The Personal Finance Podcast

Simple Financial Steps with Massive Payoffs with Paul Merriman

In this episode of the Personal Finance Podcast, we are going to talk to Paul Merriman about simple steps that you can take in order to have massive payoffs.

In this episode of  the Personal Finance Podcast, we are going to talk  to Paul Merriman about simple steps that you can take in order to have massive payoffs.

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On this episode of the personal finance podcast, simple steps that you can take in order to have massive payoffs with Paul Merriman,

everybody. And welcome to the personal finance podcast. I'm your host, Andrew founder of master money. co and today on the personal finance. We're going to be talking to Paul Merriman about simple steps that you can take in order to have massive payoffs. If you guys have any questions, make sure to hit us up on Instagram, Tik TOK, Twitter at master money co and follow us on Spotify, apple podcasts, or whatever podcast player you love to listen to this podcast on.

And if you want to hop out the show, consider leaving a five star rating and review on your favorite podcast player. Can I thank you guys enough for leaving those five star ratings and reviews. Now, today we're going to be talking to one of my favorite authors, who is. the book, we're talking millions and he gives you 12 small steps with massive payoffs.

Now, before we dive into this episode with Paul, I want to kind of tell you what we're going to be talking about today. We're going to be talking about a, his love for small cap stocks. And we have not talked a ton on this podcast about small cap stocks, but Paul's book changed my mind and my perspective on small cap stocks.

So we're going to dive deep into that. We're also going to talk about target date retirement funds and how that needs to factor into most people's portfolios. And we're going to talk about a two fun. Portfolio that they call the two fund for life portfolio and how to construct that. And then in addition, Paul has donated 3.

6 million towards financial literacy. We're going to talk about how he's done that. And we're going to go into a bunch of other questions as well. Now, before we dive into this, Paul has 12 small steps with massive payoffs. We're going to dive into some of these and you can really dissect a lot of these as you go through this process.

But I want to talk through a couple of these before we get into the episode. And the first one is save some money instead of spending it all. A very simple step. A lot of people understand that we need to do that. The next one is start saving sooner instead of later. The earlier you start investing your dollars, the faster that money can start to compound.

The next one is investor savings and stocks instead of bonds and cash bonds, obviously reduce your volatility, but over the longterm stocks are higher performers than our bonds. The next one is invest in many stocks instead of few. So that's just. Diversifying your portfolio. Then the next one, keep your expenses low.

You know, we preach about that all the time in this podcast. It is a really, really important thing that we need to talk about. Next one, choose index funds instead of actively managed funds. Obviously, you know, we love index fund investing here. We teach you how to invest in index funds in index fund pro, which is our.

Premium course that teaches you how to invest in index funds, and then include small company stocks in your portfolio. We're going to talk more about that with Paul, including also value stocks in your portfolio. So those we will also talk about with Paul, don't try to time the market or out with it. You know, nobody has a crystal ball out there.

Nobody knows what's going to happen in the market in the future. Don't try to time the market or be the smartest person in the room. Invest using dollar cost averaging, instead of waiting for the right time to invest. The next one, keep your taxes low. And then lastly, do all this in one simple step, invest in a target date retirement fund.

So he has all these steps that are amazing inside of his book. I encourage you to read his book. We're talking millions. It is one of the best books out there. If you are on the high performance book club, or if you're on our newsletter, where we recommend books every single week, that book has been on that list.

And we will always be recommending that book because I think it is a fantastic book for investors and anybody else who is interested in getting their money. Turned around. So. This is going to be an action packed episode. We got to have Paul back on this podcast too, because there's so much more I want to talk to him about, but without further ado, let's welcome Paul to the personal finance podcast.

So Paul, welcome to the personal finance podcast. Hey, it's great to be here, Andrew. Thank you very much. We are so incredibly excited to have you here because I love your work. We have recommended your book in our newsletter and to a bunch of our listeners as well in the past. So I am so incredibly excited to have you here because you've changed my perspective on a number of different things in the investing world.

But before we dive in, and we're going to talk about a bunch of your different ideas here, but before we dive in, can you talk about your background and how you actually got started doing all of this stuff? Well, going way back to the 60s, when I got out of university, Western Washington University, little campus north of Seattle, I went to work in Seattle as a stockbroker and that lasted for about 2 years.

