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How Not to Money with Joel Larsgaard

Easy Prey
“Money is this tool that touches every aspect of our lives, and yet too many people don’t know how to wield that tool effectively.” - Joel Larsgaard Share on X

Managing money isn’t about numbers, it's about making informed decisions that shape your future. Whether you’re a seasoned saver or just starting out on your financial journey understanding the basics of personal finance can make all the difference.

Today’s guest Joel Larsgaard has been helping people take control of their finances for over 15 years. As the co-host of How To Money and a weekly radio show Joel breaks down the often confusing world of personal finance. His passion for financial literacy comes from personal experience and he’s been recognized for his work including being on the Forbes Advisory Board.

In this episode we’ll cover common financial mistakes, smart saving strategies and how to avoid financial pitfalls so you can make better money decisions.

“People think budgeting is restrictive, but actually, it’s freeing. It helps you prioritize what really matters and cut back on what doesn’t.” - Joel Larsgaard Share on X

Show Notes:

“If you don’t track where your money is going, you’ll never be able to make meaningful changes. You have to shine a light on the areas where you can improve.” - Joel Larsgaard Share on X

Thanks for joining us on Easy Prey. Be sure to subscribe to our podcast on iTunes and leave a nice review. 

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Transcript:

Joel, thanks for coming on the podcast today.

Thanks for having me, Chris.

I'm looking forward to this. Can you give the audience a little bit of background about who you are and what you do?

Sure. I co-host a podcast called How to Money, also a radio show on KFI in Los Angeles with my best buddy, Matt. It is all about helping people learn how to handle their personal finance as well. It's one of those things that people are not taught about in schools, although that is changing and more and more states are adopting personal finance courses. We'll see how those shake out.

It's truly just an information thing. So many people are missing the information they need. Money is this subject. It's this tool that touches every aspect of our lives, and yet too many people don't know how to wield that tool… Share on X

So many people, even really smart people, it's not like an IQ thing. It's truly just an information thing. So many people are missing the information they need. Money is this subject. It's this tool that touches every aspect of our lives, and yet too many people don't know how to wield that tool effectively. It's like a chainsaw man in the right person's hands. You can cut down some trees and get a lot of good work done in my small child's hands, chopping up their own leg, and then that's a disaster. The whole goal of our show is really just to serve people and help them make better decisions with their finances.

I love it. How did you get into the field?

Multiple things I could talk about on that, I guess. One was I was curious and interested in personal finances because my parents didn't handle finances terribly when I was a kid. It was a topic of consternation in our house. My dad lost a job, and then there were just all these domino effects from that. They just had a lot of money troubles.

I just remember hearing a lot of money arguments. My parents—fantastic people—still people I admire to this day more than almost anybody else in this world, but money was a constant source of difficulty. I just never wanted that to be the case for me. I was at this impressionable age—11 or 12—when they filed for bankruptcy. I just remember saying, “I don't, I don't necessarily want to be rich, but I just don't want to have money problems.”

As fortune would have it, I ended up working for this guy named Clark Howard, who was a consumer advocate money guy on a bunch of radio stations around the country. I helped to produce his radio show for a decade and a half. I learned so much. It was this topic I was already  fascinated by, wanted more information, and then it was my day job. I was immersed in it for so long. I just was like, “OK, I want to help people and do this for the rest of my life.”

I've known Clark Howard for probably most of my life. He's been around doing finance for 30 years or something like that.

Yeah, over 30 years at this point. Yeah.

How did you get connected with Clark?

I had actually interned at the radio station for one of the political radio shows that was on before him, and then there was a job after my internship was done that came open with Clark. It was just this match made in heaven. I got lucky. I was a pretty dumb 22-year-old who probably wasn't very helpful in those early months and maybe a couple of years, but I learned a lot in those first couple of years. I thoroughly enjoyed getting to work with him and that team.

Everything he does is about serving people and teaching people. I just wanted to iterate and do that for the next generation. New messengers are needed from time to time, and Clark's not going to be around forever. I was, “All right, let's go do this thing.”

I think for those who haven't heard Clark, he's a little bit probably more extreme about the way he saves than most people.

That's true. I've been on many work trips with him. He will walk quite a long distance to avoid paying for parking, even if it's wintery snow in Wisconsin or something like that. I can get down with many of his cheap ways, but there were certainly some things that are not my jam. That's the thing, too, that we try to leave open on our show.

