Evan Barnard: Welcome to “The Investor Coaching Show.” I am not Paul Winkler, but we are here to talk about money and investing.
I’m Evan Barnard, here with Ira Work this afternoon. And there’s no playoff games right now. It’s a little bit rainy outside.
Ira Work: So sit around and listen.
EB: So turn on your radio and learn about some investing and financial planning over the next few hours. Boy, it’s been a busy investing week after the big freeze last week, and things just slowed down for a little bit.
IW: What big freeze? I was in the house, without heat.
EB: That’s what you were saying.
IW: Yeah, we had no heat in a little bit more than half the house: our den, living room, dining room and kitchen. Because we have a split unit, the bedrooms were heated.
EB: Let’s keep it PG.
IW: So one of the guest bedrooms is an office that I work out of. Another bedroom is our actual guest bedroom. And then we have the master bedroom.
So we ate meals and watched TV in the guest bedroom. I worked in the office guest bedroom. And we went to sleep.
EB: There you go.
IW: Because I have to keep it clean, you say.
EB: Free markets work.
IW: Absolutely. But that got fixed on Friday.
EB: Super.
IW: Yeah. So how was it down by you?
EB: It was good. We didn’t lose any power, which was fine. Our chickens survived. They were still laying eggs, actually, through the whole time period, and so we were thrilled about that.
Now, we’ve got a little bit of a pond in our backyard right now. But, anyway, that’s the deal.
The American Dream Experience
EB: But we did close out the week with a virtual American Dream Experience that had been hosted. And I thought we’d just start off with talking about just some of the concepts that we talked about in that. It’s a two-day event that we hold for clients, and non-clients, if they have some guests, or we have guests there.
And a lot of times when I’m describing it to people — I’d be interested to hear how you say that — particularly if you’ve been married, but even if you’ve done anything in what people would call the personal growth space, but I say that if you’ve ever gone to a marriage retreat, the format is a little bit similar to that. There’s some teaching and lecture. There’s some sharing that goes on of people talking about their own experiences growing up around money, or investing, things that they’ve done.
Of course, everything that’s discussed in the two days is confidential, so we won’t share any of that stuff. And then there’s an opportunity to do some exercises and assignments and make the American Dream become something tangible in your life.
The biggest thing is that it helps create community among investors, particularly because our message is upstream, if you want to call it that.
We’re counter to what most of Wall Street and the bullies talk about. And, sometimes, it’s good to know there’s other people out there as well, and you’re not the only person that thinks Wall Street’s messed up and those kind of things. So it’s really a powerful two days.
I just thought we could start off today by hitting on some of the topics that we covered there. We might even sprinkle that throughout a couple of hours.
But how do you explain it to people, I’m curious? And the difference of someone that’s been working with this for five or six years versus someone that hasn’t become a client yet.
IW: Or 10, 12, 15 years.
EB: Yeah, right.
IW: I talk to my clients about it, or people that come in to learn more about what we do, as a life-altering event around money. Of my very close now to 40-year career, the first 17 years were more of learning the client to buy what I wanted them to buy because that’s the way the industry trained me. And even when I worked as an independent, when I left the industry and opened up my first shop as a registered investment advisor, it was still selling products, with the belief and the conviction that you just buy these things, and you’ll be fine.
And with the American Dream Experience, what we’re talking about is two different aspects when it comes to investing. One aspect is the emotional, mental, intellectual part of our own brain.
EB: Yeah, just the brain science around that, yeah.
IW: Uh-huh. And then the other part is the academic evidence for successful investing — one of the things I like to say to my clients, or when they first come in. I’ve been doing this long enough to know. And the work that we do now at this company has been my sole purpose for 23, 24 years now.
It’s the only thing I do — that is coach and educate and work with investors to help them achieve peace of mind and confidence when it comes to their investments. So there are two aspects.
Understanding the Mind Over Money
IW: What I tell people when I sit down with them for the first time, and we’re looking at their portfolio. Before I even do the very first analysis in the discussion, should they decide they want to continue in this particular process that we have — which is a foundation of education — I can look at a portfolio and really have an idea of where all the pitfalls of the portfolio itself are.
EB: Right. Just like my mechanic can listen to my car, and they’ve done it 30 years and can say what’s going on.
IW: Exactly. So I tell them, “Look, I can fix this for you.” And even if I fix this portfolio, if you really don’t have an understanding, a basic knowledge, then it’s very easy when you hear other stuff going on, or your portfolio isn’t performing like certain particular areas of the market, to be disappointed.
I’ll use the S&P 500 as an example. If that’s the best area, and that is really what’s talked about on TV and radio by most talking heads, if that’s the best area to be in, and that gets 15%, and your truly diversified portfolio only gets 11%, unless you understand what you really have, you’re going to be disappointed.
