0:16 good afternoon and welcome to the way to wow show I'm your host Kevin bemel and we are here every Wednesday at 12 30 p.m Pacific Time 3 30 p.m eastern time to talk about matters relating to careers business building a business and Financial Planning and Building Wealth so all of those fall into our remit as as we say and uh yeah I I may look a little bit different uh uh today because I am back to standing up to do the show
0:52 so um my broken foot feels healed enough that uh I can spend a little bit more time standing which is uh which is healthier and and when I go to meetings I see other people at their standing desks uh you know Zoom meetings and I feel like yeah gosh you're being lazy so stand up Kevin anyway so um today um we're going to talk about financial literacy so this is I think this has become a much bigger topic over the last oh 10 or 20 years so I know that my
1:29 daughter took a personal finance class um this past semester she she's out of school starting this week and she it was a challenge for her um I I know I know even Jewish people have a challenge with personal finance sometimes okay okay now now all the criticism for you know being anti-semitic Bring it on Bring it on come on just just a joke just a joke um in any event uh when I was in high school I mean there was there was no there were no classes on on Personal
2:04 Finance we did have one on like nutrition or whatever um so they were starting high schools were starting I think to look at what are the life skills that students need um but now it appears and and I know at her high school every student is required to take personal finance so I and I think that's that's that's good because my time in during my time in the Navy one of the things I found out was um a lot of the sailors did not know very much about personal finances and in fact uh
2:43 when we were on deployment and the the infamous Tomodachi deployment when we were confined to the inside of the ship because we were sailing through a radioactive plume one of the one of the things I decided to do since so many of the sailors had very little to do in terms of work was I ran a series of classes on personal finance and how to start a business and such and I mean hopefully it was helpful I know I ended up counseling a number of sailors about their finances in getting out of debt potentially starting a business those
3:19 kind of things I know I've stayed in touch with one of them he's he's doing quite well he he was when I met him he was thinking about getting out of the Navy and starting a business which he he subsequently did get out of the Navy he went to work for another company um and and then I I think now he has started a business so every once in a while I hear about I see what Eric is doing and uh it's it's it's really heartening to to see um and and indeed uh this is I think something that that we all need so um I I put together uh you know a short
3:54 PowerPoint um this is based by the way on Research from um the Milken Institute so um I you know if you haven't heard of the Milken Institute yes it was started by Michael Milken the uh Infamous uh junk bond Trader um and and it's uh mission is to solve big problems in the world by bringing together business non-profits Academia government in in in in in a sort of holistic approach to figuring out what
4:32 do we do about these things and and they're interested in a wide variety of projects um just as an example yesterday I sent a friend of mine at Milken um a presentation that another friend had put together about um increasing the opportunity for a more diverse group of people to be starting businesses um thinking that this might be something that we're interested in and indeed he said yeah this is really this is right up our alley so um in in any event I'm I'm digressing a little bit but um so so the Milken
5:08 Institute does a great deal of research they have a lot of uh very intelligent people there um and and the people tend to move between these different spheres so the milk and institute's a non-profit organization um but they have people who will move into government roles and then come back out they'll have people in Academia that come and then come back and people in business in fact a lot of the people that worked there got their start in business um most notably of course Michael Milken um and and and and therefore they they bring that that those that multiplicity
5:43 of perspectives to their work so um let's uh let's go ahead and I'm gonna share my screen here we go okay so slideshow here we go okay so financial literacy uh is is our topic for today um and of course this is people making money uh you know one of the way to wow shows so oops let's try this there we go okay and and as I typically do
6:18 especially when I have a PowerPoint I bring up this graphic um about the three pillars of attainment everything that's done on the way to wow shows in relates to this um for those of you who who are unfamiliar with it the three pillars of attainment is is a way to look at our lives and and and again be I've used this word a number of times already holistic about how we approach life each one of us has to determine what success is for ourselves and uh I think in the
6:54 United States especially we tend to focus on success in finances or maybe in in learning um and indeed success is all of the pillars and all nine Realms and that isn't to say that we're going to strike a balance I've come to think that trying to achieve balance is is a somewhat um futile goal I'm not even sure what balance is I've talked about this before I mean is balance working I don't know nine hours a day and I mean eight hours a day and then learning eight hours a
7:31 day and playing eight hours a day so then when do we sleep and attend to our health issues so you know some of these things are going to take up a lot more time than others are dealing with our finances is and they're probably going to take up a lot more time than others at least during our income earning years if we're if we're fortunate enough to be able to retire so then maybe you know play and learning will take up a lot more of our time um going forward will it will it even out with our working years I don't know I guess it depends how old a person is when he retires and you know but but hopefully
