Recessions make millionaires: Money moves you NEED to know (ft. Mrs. Dow Jones)

0:00Haley Sachs, aka Mrs. Dow Jones, welcome to the burnouts.

0:08thanks for having me we thought it was so important to do this episode with you this week because it feels like the economy is a clusterfuck my entire for you page is just tariffs inflation is there going to be a recession what does this mean for young people who are just starting out in their 20s yeah it's such a crazy time right now i was so excited when i got the call because it felt like it was the moment to dive in. And I think especially for young people, it's so terrifying because you're just starting your career. You're just maybe getting your first paycheck and you're sort of like, cool, the well done thing.

0:45Like might as well just hang up my coat now. Like I'm done. You know, I think for context, this episode was absolutely not planned. I called Haley like eight times at 1am and I was like, we need you to come on this Sunday. We need to talk about this because we have so many questions. I think it's important for me to acknowledge I come from a very privileged background and that's not something I'm ever going to pretend I don't. But I think no matter what background you come from, people in their 20s want to learn about their finances and planning. And that's why we're so pumped to have you on today.

1:11Phoebe, you're lucky that I sleep with my phone on loud because I got the call up here. It's Sunday. I have my matcha lemonade. Let's do it. What exactly happened in the market last week? Oh my gosh, there's so much to discuss. I feel like number one, tariffs. So tariffs are attacks that the government makes businesses pay to them for importing goods from other countries. If you are an American business that's getting things from China, you as the business have to pay a tax to the American government for bringing those goods in. And that's built into the price for the consumer. When tariffs rise, then the cost of importing goods goes up and the price then rises for the consumer because it's more expensive for goods to be brought into America.

2:08And in order for that business to still profit, they need to charge more. That's how tariffs also cause inflation because there's no real way for tariffs to go up and for prices to not rise because obviously businesses need to make money. It's causing hiring to stall. It's causing consumer uncertainty. People are acting really recession-y because we're all terrified. There's so many question marks. Are you saying we're terrified? We're terrified. Yeah, exactly. We're all terrified. And so people want to just put cash under their mattress and hide and prepare for the worst because they don't know what to expect next.

2:55Should we be terrified? First of all, just know that this is not the first policy-driven economic downturn in America. What happened in the market last week? And how does that affect people, particularly in their 20s? Should we be pulling out our money from investing? What should we be doing? So learning how to weather these storms is really important if you're going to be a long-term investor. All of investing has to do with your time horizon and your risk tolerance. So the longer that your time horizon is, which basically means how long until you're going to pull out your money. if you're putting money into the market, how long it is until you actually are going to need that money, then the less you need to react and overthink market swings.

3:47In the course of your life, it's going to go up and down. Warren Buffett, my boyfriend, says that volatility is the tax that you pay to get to grow wealth in the market. You know, over the course of your life, you're going to go through on average around six recessions. If this was your first downturn, it's really scary, but trying to build the behaviors that you'll need to survive, not only this one, but future ones, is how you're going to get rich because you have not lost any money until you sell. When you sell, you lock your losses and you prevent yourself from being able to ever see the market return.

4:30And for someone who's never invested, Should they be investing right now? Like how should people approach this time? A recession is defined as two quarters in a row of negative economic growth. And so we haven't actually officially hit a recession yet, but things are feeling really recession-y. You know, like girls are putting on press on nails instead of getting manicures. Blondes are becoming brunettes. We're seeing strip clubs are seeing, you know, downturn of customers. Like there's all of these crazy recession indicators that are spiking up that people are like, OK, recession indicator. Like, I mean, I'm making the joke every day.

5:12Recession indicator. I went to Burger King last night. Like it's like recession indicator. Anything could be one. What should I do if I'm not investing right now? I haven't opened my account. We saw the market bounce up last week, you know, after Trump, you know, called off the tariffs. Should I open an account today? Would you wait a couple weeks? What would you do if I haven't started investing yet? The first thing I would say is you need to have an emergency fund. And an emergency fund is three to six months of bare bones living expenses. And you keep that in a high yield savings account. And I actually have a free emergency fund calculator that we can put in the show notes that you can use to figure out what your number is.

