Hey Financial Feminists, welcome back to the show! Today’s episode is going to be a little different. We’ve put together some of our best answers to your most asked questions. Study Hall is now in session, and of course we’re starting with the number one topic on this show — investing. I’ve pulled together some of the best advice from our past 170-ish episodes to create a one-stop-shop for everything you need to know to start building your wealth. Whether you’re an investing newbie or looking for advanced tips, this episode covers it all – from busting common investing myths to tips on how to get started, setting up your kids for financial success, and even what it really looks like when it’s time to retire. If you’ve been putting off investing or feeling overwhelmed, this episode is your permission to dive in and get started today!
Key Takeaways
- Investing is not gambling: The key to successful investing is to think long-term. Avoid chasing hot stocks or trends and instead focus on well-diversified investments that grow steadily over time.
- Start investing consistently, regardless of market conditions: Dollar-cost averaging allows you to invest the same amount regularly, removing the stress of trying to time the market. Remember, “time in the market” is more important than “timing the market.”
- Retirement strategy starts years before you retire: You don’t take out all your money at once. Plan for a gradual withdrawal with tools like a CD ladder and consider penalty-free options, like Roth IRA contributions, to keep your funds safe but accessible.
- Picture your future self to stay motivated: Visualizing the life you want to live in retirement can be a powerful motivator to keep investing. Take care of your “Nana You” by making smart decisions today.
Notable Quotes
“The vast majority of stockbrokers underperform the market, yet they’ve convinced you that investing is too complicated for you to do on your own. It’s gatekeeping at its finest.” Tori Dunlap
“Imperfect action is better than no action at all. The worst decision you can make is making no decision.” Andy Hill
“Financial independence doesn’t mean retiring tomorrow—it means giving yourself the freedom to make choices without money being a constant burden. You can still have debt and be on your way to financial freedom.” Jamilla Souffrant
Episode at-a-glance
≫ 00:37 Introducing Study Hall: Your Ultimate Guide to Investing
≫ 01:32 Debunking Investing Myths and Misconceptions
≫ 07:49 When Are You Ready to Start Investing?
≫ 09:18 DIY vs. Robo Advisors: Choosing Your Investment Path
≫ 13:16 The Two-Step Process of Investing
≫ 17:08 Understanding Dollar Cost Averaging
≫ 24:36 Exploring Financial Independence and FIRE
≫ 30:26 Crafting a Personal Financial Independence Journey
≫ 31:37 The Power of Audacious Goals
≫ 34:32 Investing for Your Children’s Future
≫ 35:48 Understanding 529 Plans and UTMAs
≫ 41:27 Roth IRAs for Kids
≫ 47:46 Planning for Retirement Withdrawals
≫ 55:06 Envisioning Your Future Self
Resources mentioned in this episode:
Financial Foundations #5: How to Start Investing
Debunking the Worst Worst Money Advice We’ve Ever Heard
Setting Financial Goals for your Best Life with Jamila Souffrant
How to Financially Prepare Your Kids for the Future with Andy Hill
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Transcript:
Tori Dunlap:
Hi, Financial Feminist, welcome to the show. I’m so excited you’re here. Thanks as always. My name is Tori. I am a money expert. I’m a New York Times bestselling author.
I fight the patriarchy by making you rich and I’ve helped over 5 million women save money, pay off debt, start investing, start businesses and feel financially confident. So, if you’re oldie but a goodie, you knew that already. If you’re new, welcome to the show. We’re doing a fun new thing on Financial Feminist, which we’re calling Study Hall. Study Hall is a new format we’re testing on the show where we’re putting together our best ever advice on some of the biggest topics that you always ask about.
So, today we’re starting with our number one topic, which is investing. So, we’ve taken the past 170-ish episodes of the show and we’re putting them together in one big bad episode for you. So, if you like this episode, let us know. We would love to know if you want more of these study halls, this is the best way to consume our advice without you having to parse through our entire back catalog. So, without further ado, let’s go ahead and get into it.
Grab your pens and paper. Let’s go to study hall. But first a word from our sponsors. Before we jump into some of the advice and the info from your favorite guests, I thought it would be best to tackle some of the myths and misconceptions surrounding investing. So, let’s listen back to the segment from a solo episode I did about investing.
We are going to talk very briefly about some investing misconceptions. We have an entire free workshop that breaks these down and breaks down how to get started investing and we’ll link it down below in the show notes. And whenever you’re listening to this, you can get access. Just click the link down below. A couple of misconceptions about investing.
One, it’s gambling, some investing is gambling. The like pick the hot stock, pick the hot new thing. Anything that basically seems sexy or that the Wolf of Wall Street would approve of that is not investing. It is gambling. I talk about this in my book as well, but the thing about investing is that it should be over the long term.
It should be over years if not decades. And so, if you are playing the investing game, thinking like, “Okay, I’m just going to pick the hot thing for a day or a week or a month and then I’m going to pick the other hot thing,” that is not investing, it’s gambling. And frankly its extremely anxiety inducing too, much time and effort, and also it does not perform well. We know statistically that thinking about investing for the long term and choosing well-diversified investments is the thing that performs well rather than chasing the hawk commodity. So, is investing gambling not how it’s strictly and financial experts define it.
Again, investing should be consistent and stable over a long period of time. One of the other misconceptions is that you have to watch stocks like a hawk and make it like your full-time job. No, the answer is no. You don’t have to do this. For me personally, what I’ve realized is that I don’t want to play the individual stock game like I was saying before, they do not perform well.
They’re too much work and effort and also I just have other shit to do. It’s not necessarily a smart investment to again be chasing the stock. We also want to think about investing again for the long term. So, its performance on a random Tuesday or even in a month or even in a year, doesn’t matter that much in the grand scheme of things in the years if not decades that you’re investing. So, even me as a financial expert, I check my investments about once a month and yes, I’m checking their performance, but I’m really just checking to see like, “Is everything going okay?
And also, can I start investing more?” We talk more about this in our Stock Market School, which we’ll also link down below, but there’s a way to start checking your investments that doesn’t feel, again, anxiety inducing or stressful. It’s just like a simple like, “Okay, everything’s good. Cool, moving on.” It’s like a doctor’s appointment, it’s like an annual checkup.
