Listen Money Matters - Free your inner financial badass. This is not your father's boring personal finance show.

The media loves to talk about the economy in a broad sense but what does it mean for us individually? We’ll explain how the current economy is affecting your wallet. There are four major economic topics that are generating most of the ink in the past several months. What’s happening in the current economy and should we worry? Debt There are two types of debt that continue to grow. National Debt The national debt stands at $21.3 trillion. At its current rate of growth, by the year 2028, it will be almost equal to the size of the entire U.S. economy. Should we worry? Well, yes and no. It’s a bit like climate change. We can continue to kick the can down the road, so it doesn’t affect us too much in the short term but long term, this kind of unrestrained debt can have dire consequences. This amount of debt threatens programs like Social Security and Medicare. These kinds of so-called “entitlement programs” now account for almost two-thirds of the federal budget. It will be hard to cut national debt without making significant cuts to entitlements. In our country’s existence, we have never found the limit where the national debt becomes too much. If we can’t find the limit on our own, some kind of catastrophic economic correction will find it for us. Continuing to kick the can down the road this way is immoral. But that doesn’t concern the Boomers whose motto seems to be, “I got mine, fuck everyone who comes after.” Like climate change, by the time the national debt is a problem, they’ll be dead.  Ironically, our mad spending on defense now may threaten national security one day. All those shiny new toys the DOD buys now when our national security isn’t at risk from the kind of things they can defend us from means that if the day comes, we are under physical threat, they won’t be shiny and new anymore.  But there won’t be any money left for new ones. We need to worry about the national debt because politicians aren’t. Again, all that pork barrel spending gets them reelected, but when it’s time to pay the piper, they will be long out of office and long dead. All that said, should you stay awake at night worrying about this? Not for now. Household Debt Household debt in the U.S. is also at an all-time high, $13.2 trillion. Most of that is mortgage debt which can be considered “good debt.” Economists are not bothered by this, explaining that this is largely due to inflation and increased population. And the growth is not as rapid as it was before the financial crisis when mortgage debt increased on pace with housing prices. But Americans now have “layers” of debt obtained through a variety of lenders. Personal loans hit a record $120 billion. What is driving this? Online borrowing which has made getting a personal loan as fast and easy and placing a Seamless order. In 2010, online loans accounted for just 1% of personal loans, that number is now 36%!     Economists are also not concerned about this. Many of these loans are taken out as debt consolidation loans which wh...

Buying a home is still the American dream for many people but with home prices going up and up, how can you save up for a house without sleeping in your car? With the median home price in the U.S. at $188,900, it seems impossible. How the hell does someone save up for a house? It’s the American Dream Buying a home is such a part of the American dream. It seems like once you reach certain milestones that are considered part and parcel of being an adult, every which way you turn, someone or something is telling you to buy a house, you must buy a house! But should buying a home still be a part of the American dream? The dream of home ownership was something that came after World War II when everyone came back and they built all these houses. Homes came to represent personal success and security, an ideal real estate and mortgage agents perpetuated. “It’s good for the economy to buy houses, but that doesn’t mean it’s actually good for the person that buys it.” Home prices in Boulder, Colorado are up roughly 69% over the past ten years and up around 43% in Hoboken, New Jersey for the same period. With so many people struggling with credit card, student loan, and medical debt, how does anyone save up the 20% down payment? Is buying a home still a good idea and if it is how can you save for a house? Do You Really Need 20% Down? You can certainly buy a home with less than 20% down. Through an FHA loan, you can do it with just 3.5% down. But should you buy a home if you don’t have 20% for the downpayment? No, you shouldn’t. Without 20%, you’re going to be stuck paying PMI, primary mortgage insurance. PMI typically costs from 0.5%-1% of the entire mortgage amount on a yearly basis. You can ask your lender to remove PMI when the mortgage has been paid down to 80% of your home’s original appraisal value, and once the mortgage balance is down to 78%, the lender is required to remove PMI. PMI isn’t the only reason at least 20% down is ideal. A bigger down payment means a smaller monthly payment and paying less interest over the life of the loan so putting 20% down saves you money in the long run. There is a workaround though, and it’s called a piggyback loan. Your first mortgage is for 80% of the cost of the home, a down payment of just 10% is made, and the remaining 10% comes from a second mortgage loan that comes with a higher rate of interest. This strategy allows a buyer to avoid PMI. Hidden Costs of Buying and Owning a Home It’s not just the down payment you need though. People feed their numbers into a mortgage calculator and see that they could be paying the same or sometimes less each month for a home than they are for their apartment. Those calculators don’t tell the whole story though. There are a lot of hidden costs in buying and owning a home. Inspection costs, closing costs, property taxes, and maintenance are just a few of them. A much more realistic calculator is this one from the New York Times. Plug your numbers in the NYT calculator and then a generic mortgage calculator and see how different the numbers are. I did that. The generic calculator showed my only cost as the downpayment which wa...

