Think Twice Before Investing #434

to kind of throw in the stew. Yeah, you you We we talked about how happiness is sort of like the stew. There's not this perfect recipe that you have to follow. It's not like baking, where you have to have very specific ingredients, the right quantity of ingredients, and you have to do them in the right order. When it comes to investing, investing is a lot more like baking.

It's a little bit less like throwing a bunch of ingredients together in a big pot and just kind of, you know, seasoning to taste and being happy with what you have at the end of the day. Because if you don't follow the right rules when it comes to baking you could. Uh. That's the difference between a nice, sweet, fluffy cake uh and some salty plato uh. And we want to make sure that you end up with a nice cake uh, not something for your kids to play with.

And I know the people who've been listening for a while might see that headline and they're like, what in the world, dudes, you talk about investing and only in the sunniest, rosiest terms. Why in the world are you coming out with a podcast. It's like, thing twice before doing this, And I promise we're not trying to be a click baity, but really, there are a bunch of things you need to think through before you actually start investing in. So that's really what this episode is about.

It's saying, yes, we love it, we still think it's great, but there's some due diligence that needs to happen on the front end before you jump in head first. Yeah. And even a few weeks ago, we talked about the importance of investing over consumption, right, how ownership is key. And so now that we've convinced you now that you want to invest, we want to just taper things a little bit and say, hey, there are a number of things we want you to think about first. That's what

we're talking about today, no doubt. Before we get to that, Matt, I just really quickly, you wanted to mention someone in our Facebook group recently was in a car accident. She seemed fine, which is fortunately she was. She was seemed like she wasn't hurt from what I could tell, and so Jessica, we wish you the best. But she had asked, what what what are people's best advice when you're in a car accident to make sure that you're not taking

advantage of financially. And one of the things that it instantly made me think of that I don't know if we've ever talked about on the show, but I feel like for anybody who ever gets in a car accident, one of the things you need to remember in your potential battle with an insurance company is diminished value. Most people, Matt, don't even know what that means. But basically, if you're twenty dollar vehicle, hopefully it's more like a ten dollar vehicle.

But let's say you're twenty thollar vehicle gets hit, yeah, and it causes eight thousand dollars worth of damage that has to be repaired. The insurance company is going to pay to have that car fixed. But the problem is or they might total it because if it's too much, damaging m title totally. But the thing is, after that damage is repaired, your car isn't worth anymore, even though

the work has been done to repair it. The there's this thing called diminished value, where on that car Fax report that accident is going to live forever and if you try to resell it, it's not selling a pristine car that's never been an accident. It's selling a car that has had some damage done in the past, and that affects resale value. And so that is one of

the things you should pay attention to. That's one of the things you should make sure you're asking your insurance company for payment for the diminished value of your vehicle. And there's actually an easy formula that you can run your car through to kind of come up with a realistic amount that you should be asking for. Well, we'll link to an article I think it was on bankreat dot com that goes through the details of that formula and how you can figure out dimnased value in your

specific case. But that's just one of those things nobody talks about. UH. Being made whole in an accident also involves receiving compensation or the fact that your car is now worthless totally. UH. And it's worth noting too that this is specifically the case. When you are in an accident and it is the other person's fault. You can try to file a diminished value claim with your own insure if it's your fault, but they're likely going to

say no, sorry, it was your fault. But if you were in an accident it was somebody else's fault, that is a claim that you would file with that insurance company. Sometimes it will involve you getting a professional appraisal of

your vehicle. But I mean if you do have a twenty vehicle or even more thirty or forty thousand dollars on the line here, you know, getting spending three to four bucks on a on an appraisal, would one be worth the money if that means you're going to be made whole and to recoup some of that lost value because of the fact that you are in an accident exactly, and part of it is just proving your case. Sometimes you will need an appraisal if you're working with a

particularly stubborn insurance company. It varies by state. Yeah, but hopefully that that actual formula for figuring out what the diminished value is in your specific case. Hopefully you can provide that and have to even hire someone and pay out a pocket that would Yeah, that would be ideal. So, yeah, make sure in the case of a car accident you don't forget about diminished value. But Matt, let's mention the beer that we're having on this episode. This one is

called Emergency Drinking Beer. It's by Wild Heaven Brewing, which is just around the corner from us in Atlanta. Can you believe that we have never had a Wild Heaven beer on our show? Is this the first? It's I checked actually before before we hit record, and because I thought, certainly back in the day we had Yeah, I mean, when Wild Heaven first came on the scene, we actually enjoyed their beers a decent bit esctan. I remember that one in particular, being that delicious quad that we enjoyed

one night playing some board games. But it has been a while since I've enjoyed their beers, and I'm excited for us to actually have one here on the show. Wild Heaven emergency drinking beer. We'll share our thoughts on this one at the end of the episode. Sounds good, All right, let's move on to the subject at hand. We're talking about thinking twice before investing and matters. We're preparing this one and made me think about road trips

for some reason. And when you're heading to the beach, you don't just HAVEV in the car and start driving south to get there. If you're in Atlanta, right, unless you are the star of a sitcom, you're like, we're going to the beach. You're Kevin James and King of Queens or something like that, right, Yeah, And because like, let's if you're in college. I feel like that's the thing that that is something maybe you do in college where you just like, hey, guess what, I'm turning twenty

one tomorrow. I want to wake up and see the sunrise at Charleston or at Folly Beach and Charleston. A friend of mine actually did that, and I opted not to go with him because classes early in the morning. I thought, I don't think I want to do that. I'm sorry, you're responsible, sir. Yeah, Well, the thing is, if you literally just start driving south, you might hit a dead end, you might hit a road closure, you could get lost completely if you're just kind of going

with a general navigational principle. And not only do you need a more specific set of directions, Fortunately you don't have to pronout those map quest directions like you did back in the college days. Remember those getting real nostalgic over here. That was terrible, that was the worst. But yeah, you you also actually need to have done some prep work in advance, like did you ask your boss for

time off before this trip? Because if you didn't and you just don't show up on Monday, that's not going to be good for you. Right. Did you pack all your beach gear? Matt? You always come prepared with a shovel when you go to the beach. Oh, I'm a digger. I love digging in the sand, and so you know, you show up to the beach with a frown on your face if you didn't pack it ahead, and if I didn't have my my shovel, I would be sadness.

The same is true when it comes to investing. You know, we talk a lot on how the money, about how you've got to get started investing. If you want to reach your bigger financial goals. We firmly believe this. It is a really, really important part of your personal finances and building your wealth. But you also don't want to pull the trigger before you've considered a bunch of important things.

And that's what we want to talk about today. Yeah, and you know, there's a good chance that you are pretty much constantly hearing the quote unquote responsible voices all around you saying that you need to be investing. And if you are investing, when you say responsible voices, it makes me think of Toby in the office, by the way, It's like, yeah, I don't know, sound good. He's not respond I mean, just because he's hr doesn't mean he's responsible.

He's just honestly though, I feel like Jim was always just the most responsible, well rounded person, which is why we liked him someone. But the fact is that is what you hear, and even if you are investing, you're likely going to hear folks around you saying that you should be investing more right It like, it's great that you're headed in the right direction, but let's ramp it up. And in fact, those are both sentiments that we regularly

share here on the podcast. Investor early invest often. But if you just take some money and you just throw it into the market without a plan, without having specific goals, and without knowing where you currently are in your own personal finance journey, then the advice to just get investing may not be all that helpful, and it could in fact harm your personal finance journey down the road if

you get started too early. You're right, Matt, Yeah, some people you've actually talked about how you are encouraged to start a roth ira really early on and over time that has been really good advice for you. But the minute that you opened up your raw ira was's not ready for not the best time for That's exactly exactly right, And the truth is that some people should avoid investing altogether,

at least for now. That's because there are a number of other money gears that you'll need to get through first. And we've yeah, we have our seven money gears that we've talked about. I believe we did a whole episode

in January this year. If you go to how to money dot com and you click the start here button, you'll see our seven money gears laid out, and it's essentially a financial order Operations of when you should do certain things, and if you do things out of order, just like making that making that cake, you're you're going to get a different end result. And so, for example, it's important to eliminate any high interest debts that are weighing you down before you start investing in attack sheltered

account like a roth ira. We love roth iras, but if you're funding your roth ira before you pay down your credit card debt, that's not a smart move. The one exception we would say is investing enough to get the match that your employer offers if you have access to one. That's one of those things that you do actually want to take advantage of before you pay off that credit card debt. But other than that, we're big fans of you becoming an investor. We don't want you

to put the cart before the horse. Want you to pay off those unsecured debts or any personal loans that have by interest rates too, before you dip your toes in the investing waters. You'll get there at some point, but now might not be the time. Yeah, And and harkening back to your road trip illustration, Joel, like before you even hit the road, there are some things that you need to do to make sure that you are road ready. Right, You've got to make sure you've got

gas in the tank. Smart, to make sure you've had an oil change recently. Yeah, you want to ensure that your tires are inflated properly. You gotta have that playlist ready to Oh, that's true. You want to have to have the tunes ready to go. These are all important steps before you leave on a long road trip. Uh. And so similarly, you first want to make sure that you first have a solid financial foundation before you invest.

