Investing is Risky. Do it Anyway w/ Jesse Cramer #872

Episode Transcript
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Speaker 1 (00:00):
Welcome to Hod of Money. I'm Joel and I am Matt,
and today we're talking about how investing is risky, but
you should do it anyway. With Jesse Kramer. Yeah, we're

(00:28):
joined today by our friend Jesse Kramer from the Best
Interest and at his core, Jesse is a financial educator,
and he also doesn't shy away from any of the
technical or any of the financial details, which is one
of the reasons why we're really excited to have him
on today. He's going to provide all the investing answers
here for us, and so he loves personal finance so much.

(00:49):
He quit a pretty lucrative job. He quit a lucrative
field that he was in in order to join a
fiduciary fee only wealth management firm. And so we hope
to get to a ton of different top today, like
whether you should be contributing to a five twenty nine
account or not, maybe how much risk we should be
willing to take when it comes to our investments, how

(01:09):
much of our investments are di wiable, Maybe even how
much we should be depending on social security because that
doesn't seem like it's going to pan out well for
most of the country. But I'll have to be said, Jesse,
thank you so much for joining us today on the podcast.

Speaker 2 (01:22):
Matt Joel, it is an honor to be here. Thank
you for that very very kind introduction. And yeah, all
those topics you laid out there sound really fun to
talk about.

Speaker 1 (01:31):
Why I'm here, Yeah, a lot to cover. And I
don't know, Matt, you might have been a little harsh
on social security there. So we see we get to
Jesse's TV. Yeah, yeah, exactly. Only time will tell, well, Jesse, Yeah,
first question we ask everyone who comes on the podcast
is what do you like to suplore? John, Because obviously
you doing the smart thing. You're saving and investing for
your future, but you got to spend a little bit

(01:51):
of money in the here and now. What's that thing
you like to prioritize? Totally?

Speaker 2 (01:54):
You gotta have fun. You gotta have fun. I'd say, Well,
my wife and I, you know, we definitely combine five nances.
So as a couple, we love a nice meal out.
Who doesn't, And we love a nice trip some traveling.
On the personal side, though, I like racket sports a lot,
and so I'm not afraid to drop more money than

(02:14):
the average person on a new racket or good shoes,
new equipment, something like that.

Speaker 1 (02:19):
Okay, sos Andre Agassi of New York, does this also
include what's it? Pickleball? So does this also include a
fancy paddle?

Speaker 2 (02:26):
It's funny, So I've played a tiny I actually really
haven't gotten too pickleball the way that many other racket
players have. I still play a lot of squash, which
is kind of like racketball. Inside. I'm here in Rochester,
New York, and you have to have a winter activity,
so mine is really squash. And then I'm getting into
tennis and this random sport that's really not national, but

(02:47):
it's kind of like pickleball, I suppose, which is called
platform tennis or paddle tennis, but depending on who you ask.
So I've gotten into that a little bit too, very fun.

Speaker 1 (02:56):
So did you start playing squash, because I'll say I've
played a decent amount of squad college, which makes it
sound like I went to some like Ivy League store
or something like that. Ye see you at the squash courts,
but I just took it as a class, not a
questioning polo in your history too, mass Yeah, Formula one racing.
That was a big sport at my college where I
went to.

Speaker 2 (03:13):
Let me ask, Hi, Matt, do you use summer as
a noun or as a Now that is a I
did get into squash in college. It's a long story,
but the short answer is the college coach at the
University of Rochester was looking for a few walk ons
to round out the roster. I was an athlete. I
played basketball and baseball growing up. I had friends on

(03:33):
the squash team and they're like, hey, man, just come
out and try to see if you can get one
of these walk on spots. And I did, and it
exposed me to some really, really good players. I was
never one of them, but I kind of was this
gym rat that fought my way onto the team. And yeah,
I mean U of R. For a while we had
a very good team. I think in twenty fifteen or
twenty sixteen we finished second in the country. We lost
to Yale IVY League. There you go, lost a Yale

(03:55):
in the national finally, so I was surrounded by some
really good, world class players.

Speaker 1 (03:59):
Cool.

Speaker 2 (04:00):
It's hard not to get a little bit better yourself
when you're playing with people who are that good.

Speaker 1 (04:04):
Were you able to parlay that walk on into a scholarship?
At any point in time.

Speaker 2 (04:08):
No, no, I got no financial benefit which a German whatsoever.
But but I tell you what it was. It was
great at I got to meet cool people from all over.
I got to be part of the local kind of
uh more citizens community here in Rochester and have met
a ton of good people, including someone who ultimately referred
me to my now boss.

Speaker 1 (04:29):
Right.

Speaker 2 (04:29):
That networking happened through squash, So it's just a great
little lesson and the people you meet and the connections
you make and the potential long term benefits you can
you can get from that absolutely.

Speaker 1 (04:39):
And plus that's how you met the Winklevoss twins.

Speaker 2 (04:42):
Correct, that's yeah, that is how I got introduced to
dose coin.

Speaker 1 (04:48):
Well, hey, it's exactly right. On another personal note, you
just had a baby, a baby a couple months ago,
so congrats there. But I'm curious if, like, has that
shifted any of your money or any of your financial beliefs
at all, Like, like, have you had any paradigm shifts
since welcoming Mave to the world.

Speaker 2 (05:04):
Yeah, little baby Mave, she's about ten weeks old. Thank
you guys, and it has I mean, introducing a new
child in your family does expose depending on the person,
but a lot of different shifts, and it can go
back to before the baby arrived, and my wife and
I were having conversations about, you know, let's earmark our
dollars and what do we need to think about this year,

(05:25):
whether it's something like, hey, we're only on a bronze
healthcare plan, so how much money do we need to
set aside for the actual cost of childbirth to how
will our monthly finances change in terms of you know,
diapers aren't cheap as you guys know, or even something
little like you know, like many babies, there's a little
hiccup here or there, and may've had to have a
little small procedure early on in her life. And it

(05:49):
was interesting just sitting there and when we heard about
what the cost of it would be to us, how
it was basically like a saying no was a non starter.
I suppose it's a negative. The idea was we were
going to say yes, yeah, like right, you have to
say yes, you know, it's for the health of the child.
And then but you do have to realize after the

(06:10):
fact you kind of have to go back and be like, oh,
we need to rearrange the budget. Now we need to
figure out how this is going to fit in because
this has to happen, and it means that you have
to shift other priorities in your in your personal finances.

Speaker 1 (06:21):
For sure, that's a good point. Yeah, I was relaying
this to Matt this past weekend. We had an orthodontia emergency.
My daughter bid it on a skateboard, and it was like,
we're fortunate, fortunate, fortunate, but like, yeah, I was told
telling them Matt, like if the if the orthodonist had
said in that moment, hey man, I'll come in, but

(06:41):
it's gonna be five thousand bucks, I would have been like, done,
let's go, like I'll pay, I'll rearrange everything, I'll figure
it out. And that's that's true. Like when you become
a parent, it's important to understand that that's going to
be the reality, and then you're gonna have to potentially
you have to make some forward looking changes. But then
also you might have to if something unexpected comes along,

(07:02):
you might have to rearrange a budget like you, like
you mentioned, I'm curious too, Jesse. You write about five
twenty nine plans, they hit a little differently when you're
saving for a baby that's actually on the scene. Are
they overrated or underrated? And have you started saving for
Mave's higher education yet?

