March 11, 2025 • 21 mins
What if financial freedom wasn’t just about retirement, but about designing a life you love—right now? In this episode, I sit down with TJ van Gerven, financial planner and host of Do More With Your Money, to dive into modern financial independence, investing strategies, and lifestyle design.
TJ shares how he helps millennials and entrepreneurs rethink wealth-building, avoid outdated financial advice, and use money as a tool for freedom, not just accumulation. We break down how to start investing, balancing risk and reward, and why your career strategy matters as much as your savings.
If you’re looking for real-world, actionable advice on growing your wealth without sacrificing your life today, this episode is packed with insights you can start using right away.
What You’ll Learn in This Episode:
✅ The biggest financial lessons TJ learned from his unique upbringing
✅ Why financial independence doesn’t always mean retirement
✅ How to use stocks, bonds, and real estate to build wealth
✅ The power of increasing income and getting paid in equity
✅ How to structure your finances to save, invest, and still enjoy life
✅ The right way to balance risk and reward in investing
✅ Why "always be investing" is the key to long-term wealth
Resources & Links:
🎙 Listen to TJ’s Podcast: Do More With Your Money → HERE
💡 Learn More About Memento Financial Planning → mementofinancialplanning.com
📲 Follow TJ on Social Media → @mementofinancialplanning
Connect With Me:
💸 Join the Manifestation March Community → https://www.youtube.com/@IncomeStreamIgnition/playlists
🎙 Follow the Podcast on Instagram → @manifestationandmoneypodcast
📩
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
[00:00:00]
Jenni (00:01):
Welcome to the Manifestation and Money Podcast, TJ.
TJ (00:02):
Thank you so much for having me on. I'm looking forward to our conversation today.
Jenni (00:03):
I am too. It's been a while since we've had a good old money chat on here.
Please introduce who you are and what your story is.
TJ (00:05):
Yeah, absolutely. It's a great question. It's good to go through that once in a while. I started my financial planning practice back in 2018. , so I graduated college in 2015. So it was a very quick journey to try to get to a point where, , I could be in a position to do things the way I wanted to do them.
, and basically, , started from scratch, trying to work with Millennials. Trying to do things a little bit differently, trying to create the financial planning wealth management practice that I would want to work with, you know, historically, , financial advisor industry hasn't gotten the best reputation for good reason, , a lot of times it's a lot of sales roles and selling products.
And so I really wanted it to be more about like thinking through how it impacts your actual life and using the money as a tool to help create a life. , that you want to live sooner rather than later. So, my firm name is Memento Financial Planning. Memento means to remember. I like stoicism and this concept of memento mori.
Remember that your life, , is, your time is finite and you want to use it to the full, , advantage of that time. And so really , using the money as a tool intentionally to create the life that you want for yourself, not just accumulating to maybe achieve financial independence.
And so this was the whole goal of creating the practice was, , helping people understand their money, using it wisely. I kind of had an interesting background of how I grew up with money with my parents. And so that's what inspired me to get into financial planning.
Jenni (00:10):
I love that. Can you share for a moment what your interesting background was?
Because obviously you had some kind of a pull to inspire you to go into this kind of career so quickly out of school.
TJ (00:12):
Yeah, it's a great point. So my dad always talked to me about money growing up. He was an immigrant from a Dutch family and his father unfortunately passed away when he was a child. So he was one of six and really experienced , pretty, extreme poverty in the sense of what you could, in America at that time.
And so he was working from a young age, worked for everything he had, and money was very, , scarce to him, and very emotional around him. So I experienced that growing up with, , he went through different cycles with 2008 financial crisis, and getting caught up in that, and kind of losing a large part of his net worth, and having to come back from that, and seeing how traumatic it was for him.
And then on the other side of the equation, my mom came from But didn't necessarily know how to manage it and didn't use it wisely. She also struggled with alcohol. And so that was part of her story. And so really seeing both ends of the spectrum, like one parent who came from money and thought it grows on trees and the other parent who like worked so hard for money, but had a scarcity mindset around there's never enough or, , using like being so focused on trying to accumulate.
Jenni (00:15):
Yeah. Thanks for sharing that. That's an interesting perspective that you have, because lots of people growing up, it's almost like the household has One viewpoint, like you're heavily on one way or the other. So that's neat that you got to see the blend of it for you. What does financial independence mean?
TJ (00:16):
. So for me, financial independence means that there's different levels of it. I think in the traditional sense is you have enough investment assets where you can replicate your spending needs and you never, it's ever going to be a hundred percent that you're not going to run out of money with a really high probability success that you're not going to run out of money.