And so, like you said, Joel, paying off that high interest debt that is important and this awesome means having enough money in the bank to ensure that you're able to withstand any unforeseen setbacks. That is the emergency fund. And so if you don't have a fully funded emergency fund in your bank, you are not ready to start investing. In our opinion. Uh. The cool thing though, is that you know once that credit card debt is paid off, once you've reached that level of savings, then you've got

a green light to begin investing. Well, Matt, I would say you're almost right on that you do have the green lights. After a few more considerations. That's what this episode is about. Come on, man. But yeah, another really key factor, another thing that you have to have before you start your investing journey is knowledge, and that's something we want to help you receive here on how the money.

We want to make sure that you understand the fundamentals of how any investment you're considering actually works, and do you know the how the specific accounts function and what they're designed for. You know, lots of folks are going straight to investing any brokerage account when they'd be better served to start with a roth ira A instead. That's our biggest gripe with robin Hood exactly. Yeah, the fact that robin Hood allows investors to start investing pretty easily

is a nice feature. But when you can invest in those tax advantage accounts and you're just going straight to a brokerage account, a lot of people don't understand the difference, and they don't realize that there's going to be a big difference when it comes tax time for all the

trades they've been making. And yeah, when it comes to the specific fund or individual stock or commodity or other opportunities that you might come across, you definitely shouldn't be making the investment because you saw it in a headline or because you saw someone say this stock is now a buy and you're like, oh, oh really, okay, I guess I should buy it, or maybe you saw promoted

on Reddit. Right, that's definitely a high place for people to get investing tips these days that someone on CNBC say, oh, this stock is a loser and you need to get rid of it right away, and then you decide to short it because why not give that a shot too. All of those things like using your hard earned money to make decisions when you don't fundamentally understand what you're doing, that's something that we want to encourage you to actively avoid.

And it does take research. It takes acquiring knowledge so that you can know what you're getting into before you put your money. There another thing to ever invest in anything you don't understand. If the investment is super complex, we would recommend you to avoid it if you do not understand how it works. So a real of thumb is that if you can explain how it works to like an eight year old, it's probably going to be

a bad idea. So, for instance, when it comes to real estate investing, there are all sorts of ways to make money investing in physical homes. Some folks are making big bucks buying trailer parks or storage facilities and and and you know, I guess in this case, we understand how that works. But it's just not necessarily our specialty. Uh, Joel, you and I we both right now are sticking to single family homes near where we live here in Atlanta.

And you know, could we do more, We could go bigger, certainly. And while you know, we are curious and we like learning about some of the different opportunities around us from the different ways that other investors make their money, we're kind of experts, you know, on this one particular form of real estate investing. We when we're looking for deals, we have a deep understanding of specific neighborhoods and we know that when something comes on the market, we know

when there's a deal. And we've used that specific expertise to grow our wealth over the long all by sticking to this method, uh that we've been able to hone over the years. I'm just not as knowledgeable and comfortable with other methods, and so for now we've kind of stick to what we know. Like the back of our hand. Yeah, and it's completely in a way of investing that I feel like I can easily explain to my eight year old.

She understands that people need a place to live and that they have to pay money to do that, and they go to work to get that money to pay someone for providing them housing. And yet there are other ways of making money in real estate that I can barely understand, and so then explaining it to my eight year old becomes impossible, and so she's like, huh, Dad, I don't get it. Like it sounds like you don't get it either, and that is a surefire sign that

