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Author of Happy Ever After, The 7 Dollar Millionaire, joins us again to shed light on the complex world of personal finances. He shares tips on getting started, saving money, and aligning your goals with your family to work your way to financial peace of mind one step at a time.

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Transcript

Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.

 

Michael:

Hey, everyone, and welcome to another episode of the real estate investor. I'm Michael Albaum, and today I'm joined by my co host,

 

Tom:

Tom Schneider.

 

Michael:

And with us we have a very special repeat guests, the 7 Dollar Millionaire, if you recall, he wrote a book that we had him on chatting about Happy Ever After. And today, he's going to be talking to us again about personal finances, some things you can do to get started, as well as how to talk to your spouse or significant other or partner about personal finance. So let's get into it.

 

Michael:

Awesome. Mr.7 Dollar Millionaire, thank you for joining us again, we so looking forward to recording with you.

 

7 Dollar Millionaire:

It's a pleasure. Thanks for having me back on that says, this is a first for me. No one's ever invited me.

 

Michael:

Well, hopefully the first of many. So how have you just curious how are things out in Singapore?

 

7 Dollar Millionaire:

Things are just improved. Yesterday, we had like a mini re lockdown. So they call it circuit breaker here for about a month. Because there was a bit of a spike in cases. But that ended yesterday. The big change is very little apart from Oh, you're now allowed to go to restaurants, their restaurants are all closed. That's pretty much it. Gyms are kind of reopening slowly, that kind of stuff. But yeah, that was that was nice. It's nice to kind of go and get a meal somewhere, you know. But otherwise, it's you know, as with a lot of Asia, they're taking that kind of minimal risk approach to it.

 

So I mean, even when there was a spike, it was like 100 cases a day. 5 million people, right? I mean, it's still a very low number.

 

Michael:

Yeah. But everybody in your world is healthy and safe.

 

7 Dollar Millionaire:

Oh, yeah. Thanks. And you guys are on good.

 

Michael:

Yeah, we just chatted with some family friends of ours yesterday, and they are double vaccinated. But she and her daughter just got his tested positive. So she had a breakthrough case. So she's feeling pretty crummy at the moment. But I'm hoping that she's hoping she's not going to go to the hospital or anything like that. So the breakthrough cases don't seem to be as severe as the unvaccinated stuff.

 

7 Dollar Millionaire:

Fingers crossed. Yeah, fingers crossed. touchwood. Right. That's that's the big hope. As long as it stays like that we can live with it. Right?

 

Tom:

I have a friend who had a breakthrough case who's also vaccinated. And he's got a wife and three little kids and his wife and three little kids didn't, didn't catch it. So he's hanging by himself. And you know, I feel much more for his wife, who's managing a house full of Toddlers and Babies versus him who's just hanging out at their their lake. Well, he's men. He's on the men. He's feeling much better. But it's Yeah, really.

 

7 Dollar Millionaire:

Did she get did she get like a second opinion on that? Right. Yeah.

 

Michael:

Thank goodness.

 

Tom:

Yeah. Doing recovering. Well, good, good.

 

Michael:

Well, Tom, it's it's funny as the wrong word. But interesting. This kind of segues nicely into what we want to chat with the 7 Dollar Millionaire about today. Again, circling back and talking some more about personal finance. But a question that I have is, so often people have these target goals in mind, and whether that's net worth or cash flow monthly annual basis. But that's so often based on today's needs, for their whatever family is currently in the picture. And I've got to imagine that changes over time. And so as someone who doesn't have kids, I don't have a really good sense of what kids costs, it could be 20 bucks a day, it could be 100 bucks it you know, I don't have a good sense for that. So how do you recommend folks think about not only their cash flow needs for today, but also for their future selves, as they continue to age but also as additional family members may enter the picture?

 

7 Dollar Millionaire:

Yeah, I mean, it's a it's a there's no right answer, right?

 

Michael:

I mean, I mean, oh, well, then we can we can we can cancel the show. We're done here.

 

7 Dollar Millionaire:

There's just no single one right answer. I mean, the first step with the first answer to this is actually just taking the first step start actually doing some work, right. I think I was working recently with talking about how you make all the progress in personal finance. And a lot of people are discouraged because they think they can't come up with an answer. And it's like painting, right? The first blob of paint on the on the canvas doesn't look like the painting You can't expect it to you go put it on, put it on, put it on. Only after a long time does it actually start to get to the real picture, and it's the same, it's exactly the same with this. You just got to start doing the work. And starting doing the work is actually working out what you want your kids to be like, what kind of life you want to live with them where it's going to be, and the kinds of expenses you're going to have.

 

So you can roll that stuff out pretty easily. I mean, so For me, because I was an expert, I had to put my kids in international school, there's some serious education expenses. You know, it's like the, for me, when my kids went to college, they got cheaper. I mean, that doesn't happen very often, right? My kids got a lot cheaper when I was paying for them to live in a foreign country, flying them backwards and forwards and paying college fees, they were cheaper than the local education costs for me.

 

So that's how individually these things can be right? I mean, you just have to do that. So you have to look forward and you think, okay, and I'll give you perfect opposite example, really good friend of mine used to live like five floors below where I had seen the apartment block right here. He's got for various reasons, he ended up with like, kind of one of those joint families who so like, five kids under the age of five, you know, bizarrely, and really bonded, situated,

 

Tom:

Yeah, Brady Bunch situation.