So I tell people, when I talk to them about the American Dream, that this workshop, this two-day event, is an event. I’ve been to those marriage retreats. It’s another event, and it takes a lot of work. You can understand the brain science, and the attacks that all these firms have against what your thinking is and what your natural mind is actually geared for — which is not investing.
EB: It’s survival, yeah.
IW: Okay. I thought maybe we’d hold that over to another segment.
EB: We can.
IW: When you have this understanding about the mind over money — which is one of the sessions, Mind Over Money — once you understand that, then it’s much easier to understand the academic stuff and how a portfolio is built. And then you learn about time horizons for a particular mix of stocks and fixed income, whether it’s 50% stocks or 75% stocks.
And there are going to be different time horizons. So that all becomes much easier to understand. And when you put them together, you’re not going to, most likely, not have questions. You’re going to probably still have questions.
EB: I still have questions.
IW: And I do too. Like when I study the Bible, the longer I’ve been studying it, the more I realize I need to study more.
EB: That’s true. I’m just confused at a much higher level. Yeah.
IW: But the whole thing is taking the client through this process to develop peace of mind and confidence around their investments. And it really, really, truly does start with discovering your purpose for the money.
EB: Yep. I think it’d be helpful to have an example of what that looks like. And if we’re talking about, just say the conversation around starting — if I don’t have a purpose for my money, I’m never going to have enough.
If I do have a purpose for my money, I’ll always have enough.
Now, you may live that purpose very differently if you have a bigger bucket than a smaller bucket.
The Destructive Cycle of Wealth
EB: A lot of times, when you’re growing up, or somewhere in your background, you hear this phrase, “Money can’t make you happy.” Or you’ve maybe even said to your kids, “Money can’t make you happy.” But why doesn’t money make us happy?
In the absence of purpose, we talked about survival, just a second ago, or mentioned it. There’s a concept that we teach clients called a destructive cycle of wealth. And we start out with phase one: survivorship stress.
Back in the day, if there were more people on the other side of the hill with spears and swords than your clan, that was a real problem. And so we do have this survival thing. We do have basic needs of food, shelter, clothing and so forth. But those are relatively easy to meet at a basic standard.
But, very quickly it becomes, “I don’t just want a shelter. I want a shelter with a guest bedroom. Or a shelter with two bathrooms instead of one, and a patio,” or whatever. And so that leads to phase two of human wants.
And as we go through this, there’s nothing wrong with wanting stuff for that sake. There’s a lot of things that we have that I could probably — I could definitely — live without. And I enjoy them, but I don’t get them because they make me happy.
So you have this survivorship, and then human wants, and then, eventually, we get it. Phase three is obtaining something. And I’ll walk through an example, just to tie that up when we go through here. But we get it and we’re happy.
Phase four, it’s, “I’m really excited that I got it. I’m relieved. Wow, okay, I’ve finally met that goal, got that car, moved into that house,” whatever it is. “I got the ninth pair of shoes.”
It depends on what someone’s looking for. But, very quickly, we start comparing, in phase five.
“Well, I got that, but somebody else has one that’s nicer, bigger, faster. It’s in a different neighborhood, closer to work or closer to the country,” or whatever.
And all of a sudden, I’m back to that survivorship stress of, “I’m still worried about the person with more spears coming over the hill.” And that happiness wears off.
The joy that you get from obtaining that thing is very short-lived.
Money and Happiness
EB: Looks like you’re getting ready to say something. Yeah, go ahead.
IW: Well, I can share a little bit about the “money doesn’t buy happiness” thing. I remember when I was separated, going through a divorce, and I didn’t want that divorce. And I remember coming home one evening and having a conversation with my mom. She lives in Florida, so we were on the phone a lot during that period of my life.
And I said to her, “I now understand the saying ‘money can’t buy happiness.’” I said, “I can walk into any store and pretty much buy whatever I want.” I couldn’t go into Ferrari and buy one of those. But I could buy a new shirt or a new suit, go to a movie, go out to dinner, pretty much do whatever I wanted.
I would do what some people would call retail therapy. And I would go to the mall and I would buy some stuff. And a few hours later, after I was home, it was like, “I’m back in the same doldrum that I was in.”
EB: Yeah, still going through that trying situation. Yeah.
IW: Right. Because it didn’t buy happiness.
You look at some very, very wealthy people. And I always say, “If money bought happiness, the people in Hollywood should be the happiest people in the world.”
Six months of working on a film, you make $20 million. I’d be pretty happy, maybe. But you think about John Belushi, Michael Jackson.
EB: Robin Williams.
IW: Robin Williams. Money doesn’t buy health.
EB: No. Steve Jobs is a good example of that.
IW: Right. There was a guy, and I use him as my example.
If money could buy health, Steve Jobs would still be alive. If money could buy health, Robin Williams would’ve gotten over his depression. More recently, Jimmy Buffet, he would’ve been able to fix the cancer.