I should stay away from investing in that way. But we've got more to get to when it comes to what you need to think about before you actually get into investing. A lot of it has to do with what's going on in your own life, in your own specific goals. Will get to that and more right after this break. Alright, we're back. We're talking about why you should be thinking twice before you start investing, and so let's dive in. Right, You've done the necessary prep work

ahead of time. You've got all your ingredients laid out, means in plas when it comes to cooking and baking. You're ready to bake that cake, You're ready to begin investing. I didn't know you were bilingual, Matt. Yeah, that's my two French words. But one of the biggest aspects of investing that you need to think twice about, though, is your time frame. And you can't think about your time

frame really without considering your specific goals. Your your time horizon is going to be everything when it comes to investing. You get that one thing wrong and what might have been a great decision maybe turns out to be a

terrible one for you. So, for example, if you're invested in the SNP back around the dot com bubble back around two thousand right, or even during the Great Recession back in two thousand and eight, two thousand nine, or even more recently during the pandemic last spring, if you were following the fluctuations too closely, yeah, look was looking pretty grim. But when you zoom out a bit, it is easy to see that there were turns are now

looking great. This is an instance where your time frame is going to have a massive impact on what you perceive to be good news or bad news. You know, they say timing is everything, and I tend to agree. It makes me think about when I first started dating Emily matt Uh. I thought she was really pretty. I wanted to ask her out. It turned out she was dating somebody else and it wasn't It wasn't really good time to ask her out. And then I did ask her out. Once they broke up and we went on

three dates, things weren't clicking. It just wasn't the right time. But later on, like we as we developed more of a friendship, we started dating again. That was the right time. And so yeah, third times the charm and so like, yeah, you never know when you know. When it comes to the timing of your investment decisions, that and and how long you plan to be invested for, you have to know your own time rise. And that is a huge part of thinking twice before investing is saying how long

am I gonna be doing this for? And yeah, if you don't have the right timing, you could be in for some heartache. It's important to understand that there be periods of time where you're going to lose money even in the market. You know, given fluctuations, like there's gonna be weeks, months, or even years where an investment you've made it doesn't look very good and you're disappointed and you're like, well, Matt and Joel said, investing is supposed

to be a good thing. They always talk it up. Well, that's really what we why we want how the money listeners to develop a long term mentality. The gyrations that happened consistently, they're going to happen, the volatility you're going to see, they're they're just not worth your time and attention. If you are a long term investor, and I guess then the question pops up, does it ever make sense to be a short term investor? We would say not

really not in our opinion. If my short term you mean five years, then that's probably okay on a timeline that's that long. But if you're talking like six months, one year, two years, it's probably not a good idea to be much of an investor. If we're talking about a whole lot less than five years, you run the risk of needing to pull money out during a bear market correction. And that's why that time frame is so crucial,

is so important. If you don't get that part of it right, if you haven't thought twice about how long you can leave that money be uh, leave that money to grow, then you might need to grab it at the exact wrong moment, locking in losses. That's right, and that's actually the exact opposite of what I'm looking for when I invest my money. I don't know about you, but I don't I don't want to lose money. I mean, essentially, you know, the longer your timeline, like, the more risk

you can actually handle. And in fact, the longer your timeline, the more that the real risk actually becomes not investing. I will actually get to that here a little bit later on in this episode, but you've got to ask yourself the question, am I okay losing some money? Because loss a version, it is a real thing, is something that none of us really want to experience, but it

comes down to your ability to stomach it. And many folks have a hard time investing because of this potential to see that balance decrease, because it takes an emotional toll, even though short term losses are completely insignificant to our long term investment plan. Or if it does play a role, it's just a signal that maybe you should buy a

little bit more while everything's on sale. But This is exactly why people don't put lump sums in to the market, even though everything points to the fact that time in the market is more important than actually timing your entrance into the market. And then over the long term, we can take comfort in knowing that the market it goes up nine eight percent of the time over any fifteen

year period. Long term investing wins uh. And actually, the only reason that it's not one, the reason it's percent instead of one of the time over fifteen year periods is because of the Great Depression. If you look at the fifteen year period between that in World War Two, it's basically had the two most significant events that had a negative impact on our modern economy, and fingers crossed,

we're not likely to see something like that again. Yeah. So, so when we're talking about taking the long term view, we're talking about investing in those tax advantage accounts that are specifically designed for your money to be there for decades. So like your four one K or your I RA A are the accounts that you should be looking to first put your investment dollars inside of. And that means no touchies for a long long time. And so, yeah,

if you're just starting out in your career. It's probably gonna seem a little bit weird to start saving for those goals that are so far away that you're not even sure if you'll actually get there. You're kind of like plan on living hard and dying young. So I don't know, Matt and Joel, the the advice to invest for my sixties and seventies just doesn't fit me. But the thing is, that's what you think now at twenty two, But you will actually get to that future point it

