Something You Should Know - Is It Good to Be Cynical? & How We All Screw Up Our Personal Finances

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Starting point is 00:00:28 the next time you get a craving, there's something you can do to crush it. Then, is it good to be cynical in today's world? Are cynics actually smarter than the rest of us? There's research that demonstrates that people believe that cynics are smarter than non-cynics. It turns out that the opposite is true. If anything, cynics perform less well on cognitive tests and on lie detection tests. Also, can some people really tell if a storm is coming from the pain in

Starting point is 00:00:58 their joints? And the best way to get a handle on your finances, because a lot of us aren't doing a very good job. There was a study done recently, and it shines light on some horrible statistics. Over 150 million people in the United States, almost half of us, report that we cry about our money or have cried about our money. And I'm definitely one of those people. All this today on Something You Should Know. At Wealthsimple, we're built for whatever you're building. Built for Jane, who wants to break into the housing market. We're built for Ted, who's obsessed with what's happening in the global

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Starting point is 00:02:02 And practical advice you can use in your life. Today, Something You Should Know with Mike Carruthers. Hi, and welcome to Something You Should Know. Do you get cravings? Probably everybody gets cravings. I crave Mexican food, chocolate, Thai food, and a few other things. And sometimes it's fun to indulge those cravings, but if you'd really rather not, the next time you're tempted to eat the junk food

Starting point is 00:02:34 or smoke the cigarette or buy something you don't really need, try this. Clench your fists. The Journal of Consumer Research did a study that found that tightening any muscle in your body will strengthen your willpower. Clenching your fist or flexing your bicep can actually trigger your brain to take control of the situation.

Starting point is 00:02:57 It also appears that willpower, no matter where it comes from, is like a muscle that can be taxed and worn out. So use it sparingly. And that is something you should know. Are you a cynical person? If you are, according to the dictionary, then you believe people are motivated by greed and self-interest and are generally untrustworthy, at least until proven otherwise? Or are you the trusting type? Do you believe people are generally good and caring and trustworthy?

Starting point is 00:03:33 What makes someone cynical? And what makes other people not so cynical? Is being cynical a good way to live? Are cynical people smarter than the rest of us? Well, that's what we're here to discuss with Jamil Zaki. He is a behavioral scientist and associate professor of psychology at Stanford University and has a wonderful TED Talk about escaping the cynicism trap. He's also author of a book called The War for Kindness. Hi, Jamil. Welcome to Something You Should Know. Oh, thanks for having me.

Starting point is 00:04:08 So from your point of view, if a person is cynical, what is it they believe? It's a theory that we have that people are mostly selfish, conniving, greedy, and dishonest. And when you have that theory, it informs and changes the way that you interact with people, what you think about them and how you live your life. And do you think, is there science to prove or suggest anyway, that people should be cynical, that generally people are greedy and full of self-interest or that generally people are not? Well, you know, I think the question of whether people are kind or cruel, callous or compassionate, good or bad, we'll never be able to answer that in any simple way. But I think that there's a lot of evidence that people overestimate how selfish

Starting point is 00:04:57 others are. So people, for instance, vastly underestimate how much others will give to charity, how interested people are in helping one another. They overestimate how judgmental other people will be, and in general, have a dim view of each other, even when it's not really that justified. And maybe that serves some sort of evolutionary purpose, that being skeptical of not just trusting people on the face of it, but being skeptical of people somewhat helped us to survive? Well, let's start with separating skepticism from cynicism. Skepticism is not trusting other people blindly, and that's a very wise thing to do. Cynicism is assuming before you know anything about someone that you do know something about them, which is that they

Starting point is 00:05:44 are not trustworthy, that they're generally bad. And I think you bring up a really interesting question. Could cynicism be smart evolutionarily? Well, I think that it's easy to make a case for it. If you are living a hundred thousand years ago, taking a risk on someone might be life or death. And so it might be better for you to start out with a cynical assumption. Maybe there are cases where that's true. And for many of us, life has dealt us really difficult circumstances. And we have lots of reason to believe that in general, people aren't trustworthy. But I think oftentimes cynicism is this protective mechanism that actually doesn't end up protecting

Starting point is 00:06:26 us very much because it causes us to lose opportunities and to live sadder, lonelier, and more divided lives than we need to. Well, it seems that our view of other people, people we don't know yet, is also situational. I mean, if I had never met you and met you at a party, I would assume you're probably a decent guy. If I see you in a dark alley at three o'clock in the morning, I'm going to be a little more cynical that I better be a little safer. And that's completely reasonable. Our circumstances dictate how defensive we want to be about other people. And that includes whether we want to trust

