How to Avoid the Money Mistakes of Every Generation

00:00:00.000 | With the biggest wealth transfer in history underway, how people think about money has never

00:00:05.360 | mattered more. So today we'll break down what each generation gets right and wrong about saving,

00:00:10.660 | spending, and investing so you can learn from their wins and avoid their mistakes. You'll walk

00:00:15.140 | away with insights on everything from navigating home ownership and inheritance to knowing when to

00:00:19.900 | play it safe and when to take more risk. So whether you're navigating home buying, just starting to

00:00:24.580 | save, or figuring out your retirement, there is something here for every generation. And to do all

00:00:29.440 | this, I'm joined by Ben Carlson, a seasoned financial advisor and widely respected voice

00:00:34.040 | in the space to help you rethink how your financial mindset stacks up and what changes might get you

00:00:38.880 | further faster. I'm Chris Hutchins. If you enjoyed this episode, please share with a friend or leave

00:00:43.600 | a comment or review. And if you want to keep upgrading your life, money, and travel, click

00:00:47.680 | follow or subscribe. Ben, for almost 30 years, I feel like we've been talking about this great

00:00:53.660 | wealth transfer from boomers to millennials. And I want to get your take on whether it's really a big

00:00:58.220 | deal. Like does this even matter for our day to day finances?

00:01:00.820 | Probably not as much as most young people would like for now. And I've been we've been having a lot

00:01:06.080 | of conversations with clients about this recently, because there's a few things going on here. One of

00:01:11.040 | them is the fact that a lot of baby boomers are having a hard time spending the wealth that they've

00:01:16.180 | created. Right? So we're having these conversations where people will say, listen, I just want to keep my

00:01:22.560 | principal and don't touch it. And I want to spend the dividends and the interest income,

00:01:26.700 | everything else just like I don't I'm too nervous to touch it. And because they've been saving for 40

00:01:32.580 | years. And they're, you know, they did a really good job, stocking money away. But now having to like

00:01:39.320 | flip a switch and go the other way and then spend it down, psychologically really, really challenging for

00:01:44.020 | them. And so for a lot of people, it's, it's Oh, no, what if I you know, I have health problems,

00:01:49.180 | and I people are living longer, and I don't know what's going to happen with the economy. And I don't

00:01:53.460 | know how the markets are going to do going forward. And so that's a big part of it. The other part is

00:01:58.100 | that, you know, baby boomers are living longer than any generation that's come before them, right?

00:02:02.940 | That's going to be every generation going forward. And so the millennials who are potentially banking

00:02:08.040 | on a an inheritance might not get it until their 50s or 60s, right? Because their parents could live

00:02:14.520 | to their 80s or 90s. I think the stat is, if you're a married couple retiring today, at 65, there is like

00:02:22.740 | a 70% chance that one of you will live into your 90s, women live longer than men. So that means again,

00:02:28.480 | that the younger cohort, the, you know, Gen X millennial are not going to receive that

00:02:33.880 | inheritance probably when they need it the most, right? When they're trying to buy a house when

00:02:38.880 | they're paying for daycare for their kids. And so a lot of the conversations we're having, you know,

00:02:44.480 | is do you want to actually have that inheritance come earlier? And does it make sense to spend it now

00:02:50.280 | and you can watch your family actually enjoy it when they need it. But a lot of the baby boomer mindset

00:02:57.020 | is no, I pass an inheritance down when I die, because that's what my parents did.

00:03:00.900 | And so there's all sorts of like psychological minefields that we're dealing with here when

00:03:06.900 | it comes to this, this money. And you're right, it is a lot of money that's going to be passed down in

00:03:11.160 | years ahead. Now, when you think out of the macro sense, it's a massive wealth transfer. Economically

00:03:15.640 | speaking, will this have an impact on people's lives who don't get an inheritance? Is it a broader

00:03:20.680 | impact on housing prices, the investment markets, that kind of thing? Or is it more a

00:03:26.300 | conceptual thing that doesn't really impact the rest of us?

00:03:29.340 | I've gotten that question a lot, like, hey, when baby boomers go to sell their stocks,

00:03:34.620 | they're going to crash the market, right? And my response to that is one, those sales are going to

00:03:41.180 | happen over the course of 20 to 30 years, not going to happen all at once, especially those who

00:03:45.340 | had very equity heavy portfolios. They're not just going from 100% stocks to 6040 right away,

00:03:51.680 | they do it in pieces. And they've been doing this for a while. And a lot of them just hold more cash

00:03:56.060 | too. But the other thing is that, as you know, the top 10% own almost 90% of the stocks in this

00:04:02.480 | country. And so it's not like there's just this big group of people that's going to go to sell most of

00:04:09.500 | that money is going to be passed down, probably. A lot of them that own the most stocks are probably not

00:04:14.400 | going to be even touch the majority of it. So yeah, I don't think that it's going to cause this

00:04:19.980 | massive problem for the economy or the markets. It's going to be more of a slow drip than like

00:04:24.740 | this big tsunami that happens all at once. Now you mentioned, you know, that mindset of boomers is

00:04:30.340 | like, this is just what I've done. And it's really got me thinking a lot about the difference between

00:04:35.540 | how these different generations think about money and what impact that has on advice we get.

00:04:41.080 | So I'm curious, like, what are the kind of fundamental differences in financial mindsets

00:04:47.920 | for generations from kind of boomers to millennials, and maybe what you see coming up in Gen Z and

00:04:53.760 | generations in between?

00:04:54.600 | One of the things that we're seeing in the wealth management space is if there is an inheritance

00:04:59.700 | and a pass down, it's listen, my parents had a guy that they worked with, and we don't trust this

00:05:04.800 | person. There's a lot of older gray haired advisors who aren't really talking to the next generation.

00:05:09.420 | And that's something that we're trying to do a lot because you want to have everyone in at the

00:05:14.200 | table for the conversation. But the other thing is just, you know, I think part of the baby boomer

00:05:18.880 | mentality of not spending really has been handed down from their parents, right? Their parents were the

00:05:23.060 | the live through the Great Depression. And so a lot of them still have that mindset of,

00:05:27.960 | I have to really have a backup plan for a backup plan. And I don't want to get caught stuck if

00:05:34.400 | something doesn't work out. And I think it's been supercharged this decade, really, because a lot of

00:05:40.480 | millennials were, you know, they felt some scars from the Great Recession, the 2008 crash, right?

00:05:45.820 | People, there was all these stories in the 2010s of millennials are shunning risk, and they're not

00:05:50.220 | investing in stocks very much. They saw their parents live through it, and they started to live

00:05:53.880 | through the stock market crashes. And it was kind of scary. And the 2020s, I think, has completely

00:05:59.380 | switched. And it's really fascinating to me to watch because I was of the opinion that,

00:06:04.120 | okay, this really was a pandemic phenomenon. Because remember at the beginning of the pandemic,

00:06:07.620 | when everyone started going crazy and day trading and open Robinhood accounts, and people said,

00:06:13.300 | well, that's just because a lot of people aren't working right now. And there's no professional

00:06:17.340 | sports on right now to gamble. And once that stuff opens back up, and people are going back into the

00:06:21.780 | offices, and they can gamble on sports again, it's just a fad, right? And then we got the meme stock

00:06:26.540 | craze. And it's like, okay, once this goes away, then people will get back to it. And it doesn't

00:06:32.020 | seem like it's going away. It's only strengthened. And there's millions of new investors now. The stat

00:06:38.440 | I keep coming back to, I talked to one of the head people from Robinhood a couple weeks ago on my

00:06:42.300 | podcast. And he said that they have 26 million customers, and 13 million of them, it's their first

00:06:48.340 | brokerage account they've ever opened. So these are brand new investors into the markets. And they are

00:06:53.760 | more comfortable with risk, because think about all the people who invested in crypto, it wasn't

00:06:57.560 | institutions, it was regular retail people, right? And they've lived through how many 75% drawdowns in the

00:07:04.300 | last 10 years. And so I think that the younger generation is just more comfortable with speculation,

00:07:08.940 | because they're doing it, they're betting on events now with Calci and Polymarket, right? They're day trading

00:07:17.260 | stocks, they're investing in crypto, they're also gambling on sports, that's in like taxable account with their

00:07:23.260 | other stuff that's tax deferred, they're investing in target date funds and index funds and ETFs. And so there's this

00:07:29.200 | dichotomy where they have this stuff where they're having fun in it, for them, it's part investing in part

00:07:34.160 | entertainment and part like lottery ticket, like I, I've seen people, you know, hit it big, and maybe I can do that too. And so I just

00:07:40.540 | think the acceptance of risk is this, this decade is something that really interests me, because people keep

00:07:46.500 | thinking that it's just going to go away. But what if this is a whole generation of people who are just

00:07:50.560 | more willing to take risk? And I don't know where that leads us like for the markets, it could be, do we have

00:07:56.640 | more booms and busts because of this mentality? I don't know, but it's interesting to contemplate.