It was pretty obvious that there were conflicts of interest that I really couldn't deal with. And so. I left the industry, uh, that end of the industry and did a number of things. I mean, I, I ran a small public corporation. I started a mail order company. I did all sorts of things that were business oriented, but not exactly investment oriented.

And then I retired at age 40 and I decided to take on the next project for the rest of my life. And that was to become an investment advisor. And to help people take care of their money, mostly focused on people doing it themselves, which is an unusual way to maybe to build a business. But my view was, if I teach you how to do it, and you won't do it, but you believe that that's the way it should be done.

I'm here. I'm your guy. And we build a really successful investment advisory business. And then I sold that practice in 2012 and started all over again as purely a teacher. I'm not a planner. I don't give personal advice. I am just a teacher. And boy, do I love that role. And you are amazing at that role because you have a very, very interesting way of kind of teaching this stuff where you take really complex subjects and you make them very simple to understand.

And if people haven't read Paul's, uh, one of your main books is called We're Talking Millions. And it's one of my favorite books out there, the one that we recommend a lot. And it has 12 simple steps that you can utilize in order to get wealthy. Basically, if you follow those 12 steps, I think they are really, really important for people to understand that if you do these 12 things, you can really build wealth as long as you do this over a long period of time.

And so I think I love the way that you laid that out. And we're going to kind of highlight in some target, some of these 12 steps, but I encourage most people to go out there and read that book, because I think it is really, really important for them to understand, you know, here's some of these steps that you can take, here's a roadmap that you can follow in order to start to build wealth, get your investments, asset allocation, All these different things.

And so I want to start off with small cap stocks because we have not talked about small cap stocks a ton on this podcast, but you actually changed my mind when it came to actually adding those into your asset allocation, which I absolutely love because I think that is something where I always felt like my asset allocation was missing, you know, a certain perspective when it came to diversifying into other different assets there.

So before we dive into this for people who don't know what small cap stocks are, can you kind of talk about small cap stocks and funds and things like that? Sure, the small cap stocks themselves typically are, let's say, 100th the size of the large cap. So if you looked at the large cap, you'd find hundreds of billions of dollars.

Small cap companies typically are. 2 to 6 billion in capitalization. And by capitalization, we simply mean the price of the share times the number of shares. So that tells you how big that company is. So these are not penny stocks. I think that's important, but they are small. They have a lot of room to grow theoretically.

But oftentimes they are companies that are on the way down, not on the way up. So it's not an easy way to identify stocks. And so basically they just look at the size of the company. But of course, my view is my focus is on small cap value. I think it's important to know the academics will say, looking back to the twenties.

That would be the 1920s, they would say that the small cap premium is about one to 2 percent versus the large cap. Well, you know, one to 2 percent is a pretty big deal, but small cap value adds another potential 3 percent to the return. And now we're talking, putting together small and value. That you have the potential of three, four, maybe even a 5 percent advantage over the, what we call large cap blend, the S and P five hundreds.

So it's just a different group of stocks. This is confusing to a lot of people. I think Andrew, because they think the market goes up and down together and it doesn't. Oftentimes small companies will go a lot and big companies don't go up at all and vice versa. So they are beautiful way to diversify and lower in some ways, lower the volatility and have a chance to raise the return.

And that is a beautiful combination. Cause like you said, a lot of times they have a difference in relationship on how they actually react to market conditions. And I think that is what I love so much about how you lay this out. Cause small cap stocks, if you go in there and you look at a list of small cap stocks, a lot of these are companies you've probably never even heard of.

If you're, if you're looking at them individually. And I love that you talk about value small cap stocks as well, because some of these may, you know, have some great financials in place, but you're looking at some of these small cap stocks and they just had different market conditions or things that have happened where, you know, there's value there in those specific investments.

Now, can you kind of talk about maybe why an investor would want to add small cap stocks to their portfolio or to their asset allocation? When they're building out this asset allocation, we have a lot of index fund investors that listen to this podcast. And so just to kind of give you that caveat there, I think there's a lot of folks out there who are looking for different ways outside of just the S and P 500 or something like that.

