(audience applauding) - Everyone, thank you for coming to our session. This is part of the accumulators track. I'm Karen D'Amato, and I am joined by a wonderful panel, starting from my right. Dan Egan is the Director of Behavioral Finance and Investing at Betterment. In his research, he focuses on understanding how our minds and our emotions work in order to help people make better decisions around their money and investing and spending.

Next, Nick Magiuli is the Chief Operating Officer and Data Scientist at Rittles Wealth Management. He's the author of the blog of Dollars and Data, and author of the recently published book, Just Keep Buying, which he's supposed to be waving up now, but you can't see it. And he'll be just-- - I have emotions.

(Karen laughing) - And he'll be discussing the book tomorrow morning at 8.10, so set your alarms early for that one. And Randy Bruns is the Founder of Model Wealth and a Senior Financial Planner with the firm, which serves consumers with hourly and flat fees. And as an advisor, Randy works directly with clients who are widely varied in their ages and in their financial resources.

- Thank you all for being here. I think the accumulator's audience is an interesting one because it can encompass people from their 20s into their 60s. Potentially, so an audience potentially of people at very different stages in their lives, different financial circumstances. And I guess the place where I wanted to start is sort of with a big picture issue.

We all have lots of demands on our time and our attention. And so to set the stage, Nick, I was hoping you could discuss your guidance on where people should focus. So thinking about, do I focus on my income, my spending, saving, investing? How do I prioritize where I'm putting my energy around my personal finances?

- Yeah, thanks, Karen. Thanks for everyone coming out. In terms of prioritizing time, I mean, this is a Bogleheads meetup, right? So we all talk about investing and how much should I have international? How do I rebalance? All those types of things. And that's very relevant for the people in the other room, right?

They've done most of their accumulating already. Their money's already saved up. They're trying to go through the next 20, 30 years, et cetera, of their life. And all those little things matter a lot. But for people in this room, people are still accumulating, or those especially younger, it matters a lot less because you don't have all that money yet, right?

So when I talk about, in the first chapter of my book, I kind of lay out this framework, which I call the Save and Invest Continuum, which basically, if you can save more money than your investments can earn you, then you need to focus on that savings part. And that's what this room is really about.

And so when I talk about where you're gonna use your time, it's your income. It's like, that's everything. I think that's something that's downplayed in most of the personal finance community is like income, income, income, it's everything, right? And so people talk about savings and things like that, but I think you have to focus on growing your income.

And that's like the primary way to build wealth. - And then that question of how much you're focusing on investing versus just finding those dollars to save. I mean, we may have people in this room who have already accumulated a lot and they're still accumulating more. So for them, the investing decisions do become more significant.

- Yeah, they'll start to become more significant as your investments can actually earn you more than you could save in a year. And let's just use a simple example of this. You know, if you have a million dollars saved up, you know, a 10% returns $100,000, can you save 100,000 a year?

Maybe some people in this room can, right? But what happens if it's 10 million? Can you save a million in a year? Most people probably can't, right? So you see as that investment value gets higher, you start to have less and less control over what happens to your wealth, right?

At least with your savings side. So that's why I would say focus on income if you're especially just starting out. - So I wanna think about my income. I wanna think about getting money into savings. But Dan, you were telling me that one thing I probably don't need to bother with is using one of those cool apps to track all my spending.

Like, why not? That seems like it should help me. - Yeah, so one of the more interesting elements of money management is how much time and effort you spend stressing about your money. It's this perversity of, like, you think you own things, but actually if those things require time and concentration and effort, they kind of own you.

They own your attention. And one of the traps people can fall into is thinking that budgeting is about looking in the rear view mirror at what I spent and being like, oh, I overspent on takeout last month. Oh, I underspent on this. There are, like, consistent studies that show, like, the more that you do that, you're not gonna save more.

You're gonna be unhappier because you're stressed about the fact that you're not doing better. And there are constant sort of escalating benchmarks of if you did good last month, you should do even better this month. People who are very good at saving as a process tend to invert the usual thing.

They don't say, I'm gonna exert a lot of self-control and I will have saved money by the end of the month by not spending it. There's lots of different ways of saying this. Generally, pay yourself first, which is effectively, I make two grand. I know that I should be saving 500 of that when I get paid.

I'm gonna auto-deposit it into a savings account somewhere so that it's not even in my checking account to spend. That sort of, like, top-down think about a budget at one point layout, very simple math, you know, like, one plus one plus one equals three. I'm gonna save 1/3 of it.

Allows you to save systematically and in a way that doesn't stress you about what specifically you spent money on. Your retirement doesn't care if you spent it on cappuccinos or muscle cars or any other thing. It's just a matter of how much money did you save. The spending should not be something that causes you stress because you know you are saving enough from the outset.

