Latest / The Personal Finance Club Show / Calculate Your Net Worth, Traditional IRAs, and Stock Picking?! | Ep 12

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Calculate Your Net Worth, Traditional IRAs, and Stock Picking?! | Ep 12 · The Personal Finance Club Show

• 0:16
  Welcome back to the personal final clip show.
• 0:18
  Hey, Jen. Hey, Jeremy, long time no see.
• 0:21
  Yes, we recorded last week's episode like 5 minutes ago and
• 0:25
  during that 5 minute break I had a very uncomfortable bathroom
• 0:29
  experience. It's pot appropriate.
• 0:33
  I was going to talk about something else, but now I can't,
• 0:37
  I can't not mention this because it's it involves etiquette and I
• 0:40
  think we all need to. We're still society here,
• 0:42
  people. So here's.
• 0:44
  What happened? So I need to like, set the
• 0:48
  stage. I, I, I work out of a small
• 0:50
  office building and every floor has its own bathroom.
• 0:52
  And in the men's bathroom, it's a very small bathroom.
• 0:55
  There's one stall, like an American stall where like you
• 0:59
  can see your feet underneath it and the, there's a little crack
• 1:01
  in the door. Yeah, that's, that's a whole
• 1:03
  another conversation. Then there's one urinal and
• 1:06
  there's a single sink. And so, you know, it can serve
• 1:11
  two people at a time as long as they're both not washing their
• 1:13
  hands. And so I walk in and there's
• 1:16
  like feet in the stall and I hear some, you know, noise or
• 1:18
  whatever. So like I'm not alone but the
• 1:20
  but the urinal is empty and that's all I need to do.
• 1:23
  So I do my number 2 and and. Then you do you do your number.
• 1:27
  What? Oh, I do my number one.
• 1:29
  I forgot which number was which for a second there.
• 1:32
  I said I was like, I got no time.
• 1:36
  I got no time for this. I turned around back to do it.
• 1:39
  I took a no, no, sorry #1 OK. Why are the numbers so
• 1:45
  confusing? All right, I took a #1 the Uno,
• 1:47
  not the deuce. And then and then as this is
• 1:52
  getting a little bit graphic as I'm like in the middle, I'm
• 1:56
  like, I hear some like toilet paper noises.
• 2:00
  I was like, what is this guy doing?
• 2:02
  Like we can't like we're trying to, we can't merge on the
• 2:06
  freeway at the same time. We're both going to like, we're
• 2:09
  both going to have to go to use the sink at the same time,
• 2:11
  right. And if I was in the urinal, I
• 2:13
  would feel an obligation. Sorry, sorry if I was in if I
• 2:16
  was in the. Stall.
• 2:18
  And someone came in, I would, I would have like a moral and
• 2:21
  ethical and, and just societal obligation to just remain
• 2:24
  absolutely silent until the urinal person had finished and
• 2:29
  left right. Like just pretend like we're not
• 2:31
  in there together. Because it's like so small.
• 2:33
  It's not like a huge one. It's not like 15.
• 2:35
  It's like, oh, it's a community thing.
• 2:36
  Like there's just two. It's like almost like being in
• 2:38
  someone's home and using it in the bathroom at the same time.
• 2:40
  And so I was like, no, this guy's not going to actually
• 2:42
  like, let this happen. And so as I'm finishing up, this
• 2:46
  guy flushes and walks out. Well, I'm like fishing.
• 2:48
  And then these things like the perfect bad time happens with.
• 2:52
  I used to just stand there and not make eye contact with this
• 2:54
  man who just #2 obviously because I heard the noise.
• 2:59
  And then I didn't wait for my attorneys to sink.
• 3:03
  I was like, what is this monster doing?
• 3:06
  Don't he's a monster. It's like what kind of sociopath
• 3:10
  doesn't have the just common courtesy to just pretend like we
• 3:14
  don't exist and just wait till I'm out of there.
• 3:17
  I would never. You can't really like this can't
• 3:21
  happen to you because you use the women's and there's no I
• 3:24
  don't know, but maybe if there's two stalls like you try to time
• 3:28
  it right. I don't know.
• 3:28
  What do you think? I just think this person's
• 3:31
  probably like not worried about you.
• 3:32
  They're like I'm done, so I'm going to finish up.
• 3:35
  That's psychotic kind. Of camaraderie that goes on in
• 3:38
  women's restroom that they, you can't imagine that we, we just
• 3:41
  have each other's backs in a way that's unimaginable.
• 3:43
  So it really wouldn't be an issue.
• 3:46
  And at most you're waiting 60 seconds or somebody to wash
• 3:48
  their hands like it's fine. It's just all tickle fights and
• 3:51
  pillow fights in there I see. It's like, can I borrow a Tampa?
• 3:55
  Oh my God, somebody broke up with me.
• 3:56
  Like, it's very, it's a magical moment.
• 3:58
  Like if you're out in the club and there's girls in the
• 4:00
  bathroom, wow. There's never been a stronger
• 4:03
  friendship than a stranger in a club bathroom.
• 4:05
  I don't know if you're talking the truth or you being
• 4:07
  sarcastic, either way, I'm. 5 girls weigh in.
• 4:10
  Weigh in. Well, this is not a club
• 4:12
  bathroom. This is like a very awkward two
• 4:14
  person. You were seemed like you were
• 4:16
  very aware of him and he seemed like he could give two shits, no
• 4:20
  pun intended about you, no. He gave exactly 2 shits and I
• 4:23
  was more than I need to know. Amazing.
