Animal Spirits Podcast - How to Start Your Financial Life (EP.182)

Episode Date: December 18, 2020

On today's show we discuss financial topics for young people including how much you should spend on an engagement ring, how to talk about money with your significant other, how much a wedding costs, managing money when you're married, starting to save for retirement, buying your first house and more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of Animal Spirits is sponsored by NaviPlan by Advocent. Built on the most precise calculation engine in the financial planning market, NaviPlan empowers advisors to cater their services to any client from simple goals-based assessments to advance catch-flop planning analysis. To see how Naviplan helps model some of the concepts discussed in this episode, visit advicent.com slash animal spirits. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment

decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. All right, Ben, today we're going to talk about how to start your financial life. everything from saving for an engagement ring all the way up to college planning and retirement planning for yourself. But before we get to that, I don't know if you and I have ever had this conversation. Do you remember your earliest money memory? I don't know, probably getting five bucks in a birthday card from grandparents, that sort of thing. Okay, that's way early.

I'm talking about like teenage years, I guess, or if it started earlier for you. I guess I got my first job at 16 and finally having some money in my pocket, that sort of thing. Did you invest right away? Tell the truth. When I was in like a junior in high school, I put $1,000 in a CD that I'd been saving. Really? Paid 5%. Yes. Good for you. Saving for spending money in college and I put money into a CD.

I didn't know what the markets were back then at all. I knew nothing of the economy or the markets until my senior year of college. I didn't even know that they existed basically, except they're on TV and movies. I guess I was tangentially aware of the dot-com bubble because I had a cousin who was super, super young, started a tech company and was supposed to retire with all this money and something ended up happening. The dot-com bubble bursting like that type of thing happened. And it didn't work out. But I'm with you. I was not really aware of the markets as a kid growing up at all, did not know what a stock was, what the bond was. My earliest one stock that did have a big impact

of my life, which I've spoken about before, is a company called Seljean. My parents got divorced. I don't know. I was fairly young. So my mom had to go back to work. My mom never graduated from college. So she didn't really have any, like, employable skills. So she went into the workforce, didn't earn very much money. But her brother had a stock tip for her. Her brother was an accountant and helped her out with her financial life. And he put, as the old saying goes, I don't know if this is exactly $10,000, but let's call it $10,000 into a company called Seljean. And in 1996, I believe, 95 and 96, this thing was tiny. It was tiny, tiny. I'm guessing it was like a $30 million market cap. Fast forward to the time I'm like 18 and this was worth half a million

bucks. I'm making that up. Something like that. It was real money to us. And so that was my first like, oh, this is what the stock market can do for you. So when I turned to 18. By the way, those stories never work out like that where someone actually holds on to it doesn't let it go. If you're not like an employee of the firm or something. Never. And the irony is that like they had no insight. That's not the irony. The irony is that here I am, one of the few beneficiaries of this type of lottery ticket story, and I spend a lot of time warning people why they shouldn't do this. And I still think they shouldn't do this. But she did get lucky. We did get lucky. So when I turned 18, is that the legal age for when you could buy stocks? I don't think there is a legal age. To buy stocks? You mean like open an account or something? Yeah, there is. To buy stocks. Hello, Arthur Ben. You can't be nine years old in trading stocks. Okay, I didn't know that there was a Mino Mage. They asked for ID if you want to trade stocks. Yes.

Anyhow, I believe it was on my 18th birthday. I asked my mom for call options in Seljean. I don't remember the exact dollar amount, but let's just say I hit it big. I think they were up like 40% or so. And I was like, this is awesome. The account was in my name. I rolled it into new options. And of course, where did they go?