Starting point is 00:07:05 that someone has good intentions or not. You're right. If we meet at a party, we probably have a friend in common or some interest in common. We're probably similar in some way. And there's lots of reasons to trust one another. I think one issue is that more than ever, we are all of us meeting in the dark 3 a.m. alley that is the internet. And that's not a place where we tend to assume that we have any shared purpose, shared values, or even shared humanity. I think that that, although there's not systematic evidence for this, I think that that could easily drive up our defensiveness, drive up our cynicism. Is your sense that cynicism is mostly situational, or are there people who are just cynical? They just wake up cynical. They just, you know,

Starting point is 00:07:52 until you prove otherwise, I don't think much of you, I don't think much of this, I don't like that. Or is it a sliding scale or what? Cynicism does vary across people. There are some folks who are super cynical and others who are less cynical, but also our circumstances can shift how cynical we become. Folks who have gone through a lot of trauma or been betrayed, for instance, can become more cynical over time. And that's, again, you can imagine is reasonable. You know, one really interesting thing about the difference between cynics and non-cynics is what we imagine versus what is true. So a lot of folks believe that one reason that someone becomes cynical is because they're too smart to be anything else.

Starting point is 00:08:39 I think it was George Bernard Shaw who said, the power of accurate observation is commonly called cynicism by those who haven't got it. And there's research that demonstrates that in general, people believe that cynics are smarter than non-cynics and that they'd especially be socially smart, for instance, able to detect when other people are lying. It turns out that the opposite is true. If anything, cynics perform less well on cognitive tests and on lie detection tests. So we've got this weird cultural, almost fetishizing of cynicism. We think of it as a type of wisdom, even though it's not. Now that surprises me, because when I think of people that I think of as cynical, I do think of them as somehow smarter, that they must know something I don't know, that they need to be, I need to prove to them

Starting point is 00:09:31 what I'm saying more than I would need to prove to somebody who was less cynical because, well, I don't know why. Isn't that funny? None of us know why. But I think it's this bias that we have where if somebody doesn't believe in something, if somebody starts out assuming the worst, we imagine that that's somehow hard won, world weary. Again, we see it as wise. It turns out that most of us are wrong about that, but that might too come from this evolutionary sense that, hey, if that

Starting point is 00:10:06 person is cynical, then they must have gone through something that made them that way. They must be protecting themselves. And protecting yourself sounds like a smart thing to do. It turns out, though, that oftentimes cynicism and naivete, cynicism and gullibility have something in common. A gullible person thinks they can trust someone before they have any evidence. A cynical person thinks that they can't trust someone before they have any evidence. And in both cases, these folks don't update based on what they learn, right? A gullible person will be a mark or get taken advantage of and still trust other people. We think, my goodness, that person is so silly.

Starting point is 00:10:46 A cynical person will not trust someone. They'll get evidence that someone's kind or trustworthy and they say, ah, that person is just pretending. They're just trying to keep up appearances. They don't update based on evidence either. And yet we somehow think that that's intelligent or wise. The true wisdom to my mind comes from skepticism. Again, this not being willing to trust people just because they're people, but rather paying attention and trying to figure out who can I trust and who can't I trust. That's real social intelligence, is not being cynical or gullible, but being open-minded. What is the word you would use if you're not cynical? Is the opposite of cynical, I don't know, is it naive? A cynic would tell you that the opposite of cynicism

Starting point is 00:11:35 is being naive. I think of the opposite of cynicism as hopeful skepticism. That is, understanding that people are capable of being trustworthy, of being kind, generous, and compassionate, but not assuming that everybody is. It seems, though, that you can create a view of the world any way you want, because there's plenty of evidence for whatever you want to believe. You can see the world as a very optimistic and wonderful place full of good people because it is. And you can see the world full of horrible things and threats waiting to happen because there they are. Mike, that is exactly one of the key points that I want to drive home in my work these days is that you can come up with evidence if you are a cynic. And if you're hopeful, you can come up with evidence if you are a cynic. And if you're hopeful, you can

Starting point is 00:12:25 come up with evidence for that case as well. One of the key things to remember, though, is that whatever version of the world we choose to imagine is more likely to become true because we act accordingly. So for instance, people who are cynical, they think that others around them are a threat. They believe that others around them are trying to cheat them. And so oftentimes they do what I call taking preemptive strikes. A cynic will cheat first in order to not be cheated. They will be selfish to protect themselves from others' selfishness. They don't trust others because they don't think others will earn it.

Starting point is 00:13:02 But guess what? When you act that way towards other people, you alienate them, you make them upset, and in turn, you make it more likely that those folks will actually bring out the worst side of themselves in interactions with you. So in other words, when you are cynical, you treat other people like they're a bunch of jerks, and they're more likely to actually act like jerks in response, thus creating the world that you thought you were living in. It's a tragic and unnecessary self-fulfilling prophecy that comes from cynicism. Yeah, because it reinforces what you believe. See, I was right. These people are a bunch of jerks. Exactly, exactly. So, the cynic has this theory of the

Starting point is 00:13:44 world, but they don't test it objectively. They make it true and then they decide that they were right all along and end up patting themselves on the back. I'm speaking with Stanford University psychology professor Jamil Zaki, who is author of a book called The War for Kindness. And we're talking about cynicism. This winter, take a trip to Tampa on Porter Airlines. Enjoy the warm Tampa Bay temperatures and warm Porter hospitality on your way there. All Porter fares include beer, wine, and snacks, and free fast-streaming Wi-Fi on planes with no middle seats. And your Tampa Bay vacation includes good times, relaxation, and great Gulf Coast weather.

