asking what's the meaning of life, right?

1680
02:08:18.000 --> 02:08:22.000
And I don't think there is a meaning to life.

1681
02:08:22.000 --> 02:08:27.000
When you look at the scale of the universe, the scale of the cosmos,

1682
02:08:27.000 --> 02:08:37.000
the concept that we as individuals bear some meaning seems to me to be silly.

1683
02:08:37.000 --> 02:08:45.000
Human beings have been around for two, three hundred thousand years depending on when you define almost sapiens.

1684
02:08:45.000 --> 02:08:56.000
I mean, that's a infinitesimally small smudge of time in that has happened already and that will happen in the future.

1685
02:08:56.000 --> 02:09:08.000
Even if humans last for another few million years, it will be an infinitely tidy bit of time against this huge cosmic universe.

1686
02:09:08.000 --> 02:09:14.000
And our individuality within that is infinitesimally small.

1687
02:09:14.000 --> 02:09:19.000
And I think there's some great meaning behind that seems to be to be the height of arrogance.

1688
02:09:19.000 --> 02:09:29.000
So I think that if you go through life and you treat people pretty well and you have a pretty good run of it,

1689
02:09:29.000 --> 02:09:32.000
I think you've done well.

1690
02:09:32.000 --> 02:09:36.000
But I don't think there's something profound in that.

1691
02:09:36.000 --> 02:09:40.000
So what is the point then? Is there a point? Is that the very question?

1692
02:09:40.000 --> 02:09:47.000
There is no point. I mean, the point is we happen to be here and it can be a good fun ride.

1693
02:09:47.000 --> 02:09:50.000
It can be a very difficult ride depending on what you make of it.

1694
02:09:50.000 --> 02:09:58.000
And in some cases, depending on your circumstances, there have certainly been people in history that have been born into circumstances

1695
02:09:58.000 --> 02:10:05.000
that made it a miserable existence with no options out of it.

1696
02:10:05.000 --> 02:10:07.000
I mean, what's the meaning of that?

1697
02:10:07.000 --> 02:10:19.000
You and I and the vast majority of people listening to us, probably a venture to say 100% of them, have a lot more autonomy over how we can make our life.

1698
02:10:19.000 --> 02:10:24.000
And will it have great meaning? No, ultimately not.

1699
02:10:24.000 --> 02:10:28.000
But it's the only life you have and you may as well make the best of it.

1700
02:10:28.000 --> 02:10:33.000
I actually listened to something last night by a guy called Lucas Jones who is an actor.

1701
02:10:33.000 --> 02:10:38.000
He has some great books. He's also a poet as far as I'm aware. I'll link his books below.

1702
02:10:38.000 --> 02:10:42.000
But he, he made wrote this poem, which I thought was quite related to that.

1703
02:10:42.000 --> 02:10:46.000
I'm just going to play for you because I think it's kind of captures the essence as well of what you're saying.

1704
02:10:46.000 --> 02:10:48.000
He starts by saying, I saw God on the train.

1705
02:10:48.000 --> 02:10:54.000
I saw God on the train. I got pretended I didn't sort of sat far away from the seat he was sitting.

1706
02:10:54.000 --> 02:10:59.000
And then he got up, I think, probably to person. He noticed me there and said, all right, what's this?

1707
02:10:59.000 --> 02:11:01.000
What are you saying? You heard it from me.

1708
02:11:01.000 --> 02:11:04.000
I said, I'm eating hard just to come for your seat.

1709
02:11:04.000 --> 02:11:09.000
And he looked at me like I was a kid covered in chocolate surrounded by rappers saying, don't know what happened.

1710
02:11:09.000 --> 02:11:12.000
And he goes, come in a minute. I've got a few minutes.

1711
02:11:12.000 --> 02:11:14.000
Tell him what's wrong, but don't fuck around with it.

1712
02:11:14.000 --> 02:11:17.000
And it shocked me then that it fit in one sentence.

1713
02:11:17.000 --> 02:11:20.000
I said, just think heavens is stupid incentive.

1714
02:11:20.000 --> 02:11:23.000
I wore a shit life for a beautiful death.

1715
02:11:23.000 --> 02:11:25.000
And those who are evil can suddenly repent.

1716
02:11:25.000 --> 02:11:28.000
Like a killer or a nunt can live like a monster.

1717
02:11:28.000 --> 02:11:30.000
Then right at the end say, I'm sorry, dear God's turn.

1718
02:11:30.000 --> 02:11:32.000
End up in heaven, right there with my Nana.

1719
02:11:32.000 --> 02:11:35.000
She's doing some knitting. He's waving a hammer.

1720
02:11:35.000 --> 02:11:37.000
It's like, Jesus, God, what a horrible deal.

1721
02:11:37.000 --> 02:11:39.000
And he goes, yes, fuck, then I hate her.

1722
02:11:39.000 --> 02:11:41.000
I'm like, mate, you're the one spinning the wheel.

1723
02:11:41.000 --> 02:11:44.000
And he goes, listen, I'll tell you a secret.

1724
02:11:44.000 --> 02:11:46.000
Oh, that's stuff, mate. I didn't speak it.

1725
02:11:46.000 --> 02:11:48.000
Like the old joke says about liars and men.

1726
02:11:48.000 --> 02:11:51.000
If God wrote the book, why are you holding the pen?

1727
02:11:51.000 --> 02:11:53.000
Now the rules I wrote on your heart.

1728
02:11:53.000 --> 02:11:57.000
Truth I spoke, even though from the start, be kind, don't harm.

1729
02:11:57.000 --> 02:12:00.000
Isn't that hard? Heaven is just a life if you're doing your part.

1730
02:12:00.000 --> 02:12:02.000
You want white clouds and endless skies.

