Bogleheads University 101 2024 Q&A with Bogleheads University faculty Ferri, Gutierrez, Mecham, Roth

00:00:00.000 | [APPLAUSE]

00:00:06.840 | OK.

00:00:07.560 | I think we're going to get started

00:00:09.280 | on our questions and answers.

00:00:12.320 | Jesse will be joining us shortly.

00:00:15.040 | Here he is.

00:00:15.760 | Come on down.

00:00:18.600 | I think one thing--

00:00:19.680 | I think we'll start with the question of,

00:00:21.360 | for people who are saving and investing now,

00:00:25.640 | how do they balance their priorities, saving

00:00:29.280 | for retirement, maybe saving for kids' college,

00:00:32.760 | for a home purchase, for their emergency fund?

00:00:37.120 | People have different priorities.

00:00:38.920 | The house is the one thing that you can buy and enjoy,

00:00:41.960 | and it generally goes up in value.

00:00:46.400 | Typically, I tell people to put their retirement ahead

00:00:50.560 | of the kid's college education.

00:00:55.520 | That's just my own personal viewpoint.

00:00:58.240 | There's a lot of discussion about funding 529

00:01:02.000 | should the kid have skin in their game.

00:01:04.240 | My answer was not a very good one.

00:01:06.880 | My parents paid for my college.

00:01:08.720 | I paid for my son's college.

00:01:11.200 | So you kind of have to have the discussion with the client

00:01:15.640 | about what their priorities are.

00:01:17.480 | And sometimes I try to shift their priorities,

00:01:20.400 | but ultimately, they have to agree to it.

00:01:24.520 | Yeah, I think that's great.

00:01:26.000 | I also love the idea of building that kind of $1,000,

00:01:29.000 | like just have like $1,000 at some point that

00:01:32.040 | is easily accessible.

00:01:33.120 | I love that idea.

00:01:35.000 | But my priority system would be get to your magic number.

00:01:39.000 | Get to that savings rate number for your future self.

00:01:42.160 | I mean, it wasn't until I actually sat across

00:01:44.160 | from people who could not retire,

00:01:46.360 | and I realized that the pain of that

00:01:48.280 | is so severe that it cannot be offset by anything purchased

00:01:53.760 | along the way, meaning that people would do anything

00:01:57.320 | to go back and change the fact that they had not

00:02:00.040 | saved enough over those decades to be able to stop working.

00:02:03.960 | So I'm sure someday one person will

00:02:06.600 | be able to give me something else that they could have

00:02:09.000 | bought that would have been more important than the ability

00:02:11.920 | to stop working, but I still have not found that yet.

00:02:15.080 | So I always put that as the number one ranking.

00:02:17.320 | And then you can kind of be in and out of credit card debt.

00:02:19.800 | Fancy free, don't save for the kids' college,

00:02:22.160 | take out tons of credit card debt and student loan debt.

00:02:25.640 | I guess that's fine, and it works,

00:02:28.080 | but maybe you won't be living and maximizing your happiness

00:02:32.480 | and utility with money.

00:02:34.440 | But I say just get that priority done.

00:02:36.640 | And then if you look at my pay yourself first kind

00:02:39.800 | of hierarchy, then second, get three to six months

00:02:43.360 | of emergency savings set aside.

00:02:45.520 | You can take about five years sometimes

00:02:47.560 | for people to build that.

00:02:49.200 | And then I believe in setting up squirrel funds.

00:02:51.760 | And so you can do that either with YNAB.

00:02:53.800 | We have a lot of clients that use

00:02:55.800 | that tool that simulates those different buckets,

00:02:58.840 | or you can actually set up your own savings

00:03:01.280 | buckets at your bank account.

00:03:03.080 | Call them different things-- vacation, home repairs,

00:03:05.960 | car repairs.

00:03:07.240 | I have a clothing savings, just all the pet savings.

00:03:11.280 | Oh my god, do you know how--

00:03:12.640 | don't get a pet.

00:03:13.480 | Forget college savings, y'all.

00:03:18.600 | I just took my dog in.

00:03:20.080 | He got Rocky Mountain spotted fever.

