Smart Money Moves After 50 | Bill Yount | 142 - Catching Up to FI: Financial Independence for Late Starters

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:02):
Hello and welcome to a midweekversion of Catching Up to Five.
This is what's known as a feed swapfrom time to time, Jackie and I on other
folks shows, and we have interestingconversations that we feel that we'd
like to share with you on our show In themidweek episode today I talk with Jesse
Kramer of personal finance for long-terminvestors, his podcast, which is fabulous.

(00:25):
He is also the writer behind the blog.
The best interest blog.
So we talked today about some of the mythsand realities of being a late starter.
He opens the show with a couple of hisblogs on things like the stupidly simple
secret sauce for Personal Finance, andthen he debunks also buying the dip.

(00:48):
We include this podcast in itsentirety because the information
he shares in his monologue is.
Equally important to the conversation.
We hope you enjoy these midweekepisodes and take it away, Jesse.

(01:33):
Welcome to Personal Finance for long-terminvestors, where we believe Benjamin
Franklin's advice that an investmentin knowledge pays the best interest,
both in finances and in your life.
Every episode teaches you personal financeand long-term investing in simple terms.
Now, here's your host.
Jesse Kramer.
Hello and welcome to episode 105 ofPersonal Finance for Long-Term Investors.

(01:57):
My name is Jesse Kramer.
Later today, bill Yt will be joining me.
Bill is the co-host of Catching up to Phi.
Phi is in financial independence.
It's a podcast targeted toward latestarters who now need to play a little
bit of catch up in their financial lives.
But certainly still can achievefinancial independence if
they right the ship in time.
And Bill has a lot of interestinglessons to share with us, especially

(02:18):
targeted towards, you know, latebloomers to personal finance
investing and financial independence.
But before Bill joins us, I havesome thoughts to share and as
always, we're gonna start offwith a quick review of the week.
This one comes from MXXX.
HXX.
That is a lot of Xs andthe title list review.
It's a five star review on Apple podcasts.
The title is Great jobExplaining Retiree issues.

(02:40):
I recently spent a fair amountof time finding and educating
myself on Roth conversions.
Today I listened to Jesse's podcast,number 99, and it was all there
in a few minutes of discussion.
Well, MXXX.
I'm glad this was helpful.
The podcast has been helpful foryou in your retirement planning.
It's certainly a topic that I'd loveto talk about, and if you shoot me
an email to Jesse at Best InterestBlog, we'll get you hooked up

(03:01):
with a super soft podcast t-shirt.
Okay.
Before Bill joins us today, I havea couple old articles, interesting
thoughts I wanted to share.
Again, targeted towards maybe somelate bloomers or some people who are
just discovering the world of personalfinance and investing themselves.
And then.
I'm recording this in, in late Marchand we've had a pretty tumultuous
march and, and part of February too, interms of investing in the stock market.

(03:22):
So I wanna share some thoughts withyou guys about this concept of buying
the dip, which is essentially, youknow, holding onto cash to some
extent, maybe hoarding cash, waitingfor a market to go into a minor.
Correction, a bear market, an outrightcrash, and then boom, you pounce
and invest once the price crashes.
It's a concept that on its face makesa lot of sense, but I think as you'll
hear today, there's much more to it thanmeets the eye, and more often than not,

(03:46):
it actually might not be worthwhile.
So we'll get to that articleand those thoughts eventually.
But first, a couple articles,some thoughts targeted towards,
again, the late bloomer.
So the first one is called The StupidlySimple Secret Sauce of Personal Finance.
Some people out there, you'll hearthem say, you know, take your income,
divide it into five E. Buckets.
Take each bucket, multiply it by your age.
You know, if Mercury is in retrograde,convert two buckets to Bitcoin.

(04:08):
Otherwise use 14% of your futuresocial security income, calculated
pro ratta and buy lottery tickets.
Something like that.
Well, that is stupidlycomplicated, but people.
Understandably, they yearn for hiddenknowledge, for secret knowledge,
the secret sauce, and they hearthings like that rambling that I
just had, and they go, oh, thatsounds like secret sauce to me.
Maybe that's what I need to do.

(04:30):
But personal finance doesnot have to be complicated.
The real secret sauce of personalfinance, in fact, is incredibly simple.
I. So we're gonna talk aboutfour stupidly simple rules.
First off the bat, thefollowing four rules.
They aren't highlighted enough in thepersonal finance space or, or maybe
they are, but I think maybe becausethey're so simple we, we overlook them.
But these rules provide the easy answerto, for example, how a frugal teacher can

(04:53):
end up in a better financial scenario thansome slick Wall Street banker, or then
some doctor, as you'll hear later today,you know, bill, bill Yun is an emergency
room doctor, and despite spendingthe first maybe 20 to 25 years, I.
As a doctor after medicalschool, he still ended up in a
position where, you know what?
He was a little bit lost financially,and it's because I think you'll

(05:13):
hear him attest to this fact.
He didn't have all these four rulesin place and they are, number one,
spend less than you earn number twoand double down on the above and spend
way less than you earn Number three.
Find ways to earn more money, but don'tincrease your spending while you do so.
And then number four, invest.
Make your money grow on itself,as hopefully we all know.

(05:33):
But you know, even today, thismorning with a client, I had this
conversation that there are twoequally important inputs to the final
product of good financial planning.
I. The first input is how muchmoney comes in the second input.
Or maybe it's an output, butit's how much money goes out.
It's how much you spend.
And we all love to focuson money coming in, right?
Salary, uh, if not for salary, how wouldI compare myself to another human being

(05:54):
asks many of the modern minuses around us.
But salary alone or income alone,that's an incomplete statistic.
Much like in a way that battingaverage was described in Michael Lewis'
Moneyball, if you're familiar withthat, it accounts for some results.
It does not account for all results,and that's why savings rate is a much
better statistic, at least when itcomes to personal financial health
because, you know, saving 50% ofyour income is, is noticeably better

(06:19):
than only saving 10% of your income.
And it doesn't matter whether you'rea teacher or a banker or someone else.
Whereas if we only compare salaries aloneand we say, well, someone's earning 50%
more than someone else, that's not enoughto really come to a good conclusion.
My second stupidly simple rule ofpersonal finance is that the winners
are loud, but the losers stay silent.
Now what do I mean by that?

(06:39):
Well, we've all seen a headlinethat looks something like this,
28-year-old turns $30,000 into 1million with Tesla stock, or with
Bitcoin or with something like that.
We love winners.
We love the stories of, you know.
Woman gets rich off ofgreat stock pick man shorts.
A company right before it goes bankrupt.
A dog digs a hole in thebackyard and owner finds gold.

(07:00):
We love those stories.
Planet Money had a, had a great episodea couple years ago on people making
money off of a Hertz, the rental car.
They had a bankruptcy and then theyhad this subsequent roller coaster of
their stock price and a bunch of peoplemade a bunch of money off of that
fact and much like a rollercoaster.
Making money creates thiswild and exciting curiosity.
You know, who doesn't like a storyabout someone making lots of money?

(07:21):
The big short, it's one ofmy favorite books in movies.
Making billions of dollars is, isa cool story, but people are rarely
publicized when they screw up.
Mundane failures aren't in vogue.
They never really have been.
You know, man spends $50,000.
On silver coins and neverreally sees a return.
A woman ne neglects free retirementaccounts and regrets her choice
some bros by by crypto at thetop and they lose their shirts.