8:06 overlaid and everything is our relationships with family friends and God um and and and that isn't to say we can't pursue two at you know two or more Realms at the same time so if we're being effective in pursuing um our uh in dealing with our finances or in learning or in playing um I I think we're probably also going to be engaging in relationships and we and through our Pursuits we have an opportunity to build relationships um and all of this is by way of supporting a sense of who we are our
8:41 sense of self our our identity you know at the top here this isn't to say that our identity is the be-all end all of our existence it's just that uh it's to suggest that our identity is built on the foundation of everything else right so our health and our mindset have a very direct impact on our identity because they have such a direct impact on how we behave I know my daughter sees this sometimes she'll sometimes you say Daddy I just I feel awful and I'm not sure why I said well what's
9:16 going on baby what's bothering you nothing really you know school's okay friends are okay and I say well um how'd you sleep last night well not very good well so you know all of a sudden our our our ability to understand ourselves attenuates because we're tired so you know and and again with the other two pillars so we today we are going to be dealing uh in the finances Realm of the Pursuits pillar okay but you'll see that some of these other things are going to directly play into
9:52 our financial literacy in both of the other pillars okay so I don't know what I don't why I did that I was a boomerang so um in in the report I read it and and I'll I'll put a link to the report in the show notes um it's it's fairly lengthy but anyway in the in the report I read from the Milken Institute it broke down financial literacy into four components and you see them here knowledge skills attitudes and behaviors okay I'm gonna go through um each one of these
10:27 no there's no clock there okay I just want to make sure okay there we go um I'm going to go through each one of these in some detail so that we can understand what does it take to be financially literate I'm not sure why it's going backwards it's it's just you know drive me crazy okay so let's let's talk about knowledge first knowledge is really the base upon which much of our financial literacy will be built so knowledge breaks down into basically three
11:04 components okay Financial Concepts Financial products and services and practical know-how so let's talk about each one of those first of all Financial Concepts so uh one of the things that I've mentioned this in in other shows a financial concept that is one of the most important when it comes to investing is um compound interest okay or a compounding return so understanding how that works for us is a
11:41 very important concept to understand how wealth is built so I remember when when I was a a boy um the idea of um compounded interest was in some ways in its infancy I think because I I you know in general and part of it had to do with this was before there were computers yes yes I'm I'm old computers existed but in terms of their widespread adoption that started around the time I was born maybe a little bit before that
12:16 it started in nasancy in the 50s sort of post-world War II um but it really started picking up steam into the 60s and 70s when when computerization start you know went from being you know very little to widely adopted so um most savings accounts were compounded monthly meaning like if you had a hundred dollar balance and you were getting uh five percent interest per year okay or um let's make it six percent interest per year because then I can do that in my head so six percent interest per year is
12:53 a half a percent a month okay so if you had a hundred dollars to start um after a month you'd have a hundred dollars plus a half of one percent which is 50 Cents okay so at the end of the first month you'd have a hundred dollars and fifty cents okay now at the end of the second month you would the interest would be compounded meaning you didn't get another 50 cents worth of Interest you've got 50 cents interest on the original hundred dollars but you also got fifty percent I'm I'm sorry you got a half a percent interest on the 50
13:28 cents which would be like a I don't know a quarter of a cent or something like that you say well who cares about that that's so small yes but over time it would build up okay and so each month the interest would compound so when I was a boy so I remember um from my bar mitzvah um was pretty typical back then I I assume it still is now I got a bunch of cash gifts anything from ten to fifty dollars like fifty dollars that was a lot I mean I it was an unbelievable amount of money from my perspective this would have been 1973 and there was a
14:05 savings and loan kind of down the street from our house I wish I could remember what it called all I remember is they gave out banks that were shaped like a lantern and I love that bank I had it on my desk and I you know put coins in and stuff so the that bank started advertising compounded daily interest right and that was a huge deal because instead of the interest compounding only once a month it was going to compound every day right and and the reality is although you know
14:40 a hundred dollars at the end of a month you you know you might have only well you might have only maybe a Penny's more interest or two cents more interest or something like that not a big deal but the daily compounding especially on a large amount of money would really significantly increase the impact of compounded interest and it was the reason I'm bringing this up and and spending a lot of time with it is that brought home to me just how important this concept of compound interest is right and then and then I remember sometime I don't exactly know when but
15:17 there was they had continuously compounded interest wow even I mean I'm not sure what continuously compounded meant it still seems to me there has to be some periodicity to the compounding but in any event it was better than even daily compounded interest now of course you never hear this talked about because with computers they can just program the computer to compound the interest however and and and you know on your way and and all banks do this so it's not a it's not a competitive advantage to to you know advertise how how frequently the compounding is done and and in some
15:54 ways that's a shame because I think people as a result don't understand the power of compounding likewise there's another Financial concept called amortization so amortization is the paying off of an amount over time or the the accumulation of an amount over time that amortization so when we amortize alone we pay it off over time so the typical home mortgage is a is a fully amortized loan so if it's a 30-year loan
16:29 at the end of 30 years not only at the end of 30 years we will have paid off the entire loan balance with interest of course so now in some cases alone it may not be fully amortized so you may have a loan that um is a 15-year loan with 30-year amortization so you say okay well so you have half of it left to pay at the end of 15 years that's not how amortization Works in fact after 15 years you probably have closer to two-thirds or three quarters of the loan balance left to to pay because of how
17:05 the interest and how interest on an amortized loan works so this is why understanding these Concepts is so important right I was reading in the Wall Street Journal this morning about how many commercial loans are interest-free so that sounds great an interest I mean our sorry our interest not interest-free interest only loans so during the term of the loan you don't have to pay off any of the principal any of the amount borrowed so that keeps your loan payment lower and and when
17:41 interest rates were really low so that was even better because you could borrow a ton of money and have a very very low payment the problem is now as these loans are coming due a billion a trillion and a half of them over the next I think it said two or three years I may be missing misremembering the article but anyway um because interest rates are higher and lenders are less excited shall we say about making interest-only loans a lot of these building owners could end up in a lot of trouble right and and that's not because by the way that they they
18:16 didn't understand they knew the financial Concepts they were just willing to take the risk unfortunately in in some of these at least some of these cases it may be that the risk is not going to pay off and they're going to be in trouble um whether it's having to come up with cash from other sources to pay off the loan whether it's um you know having to restructure the loan and taking the credit hit or whether it's losing the property to foreclosure all of those are possibilities and there are there are others so we need to start by learning Financial Concepts and in future shows
18:52 um you'll see I'm going to be talking about some of the financial Concepts okay next is financial products and services so I've mentioned a couple already I mentioned a Bank savings account um the one I missed it was actually a savings and a loan savings account Savings and Loans don't really exist anymore after the Savings and Loan crisis in the what late late 1980s early 1990s um they they got merged into the overall banking system but um but uh nonetheless you still have what are usually called savings accounts
19:27 sometimes you'll hear the term passbook account because I know when I got mine I got a little book and and the transactions were recorded in the book because again there were there were computers was all done uh manually I've loved that little book I wish I still had it maybe I do somewhere in in my uh you know archives that I've got filed away way but in any event um then you have things like CDs money market accounts mutual funds um uh annuities stocks bonds debentures senior debentures
20:04 um uh Mezzanine Financing uh Equity loans second mortgages first mortgages the primary mortgage Market the secondary mortgage Market all of these um all of these well some of them are Concepts perhaps more than products and services you we could sort of you know have a great discussion over over some bourbon on that but in any event then another crucial part of your knowledge is understanding all of these various or maybe not all of them that's that's probably not possible but many of the financial products and services that are
20:40 out there especially the most common ones so common ones that that most people really all people should know about are things like mutual funds life insurance in particular term life insurance um uh health insurance long-term care insurance disability insurance um stocks bonds pay and then loans Like Home Mortgage car loan those kind of things okay and CDs money market so you know I've I've run I've I've mentioned probably about a dozen Financial
21:16 products and services just then and and by the way there there are lots of others and depending on your particular circumstances um the stage your stage of Life what kind of income you have you may need to get into more sophisticated or esoteric products things like hedge funds private Equity um various things like that um exchange traded notes exchange traded funds those those have become very big in the last few years so all of these services and products may make up an important part of your financial
21:52 literacy depending on where you are in life and then finally practical know-how so it's one thing to know about products and services and Concepts it's another to be able to work with them so if you are thinking about buying a house and you figure out how much your payment would be based on the price of the house how much cash you're putting down the size of the loan the loan terms now these days you can go online and you can find you know loan payment calculators for example but I I
22:28 would argue that it's important to understand what's going on behind that you know program on on the you know it's on the internet so that you really so that you you know you really have a deep understanding of certain of these Concepts especially things like compounding and amortization those are two of the most fundamental Financial Concepts and so um I know the other day I was working on putting together a spreadsheet for a client and uh I I wanted to be able to
23:04 um track loan payments in a certain way for him and uh you know I I couldn't I actually couldn't find either an online um loan payment Computing program that would do it with the complexity that I needed nor could I find um tables that have the different what are called loan constants in them in order to be able to figure it out manually so I had to go into my library and find my old loan constant books that I got you know back when I started my career back in the early 1980s um I I will say it was gratified I still
23:41 knew how to use them so it um it was kind of fun and and what was more fun is um the client is is is is younger than me and so you know I I had to explain to him what the you know different things were because you know he'd done it on computers his whole life so um you know to do it manually I mean I did in a spreadsheet but manually in a spreadsheet it was fun you know talking about it and how things have changed okay so that practical know-how is is is very important and the more you can learn about how these Concepts work in a
24:17 practical way aside from how they're done on a computer the better you off you'll be okay let's go to the next one all right skills so this plays into the Practical know-how so there's basically two categories of skills One is using Concepts and the other is being able to do the math so those are not the same things it's it's you know most of us by the time were you know in in late Grade School fourth fifth sixth grade we can add subtract multiply and divide okay
24:54 um although I I will I'll be the first one to admit some somehow I never got taught how to do long division so before I started school my mother taught me how to add and subtract and multiply I could do my multiplication tables I think when I was in kindergarten I want to say and but somehow I never learned how to do long division and it it was and and since I knew these other things my teachers just assumed I guess that I knew long division so I think I didn't learn long division until I was in Middle School so uh you know thank you Mom but also you know I ended up being a little bit handicapped right but in any
25:30 event hope you know in terms of numeric and mathematical skill most of what we need to know in that regard we're going to learn by by either the end of sixth grade or certainly by the end of middle school or Junior High School depending on when we learn to deal with percentages so I mean we don't need to know about um frankly geometry when it comes to our finances okay we don't need to know calculus we don't need to know about uh you know statistics and all of that and that's not to say that they're not
26:05 useful if you're doing very very sophisticated work but for most of us if we can add subtract multiply and divide and deal with percentages we've got the numeric and math skill that that we need now I would hasten to add when I say that I also I mean being able to do that not just with whole numbers but with fractions so you know we need to know basic things like one quarter is the same thing as 0.25 which is the same thing as 25 right and and and I think those are the kind of Concepts
26:41 that uh that really mathematical Concepts that really challenge us it's like how do you how do you know that well I'm to be honest with you I don't know how I know it I just I think I just learned it um but uh you know so if if you're skilled in math at that level so you've got an important component of the skills part of of financial literacy already but the next one is using the concepts so I mentioned this uh when I was talking about uh practical know-how okay using the condo so when do we use which
27:18 concept that's an important skill to know or skill to have right so if we're let's say we're looking at buying a car and we're considering getting a car loan okay what skill do we what concept do we need to apply to that in order to understand how much we're going to have to pay to buy that car it's not going to be compounded interest it's going to be amortization most likely because we're you know if we're gonna get a car loan so that loan is going to be for a certain term okay maybe maybe three years maybe five years now there's I
27:53 think they have even seven year uh car loans and and so we need to know okay what what am I dealing with there well I'm dealing with an amortized loan in the case of a car probably fully amortized okay now by the way if you're leasing a car in a way people think oh leasing the car I'm not really buying it well you're technically you're not but if you're leasing a car still your payments are actually going to be figured out on and what amounts to a partially amortized basis so the way they're going to figure out the lease
28:29 payment is they're going to say okay what's the term of the lease let's say it's three years okay and let's say the car costs fifty thousand dollars to buy what will the car be worth in three years and let's just say for the sake of argument it'll be worth twenty five thousand dollars in three years since we call that the residual residual value okay so that means during the three-year term of the lease we have to accomplish two things one is we have to pay off the twenty five thousand dollars in value that the car is going to lose and two we need to provide some kind of return on the
29:06 entire fifty thousand dollars that we are tying up for the three-year period right that's essentially a partially amortized loan now people dealing with car leasing they may not even understand that honestly it depends on what their level of financial literacy is but from your perspective if you can apply the right Concepts irrespective of what a particular trans how a particular how a particular transaction is being described so then you you can really you
29:42 know negotiate much better perhaps than the person with whom you're negotiating okay so understanding concepts is step one having the knowledge step two this skill is when to use those those particular Concepts and how how do I apply them to the particular matter with which I'm dealing okay just checking the time here good we're doing good okay uh next is attitudes now remember I remember I said that although we're going to be dealing primarily in the finances Realm of the
30:19 Pursuits pillar that there were other issues that play into this so attitudes really are derived from our the image of ourself especially our our identity and our mindset okay but they play a very significant role in our financial literacy right and and there's here there's four components reasons attitudes confidence and proclivities okay so reasons are what we