Speaker 2 (07:17):
Yeah, I opened I opened her five to twenty nine
plan three weeks ago.

Speaker 1 (07:21):
Nice, it's like a ride a passage.

Speaker 3 (07:23):
Yeah, of course Jess was holding that like right, It's
like he's probably looking forward to that more is versificate
and then opening the five twenty nine.

Speaker 2 (07:30):
I remember her first laugh, I remember her first words,
and I remember when I opened her five twenty nine. Yeah,
and I know, I think a couple of weeks ago
was the first automated payment, automated contribution into that five
to twenty nine plans. So yeah, it's it's real, it's happening.
But back to your question, are five twenty nine plans
overrated underrated? I don't know. Maybe they're they're rated about

(07:53):
the right way. But the one the one thing that
I do have a pretty strong opinion about when it
comes to five twenty nine plan is I think the
smart financial planning thought process needs to be for a
parent to assume that some of their planned gift to
their children is going to come from a five to

(08:13):
twenty nine, but not all of their planned gift the
reason being is that of the one of the bad outcomes,
or one of the outcomes that I'd want an individual
to avoid is the outcome where the kids are all
the way through college and there's really no more outlays
of money when it comes to education in the family's future,
and yet the family still has a significant amount of

(08:34):
money left over in a five to twenty nine. That's
something I want to avoid. I'd much rather have a
family say, yeah, we spent every single last dollar out
of our five twenty nine, and then we needed to
supplement it a little bit more with a taxable account.
I think that's a much better outcome.

Speaker 1 (08:48):
You're hedging your bets by sinking some of that money
in a tax bile brokerage.

Speaker 2 (08:52):
Exactly right. You're hedging your bets. You're giving yourself some
flexibility along the way should you need to for some
reason or another and emergency strikes you actually want to
tap into that college saving money. By having a little
bit on the side in a taxable brokerage. Boom, You've
just given yourself that bit of liquidity.

Speaker 3 (09:08):
Uh.

Speaker 2 (09:09):
And then depending on the reasons for depending on the
reasons for a child not utilizing all their five twenty
nine dollars. There can be taxes and penalties associated with
trying to claw that that money back out.

Speaker 1 (09:22):
Yeah, well, and you can always just have another.

Speaker 3 (09:23):
Baby, because then did you get past that point? If
that's a smart money movie, maybe that's the tailback and
the dog.

Speaker 1 (09:28):
But don't ask me.

Speaker 2 (09:30):
I've got four kids, Jesse.

Speaker 1 (09:32):
We've hung out with you a fair number of times.
But actually, like, I don't know your I don't think
I know your money origin story, and so how did
you become obsessed with You're not obsessed with money, but
more like financial education because I didn't mention the best Interest.
It's a blog, it's a podcast, it's a newsletter. That's
that's a podcast. That's why Jesse's for media. That's why

(09:53):
he sounds so great technically over there. But it's a
merched line as well. I've actually got a best interest shirt,
yes you know, yeah, but yeah, how did you get
into teaching others about personal finance? Jesse?

Speaker 2 (10:05):
Just so we could the merch line is exactly one
T shirt, of which I think I printed seventy five
of them, so it's not it's not really a merch line. Yeah, well, no,
great question. How did I get involved with this stuff
in the first place. I mean, depending on how far
back you want to go. I suppose I've always been
a little bit of a savor, a little bit of
I'm actually reading a biography of Warren Buffett right now

(10:27):
by Roger Lowenstein. Awesome book. If you're a Buffet fan
out there. It's really good and fun and entertaining, and
it talks about how Buffet growing up and even in
his career when he's like this early kind of thirties
forties investor, he didn't necessarily want to be rich for
the sake of being like It's not like he wanted
to spend money on huge things. He just thought of

(10:48):
saving money and growing his accounts as an interesting game
and a game that he loves to play, and a
game where when he saw the number go up, it
made him feel good, and so he kept playing it.
And when I read that, I kind of could relate
to that a little bit of just growing up and
having my summer jobs or earning an allowance and enjoying

(11:08):
being able to look at my bank account and say, oh,
bank account's going up. That's cool. And I can look
at my bank account as a bit of a measuring stick,
or I can look at my accounts in general as
a bit of a measuring stick, not against other people
at all, but just against my past self and say, wow,
over the last year, over the last five years, over
the last ten years, I've accomplished these things. So then

(11:28):
fast forward to my first job out of college. I'm
twenty three, twenty four years old. I've got some student
loan debt, I've got a car loan, I'm paying all
my bills, I'm earning a reasonable salary. My dad told
me I should contribute in a four toh one k.
I'm not really sure why at the time, and the
whole idea is like I had all these things I
could have been spending my money on. Oh yeah, and

(11:50):
for the first time in my life, I had enough
of a paycheck to actually buy cool stuff, you know,
to have that craft beer equivalent, as you guys would say.
And it's like, how do I balance all these different
competing needs for the same dollars. So that's where I
did a lot of self study. I started learning. I
found the FI community, I found podcast blogs, personal finance books.
Everything I consumed a ton and by the time I

(12:12):
was in my mid to late twenties, I became enough
of an armchair expert to at least help out my friends,
help out some colleagues. They encouraged me to turn my
emails into some sort of article to share online. I
decided to start a blog. Don't really know why, but
I did. I started The Best Interest just as a
place to share the work that I was already doing
for people in my life. And the Best Interest has

(12:33):
grown eventually I started a podcast. It's still very much grassroots,
listener and reader focused. A lot of my content is
just Hey, a listener sent in this question. It's a
really good question. Let's write about it, Let's talk about it.
And that's It's been five and a half years now
of running The Best Interest, and it was cool enough
that I switched careers over it.

Speaker 1 (12:51):
Well, speaking of being able to make a living doing
what it is that we do, I mean, when you
switched from what seemed like probably a very stable sort
of career. I'm curious, maybe this is a two part question.
I'm curious what considerations came into your mind, Like what
were your pros and cons I guess of starting kind
of going out on your own and doing something like
what you're doing now with the best interest, but then

(13:12):
also if you have found it to be incredibly worthwhile,
and if you would, I guess recommend it for other
folks who might be considering something similar.

Speaker 2 (13:20):
Yeah, oh, powerful question especially, I mean they're both really
good questions. And if I forget part two, you might
have to remind me. But I'll tackle part one first,
which is it was really it was scary, and like
I definitely spent a lot of time thinking through the
pros and cons. And I remember I had a conversation
with a college buddy of mine who This buddy he

(13:41):
had two degrees in biomedical engineering, but right from the
start including I think his master's is from Johns Hopkins,
like amazing school, and he could have gone to work
for any sort of biomedical engineering firm probably in the country,
and would have had an excellent paycheck from day one.
But instead he started his own business, took on all
that risk, and and really just said I'm an entrepreneur

(14:04):
and I want to take this this bigger risk and
kind of go for broken that way. And I remember
asking him, like, how did you have the the you know, kahonees,
Can I say that here?

