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Afford Anything | Get Smarter With Money
Why Taking a Year Off Might Be Your Smartest Money Move, with David Bach
01:53:51
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- [00:00]
A
Today's guest is David Bach. He's one of the most famous names in personal finance. Have you ever heard the expression don't buy lattes? That's from David Bach. He's the author of the Latte Factor, which became an instant New York Times bestseller. He wrote the Automatic Millionaire, which has sold more than 2 million copies and spent 31 weeks on the New York Times bestseller list. He wrote Smart Women Finish Rich, which has sold over a million copies. All in all, he's written 10 consecutive New York Times bestsellers. His books have sold more than 7 million copies around the world and have been translated into 20 languages. He's made more than 100 appearances on the Today Show. He's made six visits to the Oprah Winfrey show, six appearances. And through his books, his seminars, his newsletter, through thousands of media appearances, he has reached over 100 million people with 1 million very clear message, which is automate your finances. And then his other message, of course, don't buy lattes. We talk about that in the upcoming interview because don't buy lattes has generated a lot of memes and a lot of discussion, and we unpack all of it in the upcoming interview that you're about to hear. We're going to talk about why people, even with people with six figure incomes, feel financially strained. There are six figure income earners who are living paycheck to paycheck. We're going to discuss that. We're going to discuss the importance of taking time off and reassessing your priorities and reinventing your relationship with work, money, and time, because money is a tool for living a richer life. And so we talk a lot about the richness of life, of having experiences when you're healthy enough to still do so. And we talk about enjoying what you've built. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. The show covers five pillars. Financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I Fire. I'm your host, Paula Pant. And today's episode covers really all five of those letters. Oftentimes in these intros, I kind of pick out one or two letters. Like, you know, I'd say if probably if there's a dominant letter, it's maybe the letter F, Financial psychology. But we also talk about investing and increasing your income. We, we really talk about the fii and a little bit of the R and the E. Here is that conversation with a superstar of the personal finance world, David Bach. David, thank you for being here.
- [02:33]
B
Thank you for Having me. I'm thrilled to be with you face to face because it's been six years since we did the last podcast, but that wasn't face to face. So this is super cool, right?
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A
Yeah, it's super exciting. When you were 46, you took a little mini retirement that completely revitalized you.
- [02:50]
B
Yeah.
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A
I want you to tell us about that. I want to kick off with a story about that.
- [02:54]
B
Okay. Well, it's interesting because we're in a studio that literally is across from my apartment. I just showed you where I used to live in that apartment. Once upon a time, my wife said to me, what do you want for your birthday? My wife's a big planner. And so she asked me about my birthday six months in advance, and I said, honey, you want to know what I want for my birthday? I want a year off. And she said, what do you mean? I said, a year off? I want to not work for a year. She's like, well, does that mean you're not going to go on the Today show? Because I was doing the Today show every week. I said, no, I don't want to do any television. I don't want to. You're not going to write any books? Nope. Don't want to write any books. No speeches. I want to do nothing for a year. I want a year off. And she's like, well, what would you do? I said, well, honey, I could take the kids to school like you do, and then I could go to the gym and they can be friends for lunch. Go. This whole thing that you do looks like a lot of fun, you know, and then I can pick the kids back. I can pick the kicks up. And she said, you know, it's a lot harder than it looks. And I'm kind of joking a little bit here, but I'm like, well, I want to try, right? I want to try to take a year off and see what that would be like. Now, that's kind of like the cute story. And then there was another business side of the story, which is I was in a business program looking at how to 10x my business, and I had already 25x my business from when I started in that program. And so when I was sitting there in this business class looking at how would I 10x the business again? I went through the entire matrix of how many years was it going to take me to 10x again? And then what would I do at the end of that time? And the answer was, I want to take some time off and not work. And then I had this moment of realization, Paula, where I was like, wait a minute, why don't I 10x my free time now? And so I literally crossed everything out that I had been working on all day long in this class, flipped it over and was like, how would I take a year off? I had no idea what I was going to really do with that year. I just knew. I actually didn't know that I was burnt out because I was still getting up at five in the morning, doing all the things that we do, going to the gym, journaling. Actually did take the kids to school, going and doing the Today show, doing, you know, writing all my books. But the spark from everything I was doing had gone down, right? And I didn't know why, right? Like, all of a sudden, like, the joy just wasn't there. So I decided to do the take this year off. It's funny, you go back to like when I was 46, because I'm sitting here at 58. That was 12 years ago. And the first couple weeks, it was just like being retired. I was like, okay, well what should I do? I'm cleaning up the closets. I was doing so many rent, like all the things that people do. I was getting organized, right? Cleaning out the closets. My wife's like, this is great. Then I went in the kitchen. She's like, okay, get out of the kitchen and go do something else, right? You need go get some friends, go have lunch with friends. But I started really sleeping a lot actually, and I rested. And I would tell you that about 10 weeks in, I felt maybe the best I had felt in 10 years, like physically after just a 10 week break. And I was walking my older son at the time to school, he was in fifth grade. And I was just feeling joyful for almost like no reason. I think partially I was just. I had gotten sleep and my son said to me, dad, do you ever worry that now that you've stopped working, you'll never be able to go back to work again? That you won't be able to write books, that you'll never be able to go on a TV show again, that nobody will ever want to hire you to speak, that you won't be able to start your business back up? Like literally every single worry that was running around my head, my fifth grade son vocalized. And I just looked up and was like, okay, God, I got it. Yeah, that's pretty funny. I probably don't really need to be worrying about all these things, but. And there was that moment and I just took that whole year Off. I always tell people, like Ariana Huffington had done a book on recharging your battery, the need to sleep. And it was around that time actually. And I had met Ariana, Arian Huffington. I had met her at a meditation retreat. And I said, you know what? This whole break that I'm taking, it's not like recharging your battery. It's I've replaced my battery. So it was like I completely rebooted my system and then I was energized again. Then I went off and became the vice chairman of financial service company. And then from there I updated all my books. Then I wrote the Latte Factor. Then I co founded a registered investment advisor. That firm today has over $40 billion under management. So all of that happened since then. And I moved to Florence, Italy, right after I talked to you on the last podcast because I was putting out the Latte Factor. I'm like putting out the Latte Factor and I'm moving my family to Florence. And then we never came back. We've been living in Europe ever since.
- [07:49]
A
I remember because when you went, you said, oh, I'll be here for like six months, maybe a year. I think that's what you said in that.
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B
Yeah. The plan was to take another sabbatical for nine months.
- [07:57]
A
Yeah, right.
- [07:59]
B
I called it a radical sabbatical because the main character, Zoe Daniels in the Latte Factor book takes a sabbatical.
- [08:06]
A
Right.
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B
In the book she takes a six week sabbatical. Because after I took my first sabbatical break, I started talking to so many of my entrepreneur friends saying, you know, you don't have to take a year off, but take six weeks off. Corporations all across America have these six week sabbatical programs and often the executives don't take them. The employees take them, but the executives don't take them. And so I've actually encouraged a lot of my entrepreneur friends to take a break. Now in Europe, they just call that summer, but here in the us people just work, work, work, work. I think it's a very important thing if you're an entrepreneur, even if you're not an entrepreneur and you just been working hard for a long time. I think people need to be rethinking retirement and taking mini retirements. And in fact, in the update of the Automatic Millionaire book, I talk about this idea of taking mini retirements because I think I've seen people wait all their life to get to 60 or 65 and then they're not healthy.
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A
Right.
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B
And I think if people took a little mini retirement in 30 and a mini retirement at 40 and mini retirement at 50. I think that might be the new way to think about retirement.
- [09:13]
A
Right. And to piggyback off of people wait until they're 60 or 65 and they're not healthy. There's a metric average health expectancy. So not life expectancy, but health expectancy. And that's 36, 63.
- [09:27]
B
This is kind of shocking to me. Like, you know, I'm getting. If you could see the hair on my arms. It kind of goes like this. When I was updating the Automatic Millionaire, I'm doing all this new research, and I was curious about the life expectancy, because life expectancy in the United States has gone down.
- [09:42]
A
Right.
- [09:43]
B
So life expectancy for men is 73. I think it's 78 now for women. As I was looking at life expectancy, what came up was health expectancy. So health expectancy, the World Health Organization knows at what age in each country someone will get sick, and they will get sick with something that changes their life for the rest of their life. Some medical, physical thing will happen and their life will not actually be the same. And in the United States, it's 63. That's an eye opener, right?
- [10:15]
A
Yeah.
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B
And we always talk about, you know, a lot about these three stages of retirement that you've got. Stage one, in your 60s, is what we call the go go stage. You've probably heard this. Everybody talks about this. Stage two is, you know, your 70s, the slower go stage. And in your 80s, it's often the won't go stage because the husbands aren't healthy enough to go anywhere.
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A
Yeah, the no go.
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B
I call it the won't go because it's really. The husband won't go. He can't go. You know, my dad couldn't go on trips in his 80s because he wasn't healthy.
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A
Right.
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B
My mom could. My mom still can't, but my dad couldn't. My dad just passed away. But really, when I look back on my father, you know, I was thinking, I'm missing my dad today.
- [10:51]
A
I'm sorry.
- [10:52]
B
Thank you. I actually was talking to him up there, you know, before I came here today. And I thought I had a really close relationship with my father. And it's amazing that my dad lived 84 because he didn't take good care of his health. I spent nine years at Morgan Stanley. My dad worked at Morgan Stanley. I worked alongside him for all those years. When clients would come to us in their 50s, they're coming to us in their 50s because they want to plan the next 10 years to retire. And we would sit down with them and go, and let's talk about your health, especially for the men. When did you go to the doctor last? What's going on? Like, do you have a good doctor? Are you having annual physicals? How many medications are you on? Like, most financial advisors would not ask those questions. And I'd say, because there's no point in doing all this work to save all this money and then get into your 60s and not be healthy enough to enjoy it, right? So my dad was really healthy, I'd say, till he was 75. It's a life lesson for me, like, as I'm exercising all the time, like, I'm working on how I'm going to be at 80, right? Like, and we never know what's going to happen. But you know this because we've talked about before, like, smart women finish rich. The average age of widowhood now is 59, right? It was 57 when I wrote the book the first time. 59, still really young. I'm 58. And Paul, I've already had three best friends die, and they're men, but I've lost two best friends from high school and one best friend from college, and they died at 55 and 56. So I don't take life for granted. I didn't take life for granted before, but I just tell people, man, you know, live rich now. Everything I talk about, live rich now. You need to be living your life to the fullest now. It's not just about saving money for the future. It's about using money as a tool to live your best life today. That's all it is.
- [12:41]
A
Right? So with that in mind, then, people who self select as the people who listen to personal finance podcasts tend to have the opposite problem of mainstream Americans. I think in mainstream society, most people aren't saving enough. I think a lot of the people who are listening to this show have the opposite problem where we're saving too much and we're a little too obsessed with saving for the future at the expense of today.
- [13:09]
B
Isn't that fascinating? And also it's interesting what you just said, because that's your audience, right? Which I love. That's why I felt like we had such an intelligent conversation last time we talked, because you're asking me those kind of questions versus, like, how do I get out of debt? How do I save $5 a day, right? So I love to have that conversation, right? So I just spent the last two years updating the automatic millionaire this is my most popular book. It sold over 2 million copies. And I decided I was, I would do it one more time. These are my last podcasts. This is my last book launch because I am retiring.
- [13:42]
A
You're done?
- [13:42]
B
I'm done.
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A
You're done.
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B
I'm done. I'm retiring. And so I updated this book because I have a 22 year old and a 15 year old. They still need these lessons. So the automatic millionaires about how to build financial freedom for life automatically. But in updating this book, some things really kind of shocked me. And I'll tell you what they are, which goes to your like kind of what you're asking me. In updating the book, I found out there's 24 million millionaires now in America. Now there were 7.9 million millionaires 20 years ago. Let's just call it 8 million.
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A
Right?
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B
So the amount of millionaires in 20 years has gone up by 16 million.
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A
Right.
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B
That's almost a million millionaires a year.
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A
Right. But the value of a million dollars, the purchasing power parity of a million dollars has, has shifted quite a bit over the span of 20 years.
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B
Are you going to say it's not a million dollars and not what it used to be? There's some truth to that, by the way, and we'll talk about that. But that surprised me that there's so many people in the United States that are millionaires now. The second thing that surprised me is the stat that has not changed is that 6 out of 10Americans, it depends on who you pull the data from. Some people say it's 6 out of 10, some say it's 7 out of 10. 7 out of 10Americans live paycheck to paycheck. So those may not be who are listening to your podcast, but one out of three Americans who make $150,000 a year are living paycheck to paycheck.
- [15:04]
A
And both can simultaneously be true. You could be on paper a millionaire in terms of your home Equity or your 401k balance while also living paycheck to paycheck.
