Imagine if you could sit down with a financial planner and just absorb information for hours. That's what you're getting with the new book Wealth by Virtue. Author Chad Gordon reveals tons of great personal finance advice and tells us about his brand new book in this interview.
I've got a great interview for you this week with Chad Gordon, the author of Wealth by Virtue and owner of Greenstar Advisors.
I recently had the privilege to read his book Wealth by Virtue and was pleasantly surprised by it.
Wealth By Virtue is a comprehensive look into your personal finances. Chad explains complicated financial topics with ease by using beautiful imagery of charts and graphs.
If you've ever been in a debate with someone on whether you should buy or rent a home, invest in stocks or bonds, you have the answer and all the data to back it up in an easy to understand imagery.
The book hits all the main personal finance topics like banking, investing, real estate, insurance, legal planning, and tax planning.
I highly recommend it for anyone who wants a deep dive into personal finance from someone who lives and works in this personal finance arena.
In this interview Chad tells us what the #1 financial thing you need to be doing today is. What he would do if he was 25 and starting over. Plus tons more! This is truely a great read as Chad really dives into the questions with some great responses. Enjoy!
What are your favorite books related to money?
It really depends on where someone is in life. If somebody is buried in debt and living paycheck-to-paycheck, there’s none finer than Dave Ramsey and the concept of snowballing debt. He’s been an influence to me since I was a child. I think that sometimes over-spending can be a psychosis and it’s important to indoctrinate yourself into a different philosophy of frugality and a mindful attention to debt aversion. I would differ with him on a few key points, but one in particular is that I don’t think that people should pay down their mortgage, nor should they fear having a mortgage … if instead of paying it down, they are saving it up into their investments. I elaborate on this in my book.
If somebody does not have junk debt, they need to be thinking about (in this order) (1) home ownership (2) investing 100% into equities. My view is that because of the destructive power of inflation, and because the cost of rent is going to usually make up a majority of a budget, one of the greatest long-term financial protections is to owning your home. If you own your home, then the next step should be investing into a 100% equity portfolio with the discipline of never selling, like never ever.
Forgive the plug, but to my knowledge, the only book that explains this in a full contextual way is mine – other books advocate it, but I show why in the context of inflation. Parts of this philosophy can be found in Nick Murray’s “Simple Wealth, Inevitable Wealth” and Jeremy Siegel’s “Stocks for the Long Run”. John Bogle’s book “Common Sense for Mutual Funds” is excellent, showing the importance of using low expense ratio investments; however, I would argue that while he’s 100% right, the way he shows it is full of holes and cherry-picking data (I would also argue that the book’s message could have been stated in under 100 pages. Lastly, for philanthropy, Will MacAskill’s “Doing Good Better”.
What are your favorite apps related to money?
Personally, I don’t use aggregation software. I urge my clients to be cautious with these because they aren’t products, you are the product. These companies often exploit your personal data and sell it. Were I more snarky man, I would say, “Do you remember when you downloaded the app how you agreed to something? … Okay, yea, sounds familiar. Did you read it? … Yea, neither does anyone else.” You should always ask, “How are they making money?” With my own clients, our company has a proprietary app that we’ve created. Since they are clients, my company obviously cannot legally sell their data even if we wanted to.
For myself, I really just use my bank’s app and my company’s app. My credit card has an app, but I don’t use it much.
What is the worst money advice you hear?
Oh boy. It’s hard to narrow this down to “the worst”, so I’ll make a list of some doozies:
- Be 100% in bonds when you retire – A typical retirement is 30 years long, over which prices will rise 2-3 times between when you retire and when you die. By every normal definition, when you retire, you still have a very long investing horizon and you still need to have a substantial amount of money in equities.
- Pay off your house – In my book I explain very clearly why this actually makes you considerably poorer (especially with today’s interest rates).
- Just use the boilerplate legal documents online – The value you get from lawyers (such as estate attorneys) is only somewhat found in the actual documents. The cheap boilerplate documents online will never help you consider all the contingencies.
- Cash is king – It’s totally not. Cash flow is king. Cash perpetually loses 2-3% of its value every year. Cash is like oxygen, you just need enough to breath. Having vast amounts of cash doesn’t help you at a certain point, but can be utterly costly in the long run.
- All people should just passively invest in the index and not use an advisor – This is mathematically 100% true … in a perfect world. The real world is that people investing on their own routinely panic sell out of the market and are constantly trying to time based on whatever apocalypse du jour. It’s very important to be conscious of fees, but it’s not the only consideration. Those who assume it’s the only consideration, on average grossly underperform the index.
- Student loans are permissible debt because you’re investing in your future – Education is a good thing and people should aspire for higher education. From a financial standpoint, this could certainly be true if that education will get you a higher income. But, not all education is created equal. Young people should be very thoughtful and cautious in this area. I’ve seen many people go into debt to get a degree that is unmarketable. I feel that this area of finance is becoming a very dirty business – particularly in that it indebts inexperienced young people. People who at 18 years old are legal adults, yes, but probably not equipped to make a sensible decision about getting into so much debt.
