Jason Parker speaks with David Bach, who has helped millions of people around the world take action to live and finish rich. He is one of the most popular and prolific financial authors of our time with eleven national bestsellers, including nine consecutive New York Times bestsellers and two consecutive #1 New York Times bestsellers, Start Late, Finish Rich and The Automatic Millionaire as well as Smart Women Finish Rich, Smart Couples Finish Rich, Start Over, Finish Rich, Fight for Your Money, Go Green, Live Rich, Debt Free for Life, The Automatic Millionaire Homeowner, The Finish Rich Workbook, and The Automatic Millionaire Workbook. David carries the unique distinction of having had four of his books appear simultaneously on The Wall Street Journal, BusinessWeek, and USA Today bestseller lists. In all, his Finish Rich Books have been published in more than 18 languages, with more than seven million copies in print worldwide.
David is a regularly featured financial expert in the media. He has appeared six times on The Oprah Winfrey Show to share his strategies for living and finishing rich and he has been a regular contributor to NBC’s Today Show, making over one hundred appearances. Prior to his time with the Today Show, David was a contributor to CNN’s American Morning and ABC’s Good Money. He has also a been a frequent guest on Weekend Today, CBS Early Show, CNN’s Larry King Live, ABC’s Live with Regis and Kelly, The View, ABC News, Fox News, Fox Business and CNBC. He has produced and hosted two popular public television specials including, Smart Women Finish Rich and Start Late, Finish Rich.
In addition to television, David is a former host of The FinishRich Minute which aired on Westwood One Radio Network on over a thousand stations daily as well as Finish Rich with David Bach, that aired weekly on Sirius Radio. He has been profiled in many major publications, including The New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times,The Washington Post, The Wall Street Journal, Los Angeles Times, San Francisco Chronicle, Working Woman, Glamour, Family Circle, and Redbook. He has been a contributor to Redbook magazine, SmartMoney magazine, Oprah.com, Yahoo! Finance and AOL Money.
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Below is the full transcript:
Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement. Now, here is your host, Jason Parker.
Jason: Seattle, Tacoma, Olympia, Gig Harbor, all the good people right here in Kitsap County, welcome back to another round of Sound Retirement Radio. I’m your host, Jason Parker and as always I sure appreciate you tuning in to this program, making us one of the top podcasts on Itunes under the category of Retirement. For your support of my book over the years, all the reviews you’ve written, I sure appreciate that.
We want to get the program started off right. I’ve got a joke. I know how much our community enjoys these jokes every Saturday morning so I’ve got one for you to share with the grandkids. Do you want to hear a pizza joke? Never mind, it’s too cheesy. I know you guys are out there saying, “How does this guy come up with jokes this bad?”
Let’s take a minute and renew our minds before we get started with the program. This comes from Mark 8:36, “What good is it for someone to gain the whole world, yet forfeit their soul?” I’ll give that just a minute to sink in and read it for you one more time. It’s Mark 8:36, “What good is it for someone to gain the whole world, yet forfeit their soul?” I think that’s really going to play in powerfully to the message and to the guests that we’re going to be bringing in on the program.
At Sound Retirement Radio, we’re always looking to bring experts on to this program who we believe can add significant, meaningful value to our listeners’ lives. This morning I have one of those folks. I’ve got Mr. David Bach who is the vice chairman of Edelman Financial. He is the author of Smart Couples Finish Rich. In fact, he’s the nine times, New York Times Best Selling Author. He’s a trusted financial expert in the media. He’s been on Opera Winfrey several times. It’s a real honor for me to have him on program. David Bach, welcome to Sound Retirement Radio.
David: Jason, thank you so much for such a kind introduction. It’s my pleasure to be with you and I’m really excited to help your listeners today.
Jason: One of the things that I read as I’ve been learning about the work that you do, is you say, that the number one cause of divorce in our country is financial issues. Would you take a minute and just talk to our listeners a little bit about that?
David: It’s not just myself who says it. There’s been research done for decades on this topic and to give you a little background on how I came across this issue … I grew up in the investment business and I’ve been doing this now for twenty years. Early in my career, I hosted seminars for women and those seminars were called, “Smart Women Finish Rich.” Quite a few of the women who came to those seminars would come to me in the process of going through divorce. As they were going through their divorce, I would often ask the question, “What was the cause of the divorce?” and inevitably the number one cause that I would hear over and over again was fighting over money.