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B
That's a very good point. And you know all these stats, 37% of Americans can't get their hands, according to the Federal Reserve on $400 in case of emergency purposes. Other stats say that 6 out of 10Americans can't get their hands on $1,000 in case of emergency. So basically what we have in this country right now is a completely two track financial system. And I call it the automatic economy. And so a whole lot of people have been Building enormous wealth.
- [15:42]
A
Right.
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B
And I want to get to the part where you answer your question, which is what happens when you get to this age and then you're afraid to enjoy the Money because there's $44 trillion right now in retirement accounts? I don't. Did that sit for you for a second? There's $44 trillion in retirement accounts. It's basically one out of every three dollars in America is in a retirement account, which means we did a really good job. I just spent 30 years teaching people to save for retirement, to pay themselves first, automatically use their 401 plan, use their IRA account. And lots of other people did, too. And there's $44 trillion in retirement accounts. What's unbelievable to me, Paula, is, is that people are not taking this money out now until they hit the RMD age. So for those who don't know what RMD age, it's required mandatory distribution age. It's the age that the IRS government says you have to start taking money out of your retirement account, and then you have to start taking out about four percent. And now the age is 73. And depending on your birth date, it could be 75. It used to be 70 and a half.
- [16:48]
A
Yes. Let's just call it used to be 70 and a Half. And I would always joke it's the only time that you celebrate your half birthday past the age of, you know, five.
- [16:57]
B
It was a very bizarre thing that makes your life as a financial Advisor Very difficult.
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A
59 and a half, you'd celebrate that half birthday.
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B
That's bizarre, too, why they did that. I think actually why they did that was trip people up and have you get hit with penalties. So the penalties were 50% if you didn't take it out. Now it's 25%. But if you go back and you ask yourself, wait, why is it that people are waiting to take that money out? Well, number one is because they don't want to pay taxes.
- [17:23]
A
Right, Right.
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B
So I think we actually need to be rethinking that. I actually think we need to think about lowering the taxes on IRA accounts that are deductible to a flat tax to make it easier for people to take that money out. Enjoy it. Too many baby boomers who have plenty of money.
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A
Yeah.
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B
Their financial plans have been designed to take that money last. And many baby boomers will actually never enjoy or use that money. And what I've been teaching people for years is that there's two phases. There's save and invest, and then there's spend and enjoy. I think what's really important is when you get to these 50s and your 60s, is that you start enjoying some of your wealth, Right? It's also why I tell people to take Social Security immediately, don't wait. Everybody comes in.
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A
Wow, that's counterintuitive. Or I should say that's contrarian. That's contrarian advice.
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B
You know, it's shocking to me, actually, that it's contrarian advice, but it is. Everyone's like, oh, you should wait because, look, it'll be worth this much more. It's 67. It'll be worth this much more.
- [18:19]
A
70.
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B
It's such bad math. It's like, people don't do the real math. The real math is if you take the money at 62 and you get five years of that money, if you just stuck it in a balance fund, you'd come out ahead from the amount of money that you're going to get when you're 67, and way out ahead if you come and get the money at 70. But more importantly, you just missed all those years of having that money. I would have clients come in my office and I'd say, first of all, go back to the RMD and then we'll go to Social Security. Rmd clients would be distraught over the fact they've got to do an rmd. We used to throw parties for them because, like, no, no, you shouldn't be distraught. Like, you live to this age. Hooray, now go enjoy this money.
- [19:02]
A
Right?
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B
Go have fun with this money.
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A
And they are.
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B
But I don't want to take the money and pay taxes. And I'd be like, I want you to imagine that you came in my office and I just handed you $3,000 a month. Wouldn't that be kind of cool? Well, yeah, I would love that. Here you go. Here's your money. It's the same thing with Social Security. Clients are like, well, God, I don't know why. Sure, I shouldn't wait. I'm like, your Social Security is worth 2,000, 3,000, $4,000. If you take this extra money at 62, you're healthy. You can take your family on a cruise. Go take your dream trip, travel and business class. You know, all these things that you. That you're afraid to go spend money on. Don't be afraid. Go enjoy your Social Security. By the way, while it's still right. Like, who knows what's going to happen in Social Security? I'm telling you, anybody across the board, this is the key. If you don't need the Money, Social Security, then you take it immediately. If you do need the money, then a lot of people have to consider waiting because they need the extra amount of money that would be. But I'm telling you, if you don't really need that money, take it and enjoy it. And then go, oh, Uncle Dave, on Paula's show. That's why we're having all this fun now, because we took this money early. Wow, you're looking stumped. Have you never heard people say this?
- [20:12]
A
I've never heard anyone say this. I've always heard, get the higher payout. I mean, that payout, I guess, because you know that that payout is going to increase every year until you turn 70. And it's guaranteed. Whereas if you were to put it in. In an index fund, there's volatility, you might get a higher return, but you might not. You know, there's that variability there versus a guaranteed 8%.
- [20:35]
B
Okay, so, Paul, I'm gonna give you a challenge.
- [20:37]
A
Yeah.
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B
All right? Then you can go. And then you can come back to me. Go pull your Social Security statement. Go look at what they're gonna tell you that you would get at 62. Take that number, run that number, what you would do with that money. Two things. You could enjoy it. Cause you're not gonna need the money, Right? You're the classic example. You're not gonna need the money, right? So you should absolutely take it. But let's pretend you did need the money. You should take a look at the math. What would happen if I stuck it in the Vanguard Balance Fund, the most generic, boring, simple investment that may exist in America today. 60% stocks and 40% bonds. And if I earned 8% in the Vanguard Balance Fund, because that's basically what that fund has earned over its lifetime, what would that money be worth? Then come back to me and tell me if you would. If you're going to take it early or not.
- [21:20]
A
All right?
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B
Because every time I have this conversation with people and then they run the numbers, they're like, you're right. Why is everybody saying this? And the reason everybody's saying this is that people just say the same thing over and over again, because they base. It's like sheep. And the other thing is, the government would prefer. I don't know why the government would actually prefer you to take the money later, because they're gonna have to give you more. But the one thing with all the AI tools now, whether you go to ChatGPT or Perplexity or Gemini, if you put in anything about Social Security, you know what the one thing they're not confused about, they all agree that Social Security is running out of money in 2032 or 2033.
- [22:04]
A
Yep, exactly. Yeah.
- [22:05]
B
So when people go, oh, but it's guaranteed. It's guaranteed as long as the government keeps paying the money. You and I actually don't. I mean, I know you know this, but I don't think all the listeners do. You don't actually have an account in Social Security with money in it with your name.
- [22:21]
A
Right.
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B
You have an iou. It says Paula. And we owe you this amount of money.
- [22:27]
A
Right.
- [22:28]
B
And right now as we sit here, the United States government has a $38 trillion deficit, and that is not including all the entitlement programs. So I hope Social Security exists because there's 30 million Americans that need it just to survive the day. I can take a Social Security check, I will be taking that. Ch.
- [22:53]
A
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B
It's around the fricking corner. Yeah, you know, like when they started talking about this, I was a kid, right? This conversation's 30 years old. And when they started talking about this 30 years ago, I remember thinking to myself, well, they'll do something, right? And by the way, they did. You know what they do? They push the dates back. So I've actually always said Social Security is never going bankrupt. They'll just push the dates back. That people can take retirement. They'll have to right here's what's coming. I have a crystal ball. People are going to go ape crazy over this. They're going to move the date on retirement. So you, pretty soon you won't be able to take it at 62.
- [27:27]
A
Right.
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B
Pretty soon you'll have to. You'll be able to take it at 65.
- [27:30]
A
Right.
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B
Then it'll be 67 and then they're going to one day. My guess is look at, well, how much money do you have? You know what, since you have so much money, you don't actually need Social Security.
- [27:41]
A
Now that's means tested.
- [27:43]
B
I think it'll be means now that that will be the hardest one. Actually. They're all hard. They're all hard.
- [27:49]
A
Yeah.
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B
Moving the date on retirement is brutal.
- [27:52]
A
Right.
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B
And they've tried this in other countries and people go crazy.
- [27:55]
A
The last time they moved the date was in 1983. So in 1983, that was when they moved the date of retirement and they phased that in in two month increments over the span of the next 30 years.
- [28:07]
B
Yeah.
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A
@ least for people who are currently in their 50s and 60s, I mean, they will probably be.
- [28:14]
B
Unaffected. I agree. Fingers.
- [28:16]
A
Crossed. Yeah, I.
- [28:18]
B
Agree. I think I'm safe. You know, are the 40, 30 something safe? I mean, Social Security is not a retirement plan. And I think everybody's listening knows this. So that should not be a retirement plan. That's basically just a, like a last resort security.
- [28:34]
A
Plan. Right. I should say for the audience, for people who are listening to this and worrying when it becomes insolvent, that doesn't mean they'll pay nothing. It means they're able to pay 70 cents on the.
- [28:43]
B
Dollar. Exactly. And depends again on who you research look at some will say 75 cents on the dollar. So what does that actually mean? Is it means the benefits will get.
- [28:52]
A
Cut.
- [28:52]
B
Yeah. If you were getting $2,000, they may not give you $2,000. For a lot of people, that's a huge problem. And it's a huge problem because, I mean, today in the COVID of the Wall Street Journal, they're talking about the average healthcare cost for the average American being $27,000 a year. So when you look at the things that have not gotten fixed in our country in the 30 years that I've been doing this, they didn't fix Social Security. They didn't fix the cost of college. College costs just skyrocketed. And they didn't fix the cost of health care. And when people go, why are people struggling? It's because these critical things that we need for life, health care, education. They're just skyrocketing in terms of.
- [29:35]
A
Costs. Housing as.
- [29:36]
B
Well. Housing, yeah. Insane. And that's making it hard. All these things are making it hard for the younger generation who I'm. Why update this book is making harder for them to buy homes. I know you're a big proponent of real estate. I'm a big proponent of real estate. I think homeownership is the single biggest, most important thing that people do that builds financial security. And for many young people, that is in major cities like New York, where we are right now, that is becoming insanely difficult. I lived across, literally, we can see you guys, my apartment from here, where I used to live, I looked up because I was downstairs. I went to my building and went into the little cafe just to kind of like have a memory flashback before I came here. I'm like, okay, well, I wonder what. Because my son's gonna move to New York in a year. He's a senior right now at Northwestern. He's gonna graduate, he's got a job, he's gonna move back to Manhattan. And I'm like, what would it cost for us to buy him, like a little tiny apartment right over here where we used to live? What would it cost? I went on street. Easy. Start looking. There's a little apartment over there with 800. I think it's 863 square feet. And it's basically $1.2 million. $1.2 million for 863 square feet. So that doesn't work for a 22 year.
- [30:51]
A
Old. Yeah.
- [30:52]
B
Right. But that's also what's creating opportunities in so many places across America because a lot of young people are not moving now to New York, San Francisco, Chicago. They're actually moving to these other areas that then are growing because housing prices are 253, 50, 400, not 1.1 million for an 800 square foot.
- [31:13]
A
Place. Right, exactly. So the combination of. In the age of remote work, living in those secondary cities is actually a very viable.
- [31:20]
B
Option. And for many, phenomenal. Right. Because if you move to some of these growth cities where young people are moving and you get a job and you buy a home, you got a really good chance that in 10 years at home is doubled. That's what's been.
- [31:35]
A
Happening.
- [31:35]
B
Right. Home prices have gone up in the last five years. Home prices have gone up. I think it's.
- [31:39]
A
130%.
- [31:40]
B
Right. And since I wrote this book, the automatic number 20 years ago, the stock market's gone up sixfold. And home Prices have gone up fourfold. And that's why people who paid themselves first automatically one hour day of their income and bought a home today, they're.
- [31:58]
A
Millionaires.
- [31:59]
B
Right. It didn't happen overnight. Took two.
- [32:01]
A
Decades. Exactly. To dig into the one hour a day of your income. So one hour a day, if you assume an eight hour workday, that's 12.5% of your income. So your recommendation is people save a minimum of.
- [32:14]
B
12.5%.
- [32:15]
A
Exactly. Of gross.
- [32:17]
B
Income. And I say an hour day of your income versus just 12.5%. Because first of all, when you say 12.5%, people's eyes.
- [32:23]
A
Glaze.
- [32:24]
B
Yeah. When you say, look, you're going to go to work at 9, normally you work from 9 until 12 for taxes. The only way to not do that is to pay yourself first automatically into a deductible retirement account. So your goal should be, whatever you earn, at least one hour day of your income should be going away for retirement. Now, the other thing is you really need to be putting 30 minutes a day also on top of that into an emergency.
- [32:47]
A
Account.
- [32:48]
B
Mm. Because too many Americans right now do not have enough money in cash in an emergency account with AI and the job layoffs are gonna be coming. You need to have more emergency money than you used to.
- [33:01]
A
Have. So it's no longer three months. How many.
- [33:05]
B
Months? I think people should have a year. And I know that's a lot more than people used to recommend. There was a time when I recommended three to six.
- [33:12]
A
Months.
- [33:13]
B
Right. And now I would even tell you a year to two years. I think Covid was the ultimate light bulb for.
- [33:19]
A
That.
- [33:19]
B
Right. Because, look, we were locked up in our houses for three months. If the government had started sending people money, they were going to be. There's gonna be a real problem on their.
- [33:27]
A
Hands.
- [33:27]
B
Yeah. And if this ever happens again, the government won't be able to throw all that money out.
- [33:31]
A
Again.
- [33:32]
B
Right. So there is a lot of money in cash right now. I think there's $7 trillion in money market accounts at the moment. It's the most amount of money we've ever seen in money market accounts. But the average American does not have a year of expenses set aside. This is the time to start getting your raincoat ready, because I'm going to talk out of two sides of my mouth right.
- [33:52]
A
Now.
- [33:52]
B
Okay. One is, I think the next 10 years are going to be the greatest opportunity to build wealth in our lifetime. Period. In our lifetime. Everything that's happening right now with technology, AI, where we are today, I think the next 10 years are going to be extraordinary. And I look at the last five years, the last five years have been insanely good, right? Like, if you're an investor, right? If you're not an investor, they've not been good. So if you own stocks and real estate and even crypto, you've just done amazing, right? I mean, I was looking at returns before I came over here. I always recommend simple things like VTI, Vanguard's total stock market fund. That fund's had a 15% annual return now last five years. The QQQs, NASDAQ, the top 100. That's at a 17% annual return the last five years. People used to go, oh, my God, you can't make 10%. You know, people have been in stock market have made way more than 10% annually. Now the question is, does it continue? The market's due for a pullback. I don't know when this will air. Maybe by the time this airs, the markets had a pullback, but markets always have pullbacks. That's a part of being in the market. That's normal. But I think we are in a position right now for the next 10 years, like, we're going to be blown away by the amount of wealth that's created. The thing that I worry about, which is, again, why I updated the Automatic Millionaire, I'm worried about people being left behind. I think right now we are in a place that if you are not a part of this automatic economy that's building wealth, then you are part of the automatic economy that's taking your wealth. And what's happening is people are like, the boat is leaving and there are people on the dock that don't realize this thing's taking off without.
- [35:35]
A
You.
- [35:35]
B
Yeah. You've gotta be an investor in this.
- [35:37]
A
Market. And I think you're right. The last five years really exemplified it, because if in 2019, you owned assets, you owned stocks, you owned real estate, the gains that you've seen from 2019, we'll even go January 1.
- [35:52]
B
2020.
- [35:52]
A
Right. The gains that you've seen from January 1, 2020 through today are just phenomenal for people who owned.
- [35:59]
B
Assets. I don't even think the average American realizes how phenomenal they.
- [36:03]
A
Are.
- [36:04]
B
Right. You know, when Covid happened, I created a program on homeownership. Money magazine put me on the COVID when we created this whole homeownership challenge. And I said, you know what? This is gonna be the greatest time to buy homes in the last 20 years. And it was right. Anybody who went out and Bought a home right after Covid. Oh, my God, their homes have gone up 100, 200.
- [36:24]
A
300%.
- [36:25]
B
Right. And people are like, well, it's too late for me. No, it'll happen again. There'll be another pullback. The thing is, when things go down, that's when you have to be ready for the.
- [36:36]
A
Opportunity.
- [36:37]
B
Right. Instead of just going, well, oh, my God, everything's wrong. Now I can't get involved. Like, no, you actually have to be ready. Like, the market's gonna go down, and you have to be ready. Ready and.
- [36:46]
A
Excited. Right. Okay. So that leads to you coined the latte factor. And in a moment, I'll ask you to just quickly define that for anybody who hasn't heard it yet, but the Gen Z iteration of the latte factor is the avocado toast. And that often, and we all understand it's a metaphor. It's not literally about the coffee or about the avocado toast, but that often gets mocked a little on social media by people who say, you know what? The average home in my area costs $500,000, which means a down payment's gonna be 100,000. My income is 60,000 a year. And so I don't see myself ever saving $100,000. 20% downtime. And because that feels so out of reach for me, especially while I'm also paying off student loans and I'm also saving up for IVF and all of these other expenses that especially young people have, because it all feels so out of reach, why not have a slice of avocado toast and a.
- [37:48]
B
Latte? Well, first of all, Paula, you're being sweet. It's fascinating to me because you say everybody knows it's a metaphor. I think there's a whole lot of people who don't know it's a metaphor. I think there's actually people out there, like, this guy's trying to take my coffee away, and my life sucks. And the only thing I have going for me is my going to Starbucks and having my latte. And he wants to take that away, this guy. I mean, I can't believe this guy wants to take my lattes away. And literally, there are people who go out and create latte mugs saying, drink your latte. They literally get viscerally upset about this metaphor. Now, I've been joking about this now for 25 years. Like, it's not necessarily about the latte. By the way, the latte was 350 when I started talking about.
- [38:33]
A
This.
- [38:33]
B
Yeah. Now, in New York City, where we are, you can go to Starbucks and have an iced coffee, a large one, and pay a tip, and it's 10 bucks. Right. So, I don't know. Is $10 a day a lot of money? There are for sure. 60% of Americans are not saving $3,650 a year. And my message with the latte factor was the math. It was like, look, and I always have to go and do this by looking at it. But, you know, in the book, page 45, I show you saving $10 a day, $300 a month, earning 10%. How do you do that? You buy an index fund based on stock market. What is that worth in 30 years? $678,000. What's it worth in 40 years? $10, $300 a month. That's $1,897,000. Now, what happens if you save $20 a day? $20 a day in 30 years is worth $1,356,000. In 40 years is worth $3,794,000. I think that there are millions of Americans who are not saving 10 or $20 a day. And you can make every excuse in the world for why it's not possible. Well, look, I can't get up to $100,000. If you don't give something up to eventually get up, you just will turn around in your 40s and 50s and not have any money. One of the things I put in this book, that's in the update, and I'll show you. I brought a prop. Let me. Let me go get the.
- [39:57]
A
Prop. You brought a coffee? I did, yeah. Is it a latte or a regular.
- [40:01]
B
Coffee? It's a regular coffee. What do you think that coffee costs across the.
- [40:04]
A
Street? Ooh. Okay. Financial district, New York City. $4 for a plain.
- [40:10]
B
Coffee. Six.
- [40:11]
A
Bucks. Six.
- [40:12]
B
Bucks. See, and here I am. I bought a coffee pretty rare, actually. I'll go out and buy a coffee, but I needed some caffeine before I saw you. I'm gonna bring out this stack here of.
- [40:21]
A
Cash. Ah. This is like on Oprah when you had the stack of 250,000, except a little less than.
- [40:27]
B
That. How did you know that? Did I tell you that? Oh, yeah.
- [40:30]
A
Yeah. You told that story at.
- [40:31]
B
Fincon.
- [40:32]
A
Yeah. About how you had. You suggested fake.
- [40:34]
B
Cash.
- [40:34]
A
Yeah. And they were like, this is the Oprah show. We're using real.
- [40:37]
B
Cash. And so on the Oprah show, we did the latte factor, and we had a young woman track her expense. We actually had a whole row of people track their expenses. And we took this Young woman. And then Oprah did a reveal showing that this amount of money could be what it could be worth. And showing with the reveal, over $250,000 in cash. And the whole audience just went, wow. Because it's actually real.
- [40:58]
A
Money.
- [40:59]
B
Right? So what I did here, you.
- [41:01]
A
Had, like, a bunch of armed security guards.
- [41:02]
B
Everywhere. We did had a brink struck in the back. How much money would you guess I'm holding?
- [41:07]
A
Right?
- [41:09]
B
$10,000. See, that's just because you read my book. I am. I'm holding $10,000. What does it cost to blow $10,000 a day in a year? How much money do you have to waste a day to have $10,000 at the end of the.
- [41:24]
A
Year? Well, as you just laid out, 10 bucks a day is 3650 per year, 365 days a year. So it'd be triple that. So It'd be about 30 bucks a.
- [41:33]
B
Day. She's good at math. It's $27.40. So $27.40 is $10,000 in a year. Are people wasting $27.40 a day on kind of nothing? And the answer is, some are. I'm staying at a hotel uptown. Beautiful hotel, actually. I had drinks last night with friends, and the bill came, and the drinks were $31 a drink. $31 a drink. I mean, I said to my wife, you know, I had a gin and tonic. It was 31 bucks without a tip. And that bar was packed, right? And I said, so basically, two drinks with a tip, you're, like, out the door. Almost.
- [42:13]
A
$80.
- [42:14]
B
Yeah. Call it 70. Right. Like, that's cheap.
- [42:16]
A
Tip. And that's maybe fancy hotel prices, but I'd say at the average price, you know, you could get a drink at least here in New York for 15.
- [42:23]
B
Bucks. The question I had in my mind is, do these people at this bar, are they saving $27.40 a day? Are they saving two cocktails a day? Are they saving 50, 60 bucks a day? I would be willing to bet that if I walked around that bar and could see people's net worth, they're not. So I just think we have a disconnect now. It's weird to hold this much cash because I actually never walk around with $10,000 in cash. But we spend money on our phones without really thinking about it at all. We're just cl. Click, click, click. And that's how money is being automatically removed from us. And what's happening in our automatic economy is that we're going through social media and we're clicking on this, but we're not just paying for something once. We're paying for something indefinitely until we turn it off. Everything today is about subscription fees and the lifetime value of a customer. And so everybody wants to try their stuff for free and then charge you forever until you turn it off. And people are spending 2, 3, 4, $500 a month, often on stuff they don't even use anymore. I just want people to be conscious about their spending. If you want to have a coffee every day, go for it, but make sure you're investing in the companies that make the coffee. If you're going to go out and eat every day, then make sure you invest in the companies where you're eating. Like, you should be investing in the companies in America that you use every day, Right? You're on Facebook and Instagram and WhatsApp. You should own Meta. You're using Google. You should own Google. You're going on Amazon every day. You should own Amazon now. I actually don't think people should buy the individual stocks. They should buy an index fund. Then they've got access to all these companies. But every American is out there spending every day. So, you know when people say, well, I don't think the market's going to continue, really, because do you think people are going to stop going to Starbucks? Do you think people are going to stop using Amazon? You know, Howard Schultz just got a brand new boat. Go look it up, you guys. It's a $300 million yacht, apparently. So I've had zero impact on the amount of people who go to Starbucks. But I do think the latte factors actually inspired a lot of people to finally start paying themselves first. And that was the purpose of it. The purpose of it was to get people to go, he's right. You know what? I do have enough money to start saving something. And I think today, whatever that something is, whether it's $10 a day or $20 a day or $50 a day, you have wealthy people listening. It's making sure that you're taking care of your future self. If you're listening to us in your 30s and your 40s, I'm here to tell you, you're going to go like this and be in your 50s and your 60s, and when you're in your 30s and your 40s, you have an unlimited amount of energy. By the way, it seems like yesterday I started my career and I've been doing this over 30 years. So when people are like, why are you going to stop? Are you going to Stop writing books and stop doing it. I'm like, I've been doing this for 30 years. But the 30 years went by like this. So I'm lucky because I've loved everything I've done. This has been my passion and my purpose for my entire life has been to free people financially. I believe this is what I was put here to do. I left Morgan Stanley. Where I was. My life was set where I was working with, you know, wealthy clients. Now, most of my clients were ordinary people who become wealthy because they're like the McIntyre in this book. But they had saved money automatically, and they had built financial freedom. And I decided I would leave Morgan Stanley, move to New York to dedicate my life to teaching people about money who maybe didn't have a lot of money yet. But what I was saying about energy, your energy in your 30s and your 40s is different than your energy in your 50s and your 60s. And you don't believe that that's gonna happen. And I still have a lot of energy, but my tolerance for bull is completely changed. So when you're young, you can go through. You can do anything, you can put up with.
- [46:11]
A
Anything. You.
- [46:12]
B
Can. You're driven, you're motivated, you're unstoppable. And then you get to a point, you're like, yeah, you know what? I'm good. I don't need to do this anymore. And I think you want to make sure that you set aside enough money so that the day comes that you don't want to do whatever you're doing anymore. You can stop. The whole point of money is not stuff. It is freedom. It is optionality. It is the ability to say, you know what, now I want to go live here. I want to go do that. I want to go. You know, it's the freedom of choices. The ironic part about having money. And I know you know this because you probably interviewed a lot of people who have money. Once you have money, it's actually not about stuff, right? I actually don't have anything anymore that I want. I want health. I want time with my family. I want my kids to respond to my texts every once in a while, reach out to me directly. I want to spend time with my wife. I want to travel. I want to ski. I want to spend as much time with my mom as possible while she's still alive. The things that actually really matter in life, you don't necessarily have to have money for those things, but one of the things that having money does is it frees you to have the time with those things that matter.
- [47:22]
A
Most. Right. It frees you to have the time. And the other thing I've noticed is it frees you so that when something comes up, like a health emergency. Yes. If someone you love has a health emergency, Money is not a factor in care.
