Afford Anything - Q&A LIVE from Texas A&M Texarkana

Starting point is 00:00:00 What questions do college students have when it comes to their money? We're going to find out today. Welcome to the Afford Anything Podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate and entrepreneurship. It's double-eye fire. I'm your host, Paula Pant. I trained in economic reporting at Columbia. Today's episode is a very special one.

Starting point is 00:00:22 We recorded this live in-person at Texas A&M at their Texarkana campus in Texas, right at Texas Arkansas border. I went there last week, met up with my buddy, the former financial planner Joe Saul Seahy, the guy who joins me on most of our Tuesday episodes. And we invited the students at Texas A&M, Texarkana, to ask us whatever was on their mind. And so that's what we're going to share with you today. What you're about to hear right now is the abridged version of the episode. So if you want to hear the full version, Joe recorded it as a stacking Benjamin's episode. His version that he's going to air on his podcast has all of the bells and whistles. He has a very unique signature style for his intro, his segments, his trivia contest.

Starting point is 00:01:09 We're stripping all of that out and focusing entirely on the questions that the students asked. Starting with this one. My name is Hannah and I'm a psychology major. My question is in regards to the passion versus paycheck versus peace trade-off. How can a student in their early 20s determine which tradeoff is truly worthwhile without looking back 10 years later with regrets? Wow. Thank you, Hannah. Thank you very much. We are told a lot of the time, guys, when you're in college, you know, follow your passion.

Starting point is 00:01:45 That's what you should do. Paula, do you like that? You know, I don't believe in follow your passion. So there's a more nuanced take on this, and it comes from a professor at Georgetown named Cal Newport. he talks about, rather than following your passion, he talks about follow your curiosity. And his hypothesis is that, you know, passion is such a loaded word. Most people don't know what their passion is. Most people aren't like, oh, yeah, I'm really, really into, you know, whatever.

Starting point is 00:02:14 And so when you put that kind of weight on a word, it's just too loaded. It makes it too weighty. His passion hypothesis is that passion is the consequence rather than the way, precursor. And so his hypothesis is that if you have a minimum viable level of curiosity about something, then you go deep into it. You start learning more about it. And the more you learn about it, the more you realize how little you know. Once you realize how little you know, that makes you want to learn more about it. And then as you learn more about it, you become even more aware of how little you know. So this is kind of the opposite of something that's called the Dunning Kruger effect.

Starting point is 00:02:58 Dunning Kruger effect is people who don't know much about a field think they know a lot about it. The opposite of that is the more you get to know a field, the more you realize how little you know about it, and the more you want to learn more. And so as that cycle continues, that's how passion develops. And so passion becomes the end result of following your curiosity rather than the precursor for it. Jay, it's so funny, even here at our Target, I was walking through the aisles of Target. At the Target in Texarkana, we are selling ringlights for potential influencers, right? Even here and down, because listen, when you're 18 and you hear follow your passion, what do you know? You know, TikTok.

Starting point is 00:03:41 You know, it's very difficult to follow your passion when you're 18. Well, and I think at this age, you want to be able to find a marketable job that's going to be marketable in 10 years. I think right now with the focus of EVAT AI, our students are really needing to understand exactly which of those job fields are going to be able to be reliable in the next 10 years. And sometimes... Because that's changing quickly. It is changing quickly. And so when you start getting the passion, there's a lot of incredible, well-meaning positions out there that are not going to allow you to do the things you want to do. And so when you're in your 20s and you're in your accumulatory, age bracket, that's when you need to be making money. And in my opinion, you can let the passion

Starting point is 00:04:27 hit you a little bit later and really find out what your passions are later in life once you've started to experience things. I think it's a great point because I had a client back when I was a financial planner. It's been a long time since I was a financial planner. But back when I was, I had a client who was very passionate, but you know what he did? He made stop signs for a living. Like imagine getting passionate about stops. Like I'm sure there's nobody who goes, oh, you know what, when I'm 50, I hope I make stop signs. Like, that's not something you get passionate about, but he got passionate about the relationships he had with cities, the way that he would work with the cities, and he would make sure that,

Starting point is 00:05:03 you know, he got to be an expert in safety. But he certainly wasn't spending all day going, if I could make the perfect octagon, like, how great would this be? Wow, that octagon's way better than the last one. Well, you know, the research shows that the three attributes that really determine how a person feels about their work are mastery, autonomy, autonomic. and purpose. For example, if you make stop signs, but you have autonomy over your work, you can make decisions, you know, you have autonomy over how you spend your days. Do you,

Starting point is 00:05:32 do you start at 9 or do you start at 930? Do you check your email first thing or do you make some calls first thing, right? You've got a little bit of autonomy over how you structure your day. You've got autonomy around some of the decisions that you make. Do you go with this vendor versus that vendor? You've, you know, you've got that autonomy. Because you've, you've got that autonomy, because got that autonomy, you can start to improve your processes. And so that gives you mastery. Right. So now you've got autonomy. You've got mastery. And then the third piece is purpose. You need to be sure that what you're doing, you know, like with stop signs, maybe you're creating a great work environment for your team. Or maybe there are certain practices within the industry that you find

Starting point is 00:06:15 to be a little bit shady and you're running your business in a way that doesn't do that. Right? And so that's how you have that purpose piece in it. And so as long as long as you're as long as you've got those three qualities, autonomy, mastery, purpose, you're likely to enjoy what you do. Jay, I want to go to you for the other side of this because another thing Hannah talked about was regret. Later on, you get 10 years down the road and you regret. And we've all seen that before where somebody goes into a field and you get into the field and then you realize, oh, no, this is not at all what I want to spend my life doing.

