Episode 280- Saving $30k To Quit Corporate America & Pivot To Teaching Women How To Invest With Amanda Holden

Amanda Holden 0:02

All we're doing when we're investing, it's not about Roth IRAs. It's not about ETFs. It's about you. And it's about one very specific version of you. It's about future you. And you really just have to keep that face on the process. As you navigate some of this again, kind of boring stuff that you have to learn in order to be an investor

Intro 0:23

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 4321.

Jamila Souffrant 0:52

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.com/jumpstart to get your guide right now. Okay, let's hop into the episode.

Hey, journeyers I'm excited to be speaking with this week's guests. I know I say I'm excited each time but I truly am. And this week's guest has never been on the show. Even though I do know her personally, she has such a great energy, such a vibrant character. When it comes to talking about money. She has such a like great way in which she like puts things. So I do think you'll love this episode. Her name is Amanda Holden. She is the award winning money writer, speaker and educator. She's also known as dumpster doggy on social media. And so we're going to talk about her name, because when I first saw your name, Amanda, I was like, who calls themselves dumpster doggy. But after you hear her, you'll get it, you get it. So through her business invested development, she educates women on investing and other money topics because she believes the world needs more women with financial power. Yes, yes, I do too. And so we're gonna get into investing. I know a lot of you guys listening right now maybe just concerned about the market? Or if you're keeping your pulse on it or thinking to yourself, like, what can I do now? Is there an opportunity for me to still to build wealth now? And the answer I'll just like jump to it is still yes. And So Amanda, and I will be talking about all that. So welcome to the podcast. Amanda,

Amanda Holden 2:45

thank you so much for having me. Jamila. I'm so excited to be here. Yes. So

Jamila Souffrant 2:49

Amanda, first, let's just get to your name. How did you come up with the name dumpster doggy?

Amanda Holden 2:55

Okay, so this old nickname came from a period when I was still working in investment management. So that's actually my background is working in investment management. And I hit a point where I just decided I could no longer be there. You know, the job was really great. And I learned a lot. But helping rich men get richer was never really going to be my calling. And so I just had a January 1 moment where I was like, Okay, I'm gonna save every single dollar that comes across my desk. And I'm going to be so scrappy, so I can just basically quit and probably I will, I'll leave it at that. At that point, I thought I would leave finance altogether. And so during this period during this really scrappy period, is when my coworkers at the firm actually nicknamed me dumpster doggy, because I'm working with like, all these dudes. And there's all of this excess everywhere around bands. So, you know, Jim next to me is eaten a chicken salad wrap and he leaves half of it behind. So I look over at him and I'm like, Hey, man, are you going to eat the rest of that? Because I totally will if you won't, because I was in this period of just trying to save every single dollar. And so with this nickname that I gathered at this time period, I ended up starting a blog a money blog called dumpster dog blog, and the nickname has kind of just stuck with me throughout this journey.

Jamila Souffrant 4:18

Well I will tell you like it's it's a memorable name it's I feel like it's right on in terms of like marketing and like brand awareness because it makes sense. You know, I want to go back to when you were working full time and you have made the switch like you no longer like wanted to help rich people get richer and now you have this like mission to help like the average person average woman really see their potential with wealth. Was there someone else that you saw doing what you wanted to do? Like what actually helped prompt you to like go in another direction because I feel like there's people right now who are unaware they know they want to be different. They just don't know what that is and they just stay stuck in the job. So what for you was that like catalyst to push you out and say I wanted to do something different? Yeah, it

Amanda Holden 4:59

wasn't really some Buddy that I had seen, it was more. So the experience of really coaching my friends, my girlfriends through this stuff while I was working in investment management, and another one of my friends that I worked with at the firm, we had initially had this idea to after I had quit to then you know what maybe our work here isn't done. And what we can do is write a book on investing for women using comedy as one of the educational tools. And so when I first came back to to the world of finance, kind of with my own idea in mind, I thought that it would be writing, but I kind of quickly learned that for my students hearing me teach live was much more effective for them. And so the business kind of transformed from there. It went from blogging, and freelance writing, to being more focused on workshops and courses.

Jamila Souffrant 5:52

And for what you did. So can you explain a little bit about what you did in your corporate career? Because I do find like, I came from corporate too. And sometimes, like, it's not clear, like when we say our titles, like what we actually did, and then how you took that knowledge and translated it to like, what the average person can learn to?

Amanda Holden 6:11

Yeah, absolutely. So when I first started at the firm, right after graduating from school, I was working in an associate role. And pretty quickly, I was poached to be client facing basically, a guy on my floor, who ended up becoming my mentor was like, Hey, I noticed that you talk shit all day to your coworkers, why don't you come upstairs and talk shit to our clients? And I was like, Sure, how am I, you know, at this point, I'm a 24 year old woman, I get moved into a department that there are very, very few women. And you know, the average person in this department is, you know, a 45 year old married man. And so I kind of get thrown to the wolves a little bit. And at this time, my role was called investment counselor. And so basically, it was my job to relay portfolio strategy to our high net worth clients. And so what am I doing, I'm basically talking investment strategy. I'm answering questions about the market, I'm getting to know my client's personal financial situations. And so basically, what I'm doing is a lot of hand holding, with, again, old rich guys all day. And so super great job in that I learned a lot. But it just also was not for me, right? Like this was never going to be my calling. And in fact, at this time, I really thought that I didn't want to be involved in the world of personal finance at all anymore, and investing at all anymore. And so when I left, I actually left without another job, prospect in mind, because I had saved up all this money during this crappy period, and just love to travel. But as I was traveling, I kept coming back to this idea of, dang, I have all of this information in my brain, right? Like my job was to answer every single question you could ever imagine about investing on the spot. And so I had all of this information in my brain, and I just kept coming back to this idea of maybe my work here isn't done, maybe there's something that I can do to to democratize this information to translate this knowledge. And really, just to get it to the people that I actually care about, which is all of the journeyers. It's all of you. It's really anybody who has felt left out of these conversations, because I've seen the rooms where these conversations take place. And they are so often filled with people that are already wealthy. And that's not who I want to work with.

