AAR08 - How Anyone Can Grow Their Wealth

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1:07Andrew Sather:Good to see you, everyone. Welcome back to At Any Rate. My name is Evan Ray, and we're here to help you make sustainable financial changes without breaking a sweat with this weekly series covering personal finance topics with the goal of helping people improve and better understand their finances with as little effort as possible. If you've listened to this overall IFB podcast, and you know Andrew Sather and you know that he knows his stuff when it comes to growing wealth. This makes him a perfect fit for today's episode. How's it hanging, Andrew? It is hanging pretty well. I'm happy with how it's hanging today.

1:37Andrew Sather:That's good. That's good. Maybe we'll get it to well instead of just pretty well by the end of this episode. So the goal of this whole pod series is that it's meant to help anyone. The goal isn't, there's plenty of content out there that's focused on people who are already wealthy and have a bunch of money to throw around trying to grow that bunch of money that they already have. And the goal for me for this series is to help anyone, regardless of how much wealth they have or spare wealth they have or anything, to find ways to grow their wealth and get themselves in better financial standing. So today's topic, we're going to be discussing how anyone can grow their wealth, and we're going to be discussing some ways they can go about it, why it's essential, and how the vast majority of people, frankly, aren't doing it.

2:20Andrew Sather:So from your point of view, Andrew, what kind of connotation or popular view do you see of investing, especially how did you see it when you were growing up? It's one of those weird things. I grew up, I've always been like really good at math. Weird reason. I'm half Asian, so can you blame me? And even through high school, doing math stuff with math people. Through college, I went to school as an engineer. personal finance never came up investing never came up it's just in the back of my mind for me personally it's like oh that's something i'll figure out eventually and what's sad about that to me is like there is so much the amount of money that you need is so small that if you're if your runway of investing is long enough you're gonna have massive impacts to your finances and you don't have to wait until you've quote unquote made it.

3:18And you actually don't even need to have that much that you're putting in. And that was the most impactful thing to me. If you have enough money to have a cell phone plan, if you have the latest iPhone, even your iPhone 12, whatever, the amount of a cell phone bill and the amount of money that you could sock away as an investor, at those similar levels you can build life-changing wealth and that and you can do it without a 401k even with how long people are living and how long your runway can be for investing there is so much potential because of compound interest to be able to build wealth and that's why i really believe anyone can do it and and it's because of the power of compound interest

4:10Andrew Sather:and historically with which you just mentioned you you were even you know saying being an investor to invest a certain amount or whatever at least my personal connotation which i'm working to undo but still the connotation i have my have in my head is if i hear the word investor i think of somebody who's wearing a suit to work every single day and they're they're handling the the funds for for multi-million dollar companies and everything that's the connotation of an investor that i have not somebody frankly like me who doesn't have a crazy amount of money to throw around or to invest but still invest in the stock market grows my wealth that way especially in the long run and everything and so I am an investor and you are an investor and if if you're able to put two dollars a month away into something and invest it you're an investor and so we want to undo those those long-standing connotations and get people to realize that that it's not only for the wealthy I mean, some statistics on who actually invests out there, 87 % of high-income earners invest in one way or another, but only 28 % of low-income people invest in one way or another.

5:20Andrew Sather:And I think that that fits that historical connotation, but that absolutely doesn't fit who it's actually accessible for. Like you said, if you're able to afford a cell phone plan of some kind, you can definitely afford to invest some amount of money. You're not going to be able to invest as much as a high-income earner, but you are going to be able to put away some money, invest that, and grow that over the long run. And that will make significant, I mean, significant isn't even a strong enough word, but monumental financial changes for you in the long run. What really brought it home for me, and maybe it was just my age at the time, just the way you can become a millionaire.

6:02So almost 11 years ago, over 10 years ago, I started a newsletter to prove this exact concept. But the idea was you could take$150 a month. And if you invest that same$150 every month, you get pretty decent stock market returns. By the time you retire, you're a millionaire. And something about that to me really stuck out. And I hope it can stick out for other people. Because you can adjust those numbers. If you're a little bit older, maybe the number is a little bit higher. If you're a little bit younger, 5, 10 years younger, that number could be even smaller,$50,$25. But something that's that small and achievable and then you can still become a millionaire, to me that was so impactful.