So why would they be interested in adding those small cap value stocks to their portfolio? Well, let's start with the idea of adding stocks to a bond portfolio. Why would we do that? Well, we know that bonds compound at somewhere between 3 and 5 percent a year over the last 90 plus years. Stocks, on the other hand, paid a premium of an additional 5 percent approximately.

Well, thinking about that book, We're Talking Millions, one of the points I make is for every extra half a percent that we can pick up, that should, over a lifetime, in terms of distributions in retirement and what you leave to others, add over a million dollars. If the one choice is bonds at 5 percent and stocks at 10%, literally, you get 10 million extra dollars over a lifetime by going the stock route instead of the bond.

Now that is a big, big step that you take. Now, when you add small cap value, what you'll find is that you'll add about, let's say another 3%. If I look back at the last 53 years, the S& P 500 was about 10. 4 and small cap value was about 13. 4. So about a 3 percent advantage. Well, I'm thinking if I add that to the portfolio, it turns out it will add about three tenths to four tenths.

Every 10 percent you add. And so if you could just add 20%, no more than 20%, you give yourself an honest shot at more than an extra million dollars. And the beauty is, is that this small cap value often time will go up. When the S& P 500 goes down and in fact, there's a study that Benjamin Felix did looking at the S& P 500.

He looked at all of the decades that the S& P 500 lost money. Now we started every decade with every month. So you have a lot of decades going back to 1927. There were 145 times that the S& P 500 over 120 months lost money, and the average loss was about 2. 3 percent a year. If you looked at all of those same 145...

Periods, the small cap value made money in 108 of them. Wow. Which means that you have added an asset class, not only that is likely going to do better over the longterm, but that it kind of modifies the volatility when you add it to the portfolio and just. Kind of bottom line, if you looked at all of those 145 periods, and that average loss was 2.

3 for the S& P 500, it was a plus 6. 45 for small cap value. So, there's every reason to believe, and by the way, that word is important, to believe, because like it or not, this is a faith based system. Based industry, because we don't know and all we have is the past to look back at and people will say the small cap value premium is dead.

There is absolutely no sign that is it is dead. It's breathing and living just fine. The problem is. It doesn't always work and every time it doesn't work for a period of time, people say, oh, that's the end. It's over. No, there's no sign that it's over. Now, someday we may look back and say that Paul was wrong, but then I'll be gone by that time, I suspect.

And, uh, and that's the part we don't know. So you don't have to put all your money in small cap value. But you could certainly put, in fact, we've got a table that shows what if you put half in small cap value, half in the S& P 500. It's an absolutely fantastic long term return, and with less risk than the S& P 500.

And you hit the nail on the head there, because really all we have to go off of is historic returns. That's all we really have. That's all the only facts that we actually have. A lot of people try to predict what's going to happen in the future, but they don't have a crystal ball, neither do you or I, Paul.

So we're just trying to go off what the actual facts are, which I think is really, really important. Now, if investors are listening to this, they're like, wow, that is some amazing statistics there. It is amazing what, you know, small caps have done historically, but they want to start looking at some different ways to invest in small cap stocks.

What would you kind of recommend them starting to look into? Would it be index funds? Would it be mutual funds or how do you kind of look at that? Well, we think that since our job is to help do it yourself, investors, there are about eight things that we need to teach them to do. And the last one is to select the funds or the ETFs to do it with.

And I've been around this business long enough to know that most people, when they get to that decision point, have a hard time, how do I pick from 10, 000 different mutual funds or ETFs? So what we've done as a part of our outreach to educate people is make a list. Of those ETFs and those mutual funds that we would like you to invest in.

Now, keep in mind, I am not making investment recommendations to you personally because I don't know you personally, but I can tell you that if you wanted to have a really good small cap value ETF, one of the best in the business is The Avantis small cap value, uh, ETF, A V U V. It is a wonderful small cap value.

Now, how can one be wonderful and another one not be wonderful? Well, it starts with the size of the companies inside of A V U V. And if I compare it to VBR, which is a Vanguard small cap value, the Vanguard ETF, the average size company is over 5 billion. As opposed to the companies inside of AVUV are under 3 billion, so they're smaller.

