Jared Dillian, Author: “No Worries: How to Live a Stress-free Financial Life”

[00:00:00] Hello, this is Dean Curnutt and welcome to the Alpha Exchange where we explore topics

[00:00:07] in financial markets associated with managing risk, generating return, and the deployment

[00:00:12] of capital and the alternative investment industry.

[00:00:20] George Orwell once said that writing a book is a quote horrible, exhausting experience

[00:00:24] that one would never undertake if one were not driven by some demon whom one can neither

[00:00:29] resist nor understand.

[00:00:32] Okay then, let's all agree that writing a book is a heavy lift.

[00:00:35] Let's also agree that the personal finance advice industry is littered with gurus making

[00:00:41] out landage statements about profit opportunities and often giving unsound advice on wealth

[00:00:46] management.

[00:00:47] With these in mind it was a pleasure to welcome Jared Dillian back to the Alpha Exchange.

[00:00:52] Jared is the founder and editor of the Daily Dirt NAP and the author of a recent book,

[00:00:57] No Worry's How to Live a Stress-Free Financial Life.

[00:01:01] While many of the podcast discussions are in the weeds on high finance topics like monetary

[00:01:05] policy, hedging and correlation my conversation with Jared emphasizes the basics how to

[00:01:11] get the big decisions right and in the process enjoy more peace of mind.

[00:01:16] The foundations of our discussion are debt and risk, the two main sources of financial

[00:01:21] stress in Jared's view.

[00:01:23] On the debt side he emphasizes three critical transactions, the house, the car and student

[00:01:29] loans.

[00:01:30] On the risk side he advocates for the quote awesome portfolio, a blend of stock, bonds,

[00:01:35] gold, real estate and cash.

[00:01:38] While not returning what stocks have historically, this combination has considerably smaller realized

[00:01:43] drawdowns.

[00:01:44] Overall, Jared's book is easy to consume with plenty of nuggets accessible to the non-wall

[00:01:50] street types.

[00:01:51] I hope you enjoyed this episode of the Alpha Exchange, my conversation with Jared Dillian.

[00:01:58] My guest today on the Alpha Exchange is Jared Dillian.

[00:02:01] He is the founder and editor of the Daily Dirt NAP, a newsletter that has been a success

[00:02:07] over the past decade and now he's an author as well having written a couple of books.

[00:02:13] Jared it's great to have you back on the Alpha Exchange.

[00:02:15] Hey thanks for having me and by the way the newsletter has been around for 16 years.

[00:02:20] 16 years launched during the teeth of the financial crisis.

[00:02:26] First started as missives from your seat as the person running the ETF business at Lehman

[00:02:32] Brothers and you've really made it quite a success and you've really made writing a big

[00:02:36] part of your career and you're out with a new book called No Worry's and that's going

[00:02:41] to be the chief topic of our conversation.

[00:02:44] But as we kick it off Jared, why don't you tell us just a little bit first about the

[00:02:48] Daily Dirt NAP and then a little bit about your foray into writing and authoring several

[00:02:53] books at this point.

[00:02:55] So the Daily Dirt NAP has been around for 16 years.

[00:02:58] I launched it after the Lehman bankruptcy.

[00:03:01] It's an institution at this point.

[00:03:03] Most people have heard of it, it's a great business.

[00:03:05] I still trade and invest myself and the funny thing is is that I tell people that even if

[00:03:11] I didn't have the newsletter as a business, I would still write every day because it's

[00:03:17] a part of my process.

[00:03:18] That's how I think, it's how I crystallize my ideas.

[00:03:22] So I would still definitely do that.

[00:03:25] Writing is, I made the decision when I was at Lehman that I was going to become a writer

[00:03:30] and as you know most writers don't make a lot of money.

[00:03:34] I mean even the book business in order to survive as an author, I mean you need to sell books

[00:03:41] that sell hundreds of thousands or millions of copies and most people don't do that.

[00:03:45] So the economics are pretty unforgiving but I'm very lucky that I've built the Daily

[00:03:50] Dirt NAP into a sustainable business and that provides me with a pretty good income that

[00:03:56] allows me to pursue other projects.

[00:03:59] For example, in November I have another book coming out which will be a collection of short

[00:04:03] stories it's called Night Moves and before no worries I had a collection of essays come

[00:04:08] out called Those Bastards and I have the financial freedom to be able to do stuff like

[00:04:14] that. And actually one thing I forgot to mention is that I went back to school to get a

[00:04:19] master's in Fine Arts and creative writing.

[00:04:22] I graduated in June from Savannah College of Art and Design but age 49 I got my MFA and

[00:04:30] it really was one of the best things I've ever done.

