SPEAKERS

Jared Dillian, Clint Murphy

Clint Murphy  00:00

Jared, welcome to the growth guide podcast. Before we dive into your books, no worries how they live a stress free financial life. I’d like to dive a bit into your backstory. The listeners are probably thinking, Jared, Clint, it’s easy for you to talk about being not stress free with money because you both have a fair amount of wealth. But what they’re ignoring is two things. One that brings its own worries, which we’re going to talk about. And two, we didn’t start this way. So I want you to share some of your backstory that’s led to writing the book and a bit about who you are, because you haven’t come from wealthy beginnings in that gives people a bit of an idea that there’s a path they can take on this journey.

Jared Dillian  00:48

Yeah, um, thanks. Thanks for having me. So, you know, I grew up single mother in southeastern Connecticut, live with my grandmother for a bit. We were lower middle class, I wouldn’t say we were poor. But I would you know, I think lower middle class has an accurate description. I went to the Coast Guard Academy, mostly because it was free, got into the you know, to US service academy and you don’t have to pay to go so went into the Coast Guard graduated as an ensign, then I got promoted to Lieutenant JG, than Lieutenant. When I was a lieutenant, I was making about 45 $50,000 a year. At this point in my life, I was saving like crazy. I was saving at least 50% of my income. And I saved to the point that when I was 24, I was able to use that money as a down payment on a condo in California. I bought $170,000 condo in Walnut Creek, California, and sold it two and a half years later for $300,000. Basically on a $45,000 income. So at the age of 27, I had basically I had a net worth of $200,000. No debt. And you know, unlike a lot of people my age who were struggling to pay off student loans, they had lots of debt. And I was in a great financial position. So you made a comment, which I want to comment on, you know, you talked about the fact that we both have some wealth now, and that has, you know, some stress associated with that money. Stress isn’t confined to people with no money. That is one of the biggest misconceptions about money, stress, financial stress, I know lots of people that don’t have any money, they have a job, they pay their bills, they pay their rent, and they don’t have any debt, and they don’t have any financial market risk, and they’re perfectly happy. Once you start to make some money, your life gets more complicated. You have investments, you have assets, you have debt, and, you know, look like the richest guy in the world, Elon Musk, worth $250 billion has financial stress, you know, he used his Tesla stock as collateral to buy Twitter. And that almost went upside down, Tesla went down 75% or something like that. And he almost went upside down the richest guy in the world. So it really depends on how you structure your financial affairs. You know, rich people can have financial stress, poor people can have financial stress, it’s completely independent of how much money you make.

Clint Murphy  03:29

So two things we’re going to talk about today, as we dive into this book, we’re going to talk about minimizing financial stress, not eliminating it. It’s important for that distinction. And also, we’re not talking about how to get rich. The fun part is we’re talking about how to do it without taking the FYI, frugality to the bone approach of eliminating our Starbucks or Dunkin Donuts are down in the US and basically cutting every single expense, which is something I really resonate with. Can you share a bit about that and the importance of that from your perspective? 

Jared Dillian  04:07

Yeah, I mean, there’s this whole personal finance industry. You know, we have very famous people like Dave Ramsey, and Suze Orman and below them, you have like 1000s of bloggers and YouTubers and stuff like that. And they all say the same thing. They all preach this austerity about how your wealth is the product of a million small decisions, right? Whether you buy that coffee from Starbucks, whether you leave the lights on in your house, what temperature you have the thermostat set to all the small decisions determine whether you have wealth, and if you just do the math on it. It’s absolutely not the case. Okay? So if I go to Dunkin Donuts every day and buy a coffee, it’s $3.70. If I do that every working day the year comes out to $900 a year. If I give up coffee for 40 years, it’s 36,000 dollars, if I invest that and make some rate of return like nine or 10%, and I have like $150,000. So yes, the math checks out. If I give up coffee for my entire life, I will have $150,000 When I retire, okay. But the problem with that is that you’re asking people to give up a small daily luxury, and it’s a luxury that’s very important to people, you know, like coffee makes them happy. It’s a very small thing, and it makes them happy. But when somebody buys a house, if they buy a 2800 square foot house instead of a 2400 square foot house, and the house costs $150,000, more over the life of a 30 year mortgage, they’re going to pay $200,000 more in interest, which is like two lifetimes worth of coffee. Right? So one decision, you make one decision, you can set yourself up better than making a million small decisions every day. It’s not a million little things that determine whether you’re wealthy, it’s literally just a handful of big decisions. It’s the house, your car and your student loans. And that’s pretty much it.

Clint Murphy  06:14

And the big thing there. I mean, we’re essentially talking The Pareto Principle of money, the 80/20 rule, we want to focus on the big three. And even more importantly, I resonate with what you said, when it comes to money as a choice, my friend and I, my closest friend, we’ve always had the approach of the easiest way to deal with buying what we want is simply to earn more money. And the way we look at that is, there’s no upside to how much we can earn, like there’s absolutely zero cash. But when you go with the extreme frugality approach, you can only cut so much like, at some point, you have to eat food, you have to have shelter. I mean, I don’t know if, if retiring to live in a homeless shelter is what we want to propose to people. So there’s only so much we can cut, but there’s no limit to the upside. Can you talk about the importance of money as a choice and what that means for people who say they don’t have enough.