(07:44):
Oh, those aren't storiesthat stick with us.
They aren't stories that are writtenabout, but they should be, right?
Those should be the stories that wehear, and they should be cautionary
tales of, of what not to do.
Instead, we hear stories through thefilter of survivorship bias, right?
The winners make the cut,and we hear those stories.
The losers don't get publicizedfor every winner you hear about.
You should consider the silentlosers, your slow and steady solution.

(08:07):
It might seem lame compared to thepeople who are taking rockets to
the moon, but a lot of those rocketsactually blew up on the pad, and
we shouldn't forget that fact.
The next stupidly simple rule isthat boring is best picking stocks.
It's fun.
So is picking horses.
But unless you're really, really good atit, it's probably a losing bet for you.
And let's face it, most of usare not really good at that.

(08:28):
There's some really good breakdowns outthere, and I've, I've written one or
two I'll share in the show notes aboutluck versus skill in stock picking,
you can't just be above average, right?
That's not good enough.
You've got to be consistentlyabove average, far above average
for a long period of time.
The alternative to such complex stockpicking analysis over, over long
periods is to invest in something likea boring index fund, is what Buffett

(08:49):
recommends to a lot of people like us.
I mean, he does it his ownway and he's really, really
good at doing it his own way.
You're right.
He, he doesn't invest hisown money in index funds.
Not yet.
He said that a lot of his estate wouldgo into index funds once he dies.
But the idea is that if you know enoughto be like Warren Buffet, well go
ahead, pick individual stocks, buy wholecompanies and make your money that way.

(09:10):
That's what he does all day,every day, and he is been doing
that for over 80 years now.
Something like that, right?
He bought his first stock, I think beforehe was 13 and now he's 93 years old.
For the rest of us, we might wannado something simpler so that we
can go out and live our own lives,and that's not the only one.
Where there there's a contrastin personal finance and investing
between something that's excitingversus something that's good.

(09:30):
Gold and Bitcoin can be exciting is savingtax dollars via investing in a 401k.
Is that exciting?
I don't know.
It sounds pretty boring to me.
And yet maximizing your tax advantageinvesting accounts, it's one of the
best methods for the average Americanto achieve a healthy retirement.
It's like saying, Hey, eatingcarrots and jogging every day,
it'll help you lose weight.
Great.
I bet it would.
But isn't there a magic weight losspill out there, or some Himalayan

(09:53):
calorie burning meditation technique?
We yearn for solutions to be excitingand exotic, but they don't have to be
boring and rich or exciting and broke.
For me, it's an easy choice.
My next rule is that you makethe economy go, at least in part.
You and I make the economy go around.
It's our purchases that keep moneyflowing and that flow of money
greases the wheels of the economy.

(10:15):
There's an enormous vested interestin ensuring that average Jane and
average Joe spend a significantportion of their incomes.
The advertising industry ispredicated on that interest, right?
Drink this beer because you'll be themost interesting man in the world.
Buy this computer so you'renot an Orwellian drone.
That's a famous apple.
AD from 1984.
You know these shoes will make youcool, just like insert your favorite

(10:36):
athlete Here we're urged to consumeuntil we're fat and broke, and once obese
and opulent, we're urged to lose thatweight and store that stuff, and the
cycle continues to the powers that be.
You are a consumer.
You make the economy go round.
Well, something like the fulfillmentcurve is the antidote to that mindset.
If you really know what you're spendingand how it correlates to what makes you

(10:56):
happy, you'll most likely spend less.
And once you have your personal answerto that question, maintaining these
stupidly simple rules of personalfinance becomes a really easy task.
The next one is thatmeasurement is the key.
To management frequent, contributorto the the best interest blog.
Peter Drucker had this famous quotefrom the sixties or seventies when
he was kind of at the at his peak.

(11:17):
And the quote is, you can'tmanage what you don't measure.
So to manage would be to analyze,take care of, and improve.
And to measure would be towatch, to observe, to take notes.
To quantify, let mepresent two people to you.
One of them tracks everysingle calorie she eats.
The other one pays no heedto what she slides down, her
gullet, all else being equal.
Who do you think isgonna end up healthier?

(11:39):
I. Now the first instinct, it's the womanwho measures all of her food intake.
Why?
Well, because we know that her abundantself-knowledge is likely gonna lead
her to make smarter food choices.
The woman who doesn't care, well shedoesn't care, and that's probably
gonna lead to worse food choices.
And the same exact principleapplies to personal finance.
You don't have to trackevery single dollar.
And you don't have to check your accountson a daily basis, but you should have a

(12:01):
really good idea of where your money isgoing and where your net worth stands.
Are you improving?
Are you slumping?
Are you spending thousands of dollarson Nepalese meditation retreats,
measure your money and then improve?
I. Now, what happens if you don't followsome of these stupidly simple rules?
The secret sauce, thestupidly simple secret sauce?
Well, you might end upsomething like Dave.

(12:21):
And in uh, July, 2020,I wrote this article.
Do you know Dave?
Somewhere in Middle America,there's a man named Dave.
You might know him.
Today for the first time ever,Dave is realizing that he's
in a financial death spiral.
Dave makes about $60,000 per year.
He knows he pays some taxes,but he's not sure how much.
All Dave knows is that hismonthly take home income ends up
around $3,000 right off the top.

(12:43):
Dave pays $1,200 for rent.
His apartment is sick.
Or perhaps on flee.
Pick your parlance of the times.
It's a modern, stylish, could easilyfit in another person in his apartment,
but Dave likes to live alone.
Fair enough, Dave.
And after driving a, a junky HondaCivic in high school in college, Dave
is finally able to afford a nicer car.
So he leases changingcars every two years.
Currently he's behind thewheel of an Audi A three.

(13:04):
It's 320 bucks a month, butinsurance and gas brings it
up to about 500 bucks a month.
Dave's young, his friends are young,they all like to socialize around
town and a couple drinks and dinnerlater, the $35 bill comes and life
gets a little slow in middle America.
So Dave does this a few timesa week, spends about 250
bucks a month on dining out.
What about some other stuff?
Well, Dave isn't really sure, you know,whether it's Amazon purchases, groceries,

(13:27):
gifts for his mom on Mother's Day.
Dave knows that he buys these things.
It's just that he doesn't reallyknow how much or how often.
He's unaware that he's spending another$400 a month on all these things.
Like most his peers,Dave has student loans.
He pays 500 bucks a month, and inthe five years since college, he's
paid about $30,000 towards his loans.
That's crazy.
Now his statement says he stillowes 90 grand out of the original

(13:49):
a hundred thousand dollars indebt, but by Dave's Math, a hundred
grand minus the 30 grand he's paid.
Well, that means he only owes 70 left.
So the loan company must be wrong.
He thinks, well, they're not.
Dave's dad annoys him aboutsaving for retirement.
You know, get that compound.
Dad suggests that compound at 27.
Dave isn't even halfway to retirement age.
He's got more pertinent things toconsider than retirement, he thinks.

(14:11):
So let's add it up.
All of Dave's finances, we just laid themout and if you've been keeping track, well
good for you because Dave really hasn't.
The third problem is that Dave's totalexpenses are greater than his income.
He makes 3000 a month, but hespends about 3,100 a month.
Now it's not that bigof a difference, right?
For the five years since college, thata hundred dollars monthly deficit, it
ends up on Dave's credit cards, a hundreddollars a month multiplied by five years.