00:03:21.720 | We're running about $3,000 so far.

00:03:24.800 | And then I heard another guy pay $4,000 at the register.

00:03:28.840 | And another person flinched when they said $600.

00:03:31.200 | It's no-- it is crazy.

00:03:33.160 | Don't own a pet.

00:03:34.760 | There's your kid's college education right there.

00:03:36.840 | It's cute.

00:03:39.240 | Ran over.

00:03:40.680 | I don't know.

00:03:41.720 | The insurance-- the house always wins, right?

00:03:45.080 | I know, with pet insurance, house always wins.

00:03:48.240 | [INAUDIBLE]

00:03:51.120 | This is true.

00:03:53.160 | But please don't make that decision.

00:03:54.760 | SC, I've got to disagree with you.

00:03:56.440 | Dogs are wonderful.

00:03:58.200 | So that goes back to Jesse and investing thoughtfully

00:04:01.640 | for what's important to you, right?

00:04:03.360 | Yeah, I also was going to say to get rid of your dogs.

00:04:06.600 | So--

00:04:07.120 | [LAUGHTER]

00:04:09.760 | No, that was a fantastic demonstration

00:04:11.880 | of different priorities.

00:04:13.120 | I have nothing else to add.

00:04:15.360 | I'm starting with the emergency fund.

00:04:17.440 | So how should I invest my emergency fund?

00:04:20.920 | I mean, I am not nearly as experienced in the investing

00:04:23.560 | side as these three are.

00:04:24.800 | But it obviously needs to be liquid, safe, quickly

00:04:28.420 | accessible.

00:04:29.800 | Check those boxes.

00:04:32.720 | I think that money market funds are

00:04:35.120 | good for your emergency fund.

00:04:36.560 | But I also-- for people who are in a very high tax state,

00:04:40.920 | you might want to use a treasury money market fund or just

00:04:43.800 | treasury bills.

00:04:45.160 | Just buy T-bills and roll three-month T-bills

00:04:47.960 | because you don't have to pay state income tax on that.

00:04:51.520 | Something very conservative.

00:04:53.400 | Unless you have access--

00:04:55.120 | I mean, the stock funds are liquid.

00:04:58.720 | So access to cash is more important than cash.

00:05:01.160 | And how much should be an emergency fund?

00:05:03.440 | I'm not a six-months or anything like that.

00:05:05.920 | If you work for the government, if you're

00:05:08.240 | an endowed college professor, your job

00:05:12.680 | is a whole lot more stable than if you're

00:05:14.400 | working for a startup company.

00:05:15.800 | So how much should be in there, it depends.

00:05:18.960 | Like I said, the answer to just about every question,

00:05:21.120 | it depends.

00:05:23.880 | Couple of related questions about 401(k)s.

00:05:27.520 | Should people prioritize Roth 401(k)s or regular pre-tax 401(k)s?

00:05:34.560 | And where does the solo 401(k) fit in?

00:05:39.240 | Oh, I love solo 401(k)s.

00:05:41.160 | Who asked for that?

00:05:43.360 | Great.

00:05:44.280 | OK, so generally, if you ask me, should I

00:05:50.200 | do Roth or pre-tax in my 401(k), I say yes.

00:05:55.000 | I'm not going to go to the mat on this.

00:05:56.640 | But generally, if you're kind of younger

00:05:58.480 | and you're not at your earnings potential,

00:06:00.560 | you're not making very much, choose the Roth.

00:06:02.560 | And then if you're at a higher income--

00:06:08.320 | no?

00:06:09.400 | I'm 100% in agreement.

00:06:10.840 | I'm shaking no.

00:06:11.480 | You stole exactly what I was going to say.

00:06:13.800 | OK, I was like, I don't want to disagree with you here.

00:06:16.960 | I agree with you on your network theory.

00:06:18.640 | I agree with you.

00:06:19.720 | Don't worry about it.

00:06:21.120 | So anyway, that's something I wouldn't

00:06:23.240 | lose too much sleep over.

00:06:25.640 | A solo 401(k) is a really wonderful tool.

00:06:30.000 | If you own your own business, it's great.

