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💪 How to Simplify Finances: Simple Investing Strategies from Naseema McElroy 📚
780 Plays6 months ago
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💥 David chats with Naseema McElroy, a registered nurse and financial coach behind Financially Intentional. 🏦
💡 She emphasizes the importance of simplifying finances, budgeting, and low-cost investing for long-term success. 📈
🔑 Key Topics Discussed:
⇨ The importance of simplifying finances
⇨ Psychological benefits of financial simplicity
⇨ Simple investment strategies for financial independence
🔗 Naseema’s Links:
🎥 Financially Intentional Website
💸 Financially Intentional YouTube Channel
📚 A Simple Path to Wealth by JL Collins
📘 The Millionaire Next Door Book
🔗 David's Links:
🍏 Forget About Money on Apple Podcast
🎧 Forget About Money on Spotify
🤔 SPIVA Report of Passive vs Active Fund Performance
👍 Like, Share, and Subscribe: If you enjoyed this episode, please like, share, and subscribe! Your support helps us bring more valuable content to you.
#️⃣ Hashtags: #FinancialSimplicity #NaseemaMcElroy #DebtFreeJourney #Budgeting #SimpleInvesting #FinancialIndependence #PassiveInvesting #FinancialLiteracy #SimplifyFinances #MoneyManagement #EarlyRetirement #InvestingMadeEasy
🕒 Timestamps/Chapters:
0:00 - 🚀 Introduction to Naseema McElroy's Journey
3:39 - 📈 Evolution of Financial Perspectives
5:31 - 🌐 Societal Pressures and Financial Complexity
8:28 - 🔄 Overcoming Financial Confusion and Complexity
10:57 - 💡 Impact of Budgeting on Financial Simplification
11:59 - 🧠 Psychological Benefits of Simplifying Finances
13:36 - 🏠 Pursuing Financial Independence Through Simplicity
15:29 - 📉 The Case for Simple Investing Strategies
16:51 - 💬 The Illusion of Complexity in Investment Strategies
20:24 - ⚠️ Pitfalls of Combining Insurance and Investing
23:25 - 💪 Embracing Simplicity in Wealth Building
24:20 - 🧠 Mindset Shifts Towards Financial Simplification
25:40 - 🎓 The Role of Financial Literacy in Complexity Perception
26:42 - 📚 The Financial Independence Curriculum Debate
37:32 - 🗂️ The Complexity of Investment Strategies
46:38 - 💥 Overcoming Fear and Taking Action
47:48 - 📚 Essential Resources for Financial Simplification
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Transcript
Why Finances Seem Complex
00:00:00
Speaker
Why do we gravitate towards complex finances? Today we explore how simplifying your finances can lead to greater control, peace of mind, and a clearer path to financial independence. Here we go.
Podcast Introduction
00:00:13
Speaker
Welcome to the Forget About Money podcast, where we encourage you to take action today so that you can focus on what matters most to you.
Guest Introduction: Nasima McElroy
00:00:20
Speaker
Today, we welcome Nasima McElroy. She's a registered nurse, financial coach, and personal finance blogger. She runs the financially intentional blog and podcast, and was successful for paying off nearly $1 million dollars in debt, mostly in student loans. Welcome, Nasima.
The Perception of Financial Complexity
00:00:37
Speaker
Hey, hey, hey, thanks for having me.
00:00:40
Speaker
Well, thank you for being here. So I reached out to you the last week and one of the topics we thought about talking about is why do people think finances have to be complicated? And it got me thinking, not necessarily whether they are or aren't complicated, but why we think and why maybe the general masses think that they're complicated. So why don't we think that finances are simple?
Nasima's Financial Journey
00:01:10
Speaker
One of the ideas that came to mind was the amount of bombardment that we get, whether it's from family members, fellow church members, whether it's a commercial, whether it's social media, whether it's ads on social media, trying to sell courses or this is how you get rich, that kind of thing.
00:01:31
Speaker
But what we don't see are messages that imply that it can be simple. um So in your experience, why do you think people think that finances have to be challenging? ah You know, I was one of those people, so I can speak firsthand. um I think that especially if you didn't grow up ah around wealth or you grew up kind of like for me, I would feel like I was like wealthy, ah like adjunct like I would like to the side like I saw wealth. um A lot of my and friends were very affluent, but I always grew up. No, I had a single I was raised by a single dad like we were all we just were at the point where we just had enough we didn't qualify for like government assistance, but
00:02:21
Speaker
ah Health care was unattainable for us you know so i always like was like i don't understand that and the way that those people got to what. Got to where they're at seems like super complicated and i was like let me just focus on what i have control over initially and for me that was. making sure I got really good grades, making sure I got into a really good school, and therefore, you know, get into a really good job and start making really good money. And then when I got to that point, I was like, okay, I'm done with all this school.
