Happy day to you, this is Ken Kaufman and I am thrilled you’re here for Episode Number 90,12 simple ways to supercharge your retirement. Now, I am sitting here at my desk in my hand is a book called “We’re Talking Millions“. The subtitle is 12 simple ways to supercharge your retirement. This is a book that’s authored by Paul Merriman and Richard Buck, those of you that have listened to the podcast know that I’m a big follower of the work that these gentlemen do and that the Merriman foundation does.
I think they’re doing a phenomenal job at putting out great financial education and especially in the area of investing. Not talking about trading stocks, and flipping portfolios over, this is a solid true long-term buy and hold strategy that they espouse and that they teach and this book does this amazing job, I think. And I believe I’ll probably dedicate a couple of episodes to talking through some of these things. But they feel like they’ve isolated 12 critical ways that can each be worth up to a million dollars or more each, depending on how well you do with executing on each of these 12 things.
So, I’m going to go ahead and I’m just going to open it up I have read through most of it now, and want to just talk about this concept where they really feel like these 12…again, these 12 items are about if you get them right can have potentially million dollar impact on building up a retirement portfolio and being able to have that financial independence in retirement. The interesting thing, if I go through and look at the 12 steps, I’ll go ahead and just read through them really quickly.
The first one is, save money instead of spending it all. If we all stop and think about how much money flows through our hands in an entire lifetime, that could probably make a million-dollar difference or more potentially in what we have saved and where we could be when we get to a point in time when we retire. Meaning we’re not generating a lot of income at least from trading our time for labor or for money.
The second one, start saving sooner instead of later. Saving that money sooner gives more time for that compounding growth to take place. Number three is, invest your savings in stocks instead of bonds and cash. Number four, invest in many stocks instead of only a few which means like diversify out across a lot of different companies. Number five is, keep the expenses low. Six, choose index funds instead of actively managed funds.
Seven, include small company stocks in your portfolio. Eight, include value stocks in your portfolio. Nine, don’t try to time the market or outwit it. 10, invest using dollar-cost averaging instead of waiting for the right time to invest. 11, keep your taxes low. And 12, do all this in one simple step by using a target date fund strategy. And they’ve got a really interesting unique strategy around how to use the target fund and accomplish everything from an investment perspective that they’re talking about in the book.
But I think what I want to do is just to highlight a couple of these and then probably take an episode to talk about, you know, a few of them at a time so that we can get really clear about how each one of these decisions if executed well can mean a significantly greater return, significantly more money available for you as you are investing and setting aside and allowing it to grow. So number one, it says save some money instead of spending it all. That is financial planning 101, learning to put a budget together and have some discipline. And I’ll just digress for just a moment.
About a month ago, I had the opportunity to attend a seminar all online through zoom, of course, and in today’s COVID world where Jocko Willink, who’s the author of Extreme Ownership, former Navy CO he’s got a consulting company now all-around leadership and he wrote a book actually called “The Dichotomy of Leadership”. And when he was talking about that a little bit and some of those principles in the seminar, and then he broke off, and he started talking about the financial dichotomy which is all of us want to be independent financially.
Meaning not dependent on anyone else, able to do whatever we want with our time, and not be, you know, stuck to a job, to get our bills paid, any of the there’s so many scenarios that I could lay out here. Basically, we just have total freedom and we have enough money to do whatever it is, you know, that we’ve set our goals for and that we want to do. And he talked about how we the dichotomy is, is we want this freedom, but it actually takes discipline in order to obtain the freedom which is a fascinating concept. You have to discipline and teach yourself to save.
So you know, this number one is save some money instead of spending it all, that takes discipline. It’s probably a lot easier to spend that money is, you know, each paycheck comes into your bank account, versus having that discipline. And he talked about this that the dichotomy exists in lots and lots of different things, but it never allows you to shun one in favor of the other which is if you bring discipline into your financial life if that’s your only focus and you become so miserly and unwilling to spend money on anything, then regardless of how much money you have, like having financial independence and the freedom to go do what you want, you kind of have ruined yourself.
If you go the other extreme you just spend all your money, you’ll never save, and there’s no discipline associated with it. And so there is this constant tweaking and iterating which is, you know, it’s an ongoing process and there’s no perfect formula for everybody. I know what works for me and my wife and what we’ve agreed upon, what we’re doing with our assets, what our goals are, we have had disagreements in the past, we’ve had misalignments in the past, and we talk them through and we keep working through them, and iterating to what we feel like is the best version of everything for us.
I would never prescribe exactly what we do to anybody else because you got to go through the work and figure out what really is right for you and your spouse, or if you’re on your own, and come up with your plan and your idea. But, layering discipline in allows for the freedom that we want financially, you added layer discipline into your financial life now, so that you can have the freedom that we all ultimately want to enjoy financially. You can have more and more of that down the road, the more discipline you have today.
And he goes through the dichotomy and talks about it in the context of relationships, leadership that you can’t swing the pendulum to one side or the other ever too much you have to find the right balance between the two that works for what your situation is. So, that’s the number one in the book here is save some money instead of spending it all. And then the second one is start saving sooner instead of later. I can get in that discipline early in life, and sticking to it.
One of the greatest temptations or I should say this, one of the great challenges I think of our day is people will start setting money aside into a 401k plan with their employer, and then when they leave, they cash it out, they don’t roll it over and keep adding to it and, you know, funding their IRA or Roth IRA, whichever version they have there or type. And this concept of putting it away, leaving it away, and allowing it to grow, the sooner you start the more is going to be there waiting for you when you need it down the road.