Starting point is 00:06:46 When you feel that regret, how do you actually have the bravery to be? make the change, even later in life to go do the thing that might light you up more? Well, the very first thing that I'll talk to the students about is developing that emergency fund. And when you have the ability to leave that job after 10 years, that all of a sudden doesn't have the same purpose that you originally thought it was going to have, it's not providing you with that fulfillment, then you've got the ability where you can leave that job and you still have some financial stability to be able to go and find that next, it's adventure. And so for me, just establishing that emergency fund early, and that's the importance of it.

Starting point is 00:07:27 You are able to leave when you want to leave. A friend of ours writes pieces for the New York Times, and she wrote a piece that the New York Times had at the front of the finance section that was talking about not emergency fund. She called it the F-Off Fund, where you're telling your boss to put it nicely, take a hike. Right. It's a powerful way to say it, but like, yes, when you have the ability to tell your boss, F you, there's a certain level of freedom that comes with. And you know, it's just one of those cards in your back pocket that you hope you never have to play it. But when you know that you have the ability to say that, then you don't feel trapped. Even if you love your boss, it's nice to know that you have an out. And I may use that F off in my one-on-one sessions,

Starting point is 00:08:15 but just not in my normal workshops. You know what's interesting, Jay, is that, Because I like you attaching the emergency fund to the ability to switch and not regret. But there's another thing there too, which is a lot of time when I speak to students, they ask 50 variations of how do I get into debt up to my eyeballs. How do I get my credit good? How do I for my truck? How do I get a house? How do I do all these things?

Starting point is 00:08:40 The more you stay out of debt, the easier it is also to make a mid-care shift. And I will spin it to the emergency fund and the budget every single time that they want to start coming in and talking about other topics. And so the big four that we talk about is going to be, of course, budget, emergency fund, and then we're going to go with debt reduction and credit management. Those are the four things that we pivot off of us. Because credit definitely is important. It sure is.

Starting point is 00:09:03 Keeping it clean is a great way to go. That was the first of about six questions. We're going to take a moment here to hear from the sponsors who make the show possible when we come back more questions from the students at Texas A&M Texarkana. Welcome back. Let's hear more questions that we answered a lot. live in person at Texas A&M. We've got another brilliant question.

Starting point is 00:09:37 I'm also Hannah, and I'm also a psychology major. As someone who is moving to a new job and making more, how do I prevent overspending and put the raise to good use? Awesome. Thank you, Hannah. So here in Texarkana, we just have everybody named Hannah. That's the rule. If you move here, you've got to change,

Starting point is 00:09:56 which is why Paula's not moving here because she, there's an already enough Hannah's. Well, I guess I could make my middle name, Hannah. Couldn't I add Hannah to my middle name? Paula Hannah. Yeah, yeah, Paula H-Pan. Paula H-Pants. That sounds great.

Starting point is 00:10:09 Let's go there. All of these students, Jay, are going to graduate. I remember my best friend in college, got a great job with MetLife right out of college. He immediately went to the Pontiac dealer. Remember that old brand of car, the Pontiac? Bought himself a Grand Am, got payments immediately because he had a full-time job. Yes. That may have been me.

Starting point is 00:10:30 I had a black grand dam. Did you really? I did. I did. And here's the deal. I actually bought that thing off the truck and didn't even test drive it. I was the water cooler discussion for the auto dealership for years because they were like, that guy right there, we got him.

Starting point is 00:10:47 But I've learned. Yeah. But you see this every day, I'm sure, Jay, that you've got students in there getting ready to graduate, and that is the biggest threat. It is. And, of course, one of the discussions that I have, and I'll pick on our nursing cohorts, I jokingly tell them, do not go and buy the sports car as soon as they're about to graduate, because you don't want to set yourself up with that $700 to $1,000 car payment when you haven't even found you a place to live yet.

Starting point is 00:11:11 Because if you do wrap yourself around with a lot of student loan debt and a very, very high car payment, you're going to be living in an area that you may not want to be living in. Well, and there's a big difference between renting and Texarkana and renting Paula where you are in Manhattan. Yeah, exactly. What I would say, Hannah, is you're already living at a certain spend rate right now. Maintain that for as long as you possibly can. So when you get a raise, pretend that you didn't. Just pretend, just...

