In these uncertain times, the basics matter more than ever. Joe Saul-Sehy and his co-author Emily Guy Birken take the basics and make them fun in their new book Stacked: Your Super-Serious Guide to Modern Money Management.
Listen now and learn:
- Joe’s unique framework for setting goals
- The difference between budgeting and tracking expenses
- The reason it’s important to ask yourself “what if?” with your finances
Listen to the show now or read the in-depth show notes below.
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Show Notes
In these uncertain times, the basics matter more than ever. Joe Saul-Sehy and his co-author Emily Guy Birken take the basics and make them fun in their new book Stacked: Your Super-Serious Guide to Modern Money Management.
For those of you who don’t know Joe, he is the co-host of mega-hit show Stacking Benjamins, which you can find easily on your podcast platform of choice. You may remember, I had his co-host, OG, on the show in February in Episode 36, so go check that out as well.
If you haven’t heard of Stacking Benjamins, Kiplinger’s Personal Finance has called the show the “best personal finance podcast” and Fast Company has described it as striking a “great balance between fun and functional.”
I agree with these brand name assessments, and after having read Stacked myself, I can say that if you like the podcast, you will like the way Joe and Emily hit the important basics their book.
Here are some notes from our conversation…
2:38 – The Process of Writing the Book
Because the Stacking Benjamins Podcast comes out so frequently (3 days a week), it has a Tonight Show vibe. They’re always creating something new and forgetting about the last thing.
Writing a book is much more permanent. Joe feels like the key to success is in the revision, not the first draft. There’s more time to polish, and polish some more. With the podcast, eventually they have to just hit publish.
4:11 – The Importance of Shining a Light on Our Mistakes
So many people are intimidated by money, but people who are ingrained in the financial world realize that everyone makes the same mistakes. By sharing these mistakes, it helps relax money discussions and gets people more comfortable with important truths.
There’s a study called The Secret Financial Lives of Americans with many disturbing statistics, but the one that hits Joe the hardest is that over 150 million Americans report that they’ve cried about their money. 150 million people.
And it’s not just the people living paycheck to paycheck. In fact, nearly half of people making $250,000 or more a year say they’ve cried about their money. To Joe, this is evidence of a problem in which our values are going one way, and our money’s going a completely different direction.
To have the important conversations to help people with their money, Joe likes to lighten the tone. He does this by sharing mistakes (both his own and others) because it’s important for others to know that people aren’t born doing all money moves correctly.
7:50 – A Different Framework for Mapping Out Goals
People mess up their plans from the beginning. They want to know how they are doing compared to everyone else and how to find the best investments.
Before asking these questions, you need a framework for setting goals. People without goals spend too much or save too much. People with goals can better balance today with tomorrow.
Joe uses a visual framework for goal setting, recognizing that humans are visual beings. Listing out your goals in a “Goal #1, Goal #2, Goal #3” fashion doesn’t really align with how real life works. It also forces goals to compete with each other in a non-efficient manner.
You start by drawing a line across a piece of paper that represents the rest of your life. Then you draw some circles for different goals at different stages of your life (send kids to college, pay down debt, retire, etc).
Once this timeline is in place, you can ask yourself some basic questions:
- What does each goal cost?
- How much do you need to save for each goal?
- What rate of return do you need on your savings?
The nice thing about the rate of return question is that it helps you with investing FOMO. You may hear about a great investment opportunity, but if you realize that is very different than what you have associated with your goal. In that case, you may decide a speculative investment is not appropriate for your goals. And even if you decide to do it, you might do it with savings that isn’t earmarked for the goals on your timeline.
The other thing about the timeline approach is you may realize that all your goals are not obtainable. Then you are forced to think through what’s most important to you rather than realizing on the fly that you can’t meet your goals – something that leads to disappointment and, maybe, creates one of those situations where you’re crying about money.
14:59 – Budgeting vs Tracking Expenses
Budgeting is forward looking. Tracking expenses is backward looking.
Thomas Jefferson was a fantastic tracker of how he spent money, he wrote it all down, we know that he was a dumpster fire with money, because he tracked it so well. And the bad news is, even though he wrote it down, every biographer I’ve ever read of Thomas Jefferson said he owed everybody money.
