Believe it or not, common investing mistakes that can come back to haunt even the most conservative investor.
Doug shares the story of a couple who were financially secure in their investments, but still made 3 very common mistakes. Listen to hear these mistakes and how Doug suggests to avoid them. Most importantly, he stresses the need for a licensed financial advisor who works with people who have similar needs to your own.
Get out of the paycheck-to-paycheck cycle!
The Financial Rock Star and author of 99 Minute Millionaire, Scott Alan Turner, discusses the financial mistakes he made in the beginning of his career. He and Doug explore the topic of why financing with a credit card is a bad idea. They also suggest how to change your spending habits, and why you should consider early retirement.
Scott mentions some smart lessons from other financial advisors he put to good use. If you are struggling with living paycheck to paycheck, tune in for some sound advice!
To learn more about Scott Alan Turner visit his website at scottalanturner.com.Read the Transcript
Interview With Scott Alan Turner
Scott Alan Turner, author of 99 Minute Millionaire and host of the Scott Alan Turner Show, discusses the financial mistakes he made and how he solved them. He also shares his ideas on early retirement and how to still enjoy your money while saving and budgeting.
Douglas Goldstein: I'm very excited to have on The Goldstein on Gelt Show Scott Alan Turner, who I actually met a couple of years ago when I was a guest on his show, when my book about how the strategies of chess and investing can be combined was first launched
Now, I'm very happy to have the financial rock star himself on The Goldstein on Gelt Show. Scott, how is it going?
Scott Alan Turner: I'm doing great, Doug. Thanks for having me.
Douglas Goldstein: How's your chess game coming on since last we spoke?
Scott Alan Turner: I still don't know which way the horse moves. Is it two up and one across or one down and two across?
Douglas Goldstein: We call that a “knight” there, buddy. Anyway, listen, you're a great case study and I'm sure that other people look at you, a guy who went from being heavily in debt to being much, much more financially successful than most people on the planet.
Please tell us about the biggest mess ups that you did in the beginning and then we'll get to how you fixed them.
Scott Alan Turner’s List of Mess Ups
Scott Alan Turner: Sure. I received no financial education. Like most people growing up and coming through college, I did some big financial mess ups, like buying automobiles, getting car loans, not knowing about car insurance, etc.
I was about six or nine months out of college when I bought a brand new car that was a large portion of my take-home income.
I repeated that a couple of times: bought too much house, too much credit card debt, stereos, and furniture - those typical mistakes that people make when they don't know about interest rates or money.
Douglas Goldstein: Why is that a mistake? I preach this also, and I seem to offend people sometimes. They say that I’m just an old fuddy-duddy; the wet blanket at the party.
If we spend more money and we do it on the credit cards, we know we're going to pay off eventually. It's not the case that most people go into bankruptcy and completely fall apart. Most people have cool cars, nice TVs, and they take a vacation here and there, and it's true that they finance it, so why is it such a big mistake?
Scott Alan Turner: People get into the habit of living the paycheck-to-paycheck lifestyle, like I did. Then you get those rude awakenings someday, and at least here in America, that's typically happening at age 45. You end up realizing that you've wasted 20 years of earning power and you’ve had 20 years of spending and good times, but then you've got nothing to show for it.
It's like oops, retirement's coming up, and we’d better buckle down. By then, you really have to double down in order to catch up and most people do not. They are way short of retirement money.
Douglas Goldstein: You're saying that engaging in all the bets, and spending is a waste of time. It just means that because you're in debt, you're not able to save and build up a net worth, and at some point, when you really need to build it up, you're 20 years behind?
Scott Alan Turner: Absolutely. and a lot of it is just mindless spending, not in a bad way. It's just like, we’ll go out and buy a pizza three, four days a week, and then at the end of the year we have no idea where the money went.
We have nothing to show for it and we can’t even remember that eight months ago, on a Tuesday night, we had that pizza. Oh, yeah, that was such a good time. No, we don't think about that and we don't know where the money is going.
People don't track their spending, so they don't know where it's going and they can't correct the issues that they're unaware of.
Douglas Goldstein: Do you have a recommended way for people to track spending? I do, but let me hear what you have to say.
Scott Alan Turner: I recommend starting really simply with the free program mint.com. Back when I started 15 years ago, I used Quick, which is a software version.
It was just tracking, not even budgeting. Just recording where the money was going. You do that for two, three months and then you get the awakening, “Oh, that's where all my money is going” and that’s probably eating out, or groceries, or vacation.
Douglas Goldstein: I was going to recommend Quick, which is the one that I use, and I also have an app on my phone where I keep track of it.
One of the things that we do in our house is that, at the end of the week, when the kids are home and we're doing the weekly chores to get ready for Shabbat, for the Sabbath, my kids go into Quick and enter my expenses for the week, as well as their own.
My daughter is about to get married, but when they were young, they began to see how responsible financial people actually tracked their money and built good habits.
So you had this problem and you were overspending and you had too much car, too much house, too much credit card debt, what did you do?
How Scott Alan Turner Fixed Up His Mess Up
Scott Alan Turner: It was funny. I heard this guy on the radio because I saw his billboard on the way to work one day. His name is Clark Howard and he's quite popular here in the States.