in the earlier you start. Even if it's just with small amounts, it's gonna add up and it's going to make a huge difference for future you. And so yeah, stats actually show that we become better investors. We can think more about the actual long term if we can visualize our future selves. And this might sound a bit cheesy, Matt. Back in the day, I think you and I posted a face app photo of us being like, what thirty five years older? You definitely look much better as an

old man than I do. Oh more like fifty five years older man? Was that a right? We were like set up like eighty five year olds? Okay, all right, well, uh yeah, it turns out that even just doing something like that, there was a study done a bunch of years back, and it's actually gonna give you more sympathy for future you, for geriatric you, and it will actually

help you start the process that you know you need to. So, if you've found yourself not saving for retirement because you're like, you can't comprehend you can't bridge the gap between being in your twenties or thirties and then being in your seventies, like that's hard to come to grips with, something as simple as taking a picture, putting in the face app seeing what an older version of yourself could look like can actually help incentivize you to start doing the hard

work and saving for the long term. Now, yeah, and you know we just gave that stat on the stock market performance over a fifteen year timeline. Well, here's the thing. Once your time frame starts to become shorter than fifteen years, you actually do start to realize a higher risk of loss UH in what you're actually invested in should likely start to change, and so it has an impact on

what you invest in. Uh if you're looking at investing for the next fifteen years or longer, we are huge fans of simply going with the total stock market or the smp F under indexes out there in order to maximize those higher gains with But if you are looking at investing for a goal, say in the next five to ten years, like kids college, for instance, then looking to something like a target date fund could make more

sense for you. So of course, the great thing about target date funds is that they rebalance over the years and they automatically become more conservative by allocating more of the portfolio away from stocks and towards bonds. This decreases the volatility and it lowers the risk that you're going to be pulling some money out of the market uh

during a slump where you lock in those losses. So this is just a good thing to keep in mind that your goals and your time frame do have an impact on how and what it is that you are actually invested in no doubt. So that was a lot about personal goals and time frame and how you think about volatility inside of that, and there are a lot of personal decisions that you have to make a about that.

And yeah, if you're listening to how the money and you're in your fifties or sixties, you're going to make different allocation decisions than someone who is in their twenties or thirties in all likelihood, right, And so the next thing to do, still on a personal level, is you know, now that you're hopefully identifying as a long term investor, you're saying, you know what, I'm gonna invest my money for a minimum of five years. You're gonna want to

have an actionable plan. And then it's also crucial to write that plan down. So yeah, anything we would say that you write down instantly creates a stickier effect. Studies actually show that when you write something you hear down, you're far more likely to remember it. So let's say you are in class in college and your professor is lecturing typing versus handwriting. The handwriting is actually going to make it stickier in your brain. You're gonna do better

on the test even if you never review those notes again. Uh, handwriting versus typing. Really, just that simple act changes the way your brain processes the information that you're receiving. So yeah, we would say there's something about writing down by hand. This small short doesn't have to be very long statement, this investment plan, it's gonna help reinforce it. It's gonna make it easier to recall even if it's not in

front of you. That's true. But if you happen to be somebody who lives uh in an apartment or a house where there's no paper, I would still say that

you find it on the walls. I mean, well, typing it out like that's better than nothing, right, because I mean I will say, like people who I meet sometimes I will run over to notes on my phone real quick and write down their name, what they do, you know, specifically who their kid is, because like meeting parents at school, oftentimes that's the case and the ability to refer back to that is invaluable. And so that's remembering facts in

a college course or remembering parents or kids names. But the same thing is true with making sure that you write down your plan of attack when it comes to investing. You know, just the mere act of just taking pen to paper or writing out your plan in a in a notes app is going to reinforce your newfound plan uh and and then having it on hay and for

future reference is incredibly helpful as well. I don't know how many times I've gone to my document where I write these parents names down and I search a word that I think is associated with their name, and I can find it, and then all of a sudden, I remember their name and I can pick up the conversation

where we left off. And so this can be as simple as a plan to invest five dollars into the market every single month without fail in order for you to max out your your wrath I ray every single year. And when it comes to what to invest in, if you've got a time frame of at least fifteen years, like many of us do when it comes to our retirement goals, then simply put that money in a total stock market or the SMP five index fund. It can