00:06:33.920 | So I own a salsa dancing nightclub.

00:06:36.400 | And I think we're the only nightclub in America

00:06:38.400 | that has a 401(k).

00:06:40.280 | And we do.

00:06:41.760 | We have a solo 401(k) on our nightclub income.

00:06:44.720 | So you, too, can set up a solo 401(k).

00:06:49.880 | There are some really wonderful providers of it.

00:06:53.320 | But I would suggest going to--

00:06:56.760 | I love Vanguard.

00:06:57.840 | We have used theirs before.

00:06:59.520 | But I like the smaller ones, like Employee Fiduciary

00:07:02.960 | or Ubiquity.

00:07:06.160 | They make it a little easier for small business owners

00:07:08.640 | to set them up, rather than these bigger record keepers,

00:07:12.420 | like Vanguard White Labels, Ascensis.

00:07:14.680 | These are just huge record keepers

00:07:16.360 | that are very unwieldy to work with.

00:07:18.840 | So make it easier on yourself.

00:07:21.200 | By the way, I have a solo--

00:07:22.720 | sorry.

00:07:23.360 | I have a solo 401(k) and a solo Roth 401(k).

00:07:27.480 | And quite frankly, I'm not all that happy that Vanguard

00:07:30.240 | jettisoned and sold it.

00:07:31.640 | Yeah.

00:07:33.120 | Neither am I. I was with Vanguard with my solo 401(k).

00:07:37.600 | They went to Ascensure.

00:07:40.040 | Ascensis.

00:07:40.540 | Ascensis.

00:07:41.040 | I'm sorry.

00:07:41.540 | Ascensis.

00:07:42.040 | And the very first thing I tried to do

00:07:45.020 | was I tried to make sure my allocation to my Roth

00:07:48.960 | was in stock, and my allocation to my pre-tax side

00:07:52.720 | was in fixed income.

00:07:54.200 | Again, asset location.

00:07:56.600 | And you couldn't do it there.

00:07:59.000 | Unlike Vanguard, where you could have a Roth account

00:08:01.160 | and you could buy whatever you wanted in your Roth 401(k),

00:08:03.920 | and then they had the pre-tax side of your 401(k).

00:08:06.720 | You could buy bonds over there.

00:08:09.080 | Unfortunately, with Ascensure, it's

00:08:11.720 | much more difficult to try to get it that way.

00:08:13.920 | They said, well, you need to make two contributions.

00:08:16.240 | And when you make your Roth contribution,

00:08:19.360 | you put the fund that you want that to go into.

00:08:21.480 | And then you get a weighted day, and then

00:08:23.180 | you make another contribution.

00:08:24.400 | And then if that's going to go to your pre-tax side,

00:08:26.600 | then you buy a bond fund with that.

00:08:28.060 | I said, all I want is to be able to look at it and say,

00:08:30.480 | what's in my Roth 401(k)?

00:08:32.480 | What's in my pre-tax 401(k)?

00:08:33.800 | So sorry to belabor this, but I'm

00:08:35.520 | not happy with that transfer.

00:08:38.560 | And there have also been the issues with the census

00:08:41.620 | and people with the solo 401(k)s trying

00:08:44.120 | to move their money out.

00:08:45.680 | I don't know if there's anyone in this room who

00:08:47.560 | has been in that bucket.

00:08:49.360 | [INAUDIBLE]

00:09:02.240 | Fidelity doesn't have a Roth solo 401(k) though.

00:09:05.400 | [INAUDIBLE]

00:09:07.400 | I expressed my dissatisfaction to the CEOs,

00:09:17.960 | Salim Ramji, the Vanguard CEO.

00:09:20.920 | And I got a call from a census, and they did fix it.

00:09:24.680 | So if you raise it a little higher, they will fix it.

00:09:29.960 | When the advice that you have all shared here,

00:09:33.760 | thinking about the basics of saving,

00:09:38.000 | making meaningful decisions about how to spend

00:09:40.920 | your money and investing, I'm wondering

00:09:43.040 | how your advice differs if you're

00:09:46.760 | talking to people who are starting out in their 20s

00:09:49.560 | versus there are people who are in their 40s and 50s,

00:09:52.640 | and they're just kind of getting their act together.

