Overcoming Spending Guilt, Investing When You Can, The Usefulness of Debt + More With Nick Maggiuli

Episode Number: 271

Episode 271-Overcoming Spending Guilt, Investing When You Can, The Usefulness of Debt + More With Nick Maggiulli

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Overcoming Spending Guilt, Investing When You Can, The Usefulness of Debt + More With Nick Maggiulli

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Nick Maggiulli 0:02

Investing matters a lot when you have a lot of money. And saving matters a lot when you don't have a lot of money. So when I say savings for the for investing for the rich, I mean this on an absolute sense. So like, if you're young or you don't have a lot of assets invested, the only lever you can really pull right now to change your wealth is your savings and your labor income and saving money and getting invested. Right, but as you gain wealth, then you can go and then your investments matter, then you have to focus so much more on those investments.

Intro 0:29

T-Minus 10 seconds. Welcome to the journey to launch podcast with your host jameelah. So frogs as a money expert who rocks her talk, she helps brave juniors like you get out of debt, save, invest and build real Whoa. Join her on the journey to launch to financial freedom in three, to one.

Jamila Souffrant 1:01

Journey to launch is supported by first republic bank, a seamless banking experience is something we all want. But what does it really mean? At first republic, it means you have access to your own personal banker, someone who knows your name and is there for you when you need them. I know at anytime, I can just reach out to my personal banker Lindow with any questions that I have. It's amazing to know that I won't get the runaround by the automated voice recordings and number of prompts that leads you to a dead end that don't have to be put on hold for hours before I can speak to an actual person. Whether you're browsing their full suite of services, or just have questions about your bank statement. You can reach out to your personal banker by phone or email and through the best in class banking app. See what a difference and always on seamless banking experience can make for you. Visit first republic.com today to learn more. That's first republic.com Member FDIC equal housing lender.

If you want the episode show notes for this episode, go to journey to launch.com or click the description of wherever you're listening to this episode. In the show notes. You'll get the transcribed version of the conversation, the links that we mentioned and so much more. Also, whether you are an OG journeyer, or brand new to the podcast, I've created a free jumpstart guide to help you on your financial freedom journey. It includes the top episodes to listen to stages to go through to reach financial freedom, resources and so much more. You can go to journey to launch that comm slash jumpstart to get your guide right now.Okay, let's hop into the episode.

Hey, juniors, I'm excited to have today's guests in the rocket seat. We have Nick maturely on the podcast. He's the Chief Operating Officer and data scientist at RITHOLTZ wealth management, where he oversees operations across the firm and provides insights on business intelligence. He's also the author of dollars and data.com, a blog focused on the intersection of data and personal finance. He's also the author of a book we're going to be talking about, just keep buying, which I actually got a chance to read most of it, and I really enjoyed it. So I think that you're gonna really enjoy this conversation. So welcome to the podcast, Nick. Thank you for having me on. Appreciate you. Yeah, so Okay, Nick, when I was reading the book, you said, you started your blog in 2017, you started blogging. And before we pressed record, we talked about kind of like, both of us entered into this space around the same time I started with a podcast, you started with a blog, your blog is actually very popular. From what I can see, you have tons of Twitter followers and people who really read and respect your work. And so when I was introduced to you by our common friend, and I checked out your blog, and then actually read the book, I was like, oh, like no wonder why he's so popular because I felt like you had a fresh take on the concepts that we talked about so much. We hear other people in the space talk about and I wanted to understand for you, like your love for finance, where did that come from? And then wanting to have a blog, and even go deeper? Right? So people just like do it for their own personal gain. They fixed their own finances? Is that it? Are they on the sidelines watching? But you'd like to enter the space with your own platform talk about Judas decision to do that.

Nick Maggiuli 4:28

Yeah, so I've always like been into like math, like as a little kid and stuff. But I realized like a lot of the math we learn in school, isn't that useful? I can't remember the last time I've had to think about like an isosceles triangle or something like that or writing. Like yes, some people will use that if you're in construction or an architect or whatever. But like, I always like finding things that are applicable and real. And so I remember when I first started physics, I was like, Oh, this is like the real world. I can drop something in estimate how long it takes to hit the floor or something right? And I think with the thing about like, why I really got into personal finance, I got into economics and I really just got into money because like it affects every But like, every single person listening to this, even people not listening to this are affected by money, like it's a universal language like, I don't care what religion you have, or whatever money is a concept that everyone on the planet knows. And you know, they know it very well. So I think because it's so universal, it's something that is affected my life, it's affected me, you know, I know it affects everybody's life. And so I'm in the numbers. I'm like, Where can I take numbers and apply it to, you know, to the most number of people. And I think that's got to be in personal finance, investing things like that. So, to me, it seems pretty obvious, like why it's so valuable to everybody, but I just, I just enjoy it too. Because like, and I actually like the the mathematics behind this stuff is very simple. You don't need like, you know, calculus to do all this stuff. You really just needed to know how, you know, add, subtract, multiply, divide, and then a little bit of compounding, which is obviously just like multiplication type stuff. So that's basically it. And you can kind of get the math down to do this stuff.

Jamila Souffrant 5:50

Yeah. I mean, my kids are pretty young, but they're starting, you know, the math concepts now. But this is the kind of stuff we should have learned in school for sure. Yeah, I agree with that, right. You write this book. And, you know, you start out the book with the story about your grandfather, which I really like that he had a gambling. I don't know if you did, would you say it's an addiction?

Nick Maggiuli 6:11

Oh, yes. Oh, definitely. It's one of the worst I've read on this little bit. And his was pretty bad. I don't think it's the worst I've ever read. But it's up there. So yeah, he had an addiction for a long time. And just and I was when I was a little kid, like, so I didn't know like, we'd be at the horse races. I just, I'm watching the ponies run around. I'm a little kid. I love it. I'm like, Oh, look, they're running. You know, I have no idea concept. Like, oh, my grandfather's been doing this for years. And he's throwing away a bunch of money and all that. That wasn't that was foreign to me. But you know, that's kind of my first interaction with understanding money was kind of in that context, which was interesting.

Jamila Souffrant 6:41

And then you talk about for you seeing him and then him spending his money all his time and income on gambling, like he died with nothing. So I don't know if you know the concept, I would zero like, I'm sure you know, that book. Right? Okay. Yes, yes. And you do address this in the book a bit about over saving. But when you were talking about this story, I was wondering apart from the addiction side of it, was there a part also where it was like, This is how he wants to spend his money down to zero? Or do you feel like there was something else there?

