Meet T.J. van Gerven

[00:00:00] TJ: Safe is all relative. It’s all based on your time horizon, right? So you might have money in your checking account. It feels safe. It’s not losing value. It’s not fluctuating, but there is a hidden tax with inflation where it is losing value over time. In the long term, even though stocks or real estate might feel more risky because they are moving up and down, in the long term, they are safer because they keep up with inflation.

[00:00:30] Linzy: Welcome to the Money Skills for Therapists podcast, where we answer this question: how can therapists and health practitioners go from money shame and confusion to feeling calm and confident about their finances and get money working for them in both their private practice and their lives? I’m your host, Linzy Bonham, therapist turned money coach, and creator of the course Money Skills for 

[00:00:49] Therapists. Hello and welcome back to the podcast. Today’s guest is TJ Gerven. TJ is a financial advisor and planner, the founder of Modern Wealth Builders, and he’s also the host of another podcast about Money, Do More With Your Money. Today, TJ and I get into some of the behavioral biases that we tend to have around money as people.

[00:01:10] It’s helpful, I find, to learn these kind of buckets of biases because then we can start to understand, oh, this behavior that I have that feels very specific to me is a certain type of bias, um, that’s out there. So we explore some of the behavioral biases that lead us to act certain ways and make certain mistakes with money.

[00:01:26] We talk about investing and talk about the importance of putting your money somewhere that it will grow, how our scarcity and fear and kind of clutching onto money, keeping it in checking accounts actually can work against us. We talk a little bit about some more kind of financial nerd stuff than I tend to get into here,

[00:01:43] The rule of 72, how long it takes for money to double, and how to understand how long it’ll take your money to double based on where you’re keeping it, which is all really important stuff for building long-term financial stability. So in Money Skills for Therapists and Money Skills for Group Practice Owners, what I am teaching and helping folks to understand are the foundational pieces of money.

[00:02:05] How to understand your money in your business, get clear on it, make tweaks, keep it up, you know, have that really clear grounded relationship with money. Once you build those skills and you have your feet on the ground, the kind of stuff that TJ and I talk about today, this is the next step, right?

[00:02:21] It’s how to be strategic about your money in the long term, so future you, when they go to retire is very grateful for present you for starting to put some of these wheels in motion, putting money in the right places, really thinking through where your money is going to grow and how your money can serve you in your life, too.

[00:02:37] We also talked a little bit today about the book, Die with Zero, which I just read once, and I finished the book and went right back to the beginning to start again. Because I feel like there’s so much, so much good stuff in there about, the actual function of money, how money can serve us in our lives.

[00:02:50] TJ and I talked about that a bit today. We covered a lot of ground. Here is my conversation with TJ Gerven. 

[00:03:12] Linzy: So TJ, welcome to the podcast.

[00:03:15] TJ: Awesome. Thank you for having me on, Linzy. 

[00:03:16] Linzy: I’m happy to have you here. Something that I’m very aware of in my work that I do with therapists is… I see myself as a financial educator. I’m helping them understand the basics, but there are so many dimensions to money, right? And there are so many pieces, and personal finance is a whole other world in itself.

[00:03:35] And that is the world that you occupy, I understand, is helping folks with their, their finances and like their behaviors around money.

[00:03:42] TJ: Yeah. And that’s… My goal is to be a partner for my clients. So really understanding that they’re great at what they do, just like the people that you focus on with therapists and private practices are great at what they do, but we all have a chosen profession for a reason. That’s our area of expertise.

[00:03:58] And so, you know, just because you’re really smart in one domain, it’s smart people hire smart people to delegate and look for blind spots, look for ways to optimize. And so really I’m here as a sounding board for people to quantify tradeoffs for them again, and point out any blind spots. We all have certain kinds of behavioral biases, which I think we’re going to get into today.

[00:04:18] And so really I make the same, you know, mistakes that clients make. And so really we can all use a professional or somebody at least as a sounding board who has our best 

[00:04:27] Linzy: Totally. Yeah, it’s always so much easier for somebody else. First of all, with expertise, of course, but even just having that outside perspective to help reflect, like, what’s happening there? Or I’m noticing this. Because we all get it in our heads and don’t, don’t see our own biases, of course.

[00:04:43] TJ: Absolutely. And I think we can lose sight of the bigger picture. I think a lot of times people want to focus on how to accumulate as much as possible, right, to achieve maybe this arbitrary number for financial independence, or whatever that may be. And so I like to take a step back and say, well, what are we trying to solve for here?