00:09:58.040 | I tell young people, as they get raises,

00:10:03.280 | try to keep their lifestyle fairly constant.

00:10:07.480 | Raise it maybe with inflation so they're not

00:10:09.520 | cutting their lifestyle.

00:10:11.240 | And I'm going to steal this from USC, pay yourself first.

00:10:17.880 | There are some things that you can

00:10:19.440 | do in your youth with both of your normal knees

00:10:23.920 | that you maybe can't do later in life.

00:10:26.680 | And the only thing that we teach is

00:10:30.840 | that the context is most important to be thinking

00:10:34.200 | about spending in tenses instead of just spending in general.

00:10:38.520 | So if you were to think of past tense spending,

00:10:41.920 | it looks a lot like credit card debt.

00:10:44.000 | This is spending that happened in the past

00:10:46.000 | that you're still dealing with.

00:10:47.280 | And present spending is pretty obvious what

00:10:49.520 | you might spend tonight.

00:10:50.480 | And then future spending is obviously you

00:10:52.840 | with an eye toward your future self.

00:10:55.440 | And there's no right answer to take the it depends kind

00:11:00.360 | of trump card answer.

00:11:01.320 | But it's interesting, when you're

00:11:04.840 | working with someone that's 25, their idea of future is 30.

00:11:10.320 | And it throws you off a little bit.

00:11:14.280 | But they can still, when their context is correct,

00:11:18.360 | where they're feeling past student loan spending,

00:11:20.480 | they're feeling present wants, they're

00:11:22.680 | looking toward the future, they still, with that tension,

00:11:25.960 | can arrive at a mix, a balance that works for them.

00:11:30.720 | So there is no right answer.

00:11:31.880 | But the only right thing to do is

00:11:33.460 | make sure that you hold all three spending

00:11:36.560 | tenses at the same time and start working on the answer.

00:11:42.640 | And for the people who are first focusing on this now

00:11:46.880 | in their 40s or 50s, what are the most important messages

00:11:51.400 | you would have for them?

00:11:52.520 | I mean, again, I think it goes back to get your savings

00:12:01.800 | rate in order.

00:12:02.840 | And it's much easier, obviously, to ask a 22-year-old just

00:12:06.760 | starting their first job to sign up for 10%.

00:12:09.800 | And we're able to do that.

00:12:11.040 | We have a movement in Arkansas getting every kid coming out

00:12:15.560 | of college the information to save 10%.

00:12:19.280 | And they're just going out and showing us screenshots

00:12:21.400 | of their Vanguard accounts.

00:12:22.600 | And it's really fun.

00:12:24.080 | And it's great.

00:12:25.280 | But what's hard is sitting across from someone

00:12:28.400 | who is 40 or 50, and they haven't been saving 10%.

00:12:33.440 | No one told them to do that.

00:12:34.760 | And they're just catching up.

00:12:36.640 | And for them to get to a 25% savings rate or a 30% savings

00:12:42.240 | rate that might be necessary based on that table

00:12:45.480 | in order to retire by the time they're 65

00:12:47.600 | might require downsizing a house.

00:12:50.600 | Maybe the child-- you've got kids.

00:12:52.360 | The kids don't want to leave the house, right?

00:12:54.200 | These are very emotional decisions.

00:12:56.440 | But let me just tell you this.

00:12:59.280 | I have seen people make that transition.

00:13:01.920 | And I always say, you can always go back.

00:13:03.920 | You can always go back to the spending you had previously.

00:13:06.360 | But what people tell me is that the peace

00:13:08.280 | that they feel after making that decision,

00:13:11.040 | there is no amount of spending that can replace it.

00:13:14.080 | So if you are in that place and you're inspired to do it,

00:13:17.380 | I don't think that you will ever regret it.

00:13:19.760 | We haven't seen anyone do it.

00:13:21.600 | I also want to do a shout out to the Pivot podcast.

00:13:24.760 | Sorry.

00:13:27.320 | Sorry, Catching Up Defy.

00:13:28.520 | I'm so sorry.