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Starting point is 00:14:52 You can now make the first move or not. With opening moves, you simply choose a question to be automatically sent to your matches. Then sit back and let your matches start the chat. Download Bumble and try it for yourself. So, Jamil, I was thinking when I saw the other day, you know, that you and I were going to be talking. I thought, you know, there are days, though, when I'm more cynical than others. And I don't know why. I just wake up thinking, you know, the world's a little darker than it is.

Starting point is 00:15:23 And other days I wake up full of optimism. And I don't know why that happens. Well, I mean, none of us do. It could be just waking up on the wrong side of the bed. It could be anything. We all of us experience, I mean, I know I do, even though I talk about anti-cynicism and suggest that hope is a useful strategy. I absolutely feel cynical a bunch of the time. I think one of the things that the behavioral sciences teach us is that it's useful to do a couple of different exercises inside ourselves. One is to be less sure that your experiences reflect what's out there, right? So if you wake up one day feeling cynical, it's probably not the case

Starting point is 00:16:05 that the world is significantly worse on that day than it was the day before. It's probably just that you are having an experience that is making you feel that way. But just like we should be less sure about our mood or our feeling that being reflective of everything outside us, we should be more aware that we have a lot of power in changing the world around us, even, you know, at a small scale with the interactions that we have on a given day. So if I'm feeling cynical on a particular day, I'll say, okay, wait a minute, understand that even if you think that everyone out there is horrible, it's probably not because everyone is really horrible. It's probably just the way that you're feeling. But also understand that if you act accordingly, if you mistreat people because of your cynical attitude, you will make the world worse,

Starting point is 00:16:53 even in some small way. So I think, again, being less sure of whether what we believe is really what's out there, but understanding our power to change things, that's a kind of two-step that helps me through cynical days. What happens when a cynical person and a not cynical person come head to head with each other? Kind of who wins out? Does one person pull the other the other way? Or is it oil and water and they never mix? Or what happens? What's that chemistry typically look like? Unfortunately, cynicism is a little bit like ink in water, meaning that it spreads quite easily. And one of the reasons for that is exactly to the point of your question. So there's a bunch of research from psychology and economics where

Starting point is 00:17:45 people who are generally trusting and generally cynical get together and play these little economic games where they can share amounts of money with each other and cooperate or try to cheat each other. And in general, cynics believe that the other person will try to cheat. So guess what they do? They cheat first, right? And because of that, they never get a chance to learn that the other person would have been really trusting and really kind. So they retain their cynicism. Does that make sense? Yeah. But the other person, the one who would have been trusting, who would have been kind, sees immediately this cynical individual as a cheater. And they get new evidence that people actually aren't as good as they thought they were. So the cynic ends up confirming their own previously held opinions.

Starting point is 00:18:31 And the hopeful person ends up feeling a little bit dimmer in their view of other people. And because of this, cynicism is almost like a virus. It's very easy to spread across our culture. And there's really tragic evidence that at least in the US, people are becoming much less trusting of each other over time. In 1973, about 45% of Americans believed that most people could be trusted. But by 2018, that had fallen to 30%, a huge drop in just our faith in one another that I think is underneath a lot of our major cultural issues. And maybe it's just my perception, but it does seem that there has been a shift or a gradual change that almost as if to be taken seriously, you have to be cynical. That's what makes you a serious person. And if you're not cynical, well, you're not a critical thinker. genius illusion, right? Our culture, and again, this is across lots of studies, people believe that cynics are smart. And that too makes it easy for cynicism to spread because it makes it

Starting point is 00:19:52 socially attractive. It makes it something that feels desirable. And so we perform the most cynical version of ourselves. And unfortunately, sometimes if you act a certain way over and over again, you end up becoming that way. It's fascinating to me what you said, that how we often look at people who are cynical as being more intelligent, but what you said was that they often perform worse on cognitive tests, implying, I guess, that, you know, maybe cynics aren't as smart as we think they are. But I wonder why that is. How does being cynical make you dumber? There's evidence that, in essence, cynicism is a form of incuriosity. You know, one flavor of intelligence, one way of thinking about intelligence out of many ways is that intelligence is a fluidity of mind.