(14:34):
That's about $6,000 of credit card debt.
Dave looks at his Visa bill.
He sees a charge for $90 per month ofinterest, and that interest doesn't
even affect his $6,000 in debt.
What the heck is that?
When Dave adds up his net worth, he findsthat he is about $90,000 in debt in total,
and a lot of people are in lots of debt.
He thinks, especially young people.

(14:54):
College loans, it's normal.
Dave thinks, well, chronic smokingused to be normal too, and much
like an emphysemic, Dave is introuble to the outside world.
Dave's a reasonable example ofa a successful young guy, and
I'll give Dave some credit.
It seems like he has somenice things going for him.
Education, steady income,nice apartment, nice car.
What's not to like?

(15:14):
Well, Dave's multiple and repeatedfinancial mistakes are catching up to
him, and let's call a few of them out.
After working for five years, he'sdecreased his debts by only 10%.
He isn't aware of what he spends per monthand therefore he's in credit card debt.
Despite being in debt, he's still spendinga significant amount of his money on
luxuries and fun and our young years.
Yes, we wanna enjoy being young.

(15:35):
They're also some of the best timesto invest for retirement, and Dave
hasn't done anything there yet.
These mistakes are easy to avoid, butnobody ever really taught Dave about them.
In fact, I would argue thatour economy, much like we just
described, it's actually a funneldesigned to trap people like Dave.
Even though Dave's in trouble, his pathto improvement is pretty well defined.
He should start off bysetting some financial goals.

(15:55):
Right now he's foundering,he's got no real direction.
And Dave, much like his dad said,he needs to get that compound right.
Dad is right.
Our younger years are the besttime to invest and Dave really
needs a budget or he needs to betracking his finances somehow.
Right?
Money in versus money out.
I used to use the tool,uh, you need a budget.
I currently use a tool called E-Money.

(16:15):
Whatever tool you use, you'vegot to track your finances.
You've gotta track moneycoming in and money going out.
Of course, Dave could find somepretty easy ways to spend less.
He could get a roommate, drive a cheapercar, spend less at the uh, fish fry
Friday, whatever it is, in my opinion,those are all secondary effects that occur
after he sets a goal, after he createssome sort of budget or tracking system.

(16:36):
I mean, maybe Dave really likeshis Audi that he's driving.
Fine, that's fine.
But something in his budget needs to give.
It's up to Dave to make that choice.
Now, do you know Dave?
Can you relate to Dave?
Maybe you're even named Dave.
At the end of the day, oddsare we either know someone or
maybe we were at one point.
This person, much like the first articleI read from, it's very easy to slip into

(16:57):
these traps in impersonal finance, but atthe same time, the way we get ourselves
out of them can be stupidly simple.
And now changing gears in the light ofrecent market volatility, and again, I'm
recording this at the end of March wherewe've had some back and forth volatility.
The s and p 500 right now is about8% off its highs, which, okay, first
off, we do need to zoom out and sayit's not that big a deal, at least

(17:20):
in terms of of market history, right?
8% drops happen probably something like 80or 90% of years have a intrayear 8% drop.
So it's not something there we need tobe worried about if we wanna be worried
about what's going on out in the world.
Politically, socially,internationally, those kind of things.
Totally.
I get it.
I get it.
You know, there's nothing wrongwith looking at the news, looking
at world events and saying,huh, that that concerns me.

(17:42):
I think there is something differentthough about tying that into your
portfolio and saying, ah, because I'mworried about what's going on, I now need
to make drastic changes in, in investingfor no other reason than just looking back
at, at history and realizing that chaos.
Has always kind of been there in thebackground, whether we realized it or not.
World War I, world War ii, greatdepression, stagflation oil crisis,

(18:04):
nuclear arms, race, cold war.
It goes on and on and on and on and on.
There's always been a reason to sell.
Did I mention pandemics?
Yet anyway, there's alwaysbeen a reason to sell.
And that leads to some peoplesaying, ah, I'm going to buy the dip.
And much like birds chirping at the risingsun, investors talk about buying the
dip at the first hint of a, of a stockmarket, pullback, correction bear market.

(18:26):
And yes, buying the dip makes senseat first blush because it suggests
that we should buy assets at atlower or the lowest possible prices.
But buying the dip is actually asuboptimal, a bad investing strategy.
And we need to talk about why.
Now the basic buy the dip argumentis that buying stocks is a risk.
The stocks, their prices, theymight go down after you buy

(18:49):
them and holding onto cash.
That's a risk too.
Now, the cash could be invested andcould grow with a rising market.
That's the opportunity.
Cost of not investing is that you missmarket growth as it grows away from you.
Now, either choice to invest or nothas some sort of risk and reward.
The risk is that the marketmoves in the wrong direction.
The reward is that themarket moves in your favor.

(19:10):
How do we answer
whether to buy the dip, whetherto wait for the market to
drop in price before we buy?
Well, we can't predict what the marketwill do in the future, but we can look
at previous market data to back testa buy the dip strategy, and that's
what professionals typically do andand that's what we're gonna do today.
Usually what we do is if we havesome sort of strategy in mind.
We look and see how did itperform in in past history.

(19:32):
Now, before I insult too manypeople today, we do have to
baseline ourselves a little bit.
There are two commondefinitions of buying the dip.
Kind of like there are two commondefinitions of dollar cost averaging.
It is a little bit confusing.
The first scenario of buying thedip is that you've been holding
onto lots of cash for many years,waiting for some sort of big crash.
And then after that big crash,you choose to buy stocks.

(19:54):
What is most likely, we're, we'regonna talk about stocks today.
Now, that is certainly a formof timing the market, but is
it the same as buying the dip?
I say, yes.
We'll come back to this.
The second scenario is that you'reholding a small amount of cash expecting
it to deploy into the market soon.
Maybe you just, you did a, a quarterlyor semi-annual review of your financial
plan and you realized, you know what?
You've got a few thousand dollarsextra in your bank account

(20:16):
that you really don't need.
You should invest it.
It should go into part of your portfolio.
We don't wanna find ourselvesholding too much cash.
So you have this cash, you wanna deployit, and rather than deploying it today,
you say, I'm gonna give myself a monthand I'm gonna wait for the first red
day in the stock market, the firstday of like a 1% drop before buying.
Because even if the market only dropsthat 1%, you end up buying that dip.

(20:39):
And then in future situations, when youhave a little bit of extra cash on hand,
that's the way that you choose to invest.
Now, I consider both of these scenarios tobe a form of bad negative market timing.
I say that both of these scenarios area different form of buying the dip.
Now, some people disagree with me.
Some people they argue and saythat since they're dollar cost

(21:00):
averaging anyway, since they're.
Investing money on a monthlybasis or on a, you know, biweekly
basis anyway through their 401k orRoth IRA or something like that.
Well, why not wait for a red dayfor a negative day in the market
to execute their purchase by low?
Right.
That's the argument.
Wait for a red day.
I. By low, it makes sense.
And in those people's defense, I dosee a significant difference between

(21:23):
the two scenarios I outlined above.
It's not just my opinion, the differencethat I perceive in these two scenarios.
It is backed up by convincinganalytical data, which we'll talk
about holding onto cache for years.
Stockpiling this cash waiting fora big dip to then deploy that cash.
That is a humongous losing scenario.
It could literally cost an investormillions of dollars over the course

(21:46):
of a 30 year investing timeline.
It underperforms basic dollar costaveraging by as much as 800% in total
returns in historical back tests.
Now, the other scenario whereyou're only holding onto cash for
a few days or a few weeks or amonth, that's a little bit better.
Well, I shouldn't say that.
It's actually much betterthan the first scenario.
But it's still a losing scenario overmost historical 30 year investing periods.

