Chief Change Officer - Money Philosopher Michael Sakraida: Money, Joy, and Navigating Life’s Curveballs – Part Two

Episode Date: October 11, 2024

Part Two. Money Philosopher Michael Sakraida, author of Money, Balance and Joy: Improving Your Life Story, dives into the chaos of balancing wealth and happiness in today’s noisy ever-changing world. Spoiler: it’s not just about stacking cash. Michael unveils his three-part happiness equation—monetary wealth, time wealth, and social wealth—and why you need all three in harmony to live your best life. He doesn’t hold back, taking shots at Wall Street, risk tolerance tests, and the “Financial Media Smut Club” for ignoring the emotional reality of money management. From showing why financial independence is about more than just collecting paychecks to calling out those unregulated financial influencers, Michael mixes real talk with a sprinkle of humor. If you’re tired of the same old money advice, this episode serves up a refreshingly honest, and a bit cheeky, perspective on finance. Key Highlights of Our Interview: Financial Independence: More Than Just a Paycheck—It’s About Legacy “True financial independence isn’t about working for money; it’s about working for joy. And when you’re gone, it’s the legacy—both financial and non-financial—that really counts.” When ‘Aggressive’ Turns ‘Anxious’: The Flawed World of Risk Tolerance Tests “Advisors tick the ‘aggressive’ box, but when the market drops, those same clients can flip out. The problem? Risk tolerance tests don’t dig into the emotional reality behind investing. They aren’t built to handle the emotional rollercoaster of real-life investing.” Financial Media Smut Club: Why Most Advice Misses the Mark “Too many financial articles focus on clickbait rather than offering real, actionable insights. The problem? Writers often don’t understand what they’re talking about.” The Problem with Financial Influencers: Why They Should Be Regulated or Shut Down “If financial advisors need compliance approval for every email, why do these so-called financial influencers get a free pass to spread advice with zero oversight?” Financial Advisors: If You’re Not Asking These Three Questions, You’re Doing It Wrong “Before any numbers come into play, financial advisors should be addressing the emotions tied to wealth: how you got it, what you want to do with it, and your past experiences with Wall Street.” Connect with us: Host: Vince Chan | Guest: Michael Sakraida Chief Change Officer: Make Change Ambitiously. A Modernist Community for Growth Progressives World's Number One Career Podcast Top 1: US, CA, MX, IE, HU, AT, CH, FI Top 10: GB, FR, SE, DE, TR, IT, ES Top 10: IN, JP, SG, AU  1.3 Million+ Streams 50+ Countries

Hi, everyone. Welcome to our show, Chief Change Officer. I'm Vince Chan, your ambitious human host. Our show is a modernist community for change progressives in organizational and human transformation. Today, I'm chatting with Michael Secreta, the insightful money philosopher and author of the book titled Money, Balance, and Joy. Michael dives into the philosophy of financial well-being, showing that money alone isn't the golden ticket to happiness. He talks about the need for a balanced ecosystem, which includes monetary wealth,

time wealth, and social wealth, explaining that full fulfillment comes when all three work together. He also takes on Wall Street, the financial media, and financial influencers, pointing out how they often miss the emotional side of financial planning. From risk tolerance questionnaires that don't account for real-life feelings to the misleading advice all over social media, Michael gives a candid and refreshing take. He also shares practical advice on how we can reclaim control of our finances,

build meaningful legacy, and manage life's financial curveballs with confidence. You use the word control. In the media, they don't often use the word control. Instead, they like to use the term financial independence or financial freedom. I should take on financial independence or freedom? In the last season, episode 7, I had a debate with my friend Gargan, who is building software to help millennials achieve financial independence. Personally, I don't buy into it.

I think human nature always keeps us chasing new desires. So we're never truly independent. What's your raw take on financial independence from a personal perspective? For me, financial independence is where you don't have to work, but you still work because you get a lot out of it. You're not doing it for the paycheck. You're doing it for the enjoyment. Yes, there happens to be a paycheck that comes along, but if all of a sudden there's a pandemic or your company goes out of business or just for health reasons, you can no longer work,

you don't have to worry about paying the bills. You don't have to worry about having money to leave, have that financial legacy. Independent wealth is both being able to leave a financial legacy, but also a non-financial legacy. That the non-financial legacies is important, if not more important, than the financial legacy. To me, you die and you have $20,000 left in the bank, to me, is not financial independence. That's just being lucky that you did not live your money. In another episode, actually it's episode five in season one,

I spoke with another friend, my classmate from Yale, Katie Curry, about how our risk tolerance changes as we get older, especially when it comes to career moves. We were both risk analysts for financial institutions, so we know it's not an easy concept to understand and to practice. Now, when it comes to personal wealth management, how do you explain risk and tolerance of risk to individuals in a way that's easy to understand and embrace? I think the whole risk tolerance, how that's handled by the wealth management industry is awful. They have a new client do a risk tolerance questionnaire, just 10 or so questions.

