Michael Sharpnack: Welcome to “The Investor Coaching Show” where we talk about money, investing, and financial planning. You may have noticed that this is not Paul Winkler. We decided to lock him up for the final two hours here.
Jim Wood: He always gets suckered by the cake in the basement. He falls for it every time.
MS: So, it’s Independence Day this week, and we thought we would talk about financial independence. We have Jim Wood here. I am Michael Sharpnack. I’ve been with Paul for about seven years now. Jim, you’ve been here a long time.
JW: Yeah, I’m coming up on my 10-year anniversary and I’ve actually been in the business for 15 years before that.
MS: Awesome. And Chad Henson is here as well. He has three financial designations and a lot of experience.
Chad Henson: Yeah, I’ve been around since 2015. So, I guess I’ve been working here for nine years.
For more information about what we do or how we can help you, schedule a 15-minute call with us here: paulwinkler.com/call.
Financial Independence
MS: So, financial independence. What does it take to become financially independent? Thinking about our clients, and a lot of them have been successful, what are the things that have led to their success? Jim, you had some thoughts on that?
JW: Well, yeah. Financial independence is a topic that means different things to different people, but to me it’s always been about the ability to make choices. It might be the choice to be able to continue doing the work you love in the industry you love, but it might be just the opposite.
Financial independence is about the ability to make choices.
CH: I totally agree. Not only choices in whether you work or you don’t work, but having choices in what you do in retirement, whether you love to travel or you’re more of a homebody. Maybe you want a lake house, maybe you want a pool, maybe you just want what you’ve got and to keep the status quo. Having the ability to make those choices, that’s what we’re really talking about.
JW: Maybe you want a lake house with a pool. It’s about personal freedom. And we have an exercise we sometimes take clients through, called True Purpose for Money. It’s a great exercise around making sure your money habits reflect your life goals.
When I went through that True Purpose for Money exercise the first time, and I’ve gone through it several times now, but my true purpose was revealed to be freedom. Freedom for myself, my family, my clients, and my friends to be able to make the choices they want in life. Now, have you guys done that exercise somewhere along the way?
CH: Yeah, I’ve done it. And the one thing I found interesting about it is I’ve done it a couple, well, probably three times now, and it seems that it was dialing in from the first time to the last time. It is just more dialed in than what it was the first time that I did it. And I think that makes sense that, as you get older, maybe some things change, priority-wise and all, but it just helps you get a bigger, better focus on what’s really important to you.
Giving Your Future Self Choices
MS: Right. And that’s so important because financial independence means different things to different people, right? And knowing what your goals are and getting that vision really sets you up for knowing what it means for you because it might not be what it means for someone else.
JW: How can I do what I want to do? And it’s really just about giving yourself choices. And everybody has different resources. Everybody has different wants. Some people say, “We live very frugally. We don’t spend a lot of money,” and things like that.
Their concept of that is very different from the people that say, “Well, we want to spend. We are traveling. We want to go to all these different places. We want to help our kids. We want to give to our church.” But whatever it is, what we want to do, in general, with financial planning is look at their resources and see how they line up with the things they want to do and help them get as close to that as possible.
It’s really one of the main questions people have when they come to see us. I mean, “How much income can I take? Am I going to run out of money?” Things like that.
CH: Yeah, I think that’s a very common question. I think it’s a natural fear that you have going into retirement. I mean, you’ve worked, you’ve worked, you’ve worked, you’ve saved, you’ve saved, you’ve saved. And just the thought of that steady income not coming in makes a person think, Is this going to last? And am I going to be able to do the things that I’ve planned to do or dreamed of doing? I think it all ties together in that. We talk about financial independence being different for everybody. I think that’s the one thing that it has in common.
Everybody wonders the same thing: Will I have enough?
JW: Yeah, I mean, Paul always talks about, well, okay, you have this period before where you work for your money and then eventually your money works for you. And that’s such a transition for people getting out of that mindset. I have a paycheck coming every day. And then all of a sudden that’s going to stop, and now I don’t.
But I’ve been saving in my 401(k)s and my IRAs and whatever along the way. And now that has to subsist for a multi-decade retirement. And that’s an incredible emotional change in terms of security.