- Thank you. Let's talk a little bit about the investing environment we find ourselves in. So it's a year when stocks and bonds have done terribly. Inflation is high, it's scary. The economic conditions are scary. Bill Bernstein says that's a great market for accumulators, but he also said you don't know until you're in that bear market how awful it's going to feel.

So Randy, if you could talk to us about when you talk to potential clients about investing and investing in an environment like this, what are you talking to them about? How are you trying to get them to look at the world? - Well, you stole my quote from Bill Bernstein this morning and I paraphrased him on Twitter.

I said Bill Bernstein had said, "I would love it "if I were an accumulator, I'd love a market like this. "I would drool over it," I think is the word he was using. But, and it is true because if everybody in this room is an accumulator, volatility is good.

It helps you buy more shares mathematically. You end up paying a lower share price on average than the very same mutual funds or companies you're buying into. But that still doesn't mean almost like a, something I've heard of is like you can take a, you can do a flight simulator, but, and have a good feel for what it's gonna feel like in a plane crash, but until you actually get into a plane crash, that can't simulate the feeling.

So what we do in our firm is we remind investors of their timeframe, but we also make sure they know not just how much they need to save, but also that there are going to be major bumps along the road, and we don't say, "Oh, if you're in an 80/20 portfolio "that has historically fallen as far as 37%," we actually put it in terms of dollars, and every meeting with our clients, we make sure we're the nag that says, "Hey, here's how much value you could lose "if things go south," and then things do go south, and they can't say we didn't warn them, and yeah.

- Dan, what are some lessons from behavioral finance that'll help us act more intelligently in this market? - So the first one that actually I'm gonna play off of, which is distance and time. Distance and time are very powerful assets in multiple ways, and one of the most powerful is that when we are stressed, when we are scared, we make worse decisions that are generally more short-termist.

We say, like, what do I need to deal with? Right now, I don't care about the long-term, I just wanna feel better in the short-term. One of the unfair advantages that a lot of accumulators are gonna have is that they're gonna be looking ahead 10-plus years, and when I log in, I remember during March of 2020, when it was kind of like the trough of the pandemic-related drop, I logged in and looked at my retirement plan that consists of, like, okay, I'm gonna keep saving for this many more years into these account sites, et cetera, and it said something absolutely horrifying, like, you're gonna spend $300 less per month in retirement, and I was like, oh, never mind, okay, no problem.

I'm not stressed about that anymore. The more that we can remove stress by using distance and time as buffers between ourselves, the smarter decisions we make, and one way you can think about this is, Jeff Bezos has this quote that he's like, "If Amazon had a great quarter this quarter, "it's because of decisions that we made three years ago." Like, when you are thinking about these things, the decisions you make today, they roll out, they kind of get realized in terms of the outcomes years and years into the future, and you realize that, you think, I don't need to react to what's going on in markets right now, right?

Like, we are planting trees. These things take decades to grow effectively. Stuff matters. You need to come and attend to it. You need to think about seasonality and what do I do in different seasons, but give yourself that relaxation that, like, I should not be worried about this quarter to quarter because I am sticking to a plan that plays out over decades.

The more that we allow ourselves to have distance in time in how we make decisions, we make better decisions that play out better, and we get to say, we made an awesome decision three years ago, and we're bearing the benefits of it today. - I know, Nick, you were also saying you feel like people, one of the risks today is that people are so focused on the short term, which I think it feels natural.

I mean, we're always bombarded with so much news and information, but when it's scary, I think it's, you pay a lot more attention to it than the days you look at the market and you say, oh, the market's up again. Great, and you go on with your life as opposed to the market is down a lot today.

I'm gonna spend a little more time thinking about it. Other tips for how I can resist that and keep my focus where it should be? - Yeah, I think just like studying history, you start to realize how much stuff repeats itself. For example, recently, my sister and I went to Florence, and I'm not just, it's not a brag, this is relevant, and they had these little thing called wine, I know, 'cause I'm like, what the hell, yeah.

They had these little thing called wine windows that apparently during the Black Plague, they used to sell wine and things out of these little windows to prevent face-to-face contact with people during the Black Death, right, 'cause it took out like, some cities took out 2/3 of their inhabitants, right, in Italy, it was really bad.

So during COVID, they started reusing the wine windows, right, so you see like, history repeats in very odd ways, and just like, little things like that, little stories you find out about stuff, it's like, we're sitting here looking at like, this ticker tape moving, and it like, really doesn't make that much of a difference, right.

And I really love Dan's answer about when he logged in in like, March 2020, and he looked and he said, oh, I just lost, you know, X hundred dollars a month in retirement, and I think a really cool, just easy way to think about that is like, for every $100 a month you wanna spend in retirement, that's about $30,000 in principal, right, using like, the 4% rule or something.

It's not perfect, just assume that for now, and just trust me on that, right. So if that's true, if you're down, you know, $90,000 in your retirement account right now, what did you really lose? You lost $300 a month in retirement. So, and if you actually look at the retirement date on how people spend money in retirement, they don't actually, most people don't pull down principal, they just live off their income.