00:13:31.640 | Catching Up Defy podcast.

00:13:33.960 | It is a really terrific one.

00:13:35.440 | We have seen people make the pivot that Bill and Jackie

00:13:40.560 | talk about in tremendous ways.

00:13:43.920 | And it's very inspiring for people

00:13:46.000 | who are wanting to make a big change

00:13:48.160 | and be able to get on track for retirement.

00:13:50.800 | I think your podcast is fabulous.

00:13:54.640 | I have found that it's really, really hard to get somebody

00:13:57.960 | who's always been a spender to change behavior.

00:14:00.680 | There's some marginal things that can be done,

00:14:02.680 | like use cash, make it more obvious when

00:14:06.600 | you're spending the money.

00:14:08.200 | But it can be done, but I think it's very hard to be done.

00:14:11.840 | And with Bogleheads, quite frankly--

00:14:13.520 | and I'm absolutely guilty.

00:14:15.920 | My relationship with money is not healthy.

00:14:18.680 | I've been frugal.

00:14:20.760 | I realize I can't take the money with me when I go,

00:14:24.280 | but it's still hard for me to spend.

00:14:26.200 | And I have that problem with a lot of my clients.

00:14:28.960 | And I say, here's the advice that I have,

00:14:31.040 | but it's coming from a hypocrite.

00:14:32.880 | [LAUGHTER]

00:14:35.760 | Here's a question.

00:14:39.520 | What conversation should I be having

00:14:42.160 | with my financial advisor, who I never hear from?

00:14:45.040 | [LAUGHTER]

00:14:48.400 | I think you start with saying, listen, you hypocrite.

00:14:50.840 | No, I'm just kidding.

00:14:51.720 | [LAUGHTER]

00:14:54.200 | The best financial advisor is mostly a therapist, I think,

00:15:03.560 | and understands the psychology and the emotional side.

00:15:08.200 | Anyone can do the math.

00:15:10.160 | I mean, AI, I guess, can do the math now.

00:15:11.880 | Maybe, I don't know.

00:15:12.720 | And so it really is a coach, someone

00:15:14.680 | that reminds you about your plan when you

00:15:16.960 | forgot that you set that plan, someone that reminds you what

00:15:20.560 | the goal is when you've forgotten.

00:15:22.240 | When emotions are louder than the plan,

00:15:24.040 | sometimes the best advisor can just kind of gently point you

00:15:27.800 | back to that plan.

00:15:31.160 | Well, this is a touchy subject, quite frankly.

00:15:35.960 | So I started out as a broker for 10 years,

00:15:38.440 | and then I had my own money management company.

00:15:40.840 | And when I was a broker, I called myself

00:15:42.480 | a financial advisor.

00:15:44.480 | But in fact, I was trying to sell whatever product

00:15:46.760 | they were asking me to sell.

00:15:48.600 | I wasn't really doing advice.

00:15:51.400 | I was selling something, whatever

00:15:53.840 | the brokerage company wanted me to.

00:15:55.640 | And then I figured that out.

00:15:57.560 | And then I said, OK, I really want to manage money.

00:16:00.440 | So when I started managing money,

00:16:01.800 | I was a portfolio manager, managing investment portfolios.

00:16:05.240 | And my goal was to bring in clients and manage their money

00:16:08.280 | so that I get paid higher fees.

00:16:09.720 | I mean, was I a financial advisor at that point?

00:16:12.840 | We used to help them with asset allocation,

00:16:14.880 | and we used to do the fund selection.

00:16:16.420 | But I really wasn't advising them

00:16:17.880 | on how much they should take out or whether they should go ahead

00:16:21.200 | and take their Social Security money.

00:16:24.440 | I wasn't giving them a lot of financial advice.

00:16:26.400 | I really wasn't an advisor.

00:16:28.120 | But I called myself a financial advisor.

00:16:32.280 | Now, when I'm finally doing what Alan Roth is doing,

00:16:35.600 | I think I can say I'm a financial advisor,

00:16:38.600 | because the only thing I do is give advice.

00:16:40.520 | So the first question I would ask,

00:16:42.480 | if your financial advisor is not calling you,

00:16:45.040 | they're probably not a financial advisor.

