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Most people don’t know the fundamentals of money. Schools never taught us it. And not knowing some fundamental questions about money gives you a lottery winner's chances of becoming wealthy.

But here’s the thing:

Once you understand how money works, becoming wealthy is just a matter of time.

In this episode, you’ll discover the 5 questions around money that will help you become richer than most people dream of.

Listen to the episode now and guarantee you’ll become wealthy in your life.

Show Highlights Include:

  • The counterintuitive reason why the Russia-Ukraine conflict can actually make gas cheaper (4:04)
  • Why Biden’s tax and spending bill is now less likely to eat your wallet (5:10)
  • The only 3 things you need to know about money to become wealthy (8:55)
  • How real estate protects inflation from devouring your money (13:53)
  • Why the “Father of Investing” says your biggest investment enemy is your mirror (14:52)
  • The quiet, unsexy factor which runs the entire market (and why nobody else knows this) (16:24)
  • How you can actually save money on your loans (17:35)

To schedule your complimentary retirement track review, head to https://onecapitalmanagement.com. You can also call us at 805-410-5454 or text the word ‘TRACK’ and we’ll reach out to you.

Read Full Transcript

Welcome to Make Your Money Matter, the show that aims to change the way we think about financial advice so you can make better financial decisions. Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1,500 clients nationwide, with over $2.5 billion in assets. They are a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now, here's your host, Brad Barrett.

(00:27): Welcome to make your money matter. The show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett. And it's my goal to help distill the best ideas when it comes to your finances. So you can make more confident money moves here at one capital management. Our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve friends today. The challenge is no longer the access to information, but rather it's finding the right information and more important how all that information applies to you. And that's my commitment to you here each and every week, because after all your money matters, and before we get started on this week's episode to find out more about myself or our firm here at one capital management, you can go to our website@onecapitalmanagement.com or give us a call 8 0 5 4 0 9 8 1 5 0.

(01:27): And you know, they say the truth is the first casualty of war. So here we are a little over a week into the Russian invasion of Ukraine. And the fog of war is still very thick. I think we'll all can agree with that. And as I've been speaking about in the past two episodes, essentially, you know, over the past few weeks, it's been conventional wisdom, I guess that Russia would take parts of Ukraine, maybe all, and then things would settle down while the world awaited further actions. And in the worst case scenario to many, those moves could include closing the current 40 mile wide border between Poland and Lithuania, which could all lead to direct NATO, military involvement, and a wider conflict. Now, so far things haven't unfolded as many thought they would supply chain issues, obviously for the Russian military and the formidable opposition are all slowing Russia's advance.

(02:28): It's amazing to see, especially to what many would say and myself included the morality of this war. This invasion is just wrong. So I do believe that in the story of David and Goliath, God is on David's side here with Ukraine. Now, in addition to all this, the more sanctions and military help that have come from basically countries around the world, including the us, have given a lot of hope that hostilities end somewhat early with Russia, failing, hopefully well short of its goals of taking over Ukraine. And if Russia is unable to take control of Ukraine, and we're gonna talk about this as it relates to this week's subject matter. If Russia is unable to take control of Ukraine or even forced to retreat, that would be amazing. Vladimir Putin could be in more than just political trouble. His inner circle goal may not like risking access to their personal wealth on what they might believe is an ill advised military adventure in the beginning, in the first place.

(03:27): So for Putin, this is a huge incentive to continue his attack and escalate, which is bad for everyone. Nothing is totally clear here. And as fate would have it about a week into this invasion, we also have our first state of the union by president Biden. And I wanna touch on this a little bit, cause that's a lot to do with things of our economy and the world economy, rather around inflation, interest rates, social and economic situations. And I wanna combine the two here as we look forward into this week, talking about some, some questions. I think everyone should be asking around money right now, largely on the dovetail of what we talked about last week on the show around the six reasons why we want to look long term and stay invested through volatility. And what I personally become more confident about this conflict is what it means for public policy.

(04:24): And here's what I mean by that policies designed to suppress us energy production are gonna be tougher. I think for the voting public to digest the same is true for many European countries with basically Germany, as we kind a few days ago now discussing building a natural gas reserve, and then there's the green energy, oh, the AOC green energy situation, many will keep pushing it like her and others and those projects will continue, but it's gonna be really tough in my opinion, to curtail drilling and extraction and pipelines for all fashion fossil fuels, by the way. And this now goes definitely into the conversation around the state of the union and by no means in the first five or 10 minutes of this week's episode, do I want it to be political? There's just a lot of things going on, both domestically and geopolitically around the world that are very interesting to talk about.

