Money as a Tool for Life
00:00:00.000 | (upbeat music)
00:00:02.580 | - You spent a lot of time in the book
00:00:06.600 | talking about financial planning
00:00:08.840 | and after you do the hard work about how to do it.
00:00:12.000 | And I like this kind of idea of, you know,
00:00:14.880 | bringing something fun to the conversation.
00:00:16.420 | So it's a dining room table.
00:00:17.800 | You said it's not a flamingo.
00:00:19.280 | I can't remember all the other,
00:00:20.200 | it's not a three-legged stool.
00:00:22.300 | Talk a little bit about what that is.
00:00:24.520 | What is the financial plan to you?
00:00:26.200 | Because I think as someone who started
00:00:27.980 | a financial planning company,
00:00:30.240 | it can be a big thing that's daunting,
00:00:32.580 | that is complicated and takes hours and hours to go through.
00:00:36.360 | Or you can kind of think about it in a more simple framework
00:00:39.440 | like I think you present.
00:00:41.320 | - So the idea is, you know, the American table,
00:00:43.240 | the dining room table is an institution in our country,
00:00:46.000 | right?
00:00:46.840 | This idea that the family sits around it.
00:00:48.060 | And I like it as a model for how our financial plans
00:00:51.040 | should be because it's stable, right?
00:00:52.720 | It's hard to knock over a dining room table.
00:00:55.160 | It's solid, well-built, and it supports us.
00:00:58.960 | And I think we should look at our financial plan
00:01:00.580 | the same way.
00:01:01.420 | So a lot of people build a financial plan
00:01:03.480 | that looks a lot like a flamingo, right?
00:01:05.040 | Think about a flamingo.
00:01:05.960 | They've got their one leg.
00:01:06.960 | They're incredibly unstable.
00:01:08.560 | Anything could knock them over.
00:01:10.160 | This is the person who really puts all their eggs
00:01:13.720 | in one basket, right?
00:01:14.720 | They have their W-2 job.
00:01:16.160 | They work for some company.
00:01:17.540 | And maybe if they do invest at all in stock,
00:01:22.280 | maybe it's through their 401k.
00:01:23.560 | Maybe it's actually in that company itself.
00:01:26.760 | And so everything depends on this one company.
00:01:29.240 | And God forbid, you know, a la Enron,
00:01:31.880 | this company goes down, something happens to it.
00:01:35.120 | The flamingo is incredibly easy to knock over, right?
00:01:38.400 | So then you can think about a two-legged table or stool,
00:01:41.520 | still not that stable, but a little bit better, right?
00:01:44.980 | That might be someone who has a W-2 job.
00:01:48.280 | And maybe they now have a 401k
00:01:49.920 | with some broad-based index funds, right?
00:01:52.280 | Or maybe some bonds.
00:01:53.560 | So again, a little bit more stability,
00:01:56.400 | but still not perfect.
00:01:57.880 | And then we start thinking,
00:01:58.960 | how can we even make it more stable?
00:02:00.720 | Like a three-legged stool.
00:02:01.680 | Now maybe we add in a side hustle or some real estate, right?
00:02:06.680 | And so then again, we're now creating more space.
00:02:10.920 | And then the four-legged dining room table,
00:02:14.120 | something that even if you knock a leg off
00:02:15.920 | is still gonna be incredibly stable, you know,
00:02:18.200 | is your W-2 job plus the broad-based index funds,
00:02:21.360 | plus some real estate, plus a side hustle.
00:02:24.040 | Maybe if you're excited about some alternatives,
00:02:26.320 | you have a little crypto here or there.
00:02:28.260 | Again, the idea is you're creating these different legs.
00:02:31.120 | It's this idea of a diversification,
00:02:32.840 | but it makes it a little bit more obvious.
00:02:35.820 | And again, the whole point of this is,
00:02:37.940 | really what we do wanna do
00:02:40.720 | is we wanna build a financial plan
00:02:42.840 | that supports our sense of purpose,
00:02:45.180 | identity, and connections.
00:02:46.120 | We wanna build meaning into our life.
00:02:48.160 | To do that, we build a stable financial plan,
00:02:50.720 | and then we practice risk medication, right?