What money advice would you give to your 25 year old self starting out in life.
When you choose a companion in life, it cannot be over-stated how important it is that you have similar values on money and making good long-term financial decisions. It is usually not enough for one person of a couple to be frugal and sensible. In my experience the poor spending habits of one person, will ruin the financial prospects of the couple.
Also, don’t upgrade your car if you can repair it. Paying $1,000 to repair it is better than getting a new car with a $300 per month payment. The truth is that people always have excellent rationalizations for their terrible decisions. One rationalization may be, “Well I’m spending all this money to repair it, I may as well get a new car that I don’t have to repair.” The truth is that you want a new car, and are justify it. Similarly people will ask me about spending lots of money on their house, such as upgrading their kitchen. They will ask, “This is a good idea right because we’re making the house value go up.” This is sort of true, but there’s always a difference between the math answer and the real world answer. The math answer is, “No, having a house that is worth more doesn’t do you any favors until you sell it, possibly decades from now. Because of this, it would be better to take that money and invest it and then upgrade it just before you sell it.” The real world answer is, “You just want a new kitchen and need a rationalization to justify the terrible decision.”
The balance of this perspective is that your decisions should not be solely about wealth-optimizing your future. When you are raising kids, I think it is important to spend money on things that will give them a healthy exposure to the world. I am also of the mindset that it is better to not shiver, than to keep your thermostat low to save money.
Also, have multiple career mentors. It is definitely possible to slowly get wealthy off an average income … but don’t settle for this if you can muster a little ambition. It’s hardly profound to state that it’s easier to get ahead financially if you have a larger income. When you are young, it’s not necessarily obvious how to do this and what steps you should take to get there. Become an expert brain-picker. Getting good advice can speed up your career path by years.
Do you have any financial habits you live by?
Saving money is only possible when you make the conscious decision to not spend it. Investing should only be done after you come to terms with your own self-destructive tendencies.
What is #1 thing people should do today for a better financial life?
Invest in a behavior-based, fee-based financial advisor. It takes a lifetime to learn all these things and you need that knowledge at the beginning of your life, when the time value of money is most powerful. The only sensible alternative to trying to be the library is to hire a good librarian.
Did you overcome any personal failures to get where you are today?
Oh yes, absolutely. I go into detail about this in my book. It’s best to read the context, but in a nutshell, in 2009 at the pit of the financial crisis my ex-wife suddenly asked for a divorce, which led to bankruptcy.
What was the turning point in your life to become financially successful?
I did fairly well in my 20s and was on a very good path, but that got derailed. The thing that put me on a much better (new) path was when I left corporate America and started my own business just before my 30th birthday. This continues to grow and is going into new areas that I didn’t anticipate. It’s giving me opportunities that wouldn’t have happened if I didn’t do this initial leap of faith. By the time I was 32 or so, I only had to work 10 hours per week and I was able to spend a lot of time with my kids who I have 90% of the time. This was a blessing to be able to do this while they were young, but I personally found that I didn’t like “partial retirement” and that my soul needed more challenge. I think it’s important to be introspective and to paint your own picture, especially if it looks differently as you paint it versus when you imagined it.
What steps did you take after that turning point?
I began to love my job. I almost never feel burnt out about it. It’s nice to know that I can always go back to “partial retirement”, but what really works for me is to travel more, take longer vacations, take days off in the middle of the week, but to otherwise work all the time. I don’t really see it as a work-life balance, I see it all as “life”.
Tell us what makes Wealth by Virtue stand out among other personal finance books.
Forgive the arrogance and puffery, but in a fairly crowded genre, there’s never been a book published like Wealth by Virtue. This is a bold statement, but I would say it even if I wasn’t the author. It is a clear and highly visual explanation of personal finance. The book is full color which I use to make concepts clearer and friendlier. It is highly organized and I order it in a highly logical way where each chapter builds on the last. Also, it’s entertaining, funny, and I used dozens of examples from the trenches of advising people. Beyond this, I talk about and tie together concepts that have never been published before.
How can people follow and get in touch with you?
I’ll give you a slew of links. For Wealth by Virtue:
Book Trailer: youtube.com/watch?v=r4qf5Er2CS0&t=1s
For Social Media:
My company is GreenStar Advisors: http://greenstaradvisors.com/ My clients are usually Baby Boomers. On the website (which will be remodeled in about a month), there is a place where you can sign up for a newsletter which reinforces our philosophies while giving insight on the capital markets (this will begin in the second quarter of this year). In the past, since our clientele is older, we haven’t found a strong reason to be very active online. However this seems to be changing and in response to it, throughout 2018, you’ll see many changes on the website to help anyone that wants help.