Starting point is 00:20:48 It's the ability to learn quickly and an openness to new information. And in that way, if you think of it in that way, I think it becomes unsurprising that cynics perform less well than optimists on some cognitive tests because cynics, again, have this rigid, I think you used a nice word for it, a hardened perspective on the world. They're not being fluid. They're not learning quickly. They're not learning at all in some cases about other people despite all the evidence

Starting point is 00:21:19 that they receive. And so that type of rigidity is one way of thinking about somebody who's less cognitively fluid, if that makes sense. Yeah. Well, they're the people that say, well, that'll never work. That's a cynic, right? I mean, that'll never work. I mean, that's being very incurious. Yeah. And that'll never work has been said thousands of times before something really amazing occurred. Right. And the cynics there are the ones who are left behind.

Starting point is 00:21:48 But the cynics will also point out that that'll never work is right. A lot of the time it never will work. And so they use that as their evidence that see, you got to be really careful about these things. Of course. And I think that, that knowing the difference between what will work and what won't work is a form of intelligence. Assuming that nothing will ever work is not. Right. And as we discussed, a cynic can look at the world in a very cynical way and find plenty of evidence to support the fact that they are right. There are a lot of things in the world that could make you cynical if you focus on

Starting point is 00:22:25 them. And then it becomes a self-fulfilling prophecy. Here's the thing though, Mike, I know that I hope this doesn't sound too depressing because self-fulfilling prophecies work in both directions, right? This is one of the things that I've tried to do since starting to study cynicism is to harness my understanding of it to try to create other types of self-fulfilling prophecies in my own life. And my research demonstrates this as well. If you convince people that, hey, you can have a productive interaction, for instance, with someone you disagree with, you can empathize with that person. And doing so might be really useful. We demonstrate in our work that if

Starting point is 00:23:05 you convince people to have that more hopeful belief, they end up having more productive interactions. They end up having friendlier, kinder interactions. And likewise, if we decide that, hey, you know, I don't know yet exactly if I can trust this person, but I think that if I try, there's a shot that we will have a good relationship, that something great will happen, that we'll be able to cooperate. If you decide to take that leap of faith, oftentimes your trust, your belief in others becomes a self-fulfilling prophecy, just like cynicism becomes a painful and negative self-fulfilling prophecy. Sometimes I wonder what the default is and who changes.

Starting point is 00:23:46 Are we all born cynical and then some of us become less cynical? Or are we all born optimists and some of us then become cynical? And maybe a better way to ask this is, like, where does it come from? When you look at cynics, generally speaking, what do they have in common? Their parents were cynical, they had they have in common? Were their parents were cynical? They, they had some trauma in their life or where does it come from? Cynicism has a very weak genetic component, right? So I'm not sure that, that it's really something that's, that's bound up in our biology that much. Certainly people who have been betrayed

Starting point is 00:24:22 in the past, who have a history of competitive interactions with other people, they are more likely to default to a less trusting way of being with others. But I think that another thing to remember here is that we might not be born cynical, but it seems that people are tuned, this is pretty universal, to pay a lot of attention to negative things out there, to threats. A lot of us pay a lot of attention to things that could hurt us. And that, you could say, is an evolved capacity that we have, and probably one that served us very well, again, when life was much more dangerous. The issue is that we pay so much attention to threats these days that we end up with a warped view of the world that can tend

Starting point is 00:25:10 towards cynicism. It can drive us towards the belief that people are worse than they are. So to me, part of it can come from our genes, maybe a small part. Part of it can come from our experience. But a lot of it might come from these kind of cognitive bugs, these biases that seem to come prepackaged in our minds, which is to pay more attention to potential harm than to potentially positive things. Well, I can say that I come away from this discussion with a different view of cynicism. I guess I've always thought of those people who are really cynical, they must be smarter than me. That's why they're so cynical. They know something that I don't know,

Starting point is 00:25:50 and maybe they don't. Jamil Zaki has been my guest. He's a behavioral scientist, associate professor of psychology at Stanford, and he has a great TED Talk called Escaping the Cynicism Trap. And I've got a link to that TED Talk in the show notes. He's also got a book called The War for Kindness. And there's a link to that in the show notes. And Jamil was a guest a while back, episode 338, where we talked about empathy. If you'd like to go back and listen to that. Actually, I'll put a link to that in the

Starting point is 00:26:25 show notes as well. Thanks, Jamil. Thanks for being here. Thank you, Mike. That was really fun. This is an ad for BetterHelp. Welcome to the world. Please read your personal owner's manual thoroughly. In it, you'll find simple instructions for how to interact with your fellow human beings and how to find happiness and peace of mind. Thank you, and have a nice life. Unfortunately, life doesn't come with an owner's manual. That's why there's BetterHelp Online Therapy. Connect with a credentialed therapist by phone, video, or online chat. Visit BetterHelp.com to learn more.

