Q&A: Why Smart Investors Are Questioning VTSAX and Chill

27:18You lose all the money that you made. And so Jack profiles these people that are brilliant. And as you read them, you read these wonderful narratives of, yes, it is possible. And no, I never want to do that. They're amazing books, the Stock Market Wizard books. But Jason, people can beat the stock market and people have beaten it. But that's not why you don't play the game. You don't play the game for all the reasons that we've talked about. The statistical probability of you doing it is so, so, so small. Right. And well, the other thing that Jason mentioned, and I want to highlight this, Jason, you talked about how the probability of beating the stock market is incredibly low, but you talked about that in the context of transitioning from VTSAX to a strategy that involves additional index funds, which is what Paul Merriman is advocating.

28:06No one is saying that you can't boost your returns by virtue of choosing a better selection of index funds. When we say that you are unlikely to beat the market, we mean you are unlikely to hand select individual stocks, a little bit of Nvidia here, a little bit of Kava there, right? You are unlikely to hand select individual stocks and put together a portfolio that will beat the market and actively managed mutual funds. That's what they attempt to do. These active fund managers attempt to hand select a basket of stocks with the goal of beating the market. And what we have seen over and over and over is that they cannot consistently do that over time, largely due to the drag created by the fees on the account, because those are big, big fees that actively managed mutual funds have, plus the taxes, plus, as Joe just talked about, the load, the curse of bigness.

29:08Yeah. Yeah, right. There's another thing that struck me about what Jason said that I really need to make sure we're clear about. Jason said, if you're going to go from this one strategy to picking other funds, I'm only going to address this, Paula, because I've seen it elsewhere too, where Joe picked small cap value or Joe picked this thing or Joe did, I picked nothing, nothing. The Efficient Frontier won a Nobel prize because all it shows is what historically has done this repeatedly, historically has done this. So I just look at history. The only bet that I'm making isn't on a fund manager. It's not, I'm picking a fund because I'm just going with the index that fits that category.

29:56I'm not betting on anything except that history probably won't repeat itself, but I bet it's going to rhyme. And if it does continue to rhyme, which it always has, then I think that is a much safer bet to say that these asset classes, when you put them together, will give you less risk and similar returns or similar risk and higher returns than what I'm getting now, or which the one I like best, as you know, Paula, is pick the spot for the return you need and forget all this beating VTSAX. I don't care. Find the rate of return you need to reach your goal and get a little more analytical about it by getting on the efficient frontier.

30:35And then once a year, look at that. I think that just doing that versus picking which syndication I want, there's a huge difference in those two strategies. And you can see how, and I love, Again, you said it earlier, Paula, reiterating what Jason said. It's different. Jason, what happens when you go to these individual investments, like a syndication, you're adding volatility to the portfolio. There is no free lunch. If you do a great job of picking, it's going to be way more wonderful than what I'm talking about. If you miss on it, the downside isn't going to be small. It's going to be absolutely huge.

31:15And this actually is even, Paula, part of the efficient frontier, because initially on that graph, returns go up rapidly from cash to bonds, the different types of bonds. Your returns go up, but the more risk you take, the less incremental the return additions become. Right. It becomes diminishing returns. Very much diminishing returns. You can keep adding on more risk and more risk and more risk and more risk. And what I'm saying is, Jason, your strategy is killing probably what I would advocate and definitely VTSAX because of the fact that you're taking a crap load more risk. Right. And to tie that back in with what I said earlier, when you make the decision that you are going to take on more risk in your portfolio, specializing is the manner through which you mitigate that risk.

32:10It is through deep specialization and deep due diligence that you are able to mitigate that risk because you know so much about this very, very narrow subset of the monetary universe. And we're talking right now about equities, bonds, real estate, but let's broaden this out. Businesses, privately held businesses. Yeah. Right. Cody Sanchez, who's a guest on this show, her specialty is acquiring privately held service based businesses such as plumbing companies, porta potties, electrical companies, laundromats, things of that nature. right? That is an area of specialty. It's a very, very specific area of specialty.

33:00Real estate syndication is a very different, but very specific area of specialty. Residential or commercial real estate investing, super, super specialized. Starting a business, starting your own business from scratch, right? Its own independent area of specialty. So all of these are independent areas of specialty and they all come with enormous risks. The vast majority of small businesses fail. What is it? Nine out of 10 small businesses fail. So starting your own company comes with a massive, massive load of risk. How do you mitigate that risk? You specialize. Yeah. You would gain deep knowledge.

33:44That's really what I like, Paula. That's what I like about the Schwager books too. Even inside the stock market, as he looks at these people, these people are incredible specialists. They do one thing. They do it really, really well. They know it intimately. They know this thing intimately, full-time job and more. Right. Who is the guy, the PIMCO guy who was like a absolute master at bonds, bond trading, bond investing? Bill Gross. Bill Gross. Exactly. World class at bond investing. Now, think about that. If you're world class at bond investing, you probably have the underlying skill set. You've got the intellectual chops to be able to be world class at equities investing or in private equity or in hedge funds.