[00:05:01] And what is the fastest path to that? Cause at the end of the day, money is just a tool. You can’t take it with you. There are some cliches around that, but we don’t want, I mean, there’s an interesting book called Die with Zero.

[00:05:11] Linzy: I’m reading it a second time.

[00:05:14] TJ: Yeah, I figured you might have, and I’m sure your audience has. 

[00:05:18] Linzy: No, I don’t think they have. So tell them a little bit about the book before we get into it because it’s new on my radar, and I’ve been telling everybody about it.

[00:05:24] TJ: Just understanding this concept of using your money as a tool intentionally, and basically thinking about ways that you can use it to help people today, right? So for example, if you have kids that you want to pass on inheritance to, they may be better served by giving it to them sooner rather than later, because if they wait until they’re in their fifties, they’re kind of past that time where they could have used that help.

[00:05:48] And so really thinking strategically about, again, not just accumulating as much as possible, but how can I use this money intentionally. 

[00:05:54] Linzy: Absolutely. Yeah. And I want to speak about that a little bit. And then we’ll get into the work that you do. But, I know that reading Die With Zero has got me thinking about health and wealth and the relationship between those things. And as you say, timing, right?

[00:06:07] So I do think that there’s this bias towards we save, we save, we save, we save, we try to accumulate. And in the book he talks about how folks are, are worth the most money when they retire. But that’s the point when your health is also starting to decline. So there are all these great things that you might’ve been able to do with that money in your thirties, forties, and fifties that are not available to you once you get into retirement years.

[00:06:26] And I see this with my parents who are so healthy and so active, but like my dad, one of his hips went. So that slows you down, and even if you want to do all these great things, life is harder, you’re limited in your abilities, and then he got that fixed, and now his second hip is gone. So even though they’re relatively healthy and active, he can’t do certain things now that he would have been able to do and enjoy when he was 50.

[00:06:48] He could have gone on, a mountain climbing trip when he was 45. He actually can’t physically do that at 72. So really think about where can your money serve you now, not kind of always deferring off into the future.

[00:07:03] Cause the future is not usually as good as we think it’s going to be.

[00:07:07] TJ: One hundred percent and that’s hard to strike that balance between living for the present while still thinking about the future. Some people are going to be past focus. Some people are going to be present focus. Some people are going to be future-focused. And so it’s good to have that balance perspective and think of: am I making decisions today using the resources I have, that’s going to solve for lifetime fulfillment…

[00:07:28] Kind of this idea of self-actualization, right? And thinking through what is the best use of my time. Right. And money is the tool that helps us exchange what we’ve earned for time.

[00:07:41] And so that’s where, and we can talk about some of the biases as far as like scarcity mindset and feeling that we have to hold on to this money when it could actually, we could get more value from it today by using it and spending it for things intentionally.

[00:07:54] Linzy: So let’s get into some of those biases. Cause I know that, my understanding is there’s, there’s a certain kind of, archetypes of different money behaviors or biases that we can tend to have. Tell me a little bit more about the behavioral biases that you see in your clients. And even what you see in yourself when it comes to making decisions around money.

[00:08:11] TJ: Yeah, There’s a ton. I try to be honest with myself when I catch my… And you don’t always catch it. That’s the part with biases, right? You can never really catch it unless an outside person is looking at you. But there are a few different ones. I think mental accounting is a big one. So not treating money the same in different realms.

[00:08:26] A lot of times people will take a ton of time to research how to buy an appliance from Costco, but they won’t think about the expense ratios in their investments, right? Which could be expensive over time. Right. And so there’s these things that add a lot of lifetime value.

[00:08:43] Tax planning is another one. They don’t think about all the ways that they could minimize their lifetime tax bill, which is difficult because we don’t know the future, but there’s… So, mental accounting is a big one. You know, overconfidence bias is a big one. So I work with a lot of people with company stock, and so a lot of times they feel very bullish on their company stock because they work there when we know the data shows that most of these companies are going to underperform the stock market. So things like that… 

[00:09:11] Linzy: Just to stop and define for a moment, bullish for folks who are listening and are not into the investment world. What does bullish mean?

[00:09:18] TJ: So if you’re bullish, it just means that you expect the share price of your stock to increase over time, which may or may not be true. I think there’s a heart with individual stocks is very different than the market as a whole. And so, yeah, bullish just means you expect it to go up. 