Starting point is 00:11:45 And ideally, you almost want to play a game with yourself where you are tricking yourself into forgetting that you got a raise. The best way to do that is to set up automatic transfers so that the same day that paycheck hits your checking account, you have an automatic transfer that's going to a Roth IRA. You've got automatic money going to, well, prior to even when the paycheck hits, automatic money that's getting pulled out into a 401K or a 403B. If you have any debt or student loans or anything like that,

Starting point is 00:12:16 you've got automatic money, ideally on payday that is coming out of every single paycheck that is going to anything that will improve your net worth. So when you talk about retirement savings, when you talk about debt payoff, when you talk about an emergency fund, what do those three things have in common? They all improve your net worth. And so if you can automate that on payday, what you want to do is just set up a situation where when you actually check your checking account balance, it looks exactly like the budget that you're already used to as a student. So that that way you just trick yourself into forgetting that you ever got a raise. And maintain that for as long as you can. Yeah, I'll give you permission to maybe spend a little more money. But what I would say is this and what I love about what Paula said is that right now having roommates may be fun. If you have roommates, it's fun.

Starting point is 00:13:10 Once you get rid of roommates, then you become a little bit bougie and you don't want to go back. So have roommates for as long as you can because you're used to having roommates. Later on, when you're not used to having roommates, it will stink to go back to roommates. I disagree. So I had roommates, then stopped having roommates, and then that got really lonely. We were talking about this last night. It was fun for a few months, but then it just got lonely. So then I went back to having roommates again. So maybe, unless you're Paula. Yeah. But I'll tell you, for a lot of people, they're like, I don't want to have roommates anymore. For the vast majority of people, I think that is still true, though, for a lot of people. Lonely people. But there also is this feeling, which is not true that you were a failure if you go back, you know, and you just don't want to have. that feeling like I'm doing it because I have to. And so the longer you can keep things the way they are now and funnel money into places, man, we get calls sometimes from people that are 30 years old and the cool stuff that they've done that Jay and I did not do because by 30 years

Starting point is 00:14:12 old, they have so much flexibility built into their life. And it only takes two or three years of living the same lifestyle you are living as a college student to really achieve that. There's this cool rule called the rule of 72. And I think it's really, really fun to go through the rule of 72. You know, if you graduate and you're able to make one Roth IRA contribution this year, let's say you're 22 years old, the rule of 72 is this mathematical, magical rule, it's just this great rule of thumb that says if you take the interest rate you think you're going to get, you divide it into 72, that tells you how long it's going to take your money to double. So let's say that you think you're going to get an 8% rate of return. You make a $5,000 contribution when you're 22. That means

Starting point is 00:14:57 that's going to double 8 into 72 is every 9 years. So it's going to double every 9 years. So it's going to double when you're 31, when you're 40, when you're 49, when you're 58, and again, normal retirement age, 66, 67, so we'll have a double one more time. So that 5,000 you put away at 22 isn't 5,000 bucks. The first time it doubles, it's 10. then it's 20, then it's 40,000, then it's 80,000. That one contribution at 22 years old is $160,000, Jay. And at 22, you're not going to miss 5 grand if you're putting it back every paycheck. You're just not going to feel it.

Starting point is 00:15:39 Another thing that I'll also work with our students on, and it's a lot easier to say this than do it. But if you have that invisible raise, for that first year, don't even live off of it. Just go ahead and put that right back into your emergency. or go ahead and max out, you know, which you can, you know, deposit into your Roth IRA or traditional. Yeah. It's an exciting time. But this time, this time, I think this is really an inflection point. When you graduate, if you set up these systems, Paula, right away, it's going to be great. If you don't set them up right away, three months after you graduate, it's going to be really hard

Starting point is 00:16:16 because then you have to backtrack. You've already been spending the money. It gets much harder if you wait three months. Do it immediately. when you graduate. Right, right. And I think the key thing that he just said is set up systems, because if you have to log in and manually do it every month, you forget. You know, you just, you forget the more that you can just set up the systems and automate it, like set it and forget it, the better. Well, I think that's the end of the Hanas. Let's see if everybody else can keep up with the Hanna's follow. Yes. My name is Gabriel and I'm a civil engineering major. My question is, What is the safer investment strategy? Stocks, IRAs, 401Ks, or gold and silver?

Starting point is 00:16:54 Awesome. Beautiful. Thank you, Gabriel. Thanks for the question. And engineering. I would have been an engineer if I knew what one was, by the way. I thought an engineer just drove a train, Gabriel. I was sure.

Starting point is 00:17:06 But I had no idea. So I want to put a little context around this question because you said stocks and then you said IRAs. It's a great question, though, because this is everybody has questions. like this. Yeah, exactly. I hear this question a lot, and so I want to take a moment to elaborate on why these are different things. And so imagine that you're at a bar. Imagine there are all sorts of different glass. These are students. They've never been in a bar. You're at a house party. Imagine you're at a house party. They don't do that either. And there's all kinds of different glassware. So you've got a coffee mug, you've got a red solo cup, you've got a champagne flute, you've got a pint glass,

Starting point is 00:17:45 you've got a shot glass, you've got a water glass, like the, what are this called, glass, just glassware? All the drinking implements. Right, you have all, you have a martini glass, right? You've got all of these things. And then you've also got the liquids that typically go into each one. So an IRA is an example of a piece of that glassware. An IRA or a 401K or a 403B or a Roth IRA, those are all different pieces of glassware. So that's the equivalent of a coffee mug, a martini glass, a champagne flute, a red solo cup. Then the liquids that go inside of it are stocks, bonds, gold, silver, any type of asset.