34:32But he never went there. He focused his specialty on bonds, even though that is generally a lower performing asset class, because he knew that he could absolutely master that one specific subset of the financial world. And he made legendary money doing that. All of us have a unique talent. And you see some of these talented individuals when it comes to specializing in the investing that they do. But truly, I believe that everybody listening to this in the Afford Anything community has something that they're talented in. And we spent a lot of time over the past few months since I had my little rant talking about the role of risk in your portfolio.

35:17But I don't think we look at risk widely enough. I truly think that we're asking our portfolio to do some heavy lifting. We're asking our portfolio to do a lot. And then we go and we don't ask for the raise at work or we don't push ourself in our career. We don't look at ways to make more money. Like the real place where I want to take risk is in those places where I'm a specialist. And if you're a b**** at a job and you know that area, there's a good chance that you could make more money doing the thing that you're really good at and stop begging your portfolio to take all the risk while you're not doing everything that you could do outside of your investment portfolio.

36:00I think we need to widen where we're taking risks. Right. Which is why it's so important. That's why I'm building a course around how to get a raise, how to make more at work. Take the risk there. Right. You know, it reminds me of what Nick Majuli talked about when he was on this show about how one of his regrets from his 20s was that he focused so heavily on trying to squeeze returns out of his teeny tiny portfolio, right? Because he was in his 20s. It was a beginner portfolio. And he was so focused on how to squeeze returns out of this small portfolio that he was ignoring his greatest asset, which was his ability to earn.

36:44And what's funny about Nick is he's doing okay. Yeah, he's doing great. And for Nick to say, I could have done a lot better. It's like, wow. Right. But he understands, you know, the point that he was making with that is that contributions are the single biggest determinant of portfolio success. When we can and should understand how to optimize our portfolio. But again, we should also be aware of when we're hitting those diminishing returns. And then to bring it back to specialization, that's exactly why when we want to add more volatility to the portfolio, we bring unique talent to the volatility that we're adding.

37:23And that unique talent comes from deep due diligence, deep understanding. I love this discussion, Paula. And I hope Jason, you and everybody else hanging out with us realizes why I said early on that I think this is comparing an apple and a duck. Because I think it truly is. It truly, truly is. That was a great discussion. Yeah. It's pretty exciting. Now what I would do, Jason, let me tell you what I would do. As you learn about the efficient frontier, you're going to have a piece that you want in real estate and then take your when it comes to real estate investing and put that in your portfolio.

38:08And you will take the risk that you enjoy taking in a safer way by having then that with a mix of other investments. Because one last thing, Paula, that we didn't get to is he has this false assessment of this is either or. And truly what he's doing could be incorporated into the same stuff that I'm talking about. I've known Paul Merriman for quite a while. I know he uses some shorthand, but it really is what Paul's talking about too. You can do that and incorporate it in a safer strategy and get the upside returns on parts of his portfolio while lowering the overall standard deviation. It doesn't have to be either or.

38:49It isn't real estate good, stock bad, or stock good, real estate bad. It can be a combo of all the above. Well, thank you, Jason, for the question. We're going to take a moment to hear from the sponsors who make this show possible. And when we return, we're going to have a discussion about Roth accounts. We'll also cover what books we would buy if we had$100 to spend on books for others. Stay tuned. The kids are back in school now, and I finally have some extra time to plan a weekend getaway for just us. We've been wanting to visit Lancaster County, Pennsylvania for a while now because I've heard so many people rave about it.

39:27We love exploring new places, finding the cutest shops, and eating at restaurants that the locals love. DiscoverLankaster.com is the best place to learn about the unique things to do and upcoming events. Plan your trip alongside us at DiscoverLankaster.com slash Amplified. This episode is brought to you by Progressive Insurance. Do you ever think about switching insurance companies to see if you could save some cash? Progressive makes it easy. Just drop in some details about yourself and see if you're eligible to save money when you bundle your home and auto policies. The process only takes minutes, and it could mean hundreds more in your pocket.

40:02Visit progressive.com after this episode to see if you could save. Progressive Casualty Insurance Company and Affiliates. Potential savings will vary. Not available in all states. I want to shout out to all the small business owners out there. You wear a million hats, you're doing a lot of things, and you show up for your team every single day. Gusto can help you take some of that load off, especially when it comes to payroll, benefits, and compliance. Gusto is online payroll and benefits software built for small businesses. It's all-in-one, remote-friendly, and incredibly easy to use. So you can pay, hire, onboard, and support your team from anywhere.