The opposite of that was I had also, all these really successful, happy couples that were clients. A couple that had been married twenty, thirty, forty years and really done well financially. I started thinking, “I want to interview these couples who have really done a great job. They’re in love, their relationship’s tight, they’ve done well financially.” and find out what did they do differently than these couples that I was meeting that were breaking up over money.
It was really interesting because there were just specific things that happy couples do that unhappy couples don’t. The more I learn, the more I taught and that led to a book called, “Smart Couples Finish Rich” which I created to go out and teach people, couples, all over America, how they could work together as a team on their financial life and do it without fighting so instead of fighting they could really start thriving.
Jason: I want to get into some of the specifics here in just a minute. I’ve been married for eighteen years now and I’ve found it’s pretty easy, David. The money that my wife makes is her money and the money that I make is also her money and she just gives me what I need. It’s real simple.
David: She’s got you on what we call an allowance and that’s good. By the way, it’s funny because I actually believe you, let’s say it’s true. A lot of couples do what you’ve just described, by the way. The key for couples is though that you agree on the process, or that your happy and what your doing is working, then great. As long as you’re saving money and doing all things that you need to do, fantastic. It’s when that doesn’t work, that’s where the problems arrive.
The spouse is being given the allowance, if you will, even though you’re joking about it. There are a lot of people who resent that. They’re like, “My husband, my spouse, or my wife, she’s in charge of everything. I’m not involved.” That’s what leads a lot of time to the fights. It’s very interesting.
Jason: What are some of your key take-aways? You’ve had a chance to meet a lot of people and see a lot of people whose marriages fall apart and they point to money. I always wonder, is money really the cause of the divorce or is it something a lot deeper than that and the easiest thing for them to talk about is money?
David: What happens with money, is it’s a reoccurring fight and unfortunately, it is often a reoccurring fight that happens weekly. Couples who fight about money, what they’re typically fighting about is the spending and that the issue of money is that you confront it every day. When you look at the couples who are fighting over spending, if they’re fighting about spending when they pay their bills, and that can be a couple times a month, that reoccurring fight is what starts to break the bounds of marriage. That reoccurring fight is what starts to create animosity, tension and that impacts the entire relationship.
What I always say is this … A lot of times couples end up in couples counseling. By the time they end up in couples counseling, it’s too late anyway. Often what couples need is not a couples therapist. What they need is a financial planner who can just sit down with them and really get to the root of the issue. Let’s figure out what’s going on here, guys, and let’s come up with a new plan because if you’re fighting every week about money, I can promise you it is not going to work long-term and you can fix this often in a couple hours.
A lot of times, the reason a financial planner is so valuable is you need a third party. You need somebody else to sit down with the two of you and go through the numbers in black and white and create a plan that works not just based on the money, not just based on the investments but based on your values.
That’s a big thing I want to talk about today because I really believe in what’s called, “Purpose focus financial planning.” That is where you build a financial plan around you values, which is your purpose in life. That can align as a couple. That can put the fights by the side, get you focused on the bigger picture and really get you excited. I see couples that go, “God, we hate this money stuff. We’re fighting all the time.” and then in a matter of a few hours they’re totally empowered, super excited and motivated. That’s what gives me so much energy to teach this stuff.
Jason: I love that. You just hit on something that’s really important to me. We, as a company, we sat down a couple years ago, come up with a purpose statement for our firm. Why do we do what we do? How do we do what we do? Why do we get out of bed in the morning? Will you take a minute and just talk a little bit more about purpose? How do people get really clear about their purpose?
David: In Smart Couples Finish Rich and Smart Women Finish Rich, both books, I walk you through what’s called a value circle. I did this on the Opera Show. This is a really simple process. You start by asking yourself a question, which is, “What’s really important to you? Why is it important?” and that’s not just about the money. When people say, “I want to have money for retirement.” I ask the question, “Why? What’s it mean to you?” You write down on paper, and you don’t even need my book to do this, your top five values.
Let’s say your value is family, your value is security, your value is community, your value is faith. I’m giving you some very common values that people have. Then you dive in to what does that really mean to you? What does it mean for you to be secure? What does it mean to you, to have faith? If a value of yours is giving back to the community, what does that mean to you? What does it look like? Once you get this down on paper because often we have these vague ideas.