It’s just like, “Cool, everything’s fine. We’re going to keep moving.” I mentioned this already in this episode. Another common misconception is it’s like Wolf of Wall Street and Leo DiCaprio yelling in the phone. It’s not that. My not so conspiracy, conspiracy theory is that men and specifically finance bros named Chad have literally told you that investing is difficult or complicated in order for you to A, not do it and B, pay them to do it for you.
The vast majority of people who are literally investing like stockbrokers, they work in the financial services industry, they do not perform, they’re not good at their job. We know this from statistics. I found all of these stats when I was researching for my book, but literally the very people that are trusted to manage your money and pick stocks very rarely are actually good at their job and don’t end up performing well. So, the not so conspiracy, conspiracy theory is that they tell you it’s complicated so that they keep their jobs and so that you are gate-kept out of investing when really you can manage this yourself. You just need somebody to teach you whether that’s me or somebody else.
And finally, one of the other misconceptions is, “Oh my God, we’re in a recession so it’s a bad time to invest,” or, “Investments aren’t performing great, so now’s not a good time to get in.” Couple things. One, if we’re thinking about this in terms of years, if not decades, again, it does not matter what happens in a random period of time. We know from statistics that over every 20-year period, every 20-year period, even a 20-year period that included 2008 or the dot-com boom and bust or the great recession and depression, we know that over every 20-year period you have been a 100% likely to make money on the stock market. So, what is the key to making money on the stock market?
Patience, right? So again, what happens on a random day doesn’t really matter. In addition, stocks are on sale. I have said this before on our social media platforms. Millionaires will be made right now. Millionaires will be made when stocks are on sale.
Now, is actually a great time to start investing because if a coat is a $100 normally and suddenly it’s $50, well it’s a great time to buy that coat. So, if you are that person who is hesitant to get started investing because you’re like, “Oh, it’s not performing great,” well, cool, think about it as a long-term thing. Think about it as 10, 20, 30, 40 years and realize now is actually a great time to get started investing because your investments are going to be cheaper. So, is now a bad time?”
There’s no such thing as a good time or bad time to invest. You just need to get started. We’ll explain what dollar cost averaging is in a little bit. You just need to get in and you need to ride whatever waves are coming. Okay. So now, that we have the myths and the misconceptions out of the way, you’re probably wondering, “Okay, Tori, but how do I actually get started?
How do I know when I’m ready?” In this next clip, I’m walking you through the checklist to go through before you start investing as well as answering the but how question, including one of the biggest mistakes I see new investors make. Let’s talk about when you’re ready to start investing. You are ready to start investing when you have paid off any debt over 7% interest. This is all your credit cards and this is some student loans.
We’ve talked about before why 7% is the magic number on whether we pay off debt or start investing or do other things. Please see previous episodes of Financial Foundations for why 7% is that number. We’re also ready to start investing when we have an emergency fund of three to six months of living expenses in a high yield savings account. And we are ready to start investing if your company offers a 401(k) match. Now, a 401(k) match means that your company basically doubles your money for no additional effort.
So, if your company offers a 3% match, that means if you contribute 3% of your salary to your 401(k), your company will match it at 3%. So now, you’ve just contributed 6% of your salary to your 401(k), but only done half the work. If you get a 401(k) match through work, take advantage of it. It is free money. There are very few places in this world that just give you free money.
And if you don’t know if you have a 401(k) match or if you don’t even know if you have a 401(k) available, ask, ask your benefits person, ask your HR person at work or just ask your boss if you’re at a smaller company. You have three options when it comes to investing, when it comes to how to actually start and where to start, your first option is DIY investing. This is exactly what it sounds like. You are doing it yourself. You are navigating the stock market.
You are choosing your investments for yourself. You are contributing to your retirement accounts on your own. DIY is not as complicated as people make it seem, but I will say that for the average beginner, this is not a good option for you. This is going to complicate you and freak you out and cause you to hit the bail button way too early. Some DIY companies include Fidelity, Charles Schwab, Vanguard, the pro to these companies and the do-it-yourself approach is that you’re saving money, you’re not paying somebody else to do it for you, you’re not paying a service to do it for you.
You’re saving money in fees. The con though is you have to know what the hell you’re doing. I feel confident completely managing my own investments on my own, the average person doesn’t and I understand that. So, that’s option number one and probably not the best option for you listening. Option number two is what’s called a robo-advisor.
A robo-advisor is a company that for a fee, will invest for you. These are companies like Ellevest, Betterment, Acorns, Wealthfront, Wealthsimple. There’s a bunch of them out there. So, what’s happening is that, “Do you sign up with them?” They ask you some questions like your gender identity and your age and your goals and your risk tolerance, and then based on your answers to those questions, they set you up with investments and they do it for you.
The pro to these kinds of platforms is that they’re doing it for you. You don’t have to worry about it. You don’t have to come in with prior knowledge. They will do it all for you. The cons are twofold. One is that you’re paying somebody a fee to do this and typically this fee is a percentage of your investments.
Now, a half a percent in fees doesn’t sound like a lot, but we all hope we’re a millionaire someday and a half a percent of a million dollars is a lot of money. My biggest issue though with brokerage accounts is that they are fishing for you rather than teaching you to fish. The amount of community members that we have had come to me, come to HFK and say, “I’ve been with this robo-advisor and I still don’t know any of the terms. I don’t know why they’re choosing the things they’re choosing for me. I’m still just as confused as I was when I started 3 or 5 or 10 years ago.
So, we built what I lovingly call the Hannah Montana of investing platforms because it is the best of both worlds. Get it? Did you get it? Okay, so I didn’t like that DIY was too passive. It wasn’t helpful, it wasn’t step-by-step in guidance and I didn’t like that robo-advisors just threw you in off the deep end without giving you any information. So, I built a platform with technology called Stock Market School.
We will put the link in the description. You can literally learn step-by-step, how to invest from me and other finance experts and actually invest within the app. We do monthly coaching. We do quarterly workshops about investing. It is a year of investing education taught by me and the HFK team, and I built it because I didn’t like the other options that were out there.
