0:02 Money influences nearly every part of our lives, but how many of our financial decisions are truly our own? We'll explore the people, pressures, institutions, and systems shaping our choices and how greater financial awareness can give us something even more valuable than money, the power to choose. Today on People Making Money.
0:30 >> Who are [music] you? And where are you going? What do you want?
0:45 >> Hello and welcome to People Making Money. I'm your host Kevin Bemmel and I'm here every uh Wednesday. I [laughter] don't even think that was the day of this. Um every Wednesday at 10:00 a.m. Pacific time to talk about job hunting and being an employee, starting and running a business, and building wealth. So, the whole financial side of our lives. And today I've been doing this uh what I what I call in repertoire, which is I'm covering each one of those topics, you know, one, two, three and then I start over one, two, three. And
1:20 so uh today um we are in the uh wealth building uh um point of of of the repertoire and we're going to talk about money and power and who controls our financial decisions. So, uh you know, it it's it's nice to think that oh, look, I control my financial decisions. Uh and and hopefully that is the case. Um but there are lots of pressures that
1:55 come to bear on us, that can turn what otherwise might be, uh you know, what we would call in the religious world, you know, our free will, uh into something else. And so, we I think we this is a a good subject for us to cover and to think about, uh because it it is easy for most of us to be swayed. Uh we want to be, you know, we want to be responsibly taking care of our finances, but at the same token, we want to help out our our
2:30 family members, our friends, and and you know, those those sometimes can come into conflict. Look, we want to have a nice life. We want to have nice things, maybe. Uh but, you know, on the other hand, should we really be, you know, buying, um you know, these, you know, this expensive item, um when we don't really have the money? But, you know, we're we're in the store and this the salesperson is making a good case that we deserve this. One of the words I like least in the English language in this context. So,
3:07 uh you know, I think sometimes we may uh surrender our power and not really and not realize that we're doing so. So, I I have five thoughts on this topic uh that I want to share with you uh today. And the first one is that, um our environment shapes more of our decisions than we realize. Uh and and I I alluded to this just a moment ago, but but friends, co-workers, family members,
3:42 they all influence our spending habits. Uh and and it starts when we're very, very young. So, if you look at the way that I dress, okay? Um as you might imagine, it's more expensive to dress this way than it is to dress in a, you know, t-shirt and jeans. Uh the fact of the matter is the way I was raised, uh my mother and and also my older sister, who at one time was in the fashion industry, you know, they
4:18 they raised me to be someone who, you know, cares about being a well-dressed man, I guess is the is is how we would have put it, you know, 30, 40 years ago. Uh but but also uh you know, now at this point in my life, you would think, well, what do you care what your mother and sister taught you? Well, I do. They're my family and and I want to present myself well in their eyes, out of respect for them, out of love for them. And so, you know, they
4:53 they have had a lifelong impact on me in terms of the way I dress and therefore what I spend on on clothing. Uh so, you know, and I and that and that happens to all of us. And again, it starts when we're when we're children, right? So, when I think about uh my um grandparents' generation and and to a lesser extent my parents' generation, they lived through the Great Depression in the 1930s. Uh they did not throw stuff away.
