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#204 - (HIW#9) - Financial Wisdom for a 120-Year Lifespan with Sang Kim

• Jordan Edwards • Season 5 • Episode 204

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What if you could financially secure your future while living up to 120 years? In this episode, we welcome Sang Kim, a financial advisor with over 23 years of experience, to help us unravel the complexities of planning for an extended lifespan. With advancements in AI and medical technology, longer lives are becoming more attainable, and Sang shares actionable principles like paying yourself first and the critical role of a financial advisor to avoid costly mistakes. Discover how setting aside a portion of your income can ensure financial stability and unlock the door to a prosperous future.

Unlock the transformative power of compound interest and understand the importance of starting early with your investments. Sang explains the Rule of 72 and through compelling examples, illustrates how small, consistent investments can lead to substantial wealth over time. We break down the key variables that fuel financial growth, such as the amount invested, time invested, and the rate of compounding. Learn how early financial sacrifices and smart investing can provide significant long-term benefits, demonstrating that the right financial strategies can lead to impressive results even with modest beginnings.

Navigate through diverse investment strategies tailored to various financial goals, from short-term needs to long-term retirement savings. Sang emphasizes the importance of diversification, delayed gratification, and strategic financial planning. Get practical advice on managing travel funds, making smart money decisions, and leveraging additional income streams like real estate investments. Sang also underscores the value of simplifying financial decisions and seeking guidance from advisors to stay on track. Tune in to equip yourself with valuable insights and strategies to achieve financial security and growth in an age of increasing life expectancy.

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Speaker 1:

Hey, what's going on, guys? We've got a special guest here today, sang Kim. You might have seen him before. It's Health is Wealth. We're back for another episode. Is this episode Episode nine? Episode nine so the past eight episodes we've been talking, it's called Health is Wealth, and the past episodes we've been talking about health. And now in this episode, we're going to dive into wealth, because, saying with that, how long were you a financial advisor for? Tell us a little bit about your financial background.

Speaker 2:

Yeah, yeah, so well, I taught high school for five years and then I got into financial planning. So was really into financial planning on that side for about seven years with a company called Asante Wealth Management in Canada, and then I joined TD Wealth for another 15 years or so a year of selling insurance before that. So it's like over 23 plus years in financial services.

Speaker 1:

Absolutely, and this is why I wanted to talk to saying about this, because we were actually having a conversation right before we got on. And what was the conversation? What were you getting into? We were talking about longevity and you have an idea that you might think you're optimistic about it, but it could happen. So explain it a little bit.

Speaker 2:

Yeah, like you know and this is my bias and this is my filter but I do believe and there are people out there that also believe this too, and it sounds really weird and it sounds like it's way out there. Really weird, and it sounds like it's way out there, but I truly believe that, and let's call it, within 50 years, that we will figure out with AI and with lots of different models out there, we will be able to live well beyond 120 years of age. So and it sounds a little crazy, right, but if you think about it, there are animals on this earth that live well beyond 120 years of age, like they have discovered tortoises that are 300, 350 years of age, and they're made of the same stuff as us. So what you see in the universe and all the elements out there, we are made out of the same atoms, right? So it's a matter of time of when we figure that out, versus if we figure it out.

Speaker 1:

So I do believe it's going to happen absolutely. I mean because there's only enhancements going on in regard to everything. And I just want to bring up an interesting point. Like I'm looking up this chart right now. It's from stat sista and essentially what it says is that in 1860, the average age, uh, life expectancy, was 39. 1865 it went down to 35, and this is just in the united states. From 1860 to 2020, and pretty much around 1900, it was 50 years old, 48 years old, so that now today we're at around 78, 79 years old. So my point be and this is 2020. So it's not even updated. So my point being here is that it went up 50% in a short period of time, like even from 1970 to 2020, which is 50 years. It went up almost 10% and we're just exponentially getting better with technology and understanding our bodies and seeing our bodies in different capacities and it's really causing us to constantly be on this cutting edge of change. So it's like maybe it is possible. I mean, I've had Chris Crone. He came on the podcast and he said he's looking to live to 140. So everyone's got these own ideas.

Speaker 1:

But the main thing we want to discuss here is like we have this idea of living a long time. How are people going to be able to afford living a long time? How is? How does finance play into this life experience that we're looking into? Because for me, I feel like it's always been. Once you get your finances right, then the world kind of opens up to you and there becomes this opportunity and these windfalls and you can actually think correctly, because a lot of the time when the finances aren't right, you get into this desperate state of you can't get your food, shelter and clothing, and that can be one of the scariest things out there. So it's. How do you remove that and how do you set yourself up for a long time of wealth and prosperity?

Speaker 2:

yeah, you know, it's I. I think, when you think about some of the simple principles to follow, right, you know, and and the one principle is to pay yourself first, okay elaborate on yeah. So that principle of paying yourself first is so let's say, you make a dollar, right? So how much of that dollar after tax are you going to put away for the future so it produces an income, so that you don't have to work?