 

7 Dollar Millionaire:

And he's, he's like a, he's a fund manager, based in Singapore. And he worked out that he could actually, it made sense for him to quit his job and move back to California, because paying for five kids in local education system here, when you know, that, and everything else, it's cheaper to move to a place with a good free education system and have a normal job rather than trying to have a high paid job and pay those kinds of costs.

 

So that's how individual all of these kinds of decisions get to be. The first thing is just to sit down and, and dream a little, right, exactly. Who do you want your kids to be? And how do you want to live with them. And because a lot of the costs, like your actual food costs, it's not a big deal, it's really not going to be an enormous deal. So the basic, you know, adding one bedroom to the house may or may not be a big deal, depending on on where you're at. And then after that is things like education and flying, holiday is right, they do cost literally an extra person on every single thing you do, when you start and that's times 20 years, right?

 

So there's, there's some, there's a lot of extra costs on that kind of stuff. And it's really just sitting down and working out those kinds of things, and those kinds of budgets. And then as you move closer, closer towards the end, you'll realize exactly what is going on, you'll get a much closer impression. But as always, it's just start, just sit down with a piece of paper and just go, Okay, I think it could be this, and then find out the extra information that you'd actually need. Because it can be a scary amount, or it can be really, if someone for someone like me, that was having to pay man it was 15 years of 14 years of school fees. I don't want to think what that was, you know, really, I definitely don't want to, you know, PV it, I mean, that's just insane amount of money. But you know, had to be done for In my case, if you don't have that you don't need to put it in.

 

Tom:

I love that analogy of the paint, and it just kind of evolving a little bit over time. As far as, you know, practically getting the paint down, would you recommend a model where, say this is in Excel, and each row is like a year, and then, you know, perhaps there's some different sort of expenses within the different rows, or it's just like a really kind of basic form of that is that sort of a rough construct is, and I'm sure it's you know, could be a little unique for everyone. But that's immediately where my mind goes is seeing in that sort of a model.

 

7 Dollar Millionaire:

That's definitely where I think you move it, I actually like to do a pen and paper to start with, I think there's a, there's kind of a free flow, when you're actually kind of sit down with pen and paper and just as scribble stuff out. I've even tried doing it on my iPad with you know, like the sketch but it doesn't work as well, there isn't that sort of connection, which sitting there with a piece of piece of paper and a pen for 10 minutes, and just sort of scribbling out the bunch of the cost because we're all prepared to be kind of messy on a piece of paper, right, and we can just draw in things and loop them around, that connects to that, scribble that out and need this.

 

And then once you've got probably only 10 minutes in, you can move that to a spreadsheet, seven or eight lines, seven or eight lines is going to get you most of the way to the kind of things you're thinking about.

 

Michael:

And Tom, I'm curious not to put you on the spot here in the hot seat but having a young child is this an exercise that you went through with your wife and was this conversations that you had prior to the little one arriving?

 

7 Dollar Millionaire:

You know, I was actually so I'm in my mid 30s now and when I was in my mid 20s and early 20s actually was way more active about kind of performing out like 20-30 years in advance so I actually had to pull back the old spreadsheets pain analogy I think it's probably time to have another round I love these interviews with you 7 Dollar Millionaire I literally after our last call that we had I went and totally redid all my you know auto deposit into my investing and I already have some immediate action items from from this one. So just to kind of go back I was I not not so much with these with with my current kid but I think it's an exercise to go revisit some work that I did in my mid 20s.

 

7 Dollar Millionaire:

It's always good to know right? It's also good to know how good you are at modeling. Where you make mistakes and modeling, I mean, we we professionally we do that. And it's you know, you can be miles out. But if you actually, I mean, there's a company modeling, we're actually modeling like an investment will have various inputs that we can that we can change them to go back and you look and go, Oh my god, I was miles out, but then you realize that one of the inputs was x, y, zed, which turned out not to be remotely true. So you can, okay, then change that. And sometimes it kind of comes back to closer to reality. So all these things are really, really important to actually just understand how well you model because it's not like you have to stop modeling, or you never stop acts.

 

And modeling is like, it sounds like it's too specific to what we do. But we're all forecasting all of the time. Now, my favorite analogy for forecasting and how we're all forecasting all the time, is we all pretty much expect chairs not to break when we sit in them, right?

 

I mean, even some of my weight, I don't expect the chair to break when I sit in it. But I pretty certainly if you if you sat on three chair, three different chairs in a row, and they broke every time, that fourth chair, you'd be like pushing it scratching it thinking, Okay, is this thing solid, you'd have lost all your trust in chairs, that's just forecasting. It's just natural forecasting. We do it all the time. And so knowing if you're good or bad at it is a is an amazing life skill.

 

Tom:

Do you find that most people are overly optimistic when forecasting I guess you could apply this to business or to kind of personal? I'd love to hear your kind of thoughts on, I guess human nature and in applying forecasts and ways to beat yourself and be better at it.

 

7 Dollar Millionaire:

Yeah, I honestly, unfortunately, it really it is really bad answer. But 50% of people are better than average. And there's no other way of looking at it. I think the key is most of us aren't doing it particularly consciously most of the time. And so sense of like actual aware forecasting and awareness of how optimistic or pessimistic we tend to be. Pessimists, I mean, pessimism is one of the reasons that overcaution is what keeps a lot of people out of the markets. Right. And because they think of it as markets, right, they don't think of it as I'm working. I'm living in this economy, and not being in it with my capital is essentially an enormous risk that this economy is going to crash and burn. I'm literally taking that investment option. And not seeing it that way keeps them out because they view it as being very, very high risk and pessimistic because they don't understand it enough.

 

Let’s throw some analogies around that's just like being in the dark, right? It's just being in the dark, you can walk out into your hallway with no light, and you can't find your way along the hallway anymore. Right? That's, it's it's still there. Everything's exactly where I was people without the education. I mean, we're moving back into financial education, right. It's what keeps people out. It's they're unsure, they're in the dark. And that's why I think creates most of the pessimism and overcaution around it.

 

Yeah, there's a bunch of people who, too, you know, too optimistic, too. But that's what I mean. I tend not to mind it when when investing, I don't engage over optimism. But when I'm doing things like a little bit more entrepreneurial, then yeah, I shoot for the moon. There's just no point right? or shoot for the stars even then you get the moon there's no point not being no point starting an endeavor without thinking it's going to be amazing.

 

Michael:

Yeah, I love that analogy about being in the dark. I wonder though, your take on, when people have gotten out into the hallway realize that it's not that scary. Or maybe they've gotten a little flashlight, it a little bit of education, they understand. And now they think, Well, I know everything. And so how does that that little bit of education, a little bit of knowledge, not get overblown, and a bit turned into overconfidence, where now you are taking risks, well beyond your your light beam, so to speak.

 

Tom:

Great point, Michael.

 

7 Dollar Millionaire:

Yeah, it, it's it's actually why I think it's so important. This gets taught in schools. And, you know, there's, there's a bunch of different sides on this. But it's, that's why, you know, why are we confident reading? Right, we're confident reading because we've been taught it at such a young age, right? This is this is how we have that kind of confidence. Why are we not confident in a foreign language? Because we weren't taught it. We don't know any of the words, we don't know how this thing's put together. And we need that it's, it's about having that broad underpinning to what we do, and it's why it needs to be taught in schools because any other way, you're coming in at some random entry point, right?

 

So some friend tells you the you know, you should trade options on Robin Hood because I made x, y, zed and then you kind of get in there and you learn a little bit about it. Maybe you have like some Beginner's luck and you do quite well. That's now your little wheelhouse. It may just may be a good wheelhouse for you. It may be a terrible one. More likely the second option, right. So that becomes your think that's what you need that we need the education to make sure we get a little bit of light in all areas.

 

I mean, I'll give you a perfect example for this. I so the CFA exams Chartered Financial Analyst. I'm not one I did level one.I got way too busy to do levels two and three, my first daughter was born like immediately after getting level one. And level one even just shows you the entire spectrum. So you kind of you get like a beginners entry level on everything. And that's like, you kind of you know where to come back to later. Right? If I need to calculate a bond price, I can't do it off the top of my head, but I know where to read. I know where to look. And then I'd know how to do it. And that, obviously, that's a little bit specific for most people. But that kind of general entry level stuff is I think, you know, what's needed otherwise, you do end up with the flashlight, or moving from analogies. Under the under the street lamp looking for their keys, right?

 

You know, the stories like, you know, and the guy's looking for his keys under the street lamp and a piece of wedge, you lose them over there. So why are you looking here? Well, this is where the light is, right? That's it's so important to just have like a basic level of light.

 

Tom:

To know what you don't know. Definitely.

 

Michael:

Yeah, that's Yeah. I'm curious to know, in your opinion, if someone is looking to invest in the next 12 months, they're looking to get educated and wanting to get involved, whatever investment class they deem is in their wheelhouse, where should they be keeping those funds? Should that be something that they're investing the whole time labeling? And, you know, dollar cost averaging? Or should they kind of wait till they have enough funds to do something with curious to get your thoughts?

 

7 Dollar Millionaire:

Okay, well, always dot dollar cost average, unless there's like a ticket price that, you know, makes that unavoidable that you have to go in single level, like, like some kinds of property, right, where you have to have a certain amount of downpayment, and that's the minimum you can get involved. The great thing about other asset classes is you can dollar cost average in the tiniest amounts. And you always should, I mean, cuz, you know, you can't predict the future, you don't know if it's gonna go up or down, right. So you should try and remove as much of that risk as possible. And dollar cost averaging is the is the free way of doing that.

 

Michael:

Right.

 

7 Dollar Millionaire:

So right, so always dollar cost averaging, I think there's a one thing that I quite like is what I think of it in my head is like a reverse ladder. So you know how you have ladders on fixed deposits, time deposits, whatever they call them. In the US, you know, where you can get kind of get like a little bit more return, if you lock the money into a deposit account for longer, let's say three months, six months, whatever it is, and you stagger it in. So you put in like a sixth this month and a six the next month, and then you do that over six months. So you got the money, you got access to six of the money every single month, you can put it put it into those and then actually dollar cost into the thing you're putting it into. So you can sort of you're still making a little bit of money doesn't have to sit as pure cash. Right.

 

Michael:

So so go get six CDs.

 

7 Dollar Millionaire:

Yeah, exactly.

 

Michael:

on six month intervals. And okay, gotcha.

 

7 Dollar Millionaire:

Yeah, exactly right. And then you can just plug it straight in. And you might only be making like an extra, like a few bucks. But this is how you make money, right is by it's like that little extra, which for no risk, right? That's always the key a little bit extra, no risk is better than a lot extra for a lot of risk. So just that just that small, those small moves are always useful.

 

But I think also one of the other things to do is depending on the asset class, if if what you're doing, if the cash you've got is a long way away from the asset class, then it does make sense to have some kind of hedge if it's possible. So I mean, I think one of the things often is say, like, being able to put some of the money into a REIT in advance of buying a property.