Nick Maggiuli 7:12

Well, I think the die was zero idea is very different, because it's like, you start with some money, and then you want to give it away and kind of live the life you want and then die with zero, that's kind of the idea. Versus he didn't really have money at income streams. And he just blew it all like consistently over the years. And I was like, there's nothing wrong, like with gambling necessarily, but like, there's so much more he could have done with it. And I think like he still could have gambled, he just had to like literally have his bedside, it wouldn't have changed. Like, he still could have done all of that stuff, gotten the entertainment, I could have done all of that without having to like, throw all that money away, you know, I'm saying and so on. And so even in the book, I even the The analogy I give is, if you just taken half as money invested in the US stock market, you die with a million dollars. And that's not the point to die with a million dollars, obviously, I just wanted to illustrate like, how he could have still done the same stuff. And he could have like, built wealth, even despite being a gambling addict, which shows like The Power of stocks and stuff like

Jamila Souffrant 8:04

that, right. And you start with that story, I think, because you talk about these two foundational concepts in building wealth saving, and investing. So I do want to like focus on that. And then define first, what's saving and what's investing? Because I find depending on who's saying it, it can tend to mean different things, especially the saving part. Yeah, so

Nick Maggiuli 8:25

I think how I would define saving is like, okay, obviously, you have some sort of income coming in, you have some sort of expenses. And what's leftover is kind of what you would say that's, that could just be cash for now. But I think that's savings. And then once you take that money and buy some sort of income producing asset, whether that's a stock, or a stock index fund, or some sort of real estate or farmland or royalties on a song, I mean, there's a lot of different things you can buy. But once you get that invested, now you're technically investing once that money has an option of providing return to you. That's where I think investing comes in, because while it's in cash, it can't provide a return. I mean, yes, there are CDs and things like that. So there are exceptions to this. But generally, I would even say a CD is a type of investment because it's locked up and you're not supposed to able to access it.

Jamila Souffrant 9:11

Right? Like that's a good basis to start with, like our conversation because one of the quotes you have and I love that you have like these like quotes, like you kind of Buck against like, the standard norm of like what sometimes personal finance people say, and or you just make definitive statements, which I like. So one of the things you say is saving is for the poor Investing is for the rich. And I'd love for you to break that down. You know, I know it's very absolute, and there's obviously nuances in there. But I think it's important for us to explain what that means. And then we can dive deeper.

Nick Maggiuli 9:42

So I mean it on both an absolute sense and on a relative sense. So let's go through both of those. So, what I talked about in that first chapter is called The Save invest continuum and every person listening to this every person is on this continuum and all you need to know where you are is you need two numbers, right? The first number is like how much money can you You save in the next year? Right? So let's say you could save 500 bucks a month, next 12 months at $6,000. Right? So that's your first number. And then the second number is like, how much can your investments return you in the next year? So let's say you add $10,000 invested, you expect to get a, you know, let's say 10%, returns making the numbers easy here. So you expect to get $1,000. Next year, that's your second number. So have your first number, how much could you save as 6000? Your second number, how much could your investments generate for you in a decent year is 1000. So which one's bigger in this case, the 6000 is bigger, right. And so what that means is if you can save 6000, you should take that money and then get that invested. So you can raise the other number. So over time, though, you're right now your investments are only paying you 1000 a year, if you keep investing and get that number higher and higher. Over time, that number should go higher, to the point where once you're like older, and we can just use an extreme example in a second here. Once you're older, you should be able to generate more from your investments than your than you could ever save. So let's use an extreme example. In the book I talk about when I was 23. I had $1,000 to my name, I had all these spreadsheets, I was trying to figure out oh, how much bonds Should I have? How much stocks I was obsessed, I was neurotic, right? But I didn't realize like, even if I got a 10% return on $1,000, that's 100 bucks, like I can make that, you know, in you know how many hours even minimum wage you work one day, and there's $100, right? I mean, not after tax, but let's just get close, right? It's getting close to that, right. So one day is one day of work, I could have made that my investment return in a year, I was blowing it going out with friends and you know, going to dinner and having shots and all this stuff. And like partying as a young 22 year old, like I was blowing that 100 my investment return in one night easily. And now compare that to someone with like $10 million, right? If they had a 10% decline or a 10% gain in their portfolio, that's a million bucks, like to save a million dollars after taxes is very, very difficult as you have a super high income, right? So, you know, you can see like in the extremes, like it's very obvious, like so investing matters a lot when you have a lot of money. And saving matters a lot when you don't have a lot of money. So when I say savings for the poor investing for the rich, I mean this on an absolute sense. So like, if you're young, or you don't have a lot of assets invested, the only lever you can really pull right now to change your wealth is your savings and your labor income and saving money and getting it invested. Right. But as you gain wealth, then you can go and then your investments matter, then you have to focus so much more on those investments. And so it's just about figuring out where you focus your time, based on where you are. So even when I say savings for the poor, like I said, I was poor when I was 22 I don't mean I was in abject poverty. I was not trust me. I was very I great privilege. I had great education. So I was on abject poverty. But I was poor relative to my future self. And that's kind of the idea I wanted to get across.

Jamila Souffrant 12:35

Yeah, well, I'm so glad you actually clarified. Like, it's not like you're trying to because sometimes when people say things like that, like oh, don't save your money, invest your money, he's kind of like, putting down like the saving aspect of things, which is still equally important. You know, especially like, people are not at the space in which they can invest, they have to save money first, to be able to, like, invest that money or put money aside other than what they're spending. So I love that. Depending on where you are in your life and all this time continue on like, it's gonna matter one is going to matter more important than the other. And it helps you not waste your time doing things that don't matter or don't give you as much of a return.

Nick Maggiuli 13:11

Yeah, exactly. Like I don't get me wrong, I It's nice to learn about investing. I'm not discouraging people from learning about investing, spend a little bit of time like, that's fine. I think knowledge is useful. Don't get me wrong. But you know, if you're young, or you don't have a lot of you're just getting started, like don't obsess over, it's not gonna matter that much. What's gonna matter more is like, what do you do with your career? How are you saving money? Kind of how are you going to try and grow your income to save money, things like that, I think those are far more important. And, and that sort of thing. If I could go back, I would have like, Okay, put it whatever, and s&p 500 at 20, portfolio 20% bonds, and then just not thought about it again, and then just really dug down into like getting better skills, like being a better data scientist or something.

Jamila Souffrant 13:49

Yeah, yeah. Where you're focusing your attention matters. And what you also do, as you say, this whole idea of like, save as, save as much as you can, or save a percentage, right? Like a personal finance rule, right? These rules that are there to help help us maybe encourage us, but sometimes it's discouraging for people you talk about, like, let's just be real for the fact that some people are not even earning enough money to save the rule percentage of 20%, or whatever that can be. So you just say save what you can, right?

Nick Maggiuli 14:21

Yeah, and I think that's a better it's, for guilt purposes, you feel like, Oh, I can't say you're gonna just you're gonna beat yourself up with so much mental stress about not saving that you're a not gonna enjoy your life, you're probably going to perform worse in your job, which is gonna affect your income. If you start thinking about the chain reaction of things that happen and of course I don't have data on every piece of this I have data on piece on like, just portions of it. I think the guilt culture is really bad and I just really dislike it and so I'm like, Hey, if you can't save money for the next two years, because you're not in a great spot or you're not earning enough, that's okay. But think about what you can do to raise your income in the future and that's that's the only like, yes, cutting spending can can build some wealth you know, if you're a being accepted With your spending or just a little bit in the short term, but it's a short term solution, it is not a long term solution, the only way out that I've seen in the data at least, is growing your income. And so that is a long term solution, you have to think long term and say, Okay, the next two years are going to suck, I'm not going to save anything. But after that, I'm going to do all these things to try and grow my income. So I think that's what people need to focus on. And that's what I try to like talk about.