5:29 Everything they had was precious because especially because uh my in case of my mother and father as children, in the case of my grandparents as young adults, uh they had so little during the Great Depression, right? And so, I think, you know, the first thing is is to be aware of these issues and how they impact us. And then to give some thought as to whether you know, it's they they've created a part of us that we want to be a part of
6:06 us, that we accept, or whether we reject it. So, I can tell you with my my older sister Marla
6:15 >> [snorts]
6:15 >> um like me, she likes to dress well, right? We talk about it pretty regularly, you know? And and it it is interesting because we have many of the same tastes, albeit, you know, she's a woman and I'm a man. Um so our our our our mother especially had a very pro- a profound effect on on our spending habits. But also social expectations um drive uh purchases sometimes more than personal priorities, right? So-called peer pressure. So, if we have
6:53 a group of friends that likes to eat out to at for dinner a lot, we're probably going to eat out for dinner a lot. And that that is a spending decision, right? Uh so the you know, the the group with whom we socialize will will impact us. There's a great episode of the TV show Friends from the I think it's the I want to say the second season, maybe where three of the friends who are doing well professionally and are making pretty good money uh want to go to a a a concert uh a
7:31 Hootie and the Blowfish concert and the other three friends, they're not doing well financially and and they really can't afford to go to the concert. And um and so uh, there's there's kind of a an argument between the two groups. And, and so the the three friends who feel that they can afford it, they they decide, "Well, they're going to they're going to, you know, pay for the for the tickets for for all six to go." And they they think they're doing this great thing, right? And they go, "You know, we're all going to go to the concert." And the three who can't afford it are like,
8:07 "Well, we're not a charity case, right?" So, uh, but it shows you I mean and and of course it's friends, they work it out. Uh, but but I think it's it's illustrative of this sort of peer pressure because in the beginning of the show, uh, you know, they go to this high-end restaurant where, [laughter] you know, a salad costs, you know, the equivalent of, I don't know, like $20 at, you know, what what it be today, right? And and they really can't afford it, but they go because it's somebody's birthday or celebration or whatever it is, right? These are the kind of things in which we get we get caught up.
8:43 And they can, uh, rob us of our the power of our our own power to choose. And and so the first step in gaining true financial independence is to start recognizing these external pressures and start sifting through them. And again, assessing, is this is this really who I want to be? Does this Does this conform to my values,
9:19 right? I know for myself, uh, I I used to I used to eat out, uh, for dinner quite a bit. Um, and I almost never eat out for dinner anymore. Um, I I just part of it is I I I I just don't enjoy it. Uh, and you know, there's other places where I want to spend my money. And, um, and the fact of the matter is, I enjoy cooking, right? So, um, but but but when I was married, there was pressure to, you know, go out to dinner. Um, and, uh, now I don't have that
9:55 pressure, and and I'm able to look at it and and say, "No, this is who I really am as a guy who, you know, makes his meals at home. I make myself, you know, a nice dinners and have a glass of wine or whatever, right? And and so, th- th- this is the first part of of of taking power over our finances. Okay, so next, marketing is obviously designed to influence our behavior. So, if we were to go back 125 years ago to the turn of the last century, right? That was in the, well,
10:33 pre-what we now call consumer culture, right? So, it's not that there was no advertising, but there wasn't anything like the kind of marketing and advertising campaigns that go on now. It was with with the advent, number one, of manufacturing and manufacturing of consumer goods, that the modern-day marketing and advertising industry developed in order to expand markets for
11:08 all these products being produced, right? And there's nothing inherently bad about that, per se. But, we would be foolish to think that it didn't have a very profound impact on us. So, companies spend literally billions of dollars studying consumer psychology, right? And and look, there's a lawsuit going on right now where several states are suing Facebook for addicting children to
11:45 social media. Uh you know, I'm not going to get into the merits or demerits of that lawsuit, but in the end, you know, Facebook is providing a service and they want people to use that service and Facebook does well, Meta is the company, Facebook is the service, but Meta, the company I assume does, you know, a tremendous amount of study of their customer base to see how, you know, they would say it's to how to serve their customers better and evidently all these state
12:22 attorneys generals, they would probably say it's in order to addict evermore people, you know, to the Facebook platform. So, so the fact of the matter is we while we don't have anything like a full understanding of human the human brain and human behavior, we do understand a lot about consumer psychology and it can be used it can also be manipulated, right? And that's that's the danger. So, things like uh scarcity, urgency, social
13:00 proof, they're all very persuasive tools, right? And that those are just the ones that you could say are legitimate, right? There are illegitimate tools that have been used in the past. So, back in the 1950s, theater a movie theater owners would put in one or two frames of uh like popcorn, Coca-Cola, whatever into a movie, it would go by the viewer so quickly they wouldn't consciously see it, but subconsciously they were picking up, "Mhm, popcorn." Right? And so
13:36 popcorn sales would go up, right? And when when uh people found out about this, the the the practice was was banned. So you know, it it can get that manipulative, right? But even just, you know, look, why does a Birkin bag sell for the kind of money for which it sells? It's because they're very scarce and they've created Birkin has created a huge desire among uh presumably, you know, women, uh young women, to have this
14:11 item. It it it it demonstrates a certain, you know, standard in society to have an original Birkin. And so they can get tremendous prices for their purses and in fact in some cases I'm I understand used ones will sell for more than new ones, right? Through using tactics like scarcity and social proof, right? They are incredibly powerful tools. So recognizing these tactics can help you make more intentional choices, right? So
14:46 I I I I know you know, because I'm you know, I'm into clothing, I get, you know, a lot of emails every day from, you know, you name it, from Lands' End and Bloomingdale's and whatever and like they, you know, like 80% off, today only. In fact, I just just before I I um got on this show, I was checking my email and uh I oh, it was uh um a men's clothing store here in in the Los Angeles area that I haven't been to for a while, Sy Devore. Um it it Frank Sinatra used to shop there.