(22:09):
When we back test this kind of wait andsee by the dip, let's wait a few weeks.
Attempting to buy that dip, attemptingto wait for that dip would drag
your overall portfolio down byabout 1% over a 30 year period.
And for someone retiring with$1 million, holding onto cash to
buy the dip would've cost themsomething like $10,000 over 30 years.
It's not a huge price to pay.

(22:31):
But it's certainly not good, and it's notsomething that you just wanna opt into.
Why would you opt into losing out on$10,000 on a million dollar portfolio?
Now some people would argue, well, youhave to wait for a little bigger dip.
Wait for the market to crash by 2%before you invest or wait for the
market to crash by 5% before you invest.
But the data is clear.
The bigger a dip that you're waitingfor, the bigger a dip you need to trigger

(22:55):
you to turn your cash into stocks.
The more painful, the more damageyou're doing to your own portfolio.
So no matter how big of a dipyou wait for, it'll impact
your portfolio negatively.
And the bigger the dip that you'rewaiting for, the worse it'll be.
The best thing to do isto not buy the dip at all.
Some of you might beasking right now, but why?
Because, I mean, wealready talked about it.
Buying the dip on its surface makessense because we wanna purchase stocks,

(23:17):
we wanna invest at lower prices.
I. The best way to explain itis with this simple example.
Let's say Adam has money to invest,and it's uh, based on when I wrote
this article, it's April, 2021.
And this is using real data, by the way.
So on April 1st, the s andp 500 was valued at 4,020.
On April 1st, 2021, and Adamdecided to wait before buying.

(23:38):
He wanted the market to dropso that he could buy the dip.
Unfortunately for Adam, the s and p 500increased by 4.1% in the first two weeks
of April, 2021 from 40 20 to 41 85.
Only then.
After a 4% increase, did the s andp dip It dipped by about 1.2% in,
in mid-April, back down to 41 35.

(23:59):
So should Adam buy that dip at 4135, even though 41 35 is much higher
than where he was previously sittingat the very beginning of April, it
was 40, 20, 41, 35 versus 40 20?
Or should he hold outfor an even bigger dip?
And what if that bigger dip never comes?
Right?
The market is unpredictable.
I bet Adam or these hypotheticalatoms feel pretty conflicted, full

(24:22):
of regret when those things happened.
Now, April, 2021 was a very typical,uh, month in the stock market.
On the whole, the market increasedabout 4% that month, but there were a
couple times with a, a one or one anda half percent dip for most months.
Just like April, 2021, the bestday to invest is the first day of
the month, and for most years, thebest day to invest is January 1st.

(24:43):
Early is better most of the time, right?
The market in general goes up and to theright, and if you know that, if you zoom
out on that fact, you'll realize, sure.
I mean, the market might go down tomorrowor next week or next month or next year.
It's possible, but on average, if youjust ask yourself this question over
any month in market history, you'll haverealized that investing sooner is better

(25:07):
than investing later waiting for a dip.
It's a losing proposition.
A future dip might come, but itusually gets swamped out by the
larger gains in the meantime.
That's the other thing, right?
I'm, there's always going to beanother 2% down day or 4% down day,
or even more a six or an 8% down day.
A really scary day in the market.
Those days are going tocome, I guarantee it.

(25:29):
That's the way the market works,but they usually get swamped out.
By all the gains thatoccur between now and then.
So waiting for lower prices.
Yeah, it makes logical sense,but we have to ask ourselves,
what if lower never comes?
The problem isn't buying the dip.
The problem is waiting for the dip.
Here's a quick add and thenwe'll get back to the show.

(25:49):
Every week I send a quick freeemail to thousands of readers
that shares three simple things,one, my new articles and podcasts.
Two, the best financial content ofthe week from all over the internet.
Three, a financial chartthat explains some important
concept in the news that week.
It's a great primer to boostyour financial know-how.

(26:10):
Ah, but Jesse, I don't want another email.
Well, this might not be for you,but I do hear you, which is why
I make it very short, sweet,and full of only the essentials.
A whopping 66% of subscribers readmy email at least once a month.
They're enjoying itand maybe you will too.
You can subscribe for free on thehomepage at Best Interest Blog.

(26:32):
Again, that's a free, no strings attachedsubscription at Best Interest Blog.
And with that, we're gonna welcomeBill Gown onto the podcast.
Bill is a 57-year-old practicing emergencyphysician, happily married family man.
But he's got an interesting backstorythat's led him to now being the co-host
of, of one of the biggest up and comingpodcasts out there, catching up to phi.

(26:53):
While Bill has spent much of his lifecaring for other people's health, he
never learned or didn't until recentlylearn how to care for his own money
and his own financial wellbeing.
He spent first and savedsecond, didn't know much about
investing in personal finance.
Seems that he made most of themistakes in, in the financial books.
And Bill will attest that waking upfrom that reality was painful, full of

(27:15):
what if regrets about his past and evensome shame and, and we dive into that
today, but the recovery has been hard.
Incredibly rewarding for him.
And now Bill's mission is to helpother late starters start now, right?
And get others to start as earlyas possible on their individual
journeys to financial independence.
So without further ado.
Let's welcome Bill Y to personalfinance for long-term investors.

(27:44):
Bill, thank you for joining us today.
And as the listeners are now aware ofand, and especially those who listen
to catching up to phi, your story isso resonant with so many people who
feel like they're coming to personalfinance, they're coming to investing
a little bit later in their life.
So what was the moment for you that kindof flipped the switch inside your head?
I. And then what were some of thefirst major steps you took to turn your

(28:07):
boat around, as it were, from whateverfinancial path you were on before
to this better financial path now?
Oh, it's funny you mentioned boatbecause we had a boat named Yolo.
That was kind of the mentality.
You know, I, as, as you mayhave mentioned, I'm a physician.
I came outta residencywith delayed gratification.
I thought I deserved a lot of thingslike the new house, the new car, live

(28:28):
paycheck to paycheck, uh, with mywife for the better part of 20 years.
Uh, we made every mistake in the book.
We bought whole life insurance.
We had a so-called private investmentadvisor that was with, and now out
the Northwest Mutual, unfortunatelybought a disability policy from them.
Uh, eventually we were in the privatebank at JP Morgan and paid them

(28:52):
exorbitant fees to really do us nothing.
And they didn't eventalk us out of selling.
Uh, they tried to maybe, but they didn'treally try hard selling at the bottom
of the market in the great financialcrisis and de-risking our portfolio.
So we did that.
We were house poor becausewe'd renovated a house in 2007
that was underwater in 2008.

(29:13):
Uh, so we were house poor.
We had bottomed out in the marketand sold, and then we kind of missed
because we weren't aggressivelysaving a lot of the bull market.
I. In the 2000 odds.
And so we made what I callthe trifecta of mistakes.
Yeah.
And we came out the other side of that.
I woke up at age 50, let'ssay, and that's late.