- [47:37]
B
100%. I don't know how you can underestimate that. I've had health issues in my family, that I've been able to drop everything, not need to work, and spend whatever money I need to spend to help the family members take care of these health issues. I've had my own health issues. I had to have an ankle replacement surgery. I was hit by a car when I was a kid at 15, and my ankle was crushed. And I had 27 pieces of metal put in my ankle to put it back together again. I had six surgeries, so I was never supposed to be able to walk again.
- [48:11]
A
Without. Do you set off the airport security.
- [48:13]
B
Alarm? Well, it took six surgeries. Ultimately, they took that out of my.
- [48:16]
A
Ankle.
- [48:16]
B
Wow. But I had a rod in my left femur, a rod in my right tibula. Spent a year in physical therapy to be able to. Three months in the hospital and a year in physical therapy. He'll walk.
- [48:25]
A
Again.
- [48:26]
B
Wow. But it made me who I am because it gave me the strength. Like, gave me the strength where I was. I could do anything. Like, learning how to walk again. Like, what that took at 15 was life changing. It also gave me enormous empathy because once you go through something like that, you realize, like, oh, my God. There by the grace of God goes I. You know, I got to see people much worse off than me that weren't going to get better. But ultimately, my ankle wore out. And when I was in Florence living my dream life, all of a sudden, the cartilage in my ankle was just gone. And I couldn't. I literally couldn't walk 100 yards because my ankle was bone on bone. And so I was in such horrific pain that my whole life was becoming about pain, which there are millions of people who are also. Their whole life is about pain. You have no idea. If you haven't lived your life with pain, you have no idea what it's like to live your life with pain. I've lived my whole life with pain, but it wasn't unbearable pain. Like, it was bad pain, but not unbearable pain. My day would basically, I would wake up and put my feet on the ground, and then it would be like, so this is how my day's gonna go. Right. Like, I would walk across the Ponte Vecchio and gasp. Because I was in so much pain. I tried everything, and I had the money to try it all. I had the money to try stem cell treatments and every imaginable thing. None of that worked. And then ultimately I had an ankle replacement surgery, and they went in and removed my ankle and put a new ankle in. It's like a new hinge, that surgery. I was able to walk in and put it on my amex. You know, I was able to put that. And that was an expensive surgery that's not covered by insurance. The US Insurance doesn't cover a ankle replacement surgery because it's a new type of surgery. That surgery had to be paid for in advance. I'd had that surgery in Milan, and I remember thinking, like, how lucky am I, right, that I can just go, here's my credit.
- [50:12]
A
Card?
- [50:13]
B
Yeah. It was not a decision process for me. Whereas somebody who doesn't have money, they were like, I can't do anything about this. So you're.
- [50:21]
A
Right. Yeah. Let's go back to the person who feels as though assets are out of reach. They feel as though a home is out of reach. They're paying off their student loans because healthcare and housing and all of these essentials are so expensive. And it all feels so out of reach. There's this sense of despair, and then they reach for the latte or the avocado toast because they have that sense of despair. And in the midst of that despair, the latte and the avocado toast are their only sources of comfort. What would you.
- [50:59]
B
Say? What would you say? I want to hear what your answer is, and I'll tell you my answer, because I'm literally curious. What would you say? Well, what do you say? Because you meet these people that are listening to your podcast, what do you.
- [51:09]
A
Say? The first thing I would say would be to try to find comfort. And this is going to sound funny, but find comfort in the spreadsheet, because that spreadsheet or that online calculator that shows you what your life will be like, forget 40 years, what your life will be like in 15 years, if you just make these little small moves, there's a lot of comfort in that. And even if you have to look at that multiple times a day and say, wow, I'm 22 now, but by the time I'm 35, this is how much I'll have, or by the time I'm 40, this is how much I'll have, there is a certain comfort in that. You know, there's a certain joy once You've internalized that.
- [51:53]
B
Notion. I think that's a beautiful answer, by the.
- [51:56]
A
Way. Oh, thank.
- [51:56]
B
You. I really do. Everything you said is totally true. And the other thing I would say is the moment you make a decision to fix your finances and you click the button to start paying yourself first automatically, whether that's in an IRA account or just in an investment account. I'll give an example. Like acorns. You go to acorns and you click on a button and you start rolling up your change every time you buy something. And you put in diversified portfolio, and you start putting a little bit of money into these accounts. The moment you do that, you start to feel better. Why do you start to feel better instantly? Because you know when you're not doing what you need to do financially, you know it. You know the person who's like, I don't care. I'm having my coffee. I don't care. I'm having my avocados. I don't care. I'm having my cocktails, and they're not saving anything. The anxiety of not doing anything never goes away. And as you get older, it gets worse. Because in your 20s, you're like, okay, whatever, right? Then your 30s, you're like, I know I'm supposed to do something. Then your 40s, you're just like, I'm, like, so far behind already. And in 50, you're just like, it's not even worth trying. Now. That's all wrong, by the way. You can start at any age. At any age, but you will feel better the moment you start to make the changes. And I say that because people write to me and tell me, you know, like, this book is filled with all these success stories of ordinary people that did all these things. And some of the stories are just not. They're almost not believable. And some of these people are famous now, like Tiffany Aleichi, the Budgetista. Have you had her on your.
- [53:29]
A
Show? Yeah, she's been on the.
- [53:31]
B
Show. She's remarkable. And she's in New Jersey. I sent this book to her to ask her for a testimonial, and she's like, david, a testimonial? Let me give you my whole life story. She sends me an audio recording, and she's like, I went from being a broke school teacher earning $39,000 a year to a multimillionaire teaching others how to live richer. Thanks to David Packo. That's me, his coaching, and this book, the Automatic Millionaire. Truly, stop what you're doing. Read this book. Take the action. And make it automatic. Your future self will. Thank you. Okay, that was chunked down from a seven minute recording she sent me. What she said to me in the recording was, 20 years ago, David, I had lost my job. I think she had $75,000 in debt. I forget it was astronomical amount of credit card debt. She had moved home with her parents. She was sitting on a couch with her mom. She watched me on Oprah, the show you're talking about. She's like, I'm gonna go get this book. She went down to the bookstore, bought the Automatic Millionaire, read it cover to cover, and she said, the way you talked in this book, I was like, okay, he's a teacher. He's not talking down to me. I can follow these instructions. I'm going to use these instructions. I'm going to fix my life financially. And then in the process of fixing my life financially, I realized I could teach people too. I could teach people that are like me. And then that's what she went off and did with her life. And now she's a multimillionaire, right? And that's just one unbelievable story. You know, there's a story of a guy named Jorge who came up to me at a meditation retreat. And he's like, wait, are you David Bach, the Automatic Millionaire? I'm like, he said, can I take a selfie with you? I'm like, sure. And he started kind of crying. And I'm like, what's your story? And he's like, my story is this. I'm not an automatic millionaire. I'm an automatic multimillionaire. And he goes, but I was a guy with a truck and a trumpet. And I go, what do you mean? He's like, I was living in my truck and all I had was a truck and I had a trumpet because I had moved to Florida to be a musician and it was not working out. Can I saw you on Oprah? And I read the Automatic Millionaire. I changed my whole life, and now I'm in real estate and I'm a multimillionaire. I have a whole team of people and I make everybody come to work for me. Read your book. We have a whole chapter of success stories like.
- [55:36]
A
That. And Jeff Rose, I noticed Jeff Rose is there and he was talking about how he was deployed to Iraq. On his deployment, he read the book and he contacted his wife who was back at home and said, all right, let's. I'm getting my military paychecks. Let's start being really smart about how we spend this. And they were in credit card debt at the time. I know Jeff Rose very well, you know, now they're thriving. They have four.
- [56:03]
B
Kids. They're amazing. I met them at.
- [56:05]
A
Fincon.
- [56:05]
B
Yeah. And again, I didn't know his story either. And we're sitting down in a conference room like this and doing a podcast. He's interviewing me and he's like, your whole book changed my life. And I got everybody in my troupe to read your book. And now he's like, a famous financial blogger and huge influencer. And, yeah, these little things work. They work when you work them. I know that you have a different listener than most. Most of your listeners are financially sophisticated. They're doing investing. They're not the wannabe people. Right. Like a lot of people, some people who listen to, watch TikTok or pay attention to financial content, it's almost like pornography. Like, they're just financial. It's like financial pornography. Now, I think, like, they're watching stuff and they're watching stuff, and they're watching stuff, but they're not doing anything. Yeah, your listeners are doing something. And I think that's what it always comes down to. Are you using the stuff? At a certain point, you need to stop learning and you just need to start doing.
- [56:57]
A
Right. Well, and so your answer to that question about the small comforts in times of despair, your answer is, essentially, not doing anything is going to create anxiety. And the only way to break through that anxiety is by doing something and taking some.
- [57:11]
B
Action. That's almost. You're paraphrasing me. Well, except that what I'm saying is they already have the anxiety. Someone who's not saving and investing has the anxiety. There's a reason why so many people are so stressed out. If you're living paycheck to paycheck and you have no savings and you're not doing anything, you're not an idiot. You know, you're not doing it. There's no question that there's all these issues. There's no question that things are more expensive. There's no question it's harder to buy a home. You can stack up all these things and just decide to do nothing, or you can look at all these things and go, well, what am I going to do? I gotta do something. You know, the only reason I am here today, able to do what I do is that my grandmother, at 30, was broke, living paycheck to paycheck, working full time in Milwaukee, Wisconsin, selling wigs at Gimbel's department store. My grandmother did not have a college education. My grandfather did not have a college education. He worked in a, in a manufacturer, you know, a plant. They were middle class, blue collar, Midwest, Milwaukee, Wisconsin people. And at 30, my grandmother's like, I don't want to be poor anymore. And my grandfather's like, what do you want to do about it? And she's like, I want us to start saving a dollar a week so we can start investing the money in the stock market. And he's like, you don't know anything about the stock market. She's like, I know I don't, but I'll learn. And she literally went out and learned how to invest, and they saved a dollar a week. And she brown bagged her lunch. And she went down to a brokerage firm at the end of the year with this cash and said, I want to open up a brokerage account. And they told her to come back with her husband. And she's like, my husband, if you don't want my money, I'll go next door. There's two other brokerage firms on the street. And they're like, okay, sit down, we'll open up the account. And she saved all that money. And then that stockbroker that she hired gave her bad advice. And by the end of the year, by the time she turned 31, she'd lost all the money. And I said, what did grandpa say? And she's like, I didn't tell him, but I said, so what'd you do at 31? She's like, I realized I had to actually learn more about earning. I had to take classes because I was just taking advice and I didn't know if it's good advice or bad advice. And so she started going to adult school on money. They had classes on money back then too. Like old school classes, like in a room looking, with a desk and like a chalkboard and. And she learned how to invest over her lifetime and over three decades. By the time she reached 60, she was able to retire, leave Milwaukee, Wisconsin, move to Florida, ultimately move to Leisure World California. All of her friends teased her because she brown bagged her lunch. None of them got to leave Milwaukee, Wisconsin. But because she saved and invested, she was financially free. And she taught my father how to invest, and he became a financial advisor, and she taught me how to invest. And I became one and my sister became one. I bought my first stock at age seven. So that one woman's decision, because she was tired of being in pain and made a decision to make a change, changed the entire destiny of our family, our whole family's. Life changed because of that one woman's decision. And so the other thing I would say to somebody who's just like, not dealing is like, you might be thinking you're doing this just for yourself. You actually might be doing this for your family. You might be doing this for the next generation in your family. There's a ripple effect that financial freedom creates. Generational wealth is created because one person decides in a family to fix their finances. Most people have to fix their finances. Most people aren't born doing everything correctly. It's just not how it works, including myself. I made all kinds of mistakes in my 20s. That's why the Automatic Million book exists. Because I was this idiot making a bunch of money, spending all my money. And I met this ordinary couple who that year had made $53,000 in income and was able to retire in their 50s because they were multimillionaires, because they had spent less than they made. I had to go through pain, actually, to make changes. And it's just funny. I used to live in San Francisco, and I used to get my haircut a place called Nice Cuts. So Nice Cuts had the cheapest haircuts in San Francisco in the Marina, they were $6. And the owner of Nice Cuts was a guy named Sam. And Sam had two locations. Sam was from Vietnam, and so he would cut my hair. And before I went on the Oprah show, this is actually a funny story, Paula. I said to him, you gotta give me a really good haircut. I'm calling on Oprah. It's gotta be your best haircut ever, Sam. And he's cutting my hair. And he's like, you're going on Oprah? I'm like, yeah, with the book I've been working on, the Automatic Millionaire. He's like, so what are you going to say on Oprah? What are you talking about? I go, my mission, Sam, is I want to inspire 10 million people to pay themselves first one hour day of their income automatically. So I'm telling him this. He's cutting my hair, and he goes, one hour of your income? How much is that? I go, well, it's like a little bit above 10%. Sam stops cutting my hair, bends over, laughing his ass off. He cannot stop laughing. I'm like, what's so funny? He's like, you're going on Oprah to teach people to save 10% of their income. I go, yeah. Why is that so funny? He goes, david, I came here from Vietnam, literally on a boat. Like, you hear people, we came on a boat. I came on a boat from Vietnam. I did not speak the language. I spoke no English. I had $75 in my pocket. I didn't even have a job. When I landed in San Francisco, my mom said to me, I think he was 17. He goes, My mom said to me, when you get to America and you get your first job, you need to live off of 10% of your income, and you need to save 90% of your income. So he's like, I slept on a cot in the back of a restaurant for a year. I lived off of rice and bananas for a year. He goes, but I didn't listen to my mom. I was in America. I went crazy. I spent 25 cents on every dollar I made, and I saved 75 cents. And then you fast forward his story. He's like, after a year, I could move off the cot. I got my own place. I learned how to cut hair. He owned two hair salons, and he had been buying real estate. So he had already bought three major, like, three pieces of real estate in the marina. And I'm sure, Sam, today is a multimillionaire, right? But that's an immigrant mentality.