Jamila Souffrant 15:23

I love that. And this just speaks to just the where people can be in different places as they're listening to this. And I do want to like, just go back a little bit. So when we talk about like saving, right, like, if you can't save anything right now, in terms of your cash flow, so like to say, you know, you're working with like, a restricted income, and so you don't have room to save additionally to invest. The idea for them saving for emergencies? How do you feel about that? Like, when you think about someone's cash flow, and how their savings, they can invest that money? Is there a certain amount that they should then save at least for emergencies, or have on hand so they're not inside this continuum of putting things on credit card debt or feeling really out of control? Because emergencies come up in life during that time period where they can invest?

Nick Maggiuli 16:09

Yeah, I think I think having an emergency cat that's like, if I have to pick like, you know, in the order of operations, what you do for like, do you max out your 401 K to get emergency no emergency cash is number one, right? Because you don't want anything that's going to prevent you from like, living your life and doing everything. For example, let's say you don't have emergency cash. And you require a car to get to work that so many Americans need a car or some sort of transportation, your car breaks down, you don't have emergency cash. Now you can't get to work now your incomes in jeopardy, right. So you have to make sure that as long as you can keep having your income, whatever you need to make sure that that can keep happening event, make sure you have a 5000 10,000 whatever cash reserve, that's what's important. And I think I can't remember exactly what the I remember I put in the book, I think I did where I said the average emergency expense, like a couple $1,000. But this these do, they do happen and they happen. Like, I think over a 10 year period, the probability of someone having a financial emergency is like 90%, in a one year period, it's not that high. But over a 10. If you assume they're independent, like every year, kind of just like flipping a coin, so to speak. But the coin is weighted to like a financial emergency over 10 years, like the chance you're gonna have a financial emergency is like almost certain, right? So you're saying well won't happen to me, it will. It's just a matter of when and so just kind of prepare for that. And so having that money is incredibly important. And trust me, I'm I'm definitely against credit cards for the most part because like the high interest rate and stuff, but if you're in a bad spot, and you're like you, it's an emergency, and you need to do remember, there's a real emergency like, oh, I, these new shoes came out, I had to get them or this new watch, I had to get this new watch, like, no, that's an emergency, let's be honest, be honest with yourself. But if you're really an emergency, like there are times when like, you have to use credit cards, you have to rely on things, and you've got to find a way to get out of that. So I wouldn't, don't beat yourself up, because that's gonna harm you more, it's gonna make it more difficult to get out of those situations.

Jamila Souffrant 17:49

Yeah, for me, like, in my situation, when I decided to quit my job and leave like I we could not save and invest as much as we did when we were working. So we were not following the rules. We don't really follow the rules anymore, we follow the rules that we make up, right, like we have guidelines, and then you can deviate. But I just think it's helpful because I know if you're listening to this podcast, you probably listen to maybe other personal finance podcast. And you sometimes do hear this is what you should be doing. But you got to always like transplant, like the advice you're hearing to your situation to make sure it's like relative. And if it's not, it's okay to adjust. Kind of like you're releasing people from that feeling of like, it's legitimately you cannot save or invest right now. It is okay, at least then now focus on your career, your income, so that you can get in a better place.

Nick Maggiuli 18:36

Exactly. I think another thing too, is like a lot of memories aren't like my opinions. And I'm like, Oh, I really believe this. No, it's like, I'm looking at data. And this is what the data is saying. So what you were just talking about, like, when you couldn't save and invest as much when you kind of left your corporate job like that makes sense. Because you had obviously your income was fluctuating right. And so I think a lot of this, you look at the data, like incomes are more variable today than they used to be. Because we have obviously two income earners now versus one, we certainly think about a lot of the same stuff, my stuff comes from like the 50s, when there was like, the husband would work, the wife would stay at home, there was pensions, everything was much more stable in that in terms of incomes back then now it's much more variable. So realizing that things are more variable, the advice has to adapt with it, I think, say what you can is much more adaptable. And that's, you know, and I use an analogy in there. There's this analogy with fish, you'll see if you read chapter two, it's a decent analogy, I think and it'll explain what they do and how like this is actually kind of copies nature in some ways. Like there's times when there's times when the feast and there's times when there's only famine, you have to kind of like, be ready for those types of moments in which your financial life yeah, like

Jamila Souffrant 19:33

you have to be financially flexible, not rigid with what you're doing. Well, you just mentioned kind of like, you know, like, be real with yourself, like, you know, it's not necessarily if you cannot afford like to go out and buy something. You're not like to do that. But I do think you addressed something that's really important is which is spending guilt free, and like this kind of push and pull between saving too much. Which kind of gets to the die with zero theme of like having too much at the end of your life. versus like spending money. And so some of us are in a position where we can like spend money and enjoy our life. But we don't feel comfortable. We feel like we should be saving more investing more. And I thought you had a great rule, you have this two times rule, which helps you spend money without guilt. Can you explain what that is?

Nick Maggiuli 20:16

Yes. So the 2x rule is basically like, let's say you want to spend $100 on something or splurge, it doesn't matter what the amount is, whatever. If it feels like a splurge to you, this is what matters. So if you say, Hey, I'm going to spend $100, on a very fancy dinner, right? Okay. Instead of just spending that 100, to make yourself feel better, you save another hundreds of 202x. And you take that other 100, and you invest it in, let's say, you know, an s&p 500 index fund, or you can donate, there's different ways you can do this, like, you're like, hey, if I'm gonna spend 100, on myself, I'm gonna spend 100 on someone else and help someone else at the same time. So, or if you like, wanna get a nice handbag, or a nice watch, or whatever it is that whatever you consider a splurge, if you just save double the amount of that. And then you'll say like, Okay, if I really want it, I'll save double, and then I'll donate it to either a good cause, or I'm going to invest in myself for my future, right? So one way or another, I think there's just these are just little tricks to like, kind of get over spending guilt and stuff. But yeah, I just thought this would be helpful for people because I remember saying what my whole thing is, like, let's stop with all the guilt stuff like this is money, it's affects everybody like is a very normal thing. I understand why people feel guilty. At the same time. Like, I don't think it's healthy. For us, I think stress, like I've read a lot on stress, there's a great book called Why zebras don't get ulcers, and it's all about stress. And it's basically like stress impacts people in so many different ways. And I think the more we focus on that, the more it adversely affects us. I'm trying to get people to stress less about money. And like, you know, here's what the data says, like, you'll probably be fine, etc.

Jamila Souffrant 21:40

Yeah, I think most of it, I'm sure, even with like your analysis and the data, and knowing that strategic things to do with money, a lot of its psychological. And we talk about this more, and we're going to talk about it later on, or even now, but how you know, it doesn't matter, like how much money you even have, you may never feel comfortable or rich, and you may be sitting or standing from your vantage point now and saying, Well, when I get this amount saved and invested, I'll be fine. And then realize when you get there, you'll be like, actually, I need more than that. Right? So I think releasing or having these like tricks with that are effective. And whatever that may mean for you. Like it's helpful so that you can kind of like manage, like the emotional, toil and like mindset that comes with the spending and saving and investing of money.

