Let's Ride w/ Paul Estrada
Who else is trying to figure $hit out?
Welcome to Lets Ride w/ Paul Estrada – the podcast where a dad tackles the big questions of life, career, and everything in between, by talking to interesting people that have the answers!
When I turned 18, I lost sleep at night with questions that Google was not yet sophisticated enough to answer: What career should I pursue? How can I be more than just average? And how do successful people get to where they are (was there a secret handbook I didn't know about)? After 22 years of pondering these existential dilemmas, I’ve finally pieced together some answers – An answer that is sufficient for now, but one always in need of refinement.
Join me each week as my 6 ½ year old son, Adrian, throws out a thought-provoking question or idea, and I invite a guest to help me sufficiently respond to him. From learning about money and investing, to finding a passion in life, and exploring careers that can be meaningful for you, we cover it all with a dose of humor and some soundbites of wisdom.
So, if you’re a parent or a young adult navigating these tricky waters, or if you want confirmation that other people are sometimes just as lost as you, you’ve come to the right place.
Let's Ride w/ Paul Estrada
Stock Trader: The Art of Building Wealth
Financial freedom isn't a social media catchphrase – it's an achievable reality for anyone willing to develop disciplined money habits and learn fundamental investment concepts. This candid conversation pulls back the curtain on how everyday people can build wealth through consistent investing, even when starting with just $100 per paycheck.
What begins as a lighthearted chat about eagle watching quickly transforms into a treasure trove of financial wisdom as two longtime friends share their journey from financial novices to savvy investors. The discussion highlights how average earners can achieve extraordinary results by developing the discipline to live below their means and consistently invest the difference. As Craig powerfully states, "You can afford anything, but you can't afford everything."
The conversation demystifies investing by breaking down a three-part strategy: identifying and investing in industry trends, taking profits strategically, and maintaining a foundation of sound companies. Rather than presenting get-rich-quick schemes, the discussion emphasizes the proven formula of starting early, staying consistent, and allowing time to work its magic through compound interest. For those intimidated by the stock market, there's reassurance in understanding that market cycles are normal, and historically, patience has rewarded investors who avoided panic selling during downturns.
Beyond personal finance, the discussion offers practical approaches for teaching children about money through yard sale bargaining, entrepreneurship opportunities, and witnessing parents' investing activities firsthand. By removing the mystery around money and investing, we can prepare the next generation to build wealth more effectively than we did.
Ready to start your own investment journey? Begin by opening a free brokerage account, finding a mentor if possible, and committing to learning as you go. Remember that time in the market beats timing the market, and every dollar you invest is like an employee working for your future. What small step could you take today?
In my wallet, I mean in my wallet, and then in my wallet, and then it goes in my ATM machine.
Speaker 2:Yeah, where do you keep an ATM machine?
Speaker 1:In my toy box. Oh, really, because I got it for my birthday.
Speaker 2:Oh, and does that ATM machine have a password? Maybe? Yeah, yeah, do you want to tell everybody that's listening what your password is? Yeah, you're not supposed to tell people password. Oh, but the whole point of your password is, yeah, what You're not supposed to tell people password? Oh, but the whole point of a password is so that people can't get in your ATM machine. So if you tell people your password on the podcast, then anyone can come to our house and put in your password and take all your money. Do you want that to happen?
Speaker 1:No, I was just kidding.
Speaker 2:Okay, so now do you want to share your passcode?
Speaker 1:Nah yeah, sure, zero one, zero, one eight seven six, one five.
Speaker 2:Okay, do you hear that everybody? Adrian's passcode is zero? Well, you can rewind and you can listen, and that's the passcode. How come you don't like spending? I don't think I've ever seen you spend one dollar. How come you like saving all your money?
Speaker 1:Because so then I can buy stocks.
Speaker 2:Is that why?
Speaker 1:Yes.
Speaker 2:Or do you want to buy like a toy?
Speaker 1:someday. One time I saw this toy that you couldn't get me and then like I want to save, and now I'm saving for stocks.
Speaker 2:Oh, yeah Well, I don't know. Sometimes we go to the pool store and you want to buy a boat yes. And then I say fine, well then, we'll just come back and just bring your money, and then you could buy your own boat.
Speaker 1:I'm thinking about that, but I could just buy my own boat. Maybe I'm not going to buy that boat. I'm not thinking about buying the boat anymore. I'm thinking about getting stocks now.
Speaker 2:Oh, okay, I think that's a wise choice, adrian, I think 15 and 20 year old Adrian will be very happy with that decision.
Speaker 1:To make more money, like you can make more money.
Speaker 2:How do you think the stocks works?
Speaker 1:So if it's going down, it's red, If it's green, it's up, and, like on the side, it shows you um some of the like most money you made on your stock.
Speaker 2:Right, right.
Speaker 1:Can you tell me something that like when you were little or like right now, like what you think is interesting?
Speaker 2:About stocks. Well, I, the thing is. When I was your age, I didn't know anything about stocks Nothing.
Speaker 1:What was interesting?
Speaker 2:What was interesting to me about stocks? Nothing. And what was interesting? What was interesting to me?