So it doesn't matter, it's actually kind of very interesting what I'll talk about, I need to have much more money in retirement, this and that, everyone just lives off their income, no matter what that income is. Even the people that have no savings, they just live off their social security, right.

So if you have some savings, you're ahead of them, right, and so you're just gonna live off whatever income you have. Now I'm not saying it's gonna be a great retirement if you don't have a lot saved, but you're going to make it work like everyone else in America is currently making it work, right.

So that's one positive side. - There's a key kind of insight here, which is when you start thinking about your balance like a score, like in a video game or something, and that you just want your score to go up, it puts you into a very bad place. But when you convert it into what matters to you in your life, it's very easy to be de-stressed about it.

So again, March 2020, I worked for a fintech company, markets were down, things were not good. My wife said, "Hey, just so we're clear, "if you get laid off, what happens?" And we had a very large emergency fund, and I was like, "At least over six to nine months, "we don't have to worry about anything." That meant that I didn't stress at my job, I was able to focus on the income, on doing what needed to be done.

It meant that I didn't think about taking money out of a retirement account where there might be tax penalties and I can't put it back in. So the only other thing is think about setting yourself up. If you're worried about markets, think about why. Does it actually affect anything other than looking at a score and making you feel good?

Or is there an impact to your life? And if there is an impact to your life, how can you hedge that or immunize it? How do you make it so that you don't care what markets do? 'Cause if you care what markets do, and it's not just 'cause it's a score, you're in a risky position and you wanna focus on that as almost a financial planning thing to do.

How do I not care about markets? - So I appreciate your point about the emergency fund. Part of what it is buffering me from is making a short-term decision that might not be the right one for the long-term. I feel like emergency funds, that's one of the pieces of advice you always hear, and I think there are a lot of people who don't do that.

So how much of an emergency fund do you recommend people have and where do you put it? And I'm just wondering if we're all in agreement here on the magnitude of that. - So studying for the CFP exam, I always remember they said, have somewhere between three to six months of spending in an emergency fund.

And it would be six months if it was just one sole income earner or one of the earners had less than stable income. But we would typically recommend three to six months. In most cases, we would definitely put it in like the highest FDIC-insured savings account you can find that's still accessible.

I personally have my checking account through Chase Bank, which is a phenomenal bank if you live in the Chicago area, but it's horrible when it comes to the interest rates they pay on savings, almost offensive. So I chose Ally for its online savings account, and don't wait for a Chase banker to remind you of this, but you can actually link external accounts where I don't even go to Ally anymore.

I just go to Chase to move money in or out to Ally back and forth. But I also think having an emergency reserve plays into your risk tolerance during tough times, because we can look at our investors and our clients and say, you have to spend through this before you'd even get to that.

And so if somebody has afforded themselves a lower required return, we would agree if they need a bigger savings account, because the savings account at the end of the day is just going to follow inflation. You're not going to beat inflation. But if they've afforded themselves the ability to have an overabundance of recommended cash and savings, if that allows them the peace of mind to ride out a down year like this, we're all for it.

- So yeah, the only thing on emergency fund, I agree with that. I think it's also very individualized. Every person's different. I'm guessing many of you know Morgan Housel, psychology of money, he wrote the book. He's 25% cash and he's been like this before he had a bestselling book, like he was 25% cash.

So it's like, and he's like, I sleep great at night. I'm never going to change that. So I think that's way too high of an allocation personally, but that's, everyone's each their own. So don't feel bad if you have like, oh, I want to have two years of emergency cash.

Like, I think Bill Gates, when he was running Microsoft early, had at least what, 12 months or 24 months of cash, you know, when he was running the company. He's like, I want to be able to say if we got no more money coming in the door, I can pay my employees for at least a year or so.

So like, there's different ways of thinking about risk management, but yeah. - So when we look at the people who are attending the conference, if you're here, you are probably pretty darn serious about investing, about thinking about your personal finances, about saving in your 401k and doing other things you know you should looking ahead to the longterm.

Randy, what are some of the things that people may be less likely to focus on because they're awkward and painful and difficult to even talk about? - I love this question because it's one thing to build a financial plan based on everything going as expected, but then something doesn't go as expected.

And this might be an estate plan for a young family or even if you don't have kids yet, you should, everybody, every adult should have an estate plan just to know who makes your health decisions. If God forbid you end up in a hospital or who manages your finances if God forbid you end up in a hospital.

Having term life insurance in place, whether it's before you have children or if you ever plan to have anybody dependent on your income, get a term life insurance policy immediately while you're healthy. Long-term disability. It's all based on, everything in accumulation is based on your ability to save, which starts with your ability to earn an income.