I wanted a way to teach you how to manage your investments for yourself, but with a safety net, with guidance from someone you can trust and with a lot of the emotional support that comes with a lot of new information. So, if you’re interested in that, you can check it out below. All right, one of the things that I really need to highlight, I’ve said it on the show before, I say it in my book, but we see thousands of people end up losing millions of dollars from a very simple mistake, and that is not understanding that investing is a two-step process. What I mean by that, if you open a savings account, you put money in and you’re done, you take a thousand dollars, you put it in a high-yield savings account, you’re done. Right?
With investing, the investing account itself is not the investment. The 401(k), the Roth IRA, the actual investing account is the thing that holds your investments. You have to not only put money into the account, but you have to go purchase investments. I liken it to a gift card. It’s like you put $50 on a TJ Maxx gift card, now you need to go buy your plants and your candles and throw pillows.
This right here is the number one mistake I see people make. They put money in that Roth IRA or in that 401(k) or in that general investing account and they’re like, “Cool, I’m done.” And then, they wipe their hands and then they move on. You are not actually invested though. Your money is in what I call financial purgatory because it’s just sitting there waiting for you to invest it.
You have to do step two. If you do not do step two, you are losing out on thousands, hundreds of thousands, even millions of dollars. I tell this story in my book about Rose, a cute little 65-year-old teacher who put her money diligently in a 401(k) with every single paycheck in her entire career for her entire life. And then, she got to retirement and realized that she had never done step two because nobody had taught her. And if there’s one thing I’m trying to do in this world, it’s trying to prevent more situations like Rose.
So, please do step two. Please do step two. First, we’re going to choose our basket, right? We’re going to choose our account like a Roth IRA, a 401(k), a general brokerage accounts. We have previous episodes that talk about what your investing account options are, so please go listen to those.
And then, second, we’re going to choose what goes in our baskets. If you’ve been following us for a while, you know that I’m an index fund girly. Index funds are my personal favorite investment. Those are what I choose to invest in. And again, in Stock Market School, I give more detail about what these are about, how to make the decisions in what to choose and how to choose them.
But index funds are a great diversified investments where I can invest in a bunch of different companies at once. So, that’s why I personally love them. Now, how do I know what money should go where? How do I know if I should save this certain money or invest this other money? Savings are for your short-term goals.
You 100% need to save, not invest your emergency fund because you need your emergency fund readily available for you guessed it, an emergency. Under no circumstances should you be investing your emergency fund. Some other things that I would save for rather than invest for are more short-term goals. Things like a vacation, a down payment on a house fund, a wedding fund, a I want to start a business in three years fund, things that are longer term that we want to invest for. A 100% we want to invest for retirement.
That is the primary goal that people invest for. Keeping that in a savings account while better than doing nothing is still not enough to be able to afford retirement someday. And for a lot of people, retirement accounts are also great for children’s education costs, right, things like college, things like a 529 is the perfect example of this. The general rule of thumb is that any goals, 7 to 10-ish years out, those need to be invested. Goals under that seven-year mark are better off having been saved for rather than investing for.
Another question we get a ton is what do I do if the market is “bad” right now? Or is it safe to invest when things are economically sketchy? So, we sat down with my friend and fellow co-creator of Treasury, which is the investing platform that we created for her first 100K community that talks about what to do when the market seems a little topsy turvy. And we also go over a very common term you’ll hear around investing, which is called dollar cost averaging, which is when exactly to get into the market. Can you talk a bit about that especially during times of potential economic volatility?
Elias:
Yeah. When I think about investing, it’s like 10% or 20%. How do I do this? What do I invest in? And then, the remaining 80%, 90% is how do I manage my emotions and how do I build a system where I’m going to invest for a really long time? So, that’s my investments have time to actually come to fruition. I haven’t yet figured out how to predict the future.
Tori Dunlap:
And here’s the thing, financial experts, including myself and any other financial expert, they don’t know either. We do not know. And anybody who’s telling you they know what the stock market’s going to do is lying to you or trying to sell you something. Quick tangent but I have to be clear about that. It’s not from lack of experience, none of us know because you can’t really predict it.
Elias:
And so, when people are like, “Oh…” Either the stock market is really turbulent, “Is this a good time for me to… This seems scary, I don’t want to invest,” or, “Well, the stock markets down a bunch, that seems good, right because it means I’m going to invest at a cheaper price.” And the answer is some combination of both and we don’t know. But the thing to do, or at least the thing that I do, is just try to invest really consistently whether the stock market’s doing amazingly well or doing really poorly. There’s this thing called dollar cost averaging, which is a jargony term.
Tori Dunlap:
Elias, we actually have a question from one of our listeners about that. So, let’s go ahead and listen to that question.
Speaker 3:
Hey, Tori, I just wanted to say thank you for all you do. I’m actually in my 20s and bought a house when I was 25, and everything that you’ve been giving me so far is so great. I was wondering though, where you always talk about time is on your side. If the market being low right now, would it be a good time though to be buying stocks or indexes as well as starting an IRA?
Tori Dunlap:
So, Elias, I imagine this person, I know this person isn’t alone, and feeling like, “Okay, if it’s volatile, is now a good time to invest? Should I keep doing what I’m doing? If I haven’t gotten started, is now a bad time to start?” Can we talk about that?
Elias:
Totally. So, it’s a tricky thing because let’s say you decide now is a great time to get started and you put your money in the market and then the volatility continues, and in the short run the stock market goes down more. Well, then it’s going to feel really bad because you’ll have your invested dollars will be less valuable than they were when you originally invested. But the alternate can also happen, meaning you’re like, “Ooh, it seems like things are pretty scary. I’m going to hold off for a little bit.”
And maybe in the short run, that’s smart, but then all of a sudden the market starts doing okay and you’re still holding off and it keeps doing okay and you’re still holding off and now the money that you didn’t invest is not growing. And so, because it’s impossible to predict, at least in the short run like what the market is going to do, there is this jargony method called dollar cost averaging. And what dollar cost averaging means is just taking the same amount of money and putting it into the same investments with some frequency.
Let’s say every two weeks or every month or every week, you just buy, let’s say $500 of the same investments again and again and again over a very long period of time. And what’s cool about that is it takes all of that psychological challenge out of your investing decision. It allows you to say, “Oh, the market is down a little bit. Well, that means my $500 is going to go further.” Or, “Hey, the market’s up a little bit.