Jared Dillia  07:14

But we all get to choose how much money we have. It is a choice, it is absolutely a choice. You know, for example, I make a decent amount of money. And I have like a financial newsletter business, that’s how I make most of my money. If I make a decent amount of money, I could do other things to make more money, I could start a hedge fund, I could you know, work for a large bank, I could do other things. I choose not to do that for a bunch of different reasons. So it’d be too much stress, I wouldn’t like to politics and have to move to New York. So basically doing what I do, I’m choosing to make the money that I make, everybody gets to choose how much money they make, it is an absolute choice. And the thing that the personal finance experts never talk about is making more money. It’s always about expenses, you have this pie, and we’re gonna slice the pie into smaller and smaller pieces. If you make $45,000 a year, you probably have the ability to save two or $3,000, right? Like you can cut out two or $3,000 More of expenses. But that’s pretty much it. But if you get a different job, if you get a raise, if you change careers, if you do any of these other things, you could double, triple, quadruple your income. And by the way, it’s another thing about this is that cutting expenses is not fun. It’s really not fun, it’s miserable, it’s absolutely miserable. But if you go out and make more money, that is fun. That’s a lot of fun. It’s a much more enjoyable path.

Clint Murphy  08:50

And so the listeners are hearing us say this and saying to themselves, what are these guys talking about? Like, of course, I want more money and make more money. Sounds easy. But how do I do it in you list five or six ways in your book, including entrepreneurship? What are two or three that you throw out to the listener to say, Hey, if you want more money, here’s a couple ways you can do it. 

Jared Dillian  09:13

Well, I mean, the simplest one is you can get a raise at your job. Right? And I sort of talked I talked about that a little bit like, if you want to raise at your job, you better have a good relationship with your boss because your boss doesn’t give raises to people he doesn’t like, okay, so if your boss doesn’t like you, you’re not getting a raise. And a lot of people think, well, if I’m really good at my job, that’s all that shouldn’t matter. And I should get a raise doesn’t work like that, like your boss has to like you. You can get another job that pays more. You can go on the job market and interviewed other firms and get a job that pays you incrementally more, 20 or $30,000. You can change careers, right? You can just change careers entirely. You can say I want to be a real estate agent and you So you have to do the footwork around that. So you talk to some real estate agents, you find out what their life is like. And it’s marketing and put in building a business. So that, you know, being a real estate agent really looks a lot like entrepreneurship. And then being an entrepreneur starting a business, that’s the number one way that people get wealthy in this country, you know, is through entrepreneurship, I don’t really consider myself to be an entrepreneur. I mean, I’ve had a very successful business over the last 15 years, I really consider myself to be more of a writer or an artist, and I just kind of built a business around that. But building a business is huge amounts of fun. It’s huge amounts of fun, and you will be happier, even if it fails. Even if it fails, if you get it wrong, and you make mistakes and the business fails, you will still be happier than you would be in your job. 

Clint Murphy  10:51

And there’s something I really want to zone in on here. Because this is when we talk about money being a choice. And the examples we’re getting, one of the things we’re pointing out is that if you want more money, you have to work for it. And you take your example of when you were in the Coast Guard, you were working your way into Wall Street, you were doing both you’re going to school, you’re sleeping a couple hours a night, for the last two or three years, I’ve been trying to build a podcast and newsletter, social media channels, I’m still a full time CFO and dad and I’m I’m building a few businesses in the background. Like there are sacrifices that have to be made. If you want more money. But that’s bringing up for people when we say it’s a choice. It’s a choice relative to what you want. And if what you want is up here, you’ve got to do the work to get it. And if you don’t want that, then you actually are making the choice to have less money. Does that resonate with you? How do you look at that? And what do you say the listeners as well? Well, I want it, but I’m not willing to do the work.

Jared Dillian  12:01

Some people want to want it and some people want it. If you ever seen the movie, the Pursuit of Happiness with Wil Smith. 

Clint Murphy  12:09

Yeah, that’s wanting it. 

Jared Dillian  12:11

Yeah, that’s wanting it. Yeah. And my story isn’t as extreme as that. But it’s very similar. Like it was like we were doing the exact same thing. We were trying to get a job on Wall Street. I had no idea what the hell I was doing. I bought a couple of suits for interviews at Men’s Wearhouse. They were terrible suits, they cost like $200, I had these terrible ties. I had these glasses that I got from the military. We call them birth control glasses. BCGs. Like, I was going to New York and interviewing people. And I was like this hick from the military. And I was like, not aware of the culture or traditions or anything that was going on. And I basically was marketing myself as this insane person, that would work harder than anybody else. Right. And, you know, I interviewed her like five or six different banks. And Lehman Brothers took me because Lehman Brothers, like that was a type of firm that value bat, you know, but it was a one in a million shot. People send hundreds of 1000s of resumes to Wall Street every year, they all end up in the trash can. And I got a job and, you know, had a great career on Wall Street. And you know, it was, yeah, it was like the pursuit of happiness. It was very similar. 

Clint Murphy  13:25

Yeah. So you’ve got to want it, not want to want it. I love that line. So let’s talk about financial stress. You boil it down to two things, I’d never necessarily heard this, you say, hey, financial stress can be boiled down to either debt or financial risk. Can you talk a little bit about what those are? 