00:08:02.540 | Yeah. And what about kind of the outlooks, not just on investing, but where do major kind of personal investments

00:08:10.800 | like homes and the housing market fit into these generational mindsets? And kind of how do the macro events that are

00:08:18.020 | shaping these generations affect that?

00:08:19.900 | I think one of the reasons that so many people are comfortable, you know, saving and investing more is some people are just shut out of the

00:08:26.420 | housing market. Fidelity had a study recently that said the average savings rate is now like 14%, which, which I was

00:08:32.480 | kind of blown away by I never would have thought it would have been that high. And we're hearing from a lot of people that

00:08:37.140 | listen, I can't afford a house right now, or it would take me way too long to save for down payment. So instead, I'm

00:08:42.680 | saving and investing more, or I'm traveling more. Obviously, I think the whole American dream thing with the housing is still

00:08:49.100 | prevalent. Like there's still people who are buying houses. There's not a lot of activity going on right now, because

00:08:54.100 | mortgage rates are so high and housing prices are so high. But I think that is still something that people aspire to. It's just

00:09:00.180 | happening much later in life for people. I think they said the average age of first time homebuyers has gone from 31 to 38. And that

00:09:06.660 | happened pretty quickly. And so I think people are just having to put this stuff off until later in life when they start

00:09:12.180 | making more money. Now, one of the things I think about is if you look, if you are a millennial, and you remember what

00:09:17.220 | mortgage rates were, you know, in the last 1015 years, it feels like they're really high. But if you

00:09:23.340 | have lived decades, you know, is this the new normal? Like, do we just at some point have to get used to this

00:09:29.600 | world we live in? If you look historically, I think going back to like 1970s, the current mortgage rate is

00:09:34.740 | about average, which is which is hard to believe. The problem is, is that the readjustment period happens so

00:09:41.540 | fast, we've never had a period where we went from such low rates to high rates this quickly. And plus,

00:09:47.460 | you had the 50% spike in housing prices. So in that sense, I really do feel for the young people who

00:09:53.140 | mistimed it for no other reason than bad luck, right? If you bought a house pre 2021, you lucked out and

00:10:01.620 | you got 3% mortgage rates, you had the ability to refinance and you also are sitting on a ton of equity.

00:10:05.940 | equity. And if you just happened to miss that, because life events are the fact of when you

00:10:10.660 | graduated school, or it just didn't work out for you, and you were going to buy later, and you just

00:10:14.820 | didn't do it. I really do feel for those people. If you asked people today, you know, could you afford

00:10:21.460 | your own house today at current mortgage rates, I wonder how many people would say probably not,

00:10:25.380 | or it would be a really big financial strain on us. Alternatively, the people who locked in those low

00:10:29.540 | rates and locked in lower housing prices, think about how much more disposable income they have,

00:10:34.500 | than if they're out there trying to buy today. So I think that's another piece of the risk pie.

00:10:39.540 | This decade is just the consumer spending. If I mean, remember, travel was another one that people

00:10:45.540 | said, well, that's going to die down eventually. Doesn't it now seem like people assume two to three

00:10:50.260 | trips a year, and a lot of cases, like, that's their God given, right? Yeah, it's that mentality

00:10:56.500 | has gone from a luxury to a need, essentially, for a lot of people, I think their thing that attracted me

00:11:02.980 | most to the points miles travel hacking game is just that you could attack this huge part of

00:11:09.860 | discretionary spending. But I also had that same mentality. Like it, despite that, as a kid,

00:11:14.820 | it wasn't necessarily the thing. It now feels like, how could we spend the whole summer at home? I don't

00:11:21.300 | know how that's evolved, but I know that wasn't the case for my parents. When I was growing up,

00:11:26.420 | that was the same thing. Yeah, we didn't expect to go on these extravagant vacations and travel to

00:11:32.100 | Europe or go somewhere really nice every time for spring break. But that is sort of the mentality

00:11:38.660 | these days. And the hard part for people is trying to keep up with that, right? Am I saving and investing,

00:11:43.140 | but also spending and enjoying myself? And I think that piece is probably harder than ever. And you add in

00:11:48.580 | the social media element of I'm watching all my friends share the vacations they're going on,

00:11:52.900 | and I feel left out. Why aren't we doing this? I think for people at a certain age, you know,

00:11:57.380 | in your 30s and maybe early 40s, it's never been easier to really spend a lot of money and then think,

00:12:05.140 | like, how am I not getting ahead more than I am because of how much money I'm making?

00:12:08.900 | I will say, and you've probably seen the same because when I ran my financial planning firm,

00:12:12.980 | I was just surprised that there are a lot of people that are living that life and they're just not

00:12:18.580 | saving. When you look at what everyone else is doing, unless you have the full picture of,

00:12:23.460 | you know, where's money going? How much money is being saved? You might think, well, these people

00:12:28.500 | have a nice house. They're going on vacations. Why can't I do that? But I have seen multiple people's

00:12:33.380 | balance sheets and it's like, oh, they have no savings. So if you're building up your savings,

00:12:38.740 | and not able to keep up with those people, like the tables may turn in the future and you might

00:12:44.100 | be in a lot better position. And it's just, it's funny how no one ever posts like, here's my vacation

00:12:48.820 | photo alongside, here's my debt and income and my balance sheet. Back to the original point we made

00:12:54.180 | about inheritances. I think I have a handful of friends who have parents who are relatively well

00:12:59.700 | off who are assuming, well, that's my retirement nest egg, right? I'm going to spend it all because I

00:13:04.580 | have that coming. And that's a very risky game to play. Like I said, because you

00:13:08.580 | might not get it until much later in life. And if you're not developing those habits,

00:13:13.460 | and potentially if people are living longer, maybe the nest egg gets whittled down further

00:13:17.460 | than you thought. And so, yeah, you're right. I always wonder when I see someone driving one of

00:13:23.300 | these $90,000 trucks, and I have nothing against people who have trucks, but I always look at them

00:13:28.820 | and I say, man, that's got to be a $90,000, $95,000 truck. I wonder how much they have in their 529

00:13:33.140 | plan or their IRA or these types of things. And that's the other side of it, obviously.

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00:15:52.180 | So if you look across generations, are there things that you would pick out if you could kind of

00:15:56.260 | define the personal financial mindset that's kind of ideal? What do boomers get right? What does Gen X get

00:16:03.300 | right? What does Gen Y get right?

00:16:05.300 | I'm generalizing here. There have been plenty of boomers who really did figure out the way to save

00:16:11.380 | and invest over a 30 to 40-year period. And I know everyone thinks that boomers had it easy,

00:16:15.860 | but they had these 70s to live through with inflation and high mortgage rates in the 80s and

00:16:20.660 | the dual crashes in the first decade of this century. They saved and invested from their 401k

00:16:25.620 | plan and their IRA over time. The market has done a lot of the heavy lifting for them. And we get a lot

00:16:30.100 | of those people who are DIY people coming to our wealth management practice who have just saved and

00:16:34.580 | you know, over time built wealth. So I think a lot of baby boomers did a really good job

00:16:39.460 | with that. And again, the hard part for them is then turning around and spending it and enjoying it.

00:16:44.500 | I think millennials are kind of have a foot in each camp. We lived through the great recession. So we

00:16:49.940 | understand risk, you know, and so I think millennials have a more balanced view of this thing. And again,

00:16:57.300 | if you were able to buy a house as a millennial, I think you're probably sitting in a pretty good position

00:17:00.740 | these days. The thing that worries me about Gen Z, and I think they'll snap out of it, hopefully,

00:17:05.620 | is just the financial nihilism, just the nothing matters. So I'm just going to take these crazy risks

00:17:10.820 | and hope something works out because the old nine to five, put it in the 401k, build wealth slowly.

00:17:18.660 | That's for a prior generation. And this isn't everyone there, obviously, but I think there is

00:17:22.660 | a little bit of that, you know, nothing matters. So let's just put it on red or black and see what

00:17:27.540 | happens. And I think people do graduate from that mindset eventually. But again, I think the fact that

00:17:32.980 | that generation has technology and a risk mindset, I think most of them will be okay. And I think a lot

00:17:39.060 | of them are starting to invest earlier and get experience. And so even if they

00:17:43.300 | blow themselves up trading triple levered ETFs or options, you know, date, you know, same day options,

00:17:50.980 | wherever it is, if they're doing it with less money before they start saving and putting stuff away,

00:17:56.100 | eventually those habits change and they realize like, okay, maybe I need more of a slow and steady

00:18:00.660 | approach. And I think that's what we're seeing is a lot of them get it out of their system after they

00:18:04.900 | really also hard it is to do those things. I know when I've looked at the housing market

00:18:08.580 | historically, like investments are a better return typically than, you know, a house. But is there

00:18:15.380 | any argument to be made that people who are out outside of the housing market right now because

00:18:21.060 | it's too expensive and are investing could end up being better in the long run?

