Brennan Schlagbaum (03:08):
A lot of people, if you looked at the situation, would have said, “This isn’t that bad of a situation. Your budget’s sitting there pretty, it looks okay, you can make the monthly payments.” But then, I was looking at the balance sheet and the balance sheet was what told me the right picture. I was ultra concerned with seeing $76,000 in debt. So the payments monthly were okay but I said, “Hey, we got to do something.” We sat down and we said, “All right, we’re going to attack this debt, and we’re going to go as hard as possible over the next year or two and pay this all off.” That’s how my story started.

Brennan Schlagbaum (03:40):
This is how I got into Instagram, this is how I got into coaching people is I went through it myself, and the burden that it took on me, I wanted to take away from other people. So that $76,000, we paid off in one year and I got to start this Instagram account called Budget Dog. I currently work a nine to five, I’m at a Big Four CPA, at Deloitte. And, I was thinking, you know, there are two different things to this. I have the professional career, and I have this Instagram persona, I guess you could say. How can I help as many people as possible? And it was through Instagram, social media so I took that route aggressively, I pursued it. I struggled in the beginning, growing and all that stuff. But with time, I’ve learned to master the social space.

Brennan Schlagbaum (04:21):
Now, I’m growing my presence, helping as many people as possible and it’s been a really cool journey so far. That’s where I sit today. I’m looking to grow within the next so many years, so we’ll see where it takes us. But, this is in the very beginning, initial stages.

Robert Leonard (04:36):
When you and your wife got married, did one of you bring the majority of the debt to the relationship? Or was it pretty equal?

Brennan Schlagbaum (04:43):
Yeah. That was the biggest thing, was she actually was the golden child. She had zero debt to her name. I brought the car, I brought the student loan. I guess you could say she brought the engagement ring, a little bit. But in general, man, it was all me. It was all my burden.

Brennan Schlagbaum (05:00):
We looked at it as a group, though. That’s one of the biggest things, I think with couples, is just because one brings the bad part, I guess you could say, to the relationship, it’s a team effort at that point. So to be able to come together, for her and I to see eye-to-eye, was a big part of our story and it’s a big piece of everyone’s story. It’s hard to just go through this journey alone, or one spouse is going one way, one spouse is going the other. You have to be together.

Brennan Schlagbaum (05:25):
So with that being said, we were on the same page. And, although I brought more of it, she’d helped me along the way. She was making a good salary, helping pay everything off. And at the same time, I was doing … working together. It was a group effort. But yeah, I would definitely say I brought the most of the burden to the equation.

Robert Leonard (05:41):
For anybody that’s interested in more of this dynamic of managing relationships, and debt, and just money in general, back on episode 88, I had bestselling author Erin Lowry on the show to talk exactly about all of this. Where we went into what it takes to manage relationships, whether it be a spouse, a sibling, a parent, whatever the situation is, with money and debt. So if you guys are interested in a much deeper conversation about that, definitely go check out episode 88.

Robert Leonard (06:13):
Brennan, you and I have had quite a few different conversations off of the podcast about various different things. In general, I’d say that we agree on this idea that more people need better financial education. But, where we differ is actually in the strategies that we believe in. And, one example of this is what we just talked about. You believe very strongly in paying down debt as fast as you can, where I don’t necessarily believe in that approach as much. I do to a certain extent, but not as much as you do.

Robert Leonard (06:44):
I do think what you’ve been able to do with your debt is incredible. You started your first mortgage payment back on August 1st, 2016, and you’ll have it completely paid off this year, in 2021, just five years after you got your mortgage. There’s no other way to explain it, other than saying that that’s an incredible feat. But for me personally, with interest rates so low, this strategy just really isn’t attractive. Why have you chosen to think this route, and why do you believe that strategy is best?

Brennan Schlagbaum (07:11):
Yeah, that’s a great question. I think a lot of people come down to it and they look at it from a math perspective, so I like to look at it at both sides.

Brennan Schlagbaum (07:18):
I have clients that go, “This interest rate’s really low. Why would I pay this debt off?” My thinking is, me, personally at least, is I still owe that debt. No matter if it’s 0%, no matter if it’s 28%, I still owe the debt. And me as a CPA, I look at the balance sheet a lot. When I go to measure my net worth, when I list all my assets and liabilities, I still see that total liability of that car, that house, that credit card and it’s not attractive to me. So I think a lot of times in finance in general is the behavioral side of things really takes a toll on a lot of people. Me personally, I am a very, very low-risk individual so when I look at that, it seems like a lot of risk and it seems like a burden to me, so it doesn’t better my day.