And if you suddenly can't earn an income, as I learned in March of 2020, day one of COVID, I thought I had COVID. I ended up collapsing in the shower. My wife drove me to the, or my wife drove me, the ambulance took me to the hospital and I found out like, I was in the hospital all day long.

I found out at about 4.30 that night that I had a tumor on my brain. And because it was day one of COVID, I couldn't go home. They said, we don't know what the hospital is gonna look like. If you're even gonna be back in here, we would suggest you get it removed immediately.

So that was Thursday, March 12th, day one of COVID. And on Saturday, March 14th, I had surgery. So, and if I didn't have Alex here, who's my partner at the office, he pretty much saved our practice from what could have been financial ruin just because it's not like COVID just hit and everything else was a breeze, but the stock market fell 30 plus percent that sharp period of time.

And if I didn't have a long-term disability insurance policy in place, I would have had to sell, or didn't have a savings account in place, I would have had to sell from assets that were sharply down in value and they wouldn't have been there for the ensuing recovery, which is everybody in this room knows was extremely sharp.

So, we are professional nags at making sure that those areas like having an emergency savings, having a term life insurance, getting an estate plan, and having long-term disability insurance, which most employers provide, those are the things that are very easy to overlook and say, well, it'll never happen to me.

I mean, I'm not gonna say I knew, I didn't own long-term disability insurance because I knew for some reason I was gonna get a brain tumor, but I knew the financial implications of something like that so catastrophic happening. - Yeah, I was just thinking as you were saying that, and I have to say thank you for sharing that.

Obviously, that really brings home the things that can happen to any of us so suddenly, and that is why we make plans. But I was also just thinking, when talking about estate planning, that is a phrase that has a bad name because you think, well, it's about estate planning, it's about dying, so I'm not gonna think about it, and I'm not gonna die right now, I'm young.

But if you go to an estate plan or all those other documents, the healthcare proxy, the living will, your powers of attorney, I mean, those are not about when you're dying, they're about now if something happens to you and you were temporarily incapacitated. And so I think if we thought about it as like critical legal documents as opposed to just estate planning, maybe a few more people would focus on it.

- Dan, I wanted to ask you from-- - Hey, Karen. - Yes. - So one last thing on the estate plan. So I have an almost six-year-old and a four-year-old that, like, my wife and I got an estate plan because we didn't know, if we didn't have an estate plan, who would raise these kids if we weren't around?

I have two brothers, she has two sisters. I don't trust either of my brothers to raise my kids. Her older sister, not a chance. But her younger sister is the greatest person ever to raise our two kids and her fiance, but they're not great with money. And so the person that you name as a guardian for your children may not be the person who you appoint as somebody who is the guardian of your finances, basically.

- And there are benefits, also, just from a separation of powers, checks and balances, to having those be different people, I think, too. - I think so, yeah. - Dan, are there lessons from behavioral finance that would help me, any of us, actually carry through on all these things that we need to do?

You know, the things that are sort of fun to focus on in personal finance and the things that are just chores, what can I do to help myself get everything done? - Well, there are great things. So my favorite is what's called temptation bundling, which is that, and I started doing this before I knew there was a term for it.

When I was in college, I would go into the library when I had to study for a test, and on the way in, I would buy myself four York peppermint patties. And I'm allowed a York, I put them in front of me, and I was allowed one of them once I had studied for 45 minutes.

I didn't smoke cigarettes, but I would go outside and I would eat a York peppermint patty. It was exactly like the commercial, so refreshing. (audience laughing) So it's been simple, but set this up so that it is bundled with a reward. Me and my wife have a thing, we have it regularly in the calendar.

We usually have date nights, and I think it's like once a quarter. We have admin night, and we go out and we have a beer and we look at spreadsheets together and we talk about what's right, what's not right. Are we thinking about everything okay? And that night is a nice thing because at the end of it, I'm allowed to go to the really fancy, silly hipster cocktail bar and get a nice drink and say I've done my job, now I get a reward for it.

Use technology for planning it out, doing it regularly. If you're thinking about it, if you're doing it ad hoc, I'm probably not gonna do it, but when I have number one, it in the calendar and in the calendar with someone else, we can go do it together. You can do this even if it's, you know, you're not gonna go to the bar and go over finances with your buddy, but you can both go to the bar and say we're gonna do this thing, and at the end of it we'll be able to chat.

Do it with somebody else. Make it something that's a recurring activity with somebody else so that you kind of hold each other accountable, just like going to the gym. - Thank you. Thinking about bundling, not quite York peppermint patties, maybe. Nick, tell us about your, is it the two times rule?

Do I have that right? - It's the two X rule, but basically, I think this is really relevant for bogleheads because I was just having lunch with some people I met, and the big problem for all of us is, you know, we talk about, you know, most Americans don't have $400 to meet, you know, some random expense, right?