Two Approaches to Financial Independence
And people will say, “Well, I didn’t worry about markets and things years ago, but now that I’m retiring,” all of a sudden, they’re just, “Well, what if the market crashes or anything like that?” Well, it’s back to education about markets and things like that and helping them understand how things are likely to work.
But we are going to talk later on about taking income in retirement that’s really along different lines. But what I thought would be really interesting is just sharing about financial independence. It was recently Independence Day. Well, what does that mean in terms of some clients we’ve talked to, some family members, things like that?
And so, I had one to share. I may have shared this before, but it’s a contrast between two approaches to financial independence. And it was something that I grew up close to. My grandfather was chief probation officer for Kern County out in California. So, he had a pension.
He was a good saver, didn’t spend a lot of money, but he was scared to death of the stock market. He very much had a depression era mentality. I mean, he was living in the California Dust Bowl in the late 1920s. He would not even think about investing. And at the end of his life in his 90s, with a couple more years of having to pay for the assisted living facility that he was in, he’d been completely out of money.
And I contrast that with his best friend, a family that we grew up with. Their kids were the same age, and then their grandkids, us, were the same age, and we all grew up together. But his friend was a lifelong stock investor. Probably made similar types of income, that type of thing, but he just bought stocks and held on to them. He wasn’t a trader or anything like that. He just bought good companies and kept them for a long time.
And he passed away at a similar age as my grandfather, and he passed away with millions. And it was just an approach that just like I’m just going to be that patient accumulator. And that gave him much more financial independence than my grandfather ever had.
What you do with your savings matters tremendously for your financial independence.
MS: There’s an interplay there, right? You hear so many people talk about saving and the importance of saving for retirement and putting that money away and living within your means, which is hugely, hugely important. But there’s only one side of the coin, which that story illustrates. You had two people who maybe were saving, but what you’re actually doing with those savings matters tremendously, tremendously for your financial independence in the future.
Concerns About Volatility
JW: You just think of what the market did over all those years. And even when things weren’t great in the S&P 500 and maybe at times in the 1960s and 1970s, but if you were just a patient accumulator through up and down markets and that type of thing, and then 1980s and 1990s and stuff like that, what a difference that would’ve made to him and not having that fear of, Okay, well if I run out of money, what’s going to pay for stuff?
CH: I think one of the common misconceptions is that along your grandfather’s lines of thinking of safety, preserving savings by not being in the market, his balance couldn’t go up and down, and I had a conversation with a client just a couple of weeks ago and they were concerned about some volatility. And the number one question we always get asked is, “Is it going to last me? Should I have more in savings or CDs or something that can’t go down in value?”
In a long-term goal-focused portfolio, market risk is irrelevant.
And so, we looked at the distribution coming off of the account, and I said, “Well, if you put everything you had in CDs, it won’t cover your distribution.” So, your balance is actually going to go down anyway just by the pure fact of taking the distributions because the interest that you’re drawing can’t keep pace with that. If you’re getting a 4% interest rate and you take 4% out every year, basically, you would stay status quo as far as your principal never going down, but your purchasing power would go down at the same time, because you’re never gaining any more in the account. So, the misconception of “you can protect that principle,” I don’t think people look at the other side of it. Sure, you can protect it as long as you’re not taking money out of it.
JW: And there’s several kinds of risk. And as you talked about, there’s market risk people are scared to death of because that’s what’s in their face 24/7. You turn on any news channel and there’s a ticker. What did the market do today?
In a long-term goal-focused portfolio, that’s likely irrelevant, but if that’s what’s in your face, and a lot of times—especially if there’s red numbers—people think, Oh, the market did this, and people are scared of whatever the apocalypse du jour is that they have to deal with.
Setting Proper Expectations
What is more subtle—and people aren’t aware lately because inflation went through such a spike—is the fact that their purchasing power is quietly being eroded every day. When you have a 20 or 30-year retirement, that purchasing power is getting eaten up at 3% or sometimes even higher per day, it’s like that cliche of the frog in the water. He’s boiling slowly. And pretty soon, you have, “I’m fine at this income, I’m getting my little bit of interest,” and all that, but all of a sudden prices are going up and up and that interest might not be covering that purchasing power. And so, sometimes that’s a way to just go broke safely.