00:16:47.280 | They probably sold you some products,

00:16:49.400 | or they're probably managing your money

00:16:51.160 | and don't want to hear from you, quite frankly.

00:16:53.280 | Because the best client, if you're

00:16:54.700 | managing somebody's money, the best clients

00:16:56.640 | are the ones who never call.

00:16:59.000 | Never call.

00:16:59.520 | You don't have to spend any time with them.

00:17:01.320 | You get the charge fee every single quarter.

00:17:03.600 | Those are the best clients.

00:17:04.880 | We used to say that internally in the firm.

00:17:07.120 | Oh, those are the best clients.

00:17:08.440 | They never call.

00:17:09.520 | All right, so my point is that financial advice

00:17:13.280 | is a different business than selling products, or insurance,

00:17:19.240 | or managing money.

00:17:20.640 | It really is what Alan's been doing for many years.

00:17:24.360 | I am not a life advisor.

00:17:27.280 | I am not a therapist.

00:17:28.640 | I'm still working on my own life.

00:17:32.880 | A lot of work to do.

00:17:35.840 | So I'm only taking clients that really understand and just need

00:17:40.200 | a little help in some of the complexities of getting out

00:17:44.360 | of some of the tax implications of getting out

00:17:47.680 | of complexities.

00:17:49.160 | And I'm going to brag again.

00:17:51.240 | I have the worst client retention in the business,

00:17:55.280 | doing a one-time plan, giving them

00:17:57.600 | a roadmap of what to do going forward,

00:18:00.140 | because I don't know what the market's going to do next week,

00:18:02.760 | and I don't know what the market's going

00:18:04.420 | to look like four years from now.

00:18:06.240 | So they won't hear from me.

00:18:08.040 | Other than my free monthly newsletter,

00:18:10.040 | they're welcome to get.

00:18:11.000 | And then occasionally, we talk and be friends,

00:18:13.240 | but I don't bill them for it.

00:18:15.920 | Here's the big thing you need to know.

00:18:18.240 | If you have a financial advisor, chances

00:18:21.800 | are you chose this person for a reason, right?

00:18:23.840 | They're really friendly, maybe go to church together.

00:18:26.880 | So there are a lot of people in that situation

00:18:29.520 | where they just don't know how to break up with this person,

00:18:33.840 | because it feels so personal.

00:18:35.580 | But they're such nice people, right?

00:18:37.200 | They're all doing it for free, right?

00:18:41.580 | Oh, no, they're not, are they?

00:18:43.740 | So let's say that you have $1 million with this person,

00:18:47.460 | and they have this 1% AUM fee.

00:18:50.400 | What is a 1% AUM fee?

00:18:53.060 | What is that? $10,000.

00:18:55.780 | Nice friend.

00:18:57.100 | Yeah.

00:18:57.740 | Then you're like, oh, OK, well, things

00:19:00.660 | are a little different now that I know how much I'm paying.

00:19:04.920 | And so this is where you can get a little bit more objectivity

00:19:07.960 | just by doing a little bit of research.

00:19:09.620 | So what you want to do is pull up an email and say, hey,

00:19:13.200 | I was just at this conference.

00:19:14.520 | I'm learning a lot more about my money.

00:19:16.320 | And I'd like to know, there's this thing--

00:19:18.300 | I don't really know what it all means,

00:19:19.960 | but maybe you could answer this question.

00:19:21.800 | What's this AUM fee?

00:19:23.400 | Do you have one?

00:19:25.760 | And then are there fees on the funds themselves?

00:19:29.480 | I'm just trying to understand it all.

00:19:33.440 | And then you'll be switching financial advisors after that.

00:19:36.040 | There's a lot of financial advisor training

00:19:40.760 | on hooking the client by being their life advisor,

00:19:44.600 | and that's nothing I believe in.

00:19:48.560 | So in this session, we've talked primarily

00:19:51.640 | about savings and investing.

00:19:54.040 | But I want to ask you to just--

00:19:56.800 | what are some of the other really important messages

00:20:00.880 | you would give people here in the context of a 101

00:20:04.660 | program on things beyond saving and investing

00:20:08.160 | that are really important for their financial well-being?