Speaker 1 (14:13):
Ha?

Speaker 2 (14:13):
Ha, how'd you have the kahone.

Speaker 1 (14:16):
Go?

Speaker 2 (14:17):
How'd you have the fortitude to do that? And one
thing he said, He's like, you know, man, I was
looking at it, and I said, what's the worst case scenario?
And the worst case scenario is this thing crashes and
burns in a year or two or three or maybe
even five, and I'm left with this failed entrepreneurial journey
that was pretty cool but ultimately failed. And I still
have two degrees in biomedical engineering and I and so

(14:38):
basically he said he might lose a little bit of
his future salary, but he could go get any job
in his field that he wanted. And his resume actually
was pretty cool because he had this really interesting entrepreneurial
company on it. Whereas if it goes well, man, the
sky's the limit for him, right if it goes well.
So he just said he looked at it that way.
He looked at it probabilistically, and he said, even if

(14:59):
it fail, I'm not in that bad of a scenario.
And I kind of looked at my transition the same way.
And I recently spoke with on a different podcast all
about leading the corporate culture and had shared the same story,
which was my worst case scenario. Guys, it's been two
and a half years, even more than two and a
half years since I switched, and if for some reason
this doesn't work out, I have two degrees in mechanical engineering,

(15:22):
I have seven years experience at an aerospace engineering firm.
I could probably go back and get a job back
in my old industry. I wouldn't be my favorite thing,
but it's certainly not the end of the world. And
if that's the downside risk, then that's pretty good.

Speaker 1 (15:36):
And if I remember correctly, when you were making that transition,
it was a it was a downstep in terms of
salary from your aerospace engineering firm to working in finance
full time. So it's not like you were like, oh,
let me go over here so I juice my paycheck
in a significant way. Do you have advice for other
people who are maybe working in a lucrative position but

(16:00):
they kind of dream of doing something else with their
nine to five hours. That's such a big part of
our lives and if they say, listen, it's not about
finding the perfect job, but I would love to find
something that maybe I feel more aligned with every day,
even if it means making less money. I don't know.
Do you have any advice for those folks.

Speaker 2 (16:14):
Your memory sharpest attack? Can I say that your memory
spot on, spot on, It hasn't deteriorated too much yet
give it time? No, I hope I learned this weekend
actually that maybe this is common knowledge, but just the
correlation between sleep and long term brain health. So hey,
get that sleep in guys, right.

Speaker 1 (16:33):
Will be fine?

Speaker 2 (16:33):
Your brain so important. But no, yes, I do have
some advice or at least some of the thought process
that I went through. And it really does come back
to a kind of a financial planning thought process of
how much money am I earning? How much money am
I spending? Is my new salary going to be enough
to support my current lifestyle? If not? How much time
am I going to give myself to start earning more money.

(16:55):
I mean, one thing, for what it's worth that made
me feel better about my transition that I do think
is worth understanding for other people is, you know, the
engineering field has a relatively flat pay structure, meaning, you know,
unless you're going to go into engineering sales or you
want to be an executive or like upper level management
of some sort, your total career earnings are pretty well

(17:17):
defined and capped. It's certainly enough to live a wonderful
lifestyle off of, but by no means are you going
to be, you know, doubling your salary in a year
as an engineer, that kind of thing. Whereas, Okay, my
career over here, I have a salary, but part of
my compensation is based on am I working with happy clients?
And are my clients coming back to me for more

(17:38):
advice year after year? And so the idea is I
can take my destiny into my own hands a little bit,
and my salary on the upside isn't quite as capped.
And I liked that. I said, you know what, I'm
willing to take a bit of a pay cut for
something that I think I'm going to enjoy every single day.
And obviously that's a huge part you guys alluded to
that I'm going to enjoy this work every single day,
which I have now for almost three year. And if

(18:01):
I'm doing it well and if my clients are happy
with the job I'm doing and they keep coming back,
I actually think my income potential is pretty high, higher
than it would be as an engineer. So again, yes,
all those things went into play. We could also go
into details about, you know, how's your four to one
K or retirement account benefit going to change? How does
your health insurance benefit change? Does it affect other members

(18:23):
of your family? Like, there are definitely some nuances when
it comes to the total benefits package that I think
someone should dive into those details.

Speaker 1 (18:30):
Yeah, we talk about total compensation, and when you're considering
a job, it's it's not I think people focus ninety
five percent of the time on the headline salary, but
there are all of these other things, these metrics, the
four to one K match, what is the healthcare benefits
of Like sometimes the employer will pay basically all of
your healthcare costs for your copase, right, and so that's

(18:51):
hugely significant. Yeah, how did you think through maybe those
secondary items as you were transitioning?

Speaker 2 (18:56):
Yeah, I mean I just kind of asked for all
the details up front, did my best to do an
ap apples to apples, and as you alluded to, like,
I looked at it from a total compensation point of view,
where sure, I guess the four to one K dollars
technically aren't liquid today, and like some of those things
are worth considering. But rather than get into all the
nitty gritty details. The idea is, let me try to

(19:17):
put a dollar sign next to each one of these benefits,
whether it's salary, healthcare, HSA four to one K all
of them, and just look at the sum total versus
the sum total and right up front pay cut. Not ideal,
certainly not ideal. But then you kind of have to
use some call it creative math or some subjective math
and say, what's the long what's the long term potential here?

Speaker 1 (19:38):
Yeah?

Speaker 2 (19:38):
And do I In my case, one of the questions
I asked myself was do I believe in myself enough
that I really can hit this long term potential? And
it's very cliche to say, you know, bet on yourself
or invest in yourself for those kind of things, but
there is some of that. There has to be some
of that if we want to, you know, succeed in
what is ultimately a pretty competitive economic and ivironment out there.

(20:00):
And I said, you know what, I'm going to take
a chance. And if like I alluded to before, it
helped having that safety net underneath me, which was if
it all doesn't work out, I do believe I could
go back and get a job in my old industry
that I'd be content with. So I think that's pretty
important too. I'm a big safety net person.

Speaker 1 (20:15):
Yeah, analyzing that risk potential has a lot to do
with whether or not we take those big leaps when
it comes to our career. But speaking of risk, we're
actually going to talk about risk and how that applies
to our investments. We'll get to that and more right
after this. I we're back from the break, we're still

(20:37):
talking about investing being risky. Actually, that's specifically want to
get into now, Jesse. You talk about investing in particular.
This is a subject you is near and dear to
your heart. You write about a lot, and you're typically
not writing about investing so that you can be as
rich as Warren Buffett, who you alluded to earlier, but
really so that you can kind of grow in financial security.
And I don't know. One of the things you wrote

(20:58):
about recently, you run about how risk is inevitable when
we're talking about investing, but also how not investing is
the biggest risk of all. And I think you said
that people need the willingness, the ability, and they have
to have the need to take on risk. Can you
walk us through kind of how people can and should
determine their risk tolerance when they're thinking about what sort

(21:18):
of investments start.