Straight to zero. That was my entry into, okay, this thing is fun. This could be a lot of fun. I guess I just never really had that moment. I had my foray into Warren Buffett and Benjamin Graham books that I thought I was going to be the next Buffett like everyone who initially read those books. For some reason, I was so unmotivated as an adolescent that that didn't stick with me. It wasn't like, oh, wow, this is cool. I should do something with this. I should pursue a career in finance, business investing. It just didn't click. And I didn't revisit the market until, I don't know, after my mother passed, I didn't have any money. That's probably something that people in the

financial industry take for granted. And I would include us in this too, is that most people just don't care about this stuff. That's why it's hard for people to get their finances in order because a lot of times you don't have a good role model. And I mean, you could have taken that Seljean example and become a crazy trader and assume this is how it works for everyone. looking at like your situation or your circumstances and a lot of people just don't have good financial habits to get them started or they start out after school, whether it's high school or college and they get their first job and their first paycheck and they go crazy because they finally have some money for the first time or whatever it is because it just, we've said this a million

times. No one teaches you how to do this stuff. On that point exactly, I've changed my mind on this violently. In terms of like teaching kids financial literacy, one of the things that I said and I was looking through this through my own lens, was that, uh, what do kids really learn in middle school, high school anyway? They don't pay attention. And that was me. I didn't pay attention. I was a terrible student. But that's no excuse. We should absolutely have basic financial literacy courses and maybe start as early as on lunch at school. Certainly middle school and high school. You do like home economics where you learn how to like sewing stuff. At least I did. What a waste of time. We all learned how to write in cursive. Remember that? How many hours did we waste of our

life writing cursive? Yeah, what a waste of time? How about, teaching children, 17-year-olds, that are about to take on $160,000 worth of debt, how about they actually learn what that means? Right. Yeah, just getting people prepared. Not many schools prepare you for the workforce or, yeah, just taking care of your own financial life, which money touches so many aspects of your life. It's hard because people want to say like money doesn't buy happiness, but money can

buy comfort and convenience and a lot of things that make your life easier and less stressful. How about this? don't you think the number one source of unhappiness is a lack of money? I agree. More money is not going to make more people happy, assuming that you have your basic needs met. But not having money is a source of unhappiness to billions of people. Let's say if you did a financial literacy course in every high school in America and it improved the financial lives of 10% of them, that'd be a huge improvement over the current baseline. Where does the responsibility fall now for people to learn financial literacy? Is it on their parents who oftentimes don't know anything? Right, who themselves could

be in massive amounts of credit card debt or have awful financial habits. That's often where it comes from. I guess right now it's Wall Street bets. Unfortunately, you're on your own. And that's why we wanted to do this one to just kind of go through some of the big decisions you make early on in life. Because unfortunately, making some terrible decisions early on in your financial life could lead to continue bad habits and terrible decisions later on in your life, right? Right. All right. First topic that we're going to get into is how much should you spend on an engagement ring. So this is one of the first financial goals I ever planned for when I first started working in 2004, 2005. Did you start planning this before you even had a partner in

mind? No, I was not that crazy. I met my wife in college and then went to the working world and she went back to school for a couple of years. And so knew that, okay, we're going to get married. So I was putting money aside, but I saving $100 a month or something for this. What were you doing with that money? Were you investing it or just putting it in a bank account? The savings account. All right. So how did you come up with your target? How did it work for you?

That was basically the amount of money I could save. I made nothing coming out of college. My salary was just on the floor. So that was like the amount of money I could save, basically. Right. But I'm saying like where did you want to get? How long did it take you? I think I saved for two years and then I basically financed the rest.

I saved as much as I could and then I borrowed the rest and paid it off over, I don't know, three or four years or something. It was basically all the money I could afford. How does that process work in terms of borrowing? Do you have to go to a bank? Does the jeweler extend you credit? How does that work? I did it right through the jeweler, actually. I'm sure I got raked over the coals by fees from them, but I didn't know any better. So someone did that. So we had a listener question. They said, any advice or rules of thumb for getting an engagement ring. The whole three-month salary thing seems impractical and outdated, in my opinion, in my mid-20s, thinking about making the leap in the next year or so. So the reason why I keep asking you so many questions on this is because I gave my wife my mother's wedding ring, which is good because, well, it's not good. It's actually the opposite. of good. But I was unemployed. So I worked my entire teenage years. I guess not my entire teenage years, but like I was a bus boy, a valet parker, a waiter, a caban boy. When I graduated