15:23 That's how long uh it's been in business. And an email came by or I saw an email from it and said, "Yeah, 80% off." You know, like like ending soon kind of thing. And my first impulse was to click through, right? And see I'm like, "Gosh, 80% off, right?" But the reality is like I don't I don't need to be First of all, I didn't need to be doing it then. I needed to be getting, you know, getting ready for the show. But second of all, you know, don't really need more clothes even if it's like a fantastic buy because I'm getting something for $200 that regularly would have been priced, you know, $1,000,
15:59 right? But but these are the ways that we can be manipulated by marketing and we need to kind of steel ourself from them. I know one of the things I do now is if I'm buying something online, unless it's, you know, toothpaste and I know I'm going to be out of toothpaste, but if it's something discretionary, okay, I'll shop for it, I'll put it in my cart, but I won't buy it until the next day, right? Cuz that way I have to kind of sit on it. Do I really need this? You know, I'm you know, I mean,
16:34 you know, is this something that is really going to make my life better? And sometimes it is and sometimes I go, "No, not really. I don't need to be buying this, right?" So, we need to we need to create habits that so that we are not unduly influenced by marketing. Okay. Just now another very powerful influence on our financial decisions is debt because when we have debt, it limits our freedom, right? Because we have to be paying those debts
17:10 back, right? Debt is a I mean, aside from something like, you know, buying a house or maybe maybe buying a car, but if we have, you know, credit card debt, that basically um you know, if if we used it to buy discretionary items, what we've done is we've advanced our our pleasure, right? Now, sometimes we use credit cards. We had a a healthcare emergency or some other kind of emergency. We lost our job. We had to buy food or whatever. Okay. You know, sometimes we we do incur debt because the alternative is we really
17:45 can't pay to live. So, while that type of debt will limit our freedom, on the other hand, it it is it is what is sustaining us. And so, you know, we have to deal with that. I think the debt we have to be really careful about is debt incurred for discretionary items because that's limiting our future uh financial freedom uh in in order to gratify ourselves today. Okay? So, you know, look, the the problem with
18:20 debt is it it it it it raises our fixed expenses, right? And so, then this reduces our our flexibility. It reduces our ability to save and invest. It reduces our ability to maybe take advantage uh uh of an opportunity to uh you know, maybe to go somewhere with friends because we've you know, we we we have to make our credit card payments, right? And so, we end up we end up with this burden. So, I I remember um I I started my first business back in
18:55 1986, and I basically used credit cards to start a business. I was a very young man, and no bank was going to give me money. And you know, I carried that debt for quite a number of years um and and you know, while I was building my business and then finally paid it off and [snorts] it was such a freeing experience to not have to make uh credit to make payments on a credit card balances, right? And and thereafter I only whatever I spent on the credit card, I paid off, you know,
19:31 you know, when the bill came due. So, I wasn't carrying any any debt and that freed me up to be able to really make the financial decisions that I wanted to make. So, sometimes when we have a lot of debt, now we're in a situation where because we have to make those payments, we can't make a job change. So, we we we have to, you know, we're stuck we're stuck in a job that we don't like, but we're we're not in a position to quit and find another job because we have to be able
20:06 to meet the, you know, the debt service expenses. Um it can also mean we're, you know, stuck in a bad investment because we've lost our our, you know, ability maybe to buy ourselves out of that investment, something like that. So, cash reserves, they increase our negotiating power and our personal independence. And I will also say in in in at least some cases, they allow us to get a better deal because we can pay cash as opposed to, you know, putting it on a credit card, even if we are going
20:41 to pay the credit card back. Merchants know they all pay merchant fees when they take a credit card or for that matter a debit card, right? And so, if we're willing to pay them cash, they may be able to give us a price break and on an expensive item, you know, even 2 3% can be a considerable amount of money. So, so debt can limit freedom, okay? And by by getting out of debt, we gain a lot more negotiating power and personal independence. Let's take a quick break and we'll come back for some more.