6:48And it's because, again, of compound interest. The way the stock market works, which is what we talk about when we're wanting to build wealth and do it through saving and investing, it builds on itself year after year after year. I like to relate it to a snowball that you roll down the hill. And as it picks up speed, as it gathers more and more snow, that amount and speed continues to compound. Wasn't my idea, but I just love that visual. It all builds on itself. And really in those last years of compounding is when it really multiplies into a lot. One last thing I'll say about this because it's something I've personally lived through.

7:30Like I said, I've been doing this over 10 years, publicly posting my real money portfolio, and I only allowed myself to do 150 a month into it. So a couple of things that have happened. I've gone through a divorce. I've gone through like losing pretty much everything in the divorce, but keeping this one like$150 a month thing going. And so for me, that's been really helpful because you can still feel like you're making progress even when everything else is telling you or not. And zooming back, being like a while away from that divorce and not having the ability to save and do things like that, keeping that train going was actually, it was like kind of like life-changing.

8:16like the progress is still being made and just dedicating the pain myself first and keeping that as a habit that like, this is part of my identity. This is what I do is a way that you can really make yourself resilient from a personal finance standpoint. And so you're not as dependent on like, oh, I lose my job and I'm like completely done for. It's just, it's a powerful thing. So I wanted to say that. And then the other thing is once you get to a certain point, and I don't know what the exact years would be. It depends on how good your portfolio performs. But once you get to a certain point, the amount of money you make from the portfolio becomes greater than the amount you're putting into it.

8:59And so I started to experience that in the portfolio now where I'm still putting in$150 a month. It's not making as much of a dent as the snowball itself growing from the stock market. And we're still not in that 40-year time period yet. It's still year 10, year 11. And so to see that in real time was so powerful for me. And I want other people to feel that too, because it's a really cool feeling that you have this wealth snowball that's building and you've sacrificed and you built towards it, but now it's continuing that power of compounding is continuing and you're not having to do much at that point, which is really great way to to continue to grow your wealth yeah that is an incredibly

9:46Andrew Sather:beautiful story and i appreciate you sharing that it's incredible how something that obviously 150 a month isn't nothing but it's also something that a lot of people out there can afford many many people out there can afford that that aren't currently doing it and quote-unquote just that amount of money can build something life-changing that starts working for you you know we talk about in the investing community framing investing and growing your wealth as growing your wealth past how you can contribute to it yourself if that makes sense past what your own income can do to grow your wealth that you're allowing your wealth to grow itself almost and that is a perfect example of you growing something and feeding something initially just like watering a plant initially when it's seedling and it grows faster and faster and suddenly whatever contribution you're able to give to it is vastly outpaced by its own growth.

10:40Andrew Sather:And that is incredibly powerful in a situation many, many people want to be in. But that whole journey shows that it's something that a lot more people can be in than they think. That is achievable for a lot more people. But they have to build that habit at some point. They have to start that habit at some point. And they have to continue that habit over that whole period of time, regardless of what's happening to you, like you said. And that is incredibly beautiful. We talked about how the historical point of view of investing, how it used to be viewed and hopefully how it's changing nowadays.

11:14Andrew Sather:But Andrew, what are some reasons you see behind this sort of pivotal shift in how investing is viewed kind of in pop culture or in the investing community too? I'm not going to lie. Running a small business has been stressful lately. Swamped in paperwork, different state agencies, and got all these expenses to track and everything. And it's hard to have visibility on these things. But I've stumbled on a better solution, kind of like a one-stop shop for my bookkeeping, my expenses, my P &L, my banking, my contractor payments, all of the messy pieces. It's called Found. It's for business owners like you and I.

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12:56Andrew Sather:August is National Wellness Month, but most health trends equal things like buying random gadgets and guessing at what actually works based on whatever's trendy at the time. And I wanted to stop guessing at things like that and actually look at the data behind my body. I've mentioned it before, but lately I've been taking time in the gym much more seriously, not just to build a bunch of, you know, aesthetic muscles, but to build a good, sustainable, long-term health plan for my future. Your daily resilience leaves a clear data trail in your body and function tracks the exact markers behind your energy and immunity.