00:20:13.960 | I have one interesting stat.

00:20:18.400 | And I was reminded of this when SC

00:20:20.200 | was talking about someone that's maybe 40 that's fallen behind

00:20:23.120 | and wished they would have.

00:20:26.520 | We've helped a couple million people probably go through

00:20:32.600 | and really kind of radically change the way

00:20:35.560 | they think about their money.

00:20:36.760 | And what happens is they start to spend their money on things

00:20:39.680 | they really care about.

00:20:40.720 | A lot of times, that looks like paying off debt and investing.

00:20:43.840 | And so I've asked maybe a couple hundred people

00:20:48.280 | this direct question where I say, listen,

00:20:50.020 | you were living paycheck to paycheck just right

00:20:55.240 | at the edge for years.

00:20:57.440 | And then suddenly, you have this extra money.

00:21:00.800 | And you paid off thousands of dollars in debt.

00:21:03.800 | And your net worth just completely transformed

00:21:05.920 | in short order.

00:21:08.120 | What was your secret?

00:21:09.600 | Did you get a big raise?

00:21:10.720 | Did you change jobs?

00:21:11.840 | Did you downsize and do a big financial big shift like that?

00:21:16.200 | And of those couple hundred people that I've asked,

00:21:20.140 | this isn't scientific, but it is true.

00:21:22.940 | I have gotten the same answer every single time.

00:21:27.360 | And these are success stories that I'm talking to.

00:21:32.380 | But they'll say, well, we cut back on our spending.

00:21:36.140 | And that just means they spend differently.

00:21:38.700 | And I say, well, where did you cut back?

00:21:40.460 | And I'm not kidding you.

00:21:42.820 | 100% of respondents say they eat out less.

00:21:49.340 | And so for all the talk about, gosh, how do I do this?

00:21:53.700 | How do I do this?

00:21:54.900 | I'm just telling you a response from a couple hundred people

00:21:59.100 | that suddenly found thousands and thousands and thousands

00:22:02.300 | of extra dollars over some meaningful period of time

00:22:04.980 | and that turned them around.

00:22:07.100 | I don't know why that is, but it is.

00:22:09.220 | And so you can just take that one little nugget

00:22:12.300 | and not go out to eat tonight, I guess.

00:22:15.460 | I don't know what you'll do with it.

00:22:18.060 | You're on your own tonight, if I heard correctly.

00:22:20.700 | So yeah.

00:22:23.100 | Couple of things.

00:22:24.060 | Maybe I'm jumping in front here.

00:22:25.540 | But have a will, have powers of attorney,

00:22:31.100 | financial powers of attorney, health care power of attorney.

00:22:34.660 | Do some real basic estate planning.

00:22:37.460 | So many people don't.

00:22:39.100 | And I see a lot of people who have trust accounts

00:22:41.140 | and they're not funded, there's nothing in it.

00:22:43.260 | You say, well, the will is going to do that.

00:22:45.100 | Well, guess what?

00:22:46.020 | If the will does that, it means it

00:22:47.980 | goes through probate, which defeats

00:22:49.740 | the purpose of having the trust account to begin with.

00:22:52.860 | And the second thing is-- and again, if I'm jumping ahead--

00:22:55.340 | insurance.

00:22:56.020 | Insure your most valuable asset, which

00:22:59.220 | is your ability to earn money.

00:23:01.180 | So have the correct life insurance, term life insurance,

00:23:03.820 | low cost insurance, and disability insurance.

00:23:09.300 | Super great there.

00:23:10.340 | The other thing I would add that we didn't discuss is our time.

00:23:15.020 | And when I was younger, money was more important than time.

00:23:21.940 | But as I've got three children, and we've

00:23:25.860 | gotten closer to financial independence as a couple,

00:23:29.020 | my husband and I have realized that there is nothing

00:23:32.300 | more precious than our time.

00:23:34.500 | And we have learned how to part with money,

00:23:37.140 | because you have to learn how to spend

00:23:38.820 | when you have been a significant saver,

00:23:41.780 | to buy back hours of our time.

00:23:44.820 | So we discuss that a lot, what the value of our time

00:23:50.940 | as a family is together and how much

00:23:52.900 | we're willing to pay for that.

00:23:54.780 | So for instance, I have recently purchased a lot of my time

00:23:58.300 | back in my business by hiring people.

00:24:01.580 | So I don't have to work as much, and I can meet

00:24:03.940 | my daughter at the bus stop.

00:24:05.540 | That's really important to me.

00:24:07.420 | So you can also think about things a lot more differently

00:24:12.140 | when you start approaching financial independence.

00:24:14.540 | It's a big reason to get there, because you're essentially not

00:24:18.300 | retiring.

00:24:19.140 | You're buying your hours, which I think is priceless, right?

00:24:23.020 | And I would say, have a healthy relationship with money.

00:24:31.260 | Determine what makes you happy.

00:24:33.700 | I remember as a kid, if I went to the movies with my friends,

00:24:37.620 | it would be over within two hours.

00:24:40.700 | If I bought stuff, I could have it forever.

00:24:43.380 | I had it completely backwards.

00:24:46.060 | Similar, not exactly what you do,

00:24:48.380 | I see, but I define wealth in terms of years.

00:24:51.820 | Who's wealthier?

00:24:53.220 | Someone with $500,000 and needs $20,000 above Social Security

00:24:58.900 | to live on?

00:25:00.020 | They have 25 years worth of financial freedom.

00:25:03.540 | Or somebody that has $20 million,

00:25:06.180 | but they need $10 million a year to live on.

00:25:09.860 | They have two years worth of financial freedom.

00:25:12.180 | They're poor.

00:25:13.220 | And who do you think is probably happier?

00:25:15.020 | Jesse, do you have any other thoughts for us

00:25:20.420 | on how to spend thoughtfully?

00:25:23.460 | Make those decisions of how to spend our money.

00:25:27.740 | I mentioned already that the tense is,

00:25:29.580 | you just have to make sure that you have it in context.

00:25:31.900 | So a pile of money in a bank account

00:25:34.900 | only tells you how much money is in the bank account.

00:25:37.220 | It actually lies, really.

00:25:39.260 | It's a lie.

00:25:41.420 | And people will sometimes use that pile of money to say,

00:25:43.780 | I think I can afford this.

00:25:45.060 | I think I can afford that.

00:25:47.180 | And they're wrong.

00:25:47.900 | That question of, can I afford something,

00:25:49.980 | or should I spend money on this, is

00:25:51.940 | a pretty stressful question.

00:25:54.180 | If you're living paycheck to paycheck,

00:25:55.940 | or if you're just in the habit of not spending,

00:25:57.900 | it also can stress you out.

00:25:59.660 | And so the only part that's really important

00:26:04.220 | is to make sure that you see that pile of money with purpose,

00:26:08.480 | and that purpose is yours.

00:26:09.820 | But as you see it broken down with purpose,

00:26:11.980 | the answers do start to show themselves.

00:26:14.740 | It's not rocket science.

00:26:16.380 | It's not brain surgery.

00:26:17.420 | It's just you with the right context.

00:26:20.660 | And recognizing that money is, by definition, finite,

00:26:24.860 | and that finiteness, that scarcity,

00:26:27.460 | actually instructs you--

00:26:29.220 | we often tell people that scarcity is clarity.

00:26:32.620 | Meaning, the fact that you don't have an unlimited amount

00:26:35.860 | presses you to trade off and decide

00:26:38.540 | what's most important to you.

00:26:40.580 | Thank you.

00:26:41.140 | I think that's a great note to end on.

00:26:43.260 | I want to thank our panel for giving us

00:26:46.140 | a lot of really great specific pointers,

00:26:48.860 | but also, almost more importantly,

00:26:51.100 | giving us a framework to think about a lot of these questions

00:26:55.560 | around money.

00:26:56.940 | Thank you all.

00:26:57.700 | [APPLAUSE]

00:27:01.060 | [BLANK_AUDIO]

Bogleheads University 101 2024 Q&A with Bogleheads University faculty Ferri, Gutierrez, Mecham, Roth

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