That's not the problem for people in this room, people in that room, right? It's, for most of us, it's gonna be like spending down our money, and so I think the real issue and the stuff I kind of write about is like, you know, people are disciplined or saving money over time, it's like, how do you spend money without guilt?

And a lot of people, especially if you're really good at saving, you're by definition, probably not great at spending. I mean, all is equal, right? So the question is, how can we get over that guilt? And there's a lot of different ways to do it. One rule I came up with is like, I call it the two X rule.

So if you wanna go splurge on something, you feel bad about that, like, you know, let's say it's gonna cost, you know, let's say you wanna take yourself out to dinner, you're gonna go out to dinner, you're gonna spend like $400, you're gonna spend like a lot of money, like a really, you're gonna buy a nice bottle of wine, whatever you're gonna do, right?

You should save another 400, two X, and take that other 400 and invest it in something, you know, S&P 500 index, or income producing assets of some other sort, or you could even donate the other 400. If you feel like, oh, I'm gonna spend it instead of being selfish and just thinking about myself, I'll donate the other 400.

So it's these little simple rules. I mean, they're not anything crazy. I have no data that shows that they work, so I can't really back that, but all I can say is like, it's these little heuristics that I like to use, and I know other people have found useful if you're trying to spend money.

So I'm just trying to get rid of spending guilt, 'cause I think there's a lot of people that have a lot of guilt around spending money, especially in this community where we're very good at accumulating, obviously. - We're very good at guilt. (laughing) - This is very true. Nick said it in passing earlier, but I think it's worth coming back to.

The vast majority of retirees don't spend down their balance 'cause it feels bad to see it going down. Vanguard actually has, I believe it's called a managed payout fund. That's a fund that's meant to act like an annuity. You are meant to spend whatever payments you get from it, and people take those payments and they reinvest about 25% of them back into the fund, which is extremely frustrating for the fund manager who's like, you are using my product wrong.

Why are you doing this to me? I don't want inflows. Stop it. One of the things that we've seen, so this is not a plug, it's just an explanation. At Betterment, you can use goals. You can say like, this is the thing that I want for this. This is my vacation fund.

This is my nice new car fund, or a goal or whatever it is. And bookmarking things is like, this is the purpose of this money does a great deal to remove this kind of guilt because it's like, I saved up for, a really common one is a Tesla, for some reason.

And it's like, I saved up for the Tesla, and now I have all this money, but it's in the Tesla. The entire purpose of this money is to fulfill this real life thing. It's not to just have the balance go up. And so, do it however you want. Set up a whole bunch of different savings accounts, whatever it is, it's a pain in the butt logistically, but put labels on things.

So you say like, when I spend this, it's not gonna feel bad because the entire purpose of this account was my 10 year anniversary trip to wherever. - And Randy, how do you handle that with clients when clients are saving for multiple goals? They're saving for buying a house, they're saving for college, they're saving for retirement, they're saving for the home addition they're planning.

How do you recommend that they manage that? - So what we do is we make sure that their emergency reserve is covered. And then we also make sure that they're putting away enough for retirement, and it's in very simple, low cost investments. But I remember one particular client who was, she was probably 31 at the time, but she was gonna buy a home in the next five years.

And we made it very clear to her that the growth of the portfolio is not so important, anywhere near as important as the confidence you can have that those funds will be available in five years. And Nick, I think you mentioned this in your book, right? Here's a plug, a shameless plug for Nick's book.

But anyways, like, it was five years down the road, she was putting money in on a monthly basis. And we, it also wasn't like something that she was dead set on, it has to be bought in five years. So she had some wiggle room, but we just, she was putting money in on a monthly basis.

We recommended the Vanguard Wellesley Income Fund. But if it was something that they were going to use within two years, or even less than three years, we would quantify the value of it, work the math backward, assume a 0%, if not a negative 1% or negative 2% return relative to inflation, because that's the cost of short-term safety and liquidity.

And then we just make sure that they manage to that goal, basically. - One of the things I want to talk to you about, sort of the flip side of feeling so guilty that you don't actually spend, is lifestyle creep. You know, the shared apartments and the hostels on vacation are great when you're in your 20s, but at some point down the road, you probably want to use your raises to have a bigger house, live in a different lifestyle.

How do I figure out if I'm in a comfortable place, not spending too much? I mean, how do I make sure I don't let my lifestyle get out of hand? - So, I think a lot of personal finance experts, especially in, you know, Boglehead's community, may say things like, you know, oh, we don't want your lifestyle to creep, just save all your raises, et cetera.

I actually wanted to test that, so I've written a blog post about this, it's in the book as well. Basically, long story short, you have to save like half of your raises, more or less. And actually, for people who have a very high savings rate, you actually have to save more of your raises to kind of end up at the same place, right?

You can imagine someone in equilibrium, imagine you're saving now, you know you're gonna retire at 65, you're saving whatever you're saving, right? And then you get this positive shock to your income, you'll get a raise, it's a good thing, right? If you want to spend the same amount of money through the rest of your life and in retirement, right?