(29:35):
How did I wake up at 50?
I turned 50 and I realized nobodywas gonna take care of me but me.
And that was a shock.
I was ashamed.
I had my head in the sand.
I didn't know how to pull it out.
There.
Began the journey of the late starter.
I.
Can we dive into someof those emotions, bill?
I know it, it can maybe be achallenging thing to talk about,
but it, it's one thing to getsomeone to understand the numbers.

(29:59):
We do plenty of con conversationshere on this podcast talking about
the numbers, but at the end of theday, a lot of these decisions are
emotional in some form or fashion,and you just used a word there, shame.
Can you talk us through just someof the, some of the challenging
feelings when you realize like, oh,I'm not exactly where I wanna be, but
I've gotta do something about this.
There's kind of a universal path forlate starters, and it, there's always

(30:24):
a shock to the system, whatever it be,like divorce, loss of a job, there's
always a financial shock and you go,oh my God, I'm not where I want to be.
I can't, you know, escape thislack of emergency funds or fu money
that protects me from this shock.
And so it was shock, it was awe,it was shame, it was regret.

(30:46):
You would realize that, as I said.
You had your head in the sand?
Uh, I, I got lost as I referredto it as in the funnel of life.
We grew our family, wewere focused on our kids.
We had a child withdevelopmental challenges that
took a lot of focus and money.
Life just passed by so quickly inthis paycheck to paycheck lifestyle.
We unfortunately spent firstand saved last around tax time.

(31:11):
We did exactly the reverse.
Of what people should do.
It's, I mean, it's not complicated whatyou should do, but nobody took me aside
and said plastics like in the graduates.
Nobody told me that.
Save in your 401k, max it out.
That's all somebody needed to tell me.
I. And you know, I'd been saving here andthere, but we were single digit savers.

(31:32):
It was what was left over at tax time.
And we go, okay, there wasno dollar cost averaging.
Mm-hmm.
I didn't know what that was.
I didn't know what anet worth statement was.
I didn't know what an expense report was.
I just knew if I had money left atthe end of the month of my checking
account to make sure I could pay offthese big credit card bills, was,
you know, literally hand to mouth.
Uh, I hate to say, and I'ma physician, remember, I was

(31:55):
highly trained, highly educated.
I.
And, and how to help peoplewith their health, but I could
not help myself with my wealth.
So yeah, there's a lot ofemotions associated with this.
And then it migrates.
You know, you wake up and you go,okay, let's give myself grace.
Let's pause, try andfigure out what happened.

(32:16):
Where do I stand?
What is my net worth?
What are my assets?
What are my liabilities?
What are my expenses?
What am I spending every month?
Just figure out where you stand.
And then so you plan, at that point, youwrite your investor policy statement.
You don't jump in andstart working the numbers.
You gotta work the emotions, which is 80%of the battle, and you get to the numbers.

(32:38):
But that's the last step.
Investing is really the last step.
So you pause, you plan,and then you pivot.
You change what you, you've learnedfrom your mistakes, hopefully.
And then you ask for help.
You know, you go down the rabbit hole.
I. You, whether it's books, podcast,vlogs, your podcast, my podcast that
catching up to fi i, I call it mesearch because I get to learn from

(33:00):
experts like yourself that we haveas guests on the show, new nuances
to investing every time we record.
So you just need to open yourears, open your eyes, ask for
help, do your own research.
And then with your investorpolicy statement, which is
comprehensive, it isn't just whatinvestments am I gonna invest in?

(33:21):
You know, it's kind of my estateplanning, it's my insurance,
it's all these other facets of afinancial plan, my giving plan.
There's a comprehensive look atthis and people need like yourself,
financial advisors sometimes to workthrough these things and put together
this plan and then you invest.
Mm-hmm.
I took back my money from JP Morgan,I took it back, put it in Vanguard,

(33:44):
and I had read things like theSimple Path to Wealth Set for Life.
You know, I will make you rich by Rus.
I read these things.
Actually, if you can see behind me,I've got two or three shelves of books.
Yeah.
The thing that happened to me as aphysician was I was in analysis paralysis,
which is kind of the next emotion.
You're like, what do I do?
It's overwhelming and how do I, but thenyou gotta learn, how do I take a bite

(34:08):
out of this elephant, one small biteat a time to get where I need to go?
That may, hopefully, thatanswers your question.
Oh, it totally does.
It totally does.
You hit on a few things there thatthat kind of got my brain spinning.
One being, you're right.
So even in this world of professionalfinancial planning, which certainly can
get into some complexities, where do wealmost always start the conversation?

(34:28):
Well, there's that emotional part ofit, or just trying to understand the
person we're sitting across from.
But when it gets into the numbers,you mentioned four things.
In your response there, bill, yousaid I needed to understand my income
against my expenses, and I needed tounderstand my assets versus my debts.
I. I call Lowes the Big four, andthey really are the foundation,
nu numerically speaking atleast of, of any financial plan.

(34:50):
And it's not rocket science.
It is something that everybody out therelistening can start to do themselves
and, and can get to completionthemselves if they want to right it.
It's just this idea of if you don'tunderstand those numbers and and
how they interact with your life,you will find yourself in a position
where you just say to yourself, I'muncomfortable with my money situation
because I don't understand it.

(35:11):
Often you start with yourdebts if you have debt.
Mm-hmm.
And you work those out and then, thenyou work towards, you have the emergency
fund, your debts, then your savings plan.
You follow a cashflow waterfall that I'msure you've talked about on your show.
Mm-hmm.
With the buckets that youput your money in as you flow
down that cashflow waterfall.
And that's where the boring middlestart, that's really the second

(35:33):
phase of being a late starter.
You go down the rabbit hole,you learn all these things.
You get advice, you get help.
You've overcome yourregret, shame and awe.
You've given yourself grace.
And then you gotta work the plan.
You know it there.
There's no magic buttons here.
You've got to follow as I didn'tactually the kiss principle
of keep it simple, stupid.
I. I went complex.

(35:53):
I went all in on the Paul Merriman10 Funds for Life Portfolio, uhhuh.
You know, the first book I'd ever readwas by Bill Bernstein, the Intelligent
Asset Allocator, where I had to learn howto use a financial calculator in order
to figure out some of the things he said.
It's not that I. Complex.
Start with say the simple path to wealth.
Mm-hmm.
That may give you enoughknowledge to really get started.

(36:14):
That's one thing that we alwayscome back to is kind of the
gospel of simple index investing.
It can get a little more complexlater, but you just gotta get
started because you don't necessarilyhave the time of an early starter.
You know, 35 year olds,as we said, can feel late.
45 year olds can feel late.
50 year olds, 55 year olds,but it's never too late.

(36:36):
You know, when was thebest time to plant a tree?
20 years ago.
When's the second best time today?
Mm-hmm.
Late starters gotta learn is,you know, you, you may be working
a little longer, but actuallyit's not necessarily the case.
The boring middle can be 10 to 12years if you get it right and read
the shockingly simple math of earlyretirement by Mr. Money mustache.