Simplifying Financial Management
00:02:56
Speaker
Now I can like drill into like this PhD level of trying to understand how to build wealth, right? And so I was just like, okay, now I can take this time to really just learn. And I really thought like that's how much knowledge I needed to acquire in order to really understand finances, really understand how to grow my wealth, because I
00:03:23
Speaker
understood fundamentally that making money doesn't mean doesn't make you wealthy. um But getting to that other side, I was just like, I need to really understand this, because I wasn't at the point where I was ready to like relinquish it over to somebody else to do it for me. I really wanted to understand it for myself. I appreciate your you're sharing, like how you thought about it as you were you know going through your youth to education and to young adulthood, which makes me, which made me think about like how people think about finances. Now, in your case, you might just be thinking about investing, the investing part of being simple or complicated, but finances if
Recognizing Financial Complexity
00:04:02
Speaker
is kind of broad. I mean, so as I as i got older,
00:04:06
Speaker
And that's not just you know the traditional way you graduate high school, go to college, you get a part-time job or whatever it is, or you get a real you know real job. And then you figure out how to pay bills, credit cards come around, debts come around. And so it's not just the investing case, it's how do you how do you manage credit cards? How do you manage your different bank accounts? how do you And over time, unless you know what the end result is supposed to look like, it can get really messy. yeah i I would think that if somebody's listening to this and they wanna know if their finances are
00:04:40
Speaker
complicated, they should ask themselves, like do they have multiple credit cards with differing interest rates? Do they have several banking and or investment accounts? do they If they're not organized and not cleaned up, maybe they have overdraft fees if they so if that's still a thing. I hope banks aren't too doing that, but they might. Oh, they definitely do. Oh, yeah. Still a thing. Yep. Are they missing payment deadlines? Yeah. Are they trying to, are their spreadsheets complicated? Or do they have like multiple systems for budgeting? And just in general, do they have difficulty in managing and understanding financial issues just in general? Yeah. So if you ever answered yes to any of those questions, I think you could say that at least somewhat my finances are complicated and I could do some work to simplify them.
Societal Influence on Finances
00:05:31
Speaker
Yep.
00:05:32
Speaker
We also talked about the influences of like societal norms and pressures and things like that. um I guess social media could fall into that category as well. Definitely. and definitely do you How do you think those kind of pressures contribute to financial complexity and affect how people like maybe how often they review their financial plans or what action they even take initially to get from point A to point B. Point A meaning where they're at now financially and point B being whatever monetary objective or investment objective that they have.
00:06:06
Speaker
I mean, social media in itself, I really feel like makes people think that, you know, social media is a highlight reel, right? And so they just see the best of people and they think that that's what they should be aspiring to, not understanding like a lot of the story behind where they got to, where they are and the struggle that they had to go through. And so I just wanted to acknowledge that and A lot of times social media is about selling you things. And so people feel like financial success means having a nice house.
00:06:44
Speaker
having a really nice car and not understanding the financial implications of those. um So they don't think about budgeting. They don't think about earning money. They think about, you know, how they are presented. um Do they look wealthy? Therefore they are wealthy and instead of like really understanding what true wealth is. like understanding a net worth, understanding like that their primary home isn't typically an investment, like all of these things. um And so then when you talk about like budgeting and you know understanding how to pay bills and understanding how not to overdraw a bank account and understanding how not to over-consume credit cards and having multiple credit cards or multiple loans or all of these things, I think people don't even get to that point.
00:07:36
Speaker
um because because they have done all of the things that they thought that they were supposed to do societally and it's not until they really get intentional and drill down and see like, oh, you know, I did a lot of these things to impress people that don't even really care about me or because I thought that this is what, you know, making it look like, making it looks like Um, so I think that that's the point where people are at and they have gotten themselves into like this place where they might feel ashamed about the things that they have done financially. And so they're kind of scared to take that next step. And like ah one of the biggest questions that I get is like, okay, so where do I start now?
Starting Financial Changes
00:08:24
Speaker
Right. So I'm at this place that I want to change, but like, how do I start where.
00:08:30
Speaker
where do i where's the first thing What is the first thing that I can do to kind of turn this around? And um yeah, a lot of it is simplifying things. So even for people who might identify that they're in a more complex financial situation and then they're ready to make that change, but then they still don't know where to go because they still hear their friends talking about Bitcoin or other cryptocurrencies. They hear about, you know you've got to create a course and sell it online. They hear about whatever job opportunities that they may or may not be qualified for, but maybe their friend has a big high paying job and now they want to go do something else that's out of their lane a little bit.
00:09:09
Speaker
Or the entrepreneurial pool, like just leave your nine to five and be entrepreneur and all your financial woes will be solved. So whether it's keeping up with the jones ah Joneses that had drive that desire yeah to improve your finances or I guess bluntly probably make more money as probably as what's in their mind so that they can either live a more extravagant lifestyle or invest or save for retirement or get out of debt. whatever it is. But once somebody decides they want to make a change, they still don't know exactly what to do. So they probably default to what they hear. yeah So then they're spending the $20,000 that they have in their savings account, which they may not have any other retirement accounts going on. Then their friend's like, hey, you should have Bitcoin. I made $30,000 last year. And they're like, oh, sweet. I'll do that. And the next thing you know you know. And that is definitely not simple. That's a complicated investment.
00:10:02
Speaker
Yeah, I saw this like it to to it speak on that. I saw this meme that like just hit the nail on the head for me. It's like people want to get started, right? But they're at this at the bottom of the stairs, right? And instead of taking the first step, They extend their leg all the way to the fourth step and try to make it like over complicated like going for those investments like the meme stocks and the bitcoins and all that kind of stuff instead of doing those little those basic things at first like getting your budget in order making sure that you're invested at in your company retirement account.