Speaker 1:

Yes.

Speaker 2:

Right, so? So let's say you wanted to. Let's say you're making a hundred thousand dollars a year in today's dollars. Not that that's the final answer, but we just keep it simple. Right? So how much money do I need to set aside to replace my current income in today's dollars? Right, but of course, you know, if you're doing the calculation, you want to do the calculation with inflation or future dollars, because that 100,000 isn't 100,000 in the future, it's much more than that. It could be. $140,000 is what you need, but let's just use the 100,000 in today's dollars, for example, right? So so you know, and I think, I think you can get a calculator online to do that.

Speaker 2:

Or even better, I think for most people I would say most people, like 90, 95% of the population should be working with a financial advisor, and the reason for that is it's not that you're not smart enough, it's not that you can't do it, but the thing is is is to have somebody there so that you don't make any big mistakes and do something that you shouldn't be doing at the wrong time, like during the financial crisis. You know that period. You know the market bottomed. I believe it was around March, the 3rd March, the 3rd 2009,. Right, and the worst thing to have done there was to sell off your stocks or equities at that time, right? So people that weren't working with an advisor could have made a terrible mistake and got out of the market when the markets were down, but a veteran advisor would have kept that person the emotions out of it and just kept them in the game. Right, so that is so important because it's so hard to time the market. You've got to stay in the game, right?

Speaker 1:

100%. They've actually talked about that with Warren Buffett and they talked about if you remove the biggest days, ups or downs in the market over the total duration of being in the market, the return goes down drastically. And it's kind of like this whole idea of if you're just in the game, then you like statistically it goes up, so like when things go down, and the whole thing with the advisors, what they do is basically remove the emotional attachment, so like. But like once you recalculate your mind, like where it's, oh, it's going down, good buying opportunity, like these are the flips that we have to make, because it's very contrarian to be like wait, I'm holding something and it's going down. I don't want it to go down anymore, I should sell it. So the different ideas and back to the other point. You brought up about the hundred thousand.

Speaker 1:

So there's this idea called the 4% rule, and I just know about this stuff because I've read a lot of personal finance books and the 4% rule is basically the withdrawal rate without any issues.

Speaker 1:

So basically it means that your thing can continue growing and the funny thing is that in retirement a lot of people will do, they'll do the four percent rule, but then they always forget to take out the principal because they keep letting. And then what ends up happening is you get to this uh, long period of time where, like, the money is way more valuable at an earlier age in your life, when you can do more activities and do more things than later in life. So it's this very interesting idea and I've came up with a lot of these ideas from the book Die with Zero, and there's another book called your Money or your Life, and it becomes very interesting when you start realizing that if you want 100 grand, the four percent rule would be you do 100 grand divided by 0.04 and it's 2.5 million. So that means if you have 2.5 million, you can create a hundred thousand dollars risk-free, basically without doing anything.

Speaker 2:

And yeah, I'd be careful with the word risk-free, right, of course. Yeah, yeah, because whenever you use that word risk free, it means different things to different people, right.

Speaker 1:

And I think, yeah, you gotta be careful how you use it and, and like I know what you mean A lot of yeah, I was going to say a lot of words in this podcast will probably require definitions and, like I'm not a financial advisor and it's not financial advice, and yeah, for sure, yeah, yeah.

Speaker 2:

So so what I mean by that is, and, and what jordan is alluding to, is this principle of four percent. So if you've got this walk of capital, what did you say? 2.4 million?

Speaker 2:

roughly right, I think it's 2.5 million 2.5 million yeah, that's right, sorry, 2.5 million and you take out $100,000 a year. Yes, on that, let's say it's one account, okay, so that's $100,000 a year income before tax. So the capital will stay intact In a let's just say, let's just call it a balanced portfolio, right? So you've got 60% stocks and 40% fixed income in cash, like investments. We'll call that a balanced portfolio, a moderate risk type portfolio. The chances of you running out of money at a 4% withdrawal rate is very, very low. The probability is very low, and that's what we're talking about here is we can't say you can't use the word guarantee at all, because, who knows, black events do happen. Black swans, yeah, of course Black swan events do happen, right, so, but the odds are in your favor drastically on a 4% withdrawal rule.

Speaker 1:

A hundred percent, right withdrawal rule, a hundred percent and all right. Yeah, and I mean the whole idea here is that, like we're just going to have this conversation and it's just tips that we've learned that might be able to help for you. It's not invest in this specific thing, but it's more like these different tips and tricks that might work for you in a different regard. Like one of the tips I use for myself is I have different apps that I will invest in, like through the, through the brokerage account, and like once it goes in the brokerage account, it's not going like oh, I spent too much money this weekend I need to take out of the brokerage account. Like these are like little things where, like once the money goes in, which comes back to the pay yourself first thing, because when you really think about pay yourself first, it's you pay your car every single month, you pay your phone every month, you pay your Wi Fi every month. Why should you not pay yourself?

