The Basics of Investing with Erin Lowry from Broke Millennial

Mindy:
Welcome to the BiggerPockets Money Podcast. How are you doing today?

Erin:
I’m doing well, except I feel like I need to tell everyone watching on video, I burned my hand this morning, so you might see an ice pack filter to the screen every now and again.

Mindy:
Oh, I’m sorry that you hurt yourself. I hope it’s a very small burn.

Erin:
Well, I forgot that my cast iron skillet handle would be hot coming out of the oven, so my whole hand wrapped around that handle. It was already out of the oven, on top of the stove, and then I later went to grab it and like, oh no, that’s so hot, so it’s fine.

Mindy:
I did that once.

Erin:
Yeah, I’ll never do it again, that’s for sure.

Mindy:
Yeah, once. Oh my goodness, Oh, okay, well that’s going to hurt for a while, spoiler alert.

Erin:
Yeah. All right.

Mindy:
Okay. So Erin, you last joined us, Erin is a repeat guest, you last joined us on our episode 24 where you talked about getting financially naked with your partner, and since that episode you have gotten married, and written another book, and been on a whirlwind tour, and done all these … Oh and gotten a new dog.

Erin:
Yup, and moved.

Mindy:
And moved, so you’ve kind of run the whole gamut.

Erin:
Yeah. Spoiler, I still don’t own my home. Everyone just cringed.

Mindy:
You live in New York City, where it really doesn’t make a lot of sense to purchase.

Erin:
It’s true.

Mindy:
But you’re back today to talk about investing.

Erin:
Yes ma’am.

Mindy:
Okay. This is actually really timely, because I received letters fairly frequently from listeners who say, “I don’t know anything about investing,” or I just got a letter last week and the guy’s like, “Can you just break it down what everything means because I don’t know.” And in fact, my daughter Daphne is attending an art camp, and her instructor, every time I pick her up, her instructor’s like, “I just got to sit down with you. I have to talk about investing. I just, you know, I don’t have any debt but I don’t invest in anything either.” So, where do you start with investing?

Erin:
Well, that’s the heavy question, and I would say the number, well two number one things, so one and two, or one A, one B, however you want to cut it. The first thing you need to do is educate yourself. Sitting down with someone and talking, listening to podcasts, reading books, however you want to consume the content, but you really cannot do anything until you understand what I would say the language is of investing. The way I like to explain it in my book, I try to open each chapter with a story, and in that particular chapter, I talk about the fact that I have this very vivid memory of sitting in algebra class in eighth grade and I had no idea what was going on, like what I was being asked to solve for, because I didn’t understand the language. So if you threw out a term like coefficient, I don’t know what that means so I cannot solve this problem for you.

Erin:
Investing is the same thing. If someone is telling you like, “Oh just throw your money in a diversified mix of index funds, have some of them be international, some domestic, small cap, large cap,” you don’t know what that means. So you have to go through the process of educating yourself before you get started. And then I would say one B, is you need to sit down with yourself as well and set financial goals, and you need to think short term, medium term and long term.

Erin:
The year ranges on those differ a little bit for people, but generally speaking we say short term would be anywhere between like a month to possibly up to three years away. Medium term, you’re looking about four to 10 years, longterm being 10 years plus. And the reason we have those huge chunks of time on them is because you’re deciding how much risk to put on your money based on when you need access to that money. So that term is time horizon, when do you need the money that you’re investing? That’s your time horizon.

Erin:
Let’s say hypothetically that my husband and I are saving for a down payment on a home in New York City. Super expensive to buy here, that’s going to be a lot of money that we need to have saved up, so let’s say that it’s going to be 10 to 15 years before we think we can have that money. Well, 10 to 15 years. If we just leave it sitting in a savings account, that’s a long time to just have it be earning up to hopefully two plus percent because it shouldn’t be sitting in a crappy savings account earning 0.01%. If you take anything away from today, please have it be, make sure your savings is earning more than 0.01% interest. But we might want to invest it, so that it’s got the odds of earning let’s say 5% conservatively, maybe even 7% or more.

Erin:
So for the first couple of years we’ve got it invested as we get closer to our goal, maybe we move it out of investments to take some risk off it and put it into savings because we’ve got that drop dead date of 10 years away. So, that’s a long way of talking through why it’s important to set your goals, because you can’t make decisions about how you’re going to invest until you have your goals written down. Now goals are going to change and fluctuate over time, and different ones are going to have priorities at different times, so it’s important to keep coming back to those and checking in at least once a year. The goal setting is a critical, critical part in investing overall.

Scott:
I got a question about, so you lump these things to either short, medium and long term, right. And the first thing we talk about is short, well, the first thing that jumps out to my mind is that in the short term, you want your cash to be at least a couple of percentage points, right?

Erin:
Yup.

Scott:
How would you go about doing that? Let’s say you’re completely new to this and you’ve got $10,000 that’s sitting and earning 0.01%. What would you do?

Erin:
Let’s say that that $10,000 is your emergency savings fund. Please do not invest your emergency savings. There are some contrary opinions on this one, but I’m taking a hard stand that that money needs to be liquid and easily accessible, so don’t invest it. Yes Mindy.

Mindy:
Where do you put it? That’s the question that I’m-

Erin:
I’m getting to it.

Mindy:
Okay, okay. Sorry. Continue.

Erin:
So you’ve got that 10 grand, and I just said to you, make sure it’s earning at least 2%. In my first book, it says 1% because you cannot update books like you can a blog posts, but now we’re up to 2%, and the where, usually internet only banks. You want to make sure they’re still FDIC insured, they are safe, they’ve got that same sort of backing, so Ally is a good example. Other people will reference Marcus by Goldman Sachs. There’s a bunch of options out there.

Erin:
Another thing that you can do to find these options is go to financial product comparison websites like a NerdWallet, a MagnifyMoney or a Bankrate, they’re going to list all these different banks. Just make sure that you’re doing your due diligence about which one is best for you, because sometimes things get ranked based on who pays the best commission. So you just want to make sure that you’re finding what is actually the best fit for you.

Scott:
Yeah, and I’ll chime in here. This show is not sponsored by Ally or Marcus, but I use Ally as my savings account, because it has a really good interest rate, and it was really easy to use. One thing to note, really, really important, and you mentioned it, FDIC insured. There’s a lot of new, at least I’ve come across personally advertisements for at least one or two ‘savings accounts’ that are not really savings accounts. They’re apps that are offering you the ability to earn three, 4% interest rates, but it’s not FDIC insured. It’s almost like an investment that’s very high risk but not … But getting you only that three or 4%. So just make sure that those words, FDIC insured, that’s how you’re protecting your emergency fund.

Erin:
It is. And to nerd out for a second on what that means. FDIC insurance means that you’re backed by the federal government. To go back in history, it came out of the Great Depression. If you’ve ever watched the movie, It’s a Wonderful Life, in that scene where there’s the run on the bank, George Bailey is saying like, “We don’t have the money here. We can’t pay you what you’re coming in and trying to take out of the bank.” Basically the FDIC was created so that that would never happen again. If a bank collapses, that is FDIC insured, the federal government guarantees your money up to, right now I believe it’s $250,000.