Everybody has different goals for their lives. Not everybody wants to live this incredibly frugal, buy-all-your-clothes-at-Walmart lifestyle. There's nothing wrong with that. -Joel Larsgaard Share on X

Everybody has different goals for their lives. Not everybody wants to live this incredibly frugal, buy-all-your-clothes-at-Walmart lifestyle. There's nothing wrong with that. In some ways, going hard in that direction can open up a lot of other opportunities for you when it comes to time freedom or something like that. I want to be open to that and what that looks like for other people because everybody's got different hopes and dreams.

Yeah. To me, that's always the important messaging. Your process, your mindset. The way you think about it is not the same as every other person on the planet.

Yeah. I think a lot of people think that. They think, “Everybody thinks like me. Everybody wants the same things that I want.” Some people don't. Some people want to retire at 30. I don't understand that. I like working. I'm down for working less.

I also don't understand people who want to make the most money in the world. I have no desire to be an Elon Musk or Jeff Bezos. I just want to make enough money doing something I enjoy, love my family, be a part of my community. Those are the things that matter to me, but everyone's got different things that light them up. There's just got to be room in the personal finance space for people to have different things that they're shooting for.

Yup. Before we start talking about the finance specifically, I want to ask you a question that I ask most of my guests. Have you ever been a victim of scam or fraud? If you and I can't get the financial and the anti-scam stuff right a hundred percent of the time, the audience doesn't need to feel like they're just this horrible human being. The best of us fall for this stuff.

This is another place. I was just talking about in personal finance, it doesn't matter if you're Mensa-level IQ. There's a lot of stuff you need to learn in order to get in personal finances. It doesn't just come naturally, and I think the same thing is true with avoiding scams.

I remember someone came to my door to sell discounted Blockbuster gift cards. It was a kid. The kid was like, “These are discounted because they're through the school and this is going to support the school.” The gift card had nothing on it.

When you ask that question, that's the first thing that comes to my mind. My parents still make fun of me about that because I was always about getting a deal, and my desire to get a deal  blinded me to asking any questions about whether or not this was a legitimate gift card for sale or not. Definitely got taken advantage on them on that one, but I think I probably lost $25, so it's not the worst thing in the world.

I feel like we need to preface for half the audience and explain what Blockbuster is.

I know. That's a good point. This was 25 years ago when Blockbuster was a thing.

Blockbuster was this place where you rented videos, physically.

Yes, I know. You could, in one click of a button, get it. The nice thing about actual physical video stores, though, was the recommendations you get from the employees and stuff like that. Now, I miss the human touch when it comes to recommendations. Now it's just Rotten Tomatoes, which has its benefits but also its downsides.

It's now an algorithm.

Yeah, exactly. I know. It's missing a little bit of that humanness. It was really nice.

You're like, “I know what Bob likes, but I don't know what the algorithm likes.”

Right. Yeah, exactly.

Let's jump into it. I'll  ask the overarching question, and we'll work from there. What are some of the most common financial mistakes or traps that you see people making?

I think the one thing more than anything that I see people doing is just not having a high enough savings rate. They're not tracking their expenses, that's another one. Sometimes it's just literally not knowing where the money is going. It's hard to make any changes when you're not sure what's the status of things. There should be a state of the union for your personal finances, essentially.

Part of that is—I know people don't love to hear the word budget. I don't talk about budgeting as often as a lot of the people in the space, but tracking your money, at least, and knowing where that money is going is the first step to plugging those leaks. You have to do an audit and say, “Well, where is my money going?”

There have been surveys done, Chris. The average person thinks they spend something like $120 a month on subscriptions, and yet they spend more than double that. When we think one thing and another thing is happening, there's some distance there that needs to be cleared up.

There's all sorts of low-hanging fruit ways to save that most people don't think about. One that I talk about is changing who you have your cell service from. If you get your cell service from one of the people who advertise on all the sports leagues and stuff like that watching the NBA—“Hey, that's my cell phone company”—you’re paying too much because there are some really great discounters. Guess what, you're not getting inferior service.