00:18:24.980 | So I've actually written about this before. I've tried to come up with like,

00:18:28.740 | what is the actual return on housing? Because if you look at like Robert Schiller's historical

00:18:32.580 | housing market data, essentially, over the long run, it equals about the rate of inflation,

00:18:37.940 | which is not not a terrible thing. But then you have to put in the leverage there. And then you have

00:18:42.100 | to talk about well, you have to live somewhere. So there's like implied rent, because you're not

00:18:45.700 | renting somewhere else, you're you're you have to have a roof over your head.

00:18:48.500 | And implied inflation is like three ish percent.

00:18:51.380 | Yeah, it's like three, three to 4%, something like that. But then you also have all the ancillary

00:18:54.980 | costs, the the property taxes and insurance and all the stuff you buy for your home.

00:18:59.460 | And so my stance is like no one ever really knows what their actual return is. I don't know,

00:19:04.740 | maybe you have the spreadsheet of all the costs that you've ever done in housing.

00:19:07.620 | But I don't think there's anyone who has the actual return. And maybe that's okay,

00:19:12.100 | because I don't view a house as an investment as much as it's, it's kind of a form of consumption.

00:19:16.980 | And it's a valuable financial asset. But yeah, you're right. If you just did an apples to apples

00:19:21.140 | comparison of the return, you're probably doing better off. Yeah, investing in the stock market,

00:19:25.780 | even though housing has done so well this decade. And if you bought a house in 2020 with a 3%

00:19:31.220 | mortgage, and then you had 50% returns, and the leverage, you probably did pretty great. But that'll

00:19:37.940 | slowly but surely be whittled away as returns aren't as high going forward. But yeah, the people

00:19:42.340 | who are just investing in the stock market are probably in a better financial.

00:19:45.620 | Like the stock market also did really well over the last decade.

00:19:48.340 | Yeah, yeah, yeah, it's up 14% per year in the 2020s, and did just as well in the 2010.

00:19:54.980 | And so for someone who, you know, didn't buy the house in 2020 didn't get the 3% mortgage rate.

00:20:00.500 | But you know, whether it's the American dream, whether it's they just want to own a home,

00:20:04.500 | is there ever going to be a good time to get in?

00:20:06.980 | And so it's funny, because I had people reaching out to me in 2021, right after the housing prices

00:20:13.220 | started taking off. And they said, I can't do it, housing prices are up 20%. Remember, there was all

00:20:18.420 | these, there was bidding wars and non contingent sales, and we're not going to do an inspection.

00:20:23.780 | And there was all these crazy lines out the door, because there was this housing boom. And I had a lot

00:20:27.700 | of people say, I'm going to sit this out and wait until the craziness subsides. And my stance is always,

00:20:32.500 | don't try to time the housing market. Because people who have said, I'm just going to wait for

00:20:36.260 | mortgage rates to fall. And we're still at 7% mortgage rates. And so my thing is, if you find

00:20:41.940 | a house that you like that you're going to willing to own for seven to 10 years at a minimum, that's a

00:20:45.620 | big key is you don't want to trade out trade around in houses, because the cost frictions are so high,

00:20:50.980 | and you pay most of your mortgage and interest for the first few years, it doesn't make sense to trade

00:20:55.700 | houses, I think you could probably skip the starter home these days, if you can and buy a house you're

00:21:00.980 | willing to stay in for 10 or 15 years. But I just think if you can afford to service the

00:21:05.220 | debt on it, and you find a house you like, don't worry about timing it and waiting for the perfect

00:21:08.980 | mortgage rate, or the perfect time, you just do it when you can afford it. I don't like the idea of

00:21:14.100 | trying to time the housing market like it's buying a stock or something.

00:21:16.820 | I mean, I also don't like the idea of trying to time the market, you know, the stock market either.

00:21:21.220 | But right, true.

00:21:22.900 | If someone were to say, hey, I'm just going to wait till mortgage rates drop. And the answer is okay,

00:21:27.300 | well, if they don't drop, what are you going to do? It's like, well, if they don't drop,

00:21:29.380 | then I'll bite the bullet. You can refinance if they drop unless your answer is I will never buy

00:21:33.220 | a home unless mortgage rates drop. You know, you can kind of hedge by saying if I really think

00:21:37.940 | they're going to drop, as long as you can afford it now. I think that's the big thing. You don't want

00:21:41.540 | to get over your skis and make an investment that if mortgage rates don't drop, you can't continue to

00:21:45.700 | hold because it kind of reminds me of all the interest only mortgages that had these balloon

00:21:50.260 | payments and people were just kind of expecting my salary will be more in the future.

00:21:53.700 | Uh, that's probably not great.

00:21:56.260 | Well, and the hard part is when mortgage rates do drop. So let's say they go from seven to five.

00:22:00.900 | My guess is that there's going to be a ton of demand coming off the sideline and then maybe it's harder

00:22:05.780 | to buy because you have more competition. So that that's why timing it is so difficult. Like I'll just

00:22:10.740 | wait for housing prices to fall 10% and mortgage rates to drop and getting that threading that needle

00:22:16.340 | is probably impossible these days. And again, yeah, just do it when you can afford.

00:22:19.700 | We did so much market research talking to customers when I was working at Wealthfront and

00:22:23.860 | every single person felt every single year that the market was overpriced. And they were like,

00:22:28.500 | I want to get in the market. It's overpriced right now. Like I'm going to wait a couple years.

00:22:33.460 | Well, it turns out that pandemic aside, the last 10 years, like you kind of didn't want to miss out.

00:22:38.740 | Right? Yes. Yeah. It's, and I think a lot of people do have that mindset of

00:22:45.700 | I'm going to buy when it's my time to buy. I think it's more the spreadsheet warriors who

00:22:50.340 | try to time it and overthink things and the people who don't overthink it and just realize like,

00:22:54.260 | Hey, I just got married or I'm having kids. It's time to buy a house. The life event is more

00:22:59.780 | apps to make sense than, than the financial decision, even though you still have to run

00:23:03.860 | the numbers, obviously. Yeah. And I think past 2008, skip the pandemic. Cause that was kind of a,

00:23:08.980 | an anomaly event in a way we haven't had a major market correction, right? Like anything really,

00:23:15.460 | really significant that didn't recover quickly. I've looked at this in the past. The housing market

00:23:20.020 | does not fall that often nationwide in certain markets, obviously in their markets right now,

00:23:25.220 | in like Texas and Florida, that just got so overheated that the prices are coming in and the supply is,

00:23:30.980 | is, is rising. But on a nationwide basis, even during recessions, I looked at this, I think

00:23:36.420 | in something like seven out of the past nine recessions, housing prices have risen.

00:23:41.380 | So people think that the housing crisis in 2008 is the norm, but that is an outlier. It doesn't happen

00:23:47.940 | all that often. And so if you're waiting for this big fat pitch, it just might not come. And, and again,

00:23:53.860 | it's because housing houses don't trade like stocks, right? You don't see the prices every

00:23:58.420 | day. People aren't able to panic because it's an illiquid asset. When you've talked to people or

00:24:02.580 | looked at historically, has everyone for the history of time always felt like everything's expensive

00:24:08.500 | right now and everything's overpriced. Like I haven't been in the market per se for, you know,

00:24:13.220 | five, 10 decades, but it seems like my experience the last 20 years is that everyone always thinks

00:24:20.340 | everything's expensive unless a recession has just hit.

00:24:23.220 | Yeah. So there's a guy, uh, John Reckenfeller, one of my favorite personal finance columnists at

00:24:27.380 | Morningstar retired, uh, a couple months ago. And he wrote this piece. His last piece was all about

00:24:32.740 | the stock market. And he said he'd been investing since 1987. Every year since then, people have

00:24:37.380 | thought the stock market was overvalued. What if this is it? And I missed the boat. And he said,

00:24:42.260 | every time they've been wrong. And think about how many people have tried to call the next crash ever

00:24:46.580 | since 2008 that, you know, look at the Cape ratio and look at this and the stock market is overvalued.

00:24:51.300 | And what happens when Apple hits a trillion dollars and that's the sign. And yes, I think that trying

00:24:57.780 | to play that game is just better left for professionals. And even they can't do it.

00:25:01.620 | I know you wrote this piece a while back about financial advice that doesn't work anymore. And

00:25:06.020 | I'm wondering if there are any other lessons that we've maybe picked up from our parents' generation

00:25:10.820 | that maybe for a younger generation right now, or even for that older generation living right now,

00:25:16.420 | you know, maybe those are things that they should kind of leave by the wayside.

00:25:20.340 | Well, I think one of them I wrote in there, since we're talking about the housing market,

00:25:23.220 | is that you need to have a 20% down payment to buy a house. And I think for people,

00:25:27.300 | for most people, that's almost impossible these days, especially living, think about where you

00:25:31.300 | live in California, how long would it take people to save up that money unless they have some stock

00:25:36.580 | options from a company they work at or something. And so I think it's okay to, you know,

00:25:41.460 | put five to 10% down on your first house. I think our first house, we put 5% down. And

00:25:45.860 | it seems imprudent for some reason. But again, as long as you can afford that monthly payment and

00:25:51.700 | all the ancillary costs, I don't think that's a big deal. Now, I feel like a lot of the personal

00:25:56.420 | finance experts might've shunned me for this one. But I say, especially early on, the whole idea that

00:26:00.260 | you need to have 12 months of savings and emergency fund, I think that's almost impossible for people

00:26:05.460 | just starting out. It's a goal that is something that you can work for. But again, I think if that's your

00:26:12.180 | only goal, you're going to probably have other financial goals that fall by the wayside. And so

00:26:16.660 | I think it's okay to like, put a toe in the water and slowly but surely build these things up over time.