30:54 might call the sort of logical attitudes that we have so what is the reason we have for saving money for maybe a vacation or for retirement or what are one of the reasons we have for not saving money what are the reasons we have for getting health insurance or not getting health insurance so here health insurance is a good example a lot of young people don't carry health insurance and their reasoning is I'm young I'm healthy why do I want to pay big health
31:29 insurance premiums when I'm I'm I don't go to the doctor that often right um so that's actually a that that can be a pretty rational decision to make and it's it could be a rational attitude for a given person okay for someone who's very uh careful about taking care of their health they they eat right they get good sleep they exercise they get Outdoors all those kind of things so for them you know they they don't need it they probably or may not let me say I say probably they may not need a
32:04 Cadillac's a so-called Cadillac health insurance plan maybe what they need is some kind of catastrophic you know hospitalization plan in the case of you know God forbid I don't know they get hit by a car or something like that okay so our reasons for doing or not doing things can be very important now by the way sometimes those reasons are are we've adopted them in essence from somebody else like our parents okay so I know a lot of the reasons I have for doing certain things I I have
32:40 because that's what I was taught so you know my mother and or father taught me this is this is what you do okay it's like okay makes you know and and and it was only as I got older and really started looking at these things that I had to examine well you know were these reasons actually you know do they have some kind of firm basis uh you know undergirding them or or where they uh just whatever sort of you know my my parents said come to the conclusion was reasonable and and then
33:15 taught me so um I mean I I I think I was fortunate I think most of what my parents taught me about finances was was actually pretty sound so okay so that's reasons but this last part is connected to Attitudes right so our attitudes about finances play a huge role attitudes are I would say more emotional than they are reason based so let me give you an an example of an attitude this is something that I wrestled with early in my business career and this is this is one of the
33:52 places candidly where um I think my my father and to a lesser extent my mother um sort of guided me astray if you will so um my my father had a very serious uh distrust of wealthy people um in many ways he was I think convinced that most people got wealthy through um at least somewhat nefarious means not necessarily criminal but unethical means perhaps and I didn't even realize that I
34:29 had adopted that attitude when I started my first business back in 1986 I believe it was right so here I am in the real estate business where and I was in the commercial real estate business where basically in order to be successful I had to deal with wealthy people and yet I have this attitude that anyone who is wealthy was fundamentally unethical and and I was really working at Cross purposes okay and it's stymied My Success until I
35:05 had an attitude an attitude adjustment so those for those of you who are familiar with Zig Ziglar he talks about doing a checkup from the NECA okay I I don't mean to be speaking Italian uh um and and you know I had to look at those things and say was this was this attitude that I had gotten from my parents accurate and and indeed by by that point in my career I was involved in enough um things including Charities to see wow you know a lot of these people who were very wealthy had made their money in a
35:41 very respectable way and they were just regular people like me sure they they they had their faults we all do but but they hadn't you know cheated people to get wealthy and and that kind of thing and that was a breakthrough for me anyway it was a breakthrough not just in my business life but in my financial literacy my own finances because the idea that I could accumulate wealth and and still be a good person it you know I was when I felt like well anybody who's wealthy is is at least somewhat unethical I I
36:17 again I was working at Cross purposes right so I had to do I once I went through that attitude adjustment I I realized look I'm responsible for how how I behave how I treat people okay and and if if I if I build wealth that's not a bad thing provided that I don't use it badly and and don't abuse people to to acquire the wealth that that was the conclusion I came to and that was the attitude adjustment I had
36:52 to make now and you see these sort of build on each other to a certain extent so after your attitudes and by the way the there's lots of other attitudes we can have uh toward money I mean to to love money right is if you go back to um um uh the Bible for example just to you know for those of you who don't you know believe in the Bible pardon me I'm I am a rabbi after all right A lot of people are fond of saying money is the root of all evil that is not what the Bible says
37:28 the Bible says the love of money is the root of all evil I.E greed okay and we we can have again philosophical discussion whether that that's true or not um you know come on over to my house I'll I'll mix you a martini we'll talk about it it'll be fine um but but you know from my perspective loving money that that's that's a problematic attitude enjoying money respecting what one can do with money I think are good attitudes loving money
38:06 I I think that's problematic at best at best now by the way you could say well wait a minute I I have a you know 19 1832 coin that's just so cool and I just love it oh yeah absolutely I get that I have you know stamps in my collection that are you know over 100 years old I have coins in my collection that are over 100 years old and I really do love you know looking at them and and touching them and appreciating that this is sort of artifact from so long ago right but that's not what I mean when I say loving money I mean loving money to
38:41 where you know it becomes a a an all-consuming desire in your life I I I do think that that is like I said at best problematic okay so we need to examine our attitudes and and are the are those attitudes are they so number one are they in line with our values and number two are they supporting or impeding our ability to attain our conditions of satisfaction and our goals okay and and you know we each have to be