Starting point is 00:26:57 That's BetterHelp.com. Metrolinks and Crosslinks are reminding everyone to be careful, as Eglinton Crosstown LRT train testing is in progress. Please be alert as trains can pass at any time on the tracks. Remember to follow all traffic signals. Be careful along our tracks and only make left turns where it's safe to do so. Be alert, be aware, and stay safe. If you ever feel like you don't really manage your money as well as you should,

Starting point is 00:27:34 or you wish you knew a better way to get a handle on personal finances, it hopefully comes as some small comfort that just about everybody feels that way. And if you'd like to get some really solid and sound advice from someone who has worked for years in the world of personal finance, well, you've come to the right place. Because my next guest is Joe Saul Sihai. Joe is a former financial planner who now hosts the popular podcast Stacking Benjamins, and he has a new book out called Stacked, Your Super Serious Guide to Modern Money Management. Hi, Joe.

Starting point is 00:28:14 Hey, Mike. I'm so happy to be here. Thank you. world of personal finance for a long time, and you talk to a lot of people and you've examined this subject every way imaginable. What is it you think right now is the biggest financial problem or challenge that people face today? There was a study done recently by this group called Nonfiction, and it's called The Secret Financial Lives of Americans. And it shines light on some horrible statistics. And one biggie is that over 150 million people in the United States, almost half of us, report that we cry about our money or have cried about our money. And I'm definitely one of those people back when I was struggling with money. And I'll tell you, you think though that it's people that are either living paycheck to paycheck or people struggling with their income stream. But actually the study showed

Starting point is 00:29:11 that while that's true, nearly half of people making over $250,000 a year report that they cry about their money. They're crying because they feel like they don't have a handle on the fundamentals. And I think that's timeless. That's been ever since I've been in the business, which has been a long time. Why do you suppose, as you point out, there are books, there are magazines, seminars, podcasts, so much information available to people about money, and yet it never seems to get solved. The people continually struggle with it, and people, I assume people are reading the books

Starting point is 00:29:50 and listening to the podcast and going to the seminars, but it seems like people are on a path or on a, maybe it's a rut, a financial rut, where they just do what they do, they do what they've always done, and yeah, they read about doing some other things, but they never seem to break out of where they are. I think we all know there's things we need to do, but it feels like it's going to be difficult. And I'll give you an example. I haven't been a financial planner in a long time. I was a financial planner for 16 years, but haven't been one the last 12 I've been in financial media. But back in those days, I remember I had a client named Arnie, just a great guy. But Arnie leveled with me one day. He goes, you know what, Joe?

Starting point is 00:30:31 When I come meet with you a few times a year, I don't want to come. It's almost like going to the dentist where I really don't want to go. And later on, I feel great. My teeth are clean. My teeth look good. And I know that it's healthy for me to go. And later on, I feel great. My teeth are clean. My teeth look good. And I know that it's healthy for me to go. But leading up to that, it just feels like it's going to be heavy. It's going to be boring. It's going to be all these things. So I think we have a lot of guilt

Starting point is 00:30:55 about our money. And I think the quicker that we can get beyond the guilt and realize that we're all messing up our money. And this is where I feel lucky. As a guy who was a financial planner for a long time, I got to sit, Mike, in a spot where a lot of people don't get to sit, which is I got to see those ugly closets that everybody's hiding that most of us don't get to see. And I'll tell you what's really cool from my standpoint. I will tell you, we're all messing stuff up. Like very rarely did I find somebody who is getting so much stuff right that they got the gold star and I couldn't help them. Now, there were certainly people that were doing most of the stuff right, although they were few and

Starting point is 00:31:37 far between, but there was never a person that I couldn't help them tweak as an outsider just a little bit to make their situation better. And I think once we realize that these things that we see on Instagram and Facebook and TikTok and other social media channels, that that's everybody's best moment and not their usual moment, and we realize we're going to mess stuff up, I think that we calm down the temperature a little bit and we have more fun getting our own financial house in order. Yeah, and I've always thought that one of the reasons people mess things up with money so often is there are so many opportunities to do that. Because money is such a big topic.

Starting point is 00:32:18 It's part of every little thing we do. When we buy things, when we deal with other people, when we make decisions, when we go on vacation. There are so many possible ways to mess it up. It's easy to mess it up. And so let's get real specific. What are some things that people can do that they would do? I know that financial planning can be a long, arduous task, but what's something, one thing that people ought to be doing based on all your years in the business that maybe they're not doing that would really pay off, for example? Hide money from yourself. Everybody says that you need discipline. I totally disagree, Mike. You need to have automation work

Starting point is 00:33:07 for you. And I'll tell you where this worked for me. When I discovered that I didn't want cable anymore, I realized this has cost me $70 a month and I didn't want it, didn't need it. So I canceled that. Well, if I cancel the cable, that should be $70 of savings. But if I don't hide that money from myself, I end up blowing it someplace else. So the second that I canceled my cable, I raised the amount of automatic savings coming out of my paycheck to go into a mutual fund so that I captured that savings. So automation is a big key to winning that I see a lot of people don't do right. I think a lot of financial advice that people are given, you know, causes people's eyes to glaze over. You hear things like, you need to check to make sure you're saving enough. Well, what's enough?