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41:48Welcome back. Our next question comes from Michelle. Hi, Paula and Joe. Can we talk about the details of the backdoor Roth? My husband and I are always teetering on the edge of an adjusted gross income too high to contribute to a Roth IRA. We've continued to contribute to the Roth each month in the hopes that we would be just below that threshold, but for the past two years have had to recharacterize that money to a traditional IRA at the beginning of the following year and then convert it to a backdoor Roth. This has left us with gains from the year that exceed the Roth contribution limit that then need to be rolled over to our 401k, which will be taxed upon withdrawal and retirement.

42:28If we decide to directly contribute monthly to our traditional IRA from the get-go, we have the same issue with an annual backdoor conversion where our gains will have to be left in the traditional IRA or converted to our traditional 401ks. I've considered converting to a backdoor Roth monthly to make sure that any gains grow tax-free, but that seems like an administrative pain. Or we could just contribute once annually to the traditional IRA and then convert to the backdoor Roth immediately, but then we would lose out on the dollar cost averaging and a year of possible gains. And I haven't even pondered the considerations in the event that the account lost money during the year.

43:09That's like something that luckily we haven't had to consider over the last couple of years. Basically, I'm so befuddled by the options and I've never heard anybody address the specific details of like how to actually go about doing it on a month to month basis. I'd love to hear your thoughts and suggestions. Thanks so much, you guys, for all of your advice over the years. Oh, I've got two. I've got two. I've got two ideas because I've grappled with this myself in the past. It is a pain though, isn't it? It's such a pain. Yeah. I know exactly what she's talking about. Yep, exactly. We've been through this.

43:47Yeah. I feel you on this one. Yeah. I think that's the reason we don't talk about it more is because we just try to keep it simple on the show. I thought you were going to say because we're so traumatized, we're trying to block it from our memories. Well, that too. Probably that too. I used to have hair, Michelle. It was the backdoor Ross that did it. All right. So two suggestions. One, and Michelle, you stated this, is make the conversion every month. Automatically direct money into your traditional IRA. Oh, Joe is shaking his head. Oh, okay. We're going to have some gloves on, but let me finish.

44:25All right. So you automatically make the monthly contribution to your traditional IRA. And then I don't know of any platforms that will let you automate it. In a perfect world, you could just set that up as an automation where the money goes into your traditional IRA. It sits there for 24 hours in cash. And then after 24 hours, it automatically goes to a Roth. I mean, that would be a perfect world. I don't know of any brokerages that allow you to do that. So what it means is that once a month you log in and then you just transfer that money from your trad IRA to your Roth IRA. You can do it on your phone.

45:00You can do it from the toilet on your phone. It's a very simple process. You just need to remember to do it. You set a monthly calendar reminder, and that's that. So that's one option. The other option, and Michelle, you mentioned that by virtue of contributing a lump sum, you miss out on dollar cost averaging throughout the year. That would only be true, let's say 2025, right? Let's imagine that in 2025, you refrain from making contributions for the full year, and then you make a big contribution on, say, December 30th, right? Yeah, you would lose out on all of those gains for the entire year.

45:39But my question to you is, do you have$6 ,000 in a taxable brokerage account that you could just throw in lump sum on January 1st? Because if you do, and then you just continue the habit of throwing that entire lump sum in on New Year's Day, that's your New Year's Day tradition, then you don't miss out on any lost compounding interest. You are setting that clock ahead with a big lump sum right at the start of the year. I love it. I love it. This was, yes. Okay, Paula, that was the one. Have I redeemed myself, Joe? here's the thing getting rid of complexity is nine tenths of the game yeah because the more complex it is behaviorally we're not going to do it so my goal is to make sure that perfect isn't the enemy of good and i know exactly what she's dealing with being right on that line and am i in am i out now the irs has made it even harder for you you can't do the recharacterization thing and that's going to create tax penalties or problems down the road i don't want any of that so what do I do?

46:48Michelle, the only flaw I heard in your thinking, and Paula picked it up, is that you're assuming that when you put money in the IRA, you're putting it in on the last day. Yep. Instead, put it in on the first day. Yeah. Because you get this big 15, 16-month time frame to put money into this IRA. Instead of going with April 15th, instead, let's go with January first, the year before, the year that begins the year. And by the way, dollar cost averaging is overrated. Here's the problem with dollar cost averaging. The market goes up 70 % of the time, so 70 % of the time you lose if you don't put your lump sum in right away.

47:31Before the pitchforks come out, let me put an asterisk here. Dollar cost averaging is great for money that you have not earned yet. Sure. Because you can't invest money that you don't have. Sure. So it's a great way to plan on how you are going to spend future paychecks or future income. Definitely do it. Yeah. But what that assumes is the second you have the dollar available to invest. You put it in. Yeah, exactly. You invest it. So truly, I don't think of it, Paula, as much as dollar cost averaging is I'm lump summing a little bit at a time the second I have it available, whatever my contribution is.