MS: And as much as we have talked about this, I know Paul has been talking about this for 25 years, it’s still such a pervasive misconception that you can just put all your money in bank accounts, CDs, and live off of that income.
On the other side, I see people who tend to want to be overly aggressive with their savings. And I see this a lot, maybe, with people who start to get into their 50s, a little bit past their 50s, and they feel they’re too far behind, they’ve missed the ball on it, and now they want to really go far aggressive and, maybe, taking risks on speculative products to catch up. And so many people have come in already having done that and losing so much. I mean, I’ve seen that quite a few times in just the time that I’ve been here.
JW: Yeah, the idea that, “I want to retire and I haven’t really saved like I should. I know I haven’t done that, but now I need to catch up. So, I want to be aggressive.” And given enough time, being aggressive the right way, still properly diversified, et cetera, is likely to make you the most money.
In the short term, there’s absolutely no guarantee that aggression will equal the best payoff.
CH: When you do that, if you’re one of those people that are behind the eight ball and you need to be more aggressive in your mindset to get to the point where you want to be, by adding that, you add so much volatility to the portfolio. You have to be somewhat flexible on when you’re going to retire, because with that much volatility in the portfolio, if you’re dead set, “I’m going to retire on this particular day in this particular year,” you’ve got to prepare for that ahead of time. And so, rather than being fully aggressive, where you’re in such a volatile position in your portfolio, maybe you have to adjust other things in your life, such as what your expectations are.
If that’s the most important thing to you, that, “I’m going to retire on this day and this year,” you’ve got to be prepared for that. And it is the tortoise and the hare thing. “Well, I’m so far ahead that I can just take a break.” And you fall asleep and then the tortoise passes you. You can’t be in that position where you’re just all out and then think one day that “I’m just going to switch it off and be a lot more conservative and retire.”
What Does It Mean to Be Aggressive?
MS: Yeah, I think even when people wake up, I do see that a lot to where they might not have realistic expectations, that, all of a sudden, “Well, I see that stocks long-term get 10% a year. So, if I get that, I’m going to be fine.” Well, you might get that. We don’t know what the sequence of returns are going to be over any short period of time.
If you’re behind, you have a few choices. You can invest more money. You can save more. And that’s always one way to get there sooner. You can try to get a better return. You may or may not get that.
The markets aren’t going to promise you anything at any given time.
The longer time frame you can give it, the more likely you are to get decent, average long-term returns.
A lot of times, the decision is to retire later. It’s just, “I’m just going to continue to work. I don’t necessarily want to, but for the financial health of my family and myself and a proper long-term outlook, not really much of a choice.” A little compromise might be only working part-time. “Okay, maybe I’m not going to work and save and do everything I’m going to do, but I’m going to work part-time or do a different job that isn’t as stressful, something like that, so I don’t have to take withdrawal, so I can continue to get delayed credits on social security,” those types of things.
JW: Or, if you take withdrawals, they’re smaller and not such a high percentage of your portfolio. Just to buy you that time until you can take the social security, which will naturally reduce your withdrawals, as far as needs go, because you’ve got social security taken up or bringing in the bottom portion of your needs.
MS: So, setting expectations is one way that we mitigate that. What are the expectations that you have and how do we work around that? The other thing, Jim, you said something I wanted to bring up again was about, what do we mean by aggressive? Because saying “aggressive” can mean different things to different people.
Where I was going with in the beginning is taking unnecessary risks, right? We do want to be aggressive when we’re about at least 10 years out and earlier to retirement, in terms of our exposure to the stock market. We want to have 95% stocks, depending on your situation in the stock market, but we want to be extremely diversified in that, which really mitigates risk. And so often, what we see is people are just not diversified. They are way overexposed in one area or they think such and such is going to be the next big thing. They’re under-diversifying. And so, they’re overexposing themselves to risk in a really unnecessary way.
How Much Risk Are You Willing to Take?
JW: Yeah, absolutely. People come in and maybe they’re not clients, but we’re talking to them. And people, a couple of times recently, have just been proud that they’re buying one of the big seven stocks because it’s been doing well. They haven’t necessarily owned it while it’s done well, but they’re piling into that stock. And it may or may not continue to have any type of growth in the future.
It’s always based on whatever the price is today. Everything that’s known about that company is already priced in. So, the fact that it’s been growing exponentially and people are continuing saying that they think that’s going to continue, well, that’s already going to be priced in there.