(36:57):
You know what?
You need to save and invest in order tofind financial freedom and independence.
Within 10 to 12 years,
can you talk about yourjourney a little bit more?
And specifically I'm thinking about whatyour rabbit hole period looked like and
how long it was from that moment you,you kind of woke up at 50, you spent
some time just deep diving into thePaul Merriman's and the Bill Bernstein

(37:18):
of the world, the JJL Collins as well.
But now, is it fair to sayyou're in the boring middle?
Middle?
And since you have an understandingof your future financial plan, how
long do you foresee that boringmiddle period being for you?
Well, the analysis paralysisprobably lasted a year.
It's scary.
I mean, it's scary to take overyour money and do it yourself.

(37:40):
I mean, maybe 20% of the people do it.
80% of the people still have afinancial advisor, and that is okay,
but you need to find the right one.
So the boring middle for me is lookinglike, 'cause we didn't save nothing.
I don't know what our networth was when I woke up at 50.
I could probably figure it out,but it'd be pretty complicated.
I know where it stands now and we'reabout 80% of the way to financial

(38:04):
freedom, and so I've gone from 50 to 59.
I've got three or four yearsleft in my 12 to 14 year journey.
The problem we have is we downsizedour life, but we didn't necessarily
downsize all our expenses and we, we areneeding to pursue a fat fire lifestyle.
Lean Fi, as you may havetalked about, is one thing.

(38:24):
Coast Fi is another.
Standard FI is 25 times your expenses, andthen fat fi may be 30 times your expenses.
So, you know, that'swhere we're kind of at.
And I plan on, you know, retiringessentially on time, as most people do.
It's 62 or 63.
And what does that mean?
You know, I've gotta have a planfor what happens after that.

(38:47):
It isn't margaritas, mities the beach and golf.
It's gonna be this podcast.
It's gonna be educating peopleon these issues to try and create
generational financial literacy whereour kids are better off than we were.
Because my generation, I referto it as the average American.
The average American is a late starter.

(39:07):
I'm in the silent generation.
We don't talk about itbecause of the shame.
We are also the lost generationbecause we went from defined benefit
plans to defined contribution plans,and nobody told me the difference.
My dad had a pension and all of asudden in Gen XI wasn't gonna have one.
I. And I had to do it myself, andnobody told me really what a 401k was.

(39:28):
So we need to wake up this generationso that our kids' generation doesn't
fall into the same traps we did.
So when you wake up someone in thisgeneration, what are the most effective
levers that you've seen, eitherfor yourself, bill, or, I'm just
thinking of, of so many experiencesyou have from your listeners.
The most effective levers thata late starter can pull on to

(39:50):
start making up for lost ground.
Is it simply about.
Earning more simply about just savingfirst, saving more aggressively,
looking at their budget andreally starting to trim the fat.
What helps the most?
Well, you've gotta maximizeyour savings rate and create the
gap, which means earning more.
And that's one of the leversthat late starters have to pull.
They're in their high income years.

(40:11):
Take advantage of that.
We went from a 10, say 10% savings rateto a 35, 40% savings rate within a year.
And guess what?
We didn't really feel adifference in our lifestyle.
And I was like, oh my goodness,where did all that money go?
It just trickled through the sve of life.

(40:31):
Hmm.
And as soon as we harnessed theholes, took our house from 4,500
square feet to 2,800 square feet.
We paid cash for cars wherewe hadn't done that before.
And, and bought used, you know, wegot control of our food budget and
well, we haven't gotten controlof our travel budget, but you
gotta let something go there.
I mean, you've gottalook at a balanced life.

(40:51):
Personally, I think the live onone income and the two income
family or live on half, meaning 40to 50% is a great rule of thumb.
And you need to start that early becauseas soon as you let lifestyle inflation run
away from you, it is hard to unwind that.
So, you know, downsizing is a lever.
Increasing your income, increasing yoursavings rate, decreasing your expenses.

(41:14):
Those are all levers, but you can't forgetthat late starters have social security.
That is a backstop and a leverthat you have to plan on and
pull in your investment plan.
It's going to be there insome form or another, whether
it's 80% of what it is now, I.
But don't forget about that.
It is also a powerful lever.
Diving into that social security, anyrecommendations or in general, for

(41:38):
the late starters, does it make sensefor them to wait as long as possible?
Is it really just a case by casebasis as to when they elect to
start collecting social security?
Well, if personal finance is personal,social security is very personal.
I have to recommend.
In making this decision, you go toopen sec o, open social security.com.
It's a website founded by Mike Piper.

(42:00):
Mm-hmm.
And generally in a married couple,the high income professional,
the higher income professionalshould try and wait till 70.
The advantages aretantamount, they're huge.
And then with regards to the otherspouse, it's the lower earning spouse.
Especially if it's a femalewho has a longer lifespan.
You can take it earlier.

(42:20):
You can take, I mean, your fullretirement age these days is 67, but
you could potentially take it at 63,4 5, and as long as you have longevity
on your side, the crossover pointtends to be in your early eighties.
That's exactly a, a aligns with myunderstanding of the question too.
Going back though to your previousanswer, bill, and the interesting
changes that you made in your lifestyle.

(42:42):
And how it seems like to some extent,you barely even notice the changes.
I would think that's more common for theaverage listener than they suspect it is.
And I guess the other way of puttingit is we spend all this money in our
life currently, and there's sometimeswe don't quite notice that the marginal
benefit for having spent that money.
Do you have any specific stories?
I mean, you did share some specificsalready, but whether it's a, a

(43:04):
listener story or something fromJackie's story or from your, your
own story where it's just like, wow.
I can't believe I was spending xper month on this thing and I cut
it off and I barely even noticed it.
I, I want to tell you who Jackie is first.
Jackie, my partner, my co-host onthe podcast, catching up to five.
Her story is incredibly inspirational.

(43:25):
She woke up at 38 with a net worthunder say, a hundred thousand
dollars, and by 49 she was retiredwith a net worth of 1.3 million just
by making the right decisions and.
Inspirationally.
She never made more than five figures.
She came from poverty.
She knew the value ofmoney and setting her free.

(43:45):
She knew the value of an educationin increasing her income, and she's a
single mom that did it with a daughter.
It's just incredible.
And another incredible story was myprevious co-host, Becky Hep Mean.
She and her husband hada net worth of zero.
Zero at 50, and by 63 they wereretired with 1.3 $1.4 million

(44:08):
just because of making the rightdecisions with their money.
That that speaks to thepath of 12 to 13 years.
I. Both of them kind of followed that pathand everybody has that available to them.
Should they wake up, make a few rightdecisions and just follow the path.
We had bought luxury cars andactually we didn't buy them.

(44:29):
We leased them, andthat's a huge difference.
You know, buy a three to 5-year-oldcar for cash, let somebody else
take the depreciation, hit it.
Makes a huge difference.
I mean, Rob Berger, who was on our showsaid Cars are kind of a retirement buster.
Think about cars over your lifetime.
And if you, and just like Ramit ssays, who cares about the lattes?

(44:51):
Make the $30,000 decisions, right?
And you know, keep yourcar expenses lower.
For example, we were buying luxury carsfor $50,000 when we could have been
buying a Honda or a Toyota for $25,000.
And guess what happens to the difference?
You invest it and there's opportunitycosts there that you give up.
If you buy the expensive car, and itcan mean a million dollars, right?