Brennan Schlagbaum (08:03):
What I would say to most people is, “Hey, first off, non-mortgage debt above 6%,” the industry is going to say pay that off before investing, pretty much every time. Anything below that, they’ll say invest and pay off debt at the same time. My approach is non-mortgage debt, I would wipe it out really fast. Every client I’ve worked with has been able to pay off their debt within two years. If you’re looking at the grand scheme of things, compound interest, obviously the more time you have, the more beneficial. But when you see one to two years of a debt payoff cycle, it’s really not going to take much of a toll.

Brennan Schlagbaum (08:34):
Now, the other side of the equation is my mortgage that you mentioned. So with my mortgage, you see me aggressively paying that off. What you don’t see and what a lot of people don’t see is I’m still investing a large portion of my income, so 20% of my gross income is still going to investments. And then, anything on top of that’s going to my mortgage. I always say 15% to retirement, minimum. Anything over that, whatever fits your lifestyle best. So for me, I think paying off my mortgage would make my lifestyle better, I would free up cash flow. I understand, from a math perspective, there’s an opportunity cost to it so I’ve calculated that, I’ve looked into it in-depth. My wife and I have discussed this. But, we have come to the conclusion that hey, at 30 years old if we don’t have a mortgage and we have no other payments, we are unstoppable going forward. We can invest 50% of our income if we want. We can scale back, we can invest 35%. But, the flexibility is there.

Brennan Schlagbaum (09:29):
That’s the mindset that we, I guess you could say, drive with every single day is the freedom, the flexibility, and the opportunities are going to be endless once we have that debt paid off.

Robert Leonard (09:40):
I think the most important component there is that you’re still investing a significant percentage. There are people that don’t invest that percentage without paying down debt. So the fact that you’re doing that and paying down debt, I think that’s the real key because a lot of times it’s not can I still invest a significant piece and pay down debt, it’s which one do I do. That’s when you have that dynamic that I probably would lean more towards investing than paying down debt personally, but in your case, I would probably do exactly what you’re doing as well because you’re still investing so much.

Brennan Schlagbaum (10:10):
Right. There’s the argument that “Hey, you could invest 50% right now and just keep a mortgage payment for 30 years.” My take to that is saying, “Okay, if you want me to extend my mortgage to 30 years, why don’t I just extend it to 50 years?” Out in California, I think they have some mortgages available for 50 years. Why don’t I just keep taking a loan out, refinancing at the lowest possible rate for as long as possible, and continue that my whole life, if that’s what we’re trying to do is accomplish maximizing the dollar. But, that’s not my goal here so that’s why I lean the other way more so.

Robert Leonard (10:39):
I often get asked how to manage the dynamic of living for now while also striving towards financial goals. In your case, paying down a significant amount of debt so quickly, you’ve probably had to make some sacrifices. How have you managed this dynamic?

Brennan Schlagbaum (10:58):
That’s a tough one. People don’t like to make sacrifices, ever. It doesn’t matter if it’s going to the gym every day, people don’t like that. It’s tough to really adapt your habits and stuff like that, and I think it comes down to mindset.

Brennan Schlagbaum (11:10):
So being able to tell yourself, “I am locked in. It doesn’t matter what comes at me, from whichever angle, I am going to lock in and do what I am trying to accomplish here.” So if you look at your goals long-term you can say, “Hey, I am going to go get X, Y, and Z. How am I going to get that?” You write it down on paper, you put it in action and you start the plan. Things are going to come at you, life is going to happen.

Brennan Schlagbaum (11:31):
For example, people when I paid off debt … It was a big challenge because I expected, along the way, hey people are going to ask me to go on vacations, weekend trips. My friends are going to ask me to do X, Y, and Z. If I said yes to everything, there’s not a chance I would have been able to pay down the amount of debt I did, $76,000 in one year if I just said yes to everything. So having the confidence to say no goes a long way because you know the ultimate goal is bigger than the present.

Brennan Schlagbaum (11:58):
So people need to look at the bigger picture and ask themselves why they’re doing it and keep coming back to that why because when you’re in the moment, it’s a lot easier to look at the why than that cookie if you’re trying to lose a bunch of weight or that quick PS5 that you want to go buy that’s only 500 bucks. It eats away at you, literally. I think it’s a mindset thing.

Robert Leonard (12:18):
A debt I’ve been thinking a lot about lately is student loans, specifically because of the new Administration and the talks of potentially forgiving some student loans, maybe a portion of it. I don’t want to get into a political discussion on whether this is the right or wrong policy, red blue, nothing like that. But, knowing that there is the potential for the government to forgive some student loans, how should listeners think about or approach repaying their student loans right now?

Brennan Schlagbaum (12:49):
So this is an interesting conversation, and I get this question often on my Instagram.