That's the traditional sense of it. , so if you've heard of kind of like the 4 percent rule of thumb, which goes back looking at historical, , performance of like stock and bond markets. And basically you can extract 4 percent as this rule of thumb. So if you have a million dollars investable assets, you can take out 40, 000 a year and never run out of money, assuming that you're managing it strategically.
But there are also other types of financial independence where maybe you don't have that level of investable assets, but you Can create income for yourself, whether you're self employed or even if you are doing a job that's W 2, but you enjoy it. And you can supplement using your investment assets. So that could be considered financial independence as well.
I like the term work optional because a lot of times, even if you have enough investment assets, you still may want to work, but you have the option not to work. So that's kind of the fundamental idea is that you have enough money that you can replicate your spending needs.
Jenni (00:20):
That's a neat perspective that you have because Well, for me, I come from, I have an entrepreneur heart, I'm always going to be doing something until the day I die, that's just, I know it in my core, I just feel called to do that, but I think that idea of, especially in this gig economy, , yes, I can get my investments to a point where they are covering a good portion of my income, and then I can go Have a side hustle or something that I really enjoy and maybe I can run it off of a beach somewhere in Mexico or wherever you want to be, right?
That's a very valid point. So you're getting that lifestyle piece in there.
TJ (00:22):
A hundred percent. And it's great with technology nowadays. Like you said, a lot of people can't operate running like a mobile type service or operation. And I think, , a lot of people are scared about. What's going to happen with AI and automation, all these things, but I think it's also going to open the door for if you can harness those tools, I think as a solo professional, solo creative, whatever you're doing, there's going to be opportunities to create new types of income streams that you couldn't in the past doing things that jobs that we can't even imagine.
, , I think that, You know life is both short and long in different ways And I think it's good to think about , taking breaks throughout your life and actually using your money I work with a lot of millennials who saw their parents, work at one job for like 30 straight years Just to accumulate, you know a certain nest egg or whatever and then they retire and then You know, a lot of times maybe they don't live as long as they expect to live and they've actually got to use their money.
And so really taking this long term mindset of, and that, that's the idea of remember your mortality is that how can we use the money today? Obviously we want to build good habits and take advantage of our money, but don't be afraid to actually use your money.
Jenni (00:25):
Yeah. So using money. So in today's economy, Inflation is going pew.
So a lot of people are struggling with balancing, saving, investing, and enjoying life. So how do you recommend somebody structures their finances to kind of allow themselves to still live well saving?
TJ (00:27):
Yeah, it's difficult. I think I have a lot of empathy for, you know, people that are just coming into the workforce today because the affordability is.
, much worse than it was 20, 30 years ago, where incomes have not increased with the cost of living. And if you're looking to, , buy a house, for example, the down payment to get into this house, like, just to save up for that will take you years, a lot of times. So that's not necessarily a viable path for a lot of people, and I think a lot of the older generations.
, think to their situation with how they got into real estate and how that's been one of their best performing investments, but they don't understand the affordability is very different for somebody just entering the workforce today. The good thing is, is technology has allowed us to access things like the world stock market, you know.
transaction costs. So even if you don't have an income that allows you to, , buy real estate, you can still invest on an ongoing basis again, into things like the world stock market, where you can grow with the best, , innovation of these companies around the world. And so the key is you have to learn how to live below your means, which is easier said than done.
, it's simple, but not easy. , if you're not in a position where you can. , live below your means, you have to do everything you can to increase your income to a point where you have some margin to save, right? , if you can get to a point where you're saving at least 10 percent of your income, that's a really good starting point where you can start to put away money, grow your net worth, and hopefully start investing in things that are going to At least keep up with inflation, but ideally increase above inflation, right?
So if we're just putting money in our bank account, that's not actually keeping up with inflation. That money's actually losing value, unfortunately. And so that's where we have to get over that mental hurdle of always investing.
Jenni (00:33):
Yeah, isn't that a sad fact that our money sitting in our bank account or under a mattress or out in the backyard Wherever we have it stuffed-= if you're not actively doing something with it.
It's actually losing money
TJ (00:35):
Yeah, which is a hard thing, you know a hard pill to swallow and it's counterintuitive if maybe you're just starting to get into Investing, but you know what feels safe in the short term is actually risky in the long term and then vice versa. So like for example, like the stock market, we see it fluctuate, right?