00:10:38
Speaker
Like those basic things that are just like the first step that seem like kind of boring. I think like people think like is you're not you're not winning fast enough. Like you're not getting those dopamine hits fast enough. And so you don't think that they matter. But those are your foundational things that if you get those in order, you'll be set financially.
Benefits of Budgeting
00:10:58
Speaker
Naseema, you have an incredible story regarding finances. Can you share a personal experience where you had to simplify your finances and what impact it made on your life?
00:11:09
Speaker
Yeah, I mean, again, like when um I was starting out on this journey, like I said, I thought it was gonna be like this PhD kind of level, like thing that I had to do. The most impactful thing that I actually did was learn how to budget. And I started using a zero based budget and shifting that relationship with my money and started telling my money where to go in advance and having that control but also making sure that I, you know, incentivize incentivize myself in that process by making sure I have money to go on trips and do the things that were fun for my daughter. That was the fundamentally like best thing I ever could have learned how to do and it's carried me through this point.
00:12:00
Speaker
What were the psychological benefits of moving from your complicated financial situation to a simplified one? It took so much mental strain off of me because I was always the one like up at night thinking about like how come I'm making this amount of money but I don't have anything to show for it. But when I shifted that relationship and was like, I know exactly where every single one of my dollars is going. It was so free. It seems like the worry that you were feeling before got displaced from you and the burden you put that burden of worry on the budget itself. I don't know. Sure. If you used an app or maybe what you said zero based on but what first comes to my mind is like YNAB. I'm not sure if you use that or a different app.
00:12:43
Speaker
I started out, YNAB can be a little bit complicated, but I started off actually because I was kind of in that Dave Ramsey space with EveryDollar and EveryDollar had just came out, like literally launched the month that I started um learning how to budget and that tool in itself was amazing for me. I've since moved on to different budgeting apps, but EveryDollar was really, really helpful. But doing that reduced your anxiety and reduced your stress. Oh, yeah. Yeah. Gave you a greater sense of control and clarity and I'm assuming it improved your mental health. Definitely. And I finally was meeting my financial goals, right? I knew I wanted to be debt free by a certain age and it
00:13:24
Speaker
created that roadmap for me. And it was the first time that I really felt at peace with my money and that transitions over to every other part of your life.
Simple vs. Complex Investments
00:13:36
Speaker
So, yeah. Now we are in the financial independence space. and early retirement, financial independence. When I think of complex versus simple finances, for me, I think it's much easier to just manage if it's simple. So in particular with financial independence, I know one of the overarching, at least for the base of most people,
00:14:01
Speaker
in the financial independence community of their retirement portfolio is index fund investing, low cost, just funnel it, funnel it, funnel it, broad market, low cost index fund investing. You make money, you put it there. And now you you might prioritize how you, like which types of accounts that you put it in. but that's still pretty darn simple when you do that versus trying to research and pick individual stocks, which as we know, doesn't usually turn out well um for for like day traders and big stocks. And I'm not, this is generally, I know somebody's out there gonna be like, I made so much money last week on day trading. That's not what we're talking about here. That's not what we're talking about, yeah. But I think it's it's easier to track your progress yeah towards your financial goals.
00:14:45
Speaker
um It's more efficient ah saving and investing strategies because rather than picking multiple stocks over here, funds over here, real estate over here, ah Bitcoin over here, ye or whatever it is, ah you don't have all those things to track and manage. um And I do think the more things that you have going on, you have a greater risk of making a mistake. Definitely. Somewhere along the line. This this affects this other this investment affects other investment in this way and I didn't see it ahead of time. So again, whereas we were talking you were talking about how simplicity calmed your mind and set you more to ease and allowed you to sleep a little bit better at night. I don't see that happening the more complex it happens. you know No.
00:15:35
Speaker
No, and I think one way one way I have ah like complicated my finance a little bit is just like it running my business. And so it kind of drives me crazy. Because I'll just be like, man, if I was just like, if I was just like a nurse and, you know, I'm just worried about you managing my nursing income, I would be so far ah much further along. These would be so much simpler. um But one of the things, the pivotal things for me that like changed my perspective on managing my money and building wealth was the book, A Simple Path to Wealth by J.L. Collins. And he was just like, listen, it doesn't really have to be hard. I did all the hard things. So you know I can attest that doing all of those hard, complicated investments don't necessarily yield you the financial results that you think that you're going to get.
00:16:28
Speaker
Just keep it simple, broad-based index funds, set it and forget it. um It's about timing the market, not timing the market. and That right there was the pivotal point for me as far as like going from you know doing all this heavy lifting of paying off my debt to actually getting to a place where I was increasing my wealth rapidly.
The Case for Simple Investing
00:16:52
Speaker
Yeah, you talk about simpler doesn't mean less returns. But for some reason, we think the more complicated an investment strategy is, the higher rate of return we're going to get. And that just turns out simply not the case. Spiva or SPIVA, which is, I'm not sure if it's an organization, a government organization or or independent, but they put out a report.