Speaker 1:about stocks.
Speaker 2:Yeah, I think it's important for you to learn how to invest. I think everybody should learn how to invest their money and save money so that you can be, you know, have a good life and just be comfortable.
Speaker 1:But, dad, I don't have enough money for any stocks.
Speaker 2:You will eventually if you just keep saving right. Hi, let's Ride. Listeners, it's your friend, paul Estrada. If you've gotten any value out of any of the episodes, I'm here to ask you to pause this episode and take a moment to subscribe to the show wherever you're listening to this podcast. If you're a real go-getter, please take a moment to leave a review of the podcast. I'd be indebted to you forever. Thank you for supporting and listening to the show and for going on this journey with us. Pause, subscribe and let's ride.
Speaker 2:The information in this podcast is educational in general nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized financial advice. To determine which strategies or investment may be suitable for you, consult the appropriate qualified professionals prior to making an investment decision. Our guest today embodies the spirit of hard work and determination, with a whole lot of financial savviness mixed in. He has spent over 25 years mastering the art of stock trading, starting with a $0 balance to building an impressive portfolio that has allowed him to achieve financial freedom in his 40s.
Speaker 2:Born and raised in the hardworking town of Altoona, pennsylvania, he learned the value of a dollar from a young age, setting the stage for his remarkable journey. After earning a degree in industrial engineering from Penn State, he further honed his business acumen with an MBA from UC Irvine's Merage School of Business. Through his career, he has held various vice president roles at leading manufacturing organizations, while sharpening his investment skills and building a robust foundation for saving and investing. Today, I'm excited to sit down with a good friend and an old roommate who has an inspiring story and invaluable insights into the world of investing. Our guest today is Craig Young.
Speaker 1:So let's ride. Let's ride on through the rain. Come on and take me anywhere that you want to be, so let's ride.
Speaker 2:So I walk into your house and I see some bald eagles on the TV. What's that all about, Craig?
Speaker 3:This is the famous Shadow and Jackie of Big Bear Valley, me and the kids and the wife we love watching their progress feeding their little young ones. It was a little sad. This morning we woke up and there was one less chick in the nest, so you know, teaching the kids about mother nature, and only the strongest survive. That is so Kind of like investing.
Speaker 2:Yeah, so it's like real life national geographic, but like uncensored, because it's happening in real time.
Speaker 1:Real time.
Speaker 3:Yeah.
Speaker 2:Hey, dude, that's all right, that's more intense. I walk in here giving you a hard time about it and you get into man. Last night there was a storm and there's this one of the chicks fell out of the house. We can't find it. What's going on? And, like you're making it sound like riveting reality TV.
Speaker 3:So you have to be patient.
Speaker 2:Not a whole lot happens in the Eagles lives but you know it's pretty fun to watch and follow on a regular basis. All right, I'm going to get into that If you guys maybe want to check it out. I guess it's you want to look at some bald eagles streaming.
Speaker 3:Friends of Big Bear Valley.
Speaker 2:There you go, guys. There you go, friends of Big Bear Valley, riveting, riveting television.
Speaker 3:Hey, funny though, animals can impact the local economy and investments. There was a developer who was going to put condos on that whole side of Big Bear Lake.
Speaker 2:Yeah.
Speaker 3:And because of Friends of Big Bear Valley and this set of famous eagles, they weren't allowed to build.
Speaker 1:Wow.
Speaker 3:You know it's like real life consequences All right guys, you got that All right.
Speaker 2:So I'm here with Craig A long time Known you for 15, 16, 17 years now. So we're going to talk a little bit about investing. And this is something where Adrian has just kind of taken to this and he's six years old, hasn't spent a penny. You go ask him. He'll tell you to the penny how much is in his bank account or in his piggy bank at the moment. Won't spend a dollar of it. He wants me to buy him things. Of course. Goes to Target standing in line at the grocery store asking for the candy, normal kid stuff. Will not spend a penny of his own money, so he's not getting those things.
Speaker 2:So of all the people that I've met in my life, I think you were one of the first to get me on to the world of investing. Growing up I knew nothing about it. In college, still, I really knew nothing about it. And then we lived together for a couple of years and it was at that point that you really started to introduce me to compound interest and stocks and picking stocks and index funds and all kinds of stuff that I just had no clue about prior to that. So I'm going to start all the way back from the beginning and just ask who taught you these things? Where did that come from and how did you build this foundation?
Speaker 3:Well, first of all, I love the Adrian story. It's wonderful that you're introducing him to money matters and thoughts about money, even though he doesn't want to spend any right now. It's wonderful that he's getting into it and he's thinking about that stuff, because I used to spend every penny that came in the door.
Speaker 2:Craig, I'll be honest Birthdays, graduations I remember eighth grade. I probably made like 1300 bucks from friends and family. That stuff was gone by the end of summer. So you were the exact opposite of Adrian, total opposite.
Speaker 3:And I think teaching kids about a healthy balance of budget and spending is one of the first steps, so getting Adrian to understand that if he wants a new toy, he's going to have to buy it. I do the same thing with my kids, right? So we love to go yard sale hunting and I make them bargain with the people. It's a little bit uncomfortable at first, but it teaches them how to negotiate, recognize the value of their dollar.