Speaker 1:

And this whole idea of paying yourself and you see it in America especially, and around the world, where people really optimize a majority of the middle class and some of the upper class, a majority of their wealth is literally in their 401k, which is automatic pay yourself first concept, and their mortgage and their home, because it's another force pay yourself first. So when you think about these things, these are both for savings accounts. So if you can just institute these things on your own where it's hey, I can save $25 every single week, okay great, and then just make it automatic. And once you automatic and systemize it, then you don't even have to think. It just happens and you look up one day and you're like whoa, I feel like I robbed a bank, like I. I don't know how all this money came here, because it's not usually. I mean, some people get a big windfall, but a majority of the time you're building brick by brick by brick yeah, yeah, you know you can use the, the laws of compounding, right.

Speaker 2:

Right, and you know that rule of 72. So if you take 72 divided by your compounded growth rate, right, so that means 72 divided by 10 is 7.2 years. So that means that your portfolio will double every 7.2 years with that rule of 72, right, so it's the consistency over time and being in the market. And then if you're younger, you know starting early, like if it's $100 a month, compounds dramatically.

Speaker 2:

Yeah, yeah, you can do some calculations where you know you got a young person, let's say they started investing when they're 18 years old and it was 100 bucks a month for 10 years. And then they stopped investing. Right, versus someone that started 10 years later. Right that, that 28 yearold versus the 18-year-old that stopped. Well, that 18-year-old will have more money than the 28-year-old that started 10 years later and keeps contributing about $100 a month, just say. And then they keep contributing, let's say for 30 years, and they keep contributing, let's say, for 30 years. So that 10 years of doing the forced investing compounds and becomes a greater sum than that 28-year-old, roughly 10 years later that started right, yeah, 100%.

Speaker 1:

So here are the actual numbers. So, if you do zero, if you start off with 00, right, and you invest $100 a month, yeah, let me start off. You do zero and you do $100 a month and we're gonna do that for 10 years.

Speaker 2:

Yeah, yeah, At 10% rate of return. And the 18-year-old stops after 10 years. And then when?

Speaker 1:

do you want him to go till?

Speaker 2:

Okay, and let's say that 18-year-old retires at 65.

Speaker 1:

So he doesn't touch until he's 65. So that would be 40 years, 37 years, yeah, 37 years. So the crazy 47 years, 47 years no, no, no, it would be 28 plus 30, would be 58 plus 7, yeah, 37, because you already did the first 10 years. So basically what I did, guys okay, okay.

Speaker 2:

So he's 18, he contributes years. Yeah, so after the 10 years, and then he stops putting money into it, right. And then he retires at 65 at a 10% rate of return, right. So that's 47 years, right, of compounding, without making any more contributions right, what's so?

Speaker 1:

it would be 18 to 28 is 10 years, and then it would be 37 years by the time he gets to 65. So basically what it was, was you do, basically what you do. There's this website called investorgov and basically it's compound interest calculator. So essentially what I did was I typed in 100 and then I did $100 monthly contribution. 10 years ended up being $19,000. That $19,124 with no more contributions after 37 years of a 10% return, what do you think it equates to?

Speaker 2:

Yeah, I'm just guessing right now it should be well over a million dollars.

Speaker 1:

This one has it at $650,000. But if you do add an extra like six years by 43 years, you're at 1.1 million, because that's where the real compounding starts happening. That people don't realize, because it's not that it's the compound like, yes, the earlier is the better, but it's more along the lines that it's once there's velocity in the money. Then the money can really start moving. So the more money you have invested, the more it's going to compound and grow. So these are all just interesting things that you can start to become aware of, where it's like oh, what do they mean by that? How does that work? What is that? And these are things that you can kind of like get into. So it becomes very interesting.

Speaker 2:

What is that? And these are things that you can kind of like get into, so it becomes very interesting, yeah, and then plug in while you're doing that, the 28 year old that does $100 per month yeah.

Speaker 1:

So if you do a hundred dollars a month for the 37 years yeah, yeah, 25 you're right around 400 grand. So it's 250 000 difference, massive, massive. And they didn't even have to invest all of that because the 19 000 you already left it, left it at 19,000 and let it run.

Speaker 1:

So the whole idea here is that the earlier you can get involved in this, and the more, because it's really just two things. There's only two variables it's the amount of money. Well, I guess there's three variables it's the amount of money, the time and the compounding. Those are the three variables the time and the compounding. Those are the three variables. Once you get through those three, though, then it will really open up your eyes, because that's where the real growth can be yeah.