And he was constantly under pressure with his creditors to do the next thing. And he was always trying to stave them off. Thomas realized he had a spending problem and had to plan a budget forward to try to get rid of that problem.
The second part, though, is what do you do about it? And it really depends on you.
17:15 – Behind the Scenes Casting Joe’s Mom for the Audiobook
I didn’t actually read the book, I listened to it. One of the really cool things about listening to the audiobook is hearing the real clips of expert interviews at the end of each chapter.
But I asked Joe about the voice of his mom, and Joe shares the story behind casting “mom” for the audiobook. Great behind-the-scenes stuff in this part of our conversation.
23:00 – What Would Happen If….?
Insurance is not exactly a sexy topic, but Joey covers it very thoroughly in the book. There was one concept in particular that really resonated with me and I think applies well beyond insurance decisions.
Rather than jumping to “What insurance should I buy?” or “How much insurance should I buy?” you should think more about “What happens if….”
What would happen if I became disabled and unable to work for three months?
If you have an emergency fund, you can self-insure for some of the most expensive risks. Emergency funds can seem boring because they don’t earn very much in the current interest rate environment, but they can save your money in a lot of ways.
Emergency funds do more than just hedge risk.
Ask yourself: What would happen if you don’t have an emergency fund? And you…
- Get a job offer that has less cash compensation but a lot of lucrative equity compensation?
- Have a substantially higher tax bill than you expected?
- Experience some sort of loss that isn’t covered by insurance?
- Get cancer? People don’t realize they are way more likely to become disabled in their working careers than they are to die, yet just about everyone has life insurance and a lot of people ignore disability coverage
- You lose your job
I personally think we should rebrand “emergency fund” to “cash reserve.”
31:36 – What If the Market Falls 20%?
A lot of people say “don’t panic” when the market goes down, but it’s okay to have feelings of fear. If you try to suppress those feelings, they are going to come out in a horrible way.
The key is setting expectations in advance. Joe believes in talking about losses in dollar terms rather than percentage terms. For example, if you tell someone with $1 million that they will undoubtedly lose $200,000 every handful of years, that sounds a lot different than telling them they will lose 20% regularly.
Stocks are your primary inflation beaters over long periods of time. But it goes back to having a strategy for your goals that isn’t entirely based on returns – there also needs to be an emphasis on whether money is available when you need it. That’s why having bonds in your portfolio along with some sort of emergency fund can be really effective.
While we talk a lot about market volatility, it’s not necessarily the biggest problem. The bigger problem is behavior. Knowing ahead of time that there will be turbulence is important to behaving when things get bumpy.
Book Recommendations
- Making Money Simple by Peter Lazaroff
- 7 Habits of Highly Effective People by Stephen Covey
- Steal Like an Artist, Austin Kleon
What does it mean to be a long-term investor?
To Joe, being a long-term investor means having courage and time.
Being a long-term investor is not what we saw in the last eight to ten years – it’s what we’re seeing right now. Being a long-term investor takes courage, so hanging in there is the key to your success.
Morgan Housel points out that most of Warren Buffett’s net worth happened after age 65. We overemphasize his brilliance in stock picking, and we underemphasize his time in the market.
Joe refers to our conversation on his show when we talked about the power of compound interest. To Joe, being a long-term investor means remembering we’re after that compounding. You can be pretty damn average if you find a way to let the money compound longer.
Connect With Joe
Resources
- Joe’s new book Stacked: Your Super-Serious Guide to Modern Money Management.
- Joe’s popular podcast: Stacking Benjamins
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Long-term investing made simple. Most people enter the markets without understanding how to grow their wealth over the long term or clearly hit their financial goals. The Long Term Investor shows you how to proactively minimize taxes, hedge against rising inflation, and ride the waves of volatility with confidence.
Hosted by the advisor, Chief Investment Officer of Plancorp, and author of “Making Money Simple,” Peter Lazaroff shares practical advice on how to make smart investment decisions your future self with thank you for. A go-to source for top media outlets like CNBC, the Wall Street Journal, and CNN Money, Peter unpacks the clear, strategic, and calculated approach he uses to decisively manage over 5.5 billion in investments for clients at Plancorp.
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