Speaker 2:Is that even too like where they can go, Because there's a lot of junk at yard sales? But if you shift around enough things, you find that diamond in the rough, so to speak. So do they see value and things like hey, I'm getting a good deal here, kind of thing.
Speaker 3:My kids are six and eight I wouldn't say they're quite there yet. They're still attracted by the plush stuffy toy or the shiny car or something like that and they're not quite understanding what the expected value or the true value of that thing is. So if the person way overprices it, yes, they might negotiate, but they're not quite grasping the concept of did I get a good deal or a bad deal?
Speaker 2:yet. So that's level two.
Speaker 3:That's level two stuff All right.
Speaker 2:Well, that's awesome that you're at level one. So, going back to my original question, where did you first learn about some of these general concepts of monies? Did it come from your parents, a family member? Were you self-driven, self-taught? Where did this all start for you?
Speaker 3:Unfortunately, my story was a lot like yours and I think maybe 90% of Americans not getting any exposure at a young age and being kind of just forced to figure it out or have the pleasure and the opportunity to learn from someone. I started dabbling in it after I got my first real paycheck a real job paycheck, right when I had disposable income. I said how am I going to invest this? So I opened up a brokerage account.
Speaker 2:And when you say real, we're talking about post undergrad.
Speaker 3:Post undergrad. Okay, yep, I got it.
Speaker 2:But even still so, let's stop there for a moment and let's not gloss over this, which is you at least had the foresight, when you got your first paycheck, to know some of this has to go somewhere other than at the bar or, you know, in clothes or whatever, and I think that's where a lot of people maybe even lose it right away, right when they're. Just, they don't get that concept. They don't understand that you need to budget and save money, so something or there was something within you that at least got you to ask yourself that question and know I got to save some money, right. So do you know where that came from? Well, yeah, if some money, right. So do you know where?
Speaker 3:that came from? Well, yeah, if you go way back, that definitely came from my parents.
Speaker 3:I think in installing the value of money in it. Also, the way I put myself through college right, so I didn't have a whole lot of money. So I joined the army to pay for undergrad, right. The reserves and the Montgomery GI Bill paid for all my books and things like that. So that really helped me come out nearly debt-free out of engineering undergrad, which is hard for anybody to say anymore. And then I saw my student loan debt and I saw what I was going to be earning and thankfully I could pay down my student loan debt quickly and then start saving some of that money right.
Speaker 2:But again I think so, this exact example where people are not necessarily these kids are not necessarily looking at what is my earning potential going to be versus how much money am I going to go into debt? So again, you're already got this advanced mind around money. You know what I'm saying. Like a lot of people go, they come out of college with $50,000, $100,000 in debt and having not considered or asked themselves those questions.
Speaker 3:And what the cost of that interest was going to be right. Yeah, I think that was one of the first things I did when I started looking at my paycheck how much am I paying in interest, which was just lost money? You're essentially getting no value out of that. You're not getting a nice new car, you're not getting new clothes, you're not putting money towards a house. It's essentially just lost. And I wanted to get in. Today, one of my topics I want to talk about is the difference between good debt and bad debt, because this is a pretty hard concept, certainly for kids to understand, but then even most, a lot of adults don't understand the difference between good debt and bad debt.
Speaker 2:Right, All right. So you get your first paycheck and right away you're saying I got to come up with a game plan. So what did that include and what were some of those early things you thought of?
Speaker 3:I don't know if it was that foresight approach, but I knew I wanted to do something. I knew I wanted to make my money work for me. Call it luck or skill or what have you. I said to myself what product do I think is going to take off? And I started investing in only one stock, and that was Apple stock.
Speaker 2:And just take us back. What year is this 2001. Okay, so we're going way back.
Speaker 3:Yeah, 2001. That was my first real job. Started investing in Apple stock. We're talking $100 at a time and when I mentor folks now I tell them to start with that amount of money and we can get into a little bit of how to choose a stock. I think I got a little bit lucky. I actually thought Apple was going to take over the PC market. I worked for Intel at the time and I saw us buying so many Microsoft PCs but I loved the Apple products and I said you know what PCs? But I loved the Apple products and I said you know what? I think Apple's going to take over the PC. I was completely wrong. But they won for lots of other reasons because they're a pretty well-run company with a great product right. So I didn't know where the handheld market was going to go back then, but I just held on to it. I never sold it, I never touched it. I would put in a hundred bucks out of every paycheck and gradually it just grew and you know what has happened to Apple.
Speaker 2:Yeah, and a hundred bucks doesn't seem like a lot. We're talking about almost 25 years ago now. But I think what I'm hearing is you got into this habit of I know every paycheck, X amount of dollars or X percentage of my pay needs to go here, and I'm assuming you developed the early discipline around that to where it's kind of set it and forget it, where almost this money never even crosses your bank account. It just kind of funnels over to wherever you're investing and set it and forget it. Is that right?
Speaker 3:It's absolutely right. It becomes part of your budget, just like food or clothing or your rent, right. That a hundred bucks is investment budget.