Speaker 2 (21:19):
Yeah, yeah, thank you guys for reading those articles. I'm glad.
I'm glad you are. I'm glad you find them helpful. Willingness, need,
an ability. I think those words are technically part of
I want to say, the CFA, the Chartered Financial Analyst
curriculum or something along those lines. It's a very kind
of nuanced portfolio portfolio manager type thought process. But right,

(21:41):
I mean, you know, why do we invest in the
first place is ultimately the question, and different people will
have different answers, and the one that I like is to,
you know, to grow, to grow someone's wealth, to grow
someone's spending power faster than inflation without taking undue risk.
And so risk and reward are these two terms that
will use. They're very much tied at the hip. In fact,

(22:04):
they're so tight at the hip that if someone out
there ever finds an investment that has a very very
high reward with very low risk, well that's probably a
bit of a red flag, because right, that doesn't really
make sense. Risk and reward shouldn't be that disjointed in
that way. But Ultimately, let's go back to that need
ability and willingness. Willingness is the only one of this

(22:28):
trio that's pretty subjective, meaning it's up to the individual
and some of their their personal leanings. And I think
we all know people in our lives who are pretty
gung ho, who may be a little fast and loose
with their money, or who might you know, they might
look at, say an entrepreneurial and opening a small business,
and they say, I'm going for it. What could go wrong,

(22:48):
I'm gonna do it. I'm gonna put my money at stake.
It's going to happen. Okay. That's they might have a
little bit of a higher willingness to take on risk,
whereas other people, you know, here we are recording this
on August twentieth of twenty twenty four. Other people might
look at what the stock market did in the second
half of July and early August this year, which I
think pique to trough the s and p took maybe
an eight or nine percent dip, and they might look

(23:11):
at that change in their investing account and say, this
is messed up. I hate this. I can't stand that volatility. Well, okay,
that's someone who if if that's scaring them that badly,
they don't have that high of a willingness to take
on risk. So willingness is pretty personal in that in
that case, but need and ability, those two are much

(23:34):
more objective. So the need to take on risk really
you can think of it as the need to achieve
investing reward. And what I mean by that is when
someone has certain financial goals out in the future that
require a certain outlay of money and a future date,
they might have a true numerical need for their money

(23:55):
to grow over time. And you know it said, well,
if you to double your money in ten years, you
probably can't do that in a normal bank account. You
need to take on more risk than that. Ability to
take on risk, though, is similar in some ways. It's
also objective. But the ability to take on risk has
to do with one's I don't want to use the

(24:18):
word ability in the definition, but I can't think of
a good synonym right now, one's ability to recover from
a loss. So, for example, someone who's say young and
earning a good amount of money, well, their ability to
take on risk could be pretty high. Because if the
stock market took a thirty percent drop between now and
the end of the year, that person has the ability
to continue earning, to continue investing, and in the long run,

(24:41):
to recover and likely flourish from this current thirty percent
drop in the market. Whereas when someone's eighty years old
and every dollar in their account matters to them being
able to support their lifestyle for the rest of their life,
their ability to recover from a loss and therefore their
ability to take on risk is much much less. So
pause there, But that's how I think about need ability

(25:03):
and willingness to take on risk.

Speaker 1 (25:05):
Yeah, well, to touch on I guess to drill down
a little bit on ability. Like you're talking about the
ability to recover. What do you say to folks who
are saying, Hey, all right, you're talking about investing. I
don't have the money. I don't have the additional income
in order to invest, Because in order to take that risk,
you have to have a level of margin in your life,

(25:26):
Like you have to have dollars beyond what it is
that you're spending every single month. Otherwise you don't have
money to invest. What would you say to those folks.

Speaker 2 (25:33):
Yeah, the money that we put at risk via investments
is extra money in our lives in some way, shape
or form, or it's money in our lives. I suppose
another way of putting it is it's money in our
lives that we don't need to spend in the near
term at all. This goes back to something it's called
the goals based investing framework. You guys have probably heard
of it, probably maybe even had some experts on here
talking about it before, experts who know more about it

(25:55):
than I do. But it's something that I use in
my practice day to day, which is to say, what's
a person's goals, what are their financial goals in life?
And can we put a timeline and a dollar amount
next to those goals? And if someone has goals in
the next year, you know, hey, hey guys, I'm hoping
to buy my first house this fall. Well that money
should be in cash, right, that should be in the
bank account. That's not money that you can afford to

(26:16):
take extra risk with. There's just not enough time to
see that risk play out in your favor. Whereas when
someone's on the opposite end of the spectrum and they say, hey,
all this money is retirement money. I'm not going to
retire for another twenty years. Well, now all of a sudden,
we have some timeline and we have some extra capital
to work with to take on risk, you know, feeling
confident that over a long period of time, that risk

(26:38):
is going to pay off and we're going to see
some real investing reward for it. Now, when someone doesn't
have extra money to quote unquote play with, that brings
about a different conversation, which is there any way we
can change that, you know, can we dive into their
monthly budget, say, and is there actually some room for
leeway if they're willing to cut costs in a couple
other places. I know that's always the case, and it

(27:01):
leads to some hard conversations for people. But at the
end of the day, this is this funny combination in
the conversations we have where it's very personal and we
want to understand the person and the life circumstances that
they're going through. But also on the other side, we
have these numbers that don't necessarily lie, and it's about
finding that balance. And in some cases the numbers just
don't provide many opportunities for investing. And I think it's

(27:24):
important that we just be up for a forthright and
honest and straightforward and saying, hey, that the numbers just
don't really support you taking on much investing risk.

Speaker 1 (27:33):
Right now. You wrote recently on the blog about the
crushing costs of conservative retirement planning. I'm curious what overly
conservative mistakes do you see people making and do you
see because I feel like, especially in recent years, we
see the opposite, right, the crushing costs of day trading
or of you know, putting a bunch of money in

(27:56):
the next super hyped crypto coin or whatever. What is
the But there's a there's certainly a downside from being
too conservative, too right.

Speaker 2 (28:03):
Totally totally, And that's the examples that I see again,
if done poorly. The whole idea is that retirement planning
super smart. We all should be doing retirement planning, or
whatever our long term goals are, we should plan for that.
But if you're overly conservative, you can essentially stack different
levels of conservatism on top of each other. They have

(28:24):
a multiplicative effect or a compounding effect, and you end
up with a financial plan that is so much more
conservative in every single way than what you likely need.
And so like, let's go through a very very simple example.
So I'll ask you, guys, we'll we'll we'll turn the
tables here. I'm gonna host you guys are my guests,

(28:44):
And what would you, guys say, Whether it's one hundred
percent S and P five hundred or like one hundred
percent stocks, or maybe like a sixty forty like retirement
style portfolio, what would you expect the long term annual
return there to be?

Speaker 1 (28:56):
Oh, I'm expecting fifty percent. That's why I I'm fully
invested in bitcoin.

Speaker 2 (29:01):
That's a great answer, guys, that is a terrific answer. Now,
if you were to maybe put yourselves in the shoes
of retiree, what number would you assume?

Speaker 1 (29:09):
Well, I'm going to say, Okay, for real, if I'm
one hundred percent invested in stocks, I'm expecting an average
annualized return of let's say ten percent over the decades.
If I'm a retiree, I'm probably expecting something like six
ish percent with a more balanced portfolio.