Jamila Souffrant 8:33

Yeah. So what did you do? How long did it take you to save the money? So I love that you talked about like the scrappy period and you like went to lengths like you know, eating like or taking what your coworkers were not eating. But when the moment you decided that you wanted to quit your job, how long did it take? How did you figure out how much money you needed, because we do have a lot of engineers who they're like, they want to quit, too. But what was that runway for you to quit look looking like.

Amanda Holden 8:55

It was about eight months. And so during this eight month period, I saved up about $30,000 to quit. And then I traveled for a year actually a little bit more than a year with that $30,000. And so of course, this is only something that's possible with a slightly higher income, which is something that I was really lucky to enjoy at that time. But I also was extremely frugal at this time. And it wasn't just like, you know, the silly like, taking the burrito off the desk of the guy next to me, it was more than that. Like I really tempered my spending across all of all categories, because I was so incredibly motivated to do this thing so I could quit. And in some ways, it was almost a blessing that I hated the job as much as I hated it, because it pushed me to do something really dramatic. And I wouldn't be here I wouldn't have taken this leap to start my own business. If I hadn't hated my job as much as I did.

Jamila Souffrant 9:54

You that's such a good point. I feel very similar in that way. I mean, you know, I don't like to say I hate my Shout out, because I feel like there's X coworkers who listen, but I enjoyed it for the most part, but it wasn't like my calling, but I will say I hated my commute, even though I took good things from it. And I just feel like like you said, like, sometimes it's that it's that nail, it's that like, really uncomfortable thing that's like in you, that makes you act versus a lot of people are kind of comfortable. Even if they don't like it, it's like they've learned to like, deal with it. And so that's why like, there's no big change. But I like a lot of people like there's this thing where they do feel like the back is against the wall. And so they become scrappy, they start doing things that they never thought they would do, so that they can gain that freedom. So while you know, yeah, it's annoying to have to be put in a situation that you hate, or you don't like, sometimes it's the best motivating factor to get free.

Amanda Holden 10:44

That it really is. And I have folks that come to me all the time and say I was in a similar situation. But I also have people that come to me and say, I'm not in this situation, my job, I think is mostly good. And I don't have this intense motivation to do something different. And so my advice to those people is always to simply act like you're worth more, right that you're worth more than just okay. But that's a whole another conversation. But that really is the journey that I've taken to get where I am today. And so now I've been doing this for a little bit more than five years.

Jamila Souffrant 11:18

Right right now, and your specialty is talking about investing, we are in a very volatile time, you know, even I know this conversation is going to be recorded a few weeks out from when it's released, but I still feel like it's still gonna be volatile by then I'd love to kind of get into more like the specifics of investing, and talk about for people who are like fearful now about what's happening in the market, like maybe they have just started investing, or they want to start investing, and they're like, wait a second, you know, is this a good time, let's talk about the state of where things are. And then we can get into like, concepts and more investing terms.

Amanda Holden 11:56

Absolutely. And so, yes, the markets are volatile. As of this recording, the US stock market is down in the double digits for the year. And anybody who has invested like even within let's say, your 401 K or your 403 B plan, or maybe in your Roth IRA, really, a lot of our investments are focused on and around the stock market. And because the stock market is down and actually bond and crypto markets are down as well, that means that the value of the investments that you hold are probably also down. And so if you're seeing red in your investment portfolio in your investment accounts, it's actually totally normal. And it's okay, because that's just where we're at so far this year. And so that's the state of where we're at as far as our investments are concerned. Now, where we're at as far as the economy is concerned, is similar, but the economy is different than the stock market, right? The stock market is just that it is just a marketplace for stocks, and the values go up and the values go down. The economy is so much broader, and frankly, so much more important than just the stock market because it includes everything right? It's your job, it's my job. It's your rent payment. It's that box of Kraft mac and cheese that you eat every night for dinner. It's everything right? And we're hearing the R word quite a bit these days. Are we in a recession. And so currently, right now, we're not in a technical recession, which is two negative quarters of GDP growth in a row. But we're pretty much there. And if you're in a personal recession, then we are in a recession, right. But with a recession, what we're worried about is our job stability, right losing our jobs. And so recession planning is a little bit different than what we do for a stock market downturn.