Remember, you're already on your equilibrium path. The question is, when you get that extra money, if you spend it all now, when you hit retirement, you have to drop your spending again, right? So you can imagine that already. So the question is, you always have to spend less of it to kind of, you can raise your lifestyle a little bit, but then you can save the rest and you can still retire at the same date, right?

'Cause if you spend all of it, or more than all of it, you'll have to retire later. You can just think about that logically. But long story short, basically, if you run all these simulations, different savings rates and all this, you have to save basically half your raises, which ironically fits really well with the 2X rule, so it's easy to remember.

I did, the math just panned out that way. I did not plan on that. But yeah, so that's what I would say. Like, I've looked at it, and I think you can do like half your, so if you get a raise after a tax income of $1,000, you can spend an extra $500 a month, enjoy that, but you have to save the other 500 to stay on track to whatever path you're on.

So, I don't know if anyone wants that. - The only thing I'd throw in there is that there's a sort of, if you go hard in the early parts of your career, you can have a really easy latter part of it. Meaning, if you do like 75% of every raise up until the time you hit like 32, 33, number one, all that money's going into the market earlier, more time to grow, et cetera, et cetera.

It also keeps your lifestyle low up until that point in time. Generally, right around then is when you are at very, very high risk for a certain set of liabilities called a family. And your ability to save escalates without your ability to control it. And you're like, how did afterschool cost this much?

Why does this happen? But once you, like, if you go hard in the beginning, all of a sudden you'll find yourself in this middle zone, you'll spend money on family, you'll come out of it, let's say 18, 20 years later. You'll feel okay, and you'll know then that like because you went hard early, you have an easy life now.

And you can adjust them. That's the thing. You're giving yourself the option to say, I'm not gonna be stressed when I come out of the family liability situation. If you go into it stressed, you're probably gonna come out of it stressed. You can always adjust later easily to say, like, I'm gonna spend more money 'cause I have too much.

That's a very good problem to have. The other way is not a very good problem to have. So go hard when you're younger. It'll make later life easier. - Most people, when they say that, they're not actually talking about saving, but. (laughing) - Sure. - Let's talk a little bit about real estate and home ownership.

Because you will have people in the accumulator stage who may be making that first home purchase. What do you advise people in looking at the real estate market? How do I decide if this is the time to buy and how do I do it smartly? - So one of the biggest things here, I think, is try and figure out where your private values most diverge from public values.

By which I mean you are investing in something that is your home. You will live in this thing. It is where you will spend most of your non-waking hours and a fair share of your waking hours. The important thing, everybody, there's a common price for a house. It's like, how much is this price worth?

That's what it's worth to some sort of median person. You will find the best house for you by thinking about how am I different than most people? How am I different than the median person? What matters to me that doesn't matter to them and what doesn't matter to me that does matter to them?

Real quick example, the apartment that me and my wife ended up with is not near a subway in New York City. That is fine. We love biking. We live near the river. We're able to come up and say, there's a lot of stuff about this apartment. It doesn't have a washer-dryer in it.

That's not a problem for us. When you're looking at a home, the most important thing is, again, to say, this is my house. Let me try and go out and find a house that is most undervalued, to me, in the market. And that means looking at a house that is gonna be not cookie-cutter, not sort of conventional in some way.

It should be different, and that different is gonna be right for you. - Yeah, I love that answer. Only thing I'd add is, I actually don't think it's as much of a, trust me, it's a huge financial decision, but I think it's much more of a personal decision. Like, is this the right time for me to do this?

Should I be, you know, is your professional life kind of settled or mostly settled, and is your personal life settled, right? If you're single, do you wanna be buying a house to then sell it in a couple of years and then have to go out and buy another one, right?

It's just, you don't wanna pay those transaction costs, right, it's usually like, what, 6%, I mean, when you include all the fees and everything. So, that's the one thing I would say there. And in terms of right now with how things are, with rates as high as they are, so like, payments are a lot higher, so unless home prices come down, you're not gonna be able to get the same payment that you could've got a year ago for the same size house, right?

So, it's gonna be interesting to see what happens in the next year. - And I can say, I agree that if you buy a house, you don't buy it for financial reasons. You buy it because you want to plant your roots there. I specifically, and my wife specifically, we're looking for a tall trees, fat squirrels neighborhood that looks like it had been there a long time.

Our house is 103 years old, which brings up a whole other set of issues. But these issues, so, and this is gonna tie back to the emergency reserve or just having cash on hand, we finally decided to replace seven windows in our house, and they cost, everybody knows, windows are ridiculously expensive.

So, it cost us $18,000, which we had prepared for, but what we did not prepare for was our AC unit going out on the hottest day of August that year, and then our hot water, our tankless hot water heater went out. So, we altogether, that was a $29,000 burden that we, 18,000 of which we planned for, 29, the extra 11,000 we did not plan for, but we had a buffer.

