“You don’t need to be rich to live rich.”
David Bach is one of America’s favorite financial experts. He’s been teaching America about money on Oprah, the Today Show, CNBC, Fox, CBS, and just about everywhere else. Tony Robbins has gone so far as to call him “the financial expert you need when you’re intimidated by your finances.”
He’s also a 9-time New York Times bestselling author – having sold over 7 million books. His latest is a newly updated and expanded 20th-anniversary edition of his first book, Smart Women Finish Rich, which has been completely expanded and updated for today’s woman – and today’s world.
Today, David joins the podcast to share his own journey, talk about how to make your financial dreams come true, why being a morning person has been so critical to his success, and much more…
- David’s “Live Rich” philosophy – why you don’t have to be rich to live rich and why you don’t have to wait to make your dreams come true.
- Why trying to time the market is always a terrible idea – and the benefits of sitting on your investments, even through market corrections.
- How talking about his dream at a Tony Robbins seminar helped him make the connections needed to pitch, sell, and publish Smart Women Finish Rich.
- The good and not-so-good news – as well as unique challenges – that women face when it comes to money.
- Why women make better investors than men.
- David’s 10 Golden Rules for finding and working with financial advisors.
JOIN THE CONVERSATION
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Hal: Goal achievers, welcome to another episode of the Achieve Your Goals Podcast. This is your host, Hal Elrod, and today’s episode is brought to you by the Best Year Ever Blueprint Live Experience. That is our once a year live event, experiential event that happens in San Diego, California December 7-9, 2018. And why do we do it in San Diego? Because it’s the only place really that you can pretty much guarantee you’re going to have great weather all year round, and in December depending on where you’re coming from, it might be raining. It might be snowing but San Diego is beautiful and check out BestYearEverLive.com. As we get closer to the event, I’ll go in more detail and we’ll probably do an episode on it or something but the reality is an extraordinarily, it’s hard to put it in words, but an extraordinarily experiential connected community created event and if you remember the Miracle Morning Community, just imagine the energy, the synergy of that community condensed into a 300 to 400-person event for three days face-to-face. It really is something special so I’m not going to go in too much more detail there but check it out, BestYearEverLive.com, December 7-9 in San Diego.
More importantly, at least for today, I am here today with David Bach, nine-time New York Times best-selling author, co-founder of AE Wealth Management who’s got $5 billion I believe or right under $5 billion in assets under management is really one of America’s favorite financial experts and there’s a good chance you’ve seen him on Oprah or The Today Show, CNBC, Fox, CBS, you name it. He’s been there teaching America about money now for over two decades. And Tony Robbins said this about David. He said, “David Bach is the one financial expert to listen to when you’re intimidated by your finances. His powerful and easy-to-use program will show you how to spend, save, and invest your money to afford your dreams.” And when it comes to being an author on financial books, David has sold over 7 million copies of his books and I’m excited to have him here today exclusively to learn about his mega-bestseller, Smart Women Finish Rich, and this book, which will actually, believe it or not, his first book 20 years ago just came out for its 20-year anniversary and that book alone has sold over a million copies and it’s one of the most popular financial books for women ever written, and it’s been completely updated and expanded for today, today’s economy, today’s world, today’s women. So, if you are a woman, this is for you and if you are a man, listen up because this is for the woman or women in your life that you care about, your mom, your sister, your aunt, your wife, your daughter, you name it. So, we’re going to jump in.
Hal: David, welcome my friend.
David: Hal, I’m so excited to be here with you. Thank you for that incredibly kind introduction and I don’t think you know this but I’m like an outside fan of yours. You spoke to a group of ours. I just want to give you like a high-five here for a second.
Hal: Yeah. No, I’m all ears. Keep going as long as you need.
David: Because I’m going to send out some high in my community too who might not know you, but you are a well-known expert in so many things and you spoke to a group that I’m a part of called EO Organizations. For those who don’t know, it’s one of the largest organizations for founding entrepreneurs across the world and you spoke to our group in New York City when you launched your book and I wasn’t there and it was such a huge success. Even the highest rated speakers we ever had that everybody I knew left with your book and I want people to hear about what you did too because it was all about The Miracle Morning and this idea of waking up early and people brought the book back to me and like, “Oh my God, you missed this incredible speaker.” So, I read your book, love everything you talk about which I want to talk about more because again I love what you do and then last year I was at the mastermind talks and I know there was a fundraiser there that our friend, Jon, put on for you and I’ve just never seen so many people in a room speaking so highly of one individual as our peer group were speaking about you. And I just salute you because to be the kind of human being that so many people you want to help and for those who don’t know, again, for my community with that you are suffering from battling cancer and congratulations on crushing it.
Hal: Thank you. Thank you. Thank you for all of those kind words, David.
David: Yeah. I just really I was really moved to my soul when I was at that mastermind talk and people were talking about you and raising money for you and the work you’ve done and your spirit and your energy and how many people you’ve helped. So, I am honored to be in your podcast. I think I went online. I think I’m your 237th interview. So, thank you for having me. I know that was to keep the best for last. I know this will be the last but it’s good to be here with you so thank you so much for having me on.
Hal: Oh, man. Well, it’s mutual. This is a great love fest to start the episode off. I love it. Thank you for those kind words. Yeah. The money that was raised at mastermind talks I’ve got that sitting in an account to pay forward and just waiting for the government to get back to approve our 501(c)(3) nonprofit called Support The Unsupported and all of the funds that were raised for me because I was able to take care of my medical bills, that’s all going to go toward people in need. So, really, really, really cool just the giving will continue.