[00:09:32] Linzy: Yes. And what was that? Was the confidence bias? What was that one called?

[00:09:35] TJ: Overconfidence bias. Yes, you have an exceeding amount of confidence because you have material involved. You work for that company. 

[00:09:42] Linzy: I’ve heard that too with investments. And I see this in my behavior. So I’m, I’m Canadian. And, I’ve heard that in terms of people’s investment holdings, whatever country you live in, you tend to hold a much higher amount of that particular country’s stocks. Right. So like for myself and my investment strategy, we keep, I believe it’s 30 percent Canadian, 30 percent American, and then the rest like 40 percent international.

[00:10:05] But you know, you have to kind of work against that own bias to be like, well, obviously Canada’s great because I’m from Canada. Right. The American stock market, it’s a little different because it is a powerhouse, which is why we have so many Americans, but people who live in the Netherlands do the same thing.

[00:10:18] They’re going to hold like 30 percent, you know, Dutch stock just because they’re Dutch, right? So we have that personal connection to something. So we’re, we’re biased towards it.

[00:10:26] TJ: A hundred percent. That’s a geographical type of bias, and that’s a very common one. Yeah. If you look at Americans in particular, hold a disproportionate amount.

[00:10:34] of the U S stock market. And while it’s performed so great in recent years, if we look at the longer term track history, there are benefits to owning international.

[00:10:43] TJ: And who knows, I mean, there’s, there are very rare examples, not to get again, technical weeds, but if you look at Japan, there was a time when Japan had a major stock market bubble.

[00:10:52] It took them over 20 years. They just recently are… 30 years, even, to get back to an all-time high. So it is possible, for countries to experience stock. 

[00:11:01] Linzy: Sure. Yeah. Of course. Of course. And so, yeah, this is kind of going, going all in on something is what I’m hearing. This is the overconfidence bias going all in on something because it’s familiar to you rather than thinking big picture of if this thing is Fbetter than all these other things just because you have a personal connection to it.

[00:11:18] TJ: 100 percent or… In a certain example, too, is like your domain expertise. Just because you’re great in your domain, doesn’t necessarily mean that you’re going to be great in this other domain. And the hard thing with investing in particular, can talk about financial planning, but with investing is it, it is primarily behavioral.

[00:11:35] And that’s why more effort doesn’t necessarily correlate to better returns. So, that’s a hard thing for really smart people to understand. Cause they always want to try to figure out, what is, the best strategy to maximize returns. 

[00:11:48] Linzy: Yes. Yeah. Yeah. Yeah. I think there’s maybe an efforting bias there. It’s like, if I work hard, it’ll be better rather than being strategic about what you’re doing. 

[00:11:57] TJ: This makes sense because, in every aspect of your life, there is a correlation there typically. Right? When you study harder, you do better on your test. Right. So that’s not necessarily the case investing.

[00:12:06] Linzy: Yeah. And in therapists, I see a bias towards that, the like over efforting with, overworking, right? It’s like, well, if I see more clients, I’ll make more money, but there isn’t necessarily that thinking out of, yeah, but then I don’t have the energy to make dinner.

[00:12:18] So I’m going to be eating out more. I’m going to be doing more convenient stuff. Maybe I’ll be drinking more. What are the costs associated with that effort that might mean you have less money at the end of the day because you have less bandwidth to make intentional decisions?

[00:12:32] TJ: That’s an amazing point because I like to call it return on hassle. So when we’re thinking about your financial planning, right? And this happens a lot with, I would say rental properties. I work with a lot of millennials and, they love the idea of rental properties, but they don’t necessarily think through the numbers and the logistics behind it as far as,

[00:12:50] Yeah, you may be able to generate some level of return, but how much time effort energy are you going to put into this and what is that return on hassle? 

[00:12:58] I’m a big fan of, again, practical, pragmatic, use your money as a tool. Do you want to be a landlord? Do you want to take time to think about those things? 

[00:13:06] Linzy: Yeah. And that’s something that, I’ve talked with folks, before because we have a rental property, and partially we have a rental property just for a greater good purpose. It’s not a great financial investment for me. And it’s funny because when we built it, my partner was a politician, so when people found out that we had built a rental property and we were renting it at market rent, We received a lot of hate on Reddit and other scary places, because there was this idea that we were becoming fat cats, and it was laughable because I was like, if you look at the return we’re going to get from this investment compared to the work that we’re putting in, and the ripple out expenses that came from it.