And it's going to go up or down 15 percent in a year, even when it goes up at the end of the year. And so we have to be comfortable with that short term risk. And we have to plan ahead and put ourselves in positions where we have a cash reserve or a living blower means. So we're not. , forced to liquidate our investments, or we have to have that margin of safety to allow time and compounding to take place.
But again, to get in that position, we have to have an income that allows us to live below our means. So just creating good fundamentals, at least starting with awareness, understanding your numbers. How much income comes in? What is my after tax income, right? That's what I actually have to work with. What are my fixed expenses?
What are my debt obligations, right? Do I have high interest rate debt that I can pay down first? A big concept to understand is if you have debt, what is the interest rate on your debt? If it's higher than six, 7%, Paying down that debt is like getting a guaranteed rate of return, right? So with investing, let's say in the stock market, 8 percent a year is like a long term expected return.
That's somewhat realistic. If we can pay down debt 8%, that's a guaranteed rate of return. So maybe it makes sense to focus on that first and then switch, , to investing.
Jenni (00:40):
Yeah, there's very valid points in there. And you touched on something earlier. So I just want to ask, because for me, I love real estate.
I do have real estate, but like you said now, The game has kind of changed a bit, right? The cause of housing costs have gone up significantly and interest rates have gone up equally even if they are coming down slightly right now, they're still higher than they were, right? And let alone trying to save up for that down payment in this current world that we're in.
Do you have some strategies for creating like an income stream through investing?
TJ (00:43):
Yeah, I mean, I think again, if even if you take a total world stock market approach, so for example, if you're just investing in, let's say a total world stock market index fund, what does that mean? You're owning the collective stock market for how it's comprised.
Right. So the biggest companies are going to make the biggest portion of that. If you're just owning that, and if we look back historically, you're going to outperform the majority of professional money managers. This is the crazy thing about investing is that a simple and less effort actually outperforms more effort and more complexity.
It's a really hard thing to understand, but there's not a correlation between more effort and better outcomes in investing. So just by starting with the world stock market and getting comfortable with the, , return expectations of that, that's going to give you the ability to grow your money. And then, like I said, if you can grow it to a point where you can actually extract from that, if it's growing 8 percent a year and you're taking on average over the long term, you're taking 4 percent out, you're still growing.
Over that timeframe. So taking this kind of total return approach, you can extract from your investments. A lot of times people focus on things like dividend investing, where I receive a dividend and this is the income I receive. That's great. And , that is a strategy, but at the end of the day, what matters is total return.
How much do I receive in dividends? How much does the appreciate, and I can extract from that over time. And so just getting comfortable with that as a starting point allows you then to consider other types of assets as well.
Jenni (00:48):
Okay, that makes sense. So how do you suggest balancing risk and reward?
TJ (00:49):
Sure. Yeah. , this is the idea of diversification, right? So what is diversification means? It means that you're owning assets within your portfolio that move in different ways. So the traditional assets that are Supposed to be not correlated are stocks and bonds, right? Stocks are ownership in a company.
Bonds are like debt payments that are guaranteed debt payments. And if the stock market's down, the bond market is supposed to be more resilient. So it's not going to be down as much, or it might even be up. So , it might be negatively correlated to the stock market. And so by adding these two assets together, you're increasing the risk reward of your overall portfolio.
, there are other . asset classes to consider as well. , but this is the idea of basically, you know, by adding different assets that don't move in the same way, you can increase the risk reward, meaning that you're getting more reward for less risk, meaning how much your assets, your portfolio is moving up or down in a given year.
But the key is that you need to just get comfortable with risk in general. Like I said, stock market, for example, the world stock market, , even if it's going to compound 8 percent a year, you're still going to experience 15 percent on average, up or down. So if you have a million dollars, it's going to go down to 850, 000 every year, even while it goes up over the long run.
And honestly, the best thing that you can do as an investor is getting comfortable with the idea that that's just going to happen. That's part of investing. That's why you're compensated.
Jenni (00:54):
And do you talk to your clients about the mindset around that? Because , there's probably people that come to you that are like, the market's going down, TJ, , help get me out of here, right?
TJ (00:55):
Yeah, 100%. And , there's a huge behavioral component to kind of educating people ahead of time. Here's the realistic expectations. , and it's really important once you start living off your investment assets, right? Because it's, One thing when you're not dependent on them and you have an income, right?
You're working, you're still accumulating, but then once you transition to, maybe you're just taking time off from work and you're going to live off your investment assets, you need to be really comfortable with the idea that, Hey, we're going to have a dedicated cash reserve for you, maybe 12 to 18 months to kind of have, , a buffer between you and your investment assets, but you're going to have to weather that storm because there is going to be bear markets.