Erin:
Now that does not mean that you get $250,000 if your bank fails, you get however much you had in there up to $250,000. And interestingly, some people who have lots and lots of money sitting in cash will spread the love around so that they have kind of risk mitigation on that money, because if you have $2 million in there and the bank fails, you’re only guaranteed up to 250,000.

Mindy:
On that same note then, these Apps that Scott’s talking about that aren’t FDIC insured is really just an investment, you’re hoping. So, if they collapse, you get nothing.

Erin:
Correct.

Mindy:
Okay, I would, oh …

Scott:
Now, these other companies, they’ll trick you by saying that they’re SIPC, S-I-P-C insured, which is different than FDIC.

Erin:
Totally different.

Scott:
So you want to make sure that you’re … The acronyms, FDIC, just keep it simple.

Mindy:
What is SIPC? I’ve never heard of that.

Scott:
[inaudible 00:09:34] 2% more.

Erin:
That is insurance, well, insurance is kind of a loose word. You want to see that on any brokerage that you invest with, which is a good thing to get into too in this investing conversation. Anytime you’re going to invest, whether it’s an App, Robo-advisor, brokerage, what have you, you do want to see that kind of insurance, because what that means is if that brokerage fails, you don’t just like get the money out of the market in kind of the same way you’re thinking with FDIC insurance, you can do what’s known as an in kind to transfer. So you can move your money over to a different brokerage account.

Erin:
Let’s say that I had, I’m going to name an actual investment for clarity, not because I’m endorsing it. Let’s say I had $10,000 invested in the S&P 500 Index Fund at brokerage A. Brokerage A fails, I still have that money invested in the S&P 500 Index Fund, because I wasn’t invested into brokerage A that failed, I was invested into the S&P 500 Index Fund. So now, that money needs to get moved somewhere. I need a brokerage to be the ‘middleman’ if you will, for lack of a better term, to handle everything. So now I can just roll it over, kind of an in kind transfer. It’s what it’s referred to to brokerage B that is doing well and successful and not failing. But if you are invest it-

Mindy:
[inaudible 00:10:53].

Erin:
Right. If you’re in a ‘savings account’, and the money just goes away because it was an investment, because you invested in something that failed, that’s different.

Mindy:
Okay, okay.

Scott:
So I’ve got $10,000 and my big takeaway so far is my short term is to not go bankrupt, but I also want to earn two or more percent, so I open an account at one of these banks that we just talked about, one of these likely Internet only banks that are offering 2% plus interest. What’s the next thing I should be thinking about when it comes to investing?

Erin:
I also want you to be thinking about first of all, retirement. Because that is a very longterm goal for a lot of people. For some people it might be medium or short term at this point, but for a lot of us, it’s also a longterm goal, and it feels like it’s so far away, I’ll worry about it later. There’s a couple of things around retirement that I like to talk about. First of all, the language that we use is wrong. We say save for retirement, that’s a misnomer. You are investing for retirement. And I think because we say save, it does two things. One, people don’t always recognize that the money needs to actually be invested and not just sitting in cash in your 401K or your IRA.

Erin:
And I have heard horror stories both doing, before doing research for this book, and then while researching the book, of people who work at big brokerage houses saying, “I can’t tell you how many times I’ve had a client call and they’re nearing retirement and like how much money’s in my account.” And they open it up to check on it and it might be $250,000 which sounds like a lot of money, but not to retire on for the rest of your life. They were contributing for decades, but in cash. It never was actually invested, so it never was growing and compounding and getting to a million plus as anticipated. So you want to make sure that your money is actually invested, which is one of the key things.

Erin:
And two, I think that just when we say save, we’re doing people a disservice because they don’t think of themselves as investors. I think when you can reframe your thinking to, “Oh, I’m an investor, I am investing,” it’s a very empowering feeling.

Mindy:
How do you check that the money is invested? Because this, I cannot remember who I was talking to. Maybe even on the show, Scott, does this ring a bell, that they had … They thought they had invested, but it was just sitting there in cash. It was somebody that we interviewed. I cannot remember who it was. So when the market went down, they didn’t really lose anything, but then when the market went back up, they didn’t gain anything.

Erin:
They didn’t gain.

Mindy:
Because they were not invested, they had just-

Scott:
Oh I know. Yeah, we’ll have to figure out-

Mindy:
It was some military person I think.

Scott:
Yeah.

Mindy:
How do you go in and check? Because I think that’s really, really important. When you set up the account, you might just be putting money into it like you said, and it’s just cash and it’s sitting there.

Scott:
Well, let’s, let’s even back up further for that. What account are you investing? What is the mechanism by which you’re recommending that you begin investing?

Erin:
Well, it depends on your job. And for a lot of people, you probably have access to a 401K, maybe a 403B, you’ve got the more traditional option. If you’re traditionally employed, and your employer might even offer you a match. So this is where it comes into balancing and short, medium, and longterm goals. Maybe you’ve got a lot of student loans, your budget’s kind of tight and you’re feeling like, hey, this retirement thing can go on the back burner for a decade while I get the rest of this stuff sorted out. I would argue if you have a match, that’s an automatic return on your money, try to at least get the percentage that your employer is matching. Let’s say that that’s 5%, so if you put 5% in, they put 5%, you’re already at 10%. That’s a great amount that you’re already contributing to retirement.

Erin:
If 5% even in the start is too much, every six months, eke it up by half a percent or 1% so let’s say you just start with 1%, every six months you push it up by another one, until you slowly reach your goal, because it gives that kind of frog boiling in water, pardon the kind of terrible metaphor, but it’s slowly and slowly and slowly you’re not feeling a lot of pain as it’s happening until you reach your goal, which is great.

Scott:
Can we take an edit real quick?

Erin:
Yup.

Scott:
Sorry. So what I’m kind of thinking is just, we just spent five minutes on what is a savings account and how to open one up, and I think now we’re skipping to a more advanced level with this, which I think is a great discussion. It just seems like, I bet you our listeners, if they’re wondering how to open a savings account at 2%, they’re going to be wondering what a 401K even is.

Erin:
Yup. Okay. Well I can keep, so I was going to get to like target date funds and stuff within them. Because you’re asking the question too is, how do you make sure it’s not in cash?

Scott:
Yeah. I’m just thinking, how do we introduce that subject in a way that’s more like newbie friendly?

Erin:
I mean a 401K is basically a savings account for your retirement, but I hate the word savings, because you’re not saving your investing.

Scott:
Okay. Sorry, maybe I’m being stupid.

Erin:
No, I don’t think you’re being stupid. I hear what you’re saying, but I also feel like a lot of, I would say a majority of people are familiar with the term 401K because they’ve heard it at work. They just might not know how to take advantage of it, and that it means that you’re investing.