48:09But if I'm worried about taking a lump sum of money and dividing it into 12 things, I learned how to do that when I first became a financial planner. And then I found out later on why I learned how to do that. Why'd you learn it, Joe? Because if the market goes down and your clients don't understand how the markets work, they will fire you because they think that you helped them purchase something stupid. And so what I was worried about was keeping my job. Actually, my trainer was worried about it because once I learned that, I told my client, I said, listen, here's the deal. The market goes up about 70 % of the time.

48:44So it's going to be a bet no matter what we do. It's more about you. Dollar cost averaging is more about you than it is about the investment. Well, that's assuming that you already have the money. Well, once again, this is a lump sum, right? Right. If we're using a lump sum and we're going to parcel it out, this is much more about you. If you don't think you can stomach putting$3 ,000 in and having it drop by 35 % to use the analogy we just had about the efficient frontier and that stuff. If your stomach can't handle that, then dollar cost average in if you can't handle those swings. But generally speaking, it's better to invest early and invest often.

49:26Invest like it's a Chicago election, right? Is that vote early and often? Vote early and often. Cast a lot of votes. But what the heck happens in Chicago? Man. I shouldn't even do that with all the election. I think the election's rigged thing. I shouldn't have joked about that. But a long time ago, people would talk about Chicago elections because of the quote mafia. That was an old joke. So sorry. Old guy humor. I think, though, getting in early January 1st and just doing the IRA contribution, flip that thing over, going to save you a lot of trouble. You're going to think about it once a year.

50:06Yep. You're going to most years it's going to go up. It's going to be great. Yeah. If you've got that money sitting in a taxable brokerage account, then just throw that in on January 1st. You know, I lump sum everything. I love throwing in big lump sums. And it's because of exactly what you said, Joe. I understand that over the long term, that money is likely to do well. This is what helped me a lot because there was a time in my life when I was uncomfortable with throwing in big lump sums of money. Ask yourself, if you had invested a gigantic lump sum of money on January 1st, 2008, and if you had left that money in the market, look at how much it would be worth today.

50:52Now, that means that that money, you put that money in and immediately it endured the 2008 recession. Or heck, actually, some of that really started in 2007. So let's just go back a year and say, you put in a big lump sum January 1st, 2007. So it got beat up in 2007. Then it got decimated in 2008. Then it hit its absolute low in March of 2009. So from January 1st, 2007 through March of 2009, you had two and a quarter, very, very bad years. Those would have been an absolutely terrible 27 months, but look at where you would end up today. So anytime that I feel nervous about putting in a lump sum of money, I think about January 1st, 2007.

51:45And then I'm like, cool, we're good. If that's the worst, I can withstand it. Yeah, exactly. I'm going to be better. What's the worst that can happen? Oh, I have to wait a little longer? Well, this is long-term money anyway. Yeah. Wonderful. It's kind of annoying, Paula, because I so thought we were going to fight. Ah. I was just so looking forward to that and we didn't get to do it. Well, the other option, and I use Schwab, so I understand different brokerages, depending on their user interface, their process might be more onerous. So Michelle, I don't know what brokerage you're using, but if it's Schwab or if it's anything like Schwab, the actual mechanics of the process is very simple.

52:28So easy, Schwab. Yeah, exactly. You put the money in a trad IRA and then you just hit a button and boom, it moves over to the Roth and you're done. So it's literally something you could do from the toilet. Spoken like somebody who's done it. It's where I do all my investing. Paula accidentally drops her phone. Her investments go in the toilet. What happened? My investments are in the toilet. Literally. It's not a huge burden to do it, but it is like, why do something 12 times a year if you could instead do it once a year? Amen. But if you do decide to process that monthly, if you come to that conclusion, then tie that habit to something else that you are already doing monthly.

53:21So for example, I don't know, let's say you, every time you go to the hair salon, you process that transaction. Boom. By virtue of tying it to an existing habit that you're already doing monthly, you're unlikely to forget it. And this is a tip that comes from James Clear. He looked at habit formation and he found that this practice, there's a term for it. It's called habit stacking. And it's just when you stack a bunch of habits on top of pre-existing habits. So in its simplest terms, every time that I pick up my toothbrush, I automatically pick up a tube of toothpaste. I don't even think about it.

54:01If one hand grabs the toothbrush, the other hand grabs the toothpaste. It would be strange not to. The next steps are very predictable. Then I unscrew the cap from the top of the tube of toothpaste. Then I put the toothpaste on the toothbrush. Then I brush. Then I rinse. I never have to think about the order of those steps. It's automatic. And the reason it's so automatic is because the deep, deep recesses of my brain have tied each habit to the next one. I know that when I'm standing there holding a toothbrush that has toothpaste on it, the next step is to brush my teeth. And I know that once I've done that, the next step is to rinse my mouth.

