Hey guys, thank you so much for joining the podcast. I have an exciting guest today. His name is Tim Rosen. He is my financial advisor. He has helped me out so much, not only get out of crushing debt that was caused by my own financial mistakes, but now, now that I’m in a much better place, helping me invest and set myself up for a great financial future. So this is going to be separated into two parts today. You’re going to hear him answer some questions that I had and some audience members sent in about some practical advice to take, and then the next week, we’re going to talk about speculation, what does the future look like with the economy, currency, and all that. Without further ado, it is me and Tim Rosen.
Tim, thank you so much for joining us today. Just a quick recap for our listeners, you and I first met about 10 years ago, give or take, something like that-
Yeah, the old coffee cup days.
I was introduced to you by a friend, and I was in a really bad situation, just overwhelmed with debt. I had made a lot of financial mistakes, and we sat down and you kind of helped me navigate, not kind of, you totally helped me navigate out of that by focusing on getting rid of my debt first. When it comes to … I mean right now, unfortunately, a lot of people are hurting right now, Tim. So as this recession, this kind of economic pause, it feels like, starts to lift, for those of us that are experiencing a little bit more of a debt load, would you recommend that we focus on, after we’re back to normal, do we focus on paying down our debt? What are the steps once we get out of this weird log jam to getting back on track?
Yeah. Well first of all, thank you for what a wonderful privilege to be on your podcast with you. Thank you. It’s a great honor. I really appreciate that. And a great question, no doubt on the minds of all of us right now. I think the beginning point is this season, this economic downturn, and the impetus of that was this virus that has everyone concerned, I mean obviously we’re all quarantined. It’s teaching us a lot. And those who, they always heard, “You need to save for rainy day, you need to save,” and they haven’t, man, they’re really feeling it now. So lessons learned, right? We can get stronger through this.
So the question is when we get out, we also want to prepare now. Regardless of what economic season we’re in, whether we’re in a recession, and recessions are okay guys, I’ll get back to that, whether we’re in a boom or a recession, whether there’s layoffs, whatever the season is, you always want to look out for financial health now. And part of just being financially healthy is knowing your numbers. What do I mean by that? Know your income, and as a priority, do everything within your power to protect that income. Income is key to everything. It’s a key to building wealth, it’s a key to your financial health. So if you are an employee, do everything within your power to keep your value as that employee very high. Go above and beyond. I mean, don’t get taken for granted, but just be very valuable in your employer’s eyes. If you are the employer, if you are a business owner, ramp up that value. Go above and beyond.
And Alex, you’re a model of that. Since the beginning, you’ve always given, you’ve always given knowledge, given wisdom, given ideas. So if you follow me, that’s the number one thing, you got to protect your source of income, or second or third, the gig economy that we’re in right now.
Then as we transition, we will get out of this, okay? When we’re in it, the Marines call it embrace the suck, okay? When we’re in it, we don’t like it, we can’t wait to get out. And the boom is coming. I’m sure there’s another question that will bring me back to that, okay? But always save, always pay yourself. So to be financially healthy, guard your income, protect your income, and always pay yourself.
If you look, and you took a moment and you look at your outflow, Alex, you and I went through this many times in different seasons of your life. You have to know your outflow. And this is a time where we’re all really recognizing what our outflow has been because we’re reducing it. I don’t need all these niceties now, I just need food, I just need to pay the mortgage, I just need to pay the utilities.
So know your fixed expenses, and then know what is variable. Variable means that’s up to you. Do you spend a lot in this area or do you bring it down? You’re in complete control. The timely and timeless wisdom is always live below your means. And right now, we’re really taking a clear look at, “All right, what’s my minimum number?” Some people call it the net to crap, okay? “What’s my minimum budget? I need this just to breathe and stay above water.”
Awesome. Awesome. I love what you said. We’re going to get out of this. Embrace the suck. Let’s talk about embracing the suck, embracing the pain, and kind of leaning into it. One of the things that you can’t turn on the news and not hear about it is how the stock market is doing. It’s really volatile right now. One of the things that, and I don’t want to try to paraphrase you because I feel like I’ll get it wrong, but one of the things that you taught me was looking at your investment strategy, not in terms of what it’s going to do for you in the next six months or a year, but in terms of what’s going to happen five, 10 years from now. So for those of us that are looking at the stock market, what is the mindset that you would encourage us to have as we look at our portfolio and it’s not a very happy site to see compared to what it was a year ago? But what is the mindset that we should have when looking at our portfolio and considering whether or not to invest?
So there would be a difference for those who are just starting to invest, haven’t invested yet, or those who, like yourself, you’ve already started the investment process. So this is opportunity, guys. This is great opportunity. What is often misstated is volatility. Look, wealth is created because of volatility. Volatility is the movement up, as well as the movement down. During times like these wealth literally transfers from the fearful and the emotional, those who don’t have a plan, those who don’t have someone in their corner advising and coaching them, those who are just going to go by instinct, and they sell. They knowingly sell at a loss, a low price point. But you just can’t sell to the air. What does there have to be on the other end of that? A buy.
So who’s buying? Those that are disciplined, those who understand investment, those who understand this is the long game, not the short game. So in many respects, however, this is a rare opportunity. The last crash we had, and this is very distinct from 2008, we can circle back to the distinctions of why the different crashes and why this one will recover quicker. It is a rare opportunity to pick up quality funds at a low price.
When I say funds, of course, we take an academic approach to investing. The founder of Vanguard Funds, John or Jack Bogle, he goes by both and he’s deceased now, he says, rather than trying to find the needle in the haystack, “Oh, which stocks should I buy right now while the market is at the bottom?” That stock-baiting and speculating. Mr. Bogle says just buy the haystack. Don’t try to find the needle in haystack, buy the haystack. So we take an academic approach. Our clients literally own over 20,000 companies across 45 free countries. Diversification.
So the mindset is if you’ve ever wanted to invest, now is the time, not to just throw a couple of bucks at it, you need a plan that includes this season, but a plan that includes what to do when we’re out of this season for the next five, 10, 15 years, depending on your time horizon.
I love it. I love it. For those of you listening, I want to share what I’m doing just for the sake of transparency. When I noticed this downturn happening about the second week of March, I reached out and said, “Hey, I’d love to put a one time investment to get close to maxing out my IRA, personally.” So I invested more into the IRA. And then for the first time, I actually opened up an E-Trade account. I’m sharing this just for information, please don’t follow this and assume it’s going to work out, because I don’t know if it’s going to work out.
In the same way of buying the haystack, I personally bought shares in a lot of the airlines that I follow and think are doing well that are getting hit really, really hard by this. And I personally bought a couple of different cruise line stocks that I think are at a very big discount right now because of what’s happening. And I personally bought a couple shares in restaurants that I love and go to that I think have a strong business model that are suffering. We’ll see which one of those investments pan out and which ones lose, but it was diversifying. It was like, “I’ll buy a little bit of this, little bit of that.”
We’ll see what happens in 12 months from now, whether some of those investments will pan out or some won’t. But it’s all about identifying what I think are incredible value opportunities to get shares of companies that I think are going to be okay for after this in the next 12 months, and finding value and opportunity there. So that’s what I’m doing personally for myself. I have Tim managing, and he’s doing a fantastic job, and then I also said, “You know, I’m just going to play around a little bit myself with some extras that I haven’t, and see what happens.”
Let’s dive into some more of my journey. When we first met, I was under pretty significant debt load. You helped me get out of it by identifying leaks in my spending where money was going that I wasn’t really paying attention to it, which was so helpful. I have been following the numbers religiously since we started working together, it’s been so helpful. So it took me a couple of years, but I got out of that. Thank you. So it was really good.
Then I started looking towards the future. I had been in business since I was 17, I’m now 36, and I had no retirement plan. I had nothing in case this, The Branning Group, didn’t work. The Branning Group is doing really well. So I said, “Tim, what can I start doing to plan for my future for whenever I decide to retire?” So my question to you is this, Tim, for those entrepreneurs that are in a successful business right now but haven’t yet started to think about the future, I know you mentioned paying yourself, what are some of the steps that they can take to set themselves up for, number one, being able to retire, and number two, being able to do it comfortably both now and in the future?
Great question. Business ownership opens up so many more opportunities. The IRS allows a business owner to pay themselves, meaning invest in the plan for your future. And I get it, so many entrepreneurs are driven, A personalities. I’m one of the same. It’s really hard for me just to disconnect and just gel, I’m always productive, I’ve got to do something. And what happens is we get that groove going, and sometimes there’s this, you know, we’re enjoying business, business is good, we think it’s ever going to change, and it’s always going to be this way.
And then yet, in most cases, our business is not going to be our source of retirement. You may have a business model that you can actually sell. Well, you need to know the value of that, and is it really enough to retire on. In some cases, yeah, if you’re Jeff Bezos, Bezos, whoever. I have friends who are business owners, and I pleaded with them 10 years ago, “Start something for your future.” And now, because they’re retail owners, they’re at home trying to sell things from home, and they’re getting hit hard. They got nothing set aside for their future.
So your business and your retirement planning, now I know that may not be a popular or even a fun word, retirement, now you can’t keep good men down, let’s just say your future need for income when you, A, cannot work physically, or B, you want to just stop, there needs to be a source of income. So by investing, that gives us the opportunity for our dollars to work for us, to multiply, and to allow us a large accumulation for later.