Jamila Souffrant 13:52

Okay, let's let's take it back. So recession planning, and I want to note like I want this to be an episode someone can come back to like, even if by the time you know, by chance the market is up by the time this episode is released,

Amanda Holden 13:52

who knows fingers crossed,

Jamila Souffrant 13:52

right? We don't know. But I think this is because like you said like this is actually like a part of the cycle of the market. Like if you go back to the history of the stock market, there's always been ups and downs it's always continually over time improved, but this is just part of the cycle. But I want you to talk a bit about when you say like planning for the recession, the differences between like planning for a recession and like your normal personal finances because here's the thing I feel like in general people were behind already with personal finances right like you always hear the statistics that people don't have enough invested for retirement or saved and now here we are entering this time in which you know, inflation prices are going up gas like rent in the you know, in New York City or in general everywhere, home prices, everything is going up. So how does like how do we plan when people were not even ready before this like in the normal market?

Unknown Speaker 14:59

Yeah, yeah, we're both in Brooklyn where it costs like $13 to buy an organic bell pepper. Okay, so great question. And the answer is always pretty simple. And it's just to focus first on making sure that you have enough emergency money. And that's just money that you're gonna keep in cash somewhere that you can access it quickly, probably a savings account. But you know, also, your checking account is just fine. But ideally, a savings account. And yeah, a lot of us are already behind. But I also think that a lot of us are also spreading ourselves thin across a lot of different financial goals. And when we are doing recession prep, it's a good idea to take a step back and look at the things that we can do to create some stability for ourselves right now. And having a little bit of extra cash cushion is generally a good idea. If you think that your job could be on the chopping block, which is the most dramatic thing that can happen during a recession is we see widespread job layoffs, which when we talk about it, in economic terms, it you know, it's easy to just kind of be like, yeah, it's it's, that's something that's happening, but it's really visceral and real when it happens to you. And so I always encourage people to do a little bit of soul searching, figure out some what what amount of emergency money makes the most sense for you, and your ability to sleep at night. Because I actually then do think it's ultimately going to make you a better investor. Because investing is volatile. Right? And we can talk about that in a second. But the reality is not having enough emergency money is could very well lead you to doing something that you shouldn't do with your investments in these volatile markets.

Jamila Souffrant 16:43

Right. So I mean, we talk a lot about emergency funds in general, I think like the personal finance space, like that's is one of the most common things we tell people is like get your emergency fund together. And it's going to depend like you said, depending on like the person right, someone maybe who is like single who doesn't have like kids, it that may look different, like what the amount that looks like and where they live, like, you know, what that comfortability level is? How would How would you say someone turbo charge or like to get their emergency fund together? Because I think what happens too, is you're already behind. Now you're you're a looming recession like this thing's happening. And it feels like, well, I might not have enough state by the time the layoff happens, or by the time this emergency happens, and so I'm still going to be in the red. So what are some ways that people can save up faster in their emergency fund?

Amanda Holden 17:37

Yeah, so in my work, I don't do a lot of telling people how to spend or save their money, because I trust that my students can figure this out on their own, you make a determination about what in your spending doesn't really bring you real value, and just try to cut it out for a couple of months. But also, during this time period, maintain some things that keep you happy, because that's going to be important in you being able to stick to the plan over the long term. I also think a really important element of this. And this is something that's not often talked about when we talk about saving is to yes, we need to focus on the actual work of moving the money into the savings account. But we're also needing to talk about income, right? You know, so often I have students that come to me and they'll say, you know, I have this extremely small amount of money that I have to then spread across these four or five different goals. How am I supposed to prioritize? How am I supposed to do that? And to that, my answer would be, I can't really tell you exactly what your priority should be. Because I'm not you. But when I hear that the thing that goes, the alarm that goes off in my head, is maybe our first focus should actually be in increasing our income, so that we have a little bit more leeway to spread that money across different goals. And so especially when we're doing our recession planning, yes, saving up some emergency money. Having that be the focus is always a good idea. But also, what is it that we can do to not just save your job, save your primary source of income, but potentially leverage that work to get you paid more? Right. One of the things that you can do, for example, if you think that there might be impending layoffs at your company, is go to your manager, go to senior leaders and ask them what can I do to be involved in the initiatives that save this company, and become so indispensable that they have to give you more money, right, taking initiative in this way, so that you can get paid more, even though it's a little bit longer of a game? It's not going to happen right away. But what can you do to get a raise six months from now? What can you do to ensure your job stability? If things do get worse? That's also a really good focus during an again, impending recession. Which, by the way, I think it's also important to point out that there's always a recession coming If we just don't know when it feels like it could be upon us, the time is nigh, but also maybe not. And that would be great. But it does doesn't mean that there's never going to be a recession.

Jamila Souffrant 20:13

Right, right. And this was technically defined recession again, I know you said it's two quarters of GDP being negative, what's GDP for journeyers that don't know, gross

Amanda Holden 20:24

domestic product. And so you can almost think of it as all of the spending that happens across an entire economy, and not just our spending, but also the spending by our local state and federal government. And so it's basically everything in an economy.

Jamila Souffrant 20:42

Okay, and so, we are potentially heading it in one already that we just don't know, right? Like, the numbers just haven't come out yet. But when it comes to investing now, and people looking at their portfolios, I mean, people are nervous, or some people are nervous, I shouldn't speak for everyone. But where should people be focusing on when it comes to investing at this point? Some people say, Okay, this is the time to buy more. And in theory, that sounds good, like things are on sale in theories, that sounds good, but then the human emotions take over. And it feels like maybe difficult for people to start putting more money in the market when it's down. So any advice or tips on that?