00:17:13
Speaker
And SPI VA stands for S and&P 500 versus ah active. S and&P index versus active. So what that measures is over how many years does a passively managed fund beat or not beat its active actively managed counterpart. So the latest that I saw from, and we'll include the link in the in the show notes here, But the latest report that I saw was that over a 15-year period, only 12% of actively managed funds outperformed an SAP 500 index fund. So once you see that, and these are professional money managers who are actively managing these funds,
00:17:58
Speaker
You know, there's a lot of reasons for that. We can talk about cost, we can talk about fees, we can talk about biases or, you know, individuals, whoever the managers are, just making mistakes or not ideal choices. But the bottom line is, and what people should use for their planning is, if you only have, if you have an 88% chance of not making as much money, going active, why would you ever go active? Just do pass if it's simpler. it thin And over time, it provides you with a better return. Great returns. yeah Yeah, I'm going to have to look at that report because I think people need to see that. um But the reason why I feel like um people make it complicated is because they've never managed their portfolio and then people are telling them that you know they need somebody to manage it for them or they assume that they need somebody to manage it for them. And then there's this other
00:18:54
Speaker
a group of people like life insurance people that are just like, well, you know, yeah you should get into this life insurance product because then you'll have guaranteed returns and you don't have to worry about the crazy fluctuations in the stock market without telling you all the front loaded fees and all of this stuff and really how much money you're losing by putting your money into those products. Um, but you know, it's free financial
Financial Advisors vs. Self-Management
00:19:21
Speaker
advice. And so they think that, um, they need to go that route to protect their money because I mean, you know, investing is gambling, isn't it? No, it isn't.
00:19:32
Speaker
Exactly but you bring up a good point as far as the sales people out there yeah and i think that's one of the major reasons why people don't get the message that investing can be simple because there's not a whole lot of money in it or not. Because if you think about you know the book simple path to wealth cost you maybe twenty bucks. yeah 20 bucks versus 1% of assets under management for the rest of your life to somebody to take. um Again, there's there's statistics out there, but over time, it's like 56% of your, I don't know, it's ridiculous how much crazy difference it makes yeah between just 1% in overall return. So when people pay an investor because they think that they can't do it themselves to manage their money, their chances of them actually faring far worse
00:20:19
Speaker
is is high than if they just did it themselves and and went the simple path, the wealth approach. You brought up insurance. im I don't know what you think about this, but I'm of the belief that and there's investing by itself and then there's insurance by itself. so Don't join the two yeah ever. And the people that will make the case for it are usually insurance salesmen. They're the only the so people the only people that will advocate for that are the people that have a vested interest in making money off of those products. Other than that, you know, you won't hear too many people advise you know you to do that. I don't really know any other people that would advise you to do that except for the people that sell it. So, yeah. And if you're and if you're listening to this wondering why, ah just... do some own research from reputable bloggers and some professionals and you can kind of hopefully understand why I well why I endorse the belief that insurance has its role and fasting has its role but try not to combine them yeah because then one
00:21:20
Speaker
you will likely be disappointed at some point realizing like what could have been if you'd have just kept them separate. And then it's still simpler too. You know you don't have complicated complicated intricacies and overlapping of the insurance policy, how it intertwines with whatever the investment portion the investment portion of the insurance. It's just know that you will, somebody's got to get paid for those things and those payments come out of your long-term returns. Exactly. And simplicity is the name of the game here. like that is That is the goal. But when, especially if we come from a place where we're not financially literate, we it's ah it might all these big words and rules and guess of returns ah can sound impressive. And I think that's another reason why they're more successful at pulling people in and getting getting your getting their fees out of your pocket.
Financial Literacy's Role
00:22:15
Speaker
And then over time, I don't know how many people,
00:22:18
Speaker
Maybe JL Collins would be a good person to ask this question to. How many people does he know that over time, whether they just got smarter or more educated, or more or just frustrated with their current returns that they actually decided to get rid of their advisor, do things on their own, and have been happy with their results. I'd actually be even curious to hear about people who may be unhappy with doing that too. That would be interesting as well yeah to hear that other side. I don't think there's many people that would be that way. I don't think that you'll find many people that would do that if they're actually like numbers people. um I think you may find people that
00:22:55
Speaker
may have broken up with their financial advisor and maybe maybe a little bit complacent and maybe we have a little bit of you know angst about that. However, you we all know that retirement portfolios, the retirement portfolios or investing portfolios that do the best are from like dead people, are people that just forget about their portfolios, right? yeah yeah So you know complacency may not be a bad thing in that situation. But I did also want to bring up like another book that really um changed the game for me in thinking about um simplicity and is that The Millionaire Next Door um was like really like eye-opening. like Most people that build their wealth do it really simply
00:23:46
Speaker
live simply and are kind of under the radar, and you wouldn't think that these people are wealthy. And that, to me, took a lot of that pressure off um of what wealth really looks like um and how easy it can be to attain versus like you know this hustle mindset, this's this like crazy, all these messages that you hear that um you know, can influence the way that you think or the things that you think you need to do in order to build wealth. So I'm like, yeah, Simple Path to Wealth, Millionaire Next Door. Those books are really um great mindset shifts for people who are interested in ah that getting started.
