"It worked for us before."

"It's what we know."

"We've used this before. It's terrible."

"We've used this before. It's great!"

Our perspective on different financial tools and their uses can often be hard to shake. We're told be certain financial gurus or personalities that one tool is better than the other, but is it really?

In our final episode of the Financial Toolbox series, Ron and Ryan dive into the mindlessness that can often keep us away from financial strategies that could potentially benefit us, as well as drive us toward financial strategies that may do us harm.

What's Up With Money?! Film Club:

Moneyball

Ron and Ryan dive deeper in the Financial Toolbox to discuss another framework around filling your financial toolbox with the appropriate tools.

Is it taxed or non-taxed?

Is it in the market or out of the market?

Can you touch the money before you're 59 1/2 or are you heavily penalized for doing so?

All of these are important to think about when deciding what tools you need for your own financial well being.

What's Up With Money?! Film Club:

Ocean's 11

What are these tools?!?!?!

Here is the high-level thinking about financial tools.

These are based on uses of money and things you need throughout all of life.

Income: You need this forever. It could be active from your job or passive from investments. Some things are really helpful for this - like a job. Sometimes where your money is kept is not as good for this job.

Capital: This is the money you have access to. Some call it the emergency fund or opportunity fund. Some tools are great at this. Some tools you can't use until you are age 60.

Growth: Every dollar has to be growing or it is losing. Remember that cash is a horrible store of value since inflation makes it lose value every year. For it to be considered growth you are looking for growth above and beyond the "risk-free" rate of return.*

Health: This is the money that you set aside to take care of current and future medical expenses. This is the number one bankruptcy maker and only gets more expensive as you age. Most people are not thinking about this one - especially for their future self.

You need money that does each of these jobs well.

If you don't, it may be costly to you and future you.

You do not want to come to a financial job and realize the financial tool you have is not great at that job.

If you come to the point where it is time to paint the wall and all you have is a hammer...

That's going to be one ugly wall!

*Risk-Free Rate of Return: If you're getting 5% in your HYSA, that's your risk-free rate of return. So in order to get 8% you look at how much risk you are taking on to get an extra 3%.

Ray Dalio video on the "Holy Grail" of risk correlation.

What's Up With Money?! Film Club:

Dumb Money

$100 dollars is $100 dollars.

When it goes to work, $100 may not be $100 depending on where you place it.

Everyone is looking for one place to put money, but there is no "Swiss army knife" of a financial tool. Have you ever tried to paint the wall with a hammer?

Of course not!

Now you want to try painting with a hammer, don't you?

What most professional and popular advice gets wrong is believing you just need more money and that will work.

But does it?

Perhaps if you have millions and millions of dollars, but that isn't most of us.

Comparing tools can also be a problem.

We can say, "Never use a hammer. Hammers are the worst tool. You want a paintbrush for painting a wall."

So you have a paintbrush now, but now you want to hang a picture on your freshly painted wall.

Now you wish you had that horrible hammer.

It's because dollars in different tools can get you a complete money tool box that has you prepared for every job that you need or come across.

There are tools that do financial jobs way better than other tools.

What's Up With Money?! Film Club:

The Big Short

Wrapping this series up and Parker the Dog joins the show.

We start with a PSA about working with pros and The Stock Market.

In most cases it goes better when you work with a pro, but how do you make sense of the products, the licenses, the designations?

Licenses require passing state and federal exams and means you are regulated by the government and several others.

Designations (letters after your name) mean the person you are working with did extra specialized education.

These matter, but they may not be the end all be all.

Now on to the show!

Q: Why do you need to be in the market?

A: Growth potential.

Q: Why you can't only be in the market?

A: Market money is not good at some jobs.

Long term, The Stock Market gives you the opportunity for your money to grow and that is a great thing.

The Stock Market also supports the growth of our economy and is the good side of our capitalistic society.

If the market is down, you should have some non-market money so you are not forced into "locking in a loss."

What's Up With Money?! Book Club:

Why Wall Street Matters by William D. Cohan

In this episode, we're going to look at Ronald's two biggest pet peeves about popular and professional advice.

Peeve #1 - We only talk about the market in terms of growth.

Sure, in general, if you look at the long view of the market it shows an upward arc.

We leave out the losses and how those can influence your actual growth.

A couple down years can really do damage on your investment outcome.

If that down year is the year you need the money - that is a disaster!

This is also connected to a side peeve - the difference between average rate of return and actual rate of return. These are not the same thing.

Average is what we sell. Actual is what happens in real life.

Peeve #2 - We say you get compounding interest in the stock market.

This is beyond a peeve because that is factually not what happens with your stock market participation or any market.

A stock does not get compounding interest.

A mutual fund does not either.

Your home growth isn't by a compounding interest metric.