If you want to know about 401ks, cash, rentals, and leveraged buyouts, we’re covering it with five awesome questions from you. We have awesome listeners, and they send in great questions so from time to time we like to do a five questions episode. Question One Just found you guys a couple of weeks ago and have listened to several episodes. I am trying to increase my personal financial knowledge, and I have enjoyed your podcasts. Maybe my question will  make it onto a future five awesome questions episode. My employer offers a 401k, and we have the option of either putting it into a Fidelity or TIAA account. Initially, I thought I would go 50/50 with each. However, in my mind, it seems that having it all go to one account will be better because there is a larger lump to gain interest on. However, if both companies perform the same, would the 50/50 strategy yield the same amount of gains over the long term? Thanks, Jason from Utah We believe in keeping your finances as simple as possible and having two 401ks makes things more complicated than they should be. Take a deep dive into both funds. One may have a better selection of investments than another, but often you’ll see a lot of crossover. The main decider should be the fees. Investment fees can eat up a huge chunk of your wealth over time. Personal Capital can show you exactly how much you’re paying in fees and the long-term implications. Question Two Hey guys!!! I’m a new listener to the show, and honestly, I love the content that I hear on every episode. I met an individual who is involved in FOREX trading. He gave me a lengthy elevator speech about how it works and how he makes X-amount of money doing it, and I should come to his event that he hosts to further explain Forex trading. Do you have any suggestions about this particular investment? Is it worth the time for me to go tomorrow or should I just skip it and do more research on how I can reduce my credit card debt? I searched on your website and didn’t see this so maybe you guys could cover this on your show? If not, it’s cool. Keep up the great work and look forward to hearing what you guys are drinking next!! P.S- if I want to start looking into drinking beer, where would be a good place to start? Also, if I want to look into HEALTHY beer, do you have any suggestions? Babatunde Shekoni Paying off credit card debt should always be your priority. There is no investment that is going to make up in returns what you’re paying on credit card interest. Anyone who invites you to a seminar is either a sucker or a scam artist. Do not attend! FOREX means foreign exchange. You can buy one currency and sell another. This is the opposite of our set it and forget it investing strategy and almost a sure way to lose money. If you’re new to beer, go to a brewery and order a flight. You’ll get several sample sized glasses of different beers so you can try each and start to get a sense of what you like. If by healthy you mean won’t get you drunk quickly, look for a low ABV beer. Founders All Day IPA is just 4.7% alcohol by volume. If by healthy you mean a gluten-free beer, try Omission. All their beers are gluten-free. Question Three Hi! My questions lie in the fact that my business is teaching yoga and most of my income comes in the form of cash. When you look at my income on paper at tax time, it looks as if I am very very poor.

When you make big money mistakes, you have to make big changes. We have both for you today, big money mistakes + big changes. If you’ve listened to LMM from the beginning, you’re going to hear a familiar voice today. If you’ve never heard our early episodes, the voice is going to become familiar. He’s Back Matt was the original co-host of LMM and was there for about the first 250 episodes of the show. He and Andrew disagreed about the direction of the show, and after a frustrating recording session, things blew up, and Matt left. But like Liz Taylor and Richard Burton, Andrew and Matt just can’t stay apart. A New, Old Direction LMM started out covering the basics of personal finance and overtime, the topics we cover have grown more complex. Andrew and Thomas both have such a high level of understanding the complicated financial topics that it was only natural the show drifted in that direction. If you’ve been with us since the beginning, this was great. You grew with the show, and from the solid base we built up together, you could grasp these high-level concepts. But new people find the show every day and they don’t have an understanding of the fundamentals. This is what Matt was always good at; he was the avatar for the new listeners who were coming to a topic with little or no knowledge. If Andrew got a little too deep too fast, Matt could point it out, and they would walk it back together. Some Upcoming Topics Some of the topics we discuss in upcoming episodes will be things we’ve covered before, but we’ll break them down to the ground. Things like buying a home, health insurance, how to responsibly use a credit card, the best tools for managing your finances, and ways to make extra money.  We will also cover some new things like how to accumulate and use credit card rewards. Thomas Thomas started with LMM the same way I did, as a fan of the show. He developed a relationship with both Andrew and Matt and made a few appearances on the podcast. One Monday there was no new episode, and Thomas knew something was wrong. He spoke to Andrew and Matt and offered to step in as co-host. It’s not overstating thing to say that had Thomas not stepped up, LMM would be long dead. He not only agreed to come on as a co-host but he worked for more than a year for no pay.  All of you and all of us owe Thomas a significant debt of gratitude. He certainly played no small part in giving me the life I have today. LMM is my full-time job, and the same is true for Andrew and Laura. Speaking personally, he stretched my abilities. I was sweating while trying to understand block chains but I learned a lot. As most of you probably know, Thomas has his site and podcast, College Info Geek that are taking up more and more of his time. He needs to spend more time with his baby now. Big Money Mistakes Even the most financially savvy among us are not immune from big money mistakes. Thomas Thomas found LMM while he was still in college and credits the show with helping him to avoid a lot of the big money mistakes young people often make. While he hasn’t made a mistake that cost him money, he did learn a lesson about buying individual stock. Thomas used