Speaker 2:And when you do that, is it something where Because I remember when I first started doing that it's like you put the money in it's subject to go up, it's subject to go down, but you kind of get or at least for my personality you just start obsessing over it, where it's like you wake up in the morning what's Apple stock price at today? Right?
Speaker 3:I still do.
Speaker 2:I check it multiple times a day, okay, so yeah, so that's kind of a thing, right?
Speaker 3:But I think that is personality based. It's very much each individual investor's personal preference. Some people check it every week. Some people don't want to check it at all and they don't even look at it. I check it 10 times a day.
Speaker 2:Yeah, so the money starts accumulating, right, because Apple starts going up, do you get excited about it? Or is it just like, hey, I'm going to develop this discipline around it? Or was the return starting to come back on that money where you're getting really excited? You're like, hey, how do I funnel even more money into this? Or how did the journey develop? So that was the baseline and now, as you're developing, how does that go?
Speaker 3:Yeah, I started to dabble in other things. I had some early losses. That taught me some lessons, right, and it taught me how much I didn't know about it. So I had many reasons of going to business school. After about five or six years at Intel I stopped and I went back to business school. Learning how to invest was one of them. But also a lot of the reasons were about wanting to get into leadership and management and do more with my career. Right, and the investment piece was a side benefit. Turns out that the training that I got around investing in grad school probably was one of the most valuable skills and most profitable skills that I learned, but at the time I didn't really realize that.
Speaker 2:And for people that don't know is that you have to get a certain major for that. What do you say? You're learning a skill. What does that entail in the college program?
Speaker 3:Well, at our business school we had an investment challenge, an investment competition, and it was run by a company called Polaris Wealth Group. They're out of Orange County. They came in and they taught us their investment strategy, how they pick stocks specifically, and then they gave student teams of five $50,000 to play with Like real money or Real money.
Speaker 1:Yeah, all right.
Speaker 3:Real money and the deal was the gains were split 50-50. So we had to return the original 50,000. Unless you lost, you were off the hook.
Speaker 2:You didn't have to pay back the money. Okay, that's nice.
Speaker 3:But every team won to a different degree and my team didn't win the ultimate competition. We got, I think, third out of six. But it was the life lessons and the strategy behind picking those stocks which kind of catapulted my investing career after that.
Speaker 2:So tell us about what did that entail and what are some of those early lessons that you learned about investing?
Speaker 3:There are many different types of investment strategy and what I'm about to share is by no means the only way to win. In fact, paul, you've shared you have a completely different strategy to me, so there's lots of ways to win in the market. This is just my own personal experience and what I learned from Polaris. It's based on three key approaches. One is pick stock in an industry that you think is going to win by far and away. Industry wins or industry momentum will carry a whole bucket of stocks and you can't really lose if you pick a good industry. I'll give you an example. There was a trend about six years ago of electrical vehicle stocks. You could throw a dart at a dartboard, pick any one of five and you are going to make 300% return at a minimum.
Speaker 2:Just so you guys know. So I know this to be true because Craig texts me one day Neo, nio, look it up. And Craig has never steered me wrong before. And so I remember I was sitting in my parents' driveway and he tells me about this Chinese right, chinese electric vehicle.
Speaker 3:It is a Chinese electric vehicle, fuck yeah.
Speaker 2:And tells me to get into it. I think it's like $4 or $5 at the time. I blindly listen to it. I don't look anything up. Basically all I know is the electric vehicle company, and nothing more than that, other than Craig told me to buy it and shoot man. Within six months to a year the thing shot up to 60, 70 bucks. Now that's kind of an extreme example, but it's to your point. Like it's possible. It happens Now, to be fair, that stock tanked later. But as long as you were watching it and got in and out at the right time, it was a. To your point, it was electric vehicles. You throw a dart, you can't go wrong, and it and it hit.
Speaker 3:And there's lots of uh, what I would call riding the industry trends examples that we can give. Right now, several of my AI stocks are up 500%. If you don't join in on the bandwagon, which people will often caution you about the dot-com boom, and be careful, you can lose all your money. That's absolutely correct.
Speaker 1:Yeah.
Speaker 3:But if you don't ride the trends then you miss out on extreme wealth generation. So you have to ride the trends. But it brings me to my second point, which is taking your gains. So if you ride the trends well and you follow industries that you feel are going to do well, so right now, if you feel like renewable energy is the wave of the future and you want to invest in renewable energy, do it and, as it goes up, take your gains along the way right. Because then, when the inevitable bubble drops or your stock specifically has something go wrong with it, you've already made your money. You've created a new baseline for yourself to then go invest in the next industry trend.
Speaker 2:Yeah. So before we, because I think you're getting into some a little bit more advanced things. But let's just go back to somebody that just knows nothing about any of this stuff. Where do we start? I don't even know. Again, when I'm 20, something, you say, hey, paul, put your money in an index fund. I'm like what the hell is that? I have no clue right. So for somebody that's just starting out, how would you recommend that they go about this? Should they just be going into just something that's not individual stock-based? Should they be going into their 401k? What should they be looking at at the very beginning? Or should they be going big and going individual stocks and figuring that out?