 

So let's say if there's like, if you're going to buy property in New York for some reason, then there's a new york rate, if you can do enough analysis around that read to understand it's like, oh, this is, this is pretty similar, this should go up when my property goes up, it should go down when my property goes down, you can at least put some of the money as you're building towards that downpayment into the REIT and then hedge out a little bit of that extra risk. Because, I mean, the risk on property is nearly always, everywhere in the world, the government prints more money, right? I mean, properties actually don't…

 

Micheal:

Inflation.

 

7 Dollar Millionaire:

Yeah, well, yeah, properties don't often go up in value, your money goes down in value in terms of property, right, that's what actually happens. So actually, removing that risk is is is useful. So I'd always think through these ways, rather than thinking, yeah, just chucking money in now. Just steady push it in steadily as it's just if you can, if you have the patience.

 

Tom:

That's a that's a good discipline. I mean, it kind of related as an act of discipline I can think of like going to a, like a kiss going to Las Vegas or something and playing blackjack and it's like, oh, do I push it all in on one hand or do I slowly and you're gonna have a better time to her a little bit slower. I guess that kind of really kind of relates to having fun at the casino versus having fun at.

 

7 Dollar Millionaire:

It is a good point because I do the exact opposite. I really don't like being in casinos and when I'm forced to go to them, I put it all in on one hand and literally

 

Michael:

Walk away.

 

7 Dollar Millionaire:

Just like get this over and done with either make a lot of money on one hand, or we are I'd leave and have a better time than I would do by sitting at a blackjack table, losing money steadily.

 

Michael:

I love how you knew kind of exactly where I was going with the question with regard to property investment. Because I mean, Tom you were in a similar situation with regard to you had some cash or cash out refinance, you were looking to deploy it. And in the meantime, you were thinking about putting it in the market, and I think you ultimately did. And then there was some fluctuation in the market. And you're like, Whoa, this is not this is not feeling good. So you pull back a little bit, right?

 

Tom:

Yeah, yeah, just, I think like within, there's more, like risky allocations, and then safer allocations. And I think, being cognizant of kind of which risk profile I was investing, versus the strategy I initially did was go running up to the blackjack table and throwing it all down. And, you know, thankfully, didn't get getting didn't get burned too bad. But, you know, stepped back away and left the casino and invested in a nice asset allocation that was comfortable for the time horizon at which I wanted to spend it. So..

 

7 Dollar Millionaire:

That's I mean, that's, that's, that's also the other point is actually nothing wrong with taking a second most important thing of investing is actually understanding your own psychological needs, because you can't invest against them. It's really, really hard to actually invest in a way that you don't think is correct for you. So taking too much risk. And just I mean, I don't have sleepless nights with what I do for a living. Because I don't invest in a way that is wrong. For me. I actually feel like I understand what I do. Whenever I hear people like they have sleepless nights like that's because your style investing does not match what you actually believe. I mean, that just can't be. That can be the only reason I think what you did, there was smart.

 

So the only way I've done this in the past is that I buy I bought properties in the past in, in foreign countries I have bought in Singapore, once I buy in the UK, I bought in Japan, I bought in Australia, one of the things when I know I'm going to do that is I immediately switch the money into that currency. If I think it's cheap, I think it's expensive. I don't.

 

But I try and you know, work because current currency, and I do sometimes take a view on the currencies. So you know, but that's it's that kind of move. So for example, I think I kept I think I kept just cash in a deposit in Sterling for about three years before I bought a property there because I wanted to take away because it was cheap. And I wanted to remove the currency risk, that it would get more expensive at that particular time. Basically, the moment Brexit happened and the pound and the pound collapsed, I put money into Sterling, because I knew I'd be thinking about buying a house not long after,

 

Michael:

I think I've mentioned this to you in the past, Michael, but I really took it on the nose with the currency exchange because I bought a place in Portugal. And it was right around February, January, when we were looking at doing a transaction and the dollar against the Euro was like 94 cents. And it has just continued to climb and climb and climb. And so this is going to be great. This is going to be an equal transaction, by the time I go to actually pull the trigger. And so I waited, waited, waited and then COVID hit and the dollar just tanked. And I really got taken to the carwash on that one.

 

So I think that makes sense is if if you if you know what it is today, that's worth something and how you feel about it, I think is also important, but also a bird in the hand is worth two in the bush.

 

7 Dollar Millionaire:

Well, it's it's actually a lot of these things is understanding future liabilities, and not just your existing liabilities, but your future liabilities. And that's one of the ones like with kids, right? You're going to have these are future liabilities, you've got costs down the road. And if you know that you've got, you want to have a place in Portugal, then if you think the currencies pretty decent, and you know, you don't have a view either way, you can just put that money into into euros immediately and just remove that risk, right, there's no risk now. Right?

 

If that money wa s just gonna sit, and you could have it in euros doing something else, I mean, you can still take another risk on top of that, but at least you've closed off that currency risk. And currencies, they move around a lot. I mean, there's, you know, within like a two or three year timeframe, they can really shift. And that's a risk that's nice not to have or even potentially gain you can make rather than, you know, taking that huge risk.

 

Tom:

So backtracking Just a minute, a little bit ago, you were talking about if you were to evaluating buying property in New York, and you know, parking it into a REIT in that space. I never and then you know, you can research that read I never thought of that, because they're sort of there's this is, you know, primarily single family rental investors. There are single family rental REITs out there. And is the idea to maybe to to learn more about that specific REITs that you're going into that asset class like to benchmark what kind of returns you what are my totally hearing this on a different?