literally be as simple as that. But making sure that you write it out and that you can refer to it will help you to stay the course. Yeah, Matt, And there's a really, really good reason that we recommend investing in a total stock market or an SMP five hundred index fund for a whole lot of people, and

it's because it's simple. It's a really simple approach, and I think a whole lot of One of the major reasons that people don't even get started investing, ever, is because the financial services industry has made it sound like it's really difficult, and we're trying to say no, no, actually it's not, and don't let perfect be the enemy of great. And you know, low cost index funds are

a great way to get started in investing. But on that note, there are other considerations that you need to be aware of before you take the leap into investing in. One of them is fees. We'll talk about that and how not every index fund is created equal. We'll get to that right after this. All right, we're back from the break and we're still talking about how you need to think twice before investing in Joel et s too. Some of the other considerations, specifically fees. Let's talk about him, man.

We uh, you know, we discussed a whole lot about low cost index funds, target date funds. If you purchase a total stock market index funds via Vanguard, uh Fidelity, even in one or a Schwab, you're gonna pay next to nothing to do so. And interestingly enough, some brokers charge an arm and a leg for what are essentially identical funds. There are still somehow lots of investment firms who are charging in the point five percent range for you to invest your money in the total stock market

or the smp F hundred index funds with their firms. Yeah, and so that's ten times what you should actually be paying with our favorites, who are either either charging literally zero or point zero four percent and point zero four it sounds like that, like in your head, especially when you hear it audibly, you're like, what's what's the big difference, dude? This is a massive different different ten x. These are huge savings in that same gap exists in our other

favorite funds, target date funds. The low cost brokerage firms make it really cheap to invest in those, but a lot of others are still charging uh, pretty high fees. We've talked in depth about the impact of fees on your investment returns, but uh, if you're paying around one percent in additional fees every single year, that could cost

you of your portfolio's value over forty years. And so, just simply put, right, instead of having a million dollars by the time you hit retirement, you might actually only

have seven fifty dollars. And so you want to make sure that you are paying close attention to those fees important that there's just a really high impact of a small amount of fee increase and it seems like that, well, what's the difference between point one and point three, and it's like, actually, it really really adds up significantly, and it's your money. Then it's eroding if you're paying high fees.

And so before you invest, when we're talking about thinking twice before investing, looking taking a hard look at the fees uh at that your brokerage is charging you to invest inside of those funds is really important because oftentimes

you you might just be in the wrong place. You might be at the wrong firm who is offering you access to one of the kinds of funds that we talked about, but they charge much more ridiculous fees, meaning you should you know, walk out of there and go more else, preferably to one of the low cost providers that Matt mentioned that isn't going to fee you to death, that's going to allow your money to work more for

you less for someone else. And another consideration we would say you need to make before you take the leap into investing, you have to ask that question, how liquid is my money at Some investment accounts give you access to your money in an instant. You can put some money in today, you can pull it out tomorrow even if you want. That's what we're talking about earlier with brokerage accounts right to give you that ability, but there

are tax implications of doing that. That is actually one of the cool things about the Rath I RA, which we love. It's one of our favorite investing vehicles. If you need to take some of that money out down the road, you actually have access to the money you've

contributed without paying any tax or penalty on it. And so the Rath kind of gives you that balanced approach where it's like, oh wow, yeah, if if I do get in a pinch, I can take at least the contribution portion out of that if God forbid, something awful happened and I and I really needed it. But but for the most part, retirement accounts are inaccessible, and they're inaccessible for a reason. Right. There's penalties to make sure that you don't touch the money that you're putting aside,

uh until decades from now. That's kind of the point of these accounts, and so there is a a stick essentially to prevent you from doing so. But it's important to know whether you're gonna have access to the money you've invested, or whether it's essentially locked away for years and years to come, and what sort of penalty you'll

incur if you absolutely have to have it. Knowing the rules around that and how liquid your funds actually are is important, especially when you're considering which investment vehicle you're gonna put that money inside of this right, Uh, let's talk to you about inflation, because it's also important to know what will happen to your money if you choose not to become an investor, and that is that you're going to see the value of your money erode, and that erosion gets worse and worse as the as the

years chug along. Not investing for a year, maybe two years, it's not the worst thing in the world. It's not gonna be the end of the world for you. But if you choose to wait another decade before you start investing, you will have lost some really important years and it compounds. And if you've been holding on to that money just in savings accounts or other safe places quote unquote safe places, right, it's not really safe there. You're actually taking on more