Every three to five years and then there's going to be market crashes probably once a decade And so you have to be you have to be ready for the fact that that's going to happen.
Jenni (00:58):
Mm hmm. And you hope that doesn't happen right at that same time that you are trying to retire and pull money from that, right?
Every time we hit one of those markets, , it's crushing to hear about the people that are in that point where they now need the money. And it's
TJ (01:00):
a hundred percent, but I don't necessarily work with retirees all the time, but what I would say in that situation is, you know, you would coach them and like, Hey, listen, you still have, this is why we have, , cash set aside for 18 months, right?
Because that's 18 months where, , that's the typical time that a bear market lasts is about a year and a half. And so if we can withstand that and reduce your withdrawals from your portfolio over that time, then we'll be fine. And also we might have. So if you have several years worth of expenses in bonds, so even if the stock market is going down, right?
So let's say you have a 70 percent stock allocation, 30 percent bond allocation, that 30 percent covers five years of living expenses. Again, you still have a buffer of five years. And so with proper planning ahead of time, you're planning like for that event to happen kind of thing.
Jenni (01:03):
So somebody came to you today and was like, I'm just starting out. I've got a little bit of money that I'm solely say I've got to that 10 percent point where I want to start putting it in something. What is the kind of strategy you would suggest to them?
TJ (01:04):
Yeah. So I would say fundamentals, right?
So the first thing is, okay, so that's great. You're living below your means. You understand your cashflow and you have a 10 percent margin of safety. Okay. Number one, do you have high interest rate debt? I would say anything above like 5 percent interest is going to be more high interest rate debt. So maybe you want to consider paying that down at an accelerated rate.
, do you have at least three months of living expenses in cash? , your income, how steady of an income stream is that? If you're more of a transactional type income, maybe you want more like six months of living expenses. Then once you determine your cash reserve, you have your cash reserve in place, and you have no high interest rate debt, then you look at your various accounts.
Maybe you have tax deferred accounts where you're going to get an income tax deduction on contributing to that. So, , In America, it's like, , we have like a 401k where you're getting income tax deduction. That's up to, for example, 23, 500. Maybe you fill that up. Once you fill that up, you might still want to do a Roth IRA contribution, because that's a tax free bucket for you.
Maybe you have a health savings account. Maybe, and then once you get past all those things, then you have just a taxable brokerage account, which is going to give you flexibility. This is a non retirement account so that you can pull from. Yes, you owe, , capital gains taxes if you sell and you have gains, which is great, but it gives you that flexibility to where you should always be investing.
That's money you can use for that down payment on the home. That's money that you can use to bridge. getting access to your retirement accounts. The key is always be investing basically.
Jenni (01:10):
I love that in there. Yay. Look at the capital gains is a positive because you've made gains.
TJ (01:11):
Exactly. Yeah.
Jenni (01:12):
That's a fun little poke there.
What is the best piece of financial advice that you've ever received?
TJ (01:14):
Man, that's a great question. I've received so much advice. So I'm trying to think to the best advice. I mean, it's definitely cliche, but , investing in yourself when you don't have that income that allows you to live below your means, right?
So don't get caught up in all this technical stuff that I'm even talking about when it comes to, , thinking through , You know your asset allocation and tax plan all this stuff. None of that matters until your income is high enough That you can live comfortably below your means and translate your income to assets So again figure out the career that you want to be in or the industry that you want to be in And then focus on increasing your skills and marketability within that industry.
And then, yeah, don't be afraid to use the tools that, , think like an entrepreneur, even if you're an employee, right, use these tools at your fingertips, whether it's AI, all the various tools to increase your marketability, increase your, , earning potential.
Jenni (01:17):
I love to hear you speak in there. You keep giving nods to lifestyle.
I'm all about lifestyle design and , it sounds like when you're speaking with your clients, you are like, how can you be creating that lifestyle you want? you're making an income in the field that feels good to you, right? You're not just slogging it out at some job. You're intentionally working your way up in something that you're actually enjoying doing, and then using those funds to support your future lifestyle.
TJ (01:19):
Absolutely. And I think if you can put yourself in a position where I'm a big fan of getting paid in equity, right? So if you can work for a company where you have skin in the game, where you are compensated, if the company does well, then that's going to give you that opportunity to have these kind of windfall type moments where all of a sudden, if the company does really well, maybe your stock compensation doubles, triples, quadruples, et cetera.