Nick Maggiuli 22:29

Okay, yeah, I agree. And it's funny, there's so many different, like, I didn't put everything in the book that I quote about not feeling rich, someone wants to ask like John D. Rockefeller, how much more money do you need, you know, and his response was, like, just a little bit more. And that's always like, even rich people, like, you know, if I had two or three eggs, I promise I would never want any more. But the issue is, you're always climbing that ladder. And I think the, the real thing here is like, as you start to, like, let's say, level up, or whatever you want to call it, like, you start to make more money, you're doing better, you're gonna start probably hanging out with people who were doing better, and then you're gonna be like, Wow, they're doing even better, I need to catch up to that. And so it's a game you can play forever. If you really want to, I think the the key to not playing that game is like kind of realizing where you came from trying to look at absolute measures and relative measures. And trust me, I understand like, well, it's always going to feel relative, like, the average person today, like lives has better health care and lives better than 1000 years ago, like, you know, even the richest person in the world would could have died of some random disease that no one could get today, because we have cures for it, right. So there's just things like that we're like, in certain measures, like people are living better today than they've ever lived. But of course, you know, everything's relative to right. There's a lot of things there. So we can definitely dig into it more. I think there's a lot more psychology where people don't feel rich, but it's an interesting topic.

Jamila Souffrant 23:39

Yeah, well, I mean, it goes along with like this idea of the city are successful, right? Like you're successful in growing your income, getting those bonuses raises, changing careers, whatever that means. So you're on a trajectory where you're, it's, you know, it's positive, there's a net gain over time, but then it comes to like that, how much of that game do you spend on yourself versus save and you do address this in the book, but I'd love to like go over that because I found that was helpful for me while I was in college, like not earning a lot that what I didn't get my full time job I kind of kept it very kind of rigid and was able to save a lot but then you know, as I got older as I had more responsibilities, and my wants change, right? Like I didn't want to go on vacation and share room with six of my friends anymore. Like I know I want to go and like have a nice, like nicer vacation and spend more money. But I think sometimes people get caught up with now how much of that should I be spending on myself if I got that bonus and raise because hey, I deserve it. Versus No, you should be actually saving that. So what's your thought?

Nick Maggiuli 24:37

A lot depends where you're starting. So for example, if you're in like deep debt, and like really bad debt, and you're like, Oh, I got a raise, like how much that you should probably just use once you need to get out of that really bad situation once you're out of I don't mean like, Okay, you have some mortgage debt. That's fine. I mean, like, you're deep in like credit card debt or something like really high interest stuff. In those cases, you probably got to save everything you know, but once you're out of it once you're in a decent but this is like the question of someone who's like, Hey, I'm saving, I feel like I'm on a decent path to retirement, I'm going to be okay. And that's the people I'm trying to talk to with that chapter with this race chapter. Because there's a lot of people like, Okay, I just, I'm in this decent steady state, we'll call an equilibrium, whatever you want to call it. And then I have this what economists call a positive shock. So I got a raise, or I got a big bonus. Right? So this positive thing happened to me. What do I do with that money? Basically, I've done some simulations with surely Okay, based on your initial savings rate, you know, how much of that raise should you save to kind of retire at the same time? That's the idea, right? Because if you think about a raise, right, if you get a raise, if you save all of it, right, you're going to retire sooner, right? If you save none of it, you're actually going to retire later. And you're saying, Well, why is that? Well, because remember, in retirement, let's assume you want to have the same spending throughout your life, right? If you don't save any of it, that means your spending just shot up by the raise amount, right? So if you were spending, let's say 20 grand a year, and then you got a $5,000, after tax raise, and you save none of it, now you're spending 25 grand a year, right? So that extra five grand that's going in perpetuity till your death whenever that is will model it in some way, right. But now you're spending that forever, and you weren't saving for that in the past. But now you have to save for that. So you have to like delay your retirement, you see that simple, you can understand like it's affecting how it's affecting your spending is what matters. So Anyways, long story short, I run these simulations. And basically like, I find that you need to save about half of it, right? It's it's funny that it came in the numbers kind of got to around 50%. And actually kind of funny, that also matches the 2x roles. So it's very easy to remember. But as long as you're saving about half of that raise, you can save having to spend the other half and you'll still retire around the same point. That's, that's the kind of the key there, right. And it's because you're kind of keep your spending the same. So you're not only you're spending the go up now, but it's gonna go up into retirement and beyond. And you know, that 50% rule is very simple and easy to remember. It's like halfs for you, and then the other half for future you right? So that's another way to think about it.

Jamila Souffrant 26:50

Yeah. And you could also say, like, maybe with a raise, that affects like your continuous paycheck, that's going to impact like ongoing expenses, where you can increase like, right versus like, one time bonus, that may be a little bit different, where that's going to be like a one time purchase, maybe like a trip, or car, or like kinda like those bigger purchases, I think it's important to like separate that out to like, not all increases are equal, depending on where you're raising, or putting that extra money to within your desired expenses.

Nick Maggiuli 27:19

Yeah, I should have mentioned in the book I did not, but that's a great point. I mean, I think the race I was trying to focus more on the race because that's where I think most people get don't get me wrong, people get bonuses, obviously. I just think that 50% Just use it across the board. It's just easy. It's so easy to remember, I'm just lazy. I don't want to be like okay, what should we do in this case? But yeah, and honestly, depends what you're going to do. Obviously, if you get a bonus, and you need to take care of something like yeah, use the whole bonus and spend it all if you have to, like you know, I'm not trying to give these rigid rules like you have to save 20% You have to save 50% and raise there's gonna be obviously exceptions to this, but if you're like, hey, I don't know what to do with this money like okay, I want to spend some of it but like, I don't know, like okay, sports, half of it. Take the other half and save it right. That's my argument.

Jamila Souffrant 27:57

Yeah, I agree.