That means the money I’ve invested previously is benefiting from the market being up.” And so, if you just do that, you end up getting basically the average price that the market is at over that long time period and all the while you are investing, which means you’ve overcome the most important hardest step about investing, which is getting started.
Tori Dunlap:
Right. And for whatever reason, if you’ve been tuning us out or you’re not listening, come back please. Because if there’s one thing I have to tell you, there is never a perfect time to invest. In that way, every time is a perfect time. It is never a bad time to invest as long as you’ve gotten started. Literally every day is a good time to start investing, especially because we’re thinking about investing not just for a week, not just for even a year.
We’re thinking about multiple years if not decades. So, what happens on a random Thursday? What happens even in a random year? Doesn’t matter if we’re thinking about investing for the long term. So, when Elias talks about this concept, dollar cost averaging, right, it’s just the idea that we need to put more time in the market than trying to time the market.
They say this in the financial industry all the time. Time in, I-N, time in the market is more important than timing the market because none of us can, even us financial professionals can’t time the market. So, it’s just important to start investing and to invest at a consistent rate over a long period of time. I will also say too that there’s a lot of talk about like, “Oh, my investments are down, or I’ve lost money and I put lost money in quotes.” Because the truth is you actually haven’t lost or gained money on your investments unless you choose to sell your investments.
So, you have not actually lost money on the stock market unless you choose to liquidate, right? Unless you choose to sell your investments just in the same way that you actually haven’t gained any money on the stock market unless you choose to sell your investments or liquidate your investments. So, all of this I talk about like, “I’ve lost money on the stock market.” You’ve only lost if you sell. And if again, we’re thinking about this in the terms of years, if not decades, we’re strapping into the roller coaster and we’re riding the roller coaster for a while.
So, part of it is curbing that anxiety. And again, the shameless plug of treasury is it’s like you want a place to be able to get a pep talk from people you trust and be able to ask questions and figure out how to navigate something you haven’t navigated before in again, a way that’s not going to be judgmental or shaming. Personal finance is personal, and as we know, investing is no exception. And you might be familiar with something called FIRE, Financial Independence, Retire Early. We recently had Jamila Souffrant on to talk more about FIRE in all of its forms.
Jamila Souffrant:
So, I start with the technical definition of financial independence, which is the ability to live off of your investments. So, the investments that you accumulate over time, pay for your living expenses where you have the option of never actively having to work again. You get that income from your investment and your portfolio. And so, that concept for a lot of people feels very audacious. It feels almost impossible, which I understand.
There’s some people who won’t even touch the concept of FIRE, Financial Independence, Retire Early because the thought of it just doesn’t seem to make sense from where they’re starting. And so, with that, I knew and understood to help people along their journey and to bring more people on the path with me, because I’m on the journey to reach financial independence, I’d have to break it out into more manageable steps because I also agree if you’re just coming to understanding that concept, it’s just like, “Really, I have all this debt. I’m at this starting point.
I feel that I can’t do it.” And so, for me, I had to understand and break down the difference between financial freedom and financial independence. I believe you can achieve financial freedom on your way to financial independence. Financial freedom is not linked to the amount of money you have. You can still be in debt and have achieved some level of financial freedom.
It’s the ability to make choices, to have security, to feel good about where you are, even if you have some insecurities about your money. And so, you can achieve financial freedom on your way to financial independence. And that concept, I think, like you said, so many people say it differently, even the word financial independence, if you’re not in the FIRE movement, it means something different because you could be financially independent from your parents, a partner, a job.
But when I say it, I mean financially independent from everyone and everything, you can literally walk away and be in control. And I don’t know who doesn’t want to have that feeling. And so, I encourage people to start the journey to financial independence because on your way, you’ll achieve more freedom, more options, more autonomy over your time on that path.
Tori Dunlap:
Well, and you’ve been in this game for a while, and I sure you recall the early FIRE days where it was like Silicon Valley, straight White tech bro, who had no kids and could retire at 33 because he sold his multimillion-dollar software company and rode his bike everywhere. And that was the advice of ride your bike everywhere and start this huge tech company. And that’s how you can retire early and a lot has changed since then.
Jamila Souffrant:
Oh my gosh. So, here’s the thing. I discovered financial independence in the FIRE movement when I was in my early 30s. So, this is now after I failed at my audacious goal of not working for anyone past 30. And so, I was now pregnant with my first son, and I have three kids now, by the way. So, I was pregnant with my first child in my early 30s, and I had this horrible commute.
It was an hour and a half each way, and I remember a really particular day. The commute was hours, couple hours long, and I realized, and I was heavily pregnant, and I said, “No, wait a second. What is happening? This cannot be my life.” I knew I wanted more kids and I broke down in the car and broke down to my husband. So, my boyfriend then became my fiancé and then husband and said, “I cannot do this.”
And that’s what prompted me to search for solutions. I asked questions to myself, “How do I quit this job?” And I Googled it, and I found all these podcasts and blogs and this thing called the FIRE Movement, and I was just like, “What is this thing?” And because I had such a long commute, I was able to immerse myself in that world and start to listen to all the podcasts at work, read all the blogs, and yes, most of them were by White men, but I was able to pull out information that related to me. Right?
So, it’s like maybe we don’t necessarily look alike, we don’t have the same background, but you just interviewed a teacher that was able to do this, and my husband is a teacher. So, what can we learn from that?
Tori Dunlap:
Jamila, I don’t mean to interrupt you. Can I stop you for a second?
Jamila Souffrant:
Yeah.
Tori Dunlap:
What you just said was so powerful and I just want to make sure people hear it.
Jamila Souffrant:
Let’s go. Let’s go. Yeah.
Tori Dunlap:
It’s just so incredibly important that nobody’s story is going to be the same as yours. And I can speak to my own experience like my 100K at 25, that’s what I was known for a really long time. Her first 100K was saving that 100K at 25, and I would see people comment on the Good Morning America story about me or the podcast episode and be like, “Well, you didn’t have student loans and I have student loans, so I’m not going to listen to you.” And there was so much privilege in my story, and I’m the first to acknowledge that. But there’s also things that you can take away from my story, even if the story is different.