Amanda Holden 21:18

Well, you've nailed something exactly, which is what I was alluding to earlier, is having some sort of financial stability in the form of an emergency fund, or in furthering your job security is ultimately going to allow you to be a better investor, and potentially take more risk or see risk with a slightly clearer head. Because like you said, when we see our investments drop in value, something very cave person takes over. Like we were designed with these beautiful brains that were designed to keep us alive for many, many years in the wild, right, right, like for protecting our young and fighting mighty mountain lions. But our brains are very mismatched with the task of investing in capital markets. Because when we see something that is causing us pain, we are quite literally hardwired and chemically driven. To do something about it, right, you see your investments drop, and you're like stock market, kill it. And we actually want to train our brains to think a little bit differently. Right, the oldest investing adage in the book, it's a warren buffett ism is be fearful when others are greedy and greedy when others are fearful. And again, that sounds great in theory, but it's very hard in practice, because it is so difficult for us to weather tough stock market times and economic times, they're often they're often happening concurrently. And so how do we train our brain to think about a little bit differently, I actually think that it helps to remember, first of all, what it is you own when you own a stock. A stock is a share of company ownership. And so for example, let's say that Jamila with your company, let's say that you were offering 10 shares of your company to sale to the journeyers. And to the journeyers, I asked you this, would you rather buy a share in Gemelas company for more expensive or for less expensive, right? As long as it's the same proportional share, ideally, you buy it for as good of a deal as you can get it. And that's really all that's happening right now is stocks across the board. So the average performance of stocks right now is certainly down, right. And we kind of we tend to use this word, it's bad things are bad right now. But bad and good is all relative to your vantage point. And what I mean by that is a bad market is good, if you are trying to buy shares, if you are in the process of collecting investments, that of course we want them to be cheaper and not more expensive. But again, it's our brain that kind of plays tricks on us. Because we hear bad, we hear things are bad. But again, it's good. And in fact, the worse the market is. And the longer it is bad, the better it is for new investors, young investors, people who are in the process of collecting shares. And so nobody needs to be wishing for a bad market because the flip side of that is a bad market is really bad if you're trying to live off of the profits of your investments, right? And so we're not buttheads, we don't need to wish for that. But that being said, you do have to train yourself as an investor to think about the opportunity that exists in the market when things are quote unquote, bad. All of that said, I don't think that anybody needs to be timing anything at all. The best thing that we can do is simply invest with as much regularity as possible. So if that's every month, great if it's every other month, great, but just stick to the schedule. Keep buying shares you have way more invest Going ahead of you, then behind you, and then just stay cute and stay on bothered,

Jamila Souffrant 25:05

stay cute. No, and this is important to note, you know, we are not your investment advisors, you know, this is not investment advice, specific investment advice. But I do want to save that, you know, the options when it comes to investing, right. So let's demystify that a bit, because you talked about buying shares in like Journey to launch. But it's important to know that, like, when you're investing in one company, you have to have competence in that company, right? Because buying like one share, like, let's just say, you know, journey to launch, the reason why the share was cost less versus like a year ago, just because the overall market like every, every company is a little a lot. So it's not just me, it's not because the business is dwindling, and about to go under. Right. And I think that's just important to note, because like, that's the difference to me between like the solid companies like, you know, the ones that you would invest in, they're gonna stay around, they're gonna be around, versus some more of the speculative companies that you just a bigger risk, you may or may not want to do that, versus index funds, which I'd love to give a definition of, I do have an episode where we can direct people to with JL Collins just on investing funds, but to give like the differences in the options for people, because I feel like sometimes people get a little confused. And oh, so that means that should go by, you know, just like 10 shares of this one company, when they're like not understanding what options they have to be able to invest.

Amanda Holden 26:22

Yeah, absolutely. And so let's break it all down. So let's set funds aside for just a second. And let's talk about the investments themselves. And so when we're talking about investing in what we call capital markets, we're really talking about two different types of investments. There are stocks, and there's bonds, I remember when I first started working at the firm, and I walked in, I was like, Oh, my God, this is going to be such a headache to have to learn every single investment type in the universe. It's endless. And the guys were like, oh, no, there's actually only there's only two, there's only two types of investments. There are stocks, and there's bonds. And everything else is some derivation of stocks and bonds, or some combination of stocks and bonds. And so, a stock, like we said, is a share of ownership in a company in a publicly traded company. The idea is that it's your piece of that company pie. And as that whole pie grows, then so does your little piece of it very basically, that's what a stock is, you are an owner in that company, you have equity in that company. Compare that to a bond. A bond is a contract with a government, like the federal government, or with a company like imagine Coca Cola, where we are quite literally the lender, now we loan Coca Cola, our money, and for the pleasure of using our money for whatever it is that they want to use, our money for Coca Cola is going to pay us a rate of interest. So think about it like just like a mortgage loan, but in reverse, we are the bank now. And the money we earn on that investment is money is interest that is being paid from that bond. And so really, those are the two different primary we call them asset types. And asset is just an investment, it's just something that you buy that you think is going to increase in value over time. And so then enter funds, a fund is just really nothing more than a big old basket of some other investment type. So it could be a big ol basket of stocks, it could be a big ol basket of bonds, it could be big basket of real estate holdings. And then of course, there are many different types of funds, you can have funds that have an active manager behind the scenes is trying to actively pick the best investments, which spoiler alert is something that has been extremely unsuccessful over time, if I'm being completely honest, and maybe I just have a very jaded view of the financial services industry. But I believe actively managed mutual funds exist for one purpose and one purpose only. And that is to procure fees from investors like us who do not even know that they're paying the fees because they're embedded into the funds themselves. The alternative to something that's actively managed, is using an indexed style fund. This is just a decision about stylistically, who are by what method decides what goes into the fund, an index just means you're investing in everything across some market, generally mirroring an index that's just a measure of that very market. So you get a little taste of everything. So for example, a total US stock market index fund is literally going to buy you shares in every single stock in the United States. So you're not trying to pick and choose the best what you're saying is just I'm cool with being along for the ride. And so this is a really great starting place for just about anybody to invest in the stock and bond markets using some sort of index fund. If you have determined that investing in the stock and bond markets is right for you. And so we love an index fund Jamila