Jared Dillian  13:43

Yeah, I mean, it’s pretty straightforward. So debt is a mortgage, a car loan, student loans, credit card debt, those are the four big things in risk is your exposure to loss in the financial markets, those two things and only those two things cause you stress, not having enough money, it’s not a source of stress, it all boils down to debt, and risk, right. So somebody who has an obscene amount of credit card debt, they have like $300,000 in credit card debt, and they’re paying $60,000 of interest a year and their payments are like $4,000 a month, like they go to bed every night, and worry about how they are going to make that next payment and it keeps them up at night. Like that’s really the way that’s the way I look at this stress. Like what types of things would keep you up at night, and I still do things that cause me stress not so much on the debt side, but on the risk side. You know, I’m a very aggressive trader and I take large positions, and sometimes I get too enthusiastic about a trade and I make it too big. And then I’m nervous, you know, and I it’s self inflicted, like I caused myself stress, you know, so it’s about getting your risk and your debt down to a manageable level.

Clint Murphy  14:59

And I’m the same as you, but I’m on the debt side. And so we’ll chat a bit about that in this conversation. And don’t worry, it’s not the credit card debt. But what I will throw out at you is, you know, the classic debate in the personal finance circles, we’re saying, let’s get our debt down to zero. And we’re looking at it and say, well, by the way, wait, wait, wait, I can borrow half a million bucks at 4%. And I can put it in the stock market and should be able to earn 8% Why don’t I want that? $20,000 a year, Jarred?

Jared Dillian  15:30

That’s the classic question I get from people all the time, you know, people ask me, Should I pay down my mortgage, I have a 4% mortgage, right? I have 300,000, left on my mortgage, and I have $300,000 in cash, I can invest it in the stock market, or I can pay down my mortgage. So this is a classic decision theory problem, right, you can make a certain 4%. And that’s what you’re making. When you pay down your mortgage, you’re actually making 4%. Or you can make an uncertain 8%, you can make more than a percent, you can make less, you could lose money. But you can make an uncertain 8%. From a stress framework, you should pay down your mortgage, you should pay down your mortgage. Because that is going to eliminate your financial stress. Like I have paid off a couple of houses in my lifetime, in the feeling of owning a house free and clear with no mortgage payments. If you have a house with debt on it with a mortgage, you don’t really own the house, the bank owns the house. For example, if you have a mortgage, you’re required to purchase homeowners insurance, if you don’t have a mortgage, you don’t need to purchase homeowners insurance, you should, but you don’t have to you own the house, you can make the decision. So the feeling of owning a house free and clear is like nothing in the world. And it massively reduces your stress. So that’s what I tell people. And the interesting thing is, is that, you know, three or four years ago when interest rates were 0%, and you could make a percent in the stock market, that was a much harder conversation because, you know, interest rates were so low, but now that mortgage rates are like 6, 7, 8 percent, like it’s kind of a no brainer, you pay down your mortgage debt.

Clint Murphy  17:20

100%. And it’s the first time we’re looking at it even personally, and I’ve heard about this in my newsletter, and and in the process, probably this spring, we’re gonna sell our house and downsize into a townhouse. And just looking at it and saying financially, I just want to take that extra, you know, we’re in a high cost of living city, I want to take that debt off the table and just lower, it’s exactly what you said, lower the stress levels, and increase the optionality of what I’m able to do with my career. If I want to be able to make a pivot, which the plan will be this year that I can’t be sitting on a huge debt load. So absolutely agree with you on that one. Jared, you talk about something you write about a lot in your newsletter, actually, volatility seems to be one of your favorite areas to write about. And to trade on, I believe in you talk about the purpose of volatility is to make people make stupid decisions. What do you mean by that? And how does that tie into our money conversation? 

Jared Dillian  18:19

Well, human beings are hard wired to be terrible investors, right? Like, let me put it this way. If you go to the grocery store, and you want to buy eggs, if the price of eggs is low, you’re like, great, I’m gonna buy five dozen eggs. If the price of eggs is high, you’re like, eggs are too expensive, I’m not going to buy the eggs. Financial assets are totally different, right? With eggs, you get excited by lower prices, and you get demoralized by higher prices. But with stocks, you get demoralized by lower prices, and you get excited by higher prices. So when a stock goes up, you’re like, This must be a good stock, I’m going to buy it when it goes down, you’re like this is probably a terrible stock, I should sell it. And people’s like this is the financial markets are just ruled by emotion. And people’s instincts around investing are always bad, always bad. So what you can try to do with people, you know, the wisdom around investing, I would say for the last 10 years is buy and hold index funds and dollar cost average, right? But when you invest in an index, you get to return to the index, which are great. But you also get the volatility of the index. And you know, the s&p 500 is pretty volatile. You know, it moves around 16 20% a year. And even if you have somebody coaching you if you have somebody telling you dollar cost average invest every month, if the stock market goes down 30% You’re gonna panic and you’re gonna sell and if the stock market goes up, 30% you’re gonna pile into it. It’s just human nature, right? So volatile Hilde is the enemy. And you try to construct your portfolio in such a way that minimizes volatility. So you don’t experience the sorts of emotions that lead to bad decisions.

Clint Murphy  20:11

Something that I really want to zone in on with you is this idea that you wrote about rich people, which is they have this belief that even if they lose everything, they can make it all back. What does that look like? And how does it tie to the three ideas you say, will change your life, revenue upside and luck?