Speaker 3:It depends. If you're blessed enough to have a mentor, I would encourage you to get a mentor. But if you can't get a mentor, then invest what you believe in. It's not that hard I mean Google, Yahoo Finance to do a little bit of stock research. If you believe in something, then go find a stock that speaks to you. And if you believe social media is going to be around forever and you love it and you're on TikTok and you're on Instagram, go pick one of those stocks and start investing in it, Because chances are that if you believe in it, a lot of other people are believing in it too, and those stocks are going to do well.
Speaker 2:You know it's funny that that jogged a memory. I remember the very first time a buddy of mine introduced me to Chipotle and this is probably 2005, 2006, somewhere around there. I had never heard of it before and my buddy's like have you never heard of this? We got to go get one of their burritos and I went. I'm like yeah, this is pretty amazing. Now, had I had the foresight or knowledge I have now, I would have eaten that burrito and immediately went and say is this company publicly traded? Oh, they are. Okay, let me go dump some money. I didn't do that and I mean, that thing is probably you wish you would have.
Speaker 2:Yeah, I wish I would have right, because I didn't have the foresight or thought. So I think to your point. What you're getting at there is every day we're at the store, we're buying things, we're being sold to through marketing, or we get on this certain trend that we really love. And, as you're an investor, maybe one of the things you should get into I'm drawing a blank on the word right now, but is hey, when you run into those things, try to have this trigger go off in your mind Is this publicly traded?
Speaker 3:Let me do a little research on this. I mean, is that kind of how you think about it? Absolutely, absolutely. And it even gets harder as you get older.
Speaker 1:So I try to tap into what's popular with the younger generation as well right, so talk to your kids about what they like.
Speaker 3:My son can't get enough Prodigy. I would never even know what Prodigy is right. If it wasn't for my son. But there are apps, there are games, there are things out there that are creating huge markets for themselves that you may not be exposed to. So it's a little bit of listening to your kids, listening to other parents, seeing what you love yourself and just being aware in general right, right, all right.
Speaker 2:I think you had a third thing on your list. Let's go to that.
Speaker 3:The third one is a little bit more technical so I won't get into it too much, but it's about picking sound companies. So the previous point about writing the industry trends you don't want to put your whole portfolio on that because there's a chance you could be wrong. So a good percentage of your portfolio needs to be in what I call very sound companies that you know are going to give you dividends. They're going to raise their earnings every single year. They're just good companies. Back in the 50s your dad used to tell you I invested in GE.
Speaker 3:I mean that's what everybody did right, Because it was a good, sound company. They knew it was going to do well for years and years and years and that was where people put their money. And that concept is still sound today. I still have my same Apple stock that I've held for 25 years now because it's a good, sound company. It's not going to go belly up next month, next year. It could have its down years, but I know over the long haul it's going to do very, very well.
Speaker 2:So, for people that might be feeling overwhelmed at the moment, again just going back, where do they start in terms of, again, I don't know what an index fund is. I don't even know where to trade stock. I don't know what platforms to use. Think back to what is it 25 years ago, craig? How do they just build the foundation of just starting to learn about this? Obviously, youtube, there's a million things, but what do you recommend they do so that they could just at least be introduced to the different concepts that you're talking about?
Speaker 3:Well, start with opening a free account. I mean that's. A lot of people say, oh, I don't have an account, I don't know how to trade stocks. It really is super easy, right? Td Ameritrade is what I started with. It doesn't even exist anymore, right, but you've got all of these platforms. Everything is free now. It's zero risk. You can do it. Fidelity, Charles Schwab, E-Trade all of these platforms are great. They've got tutorials right there. Ask a friend how they're doing it. Ask a parent See how it's done.
Speaker 3:Make your first trade. Get off the couch and into creating your money, working for you right.
Speaker 2:Like you said, you mentioned mentorship, which is something we haven't really talked about on this. But, yeah, I didn't grow up my parents really explaining money other than I get a little bit of an allowance and things like that, but no real concept of money. And, like I said earlier, I think it wasn't until I met you that I was like oh yeah, these things exist and I need to start figuring them out. And even then it probably took me until almost 30 years old before I got really serious about it, and by then I just felt like, man, I just let almost a decade go by where I could have been doing things and I, for whatever reason, didn't. And so I'm glad that I've taken the time and, like you said, I've spent a lot of time on YouTube.
Speaker 2:Just what does this mean? What does that mean? And just trying to figure that out. And it still feels overwhelming because, when it comes to finance, I remember taking a finance class in college and not understanding present value, net, whatever future value, and just being super overwhelmed by all the different concepts that come along with investing and then finally just saying if I want to have the type of future that I want to have, I have no choice but to figure this out.
Speaker 3:One thing I admire about you is you're a lifelong learner. You never stop learning right. So I taught you a few concepts and then, years later, you were teaching me things that I didn't think of, and it just goes to show you there is an immense amount to learn about investing. There's no one strategy to make your money grow for you, and I can remember a couple of years ago you were putting your home equity to work and I was like, why didn't I think of that? That's a whole big pool of money that I could be using and putting into my strategy to make more money. But you oftentimes just don't think of everything that you can be doing. So it's great to bounce ideas off friends. Tell them your different things that you're thinking of. I know we text about stocks all the time. Sometimes they're winners and sometimes they're losers.