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21:56 or visit magnumprops.com. Okay. Next, um institutions can also shape our financial choices. So, the institution, for example, may be the government. So, the government uh you know, it taxes us. So, we have to pay our income taxes. We have to pay sales taxes. We have to pay property taxes, right? All of this has an impact on our financial decisions, right? And and like it or not, we have to comply
22:34 with those laws. But, so do employer benefits, so do lending standards, so do regulations that influence the wealth-building opportunities. So, for example, to invest in certain private offerings, okay, it's different if we're a qualified investor versus a non-qualified investor. So, a qualified investor has um much more flexibility in the things in which he can invest than a
23:09 non-qualified investor. And for the the people promoting their their you know, an investment, they they also have more flexibility in dealing with qualified investors than non-qualified ones, right? Uh lending standards, right? So, um you know, even if it's something like a credit card or an auto loan, our credit score is it's pretty much it, right? I mean, if if you if if you've if you've applied for a credit card lately, I know I just applied for one um just a few weeks ago
23:44 um and uh you know, all they did was track you know, check my credit score and go, "Yep, okay. Check, you're good." Right? And 10 days later, I had the credit card uh in the in the mail, right? So, the fact of the matter is though, as I look at my credit score, right? One of the things I looked at is I Well, okay, I got approved on this credit card, but I'd still like to get my score up. What do I need to do in order to increase my credit score? Because because it has
24:19 such a large impact on my ability to to borrow and have financial flexibility. Again, not not to borrow to then have a lot of debt pile up, but the fact of the matter is uh one of the aspects that affects that it that impacts a credit score is what percentage of the balance of a credit card um is being used. Even if it's Even if it's being paid off every month, there's still a certain percentage being used. And one of the things I was looking at was saying you want that to be under
24:55 20%, right? So, if you've got, you know, one credit card that allows you to charge $5,000, but you routinely spend, you know, $3,000 a month, right? Even though you pay it off every month, you're using 60% of the balance. So, that'll have a negative impact on your credit score. So, you you know, you'd be you'd be better off getting two more credit cards, so you have a total of $15,000 in credit if they're 5,000 a piece. Now, $3,000 of $15,000 is only 20% and presumably
25:31 then you'll have a better credit score. So, looking at some of these institutional issues is important in developing greater power of choice over financial decisions. So, understanding these rules is important and it's a lot to understand, right? There there When I when I talk about lending standards, I just mentioned credit scores, but if you're looking to get a mortgage to buy a house, in that case it is more than credit scores. It's your your They're going to look at your income and
26:07 there's percentages of income that can be used toward the mortgage. There's a percentage of your income that can be used toward pay making payments on the mortgage plus all your other debts, right? So, that that's an issue. And um there are uh you know, rules that lenders have about what percentage of the value of an asset uh can be borrowed. So, you know, the you know, having more money is a great thing. It does, in theory, give us more
26:42 more opportunity and and and more freedom, but also it carries with it uh a higher obligation to understand the rules that come with greater financial resources. So, gaining financial literacy is about in part about understanding the systems in which we are involved when we are making financial decisions, right? And and by the way, if you're interested in
27:17 gaining financial literacy, I'll mention the the mini-series I did with my friends John Robino and John Clark called Money in Motion. If you go to um wait a while YouTube channel or the wait a while shows on Apple podcast and Spotify, you can find that mini-series and we it's seven episodes, I believe, and we we go in into pretty good depth on a lot of issues of financial literacy. Okay, so
27:50 >> [clears throat]
27:51 >> institutions will can shape our financial choices and so we need to understand how they work so that we can work within the rules. Finally, I think we need to recognize that the greatest financial power that we can have is the ability to make a choice, right? So, wealth creates options more so than just merely possessions, right? So, for my clients
