Episode 102: Part 2 Money Mentality, can you stomach it?

DAD: Hello and welcome back to Money with Mak and G. Don’t forget to like, subscribe and comment on the podcast. This is part two of the money mentality. Welcome back! We finished part one of the discussion on mindset with a story of commitment I made via a contract to pass my CPA exam. I can’t believe Grantt actually remembered that story. It took a lot of work, and I could have never done it without all the support of my family, friends and instructors. We discussed how having more control over your life was found by one researcher to be a key indicator in happiness. And a powerful goal since money can be a big part of that having a goal and getting support is something to really think about as well, since it can increase your success. The CPA story probably sounded a bit corny, but it helped to have the support of others and clear expectations of myself and my parents who helped me in that endeavor. Okay, let’s keep going back to you, Mak.

MAK: Hey, I believe if we were alive, and we knew how important something like that was for Dad, I would have helped him in any way I could. Maybe keeping the noise down, bringing him something to drink or doing the dishes. I think everyone would have liked to join in. The point is that committing to change sometimes requires putting it out there and having others hold you responsible for what you committed to. The daily reminder on the fridge would probably go a long way too. It might feel annoying if Grant reminded dad if he was off track, but I bet dad would have appreciated it. Just imagine the support you would get. Plus, I would have loved to be part of helping dad reach an important goal for himself. With a money goal, I’m sure we could help and come up with a way to save it. Hey, we came up with the movie night and we love it. Instead of going to the theater we do it at home and save on the cost of movie tickets by doing a rental. Mom buys drinks instead of the $4 one gallon cokes with free refills. Plus, we have our choice of popcorn and we always throw in m&ms, goobers, chocolate raisins or some other candy to make it fun. We spend less than $20, which is a lot less than $50 or $60 at this theater. That’s a big savings. Plus we get to talk and take bathroom breaks without missing this show, which sometimes drives dad crazy. I know we haven’t gone to the movies lately, because COVID but it’s fun for home movie night to be able to buy any candy we want and hang out as a family under our favorite covers.

DAD: There you go. Set a goal, commit to it, ask for help and support. Make sure to remember you won’t always be perfect. That’s not so bad, right? I know we’ve covered a lot of ground, but you can take notes or listen to this over and over and over again. I think those are fantastic first steps to put you in the right mindset. There are a couple things to be aware of as you continue to move into the next steps of your mental preparation. Make sure to be honest about the change. It won’t happen overnight. But you must keep moving forward and appreciate the winds. Okay, so you spend a bit more than you hoped to in a month, the budget is upside down. You have to get back on the horse and try again. What if you wanted to save $100 And you only save $10 in a month. Of course, that’s not what you wanted. But it’s still a win. Appreciate the fact that you took a step towards your goal and you’re still moving forward. And never underestimate how you need to expect the unexpected. Once you embrace the concept that you will have unexpected setbacks, the better when they happen, you’ll be in a better place to get through them because you know they’re coming. Who could have ever seen COVID right? I remember when I started to make some progress saving when I was younger, just out of college. I broke my hand while tubing down a hill in the snow. The medical bills set me back several hundreds of dollars and a couple months on my plan. I talked to my dad about it and he just laughed. After he saw how I was in pain, he explained that having five kids is all about unexpected financial setbacks. He got over that a long time ago. Somebody gets sick. Somebody gets in a car wreck. Somebody grows too fast. And the hand me downs just won’t fit. The possibilities are endless. Stuff happens and as my friends told me about my experience, being stupid costs money, so don’t be stupid.

GRANT: That’s crazy advice, dad, maybe Mak should learn that. 

MAK: I got your number G, so be careful. I’d suggest you sleep with one eye open.

DAD: Okay, okay. Grant back to the point, what were you going to say?

GRANT: So we started saving and put ourselves on a plan. When talking about expecting the unexpected, it makes me think about investing. When Mak and I started, it wasn’t always fun, which took a little mindset adjustment as well. We watch our investments every day, and sometimes it hurts to watch him go down. We had to learn the reality of the stock market and learned one very crucial thing at the time. Stocks go up and down. So we stopped watching them daily or even weekly. It cut down the stress, and we didn’t need the money because we weren’t going to be selling them anytime soon. But letting your investments work for you is crazy important. We started early. And if you look at the different time periods of investing in the stock market, you’ll understand that it’s important to just give them time and not worry about the dips or even drops. If you go back to the year 1925, you’ll find out that keeping your money in the market without touching it gives you the best chance of actually making money. Okay, here are some of the numbers. Investing one day in the market gives you about a 50-50 chance of making money. If it’s over one year, it’s about 75% chance of making money. 10 years is about 95% chance, and are you ready for 20 years? You would have made money 100% of the time. The mental mindset is to be able to keep the money in your plan in the market for the long term. I love that 100% of the time, after 20 years, you make money, not guaranteed for the future. But that’s the records from the past. And if history repeats itself, we’re in good shape. One more thing. The worst total return over a 20 year period was over 50%. But the worst 30 year total return was about 850%. You heard me 50% To 850% from 20 to 30 years. 