They're more deeply discounted. And there's something else that's special about AVUV. They also look at the quality of the companies and the quality of those small value companies, those that have the highest quality historically have produced the highest return. So that's why we like that fund so much and it didn't start until 2019.

But if you go to Morningstar and you look at the return since it started, you will see that it has more than doubled almost any small not not all, but most small cap value funds. So from our viewpoint, and by the way. We don't work for Avantis. We don't get anything from Avantis. We just want to encourage people to put their investments the best place that we know how.

And we have a fellow, Chris Patterson, one of the smartest people I've ever worked with, whose job it is To go through every couple of years and update the best in class, what we call best in class ETFs, to see if there's some reason why there is one that should be better in the future. Now we're hoping not to change those very often, but if we find one, we want you to know about it.

And so that's just part of what we offer as part of the educational process on our website. I love that you guys do that because you're so right. When we talk about index funds and ETFs, or we talk about different funds and teach people how to invest, that's the first question they have. Well, Hey, if I'm looking at this S and P 500 fund, should I go index fund?

Should I go ETF? Which index fund or ETF should I go with? Should I go with Fidelity, Vanguard? So I'm so glad that you guys kind of point people in the right direction when it comes to that kind of stuff. Now, when it comes to. Your book, you also love to talk about target date retirement funds, which I think this is a great way for new investors or people who have their 401k or all these other different things to be able to go out and just find a way to put together an asset allocation.

That is super, super easy. And the amazing thing is now they're coming out with target date retirement ETFs, which is going to be really cool for a lot of investors. And you can start to add these in some of your different portfolios, anywhere you're investing. So I think this is a really cool thing to talk about here.

And we'll go through kind of some of these target date retirement funds. But first we love index funds here. So do you feel the same about index funds? And is that something that you've invested in for a long time? I do. I do. Yes. For a very long time. And that is what our company, uh, for people who were buying hold investors, that is what we recommended passively managed index funds.

By the way, a lot of people don't know there's a wide variety. Even within the range of small cap growth indexes, there are many there are at least 6 and the returns vary as much as 2. 5 percent a year over a 15 year period. So it's more than just saying, I'm going to get into an index fund. You need to understand the index funds.

That you're getting into if you're trying to maximize your return, but I love index funds. I once wrote an article, 30 reasons I love index funds. And the fact is almost everything you look at. that should lead to better rates of return, probability wise, are found in an index fund. More diversification, lower expenses, lower taxes, control like you've never had before.

Because if you go into a, an actively managed fund, you don't know what they're going to do. And here's probably one of the most important reasons. I'm looking for a half a percent and every half a percent, as I said, I think is worth more than a million dollars to even the modest savers over a lifetime.

I know that the average return of the actively managed fund is about two percent less than the index itself. Now think about that. I'm looking for a half a percent. In this one decision, I can go from being average to making 2% more per year, and this is out over 20 years, not just in the last year. Now it gets worse because average was 2%.

What about the poor folks who picked the best fund? They could, but it turned out to be less than average. I mean, somebody has to be less than average to have a 2% difference to begin with. What if you ended up in a fund that was 4 percent a year, or 3 percent a year, worse than the index? I wouldn't recommend anybody take that risk for any reason.

You ask yourself, why do people do that? Well, why do people buy lottery tickets? They have a sense. They have some, remember this is a faith based industry. They have faith that manager knows how to pick the right stocks. And there really isn't any evidence that that is so, so I'm going with index funds all the way, but there's a wide range of ways that index funds are managed and there's reasons why some ways are bad.

And some ways are good, and it's important for people to understand that difference. Exactly. That is spot on, because really figuring out those reasons why some are bad and some are good is one of the things that we try to educate as much as possible, looking at expense ratios, kind of diving into what's inside of that fund.

So there's a lot of cool things that we can talk about there as well now. As people are going to see here, we're going to build out this portfolio as time goes on here, as we lead to this, but you alluded to earlier, you are a big proponent of those target date retirement funds. And I think it's just a really, really great way for, for a lot of investors to invest.

So can you kind of talk about target date retirement funds and why investors should consider investing in them for their retirement? Well, I think any investor that doesn't know what they're doing or doesn't want to know what they're doing. They just want somebody to take care of it. In reality, if we look at the past, there were people who put money away every month for their whole career.