00:02:52.680 | What we're really doing is trying to protect ourselves
00:02:55.000 | against the unknown risks,
00:02:57.240 | like you'll suddenly lose your job,
00:02:59.040 | like an economic downturn,
00:03:01.000 | like a healthcare crisis or problem.
00:03:03.120 | Like all of these things,
00:03:04.440 | we wanna create that dining room table
00:03:06.800 | that's gonna support us
00:03:07.920 | so that we can withstand whatever trauma,
00:03:10.080 | whatever black swan,
00:03:11.160 | or I call them white swan events that happen, right?
00:03:13.400 | These events that,
00:03:14.960 | a black swan event is a totally unexpected event
00:03:17.520 | that can really ruin our financial lives.
00:03:19.640 | White swan events are events
00:03:21.840 | that can ruin our financial lives,
00:03:22.920 | but they're not totally unexpected,
00:03:24.120 | like a healthcare problem, right?
00:03:25.680 | People get sick and end up spending a lot of money
00:03:27.560 | on healthcare, it's common.
00:03:29.280 | A divorce, right?
00:03:30.840 | The whole point of all this
00:03:32.120 | is to build a solid financial foundation
00:03:35.040 | so you can mitigate your risk
00:03:37.680 | and withstand the winds of change
00:03:40.200 | that are gonna affect you and your financial plan
00:03:42.360 | so that you can continue using that money
00:03:44.360 | to do what it's supposed to do,
00:03:45.600 | which is give you the space and time
00:03:47.600 | to do meaningful things.
00:03:49.820 | - To its core, would it be fair to say,
00:03:52.460 | a lot of times people think of the financial plan
00:03:54.820 | as what do I do with my savings?
00:03:56.820 | And your point is,
00:03:58.380 | it's not, you have your income,
00:04:00.380 | you have your savings,
00:04:01.620 | but then you might also have some other assets you own,
00:04:03.820 | whether it's a business,
00:04:04.860 | whether it's real estate,
00:04:06.260 | and you might also have not just your job,
00:04:08.700 | but your other income.
00:04:10.100 | And the more you can start to build
00:04:11.780 | different buckets of money
00:04:13.580 | that aren't just your savings,
00:04:15.460 | the more stable you can be.
00:04:17.700 | But at some point,
00:04:19.100 | you mentioned the dining room table with four,
00:04:21.220 | at some point,
00:04:22.060 | maybe you don't need your eighth, ninth, 10th, 11th, 12th.
00:04:24.780 | If you can get four,
00:04:26.940 | which if one falls off three is still a little stable,
00:04:29.520 | four kind of solid pieces of financial wealth, if you will,
00:04:33.660 | whether it's a job or,
00:04:35.340 | that's kind of a place to strive for.
00:04:37.660 | - Yeah, perfect is the enemy of good.
00:04:39.060 | I love these posts on social media
00:04:42.300 | where you have someone in the personal finance world
00:04:44.220 | that says, "I've got nine forms of income."
00:04:47.020 | And they love to say the different side hustles
00:04:48.900 | and the difference.
00:04:49.780 | That's great.
00:04:50.620 | But for the majority of us,
00:04:52.380 | four or five revenue streams that are stable,
00:04:55.540 | that are diversified,
00:04:56.660 | that are uncorrelated,
00:04:58.260 | like I don't wanna go too far,
00:04:59.660 | but how can we start building these streams
00:05:01.560 | and be thoughtful about it, right?
00:05:02.880 | So, okay, I'm gonna retire.
00:05:05.560 | Do I have a pension?
00:05:06.700 | Do I have a 401k
00:05:07.860 | that I can start taking distributions from?
00:05:10.620 | Do I wanna set up an insurance policy
00:05:12.400 | that'll pay me like a spia?
00:05:13.780 | Like there are different ways of doing this
00:05:15.860 | so that when one revenue stream drops off,
00:05:18.780 | you can create another revenue stream.
00:05:20.500 | And therefore, again, you can protect yourself from change
00:05:24.220 | because that's ultimately,
00:05:25.280 | we have no control over change.
00:05:26.700 | We have only control over the best planning we can do
00:05:29.340 | and then what we do with our lives.
00:05:30.960 | - So that's the planning piece.
00:05:32.220 | But you do talk a little bit about how
00:05:34.700 | one of the ways to tackle your finances is.