Speaker 2 (29:23):
Yeah, okay, totally fair answer. Totally fair answer. Now, I
think when you actually look at sixty forty, I actually
think the actual numbers of six percent SoC forty percent
bond is more like eight percent. But I mean six
percent is fine. It's a little conservative. Though, But so
let's keep that in mind. We're going to use these numbers.
So I'm telling you right now that the average return

(29:44):
for sixty forty, we'll say, is an eight or nine percent,
but if we want to be conservative, we'll say six.
And now, how about inflation? What what do you guys
think that inflation is on an average on an annual basis?

Speaker 1 (29:56):
I'd say two point nine percent today, but typically, right
the feshe for two percent.

Speaker 2 (30:00):
Yeah, exactly right, So let's say two percent. But if
we're gonna be conservative, let's say four percent. Okay, let's
just say we're gonna be conservative here, so we're gonna
say four percent. So if we're using real numbers and
we say, well, what's someone someone's inflation adjusted return, The
real numbers say it's going to be the eight or
nine percent from a sixty to forty portfolio minus the
two percent inflation, So their real return is going to

(30:23):
be six or seven percent per year. But if we
use the conservative numbers that we just talked about, we're
gonna say, well, their nominal return is going to be six,
inflation is going to be four, their real return is
actually going to be two percent per year. So you
guys understand compound math. All the listeners understand compound math
enough to know that if I'm compounding seven percent per

(30:44):
year for twenty or thirty years versus two percent per
year for twenty or thirty years, that's gonna end up
being a huge difference in ending account values.

Speaker 1 (30:55):
Right.

Speaker 2 (30:55):
Well, what if we also add in tax rates? Well,
what are federal tax rates going to be to assume
they're the same as today or do we make them
much worse? Social Security, which I know you guys alluded
to before we can get into that. I know people
in the FI community especially who say, I don't want
us to think that social Security is going to be there.
It's a zero in my financial plan. I'm just assuming

(31:16):
it's not even there.

Speaker 1 (31:17):
That's the conservative approach.

Speaker 2 (31:18):
It's very conservative. It's very conservative, and I can understand it.
I'm happy to get into the details about why I
have some disagreement with that. But the whole idea is
if you stack these conservative assumptions on top of each other.
And what I did is I took what I consider
a very mundane real life example in my article on it,
I forget the exact details. I think it was someone
who's like fifty years old, they have a million dollars

(31:40):
and they want to spend fifty grand a year in retirement.
It's something like that. Just like, here's this fifty year
old couple. Here's a few details about them. If I'm
being really conservative versus if I'm just being what I
would consider normal, it could be like a fifteen to
twenty year difference in their expected retirement date. And that's really.

Speaker 1 (31:59):
The long stinking time, totally, totally and ultimately like, that's
probably how we should be measuring these things too, right,
is well, how much of your time the one resource
you can't get back?

Speaker 2 (32:08):
How much of your time is this assumption going to
cost you? And to me, that's the crushing cost of
being overly conservative, is you're gonna spend years that you
can't get back.

Speaker 1 (32:18):
Yeah. Yeah, incredibly valuable years, whether it's like the remaining
years while your kids are at home or what have you.
But so I've got to think that the kind of
client tele the kind of folks that are coming to
talk to you, that's probably what you're seeing, right, It's
probably folks who have said, you know what, just let's
just play it safe. They're taking The more conservative approach
is that typically what's going on there is folks and

(32:40):
they almost need like permission from you to start spending
some of their money or perhaps to not maybe save
or invest as aggressively.

Speaker 2 (32:47):
I mean, your instinct is right. More people are what
would you call them? I think that the phrase that
I've heard recently from I think Ben Carlson right was
tightwads versus spend thrifts. Tight rods don't spend enough, spend
thrift spend too easily. Most people that I speak with
tend to be on the titwat end of the spectrum
where they're looking for permission to spend, where they're very,

(33:08):
very concerned about their financial future, even though you know
it's like, hey guys, you know you could withdraw. What
you're telling me right now is that your withdrawal rate
is going to be one point five percent per year.
Let's talk about this thing called the four percent rule,
and I'll show you kind of how safe you actually are.
So right, people tend to be on that end of
the spectrum. But that said, some people come in with

(33:29):
very very concentrated portfolios thoughts about cryptocurrency or you know,
some people come in very aggressive, or simply come in
and they're spending way too much, way too soon, and
then we need to have the opposite end of the conversation.
So it's all over the map.

Speaker 1 (33:45):
Yeah, is that what you typically see when when folks
are coming in and their portfolios are just way too aggressive?
Is it because they're invested with a singular company, maybe
in fact the company that they're employed by, Like where
they've got all their eggs in one basket.

Speaker 2 (33:57):
That's certainly happens pretty often, especially today's day and age,
with tech companies, growth stocks, companies using RSUs or ISOs
or different kind of options as payment, where you'll have
someone and yeah, they'll they'll be a two million dollar
net worth and they're earning three hundred thousand dollars a
year from their employer, and of their two million dollar portfolio,

(34:18):
a million of it is employee or is stock options
or RSUs or something like that from the employer, And
so you have this real concentration. You know, again, I
don't it's not fear mongering. It's just storytelling, I suppose.
But basically one of the quintessential stories there is the
Enron story about so many en Round employees who just manned.
They were living life so good because their end round

(34:41):
salary was great, their prospects as far as they knew
in the company were great, just on the way up,
and they were getting stock options on top of that.
And when one tumbled the stock price and really the
whole company crumbled, it affected so many different parts of
their financial plan. And so yeah, for anyone listening who
feel like they're in that situation, long story short, the

(35:02):
best safest advice is try to de risk your stock
side as soon as possible and diversify. And you just
have to be you have to be willing to live
with the fact that you might be wrong and maybe
the stock will go to the moon, but you're taking
the smartest probabilistic bet you can by diversifying out of

(35:23):
the stock of the company that you work for into
a broader portfolio.

Speaker 1 (35:27):
Yeah. I'm not necessarily interested in asking whether or not
you think advisors are worth the fee or not. I mean,
I feel like that debate has made it through. It's
the personal finance realm fairly often, and hopefully there's like
a happy medium understanding that many people have come to
on that one. But I am curious you wrote an
article recently about the financial issues that advisors help with

(35:51):
that tend to be dii wiable. So not everything an
advisor does can be done I don't think necessarily by
an individual from the comfort of their own couch. Can
you walk us through maybe some of those things that
are dii wiable that a financial advisor would typically lend
a hand with.