Jamila Souffrant 29:55

yes we do and they're low and you know, typically they are low fee and like you Sid compared to the actively managed funds, like you're paying for that you're paying for the person to beat the market. Right that like, you hope that they will do that. And by the way, that episode with JL Collins that specifically talks about index funds is episode 141. For anyone who wants to check that out and learn more. Alright, so now that we kind of have, okay, we have our basis of understanding the what we can invest in, or the types of investments. And now I want to talk about, like, so many people, like don't view themselves as investors, even though and they are like, you know, and I want to talk about like, what makes an investor? If you have a 401k, you're an investor, you know, and I feel like some people are just like, well, that doesn't seem as like fun and sexy as like the way people talk about it online. Like, should I be picking stocks? Like, Isn't it supposed to be like, look different? And I'm like, no, like, if you have access to a 401 K at your job, you're an investor. And so let's talk about like, what that can look like the options for people that are available to them and why they should consider themselves investors.

Amanda Holden 31:00

Yeah, absolutely. I love that you brought that up, because it is a very common misconception that you have to pick individual stocks to be an investor or to be a good investor, when actually all of the empirical data shows us the exact opposite, that the more you try to pick, and think that you're super smart, and you know, something that everybody else doesn't, the more opportunities you give yourself to do something wrong. And so absolutely buying, quote, unquote, boring index funds, makes you an investor, right? Like, just because somebody has 16 Day Trading screen, I believe, I've seen guys that have 16 Day Trading screens up in their apartment, and still managed to lose 89% of their net worth. And so it's also important to understand what is the difference between investing in what is the difference between or sorry, let me say, what is the difference between investing and gambling, right? Because some of what people are doing is done for entertainment, right? Like if you ever go into Reddit, or if you go onto Twitter, and you're following like the stock pic bros like the Brad's in the Chad's of the world, what you're really seeing is a community of people that are entertaining themselves, through investing and through the use of financial products. But a lot of what they're doing is much closer to a roulette table than it is to what Warren Buffett is doing.

Jamila Souffrant 32:25

Yes, that's such a good way to put it. Because there is this idea. And we've because of marketing, because of social media, you see it more, you make it look sexy, you know, people are in front of the Jets and the cars and they're talking about the way they got it. And you know, like they're trading and again, I'm not against people who really take the time to learn, and they they know what they're getting into when they're trading, right, like, and day trading. But I think long term investing, like it's considered for some so boring, and we're not understanding, like the marketing behind the people who are putting out these messages, like, you know, there's usually something behind it that they're selling and or the lifestyle that they want to portray, that we have to be aware of. And so I think what you're talking about what I like talking about is long term investing, like being in it for the long haul means, yes, your portfolio may go down now. But if you're not using that money today, you won't need to use it for a while, then ultimately, it will go back up, you'll you'll potentially, you know, make more money, right? Because you're our long term investor looking at the game in the future.

Amanda Holden 33:29

Yeah, absolutely. And it's so funny when we talk about index funds as being boring, because it's boring in the sense that it's easy, like, it's easy to do, and anybody is capable of doing it. Once you get past, you know, the initial learning curve that very much exists. I'm not saying that learning the language of investing is, is easy, but actually getting your passive long term index fund strategy up and running is pretty easy. And so it's boring, but isn't boring. I mean, we are, we are also, you know, in a market environment right now, where a lot of people would say that it's not boring. And it's plenty of risk already, for people to be invested in the stock market, even in a broad way. And so I find that that is, again, plenty of risk. And for me, taking on significantly more risk in the stock market is just certainly not something that I want to do myself, and I don't actually think is appropriate for most people. And I think that that's something that's really important to understand in investing is that risk and reward are always going to be two sides of the same coin, you do not get to have one without the other. If somebody tells you that they have an investment that is no risk, all reward all return, then I promise you, it is a scam that does not exist run. Instead, you have to remember that what you could potentially earn on an investment is always going to be correlated to the amount of risk that you are willing to take. And so for example, when we're talking about risk in the stock market The risk really takes two forms. You know, we've heard over time that stocks return, or at least US stocks return about 10% per year on average. Well, you know, this is another thing. That's one of my pet peeves, especially with the rise of, of online influencers, if they don't appropriately talk about what the experience will be, because what will not happen is somebody is not going to deliver 10% returns to you and drop them at your doorstep of December 31 of each year, tied up with a little bow. That is not the way that it works. The stock market does not care about our cute little Gregorian calendar and instead moves in these big sweeping cycles, right. And so it's much more likely that you're going to have like big up years years that are like up 20%. And then you'll have a year that's middling, it's like up 2%, you'll have a year that's down 20%. And over time, it averages out to about 10% per year, which I actually think is a little bit intuitive, right? Like think about your own life and think about how everything is always a little bit two steps forward, one step back, and Jamila, when I'm teaching my students, I always like to compare it to my dating life, right? Like, like some years, I hook up with, like 20 Dudes, some years, I hook up with like, two dudes, some years, I hook up with, like, negative dudes, but over time, it averages out to about 10 Dudes per year. Point is not every year is going to be a banner year, that's just not the way life works. But anyway, sorry, I kind of got off on a tangent there.