And when they retired. They got a check a month from a pension fund. It was their money. It wasn't the corporation's money. It was their money, but they were not asked to manage that money. If they had been asked to manage that pension investment that was put away every month, who knows what they would have done with it?

Who knows what con artists would have gotten their attention or who knows what they Or just chasing performance because it's so common for investors to change performance. But the target date fund is in essence what a pension trustee was responsible for doing. And that was to manage the money inside that pension fund so that when Joe gets to be 65 or Sally gets to be 65, they can start paying out that monthly pension that they promised.

And that's what I think is probably of all the financial luxuries one might have is to know that every month you're going to get that check now. Unfortunately, many people don't get those pension checks anymore. In fact, fewer and fewer people get them because corporations are saying, look, you take care of it.

We may match part of the money you put in. That will be our way of, in essence, seeding the pension if you want to look at it that way. But you have to make the decisions. But if you don't really know, why don't you just let the pension trustees, the people who run the target date funds, do it for you? And let me give you a number.

I just love numbers when they tell a story that replicates the kind of challenges The individual might have Wharton did a study along with Vanguard. They looked at 1. 2 million investors in 401k plans. Some of them had nothing but target date funds. Some people had no target date funds. And then they looked at the expected rates of return, uh, over time using those two different approaches.

And it turned out those that had the target date fund, uh, turned a 2. 3 percent a year better return. Wow. 2. 3 percent a year. Now, that's a big deal again. I'm talking that half a percent being meaningful and so I just think a target date fund is the right thing for probably 99 percent of people to do.

But then I get down on bended knee and I get down and I ask you to read that last half. Of we're talking millions because the last half is all about target date funds. And what I'd like you to do is I'd like you to add 10 or 20 percent small cap value. I truly believe that will be a life changer. So you put 8 cents into the target date fund and 2 cents.

And to small cap value that I think is what people should be looking at doing. And the younger you start doing that, I think the better off you're going to be. And let's talk about that because I think that is one of the most powerful things in we're talking millions is you have the two funds for life is what you guys call it.

And I think this is a simplistic portfolio that I think a lot of people, you know, if you don't want, like you said, if you don't want to. Learn how to invest. You could care less, but you want to obviously be able to retire and you want to get your money working for you. This is a perfect scenario for a lot of people because this is a set it and forget it system.

You can automatically now in today's day and age, you can automatically send money to these accounts and start automatically investing your money in this. So can you talk about that two fund portfolio and maybe, you know, talk about, you know, how it works and then also just kind of how to select maybe that target date retirement fund on that side, you select it by risk tolerance, or how do you think about that?

Well, first of all, let me talk about selection of the target date fund. Sure. Uh, that's important. That's the beauty of a target date fund. You tell the manager of the target date fund the year approximately you're going to retire. And obviously, when we're 20 years old, we're not sure. But if you think that you might retire in 2065, Then what you would do is you would put your money into the 2065 target date fund, and the people who run it know, hey, these are all the people who want to retire in 2065.

Now, one of the reasons I'm a big fan of adding a little more Push a little thrust to your investment is that target date fund is run very conservatively. They have to, because it's for everybody who's in it. And so in a sense, you kind of think of going up the mountain, you're going to set the pace that most people are going to be most comfortable with.

And that is conservative. I mean, that's just the way it is for people who don't understand investing very well. Now, what you can do then is you can add this small cap value. Now, unfortunately, there's two paths that you can take. One is really simple. You just start off and you put 20 percent into small cap value.

Leave it. Don't rebalance. Just leave it where it is until you're at least 45, maybe even 50. But the bottom line is, is that what you're going to do is automatically invest in these two funds, either 10, 90, or 80, 20. I would say that's a conservative way to do it. If you want to be more aggressive, when we go into this in the book, I think Chris Patterson, who developed the Two Funds for Life strategy, what he did was he built a formula.

Basically, you multiply your age by one and a half. So if you're 20, that would be 30. And you put 30 percent into the target date fund and the balance into small cap value. Whoa, wait a minute. That's pretty aggressive. Yes, it is because you're young. And in theory, the textbooks would say that you should be all equity and you should have more in the risky equities.