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14:01Andrew Sather:Join at functionhealth.com slash beginners and use gift code beginners25. What's the best way to get started in the market? Download my ebook for free at stockmarketpdf.com. I'm very optimistic about investing and really the way it has evolved and it's improved so much. And I do think it's a much bigger idea now and it's not as hidden of a tool that you can use as it used to be, let's say 10 years ago. As much as I like to rip on TikTok and some of the ridiculous ideas that are out there about growing your wealth from bottom left to upper right tomorrow there is a lot of good creators who are just pushing this idea like save invest things like that at least that's what i'm told i don't know i'm not on there no is that true it's there oh it's there it's 100 there it's not the easiest thing to find but you can find it okay cool so yeah it is and then the whole game stop thing that was four years ago brought a lot of people who maybe would have never thought about the stock market or building wealth or investing and and just the way that knowledge is expanded naturally with the internet and how like my 12 year old daughter for example grew up and she's only ever known the internet like i i'm old enough where the internet was a newer thing so it's just the amount of information the way you can rely on some of the information that's on the internet and just that overall awareness is in such a better place than it was so at that point it becomes doing something with the information rather than just being aware of the information and as we all know if you've ever tried to be on the diet if you've ever tried to motivate yourself to work on different things or whatever it's the knowledge is one thing and then the actual behavior is another.

16:02Hopefully we can help with that. But what's also encouraging is that there are tools and resources out there that are making it easier and easier seemingly by the day. When I first started the newsletter back in 2015, there was not partial shares and there were commission fees. So if you go back to the archives of the newsletter, I was putting in 150 bucks and only getting enough shares for like 145. So just like right off the bat, because of the commission fee to buy a stock, you were getting hampered by that. And then I had to do this thing too, which was really weird. And like today you'd be like, what the heck?

16:44Where if I was wanting to buy a stock that was like $250 or$300. I couldn't do it with just$150. So I had to wait an extra month and basically save that. And so that would do is I would recommend the stock and say, I'm buying this next month because I need two months worth of savings to buy this stock. And that's crazy now because you can just buy partial shares and be done with it. So the game has changed. It's become easier than ever. Even in the last 10 years, it's become so much easier. And so really it's on us now to behave in a way that takes advantage of these tools. And things are improving as we go along.

17:25So I'm optimistic. There's just, you can do it. If you are worried about the stock market's always been this way. It's always been Monopoly Man and Great Depression calling your broker, blah, blah, blah. It is just, that is so not the case anymore. and I wish we all really fully understood it and not just understood it, but also took advantage of it because it can change lives to be able to have money that gives you a sense of security. It's a very nice thing to have if you can get it and it's a worthwhile pursuit because you can build self-discipline and things like that too. So there's just a lot of benefit to being able to take advantage of that and the more people that can, to me, that's a good thing.

18:12Andrew Sather:and nowadays with you know financial education like we're talking about something like tiktok is so accessible there's also stuff like this podcast you know ifb and at any rate that and many other very very good podcasts out there that cover these topics and cover a wide range of topics specific situations actual actionable steps blah blah there's so much content out there and you know we're talking about growing wealth in general even something like a high-held savings account that didn't exist 20 years ago or something is not only a thing, but it's also so accessible that you can go sign up for a brokerage account or in this case for a banking account with an online bank and set it up in 5-10 minutes and start contributing to that high-old savings account and suddenly you're growing your wealth.

18:57Andrew Sather:You're somebody who's growing your wealth or set up a brokerage account 5-10 minutes, start up an automation to start investing into an overall index fund like VOO or something to just track the overall market. It takes you 20 minutes, and now you're an investor. There's somebody who's growing your wealth, and automation like that has been, for me, incredibly pivotal in making it accessible and easy for anybody. Even if you're raising four kids, if you can take 20 minutes to set up that automation, now you only ever have to worry about it, maybe checking up on it periodically, but you take care of the four kids, you don't give a crap about worrying about that investing anymore because you're now an investor, And it's now set up in the background without any ongoing effort from you.