Speaker 2 (36:05):
Yeah, totally. I think that especially for people who are
if you're listening right now, you have self selected that
you are going to go out and proactively listen to
a podcast about personal finance. And not everybody is in
our group, right, We are all in this group together
where we either like this stuff enough to be recording
podcasts and writing articles about it, or we like this
stuff enough at the very least to go read articles

(36:27):
and listen to podcasts about it. And if you're that
kind of person who really wants to kind of take
the bull by the horns and learn the stuff, then
a good example would be for all of our clients,
one thing that we want to do, so long as
they're willing to do it with us, is we want
to put together a net worth statement or a balance
sheet that lists out all of their assets and debts,
and we want to put together some sort of cash

(36:48):
flow diagram or cash flow statement that says, on a
monthly basis, here's what's coming in and here's what's going out.
Those four things assets, debt's, income, and ending. That's the
foundation of every financial plan period. And that's not rocket science,
right going back to the rocket science thing, that's just
something that any di di wire out there. That's just

(37:12):
something that any DI wire out there can and probably
should do. So it's just very very straightforward stuff like
that when it comes to making decisions in like you know,
how much should I put into my four oh one K.
Once it's in my four oh one K, how should
I invest it? There's some pretty low hanging fruit that
we certainly help all of our clients with. It's very

(37:34):
valuable help, but it's certainly not something that the average
DI wire can't do. As you guys alluded to, there's
some things in financial planning that I've been here for
three years and I don't even feel comfortable with it yet,
Like intricate stuff because you've got a lot of moving pieces.
You've got stock options, business ownership, estate planning, all these things,

(37:54):
and there's a reason why it takes a lot of
time and effort to pass a CFP exam. But yeah,
it doesn't mean that we don't worry about the low
hanging fruit with our clients, because that stuff's really important
too it, but it just means that you don't necessarily
need an advisor to help you with that.

Speaker 1 (38:10):
Yeah, all right, Well, we talked about social security briefly.
We hinted at it at least, and how that's not
factoring that in at all into your retirement plans might
be an overly conservative approach. So what is the right
approach then, especially for the younger listeners out there, How
do I think of and conceive of social security in
my financial future. We'll talk about that and a little

(38:30):
bit more with Jesse right after this. All right, we
are back from the break talking with Jesse Kramer about
how we all need to be investing even though it's risky.
And Jesse, you know, speaking of risk and like something
that's inevitable is death, and I'm thinking about how, like

(38:52):
we started our conversation talking about how you having a daughter,
how that's kind of changed your perspective. One of the
best guys in personal finance and investing I'm thinking about
Jonathan Clemens with the Journal, but he maybe three months
ago or two months ago, he revealed that he's diagnosed
with a terminal brain tumor. And he's not like crazy old, right,

(39:14):
I think he's something like sixty one years old. It's
how it's been fascinating to see how he has changed,
how it is that he is like what he is
allotting his life to, right, because like he's got this, Hey,
this is the amount of time that you're looking at.
Because imagine, right, if we all knew exactly when we're
going to die, we could allot our dollars and we

(39:35):
could parse out our time in a way that makes
the most sense to us now. But most of us, like,
we don't have that knowledge. I'm curious, how does anyone, no, no,
unless you're in the unfortunate, even him, he doesn't totally know, right,
he has, like I guess, a rougher idea than we do. Sure,
but how does something like that, How do you think
that that understanding or the impending reality of our death,

(39:58):
how should that impact our financial habit? Do you think? Yeah?

Speaker 2 (40:01):
I mean specifically when you brought up Jonathan, it's so
interesting I invited Jonathan on to the Best Interest podcast
back in May, and I think the episode might have
come out in early June. But on our episode, as
we're recording, he explained to me why he owns a
very simple type of fixed life term annuity, because he was,
you know, he's The idea is that if you lived

(40:23):
to being ninety or one hundred, the benefits of owning
an annuity get better and better. I'm still not really
pro annuity for what it's worth. I've talked about annuities
on my podcast, but if you do live for a
really long time, that's the one time when you might
want an annuity. And he was explaining that to me,
and I was like, okay, I get it. I get it.
And it was either the next day or the two
days later is when he had his doctor's appointment because

(40:43):
he was losing his balance and he found out about
this this terminal diagnosis, and he shared that with me.
It's just a gut punch, a complete gut punch. But
you're right. I mean, he is providing so much interesting
perspective and sharing with the world his thought processes and
kind of how he's going through it and the things
he's changing, or sometimes the things he's not changing as

(41:05):
a result of his diagnosis. But yeah, I mean from
a financial planning point of view, there is this kind
of running joke in the in the industry, which is, yeah,
I mean, tell me when you're gonna die, and I
will put together the perfect financial plan for you. Okay, Well,
if we don't know when someone is going to pass away,
we have to be we have to be very willing
to accept the fact that financial plan won't be perfect,

(41:26):
it'll be ever evolving. And the analogy I like to use,
which hits with some people and it doesn't hit with others,
is now, Texas Hold'm poker is a reasonably popular game.
Many people understand at least the basics of it. So like,
can I ask you, guys, do you know what the
best hand? The best starting hand in Texas hold him
is pocket aces?

Speaker 1 (41:43):
Right? No, I've got no clue. I've never been in
a poker.

Speaker 2 (41:45):
Pock pocket asis. That's correct, it's pocket ices. So if
I deal you pocket aces, like you're gonna play right,
it's just the best hand. But does it mean you're going.

Speaker 1 (41:53):
To start pushing people around early on in that hand? Exactly?

Speaker 2 (41:55):
Exactly? But does it mean you're gonna win?

Speaker 1 (41:57):
Of course not, depends on what happens with the flop.

Speaker 2 (42:00):
Totally, totally. There's so many variables out of your control
in the future that it doesn't mean that you shouldn't play.
You should play. You should make the best decision right
now with the information you have and the information you
have as pocket ass you're gonna play, but you have
to be willing to accept the fact that at the
end of the hand you might look back and say, oh,
you know what, someone started with a pretty bad hand
and then they got lucky later and they beat me

(42:21):
at Financial planning is really the same way, at least
very similar in that way, which is, you make the
best decisions you can with the information available today, and
over time, as your information changes, as your life changes,
as what you know about your future changes, you make
some adjustments. You have to be willing to accept the
fact that the decisions you make today aren't going to
be perfect. There will be hiccups and bumps in the

(42:42):
road along the way. But again, it feels like kind
of engineering and nerdy to say, but all you're doing
is dealing with probabilities and you're trying to make the
best probabilistic problem solving decisions today that you can possibly make.

Speaker 1 (42:56):
I like that too, because you're reorienting right over time
as things change, right, as the flop changes, your betting strategy,
how you're competing against your opponents, what you're thinking about
your hand changes. Because if I've got pocket aces and
then the flop comes out, you know, five seven nine,
then I'm like, I might still have a good hand,
but I might not because someone has pocket lives now

(43:17):
they've got trip fives, and I'm potentially losing us. Sorry
poker nerds Nerd. Well, So my question though, Jesse, So
this is assuming though, that making as much money as possible,
for instance, is sort of the goal. Right, So I
guess I guess that is what you're saying though, right,
You're because you're optimizing or thinking about everything. Yeah, well,
so I guess that that kind of gets to my question. Then,

(43:38):
how much do you think that there is a disconnect
between what it is that folks are doing with their
money today, those actions taken today versus the goals that
they have for tomorrow. The clients that you've talked with
and the folks that you've seen, and even just as
you've thought about this. Do you think that folks are
thinking long and hard enough about what it is that
they are wanting to get from life?

Speaker 2 (43:58):
The short answer is no. I think the average person
probably isn't thinking enough, or at least long enough and
hard enough about that future version of themself. And I'm
going to borrow a really cool metaphor or analogy that
I heard from a gentleman named Phil Pearlman. Phil's awesome.