college, which took an actually year and a half for me, I probably had about $40,000 saved up. And it's a good thing that I did because I was unemployed. My first job was at- You saved that much money in college? That's pretty impressive. Well, it's actually not impressive because I got kicked out of college and I was home and I had no friends around, I was a waiter full time, literally full time. I was working probably five or six days a week for probably about two years. And I had worked and made good money as a good band-a-boy before that. I graduated with quite a bit of money, especially for a kid. I felt rich at the time. I started off with a net worth in the negative because I had student loans. I had my first

car payment in the world. I had a job that didn't pay a whole lot. I took the job because it was a good experience for me and I really wasn't that employable at the time because I didn't know what I want to do with my wife and I probably screwed around too much in college. So it was up to me to kind of play catch up. But yeah, I kind of saved what I could. So we found some numbers. This is from the Wall Street Journal and CNBC. They said the average ring runs around $5,900, which is a lot for a young person, for most young people. Yeah, it is. So we'll get back to these numbers. But when you bought it, did you have any sort of feelings of, oh my God, this is the biggest purchase I've ever made? This is so much money. Or were you already psychologically prepared to let that money go?

I remember there was a lot of pure pressure. Because when you're at that age, after school, and then all your friends are getting married or engaged, and people are telling you, this listener asked, you know, the whole thruant salary thing. I remember people telling me that. Ben, you have to spend two or three one salary. And I'm thinking, okay, how am I going to live? Right. Yeah, I tried to save. Is that still the rule of thumb? And where did that rule of thumb come from? Two to three months? Here's a survey. Two thirds of younger Americans, Gen Zian young millennials, think an engagement ring should cost less than $2,500, according to one survey, which is less than half the national average, obviously. So maybe young people are hopefully

trying to bring this down. But again, for young people, that can be a lot of money. And because you have the peer pressure to do it and because it's like tradition, I don't know, hopefully maybe young people can break that because it is cumbersome to that if you don't have help from parents or some other source. I'm sort of surprised we haven't seen like an ESG type of explosion in diamond rings. You know what I mean? Like an alternative material. Think about like the process you go through. You go there. They show you the diamond in the microscope and you're looking for like the flaws in it or whatever. And what do you know, how much it's worth or what the right amount of carrots or the flaws should be? You have no idea. This is a big ass for a young person,

but did you negotiate? No, I didn't, but I should have. Thinking back on it now, that's one of the things that I would tell people is that, especially if you go to a smaller plate, those places are willing to negotiate. And if the worst thing they can do is say no, it's worth it to say, I'm shopping around a little bit, I'm checking out some different places. Having said that, I think a lot of people go ahead of time with their significant other or their future significant other and try to pick one out that they like. So once you get your mindset on something, then you kind of know. And that's basically what we did.

We kind of had one picked out in advance. So I knew what I was getting. From the engagement, you move on to the wedding. Actually, before the wedding, should we talk about commingling finances? Maybe that's the next step. Yeah, because that's probably a discussion that you should have before. Are we going to put our finances together? How many kids are we going to have if we're going to have children?

Where do we live? are we both going to continue to work if we have children, child care, what's our savings plan? There's a lot to cover if you're trying to plan out your life. Obviously, you make plans and God laugh sort of thing, but it's worth it to have those conversations. All right, so maybe let's use a listener question to kick off this topic. How does a couple go about splitting their finances? The mortgage to the house we live in is under my name, and she gives me a little money each month to help pay for the mortgage, utilities, and property taxes. We split on groceries and put money in a jar for date and safeifications.

Otherwise, everything is separate. I am more of a saver and she is more of a spender. We seem to have little arguments from time to time. I never seem to have the money she wants to spend on skiing golf trips. And she gets mad at me when I put money into house repairs. About 40% of my income is to go to the house while her contribution works out to 28% of her income. How shared or separate should a couple's budget be? This is a tough one because if you're trying to split everything and make it fair, do you go by income?