[00:04:33] Fantastic, you talk about writing as part of your process and it sounds to me like

[00:04:38] you would do it anyway even if you weren't running a newsletter but let's just talk

[00:04:42] a little bit about the success of the Daily Dirt NAP and it's wherewithal through episodes

[00:04:47] of crisis, through markets that were exceedingly dull maybe that's the 2013, 14, 15, zero

[00:04:54] rate years.

[00:04:56] You've always found something interesting to write about the competition for eyeballs

[00:05:03] has never been greater.

[00:05:05] There's a sub stack and Twitter and everybody's got an opinion so there's been a democratization

[00:05:11] of the printed word so that's good but it also makes it hard for folks like you in the

[00:05:16] sense of there's just so many pieces out there.

[00:05:20] How is it that the Dirt NAP has sustained itself for such a long period of time?

[00:05:24] What do you think you've done differently to make it so enduring?

[00:05:28] There is a lot more competition.

[00:05:30] When I started there was Jim Grant, there was Dennis Gartman, there was a few other people

[00:05:35] but there weren't that many people in the space and now gosh there's dozens and hundreds

[00:05:41] of sub stacks and newsletters and stuff.

[00:05:43] I will say it's gotten tougher but I also don't worry about it too much.

[00:05:48] My goal isn't to have 20,000 subscribers.

[00:05:51] I'm very happy with what I have and people find me and I really think the one thing that

[00:05:57] sets it apart from other publications is the quality of the writing.

[00:06:01] I do not have the best financial mind in the world.

[00:06:06] I'm not even in the top 100 but what sets me apart is number one, the quality of the writing

[00:06:12] and number two, my focus on sentiment which I tend to do better than everybody else.

[00:06:18] That's my niche.

[00:06:20] Nobody else really does it as well as I do and when people subscribe to me specifically

[00:06:26] for that.

[00:06:27] I think that having been in this business myself for over three decades and sometimes reaching

[00:06:32] periods of exhaustion from all the content that's coming your way, making something an enjoyable

[00:06:39] read is half the battle.

[00:06:41] Obviously the insights are critical.

[00:06:43] You want to be reading folks for whom the time you spent in engaging with the content

[00:06:48] is valuable but also there's just something about reading something that's enjoyable to

[00:06:53] read as well.

[00:06:54] I think you definitely focused on that a lot and in your latest book which I want to turn

[00:06:58] to, I see a lot of that there which is just breaking down a complex subject into a style

[00:07:04] that's very digestible, simple and making it attainable for even the average person.

[00:07:11] Let's talk about no worries.

[00:07:13] You have been in high finance for a long time.

[00:07:16] The ETF business thinking about things like volatility and market risk episodes, inflation,

[00:07:23] asset prices and what I think you've done here is made an effort really to create a roadmap

[00:07:29] so to speak on the personal finance side.

[00:07:33] Maybe rewind to the motivation for writing the book.

[00:07:38] There's a lot of places you can decide to focus on in terms of what you write about.

[00:07:42] Tell us about how you came to think about writing no worries.

[00:07:47] Well honestly I think personal finance is actually more interesting than institutional

[00:07:52] finance.

[00:07:53] With high finance there's usually an optimal solution but personal finance is actually

[00:07:58] more complex.

[00:08:00] If you think about something as simple as the decision of whether to pay down a mortgage

[00:08:04] or invest in the stock market, there's so many things you have to consider in making

[00:08:09] that decision.

[00:08:11] Around 2018 I got interested in it so what I did was I started reading all the personal

[00:08:17] finance classics.

[00:08:18] I read the millionaire next door and Dave Ramsey's book and Kiyosaki's book and all these

[00:08:23] books.

[00:08:24] I was shocked at how bad the advice was that people were getting on personal finance and

[00:08:32] that persists.

[00:08:35] I really wanted to publish the smart personal finance book, the book that was right and it

[00:08:42] is right.

[00:08:43] Basically the focus of the book is about financial stress.

[00:08:47] The title of the book is no worries how to live a stress-free financial life.

[00:08:51] What I discovered was a lot of the other books were focusing on how to make the most money

[00:08:58] or how to eliminate debt but not how to minimize your financial stress.

[00:09:04] That's really the takeaway of the book.

[00:09:06] That's the overriding theme is that finance and financial uncertainty can be a source

[00:09:12] of stress and you're giving a number of different areas of advice there, one of which is I think

[00:09:17] as you're referencing this misscelling of certain gurus who are providing advice.

[00:09:22] You start with the main premise that debt and risk are the two main sources of financial

[00:09:29] stress and then you break that down a little bit as well.

[00:09:33] I guess what I wanted to start with is you make the point, get the big decisions right

[00:09:37] and that's the critical part and you point to the house, the car and student loans.

[00:09:43] I thought that was so simple and pretty powerful at the same time.