- [63:22]
A
Right?
- [63:22]
B
Yeah. And. And yet people are like, oh, I can't give up my Starbucks coffee. Like, oh, my freaking God. Then don't. Like, then just. I just don't know what your plan is when you're in your 50s and your.
- [63:34]
A
60S. Yeah. The immigrant mentality. My parents. The last time I was visiting home, I was wearing this pair of sweatpants that I love. My mom, she saw it and she liked it. She was trying to find some sweatpants that would fit. So she was like, I like those. Where are they from? And I said, oh, they're from Target. And my mom said, oh, Target, that's too expensive. Why are you buying clothes from Target? That's way too.
- [63:57]
B
Expensive. Oh, that's so funny, Taj. Yeah.
- [64:02]
A
Exactly. All these years later, that mindset still sticks, where you're like, I'm not gonna do something fancy, right? Like, go shop at Target. That's for rich.
- [64:12]
B
People. You know what? When I was growing up, Sears was where my parents shopped and where they took us to shop. And part of that was because my dad worked at Dean Witter, and Dean Witter was Sears, were actually owned by the same company Sears bought Dean Witter. And so as a Dean Witter employee, they had a. You got a Sears discount. And so that's where we would. Kids have to go shopping for our clothes. I remember being a young kid, like, third grade And I wanted a pair of Adidas. And Adidas were like $12. And the same pair of shoes at Sears that were blue with four stripes. They looked like a samba, but they had four stripes. They were like four bucks. My parents were like, I'm buying you a pair of Adidas. And I was like, but I want a pair of Adidas. Like, that's the cool shoe. And my mom's like, we'll buy you these shoes at Sears and you can cut one of the stripes off. And I was like, I don't want those shoes. I don't want to want the one with four stripes and cut the stripe off. And so I said, well, what kind of, you know, let's negotiate. How about I do a bunch of stuff for you in the house and I save my own money and then you, you split the shoes with me. And that's ultimately what happened. I, you know, they're like, okay, they gave me all these projects and then they split the Adidas shoes with me, which were $12. And I put in six. And they put in.
- [65:22]
A
Six.
- [65:23]
B
Wow. I really appreciated those shoes.
- [65:25]
A
Though. That is good financial education. Yeah, that's very good financial.
- [65:29]
B
Education. So find those memories. Yeah, it's.
- [65:31]
A
Amazing. You know, you don't have to let big wireless and your overpriced phone bill suck the joy out of the holidays this year. Because right now all of Mint Mobile's Unlimited plans are 50% off. You can get 3, 6 or 12 months of unlimited premium wireless for 15 bucks a month. It's their best deal of the year and makes it real easy for you to give your expensive wireless bill the Scrooge treatment. Mint Mobile's best deal of the year is happening now. So get a 3, 6 or 12 month unlimited plan for 15 bucks a month. All Mint plans come with high speed data and unlimited talk and text on the nation's largest 5G network. You can bring your current phone and number over to Mint. No contracts and no nonsense. I've been using Mint for about five or six years. I've experienced the same quality service that I had with a previous big box provider, but for a fraction of the cost. I've saved hundreds of dollars by switching to Mint. Turn your expensive wireless present into a huge wireless savings future by switching to Mint Shop. Mint unlimited plans@mintmobile.com Paula that's mintmobile.com Paula. Limited time offer valid until February 4, 2026. Upfront payment of $45 for 3 month, $90 for 6 month or $180 for 12 month plan required $15 per month equivalent taxes and fees Extra initial plan term only over 35 gigabytes may slow when network is busy. Capable device required Availability, speed and coverage varies. See mintmobile.com you know you don't have to let big wireless and your overpriced phone bill suck the joy out of the holidays this year because right now all of Mint Mobile's unlimited plants are 50% off. You can get 3, 6 or 12 months of unlimited premium wireless for 15 bucks a month. It's their best deal of the year and makes it real easy for you to give your expensive wireless bill the Scrooge treatment. Mint Mobile's best deal of the year is happening now, so get a 3, 6 or 12 month unlimited plan for 15 bucks a month. All Mint plans come with high speed data and unlimited talk and text on the nation's largest 5G network. You can bring your current phone and number over to Mint. No contracts and no nonsense. I've been using Mint for about five or six years. I've experienced the same quality service that I had with a previous big box provider, but for a fraction of the cost. I've saved hundreds of dollars by switching to Mint. Turn your expensive wireless present into a huge wireless savings future by switching to Mint. Shop Mint unlimited plans@mintmobile.com Paula that's mintmobile.com Paula Limited time offer valid until February 4, 2026. Upfront payment of $45 for three month, $90 for six month or $180 for 12 month plan required $15 per month equivalent taxes and fees Extra initial plan term only over 35 GB. May slow when network is busy. Capable device required availability, speed and coverage varies. See mintmobile.com so if you're giving gifts for the holidays, give something that is high quality and timeless and that people are going to use for years. You're going to get that at Quince. From Mongolian cashmere sweaters to Italian wool coats, everything is premium quality at a price that totally makes sense. Quince has super high quality clothing. We're talking soft Mongolian cashmere sweaters starting at 50 bucks and they look and feel like designer pieces. They've got silk tops and skirts for dressing up, great denim, amazing outerwear, puffy coats, Italian wool coats, well crafted. Every piece is made with premium materials from ethical trusted factories and it's priced way below what other luxury brands charge. And there is craftsmanship. The stitching, the fit, the drape. I am currently right at this moment I'm wearing this button down V neck ribbed Fisherman cashmere sweater. And I have a nearly identical one from a luxury brand. I won't name names, but nearly identical one that I have was priced like five times higher. And so I've got two of nearly the same sweater. And I like the one from Quince more. The one from Quince is softer. I like the color a little bit better. It doesn't pill. I like it more. And it was way, way less expensive. Like not just a little bit less expensive, but it was like 20% of the price. So find gifts so good you'll want to keep them with quince. Go to quince.com Paula for free shipping on your order and 365 day returns. Now available in Canada too. That's Q-U I N C E.com Paula to get free shipping and 365 day returns. Quince.com Paula. So just to spell it out for everyone who's listening, the notion of an automatic millionaire is that you automate everything because life is busy and you're going to forget. So you automatically pay yourself first. You automatically save into an emergency fund, into your retirement funds, into your dream.
- [71:01]
B
Fund.
- [71:02]
A
Exactly. And you automate all of it and it comes right off of the.
- [71:05]
B
Top. And you also automate your bills. So like with the credit cards, one of the biggest things that affects people with credit cards is they get late fees and then interest rates go up. And so the banks and the credit card companies make billions of dollars on late fees. So at a minimum, you got to automate your credit cards, also make the minimum payments and then manually go in and make extra payments. There's really three accounts. There's retirement, there's now the emergency money, and then there's the dream account. The dream account is that, you know, what do you want to do that's a dream of yours between now and retirement. It could be a short term dream, it could be a medium term dream. It could be the dream could be to buy a house or it could be like, you know, I'm gonna, I wanna go on vacation. Whatever the dream is, the way you make those dreams real is you put some money away in an investment account to pay for those dreams. A lot of times people are like, well, I don't know what my dreams are. I'm like, great, fund a dream account anyway, because what'll happen is all of a sudden you'll have something will come up and then you'll have the money in the account for.
- [71:59]
A
That. A lot of people when, especially when the topic of dream accounts or emergency Funds come up. A lot of people get really. In a bull market, get reluctant to keep that much in cash. When we've had a consistent bull market for so long, people often start viewing the stock market as a high yield savings.
- [72:20]
B
Account. That's.
- [72:21]
A
Crazy. By the way, can you speak to that? Because I hear that all the time, you know, oh, I don't want to leave this money in cash. I keep thinking about how much more I could be making if I had.
- [72:30]
B
This. Yeah, you know, it wasn't that long ago that Covid happened. People at Cash were really happy. It's like getting in a car without a seatbelt or an airbag, you know, hopefully you'll never get in a car accident, but, man, when the day comes and you have a car accident, it's nice to have the seatbelt on and have an airbag. I think that people should have at least 10% of their money in cash. I have closer to 20% of your total net worth.
- [72:53]
A
Yeah.
- [72:53]
B
Wow. Maybe 15 right now. I have a lot of fixed income. I'm overly conservative, more conservative than my financial advisory team would like me to be. But you know what? You have to know yourself. You have to know how much volatility you want, and you have to know what kind of return you need. Because that's another thing. You're not just investing just to have money. Right. Like, how much of a. What kind of return do you need? When I was a financial advisor, we would work with our clients. Like, look, the goal for your money is to earn somewhere between 7 to 10% annually, depending on how much risk we take. That's the goal. Right, Because. Because then we can outpace inflation and we can outpace your spending. You know, the 4% rule of spending is a great rule. And if your money's earning 7% annually, you'll be able to take your 4% and your money will keep growing. One of the things that people do in markets like this is their accounts go up 15 annually, and they start looking at that like, that's real money. And they start spending 15%. And then the markets turn around and go the opposite direction. And their lifestyle has gotten to a point where they need that money. That's a huge mistake, too, by the way. Cash has been an amazing place to have money because the rates have been 4 or.
- [73:58]
A
5%.
- [73:58]
B
Right. The problem now is rates are coming.
- [74:00]
A
Down.
- [74:01]
B
Right. So people will start to not want to have less money in cash because the rates are coming.
- [74:05]
A
Down. Yeah, exactly. But it's simultaneously. I mean, rates coming down is Bad for savers, great for borrowers. So as the rates come down, homeownership feels more attainable because those interest rates are a bit.
- [74:19]
B
Lower. Absolutely. And homeownership is already starting to pick back up again because of that. I think one thing, you know, again, we haven't even talked about the issue of renting versus owning. You know, the latest statistics right now is that the average homeowner is worth $4,000, some people say for 30, and the average renters were $10,000. So homeowners are worth still. Basically, the stacks stayed. So consistent, homeowners are worth 40 times more than renters. And so when you look at, like, what is the primary thing that impacts wealth in America, it's homeownership. And if you don't figure out a way to get into the homeownership game, you're at a huge disadvantage. If someone's like, I'm going to rent forever because I just don't believe I can buy a home, then you have to save twice as much money. You still won't catch up to the person who bought a piece of real estate. And then, you know, the question is, well, how do I buy my first piece of real estate? You know what, you got to work really hard in many cases to buy that first piece of real estate. And it won't be a dream property. My first piece of real estate that I bought, my first house, I split it with the best friend, $225,000 house. So we each put down, like, a little over ten grand. We borrowed 90% of the time, and we didn't even have the money to make the mortgage payments. We had to rent rooms to friends, but we had friends we knew would rent rooms because we knew our friends all needed to.
- [75:29]
A
Rent. So your very first property was a rental property, in.
- [75:33]
B
Essence? It really.
- [75:34]
A
Was.
- [75:34]
B
Yeah. Yeah. And that's how we could afford the property. And it was a complete fixer upper. We didn't know what we were getting into. We just thought it would be.
- [75:41]
A
Fun. Where was this? What was.
- [75:42]
B
This? It was in.
- [75:43]
A
Danville. Where's.
- [75:44]
B
Danville? Danville's in the East Bay in California. That house today would be if we kept it. So sad we didn't. But that house is probably worth 1.5 million. My mom came over that house, looked at it and cried. Like, why cry, Mom? She's like, oh, my God, what have you done? Like, but we worked on a house like a year. That's what we would do on the weekends is go to Home Depot, get the Stuff come back. Tile, paint.
- [76:06]
A
Sand. How did you know before YouTube, how did you know how to do those.