00:26:21.700 | Building up your savings rate, like slowly increase it every time you get a raise or every year,

00:26:26.980 | right? And, and start out with one month of emergency fund savings, and then work up to two,

00:26:31.540 | three and four and slowly but surely get there and not try to just do everything all at once. I think

00:26:37.460 | people in the personal finance world often kind of look down on that stuff.

00:26:41.620 | And just the other one that I've completely changed my mind on, I've always been the spreadsheet

00:26:46.980 | warrior. For whatever reason, I think part of it was, I think a lot of people get their financial

00:26:50.980 | habits, it's half your personality and half your upbringing, some combination thereof.

00:26:55.940 | And my parents did a really good job instilling in me the savings habits. And my dad always talked

00:27:01.540 | about just don't have credit card debt. Like that was the one thing that was drilled into me from an

00:27:04.740 | early age. Don't have credit card debt, it's one of the worst decisions you can make. And I still

00:27:08.500 | believe that. But I think especially since I've had kids, the idea of just spending money and enjoying

00:27:12.980 | some of it now, that has been a big mindset shift for me that if you would have told me that in my 20s and

00:27:18.100 | early 30s, I would have said, you're nuts. No, you think about how much you're giving up on compounding

00:27:23.300 | interest over time and all these things. And I do think that's one of the areas where the younger

00:27:28.740 | generation has learned to enjoy themselves more. Now, older generations may look at them and say,

00:27:34.020 | well, they're overdoing it. They're spending way too much money. But I think that that mindset shift

00:27:40.340 | is way different now of just things like paying for convenience and, and again, traveling and,

00:27:45.700 | and paying for experiences. I think that's something that a younger generation gets right,

00:27:50.420 | that the older generation probably didn't spend enough time thinking.

00:27:53.220 | How did you make that transition? I know there are a lot of people listening who kind of

00:27:56.980 | fall in the frugal, heavy saving mindset. And so it's hard to like actually recalibrate to say,

00:28:03.700 | let's spend some money. You know, like I can look back to moments where I was like,

00:28:07.540 | I'd love an appetizer, but like, do I really want to pay an extra $7? It's just hard for me

00:28:12.660 | to learn to spend and I've had to get better. But I feel like when I hear you on your show talking,

00:28:18.260 | it's actually, you've kind of changed your habits without a gigantic windfall.

00:28:22.740 | So a couple of things, I think I did baby steps at first. So when I first got out of college and I'm

00:28:29.140 | trying to learn about markets, this is pre podcasting and pre YouTube. And I had to go to the library and

00:28:34.900 | start reading books because I was so far behind and I didn't have a lot of knowledge.

00:28:38.500 | I realized that in my first job, like, Oh my gosh, I have textbook knowledge,

00:28:41.140 | but I don't really understand how the markets work and how behavioral psychology works.

00:28:44.580 | And so I would go to the library. And if there was a book I really wanted,

00:28:47.060 | and it wasn't there, I would just have to wait for it. And this is my frugal mindset going,

00:28:50.180 | okay, I'll just wait till it's ready. And six months later, I'm still waiting in line.

00:28:53.860 | And at a certain point, I just said to myself, why am I not just spending $9.99 on Amazon to buy this book?

00:28:58.740 | And so I gave myself permission that anytime you want to buy a book, just buy it.

00:29:02.980 | Right. It's good. This is going to help your career. It's going to help your knowledge. Like

00:29:07.300 | it's going to be a good thing for you. So in categories like that, give yourself permission

00:29:11.780 | to just spend on those certain categories. Right. That's not everything. It's just,

00:29:15.540 | that's one or two things. And the other thing I did is I started just making it part of my savings

00:29:21.060 | budget. Right. So I, I turned the dial up on my vacation fund. And so every month,

00:29:26.900 | a certain amount goes into my high yield savings account. And it's just bucketed for taking a

00:29:31.300 | vacation because my wife and I had to talk about this. And I just said, what, what is important to

00:29:36.100 | you in terms of spending? And this is when we had kids, she said, I want to go on more trips because

00:29:40.340 | the first couple of years of having twins, we could not go on vacations because it was just too hard.

00:29:45.140 | The strollers and the double car seats and all the stuff that they need. It was impossible. So

00:29:51.380 | after, after we got through that period, my wife just said, I want to make this a priority in our

00:29:55.460 | finances. And so we dialed up that savings. And even if it meant not money, not going into our

00:30:00.900 | retirement accounts or whatever, it, it, it's something that we, we created as a monthly part of

00:30:06.580 | our budget. I track, you know, how much we'd save every year, obviously, as a personal finance guy,

00:30:11.380 | I showed my wife, here's our savings by year. And I plotted it out in a, in a bar chart.

00:30:15.620 | And we had this outlier year in 2021. And I think it's probably partly pandemic related.

00:30:21.300 | We just saved way more money than we'd ever saved before. And I think part of it is we weren't quite

00:30:26.180 | traveling yet. And I said, what are we doing here? Why, why did we all of a sudden ramp this up so

00:30:32.340 | quickly? Cause I like slowly, but surely saving more money. And my wife said, maybe we need to just

00:30:37.140 | increase the spending a little more too, then, and not have the savings jump that high.

00:30:41.220 | And so in recent years, since 2021, that's like a high watermark for me.

00:30:45.060 | And we've made a conscious decision to, Hey, we're still hitting our savings goal, but we don't need

00:30:50.260 | to like overdo it so much. It's something that was a multi-year thing for me where I had to slowly,

00:30:56.020 | but surely ease into it. I say that there, you should save enough money where sometimes it's

00:31:01.700 | painful where you go, geez, I could be taking a vacation to Hawaii with how much money I put into

00:31:07.220 | my 401k or IRA this year. Right. And you kind of think that, but on the other end, you're spending

00:31:12.500 | enough money where you go, geez, in 30 years, can you imagine how much money this would be worth?

00:31:16.660 | And I think you have to kind of go back and forth between these two camps. That's like the balance

00:31:21.060 | you're trying to strike.

00:31:21.780 | Now, maybe it's a complicated model, but is there something that gives you the confidence

00:31:27.380 | that the amount you're saving, which might be less because you've, you know, dialed up some of your

00:31:31.300 | spending is still enough. The idea of coast fire, right? You save a lot of money and then you let

00:31:35.940 | it compound. I think because my wife and I started saving early, seeing the compounding over time and

00:31:43.540 | then doing some calculations of in 20 years, here's what this is going to be when we decide to retire,

00:31:48.340 | whatever it is. Saving early was a big thing that's given me confidence where I don't have

00:31:53.140 | to keep, you know, plowing in and not in delaying the gratification. And so I think that's part of it,

00:31:58.580 | too, that we did so well saving in our twenties and we weren't making a ton of money and we weren't saving

00:32:04.340 | it a lot, but we did so on a regular basis and we slowly but surely increase. And so I think having that

00:32:09.780 | piece where I think of the compounding benefits and you never know how the future is going to turn out,

00:32:15.700 | but that gives me some sort of peace of mind that, okay, we've been saving for 20 years

00:32:20.340 | and it's going to keep compounding, even if it's at a lower rate than it has for the past 20. I think

00:32:26.260 | we're still in a pretty good place. So that's given me some peace of mind, too.

00:32:28.980 | Yeah. And I think sometimes it comes across like coast fire is not a is not a spectrum, but

00:32:34.100 | you know, it's like, oh, well, I have enough money that I don't have to save or I don't have

00:32:38.820 | enough money. So I have to save everything. And there's obviously spectrum in there. Like

00:32:43.460 | you and I probably might feel like we have a good amount of savings. That doesn't mean we never put

00:32:47.380 | more money in savings. Like I'm putting money in retirement accounts and 529s and I'm still saving.

00:32:52.660 | But similarly, I've realized what we've been saving so much. Are we going to be okay if we just save a

00:32:58.420 | little less for a few years when we think that's the right time? And I will say it's tough to model

00:33:04.100 | that out. Like there are, I'm going to do a whole episode on these like net worth modeling tools. And

00:33:08.500 | sometimes it's just hard to know if that's going to be enough because who knows how long it's going to

00:33:13.780 | be, who knows what's going to happen with the markets. And even these tools, if you dial the

00:33:17.700 | assumption for your rate of return up by one or 2%, it's like you're going to retire with millions of

00:33:23.140 | dollars or you're going to run out of money. So I guess at some point, the thing that gives me

00:33:28.500 | confidence is, well, you know what? If the markets don't stop returning like they have the last 10

00:33:34.260 | years, your spending is a knob you can change, right? If you go buy a house, you could sell it,

00:33:40.180 | but that's a harder thing. But if you spend a little more on vacations in years when the market's good,

00:33:45.060 | and then all of a sudden we're in a really big problem, you could stop going to vacation.