CH: I think one of the key things, to your point, Michael, about defining how aggressive you are is the scientific way of measuring it and measuring how volatile your portfolio is. That’s really what risk boils down to. Risk is not intended to be the chance that a person is going to lose all their money.
Certainly, if you put all your money in Enron years ago, that was not a good decision. But when talking about a properly diversified portfolio where you own multiple companies all across the world and everything, risk is really just how volatile something is. And you can actually measure that by standard deviation.
I’m not going to get into all the math here and everything that’s involved in it. That’s what your financial advisor should be able to help you take a look at and evaluate what risk you’re in or what risk category you’re in. But it’s just a measure of how much volatility you’re exposed to.
JW: And how much you’re exposed to and how much you’re willing to take. I mean, to be invested in stocks, and especially a properly diversified portfolio owning thousands of stocks, you still have to be willing to see some of your principle temporarily go away.
And at the worst, three times since the Great Depression that’s been about 50% or even a little bit more every five years can be 20% or on average more like 33%. And every year, that’s averaged about 14%. So, you have to see these downturns that have always been temporary, then eventually the long-term trend goes up. But that’s precisely why stocks have better returns, because you get paid for taking that risk long-term.
How to Reach Financial Independence
CH: Yeah, I think that’s an important point there that you made, Jim. And it’s all about, we go back to when we were talking about financial planning and obtaining financial independence. It’s all about setting expectations. That’s part of what we do when we’re meeting with clients, and it’s a big focus of mine when I’m meeting with somebody new. Yes, with markets, this is what you can expect on a long-term return.
Throughout history, we look at every 30-year period, you’ve all heard this, but there are going to be periods of time where you don’t have those returns. I mean, take the S&P 500 just for an example. You talk about 2000 to 2010, that 10-year period had a negative return. But if you carry it on out, you go into a positive return.
The sequence of returns is not something you can control.
You mentioned earlier, Jim, the sequence of returns, and that’s something that we can’t control. You have to have those proper expectations going into it to know that this can happen.
MS: That’s right. Well, talking about financial independence here, I think point number one is it matters what you invest in. It matters where you put your money. That has a huge impact on what happens much later in life, as you seek independence later.
In the first segment, we talked about what you invest your money in and how huge of an impact that has on your independence. Jim, I think you had an article you wanted to share on this topic.
JW: We’ve worked with literally hundreds of clients between the three of us, and you really see what works and what doesn’t when you work with so many people. Some people come in here who for their whole lives have done a great job in terms of saving, paying off debt, and things like that. Some people were never taught anything about this and are just really waking up to the fact that, “How do we do this?”
Set Goals
I came across an article from investopedia.com, “How to Reach Financial Freedom, 12 Habits To Get You There,” and I thought this would be a great place to take some ideas and just throw them around a little bit regarding getting financial independence.
So I’ll just throw some stuff out there and you guys let me know what you think, but first, setting life goals. That was the first one on this list. And I think having goals is important. And I also think that just setting a goal is a very, very minor step.
I don’t know if you guys are familiar with Scott Adams. He’s a cartoonist that wrote Dilbert for years. He still writes it, I guess, but he was canceled for some stuff, but he’s a super smart guy. He’s written some books on self-improvement and stuff like that, but what he talks about in general is not so much a goal, having a goal is having a process, because it’s the process that’s going to get you there.
Having a goal is about having a process that will take you where you want to go.
CH: Right. Yeah. As far as goals go, that’s hard to say, you have to be more specific. For example, a goal isn’t, “I want to retire when I’m 65.” I mean, that’s just not specific enough unless you’re 64 and a half and that’s vastly approaching. But if you’re in your 50s and you want to retire at 65, it’s a great place to start, but you’ve got to get more specific than that.
Okay. What does retirement even look like? I mean, sure, you could retire at 65. If you don’t have anything saved and you don’t save anything between now and then, are you going to live on social security? You have to be more specific than, “I want to retire.”
And so that’s one thing that I find that we have to help our clients through. And when I say help, it’s not that we’re suggesting things. We’re helping them… like we mentioned in the first segment, the true purpose of money. We’re helping them define what they want retirement to look like in their own words, but you’ve got to have specifics in goals. Just a broad general goal is not going to get you anywhere.