 

7 Dollar Millionaire:

I think you know more about the US property market than I do. So I'm, uh, yeah, you're probably hearing things I don't know, all I mean is is as close as you can remove risk, I'm not talking about actually

 

Tom:

Sure getting as close.

 

7 Dollar Millionaire:

Yeah, the closer the asset thing, the asset class you're going to buy, you're removing as much risk as you possibly can. So if it's in similar geography, in a similar asset class in a similar geography, it still may not correlate, and there's nothing you can do about that there may be a problem with the REIT, and there may be a problem with a manager and maybe a problem with something else. But if you're going to buy commercial property in New York State, if you can find a commercial property right, in New York State, yeah, then maybe maybe there'll be reasonably correlated, and you're taking a risk there, that, you know, there's no reason for cash to be correlated to it, there's definitely no reason for any other asset class to be correlated to that thing. So just a little bit of work and probably find you, okay, what's the new what's the New York State REIT, which ones are similar? Bang, okay, that one might reduce my costs and reads tend to pay pretty good dividends as well. So you actually could get paid out while you're doing it. So the return could be stronger, while being more correlated. And that's kind of all you're aiming for. with that.

 

But I mean, I'm gonna say as well, I don't know, if I mentioned on last couple of one of my it's a small family single, you know, real estate, is actually just such one of the best asset classes to be in as an individual. Just because it's not not something that big corporations do particularly well. And that's where it's sort of maybe steer clear of big corporations tend to do big properties very well, right. It's just like one guy making a decision pushes a button, and then the whole building does x, y, zed, right? Whereas when you look at what we all live in, so small fixer uppers, those single unit setup takes an enormous amount of management to run as a business.

 

So that's one of the reasons I love real estate as an asset class is because the world's capital is not trying to jump into this, right, it's just individuals doing the thing they do. So we can have an advantage. But within the REIT, maybe less if you get too specific, too granular. And I just sort of aim, you know, and the other thing would be to not get into to smaller thing, right? You want it to be liquid, you want it to be well traded, you know, one reasonably well known

 

Tom:

That makes sense definitely.

 

Michael:

Makes a ton of sense. I'm curious, Michael, do you have generic guidelines or principles when you're teaching, you know, financial education to folks around how much of someone's paycheck or how much someone's net worth should be broken down and spent on the different typical categories? So housing, or transportation or food entertainment? Do you have a pie chart that you that you utilize?

 

7 Dollar Millionaire:

No. I mean, there is one, right. There's the 50 30 20, that is commonly used. And it's a great starting point, I actually think the 50 30 20 is a great starting point. But I think there's just too many examples of people who do way better than that, than I do. You know, you don't want to set the goalposts too easy, right? You know, you just come across people who are saving half or even three quarters of their of their income, and you don't want to tell them, You should save 20 it's similarly right, you know, it's just like, but the only one I really use is like, never go above like a third of your income on property.

 

And I think if you can keep it below that number, pretty much everything else starts to slide with it. Right? You start your cut, a lot of other costs are gonna be I mean, so in the book Happy Ever After I use 50 3020 as a starting point, but then say, Well, yeah, you know, but what if you could do 30 30 10? Right, you know, 30 30 30 30 30 40, because it would be, because 30 30 10 doesn't add up great. But if you can keep those costs down, all of those extra the 1530, way below those numbers, you're adding up to a much higher number on the 20. And that's the thing, I think, to use that 50 30 20 is a great thing to say to someone who's saving zero, or 5%.

 

Tom:

Sorry, just to clarify the 5030 is 50% is your needs housing, grocery grocery, all that 30% is the ones and 20% savings. Is that the?

 

7 Dollar Millionaire:

Yeah, that's right. Yeah, that's, I mean, it's not that I didn't invent that. I think that's a standard financial personal finance tool. And, you know, as as with the glob of paint, right, it's a great job of paint, unfortunately, it's kind of it sounds to 20 20% is gonna have you if you did it from the age of 20 20% is going to have you retired somewhere in your 60s. It's not amazing, right? That it's it's, it's better than not, but it's it's not amazing, and that's where I wouldn't want to see it to see us as I try to use it just as a general this is dob of pain. 20 is great, but if you want to do better, you should aim for better.

 

Michael:

Yeah, that makes tons of sense. And I think that's great. I love I love that dob of paint analogy. I think it makes so much sense. I'm a very visual person. So that that resonates with me.

 

7 Dollar Millionaire:

Cool. That's good. That's really good. Because it's because I wrote it for for a new book I'm working on. So I'm glad it works. I'm trying it out with you guys.

 

Michael:

Are you really writing a new book?

 

7 Dollar Millionaire:

Yeah, yeah. This is actually the first morning in about three weeks I am, I've got up to talk to you guys instead of getting up to write. But I've been writing to non stop for last three weeks.

 

Michael:

Awesome. Can Can we get a little preview as to what it's about?

 

7 Dollar Millionaire:

Yeah, it's it's an attempt to combine Zen mindfulness practice and personal finance. So I'm trying to map I'm trying to get that Venn diagram. I feel at the moment, those Venn diagrams are like, here, I'm just trying to merge them. But in many ways, I feel that they merge really easily. It's like, you know, it's what is tracking what is tracking your spending, if not being mindful of what you're doing?