Brennan Schlagbaum (12:54):
So first thing’s first is saying everything you do should be you in control. Obviously, you need to approach the situation as if, “Hey, I need to pay this off because it’s mine, and I need to take accountability, I need to take action and initiative.” If you do that and lead with that, everything else is just noise on the outside. Now, we can’t ignore if the current Administration forgives, let’s say $10,000 that they’re looking at doing, go ahead and take it. But, I would not game plan around that. Because, for example, when I was paying off my student debt back in 2018, these conversations were already being brought to the table. If I would have said, “Hey, I’m going to wait to pay that off, I’m going to pay the minimums until the government comes to my relief,” it would be 2021 right now and I would still be waiting for the government to do it.

Brennan Schlagbaum (13:41):
We’ve seen with recent stimulus checks, they’re willing to dish out quite a bit but on an individual level, $1200, $600. So how much is that really going to add up over time? And, if you have $40,000, you cannot expect them to just wipe out $40,000. They could, you never know, but I would take and initiative and just attack it myself and anything that they provide is sugar on the top.

Robert Leonard (14:05):
Back in early January, I posted on Instagram saying, and this is the quote that I posted. It said, “You have to actually invest the cash in your brokerage account.”

Robert Leonard (14:15):
The reason I did that was because I had a guest on the podcast who told me a story about an individual who contributed to their retirement for nearly 20 or 30 years, just like she should. And then, when she got to retirement she excitedly opened her brokerage statement, and she realized that she didn’t have much more than she had contributed. And obviously, she expected to have a lot more than that. Why didn’t she have more money? Well, she didn’t actually invest the money, it was just sitting in cash, in that retirement account, earning practically nothing for the whole period that it was there, when it could have been compounding. Everyone told her that she needed to invest so she listened and invested, or at least she thought she did. No one told her that she actually had to do something with the money that was in the retirement account.

Robert Leonard (14:58):
Just a couple days ago, you tweeted about this same idea. Break down the difference between actually investing the money that’s in the account, and then how the different vehicles are that hold the money.

Brennan Schlagbaum (15:09):
So I have a really good post on this, actually. It’s a visual of how index investing and how investing works. And, basically what it does is at the grand level, you have a broker, this is the company that you work with. Let’s say Vanguard you probably have heard of, Charles Schwab, Fidelity are some big names out there. They house all the investments, they house all the accounts.

Brennan Schlagbaum (15:30):
So as an investor, as myself, I need to go to one of those guys and say, “Hey, I want to hold money in an account,” whichever one that may be. It could be a Roth IRA, it could be traditional, 401K through work. So within that account, they’re holding your investments. But within the actual account, you have to go one step further, and that’s actually where you select your investments. So there’s a thing called a money market fund, like a cash account essentially, is where a lot of money that is invested per se goes to, by default. Now most of the big guys, brokerage firms, that have a 401K through work will default you to what’s called a target-date fund so you’re technically going to be invested at that point. But, there are a lot of cases where people put their money into this account, but then it’s flowing into a cash account, essentially, which is no different than a bank account.

Brennan Schlagbaum (16:19):
What I like to tell people to do is, first off, we have to understand what we’re investing in. If you know what you’re invested in, this problem isn’t going to even pop up because you’re looking, and you’re researching and you’re seeing what you should be putting your money into. But, there’s been some horror stories where, like you said, 20, 30 years down the road, they haven’t looked into what they’ve invested. Assuming, “Hey, I’m doing the right thing. I’m putting 6% into my investment account. With time, I’ve been told I’ll be a millionaire.” But they’re led astray, and they’re forgetting the crucial point of this is you have to actually select the investment in the account. That’s a huge point I try to make.

Brennan Schlagbaum (16:51):
So I was trying to save some lives yesterday, by tweeting that and making that go viral, to save as many people as possible because it’s happened more than once.

Robert Leonard (16:59):
Yeah. I actually had quite a few people reach out to me from that post and say, “Hey, I didn’t know this. What do I need to do? I’ve been contributing to a Roth and I haven’t don’t anything other than that. So, what do I need to do?” I was able to help as many people as I could. And then, I saw a lot of people responded to your tweet and felt the same way. They were like, “I didn’t know this,” and it sounded like they needed to go back and do some research as well.

Robert Leonard (17:18):
A lot of times, I think for us, it almost seems like we forget those baby steps because we’ve been doing it for so long. But, there’s a lot of people that [inaudible 00:17:27] the step they’re on is and they need to know that as well, and it’s super, super important.