I think tracking where your money is going, that’s going to at least shine a light on the areas that you can change. -Joel Larsgaard Share on X

I think tracking where your money is going, that’s going to at least shine a light on the areas that you can change. There are some things like when I use the word budget, what people typically think, they're like, “Oh, Joel doesn't want me to ever eat out again.” It's like, “No, of course I do.” If that's what you're into, that's great. I just want you to make these choices with your eyes wide open with the information in your hands instead of making a choice based on information that is nonexistent. You keep doing the same thing that you're doing, and you're digging yourself further into a hole. Typically, that's a dead hole.

Another big common financial pitfall is that people use credit cards indiscriminately. That has extended to buy now, pay later, which is just a common thing that's happening right now, the escalation of people using BNPL. I think a lot of those people are using it on top of credit cards. Something like 50% of people have a revolving credit card balance that's right around that $10,000 mark.

Something like 50% of people have a revolving credit card balance that's right around that $10,000 mark. -Joel Larsgaard Share on X

Something like 10% of people who use credit cards pay the minimum payment amount, which means they're going to be in debt for decades to come, paying ridiculous amounts of interest. It might seem insignificant or small—“I got a few thousand bucks on my credit card”—but that mentality over time is just going to put you in a really nasty situation.

Something like 10% of people who use credit cards pay the minimum payment amount, which means they're going to be in debt for decades to come, paying ridiculous amounts of interest. -Joel Larsgaard Share on X

Yeah. I was talking with someone recently, and they were over that $10,000 number. I didn't ask what the interest rate was, but I'm sure it was 20%. What's common these days, 20%?

Twenty-two.

Five or six hundred bucks a month in interest just to stay even. I was like, “Oh, dude, you’ve got to do something.”

Yes, I know. The thing is, most people don't know what to do, and you’ve got to come up with a plan. For a lot of people, it's like, “Yeah, I know I need to do something,” but you have to come up with a plan. You have to like, “What are all my debts?” This is, again, laying eyeballs on everything. List them out; what’s the interest rate?

How much overall do I owe? How much of a gap can I find in what I'm earning versus the monthly bills that are non-negotiable? Where are the gaps here where I can find some extra savings? How much money can I actually throw towards this debt? How long will it actually take me, then, with this extra money that I can throw at these debts to pay it off and then come up with a strategy? Which one should I prioritize?

There are different strokes for different folks on that. There's a website that I typically recommend to people. It's called Indebted, and it can help you, for free, come up with a little debt payoff plan. Without a plan, progress is going to be slow. Come up with some plan, stick it on your refrigerator, on your bathroom mirror or something like that, and find the motivation to get rid of it.

I've never seen anyone pay off debt and not be thrilled about it. The feeling at the end of that is good. It's just like running a half marathon or something like that. It sounds painful in the beginning, but once you get to the point where you're able to accomplish it, you feel like the baddest mofo around. You feel awesome.

One of the things when my wife and I, we got married, it was, “OK, we're paying off our debt. Yeah, we're going to pay our bills, but we're not going to be your hermits and eating top ramen every day.” It was like, “No. Any raise that comes in, any bonuses that come in, it doesn't go to fun. We’ve just got to buckle down for a couple of years here and just knock stuff off and every time.” Every card that got paid off, it was like this weight came off our shoulders of like, “OK, there's just one less monster chewing at our ankles.”

It's like you can do the hard thing now or you can do the hard thing later. Doing the hard thing now sets you up for success to where it's just easier sledding later on. If you do the easy thing now, which is to continue those consumeristic tendencies, keep hitting “buy now” on Amazon, keep doing the buy now, pay later thing, keep racking those things up, the hole gets bigger.

It's easier to get into that hole than it is to get out. It might have taken you a few years to get there, but then it might take you five or six to get out. It might take you twice as long. For a lot of people, it does. You take the easy routes. You're going to have to endure more pain later on.

You were talking about budget. I have seldom met anyone who is like, “Oh, I just love budgeting. I just love making budgets.” What is it about us that just makes the process of sitting down and coming up with a budget this thing that we just don't want to do?

I totally get that reaction. It's my reaction too, personality wise. I am not the detail-oriented fella. Spreadsheets and I do not mix very well. I am thankful for online budgeting software that does make it a lot easier because if it was literally putting pen to paper or Excel spreadsheets, I'm not going to do well with that.