Starting point is 00:18:30 CEDs. Yeah, CDs, just cash. You know, those are all the liquids that go inside of it. And there are certain types of liquids that are generally better inside certain types of glasses. that this is something that's called asset location, like what's the best liquid to put inside a certain glass? So, like, generally speaking, beer is drunk from a pint glass, and champagne is drunk from a champagne flute,

Starting point is 00:18:55 and coffee is drunk from a coffee mug. But there's no actual rule saying that you have to do it that way, right? So you could put coffee in a champagne flute. Yeah. Yeah, if you wanted to. Part of the reason that we chose the question is because the first piece of it was that I wanted to differentiate between an IRA versus, the other components of the question between an IRA versus stocks, gold, silver.

Starting point is 00:19:18 So when you graduate, there's going to be these different glasses to choose from. I can put money in a savings account. I can put money at, we should say, at Red River Federal Credit Union, right, since they have underwriting this. We can have a savings account. That's a glass. We can drink out of that glass whenever we want. We can have a brokerage account.

Starting point is 00:19:37 We can have stocks. We can have bonds. And we can drink out of that glass whenever we want. If you get a 401k glass or an IRA glass, there's rules about when you can drink out of that. Yeah, so a 401k or an IRA is basically an agreement between you and the government, in which the government says that they will give you a tax break if you promise not to spend that money until you're a certain age. So a lot of people think of it as a quote-unquote retirement account, and that can be a little bit misleading because retirement is, in many people's minds,

Starting point is 00:20:09 retirement is a job description or the lack of a job description. Like retirement is a description of your work status. And technically a 401k or an IRA isn't a retirement account. It's an age-restricted account. So basically you're just making a deal with the government that if you don't touch that money until a particular age, they will give you a big tax break. It is a great way to segregate money, though. I mean, if you're not going to spend it for a long time, if you're not going to spend it for a long time, if you want to make sure that you have some money after 59 and a half, which is the rule on most of these,

Starting point is 00:20:44 put it in those accounts because you'll save money on taxes. But then inside of there, let's answer Gabriel's real question, Jay, which is this word safe, right? Which one is safer? I think safe has a lot of different meanings. Well, you could have a 401k and it's still not be safe. It depends on what you chose to put your money inside. What are the drinks? What's the mix of drinks inside? And so even that can be a little scary when you start using the word safe. And I think the students now understand the word inflation a little bit better than I understood it whenever I was their age. Because right now, with inflation being the way it is, you start looking at your gold and silver. That's not quite as safe as it was because of inflation. For me, it's a little scary to be able to just talk about

Starting point is 00:21:34 what's safe and what's not. A lot of it has to do with what your comfort level is and what your risk tolerance is going to be. Yeah. Well, and I think for me the big thing is time frame. Because safe over the short run, if I need to spend the money in the next six months, putting money into the stock market is not safe. But if I am going to spend money 20 years from now, putting money in a savings account isn't safe. It feels safe, but it's going to get eaten up by Jay, what you talked about, by inflation. So you're going to very safely never have any more money. You'll actually have less money to spend based on the amount of bread you can buy than you had before. But stocks, stocks as a rule over long periods of time are very safe if you buy them in a diversified

Starting point is 00:22:20 collection of them because of the fact that you are buying the economy. And if a company's going to make money, they have to beat inflation. Right. They have to make money for their investors. And so if you're investing in Coca-Cola, Coca-Cola is what makes inflation, right? The price of sugar goes up, the people at Coca-Cola don't go, well, the price of sugar went up, we're screwed. They go, no, we're going to find a way to make Gabriel pay more money for that Coca-Cola. And when they do, all the investors reap the benefit of the higher price that they were able to, you know, have better advertising. So owning Coca-Cola means, by definition, if Coca-Cola succeeds, they're going to beat inflation.

Starting point is 00:23:00 And that's a great place to be and a safe place to be long-term as long as you're diversified. Right. But to be clear, that doesn't mean that you should necessarily pick Coca-Cola or Pepsi or any individual stock, because if you're trying to pick winners and losers, you might be right. You might be wrong. Even professionals who spend their whole lives learning how to pick winning companies or losing companies, more times than not get it wrong. Statistically speaking, yeah. We did a show recently with a couple people that studied stock market pickers. They have a brand new book out that's great called Stock Market Maestro's. the best of the best had a 45% hit rate, which means 45% of the stocks that they picked were winners. They lose more often than they win. And these were the best of the best of the best. These people have maestro in their title and they're horrible. So they were saying the average person's hit rate is about one out of every three stocks. Professional gamblers, 54, 55%.