Brennan Schlagbaum (17:32):
That’s a good point you made, is we forget the baby steps. As you get more ingrained into the investing world, to anything that you’re specializing in, you have to take a step back, especially if you’re a teacher, and think baby step one, baby step two, the fundamentals. I try to teach the fundamentals a lot because of that, because there could be 55 people that read my post, and maybe two of them are experienced investors. I could be benefiting the remaining majority of them by just saying the basics that I think I take for granted but are actually the most important to the whole equation. That’s a good point that you made.

Robert Leonard (18:05):
There’s a bias and I can’t think of what it’s called. But, there’s a bias that people have, that you and I likely have, is because we know something we assume that everybody else knows what we know. And clearly, that’s not always the case.

Robert Leonard (18:17):
Education, specifically financial education, has really just completely changed. There are so many resources available nowadays, especially at a low cost, that weren’t available before. First, what is currently wrong with our financial education system? And second, how are these low-cost resources going to change the future of financial education?

Brennan Schlagbaum (18:41):
I don’t know if traditional education’s necessarily wrong. I think it’s what was in place at an earlier date and time, and going forward, I think online education could possibly replace it in different forms. Or, traditional education’s going to have to get on the same hemisphere, essentially, and realize they have to adapt, they have to change, and currently, they are not.

Brennan Schlagbaum (19:01):
My mom’s a teacher, for example. And I asked her, I said, “Hey mom, what do you think about the current traditional education? What do you think needs to be changed? Do you think financial education needs to be taught?” She looked at me like there was nothing to be changed. So there’s a lot of people, believe it or not, in the education system that think that is what needs to be taught. Is it going to change and adapt? Or, is online education in a skill-based type of community going to develop?

Brennan Schlagbaum (19:26):
I think that a lot of big companies are going to see, “Hey, this person, I could hire this person today because they took X, Y, and Z course and they have this skill. They’re going to be better suited to start in a lower onboarding cost, essentially, than the person that went to four years of school, spent $100,000 in school loans and doesn’t really know the practicality of this job.”

Brennan Schlagbaum (19:48):
So traditional education, I went through it. I went through online education. Every single time, I come back to online education and I realize this taught me more. Self-education, every single time, has been better for my personal experience. I think that might be the case, going forward. I think a skill-based type of economy might develop, with time. Now, I’m not going to say somebody’s going to go on Instagram or Twitter and companies are going to look at that as enough education, but I think there’s going to be adaptability within the community too, eventually, that could be one of the skills that they’re looking for is how to get invested. Do you understand how to do this skill at work? Because I came into the workforce not knowing anything on my actual, but I felt like I knew a lot from the books.

Brennan Schlagbaum (20:33):
Online education I think could have a huge, huge change in the near-time future. Honestly, I’ve been looking at my child’s education, which we don’t have yet, but eventually is do I want to invest in a 529? Or, do I want to invest in a UTMA? I’ve been considering the differences because of will the traditional education still be around, will 529s be grandfathered in, will there be changes? There’s been a deep conversation with my wife and I on those topics, because of that.

Robert Leonard (21:07):
On your point of 529 versus UTMA. I have a two-and-a-half-year-old son, I chose UTMA, because of exactly what you just said. I don’t want him to feel like he has to go to college because he has this huge lump sum of money sitting aside for him, that can only be used for college. And, I don’t personally believe that college is going to be what it is today in 15, 16 years when he’s ready to go to college. Truthfully, if I could go back I probably wouldn’t go to college and I have an MBA. So I’ve done grad school, I’ve done it all, I was in school for a while, a long time. I don’t know if I’d go back and do it again. So for me, personally, I chose a UTMA for my actual son.

Brennan Schlagbaum (21:42):
I would like to think that the 529s would be tailored or there would be restrictions lifted if things do change. But, I don’t really want to rely on that. I think a UTMA is an awesome alternative to the 529. We’ve been heavily the UTMA because of that.

Robert Leonard (21:59):
I saw an interesting video from Elon Musk the other day, and it touches on this dynamic that you talked about of taking courses and having a skill set that you can bring to the workforce, rather than just a degree. And in this video, Elon basically said, “I told everybody that any job description we have, it cannot say that it requires a degree.” It says it needs to require exceptional ability and not a required degree. And, what he went on to say was that you need to be able to demonstrate that you have exceptional ability.

Robert Leonard (22:28):
That’s how I feel the future of getting jobs is going to be because right now, I think that’s the big disconnect. You can just put that you have a degree on your resume and everybody knows what that means, everybody assumes that means that you have a certain level of education. Whereas, you could have a higher education than somebody with a degree because you’ve studied more from books and podcasts, but you’re not being able to show that to them.

Robert Leonard (22:51):
I think what’s going to happen is if you’re studying in untraditional ways and have this knowledge, you’re going to need to also learn the skillset of being able to present that information to a potential employer, and get them to understand the value in you not having a degree and how you obtained that education.