Money is essential, but it shouldn’t consume your thoughts or your life. We should live with money, not for money. This is a podcast about money, but we also believe that money shouldn’t be the most important thing in your life. We have to live with money, but there is more to life than accumulating as much money as you can. Life is Not About Money What if we were to value other things in our lives in the same way or even more than we value money? Imagine if it weren’t about money? What if we viewed money for its actual intent, survival? Can Go Both Ways When most of us think about being obsessed with money, we think of making money. But some people are obsessed with saving money. There is nothing wrong with being frugal, especially if you have debt you’re trying to pay off. But some people take being frugal too far. Buying two-ply toilet paper and splitting it into one ply isn’t frugal, it’s cheap and gross! Why not go all in and use old corn cobs? And at some point, isn’t your time more valuable than whatever small amount of money you’re saving by grating bars of soap to make your own laundry detergent? Wouldn’t working even a minimum wage job pay more than you’re saving by extreme couponing and pretending that’s a job? Your Buying Diary A piece of advice often given to people wanting to lose weight is to write down everything they eat or drink, all of it, the lick of the sauce spoon while making dinner, the rest of the chicken nuggets you ate from your kid’s unfinished plate, not just what you had for breakfast, lunch, and dinner. People are often shocked and even embarrassed when they look at what they eat in stark black and white. Do the same with the things you buy so you can reflect on how you spend money. How you spend money is a reflection of who you are and what your values are. What would your spending say about you to a stranger? Is that how you want to be seen? Fueling the Consumption Look back at your past spending decisions and your current financial commitments. What of those things bring you happiness and what are just a vestige of previous decisions. You bought an expensive car and a house. Why did you do that? Because they were the next things on the list of “Stuff Adults Do?” Who made that list? You? Your parents? Your peers? Society in general? A big car payment and a mortgage are like a ball and chain. That’s not to say owning a home is a bad idea for everyone but for young people who might move around with their career for several years, there are more affordable, less committed options. Being chained to your lifestyle can mean being chained to a high paying job you hate. Reigning in lifestyle spending affords you the ability to take a pay cut to do a job that would be more meaningful and enjoyable. You’re stuck in that job though because it fuels your consumption. The FIRE Movement Lifestyle doesn’t necessarily mean spending a lot of money; It can mean you’ve become too invested in the FIRE movement.  The idea of this movement is to cut your expenses and maximize your savings to allow you to reach financial independence and a very early retirement. The movement calls itself FIRE—short for financial independence / retire early. The FIRE movement is made up of people around the country who think that you should be wel...

We’re Listen Money Matters, but we’ve never discussed money. Get ready to holla. Dolla dolla bills y’all: The history and evolution of cash. Societies haven’t always used cash to transact business. The evolution of cash is pretty fascinating. The Evolution of Cash Money is around 3,000 years old. Before that, societies bartered. I make candles. You make shoes. I need shoes, and you need candles. I give you some candles, and you give me some shoes. This isn’t a great system though. How many candles are the shoes worth? What if I need shoes, but you don’t need candles? There needed to be a better system. Coins and Paper Currency The first coins were minted by King Alyatttes of Lydia (modern Western Turkey) in 600 BCE and minted with a naturally occurring mixture of silver and gold. Paper bills first appear in China during the Tang Dynasty (618-907 A.D.). Paper currency was first used in what became the U.S. in 1690 and was known as Colonial Notes. The Continental Congress issued paper notes called Continental Currency during the Revolutionary War to fund the militia. U.S. Money The United States and the dollar are inextricably linked, and the dollar has been around almost as long as the country. The First Dollar Inflation had caused the Continental Currency to become worthless, so a new form of currency was needed. Congress created the U.S. dollar in 1792 and designated it our standard unit of money. The term dollar wasn’t coined (ha!) by the U.S. though. Spain had a coin called the dollar. For decades, it was state-chartered banks and not the federal government that issued paper money. This meant that there were thousands of different kinds of currency floating around the country. This was untenable; we needed a single, national currency. The National Banking System To address this problem,  we created the National Banking System in 1863.  It eliminated all those different varieties of paper money that was in circulation and created a system of banks that were charted by the federal government rather than by state governments. The Guys in Suits Counterfeiting was a significant problem and combatting it was the original purpose of the Secret Service. After President McKinley’s assassination in 1901, its duties expanded to include protecting future presidents. The Secret Service does both today. The agency protects the U.S. financial system from crimes including counterfeiting, bank, mail, wire, and credit card fraud. No Reverse Image Search In 1889, legislation passed that required that currency and other securities with portraits also had to include the name of the person portrayed. Only portraits of deceased persons “whose place in history the American people know well” are allowed to be used on government-issued securities. Which is good because none of us want Trump dollars in our wallets. Were there no law already in place preventing such, I’m sure they’d be a thing. Separation of Church and State! We have (for now) separation of church and state enshrined in the First Amendment so why is “In God We Trust” printed on our money? It wasn’t always there. It was put in place in 1955 as a way to distinguish gawd fearing ‘Mericans from the godless commies of the USSR. This is why “One nation, under God” was added to the Pledge of Allegiance too. The phrase was not initially in the pledge; it wasn’t in use before 1954. No More Baller Bills In 1946, the U.S. stopped printing bills in denominations of $1,000 or more, but they continued to circulate until 1969 when the Federal Reserve recalled them. President Nixon thought to have such large denominations circula...