(05:19): As we look at our money and look at the economy here, the build back better president Biden's plan to raise spending and taxes for the next decade. It looks even less likely to me when I heard that than before war means disruption and many will argue, we should wait and see how the economy reacts to the, in addition to this, while the war will likely make global supply chain issues, even more problematic, something we're looking at and inflationary the federal reserve is likely to pull back on tightening plants because of the potential economic upheaval. We saw that on Wednesday of last week, when Jerome Powell got on the stand, basically saying that he is looking at what he called a soft landing and looking at a rate hike of around 25 basis points, maybe even 50, depending on where it goes next few weeks in March, which obviously the likes and we are a fan of when the central bank is able to do two main things in a low and straight environment to raise rates, to stave off the inflation that we're seeing, but also able to taper or lessen the amount of bonds they are buying on the open market.

(06:37): We're gonna start tightening a very loose policy we've had for two years. These are good things now while not related to Ukraine, but has a lot to do with the state of the union. I also wanna touch on one thing, the Supreme court's decision, the recent decision slapping down, basically private sector vaccine mandates by OSHA a. This is again speculative for me, but I just wanna bring it up because it's interesting as we talk about opening up the economy, I think it's a sign that it's willing to limit the power of bureaucrats, which I'm only bringing that up because that may be good news for growth, not political, just looking at it from a macroeconomic perspective and just putting an opinion on it. As I was going through this last week of writing the show and talking with a lot of clients around the conflict in Russia and Ukraine, hearing president Biden talk last week at the state of the union and putting it all together, the prospects for staying in the political camp for a second prospects for more bills that expand government, I think are gonna be waning a little bit while the court seems to be more wary of regulatory expansions, which again is a good thing for growth.

(07:50): We saw that in the Reagan years with expansion, less government more growth. Now, while war, I want to say very clearly on this and to put a bow on the conversation around the Russia, you Ukraine, as we dive into this week's conversation, while war is hell and all of our prayers and mine for sure are with Ukrainians, the direction of policy is moving toward the better. And this may be an interesting outlook for that. And as we basically dissect the week or two, and I've been writing a lot of the content around stuff we've been talking about with clients, some of the fears and anxieties we all have when you see a conflict like this, even if it is going on miles and miles away from us, the ability for it to spill over is still of concern. The ability for us to be drawn into it is of concern.

(08:41): And so when we talk about this, as it relates to our portfolio, our retirement, our overall planning, I wanna pick up on a couple things we talked about last week. And if you didn't get a chance to listen to the six reasons to stay invested and to look at the long term, when it comes to your money and investing, as it relates to conflicts and wars, I wanna talk about five important questions in general to ask around money. Now, when it comes down to the basics of this, there are only a few things you need to know about money, how to make it, how to keep it and how to grow it. Now, obviously within those three camps, a lot happens. And a lot of it's topical. We've been talking about it. I mean, in the first eight weeks or so of this year, a lot has happened.

(09:27): We've had market volatility. We've had a conflict in war. We've had discussions from the fed around rate hikes. We've had inflationary items and supply it issues spilling over from last year. We've had a state of the union. A lot has happened in these first two years. And I know I may be oversimplifying the statement of how to make it, how to keep it and how to grow it. But most people don't even know the basic stuff. And I think it's really important as we talk about this and I am very open about this. It's okay if you're listening right now and you're like, you know, I don't know how to make it. I don't know how to keep it. And I don't know how to grow it. I may know how to understand some of those things, but I was never taught it. And I mentioned this before in high school, you weren't taught what a mortgage was.

(10:10): You weren't taught. If you were taught about a mortgage or a discussed a mortgage at all with any economic teacher, maybe you weren't taught how to fill out the HUD one form or what the process is for a real estate agent on the buy or sell side. As an example, we weren't taught these things a large part in my nearly 20 years of being in the financial services industry has been around education because I myself had to realize early on as a young kid, a what it was that I needed to learn about money to make sure I protected myself, many have heard my story. But when I was 16 years old, my dad's company went bankrupt and we had to basically reset our entire life. And it was really scary at the same time for him, for us, we were kids. So he shielded a lot of it, but I saw the evil, the bad side of someone taking a company.

(11:01): It wasn't him, his boss, the CEO of the company, decided to just be a bad person, essentially. And the entire company suffered thousands of people. My dad included. It was shocking to all of us. And I remember right there, I made a decision to do two things. One, I was gonna learn everything I possibly could about money and two, I wanted to help people. I wanted to do that for others. And that's why you're listening to me today. That's why 20 years later, this is what we're doing. And so these five questions I'm gonna bring up may seem very simple, but they're kind of bedrock foundational items to go through. And in doing this, there was a quiz I actually found on FINRA's education foundation site that can help some of these things and what I distilled it from this. And this is also coming from an article that was written by John LASIK.