• 4:27
  Well, was not expecting that, but.
• 4:29
  Like that guy? Don't be like that guy.
• 4:32
  And I guess 5 year olds can TuneIn starting now because that
• 4:34
  might have been like PG13 at best.
• 4:38
  Fame. I have a four year old at home
• 4:40
  and that would have been his favorite conversation with any
• 4:42
  of our podcast. There's nothing he likes talking
• 4:45
  about more than pooping. That's fair.
• 4:47
  OK, well let's get into our first segment.
• 4:53
  Explain it like I'm 5. This is a topic that you go over
• 4:56
  in depth in your course and something that I hadn't really
• 5:00
  explored until I started working with you.
• 5:02
  How do I calculate my net worth and why is it important?
• 5:07
  I love this question because it's so core.
• 5:11
  It's like core. It's like that little center,
• 5:13
  the little nucleus of everything in the personal science world.
• 5:17
  And it's so not talked about, so often ignored.
• 5:20
  And I'll, and I'll give you an example.
• 5:22
  Sometimes in a post, I'll mention that the median US net
• 5:27
  worth is $192,000. And without fail, I get comments
• 5:33
  like, no way people, no way the average person is making
• 5:37
  $192,000 a year. And I'm like, whoa there.
• 5:41
  I didn't say earning, I said net worth.
• 5:44
  And it's just like this core misunderstanding because we only
• 5:46
  talk about earning, how much you're making per year, and
• 5:49
  that's not what it is. And so I'll give you an example.
• 5:51
  Let's say there's two people who are both 100% broke.
• 5:54
  They have no checking out, no savings account.
• 5:56
  They have $0.00 to the name. Person A, let's call her Annie,
• 6:01
  makes $500,000 a year. And Annie spends $500,000 a year
• 6:06
  for incomes. Yeah, exactly.
• 6:09
  There's a word for that. It's called broke.
• 6:11
  At the end of the year, Annie has $0.00.
• 6:13
  Her net worth is 0. And let's say there's someone
• 6:16
  whose name starts with AB Bob. Bob makes $70,000 a year and he
• 6:21
  spends $60,000 a year. At the end of the year, he has
• 6:24
  $10,000. So his net worth is 10,000.
• 6:27
  And so while earning is basically how fast you're going,
• 6:30
  it's how fast you're making money.
• 6:31
  Net worth is how far you've gone.
• 6:33
  How far, like how much money you actually have.
• 6:36
  And you know, Annie went forward 500,000 and she went back
• 6:38
  500,000, so she's at zero. And Bob went forward 70 and back
• 6:42
  60, so he's at 10. So that's the difference.
• 6:45
  Net worth is how much you actually have, and earning is
• 6:48
  like how fast you're making money, but you also have to take
• 6:52
  account spending. So here's how you calculate your
• 6:54
  net worth. You open up a spreadsheet, Excel
• 6:57
  or Google Sheets or God forbid, Numbers if you're a Mac person.
• 7:01
  And that's never fine. Yeah.
• 7:04
  OK, God forbid use numbers. If you use numbers, you go talk
• 7:07
  to bathroom guy and you 2 can have a little club of just like
• 7:11
  social outcasts where you're trying to wash hands at the same
• 7:15
  time and use like poor guy. Absurd spreadsheet programs.
• 7:23
  I assume he's not one of the 1000 people who listens to this
• 7:25
  podcast each week Space statistically anyway.
• 7:30
  So on this spreadsheet at the top you list everything you own,
• 7:34
  all of your assets. These are things like your
• 7:37
  checking account. How much money is in there?
• 7:39
  So you put checking account $2000, you say 4 O1 K $100,000,
• 7:44
  you say my home, I own a home. The current value as is
• 7:48
  estimated by your realtor by the Zillow estimate or by Redfin,
• 7:52
  let's say it's $500,000. You add those things up, 2000 +
• 7:58
  100,000 + 500,000 equals $602,000.
• 8:02
  So all of your assets combined are worth $602,000.
• 8:06
  But wait, we're not done yet because you need, you need to
• 8:09
  subtract all of your debts. Let's say you have a $10,000
• 8:13
  credit card debt and let's say your home is maybe worth
• 8:16
  $500,000, but you have a mortgage on it and you still owe
• 8:20
  $400,000. So you put those debts -10,000
• 8:24
  dollars credit card debt -400,000 dollars mortgage.
• 8:28
  And then you add up all the numbers.
• 8:30
  So all those, everything you own at the top, minus everything you
• 8:33
  own owe at the bottom. That's your net worth.
• 8:37
  That's what net means. It's all the pluses minus all
• 8:39
  the minuses. And so if you app all those
• 8:41
  numbers I just said you get to 192,000, which is actually a,
• 8:46
  you know, specific example I came up with because it's the
• 8:48
  median US net worth 192,000. So you can see those numbers as
• 8:54
  I said weren't crazy. You know, you have $100,000 in
• 8:56
  equity in your home. You have 100,004 O 1K.
• 8:58
  You got 2000 bucks in your checking account.
• 9:01
  Those added up are where you get to your 192.
• 9:03
  So maybe you're making 75 grand a year.
• 9:05
  You could imagine over a few years you get into the situation
• 9:08
  of having a net worth of 192. It's just why it's important.
