E89: The Huge Benefit of Investing in What You Enjoy

In this episode, we discuss why it’s so important to focus your investing in the areas that you truly enjoy and believe in.

Most people just do what everyone else is doing or they get caught up looking at the rate of returns. However, as we’ve seen with the recent market sell-off, all the returns for the past few years disappeared in a matter of weeks. It’s time to take back control of your money.

Topic Discussed:

  • The unsound choices people make when panic sets in
  • How kneejerk reactions get people in trouble
  • How long it takes to recover from market downturns
  • Acknowledging the lack of a crystal ball and investing accordingly
  • When the FDCI can and can’t manage crisis
  •   How to avoid the next bubble burst or other market crash

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Podcast transcript for episode 89: Investing in What You Enjoy

Nate: In this episode, we will discuss why it’s so important to focus your investing in the areas that you truly enjoy and believe in. Most people just do what everyone else is doing or they get caught up looking at rate of returns, but as we’ve seen with the recent market sell off, all the returns for the past few years disappeared in a matter of weeks. It’s time to take back control of your money. She’s Holly, and she helps people find financial freedom.

Holly: He’s Nate, he makes sense out of money. This is Dollars And Nonsense. If you follow the herd, you will be slaughtered.

Nate: All right. Well, for two episodes in a row, the only thing that’s on anyone’s mind is the coronavirus and the stock market effects it’s having, and the effects just on our lives in general. Holly, today I actually went this morning to Sam’s Club and I don’t know if our listeners understand this, but we shoot our podcasts in advance and record it in advance, so they may not be hearing this at this time, but right now as we’re talking about it, the big crisis is toilet paper.

Everyone’s running out of toilet paper and I could believe it, but I didn’t even think about it, so I go to Sam’s and I have never seen so much toilet paper in my life, but not exactly stocked up. I mean almost every single cart in the entire store had a bag of 45 mega rolls of toilet paper, and there was I would say 40% of the people there had two bags of 45 rolls of toilet paper, like a year’s stock.

I don’t know how long they think we’d be quarantined. Maybe by the time this episode airs we will all be quarantined. I’m not totally sure, but there is certainly panic and it has repercussions, but there’s a lot of things we can learn about how we should be managing our finances when things like this happen. The people like you and me who say, “Hey, don’t get just so comfortable with stock market returns and these other things. Start finding what you really believe in and go with that.”

A time like this really shocked people into reality, because yeah, Holly and I have been saying this for so long and we’re going to get into that today, so Holly, let’s go ahead and jump in. What are we doing? What are some things that you’re hearing from your clients, and what’s going on?

Holly: Well, I think one of the biggest concerns, and that’s even prior to today, when we’re recording this, the reality is that people are starting to look at their 401(k), their retirement program, and they’re losing significant money just in a matter of days. Not weeks, days, whether it be one of, “Oh my goodness, why didn’t I start this sooner? I’ve just lost $11,000. How long is it going to take me to get that back?”

Because the money is still sitting in their 401(k) or their retirement program, “And should I take that money out? Is it better off somewhere else or safer, or should I just leave it, because of penalties and taxes?” In reality, they’re really worried about the penalty of taking it out and the tax ramifications of it. Yet, in reality, if they don’t do something, they’re not going to have anything left or very little in regards to even having a retirement program.

Nate: And what we’ve been hearing for years, “Nate, I hear you talking about [inaudible 00:03:42] I really believe in that concept. I would love to have secure growth, but shouldn’t I be putting some in the market? Look how well it’s doing, making 20% last year,” or something like that, because the last few years have been really pretty good. I guess I shouldn’t last years. Last year was really good.

The year before that was not, and so forth, but either way, and we start hearing these things and you’re missing the point that we’re trying to say, because at any point in time the stock market is doing really well and most of them people are late to the party, so I guess what Holly and I have always been preaching is that it doesn’t actually matter how well the stock market is doing right now. The question is how well will it be doing when you need the money?

And that can be a different question and totally different answer for a lot of people who are trying to retire in 2020, the same thing as what happened in 2008. They’re going to have to postpone. By the end of this crisis, who knows how low the market’s really going to have dropped? We don’t know the full ramifications, but either way we’ll know we’ll have lost a significant amount of money, and Holly, you and I, we were looking at those calculations.

Holly: Yes.