Then in the very conservative equities, but notice what happens as you get older when you're 30. Now you are 45 percent of the target date fund. When you're 40, you're 60 percent in the target date fund. When you're 60, you're 90 percent in the target date fund. And by the time you retire, you're out of the small cap value.

To which I would say, please don't go all out of the small cap value. Keep at least 10, maybe 20 percent in small cap value. Even when you get into retirement, I'm 80. I am 25 percent in small cap value in my equity portfolio. So I'm living evidence of how, at least how I think that a person should invest.

And that is absolutely spot on. So Paul, when someone is trying to select their target date retirement fund, and maybe they're just going through this process, there's a bunch of different brokerages out there, and if they don't have one in their 4 0 1 k, that's just kind of brought to them, how should they kind of think about this when it comes to maybe Vanguard or Fidelity or Charles Schwab or any of those brokerages out there?

What do you think about their target date retirement funds and how someone should select that based on brokerage? Well, if we want to be true to the idea of indexing, seems to me that we need to find one that uses indexing. So at Fidelity, for example, you can buy an actively managed target date fund where they charge 0.

7 percent for that fund, or you can buy their index fund where they charge 0. And that's a target date fund that uses index funds where they charge 0. 12. So you save over a half a percent between those two mutual funds. So I would be an advocate for indexing. Vanguard has a, has a terrific. target date fund.

I must admit, I'm not a fan of having any bonds in the portfolio when somebody is in their 20s or their 30s. Every 10 percent you have in bonds reduces the return by about a half a percent a year. And so I really don't. In fact, when I met with John Bogle way back in 2017, I asked him about that. Why do you have those bonds in there?

And he said they want to make it very clear that their responsibility is to manage not just the stock portion, but also. The fixed income and so they start with a small amount, what he calls a small amount. And of course, I want to grab him by the shirt. Say it's a half a percent, but that is just their way of letting people know that is part of the process that they will take care of the bonds.

Keep in mind, 10 percent in bonds does not protect you from a bear market. It's not going to reduce the loss by any meaningful amount on the other end. What it's keeping you from doing is investing in those great equity funds when they are down. That's when we want to be able to maximize our investments, when they're down.

So, I'm not a fan, but almost every one of these target date funds is sitting on a bunch of bonds, 20s. Absolutely. And what kind of comes into play with this is maybe considering when you have this two fund portfolio is how do you can think about rebalancing? Because rebalancing is one piece that obviously, you know, there's some people like John Bogle out there who has said, you know, he doesn't really think rebalancing matters, but there's other people who have looked at that and they've been interested in rebalancing and looking at the studies there.

So how do you kind of think about rebalancing when you have this two fund portfolio over time? Well, it is something that is going to have to be designed for the individual, unfortunately, and there's a point at which you maybe hire somebody by the hour. You don't have to pay him 1 percent a year to help you figure out whether you should be rebalancing or not, because if you put away 20 percent in small cap value, and you don't rebalance for 20 years.

You are likely going to have a lot more, a small cap value in the portfolio than you might be comfortable with by the time you're 40 or 50 years, 60 years old. So I suspect that you will probably find yourself. Rebalancing that small cap value to a smaller percentage when you get into, let's say, 45 or 50.

But before then, I don't know that you do have to rebalance. I think you can just let those things go. Where you definitely want to rebalance is when you get into retirement or close to retirement where you have a kind of a limit as to how much money you're willing to lose. My wife and I are 50 50 stocks and bonds.

I know what that means. I know that means according to the tables that we provide people to look at to see what the risk is in different combinations, that means I must be willing to lose 20 to 25 percent of our portfolio in a bad year. Now, that's a lot for a lot of people. For my wife and I, we're okay with that because we over saved.

And that's one of the reasons that how much you have in fixed income, when you get it into fixed income, can be such a personal decision. Because if you have more money than you need, you don't have to be as... Concerned about the fixed income component, and sometimes you got a husband or a wife that is willing to take a lot of risk and the other one isn't.

And when I was an advisor, I always tried as best I could to get it so that both of them could be comfortable. And, uh, and that isn't always easy because the difference between the aggressive investor and the conservative investor can be a world apart. Absolutely. And I think that's really, really important to kind of note is the difference between your asset allocation, your risk tolerance, all those different things is really, really important when it comes to this.

