What Type of Gifts Do You Buy? | Brandon Averill, Justin Dyer | AWM Insights #88
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Episode Summary
The gifts you buy for other people define a lot about your relationship with money. Are you compensating for an insecurity? Are you showing off?
Success with your money starts with your relationship with your money. What are you trying to achieve with your assets or income? Is your portfolio customized to your specific priorities and vision of success?
Understanding the cash flow game creates the extraordinary opportunity to generate enough passive income to enjoy the lifestyle you desire for life. Understanding your own relationship with money is key to winning this cash flow game.
Episode Highlights
(0:57) News: unemployment continues improving, Rivian has now gone public with a market value greater than Ford Motor. Staples Center becomes Crypto.com Arena. The Build Back Better Plan has passed in the house and moves to the Senate.
(2:23) This holiday season is predicted to be the highest retail sales on record.
(2:55) Relationship with money and the why behind what kind of gifts you give to other people.
(3:58) A great book that explores the complex attitudes and emotions that people have with money is The Psychology of Money by Morgan Housel.
(4:58) Success with money has very little to do with how smart you are. Many intelligent people struggle with money and saving.
(5:55) “The gift is for the giver” is an old saying because there is usually an interesting why when it comes to what people give each other.
(7:00) Winning the cash flow game is essential to financial success.
(7:44) Simplifying the ways to generate income: human capital, intellectual capital, social capital.
(8:20) After taxes you can spend it, give it or save it. It’s that simple.
(8:45) “The cash flow game is making sure you can get enough into the savings and growing category so that the earnings from that, the passive income from that, can pay for the lifestyle you’ve created” -Brandon Averill.
(10:10) Winning the planning aspect early sets you up for the future.
(11:25) The breakdown we see is a portfolio not invested to achieve the priorities of the client. Each portfolio should be invested according to the priorities and values of the client.
(14:28) Visit our website to request a free copy of Morgan Housel’s book Psychology of Money.
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+ Read the Transcript
Brandon Averill (00:00):
Hey, everybody. Welcome back to AWM Insights. As you know, each week we cut through the noise of what Wall Street is trying to sell you and bring you the knowledge, skills, and access that you need to invest like a pro. And today, Justin and I are going to tackle an interesting topic, our relationship with money. We're headed into the holiday season. We tend to go a little AWOL and make some interesting decisions. So we're going to dig into that today. But before we do as always Justin, what's going on in the news?
Justin Dyer (00:38) : Let me first say happy Thanksgiving to everyone. My favorite holiday, you get to eat and drink some fantastic wine and actually don't-
Brandon Averill (00:46):
Learn something new about you.
Justin Dyer (00:47):
Not worry about gift giving. I mean, that's one of the things I actually like about it. On the news front, so unemployment has continued to improve or rather unemployment claims to be specific. So again, this is a weekly statistic that is closely watch, but is incredibly noisy. For the last seven, eight, nine weeks I believe it's actually continued to move in the right direction. So a positive sign on the economic front. On the IPO front, we touched on the Rivian IPO, upcoming IPO, in one of the last podcasts. And they did go public and it's been an incredible roller coaster ride, kind of just underscores the crazy market dynamics that we are in right now.
Justin Dyer (01:25):
It IPOed around $78 a share, I believe in the 70s and went up to 170 something and has come back down into the $135 range as of this recording. So it's been an incredible rollercoaster ride and it's, I think double the value of Ford at this point in time, which is just mind boggling. I mean, they don't really have a product yet. So we'll see how that all unfolds. On the crypto front Staple Center being renamed, rebranded to crypto.com arena. Sign of the times. So that one's pretty interesting. And then on the legislative front house did just pass the Build Back Better act, I believe is what it's called. And then going more towards the topic at hand National Retail Federation has come out and predicted that this holiday season will be the highest retail sales on record. So people are going to expect it at least to have their credit cards out and checkbooks and whatever, maybe even selling some of their crypto to buy those gifts. But it's a great time as we head into the holidays and with that headline to touch on our relationship with money.