Speaker 2:Most of the times they're winners. So in order to we got a little bit ahead of ourselves, but it's a great conversation. In order to have the money to invest, you have to know how to budget and save money. And one thing I've always admired about you is you could walk down. This has nothing to do with your clothing style, by the way. He looks great, but he could walk down the street and you would never know the level of success that you've achieved, not only just in career and your earning potential, what you've done, but what you've been able to do as an investor.
Speaker 2:And I think that that's more of a testament to you just being a very sound and savvy person with money. And that starts with. But you have to have money to invest money, and you've just been very good about accumulating the money necessary to do that. So I do want to touch on where did that mentality come from of just saying like, hey, I don't need all the bells and whistles and fancy things, I need to prioritize saving money and that sort of thing. So where does your thoughts and philosophies come on that?
Speaker 3:It's a great question. I think it comes from humble beginnings, but also I don't want to discount what makes other people happy. I'm happy with all those things that you described, and financial freedom was at the top of my list to develop happiness. But if new things are what makes you happy, that's not necessarily a bad thing, as long as the stress of debt or whatever else is causing you to buy those new things is not decreasing your overall happiness. Right? So economists hey, you're getting philosophical.
Speaker 2:Craig, I like that.
Speaker 1:No, I mean it's philosophical, yeah, yeah no.
Speaker 2:It's economics too, right.
Speaker 3:So economists Now you're getting philosophical, craig, I like that Well, yeah. No, I mean it's philosophical. It's economics too right. It's your bucket of happiness, right For me. From a personal note, I wanted that financial freedom. I wanted to live comfortably, but not above my means. Yes, probably some of that came from my beginnings. Some of it is personality-based. When I was growing up as a kid, there was this one kid in my neighborhood who had a really nice pool and he would use it as a bargaining chip. He was the coolest kid. My pool is the best.
Speaker 2:Well, yeah, and if you're nice to me, you can come swim. By the way, craig's from Pennsylvania, so having a swimming pool is kind of a big deal.
Speaker 3:It was a big deal in the country of Pennsylvania, right? Yeah, you had to empty it out every winter. It's not like out here in California, right? And I just remember really resenting the way that he bragged about it and made me feel, and I think that had a lasting impression on me and how old were you when this was happening?
Speaker 3:This was elementary school kind of thing right, so lasting impression when you're growing up that I never wanted to be that person to rub my money or my success in someone else's face. I think that always stayed with me.
Speaker 2:Yeah, but I mean, yeah, so you got your MBA from UCI, you've had a very successful career, but again, you haven't seen what people use the term lifestyle creep, that as they make more money, they spend more money. But for those that can continue to move up the ladder and, instead of spending that money, sock it away and accelerate your ability to then go invest right. So again, maybe just speak a little bit to your philosophy around that and how, yeah, I a little bit to your philosophy around that and how, yeah, I guess, just speak to your philosophy around that.
Speaker 3:I think one of the greatest sayings was from my father-in-law when we got married. He said to my wife and I he said, Craig, Rebecca, you can afford anything, but you can't afford everything. And I love that saying because it speaks to saving your money, investing to buy the thing that you really, really want, but don't buy everything that you want, because that's going to lead to problems in the future, right?
Speaker 3:And that goes back to the good debt versus bad debt that I wanted to talk to a little bit about, because a big problem that so many people face is credit card debt, and it's just a never-ending spiral. That is the number one thing that you need to avoid, right? So the general rule of thumb is, if you can't pay off your credit card bill, notwithstanding special circumstances right, I don't want to say that anybody's doing the wrong thing, but in general, if you're making just random purchases and you can't pay off that credit card bill, that is one of the worst decisions that you can make. So that goes into what you're talking about, paul, which is living within your means and controlling your budget and spending so that every single month, you're paying off that credit card, you're getting no interest. That's got to be one of your main goals.
Speaker 2:All right, and so you have kids now, and probably one of the top reasons why I started this podcast was to help educate myself and my kids but others, on these different concepts and money. Like I said, I just didn't grow up with the detailed level of concepts that I have today, but you and I have talked about just how do we effectively get these concepts across to our kids are all young, so maybe it's more about planting seeds more than it is about getting into the details and technicalities of investing, and you talked about one example already with going to the yard sales.
Speaker 2:But just speak more to that for those parents that are listening. What are some good things that we can be practicing with our kids to get them ready for some of the things we're talking about?
Speaker 3:Yeah, with my six and eight-year-old we talk about investing grandma dividends, right? So you know the main source of income for them right now is birthdays and holidays. They get a $5 bill in the mail from grandma every single time and they then have started to learn how to budget and save that and plan for their future expenses. So at that age I would say less than 10 years old that's really where you want to start, and focus is teaching your children the value of a dollar. It goes to the yard sale too, but it also goes to the mental approach of planning your money, right? You're planting that seed in that young mind that says if I save for five holidays, I'm going to have $25 and then I'm going to be able to buy the video game that I want. Or for my son, he's going to be able to upgrade his equipment on Prodigy, or whatever's important to them.