We all make mistakes, but financial mistakes can be especially costly. These are the biggest financial mistakes people make and how to fix them. There are some mistakes you can’t fix, but financial mistakes usually don’t fall into that category. It’s not always easy, but most financial mistakes can be rectified. Joy Liu from The Financial Gym is here to tell us about the biggest financial mistakes she helps her clients fix. You’re Too Vague It’s great to have financial goals, but they have to be well-defined. “I want to buy a house” is not a well-defined goal. When do you want to buy a house, in years, in ten years? How much house can you afford? It’s easy to be seduced by the number you see when you input your numbers into one of those online mortgage calculators. Damn! You could own a whole house for what you’re paying in rent! But there are a lot of hidden costs in buying and owning a home. You need to factor them in to know how much house you can actually afford. Will you be able to come up with at least a 20% down payment? If not, you’ll get stuck paying PMI. If you want to buy a house, understand your real numbers. Once you do that, you can break your goal down into small, manageable steps. You Have No Debt Plan If you have debt, especially high-interest debt, like credit card debt, you can’t just ignore it or throw money at it haphazardly. Know the balance and the interest rate on each card. Use the snowball or stacking method to pay the cards off. We know it’s scary to open your mail when you’re in debt and getting collection notices, but you can’t solve the problem if you don’t know the scope of it. Some of those debts could be relatively small and paid off before they’re sent to collections. Debt in collections is going to really do a number on your credit score. Open your mail and if you’ve moved, update your address with any company you owe money to. If you’ve lost your job, call and let your debtors know. It’s in their interest to work with you. They may be able to lower your payments or put your account in forbearance. In the case of student loans, you may be able to get a deferment. Don’t just start missing payments. Being in debt sucks so it’s understandable you want to pay off as much as you can as fast as you can. But make sure you’re not using money that you need for necessary living expenses like rent and groceries to pay that debt. All you’ll end up doing is going into more debt because now you have to put those things on the very credit cards you’re trying to pay off. Debt repayment should be a regular budgeting category. Too Much Cash There is such a thing as too much cash if it’s sitting around in your checking or savings account making 0.00001% interest. You might think your money is nice and safe there, but it’s losing value because of inflation. Historically, the average rate of inflation in the US is around 3%. That means that any long-term saving and investing strategy needs to realistically plan for a return of at least 3% just to keep from l...