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Nick Maggiuli 29:45

so I think the two most useful pieces for debt are gonna say mortgage debt. And then the second one is, you know, student loan debt, but obviously, the second one's very conditional, like, No, I'm gonna be very conditional here. It's like, what are you getting with you? When you're getting a degree of some sort, what are you going there for, you know, if the market even supports that there's a lot of questions there and how much you're paying. There's, there's a lot of calculations you have to do. But basically, I have like a simple formula you can use in there, which it tries to, it tries to simplify a lot of stuff, and basically just says like, Okay, if you assume a couple things, here's how much you should be willing to pay for this right going forward. I think that's the key is like figuring out like, okay, debt can make sense. If it's gonna like, for example, if your earnings are, let's say, $50,000, a year, over 40 years, let's say on average, that's $2 million, total lifetime income, right? If going to get a degree is going to double that. Now, that's pretty extreme. I don't think that's true for most cases, but let's just say that's true. That means $2 million, okay, that means you'd pay 2 million for your degree, you have to discount all those earnings back to the president, there's all this, you know, and the formula does that but basically taking that you can say, okay, maybe I'd be willing to pay like $100,000 or $200,000, for that, all else equal, right? So it's about realizing like, is this going to really impact my income, and I and don't get me wrong, there's people that just you want to get an education get an education, like, there's some personal pride in that, too. So I don't, it's not just dollars and cents. But like, if you really are focused on dollars and cents, like, make sure that there's someone you have some objective criteria, like, look, without this degree, here's what I would expect to make in the marketplace with these types of jobs, or find other people that are similar to you that like, Hey, I feel like they're like me, and they didn't get a degree. And here's what they did. And then here's people like that grew up in my town that got a degree in kind of similar mean, here's what they didn't see and kind of see the difference. So there's, there's ways to do this, where you can get a rough idea of how much your earnings might increase as a result of doing that. So in terms of debt overall, like Yeah, I said, mortgage debt usually doesn't affect people mentally, there's no stress around that. And then student loan debt, business debt, I don't know as much about that. But I know, if you're trying to start a business, sometimes people do that. Other ways you can sell equity, there's different ways of doing that. But those are the types of debt I would recommend. And obviously, like once in a once in a while, if you really, really need it, and it's a dire straits, like credit card debt can be useful. But generally, I say, try to avoid that. Really, the ultimate thing, you know, debt is most useful to it's kind of ironic, like debt is most useful to people who don't need it, you know, it's like, oh, that when you have a lot of money than you make more money, like makes no sense, like, well, I don't have any money and like, no one wants to pay me anything. Yet, once you have a ton of money, they just give you more money, they give you free, you know, cheaper rates and all that stuff, right? It's the same with debt, you know, the people that can that don't need debt can use it most effectively. And I think a great example is an extreme example. But you know, when Elon Musk, he was not selling his Tesla shares, he was using them as collateral. And he was borrowing against it of super low interest rates. So he could fund his lifestyle without ever having to sell any shares, which is kind of interesting, right? So he can keep that equity, the equity can keep appreciating, and he doesn't have to do any, he doesn't have to self pay taxes, or any of that stuff on that type of thing. So that's an extreme example, but I think it illustrates how debt really is for people that don't need it. It really, it's optimal for those people. Like if you can put 20% down, I'm not saying you have to put down 20% Down on a home. But like the people that can put 20% down and don't are probably much better off than the people that can't even afford to put 20% down, right?

Jamila Souffrant 33:01

Right. It's kind of like who wields the weapon like it matters, who's like holding the sword like that, like how it strikes, because you're totally right, in terms of it's a choice, you said, it's in the book to like, basically, like when it's a choice, that's when it's beneficial, like when I couldn't buy it in cash, but I choose not to, because I'd rather get that credit card point and just paid off at the end of the month, I'm in a position of power, versus someone who unfortunately, like, they literally don't have an option, like they have to do this thing. And then I think there's people who don't have an option, they it's a necessity, they have to put it on their credit card debt, the people who are just like, oh, this is a splurge, but I can pay them cash, and I'm going to leverage that. And then there's that kind of like, you actually shouldn't be doing this, like, you know, it's not part of your financial goals. And it's taking you further away from what you're saying you want to do.

Nick Maggiuli 33:49

Yeah, I agree. Um, so I think that having that alignment is important. So if you really want a house since like, well, I got to take up debt to have to own a home, then that's what you have to do, or there's not really many options, it's very difficult and expensive to own a home straight cash. And I wouldn't even necessarily recommend that, you know, because, you know, if you think about you, and I talked about this in the real estate chapter, but you know, you lock in your payment, and if inflation is high, so anyone who bought a home, you know, in 2017 2018, right now, we're feeling great, because like inflation is going up, in theory, their income should be going up with it in some way, let's hope but their payments, not their house payment is fixed, right? And that's gonna be fixed forever. And I use an example of my grandparents, you know, they bought a home in California in like 1972 Trust me, prices are much lower than just like $27,000 For whom their mortgage payment was like 270 a month or something or 280 a month and within 10 years due to inflation that was technically cut in half in real terms, right. So soon my grandfather's pay just moved just was pegged to inflation exactly 10 years later, his house payment was cut in half based on if his pay double basically and you know, his payment didn't move, right. So that's kind of the beauty of like long term debt is by the end, it's so small that it's it's minuscule,

Jamila Souffrant 34:56

right, unless you and you know, in case of people who are Over leveraging and buying too much house, then the mortgage does become like the problem. So in all of these like scenarios, whether it's your education, or buying a home or buying that bag, like you do have to, like, be smart.

Nick Maggiuli 35:14

Of course, yeah, it's always like, you know, the, the tackling at the top of my book says exmar, live richer. So that's kind of ideas like, you know, trying to help people make better decisions with their money and their life. And, you know, it's, of course, money matters. But like, that's just like one piece of the whole thing.

Jamila Souffrant 35:27

Alright, let's talk about another way to be smart with our money, which is investing so that you focus on saving and investing, investing. Let's discuss why people should invest. It's so simple, but I feel like we still need to encourage people.

Nick Maggiuli 35:41

Yeah, of course. So I think that there's a couple of reasons why people want to invest. The first thing is, well, it's kind of in the news, right? Now it's inflation, right? Inflation is going to, if you're just saving money, that's great. I think that's a good behavior already. But if it's just sitting in cash for a long time, that money is losing value, it's purchasing less goods over time, right. And so what's going to happen is, you know, inflation over the, let's say, the last year, I don't know what's going to the next prints going to be interesting. 8.5%. So whatever you could buy before, and you know, all else equal, you're buying 8.5% Less of goods with your same, let's say, $100, and you could have bought a year prior. And obviously, inflation is very disparate, in the sense of like, certain, you know, maybe gas prices are much higher, but like, televisions are lower. So like every inflation is very unique, how like, it affects different goods differently. So that's one thing, you want to preserve your purchasing power to be able to buy the same stuff over time, right? So in the future, you don't have like, you know, you're trying to buy the same thing. It's like, Wait, that's way more expensive. So that's why we invest to offset that. That's one reason. Another reason is to save for your future self. That's like a thing. And we actually look at the data on they basically ask people like, why are you saving money, and there's a bunch of different motivations. And the one that's most common, or the one that actually helps people save more is not like, oh, save for your kids, or save for vacation? Nope, none of that works. What really works is get people to save for themselves be selfish. So when you want to save more money, think selfishly. One of the experiments they did, for example, I don't know if you guys remember, there was like this app called like face app or face tune or something where like, you had to picture your face. And then the age image look like really old, I remember this thing happened recently. But this was like before that they had like, they basically use this type of face app. And when people saw older versions of themselves, they started to save more. And so I think it's like thinking about like, you're going to probably be an old person one day, so you probably need to save more money. So that's the second thing. So like, you know, we talked about inflation, you know, to preserve purchasing power, we talked about saving for your future self. And the third, the third reason is to preserve is to like convert your human capital into financial capital. So what do I mean by that, your human capital is really just like all your skills and time and everything, the value of all that that has value right now. And so as you go out and work in the marketplace, you're using those skills to like, kind of turn that, that value you have into financial value, which is the money you're earning, right. And the idea is, if you get that money invested, that money is gonna start earning you money on itself, right. So it was when I talked about earlier an interview with the Save invest continuum, right? Early on, you have a lot of financial, or I'm sorry, a lot of human capital, and you have all that and you can save money. And you take that and turn that into financial capital, like investing in stocks, or farmland or whatever, income producing assets, such that that financial capital can replace your human capital, that's the ideas over time, you should see, you should be able to earn more money, ideally, from your investments than you could earn in the marketplace one day, you know, like, once you're older, once you're in your 60s or something like you should, you should be able to, if everything goes according to plan, you should be able to have like your investments give you more money than you could like, save in a year, that would be ideal. Right?