• 9:12
  People get obsessed with their credit score.
• 9:14
  And I hate that because we live in this world where we all try
• 9:19
  to get grades as kids and, and we think our teachers will be
• 9:22
  disappointed with us if we don't have a good score.
• 9:24
  And so we try to get a better credit score.
• 9:25
  But your credit score doesn't really have any effect on how
• 9:30
  financially independent you are. If you want to become
• 9:32
  financially independent and you want to be rich, you need a
• 9:35
  higher net worth. And so we should be giving like
• 9:38
  a little teeny little teen, like a fraction of a percent of
• 9:41
  effort into our credit score and like a 99.9% effort into our net
• 9:46
  worth. We want to pay down debt.
• 9:49
  We want to save more, invest more, more assets, less debt.
• 9:52
  That's how you increase your net worth and that's what we should
• 9:55
  be focused on. If you want to be rich, if you
• 9:58
  want to be wealthy, if you want to be financially independent,
• 10:00
  that is what matters. Wow, you can't explain that like
• 10:04
  I was 5. OK.
• 10:07
  Do you know your net worth, Jen? Well.
• 10:09
  We're not going to talk about it here, but I do know network.
• 10:11
  OK then, the Student Loans kicking my ass.
• 10:14
  Oh, Jen is more like a normal person who doesn't post her bank
• 10:17
  account information on social media like I do.
• 10:21
  Yeah. Not till I become a millionaire,
• 10:22
  then I'll start posting it all the time like you.
• 10:24
  Yeah, my net worth was negative at some point.
• 10:26
  I had $2000 in my bank account and like $12,000 of credit card
• 10:31
  debt. So I had like a negative $10,000
• 10:33
  net worth at one point and then over the years I paid off my
• 10:35
  credit card debt and I got to a net worth of 0 and I had $2000
• 10:40
  in cash and $2000 in debt, net worth of 0.
• 10:43
  And then when I paid off that debt completely, I had a net
• 10:46
  worth of positive $2000. And then it grew.
• 10:49
  I started investing in saving and my net worth grew to like
• 10:51
  $100,000 and I sold my company, my network became $2.1 million
• 10:55
  and I've been investing for the last 10 years and now my net
• 10:57
  worth is more like $6 million. And so that's, that's what you
• 11:01
  want to be. And it has my, what's my credit
• 11:03
  card credit score on? I don't know.
• 11:05
  It's been fine the whole time. Yeah, well, you don't want to be
• 11:08
  like you when I grow up. So that's what that's the only
• 11:09
  reason I'm here. You got five years left?
• 11:12
  Because I think I'm five years old, new.
• 11:14
  Yeah, that sounds about right. OK.
• 11:17
  I love it. You explained it like we were
• 11:18
  five. You did a great job.
• 11:20
  We're going to move on to our next segment, Money.
• 11:22
  Money. Can I ask a dumb one?
• 11:26
  Are you ask a dumb person or is a dumb question?
• 11:28
  This is my favorite kind of dumb question because it does seem
• 11:31
  like a kind of a dumb question, but it's like the smartest dumb
• 11:34
  question. I love it, so let's hear it.
• 11:35
  OK, I completely understand Roth first traditional 4 O1 KS like
• 11:40
  I've been maxing out my 4O1K. I'm a little bit confused
• 11:46
  between Traditional IRA and Roth IRA.
• 11:49
  Roth IRA makes sense, right? Because you're taxed on the
• 11:52
  principle that you invest or whatever.
• 11:55
  Which makes sense to me because it's like OK I get the money in
• 11:58
  my checking account then I transfer it to my Schwab
• 12:01
  account, then I invest it in a Roth IRA.
• 12:05
  That makes logical sense to me. I don't understand the logistics
• 12:08
  of how you would invest in a Traditional IRA because the
• 12:12
  Traditional IRA is supposed to be you're investing pre tax
• 12:15
  money. But like how am I getting the
• 12:18
  money to be pre taxed because all the money that hits my chase
• 12:22
  account is already taxed. Like how are you logistically
• 12:26
  getting it to be pre taxed? Like does that make sense?
• 12:30
  I'm so confused because with my four O 1K it makes sense because
• 12:33
  they're pulling it out of my company like because it's
• 12:37
  company related. So I guess like if you do
• 12:39
  traditional 4O1K like I understand how that money could
• 12:43
  be pre taxed. I don't know, I'm like confused
• 12:46
  on how that could make sense. Love that Kathy.
• 12:48
  So that question was from Kathy. That's like, I think it's my
• 12:51
  favorite question so far because it just gets to the core of how
• 12:54
  this shit is so abstract and you're like pre tax and post
• 12:58
  tax. And she she's exactly right.
• 13:00
  You're like, OK, after your company withholds all the taxes
• 13:05
  from your paycheck, whatever shows up in your checking
• 13:07
  account, that's the post tax money.
• 13:10
  Then if you put into your Roth IRA, that's post tax.
• 13:13
  Great, makes sense, never tax again.
• 13:15
  But then pre tax, wait, it's already post tax.
• 13:18
  So if I make a contribution, like if I transfer money from my
• 13:20
  checking account post tax to my Traditional IRA, supposed to be
• 13:24
  pre tax, How's that work? And I love this question.
• 13:27
  Great question. And I'll give you the answer.
• 13:29
  I know the answer and it's actually pretty simple.
• 13:30
  And the answer is, is you settle up at tax time.