19:40Andrew Sather:It's all incredibly powerful and beautiful. Yeah, and you can correct me if I'm wrong because you've been doing this automation thing since I've known you. But I remember when Coinbase came around, the whole crypto thing, and they started this site. I thought, unless there was other options I just wasn't aware of. but i remember when they said you could put 150 bucks in the like bitcoin or something and you could just have it automatically buy bitcoin or ethereum or whatever you wanted i don't remember that being an option for stocks like i i you can correct me again if i'm wrong but i thought you would always have to transfer money into the account and then actually manually go in and buy things i don't know if it was coinbase becoming popular that made it so you could now buy the stocks or buy the etfs that you want and just have that completely run in the background but it's a great feature yeah yeah don't don't quote us on this because you know we're not this isn't our expertise however i i do think you're right that it was it was at least around the crypto era when it started coming about where now because of course all the crypto was online based all of these people are wanting to access their investments from anywhere from their phone from the web whatever and I think that that kind of caused a shift in thinking about investments instead of it previously being you know go to your brokerage or contact your broker or something like that and it's this whole process it turned it into much more well I want it at my fingertips just like crypto is you know and these brokers like robin hood or something that took on crypto but were also taking on stock market investments i think they kind of thought well why not do a similar thing over in investing and make it much more accessible because of course it benefits the brokerages the more people they're able to get on their platform in one way or another that's their end goal at the end of the day is to make it as good of a platform as possible so that as many people come over as possible and i think that they saw that as an opportunity to make investing just as accessible and exciting for better or for worse.

21:48Andrew Sather:I'm not going to argue that necessarily, but as accessible as crypto was at the time. Just go sign up online, start investing on a regular basis. And if we can do that for stocks, then it's better for them. So talking about these brokerages and all these brokerages offer many different accounts that you can be investing in. If you're not aware, there's many ways to invest your money. And it's not just about what you're investing in, but what account you're investing in that through. Investing in Apple through something like a Roth IRA is going to be different from a taxable investment account.

22:19Andrew Sather:So some of our favorites that we feel the most powerful, first off, we have the 401k. I'll always talk about the 401k as just the goat when it comes to investing. If you're able to get an employer match, it's for me an absolute no-brainer. If you're able to contribute 5 % to your 401k and your employer will also contribute 5 % to your 401k, that is an instantaneous, immediate, guaranteed 100 % return, and you're going to get that nowhere else. So for me personally, at least maxing out the employer match is essential. The 401k, in case you're not aware, is it's pre-tax funds going in that are able to grow tax-free, and you don't pay taxes on anything until you withdraw later, and then you pay taxes on your contributions that you had made to the account.

23:05Andrew Sather:Now, this is incredibly powerful because like the snowball that we discussed earlier, that gives you a bigger snowball up front. You're able to start with a larger snowball that's able to gather more snow more quickly and everything is going to compound much, much more quickly. However, since it's locked up until retirement without paying any taxes or fees, it's really only long-term investing. So you don't want to go contribute 50 % of your income to your 401k because you won't be able to touch 50 % of your income until you retire. but something like the employer match hitting that five or six percent or something or common figures maybe three percent to me is an absolute no-brainer then from there if you're investing outside of a kind of restricted retirement account like a 401k and you have the flexibility to invest in what you want then etfs are a great way to go past my 401k that's also how i personally invest is i just stick to etfs which are exchange traded funds and think of a fund as essentially just a group of stocks that you're able to invest in small portions of everything in that fund at once just by purchasing that single fund.

24:08Andrew Sather:So instead of purchasing one share of Apple, you're purchasing one share of a fund that includes Apple and Microsoft and Netflix and a ton of other maybe related stocks or maybe all the other largest stocks in the stock market. I personally invest in the VOO that allows me to invest in all the top 500 companies in the stock market all at once. That's just how I personally go about it. You're able to set it and forget it and it gives you fantastic diversification in your investments. Even if Apple goes to zero tomorrow, your fund isn't going to go to zero because it's including 499 other stocks at the same time.

