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In this episode, Chelsea speaks to Kevin L. Matthews II of Building Bread about investing, responsible stock-picking, and helping underserved communities gain financial confidence.

The Financial Diet site:
http://www.thefinancialdiet.com

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Kevin L. Matthews II on Instagram: https://www.instagram.com/buildingbread/
Buildingbread.com: https://www.buildingbread.com/
Hello, everyone, and welcome back to another episode of The Financial Confessions.

It is me, your host, Chelsea Fagan, co-founder and CEO of The Financial Diet and person who loves to talk about money. And today, I am here to talk about money with someone who does just that all the time.

He is an investing expert. He's a former financial advisor and a former teacher who now works in financial education, helping people understand their money, and specifically understanding investing, which is something, as you guys know, we are very, very passionate about here at TFD. And I wanted to learn a little bit more about how he approaches those things because, as you guys know, at TFD, we have a pretty specific way that we talk about investing, and kind of the generalities of what to do and what not to do.

But there are many ways to approach it. And I think one of the best things we can do in financial education is apprise ourselves of all of the different methods out there to really decide which is the right one for us. And when it comes to financial education, few people are doing it as innovatively or consistently as my guest, Kevin of BuildingBread.

Hi, Kevin. Hey. Thank you for having me.

Thank you. And congratulations on your about-to-be-released book! Thanks.

It actually might be out by the time this airs, so we'll have to double check. Either it's about to be out or it just came out. So tell us a little bit about your book, first of all, but also a little bit more about what you do and what brought you to the space of financial education.

Yeah, so I'll start with the book. The name of the book is From Burning to Blueprint-- How to Rebuild Black Wall Street After A Century of Silence. I'm a native of Tulsa, Oklahoma.

And this May, it will be the 100th anniversary of the Tulsa Race Massacre, which is very personal to me. And Tulsa was known as Black Wall Street at that point in time. So my book is a lot different than many of the other great works that have been done in the past because it doesn't just tell you about the history of what happened 100 years ago.

It talks more about how do we recreate this? What are the wealth conversations that we need to have today to improve the situation for people in Tulsa, and people all across the world? I love it.

And tell me a little bit about what brought you to financial education, a little bit about your background in finance, and what you do now. Yeah, so what brought me to financial education was probably a mistake. So I started-- did an internship in 2010.

I was always interested in money. I was just-- how do people get rich? What could I do with that type of wealth?

But really didn't put together the dots until 2010. Took an internship-- again, I'm from Oklahoma-- and I took an internship in New York City, which was a mind-blowing experience for me. I had never ridden a train before.

I had never seen so many people. It was just a culture shock. It was also a financial shock because they threw me into mutual funds, and the stock market, and 401(k)s without teaching me a single thing about what any of that stuff meant at that point in time.

So after being frustrated for 10 weeks, I went back home and said, look, it cannot be that hard. How do I figure this out? And then once I did, I said, look, I've got to tell people about this.

So I started to teach in my dorm room-- that's how I started BuildingBread-- and started to tell people about investing. Why was it important and what you could do right then, which is-- at that time, I was 19, 20 years old. So I've been doing it close to 11 years now.

And it started from that internship. So you obviously, in the work that you do-- which I really identify with as we do here at TFD-- is speaking to people about building wealth who have typically been left out of that conversation. Here at TFD, we do it.

We-- our audience is overwhelmingly female and women typically do not lead the long-term wealth-planning decisions. They do not have control over their long-term finances when they're in marriages and so forth. But I often find that one of the most kind of complicated things about speaking about financial literacy to people who have typically been left out of it is that there's a very-- there's a delicate balance, right?

Between what financial literacy and education can do and what systemic barriers and historical disadvantages, what role they play. So for example, you bring up the burning of Black Wall Street. And if we look at the racial disparities in wealth over the past-- essentially since the founding of the company-- there are enormous barriers to people-- based on, for example, race-- to building wealth and to making up that difference from centuries of disadvantage.

So how do you navigate both giving people those tools, but also understanding that systemic inequalities are a huge stumbling block? Absolutely. And it's-- first is by recognizing that those do exist, because you get some experts out there that say, yeah, you just do this, and that's just the end of it, which is not always the case.

So being able to recognize what causes those gaps, what are some ways to try and mitigate it? But also, more importantly, how do you advocate for those, as well? So I try to give people the financial basics, number one.

But then also point out the gaps and then try and give them ways to say, look, if we're not paid the same, what are some ways that you can have conversations to understand what those pay gaps are? How do you negotiate your salary? How do you bring up salary with your colleagues so that you all are paid equally?