risk than you should. Inflation is often referred to this invisible force. Uh. And it's just this way that we're essentially taxed without realizing it. This is something that a lot of economists UH point to, like Milton Freeman says that this is the one form of taxation that's imposed on us without legislation. Thomas Souls says something really similar. But we need to be aware of the fact that inflation does a road on money, even if it's not being extracted from our accounts by a fee or an

actual heart tax that we're paying. Yeah, and of course inflation top of mind these days, and so yes, hopefully that helps drive the point home that not investing means your money is going to get eaten alive by inflation over time. And let's give some stats to back that up. For instance, if you stuck a dollar under your mattress in ninety three, when I was negative eleven years old, it would be worth basically fifteen cents in today's economy.

The that's because inflation continues to take along. It is. What Matt said, is this silent mover that you, uh, you almost don't see until the headlines start to recognize it and you're like, wait a second, it is having an impact. But in most years you barely realize it doesn't register on your radar that things are getting more expensive, but they are. And so, yeah, being a good saver,

it's obviously important. We extol the virtues of saving money a lot, like we think it's important, But if you keep all of the money that you're saving in cash, it's going to be worth less and less over time. Cash it's not trash. I think that's another terrible misnomer when it comes to cash. We we think having money and savings money and an emergency fund that liquid cash to back you up in case something happens. That's really important. But it's also not where you want the majority of

your net worth either. And if the majority of your net worth is in cash, well then you're gonna see your net worth slowly start to decline. And yeah, the only way to come at that really is through investing. Yeah, I think another way to think about inflation it's, you know, with distilling, Like when you're like whiskey goes in barrels,

it's like an angel share exactly. Yeah, when it says there in the in the barrels, a little bit of it evaporates over time, and the distillers they call that the angel share, and that that's why there's like twenty something year old scotches are so much more expensive. Is one of the reasons there's been more evaporation, right, and literally you are paying for the fact that, well, maybe ten years ago you would have gotten a lot more for your money, but now there's a lot less. And

so it's just another way to think about inflation. Is this portion of your money that you're just seeing, you know, evaporate up to the heavens, to the angels. But up until now, you know, we've been primarily talking about investing in the stock market, but it's also important to point out that there are other ways to invest that might align with your strengths and your skills that could lead

to better outcomes. And I'm thinking specifically about starting a small business, because they can often take a lot of money to get an operation off the ground, especially if it involves a physical space, right, like a brick and mortar space, And that is money that might work harder for you in your business rather than invested in the

stock market. And so, you know, Joel, you mentioned our money years earlier, and they're pretty formulaic but for the vast majority of folks, we feel that they are going to work really well for you. They're gonna get you on that path to financial independence. But we wanted to mention starting your own business because we feel that there is room for nuanced conversation and there's room for opportunities like this. When it comes to thinking twice before investing.

You don't have to always say, Okay, you must invest as much money as you can in the stock market before you pursue this opportunity. But there are ways for you to say, you know what, this is something that is unique to me. That is something that you need to say to yourself that you need to ask yourself, because everyone out there knows their own personal specific situation better than we do, and sometimes it is worth taking the non fundamental look and approach towards investing your money

as well. Yeah, if you've got an extra ten grand and you're like Matt and Joelson, I should invest it in the SMP five hunder, but I really wanted to start my own business. We don't necessarily just go to the stock market direction, because at ten grand invested in your own online business or local business, whatever it may be, could pay much bigger dividends for you down the road, and it could provide a source of like continual income

of livelihood. And if it's something you're passionate about too, you have to factor that in. So, yeah, you definitely don't want to be a robot. You want to consider your own personal goals and if getting your own business off the ground is part of that, or investing in yourself to increase your skills, that's another thing that doesn't get talked about enough. We would say that, yeah, you can earn more over the years if you were to invest more in education or skills building, and so that's

something you have to consider too. It's not just about putting more money in your wrath. If you need to half cut your ROTH contributions in half for this year so that you can go back and get a couple of additional skills so that you can make more money, that's a good investment. To get recertified. Yeah, I mean, if that's if it's some sort of certification that you need, Sure you no certification needed for podcast. That's either lucky

or unlucky, depending on how you view it. But yeah, yeah, and like so as we're fond of saying personal finance is personal, so it really is important to think through your own personal goals and how investing fits into those. In most of the time, you'll realize that saving and investing more of your money is what's going to actually allow you to achieve those goals a whole lot sooner.