Jared Dillian  20:36

Yeah, I mean, I think that for 99% of people, the fear of bankruptcy, the fear of losing everything is what drives a lot of decisions. Because you would be bus, you would be poor. And that would be basically the end of the line. And, you know, not to bring up Elon Musk again, but somebody like Elon Musk, he’s willing to risk at all, even if he went to zero, he could just start over and do the same thing all over again, he has that much belief in his abilities. You know, earlier, we talked about getting exposure to upside, right. And you can get exposure to upside a bunch of different ways you can do it in your job, if you have a career that basically there’s no limit on how much money you can make. You can do it in the financial markets, you have exposure to upside. But I like talking about luck. Luck is a real thing. Luck is a real thing. And I consider myself to be a very lucky person. But the thing that I do that a lot of people don’t do is I put myself in a position where I can be positively exposed to luck, right? So that is, you know, how I ended up getting the job and Lehman Brothers was I got a job on the floor of the Peacoast Options Exchange. And the reason I got that job is because I went down there to have an interview with an alum of my business school. And after about 20 minutes, I said, Hey, do you mind if I just walk around the floor? And some guy came up to me and asked me if I wanted a job, I was just down there on the floor. And so you say, Well, that’s very lucky. But I put myself in a position where I could be exposed to luck, I took the action, I set up this interview, and I was on the floor. When somebody asked me if I wanted a job, you know. So my philosophy on this is always go to conferences, meet people, you never know what opportunities you’re going to get. Always go to parties always go to social events. I like to be out there meeting people being positively exposed to luck. I’m in my office right now. It’s a very small office, nothing happens to me in here, nothing happens. I don’t get opportunities in this office, right, I have to go out and make stuff happen.

Clint Murphy  22:54

And I always say people talk about the law of attraction. And it’s great to have your mood board and your goals and but the key word in the Law of Attraction is action. And so you’re doing the work, you need to increase the surface area of your lock. I love that. Let’s flip over to the greatest investment you’ll ever make marriage who you marry. The other line, I’ve heard Jared that you may appreciate is best investing strategy is to not get divorced. And so one of our bankers told us that went on a tour of a property the other day, I loved it filed that one in the memory bank. So why is that such an important decision? And what are you looking for in a partner when it comes to money? Because money is such a stress in relationships.

Jared Dillian  23:45

You need to find somebody who shares your values on money. Okay, I got married very young. I was 23 years old. I’ve been with this girl since we were 15. Right? Like we you know, we were highschool sweethearts. We’ve been together. And we’ve been together for 35 years, you know, we had similar values on money. I grew up lower middle class, she grew up poor, like really poor. And we were both saver we both had the same attitudes towards money. We never got into fights about money. We’ve gotten into fights about a bunch of things in our marriage. We’ve been married for 26 years, we have never fought about money. Never. We’re a team. And we do things together. And in most marriages, you find people that fight about money they get into like these knockdown drag out arguments over like 50 bucks that somebody spent, and it’s toxic. Like it’s really terrible. So, you know, my wife and I were both cheap. You know, we were both CFs but you get some people who spend money and you know, if you’re a spender, you don’t want to be with somebody who is cheap. You’re gonna you’re gonna fight about money all the time, you know? So you want to be with somebody like yourself. So you want to find somebody that shares your values on money. 

Clint Murphy  24:59

When you talk money, one of the things you talk about is similar to Warren Buffett is this idea of the option value of cash. And for the listeners, they may wonder what we’re talking about there. And tied to that, when you look at the awesome portfolio as an example, you say I should have up to 20% of my net worth in cash. And so one of the things that jumps out at me there is does that change? Is my net worth increases? So for example, if it’s approaching 5 million, do I really want a million bucks sitting in, you know, holy, crap territory, like, I’m actually getting financial stress, just thinking about that? So why do you look at it as option value, and one of the reasons I think about that is, like, I look at you, or I think of me, and I do see an option value to it. Because if there’s blood in the streets, we’re both gonna plow that million bucks in and say, Hey, that was the option cost. I sat on that cash. And now there’s an opportunity, I’m going to take it. But the average listener out there, you already said they’re poor investors. And so when when when there’s blood in the streets, they’re just going to sit on that million bucks. So the option value is through the roof for them. Am I missing something on that one? 

Jared Dillian  26:12

Well, it’s, you know, having cash, cash as an option doesn’t just apply to financial markets, it also applies to buying stuff, you know. So let’s say you have a million dollars in cash, and you go on vacation to Fort Lauderdale, and you’re with your wife, and you see a condo, you’re like, Oh, my God, we have to buy this condo, right? Well, if you want to put down a down payment, you can just write a check, you can do it on the spot, like it’s not a matter of alright, I have to sell some stocks and move money around and sell this and sell that. And like, you can literally just write a check. So it could be a house, it could be a car, it could be something you like, but in terms of the financial markets, you know, let’s say we have a bear market, and it’s a really good time to invest. You need the three C’s, courage, capital and conviction, okay. And you have to have the in the first part of that is you have to have the capital, right? Like you have to have the cash. And most people don’t like there were opportunities all over the place in 2009 2010. And people could not take advantage of them because they did not have the cash, right. And you have to have courage, which is self explanatory, you have to have the courage to make that investment. And you have to have the conviction, courage, capital and conviction. There is in 2006, of course, right in 2006. in Myrtle Beach, they built this mixed use retail residential development, it’s called Market common. And it was built for $120 million. In 2010, it’s sold for $19 million, $19 million. And of course, what’s happened since then, you’ve had this huge migration of people to Myrtle Beach, it’s all built up, they have all this traffic, it was a homerun, it was one of the greatest trades of all time, 90 million bucks. I mean, you could do that somebody with 20 million bucks could have just written a check. You know, it was so cheap. And there were opportunities like that all over the place, but you have to have the cash, you have to have the cash. 

