Talk Your Book: No Worries with Jared Dillian

0:00On today's show, Ben and I are joined by Jared Dillian, author of The Daily Dirtnap. on today's episode, we talk about why you probably shouldn't buy a German car, why Jared thinks you should pay down your mortgage, and other tips for living a stress-free financial life from his new book, No Worries, How to Live a Stress-Free Financial Life. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.

0:34This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

0:48We are joined today by Jared Dillian. Jared is the author of a new book. I'm holding it up like the audience could see this. They can't. This is a podcast. But it's called No Worries, How to Live a Stress-Free Financial Life. Jared is the author and editor of the Daily Dirtnap. Jared has a newsletter that I read. I don't know if the newsletter is not where we're going to get these best. What is it? It's like essays? Yeah. Yeah. Yeah. Yeah. Yeah. That's what it is. Yeah. Jared spent a long time on Wall Street. He was at Lehman Brothers doing a lot of ETF trading. On the cover of your book, Gregory Zuckerman says, an independent thinker with a unique voice.

1:25And I was just telling Jared before we started, Jared is the only person that I read. And I do read a lot of his stuff who really and truly says what he thinks. Jared, I'm curious because you write, it seems like you write with so much freedom. Are you thinking like as you're writing on at least what I read, we're going to get these bastards. Are you thinking in the back of your mind, like what is the person on the other end of this going to think? Or are you truly unbridled? No, I don't. I don't. I generally don't think about what somebody is going to think. Although I will say that I do self-edit.

1:58It may not seem like it, but there are hot takes that are just steaming at the bottom of my hot take hamper that never come out. There's things that I would like to write. But if you check out my second book, All the Evil of This World, that's where they all are. Like that's – that's – you know. I came across your newsletter because Michael kept just sending me stuff saying you've got to read what Dillian wrote today. Yeah, you take a blowtorch to a lot of things, which you do in the book as well. But Jared, this is your sixth book? Fourth book. Fourth book. All right. Well, you'll get to a sixth.

2:37Was Street Freak the first one? Yeah, that was the first one. Yeah. So Street Freak was about your experiences during the meltdown at Lehman. Yeah. I mean, and it wasn't strictly a Lehman Brothers book. It was about me having bipolar disorder and working on Wall Street. And, you know, obviously I worked there from 9-11 to the bankruptcy and it's about that time. So, all right. I don't think I've ever asked you this. Where did the name daily dirt nap come from? Or am I an idiot? Is that a phrase that I just don't know about? Or did you make that up? So I used to be a local on the P coast options exchange and dirt nap was a big word on that exchange.

3:16Like the traders on the floor would say, oh my God, the market's taking a dirt nap. It was like a big word on that floor. so I kind of brought it back to New York and then I made it part of the newsletter. What did it mean when Mark was taking a dirt nap? Was that like Mark was getting crushed? Yeah, yeah, yeah. It sounds like a mafia phrase. Yeah, yeah. So I think the part I like most about your book is that you do focus on the stress part because something Michael and I talk about all the time is we hear from and talk to wealthy individuals who are so stressed out about their money because of their place in life, because there's people richer than them or whatever.

3:53And the whole idea that I've always thought is that if you're constantly worried about money all the time, I don't care how rich or wealthy you are, you're not living a rich life because it just consumes you. So I like how you take the book from that angle. At what point in your life, because you talk about your own experiences, did you let that stress side of things go and not worry about money as much anymore? Well, first of all, let me say, you hit the nail on the head. Financial stress is not related to how much money you have at all. Like you said, there's billionaires who are freaked out about money.

4:32They think they're going to lose everything all the time. And then you have people with no money living paycheck to paycheck. And as long as their basic needs are met and they don't have any debt and they don't have any risk, they are, they don't worry about money at all, you know? So I've actually, you know, one of the reasons I wrote this book is because this is the way I have lived my life really since I graduated from college, you know, with a couple iterations along the way. Like, you know, in the book, I talk about the fact that I used to be a CF, you know, and I'm no longer a CF. So for those who haven't read the book yet, Jared's talking about cheap f**ks.