It is asset appreciation (growth) and depreciation (loss).

This is fundamental in understanding what's actually happening when you are in the market. Compounding interest is easy to make projections, but that is not what happens with your money.

You can reverse engineer to calculate the percentage of growth but you were not credited that amount of interest.

What's Up With Money?! Book Club:

Why Wall Street Matters by William D. Cohan

We took this episode outside for the first time.

So, why is investing so critical to us financially, but more so psychologically?

We can easily intuit that having more money does something beneficial so we have to put money to work. So we invest!

But is that all there is to it? Nope.

Market's are not magical but you need to use them to grow your money.

People tend to chase rate of return thinking they can double their money tomorrow. This happens in rare cases, so we chase it!

Large numbers earn large numbers. That is market math.

What is important to understand about all financial tools and strategies is that they all require funding - and that is the rub.

It is just like working out. Ugh!

I want to be fit without doing anything. How can I get that?

You see it over time. The gains get you exponential gains.

Like the whole body of health... We look at the whole body of finance.

We have been focused on accumulation for a long time - and that makes sense, but does it really work? It depends, but not often.

You may not have the diversification you actually need for complete financial wellness.

You could be boxed in by market drops, taxes, liquidity, and so on.

What's Up With Money?! Book Club:

Why Wall Street Matters by William D. Cohan

What do we actually mean by these two ideas of saving and investing?

Saving is putting money aside - which is Part 1.

Investing is putting the money to work - which is part 2.

Most people think of investing as a house or the Stock Market. You buy something that will grow larger than the price you bought it for.

Simple!

Investing is buying something with your money. This could be buying interest. It could be buying an asset.

We have said you have to spend every dollar you make which freaks people out.

We do that on purpose to get you thinking that you need money at work and not sitting around.

One of the great things about this episode is that we talk for a while and Ryan feels like we didn't say anything. Welcome to the real world of investing and securities!

Never mind the confusion over IRA's and how they are not accounts. They are arrangements between you and the IRS.

Confused yet? Don't worry - we solve everything!

This episode was really fun for us and we hope it's fun for you.

Investing is crazy. You have to do it to get growth. It is strange. It is confusing.

Stocks. Bonds. Mutual Funds. Options. Derivatives. Tranches. Indexes. Reits.

We said it before - simple!

What's Up With Money?! Book Club

Why Wall Street Matters by William D. Cohan

We're going to look at the ways finance being on you and the things that are not your fault make you feel anxious.

Both of these make you feel like crap!

The financial anxiety ride is something that seems all on you. You feel behind others and you aren't quite sure what to do that could get you ahead or up to par with others.

That drives financial anxiety.

Compounding the problem - all the guru's push this agenda that you are a financial screw up and you should feel bad. They say, "Shame on you!" We say, "Shame on them!!!"

We can end up in a downward financial anxiety cycle of wanting help, turning to popular financial gurus, and then only hearing you are doing a bad job which only makes you feel worse.

You can end up living in crazy town feeling like you are doing everything you are supposed to do, following the advice, and not getting the financial momentum you should be seeing.

There are many factors that work against you that you have no control over that contribute to more and more financial anxiety.

Ultimately, you need to pay close attention to the things you can control and be responsible. This can aid your financial anxiety.

You also need to pay attention to the things outside your control and not let them drive you more into financial anxiety.

Check out our episodes on Financial Anxiety

Episode V: The Financial Anxiety Ride Strikes Back

Episode VI: The Return of the Financial Anxiety Ride

What's Up With Money?! Book Club

Books to Avoid!

Here we want to help you not waste money on money books.

Most guru strategies and money advice books follow the exact same formula and it goes like this --

And maybe a couple other things like a house or saving for college.

But there you go; the magic formula.

We may have saved you some money.

If the cover has on it a step-by-step or 6 steps, beware!

If the table of contents has those items above listed as chapters, place it back on the shelf.

Well... not so fast.

This is not the answer to things being out of your control and your financial situation not being entirely your fault.

It can be daunting to be responsible with your expenses when the world is getting more expensive all around you.

It is true that following the golden rule of finance - spending less than you make - allows you to save and get money working.

Most people only focus on this aspect of finance which probably made a lot of cents (our favorite money pun) from 1980 to 2010. But is that still the only responsibility aspect to think of?

We have lost sight of the aspect of trying to take control of your income.

This is the new problem (and opportunity) after 2010.

We need to get more control of our income - so how do we do that?

Can I simply ask for double the income at my job?

Probably not.

The new mentality is figuring out how to make more money from side hustles and moving to the gig economy in order to make it.

Taking control of your income is the new problem. You need to explore and make more money and explore your own human ingenuity.

Money can be made outside of your W-2 job.

Get a raise!

What's Up With Money?! Book Club

Books on Life Insurance: