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Having financial and investment knowledge is good. But it doesn’t help make more money in the market unless you have wisdom.

So what’s the difference? 

Knowledge is what you know. But wisdom is how you apply what you know to your real life. 

In this episode, I’m revealing how you can turn your knowledge into wisdom so you can experience a life full of wealth (even if you’re broke right now). Listen now. 

Show Highlights Include:

  • Why learning more about the stock market doesn’t help you make more money from it (3:26)
  • The counterintuitive way it’s more profitable to lose all your money in the stock market than to avoid investing completely (7:50) 
  • Don’t have extra money to invest? Here’s the simple 4-step process that makes your money work for you in your sleep (10:41) 
  • How some people making 6 figures still live paycheck to paycheck (and how to prevent this even if you make less) (12:17) 
  • How compound interest transforms your $400 car payment into almost $600,000 (18:52)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are. At whatever stage in your career you are in, in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors here at ONE Fire and Police are dedicated to ensuring you not only take control of your finances and build the life you deserve. Before we get started today on this week's episode of Pension Attention and to find out more about myself or Toby Rodriguez or our advisory team here at ONE Fire and Police, you go to our website PensionAttention.com or give us a call. You can call us at (805) 409-8150. Let us know, leave us a comment, let us know what we're doing. It's always good to get feedback. And as I say every week, if you like the show, tell someone you like, if you don't like the show, I guess tell someone you don't like, but share the podcast. Because the idea with this platform is to be able to get to each one of our clients. Those are prospective clients, who've heard of our firm because we talked so much about financial management, what wealth management is to an individual person, a family, an endowment fund, a company. Here at One Capital Management, we serve so many different clients. We get a, a bird's eye view, almost of everything that's going on. And that's what this week's episode is dedicated to and here's a quick example of what I mean by that. [02:03.3]

Alphabet letters, vowels, consonants, all formed into words, sentences, paragraphs books and everything from spoken signed, whispered written printed. I mean, from friendly advice, we get from colleagues to our neighbors, to our family, all having to do seemingly with facts and figures, especially when it comes to money. This friendly advice, you know, even to in passionate speeches, by someone you follow on Facebook or some social media platform, they're all constantly sent and received with literally each sender trying to impart knowledge and wisdom. Wouldn't you agree? Now woven into the fabric of humanity is the desire to learn and understand. Our minds set us apart from say animals. We analyze reconceptualize, theorize, discuss, we debate everything from science to the supernatural. We build schools, institutes, and universities. We're literally educated teachers can help us learn about the world and about life. We are constantly seeking knowledge and wisdom.

Now knowledge is good, but there's a vast difference between knowledge basically having the facts and wisdom, appropriately applying those facts say to life. We may amass this incredible amount of knowledge, but without wisdom or knowledge is useless, we must learn how to live out what we know. And if thinking about this and in discussing this for today's episode. By the way, this episode really came from the past couple of weeks in my own review meetings with clients, with conversations with prospective clients and with discussions with my advisors here at One Capital Management, there's a lot going on in today's world. We are thrown facts and opinions and figures, and we have to disseminate all of this information. It reminded me of the wisest man in the world. Who do you think that is? Now many of you can probably debate it, which by the way, is the irony of this week's episode, right?

But to me, it's Solomon, other than him being a king and literally the richest man that's ever lived. I mean, you think Besos, he trumped bass house and other than him being a king, he wrote some of the biggest books in the Bible from Proverbs to Ecclesiastes, to song of songs. And in these books, he gave us some practical insights and guidelines for life. Now in the first of these three volumes, Solomon passes on his practical advice in the form of Proverbs. Many of us quote these daily without even realizing it comes from the book of Proverbs. A proverb, by the way, is a short, concise sentence that conveys moral truth. The book of Proverbs that Solomon wrote is a collection of these wise statements. The main theme of Proverbs, if you look at it, as we all might expect is the nature of true wisdom. He then goes on to proceed to give essentially hundreds of practical examples of how to live according to that wisdom. Proverbs covers a wide range of topics, including youth and discipline, family life, self-control, and essentially resisting temptations, business matters words and the tongue and how we use what we say, marriage seeking the true wealth and poverty immortality, and of course wisdom.