[00:13:41] We destroyed our whole backyard. Now we have to rebuild a whole backyard. Right? We had to replace our whole sewage system because we discovered there are all these costs, but I think again, there’s this bias towards this idea that, well, that must be a good investment. You must be making a ton of money 

[00:13:55] and it’s quite the contrary. I would have been much better just investing in one of the ETFs that I know is reliable and leaving it alone. And I would have had a lot more time. And so it’s yeah, thinking… There’s that bias, this idea that like, obviously, if you’re doing more, you have this thing, you’ll make more money.

[00:14:10] But that’s not necessarily true. You have to make sure you’re doing something you want to do.

[00:14:15] TJ: Absolutely. And that you bring up some interesting points there, and I don’t want to defend landlords, but that is a common thing where it’s, oh, your landlord’s raising your rent. It’s like, well, it is a function of the market, and what it costs. And if you look at the cost of ownership of these properties, you have personal experience with that.You can see it’s, it’s not always the best investment.

[00:14:36] Linzy: No, it’s not. Yeah. But some folks are biased towards it. And it would be hard to tell them that. Let’s review the behavioral biases so far, cause these are helpful boxes for folks to think about. So we talked first about the,

[00:14:47] TJ: Mental accounting would be the first one.

[00:14:50] TJ: Overconfidence.

[00:14:51] Linzy: Yes, what other biases do you see show up often for folks?

[00:14:56] TJ: Sure. Yeah. I would say like a scarcity mindset

[00:15:00] is one that I and I have this and it’s, it’s good to analyze again. This is a great area for you guys because thinking about childhood experiences and how that impacts you as an adult. And so I consider myself a solo entrepreneur and it’s hard to

[00:15:16] Sometimes reinvest money when I’m… You know, I started my practice with zero clients and grew it over time very slowly, kind of a Profit First mentality. And so it’s hard for me to, even though there is a clear return on investment there, to kind of give up that money and reinvest and spend. And so I tend to attract clients, I think with similar mindsets who are hardworking, but maybe have some of that scarcity mindset.

[00:15:39] And so really just showing them and quantifying for them you know if they’re a high earner and they have the resources, it’s like, hey, you have so much bandwidth here You have so much margin for error and you’re living below your means so much which is fine But if there are ways that you can use your money today to enhance your life, you’re not sacrificing your financial future. This is something you should consider. 

[00:16:00] Linzy: Absolutely. And I see a lot of the scarcity mindset in, in the folks who, take Money Skills for Therapists. and it’s often there’s a story, right? Like these, these biases come from somewhere. And I’m curious for yourself or for your clients, like, where have you seen some of the scarcity mindset come from?

[00:16:19] What kinds of experiences tend to lead to a scarcity mindset?

[00:16:23] TJ: Yeah, I have some Indian clients who grew up in India, and they have certain cultural things that they feel with money there. And also, it’s really, people that tend to not come from money. I’ll just speak for myself.

[00:16:40] I had a kind of unique upbringing where my mom did come from some generational wealth, but was more of a spendthrift and had some issues there. And then my dad came from poverty. His parents were Dutch immigrants, and he was one of six. His dad died when he was a baby. So it was just his mother.

[00:16:57] And, and so basically he had a very scarcity mindset, which. We’re probably where I got it from where all we talked about growing up was money. And he was very into real estate because, for him, he’s a blue-collar tradesman. He could build a house himself, which is very impressive. 

[00:17:14] Linzy: Yes. Yes, seriously. 

[00:17:15] TJ: But if you factor in, again, your time and return on hassle and all these things, it is a ton of work for necessarily not the best like return.

[00:17:23] And so, you know, for me, I was always trying to figure out what is the best use of your resources, from a practical standpoint, and that’s what I try to help clients 

[00:17:33] Linzy: Yeah. Yeah. Because what I see with that, I think about my own family. And my, my grandmother passed away last year, so it’s kind of like the last remnants of her and my grandfather’s efforts were distributed. And similarly, both came from poverty. My grandmother came from quite, quite extreme poverty.

[00:17:48] Big families, nine to 11 kids in both of their families. My grandmother and my grandfather. My grandfather was a farmer where there’s that unpredictability, you know, like you have a bad season, and you could make no money for a whole year’s worth of work, right? So there was a lot of

[00:18:02] real precarity and scarcity there. You’re at the will of the weather gods. And you could work super, super hard and be like, Well, we’re dipping into our savings from last year. It’s out of your control, right? So if I look at how my grandparents lived their lives, they did manage to move up a class bracket to become middle class.