00:33:49.940 | If you were spending it on private school, you could put your kids in public school.

00:33:52.740 | Like the nice thing about flexing on, on kind of variable spending is that you can change it.

00:33:58.900 | If the underlying assumptions change, you lose your job, you know, you get a windfall,

00:34:02.820 | you could dial it up. You know, there's, there's that flexibility.

00:34:05.220 | And that's the conversation that we have with wealth management clients.

00:34:08.740 | You know, the, the 4% rule for retirement withdrawals, it's a rule that maybe 1% of the

00:34:12.580 | population actually does in, you know, in reality, because most people spend more money in their

00:34:17.860 | sixties than they do in their seventies and their eighties, right?

00:34:20.020 | Because their health slows down. They don't travel as much.

00:34:22.660 | But also when things are going good, people tend to spend more.

00:34:24.900 | And when things are going bad, they tend to reign it in.

00:34:26.580 | And I think that's actually okay to have some variability there.

00:34:29.860 | And we tell that with clients, like we're going to use a baseline for a percentage of spending,

00:34:34.020 | but it's more based on your budget. And then we're going to have conversations.

00:34:37.380 | Okay. Here's what the market actually did.

00:34:39.140 | Maybe you can turn the knob up a little bit, or, Hey, things are worse.

00:34:42.500 | If you're a little worried, maybe dial it back this year. Don't take that fourth vacation or

00:34:46.260 | whatever it is. And so I think that having some flexibility, that's the whole point of financial

00:34:51.220 | planning and why we always tell people that it's a process and not an event.

00:34:54.340 | It's not something that you lay out on day one and say, this is exactly how it's going to go.

00:34:58.580 | Because I look at my own life and think through all the different changes and career paths and savings

00:35:04.100 | and investment vehicles that have happened and how the market has turned out.

00:35:06.660 | I don't think I could have possibly ever thought the market would have done

00:35:10.820 | this well coming out of the great financial crisis.

00:35:12.820 | We're looking at like a 15 year bull market, depending on how you define these things.

00:35:16.740 | We've had setbacks along the way, but I think back to the way people were talking in 2010, 11, 12,

00:35:23.540 | and people were still so worried about the state of the world and the market is,

00:35:27.460 | what if it just takes so long to come back? And so I think trying to predict these things is just

00:35:33.060 | so difficult to do. So yeah, to your point, if you're just a little more flexible with it,

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00:37:47.540 | the description to start earning points on your rent payments today. How are you talking with clients and

00:37:53.220 | just thinking about things like Social Security? I know a lot of my peers look at their parents like

00:37:58.500 | that's subsidizing their cost of living, you know, depending on where they live in the country,

00:38:03.300 | like significantly to somewhat. I feel like we've been talking for 20 years about the future of this

00:38:08.100 | program. And do you factor that in when you think about your future or clients' futures?

00:38:13.620 | Okay, so I feel very strongly about this and I've written about this a lot. The fact that millennials,

00:38:18.340 | some of them think, well, Social Security is not going to be there for me. And I think it would be

00:38:24.020 | crazy if it wasn't. So there's this thing where in 2034, right, the amount of money coming in, it's going

00:38:29.940 | to be exceeded by the money that's coming out to make payments. People think, oh, that means it's insolvent.

00:38:36.740 | All that it means is that that money is going to have to come from somewhere else. And I can't imagine

00:38:40.900 | that any politician in their right mind would cut Social Security. Maybe I'm wrong. All it means is that,

00:38:48.100 | you know, if they really did, you'd receive 90 or 80 cents in the dollar. So I still think you can factor

00:38:53.940 | it in. And Social Security is another psychological versus spreadsheet one that we deal with because

00:38:58.260 | the numbers are, if you wait to get it until you're 70, it's something like an 8% per year return.

00:39:04.660 | It's almost like the stock market and your amount you're going to get on a monthly basis is that much

00:39:08.740 | higher. So it's like 70% higher at 70 versus 62 when you take it. But we see most people still

00:39:16.180 | decide to take it at 62 or 65, right? They take it earlier. And I've been having conversations with

00:39:21.540 | people about this. And they kind of do some, you know, break even if I just took the money and invested

00:39:26.740 | it or whatever would be fine, or it would take me until I'm 85 to break even or whatever the number is.

00:39:31.300 | And most people just say, I would just prefer to take it now for peace of mind.

00:39:35.140 | Even though the spreadsheet answer tells me, if I just wait a little longer, it's going to be much

00:39:39.860 | higher when I'm 70. Most people just feel more comfortable and just want to spend it now. It's

00:39:44.900 | kind of like, it's my money. Why wouldn't I get it earlier at 62 or 65 or something like that? I want

00:39:49.540 | to have to wait until I'm 70 to do it. So it's one of those ones where people say, I know this doesn't

00:39:54.340 | make sense on the spreadsheet, but I don't care. I'm going to take it now anyway, because it just,

00:39:58.260 | it makes me feel safer.

00:39:59.780 | Yeah. I similarly believe that it would be wild if everyone contributed to this program and there's

00:40:05.780 | statements showing how much money you've put into this program. And then they're like, all right,

00:40:09.380 | it's gone. Like that seems crazy. Do they push back ages because we're living longer? I don't know.

00:40:14.980 | That seems somewhat reasonable.

00:40:16.340 | This is one of the easier programs to fix if people ever decide to do it. Yeah. If they say

00:40:20.180 | over the age of 45, your grandfather in or 50, but under that, now your retirement date is this

00:40:25.220 | because you're living longer that. So social security to me is an easy one to much easier

00:40:29.060 | to fix in some of the other programs.

00:40:30.580 | Yeah. Okay. Well, we won't go down a list of programs right now, but we, we talked about kind

00:40:35.860 | of you thought in the wake of the great financial crisis, there's lots of volatility. What's going to

00:40:40.740 | happen. I feel like in the last two or three months, like with tariffs and whatnot, it just feels

00:40:46.020 | like we live in a world where we can have swings that used to be like an annual return in a week.

00:40:52.580 | How are you thinking about the way you invest or is anything changing

00:40:58.180 | other than giving lots of good fodder for conversation?

00:41:01.300 | I definitely think markets are happening faster. Cycles happen faster. The market prices things in

00:41:06.900 | way faster. And that's why we're seeing these bear markets happen quicker, but then the recoveries

00:41:11.300 | happen quicker. And so part of me thinks that these boom bust cycles are

00:41:15.700 | just going to happen more often. Like we've had three bear markets this decade already,

00:41:19.140 | right? In the, in the course of six years. And obviously sometimes it's not going to snap back

00:41:23.620 | so quickly, the information age and the speed of information, the amount of algorithms that are

00:41:28.180 | operating in the market, where it's like act first, think later. The hard part is,

00:41:32.420 | is that it's, it's giving more opportunities for people to panic. And I, I talked to a lot of

00:41:38.340 | people who, when the liberation day stuff happened and the tariffs kicked in, they sold some of their

00:41:43.940 | stocks. And these are people who held through a lot of other bear markets in the past. And they

00:41:47.780 | said, I know what the impact of tariffs are going to be. And so I think the problem with that is it,

00:41:51.540 | is it does give you more opportunity to mess up and make a market timing mistake.

00:41:56.500 | Now on the other side of that, I've been pounding the drum on this for a while. It's interesting to

00:42:01.220 | see how many people look at volatility as an opportunity now. And it's not a panic situation.

00:42:06.900 | It's no, I'm going to dive into the fire and I'm going to buy. And you saw record amounts of retail

00:42:12.340 | buying in April when the stock market fell. And it's interesting to live in a world where

00:42:17.860 | investor behavior, I think has actually improved for the better, right? That's not everyone. There's still

00:42:24.020 | people who are speculating and taking on too much leverage and day trading and market timing and all

00:42:29.060 | these things. But I think a majority of people now have actually learned because it's been beaten to

00:42:36.180 | their head for the past 10, 20, 30 years. Listen, when the stock market falls, you don't run out of the

00:42:42.100 | store because stocks are on sale. You run into the burning building and you buy. And more people have

00:42:46.660 | done that, I think, than ever before. And I think that's a great thing, but you do wonder if it makes it

00:42:53.460 | so these cycles just play out differently if they didn't pass.

00:42:56.260 | Yeah. And people are like, well, I don't want to invest because I could just wait for the next

00:42:59.540 | crash because they're happening so fast. Whereas I think earlier in my investing career, sure, when

00:43:05.140 | 2008 happened, I didn't have money to invest. So it wasn't a buying opportunity for me, but I didn't

00:43:10.340 | have this belief that there would be another one so soon. So I just slowly kept putting whatever I could

00:43:16.340 | in. And now a part of me is like, gosh, if these swings are so great, should I just be keeping

00:43:21.380 | every amount of savings on the sideline in cash and just constantly time the short crashes, which

00:43:27.460 | just both feels like a good idea and also feels like a terrible idea at the same time.