Because when you are paid equally, you can invest more. When you can invest more, you can have more financial security. So it's being able to do both-- talk about the tangible things that you can do now at any budget level, regardless of salary, but also point out those areas that there are discrepancies and have those conversations so that you know what you're walking into, you can mitigate what you can, but also advocate in the cases where you need to do that as well.

And in terms of speaking to people who, for example, they have not experienced generational wealth, they're not starting off from a very financially advantageous point. Maybe they're just starting in their career, maybe they have a ton of student debt. We often get the question, when it comes to investing-- I'm broke.

You know, I'm in a ton of debt. I don't have anything to invest with. How do I get started, especially when I don't have the knowledge, but I also don't have the funds?

Where do you suggest people start who are at that place? Yeah. So there are two areas that I usually suggest.

And the first one is to start where you are, in that it doesn't have to be expensive to invest, at least not anymore. For example, there are tons of new financial apps out there. Even some of the more established players out there allow you to invest with as little as $5 or $10.

And yes, that may not seem like a lot of money, but anything is better than nothing, and that money does start to compound. You have to know that it doesn't have to be expensive. So for example, in 2020, from January to November-- and I put a tweet out about that-- that just $50 a month-- that's it-- $50 a month could have given you close to $1,800 by the end of November in a stock like Moderna.

And that's the small steps add up. Imagine if you could do more than that where you would be today. So even if it's $10 consistently, $20 consistently, $100 consistently, you want to start somewhere because any amount that you put in consistently is going to grow for you.

So I'm glad that you brought that example up. Because as I mentioned in the intro, I think your philosophy around investment is a little bit different from ours. And not-- at TFD we generally advise against individual stock picking in pretty much any form, and really encourage people to just really follow the indices to be super well-diversified to, obviously, prioritize any tax advantage retirement accounts, et cetera.

But I think you seem a little bit more open to the concept of individual stock picking and being a little bit more versed in the individual, either industries or companies that you're investing in. Can you explain a little bit about your investing philosophy, and how individual stock picking can fit into a healthy investing philosophy for you? Yeah.

So for me, I'm much more of a hybrid, more of a hybrid than most, in that I still have index funds. I am still a big fan of index funds and recognize and realize that individual stock picking is not for everyone, nor is it the easiest thing to do in the world, in terms of managing your emotions and how the market moves. However, the way my philosophy works is that I have about 60% to 70% in index funds, but the other 30% or so, I'm using for individual stocks to kind of increase my wealth a bit more aggressively.

And the way that I do that is I actually look into my index funds. So in most funds, you'll see the top 10 holdings, right? You'll start to see where those companies are putting that money and you can start to gauge and analyze from there.

So a lot of the bigger, more established companies-- perhaps an Apple or a Microsoft-- that's what I personally look towards. But I always look for what is established, what can we look back in history and see has established better returns than the market, and how can I implement that into my own portfolio and investing philosophy? Interesting.

Now you said how you kind of manage your own emotions when it comes to individual stock picking. Can you tell me a little bit more about what that means? Yeah.

So there's a lot of data out there about how people react to losses. And I think there's a famous one from JP Morgan, maybe two or three years ago, that says that when the market falls, if you were to withdraw your money for just five days, that your returns are drastically lower than someone who could just have left it alone. Right?

So for me, I set out dates very early in the year of when I'm going to go into my portfolio and make changes. And right now, that is two times a year. That is June and December.

I am not checking the market and making changes in my portfolio every day. I'm not looking at the losses every day. And that's what kind of helps me to stay measured.

Because we just saw this last year in 2020. If I looked at my account in March and saw everything dropping by, what was it, 37%? I may have overreacted.

I may have sold. I may have bought something I probably should not have bought. However, by June when I checked, the market was already recovering.

We were already halfway through the year and I would have-- I missed out on a lot of the pain just by simply minding my own business. But we also know that when you check your account monthly, when you check your account weekly, your terms are also lower. Because you can get emotional, you can overreact to what's going on.

So a lot of times, staying patient is the best move, leaving things alone is the best move, especially if you have high quality companies in index funds. When it comes to people who really didn't, maybe, receive a huge financial education growing up and the concept of investing is all new to them-- and I think beyond just being new, it's also scary and intimidating. And it feels like, why would I do that?

I would rather just put my money in a savings account where it's FDIC insured, and whatever. Or even keep it cash. How do you kind of counsel people on becoming comfortable with investing as a way to grow their wealth?

Yeah. There's a practice. You want to get into it in the right way and be introduced in the right way.