54:46There is no level of thought that goes into that. So you want to take that same model and apply it to any habit that you're building. So if you do decide to do it monthly, and Michelle, I'm not just saying this to you, but there's probably people listening to this who say, you know what? I like the January 1st idea, but I don't have$6 ,000 sitting around or$12 ,000 if it's two people. Actually, look at me. I'm going off of old numbers. Isn't it 6 ,500 now? Well, it's 2025. Eek. No, I'm saying it's 2025 numbers. It's going to be 7 ,000. Oh my goodness. Inflation. And if you're 50 or older, Paula, 8 ,000.

55:24Look at me living in the past. I've been saying 6 ,000 this whole time. It's actually seven. Remember when it was six? We were young and innocent. Back in the day. Back in my day. And we thought the Roth IRA contributions. Oh, those were good times. but these are better times. All right. Yeah. So there are a bunch of people who are listening to this who are going, all right, I don't have$7 ,000 sitting around or I don't have for two people,$14 ,000 just sitting around. So for those people who don't have the money for the January 1st lump sum, I'm saying making this monthly recommendation for all of them, tie it to an existing habit that you already do monthly.

56:09So Michelle, we're with you. Yeah. 100 % we're with you. It's a pain. And I think this might not shovel exactly the same amount of money in, but it's going to be so much easier for you. Well, thank you for the question, Michelle. Enjoy that backdoor Roth. We're going to take one final break to hear from the sponsors who make this show possible. And when we return, we will field a question from Evan, who's wondering what personal finance books we would buy if we were buying them so that others could read them. This Friday, the NBA on Prime tips off with their debut doubleheader. First up, Boston brings the action to the Garden as the Celtics face the New York Knicks.

56:55Then out west, it's a battle of the superpowers as the Lakers try to poster the relentless pace of the Minnesota Timberwolves. Timberwolves. The Celtics and Knicks. Who has the most hustle in defense? This game will come down to who wants it more. And the Timberwolves and the Lakers. It's two Western Conference heavyweights going toe-to-toe. Buckle up, folks. This one's going to be electric. Celtics-Knicks. T-Wolves and Lakers. Coverage starts Friday, 7 o 'clock Eastern. Only on Prime. about. Abercrombie Kids knows how to make outfitting easy. Mix and match sets are their ultimate outfit hack for fall.

57:38Their sweatshirts and sweatpants are super cozy, and they always have the cutest colors and patterns. Shop fall's easiest outfit at Abercrombie Kids in the app, online, and in stores.

58:04Welcome back. Our final question today comes from Evan. Hi, Paula and Joe. This is Evan in Maryland. I'm a high school teacher, and I've just gotten permission to spend$100 to put personal finance books into our school library. I've heard you can afford anything, but not everything. And I'm curious which books would make the cut for you if you could only spend$100. I look forward to hearing your thoughts. If I had$100. If I had$100. I buy books for my school. I buy books for my school. All right. So what changes this answer? Not changes, but like one of the ways in which I am approaching this answer is specifically what books would I buy for high school students?

58:51Yes. And honestly, this is actually pretty similar to what I would buy for adults. But specifically when I'm looking at it through the lens of what would I buy for high school students, there are two that jump out. One is Rich Dad, Poor Dad by Robert Kiyosaki, because it is such a foundational book. It's an easy read. But when I say an easy read, it is profound concepts stated simply. and the mindset shift that comes from this particular book. Robert Kiyosaki in this book essentially talks about how we've all been taught that getting a whole bunch of degrees and getting a big fancy education and a big prestigious job is how you make a lot of money.

59:38But the reality is owning assets is how you make money. Now, a bunch of degrees and a big fancy job will get you a high income, but having a high income is not the same as owning assets. A high income can be used to purchase assets, but fundamentally what you need in order to become wealthy are assets, not income. And so he really lays that out in a way that is digestible. It's easy to understand. He really even highlights the distinction between being self-employed, where you own a job, to being a business owner, where you own an asset that can survive beyond your own lifetime. One of my favorite analogies comes directly from this book.

1:00:23It's this idea. And I remember how, when I first read Rich Dad Poor Dad, how this struck me that you can go to work every day with your lunch pail. But if you create an investment pool, whether it be a business with other people working for you, bringing in money or investments, whether it be real estate stocks, whatever it might be. that money goes to work every day with its lunch and comes back with more money. And then you realize this idea of passive income, which in a lot of ways is a lie. Really what that's all couched in is you want to create a pool of money that's making money for you so that if one day you're sick, now you're beyond living this day-to-day existence.

1:01:10I thought that was really powerful. Yeah. Your labor can create capital and your capital can create capital. And over time, the capital creates way more capital than you ever could. Right. Exactly. Because you're limited by the constraints of one human life. Two hands. Yeah. Yeah, exactly. Your capital is unlimited. That was powerful. I will say in this book, because, Paula, this was not on my list, but I 100 % agree. This book changes people's viewpoints so much. They go, oh, wow, I never thought of it that way. Like it's such a slap across the face for a lot of people in a good way, by the way, that well-meaning relative who's giving you the lovingly slap across the face.