Scott:
Okay. Let’s get like 10 seconds on what a 401K is, and then why you should be contributing using a 401k rather than just-

Erin:
I’ll say or an IRA, yeah.

Scott:
Yeah, and then we can get into what that looks like.

Erin:
Okay.

Scott:
Does that work?

Erin:
Yup.

Scott:
Okay. How should somebody begin, as you say, investing for retirement?

Erin:
I would say the easiest way to start investing for retirement is one of two vehicles. The first one being a 401K, which usually you need to be traditionally employed with an employer, and they offer this as a company benefit. When you joined on that first day, you got all those mountains and mountains of paperwork, your 401K was probably buried somewhere in there. Some companies have, you automatically default investing, but that’s kind of rare, so usually you have to be the one that proactively puts part of your paycheck every single time you get paid into your 401k.

Erin:
Now here’s the trick. With a 401K, you still have to go in, sign up. So this whole process of putting in all your information where you live, your name, your social, you should set up a beneficiary, which if you die is the person that gets your money, and then you have to pick your investments.

Erin:
Now, for me, that was an incredibly overwhelming experience the first time I tried to do it. It’s really easy to fill in all your personal data, but then you get confronted with this screen, it’s like, okay, now what do you want to put your money into? With a huge list of terms that I didn’t understand. So I did what most people do and I closed the browser, because I just felt very overwhelmed.

Erin:
What my recommendation would be for people now, if you reach that point where you now have to pick your investments, and you’re feeling really overwhelmed about it, one of the easiest things to start with is called a target date fund. Sometimes that’s known as a lifecycle fund, sometimes it’s called an all in one fund. All the same term for basically the premise is, it’s a mutual fund that’s tied to approximately five years within a retirement year.

Erin:
Let me back that part up. Let’s say I’m going to retire in 2053 well, there’s probably not target date 2053 ,it’s either target date, 2050 or target date 2055. Let’s say that I pick target date fund 2055. What that’s going to do, is it’s going to automatically put me in a portfolio, so my collection of investments that are a bit more aggressive in the beginning as I age, it’s going to be a little bit more moderate. And as I get close to retirement, it becomes more conservative to make sure that if something happens in the market, I’m not going to lose all of my money right before retirement. It’s a way that this automatically happens.

Erin:
Now there are downsides of the target date fund. It’s not a magic bullet trick. One, it’s more expensive usually than if you do it yourself and build your own portfolio because there are higher fees. Fees are something we should come back to. It’s one of the most important things to understand in investing, because every dollar that you spend in fees is a dollar less that’s compounding for future growth for you. So one, target date funds have higher fees.

Erin:
Two, they’re kind of a one size fits all solution to a problem that should be custom tailored to you, and your goals, and what you want. So you’re not being invested in a way that completely aligns with your goals, it’s kind of a, well, based on your age and your supposed risk tolerance, this is probably okay.

Erin:
Now the reason I recommend them for people who are in this, I’m just starting out, I’m just trying to figure everything out situation, is it solves for the problem of I’m putting money into my 401K, but it’s now just sitting in cash because I didn’t actually invest it. So your money is actually invested, it’s an easy way to just make a decision, and then as you learn more about investing, perhaps you hire somebody to help you, whatever it is, you can always go back in and reconfigure your portfolio, and take it out of the target date fund and build it to something that’s more custom to you. There’s no rule that says, once you’re in a target date fund, you’re locked in here for life. So it’s a good way to get started. You can always go in and play around.

Erin:
And I also would like to recommend for all of the listeners who are not traditionally employed, myself included, you have to look out for yourself. So, you need to open an IRA on your own behalf. You could do a traditional IRA, you could do a Roth IRA. If you think you can put more than $6,000 a year in, you could do a SEP IRA, which is for self-employed people. You can put a heck of a lot more money in there depending on how much you earn in a year. Those are things that again, target date funds are also offered in there. If you’re feeling overwhelmed about what to pick in the beginning, just go with that, and then as you get more educated, you can go in and retool in the future.

Scott:
Why am I investing in 401K or IRA, as opposed to just another regular account?

Erin:
Just saving or taxable investing?

Scott:
A taxable account, in our language, yeah.

Erin:
Yeah, so, and for everyone I clarified that question, then you might be like, what the heck does that mean? So there’s two different ways to think about investing. There’s taxable and nontaxable accounts. So these retirement accounts, a 401K, an IRA, whether it’s Roth or not, there is a tax advantage of doing that. Now, Roth and traditional, I can get into a second about what the differences are between those, but regardless, your money is getting to now grow in there, tax deferred or tax free, depending on if it’s Roth or traditional, which is a huge advantage for you. And then when you take the money out in the future, if it’s a Roth, you’ve already paid taxes, so your money is getting taken out tax free. But if it’s a traditional, you deferred paying taxes and then you’re going to pay taxes at whatever your tax bracket is in retirement when you take the money out.

Erin:
It doesn’t really matter at the end of the day if you go Roth or traditional in the sense that I just want you to be investing for retirement. So either way it’s a win, whether you’re going Roth, whether you’re going traditional. Generally the logic is, if you’re younger, you want to go Roth because your tax bracket right now when you’re young and not making as much, is probably going to be lower than what it will be in the future when you retire. That’s the general logic. But the reason that you really want to be focused on these retirement accounts first is one, you want to be preparing your future self, and two, you get these tax advantages.

Erin:
Now, if you’re investing in, let’s say it’s you’re using a micro investing app or you opened up a Robo-advisor and you’re just investing in a regular index fund or a mutual fund, or you’re doing individual stock picking, heaven help you, or whatever it is, you can sell that at any time, you’re just going to have to pay taxes on it. So that’s the difference between money that’s being put into retirement funds are tied up generally until 59 and a half. There are some loopholes, I don’t like to get into them, because I don’t like people thinking they can take their money out. And then when you’re looking at medium term goals, you want to be doing taxable investing because then you can sell it at any time. All you have to do is pay tax, but there won’t be a penalty. If you take money out of your retirement accounts early, there’s a penalty. Usually you have to pay tax plus 10% as the penalty.

Mindy:
I’m going to say, we talked to the Mad Fientist way back on episode 18 of the money show, and he gets into the how to take it out early, which is like you said, it’s an advanced topic. If you are not yet investing, don’t worry about taking it out early, just start investing. You also talked about fees, and you said you’d get back to fees. Why are fees like, what’s a fee and who’s charging them? And why high fees bad? That’s a dumb question because you always want to pay as little as possible for everything, I mean, I do, but you know. Okay, so there’s that terrible question.

Erin:
There’s so many ways to approach fees, because there are so many different types of fees. I have an entire chapter of my book dedicated to this conversation about fees. And I would say the first fee that I really want you to pay attention to is called the expense ratio. That is how much money you are paying for a particular investment. Different brokerages are going to have different expense ratios on different funds, even if it’s the exact same fund.