- [76:09]
B
Projects? We did not know how to do those projects. I honestly don't know what. But that was the beauty of being young, right? There's something to be said for being young and dumb and hungry. And we were young and dumb and hungry, and we were both really hungry. We both really wanted to make a lot of money and we wanted to be investors at a young age. And we were paying money in rent. My friend was a mortgage broker and I'm like, you know, between what we're both paying in rent, we could get a mortgage. You're a mortgage guy, do the numbers for us. And he's like, I think we qualify for like a $200,000 mortgage if we split it. And so we did. Now at the time, I had about three months of money set aside to make mortgage payments. And I was in commercial real estate on commission only business. So I remember being close to having no money and being like, how am I going to make my mortgage payments? You know? And I was very driven then because I needed to close deals and I cold called. Like nobody's ever cold called because I had to get deals.
- [77:03]
A
Going. Right. How long did you have that.
- [77:05]
B
House? Had that house probably five, six, seven years. The two of us also, we moved. I moved to San Francisco, he moved to Las Vegas, and we rented the house up for a few years. Now that was not a huge success story with that house. When we sold that house, we sold that house for like a little bit more than we paid for it because there was a time where the market was.
- [77:22]
A
Flat.
- [77:23]
B
Yeah. And then after we sold that house, the market.
- [77:25]
A
Skyrocketed. Oh.
- [77:26]
B
Man. You know, so that was the only property I ever bought during my lifetime that I haven't made a bunch of money on it. In fact, it's the only property I ever bought that I didn't get at least the 250 to $500,000 in tax free gains. Right. Because you know, when you buy a house, if you're single, you get $250,000 tax free on a sale. And if you're married, you get $500,000 tax free sale. And I know you know this.
- [77:47]
A
If it's your primary residence, it's your primary.
- [77:49]
B
Residence. But a lot of people don't know that as a rental property, you can just keep flipping them over and over again and doing a 1031 exchange. So all the tax laws were designed to make people who own real estate.
- [77:58]
A
Rich.
- [77:59]
B
Right. That's why the real estate goes up in value. And when people go, oh, but it's cheaper to rent than own because of all the expenses, taxes and maintenance and all these things that you have to do, I just say to people like, I don't know who you think is paying for that is the landlord's paying for that. People don't buy investment property to eat those expenses. Those expenses ultimately get passed to you as a renter. That's why all these companies have gone in and bought up all these rental properties. They know it's a good investment, and that's why they keep raising their rents. Rents next door where I used to live, have doubled. If you rent long term, the only thing that will happen for you is that your rent will go.
- [78:37]
A
Higher. But there's a distinction between the math that a mom and pop investor, rental investor does versus what a private equity firm does. And when private equity is buying big multifamily real estate, they are getting favorable loan terms, they're getting favorable, you know, very favorable deals that would make owning in a location like Manhattan make sense for that PE firm in a way that it wouldn't for, let's say, a mom and pop individual.
- [79:08]
B
Investor. What you said is true. You jump to individual investor. I'm just talking about buying your.
- [79:14]
A
First home, but where that starts to break down. So I'm thinking about the numbers here in Manhattan right now. For every. And you talk about this in the automatic millionaire, based on current interest rates, every $1,000 of rent translates to about $125,000 worth of home. Right. So in New York, the average one bedroom is about 4,000 per month in Manhattan. So $4,000 per month, that would translate to $500,000 worth of homes. But you can't buy the equivalent of a $4,000 apartment in New York. You would not be able to buy for 500,000. So the equivalent of a $4,000 apartment in New York would cost about a.
- [79:56]
B
Million. Yep. Which means actually 1.2.
- [79:59]
A
Million.
- [80:00]
B
Yeah. I mean, literally, literally, what could you buy for $500,000? You can't buy anything. I mean, you can't. I shouldn't say you can't buy.
- [80:07]
A
Anything.
- [80:07]
B
Right. But, like, right across from us right now, you can't buy anything there for half a million dollars. It's 1.2 million to start. 800 square feet. To your point, someone who's paying 4,000amonth, they're not buying a place for $1.2 million. Unless. How are people buying these places in Manhattan they're younger, their parents are.
- [80:26]
A
Giving them a down payment for some of.
- [80:27]
B
Them.
- [80:28]
A
Yeah. Otherwise they're not doing it for some of them. There are also more creative ways to do it. So there will be groups of friends who buy together. There are certainly couples who should break up, but who stay together so that they can buy a.
- [80:41]
B
Place. People move out of the.
- [80:42]
A
City.
- [80:43]
B
Yeah. I mean, that's the other thing. All outside in Brooklyn, all the different areas that have grown, have grown because in order to buy your first place, you have to move out of the city. But that's true all over the place. That's true in Chicago, that's true in San Francisco, by the way. It's always been true. Right. Austin grew. All these areas grew because people needed to move somewhere that housing was affordable. Then that housing went up, then they had to move to the next place that housing was affordable. I'm not disagreeing with you at all. It's very hard in a city like New York for someone in their 20s or 30s to buy something. And the reality is, how are people in their 20s and 30s buying something? Usually the parents are helping them with a down payment. And that's still tough because the reality is right now, if you buy a kid a place for cash with no mortgage, the carrying costs and taxes can be the equivalent to what rent is in New York.
- [81:35]
A
City. Right. Which is why it seems to me like in very high cost of living areas, areas where the price to rent ratio is completely skewed, like.
- [81:43]
B
Manhattan.
- [81:44]
A
Yeah. Renting could make more sense if you take that cost differential and put it into an index fund.
- [81:49]
B
Yeah. Well, I think people who move to New York, they come here for a dream and a.
- [81:54]
A
Job.
- [81:55]
B
Yeah. So they have to rent to begin with. Now the reality is what happens is that many people who rent. $4,000 is not cheap to rent. Right. So people are stretching to rent in these cities. Often the parents are helping with rent too. So they're not necessarily saving unless they've got a parent like me who's like, the moment you get your first job, you have to use your 401k plan. You have to max out your 401k plan. You have to be saving some money. But you got a lot of people, a lot of kids in these cities living, making good money. A lot of people making 100, $200,000 a year in New York, and they're still broke and they've got a decent apartment. It's not a luxury apartment. And they're not getting ahead. That's also why People often can't stay here. They come here when they're young and then they leave. Most people who come here, they stay for a year, two or three, and then they leave. The ones that stay, there's a certain person that stays in Manhattan. When I lived in New York, they said if you stay more than two years, before you know it, you'll be here 10. And the 10 years will go by like that. And that's exactly what happened. Now the thing is, if you rent for 10 years, you got nothing to show for it. In New York, if you were able to scratch your way into a place and you bought something, you did really, really well. In New York's one of those rare cities where it doesn't seem to ever matter what happens. New York always bounces back. This is just one of the most remarkable cities in the world. People always want to come here. You know, after Covid, when things were bad, people were like, oh, New York's done, it's.
- [83:22]
A
Over. Yeah, the death of.
- [83:24]
B
Cities. This city is more vibrant than I ever remember it being. It's like when I first moved here and the energy here, it's electric, it's filled with young people. And I think people should still move to these kind of cities because it's a different energy when you're young and you just sometimes have to make some sacrifices. So maybe you don't get to buy your buy a home right.
- [83:44]
A
Away. Right. My advice to people is typically to rent in a high cost center. Rent your primary residence in a high cost center, and then buy an income producing property in a low cost area. That way you still own real estate. Yeah, you just own real estate where the price to rent ratio works in your favor quite a bit.
- [84:04]
B
More. That's a great.
- [84:05]
A
Idea. You talk a lot about the importance of contributing to a portfolio, but how should people construct that portfolio? What should people put into that portfolio once they have.
- [84:15]
B
It? So to keep it really simple, first of all, I fundamentally believe in asset allocation. Right. You need to have a complete mixture of stocks and bonds, US stocks, global stocks. Easiest way to do that when you've got a 401k plan is to have a target data mutual fund. So there's trillions of dollars in target data mutual funds. When I first started writing about them, they were brand new. Now that's like the default option in 401k plans. People who are not familiar with what they are, I think most people are. But if you're not familiar with it, you know, you basically pick a fund that's Got a date around when you would retire. So if you want to retire in 30 years, you'd have a fund 30 years from now. So let's say you've got a fidelity 401k plan. You'd have the fidelity target dated fund 20, 50 or 55. Same thing with Vanguard. Whoever's got the 401k plan, they will have these funds with a date on them. And they're great because they do the allocation for you. So they, you know, as you're younger, they're more aggressive. That means there's more money in stocks, less money in bonds. As you get older, it rotates into more bonds than stocks. That is the best solution for most people, bar none. Because people do not spend time actively managing their 401k plans. They shouldn't. You shouldn't be timing with your 401k plan. You know, really all you should be focused on is putting money away in it. And if you do a Target aided fund, I think you'll be thrilled with the results. It's funny to me because I've spent so much time in this business. I was just on the investment committee of our registered investment advisor for eight years. Every quarter we have a 90 page deck of all the models to go through with our chief investment officers. Everything from active management to passive management to outside money managers to internal portfolios. I have been for eight years knee deep in 90 pages of review of all these portfolios. And at the end of the day, the bulk of money in retirement accounts is in a balanced model. Balanced model, 60% equity and 40% bonds. And when you dig through all the money in retirement accounts, what does it look like? It's somewhere between 50, 50, 60, 40 or 40, 60. That's the variable, right? So people who are under the age of 50, it's like more like 75% stock, 25% bonds. That's typically what people use to become millionaires. Fidelity's got the most research and the Most data on 401k millionaires. They have 565,000 people right now in fidelity 401k plans that are millionaires. The average person who became a millionaire in a fidelity 401k plan, these are actually really interesting statistics. It took them 26 years and they hit the millionaire number by age 59. Now the average account is 1.4 million. And their allocation to get there was roughly 70, 75% stock and 25% bonds, which is pretty growth oriented. But that's also probably why they got there by that age. If someone were to ask me what do I think the perfect allocation is? I think a balanced allocation for most people who are retired is a pretty good allocation. And I think when you're in your 20s and your 30s and your 40s, you can be a little bit more aggressive than that. But I do believe that some of the worst advice is that when you're young, you should be super.
- [87:28]
A
Aggressive.
- [87:29]
B
Really? Yeah. Because, you know, everybody's always surprised by.
- [87:31]
A
It. Yeah. Yeah, I am surprised because everybody.
- [87:33]
B
Says, oh, you're young, you can afford to take.
- [87:34]
A
Risk.
- [87:35]
B
Yeah. And what I would say is, you know what? Losing money sucks at any age. And what happens when you start investing and you're young and you take a lot of risk and you lose a bunch of money, a lot of people get out of the market forever. And so there's a myth that because you're young, you're in your 20s and your 30s, that if the market goes down 30%, you're like, oh, it doesn't matter. I'm not going to need it for 20 years or 30 years. And then the reality is you look at your brokerage account and you're like, oh, my God, I've lost all this money. And then people panic and they sell and then they don't get back in the market. So I think you're much better off to have a boring balanced portfolio when the market corrects. Except for what happened, like, whatever it was three years ago, we had the worst correction we've ever seen on balanced portfolios. Is that 2022. That was unbelievable, Right? A balanced portfolio went down like one point, like 33%. I think that was like a historical moment, like the worst we've ever seen. I think in a hundred years. Hopefully we don't see that again. But, you know, it was worse if you were 100% equity. So I think boring is really good when it comes to your money. And the tortoise approach to building wealth gets you through the decades and gets you to the end. And I think if you're too aggressive when you're young, you actually don't get to the end where you've got the money. And I see people right now, you know, they're trading meme stocks and getting rug pulled and meme coins and getting rug pulled and NFTs. I mean, the amount of people that you know, because what we do, right, the things that people come up to you and they're like, so I've quit my job and I'm trading.
- [89:04]
A
NFTs.
- [89:05]
B
Yeah. What do you think of that dude, I'm like, I think that's not going to go very well. What do you mean? I'm making a fortune. Well, yeah, now it's all over, right? Like, you know, meme coins, same thing. Like all these things that people are like, the dream of getting rich quick leads to a lifetime of being.
- [89:19]
A
Broke. Right? Well, and that was actually going to be my next question because sometimes I think it's funny, like we will often talk about risk in the context of a portfolio where you're just managing your allocation of broad market index funds among stock funds and bond funds, right? And we talk about risk modeling in that context. And then meanwhile, over in this other corner of reality, you've got meme stocks and all of the hot trends, all of the stuff that you see on TikTok, that's a whole different level of risk that kind of makes the stock bond allocation conversation in a sense sound a little.