David: Amazing. Beautiful. Pay forward.
Hal: That’s right. Well, so before we jump into the book, I have a couple of related questions that I want to ask you and actually the first one I’ll start with because you just touched on it which is you’re a fan of the morning rituals, the 5 AM club, whatever you want to call it. Well, I want to hear your take on that. Why are you a big fan of early rising, or having that morning ritual routine dialed in?
David: So, I’m going to go way back here like way back to like growing up. So, I was not always a morning person. Like probably a lot of people who are listening may not be morning people. Not everybody’s a morning person, but when I got out college I went to USC, I graduated, I wanted to be successful quickly and I went into real estate and I was in commercial real estate and my boss, my mentor who own the company his name is Chip and Chip came in. He was the first person in the office. He was in the office at 6:00. And when he hired me he said, “You’re going to be in the office before me. Every single day you’re going to be – when I get to the office, David, you better be at your desk working and I’m going to leave this office at 6:30 or 7:00 or you’re going to still be working when I leave. You’re going to work harder in the first year than most people work in the first five and within two years you’ll have 10 years of experience.” So, my first experience out of college in order to get to the office before quarter to 6:00, I had to get up in like 4:15. So, I had to learn like right out like, boom, and coffee, up, get going, crush the day. I had so many things that were interesting about that experience. I would drive to work at 5 o’clock morning. That would be a time with no traffic, but I would notice that some of the fanciest cars on the road were on the road at that hour.
David: Because a lot of times it was the entrepreneur going to work and then after real estate, I went into the financial service industry and I decided at the time I wanted to write my book. The first book, Smart Women Finish Rich, I got that book deal and normally at Morgan Stanley I had to be in the office again like 6:30, 7:00 latest. So, in order to find the time because you got to find the time to live your dreams, I started getting up at 4:30 so I can write my book between 4:45 and 6:30 to 7:00 like I had it very dialed in. I would basically get coffee, write the book, go to the office, and that is how Smart Women Finish Rich was basically written between the hours of 4:30 and 6:30 and that is what set my cycle for get up early and get it going. And I today here I am 25, more than 25 years later, because I’m 51 right now, I still if I get up at 6:00 it’s a late day for me and normally my wife and I are up at 5:00 and we have rituals. We wake up, we meditate next to each other in bed, and then I get on online. I always plug these guys because I love it, but I get on my Five-Minute Journal app every morning.
Hal: Me too, man. I use the Five-Minute Journal app every day.
David: Do you really?
Hal: Yeah. I love it.
David: And I start my day with my pod, Dan Sullivan too, strategic coach, but my positive focus I do it in my Five-Minute Journal I write down what I’m grateful for. I get super centered and super present. I write down what I’m going to do to make the day great. I put my picture there from the day before that’s meaningful for me, so I can go back and look at it. So, I’ve got a visual diary of the highlights of my life. And then I go to the gym and then I come and have breakfast with my kids and then I go start my day. I’m doing as anybody who’s part of 5AM Club knows, that Miracle Morning concept, everything I just described to you it’s done by 6:30. So, my days are already rocked in the right direction because I woke up early, I meditated, I did a positive focus, I’ve gone to the gym, I’ve spent time with my family, and then you didn’t have to drop off. I’m still in the office by 8:30. The amazing thing in New York City is you would think everybody’s here to crush it but if I’m in the office at 8:30, I’ll be in an office with an entire floor with no people in it yet. So, it’s always fascinating to me that not everybody’s waking up early.
Hal: Yeah. But you’re a man of my own heart for sure. But like you said, you’re getting those things. Those things that people put off, you know, like, “I’d love to meditate. I’d love to exercise more. I don’t have time. I don’t have time to read,” it’s like, no, you have time. There’s that pocket in the morning where no interruptions, no phone calls are coming in that don’t open your email but become a better version of the person you were when you went to bed the night before and you’re on point to crush the day. So, I love it, man. That’s great. Before we get into the book, the first thing that I’m interested in hearing about is your Live Rich philosophy where it’s not waiting to live your dreams which I love and where you say, “We don’t need to be rich to live rich.” Can you expand on that?
David: Yeah. Well, I think this is my favorite thing to talk about these days. I mean, so many people have almost been turned off by the concept of saving which is painful for me because I’ve spent 25 years trying to motivate people, save and invest automatically every time they get paid. And there are millions of people doing that but there a lot of people who aren’t and when you talk to people who haven’t started saving yet or they’re behind, they feel like they’re starting late, the thing that people say to me is, “You know what, damn it, 20, 30, 40 years from now I don’t want to put off living the life that I want right now, so that someday I can retire, and I don’t want to wait and I totally 100% get that. And what I’ve been sharing with people really more and more like the last five, six, seven years is that it’s not about saving to put off your life so for that someday. It’s not just about putting money away for that day you’re going to retire or the rainy day. It’s about two areas that you put money away for. I teach two things. In retirement basket, which is basically in retirement account, and then dream account.