Speaker 1 (44:16):
Phil.

Speaker 2 (44:16):
If you're listening to this, you're a great guy. And
Phil's focus is mainly on health, but he's actually pretty
cool because he's a PhD I want to say psychologist,
not psychiatrist, psychologist who worked on Wall Street doing behavioral
finance stuff for like twenty years and then he retired
to focus more on health. And one thing he was
telling me about his health help that he provides people

(44:38):
is to realize that you know. Like so, Matt and
Joel again, I'll pose the question to you guys, And
it's a bit of a morbid question, but hey, we're
talking about life and death here at times, so it
comes into play. But the question I'm going to ask
you is, what is the probability that one year from
now on August twentieth, twenty twenty five, you guys are alive,
and well.

Speaker 1 (44:57):
I'm gonna say, oh, gosh, probability's n eight point six percent.
I'd say, yeah, h ninety nine plus percent.

Speaker 2 (45:04):
Yeah, I would agree with you. It's it's probably ninety
nine plus percent. And so I would say that, except
for a tiny sliver of probability, that that future version
of you one year from to now is real. That
is a real person. You haven't met them yet. They're
in some other part of the universe, so to speak,
you know, in some alternate university or whatever you want
to think about it, depending on your metaphysical point of view.

(45:26):
But that person is real except for some tiny sliver.
And I could go two or three or five or
ten years out, and granted the sliver gets a little
bit bigger each year. Ten years from now, maybe the
odds that you're not around is three percent or five percent.
It's sad to think about, but it's real to think about.
But most likely that future version of you is real,
just as real as the person sitting here today, and

(45:47):
it's important for us to realize that no pun intended
and make decisions accordingly. And I think the short term mindset,
whether it's diet and health like Phil talks about, or
whether it's personal finance that we're talking today, the short
term mindset often is that failure to realize that today's
decisions will have an impact on a very real version

(46:09):
of you in the future. And we'll focused a little
bit too much on the one hundred percent version of
us that's here today. Right, there's no sliver, we're here,
it's one hundred percent Reeal, we forget the fact that
that future version of you is ninety nine or ninety
six or ninety percent real, and they deserve to be
thought about as well. And I think that at least
for me, Granted maybe that metaphor doesn't work for everybody,

(46:30):
but for me that helps me realize, Okay, I need
to make some decisions today that are going to benefit
that person ten or twenty years from now.

Speaker 1 (46:37):
Less Yolo a little more future orientation. Talk about social
security for a second, Jesse, you've written extensively about social
security and the system seems to be in financial trouble.
There's is in financial trouble, and there's been a lot
of inks bill on that recently, But the truth is
too you can read those headlines and you can be
freaked out, especially if you're in your twenties, thirties, or forties,

(46:57):
and you might think, Yeah, like we talked about earlier, Yeah,
I'm just I'm just gonna assume that I'm not getting
anything from Social Security? Why would that be a mistake?
And how should people think about social Security and the
role that it's going to play in their retirement.

Speaker 2 (47:09):
So depending on what article you've read and when you
read it, odds are they put a certain year in
that article. Maybe that year was in the mid twenty thirties.
Have you guys seen these articles in that year?

Speaker 1 (47:20):
That's when the trust fund's running out?

Speaker 2 (47:21):
Right, exactly exactly, And that's pretty scary. Whoa social Security
is going to run out of money in twenty thirty four.
It's semi true, it's a half truth, but when we
see the full truth, we realize, Okay, it's maybe not
quite as dire. It's not good, let me put it
that way. It's not good, but it's also not necessarily dire.
So right now we're sitting here in twenty twenty four,

(47:42):
and you and I and most people we know are
contributing into the social Security system via payroll taxes. Right
faika oasdi. These acronyms might mean something to you. We're
putting money into the system, and at the same time,
the Social Security Administration is basically they're sending checks out
to all these retirees who are collecting Social Security. As

(48:05):
we sit here today, the amount of checks that are
going out are covered. About ninety percent of the checks
that are going out are covered by the tax dollars
that we are putting in, and that remaining ten percent
of the checks that are going out, that money is
being drawn from this so called trust fund. And over time,
so here we are in twenty twenty four that that

(48:25):
fraction is ninety ten. Over time that fraction is going
to shift to like eighty five to fifteen and eventually
eighty twenty. And based on actuarial projections, that trust fund
is going to run out of money in about twenty
thirty four, which means in twenty thirty four, of the
money that's going out, or the money that's promised to
retirees at that point, only about eighty percent of that

(48:46):
money is going to be covered by payroll taxes. It's
not zero, it's eighty percent. So in my opinion that
the worst case scenario is that twenty thirty four comes around,
nobody takes any action, the trust fund is gone, and
yet we still all this money to people. Well, eighty
percent of the money that is promised to them will
be covered by that year's taxes. Social Security collections via taxes,

(49:08):
same goes for twenty thirty five to twenty thirty six.
So if I were to be ultra conservative in a
financial plan right now, and I was worried about my
Social Security income in twenty thirty four and beyond, I'd
assume I'm only collecting eighty percent of what has promised me,
not zero. Eighty percent.

Speaker 1 (49:23):
Yeah, and eighty percent of a guaranteed amount. Let's be honest,
that's not that bad. Yeah, whatever the number shows when
you log into my social Security dot gov, if you
just factor in eighty percent of that, that could maybe
bring a little bit of stress relief when it comes
to how much you figure are factoring that you need
to save for your own retirement. So when it comes
to strategy, though, like the common advice to folks who

(49:43):
are are nearing retirement is just to wait until you
reach age seventy in order to maximize those monthly payments.
But you actually recently wrote about why taking social Security early,
perhaps at sixty two, how that could be a better option.
Can you fill us in how might that work out?

Speaker 2 (49:59):
Yeah? So I had a reader right in and because
I'd written maybe three or four articles in over a
few months on social security, and I had a reader
right in and say, hey, Jesse, you forgot about something
which is kind of cool. The thing you forgot about
is that you could start collecting social Security at sixty two.
You could invest that early collection money, and as long
as you just let it ride, you're actually going to

(50:20):
end up better off for it than if you had
waited till age seventy. I was like, oh, that's kind
of intriguing. I hadn't really thought about it. Let's see
what the math bears out. And this gentleman isn't quite right,
but he also wasn't quite wrong. He was somewhere in between.
And the reason why, and if this gets into some
nerdy investing talk here, but if I invest, let me

(50:41):
put it this way to you guys, if I invest
money in the stock market versus I throw money into
a savings account, is one going to give me more
investment reward, but is also that one going to provide
going to cause more investing risk? Yep, right, it is right.
Putting money in the stock market over a long enough
period of time, of course it's going to bring me
more reward, but it's certainly not guaranteed. That lack of

(51:03):
a guarantee we call that risk. So the stock market
is more risky now when I go back to social Security.
By delaying social Security till seventy and increasing the monthly
amount that I'm collecting by every month that I delay,
the federal government is guaranteeing me that I'm going to
be collecting more money if I delay. That guarantee means something.
It means that there's not much risk there. Whereas if

(51:26):
I collect early and I put it in a sixty
to forty portfolio or one hundred percent stock portfolio, well,
I'm taking on more risk in order to achieve more reward.
So ultimately, that was the conclusion of that gentleman's comment
to my blog post, which he was kind of right,
which is like, Yeah, if you want to start collecting
at sixty two and you want to take on some
real investing risk, you probably you might be able to

(51:48):
It's not guaranteed, but you might be able to walk
away with more money. The odds might even be in
your favor. But for the average person who maybe they're
a little risk averse, they're not familiar with the market,
and really Soli's care ccurity is meant to be a
guaranteed form of retirement income, you're playing with a little
bit of fire and it's not something that I'd necessarily
recommend for every person to do. It's kind of like

(52:10):
a bit of a buyer beware or you know, proceed
at your own peril type recommendation.