[00:09:46] Why don't you walk through that concept and why that's so important, the big decisions?

[00:09:51] Well, what you see with other personal finance experts is an obsessive focus on small

[00:09:59] expenses and austerity.

[00:10:02] So I was like okay if buying coffee from Starbucks is really an existential threat, let's do the

[00:10:08] math.

[00:10:09] Let's do the math and see if this makes sense.

[00:10:12] So I go to Dunkin Donuts every day when I go to work.

[00:10:16] It's $4 a day.

[00:10:18] $225 a year, that's $900 a year.

[00:10:22] That's $36,000 over 40 years.

[00:10:25] So I will spend $36,000 on coffee over my lifetime.

[00:10:30] But if I buy a house that's 500 square feet bigger, that's an additional $100 to $200,000

[00:10:37] plus the interest on that $100,000 to $200,000 will exceed $100,000 or $200,000 over the course

[00:10:46] of paying down a 30 year mortgage.

[00:10:49] And that's really the thing, paying interest.

[00:10:52] So the big decisions, the house, the car and the student loans, the consequences of those

[00:10:57] decisions are much greater than the million small financial decisions you make on a daily

[00:11:03] basis.

[00:11:04] There's people out there that will go to a soda machine and they agonize about whether

[00:11:08] to spend two bucks on a soda.

[00:11:11] And that is the stuff that just does not matter at all.

[00:11:14] We are taught that it's the little things that matter and that's broadly true of everything,

[00:11:20] not just finance.

[00:11:21] But it's not the little things that matter.

[00:11:24] It's the big things that matter.

[00:11:25] The little things don't matter at all.

[00:11:27] And you shouldn't spend any time thinking about them.

[00:11:30] Reminds me if there's one of those reality shows, I think it's called extreme couponing

[00:11:34] where someone finds a way to get $100 free in groceries but probably spends hours and

[00:11:39] hours accumulating these coupons.

[00:11:41] You say money is not the product of a million small decisions but rather a few big ones.

[00:11:46] And then you go on, I love this line.

[00:11:47] You say people aren't appropriately nervous when buying a house they should be.

[00:11:53] So let's talk a little bit more about the big decisions.

[00:11:57] How they go wrong, maybe wear some of the advice that you've seen out there already,

[00:12:03] Mr. Rex people, maybe start with the house.

[00:12:06] It's the biggest decision in terms of the impact on your future.

[00:12:10] It obviously requires a tremendous amount of upfront payment and then ongoing payments.

[00:12:16] So there is a lot of risk in buying a house.

[00:12:17] How should folks approach this big decision?

[00:12:20] Well, what I said in the book is that people don't really understand the risk which is

[00:12:24] true because buying a house in this country is a fairly easy process.

[00:12:29] You get pre-approved for a mortgage and the realtor takes you to a house and you get

[00:12:33] an inspection, you get an appraisal and you sign the loan documents.

[00:12:37] I mean it's complicated but it's very simple.

[00:12:41] And if you buy a house and you put 20% down, you have 6% in transactions costs.

[00:12:48] So really if the price of the house goes down by 14%, you are under water and you can't

[00:12:54] move.

[00:12:55] You have to pay to get out of the house.

[00:12:57] And 14% is not a lot.

[00:13:00] That's at prices go down 14% all the time.

[00:13:03] That might seem hard to believe now because housing has pretty much gone straight up since

[00:13:09] early 2021, but yes, housing prices can go down 14%.

[00:13:15] So it's a lot of risk and people can't comprehend how much risk it is which is weird because

[00:13:22] we went through this in 2008 and even just 16 years later, people have complete amnesia

[00:13:31] about how this could go wrong.

[00:13:33] So yeah, buying a house is one of the riskiest things you can ever do and your hands had

[00:13:38] better be shaking when you're signing the loan documents and if they're not, you don't

[00:13:43] understand the magnitude of the situation.

[00:13:46] And it's a very challenging circumstance these days because the expected decline in housing

[00:13:51] prices that was supposed to arrive as interest rates rose is really not happened.

[00:13:57] There's the supply issue.

[00:13:59] Everyone who's in that mortgage is going to stay in that mortgage.

[00:14:01] So you have the double whammy right now of housing prices that are high elevated and the

[00:14:07] financing of those houses via the mortgage is also expensive.

[00:14:11] How should someone think about the balance of trying to be careful and make a safe wise

[00:14:17] decision with the reality that family formations are not exactly that easy to time.

[00:14:24] You can't time the housing market as you time, maybe the equity market, it's just a lot

[00:14:28] more onerous.

[00:14:29] What's that tradeoff look like?

[00:14:31] Well, really what you're describing this phenomenon where prices are high and interest

[00:14:35] rates are high is affordability and affordability right now is very low affordability in 2020 was

[00:14:42] great.