Clint Murphy  28:21

And the key one there is is the courage and the conviction because people what people often ignore is they always hear that, you know, saying invest when there’s blood in the street, but what they forget is when there’s blood in the street, you’re fuckin scared. Like, there’s blood in the street, like holy shit, like, people around me here, like getting taken out. Companies are going under like I can’t invest. It’s a really important when you bring up there. And you almost also, like I always blame it on concussions, like maybe I’ve got a switch flipped that I’m supposed to not want to buy real estate when everyone says it’s a bad idea, but that there’s something there that that people have to think about. So the other thing we want to talk about, so we already talked about revenue, we already talked about upside, we really want people to focus on that earn more money. But on the other side of the ledger, something that we really want people to think about is credit card debt and eliminating that. Why is that such an important one we want people to focus on. And as part of that, looking at at, there’s some conveniences to credit cards, there’s some benefits with points. And for the average person, there’s also a kick in the teeth with the compounding interest rate.

Jared Dillian  29:42

Yeah, there’s a lot to talk about there. First of all, credit cards are simply a convenient way to pay for things. They’re a terrible way to borrow money, right? If you want to borrow money, go to the bank and get a personal loan at eight or 10%. And that feels very much like borrowing money like you’re in an office and you’re this guy is wearing a tie, and you’re signing this paperwork, and it’s a loan, and it feels like loan credit cards don’t really feel like borrowing money. Okay? The points thing is nuts, okay? Interest rates on credit cards are 21%. Okay, with points, you’re generally getting back one to 2% of your money when you spend. So if you’re focused on the points, you know, if you book a trip to Miami for 10,000, bucks, flights, hotels, rental cars, stuff like that, you’re getting 100 bucks back. But if you carry that balance over the course of the year, you’re going to pay 2000 bucks. If you carry a balance on your credit card, it makes no sense to focus on the points, the points only work if you don’t carry a balance. And the funny thing is, is that the marketing on these credit cards, you see all these commercials, what are the commercials about the commercials are about the points, they advertise how much points you get. When was when was the last time you saw a credit card commercial that advertise the lowest interest rate? You never see it? Nobody cares about the interest rates, they all care about the points, which doesn’t make any sense. 

Clint Murphy  31:10

I mean, it’s funny, you say that we just this weekend was out with some friends and we had a conversation about cards. And our friend sent us his referral link because the card he’s using has the best points and my wife signed herself up and then used her referral link to sign me up. So now we’ve got new credit cards. But the you know, what are the important things you talk about? Because I pay for almost everything on credit cards, you use a fair amount of cash, I do the same thing as you, if I’m going to the ATM, I’ll take 500 bucks out at a time, it doesn’t make sense to do less. But I pay for almost everything on the credit card. The key thing is other than MBNA is 1% credit cards that I’ve been carrying about $70,000 on for about 13 years straight now. Because it’s just seems like a gift. I’ve never carried a credit card balance because similar to your rule, if you can’t pay it off at the end of the month, don’t buy it. Can you talk a little bit about the importance of that for people? 

Jared Dillian  32:13

Well, I mean, there’s this quote that’s attributed to Einstein, where, you know, supposedly, he said that compound interest is the eighth wonder of the world. Negatively compounding interest is a bag of shit. It’s like if you have credit card debt, see with revolving installment debt, the interest doesn’t compound, you pay the interest every month, and it doesn’t compound with revolving debt it compounds. If you have $10,000 in credit card debt, and you have $200 of interest in a month, the following month, you’re going to have interest on interest and that compounds over time. So people with huge amounts of credit card debt are negatively compounding. And that is not a recipe for success, not a recipe for success.

Clint Murphy  32:58

An absolutedisaster, something that would be fun to have a little bit of a debate on with you houses. So the for one of the things you say that I always take a bit of an exception to is that houses are not an investment. The only reason I take an exception to it is it seems like a vast majority of people either don’t invest, or when you look at buying versus renting. They don’t take the difference in the payments and invest in them. So you look at it and say for the vast majority of people, the only investment they seem to ever make is the house they buy, like they don’t actually do any other investment. So that’s the only reason I ever say well, I kind of do look at it at houses and investment for the average person. 