Brandon Averill (02:38):
Well, we know selling crypto for gifts is blasphemy. So that's certainly not going to happen, but I think it's such an interesting topic this time of year, because we just seem to really lose sense of money and our relationship with money. It seems like we're buying gifts and we're doing different things. And I think, sometimes taking a step back and saying like, why am I giving this gift? Am I giving this gift for me so I can show off and do something? Or is this really a thoughtful gift for somebody else? And I think that like the investigation of that even simple little problem or analysis tends to reveal quite a bit about our relationship with money. And I'd be remiss if I don't recount this story. You should have seen the look on Eric's face one year when I gave the guy a water Buffalo for Christmas.
Brandon Averill (03:26):
I mean, it blew his mind. We still hear about that 15 years later. But I just think as we look at this and the relationship with money, we all know the example. And there's a great example in The Psychology of Money, a book that Morgan Housel wrote and quickly became a best seller. And the whole topic is around our psychology with money, but we all know the person like he describes in the book, the smart, rich man built a company, but always has like the bank roll. He's rolling into the valet, he's pulling out the wad of cash. He's throwing money around left and right. And in the book, he's got the example where he actually has somebody go down and get a bunch of thousand dollars gold coins.
Brandon Averill (04:08):
And then they go out and they're chucking them off the pier. And the whole point, right, is it must be an insecurity or some reason why is he making these decisions? It's because he's allowing some external forces to pull him away from probably what makes him happiest in the world or his priorities and what we learn through that lesson. And I think through a lot of lessons is really that doing well with money actually has very little to do with how smart you are. We see smart people make bad decisions all the time. And then people that are less sophisticated in business or money actually have really successful outcomes. So I think it's an interesting topic for us to hit on at this time of year, Justin.
Justin Dyer (04:54):
Yeah. And at the heart of this is self-reflection and it's incredibly difficult for us humans to do that. But in my opinion, and I think there's plenty of examples that really back up this is that self-reflection leads to so much success in so many different parts of life. We're talking about money specifically. It certainly helps within investing, which is a subset of the topic of money. But really taking a step back and asking why, why do you have this itch you want to scratch? Why do you want to give this particular gift to somebody? Is this really just for you? That old adage, the gift is for the giver boy, that seems to ring true in my experience more often than not, which I'm not trying to say that I don't appreciate gifts from people, but it's always welcomed, but you really do get that sense and that feeling.
Justin Dyer (05:48):
So taking that step back and saying, what are we trying to accomplish? What are our priorities when it comes to building a portfolio? What are our priorities when we're giving a gift to somebody? Is it to make an impact on their lives? Is it to make me feel better and just, that's fine. That could be a totally fine answer, but having that self-reflection always leads to a better outcome in life in general.
Brandon Averill (06:12):
I think that's a great point. You hit on a really interesting point there talking about investing because I think especially people listening to this podcast, we talk a lot about investing, but investing can only go so far. Right. When we talk about having success long term with our clients, often we talk about winning that cash flow game. And this could even be somebody that's earning $20 million a year. It's really the same equation, is that if you don't win the cashflow game, you set yourself up essentially, you can't invest and earn a return that's going to work you out of that problem. It's just very rare to actually have that happen. I think that's where people, they get a misunderstanding and they start chasing things that put an undue amount of risk on their overall situation, purely because they don't have discipline or a good relationship with money.
Brandon Averill (07:04):
And I think when you really work on that piece of the puzzle, really work on the cash flow game, understanding this is how money comes in. It either comes in via my human capital for our athletes, recognition that your physical ability can generate cash flow, your intellectual capital, like us building a business and providing value to other people. Or social capital, the relationships that you have. These are the three ways really that you can generate income. And then from there, we get hit with taxes. We know that's going to happen. It's a guarantee. We're going to work on minimizing them, but once you get beyond taxes, it really comes down to what happens with the money. And we know one thing for certain, there's a couple different ways to use it.
Brandon Averill (07:52):
If you're just spending it on lifestyle, you spend it, it's gone. It's no longer productive asset. Right. You can give it away, which is fantastic. And we spend a lot of time working with our clients to do so, but again, it's gone. So you can't make that a productive asset. And then you can invest it, you can save it or grow it. And really the cashflow game is making sure that you're able to get enough into that savings and growing category so that the earnings from that, the passive income generated by that can pay for that lifestyle that you've created. And so it's this kind of circular equation. And if you really mess up the bottom half of that, you spend far too much, you're not going to be able to get enough into the part of the equation that starts to generate the income to pay for the rest of your life so.