Now, one thing I want to kind of shift gears to ask you some other questions here, but one thing we were talking about is for someone who has kids, we have a large portion of the audience who is. You know, starting to have kids or they already have children. How would you kind of think about investing for your kids or how would you kind of think about that different thing as you start to think about, you know, Hey, I want to build wealth for my kids.

I want to help them out down the line. What would you do in that situation? Well, there are a whole bunch of things that you can do, depending on the age of the kids, I've written a number of articles about this topic. I'm a great believer in putting away a dollar a day. The time a child is born $365 a year, you do that for 21 years and then you motivate the child, encourage the child to continue that.

That early money from age one to 10 is absolutely huge and what that money is worth. 50, 60, 70 years later, and so you can actually turn a dollar a day into a $2 million or even a $4 million retirement just by being in all equities all the time. All the way to retirement, but only with this 365 a year, they can be invested in a very conservative way and their 401k or whatever.

And by the way, this should be inside of a Roth IRA. So not only is there a big chunk of change there, it's a tax free chunk of change, which I really think. It could be a life changer or the other side of it. It could be lots of money to give away to others, because that's also a part of what doing a good job of managing your money can lead to exactly.

And you are the best representative for that because you donated 3. 6 million basically to the Merriman Financial Foundation. And I think this is a really, really cool thing that you guys did because you're trying to promote financial education to people who are younger. So can you kind of talk about that and how that started and where that idea came from?

Well, actually that 3. 6 million is a recent commitment to Western Washington University, and that commitment is to underwrite, and they're going to need more money than what we've got to give, but they're going to underwrite a program, and we just happen to be the first takers to have every student who comes through Western.

We'll have about 40 hours of financial literacy as a part of what their education there. And I think that's going to be a life changer. Just so happens that Western Washington University about half a little more than half of their freshmen are 1st generation college students. Wow. And so a lot of them have not had a.

A serious, uh, I mean, some have obviously just because you don't have a lot of money doesn't mean you can't be financially literate. But the bottom line is that these kids, many of them need help. As a matter of fact, if they don't get help early on, when they get to Western, they are likely. To, uh, not have enough money to get through Western.

So, it isn't just about learning how to do a 401k or how to do a mortgage or insurance. It's also making sure you understand how to budget your life because that can make the difference. One, whether you graduate from college. And two, benefit from all of the, uh, advantages of having graduated from college.

So, it's a big deal. That particular foundation is specific to Western. When I retired, I started a foundation and that's the Merriman financial education foundation, which is what we're talking about here today is our outreach program, articles, podcasts, videos, free books, uh, everything that we can to help people take better care of their money.

I absolutely love that. Where's a good place that people can find out more about that foundation. Well, if they go to paulmerriman. com, they're going to be able to find out information there, or they can go to the merrimanfinancialeducationfoundation. org. Yeah, just go to paulmerriman. com. I'll tell you what, when you go to paulmerriman.

com, that's where you're going to find all the free books. And if I could just mention something, Andrew, on our homepage, we have a thing called bootcamp. And if you're serious about learning from us. You go into bootcamp and it will cover really eight different topics. They are different kinds of topics.

And in each case in that topic, there's going to be an article, a podcast, video, and tables galore. We have over 200 tables on our website because we believe those tables tell a story that every student should learn. That is absolutely incredible. So we're going to link all of those down the show notes.

So for people who are listening, they can check those out as well. And they can go directly there. We will definitely link all of those up because I think it is amazing what you guys are doing. And this is a great representation of what we talk about a lot of this podcast is one big reason why some of my financial goals have changed is because I want to give back to the community.

And there's the giving aspect of, of your finances as well. And you guys are doing exactly that, which I absolutely love. So Paul, I want to shift gears here. Cause I'm going to ask you some questions that we like to ask a lot of our guests. Sometimes we do this in rapid fire form and see, you know, usually we get some pretty interesting answers here.

So what are some of your favorite books that you have ever read? Oh, man. Uh, well, uh, I'll talk about investment books, your money and your brain by Jason Zweig, marvelous book. I mean, the reality is the, uh. Emotional challenges of investing are amongst the largest and that books, it introduces you to all of those hurdles that you're going to face and you get over those hurdles and you got it made.