Nate: If you had a pool of money and you put it into like the S&P 500 or the Dow Jones or something, in the year 2000 and you go until today, the actual return you would have had on that money just sitting in the stock market is right around 4%.

Now, that would be before any taxes would have to be owed on that money. That would be before any fees would have been owed on that money, which I’m sure if you’re investing through the 401(k) or an IRA or something like that, there’s going to be fees and that would also be assuming that the mutual fund you’re in produced at least what the stock market produced, which everybody knows that it’s so rare for a mutual fund to actually outearn, let’s say the index like the S&P 500. In any given year, mind that, let alone over a period of 20 years, it’s practically impossible. No one is doing that, so we’re talking sub 4% returns, significantly sub 4% returns.

You could practically be where you were in the year 2000 today. Who cares what it did last year? Unless you’re in trading and you’re buying and selling, and you’re really smart about how you’re doing this, don’t get caught up with the herds. “Oh, it’s doing really great right now.” The only thing that matters in the stock market, it doesn’t matter how long the time period is. When did you get in and when did you get out? And everything else is nonsense, because it’s a valuation that changes, as we’ve seen this week, immensely over a sickness from China. Come on.

Holly: If you had even $100,000 of money sitting there right now in the Dow, and today alone you just lost 10 grand. There’s not many days you can keep going or even weeks of losing that kind of money before you have zero, even over 20 years of the 4% growth. That’s 20 years where you never could touch that money you put in whatever lump sum it was, and so you don’t even get to touch that money, and I guarantee what you put in just with inflation over 20 years is probably higher than 4%. Just a ballpark guess there, but I’m guessing that inflation over the last 20 years has been more than a 4% increase.

Nate: This just accentuates what we’re trying to say. Nobody has a crystal ball. People ask, “Well, should I put money in the 401(k) or should I just put it all into infinite banking policies, or should I do something else?” Once again, you have to start believing in something and going after it. I can’t tell you for sure which one will be better 20 years down the road, but at least if you’re investing in something you believe in, then you’re going to do better with it and you’re going to believe in it more, and these wipe- outs are not going to crush your spirit and cause you to panic, so for me, I don’t believe in the stock market, because I see these losses. I see it being built up on the federal reserve, printing money and flooding the economy within.

I think it’s all just a house of cards. There’s nothing real there anymore, so of course I’m thinking I’m not going to buy in, and I say that now, Holly, which I mentioned in the last episode. It’s going to get real tempting to buy in here at the bottom very soon, so maybe I’ll be saying something different, but that’s what, that’s the luxury of having policies. You’re not limited to doing anything you’d like to do, and it allows you to take advantage of opportunities. There’s going to be so much wealth created in this recession that we’re entering for those that have capital that has been unaffected by the recession.

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Holly: We’re not just talking about the stock market and our mutual funds, and stuff like that. I don’t know about you, but I’ve got emails from my bank, “Hey, we’re still open for business and this is what we’re doing, but your money’s still safe.” When a bank has to send me an email, reassuring me that my money’s still safe, that’s when I start having warning bells go off in my head of why are you telling me my money’s still safe?

Nate: Exactly. Well, I knew we’re going to talk about that too. There was an article just today in the Wall Street Journal. I’m not looking at right now, but the title was something like, “Everything is Awful for the Banks,” so it is a perfect storm for banks to lose a lot of money with people foreclosing and not being able to repay their loans at a higher pace than normal due to layoffs at companies and revenue problems. There’s going to be lower interest rates, which as a consumer is great, but at a bank, at some point the rates get so low, they just don’t make very much. Savings rates are still practically zero and loan rates are where they are.

They’re still pretty low, but if they keep going down that’s just going to eat into their margins even further, and the fact that most banks make a lot of their money now, not from lending, they have investment houses that they own on the side that generate a lot of profit. Well, when the stock market goes down, their fees go down to some degree. They’re still getting paid, even though you’re losing a whole bunch of money and that’s always exciting, but aside from that, their fees are based on how much money people have, and if people pull money out of the market they won’t be making anything off that money. Just goes, or very little, so either way, I guess what we’re saying is I’m interested to see what’s going to happen when the FDIC does have to come in and start bailing out banks and bailing out depositors when their banks fail.