24:40Andrew Sather:Next, we have the high yield savings account, which we discussed this a lot more in our emergency fund podcast. So if you want to just search at any rate or AAR emergency fund on Spotify or whatever podcasting app you use, it'll come up and we discussed a lot more about how to structure emergency fund and set it up, but Highland Savings Account are just the absolute perfect account for something like emergency fund. You'll still get solid returns while simultaneously still being very liquid and accessible for you to use whenever you need, even if emergency comes up. And then the last tip that I'll say for this is to start small.

25:15Andrew Sather:Like we talked about before, growing your account doesn't mean that you have to put a ton of money away, and it also doesn't mean that you necessarily should initially. If you overcommit initially, you're going to be taking on a lot more risk than you need to and also a lot more than you may want to. You may not want to throw all your income into investments just to see it tank the next month because maybe you were hoping to be able to still see that or be able to access that money or maybe that's demotivating for you, demoralizing, and now you don't really want to continue because now you've seen your money drop.

25:45Andrew Sather:You've seen yourself lose a thousand bucks or something. We kind of want to avoid all that. We want to start small, utilize automation. We also have episodes on automation and, and just take those, those small steps up front and build that habit and identity initially so that you're able to continue this for a long time. We want you to be investing for the next 50 years, not just investing for five years until the market drops. And now you're too stressed about everything that you did. You don't want to touch it anymore, but we want to avoid that at all costs. Yeah, that's a great summary. And if you missed any of that, please go back and listen again because there's so much there so if someone's trying to do this for the first time could you outline some basic steps that they could do to to get started with this yeah so when it comes to just growing wealth that we just we just have that end goal here i would say that there are three main steps for somebody the first and that this is pretty much always going to be the first step and practically anything we discuss is just going and building a basic budget.

26:49Andrew Sather:Have a basic foundational understanding of where your money is going, how much is coming in, how much go to your needs, how much do you need to survive every month, how much do you want to be able to spend on clothes, eating out, decorations for the house, electronics, just these things you don't need to survive, but are fun for you to spend money on in a way for you to enjoy your life. Life is also about enjoying spending your money and not just restricting yourself as much as possible. And then lastly, the last bucket will be saving and investing. So any money that isn't being spent in the short term and is instead being put away.

27:25Andrew Sather:If you want to include something like saving up for a house in five years like I do, then that's perfectly reasonable. As long as it's money, you're not going to be touching initially. So that's the first step is be able to set up a spreadsheet, a table, write it down by hand. I don't care. Have it somewhere where you can visualize where all your money is going. The next step, which we talked about earlier, is hitting that employer match on a 401k. If you have an employer who's able to match or if you're self-employed and you're able to use your company's income to match your own contribution or something, any way you can get that 100 % guaranteed return on your investment is an absolute no-brainer.

28:01Andrew Sather:That is the definition of free money, which usually just doesn't exist in the investing space. We talk about solid returns and where it can earn you more money or is more likely to earn you more money or whatever, but an employer matches that one place that's guaranteed. Plus, then you're left with a 401k with more money in it, and a 401k is a very powerful investment account that's going to grow at a faster rate than nearly anything else out there in terms of growing tax-free. Then the last step is to open a high-yield savings account. I would say that once you have exposure to the stock market through the 401k, it's not absolutely essential for you to go out there and start investing in the stock market in other ways if you don't have the spare income to or the spare risk level I'll say to be able to do that or to want to do that then I think the next best step is to go open a high-old savings account start putting savings in there start building an emergency fund start having money that is growing at a significant rate we're talking between four or five percent or so my mind's at four and a half percent currently.

29:02Andrew Sather:It'll vary based on the interest rate in the U.S. But the important thing is that it's growing at a solid rate. It's still liquid. It's still accessible. And you're growing your wealth in one way or another consistently. And I guess one last bonus step I'll add to all this is make sure it's all automated. We want all this to be happening in the background. I'm never going to shut up about it. I guarantee that Andrew and Dave or their ears are going to start bleeding if I say automation again. But we want all this to be automated so it's completely out of your hands and you're not having to think about it.

29:33Love it. You know, those three.

30:00Brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility, and availability varies 18+. What I love about each of those, just real quick, my key to being able to do$150 a month I talked about earlier was the budget.