I started listening to him, learning about proper money habits. He used to talk about the importance of having an emergency fund, tracking your spending, getting the right amount of insurance for your vehicle, and so on.
It was more of a wake up, aha moment. When I purchased my house, I had too much house, too much car, empty bank account, and I was a single guy.
I realized that if something were to happen, that would not be a good situation to be in. I immediately unloaded my expensive car, paid cash for a junker, funded my emergency fund, and started saving full-time. I didn't feel deprived, I just happened to drive a junky car at the time.
Douglas Goldstein: Scott, you mentioned Clark Howard, who's also a former guest on The Goldstein on Gelt Show. He gave us a number of really good ideas when he was here. He spoke about the idea of living large for the long haul, which meant not to start living large when you're young, but if you begin and do some of the right things, it's not going to take forever until you can begin to feel financially comfortable.
How did you change your habits, because for most people, it's hard to turn off the joy of spending?
How Scott Alan Turner Changed His Bad Habits
Scott Alan Turner: It came out of fear. It was fear-based saving. I realized that I was in a bad situation and if anything went wrong, I didn’t have a backup plan. So I started saving. When you start automating and taking the money off the front, you don't even miss it; you get into the better habits as compared to the bad habits of just spending everything.
You start accumulating wealth over time and you see that money grow. It's like, oh, this is pretty cool.
I'm still having a good lifestyle and not blowing everything on unnecessary things. You accumulate wealth by buying the stuff that's important, and recognizing the spending habits that are not important.
Douglas Goldstein: When you talk about watching wealth grow, we all know that the market has good days and bad days, good months and sometimes really bad quarters or even years. That's not when you see your money grow. How do you deal with that?
Scott Alan Turner: I like Warren Buffet's quote, even though his investment style is a little bit different. He's a stock picker, has been for a long time, but even he talks about low cost index funds and automating your savings.
His quote was, "When the statement arrives from your 401 (k) plan or the investment company, take it, walk from the mailbox, and throw it in the trash."
That's what I do. Don't even look at it. I look at my investments probably once or twice a year and I ignore what the market is doing because it's all hype.
Douglas Goldstein: I see. I think it's very true, that the market moves based on the news, and the news moves on the media trying to sell more news to us, so they certainly do shape people up in order to get them to either buy or sell.
Sometimes there are real fundamental issues or major crashes in the market. How do you see that? Maybe you could talk to us a little bit about being retired. Somebody who's retired and watches half his money go down the drain because the market crashes, that can definitely shake them up.
How Should You React When The Market Is Going Down?
Scott Alan Turner: It can, and for the person who sees half their money go down the drain that probably means they weren't in the right investments to begin with.
If you’re going to be retiring starting tomorrow, and you're going to live for another 30 years, you shouldn’t be 100% in stocks, and you would see your money go down half as much by then.
For younger people, when the market's going down, we should be up and down or cheering because it's a fire sale. We can buy more for a dollar using dollar-cost averaging.
Douglas Goldstein: I think that's a big mistake that people make. People often say, if you wanted to buy a Ferrari, a $200,000 car and you walked by the store and they say, “Listen, it's on sale now for $110,000” you would jump all over it because it’s now on sale.
Whereas, when the stock market drops in half, people go, “Oh my gosh! I'm going to sell. I don't want to buy.” Why don't they buy that on sale?
I think it's just another way of looking at it and it's the fear that you mentioned before.
Scott Alan Turner: It is. It's perception, and then when the market did drop 54% between ‘08 and ‘09, all the people that bailed out missed on the market coming back over the next 18 months after that, and then another a couple of years on top of that where their investments would have tripled in value.
You get out, you stay out. If you have that fear-based investing, you miss out on the gains. The market always comes back, and always has, though we can't always say it always will.
Douglas Goldstein: All right. Past performance is no guarantee of future returns. Tell us a little bit about your retirement concept, because you retired early. Is that a good idea?
Scott Alan Turner: It was for us. It was a combination of frugal living early on, both as a single person, and when my wife and I got married. We had a pretty low-cost lifestyle, proper investing, asset allocation, and threw a lot of money into our investments.
Earlier on, we lived with our in-laws for a year, so that was a low-cost of living year just because of circumstances.
I had also been a serial entrepreneur for a number of years, had a lot of businesses too. I have seen successes with those, so taking that money and not spending it, but rather putting it into investments, allowed me at a very early age to accumulate a lot of wealth.
We took advantage of those market gains after the crash happened in ‘08 and ‘09. That's when we really started to throw money into the market and it grew.
Douglas Goldstein: What do you do as a retiree?
Scott Alan Turner: I teach people to not make the mistakes that I used to do. I get to spend my days teaching people about personal finance with proper budgeting. I teach them to begin investing. To either host a show, author, blog, and do different things along that line.
Again, keep them from being the money moron that I used to be. I have great joy in that - helping people out.
Douglas Goldstein: That is fantastic. Scott, in the last few seconds, tell us how people can follow you and follow your work?
Douglas Goldstein: We will put a link to that at the show notes at Goldstein on Gelt.com. Scott Allan Turner, thanks so much for coming on to the show.
Scott Alan Turner: Thank Doug, my pleasure. I enjoyed it.