Actually, one of the things that I was interested in early on getting good with money was how can I get to the point where I don't have to think about it nearly as much anymore? Part of that is being naturally frugal. Having a big savings rate means that I don't have to pay quite as much attention. Most people do, especially in those early years, and I had to in those early years.

I think a lot of people also assume that a budget is similar to a diet. It's restrictive, but I think the opposite is actually true, maybe not for a diet but definitely is for a budget. If you say one of the things I really want to accomplish for myself in the coming year, and let's say taking a $10,000 vacation to Hawaii is one of those things, if you're not proactive about it and funneling money towards that goal, chances are you're not going to just randomly have $10,000 to go to Hawaii. If you're thoughtful about it and you say, “Listen, I can cut back here and here and here,” and then it makes actually those cutbacks not feel drudgery. It makes it feel like it's the onramp to you getting where you want to go, goal wise.

When you don't go out to dinner or to breakfast, you're not thinking, “My life really sucks right now.” You're thinking, “My life's going to be awesome when I'm in Hawaii six months from now.” I think that people get it wrong, where, “Oh, I never get to enjoy anything ever again.” The opposite is true; it actually helps you figure out and plan for the things that are going to bring you the most joy, then save your money for those, and then cut back more ruthlessly in those other areas that don't matter nearly as much.

I've read this concept with dieting. We'll continue that comparison. One thing that could be really successful is not even thinking about cutting calories, exercising more, or doing anything. It's just document what you're currently doing. That suddenly results in people just naturally starting to taper back on what they're eating, the amount that they're eating, they start exercising more without anyone saying, “Well, you have to do this or you can't do that.” Does it work the same way for money? Is it once people start looking at, “What did I spend my money on, where did my money go,” that just starts that process rolling?

A hundred percent. I think most people would say, “I probably have two to three drinks a week.” That's a common response. If you actually write it down and go back to look and you're like, “I had three margaritas on Tuesday,” that was just Tuesday. Once you write it down, though, you can no longer deal with assumptions, you're dealing with reality. It also applies to finances.

You assume certain things about where your money is going. We probably spend this much on eating out. We probably spend this much at the grocery store, and then you might not realize, “Oh, my goodness, we’re way over that this past year.”

One of my friends does something really old school that I think can be helpful to people. She literally has a ledger on her kitchen island. She comes in and she writes down everything that she spent. I think there's some power in that, maybe doing that for 30 days as a trial just so that it does register with your brain. There's something powerful about writing things down that does something to us.

I would encourage people to do that for a little while. Write down everything that you're spending because it's so easy. We're so forgetful. I think a lot of people forget. When the Amazon box shows up, “What's in here again? I don't remember what I bought.” That's how far gone we are as a culture. That has happened to me before and I feel shamed.

I've definitely had those. “That's a box on the door. Did you order something? I don't remember ordering anything.”

Yes, I know. I think writing that down helps connect it in a way. It's a great thing then to go back and look at and say, “Well, I don't know, am I getting the value I want out of these things?” I'm a valuist at the end of the day. There are some purchases that other people might say, “That's ridiculous. I would never spend that much on that.” For me, I get a heck of a lot of value out of it, so I'm more than happy to spend the money on the thing. Craft beer is one of those things.

There are other things, though, that hit that list for me, but everyone's got their own thing. Figure out what that is and then dial up even your spending in that category, where you're like, “Oh, mountain biking is my jam, so I'm going to probably spend $2500 a year in bikes, components, trips for mountain, whatever.” Spend the money proactively on that stuff and then just cut back in the other areas. That's actually freeing and actually exciting to be like, “I'm funding the stuff that really moves the needle for me.”

You alluded to it earlier with cell phone services of move away from the big name brand carriers and use the move MVNOs. Switch to one of those. It's still the same network, you're just paying somebody else for a smaller amount of money. What are some other ways or things that we could do, where we could get the same product or service for less money or no money?

The first thing I think about is insurance. Tougher in California right now than almost anywhere else, sadly, of course. Just tough times in the insurance industry in general. In an era of rapidly rising costs, it means the disparity between one insurer to another can be significant. I think people should shop their insurance every year or two. The amount of money you can save with car and home insurance could be $1000 a year, which is not insignificant.

There are insurance providers or insurance agents who aren't attached to specific companies. They're independent. There's a website, trustedchoice.com, and you can reach out to an independent agent. It's not even like you've got to hit the phones all day or something like that. You could have someone help do it for you on your behalf, or Policygenius has a similar service.

I think insurance is just another one of those areas. I think it's wise to look at the Consumer Reports rankings and you can say, “Well, am I going with a much crummier insurance company here that doesn't seem to hold up its end of the bargain when a consumer files a complaint?” I would factor that into my decision-making process. It's not all just like the cut rate provider I guess that isn't going to back you up if you have to file a claim. That'd be cheap, not frugal, but I think that's one of those things.

Even just honestly pestering the insurance agents sometimes. “What are the other discounts that you offer?” It's amazing how many discounts you can get if you just ask, and it's like the magician with the tape that keeps unraveling. You're like, “How are you pulling that out of your sleeve?” They will continue to cough up information about what discounts might be available to you.

For instance, there's a defensive driving course that you can take. Guess what? You don't have to go in person to an actual defensive driving place that you see off the highway or something like that. You can go to AARP's website. I do not qualify for AARP yet, but I took the course. It was $25-$30. It saved me over 100 bucks a year for multiple years in a row on my car insurance. Those are the things where if you start asking that, you start barking at that tree, you're going to find, “Wait a second. Thirty minutes here could save me a few hundred bucks over the next few years.” Those are the questions I think a lot of people just fail to ask.

What about subscription services? Are there ways that we can get the same products and services for lower rates?

Kind of. Some of it's like bundling. We're starting to see this consolidation in the streaming space, but that's also, I think, on purpose. They want to give us now. They're seeing that consumers have responded, and they're canceling some of those subscriptions more frequently because there's just a plethora of service providers. People are like, “Yeah, I'm going to get the Peacock. I'm going to get Paramount+. I'm going to get Apple and Netflix.” And then you're like, “Wait a second; this costs just as much as cable.”

At first, what sounded so good, and it was de-bundling, but guess what? It doesn't come with any of the live sports. If you want that, that's going to be a heck of a lot more money too. At the end of the day, I think consumers are almost more frustrated to a certain extent with their streaming choices, especially now that ad-supported plans are becoming the norm. Granted, you can save a lot by going the ad-supported route, but the providers at the end of the day make more money if you choose that option.

I think if you are super loyal to one or two of those and you're watching frequently on Netflix, then it's OK to sign up for that and never cancel. I think most of the time, though, loyalty is what's going to kill you. Sign up when there's a good deal. Hulu would offer, on Black Friday, a $1-a-month-for-the-year thing. Twelve bucks over the course of the year, you're like, “If I just watch three movies on there, I've more than paid for my subscription.”

Just be more shrewd about that. When I sign up for a promo deal with one of these streaming service providers, or if I sign up for a free trial, I am cognizant to what am I going to watch, keep a list of that, and then I put it on the calendar. “Cancel by this date.” If I sign up today, it's like, “All right, February 13th I need to cancel then so that I'm not charged for an additional month.” That way I actually go in there and I do that, but most people are like, “Yeah, I'll do the free trial. Free, haha, great.” Then they start getting charged and they're not watching the service. It's just not paying attention—that’s what's costing people money.

I know someone who exploits their lack of loyalty. It's like, “OK, it's January. January is Netflix month. I will have my Netflix subscription just for the month of January, binge everything on Netflix, then cancel it next month, and then I get Peacock. I run it for a month, I cancel it, then I get Amazon Prime or whatever. Watch it for a month, then cancel it, then go back to Netflix, watch it for a month, and then HBO for a month.”

Yeah. That's why they're trying to do more package deals and offer more discounts for paying annually, because they realize that if more and more watchers or viewers are doing that cancellation on a month-to-month basis, then maybe they've only got Hulu two months out of the year instead of 12. “We're only going to get paid—even if it's a bigger per-month fee—we’re going to get paid a heck of a lot less, so let's sign them up for the annual deal. That's going to pad our pockets more.” It's just like selling a gym membership. They don't want you to come into the gym. They're more than happy for you to keep paying and never darken the doors, never hop on a treadmill.

That's only in their interest for you to never show up.