00:43:33.300 | Yes. I've just realized that I've seen enough professional investors over the years try to do

00:43:39.860 | this and just fail. And I think almost everyone is just better off putting it in on a regular basis,

00:43:45.460 | a weekly, a monthly, a bi-monthly, whatever it is. I think that's just so much easier. And you

00:43:50.180 | mentioned the 2008 crash. That's when I really first started investing. And I still remember I had a

00:43:55.300 | colleague who was older. He was in his 50s and it looked like the world was falling apart. And we had

00:43:59.620 | a hedge fund manager in September tell us, listen, this is a Friday. He said, go to the ATM, take as

00:44:05.620 | much cash out as you can now, because on Monday, you might not be able to get any cash out of the bank.

00:44:09.460 | Like it was, it was a scary situation. And this guy in his 50s is telling me, listen, Ben,

00:44:14.180 | take all of your 401k contributions and put them in the stable value fund, because this, this is looking

00:44:20.900 | really bad. And my thinking at the time, I'm, you know, I'm reading all these Warren Buffett books

00:44:25.060 | about the fat pitches and, you know, being greedy when others are fearful. And I just thought to

00:44:30.500 | myself, the stock market is down almost 60%. I'm never in my lifetime going to be able to buy

00:44:34.980 | at this, these low prices again, right? Even if they go lower from here. And I think that's the

00:44:41.620 | mindset. And I do think people have learned that because there was enough people who got out of the

00:44:45.380 | stock market for whatever reason, some of it was because they panicked. Some people just had to have

00:44:50.020 | money because they needed it for other things because they were losing their house or whatever.

00:44:53.540 | But I think enough people saw people panic during the great depression and have kind of learned from

00:44:58.100 | that behavior. And it's interesting to see. And I think that's part of the reason that the market

00:45:02.580 | snaps back so quickly. You have all these automatic contributions going in to 401ks and IRAs. Unlike ever

00:45:08.580 | we've ever seen before, people are putting money into their brokerage account on a regular basis.

00:45:12.580 | The barriers to entry have been taken down because it's so easy to invest in Robinhood. Think about how hard it

00:45:18.500 | was to invest in the 1980s. You had to go to a brick and mortar building for Merrill Lynch or

00:45:23.140 | something, write a checkout, fill out all this paperwork. It would take a few days. Then the

00:45:28.980 | check would clear. Then you could invest. You open a Robinhood account, now link your bank account,

00:45:33.700 | and you can invest in five minutes.

00:45:35.540 | It's so funny. You use Merrill Lynch as the example. I recently opened up a business brokerage

00:45:40.420 | account at Merrill Lynch, and it can only be opened up by ink signature, paper application. Business brokerage

00:45:46.820 | accounts live in like the 1980s version of opening a brokerage account. And I was like,

00:45:51.300 | this, it took eight tries and three weeks to open the account. And I was like, oh my gosh,

00:45:56.100 | like if that's what it was like for consumers, it was hard.

00:45:58.740 | A lot of people see this behavior and they worry about the downsides. Like what happens when people

00:46:03.700 | go in to buy the dip and the stock market keeps going down and we get an actual financial crisis

00:46:08.180 | situation? Then what's going to happen? That'll be interesting. But I do think the fact that so many

00:46:13.380 | people are more comfortable with the risk these days probably does open us up to the fact of we

00:46:17.300 | could just have more mini booms and busts and people might just have to get comfortable with this much

00:46:23.860 | faster volatility hitting the markets on a regular basis. We talked a lot about these mindset shifts.

00:46:28.820 | You've written a lot about demographic changes and how much does that change the investment landscape

00:46:33.940 | going forward? We've never had a generation as large and as wealthy as the baby boomers that

00:46:39.140 | are going to live for as long as they do. So I think they're going to screw up a lot of

00:46:42.020 | historical relationships in the years ahead. I think that part of it is going to be

00:46:45.700 | going to be bizarre. But then they have the offsetting millennials, right, that are just as

00:46:51.060 | big as they are. We're getting into middle age these days, right? So that shift, I think,

00:46:57.220 | is interesting. I've just been having talked with people that I think the need for financial advice

00:47:02.900 | in the years ahead is going to be greater than anything we've ever seen. Because again, you have

00:47:07.860 | all these people who did the DIY thing and saved and invested and they did just fine on their own.

00:47:12.180 | And then they realize in retirement, okay, now I'm really on my own. I'm in the water with no life raft.

00:47:18.660 | I don't have any income coming in anymore. I'm just living on this portfolio. I have to think about taxes

00:47:24.020 | and withdrawal rates and what happens to my family in estate planning. And God forbid,

00:47:28.900 | something should happen to me. I'm the one who's been dealing with the finances.

00:47:32.260 | What happens to my spouse or my kids if something should happen to me? And so

00:47:35.300 | I think the need for financial advice is going to be greater than ever in the years ahead.

00:47:39.540 | And I also wonder how much of that burden is going to fall on financial advisors and how much

00:47:44.340 | AI is going to pick up the slack. A lot of the conversations we've been having lately is

00:47:47.620 | are people going to trust these LLMs to be their financial advisor in the years ahead?

00:47:53.060 | I was just talking with a business coach. Like is the future of coaching? Is the future of therapy?

00:47:58.020 | These roles where it's a person with a lot of knowledge that can talk to you. And you know,

00:48:04.580 | I always told people that when I was doing financial planning, like a big component of it

00:48:08.660 | is about the conversation. It's not always just, you know, the numbers and the advice.

00:48:14.100 | I don't know the answer to that question, but I think it will certainly be amazing for

00:48:19.620 | people who otherwise wouldn't have the assets to qualify for a human to spend time with them.

00:48:25.620 | Like they now have the ability to have conversations about their money.

00:48:28.900 | It's already starting, but it'll probably get so much better in a few years of like

00:48:33.060 | that knowledge also includes their portfolio, their savings rates, all those kinds of things.

00:48:37.700 | It's going to be an interesting time for advice across all aspects of our life.

00:48:42.340 | Yes. My thinking is, especially if it just becomes a commodity where everyone has access to it,

00:48:47.380 | I think wealthy people are still going to go, well, I'm not going to do the same thing that

00:48:50.740 | everyone else is doing. There's certain wealthy people will be able to build their own model and

00:48:53.940 | have their personal, you know, AI financial advisor. But I think most wealthy people are going to go,

00:48:59.140 | I'm not going to trust a robot. I still need a person there with their hands in a steering wheel.

00:49:02.420 | And again, like you said, someone with, with empathy and can, and I trust and I have faith in them.

00:49:06.740 | But for the people on the lower end of the spectrum, who maybe didn't meet wealth management

00:49:11.460 | minimums in these things, and maybe you've gone to robo advisors and that sort of thing in the past,

00:49:15.460 | or just target date funds. I do think that the advice for them is going to open up is going to be

00:49:19.620 | wonderful. And I think that it's just going to help that behavior even more. And like you said,

00:49:24.260 | if you can upload your whole financial life into there and say like, what am I missing here?

00:49:28.260 | Because I get that question a lot from people like, Hey, I started saving. I got it all automated.

00:49:33.540 | We're going to have a kid. Like, what's the next step? What should I be doing now? And I think if you

00:49:38.020 | have a, this LLM that can do that for you, I think it's going to be very helpful to a lot of people.

00:49:43.620 | Yeah. I mean, I've used it to walk through financial decisions and personal decisions now,

00:49:47.380 | even when it doesn't have all the data. But when you give it data, it's wild. We didn't talk at all

00:49:52.420 | about investment advice. At least my traditional strategy has always been low cost, passive,

00:49:56.980 | diversified index funds for actually the portfolio construction. Do you think that kind of advice

00:50:02.580 | changes? Or is that still where you think most people probably should be investing?

00:50:08.260 | It's funny. When I first started blogging, this is back in 2013, I think. There was still kind of an

00:50:15.060 | active versus passive debate. And there was a lot of writing on it. And I almost think that that debate is

00:50:21.380 | just dead now. Because I think the numbers have gotten so bad that if you look at the historical

00:50:28.660 | 10, 15, 20 years, it's like 95% of professional money managers lose out to an index fund. And

00:50:36.020 | part of that maybe is just the environment because we've had these really big tech stocks that have

00:50:40.820 | carried the day. And it's really hard to beat if you have seven to 10 stocks that are carrying the

00:50:46.260 | weight for almost the entire stock market performance. But you'd hear for years, just wait until it's an

00:50:50.900 | active stock picker game, stock pickers market again. And that never really seems to happen.