And I love that what you did was like, “Yeah, probably not a lot of representation, especially at that time for women, for Black folks,” but you were able to say, “You know what? Yep, I’m not able to start that multibillion-dollar software company and sell it, but I can do this thing that they advise me to do.” And I wish more people had that mindset when they approached personal finance as opposed to seeing those sexy a 100K at 25 titles or millionaire by 30. And then, just being like, “Well, that’s not even possible for me.”
Jamila Souffrant:
Well, listen, ultimately, I think, and I also mentioned in my book I say this is that there are going to be people who have more privileges than you, but you also have probably more privileges than someone else. And the idea is not to pinpoint and see the differences, which obviously there are going to be a lot, but it’s to pull what works for you or what you can relate to. And so, from my story, I took what I needed. I took the information and the inspiration that I needed, and if something didn’t relate to me, I’m like, “Okay, that’s fine.” And I moved on.
And so, with that, I was able to craft my own idea and process of what my financial independence journey would look like. And to your point, when I first started, because I was listening to a lot of people who were into frugality and aggressively saving, that was my path that I took. And that path did allow me to save and invest a $169,000 in two years and then eventually quit my job. But as I started to go on my journey, I realized that the frugality as my lever into reaching financial independence was not going to be it. I needed to create a sustainable pathway as a wife, a mom of three, living in New York City that my path was going to be a little bit different.
And so, I adjusted what my journey looked like. I became more okay with spending on the experiences and not investing in saving as much, but I’m still on my journey to financial independence. And I knew that there were so many people who would be more into this concept if they realized how amazing and diverse it could be in that it’s not one size fits all, right?
But the attempt and pursuit of financial independence puts you in such a better position and there’s no way you can fail because the goal is so audacious that let’s just say you say, “Okay, I need to reach $2 million to reach financial independence.” And then, in 15 years or however many years you start, you say, “What the heck, I only made it to 300,000.” That is better than probably not doing anything at all if you would’ve not started. So, that’s my whole thing.
Tori Dunlap:
I literally had phone call. I can remember this, a phone call with my dad because at this time I had gone public with my 100K goal and he was like, “So what happens if you don’t hit it?” And I’m like, “Then, I have 80K,” and 80K at 25 is still an incredible accomplishment and pretty significant. But he was doing the, “You’ve announced this publicly, what if you can’t stick to it?” And I’m like, “I am still. I get 80% of the way there.”
Cool. Even setting the goal and progressing towards it, even if you don’t manage to hit it, still puts you in a better spot than you were before.
Jamila Souffrant:
Right. I call it moonshot goals. You aim for the moon and if you fail, you’re among the stars anyway. It’s better than that launching, so let’s just do it. Let’s go.
Tori Dunlap:
Right. Well, and I think for women especially, we do feel like we set goals that we can a 100% achieve because we’re so scared of failure. We’re so scared of not being perfect.
I feel like a true goal. You should have a feeling of going, “I don’t know if I can do this.” You should have this little inkling of like, “This might not happen.” And that means it’s an actual goal because it’s something to aspire towards.
Jamila Souffrant:
Right. And I think it’s important to think of the questions you’re asking yourself if you are facing an audacious goal or thing you’re trying to accomplish because black and white questions like, “Can I do this?” And the answer is yes or no. It’s hard to make if you don’t have all the necessary information. And so, many people when they’re starting their journey, they don’t know, you don’t know all the things. There’s some things I don’t even know now that I know along the way, I’ll still pick up.
And so, it’s more important to ask things like, “What do I need to learn to make this goal accomplishable? How can I put myself in a better position?” And so, I think the quality of our questions on our journey far better impacts what happens versus can I do this? You don’t know enough yet. If you’re listening to this, can I do this?
Unless you’re going to say maybe or it’s something positive. But saying no from this position of not understanding that there’s so much, and I feel like I’m a testament to that because I’m still… There’s five stages to reach financial independence that I talk about in the book. The ultimate stage five is the captain stage. You never have to work again. I’m a stage below that.
Stage four, the commander stage work flexibility. So, I was able to quit my job. I am work flexible, meaning I can’t take time off of journey to launch, pause what I want to do, not have to actively work, but I can’t do that forever. And I believe this is a stage that everyone can actually get to, but I would not have gotten to this stage without starting my journey to financial independence because I would not have pushed myself or realized the opportunities in front of me without starting the journey.
Tori Dunlap:
Another question we get a lot is how to start investing for your children. And since I don’t have any of those, we brought in one of our favorite dads and personal finance, Andy Hill, to talk about some investing options for kids and other accounts you might want to consider. So, let’s talk about these accounts.
Let’s talk about 529’s first. What is it? How does it work? How do we contribute to one? Talk to me about it.
Andy Hill:
Yeah, absolutely. I think the first one, when we talk about investing for generational wealth, even though there’s so many problems with student loans right now, I still think that a college future, a college degree gives you a leg up in this world more than not having one. There are some studies out there that say a person with a college degree has an opportunity to make $1 million more in their lifetime than somebody without one. Obviously you could hit it big and not go to college and start a great business and do well. There are a lot of anomalies there.
But on the average, average person who’s able to graduate from college without a lot of burdensome debt, they can make a lot more money. And with that money, you can build wealth, you can have more time freedom, you can be happier. So, I guess money’s not the entire thing, but I still believe that a college future can help out with that. So, what can we do to invest for our college future? Our 529 college savings account is a great way to go. This is an opportunity for tax advantaged investing for educational purposes, so you can potentially get state tax deductions.
Now, a lot of people worry about, “Well, what if my kid decides to go to trade school or does an apprenticeship or something like that?” You could still use the 529 for that. “What if they go out of state?” You could still use the 529 for that. There’s a lot of additions and updates to the 529 plan that have been great as of late too, with the SECURE Act 2.0 that just passed recently. They’re even allowing for some rollovers of 529 if you have too much in there to roll over to a Roth IRA in the future for the kid as well.
So, they’re coming up with new ways to make this a possibility. Obviously, there’s an investment in our country that the country essentially wants people to go to college so they can get that education so we can keep moving forward and having our capitalistic society. So, this is an opportunity for you to look at a 529 college savings account. You can look at your specific state plan and that can help you out a lot as a good starting place.