Jamila Souffrant 36:32

I love that analogy. I feel like I'm sure some people can relate to that like, but it's good to put it in that perspective on. Like, when we talk about returns, like the risk and reward, I think that's just important to understand that there is no risk. Without the reward, there's no reward without the risk. And that goes for anything in your life. But especially investing,

Amanda Holden 36:50

especially investing. And when you're investing in the stock market in a broad way, like in a diversified index fund sort of way. The two forms of risk that you're taking on are the volatility in the short term, which is what I just described via my dating life forecast this year, not looking so good, everybody. And the other form of risk is that there are no guarantees in the future. And so, again, for me, what I find is that for most people, that's plenty of risk. And so anytime you want to do something beyond that, for example, trying to pick your own stocks, that is something that you're more than welcome to do, I probably wouldn't do it with any more than, you know, five or 10% of my overall strategy. But know that what you're doing is you're actually adding in additional risk to your overall strategy. Because, yes, maybe you catch the next amazon before it's Amazon. But for every single Amazon, there are tenancy worlds. And so it's very likely that you could just pick a bunch of duds. Yes, you have a higher potential for picking the skyrocketing winner. But there is also a significant downside potential.

Jamila Souffrant 38:03

Right, right. Okay, so we would talk a little bit about risk and reward when it comes to what people can invest in, like the options. I'd love to just like quickly kind of go through that, you know, so I talked a little bit about 401, K's. And you know, that's pre retirement, or pre tax investing. And then there's post tax investing. So I know that it's gonna depend on your access to like a 401 K, versus maybe your income levels, but can you just give us like maybe your own idea of where people should be investing depending on what they have access to?

Amanda Holden 38:39

Sure. Do you mind if we even just take a big step back? I think that there is a really common misconception about retirement accounts in general. So 401 K, Roth IRA, SEP IRA, WTF, this alphabet soup of letters? Like, why? Why is it even like this? Like, who did this to us? Well, the IRS done this to us. This has everything to do with taxation, retirement accounts have everything to do with taxation. And really, at the end of the day, all any retirement account is, is it is a bank account that gets special tax treatment that holds investments, because one of the things I hear said wrong the most is this, people will say my 401k is an investment or my Roth IRA is an investment. And because I'm terrible at parties, I will step in and correct them and say you're so close and I love you. But a 401k is not an investment. A 401k is a fancy bank account that holds investments. A Roth IRA is a fancy bank account that holds investments. And so what I always like to compare it to is like think of like, did you ever Jimmy, like did you ever have a cup of noodles growing up?

Jamila Souffrant 39:55

now but I have such a bad memory that I might have it and I just don't know or remember what it was?

Amanda Holden 40:00

Okay, so my fellow elder Millennials might know what a Kaboodle is, is they were like this big like little purple or hot pink and teal, like little double decker treasure storage units like you could keep your tie dye scrunchies and your miniature novelty eraser collection and your Lisa Frank stickers, all of your treasures you could keep inside this little warehouse for those sad treasures and your 401k or your Roth IRA is essentially the caboodle it is just a cute little storage unit for all of your treasures. The Lisa Frank stickers, your lip smackers your OPI nail polishes, whatever the treasures you hold inside, those are the investments themselves, probably some sort of funds that hold stocks and bonds. And so right now we are just talking about the capitals, we are just talking about essentially the garage that holds investments. And so when we are looking at the landscape of retirement accounts, really, they're all providing us the same primary tax benefit. And generally speaking, the idea with retirement accounts is you are getting some sort of tax incentive to invest within this thing as compared to doing it within a non retirement regular smuggler old brokerage account. But the flip side of that is that then the IRS gets to write the rules for use. And so if you're ever like, why are there so many crusty, musty rules involving these retirement accounts, it's because there are essentially limits to the IRS, his generosity, only you can use this account, you can only put this amount in in this year, you have to wait X amount of years, whatever, there's so many rules, because you are getting that tax benefit set another way, the IRS is like, Hey, I'm gonna throw you a little tax bone, but I'm writing the rules for us. And so with any retirement account, you are getting some tax benefit. But again, there's going to be less flexibility. If you invest within one of these regular, regular, that's such a gross word. I wish I hadn't chosen that. Right. I love it.