39:17 we each have to figure that out on our own talking to friends and other people might help us fall figure it out but in the end I I think it's a mistake to allow someone else to impose you know their values their reasoning on us we've got to work that through it's part of the maturation process and I know I'm I'm that's one of the things I'm working with my daughter on right now she's she's working to figure that out okay and and and and good for her by the way and and I I've told her many a time maybe it's not for me anymore to direct
39:53 you and tell you what you must do I'm here to be a sounding board to give you some thoughts to ponder perhaps and and if you care to hear it give you some advice um and and and if you want me to help you make a decision but I'm not here to tell you what to do right you at her age she's got to start now figuring out what is she gonna do um so that she can you know she's prepared to you know run her own life okay so attitudes confidence now um off you know there's there's there's confidence and then there's uh lack of
40:31 confidence and then there's unwarranted confidence shall we say and I what we want to be is is in that middle ground I I would argue so um now we're probably not going to start there if we don't have a lot of knowledge and we don't have a lot of skills we don't understand our reasons and attitudes it would be pretty foolish to be confident in our financial literacy and in our ability to make financial decisions because what do we know about doing that okay so confidence is something we have to build through education through working with our
41:07 finances through talking to other people through you know having some wins and probably making some mistakes I certainly have made my my share of financial mistakes you know I've I've spoken about this adage before my adage is when I make a big Financial mistake I say to myself okay well I just bought myself another semester or another year at the Wharton business school right um look that's that's how it goes and and we've got to do our best to recover from mistakes and and appreciate um the things that we do right
41:42 um so confidence is something we build okay and and and once we've built it we shouldn't become overconfident thinking like oh I I got this I I don't need to talk to anybody I don't know I can I'm knit um I'm good you know that kind of no that's that's over confidence and that's that can oftentimes lead to making major major mistakes so I think we want to have a reasonable amount of confidence and and we and I think the other reason we want to be have a reasonable amount of confidence is
42:17 we should recognize we're going to make mistakes and the best thing we can do as a result of making a mistake is figure out okay what can I learn from this mistake and how can I move on and repair the damage most quickly with finances that's the key okay if we're overconfident it can oftentimes cause us to lose way too much confidence and go to the other direction so we want to kind of keep that pendulum sort of swinging a little bit here and there as opposed to swinging wide okay and finally we have proclivities so
42:53 proclivities are the way we just sort of feel like we have to act okay what are what are what are the what how do we tend to behave sort of instinctively okay now proclivities can be very hard to control okay um I used to joke about the a person I knew um who owned a lot of shoes and when I say a lot of shoes closet just stacked with boxes of shoes and in many cases she had never worn
43:28 them and I used to joke with her you win the Imelda Marcos shoe award Mel DeMarcos was the wife of the president of the Philippines going back I think into the 70s I want to say and and it came out at one point but she had just thousands and thousands of pairs of shoes or something like that so it's a little bit of a joke right but her whenever she was not whenever but when sometimes when she was was anxious or upset or wanted to reward herself what she did is she went and bought shoes that was her proclivity now let me say that she could afford it so
44:04 um her proclivity wasn't damaging um in in in in in that sense but some people have a proclivity to gamble and I I guess if you're really really wealthy so then maybe that proclivity isn't bad either but for most of us gambling can be a can be a very slippery slope um and if and if we're really we really love gambling it can be very easy to cause ourselves a great deal of financial distress at best um if we get the if the gambling gets out of hand so the key about
44:39 proclivities is to understand what are my proclivities and what do I do about them you know is a particularly particular proclivity likely to become a very very you know bad aspect of of my finances or is it something I generally have over control is it something I can indulge periodically if so when under what circumstances okay so we want to understand our proclivities okay so they do not undermine our confidence and undermine our finances okay and you so
45:16 you can see all of these under attitudes you know they're they're really part of understanding who we are and becoming more mature um you know as as time goes by hopefully okay let's just see where we're at here okay good we're doing well on time okay so the last of the four is behaviors okay and you can see how all these kind of tie together so we have proclivities right that this leads into behaviors so first of all we have our sort of day-to-day uh behaviors our day-to-day
45:53 Financial behaviors our money our sort of you know money management our regular money management so how how do we handle this thing so so for example are are you the kind of person who you know pays their bills as soon as you get them now that's a somewhat uh outmoded con a concept for most of us I know for me probably ninety percent of my bills are paid automatically either they're charged directly to a credit card or they're paid automatically you know from my bank account or whatever it is okay so that's but but in in you know in in there's lots of tools for dealing with our