Starting point is 00:24:00 So just take it to Vegas, Jay. And we're done. That's the kind of teaching we do. And I do want to go ahead and share too. Your 401Ks become safer when your company is going to provide a match. And so anytime that your company is going to be able to provide that match, I'm going to recommend that you're going to at least take advantage of that. Absolutely. Yeah, free money. You were talking about diversification, though.

Starting point is 00:24:23 Right, right, exactly. So the 401K, again, that's the coffee mug that you're drinking out of. But in terms of what you actually put inside of that coffee mug, you don't want to put individual stocks in there, because you, more times than not, the probability is that if you're picking individual stocks, you are likely to get it wrong, no matter how smart you are, no matter, even if you're doing this full-time as a professional on Wall Street, you're more likely to get it wrong than not. And so instead, what you do is you buy what are called these broad market index funds,

Starting point is 00:24:56 and that means that you are buying the overall market. So when you, you know, when you turn on the news and you hear like the Dow Jones, Rose, or fell, or you hear that the S&P 500 rose or fell, or the NASDAQ rose or fell, that's what you're buying. You're buying the entire S&P 500. You're buying the entire Dow Jones, right? And so you're going to do as well or as poorly as the overall index, which is essentially the overall economy, no better and no worse.

Starting point is 00:25:27 And over long periods of time, your return has been around 8% doing that versus. versus over the short run, a savings account is going to earn a couple percent? Right. Yeah. And so with an 8% return, that goes back to the rule of 72. If over the long term, you're going to be earning 8%. That means your money will double on average every nine years. But the important thing to remember, and I got this wrong when I was in my 20s, is that

Starting point is 00:25:57 the stock market is not a high-yield savings account. We're talking about over the very, very, very long term, meaning like 20 plus years, it's likely to do well. But in the short term, in the next three years, who knows? So if you need that money in the next three to five years, don't put it in stocks. I know a lot of people, Jay, that you brought up Las Vegas. I mean, you brought up gambling. And a lot of people think the stock market's gambling, which if you need the money tomorrow, the stock market is gambling.

Starting point is 00:26:26 If you need a long time from now, Paula's index is much safer. Well, and we had a discussion a couple weeks ago, one of our workshops, and it just talked about the prediction markets that are even starting to hit out there, you know, Kauci and some of the others. There's still a huge risk involved when you start playing with something like that. So, you know, for me, it's going to be your 401k's, you're going to put, you know, your index funds and not play with prediction markets in Las Vegas. Our fourth question comes from Hello, I'm Stefano, I'm a business major And my question is, what are a few common money mistakes College and grad students make that I should avoid

Starting point is 00:27:08 Now that I'm still in school? Awesome, thank you, Stefano. What are some common mistakes? I'd say a lot of mistakes come from going to one extreme or the other. So on one side, and I think this is the mistake that you hear about more frequently, you have people who spend too much and get into debt. But on the other side, you also have people who are too cheap to the point where it is debilitating, to the point where it holds back your life.

Starting point is 00:27:40 You know, there are certain things, even as a college student, you don't have a lot of money. You know, most college students don't have a lot of money. But if you can, to the extent that you can spend some money doing things that will allow, you to build your career, you know, maybe that means that you get one nice shirt, just one, that you can wear to professional events. Or maybe it just means that you've got gas money to go to that professional event, right? That you've got, you can put the gas in your car to go to that networking event. Those are the things that you don't want to cheap out on. Anything that will allow you to build your network and increase the odds that you're going to make more money

Starting point is 00:28:23 in the long run, those things are worthwhile. Jay? Well, for me, there's two things that our students really talk about, and that's, you know, using credit cards. And sometimes they use that either as a reward or they use it as maybe a supplement to their income. That right there is a concern when you start looking at 20 plus percent interest rates. You're basically taxing your future self whenever you get into that role. Yes, supplement to the income is the one that always makes me cringe. I don't have off money, so I'll just put it on the credit card. Figure it out later. Not good. And then the second thing that our students can do is at times they're going to take out

Starting point is 00:29:01 too much financial aid, so they'll actually get what financial aid calls a refund. And to me, that's not a refund at all. But they're going to end up having some extra money that they're now going to be paying interest on whenever they graduate. So, you know, not spending that money and just going ahead and turning right back around and paying that loan back off rather than using that refund to buy the, the latest iPhone or pizza or anything else out there. For me, a common mistake that I see students make that they will continue to make,

Starting point is 00:29:32 and this isn't just in your financial life, it's that you think that discipline is the answer. And discipline fades as the day goes on. You get hungry, discipline gets replaced by Bubba's down on the freeway. Discipline gets replaced with splurging. So it isn't about discipline. It's about systems. whenever you think I need discipline, replace that with systems, and it's great. So how can I systematize my money? What can I do to make sure? As an example for me, I was a guy who used the credit card all the time,

Starting point is 00:30:04 and so I had to cut up my cards. I'd have no access to credit cards because if it was in my wallet, baby, I was using it. Like that was going to happen. So I set up a system to make sure that I won. We talked about with Hannah, you know, putting money away, automating money, going into savings, so that you've got that emergency fund that Jay talks about, having that as a system versus telling yourself that I'm going to put some money away. If you tell yourself you're going to put some money away, you'll never do it. If you have it automatically go into the account, it'll happen like clockwork. The other thing that you should systematize,

Starting point is 00:30:37 and this goes back to the earning more money portion, because especially as a student, the most powerful thing that you can do is to increase your earnings capability. Oh, you stole my next one. Oh, mind reader. Man. Mind reader. Yes. We don't ask for raises enough.