00:24:33
Speaker
ba Yeah. And another another very popular book in the space is Your Money or Your Life by Vicky Robin and her husband, her late husband. And I know like in 2016 or 15, another book came out and um'm ah periodically it makes these rounds on social media. This is one of the good social media rounds. It's the the index card. Do you remember that? Oh, no. The index card by Elaine Olin and Harold Polak. No, I never heard of that book. I think these two professionals were just sitting, friends having dinner, and one person expressed interest in their own personal life about finances. And the person sitting across from him or her said, I can tell you everything you know on one index card, wrote it down. And it's similar to like our order of operations, you know, max out this versus, you know, and this is US based.
00:25:21
Speaker
But from that came a whole book about it. And I'm sure a lot of the topics or are similar to what we're already familiar with. yeah ah But this is that's just one additional resource that we've already shared and that we endorsed that someone could find useful.
Financial Education in Schools
00:25:37
Speaker
Yeah, I love it. I love new resources. I'm going to have to check that out. Do you think one of the reasons that we believe that finances need to be complicated is because we just don't have the financial literacy? 100%. It's sorely something that's missing in um our education systems and just because generationally, like our parents weren't really taught it. um
00:26:04
Speaker
and we lack the basic knowledge to understand what it takes um to have financial freedom or what it takes just to manage money properly and so yeah that literacy piece is key. Yeah, I am somewhat encouraged by on a national scale that when we were going through high school, I don't know that it was offered. Personal finance was offered in your school, but it darn sure wasn't in mine. And I think even if it was, I don't think anybody would take it. But now.
00:26:35
Speaker
think more than 20 states are mandating financial literacy classes in some capacity at the high school level prior to graduation. Some it's a whole course, some it's a sub course and another course, something like that. But it it is being touched upon. My only concern then is, is the curriculum really like, does the curriculum support the tenants that the financial independence community think or are there other fact External factors at play in designing that curriculum and endorsing that curriculum, which, you know, is it going to be, does it lead to more people being more complex with their finances or they are they advocating, hey, here's an index fund and this is why this beats actively managed funds go. You know, it's as simple as that, but. Yeah.
00:27:19
Speaker
I don't know. From what I've seen, the people that are spearheading these movements in these um different states have been people that are of similar mindset and of the kind of same space as us. So I um have been you know ah enthusiastic about that. like i My antennas haven't gone up too much. but and You have seen it in different industries like where they push financial education like i know they do that for doctors right they they set him up with these financial advisors. You know early on are there. Put into the spaces where they're at um our professional athletes these financial advisors are put into these spaces.
00:28:04
Speaker
and they're not necessarily serving the best interests of the clients. A lot of the products and things that they sell, um people are those insurance products, those annuities, things that they usually get really high commissions off of as opposed to actually educating and um putting the putting these people up, um but setting these people up for success. And like ah one of the things I love to to talk about is like LeBron James wasn't like, He wasn't about to be a victim to that.
Insurance and Financial Planning
00:28:37
Speaker
um And he just straight up call he just straight up called Warren Buffet and was just like, what should I do like to manage my money? And Warren Buffet was like, listen, I'm going to tell you what I would tell my wife if she came to me. Put your money in an index fund and just leave it alone and you'll be set. Does it get much simpler than that? Exactly.
00:28:57
Speaker
I'm the richest man. That's gonna have to warm up it. Are there situations where a more complex investment strategy might be justified? I think for maybe like less than 10% of the population, right? I think we all get, we can get to a point where we're making a lot of money. We have multiple businesses and we need to make sure that um we are ah like tax wise in a good position. And that's when you need ah but different kinds of financial plans. But for 90% of the population, like,
00:29:33
Speaker
If they invest in index funds, if they have whole life insurance, if they make sure that you know they have a willing trust in place, they're golden. It's just that simple. you know um and ah It does not have to be hard, and this is 90% of people, but um those 10% of people are what a lot of people um though That ten percent of the population is what a lot of people aspire to and that's what a lot of these people that sell you into these products say you need to be like them but no you don't need to be like them because your finances aren't as complicated your life isn't as complicated as them so why would you aspire to be like them.
00:30:16
Speaker
aspire to make sure you are doing right for what your needs are, where you're at in your life and your financial and your finances right now. Like, nah, don't be like them. Stay young. I agree. Yeah. Yeah. I agree for the masses. Simpler is better at some point, whether you're become a high net worth individual, you might need some advanced estate planning or tax strategies. Yeah. Or even if you're a professional investor, but we're, again, we're talking about a smaller, smaller percentage of people, not the masses, not not the people who are listening to this podcast right now.