5:15And you're so right, Jared, when you talk about like, there's really very little correlation between money and real happiness. And in weird ways, like money and even like how stressed people are about it. I was a valet parker for many years. And it was always the assholes in the nice cars who were CFs who gave me a dollar folded up a million times as if I wasn't going to unfold it. And I can't tell you how many times people in 15-year-old beaters were giving me$5 and$10, like regularly. So tell me about your transition from CF to how you live now. Well, in the book, I tell the story about how I went out to San Francisco in 2012, and I was making decent money with the newsletter.

6:05I mean, the newsletter was pretty new, but I was making a few hundred thousand a year. And I went in the Prada store in Union Square and I didn't even know what Prada was. Like I was a dork and I didn't know anything about fashion, but I just had some time to kill. And I walked in this Prada store and I see a pair of boots and I was like, oh my God, those are the best boots I've ever seen. And I picked them up and I look at the price tag and they were a thousand bucks. So I said, I can't buy these boots. So I walked out of the store and I did a couple laps around Union Square. And then I thought about it.

6:37I'm like, actually, I can. You know, I make I make decent money. You know, I like the boots. The boots are going to make me happy. So that was the moment at which I crossed over from being a CF to just a normal person that has some perspective on, you know, the fact that, look, like you make decent money, you can afford nice things like that's kind of the purpose of money is to buy things that make you happy, you know? What a novel concept. Well, that's how you balance it out with, you say you have the cheap f**ks on one end, you have the high rollers on the other end, and the happy life or the stress-free life is finding somewhere between.

7:15So you're spending on some things like that that you can be okay with, but other areas of your life you have to cut back. And that's the hard part for people is not going to the extremes. Yeah. And the things you have to cut back on, there's basically three big things. And it's your house, your car, and student loans, like those three things. Like everything else is just small stuff. And people get really focused on peewee bullshit that does not matter. You know, like there's people who make six figures who stand in the grocery store and sit there and try to figure out which is the cheapest can of soup.

7:51You know, it just it doesn't matter. Like just grab a can of soup and put it in the cart, you know. but there's the three big things, the house. If you get a house that's a little bit bigger, it's going to cost$100 ,000,$200 ,000 more. You're going to be paying interest on that over the course of 30 years. It's going to be multiple six figures in interest. That is the stuff that matters, not buying coffee on the way into work. The$4 you spend on a cup of coffee does not matter at all. I love how you talk about like people are unable to give up on small, give up small luxuries. And I could not agree more.

8:29Small luxuries are what make life worth living. It's so weird though, because a lot of the personal finance industry is focused on depriving yourself. And like money is not for hoarding. The goal of life is not to have a pile of money that you can't spend. The goal of money is to spend it and enjoy it. So talk about, it is getting the big things right. You got me jumping around in my seat over here because I'm really fired up about this. There is a personal finance industry in this country, right? You have some really big names. I can name them if you want, but they all pretty much say the same thing that you should just relentlessly cut small expenses, small luxuries.

9:16And it just does not matter. Like these things don't matter. It's not the little things, it's the big things. And in this country, we're kind of taught that it's the little things that matter. In the book, I talk about the make your bed speech by Admiral McGrathen, you know, where if you make your bed in the morning, you're going to have like a terrific day. It's not the little things that count. It's the big things that count. So I love the, the stat that you put in here that I didn't realize, uh, about the car thing. So I agree that you got to get the big things right, especially the car and the house and student loans is a bigger one probably now than it was back in the day.

9:49But you said the average person spends 4 % of their time driving a car. And I am more of an A to B kind of guy. No, say it. You're a big truck shamer. Well, no, I understand. I listen, I'm okay with people driving a luxury vehicle or driving a huge truck that costs 80 grand. As long as their other stuff is taken care of. And the whole point you make in the book too, that I really like is you're saying, listen, when you're young, you're probably going to have to be more of a CF and you're going to have to save a little bit. And, and, but your relationship with money should change and evolve over time as you make more money and progress your career.

10:21And that's exactly what's happened to me. And I think that that's the most important point for people. And it's hard if you pigeonhole yourself into one area and, or one way of looking at money that it's hard to ever change your mind and get out of that mindset? Yeah, cars, cars really do not matter. You know, I mean, what I talk about in the book is that the capacity utilization of a car is 4%, right? So if you had four people in a car driving 24 hours a day, the capacity utilization would be 100%. And instead, we have one person, you drive it a half hour to work, it sits in the parking lot all day, you drive it a half hour home, it's it sits in your driveway, if you're using it 4 % of the time, and cars just do not matter.

11:03So I'm a Toyota guy, like you mentioned, Toyota and chill, right? Like, I buy Toyotas, I drive them for 10 years, they're fully depreciated. And that's how you end up saving money. I love this quote, worrying about money is stupid, because there are just, there are choices that we can make to reduce that worry. And financial stress is the source of most people's stress. And it just need not be that way. The fire, the fire movement, you take a blowtorch to this and I love it. Michael sent me this a couple of weeks ago. Yeah. You really go after the fire community. Your essay on fire was hilarious, but you wrote, I don't want to live in deprivation for 15 years so that I could live in deprivation for the next 40 years.

11:49I, Ben and I joke about this quite a bit. I don't understand this mentality. I think this has to be, this has to be deep rooted in some sort of psychological something or the other. It's the, the, the fire movement is an anti-consumption movement, right? It's about the idea that we shouldn't consume anything. We shouldn't produce anything. We should just exist and just let time pass. Like, it is one of the, you know what's funny is there's the whole van life thing, which goes along with this thing. You probably heard about van life where you sell off all your positions and you drive around in a van.

12:31Like, you know, Chris Farley, there's that joke about living in a van down by the river. Well, now people actually want to live in a van down by the river, you know? Well, I think the other thing is about fire especially is a lot of people just really hate their jobs and they don't look what they do. And they think if I save 80 % of my income for the next eight years and I live off of it forever, I don't have to go to this soul-sucking job anymore. I think that would solve a lot of the problems for people if they actually found a career or a company that they actually enjoyed working for. 100%.

13:03But what I've found is the people who hate their jobs will hate their jobs no matter what job they have. right? It's, it's really about, it's really about your attitude. You know, I've never hated a job. Like I was in the coast guard, like I was in the military. It was hard. I didn't hate my job. You know, I wasn't like dying to get out of there every day. So I think, I, I think it's really, there's, there's a certain, there's a certain psychological profile of somebody who dislikes their job and they want to stop working, but then you stop working. And what are you doing with all this time? You know, like, what are you doing with this time?

13:42And then I then I talked about the fact that, OK, you saved up a million bucks in your age, 35, and you dropped out of the workforce. And what are you doing for the next 50 years? You're watching that million dollars tick up, tick down, go up and down every day. Anytime the market goes down 20 percent, you're freaking out. You think you have to go back to work like it's miserable. I don't know why anybody would choose this. It also seems socially isolating. Yeah. Like what do you talk, what do you, if you don't know coworkers and no, whatever. Okay. Let's talk about houses. So you say a house is not an investment.

14:18I completely agree. My insurance bill that I paid today proves this. People like to talk about the house that their parents bought for 150. That's now worth 400 without talking about all of the things, all of the expenses that went into that. You like prepaying a mortgage as quickly as possible. I think Ben and I, this might not surprise you, would disagree. However, I feel like the way that you lay it out, I understand completely. And I think to prepay or to not prepay your house is one of the most personal things about personal finance where I see both sides. I don't think there's like a right thing to do and a wrong thing to do.

14:59I really think that this is situation, financial dependent, personality dependent, all those sort of things. With that said, why do you like to prepay the mortgage? So in 2010, when I moved to South Carolina, I bought a pretty cheap house. I mean, housing values around here are pretty cheap anyway, but it was a$280 ,000 house. And I was like, screw it. I'm just going to pay cash. I have the cash. I'll just pay cash. I lived in that house for five years. Best five years ever. Like, didn't have a mortgage payment, you know? And I started to think about it. I'm like, you know, no matter what bad things happen in my life, whether I get into a car accident or I get cancer or I have legal problems or something, nobody can take this house away from me.