[00:18:20] But going back to Die With Zero as well, When my grandmother died, she was 98 years old and she had 300, 000 for each of her three daughters. So she died with 900, 000. And that was like at 98, it’s like the way at the end of her life. And when I think about my grandparents’ lives, I wish they had spent that money.

[00:18:42], I wish that they had gone on more trips together. I wish that they had taken more time off. If I just think about the value of that money, and by the time that money was dispersed to their three daughters, their daughters are in their 70s. They don’t, they don’t need it.

[00:18:55] They’re also like as I mentioned earlier, starting to come into poorer health, and their worlds are getting a little bit smaller, as naturally happens as you get older. And so, yeah, if I think about that money. They made such strategic decisions in terms of growing investments, but I don’t think they got the value out of their money that they could have. 

[00:19:14] TJ: And that’s where there is, it’s kind of an interesting concept to think about, but as a retiree, you do want to focus on not just overspending in retirement, but underspending in retirement. Right. So those are the two things to think through. 

[00:19:28] This is not necessarily normal. And there is, I would say a bias in the financial industry, right, to kind of make sure that people do kind of die with more money because maybe they’re incentivized. They get compensated for that, so there is something to consider there.

[00:19:42] Linzy: Can you talk about that a little bit more? Because we have had other financial advisors on the podcast before and I always want to help my clients. The audience understands that there are financial advisors who are just service fees, who are there to just like serve you.

[00:19:55] And then some folks are actually like making money based on the financial decisions that they’re guiding you in making. So can you talk a little bit about that piece that you just referenced?

[00:20:04] TJ: yeah. So, I mean, there’s always going to be conflicts of interest regardless of the fee model. So I want to throw that out there, and I’m not somebody who likes to bash different fee models, but I will say that you know, in my opinion, there’s a couple of different distinctions. The first thing is product-driven sales versus like you said, service fees.

[00:20:20] So. If you’re working with somebody who’s selling primarily financial products, and that’s how they’re compensated, whether it’s an investment product or insurance product, that can tend to lead to suboptimal outcomes because they’re just focused on that product sale, in my experience. With the fee-for-service model,

[00:20:36] That’s a cleaner model. However, there still are some conflicts. The industry is, predominantly, like this AUM model where it’s a percentage off, so I give you a million dollars to invest. I take percentages. So I’m 

[00:20:48] Linzy: And AUM being assets under management. So they make a percentage of what their client holds,

[00:20:54] TJ: Correct. Right. So this could again, lead to some conflicts of interest, where if you’re in retirement and you’re focusing on, I don’t want to overspend or underspend.

[00:21:02] You might be underspending, you know, partly if there is a bias there for the advisor to retain those assets because their compensation 

[00:21:09] Linzy: right? Cause they’re going to make a lot more money if you are holding onto 600, 000 compared to if you’re holding onto 150, 000.

[00:21:17] TJ: Sure. So that is something to consider. And I’m not saying… There are a lot of great advisors who charge AUM, who are all about making sure… I’m just saying that is something to consider. Always think about the incentives of any kind of professional. I mean, for me, the way I think about it your health is the number one.

[00:21:30] And then maybe your money is number two.

[00:21:32] So it’s like when you’re working with professionals in those areas, you should always consider those incentives, right? You don’t want to work with a doctor who necessarily likes the product they’re getting compensated on the product. Right?

[00:21:40] Linzy: Yes. Yes. For sure. Yeah, of those biases, we talked about scarcity, right, which certainly shows up. And I see this sometimes in students where I’ve worked with them for a few months. They’ve come to calls. I feel like I have a sense of them. And then as part of my course, I offer on ones, and then we’ll have a one-on-one conversation and then they’ll let me know that they have, massive generational wealth that they don’t know what to do with, or that they have a bank account with 75, 000 in it that they’re not sure what to do with.

[00:22:06] So I see that show up. And sometimes I talk to folks about like kind of that becomes a hoarding behavior where the money has no job, but you’re scared to let go of it. So you’re just holding onto it just in case, but yeah, it has no function. I’m curious about what would be the bias that leads to kind of the opposite end of that spectrum of folks who are overspending or can’t hold onto money.

[00:22:25] Is there a certain bias that explains those kinds of behaviors? Or how do you understand those?