You’ve probably heard the term but might not know what it means. What is an IPO? We’ll explain how they work and whether you should invest in one. There have been so big IPOs in the last decade. Some killed it, and some landed with a thud. We’ll explain what an IPO is and whether or not you should invest in one. What is an IPO? IPO stands for initial public offering and sometimes called “going public”. It’s the first time a company sells stock to the public. Before an IPO, a company is private with a few shareholders, typically the founders and sometimes professional investors. Before an IPO, the general public has no way to buy stock in a company apart from asking the owners to sell to you, but they don’t have to do so. Once a company IPOs, any investor can buy stock in it. Why Go Public? An IPO often serves as a way for companies to raise capital for funding current operations and new business opportunities. The typical IPO raises $100-$150 million. When the company raises money through the sale of stock, they have better financing options. It’s less expensive for a public company to borrow money than a private one because of the public disclosures and accounting oversight that are required for an IPO. An IPO is basically a regulated cash grab for founders and early investors, giving them to cash out or get a nice lump sum. The promise of an IPO can also be a way for a company to attract the talent they can’t afford to lure with salary alone. When the company is private, the founders, private investors, and employees have shares but the shares don’t have much value since they aren’t yet publicly traded. After the IPO, the value of those shares can skyrocket, and anyone who has a lot of them can make themselves very rich when they sell them. Being a publicly traded company also shows that a company has been able to meet the ponderous federal regulations required to be publicly traded and that gives a sense of stability which can attract more investors. When to Pull the Trigger There are some things to consider before deciding if the time is right to IPO; * You can forecast future financial performance. No one can predict the future exactly, but inaccurate revenue and cost projections can negatively impact valuation and the ability to raise debt or equity capital in the future. * The right team is in place to guide the company through its next phase. * Your company is audit-ready. * The valuation expectations are realistic. Not every company is an Alibaba.  * There is a good reason for doing so. * The company has a strategy to grow the business and give potential investors the returns they expect. Even when the time seems right, not all companies are clamoring to go public.  Tech companies are staying private longer. Amazon went public in 1997, just two years after its first round of institutional financing, at a market capitalization of about $440 million. Compare that with on-demand ride service Uber Technologies, which remains private close to six years on and after recently raising $1.2 billion at a whopping $40 billion valuation. Venture capital money is not exactly in short supply. It takes a long time to get a company in a position to IPO. SEC approval can take 6-9 months.

No one can predict the future but based on past events; a market correction is coming. You need to start preparing for a market correction with an opportunity fund. No one can predict the market but we can try to understand the present and try to make the best decisions for the future. What is a Market Correction? A correction is a decline in the stock market of at least 10% from its 52 week high that stops an upward trend. Is a correction a crash? No, a crash is a loss of 10% in a single day. A correction happens over a longer span of time. While no one can predict a correction, we can look to past events to anticipate when the next one might be coming. According to market analytics firm Yardeni Research, there have been 36 corrections in the S&P 500 since 1950 of at least 10%, or about one every two years. What Causes a Correction? You’ve heard the term “irrational exuberance” when it comes to the stock market. It means that investor’s enthusiasm is driving up stock prices to levels that aren’t supported by fundamentals. The market goes up, and everyone jumps on the bandwagon hoping to get in on the profits. When the prices return to where they should be, a correction has occurred. It’s Coming We are in the second longest boom cycle in the history of the US. In exactly 12 months we will be tied for the longest with that boom cycle ending in the dot-com bubble in 2000. The low, slow burn of this recovery prevented things from overheating, and we avoided the fast boom-bust cycles that the economy has experienced in the past. But many economists are predicting a correction and it could much more than 10%, some think it might be as high as 30%. What do they see in the tea leaves that indicate this? A few factors including increasing credit loans, an increase in the U.S. fiscal deficit, doubts about touted infrastructure spending plans and what is shaping up to be a nasty trade war. Other Indicators There are some other signs pointing to an upcoming correction. Shiller PE Ratio Yale Professor Robert Shiller invented this ratio to measure the market’s valuation. Some believe it to be a more reliable indicator than the standard P/E ratio because it eliminates fluctuation of the ratio that is caused by the variation of profit margins during short-term debt cycles. The Shiller P/E ratio is calculated using the annual earnings of the S&P companies for the past ten years. Past earnings are adjusted for inflation using CPI. Past earnings are adjusted to the current dollar. Average the adjusted values for E10. The Shiller P/E equals the ratio of the price of the S&P 500 index over E10. The standard P/E uses the ratio of the S&P 500 index over the trailing 12-month earnings of the S&P 500 companies. In an up economy, the companies have high-profit margins and earnings. That makes the P/E ratio artificially low because of higher earnings. In a recession, profit margins and earnings are low. That makes the P/E ration higher. How can we use this to make better investing decisions? The information can help us devise investment strategies at different market valuations. In an overvalued market (rational exuberance) as we have now, it’s best to sit back and wait. When the correction comes, you can buy while the prices are low. What Ray Dalio Thinks