We talked about that recently with LA Fitness. LA Fitness has 2500-plus stores around the nation, and they want to double that over the next few years. They have such a low price threshold. I think people are so price insensitive at that particular $10 to $15 a month threshold. They're like, “How much could it actually be costing me?” Well, $180 a year is actually a lot of money. If you are using it, it's a great deal. You're getting your fitness on for very little. If you're not using it, just wasted money.

Yeah. Are there banking products and services that we should be steering towards or steering away from? In the same way that there's loyalty towards name brands, wireless carriers, and loyalty towards particular streaming services, do you see that with banking as well?

Yeah. What I see is that people grow accustomed to doing business with either the bank they've been doing business with for a long time or the bank that they see on every street corner and advertisement. That is in particular as interest rates on savings accounts have gone up in recent years, down in recent months but up in recent years, that is costing you more and more money. The big banks care absolutely 0% about anybody who does business with them who doesn't have a net worth that starts with a B. “I have a million bucks.” They don't care about you. They just don't.

They're going to pay you next to nothing on your savings. That really adds up in an era where the best banks, my favorite, which are the online banks, are paying reasonable rates of return on your savings. You're talking about inflation. Everyone hates inflation. How do you outpace inflation? (1) By investing. (2) By making sure with your money that's in liquid savings is in a high-yield savings account and not in some crummy trashy savings account with one of the big banks.

Wells Fargo and Chase don't do business with Bank of America. Move your money if it is there and go with all these neobanks. I don't love those either. There's some pitfalls with some of those neobanks in particular. We've seen those come to light recently.

I always highlight a few online savings accounts that are highly competitive, have great service, customer service, great features—CIT, Discover, and Ally. Capital One is another great one. They've come under fire recently, too, from the federal government about having two different savings accounts, so I get the frustration there. I think if you're in Capital One's better account, they’re still a great institution to do business with. They have some great products. In particular, if you have kids and you want your kids to have an account, Capital One's great for that.

I think those online savings accounts, they're FDIC-insured. They're going to offer you competitive rates. Maybe it's one of these, “I've never heard of CIT, Joel.” Or, “I've never heard of Ally.” That's OK. Go check them out. They really are FDIC-insured. You can go to the FDIC's website and verify. I would much rather see people doing business with those banks.

You talked about interest rates on the accounts. At what point should you start getting suspicious of, like, this seems surprisingly high?

That's a really good question; that’s why I hesitate with some of those neobanks. Maybe I should define that. They're basically these fintech companies that have launched really cool looking websites and really interesting, neat features like, “Oh, man. You get your paycheck two days early. That sounds really cool. Maybe I should go with this bank called Chimity Chime or something like that.” They have these funky names, this fun branding. They have some interesting features, but at the end of the day, what's going on and what's the fine print look like?

Particularly, there have been some of these banks that have crypto affiliation. They're offering 8% or 9% returns on your saving. You're like, “How's that?” That's a lot better than what my bank's offering. That's way better than those online banks that that guy Joel talked about. I should go over there.” People get, people get screwed. They lose their money. They lose access to their money. We've even seen that with some of the neobanks.

There were some of the better neobanks, where behind that fintech company is some other small regional bank. There's an issue between the neobank and that bank because they're two separate entities, and then the consumer on the back end doesn't really realize that. They don't have access to their money when a kerfuffle arises. It can be a big problem. That's why I would rather see people do business directly with online banks who have that FDIC insurance, and they're not working with some third-party bank.

As the consumer, how do you identify the difference between those types of entities?

You can go specifically to fdic.gov and look up that fintech company. You'll see down in the fine print on their website too. “Actually, this is being run in the back end by a different bank, a bank that I've ever heard of.” Yes, there's FDIC insurance from that bank, but when there are two different entities at play, there's this gray area. It's scary that so many neobanks have launched and not much has been written or talked about on this.

It might sound sexy in the marketing materials and fun on the website. It's appealing to Gen Z and this super-fun lifestyle or something like that, but that's why I want you doing business directly with the online bank who's in charge of your money, who is FDIC-insured; there's nobody else that you're dealing with. You're dealing directly with the four I mentioned.

Those four are great. They're big enough to have competitive offerings to have great services. They've gotten rid of the stupid fees that some of the big banks still charge. They have consumer-friendly practices for the most part, even if they're not perfect. They're not fly by night either like some of these neobanks are.

Got you. When it comes to evaluating investments, move into 401(k)s, stocks, and other investments, at what point do you start getting suspicious of whether it's a legitimate opportunity or not?