So the way that I did it, personally, was by going to a place like Investopedia and they have a simulator. And what it does is allow you to practice to see how a real investment would have done with simulated dollars. So I had two friends and I, we were maybe a sophomore or junior in college, and we tested out for an entire year, kind of like a contest.

We simulated if I bought Nike, if he bought Apple, who would have made the most money at the end of the year. And that's what got me comfortable because I was able to see money grow, see the market fluctuate in a very safe environment that did not lose me money. That's what got me comfortable and I eventually started to branch out, learn more, listen to podcasts, and really get more educated that way.

So number one is take it step-by-step. You don't have to be a master at once. I definitely recommend-- if this is the first time you're going into investing, you definitely want to go to index funds and stay there.

Start there first. And if you do nothing else, you are going to be fine. But the second thing I would also say, when I get people to get comfortable about and to at least think about it, is my two-year-old son has more money at two than I had at 18.

And that is only because he is investing. And that type of return over, and over, and over again is what set him apart. That's where wealth starts.

And my savings account, no matter how much I saved, I was never going to catch up to where he is. And you know, he's only two now-- he's three now, but at the time that we wrote that article, he was just two-- and that's the power of investing and the power of compounding interest. More than you will ever get in a savings account.

Very true. And in terms of the more traditionally understood ways of building wealth-- so a lot of people who are maybe immigrant families, or families that did not have a lot of wealth, or experience financial insecurity-- when it comes to thinking of building wealth and investing, a lot of what they'll think of first and foremost is real estate. Because I think it just has a very different relationship with people, a very different reputation, and of course, it also gives you a tangible good that you can live in.

And we all need to live somewhere. What is your view on the balance between investing through real estate and investing through the market? And where do you see-- how do you advise people find that balance in their own life?

Yeah, I think balance is key. I think sometimes in the financial industry, we can always get into the binary option, where only one can win and you can't do both. So yes, balance is key.

For me, I think you want to get back to the understanding of it. In that, a lot of times when you're investing in the market, you're still buying tangible things. If you get a Walgreens, you can walk into Walgreens.

You can walk into a McDonald's. Those things are real, they are tangible. So that's something that you want to make sure that you're making an apples-to-apples comparison.

The other thing, too, is when it comes to real estate, you want to be very careful of all of the expenses that you may incur, as well as the area that you are in. And you also want to make sure that you are coming out on the top in terms of any disparities that may exist. For example, in the African-American community, real estate did not recover in the same way the stock market did, and that actually contributed to the wealth gap from 2008 to today.

We also know that Hispanic communities and African-American communities pay more in interest and their house-- their housing value is devalued. It's, for Black Americans, close to $48,000 per home. So when you are calculating what you think that return is, you do want to be careful of that.

You do want to calculate what interest you are paying and then make that comparison and balance between what you want to invest in real estate and what you may want to consider investing in the market. When it comes to setting goals for building wealth, I think that's also a big stumbling block for people, especially if they come from any kind of financial insecurity, or don't have a background of generational wealth. Because, for so many people, the goal is just like, be able to pay my bills at the end of the month.

You know what I'm saying? Like there's just not a ton of thinking about financial goals in the abstract. And especially when it comes to something like retirement, obviously as we know, enormous amounts of people either don't or can't save for retirement.

And even when you can, I think it can be very difficult for people to say, well, how much should I really be saving? And when should I be retiring, and all these questions. So what is your philosophy, in terms of how you set your own goals for the wealth that you build?

And what are some guiding principles that you would give other people to set their goals for wealth? Yeah. I would say, for me, when it comes to building wealth, especially if you come from a place of financial insecurity, is figure out what your comfort level is.

And figure out, for you, how to take that next step. So I think the problem sometimes is, you may have some difficulties-- I've had difficulties in my past. We all have some burden that we're trying to break past.

But to set medium term goals. To set short term goals for you to kind of break through and go past. Because the thing is, if you're starting in a place where you didn't have a leg up, you didn't come from a place of generational wealth, and someone spits out a formula and says you need a million dollars, that's going to feel impossible.

That's going to feel discouraging. You want to say, look, I made need a million one day, but I'm going to start with the first $100. Once I get there, I'll start with the first $1,000.

And that's what's going to build that momentum. So it's being able to break down those big wealth goals into smaller, tangible pieces, and that's where you start to see momentum. And you want to make sure that you can measure that momentum as you move forward.

What does the role of an emergency fund play in your strategy? How much do you advise people to have before they start investing? Yeah, I would say it is, perhaps, the most critical part, is to have a good emergency fund.

And I'll explain why in just a second. But to answer your question of how much one should have, the way I describe it-- and it's going to depend on if you're an entrepreneur full time, or if you are someone who has a full time job, or even a part time job-- I like to say anywhere between three to six months of rent or mortgage. The reason I say that is because [INAUDIBLE] reading the article and they always say expenses, three to six months of expenses.

We all don't know what all that entails. We do know what that monthly mortgage is, we do know what that monthly rent is. Multiply it times 3 or multiply it times 6 and that should be your goal.

I will also say that because that can be a big number, you're not going to hit it overnight. It could take you a while to do that, and that's fine. You want to make sure you are progressing towards that as you start investing.

The reason why you have to have it, and the reason why it is so important to have it or to begin striving towards it before investing, is because of this. Once you put your money in the market, just like you would put a seed in the ground, you want to make sure that that money is going to grow for you. However, if you experience an emergency and you have to dig it up early, you are hurting your future prospect.

You are hurting your future self. Also, depending on what type of account you have, you could also be taxed by pulling out that money early. So you're hurting yourself in two ways by not having that emergency account first.

So you always want to have something to pull from-- in case it's car repair, health, anything-- that doesn't cost you as much, and have that cushion before you turn to credit card debt, or before you even turn to your investments. That's great. Now for people who are really total novices about investing, and feel very overwhelmed with being able to learn about it, learn the jargon, learn what to follow, learn what publications to read-- it can feel so overwhelming.

And it feels like this secret society that you'll never be able to crack into. What do people, when they're starting at that place, what do they need to know and what do they not need to know? Oh, man.

So there are a lot of things that you do not need to know. My favorite metaphor about this is, you don't need to be a mechanic to learn how to drive. I don't know what a camshaft is, but I can drive.

Right? That's how your investing strategy should be, or your approach to investing. You don't need a degree.

You don't have to be an expert to learn how to start investing. I would say the most important things, the things that you need to start with, is start with understanding what an index is, like the S&P 500. You want to make sure that as you are learning about the market, that you can relate it to as many things as possible in your own life.

The way that I explain what an index is versus a stock, it's the same way I would explain what an NBA team is versus the entire NBA. One is more risky. You don't know if that team is going to win.

The other-- the league, the entire NBA-- I get to spread my risk. Doesn't matter who wins. I still own the whole league.

So that's one way that I try to make sure that it's tangible. And whatever I'm learning, I try to make sure that I break it down and make it as tangible as possible. But in terms of stuff that you don't need, I would say, close to 85% of that stuff.

You don't have to learn how to read charts, you don't need to know every single Wall Street term. Start with what an index is, learn your 401(k). Start there and that's what's going to help you the most.

We have a lot of people who ask us about the role of robo-advisors in all of this. My advice tends to be whatever gets you investing, go with it because the hardest part for most people is just actually starting to invest. But a lot of people, I think, are hesitant to use them because obviously sometimes the fees associated can be higher.

And a lot of people also want to get on a track where they can sort of wean themselves off of a robo-advisor if they're on one. So how do you view the role of robo-advisors for people getting into investing? Yeah.

I think robo-advisors can be very interesting. I think the thing is, what is your goal by getting a robo-advisor? For some, they're looking to increase their returns, to make the most money possible.

And that's fine. And then you have others that just want to start. So if you just want to start, totally fine.

But you also want to make sure what you're getting out of it. If you are getting an advisor for a specific reason, you want to make sure that that advisor-- that robo-advisor, in this case-- actually helps you to do that. But I don't have any strong stances in either way-- in either case.

My thing is if you're starting, you're starting. And if you're growing your money, you're growing your money. So if that's a route that makes you feel more comfortable, that's more hands-off, then it actually works for you.

And we have some data, so far, that shows you that robo-advisors are fine. They are going to help you to build wealth, but it's going to be a lot more hands off. So if that's what you're looking for, then it may be a route that could be best for you.

And we also get a lot of people who ask about the role of a CFP. We get a lot of people saying like, when do I know if I need a CFP? Where should I look for a CFP?

What should a CFP do for me? So what is your view on that subject? Yeah.

So I think you will need some help at some point in your career. I think, for me, it's when your situation becomes a bit more complicated, meaning you've hit the $100,000 mark in investments, you may have a child or two, you may be married. The reason is, when you talk to a CFP, they can help you work through certain situations, and make sure you're covering your bases in all sectors of your life.

Most people think that a CFP-- certified financial planner-- only talks about investing. And that's not always the case. They do a lot of planning around-- if you have a kid, how much should you be saving for college now?

How much is college going to cost? You just bought a home-- how much insurance do you have? How do you make sure that you and your spouse are saving the right amount for retirement?

All of these questions you can't always Google on your own. And if you do, it can be a lot more cumbersome for you unless you have a financial background. So I've noticed some [INAUDIBLE] that you may want to consider one.

It is not required, by any means, but the value in having someone who is an expert to do those plans for you is that they've seen dozens and dozens of times. You have one shot with your financial life to get it right. You can learn from someone who has done it, again, dozens of times, so they've seen what works and what doesn't work.

And they can help you to be more efficient in your own financial planning. And in going back to the subject of individual stock picking, so to use the example of the Moderna one you gave, right? So if someone were to ask you, OK, well, everyone knew that these pharmaceutical companies were coming up with these drugs that were going to explode, and obviously those companies' stocks were going to shoot up insanely, so why doesn't everyone just buy pharmaceutical stock and then everyone gets rich?

So how do you explain kind of the math behind how that works a little bit? The math behind how the market works, in general? Well, in terms of like why isn't everyone able to predict the market, I guess is the question.

Oh. Yeah, so there are a few reasons. So first-- I hesitate around this because predicting the market is near impossible.

Even myself, I don't consider myself a market predictor. But I am someone who does rely on history. So for example, we know that, I think since 2000, we've only had like five down years.

So I know that the stock market, or I know that index funds have been reliable. You can go all the way back to 1950 and the stock market and index funds are extremely reliable. I can do a similar thing with certain companies.

So I can look back and say that Apple, since 2000, has been really solid. Or Apple since 2010 has been solid. So that same history, the same logic I use for index funds, I can also use for certain companies.

The problem is some people get greedy and that's why everyone isn't able to do it. But also, some people get emotional because the stock market does not go in a straight line. No company goes in a straight line.

So what some people try to do is, when the market dips, they leave. They get out of it altogether. When in reality, you're most served-- in most cases, not all-- to just stay put and let things play out.

And in terms of-- so another kind of like more philosophical question that we get a lot-- again, from people, I think, who have legitimate historical reasons to mistrust the financial system, and to mistrust the government even, and mistrust society. We get a lot of questions about like, well, what happens if the stock market all goes to 0? Like what happens if my 401(k) is worthless?

And we obviously have our answers to that question, but I'd be curious what you would say to someone asking that. Yeah, I mean, I would say I don't think there's ever been a time in history where it has been zero, and that's really what I'm banking on. The good thing-- and the stock market is not perfect by any means at all-- but the good thing is, in most cases, all of our interests are aligned, or as aligned as possible.

So there is no incentive for Walmart stock, if I owned Walmart, or Amazon, or whatever-- to go to zero, because they lose money and so do I. So we're all trying to work together to ensure that does not happen. But from a historical perspective-- I mean, from the Great Depression, to the 2008 crisis, to what we just saw last year, you can go all the way back to the dot com crisis in the early 2000s-- we have recovered from all of those situations and more.

And really going back and banking on history, in that most of the time we have seen the stock market recover, we have seen the stock market grow, and we have seen it create wealth for years, and years, and years. So it's really like, could it happen? It's a possibility.

But the odds of that are extremely low, and we've got more than 50 years of data to show us that. Yeah. At the end of the day, everything in life is a risk, right?

Like we all take risks when we get in our car and drive to the store. Not that I do that. I don't have a car.

But you know, people who have cars, they're taking risks every day. So a lot of people who are interested in building wealth, one of the reasons, obviously, is for their children or future children, and securing that generational wealth. So can you talk a little bit-- I mean, we get a lot of questions about the investment vehicles specifically designed to save for your child's education, and in terms of how they can optimize their strategies to secure generational wealth for their family members.

So you're asking which vehicles? Well, to talk a little bit about the vehicles available and sort of what you think about them, but also how people can sort of optimize their investment strategy generally to make sure that they're really securing wealth for their families. Yeah, so for me, I'm really big on generational wealth.

Have a three-year-old son and an 18-month-old daughter, and I wanted to make sure, and the reason why I'm so invested in this particular topic, is because I wanted to make sure that they never wonder what if. And in 2010, when I did that internship, second to the last day, I figured out that I could have had like $850,000 if my parents only invested $1,000 per year-- per year-- in something like Apple. And I was kind of like, my life could have been drastically different if that were the case.

And back then, there weren't a lot of these apps and things like that. So no hard feelings towards my parents, but they-- and they also didn't know how the market worked either. So for me, it's extremely important to do it.

The sooner you do it, the more money they could have. When it comes to vehicles, I'm a big fan of 529 plans. That is more geared towards education and you can be flexible with that.