Speaker 2:

And if you think about it right and you say, okay, if I can, I can make sacrifices earlier on in my life, it's going to make a huge difference later on, right? So I think if you're looking at spending money or not, right, and you say, okay, I've only got so much money, only got so much money if you can, if you can sock away 20 of your cash flow after you pay tax into savings, versus 10, that's going to be huge earlier on. So so the message is the more you sacrifice early on in life while you're making money, the greater your nest egg is. If you don't touch it and let's just say you just bought the s&p 500, like you can see an etf the spy.

Speaker 1:

So that was another. That that's another big disparity that I wanted to happen on is because you said the word save. So a lot of people think savings and they leave money in their bank account and they're like I'm just going to save it. If you just took that savings and invested it, then that changes. That's where you start getting the 10 instead of like the 0.03 and that's where the compounding happens. It's not because you saved more money in your bank account, it's the investing that allows it to come.

Speaker 2:

Correct and you've got to save money for different goals, right? So let's say your goal is to have an emergency fund.

Speaker 1:

Yes.

Speaker 2:

In case you, you know, let's say you need to have three to six months of cash and let's say you need to have three to six months of cash available, liquid money that's invested in a safe instrument like in the US Treasury bills, money market funds, right, like in Canada, we have guaranteed investment certificates, something that's safe and it's insured, yeah, and have access to and it's liquid. Right, you're gonna, you're gonna, you're gonna make it really more conservative. Now, the growth money that we're talking about is that money you don't need, like you alluded to, and you're going to save it away and not touch it till retirement.

Speaker 1:

Yeah.

Speaker 2:

So you got different pockets. Got the short-term money pocket for emergency, and then you've got, uh, maybe. And then you got a goal. So you're a younger person and you're going, okay, I need to save money to put a down payment on a condo or a house, so you might have a different bank account for that goal or different investment account. And then you get the long-term account which is I'm not touching until retirement. So you got three different accounts right, yes, yes, and I absolutely.

Speaker 1:

This is one of my favorite things is paying towards the different accounts, because one of the things I I mean, if you're listening to this podcast, you know that I enjoy traveling so, like, one of the biggest constructs of traveling is that you're sitting there going wait. I thought you're listening to this podcast, you know that I enjoy traveling, so, like, one of the biggest constructs of traveling is that you're sitting there going wait, I thought you were going to compound interest this money. Where did all the money get? Like? And you're trying to use it for your travel and you don't want to overuse your travel money. So what I do is I set a certain amount per month and I transfer it to an account. Why? Because if I use it, it then it will go down and that's my monthly spend on my stuff. That's fine. Or if I don't use it, then it just keeps, starts to compound in that account. But I know I'm saving everything in that account for travel purposes.

Speaker 1:

So when the big trip comes up and I actually did this for the uh, I did this there's an app called called Acorn, and I can put the referral link in the code, but basically what it does is like you pay I want to say like a dollar a month or whatever it is and then it will compound. It will basically take your money, like I have. It take like 30 bucks a week, so it takes money each week and it just invested into the s&p 500 and just. But I use this as my non-seeing travel money, right. So I do this for years and years and then, uh, 2021, I went to peru, right, and the trip ended up.

Speaker 1:

We did the inca trail, we did this whole thing and I was on this whole budgeting thing and I didn't want to overspend on the trip. So what I did was I took the money that I've already pre-saved and put it towards this trip. So basically, by the end of the trip, I was like the trip's free because I already had it saved. So my point being here is that finances sometimes sound scary and sound intimidating and do this thing and do that thing. But it can become very empowering if you find the buckets that you want to invest in and you do them properly and you do them every single month, because then it starts to compound and that's when you start going whoa, why do I have so much money in my travel account, and it's not you.

Speaker 2:

It's just that the money's always, it's just complex yeah, yeah, and you know, and one of the principles of investing is time horizon yeah, I was gonna say your experience.

Speaker 1:

You've seen this. I've seen this a few people.

Speaker 2:

You've seen this drastically more, so you can definitely yeah, you know what I would say is you got to look at your time horizon and risk tolerance will determine how risky the portfolio is or the investment is for that goal. So I'll give you a scenario right If your travel account is going to be used up in within, I would say, two years right, okay. Or in less than two years. I would not invest it in the S&P 500 because the S&P 500 could technically go down 30% to 50% in that time span right, yes.

Speaker 2:

So you got to match your timeline with your goals yes, and you got to make sure the investment strategy, your timeline with your goals yes, you've got to make sure the investment strategy matches up with the timeline. So, for a travel account that you're using within, have it all plus the interest right.

Speaker 2:

Now, if your time horizon is, let's say, greater than five years, right, you might want to. And if you want some access to growth, you might want to. And if you want some access to growth, you may want to get a conservative to a balanced portfolio, depending on your risk tolerance.

Speaker 1:

And then greater than five years, six years, that's where there's time for the markets to rebound.