Voila, you're conservative, you're moderate, you're aggressive, and that's how we're going to manage your portfolio. That's as much a CYA activity that the compliance wants to do, but they're not explaining what this means. If you're a conservative person, if the market goes down, say, 10% or 15% to your investments, your overall worth on paper goes down 10% or 15%, you're going to be more upset, more stressed, maybe even unable to sleep at night than the moderate risk person. But they don't explain, okay, here's what this means for you in terms of achieving your financial goal, your financial legacy that you want to have. I did an analysis on data provided to me by a financial firm that over a 32-year period, if you're that moderate risk person, advisor has to say to you, you're less likely statistically to reach your financial goal. I had clients like this when I worked directly, they were super wealthy. They had generational wealth.

For them, to be conservative didn't matter. But other clients I had that were in that accumulation phase, being conservative or moderate does matter. The advisor needs to have that conversation in very simple terms, not financial advisor speak, not behavioral finance speak, but again, about their emotions. You need to then say, are you okay with this? Some people say, yeah, I just want to be conservative. Yeah, I want to be moderate. But others say, no, I'm not okay. How am I going to have this type of legacy?

Some advisors do this, and I got this idea, frankly, from an advisor. And when I first heard it years ago, I was like, of course you should do this. So what he does is they say, no, okay, here's what we're going to do. We're going to work together. It's not going to happen overnight, but it's going to get you further out on that risk tolerance continuum so that you're going to go from conservative, say, to a moderate, and then eventually down to aggressive.

Now, this is only the client wants to do that. And again, with the client understanding this isn't, you can't snap your fingers and have this change happen overnight. So the other problem with the whole risk tolerance is that it's, the questions are taken at a point in time and a point in time with the economy and with the markets. So you're going to have people that, oh, yeah, I'm aggressive after the market's been up. And a long bull market creates a lot of aggressive investors. And so now all of a sudden the market goes down even 10, 15%.

And some of these aggressive people, their whole risk tolerance just changed. They're flipping out. They're upset. What should I do? I should sell. I should sell everything. Dive into the bunker and wait till the bombs stop going off. So the advisors, though, oh, Al's aggressive.

I don't need to call him. I don't need to check in on him. And if he's having a problem, he'll call me. Sometimes one don't know when they're the fear and greed emotions are kicking in. And number two, they might be embarrassed to go from, yeah, I know I told you I was aggressive and I know my survey said I was aggressive, but right now I'm really panicking. And so it's an instrument, a risk tolerance survey. The setting isn't fully being used for the benefit of the clients and also for the benefit of the advisors. This is the last question of today.

And I'd like to pick your brain on the rise of financial influencers. As you mentioned, financial media before, financial influences on platforms like Instagram, TikTok, and YouTube has sparked a lot of debate regarding the impact on individual investment decisions. On the one hand, they democratize access to financial information, easy-to-access advice. On the other hand, they are concerned about their qualifications, the accuracy of their information, and potential conflicts of interest. For example, some may not have formal financial education or may promote investments for personal gain without adequate disclosure. So here are two questions for you. In your views, what are the potential risks for individuals making investment and money decisions based on all these easily accessible advice? Second question, what advice, what guidance would you offer to someone looking to navigate the vast amount of financial advice online, especially from those influencers.

How can investors, how can everyday people identify and follow advice that is both secure, safe, and hopefully and potentially profitable? First of all, with them, they should either be licensed and regulated like financial advisors or put out of business, is my opinion. The regulators, I don't care what is being regulated, are awful with handling new technology. So all they see is it's this cool technology, social media, and these people providing some help. And it's different than a financial advisor's charging a fee or getting commissions and all.

They're just awful with it. But you look at Bitcoin and all that, there's still no regulation on that. It just dropped the awful with it. You look at Bitcoin and all that. There's still no regulation on that. It just dropped the ball with that. So if I'm on Instagram and I have these testimonials from people who did my coaching and they saved X amount of money and say, oh, this person, they save an average of $5,000 a year and increase their income by an average of $20,000 a year. And the FTC, which they're doing, knocks on my door, says, oh, we saw this posting.

We need to see all this. We need to see who did this, what each person's result was. And if not, then you get a nice fine from the FTC. No one's doing that with these whatever internet influencers. So if I have to worry about what I say and get in trouble or I get in trouble, if a financial advisor has to worry about what they say and do and show any conflicts of interest, for example, then I don't get it. I don't get why all these financial influencers are just allowed to do what they do. So that's maybe not an answer you want to hear, but this is serious stuff. This is serious stuff with people's money.