And so, I teach people, “You need to be funding a dream account because small amounts of money can get you closer to your dreams much faster than you realize.” And so, I’ve really been kind of taking people on the spiritual journey of like let’s look at your life, what is it that you really want to do right now that you’re not doing. Let’s look at does it cost money because a lot of times it doesn’t, but if it does cost money, let’s come up with a dream, let’s literally name this your dream account. Let’s open up an investment account. There’s lots of different ways to do this, right, like you can save a dollar a day with companies like Acorns as an example. It’s on my robo-advisor account. You can go meet with a financial advisor and set up a systematic investment account. But without giving the technical aspects of it, it’s having an account a place where you take part of your money as it comes in and you literally put it in that account of your dreams. And what happens the moment you do this, Hal, is that your dream starts to feel more real. So, I was like, give you a really specific example like I had this woman that came to us online. Her name is Vicky and she’s like, “It has been a dream of mine my entire life to go to Hawaii,” and I go, “Well, great. Where in Hawaii do you want to go?” and she’s like, “I haven’t thought about it.” I’m like, “Let’s think about it,” and she’s like, “Well, I always wanted to go to Oahu.” I said, “Okay. Great. Where in Oahu do you want to go?” and she said, “Well, I want to go to North Shore. I’ve seen all these movies on the North Shore and I want to go there when they’re having these huge surfing events.” I’m like, “Great. What month is that?” Like, I kept making her visualize it. “Oh, well, it’s this month. Well, how much would it cost you to go?” And she said, “I don’t know. I’ve never looked at it.” “Okay. Well, your homework is go look. Go find out what it would cost to go to that surfing event on the North Shore next year.” She comes back and she gives me a number and I’m like, “All right. So, the number is…” I think her number at the time I want to say it’s like $2,600 like she wanted to do this trip right. And I go, “Okay. Well, so let’s back it out between now and that trip is 14 months from now. Let’s literally look at how much money you need to save a day to get there and then let’s put that money into an investment account for you.” And she just looked at me and like we ran her numbers and they weren’t very big and she kind of looked at me and she’s like, “Can it really be that simple?” I’m like, “Look, it’s as simple as you want to make like you have to go do the work like we have to have the money to take every month. You got to take this money and put into an investment account.” And so, she did that and then as she was working towards this goal of hers, she was like, “You know, I already feel so rich just because I’m realizing that this dream’s going to come true.”
Well, that’s a story that happened thousands of times to people who follow this, right, like the moment you start saving for your dream was the moment that dream starts to feel like it’s not just a dream. It’s actually a real thing that could happen to you and then it does happen. So, it’s about buying your dreams and again lots of time it doesn’t take money. That’s why I always say you don’t need to be rich to live rich. A lot of times it just takes figuring out what is you wanted then realizing a lot of what you want can actually be done without money. There are lots of ways to get your dreams. So, I just really focus these days on getting especially young people to realize like you don’t have to wait to be 60 to enjoy your life and then I mean lots of millennials are kind of like tuned into that but on the other side of this, Hal, is I’m really focused on getting, we have a lot of retiree clients. In fact, most of our clients are retirees and they come to us in their 60s or early 60s and they’ve been led to believe that they can’t spend money the first 10 years because they’re going to run out and we’re helping our retired clients realize like this is a really important decade like this is your honeymoon decade. You need to go enjoy it. So, let’s not wait to be 75 to go enjoy your wealth. Let’s really enjoy it now. To me, that’s about living rich. So, whatever age you are it’s about having a plan where the money that you got and the life that you have, you are using that energy and that time and those resources to live your richest life today that you’re not putting it off.
Hal: I love that. And it goes back to that the old adage, what you focus on expands. By her focusing on Hawaii then all a sudden in focusing on saving the money for it, that money expand, the account expands, and all of a sudden how like you said the dream becomes something that very realistic. I love that.
David: Oh wait. Just finishing that story of that person. Ultimately, she figured out that she could go volunteer work on that surfing contest and so, she started telling people that this was her goal and her dream and then she got invited to stay in somebody’s house with another friend. So, like what she thought that that actual cost, that trip was going to be ended up being half the price and that’s just one more example of where like when you put it out into the world you manifest things and people show up to help you.
Hal: That’s so true. I’m writing a book right now or just finished it called The Miracle Equation and Chapter 1 is called Taking the Mystery Out of Miracles and then at the end I go, “We’re putting a little mystery back in.” I go, “Look, as practical as I’m trying to make this for you, guys, I don’t know how to explain the fact that the universe does stuff,” like when you’re committed when you’re fully present and committed to whatever it is that you want and you put it out there like you said, David, it’s like resources that you can’t predict, people that you wouldn’t have under, you know, just come into your life. It just it’s crazy. I think most people would go with that like they start with this helpless idea of like, “Well, it’d be nice, but I don’t even know where to start.” It’s like, “Well, then start wherever you are. Start with a Google search.”
David: Oh my God. It’s so true. I wish you could see the hair on my arms sticking up right now because it gives me the chills. I’m going to tell you a story right now. It kind of pivots into Smart Women Finish Rich.
Hal: Perfect. That’s where I want to go next.
David: Because it’s exactly this story. So, I’m at a Tony Robbins seminar. I’m young. I’m working on my motivation, my goals, my dreams. I’m at a Tony Robbins seminar. At that Tony Robbins seminar, he talks about this exact thing. You got to write your goals out. You got to share them with your friends. He breaks us into groups and he’s like, “I want you to get in these groups and I want you to tell these strangers your number one dream in life, the goal that you’re afraid to share.” So, in my group, I tell the dream and the goal and it’s to write this book, Smart Women Finish Rich. That’s my goal and my dream and I want to go teach a million women how to be smart with their money because I learned about money from my grandmother, changed my whole family’s destiny and I want to help a million women be smarter with money, so they can protect themselves and their families and teach to their kids. I share that and I’m totally afraid to share this. I don’t know these people in this group. I’ve got all the fears as somebody would have when they have the dream. Share the dream. We do that, everybody goes around. We give each other hugs. We do the whole, “Congratulations! You’re amazing!” We go back in the room. Tony said, “Wasn’t that incredible? Wasn’t that amazing?”
Okay. About 45 minutes later and I’m at the back to the room. A woman finds me. This is a room of like thousands of people. She comes over to me. She taps my shoulder. She says, “Hi, David. I just heard about your dream from somebody to write a book called for women and money,” and she says, “I’ve worked with Tony on his books. I can help you write a book proposal.” And I go, “Oh my God.” Her name was Vicky St. George. I go, “Vicky, I just got an offer to talk to an agent. She told me I need a book proposal. Let’s meet.” Well, Vicky St. George helped me write that book proposal.
Hal: That’s awesome.
David: That book proposal led to getting my agent which led to me getting the first book of my career, Smart Women Finish Rich, which would basically led to my career. And that’s just like just putting it out there.
Hal: Yeah. I love it and I don’t know if it’s law of attraction or what like I kind of balk at that sometimes but at the same time, you can’t deny any successful person can tell you so many instances of what felt like luck, serendipity, coincidence, like whatever you want to call it and it’s the more you put yourself out there. So, let me start here. As a man, how did you end up writing a book for women about money like why was that your first inclination in terms of where to go?
David: Well, so I’ve learned about money from a woman that was my Grandma Rose Bach. First of all, going back to my grandmother, she started with nothing. She’s broke at 30. She was living paycheck to paycheck, she started investing, and over her lifetime she became a self-made millionaire and that was just it changed her whole life and it changed our family’s life because she passed those lessons onto my father who became a financial advisor, then to me. I started – she helped me buy my first stock at age 7 in McDonald’s and that amazing experience when I became a financial advisor, I was a little naïve. I literally thought that a lot of women were like my grandmother if not all. Like, I thought well everybody must be the matriarch of the family managing the money. And then quickly what I found out was that a lot of women had delegated this to their husbands and so as a financial advisor I started sitting in these meetings with a bunch of widows where we were teaching these women clients of ours how to read the broker statements, how to write checks, and how to know if they were going to be okay financially after their husband had passed away. And at the same time, another thing is happening in front of me was that my mom’s friends were going through divorce, and they were being wiped out financially by the divorce. So, this all happened when I was very young. I mean, I’m in my 20s and I’m a financial advisor and I was like, “God, you know what, I have to do something about this.” So, I’m going to teach a class. My mom gave me the challenge. She’s like, “Why don’t you teach a class on investing?” and I’m like, “I can do that,” and then I’m like, “I should write a book on this.”
So, I went and taught that first class and at that first class I got asked for a book for women and money and there wasn’t one, and that’s what led me ultimately years later, a couple of years later. It wasn’t like the next day I wrote the book. I started teaching class on women and money in Lafayette, California. I had a lot of women get really into it, want to bring their friends and their daughters and their mothers to the next class. It grew, and then more and more people like you got to put this in a book. And so, after about three years I was like, “I’ve got to put this in a book.” If I’m going to reach more people, I’ve got to put it in a book.” And so, it manifested itself over time. It was like I started teaching that class in 1994 and then in 1996, I got the dream to write the book. In 1997 I worked on the book proposal. And then 1998 the book came out. Nobody thought the book would work. Nobody believed that women would buy a book for investing. I was told over and over and over again women don’t buy investment books. There’s no market for it. They’re not going to come to your seminars and I just didn’t listen. And then people were like, “Oh, you’re a man. You can’t do this.” I’m like, “Well, I just did it.” I just kept doing it over and over and over and I was too dumb to know it wouldn’t work.
Even back for the first seminars, it’s kind of a classic story. My first seminar, the local newspaper would not return my phone calls to run an ad and I kept calling and calling and to pay them money to run an ad for this seminar. They wouldn’t return my phone calls. I drove down to the newspaper, got in front of the editor of the newspaper and said, “You guys don’t even return my phone calls to run an ad for a seminar for women and money,” and they’re like, “We thought this was a joke.” I’m like, “It’s not a joke. I have 100 women coming.” I said, “How about you bring a reporter down and watch me do the seminar?” Well, they brought a reporter down and a camera crew and they took pictures then that led me being on the cover of the local newspaper and that was like my first media in the little local newspaper.
So, it’s the dream started off in a super small and a local community and then it grew. I just kept looking at it like, how could I help more people? And so, books are just, as you know, like if you can write a good book and then go out and get into people’s hands, books change people’s lives. I traveled all over the country on my own dime. I did my own book tour. I stayed in every Motel 6. I started in the college radio shows. I mean, there wasn’t anything that I wouldn’t do. I’d booked 40 of my own book signings. I drove everywhere. And it was hard. I didn’t hit the New York Times bestseller list right away. It almost took eight months to hit the New York Times bestseller list I think it was. But over time it snowballed and then I did a public television show and then we started having our seminars taught around the country by other financial advisors and just I never gave up and then the realities I also never stopped pushing. I mean, look, you and I are doing a podcast today. I’m doing a podcast today because I’m still pushing like…
Hal: Sure. 20 years later.