Maintain Clearly Defined Goals
JW: Yeah. I guess having that goal is, like you said, kind of a necessary first step and that if you know you were here at point A and you want to be at point B, then that’s the first part of it. And then, okay, how do you get from point A to point B? And it’s likely not to be a straight line.
I use that analogy a lot of the idea of a financial plan being like a flight plan, in that when a pilot takes off, he rarely flies directly from city A to city B. He flies up, might have to go up higher to get over a storm, fly over to the left to miss another plane, et cetera. So you have to make adjustments along the way.
So the goal is saying, you know what the destination is what you want, but the process of getting there takes regular actions. And with retirement of course, that means regular savings, it means properly investing, it means paying off debt, those types of things. Then those are the things that are going to get you there.
Know your goal and what it will take to get there.
MS: Yeah. Jim, I like how you were talking about the process part there. A lot of times, I’m working with young people who don’t have clearly defined goals and they just don’t really know what life is going to be in the future. But we set up what we call maybe a special goal fund, where we put money aside and we put it a little bit more conservative and we want to make sure that we have retirement savings going to a certain spot and emergency savings going to another spot, that those are adequately taken care of.
But we may have this money in the middle that we can save for a goal that may not be defined, but the process of like, they are saving, they’re putting that money away, they’re living on less, they’re getting used to living on less, and now they have this money in this fund that’s doing something for them, can allow them freedom to use that money in the future for a goal that may pop up that they didn’t realize they had.
Part Two
CH: Welcome back to “The Investor Coaching Show” where we talk about money and investing in Paul’s absence. We are covering financial independence. We talked about goals in the last segment. Jim, what have we got next?
Make a Monthly Budget
JW: Well, you were talking about part of the process that you had mentioned was being on top of your finances, that type of thing, so the next one on this list is actually making a monthly budget. And I think this list is interesting because it has some really big goals and it has some things that are smaller ones or big points I guess and smaller points. But almost no one comes into the office with a monthly budget done. I think there’s people that do and have their spreadsheet and have every line item. They know where every dollar is going. But I think that’s the exception, not the rule.
Most people have a fuzzy idea, well, we spend about this much and that type of thing, but especially young, starting out in life, getting control of your finances, that type of thing, having a budget can really, really be valuable in terms of knowing where your money goes, because sometimes that’s shocking. “Do we really spend this much money on Starbucks?” Or whatever that is. Or like, “All our streaming services are costing us $80 a month? Do we really need to watch that much TV?” That type of stuff, it can really, really be valuable.
MS: Oh yeah, absolutely. 100% agree. That was the big eye opener for my wife and I. One day we sat down and we’re like, “We make too much money to be paycheck to paycheck.” And so what we did was we wrote down our bring home pays in one column, and then we wrote down all our bills in another column that we pay every month. And then what was left over was money that we couldn’t account for. And it’s surprising most of the time for most people anyway.
Too often, people just spend what they spend without thinking too much about it.
CH: Yeah, that pattern, I see it in almost every situation. People haven’t made a budget. They just spend what they spend. What comes in is what goes out, and sometimes maybe a little more. Which leads to the next point. But going through that process, I think can be really cathartic and healthy.
JW: And especially as you start out in life and you don’t really have much of a budget because all your money’s going to whatever bills you have and you don’t really have an opportunity to save and things like that. But then you start advancing in your career and things like that, and you get a little more money and you start to get a bigger lifestyle because your check’s a little bit bigger.
“Well, we can go out to dinner a little bit more.” And there’s nothing wrong with that. Enjoying your life is what it’s all about. But just keeping track of that type of thing and making sure you keep that same balance between, “Okay, we want to live for today, but we also have to take care of our future.”
Create Automatic Savings
MS: Yeah. This is going to jump ahead to basically our fourth point here, but the fourth point is to create automatic savings. And one thing that I’ve done, and I’ve done it with a couple of clients, most of them were younger clients, and Paul always talks about this—make yourself a priority. Make yourself a bill.