This is their livelihood. There's a reason the Balfour guy, whatever, the Wolf of Wall Street guy, which was a real live person, was put out of business. That they were stealing money from people there's a reason advisors and broker dealers have compliance people to make sure that everything is done an advisor cannot even send out a mass email without compliance reviewing it, filing it, and when they get audited,

going to see, okay, they have to see all that. This is my opinion. I don't care if there's some good advice out there. I don't care if there's good intentions out there. All I know is there's a lot of bad actors. There's a lot of stupid people. You talk about the financial media, how you'll read an article and kind of scratch your head. And that the advice in my book, I call some of them the financial media smut club. They just focus on tantalizing things that get you excited, but really aren't good advice. And a lot of these people, they don't know what they're writing about. A recent article I read on restaurants with inflation. So the financial writer was talking about how expensive everything is for these restaurants.

They have to charge more. The financial reporter said, I don't know why that would still be an issue because inflation's down. Inflation's not down. The inflation rate is down. And so either that reporter knows that they're lying or that reporter has no clue what they're writing about. I remember there was an article years ago,

there's an article in the Wall Street Journal. The author completely missed the point. The article was about if you have a windfall and you're going to buy bonds, what do you buy? It's all corporate bonds, treasuries. I called up the writer of the article. I didn't care. That person wrote for the Wall Street Journal. They didn't intimidate me. They probably went to a better college than I did. I don't care. And I said, okay, if this person has this huge windfall, now do you think that would probably guarantee that they're in the top tax bracket? Yeah, of course, duh. I said, then why wouldn't you talk about municipal bonds?

There's dead silence. Because he knew exactly what I was talking about. And just completely missed it. I was in my early 20s at the time. It just showed me how many times they get it wrong in the financial media. So they have to get oriented. They have to have greater self-awareness and what's important to them. Most people need to have that orientation, that increase in self-awareness. And one of the things I say in there is, okay, if your candidate advisor isn't asking these three main questions, you should ask them, tell them to ask these questions. So the first is really understand the source of your wealth.

And how does that affect you emotionally? You have the wealth because you made a business, sold a business, and now you're worrying, I can't screw it up because I don't have another business to sell with it. Did you inherit money? Grandma started a business on the kitchen table, and you inherited that money. That comes with a lot of responsibility.

I can't waste or do stupid things with Grandma's money because she didn't do stupid things. I got to honor her. There's that pressure. So there's all different scenarios affect you from an emotional standpoint. I've had financial advisors yell at me, what does that question have anything to do with me putting a financial plan together? By the very fact you asked that question, you might want to rethink what real value you add to your client. The second question is, what are your financial goals and non-financial goals? What kind of legacy do you want to leave financially, non-financially, the kids, being involved in the community, being involved with your church, want to sail around the world or participate in the Bermuda race.

A friend of mine recently did the pilgrimage in Spain. So that took years for him to be able to do that. The third question is, what's been your experience with Wall Street? Is it good? Is it bad? Have you felt ripped off? Have you felt talked down to, clueless? Again, the emotion. Like you said before, hey, Mike, talk about your past, because that shapes who you are today.

So all those three questions and doing the work, the answering, and really the self-awareness from that tells you where you're at today. And that's going to help you make the changes go on the plan. Now, one of the other things, the greatest mistake people make with investing, and this comes into play with risk tolerance, is they look at their investments as just a jumble of money and stocks, bonds, whatever. They don't look at it as an extension of their values, who they are, their hopes, their dreams. And there's studies, I know at least one academic study on this, and I'm sure there's others, that the more you view your investments as an extension of you and your values or your faith or both, the less likely you're going to fall for the fear and greed emotions that we talked about. Wanting to increase your risk at the top of the market where you have the greatest chance of the market to go down.

And that fear, after the market goes down, you sell where you have the greatest odds, when you have the greatest odds of the market going back up. Financial professionals make this all for the same fear and greed. So don't think I'm talking down to the non-financial professionals listening. Many advisors, many CEOs of the bank or CEOs of insurance companies, what have you, have fallen for fear and greed. If not, you wouldn't have had all these companies that had to be bailed out during the Great Recession. You wouldn't have had all these brokerage firms or investment banking firms that went out of business because of that. You have to look at it, those kind of three key things. So anything based on emotions is not a do-it-yourself project. It's not this quick

thing that I could do an Instagram post and everyone's so goody like some of these financial influencers. And that's why, honestly, I had to write the book was to help these people start this journey and then get them to the point where they're able to take that next step in the journey.

Thank you so much for joining us today. If you like what you heard, don't forget, subscribe to our show, leave us top-rated reviews, check out our website, and follow me on social media. I'm Vince Chen, your ambitious human host. Until next time, take care.