David: Twenty years later Smart Women Finish Rich is coming out September 18. By the time people here this, it’ll be out in stores. You can preorder if it’s earlier than that and I said to my wife yesterday, I was showing her my schedule because the next, as you know when you wrote a book, it’s just craziness. And I’m still stressed out. All these a year later and I’m like, “You know what, I know I’m overworked up about this, but I care so much.” I worked a year to update this book. It’s helped a million women but I’m like, “Honey, I want to help another million women,” and she kind of gave me a hug last night and she’s like, “That’s why you are who you are.” I’m like, “I know but I wished I didn’t always have to be so worked up.” Like, but you know what, I’m just still pushing because it still matters and I’m still reaching new women every day with this message that Smart Women Finish Rich that as a woman if I was going to really just nugget this down and comes down to, as a woman you need to be in charge of your financial life. I don’t care if you’re married to the local bank president. You need to know what’s going on with your finances. You need to be in charge of it because 90% of women at some point will be forced to be in charge of their money whether they want to or not, whether it’s widowhood or divorce or staying single. So, I don’t care what your age is as a woman if you’re listening. You owe it to yourself to be in charge of finances and being in charge of your finances powerfully and that’s what Smart Women Finish Rich is about giving. It’s about giving you the power and the confidence to take charge of your financial life.
Hal: So, diving into the book, in the book you talk about the new good news for women and money but also the not so good news and so I’ve got a question and a half here that are linked. So, do women really face unique challenges when it comes to money versus men and then has much changed since you wrote the book originally 20 years ago?
David: Yeah. So, women do face, first of all, a lot has changed, and a lot hasn’t changed. Let’s talk about the core. What’s core to women about money that’s different than men? If you’re a woman, what are the challenges you’re faced with? What’s the big hurdle? So, here’s the major big hurdle. Women don’t die. Slightly exaggerated but women live longer than we do. So, women’s life expectancy just keeps going up. Women live an average of seven years longer than men, average. So, most women if you’re married, most women marry men that are older than them and most women live 10, 15, 20 years longer than their husband if they’re married. 80% of women will die widowed. 80% of men die married. Let me repeat that. 80% of women die widowed. 80% men die married. So, the first hurdle for women is simply the fact of longevity. You are healthier today than you’ve ever been. Most many, many, many, many women listening to this are going to solidly live to be in their mid-90s. One of my grandmother’s – I had two grandmothers obviously. They’re both grandma Rose. The Grandma Rose that’s not the one who is dedicated in this book because my mom’s mom she outlived two husbands. She passed away at 97 years old and her first husband died in his 50s. The average age of widowhood when I wrote this book was 56. It’s gone up. The average age of widowhood now is 59. That’s really still young. So, the first issue is you’re going to live longer. Your retirement is an average of at least a decade longer than the man in your life. You retire so that’s huge. That means you need more money put away for retirement than if you’re married, then your husband does. Okay. Now, well fine. Well, what else are your unique challenges? So, you live longer, but you end up with across the country on average, you end up with less money in retirement. Why? The average woman when I wrote this book took 11 ½ years off from work during their prime earning years for childcare. It’s gotten worse. Now, it’s not just childcare. It’s parent care. Well, the person who takes the bulk of parent care responsibilities is the sister.
So, women are being faced with more years off of work now because of that exact issue. So, we’re seeing women taking anywhere from 10 to 15 years off of work and also by the time you take them out of work because – not all women do. I’m just giving you the overall general issues, that leads to less money going to social security, less money going into pension plans, less money going to 401(k) plans. So, you showing an average woman aged 65 in this country her income average income in America is about $18,500 a year. So, women have less money and benefits, less money in social security and they’re going to live longer. Those are the core issues. Women don’t need like a pink mutual fund versus mandating a blue mutual fund. The investments are the same but the fundamental issue if you’re going to live longer and you have less money in retirement right now is critical. Also, often women are not funding their retirement accounts as early as high as men. That’s still a major issue. Women often don’t invest as aggressively. Not the ones that read my book because they’ve been trained how to do this, but often women are leaving money in retirement accounts in cash. Huge mistake. So, that’s the negative. Like, what’s the good news? Way more good news than we’ve ever had. The good news is there’s a lot, first of all, today’s entrepreneurs are women because to deal with this issue of being a mom and wanting to still work, many women have become home entrepreneurs. So, there are more women starting businesses today than men. There’s 10 million women entrepreneurs. There are more women graduated from college, both undergraduate and graduate than men. We have more women in politics and we have massive amounts of wealth transfer coming to women. And women’s incomes have gone up. In many cases, women today are graduating and earning more than men. Not all but many and we have women today that are actually very, very tuned in to their finances. So, we see when I wrote the book I show that women make better investors than men and the reasons that they do is that they don’t actively trade. They’re way more disciplined. They invest for the long term. They’re better at goal setting and financial planning than most men are and that’s still true.