But I also enjoy what we call custodial accounts, which allows them, when they're 18 or 21, depending on the state, to take that money and use for a down payment. They can use it for college, if they choose to. They can start a business if they want.

But I wanted to make sure that they have the autonomy to do what they want when they're of age. So being able to deploy that capital, to put money into the market, and allowing them to have those choices was extremely important to me. Because that's what money buys at the end of the day, is choices.

Where you want to go, how you want to go, and what you want to do. I wanted to have-- to give them the opportunity to choose everything, and give them more choices than I had, or their grandparents had. I love that.

And in terms of when it comes-- so for most people, I feel like they get the basics, right? Like they'll probably if-- a lot of people, if they have a 401(k), they'll be setting up their 401(k), and they kind of understand that. But in terms of prioritizing investment over other things, I think mentally, it's very difficult for people to get over that roadblock of delayed gratification.

And to like say no to the instinct to constantly be checking the market. Basically, when it comes to investing, our psychology works against us at every turn. So how do you recommend people get over all of those mental roadblocks to start investing in a way that's a lot more proactive than just whatever your company might offer?

Yeah so I think the first thing is to know that your mind isn't always on your side when it comes to investing sometimes. Because we have a proclivity to check, just to make sure everything's OK. So knowing that upfront is one way to get around that.

Again for me, I set dates on my calendar and just have it ongoing for me to come back and check at this date, to check on this date every single year. And that's what kind of helps me. The other thing is I really like to rely on history and just say like, 10% of the time, 100% of the time, whatever the stat is, to help me kind of understand what is the reality there?

And that's what helps me to manage those emotions. When it comes to allowing things to go on for that long and to get your mindset in the right place to invest for 20 or 30 years, I like to say it like this, the time is going to pass anyway. And whether you are investing or not, that time is going to pass.

So what you want to do is ensure that your money is working for you during that time so that when you get there, you'll have something to pull from. When you get there, you can do what you want to do and not do what you have to when it comes to wealth and working. I love that.

It's going to pass anyway, so be wealthy on the other side of it. Yeah. I think one thing I also say around that is, 10 years from now, you're going to wish you started 10 years ago.

And that's something that happens, as well. Because I'm 31, so 31 years ago, yes, I wish my parents had index funds. Yes, I wish my parents invested in Microsoft.

So the next 31 years, do I still want to ask that question? Or do I want to do what I can now to avoid those questions? Do I want to do what I can now to ensure that I have the wealth that I wish I would have had 30 years ago?

Exactly. And on another sort of mental, emotional roadblock, so if someone has been behind the eight ball generationally, and maybe they're in debt from school, maybe they're in a very not-super-great-paying job, et cetera, I think a lot of people honestly feel a level of resentment, of frustration, of they feel the unfairness-- which is real. That unfairness is real.

And they can also, I think, feel like why bother, when it comes to building wealth, especially if they think they're starting at such a far behind place. So what do you-- what would you counsel to people in that mindset? Yeah, it's difficult.

And I think the way I see it is, if I do nothing else, I can still pass the baton. If my son inherits $100, that's still more than what I had when I started. And the most important thing is that anything that you do is better than zero.

And if you couldn't do all the things in the world-- you didn't inherit a million, you couldn't build a million for yourself to pass on-- that's fine. But you do want to improve. You do want to take a step forward.

And whatever that is, that is successful. As long as you start at a better place than where you started, that's success in and of itself. And it's just sitting down and defining what that is.

Because sometimes when it comes to financial hardships, we feel that way because A. you've gone through a hardship. But also, we're comparing ourself to someone else, and we don't know their entire story. We don't know what the actual numbers are for other people.

So being able to say, look, this is my definition of what success is, this is my path. And you chart that path, whatever it may be, and you'll be able to kind of get out of that a bit, change your mindset, and make sure that you're going in the way that is best for you. And what do you counsel to people, especially people in our generation-- I think this is especially true for women-- who feel like there's such a pressure to spend.

There's such a pressure to buy things, to consume, to appear a certain way on social media, or to other people in your life, and it can be really difficult to live in a more frugal way so as to redirect those funds to things like investing. How do you recommend that people kind of unplug from that narrative that we should really be directing our money toward buying stuff? Yeah, I take a balanced approach here, too.

In that, it is OK, within measure, to have nice things. I have a vacation fund. I think everyone should have a corner of their money set aside for that.

But finance doesn't have to be like, you only save, and you do everything for 30 years from now, and nothing today. So for example, I'm a big fan of the 50/30/20 rule, where you're setting aside about 30% to spend on things. And I think that's a part of it, because if you are seeing saving and investing as a punishment, then it is very, very hard for you to stick to that path for a long period of time.