 

Right. I mean, you sit down and journal but journal your expenses, right actually know what you're doing in life, I actually think they they align quite neatly, I just haven't seen anyone do it before. And, and I, one of the things I've realized more and more about personal finance is that the SEC, the same five or six things, we all need to know how to do the basics. But we need to approach every person in a slightly different way to get those five or six things in. Once you're in, you'll learn them really fast, but you need to get in.

 

And that's why I sort of just occurred to me will be a fun thing to do. So yeah, I need it to be fun. As well, I need to actually want to be able to, if I have to get up at six in the morning, I have to want to

 

Tom:

Yeah, big, big mindfulness fan, I try and do have a personal retreat every year. And man, I can just see how a lot of those concepts of just being present is so relevant. And you can basically apply it to anything and it's so natural into, you know, the currency that, that our resources that we live off of its camp can't wait for it to talk more about it and for it to come out.

 

7 Dollar Millionaire:

Cool. Well it come at it. Well, if I finish it, it should come out next year. That's exactly what it is. I mean, it is this sense of in every place in our finances, if you're not aware, they take control of you rather than the other way around. And if you can be aware and mindful of what you're doing. So even to the standard market to you over emotional, are you under emotional, you know, how are you what's actually going on in you, that is making you do things that are not to your benefit and understanding those things are such important drivers and in the in the space. So addressing all those things. Equally, what's quite nice is I feel like I can recycle the some of the Happy Ever After book as well, because the middle of the middle bit of this book is a man being the same steps mission, money income saving, spending, investing, owning now those steps.

 

And so rather than to using sort of like the fairy tale, we sort of really creating a path. And as with so many things on sort of mindfulness, this is a path, you have to understand the path and now you hear whether the dob of paint was coming in, right? Don't get upset that you don't know where you're at, you're just putting a dob of paint is just the first dollar painting this will build. And that's Yeah, that's why I'm so happy like the analogy cuz it's right up the front.

 

Michael:

Oh, this is great. I'm very excited to read the book. I want to shift gears here a little bit. And I'm curious to know if you have any tips or tricks or guidelines for folks to have these types of financial, personal financial conversations with a spouse partner significant other, because so often I hear in the Roofstock Academy is Hey, I'm all on board for real estate, but my husband isn't, or my wife isn't or my partner isn't interested? How do you bring them in in a productive way?

 

7 Dollar Millionaire:

Yeah, it's hard. And you know, you, it's okay, we're gonna get back to the mindfulness, but just for a second, and I'll come back to this, right, because

 

Tom:

It's all part of everything

 

7 Dollar Millionaire:

You have to know is that you, you can only affect yourself, you can't create change outside yourself, you can only create change inside yourself. So you, you can't force a partner to come up to your speed when you want them to. So that's the number one understanding. So you got to be ready for them to not be prepared to do this.

 

The second thing is, it's why I wrote the book is for the original one happy ever after it was to outsource a lot of the conversation with this time, but that time with my daughter to paper, get her to read it. So I don't have to go through an enormous amount of the background of how this works, right? It I can just imagine it. When I realized my daughter didn't know anything about money. I was like, I've got a teach her this stuff. I don't want to spend every weekend for the next year having daddy daughter money lectures, because that's just you know, it's wrong.

 

Right? So but if I write her book, she can read it in their own pace, and we can have those conversations and she's already up to speed. Right? So to get some level of outsourcing so to encourage, could you read this book, have a look at this, what do you think about this, and then let the person do it in their own time. So they'll come up to speak because again, we go back to that you can only change you they have to change themselves on on their timeframe.

 

I think the other thing is too, sometimes it's useful just to have like a group budget as a track as a family exactly where all the money goes. Because that That, to me is like, is the starting point we're spending money on on these things. And you know, if there's any dispute, it's like, let's get the, let's get the receipts out, this is actually exactly where all our money went in the in this period. Because I think that's the, I think it's very difficult to jump from an investing mindset. Jump to it, without going through saving. And you have to warn you that that requires understanding your spending.

 

So those two things combined to be like, okay, we understand that what we're saving and what we're spending, okay, now we can invest our asset class, we can we can move on to as you said, How do I get my spouse to think about real estate, they're probably not thinking about it, because they're not probably not thinking about the saving and spending, the moment you think about your, I'm going to give up this spending to save the money, you tend to get a lot more interested in how much money that money is going to make for you. So you tend to get a lot more interested in the asset class. So I that's why I do see these things as being a 1234. And then you can get them interested in the asset class.

 

Tom:

Maslow's hierarchy of conversations to have with your significant other. Yeah, it's, so this is a one would be, I guess, spending, saving, and then more offensive investing that I understand this kind of triangle correctly.

 

7 Dollar Millionaire:

Okay, I will never allow spending to go in front of saving savings by okay. It's in the dictionary in the book in life saving comes first, right? Get the saving done first. And the saving is how you top up your yield. So the safe spending is cutting down on your spending is how you top up your savings. Right? Did you put the put the savings away first.

 

But yeah, and then once you've got savings, you need to do something with them. And so the thing you do with them is what asset class and then you can have those conversations. But if the person isn't engaged in the saving, right, then they're probably saying I don't want to invest in real estate, because actually, I'd rather be spending the money on a car.

 

And you've got to move the people have got to be with you on those steps. And it's, if then if they haven't got those fundamentals like Well, yeah, we could buy the car, but these savings will double in 10 years time and quadruple in 20, et cetera, et cetera. And then we'll be setting we can have as many cars as we want, if that's your thing. But let's just actually understand our priorities today, and where we want to be with that.