15:48It's paid for. I own it free and clear. Nobody can take it away from me. And that peace of mind was incredible. The next house I bought in 2015, I put 35 % down and I paid that mortgage off in three and a half years. So for the last six or seven years, I've been living in it free and clear, same thing. So it's really the one downside of prepaying your mortgage, which I will admit to, is you lose liquidity. So once you send that check into the bank, you can't get that money out, not until you sell the house. But you could afford that. You could afford to give it a little liquidity. Yeah, yeah. So it really is situationally dependent.

16:32The thing that I like, the angle that I like is of course you're paying way less interest, right? That's a given. But if you think about paths of return, yeah. Like I would say, why would the hell would I ever pay off a 3 % mortgage when I can invest it and do better than 3 %? But your point is that you're paying that 3 % off in a straight line. Like you know that you're getting it. You don't know what you're getting in the market in any given year. and when you combine that with the peace of mind, with the interest, I totally, I wouldn't push back. I get it. It's just - You never got a little tempted to take some money out of 3 % to borrow against it?

17:02Just a little tempted? No, I never did. And the funny, and that calculus has changed now that interest rates are higher. Yeah. So before you could earn a certain 3 % or an uncertain 9%, but now you can earn a certain 7 % or an uncertain 9%. It makes, with interest rates higher, it makes much more sense to pay off the mortgage now than it did a couple years ago. I agree with that. One of the chapters in the book, you talk about relationships and money, and you talk about obviously one of the most important choices you make is your spouse and being on the same page. But in the next segment, you talk about money and friends.

17:39And I actually think friends add more stress to the situation than ever these days when it comes to thinking about your finances the right way because it's so much easier to see the vacations your friends are taking on social media and the stuff they're buying and comparing yourself to the Joneses used to be just the people down the block or the people that you worked with. And now it's literally everyone on Instagram and social media. And it's impossible to not compare yourself to others. So how do you think about that in terms of trying to live a stress-free financial life and comparing yourself to others when it's so hard to just live in your own bubble these days?

18:11Yeah, it's funny. I never had that reflex. You know, I'm on Facebook, like a lot of generation Xers. And I see, you know, I have some very wealthy friends, much wealthier than I am. I'm friends with a guy who built this like$15 million house in Silicon Valley. Like, I'm, you know, I'm friends with a lot of rich people. And I look at them, and I'm just like, that's their path. And I'm on my path. And that's totally fine. So I don't get FOMO. I don't get it in the stock market. I don't get it in real life. I don't covet my neighbor's possessions. I just kind of do my own thing. That's unique. Most people cannot watch somebody who they feel is intellectually inferior to them, make more money.

19:05And I totally get that. It is a very normal thing to covet, especially if it's like the worst is, I guess, let's just use crypto as an example, where you see people that you think are dumb and something that you think is dumb getting rich. That is really difficult to stand by. So I'll tell you what, actually, the first time I bought Bitcoin was in 2000, it was June, 2020. And the reason why I bought it was it was emotional. Howard Lindsay calls it schmuck insurance. For me, it was an emotional hedge against it going to a hundred thousand. I do have FOMO. And I know that if I saw this go to a hundred thousand and I own zero, I would spontaneously combust.

19:50Like I would just go up and smoke. So in order to protect myself because I'm weak. I am weak and I'm not afraid to admit it. In order to protect myself from having those bad feelings, I capitulate. I said, I got to own some of this. Michael always says, I'm going to be fearful and other people are fearful. So maybe that's the part is, is like, Jared, you seem to know yourself and be comfortable in your skin. Michael does too. I do think that's an important part of it is, is understanding your own personality and what the levers are that are going to, they're going to impact your, your feelings about money.

20:19Yeah, yeah. I think the best way to really find out who you are as an investor is to just get after it. Like Ben and I have very different predispositions. I am a gambler. When Ben opened his first account, I think, Ben, did you buy a balance? Did you buy a target date fund? I bought a target date fund on my IRA. It was my first ever investor. His first ever investor was a target date fund. Now, I am able to bucket my personalities. Like in my retirement funds, I am Jack Bogle. Like I just keep buying index funds and I will keep doing that forever. And then in my this account and my that account, I behave much differently, which I don't think is totally irrational.

21:02Well, it is irrational. There is – Richard Thaler talks about this, this ideal of compartmentalization. Like because money is fungible, right? But it's rational. It's rational irrationality. It's rational irrationality, yes. My first investment was also an index fund in 1997. I bought a Vanguard index fund. The first stock I bought was Philip Morris in fall of 1998, the week before the Engel case, the master settlement agreement before. So it was trading at 18 or 19 bucks. The stock was totally bombed out. It had like an 8 % or 10 % dividend. And I bought it, and the stock went up after the settlement.

21:48And it went to 25, and I sold it, and then it went to 80. So you always hear these stories about people on Wall Street where they make all this money, they get these big bonuses, and they might be the masters of the universe when it comes to investing, understanding markets. But they're terrible at managing their own personal finances. Did you learn anything like that when you worked on Wall Street that you saw people overspending or not paying attention? because that's kind of the, okay, so you learned a lot about personal finance that way. Yeah. I mean, it was, there were, you know, coming out of Lehman Brothers, you know, I lost a lot of money in stock.

22:21My stock went to zero, right? You know, I basically, in the financial crisis, I took a 50 % haircut with my personal investments in the Lehman stock. You know, there were some people who were basically financially ruined by the bankruptcy. And there were some people who were totally fine. And it all depends upon how you structure your financial affairs. You know, some people were very conservative. So Jared, you wrote, there's nothing wrong with trading stocks recreationally, as long as you're being honest about your intentions. That's what I do in one of my accounts. I, I, I'm not like slinging, right?

23:00I pretty much buy with the intention of holding, at least for a little while. But I do so because I get personal enjoyment out of it. I have zero expectations that I'm going to beat the S &P 500. But the purpose of that financial account is not to beat the S &P 500. It's to provide me with entertainment. I know that from what I've seen in your writing, you don't have that gene. you approach the investing side much less, you're not looking for thrills. No, no, absolutely not. No. The funny thing is, is that I'm in the financial entertainment business. I have a newsletter for sophisticated investors.

23:50And the goal is to beat the S &P 500. I don't think I do consistently, but it's fun to try. It's fun to think that you can. There's a lot of people who invest as a hobby, right? And that's what it is. It's a hobby. And that's a good hobby to have. But if the hobby sort of takes over your life and you devote 100 % of your assets to some trading account where you think you're going to beat the markets, it's a couple months ago, I talked to somebody who talked to somebody who worked at one of the online brokerages. Okay, I won't say which one. But they said the online brokerages, their business model is basically to acquire new customers all the time.

24:38Because what happens is they acquire a customer, they get 10 or$20 ,000 in funds. And over the course of about five years, that goes to zero, and they stop trading. And then they have to acquire new customers. Like that's generally what happens with people's recreational trading activity is that over time, it will go to zero. Buy high, sell low, repeat until brook. Yeah. One of the parts of the book that I like for you that you say that mythic dispel, you say like, listen, everyone in the US is not some YOLO spender who's buying the big truck and totally overdoing it. Most people are pretty decent with their money.

25:15And I think that's true with investing too. But you say, you know, people budget and they buy stuff within their means, but they don't try to make more money. And I think that's the reason that the frugality side of personal finance is so big because it's easier to talk about saving money than it is to help people earn more money. And that is where the big changes come when you make more money. It's way easier for people to save more money when they make more. I think that's pretty obvious, and it's something that not a lot of people think about. Like, oh, that's the part that I should be – the lever I should be pulling more as opposed to making my own toothpaste in the backyard or whatever.