We have, “Well, of course we have values.” but really, what are they? Once you get them down on paper and you sit down with your life partner, and they get it down on paper, then you talk about it. Then you go, “Let’s go through your values, let’s go through my values. Now let’s talk about what are our values as a couple?” and if you have kids, you can even go deeper and go, “What are our values as a family?”
You talked about your values for your business. Great! Lots of people do values for their business and primarily that be so they can run a better business and that they can sell better. How about for the family? How about for the family you sit down and go, “What are our core values? What do we stand by?” Then, the financial plan … You trade your time for income so when you go to work every day and you’re gone, away from your family for eight, nine, ten hours a day, that’s a trade off.
It’s part of your life, you’re trading your time and you’re trading it for income stream. With that income stream you’re trying to use that money to live your values. Allow this as going, “Look, it’s not just about saving 5% of your income or 10% of your money here, having a will and insurance. It’s about the bigger purpose here in your life.” That’s where you become unstoppable as a couple.
Jason: That’s awesome. You say something that I want to touch on because I found, personally, for my wife and I, when we really got on the same page … Again, having a financial coach or a counselor, so it’s their idea, it’s not my idea, it’s not my wife’s idea. We’ve got a third party that says, “Here’s a plan that you can work with.” I think that’s really powerful.
I was going to say for us, as a couple, one of the things that was really powerful is when we got on a really good budget. We went back to the old fashioned way of doing it in the envelope system, where we just put cash in envelopes and spent it that way. That was a game changer for us, but you ask the question, “Why doesn’t budgeting work?” Can we take a minute and address that with our listeners?
David: I’ve heard a lot of couples use this envelope system you’re talking about. I’m up for anything that works. If it works for you, fantastic. What we see is often when couples try to budget, then they start fighting about it. They start fighting about, “Did you put enough money in that envelope? Why did you spend money out of this envelope?” They create the list and then they start trying, “You can’t have an appetizer tonight because our budget for dinner is only $15 and the appetizer throws that over the budget.” I’m giving you examples here. What we see is that for most couples budgeting, it’s like dieting. They may go on it for a short period of time, but typically it’s misery and they don’t stick to it.
The second thing is that most couples are not inclined to be equally interested in money. What happens often is you got one person who is born to spend. I would say you’re either born to spend or you’re born to save and budgeters typically fall in love with spenders and then it is very hard to keep in the budget.
My whole belief is that you do what the government does. The government doesn’t trust Americans to budget. That’s why they take our taxes from us automatically. They pull money out of our paychecks. They didn’t always do this, but they figured out that if they didn’t pull money out of our paychecks for social security, state tax and federal tax that there would be no money to run the country. They figured that out after spending years trying to get Americans to budget and save. It doesn’t work. The government can’t budget either, but that doesn’t matter because they’ve got our money.
Jason: I was going to say, do we really want the government to be our role model here?
David: It really is the role model, so is business. When you go to a gym membership or just about anything else in life today, the first thing that business wants to do is get you to pay them automatically. You join a gym, they take your credit card or checking account number because they don’t want to have to come after you to pay them every month because they know they won’t get paid.
This goes back to, “How do you create a financial plan?” You create a financial plan that is automated so your savings is automated, your emergency account is automated, your college accounts are automated, your fun account or your dream account I call it, is automated. Most financial plans for families can be put on an autopilot system in less than a few hours.
I’ve had 7 million books out there. People can go to my website, finishrich.com, and we just get success stories every single day from people who have automated their financial life. Like you, I’ve spent twenty years in the investment business and I’m free based financial planner. Today I’m the vice chairman of Edelman Financial Services. We’re one of the largest financial planning companies privately held in the country and we work with over 26,000 families. Every day we sit down with couples and help them put in place a financial plan.
Whether it’s us or it’s someone else, I know that you’re in the business. It’s finding somebody good in your community that you can trust, that will sit down with you and do this on a holistic based style. It’s not just about the numbers, but it’s about your life and your purpose.
Jason: David, for our listeners out there that are driving down the road right now. Maybe they’re tuning in to the program. I want to remind you that this is episode 046. We archive all of these programs online. You can listen at soundretirementradio.com. Today, I’ve got David Bach on the program. He is the vice chairman of Edelman Financial. He’s the author of Smart Couples Finish Rich. He’s a nine time, New Yorks Times best-selling author. He’s been on the Opera Winfrey show several times, really a trusted person in the media for financial advice. Today we’re talking about how it is that couples can … The number one reason for divorce in our country apparently is finance and arguing over money. David has really made it his mission to go out and teach and educate and help heal that. I’m real honored to have you on the program.
I wanted to take this on to a little bit more of a personal level, David because we’re always looking to learn from peoples’ real life experience. As you think about your own life, we all make mistakes with money, what’s been the biggest mistake you’ve made as you think about your own personal story?
David: I get asked this question a lot, right? As the years go on, the answer changes. I was watching a video that I did on this question a while back and one of the examples, I’ll give you a couple of examples, one of the examples being it has always comes down to the investments that I’ve sold. Even though you’re not supposed to look back on investments that you’ve sold and regret selling them.
The first home that I ever bought, I bought it in Danville, California. I bought a home right out of college with a best friend, we fixed it up. We planned to keep it as an investment. We rented bedrooms out of that house so we could afford to fix up the property. We owned that property as a rental property for five years. We paid $220,000 for the home and we sold that home five years later for $225,000 dollars. At the end of five years we didn’t really make any money on it. Within five years that same home was then worth about 750 and today that land that is underneath that, where that house was, is probably worth 1 million, 1.2 million now without the house.
Sometimes I can look back on things that I’ve sold and wish I hadn’t sold that. It tends to be the case with most high quality investments. I can look at a lot of investments that I’ve owned that if I had, maybe if I had doubled or tripled my money, and then if I would have just kept on them today as purulence I would have had a ten, fifteen or twenty bagger. It’s been the things that I’ve sold that have been some of my biggest regrets.
I think the things that I’m happiest I’ve done is that I’ve, for the most part, I’ve had a financial plan that looks exactly like what I teach people to have. It’s extremely boring. It’s totally diversified. It’s re-bounced automatically and I don’t have to worry a lot about my financial life because I do what I taught my clients to do and what I teach my readers to do.
I sit here today at the age of forty-eight and I have a seven figure retirement account. I say that, not to brag because I didn’t buy a stock that went up thirty times. I just simply invested it over the last twenty-some-odd years in an retirement account. I started with an IRA account with $2,000 when I was twenty-three years old. I then got a 401k plan when I went to Morgan Stanley. Then when I started my own company I opened a SEP IRA and I ultimately has a solo 401k plan. Finally, I had a defined benefits plan. I secure at the age of forty-eight with a seven figure IRA account that’s going to conceivably be worth over 10 million dollars, I believe, by the time I retire.
That’s frickin’ remarkable when you think all that’s just a result of everything I teach. Saving money automatically, the miracle of compound interest, I haven’t had any home run returns. I just looked at my portfolio before I got on the call with you and I am 60% equity and 40% fixed income. It’s a balanced account, it’s boring and it’s working.
Jason: Boy, that’s awesome. You know there’s that old saying … Find somebody who has what you want, do what they do and you’ll get what they’ve got. I like that you talk the talk and you’ve walked the walk. That’s really powerful. I want to ask you though, you’ve mentioned two things that I want to bring up just based on the economic reality of the world we live in today.
Real estate, you talk about real estate and that could have been a much better investment for you, but as you look out into the future and you think about real estate, do you think real estate is going to be the same type of an investment it had been in the past given that interest rates have really nowhere to go but up? It seems like peoples’ incomes are a little bit static these days. As you look out in to the future, do you think real estate is where people should be putting a lot of money?
David: First of all, I always go back to the basic premise of real estate, which is, “You have to live somewhere.” I always start with, you have a choice, either you can rent or you can own. If you rent, you’ve got one thing you can guarantee yourself. You will ultimately make the landlord well paid and in yourself you won’t create wealth. Home owners are working an average of 30-45 times more than renters. When the recession hit, when people started losing their houses and people are like, “Oh my God, Americans are never going to own a home again.” which is ridiculous. That was never going to be the case. I would sit there and say to people, “The only thing I can promise you in 2008 and 2009, is that rents are going to go higher.”
In New York City, where I live, rents have gone up 25% since 2009. Home prices have skyrocketed in most major cities since the recession. People who bought homes three or four years ago have made an enormous amount of money. It depends on when you bought it and where you bought it. I always start with, “You have to live somewhere.” First, it’s a decision. Do you plan you plan to rent for the rest of your life or would you like to ultimately own your home? When you look at Americans, 60-65% of Americans net-worth are in their houses. What you know, just simply when you look at the wealth of America, is if you don’t own a home you are at a huge disadvantage.
Now the question becomes, “Are you going to own rental properties?” For most people, most people don’t want to own rental properties because the don’t want to deal with tenants and they don’t want to deal with all the issues that are involved with rental properties. There are a whole lot of people who will become extremely wealthy owning real estate. Real estate is a phenomenal assets class. It’s a part of your portfolio. If you don’t want to own real estate yourself, you can own it through investments like REETS. When I say REETS, I mean Real estate equity trusts, not non-listed REETS because those are risky and I never recommend people buy those.
You can build portfolio with an ETF that’s got real estate in it, that’s low cost and totally efficient and boring. There are lots of ways to put real estate in your portfolio without actually having to own rental properties yourself.
Jason: I appreciate that thought. You’re going to be heading out on a four city speaking tour. Before we run out of time I want to make sure we tell our listeners about this. Can you just real quickly talk about this tour that you’re going to be going on?
David: Jason, thank you. Smart Couples Finish Rich is a course that hundreds of thousands of couples have gone through over the years. I’m going out on the road myself, live, to teach a brand new class based on this program. I’m going to Irvine, Detroit, Chicago and Boston. So if you happen to be listening, anybody who’s in those markets or know people who are in those markets, send them to smartcoupleslive.com. If you put in the gift code, the code is tour, you can come to the event for free. I’ll be speaking for two hours, doing a book signing and it’s going to be just a total blast.
I know a lot of your listeners can’t come to it live, so here’s what I can tell you … We will be doing a webinar also on the program and they can go and watch the webinar and that’s free. Again, the place to register is smartcoupleslive.com.
Jason: That’s awesome. You know, David, we have people tuning in from the program all over the country as a result of the podcasts. Our local listeners, I don’t know if they’re going to make a trip down to California, they may get a little thirsty looking for a bottle of water down there, but we don’t have that problem here is sunny Washington state. I only have maybe two minutes for you to answer this one, but you’ve had a lot of experience. You’ve worked with a lot of successful people. What have been some of the biggest regrets you’ve encountered out there from folks in their financial lives?
David: You said successful, right? The ones who are successful don’t typically have regrets. It’s the ones who are unsuccessful. I think the number one thing I hear people regretting is that they didn’t start sooner. Which is probably the thing I hear the most. People in their 50s or their 60s will come up to me after hearing me speak or reading my books and be like, “Where were you thirty years ago? If only I had met you when I was in my 20s or my 30s.” I wrote a book called, “Start Late, Finish Rich.” which is geared towards people who feel like that.
I think a lot of people regret waiting. That’s the most common. People definitely regret not saving more when they were younger. I always focus on, “Look, just fix where you are today.” If you’re in your 50s and you feel like you’ve waited too long, you didn’t wait too long. You’re here today. This is where you start. If you’re saving 5% of your income and you regret that you didn’t save 10% of your income over the last twenty or thirty years, fix it today. Increase what you’re saving.
Jason: In thirty seconds, if people are really inspired by your message here today, what is the best book that they should start with that you’ve written?
David: I think “The Automatic Millionaire.” That’s my most popular book. You can read it in less than an hour and I think for most Americans, it’s just the best place to start. People love that book. It’s what book I launched on Opera. There’s millions of copies out there. You can get it at the library too. You don’t have to buy it. I’m all about helping as many people as possible so however you want to get my information. The last thing is just the website, finishfirst.com, lots of great resources on our website and there are ways to help you there.
Jason: David Bach, thanks so much for being a guest on Sound Retirement Radio.
David: Jason, thank you. I really appreciate it. It’s been a pleasure. Have a great day.
Jason: Yeah, you too. Take care.
Announcer: Information and opinions expressed here are believed to be accurate and complete for general information only and should not be construed as specific tax, legal or financial advice for any individual and does not constitute as solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent fee-based, wealth management firm located at 9057 Washington Ave. NW, Silverdale Washington. For additional information call 1-800-514-5046 or visit us online at soundretirementplanning.com.