1:01:52But I'll tell you the downside about this book, I don't like the tactics he uses at the end of the book. He talks about micro cap stocks and real estate are all you need to own and you're going to get there. I'm like, well, but I'm not going to throw out the baby with the bathwater, so to speak, as my mom says. I think 99 % of this book is wonderful. It's just absolutely wonderful. To me, the downside is where Robert Kiyosaki has gone since publishing the book. I think the book is wonderful. Well, when you look at actually how that book was made, don't get me wrong, it was Kiyosaki's inspiration, but Sharon Lecter, his co-author, when you look at what she's done recently and what he's done, you can kind of see how that book might've gotten written, if you know what I mean.

1:02:37Yeah. With all due respect, I was debating whether or not I should say this publicly, but I'll simply say this. There is a reason that we have elected not to have him on this podcast. He will not be on Stacking Benjamins either. Yeah. As in, you have made that choice, Joe. I have made that choice. Yeah. I will never have him on Stacking Benjamins. Yeah. I have also made that choice. We have had many opportunities to have him on the show and we have declined. But this book? But the book is great. Yeah. Honestly, it's one of my favorite books. Yeah. It's difficult to have a book that you love and that changed you and that inspired you in such meaningful ways and to have the current reality of the author.

1:03:25Do you want to just go back and forth on these, Paula? Because I have a list like yours. Yeah, yeah. Let's hear yours. Yeah. So the first one on my list is one that we talked about earlier in the show. So I'm just going to go ahead and do that. This book was written specifically for the author's daughter. His goal was to give her this let's not freak out about money. Oh, can I guess? Can I guess? Can I guess? You got it. Oh, the simple path to wealth by J.L. Collins. I think this is perfect. It is written for people who are high school age, and it's a wonderful way to begin your investing journey with the right framework.

1:04:02You will be well off worrying about not the stock market, but worrying about what you need to do. Wonderful book and a great starting point. So the book that I was going to suggest, but then I kind of stopped myself. When I was in high school, I read The Millionaire Next Door And I got a lot of inspiration from that because I had previously assumed that as many teenagers do, like, oh, if you're rich, you probably inherited it. You came from a wealthy family, blah, blah, blah. And the data doesn't bear that out. And The Millionaire Next Door does a great job of highlighting that. It shows that the vast majority of millionaires in the United States are the first generation of their family to be millionaires, and that over 50 % of them never inherited anything, not even one single dollar, not even$1 from their parents.

1:04:58And so this book really disrupted a lot of preconceived notions. And on top of that, it also showed that the majority of millionaires made their money by owning businesses and specifically owning, quote unquote, boring businesses like pest control, like HVAC, like a janitorial services company. So it goes back to our earlier conversation. Was podcasting in there? It was not in there. Well, but see, here's the reason that I might not recommend it. So the original book was written in the 90s before podcasting existed, I should add. And so a modern high schooler probably is not going to relate to a book that was written 30 years ago.

1:05:38Now, Dr. Thomas Stanley and his daughter, Dr. Sarah Stanley Fallah, came out with a sequel to the book in… Just a few years ago. It was ballpark roughly 2015, 2016-ish. Yeah. Somewhere in the 2015, 2016 neighborhood of years. And so that book, which is called The Next Millionaire Next Door, is an update of the research that was done in the 90s. And so it gathers research from the 2010s and shows that the same applies, that really nothing has changed. Even think about the difference between the 90s and the 2010s. Now we're in the internet era. In the 2010s, actually, we're even in the smartphone social media era.

1:06:25And yet still, even in that context, nothing had changed. The best thing I like about this, both books, Paula, and I think it's really important for high schoolers living in the social media world is that ostentatious wealth is not the same as real wealth. Right. And Instagram and TikTok will have you believe completely otherwise. I need to look rich. I need to look like I'm doing stuff. And these books definitively prove that that is not true at all. Both of these books talk about how millionaires have a preference for cheap beer, the Bud Light, Miller Light, Coors Light type of a category of beers.

1:07:03They have a preference for that over some fancy, expensive wine. Which is why it took me so long. Your preference for fancy, expensive wine? Like the fancy expensive one. That was my number one problem. The fact I couldn't budget or didn't budget. So my knee jerk reaction was to recommend these books, but the original one from the 90s, I think is probably too old for a modern high schooler to relate to. And the new one, I mean, it's great. Okay. So what's your next one? Because I've got like five. Oh, geez. Gee, okay. Well, let's hear yours. Well, he's got a hundred bucks. He doesn't have five bucks.