Jared Dillian  33:45

Yeah, I mean, residential real estate has appreciated at about 4% per year over the last 100 years, which barely beats inflation, it’s not a good investment. Plus, you have all sorts of costs associated with that you have insurance and you have maintenance and stuff like that. I kind of go back and forth in the book. I mean, it is an investment. It’s not an investment. You know, there’s a lot of people. Let me give you an example. You have a guy in Brooklyn, who bought his house in 1981 for $70,000, In 2022. He sells it for $900,000. He it’s paid off, he has no debt on it. He sells it for $900,000. He moves to Myrtle Beach, he buys a house for $300,000 and pays cash and just lives off the rest of retirement, never invested in stocks, never invested in bonds never invested in anything. All he did was pay that mortgage off for 30 years. And he set up for retirement. Yeah, I mean for that person. It’s a great investment. Houses are a lot like stocks sometimes. You know, like if prices go up, people get excited. If prices go down, people get demoralized. It’s a financial asset. People generally pile into the housing market at the worst possible time, I just like to say don’t think of it as an investment. Don’t think of it as an investment, it’s a place to live. And by the way, it has negative carry, right? Because you’re paying interest. You’re paying maintenance, you’re paying insurance. So it’s this asset that’s negative carry. Don’t think of it as an investment, just think of it as a place to live.

Clint Murphy  35:21

So something that brings up because for the listeners, they’re probably not surprised that you and I have very similar views on money. When I when I write about money on Twitter or my newsletter, I take very similar approaches and recommendations to you. Now, what about these young kids that are in college now, and they’re looking at you and I, and they’re saying, these guys are fucking boomers, like the world just isn’t the same for us, like, both of them bought their first condos for under 200 grand, and they sold them for 50%, or 75% gains. And then they did that five times. And now I’m going to college, which we’ll talk about next, which is an absolute gong show of craziness. What we do to these kids like it’s, it’s one of the things that I think bothers me the most about money is, is the college but we’ll in we’ll dive into that the cost, the expense, the debt, now I get out, the jobs that are available are shittier, than when you two graduated, they don’t pay as much. And like if I want to buy a house, I gotta pay a million bucks for that same condo that you paid 200 grand for, like, how do we approach that side of this argument? 

Jared Dillian  36:35

Well, you know, it’s funny, I actually teach at the university level, I’m an adjunct professor at Coastal Carolina University. And I’ve just finished up a class teaching personal finance, basically, to college freshmen. And I was kind of shocked at how little knowledge there was about this kind of stuff, you know, I do want to get into the student loan thing. College is expensive for a whole bunch of reasons. Nobody in my class knew that student loans are not dischargeable. In bankruptcy, I had to explain that like 10 times, I’m like, if you have $100,000 in student debt, and you have all this other debt, and you go bankrupt, all the other debt goes away, but you still have your student loans, they never go away. They never heard of that before. Nobody told them, you know, like, it’s the economic environment where, you know, houses are more expensive school is more expensive jobs, pay less or whatever, like, it is still possible for a young person to save and invest to become wealthy in this environment. It is harder, but it’s still possible. But really like, nobody is teaching these kids any of this stuff. You know, it’s bizarre to me. 

Clint Murphy  37:51

Yeah, I agree in In fairness, though, I mean, you look back I grew up very similarly, the I always use the same bracket, lower middle class, right weren’t poor had a roof over our heads had food, just didn’t have any of the luxuries didn’t have the option to have that the the wants, right, you had had most of the needs, but not the wants. But one thing we didn’t have was people who taught us about financial literacy. Right? My mom and dad didn’t know anything, their parents didn’t know anything. So you learn that through going to Wall Street, I learned that by becoming an accountant and working at KPMG for a decade and surrounding myself with financially astute people. It’s not necessarily surprising that these young people don’t know these things. And so that brings us let’s talk about college. Because this is such a big one. For people who are listening who have kids, or they are younger, I really agree with you that this is a big one, like I almost look at the US system with the high cost of tuition, the student debt that comes with it, the inability to discharge it, and it almost creates this generation of of indentured servants in the point where I started to see these programs come up, where you were able to discharge your student debt to a company, and what that company was doing, was buying a piece of you. So buying a piece of your future earnings. And so what you were doing was saying, Well, what are my future earnings? Well, you probably didn’t even have the ability, Jared to like, because if you’re selling your future earnings, you probably didn’t even do the math to say are my future earnings worth more than this debt? Like, am I getting an arbitrage win? Or am I actually losing by selling a piece of my future earnings to this company to take away this debt? So there’s that in you sit back and say, Well, let’s talk about a few things. Should you even go to college? Is that the right path for you? If you do go to college, what colleges should you be choosing and what should you be willing to pay, depending on the college you choose, do you want to take over there and go in any direction you want? 

Jared Dillian  40:06

Pretty simple. I mean, we do have an oversupply of people going to college. And we have an under supply of people not going to college. You know, we have college graduates working in sales making 55,000 a year, and we have high school dropouts, driving trucks making 110,000 a year, like that happens. Like it’s all supply and demand, we have too many people going to college, there’s lots of stories about out there about somebody with a high school education, who starts doing HVAC, and they do that for five or 10 years, and they start their own company, and they build a company. And then they sell it for 10 million bucks. And they live in a gated community and it’s somebody with a high school education, there’s lots of people that do that, then you have the adverse of that is you have somebody that gets a four year degree and is kind of a useless major and ends up waiting tables, you have a lot of those stories. There’s a lot of discussions about you know, what is the purpose of a college education is the purpose of a college education to get you a job, or is the purpose of a college education to make you will more enlightened person. So I think it’s both, you know, I think it’s both, but I think colleges generally do a pretty good job at the second part and not a very good job at the first part, okay. So go to college, but don’t have more than $40,000 in debt. If you have $40,000 in debt, and you get out of college and you make $60,000 a year, you can pay $8,000 A year and pay off that debt in five years, the goal is to pay it off in five years. If you can’t pay it off in five years, then go to a cheaper school or don’t go to school, it’s not worth it. Don’t go someplace where you’re going to have $200,000 in debt. And you’re going to be making $40,000. Afterwards, the economics just don’t make sense.