So first thing is, do enjoy a portion of your money. The second thing, though, is the overspending. Right?

Like the Keeping Up with the Joneses, what you don't want to do. So in that case, you may want to consider switching around who you're following. You may want to kind of introduce some limits to your social media.

For me, last year-- I think 2018 through 2020-- I had a timer on my phone that cut me out of Instagram and Facebook after a certain amount of time. And I felt a lot better because I didn't have to see all the stuff all the time. And it kind of helped me focus on what I needed to do financially and what I also needed to do on a personal level.

Oh, yeah, just for people who are listening who may not be totally familiar, could you just quickly outline the 50/30/20 rule? Yeah. So the 50/30/20 rule is probably my favorite budgeting rule, and might be one of the most consistent financial rules I have stuck with for forever.

So the way it works out is they want you to, or the rule suggests, that you should spend 50% of your money on living expenses, 20% for saving and investing, and 30% for stuff. 30% for you to enjoy. Now not everybody can get those exact numbers. You want to get as close as you can.

And the way I've had it work for me is when I got my first job, I wanted to make sure I could back my way into that number. So I got my salary, I said, OK, I think taxes are going to be this. How can I make sure that rent, my student loan payments, all my stuff, can get as close to 50% as possible?

When I first started, it was probably like 60% to 65%. So it wasn't exactly perfect. But it allowed me to have the rest of my salary to enjoy and to save.

I love that. So I have-- before I get to our rapid fire questions, two quick things that I know everyone's going to ask, so I better just ask you. Do you consistently outperform the market with your mixed strategy, putting about 30% in individual stocks?

Yes. So out of-- now not every year. Now I will say that, not every single year.

But yeah, so for the most part, I think 80% of the time, I tend to outperform the market. That doesn't mean that it's by leaps and bounds. So some years, it's been like 1% or 2%.

Last year was pretty big. It depends. Last year, I cheated.

I had Tesla. Tesla was up 400%. So you know, there's that.

I just want to take it with a grain of salt. So 80% of the time-- at least for the last five, maybe six years-- I have outperformed the market, but not by leaps and bounds. Not always by leaps and bounds, rather.

Out of curiosity, did you cash out Tesla? No, I did not. So the way my portfolio is set up, I only have about maybe 5% to 7% in Tesla, so it did help because it pulled up a lot of other investments.

But I'm holding for the long term. I say that. I'm not married to Tesla at all.

I'm not one of the guys that's gung ho about Elon Musk and the company, so come June we'll see where it is and I may or may not let it go at that point in time. But yeah. Interesting.

All right, well I'm curious to see where it will be when you're checking next year. Or next-- I guess it's in, God is it three months now? June is so close.

The year is going by so fast. Two months! Oh my God, two months.

Anyway so it's coming up soon. We'll see where you are. And then the other question that I know people are going to ask is can they subscribe somewhere to just do what you do?

Yeah, so I do teach courses where I show people exactly how my process works and what I do. I also, most importantly, show people what not to do, and mistakes that I have made myself. And also what I've seen other people make, too.

And I think that's the value. So you can buy all that stuff at BuildingBread.com, where I show you my classes, my Instagram, and all my social channels there. We're just going to have to get a BuildingBread tracker going and just follow whatever you're doing.

And outperform the market 80% of the time. Yeah. I should-- so I think last year, I did have a quarterly watch list.

And that one beat the market. And I think I was only picking the top five, so we did that. And then the other thing, too, that I consider a cheat code-- some people do, some people don't-- is I'm still primarily a long-term investor.

So when I do select stocks, I'm usually not in today and out tomorrow. So a lot of people find it boring, but it works. So there's nothing that I do-- and Warren Buffett does this and several other investors.

Like if I have an Apple or a Microsoft, which has beaten the market for a very long time, why get rid of those? So that's another way as to why I've been consistent in that. It's because a lot of the stocks stay the same from time-to-time.

I'm only changing out a few based on what we see in the market. Love that. Also, I feel like anyone-- people do not do the fantasy football investing enough.

I feel like more people should do that before they actually invest, and just see how it would have been. Because I know a lot of you guys are doing like fantasy football. Some of you doing like fantasy Bachelorette leagues, like redirect that time into fantasy investing so you can get more comfortable.

Yeah. So fantasy Bachelorette, that's interesting. I should have done that for the last season.

Wait, do you watch The Bachelor? So I did. So the first time I ever watched it was this past season.

OK. I don't watch it, but our producer is very, very into The Bachelor. Yeah, so I think the guy that was on it, my wife knows because he's from this area, apparently.