I know that there are couples who can do this and make it work where you split finances. I think that you're inviting more arguments into the situation than you're solving problems in this case. That's always been my stance. There's like a spectrum of how finances are talked about in relationships. For example, I've seriously tried many times to get Robin involved in terms of where we're spending, how we're doing, and she doesn't want to hear about it. I know this is obviously dangerous. God forbid something happens to me, but I can't force her. I've tried many times. You can put me in your will as your go-to financial planner if you should pass away. How's that sound? On that vein, the way that we do it, and this is just what works for us, is that I take care of

everything. Everything comes into my bank account. Obviously, her name's on him. Her paycheck, my paycheck, everything comes into my bank account. Her credit cards are linked to my bank account, so everything is funneled through me. So she really is completely out of the loop, which is fine for her. That's kind of the way it works for us. To be fair, most of our stuff is automated at this point anyway. So our names are on everything, whatever, the house of the accounts, everything are our name. So for us, it's just one big bucket. We're not doing the mental accounting thing of breaking it up between you pay this or you owe this. Savings are together. The bank accounts and everything are easier that way for us. And my wife has said, like, she's asked me a bunch

of times before, like, should I just have my own account to do something with? And it's kind of like, well, what's the difference? You can spend your money. That's just the way that we've fallen. I feel like if you separate it and no judgment, but it just seems like more things can go wrong. Yes, again, we in the past, when we weren't making as much money, and we both came out of college and we were kind of low people on a totem pole, we would have discussions of, if we're going to spend more than $200 or $300, we should discuss it. And we don't really have those discussions anymore as much. Maybe that number is bumped up a little bit, but you should maybe have a threshold where if there is one person who is a saber and a spender and you have the

opposites attract type of thing, you should have some sort of boundaries potentially where you, what constitutes having a discussion about spending money? I would assume like material purchases that are over 500 bucks, for example, certainly go in that bucket. I think that to your point, as people get older, a lot of those big ticket purchases are mortgage and daycare and most of the other material possessions, not for everybody, but for most people fall by the wayside. My wife doesn't really buy new bags that often or anything like that. Yeah, I can look out there too. If you're not on the same page, you're not going to agree on everything. But if your overall values of how money should be treated and how you should spend and save, if those are polar opposite,

that's going to be tough. Let's get back to the wedding. The CNBC article, the average wedding costs $33,900 in 2019. And that includes the engagement, ring ceremony reception. So they include the engagement ring there, which is, again, $1,500. This definitely fluctuates wildly by state because I know, for example, in New York, it's weddings are pretty expensive. This is one where the spending shamers come in a lot and they scold people and say,

this is stupid. Save your money. Have a small wedding. I wish I would have done it that way. This is something that people who've gone through the process can say. And I would say too, like me and my wife got married now, we would invite quarter of the people and we would make it much smaller and we would save the money or something. But good luck telling someone that when they're planning the biggest day of their life at that point to save money and just cut back because no one wants to do that for their own wedding. And I think the things that don't make sense on paper, like why would you buy a wedding dress for one day and spend so much money on it? Or why do bridesmaids pay so much money for a dress that they're never going to wear again?

Or all these things that you spend money on. But it's the psychic income of it, right? Yeah, it makes no sense. Economically, imagine you break it down per hour. You're talking, I don't know, depending on your wedding, $10, $15,000, $25,000 per hour. But it's a lifetime of memories. I completely agree with you. It's easy to say you could take that money.

You could start a life. But all right. That was the only day of my life where every single person in my life that is a friend or a loved one, was in the same room on the same day. And it's the only time except for when you die. There you go. Right? That's it.

So how do you put a price in something like that? Now, I agree. You shouldn't be irresponsible. You shouldn't spend, you know, you shouldn't put yourself in, like, debt that you can't crawl out of. But I understand that people want lavish weddings. Let's say you're not one of these lucky people who have parents who are going to pay for it because obviously a lot of people are in that boat where their parents pay for it.

they just don't have to worry. So what do they care anyway? It's on mom and dad's dime. In his book, I will teach you be rich, Rameet went over this. He said that he started saving for a wedding before he even was engaged. It's kind of crazy. So he says, like based on the average wedding, if you're 22 and you have five years into the wedding, you have to save almost 600 bucks a month if you're going to pay for this yourself. That's impossible. That's part of it too, is are you paying for this yourself? And can you really afford it? And should you start saving now? Another thing for young people to think about is some people just may not have the ability to meet that average and they have to skimp and save out of necessity. There's this idea. You help pay for somebody's wedding. You take

percentage of their future earnings. Ah, the ISA is a wedding. How much money do you think young people saved by not having a wedding season this year? It's got to be a multi-billion dollar industry. I can't even imagine how much money when we had wedding season for that two or three years out of college or however long it was. Oh, you mean young people by not going to other people's weddings? traveling, bachelor-bachelorette parties, hotels, gifts, I don't know, tens of thousands of dollars for some people, potentially, over the course of a summer. Well, they're just kicking the can. They're going to make it up. Yes, wedding season next summer.

If it's summer's open, it's going to be crazy. All right. So you buy a wedding ring, you get engaged, you get married, you're earning a living. You're in debt up to your eyeballs from the engagement ring and the wedding at this point. I think we have to talk about the fact that we've mentioned this before, but you shorted the S&P to pay for your wedding. That's not exactly true. What's the story? That's not exactly true. All right. So I guess you could say Seljean paid for my wedding. I paid for the wedding with some of the money that my mother left me. Seljean, like investor relations needs to know how this company changed your family's life.

They were bought by Bristol Myers. Okay. So I had no idea what I was doing. I just knew that it was a lot of money that I needed for the wedding. You inherited that money at a relatively young. How old were you when you got the I was 25, I think. And again, this was just sort of when I started getting interested in the market as a potential career. So I didn't know what I was doing. But I was picking stocks and I was pretty much fully invested. And this was a relatively large dollar amount for somebody at that age. I couldn't emotionally deal with the fluctuations of that portfolio, especially given that it was my mother's money. I had all these emotional attachments to that money. It was my moms. So seeing those dollars swing on the screen, which is more than I can handle. And so I shorted

the S&P just to offset some of that. So it's not like Harry Denting, the S&P 500. I was fully long and I just wanted to protect myself because I had this wedding coming up. But yes, technically short, even though I was more than long against it. Okay. So while my wife and I were engaged, I actually had the talk with her. I had really become interested. I'd been working in the field for a couple years, finally had a little money. I mean, when I started, I talked about this in my new book. I think I started making $36,000 a year out of college. I was making nothing. I had enough money.

I was saving $50 a month in a Target Date fund. That was my retirement. I didn't have a 401k at work. Hold on, slow it down. What age were you? You immediately got into the workforce and started. How was that planted in your brain? Was this your parents who did this?

I'd been working for a year not saving any money because, again, I was trying to save for an engagement ring. My dad's like, all right, it's time to open an IRA if you don't have a 401k at work. Because I looked for a very small private firm. I think there were six of us there. and we didn't have a 401k. My dad helped me open an IRA, and I started putting 50 bucks in, I think, that Tiro price and a target date fund. That's awesome. That was my initial four into investing. So I started talking to my wife about it because I had been interested in it and going through

this self-discovery process of investing and reading. My wife and I, it was a long-distance relationship. She was in one city. I was in another, and I knew no one there. I would read for two or three hours a night because I knew I was so far behind where I should have been coming out of school. And I was playing catch-up basically and learning everything I could. I had to talk with her and I basically created like a little mini PowerPoint presentation. This is how nerdy I was about how we're going to keep. By the way, was LOL. Yeah, true.