1:07:46I'm assuming he's buying one copy of each or were you thinking he's buying like. Yeah, yeah. No, yeah. He's buying one copy of each. Yeah. So another book on my list, I think just the philosophy of your money or your life is really good in high school. I think this idea that if you learn from the very beginning not to trade your hours for dollars, especially for high schoolers that have had crappy jobs, because that's when I have my crappy jobs, that might be a good choice. You're looking at me like, nope, no. Wow. Yeah. Well, I mean, that was also written in the nineties. Yeah. But it's one of these big idea books that I don't think the idea grows old.

1:08:26You know, it's funny. Every book on my list, I think, if not written pre 2000 was written a long time ago, But they're still big books for a reason, Paula. They have staying power for a reason because these books are speaking to something bigger. Okay. Well, here's a big idea book that I think the right high schoolers would really connect with. The Almanac of Novel Ravikant. Wow. Right? That's a big idea book. Wow. That is a big idea book. That is the biggest of ideas. Well, and here's what I like about that pick because the rest of my picks are not about personal finance. Oh, I think when we, when we talk about really a financial education curriculum, like what is really important to get your money together?

1:09:16And I think it widens it much like Paula on your show, you're widening the discussion to be about your thinking, right? Right. So for me, it's what are the skills that are going to help you build the portfolio? So I think these books are on here for different reasons. It's simple path to wealth. Don't worry about it. Money or your life. Don't trade your hours for your time. You get those things down. And then I think there's other skills that we bring to the tables, which is the other three on mine. But I think you're bridging that with this book. Yeah. Because this book is much more about thinking than about personal finance.

1:09:47Right. And it absolutely ties to money, but it is such a big idea book. And it's so brilliant. It's insightful. It's timeless. It's one of the best books I've ever encountered. Naval Ravikant is an absolute genius, and he doesn't publish a lot, but everything that he says is so deeply inspired. I always feel like his words are so reasoned, like he thought about them for about 16 days before he said anything. He's more in the spotlight than Naval, but he's enormously insightful, and he can convey tremendous wisdom succinctly. is Morgan Housel and his book, The Psychology of Money. That almost made my list.

1:10:33It's a book about thinking. And also, of course, as the title indicates, a book about money. It's a big picture book. It's a book about how we think about risk, how we think about opportunity, how we think about disasters and think through choices. So it isn't a book about the nuts and bolts, the actionable tactics of budgeting. It's a big ideas book. My next book I put on the list specifically because I thought about you are going to spend most of your life earning money. And if you're going to earn money, knowing how that machinery works, I think it's going to be a huge part of your financial success.

1:11:15So I'm going to the income side of the equation. I think every high schooler should read the E-Myth. Really? Wow. Whether you build your own business or you work for somebody else, understanding that it's not about creativity inside the system. It's about building creativity outside of the system and then tweaking the machine. And when you look at life as a set of machinery versus working at trying to be brilliant for 15 minutes, and then you have to replicate that over and over and over and over versus document the process that you did and automate it. Like the stuff I got personal finance wise about automation really came for me from the e-myth.

1:11:58If I set my personal financial picture on autopilot, where the second that I find money, I'm able to add it into the plus column on my balance sheet. Brilliant. Just absolutely brilliant. And that comes specifically from the E-Myth. Don't work inside a business. Work on the business. Work on it rather than in it. Yeah. Yeah. And I think that if you're a high schooler and you read that and you work for somebody, then you know what your boss wants. then I think you're going to be eligible for a raise much more quickly. Wow. I think you're going to cut through a lot of noise. I might disagree with you there, Joe.

1:12:33I think that... Well, it's okay being wrong once in a while. I think the book would be good for college students, but I think high school might be a little young for those concepts. Well, then you're not going to like my next one either then. Oh, what is it? You will like my last one, but you won't like this one. Because this is a book that's in college classrooms all the time. you should get this book in high school because much like the E-myth is a story. Why I think that high schoolers will latch onto this is because the fact that the E-myth is a simple story makes it really easy reading. And I think it makes these big heady ideas easier.

1:13:10Same thing with the next book, The Goal. I think the book, The Goal, which goes over the theory of constraints, but it does it in a way that there's a factory that's failing. This factory is failing and they're sure they can't save it. And this guy's coming in to kind of mop stuff up and he's like, what if I can save it? And then he figures out about bottlenecks and about throughput and systems. And that book, man, I read this book very early on. And I think I would have gobbled this up in high school just because it was such a cool story about a business and how to turn it around. And once again, it wasn't about being brilliant.

1:13:50It was applying some science. It was bringing in these different ideas. So I like those two things in terms of how to make money. Man, if out of high school, you've read the E-Myth and the Goal, you know 80 % of the landscape by the time you hit college or your apprenticeship or whatever, the military, whatever you decide to do, you've got this solid foundation already of how the business world works that I think will serve you. for a good long time. Interesting. So the goal is the first book that we've discussed that I haven't read. I've never read that one. That's fabulous. Fantastic. I'm still thinking about The Millionaire Next Door slash The New Millionaire Next Door.