(11:52): And it's an interesting one from fors media that I liked. And so we're gonna talk about this. And number one is compound interest. Okay, let's go to the basics. What you need to know about compound interest. Most people, we really don't do the math. If you're earning interest or reaping dividends, it grows over time. We can all fathom that. Let's say you're earning as an example, 2% interest on a hundred dollars. That's not much, but it will increase over time, a savings account with a hundred dollars in it. And a 2% annual interest rate would earn $2 in interest for an ending balance of that year of a hundred, $2. Right now applying the same 2% interest rate, the 102 would now earn $2 and 4 cents in the second year for an ending balance of $104 and 4 cents at the end of that year. And so we gotta think of applying that to larger sums of money over longer periods of time.

(12:47): Now I know I'm coming outta the gate with a very rudimentary concept around money, but I think as we think about compound interest, we about dividends. We think about adding to it. And it's a really important tool to remember as we talk about some of the five main areas around money and number two, and this is both topical and important always is inflation. No, we all need to know how inflation eats away at our money. And here's why I bring this up. Inflation's a trick key one because we, it's not, it's not tangible. You can't touch feel and taste it. You only really see it when it's two things right in front of you and somewhat large. And right now is a great example. Gas. You go to the pump, you're seeing it, you know, that paying, you know, $4 a gallon is somewhat normal, depending on what state you're in.

(13:38): Mostly in California and New York, that's pretty normal, but now paying $5. It's like, okay, it's right in front of me. I fill it up every two weeks. And it's definitely larger than what I'm used to paying. That's how we see inflation now while inflation it's bad for those kind of things. This is good for real estate. It devours our money in other areas like cash, because it's all about subtraction and people don't think about inflation this way. And that's why I wanna simplify it. If the annual inflation rate, let's just go with the annual average of 2%, but the savings account only earns 1%, by the way, that would be a great savings account right now. But bear with me. In my example, if inflation is 2% and the savings account only earns 1%, the cost of goods and services has outpaced the buying power of the money in the savings account.

(14:29): That year put another way your buying power has not kept up with inflation. You spent 1% more because you only earn 1% in what the accrediting side is giving you. And the 2% is eating away at it. That's how you wanna understand your Delta and how inflation eats away your money. And again, it's a hard concept because again, inflation, isn't tangible. And a quick aside, Benjamin Graham sometimes considered the father of investing and things like that. He wrote an incredible book that most people look at called security analysis. It's for many of the old school investors Bible, if you will. And he was quoted in saying the investors chief problem, and even his worst enemy is likely to be himself. And I bring this up because education has a lot to do with it. The more we try to do things ourself in a way around things that we think we know it's really important to find counsel something I preach on every week, right?

(15:24): Find that person no different than going the mechanic. Like I'm very open about this. I was not raised to underst. And what goes on under the hood of a car, many are many are gifted in that case. And I want to partner to my weaknesses and that's one of my weaknesses. And a lot of times money really it's a humbling topic for sure. But when you really peel through the layers, the reality is money means something to every person and understanding what it means to you is really important. And specifically these first two things of interest and inflation, albeit somewhat simple and widely used terms really needs to be dissected so that you truly understand it. And number three, bonds, bonds and interest rates. When interest rates rise, bond prices fall, the inverse is also true. When interest rates fall, bond prices, rise. Think of it like a Seesaw.

(16:18): Something I share with my clients often around bonds and why this is important is, and people don't wanna admit this, but bonds, they kind of run the market. They're that quiet, not sexy thing. No one wants to talk about, but you think about it. We talk about bonds a lot. When it comes to our mortgage rates around the 10 year note, we talk about as the number one flight to safety, when people are feeling a little volatile on the markets and unsure what the market's gonna do, bonds have a lot to do with the markets. So understanding bonds and how they work are really important. And more importantly is just because rates are rising. Doesn't mean bonds is necessarily a bad place. A lot of people will say that, yes. When in rates rise, your bond prices go down, but you can shorten your duration and it still serves the great diversifier in your portfolio.

(17:03): Something we do here at one capital management, but we also don't just sit on our hands saying, oh, bonds is a great thing to diversify. We also wanna find the right types of bonds and the right duration, meaning how long we're gonna own those bonds. And that really is important when it comes to compound interest, inflation and bonds. Those are the first three things I wanna bring up as the kind of rudimentary foundational aspects and number four and five, get into more of the debt and markets. Number four, you can actually save money on loans. If you really go through it through lower rates, over shorter periods of time. Something I talk about with clients around debt management is let's say you have a couple credit cards. Let's say two, for example, and you have one that's a $10,000 balance. That's paying you at 5% interest rates.