Brennan Schlagbaum (23:07):
Yeah, that’s a really good point. That’s why I talk about the skill-based economy. As a self-employed person and the potential of being self-employed is if I were to go hire somebody, I would not look for certifications, I would not look for degrees, because I would want somebody that I could go pick out of the workforce and say, “Hey, go do this task or go do this task.” I want you to be self-sustainable, I don’t want to have to sit there and onboard you and teach you. I want you to be able to pick up the skill because you’ve learned it elsewhere and take it, even adapt, even build and be creative with it.

Brennan Schlagbaum (23:38):
I feel like a lot of traditional education puts you in the workforce, and I think the workforce has a box around you. I don’t think it allows for adaptability and creativity. It’s like, “Hey, you’re going to X, Y and Z, every single month,” especially in the accounting field that I’m in. And, “There’s no other thing that you’re going to do, that’s what we’re going to pay you for.” I think that shuts a lot of people’s minds down. They become every single day, they’re going to the same place, doing the same thing. Their brain and their creativity’s closing down. They’re tired when they get home because they’re tired of the same thing they’re doing every day. They’re losing interest and they’re losing that faith. They get home, they just want to rest and hang out.

Brennan Schlagbaum (24:14):
I think a lot of dreams go to die when that happens. I’ve realized that with myself is I need to find the kid in me again, the dreamer and somebody that’s actually believing that I could take this and create this, versus it is what it is and that’s what it’s going to be. I think that’s a huge thing and I think a lot of people are starting to realize that, especially with the engagement online. The engagement online has been incredible. People can talk across the world in seconds. Think about where you are and where I am, we’re sitting here talking almost as if we’re in the same room. I think that’s invaluable, really.

Robert Leonard (24:45):
The only thing I’d add is that I can’t really speak for other majors, but I’ve been through finance, economics, and accounting. What I learned in all of those courses and through those degrees, and even my … I’m a CMA, you’re a CPA. Very little of that was actually applicable to what I actually did in my day-to-day job. And, I’ve scaled the corporate ladder. I started at the very bottom and I didn’t get to the CFO spot, but I got pretty high. And throughout that whole thing, there was very, very, very little that I used from my traditional education in my day-to-day job.

Robert Leonard (25:16):
There was sometimes where I’d lean on some theory that I learned in school, but this tactical stuff … To get into the nitty-gritty of accounting, even they teach you debits and credits in all the accounting in school, but when you’re going to do that in accounting software in the real world, it’s so different. It’s so, so different. It’s almost like it was useless even to learn.

Brennan Schlagbaum (25:37):
The concept and the fundamentals are there, but the way you actually work and do it in the real world doesn’t even matter if you almost even know that theory. It’s almost there’s no point. I think a lot of traditional education teaches that theory-based learning. And while that’s beneficial to some extent, I don’t think we should be paying to do that to get a job. It should almost be reversed, whereas to online skills, the entrepreneur-type skills that you’re trying to learn should be the ones we’re paying for. And hey, if we want to go learn some theory, be a deep thinker and think different things like Aristotle back in the day, we can do that. But, we don’t need to necessarily pay for that.

Robert Leonard (26:13):
If there’s somebody that can bring the value of networking from traditional education into an online platform, and I know there are people that try to do it … I would argue that nobody necessarily has replicated it. But, if somebody could replicate the networking value from traditional education on an online platform, I think it’s game over. I think that that is going to be the future.

Brennan Schlagbaum (26:37):
Totally. Networking is a skill of mine, I love it. I love networking with people, I love talking to people. But it’s funny because you say that, and I think of traditional education … Not traditional education, but the workforce. When you have a corporate event that you’re supposed to go network at, how many people actually get excited for that? Because they’re not passionate about what they’re doing, so they’re not really looking for business, they’re not really caring about it, it’s more of a requirement. Whereas when I think about networking with my online account, meeting people, I seek that out. I get excited, I light up when I meet somebody new. I’m like, “Hey, we could work together in this capacity,” or whatnot, and it’s really exciting.

Brennan Schlagbaum (27:13):
I agree with you. I think people that are going to learn to take the networking game from corporate and bring it to the online world … I think it’s already happening. I think some social medias are starting to do that. Discord is a new platform, Clubhouse is more engaged. I think those are really good platforms that are starting to take that basic, fundamental strategy and bring it into the real world, and I think we’re seeing a lot of change with that.