MAK: So I’m really glad we started early and spread the word. We found out that there are scientists that truly believe someone is currently alive, who will become the first person to reach 150 years old. Crazy, but starting early will surely help that person. The key to all of Grant’s info is that you’d have to stay in the market. It’s a mindset. Sometimes it’s really hard. When COVID hit you could have lost 30%. But if you held on you’d be in a much better place right now. The history of potentially worldwide diseases on the stock market shows a drop and a recovery. Dad researched that for a TV interview he had last year. The bird flu dropped the market about 7%. But six months later, it was up double digits. But can you figure out which day the market will jump up? It’s very hard to predict. So it’s best to just stay in and ride it like a roller coaster. One study of the s&p over 15 years showed some interesting stuff. If you stayed in the market, you would have earned 8% annually. However, if you miss the 10 best days, not years, just days, you would have cut your return down to 3% annually. Ouch. And if you miss 20 of the best days, your return drops to zero. Let’s take it one more step. If you miss the best 40 days, that turns into a negative 5% annual return. So out of the almost 4000 trading days, if you miss 10, 20 or 40 days, it will crush you.

DAD: Can you stomach it when things go bad no matter what level of risk you take? Can you remind yourself that you’re in it for the long term and if things go down, it’s not time to worry? It’s actually time to buy stocks when they’re on sale. I know it can be very hard. But Warren Buffett loves to buy when there is blood in the streets. He says that when it feels like things are absolutely horrible. And prices are really down, that it’s time to buy. That’s what he does. And we all know he’s a pretty darn good investor. This is clearly part of getting your mindset, right, everyone is different. And if he can’t sleep at night with a 20% drop, don’t be invested in volatile stocks. Your health is worth much more than any investment strategy that doesn’t fit. Only you really know yourself. The kids can withstand the ups and downs because we the parents pay for everything. But when you think you see your dreams evaporate in front of your eyes because of a big drop. It’s tough. I’ve heard stories over and over about people getting out of the market at the wrong time. It breaks my heart. I had a client that didn’t have the most rosy outlook on the world when Brexit occurred, that’s when Britain didn’t want to be part of the European Economic Community. For us, it would be like Texas leaving the US economy. He thought the world was about to end. Anyway, he told me to sell everything which would have meant big over 20% loss. I knew that timing the market is tough, and I highly encouraged him to hold tight, which he did. Less than a week later, the market rebounded completely and was in positive territory. He wasn’t even in volatile stocks, which means they didn’t bounce around as much as the overall market did either. It was just too much for him, and he simply couldn’t sleep and stuff like that happened.

GRANT: We heard a story from dad that the best investor by age and gender is a 40 year old woman. He said he learned about that during his studies but can’t find it. He thought he was such a great piece of information, as it helped explain why that was true. A lot of times men would be overconfident about their trading abilities. They would try to jump in and out of stocks. However, the 40 year old woman would set up their portfolio and let it run. They didn’t jump in and out of the market and simply just let compounding do their thing. When analyzing their returns against others, they consistently beat everyone else. But the point is not to try to jump in and out of the market. 

MAK: Dad and his friend have an active trading account. And it has shown that they have had incredible success early on. They doubled the account, but now it’s down 30%. Maybe he’s got a bit of overconfidence, but he says it’s a learning experience that he’s always wanted to try.

DAD: I guess I have to get mentally prepared for the comments from Mak and G on my active trading. It has been a roller coaster and now that we’re down, it’s really reiterating the fact that trying to time the market is really tough. We surely covered a lot of ground on mentally preparing yourself to save and then invest. Setting yourself up for success and sticking to your plan is about your behaviors. Getting help and support and possibly bringing in others to help can be powerful. Okay, now that we are putting ourselves in the right mindset, it’s time to assess things. Let’s move on to the next step of the three step mad process. Thanks for being here. And don’t forget to like, subscribe and comment. We’d love to hear from you. And until next time, bye!