So, these Proverbs are short poems, usually in a couplet form containing a mixture of common sense and timely warnings. Now, why am I bringing this up to today? I think more than ever, when we look at the difference between facts and opinions and disseminating the truth, finding your truth is a really important factor. And when it comes to your money, understanding the context in which your financial planning, your wealth management, your investing lies is important. And before we start looking to our politicians for answers, we might want to start looking within and make sure that we design what we need for us to secure ourselves. That's where I always talk on this show. And we believe heavily here at One Capital Management for the, all the clients we are blessed to be able to serve is to be able to find that partner, that advisor, to help you through and maintaining the stress levels that you might be having around your money. Understanding what true wisdom is around the context of planning for your retirement or planning an investment portfolio.

Anything about politics I mean, you gotta look almost back to the Groucho Marx comment around politics the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies. We don't want to fall into that trap. We want to make sure that we listen to what's out there knowing what's going on and find good counsel. By the way, Proverbs 15:22 states ‘Plans go wrong for lack of advice.’ But with many advisors, it brings success. So, understanding wisdom and where this counsel comes from is important. Now, again, like I said, Solomon was to me, the wisest man that's ever lived. And to many, it is maybe not for you. What I'm trying to say is the facts and opinions that matter for what you are bringing to the table when it comes to the context, which I'm going to say a lot in this episode, because it matters when you're looking at things from investing to overall planning.

And for many listening right now, when you're looking at the world of investing or planning, you're almost thinking why would I even bother that is just a game that I do not want to play. Don't understand, I'm getting fed all this information that the world is ending, or there's so much corruption or this, that, and the other. This is why I want to write this episode where I'm talking about wisdom and truth, understanding what your context of that is. Because one of the biggest detriment that anyone can have, and if you're listening right now, especially as a younger person, starting their career, maybe in their twenties or thirties is inaction. It has been said, the cost of inaction is almost always greater than the cost of a mistake. Reminds me of the Teddy Roosevelt quote, which I always loved, “A man who never makes a mistake is a man who's never done anything.” And Solomon again, the wisest man in my world actually wrote about this in his book of Ecclesiastics, “Because life has no guarantees, we have to be prepared.” Wouldn't you agree? That's where planning comes in. We can't guarantee a rate of return, by the way, if anyone does run, please be careful.

Understand that investing has risks. Life has risks. Managing that risk is really what a risk manager does. And essentially when you look at an advisor or an investment manager, that's what they are, they're risk managers. In a discovery meeting that we have with a client, a prospective client here at One Capital Management, we'll go through a lot of quantitative data with them, understanding their income maybe, their outflow with their spending each month or each year, their debts, their assets, ages, career, a lot of numerical data we'll talk about. But you know, we'll also talk about which is equally as important is the qualitative data, the interest goals, relationships, hobbies, and ultimately values. Those are as important to know about a client. And if your advisor isn't looking at that or asking those questions, make sure you find someone that does, because those are equally as important as your numerical or quantitative data, the numbers, and everyone wants to make you feel like you have to understand the market. And yes, there's a good education should be around that when you talk with your advisor, but there's also something you need to understand in that meeting with an advisor is to help guide you through these waters. Navigating between again, these facts and opinions and truths that are out there because there's plenty of them and depending on who you want to follow, whether it's on social media or an economist you want to follow, or maybe it's your neighbor or some water cooler conversation, you're having with a colleague at work.

Remember that all information that you take in each day, your mind and your body relate to that information. It disseminates in its own way, basically with its own filter. So, letting that out and seeking counsel helps again, disseminate what is right to you for your planning and for your investing. [09:43.8]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the DROP program? Go to www.pensionattention.com to find out how we can help.

And as I was talking about Ecclesiastes is one of the books, that's all in the route. Many people understand Ecclesiastes these to be kind of this Debbie Downer book in the Bible was kind of this like, oh, life is meaningless and that's the last chapter of it. But if you really look through the meat of it, he might have, it wasn't a supportive, a stingy despairing attitude. I mean, just because life uncertain doesn't mean we should do nothing. We need a spirit of trust and adventure facing life's risk and opportunity with enthusiasm and some faith maybe
And for those listening right now thinking, you know, I really should invest and get out there, but I don't have money to invest. Well, tell you what, here's a couple of steps to start. One print out your bank statement from last month. Two highlight every single expense that was a, what you would categorize as a “Want.” Then three calculate the total amount you spent on all those wants. Four next month, reduce your wants by 25%, then increase your investments by 25% and then go to bed knowing your money will be working for you while you sleep. BOOM, try that can't hurt. I've had a lot of conversations with some prospective clients lately around, I don't know if we have enough money to invest, I'm not sure where we at. And I’ve always told clients this, something we believe here's is a value is it's not necessarily the amount that matters so much as it is the intent to want to grow within your investing world. Take that risk. Find that counsel to be able to build the plan that you want to build. Shying away from it, isn't the answer. I know that's the easy one because it's uncomfortable. And just by not looking at as a little more comfortable means, you don't have to worry about it right now. And you can just kick that can down the road. It will come back up. I promise you. You ask anyone who's 10, 20 or 30 years older than you are right now, whatever age you are. I can promise. You'll talk to them. If you bring up the concept of money or investing or saving, they would say man, I wish I started earlier.