00:30:48
Speaker
yeah um Yeah. um And regarding, I want to touch, you did mention whole life insurance. I just want to make sure that there's, people understand there's different kinds of insurances. There's term life, there's whole life. And you can even, if you're squared away financially, you might even choose choose at at some point to self-insure. So there's disability insurance. so where Or-term care insurance. and There's a lot of different names for a lot of different things. yeah But so thank you for bringing up the topic of insurance, but there there is more than just whole life insurance and and there are pros and cons to each thing. it just You just have to pick what fits best for you, but educate yourself on all of it before you just default to taking a yes or saying yes to a whole life policy insurance salesman or term salesman or whatever it is. Just understand them ah for you before you write that check and start paying those premiums. I think one thing to differentiate is a lot of um insurance salesmen pass themselves off as financial advisors or you know they wear both hats and so that's where it can kind of be confusing. So you know if you're ever confused, be like, well, are you selling me in into an insurance product or are you actually like helping me financially? And so I usually just... tell people to steer clear of those kind of people. And if they really just are interested in getting their finances in track on track, then just get a fee base, a flat fee financial advisor that does not have a vested interest in your portfolio or in selling you an insurance product. Like they are just there to give you financial advice. You take the action to implement it, but you know they have your best interests at heart.
Self-Managing Investments
00:32:37
Speaker
Yeah, and i I definitely encourage others to do that because yeah I think if if down the world without if a person out in the world just comes across a something that they believe is a financial advisor. Their default should be that they're not an advisor, they're a salesperson. They're selling you something, period. Advice can come along with that, but they're selling you a product for which they get paid. And so then as soon as that happens, I believe there's a conflict of interest for your best interest.
00:33:09
Speaker
And again, separate it. yeah You can pay for just strict advice and then take the action yourself. you know Buy that index fund, set up your own Vanguard account or Fidelity account or Schwab or whatever it is. And I believe the only thing that you would need to do as far as like additional in your portfolio, you might at some point need to pay a tax advisor if you get a little bit complex, if you have real estate or you're just like, want some peace of mind because you don't necessarily understand all the tax code or how things play out or estate planning, of course, but don't don't pay somebody an ongoing fee yes just to call you twice a year and say, let's change all your mutual funds around because not only do they get a fee, now they get some kickback from just making the trade itself. And all this stuff comes out of your pocket and and kills your long-term gains. so
00:33:54
Speaker
Yeah, that's 100% agree that a lot of times people think they need financial advisors, but they really probably just need to consult again once a year like ah a CFP to do some tax planning or ah you know and ah not a cpa a CPA to do some tax planning. you know like I feel like that's a much better value than a financial advisor, right? um Sometimes you need a lawyer, ah like an employment law lawyer to kind of get your job in order, your workplace in order. That's a better investment, like a one time thing um that I feel like that is better than paying for these financial advisors. So um yeah, I don't I don't across the board advocate that.
00:34:37
Speaker
everybody needs a financial advisor. I believe, like I said, like 90% of people probably can't won't benefit as much from a financial advisor, but most people will benefit from a really good CPA, a really good lawyer, you know, things like that, like a estate planning, all of that. So yeah. Yeah. So the single resource that I recommend to people, you already mentioned it. So if somebody is like thinking, Oh, I know I need to get around to doing something, you know, whether it's your 401k investing or whether it's external brokerage account investing, or even how to think of it, and you have no idea really where to start, do not go to a advisor first. Go pick up JL Collins book, yeah Simple Path to Wealth. Read it from cover to cover, it's an easy read. ye
00:35:21
Speaker
believe it or not, it's an easy read for any book, not just a financial book. Listen, I have read that so many times. I have it on, ah first of all, Dale Collins has the best voice. So I have it on Audible. I have the physical book and I have the ebook because I go through it all the time. It is such a great book and it is an easy read. Yeah, I know we're talking about J.L. Collins, and I'm gonna do a shameless plug for this podcast. If you look at an earlier episode, I actually interviewed J.L. Collins he's and Paul Ann just alone, and then there's another episode where I have him and Paul Merriman, and two very well-known and respected people in the space. It was pretty cool ah to have them both on the show. So if you're interested in what we're talking about, please go back, check out, go back and check out that episode and then go buy the book and listen, or listen to the audible.
Steps to Simplify Finances
00:36:03
Speaker
I have the audible as well because you're right, his voice is just great. He is a great voice, yeah. yeah
00:36:09
Speaker
So if you decide for yourself that you've got complicated finances and you want to simplify them, what are some steps that you can take to simplify? I think the first thing you really just need to do is just get a picture of where you're at right now, right? And so you list out all your debt, you list out all your ah your investment accounts, your assets. You start tracking your spending for the last two months, like go through your bank statements, go through your credit card statements and get a good financial picture
00:36:41
Speaker
And then you can start putting things in categories. Like it's nothing like just seeing everything like in one big picture. And there's apps that do this as well. Um, actually we talked about every dollar, but that's not as comprehensive as like a YNAB. But what I've really found resourceful lately to like kind of see everything in a big picture is a Monarch money. They have a really good app where you can see all of your accounts. You can see, um, um, ah your income, your outflow, everything, your cashflow, that's what it's called. um So you have these different screens, but it it captures all of your finances in one place. And then you can get to a point like you just need a starting point, you need to set like where you're starting from. And then you figure out like, what is your first goal and won't work on one goal at a time, right? So if your first goal is going to be, you know what, I need to pay off debt, I need to focus on debt.
00:37:39
Speaker
Okay, start there and get a plan in place to start working on your debt one debt at a time. And then move on to the next thing, like drill down, simplify it. And then if your next step is, okay, I need to start investing. Okay, focus on one thing. Make sure that your company retirement account is set up um and optimized. Just focus on that. Once you get that down and automate it, move on to the next thing. So, you know, Simple, simple, easy, step by step. But the first step, get that picture in front of you so you know where you're starting from. So not only get a ground truth of you know net worth, and so yeah categories categories of spending. yeah And I think that'd be eye opening for, honestly, I haven't done that in a while. It might even be an eye opening for me to do.