[00:22:29] TJ: That’s a great question. I don’t tend to attract people like that. So I don’t work with them, but I have personal anecdotal experience with it. I would say it comes with your upbringing and how you view money. If you viewed it as kind of an unlimited source, and you didn’t understand kind of the utility of, of how difficult it can be to earn that as a wage earner, for example, then yeah, you may be inclined to have habits that are going to lead you down that path. It all starts with financial literacy. I would say,

[00:23:02] Linzy: Cause you to know, I see a couple of things, like, thinking about the origins of those behaviors. One is that I see this narrative of I deserve it, right? So sometimes when folks have come from financial struggles and they grew up without a lot, and I’m thinking about people in my own life who come from that situation, there’s this making up for the lost time.

[00:23:19] When you get grown-up money, you’re like, I just want the thing. I want the nice shoes. I want a nice car. Because they had this feeling of going without as a child. But I’ve also seen that behavior with folks who are scared of the money being taken from them. So either they had an experience of having family steal money from them.

[00:23:36] Or yeah, there’s just this sense of the money’s not safe. Yeah. So you spend it so that you can’t lose it. It’s like if I spend it, then it goes to something that I want rather than maybe, a distrust of systems, that the money will disappear from the banks but it is interesting how these different behaviors Can really lead to money and then what I see in my students a lot too is it’s just really anxiety provoking, so they just avoid so they’re just kind of  driving in the dark with no headlights, spending money not realizing, oh, I just spent everything that I have.

[00:24:03] Because there’s just this fear of being in touch with their numbers or just a lack of a kind of literacy there.

[00:24:09] TJ: The first step, to me, is always awareness, so having a basic understanding of your numbers, if you do feel overwhelmed with money like you’re not making money decisions, I wouldn’t even, it’s not even about taking action yet. It’s just about gaining awareness. Right. So, just thinking through your basic numbers, a great tool that I recommend is Monarch Money.

[00:24:27] If you’re looking for cash flow and budgeting. And it’s, it’s just a tool, where you can link all of your financial accounts and just get comfortable with it, it’s not about making any changes. It’s just, Hey, do I know my basic numbers? Do I know over the last six months, what were my average outflows or my average inflows, just these basic things?

[00:24:43] Then you can start to think through what. What changes can I make? How can I automate things? You know, what are some baseline habits I want to maintain? 

[00:24:51] Linzy: Absolutely. Yeah, I’ve got a framework for teaching both of the courses that I teach, which is Commit, Clarify, Adjust, Implement. And that’s the clarifying stage, right? It’s just, what’s even happening here? Where’s my money going? And sometimes what I find with my students is, they’ll look at the money and be like, Oh, this is why it feels like I have no money.

[00:25:07] Because actually, my cost of living is higher than the paycheck I can pull. So that’s why I’m always pulling, and that’s why I never have tax money because I’m always pulling from taxes. After all, I need more money than I’m making, and that in itself is extremely clarifying to understand, oh, it’s not just a feeling that I have no money.

[00:25:25] TJ: Yeah, and that’s a reality that you should confront. And the reality is… And I don’t, I’m not a pessimist; I am a long-term optimist, but the reality is, is that inflation is always going to be around. It has increased relative to historical annualized inflation, but just understand that you have to, unfortunately, figure out a way to generate income that allows you to live below your means, number one, and then with that discretionary income that you have, you have to figure out a way to retain the purchasing power, meaning the value of it, because inflation is eroding that value.

[00:26:01] And so if you’re not transferring your earned wages into wealth, unfortunately, this is where we see this wealth disparity over time because the people that are transferring into wealth via stock, real estate, commodity, whatever, they’re retaining it.

[00:26:15] and then we get this perpetual cycle of inequality over time. 

[00:26:19] Linzy: Yeah, because, and I noticed this goes with the scarcity behavior too, is like people get paralyzed, and they don’t know where to put the money, so it’s just sitting in sometimes a checking account, or a savings account, but, you know, what you’re saying is something that I’ve been talking to my students more about lately is, yeah, you have to put it somewhere that it’s going to grow, because as you’re saying, every year, our money’s worth a little bit less.

[00:26:39] So if you’re not putting your money somewhere where it’s growing, it’s losing, losing power over time sitting in that checking account.

[00:26:47] TJ: And this is kind of, I guess, a bias in some ways where people don’t understand. Like safety is all relative. Okay. It’s all based on your time horizon, right? So you might have money in your checking account. It feels safe. It’s not losing value. It’s not fluctuating, but there is a hidden tax, if you will, with inflation where it is losing value over time And so actually in the long term, even though maybe stocks or even real estate might feel more risky because it is Moving up and down in the long term.

[00:27:17] It’s safer because it’s it’s keeping up with inflation. 

[00:27:20] Linzy: So in the end acting is safer than not acting in terms of putting it somewhere intentionally that it’s going to grow is a safer move than staying frozen.

[00:27:32] TJ: Yes, and that is hard and I think from a financial literacy standpoint If you can get over that mental hump that hey It’s safer. I mean, you should have fundamentals, right? You should have a cash reserve. You should know your numbers. You want to have that margin of safety, but once you do, you have got to get in the mindset of I’m always investing, or else your money is going to lose value over time.

[00:27:53] Linzy: Which is, I’m sure for some folks listening, is a terrifying thing to hear. If they’re not investing, because what I find with my students is, once we do that foundational work of, okay, here’s your numbers, now you’ve got some clarity, now you’ve made some adjustments, maybe you’ve changed the way you’ve set up your practice, maybe you’ve changed your fee maybe you’re going off of insurance panels, maybe you’re seeing just a couple more clients a week because you realize that makes all the difference.

[00:28:14] Once you make those adjustments, then you have to figure out what to do with the extra money. How do you start to save for the future? What I find is a lot of, folks who have not been already immersing themselves in that world, it can feel intimidating to figure out investments where to invest, and, which investment vehicles to use.

[00:28:35] And do I put it in my SEP IRA or do I, you know, put it in my 401k? It’s confusing for people as to where to start. 

[00:28:42] TJ: It is. And, the thing, I think that’s hard if you are a business owner, right? You have your practice. There is this dynamic of, and I struggled with this as well as figuring out my best return on investment, reinvesting in my

[00:28:54] practice or business, or investing elsewhere. Now, the thing is I don’t think most people want to always be tied to their business, and so they must be built outside of that so that they have that ability to retire or

[00:29:05] achieve financial independence and that’s where you have to think and look and have that abundance mindset, if you are more of an entrepreneur, where it’s like, Hey, maybe the best investment is continuing to invest.

[00:29:14] But then if I do have a profit in my, at least every year looking at maxing out my retirement account or something over time. 

[00:29:21] Linzy: Yeah, it’s, it’s investing in yourself. But you need to have the clarity to know if I do A, then B will happen. And that’s going to result in there being more money than, say, the like 7 percent you could get by putting it in the stock market year over year, right? And for all of us, there’s probably going to be some sort of limit where your business is at full cruising altitude.

[00:29:39] And unless you’re going to make major changes, you’re kind of at the max of what you can earn. And at that point, It makes sense. But I remember when I first started thinking about private practice, I was speaking with my boss at the agency that I worked with, and I had been given some money by my grandparents while they were alive because that is something they did well, is they gave their grandchildren, there’s only three of us, money while they were still alive, so they could see us enjoy,

[00:29:59] The inheritance that they gave us. So I had been gifted this money. I was a little bit tortured. What do I do with it? The stock market isn’t ethical. I don’t want to invest in oil and guns, you know, tortured liberal kind of stuff. And, uh, I was talking to my boss and she said start your practice.

[00:30:16] Like you are the most ethical thing that you can invest in. And that is true because money that I thought I could never make when I was working in an agency, making 45, 000 a year now is normal money for me. Right. But that’s a much better return than I would have got just investing that money, starting my practice and getting all the education and all the personal, professional development has been a much bigger return on investment.

[00:30:37] But at a certain point you’ve kind of  hit what is probably going to be your max and then putting, as you say, basically diversifying. Right? Putting your money somewhere else, putting it into the stock market, putting it into real estate. So, you’ve got your money growing in a few different ways.

[00:30:50] It’s not all based on you showing up and performing forevermore.

[00:30:54] TJ: That’s a great point. And I think that you know, understand that the stock market won’t be your best return on investment, but it is the most scalable and practical and lowest return on. So, you may, and I like that you use 7%, right? And it may be we can seven, eight, whatever percent we’re targeting for a benchmark.

[00:31:14] It’s so important to understand compound interest. What does that mean? What does that look like when you compound 7 percent over a long timeframe? Because that some people that doesn’t sound like a lot, but if you put the time in and you understand the power of compound interest, it ends up being quite a lot and understand that,

[00:31:30] Again, it’s repeatable, it’s scalable, it’s diversified outside of your business. And so even though your best return may not be that, it’s still something to consider building. 