Robert Leonard (27:36):
Yeah. I’ve been forced to go to some of those networking events. Even in traditional education, you’re forced to go to these networking events, or in the corporate world, you’re forced to go to them, and like you said, you’re not excited. But where I did get crazy value from networking was playing on the company softball team. You’re playing with all these guys and girls that they’re from engineering, or legal, or whatever and that’s networking. That’s the valuable networking that I got, even in college. You go to these and you’re expected to talk about work, whereas you go to these other things and you eventually end up talking about work because it’s what you all have in common, but it doesn’t start out that way. It’s all more personal, you build real relationships. It was the same for me in college, when I played sports. That’s how I made a lot of networking connections.

Robert Leonard (28:19):
It’s not going to these financial networking events that you were told you were supposed to go to, it’s playing flag football with 20 other dudes and just getting to meet them all. That’s how the networking comes about.

Brennan Schlagbaum (28:31):
I meet so many people at the gym, on a daily basis. New faces that walk in, I’ll just go talk to anybody. But, when I go to a corporate event, I’ll leave that event and all those business cards I got, I’ve already written them off, I’ve already forgotten about them because I’m calling my wife saying, “Hey, that was horrible. I’m on my way home.”

Brennan Schlagbaum (28:46):
That’s just the truth of it. It’s forced, awkward engagement that nobody really wants to have, so there’s no true growth with it. Whereas something that’s fun, organic like a sport or an event, out and about like at a grocery store, you could run into somebody and it could be the CFO of Kroger, and you could be starting to have a conversation. You would get to know them better during that environment than a forced engagement through a corporate event.

Robert Leonard (29:09):
As part of the financial education that you offer, you talk about how a budget isn’t restrictive and you’re not cheap for having a budget. What do you mean by this? Why doesn’t a budget have to be restrictive?

Brennan Schlagbaum (29:23):
So I make the case that Jeff Bezos needs to budget, a lot of people would disagree with that. But, I think of a budget as somewhere to tell you where your money’s going. If I have $100 or if I have $100 million, I want to know where all those dollars are going because I can optimize and make my life better. So I think it’s a tool, I call my budget template a budget tool because I want the connotation behind budgets to change. I think a lot of people as, “Well, if I have a budget I’m going to have to take all these expenses away every single month. I can’t go get my nails done,” a lot of women would think that. “I can’t do all things different things that, before when I didn’t have a budget, I could do.” That’s not the case, you can add a line item for that.

Brennan Schlagbaum (30:05):
But, you have to come to the realization it’s being an adult. It’s taking accountability and realizing, “Hey, money, whether we like it or not, it’s a big part of our lives.” If we can say, “All this money is going here, here and here,” our life is going to be a lot simpler than if we’re like, “I don’t really remember where that dollar went, or that $300 went.” You start to get overwhelmed when you don’t know where things are.

Brennan Schlagbaum (30:27):
So I think a budget’s a huge tool that everyone needs, no matter if you make $20,000 or $200,000.

Robert Leonard (30:36):
A budget doesn’t change how much money you’re making. It doesn’t change how much money you have to spend, it’s just telling you, like you said, where it’s going.

Brennan Schlagbaum (30:41):
Yeah, that’s the point I try to make all the time. People instantly … I have friends that say, “Oh, is that in the budget?” They’ll make jokes at social gatherings. “Is that in the budget? Is that in the budget?” Actually, it’s not, because I don’t value it but it’s not because of that. And that’s what they don’t understand, I’m trying to teach that education. My budget in the month of December, we invested $30,000 but we spent probably $100 on frivolous items because our budget said, “Hey, we have $100 extra to spend there, we have $30,000 to the investing side,” because we value the investing side better because we want freedom. We don’t want to just go buy aimlessly.

Brennan Schlagbaum (31:18):
Would you call me cheap if you found out I spent $30,000 and $100, but I just allocated it differently than you? I would that you’re saying, “Hey, they have some money.” But, it’s where you put it is the important thing, and that’s where I think a budget tells you your values.

Robert Leonard (31:33):
Yeah. That’s a good point because if you tell your friend, “Hey, I spent 30 grand this month,” and you don’t tell them what it was on, they’d probably think, “Wow, they spent a lot of money.” But then, if you get into, “Hey, 25 of that went to investing, the other five went to snowboarding,” they wouldn’t think that you really spent that much money, in comparison to the 30,000.

Brennan Schlagbaum (31:54):
Right. I get it all the time, from family and friends. It’s a value-based thing, and I think a lot of people are afraid to actually budget because it brings up what they’re actually spending on it, it exposes that. It makes people uncomfortable and people don’t want to be uncomfortable, naturally. They stray away from it, they’re scared to see the reality.

Robert Leonard (32:11):
Some guests on the show strongly oppose individual stock investing, recommending strictly index funds instead. Others believe individuals can beat the market by picking individual stocks. Where do you fall on this debate? Does it depend on the person?