00:38:29
Speaker
it And Marnock does that. Like the first thing you go to is your network. You see your network at a glance and you see all your accounts, you see your cashflow, then there's the budgeting tab. And so I think that that's a great resource. It's a relatively new tool, um you know, coming out of Mint closing down. But yeah, I'd say do it. I want to see. said Okay, yeah, we'll definitely i'll put that link in the notes too, because I'm gonna check it out myself. Yeah. One thing that I've come across in talking with people about finances, because once you once people know that you like finances, then you become like the local money guru. nobody Hey, I got a question about this. I got a question about that. And I'm glad to help. Yeah. But one thing that I've come across, and these days, people rarely stay at the same job for very long. So one of the things that happens is,
00:39:13
Speaker
They have a 401k here, a 401k there, and then they may not know what they're in. a lot They may have lost their login. They have no clue. So one thing that I recommend is that they first off find the login and try to figure it all out, what they're invested in, and then consolidate all that into one account so that they can manage it. And you can open up a rollover IRA. if you're no longer with a company, you can open up a rollover IRA with any major mutual fund company and manage it yourself at that point. So that's another way people
Automation and Financial Management
00:39:44
Speaker
can simplify. But let me just say that there's a free tool that does that for you. It's called Capitalize, and they will help you find all of your logins so they get paid in the back end from the investment companies. So it's totally free for you to use, but they go in, find all of your old 401ks, 403Bs,
00:40:03
Speaker
and find your logins, set up your ah rollover account, and bring all of that over. so Because yes, i am like that's one of the first things that I advise people. like You probably got money all over the place. You don't think you're an investor, but you've worked out these jobs that had retirement plans. And so you need to take that money, put it into your own IRA. But you know that can seem overwhelming. But guess what? It's a free service that does it for you. So do that. um So yeah, capitalized is a great resource. Another step I would recommend is automate yeah savings and yeah bill payments. Yes. So if you automate it, you don't have to think about it. Yes. It just reduces all that little noise in your head. Like, did I pay that bill? um automation Automation is key. Automation is my best friend. The other thing that I automate because I do use credit cards, but I don't believe in paying interest is making sure that I have my auto pay set up. So that I'm paying like the interest saving balance like every month if I'm not just wholly paying off the um card but making sure that that in itself is always set up so I am not paying any interest on my credit cards and I only put on my credit cards what I have budgeted for.
00:41:15
Speaker
Like, so that's how I use my credit cards because I believe, you know, credit cards can get you in big trouble. So if you are in a position where you're not able to pay off your credit cards every month, it's probably a good idea to stop using your credit cards until you can get to that point.
Investing in Index Funds
00:41:31
Speaker
And once you get to that point, then you make sure that you're always paying your balances in full automated. Another step. that someone can take to simplify their finances is to focus on low cost, broad market index funds for their investing. yep Not only does it simplify it by taking out that third party or most of the third party. And what I mean by that is if you go direct to a Vanguard or to a Fidelity and pick their lowest broad market index fund, as far as when I say lowest, I mean their lowest expense ratio and Vanguard VTSEX is 0.04 and I think Fidelity has some zero. zero
00:42:06
Speaker
Yeah. And and i've actually, if I was advising, if I was advising, this is not official advice. If I was advising ah someone ah who was just starting out, I would actually, I use Vanguard, but I would i would recommend that they use Fidelity because Fidelity doesn't have that $3,000 minimum.
Choosing Investment Platforms
00:42:21
Speaker
Yeah. They have no minimums and ah they have the zero cost index funds and they have um Fractional investing fractional so you can if you have $20 to invest you can just invest that $20 as opposed to waiting until you have the You know hundreds of the dollars per share to invest so yes a hundred percent like we ah are definitely team Vanguard however fidelity has changed again, and they have opened up the space for um more people to
00:42:56
Speaker
you know, access investing and all all about accessibility. So a hundred percent right now, I tell people to go to fidelity, not investment advice for you, but I'm just like, Hey, check fidelity out. Cause they're doing a lot of things right. Yeah. And some of these funds, the probably the most popular, low cost, broad market index fund for Vanguard is VTSAX. And I believe the equivalent one of the, it's either VFIAX, I think that's FZROX. It's F Z ROX. Yeah, I think that's the zero fee one, right? Yeah, yeah f zero there's a couple of zero fee ones, but the broad based one and that's equivalent to VTSAX is FZROX, I believe. then and So you can just go to the... Oh, and another benefit of Fidelity. Again, I don't use Fidelity, but I do i do use Vanguard and... ah Benefit of Fidelity is their user interface is much better than Vanguard's. A hundred percent. Vanguard is just a little spoiled because they you know they they old school, they know they got ride or die people for them, so they don't necessarily change as fast, but ah Fidelity's user interface is amazing. um I have two both Vanguard accounts, um but now like my newer accounts are is in Fidelity and I just do everything on my phone. It's super easy. like I love the interface.