Speaker 2:

Yeah, because if you look at it, roughly 75% of the time the markets are going up and 25% of the time the markets are going down. Roughly right, you know, just you know. So we're in a bear market about 25% of the time, okay, but most of the time the markets are in a bull market or a rising market. So, yeah, you got to take those things in consideration when we're talking about because if you're putting all your money into the S&P 500, it's considered higher risk because it's all equities or the stock market.

Speaker 1:

Yeah.

Speaker 2:

So there's more up and down, absolutely, and you've got to be comfortable with a minus 50%, because that can happen in a short time.

Speaker 1:

Yeah.

Speaker 2:

Right. So I just want you know, to caution you on that.

Speaker 1:

No, I appreciate that. Yeah, no, it's very interesting because that's true, because with that account I'd never even thought about it, because I'm just like I just put it in and then, when it's time for a trip, I'll just take some out, and if it's less it's fine, if it's higher, it's whatever.

Speaker 2:

Right, right.

Speaker 1:

But like the other account I have that I uh, I do more with, like I put more in that one, we just leave in like a, like a money, like you get four percent five percent thing, because it's like I don't want that, but I don't want that to go awry. Where I'm like, where is it like?

Speaker 2:

yeah, yeah, no, no, it's good, right, right. And I, yeah, I want you know it's it's have have a certain bank account or an investment account for a goal and it keeps you sane. You know what?

Speaker 1:

I mean.

Speaker 2:

Yeah, yeah, If the markets tank and that's your that's supposed to be your safe money account and you go. Oh geez, we were supposed to go to europe with that money and now it's worth 30 less or 50 less. Oh honey, we can't go to europe this year because it's a bad time to pull the money out and it doesn't make sense, yeah, and you see, that happen all the time yeah, yeah, yeah. So what you do yeah?

Speaker 1:

Just be aware what the goal is, what your timeline is and then you can, and what your risk tolerance is.

Speaker 2:

Now you might have a high risk tolerance. You go, you know that's okay. I'm going to just invest in the S&P 500. I don't care if it goes up and down, but I've got this other pot of money that I can take out and not touch the S&P 500 money, Right.

Speaker 1:

And I'm OK, a hundred percent, yeah, because I mean, the other thing is that we have so many strategies and it becomes so complex, so, like we've got the pay yourself first, we've got the compounding understanding, the end goal insight. So like, whatever the income you want to produce, the 4% rule. What other tips or strategies do you think are really important for people to just like? My whole goal of this is to raise financial literacy. So I think financial literacy is something that we're definitely struggling with, and when people go a credit card I don't even know what that is.

Speaker 1:

We might talk about that stuff in another episode, but this is just more of hey, if you're making money, keep more money than you have. Like, spend less than your savings. Like that's a really good one. Like I like that one a lot where it's where it talks about even the ones that talk about, like the housing and people who are house poor, and like it's it's travesty. Or like you have this cool car but it's more than your housing payment and now you can't even go on a trip because your house and your car are so expensive yeah, yeah, like like the the other, the other, uh, principle I, I think.

Speaker 2:

I mean, and we've already talked about it, right, it's delayed gratification yes right. So I know there's been a number of studies out there with delayed gratification. So if you look at, like the book the Millionaire Next Door, which is one of my favorite books Stanley and Danko, I believe, are the authors Right and it's really, it really is about delayed gratification, right, and if you can do it in your younger years, delay buying a brand new car until you have the cash flow and the investments to pay for it right.

Speaker 2:

So I don't think I've ever bought a brand new car, right, it's always been like a. The newest car would have been a demo or I've taken over a lease, but it's been, you know, and maybe a few thousand kilometers on it, right, because I want to, you know, pay the extras there's so much appreciation yeah, exactly right so like when you start to realize it, it doesn't make sense.

Speaker 1:

And I actually recall reading the Millionaire Next Door in, like I want to say 10th or 11th grade, and I was just like this is fascinating because it does put in perspective of, like, most people who reach millionaire status don't even make more than 100 grand. Like it's not an income game, it's a habits game. So once your habits get correct, then it becomes super easy and the way you do that is there's so many ways to automate.

Speaker 2:

It now becomes so simple and easy yeah, and, and you know, as I can recall some of the principles in that book, right, number one is delayed gratification. Right, it's. Yeah, you know you don't need everything to be brand new, right, or delay things for a year or six months until you purchase it. You think about it, right, it's like, okay, do I really need to replace my iPhone now? It still works, right, I've had it for three years. Am I getting any more value out of buying the new iPhone 16? No, right. So it's like, okay, I can delay that. Just from delaying it one year, you're saving yourself a thousand bucks.

Speaker 1:

Just say, take that thousand bucks and invest it for the future. Yeah, into the Apple stock.

Speaker 2:

Right or yeah right.