But occasionally you might have a more near term goal, which means putting more of that money towards an expense and seeing it shrink or towards that business to making sure he gets off the ground, rather than putting it towards an investment and seeing it grow. Another example of that on the purchase side would be a house for

your primary residence. That's that's an example. You know you could you could take the down payment and you could invest it and keep renting instead of buying a like Sweet three two in a neighborhood near where you live. And sure you're likely to see a better return on your investments. But there are some things that are worth spending money on, and you just need to know what those things are for you. There's how healthy balance to

be struck when it comes to investing. We think investing is great, but if you're foregoing those other important life goals that you have for yourself in order to just quote unquote invest more. It's possible that you might get to the point where you would be investing what could be considered an unhealthy amount for you. But here's the thing, at the end of the day, investing it's a really

great thing. We don't want you to listen to this episode and realize or or to think that we're trying to steer you away from investing, because truly, we want all of our our listeners out there to get to the point where they are investing decent chunks of their income on a regular basis, but not before you've asked yourself some of the important questions right and making sure that you've gone through some of those initial money gears.

And while there are some great resources out there for buy and hold investors, it really does feel like all the headlines these days are highlighting short term trades and risky investment options. We do not want you to succumb to the noisiest folks and headlines out there. We want you to know your plan, and we want you to

write it down and then to stick to it. We want you to not only be an investor but we want you to be an informed investor where you're knowing how and why it is that you're making the decisions that you make, and we hope that we've been able to steer you in that direction with this episode, no doubt. And if you're like, I don't know, I'm still feeling confused, I've got some specific questions. That's why we have our ask h Team episodes for seriously, send in your investing question.

We'd love to tackle your specific one on an upcoming show. It's really easy to do that. You can go to have the Money dot com and find the directions there. But Matt, let's get back to the beer that we had while we were talking about investing here and rethinking your approach to it. This one was Emergency Drinking Beer by Wild Heaven. It's a pilsner from them. Yeah, what

was your take on this beer? Well, we don't necessarily plan our beers out to go with our episodes, but it is worth mentioning that it it is called emergency drinking beer, and like we said during the episode, you want to make sure you've got that emergency fund before you invest. But let's actually, yeah, let's talk about the beer. Uh, it is hard to get past the branding of this beer.

It is an all yellow cane with just stark writing across the front of it, and it it just says emergency drinking beer sort of, you know, not un like emergency drinking water and like a FEMA zone where there's a natural disaster and everyone's having to bring in water. And I agree that we should also have that when it comes to beer, because there are certain emergencies that just call for solid quality drinking beer. I will tweet it FEMA right away and then make sure they're incorporating this

into future disaster really plans. You know what's really funny is I remember when they first came out with this beer, all of the water in the city where this where the brewery is went out like there is a I don't know, like a pump ottage And anytime there is a pump outage like that, you know, you're not like a boil water advice. Yeah, you're not supposed to drink it because it's been exposed to air or something. I

don't know how how it works or whatever. But they had just released this beer, uh, and they totally were able to dovetail that natural disaster on a very small scale with the release of this beer. But man, this is I mean, it's a Pilsner style ale and so it tastes like beer, Like like, there's there's nothing really super unique about it. It tastes like your uncle smell

that Thanksgiving. That's probably pretty accurate. What were your thoughts on a Joel, I mean smelled like my uncle was being honest, But yeah, I would say it's it's chill, it's light, and it's kind of got like a just a light biscuity kind of flavor going on with that breadiness. Yeah,

just just a little bit, but just eminently drinkable. If you're one of those people who's like, I like the old school style of beers, I'm not really into like beer from the eighties, all the happy, hazy, stoudy, all that kind of stuff, and you're like, I just want to beer that tastes like beer, this is a good one for you to check out, for sure. So all right,

that's gonna do it for this episode. For If you want the show notes for this episode, including links to anything that we mentioned, well, you can find those up on our website at how to money dot com. And

if you haven't yet already. Make sure to rate and review our podcast over at Apple Podcasts or wherever you like to listen to your favorite podcasts, and a big thank you in advance, because that truly does help to get the word out and it allows other folks to find this podcast, all right, Joel, that's gonna be it for this episode, buddy. Until next time, Best Friends Out, Best Friends Out, m M