Over the past several years, ride-sharing services like Lyft and Uber have made a remarkable splash in cities across the country. These ride-sharing services give users a platform to request a ride from freelance drivers who can get them from point A to point B safely and conveniently. The popularity of Lyft and Uber has skyrocketed, especially in markets where taxi cabs are limited, prohibitively expensive, or just plain jerks. Despite their ongoing controversy, the rise in transportation apps like Lyft and Uber are unsurprising in hindsight. Open up an app on your smartphone, input your destination, and voila! Similarly, if you’re looking for a low-cost way to make some extra cash, ride-sharing platforms like Uber and Lyft are a great choice. Still, despite the similarities of these two ride-sharing services, they are not exactly the same, and many people have strong opinions about which one is better. Whether you need a ride across town or you are considering working as a freelance driver for Lyft vs Uber, it’s important that you consider the advantages, features, and disadvantages of each. When a behind the scenes look at what it’s really like to be a driver? Listen to our episode with The Ride Share Guy. What is Uber? Based in San Francisco in 2009, Uber operates worldwide in hundreds of cities. Both drivers and riders use the Uber app to request and accept rides. When a rider requests an Uber, the app will notify the nearest available driver, who can choose to accept or decline the ride. If drivers accept, the app will route them to the location of the ride requester. Once the driver has picked up the passenger (or passengers), the driver’s app will display directions to the destination of the rider. The app tracks the distance and duration of the ride to calculate a rider’s final cost, paying the driver a portion of this amount. One of the most convenient things about Uber is the fact that you don’t need to carry cash or cards with you. Instead, riders can link one of their spending accounts to the app and pay for the trip from their phone. Because of the size of Uber, riders in most larger cities can secure a ride in a matter of minutes. Uber drivers work in a freelance capacity, which means that they are not eligible for benefits or formal employment status. They are responsible for the maintenance of their vehicles, as well as their insurance and license. Because drivers maintain their own vehicles, Uber can maintain relatively low overhead and keep ride prices low. What is Lyft? Like Uber, Lyft is also a San Francisco-based company. However, the company is smaller and currently operates only in the United States. Still, the process of requesting and paying for rides is nearly identical to Uber. A rider requests a driver, who can accept or decline the ride, and the app directs the driver to the location of the rider. Again, navigation, requests, and payment all take place within the app. Comparing Uber vs. Lyft You might be wondering whether there are any major differences between two companies with such similar services. We are here to tell you…Yes! There are key distinctions that can affect the experience of riders and drivers alike. Here are some of the critical factors that distinguish these two ride-sharing services so that you can make the best choice the ne...

There are only so many hours in a day so you need to build a business that can grow while you’re sleeping, on vacation, or working on your next business. You have to do things that scale when starting a business that will take off. While we are discussing scaling a business, there are plenty of other areas of life that you can scale including investing and video games. What is Scale? To scale a business means to create a system, product, or service that can generate more money through some resource that isn’t your time.  Scale is typically used in computer science. We have a website that can support 100 people. How can we scale it to support 100,000 people? Scale is a concept that is meant to support infinite growth. When starting a business, you want to find ways to apply your time and money that are scalable and to shift your focus from things with a hard maximum return to things that have the potential to be infinitely scalable. Scale is Sexy Sexy sells and is why Amazon is such a sexy business. When Amazon recently announced that the cost of Prime would go from $99 a year to $119 a year, they scaled their revenue without doing any additional work or spending any additional money. Amazon Prime is not a physical good, it can be sold over and over, and the price can continue to increase. Those price increases create revenue out of thin air. Things That Scale If you’re looking for a business idea, these are examples of a things that scales. Digital Creations Microsoft coded the first version of Windows once and have since sold it hundreds of millions of time. Windows 7 has sold 450 million copies. Subscriptions How many of us pay for a monthly gym membership we don’t use? Or a domain name that is dormant. Do you subscribe to magazines you don’t read? When you have a business based on subscriptions, retention is more important than acquisition. You’ve switched the customer’s resistance from purchase to cancelation. This is why Trim is such a great model; it’s a business that scales because there is no end to the number of people who have subscriptions they don’t use. Why don’t they cancel them? Because it’s a pain in the ass to do so. Trim does it for you. Podcasts, Blogs, YouTube Channels Each episode of LMM has a fixed cost to create. It’s Andrew, Thomas, Laura, and my time. But once we publish each episode, everything after is profit. Sometimes an episode makes a lot of money, and sometimes it languishes out there. Gangnam Style has been viewed more than 3.1 billion times. From Youtube views alone, it has made $870,000 and more than $8 million in total.  Things That Can Be Automated Things that can be automated are things that scale. The average profit margin for a dry-cleaning business is 150%! It’s not unheard of for the business to make a $1 profit on every article they clean. Why so high? Because almost all of the dry cleaning process is automated and it’s a service that there is always a need for. Car washes are another excellent example. The employees don’t even touch your car; the whole thing is automated. The only expenses after set up apart from low paid employees are water and soap, both of which are cheap.  (As an aside, I have never driven and lived in NYC for 15 years where no one else did either.