So, there’s a lot of things benefiting women that take charge of their financial life. I think the thing that gets me the most excited right now with women is the huge interest in taking charge of financial life. Twenty years ago, this was a battle to get women, not all women, but to get women like listen to why this was so important. Today’s woman says, “I want to be in charge of my money. I want all the tools. I’m here. I’m going to do this, and once they do it, they never turn it back over yet. Now, one last thing I’ll say is more women are buying homes today than they were 20 years ago and that’s really critical because people are getting married later. So, I always say to women, “If you’re a woman who’s not going to get married in their 20s which many women today are not getting married in their 20s. They’re getting married in their 30s. Don’t put off buying a home. Because men don’t put off buying today. Men don’t say, “Well, someday I’m going to get married and then I’ll buy a home.” Men will go out and start investing, period. So, my big mantra 20 years ago is, “Ladies, don’t put off buying a home. Go buy a home and then when you get married, turn that into a rental property and don’t put your husband’s name on it. Keep that separate. That’s a separate asset and then you go get married and buy a home together. So, I’m a big crusader and advocate for women. Go make your money and then keep that money and then we get married and keep that money. You may divorce. You got money separate. So, that if the day comes and you do go through divorce, you got your own assets and I teach women who make more money than men why they should have prenuptial agreements. So, any way you go and slice it, I’m constantly out there trying to be a crusader for women until I put their best foot forward from pure financial confidence and strength.
Hal: Yeah. Well, that makes sense rather than playing the, “Well, if everything goes well, I won’t have to worry about my finances,” but that strategy of hope is not really a strategy. Now, you suggest in the book that most people and this is really male or female, it’s gender neutral if you will but that most people should work with a financial advisor and that you have an entire section in the book called the 10 golden rules to hiring a financial advisor. So, can you talk about why you think it’s so important to get help and what type of advisor you personally recommend?
David: Yeah. You bet. Well, what happened when I first started writing these books is ironically I was a financial advisor and today I’m a co-founder of a registered investment advisory firm, AE Wealth Management, where we have hundreds of financial advisors. I don’t personally work with clients anymore. But the question I was always asked all the time is, “Where do I find a good financial advisor, and do I need one?” So, you said something which is actually not what I say. I don’t tell everybody that you need a financial advisor. Today with technology and I go through all the different firms where you can do it yourself today. When you’re getting started, realistically you’re not going to hire a financial advisor. Like, when you’re just getting started, you’re going to go, you need to go use your 401(k) plan. You need to set up a systematic investment plan online. You can probably do a bunch of things yourself with education. Once you get to have $100,000 or more then it’s time to start meeting with a financial advisor and so I go through all the different types of financial advisors there are.
And before I go into that, let me just say when it’s really critical to hire a financial advisor is when you get in your 50s. When you’re 55 years old and you’re five years away from retirement, or six or seven years away from retirement, and that’s the time to get serious. That’s the time to be sitting down with a financial advisor, having a financial advisor do a financial plan. That is a black-and-white document where they’ve taken all of your – show me what you spend. Show me what you earn. Show me what your investments are right now. Let’s run an analysis. It’s like doing an x-ray on your money and let’s look at what is it going to take for you to be able to afford to retire? Let’s look at inflation like it’s going to cost more as you’re older and will you have enough money based on inflation? Let’s look at Social Security. Let’s look at your 401(k) plan and your pension plan. All this stuff is a lot of stuff. Let’s put it all together and then let’s put it in black and white for you, so you know if you’re on track to get your goals. And so, that’s when it’s really when you’re there, that’s when it’s really timed to be doing sitting down with a financial planner. Most of our clients are coming to us in their late 50s and early 60s. A lot of people coming with financial planner right when they’re about to retire. I think if you can even do it 5 to 10 years before you’re about to retire, you can be in much better shape and retire early.
But the key is to find the right financial planner. That’s not a no-brainer, right, like there are a lot of financial advisors and the key is to find a really good one. So, what I did in Smart Women Finish Rich was again to be the advocate for you, I’ve got these 10 golden rules that I go through and I really wrote these rules in a way that like I would give them to my best friend and I literally just sat down with a friend and went through these rules with them the other day. I’m like, “Look, I wrote these rules out. I’m telling you, just before you go,” they were interviewing somebody, actually, one of the big brokerage firms and I said, “You just go through these rules,” and so I’m like, “Well, the first rule is you need to look up the advisor online and see if there’s been any complaints about the advisor,” and she’s like, “Well, if the advisor works in this big firm, why would I even need to go look that up?” and I’m like, “Because there are lots of financial advisors that work at firms that still have complaints against them,” and you want to know if there’s been any complaints like do they have any regulatory issues? Are there any criminal indictments, any criminal junctions against them? The point is like you start with making sure there’s no complaints. You look for a financial advisor who’s been in the business a long time who specializes in working with clients like you. You look for a what I call registered investment advisor. You’re looking for a fiduciary, somebody who has to put by law your interests first. They can’t be selling you commission-based products or have a conflict of interest. They have to disclose everything. They do true financial planning. That’s what I call holistic base. They do, values-based financial planning. They don’t just talk about the money. They talk about who you are as a person, what your dreams are, what are your fears, what are your hopes. They build your financial plan around that.
And so, again in Smart Women Finish Rich I’ve got these 10 golden rules and it’s just a great and I go through every type of financial advisor, commission-based advisors, hybrid-based advisors who are commission and fees, fiduciary financial advisors, fee-only financial advisors. I really laid it all out for you so that you really you can look at what kind of advisor do you think you want and then show you how to go find that type of advisor.