Tori Dunlap:
I also want to highlight that these are investing accounts. So, what you’re doing is just like any other investing account you’re putting money in, but that’s not enough. You have to go choose your investments to live within that accounts. One of the common mistakes, Andy, that we see is with any investing account, people put money in and they think, “Cool, I’m done. I don’t have to do anything more.”
But it’s not like a bank account. You have to actually choose your investments. You have to choose what the money is going into the 529 or any other investing account is just the account that holds the investment. So, this is an investing account on the stock market, not a savings account.
Andy Hill:
Absolutely. Yeah. To your point, if it’s just sitting there that’s potentially sitting in a money market, then you’re probably even learning less than a high-yield savings account at this point. So, making sure it’s invested and diversified. A lot of these plans, which is a bonus, end up having these time-based strategies too, because you go in there and you’re like, “Well, I don’t know what to invest in.”
They essentially give you these time-based strategies, which is essentially like a target date fund where you say, “Okay, my daughter’s going to graduate in 2030. What index fund portfolio can I invest in to help me get there?” So, there are some easier ways to look at the investment process.
Tori Dunlap:
Amazing. And just to clarify, if you have multiple kids, you can open up how many 529s?
Andy Hill:
You can open up a 529 account for each kid. Now, if you open up just one and you pile it up and that kid doesn’t use all those funds, the name can transfer from one account to the other kid. In fact, you could even change the name to your own account if you don’t use all of the money. My wife just did this recently, actually. She went back to school to become an esthetician, and we needed some funds to do that, and we used the 529 that we’d built up.
So, it’s very flexible and portable as opposed to what also is out there, which is a UTMA which is essentially a kid’s brokerage account. The name can’t be switched on that, which is one of the downfalls, but it does have the option to be used for anything else besides college.
Tori Dunlap:
Let’s talk about a UTMA. Tell me more about that. Tell me more about how it works.
Andy Hill:
Yeah. Yeah, so that’s another option. So, when people are like, “Well, I’m not sure if my kid’s going to go to college or I don’t know if I want to just invest for college, maybe I want to help them buy a home, maybe I want to help them to start their business.” UTMA could be a great route for that because with the 529, you’re saying, “This is for educational purposes only,” and that’s okay. There’s nothing wrong with that. But if you’re saying for, “Well, I’m not sure I want to do that,” then you could look at a UTMA.
And again, that is essentially Tori’s talked about it on the show, a brokerage account, but this is a kid’s version of a brokerage account. So, you can invest in a UTMA kid’s brokerage account that helps you to get towards those goals in the future. Some of the downfalls about it though are the flexibility. It’s great, you can use it for anything, but when they turn 18, they can use it for anything. So, it could be a business in our brains we’re like, “Oh yeah, they could start a business or they could buy a home, or they could blow it all in Vegas or whatever.”
It’s in their name. It’s not in your name. The 529 would be in your name. So, you’re in more control of that account. And the portability of it makes it difficult just in case if you wanted to switch it to your other kid’s name, you can’t do that. And when it comes to student loans, the 529 has about a 5% impact when you’re looking at the FAFSA as far as it being a parent asset.
And then, when you look at a UTMA, since it’s a kid’s asset, that hits things at about a 20% rate. So, your ability to get as many loans or scholarship opportunities is decreased just by that amount. So, those are things to look at. Neither one is perfect, but you just have to analyze your specific situation, what your goals are and where you think, I don’t think doing either one would be horrible either way. And if you’re feeling stuck, you can just analyze those pros and cons and decide which way to go.
Tori Dunlap:
That’s super helpful. Yeah. And again, imperfect action is better than no action at all.
Andy Hill:
Exactly. Yes, exactly.
Tori Dunlap:
There’s one thing you always take away from these episodes. Do something, even if it’s not perfect, the worst decision you can make is making no decision at all.
Andy Hill:
Yes, the inaction is the worst. Even some middle ground there would be a high yield savings account. I mean, just throwing it in a high yield savings account, earning 4%, some 5% interest right now gets the game rolling for this future college expense.
Tori Dunlap:
I would love to talk about something that I, speaking of TikToks have seen a lot of TikToks on, and I know you do this as well, which is opening up Roth IRAs for the kids. With a Roth IRA, you have to earn income in order to contribute. But we’re talking about children under the age of 18 who maybe when you’re in high school, you’re earning income, but if you’re seven, are you making money?
And you and a lot of folks on TikTok have a really smart workaround for this. So, talk to me about how parents, especially parents who are entrepreneurs or business owners can take advantage of Roth IRAs for their kids.
Andy Hill:
Yes. Yeah, the main stipulation with Roth IRAs, whether it’s kid or it’s you and I, is that they have earned income. So, I do see some videos on there just saying, “Hey, I started a Roth IRA for my kid when they were born.” Well, they better be earning income in a legitimate business in order for that to happen. Otherwise, that’s not going to work out.
So, the workarounds that I do as a dad who owns a family finance education company is that I have co-hosts on my podcast that are my daughter and my son, and I’ve also taught them how to do social media marketing for my site. Now, they do this for an hour after school twice a week. It’s not a ton of money. They’re not millionaires or anything like that, but I do know-
Tori Dunlap:
You’re not running a child labor scheme on the side of marriage, kids and money.
Andy Hill:
Exactly. Dad’s sitting right next to them, I’m helping them. But legitimately they have learned over the past couple of years to do some very helpful thing, not just yesterday. I said, “Zoe, can you get up those Facebook posts for our Facebook group so that they are recurring each week? So, they pop in there and ask about people’s family financial wins.”
And two years later, after doing it with her for a while, I didn’t even have to show her how to do anything. She just did it. So, she had her cereal after school and she started posting the Facebook posts. I’m like, “Oh, this is working.” And she’s learning.
She’s learning some really good skills about how to run an online business. So, it’s not only a great thing to start investing for your kids early, but you can have some great, as we talked about earlier, some great conversations with them about how this stuff works, man. And then, with their earnings, you can take a portion of it, you can take all of it and invest it as earned income in a Roth IRA that can build up over time. And as you’ve seen with some of these compound interest charts, man, that can build up to millions and millions of dollars. This is a great way to make your kid a millionaire.