5:51And that is your first priority. Like right now, you're going to see all of this news, people being like, buy the dip. TikTok's telling you to make this stock move. Take a step back. First, put your own oxygen mask on and make sure that you have an emergency fund. That's first and foremost. After that, the next step is paying off high interest rate debt. So that is any debt above a 7 % APR. If you have a three to six month emergency fund, right now you might want it to be six months just because economically things are feeling really unstable. We're seeing the job market experience, a lot of dips as well.

6:31So you wanna make sure that you have a runway that makes you feel super comfortable. And then also that you've paid off your high interest rate debt. If you have both of those done and you're able to pay for your life and you have money left over at the end of the month, put that money into the stock market. And how do I do that? Do I open a Fidelity account? Can you walk me through that process? 100%. So I am a big fan as the first step in your investing process of maxing out your tax-advantaged accounts. And what I mean by that is you might have heard about a Roth IRA. So a Roth IRA is basically this account that you put taxed money into, and you You can put up to$7 ,000 in it per year of tax money.

7:19And then you get to take it out during retirement tax-free, which is unreal because Uncle Sam is everyone's least favorite uncle. We definitely don't want to have Uncle Sam be taking a piece of that pie. So I always say, first and foremost, start with those accounts. So max out your Roth IRA. And it's super easy to do. You can open it at Fidelity. You could open it at public.com. You can open one at Vanguard, any of these brokerages, you can open one. And then the most important thing is to make sure that the money inside your Roth IRA is actually invested. Because a lot of times people think that like by opening a Roth IRA, you're investing it, but actually it's just an account.

8:01It's sort of just like, it's like having shoes, but like you also need socks. Like, you know what I mean? Like, it's not like one or the other, like they go to get critical. They're both so critical. I think that's also, I know that you had said earlier, you're a big fan of long-term investing and index funds and you don't do individual stock investing. Can you explain why? Like if I have income that I've saved up and I want to invest it, what are your top recommendations? Where should I be putting my money? Data shows that trying to beat the market and buy individual stocks way underperforms buying low-cost index funds.

8:43What low-cost index funds are, are they're basically like baskets of stocks. So you buy, you get to buy it with one swipe and you're getting exposure to hundreds of different stocks. So that means that if one goes down, then a few others are going to go up and you're going to come out, you know, on top at the end of the day versus if you just buy one stock and that stock goes down then you're screwed oh my gosh I'll tell you about my worst investment ever which is why also I don't buy individual stocks but during the pandemic I was I became obsessed with Laird Hamilton the surfers oh god yeah just they got our worst is this your worst financial mistake

9:29my worst financial wait what is this Laird surfers he's like a surfer guy he's like a big surfer guy he's a big surfer guy he's a heartthrob he is heart no he's still got it he definitely does he's an older surfer okay anyways explain this okay honestly mood basically he had a powdered coconut water that i was obsessed with during the pandemic because it was a pandemic so you couldn't get actual coconut water and then you were like this is gonna skyrocket fully i was like did not look at the company's fundamentals did not look at like you know their debt i had no idea about the company but i was like yeah i'm putting a thousand bucks into this like Like not me day trading.

10:05Okay, watch out world. Like I'm about to be a millionaire. Flash through to today, that$1 ,000 investment is worth$90. And that's why we don't buy individual stocks. Wait, what are in next funds? Like what can you give us like the stock symbol or like I'm going online, I'm a complete dummy. Like what should I be looking up? So, okay. So we talk about opening your Roth IRA, which is a great first step. I opened my Roth IRA. I have to be making under what? 150k a year annually to open my Roth IRA. If I'm married, what's it under? If you're married, it's under 236. Okay. So I opened my Roth IRA, but now I have to make sure it's invested.