So, and that's something that, an example we use with, we have an individual that, a couple that we worked with a few years ago, who only one of them was working, they were living, they were renting, and they just felt like, they were 31 and 30 years old, and they just wanted to no longer rent, and we said, "Well, why?" So, first of all, they didn't have any savings.

They woulda had, she was a veterinarian's technician or whatever, she would qualify for a doctor's loan, which allowed her to put only like, you know, however much down, a very small down payment, and then she didn't have to pay private mortgage insurance, and we just said, "No, do not do that.

"What if your furnace breaks?" So, we talked them out of it, thankfully, but that's a big, big concern, too. Renting is fine. - I have one more thing that I think's interesting, and nobody thinks about it the right way. You generally don't wanna be the least well-off person in your neighborhood.

You will be unhappy there, 'cause you will be constantly comparing yourself to your neighbors. It's tricky, 'cause that's usually associated with, but I wanna get my kid into the good school, something like that, there are other factors, but do you think about, like, the neighborhood that I am buying a house in, am I gonna feel good living here, or am I gonna feel unwelcome, or like I am not as, you know, I'm not spending as much, and like, just drive around.

What kind of cars are people, are they displaying their cars out there? You know, like, what do the houses look like? Being aware of what it's gonna feel like to live in a neighborhood in terms of what the houses, and it feels like money-wise, is actually important. Be at the upper end of that, not the lower end.

- Because also, if you're at the lower end, and you are very aware of that, that's another thing, that's the other lifestyle creep pressure, and it's not even fun, it's that pressure to keep up with the Joneses. - Absolutely. - One thing we haven't talked about yet is debt.

So there will be some people in the Accumulator audience who may be early in their careers, may actually be earning substantial salaries, but are starting from a point of having significant debt, as well, from their education. Randy, how do you work with those clients, and what are some of their particular issues?

- Well, so being an hourly-based firm, we do cater to a lot of recent college graduates who are buried in college debt, still haven't saved up for a sufficient amount in an emergency reserve. They want to save for a down payment on a house. They also are, you know, they wanna save for retirement because what's the most precious commodity that any young saver has, versus everybody in that room, is time.

So I think we help people prioritize, and definitely if you have high-interest credit card debt, if you're paying 19%, that's not doing any good. So pay off the credit cards first. But I'd say, like, the debt pay down versus saving for a down payment on a new home, and then we have, like, with student loan forgiveness, I think that's a pretty complex answer that's gonna be very specific to each individual, but we would prioritize at least saving to your 401(k) up to the company match, and then pay off any high credit card debt, because again, paying interest in the teens is, I mean, it's basically getting a 15% return once that's down, or paid off.

But I don't have a specific answer, because everything we do is very much case study specific to each individual. - Got it. I think we'll take a moment now and see if people in the audience have questions they'd like to ask the panelists. I'll bring our microphone down, or I'll let Rick bring the microphone down.

(microphone thuds) - Thank you all. I've got a question that might be a bit of a math-ma to the crowd here, but what are your thoughts of sort of platforms like SeedInvest, WeFunder, that allow people to invest small amounts of money into private companies, and also the proliferation of ads, at least, of fractional art, fractional cars, and all that kind of stuff as an asset class?

- So I've done some of these things. I've done something with WeFunder, and I've also, I do own some art. I have a partnership with them, so I will not mention the name of the company, but you can probably guess who it is. So I think that should be a very small portion of your portfolio.

I think like 90% of your assets should be in income-producing assets. I don't see art, or wine, or crypto, or gold as income-producing, because there's no cash flows. And so because of that, even WeFunder, which is private companies, you're like, well, that's a business, isn't that cash-flow producing? Well, right now it probably isn't, so I would say for all practical purposes, those are like the high-risk, like non-income-producing.

I keep that 10% of my portfolio. I don't know what other people do, but that's just kind of how I look at it. I think those are sometimes, they're actually hobbies masquerading as investments, and I think I expect to lose money on my hobbies. I spend money on equipment.

I spend money on fees of various kinds. I love it, it's worth it, I'm gonna do it anyway, but I don't expect to make money on my rock climbing. And I think a lot of that's similar. Like enjoy it, get into the community. This is your spare time. Don't expect to make money on it, just enjoy it.

- Thank you. - I had a question about estate planning. It's something I always know I need to do, but I've always postponed it because in my mind, I'm thinking, okay, if I don't have at least two million or three million, do I really want to do estate planning?

So I guess my question is, is there really the right time when you should be doing estate planning, and is there really a certain threshold or dollar amount that it makes sense to start doing estate planning? - I can't say much about dollar. I'm gonna hand it off to you.

There's one, me and my wife said, oh my God, we have a kid. We need to have this done just so it's clear what's going on. The worst thing you can do to a spouse or a significant other is to have them deal with the loss of you and all this stuff at the same time.