Jamila Souffrant 38:35

Thank you for breaking that down. I think it's interesting, like you said that people said, investing for themselves, their future self is the primary motivator. Because, you know, I've been thinking like, how to get people more like, especially even people in my life, like, get them more excited about like investing now for their future self. And I find like in real life, yeah, they want to, but it's like, yeah, but I want it now. They want to use their money today, or enjoy experiences today. And so the human capital, like changing it from human capital, financial capital, I feel like if you can convince people that that can happen sooner rather than later, like, yes, it's long term. But that kind of like this idea of financial independence retire early, which is why I think so many people are like, myself was attracted to it. It's like, How can I like, shorten that? And like, have my money working for me faster than in 30 years? That's something that stood out to me.

Nick Maggiuli 39:27

Yeah, I think that's definitely something you can do. You got to think about like, you know, hey, if I start getting started saving more aggressively earlier, like yes, you can kind of supercharge that and I understand there is that poll right? That's why there's this like kind of guilt thing like Oh, every dollar I I'm spending I could be saving right and understand that that that makes sense to me. So at the same time, like you want to strike a balance, right? You want to not completely deprive yourself, but at the same time, you also want to make sure that you can live the life you want to live to some extent.

Jamila Souffrant 39:54

All right, here's the other thing that I know, just trips people up and causes them not to even say started or just like, running circles is where to invest first, like 401 K. Roth IRA, I always like to kind of go back to the basics in cases like the first time someone is hearing these terms. So can you quickly just define those, but then let's talk about where someone should be looking to put their money first.

Nick Maggiuli 40:19

Course Yeah, so in terms of discussing, like 401, K, and IRA, so 401k is going to be an employer sponsored retirement plan. So your employer will either have one or not, and you'll know I mean, they, you probably this point should know, right? If you don't know, maybe talk to someone, talk to an HR and I do have a 401 K plan. And if you're doing that, basically, your 401 K is just going to take some money out of your paycheck, every paycheck, and it's going to invest it in, you have to pick something to go pick the options, or only you have a limited set of options, you can pick whatever you want, you can't pick, you know, GameStop or whatever I'm not recommending GameStop, by the way, I'm just throwing it as an example. So you can pick whatever you want, you have to kind of look at what are the options that are there. That's what the something like 401 K, or a Roth 401 K, that's pre or post tax. In something like an IRA, that's an account, you have to set up on your own, but you get to pick what you invest in, right. And it's also non taxable in the sense of any of the investment gains will not be taxed, right. So the difference between like an IRA and a 401 K, and something like a traditional brokerage account is that any gains you have on your investment, so I'll say you put $100 in a year from now, let's say it's $110, that $10 is a gain. And so if you sell your investment after a year, you're gonna have to pay some tax on that $10 gain, right, so let's say you're in the 15% bracket on the capital gains bracket, that means of that $10, you have to pay 150 to the government and you get to keep the other 850 on the game, right. And of course, imagine it's like $100,000, and you know, you get a 15% returns 15 grand, or I'm sorry, a 10% return, that's 10 grand, and then you owe that 15%. So you're paying $1,500, to the government, you're keeping at 500, etc. So those are the different types of accounts, right, and so, where to invest first, obviously, I think, you know, having some sort of stuff for retirement is very important. So I do recommend people putting money into their 401, Ks and IRAs and the 401 K, especially if there's an employer match, because that's like free money. So if they're going to match 4%, I would say just due to the match, I have some controversial opinions on whether people should max or not, we can get to that. But I think for the most part, like at least get to the match. And then if you want to do an IRA, you can do that as well, there are sometimes income limits on those, so you got to be careful to make sure you don't make too much money, then you can't put money into an IRA, things like that. And then you know, I think where you invest, especially when you're starting doesn't matter as much just get started, find a way to like start saving money and putting it into an account. And, you know, they said you can do a target date fund or something where you can just put it into like, I don't know, I'm not gonna I don't want to pick an allocation for people. The issue is, there's no right way to get rich. Like there's so many ways that people have gotten rich, like you can get rich. In real estate, you can get rich with farmland and get rich with stock index funds, you can get rich, like I can go down the list, there's a lot of ways to go rich, there's only like a handful of ways to go broke. And that's usually high costs, which is like high spending high fees, things like that, or high risk, which is like high leverage, or you're concentrated all in one stock or one like penny stock or a crypto random cryptocurrency like things like that, that's how people go broke, right? And so you want to avoid those things. That's more important. I don't really discuss that in the book. But I think I'm gonna put out a bonus chapter I'm going to release to fans are going to be kind of discussing those ideas. So that's the main takeaway there is like, don't worry as much about exactly what you're like the exact mix doesn't matter too much like trying, you know, figure, okay, I want some amount of risk, but I don't know how much exactly, you got to figure that out. So that's like a stock bond mix plus you can have other income producing assets and there so that's what I would say is like find some mix that works for you. And especially if you're just starting to focus more on your income and your career because that's how you're going to really start leveling up. It doesn't matter if you're 15% bonds or 30% bonds that's going to be almost irrelevant for someone who's starting what's going to matter is like as I said, income and career

Jamila Souffrant 43:55

Yeah, what do you say to focus more on where you invest kind of like as you gain assets as you have a bigger portfolio right that's more important there.

Nick Maggiuli 44:04

Yeah, and I would recommend people open a brokerage account whether you're going to do that I'm not going to you know I'm not trying to pick any there's no right place to go you can do this I like a lot of places like you know, Chase has one Schwab has one TD fidelity like there's so many places you can do this at Vanguard you can technically I think open a brokerage account right and now with I think, with plaid, which I think allows you to connect your bank so almost any bank you can connect to another just online you don't have to go in anymore to a branch and physically fill out paperwork, which I think is kind of cool. So I think there's a lot you can do just with like you know a brokerage account it's on top of like yes, you want to save in your retirement account save for your future of course you want that tax savings that helps. In addition to that though, I do think people should have more brokerage accounts I'm definitely big on like getting people in like using after tax money and investing.