You’ve heard the term diversification, but you might not know precisely what it means. Turns out it’s more complicated than just owning stocks and bonds. We are going to deep dive and give you a master class on diversification with Adam Grealish. We love Betterment and today our guest is from Betterment. When you invest with Betterment, your investment is diversified. How does Betterment ensure that diversification? What is Diversification? Diversification simply means having a wide variety of assets in your portfolio. Owning stock in a single company means you have zero diversification. This is the riskiest thing you can do with your portfolio. A diversified portfolio would contain stocks across various sectors and economies, bonds, real estate, and cash or cash equivalents. Sounds Boring. Why Should I Care? Diversification sounds complicated and confusing, plus you have to catch up on Netflix shows, why should you care? Part of successful investing is reducing risk. If you own stock in a single company and the CEO of that company is caught up in a scandal, your entire portfolio is at risk. The way to reduce that risk is to diversify. Multi-Layer Diversification One layer of diversification is to buy stock in more than one company but in the same sector. You only had stock in Apple, so you decide to buy stock in Microsoft. That is one layer. You have stock in more than one company. But both those companies are in the same sector, technology and the tech sector is not doing well. You’re still not diversified enough. A second layer of diversification would be to buy stock in another sector, so you buy stock in Pfizer and Novo Nordisk, those are in the healthcare sector. Tech is not doing well, but healthcare is. Great, you are more diversified. But where are all those companies based? In the US. In fact, 40% of all stock dollars invested are invested in US companies. To further diversify, you need investments outside of the U.S. in international developed and emerging markets. Into Every Portfolio Some Risk Must Fall If you aren’t willing to accept some risk when it comes to investing, you aren’t going to make any money. So how do you determine how much risk to take? Goal-Based Investing Basically, the longer your money is going to be invested, the more risk you can afford to take. An investment started to help you save money to buy a home is going to look very different from one meant to fund your retirement. The house investment will have a shorter timeline and the all the money in it will be used in one fell swoop. The retirement investment will be invested for many years and spent down over a long period of time. The further away your goal, the more risk you can take. Weathering Storms When the stock market and economy take a downturn, people get nervous. Especially when we think back to 2008-2009.  With home prices tanking, the report estimates a loss of $7 trillion in the real estate industry. The stock market decline has brought another $11 trillion in losses, and retirement accounts have lost $3.4 trillion. You can weather the inevitable storms by being diversified among asset classes, sectors, and countries. While the last significant recession impacted most sectors and most of the world, not all sectors and economies move in lockstep. Volatility of a portfolio with N uncorrelated assets,

Almost 50% of Americans cannot come up with $400 if they needed it urgently. 1 in 3 Americans has $0 saved for retirement. In the U.S. it seems we’re much better at spending money then we are saving. This spending problem is leaving too many American households living paycheck to paycheck with close to nothing saved for the future. Americans have a serious problem saving money The savings rate has been falling for most of the past few decades. Maybe we stopped saving when our income growth flatlined after the recession, maybe it’s because we’re being buried in student loan debt, or maybe consumerism has taken over but it doesn’t change the cold hard truth that most people are not prepared for retirement at all.   Americans today save a lot less than their parents and grandparents did a generation ago. The average savings rate for our parents was between 7 and 10 percent and two generations ago, Americans saved 10 to 13 percent of their income. Today the average is 4.8%. Whomp Whomp. So where is it all going?   Chances are, you’re not saving enough Did you know 1 in 3 Americans has $0 saved for retirement? Yeah, that’s a scary number. And 56% of Americans have less than $10,000 saved for retirement and 74% have less than $100k saved for retirement. 100k may sound like a lot of money now but it’s nowhere near enough to retire. If you’re young you still have plenty of time to save for retirement but, you’ll need to figure out how much you will actually need. You can’t just pull a number out of your butt. And if you are already consistently saving for your future, how do you if you’re saving enough? A good benchmark to follow is aiming to replace between 70% to 90% of your annual pre-retirement income through savings and Social Security. For example, if you earn an average of $100,000 per year before retirement should expect to need $70,000 to $90,000 per year in retirement. Want to know how much you need?  Betterment has an awesome retirement calculator that will tell you how much you’ll need in retirement, and what you need to do to get there. Go ahead, give it a whirl. Saving now is easier than saving later It’s much easier to save money while you are young – you know, before the mortgage, 2.5 kids, and minivan payment. You are also more likely to get consistent raises or big bumps in your salary in the begining of your career. Instead of upping your lifestyle every time you get a raise or bonus be smarter with the extra money. Actually don’t even think of it as “extra money”. Pretend it’s not there. That means holding out on getting your own place and living with your roommate a little longer. That means going your local dive bar with the great happy hour instead of the upscale cocktail lounges. Let us be honest – you’re going to drink the $16 cocktail the just as fast $6 beer. That means packing your lunch instead of getting a $15 salad every day. That means driving a beater car for a few more years instead of buying that Tesla. Your retired self will thank you. Or better yet, move closer to work so you can commute to bike in. If you live in a city, don’t get a car unless you really need one. We use