1:14:33Do I recommend it or not is still playing on my mind. The ideal circumstance would be to have both books because I think that they work best together when you read them both. The original book is powerful and it's beautifully written and the second book really builds on the first. That said, Evan only has$100. And if he's got to choose, I was debating this in my head, I would still get that second book. Unfortunately, for high schoolers, I personally think the first is better. But I don't think a high schooler would relate to these examples from the 90s. I would get the second because I think high schoolers can relate to it because it's more modern, it's newer, it's internet, smartphone, social media age.

1:15:18and it reinforces those same underlying fundamental concepts. Love it, love it, love it, love it, love it, love it, love it. I like Scott Trench's book, Set for Life, by the way. Yeah, that's a great one. I think especially for a high schooler because it starts off with the assumption, which a lot of high schoolers have, that they want a bajillion dollars, right? That life is about getting as much money as you possibly can. And if you want to get there, here's a roadmap. And so I think in high school, I would have looked at Set for Life like it was a treasure map. But that's an honorable mention.

1:15:52Last book on my list, again, because I'm looking at fundamental foundational knowledge. Ooh, ooh, ooh, ooh, ooh. Before your last book, I've got one more. Oh! Richest Man in Babylon. 100%. Great idea. Mm-hmm. Yeah. It's short. It's a story. It's a simple read, but it's timeless concepts. I think the books that are stories with the concepts built in, some of these heady concepts built in are the best way. Look at how many of them made our list. That's the fourth one we've recommended. That's a story. That's pretty powerful. I think you need to be organized. I just think if I would have learned earlier how to be organized, it would have made all the difference.

1:16:34I'm not naturally an organized person. I know when my kids were in high school, they weren't that organized. I went through this book with my high schoolers and it was helpful. Did it stick? I don't know. They're almost 30 and sometimes I wonder. But I think there are so many good lessons in David Allen getting things done. I think the idea of getting things done is something high schoolers can appreciate. I think they can apply it right away. I think David Alan is a great person to latch onto when it comes to how to accomplish more, which they're going to need to do. They're going to need that no matter what they decide to do out of high school.

1:17:13So that was kind of mine. I also thought about another really heady book. You know how much I love this book, but I think you need a little life experience before you do this last one. It's an easy read, Happy Money. Oh, yeah, by Ken Honda. It's a cute book. It's an easy read. Yeah, I agree. I think you need to be in like your at least mid twenties to really appreciate it. Yeah. That book hit me really hard, hit me much harder than the fire movement idea did because it's so much about gratitude and sense of community and honor. Absolutely love it. Big ideas, very simply put, happy money, but I'm with you.

1:17:50I'm going to cross that one off. Set for Life, I think is really good high school material. Beautiful. So Evan, there are your answers. That was fun. We should do this every holiday season. Paul and Joe's top five. Yeah, exactly. That's wonderful. All right, Joe. Well, we did it again. I can't believe it's over already. Where can people find you if they'd like to hear more of you? I mentioned this the last time I was here, and I'd just like to mention it again, which is that I am working with a small cohort to get through. By the way, I assumed I wasn't going to talk about my book. so my book's great for everybody all the time no matter who you are and paula pants in it i page 13 or 17 either page 13 or page 17 one of the two it is page 13 i looked it up really oh you did you confirmed oh great yes and paula on the book tour best page in the book would sign page 13 for people i would yeah yes congratulations on finding my page i know and when doug Doug was with us.

1:18:54Mom's neighbor, Doug, from the Stacky Benjamin Show. Doug would write in the very front, congratulations on meeting me. That was where I got it from, actually. It was a play on Doug's joke. It was so good. But I'm taking a small cohort of people through not just the Efficient Frontier, which we talked about, but how to timeline your goals, these tax strategies that get in your way. How do you fundamentally understand these things? Insurances, risk management, of financial plan from the beginning to the end and starting near the end of January. I'm taking a very small group of people through my book.

1:19:28It's 10 90-minute sessions. We did a survey of people last year that went through this on a scale of 1 to 10 before they went through that we call it the book club. On a scale of 1 to 10 before you did the book club with me, how comfortable did you feel with your overall financial picture? The average answer, Paula was a five. Afterwards, how did you feel on a scale of one to 10, nine. And the testimonials were huge. They didn't like just the fact that they were learning from me systematically how to do this, but also that they had this little group of people that they could also work with together.

1:20:06And when one person struggled with stuff, one of the great comments we got was, sometimes I was struggling with stuff and I didn't even realize the right question to ask, and somebody else would ask the right question. And so I could learn from somebody else's question, which was very helpful. So to get in, it's stackingbenjamins.com book club. And it's not for everybody. And it's going to be a very small group, but I really look forward to working with a few people to go through the lessons in Stacked and build a financial plan. Let's go. Oh, wonderful. Well, thanks to all of you for being part of the Afford Anything community.

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