Are you a millennial looking to take control of your financial future? In this episode of The Agent of Wealth Podcast, host Marc Bautis sits down with Daniel Solin, a renowned financial expert and New York Times bestselling author. With his latest book, Wealthier: The Investing Field Guide for Millennials, Solin delivers expert advice tailored to help younger generations navigate their financial journey with confidence. Discover essential strategies for managing debt, making smart investments, and avoiding common pitfalls.
Tune in to gain valuable insights that will set you on the path to financial success.
In this episode, you will learn:
- Why millennials should prioritize paying off high-interest debt and building an emergency fund before focusing on investing.
- How financial advisors can help millennials manage emotions and prevent costly mistakes.
- How millennials can avoid over-trading, emotional impulses, and falling victim to media hype.
- The benefits of early and strategic saving.
- The value of simplicity in investing.
- And more!
Resources:
wealthierbook.com | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. Today, I’m joined by a special guest, Daniel Solin.
Dan, a reformed lawyer and former financial advisor, is a financial expert and New York Times bestselling author of the Smartest series of books, which include:
- The Smartest Investment Book You’ll Ever Read
- The Smartest 401(k) Book You’ll Ever Read
- The Smartest Retirement Book You’ll Ever Read
- The Smartest Portfolio You’ll Ever Own
- The Smartest Sales Book You’ll Ever Read, and
- The Smartest Money Book You’ll Ever Read
He is also the author of Ask: How to Relate to Anyone and Does Your Broker Owe You Money?
His latest book is Wealthier: The Investing Field Guide for Millennials.
Dan, welcome to the show.
Thank you, Marc. I’m really excited to be with you.
Financial Education and Investing
I’m excited too. I think talking about investing, millennials, and things they can do better or look out for is definitely a topic that will be of interest to our listeners. Your Smartest series is widely acclaimed. What inspired you to start writing those types of books?
Probably stupidity, I would say. I wasn’t aware of how difficult it was to break into the book market. Had I known, I never would have done it. But what actually inspired me was, in the latter part of my legal career, I represented a lot of investors who were harmed by the misconduct of their brokers. Those arbitrations, as you know, are administered by FINRA, which is basically an industry trade association. The track record at the time, though it’s a little better now as they’ve made some reforms, wasn’t very good. I was losing a lot of those cases and thought there must be a better way to help people before they get into trouble. So I decided to write a book. I didn’t intend to write a series; it was just going to be a guide on how people could invest in a simple, easy-to-understand way with some academic support behind it.
Each of the books in the Smartest series targets a specific aspect of personal finance, like investing, retirement, and 401(k)s. Is there a philosophy or something that binds the books together?
I think what binds the books together is that they’re all grounded in significant academic research. Investing is one of those emotional subjects where everybody has an opinion on cryptocurrency or what they should invest in, where the market is going, and what about the national debt? It doesn’t take a license to have an opinion. You could talk to anyone from plumbers to PhDs in finance, and they all have opinions. My theory was that while everyone has a right to an opinion, it would be interesting to figure out what the data actually shows. I did extensive research, and there’s a lot of it in my books. I include it in the bibliographies, knowing that few people are really interested in it. So what brings the books together is the academic research supporting the investment philosophy I advocate.
Focus on Millennials: “Wealthier”
Your latest release, Wealthier: The Investment Field Guide for Millennials. What inspired you to specifically focus on millennials for this book?
So that book, which is available in English and Spanish, was inspired by the fact that there are 14 million Americans who are largely underserved. Sophisticated advisors like you, I don’t mean to speak for you, but probably don’t want their business because many of them are just starting their careers and don’t have sufficient assets. I would get a lot of questions at talks and when speaking at universities, asking about what to do starting with their first paycheck. Should they buy a house or rent? Lease a car or own one? They’re not getting advice from advisors like you, for the most part. I thought there was an underserved group of people, and then I looked at the Spanish-speaking American market and realized they surely weren’t getting this kind of advice either. So I wanted to write a book that would be valuable to those groups.
Investing Strategies for Millennials
As for the specifics, obviously some things are unique to millennials, like deciding whether to buy or rent, or lease or own a car. If we look at it from a high level, what’s different about how a millennial should approach investing compared to someone from a different generation?