• 13:36
  So the money that your company withholds is just purely a
• 13:41
  guess. And that money that shows up in
• 13:44
  your check account, it feels like it's post tax because that
• 13:46
  guess is usually pretty good, but it's not.
• 13:48
  What happens at tax time is you submit the forms to the
• 13:52
  government, you send them your W2, how much money was withheld?
• 13:54
  How much money did you take home?
• 13:55
  You submit them your your tax documents from your investments.
• 13:58
  You sell them how much money you put into Iras and Roth IRS
• 14:01
  attritional Iras, the idea. And then through the formulas
• 14:05
  provided by the IRS or your tax software or doing the
• 14:08
  calculations manually on your tax forms, you come with a
• 14:10
  number and you say, hey, I have overpaid my taxes by 1000 or
• 14:14
  I've underpaid my taxes by 1000. If I've overpaid, the government
• 14:18
  sends your rebate check as a tax refund.
• 14:21
  If you've underpaid, you have to go right, and we have to go pay
• 14:23
  more money to the government. And so everything up until tax
• 14:27
  time is purely a guest. So with holdings, a guest,
• 14:30
  everything's a guest. When you actually get your bill,
• 14:32
  you get your receipt the end of the year, that's when you settle
• 14:35
  up. And so if you made that
• 14:36
  contribution to your Traditional IRA at tax time, you're going to
• 14:41
  submit a form and let's say using TurboTax or some tax
• 14:44
  software, it's going to say, hey, good news.
• 14:48
  You put money in your checking account to your Traditional IRA.
• 14:52
  That means you get to lower your tax burn this year.
• 14:54
  I'm going to send you back a refund check that's going to be
• 14:57
  $500 more than it would have been otherwise.
• 14:59
  That's how it becomes pre tax money, even though it doesn't
• 15:02
  exactly follow the flow from, you know, payroll to withholding
• 15:07
  to checking account to Traditional IRA.
• 15:09
  You settle up a tax time and then you get the money back.
• 15:11
  Then that's how it works. Wow, you're getting really good.
• 15:17
  That's a good question. It's a kind of question I love
• 15:19
  because it also confounds me because you're like, how does
• 15:22
  this actually work? And and I think Kathy kind of
• 15:25
  like was as exasperated as I am about all this stuff.
• 15:29
  And so as I'm coughing, as I'm talking.
• 15:34
  So I love that question. Thanks, Kathy.
• 15:35
  And by the way, if you want to submit your own question, this
• 15:38
  is what I want you to do. I want you to take a selfie with
• 15:41
  your camera, make it between 30 and 60 seconds.
• 15:44
  Kathy was just over 60 seconds. So that's not terrible.
• 15:46
  But yeah, 30 and 60 seconds. Send it to us at.
• 15:49
  Podcast at personalfinanceclub.com or DMS
• 15:53
  on Instagram. Yeah, or DMS on Instagram and
• 15:55
  we'll include your audio and your video and say your name and
• 15:58
  your city and we'll make it all, all fun.
• 16:01
  Yeah, that sounds fun. OK, cool.
• 16:03
  Let's move on to our next segment, Scroll Patrol.
• 16:10
  Scroll Patrol. OK, I've got a video here.
• 16:13
  Jeremy has not seen it. He's going to react to it in
• 16:16
  real time, tell us his thoughts, and here we go.
• 16:21
  Give. Me 60 seconds and I will show
• 16:23
  you how easy it is to make a budget.
• 16:25
  We can break a budget down into 3 categories.
• 16:27
  It's your income, it's your fixed expenses, and it's your
• 16:30
  variable expenses. Income is very obvious.
• 16:32
  It's the money that you make throughout the month.
• 16:34
  So This is Money from a job, a side hustle if you're receiving
• 16:37
  child support. After we calculated our monthly
• 16:39
  income after tax, we then need to focus on the fixed expenses.
• 16:43
  Fixed expenses are expenses that do not change throughout the
• 16:46
  month. Things like rent, car payment
• 16:49
  don't typically increase every single month, so that is
• 16:51
  considered a fixed expense. When you subtract your monthly
• 16:53
  fixed expenses from your income, that shows you how much money
• 16:56
  you have left for your variable expenses, groceries, gas,
• 17:00
  electricity, that always go up and down because those expenses
• 17:02
  always fluctuate. A great way to get a typical
• 17:05
  average of what you're spending every month is to track your
• 17:07
  spending. You typically spend by using a
• 17:09
  credit card or a debit card. You could look at your bank
• 17:11
  statement. The bank statement is going to
• 17:13
  show you all of your transactions throughout the
• 17:15
  entire month. That's how you could start to
• 17:16
  somewhat develop an average of what you typically spend
• 17:19
  throughout the month, and that's how to easily make a budget.
• 17:21
  It shows you how much money is coming in and how much money is
• 17:24
  going out. If you have more money going out
• 17:26
  than coming in to see if there's anything in here that we could
• 17:28
  cut out or do less of to try to save money, you could just
• 17:31
  Google image budgeting template. There's so many.
• 17:33
  Pick one that works for you and then get started.
• 17:35
  Nice. I like that video.
• 17:37
  I don't think I know him. Maybe I've interacted with
• 17:39
  Bradley on a budget online before.
• 17:41
  I'm not sure. You know, I like that because
• 17:44
  it's simple and he, you know, it's kind of like the net worth
• 17:48
  conversation we had, which is it's so core to your personal
• 17:54
  finance world that but we don't talk about enough.