Tori Dunlap:
We had a previous guest on the show, her name’s Shazi Visram, and she has multiple companies that she’s founded that are family focused or baby focused. And on the back of them, she has these really beautiful pencil drawings of her kids and she’s like, “They are spokespeople. This is how-“
Andy Hill:
There you go.
Tori Dunlap:
“This is how I am able to contribute to their Roth IRAs,” because on the back of every single product they sell there are their faces. It’s their spokespeople for the company.
Andy Hill:
Absolutely. And if you don’t have your own helpful family business like I do, it doesn’t matter. The kid can start their own business and that is earned income. The kid could eventually work for a company when they’re in their teens, and then that could be earned income. Now, it can’t be like, “Hey, they babysat the kids around the house and they watched it when we went to the store and I’m going to pay them a hundred dollars an hour, and then we got a Roth IRA.”
There are stipulations in there, and you want to make sure that you consult with your CPA or accountant before you do anything like that. But if they have their own business or if they’re working with the family business, these are great routes to consider. Or again, if they’re in their teens and they start to work like you and I did in our teen years, these are great ways to earn some money and then invest.
Tori Dunlap:
Andy, any other accounts that you can think of or that people have common questions about?
Andy Hill:
I think when we talk about investing, I like to think about it in three different areas. When we talk about wealth building and for generational wealth, I think we talk about college as a big thing to invest for in the future. I think we talk about retirement, so we’ve talked about two of those. And then, there’s homeownership. Homeownership is becoming one of those things that is, it’s going to be difficult for a lot of people, man.
I know you’re hearing it a lot right now that it is high interest rates, high prices, and unfortunately, I only think that the prices are going to continue to go up. So, if you feel passionate about your kids owning a home in the future and knowing it’s one of the major wealth builders in our country, you could start investing with a UTMA, a kid’s brokerage account so that they could get that elusive 20% down payment or 10% down payment or whatever it ends up needing to be in the future. Because time and compound interest can help you make that happen.
If you do that from an early age up until they’re maybe 30 years old, you could help them get a 20% down payment on a million-dollar house. And that’s probably where houses are going to be in 20, 25 years, a regular old house.
Tori Dunlap:
In Seattle.
Andy Hill:
I know you’re in Seattle, so it’s like that is a regular old house.
Tori Dunlap:
Nothing cost less than a million. Yeah, through two bedrooms, two baths, three bedrooms, two baths. You’re looking at a cool 1, 1.1, 1.2 like ease.
Andy Hill:
Yeah. So, can you only imagine?
Tori Dunlap:
And then, a bidding war.
Andy Hill:
Yeah, yeah. Sight unseen, right? Yeah, exactly right. So, yeah, can you only imagine in 10, 15, 20 years where things are going to be, I just don’t think it’s going to go down. We can look at other countries like Canada and we can look at other countries like Australia and just say how it’s just become so difficult for people to buy a home.
So, if you’re passionate about that and your family, you could start early and just start compounding that wealth to help your kids have that choice. And again, if you use something like a UTMA or kids brokerage account and they decide they don’t want to be a homeowner, then they can use it for something else. They can use it to start that business. They can use it for a killer wedding. I don’t know, whatever you want to use your money for when you’re older on.
Tori Dunlap:
Okay. So, you know how to invest, you know how to invest for your kids, and you even know how to invest to retire early, but what do you actually do when it’s time to retire? We got this question from a listener recently and we dove into what to do when it’s time to take your money out of the market and fully retire. This is from our podcast community and a voicemail from Emily.
Emily:
Hi, Tori. Thank you guys so much for all you’re doing. I have a really possibly dumb question. What does retirement actually look like logistically when you’re trying to take the money, when you’re at the stage of taking the money out of your IRA accounts? And are you having to sell all those stocks all at once and then you get that money, then you get it in distributions?
Are you doing it a little bit at time? And if that is the case, what if the market is really bad at the time that you’re retiring? Let’s say if somebody was trying to retire like tomorrow and the market is super low and you have to sell all these stocks in there. So, if you could provide a little bit more clarification on what the logistics will look like post-retirement and how you would actually pull your money out of those funds once they’ve grown and sat in those accounts for a while, that would be super awesome and helpful. Thank you so much.
Tori Dunlap:
I appreciate it with Emily’s voicemail that I think we heard some wind chimes in the back and it was very ASMR soothing, and I don’t know, I just really appreciated that. Okay. Emily, this is a question we get a lot. A question that we have answered in a full workshop in Stock Market School. So, I’ll give you the TLDR.
If you are anticipating retiring soon, this is not the time to start planning for how you’re actually going to use this money. What I mean is if you’re 64 and expecting to retire at 65 with some money in your retirement accounts, that’s not the time to start thinking about, “Oh, I’m going to need this money tomorrow.” We’re going to backtrack a little bit, and if you can, we’re going to start thinking about you needing this money 5 to 10 years before you actually need it. I’ll give you the example of my parents. My parents are in their early 60s, and for the past couple of years, what they’ve been doing is slowly taking out money from their retirement accounts and from their general brokerage account, which as a reminder is not a retirement focused account, but is an investing account.
And they’ve been putting it in what’s called a CD ladder. What is a CD ladder? It is various CDs with various terms like year amounts. So, for instance, they might have one CD that matures, for instance, 10 years from now, and then they’ll have another CD that matures eight years from now, and then five, and then four, and then two, and then one, so that they’re slowly getting that money as they will need it. You are not taking all of your money out of your investing accounts for retirement at once.
One, that’s going to be a tax nightmare. And two, the point is you want to allow your money to continue to grow the money you don’t need yet. So, if you spend, let’s say $50,000 a year, if your expenses every year are $50,000, maybe the time you’re thinking about retirement, and those maybe five years before, you’re slowly starting to pull out that money, you might take out, if we’re retiring at 65, at 58, you might take out 50K, and then when you’re 59, you might take out another 50K and then another 50K, right? You are not taking out this whole lump sum of money at one time, but you’re moving it instead to places where your money is safe and at a less high of a risk. You mentioned in your voicemail like, “Oh my God, what if I am taking out my money for retirement, but the stock market isn’t performing well during that time?”
This is why we’re slowly taking out our money in anticipation of needing it to protect it in places that aren’t the stock market, hence a CD. And again, as a reminder, a CD, we’ve talked about this before, is a certificate of deposit. It’s like a souped-up savings account. It is holding your money for a period of time, and in exchange for you not being able to access your money, you’re getting a higher percent interest rate. So, that’s one strategy that you can employ.