Erin:
So to refer back to something I already mentioned, the S&P 500 Index fund. Brokerage A might have it as an expense ratio of 0.05%. Brokerage B might have it at 0.1%. So that might not sound like a huge different 0.06% difference, but that can actually add up to a lot of money over time. So the thing too, to make sure that you’re evaluating with fees, so expense ratios are the fees that are applied to funds. Typically they’re applied because they’re covering things like administrative costs, operational costs of a fund. You’re always going to be paying that kind of a fee on a fund, and it’s okay. These are not non for profit organizations. They need to make money, they need to cover costs, but you still want to find the cheapest option for you, but you also want quality service.

Erin:
So that’s the other thing that comes in here, is you need to evaluate if you’re paying a higher fee. For instance, if you go the Robo-advisor route as opposed to a do it yourself investor route, you’re going to pay a little bit more, because you’re also probably going to pay an overall fee to the Robo-advisor in addition to some of these expense ratio fees. So maybe it costs 1% a year of your total portfolio to be putting your money with that Robo-advisor. But maybe you are finding a ton of value in that, because maybe you are not someone who’s going to go in on a regular basis and rebalance to make sure that everything stays aligned with your goals.

Erin:
Rebalancing is when, let’s say for example that you have decided that your investment portfolio should be at what’s called an 80-20 split. 80% of your investments are in stocks, you’re being aggressive. 20% of it is being in bonds to have a little bit of a conservative lien. And you decide that that is the asset allocation that you need for your risk tolerance. But then, your stocks do really, really well this year, and it’s at a 90-10 just because of how well your stocks performed. Well, technically you should sell off 10% of your stocks to buy 10% more bonds, to even yourself back out to this 80-20 split.

Erin:
But a lot of people don’t like to get in there and retool and reconfigure that themselves. It kind of takes some work, so a Robo-advisor could automatically do that for you. Or they could be looking out for you in terms of taxes. They might be trying to tax optimize your portfolio in the best possible way. This concept called tax loss harvesting, which I asked so many different people when I was writing this book to explain that concept to me because I think that it is ridiculously difficult to understand in layman’s terms. That basically suffice to say they’re just trying to tax optimize your portfolio.

Erin:
These kinds of things, if you’re a do it yourself investor, you might not want to actually do that yourself. And hiring a Robo-advisor might be a way that that gets handled for you, but you might not have a ton of money to go out and hire a human advisor, and a human advisor might require something like half a million dollars under assets in order for you to even knock on the door. Not always the case, there are actually a lot more options for us now, but traditionally used to have to have a lot of money to have a human advisor pay attention to you.

Erin:
Now they usually charge something called AUM, assets under management, and usually that means that they get 2% typically sometimes higher or lower, 2% of your portfolio, however much money you have with them is what they earn every year. That’s the fee that you pay them. But you might be seeing value in that, maybe you like the face to face conversation, maybe you feel like they’re performing really well, whatever it is, as long as that fee is bringing true value to you, I’m not going to judge the fees that you’re paying. But just keep in mind that means less money that’s growing for future you.

Erin:
And then there’s also tons of other fees that can get riddled on investments. There can be fees when you buy, fees when you sell. Mutual funds for instance, can have loaded fees. So front end load, back end load, depends on what you get charged, when you buy, when you sell. So you want to actually go through and see all of the fees that you’re getting charged. And I know I’m throwing a lot of terms around, it’s all outlined in my book. It’s hard to define every single thing as you’re saying it, but these are just terms that you’re going to hear as you’re investing.

Erin:
But I would say expense ratio is the number one thing that I want you to learn in the beginning and the importance of what that means. And funnily enough, sometimes you’ll hear it referred to as a basis point, which also happens when we’re talking mortgages, but expense ratio is the big term to know.

Scott:
Yeah. One of the things that I like to think about when I’m thinking around fees is, the lowest fees I’ve ever seen or around them, are four a Vanguard ETFs, right? Vanguard mutual funds or ETFs, right, and the index funds in particular. So when you talk about the longterm expected return of the Stock Index Fund investment, right, the stock market on average, you’re thinking eight to 10%. And a Vanguard fee might be, like you said, mentioned 0.06%, so that’s I think what I pay on one of my fees in there. The fees all in in these other types of funds, like mutual funds, target date funds, they can be upwards of one and a half, two or two and a half, 3%, which can absolutely destroy your returns over a 30-40 year time horizon when you’re looking to retire.

Scott:
And that’s what you’re looking out for here is, hey, where you can, how do you get towards those lower fees? And frankly, in my opinion, this entire industry within the 401k segment is just a racket that is just leaching massive amounts of money from middle-class America, because like you, they don’t know all of this stuff around fees and they just pick a fund with high fees and put their money in it and let these guys suck it out of there ever a very long period of time.

Mindy:
Can I tell you that I was paying 2.5% before I looked at it, and I was like, I can’t believe how much money I have, wasted isn’t the right word, but I felt like it was a waste. It’s a pretty close to the right word, because I mean some index funds, what are some of the index ones? Like 0.14?

Erin:
0.04, yeah.

Mindy:
0.04, and here’s me paying 2.5, I mean that’s … And obviously once I figured out where, you know, that I was paying this much, we made a big change quickly.

Erin:
And I think to further contextualize for listeners, when we say a lot of money, this could be tens of thousands, to hundreds of thousands of dollars over your career as an investor that you’re paying in fees/losing out on in terms of compound interest. It’s not a few grand, it’s a lot of money.

Mindy:
Yeah. We estimated it would be something like 250, it sounds so weird, $250,000 over the course of our investments, which is a whole lot more than 2.5%. What’s 2.5%, that’s nothing. No, but you know what’s nothing, 0.04, I like that better.

Erin:
And you know what I think too, to make this for people who maybe aren’t investing yet but have a kind of debt, I think this is a great way to reframe it. Compound interest is either your greatest asset or your worst enemy, and we’re talking right now about how compound interest can be working for you, but if people are taking slowly some of the money out, it loses some of its power. But if you’ve ever tried to pay off a student loan or a credit card, and you’ve got that feeling of, I’m throwing so much money at this thing every single month and it doesn’t feel like the principal balance is going down, it’s just kind of sitting there or going down very incrementally compared to how much money I’m putting at it. That’s because compound interest is working against you in this situation. Because it just feels like this money keeps growing and growing and growing, but you’re not happy about it because you’re in debt.

Erin:
Now when you’re an investor, you’re harnessing the power of compound interest for good and to be on your side, so this money can just keep growing and growing and growing seemingly on its own, or with you just putting in a little bit of money every single month.

Scott:
Okay, so let’s recap this. Suppose I just joined a company within the last year and I haven’t really contributed to a 401K or whatever. I’m offered this program by the company and I’m set with all of these investing options, and the option to contribute in general, right. To recap what you were saying, you would recommend, you take the match and then put it either in a target date fund, which has the round the date when you turn 65 whenever you want to retire, or a low fee index fund.