Now you have some money to take time off on your own, pursue self employment. Etcetera. And be willing to walk away from, , negotiations. That's huge, right? That , we know the data behind changing jobs. The more frequently we change jobs, the better our compensation is going to be. And that's just the reality.
Jenni (01:21):
Yeah. Definitely. You've dropped so many little nuggets throughout this conversation. And where can people reach out to you and find more of your wisdom?
TJ (01:22):
Yeah. So I have a podcast, Do More With Your Money, available wherever you stream. So check that out. And then mementofoundationplanning. com. You can learn anything you want there.
Jenni (01:23):
Okay. Awesome. Thank you so much for joining me on the show today, TJ.
TJ (01:24):
so much for having me.
[00:00:00]
Jenni (00:01):
Welcome to the Manifestation and Money Podcast, TJ.
TJ (00:02):
Thank you so much for having me on. I'm looking forward to our conversation today.
Jenni (00:03):
I am too. It's been a while since we've had a good old money chat on here.
Please introduce who you are and what your story is.
TJ (00:05):
Yeah, absolutely. It's a great question. It's good to go through that once in a while. I started my financial planning practice back in 2018. , so I graduated college in 2015. So it was a very quick journey to try to get to a point where, , I could be in a position to do things the way I wanted to do them.
, and basically, , started from scratch, trying to work with Millennials. Trying to do things a little bit differently, trying to create the financial planning wealth management practice that I would want to work with, you know, historically, , financial advisor industry hasn't gotten the best reputation for good reason, , a lot of times it's a lot of sales roles and selling products.
And so I really wanted it to be more about like thinking through how it impacts your actual life and using the money as a tool to help create a life. , that you want to live sooner rather than later. So, my firm name is Memento Financial Planning. Memento means to remember. I like stoicism and this concept of memento mori.
Remember that your life, , is, your time is finite and you want to use it to the full, , advantage of that time. And so really , using the money as a tool intentionally to create the life that you want for yourself, not just accumulating to maybe achieve financial independence.
And so this was the whole goal of creating the practice was, , helping people understand their money, using it wisely. I kind of had an interesting background of how I grew up with money with my parents. And so that's what inspired me to get into financial planning.
Jenni (00:10):
I love that. Can you share for a moment what your interesting background was?
Because obviously you had some kind of a pull to inspire you to go into this kind of career so quickly out of school.
TJ (00:12):
Yeah, it's a great point. So my dad always talked to me about money growing up. He was an immigrant from a Dutch family and his father unfortunately passed away when he was a child. So he was one of six and really experienced , pretty, extreme poverty in the sense of what you could, in America at that time.
And so he was working from a young age, worked for everything he had, and money was very, , scarce to him, and very emotional around him. So I experienced that growing up with, , he went through different cycles with 2008 financial crisis, and getting caught up in that, and kind of losing a large part of his net worth, and having to come back from that, and seeing how traumatic it was for him.
And then on the other side of the equation, my mom came from But didn't necessarily know how to manage it and didn't use it wisely. She also struggled with alcohol. And so that was part of her story. And so really seeing both ends of the spectrum, like one parent who came from money and thought it grows on trees and the other parent who like worked so hard for money, but had a scarcity mindset around there's never enough or, , using like being so focused on trying to accumulate.
Jenni (00:15):
Yeah. Thanks for sharing that. That's an interesting perspective that you have, because lots of people growing up, it's almost like the household has One viewpoint, like you're heavily on one way or the other. So that's neat that you got to see the blend of it for you. What does financial independence mean?
TJ (00:16):
. So for me, financial independence means that there's different levels of it. I think in the traditional sense is you have enough investment assets where you can replicate your spending needs and you never, it's ever going to be a hundred percent that you're not going to run out of money with a really high probability success that you're not going to run out of money.
That's the traditional sense of it. , so if you've heard of kind of like the 4 percent rule of thumb, which goes back looking at historical, , performance of like stock and bond markets. And basically you can extract 4 percent as this rule of thumb. So if you have a million dollars investable assets, you can take out 40, 000 a year and never run out of money, assuming that you're managing it strategically.
But there are also other types of financial independence where maybe you don't have that level of investable assets, but you Can create income for yourself, whether you're self employed or even if you are doing a job that's W 2, but you enjoy it. And you can supplement using your investment assets. So that could be considered financial independence as well.
I like the term work optional because a lot of times, even if you have enough investment assets, you still may want to work, but you have the option not to work. So that's kind of the fundamental idea is that you have enough money that you can replicate your spending needs.