Speaker 1:

You know, buying the companies you want to do is a big one, but it's just. It's also this idea of being committed to yourself, because the biggest thing I find with a lot of people through the coaching is that there's some individuals who have expanded themselves so much in regards to this instant gratification that they don't build up this protection and this financial savings. Whether it's saved or invested, it doesn't really matter, but it's just this ability to to think clearly, because I think that's one of the biggest ones. Where you find someone who's very paycheck to paycheck and in america that's very, very common right now, yeah, and it doesn't allow you to think clearly yeah, and here here's, and here's another one.

Speaker 2:

That I did when I first bought my first house was we rented out the basement. So I didn't have any kids at the time. And so my ex-wife and I we bought this little house and we said, hey, there's like two extra bedrooms downstairs. So we've rented the basement out to a university student, right.

Speaker 2:

So now you have, you've got an additional form of income yes right and and you know, and this strategy can be used like today you can still do it. So maybe you can't afford to buy this bigger house, or maybe you can if you have a basement apartment and then they're helping you pay for half the mortgage or 30% of the mortgage.

Speaker 1:

Yeah, there's a way to massage things and a way to make things work. The other idea there is it's one less, two less rooms to take care of. Like you realize, it's like on average, like, how much room does one individual utilize? Like my understanding, I think one individual. 500 to 600 square feet is like a very comfortable area. So you got two people at 1200. There's some houses that are 5000, 10,000 square feet and it's like there's not that many people in there Like so it just it becomes more of a maintenance game. So it is true, like, if you like, utilize all the the space and you make the most out of it. I think there's real value there, but the ability to rent something to and become additional incomes such a value add.

Speaker 2:

Yeah, yeah, or or, and I think there's probably more opportunities in the US than in Canada, but you can still use the same strategy, right? And maybe you're a young couple and you're using the same strategy that I talked about and you buy a three-plex or a four-plex.

Speaker 1:

Yes.

Speaker 2:

And then you rent out the one unit, right. And then the other three units are rented out, so they're helping you to pay for your mortgage. And then, let's say a year or two later, right, the markets change in the housing markets and you get some appreciation and then you can take that equity out and then go buy another place. And now you got a rental property helping you to produce that income. And then you think about it. Remember, that example we talked about is okay, I want to replace that $100,000 of income. And now you got this house and let's say it's generating I don't know $4,000 a month of income.

Speaker 1:

That's 48 grand.

Speaker 2:

That's 48 grand and let's say, 25 years from now. Right, the rental property is paid off and you got 40. You got almost 50 000 of income.

Speaker 1:

So you, you're already halfway there absolutely, and it would probably go up more because the thing would be paid down. So so what is your? What, what would you say would be best for 20 something, 30, something, like whoever's like I want to get financially fit. What? What would you, what would you say is a good first step or a good few steps? Because I mean, we're looking at some big picture ideas, we're looking at some niche ones, but I want like real actionable steps where it's like hey, like I have a job, I'm doing all right, I'm making some extra money. What do you think it is? What do you think the real?

Speaker 2:

Yeah, I think you know. You know what I think is. You know my personal opinion. I think if you build a foundation with at least one or two properties, yes. Because, let's assume, because it provides some stability Right, and you got equity being built up slowly.

Speaker 1:

Yes.

Speaker 2:

I think that's not a bad idea. And get that, get that, you know, get one or two rental properties right, build that, build that up. And how do you get there is you pay yourself first and maybe at the beginning just live frugally so that you can save a ton of money so that you can get your first property and when it makes sense, right. And I think with interest rates dropping, it's going to make more and more sense over the next 12 months as interest rates drop here in Canada and the US. So there'll be some great opportunities to get into the real estate market again, or for the first time to get into the real estate market again or for the first time?

Speaker 1:

Yeah, absolutely, and I think one of the missing points and this is something that's always helped me when I think about these things is every property you get is like a semi-retirement. That's a retirement. You know what I mean. Every investment account you have whether it's a Roth, a 401k retirement Like that's a retirement. You know what I mean. Every, every investment account you have, whether it's a Roth, a 401k retirement, every insurance policy if you get like a long term cash insurance policy retirement like some people would say, crypto retirement Like these are all semi retirements, where you're putting your chips in different places and you're just down the line. You're investing in different things and some things may go up, some things may go down, but over the long period of time, you're building out four or five, 10, 20, 30, 50, 100, 1,000 different potential retirements and the more you have, the more diversified it becomes.

Speaker 2:

Yeah, yeah, you know, if you look at the super wealthy and you look at their asset allocation or where their net worth is of capital, right, I mean I've seen some different charts it's probably 40 to 50 percent of these billionaires have 50, 40 to 50 percent of their net worth in real estate. Wow, and in the us there's um, I mean, the tax strategies around real estate is very favorable, even more favorable than here in Canada you know, with the opportunity for tax breaks against your current income by flipping properties and keeping them, you know, in a corporate environment.