That's a good question. I guess I'd be curious to hear what people are being pitched and maybe what red flags they're feeling. Ultimately, at the end of the day, I think simplicity trumps everything. The interesting thing is when you look at stock market returns and you look at how the average investor fares, over time, investing in the simplest products, which is something like a low-cost index fund from a low-cost brokerage firm like Fidelity, Schwab, or Vanguard, those people come out ahead. They just build wealth. Guess what? They also don't have to really think or worry about it.

I think there has been this, for many decades, attempt by Wall Street. Granted, index funds came around in 1970, so it's not like they've been around for forever either. In America, we want to be exceptional, and getting average returns sounds like a dumb idea. “Why don't I try to beat all that stuff?” The truth is it's really, really hard to do. Even people who professionally manage money have a really hard time doing that. In fact, the vast majority of them don't come close.

If you can buy the average and pay very little to do that, you are going to just build wealth steadily and slowly. I say slowly, which sounds like a bad thing, but that's the goal. -Joel Larsgaard Share on X

If you can buy the average and pay very little to do that, you are going to just build wealth steadily and slowly. I say slowly, which sounds like a bad thing, but that's the goal. The more money you stick into there, the faster you'll actually build wealth—some years not so slowly. Look at the last two years of stock market returns. That was pretty great for anybody who kept sticking money in.

You will have those years like 2022. You will have those moments like Covid when the stock market got slammed. Those times might encompass more than one calendar year. It could be two or three years, where the market experiences difficulties. The truth is, those are actually buying opportunities for especially younger investors. I think index funds inside of your retirement accounts, trying to get at least the match from your 401(k), then moving on to a Roth IRA.

I'm a big fan of HSAs as well. It could take a long time to explain those sometimes, but I think they're really cool vehicles. If you do your due diligence, we've got articles up on howtomoney.com specifically about HSAs and why they can be a great investment vehicle. Looking to those and doing the slow, steady, boring stuff is ultimately what's going to get you where you want to go.

If you're trying the sexy alternative, investing stuff that's hitting right now and becoming popular, and there's more and more websites devoted to siphoning your money into investing in wine, whiskey, art, or farmland, those all sound fun like, “Ooh, I can own some formula. I can own some fancy bottles of wine. Maybe that'll take off more than the silly S&P 500.” The truth is no, the fees are high. The sexier the investment sounds, the more somebody who's running the investment is getting paid.

The sexier the investment sounds, the more somebody who's running the investment is getting paid. -Joel Larsgaard Share on X

The more vertical the investment is in terms of how niche is it?

That's the thing with these alternative investments. We can talk about cryptocurrency too, a lot of the meme coins, and stuff like that. The great thing about buying an index fund is that you own essentially an incredibly small amount of all these businesses that many of which we do business with every single day, right. We talked about Netflix or Amazon. Those are companies that you're buying when you buy the index. You're buying a company like NVIDIA, who is funneling the AI revolution.

You own little bits of them without being overexposed. These businesses have a profit motive. We get to partake in the benefits of that. The other great thing is, again, the amount of work that it takes to do that is pretty minimal. For most people, I have a day job, I have kids, I have hobbies. The idea of looking over prospectus reports and trying to decipher whether or not this alternative investment is going to help me beat the market or something like that, I don't have time for that, or I'm just not interested in spending my time that way. Some people are—more power to you—but you’ve just got to be careful if you go in that direction because chances are, you're going to make less money, you're going to spend more time, you're going to pay more fees. You're not going to come out ahead by doing it.

Depending on what it is, you might lose it all.

Yeah, that's true. The meme coin space is rife with fraud and scams, and some people are being sued for that. There was one young lady who became famous on the internet because that's what happens these days. She launched a coin and made money.

Everything's good then, right?

Right, yeah, but a lot of other people didn't. Not to get political, but our president and the first lady launched a meme coin. That was another thing, where there's paper money being created out of thin air here. What are you actually buying? Are you hoping to get rich quick?

I've just talked to too many people who put money into the meme coin space or even just cryptocurrency space in general. They were hoping with meme stocks that they were going to buy at the right time and sell at the right time. They were the fool on the other side of the trade. Especially if you're not doing the right thing with 90% to 95% of your funds and you're taking big bets like that, it really is like going to a casino. We just have so much more casino-like behavior in the United States these days on apps or at our fingertips on our phone. It's frightening.