Hal: Got it. Now can you spell fiduciary? I’m familiar with what it is but…
David: Once again, I spell on top. So, it’s F-I-D-I-C-I-U-A-R-Y. I’m doing that from the top of my head without writing it out. So, there’s been so much attention placed on this because this is probably what most people don’t pay attention to, but the Department of Labor all through from Obama then to Trump was discussing this issue of being a fiduciary and the need for advisors to not have a conflict of interest. And I have talked about the need to work with a fee-based advisor for 20 years like I think it’s really simple. I train all of our financial advisors do what’s right by the client always no matter what, period. And when I talk to clients I’m like, “Don’t you want to work with somebody that will always put your interest first, that will disclose any conflict of interest that will have total transparency where you know what you’re paying when you work with them? And everybody says, “Yeah. Of course, I do.” So, when you work with what’s called a registered investment advisor, there was known as a fiduciary and actually had to pass a certain test and then they are regulated in a way that they can’t have a conflict of interest. They can’t be selling you commission-based products and not disclose that they need to be putting your interest first by law.
Hal: That’s great. One of the things that’s always on my mind, and I think it’s kind of a monkey on my back if you will or just the concern that’s always there and it’s timing the market. It’s anticipating the next financial or the next real estate crash. And what do you suggest to not just women, but maybe men too I would say listening who are approaching retirement, and they’re worried about timing the markets correcting?
David: Okay. Great question and so on page, I’m really, I’m holding my book right now because I’m like, “Oh, I have a brand-new chart in this.” On Page 281 of my book, I go through a little ways titled, the ten biggest mistakes investors make. One of them is trying to time the market and I have a chart that just shows you the last 20 years, from 1987 through December 2017. So, many good years and also a lot of really difficult years in the market, right? So, this chart shows had you been invested in the market for $100,000 into the S&P 500? And you just left alone reinvest the dividends. That 20-year period of time you had a return of over 7%, right around 7%. It’s 7.19%. The $100,000 would’ve grown to 400,000. Now, if you try to time the market and you missed some of the best days because the markets move in a very small amount of days. If you miss just 10 of the best days, your return would’ve been instead of 7.19%, it would’ve been 3.53% so your return would’ve dropped in half. $100,000 would’ve earned $200,000. What if you missed the 50 best days? Well, if you missed the 50 best days, your $100,000 would’ve not grown. It would’ve gone down to $39,649. So, the person at 1997, putting $100,000 in the market, S&P 500 left alone, 20 years later with the dot-com bust of 2001, with the recession of 2008, 2009, if they just left it alone, today they’d have four times more money. They’d be over $400,000. If they time the market and they did it wrong, they could’ve lost money.
And so, that’s like a really important like example like don’t time the market. What’s hard is that people are super brave when the markets go up and as soon as markets go down they become fearful really quickly. And so, I have another chart where on Page 283 of this book where I go through everything single market decline going back to 1965 and I show and this is a really like I geek out on the stuff but when you look at the different market drops because we typically have a market correction every roughly a year-and-a-half like we’ve had a very, very robust market but then the market glove now is the longest bull market in history with not a lot of corrections but usually we have a correction of down more than 10% about every 19 months. And when you look at those corrections, the average market recovers less than 90 days. So, really important to note is because we will have another correction. When we have another correction if you just like turn off the news for 90 days like don’t watch CNBC, don’t watch me on CNBC because I’m always in the media and then telling people don’t watch me. But I’m always the guy in the media when the market corrects, I’m telling people to be calm because it’ll come back. If you cannot pay attention to the news and the fear during a market correction and just leave things alone, you will come out on top. Even the last market correction that we had, it only lasted 19 months. So, only. It felt like forever, but you know it’s not forever. These markets recover. So, don’t try to time the market.
If you’re worried right now because the markets are up so much, the good news is you’re way ahead like if you’ve been investing for the last 10, 15, 20 years, even five years, you’re up so much that if you want to take a little profit off the top and reduce your risk, it’s a great time to do it.
Hal: Yeah. That’s a great point.
David: Don’t sell everything but just take a look like we say to our, again, our clients are all retired, for the most part, I’m like, “Gosh, instead of being fearful, most of you are way ahead of plan. Like if you’re up 10%, 20%, 30%, 40%, 50% when we were supposed to be then take some of the profit, put it in cash, go enjoy it.” Stock’s boring, right? Like, part of winning is celebrating. So, if you’re ahead of plan and you’re up like take some of the profit. Enjoy it. That’s a great way to reduce your risk and it’s also, by the way, super important to reduce risk because we do have people who would not reduce risk and with the markets having gone up over 400% since 2009 so with fee-invested dividends marks us up 400% since 2009. If you haven’t reduced your risk, then your account’s probably too risky right now.
Hal: Yeah. That makes sense. I want to ask you one more question and it’s something you talked about in the book that I find interesting and you talk about ROR which is you called return on retirement. Can you just briefly share a little about what that means?