Jamila Souffrant 44:48

Yeah, well, let's talk about like your controversial opinion. And also like for you what kind of and relate to just your personal story in. You felt that one point like looking back that you put too much money in a 401 K

Nick Maggiuli 45:00

Yes, so my controversial opinion is that you probably shouldn't max your 401 K, don't get me wrong, there are exceptions which we can get into. But I think the issue is, you know, most personal finance experts across the board have just said like Max, your 401 k max for 401 k max for from K, no one's actually run the numbers, how big is that there's a benefit to using a 401k over just taking that money, having it in a taxable account, like a brokerage account, there is a difference that right, because there is some sort of like tax savings, or tax alpha, as they would call it that you're gonna get, I do some calculations and I, it's roughly around, you know, point 7% A year, right. And that's not nothing, don't get me wrong, that compound over long time can be a lot of money. The problem though, is that figure doesn't include your all in 401k fees, the fees you're paying on, because maybe we're in a 401k, you can't choose the option. So if you're, if you happen to pick, like investment funds, like our funds in there that are more expensive than what you could get on the outside, like you can get a low cost US stock s&p 500 index fund for like 0.05%. So if by chance, let's say your fund costs like point 7%. And remember, there's a point 7% benefit. That means basically, all of the benefit of having that inner 401k is wiped out because you're paying it in fees. And that doesn't include like the all in 401 K fees. If you don't know the fees, I would talk to someone HR and say, Hey, can someone explain this to me and like walk me through all the fees and stuff. And if they don't know, they should probably go to someone, and they'll probably get that information back to you. But it's good to know that because then you realize, like, oh my gosh, like, there's so many Americans out there and 401k plans that are maxing out right now. And they don't realize that the fees they're paying is larger than the expected benefit, they're gonna get what so what that means is they should probably take that money, and then have it on the outside in a brokerage account. And then they could better invest it in cheaper funds and have more money in the end than by locking it up into a bad plan, basically. And so

Jamila Souffrant 46:45

that takes into account the tax savings that someone is saving from not so with the pre tax retirement account, you know, like it reduces your taxable income when you're investing in like a 401k. So is that that benefit, take into account the tax savings on that?

Nick Maggiuli 47:01

This is where it's a little more complex, because there's technically two layers of taxation, right? So there's the traditional 401k that we all know. And then there's the Roth 401 k. Now, what's the difference with the traditional, you take that money you put into the account, and it doesn't count as your taxable income? So you don't have to pay anything to the IRS on that money, right? With a Roth, you pay your taxes to the IRS, and then you take the money after you paid those taxes, and then you put it in? I'm talking about the Roth specifically. And why does this matter? Because that point, 7%, annual tax benefit I'm talking about is avoiding capital gains, that's the real benefit you're gonna get in a in a 401k. That's like, easily measurable, because whether you do a traditional or a Roth, like paying tax now versus paying tax later, you're going to pay income tax, right? So I make this assumption that your income taxes are the same over time, that's not necessarily true. The problem is we can't predict future income taxes I have no, I always thought like, oh, income taxes are going up. So you should do Roth, right? Because you want to pay your pay the lower tax now. And so the higher tax later, I thought that in 2012, then guess what the 2017 You know, tax cut and Jobs Act come out and tax rates go down. So I was it's hard to predict tax policy, and I think it's difficult to be like, Okay, well, I'm gonna play this tax game, or I'm gonna try and guess. So I'm just like, let's just assume tax rates are constant over your life such that like, if you do Roth or traditional, it doesn't make a difference right on your 401k. So like, let's put that piece aside, because that that's happening separately, right? So assuming you've already paid your tax, right, that's already happened, the income tax has to be paid no matter what, whether you put that into a brokerage account, or a Roth or, or a traditional that income tax has to be paid, you can't avoid that. But what the 401k does, it allows you to avoid the capital gains tax, right? As I talked about earlier, you have $100, you gain 10%, goes to 110. You sell it after a year, that's like a 15% tax you're going to owe right. And that's what the rates are now, for most people, it's about 15%. Tax, you pay that that that hunt that $10, you pay the 15%. So you give the 150 to the government and you keep the 850. Right. So if that was in a 401k, when you sold it, you don't have to pay any of that 150 You keep all $10 You don't you instead of keeping the 50 Keep the full $10. Right. The idea is like that little 15% Over time, that's about you know, point 7% of your 70 basis points, as they call it, right. So it's almost a percent a year. So that's the that's the tax off I'm talking about. So if those fees are high enough in the 401k, it completely negates that capital gains, like it's better for you to pay capital gains in a brokerage account, right that 15% over the long haul, than it is for you to go and pay 1% a year on your funds in a 401k. So that's it. Technically the argument this is even more if we really want to get into it. I actually kind of overlooked it and I should have included in the book. But if we really want to get into it like I don't know if you know this, but a single person with no other income if you only have capital gains, right, that's your only source of income is capital gains, right? You have no other income, you can have $50,000 A year tax free. So let's say you have, I don't know let's say you have a million dollars invested and it's paying you a 5% yield a year. Of course, this is kind of outrageous. Nothing's paying 5% a year but let's just say it is a million dollars in the stock market. It's paying you 5% A year If you can have that as capital gains, and you pay 0% tax on it, that is a current, it's like 40,000 plus the standard deduction, it's about 50. So for a couple, you can have $100,000 A year tax free. So imagine that now compare the your 401 K plan. And now compare that to putting it in a brokerage account where you can have $100,000 a year, and it's just sending you money tax free, 0% tax rate that is in the tax law, you can look this up, it's you guys obviously have to have a lot of money invested to have $100,000 in income coming in on capital gains. But that's a whole nother I even get into that in the book, if you include that that like it really kind of says like, do you really want to max like, I think you should, everyone should go up to the match. And after that, you need to really think about it because there's, I mean, of course, it talked about a lot of numbers, I didn't get into the flexibility option, like what if you need the money for something like, for example, if I wanted to buy a place in Manhattan right now, I just couldn't because I get down payments are so large, like I would just need it would take me it's gonna take me a few more years to get there because I put so much more money into my 401 K because I max because everyone said so. So, on top of the flexibility, I don't think the financial benefit, the tax alpha, as I call it, is that large that it's going to make sense for a lot of people. So I'm saying like, just hit the match, no matter what gets your employer match, and after that, keep the money outside a little bit more flexible. That's my take.

Jamila Souffrant 51:12

Okay, I love it. And I don't want to like beat this any more like, I just want to like make a point and or just say that I know, when some people in the financial independence community like what they're doing is they're assuming that their income in retirement is going to be less, so that they're just banking on let me just like make all the money I can now but capital tax rate, that's lower because, or my tax rate is higher now. So I'm gonna or my income is higher. Now I'm kind of reduced what my taxable income is. And then I worry about getting my money out in the future when I need it. Because I'm going to be earning less in early retirement or retirement. That's kind of the assumption that like I went in, and it was just like, I worry about it later. But I think everything you said, and you can definitely like respond or like have a point to that is kind of like this is why it's important to Yeah, follow the rules of thumbs and like do certain things. But now you have to like do a more analysis based on your scenario based on your life. And then even like, talk to a financial planner, or an advisor, who you can ask these questions to specific to your situation, and can help you kind of run these scenarios.