 

But I do think it's really important not to make that a face to face conversation too often, unless you're both open to that and let that someone like me, let an author let a book, let a TV show, do the heavy lifting, right? I mean, and then then have the conversation subsequently.

 

Michael:

So for anybody listening, needing to broach this subject with a partner, spouse, you can either go get Happy Ever After by 7 Dollar Millionaire, that's great.

 

7 Dollar Millionaire:

I couldn’t have said it better myself. Love it, love it.

 

Michael:

I know you're not really familiar with the US system of Roth versus non Roth, but we can talk about it in a higher level discussion. And so in the US, we have Roth and non Roth retirement accounts. A Roth is simply you pay the tax on the dollars that you invest on the front end, and then you get tax free growth and distributions on the back end, versus a non Roth is you get a tax benefit of reducing your taxable income today, it grows tax deferred, and then when you go to remove those dollars, it gets taxed at that point in time. Do you have a sense for pros cons, how people might be thinking about this?

 

7 Dollar Millionaire:

The only thing that go into there is I'm assuming there are some other sub clauses in terms of what your access to the money in the intervening periods? Right? So I'm guessing from what you've said, that the one where you get, like, you pay tax now and you'd be don't pay tax on on the eventual money. You can only take it out on a certain date. And if you take it out between those dates, I'm assuming there's some kind of penalty as the as the price of actually getting a tax tax, tax free later on, are tax exempt.

 

Whereas the other one sounds more like well, if you know, you're actually if you're not being taxed on the money that goes in that's probably fairly similar. But I'm guessing it's probably a little bit freer money in terms of you can probably access it at any point in time.

 

Tom:

The big gating factor between the two is there's limitations on who has access to use a Roth, this one that's taxed up front, and that your income needs to be under a certain level.

 

Michael:

But the access to the funds are fairly similar in that you pay a penalty on both if you remove them before your retirement age. Yeah, yeah, I mean, I think if you can afford it, you probably want to put the money away that you can take it out later tax free. That to me sounds like you know, because then you, hopefully if it's a long period of time, and it compounds reasonably well, that's a bigger number than the money you're putting in. And that's how the only thing I could think of that. Honestly, these things is weighing me up. I people make tax codes way too complicated.

 

It's just like they make tax codes complicated. And then don't teach financial literacy in schools. The idea of this is beggars believe, right? The problem with making them complicated is very often, it tells people like, it's like, we go back to a dog with pain, right? We go back to our dob of pain, someone is telling you, I need you to paint the Mona Lisa, and you've never painted before, you're scared to put the first piece of paint on, you won't, you'll just, you know, you'll have you'll kind of you'll have like a punk rock moment, and you'll toss the canvas and break it on the wall and walk out the room.

 

That's what everyone does. Everyone's just like, this is too hard. I'm not doing it. And so you stop people actually getting involved. So I am going again to run again, all of these systems are way too hard. The correct answer is save them money, one of those will be doing deep, it will be better than none of them and don't over stress it.

 

Personally, I probably go to have the tax deferred later. Because I want the money to compound my age, that's probably wrong. Because I'm you know, I'm probably begin taking the money out in 10-15 years, so might not compound that much. And I might be better off actually having more money now. And I suspect that's where the differential is. That's probably where, you know, that's where the delta is on that. But God, I mean, that's just way too hard. Sorry, not telling you off it. But it's way too hard a question to put to someone who probably has very minimal financial literacy, I could probably work out what the right answer is with a spreadsheet. That means it's a really bad policy to be offering people. Sorry to criticize your country.

 

Tom:

I like it.

 

7 Dollar Millionaire:

Okay, good.

 

Tom:

My wife's a tax attorney and keeps keeps busy. Yeah, moving tax code.

 

7 Dollar Millionaire:

Oh man. It's actually it's actually also one of the reasons why, you know, the financial literacy thing is so important, because you can't trust governments with this stuff. In the we all think that everything we experience from childhood has been around forever. The reality is, before the Second World War, most people were dying around 65 70, they did not get a pension because they didn't need it. They were literally going to last maybe four or five years after they after they finished work, they would expect to work to death. And only after the Second World War, do we get this mass input of pension schemes? And which is why in lots of countries, they're just paid out of government revenues. And I'm not saying that's necessarily a bad thing. But it does. What it means is it's not necessarily going to be around forever. Tax codes aren't around forever. And it's one of the things that I worry too much about putting too much time into worrying about tax codes. Because by the time you take the money out, you'll have been through five different tax codes. It will all have changed so many times that if you try to think long range about tax, you're doing the wrong thing, because the risk on that is enormous.

 

Michael:

That's such a good point. I think so many people hear about Taxco changing scramble to do whatever they can. And then next president next administration comes around things change scramble to do what we can and then you know, over and over and over again.

 

7 Dollar Millionaire:

The people that make the money are Tom’s wife. They make all the money!

 

Tom:

She is just there, interpretating whatever, whatever comes out. Yeah,

 

7 Dollar Millionaire:

Yeah, exactly.

 

Tom:

It's good for the Schneider family. It's good for them.

 

Michael:

That's great. Well, I think we just got to wrap this up, Tom, any other questions for the 7 Dollar Millionaire?

 

Tom:

No, I love it. I think of all of our podcast guests. I never have more like impactful like meaningful, like things that I go off and do after the episode. So I really appreciate you coming on super excited about the book coming out.