You pay yourself first and then you spend later on. But the thing that I found that really strikes home is that . . . It was eye opening for a couple of clients that I worked with that if you make yourself a priority and you make yourself out like a bill and you create an automatic savings where it goes into your 401(k), your savings account, to your emergency fund, whatever the case may be. You pay your bills, you’ve paid yourself, and if there’s money left over when you spend that money, it’s guilt-free money. Whereas if you spend it and then you don’t end up saving, you feel bad about what you spent. I shouldn’t have done that or I shouldn’t have done
this.
JW: Little nagging voice sitting on your shoulder there.
MS: But if you’ve checked all the boxes and there’s money left at the end of the month and you spend it, you don’t have to feel guilty about it.
CH: That’s right. This goes to a concept I often like to explain that there’s a difference between financial knowledge and financial discipline. You can read the book and know the things that you’re supposed to do, but if you don’t have the process, if you don’t have the discipline, if you don’t have the systems in place that actually is making it happen, then you’re not going to meet those goals. Or even the goals that are undefined, you’re not going to be in a place to have freedom when you want to.
Knowledge without action is worthless.
JW: Yeah. Essentially what you’re saying is knowledge without action is worthless. We can know all kinds of things, but if we don’t take the right steps, well, they’re not going to help us much. It’s nice to have that knowledge, but if you ignore it and then just do whatever anyway, then that’s how you’re going to end up in a place you didn’t want to be.
Yeah. So definitely create automatic savings, and there are many opportunities to do that. Certainly if you have a matching plan with your employer, that’s always one of the first places to go, if not the first place all the time, because that’s an automatic return on any money invested.
Pay Off Debt
As soon as you put that money in there, you’re getting a bump on that. And the great thing about employer plans too is they’re automatic. It just happens out of your paycheck. You don’t see the money. And I think especially when people are new to those plans, to think like, “Wow. I never thought I could save $4,000.” And they just started out and now they’re starting to see that balance grow and they’re just like, “This is really cool.”
CH: Yep. And that does go back to that interplay between, it’s important to have that discipline and be doing these things, but also it matters what your 401(k) is invested in. Going back to point one about what you’re actually doing with your money—how many times have we seen a 401(k) that’s just totally undiversified, totally out of whack, with so many issues.
JW: Well, yeah, it’s definitely you have to have proper planning, but proper planning without the right investments doesn’t work. The one we skipped over, three, is paying off credit cards in full. And I think that’s kind of a smaller point than some of these, but still a valuable one. And that’s not only just credit cards, but it’s any type of high interest debt. Because I’m sure we’ve all dealt with people that come in and just say, “Okay. I have this loan at 3%, this loan at 4%. I have this loan over here plus my credit cards on this. Which one should I pay off?”
And sometimes just life blows up and you can’t control it, and it happens, but that just makes it so hard to do all these other things that we’re talking about, whether it’s saving, building up an emergency fund, whether you want to buy a house or something like that.
If you’re constantly servicing debt at higher interest rates, the debt becomes so hard to overcome.
And that’s why there’s the financial gurus out there, and a lot of them have programs and things like that. There’s one that everybody knows, and I’ve had clients that follow his debt advice and they come in and their house is paid off or getting close to, and they’ve put the money in the envelopes, and they’re in a great position because of that.
So just following that, being disciplined and things like that, having a plan like that can just make all those things easier down the road and really put you in that place for choices.
Watch Your Credit Score
CH: Yeah. It comes back to that discipline. Like you said, that’s so important when you’re making these decisions, having that discipline to do it.
JW: Start investing now because that’s what automatic savings do.
Well, get educated on how this works. People in their 20s, 30s, 40s, or even 50s or something should not be worried about short-term market returns. The market can go down. While you’re still a patient accumulator, meaning you’re saving out of your paycheck or every week or whatever that is, then what that really means is I get to buy things on sale. And you might be getting to buy at prices you never see again, so that’s not necessarily a bad thing.
MS: Welcome back to “The Investor Coaching Show.” Michael Sharpnack, Jim Wood, Chad Henson, taken over in Paul’s absence. We’re talking about financial independence. We’ve been going through an Investopedia article that has some good tips, but we’ve been kind of analyzing it using our experience to give some further information. Chad, I think you had a point that you wanted to share on the last one.
CH: Well, it’s actually the next point is to watch your credit score, and the only point I want to make on that is not from what everybody would perceive, as far as “I have a good credit score, I’ll get a good interest rate,” because we certainly don’t advocate going out and borrowing money that you don’t absolutely have to borrow money for.
