035: The Secrets to Investing Success and Building Wealth with Author Dr. Daniel Crosby
Educated at Brigham Young and Emory Universities, Dr. Daniel Crosby is a psychologist and behavioral finance expert who helps organizations understand the intersection of mind and markets.
Daniel was named one of Investment News “40 Under 40” and a “financial blogger you should be reading” by AARP.
Daniel’s second book, Personal Benchmark was a New York Times bestseller. His latest book is The Laws of Wealth: Psychology and the Secrets to Investing Success.
In this episode, Daniel and I discuss how he’s made the most of his degree and career path, how he talks to his kids and wife about money, his financial screw-ups (like buying too much house) and successes…
…and we get into his ideas around actively investing that 10-20% of your portfolio that might be available for a more aggressive approach.
So let’s dig in. Let’s meet today’s Master of Money….
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I hope you enjoyed that. A big thank you to Daniel for giving us the gold today.
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Pimping the Degree
Daniel noticed that some of the folks who graduated with their PhD. have had to take other jobs or even join the military to have enough to pay the bills. He has been strategic in promoting himself and his education in order to get himself in front of more people.
While some may think they need an advanced degree or more training to see success, Daniel believes that you can use what you have and make cool things happen.
So what does it mean to “pimp your degree”?
Daniel uses the term to mean going more against the cultural norms. So if you have a PhD. in psychology, the norm would be to go work at a counseling center or go into private practice. Pimping your degree would be taking the building blocks of your education and using them to do something innovative.
Escaping the Norm
Daniel is using his degree in psychology to work in the field of finance; specifically studying investing and why people make the decisions they make. He also teaches people to make more money through their investments by making smarter decisions.
But how can you take your degree and “pimp it”? How can you do something innovative with whatever degree you have?
Daniel says you have to think more expansively. If you have a teacher’s degree, the first thing to do is consider the skills you learned while getting that degree. Did you learn to manage other people? Did you learn to speak in front of a group? Did you learn to take information and break it down into a simpler form?
Think of all the applications for those kinds of skills that have nothing to do with being a teacher.
When Reality Isn’t What You Expected
After getting his PhD., Daniel was offered a job teaching at the college in his hometown where he had been hoping to work. The only problem? The salary! He knew that this job was not the start he needed in order to provide for a family in the way he desired.
That’s when he began working with banks and got into the psychology of how people deal with money. Before this point, Daniel had never considered the psychological aspects of money; he just saw the accounting side.
Daniel grew up in a home with a father who was a financial advisor, so he wasn’t clueless about money. He went through 8 years of college without taking out loans thanks to the generosity of his parents. And he laughs when sharing that the word “debt” was the 4-letter word his dad didn’t allow in their home.
One thing Daniel did learn from his dad was not to miss living while focusing on money. His dad says that he missed out on some things in order to pay off their house early, and Daniel has taken those lessons and tried to learn from them.
Saving for the Future You Want
After graduating, Daniel worked for the financial firm for a few years before moving back home to start his own firm. (A non-comp agreement with the firm meant that he couldn’t start a firm in Atlanta, where he and his wife both longed to live.)
They were both working full time, with their thoughts toward Daniel’s wife being able to stay at home with their children when they had them. In order to make that a reality, they were actually saving 100% of their largest salary.
This savings was partly for a down payment on a house, but also emergency fund cash. Nowadays, Daniel’s wife is at home with the kids but they are still able to save a good portion of their income. He admits he hates budgeting, so how do they do it? They set a savings goal every year and then they don’t nickel and dime themselves to death keeping up with every little daily expense.
Buying a Home, and Why Daniel Regrets It
If you recall, Daniel talked about saving a large amount of money to purchase a home. They did, in fact, purchase a home, and that home is now a rental property for them.
They currently live in a large, beautiful home in the Atlanta area and Daniel says it was a big mistake. A stupid thing to do. Why?
Realizing the costs associated with owning a home, especially a large home, has brought some amount of regret for Daniel and his wife. They don’t need the amount of space they have and they aren’t happy with how much it costs to maintain it. But they love their schools and the kids have friends, so they feel “stuck.”
How to Not Eat Cat Food in Old Age
Daniel’s house is about half paid off now, and his big goal is not to get it paid off as quickly as possible. So what is that next big thing he’s working toward?
Having a retirement fund big enough to stop having to save so aggressively for it. He has a number he’s working toward that will allow him not to retire, but to at least relax a little bit. The power to say no to things is what drives Daniel to continue to strive to hit that number for savings.
While there are different schools of thought on saving for retirement vs saving for your kids’ college, Daniel has no qualms about saving for retirement first. Being able to sleep at night because he has the security of knowing he won’t be eating cat food in old age is his first priority
for now.
How to Get Wealthy
First of all, Daniel highly recommends watching the HBO documentary on Warren Buffett. Understanding compound interest is the first step in growing personal wealth. The ability for money to make money is the only way to grow wealth.
For example, maybe you own a home. That is seen as wealth, but that house has a cost associated with it. It isn’t money making money. That house doesn’t appreciate over time like the stock market does, doubling your money, on average, every 7 years.
Show Notes
Time Stamp
- 02:30 How you can “pimp your degree” to do innovative things and escape the norm
- 04:55 How Daniel uses his doctorate in psychology to work in finance
- 07:05 The lessons Daniel learned from his own dad and how it affects his handling of money
- 13:00 Saving for the future you want to have
- 15:00 How Daniel and his wife saved 100% of their largest income after graduate school
- 18:00 What are the financial things that make Daniel put his head in the sand and not look?
- 23:25 Why buying a big house, with a 50% down payment, was a stupid decision
- 27:45 How Daniel plans to avoid eating cat food when he gets old
- 32:10 How to figure the average return you will get from investments
- 34:50 Why Daniel isn’t saving for college yet
- 38:08 The difference between an asset manager and a financial advisor
- 43:30 How using psychology helps people make financial decisions
- 45:40 What Daniel loves most about his unusual career path
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This show is part of the FinCon Podcast Network and was produced by Steve Stewart.
This was a great podcast. I really enjoyed it!