10:41You're saying the best thing to put it in is these index funds. Low-cost index funds. Low-cost index funds. What index fund are you looking at? Are we talking like S &P 500? Yes. Okay. So I'm a fan of like, I will talk to you. I'm a big fan of the two to three index fund portfolio. The three funds that I really like, again, this is personal, not financial advice, prescriptive at all. Use it at your own risk. But I really like QQQ, which is a technology index. So you're getting access to all of the big tech stocks. So you can make that tech money. Not all of us are founders of FIA. So we want to have exposure.

11:17We're still investing in QQQ. You're good. You want to get that money in QQQ. Love that. I also love VOO, which tracks S &P 500, which is, I mean, you probably, if you follow me, I'm always talking about S &P 500 index funds. They've returned historically over 8 % to 10%. And so we're getting those average returns that we want. Remember, we don't want an average life. We don't want average relationships. We do want average returns on our money, 8 % to 10%. That's what we're looking for. And then I love, I love especially right now, throwing in one that is global. So VXUS is a really cool index fund that gives you a slice of the global stock market.

12:00So it has stocks from over 40 countries, emerging markets, emerged markets. And it's a great way to diversify because right now, especially when you're reading the news, so much of what's happening economically is that we're seeing people lose faith in America. And I want to be clear. I have faith in America. The American stock market is always a great place to put your money, but it's good to have diversification. Investing is all about diversification. So VXUS, if you're feeling, okay, maybe a little bit uneasy about what's going on in America right now, you know, American stocks are down, but international stocks are going up.

12:42So it's a good place to have a little bit of that money in your Roth IRA as well. So can you walk me through the different steps of investing? Give me my little checklist. The first step is to get your emergency funds saved. And also, if you are at a job that offers a 401k match, so that means that if you put money in a 401k, your employer is going to put the same amount in up to a certain amount. Take advantage of that too as step one, because that's free money. That's the only time in your life that you're guaranteed 100 % return on your money. So that's step one. 401k match. Yes. If you get a 401k match, take advantage of it.

13:23That's step one is saving that emergency fund and getting that 401k match. Step two, paying off that high interest rate debt. And then step three, we are maxing out our tax advantaged accounts. And so that's your 401k, your health savings account, and also your Roth IRA. once you do all of that you can be more creative with your financial planning you want to open a taxable brokerage account you want to think about maybe investing in real estate whatever the things are that you're more interested in but like your financial foundation should be that and for financial foundation i just start getting like my first paycheck right i'm getting my first paycheck every single month how should i be budgeting my money what goes to rent what goes towards discretionary spend?

14:09What should I be saving? How would you advise someone who's just started getting their paycheck? How should they be looking at it? I'm a big fan of the 50-30-20 rule, the 50-30-20 budgeting rule. And that says that 50 % of your after-tax income should go to needs, 30 % towards wants, and 20 % should be action money. And that's money that you use to take action towards your financial health. So that's money that you're putting towards your emergency fund, you're putting to pay off your debt, you're going to put towards your tax-advantaged accounts. It's money that you are taking action towards to build wealth and to improve your financial health.

14:54And something else I really wanted your advice on is something I've been seeing a lot about is dollar cost averaging, really in regard to investing. Can you walk us through that? I love that question because it's so pertinent to where we are right now, where the economy is obviously shifting. It feels really unstable. And so people are every day second guessing how they're managing their money. And dollar cost averaging is basically this principle that you're putting the same amount in every month, no matter what's happening. And it could be every month. It could be every day. that means that sometimes you might be buying high and sometimes you're buying low.

15:34But the dollar cost average is that you're going to come out in the middle and you're going to get those good returns. So you should just always be investing on a regular cadence and then long term it nets out fine. It doesn't take a genius. It just takes consistency. How do you deal with FOMO though? I feel like every time I'm on social media, someone's like, oh my God, I just made a million dollars with$50 that I put into this meme stock. You should go buy Dogecoin or whatever. And it makes me freaked out because I'm like, am I being too safe? Like is 8 % to 10 % returns enough? Like how do you deal with that?