• 17:58
  And, and his little budget template that he's showing is
• 18:01
  kind of similar where this is like this is really basic.
• 18:04
  And, you know, and myself, I'm kind of going through this right
• 18:06
  now where I had a bunch of changes in my life recently
• 18:09
  where I got married, had a child, bought a house, got a
• 18:11
  mortgage. And all of a sudden, you know,
• 18:13
  money, you know, is going out a lot faster than it's coming in.
• 18:17
  And then I used to. And, you know, just having
• 18:19
  visibility on that is so clarifying.
• 18:23
  That said, he kind of didn't say, you know, and, you know, my
• 18:26
  least favorite critique on like little social media clips, at
• 18:30
  least when I make them, is people saying, yeah, but and I'm
• 18:32
  like, I know, but, you know, I only had 60 seconds until this
• 18:35
  is the this is the point I was making here.
• 18:36
  So I think the point he's making there is fine.
• 18:39
  But I would say what I would like to have mentioned is, you
• 18:43
  know, he's only really talking about in the month expenses.
• 18:47
  And I think part of a budget is future expenses and saving.
• 18:52
  And so if you're trying to spend all your money, then you know
• 18:55
  you're going to be living paycheck to paycheck, right?
• 18:57
  So if, if you're, you know, if your total expenses match your
• 18:59
  income there, then you'll have no money at at at the end of the
• 19:02
  month. And so part of the the line
• 19:05
  items on the expenses I'd like to see are things like saving.
• 19:08
  So OK, maybe your income is $2500 and all the money we spent
• 19:14
  is $2200. I'd like to say, OK, $100 into
• 19:18
  my emergency fund, $100 into my Roth IRA, $100 into, you know,
• 19:24
  my wedding fund or something like that.
• 19:27
  And then, and that's what's called a 0 based budget where
• 19:30
  every single dollar has a job where whether or not you're
• 19:33
  actually, it's actually coming out of your accounts this month,
• 19:36
  it has a purpose, which is to be saved or invested for the
• 19:38
  future. And you know, having that 0
• 19:41
  based budget where you really know what every single dollar is
• 19:44
  doing is a really good way to basically have some more clarity
• 19:49
  and focus. And it relieves stress because
• 19:53
  if you just, if it's just like chaotic numbers, like flying out
• 19:57
  of your checking account and you don't really know what's
• 19:59
  happening, I think that's kind of a scary place to be when you
• 20:01
  see like what? OK, this is exactly what's
• 20:03
  going. Here's the plan.
• 20:05
  I've got some savings, I've got some investing.
• 20:07
  I have transparency into my spending.
• 20:10
  That's what to do. By the way, shout out to wine
• 20:12
  right now, Full disclosure, I've only ever, ever, ever, ever done
• 20:17
  1 corporate sponsorship and has been with Wine AB.
• 20:21
  This is not part of it. This is just an authentic shot
• 20:23
  up because I've been using them since 2015 and that's what they
• 20:27
  do. It's a.
• 20:29
  It's a 0 based budgeting app and they actually, they used to
• 20:33
  stand for You Need a Budget and they don't like the word budget
• 20:35
  for the same reason I don't because it feels like they're
• 20:38
  restrictive. And so now it's like a personal
• 20:39
  finance app that just adds transparency to your
• 20:43
  spendfulness as they call it these days.
• 20:47
  But it's an app that basically does all that stuff.
• 20:49
  You pay for it. You know, I think, I think it's
• 20:52
  worth it, but not everyone does of course.
• 20:55
  So I give this, I give it AI, give it a minus.
• 21:01
  Good advice. Yeah.
• 21:02
  Nice. Very nice.
• 21:03
  Yeah. I like it because it gets you
• 21:05
  started. There's obviously a ton of apps
• 21:06
  that you can use to track your budget and everybody wants to
• 21:09
  kind of sell you something or sell you a spreadsheet or even
• 21:11
  just give you the resources. But I think that just starting,
• 21:13
  being more mindful about how you're spending is is part of it
• 21:16
  and the psychology behind it. So I liked it.
• 21:19
  Yeah, and I like that. It's like simple.
• 21:20
  He's like, he's like here. He's like the green, the red.
• 21:23
  Just Google it, find one. Yeah, he's like, just Google
• 21:25
  something. He's not even giving you a
• 21:26
  spreadsheet. Totally.
• 21:27
  And and that's how I feel like with net worth, you know, you
• 21:30
  could have some like super fancy, you know, financial
• 21:33
  planning app. But I think there's something
• 21:35
  really powerful about just like starting with a blank sheet and
• 21:38
  like putting in your numbers because like when you touch them
• 21:40
  yourself and you feel them and you see them and you like look
• 21:42
  them up and you kind of like, you get a sense of what's going
• 21:45
  on. If you just go link a bunch of
• 21:46
  accounts with some fancy app and you're like, OK, I guess
• 21:49
  something, you know, it still feels like very abstract, like
• 21:52
  out of your hands. So I like doing it, you know,
• 21:54
  eventually you'll probably, you know, graduate to a fancy app,
• 21:57
  but I like doing it manually with your net worth and with
• 22:00
  your budget at least once just so you it kind of takes in the
• 22:04
  mystery away of like where this this money actually is.
• 22:07
  For sure. All right, Wow.
• 22:09
  We're flying through this episode.