28:26 who in general have inherited a lot of money, right? And in many cases didn't grow up with it. Okay, so now they've got this new found wealth and they're like, what do I do with this, right? So, what I try to explain them what I what I work to help them understand is having wealth isn't about having a lot of stuff. It's about having a greater ability to craft the life that you want to live
29:02 and to solve problems that inevitably come up in everybody's life. Okay? That's really what wealth is about. And notice that both of those are choice functions. Right? Living the life that we want to live is about being able to exercise those choices and having the financial resources to support the choices. Having more options for solving problems is also a choice because now we you
29:38 know, we we can decide, do I want to spend, you know, $10,000 solving this problem and have somebody else take care of it for me, or do I want to spend $2,000 solving this problem and I'm going to take care of it myself. That's the kind of choice that we get that someone who maybe all they have is $2,000 to solve the problem, they don't have the the they don't have the option of hiring someone to solve it for them. They're going to have to do it themselves, right? So, true wealth or I should perhaps I should
30:13 say the the true use of wealth is to give us the ability to expand our choice, right? And the ability to say no is often more valuable than the ability to buy more. And the reason I say that is I I I I I I don't have any studies to support this, but I suspect the vast not the vast majority, but more insomnia is caused by people worried that they don't have enough money
30:50 than I have a lot of money and I don't know what to do with it. All right? And so if if if my supposition is correct then our ability to say no to the thought of buying something retains those resources and that comfort level that allows us to sleep more soundly, to live a more content life, to be a little bit less anxious in this very stress-filled world.
31:26 And so cultivating no is a very healthy way to make to take more power over our choices. In many ways, the more often we can say no to the things that we don't we don't really need right? The better off we will be. So long-term financial success ultimately comes down to increases in time oh I'm sorry, increases in control
32:01 over your time your career, your life. Right? We we cannot control all circumstances. What we can what we can control is what we say and what we do. Okay? And both of those are are are ways that we make financial decisions actually come into being. We do something, we say something, right? So the greater control we can take over ourselves the better luck the better career we'll
32:36 have, the better family life we'll have, the better overall life we have. And that's why I think it's so important to examine what things are impacting our financial decisions and take steps to lessen their control over us. So, curious to know uh what are the biggest um influencers on your finances? Is it a Is it a family
33:11 member? Like in my case, it was my mom. Is it susceptibility to marketing campaigns? Is it, you know, you're in a lot of debt and that really impinges on your financial freedom? Um look right down below you and you'll see links to social media. I'm not asking you to to uh you know, disclose anything embarrassing, but just, you know, share a thought if you'd care to and I'll always like to hear from you and and and I I certainly will respond, especially if you if you ask me to. Um but I think we all have our struggles in this uh
33:48 regard and so to the extent that we can share thoughts to help each other out, we'll be much better off. So, uh thank you very much for joining me today. Schedule of shows: Mondays at 10:00 a.m. Pacific Time, Trust in the States Weekly. Tuesdays at 10:00 a.m. Pacific, Business Lessons from the from the Military. Wednesdays, like today at 10:00 a.m. Pacific, People Making Money. And every other Thursday at 5:00 p.m. Pacific Time, join me at Jigger's Place for a cocktail and a schmooze. We'll
34:23 talk about all the things unrelated to finances, like books, movies, ideas, uh values, all those kinds of things. you very much for joining me. By the way, if you are watching on Apple Podcast or Spotify, um, please follow the People Making Money Show, so you'll automatically receive new episodes every time they post, and let me know which topics you like and which ones you'd like to see more of in future episodes.
35:01 Same thing goes for, uh, my YouTube channel, as well. So, wishing you a wonderful rest of the day, and signing off as I always do. Marie Darling, you're my bell. Courage at all times.