Jamila Souffrant 42:07

I love I love saying regular, regular,

Amanda Holden 42:10

regular, smuggler, non retirement investment or brokerage account, whatever you want to call it, just a non retirement account, right? Is going to not give you that tax benefit, but total flexibility of you. So you can use it for whatever purpose you can put as much as you want into that account. And you can invest it in any way you want. Right. And so that said, right. So without now honing in on the universe of retirement accounts, the thing that is missed most often is what is happening when the money is invested and growing within the account. Because we hear so much battling in the personal finance space about whether you should pay the income taxes upfront, as is with a Roth, or you should pay your income taxes later, with any other sort of traditional or tax deferred account, like your 401 K, your 403 b and so on. Right? All of his argument. But here's the thing. Either way, you're you're paying income taxes, you're not getting out of paying income taxes. And so I don't really care that much about when you choose to pay your income taxes, because it's missing the point and the benefit of all retirement accounts. And that is that we also have to consider a whole another type of tax. And that is a tax that we would have to pay on money, we earn investing. So there's income taxes, you're either paying that on the way in or the way out. But there's a whole another type of tax, right, there's a tax that gets levied on dividends on interest, and we call it capital gains, that's just when you sell an investment at a game. And so these are the three primary ways that you can make money investing, and let's just use a dividend. As an example. Let's say you buy a stock or a fund that pays a dividend. And let's say you own that fund or that stock within your 401k a dividend gets paid, you don't have to tell the IRS about it because you get tax free investment growth. Same with your Roth IRA. Now, if that had happened in your regular regular account, if that dividend was paid into your regular brokerage account, you will have to tell the IRS about it and pay a tax on that dividend. Because if you figure out a way to make money, the IRS wants to hear about it unless you are doing that investing in the tax free shelter that is a retirement account. And so I know that that was a lot of words, but I think that there's so much misunderstanding about why these things even exist and that's why and the good news is no matter which one you choose you get this benefit

Jamila Souffrant 44:41

yeah and I think that there's you know something to be said for over analyzing like and some like this power paralysis people get into on like, which what should I do first? What should I do next? And at a certain level, especially when you're just beginning it almost doesn't matter as much because it's what matters is the action right or creating that that level of I'm gonna, you know automatically put or sign up for my 401 K. And so just have it automatically take out, you know, 5% of my check or make a Roth IRA, that reoccurring payment there because it's more just building that muscle like, it doesn't matter as much. I think as you make more money, as you you know, as you become the millionaire you want to be, then your tax strategy and being important where you put things and when you're starting to access that money. But I do want to just clarify or understand the point you made. So there are capital gains tax that you'll have to pay. When you make money on an investment, it's usually done when you like, it's a realized gain, meaning you're actually making the sale, right? So if I have a taxable account, as long as I'm not taking money out, or cashing in on that stock and that dividend, then I'm not paying that capital tax yet. Correct.

Amanda Holden 45:49

Correct. So the point of necessary reporting, when you have to tell the IRS is the point in which you actually sell, and like you said to me, like selling is what we call a realized gain. And so in any year, let's say you bought a stock for $10, and you sold it for $100, you just made a gain of $90. And at that point, you will have to report then to the IRS that you made a gate gain of $90. And you will owe a tax on that money.

Jamila Souffrant 46:18

Right. Okay. Thank you for clarifying that. And again, I think, you know, I wanted to bring up the 401, K and Roth, because I get that question a lot on what should I do first. And I know part of I know, in the early retirement community, at least, or the highest people who are earning more money, like the ideas that you put a lot into your pre tax retirement accounts like a 401 K, so you can reduce the amount of taxes that you are earning. But again, it's hard to predict the future in certain areas of how much you think you're going to make in the future. So people plan to earn less, which is why like, they rather pay the taxes now, but we don't know what the government is gonna look like what the tax laws are gonna look like in 30 years. So especially just to start investing, like if you have not already or continue to invest, because you're going to be that money.

Amanda Holden 47:01

I could not agree more. And it's really unfortunate that the first decision that people have to make is this account decision, because it's actually one of the most complicated decisions. And so, by the way, if you're sitting at home and being like, this is way too complicated, trust me, it is not you, it's the system. And frankly, what I really think we should do is burn it all down and start over with something that's a little bit more intuitive. But this is the system that we've got. And I do totally agree with you in that we cannot let this account decision be a roadblock that stops you from investing. Because right now as newer investors, the single most important variable is not going to be whether you do tax deferred or Roth, the single most important variable is going to be how much money you invest. And so use whatever's easy use what you have right in front of you, you know, open up a Roth, if you qualify for one, there will always be time down down the road, where you can fine tune your strategy as you learn more. But for now, just open up a bank account and get to the investing because we're still talking about accounts. We're not even talking about the investing yet, right? We're just talking about the caboodle, we're just talking about the garage, we're just talking about the bank account. And really, the much more fun part is the part where we're picking the investments. Also, it's the investments that are going to be the thing that generates a rate of return for us, a Roth IRA, again, does not generate a rate of return a 401 k does not generate a rate of return. It's the investments that are being held inside of it.

Jamila Souffrant 48:38

Yes, yes. And like you said, as you get more information, then you can fine tune your strategy. So as it comes to for you, I know you teach, you know, so many people investing, but what's the best way that you found to get people to care more or to realize how important it is? Because I know why I didn't care in my 20s. So I was just like, I'll just do that. I'll figure that out later. You know, I wanted all my money from my paycheck. Like right away. I didn't think about investing for the future me until I understood like, wow, like when I saw the money, like what it could have been if I started earlier. Is there an exercise or something that can help people a little bit in terms of why so important? And I'm asking you this because I have a lot of sisters, but one of my sisters, I keep telling her invest, like you're making more money now invest your money. And I know she wants to but she just doesn't see like the urgency. And I tried to show her the charts and how much she could have, like in 30 years if she does this, but I don't think she cares, like as much as I did when I was in my 20s about that 30 years from now like so, what are ways in which we can encourage people what has worked for us encourage your students to care more about like this investing and taking money that they're going to see today and putting it away for another day?