So two things: Everyone’s working, and what are we working for?
Why are we spending so much time, if money doesn’t buy health and money doesn’t buy happiness?
And when you think about it, you spend more time in your office, most likely, I know I do, than I spend in my house.
EB: Yeah. Well, I sleep at home.
IW: Well, all right.
EB: Waking hours.
IW: So let me rephrase that.
EB: Waking hours anyway, yeah. I’ll give you that one.
IW: Right. You spend more time awake in your office than awake in your house. So it doesn’t buy happiness.
Money as a Tool
IW: Now, to go into the destructive circle of wealth. I’ll skip phase one because, as you mentioned, it’s survivorship bias. So let’s talk about phase two: human wants.
I remember all I wanted was a two-seat roadster convertible car. And I finally got my little two-seat roadster convertible car. And I was happy.
I hit phase three. I attained my car, and I was happy driving around. Moving into stage four, relief and exuberance, I was just looking around. I had attained it, had relief and didn’t have to think about that new car.
And then, one night, Elaine and I were walking out of a restaurant. And in front of the restaurant was a convertible Bentley.
I’m like, “Oh. I have that puny little car. It’s a nice car, but it’s not that car.”
Phase five is comparative analysis. Now, I didn’t go into the survivorship stress, of “I got to have it. I want to compete with them.”
I didn’t do it. I was able to just deal with that and recognize I was in this destructive circle.
And I think that most people who don’t have a purpose, that’s the circle they’re living in. My son had asked me one day, “Dad, do you ever think that you’ll buy a Ferrari?”
And I said, “Do you know what? I have a hard time with that.”
And you know what? I believe you work hard. You make the money.
Play hard. But I don’t begrudge people making a ton of money.
EB: Yeah, the concept is not against things, right?
IW: Right. It’s not against things. I’m all about having things.
EB: Toys and cookies. Is that what we call it? Toys and cookies.
IW: Toys and cookies, yep. But I said to him, “There is so much more that I can do with that type of money that would actually help fulfill what I believe is my purpose for my money. And that’s really what I want to do.”
EB: Yeah, great story. We’re going to take a short break here, and we’ll wrap up some of the purpose conversation. And I’ll give an example of the cycle of wealth.
Again, money is not bad. It’s a great thing to use. It’s a tool. But it isn’t what gives us joy and happiness.
Going back, I want to give an example of this destructive cycle of wealth and how that plays out. This is just something — I like how you said it last segment — to be aware of.
It’s not that it’s good or it’s bad; it just exists.
And we’ve led that workshop a few times and certainly participated. I don’t know, we’ve probably been through about 20 American Dream Experiences at this point. But what’s interesting is even teaching it, even listening to it.
Breaking Away From Comparative Analysis
EB: I had an example. This would be during COVID actually, and travel is a big thing for my wife and I.
We don’t have lots of toys. I’m not a car guy. Our son is the car guy in the family. I just want it to run when I start to head to work in the morning, and I want to sit on my living room couch going down the freeway — that’s my goal for a vehicle.
But travel was our thing, and you couldn’t go anywhere during COVID. And so that was really constraining. So we started looking at campers and thought, Okay, well, we don’t have to wear a mask in a camper. We can just go to a park, be outdoors and just relax; we can at least get out of town.
So we started looking at these motorhomes, and we found one. This is interesting. I was actually out in Scottsdale at an American Dream Experience, and we got a text from the salesperson that we’d been talking with.
He said, “Hey, I think I found one that fits the bill.” He sent me the images — like when you’re looking at a house or car online, you see the 32 standard pictures of the odometer and the wheels and stuff.
So we went to look at it when we got back in town, and it was really everything we were looking for. It had a slide-out. It wasn’t too long. It actually had two bathrooms.
I didn’t even know a camper could have two bathrooms. It’s pretty cool.
EB: Before we had even bought it, before we made an offer on it, we’re standing there in this camper and we’re looking out the window like, “Wow, there’s this 40-foot diesel right next door to this thing. Man, that’s got a dishwasher, honey. All this and bigger stairs.”
We went through the cycle of wealth, and we hadn’t even purchased the camper yet. And we’re already thinking we’re not going to be the longest one in the park.
So it’s just something to be aware of. But very quickly that awareness got me back to asking, “Why are we buying the camper? It’s not the camper that’s going to make us happy. It’s the fact that Cindy and I are going to be able to spend 72 hours away from distractions and enjoying God’s creation and so forth.”
Those relationships, now those can make you happy, and money is just a tool to use in the process of relationships.
So again, it’s not that things are bad. We did end up getting the camper, and we love it.
IW: The one that you were standing in on the table?
EB: Yeah, the one we were standing in. Thank you.