Starting point is 00:33:54 It seems no matter how much you're saving, it's never enough. And I don't know what's enough. I don't know what the formula is to know how much is enough. And then, you know, you need to see if your investments are right. Well, I don't know what makes an investment right. And since people don't know what those questions really mean or how to figure out the answer, their eyes glaze over and they do nothing. Yeah. Yeah. No, I would totally agree. And I think it's because we start from the wrong place. I think most of us start with, and because I get this question all the time,

Starting point is 00:34:27 is this a good investment? Is this a great investment? And the first question shouldn't be that judgment call of, is this a good or bad investment? It should actually start with, does this type of investment fit my goal? And let me explain what I mean there, is that I grew up in West Michigan, which was farm country. And as a kid, I worked in countless fields and my neighbor's farms. Well, thousands of years have told farmers that if you're growing corn, you don't plant at this time of year in the Northern hemisphere anyway, because it's going to die. Your corn will die. You plant it in the spring. And then in the fall, you harvest the corn. And the reason is we know that's what

Starting point is 00:35:06 works for that crop. There's so many different investments to choose from. There's a gazillion different investments. And is this one right? How can I possibly know all these things? The cool thing is you don't have to. You look at your growing season, which is the time until your goal that narrows the focus of the investment choices that you have down to a few different types versus a lot of different types. And now you can spend all of your time doing the research you need to do on just a few things rather than having this fear of missing out about a billion things. And something else too there, Mike, which is often somebody at work will tell us, they say, hey, this is a great investment

Starting point is 00:35:45 opportunity. You know what's great? It might be, but I no longer have to make that judgment of it's good or bad. It can be a great investment, but not fit me and it's okay. And I can just let it go instead of feeling like, man, I need to put some money in all these things that may or may not be the right thing for me. Is there some sort of baseline advice? We've all heard it of, you should have so many months of income in a savings account. You should pay off your credit card. Are there some ABCs, do this first before you do anything else? There definitely is.

Starting point is 00:36:22 Before you have anything else going, I think a big magical thing to do is to free up cash flow because free cash flow is the dynamic that's going to fuel everything. It's going to get you to your long-term goals. It's going to make sure that you have an emergency fund in place. It's going to help you avoid unnecessary insurances. When I evaluate a stock, I evaluate a company. The first thing I look at for that company is how much free cash flow does that company have? Because free cash flow equals flexibility. And the more flexibility we have, the more we can do what David Allen said in his great book, Getting Things Done. He talks about being like water. And the more we can, and this might be a little Zen, a little Eastern philosophy, but water just flows in the right direction it's supposed to. And a lot of times we're so muddled up between our debt, between the things that we're doing at work, the clutter in our house. If we get rid of all that clutter

Starting point is 00:37:23 and instead have a lot of free cash flow that we can work with, we can now point it in the direction that the water tells us to go toward. So some ways to do that. The first thing that you do is you track your expenses to see where your money's actually going. And most people have an idea of where they're going, but I'll tell you the place we get tripped up is not on the utility bill or the grocery bill. We get tripped up on those one-time expenses, like the muffler dragging behind the car, or we get, we get tripped up by kids. You know, like I mentioned earlier, I twins, I can't tell you, you know, my kid a week before a birthday party says, Hey, I was invited to a birthday party. And all of a sudden, I've got $50 worth of gifts because both of my kids have to bring a gift to this birthday party.

Starting point is 00:38:08 That's the stuff that trips you up. So you need to track your expenses, number one, to see where you've been. The second thing you need to do then is create something a lot of people don't like. And I was one of these people, which is a budget. Now, a budget is different from tracking your expenses because a budget is projecting what tracking your expenses because a budget is projecting what you're going to do the next week, next month, next quarter, whatever it might be, where tracking just looks back at where you've been and how you messed up. And I can illustrate

Starting point is 00:38:36 it this way. Thomas Jefferson was a guy who was fantastic at tracking his expenses. He was phenomenal at it. He wrote down every single nickel he spent. Well, if anybody here knows history that is listening, you know that Thomas Jefferson was broke almost all the time. He was so busy overspending and writing down how he overspent that he never once, it seemed, planned ahead how to make sure that he got his financial house in order. And even when he passed away, he owed money to so many different people. He was great at tracking. But the second thing that Thomas Jefferson really should have done, and frankly, when my financial house got better is when I started doing this,

Starting point is 00:39:20 was creating a forward budget. And there's lots of tools out there that'll help you do that. You know, if you're really nerdy, something like a tiller or YNAB, those are subscription-based services. You're going to pay for them. But I like the fact that you pay a little bit of money. I also like a thing called cube money that takes your, this is really cool. It's like 50 style envelope budgets. Cube does a great job of creating these cubes, which are the same thing as envelopes. And now when I go to the store, I just tap on that cube in the app. It opens up that one little portion of my bank account. And as long as there's money in that portion, the money goes through. If there's not and I overspent, it actually doesn't go through.