Scott:
And by the way, just as a heads up, you’re going to be bummed you listeners, when you look at this, because even the index funds are not going to have the 0.04% that we recommended. That’s only going to be accessible to you in your after tax non 401K investing account. Even Vanguard, these guys are going to have really high fees within the 401K itself.

Erin:
But hopefully you’re getting a match, which is part of the reason that you’re compensating here because then you can be putting, let’s say you’re putting 5% in, but you’re getting 5% so 10% is going in.

Scott:
That’s right.

Erin:
And then when you leave your company, because let’s be honest, at some point, most people are doing job hopping, you could move that into an IRA at say a Vanguard and then you could get access to those nice low fees, but you’ve gotten that extra 5% bump from having your employer match.

Scott:
We intend to stay forever at BiggerPockets.

Erin:
Hey, that’s fine, but your listeners are not all employees of BiggerPockets, and I’m betting some of them are hopping around.

Scott:
That’s right.

Mindy:
Oh, but BiggerPockets is hiring. If you are a woody on rails programmer. No, BiggerPockets is always hiring, we’ve got a lot of options available at biggerpockets.com/jobs that’s the end of that commercial. So back on track, back to investing, you just mentioned debt in the reverse compound interest actually harming you. What do you do when you have your student loan debt, and you have credit card debt, and you have other things? How do you start investing? I mean I personally would say still if you’re getting a match, do that and then pay off before you start investing afterwards. But what do you say? It’s not my show it’s yours today.

Erin:
So generally, what you just said is correct. If you can get a match, the advice generally is to take the match. So again, just going back to 5%, if you have a 5% match, try to put 5% in and if you can’t do the full 5%, put something in because it gets matched. But you also want to check the parameters of your company match, and also, remind me to come back to the term vesting, this is a very important thing to understand when it comes to retirement. So pin in that.

Erin:
Let’s talk debt. Again, going to plug my book, I have an entire chapter dedicated to student loans and investing, because it was the number one question I was getting asked when I was writing this book. So should I be invested when I have student loans? Credit card debt is different than student loans generally, because the interest rate is usually significantly higher. Interest rate on credit cards, you’re looking at anywhere between 15 to 30%. You are not seeing those kinds of returns, especially on average in the stock market, so it makes more sense for you to focus your money on aggressively paying off your credit card debt.

Erin:
In fact, it’s one of the things on the financial oxygen mask that I outlined early on in the book. You need to have your high interest debt gone before you start thinking about investing. Again, caveat being retirement. If you can be investing in getting a company match, go for it. There are shades of gray, some people prefer to put a pin in that and to be focusing all of their money on their credit card debt. It’s your choice. I personally like to do a little bit of still getting that matched, still putting that money away early. But everybody has different debt and risk tolerances.

Erin:
But when it comes to student loans, it’s actually an interesting shades of gray conversation because of the interest rates. So I asked every single expert I interviewed for this book, should you be investing while you’re paying off student loan debt? And almost unanimously they came back with a single number and that number was 5%. And what that means is if you have an interest rate of 5% or higher on your student loans, it probably makes more sense for you to invest for retirement, get that match, but otherwise aggressively focus on paying off those student loans. And the reason is, are you on average as an investor during that period going to outperform 5% in the market? There’s not a guarantee that you are, so the better return is just to pay off the debt.

Erin:
But if you have really low interest rate student loans, maybe you refinanced, maybe you’ve got some sort of great deal and it’s sitting at two or 3%, well the math might work out in your favor. Maybe you can in tandem be putting some money into tactical investment accounts while paying off your student loan debt. But also pretty much everybody said, no one really regrets paying off their student loans.

Erin:
It really does come down to risk and debt tolerance. Does it keep you up at night to have the student loan debt? Is this weighing on your mind constantly? I still would argue you should get the match on your 401K, and if you’re self employed, you should be putting at least some money into an IRA just to get the ball rolling there. But other than that, just crush the debt and then you can refocus.

Scott:
Well, but yeah, I think that concept of the spread, of the interest rate and then your expected return from other investments is the critical thing here, right. So if your interest rate is, like you said, is 5% and you have $10,000, you’re going to pay $500 in interest. But if you could get 7% in the market, you might make 700 bucks, which gives you, nets your advanced $200. But note but know that we’re only talking very small amounts of money here on that kind of spread. And it really seems like the story here is cashflow.

Scott:
How do you just save as much as you possibly can and generate cash? Because if your time horizon is less than five, 10 years, less than this medium term, less than that long term, and from the investment perspective, it just kind of says like, Hey, this choice is really, it’s something that people fret over a lot, but you can really just kind of go either way it sounds like at that 5% mark, right?

Erin:
Yeah, or under. And I think for a lot of people it really does come down to the tolerance question, that risk and debt tolerance. And one of my favorite quotes from the whole book and to kind of all investing generally, not just about this question was from Jill Schlesinger who is the host of Jill On Money, she talks about how, you know, if investing just this whole conversation has stressed you out, if you are still feeling super overwhelmed and you want to head in the sand, not think about investing. She says, you know, and I’m paraphrasing, but you don’t have to invest if you don’t want to, but you’re going to have to save a whole heck of a lot more money to reach the same results. And she also says when you invest your money to some of the heavy lifting for you.

Erin:
And I really love that concept, like you are putting your money to work when you are putting it in investments. And one thing I always recommend people do is actually do the math. If you want, let’s say $1 million is your goal, how many years until you want to hit that goal and if you just save it, how much are you having to put away every single month, compared to if you invest it and you’re earning, let’s say conservatively a five or 6% return in the market, how long is it going to take? There is a great compound interest calculator from the SEC has it, it’s investor.gov, there’s a compound interest calculator there, so if you want some help doing that math, that’s a great tool to go use.

Erin:
But I highly recommend you actually play around with those numbers at some point because it is a very startling thing to be like, Oh, if I start young and just put a little bit of money in every month and then increase it a little bit over time as I pay off debt and get raises, I’m going to be able to achieve this so much faster than the thousands and thousands of dollars every month I would have to be trying to save, if I was trying to save for the same thing.

Mindy:
I’m glad you brought up the compound interest calculator because the curve on that calculator starts off pretty small. It’s like flat, flat, and then all of a sudden it’s this like hockey stick, unbelievable. And if you have a hard time wrapping your mind around compound interest, because it isn’t the easiest concept in the world to grasp. Having that visual on the calculator is just stunning. I mean, you don’t have to put away $10,000 a month to be a millionaire at retirement age. You can put away a very small amount. You start small, you go a little bit more. Even if you just start small and stay small, it still grows at this unbelievable rate.

Mindy:
And, I do encourage everybody who’s listening, who’s on the fence about investing or Oh, I’m overwhelmed by the possibilities, go to investor.gov, we will have the link in the show notes, which is biggerpockets.com/moneyshow81. Go there and just plug in a few numbers. Make it up. You can do, Oh, I can afford $100 a month. Great. Throw that in there, and see what you get and then double it, throw in $200 and see what you get there, and it will be astonishing how much more you have in 10 years, 30 years just by doubling a small amount now.