Starting point is 00:30:55 And even in that, there are systems that you can start to implement in your life. Like, if you get somebody's email address or contact information at an event, follow up with them immediate. Don't wait until the next day. Just do it that night. Do it in the car on the way home. Make a system for yourself like, or this would really be more of a habit. But like, as I'm brushing my teeth, that's. when I follow up with people so that that way your brain links brushing your teeth to that follow-up.

Starting point is 00:31:24 That's the thing, Jay, that I think is so important that I didn't know. I don't know if you knew it, but when I was in college, all these professors were people, I remember that they would reach out, they'd try to help, I didn't want to bother them. I saw other people that network with the professors, the great minds that were around them, some of the people that were maybe people they admired in their classes, staying close to those people. Like when you're on a college campus network as much as you possibly can. Absolutely. And the professors that I've been able to get to know here on campus love to be able to do that for our students.

Starting point is 00:31:59 Yeah. And to be able to share more than just what's on the syllabus. I regret not doing that more. You know, for me, it's going back to the professor, maybe the next semester or that three semesters after you've taken them. And just following back up and just saying, hey, appreciate what I learned in your class or, you know, hey, can we go grab a cup of coffee? I'd like for you to introduce me to some industry people that you know here in town. And they're happy to do it, like you said. And one more thing I wanted to jump on is we talked about it a little bit earlier,

Starting point is 00:32:26 but I'll start later. That is a big mistake. Is I'll start later in developing emergency fund. I'll start later in developing my budget. I'll start later in savings. That fallacy of I'll start later is big. Yeah, and building those habits right away. So important.

Starting point is 00:32:41 Oh, and just one other thing I wanted to say on the topic of like following up with meeting people, following up with people, professors, whoever it might be, industry people. One thing that I did not understand when I was in college, that I only learned later in life, I thought that what mattered was my resume, and in real life, what has mattered, are my relationships, my professional relationships,

Starting point is 00:33:03 not my resume. And now being on the hiring side, you know, both Joe and I have hired people in our businesses. When we, well, I don't want to speak for you, Joe, but when I go to hire, the first thing I do is I talk to the people around me and I say, I'm looking for somebody to fill this type of a role. Do you know anyone? It's that word of mouth recommendation. That's the starting point. And there's two sides of that. You still have to be good at what you do. Right. Because I do see some people that think it's just all schmoozing all the time and it's not.

Starting point is 00:33:32 Right, right, right. Yeah. You have to have a reputation for being good at what you do. These are fantastic questions from the students at Texas A&M Texarkana. We're going to hear more right after this final word from the sponsors who make this possible. Welcome back. Let's hear more questions from the students at Texas A&M, Texarkana. I'm Valerie, and I'm an accounting major. What are some good money management tips to limit spending? Oh, good money management tips to limit spending. Man, that's so hard. So I had to learn a lot of these, Valerie, the hard way. So Paula, you want to start? Yeah, when it comes to limiting spending, there are. are two categories of expenses that you have. You've got your fixed expenses, like your rent,

Starting point is 00:34:27 your car payment, if you have a car payment. These are the things that are, they're fixed in your budget, you're locked into a lease, and your rent is going to be the same amount every single month, and it's really hard, unless your lease ends, it's really hard to get out of that. Same thing, if you have a car payment, it's a fixed amount every single month, and it's really hard to change that unless you refinance that loan. Those are your fixed costs. And then you also have discretionary costs, or variable costs, I should say. Like you've got variable costs.

Starting point is 00:34:59 Some of those variable costs are truly necessary, like groceries. And some of those variable costs are discretionary. You know, that's where we talk about the iPhone and the pizza and the new sweater and all of those sorts of things. I think the mistake that a lot of people make is that a lot of people, when they try to save money, The first thing that they target is variable discretionary spending. And the reason that people often target that is because it's the low-hanging fruit. And there is low friction, there's a low barrier to getting rid of those expenses.

Starting point is 00:35:36 Like there's not a lot of headache or hassle around not buying a new sweater. You simply don't buy it. And I get that there are behavioral, you know, there's the psychological. of that and there's the behavior and there's the habit formation. But ultimately at the end of the day, variable discretionary spending is the lowest friction category to eliminate. By contrast, when you talk about fixed expenses like your rent or your car payment, there's huge friction to changing that. To change your rent, you literally have to move out or get a roommate or get more roommates. But because those are so high friction, once you make that change, as difficult as it's,

Starting point is 00:36:18 maybe, it's locked in. And much higher impact. Much, much higher impact. So if you really want to move the needle, go for the fixed expenses. Well, Paula, you mentioned friction a few times there, and for me, it's make it hard to spend money. I can literally go a day or two or even three and not pull out my wallet anymore because I do have payments on my iPhone. and so I can just go scan a QR code and my groceries get paid.