(45:15):
Over 20 years in portfolio.
Literally.
I mean, do the math, right?
Yeah.
Yeah.
I mean, especially, you know, oneof the other big costs is housing.
And someone might listen to this and saylike, well, should I stretch for housing?
And, well, the answer there is,at the very least, if you go a
little bit beyond your means tobuy a house, it is expensive.
Mortgage costs can be quiteexpensive, the interest costs you pay.

(45:35):
I will say though, at the end ofthe day, you have an asset that is
most likely appreciating, even if.
In a small way.
Now, personally, I don't view residentiallike my personal home as an investment.
But I am comforted by the factthat it's most likely gonna
retain its value in the long run.
Well, it's a store of equity.
It's a store of equity, but it's a,let's say it's a savings vehicle, but I

(45:57):
don't view it as an investment either.
Correct.
I view it as a liability because thecash flows out no inward cash flow.
So I think very stronglythat a house is a liability.
Renting is not a bad thing.
Mm-hmm.
You know, you don't have those,all those ancillary maintenance
costs, all the big surprises.
You don't have the headaches.
And so these days with the costof housing and the interest

(46:18):
rates, I think there's gonna be ageneration of longer term renters.
Quite possibly.
Quite possibly.
But I think if you compare that to,going back to the car example, I. Right.
Whether you're buying new or buying usedor leasing, at the end of the day, call
it ten, twelve, fifteen years from now,you are going to have a rusty car that no
longer works and has no appreciable value.

(46:40):
I mean, one way or the other, it's,we all know it's a depreciating asset.
And to your point, I thinkwhat you're saying is you just
wanna minimize the pain of thatdepreciation as asset as best you can.
However, the, the math works out for you.
That's correct.
I mean, minimize the holes in the bucket.
You know, make it leak proof,and then, you know, it'll fill up

(47:00):
and flow into your next bucket.
Money is potential energy.
You create a dam and then you, youfill up the lake behind it, and then
you release the energy as you need it.
I mean, it, it flows.
It's infinite, but it's really in,in the end of the day, it's not
something we own beyond our deathand it transfers to other people.
But you want to try and make aperpetual store of energy that lasts

(47:22):
for generations, not just yours.
Here's a quick
add
and then we'll get back to the show.
I still remember it was 2019 and a guyfrom Fidelity came in to speak to my
then employer about personal financein general and about our 401k plan.
In particular, there were 60 or s whoattended mostly 50 plus years old,
clearly with retirement on their minds.

(47:43):
And nothing against this individualfrom Fidelity, but unfortunately
the guy just didn't reallyknow what he was talking about.
It ended up being a major disappointment,and a bunch of my colleagues
afterwards said, in short, you know,man, we're really thirsty for good
financial retirement information.
Where do we go find it now?
Does that sound true?
Listeners, for you and your colleagues.
Last year, either in person or via Zoom,I spoke to about 800 employees at 11

(48:07):
different organizations, sometimes aboutpersonal finance in general, sometimes
about specifics of their retirementplans, sometimes about the the nitty
gritty details of social security andwithdrawal planning and retirement math.
The point being if you're interestedin inviting me to come talk money to
you, to your colleagues where you work.
That is absolutely something I'minterested in talking to you about.

(48:27):
Simply drop me an email to Jesse atBest Interest Blog and let's start a
conversation, something on, on catchingup to fi I mean, have you found anybody
who started, uh, you know, was very mucha late starter but now has gone not only
to the point of their own retirementplanning, but is starting to think about
that next generation and, and all theassets they're gonna be able to leave
behind or the, the long-term impact thatthey're gonna be able to leave behind,

(48:50):
whether it's charity or their childrenor, or some other long-term cause.
There's a Bill Perkins book thatsays, you know, die with Zero.
Sure.
There's that option where you don'tcreate generational wealth and then you
maximize your quality of life during life.
That's not part of ourinvestor policy statement.
I think we do wanna livesomething for the next generation.

(49:12):
It would be nice to have a perpetualmoney machine that helps them,
their kids, their grandkids.
You can look at five 20 nines that way.
Build up an educational fund thatpasses down to generations so they don't
have to worry about educational costs.
Build up a donor-advised fund where youcan have perpetual giving and they learn

(49:33):
about giving as part of their portfolio.
Generational wealth is to us importantand you have to plan for that because that
means that your number that you need tosave maybe need to be a little bit more.
I'm thinking about the late starterswho are tuning in right now, or even, I
mean, I can think of some people, bill,who are my age, and I know they listen
to this podcast and they're probablyconsidering themselves a late starter.

(49:55):
So it's not just the 50 and 55 year oldswe're going down into the thirties too.
But either way, there's always gonna bethat roadblock in their minds of, I'm a
little late to this game, and thereforethey might be susceptible to some of the.
I'll call them the biggest mythsout there when it comes to financial
planning in general, or more specificallylate stage financial planning.
What are some of the more interestingmyths that you and Jackie have heard

(50:18):
through your Facebook group say, catchingup to fire, just your work over there and,
and how have you helped people overcomethose mythological false mindsets?
Well,
one myth is that riskis to your advantage.
You know, there's no magic buttonsand to take on too much risk as a
late starter is probably unwise.
You know, you really need a 10 yearrunway for equities and you could be

(50:41):
potentially a hundred percent equitiesfor 10 years, but you need to wind that
down as you get closer to retirement.
Uh, within five years of retirement.
That should be wound down.
But then you gotta be able tosleep at night and you gotta
know your risk tolerance.
You know, your ability andyour need to take risks.
Those are two different things, and latestarters do need to take some risks.

(51:01):
You can't be too conservative'cause you need growth.
And, but their ability may not becommensurate with their need and trying to
assess that may take somebody as a coachor an advisor to help you figure that out.
It may be hard to figureout on your own because.
You know, you make a mistake, like recentdays where you went all in and now we're
in a 10% correction, and who knows howfar that's gonna go because of what's

(51:26):
happening sort of as a manufacturedcrisis in the economy that we might
have expected, and some people did.
But you know, not getting toopolitical, you gotta stay the course.
That's another really important thingfor late starters is don't, like I
did, let you fear dictate what youdo next, and don't time the market.

(51:47):
Don't, you know, try and go allout on January 20th and then figure
out when you need to go back in.
You know, they call it the whipsaw.
Mm-hmm.
You have to be right twice to takeadvantage of timing the market.
Don't do it.
That's a myth too.
What other myths are there?
There's no magic button.
You've got to stay the course and youknow, do what you would do if you were 35.

(52:10):
Do it the same thing at 55.
The path doesn't change except forthe fact that the older you are,
the more aggressive you need to bewith savings and having a big gap.
And just as a, a time capsule,uh, listeners, bill and I are,
we're chatting here on March 11th.
This episode probably won't comeout for a few weeks, but the, the s
and p 500 right now live is 55 73.

(52:33):
As Bill alluded to
down about 10% from its highs.
We'll see by the time this episodecomes out where the market is
at you, you never quite know.
It's a fun, uh, this is one of thefun side effects of podcasting,
I think, is you get to haveconversations at a point in time and
then see what happens from there.
I said,
Yahoo, let's buy, and I also said,Yahoo, let's tax lost harvest.

(52:53):
And I'm sure you explained those,uh, things, and I mentioned it
in my community today was, youknow, this is your opportunity.
Don't forget the tax lostharvest in your taxable accounts.
Take the losses now.
Let the government helpyou stomach those losses.
Mm-hmm.
And then, uh, lower your basisand, you know, let it ride.
It's only gonna go up into the right.
Don't let short-term swingsdictate your long-term vision.