Now you're a super cool dad. Kids, check out my blog. It's all about finance. Just basically telling her like, okay, just so you know, the bulk of our money is going to be saved in the stock market. And that's the way that we're going to grow wealth over time. And I try to walk her through most people, if you don't pay attention to the stock market, it's what you see in TV and in movies and you think, well, isn't that

risky that I don't want to lose money and all these things. And I walked her through it and actually kind of a good conversation because it started off some other things about saving and how much we're going to save and how we can do this and how we can reach our goals and what those goals even are. And it was actually a worthwhile conversation to have. And we kind of got on the same page. And after that, she was kind of like, okay, I trust you. You handle the investing side of things. We had a similar experience in terms of like discovering being very late to discovering the stock market. I've shared this before. So I'll make this very quick. My first book that I read, I think, was the intelligence investor while my mother was still alive. Because I believe it or not,

I remember telling her how excited I was about this. So I was probably, I don't know, 23, went to Yahoo Finance, looking at some stocks, getting interested that way, and then found Jesse Livermore, holy cow, I'm going to be the next Paul Tudor Jones. That didn't work out. You know, that's a fairly typical path, I would say, something like that where you find value investing, you find trading, and you realize, okay, both of these are really hard. And then you land on the target date fund and you call it a day. I honestly think part of it was circumstantial because I didn't have money. I wanted to trade stocks and such, but I didn't have any money to do it. I needed to save first and I started saving in a simple way. So if I would have had more money to play with, I probably

would have developed maybe worse habits for it. But it was almost out of necessity that I developed good habits because I didn't have a base of capital to start with. I was a broke person with no money. All right. So then you start developing, and what I say you, I mean literally, you, Ben, started developing good financial habits. How did that progress over the years in terms of like, okay, I'm going to increase my savings in my 401K? Like, how does that happen? How do people know, like, what's the right dollar amount that they could afford or percent amount? I slowly realized, as I was reading all these books and trying to learn about the markets, sprinkling in personal finance books here and there, too, I think if you're a financial

advisor and you don't have the millionaire next door on your bookshelf, you're a fraud, right? Everyone's read that. But I was realizing, oh, okay, actually these personal finance books are way more applicable to me in my real life, whereas the market books are more applicable to my career and my job. What are some good personal finance books? Because I kind of skipped that. I was never really interested in that, even though I think that's way more, I repeat, that is way more important than reading investment books. One of the only, and I only read this a few years ago, I basically skipped the personal finance books, but I will teach you to be rich. by Ramit Sadie, which you recommended. It's an excellent book. I read The Wealthy Barber.

It's a great story. Sort of like the millionaire next door. It's basically just send 10% of your money is the TLDR. What else is out there? I remember the first one I read where it really clicked was the automatic millionaire by David Bach. And it was basically just how you can automate everything. And if you just save money consistently every week, every month, whatever. It's almost inevitable. Yes. And it was like, oh, that makes sense to me. If I just set this on autopilot and leave it alone, I'm going to grow my money over time if I'm investing in something that has a little bit of the risk asset. Would you say that when you're looking at these personal finance books, at the end of the day,

the only thing that matters is your savings rate? Pretty much. I ran a million different numbers and all this stuff on compound interest and saving for my new book I just wrote. So let's say you start saving at age 30. These are simple numbers and they're totally unrealistic because it assumes you save the same amount every year. But let's say you start saving $250 a month.

By age 30, I think depending on your... situation, let's say that's doable. Every year, you just increase that by $100 a month. So you go from $250. You start $250 at what age? At age 30, $250 a month. Every year you increase that by $100 a month. So then you go from $250 to $350 a month and then $350 to $450 to $4.50 until you can max out. So that would take you like 15 years to get to the point where you're maxing out, which now is like $19,500 in your 401k. So it takes you 15 years to get to that max. So you're not doing it right away. Like that's unreasonable to assume most young people can get there. If you did that And then you just maxed out your retirement account from that stage forward.

To reach a million dollars, your required rate of return is like 3%. Right. There you go. It's just the act of starting and then slowly building. And that's the thing that I tell people is just, again, I started saving $50 a month for retirement. As I progressed in my career, I made a little more money. I finally my first job with a 401k, they actually offer like a 10% match, which was amazing. And you start slowly increasing it and slowly increasing.