00:50:56.660 | And so I think that's another big leap forward for people is just they have realized that I was a

00:51:03.540 | sucker at the poker table. I'm not going to sit at this table anymore. I'm going to go this other

00:51:06.580 | table that's much easier and it's much cheaper and it's more tax efficient. And they still may pick

00:51:11.780 | stocks in their Robinhood account and have this side pocket or sidecar, right? Where I'm going to

00:51:17.300 | take 10 or 15% of my portfolio and I'm going to go nuts and I'm going to trade crypto and I'm going to

00:51:21.460 | buy and sell individual stocks. But the other stuff is on autopilot. And I do think for the vast

00:51:26.420 | majority of people, that is still the best way to do it. And I think the individual investor has just

00:51:32.420 | never had it better than they have it today. As low as costs are and zero dollar commissions and

00:51:38.420 | automation and all these things. I was having a conversation recently with someone about health and

00:51:43.780 | wealth and how the personal finance analogy has always been health and wealth are kind of similar

00:51:49.220 | because you know what you're supposed to do, but it's hard to actually follow through with that

00:51:52.900 | advice. But with health, you have to choose your meal every day, right? And you have to actually

00:51:59.220 | force yourself to eat right. And you have to force yourself to go to the gym. With your finances,

00:52:04.260 | you can automate a lot of good decisions ahead of time and really take yourself out of the equation.

00:52:09.140 | The fact that if you're willing to do the heavy lifting upfront and create those decisions and make

00:52:14.260 | all that automation part of it, it's never been easier to take your bad self out of the equation.

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00:53:35.300 | the link in the description. And when you talk about automation, the things that come to mind for me are

00:53:39.460 | just kind of like automated recurring deposits, robo-advisors. Are there other types of automation

00:53:44.580 | you're thinking of?

00:53:45.380 | So now, you know, tax loss harvesting, I think is one in the last 10 years that I think didn't really

00:53:50.100 | exist for a lot of individuals before. I think the biggest ones for most people are just the

00:53:54.260 | contributions, the rebalancing, the asset allocation, and just setting it and forgetting it. There's other

00:53:59.460 | stuff on the margins, I guess. But as long as you have those ones, you're doing better than the majority of

00:54:03.300 | the investing population. Yeah. Amazing how much I find people that really like to think about money

00:54:10.420 | actually don't think about their portfolio that much. I might spend a lot of time in spreadsheets.

00:54:14.660 | I know you do too. Like we've got our charts and models, but I'm usually not thinking like,

00:54:19.140 | do I need to tweak my allocation to something? I'm thinking more, am I contributing enough?

00:54:25.140 | Should I be spending a different amount? Where is that spending going? How are the returns going?

00:54:29.300 | How is my 529 looking? And all that kind of stuff. So I'm in the investment committee for our wealth

00:54:33.860 | management firm. And we don't make allocation decisions for our clients based on we think rates

00:54:38.740 | are going to go higher or inflation is going to go lower. We're basing it off of risk and reward, right?

00:54:43.380 | Are rates high enough where you're being compensated for the risk you're taking? Or are rates too low

00:54:48.260 | and you're not being compensated? So don't take any risk there. Most of the decisions that we have

00:54:51.860 | with clients is not based on the market itself and the market changes, although sometimes it is,

00:54:56.100 | but it's more on life events. And do you have something going on in your life that would

00:55:00.020 | necessitate a change? Has your risk profile changed because you're retiring or because

00:55:04.420 | you're receiving an inheritance or because your kids are going to college or you have a wedding coming

00:55:08.500 | up? And it tends to be those life events that make it for an allocation change or change your saving

00:55:15.540 | habits or spending habits than the market itself.

00:55:17.940 | I wanted to try this new thing and you brought this up. So this idea of advice swapping on topics

00:55:22.820 | that have nothing to do with the core topic at hand. And so the question I had for you is you're

00:55:28.500 | further along than me in the parenting journey. When I read what you write and hear what you talk

00:55:33.300 | about, I feel as a kindred spirit to your attitude towards money and life and enjoying things in the

00:55:38.980 | moment, any advice for me being, you know, five to 10 years behind you in the, in the parenting

00:55:45.540 | life game? Yeah. Our oldest is 11. Now we have twins that are eight. Um, good luck with travel sports.

00:55:52.660 | That's one of them. This is something I did was not totally unprepared for. I grew up playing on school

00:55:57.380 | teams and, and rec leagues. And I never realized how professionalized sports are from a very young age.

00:56:03.540 | Now, uh, we have two girls who are in travel soccer and I can't believe how, you know, their sponsors

00:56:10.580 | involved and there's all these jerseys that you have to buy and it's traveling and it's every weekend

00:56:15.540 | and, and it's not cheap. So, uh, travel sports is certainly one of them. The interesting thing is,

00:56:22.340 | is that I, you know, people always say like, how do you teach your kids about money? I think at an early

00:56:27.060 | age, especially I've tried to bring up conversations. I think most of it is really just the actions that you

00:56:32.180 | have and not really what you're telling your kids. I think they're going to, they don't want to hear

00:56:36.260 | from you yet. Obviously they're going to maybe want to hear from you when they're older, but I think

00:56:40.420 | it's just really setting the right examples is what I've realized for a lot of different things for

00:56:46.820 | them. I try to bring my kids. I mean, they're, they're three and four, right? Like I'm trying to

00:56:50.740 | bring them along the journey of like, Hey, we're going to go drop these cans off at recycling.

00:56:55.220 | And then we make a little bit of money and then we can use that money to go buy a book,

00:56:58.500 | you know, like little, little drops of like how the world works around money.

00:57:03.220 | But I'm certainly not trying to teach them as much as show them.

00:57:06.500 | And we've still been, we've trying to teach them with cash. And it's interesting,

00:57:09.380 | they get a lot of cash gifts for birthdays and holidays and such. And because we're really

00:57:15.220 | moving towards this cashless society where it's everything you buy it online or you tap a credit card

00:57:20.340 | or you pay with your phone. And so money to them, isn't going to mean as much as it did to us.

00:57:26.180 | And so I think having cash be part of the deal where they're saving and all my kids have piggy banks

00:57:30.900 | and still work with cash. And we try to help them save that money. It's, it's harder to have those

00:57:37.780 | conversations because money in a lot of ways is just out of sight, out of mind now. And it's so much

00:57:42.980 | easier to spend than it was. And I think that's a really difficult part of it is just teaching them.

00:57:48.500 | Because when you had a lot of cash back in the day and you spent, you could literally see

00:57:52.980 | it getting smaller and you really felt it. And it's hard to feel those spending decisions anymore.

00:57:57.300 | I've had times where we bought something, was there ice cream? And my wife will be like,

00:58:00.820 | how much was that? And I'm like, I don't know. It's on the screen, you tap your phone, you hit the,

00:58:05.140 | you know, tip button, and then you walk away. And it's like, it's so simple that there have been

00:58:10.820 | moments where I was like, I couldn't tell you whether it was 12 or $15. Maybe that's,

00:58:14.740 | that's good that I'm not thinking about the pennies in the sense, you know, but also

00:58:18.180 | I, it's not even in front of you. Like it would be if I had to count out the cash and get the change

00:58:23.620 | and all that. And on the travel sports thing, it's funny. Cause I think I've gotten emails

00:58:27.060 | from so many people on different ones. Like the first time I got an email, someone said, Hey,

00:58:32.260 | if you've never taken your daughter's ice skating, don't do it because my daughter is now a competitive

00:58:36.980 | ice skater. We travel all around the country. Do not let her touch the ice. And then I was like,

00:58:41.460 | Oh, okay. So no ice skating. And then the next one's like travel soccer. Okay. Don't let them

00:58:45.060 | touch a soccer ball. It's like, turns out that every sport seems to have been created in a competitive

00:58:50.180 | way. Uh, more than I remember as a kid, this is the life we live now. And yeah, I complain about,

00:58:55.060 | but it's also very fun. Like, um, my wife and I always say, like, what else would we be doing on

00:58:59.460 | the weekends anyway? You know, we, we have our summers open. There's no travel sports in the summer.

00:59:03.780 | They do some camps and stuff, but honestly, it's very fun. And that's how you get new friends with

00:59:07.860 | the parents. And, um, I know people complain about it and it's fun to, you know, joke about

00:59:12.660 | it, but it is really fun. Okay. What, what, what was yours?

00:59:16.580 | Okay. So I listened to your podcast with Tim Ferriss, where you went into, you went into some

00:59:20.660 | like your very deep Jedi point stuff. And, um, the, the gold bar one killed me. I can't believe you're

00:59:27.300 | going to Costco and buying gold bars and you're buying a million dollars worth of, of gift cards on

00:59:31.620 | Amazon. And so I listened to Patrick O'Shaughnessy and invest like the best. And he has like the world's

00:59:35.700 | greatest venture capital investor on there or a really good stock picker. And he'll be like,

00:59:39.220 | his whole thing is like, this is who you're up against. And that's you for me with when it comes

00:59:43.140 | to points. Um, so I wanted to give you my point strategy and I wanted you to critique me a little

00:59:47.860 | bit because I, I would, I'm what I would consider a dabbler. I, I like to use the point system to my

00:59:54.580 | advantage. I think that I'm being compensated in some way, but I don't go nearly as deep as you,

01:00:00.420 | right. I'm very surface level. And so I'd say every 24 months or so I will get a new card because

01:00:08.340 | I want to get the bonus for it. I know we're going to be spending money on a vacation or my wife wants

01:00:12.900 | new furniture and we're going to be spending enough to hit the limit. And so I'll just do it all in one

01:00:17.060 | fell swoop and we'll get the a hundred thousand point bonus or 60,000 point bonus. But I think that

01:00:23.540 | the inflation has been so high in these where you don't get as much bang for the buck that I used to

01:00:29.940 | save all my points. And I was interesting listening to Tim Ferriss talk about he's got like 15 million

01:00:34.020 | points. I was wondering how much has been inflated away by the value that he could have gotten if he

01:00:38.420 | would have just spent them along the way, because my strategy now is every month I get them, I take it out

01:00:44.820 | and I do it. I just get it in cash. I don't wait. I don't save it for anything else besides my airline

01:00:51.060 | miles for my main credit cards. I just take the cash every month because I feel like the points aren't

01:00:57.780 | worth what they used to be. If you had to back the envelope, what would the inflation rate be on points

01:01:02.740 | for the last 10 years? It's pretty high, right? I would say it's been pretty high. I remember one

01:01:07.220 | specific moment, which was my wife and I did our honeymoon to the Seychelles in business class.