46:28 day-to-day um money man and money management um and they can be good or they can be bad so we can put things almost on sort of you know automatic um but then that would tend to to me that would tend to um work against are really knowing what's going on in our financial lives so so then that does what does that mean well it may mean that we need to develop other money management practices so that we are periodically reviewing what we're doing and making sure we're adhering to um uh reasonable Behavior behavior that
47:03 aligns with our attitudes etc etc okay so understanding how how to properly build a day-to-day Financial regime how to do sort of routine money management that's an important aspect of behavior and and and exercising financial literacy okay so from the from the short term we go now to the long-term planning right so what a long-term planning it could be anything from maybe planning for a big vacation in 18 months or two years or even a year to
47:38 planning for retirement planning to buy a house planning on a college education for our children uh maybe planning on a college education for our grandchildren all kinds there's many many different long-term goals maybe you have a long-term goal to start a charitable Foundation okay so how how does all of that work how are you going to make that happen how are you going to exercise what is going to be a long-term need for discipline in order to bring your long-term plan to fruition okay so
48:13 um and and by the way the long-term plan will impact the day-to-day plan so I whenever I talk about goal setting and setting up conditions of satisfaction I recommend you start with the long term and then chunk back okay so that what you're doing now is supporting where you want to be one year from now three years from now five ten twenty Thirty fifty years from now okay so the two have to work hand in hand now by the way you may start with a long-term goal and uh with
48:48 long-term planning and and on a long-term Financial goal and chunk back to today and find out wow I can't afford to live today so then you're gonna you may have to adjust the long-term goal or you may have to adjust an intermediate goal so that somehow you can accelerate things you know a little bit later on in your life to get to your eventual long-term goals those are all uh issues that that you need to work out and that's why that's why understanding your day-to-day finances and money management and your long-term planning need to work and it's sort of back and forth system
49:25 okay next is decision making so how we make decisions will have an enormous impact on our finances so if someone is very impulsive okay then uh you know they tend to buy things and and then you know in a short period of time why did I buy that okay so I'll just tell you what my philosophy is if I see something I like but don't need it's not a necessity like food okay
50:00 I will not buy it right away okay I'll think about it for at least a day or two do I really need this why do I want this why do I change why do I why do I want this uh you know is it really going to enhance my life um how is all of that gonna work and here's what I find is a lot of times I come to the conclusion nah actually I can get along without it I don't you know I don't need it and um you know I'm better off waiting so
50:36 here's here's a very recent example so as a result of being able to stand up to do the show today I had to adjust my my stand-up desk and in doing so I flipped my Ur ring uh charger off of the desk am I ordering I don't it went somewhere and I spent an hour and a half looking for it and did not find it yeah and I I am an Ura ring devote right so the question comes up should I replace it well I mean I get a lot of important Health
51:12 Data from it it's it's a big part of how I monitor how well I'm taking care of my health so you know and I went online I can replace it for uh I think 250 dollars okay because there's a Father's Day special I think it is um but I was but I I said you know what before I buy a replacement because it would be a direct price replacement I have a gen 3 ring I said well I wonder if they're going to be coming out with a Gen 4 ring soon and indeed there was an article published last month talking about the Gen 4 ring and it's gonna supposedly gonna be a huge upgrade from
51:47 the Gen 3. so I I you know I I concluded well I still have my generation 2 ring maybe I'll use my generation 2 ring for for now maybe I'll end up finding my gen 3 ring and and I'll wait and if I don't find my gen 3 ring by the time the Gen 4 Rings come out then I will buy a Gen 4 ring whereas typically I skip Generations when it comes to technology I don't buy every I don't buy I don't get the next iPhone each time it comes out of the next computer I just don't do
52:23 that I wait usually for at least a couple of iterations before I replace technology so okay so that's part of my decision making process now for married couples this can be difficult because two people may have a very different way of making decisions and it can cause a lot of conflict so what I can tell you is I recommend highly if you are not married talk about how you're going to make financial decisions with your fiance or with you know the person that you're considering making your fiance to
52:58 understand how is this going to work if we do get married okay are we going to have separate checking accounts when it comes to a big item like a house um how are we gonna deal with that so I will tell you that um one of the contributing factors to the breakup of my first marriage was my wife at that time went out and bought a house without consulting me literally right and and her attitude was well I'm going to use my money to buy the house I said yeah but we're both going to live there you know um and and and it was it was frankly
53:34 kind of a a long series of events where we were not acting in concert right so decision making isn't just how I make decisions it's also how decisions are made when the decisions affect other people so this extends to if you're in some kind of Business Partnership our financial decision is going to be made what are the tools you need to be able to make sound decisions having those decision-making tools is part of your financial literacy okay finally there's