Jenni (00:20):
That's a neat perspective that you have because Well, for me, I come from, I have an entrepreneur heart, I'm always going to be doing something until the day I die, that's just, I know it in my core, I just feel called to do that, but I think that idea of, especially in this gig economy, , yes, I can get my investments to a point where they are covering a good portion of my income, and then I can go Have a side hustle or something that I really enjoy and maybe I can run it off of a beach somewhere in Mexico or wherever you want to be, right?
That's a very valid point. So you're getting that lifestyle piece in there.
TJ (00:22):
A hundred percent. And it's great with technology nowadays. Like you said, a lot of people can't operate running like a mobile type service or operation. And I think, , a lot of people are scared about. What's going to happen with AI and automation, all these things, but I think it's also going to open the door for if you can harness those tools, I think as a solo professional, solo creative, whatever you're doing, there's going to be opportunities to create new types of income streams that you couldn't in the past doing things that jobs that we can't even imagine.
, , I think that, You know life is both short and long in different ways And I think it's good to think about , taking breaks throughout your life and actually using your money I work with a lot of millennials who saw their parents, work at one job for like 30 straight years Just to accumulate, you know a certain nest egg or whatever and then they retire and then You know, a lot of times maybe they don't live as long as they expect to live and they've actually got to use their money.
And so really taking this long term mindset of, and that, that's the idea of remember your mortality is that how can we use the money today? Obviously we want to build good habits and take advantage of our money, but don't be afraid to actually use your money.
Jenni (00:25):
Yeah. So using money. So in today's economy, Inflation is going pew.
So a lot of people are struggling with balancing, saving, investing, and enjoying life. So how do you recommend somebody structures their finances to kind of allow themselves to still live well saving?
TJ (00:27):
Yeah, it's difficult. I think I have a lot of empathy for, you know, people that are just coming into the workforce today because the affordability is.
, much worse than it was 20, 30 years ago, where incomes have not increased with the cost of living. And if you're looking to, , buy a house, for example, the down payment to get into this house, like, just to save up for that will take you years, a lot of times. So that's not necessarily a viable path for a lot of people, and I think a lot of the older generations.
, think to their situation with how they got into real estate and how that's been one of their best performing investments, but they don't understand the affordability is very different for somebody just entering the workforce today. The good thing is, is technology has allowed us to access things like the world stock market, you know.
transaction costs. So even if you don't have an income that allows you to, , buy real estate, you can still invest on an ongoing basis again, into things like the world stock market, where you can grow with the best, , innovation of these companies around the world. And so the key is you have to learn how to live below your means, which is easier said than done.
, it's simple, but not easy. , if you're not in a position where you can. , live below your means, you have to do everything you can to increase your income to a point where you have some margin to save, right? , if you can get to a point where you're saving at least 10 percent of your income, that's a really good starting point where you can start to put away money, grow your net worth, and hopefully start investing in things that are going to At least keep up with inflation, but ideally increase above inflation, right?
So if we're just putting money in our bank account, that's not actually keeping up with inflation. That money's actually losing value, unfortunately. And so that's where we have to get over that mental hurdle of always investing.
Jenni (00:33):
Yeah, isn't that a sad fact that our money sitting in our bank account or under a mattress or out in the backyard Wherever we have it stuffed-= if you're not actively doing something with it.
It's actually losing money
TJ (00:35):
Yeah, which is a hard thing, you know a hard pill to swallow and it's counterintuitive if maybe you're just starting to get into Investing, but you know what feels safe in the short term is actually risky in the long term and then vice versa. So like for example, like the stock market, we see it fluctuate, right?
And it's going to go up or down 15 percent in a year, even when it goes up at the end of the year. And so we have to be comfortable with that short term risk. And we have to plan ahead and put ourselves in positions where we have a cash reserve or a living blower means. So we're not. , forced to liquidate our investments, or we have to have that margin of safety to allow time and compounding to take place.
But again, to get in that position, we have to have an income that allows us to live below our means. So just creating good fundamentals, at least starting with awareness, understanding your numbers. How much income comes in? What is my after tax income, right? That's what I actually have to work with. What are my fixed expenses?
What are my debt obligations, right? Do I have high interest rate debt that I can pay down first? A big concept to understand is if you have debt, what is the interest rate on your debt? If it's higher than six, 7%, Paying down that debt is like getting a guaranteed rate of return, right? So with investing, let's say in the stock market, 8 percent a year is like a long term expected return.