Erin:
And I’d also challenge when you’re playing around in there, see the difference in the timelines. So if you start with just a hundred dollars a month for 40 years, compared to if you wait 10 years and do $300 a month, you don’t always catch up. A lot of times you don’t catch up. So even trying to double down your efforts, but waiting a decade to do it or longer does not mean you’re going to be able to catch up.

Mindy:
Yeah. I’ve said this before, I read this study that said, if you put in let’s say $1,000 a month, every year from the time you’re 22 to the time you’re 30 and then you don’t invest in another dime forever, you will have more money at the age of 65, than if you put in $2,000 a month from the age of 30 to the age of 65. That’s how powerful compound interest is. And you know, play with that number in the calculator and see what happens. It’s just astonishing. Now, did I follow my own advice? No, but I didn’t have a podcast to listen to when I was 22.

Scott:
But I’ll say like, one thing that’s, the emotions that I’m picking up right now is like, the three of us, we feel we understand this concept, right, we’ve studied this concept, we get it. We feel so comfortable with money in general and investing, right. We’re not like, Oh, are we going to run out of money next week, or are we going to run out of money next month? Are we not going to be able to save for retirement? No. Our plan, because we just bothered to research this, now I said we probably put it collectively, way more research than the average person, this is what we do for a living, we love talking about this, you can tell.

Scott:
But, the fact that we’ve researched this, the fact that I knew this before I started talking about it in blog posts and all that, made it so that there was no question. It was not even a likelihood that I’m going to run out of money. It’s almost being on the other side of that, being comfortable in an easy with this. Is just understanding of investing. And you used the phrase earlier, putting your head in the sand like an ostrich or whatever, you just can’t do that. It’s if you’re listening to this show, why would you walk away from today’s show and not just dive in, spend a couple of months reading some books. I think they’re exciting, you might think they’re boring, about investing in money management and then just get in complete control of your destiny over the longterm at least.

Erin:
I also think it’s the greatest gift that you can really give yourself. To me, the stock market especially is kind of a wealth equalizer, particularly today because technology has afforded a lot of us to have easy access to it. You don’t have to have thousands, or tens of thousands of dollars anymore to even just get started. There are so many avenues in, but the best way to take advantage of it is to start as early as you possibly can. So that is always, no matter your age, because I also don’t want people to feel demoralized. If you’re a 40, 45 and you haven’t started yet, and I don’t want you to feel like, Oh, what’s the point? Oh, there’s still a huge point.

Erin:
But I also try to get to people as young as possible and be like, now is the time, and I understand there are so many competing financial goals. And that’s part of the reason I highly recommend if all you can start with is 1% and that might feel like ridiculous. It might feel like this is $15, $20 every paycheck, what is the point of that? I live in New York City, you cannot even buy a craft cocktail for like $15 anymore. It’s ridiculous. So I understand feeling like that is pointless. I promise you it adds up over time.

Erin:
And the other big thing, and this is true of really all things with personal finance/life, it’s building the habit. The earlier that you can make this just a consistent part of your monthly or biweekly, whenever you get paid ritual, the better off you are, because then as you pay off debt, as you start to earn more, as things in your life change, you still have this habit of putting this money away. Because I will say the other big fallacy that happens for people is they think, “Oh, I’m 25, I’ve got other things to figure out. When I’m 35 I’ll be making a lot more. Maybe my student loans will be gone or largely gone. I’ll just be in a better place. Overall, that’s when I’ll start focusing on retirement.”

Erin:
Life tends to get more, not less complicated. So just because you’re earning more and the debt might be paid down, maybe you bought a house, maybe you started a family. There’s now different competing things for your financial goals, so it doesn’t necessarily mean there’s going to be all this discretionary income with which you can start trying to play catch up.

Mindy:
Erin, what do you think about giving listeners a few things to do? Like, okay, let’s say you’re still, you know, you’re a little overwhelmed, you’re listening to this, you’re excited about investing now, that investor.gov thing is unbelievable. Like holy cow, that’s just so astonishing to see the those numbers. I want to tell people to go there and play with some numbers. Figure out if you are invested in anything in your company 401K, see what it is you’re invested in. Look at the fees and see if there’s a lower cost option that gives you the same basic results. And go to like a Vanguard or Fidelity and open up an account. I think you can open them with like $100, right?

Erin:
It depends on which fund you’re interested in. So sometimes, unfortunately, still for a few of the funds, this is a bit more true for Vanguard than Fidelity, Fidelity has a fewer low or no like $0 to open funds. Some of the Vanguard ones still require about $3,000 or $1,000 depending, so you might need to save up a little bit more if you want to open that particular fund. But you could go to Fidelity in the interim if they have a different option or you can just use them entirely.

Erin:
The other thing to consider, because people always have these questions, are the micro investing apps. So what about the guys that are saying just $5 a month you can put money in and it’s invested. My rule of thumb with micro investing apps is that the fee on those sounds super cheap. It’s usually a dollar to $3 depending on what you’re using it for. And I don’t know about where everyone else lives, who has to go to a laundromat to do laundry, but I can’t even do a load of laundry for a dollar. So the idea of investing for a dollar sounds like a great deal. But if you’re only putting $5 or rounding up your spare change, and that’s the investing you’re doing, that dollar a month is eating away all of your returns.

Erin:
So my rule of thumb is try to put at least $25, preferably $50 a month into those accounts if that’s what you’re using. I also don’t see those as your longterm overall investing strategy. It’s a good way to get started. A lot of them have great educational components. They talk about different language. They can help you learn more, but as you start to amass more and more wealth or have more money, I would look at some of the more traditional brokerages like a Fidelity, like a Vanguard, and maybe you want a Robo-advisor if you want a little bit more hand holding, that’s also okay too.

Mindy:
Okay. Sorry, I got to take notes sometimes. Okay, Scott, do you have anything else you want to ask before we get to the famous four?

Scott:
Oh no. I thought you just had several-

Erin:
I do have, yeah. I have other-

Scott:
[inaudible 00:49:49] Mindy.

Erin:
I have other, so things like just get started like hey, you feel very overwhelmed. Here’s what to do right now.

Mindy:
Yes, okay. So I actually wanted to keep in that, I’m like, Oh, let’s give listeners a few things to do, and I rattled them off. And then Erin had a really great comment so we’ll just keep all that part in.

Scott:
Okay.

Mindy:
I’ll make notes for Dave.

Erin:
In addition, Mindy, to what you said with going to investor.gov, checking in on what your retirement plan option is at work, and if you don’t have one at work, you need to look into opening up an IRA. I will just give a quick what I do personally to make sure I’m always putting aside money for retirement as a self employed person. Every single time I get paid, 45% of that paycheck goes into a separate savings account that is for my quarterly estimated taxes. 45% sounds super high, part of it is because one, I live in a state and city of New York, so I have to pay city, state and federal taxes, so I always want to be prepared for that tax bill. And then whatever is left over, I dump into my SEP IRA. So that is a way that I am forced saving for retirement, let me rephrase that, investing for retirement. I’m putting money aside so I always have some money to put into my accounts as a self employed person.