(53:15):
Did you chat about the wash sale rule atall in your, in your group when talking
about the tax loss harvesting bill?
Yeah, you gotta be carefulwith 30, 31 days, but as long
as you buy a different index.
For example, if you trade total market USfor s and p 500, you've avoided the wash
sale and you can do it on the same day.
If you try and build the same thingon the same day or within 30 days

(53:36):
prior to and after, you're gonnaget into a little bit of trouble
and you won't gain all those losses.
Yeah.
Yeah.
It's interesting.
I've, maybe what we'll do is we'llthrow an article in the show notes
that I wrote about tax loss harvesting.
'cause on net theredefinitely is a benefit there.
But as you alluded to, youare lowering the basis of your
portfolio and essentially it kicksthe tax can down the road, right?

(54:00):
Eventually, that those capital gainswill be realized or eventually you'll
die and then pass the assets alongto your heirs at a stepped up basis.
And so I guess what I'm saying is.
Most likely for most people, thetaxes will come due eventually.
It's just a matter of, you know what,maybe you're in a really high tax year
this year and it makes sense to taxlost harvest to your, to your advantage

(54:21):
because when you kick that can down theroad, you'll have some more control over
realizing them in a, in a lower tax year.
Something like that.
You asked about inspirational storiesand it doesn't have be all paper assets.
We had a guest on our show, Monica Scre.
The name of the showwas, mama, are We Poor?
And she had come frompoverty, but used real estate.
To her advantage to get where sheneeded to go again in 10 to 12

(54:44):
years and that was her vehicle.
You don't have to use stocks,bonds, and alternatives in paper
assets to get where you want togo, but you can start a business.
All these things may be a little bit morerisky and the more work 'cause it's a job.
Yeah.
I personally choose to be passive.
Well, let's end on thinking about.
Some of the traditional investmentadvice or traditional just personal

(55:06):
finance, financial planning advicethat either needs to be drastically
modified or tweaked for the late starter.
Does anything come to mind as somethingthat you say to yourself, bill, like,
yeah, that that really does work?
If you're 25 or 30 and just gettinggoing, but if you're coming to
this situation at age 50, we haveto rethink what's going on here.
Compound growth worksgreat if you're young.

(55:29):
It works better.
It works a little bit better, not better,but as you age, you have less time for
doubling or remember the, the rule of 72.
Generally seven to 10 years,uh, you'll double your money and
you're losing, doubling time.
So you have to save more aggressively.
I. That's a big difference.
You have to downsize your life so youhave a, a bigger gap that's people

(55:53):
need to live within their means.
Not have too much house, as we talkedabout, not have too much car, you
know, and, but, and again, remember,you're investing for the long run.
It isn't just a 10 or 15 yearrunway to your retirement.
You've got 30 years ahead ofyou if all things go well.
So it, it is a long time,long-term investment.

(56:13):
And you'll more than likely have morethan you started with when you retire.
So you have to make a plan for that.
Yeah.
You just hit on something there.
Speaking of myths or mis misconceptions,that runway or that timeline
that we're talking about, right?
Let's say I'm, I'm 55, I'mlistening to this podcast right now.
You're right.
Some of your dollars might have thisfive or seven year timeline until you

(56:34):
hopefully retire and start spending them.
But a lot of your dollars have a,a runway until you're 70 or 80.
They have a 15 or a 25 or a 30 plus yeartimeline ahead of them, and it's, each
dollar has its own unique timeline and itkind of all comprises a total portfolio.
So a, a misconception that I hear issomeone says, oh, I'm 58, I'd like

(56:55):
to retire by 60 and that's why I'vemoved my entire portfolio to bonds
'cause it's only two years away.
And I kind of hear that and say, whoa,
so much of your timeline is still.
A decade plus away.
Well, you need, you need tobeat inflation, you know, you
can't forget.
Absolutely.
And bonds won't necessarily get you there.
You gotta have a, have a gap there.
You know, keep your costsof your investments flow so

(57:17):
that the gap works for you.
But remember, inflation is a huge cost.
Taxes are a huge cost.
And unless you have growth assets, youcould be in real trouble later on as
your money loses value over 30 years.
Oh, exactly Right.
I feel like we've covered a lot of
interesting, you know, little, little,uh, little pockets of information that
apply to the late starter today, bill.

(57:38):
And if anyone wants to join yourcommunity, 'cause that's really,
it's more than just tuning intothe Catching Up PHI podcast.
It really is a communitythat you've built.
How can someone get in touch with you?
Get in touch with Jackie and join theconversations that you guys are having.
The first thing I'd recommend,uh, a new late starter to do
is listen to episode a hundred.
That is the odyssey of the Late Starter.

(57:59):
We tell you exactly as we've talkedabout today, the things you need to do.
But as far as joining the community ofcatching up to five, we have a Facebook
community of over 17,000 members.
I. We have great moderators.
It's a great place to be vulnerable.
It's a great place to crowdsourcesome of your questions.
It's a great place to meetpeople, to take things offline.

(58:19):
We have a lot of, like yourself,we have a lot of really intelligent
people in that community that areready, willing, and able to help you
with your journey and your questions.
And a lot of peoplewill tell their stories.
And what you realize is there'scommonalities to all of them.
And the best part aboutit is you're not alone.
Now in the podcast, we're trying tohave a dialogue in the community.

(58:39):
We're having a dialogue.
We're gonna start a newsletter thatwill also allow for a dialogue.
So join us at Catching Up Defi.
We've had people binge on all 120some odd podcasts and leave us a
review, and it just warms our hearts.
As a physician, I've been taking care ofpeople for better part of 30 years, and
I've received more gratitude for what wewere created at catching up Defi in the

(59:03):
last two years than all those 30 years.
So it's an incredible thing.
It's a great thing to be a part of thiscreative community, and it's a great
legacy for me to leave this behind.
Awesome.
Well, thank you so much Bill, for, for allthe work you do and I, I can't recommend.
Catching up to vie highly enough.
What else can I say other than, thanthank you and extend my gratitude.

(59:24):
And so once
again, thank you Bill y for stopping bypersonal finance for long-term investors.
Well, thank you for having me.
Thanks for tuning into this episode ofPersonal Finance for Long-Term Investors.
If you have a question for Jesse to answeron a future episode, send him an email
over at his blog, the Best Interest.
His email address is Jesseat best interest blog.

(59:46):
Again, that's Jesse at.
Best interest blog.
Did you enjoy the show?
Subscribe, rate, and review thepodcast wherever you listen.
This helps others find the showand invest in knowledge themselves,
and we really appreciate it.
We'll catch you on the next episode ofPersonal Finance for Long-Term Investors.
Personal finance for long-terminvestors is a personal podcast meant

(01:00:08):
for education and entertainment.
It should not be taken as financialadvice, and it's not prescriptive
of your financial situation.

All Episodes

Smart Money Moves After 50 | Bill Yount | 142

Episode Transcript

Popular Podcasts

Crime Junkie

24/7 News: The Latest

Stuff You Should Know

.css-15opob5{left:0;position:absolute;top:0.8rem;} All Episodes

.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Smart Money Moves After 50 | Bill Yount | 142