Speaker 2:

So there's, you can really build that up quite nicely if you're disciplined. Absolutely build that up quite nicely if you're disciplined, absolutely yeah. So paying yourself first, diversifying your assets, don't put all your money in one basket.

Speaker 2:

However, if you are an entrepreneurial type I mean most millionaires are either like professionals or small to mid-sized business owners so if you get capital and you're somewhat entrepreneurial, and it's not everybody, but there's a great opportunity to buy small businesses in Canada and the US Canada and the US and I think there's great opportunities to get some good small businesses at a reasonable price that produces cash flow already. So you're not having to start up a business all by yourself. You're buying the existing business with cash flows, which is a lot easier than starting something up from scratch.

Speaker 1:

Of course, because you have a brand, you have people who are already working with you. It does become one of these games where it's not even it is about getting a certain amount of money saved up, but at the same time, it's also if you can create that cash flow in a faster capacity. It's also, if you can create that cash flow in a faster capacity, then you're basically getting yourself to that financial freedom increment, because what the cash flow does is it protects you from anything that occurs. So, like, you can get cash flow from businesses, you can get cash flow from real estate, you can get cash flow from investments. So it's like, once you start creating the cash flow now it's like, okay, that's one last thing I have to do, because you start building and building.

Speaker 2:

Yeah, yeah. So back to your question, it depends, right? If you're entrepreneurial, save up your money and buy a small business and then go buy another one, right? If you're the type of person that is going to work for somebody, that's fine too, and then you got to save more and invest as much as you can early on. But those two paths are really good paths to take and really delay the gratification. Save more now for the future and then you can. You can relax a lot more in the future and have more options in the future. It's about having freedom right 100.

Speaker 1:

And one of the other biggest things I would bring up too, is a lot of people believe that if they're investing in their uh, their retirement account, that might be enough. Um, sometimes that is enough, sometimes that's not. So, um, just me alone, I like to invest my own stuff and have that in a in a different capacity. Um, just because, like I said, there's just more optionality. Just because, like I said, there's just more optionality and there's more possibility.

Speaker 2:

Yeah, what do you think that manages? You know? Trillions of dollars in ETFs, right. Electronic traded funds right. It's just a package of investments, these electronic traded funds? Right. They did a study a little while ago and people that were working with financial advisors had a 3% greater net return than somebody that didn't have a financial advisor.

Speaker 1:

Oh, wow.

Speaker 2:

And it's because of the psychology of it all.

Speaker 2:

Right, it keeps you in the game, keeps you less emotional, and somebody to make you accountable to not do stupid things with your money, and that's the big thing.

Speaker 2:

It doesn't matter how smart you are. So it really is something that we want to keep reiterating because you need to work with somebody, and I believe that most people aren't very good, like you might be part of that one, half of 1% that does really well with your own money, but that's not most people. Most people do need to work with a professional, because if you don't know much about taxes right, and you make one bad decision about how to invest money or how to move money around, or a tax decision, right, you know that advisor is going to help you potentially save millions of dollars. Right, because you made a smart decision with a team of subject matter experts. So a really good financial advisor will be working with a team of subject matter experts you know their insurance license as well working with accountants, lawyers, estate planning professionals, healthcare professionals right, you know, and that's the value is having somebody that's going to, you know, make sure that you stay on track to your goals for the reasons that are important to you, most deeply held values.

Speaker 1:

So yeah, I mean, mean, whenever you have someone holding you accountable, working towards those goals, it's always beneficial, like, and especially when you can get another perspective it's also. But I think the big moment you brought up is actually having a team where they're collaborating together in all these different capacities, because there's not too many times where the individuals are speaking with each other and they're all feel kind of siloed. So like when they're all together and they're unified, for you, that becomes a very valuable asset to anyone.

Speaker 2:

Yeah, so when your trusted advisor is your financial advisor, working closely with your accountant, lawyers and other subject matter experts, you're going to get so much value out of that and save you a ton of money in taxes and make sure that you don't do stupid things with your money. Keep you focused. And then there's one less thing that you have to worry about, because having peace of mind with your investments will allow you to sleep at night, and we all want to sleep better at night, don't we?

Speaker 1:

That's true, that's true, absolutely. And so what are these actionable steps for the individuals to take away? Like I know, we got a few more minutes left in the podcast and I just want to make sure that everyone's got. So the big ones that we've covered so far are pay yourself first. Definitely spend less than you make Any anything else. Major that we're missing here.

Speaker 2:

Yeah, I like the words delay, gratification.

Speaker 1:

Of course.

Speaker 2:

Right, you know and that covers a whole bunch of stuff off right, like like you think about, we talked about starbucks coffee, right? So like how many people spend four bucks a day on a starbucks coffee? Four? Bucks a day even five days a week. That's 20 bucks a month. 20 bucks a week times four, there's $80. Let's call it $100 a month. You're going to save.