[00:31:38] Linzy: Yeah. Yeah. And I just learned the rule of 72. That just came into, my radar, um, because I’ve been chatting with some of my students about this of , okay, you’ve got this money in a checking account. You’re going to need to retire in like 15, 20 years. If it sits in your checking account, it’s going to lose value.

[00:31:53] If you put it in the stock market in a safe, diversified way, it will start to double over time. But like the timeframe of that doubling. So the rule of 72…

[00:32:03] TJ: yeah. Yeah. So basically it’s just, whatever rate of return that you expect. You divide that into 72 and that’s how many years it’ll take for your money to double.

[00:32:13] Linzy: So it’s like the example that I gave where I said 7%. If we’re expecting kind of 7 percent return from an investment, that would be just a little over 10 years. Right? We take 72 to go to 7. So your money will double every 10 years if you have a 7 percent return over that time, which is like pretty crazy to think about.

[00:32:28] Cause as you say, 7 percent sounds like, eh, it’s like little, but if I put 100, 000 in and in 10 years, that’s 200, 000 and 10 years after that, that’s going to be 400, 000. That’s, that is a big impact. Yeah.

[00:32:40] TJ: Well, I think people confuse simple interest with compound interest, right? So a lot of times, in a checking account, it’s simple interest. So if I have a thousand dollars in there, and I’m getting 5 percent interest, let’s just say I’m getting 50, but I’m not getting 5 percent on 1050

[00:32:57] The next time the compound interest, I’m making interest on my interest.

[00:33:03] Right. And so that’s where the power comes in, where it’s like, then the next time it doubles, it’s doubling based on that, that value.

[00:33:08] Linzy: Yes. It’s beautiful. Beautiful math in terms of building long-term stability. Uh, so TJ, thank you so much for coming on the podcast today. This has been really helpful information. I know that the folks who listen to this podcast,  this is kind of the next step for them is starting to understand and think about these things, so it’s so helpful.

[00:33:24] to have you here. If folks are interested in hearing more from you, where can they find you?

[00:33:28] TJ: Awesome. Well, first of all, thank you for having me on. I’m happy it was helpful. modernwealthbuilders. com is my website. You can learn everything you want there. And I have a podcast called Do More with Your Money, or we explore similarly. 

[00:33:39] Linzy: Wonderful. Great. Thank you so much for coming on the podcast today.

[00:33:41] TJ: Thank you. 

[00:33:57] Linzy: Coming out of this conversation with TJ, I’m reflecting on that freeze response that so many of us can have around money, that fear of doing it wrong. So we just hold onto it because we’re scared of making a mistake. And that piece that he talked about where it’s safer to invest your money.

[00:34:15] It’s safer in the long run to put your money in real estate and the stock market. I would add in balance diversified ways, is a great reframe on that behavior. Because the freeze response tells us that the safest thing to do is nothing, right? But when it comes to money, because of the way the economy works and because our money is losing value over time with inflation, it’s not safe to do nothing.

[00:34:42] So that’s helpful to reframe that it’s safer to do something, to put it somewhere that is going to grow, and I would say to put it, yeah, into different places. Invest in real estate if you’re able to. If you haven’t already, certainly start putting that retirement money away.

[00:34:58] Get advice on how to invest in a way that aligns with your risk tolerance, right? Don’t do things that are scary or too risky for you, but you have to do something. You’ve got to put it somewhere that is not just, kind of, in your metaphorical mattress, which would be like a checking account or a low-interest savings account.

[00:35:15] And as we talked about with the rule of 72, that doubling, that is what’s going to help you build real financial stability for your later years. But I would say even in between, depending on the type of investment it is, that’s what’s going to allow you to take that amazing 20th-anniversary trip with your spouse.

[00:35:32] Growing your money is essential for your suitability, but it is also a way to enjoy your life more as you go by making compound interest work for you. So thank you so much to TJ for coming on the podcast today. You can check out the link in the show notes to hear more from him, but I encourage folks who are listening, if you notice you’re in that freeze response, to start to get some support so you can start to make movement 

[00:35:54] with your money. Your future self is going to thank you. You can follow me on Instagram at Money Nuts and Bolts. And if you’re enjoying the podcast, tell a friend about it. Tell your colleague. It is so helpful for you to just spread the word about the podcast. It is the best way for other therapists and health practitioners to be part of these conversations.

[00:36:13] Thanks so much for joining me today.