(17:51): So you're paying 5% on 10,000 and the other card is 5,000, but you're paying 2%. Obviously anyone listening would love those interest rates for credit cards, but most people think, okay, I have $5,000 from a tax refund. Let me just chip away at the one that's $5,000, but you're only 2% on that we need to focus on the interest rate. First, the higher interest rate over time has much more of an ability to be able to save you, even though you're not gonna pay the full balance off, you're gonna pay the larger interest rate, almost double the interest rate in my example, first, and that matters to help save money. So understanding debt strategies is also very important and you know, on the debt strategy, I think the rule of money and wealth is really important when it comes to debt, we all can carry debt and there's good debt and bad debt.

(18:41): I've talked about this a lot on the show. You can go back to previous episodes and I talk about this a lot with clients is leverage or debt. Isn't always a bad thing. It's just, you need to use it for a purpose. For example, taking leverage for an asset may make sense, taking leverage or debt for a depreciating asset may not. The rule of money and wealth, I think is very simple. Don't buy a $500 wallet to have nothing in it. Buy a $75 wallet, put $425 in it. Don't go broke, trying to look rich and debt nowadays has a lot to do with that. So being mindful of the perspective you have on debt matters a lot. And the fifth item I wanna bring up of the top five questions, and this is again a generic question mark, that I've kind of built together and summarized over a lot of client discussions.

(19:36): And in this last week, especially last week in our episode, talking about the six reasons to stay invested, I thought it might be good to talk about five good questions to ask yourself and educate yourself on, or find an advisor to help you with around money in general. And the fifth and final one is when investing in stocks or bonds diversify, there's often better returns and lower risk in investing in large pools of securities than just going and harpooning. One stock. Now past performance will never reflect future gains, but you can look a lot out there around diversification. I know it's an overly used term, but it matters with a single stock. All your eggs are in that one basket, right? If the price falls, when you sell, you lose money in a diversified portfolio that invests in stocks and bonds of companies across the world, really both domestic and international, you lower the chances that a price decline for any one single stock will impact your return.

(20:36): I should also add here when it comes to stocks and bonds and just maybe one other item here is around cash. I think it's important to know how cash works in your overall plan and how you should perceive it largely talked about now during inflationary time periods, right? Cash is not a great asset class, but we still do wanna have an emergency fund as a certified financial planner myself. We go through the board standards right of a three to six months of cash reserve for your overhead. What does that mean? You can look at it from a standpoint of P I T I principle interest taxes and insurance. I'd also add in your overhead for other things like food, stuff that you know, you're gonna need. If your overall overhead, every month is $5,000 to basically wake up and live and sustain yourself. You should probably have summer between 15,000 and $30,000 in just a cash reserve.

(21:26): So for the O sitting there right now with 150, $200,300,000 in cash, really understand your cash reserve need, and you might wanna make sure that the rest of that cash is working for you. Now, that's not a blanket statement for everybody to just go on and act on, but really talk through that with your advisor, to make sure that you know, how much cash you should have and how much cash you should be investing and in a summation here, and to put a bow on this week's topic on the dovetail of last week, five key areas to really understand, as it relates to everything we're seeing topically in the world of understanding confide interest, going back to the basics here, right? Understanding confide interest, understanding inflation under bonds, relative to interest rates, understanding your debt and understanding investing in stocks or bonds and diversifying. Once you learn how to spend your money to make more money in a lot of those categories becoming wealthy.

(22:22): And again, wealthy is a matter of perspective for each person, but becoming wealthy is just a matter of time. And time is really the key thing that I think everyone should know about when it comes to investing and overall money. The sooner you do it, the better time is your best friend. Now, something I've said often, and I'll end with this is it's not about timing the market. It's about time in the market, which is a lot to do with our conversation last week, around looking long term, looking through the window here as to what we're seeing around the world, we are doing that for our clients. I do hope anyone listening right now is actually making sure they're having conversations with their advisor. We like to make sure we reach out on quarterly calls, quarterly discussions, perspectives that we like, right. Staying in communication around world events.

(23:12): Like what we're seeing is vitally important. And I wanted to spend this week a little bit on touching on some of the stuff we saw in the past week with regards to the conflict in Russia and Ukraine, the state of the union address. Again, it wasn't to be political. It was just to kind of give a perspective on what we're seeing future forecasting out in, into the world of 20, 22 and beyond. And then talking about some of the basics of confide interest and inflation and bonds and debt in the market and how those things matter. And to find out more about us or more on these subject matters, you can go to our website@onecapitalmanagement.com. I wanna thank you for listening to the, make your money matter show and before acting upon anything discussed today, remember speak with a financial advisor near you. And if you're not sure where to turn and you'd like our help, you can visit us@onecapitalmanagement.com. Give us a call it'll five four zero nine eight one five zero. And remember, always make your money matter.

(24:12): The information in this podcast is educational and general in nature and is not take into consideration the listener's personal circumstances. Therefore it is not intended to be a substitute for specific individualized financial lead goal or tax advice to determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision.

The information in this podcast is educational and general in nature and does not take into consideration the listeners' personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.

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