16:11Making like fear your financial advisor is a bad idea, which is when people hoard cash, but also making impulse your financial advisor is a bad idea too, because you are making decisions not based at all in a company's background, in the leadership, in their debt. You're basing it on someone telling you something on social media. And we all, you know, right now people are posting from Coachella telling you that they're having a great time. Is that real? No. I'm also reading about how it's like record heat and no one can find shade. Like it's so confusing every day. There's a new headline. Like what am I going to be spending more money on things?

16:50My friends BNC bought an iPhone. Like, should they have done that? So what is happening right now? Well, that's what I'm saying. It's a paper. It's so confusing. Like we're all getting whiplash. We're trying to be responsible consumers where we're looking at, okay, what are tears going to affect? Let me buy that now if I really need it, because then I'll be able to avoid paying 100 % more for that in a few months or, you know, a few weeks. But then they're being dropped and you're like, okay, so I guess I just panic bought that for nothing. I bought 17 phones. Yeah, I have 17 phones. I'm good till, you know, 2020, whatever.

17:30And there'll be a new update. There'll be a new update. How often should someone be checking their savings or investment account? I think at the very least, you should have a money date every month because money is a relationship. And this, especially when you're in your early 20s and you're having that first paycheck and you're just sort of learning how to manage your own finances, it is such a great habit to get into just to take that. And I used to do this in my 20s with my best friend. We would do it together. And so like, if you, you know, like make it instead of book club, do money club, like, you know, make it a communal experience if you need someone to hold you accountable for doing this.

18:06But that's your moment where you can check your balances, check your credit card statements. There's always fraud on your credit card statements. There's always a subscription that you forgot about. There's always a package that you forgot to return. And then that money date, you can take care of all of those calls as well.

18:27Have you always been like this? When did you start investing or becoming good at finance? So I started my career, my first job was for David Letterman. I fully thought that I was going to go into entertainment. And I was also really confused about money in my early 20s. I mean, basically for my whole life until I became Mrs. Tao Jones. And it was just something that I was sitting with and thought was normal. Like, oh, like, yeah, this is how it's supposed to feel. Like, you're always supposed to feel sort of like a little bit of dread when you swipe your card or like you're not supposed to look at your credit card statement or like you're not supposed to feel like confident, like, you know, knowing about what a 401k, like I just love.

19:09It's a yield. Yeah. I was a yield. Like, you know, what is a bond? Like just, I thought that it was French to everyone, but then I got my dream job at, for Lauren Michaels who started SNL. And I really wanted to come off as super smart and savvy and like put, you know, my best foot forward. And on the first day of that job, they of course asked me the questions that you would ask anyone on their first day at a job. What 401k contribution do you want to make? Which health insurance are you signing up for? Like all these, you know, normal questions that had to do with financial planning. And I was completely clueless.

19:50And so I sort of nodded and was like, yeah, for sure. Like I know what those are. And then went home that night and did what any like self-respecting I'm a millennial, a millennial would do. You went on YouTube, tried to learn and was so bored by what was out there. The guy's literally like, this can't possibly be it. Literally guys in t-shirts with whiteboards behind them. Like they couldn't even add a graphics package into their videos. Like welcome to Khan Academy. Today we're going to teach you about stocks and bonds. Oh yeah. I know the videos. When we tried to open our 401k account for like for Fiat, I think I fell asleep.

20:25I think I woke up with the keyboard imprinted on my forehead. I was so bored. Right. And they're It's literally a whiteboard. And so to teach myself, I started to make content about it because I also felt like there must be other people who felt like this too if I felt like this. And then it was so amazing because pretty immediately a community grew around it. When I was growing up, it's really interesting because my parents very much had a save, save, save mentality. So when I first made my first paycheck when I was 16, I was doing volleyball refereeing. They said, stockpile the cash, save it.