And so, I've dropped a couple ideas for those of you listening, who may feel they don't have enough to invest or I’m not sure I'm spending so much in living right now. There's always a way, it just depends. If you want to put the effort towards it. Now take some facts and figures for a second, since we're talking about some things out here, like this. One in four people who make 75,000 to a 100,000 live paycheck to paycheck. One in six people who make a $100,000 to $200,000 live paycheck to paycheck. One in 12 people who make over 200,000 live paycheck to paycheck. You're probably going Brad, why you're saying that? Key takeaway learn to manage the money you have today, so you can effectively manage it later. The steps you're going to put into today's world for you right now will impact you later. In fact, one of the episodes we talked about, this was the ripple effects that happened with one seemingly innocuous decision you might make today. Maybe it's listen to this podcast today and it's like, you know what? I do want to dip my toe into understanding how much I should live on how much I should save for short term midterm, long-term, what those even mean, I should reach out to someone to help me with that. That's where advice comes in.

There's a book written recently called The Psychology of Money was by a guy named Morgan Housel. It’s actually a book introduced to me by a good friend of mine. And I've read it multiple times now, it's fascinating. So, I do recommend downloading the book again, called The Psychology of Money. And one thing he talked about save money, he goes less ego, more wealth. Saving money is the gap between your ego and your income and wealth is what you don't see. For any of you, young people listening out there right now that's important. Even if you are in your sixties or seventies or eighties listens right now or on the radio program, when I talk about this, it's really important to know that what you have going out matters just as much as you're earning in say your portfolio. Managing your income and your outflow has a lot to do with how much you can save where your risks are when it comes to investing and making sure you don't get caught up in the trap of keeping up with the Joneses is really what Morgan was talking about when it comes down to the ego side of things, when it comes to your money.

And when it comes to ego, let's just put this on the table. In nearly 20 years of being a financial and investment advisor for clients, I've noticed a few things. Someone who makes $20,000 looks at a person making $50,000 as balling. Someone who makes $50,000 looks at someone who makes a $100,000 as balling someone who makes a $100,000 looks at that person making $500,000 as balling. There will always be someone ahead of you. Just do you. Start today and don't look over your shoulder just yet. Make sure you manage all the things that come into your finances. And by the way, again, I'm going to say this many, many times today. The context around your planning has very little to do believe it or not with your colleagues planning, your neighbors, even your family members. Your specific and unique planning has to do with you, your immediate family, your spouse, maybe your kids, and understanding how many topics that get discussed, things like savings, investing debts, things like buying a car or buying a house or even credit cards, managing cashflow. These all come into play when it comes to building a retirement plan. So, if you haven't done that or are shying away from it. As I mentioned before, inaction is more costly. The ripple effects the small again, seemingly innocuous decisions we make matter.

Even down to the wisdom that to me, the wisest man in the world, Solomon was writing about when it comes to don't shy away from things in life, even though life's going to throw a lot at you. And right now, why I thought this was a timely episode to have, we're seeing a lot going on politically, geo-politically in our markets, everything from interest rates to inflation rates, lots being discussed. A lot of facts, figures are gonna come. We have to disseminate, those facts and figures and make sure it works for what your risk tolerance is, what your planning is, everything from your time, period, your timeframe to your overall objectives and goals. And if you don't know, Brad, what are you talking about? What are my goals and objectives, that's where a discovery meeting with a good credentialed advisor will sit down with you and help you build that. It's amazing when you can create this roadmap for yourself, I can't tell you how joyous it is each and every week when we build what we call our Blackbook our wealth forecast for a potential new client. And we build that forecast for them. Seeing the joy that comes from understanding that these are their numbers and potentially your numbers looking at this, it makes all the world of difference. It's taking all that noise and I'm gonna call it that for right now, all the noise that's coming from media outlets, everything from facts and opinions, all the data, again like on macroeconomics or political or geopolitical, all that stuff that's out there, bringing it down into a two-page format, very simple that puts into your numbers, your goals, your objectives, your values, your interests, all of that comes into play and seeing it all of a sudden, the light bulb clicks. I see it each and every week with our clients.