I think we’re in for a rude awakening, as we realize that the FDIC does not have enough money to manage a banking crisis. I’m not saying we’re going to get there. I hope we don’t. That sounds terrible, but it’s true that the FDIC, they’re insuring these deposits. They don’t have the money. If you research it, you’ll find they don’t have the money. Where is that money going to come from? I don’t know. Maybe the taxpayers, I don’t know. Maybe. Maybe we’ll get a big loan from the Chinese government. I don’t know, but it looks gray.

Holly: Nate, we are the taxpayers.

Nate: Yeah, use my money to bail my own account. What? I don’t have any money anymore.

Holly: I don’t have any money.

Nate: My account was drained, and then no one’s there to re replace it. I don’t know.

Holly: Well, and I think that’s important too, because people are now with what is happening, they’re less likely, I mean like, like you say, but they’re less likely to go want to borrow money. I keep a very small amount in our banks, I’ll be honest. I like my life insurance policies a lot. I feel real safe with those. It makes me want to take even more money out of the bank and I don’t want to be a panic type person, but I will say like where you went to Sam’s, I went to Costco.

Now, I didn’t go to buy toilet paper, funny enough. We were just out of milk, and I was like, “Never go back or wait a while to go back to the store,” because I have never seen lines, Nate, like I saw. We’re talking wrapped around through the store lines to checkout, with every single checkout person open, no shopping carts available and nobody had toilet paper in it, because they were out of toilet paper, but I did have a cashier tell me that a fight had broken out over toilet paper.

Nate: Well, what’s funny is I’m making fun of buying toilet paper. If you’re listening to this podcast and you’re the guy with three bags of mega rolls, I’m not trying to make funny. Maybe I’m the doofus. Maybe I should have been buying some toilet paper. I didn’t buy any toilet paper when I was there, because I
was just too in awe. I didn’t want to be a part, I didn’t want to be the herd. I’m like, “Man, I don’t need toilet paper right now. I’m not going to buy it.”

Holly: I think when we were talking about what you want to invest in, what you truly believe in and things like that, we don’t want you to follow the herd, and we really want you to actually make a conscious choice of where you’re putting your money and why you’re putting your money there, because in reality, what is happening and occurring is people are making decisions based off everybody else or somebody else’s panic, instead of actually asking themselves, “Do I need this?”

I saw an individual that I’ve never seen somebody load up on so much meat in my life, and I was like, “Eventually, it’s going to go off or it’s going to go bad.” In my head I’m thinking that, but obviously people are believing or thinking about the worst. I tell you that you really want to make a choice of where you have peace. I truly haven’t worried this entire time or even had a thought of is my money okay? Because I know where my money is, Nate. That’s more of the peace.

I feel really bad when I’m talking to clients and individuals, that they’ve lost, we’re talking to over 10, 20, 30 in a couple of weeks, just because of what’s happened and taken place, and saying I was going to retire. I actually had this conversation. I was going to retire in three years and now it’s like maybe I can retire in seven years or maybe in eight years, and that’s the question. How long is it going to take me to get this money back? If you think of over a 20 year period in the stock market alone, you only got a 4% return, it’s going to take a long time to recover any of that money, if you ever are able to.

Nate: I just don’t know how you can sleep. We’ve talked about this. It’s hard to put a price tag on peace of mind. Right now, I feel much better having my money growing in policies, and I’m going to make 20 grand this year with my policies. It’s the worry is not there. I do feel bad for the people who are losing money, because how do you feel safe? How do you feel secure? You may have money, but you’re like, “How much is it going to be left after this?”

And then at the bottom you don’t even really want to pull it out, because you’re thinking, if I take it out now, I’ll just have lost all this money. I’ve got to wait for it to get back, and then we don’t even know how long that’s going to be. It’s not a fun place, so our encouragement today, as you’ve heard us many times in the podcast, we’re sorry for being repetitive, but we just, it’s don’t get caught up in the rate of return game. Oh, we’re making so much money. Let’s leave it there.

It’s so important that you grasp on to what you really want your money to be doing. If you really believe that investing in the 401(k), maybe because of the employer match or something like that, is a really good deal, that’s fine. Do it, but believe in it. Don’t just say, well, is it going to be better? You’ve got to make a choice. Take control, take ownership of it.