Back to the focus of the question, is what can business donors do? You can set aside for yourself much more than an individual can. An individual in an IRA, you can set aside $6,000 if you’re under 50, and you could put aside $7,000 but you’re over 50. Now for those who really want to back the truck up and put in more, especially as a business owner, there are plans that allow you to put up to 25% or $54,000 a year as a business owner, and that’s good. Now, you have to understand that that is money marked for your future, not for next year’s new car, or I want to buy a house someday. No, that’s for your later life. And again, great opportunities.
I may be answering another question that you’re about to ask.
No, go ahead, please, please.
We have to have balance. Investing is not saving, saving is not investing. We need both.
Yeah, absolutely. Absolutely. Even when I was out of my crushing debt, I was doing well, I saved, I followed our plan, I saved money, and The Branning Group had a couple months where it was like it dipped. But we were able to keep going and keep surviving because we had that savings account that was there. It was like a nice little padded cushion, you know?
Good for you. Good job.
It didn’t feel good to pull from it, but it also felt good not to get in trouble. My crushing debt load that I had that I came to you with was because business went really, really good until it didn’t, and I did not have any savings, I didn’t have any safety net at all, and that’s when I went way under. And so when I first came to you, I was like, “I screwed up!” It’s like I knew I should have done all those things like saving and all that, but I hadn’t, and I was in a really bad situation.
Well good for you, also, for being transparent. Admitting our own missteps is a necessary first step to financial health, because if we’re in denial, if we keep going about going forward, so to speak, with our same habits, we’re actually going backwards.
Exactly, yeah. I had to fix my view and my daily habits before I could see the positives that we have now. Let’s dive into some of the practical questions that the audience sent in. And I know this is a variable question because it depends on who’s asking, but the question is can you lay out the path to get out of debt while saving money?
Great question. And I have laid that out in my first book, because time remaining isn’t enough time to go over that. But here’s the mindset, here’s the approach, and then here’s the big picture. You have to have balance. Now I know there’s some teachers out there that will say, “Get out of your comfort zone. Get out of balance. Get rid of that debt.” The problem is, if you identify some extra dollars that you can put towards debt, and you’re attacking that thing, you’ve got gazelle mentality, and intensity, and all of that, but you’re not saving, guess what? Life continues to happen, and when you need to replace the tires on your car, when you’ve got that medical copayment for your MRI of 1200 bucks, and you don’t have that in savings, you go right back to using credit cards again.
So here’s some free advice. Look closely at your dollars, and look at those dollars that you can recoup, redirect, as I taught you Alex, and you implement it. Okay, live with some less niceties. Right now, dining out really isn’t an option, but that’s a big one for most people in a normal season where we’re not indoors, is we like to go out and we eat. Whatever leaks are in your bucket, redirect, get those dollars, identify the dollars that you can put to work.
Let’s say it’s 200 bucks. Don’t put all $200 towards your debt elimination. Yes, there’s the excitement and the intensity that, “I want to get rid of this debt.” That’s good. At the same time, you need to have savings. You’ve experienced it, Alex. We’ve all experienced it. So maybe split that, $100 in addition to a minimum payment on your credit card. Yes, start with the lowest one. Why? You could say, “Well, it’s not rational to pay the lower one when my higher balance one, I’m paying more interest.” Well, it wasn’t rational thinking that probably got you into debt.
Yes. Yeah.
Just set aside that argument, and let’s work out what is more efficient. To knock out a smaller account gives you a victory, puts wind in yourself, “Yes, I can do this.” So you attack that $400 JCPenney balance or what have you, then you take that minimum payment plus that $100, and then you go for the Visa that’s 1200 bucks, 2000. You keep going at it that way.
Meanwhile, you’re still saving every month, every paycheck. You need that. Now there’s a temptation, “Man, I got two grand there. Why do I have 2,000 in the bank when I’ve got a $3,000 debt? Doesn’t it make sense to just take this, it’s not earning anything, and get rid of this? I’m paying 29%.” Okay, call it an expensive education. I have to go through that process of the challenge, the pain, and the process of getting that victory or else you’re thinking is never going to change and you’re going to always revert back to using credit cards. When you go through the pain and the process of, of tackling this, and you get out, now your mind is set, “There’s no way I’m going back.”
So the short answer is, split that amount, whatever it is in your finances that you can attack credit with, but at the same time still save because there will be a need that’ll come up. You don’t want to go back to credit, just pay cash for that need that comes up.