01:01:12.980 | And I seem to remember somewhere around like 120,000 points round trip. And now that trip would be like

01:01:20.980 | 200,000 points or something like I'm going to get the numbers wrong. I could probably go back and look at

01:01:25.460 | them. But I would say there are a lot of things that in the last 10 years cost twice as much to do,

01:01:30.580 | which is a meaningful change. Now, how much has travel costs? Like, is that flight twice as much

01:01:36.340 | now? I haven't done that math either. Maybe I should. I think we're in an interesting place today in 2025,

01:01:44.820 | because I can't remember it was what branch of government investigated a couple airlines and said,

01:01:50.340 | hey, you guys are devaluing your points. We're going to do an investigation. So I think that probably for

01:01:55.060 | the next one to three years, you probably won't see point devaluation for US airlines, just because

01:02:02.180 | there's like an investigation into these airlines for this practice. And if they were going to do it,

01:02:07.140 | this would not be the ideal time to do it in the middle of this whole thing. Now, international airlines,

01:02:12.180 | different story. I think that the difference in value, there's kind of, let's put it at like three

01:02:19.620 | tiers. There's the like, I am only going to redeem my points at these like incredible values. But it

01:02:25.060 | means that I either have to travel in a way that maybe isn't how I want or wait a really long time.

01:02:31.140 | And I'm like, I like doing that. Not everyone does. I wouldn't encourage anyone to do that.

01:02:36.100 | I think the taking your points and using them for travel, right? Like if you have a chase FI reserve,

01:02:41.940 | you can use it to buy flights and hotels in the portal at one and a half cents. I think doing that

01:02:46.820 | is probably a good way to cash out your points. That's better than taking the statement credit at

01:02:52.260 | one cent or something like that. My thing that I think I told Tim was you've got these points.

01:02:57.140 | Anytime you're traveling, I would go see there's so many tools that do this now award tool points.

01:03:03.780 | Yeah. Is there a way I can get more than one and a half cents booking the trip that I want?

01:03:07.700 | No, let's use the one and a half cents. That's the like, I just want to get the easy solution

01:03:12.740 | that gives me good return. And if you're getting one and a half or more cents on a card, that's earning

01:03:17.940 | three X points on travel and dining. You know, you're getting four and a half percent back.

01:03:22.660 | That's pretty competitive with cash back. That said, I think there's a good argument the other way,

01:03:30.260 | which is like out of sight, out of mind, get cash back.

01:03:33.220 | It's like the simple strategy. That's where I've landed. It's like the indexing of points.

01:03:37.540 | And so I would say if you don't want to play the signup bonus, welcome bonus game,

01:03:42.180 | Coinbase just announced this card. That's like, okay, if you hold some Bitcoin at Coinbase,

01:03:46.500 | and they didn't say how much, I don't think it's just another 4% card, right? The Smart League card

01:03:50.420 | was 4%. Before it got retired, the US bank altitude reserve was effectively like a four and a half

01:03:56.980 | percent on travel and mobile wallet, which is like a lot of our purchases. Now, if you can afford to move

01:04:03.460 | $100,000 into a brokerage or bank account at Bank of America, like you can get three and a half

01:04:10.180 | percent back on travel and dining and 2.6 to 5% back on everything. And if you use those points

01:04:17.140 | to book travel, you add 25% boost. So now you're looking at like, I think it's like 3.2 on everything,

01:04:23.700 | 4.4 on travel and dining. It's a pretty compelling alternative to points. If you're not willing to

01:04:31.140 | dabble in this other thing, if you are right, like, then I'm typically having points be worth

01:04:37.700 | 3 to 6 cents, and it blows everything out of the water. And so if my points are going to be worth

01:04:43.300 | three times more, right? If points are worth 5 cents, I'm getting 3x, that's 15% back. That's way,

01:04:48.260 | way better. And I think I've worked that muscle to a point that it doesn't feel like a lot of stress,

01:04:53.860 | because I know, hey, we're going to have something booked. It's going to all work out. I'm comfortable

01:04:59.380 | saying we were going to go to Europe in summer. We don't know which weeks, and I just know something

01:05:02.820 | will pop up and we'll make it work. I'm going to wait for my AI assistant to do this all for me,

01:05:07.460 | I think. You know, I have one more question for you. After listening to the Tim Ferriss podcast,

01:05:12.020 | how much of this is a game to you versus how much you care about the monetary benefits? Because a lot

01:05:17.940 | of it, I feel like, for me, like following the markets, I don't really buy and sell individual

01:05:22.980 | stocks that much. I just love following the markets because I think it's so interesting.

01:05:26.580 | Is that the points game for you as well? Yeah. I get a lot of dopamine out of it. It's fun.

01:05:31.460 | And I've created a content place to talk about that thing. And so I think the only two things I'll say

01:05:38.340 | that put a stronger push in both directions. So one, points are always on sale. And so if you have cash

01:05:44.900 | back, you can still go to those same tools and be like, "Hey, is there some world where I want a flight

01:05:51.300 | that's three grand, but I can book it for the points equivalent of $500?" And like,

01:05:55.780 | you could just maybe go buy that, those points for $700. Even if you bought them for $1,000,

01:06:01.940 | you know, it's such a good deal. So you can play the cashback game and get the arbitrage that you get

01:06:07.380 | from points being able to have outsized value, even without having them because you just go buy them.

01:06:11.620 | The other side is what you said. Every 24 months, you open up a card. The average return of a top 20

01:06:18.100 | signup bonus, meaning like pick the 20 best welcome offers right now is about 16.7%.

01:06:23.940 | So you are better off always working on your welcome bonus than doing anything else, cashback

01:06:30.100 | points. Even if you use those points in the worst way, I think that you would probably have no negative,

01:06:37.140 | if not a positive impact on your credit score of you and your partner or your wife or your husband,

01:06:41.940 | whoever's listening, opening up a card every quarter instead of every two years.

01:06:46.020 | And so like,

01:06:46.580 | people find that overhead really stressful. And I laugh because they're like, "Oh,

01:06:50.980 | it's so stressful to open up a card every quarter." And I'm like, "Okay."

01:06:54.820 | But if you actually look at the difference between getting 16% back in like four, like it's pretty

01:06:59.780 | meaningful. And that's what I do. And I just keep one or two automatic payments on those cards to keep

01:07:05.300 | them open because it, like you said, it's part of your credit. So that would be my advice is like,

01:07:09.860 | whenever you see a bonus, why not go for it? Otherwise, for your personality, it's like you can

01:07:15.460 | almost just shift all to a high cashback card. And maybe there's categories where you're like, "Well,

01:07:21.220 | I've got a 5X flights card, a 3X travel card." Great. Get the points. Like, great deal. But I would

01:07:26.660 | hang on to them. And if you're booking a family trip, use one of these easy tools and be like,

01:07:30.660 | "Is there an amazing way to get a great deal here?" Or maybe you're like, "We don't really

01:07:34.820 | care where we go. We want to go on a fun spring break." Great. Go to this pointy daydream explorer.

01:07:40.580 | Where in the world can we go for an incredible experience?" But I don't know. That's my advice.

01:07:46.340 | I wasn't aware of those websites either. So I will be bookmarking those now too.

01:07:49.540 | Yeah. They make it so easy. That's the joy of the points game for someone who doesn't

01:07:53.860 | want to go down the rabbit hole is it's never been easier to have something like Google Flights.

01:07:58.420 | In fact, go download the PointsPath extension and it'll just layer on points deals to Google Flights.

01:08:04.900 | Oh, wow. Okay.

01:08:05.780 | It's like, I'm searching for a flight and it's like, "Aero, use your points."

01:08:08.980 | See, bring it all full circle. It's never been better to be an individual investor or a points person.

01:08:12.980 | Yeah. Yeah. It's never been better to be alive.

01:08:15.780 | That's right.

01:08:17.060 | All right. This has been great. I really appreciate you joining. Until the next time.

How to Avoid the Money Mistakes of Every Generation

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