As Holly and I would say, we prefer funneling as much money as we possibly can into policies and having that money available to make other investments as we see fit, whether that is here at the bottom of this stock market drop, or whether that’s into real estate or in businesses or in lending. There are so many different ways in real estate and various things to make money that’s not going to be as affected as a stock market is, and things that you can control to some degree.

If you go buy a house, put some remodeling work in it, increase the value, even if the house drops in value, you would have created value through what you did with it, because you’re good at doing it, because you’ve spent some time doing it. So many people don’t want to take ownership of their choices financially, and that’s what I encourage you to do. Take ownership of the choices. The woe is me. the mentality needs to get out of here. Start learning, start researching, get ownership of your choices and run with it.

Holly: The other thing, Nate, is that owning up to the fact, it is your choice. You can determine where your money’s going, and what you want to use it for and how you want to use it, but until you take control of the money, as long as somebody else is controlling your money and dictating how it grows or what investment it goes into, then really you’ve basically just said, “Here you do this. You take my money and whatever you decide I’m okay with.”

And at some point we have to stop being okay with that and say, “No. I want to know I am in complete control of my money and I’m using the money the way I want to use it,” versus how somebody else is telling you to do it or use it, because most of the time you only lose money when you give control of that money over to somebody else, who you honestly thought could do a better job with it. Most of the time, that’s the only way you lose the money, is because you gave it to somebody else. It is your money. You’re doing all the work, so take control of that.

Nate: This will pass and we’ll get back to life, and don’t fall back in the trap of the stock market’s going to do well. If you want to dive in, if you’re listening to this and you already own policies and you got money sitting aside, and you think, “Man, once we hit rock bottom, I’m going to dive in.” Maybe that’s a good idea, but you’d have to be smart. You have to understand, you have to research and do things. You’ve got to live by the set of principles that you have.

For me, there is no better foundation than policies and from this foundation of never being able to lose money, always getting more money every year, guaranteed. Contractually. They can make choices easier, can make life, living life easier, more simple. Really better in every way you can, so don’t get caught up in the rate of return game. Don’t just make decisions on what’s going to make you the highest rate of return.

Just as a side note here, before we end, I’ve had people pose different investment options for me and they say, “Man, I’ve been making 12% cashflow a year from this. I’m making this,” and so forth, and I’m thinking I’m not going to buy into an investment, because you’re quoting to me rate of return numbers. I’m going to go in if I believe that it’s based on a good premise and if I believe the profit is worth the potential risk, and on some of these investments, especially investments where you are not actually investing directly in assets, but more investing into a company of sorts who’s making the assets for you and sharing returns with you, those are always dangerous, because if they go bankrupt due to mismanagement then you will lose out, and I’ve seen that happen way too many times, so just don’t get so caught up in rate of return game.

That’s why we say, if you start recapturing money using the infinite banking system and you’re able to pay yourself back for your car loan, your mortgages, your credit card payments, send kids to school and pay yourself back, and you start recapturing this money and have it all earn a steady return in this policy with no risk, life can be simpler and it can be very profitable just by how you manage money, without having to work any harder or change your cashflow. That’s really what we’re all about.

Holly: Yeah. I think you couldn’t have said it better there, Nate, that our goal is really educating you guys and really allowing you the ability to truly have peace of mind, and really know what your money’s doing, and when it’s growing and how it’s growing for you. That’s really the joy of it, and I really agree. You can’t put a price tag on peace of mind or the ability to just know that no matter what is happening with the stock market, your money is still secure and it’s still safe. And I think for those of you out there, I wouldn’t just keep waiting and say, “Oh, I hope this turns around,” or, “Oh, I hope that I know what I’m doing,” and we’re so worried about these penalties and tax fees that we don’t actually take control of the money.

Nate: And don’t let the nickel hide the dime. Just you’ve got to make a choice and it’s never a bad choice to start putting money in policies, because as we’ve always said, we can always move it out of policies and invest somewhere else, and actually make more. We’d love to show you how to do that, but absolutely, Holly.

Holly: I hope you reach out to Nate or I and just say, “Hey, can we sit down and talk?” Because you need to be doing something different and we’ve got to get out of the herd mentality. We just have to.

Nate: You’ve lost money this time. Great, but don’t let the next bubble bursting have as great of an impact as this one had. We can’t go back a couple of years and transition money into policies then, but we can change where you’re at now to avoid in the future. That’s great, so this has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e89.