And I tell people, do not worry about your investment returns when you start saving. worry about how much you're increasing your savings rate. So I say my rule of thumb is increase your savings rate by more than the historical return on stock. So let's say 9 or 10 percent, your savings rate. So going from, let's say you save 3% of your money to start. If you go from 3% in one year to 4% the next year, that's a 25% increase. Those are the increases you should care about. How much your savings rate increases as a young person in getting that to the place where you can do some real damage eventually, even though you don't see much progress over time if you're starting small. That's good advice. Well said, Ben. Let's go.

on to our last topic we're going to talk about, and we've spoken about this before, but how long did you rent before you got serious about thinking about buying a house? What was that process like for you? We rented a big loft apartment in downtown Grand Rapids. We planned being there for at least a year before buying, maybe two. It was a rental place and someone bought it and decided to refurbish them and sell them all. So ours got sold out from under us after six months. So we were kind of forced into, okay, do we move to another rental or do we just buy. It was actually late 2007, early 2008. The real estate market at that point was crashing. We were coming from a rental in a good position as a buyer. Like, we had all the leverage.

It was actually a good time for us to buy. So we ended up just buying nine or 12 months after we got married. Oh, wow. Okay. Was that a financial decision or was that more like, let's start our life decision? The finances of it were, I mean, I did some research and such and understanding the taxes you'll pay and how much this is going to really cost. And I tried to understand all that stuff, but it was more, okay, this is the next step you have to take. And I think that's another peer pressure thing where a lot of people at that age is like, okay, you've settled down, you're out of school, you have a job now. You're married or you're with someone. Now it's time to buy a house. That peer pressure is real because for us, we realize that we want to stay

here and put down some roots. But for some people, they make that decision without thinking through all the consequences. It doesn't have to be the next step for everyone. That's another thing. I don't know what the average age of the first time home buyer is. I imagine that it's gone up over time. I'm going to guess 30 years old. So young people, they're typically taking out, it's a lot of leverage. Yeah. So this says around 33 right now. It's usually what, five to one if you put down 20%? Here's the other thing. You save for an engagement ring, then you save for a wedding. Or I should say four to one. I mean, do you think a lot of young people really have enough to do that 20% down payment at that point? It's tough again. If you don't have some sort of financial backing or help from another source, it's, tough. Median home price is $330,000? For my first house, I put down 5%. I didn't have enough money for 20%. We put down a 5% down payment and they let us do it, which you have to pay the private mortgage insurance a little bit extra, but surprisingly they let us do that as first time home buyers for a 5% down payment. What do you think some first time home buyers miss? Here's a podcast question. What do you know now, then, that you wish you knew then? Obviously, there's a sticker shock

of your monthly payment with taxes and all that stuff and what you're going to pay over time with maintenance. That's stuff people talk about. But I think initially, you don't realize the amount of money you spend. If you're someone who's going from an apartment to a house, you spend so much money outfitting that house. We try to take our time doing it and we try to do it using IKEA and Target in these lower cost places. I've never been one for like big expensive furniture. That's especially true if you have kids. Do not buy expensive furniture. It's not worth it. It gets ruined. But it's a lot of money that you spend just outfitting your house. That's absolutely one of them. How about you think like, okay, I'm going to put down 10%. So I'm buying a house. It's

$300,000. I'm going to put down $30,000. Wrong. The closing costs, the closing costs like knocked me off my feet. Well, and for you, the closing costs versus from Michigan to New York, that's like a beer from Michigan to New York. You guys pay all these crazy fees for lawyers and you guys pay these fees that I've never even heard of in New York. Yeah, I don't know. It sounds like total manipulation. An expensive process and something that you want to go into with your eyes wide open. It's much more than just that monthly payment. My favorite line on homeownership comes from our friend Morgan Hasel who said, a home is a liability masquerading as an asset. People always talk about it being your biggest investment. It's a form of consumption because you have to live somewhere. So you'd be

