The host of the Mo’ Money Podcast, Jessica Moorhouse tells Doug what millennials need to know about investing. They discuss the financial difficulties the millennial generation deal with and how that poor preparation can be countered. Jessica emphasizes the ideal financial plan of both reducing debt and investing money for the future.
One of these planning techniques is creating smart money habits, which are the surest way to meet financial goals and to prepare for what the market throws your way. Jessica shares some of these smart money habits and how to establish them.
Doug will be teaching a class soon!
Doug will be teaching an MBA class in finance at Webster University. The course will be based on the principles laid out in his book Rich as a King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. The book was co-authored with Susan Polgar, a Grandmaster in chess. Believe it or not the game of chess and investing have a lot in common. Doug will outline some of the topics he will cover in his course and how financial behavior plays a part in investment choices.
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Interview With Jessica Moorhouse
Douglas Goldstein interviews Jessica Moorhouse, an award-winning personal finance blogger. Jessica talks about retirement and investment, from a millennial’s point of view.
Douglas Goldstein: I’m very excited to have on The Goldstein on Gelt Show, Jessica Moorhouse, who is the award-winning personal finance blogger and podcaster at Mo’ Money Podcast. Jessica, a real pleasure to have you.
Jessica Moorhouse: Thanks for having me.
Douglas Goldstein: I know you speak to a different generation from what I speak to. I normally talk to older people about retirement, but I think you speak to younger people. You also speak a lot about retirement.
Jessica Moorhouse: I do.
Douglas Goldstein: What’s the difference?
How Do Millennials View Retirement Differently From Older Generations?
Jessica Moorhouse: First, I definitely talk to millennials because that is the perspective I’m coming from. I’m a millennial, and when I started learning about personal finance it was from this perspective of, “Okay, lots of the stuff that I’m reading in books doesn’t apply to me,” because things have changed a lot since I graduated university.
That was during the recession, so a lot of the rules I was taught growing up on how to deal with money, how to have a successful career, went out the window.
I started my blog, and then my podcast, to educate people on what they should know from a millennial’s perspective, which I think is fairly important. Also, I wanted to talk to people in an understandable, digestible way that’s not intimidating.
I think a lot of people, and especially people that I talk to day to day, feel very intimidated by personal finance because they think it’s over-complicated.
They think you need an MBA to understand how to invest and I want to show them that that is not the case at all.
Douglas Goldstein: Is there something fundamentally different in the way that millennials should look at money or the way that they look at money?
Do Millennials View Money Differently From Older Generations?
Jessica Moorhouse: I think money for millennials is, across the board, very different. I look to my parents, who were the boomer generation, and they have a very different idea of money.
Whereas me, being a millennial, none of those rules apply to me. For instance, lots of millennials graduate university expecting a great job with a good paying salary, and what they realize is that a lot of those jobs are hard to find.
You’re going to be starting at the bottom, making a very low base salary and also, “Oh, hey, surprise, you have $40,000 of student loan debt to deal with.” This is something that I think a lot of older generations didn’t experience. As a result, we have to find different ideas and we’re like, “What do I do?”
You have to live frugally for a lot of those years. You may need more than one job, and that’s very common among people that are the Gen-Y generation.
You need to have a side hustle, as we like to call it.
Douglas Goldstein: But aren’t they surprised? In other words, a lot of times people say, “And then I was surprised I couldn’t find a job.” I mean, frankly, we’ve been talking about this for years.
No one is telling the kids from high school this information and it’s like a big secret. Then they end up leaving college in debt and with no jobs.
Jessica Moorhouse: I think a lot of what I was taught, especially when I was younger, is, “You’ll have a tough time finding a job if you don’t go to post-secondary and get your degree. So if you just expect to get a good job out of high school, good luck. If you go to university and get your degree, it will be way easier.”
Everyone was told that, so everyone went to university and had a degree. Now, we’re all in the same boat, trying to fight for these entry-level jobs with these bachelor’s and master degrees.
Douglas Goldstein: Is there anything to talk to millennials about investing, or is it all about how to get out of debt and how to keep a good budget?
Jessica Moorhouse: Oh no, definitely not. I think investing is important especially because a lot of millennials focus on paying down their student loans, saving up for their first house, and saving up any kind of money so they can have a decent life.
Only then do they think, “Hey, what’s that investing thing?” and sometimes they never get to that point. That’s definitely something that I’m hoping to educate more millennials about because the sooner you start to invest, the better off you’ll be.
That’s why I talk about retiring and early retirement on my show and my blog, because I think it’s an idea that a lot of millennials think of as a future event.