Brennan Schlagbaum (32:29):
It does depend on the person. And, for the vast majority of people listening, I’m going to say go index fund investing until you are an expert, and even experts will get burned by the market. The market is not something to play with. I’m not saying you can’t beat the market, there are people like my uncle specifically, that has had 1% better than the market since he’s begun investing. He’s an expert, and that’s 1%. 1% is good, in investing terms but it’s tough to do, and it takes a lot of time.

Brennan Schlagbaum (32:58):
A lot of us would rather focus our time elsewhere by either making more money, income that we can invest into index funds. Or, it’s just spending our time elsewhere. We don’t want to be glued to our TV and our computers, and phones, looking at the market, seeing the latest trends, what earnings have done what, because that’s not really life. If we’re sitting there glued to one specific thing, we’re not really enjoying different aspects of life. Me as a family guy, I like to spend time with my family and friends. If I was sitting there staring at my phone all day, wondering if Apple’s going to release a new product or if there was a fraud allegation with Nvidia, that would put me on edge and I would not be the same person.

Brennan Schlagbaum (33:37):
I think it’s easier just to do passive investing through index fund investing, and just let your money ride. Go focus on what matters, if that’s making more money, if that’s relationships, and then let your money ride. Because what people don’t understand is okay, one person gets 1% better, that’s great, that’s a better return long term. But, all that time and energy spent to do that 1%, was it worth it? And, most times you’re not going to that plus 1%, you’re going to be that negative 5% compared to the market.

Brennan Schlagbaum (34:05):
There was a study, up to 2015, the average equity investor actually returned 5.69%, or something along the lines of that, versus the market of returning about 9%. And, that tells you that people were too active in the market and most people, 95% of people, are going to get burned if they continually try to day trade, swing trade, options trading, all that kind of stuff. It’s cute, it’s exciting. But good investing, in my opinion, is boring investing.

Robert Leonard (34:34):
What do you think about there being a potential index fund bubble?

Brennan Schlagbaum (34:37):
I think it’s bogus because if you know the core … What an index fund investment is, is essentially you’re buying the market. If there’s an index fund bubble, and all of these people went into let’s say the S&P500 and it’s over-valued per se, okay well the market’s going to crash eventually. But, is it going to take that big of a toll?

Brennan Schlagbaum (34:57):
I think if you look at a market in general, there’s going to be peaks and valleys, that’s part of it. If it does burst, and it will at some point, people are going to sell, it’s going to dip, the world’s going to end, and then it’s going to go right back up. So you’re buying the entire, let’s say the Total World stock market index, like a Vanguard ETF with VT, the Vanguard Total World. If the Total World stock market collapses, well I think there are bigger issues to worry about than your investments at that point, because the whole world’s on notice.

Robert Leonard (35:27):
I think people often misuse the term bubble as well. I think “bubble” has become a catchword in the financial industry. Everybody wants to say everything’s a bubble, whereas a lot of times, maybe the index funds aren’t in a bubble. It’s just a business cycle, maybe it’s a market cycle. Things pull back every seven to 10 years, historically. That is a proven fact, that’s how the market cycles work. Maybe index funds aren’t in a bubble, they’re just ready for a cycle and a retraction.

Brennan Schlagbaum (35:55):
That’s another thing, is people like to put valuations on these companies, and these index funds, and all these kinds of things, but you can only value so much. This is why it goes back to the index fund investing versus individual stock picking, is you can value a company at X, Y, and Z, but there’s so many different metrics to look at that, even if there are 100 metrics and you pick the exact right one, other people could drive that stock price another way just based on human behavior and you can’t account for that.

Brennan Schlagbaum (36:21):
So there are all these metrics and numbers to look at. I audit company financial statements for a living, I look at financial statements for big corporations, day in and day out. I can go and value a company pretty easily. But one, is it worth my time? And two, are my metrics and numbers going to really help me in the long run? I would guess not because based on history, there’s no telling based on what a company’s valued at if it’s going to really be that in the eyes of the public.

Robert Leonard (36:49):
Your analysis has to be right and the market has to agree with you.

Brennan Schlagbaum (36:53):
Yes, and that’s a lot of time.

Robert Leonard (36:57):
What are the most common mistakes you see new investors making? What mistakes do you see amongst your friends that are your age, and maybe your family and those in your community?

Brennan Schlagbaum (37:08):
Yeah. I think the number one thing is chasing returns, past returns. I think that’s the biggest thing, dividend investing is a huge thing. I think when people chase a yield because they pay a high dividend, they’re not even looking at the company. They’re seeing a number and they’re saying, “Hey, this pays 8%, that’s a really high dividend. I want to invest in that.” But what if they’re on the verge of bankruptcy or what if they’re going downhill? Well, is still investing in that company long-term going to make sense, because that 8% is going probably recoil and probably go away eventually, if they go bankrupt or something happens to the company.