We don’t advocate borrowing money without good reason to.
But the thing that watching your credit score does is, what most people don’t realize is it can affect your insurance rates and things of that nature. So keep an eye on your credit score for that, and also to make sure to protect yourself against identity theft and things of that nature. So that’s the only thing I really had for that one.
JW: And I’ll just add real quick: the one time you might want to borrow in regards to building up your credit score is when you’re first building credit. I have a young son who’s just like, “How do I get my first credit card?”
And that might be, “Hey, if I take out this loan, even though it’s kind of ridiculous, or I pay a little bit of high interest at low rates, if I can build on my credit score, that might be worth doing.”
Negotiate for Goods and Services
The next point on here, I thought, was, again, one of the smaller points, because it’s just negotiating for goods and services, which I think is a good idea, but is that really a big picture idea? Every time when we go into 7/11, should we negotiate over the Slurpee? Good luck with that.
But there probably are things that you can negotiate: when you go to the farmer’s market or things like that; or if you’re buying in bulk, for example, as an example that it gave here.
MS: A lot of times I’ve had an internet bill and they’ll give a 12-month intro offer for this price, and then it jumps up after that, after the 12 months. And when it jumped up, I called and said, “Well, this other provider over here has this price,” and they bumped it back down. They do that. They have those little price bumps to catch you, but you can often push back a little bit.
CH: I think one of the places that you can push back is in the services part. Like if you’re going to hire a landscaping company to come out and do some work at your house or something, don’t necessarily hire the first person that comes out and take the first bid. Maybe you get a couple of quotes and you can negotiate a better price with whoever you prefer to use.
JW: Yeah. And of course, cars. That’s kind of a famous process where you end up negotiating almost to a painful point sometimes. But I just wanted to get through those last two because I really think this next one is really one of the most important. It’s really one of the things that we are all about, which is staying educated on financial issues.
What can be crucial to your success is understanding a little bit about how markets work.
Where do returns come from? What am I investing in when I invest?
Okay, I own these things called stocks. Well, what are stocks? Stocks represent ownership in companies, and that really changes the thinking about that. “Well, I just own weird pieces of paper that hopefully the value of goes up,” to “I own companies that have a product or a service that are made up by sometimes hundreds or even thousands of employees that have a goal to ultimately achieve the success of the company by increasing earnings.”
And of course, that is how stock prices go up, because stock prices long-term follow increases in earnings. And so when everybody’s aligned around the success of the company, no matter what things happen out in the world, high interest rates, inflation, political changes, whatever, that company still has the goal of: “We need to increase our earnings, or everybody loses their jobs.” And so the incentives align with long-term gains in the market.
MS: That’s right. You need education and you need discipline. We talked about that. There’s an interplay between both of them. You can’t really have financial independence if you don’t have that discipline to do it; but you also need the education to know, as Jim just said, a little knowledge goes a long way, especially when it comes to your money.
You Need a Coach
I want to throw one more point out there to wrap up this hour, and that is: you need a coach. Paul has said this before, but you look at the most successful athletes, even Tom Brady had a coach, even at his peak.
We don’t know what we don’t know.
We can be so blinded by our own biases that we make mistakes without even realizing we’re making mistakes.
So we need a coach to get us through that process in every important area of your life, especially this all-important area of finances.
And that’s what we can help you with. You can go to paulwinkler.com, the website and schedule a call with any of our advisors. They are all across Middle Tennessee. We even have a new one in Bowling Green, Kentucky, if you’re listening up there. There is a new one in Cookeville as well.
We are all degreed advisors, every one with over 15 years experience in the industry. So many of the advisors have come from backgrounds in insurance or in brokerage firms. They’ve seen the other side of the industry. We’ve seen the selling side of the industry and have come over where we can work with you as a coach and we can help you, come alongside you, and educate you. That’s what we do on this show. We educate.
So we are Michael Sharpnack, Jim Wood, and Chad Henson. Paulwinkler.com is the website. You can go there. Like I said, you can schedule a call. You can also just check us out. There’s tons of content, over 400 podcast episodes, hundreds of videos, blogs, and articles. There’s webinars. You can get yourself educated. You can see what we’re all about before you make any kind of decision.
Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.