Justin Dyer (08:41):
And I think in inherent in this is, well, obviously the psychology around this, but also planning, right? I think the psychology that people get caught up in very frequently is, oh, I'm going to make more next year or, oh yeah, I have a big contract. I know it's going to happen in a year or two or whatnot and or my company's going to sell for whatever X, multiple. Or I'm going to get hired and get stock options, get equity in a startup and that's going to 10X. Right. This psychology where it's like, it doesn't matter what I do today, because something's going to come down the pike tomorrow.
Justin Dyer (09:17):
I mean, it's just, that's an incredibly slippery slope and dangerous arena to play in where I think underpinning here is the planning aspect. So winning that cash flow game, winning the investment game by planning for today, taking the step back and having that self reflection and say, what is truly important for me today and obviously into the future. And making sure, regardless of what potentially could happen in the future, you're planning with reality today and setting yourself up for success, making sure the actions you're taking tie back into your values, your priorities, whether it is giving to charity or giving gifts to your family members in some way, shape or form. But making sure those gifts are impactful and the right size and not impacting your current financial security in any high probability fashion.
Brandon Averill (10:08):
I think that's a great point, Justin. And when you get down right to that, you just hit on, making sure that the bottom part of that equation, once you get down to, okay, I do have a priority to live a certain way. That's a very legitimate priority or give money away, that's a legitimate priority, but making sure that that equation allows enough money to get into your investment growth portfolio. So that way you can build a really customized portfolio, because everybody listening to this should have a customized portfolio based on the priorities they want to achieve. And oftentimes that's the breakdown we see is somebody creates a life for themselves. They go to some traditional wirehouse financial advisor that goes, okay, well you're young, you're earning a lot. Let's put you in some model portfolio a 60, 40 or a 70, 30 portfolio, and that's going to kick off this, but they never give thought to what they're actually trying to accomplish.
Brandon Averill (11:05):
We see this all the time, is that okay, great. We're going to put you in this 20% bond and 80% stock portfolio. And nobody really knows how to evaluate whether that's a success or not. And ultimately what it's doing is like, there's no consideration if that's actually going to provide for the priorities. So it all kind of comes together when you start to think about this, but it starts with your relationship, right? What are you trying to achieve with the assets that you've been able to accumulate or the income that you've been able to generate? And it all breaks down if we don't go back to these decisions that we're making, certainly in a very minor way in this holiday season, but it's really identifying the type of person you want to be the priorities, the behaviors, et cetera, and making sure that we're optimizing for that.
Justin Dyer (11:54):
And I would just add or underscore, kind of tie a bow on all this. I mean, at the end of the day, if you live a life where your money is used as a tool to accomplish your goals and your priorities at the end of that journey, hopefully it's a very long journey for all of us, you are going to be so much more fulfilled in your experiences as opposed to chasing your tail, if you will. Or the more materialistic side of this where it's, I don't know, not very thought through and tied back to your priorities. It can be complicated. It's not surface levels, certainly to do exactly what Brandon just outlined.
Justin Dyer (12:38):
Build a custom portfolio tied to your priorities, your values, then also make sure your actual day to day decisions also reflect all that stuff. It takes some more thought, effort, self-reflection like we're talking about. Whereas again, the wirehouses are all so surface level and a lot of the world that we live in is surface level and not going kind of to that second layer. And it's unfortunate because I mean to really, to be here, to be human and have fulfilling lives, it doesn't take a lot, but it is difficult for people to get there just because of all the noise and distractions around us unfortunately, so.
Brandon Averill (13:14):
Yeah. No, I think it's great. Well, it's definitely Thanksgiving season. We're thankful for everybody listening to this. So we're going to throw out a special today. If you hit over to AWMinsights.com, one thing we'd love to gift you guys with, because we feel like this is in our priorities is a copy of Morgan's book, The Psychology of Money. So drop us a note in there. If you'd like a copy, we'd be happy to send one out. We think it's a fantastic book, a great start on this whole path of really understanding your relationship with money, your psychology to money. And so with that until next time, own your wealth, make an impact, and always be a pro.