And I've seen that play out multiple times. So just if somebody else is effectively dependent on you in some fashion, or it's gonna be a big pain in the butt to deal with, do it ahead of time. Again, when you're cool and calm and collected, it's a lot better way to do it.

We used a site online called Trust and Will, and I think it's just trustandwill.com. It was fantastic. It was like easy to get through. We don't have an estate. We don't have, we're not landed gentry, but it was very good for like the 98%. - I'll reference the CFP exam, which I took, shoot, probably 12 years ago.

But there was one question, and Alex, you had it on your exam too. They gave just like four just insane things that no prudent investor or consumer would ever do. It said like, oh, this person has $30,000 in credit card debt. All of their retirement's tied up in one stock.

They have no savings account, and they don't have an estate plan. What should this person do? And in the practice exams, I said, oh, you know what? They should pay off the credit card debt, you know, whatever, or I can't remember. But the answer was get an estate plan because you never, like Dan just said, you never want to be a burden to somebody else.

And even if you don't have any assets, or you don't feel like you have $2 million as you said, well, who is going to make the decisions if God forbid you end up in a hospital and somebody has to determine, do we pull the plug on this person or, you know, give her treatment?

So it's not, the nice thing about not having a complex estate means you're not going to pay that much for a good estate plan. - So I think that question is appropriate given my circumstances. I've been widowed for eight years. My husband dropped dead on me. And I would say that that advice, I would hope that everybody takes that to heart because had he not had that in place, I think it would have been considerably worse than my situation is.

I have a two-year-old and a six-year-old when he died, and now they're 10 and 15. So we're still trying to, you know, make our way through things. I had two comments. One of them was, this is a very male heavy crowd here and there, make sure that your partners are aware of where your money is.

The greatest thing my husband did for me was teaching me about where, you know, keeping track of the money, keeping track of the accounts, all that stuff. We didn't have like the big book that the Bogleheads talk about, but I had everything in Quicken. So when he died and two months later, I had to file taxes.

I filed taxes in two hours because everything was right there. The next year, it was a mess. But so I would say, at a minimum, even if your spouses are not really into it, the chances are, you're gonna, you know, men are gonna die before women. And, you know, to the extent that you can encourage your partners to at least know a little bit about where your puts and takes are, that's super helpful, as I can attest.

One suggestion I just came to my mind was, when you have a power of attorney for your finances, consider, something that I did, having it be valid right now. And because when I brought this up to my attorney, I said, you know, how can I trust somebody if there's a valid power of attorney?

She could clean me out. And her response to me was, well, why would you trust somebody when you're, you know, half dead, you know, half brain dead in the hospital? It should be somebody that you could trust while you're, you know, compus mentis and non-compus mentis. So I just throw that out there, too.

My question, though, is what advice do you give to your clients about the reality about returning to the workforce after being out for a period of time? - First of all, sorry for your loss. I don't know, I don't really have a great answer to that. So what advice would we give to somebody who's been out of the workforce?

(audience member speaking indistinctly) What is it, you know, (audience member speaking indistinctly) - Yeah, so first of all, that would be very admirable, and it's unfortunate because you, it sounds like you did have to take time off because of your husband passing. I mean, I would think the best thing I would do is just stay very active on the LinkedIn community, stay closely connected to wherever it is you were working, make sure your resume stays fresh.

I don't really have a great answer to that, though. Anybody? - This is like not necessary for everybody. This came up, we were looking at the stats around the impact of women staying home to take care of kids, especially in the first four years. And there was a great report that was done on it that was like the biggest financial hit is not that they are not earning money.

And it is not that they are not saving. It is that when they come back to the workforce, their marketable skills have gone down, and people are like, oh, we're gonna pay you less in real terms than when you were here last. So I think the key thing there is take whatever time you can to keep some evidence-based skill up that you're like, I have been doing this.

I have been volunteering to do taxes down here. I have been doing some professional thing. So that it is, and you know, if you haven't lifted weights for four years and you come back, the first time you do it is horrific. Whereas if you just go every once in a while, it's not that bad.

So I think a little bit of continuing to do something to keep those muffles there and keep it evidence, like it can be one day a week, whatever. It's just keep your foot in the game just a little bit. And I would also flip it and say, this is a opportunity to think about changing careers if you haven't.

Again, not for everybody. My wife went through this. She went from being a public school teacher to being a software engineer. She learned how to program, did all that stuff, and ended up coming out of it much happier. So it is, you know, you can go into the chrysalis and metamorphosis and come out the other side of something new.

- Thank you all. I think we're gonna have to cut it off now. Sorry. Thank you to a tremendous panel. It has been my honor to be with you, meet you all. Rick, tell us where we're going now. We're going back to the next room for your conversation with Burt Malkiel, is that right?

Okay, thank you all. - Thank you very much.