• 22:11
  Nice, we had a long one last time so.
• 22:14
  We did. OK.
• 22:15
  So the last segment of our episode, Jeremy had time today,
• 22:22
  OK, on a recent post about stock picking that highlighted NVIDIA,
• 22:26
  Do you want to explain the post actually before I read the
• 22:28
  comment? Yeah, so the post has a little
• 22:30
  emoji guy, like very confidently saying I bought NVIDIA in 2015
• 22:35
  and I'm up 21,000%, which is actually true about NVIDIA.
• 22:38
  It's up like a crazy amount since 2015.
• 22:42
  And that is under the title, what they say, but then under
• 22:45
  the title, what they don't say is including all my other
• 22:48
  stocks, including all my other 67 stocks, I'm down a total of
• 22:52
  -14% And so the point is basically a lot of people on
• 22:59
  social media, at barbecues, at family Christmas, whatever,
• 23:02
  they're going to talk about investing in a, you know, that
• 23:08
  one time I caught that big fish way, like I, I caught a fish, it
• 23:12
  was that big. And it was probably an
• 23:14
  exaggeration. It probably wasn't that big.
• 23:16
  And they didn't talk about all the times that like they lost
• 23:19
  fish. And with investing, when you do
• 23:21
  a really careful audit of all of your investments, not just the
• 23:24
  one that you like, thought you like, did really well on, it's
• 23:27
  usually much worse than just having bought an index fund.
• 23:32
  And so the the message here, as is always the messages don't
• 23:35
  don't get caught up in this stock picking game.
• 23:38
  Just buy the index. And the focus shouldn't be on
• 23:41
  doing more research and picking more clever stocks.
• 23:44
  The focus should be on spending less, putting more money into
• 23:47
  your into your index fund and letting it ride for longer.
• 23:50
  Yes, OK. So we had a commenter say it's
• 23:54
  just nonsense to call investment.
• 23:56
  Picking stocks in a casino actual investment is not a
• 24:00
  gamble, but a weighty decision to direct capital on the basis
• 24:03
  of learn judgements about the value provided by a company's
• 24:06
  business model to customers and the ability of that business to
• 24:10
  efficiently market its products to those who benefit from buying
• 24:13
  them. If you're picking stocks based
• 24:15
  on technicals or some other nonsense, then yes, definitely
• 24:18
  stop. If you are choosing to invest in
• 24:21
  owning portions of companies that you already that you have
• 24:23
  strongly evaluated on fundamental business
• 24:25
  proposition, then it's not gambling in the least.
• 24:28
  Though you have to ride out the volatility from all the people
• 24:30
  who buy and sell based on spurious forecast and technical
• 24:34
  evaluations. That's a little bit of a
• 24:36
  mouthful. I wonder how that noise is going
• 24:41
  to sound on your drive to work. I don't like this comment.
• 24:46
  And I'll tell you why. And I usually do like the
• 24:48
  comments, even the ones that are picking on me.
• 24:51
  But I think it takes a really smart person to make things
• 24:56
  simple, and this person is clearly going out of their way
• 25:02
  to try to sound smart. It's a weighty decision to
• 25:06
  direct capital. Direct capital.
• 25:08
  Like, why would you use those words?
• 25:10
  You know what you mean? Buy stuff, direct capital.
• 25:14
  Give me a break. Buy, buy stuff is what you mean.
• 25:16
  Direct capital based on the learned judgements, the learned
• 25:20
  like, Oh my gosh, the business model and efficiently market its
• 25:24
  products. Like Oh my God, you know what
• 25:26
  you're saying here is like if I read about a company, I will
• 25:31
  have a better idea if it's a good company and if I should buy
• 25:34
  stock in that company. And, you know, trying to use
• 25:40
  complex language to make yourself sound smarter, to make
• 25:43
  it sound like you're doing a better job of this is, is like
• 25:47
  the exact part of that Dunning Kruger curve where, you know,
• 25:50
  you think you're smart and you're actually not that smart.
• 25:53
  And so I don't like that because I think this type of language,
• 25:58
  you know, this person, I don't care.
• 26:00
  I don't care what they do with their money.
• 26:01
  I don't care what anyone does with their money except for me.
• 26:03
  And you know, I just like I do this podcast and I have this
• 26:06
  passion because I like helping people.
• 26:08
  But this type of comment is like very discouraging to people who
• 26:15
  are entering investing new investors.
• 26:19
  They're like, how could I ever direct capital?
• 26:21
  I don't even know what capital means or I could direct it.
• 26:24
  I'm not a director. And like, you know, capital
• 26:25
  means money and direct means do you buy something with it?
• 26:29
  And so, you know, I don't like that.
• 26:32
  I don't like the tone primarily. Do you like how I write it
• 26:36
  though? Because I'm feeling attacked
• 26:37
  right now. Well, you're, you're always the
• 26:40
  the proxy for the, the audience, right.
• 26:43
  So sometimes it's a good time, isn't bad, but you're going to
• 26:45
  get in blank catching. Strays right now OK, but I don't
• 26:48
  like the tone in general. OK, I do think that you had
• 26:50
  trouble reading it because there's such like word sound of
• 26:52
  like, oh, the Vol totally sold the spurious forecast and
• 26:55
  technical evaluation. I don't.
• 26:57
  Think I've ever said the word spurious before?
• 26:59
  I know. Why would you need to?
• 27:00
  It's nonsense. OK.