If we break it down a little differently, good investing to me is good investing, and it’s solid for everyone. Obviously, people with significant resources have different options and problems, and their investing may be more complicated. But my honest opinion is that most Americans would be fine with just two ETFs: a total world stock fund, like VT from Vanguard, and a short-term treasury bond fund. Instead of focusing on other investments and complicating things, they should focus on their asset allocation, meaning the division of their portfolio between stocks, bonds, and cash. If everyone invested that way, people would be far wealthier than they are today.
Cryptocurrency and Trending Investments
On that topic, and something you previously mentioned about cryptocurrency: One thing I’ve found working with millennials is that they are interested in things like cryptocurrency. How does that fit into what you mentioned about most people needing just two ETFs to cover everything? There’s also the fear of missing out, which affects people of any age. What advice would you give about investing in cryptocurrency or other trendy stocks like those driven by media hype or advice from friends or family?
I know I sound like a broken record, but I go back to the research. Let’s look at the research on cryptocurrency. What the research tells us is that it’s the equivalent of a highly speculative stock. There’s nothing behind it. The price of cryptocurrency is determined by how much people are willing to pay now and in the future, and none of us know what that will be. So I have no idea whether cryptocurrency is going to take off or tank, and neither does anyone else. That makes it very risky. When dealing with a risky asset, the general advice is to risk only a very small portion of your portfolio if you’re attracted to it. What’s ironic is that cryptocurrency appeals to millennials, who are also very sensitive to environmental issues. Cryptocurrency mining causes enormous harm to the environment. Few people understand that cryptocurrency is banned in China due to these concerns, among others. So my basic advice is to look at the research.
Prioritizing Financial Goals
You mentioned specific challenges for millennials, like student debt. Many are trying to balance paying off loans, buying a house, starting a family, and saving for retirement. How should they prioritize these financial goals?
You have to feel sorry for millennials because they’re in a very challenging position. They get out of school with enormous student debt, high credit card debt, and aspirations for things like starting a family, buying a car, and a home. And then people like you and me say, “Oh, don’t forget to save 15 to 20% of your paycheck from your first paycheck because, the sooner you start, the better off you’ll be due to the power of compounding.” It’s very difficult for them to balance all these competing interests and come up with a financial plan that makes sense. My recommended financial plan is to prioritize paying off high credit card debt first, followed by student loan debt. Fortunately, some of that is being forgiven through various federal programs. I caution against converting federal student loan debt to private student loan debt for many reasons. Generally, debt should be addressed before focusing on things like investing and insurance. If others depend on you for income, you’ll want to ensure you have insurance. Though statistically, the chance of premature death is low, it still happens tens of thousands of times a year. So you want to protect your loved ones. My order of priority is to reduce debt, make sure you’re insured, and have an emergency fund of three to six months’ worth of living expenses, preferably nine months to a year. Only then should you focus on investing.
Universal Life Insurance vs. Other Types
From some of the content I’ve read, it seems you’re a proponent of life insurance, specifically universal life insurance. Why universal life versus whole life or term life insurance?
I’m a proponent of insurance generally, to protect your loved ones. If all you can afford is term insurance, it’s better than no insurance. The data shows that certain kinds of life insurance, such as blended whole life and universal life, have some benefits. From certain insurance carriers, very few agents can discount their commissions up to 90%. If you can find someone who will do that, and I name at least one who’s the only one I could find, but there are others, the data shows that if you can afford the difference, which is significant—term insurance for a 40-year-old might cost under a thousand dollars, while whole life insurance, whether blended or universal, costs roughly $16,000 a year—you will end up with more money for savings. So I would say explore all your insurance options. Don’t discount whole life insurance just because it has a bad reputation. It has many benefits, and if you can get discounted rates, all that money goes into equity.
Managing Investment Activity
I want to go back to something specific about millennials. You mentioned how investing and finance are emotionally driven, with psychology playing a significant role. One common thing I’ve seen is that millennials feel they need to be constantly active in their investing, otherwise they’re falling behind or missing out. However, technology and digital platforms have made it incredibly easy to trade. What advice do you have for them to prevent blowing themselves up and to strategically save for future goals?