 

7 Dollar Millionaire:

Yeah, thanks very much for that. It's, it's, um, I'm really excited about it, too. It was the publishers Wiley to appeal to published happy ever after. And they, they asked me when I kind of that they were actually publishing happily ever after they said, do you want to do a follow up? And I was like, No, no interest. The and it because I took that to mean that did they want me to write teaching my daughter how to invest properly, and not as a cop out? That's just too complex.

 

You know, the reason I write what I write is I'm interested in getting people off the ground up to being able to understand other books. I'm not interested in the other books, those are all great. They've already been done, you know?

 

 

And then, you know, while he was coaxing me and saying, Well, no, we have this book series called “The Little Book of“ Series, which like the Little Book of Common Sense investing is written by John Bogle. And I'm like, kidding, right? I get to write a book in series that that goes in. And actually the bigger one for me was actually The Little Book valuation is by Aswath Damodaran. Who, I don't know if you guys know him, but in my industry, he's a god.

 

Aswath Damodaran book bbout this thick on on, it's just got damodaran valuation. And it's got every way of valuing everything ever. And it's the Bible for my industry. Everyone's got a copy everyone's read it cover to cover. It's literally and it I mean, it's dense. He's I think he's a, he's a professor at NYU stern. And just like, super clever guy. So he wrote the little book of value valuation. And they're asking me 7 Dollar Millionaire if I want to write one of those. So I thought I've got to think about it. So just like so thinking about it. And I was like, still didn't want to write a follow up on investing. Now, I did literally woke up one morning, I was like, the little book of Zen Money. And just that the title just runs so nice. I was like, Yeah, okay, what, what can I do with that, and I was like, then the subtitle came to my head was like, okay, a simple path to financial peace of mind.

 

Okay. And literally, I'm writing the thing, first word to last word and like, not how you should write, you should break it up into bits. And Right, right, like the middle first, and then the end. And then the beginning. And I'm literally going from the title. And the last word, all right, will be the kind of the end. And just going that direction, because it just makes sense to me all the way through.

 

Tom:

Yeah, it's there already. just pulling back.

 

Michael:

Yeah, gotta get it onto paper.

 

7 Dollar Millionaire:

I stay away from the other analogy. But the other analogy is chipping blocks off the stone, right to make a sculpture. That's what I'm doing with this one. It's there. It's already there. I've just got to find it. enough fun. Yeah, I wake up every morning and get at it part from today, when it's fun to talk to you guys instead.

 

Tom:

Yeah, I mean, one of the takeaways also for these conversations is like, you know, this 80-20 principle where, you know, you get 80% of your value from 20% of the work and that last 20%, like, that's where it gets, like overly complicated moving targets, you know, anxiety, all that stuff, but just getting up and getting that initial blob of paint? I mean, I feel like I'm probably repeating a lot of the conversation, but it's a really powerful one.

 

7 Dollar Millionaire:

Exactly. I mean, you know, it's it really is that that first move separates you from everyone who's not investing, who's not saving. That's it, right that if you were the stat or last year, it was ended. 2019. Right there, 61% of Americans didn't have $1,000 in an emergency fund.

 

Just having $1,000, that puts you already in the top 39% of the richest country in the world. That is already that that's the 80 20 rule right there. They're taking their money and opening an investing account, bang, you're probably in the top 10%. Right. And taking those actions is what moves you along these things all the time. That's why is is so important.

 

Yeah. It's the problem, as you said is, someone tells you, you should invest. Oh, and you should invest in this. So what you know, that's just way too complex. It should just be you should save, you should invest, and probably, you know, VTI just go there. He can be a while before you find anything else. So you can overcomplicate it later when you're ready to overcomplicate it, but to start with just go there.

 

Michael:

Love it.

 

Tom:

Love it. And VTi is the vanguard index fund. That's just kind of just blankets. The economy beautiful. Yeah, big fan.

 

7 Dollar Millionaire:

It's, it's the it's the biggest economy in the world. It's the top 500 companies in the biggest economy in the world. You know, when we if you live off grid, you're not involved in the global economy. Fine, right. But that's like naught point naught naught 1% of us that's discussing this properly off grid. The rest of us are buying stuff to live our off grid life anyway, we're in the economy. That's that the most natural hedge just by that.

 

Michael:

And the folks that do live off grid probably aren't gonna be listening to this podcast on their iPhone, in the middle of nowhere wherever they live off grid, so I don't think we have to worry about them.

 

7 Dollar Millionaire:

They probably are.

 

Michael:

Living off grid with faster Wi Fi than any of us.

 

7 Dollar Millionaire:

Exactly.

 

Michael:

Awesome. Well, $7 millionaire Always a pleasure to have you on thank you again for hanging out with us and bestowing some wisdom. And like I mentioned, and I mentioned very much looking forward to the book when it comes out. I know I'll be getting it. We will both be getting it I'm sure.

 

7 Dollar Millionaire:

Excellent. Well, thank you very much. It really it's always a pleasure. Really good fun. Thanks, guys.

 

Michael:

Awesome. Take care. I'll talk to you soon.

 

Alright, everybody, that was our episode a big big, big thank you to 7 Dollar Millionaire always such a pleasure chatting with him. Tom, I know you and I get so much value out of our talks with him and after all of our conversations, we have going making some changes to our own personal finance realm. So very excited to do that yet again. If you'd like the episode, please feel free to leave us a rating or review wherever it is just in your podcast. If you're checking this out on YouTube feel, feel free to hit that like and subscribe button. And as always, we look forward to seeing on the next one. Happy investing.

 

Tom:

Happy investing.