1731
02:12:02.000 --> 02:12:03.000
Yeah, look around.

1732
02:12:03.000 --> 02:12:04.000
You don't have to die.

1733
02:12:04.000 --> 02:12:08.000
And I probably bring you some pain to think of the dead as just dust and a grave.

1734
02:12:09.000 --> 02:12:13.000
But humans can't comprehend it when I say life is a cloud.

1735
02:12:13.000 --> 02:12:14.000
Death is the rain.

1736
02:12:14.000 --> 02:12:17.000
And I go to my stop and felt kind of mad.

1737
02:12:17.000 --> 02:12:22.000
I'm not sure we answered the questions that I looked up and saw the sun rising.

1738
02:12:22.000 --> 02:12:24.000
Said you're looking for heaven.

1739
02:12:24.000 --> 02:12:26.000
But you're the one hiding.

1740
02:12:29.000 --> 02:12:30.000
LJ, thank you.

1741
02:12:30.000 --> 02:12:34.000
Thank you for writing these incredible books that I highly recommend anybody who is

1742
02:12:34.000 --> 02:12:36.000
on their own journey to financial freedom.

1743
02:12:36.000 --> 02:12:41.000
And it's looking for a free life, a financial independence or just independence

1744
02:12:41.000 --> 02:12:47.000
from one's own tall-minting psychology should buy this book.

1745
02:12:47.000 --> 02:12:52.000
The simple path to wealth has been an absolute smash hit for understandable reasons.

1746
02:12:52.000 --> 02:12:55.000
Once you read it, sold many millions of copies from what I understand,

1747
02:12:55.000 --> 02:12:57.000
more than a million copies at least.

1748
02:12:57.000 --> 02:13:01.000
And I highly recommend everybody goes and starts with this book and then accept pathfinders.

1749
02:13:01.000 --> 02:13:03.000
I'm going to link both of these books below.

1750
02:13:03.000 --> 02:13:04.000
And there is a third book.

1751
02:13:04.000 --> 02:13:07.000
It's slightly smaller called How I Lost Money in Real Estate before it was fashionable.

1752
02:13:07.000 --> 02:13:08.000
Of course you retail.

1753
02:13:08.000 --> 02:13:11.000
I'm going to link all of them below.

1754
02:13:11.000 --> 02:13:13.000
And if anybody else wants to find more of your work,

1755
02:13:13.000 --> 02:13:15.000
is there anywhere else that they can get in contact with you?

1756
02:13:15.000 --> 02:13:18.000
Read your work that I should recommend.

1757
02:13:18.000 --> 02:13:20.000
So probably the easiest thing is the blog,

1758
02:13:20.000 --> 02:13:25.000
which is Jail Collins NH, or dot com.

1759
02:13:25.000 --> 02:13:28.000
And you'll find a lot of the vibrating.

1760
02:13:28.000 --> 02:13:30.000
I don't write on the blog too much anymore,

1761
02:13:30.000 --> 02:13:33.000
but the material that's there is evergreen.

1762
02:13:33.000 --> 02:13:37.000
It's the source material for the books that you were kind enough to share.

1763
02:13:37.000 --> 02:13:40.000
The last book, How I Lost Money in Real Estate,

1764
02:13:40.000 --> 02:13:42.000
is if somebody wants to have a laugh at my expense,

1765
02:13:42.000 --> 02:13:44.000
that's the book they want to pick up.

1766
02:13:44.000 --> 02:13:46.000
Thank you for doing so much of what you do.

1767
02:13:46.000 --> 02:13:47.000
I know what the comments are going to say already.

1768
02:13:47.000 --> 02:13:50.000
They're going to be people talking about how soothing your voices.

1769
02:13:50.000 --> 02:13:53.000
I happen to agree.

1770
02:13:53.000 --> 02:13:54.000
Thank you so much.

1771
02:13:54.000 --> 02:13:55.000
My pleasure.

1772
02:13:55.000 --> 02:13:56.000
Thank you for having me.

1773
02:13:59.000 --> 02:14:03.000
If there's anything we need, it is connection,

1774
02:14:03.000 --> 02:14:05.000
especially in the world we're living in today.

1775
02:14:05.000 --> 02:14:08.000
And that is exactly why we created these conversation cards.

1776
02:14:08.000 --> 02:14:10.000
Because on this show, when I sit here with my guest

1777
02:14:10.000 --> 02:14:13.000
and have those deep intimate conversations,

1778
02:14:13.000 --> 02:14:16.000
this remarkable thing happens time and time again.

1779
02:14:16.000 --> 02:14:18.000
We feel deeply connected to each other.

1780
02:14:18.000 --> 02:14:21.000
At the end of every episode, the guest I'm interviewing

1781
02:14:21.000 --> 02:14:23.000
leaves a question for the next guest,

1782
02:14:23.000 --> 02:14:26.000
and we've turned them into these conversation cards.

1783
02:14:26.000 --> 02:14:29.000
And we've added these twist cards to make your conversations even more interesting.

1784
02:14:29.000 --> 02:14:32.000
And there are so many more twists along the way

1785
02:14:32.000 --> 02:14:33.000
with the conversation cards.

1786
02:14:33.000 --> 02:14:34.000
This is the brand new edition.

1787
02:14:34.000 --> 02:14:36.000
And for the first time ever, I've added to the pack

1788
02:14:36.000 --> 02:14:40.000
this gold card, which is an exclusive question from me.

1789
02:14:40.000 --> 02:14:45.000
But I'm only putting the gold cards in the first run of conversation cards.

1790
02:14:45.000 --> 02:14:49.000
So get yours now before the limited edition gold cards are all gone.

1791
02:14:49.000 --> 02:14:51.000
Head to the link in the description below.