Starting point is 00:40:02 Now, the good news is there's no overdraft fee. You don't get hit with all these silly fees that a lot of banks have. No fee, but you also don't overspend. You can't really talk about personal finance without talking about credit cards because a lot, everybody has credit cards. A lot of people get in trouble with their credit cards. They can be very seductive. And I think a question people have is, okay, if I decide I'm really going to make an effort to pay off my credit card debt, do I take all my spare money and pay it towards the credit card? Or do I also put some money aside in a savings account or in an investment? Do I keep that going as well or pay off the high interest credit card first? Yeah. Realize that your salvation is not putting every dollar toward the debt, which doesn't seem right because if the

Starting point is 00:40:52 average credit card interest rate is 23%, well, why wouldn't I put every dollar toward that? I'll tell you why. When I was a financial planner, people would have had debt for sometimes 20, 25 years and they'd never gotten out of it because they put every dollar toward the card. And when you do that, you don't interrupt the cycle. And I'll explain what I mean. If you put every dollar toward the credit card, you have two choices. Either make sure nothing ever comes up or make sure that you have some other means of money to draw from. Well, if every dollar goes to the credit card, you can't make sure there's another place to draw from. And in what sounds like contradictory advice, you have to put money in a very low interest savings account. Now,

Starting point is 00:41:38 I'm not saying low interest because you're searching for low interest, but just savings accounts don't really pay any money. But that money allows you to use cash so that if the muffler's dragging behind the car, your kids get invited to that birthday party, whatever it might be, you now go to cash instead of going back to the credit card. And the second you can disrupt that pattern of whipping the card out of your wallet every time you have an expense. That is the magic. So my advice to get out of debt, cut up your credit cards if you can. At the very least, try to put your credit cards in a place where they're very difficult to get. Go to an all-cash lifestyle and put some money in the bank to spend as an emergency fund while you're getting your act

Starting point is 00:42:23 together. And frankly, even once your act is together, having that emergency fund still is going to be really important. So it's a great place to begin. It's one thing to listen to advice on a podcast and get some ideas. But if you want to get very specific advice about your very specific financial situation, do you think that people should hire an advisor? And if so, how do you do that? Having advisors in my corner, I absolutely love. Now, there are good advisors and there are bad advisors. So I'll tell you the type of advisors that I'm referring to. Do not hire advisors that allow you to abdicate the throne, meaning that they just take all of your financial decisions away from you. They somehow magically put it together.

Starting point is 00:43:13 And then three months, six months, nine months later, you walk into their office and you're like, hey, money person, how did we do? You don't want that. You need somebody who's going to make you smarter, somebody with the heart of a teacher that can show you how to get from point A to point B much more quickly than you could without them. And so that's going to be a special type of advisor. Now, there are a couple things that are roadblocks that I see a lot. And unfortunately, I've been in a lot of different financial planning offices. I say unfortunately, because I've been in a lot of bad ones. If you ever go into a financial planner's office, there are so many clues to see if they're a bad advisor. When you walk in the front door,

Starting point is 00:43:55 if they've got Jim Cramer on television or CNBC or Fox Business, and somebody's yelling, sell, sell, sell, you want to run from that place because your advisor's job is to cool you off, not raise your temperature. I would rather see the travel channel and things about getting more for yourself than I would the hot stock pick stuff because that's not financial planning. That's just trading. The second thing is every office I walked into, Mike, where the receptionist seemed bitter and not happy, that all comes from the top. And that man or woman's boss creates that atmosphere. And if the people working there don't seem happy, I'll tell you, there was never a case where it was a mistake and you would

Starting point is 00:44:45 have been happy with that advisor. Always horrible advisors were horrible even with their staff. And I'll give you one more because a lot of people now meet with advisors online and don't go into the office. If you're meeting with an advisor and the advisor doesn't open up with a process. In other words, how do we discover what is right? And instead begins with some magic investment that's going to solve all your problems. If they start with product and not process, you need to run. That person is a salesperson, not an advisor in your corner. Do you think the average person should own individual stocks or not? The easy answer is no, because of the fact that the average person is too busy to keep

Starting point is 00:45:33 the garden weeded, if you get that analogy. An individual stock portfolio means that you're going to follow those companies, you're going to look at how they're performing, you're going to dive into what's new and exciting at those companies all the time, but still also have the fortitude to hold them for the long term. You look at some successful investors like Warren Buffett. They hold onto the stocks for a long, long time, but they always know what's going on with individual stocks. The other problem with individual stocks is the average person doesn't have a large enough net worth to just own a few stocks. And I'll tell you an example that I think most of us will appreciate, which is, let's pretend that your kids are out