[00:14:43] So in the book, I say that you shouldn't spend more than 25% of your income on housing

[00:14:50] costs because if you do, it's going to crowd out your ability to save and invest and even

[00:14:57] have fun like take vacations.

[00:15:00] If you're spending 45% of your income on housing costs, you won't be able to do any of those

[00:15:04] things.

[00:15:05] And I also talk about how renting is not really the worst thing in the world.

[00:15:10] The number one thing I get from kids who read the book or like 27 years old, 28 years

[00:15:15] old.

[00:15:16] They say, well, I'm 28 years old and I don't own a house yet so I don't feel like an

[00:15:22] adult home ownership is a bit of a cult in this country.

[00:15:25] We have very high home ownership rates about 66% and that's typically what people do is

[00:15:31] you talked about household formation.

[00:15:33] People get married, have kids get a house, but renting is also an option.

[00:15:38] It's a lot less hassle.

[00:15:41] In 90% of the time, it's actually cheaper than owning a house so I never say that people

[00:15:47] have to own a house.

[00:15:49] So the other two big decisions that you highlight won the car not nearly as big a decision as

[00:15:55] a house but the third is student loans and of course, that's all the time in the news

[00:16:00] with regard to student debt relief.

[00:16:02] There's a lot of folks feeling like they've got an albatross that's preventing them from

[00:16:07] doing other things because of this burden of student loans.

[00:16:11] We were taught in the same way that home ownership is supposed to be that ticket to financial

[00:16:15] freedom that a college degree was as well and so there's a lot of rethinking on that.

[00:16:21] Layout would you've written on the student loan front in terms of risks and how potential

[00:16:26] student loan borrowers should contemplate that?

[00:16:29] Well, really probably the biggest problem we have with student loans these days is the income

[00:16:35] base repayment plans and this law was passed in 2009, 15 years ago.

[00:16:41] And basically what it does is let's say you spend $100,000 going to school, you borrow

[00:16:45] $100,000 and ordinarily you would owe $1200 a month in order to amortize the principal.

[00:16:52] What the government does is they say you're only making $45,000 a year so we're going

[00:16:58] to means test this payment and you only owe us $300 a month and people say great I'll pay

[00:17:04] $300 a month but what they don't realize is that the interest that they're not paying

[00:17:10] is actually being added to the back end of the loan.

[00:17:13] So you see all these stories on Twitter and other places of people who they've been paying

[00:17:18] their student loans for 15 or 20 years and the loan balance is actually bigger than when

[00:17:25] they started in terms of fairness, I think most people disagree with that.

[00:17:29] So really what you have to do is if you are on one of these income base repayment plans

[00:17:35] you have to pay down the principal aggressively and make sure you amortize it.

[00:17:40] But I do have rubric for going to college, if you do get into a really good school like

[00:17:44] a Harvard or something like that, it doesn't really matter what it costs you should just

[00:17:48] go, the benefits are worth it.

[00:17:51] If you go to a second tier school then what I say is that you should have no more than

[00:17:55] $40,000 in debt or at least any debt that you can pay off in five years.

[00:18:02] You have to be able to pay off your student loans in five years and if you go to a third

[00:18:05] tier school then you can't have any debt at all.

[00:18:08] Interesting okay so as someone who's facing these tradeoffs in terms of going to college

[00:18:15] are you thinking about is the students supposed to also think about what their intended area

[00:18:21] of study is in college and what they at least potentially could make income wise is that

[00:18:26] part of the decision tree as well.

[00:18:28] Absolutely, interestingly enough I didn't talk about that in the book but you do have to

[00:18:32] do that math depending on what you major in you have to think about your earnings potential

[00:18:38] in that major.

[00:18:39] But I think one of the reasons I didn't really focus on it is because there's really

[00:18:44] only loose correlation I think between what somebody majors in what their earnings potential

[00:18:50] is.

[00:18:51] I've worked with plenty of English majors and history majors on Wall Street and they've

[00:18:58] been very successful and they've done super well.

[00:19:01] I think just because you major in something doesn't mean that's going to be your whole

[00:19:05] life.

[00:19:06] I was a math major in college so I guess my earnings potential was a little bit higher.

[00:19:11] Yeah, I think that at least what I see and I've done some teaching at my alma mater St.

[00:19:16] John's University and I think this is probably consistent across most schools as well

[00:19:20] is that there's recognition that almost from the day you start going to college, you ought

[00:19:25] to be thinking about where you're going in terms of graduation.

[00:19:29] So I see the schools better connected to outside firms.

[00:19:34] There could be group projects where an outside firm works with the college on a team oriented

[00:19:41] project in which a team of students at the school is delivering some research report or

[00:19:47] some study to the outside firm.