Clint Murphy  42:00

And something some young people can think about is this idea. When I look at it, it was partially driven by grades and not really being a student in high school. But I went to a local community college for a couple of years. And then once the grades improved and had a little bit more financial wherewithal upgraded and went to one of the bigger, what you would refer to as a state college here and in Canada, and was able to graduate from that. So you know, that’s what’s on the resume. But the first two years, were basically free, because it was like going to a high school down the street. And so there’s that ability, you don’t always have to start at one, you can do a couple cheap years and then upgrade. Now. Now what about though you talk about the Ivy’s? And you’re like, hey, if you get into those pay whatever it takes. What’s your view on that? Because I know, that’s definitely what I’m pushing my two boys to do? 

Jared Dillian 42:58

Well, it’s funny, because, you know, obviously, the book was written a couple years ago, and we have this whole controversy. You know, so but but anyway, but like, let’s pretend that didn’t happen. Okay. You know, what I said in the book is, if you get into Harvard, go to Harvard, it doesn’t matter what it costs, if it costs you $300,000. And by the way, it won’t, because you’re gonna get scholarships, but pretend to cost $300,000, you should just go because the people you are going to come in contact with while you are there. I mean, that’s really the value of an Ivy League education, Ivy League, or MIT or Caltech or Chicago or something like that. The people you are going to be surrounded with, are going to go on to do incredible things. They’re going to they’re going to be CEOs of huge corporations, they’re going to be supreme court justices, they’re going to be presidents, I mean, your Rolodex is going to be worth a lot of money, and also the name brand of a school counts. You know, maybe it counts less for Harvard now based on what’s happened. But, you know, prior to this whole plagiarism scandal and stuff, maybe, you know, if your resume says Harvard on it, at least as of last year, it goes to the top of the pile, you know, so that name brand to the school, a lot of people’s, you know, parents do this all the time, and they do their kids a disservice. They’re like, well, we’re not paying for this fancy Ivy League school, you can go to a state school, you can be in the Honors Program. You’re really doing your kids a disservice because like Wall Street banks, don’t look at those resumes. Law firms don’t look at those resumes, like the name brand of the school really does matter.

Clint Murphy  44:38

Yeah, it comes right back to earlier in this conversation. You talked about luck and one of the best ways I’ve enjoyed hearing someone describe it as increasing the surface area of your lock in in going to the Ivy’s going to that name brand. It increases the surface area of your lap the people you know the name brand on the resume well 100% the area for investing. So super complicated area, you boil something down to a very, very simple way with the awesome folio. Can we talk about the awesome portfolio and just show people how simple investing can be in before we do. I was trying to find it. But I couldn’t find it a number of years ago, you had a different portfolio that you put in your newsletter. And it had different classifications, it was close to the awesome portfolio, but not quite exact. It had, it was a bit more of a portfolio that was meant to be a little bit more risk adjusted. If if the market was you know, you felt it was frothy and you had health stocks, defensive stocks. Do you recall what the name of that was? Or am I okay? I’ve got to find that. But let’s Okay, so let’s awesome portfolio. How can you boil it down to something so simple for people? 

Jared Dillian 45:59

All right. So here’s the deal, the stock market has returned 9% Over time, like 9% Over the last 100 years? What if I told you that there was a portfolio that could get you 8% with almost half the risk of being in the stock market? You’re so you’re trading off 1% performance and you have about half the risk? Why wouldn’t you do that? You know what I mean? Like it’s just, it doesn’t make any sense. So the awesome portfolio is 20% stocks, 20% bonds, 20% gold, 20% cash and 20% real estate, and you rebounce it every year. And you can do it all with ETFs. Right? There’s five ETFs in the cash, you can just have in a money market fund or something like that. Very simple diversification. A lot of people they buy like an s&p 500 index fund, and they’re like, Oh, I’m diversified. I own 500 stocks. Okay, so I’m diversified. Well, not really, like you own the stock market that’s not really being diversified. So they say, well, I’ll have a 6040 portfolio have stocks, and I’ll have bonds while you’re still not really diversified, because they’re both financial assets, right? Like, you don’t have any hard assets. And also, like stocks and bonds are not always negatively correlated. Like sometimes they’re positively correlated, like now. So then you start thinking about adding hard assets, like commodities, and real estate and stuff like that. And the nice thing about doing that is they’re less correlated to stocks and bonds. And they also give you some exposure to inflation. You know, gold in real estate generally do well during periods of inflation. And the cash is there for a stabilizer. And when I first developed the awesome portfolio, like three or four years ago, people are said, You’re nuts for having cash in there, because cash was yielding 0%. Nobody says that anymore. Now you can get 5% on cash. So this combination of asset classes, you know, basically, we have history going back to 1971. And that’s as far back as we can go because you couldn’t hold gold before 1971. But since 1971, I think it’s returned 8.1% a year. But the important thing is, the maximum drawdown in any year was 12.2%. That’s the most this portfolio is lost in the last 50 plus years is 12.2% maximum drawdown in the stock market was over that time period wasn’t 2008, it was 57%. So you’re saying okay, I can invest in the stock market and make 9%. But I could lose 57%, from top to bottom, or I can have the awesome portfolio and the most I can lose the 12.2% at least historically. Right? So I don’t know. It makes a lot of sense to me.