And it’s been interesting. Everywhere we have camped, there have always been numerous campers that are bigger than ours. And it’s just not a big deal. We’re doing exactly what we want to do.
Where you kind of win that game is breaking out of the comparative analysis cycle. It’s, “Hey, I’m still with Cindy.” We could probably be in a VW bug and a pup tent and we’d still probably be having about the same amount of fun until it came time to wash her hair. And then she’d probably rather have a camper than a VW bug.
IW: Put her head in the creek or something like that.
EB: Yeah.
Types of Relationships With Money
EB: So about the American Dream Experience and purpose — we all kind of have this relationship already with money. And what do we mean? Not that you love money or you hate it, not that kind of a thing, but you’ve probably grown up hearing certain phrases.
IW: These would be possible relationships that one could have.
EB: That’s right.
IW: And as we maybe discuss a few of them, you might have one or two of these relationships.
EB: Or all of them at some point in your life. Yeah, right.
But just kind of a common phrase is “money is evil.” You’ve maybe heard that phrase or that may even be your possible relationship to money right now.
Given the location of where we are and broadcasting from, scripture’s pretty clear that it’s the love of money that’s evil. Not money is evil. Just to clarify that for whoever’s driving around.
But that’s a common belief or a relationship someone has. So I’ll ask you, Ira, if your frame of reference around money is that money is evil, how excited are you going to be to invest and grow a portfolio for retirement?
IW: Well, I might not even want to go to work if money’s evil, because if I’m working, I’m getting paid. And why would I want to work for that thing that causes me to get something that’s evil, other than maybe going and working a job that provides me with just enough money to get by? But I’m not going to try to grow any wealth.
EB: Because I don’t want to be evil.
IW: Or I don’t want people to think I’m evil.
EB: Yes. Yeah, another good one.
IW: Who did I have to take advantage of to achieve this kind of wealth? That could be an issue for some people. Another one is it never being enough.
EB: Right. Money’s never enough.
IW: It’s the workaholic. I’m trying to remember who it was. They were asked a question, “Well, how much is enough?”
I think it was J. Paul Getty. And his answer was, “More.”
EB: Right. More is better. If a two-egg omelet’s enough, then three eggs — now that’s the good omelet.
IW: A better omelet.
EB: Right. There are two sides to this coin. Sometimes people have a fear of failure. At different times, the same person might have a fear of success.
I heard a good story from someone that was going through this a couple of years ago, and it was another coach, actually, who was sharing this. They had been doing well, but they had this opportunity to do better.
And they were concerned that, well, “If I succeed at this new venture, my bum brother-in-law is going to want to be borrowing money. And then this family member’s going to want to take advantage of me” and those kinds of things.
So how you view money and how you view people’s identities around money does affect a lot more of your decision-making than you think.
In this whole conversation, the context ultimately is investing, but money affects almost every area of our lives. Just food, clothing, shelter. It’s a part of a lot of decisions.
What job do I take, what school do I go to, what school can we afford for our son or daughter? It impacts a lot of stuff in life.
Emotional Constraints
IW: Because of that, it’s a very emotional thing that we have. I say there are three biggest forms of emotion that we deal with. Number one is our family. Your child gets sick, your parent gets sick.
Secondly is our health. I mean, I remember how emotional it was for me and my wife when I was diagnosed with cancer three years ago.
And the third is our money. Because one possible relationship that you can have with money is the fear that you’ll run out of it one day. And how are you going to pay the electric bill?
Let’s assume your house is paid off if you’re retired, but how are you going to pay the electric bill? Or how are you going to buy food if your money runs out? So that could become a relationship that you have with money itself.
Another one, and you hear this one touted a lot, especially now that we’re in an election cycle, is we’re going to have to get the rich to pay their fair share. Okay?
EB: Right.
IW: It’s not fair that I have to pay so much money in taxes. It’s not fair that he or she has so much more money than I have. So that can become a relationship that you think about money, and it’s always, “it’s not fair” because of how hard you work.
I remember my son asking me about being successful. “What does it take to be successful?”
And I said, “Well, if you’re thinking about it from the form of money,” and this is how long ago the conversation was, “unless you’re Bill Gates, there’s somebody richer with more money than you.” I read a headline today: “Elon Musk is not the richest man in the world, again,” because Tesla just announced EV sales are slowing down. Thank God.
EB: As we close out this segment, here’s what I want to leave you with: Money is useful. This has kind of been a little bit of a heavy segment, but that’s why we are so passionate about making sure that the money that you do create, the money that you do invest, is working as hard for you as possible and taking a lot of the emotional constraints out of that situation so that you don’t make a mistake and start to fall prey to these things. And so we’ll get into the positive side of investing.
When you overcome this, you actually can be relaxed about volatility, relaxed about an election and not worried about all of that stuff.
So stick around. We’ll get into some financial news this week.
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.