Nick Maggiuli 52:18

That's exactly correct. This is why I hate writing on tax, and then I may never do it again. Because everything's about your personal situation, you're completely right. If you for example, let's say you live in California in New York, right now, high tax states state and state income taxes high. But you know, you're gonna retire in a low income, income state, let's say Texas, or Florida, and let's let's just assume state income taxes stay constant forever, that's a huge benefit. Because you know, you're, you'd want to avoid the tax now. So you have a traditional, you know, 401k now avoid the tax now. And then in retirement, you pull it out, and you don't have to pay state income tax, right. So you can see that's like a little state income tax arbitrage where in that case, it would make more sense to to max out that's probably worth more than that little tax Alpha thing I was talking about. So I just wanted to raise awareness around this issue, and just to be a little bit more open about it, because when every single person says max out your 401 K, I think it's a problem. But I think it's like, let's really look at this and like, I just want people to question and no one's ever questioned it. And that's what I'm trying to do here. But I completely agree with you. It depends on a lot of factors. You're right, if you're going to be pulling out 20 grand a year, but right now you're making 120 grand a year, it makes sense probably to max your 401 K because when you're pulling out 20 grand in retirement, the marginal tax rates then even if tax rates go up are probably lower than the tax rate you're gonna be paying that right. So I completely agree on all those sectors. And for a lot of people, it could even make sense to Max 401 K if tax rates were to increase a lot in the future like for everyone would make sense. Or if capital gains were to double then yes, my whole analysis is junk net, right. So like, there's so many factors I'm saying right now with the current information I have I'm not sure it's right for everyone. And that's kind of I just want to open that possibility up. I'm not saying I'm right forever. I'm just possibly a little right now. That's all

Jamila Souffrant 53:53

Yeah, well, listen, we're critical thinkers here and everyone listening is a critical thinker. So this is just like encouraging you to dig deeper and think more about like your money in your investments. One thing you mentioned it but I really liked the way you said this, but I'd love for you to explain it is that you say we begin our lives as growth stocks and then we end our lives as value stocks. What does that mean? Yeah, so

Nick Maggiuli 54:13

just a quick refresher growth stocks are those stocks that have very high expectations like you expect a lot from them and that's why their prices get bid up a lot and you can think of like, everyone probably can think of stocks that were like kind of peaking in November 2021 You know, like, or even before that, like there's a lot of stocks are really high, the peloton of the world resumes, all these things that have high growth, everything's happening over the pandemic happen, all the stocks are going to the moon. And then value stocks are those that have been beaten down very badly and no one thinks there's anything's going to come good from them. But there's usually these positive upside surprises like Oh, it wasn't as bad as I thought. And so then the stocks tend out. So that's why value stocks historically over very long periods of time have outperformed growth stocks because like growth gets you know, really highly valued and then those expectations usually don't happen. They come down and value stocks are very beaten down but then There's upside surprises. So over, over the long haul values being growth recently, that's not necessarily true. But over the long haul that's true. And how does that relate to our lives, I said, you know, we begin our lives as growth stocks, we enter lives value stocks, we look some of the happiness data. There's a lot of people especially like your early 20s, you have all these expectations for where you expect your life to be when you're 3035 40, whatever. And the the researchers find that everyone's like, just makes these really crazy forecasting, or they think they're going to be the greatest thing since sliced bread. And then it finds out like, oh, life doesn't turn out that way. Maybe you're, you know, you want to be married with kids and have, you know, a house and all these things or be famous. And none of that ends up happening. There's a couple of those things happen, maybe right. So your life doesn't turn out what it has to be. And that's fine. I'm saying most people don't meet their expectations. In my case, I remember when I was like, 23, I was like, I knew like Warren Buffett had a million dollars by the time he was 30. And I was like, You know what, I want to have half a million member. By the time he was three a million dollars, like, just for flesh was like 9 million. So I didn't even adjust for inflation. And I cut it in half and said, I should probably get to half a million by the time I'm 30, you know, should be good. And I hit 31, I still wasn't worth half a million dollars. So like, sometimes we don't hit our expectations. Like that happens. It's okay. It's not the worst thing in the world. But the good thing, though, is like people start to have that, you know, midlife crisis, that that middle slump, and you know, they life's gonna get worse. But actually, a lot of people, you see that happiness kind of starts to go up over time, or as you get older starts to go up. And so there's kind of like that, you know, we end our lives as value stocks and like we expect things to be, you know, terrible. We're all beaten down yet, you know, life ends up giving us some upside surprise, whether that's grandchildren or children or some sort of something in life, that gives us some sort of upside. And so I think that's the thing to think about is like, Hey, it's okay, if you haven't gotten to where you want to be, especially on your financial journey. But like over the long term, like generally people will, you'll end up finding more upside surprises than maybe you'd expect. So keep a stay in the game basically.

Jamila Souffrant 56:45

All right, see, we ended on a positive note we are we ultimately will we'll be value stocks people will be okay. So Nick, thank you so much for coming on the show. Please tell everyone where they can find out more about you, your blog and your new book.

Nick Maggiuli 56:59

Yeah, so you guys can if anyone wants to DM me, you'll find me on Twitter at dollars and data or you can DM me at Instagram. It's Nick moduli. Just make sure to spell it right. I have imposters so just ma GG you ll i You can find me on my blog of dollars and data.com and you can find my book just keep buying on Amazon, Barnes and Noble, etc. So thanks, guys for your time. Appreciate your time. journeyers

Jamila Souffrant 57:21

and I will link all that in the episode's show notes. Thanks again. Thank you don't forget you can get the episode show notes for this episode by going to journey to launch.com. Or click the description of wherever you're listening to this. And you can still grab your jumpstart guide for free to help you on your journey to financial freedom by going to journey to launch.com/jumpstart. If you want to support me and the podcast and love the free content and information that you get here, here are four ways that you can support me in the show. One, make sure you're subscribed to the podcast wherever you listen, whether that's Apple podcasts, that purple app on your phone, your Android device, YouTube, Spotify, wherever it is that you happen to listen, just subscribe so you're not missing an episode. And if you're happening to listen to this and Apple podcasts, rate review and subscribe there. I appreciate and read every single review number to follow me on my social media accounts. I'm at journey to launch on Facebook, Instagram and Twitter. And I love love love interacting with journeys. They're three support and check out the sponsors of this show. If you hear something that interests you, sponsors are the main ways we keep the podcast lights on here. So show them some love for supporting your girl for and last but not least, share this episode this podcast with a friend or family member or co worker so that we can spread the message of Journey to launch. Alright, that's it until next week, keep on journeying journeyers

(This post may include some affiliate links)

Nick Maggiulli, blogger and author, joins the podcast to discuss the intersection of data and personal finance. 

We talk about the numbers behind financial moves to save money, invest, and build sustainable wealth, while also combatting common absolutes in the personal finance world. Nick and I discuss the order of operations of investing, how debt isn’t always bad, why he thinks you probably shouldn’t max out your 401k, and more.

In this episode we discuss:

  • The importance of where you focus your attention in your financial life
  • Why you need an emergency fund first and foremost
  • How to stop the stress and guilt we feel when we spend money
  • The 2x rule when you are able to spend
  • The usefulness of debt + more

Episode 271-Overcoming Spending Guilt, Investing When You Can, The Usefulness of Debt + More With Nick Maggiulli Click To Tweet

Other related blog posts/links mentioned in this episode:

  • Buy Nick’s book: Just Keep Buying
  • Join the waitlist for my signature course, Map Your Way To Financial Independence, here.
  • Check out my new personal website here.
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  • Leave me a voicemail– Leave me a question on the Journey To Launch voicemail and have it answered on the podcast!
  • Watch me on News12  Watch my latest segments on News12
  • YNAB –  Start managing your money and budgeting so that you can reach your financial dreams. Sign up for a free 34 days trial of YNAB, my go-to budgeting app by using my referral link.

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