• 27:02
  And you know, he's basically making a case for fundamental
• 27:06
  investing, which is saying, Hey, I can look at companies, I can
• 27:09
  read about them, I can see if they're good or bad.
• 27:11
  And then if I can buy the good companies, if I if I do that
• 27:14
  over time. And he's he makes a good point.
• 27:15
  Like you don't get caught up in the short term volatility of day
• 27:18
  traders and things like that. You just buy them for a long
• 27:20
  period of time. It's like very like there's a
• 27:22
  guy named Benjamin Graham, who is Warren Buffett's mentor, who
• 27:26
  basically has made this case. And you know, this is a very
• 27:29
  long time ago now, obviously, because Warren Buffett's I think
• 27:31
  like in his late 90s now and for fundamental investing.
• 27:36
  And and that's like, you know, like there's kind of a point
• 27:39
  there. But here's the problem.
• 27:41
  And I make a sports analogy. Oh no.
• 27:45
  The opening, it's going to be pretty easy sports analogy, I
• 27:48
  think I went to Michigan, big Michigan football fan, Michigan
• 27:52
  football this year in the opener, they played New Mexico,
• 27:56
  the Lobos. And Michigan is the winningest
• 28:00
  program in football history. They won the national
• 28:02
  championship two years ago. They got the number one
• 28:05
  quarterback recruit in the nation.
• 28:06
  The you know #1 recruit overall, you know, huge offensive line,
• 28:11
  deep running backs, great coaching, blah, blah.
• 28:14
  And like New Mexico has like a young program and like weaker
• 28:18
  quarterback and weaker coaching. And, and you can read about both
• 28:23
  these programs till you're blue in the face and you're
• 28:27
  everyone's going to come to the same conclusion.
• 28:29
  Michigan is going to stop New Mexico and the game and the game
• 28:32
  happened. And guess what?
• 28:33
  Michigan stopped New Mexico. And so you might be saying, you
• 28:36
  know, this comforter might be saying, hey, I'm just going to
• 28:38
  bet on Michigan because Michigan's going to win, no
• 28:42
  doubt. But here's the problem.
• 28:43
  You're not betting if Michigan's going to win, you're betting
• 28:46
  against the spread because everybody knows Michigan's going
• 28:49
  to win. And so then the bet doesn't
• 28:51
  become who's going to win. The bet becomes how much is
• 28:54
  Michigan going to win by? And guess what?
• 28:56
  The spread going into that game was 34.5 Michigan was supposed
• 29:01
  to stomp New Mexico by 34.5 points.
• 29:03
  Half the betters thought it was going to be more than that.
• 29:05
  Half the betters thought it was going to be less than that.
• 29:07
  That's how the spread is kind of good because everyone deeply
• 29:10
  understands the rosters, the history, the, you know, the
• 29:12
  matchups, the all this football stuff, right?
• 29:15
  Everyone knows that because people who put putting their
• 29:17
  money online aren't going to make a dumb bet.
• 29:19
  They're going to really understand what's on the line
• 29:21
  here, right? And So what happened if you were
• 29:24
  to if, if this person would say, ah, Michigan's a blue bud,
• 29:26
  Michigan, blah, blah, Michigan didn't win by 34.5 or 35 as they
• 29:30
  would have needed to to win the bet.
• 29:32
  Michigan won by 17, still 2 1/2 scores.
• 29:36
  They still stomped New Mexico, but if you would have bet on
• 29:38
  Michigan, you would have lost, right?
• 29:40
  And so just like that, when you're picking a stock, you're
• 29:44
  not betting is this a good or a bad company.
• 29:46
  We all know NVIDIA is a good company.
• 29:48
  We all know AIAI is the future. We all know they have $100
• 29:52
  billion deal with open AI. We all know that China is like
• 29:54
  relying on their chips. We all like, we all know all of
• 29:57
  these things. And so doing this fundamental
• 29:58
  research doesn't matter because you don't know more than
• 30:01
  everyone else who's also choosing to buy a stock.
• 30:04
  And so if you go and buy a share of NVIDIA stock, not only does
• 30:08
  it have to do all those things we all know it's going to do, it
• 30:11
  has to do even better. It doesn't have to win the game.
• 30:13
  It has to win the game by more than 34.5 points, right?
• 30:16
  And so it's not gambling in that you might lose money, you might
• 30:21
  win, you might make money. It's gambling relative to the
• 30:24
  market, it's gambling relative to.
• 30:27
  I could just buy an index fund and guarantee the growth of all
• 30:31
  the companies. And is is buying NVIDIA today
• 30:33
  going to do better than an index fund?
• 30:35
  The answer that I give you and the answer this guy maybe won't.
• 30:39
  This one must be a male. We don't do another gender of
• 30:41
  this person a female, would I? Think it's a man but I can't
• 30:43
  remember. There's no way a female wrote
• 30:45
  these words. I will but the spread on that is
• 30:48
  1,000,000 points. I will take the spread on that,
• 30:50
  but there's no way a female Rd. spurious forecast and and not
• 30:54
  that a woman couldn't they just said she.
• 30:56
  Wouldn't they just? She wouldn't.
• 30:57
  They're too smart to write nonsense like that.
• 31:00
  OK, So not only you know, you know you have to, you're not
• 31:06
  betting it's zero. You're betting it's the market,
• 31:07
  right? And so is, is NVIDIA going to
• 31:09
  beat the market? The answer is I have no idea and
• 31:12
  neither does this commentary, right?