[00:19:49] So making that connection and then making college something where again, when you're finished

[00:19:54] you've really got a strong idea as to where you're going.

[00:19:56] I think that's a pretty big part of it.

[00:19:58] So we started with debt and risk as the two main sources of financial stress and we talked

[00:20:04] about debt probably circle back on that but let's talk about risk.

[00:20:08] So part of this discussion is around owning stocks.

[00:20:12] You make the point that there is this cult like following to the idea that just own stocks

[00:20:17] forever.

[00:20:18] But why don't you lay out how you think about risk and in what way that's a source of

[00:20:22] financial stress for folks?

[00:20:24] The conventional wisdom nowadays is you put all your money in an S&P 500 index fund and

[00:20:30] you just ride out the ups and downs and you have a couple million when you retire.

[00:20:34] If index funds have a place for sure but index funds, the returns are good.

[00:20:42] The returns are very good.

[00:20:43] Most active managers can't beat them but if you invest in an index, not only do you get

[00:20:48] the returns of the index, you get the volatility of the index.

[00:20:52] So the volatility of the S&P 500 is pretty high.

[00:20:55] The market moves around 15 to 20% a year and it's the volatility that causes you stress

[00:21:01] and the purpose of volatility is to make people make stupid decisions.

[00:21:06] So if the market goes down, you're experiencing stress.

[00:21:10] You're like, well, it'll come back and you just constantly second guessing yourself.

[00:21:16] What I found is that when you get a really big bear market, we're talking like 30% or

[00:21:21] more, then people can't hang on.

[00:21:25] They can't hang on and they will liquidate their portfolio at the worst possible time.

[00:21:31] I've seen it many times in my career.

[00:21:34] But even if you could hang on, even if you had the ability to hang on, why would you put

[00:21:39] yourself through that stress when there is another solution and the solution that I

[00:21:44] proposed in the book is called the awesome portfolio.

[00:21:47] Tell us about the awesome portfolio.

[00:21:50] Well the awesome portfolio was 20% stocks, 20% bonds, 20% cash, 20% gold and 20% real estate.

[00:21:58] The interesting thing about this combination of asset classes is that it doesn't return

[00:22:03] a whole lot less than the stock market.

[00:22:06] It historically has returned 8.1% a year, but it has half the volatility of an 80-20 portfolio

[00:22:14] and the max drawdown in any given year is 12.2%.

[00:22:20] So you look at this and you're like, Gary, I can invest in this thing and it gives me

[00:22:25] about a percent to a percent and a half less than the stock market.

[00:22:28] I get half the volatility.

[00:22:30] My max drawdown is minuscule, why would you not do this?

[00:22:36] I guess the returns add up at the end, but one of the things about investing is that it

[00:22:42] doesn't really matter what you're invested in.

[00:22:44] The most important thing is that you stay invested.

[00:22:48] So you want to be in a portfolio where you can emotionally handle the ups and downs

[00:22:53] and stay invested over time.

[00:22:56] There's that old saying, timing the market versus time in the market.

[00:23:01] So staying invested, it's an interesting stat you quote on this portfolio.

[00:23:05] You said the max drawdown was 12%.

[00:23:08] Yep.

[00:23:09] I know the S&P during the GFC was, how to be close to a 50% drawdown.

[00:23:15] From the top in 2007 to the bottom in 2009, it was 57%, but in the calendar year 2008,

[00:23:23] it was 38%.

[00:23:25] So significant.

[00:23:27] Let's talk a little bit about, you sort of reference it there.

[00:23:30] You've got 20% in cash in your awesome portfolio.

[00:23:34] And one of the areas that you explore a little bit in the book is the option value of cash.

[00:23:40] So walk us through that statement and how it fits into thinking about maybe seizing on opportunities.

[00:23:46] Cash is a big pile of opportunities.

[00:23:49] You can't take advantage of opportunities unless you have cash.

[00:23:54] Just for example, the house that I'm currently living in, I'm moving in about six weeks,

[00:23:59] but the house that I'm currently living in I bought in 2015.

[00:24:02] I found the house.

[00:24:04] It had been on the market for two days and I basically just had to write a check for

[00:24:11] the down payment.

[00:24:12] I didn't have to sell stocks.

[00:24:14] I didn't have to think about taxes.

[00:24:16] I didn't have to move money around.

[00:24:17] I didn't have to take out a loan.

[00:24:19] I just had cash and wrote a check.

[00:24:22] And that is the most powerful thing in the world.

[00:24:25] There is nothing more powerful than liquid net worth, especially cash.

[00:24:29] So at sometimes in your life you're going to be on vacation and for a water day

[00:24:33] or you're going to find a condo.