Annuities are not exactly transparent, and neither are the people selling them. They are almost always a terrible investment, and when we explain what the f**k are Annuities, you will understand why and stay far away from them. There is so much misleading information out there for Annuities in no small part because the financial incentives for selling Annuities is very high. We will take an unbiased look at them. We’ve never accepted a dollar from an annuity company, and there probably won’t be any beating down our door after this! What the F**k are Annuities Annuities are a financial product, typically backed by insurance companies and sold by investment banks that guarantee a fixed stream of payments primarily used as an income stream in retirement. This income is taxable just like ordinary income you earn from your job and subject to the same tax rules. You fund the Annuity with your own money either through a lump sum or monthly contributions. Your eventual payout depends on your contributions, the type of annuity you choose and its term. They are often compared to pensions or even directly labeled as “personal pension plans.” You pay a certain amount of money during the accumulation phase that is later paid out to you as fixed payments during the annuitization phase. Tax Deferred  Annuities provide tax-deferred gains that are not all that different from a 401k. However, it’s important to note that they are not 401ks. Investor.gov recommends maxing a 401k and IRA before even considering an annuity for reasons we will get into. A fixed Annuity has a set, guaranteed interest rate, and a guaranteed payout. A variable Annuity depends mostly on the performance of its underlying investments so the payouts can vary from month to month. Often the most popular annuity is described as a “fixed income” style product with quoted returns as high as 6%. This is disingenuous at best and generally a flat-out lie. Technically you would have to live infinitely for the return to hit the sticker rate. “Buying an annuity begins with the immediate loss of 100% of your original investment. So for the first 15 years, the annuity company is simply giving you back your original purchase price. The way most salespeople describe thinking about the annuity discourages investors from realizing that their original money is gone forever. They do this by referring to it as an investment. I would not call it an investment because after you purchase an annuity, your principal no longer has any value.” Why Are We Telling You This? If we don’t recommend Annuities, why are we even talking about them? Because eventually, someone is going to pitch them to you. Andrew and Laura got the hard sell by an Uber driver on the way home from the airport! And it’s not surprising Annuities are pitched so hard. The commission on them can be as high as 10%! There are even Annuity startups popping up, and they can be very seductive, so it’s important to know just what you are being sold. Fear is what you are being sold. It’s often a big part of an Annuities sales pitch although it can be so subtle, you don’t realize it. People can be fearful of the stock market, especially during a shaky economy. Those selling Annuities play on this fear and pitch them as a safe alternative.

The worst has happened. Whether their fault, your fault or nobodies fault, you lost your job. We don’t want to make a bad situation even worse by making big financial mistakes. This is what to do after a job loss so you can stay or get back on your feet quickly. We have all probably suffered a job loss at some point so we know how scary it can be. But there are lots of things you can do to mitigate the damage. Preparing for a Job Loss Sometimes you can see the writing on the wall. Whether you’ve been slacking off at a job, you hate and know the ax is about to fall, or the company is showing signs of distress so dire that you can see it’s about to go under, sometimes you know you are about to lose your job. This is how to prepare for the inevitable. Emergency Fund This is exactly what an emergency fund is for. If you don’t have one, or your’s is a little skimpy, start beefing it up. Before the end comes, you want to have two to six months of expenses saved up, depending on how confident you are in your job prospects. If you are going to save a few months worth in addition to your current emergency fund or are starting from scratch, don’t invest that money. Because the need to dip into your emergency fund is rare and it’s a big chunk of cash, we recommend, although not without some controversy, that you invest your emergency fund somewhere like Betterment. It’s too much money to have sitting in a low yield checking, or savings account for years on end. But you are going to need to live off this money in the very near future so it needs to be somewhere readily accessible which means your checking account since you will be paying bills and other everyday expenses with it. Update Everything Even if you are thrilled and secure in your job, you should update your resume once a year. You never know what opportunity might cross your path and you want to be ready for it. If you have recently completed a big project, update your resume to include it while it’s fresh on your mind. Keep your LinkedIn profile updated as well. And while you’re at it, ask for LinkedIn recommendations from the people at your job (or past positions) who think you’re fantastic. It’s always painful to ask but just do it, most people will agree and may even ask you to do one for them which makes the whole process feel less needy. Google Yourself Nearly all potential employers are going to Google you and what they find might be embarrassing. If you have a Google account, you can control what comes up under your name if you control the content. If you do not control the content, you may still be able to have it removed.  Know Your Worth Understand your worth in the job market. You can use sites like Glassdoor and PayScale to see how much others in similar jobs and similar locations are being paid. Take a look at Indeed to see how many openings there are for your job. If there is not a lot of demand for what you currently do, you may need to learn some new skills that are in demand. This doesn’t mean you have to go back to college or spend a ton of money. There are a lot of free or low-cost sites that will teach you new skills like Udemy and Coursera. After the Loss Okay, now it’s happened. You are officially unemployed. These are your next steps.