Starting point is 00:36:48 I can scan at the gas pump and my gas gets paid. If I want to order online, I already have my debit and credit cards already in the system. And so for me, whenever I'm talking to students that really are having an issue with spending, turn off the accounts. Make it to where you have to pull out your wallet and heaven forbid spend cash. But even if not, you still have to pull out your debit card or you have to pull out whatever payment method. rather than just rely on just walking up and placing your phone on top of something or just scanning a QR code. Yeah, most people think of a budget and they think of a pain in the ass. Like, it's really going to be tough.

Starting point is 00:37:25 So I like gamifying it. And I think turning this into a game and making it fun really changes things. There's this cool app, and you don't need the app to do it called YNAB. And it's you need a budget. And I don't want to talk about YNAB, but I want to talk about why it turns it into a game. So if you really want to do better with money, do what the YNAB people do. And that is, before the beginning of the week, plot out how you're going to spend it. So every dollar has a purpose ahead of time.

Starting point is 00:37:55 So you begin your week and you're like, okay, I want to go out to a restaurant with my friends on Thursday. So I'm setting about this much money for that. And then I've got my rent due. I'm setting that aside for that. And before the week even begins, you've done all your spending. And because of that, you turned it into a game and you did it ahead of time. You're still having all the fun you had, but now you know where every dollar went. Versus what I did, Jay, it sounds like what you did, you know.

Starting point is 00:38:21 Friends are going out. I didn't expect it. And I didn't have any money in my budget for serendipity. I didn't have any money set aside. Oh, if my friends asked me to go out, I'm going to have 15 bucks sitting over here, whatever the number would be. I didn't have any of that. I would just whip out the credit card then and get myself further in a hole.

Starting point is 00:38:37 Well, I have some phenomenal programming that I'm wanting to do in this. in the fall, and if Wynab wants to contact me, they can. But I will go ahead and plug them real quick because our A&M students with their A&M email address get one year free of YNAB. Oh, cool. So there's no reason for them not to, but YNAB could still call me. We've got some programming that needs to be paid for. I did not know that, and I brought it up. I fed right into that. But it is a great program for that reason, because it turns it into a game. Cheryl and I have this weekly money meeting where we talk about, how did we spend money last week? What are we going to spend next week? It's a fun meeting. We cap it at 20.

Starting point is 00:39:10 20 minutes. We have a timer. We cap it at 20 minutes and it's done. And it makes it so much more fun. And we find in the weeks that we don't miss that, because we do miss it from time to time. We do really well with money just because we talked about it. Yeah. Another thing that I wanted to say, though, was this is a problem that I had with money when I was a college student. I would get really excited about this. And when you get really excited about personal finance, you decide I'm going to live on ramen noodles every day and save every dollar. And that's awesome. them for like four days. So you have to build in splurges because otherwise splurges are going to find you. You're going to get done with three weeks of doing great. And then you're going to say the words that are death for any broke person, which is I deserve it. I've been great for three weeks, so I deserve it. And what I deserve it means is I'm going to go blow up all the good stuff I did those last three weeks. No, that's definitely a common mistake that's out there. And another, I guess, tool that you can use is have that 24-hour rule. So if you've got something in the cart, if you've got something in the cart, leave it there.

Starting point is 00:40:20 And if you still want it 24 hours later, then maybe it could be the right decision for you. And you may even get a discount because they want you to go ahead and check out. But and have that magic number, and everybody's going to be a little bit different. It could be anything over $50, anything over $100. you know, whatever that magic number is for you and your family or your household. If it's over that, think about it rather than just go and do that. That was probably and is the biggest thing that my wife would say I had an issue with when we were younger.

Starting point is 00:40:49 I'm getting better. That's well, that's me too, because I'm laughing because I have to do that with board games. And my board game buddy Angelo is hanging out with us tonight and he knows it can be a problem. You get the new hot game. You want it. You're not even thinking about the budget. you think, ooh, this new thing came out, but putting it in the cart and waiting 24 hours, then you're like, do I need it today? Do I need it now? And to your point earlier about increasing

Starting point is 00:41:14 friction, I know people who, you know, because there are a lot of websites where you can have your payment information saved, I know people who intentionally will not save their payment information, they won't save it in a password manager, they won't save it anywhere, so that you have to physically get out your card and type in all 16 digits in order to buy something. Even just that little bit of friction, because you know right now you've got that bright purple shop pay button that makes it very easy, the more you can not save your information in that and your wallet's on the other side of the room and you're in bed and it's cold, right? And you have to actually get out of bed and walk all the way to the other side of the