Speaker 3:And then allowing them the flexibility to make that purchase if they're budgeting and planning correctly. We also have a system where, if you borrow from sis, you have to pay her double back. So now you're starting to understand at a very basic concept. That's worse than a credit card interest.
Speaker 2:That is worse than credit card interest right.
Speaker 3:I borrow $1 from sis to buy my toy. I got to pay her two back whenever I have it. So it starts to teach them the basic concepts.
Speaker 3:Yeah don't live beyond your means Of borrowing. Yeah, right, other things at this age that are great. Entrepreneurship, I have to give it to my wife because she started two businesses in the last three years and the kids get to help out. They get to help make calendars, they get to help pop flowers. They get to see those sales and the hard work that goes into creating those businesses. Right, and now you know they want to. And the hot chocolate stands. And then my son was like dad hot chocolate sold at a double rate of lemonade. Why is that? I upcharge for marshmallows, let's only sell hot chocolate from here on out.
Speaker 3:I'm like. Well, son, it was a cold day.
Speaker 2:Seasonal.
Speaker 3:Everybody wanted hot chocolate. You got to understand your market.
Speaker 2:Yeah, yeah, yeah you know.
Speaker 3:So I think entrepreneurship is a great thing to teach young. And then we talked about borrowing and interest basics, which is paying back, sis.
Speaker 2:Yeah, yeah, so, yeah. So that's awesome with Adrian. The way I kind of think about it is he? Well, he's kind of the he won't spend a penny, but he won't. He doesn't want to put it in the brokerage account either, so it's just kind of I'm like all right, inflation's a little bit too much. That comes like technically sudden. You're losing money.
Speaker 3:You're losing money. What dad?
Speaker 2:But, uh, you know, I think just some of the things I think about right Is sometimes before work I'll be on my brokerage account before the family wakes up and just kind of looking, like you said, right, just starting to do some research, looking at charts, doing some technical analysis, and he'll come down and just plop next to me on the couch and just kind of watch. He'll ask a question here or there, but those times for me are just like man, I hope this is really valuable. I'm sure it is valuable for him where he's just seeing you go ask him right now ticker symbols. He'll know QQQ. He doesn't necessarily know what it is per se, but he knows QQQ right. Or I bought him some Costco stock a lot because we go to Costco so he can kind of see that in action.
Speaker 2:Right, it's like okay, not only is this a ticker symbol on a computer screen, but this is an actual business. And he walks in there with a sense of pride like hey, I own this. I'm like you own maybe the tiniest microscopic piece of this. But yeah, technically you do, and just yeah, I can't. We'll see how that works out in the future, but I just I don't know. I feel really good about that, and I'm just always looking for new ways to introduce those types of skills.
Speaker 3:What you're accomplishing there is you're removing the mystic and the fear from the stock market in general, and I think that's the single biggest hurdle that prevents even really smart people. We hire a bunch of young engineers and people right out of college and I ask them hey, do you have an investment account? What are you doing with your extra funds? Oh, I don't know anything about that. I'm afraid they actually admit to it. I'm scared to get in the market. What if I lose it all? I'm sure they've heard horror stories or I think it's just we're afraid of the unknown. So what you're doing there? By just exposing him to it, you're showing him that this is not a three-headed monster, it's just a stock market. You can only lose what you put in and you can always sell quickly and not lose, right If you watch it.
Speaker 2:I think that's where people do get concerned or scared or, like what you said, three-headed monster, right, which is the fear that I can lose it all. I worked hard for this and I don't want to lose it all. And the reality is that a stock market ebbs and flows. It has its ups, it has its downs and obviously, when things are going up, we feel great about it and just I'm going to dump everything I can into this, but you've got to be prepared for it. When it goes down, just speak to a little bit of the psychology around, not freaking yourself out Right now. We're recording this in March and we're looking at a pretty significant Correction. Correction that's happening, but it's not like this is new. This happened two years ago. It happened. There's a number of different times throughout history where this has happened. How do you, do you have any strategies at how people can put their mind at ease when things like that are happening?
Speaker 3:Yes, this is a very I mean, it's a very personal question and it involves risk tolerance. It involves a whole lot of psychology. Do I have any words of wisdom? I mean, all I can say is ride it out. Ride it out, especially if you're young. Right Time in the market is 100% more important than timing the market. So if you ride it out, the market will come back. It's come back for 150 years now, right? So it's always going to come back. So you can't panic and sell or else you really do lose. Then Now, if you're one of those few very fortunate individuals that predicted the dot-com boom and you sold everything, okay, great, wonderful for you.
Speaker 3:But the rest of us just saw it drop 50% and we waited and in three years it was back in positive territory. And the same thing with, in fact, what I've seen over the last 25 years is the cycles are getting much shorter. Yeah, so we had the pandemic crash. One year later we were up like 50%. I mean it was crazy how fast the market came back, and a lot of it is just because access to the market is so much greater than it was even 10 or 15 years ago. 15 years ago I was as an individual investor, I was absolutely the minority. The markets were 100% controlled by pension funds, big investors and the elite. But now we saw the whole GameStop and the meme control by individual investors.