Starting point is 00:46:19 behind your house and they're throwing a ball back and forth and you have a window and the ball errantly goes through the window and it breaks. Well, how much of that window do your kids have to replace or you have to replace? You have to replace the whole thing. Well, if that window, instead of being one pane, was one of those French pane windows where there's lots of different panes, that ball goes through the window through one of those little panes. You only have to replace that little piece. That's the difference between an exchange traded fund or mutual fund

Starting point is 00:46:50 and an individual stock. If you own one stock and you break the window, i.e. something bad happens to that stock, what happens is you lose a ton of money and you don't really have any recourse. If you own a mutual fund or an exchange traded fund, that is a basket of a ton of money and you don't really have any recourse. If you own a mutual fund or an exchange traded fund, that is a basket of a lot of different stocks or a lot of different pieces of real estate or a lot of different bonds, whatever the type of investment you have. But it's a collection. And now if one bad thing happens, like that rock going through that window, in the other pains, good things might be happening. And you actually might make money on those days. So when it comes to freedom from worry and it comes to being able to focus on your engine, which is whatever you actually do to make money, focusing on a diversified

Starting point is 00:47:37 collection of either exchange traded funds or mutual funds is a much better way to go. Well, what I like about this conversation is it makes me, and I suspect people listening, think about their money a little more. You know, it's easy to kind of push the money management fundamentals into the background because, you know, we're all busy and it's easy to do that. But this kind of makes you think, well, you know, maybe I need to pay a little more attention to this or that. So I appreciate it. Josal Sihai has been my guest. He's a former financial planner who now hosts the popular podcast Stacking Benjamins.

Starting point is 00:48:19 And he has a new book out called Stacked, Your Super Serious Guide to Modern Money Management. There's a link to that book in the show notes, as well as a link to his podcast. And I'll also put in the links for those financial apps that he talked about in the show. They'll be in the show notes as well. Thanks, Joe. Yeah, thanks. Stay out of trouble, my friend. There are people who claim, who swear, that they can tell a storm is coming or or that there are big weather changes coming, because they can feel it. They can feel it in their joints, like in their knees.

Starting point is 00:48:51 According to meteorologist Paul Yeager, there is something to this, although scientists have difficulty pinpointing exactly what's going on, but it appears that when outside pressure falls, which it does when a storm is approaching, tissues can expand. Healthy tissues may expand more than scar tissue does, and that different rate of expansion can put pressure on joints, and that pressure can result in aches and pains. So, achy joints and pains may actually be a good predictor that a storm is coming.

Starting point is 00:49:27 And that is something you should know. You are invited, because I'm inviting you right here, right now, to leave us a review on Apple Podcasts or wherever you listen, if reviews are allowed. A rating and review really does help us out, and the five-star ones really help us out. So, I'd appreciate it if you would leave us a rating and review really does help us out, and the five-star ones really help us out. So I'd appreciate it if you would leave us a rating and review. I'm Mike Carruthers. Thanks for listening today to Something You Should Know. Do you love Disney?

Starting point is 00:49:54 Do you love top ten lists? Then you are going to love our hit podcast, Disney Countdown. I'm Megan, the Magical Millennial. And I'm the Dapper Danielle. On every episode of our fun and family-friendly show, we count down our top 10 lists of all things Disney. The parks, the movies, the music, the food, the lore. There is nothing we don't cover on our show.

Starting point is 00:50:15 We are famous for rabbit holes, Disney-themed games, and fun facts you didn't know you needed. I had Danielle and Megan record some answers to seemingly meaningless questions. I asked Danielle, what insect song is typically higher pitched in hotter temperatures and lower pitched in cooler temperatures? You got this. No, I didn't. Don't believe that. About a witch coming true? Well, I didn't either. Of course, I'm just a cicada. I'm crying. I'm so sorry. You win that one. So if you're looking for a healthy dose of Disney magic,

Starting point is 00:50:48 check out Disney Countdown wherever you get your podcasts. Hi, this is Rob Benedict. And I am Richard Spate. We were both on a little show you might know called Supernatural. It had a pretty good run. 15 seasons, 327 episodes. And though we have seen, of course, every episode many times,

Starting point is 00:51:09 we figured, hey, now that we're wrapped, let's watch it all again. And we can't do that alone. So we're inviting the cast and crew that made the show along for the ride. We've got writers, producers, composers, directors, and we'll, of course, have some actors on as well, including some certain guys that played some certain pretty iconic brothers. producers, composers, directors, and we'll of course have some actors on as well, including

Starting point is 00:51:25 some certain guys that played some certain pretty iconic brothers. It was kind of a little bit of a left field choice in the best way possible. The note from Kripke was, he's great, we love him, but we're looking for like a really intelligent Duchovny type. With 15 seasons to explore, it's going to be the road trip of several lifetimes, so please join us and subscribe to Supernatural then and now.

Something You Should Know - Is It Good to Be Cynical? & How We All Screw Up Our Personal Finances

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