They think of retirement as, “Oh, well, I’ll be 70 and I’ll figure it out then or whatever.” We also look to our parents who are in that age range where they are starting to retire, and I’m like, “I want to make sure that I’m not worried about having enough money.” I think a lot of us are looking at our parents and we’re like, “Oh my gosh, I want to make sure I’m way more prepared than my parents were.”
Is It Better To Pay Debt Or To Invest When Millennials Get Money?
Douglas Goldstein: One of the issues that you started to raise before, and I want to dig into this, is people who are young and buried in a lot of debt, like student debt and maybe even buying a house, have negative equity.
They don’t have money. When they get money, is it better for them to try and dig themselves out of debt by paying off these loans, or should they say, “I’m going to take some of this money and invest it in stocks, bonds or mutual funds?”
Jessica Moorhouse: I think it’s always both. I think it’s very important to attack your debt head on and have a plan, have a due date for when it’s going to be paid off, and really aggressively try to get that number to zero. But I think you can’t just focus all your energy into debt reduction. I always tell people you need to also save and start investing even if it’s just a little bit of money, and that’s a big misconception, I think, especially with my generation. They think that you already have to have a lot of money to begin investing, which isn’t the case.
You can invest in stocks, bonds, and index funds without a lot of money, and it’s very easy to do it. At this time, there are so many different robo-advisors out there. You can start investing within minutes online.
Douglas Goldstein: Say you start investing. The odds of being able to earn more on your investments than the interest rate on your debt are next to none.
We’re not even talking about consumer debt that a lot of people have as well. I hear what you’re saying, that getting the mindset of being a saver is important, but just on paper, does it make sense to be investing? Should you try to get a clean slate as far as debt is concerned before you start putting money into long-term investing?
Jessica Moorhouse: I was getting there. There’s the importance of creating smart money habits. It’s great if you become good at paying down your debt. That’s awesome, and there are so many laws that are dedicated to being like, “Look, I’m crushing my debt.”
Then there’s the point where they’re debt-free, and they’re like, “Now what?” Wouldn’t it be great if you already had a plan, and you already had a thing you were doing, which was like investing on a continual basis and you can think of dumping your money in a certain investment or thinking about saving for other financial goals?
I think it’s important to do both at the same time. It may obviously take you longer to pay down your debt, but creating those smart financial habits is so important.
The Importance of Good Money Habits
Douglas Goldstein: I agree that that’s critical. In my day job, I’m a financial advisor and I have the opportunity to work with people who’ve built wealth over the years. At the same time, I work with people who’ve inherited it.
The people who built their wealth over the years do much better because the reason they built it is because they had good habits.
Quite frankly, it’s not uncommon for someone who inherits a lot of money to literally blow it within a couple of years because he doesn’t have those good habits.
He doesn’t think like a wealthy person or someone who built wealth. He just thinks like someone who got a lot of money and is wondering where to spend it.
Jessica Moorhouse: Exactly. That’s the key thing that I like to drive home to my audience. It’s not about how much money you have. It’s what you do with it.
Creating those habits as soon as you can is key. I started educating myself about personal finance at 24. Now that I know so much, I’m like, “I really wish I had put those things into practice as soon as I got a job at 16.”
I wonder how much money I would have accumulated, what my net worth would be now, if I had done that earlier.
Douglas Goldstein: Tell me how people can deal with the fear, and it’s a legitimate fear, that the market’s going to crash?
Here you are being a cheerleader for investing and people say, “Wait a second. The market’s been going up and up and it’s likely due for a crash. Do you really think I should put my money in now?”
Dealing With The Fear That The Market Will Crash
Jessica Moorhouse: Yes. There’s no time better than the present to start investing, but the key is to diversify. Don’t just dump all your money in stocks. You need to be prepared because these things happen. That’s what happens in the economy; there’s crashes. Things go up and down and you need to diversify to be prepared for that.
I’m a big cheerleader for index funds and also for buying when things are low and selling when things are high, and doing the reverse. I think a lot of people look at the markets and they freak out and then they do the opposite.
They start selling when everyone else is selling, and that’s when bad things happen.
Douglas Goldstein: You espouse the ‘buy low, sell high’ philosophy of investing, which is of course correct, but it’s difficult to do, as you’re pointing out.
Jessica Moorhouse: Yes, it is.
Douglas Goldstein: Jess, in the last few seconds, please tell me, how can people follow you and follow your work?
Jessica Moorhouse: You can find me at jessicamoorhouse.com and you can follow me on my own podcast, The Mo’ Money Podcast on iTunes, SoundCloud, and YouTube.
Douglas Goldstein: Jessica Moorhouse, thanks so much for your time.
Jessica Moorhouse: Thank you.