20:56Or if you want, spend it a little bit. You're young. It's not super important to be investing. My aunt was completely different. She's the risk taker of the family. She said, go put that money in the S &P 500. Wait, in 10 years, it's going to grow so much. I kick myself because I didn't at the time. I didn't realize how important it was. But it wasn't until a few years ago. And she said to me, if you're keeping your money in cash, you're actually losing money. I see that so much with women, especially where like because the stock market investing where it feels a bit more masculine and like it's it's only 20 percent of women invest and it's 41 percent of men it's so crazy and it really is just and also you have to remember that the financial services industry is built on fees so they are desperate for you to feel confused because then you are going to pay them to do it for you so like all of the jargon and the confusion it's all part of this master plan for people to be like math woman meme when they're thinking about their finances and then either like not do something or that you're just going to pay someone to do it all for you.

22:06Being good with money doesn't mean that you have to hate money or hoard it. It means that you just need to have a good relationship with it. What's your hot take? Like, should I feel bad about my morning coffee runs? No, I think it's all about knowing what your private, like, I think you need to spend better. So it's like, if you, like, I am obsessed with matcha lemonade that I get every dollar out of actually get more than what they pay, but I pay for it out of it. Like it means so much to me, but it's like knowing where I want to spend and where I want to pull back means that I get so much more value from my purchases.

22:40And I recommend people have like three to four categories that they want to really double down on and then cutting the rest oh like the girl math of i shouldn't feel bad about ordering in because i took the subway and i did an uber or something like that yeah i hate girl math but like that's a whole other episode i'm literally like anti-girl math like i just make that sound a reductionist it's like we have to like literally uh like do all of these mental obstacles to like get us to manage our money it's like no let's just be up front with ourselves with our finances and be in control of things.

23:16Just math. Just math, girl. Someone on our Instagram asked, what are your thoughts on home ownership versus renting? Are you wasting your money when you're renting? Is home ownership the better opportunity? Especially, I think about what my parents taught me or older people in my life. It's always like, oh, the big saving goal should be having a house. That's the safest investment you can have. What is the real truth when it comes to renting versus buying? The rent first buy discussion is, that is a hot one. Like I am a millionaire and I rent my apartment and people can't believe that because they think that if you have money, that means that you should own your home.

23:56But nothing about finance should be so hard and fast. You have to also think about where you're at. Like, okay, are you going to be there for a really long time? do you want to be a homeowner do you want to know what an hvac is do you want to like deal with you know plumbing issues or would you rather have a super and be in like a rental where you can rely on someone else do you want the flexibility to move but then also when we look at the numbers in many major cities you would make more money putting your down payment money into the stock market and renting versus buying a home. But there's still this idea that you can't like put down roots properly if you don't own a home, that that's what it means to be an adult.

24:46We really need to rethink that because there's so many ways to grow wealth. We are in the golden age of wealth creation. Like it's never from our fingertips on our phone. Can we like invest in the stock market and do all of these amazing money management things that make it so easy for us to actually start creating our future. No, I don't think that you need to own a home to be rich. And I don't think that owning a home is the best financial decision. Haley, is there anything we haven't asked you today that we should really touch on for women who are just entering their careers and making their first money?

25:23Make sure that you guys are negotiating your salaries because women miss out on over a million dollars over the course of their careers because we don't negotiate. And so I know maybe you're not so excited to negotiate your salary, but 10 minutes of sweaty palms are worth that million dollars over the course of your career. Quick tips. How do you do that? How do you negotiate a salary? First of all, you have to be good at your job. I have a rule called first one in is the hottest. And I live by it. I think that, you know, first one into the office is the hottest. Work hard. give it your all. And that's huge.

26:06So be good at your job and make a wins folder. So whenever anything good happens at work, maybe your boss is giving you kudos on that presentation you just did. Maybe you are in marketing and you saw the subscriber beast grow by 20%. Put it in your wins folder. Because like they say on Real Housewives, receipts, timelines. When you go to that review, you want to be able to give them a laundry list of all the ways that you have added to their bottom line. Just make it really easy for yourself. Keep that wins folder. The other thing is to always have a BATNA, which is a best alternative to the negotiation.