Starting point is 00:41:57 room and get your wallet and punch in the numbers. Creating that friction, stops impulse spending. It's a great thing. It's gone on all the way through the night. It's funny, because the world is making it easier to buy. But they're also making it easier to save. You've got to decide what team you're on. Yeah. We have one more question. How do I manage my finances and student loans after college? Awesome, Thomas. Thank you. Finances and student loans after college, and you're a senior, right? This is a little bit like Hannah's question. But Jay, Thomas has his degree. He's got his knowledge. new job. What does he set up first tactically? Well, the first thing you've got to do an inventory check,

Starting point is 00:42:37 and you've got to figure out exactly if you're, if you have student loans, what those balances are, what those payments are, and get that set up with your service. When they start. That's going to be the first thing that you're going to want to do. And then secondly, you don't want to go out there and have that deserving aspect. You know, I've made it four years. So I'm now going to go and spend every penny that I have saved up. And we've already alluded to this, but just start. start developing the emergency fund, start saving, start developing your budget, and just start. Hiding that money from yourself, like we were telling Hannah earlier, is so important, Paula. Yeah, I think with debt in particular, with student loans, you'll want to be thoughtful about

Starting point is 00:43:17 how much of your money you want to put towards student loans versus how much of your money you want to to put towards starting your retirement savings. Because going back to what we said earlier about the rule of 72, you know, every dollar that you put towards retirement savings when you're 22, assuming that you leave it there until you're 67, that's going to go through several compounding cycles. Five doubles. Yeah, exactly. I had some friends who were super focused on just paying off debt and wanted to be debt-free

Starting point is 00:43:48 as fast as possible, and that's great. Like, it's coming from a good place, but don't let it come at the expense of retirement savings, and particularly, J, to your point, if you have a 401k match, definitely get the match. definitely get the match. If you don't, because many jobs don't necessarily offer a match, you'll still want to put some money aside, even if it's unmatched, into a 401k, or if you don't have access to a workplace 401k, into a Roth IRA. And this all starts with general mindset. We've had a lot of smart people that Paul and I have been able to talk to over the years that we've done our shows. There was a very

Starting point is 00:44:26 brilliant guest we had on. I was very lucky to have him on twice. His name is Jonathan Clements. For a long time, he was the personal finance columnist at the Wall Street Journal. He actually passed away recently, sadly. What was really neat about Jonathan was he was so brave. He even wrote columns about the process of dying and all the things that you need to do. But what he wrote, I think that's important for us tonight, was he said, you have this choice. You're going to, almost like Paula, you say you can afford anything, but not everything. Jonathan said you have two choices. You can party in your 20s or you can party later. You can work your butt off early and party later or you can party early and work later. You get to choose which one you

Starting point is 00:45:13 want to do. And he said for most people, for him especially, he was very glad that he chose that he was going to work his butt off those few earlier years so he could party in the later years. But we all have that have that choice. And I think having that mindset when you retire that this is not going to be forever, I'm just going to put my head down. I'm going to have roommates for a while, like we told Hannah. I'm going to, I'm going to keep living the same lifestyle just for a few years so I can get that doubling going. And then things get exciting in a hurry. And then Jonathan, sadly, didn't get to party as long as he wanted to. But I'll tell you, he lived a great life. And in his columns, you see that he lived a really great life. Right. And not only that, but like he lived a great

Starting point is 00:45:56 And towards the end of his life, the fact that he was still saying, I'm still glad that I did it. That I did it, right? You know, so that his final years could be more peaceful. Yeah. That kind of goes back to your question about, like, how do you balance peace and purpose and, you know, all of that? Like, there's a certain degree of peace that you have when you know that your finances are solid. All right, you've just heard the live Q&A that we did with the students at Texas A&M.

Starting point is 00:46:27 Thank you so much to the staff at the university, to Jay in particular, for inviting me to campus and providing both me and Joe the opportunity to talk directly with the students. Thanks to Joe, Saul Seahy, and to his spouse, Cheryl, for welcoming me to their home, letting me crash at their place for a couple of nights. Thanks to everyone in the Texarkana community who works so hard to make that small city a thriving and vibrant place. And thanks, above all, to the students who are enormously inspiring. You are the reason that we do this.

Starting point is 00:47:04 And thanks to all of you for being afforders. If you enjoyed today's episode, please share this with the students in your life. Share this with college students that you know. That is the single most important way that you spread the message of great financial health to the next generation. I am a believer that financial well-being is core to who we are. There's physical well-being, there's mental well-being, there's spiritual well-being, and there's financial well-being, and none of those can be ignored. So please share this with the people in your life, particularly the students, people in their 20s, people who need to hear this message.

Starting point is 00:47:42 Oh, before I go, I'm hosting a live webinar on the topic of real estate in 2026. If you've got questions, if it's been on your mind, afford anything.com slash rental 2026. is where you can go to sign up. That's afford anything.com slash rental 2026. It's free. The webinar is on Tuesday, May 12th. I'll be live answering your questions. So if you want to interact live, afford anything.com slash rental 2026. All right. Thank you so much. My name is Paula Pan. This is the Afford Anything podcast and I'll meet you in the next episode.

Afford Anything - Q&A LIVE from Texas A&M Texarkana

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