And I don’t have any of the numbers or the studies in front of me and that wasn’t my objective and open up this book and talking to you about these principles or concepts. But the difference between somebody who starts at the age of 18, or 20, to save for a Roth IRA versus 30 often, if you fund a Roth IRA from the age of 18 through 30, and then don’t do anything else and you just let it grow, even if you start at age 30 and you fund that Roth IRA all the way until age 65, you will not have as much money as if you just funded it for those 12 years from 18 to 30 because of the power of time.
The earlier you start, the sooner you start, the sooner you are creating, or I’m sorry, the more likely you are to have more investments available for you excuse me, down the road when you need them. And then the third is, the third and I’ll again, I’ll break this up. In fact, because there’s 12 I’ll probably do this over the next four episodes, or maybe I’ll simplify down to three. But his third point here that I want to end on is invest your savings in stocks instead of bonds and cash.
Now to be clear, it was savings. He’s not talking about your emergency savings or money that you may need in the next six months or one year, or two years, he’s talking about your long term savings, whether it be in a specific retirement account, or if you’re just setting money aside to save it for the long term. Putting your money in stocks versus bonds over time generates better returns.
Now I’m not making any promises or guarantees. When you look back at the stock market and the bond markets, and you see what’s happened over time there’s been huge ups and huge downs in stocks. Bonds have been a little bit more flat through the process, although ultimately up into the right, stocks up into the right is much greater and much more significant than the up into the right of bonds. And so, the concept or the principle here is, just figure out how to get yourself into stocks with your long term money, because that’s going to be the best opportunity for you to really grow your assets over time.
Now think against bonds nobody wants to pick on them, they have their function, and they have the outcomes that they’re designed to generate. Stocks over time will provide a greater return. So these are the first three and again, each one of these as you recall that in the author’s Paul Merriman and Richard Buck, their communication here is just that every single one of these 12 could be worth up to a million dollars if you get them right and if you execute well.
So let’s all just stop and ask ourselves, are we saving some of everything we earned and not spending it all, and how much the more the better? Are we starting to save sooner as opposed to later? And again, no shame wherever you’re at in life but if you can start today and say I’m going to start saving today that’s better than if you wait until next year. Wait until the year after or wait until you set a new year’s resolution that you may or may not keep at some point down the road.
So critical the sooner you start, the better off you’re going to be. And then the next one is have you figured out how to get yourself into the stock market and in the right way and participate in the upside of the stock market. That is there and available again over time and there’s no promises or guarantees about returns, or dollars, or any of those things it’s just when you look historically that stock market generates better returns than the alternative which is the bond market.
And then he’s gonna go in and he’s gonna start to talk about what type of stocks and how to think about that. I’m here in the book to really kind of hone in because it’s not just about owning stocks, it’s about having the right strategy and perhaps you have a financial planner, or an investment specialist that you go to that helps you with this. Or perhaps you just trust your 401k and what’s in there. Or maybe you’re more like me where I’m nerded out, and I’ve got the spreadsheets, and I’ve done analysis, and I’ve got a really clear strategy for exactly what we invest in, and why, and the timing, and everything else.
Whoever you are, it doesn’t matter I think that thinking this through and getting this right if you need help, great. If you want to figure it out on your own and be a do it yourself, that’s fine, too. Or if you want to be somewhere in the middle, get a little advice, but mostly do it on your own. At the end of the day the objective here is to figure out how to get yourself into stocks with that long term money because you’ll be much happier you’ll be growing over time most likely at a pace faster than inflation, and ultimately driving toward, you know, this outcome now, you know, Paul Merriman and Richard Buck are saying how to supercharge your retirement, but it applies to so many other things.
And ultimately, this goal of at what point do I not have to work anymore? At what point do I have enough money that I can accomplish what I want to in my life? And I’m not talking about like somebody being a multi-multi millionaire, this is just having the financial security to be able to do what you want with your time, and accomplish and focus on the things that are the most meaningful, and not trading your time for money somewhere else. That ultimately in my mind is what financial independence is.
And so whatever that is for you again, nobody’s going to find that except you. And nobody’s going to be accountable and responsible to take the steps necessary to get there, but you and possibly your spouse if you are married and have that relationship going. And so, again, I think I am just going to take a few more episodes talk about these different critical decisions and critical things that need to be done in order to try to help people grow their assets and grow their net worth to a place of this financial independence.
I think it’ll be helpful I’ll put a link in the show notes to this book. It’s “We’re Talking Millions” you can pick it up on Amazon. I’ve been following again Paul Merriman for years his material is outstanding, and the research that they have is outstanding I would recommend it to anyone. It’s not for the person who wants to be trading stocks all day checking their TD Ameritrade, or Charles Schwab account or, you know Fidelity Investments account in trading in and out and trying to beat in time the market.
It’s a long term buy and hold very clear glide path strategy that allows you to invest in the right amount of stocks and bonds through a lifetime to create the best potential scenario and the best potential outcome. And again, no guarantees or promises around returns. Nobody knows exactly what’s going to happen in the future we just have this past that we can look back to and say, over time, this is how it works and the risk is worth it at some degree.
And there’s anyways, we’ll get more into how to measure that and how to make all that work. But that’s, I think I’m going to stop there. So those are the top three, save some money instead of spending it, start saving sooner instead of later, and then invest that long term savings into stocks and not bonds. I hope just this conversation has been helpful and we’re going to dive into some more specifics about exactly how to make all this happen as we get into the next several episodes.
Many, many thanks to you for joining today, this is a wrap for Episode 90. Happy day.