They make long-term financial decisions based off of a dopamine high.

Right, yeah. It's betting. Now you can bet on your phone, sports gambling, in Robinhood, which we're blurring the lines. Robinhood wanted to make gambling on the Super Bowl legal. Maybe we are flirting with some legal gray area here. “If we do this, we might run afoul of some government agencies,” so they pulled that back in advance of the Super Bowl. That is one of those things, where it's just becoming normalized. We're seeing more and more people are like, “Hey, my buddy's doing it. You know what? I know more about the Cincinnati Browns or Cleveland Browns running back. I think he's definitely going to run for 100 yards in this game.” Football's over now. Just because you have that belief doesn't mean you should put your money where your mouth is.

I think part of it is, when people are on the upside of that and they win big, they tell everybody. When they're on the bottom side of it and they lose everything, they don't tell anybody. All you ever hear are the success stories of cryptocurrency, the success stories of meme coins, the success story of a wine ETF.

We don't share our beats publicly.

Yeah, people don't like, “Oh, yeah, I lost a hundred thousand dollars on a meme coin last week.” No one is going to come forward and say that. The human nature is we tout our successes and we hide our failures. What we hear is not necessarily a good indicator of what reality is.

Yeah. I think some people in particular on the lower end of the socioeconomic spectrum might think, “This is just my only ticket. This is the only way to take the flyer on the high-risk but potential high-reward payoff.” When you run the numbers about what the average person in lower socioeconomic strata spends on something like lottery tickets, you add it up, I think it's average is something like $20 a week. Eighty bucks a month put into an index fund over 30 years is not insignificant.

When you run the numbers about what the average person in lower socioeconomic strata spends on something like lottery tickets, you add it up, I think it's average is something like $20 a week. Eighty bucks a month put into an index… Share on X

Sometimes these schemes target the poorest among us who have other options. They just don't know, and they haven't been taught how to do it. We have to like, I want to ring the bell about index funds. I want to ring the bell about ways to save money and how to increase your savings rate, because even for people who aren't making six figures, there are still a lot of options open to them for building wealth, at least within reason for what their lifestyles look and what their goals, hopes, and dreams are.

The markets change. You don't have to have $50,000 to open up a brokerage account anymore.

Yeah, right. Yeah, there used to be high barriers to investing, and now there are no barriers. In some ways, it's a little scary because you can hop on Robinhood and just start buying random stuff. In the other ways, you can also hop on Robinhood, or you can hop on one of my other favorite low-cost brokerage firms. You can literally start buying the S&P 500 or total stock market index fund with $20, like put in every single $5. The minimums have essentially gone away with many of these companies. It sounds very little.

The goal is, of course, not to stay at $5 a month in what you're putting into that account. I found too that there is something the personal narrative changes when you get started. You start to think of yourself then as an investor. “I'm building wealth.” It's small. It feels like it's almost nothing, but then it can become over time as you say, “Oh, I like this. It's really cool to watch this thing grow.”

“Now I'm putting in $20 bucks a month. Now I'm putting in $50 a month.” It's like this snowball rolling downhill. It's amazing what starts when you look at an avalanche. It starts as something incredibly small. One stone hitting one piece of snow. What it leads into can be insane. Not like you're going to be a billionaire, but the amount of money that you can amass over time. Six figures, maybe seven figures if you're just consistent over the long haul.

Yeah, that's awesome. If people want to learn more and get the bigger picture, where can they find you online?

Wherever they listen to podcasts, they can find the How to Money Podcast. We've got a lot of resources as well up on our website at howtomoney.com, a lot of articles that we've written over the years to try to help people with HSAs. Even just when you go to howtomoney.com, there's a “start here” button. If you're trying to figure out, “I'm so new to personal finances. I feel like I'm that guy that Joel described. I don't really know anything.” Click on the “start here” button. It starts slow. We want to, like, help ease you into the water so you don't feel completely overwhelmed by the jargon immediately.

I love it. Easy introduction and easy process to get started.

Yeah, no doubt.

Cool. Joel. Thank you so much for coming on the podcast today.

Yeah. Thanks for having me, Chris. I appreciate it.

 

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