That's somewhat realistic. If we can pay down debt 8%, that's a guaranteed rate of return. So maybe it makes sense to focus on that first and then switch, , to investing.
Jenni (00:40):
Yeah, there's very valid points in there. And you touched on something earlier. So I just want to ask, because for me, I love real estate.
I do have real estate, but like you said now, The game has kind of changed a bit, right? The cause of housing costs have gone up significantly and interest rates have gone up equally even if they are coming down slightly right now, they're still higher than they were, right? And let alone trying to save up for that down payment in this current world that we're in.
Do you have some strategies for creating like an income stream through investing?
TJ (00:43):
Yeah, I mean, I think again, if even if you take a total world stock market approach, so for example, if you're just investing in, let's say a total world stock market index fund, what does that mean? You're owning the collective stock market for how it's comprised.
Right. So the biggest companies are going to make the biggest portion of that. If you're just owning that, and if we look back historically, you're going to outperform the majority of professional money managers. This is the crazy thing about investing is that a simple and less effort actually outperforms more effort and more complexity.
It's a really hard thing to understand, but there's not a correlation between more effort and better outcomes in investing. So just by starting with the world stock market and getting comfortable with the, , return expectations of that, that's going to give you the ability to grow your money. And then, like I said, if you can grow it to a point where you can actually extract from that, if it's growing 8 percent a year and you're taking on average over the long term, you're taking 4 percent out, you're still growing.
Over that timeframe. So taking this kind of total return approach, you can extract from your investments. A lot of times people focus on things like dividend investing, where I receive a dividend and this is the income I receive. That's great. And , that is a strategy, but at the end of the day, what matters is total return.
How much do I receive in dividends? How much does the appreciate, and I can extract from that over time. And so just getting comfortable with that as a starting point allows you then to consider other types of assets as well.
Jenni (00:48):
Okay, that makes sense. So how do you suggest balancing risk and reward?
TJ (00:49):
Sure. Yeah. , this is the idea of diversification, right? So what is diversification means? It means that you're owning assets within your portfolio that move in different ways. So the traditional assets that are Supposed to be not correlated are stocks and bonds, right? Stocks are ownership in a company.
Bonds are like debt payments that are guaranteed debt payments. And if the stock market's down, the bond market is supposed to be more resilient. So it's not going to be down as much, or it might even be up. So , it might be negatively correlated to the stock market. And so by adding these two assets together, you're increasing the risk reward of your overall portfolio.
, there are other . asset classes to consider as well. , but this is the idea of basically, you know, by adding different assets that don't move in the same way, you can increase the risk reward, meaning that you're getting more reward for less risk, meaning how much your assets, your portfolio is moving up or down in a given year.
But the key is that you need to just get comfortable with risk in general. Like I said, stock market, for example, the world stock market, , even if it's going to compound 8 percent a year, you're still going to experience 15 percent on average, up or down. So if you have a million dollars, it's going to go down to 850, 000 every year, even while it goes up over the long run.
And honestly, the best thing that you can do as an investor is getting comfortable with the idea that that's just going to happen. That's part of investing. That's why you're compensated.
Jenni (00:54):
And do you talk to your clients about the mindset around that? Because , there's probably people that come to you that are like, the market's going down, TJ, , help get me out of here, right?
TJ (00:55):
Yeah, 100%. And , there's a huge behavioral component to kind of educating people ahead of time. Here's the realistic expectations. , and it's really important once you start living off your investment assets, right? Because it's, One thing when you're not dependent on them and you have an income, right?
You're working, you're still accumulating, but then once you transition to, maybe you're just taking time off from work and you're going to live off your investment assets, you need to be really comfortable with the idea that, Hey, we're going to have a dedicated cash reserve for you, maybe 12 to 18 months to kind of have, , a buffer between you and your investment assets, but you're going to have to weather that storm because there is going to be bear markets.
Every three to five years and then there's going to be market crashes probably once a decade And so you have to be you have to be ready for the fact that that's going to happen.
Jenni (00:58):
Mm hmm. And you hope that doesn't happen right at that same time that you are trying to retire and pull money from that, right?
Every time we hit one of those markets, , it's crushing to hear about the people that are in that point where they now need the money. And it's
TJ (01:00):
a hundred percent, but I don't necessarily work with retirees all the time, but what I would say in that situation is, you know, you would coach them and like, Hey, listen, you still have, this is why we have, , cash set aside for 18 months, right?