Speaker 1:

Well, that's to pay yourself first, or it's the people spending $20 a week on lunch and they go out for lunch.

Speaker 2:

You see, delaying gratification is slightly different than paying yourself first. So you pay yourself first, yes, and you look for ways to delay gratification. So maybe you go to Starbucks two times a week instead of five times a week, right? You delay the purchase of a brand new car. You buy used cars.

Speaker 1:

By delaying gratificationification you can increase, paying yourself more yeah, yeah, so you, you get.

Speaker 2:

You know, depending on what words resonate with you, right I? I think you know some people might say, yeah, I gotta delay gratification in order to pay myself first. Or you know other people might think, okay, I need to save first to delayed gratification, right? So? So you know, whatever works for you, right, it's the meaning you attach to these words, but figure that out, right?

Speaker 1:

however, that, however, the math works for you a hundred percent, and I would also uh another thing we kind of brought up really run the numbers and know the numbers when you purchase anything a vehicle, a boat, a house, any of these things because these are things that you're going to be liable for for a while unless you're paying it off in cash. So that's something that you definitely want to make sure you're making the proper decisions with, instead of being in this place of oh my God, I can't believe I did that. Now, how do I get out of this? Because that that was kind of a point we talked about a little bit too as well which is like being a house poor or a car poor where it's, you're just reliant, like you literally just work to pay these bills, and it's like it's not a fun reliant, like like you literally just work to pay these bills, and it's like it's not a fun situation to be in. So just be very cautious and careful when going about that and make sure that you can afford it. Like some people say, you shouldn't buy something unless you buy it twice or three times, and these are all things that you should consider when making these higher level decisions.

Speaker 1:

And I actually saw something and I'm curious on your take on it. Someone was saying that when you think about your net worth so say, someone's net worth is $100,000. Basically, what you do is you knock off the three zeros and anything under that price they can make the decision on. So, say, someone's at a $300,000 net worth under $300, they can make the decision on. So say, someone's at a $300,000 net worth under $300, they can make the decision on. But anything over that price point they should sit there and like think about it and really make sure they need it or don't need it. Um, in that regard cause that was one thing where I heard it and I was like, oh, that is kind of interesting.

Speaker 2:

Um, cause it gets you to think a little bit, cause it's one of your net worth- yeah, you know what I like, that you know anything that can cause you to pause and to think about it, and I think, I think it's great. So, yeah, I like the stop gaps Right, a hundred percent, yeah.

Speaker 1:

One of the biggest things I realized is that we all have stop and goes right. So some of us are so specific and what I talk about I have a group in the men's group I talk about is like what's your like? I call it an F? It number. But what's your number? Where you just don't care and as you have more wealth, that number should rise. But there's some of us who that number is way too high. Like if you have $100,000 net worth, your F-it number should not be 500 and below, it should be 100 and below. But some of us have a $5 million net worth and our F-it number is like $5, where we're like we don't want to get ripped off, we've got to make sure we get the $5. And it's like that's too many decisions.

Speaker 1:

So it's these little things where you start to realize that true happiness kind of runs up that scale a little bit, because it gives you that freedom of like hey, I worked really hard and I deserve this. And if you have a $10,000 net worth, $10 is your number and that's cool too, but that's why you got to be really on the ball. But when you have a million dollar net worth, your number would be what? Would it be? A thousand? Okay, these are both decisions that you can kind of think about and jump around with, but it causes you to not be so like spend the money, spend the money, see this, do that, do this instantly. And it causes you to sit there and be like what is my effort number, what is my comfortability? And that was something I saw and I was like this is really easy for people. So saying this has been incredible. Is there any last things that you want to leave the people with Slash? Where can they find you? And et cetera, et cetera.

Speaker 2:

Yeah, you know, like I'm a values based trained advisor with my former mentor, bill Bachrach. Right, and as Roy Disney once said, once your values are clear, your decisions are easy. Disney once said once your values are clear, your decisions are easy. So, find out what's important about money to you, and what I mean by that is you know a certain amount of money so that you feel certain about what's going on and what you're comfortable with. And I love your little rule there that you were talking about. Right, take the three zeros off of your net worth you know, and then make decisions on what's important to you and get your needs met.

Speaker 2:

And yeah, delaying gratification and paying yourself first, those are two principles that will get you a long way in this process. So, and I do believe, keep things really simple so that it's executable and you can be consistent and you don't have to think too much and have these simple rules of thumb to keep you guided. And, no matter what your net worth you know, have an advisor. It could be someone that has a lot of money or, if you've got certain net worth, working with somebody is going to help you to stop making bad decisions with your money based on what's important to you, ok, so.

Speaker 1:

Yeah, I love the extra values, and always having other perspectives is always something super valuable. So can't say that enough saying this is incredible. I can't wait for our next episode awesome, that was fun, thank you.

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Jordan Edwards

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