Speaker 3:We see I won't call it the power is switching because the huge investors still have the majority of the power, but we have the individual investor creating a whole lot more momentum in the stock, and what that causes is the large investors to take notice the stock and what that causes is the large investors to take notice and then the big money starts to pour in to the stocks that the individual investors are calling out. And that's what's happening in some of these AI stocks and all of these trends, why the market is coming back so fast after downgrades. Where else is the money going to go?
Speaker 2:Yeah, exactly Right. Okay, the last big concept I want to you mentioned this, but I want to circle back to that and that's this concept of financial freedom and I think on social media, that's kind of been. It's kind of almost like an eye roll, honestly, when I hear it, because it's just you have all these social media influencers and things like that. Or the other term that I hear all the time is passive income, right.
Speaker 3:Passive income sure.
Speaker 2:There's no such thing really, if you think about it, but anyways, yeah, so just this idea of that.
Speaker 3:Well, I think there are those few blessed people out there that create one video and they're getting hundreds of thousands of dollars. But for the rest of us, we have to work for our money, right? But we do want our money to work for us, right. So I think that's mostly what they're referring to when they say passive income is how do you get your money to work for you? I know it.
Speaker 2:One thing that got me excited about it that I heard that's really stuck with me is like think of every dollar that you're investing as an employee that you're putting out in the market. Every time you put a dollar, that's an employee that's making money for you, right? And when I thought about it that way, I'm like that makes a lot of sense. I need more employees, right.
Speaker 1:I need more employees.
Speaker 2:That's what I've done. But I think maybe the other thing too is getting to this place where you're giving up short-term gains or short-term happiness. You're giving up short-term something in exchange for something down the road, right, because you're putting your money in and ideally you're not going to touch it for 10, 20, 30 years and then you're going to reap the rewards of it, right, and so maybe part of it is just people coming to terms with that right and being okay with that. And to your point, I think where I got over that hump was that concept of finance.
Speaker 2:I know where I was going with this now is that concept of financial freedom, which is I don't want to work forever. I'm not, unfortunately, in a position or a type of role where I've got this great pension at the end of this 30-year career. It's up to me and me alone to create this future to where I can retire one day, whether it's at 65, 60, 55, 50. It's kind of up to me in how I'm earning and how I'm saving and how I'm investing, and that concept gets me really excited, and I guess what I'm just to circle back is maybe that's where people are not connecting the dots of just like man, I really want this one thing today, right now, like this is going to be so awesome, versus I'll enjoy this in 20 years, kind of thing, right. So how do you feel about that? How do you balance that?
Speaker 3:Yeah, it's doing some soul searching and really asking yourself you know, do you need that new BMW or are you cool with a nice used Kia? I mean, you know. So it's really determining what is important to you. Can you put off that spending? Can you live within your means to maybe send your kids to Stanford versus ITT? What's important to you in 18 years? I know we're talking to a lot of parents out there Do you want to send yourself your kids to a great private school? You got to be investing now, because private school is going to cost $500,000 per kid in another 15 years, when you and I are sending our kids to school and you're looking at three college tuitions Cross my finger for scholarships, craig, that's still the plan right.
Speaker 2:Academic athletic, whatever it is, whatever it is.
Speaker 3:Yeah, and I'm going to encourage my kids to take out loans because they're going to know how to manage their money and I'm going to feel confident that they're going to know how to pay those back, right, right. But at the same time, I mean just everything is going to be very expensive and we have to invest in our kids' future. We have to invest in our future. Pensions are a thing of the past. They're just not around to get anymore. And, like you said, if you want to enjoy your life, live comfortably, not stress about money once you're 40, 45, there are things you can do in your early 20s to absolutely make that happen. But yeah, you got to make some choices.
Speaker 2:Some sacrifices, some sacrifices.
Speaker 3:I'll tell you what, looking back, I don't even think that they were sacrifices. You don't miss stuff. When you're older, you know. You don't miss that stuff at all. But I'm very happy that you know. We're blessed to be building a house right now. And that was all because of investing. And my wife and I said when we got married, what is one of our goals? We both wanted to build a home. Well, it was all that preparation for 10, 15 years that allowed us to do that. And now, yes, we're spending a ton of money, but that is what-.
Speaker 1:But you have it.
Speaker 3:That's what we want to spend our money on at this point right, so it's fun.
Speaker 2:Okay, Any final words partying thoughts.
Speaker 3:You know, I think, make money fun, make it responsible, teach the basics and remove the fear, like we talked about, and I think our kids will grow up to be probably much better investors than what we are.
Speaker 2:Craig, I want to be you when I grow up, so thanks for your wisdom today and we'll see you around.
Speaker 3:Thanks for having me, Paul. All right, see you, let's ride on through the rain Come on and take me anywhere that you wanna be.
Speaker 1:Let's ride and let's ride. Let's follow the skyline and when we make it to the other side, we'll find all the bluest guys.