Because that's 18 months where, , that's the typical time that a bear market lasts is about a year and a half. And so if we can withstand that and reduce your withdrawals from your portfolio over that time, then we'll be fine. And also we might have. So if you have several years worth of expenses in bonds, so even if the stock market is going down, right?
So let's say you have a 70 percent stock allocation, 30 percent bond allocation, that 30 percent covers five years of living expenses. Again, you still have a buffer of five years. And so with proper planning ahead of time, you're planning like for that event to happen kind of thing.
Jenni (01:03):
So somebody came to you today and was like, I'm just starting out. I've got a little bit of money that I'm solely say I've got to that 10 percent point where I want to start putting it in something. What is the kind of strategy you would suggest to them?
TJ (01:04):
Yeah. So I would say fundamentals, right?
So the first thing is, okay, so that's great. You're living below your means. You understand your cashflow and you have a 10 percent margin of safety. Okay. Number one, do you have high interest rate debt? I would say anything above like 5 percent interest is going to be more high interest rate debt. So maybe you want to consider paying that down at an accelerated rate.
, do you have at least three months of living expenses in cash? , your income, how steady of an income stream is that? If you're more of a transactional type income, maybe you want more like six months of living expenses. Then once you determine your cash reserve, you have your cash reserve in place, and you have no high interest rate debt, then you look at your various accounts.
Maybe you have tax deferred accounts where you're going to get an income tax deduction on contributing to that. So, , In America, it's like, , we have like a 401k where you're getting income tax deduction. That's up to, for example, 23, 500. Maybe you fill that up. Once you fill that up, you might still want to do a Roth IRA contribution, because that's a tax free bucket for you.
Maybe you have a health savings account. Maybe, and then once you get past all those things, then you have just a taxable brokerage account, which is going to give you flexibility. This is a non retirement account so that you can pull from. Yes, you owe, , capital gains taxes if you sell and you have gains, which is great, but it gives you that flexibility to where you should always be investing.
That's money you can use for that down payment on the home. That's money that you can use to bridge. getting access to your retirement accounts. The key is always be investing basically.
Jenni (01:10):
I love that in there. Yay. Look at the capital gains is a positive because you've made gains.
TJ (01:11):
Exactly. Yeah.
Jenni (01:12):
That's a fun little poke there.
What is the best piece of financial advice that you've ever received?
TJ (01:14):
Man, that's a great question. I've received so much advice. So I'm trying to think to the best advice. I mean, it's definitely cliche, but , investing in yourself when you don't have that income that allows you to live below your means, right?
So don't get caught up in all this technical stuff that I'm even talking about when it comes to, , thinking through , You know your asset allocation and tax plan all this stuff. None of that matters until your income is high enough That you can live comfortably below your means and translate your income to assets So again figure out the career that you want to be in or the industry that you want to be in And then focus on increasing your skills and marketability within that industry.
And then, yeah, don't be afraid to use the tools that, , think like an entrepreneur, even if you're an employee, right, use these tools at your fingertips, whether it's AI, all the various tools to increase your marketability, increase your, , earning potential.
Jenni (01:17):
I love to hear you speak in there. You keep giving nods to lifestyle.
I'm all about lifestyle design and , it sounds like when you're speaking with your clients, you are like, how can you be creating that lifestyle you want? you're making an income in the field that feels good to you, right? You're not just slogging it out at some job. You're intentionally working your way up in something that you're actually enjoying doing, and then using those funds to support your future lifestyle.
TJ (01:19):
Absolutely. And I think if you can put yourself in a position where I'm a big fan of getting paid in equity, right? So if you can work for a company where you have skin in the game, where you are compensated, if the company does well, then that's going to give you that opportunity to have these kind of windfall type moments where all of a sudden, if the company does really well, maybe your stock compensation doubles, triples, quadruples, et cetera.
Now you have some money to take time off on your own, pursue self employment. Etcetera. And be willing to walk away from, , negotiations. That's huge, right? That , we know the data behind changing jobs. The more frequently we change jobs, the better our compensation is going to be. And that's just the reality.
Jenni (01:21):
Yeah. Definitely. You've dropped so many little nuggets throughout this conversation. And where can people reach out to you and find more of your wisdom?
TJ (01:22):
Yeah. So I have a podcast, Do More With Your Money, available wherever you stream. So check that out. And then mementofoundationplanning. com. You can learn anything you want there.
Jenni (01:23):
Okay. Awesome. Thank you so much for joining me on the show today, TJ.
TJ (01:24):
so much for having me.
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