Love it. Love it. Let’s talk about a more immediate thing that a lot of people are thinking about right now. That $1,200 stimulus check that we’re getting from the feds. This is a question from the audience, Lily, thank you for sending it in. If you don’t need that check for essentials, what’s the best thing to do? Put it towards paying off debt, invest, or something else? You kind of answered that a little bit by saying identify what you can pay off and put some in savings, but it sounds like in their case it’s extras. I know it’s like a very … you’re not sitting with the person, so it has to be [crosstalk 00:21:15]-
Right. The answer would be subjective. If we were sitting down, I would look at your overall financial picture to see what is best for you. Thus, it’s subjective, not objective. I can’t just give a paint with a broad brush and say everyone ought to do this, but I appreciate that she added some caveats. Should we pay some towards debt, should we save, should we invest? So the very fact that that’s part of the question, should we pay off debt, tells me that maybe there’s some debt.
This is, hey, it’s a gift. It’s not going to solve everything. Grateful for it. We can kind of get into the whole economics side of things. It’s our own money, taxpayer money coming back to us. But it is a one-time, and thankfully you’re not dependent upon it. Some people, it’s going to be that breath of oxygen because they’ve been suffocating financially. So if you don’t need it, but you want to be wise with it, why not split it up? Take a look at your debt.
But even to the person that I would say, “Okay, maybe put some of it towards debt,” we’d have a conversation about, “Well, what’s your view towards credit cards?” One of the first questions I ask when I sit down with someone is, “Finish this statement for me, I only use a credit card when,” and that answer will tell me everything. “Well, I’ll only use it in case of an emergency.” Okay, define emergency. A sale it Macy’s? I don’t have the money in the bank and this came up, that’s an emergency? You’ve got an unhealthy view of emergency, right? You need cash in the bank to take care of those emergencies.
So it is really subjective. If you have a healthy view towards credit, in other words, “I’m never going back, I’m just plowing my way to get through,” then it could be a bet to apply some of that towards debt, provided you’re not just going to go right back and bring your debt up again. It’s certainly good to hold onto it in savings, but if you have excess in savings, how do you measure that? A homeowner’s going to need more in savings because you’re responsible for all the breaks, and repairs, and everything, right? The owner’s going to need a little bit more in savings, and it also depends on if there’s major life events coming up. You’re saving for a wedding, you’re saving for a vacation, it can help do that.
And it can also help you in this opportunity window [inaudible 00:23:33] time, I don’t know, I’ve heard anywhere from four to 12 weeks. You can certainly buy some investments while they’re down. You certainly don’t want to do a one time, “Hey, I want to invest. I’ve got 200, I got $400, what should I buy right now?” That’s not going to answer any of your financial woes. They’re not Jack’s magic beans that we hope to turn $400 into a beanstalk, and just take care of us, right?
Right.
So part of building wealth and financial health is just that steady, every month investing, so bringing that back to investing. I guess the answer, depending on your situation, why not give a portion here, and a portion here, and a portion here, and split it up.
I love it. Similar question coming in from Joshua, he said, “I have $200 to invest in right now. What do I choose?” And I know that you have to be careful on how you answer that with specific stocks, but how would you guide someone who the stimulus came in, maybe their debt is paid off, their savings are good, they have some extra money, and they’re going, “Man, I see opportunity.” What would you advise that person to do with their sum?
Okay, so here’s the tough love answer, okay? This is my home office, and you hear the little puppy in the background. I’m going to say that you’re asking the wrong question, okay? Here’s why. Successful investing isn’t a one time opportunity. I’m sure you’re wanting to get the biggest bang for your buck. I mean, even if you doubled it, okay, great, you have $400. Now what? Then we’re out of recession, the markets are back up, and we’re back to business as usual. What do you do? You sell those shares, you get $400. Then what?
So not to demean the amount, I’m talking about the approach. Yes, we are in a very unique opportunity. It hasn’t happened in 12 years, since the last downturn of 2008. We can all look back as geniuses now, like, “Yeah, If I would’ve bought Bank of America at four bucks, now … Yeah, if I would bought Citibank at $1 … ” It is unique, but I’m not a big fan of one time shots in the arm because, again, what’s the big picture? What is it going to do for you?
Maybe take some of that money and invest in a coach, invest in an advisor. Alex, you talk about investing in your business. What if you could multiply that with knowledge and wisdom and the plan that will help you make tens and hundreds of thousands of dollars, rather than, how can I turn this $200 around quicker?
Yeah, I love that. I love that. Yeah, I am all about, right now, there’s so many great opportunities to get education at a discount because the people that are selling the courses are going, “How can I get my course into more people’s hands?” So I’m personally investing in courses for my team as well. I love that answer.
You and me both.
Yeah. Hey guys, that was a fantastic first part to the interview. Join us next Monday, when we talk about how Tim sees the future. We’re going to talk about paper currency, we’re going to talk about what industries are going to be forever changed by this coronavirus pandemic and the economic shutdown that occurred, what was reset. It is going to be eyeopening, and I think you’re going to get a lot of fun information out of it. So come back next Monday, when we talk again with Tim Rosen.
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