033: Stop Worrying About Money with J. David Stein from Money for the Rest of Us

David Stein produces and hosts the top-10 iTunes ranked investing podcast Money For the Rest of Us where he teaches over 25,000 listeners per episode about money, how it works, how to invest it, and how to live without worrying about it.

So let’s dig in. Let’s meet today’s Master of Money….

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A Willingness to Try

Are you willing to make mistakes in your finances if it means possible success in the future? David says that a willingness to try, even if it means failing, has made a difference for him financially. Have you ever heard someone say, “Just do what you’re told and don’t ask any questions!”?

That works for certain areas of life. If you work on an assembly line in a factory, you truly do just need to do what you’re told. But in many areas of life, we should feel the freedom to experiment with what works for us. Dave has taken risks in business, investing, podcasting and running an online membership site.

By no means does David advise jumping off the high dive and risking it all. He advises taking small risks at first so that if you do fail, you don’t get into huge financial trouble. You have to “protect against the downside and capture the upside.” You experiment in small ways to lower your risk.

Growing Up Poor

David didn’t grow up in a wealthy family, or even a middle-class family. He describes his family as “pretty poor.” And he knew he didn’t want to be poor anymore. He wanted to be able to buy things and have experiences, but as he got older he realized that it wasn’t things he wanted. It was freedom.

He began reading books by Zig Ziglar, Napoleon Hill and the well-known book The Richest Man in Babylon. While he hasn’t read those books in many years, and even feels an aversion to them now due to “too many positive affirmations in front of my mirror”, he attributes them with his early interest in financial matters.

Education – In School and Out

David was able to attend college through the use of Pell grants and scholarships. Even though he was the recipient of some scholarship money, he had no idea about seeking scholarships or even preparing for the SAT/ACT. He was one of very few students from his hometown to even go to college.

While college did prepare David somewhat for handling his personal finances, he learned even more as he went to work for an investment advisory firm. Having mentors in the business and learning how they managed money helped showed David how to take what they did and apply it to his own situation.

Avoiding Debt

As a new college graduate and newlywed, David says that he and his wife were frugal for the most part. He does remember getting his first credit card and using it to pay for groceries, which at the time was highly unusual. A trip landed them in debt and he quickly realized that he did not like the feeling of being there.

Eventually, they were able to pay off their home and while David can name all of the “benefits” of having a mortgage, he likes the feeling of freedom more. So they set a goal to pay it off, which David says is what made the process easier. They’ve been completely debt free for the past 10 years.

Real Estate Investing

David and his wife tried the traditional method of purchasing a single family dwelling, turning it into a triplex, and hiring a real estate manager to oversee the property for them. They couldn’t find a manager, so David took on the job himself. And he hated it. They sold that property and instead became an entirely different type of real estate investor.

In the United States, people can invest in rental property through their IRA’s. The only problem is that banks don’t want to lend on them because there are no guarantees, so the rate is around 6%. David put up 50% of the cost of the purchase and the buyer put up 50%. This gives David a 6% return on his investment.

This is a great example of an experiment that David went into that has worked well for him. Because the building was brand new, in a college town, and a high amount of equity was invested by the buyer, David carries very little risk in the property.

Getting His First Advisory Job

David took a pay cut when the firm he was working for moved to another state and he began looking for another job. An ad in the newspaper led him to apply at an investment firm, where he would be hired and grow with the company, eventually becoming an owner.

David wasn’t seeing the financial growth he wanted to see though. Two years in, he was still making $43,000 a year, while advising hundred-million dollar endowments. He decided he was done. The lack of reward for his accomplishments was too much for him to take anymore.

A shake-up in the organization meant that the original owners sold the business and within a year David had become a partner and was on the executive committee. The firm was eventually sold again, only to be bought back by David and his partners in 2005. He left the company in 2012 to do his own thing.

Why David Doesn’t Balance His Checkbook Anymore

When asked what area of his finances he isn’t very good at, David confessed to never balancing his checkbook anymore. Instead, they do an annual budget. They have a good idea of what they spend, so they try not to get bogged down in the details.

David says this is one of the reasons he is debt free. He hates managing the minutiae of finances; things like paying bills and balancing his checkbook to the penny. And since he hates getting mired down in the details of daily money management, David uses a company to manage his money and an online budgeting software to control annual spending.

He does keep a spreadsheet that he checks on monthly, to see what their spending was and how his investments are doing. Because he shares this information on his website, he has to keep up with it more closely.

Planning for the Future

Now that David and his wife are empty nesters and they have enough money for life through the sale of his part in the company, what is he working on for the future? Any big goals or dreams?

He says not really. Although he does want to get his podcast and website to the point that he is making enough for them to live on without touching any of the money he receives from the company sale. It looks like that will happen for him next year.

David admits to not being particularly goal-oriented. He isn’t one to write down a list of goals at the beginning of the year. Rather, he has projects he works on. This year it was developing an app for his members. But he says his main goal is always to find ways to help others and serve them.

Living a Life of No Regrets

David’s family has lived what many would call an unusual life. He spent many years telecommuting for work. He and his wife have homeschooled their kids mostly through unschooling. They’ve always been comfortable doing things differently and they plan to continue doing so.

He does admit that they made mistakes along the way…like building that big, expensive house they couldn’t afford. But he doesn’t regret it. He says, “You cut your losses and you move on.”

Show Notes

• 01:20 How a willingness to try, and fail, has helped David achieve financial success
• 03:02 How growing up poor inspired David to make better choices with his money
• 05:35 What David didn’t know about preparing for college and his education on the job
• 08:15 What his spending habits were like as a new college graduate and newlywed
• 11:10 How capital gains taxes have changed since the 90’s
• 12:25 Why real estate management didn’t work for David and what he does instead
• 15:15 David’s first advisory job: buying a company, selling it and buying it back again
• 25:00 Why David doesn’t balance his checkbook anymore
• 26:55 How selling his part of the company changed David’s investment strategy
• 31:00 What David does with the company payout he receives each December
• 33:00 How David manages his money without having to deal with the details
• 34:30 Freedom and flexibility over goal setting for the future
• 36:30 Living a life of no regrets

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Links/Terms/Concepts from the Show

• Zig Ziglar
• Napoleon Hill
• Deed of Trust
• Investing in Stocks
• Fund of Funds
• PeerStreet
• Schwab
• Mint

Full Transcript

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This show is part of the FinCon Podcast Network and was produced by Steve Stewart.