Erin:
So long winded way of saying make sure that you have an option for retirement. And I mentioned a lot earlier, the idea of vesting. This is another thing I want you to look into if you have access to an employer matched 401K. Vesting is the point in time that you get to walk away with your employer contributions, because sometimes they’re a little bit sneaky and it’s a way to try to retain you as an employee. If you leave tomorrow, it doesn’t mean that you get to walk away with everything that your employer contributed. Remember you always get to keep what you put into your 401K. That’s yours, that’s your money.

Erin:
But your employer match could be on one of three different types of vesting schedules. The first being immediate, which is great. If you start on February 1st and leave on March 31st you can still take the money that they put into your account. The next one is called graded, which means that every year that you stay, you get a certain percentage. Usually it starts at either like 0% after year one, or 20% then 40, 60, 80, you get the point, till you reach 100. Often around year five or six. So if you leave in year three, maybe you only get to walk away with 40% or 60% of your employer contributions. So if you’re on year four, and you’re flirting with the idea of leaving, and next year your 401K vests 100%, that might be enough to keep you there for another year.

Erin:
And then finally is cliff, which is the worst one. That means that for usually five years, if you leave, you get nothing, and then at the end of year five, if vest 100% so anytime you leave after that, you get 100% of your employer contributions. It is important for you to understand when your 401K vests, and that’s one of the early things that I would check if I were you.

Mindy:
Yeah, that’s a great thing. And you just check in with your HR rep.

Erin:
You can. It’s also usually in the paperwork if you can go back and find that or if you log into your portal, either like your benefits portal or maybe even the 401K portal itself, and if you look up the term vesting or like control F4, sometimes there’s a little side bar somewhere there, but HR can definitely help you answer that question.

Scott:
Yeah. And I think that that should be a component of your thinking about how you are going to … How much you’re going to contribute, right. Because we just said take the match, right. That’s kind of just the advice that’s just thrown out there. But if you’re going to leave in a year, then why are you, maybe … And you have a lot of debt at a high interest rate, then maybe that changes the equation because none of that match is going to be vested.

Erin:
Or it makes you want to put it into an IRA instead of that 401K, because the fees are lower and that match wouldn’t really have made a difference compared to the fees. So listen, anytime someone throws out generic personal finance advice, there’s always shades of gray. Let me tell you what, so it is always something to keep in mind, but the vesting thing is an incredibly important thing to understand with your overall financial picture.

Mindy:
Yeah. You now what, that’s not something I hear talked about a lot, and I’ve seen the tiered like 20, 40, 60, 80, 100 option most frequently. I’ve never worked at a cliff and I’m really glad that I’ve never worked at a cliff because that would stink, to be putting all that money in and watching it grow. Because you watch it grow with your employer’s contribution too, and then you pull it, you know, you leave and you’re like, why do I only have half? So, okay.

Mindy:
Okay, Erin, what is the most important thing you want people to take away from this episode about investing?

Erin:
I would say it’s just to get started, and when I say get started, I don’t mean go open a brokerage account today and just shove money in. I really do mean get started in wherever you are in your process, and for a lot of folks that probably means just get started learning more and educating yourself, and starting to feel confident because I was really serious early when I said, I think it’s the one of the greatest gifts, especially financially that you can give yourself, is to be an investor and understand at least the basics. You really don’t have to know all of the nitty gritty, all of the complicated stuff, you can keep it pretty simple. But you do have to have a basic understanding in order to just feel confident in yourself and you are completely capable of doing this.

Mindy:
That is a really good ending statement. You are completely capable of doing this. Erin believes in you and so do I. Okay, now it’s time for the famous four questions, these are the same four questions in one command that we ask of all of our guests. Erin, are you ready?

Erin:
I am.

Mindy:
What is your favorite finance book?

Erin:
I hate this question because it’s so hard, because there are so many, but one that I don’t think ever gets referenced, which is why I like to throw it out is called the Thin Green Line by Paul Sullivan, and it is not your traditional finance book in the sense of like telling you all the nitty gritty about how to do things. It really talks about how the wealthy get and stay wealthy from a journalist perspective. And he is in New York Times reporter, so he does a lot of going and sitting in on meetings and talking to people and it’s kind of this undercover, very psychological look at the wealthy, and I just found it fascinating.

Scott:
I’ve not heard that one, I’ll have to check it out.

Mindy:
Yeah, I don’t think anybody’s referenced that before.

Erin:
That’s why I like to use it. No one does.

Scott:
All right. What was your biggest money mistake?

Erin:
Well, since we’re talking about investing, I would say it was waiting too long to start investing. Now I’m 30 so I get that that still feels like, okay, you still started fairly young, but I could have started earlier and when you get this entrenched with learning about it and studying it and doing the research and you realize the tens of thousands to possibly hundreds of thousands dollars difference by not starting five years earlier when I had taxable income, it’s a little bit painful.

Erin:
Plus fun family fact, my sister who likes to call herself the real broke millennial, who is not as money inclined as I am these days, grew up in the same house, very different relationships to money. She actually invested in high school in China Mobile, we were living in Shanghai, China at the time, because my dad was like, “You guys should start investing.” So she actually did the research and invested and I was like, “No, I’m just going to leave it in a savings account, that feels like the better play.” It was not. So she might actually be some sort of investing savant even though right now she’s like, “No, I’m going to claim the title of the real broke millennial.”

Scott:
I love it. The opportunity cost I think is, you know, so many times we hear, Oh I bought a fancy car or to get through my student loan debts, but the opportunity cost of not investing is hundreds or thousands or millions of dollars over time, and I think it’s just a much, it’s a very sophisticated mistake.

Erin:
Yeah. I wish I had something sexier to tell people. I mean like everyone, I’ve bought things so like you know the cliché of I’m going to fit into this dress so I’m going to buy it and it’ll encourage me to fit into a kind of bananas BS, but listen, the real one, the big expensive mistake was not starting investing as soon as I could have.

Scott:
I have the same dress problem.

Erin:
I feel like everyone buys some sort of aspirational piece of, if it’s a clothing, if it’s an accessory, if it’s like I’m going to be this person, if I buy this thing, we all make that mistake at some point.

Mindy:
Yeah, I only made that mistake once, Ha Ha Ha. I don’t continually make that mistake over and over again. Okay. Erin, what is your best piece of advice for people who are just starting out? And we kind of just said that, this whole hour, your best piece of advice.