Clint Murphy  48:48

Yeah, it gives you that ability to just put the money into it rebalance once a year, never look at it and never worry about it. Never stress about it until you decide you’re going to retire. Yep. Okay, so I’m gonna fire for rapid fire questions that you outside of the book. What is one book that’s had a massive change on your life, Jared?

Jared Dillian 49:08

One book that’s had a massive change in my life. I mean, probably, I would say, the scene Tom labs, first two books Fooled By Randomness and the Black Swan. You know, I read those early in my trading career. And that really got me to think about risk in a different way, so.

Clint Murphy  49:24

That makes sense is one of your newsletter readers. What’s on the shelf right now? What are you taking down that you’re enjoying?

Jared Dillian 49:30

I’m mostly reading literary fiction. I’m trying to get short stories published in literary journals and not being very successful at it. But I’m subscribed to a couple of journals and I’m reading short stories and stuff like that, so.

Clint Murphy  49:43

 Oh, fabulous. The one thing people don’t appreciate is when you decide you’re going to write getting the book actually published is as much or more work than writing the book, I write fantasy in my spare time with my sister and so we’ve actually got to get back on on that side of the equation, not the writing, but trying to get someone to actually publish it. What’s one thing that you spent less than $1,000 on in the last year that Jared has thought to himself? Damn, I wish I bought this sooner. 

Jared Dillian  50:15

Gosh, one thing I’ve spent $1,000 on or less? I don’t know, that’s tough question. I don’t generally buy gadgets and stuff. I buy clothes. I’m like a clothes horse. So it may not seem like a right now I’m wearing a hoodie. But actually, like, I bought probably half of what John Varvatos has ever come out with. So I just like I just buy clothes. And also like, I’m building a house. So I’ve been saving money. So I just really haven’t spent money on stuff, so.

Clint Murphy  50:43

When is the house gonna be done? 

Jared Dillian  50:45

About three months?

Clint Murphy  50:47

And is it the classic 50%? over budget? 50% over time,

Jared Dillian  50:51

It’s under budget. It is under budget? Yes. Yes. It is massively under budget. Yeah. 

Clint Murphy  50:58

That is such a devastatingly fun and challenging process. So this show is about growth, it’s about improvement. So what’s one behavior change or mindset shift that you’ve had in your life that’s had an oversized impact on you? 

Jared Dillian  51:16

In June, I graduated from the Savannah College of Art Design with a Master of Fine Arts and Writing. And, you know, it’s funny, like, how do you summarize three years of school until like one sentence, but the one thing I learned from that program is writers write, like, I write all the time, all the time I write my newsletters, you know, this is my fourth book, I’m going to have a book of short stories that’s coming out at the end of 2024. I have another book of essays coming out, I’m going to be writing the sequel to No Worries, I just write all the time. Like, I don’t stop. So you know, I’m in the office here. And when I go home, you know, I have dinner and I sit on the couch, and I write I write all the time, you know, and that’s, like, that’s what I learned from that program. It’s just, like, if you’re going to do something and do it well, it has to be an obsession. It has to be an obsession, you know?

Clint Murphy  52:11

Yeah. And something I read last week, and it’s similar to how I’ve always wrote about it is to be the noun, do the verb. So if you want to be a runner run, if you want to be a writer, write. Like life is simple. He, Jared, we went pretty far and wide, pretty deep in the book, is there anything we left out that you want to make sure you get across to the listeners? Really,

Jared Dillian  52:35

it’s the idea of balance, okay. And the goal was to have a healthy relationship with money. Most people have an unhealthy relationship with money. They’re either super cheap, and they don’t spend enough money, or they spend too much money. There is such a thing as not spending enough money. Okay, like that. A lot of people don’t understand that. But like in America, we say those people would be ideal, right? But there is such a thing as not spending enough money. The goal is to have balance and to have a healthy relationship with money. And to get to the point where you never even think about it. You spent 1% of your time thinking about money. That is the goal.

Clint Murphy  53:16

I love it. And I’ll say I probably hadn’t checked my credit score in 20 years till I was reading your book and just throw it to my wife, hey, what’s our credit score? She had just checked because she was applying for those credit cards. So other than that, you know, I haven’t thought about that type of thing for for 20 plus years, all I’ve thought about is just make more money. And where can people find you, Jared?

Jared Dillian  53:37

My author website is Jareddillian.com. So if you want to check out my personal finance website, it’s Jared dillian money.com. We have a bunch of great products. There’s actually a Bond masterclass. A lot of people don’t know anything about bonds. There’s a whole masterclass on bonds. It’s really like taking a college course and it’s relative to taking a college course it’s super cheap. So there’s some good stuff on the website. And of course, here is the book. No Worries. It’s being released January 23. Tuesday, you’re definitely going to want to get your copy. 

Clint Murphy  54:14

Love it. Thanks for joining me today. That was fun.

Jared Dillian  54:16

Thank you