[00:24:34] You're like, gosh, wouldn't it be nice if we had a vacation spot a second home

[00:24:38] and you can just write a check?

[00:24:40] Or somebody comes to you and they say,

[00:24:41] I have an investment opportunity.

[00:24:43] You can invest in my tractor business

[00:24:45] or you can invest in this hedge fund.

[00:24:47] You just write a check.

[00:24:49] You can take advantage of these opportunities if you have cash.

[00:24:53] If you don't have cash, you can't take advantage of these opportunities.

[00:24:58] I think one of the themes that you hit on a couple times in the book is maybe some fallacy

[00:25:04] that you can get rich simply by controlling your expenses.

[00:25:09] Clearly there's a thread that money is a source of stress for folks.

[00:25:13] That's why you're writing the book.

[00:25:14] But you also make the point that austerity is not the solution.

[00:25:18] You say under austerity money is not your friend but is your master.

[00:25:23] So what is the balance between not trying to save yourself to getting rich by not going

[00:25:30] to Dunkin' Donuts each day?

[00:25:32] And the reality that people have overspent, they do run large credit card balances.

[00:25:37] They're paying too much interest on that front.

[00:25:40] What's the happy medium?

[00:25:42] Well, that's really what the book is about.

[00:25:44] It's about achieving some balance in the book I talk about these people called CFs and

[00:25:49] high rollers.

[00:25:50] CFs are people who spend too little and high rollers are people who spend too much.

[00:25:55] Really the goal is to get to a point where you're just not thinking about money on a daily basis.

[00:26:01] You're not thinking about it at all.

[00:26:03] You don't worry about it.

[00:26:04] That's the place you want to get to.

[00:26:06] Some people think about money all the time.

[00:26:08] It's funny.

[00:26:09] I was talking to a buddy of mine and he's the cheapest guy I know.

[00:26:14] And he was getting some work done on his back deck and he was unhappy with the work and

[00:26:19] he wanted to refund.

[00:26:21] So he had paid with it with a credit card and he made them refund it on a debit card

[00:26:27] so he could keep the points.

[00:26:29] And I'm thinking to myself, I'm like who thinks of that?

[00:26:33] In a million years, I would not think to do that.

[00:26:36] This is somebody who thinks about money all the time.

[00:26:39] And if you think about it, if it's a $2,000 job and $2,000 in points, it really comes down

[00:26:45] 20 bucks going through all these hoops to save 20 bucks.

[00:26:50] I can't even possibly imagine it.

[00:26:52] So yes, there are some people who just think about money all the time.

[00:26:57] And from my standpoint is money stress compounds other kinds of stress.

[00:27:03] If you have other kinds of stress in your life, whether it's marriage stress or kid stress

[00:27:07] or job stress, money stress is going to make it worse.

[00:27:12] And it's totally preventable.

[00:27:15] It's completely preventable.

[00:27:16] So it's all about how you structure your life.

[00:27:19] As you watch the financial news shows, there's some interesting commercials that pop up during

[00:27:25] some of these shows and striking to me that these folks even have the money to spend

[00:27:29] on these commercials.

[00:27:31] There's one area which is your gold coins, precious metals.

[00:27:37] It typically has some version of the US's banana republic and it's dead as going out

[00:27:42] of control, which certainly could be true.

[00:27:44] There's another version that say I've gotten rich selling real estate.

[00:27:47] You should just follow this book.

[00:27:49] I can send you the book for free.

[00:27:51] These commercials are sometimes on it two in the morning, not that I've seen them.

[00:27:54] There's another version which is selling currency options and earning 3% a month.

[00:28:00] So there's a lot of this stuff out there aiming to find the individual that might be down

[00:28:05] on his or her luck.

[00:28:07] And I just curious if you have any thoughts on how it is that we can reach out to the

[00:28:12] individual who might not be an expert in finance and do more of what you're doing unless

[00:28:17] of those couple of commercials I cited.

[00:28:20] That's really the goal.

[00:28:21] I wish I knew the answer to that question.

[00:28:24] What I'm hoping is, is that people will hear about the book, they'll see it in the

[00:28:28] store, they'll look at the cover, they'll be like, how to live a stress-free financial

[00:28:32] life.

[00:28:33] Well, that sounds interesting.

[00:28:34] I want to live a stress-free financial life.

[00:28:36] So those commercials tend to appeal to people who don't understand how difficult it is

[00:28:43] to even make 4% above Fed funds in a given year.

[00:28:47] It's really, really hard.

[00:28:49] And I think I talk in the book.

[00:28:50] I can't really remember but I think I talk about the virtues of getting rich slow.

[00:28:56] You can sell currency options and make 3% a month until you get hit by the blacks one.