54:11 Financial advice so no matter how much you know about finances no matter how financially literate you are it's extremely unlikely that you know everything okay I've been dealing with finances uh well at least since I was 13 right when I opened up that that bank account with my bar mitzvah money and got daily compounding interest right so that's close to half a century and there are reams of information that I do not know about financial uh finances and
54:47 financial literacy okay um you know I mean I I've taken a number of uh uh Securities examinations recently and I will tell you like uh questions about um options puts and calls they they challenged me right and and I when I talked to my friend Michael he's like oh come on it's blah blah blah blah blah blah blah blah blah and it's like easy for you difficult for me right so when it comes to so when it comes to financial advice I think the key issue is understanding
55:22 what do I know and what are the limits of my knowledge so that then I can go seek out advice and and and then the next step is where or how do I find trusted advice so with the internet it seems like I just go on the internet and I can find the answer to anything well that's true but how reliable is the source and that's that's something that we have to be careful about and not that people are necessarily you know going to purposely mislead us although certainly there are
55:57 lots of financial scams around an email and on the internet Etc okay but just you know how much experience does the financial advisor have what kind of credentials do they have um how successful have they have they been what has been some of their failures by the way if I were talking to a financial advisor who told me he'd never made a mistake I would not hire that financial advisor okay either they have they've only been working for you know a very short time or they're lying now I suppose there's
56:32 someone out there who uh has never made a mistake but even the the lauded uh what is his name uh Warren Buffett right that everybody oh he's the financial genius even Warren Buffett has admitted making mistakes and of course he has it's it's in the nature of human endeavor everybody's gonna make mistakes so what you want in when you're seeking Financial advice I would suggest is someone who will give you their best advice and will be candid when they make
57:07 mistakes so and and and help you fix them right because no advice is a hundred percent no or no I should say yeah no advice is 100 and no advisor is a hundred percent okay and someone we need to have the humility to recognize that and our advisors need to have the humility to recognize that okay so I'm just gonna real quickly go back to the beginning here so the four components of financial literacy knowledge skills attitudes and behaviors and and if we work on these and continually work on these we will
57:43 become ever more financially literate so it's not it's not a a a a an issue of being financially literate per se although perhaps there's sort of a a base level of financial literacy we need to have in order to be financially literate at all the real issue is building our financial literacy keeping up with where we are in life where we are in terms of our wealth where we are in terms of of the complexity of of the situations that we face that's where we need we need to keep our financial
58:18 literacy on par with where we are in life whether it's just for ourselves whether it's as a professional um that's that's those are all issues okay so as always uh if you have any questions feel free to get in touch with me you see these things here on the screen they'll be in the show notes feel free to reach out to me via email or send me a message through the various uh social media I'm happy to ask answer any questions if you um liked anything in particular please
58:53 let me know it's always good to hear and if you didn't like something or you think something is wrong by all means let me know um I do not claim to be infallible um I I do my best to be well informed but but some of these things are are matters of opinion and perhaps you know you've got a perspective on something that's different than what I talked about and and uh I'd be happy to to share that um if if if you've you know got got a valid point to make I I not only be happy to I'd really like to share it with uh viewers you know in an upcoming
59:30 show and oops what I got here okay there we go and here's all the the legal stuff I'm gonna stop sharing because we're almost out of time so that's that's what I have for you today on financial literacy next week I have a guess I hope you will tune in um and join me when I talk to my friend Brett Henderson who is himself a financial advisor he also happens to be a Marine Corps veteran and uh and has uh built for himself a very nice uh civilian life so um I hope and then I I
60:06 have another guest I think the following week so that's kind of ramping up so so for those of you who want to see some other faces on this screen um you'll you'll have a little bit relief from uh you know this so thank you very much for watching and joining me today and uh just want to remind you next week uh we we start our regular schedule on Monday at 10 A.M Pacific Time 1 p.m eastern time with trusts and Estates weekly uh Tuesday is uh business lessons from the military at 11 A.M
60:41 Pacific 2 p.m Eastern and then next week on Wednesday again uh the next version of today's show people making money uh with my guest uh Brett Henderson so I I I you know really appreciate you tuning in I hope I'll see you uh often uh next week and in coming weeks if you have um uh you know I mentioned some of the past shows please do consider please go to my YouTube channel and consider subscribing that way um you know you'll you'll be notified every time a new show posts and and I I do my best to be very descriptive about
61:17 the titles so you can tell right away whether it's something that uh you know you want that that you know that you're interested in and would like to watch so uh that's we go I'm a little bit over time here so thanks again for watching and uh have a wonderful rest of the day in the week uh yeah I don't have to wish you a good Father's Day yet and uh I'm gonna sign off as I always do with a tribute to my my very dear friend who uh I have no doubt is in Marie You Are My Belle darling thank you thank you
61:52 again and have a wonderful rest