Amanda Holden 49:52

Yeah, I would say it's really a combination of doing some fun visually visualization of your future self comm bind with some really sobering facts. And so, you know, the first part is fun is I really always encourage people to think about their future selves and, you know, do a future self vision, like, Who is this person going to be? Well, I can give you a hint, this person is going to be an adorable, slightly wrinkly version of the person that you are now, this person is also going to be significantly more more vulnerable. And it is our moral obligation to take care of ourselves right now our present selves. But I also do believe that we have a moral obligation to take care of our future selves. And unfortunately, if you live in the United States, which I assume a lot of your listeners do, we live in a country that has very little social safety net. And we also live in a country where we don't really have pensions, this idea that retirement is like an age like age 65 is really a relic of generations past, right, some of our parents, and some of our grandparents had pension plans through work, where they would save and invest money for your retirement and send you a check in each month of retirement. Most of us unless you are a governmental employee are not going to have access to any sort of pension. And so retirement is very much well, I should say retirement is not an age, it is very much an amount of money saved and invested. You can only afford to walk away from work when you can afford to walk away from work. And so that's that is something that I would remind people, I do think that a lot of folks bristle at hearing even just the word retirement because I think so many folks, especially young people think that planning for retirement is a bit of a fool's errand, because will there even be a society to live in at that point. And given how, how difficult it is to be alive right now, in this economy, a lot of folks think that they maybe won't even have that as an option. But you know, even if you don't have like a traditional retirement, where you walk away from work completely, I really encourage people to give themselves the option of at least having some financial independence, some financial freedom to at least choose the type of work that is only meaningful to them, or is only part time work, or is something that is more community based, or whatever it may be, right, because another word for retirement is essentially just financial independence. That's all it is, is just all we're doing. When we're investing. It's not about Roth IRAs. It's not about ETFs, it's about you. And it's about one very specific version of the you, it's about future you. And you really just have to keep that face on the process. As you navigate some of this, again, kind of boring stuff that you have to learn in order to be an investor. And so that's generally what I would do. Everybody should think of their future self vision, like I know, for me, I'm going to be traveling around Europe, with my significantly younger lover, that's going to be my vision for me when I'm age 75. But you know, you do you,

Jamila Souffrant 53:10

yeah, yeah. And you know what to like, and I can speak from experience that, you know, you're planning far out you that's what you think you're doing when you're investing for retirement. Like, you know, you're almost like building like this preserver this life raft that you're gonna use that in the future, but like, literally, you can use it. And I don't mean technically, like, use it, and like, I'll take the money out tomorrow, but meaning having it and building that in the future for yourself actually gives you the preserver or the life vest, the next day, potentially, meaning I wouldn't have been able to quit my job, or do what I'm doing now without having starting like the path of investing more in my retirement accounts. Right. Like, once I knew that I was on track to be okay, at the standard retirement age, it gave me more flexibility to take more risk, and my current, you know, life today, and so just future encouragement, that it's not just about your future self like yes, that's what we're doing. That's what we're, you know, making sure we're good down the road. But it literally you can see the benefits of investing and taking care of your money today tomorrow by making these changes by just starting.

Amanda Holden 54:15

Yeah, and I'll even add to that and even go a little bit more, which you will Whoa. And that you know, a lot of the millennials I talked to say they don't want to invest in a world that they're not even sure will be a reality right? To which I say I completely understand. But there is also benefit today in having some sort of long term plan and feeling like you're at least working on something because there is really daily pain and living without a plan.

Jamila Souffrant 54:46

Yeah, kind of emotional mental like we it does impact you know, when you feel insecure about where you currently are versus knowing you know what I'll be okay I have that in the future can allow you to take more risk.

Amanda Holden 55:00

Yeah, and you're just you're giving yourself a fighting chance.

Jamila Souffrant 55:03

Oh my gosh, Amanda, I can talk to you about investing all day. But I would love for you to tell people where they can find out more about you and your wonderful work.

Amanda Holden 55:14

Jimmy, do you mind if I give a quick shout out to your number one and two fans? Yes.

Jamila Souffrant 55:20

Go ahead. Yes. Oh my gosh.

Amanda Holden 55:23

Yes. So my good friends case on and Benji, maybe they're listening are diehard, journeyers, and Jamila fans, and hi, Kay. Hi, Benji, I love you very much. And everybody should check out Ks. Humans of New York story. He's so inspiring Benji as well. And on the day that this podcast comes out, I'll share the story on my Instagram. And so come find me on Instagram. I'm at dumpster dot doggy. That's where I do most of my free investing education. So find me there. I'm also on Tik Tok and YouTube, same name, dumpster dot doggy. And then I don't even know if we mentioned this. My business is actually called invested development. So my business and then my full investing course are called invested development. And so check that out if you're interested in as well. Oh my

Jamila Souffrant 56:10

gosh, yes. I'll link that all in the show notes. And I will just say quickly, high k. And Benji, if you are listening, I remember you tagged me in the story when they were profiled on Humans of New York. And I had reached out and we made it like really cool connection. And so I want to thank you for that. Because I wouldn't have known that or knowing that they were like listeners of the podcast. And it just goes to show the importance of just like putting yourself out there. Because you just never know who's listening and who needs to hear what you have to say. Thank you for being derniers can Benji and everyone else who listens and supports the podcast.

Amanda Holden 56:44

Well, and thank you for doing this work Jamila.

Jamila Souffrant 56:50

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.

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