I think we, John Bogle's little book of common sense investing is a must read. It's an easy read. And if all you did would learn, just read the quotes, just read the quotes. You're going to learn a lot about it. Need a successful investor. And by the way, I think, uh, the, the book called two funds for life that Chris Patterson wrote.

It's available at the website at no cost. That's another really good book to help investors think through the process. Now I'm going to warn you that Chris is an engineer. I am not. His has more detail than mine does. And for people who like the more details, Chris's book is marvelous. Absolutely. We will link all those down below too.

So you guys can check those out. Cause I think that is a really, really, uh, those are great suggestions for sure. What part of your work or life makes you come alive? Oh, I love doing what I'm doing right now. I love changing other people's lives and I am blessed because I happen to go into an industry that, uh, virtually everybody needs in some fashion, they may not need it very much, but they need it.

And the reality is there is so much bad information that is spread in the best interest of the seller rather than for the buyer. And I just love it when I'm able to share information, whether it's to a bunch of people that are listening or one on one. I love that opportunity to take people to a fork in the road, load versus no load, stocks versus bonds.

Large versus small and just help them understand how each fork in the road is going to change your life. I can't guarantee it'll be better. I can guarantee it'll be different. And so what we want to do is not only make it different, but make it better. I love that process. Absolutely. And that is one of the most fun things for me too, is when you teach people about money is just watching them from the beginning stage, all the way up to actually figuring it all out.

It is so cool to watch that light bulb moment. What is your biggest fear when it comes to money? Well, I have a scarcity problem. I wanted to have money from the time I was a little kid. I started working when I was 11. And, uh, I didn't want it for anything. I don't have, I don't need anything. I love good food.

That's obvious, but, but the fact is that I equated having money with security. Now I emotionally intellectually know that's not how it works, but emotionally. I still find having more money than I need, uh, gives me a sense of, uh, a security and I don't worry one bit about our finances because we over saved, we spend carefully, but that's because I think of my scarcity issues that I was, uh, born and raised with.

For sure. I feel some of that too. And I completely understand that if you could tell your younger self, one thing about money, what would that be? Boy, that's a hard thing because I made a ton of mistakes. So I'd like to have not made those mistakes. But one of those mistakes led to me owning shares in a little company that then grew to be a bigger company.

But what I did was a mistake. I just happened to luck out in that particular case. And so without that mistake, I would not be where I am today. So, I don't know what that one thing would be. I guess, oh, maybe I do know what I would tell myself, just take a little more time for myself. I have been a workaholic.

I don't know why, but that's what I've been and that has worn out wives and worn out kids. And, and so I guess in hindsight, I would learn to have taken more time Instead of going the easy path, being a workaholic is an easy thing to become, to do. You gotta work not to be a workaholic when that's what's in your blood.

Absolutely, that is spot on for sure as well. You almost have to consciously be thinking about that side of it as well, in addition to, you know, getting the work done. Now, the last one is my favorite one, and it is, what does wealth mean to you? Well, wealth means to me the ability to help others. It also means the ability to be secure.

So I love working for others. I love that we were able to have enough wealth. To support a program that will go on hopefully for the next hundred years and be changing lives. That is an amazing thing to be able to do and that's just where we ended up in our life. And so it is great to give, it's great to get, it's great to be able to have fun, have experiences, and so it offers me so many possibilities to enjoy life.

Absolutely. And I completely agree with that. I absolutely love that answer. And I think there's so many cool things that you can do. Once you start to build wealth, it gives freedom with your time and your energy and everything else. There's so many cool things that you can do there. So Paul, this has been absolutely amazing.

Where can people find out about more about you, your foundation, your book, everything else. I just think go to paulmerriman. com and you'll find 700 podcasts, articles and videos there and, uh, and my email paul at paulmerriman. com. I try my best to get back to all the emails. I do not give personal advice, but, uh, if you don't understand something that we've written about, let me know.

We don't want you hung up on something that could be the difference between success and failure. Absolutely. We will link all those up down in the showdowns below. Paul, thank you so much for coming on. This has been incredible. Thank you, Andrew. Thank you very much. Good luck to you and your listeners and your viewers.

Thank you so much.

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