Speaker 1 (52:16):
Yeah, it kind of. It reminds me of why folks
who own their own home, even if they have a mortgage,
why they tend to be wealthier, right, because it's a
forced method of savings, and you don't have to do that,
but you do have to stay disciplined enough to invest
the difference over what it is that you would pay
in rent, and not a lot of folks are doing
that in the same way, not a lot of folks
are going to have the discipline to take that money

(52:36):
to invest it in to see potential outside returns. You
also have to do that at a time when risk
is harder to come by because of your ability to
endure some of the downside potentials of that risk. Love it,
love it, Jesse. Yeah, Hey, we appreciate you taking the
time to chat with us today. Want you share with
folks where they can learn more about you, read your writings,
and listen to your podcast as well.

Speaker 2 (52:56):
Oh, thank you man, Joel. Thank you guys for letting
me come on and share some thoughts to day. Yeah.
If listeners want to check out my work, the easiest
thing they can do is go to best Interest dot blog.
That's not dot com, it's not dot net, it's not
dot yeah, dot blog, best Interest dot blog, and you'll
see my blog, You'll see my podcast there, and then
you'll see a little sign up for him from my

(53:17):
weekly newsletter. I send a weekly newsletter that shouts out
other cool stuff I find around the internet. Some somehow
to money podcasts make it on there, and it's also
where I share my my most recent work, so people
can rather than having to go to the website and
find it, they can just subscribe to one spot and
I'll send it to them.

Speaker 1 (53:33):
Nice Jesse, thanks for joining us, man, We really appreciate it.

Speaker 2 (53:36):
Awesome thank you guys.

Speaker 1 (53:38):
All Right, Matt, you got to love Jesse, one of
the best in the business, talking about he's a stud,
and I say, really is just kind of translating some
of those nerdier personal finance concepts to what you know,
people like you and I with lesser IQs can understand.
So big thanks to Jesse for coming on the show.
You calling me dumb, call you us dump. Well collectively,

(53:58):
we're both smarter individually, right, I think so, but when
we get together, we post together terrible decisions become total idiots. Yeah,
were the was your big takeaway from this combo? Yeah? So,
I think my big takeaway is going to be when
we were discussing the crushing costs of an overly conservative
portfolio within retirement, right, and he and Jesse was he

(54:18):
was pointing to the fact that you take some of
these more conservative stances when it comes to returns, when
it comes to let's say, inflation, when it comes to
life expectancy, and then you take all of those things
and you add them up, that there is a compounding
impact by having taken a more conservative approach, Right, And
so I guess my takeaway is going to be to
sort of take that idea and run with it, which

(54:40):
is that I think when we have a natural tendency
to be more aggressive in how it is that we
view things, if we tend to be more overly optimistic,
or if we tend to over the opposite, right, if
we tend to be pessimistic, that we then take those
principles and apply them to other areas of life, because
that's just naturally how we see the world. And so
I just think it's important to remember that when it

(55:01):
comes to some of the different decisions that we're making,
is that we we kind of have a set default
of how we expect the future to unfold, and I
think it takes a rare individual to approach that sort
of long term outlook with balance. I guess this is
probably not going to be nearly as optimistic as the
most optimistic person might think it might be where they're

(55:21):
looking at the entire world through you know, rose tinted glasses,
But it's probably not gonna be as terrible as the
most pessimistic person who's thinking the world's gonna end and
the markets are going to crash and the dollar is
not going to be valuable in the you know, like
all you see what I'm saying, Like, but very few
people land it doesn't sell, right, what shows is the
perma bear or the hyper bowl And whereas like the

(55:42):
normal everyday person just assuming regular returns over many, many decades,
which is gonna pay out really nicely for your bottom line,
that it is not as sexy and sure it's not
gonna make that even aside from media. Right, But like
I'm I think what you're saying is totally true. But
even as individuals, I think it's just important to be
aware that. I I think we all tend to have
a proclivity to lean one way or the other and

(56:04):
for us to be mindful of that. Yeah, And I
think that's why, because of what the media portrays are,
because of the people who get all the Twitter followers
because they're extreme, we often end up adopting one of
those extreme stances instead of a more middle of the road,
historically based approach because that's what we hear more more of. Exactly. Yeah,
there's extreme views all right. So I think my big
takeaway was when Jesse was talking about switching jobs and

(56:25):
he says he took the long term view, right, Yes,
he was taking an immediate pay cut, but he was saying, well,
I figured over time there was actually more potential upside.
And I think a lot of people Matt would take
that would say, you know what, I'm either going to
stay put because I like keeping my paycheck. I don't
want to see a salary reduction. But it was interesting
to see the Jesse extrapolated and he said, actually, in

(56:46):
this line of business, my pay is great now, but
it looks like there's less opportunity for promotion, advancement, and
increase in pay than if I go in this other direction. Yeah,
it's going to be kind of an immediate little gut punch,
but I can survive that because I'm smart with my money.
Three years in now, I'm curious to see when he
crosses that maybe threshold. But I think there's a good
lesson for all of us in that. Yeah, let's get
to the beer you and I enjoyed today. It's called

(57:08):
When We Swung from rafters and Danced upon Bars. Of course,
this is a beer by Burial Beer Company. What were
your thoughts? Well, the can art looks like a Salvador
Dolly painting. Yeah, pretty cool. Yeah, and Burial just continues
to master the naming conventions Dolly mixed with a little
bit of Esher. Yeah, but yeah, absolutely, I thought this
beer was fascinating. It was incredibly nuanced. This was soft

(57:31):
and velvety, but it also it was like not brash
but beautiful. And I feel like a lot of hazy
IPAs really are like sucker punches to the mouth. This
one was not. It was, but it still had like
a ton of flavor going on. It's amazing what you
can do with different hops and burials, like they're the
masters at hazy IPAs and just kind of and making

(57:52):
them each unique and separate. Yeah, with this being a
double tons of flavor, so like in my opinion, had
tons of sweetness but tons of hops as well. You
just packed a whole lot into this one. Glad you
and I got to share it during our conversation today
with Jesse Kramer. That's gonna be it. You can find
our show notes up on the website at howtomoney dot
com and buddy. Until next time, Best Friends Out, Best

(58:13):
Friends Out.

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Matthew Altmix

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Investing is Risky. Do it Anyway w/ Jesse Cramer #872