And that's why I'm so passionate about talking about investment management and planning, especially on a podcast or on a radio program or with all of our clients, are those that call in to set meetings with us. It's really important to know that that's our objective is to make sure you feel at ease with what your planning is and we'll help you get there. And with all that said today, never be so busy comparing what you have that you forget how fortunate you are to have it. Just take a look at the world around us today. We need to be fortunate and take good stewardship. Something Solomon talks about when it comes to wisdom, take good stewardship and ownership and believe that plan can be put in place and find that counsel to do it. Listening to the last person that said something on some social media influencer account may not be the right approach. Reach out, seek counsel, seek, help, understand how that's going to fit for you because end of the day, your money matters. And knowing what to do with your money is vital to the success of your overall financial life. And your success, believe it or not, depends on the risks you take. Your survival in life in general, let alone in the financial world, your survival depends on the risks you avoid. If your success depends on the risks you take and your survival depends on the risks you avoid, understanding your risks is pretty important, wouldn’t you say?

And with that before we end today, I want to talk about something that I learned probably when I was like 20 years old. I was a sophomore in college. I had my license at that time. I was working at a broker dealer, managing clients. I started very young and I was very fortunate to learn something very early on. I remember this vividly. I signed up for a car loan, it was like $20,000. It was big money for me because I had zero money at the time. $20,000 in the payment was like $400 a month. I’ll never forget this. And I was shown by our then investment manager at my old firm, the idea of present value, future value, and the overall idea of compound interest. And it changed my world forever. At that time, I signed up our $20,000 car loan for a $400 a month payment. And showed me what an 8% as a hypothetical would grow to with that same money spent over 10 years, almost $75,000. Over 20 years, almost 235,000. Over 30 years, almost $600,000. It was never the same for me after that, ever again. Understanding those payments instead of paying for the car, a depreciating asset, I wanted to find things that are appreciating and build my life from there in the financial aspect.

And if that's you, there are a lot of tools out there to find that wisdom and that knowledge, something we spoke about at the top of the show today. Understanding what knowledge is, and then put it to use with wisdom that wisdom comes with counsel, seek that counsel. Find that person you want to build trust in, find that fiduciary advisor who's there for you to help you combine the knowledge that you might have and where you're going with it, with the wisdom of someone who's been there, seen it and combine those two things. I still think to this day, the guy that showed me those kinds of numbers and how to work them in different lights. And it made me unbelievably happy to know that it can be used in a different way. We were so ingrained to just spending money on something that I thought I needed member that wants category. And yes, I needed a car, but I may not have needed a $20,000 car, that was probably unnecessary. I could have gotten away with something that was much cheaper with a much less monthly costs and taking the spread the Delta there and invested it, that's what I did.

So, if you are thinking about that and it is causing some level of, I don't know, which then evolves into some stress or anxiety, reach out, you can give us a call at (805) 409-8150. You can also go on our website at PensionAttention.com and set some time with myself, Toby Rodriguez my advisor partner, or any one of our staff here, we're here to help. And we're here to help you reduce those stresses when it comes to your deferred comp plan. And again, if any of those seven things work for you, let us know, it's great. A lot of those aren't items that we haven't heard before, but it was just interesting that list that I was reading again from Jamesclear.com was very cool because I thought it was just seven. Again, I'm a somewhat of a nerd. It was scientifically proven, not just something you hear from a friend like, oh, you should do this. Or, you know, rub CBD on that. You know, everything we hear about nowadays, these are scientifically proven methods to look at. Now with that, there are questions that come around when it comes to money. And again, those are questions that can be answered and reach out (805) 409-8150 or again, you go on our website at PensionAttention.com.

Thank you for tuning into our episode of pension attention this week before acting on anything discussed today, remember speak with a financial advisor near you about your specific situation or again, if you'd like our help, you can visit us at PensionAttention.com or give us a call (805) 409-8150. Have you asked yourself recently, do I have too much cash? Well tune in next week to Pension Attention, we're going to be going through that exact question. I'm looking forward to it until then stay safe.

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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