paying it on rent or a house. So you have to do it. We've talked about this recently that it is a form of for savings for people and that's positive. But this is one of those decisions that, yeah, it should be part financial and part lifestyle, basically. I said last topic. This is really the last topic. So you get a house and then, of course, kids come. Not for everyone. For many people, kids come. I sort of dragged a little bit on this. Robin had to twist my arm. I felt like I was maybe 31. And I felt like my career was like just getting going. I loved the freedom of being able to see a movie on a Friday night by myself whenever I wanted. And I wasn't ready to give that up, but I'm glad, obviously, that we did it when we did it. That's a decision that I think people

in the past, our parents' generation, never would have thought twice about. You didn't try to plan out when's the perfect time to have kids. They just did it. I think my mom and dad were like, I don't know, 21, 22 when they had my sister, their first child. Yeah. So that seems like a new thing to me that people try to plan it out so perfectly and have it at the right age. But we did a whole podcast, we'll include in the show notes, the economics of parenting. So we'll include that one as well. So there's more on that topic as well. A good place to end is with the college for kids, especially now where it seems like, okay, if I'm sending my kids to college in 15 years, 20 years, and you extrapolate out the growth in the tuition costs, well then, geez, how in the

world are you going to afford your kids college? It just sounds like a number that can't be met. So somebody asked us, in January, my wife and I welcomed our firstborn son. Immediately upon his birth, we established a 529 plan along with an up in a brokerage account making monthly contributions. We are both establishing our careers and our respectable income and limited liabilities. Our ultimate goal is to provide the same luxuries for our children as we were afforded, given the recent trends in higher education transitioning to a more online hybrid model, along with the big tech players like Google rolling out the Google Career Certificates platform. Do you feel it is justified to focus a majority of our efforts on funding of the

529, or would you feel more inclined as a new parent to just contribute to and invest the money in a general account, not necessarily focus on higher education? Any thoughts would be appreciated. So I don't know about you. I actually just opened up an account on Lyftoff for the boys, which was your idea. And I'm contributing six times as much to their 529 as I am to this. Because I guess I've put too much thought into this, but I'm just thinking like, let's say that this is 15, 20 grand there, the money that I'm putting a lift off. By the time they graduate college, I'll give this to them. And it'll be a nice little way to kick off their adulthood. I think I'd probably say four or five times from the 529. I opened up a 529 for all my kids

and they're born. I've gotten similar questions before saying, like, what if the pandemic disrupts college and it doesn't cost as much? Or I don't want to take that chance, I guess. And if we get to the point where I have these 529 balances and my kids are going to college and they're going to be the next Mark Zuckerberg, they're not going to drop out or they're not going to go, or they're going to do something else. I don't know what the implications are. They're the tax on it. I'd be fine doing that, knowing I had that plan for just in case. I don't really want to roll the dice on that one because my dad said when we were born, they were having discussions saying there's no way that the cost of college can continue to

rise like this, and it still happened. How methodical are you being about your 529 plan? Do you have like a spreadsheet where you say, okay, my goal is to take care of all of their college? Like, how are you doing that? I think that's an impossible thing to plan out. I have a certain amount that I save each month, and it's nice. My daughter is six and seeing the balance grow. It's amazing. Like, oh, my gosh, it actually works.

I've saved the same amount every single month since she was born. I've tried to tell the grandparents, like, hey, for birthdays and Christmas or whatever, if you guys want to make a 529, here's how you do it. And I've gotten a few of those, so the peer pressure that has worked. I don't have a set amount in mind. I've run the back of the envelope stuff, but, like, I don't see how you can even come close to thinking about what that's going to cost. And for me, it's going to be in 12 years.

no clue. So I think you just do the best you can. And I do think that putting your mask on before your kids, if the plane's going down, like save for your retirement first. And then if you have some left over for the 529, that's probably the right way to do it because you hopefully maybe you can figure it out later. But again, I think I've said this before. I understand why it's hard for some people to save themselves because they would put their kids first in a lot of ways. All right. I think that's a good place to end it. Thank you to Advicent for sponsoring the show. Animal Spiritspod at gmail.com. We will see you next time.