- [90:00]
B
Quaint. Oh, 100%. My 15 year old, we were skiing in Switzerland, this is over the Christmas holidays. And my 15 year old is actively trading meme coins. And he's training like, he's got his screens and he's really trading meme coins and he's on investor calls for meme coins. This is a 15 year old kid and he's taken in like six weeks, $400 and he's turned into 8,000. And we're skiing and we're on the lift and he's like, dad, I'm telling you, you're just, you're like, you're like, you know, he goes, you want to make 10% a year, Dad, I want to make 10% in an hour. You have no, you're just, you're just old. You need to get with the times. As I'm watching his money grow over like a three week period of time and he's actually trading, he's not just getting lucky on one coin. I'm like, God, really? Like, I don't know, this all seems like bull to me, but I want him to have all these experiences, right? So, but I have this moment in time. I'm like, am I completely out of touch? And he's like, you know, dad, you gave me a million dollars. Can you imagine how fast I could turn that into 100 million? Like, look what I'm doing. Well, two weeks later, that was all over. His $8,000 went to zero. All those coins got rug pulled. And he went from being so excited about trading and believing he'd found a system and believing he was on the inside to having that experience of losing all his money. He stopped trading now and I hope he'll go back to. I literally talk about investing all the time, but I'm like, I want you owning index funds. He's got a portfolio of primarily index funds that I've created for him. And he's like, but they're boring. I'm like, I know, but boring's good when it comes to your money. Because one of the key things about money is return. People talk about return on investing, roi. I talk about roc, return of capital. You want the money that you invest to at least come back to.
- [91:53]
A
You. Principal.
- [91:55]
B
Preservation.
- [91:55]
A
Yeah. What would you recommend for entrepreneurs who are trying to figure out how much money they should pull out to put into retirement accounts, real estate, all these other types of investments versus how much to reinvest back into their own.
- [92:11]
B
Business? Well, the first thing I would say to all entrepreneurs, especially the ones that are really like a self employed entrepreneur. Right. Like they're like, they're a one man.
- [92:19]
A
Shop.
- [92:20]
B
Yeah. Or two man or women. You know, one man woman shop. You're a small business, maybe you've got freelancers, but for the end of the day, it's basically.
- [92:27]
A
You.
- [92:27]
B
Yeah. Which is like a lot of Americans. A lot of Americans are freelance. They're their own.
- [92:31]
A
Business.
- [92:32]
B
Right. The number one thing you need to do is set aside money for taxes. Because what destroys people's lives is they don't set aside money for taxes and they live off the money coming in. And all of a sudden they become a year to two years behind on their taxes and they just don't even know what to do. Destroys people's lives. So the first thing you got to do is it's not, you know, there's pay yourself first, but there's also you have to be putting aside your tax dollars. So it's really important to have real bookkeeping. Whether you're using Quicken or you're using Quickbooks and you're doing it yourself. Or have an online bookkeeper and know your numbers and set aside money for taxes, then the second thing is you need to set aside money to pay yourself first. So many entrepreneurs don't. And when you talk about reinvesting, like how much you want to reinvest, well, at least 10, 15, 20% you can reinvest in the business is usually what it takes in order to even keep the business going, much less growing. Your numbers have to be dialed in as an entrepreneur. It's much harder as an entrepreneur than it is as an.
- [93:29]
A
Employee.
- [93:29]
B
Yeah. And a lot of entrepreneurs do a really poor job managing their money. Yeah, a lot of entrepreneurs, they have the dream is I'm going to build this business and sell it. That's just not reality for most entrepreneurs. So if you don't know if you're building a business right now and you don't know who would buy it, and you don't know what multiples of business trades for, then you don't actually know if you have a saleable business. Certain businesses, you know exactly what they trade for. You know exactly what based on EBITDA or gross revenues you can solve for. You know, if it's a 3x or a 5x or an 8x or 10x. And so, you know, if I build this, I can sell it for this. By the way. Those are better businesses, you know, but not everybody goes into business that.
- [94:09]
A
Way.
- [94:09]
B
Right. You know, a lot of people go to business for passion and purpose and they're not thinking about the multiples. I, I didn't think about the multiples when I went into the financial education business. I just wanted to go out and teach. I did think about though with financial.
- [94:21]
A
Services. Right. When you co founded an.
- [94:24]
B
Ria. Yeah, I mean that was an intentional decision. I'm like I know exactly what these businesses trade for. I know how long it takes to build them and I know what they can be worth. That's a great.
- [94:32]
A
Example. But with co founding an ria, a registered investment advisor, so much of that business is the trust that clients have with their advisors. So does that limit.
- [94:43]
B
Scalability? No, this exact opposite. Do you know the multiples these businesses trade.
- [94:48]
A
For? I.
- [94:49]
B
Don'T. They trade for anywhere from, you know, eight to 20 times multiples. So these businesses are bought based on revenue assets under management, ebitda. And today most of these businesses, a small business where it's really one advisor working with clients one on one, that business is not easily.
- [95:07]
A
Saleable.
- [95:07]
B
Right. But like we built a platform for individual advisors and we teach our advisors how to become entrepreneurs and build real businesses that can be scaled and sold. The amount of money in the RA business right now is unbelievable because everybody's gotten it now. All the private equities got involved in the RA business. Everybody wants a piece of the auction and it's just a huge marketplace right now for Good, well run RIAs. And a lot of these businesses are 2, 3, 4, 5 million dollar businesses. But the ones that have really scaled, they're much bigger than that. You know, they're 10, 15, 20, 30 million dollar RAs. We built a platform for individual RAs. We help them with everything from their asset management to their compliance to their marketing and then they run their own business. But it's still, by the way, you want to get in a good business. Being a financial advisor is a phenomenal business, phenomenal business. And it's going to continue to be a phenomenal business for at least I think another 10, 15, 20 years. Because so many people have so much money and, and they're retiring and they need help now. AI is going to change a lot of financial planning. We don't yet know where that's going to go and how, you know, does that remove the need for a financial advisor. But I think at the end of the day, when you, when you have money, you ultimately want somebody to talk to. Right now what's changed is everybody used to have to come into your office. That was a big thing where you were located. And what's changed now in the financial advisory space is I've actually never seen my financial advisor face to face. My entire relationship is over Zoom. And they're based in Kansas and it doesn't matter at all where I am or where they.
- [96:44]
A
Are.
- [96:45]
B
Right? And that's a game.
- [96:46]
A
Changer. When you're hiring, it's crucial to find the right people with the right skills. So for example, we recently hired a customer support and operations assistant. We needed someone who not only had a customer service background, but also, because we're a small business, could be flexible and nimble and sort of step into various assignments as needed. We put a job posting on Indeed.com we got more than 700 applications and we found someone great. So if you're hiring, Indeed is all you need. Give your job the best chance to be seen with Indeed. Sponsored Jobs. Sponsored Jobs boosts your post for quality candidates. Which means that Sponsored jobs posted on indeed are 90% more likely to report a higher than non sponsored jobs. And more than 1.76 million companies sponsor their jobs with Indeed, including us. We've hired two people using them. Plus, with sponsored jobs, you only pay for results. No monthly subscriptions, no long term contracts. And in the minute I've been talking to you. Companies like yours made 27 hires on Indeed according to Indeed Data worldwide. Spend more time interviewing candidates who check all your boxes. Less stress, less time, more results. Now with Indeed Sponsored Jobs and listeners of this show will get a $75 sponsored job credit to help get your job the premium status it deserves@ Indeed.com Paula. Just go to Indeed.com Paula right now and support our show by saying you heard about Indeed on this podcast. Indeed.com Paula Terms and conditions apply. Hiring do it the right way with.
- [98:16]
C
Indeed Kevin Harlan here tomorrow. The NBA on Prime crew is back as the Emirates NBA knockout rounds continue the action heads to Las Vegas tomorrow for a thrilling semifinals doubleheader. Four teams remain, but only two will move on. The last two teams standing will then go toe to toe Tuesday night, December 16th in the championship game for a shot at the cup, bragging rights and a place in NBA history. And prime is your exclusive home for all the action. So don't miss the final chase for the Emirates NBA cup coming to you live from Las Vegas starting with the semifinals doubleheader tomorrow at 5:30pm Eastern. And Prime's also got your front row seat for the championship game Tuesday, December 16th at 8:30 Eastern. If you're not a Prime member, that's not a problem. Sign up for a free 30 day trial to get started today. Restrictions apply. See Amazon.com amazonprime for details. And don't miss the thrilling conclusion of the Emirates NBA cup tomorrow. Only on.
- [99:20]
A
Prime. You're not a cfp, but you were a financial.
- [99:30]
B
Advisor.
- [99:30]
A
Yeah. Where are the opportunities now and in the next five.
- [99:34]
B
Years? Well, if you're young, usually go at this point you go work on a team, right. And you train on a team and you get to be a part of a team. And then the question is, do you leave the team and go on your own? But everyone's hiring in the financial service business. We call them the warehouse firms, Morgan Stanley. Name every major brokerage firm, they're all hiring, including Schwab and Fidelity and Vanguard. Everyone's hiring. All the RAs are hiring. They can't get enough financial advisors. Being a financial advisor is not a difficult job. Marketing at clients is the hard part. There are different ways to go into the business. One is you go work for someone who's got all the marketing down and you work on their team. Or you work as an employee and they bring you the clients and you work with those clients and you get paid a salary. You get paid a piece of it. And the other is you go out and hunt and you get your own clients. So it depends on where in the you know where you are in the business stack. But it's great business for women too. The bulk of wealth is going to transfer to women. I bet you the business today is still probably 85% men and 15% women as advisors. And yet the bulk of assets are going to be inherited by women and those women when they don't have a relationship with their financial advisor who their husband might have chose. When the husband dies, they immediately move advisors. If I were a young person today, I would seriously consider going to the financial service business, which is ironic because even though I was in it, I didn't intend to go in it. My dad talked me into coming into it. I was in commercial real estate and he's like, oh, you should really try this business. And so he's like, just come over and try for a year. I tried to talk my son into it too, but I think my kids are going to go do their own thing. But I think it's a great opportunity for a lot of.
- [101:23]
A
People. At the top of the show, you mentioned there's 44 trillion in retirement accounts and a lot of people are reluctant to take that money out. What solutions do you propose? You mentioned earlier that you think a flat tax would help. How else can we encourage people who they've got lots of money for retirement, but they're not willing to give themselves permission to spend? What are the.
- [101:48]
B
Solutions? Well, so I think the first thing is you have to realize as a country that this is a problem actually stop and go. Is this what we wanted to have happen with these retirement accounts? We created this enormous tax incentive to get money put away for retirement, which is great, it's worked. I still want people to do it. But now we've got this barrier to our money, which is ordinary income tax. And the thing that occurred to me, really in the last 12 months with no tax on tips, like Trump was doing an event and someone said we shouldn't have tax on tips, right? And he was like, maybe, you know what, that's a good idea. Maybe we shouldn't have tax on tips. And sure enough, there's no tax on tips, so we shouldn't have tax on Social Security. You know what, we shouldn't have tax on Social Security. Now there still is tax, but it's almost all gone. It's 83% gone. 83% of people are getting Social Security and not paying taxes. And now there's even Democrats talking about removing taxes on Social Security. You have Ron DeSantis this week that announced no tax on real estate. The idea of no tax on real estate in Florida, we're experiencing new ideas that have never been discussed before and were not even really imaginable. My question thought experiment idea could be what would happen if we had an eight year tax policy where like the last time we had tax law wasn't permanent, it was eight years Long the government came out and said, you know what we're going to do for eight years? Pick a year. It starts, let's say it's next year. It won't get done that fast, but let's say it did, right? For eight years. If you're over the age of 60, we're going to reduce your ordinary income tax to 12%. Now, the average American pays 22% in taxes when they pull money out of their IRA account. So the question would be, if we did that for eight years, what would happen? Would people over the age of 60 go, huh, you know what? That's a pretty good little window right there for me to pull that money out and pay half as much tax. That's a lot more money back in my pocket. I think what it would do is it would free up trillions of dollars in retirement money. And that that money then would be put into all kinds of things. You know, all of a sudden you'd have 73 million baby boomers that might be getting like, you know, talk about caffeine, like the ultimate boost, right? Like, you're in. You're in your 60s and your 70s, and all of a sudden you're like, huh, all this money that I didn't think I could access. Yeah, you know what? That's even better than a Roth conversion. I'll take the money out. Now, a lot of baby boomers would take the money and keep the exact same account, and they just, I think, move it into their taxable portfolio. So if they had a balanced portfolio, they just literally take it out, pay the flat tax. So that means the government would get taxes sooner. Right, because all that money would get pushed forward. Now, it does create later, possibly a tax deficit. Depends on how many people pull it out. But some of the baby boomers would pull that money out, and then they go enjoy some of that money. And where does that money go? Could go all over the place. Could go into buying houses. Could go and buying houses for their kids. Could go into second home markets, RVs, travel, vacation. It goes wherever it goes, and it circulates through the economy. And that, from having done research on this, looks like that could increase the GDP by a quarter to 1% annually. One thing I'm going to talk about next 90 days is this idea. Because I think the idea of creating an IRA flat tax would be a remarkable thing to bring a boost to the economy, a boost to baby boomers. And baby boomers are 73 million strong, but there's 50 million people behind them in their 50s. So if you're between the age of 53 and 60 and you knew there was an eight year window to put more money in your retirement account and then take it out quickly before the eight years are up at a lower tax bracket, I think you'd see a huge spike in savings in retirement accounts in their 50s too. Right? Cause if you're 54, 55, 56, 57, 58, and you're like, okay, I'm going to step up my savings in these deductible accounts and then as soon as I hit 60, I can take it out at a lower tax bracket, boom, you'd see a huge influx of more money going to retirement.