So they were really invested. I'm like, oh, this is interesting, as I eat my popcorn. So yeah.

Interesting. I say that in no judgment. I watch many other reality shows.

So now the time has come to ask our famous rapid fire questions. So no right or wrong answers to any of these. Just whatever comes up.

What is the big financial secret of your industry? And we'll say financial advising. The biggest secret?

The biggest secret is that it is not what you see on TV, not at all. I think most people think you're like, you're in there. I think everybody thinks this is day trading, and it's the most risky thing in the world, and it's very, very, very dangerous.

It's really not that way. And most people who are successful-- even my millionaire clients-- their strategy is really boring. My strategy is boring, but it does work.

And I think most people have an opposite perception, where you've got to be jumping through hoops to consistently beat the market, or even get close. That is interesting. Now let's make this not actual investments, because I'm curious about this in your actual life, what do you invest in versus what are you cheap about?

Like in terms of things. Oh in terms of things. So I am pretty big on technology stuff.

So I will try to get what I think is the best or top at the time. I try to really get the best books, too. Because I can't go to the library for books.

I just can't do it. I like too much, and I just, I do too much work for that. So I try to get high quality there.

Stuff I'm cheap about-- I'm probably cheap on clothes. I just-- if it's not an actual suit, I don't care where it's from. I'll just wear it.

As long as it fits. Nice. Well especially right now.

Like where are we going? What has been your best investment and why? Best investment, just in general?

Yeah. Some people say an actual investment, which I guess might be Tesla or something for you. But some people say like, my wife.

I don't know. I mean, that is where I was going to go. I would-- outside of all of that, the one that people don't talk about much, the best investment that I have had has been virtual child care.

So there is like a Zoom classroom that my son goes to for like an hour, hour and a half a day. They do the alphabet and all that kind of stuff. And one, he's actually learning.

But two, it gives me time to do the things I need to do. So whether it's editing the book, going to meetings, stuff like that, I've been able to alleviate that because my time is very valuable. I would say that has been the best investment, especially during a pandemic.

Love that. Also I love imagining someone being like, it's a shared top spot between my wife and Tesla stock. What has been your biggest money mistake and why?

Oh, yeah. So I did Teach for America and I taught seventh grade math in Dallas, Texas. During that time, I had two whole years of not being required to make any student loan payments.

And at the end of that experience, I was given $10,000 to pay off those student loans, which gave me an additional two whole years to not make any payments. I just threw it at the loans and said, I'll see you guys whenever I need to make payments. So for four years, I didn't make any student loan payments.

Now that benefited me in that I was able to buy my wife's engagement ring in cash and invest more money, do that kind of stuff. But I could have been student loan debt free, too, had I really just honed in and paid that off when I didn't have to pay interest and didn't have to make any payments. So if I could go back, I would definitely adjust that, where for four straight years, I didn't make a single payment and didn't really even think about it.

What a wasted opportunity. But you're making up for it now. Yeah, I'm making up for it.

What is your biggest current money insecurity? Money insecurity? I would say sharing my gains and returns.

I think that that had been a big insecurity that I'm still kind of working with. There are some trusted experts that say, hey, here's my net worth, here's what I made in the market today good or bad, and just put it out there. I'm still insecure about that, for a few reasons.

One, I am not a fan of leading with gains because the market can make you look like a fool very quickly. So I'm not always like hey, here's how much I made this exact time. So I'm working on it.

I do want to be more transparent and let people know how I work, what's good and what's bad. But that was probably my biggest one. I like that.

That was a really-- no, we've never gotten one like that and that was good. When did you first feel successful, and what does that word mean to you? There are a few points.

So success, to me, is setting out a goal and actually achieving it. The first time I felt real successful, it was my college graduation. It was the first time I had ever-- first time in my family anyone had gone away and did a four-year university.

I was the first one to do it in our immediate family. And I was able to, on Mother's Day, give my mom my diploma. My grandparents had-- they grew up in the 1930s.

It was a very, very different time. So for them to raise my parents and allow me to cross that stage was the first time I really felt successful. I love that.

That's so wonderful. So before I let you go, I'm sure our audience is clamoring for more of these pearls you've been dropping this entire conversation. So where can they go to find out more about what you do and preorder your book?

Yeah, so you can find me on all things BuildingBread. If you're looking to join the preorder wait list, you can go to BuildingBread.com/1921. That's 1-9-2-1.

I love it. Well thank you so much for joining us. It has been a true pleasure.

And thank you guys all for tuning into this episode of The Financial Confessions. I really look forward to talking to you next Monday. Bye, guys. [MUSIC PLAYING] "