Brennan Schlagbaum (37:41):
So I think a lot of people see the GameStops, the AMCs and they say, “I need to be a part of that.” So they experience FOMO, fear of missing out, and they get in at the bubble or the top per se, and it collapses and they forget what they were actually invested in and why. So then, they sell at the bottom. So as most people would say, “Buy low, sell high.” Well, they’re doing exactly the opposite. So people always preach that buy low, sell high but instead, they actually buy high and sell low, a lot of times, because they don’t know what they’re invested in.

Brennan Schlagbaum (38:11):
FOMO, fear of missing out, chasing returns, I think those are the three biggest things, especially with Millennial investors. They have access to the internet and see all this information flowing everywhere, nonstop.

Robert Leonard (38:24):
When you look back to when you just started investing, what do you know now that would have helped you grow your wealth quicker if you had known it back then?

Brennan Schlagbaum (38:34):
Starting earlier would always be my answer to that. And, I started when I was 21 years old, 22 years old. If I would have started three years earlier, that would have been awesome. And I think that would have been my biggest thing, is I wish I would have known more now, and I think that’s most people in life. As they go on they say, “I wish I would have known more at 38, at 48, at 58,” it’s always going to be the case.

Brennan Schlagbaum (38:56):
But if anybody’s listening to this, and let’s say they’re 18 years old, start investing today. Learn about it, it’s not that complicated. Download an ebook. Read Common Sense on Mutual Funds, an easy book to read. And start investing, because that’s all it takes. Once you start investing, you’ll understand the power of time. Time is absolutely the most important thing of investing in general. The more time, the more compound interest, the better the returns, and so I often say start now.

Brennan Schlagbaum (39:24):
Another thing I wanted to mention though, for others that are listening that are later in the game. And they’re like, “Well, time’s not really on my side.” Invest now. Just because you haven’t invested up to this point doesn’t mean you can’t take advantage in investing in the future. A lot of people get bummed out or they get down on themselves and think, “I’m 50, I’m 48, I can’t invest.” You have a lot of time, relatively speaking. Get in the market. The best time to invest was 20 years ago, the second-best time is now and that’s always going to hold true. So that’s, in general, what my answer would be to that.

Robert Leonard (39:55):
Being worried that it’s too late doesn’t make anything any better. What are you going to do, wait longer? Yeah.

Brennan Schlagbaum (40:01):
Yeah. What’s the alternative? You’re going to sit there and hold cash for the next 10 years, 15 years? It doesn’t make sense. Just start investing, just learn, learn. Self-education is key, going back to the online education conversation. You can learn within a week, honestly, with how much knowledge at our fingertips.

Robert Leonard (40:18):
I’m a big proponent of actually taking action on the information that you learn, not just learning loads of information. So when someone is done listening to this episode, maybe they log off the Instagram Live, or they’re listening to the podcast or watching the YouTube video, I want them to go take action. What is that one action they should go take when they’re done?

Brennan Schlagbaum (40:40):
The number one thing is get a budget and really sit down with your spouse. If you’re single, do it yourself. If you have a spouse, involve them in this process. Sit down and create a budget. A budget is the single most foundational part of personal finance. It is the snapshot, it is understanding where everything’s going. And if you do that, you’re going to be so much better off just by knowing where things are. A CEO of a company could not direct a company without understanding where their funds are being spent, where they’re making their most money. If you don’t do that on a personal level, then how are you going to succeed as an individual? Just like a company would not succeed as a company.

Brennan Schlagbaum (41:15):
So download a budget template. I have a free budget template in my LinkedIn bio that is awesome, with analysis built into it, for you guys to use. Use that, do that today. I promise you, you’re going to be better off.

Robert Leonard (41:27):
Brennan, thanks for joining me on the show today. For those listening that want to learn more and connect with you, where’s the best place for them to go?

Brennan Schlagbaum (41:35):
So @budgetdog is my Instagram, I have Twitter @budgetdog as well, and I also have Facebook so connect with me with any one of those. Go to my LinkedIn bio and all my other links are within there and you will be connected everywhere.

Robert Leonard (41:48):
I will put a link to Brennan’s resources as well a couple of different books and other resources that we talked about throughout the show, in the show notes below. Whether you’re listening on YouTube or in your favorite podcast player, you can check those out below in the show notes.

Robert Leonard (42:02):
Brennan, thanks so much.

Brennan Schlagbaum (42:04):
Appreciate you having me, man.

Robert Leonard (42:05):
All right guys, that’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (42:12):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires via The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.