[00:29:02] So that's introducing a lot of volatility into your life which I don't really want.

[00:29:08] It's interesting.

[00:29:09] I'm wondering if we start with the premise that, I don't have the stats in front of me but

[00:29:13] the average 65 year old is really ill prepared for retirement financially.

[00:29:21] We just have not found a way to allocate enough savings especially with life expectancies

[00:29:27] least potentially being longer.

[00:29:29] So there's a long road you've got to have some resources built up if you're before retirement

[00:29:34] but you see where this is going in terms of having too much debt and too little savings.

[00:29:39] How should someone think about the first steps in terms of trying to get back on track with

[00:29:43] the premise that a lot of the selling of solutions tends to be not exactly suitable for

[00:29:52] a lot of individuals.

[00:29:53] In other words, it's the problem solver that's seeking to get rich in the process whether

[00:29:57] it's consolidation of credit card debt.

[00:29:59] Some of those solutions aren't really great solutions for people.

[00:30:03] How should someone think about getting back on track?

[00:30:06] It's really just hard work is what it is.

[00:30:09] For somebody who has a lot of debt the only way out of it is to pay off the debt.

[00:30:13] One thing I talk about is this idea that most people's solution to paying off debt is

[00:30:21] to cut expenses.

[00:30:23] So you're going to eat 69 cents and a soup and you're going to eat ramen noodles and

[00:30:29] you're not going to go on vacation and you're just going to save money and pay down the

[00:30:32] debt.

[00:30:33] That's the hard way to do it.

[00:30:34] The easy way to do it is to make more money.

[00:30:37] So there's a chapter in the book called The Revenue Side.

[00:30:40] This is true of a lot of people.

[00:30:43] For example, there are people who go to third tier law schools and they have $150,000 in

[00:30:49] debt and they're an attorney and they're making $40,000 a year and it's checkmate.

[00:30:54] They can't pay off the debt.

[00:30:56] Well, they can't pay off the debt if they stay working as an attorney.

[00:31:00] I mean, they can pay off the debt if they get a different job and make more money and

[00:31:05] a lot of people never think about that.

[00:31:07] So that's called The Revenue Side, which is where you're not so much focusing on expenses

[00:31:12] but you're focusing on making more money.

[00:31:14] Yeah, and I think that ties into another aspect of your writing in this particular book,

[00:31:20] which is this idea of the abundance mentality and you have this discussion on upside.

[00:31:26] Talk to us a little bit about that.

[00:31:27] Well, you and I both work on Wall Street, so we think about upside all the time.

[00:31:31] A lot of people who work on Wall Street wouldn't work there if they didn't have unlimited

[00:31:36] upside.

[00:31:37] I like to do things like writing a book, for example.

[00:31:40] No worries.

[00:31:41] Probably isn't going to sell a million copies but when I was writing it, I was like, well,

[00:31:45] it could and it's an option and had the ability to change my life.

[00:31:51] So I like to do things that give me the potential for that unlimited upside.

[00:31:56] If you're working not to denigrate teachers but if you're a teacher, if you work for

[00:32:01] the government in any capacity, you make what you make and you don't have any potential

[00:32:07] for upside unless you do things like invest in stocks or stuff like that.

[00:32:13] So getting exposure to upside is a habit of highly successful people.

[00:32:19] So there's entrepreneurs and you make the point here that entrepreneurship can make you

[00:32:24] happier.

[00:32:25] There's a certain sense of control that the mistakes are going to be all your own and

[00:32:30] you can account for them.

[00:32:31] But also as you say, you've got this distribution of potential outcomes, one path of which

[00:32:37] could be extremely, extremely attractive.

[00:32:39] Not everybody can be an entrepreneur, of course.

[00:32:42] There are teachers.

[00:32:43] Is there some mechanism for someone who's got a more traditional nine to five job to

[00:32:50] introduce this idea of upside into how they think?

[00:32:55] Are there maybe side projects or what's the recommendation for someone who is likely

[00:33:00] to remain a teacher but still really wants this concept of upside?

[00:33:05] Well, there are 24 hours in the day and you spend eight of them working at your job.

[00:33:11] You're going to spend eight of them asleep.

[00:33:12] There's still another eight hours.

[00:33:14] There's other things you can do.

[00:33:16] You can be a landlord.

[00:33:17] You can sell stuff online with Etsy or something like that.

[00:33:21] The word side hustle has a negative connotation these days.

[00:33:25] But a lot of side hustles turn into successful businesses.

[00:33:31] You're doing this thing that makes you an additional 10 or 15,000 a year but then it grows

[00:33:37] and pretty soon it doesn't make much sense for you to be even working in your job anymore

[00:33:42] and you just end up doing this full time and that's a good outcome.