00:44:11
Speaker
and For both places, I like to say the customer service is hella good. They are so sweet. One of the things that I like to do for fun because I work at night is at five o'clock in the morning, if I have any questions or if my coworkers have any questions. I love to call their customers support because they are so freaking nice and they walk you through like all of the things. like They don't give investment advice, but if you're just like, you know what? like I just really wanted to open up a Roth IRA, but I really am kind of like scared like and I don't want to mess up. like That's what people say. I don't want to mess up because I don't know how to do this. Oh my God, they'll walk you through it and they are so nice about it.
Taking Financial Action
00:44:53
Speaker
um those two companies firsthand experience, ah love to talk to their customer support. I was in her picturing a group of like half asleep nurses who have been up all night getting re-excited at 5 a.m. all gathered around this phone. I'm telling you, what's that time curse? Put it on speaker, put it on speaker. Yes. That is us. Well, ah fun fact, you cannot, when you're talking to those people, put your phone on speaker or if they hear something in the background, they're just like, hey, I we i can't really talk to you about this with like a lot of people. But we do set our timers to it. I do have my nurses like on the phone with them. And they're just like, every time, they're just like, they are so nice. And I'm just like, yeah, I told you. So like it's one of my fun like entertainment things as a money
Changing Financial Habits
00:45:35
Speaker
nerd. That is what brings me a lot of joy.
00:45:38
Speaker
Well, this has been a really good conversation. and i let's And I want to focus on the person out there who, it doesn't matter what age, maybe they've already, they know they're doing some things they believe are probably right. and Maybe they are, but for some reason they're still not taking that action. I mean, I've known people, I've had talks with money for years and they know me like, and they could just say, Hey, David, help me through this. And I would do it, but for some reason they're still not doing it. And yeah so time is not on their side, but something is holding them back. So if you're listening to this and and you haven't taken action that you Do you think that you should have taken, you know, try to overcome that fear of change and or the lack of knowledge and you do that through some of the resources that we've recommended here?
00:46:17
Speaker
um really understand your emotional habits with money. ah Really take a take a step back and try to observe that from like a third party perspective. and So you can understand why you're doing the things that you're doing with the money. and And once you identify that, then you can take overt steps to change that. And like you said, start small, pick one goal yes what and just start tackling that. And the psychological advantage is that you'll gain over that and the motivation, the self motivation that you'll gain from that will well bring you to that next challenge one at a time.
Seeking Financial Therapy
00:46:47
Speaker
And next thing you know,
00:46:48
Speaker
If you have a negative net worth, now you're at a zero. And if you have zero, or you know then you're just up and to the right on the trend line. so And that's where we wanna go. yeah It's really less about, I think, the final dollar amount. It's more about just getting that trend line going up and to the right. Whether you're starting negative or positive, as long as that trend line starts going in the right direction, that has a lot of power just seeing that. Even if you're not at your million dollar benchmark or whatever it is. It's 100%. And in the closing's out. I think that, again, a lot of people probably don't need a financial advisor. However, a lot of people could probably benefit from a financial therapist because money money trauma is real. And maybe if you're not taking those first steps, it's something that you need to address that has happened to you in the past that has um affected the way that you think about money. So I highly recommend if you're stuck, work with a money therapist. And I think that would be a really good
Resources Recap and Closing Remarks
00:47:44
Speaker
investment.
00:47:44
Speaker
in yourself. Let's really go back over the resources because you mentioned a lot of them. Yeah. ah Okay, of let's let's go over the books first. Yes, let's do simple path to wealth, a millionaire next door. You set the index card um as far as like seeing your financial picture at a glance, at your fingertips. Monarch money is a great tool for that. um And then um getting all of those accounts rolled over for free, capitalized is gonna be your best friend for that. um But yeah.
00:48:19
Speaker
and then get a financial therapist, get a good CPA, all those things. um I think you'll set yourself up for um great success with your money by doing those. So if you want to reduce your anxiety and stress, improve your mental clarity and focus, enhance your overall wellbeing and peace of mind for your financial confidence in your actual financial picture, then really take some steps to simplify your finances, and I think you'll be very, very glad that you did. Yes. Thank you, Nasima, for being here today. It's a pleasure to meet you. This is our first time actually seeing each other face to face. I feel like I know you because we know so many of the same people. Of course, and it does not seem like it's my first time meeting you because you have like an identical twin that I know very well. So it's just kind of like, I already know you. I already know everything about you.
00:49:13
Speaker
There are definitely a lot of similarities. Yes. You guys do act very much alike. So, you know, I'm very much at ease with you. It doesn't feel like our first time talking. I feel like I've known you for so, so long. ah Okay, good. Then you'll come down to San Diego and hang out sometime. Oh, you know what? I definitely will come down down to San Diego. I got to bring these kids to Sesame Place, Legoland, the beach down there. The beaches are just amazing. So we're we'll be there. See, what and it just warmed up like two days ago. What? It has been cloudy and cool until just two days ago. Meanwhile, it's a hundred degrees where I'm at. So there's that. I'll be spending the tomorrow at the beach. It's going to be nice. Yay. Thank you, Nasima, for chatting and thank you all for watching and listening. Yay.