• 31:13
  And so it is gambling that set. So that said, I don't hate
• 31:18
  picking stocks. Like if you want to buy one or
• 31:20
  two or three or five or 10 blue buds and hold them for a long
• 31:22
  time like this person does, it's going to do very fine.
• 31:24
  But don't kid yourself into thinking you're going to
• 31:27
  outperform the index because you're not likely to.
• 31:30
  Experts have tried and tried and tried and studies have looked at
• 31:33
  this over and over and over and over and over and over again.
• 31:35
  And they always find that the experts can't outperform the
• 31:38
  market because they're betting against the spread.
• 31:41
  They're betting against everyone else.
• 31:42
  And when you take into account the fees, if you're paying an
• 31:45
  expert to do it, like in an actively managed mutual fund or
• 31:48
  your time and the cost like the bid ask spread and the effort in
• 31:51
  in into picking stocks, you're not going to beat the market
• 31:54
  most likely over time. And so if you want to with a
• 31:56
  little bit of your money, fine. But I I disagree with this
• 31:59
  comment. OK, now can I ask a dumb one?
• 32:02
  Yeah, I would love for you to ask a dumb one.
• 32:05
  That really, really though. For this last sentence though,
• 32:08
  I'm I'm gonna read it again 'cause it's possible though you
• 32:10
  have to write, write out the volatility from all the people
• 32:13
  who buy and sell based on spurious forecasts and technical
• 32:16
  evaluations. Doesn't that also affect, and
• 32:19
  this might be a scaled back to way of what, saying what you
• 32:21
  just said, but doesn't that also affect the market?
• 32:23
  All the people that are doing what he's doing is affecting the
• 32:26
  market in a way that makes it easier to just to not pick
• 32:29
  stocks and just go with index 1. Is that true or no?
• 32:32
  Totally like spurious forecast means, you know, CNBC or you
• 32:38
  know, Goldman Sachs or you know, whoever is out there predicting
• 32:42
  what stocks are going to do are making their predictions and
• 32:44
  technical evaluations are you know, he's a, he's a value
• 32:47
  investor. He's, he's a, you know, he's a
• 32:49
  fundamental investor. A technical investor would be
• 32:51
  someone who's like looking at, you know, red and green charts
• 32:55
  and, and 128 averages and just trying to basically pick and
• 32:59
  choose stocks based on the technicals of the stock.
• 33:03
  If it's going up, if it's going down, if it's trending up or
• 33:05
  whatever. And you know, the, the
• 33:07
  fundamental investors like him would say, oh, the, the
• 33:09
  technical investors are silly or whatever.
• 33:11
  And but the point is the sum total of all of this is being
• 33:14
  priced into every share of NVIDIA stock.
• 33:18
  And so he can say, you know, saying to ignore something and
• 33:21
  write it out is good advice. But still, when you go buy a
• 33:24
  share of NVIDIA today, all that money is already priced into it.
• 33:27
  All that information is already priced into it.
• 33:29
  So you're still getting the same price those guys are?
• 33:31
  All right, you definitely had time today.
• 33:35
  And I know I was kind of more mean to this person than normal,
• 33:37
  but I just, I just didn't like. Spurious took you over the edge.
• 33:41
  Yeah, spurious. It got me the weighty.
• 33:46
  Decision to direct capital, OK. That's how we talk when we're
• 33:52
  trying to be inclusive and encourage people to get started
• 33:55
  investing. So yeah, I don't, I really have
• 33:57
  a lot of sympathy for that kind of language.
• 34:00
  We can use the effort, but we're not saying spurs and we're not
• 34:02
  saying capital. I mean, sometimes you have to
• 34:04
  say capital because there's like capital gains and stuff like
• 34:06
  that. But we try to just use simple
• 34:09
  language here because I'm a simple man.
• 34:11
  Yeah, somebody, I'm a dummy. He thinks I'm a dummy.
• 34:12
  A simple millionaire. Your autobiography.
• 34:15
  Yeah, exactly. I'm we're that's.
• 34:17
  Probably already a book. OK.
• 34:20
  Shout out to the Simple Millionaire.
• 34:21
  Send us a YEAH. Let's trademark that and I'm
• 34:24
  going to Google it later. OK, That's all that we have time
• 34:27
  for today on the Personal Finance Club show.
• 34:29
  Thank you for listening and we'll see you next week.
• 34:32
  And don't forget the 2 rules of Personal Finance Club.
• 34:34
  Rule #1 live below your means and rule #2 invest early and
• 34:39
  often. The Personal Finance Club show
• 34:42
  is produced by Jeremy Schneider and Jen Wendia, music by Essa
• 34:45
  Balu and Homie. Send your questions to
• 34:47
  podcast@personalfinanceclub.com. The Personal Finance Club show
• 34:51
  is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
• 34:55
  and SEC Registered Investment Advisor.
• 34:58
  The views expressed on this show are those of the hosts and
• 35:00
  guests and do not necessarily reflect the views of Nectarine.
• 35:04
  Please refer to hellonectarine.com for all
• 35:06
  relevant disclosures. This podcast is for
• 35:09
  informational and educational purposes only and should not be
• 35:12
  construed as personalized investment advice or a
• 35:14
  solicitation to buy or sell any security.
• 35:17
  Listeners should consult their own financial, legal or tax
• 35:20
  professionals for advice specific