[00:33:45] So when I started the daily dirt nap, it wasn't a side hustle.

[00:33:49] It was a complete career change.

[00:33:51] I had no net.

[00:33:52] If it failed, I was totally screwed but that's what you got to do.

[00:33:57] And then last area I just wanted to ask you about around the book before asking a little

[00:34:03] bit more about the MFA and writing in the book.

[00:34:05] You also talk about gaining positive exposure to luck as part of the upside discussion.

[00:34:11] Talk to us a little bit more about that.

[00:34:13] So I like to put myself in positions where I can be positively exposed to luck.

[00:34:18] And the whole reason I started working on Wall Street was because I had an informational

[00:34:23] interview on the floor of the P Coast and somebody threw a water bottle and it almost hit me

[00:34:29] in the head which resulted in me getting introduced to the head of a market making firm

[00:34:35] and that's how I got my first job on Wall Street.

[00:34:38] So you say, well, I was lucky.

[00:34:40] I almost got hit by this water bottle but I put myself in a position where something good

[00:34:45] can happen to me.

[00:34:47] And luck happens around other people.

[00:34:50] Luck will never find you in your apartment.

[00:34:53] So you have to go to conferences, you have to go to parties, you have to put yourself

[00:34:58] in a position where something good can happen to you and that always happens around other

[00:35:03] people.

[00:35:04] I really like that.

[00:35:05] I completely agree.

[00:35:07] Engaging with others in various forms.

[00:35:10] It could be conferences.

[00:35:11] It could be social events.

[00:35:13] It really does create some, as you say, positive exposure to luck.

[00:35:18] So that engagement is an end in itself but also can produce lots of optionality I think

[00:35:23] with what you're implying.

[00:35:25] So let's finish off with your foray back into a little bit of being a student.

[00:35:30] So you've pursued and succeeded in earning an MFA and writing.

[00:35:34] Tell us a little bit about the why of that and then what that program was like?

[00:35:39] Well, I was 46 years old and I went camping with my wife.

[00:35:43] This was in the early days of the pandemic and we were cooped up in the house and we're

[00:35:47] like, well, let's go camping.

[00:35:49] And it was in the summer and I went in the tent to go to sleep and I was like, oh my God,

[00:35:54] it's so hot.

[00:35:55] I can't sleep in here.

[00:35:56] So I just got out of the tent and I sat in a chair by the fire all night long and I

[00:36:01] didn't sleep.

[00:36:02] And I just thought about my future.

[00:36:04] I thought about what I was going to do.

[00:36:06] And I decided to go back and get my MFA something I had wanted to do since I was 22

[00:36:13] years old and I was going to do it at age 46.

[00:36:16] I did it at SCAD, the Spanic College of Art and Design and it was an online program.

[00:36:22] I did drive down there for my oral exams and my thesis defense but really it was the

[00:36:28] best thing I've ever done.

[00:36:30] Actually, I wasn't the oldest student.

[00:36:32] There were people that were older than me, but it was a fantastic experience and my writing

[00:36:36] got a lot better.

[00:36:38] Fantastic.

[00:36:39] Especially 25 years after you had the initial idea.

[00:36:42] So it just I think reinforces the notion that sometimes things just have to materialize

[00:36:48] on their own timeline and their own calendar, but you got it done.

[00:36:52] Well, Jared, listen, I read No worries.

[00:36:54] I really enjoyed it and I really respect authors.

[00:36:57] I think that's always an extremely heavy lift.

[00:36:59] Probably I can't even appreciate it altogether, but it's great to see you out with another

[00:37:04] book enjoying yourself and making a contribution especially on the personal finance side.

[00:37:09] Thanks for reading the book.

[00:37:10] I love the book.

[00:37:11] It's a great book.

[00:37:12] I want lots of people to hear about it and buy it.

[00:37:14] It's funny.

[00:37:15] In personal finance, we hear every once in a while, Susie Orman or Dave Ramsey will say something

[00:37:22] really stupid and everybody makes fun of them online.

[00:37:26] And yet these people continue to just dominate the discussion on personal finance.

[00:37:32] And I think it's time for another voice, a contrarian voice and the book is a great

[00:37:37] contribution.

[00:37:38] So thanks for reading in.

[00:37:40] Thanks for having me on.

[00:37:42] You've been listening to the Alpha Exchange.

[00:37:44] If you've enjoyed this show, please do tell a friend.

[00:37:47] And before we leave, I wanted to invite you to drop us some feedback.

[00:37:51] As we aim to utilize these conversations to contribute to the investment community's

[00:37:55] understanding of risk, your input is valuable and provides direction on where we should focus.

[00:38:01] Please email us at feedbackatalphaexchangepodcast.com.

[00:38:05] Thanks again and catch you next time.