Erin:
Yeah. But actually, I would say if you’re totally starting out just at zero with finances, the number one thing you need to know is your cash flow. And you have to face your numbers. I think that’s the first thing that a lot of people like to avoid for as long as possible because especially when we’re talking student loans, you don’t necessarily want to tally up the total result. You don’t want to necessarily know the exact interest rate, the exact principle balance that’s due, all of that. I want you to know the nitty gritty of everything, exactly how much money you have, exactly how much is coming in each month and what all of your bills are and your debts and the interest rates on those.

Scott:
All right. What is your favorite joke to tell at parties?

Erin:
So I am more of a, if you couldn’t tell already, storyteller, narrative type of joke teller, so I feel like I just tell situational jokes as opposed to like, here’s a quippy thing that I heard one time. I would say my current favorite, so I hope my in-laws don’t listen to this podcast, but one of my current favorite scenarios was, my husband and I live in New York City. My mother-in-law, I think has always secretly wanted to live in New York City, and they live in upstate New York, and by that I mean like western New York, real upstate New York, not like Yonkers. And she was talking one night about like, where would she and/or her husband go if and when like certain things shake out as they age.

Erin:
So we were having a very serious conversation, and in the midst of this serious conversation, there’s three children. I’m married to the middle, my husband is the middle child and he is such a mama’s boy, but in a very good way, like they have a very good relationship. I have a very good relationship with my mother-in-law. And I said, “You know, I think that, if Scott were to pass early and maybe you would just move to New York to be near us and we’d get you a little apartment nearby, probably not the same building, but close.”

Erin:
And she goes, “Oh, I’d want to live separately, of course.”

Erin:
And then she starts going down this path of this like idealized, Oh, I could go to the park and I could take the grandchildren to this museum and that museum and she just like living her best life in her head for about three minutes until my father-in-law goes, “You know I’m dead in this situation, right.” And it was so funny, this moment of her being like, “Oh, I get to live this wonderful life,” and I’m like, wait a second. It’s coming out of a very terrible scenario.

Scott:
Nice.

Mindy:
I can picture that whole conversation. That’s hilarious.

Erin:
That was great. Oh, that’s great.

Mindy:
Huh. Okay, Erin, tell us where people can find out more about you.

Erin:
Well, Instagram @brokemillennialblog, Twitter @brokemillennial. My website is brokemillennial.com, and my books, there are now two of them. I’m working on the third but Broken Millennial, Stop Scraping By and Get Your Financial Life Together is book one. Broke Millennial Takes on Investing, A Beginner’s Guide to Leveling Up Your Money is book two. They are both also available on audio. They are available wherever books are sold and hopefully always like to plug your local library. So, if you want to just go learn something, feel free, check out your library and if they don’t have it you can try to request it.

Mindy:
That is fantastic. We will link to the books in the show notes which are found at biggerpockets.com/moneyshow81 along with all of those social media and your website and all of that, we will link to everything there, so you can just click on us to find Erin. Erin, thank you so much for today. I really appreciate you taking the time to share just the basics of investing, because it’s difficult to get started. It’s scary to get started, but it doesn’t have to be. Like you said, this is the best gift you can give your future self.

Erin:
It is, and also if you’re feeling overwhelmed, I get it and that’s okay, but take the time to find, maybe this didn’t connect with you, maybe it’s not my book that’s going to connect, but I promised something will, so just keep searching for that thing until you are like, “Oh, okay. Now investing got explained to me in a way that I actually get it and it has clicked.”

Mindy:
Awesome. Okay. Well Erin, thank you so much and have a great day. We’ll talk to you soon.

Erin:
Thank you.

Scott:
All right. That was Erin Lowry with Broke Millennial. Really loved the episode. Mindy, did you like it as well?

Mindy:
Oh my goodness. I love Erin. I love listening to her talk. She’s so smart. She’s so down to earth and she just has a really great grasp on the concept of investing. Coming from a point where, hey, I didn’t know anything either and I figured it out. She doesn’t make you feel stupid for not knowing something. I mean, there’s a lot of things in the world I don’t know. I know, shocker, but there’s a lot of things in the world that I don’t know, and I don’t feel stupid for not knowing how to do brain surgery. I don’t want to do brain surgery, but investing is something that I think everybody needs to know about.

Mindy:
But also if someone doesn’t know about it, they kind of feel stupid for not knowing about it. I think that’s kind of an overwhelming majority of people that I talk to, they’re like, “Oh, I just don’t know.” No, you don’t know until you learn something. There’s a lot of things you didn’t know until you learned, and once you learn it. So you know, Erin, I think Erin does a really good job of explaining it in a way that’s easy to understand and also not talking down to people.

Scott:
Yeah. And I think, it’s that comfort that is what you’re getting from every guest on the show. Over the last couple of years, is just that understanding around these concepts and how to apply them over a long period of time. Nobody that we’ve talked to is worried about retiring, right. Nobody’s worried about running out of money at some point in their life. The question then becomes once you get these concepts, maybe I can do this faster than 65 or 70, right? Maybe I can have a big surplus of money and lots, all the freedom that provides earlier in life. This is the start of the … This is how to get there. Yes, it’s about cashflow in the first couple of years, but the investing is just going to carry you through to the end game.

Mindy:
Yup. And I don’t think we’ve talked to anybody on the show who hasn’t invested for their future in some way or another. I don’t think we’ve talked to anybody who’s just saved up a big pile of cash.

Scott:
Nope.

Mindy:
Nope. It’s all investing. And investing, I mean, clearly if everybody that we’ve talked to knows how to do it, it’s not that hard to figure out.

Scott:
And, it’s probably not appropriate time, but I’m going to go into one of my periodic gold dashes here. We also haven’t talked to anybody who’s going to retire on their mountain of hoarded gold, right. So there’s a difference between investing and accumulating a currency or a pile of stuff, or items. It’s investing in assets that produce future cash flows, right. That’s real estate, stocks, bonds, whatever. So sorry guys, I know that there’s a couple of you out there who don’t like my irregular gold dashes, but there it is,

Mindy:
And you can contact him at [email protected].

Scott:
Please let me hear about it, [inaudible 01:11:21] a way to cashflow gold, I would love to hear it.

Mindy:
I am also not a huge fan of gold. I think if you look at the historic gold prices, they haven’t gone up at the same rate that the stock market has gone up. So, if anybody can prove me wrong, again, prove it to Scott at [email protected].

Scott:
I might be open to an argument that it is a superior way to hoard your emergency reserve, because the return could be higher against inflation than 2% in a savings account. I have to think about that one, but anyways.

Mindy:
Yeah, again, [email protected]. Would love to hear your argument on that. Okay. Today we talked to Erin from Broke Millennial. The book is called the Broke Millennial Takes On Investing, A Beginner’s Guide To Leveling Up Your Money, and it is available pretty much wherever books are. Amazon, local bookstores, even your library. And if it’s not, you should request it because they’ll get you a copy, then you can read it for free.

Mindy:
Okay. From episode 81 of the BiggerPockets Money Podcast, this is Scott Trench and Mindy Jensen. And, Huh, I don’t have a cute money quip to say. Check you later or we’re leveling up our money or whatever. So just bye.