- [106:00]
A
Accounts. I can see the benefit when it comes to increasing consumer spending, spurring the economy, increasing the volume of transactions that take place. The problem that in retirement that is still left unsolved, which we talked about earlier, is the Social Security insolvency problem. How do we solve.
- [106:21]
B
That? Well, interestingly enough, having done research using all the different AI tools, they don't all agree, by the way, what would happen. It's interesting because we've run this through ChatGPT, Perplexity Gemini. By the time this podcast comes out, we'll have a website on this idea and the website will be called Ira flattax.com people can go to davidbock.com, they can actually click on a tab, it'll take them to where these reports are. A flat tax could actually push back the time of insolvency because you'd have people that would. It's interesting what the different research thinks. What some of the research says is meaning AI research says based on behavior. We think that people would work longer part time so people would actually retire later because they could access some of the retirement money. So it's possible that it could actually start to push back the insolvency maybe by a year or two. It's not a massive change that could be helpful. But I don't what can we do to save Social Security? There's nothing we can do. What they're going to do is they're going to move the date back and they're going to reduce the benefits. There's nothing that can be done because you don't have enough people coming into the workforce to put the money in. So what can be done? The only thing that can be done is push the date back, reduce.
- [107:39]
A
The benefits, and then on the extreme increase payroll taxes. That would be the.
- [107:43]
B
Other. That is never going to happen. I don't think but that could be one that's the harder.
- [107:49]
A
One. Yeah. Increase payroll taxes or raise the cap on the amount of income that Social Security taxes come.
- [107:56]
B
From. And that will probably happen too. The problem with raising the tax for Social Security is you're basically going to go and say we're going to raise taxes for you to put money in something that we don't really know if it's going to be around in 50 years. I don't know how they're going to solve this. Which is why they haven't done anything for 30.
- [108:14]
A
Years.
- [108:14]
B
Right. You know, this has been that topic that nobody wants to deal with. And now we're here. So what can you do? Don't be dependent on Social Security. I mean, I, I never thought I'll get a Social Security check. I still.
- [108:25]
A
Haven'T. By the.
- [108:25]
B
Way. I always assumed that in my financial plan that Social Security wouldn't be real for me. And so I don't really look at the number now. It turns out before I know it, I'm going to be at that age. And I think it is going to be real. But I think if I were in my twenties or my thirties right now I wouldn't be counting on Social.
- [108:41]
A
Security. Right. So that three legged stool, you know, people talk in retirement planning about the three legged stool of Social Security portfolio and pension. Two out of those three are really going away. Most people don't qualify for pensions unless you're maybe a teacher, firefighter, you know, military, career.
- [108:57]
B
Military. Two out of three are going away. And so who I just came from doing Mel Robbins podcast, like the biggest book of the year is the let them theory. Have you read the.
- [109:08]
A
Book? I haven't read.
- [109:09]
B
It. Oh my God, you gotta read the book. It's phenomenal. She sold 7 million copies already of this book. And the let them theory is, you know, the difference between what do you need to let go and what you need to be in charge of? Let them and let me. And I basically said, you know, all those things like what we just talked about Social Security and pensions. That's a let them issue, meaning that you can't do a thing about.
- [109:28]
A
It.
- [109:29]
B
Right. You and I cannot fix. Even though I'm talking about an idea to have a flat tax and IRA accounts. You and I can't fix Social Security. We can't fix the fact that pensions are gone. We can't fix the fact that things cost more in the United States, that health care is going up, the education. None of these things can we fix and do anything about the Only thing we have control over is what we do ourselves. We don't even have control over how the stock market goes. People fixate on the return. Can I make 10% of my money? You should fixate on your savings rate. Are you saving 10% of your income? The average American who saves saves 3 to 4% of their.
- [110:09]
A
Income. This reminds me of Stephen Covey's Circle of Concern versus Circle of.
- [110:15]
B
Influence. Hello, Stephen.
- [110:17]
A
Covey. Yeah. In Seven Habits of Highly Effective People, he. He describes your circle of concern. Everything you could possibly be concerned about, ranging from the tax rate to nuclear war. And then inside of that, you've got a much smaller circle of influence, and those are the things you have direct control over and you have direct influence over. And he talks about how the more time you spend inside of that circle of influence, the more effective you are, and over time, the larger that circle of influence grows as a.
- [110:47]
B
Result. I also think you have more peace of mind. That was a beautiful book, that book. It's a book that probably is worth rereading every five years. And if you haven't read that book, I highly recommend that book to people. Now that you brought it up, I'm like, I need to go reread it because it's a legendary.
- [111:01]
A
Book.
- [111:02]
B
Absolutely. There has always been so much beyond our control, and then there's always so much within our control. I mean, before I came over here, though, today, there's an. A lot of elite thinkers in the AI space today came out publicly, hundreds of these people saying that we should stop the development of superintelligence AI and the reasons why. And I'm like, man, I'm super excited about the next 10 years. I think things are going to be phenomenal. I just got done telling you that I think this is going to be the greatest opportunity for our lifetime, for investments and progress. And I'm like, as long as we don't destroy the.
- [111:38]
A
Earth.
- [111:38]
B
Right. And I literally think. I mean, I'm in my hotel room reading this article, getting ready to come over here. I'm like, as long as AI doesn't destroy the Earth. But I have no control over that. You're not. You have no control over that. So I have to focus on what can I control? And that's ultimately what everybody else has to do.
- [111:54]
A
Too. Yeah. Focus on how to be.
- [111:57]
B
Resilient.
- [111:57]
A
Yeah. In the face of rapid.
- [111:59]
B
Change. And there's always been rapid change. You know, I think we always think every 10 years that it's different, and it is different, but it's the Same. There was rapid change when My grandmother was 30. My grandmother was from the Depression era. She's a depression year.
- [112:13]
A
Child.
- [112:14]
B
Right? That's a horrible time. People go, oh, this is the worst it's ever been. Like, what are you talking about? There have been worse times in history than this, and for a lot of people, this is not a bad time. So it's just, where are you right now? And if where you are is not where you want to be, then the question is, where do you want to be? What is it in your life that's not working? I have this big belief called don't be mad, be done. Everyone's got something in their life that's not working and it ruminates. Take out a yellow pad of paper, write down everything in your life that you don't want that makes you mad. And then start to ask yourself, what are these things can I get rid of? And then ask yourself, what do you want? When you look at the most successful people in the world, Oprah was asked this question. It's so profound. Someone asked Oprah on a talk show. I forget who it was. Oprah, you have been with the most successful people in the world. What is the common denominator of these people? She said to a T. They all knew what they wanted. They had clarity. Then they worked on going and getting it. And I think we are sidetracked with all these other things and we don't ask ourselves, what do I want? And if you ask yourself, right now you're listening to this podcast. I actually don't think it's funny. People turn into investment podcasts for investment advice, right? We've just spent all this time giving investment advice. You know, it's ironic. Nobody goes around needing investments. You know what I really need right now? I need an index.
- [113:48]
A
Fund. No, no.
- [113:49]
B
No. I need a Target Date mutual fund. I need a portfolio that's 60% stock and 40% bonds. No, what you want is whatever it is you actually want, right? And that's what people should think about. What is it that you want? If you had 10 years left to live and you knew that then, how would you live your life now? What if I told you you had five years left to live? How'd you live your life? What do you want? What if you had three years left to live? What if I told you you only got 12 months? What do you want? We go through life thinking like, I got all this time, and that is a mistake because you just don't know. And I think the sooner you ask yourself what is it that I want and what don't I want? And then you start focusing on, okay, this is what I want. How do I get there? I would even ask yourself, why did you even tune into this podcast? What made you come on this podcast? Like, why are you listening to us right now? Because again, nobody even needs a book. Nobody's like, I really need the book, the Automatic Millionaire. I mean, I hope this book will help a bunch of people, but, like, what is it that you want? Think about that when the podcast is over. We're about to end here. Stop. Don't go to the next activity. Take out your journal. I'm sure a lot of your listeners have journals. And have a heart to heart conversation with yourself. Maybe one that no one else will ever get to see, which is, you know what, David? I don't want these things anymore. And this is what I want now. Who do I know that can help me get there? Who's gotten there before me? There's nothing that we want to do that other people haven't done. Who can mentor me? What can I read about? What can I learn about? And then do that? That can be good.
- [115:29]
A
Right? Don't forget the. The why behind it all. And that circles back to what we talked about at the beginning. Some people get so caught up in the in the how, which is money, because money is a tool that you can sometimes lose sight of the why, what's it all.
- [115:43]
B
For? And when you're clear on the why, the how becomes easy. I didn't even say it today on this podcast, but my biggest thing I've said for decades is when your values are clear, your values are clear. Your money decisions become easy every day. We've got money decisions to make, and most of them are made unconsciously. But when your values are clear and you know what's most important to you, you will make decisions faster, easier, and quicker in the right direction. Because you're like, now, these are my values. This is where I want to go. And values are like a magnet. When you're clear on your values, all the obstacles becomes smaller and smaller and you are pulled towards where you want to.
- [116:24]
A
Go. Amazing, David, thank you for spending this time with us. Where can people find you if they'd like to learn.
- [116:30]
B
More? Paula, thank you. This has been fantastic. Come over my website, davidbach. Com. Come check us out if you get a chance to read the Automatic Millionaire. Let me know how you like.
- [116:39]
A
It. Thank you, David. What a fantastic conversation. All right, what are three key takeaways that we got from this incredible discussion with David Bach. Number one, we don't just have a life expectancy, we have a health expectancy like the age at which we might not be healthy enough to enjoy our money. And that in the United States, that's 63. So you don't just have a financial timeline and a life timeline, you also have a health timeline. And if there are things that you really want to do, dreams that you hold outside of your career dreams, then make a plan to do it while you're still healthy enough to be able.
- [117:23]
B
To. Health expectancy. The World Health Organization knows at what age in each country someone will get sick and they will get sick with something that changes their life. For the rest of their life. Some medical, physical thing will happen and their life will not actually be the same. And in the United States, it's.
- [117:43]
A
63. That's key takeaway number one. Key takeaway number two, there's a tension right now that a lot of people feel, which is that on paper you might look wealthy in that your 401k balances are doing well, your IRA balances are doing well, your investments make you wealthy on paper. And yet your paycheck at the day to day level means that money is kind of tight, right? There's a distinction between your wealth and your.
- [118:16]
B
Income. 7 out of 10Americans live paycheck to paycheck. Those may not be who are listening to your podcast, but one out of three Americans who make $150,000 a year are living paycheck to.
- [118:29]
A
Paycheck. That is the second key takeaway. Finally, key takeaway number three. Automate everything. That is the core of David's philosophy. Automate everything. Because life is busy. And no matter how smart you are, no matter how disciplined you are, you're still going to forget. Things come up. Automation means that it's running in the background and you can focus your time, your energy, your effort on other things. It removes the friction, it removes decision fatigue. It acknowledges the fact that you're juggling a million things. And so set it, forget it, move.
- [119:03]
B
On. The moment you make a decision to fix your finances and you click the button to start paying yourself first automatically, whether that's in an IRA account or just in an investment account, the moment you do that, you start to feel better. Why do you start to feel better instantly? Because you know when you're not doing what you need to do financially, you know it. The anxiety of not doing anything never goes away. And as you get older, it gets.
- [119:33]
A
Worse. Those are three key takeaways. From this conversation with David Bachelor. Thank you so much for being part of the Afford Anything community, for being an afforder. If you enjoyed today's episode, please subscribe to our newsletter. It's completely free. Afford anything.com Newsletter we write things. We send things out that you do not find anywhere else. The stuff that we put out on the newsletter, you're not going to find it on the podcast. You're not going to find it on YouTube, you're not going to find it on social media. It is exclusively for people who subscribe to the newsletter and it is completely free. Affordanything.com Newsletter Please go there subscribe to the newsletter Enjoy what we send. That is number one. Number two, please share this episode with all of the people in your life. All the automatic millionaires. The people who moved to Florida to become a musician. You know the guy with the truck and the trumpet. He told that story like right around the one hour mark. Remember the Florida musician who is now a real estate multimillionaire. Share this with the musicians and the real estate multimillionaires and everyone in between. Share it with the people in your life. Your friends, your neighbors, your siblings. Share it with the people who love to play wordle and the people who love to drink wine with the people who are nerds and the people who are not. Share it with everyone you know, because that is the most important way to spread the message of F double I R E. And finally open up your favorite podcast playing app. Hit the follow button and please leave us a 5 star review. Won't you please write a few words, tell us what you enjoy about the show. These reviews are incredibly important. Thank you in advance for taking the time to review us on Spotify on Apple Podcasts. It's a huge support and thank you in advance. This is the Afford Anything podcast. My name is Paula Pant. I am so happy that you are part of the Afford Anything community and I'll meet you in the next.