This is one reason why I wish more millennials had access to advisors. One of the primary values of advisors is managing clients’ emotions. It’s counterintuitive, but in most aspects of our lives, activity equates to progress. We value active people—nobody wants a passive child or athlete. We think activity is a positive thing. But in investing, it’s often a negative thing because the more you trade, the more you incur costs, which impedes returns. Buy-and-hold investing is boring, but if you simply bought and held without doing anything else, you’d be much better off. Yet people feel compelled to act due to market movements and financial media fueling fear and greed. All the pundits on CNBC and elsewhere predict market movements and recommend stocks, which only adds to the confusion. Data shows that activity is detrimental to wealth. Stock picking is also problematic; I believe roughly 4% of stocks account for 80 to 90% of historical gains. So, while picking winning stocks isn’t impossible, it’s not a sensible strategy.
Improving Financial Literacy
So, you’ve written books on financial literacy. How else should people be educated about this, and when should it start? I’m a strong proponent of teaching financial literacy as early as possible, but it seems there are many obstacles to making it effective. People often end up relying on whatever habits they pick up from their families or what little they learn in school. How can we better educate people?
I’m seeing some progress with high schools now requiring financial literacy courses. However, the issue is that these courses are often taught by the brokerage community, which tends to impart misleading information. Financial literacy often focuses on asset allocation, keeping costs low, buying a few ETFs, or simplifying it with something like a Vanguard Target Date fund. I once spoke to a graduating class at Berkeley and told them to buy the Vanguard Target Date fund closest to their retirement date, start with their first paycheck, put all their assets in that fund, and do nothing else. They would be fine. Financial literacy is often portrayed as difficult and boring, but investing can be very simple.
John Bogle once said investing is simple but not easy. While I respect him greatly, I believe it’s actually simple and easy. How hard is it to buy two ETFs or one target date fund? You’ll be fine if you do. The real challenge, as you mentioned, Mark, is people’s difficulty with being passive. They’re constantly tempted to time the market, but there’s no support for that. The data on market timing is terrible. Funds managed by highly-paid professionals with the goal of timing the market often have poor track records. It’s hard to accept, but doing as little as possible will usually yield the best results.
Developing Effective Saving Strategies
Another significant challenge is not just understanding that investing can be simple but actually saving the money in the first place. Many people have ingrained spending habits, where money comes in and goes out without anything left for savings. The priority should be developing a saving strategy.
I completely agree. The first step is to establish a saving strategy. You and your partner need to agree on this. A strategy I recommend is called consumer smoothing. It acknowledges that when people are young, they may have debt, high expenses, and limited income, making it difficult to save 15-20% of their paycheck. Consumer smoothing suggests not feeling guilty about this. Instead, focus on living slightly below your means, eliminating debt, and securing insurance.
As your career progresses and your income increases, avoid upgrading your lifestyle in proportion to your increased earnings. Instead, aim to save more than 15-20%, potentially up to 25-30%, and save even more during the peak of your career. As your career declines and you approach retirement, continue to smooth your savings. Consumer smoothing is widely recommended by economists for retirement savings.
Saving for Education
I also wanted to ask about saving for education, particularly for millennials and older individuals. We’ve discussed managing student loan debt, but what about saving? There are various options like 529 plans, life insurance, and even real estate. What’s your approach to saving for education?
The key to saving for education is to start as early as possible, ideally when the child is born. Parents and grandparents should consider making gifts to a 529 plan. I favor 529 plans because they offer tax benefits if you’re in a state that provides them, and they allow for flexibility beyond just college tuition, including K-12 expenses. However, avoid real estate or other illiquid options since you’ll need access to that money. Custodial accounts are another option, but they lack the safeguards of a 529 plan. Once the child turns 18, they have control over the funds and can use them for any purpose. Overall, I still prefer the 529 plan for its advantages.
Finally, if someone wants to write about complex financial topics, what advice would you offer based on your experience as a successful author?
Artificial intelligence has transformed financial writing. You can’t be a modern writer without utilizing AI. All my books except the last one were written without AI; the last one benefited greatly from it. AI is incredibly powerful. Get comfortable with various programs, not just ChatGPT. Grammarly is also invaluable for improving writing quality. Start with AI to draft your content, use Grammarly to refine it, and hyperlink to reliable sources. This approach will help you create an effective financial blog.
Great advice. Alright, Dan, that’s all the time we have for today. Thank you for joining me and sharing your insights. How can listeners learn more about you and get a copy of your book?
It’s been a pleasure, Marc. Thank you for having me. The website for the book is wealthierbook.com. The book is available in English and Spanish on Amazon, and all my contact information is wealthierbook.com.
Great, we’ll include that, and everything else we discussed, in the resources section of the show notes. Thanks again Daniel, and thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.