My parents have done that, again, a CD ladder and just being more strategic about when you’re taking out your money and how you’re using it. So, the biggest thing to think about to your question is one, no, you’re not taking out all of the money at one time. That, again, would be a nightmare in terms of managing it. But two, you want your investments to continue to grow as well as during retirement season, let’s call it. You don’t want to hypothetically start planning for your retirement six months before you’re set to retire.
This is something we want to think about in anticipation of retiring, and this is the perfect time, just like any time to sit down and make sure that you are setting yourself up for success, not just right now financially, but in the future. So, this is why my parents have done something like slowly siphon their money out of retirement accounts in order to protect it in lower risk or really no risk savings accounts. And the thing that they’ve done, because if you know a bit about retirement accounts, you might be asking yourself, “Well, how did they do that without paying a penalty?
How can you start withdrawing money out of a Roth IRA, for instance, without paying a penalty?” Fun fact, you can take your Roth IRA contributions out penalty free. So, your $6,500 that you’ve contributed year over year, and it’s different depending on the year, but that contribution that you’ve made, you can take out penalty free. So, that’s part of what my parents have done is take out their contributions, but not their earnings of their Roth IRA early so that they don’t have to take a penalty. But it’s only if you’re under age 59 and a half that you have to pay a penalty for withdrawing your earnings.
So, if you’re over that age, right, my parents are now over that age, they can start taking even more money out of their Roth IRA. That might be an option for you. This is all in the weeds, right? But if you are somebody who’s trying to plan for early retirement, you are somebody who’s trying to help an older family member, or you maybe are an older listener to this show, then this is a just general piece of potential guidance. But you got to figure out what’s right for you.
You got to make sure that this works for you. And I’ll also say too, we have had so many conversations in Stock Market School about how do I stop working as soon as possible? And these are those kind of strategies that are more… again, slightly more complicated because they are more strategic. They’re in a positive way gaming the system that exists so that you can say fuck off to your work life forever and retire. So, yeah, that is my answer to that question.
You’re not taking all the money out at once. You’re being more strategic about it. And if you can plan ahead, we’re talking years, if not a decade, that can be really, really helpful for you in strategizing your future retirement. Okay. As we wrap up this episode, I want to hop back to one of our foundation episodes about investing and share this homework assignment, especially as you’re figuring out what you want your retirement to look like.
I’m pulling this from my own book, from our chapter on investing. But one of the things that I have loved doing is picturing 65-year-old me and I call this Nana You. Nana Tori, she is very infamous already. She is drinking Sauv Blanc with lunch, she is flirting with her much younger Pilates instructor named Luca. She is adopting dogs in the Tuscan countryside.
She’s somehow more badass than I am right now, which I don’t know how that’s possible and I’m so excited to meet her someday. But the only way Nana Tori gets to have the best life possible and be able to be the badass nana and grandma I know she is, is if I take care of her right now. And this is the final thought I’ll leave you with, is that so many people, especially if you’re younger, it’s very hard to imagine 30 years from now or even 20 or 10 years from now, it’s very difficult to get yourself to care when you’re like, “I have all of these other things to think about. I have all of these other things like debt and my current expenses to think about and why would I save for retirement?” You’re saving for retirement for 65-year-old you.
You are saving for retirement so she can have the most kick-ass life possible. You are making sure you’re having a great life right now and a great life in 10, 20, 30 years. So, I would like you to imagine the best version of your older self. She’s retired, she’s financially stable, she’s happy, and she’s got the cutest little wrinkles you’ve ever seen. Where do they live?
What do they do? Do they work part-time for fun or do they enjoy their time on a beach somewhere? Use this future version of yourself to remind you why you’re investing. Maybe even write a letter to future you. Why are you taking care of her or them?
Why are you making sure to take care of them? And when, again, that goal seems really far away and you’re not sure how to keep going, how to keep investing. Remember the vision of nana you or of grandparent you. Remember what that vision looks like and use that as motivation and as a reminder that you’re really just taking care of yourself and you’re taking care of the cutest, but also sometimes the most fragile version of you and making sure that they have the best life possible. Team, thank you so much for joining us.
This was so much fun. I feel like I’m doing a fun little greatest hits compilation. So, if you liked these Roundup style episodes, feel free to tell us. You can also leave a voicemail or comment with more questions about investing that we can answer in a future episode. Thank you as always for being here.
Thank you for listening to Financial Feminist, a Her First $100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, and Tamisha Grant, research by Sarah Sciortino, audio and video engineering by Alyssa Midcalf, marketing and operations by Karina Patel and Amanda Leffew. Special thanks to our team at Her First $100K, Kailyn Sprinkle, Masha Bakhmetyeva, Taylor Chou, Sasha Bonnar, Rae Wong, Elizabeth McCumber, Claire Kurronen, Daryl Ann Ingram, and Meghan Walker, promotional graphics by Mary Stratton, photography by Sarah Wolfe, and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First $100K community for supporting the show. For more information about Financial Feminist, Her First $100K, our guests, and episode show notes visit financialfeministpodcast.com. If you’re confused about your personal finances and you’re wondering where to start, go to herfirst100k.com/quiz for a free personalized money plan.
Tori Dunlap
Tori Dunlap is an internationally-recognized money and career expert. After saving $100,000 at age 25, Tori quit her corporate job in marketing and founded Her First $100K to fight financial inequality by giving women actionable resources to better their money. She has helped over five million women negotiate salaries, pay off debt, build savings, and invest.
Tori’s work has been featured on Good Morning America, the New York Times, BBC, TIME, PEOPLE, CNN, New York Magazine, Forbes, CNBC, BuzzFeed, and more.
With a dedicated following of over 2.1 million on Instagram and 2.4 million on TikTok —and multiple instances of her story going viral—Tori’s unique take on financial advice has made her the go-to voice for ambitious millennial women. CNBC called Tori “the voice of financial confidence for women.”
An honors graduate of the University of Portland, Tori currently lives in Seattle, where she enjoys eating fried chicken, going to barre classes, and attempting to naturally work John Mulaney bits into conversation.