David: Yeah. Definitely. So, again, I can geek out on the money part of financial planning, and I do sometimes. I apologize for that but a lot of financial advisors, a lot of the financial service industry is constantly talking about rates of return, which is what I just did by the way. And so, like you open up a newspaper and the ads are all about how much a money market account is paying. It’s like the savings account is paying 2%. The CD is paying 3%. The annuity is paying 3.5%. If you’re in the market you can understand it but in a way, I just kind of did this. And so, what I actually talk to clients about is I’m like, “Stop fixating on return on investment. Everybody’s talking about ROI and your rate of return. Let’s talk to you instead about your return on retirement. You just worked…” and this when I’m in room of live audience. I’m like, “Most you have worked three decades or more to be in this room. How many of you worked through decades or more?” and all the hands go up. “How many of you worked 35 years or more?” Most hands go. “How many of you have worked four decades?” The hands are going up. Great. So, now you’re here. You’re here now for retirement so let’s take the average person who’s retiring. Most people retire before 65. You retire before between 65, you retire – let’s use 65 as an example. You retired at 65. Now, I run your numbers and I go, well, you’ve got a good chance to live to be 95 and I show you 30 years.
What I teach people is this. There are three stages to retirement. The first stage is 65. It’s called 65 to 75. Those are the go-go years. Okay. This is your honeymoon decade. You are healthy. You have money. You have friends. You have grandchildren probably that want to spend time with you. You have energy. This is the time to get the most return on your retirement because you can do the most amount of stuff. From 75 to 85, it’s the slower go years. That’s the second stage. You’re not going to be moving around and doing as much stuff. Now, I know it’s not all people, but it’s a lot of people who are between 75 and 85. They’re not traveling and doing as much as they could’ve done or more doing in their 60s. And from 85 to 95 it’s a totally different life cycle of health. It just is. You may live to be 95 but my grandmother was not running around the world at 95. She basically stopped traveling by 85. So, I just really try to help our clients and people listening and as I go out and speak, don’t fixate on the return on investment. Fixate on the return on your retirement. Look at these years when you’re retiring as the best years of your life and sit down with a financial planner to figure out how do you do the most amount of things in your first decade? So, you get all these things you want. By the way, don’t call it a bucket list because that infers that you’re checking off and you’re dying. Call it a trophy list like what are the things you want to do that you that, “This is my trophies. I want to go do this and I want to go do this and I want to go do this.”
And by the way, I’m talking about return of retirement. But there are a lot of people who now want to retire earlier than 65 and so this goes back to my whole Live Rich philosophy, which is like, “Man, the money that you’re working for, the money that you’re saving, the money that you’re earning it is here to help you have your best life. Don’t put off doing what you want to do too late to not be able to do it and that’s the whole thing with money and financial planning comes in. So, I just want to make sure the people are not – I see so many people that have reached retirement and they’re afraid to spend any of their money and they don’t spend their money.
Hal: They’re just hoarding it.
David: You know, they’re so afraid like a lot of retirees because they’ve been told they’re going to live forever and everything’s to be more expensive. And then by the time they get ready to want to spend their money that they don’t have the energy to want to go anywhere. So, I just went on a safari with my mom to Africa. It was a trip of a lifetime and it was on her dream list and she’s 76 and we had the best time and she’s like, “I’m so glad I’m doing this now. I don’t think I’ll be able to do this in five years,” and my father didn’t feel well enough to go and do it. He’s 78. So, I’m already seeing that with my dad. He’s like, “That’s too much for me. I can’t go to Africa. So, if you got parents to retirement and inspire them if they haven’t got a plan done, go meet with a financial planner, run the numbers. Help your parents have the time in their life and not also parents listen to like, I’m like, “Hey, you know what, you worked hard for your money. You don’t have to leave a huge inheritance for the kids. Don’t let them listen to this podcast. You go out and enjoy the money.” Let your kids work and make their own money,” and parents always laugh about that, but I mean really, I just I’m here to wake people up to don’t go through any part of your life in a daze like you’re The Miracle Morning guy like wake up like go meet your best life now.
Hal: That’s right. Wake up to your full potential. That’s what I say. So, David, this has been super helpful and, honestly, for me, I want to thank you for all the great work that you’ve done. I’ve read many of your books and the first one I’ve read was probably 10 years ago. My wife and I have one your books on the nightstand right now, Smart Couples Finish Rich, so that’s literally on our nightstand right now. It was so funny before you and I connected to do the interview I was like, “Oh, sweetie, you know the guy, the book we’re reading? Yeah. I’m interviewing him.”
David: Oh wow. That’s really cool. I hope you got the new edition. We got to make sure we get a new edition.
Hal: I think it’s new. I just got a few months ago. So, yeah, man, so thank you for the great work that you do to be a crusader for women and money and just financial education in general and I guess last but not least where can people learn more about you and the new book, Smart Women Finish Rich and all your other books?
David: You’re awesome. This is a blast. Thank you so much for having me on. I know I talked a ton, but I really just appreciate you. Appreciate you being here. People can come to my website DavidBach.com. They can go to FinishRich.com. It will take it to the same place and on that website, you can download a free chapter of Smart Women Finish Rich and a bunch of worksheets and you can order the book right there and it’s time for our newsletter and that way we can be in touch with you when we do future cool stuff.
Hal: Awesome, man. Well, when it comes to financial education, you’ve been one of the leaders in that space for, well, for 20 years, right?
David: Thank you.
Hal: So, appreciated, man. Well, hey, goal achievers, thank you for tuning in. I hope you got as much value out of the conversation I had with David today, as much value as I did, and remember you can listen to David Bach, co-founder of AE Wealth Management and author of many books, the newest which is the updated edition for Smart Women Finish Rich. You can go grab it today. Check out DavidBach.com or FinishRich.com. And I love you, I appreciate you, and look forward to connect with you next week. Take care, everybody.